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Indiabulls Housing Finance Limited Vs. Green Gardens Private Limited - Court Judgment

LegalCrystal Citation
CourtChennai High Court
Decided On
Judge
AppellantIndiabulls Housing Finance Limited
RespondentGreen Gardens Private Limited
Excerpt:
in the high court of judicature at madras dated:30. 04.2013 the honble mr. justice vinod k.sharma o.p.nos.228, 229, 258 and 272 o”1. m/s.indiabulls housing finance limited *(previously known as indiabulls financial services limited) having its registered office at f-60, ii floor, connaught place, new delhi-110 001. rep. by its authorized representative mr.r.inbasekaran ... petitioner in o.p.nos.228 & 229 o”2. m/s.indiabulls securities limited having its office at plot no.448-451, udyog vihar phase v, gurgaon-120 001. haryana ... petitioner in o.p.no.258 o”3. mrs.a.indira anand 4. mrs.k.bharathi ... petitioners in o.p.no.272 of 2012 -vs- 1. green gardens private limited 601, anna salai, chennai-600 002.2. gemini arts private limited, 601, anna salai, chennai-600 002.3. gemini.....
Judgment:
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated:

30. 04.2013 THE HONBLE MR. JUSTICE VINOD K.SHARMA O.P.Nos.228, 229, 258 and 272 o”

1. M/s.Indiabulls Housing Finance Limited *(previously known as Indiabulls Financial Services Limited) having its Registered Office at F-60, II Floor, Connaught Place, New Delhi-110 001. Rep. By its Authorized Representative Mr.R.Inbasekaran ... Petitioner in O.P.Nos.228 & 229 o”

2. M/s.Indiabulls Securities Limited having its Office at Plot No.448-451, Udyog Vihar Phase V, Gurgaon-120 001. Haryana ... Petitioner in O.P.No.258 o”

3. Mrs.A.Indira Anand 4. Mrs.K.Bharathi ... Petitioners in O.P.No.272 of 2012 -vs- 1. Green Gardens Private Limited 601, Anna Salai, Chennai-600 002.

2. Gemini Arts Private Limited, 601, Anna Salai, Chennai-600 002.

3. Gemini Foundation Private Limited, 601, Anna Salai, Chennai-600 002. Also at: Plot B, 60-63, PIPDC Industrial Estate, Mettupalayam, Pondicherry-606 001.

4. Mr.A.Ravishankar Prasad, 5. Mr.A.Manohar Prasad 6. Mrs.AIndira Anand, 7. Mrs.K.Bharathi 8. M/s.Indiabulls Housing Finance Limited (previously known as Indiabulls Financial Services Limited) having its Registered Office at F-60, II Floor, Connaught Place, New Delhi-110 001.

9. Hon'ble Arbitrator P.K.Balasubramaniyan, 32, New Moti Bagh, New Delhi-110 043. ... Respondents 1 to 9 in O.P.Nos.228, 258 o”

10. M/s.Indiabulls Housing Finance Limited (previously known as Indiabulls Financial Services Limited) having its Registered Office at F-60, II Floor, Connaught Place, New Delhi-110 001.

11. M/s.Indiabulls Securities Limited No.935, GKS Towers, I Floor, Poonamallee High Road, (Near Abu Palace Hotel) Chennai-600 084.

12. Green Garden Private Limited 601, Anna Salai, Chennai-600 002.

13. Manoharamma Hotels & Investments (P) Ltd., 601, Anna Salai, Chennai-600 002.

14. Gemini Arts Private Limited, 601, Anna Salai, Chennai-600 002.

15. Gemini Foundation Private Limited, 601, Anna Salai, Chennai-600 002.

16. Positive Housing (P) Ltd., 45, Arcot Road, Saligramam, Chennai-600 093.

17. Mr.A.Manohar Prasad 18. Mr.A.Ravishankar Prasad 19. Mr.Justice P.K.Balasubramaniyan (Retd.), 32, New Moti Bagh, New Delhi-110 043. ... Respondents 10 to 19 / 1 to 10 in O.P.No.272 o”

20. Manoharamma Hotels & Investments (P) Ltd., 601, Anna Salai, Chennai-600 002.

21. Mr.A.Ravishankar Prasad 22. Mr.A.Manohar Prasad 23. Positive Housing (P) Ltd., No.220, Okhla Industrial Estate, Phase-III, New Delhi-110 020.

