Rayabarapu Ranapratap vs M/S. Shriram City Union Finance ...
2022 Latest Caselaw 1785 Tel

           HIGH COURT FOR THE STATE OF TELANGANA
                           ********

CIVIL REVISION PETITION NOs.1354 AND 1934 OF 2021

C.R.P.NO.1354 OF 2021:

Between:

Roop Singh Bhatty, s/o. Narasimha Singh, Aged 40 years, occu: Business, r/o.15-8-19, Ramannapet, Warangal and others.

..... Petitioners/ Judgment Debtors And

M/s. Shriram City Union Finance Limited, having its Branch Office at Warangal rep.by its GPA Holder, i.e., K.Srinivasulu, s/o. Rangaiah, Aged 40 years, occu:Assistant General Manager in DHR Company.

                                                              .....Respondent/
                                                               Decree Holder


DATE OF JUDGMENT PRONOUNCED                 :   08.04.2022


                 HON'BLE SRI JUSTICE P.NAVEEN RAO
                                 &
                 HON'BLE DR JUSTICE G.RADHA RANI

1.   Whether Reporters of Local Newspapers      :       No
      may be allowed to see the Judgments ?

2.   Whether the copies of judgment may be          :   Yes
     marked to Law Reporters/Journals

3.   Whether Their Lordship wish to             :       No
      see the fair copy of the Judgment ?
                                                                       PNR,J & Dr.GRR,J
                                                             CRP Nos.1354 & 1934 of 2021




                        * HON'BLE SRI JUSTICE P.NAVEEN RAO
                                       &
                        HON'BLE DR JUSTICE G.RADHA RANI

+ C.R.P.NO.1354 OF 2021:


% 08.04.2022

# Roop Singh Bhatty, s/o. Narasimha Singh,

Aged 40 years, occu: Business, r/o.15-8-19, Ramannapet, Warangal and others.

..... Petitioners/ Judgment Debtors

Vs.

$ M/s. Shriram City Union Finance Limited, having its Branch Office at Warangal rep.by its GPA Holder, i.e., K.Srinivasulu, s/o. Rangaiah, Aged 40 years, occu:Assistant General Manager in DHR Company.

.....Respondent/ Decree Holder !Counsel for the petitioners : Sri P.V.Ramana in both CRPs Counsel for the Respondents : Sri P.Gangaiah Naidu, appearing for Sri N.Srikanth Goud for sole respondent in CRP No.1354 of 2021 and for first respondent in CrP No.1934 of 2021

<Gist :

>Head Note:

? Cases referred:

2013 (1) ALT 44 (SC) AIR 2004 SC 716 2002 LawSuit(Cal) 338 2003 LawSuit(Cal) 304 PNR,J & Dr.GRR,J CRP Nos.1354 & 1934 of 2021

HONOURABLE SRI JUSTICE P.NAVEEN RAO & HONOURABLE DR. JUSTICE G.RADHA RANI

CIVIL REVISION PETITION NOs.1354 AND 1934 OF 2021

COMMON ORDER: (per Hon'ble Sri Justice P.Naveen Rao)

CRP No.1354 of 2021:

The respondent, M/s.Shriram City Union Finance Limited has

sanctioned a sum of 25,00,000/- to the first petitioner herein.

Petitioners 2 and 3 are the Co-borrowers/Guarantors. The petitioners

had agreed to repay the loan amount with financial charges, bringing the

total payable amount to 45,62,250/- to be payable in 60 installments.

The petitioners had failed to pay the full loan amount and committed

default.

2. As loan is not discharged by the petitioners, the respondent

invoked the arbitration clause. A Claim Statement was made by the

respondents before the sole Arbitrator on 27.04.2016. The petitioners

filed their defence statement on 21.12.2016. The Arbitrator passed the

award on 27.12.2017.

3. As the amount quantified by the Arbitrator was not paid, the

respondent-M/s. Shriram City Union Finance Limited filed E.P.No.1432

of 2018 in ARB Case No.220 of 2016 in the Court of

III Additional District Judge at Warangal, seeking enforcement of the

award. The Execution Court over-ruled the objection raised by the

petitioners and declared that decree holder is entitled for recovery of

amount and allowed Execution Petition. Aggrieved thereby, this revision

is filed.

CRP NO.1934 of 2021:

4. The respondent, M/s. Shriram City Union Finance Limited has

sanctioned a sum of 20,00,000/- to the first petitioner herein.

PNR,J & Dr.GRR,J CRP Nos.1354 & 1934 of 2021

Petitioners 2 and 3 are Co-borrowers/ Guarantors. The petitioners had

agreed to repay the loan amount with financial charges, bringing the

total payable amount to 36,49,980/- to be payable in 60 monthly

installments. The petitioners had failed to pay the full loan amount and

committed default.

5. As loan is not discharged by the petitioners, the respondent

invoked the arbitration clause. A Claim Statement was made by the

respondents before the sole Arbitrator on 27.04.2016. The petitioners

filed their defence statement on 18.10.2016. The Arbitrator passed the

award on 09.08.2017.

