Skip to content


Kunnul NoorudIn Vs. Jayabharat Credit and Investment Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration;Civil
CourtMumbai High Court
Decided On
Case NumberArbitration Petition No. 121 of 1982
Judge
Reported in1984(1)BomCR308
ActsCode of Civil Procedure (CPC) , 1908 - Sections 9A - Order 9, Rule 13; Arbitration Act, 1940 - Sections 30 and 31; Bombay Money Lenders Act, 1946 - Sections 10
AppellantKunnul Noorudin
RespondentJayabharat Credit and Investment Co. Ltd.
Appellant AdvocateS.V. Shetty and V.L. Ahuja, Advs.
Respondent AdvocateK.L. Desai, Adv.
DispositionPetition dismised
Excerpt:
.....of the terms of the said agreement and had acted on it. the agreement is clearly an agreement of hire-purchase. there is no substance, therefore, in the contention of the petitioner that the arbitrator ought not to have proceeded with the reference in view of his advocate's letter of 15-1-1982. 9. it was lastly contended by the petitioner that the arbitrator did not give him any notice of the hearing which took place before the arbitrator on 29-3-1982. thereafter the arbitrator pronounced the award ex parte on 29-4-1982. according to the petitioner, in the absence of any such notice given to him by the arbitrator of the final hearing, the award is bad, as it is in violation of the principles of natural justice. in the very first notice the arbitrator had informed the parties that if..........dated 13-1-1979 under which the petitioner was given possession of truck bearing no. kln 693 on hire purchase basis by the 1st respondent, who are described as the owners of the said truck in the said agreement. the agreement is annexed to the affidavit in reply of sanjeeva dugappa maindan dated 2-8-1983. originally the said truck was in possession of s.k. shivdas of cannanore town under a hire-purchase agreement entered into by him with the 1st respondents shivdas was unable to pay the agreed installments and the truck had been seized by the 1st respondents and was in their possession. thereafter the 1st respondents gave the said truck on a hire-purchase basis to the petitioner. according to the 1st respondent, the petitioner made defaults in the payment of agreed installments of.....
Judgment:

Sujata V. Manohar, J.

1. This is a petition for setting aside an Award made by N.G. Thakkar, Advocate on 20th April, 1982. The petitioner had entered into an agreement with the 1st respondent dated 13-1-1979 under which the petitioner was given possession of Truck bearing No. KLN 693 on hire purchase basis by the 1st respondent, who are described as the owners of the said truck in the said agreement. The agreement is annexed to the affidavit in reply of Sanjeeva Dugappa Maindan dated 2-8-1983. Originally the said truck was in possession of S.K. Shivdas of Cannanore Town under a hire-purchase agreement entered into by him with the 1st respondents Shivdas was unable to pay the agreed installments and the truck had been seized by the 1st respondents and was in their possession. Thereafter the 1st respondents gave the said truck on a hire-purchase basis to the petitioner. According to the 1st respondent, the petitioner made defaults in the payment of agreed installments of hire under the said agreement and thereupon the 1st respondents seized the said vehicle under a right which was conferred on them under the said agreement. The petitioner, however, lodged a complaint with the Manatody Police Station. Thereafter the said vehicle was seized by the Police and it seems that under an interlocutory order passed by the Judicial Magistrate, First Class, Manatody the petitioner has been given interim custody of the truck on deposit of a sum of Rs. 10,000 as security and on his executing a personal bond in a sum of Rs. 1 lac with two sureties. According to the petitioner, he has paid all the installments of hire under the said agreement and he is entitled to be declared the owner of the said truck.

2. Under Clause 20 of the said agreement dated 13-1-1979 it is provided as follows :

''XX(a) All disputes, differenced and/or claims arising out of this agreement shall be settled by arbitration in accordance with the provisions of the Arbitration Act, 1940, or any statutory amendments thereof and shall be referred to the sole arbitration of a person to be nominated by the owners. In the event of the death, refusal, neglect, inability or incapability of the person so appointed to act as arbitrator, the owners may appoint a new arbitrator. The Award of the arbitrator shall be final and binding on all the parties concerned.''