24. Mrs.A.Indira Anand 25. Mrs.K.Bharathi 26. Hon'ble Arbitrator P.K.Balasubramaniyan, 32, New Moti Bagh, New Delhi-110 043. ... Respondents 20 to 26 / 1 to 7 in O.P.No.229 of 2012 (*The name of the company "Indiabulls Financial Services Limited has been changed to M/s.Indiabulls Housing Finance Limited vide order of amendment dated 08.04.2013) Prayer in O.P.228/12:- Original Petition is filed to to set aside the award dated 18.02.2012 to the extent of the directions passed by the Hon'le Arbitrator directing the petitioner to pay a sum of Rs.7 Crores to the 6th respondent and a sum of Rs.23 Crores to the 7th respondent and to direct that the payment of interest by the borrowers, namely, the 1st to 5th respondents at the contracted rate of interest as per the terms of the said agreement dated 26.06.2008 until 13.10.2009 and declare that the sale of the shares made by the petitioner 19.12.2008 as purportedly in breach of an injunction order passed by the Hon'ble Court passed in Suit No.1172 of 2008 and Suit No.1177 of 2008 was beyond the jurisdiction of the Hon'ble Arbitrator. Prayer in O.P.258/12:- Original Petition is filed to to set aside the arbitral award dated 18.02.2012 in respect of imposition of penalty of Rs.13 Crores on the petitioner to be payable to the pledgors and the observation made in respect of knowledge of injunction order passed in suit(s) filed by pledgors and / or subsequent observation made in respect thereof. Prayer in O.P.272/12:- Original Petition is filed to to set aside the award dated 18.02.2012 passed by the learned Arbitrator. Prayer in O.P.229/12:- Original Petition is filed to to set aside the arbitral award dated 18.02.2012, namely, the Hon'ble Arbitrator to the extent that the petitioner was disentitled from claiming at the enhanced rate of interest and the penal interest at the rate of 10% p.a. In terms of the said agreement, to direct that the Rs.72,05,97,260/- (Rupees Seventy Two Crores Five Lakhs Ninety Seven Thousand Two Hundred and Sixty only) should be appropriated in the first instance towards interest and the balance, if any available, to be thereafter adjusted against Principal amount and also to set aside the finding of the Hon'ble Arbitrator that the Principal Outstanding was Rs.72,05,97,260/- (Rupees Seventy Two Crores Five Lakhs Ninety Seven Thousand Two Hundred and Sixty only) on 31.3.2008 and hold that principal amount was Rs.82,00,00,000/- (Rupees Eighty Two Crores only) as on 31.3.2008. For Petitioners : Mr.T.V.Ramanujam, S.C. For Mr.S.Raghunathan (in O.P.Nos.228 & 229 of 2012) Mr.Vijay Narayan, S.C. For Mr.N.Namasivayam (in O.P.No.258 of 2012) Mr.Rajuramachandran, S.C. For Mrs.R.Maheswari (in O.P.No.272 of 2012) For Respondents : Mr.Rajuramachandran, S.C. For Mrs.R.Maheswari (For R1 to R3) Mr.Vijay Narayan, S.C. For Mr.N.Namasivayam (For R8) (in O.P.No.228 of 2012) Mr.Rajuramachandran, S.C. For Mrs.R.Maheswari (For R1 to R3) Mr.T.V.Ramanujam, S.C. For Mr.S.Raghunathan for R8 (in O.P.No.258 of 2012) Mr.T.V.Ramanujam, S.C. For Mr.S.Raghunathan for R1/R10 Mr.Vijay Narayan, S.C. For Mr.N.Namasivayam (For R2/R11) (in O.P.No.272 of 2012) Mr.B.S.Shankara Narayanan, S.C., (For R1, R4 & R5) (in O.P.No.229 of 2012) ***** C O M M O N O R D E R This judgment shall dispose of the Original Petitions, viz., Sl.No. No. of the Petitions Name of the Parties 1. O.P.No.228 of 2012 M/s.Indiabulls Housing Finance Limited vs. Green Gardes Pvt. Ltd & Others 2. O.P.No.229 of 2012 M/s.Indiabulls Housing Finance Limited vs. Manoharamma Hotel Investments Pvt. Ltd & Others 3. O.P.No.258 of 2012 M/s.Indiabulls Securities Limited vs. Green Gardes Pvt. Ltd & Others 4. O.P.No.272 of 2012 Mrs.A.Indira Anand & anr. vs. M/s.Indiabulls Securities Limited & others. as all four Original Petitions are directed against two awards dated 18.02.2012 passed by the Hon'ble Mr.Justice P.K.Balasubramanyan (Retd.).

2. M/s.Green Gardens Private Limited entered into Facility Agreement dated 26.06.2008 with M/s.Indiabulls Housing Finance Limited to avail loan of Rs.240 Crores. The loan was secured by pledge of shares equivalent to 200% of the loan amount. M/s.Indiabulls Housing Finance Limited disbursed the loan of Rs.227.5 Crores against sanctioned loan of Rs.240 Crores.

3. Mrs.A.Indira Anand and Mrs.K.Bharathi executed Pledge Agreement in favour of M/s.Indiabulls Housing Finance Limited to pledge their shares as security for the loan advanced to M/s.Green Gardens Pvt. Ltd. Mr.A.Ravishankar Prasad and Mr.A.Manohar Prasad gave personal guarantee to secure the loan. Along with the Pledge Agreement, Mrs.A.Indira Anand and Mrs.K.Bharathi also executed irrevocable power of attorney in favour of M/s.Indiabulls Housing Finance Limited. Taking note of pledge creation forms executed by Mrs.A.Indira Anand and Mrs.K.Bharathi, M/s.Indiabulls Securities Limited recorded pledge of share in their record.

