Rajatha Mahal Jewellers, Prop. K.V. Jayaprakash and Others vs Secretary, Government of Tamil Nadu, Commercial Taxes and Registration Department and Others

P.R. Shivakumar, J.—Heard both sides. The subscriber to a Chit, who turned out to be the priced subscriber pursuant to which a

promissory note was executed by the subscriber and two sureties, has come forward along with the said sureties, with the present writ petition

challenging the order of the first respondent passed in an appeal preferred against the award made by the second respondent in the statutory

arbitration in A.R.C. No. 2189 of 2004, praying for the issuance of a writ of certiorarified mandamus to quash the same and to direct the first

respondent (appellate authority) to remand the Arbitration Case in A.R.C. No. 2189 of 2004 to the second respondent (arbitrator) for conducting

further enquiry and pass further orders.

The above said prayer has been made on the premise that the award of the arbitrator was passed ex parte and the appellate authority, namely

the first respondent, also did not properly consider the fact that the writ petitioners were prejudiced because of the passing of the ex parte award.

The writ petition is opposed by the respondents contending that the petitioners, who were respondents in the A.R.C., after service of notice, did

enter appearance but failed to file their counter opposing the claim made by the third respondent herein which made the arbitrator/second

respondent to proceed with the ex parte enquiry and that hence, the second respondent cannot be said to have adopted a procedure against the

established legal principles of arbitration. The further contention of the respondents is that though the opportunity given to the writ petitioners was

not availed by them before the arbitrator, such an opportunity was available to them in the appeal filed before the first respondent in which they

could have sought permission to produce documents in support of their case of defence, if any, which they failed to do and that every ground of

objection raised by the petitioners herein before the appellate authority was specifically dealt with and answered properly by the appellate

authority. In short, the contention of the respondents is that the opportunity, which the petitioners did have before the arbitrator and also the

appellate authority, were not utilized by them and that they did not come forward with any plea that they have paid any part of the amount due to

the third respondent. Under such circumstances, the respondents have contended that the High Court, in exercise of its writ jurisdiction under

Article 226, shall not interfere with the order of the first respondent confirming the award passed by the second respondent.

Mr. V. Girish Kumar, appearing for the petitioners and Mr. M.R. Raghavan, appearing for the third respondent and Mr. M.S. Ramesh, learned

Additional Government Pleader representing the respondents have advanced arguments in line with the above said stand taken by them in the writ

petition.

This Court paid its anxious considerations to the same.

From a perusal of the record, it is found that the petitioners, who were the respondents in the arbitration case, after entering appearance and

getting a number of adjournments for filing counter, did not file counter, which left the arbitrator with no other option than to proceed with the

enquiry ex parte, which resulted in the award dated 5.12.2005 holding that the petitioners herein, as subscriber and guarantors, were jointly and

severally liable to pay a sum of Rs. 3,50,000/- towards principal and a sum of Rs. 1,26,000 towards interest along with the expenses of arbitration

which was fixed at Rs. 9910/-. The petitioners herein were also directed to pay interest at the rate of 12% from the date of filing of the case till

payment. In proof of the applicant''s case/case of the third respondent herein, one witness was examined and three documents were marked. The

promissory note executed by the first petitioner in the writ petition along with the second and third petitioners, who signed it as securities, was

produced before the arbitrator as Document No. 2. The receipt executed by the first respondent for the receipt of the priced money was produced

as Document No. 1 and the legal notice issued before the institution of the arbitration case was produced as Document No. 3. All the above said

evidence was taken into consideration and the arbitrator passed an award as indicated supra.

The writ petitioners preferred an appeal before the first respondent raising the following contentions:

1) The chit was unregistered and hence, the initiation of the arbitration under the Act was not sustainable;

2) No legal notice was issued under Sections 32 and 33 of the Chit Funds Act; and

3) No copy of the Chit agreement was given to the appellant.

As the said contentions were not raised before the arbitrator, the arbitrator cannot be expected to answer the above said contentions. No doubt

such contentions were raised before the appellate authority, namely the first respondent. The first respondent, from the records produced, found

that the Chit was a registered one and that legal notice u/s 33(1) was issued to the appellants therein/writ petitioners. Though the appellants had

taken a stand that copy of the Chit agreement was not given to them, the fact remains that no evidence to substantiate such a stand had been

adduced. Above all, the writ petitioners did not dispute the contention of the third respondent that the first petitioner was the priced subscriber and

the promissory note was executed by the first petitioner in which the second and third petitioners signed as securities. It is also not in dispute that

the pronote was executed for a sum of Rs. 3,50,000/-, the balance subscription to be paid. That being so, the writ petitioners ought to have stated

whether the said amount was paid or any portion of the said amount was paid. No such stand was taken by the writ petitioners. Therefore, the

necessary inference would be that the writ petitioners did not make any payment after the execution of the receipt and promissory note dated

4.4.2001 on payment of the priced money to the first petitioner. That being so, the petitioners'' prayer for quashing the order of the first respondent

and for issuing a direction to the first respondent to remit the case A.R.C. No. 2189 of 2004 to the second respondent to conduct fresh enquiry

and disposal cannot be sustained. For all the reasons stated above, this Court comes to the conclusion that there is no merit in the writ petition and

the same deserves dismissal.

Accordingly, the writ petition is dismissed. No costs.