An executing court cannot suo motu annul an arbitral award or go behind the decree unless it is a nullity due to inherent lack of jurisdiction. Challenges to an award's validity must be pursued through Section 34 of the Arbitration and Conciliation Act, 1996.

ORDER :

Pavan Kumar Dwivedi, J.

Heard on I.A. No.10073 of 2025, which is an application for condonation of delay.

There is a delay of 76 days in filing the appeal.

Learned counsel for the appellant submits that the delay in filing the present appeal was caused because the head office / registered office of the appellant company is situated at Chennai. After the order came to the knowledge of the appellant, certified copy was obtained and the local office at Bhopal contacted the head office / registered office for permission to file the appeal.

Considering the reasons mentioned in the application, I.A. No.10073 of 2025 is hereby allowed. The delay in filing the present appeal is condoned.

2. The present appeal has been filed by the appellant under Section 37 of the Arbitration and Conciliation Act, 1996 being aggrieved by the order dated 12.04.2025 passed in an execution petition filed under Section 36 of the Arbitration and Conciliation Act read with Order XXI Rule 11 of the Code of Civil Procedure, 1908.

3. The facts of the case are that the appellant is a Public Limited Non- Banking Financial Company incorporated under the provisions of the Companies Act, 1956 and regulated by the Reserved Bank of India. The appellant is engaged in the business of providing financial facilities in the form of loans secured by mortgage.

4. The respondents approached the branch office of the appellant for a finance facility against the property proposed to be mortgaged. Accordingly, a loan agreement was executed on 19.03.2021 pursuant to which a loan of Rs.1,50,000/- was sanctioned and disbursed, repayable in EMIs together with interest at the rate of Rs.24.54.% per annum. The loan agreement contained a dispute resolution clause. Upon default by the respondents in repaying the loan in terms of the loan agreement, the appellant invoked the arbitration clause and opted for institutional arbitration with the Kovise Foundation Conflict Resolution International (for short "KFCRI") for appointment of sole arbitrator.

4.1 The said institution after following the established procedure, appointed one Shri S.R. Periyasammy, Advocate vide letter dated 31.05.2023 as the sole arbitrator for adjudicating the dispute between the appellant and the respondents.

4.2 Despite granting ample opportunities to the respondents to participate in the arbitration proceedings by issuing registered notices, they failed to appear before the learned arbitrator. Neither did they raise any objections on the merits of the issue nor did they raise any objection to the appointment of the arbitrator nominated by KFCRI. Consequently, the learned arbitrator passed an ex parte award dated 21.09.2023 directing repayment of an amount of Rs.1,86,658.86/- along with interest at the rate of 24.54% per annum from 07.03.2023 in favour of the appellant.

4.3 Even after the passing of the said award, the respondents failed to make payment. Accordingly, after the expiry of the period prescribed for challenging the award, the appellant filed an execution application under Section 36 of the Arbitration and Conciliation Act, 1996 read with Order XXI Rule 11 of the Code of Civil Procedure, 1908 before the learned II Additional District Judge, Biaora, District Rajgarh, which was registered as EX AB 3/2024.

4.4 The said Court initially issued notices to the respondents in the execution proceedings, however, the respondents failed to appear therein. Despite the same, the executing Court by referring to various judgments of the High Court and even of the Hon'ble Supreme Court, suo motu dismissed the execution application by the impugned order passed on 12.04.2025 holding that the arbitrator had been appointed unilaterally and that the award passed by the sole arbitrator was invalid due to lack of inherent jurisdiction. Consequently, the award passed by the sole arbitrator was held to be unenforceable. Being aggrieved by the said order passed by the executing Court, the present appeal has been filed.

5. Learned cou