4. 11.07.2008, Mrs.Gemini Arts Pvt. Ltd., and M/s.Gemini Foundation Pvt. Ltd., also became co-borrowers along with M/s.Green Gardens Pvt. Ltd. On 30.09.2008, M/s.Indiabulls Housing Finance Limited issued a recall notice to the borrowers as well as to Mrs.A.Indira Anand and Mrs.K.Bharathi.

5. In response to the notice, M/s.Green Gardens Pvt. Ltd., repaid a sum of Rs.5,00,00,000/- (Rupees Five Crores only). However, on 12.11.2008, notice was issued to the borrowers informing that the cheques issued for Rs.2 Crores and Rs.3 Crores were returned unpaid. M/s.Indiabulls Housing Finance Limited invoked the pledge on 12.11.2008 and accordingly, pledged shares were transferred to the account of M/s.Indiabulls Housing Finance Limited in terms of Regulation 58(8) of SEBI Regulations, 1996.

6. On 18.11.2008, margin call notice was issued and on 02.12.2008, M/s.Indiabulls Securities Ltd., sold a part of the shares pledged on instruction of M/s.Indiabulls Housing Finance Limited. Being aggrieved by the action of M/s.Indiabulls Housing Finance Limited in invoking the pledge and sale of shares by M/s.Indisbulls Securities Ltd., Mrs.A.Indira Anand filed C.S.No.1172 of 2008 in this Court.

7. On 16.12.2008, M/s.Indiabulls Securities Ltd., sold a part of pledged shares again on instruction of M/s.Indiabulls Housing Finance Limited. On 17.12.2008, interim order was passed in C.S.No.1172 of 2008. Mrs.K.Bharathi also filed C.S.No.1177 of 2008 and interim order in her favour was also passed on 18.12.2008. It is claimed, that on 18.12.2008, the interim orders were conveyed to M/s.Indiabulls Housing Finance Limited by FAX.

8. Thereafter on 19.12.2008, again part of shares pledged were sold on instruction of M/s.Indiabulls Housing Finance Limited, which resulted in filing of Contempt Petition Nos.204 and 210 of 2009.

9. The case of M/s.Indiabulls Housing Finance Limited is that notice along with all papers relating to order of injunction was received after sale of shares on 19.12.2008. On 19.12.2008, Karvy was also issued letter, showing exact nature of injunction. In the pending suits, parties agreed to refer the dispute in the suits to the sold arbitration of the Hon'ble Mr.Justice P.K.Balasubramanyan (Retd.).

10. The Hon'ble Arbitrator passed two awards. Award No.1, which is under challenge in O.P.Nos.228, 258 and 272 of 2012, relates to the dispute with regard to the loan advanced to M/s.Green Gardens Pvt. Ltd., whereas the 2nd Award, which is under challenge in O.P.229 of 2012 was passed with the regard to the loan advanced to M/s.Manoharamma Hotels & Investments (P) Ltd.

11. The joint memo, which forms the basis for reference to the Hon'ble Arbitrator, reads as under: Whereas at a time when the interim applications in the above mentioned suits were argued before the Learned Single Judge, the parties wherein mutually agreed that all the disputes between them arising out of loan documents dated 28.12.2007 and 26.06.2008 and the pledge agreements, supplementary agreements, mortgage deeds and the incidental matters thereto could be resolved by resorting to Arbitration by a Sole Arbitrator. AND WHEREAS on the aforesaid premises, it is agreed between the parties as follows:

1. All disputes inter-se between the parties herein shall be referred to Hon'ble Mr.Justice P.K.Balasubramanyan (Retd. Judge of Supreme Court), the Sole Arbitrator appointed by consent of all the parties herein; the parties herein further agree that the three above-mentioned suits along with all the pending applications, except the contempt applications in Appl. No.204 of 2009 in C.S.1172 of 2008, Appl.No.210 of 2009 in C.S.1177 of 2008 and Appl.No.2095 of 2009 in C.S.142 of 2009, which shall be kept in abeyance until such time the final award passed by the Sole Arbitrator is enforced through courts of law, shall stand referred to Arbitration accordingly. 2.The venue of Arbitration shall be within the city of Chennai. 3.The proceedings of the Arbitration shall be in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any modification thereof. 4.Parties herein shall be entitled to file their respective claims and such evidence both documentary and oral in support of their claims. 5.There shall be manintenance of status-quo in so far as interim orders already passed by the High Court of Madras for a period of six weeks from this day or the first hearing of the Arbitral Tribunal, whichever is earlier. Thereafter on the request of any party the Arbitrator may consider passing orders varying, dismissing and passing fresh interim orders as the occasion may demand after hearing all the parties concerned. 6.The costs of Arbitration shall be shared by the parties in the following manner: a. Pledgors - 25% b. Borrowers - 25% c. Lenders - 50% 7.It is understood between the parties that they would endeavour to complete the Arbitration within six months from the date of Arbitrator entering reference. 8.The Arbitration proceedings shall be subject to the Jurisdiction of the High Court of Madras exclusive. 9.None of the parties herein shall be entitled to initiate any fresh/new proceeding either civil or criminal in respect of the Loan agreements, Pledge agreements, deeds of mortgage or in respect of any other document executed by an between the parties.

