Sanjay Kumar Mishra vs Shriram Transport Finance Company Limited

Anand Byrareddy, J.—Heard the learned Counsel for the petitioners and the learned Counsel for the respondents.

The facts are identical in all these cases. The brief facts are as follows:

"The petitioner, who is common in all these petitions, claims that he is an iron and steel merchant carrying on business in buying and selling steel, used in construction. The first respondent is a company incorporated under the Companies Act, 1956, having its registered office at Chennai and carrying on finance business in various cities including Bengaluru. The second respondent is the Regional Branch Office of the first respondent company at Bengaluru and the third respondent is said to be the actual borrower of the vehicle and the fourth respondent is the arbitrator who has passed an award against the petitioner and the third respondent upon the purported loan hypothecation agreement. The petitioner had hired such vehicles from the third respondent for transportation of material. In the month of May 2005, the third respondent along with certain officials of the first respondent company came to his office at Bengaluru and represented to the petitioner that he had availed hire purchase facilities from the first respondent - company and as the vehicles were attached to the petitioner''s business, the first respondent company desired the petitioner to execute certain documents which would ensure that in the event of any default in the repayment of the loan by the third respondent, the first respondent could claim from the petitioner any monies due to the third respondent towards transportation cost and that the same be paid to the first respondent. The petitioner had signed various documents though reluctantly. Subsequently, it transpires that the third respondent had closed down his business and absconded. The petitioner therefore was compelled to engage the services of other transport operators. However, on the footing that the third respondent owed huge sums of money to the first respondent and that the petitioner had undertaken to discharge those outstanding amounts by virtue of documents executed, the first respondent is said to have instituted arbitration proceedings purportedly at Penukonda, Andhra Pradesh, on the footing that the arbitration agreements provide for such institution. The petitioner had received notice from the arbitrator appointed by the first respondent company unilaterally and the petitioner had taken objection to any such appointment and protested such a procedure. Thereafter, proceedings appeared to have gone on ex-parte and the petitioner was mulcted with an award.

It is in this background that the petitioner sought to have the award set aside by filing applications in the respective matters before the District Court, at Bengaluru. The court below having found that the arbitration proceedings had taken place at Penukonda was of the opinion that it is the District Court which has jurisdiction and would be competent to receive such application and has summarily rejected the application. It is that which is under challenge in the present petitions."

Shri Thiruvengadam, learned Counsel appearing for the petitioner, taking this court through the provisions of the Arbitration and Conciliation Act, 1996, would contend that the transactions are fraught with fraud and this is demonstrable on a plain examination of the material documents, which are relied upon by the first and second respondents. It is evident that these are got up documents and on a plain examination, it can be demonstrated to be as such. Therefore, fraud unravels all and it would matter little that the definition of ''court'' is indicated as being District Court having original civil jurisdiction. On the other hand, it is the District Court at Bengaluru which would have jurisdiction over the subject matter of the contract, even if it is admitted that there are agreements executed by the petitioner undertaking to discharge the liabilities that have been created by the third respondent to the extent of such transport charges which the petitioner would be liable to pay the third respondent.

Primarily, there is no such agreement executed by him out of willful consent and seeks to disown the documents that are produced by the first respondent company and its branch office in setting up a claim for arbitration. Therefore, the learned Counsel would contend that the technical objection taken by the court below as to the arbitration having taken place at Penukonda and that it is the District Court having jurisdiction over Penukonda, which would be competent to entertain the application, is without reference to the gross injustice caused to the petitioner. Therefore, the court below ought to have viewed the matter in that light in order to entertain the application and hence, the learned Counsel would seek to emphasize that the court below was not justified in summarily rejecting the application when fraud is apparent from the material on record.

The learned Counsel for respondents 1 and 2, on the other hand, would seek to justify the order of the court below.

The point for consideration in the present context is that whether the court below was right in its opinion that it did not have jurisdiction to pass the award on an application under Section 34 of the Arbitration and Conciliation Act, 1996.

Without entering upon the merits of the contentions raised by the learned Counsel for the petitioner, the question in such circumstances would be, when the arbitration proceedings rightly or wrongly having been instituted at a particular place, whether it is the civil court which would have jurisdiction over those arbitration proceedings?

Since the arbitration proceedings have apparently been conducted at Penukonda, even if the arbitration agreement was invalid or the appointment of an arbitrator was vitiated as not having followed the appropriate procedure, it would be for the petitioner to file an application to have the award set aside before the District Court having jurisdiction over such arbitration proceedings. If arbitration proceedings have been held at Penukonda, it is the District Court having jurisdiction over Penukonda which would have jurisdiction to entertain such application. Therefore, the petitioner would do well to approach the District Court. The question as to whether any such application would be barred by limitation. Since the counsel for the petitioner has expressed that if the petitions are disposed of in the opinion formed by this court, the petitioner would face the hurdle of limitation and any such application to be filed before the competent District Court in Andhra Pradesh would be rejected on account of delay.

As seen from the orders impugned, the court below has merely returned the application to be presented before the competent court. In the bona fide belief that the contentions urged ought to be considered by the very court, the present writ petitions having been filed, it can be said that the petitioner was proceeding bona fide as to his opinion on the merits of the case. Therefore, it cannot be said that the applications being filed on the disposal of these writ petitions would be rejected on the ground of limitation.

The petitioner should proceed with expedition in filing such applications and brook no delay. This would amply acquit him of any such alleged delay in instituting proceedings before the competent court. The fact that these were proceedings pending on board for all these several years after disposal by the trial court would have to be taken into consideration by the competent court, in the event the petitioner should approach such court with expedition. It is also stated that apart from this, there are other applications pending before the lower court which are similarly filed. The petitioner would be well advised to withdraw those applications and immediately move applications before the court at Andhra Pradesh.

The petitions stand disposed of in terms as above.