Newgen Specialty Plastic Ltd. vs Intec Capital Ltd.
2017 Latest Caselaw 3276 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         FAO No. 292/2017

%                                                      14th July, 2017

NEWGEN SPECIALTY PLASTIC LTD.              ..... Appellant
                 Through: Mr. Girish Chandra, Advocate.

                          versus

INTEC CAPITAL LTD.                                     ..... Respondent

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?

VALMIKI J. MEHTA, J (ORAL)

C.M. Appl. No. 24266/2017 (for exemption)

Exemption allowed, subject to all just exceptions.

The application stands disposed of.

C.M. Appl. No. 24267/2017 (for condonation of delay of 20 days in re-filing the appeal)

For the reasons stated in the application the delay of 20 days in

re-filing the appeal is condoned.

The application stands disposed of.

FAO No. 292/2017 and C.M. Appl. No. 24265/2017 (for stay)

1. This first appeal under Section 37 of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as 'the Act') is filed

against the impugned judgment of the court below dated 6.3.2017

dismissing the objections filed by the appellant under Section 34 of the

Act.

2. The facts of the case are that appellant/objector had

obtained a loan from the respondent for purchase of equipments for his

business. The loan advanced was for a sum of Rs.3 crores. Loan

agreement was executed on 30.4.2014 and appellant had to repay the

loan in 71 equated monthly installments of Rs.6,20,305/- each. The

equipments purchased from the loan amount were hypothecated to the

respondent. Appellant also tendered a collateral security for a sum of

Rs.90,00,000/-, and which amount was to be returned with interest at

the rate of 7% per annum for 51 months subject however to discharge

of the obligations of the appellant under the loan agreement. Since the

appellant failed to pay the monthly installments on time, hence there

arose dues of Rs.2,80,25,074/-, and to recover which claim the

respondent/lender invoked arbitration proceedings.

3. Appellant/applicant appeared in the arbitration

proceedings on some dates but thereafter failed to appear and hence

was proceeded ex-parte. The respondent thereafter led ex-parte

evidence. The impugned award dated 11.2.2016 was then passed

decreeing the recovery of the amount along with interest but subject to

adjustment to be granted to the appellant with respect to the collateral

amount of Rs.90,00,000/-

4. Appellant challenged the impugned award dated

11.2.2016 passed against it ex-parte by filing objections before the

court below under Section 34 of the Act, and which have been

dismissed by the impugned judgment, hence the present appeal.

5. Once, it is established by the respondent by leading

evidence that appellant had taken a loan, that there was default in re-

payment of the loan amount as there was default of the payment of

monthly installments, i.e the respondent proved its claim in the

arbitration proceedings, the impugned award dated 11.2.2016 could not

have been interfered with by the court below under Section 34 of the

Act. The court below could not have interfered with such an award not

only because a court hearing objections under Section 34 of the Act

does not sit as an appellate court to re-apprise the evidence as also

findings of facts and conclusions, but also because even if the court

below hearing objections was a civil court, yet the impugned award

even as a decree could not have been set aside as the respondent's

entitlement was proved for recovery of the amount taken as loan (but

not repaid) with the agreed rate of interest.

6. Learned counsel for the appellant firstly argued that it was

the duty of the respondent/lender first to adjust the amount due by sale

of hypothecated equipments, however when I put a query to counsel

for the appellant that whether the appellant had returned the machinery

to the respondent, it is conceded that the machinery/equipment

purchased by the appellant, by utilization of the loan granted, have not

being returned to the respondent.

7. Learned counsel for the appellant then argued that the

respondent is liable to adjust the security amount, and to which there is

no dispute, because, arbitrator as per the impugned award while

granting relief as per para 8 directed recovery of the amount due only

after adjustment of the amount of Rs.90,00,000/-.

8. Though, learned counsel for the appellant argued that the

amount of Rs.90,00,000/- had to bear interest, however, this plea could

only have been taken before this Court if the appellant had taken such a

plea in the arbitration proceedings, and substantiated the same, but

once the appellant chooses to remain ex-parte in the arbitration

proceedings, a plea on merits which is not raised before the arbitration

proceedings cannot be raised before the court hearing objections under

Section 34 of the Act and much less this appellate court heaving appeal

against the dismissal of objections.

9. Accordingly, this Court cannot adjudicate the issues on

merits which were not addressed in the arbitration proceedings.

10. In view of the above discussion, there is no merit in the

appeal and the same is hereby dismissed. If course, it will always be

open to the appellant to claim any adjustment for any amount which

may have been paid towards the awarded amount during the pendency

of the arbitration proceedings, and may be even thereafter, subject of

course to establishing this aspect before the executing court or in other

appropriate forum.

JULY 14, 2017                                VALMIKI J. MEHTA, J
AK