12. M/s.Indiabulls Housing Finance Limited filed two independent claims before the Hon'ble Arbitrator, by treating two loans as independent transaction secured by separate mortgages and pledges. Whereas the stand of M/s.Green Gardens (P) Ltd., and M/s.Manoharamma Hotesl & Investments (P) Ltd., was that two transactions were part of same transaction of loan and that the loans to the two debtor companies were separately granted only for convenience on the suggestion of the creditors.

13. The Hon'ble Arbitrator, on considering the respective contentions of the parties, came to the conclusion, that it would be convenient to enqire the two claims together, in view of the nature of dispute raised by the parties and the evidence adduced. However, it was clarified that at the end of the proceedings, two separate awards would be passed. The Hon'ble Arbitrator also held, that the dispute really centre around the claim made against M/s.Green Garden (P) Ltd., where the pledged shares were sold, whereas as regards the loan advanced to M/s.Manoharamma Hotels & Investments (P) Ltd., was concerned, the question to be ascertained was the amount due under transaction.

14. The Hon'ble Arbitrator held, that the loan of Rs.240 Crores was sanctioned at the request of Mr.Manohar Prasad and his brother and the loan was secured by mortgage of immovable property and pledge of shares including shares held by Mrs.A.Indira Anand and Mrs.K.Bharathi in SUN TV Network Ltd.

15. The terms of loan was 9 months and repayable with interest along with 21% p.a., was to be paid on quarterly basis. Two pledge agreements were also executed, thereby 26,70,011 and 97,89,919 shares of Sun TV Network Ltd., were pledged in favour of the creditors. These two ladies also executed a power of attorney in favour of the creditor authorizing it to deal with the shares at its discretion.

16. On 11.07.2008, additional properties were offered as securities. A registered mortgage was also executed in respect of land and building situated at 601, Anna Salai, Chennai on 17.07.2008. The parties had agreed that the mortgage value of the security including pledged shares were not to go down below 200% of the loan amount disbursed. It was also agreed, that the rate of interest was subject to change from time to time as per the creditor's notification and in the event of default, interest payable was 26% p.a. The cheque issued by the debtor was dishonored and there was also default in payment of interest.

17. It is submitted, that the rate of interest was raised to 22% with effect from 01.07.2008. In view of the fall in value of shares in the share market, additional immovable property security was taken. In view of the continuous fall in value of shares, the level of security went below 200%, and because of this and keeping in view the default in payment of interest, the call notice issued on 30.09.2008, vide which, debtors were called upon to pay Rs.239,95,92,159.79 within a period of five days. It was informed, that pledged shares would be sold among other steps to be taken to recover the loan.

18. That another cheque issued by the debtor was also dishonored. Margin call notices were issued calling for further security. As no response was received from the debtor and no additional security was created, therefore, in exercise of powers under the agreement and on the strength of power of attorney, shares pledged by Mrs.A.Indira Anand and Mrs.K.Bharathi were sold and the proceeds were credited towards the loan transaction and after an adjustment of the proceeds, a sum of Rs.83,70,42,866.78 along with interest remained outstanding on the date of claim, which was claimed to be payable.

19. The Hon'ble Arbitrator took note of the stand of the debtors, that the debtors had taken up the project for developing land and its sale and had taken a loan of Rs.150 Crores from Infrastructure Leasing & Financing Services Limited for that purpose. In order to pay that debt, the debtors were not allowed for further finance and Mr.A.Manohar Prasad and his brother put in touch with SBW1 and SBW2 of Indiabulls. It was made clear to the creditors, that the loan was primarily required to pay off the loan to Infrastructure Leasing and Financing Services Limited. A loan of Rs.100 Crores was approved to M/s.Manoharamma Hotels & Investments (P) Ltd and another loan of Rs.240 Crores was to be disbursed to M/s.Green Garden (P) Ltd. But it availed a loan of only Rs.227.50 Crores.

20. It was submitted, that due to the change in the economic situation across the world, efforts were made to secure further financing from certain overseas merchant bankers in Singapore, which was within the knowledge of the creditors. The lender had committed that it would wait until the financing from Singapore was arranged, but contrary to the understanding, abruptly the creditor transferred the pledged shares of the pledgors in Sun TV Network to its own name without notice to the debtors or the pledgors. That the transfer was effected indicating an average price of Rs.162 per share.

