India

Krishnabhagwan Rajaram Sharma vs M/S Tata Motors Finance Ltd; [Arbitration Petition No.304 of 2014] decided on 4th March 2015: The petitioner (being the respondent in arbitration) filed an application under section 34 of the Indian Arbitration and Conciliation Act, 1996 (Arbitration Act) to set aside the exparte award dated October 7, 2013.

Brief facts of the case:
The petitioner approached the respondent for a loan of Rs.19,64,000/- in December 2009. The respondent sanctioned the loan vide agreement dated December 30, 2009, payable in monthly installments of Rs.50,797/- w.e.f. March 2, 2010. On May 2, 2012 the respondent issued a loan recall notice calling upon the ppetitioner to pay sum of Rs.12,07,650.77 and terminated the agreement and also called upon vide notice under Section 21 of the act stating that failure to abide would give rise to a right to appoint a sole arbitrator.

An arbitrator was appointed and the petitioner was notified. The respondent filed a claim petition under Section 17 of the act and ad-interim ex-parte order was passed. The arbitrator issued notice to the petitioner to remain present on June 16, 2012 failing which the matter shall be dismissed or proceeded ex-parte.

On June 16, 2012 the petitioner filed an application under section 13(2) of the act, before the sole arbitrator challenged his appointment. The matter was adjourned. On July 28, 2012, neither the petitioner nor his advocate were present before the sole arbitrator at the time of hearing of the application and the matter was adjourned to subsequent further dates. The petitioner received a copy of the Award dated October 7, 2013 passed by the learned arbitrator.

Contentions of the lawyers of the petitioner and respondent:
The lawyer of the petitioner submits that the learned arbitrator ought to have issued notice to the petitioner before proceeding with the matter ex parte against the petitioner and in absence of such cautions notice informing the petitioner that the learned arbitrator would proceed ex-parte against the petitioner in case of the petitioner failing to remain present. Therefore, the award rendered by the learned arbitrator is in violation of principle of natural justice.

However, the lawyer of the respondent submits that since the petitioner chose not to participate in the proceeding inspite of full knowledge, they cannot urge that the learned arbitrator proceeded exparte and in the case the arbitrator has right to go ahead with the proceeding in the absence of the petitioner.

Judgement and conclusion: The Honourable Court observed that Section 24(2) of the Arbitration Act, provides that the parties shall be given sufficient advanced notice of any hearing and of any meeting of the arbitral tribunal for the purpose of inspection of documents, goods or other property and under section 25(c) of the Arbitration Act, if a party fails to appear at an oral hearing, the arbitral tribunal may continue proceedings and make the arbitral award on the evidence before it. Hence, there is no provision under the Arbitration Act, which makes it mandatory for an arbitrator to issue a caution notice to a party for every meeting stating that in absence of such party, the learned arbitrator would proceed with the proceedings ex-parte.

Further, the Honourable Court relied on the judgement of Noor Shaikh Mohammed Hussain Vs. Tata Motors Limited in Arbitration Petition No.937 of 2010 wherein the High Court of Bombay held that once a party had failed to attend the proceedings in absence of the petitioner. The court did not interfere with the ex-parte award rendered by the learned arbitrator in view of the petitioner remaining absent from time to time.

The court observed that after perusal of the record indicates that the petitioner had admittedly not responded to the loan recall notice issued by the respondent. The petitioner did not file any written statement. Further, the court observed that it is not the case of the petitioner in the petition that they were not defaulters. Therefore, the court held that the learned arbitrator had considered the evidence on record made available by the respondent and has highly allowed the claims made by the respondents in absence of the petitioner. Hence, there is no ground made out for interference with the award which is passed and therefore the petition need not be admitted.

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