arbp1142-10.doc 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.1142 OF 2010 Upkar Infra Projects Pvt. Ltd. & Anr. .. Petitioners Versus Tata Motors Finance Ltd. .. Respondents Mr.Vishal Kanade with Uzan Kazi i/b. Negandhi, Shah & Himayatullah for petitioners Mr.Chinmay Gupte i/b. Mohit Gadkari & Co. for respondents CORAM : S.C.DHARMADHIKARI, J. DATE : 9th FEBRUARY 2011. P.C.: 1] The challenge in this petition is to the award dated 15th April 2010 rendered by the sole arbitrator. Tata Motors Finance Ltd., previously known as TML Financial Services Ltd., was the original claimants whereas the petitioners are the original respondents. 2] The loan cum hypothecation cum guarantee agreement dated 6th June 2007 was executed by and between the parties under which the loan amount of Rs.1,63,50,000/- was advanced. It was undertaken to be paid in 35 monthly instalments commencing from 11th july 2007 and ending on 11th May 2010, without committing any defaults. The arbp1142-10.doc 2 agreement is admitted so also the fact that the same contains clause 23 whereby the parties resolved to have disputes and differences by arbitration. 3] It is stated that the statement of claim was received and the respondents petitioners before me filed written statement on 12th October 2009 to which a rejoinder was filed. The claim arises out of defaults committed in payment of loan by monthly instalments. The preliminary objection was raised by the petitioners – original respondents about the bias of arbitrator. They question the impartiality of the tribunal mainly on the ground that although the letter which is dated 15th May 2009 referring the dispute between the parties to the arbitration, the Arbitrator has addressed a letter which is dated 5th May 2009 and that is how it was urged that even prior to the claims being referred to him for arbitration, he was biased in favour of respondents original claimants. The Arbitral Tribunal, in my view, rightly turned down this objection by observing that the letter is dated 15th May 2009 it was posted on 20th May 2009 but due to typographical error the date mentioned was 5th May 2009. This typographical error will not be of any assistance to the petitioners. arbp1142-10.doc 3 4] I am not in agreement with Mr.Kanade on the point of bias of the Arbitrator as beyond the reference to the said letter, nothing has been pointed out by which it could be said that there was real and genuine apprehension of bias in this case. 5] The second contention of Mr.Kanade is that the perusal of the agreement would show that the first respondent company is the borrower. The second petitioner has signed the agreement in his capacity as an employee/ Director of the first respondent company and not as a guarantor. Therefore, the award could not have been made against all the petitioners on the basis that the petitioner No.1 company is the borrower and petitioner Nos. 2 and 3 are the guarantors. He invites my attention to the statement of claim in which, according to him, the respondent itself has stated that the petitioner No.1 is the borrower and the petitioner No.2 is the employee Director of the borrower. He is not a guarantor and, therefore, not sued in that capacity. If this is the claim of respondent itself, then, the Arbitrator could not have ignored it and made all three liable. 6] It is then contended that the Arbitrator erroneously proceeds on arbp1142-10.doc 4 the basis that the petitioners declined to cross examine the respondent’s witness or that they did not lead their evidence in defence. In fact an affidavit of the claimant’s witness was filed on 12th March 2010 along with original documents but the said witness Ramprasad K.K., was not present. Therefore, there is no question of cross examining the said witness when he was not present. The question of petitioner declining to cross examine does not arise. In such circumstances, the Arbitrators finding that the petitioners did not choose to cross examine this witness and did not file evidence in defence is erroneous and violates basic tenets of fairness, equity and justice. In such circumstances, the Award is contrary to public policy. 7] Learned Advocate appearing for respondents supported the award and submitted that none of the arguments have any basis, inasmuch as the Arbitrator was not biased and interested in the subject matter of the reference nor the claim has been accepted without any evidence or proof. Once the petitioners decline to cross examine the witness, then the Arbitrator cannot be expected to wait until the petitioners make a request in that behalf. He has not denied then opportunity to defend but if the petitioners did not seek leave to cross examine the respondent’s witness or arbp1142-10.doc 5 lead evidence, then, the Arbitrator was justified in holding that the claim is proved by relying upon the affidavit in lieu of examination in chief and the contents of the documents produced. 8] As far as the direction to pay the awarded sum by all the petitioners is concerned, it is submitted that the Court may pass appropriate directions modifying the award to that limited extent. 9] Having heard both learned Counsel at some length and with their assistance perusing the petition and the annexures thereto including the Award, I am of the opinion that save and except the limited modification in the Award, the ultimate finding and direction therein can be sustained. Firstly, the Arbitrator was not biased and interested in the subject matter of reference and that aspect has also been dealt with by him. There was absolutely no basis, much less, reasonable for entertaining any such apprehension. 10] As far as the contention of denial of opportunity to lead evidence is concerned, even that is without any substance because the Arbitrator has at more places than one in the award observed that when arbp1142-10.doc 6 the original documents along with affidavit of evidence is filed, the petitioners declined to cross examine the witness nor did they file any evidence. This is the finding rendered in para 9 of the Award, which is reiterated in para 16 thereof. To my mind, the arguments now canvassed are purely an after thought. Nothing prevented the petitioner from making a request to summon Mr.Ramprasad for cross examination. It does not appear from the record that any such application was ever made. Nothing also prevented the petitioners from leading their own evidence and even such a request does not appear to have been made. Except oral arguments, which have been dealt with in para 15 of the Award, nothing was produced to controvert any of the allegations in the statement of claim or to support the version in the written statement/defence. Therefore, there is merit in the contention of the learned Counsel for the respondent that the Arbitrator was justified in holding that the claim stands proved by virtue the affidavit of evidence of the claimants’ witness and the contents thereof. 11] However, there is some substance in the grievance of Mr.Kanade that the petitioner No.2 K.Ravindra Reddy cannot be made liable independently and in his capacity as alleged guarantor to pay the arbp1142-10.doc 7 amounts as awarded. If the Annexure I to the agreement is perused, it is clear that it is signed by K.Ravindra Reddy. He has signed as authorised signatory/ Managing Director of the company. The guarantor’s name is M.Vasudev Reddy. In the column “details of guarantor” the name of K.Ravindra Reddy is not mentioned. In these circumstances and by the statements made in para 1 of the Statement of Claim, it is clear that the said Ravindra Reddy, petitioner No.2 is not independently liable nor can he be termed as guarantor of the loan given to the borrower. He has not secured or guaranteed the repayment of the amounts lent and advanced to the first petitioner company. In such circumstances, by relying upon a Full Bench decision of this Court reported in 2010 (1) Mh.L.J. 547 (R.S.Jiwani (M/S), Mumbai Vs. Ircon International Ltd., Mumbai) to which I have been a party, even at this stage the Award can be modified. Such modification is permisible in law, as has been held by the Full Bench. If the portion which is erroneous can be separated and segregated from the rest of the award, then, the award can be sustained. Applying this principle and partially modifying the award, this petition is dismissed. No costs. 12] It is directed that the amounts as awarded will be recovered arbp1142-10.doc 8 from the petitioner Nos. 1 and 3 and petitioner No.2 will not be personally liable to pay the amounts as awarded in the Award 15th April 2010. 13] Needless to state that if any amounts have already been paid by the petitioners or petitioner No.3 under the subject award, due credit and adjustment will be made in the records of the respondent and if no such adjustments or credit is given, it will be open for petitioners to make appropriate grievance before the court enforcing and executing the award. (S.C.Dharmadhikari, J)