21. Thereafter, on 02.12.2008, the creditor sold 11,37,915 shares in the stock market at an average price of Rs.129 per share, which was without notice to the pledgors and at under valuation causing huge losses to the debtors and the pledgors. Thereafter, more shares were sold on subsequent dates. By ignoring the interim direction of this Court, on 19.12.2008, the creditor sold the balance share at Rs.145 per share, whereas the market value of Sun TV Network shares for that day was Rs.160 per share.

22. The stand of the respondents as recorded by the Hon'ble Arbitrator was, that the creditor had chosen to sell the pledged shares at a price, which was not the true and real value of the shares. The creditor therefore did not act prudently and with care to protect the interests of the debtors inspite of its obligation to do so. This negligent and fraudulent had caused great loss to the debtors and the pledgors. The stand therefore was that the creditor was bound to account for the shares misappropriated.

23. It was also the case, that account has to be taken to find out whether any amount was due to creditor or to the debtor. The defense was that sale of shares on 19.12.2008 was the fraudulent conduct of the creditor. It was also the stand, that sale of shares on 19.12.2008 was malafide. It was held, that the value of sale of shares has gone considerably high, which is required to be taken note by the Hon'ble Arbitrator. Whereas the stand of the pledgors was that the pledged shares were illegally and unnecessarily sold by the creditors by causing great loss to the pledgors. The sale was effected without notice to the pledgors as enjoined by law.

24. The stand was, that the sale of shares effected on 02.12.2008, 15.12.2008, 16.12.2008 and 19.12.2008 was in contravention of the provisions of the Indian Contract Act. Whereas the sale on 19.12.2008 was malafide and was a deliberate flouting of the order of injunction passed by this Court. The sale was also not bonafide being orchestrated and pre-arranged one. The pledged shares were sold at gross under value and the sale being illegal, the pledgors sought restitution of shares to the pledgors.

25. In the alternative, prayer was made to award market value of the shares. Mrs.Indira Anand claimed a sum of Rs.134.19 Crores towards damages for wrongful sale of 26,70,011 equity shares held by her in Sun TV Network. Mrs.K.Bharathi claimed a sum of Rs.589,84,26,197/- as damages for wrongful sale of her 97,89,119 equity shares. The debtors reiterated its stand in the claim petition as defense to the counter claim and pleaded, that the the sales of shares were completed in the normal mode through the stock exchange and there was nothing illegal about them.

26. The stand was that in the circumstance of the case, creditor was justified in proceeding to sell the shares to protect its interest. In reply to the claim of the pledgors, the stand was that the pledged shares were already transferred to third parties and proceeds were applied towards the repayment of the loan. As the pledgors having not not offered redeem, were not entitled to claim restitution of shares.

27. It was pleaded, that there was no violation of Section 177 of the Contract Act. Since no attempt was made to get back the shares pledged or even to offer to redeem the pledges. It was denied, that shares were sold at a loss of Rs.33 per share. The stand was taken, that the creditor was obliged to under the terms of the contract to proceed against securities other than the pledged shares in the first instance, as the pledgors were deemed to be borrowers in terms of the pledged documents.

28. It was denied, that no notice was issued before sale of shares, as notice dated 30.09.2008 was issued to M/s.Green Garden (P) Ltd and the notice dated 16.09.2008 was issued in respect of the loan to M/s.Manoharamma Hotels & Investments (P) Ltd.

29. The creditors also took a plea, that some of the disputes or aspects raised by the pledgors and the debtors were outside the purview of the arbitration of the arbitration. Whereas the stand of the pledgors and the debtors was, that the reference was on wide terms as agreed to between the parties and that the arbitrator had jurisdiction as per the agreement as confirmed by the order of Court to go into all the claims except on the question whether the creditor and share broker were guilty of contempt of Court for violating the orders of injunction.

30. The Hon'ble Arbitrator, after going through the joint memo read with the order passed by this Court, held, that it was his duty to decide all the disputes between parties, except where the creditor and the share broker were guilty of violating the orders of injunction, thereby committed contempt of Court. The Hon'ble Arbitrator held, that he was to consider some of the aspects involved while deciding on the validity and propriety of the sale of shares on 19.12.2008, which is one of the issues arising in this arbitration as agreed to between the parties. Therefore, the objection raised by the creditor was overruled.

