Delhi High Court
Hony. Capt. Hukum Chand Yadav ... vs Bombay Mercantile Co-Operative ... on 22 August, 2017
$~OS-41
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 22.08.2017
+ O.M.P. (COMM) 69/2016 and IA No. 3929/2016
HONY. CAPT. HUKUM CHAND YADAV (RETD)..... Petitioner
Through Mr.K.R. Chawla, Adv.
Versus
BOMBAY MERCANTILE CO-OPERATIVE BANK
LTD & ORS. ..... Respondents
Through Mr. Anuj Pal, Adv. for R-3.
CORAM:
HON'BLE MR. JUSTICE JAYANT NATH
JAYANT NATH, J. (ORAL)
1. Present petition is filed under section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to "the Act") seeking to impugn
the ex parte Award dated 3.2.2016 passed by the learned sole arbitrator.
2. Some of the relevant facts are that respondent No.1 states itself to be a
Multi State Co-operative Bank registered under the Bombay Co-operative
Societies Act and also deemed to be registered under Multi State Co-
operative Societies Act, 2002. It is the case of respondent No.1 that the
petitioner approached respondent No.1 for availing of a loan on 10.03.1992
for purchase of two tippers/trucks and a loan of Rs.9 lac was given on
11.5.1992. The truck was hypothecated to the respondent No.1 and was also
OMP.(COMM.) 69.2016 Page 1
secured by the personal guarantees of respondents No.2,3 and one Shri
Dharmender Singh Yadav who is not impleaded as a party. Various
documents are said to have been signed by the petitioner. It is urged that the
petitioner agreed to pay interest @ 17% per annum which may be varied as
per RBI guidelines. It is urged that a sum of Rs.1,45,81,311.27/- became due
and payable by the petitioner and other co-guarantors as on 30.11.2013. The
Arbitrator was appointed under section 84 of the Multi State Co-operative
Societies Act, 2002 read with Arbitration and Conciliation Act, 1996. The
learned Arbitrator has noted that the petitioner was not served by ordinary
process. Service was directed to be done by publication. As none appeared
for the petitioner, he proceeded ex parte. An Award has been passed against
the petitioner and other co-guarantors for a sum of Rs.1,46,01,311/-.
3. The case of the petitioner is that he has retired as Hon.Captain from
the Army. It is stated that the petitioner and respondents No.2 and 3 decided
to incorporate a Private Limited Company. The Director General
Resettlement, Ministry of Defence, R.K.Puram, New Delhi sponsored the
company to undertake transportation work at Dhanbad. It was the said
Director General Resettlement, Ministry of Defence who requested the
respondent No.1 Bank for financial assistance to Ex Servicemen and
forwarded the loan applications for grant of loan for purchase of 14 vehicles
of 11 persons including the petitioner and respondents No.2 and 3. It is
stated that it was respondent No.3 who purchased two tippers for
transportation and it was respondent No.3 who was looking after the
business at Dhanbad. It is stated that from 28.10.1998 which is the date of
the final notice said to have been issued on respondent No.1 till copy of the
Award was served, no notice/summons, statement of claim or any document
OMP.(COMM.) 69.2016 Page 2
was ever served on the petitioner. It is urged that the Award is illegal as no
notice was served on the petitioner and the petitioner was deprived of an
opportunity of defending the case. It is further urged that the Award is
hopelessly barred by limitation.
4. I have heard learned counsel for the parties. Learned counsel for the
petitioner has reiterated that the Award is hopelessly barred by limitation and
is unfair and illegal. He relies upon the last notice dated 28.10.1998 sent by
respondent No.1 where a demand is made for Rs.11,80,000/- It is stated that
this sum of Rs.11,80,000/- is now being transformed into a figure of
Rs.1,46,01,311/-. Hence, it is urged that the award is wholly unjust and
unfair and that the entire proceedings are manifestly vitiated. It is also
pointed out that the notice to the petitioner has been sent at the wrong
address and hence the petitioner was not served. It is also pointed out that
publication has been carried out to serve the petitioner in some unknown
newspaper which has no circulation in Delhi and cannot be the basis to effect
service on the petitioner. The learned counsel further submits that respondent
No.1 states that his claim is within limitation under Section 85 of the Multi
State Co-operative Societies Act, 2002. It is urged that precondition for
application of this provision is that where the disputes relates to recovery of
any sum due to a Multi State Co-operative Society by a member, the
limitation has to be computed from the date on which such member dies or
ceased to be a member of the society. It is urged that the petitioner ceased to
be a member of the Society long back and hence the said provision would
have no application to the facts of the case and the claim petition filed by
respondent No.1 in 2014 for alleged dues of 1992 is clearly barred by
limitation.
