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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE P. JYOTHIMANI
Dr. Sasidaran
Versus
India Cements Capital Limited, Rep. by its Assistant General Legal, Pradeep & Others
O.P. Nos.426 of 3009 & 121 of 2010
Decided On : 04-12-2010
Novation - Hire Purchase Agreement - Arbitration and Conciliation Act, 1996, Section 34 - 2008 (6) CTC 509 (SC), 1966 (2) SCR 823 - The court discussed the Novation Agreement, valuation of the vehicle, and the legal principles of novation and sale valuation. The court found that the Novation Agreement was not signed by the claimant and concluded that there was no formation of a new contract. The valuation report was found to be vague and unreliable. The court held that the Arbitrator's decision was not illegal or unreasonable, and confirmed the award.
Fact of the Case:
The claimant initiated Arbitration proceedings against the First Respondent for defaulting on a Hire Purchase Agreement for a truck. The Arbitrator awarded the claimant an amount with interest, which was challenged by the Respondents.
Finding of the Court:
The court found that the Novation Agreement was not signed by the claimant, and there was no formation of a new contract. The valuation report was deemed unreliable. The court confirmed the Arbitrator's decision as legal and reasonable.
Issues: The main issues were the validity of the Novation Agreement and the valuation of the sold vehicle.
Ratio Decidendi: The court held that the Novation Agreement was not valid as it was not signed by the claimant, and the valuation report was unreliable. The court confirmed the Arbitrator's decision as legal and reasonable.
Final Decision: The Original Petitions were dismissed, and the award of the Arbitrator was confirmed. No costs were awarded.
1. These Original Petitions are filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity, “the Act”) challenging the award of the Arbitration dated 26.11.2008. While the Third Respondent before the Arbitrator ahs filed O.P NO.426 of 2006, Respondents 1 and 2 have filed O.P. No.121 of 2010.
2. For the sake of convenience, the parties are referred to as per their rank before the Arbitrator.
3. 1. It is based on a Hire Purchase Agreement entered between the claimant and the First Respondent for purchase of a second hand truck TATA LPT 1997 Model bearing registration No. NL-01-A-5940 by obtaining finance to the tune of Rs. 4,50,000/- under an agreement dated 22.9.2000, for which Respondents 2 and 3 stood as guarantors, the claimant had claimed an amount of Rs. 7,04,881/- with interest at the rate of 36% per annum and initiated Arbitration proceedings.
3.2 It is stated that when the First Respondent was unable to repay the amount, he has surrendered the vehicle before the claimant within one year and at the request of the claimant, who is stated to have introduced one Ahmed Koya, a Novation Agreement was entered between the First Respondent and the said Ahmed Koya and the said deed was stated to have been handed over to the claimant after obtaining signatures of the said Ahmed Koya and the First Respondent and therefore, according to the Respondents by virtue of the Novation Agreemetn, the original Hire Purchase Agreement dated 22.9.2000 stood terminated and the entire arbitration is without jurisdiction.
3.3 It is stated that thereafter the claimant has sold the vehicle for an amount of Rs. 1,50,000/- and according to the Respondent, the sale was effected without finding out the correct value. It is the case of the Respondents that the claimant has not accounted for the amounts paid by the First Respondent towards installments and the sale has been effected for a meagre amount, which, according to the Respondents, is a bias.
3.4 Before the Arbitrator, the claimant has examined one witness and marked 20 documents, while on the side of the Respondents, one witness was examined and four documents were marked.
3.5. The Arbitrator has passed an award on 26.11.2008 allowing the claim of the claimant, by directing the Respondents to jointly and severally pay an amount of Rs. 5,54,881/- with interest at the rate of 9% per annum from the date of filing of the claim, till the date of realization, apart from ordering arbitration expenses and costs. It is against the said award, the present Original Petitions are filed by the respective Respondents.
3.6 The award is challenged by the Respondent on various grounds, including that the same has been passed on mere surmises; that the legal Principle of Novation has been ignored; that the claimant has made an unlawful claim with mala fide intention and the Valuation Certificate itself has been obtained by fraud for selling the vehicle for a very low amount; and that the award is one sided.
4.1. It is the contention of the learned Counsel for the Respondents that when once the First Respondent has paid six installments and thereafter a new contract was entered with Ahmed Koya, the original Hire Purchase Agreement comes to an end and therefore, there is no Hire Purchase Agreement in existence and hence, the award is bad in law.
4.2. It is the further case of the Respondents that during the pendency of the Arbitration, the claimant has sold the vehicle which is stated to be valuing Rs. 5,75,000/-at a low price of Rs. 1,50,000/- and therefore, it is not a fair value and in spite of the same, the Arbitrator has directed the payment of the amount of Rs. 5,54,881/- with interest at the rate of 9% per annum and it is their contention that no sale has in fact taken place.
4.3. The learned Counsel for the Respondents to substantiate their contention about the first legal point about novation would rely upon a letter dated 15.11.2002, marked as Ex.C5, to show that b
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