31. The Hon'ble Arbitrator, on the pleadings referred to above, framed the following issues:

1. Whether the security provided by the pledgors, namely, equity shares in Sun TV Network Limited in favour of the creditor for the loans availed of by the debtors was part of the aggregate collateral securities provided by the debtors? 2.Whether the creditor and the share broker were justified in selling the equity shares pledged by the pledgors on the various dates? Are the sales valid and binding on the pledgors and the debtors? 3.Whether the creditor and the share broker are entitled to rely upon various terms in the agreements and pledge agreements, they being contrary to the provision of the Indian Contract Act, 1872? 4.Whether the creditor gave valid notice to the pledgors before affecting the sale of the pledged shares? 5.Are the sales of shares effected by the creditor and the share broker genuine and valid? 6.Are the sales of the pledged shares by the creditor and the share broker vitiated by mala fides? 7.Are the creditor and the share broker bound to disgorge the benefit derived by sale of the shares or return the shares to the pledgors by way of restitution? 8.Are the pledgors entitled to damages on account of sale of the pledged shares by the creditor and the share broker, and if yes, to what extent? 9.Whether there is any privity of contract between the pledgors and the share broker as regards the financial facility availed of by the debtors from the creditor? 10.Whether the pledgors have any cause of action as against the share broker? 11.Whether pledgors are entitled to claim reliefs as against the share broker in this arbitration in view of the existence of other statutory remedies available to them? 12.Whether the pledgors are entitled to claim the reliefs prayed for as agaisnt the share broker? 13.Whether the debtors and the guarantors are jointly and severally liable to pay Rs.83,70,42,866.78 along with interest at the rate of 28% per annum pendente-lite and future, under the facility agreement dated 26.06.2008? 14.Whether the debtors and the guarantors are jointly severally liable to pay the default rate of interest as per the facility agreement dated 26.6.2008? 15.Whether the creditor can recover the sum of Rs.83,70,42,866.78 through the sale of the properties mortgaged by the debtors for securing the loan, under the facility agreement dated 26.6.2008? 16.Whether the debtors under the facility agreement dated 26.6.2008 were liable to keep a security cover of 175% of the loan by providing shares and additional securities or could they rely upon the properties already mortgaged for calculating the intended 175% cover? 17.Whether the creditor could have sold the pledged shares on and from 2.12.2008 and if answer is in the negative, is the creditor guilty of conversion and what consequences then should follow? 18.Are the debtors entitled to set off any amounts which they pay against the loan advanced to Green Garden Pvt. Limited directly or through sale of pledged shares against any other loan taken by the debtors from the creditor? 19.Whether the creditor had agreed to advance a loan to the tune of Rs.340 Crores to the companies under the control of Manohar Prasad and Ravishankar Prasad as a composite transaction? 20.Whether there was any valid recall of the loans by the creditor? 21.Whether the loans had become due and repayable on the dates of sale of the collateral securities, the pledges shares? 22.Is not the creditor required to give a true and proper account of the monies realized by it by the sale of the pledged shares? 23.Was there a requirement for a top up of the securities as on 19.12.2008? 24.Is not the interest claimed by the creditor usurious? What should be the interest that should be permitted to be recovered by the creditor on the loan transactions? 25.Is the creditor liable to account for hasty and illegal sale of the collateral securities and to compensate the debtors for the loss occasioned to them thereby? 26.What, if any, are the reliefs to which the pledgors are entitled to? 27.What, if any, are the reliefs to which the debtors are entitled to? 28.What are the reliefs to which the creditor is entitled to? 32. The parties therefore were allowed to lead oral and documentary evidence. The Hon'ble Arbitrator, after taking note of documentary and oral evidence, recorded the following findings: i) On Issue No.19, after going through the agreement entered into between the parties and the oral evidence led by parties and on appreciation thereof, held, that the creditor had agreed to grant a loan of Rs.340 Crores to be disbursed in two installments to two different companies. This issue was decided in favour of the debtor. ii) Issue Nos.1, 16 and 23 were taken up together, as the answer to all these issues depended on the contract between the parties. The Hon'ble Arbitrator again went into terms of the agreement entered into between the parties and also other documents executed by the parties. Further discussing it in detail, recorded, that the plegors had pledged shares held by them in Sun TV Network in favour of the creditor as part of the overall security the debtor has to furnish for availing the loan. The Facility Agreement and the pledge documents and the power of attorney executed by the pledgors gave the creditor right to proceed against the pledged shares. The Facility Agreement also confers a right on the creditor to call for additional security if the value of the shares pledged fell in the stock market. a) It was held, that inspite of these rights available to the creditor relating to the pledged shares, it was only treated as part of the overall security for securing the land and that there was no default on the part of debtor to make up any deficiency in security. The finding recorded, therefore, reads, that the pledge of shares was as part of the aggregate security and that the debtors were liable to keep security of 175% of the loan advanced, and that they could rely on the additional security provided by way of mortgage in that context and it has not been proved, that there was a default on the part of the debtor to make up or top up the security. iii) On Issue No.4, the Hon'ble Arbitrator recorded the following findings: "40. The sale of pledged shares took place in the loan transaction of the creditor with M/s.Green Garden. This issue is concerned with the question whether notice was given by the creditor to the pledgors before the sale of the shares and if yes, whether it was adequate. It is the case of the pledgors that no notice was given to them by the creditor before invoking the pledges and selling the shares. They were, therefore, deprived of an opportunity to redeem the pledges or object to the invocation of the pledges.

41. The pledgors having denied receipt of the notices, the burden is on the creditor to show that notices were, in fact, given to the pledgors, calling upon them to discharge the liability and giving them an opportunity to redeem the pledges. The creditor has pleaded that Ex.C8 notice dated 30.09.2008 recalling the loan was given to the debtors and the pledgors and that the pledgors had more than adequate opportunity to redeem the pledges. Ex.C8 is seen addressed not only to the debtor company and the mortgagor companies, but also to Indira Anand and K.Bharathi, the two pledgors.