OMP.(COMM.) 69.2016 Page 3
5. Learned counsel for the respondent No.1 has pointed out that in terms
of Section 85(1)(a) of the Multi State Co-operative Societies Act, 2002 the
petition is within limitation. He further reiterates that the petitioner was
deliberately staying out of way to evade service, a publication had to be
carried out.
6. I will now deal with the submission of the petitioner about service of
notice of the arbitration proceedings on him. A perusal of the Claim Petition
filed by the respondent before the learned arbitrator would show that the
address of the petitioner has been correctly stated as Post and Village,
Rajoukari Tehsil, Mehrauli, New Delhi. However, in the summons sent to
the petitioner the address is changed to Village and Post office Rajauri. The
summons have been sent by courier from Overnite Express Private Limited.
The report of the courier service is that the address is incomplete. Similarly,
summons have also been sent by registered A.D. There is nothing to show in
the arbitration record that the document was delivered to the petitioner, as no
AD Card is available.
7. The record shows that on 5.7.2014 the learned Arbitrator recorded the
submission of learned counsel for respondent No.1 that the petitioner is
deliberately avoiding service. Publication has been effected in Hindi
newspaper „Rashtriya Sahara'. The order of the learned Arbitrator dated
05.07.2014 reads as follows:
"Arb/S.S./77/14
05.07.2014
Present Mr. Anisul Haq (Adv for claimant)
None for respondents
R-2 & R-4 are already ex parte R-1 & R-3 are not served.
Learned counsel for claimant state that R-1 is deliberately
avoiding service. He prays for substitute service by way of
OMP.(COMM.) 69.2016 Page 4
publication. Prayer allowed. Services be affected by way of
publication against R-1 & R-3 in national daily fix for
16.08.2014.
-SD-
05.07.2014"
8. On the issue of effecting service by publication, reference may be had
to the judgment of the Division Bench of the Calcutta High Court in the case
of Teharoonchand v. M/s Surajmull Nagarmull, AIR 1984 Calcutta
82/(MANU/WB/0018/1984), wherein in para 9 the court observed as
follows:
"9. As regards service through registered post, the registered
cover shows that the addressee was not met on different
occasions. There was thus no tender of the registered cover to
the addressee. It is true that under the law service of summons
under Order 5, Rule 20 of the Code shall be as effectual as if it
had been made on the defendant person-ally. Before issuing
summons under Order 5, Rule 20 of the Code, the Court is to be
satisfied that the defendant is keeping out of the way for the
purpose of avoiding service, or that for any other reason
summons cannot be served in the ordinary way. Before such
satisfaction, the Court has to consider the case carefully having
regard to the nature of the earlier attempts made for the service
of summons. Mere assertion of the plaintiff in this respect to
attract the provisions of Order 5, Rule 20 of the Code will not
be enough. Only when the Court is satisfied from the materials
on record that there is reason to believe that the defendant is
keeping out of the way for the purpose of avoiding service, or
that for any other reason summons cannot be served in the
ordinary way, the Court will be entitled to order service of
summons under Order 5, Rule 20 of the Code. In the instant
case, all these questions did not appear to have been properly
considered before issue of the summons under Order 5, Rule 20
of the Code. The learned trial court has failed to exercise
OMP.(COMM.) 69.2016 Page 5
jurisdiction properly. In this matter the learned appellate court
has not come to any finding regarding the service of summons."
