The judgment underscores the significance of notice and opportunity to be heard in arbitration proceedings, and the consequences of non-appearance.

This original petition is filed to set aside the award passed by the second respondent dated 14. 2007.

2. The case of the petitioners is that on 21. 2005, the first petitioner entered into an agreement of hire purchase with the first respondent company for a sum of Rs. 6 lakhs for the purchase of TATA vehicle bearing Engine No.AUZ 100930, Chassis No.AUZ 101653. The second petitioner stood as the guarantor in his personal capacity and executed the said agreement. According to the petitioners, as per the terms of agreement, the first petitioner has to repay the loan amount in 45 monthly instalments at the rate of Rs. 17,150/- per month from the first month to the 30th month and at the rate of Rs. 15,700/- per month from the 31st month to 45th month. According to the first petitioner, he paid 21 instalments and thereafter, due to his ill-ness, he could not use the vehicle and was unable to pay the due amounts. The time to pay the entire loan amount was available till 210. 2008. The first petitioner surrendered the vehicle to the company at Sonbhadra in Uttar Pradesh State in the month of July, 2006 and according to the him, the balance payable was Rs. 2,85,000/-.

3. It is also stated in the petition that the first respondent informed the first petitioner while handing over possession of the vehicle, that the Manager of the first respondent can sell the vehicle for a sum of Rs. 5 lakhs and return back the excess, if any to the first petitioner and believing; the said promise, he returned to his native place. It is further stated that only after receiving the notice from the Execution Petition from the learned District and Sessions Judge, Sonbhadra, Uttar Pradesh, on 22. 2008. he came to know about the passing of the arbitration award against the petitioners on 14. 2007.

4. The contention of the first respondent that the vehicle was sold for a sum of Rs. 3,20,000/- is stated to be false in the petition and in fact, the vehicle was sold for a sum of Rs. 4,95,000/- on 30.9.2006 as per the information given to the petitioner by his friend. It is averred in the petition that the company nominated the second respondent as Sole Arbitrator, without giving any proper notice and intimation to the petitioners and the second respondent, in violation of the principles of natural justice, with the prejudicial mind and in a biased manner, passed the award. The petitioners deny the arbitration agreement itself in this petition and consequently the award passed by the second respondent, as Arbitrator, is sought to be set aside on the ground that no notice of appointment of Arbitrator was sent to the petitioners, no notice was received by the petitioners from the Arbitrator regarding the proceedings and without their knowledge, they were set ex parte on 14. 2007 and the impugned award was passed on the same day in favour of the first respondent.

5. It is also contended in the grounds that the proceedings dated 13. 2007 sent to the petitioners, which were returned with an endorsement made in some vernacular language, is not known to the Arbitral Tribunal, hence, it was presumed that the service is completed and due to the lack of opportunity given to the petitioners, the impugned award is to be set aside under Section 34(2)(a)(ii) of the Arbitration and Conciliation Act, 1996

6. The first respondent has filed counter affidavit stating that the loan agreement was signed by the petitioners on 21. 2005 and the said agreement contains a clause that in the event of default in payment of the Instalments, the borrower is liable to pay additional finance charge at 36% per annum, on the arrears of the sum due. until realisation and the loan obtained by the first petitioner was guaranteed by the second petitioner, who also signed in the agreement. Since there was default in payments, the first respondent re-possessed the vehicle and the same was sold through auction for a sum of Rs. 3,20,000/- being the highest bid. The difference amount of Rs. 2,71