42. In Ex.C8 the subject is noted as (a) loan recall and payment of outstanding amount, (b) sale of securities provided under the loan Agreements and (c) change of the fax and telephone numbers of the creditor for communication. After referring to the relevant transaction documents including the pledge agreements, it is noted that as on 30.09.2008, the outstanding was Rs.239,95,92,159.76. It is then stated that it was observed that there have been breaches of the loan agreements including failure to make payment of amount due on the due date(s). The addressees are called upon to pay the sum of Rs.239,95,92,159.76 within five days of that letter. Then, it is stated as follows: "Please note that in case of failure to pay/repay the aforesaid amount within the time stipulated above, without prejudice to our other rights, we shall be entitled to initiate legal proceedings against you at your risk, cost and expenses in addition to, inter alia, to enforce/invoke/liquidate/sell/transfer/disposs off the securities provided to or created in favour of the lender for securing the payment/repayment of the amounts payable by you under the Loan Agreements without any further notice to you." There is some merit in the contention on behalf of the pledgors, that this is not a notice invoking the pledges, but that it is only a general notice to the debtor to repay the amount within a stipulated time and threatening steps for recovery on this failure to repay the loan. There is also merit in the contention that the creditor did not treat this as a notice invoking the pledge, since it went on issuing further notices to the debtor to perform its obligations under the loan Agreements. The margin call notices of November, 2008 issued by the creditor and Ex.C45 dated 12.11.2008, do support this position as one finds the creditor going on calling upon the debtor to top up the security for the loan and to pay the defaulted interest with the threat that the security will be enforced for recovery. The margin call notices and Ex.C45 were not specifically addressed to the pledgors. I am, therefore, included to the view that Ex.C8, assuming it was delivered to the pledgors cannot be treated as a notice specifically invoking the pledge. It appears that the creditor itself did not deem it so in view of the subsequent notices issued by it to the debtor calling upon the debtor to rectify its alleged defaults. At the same time, I also find merit in the contention of the creditor that the debtor had failed to respond at all to any of the notices and in the face of this strange conduct of the debtor, the creditor was justified in proceeding to take further steps. But then, as pointed out by counsel for the pledgors, the only notice claimed to have been sent to the pledgors was Ex.C8 and as far as they are concerned, the question has to be decided based on it.

43. Ex.C8 indicates that it was sent by Registered post. The registered article addressed to Indira Anand bears the number, 5166 and the one addressed to K.Bharathi is numbered 5165. Apart from relying on the presumption of service, the creditor has relied on Ex.C49 and Ex.C50 in support of its case that Ex.C8 was in fact posted and received by the concerned post office in Delhi. Ex.C49 issued by the Senior Superintendent of Post Office, East Delhi Division, Delhi-51 is a reply to the creditor dated 08.09.2009, informing the creditor that Registered letters, 4242, 4271, 4272 and 4278 dated 11.09.2008 were dispatched the same day for delivery to the addressee. Another letter of the same date gives the same information regarding registered letters, nos.5153, 5154, 5165, 5166 and 5167 dated 01.10.2008. Ex.C50 is another letter to the creditor from the Manager, Chennai City South, Department of Posts, that Registered letter with acknowledgement, due bearing no.5166, was reported to have been delivered to the addressee by the Post Master, Adyar, on 22.10.2008. It may be noted that letter no.5166 was the one addressed to Indira Anand. There is no similar information forthcoming regarding registered article no. 5165 said to be addressed to K.Bharathi. No dispatch register or acknowledgment is also produced in support of service of the notice on K.Bharathi.

44. CW1, the Chief Executive Office of the creditor, the only witness examined on behalf of the creditor deposed in his chief examination that on the failure of the debtor to pay the interest on the loan that fell due on 26.09.2008, he intimated the legal team of teh creditor to serve a "Loan Recall Notice to the borrowers" and that he was informed that on 30.09.2008, a Loan recall notice was sent to the borrowers and the pledgors by registered post and U.P.C. He also deposed that on receipt of the recall notice, the debtor paid Rs.5 Crores though it was not enough to revoke the loan recall notice. He also deposed that another notice Ex.C45 dated 12.11.2008 was issued to the debtor in view of the dishonor of two cheques issued by the debtor. He also gave evidence that since no payment was forthcoming, he instructed the concerned team to start sending margin call notices from 18.11.2008 itself. Since the parties did not respond to the recall notice or the margin call notices, he instructed one of his company's brokers to sell the shares pledged. The creditor had received a letter dated 03.03.2010 from the Indian Postal Authorities regarding complaint no.60020022397 stating that the registered letter vide 5166 receipt, was delivered on 22.10.2008. That number related to the notice sent to Indira Anand. He deposed in his oral chief examination that he had made inquiries with the department of post at New Delhi about the registered article nos.4242, 4271, 4272, 4278 and UPC letter dated 16.09.2008. He marked Ex.C49 reply of the postal department. He also marked Ex.C50 written by the postal department, Chennai City South Division and explained why and how he got that information by way of clarification. He explained in cross examination that even after a loan recall notice sent, meaning that the entire loan was being recalled, it may be withdrawn in case the breach of agreement that led to the recall notice is rectified. He also stated that as a matter of practice, the company may continue to send margin call notices inspite of the fact that a recall notice had been issued earlier. He denied the suggestion that Ex.C8 notice was fabricated for the purpose of the arbitration. He referred to Ex.C32 addendum, countersigned by the borrowers to show that the creditor had recalled a sum of Rs.10 crores on 24.01.2008 and Rs.10 crores on 26.02.2008 clearly indicating that the option of sending loan recall notices had been exercised earlier and that inspite of it, the parties were still in discussion.

