IN THE COURT OF [ENTITY]: CIVIL JUDGE10, CENTRAL, TIS HAZARI COURTS : DELHI M.No[SECTION] In reference: M/s. [ENTITY] Petitioner VERSUS OM SARUP KHOSLA & Ors. Respondents ORDER
1. Vide this order, the objections u/[SECTION] & [SECTION] of [ACT] (hereinafter referred to as 'the Act') filed by respondent no.2 Ms. [ENTITY] for setting aside the award dt. 24.08.1991 shall be disposed of.
2. The factual background necessary for the disposal of present objections is that there was a commercial agreement between M/s. G.B.S. Chits Pvt. Ltd. on one side and Sh. [ENTITY], Ms. [ENTITY] and Ms. [ENTITY] on the other. On the dispute having arisen between these two parties, the matter was referred to an arbitrator for adjudication. The learned arbitrator gave an ex parte M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
award against the respondents on 24.08.1991 and thereafter the petitioner applied for making the exparte award as the rule of the court by filing [CASE NUMBER] which was allowed on 17.11.1992. Thereafter, the petitioner took out the execution proceedings against the respondents and got a notice published in the newspaper 'Statesman' on 04.10.1993. On 18.10.1993, the respondent sent a reply to the present petition contesting their claim and also pointing out the notices were never served on them with regard to the award of the arbitrator as being made rule of the court.
3. Thereafter, application of the respondent u/[SECTION] [ACT] read with [SECTION] [ACT] was allowed and the exparte decree dt. 17.11.1992 was set aside and consequently the execution petition was dismissed as infructuous. It is in view of these facts that the present objections have been filed.
4. It has been stated by respondent no.2 that the respondents have not executed any document, no amount was received, arbitration agreement was not executed, no notice has been received from the Arbitrator and the summons were not sent at the correct address; that the award was obtained without disclosing that the amount of the cheque was not credited in the account of the respondents; that this Hon'ble Court has confirmed while deciding issue no.1 framed on application u/[SECTION] [ACT] that the summons were not served on M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
the respondents and the address given in the summons was PocketII and not PocketXI; that the respondent no.1 and 3 have died during the pendency of the case, the matter is now being contested only by the respondent no.2 and the respondent no.2 has not inherited anything; that the respondents have not received any claim copy filed by the petitioner either from the petitioner or from the Arbitrator; that the respondents have not been served before the Arbitrator and the addresses mentioned in the alleged notices are not correct; that no notice of appointment of the Arbitrator was given and the reference was made unilaterally; that the award given by the Arbitrator is an ex parte one and the said award has been made without giving an opportunity of hearing to the respondents herein and the same is illegal and void; that the petitioner has failed to disclose any dispute required for making a reference to the Arbitrator; that the respondents have never consented for the appointment of the Arbitrator and have not executed any document acknowledging the appointment of the Arbitrator; that even the fact appearing on the documents on record shows that the same is vague in regard to the particulars of the alleged Arbitrator; that the respondent no.1 has not given any bid in the auction claimed to be held on 25.04.1990 and the father of the deponent has not signed any voucher dt. 27.05.1990, receipt, demand promissory note, receipt, and arbitration agreement dt. 27.05.1990;
M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
that the amount of the cheque bearing no. 053158 for Rs.34,975/ has not been credited in the account of respondent no.1; that as per the bank record of the petitioner, the amount of the cheque was credited in the account of G.K. Plastic Industries; that Sh. [ENTITY], Manager of UCO Bank has also made statement during his evidence, on the application of the respondents that the amount of the cheque was credited in the account of G.K. Plastic Industries operated by Sh. [ENTITY]; that the Arbitrator has misconducted in the proceedings and has not acted fairly and honestly. Hence, it is prayed that the impugned award be set aside.
