In FAO No. 6071 of 2019 (O&M)-PUNJ HC- P&H HC refuses to interfere in case where application u/s 8 of Arbitration & Conciliation Act was dismissed in presence of counsel for both parties yet fact of passing of arbitral award was not brought to Civil Court's notice
Justice Avneesh Jhinghan [27-03-2023]

Read Order: SHAMSHER SINGH V. HDFC BANK LIMITED AND ANOTHER

Mansimran Kaur

Chandigarh, April 25,2023: While reaffirming that the  allegations of fraud relating to civil dispute can be a subject matter of arbitration, the exception being of a fraud which invalidates the arbitration clause,the Punjab and Haryana High Court has dismissed an appeal instituted under Section 37 of the Arbitration and Conciliation Act.

A Single -Judge Bench of Justice Avneesh Jhinghan dismissed the present appeal by observing that in the present case, no case was set up either in objections under Section 34 of the Act or before this Court for rebutting the presumption invoked against the appellant as per Section 27 of GC Act.

The relevant facts were such that the appellant purchased a vehicle from Surjeet Motors, Sirsa. An account was opened in HDFC Bank, for financing the vehicle. The loan amount was to be paid in monthly installments. On default of repayment, the Bank initiated arbitration proceedings which culminated in an award dated March 19, 2015. 

 The appellant lodged an FIR of 2014, under Sections 420, 467, 468, 471 IPC . The allegations were that blank papers and cheques were made to sign by the appellant and the bank account was opened with malafide intention. He also filed a civil suit against Surjeet Motors and Branch Manager of the Bank. The application filed by the Bank under Section 8 of the Act was dismissed and the objections filed by the appellant were also dismissed, hence the present appeal.

Counsel for the appellant contended that the award was passed at the back of the appellant and the arbitrator was appointed unilaterally by the bank without informing him.

It was further submitted that the dispute was not arbitrable as there were allegations of fraud and the application under Section 8 of the Act was dismissed by the Civil Court.

After considering the submissions from both the sides, the Court noted that in the impugned order, a finding was recorded that the letter regarding appointment of the arbitrator and notice intending to proceed exparte were sent to the appellant through registered post and postal receipt were on record. To prove this fact, deposition of Mohinder Sharma, Manager of the Bank was also relied upon. 

The contention that application under Section 8 of the Act was dismissed was rejected noting the fact that the arbitral award was prior in time. The allegation that the appellant had not got the vehicle financed and bank account was fraudulently opened was rejected. The Court noted that the appellant himself made payments in ten monthly installments for repayment of the loan and had not raised any objection till ten installments were paid, the Court noted. 

Before proceeding further, the Court deemed it appropriate to analyse Section 27 of the General Clauses Act, 1897. 

In view of the same, the Court noted, Section 27 of the GC Act deals with service by post. The term 'any other expression' used in the section widens the ambit of the Section. There is presumption of service of a document, if it is posted by registered post, after prepaying, properly addressing and containing the document, the Court stated. 

In furtherance of the same, it was also noted, “There is no quarrel on the proposition that presumption of service of the document is rebuttable. The onus lies upon the party denying receipt of a document”.

Reference was made to the case of Sunil Kumar Sambhudayal Gupta and others v. State of Maharashtra. 

Thus, the Court opined that in the present case, no case was set up either in objections under Section 34 of the Act or before this Court for rebutting the presumption invoked against the appellant as per Section 27 of GC Act.

Further reference was made Vidya Drolia and others v. Durga Trading Corporation,wherein it was held, “the  allegations of fraud relating to civil dispute can be a subject matter of arbitration, the exception being of a fraud which invalidates the arbitration clause”. 

Thus, the Court at the outset observed that the dismissal of an application under Section 8 of Act after the passing of the award in itself will not nullify the award. Moreover, the application under Section 8 of the Act was dismissed in presence of counsel for both the parties yet the fact of passing of arbitral award was not brought to the notice of the Civil Court.

Hence, the Court stated that no case was made out for interference under Section 37 of the Act and the appeal was accordingly dismissed.