9. Similarly, the Division Bench of the Allahabad High Court in Johri
Lal v. Commissioner of Income Tax, AIR 1967, Allahabad 170/
(MANU/UP/0061/1967), held as follows:
"5. Order 5, Rule 20 provides for substituted service. It enables
the Court, where it is satisfied that there is reason to believe that
the defendant is keeping out of the way for the purpose of
avoiding service, or that for any other reason the summons
cannot be served in the ordinary way to order the summons to
be served by affixing a copy thereof in some conspicuous place
in the court-house, and also upon some conspicuous part of the
house, if any, in which the defendant is known to have last
resided or carried on business or personally worked for gain, or
in such other manner as the Court thinks fit. Service by this
mode is as effectual as if it had been made on the defendant
personally. Now, it seems to us, that if substituted service is
resorted to all the conditions mentioned in the procedure set out
in Order 5, Rule 20 must be fulfilled. The Code has specifically
spoken of it as "substituted service". It is not service in the
ordinary sense of the word. It is service in an artificial sense
proceeding upon a fiction imported by necessity. A special
mode of procedure has been proscribed, and it is incumbent for
the purpose of effecting such service that the entire procedure
specifically mentioned in the rule should receive full
compliance When an Income tax Officer resorts to Order 6,
Rule 20, not only is it necessary that a copy of the notice should
be affixed upon some conspicuous part of the house in which
the assessee is known to have last resided or carried on business
or personally worked for gain, but it is also necessary that he
should cause to be affixed a copy of the notice on a conspicuous
place in the Income Tax Office. Unless this is done, it cannot be
said that substituted service has been effected. We are supported
in this view by the decision of the Punjab High Court in Jhabar
OMP.(COMM.) 69.2016 Page 6
Mal Chokhani v. Commr. of Income Tax
MANU/PH/0136/1963"
10. Section 19(1) of the Act provides that the arbitral tribunal is not bound
by CPC or the Indian Evidence Act. However, it is clear that the arbitrator
has to be careful to ensure that proper attempt to serve the party has taken
place before ordering service of notice vide publication. A perusal of the
order of the learned arbitrator dated 05.07.2014 would show that there is no
proper application of mind as to whether the petitioner is deliberately
keeping out of the way to avoid service of notice/summons. Merely the
submission of the learned counsel for respondent No.1 has been noted that
the petitioner is avoiding service and the plea of respondent No.1 for
substituted service has been accepted. Clearly the substituted service effected
is illegal.
11. Section 18 of the Arbitration and Conciliation Act reads as follows:
"18.The parties shall be, treated with equality and each party shall
be given a full opportunity to present his case."
12. It is the settled legal position that each party has to be given full
opportunity to present his case. In the present case on account of a mistake
on the part of the office of the Arbitrator notice has been sought to be sent at
the wrong address, namely, to village Rajauri instead of village Rajokari.
Summons had been returned back showing that the address is incomplete.
This is clear from the report of the Overnite Express Private Limited the
courier through which the notices were sought to be delivered to the
petitioner. The record show that notices have been sent by registered A.D.
but A.D.Card has not been received back. In view of the fact that the notices
OMP.(COMM.) 69.2016 Page 7
were being sent at the wrong address, it cannot be said that any presumption
arises of delivery of this notice sent by the Registered AD.
13. Another plea raised by the petitioner is that the publication has been
carried out in a news paper, namely Rashtriya Sahara. It has been urged that
this newspaper has almost nil circulation. There appears merit in the
contention of the petitioner inasmuch as there is nothing on record to show
the nature of the circulation of this newspaper. The respondent/learned
Arbitrator had to take adequate care to ensure proper service is effected on
the petitioner. This specially so as the arbitration proceedings were
commenced 15 years after the last notice had been dispatched to the
petitioner and other respondents. It is quite clear that the petitioner was never
served with the notice of the arbitration proceedings. The procedure adopted
by effecting service by publication has been wrongly affected and cannot be
termed as proper service on the petitioner.
14. The Supreme Court in the case of Associate Builder v. Delhi
Development Authority, AIR 2015 SC 620/(MANU/SC/1076/2014), held as
follows:
"....The Audi Alteram Partem principle which undoubtedly is a
fundamental juristic principle in Indian law is also contained in
Sections 18 and 34(2)(a)(iii) of the Arbitration and Conciliation
Act. These Sections read as follows:
18. Equal treatment of parties.--The parties shall be treated with
equality and each party shall be given a full opportunity to
present his case.
34. Application for setting aside arbitral award:-
(2) An arbitral award may be set aside by the Court only if-
(a) the party making the application furnishes proof that-
OMP.(COMM.) 69.2016 Page 8
(iii) the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case;"
15. Section 34(2) of the Act reads as follows:
"(2) An arbitral award may be set aside by the Court only if--
(a) the party making the application furnishes proof that--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which
the parties have subjected it or, failing any indication thereon,
under the law for the time being in force; or
(iii) the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by
or not falling within the terms of the submission to arbitration,
or it contains decisions on matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, only
that part of the arbitral award which contains decisions on
matters not submitted to arbitration may be set aside; or
..............."
16. Hence, the impugned award is contrary to the fundamental policy of
Indian Law. It has been passed without following the principle of Audi
Alteram Partem. The award is also hit by Section 34(2)(iii) of the Act as the
petitioner was not given proper notice of appointment of an Arbitrator. The
award is liable to be set aside accordingly.
17. In the light of the above, I set aside the Award dated 3.2.2016.
Respondent No.1 is free to take further steps as per law.
OMP.(COMM.) 69.2016 Page 9
18. Petition stands disposed of. All pending applications, if any, also stand
disposed of.
(JAYANT NATH)
JUDGE
AUGUST 22, 2017
n
OMP.(COMM.) 69.2016 Page 10
