TMI Blog2008 (11) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 3 were the guarantors for the due compliance of the terms of agreement. On the same day, the first petitioner, along with the other two petitioners, entered into an arbitration agreement marked as Ex. A2. In terms of the Hire Purchase Agreement, the first petitioner was to repay the amount in 36 monthly instalments i.e., at ₹ 25,700/- for the first 30 instalments starting from 8.6.2001 to 8.11.2003 and at ₹ 25,500/- for the remaining 6 instalments starting from 8.12.2003 to 8.5.2004. 2. Clause 6 of the Hire Purchase Agreement stipulated that in the event of a default, the first petitioner was to liable pay additional finance charges at 36% per annum. It is stated that, apart from delaying the payment of monthly instalments on due dates, the first petitioner herein committed default; thus in terms of the hire purchase agreement, attracted the additional finance charges on the defaulted amount. In view of the default thus committed and in terms of the agreement on arbitration, the first respondent sent a notice on 27.8.2003 to the first and second petitioners and on 24.12.2003 to the third petitioner-guarantor. Notice on the appointment of the Arbitrator was sent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llogical and fanciful, the petitioners pointed out that when there was an offer for the sale of the vehicle for ₹ 5,60,499/-, which was within the knowledge of the first respondent, there was no justification for the sale of the vehicle for a lesser sum. It is stated that the vehicle was taken possession as in full and final settlement of the claim. However, the first respondent failed to carry out the promise and sold the vehicle for a sum of ₹ 3,50,000/- even during the subsistence of the agreement under the guise of a default in payment of the dues under the agreement. The petitioners took the stand that by selling the vehicle for a paltry sum of ₹ 3,50,000/-, the first respondent had caused a wrongful loss of ₹ 2,10,499/-. Consequently, the petitioners claimed that there was loss of business notionally valued at ₹ 2,00,000/-. Thus a counter claim of ₹ 4,10,494/- was made against the first respondent. The petitioners alleged that the first respondent had failed to produce the statement of accounts and the receipts, which would establish the ingenuity of the claim of the first respondent. 5. After hearing both sides and on perusal of the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A16 is the notice of arbitration sent to the first and second petitioners and Exs. A17 and A18 are the postal acknowledgments of the notices of arbitration. Ex. A19 is the letter of appointment of the Arbitrator and Ex. A20 is the postal acknowledgment of Ex. A19. Ex. A23 is the postal acknowledgment of the service of notice on the third petitioner. The petitioners alleged that the learned Arbitrator acted in a biased manner and that there is no material recorded to show that the learned Arbitrator was satisfied of the claim of the first respondent herein. Taking the objection that the Application itself is not maintainable as the first respondent had not placed the original of the Hire Purchase Agreement on the basis of which the claim was made, learned counsel pointed out that that Mr. Om Prakash Sandu did not have any authority to sign the pleadings on behalf of the first respondent. No documents were filed in support of his claim that he was authorised to file the Claim Petition and prosecute the proceedings. Learned counsel appearing for the petitioners pointed out that the person who signed as a witness in the hypothecation agreement marked as Ex. C1 cannot sign the Claim Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legation that the agreement was signed in blank form and that the first respondent had interpolated the same are baseless. As held by this Court in the decision reported in S.S.M. Soundappan and 5 others v. K.G. Balakrishnan and 14 others, 1997 (2) CTC 385 in the absence of any proof, the allegations have to be rejected. 14. As regards the contention of the petitioners herein that they had entered into an agreement dated 15.7.2003 for the sale of the vehicle at ₹ 5,85,000/-, document marked as Ex. B2, learned counsel appearing for the first respondent submitted that the vehicle was surrendered on 19.7.2003. Had there been really a sale agreement, the petitioners would not have surrendered the vehicle in such an eventuality, apart from the fact that the petitioners should have informed about the sale agreement, which they did not. Hence, the contention as to the sale agreement is only an after-thought to oppose the claim in the arbitration proceedings. Learned counsel submits that in any event, given the credit for depreciation, the vehicle could not have been sold for more than ₹ 3,50,000/-, since the vehicle was not in good condition. The first respondent further su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim Petition but later on taken with the permission of the learned Arbitrator for the purposes of filing the same before the Criminal Court in connection with the Criminal Complaint filed against the petitioners. He submitted that the provisions of the Indian Evidence Act applied only to the judicial proceedings as held in the decision reported in Vijay Packaging v. Spectra Packs Private Ltd., 2002 (2) CTC 705 and the Arbitrator was required to follow the principle of fairness and the well established principles of evidence sustained and the technical objection based on Section 34 of the Indian Evidence Act need not be considered by the Arbitrator. Pointing out that the learned Arbitrator should have passed an award of ₹ 4,92,175/- as against an award of ₹ 4,59,206/-, learned counsel appearing for the first respondent pointed out that there was calculation error and mistake and that this Court had jurisdiction to correct and modify the same. Learned counsel submits that there are no merits in the Application; hence, the same be dismissed. 