6. As the amount quantified by the Arbitrator was not paid, the

respondent- M/s.Shriram City Union Finance Limited filed E.P.No. 1125

of 2018 in ARB Case No.33 of 2016 in the Court of VII Additional District

at Warangal, seeking enforcement of the award.

7. Heard Sri P.V.Ramana, learned counsel for the petitioners in both

revision petitions, and Sri P.Gangaiah Naidu, learned senior counsel

appearing for Sri N.Srikanth Goud, learned counsel for sole respondent

in CRP No.1354 of 2021, and for first respondent in CRP No.1934 of

2021.

8. As the issue raised in both revision petitions is same, both

revisions are considered together.

9.1. The learned counsel for the petitioners contended that as the

award was not passed within one year from the date of filing claim by the

first respondent, M/s. Shriram City Union Finance Limited, the award is

a nullity and therefore cannot be enforced. He contended that the

execution Court failed to consider the objection raised by the petitioners

on the issue of nullity of the order passed by the sole Arbitrator in the PNR,J & Dr.GRR,J CRP Nos.1354 & 1934 of 2021

Arbitration Claim Petition Nos.220/2016 and 33/2016, respectively, on

the face of Section 29A(1) and Section 29A(3) of the Arbitration and

Conciliation Act, 1996 (for short, 'the Act, 1996').

9.2. He would submit that plea of nullity can be raised in execution

proceedings. Further, scope of challenge to the award under Section 34

is limited and this plea could not be urged. The learned counsel for

petitioners argued that as per Section 29A(1) of the Act, 1996, as in

force, an award should be made within a period of twelve months from

the date of Arbitral Tribunal enters upon the reference. Section 29A(3) of

the Act, 1996 gives power to the parties to extend this time period for a

further period not exceeding six months. Section 29A(4) of the Act, 1996

specifies that if the award is not passed within the time period prescribed

in clause-1 or clause-3 then the mandate of arbitrator would terminate.

Since arbitrator was not competent to pass award, as it is a nullity,

question of enforcement does not arise.

9.3. Learned counsel placed reliance on the decision of Hon'ble

Supreme Court in the case of State of Haryana and another Vs. Kartar

Singh (D) through LRs1 arising out of Land Acquisition Act, 1894. He

would submit that the Execution Court failed to appreciate this aspect

and has committed grave illegality.

10.1. Per contra, the learned senior counsel Sri Gangaiah Naidu

appearing for learned counsel for the respondent-Chit Fund company,

contended that the Claim Statement was filed before the sole Arbitrator

on 27.04.2016; the petitioners dragged on the matter deliberately and

willfully; the petitioners refused to receive notices and delayed the

process for a span of eight months and three months respectively. They

finally filed their defence statement on 21.12.2016 and 18.10.2016

2013 (1) ALT 44 (SC) PNR,J & Dr.GRR,J CRP Nos.1354 & 1934 of 2021

respectively. The learned senior counsel for respondent-Chit Fund

Company further contended that the petitioners took very long time to

file their defence as against the permissible time of six months and hence

the period of twelve months should be reckoned from 21.12.2016 and

18.10.2016 respectively and the period of twelve months expires by

21.12.2017 and 18.10.2017 respectively. Thus, within one year after

filing the written statement, the award was passed.

10.2. Learned senior counsel further contended that Section 29A of the

Act, 1996, as it stood earlier was substituted and as per the amendment

the award was passed within one year. He would further submit that

O.P. filed by the petitioners was dismissed and the award has become

final and therefore they cannot raise their plea at the stage of

enforcement of the award.

10.3. Learned senior counsel placed reliance on the decision of Hon'ble

Supreme Court in the case of Mallikarjun vs. Gulbarga University2, the

decision of Division Bench of this Court in P.Swamy Reddy vs.

M/s.Shriram City Union Finance Limited, Nirmal Branch (CRP No.1904 of

2019, dated 14.08.2019), the decisions of Calcutta High Court in the

cases of Fingertips Solutions Pvt. Ltd., vs. Dhanashree Electronics Limited

(C.O. 3955 of 2015 dated 27.04.2016), Narendra Kumar Anchalia vs.

Krishna Kumar Mundhra3, Krishna Kumar Mundhra vs. Narendra Kumar

Anchalia4, and the decision of Allahabad High Court in the case of Larsen

and Tourbo Ltd vs. Maharaji Educational Trust (Civil Revision Case No.213

of 2010 dated 24.09.2010).

10.4. According to learned senior counsel, Section 29A of the Act, 1996,

only lays down procedure and non-compliance thereof does not vitiate

the award.

2 AIR 2004 SC 716 3 2002 LawSuit(Cal) 338 4 2003 LawSuit(Cal) 304 PNR,J & Dr.GRR,J CRP Nos.1354 & 1934 of 2021

10.5. He would submit that if there is anomaly it must be reconciled

having regard to the purpose and object of the Act.

A litigant who deliberately avoids taking notices and does not file written

statement for a long time cannot take advantage of statutory provision on

limitation after the award was passed depriving the respondent fruits of

his success.