In view of the disputes which had arisen between the parties, the 1st respondents by their letter dated 18-11-1981 addressed to the petitioner terminated the said agreement and appointed N.G. Thakkar, Advocate as an Arbitrator pursuant to Clause 20 of the said agreement. The 1st respondents informed the petitioner of the name and address of the said arbitrator and informed the petitioner that they were asking the said arbitrator to fix a meeting and give directions. To this letter the petitioner sent his Advocate's reply dated 8-12-1981 in which he denied that he had entered into any hire-purchase agreement with the 1st respondent and contended that he had purchased the said vehicle from Shivdas. He also contended, inter alia, that the 1st respondent is not legally entitled to refer the matter to any arbitrator and he also contended that the Court of law at Bombay has no jurisdiction in the matters as the agreement had been arrived at in Cannanore. Thereafter the arbitrator addressed a letter dated 5-12-1981 to the petitioner and the respondents about his appointment as an arbitrator and gave directions regarding the filing of statements of claim, written statement and counter claim, if any, and gave notice that the first hearing of arbitration proceedings would take place in his Chamber at the address given in the letter of 8-2-1982, at 5.00 p.m. peremptorily and shall proceed from day-to-day. He also directed the parties to attend with their witnesses and to produce all documents before him on that day and he also informed the parties that if they failed to appear before him at the appointed time he would proceed ex parte and determine the disputes between the parties. The Advocate of the 1st respondents (sic) sent a reply dated 15-1-1982 to the learned arbitrator in which he, inter alia contended that the appointment of an arbitrator was illegal and not binding on his client. Thereafter the first meeting before the learned arbitrator was held on 8-2-1982. The 1st respondent appeared before the learned arbitrator. The petitioner was absent. The meeting was adjourned thereafter to 8-3-1982. The arbitrator wrote a letter dated 23-2-1982 addressed to the petitioner informing him of the adjourned date. The meeting before the arbitrator on 8-3-1982 was thereafter adjourned to 29-3-1982. The arbitrator wrote a registered letter dated 17-3-1982 addressed to the petitioner informing him of the adjourned date. The petitioner however denies receipt of this letter. Thereafter the hearing before the arbitrator took place on 29-3-1982 and the arbitrator made his award on 20-4-1982. Throughout the arbitration proceedings the petitioner was absent and the award was pronounced ex parte. On 21-4-1982 the arbitrator informed the parties of the making and signing of the side award. Thereafter the present petition has been filed challenging the said award.

3. After the award was made, the petitioner on 26-5-1982 has filed a suit in the Court of the Subordinate Judge, Tellichery on the basis of the said agreement dated 13-1-1979 and has asked for a decree to the effect that he has become the sole owner of the said truck since he has discharged his entire liability in respect of the said vehicle to the 1st respondent.

4. The first contention raised in this petition on behalf of the petitioner is that the said agreement of hire-purchase was not signed by him without explaining to him the contents of the said agreement and, therefore, according to the petitioner, the said agreement of hire-purchase is not an agreement in law or is in any event not binding on him. He has contended that the agreement is in English and though he has signed the said agreement in English, he did not know the English language. Nobody explained to him the contents of the agreement and he signed the agreement without understanding the contents of the agreement. As against this plea taken by the petitioner in this petition, the petitioner has, in the suit filed by him at Tellichery, relied upon this very agreement in support of his claim to have become the owner of the said truck. The suit before the Tellicherry Court is based on the provisions of this agreement and the petitioner has contended in his suit that since he has fulfilled the obligations under the said contract, he is entitled to become the owner of the said truck. He has not contended that the agreement was not explained to him or that it is not binding on him. The petitioner cannot before one Court rely upon the terms of the agreement in support of his claim and at the same time before another Court contend that the agreement is null and void and is not binding on him. His plea, therefore, that he signed the agreement without understanding it cannot be accepted. His course of conduct throughout also clearly indicates that he was fully aware of the terms of the said agreement and had acted on it.

