Mortgage disputes are non-arbitrable, and interested third parties can contest the executability of arbitral awards in execution proceedings.

ORDER

An award made in favour of the revision petitioner under the provisions of the Arbitration and Conciliation Act, 1996 (in short, “the Act”) was sought to be enforced under the Code of Civil Procedure, 1908 (in short, “the Code”). At the instance of a third party to the arbitral proceedings, the court held that the award is a nullity and hence unenforceable. Insofar as the revision petitioner is concerned, that was a bolt from the blue. Feeling aggrieved, the revision petitioner challenges the order on E.A.No.379 of 2013 in E.P.No.412 of 2011 in Arbitration O.P.No.10 of 2008 before the District Court, Ernakulam on the ground that invocation of Section 47 of the Code by the court below was erroneous and opposed to law. According to the revision petitioner, except by way of taking a recourse against the award under Section 34 of the Act, neither a party to the award nor a non party can take a short cut under of the Code to challenge the virus of the award.

2. Heard Dr.George Abraham, learned counsel for the revision petitioner and Sri. Sreelal N.Warrier, learned counsel for the first respondent.

3. Brief facts relevant for appreciating the rival contentions are as follows: Revision petitioner is a public limited company engaged in the business of extending financial assistance to prospective customers. It is a non banking finance company. Second respondent requested the revision petitioner to finance for purchase of a vehicle. Accordingly, the revision petitioner extended a hire purchase finance facility to the second respondent with the third respondent as guarantor. An agreement was executed on 29.07.1998. Respondents 2 and 3 provided security to the revision petitioner, for prompt repayment of the hire purchase installments under the agreement, by creating an equitable mortgage over their property comprising 72 cents of land. Thereafter, respondents 2 and 3 made defaults in repaying the amounts. Therefore, the revision petitioner caused to issue a legal notice demanding the respondents to pay off the liability. Since they did not settle the claims, the revision petitioner invoked clause 21(a) and (b) of the hire purchase agreement, whereby the parties had agreed to settle all the disputes, differences and/or claims under the agreement by arbitration. Accordingly an arbitrator was appointed. In the claim petition, following prayers are made by the revision petitioner:

“In these circumstances the Claimants pray that an award be passed directing the Respondents:

I. to pay a sum of Rs.20,92,549/- as on09.12.2008 to the claimants jointly and severally with interest @ 36% per annum till the date of realization, in default of which, the Claimants be permitted to bring the said property mortgaged by the third Respondent to sale with the intervention of court of competent jurisdiction and in the appropriate proceedings

II. To pay the cost of these arbitration proceedings and

III. To pass such further or other reliefs deem to fit and proper in the facts and circumstances of the case and render justice.”

4. In spite of sending notices to respondents 2 and 3, they did not appear before the arbitrator and contest the matter. The arbitrator had raised issues for consideration. The issue relevant for our purpose is issue No.5, which reads thus:

“Is the mortgage created by the Respondents valid and liable to be brought to sale for non payment of the award amount by the Respondents?”

On 26.10.2009, the arbitrator passed an award in the following terms:

“In the result Award is passed directing the Respondents 1 and 2 to pay jointly and severally a sum of Rs.24,23,802/- with interest at 18% per annum on the said sum from 27.10.2009 till the date of payment/realisation, and costs of Rs.27,000/- and in default thereof the Claimants are entitled to bring the mortgaged property namely land measuring an extent of 29 Ares and 20 Sq.metres (72 cents) in survey number 649/1/25 now Resurvey Number 16/7 Block No.17 situate at Mookkannoor (Manapara) village, Al