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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
Komal Narula - Petitioner
Versus
DMI Finance Pvt. Ltd. And Anr. - Respondents
O.M.P. (COMM.) 166 of 2019 and IA Nos. 6024 of 2019 & 11657 of 2020
Decided On : 15-07-2021
Arbitration and Conciliation Act, 1996 - Section 34 - Award - Loan Agreement - Whether petitioner was served due notice of arbitral proceedings and had full opportunity to defend the case instituted by respondents - Petitioner has assailed the impugned award on the ground as set out in Section 34(2)(a)(iii) of the A&C Act - that petitioner was not given a proper notice of appointment of Arbitral Tribunal or of the arbitral proceedings and, was unable to defend the case - Disputes that had arisen between the parties in relation to a Common Loan Agreement.
Finding of the Court: Arbitral Tribunal had proceeded on basis that the petitioner had refused service of notice. But, there is no evidence or any material to indicate that petitioner had refused service of the notice sent to her at her address - Respondents have failed to establish that petitioner was duly served of notices regarding constitution of the Arbitral Tribunal or had due notice of arbitral proceedings at material time. Although it does appear that one of notices sent to the petitioner at her correct address had not been received back but, in facts of present case, where petitioner has affirmed on affidavit that she had not received any notice from the Arbitral Tribunal and the respondents have failed to establish that the same was delivered to the petitioner - Court is of the view that there is merit in the petitioner’s contention that she did not have notice of appointment of the Arbitral Tribunal or of the arbitral proceedings. Court is of the view that there is merit in the petitioner’s contention that she did not have notice of appointment of the Arbitral Tribunal or of the arbitral proceedings - Impugned award set aside.
Result: Petition is allowed.
JUDGMENT :
VIBHU BAKHRU, J.
1. The petitioner has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘A&C Act’) impugning an arbitral award dated 01.05.2016 (hereinafter ‘the impugned award’) passed by the Arbitral Tribunal comprising of a learned Sole Arbitrator.
2. The impugned award was rendered in the context of disputes that had arisen between the parties in relation to a Common Loan Agreement dated 14.01.2015.
3. By the impugned award, the Arbitral Tribunal has partly accepted the claims preferred by the respondents. The Arbitral Tribunal has accepted that the total amount of Rs.1,43,92,456/-is payable to respondent no.1 in respect of its claim; and an amount of Rs.62,57,590/-. is payable to respondent no.2 in respect of its claim. The Arbitral Tribunal has further awarded pendente lite and future interest till realisation of the awarded amounts at the rate of 12% per annum. The Arbitral Tribunal has also awarded costs, which it quantified at Rs.80,000/-.
4. The petitioner has assailed the impugned award on the ground as set out in Section 34(2)(a)(iii) of the A&C Act – that the petitioner was not given a proper notice of appointment of the Arbitral Tribunal or of the arbitral proceedings and, was unable to defend the case.
Factual context
5. DMI Finance (hereinafter ‘respondent no. 1’) is registered as a non-banking finance company with the Reserve Bank of India (RBI) and DMI Housing (hereinafter ‘respondent no. 2’) is registered as a housing finance company with the National Housing Bank. The respondents are companies of the same group with a common management.
6. It is the respondents’ case that Ms. Komal Narula (the petitioner), Mr. Nitin Chawla, Mr. Harsh Chawla, Mr. Jitin Chawla and Chawla Iron Traders Private Limited (hereinafter collectively referred to as ‘Borrowers’) jointly approached them and requested for financial assistance of Rs.1,65,00,000. The respondents jointly agreed to grant two loans of a sum of Rs.1,15,00,000 and Rs.50,00,000 respectively (hereinafter collectively referred as ‘loan facilities’). It was further agreed between the parties that the loan facilities and the payment obligations would be secured against an equitable mortgage of the “freehold residential entire 3rd floor with roof rights build on plot bearing 156 in-Block – A, having area admeasuring 287.50 sq. yards situated in the layout plan of Janta Co Operative House Building Society Ltd, Meera Bagh, Paschim Vihar, New Delhi -110087” (hereinafter ‘the Property’).
7. The said loan facilities were sanctioned by the respondents by letters dated 14.01.2015, which were signed by the Borrowers, as acceptance of the terms and conditions contained therein.
8. Pursuant to the sanction of the said loan facilities, a Common Loan Agreement dated 14.01.2015, a Demand Promissory Note dated 14.01.2015 and an Affidavit cum Undertaking dated 14.01.2015 were executed by the Borrowers.
9. Further, the Borrowers executed a declaration and a letter dated 14.01.2015 confirming the deposit of the title deeds and deposited the original title documents of the Property with the respondents.
10. The sanctioned loan amount of Rs. 1,15,00,000 was disbursed by respondent no.1 vide Cheque No. 000265 dated 16.01.2015 drawn on HDFC Bank in favour of M/s Chawla Iron Traders Private Limited and Rs. 50,00,000 was disbursed by respondent no.2 vide Cheque No. 000045 dated 16.01.2015 drawn on HDFC Bank for Rs. 26,52,838 in favour of HDFC Bank Limited Loan A/c No 28333075; vide Cheque No. 000046 dated 16.01.2015 drawn on HDFC Bank for Rs. 12,11,930 in favour of IndusInd Bank Limited; vide Cheque No. 000047 dated 16.01.2015 drawn on HDFC Bank for Rs. 5,25,999 in favour of Shriram City Union Finance Limited; Cheque No. 000048 dated 16.01.2015 drawn on HDFC Bank for Rs. 3,30,142 in favour of Mrs. Harsh Chawla; and a sum of Rs. 2,79,091 was adjusted towards processing charges and other charges.
11. In terms of the Common Loan Agreemen
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