5. The second contention of the petitioner is that the agreement of 13-1-1979 is not an agreement of hire-purchase but is an agreement of loan. Since the transaction between the petitioner and the 1st respondent is of money lending, the 1st respondents are money-lenders. The 1st respondents have not complied with the provisions of the Bombay Money Lenders Act, 1946 and hence the agreement is illegal and/or void. In support of his contention the petitioner relied upon a decision of the Supreme Court in the case of Sundaram Finance Ltd. v. State of Kerala, reported in : [1966]2SCR828 . In this case the Supreme Court was required to consider the terms of an agreement of hire-purchase entered into between the parties in order to decide whether the agreement was an agreement of sale and if so, whether any sales tax was payable in respect of the transaction in question. In that case, the customer purchased the vehicle directly from the dealer and got it registered in his name. The appellants agreed to advance to the customer the balance unpaid purchase price and pay it to the dealer. The customer executed a promissory note for repayment of the amount, a sale letter saying that he sold the vehicle to the appellants and a hire-purchase agreement under which the customer took the vehicle on hire-purchase from the appellants. On the customer paying to the appellants the stipulated amount, the vehicle would become the absolute property of the customer. The sales tax authorities contended that there were three transaction of sale-when the customer purchased the vehicle from the dealer, when the customer executed a sale letter in favour of the appellants and when the vehicle became the property of the customer on full payment under the hire-purchase agreement. The Supreme Court was required to consider the eligibility to sales tax of the last transaction. In considering whether the transaction was a transaction of sale or not, the Supreme Court observed on the basis of the terms of the documents executed between the parties that the ''sale letter'' was merely an order to create a hypothecation of the vehicle in favour of the appellants. It was not a transaction of sale but a transaction of loan on the security of the vehicle. This decision is of no relevance in the present case.

6. The agreement of hire purchase in the present case, cannot in any view of the matter, be considered as a transaction of money-lending. The vehicle was purchased directly by the 1st respondents. Under the terms of hire-purchase agreement the 1st respondents remained the owners of the said vehicle. Under Clause 5 of the said agreement the petitioner is liable to pay to the owners monthly hire charges as set out in the said clause. It is provided that on the petitioner paying to the owner all sums of money and all instalments of hire as set out in the said agreement, the hiring shall come to an end and the vehicle shall at the option of the hirer, become his absolute property; but until such payments are made, the vehicle shall remain the property of the owner. The hirer is also given the option of purchasing the vehicle at any time during the currency of the agreement by paying in one lump sum the balance of all the hire charges and all other sums under the said agreement. Under Clause 7 of the said agreement the hirer is at liberty to terminate the hiring at any time during the continuance of the said agreement by returning the vehicle to the owner at Bombay as set out in that clause. Under Clause 9, sub-clause (h), of the said agreement the hirer is required to declare to the Registering Authority that the vehicle is in his possession under this agreement and to have necessary endorsement to that effect made by the said authority. The agreement is clearly an agreement of hire-purchase. It is an agreement of bailment of the said vehicle with a provision for its sale to the petitioner as provided in the said agreement. It cannot be considered as an agreement of money lending covered by the Bombay Money Lenders Act, 1946. There is, therefore, no substance in the petitioner's contention that the agreement is illegal as it is contrary to the provisions of the Bombay Money Lenders Act, 1946. Incidentally, under the said Act, an agreement of money lending is not illegal. But (inter alia) under section 10 a Court cannot pass a decree in favour of a money lender in any suit to which the Act applies unless at the relevant time the money-lender had a licence under the said Act.

7. It is next submitted by the petitioners that the Court at Bombay has no jurisdiction in respect of disputes between the parties because the entire cause of action has arisen in Cannanore. This contention also is incorrect because the 1st respondents have accepted and executed the said agreement at Bombay. Hence a part of the cause of action has arisen here. The 1st respondents also carry on business here. Under Clause 21 of the said agreement it is provided that the agreement is executed and accepted by the owners at Bombay and it is agreed between the parties that all the terms and conditions of this agreement so far as possible shall be observed and performed at Bombay. It is also agreed between the parties that Bombay Courts shall have exclusive jurisdiction to try any legal proceedings or suit in respect of any matter, claim or dispute arising out of this agreement. Therefore, this Court has jurisdiction to deal with the subject matter of dispute between the parties.