5. In reply, it is admitted that the cheque was not credited in the account of respondent no.1 but it has been submitted that the cheque has been endorsed by the respondent no.1 as the same was issued in the name of Sh. [ENTITY]; that in execution no.76/06 a witness from UCO Bank, Mukherjee Nagar Branch, Delhi deposed before the predecessor of this Hon'ble Court that the cheque bearing no.053158 dt. 27.05.1990 for Rs.34,975/ favouring Sh. [ENTITY] issued by M/s. G.B.S. Chits Pvt. Ltd. was apparently endorsed in favour of M/s. G.K. Plastic Industries by Sh. [ENTITY] and on 18.08.1992 Sh. [ENTITY] received the amount from M/s. G.K. Plastic Industries vide cheque no. 845198 for Rs.50,000/; that the respondents have been deliberately avoiding the service through process server and M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
registered a/d, however, the respondents were duly served by [ACT]; that the arbitration agreement named the Arbitrator and it was duly signed by both the parties; that it is not denied that cheque bearing no.053158 for Rs.34,975/ has not been credited in the account of respondent no.1 but it does not mean that the amount has not been received by the respondent no.1; that the demand promissory note was signed by the respondent no.1 as principal debtor and the respondents no.2 & 3 as guarantors; that the amount mentioned in the promissory note is Rs.44,000/ on 27.5.1990 and the amount was repayable with interest @ 21% p.a. and the principal amount has been calculated on the above mentioned figure; that the objections are barred by limitation. With these submissions it is prayed that objections filed by respondent no.2 be dismissed.
6. Rejoinder has been filed on behalf of respondent no. 2 wherein the averments made in the objections have been reiterated and that of the reply have been denied.
7. Arguments heard. Record perused. Reliance has been placed upon [PRECEDENT]., [PRECEDENT]., and [PRECEDENT]
8. The foremost thing to be seen is how this court has M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
jurisdiction to try and entertain the present objections. [SECTION] of the Act does not prescribe the Court before which an application under this section may be filed, but [SECTION] of the Act makes such provision. [SECTION] provides that all questions regarding the validity, effect or existence of an award or arbitration agreement shall be decided by the Court in which the award under the agreement has been filed or may be filed. [SECTION] prescribes the Court in which the award may be filed.
9. [SECTION] lays down the forum, the court which will have jurisdiction to decide the questions forming the subject matter of the reference, if there were a suit in respect of them. The application may, therefore, be moved in the court within whose jurisdiction the opposite party resides or carries on business or within whose jurisdiction any part of the cause of action arises.
10. The validity of an arbitration agreement or of an award can be challenged by an application under [SECTION] the Act. Hence, this court is competent to try the present objections.
11. The first objection raised by respondent no.2 is that notice of the arbitration proceeding was never served upon the respondents and therefore, the impugned award has been passed without even affording an opportunity of being heard to the respondents. The fact that the respondents were not served has been duly considered while passing M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
the order dt. 20.01.2014 in execution no.46/13 on application u/[SECTION] [ACT]. After a detailed appreciation of evidence, it has been held that the respondents were not served and this finding has been upheld till the Hon'ble High Court as it has been observed in order dt. 11.09.15 that Learned Trial Court after recording of the evidence had opined that the respondent had not been served and this was rightly so as evidence was brought on record. Hence, the question to be considered now is whether non service of respondents is a ground for setting aside award u/[SECTION] and [SECTION] of the Act.
12. [SECTION] of the Act provides that an award can be set aside if the arbitrator has misconducted himself or the proceedings. It is the import of the word 'misconduct' that is now to be looked into. Such misconduct does not necessarily imply moral turpitude. It means misconduct in the judicial sense of the word and not from a moral point of view. There may be ample misconduct in the legal sense even though there is no ground for imputing the slightest improper motive to the arbitrator. In that sense misconduct means even misconduct arising from some honest, though erroneous, breach and neglect of duty and responsibility on the part of the arbitrator causing miscarriage of justice and includes any irregularity of action which is not consonant with general principles of equity and good conscience which ought to govern the conduct of an arbitrator. The arbitrator in M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
their function which is quasi judicial must act in a judicial manner. They should give notices, maintain proper records and notes. Though they need not strictly follow the rules of procedure and evidence, yet they cannot dispense with the substance of justice. Any departure from the fundamental rules of procedure and established canons of justice will vitiate their award which is liable to be set aside and the arbitrators will be held guilty of misconduct under [SECTION]. Giving an opportunity of being heard to both the parties is the basic principle of natural justice and conducting any proceeding without serving the notice on one of the parties is basically denying the right of being heard.
13. In the present case, since the respondents were not served with the notice of arbitration proceedings, it can very well be said that it amounts to misconduct within the meaning of [SECTION] of the Act.
14. The second objection raised by respondent no.2 is that no notice of appointment of arbitrator was sent to the respondents. In the present case, no notice of appointment of arbitrator has been placed on record. Rather, letter dt. 02.05.91 was sent to the arbitrator on behalf of M/s [ENTITY] only for adjudication of dispute that was stated to have arisen between the parties. It has been held by Hon'ble Supreme Court in Dulal Poddar vs. Executive Engineer AIR 2004 SC 1049 M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
that when an appointment of arbitrator is made without sending a notice to opposite party, such an appointment is illegal and the award made by such an arbitrator is to be set aside. Hence, the impugned award fails on this account as well.