19. Considering the claims of the first respondent as to the filing of the original agreement and the power of attorney filed bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case was posted on 13th February 2004 by the learned Arbitrator and a common counter was also filed by the petitioners herein. The petitioners submit that there had not been a proper initiation of the proceedings; hence the same is liable to be rejected. On a perusal of the counter filed on behalf of the petitioners, it is seen that no objection was taken as has now been contended nor the grounds raised before this Court touch on this. Except for an oral submission made, no protest was made as to the assumption of jurisdiction of the learned Arbitrator at any stage of the proceedings. In the circumstances, there being no contention taken to object to the jurisdiction at the earliest opportunity, I do not find any justification in the submission of the learned counsel appearing for the petitioners that there is no proper initiation of the arbitral proceedings. In any event, having participated in the proceedings without raising any protest, I do not find, there exists any ground violating Section 16 of the Act. 22. As regards the second contention of the learned counsel appearing for the petitioners that the Claim Petition did not carry the seal of the Company, it may be note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the proceedings before this Court and that the Arbitrator is required to follow the principles of fairness and the well established principles of evidence sustained and the technical objection based on Section 34 of the Indian Evidence Act need not be considered by the Arbitrator. 25. While considering the question as to a situation where the award was passed on the accounts statement produced by the claimant that the aggrieved party to the award contended that the claimant had failed to prove the entries therein in accordance with the Indian Evidence Act, this Court, considered the submission based on Section 34 of the Indian Evidence Act. Rejecting the said submission, this Court held as follows: 12. The submission made by placing reliance on Section 34 of the Evidence Act is not very well founded as Section 1 of the Indian Evidence Act, 1872 provides that the Act applies to judicial proceedings in or before any Court, including Courts-martial. The Act in terms does not apply to arbitral proceedings. It is clear that the arbitrator is not confined by the technical rules of evidence and so long as the basic principle of fairness and the well established principles of evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 705 that failure to give notice about the petitioners being set ex parte is fatal to the passing of the award. 29. It is seen from the records that although the arbitration proceedings commenced in the year 2004, the matter stood adjourned on several occasions for one reason or the other. As rightly pointed out by the first respondent, the matter stood adjourned by more than 29 times. When the learned Arbitrator decided to set anyone ex parte, it is but fair that the parties must be informed about the said decision. Learned Arbitrator should have given information of the said decision to the first respondent before passing the award as against the petitioners. 30. It is not denied by the petitioners that they did not appear either in person or through counsel on 23.8.2004. No reasons are given in the Petition filed before this Court as to the absence of the petitioners to appear on that day before the learned Arbitrator. The petitioners, however, contend that the learned Arbitrator passed the order summarily, without affording a reasonable opportunity to the petitioners herein and made an ex parte order in an unceremonious manner. It is further claimed that there is no m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for claimant argued the matter. Respondent set ex parte. Post it for award. Call on 6.9.2005. Sd/- xxxx 23.08.2005 33. It may be noted that under Section 25 of the Arbitration and Conciliation Act, 1996, when the claimant failed to communicate the statement of claim in accordance with Section 23(1) of the Arbitration and Conciliation Act, 1996, the Arbitral Tribunal is entitled to terminate the proceedings. As per Section 25(b) of the Arbitration and Conciliation Act, 1996, where the respondent fails to communicate his statement of defence in accordance with sub-section (1) of Section 23, the Arbitral Tribunal shall continue the proceedings without treating that failure as an admission of the allegations of the claimant. Under sub-section (c) of Section 25, if a party fails to appear in a hearing or to produce documentary evidence, it is open to the Arbitral Tribunal to pass an award on the evidence before it. The provision lays down the consequences of the failure, thereby ensure the effectiveness of the parties' agreement or settlement of the dispute through arbitration. It may be seen from Section 25(c) that the Arbitral Tribunal is not precluded from proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he party concerned does not attend, he will proceed in his absence. But if after making such a peremptory appointment and issuing such a notice, the Arbitrator does not in fact proceed ex parte on the day fixed, but fixes another subsequent date, he cannot proceed ex parte on such subsequent date unless he issues a similar notice in respect of that date as well. If he issues a similar notice and the party concerned does not appear, an award made ex parte, will be in order. But if he does not issue such a notice on the second occasion, but nevertheless proceeds ex parte, the award will be liable to be set aside, in spite of a notice of a peremptory hearing having been given in respect of the earlier date, subject, however, to the condition that prejudice was caused to the party against whom the ex parte order was made. But this duty to give notice of an intention to proceed ex parte is not an absolute duty. If it appears from the circumstances of the case that a particular party is determined not to appear before the Arbitrators in any event, as when he has openly repudiated either the reference itself or the particular Arbitrators and has shown no desire to recant, the Arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural justice in giving this opportunity to the petitioners herein. There had been consistent default of the petitioners in their appearance before the Arbitral Tribunal. After posting the case finally on 5.7.2005, at the request of the first respondent, the matter was adjourned to 2.8.2005 from 26.7.2005. The petitioners did not appear. Hence, the matter was posted on 9.8.2005. As per the order dated 9.8.2005, there is no endorsement as to whether the petitioners were present. Thereafter on 27.8.2005, the last hearing date, the petitioner herein was called absent, set ex parte and on 6.9.2005, the award was passed. It is no doubt true that in a given set of circumstances, an ex parte order passed is liable to be set aside if it results in prejudice to the defaulting party by reason of the fact no fair opportunity was granted to the defaulting party to defend his stand. As already noted, Section 25 of the Arbitration and Conciliation Act, 1996 lays down the consequences of failure of a party to appear before the learned Arbitrator. When there had been consistent defaults, the contention of the petitioners that failure to give a second notice to proceed ex parte would vitiate the aw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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