11. The issue for consideration is whether the awards of the

Arbitrators are sustainable and Execution Petitions are maintainable?

12. The issue raised in this revision revolves on scope of Section 29A5

of the Act 1996, as it was in force at the relevant time.

This provision was introduced by way of amendment notified on

01.01.2016 with retrospective effect from 23.10.2015.

13. Section 29A of the Act, 1996, as it stood when awards were passed

mandates that the award should be passed within a period of twelve

months from the date Arbitration Tribunal enters appearance. The

explanation appended to the provision as it stood at the relevant point of

time explains that arbitrator is deemed to have entered appearance when

he received notice in writing of his appointment. It is not in dispute that

arbitrators entered appearance on 27.04.2016 in both claims. They were

Section 29A. (1) The award shall be made within a period of twelve months from the date the arbitral tribunal enters upon the reference.

Explanation:- For the purpose of this sub-section, an arbitral tribunal shall be deemed to have entered upon the reference on the date on which the arbitrator or all the arbitrators, as the case may be, have received notice, in writing, of their appointment.

(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to receive such amount of additional fees as the parties may agree. (3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.

(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub- section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:

Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, it may order reduction of fees of arbitrator(s) by not exceeding five per cent for each month of such delay.

(5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court. (6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s) appointed under this section shall be deemed to have received the said evidence and material. (7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal. (8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section. (9) An application filed under sub-section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.

PNR,J & Dr.GRR,J CRP Nos.1354 & 1934 of 2021

therefore required to pass awards within one year from that date and

admittedly they did not finalize arbitral proceedings by 27.04.2017.

14. The provision as it stood was in mandatory terms and leaves no

scope to infer otherwise. The intention of the Parliament is made

abundantly clear from the reading of Sub-sections (3) and (4). Sub-

section (3) enables parties by consent to extend the time by further

period of six months. But it also makes it clear that it should not be

extended beyond six months. According to sub-section (4), after the

initial period of one year and extended period of six months, if extended

by consent, the mandate of the arbitrator terminates. Thus, he becomes

functus-officio after that period and, therefore, seizes to be an arbitrator.

An arbitrator is a creature of the statute and has to work within the four

corners of the Act.

15. Section 29A as introduced by Amendment Act notified on

01.01.2016 was substituted by way of Amendment Act dated

09.08.20196. The amendment takes care of the drawbacks in the earlier

provision.

16. We see no merit in the contention of learned senior counsel that

the effect of substitution of Section 29A of the Act, 1996, operates

retrospectively and, therefore, award made is legal. As held consistently,

merely because word substitution is used, the amended provision does

not relate back to the date of original provision that was amended. It

depends on the language employed, effect of the amendment and the

intendment of the legislature. This issue need not detain further having

"Sec.6. In Section 29A of the principal Act,- (a) for sub-section (1), the following sub-section shall be substituted, namely:-"(1) The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of Section 23:

Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavour may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-Section (4) of Section 23.";

(b) in sub-section (4), after the proviso, the following provisos shall be inserted, namely:- "Provided further that where an application under sub-section (5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application:

Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced".

PNR,J & Dr.GRR,J CRP Nos.1354 & 1934 of 2021

regard to the intendment of the Parliament. Section 29-A was amended

vide Section 6 of the Amendment Act dated 9.8.2019. By notification

dated 30.08.2019 the effective dates of commencement of amendments is

notified. It reads as under:

"S.O. 3154 (E):- In the exercise of the powers conferred by sub-section (2) of Section 1 of the Arbitration and Conciliation (Amendment) Act, 2019 (33 of 2019), the Central Government hereby appoints the 30th August, 2019 as the date on which the provisions of the following sections of the said Act shall come into force:-

(1) Section 1;

(2) Section 4 to Section 9 (both inclusive); (3) Section 11 to Section 13 (both inclusive); (4) Section 15"

17. The disputes raised in these two revisions were covered by

unamended Section 29-A. From the dates and events of these two cases,

it is apparent that the concerned arbitrators passed awards after one

year of entering appearance. They became functus officio one year after

entering appearance and were wholly incompetent to deal with the

disputes and pass awards. Thus, awards passed by the arbitrators are

nullity and void ab initio. In law there do not exist awards and therefore

question of enforcement of the awards do not arise. The execution Court

grossly erred in not appreciating this aspect.

18. The Civil Revision Petitions are allowed. However, no order as to

costs. It is made clear that it is open to respondent-Chit Fund Company

to avail appropriate remedy as available in law to recover the money, if

any due. Pending miscellaneous petitions if any shall stand closed.

_____________________________ JUSTICE P.NAVEEN RAO

_____________________________ Dr.JUSTICE G.RADHA RANI Date: 08.04.2022 Kkm/tvk PNR,J & Dr.GRR,J CRP Nos.1354 & 1934 of 2021

HONOURABLE SRI JUSTICE P.NAVEEN RAO & HONOURABLE DR. JUSTICE G.RADHA RANI

CIVIL REVISION PETITION NOs.1354 & 1934 OF 2021

Date: 08.04.2022 kkm