15. The third objection raised on behalf of respondent no.2 is that the name of arbitrator has not been mentioned properly in the arbitration agreement. Perusal of arbitration agreement shows that the name of sole arbitrator has been mentioned as Sh. [ENTITY]. It is submitted on behalf of respondent no.2 that in the absence of specific particulars, there is ambiguity in the identity of arbitrator. Per contra, it is submitted on behalf of respondents that if that be the case, the respondent should have not signed the arbitration agreement. It is not the case of respondents that they have not signed the arbitration agreement or their signatures have been obtained fraudulently. Once, they have signed the agreement they cannot be allowed to deny any part of it on the ground of ambiguity. The objections as to confusion in identity of the arbitrator could have been and should have been raised at the time of signing the agreement itself.
16. Another objection raised on behalf of respondent no.2 is that the amount in question was never received by respondent no.1 but was credited in the account of G.K. Plastic Industries and that the impugned award does not show how the amount has been calculated M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
by the arbitrator and hence, the award deserves to be set aside. However, the law is well settled that an award is not invalid and cannot be set aside merely on the ground that it allowed a lump sum in full satisfaction of the claim, without dealing with every item of the claim separately, and without specifying the period for which the claim was being allowed or disallowed, and without mentioning the rate at which the claim was being accepted and allowed. Further, it has been held in [PRECEDENT] that when a court is called upon to decide the objections raised by a party against an arbitration award, the jurisdiction of the court is limited as expressly indicated in the [ACT], and it has no jurisdiction to sit in appeal and examine the correctness of the award on merits with reference to the materials produced before the Arbitrator. The court cannot sit in appeal over the views of the arbitrator by reexamining and reassessing the materials.
17. It has been held in [PRECEDENT] that where the arbitrator has laid down the principles of law correctly, the award cannot be challenged on the ground of erroneous application of those principles where no reasons for arriving at the conclusion are given in the award.
18. Similarly, it has been held in [PRECEDENT] that an award may be set aside on the ground of M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion.
19. It is well settled that the court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out whether or not the arbitrator has committed an error of law.
20. The court cannot interfere with the decision of an arbitrator on questions of fact or of law, but if there is an error of law apparent on the face of the award the Court can interfere. In [PRECEDENT] , the Privy Council cited with approval the following observations of [ENTITY], J. in Hodgkinson v. Fernie :
'The law has for many years been settled, and remains so at this day, that where a cause or matters in difference are referred to an arbitrator, a lawyer or a layman, he is constituted the sole and final judge of all questions both of law and of fact The only exception to that rule are cases where the award is the result of corruption or fraud, and one other, which though it is to be regretted is now, I think M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
firmly established viz. where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award.' The Privy Council observed :
'An error in law on the face of the award means, in their Lordships' view, that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and, which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party that opens the door to seeing first what that contention is, and then going to the contract on which the parties' right depend to see if that contentions is sound.'
21. Thus, in view of above legal proposition, respondents cannot challenge the impugned award on the ground that the amount in question was not received by them or that the award has not been properly calculated as this court does not have jurisdiction to decide M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.
this objection while exercising power u/[SECTION]/[SECTION] of the Act.
22. It is submitted on behalf of petitioner that the present objections are barred by limitation as they ought to have been filed within 30 days from the date of knowledge of filing of award. However, it is to be noted that the impugned award was made a rule of court and an application u/[SECTION] [ACT] was filed to set aside the same which was allowed by the trial court vide order dt.20.01.14 which was ultimately upheld by Hon'ble High Court vide order dt. 11.09.15. The present objections have been filed on 01.10.15 i.e. within 30 days of setting aside of the ex parte decree. It has been held in [PRECEDENT] that where the award was made a rule of the court before the expiry of period for filing objection and decree is set aside on the ground, objections filed within 30 days of the date of the setting aside of the decree would not be barred by time. Hence, the present objections are within limitation.
23. In view of above discussion, present objections are allowed and award dt. 24.07.1991 is set aside.
24. File be consigned to record room.
[ENTITY] Digitally signed by [ENTITY] Announced in the open MITTAL Date: 2019.11.23 17:37:25 +0530 Court on 23.11.2019 ([ENTITY]) Civil Judge10 (Central) THC/Delhi
M/s. GBS CHITS [PRECEDENT] [ENTITY] & ORS.