8. It is next contended by the petitioner that as soon as the petitioner received a notice from the learned arbitrator, the petitioner by his Advocate's letter dated 15-1-1982 contended that the arbitrator had no jurisdiction and that the agreement between the parties was illegal and was not binding on him. It is submitted by the petitioner that in view of this dispute raised by him relating to legality and validity of the contract containing the arbitration clause, the arbitrator had no jurisdiction to enter upon the reference or to decide the dispute between the parties. In support of this submission the petitioner relied upon a decision of a Single Judge of this Court in the case of Chiranjilal Fulchand Parasrampuria v. Dawrkadas & Co. Ltd., reported in 59 Bom.L.R. 1053. In that case the learned Single Judge held that as the arbitrator had no jurisdiction to decide the question of legality of the contract containing the arbitration clause, as soon as a party of the arbitration proceeding challenged the legality of the contract containing the arbitration clause the arbitrator could not proceed with the reference. This decision, however, has been overruled by a subsequent decision of a Division Bench of this Court in the case of Shri Vallabh Pittie v. Narsingdas Govindram Kalani, reported in : AIR1963Bom157 . The Division Bench of this Court considered several authorities cited before it in that case and came to the conclusion that a mere denial of the existence of the contract of arbitration by one of the parties does not denude the arbitrator of jurisdiction. It is in the agreement that vests jurisdiction in the arbitrator and not its acceptance or denial. The arbitrators may consider the question, of jurisdiction, not to give a final and binding judgment on that question but in no order to determine what course they should adopt. The Division Bench held that it was open to the arbitrators to proceed with the reference. The party who contended that the arbitration agreement was not valid could either approach the Court to have the question determined either under sections 31 and 32 read together or approach the Court under section 20 of the Arbitration Act. It was also open to such a party to take a chance of the decision of the arbitrators being in his favour and challenge the award later if it went against him on the ground that there was, in fact, no valid and existing contract of arbitration. Thus, merely taking up a contention in a letter to the arbitrator that there was no valid and subsisting arbitration agreement between the parties, would not prevent an arbitrator from proceeding with the reference. There is no substance, therefore, in the contention of the petitioner that the arbitrator ought not to have proceeded with the reference in view of his Advocate's letter of 15-1-1982.

9. It was lastly contended by the petitioner that the arbitrator did not give him any notice of the hearing which took place before the arbitrator on 29-3-1982. Thereafter the arbitrator pronounced the award ex parte on 29-4-1982. According to the petitioner, in the absence of any such notice given to him by the arbitrator of the final hearing, the award is bad, as it is in violation of the principles of natural justice. In support of his contention the petitioner relies upon a decision of the Delhi High Court in the case of M/s. Lovely Benefit Chit Fund & Finance Pvt. Ltd. v. Puran Dutt Sood, reported in : AIR1983Delhi413 . In the case before the Delhi High Court both the parties had appeared before the learned arbitrator on some occasions. Thereafter the petitioners did not appear before the arbitrator in some of the meetings. The arbitrator changed the venue where the arbitration proceedings were being held and thereafter pronounced an award ex parte. On the facts of that case the Court said that the principles of natural justice required that a reasonable opportunity should have been afforded to the respondents of being heard. The learned Judge said that there was no hard and fast rule of giving a notice by the arbitrator of his intention to proceed ex parte or to change the venue of arbitration proceedings. But on the basis of the facts before the learned Judge, he felt that the principles of natural justice required that a notice should have been given to the respondents of the arbitrator's intention to proceed ex parte against them on a specified date, time and place, with the arbitration proceedings. What is, therefore, required is a reasonable to the party of the arbitrator's intention to proceed ex parte. In the present case, the arbitrator has given a number of notices to the petitioner. In the very first notice the arbitrator had informed the parties that if they failed to appear at the time and place specified by him, he would proceed ex parte against him. In spite of the clear terms of the notice, the arbitrator out of abundant caution, also gave notice to the petitioner of the adjourned date of hearing on two occasions, though the petitioner denies receipt of one of these notices. Nevertheless the arbitrator was not bound either in law or under the principles of natural justice to give a notice to the petitioner of each and every adjourned date of hearing when he had made it clear that he would proceed ex parte if the petitioner did not remain present before him. The correspondence exchanged between the parties also makes it quite clear that the petitioner had deliberately chosen to remain absent from the arbitration proceedings. He has intentionally allowed arbitration proceedings to proceed ex parte against him. He cannot now complain that the award has been made against him ex parte. There is no violation of principles of natural justice in the present case.

10. The petitioner has contended that on the merits of the dispute in the present case between the parties, he has paid all the instalments of hire charges under the said agreement. The respondents deny this and contend that the petitioner was liable to pay the defaulted amounts of Shivdas as well as the subsequent instalments. The petitioner, however, did not choose to plead his case before the learned arbitrator. It is not possible in the present petition to go into the merits of the dispute between the parties.

11. Thus, no case is made out for setting aside the award.

12. Petition is, therefore, dismissed with costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //