Delhi High Court
Shutham Electric Ltd. vs Vaibhav Raheja & Anr. on 10 September, 2024
Author: Tushar Rao Gedela
Bench: Tushar Rao Gedela
$~S-41
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO(OS) 125/2024 & CM APPLs.52729-52732/2024
SHUTHAM ELECTRIC LTD. .....Appellant
Through: Mr.Ramesh Singh, Sr.Advocate with
Mr.Ashutosh Kumar, Mr.Arunava
Mukherjee, Mr.Nisarg P.Khatri,
Mr.Kushagra Sharma and Ms.Hage
Nanya, Advocates.
versus
VAIBHAV RAHEJA & ANR. .....Respondents
Through: None.
% Date of Decision: 10th September, 2024
CORAM:
HON'BLE THE ACTING CHIEF JUSTICE
HON'BLE MR. JUSTICE TUSHAR RAO GEDELA
JUDGMENT
MANMOHAN, ACJ : (ORAL)
1. Present appeal has been filed under Section 37(1)(c) of the Arbitration
& Conciliation Act, 1996, challenging the judgment dated 31st May, 2024
passed by the learned Single Judge in O.M.P. 1/2023 wherein the arbitral
award dated 2nd May, 2023 rendered by the learned Sole Arbitrator,
directing the Appellant to pay an amount of Rs.2.5 crores along with interest
@ 5% p.a., was upheld.
2. The Appellant had entered into a loan agreement with the Respondent
No.1 (Claimant in the arbitration proceedings) for an amount of Rs.2.5
crores. Learned Sole Arbitrator had allowed the claim and passed the arbitral
award by allowing the Respondent No. 1's application under Order XII Rule
6 of the Code of Civil Procedure, 1908 ('CPC') after finding that there were
admissions made by the Appellant about its liability.
3. Learned senior counsel for the Appellant states that the learned Single
Judge failed to appreciate that the claim of the Respondent No.1 in the
arbitration proceedings was barred by limitation as the loan agreement was
dated 14th June, 2013 and the alleged last admission was dated 2nd February,
2017, whereas the notice invoking arbitration was issued by the Respondent
No.1 on 18th November, 2019 and that too admittedly at the wrong address.
He submits that as there was no compliance with Section 21 of the
Arbitration & Conciliation Act, 1996 ('Act 1996'), the learned Arbitrator
should have dismissed the claim petition on the ground that it was barred by
limitation.
4. He further states that the learned Single Judge failed to consider that
the appointment of the learned Sole Arbitrator was not in accordance with
the agreement between the parties. He states that Clause 13.3 of the loan
agreement, i.e., the arbitration clause, contemplated an arbitral tribunal
comprising three arbitrators and, therefore, the appointment of a sole
arbitrator was contrary to law.
5. He also states that cause of action for demand of interest was 18th
May, 2016 and as the alleged notice invoking arbitration was issued on 18th
November, 2019, the Arbitrator was not competent to award any interest on
the outstanding amount.
6. The Apex Court in the case of Uttam Singh Duggal & Co. Ltd. v.
United Bank of India, (2000) 7 SCC 120 has succinctly outlined the intent
and object of Order XII Rule 6 CPC. The relevant portion of the said
judgment is reproduced herein below:-
"12. As to the object of Order 12 Rule 6, we need not say anything more
than what the legislature itself has said when the said provision came to be
amended. In the Objects and Reasons set out while amending the said Rule,
it is stated that "where a claim is admitted, the court has jurisdiction to
enter a judgment for the plaintiff and to pass a decree on admitted claim.
The object of the Rule is to enable the party to obtain a speedy judgment at
least to the extent of the relief to which according to the admission of the
defendant, the plaintiff is entitled". We should not unduly narrow down the
meaning of this Rule as the object is to enable a party to obtain speedy
judgment. Where the other party has made a plain admission entitling the
former to succeed, it should apply and also wherever there is a clear
admission of facts in the face of which it is impossible for the party making
such admission to succeed."
