The court reaffirmed that under Section 34 of the Arbitration and Conciliation Act, 1996, the scope for judicial interference with arbitral awards is limited, focusing on procedural compliance and the absence of patent illegality.

JUDGMENT :

In this appeal, filed under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, “the Act of 1996”), challenge is to the judgment and order dated 31^st October, 2017, passed by the learned Principal District Judge, Amravati, whereby the learned Principal District Judge allowed the application made by the respondent under Section 34 of the Act of 1996 and set aside the award dated 26^th April, 2014, passed by the learned sole Arbitrator.

2. The facts are as follows:

The appellant is a Multistate Credit Co-operative Society. The respondent borrowed a sum of Rs.17,00,000/- from the appellant on 28^th January, 2011. The loan agreement stipulated the terms and conditions with regard to the repayment, interest, security, etc. As agreed, the respondent pledged 100 cotton bales weighing 187 quintals at the relevant time, lying in the Charbhuja Ware Housing Godown owned by the appellant. The rate of the cotton bales mutually agreed at that time was Rs.13,202.25 per quintal. The loan amount was to be repaid on or before 19^th March, 2011. In case of failure of the respondent to repay the loan amount within the stipulated time, the appellant had the right to sell the cotton bales and recover the loan amount.

3. It is the case of the appellant that the respondent did not repay the loan amount before 19^th March, 2011. The appellant made a demand of the money orally as well as in writing. The appellant, on the request of the respondent, extended the period for repayment of the loan amount up to 17^th September, 2011. The payment was not made within the extended time. The appellant, therefore, issued number of notices to the respondent and called upon the respondent to repay the loan amount. Similarly, the respondent was informed by the appellant that the appellant was proceeding ahead to call bids for the sale of the cotton bales. The notice, calling bids from the public, was published in the Deshonnati Newspaper on 9^th February, 2012. The bids were to be opened on 17^th February, 2012. The bids were opened, and M/s. Amrut Cotton Industries, Khamgaon, District Buldhana, was declared to be the successful bidder. The cotton bales were sold for Rs.13,58,282/-. The sale proceeds were credited in the loan account of the respondent. It is the case of the appellant that, after adjusting the amount of the sale proceeds of the cotton bales, the sum of Rs.7,73,083/- was still outstanding against the respondent. The appellant, vide notice dated 13^th June, 2013, called upon the respondent to pay the amount with interest. The respondent did not pay the amount. Therefore, the Board of the appellant decided to initiate the proceeding under Section 84 of the Multistate Co-operative Societies Act, 2002, against the respondent.

4. The dispute was, therefore, referred to the learned sole Arbitrator. The appellant filed a claim statement with the documents before the learned Arbitrator. The notice of the claim was issued to the respondent. The respondent, despite receipt of the notice, failed to appear before the learned Arbitrator. The affidavit of the evidence of witness No.1 on behalf of the appellant was filed. The witness produced the relevant documents. The cross-examination of the witness examined by the appellant was treated as closed, inasmuch as the respondent failed to contest the claim. The learned Arbitrator, vide award dated 26^th April, 2014, allowed the claim and directed the respondent to pay a sum of Rs.7,73,083/- to the appellant with interest @ 15.50% from 13^th June, 2013, till the realization of the said amount.

5. The respondent, on being served with this award by the learned Arbitrator, filed an application under Section 34 of the Act of 1996 for setting aside the award on multiple grounds before the learned Principal District Judge, Amravati. The appellant appeared in the said proceeding and contested the said application. The learned Principal District Judge, on re-appreciation of the material on record, allowed the appli