(emphasis supplied)
7. This Court is of the view that the learned Single Judge has rightly
held that as per the correspondence between the parties, particularly the
letter dated 2nd February, 2017, the Appellant has acknowledged its liability
of repayment of the loan in question. The letter dated 02nd February, 2017 is
reproduced hereinbelow:-
"February 2, 2017
Mr. Vaibhav Raheja,
C-5/6 Vasant Vihar,
New Delhi - 110057
Sub: Request for extension for repayment of outstanding loan of Rs.2.5 crores.
Ref: Loan Agreement dated June 14, 2013
Dear Mr. Raheja,
With reference to the above we were suppose to repay you the principal amount
of the loan outstanding by May 31, 2016.
You are aware that we are in the process of arranging the funds for repayment.
This process will require some more time.
With this letter, we request you to grant us an extension for repayment till
March 31, 2017.
Thanking you
Yours faithfully,
For Stutham Electric Limited
(Signed)
Samarjit Bose
Managing Director"
8. This Court, with the assistance of learned senior counsel for the
Appellant, has perused the notice invoking arbitration dated 18th November,
2019 and finds that the same had been issued to the Appellant at two
addresses, namely, 6, Galaxy Society, Boat Club Road, Pune-411001 and
S.No. 28, Chakan Road, Hanuman Wadi, Korwa Samor, Kelgaon, Taluka
Khed, Distt Pune-412105. While the second address, admittedly, is vitiated
by a typographical error, this Court finds that the first notice had been issued
by registered post and the postal receipt has been placed on record at pages
618 and 619 of the paper book. Section 27 of the General Clauses Act
stipulates that a presumption of service would have to be drawn.
Accordingly, keeping in view the aforesaid notice as well as proof of service
that has been annexed, it cannot be stated that the notice invoking arbitration
dated 18th November, 2019, was either not served or beyond the period of
limitation.
9. Further, after considering all the documents on record, the learned
Single Judge has rightly held that the Appellant did not refute the factum of
loan, both in its pleadings before the learned Sole Arbitrator and the reply to
the Respondent No. 1's application under Order XII Rule 6. In fact, the
Appellant has clearly admitted in the contemporaneous correspondence that
it owes the loan amount in question to the Respondent No.1. The logical
sequitur of this admission would be that the Appellant would also have to
pay the interest on the outstanding amount. In such a scenario, the learned
Arbitrator correctly exercised his power under Order XII Rule 6 and passed
the arbitral award both for the outstanding amount as well as the interest.
10. Lastly, the argument that the arbitral tribunal was not constituted in
accordance with the agreement between the parties is not tenable. The
learned Single Judge has rightly held that the Appellant itself did not adhere
to the provisions of the arbitration clause forcing the Respondent No.1 to file
an application under Section 11 of the Act, 1996. Moreover, there was no
such objection raised by the Appellant at the time when the learned Sole
Arbitrator was appointed by a learned Single Judge of this Court.
11. This Court is further of the opinion that the Appellant believes that the
arbitral award is not the end of the dispute, but a prelude to stage two of
their disputes - this time before the Courts. The Appellant's belief is
contrary to the intent and object of the Act, 1996.
12. It is trite law that this Court will not re-assess and re-examine the
evidence placed before the learned Sole Arbitrator. The proceedings under
Section 37 of the Act, 1996 are even more limited in scope than those under
Section 34 and cannot be equated with the normal appellate jurisdiction of
this Court. (See: Reliance Infrastructure Ltd. v. State of Goa 2023 SCC
OnLine SC 604).
13. The grounds urged by learned senior counsel for the appellant
certainly do not fall within the parameters of Section 37 of the Act, 1996.
14. Accordingly, the present appeal, being bereft of merits, is dismissed
along with applications but with no orders as to cost.
ACTING CHIEF JUSTICE
TUSHAR RAO GEDELA, J
SEPTEMBER 10, 2024
TS