45. In the cross examination on behalf of the pledgors he asserted that the loan recall notices were sent to all parties before invocation of the pledges. He could not identify who had signed Ex.C8 which he identified as the loan recall notice. He deposed that Ex.C8 referred to breaches in the loan agreement. It was based on default in payment of interest, but he had to admit that the notice did not say that there was default in payment of interest. He stated that the company maintained a data base of dispatches, but he did not know whether it was in electronic form only or there were dispatch registers also. He evaded an answer to the question that in Ex.C8 the creditor had consciously avoided mentioning 'failure to maintain security of appropriate value' by stating that the legal team can answer that question. He denied the suggestion that the creditor had not issued any notice to the pledgors calling upon them to make any payment in terms of the two Facility Agreements and stated that the notice is on record. He also denied the suggestion that the pledgors were not put in notice of any event of default having occurred. To a suggestion that the creditor never called upon the pledgors to top up any security by way of margin call notices, he replied that margin call notices were sent to the debtors as per the terms of the Facility Agreements. His understanding was that the fax number furnished to the creditor was common both to the debtors and the pledgors. He would have to check whether margin call notices were separately issued to the pledgors. To a question by the Arbitrator, he stated that Loan recall notices were sent by RPAD and other means. Margin Call Notices were typically faed or e-mailed.

46. It may be noted that no communication from the postal department of service of Ex.C8 on K.Bharathi was produced on behalf of the creditor except the production of the letter indicating that Registered Article no.5165 had been received at the Post Office in Delhi. CW1 did not also refer to any communication regarding that letter from the postal department either in his chief examination or cross examination. No dispatch register or other dispatch data was also produced. CW1 was not even sure in which form the information in that regard was being kept by the creditor.

47. In their claims and in their common defence to the claim of the creditor in respect of the loan advanced to M/s.Manoharamma Hotel, the pledgors pleaded that no notice had been served on them before sale of the pledged shares. They were not impleaded by the creditor in its claim against M/s.Green Garden on a plea that the pledged shares having been sold, they were not necessary parties. In support of their denial of receipt of Ex.C8 notice, neither Indira Anand nor K.Bharathi got herself examined. Two witnesses, other than an expert, were examined on their behalf as PLW1 and PLW2.

48. On behalf of the Pledgors, Ex.PL24, PL25 and PL31 were filed in support to show that no notice dated 30.9.2008 was served on Indira Anand and K.Bharathi. By Ex.PL24 dated 09.02.2009 K.Bhaerathi wrote a letter to Post Master, Alwarpett, Chennai-18 requesting him to check and let her know whether any registered letter sent in her name by M/s.Indiabulls Financial Service Ltd., New Delhi, bearing numbers no.4278 and 5165 were received in the third week of September or 1st week of October, 2008 from Dehi. Ex.PL25 dated 20.02.2009 is the reply she received from the Senior Supdt., Post Office, Chennai City, Central Division. By that letter the Sr.Supdt. informed Bharathi that he has ascertained that registered letters referred to by her do not appear to have been received for delivery at the Tenampet Post Office. He requested Bharathi to lodge a complaint along with copy of the receipt at the office of booking through sender of the registered letter. Ex.PL31 is a letter dated 12.01.2009 written by Indira Anand to the Sr.Supdt. Of Post Office, Chennai City Division seeking information under the Right to Information Act whether registered letter nos. 4272 and 5166 had been delivered to her and whether that fact is indicated in the records of the department. She also sought information that if the letters were delivered, the details of the same, namely, date, time and delivery of the letter and the person who had received those letters may be furnished. It may be noted that Ex.C50 communication on the side of the creditor dealt with letter no.5166 addressed to Indira Anand. Ex.PL38 was subsequently produced to show that in the reply to Ex.PL31 received by Indira Anand. It was indicated that information was not available at the Chennai end as the letters were sent from New Delhi. It is also stated that Sub-Post Master, Adyar, had reported that registered letter nos. 4278 and 5166 were not received at his office for delivery. Indira Anand was advised that she should appeal to the higher authorities. The effect of these Exhibits is to show that K.Bharathi made a complaint and received the information that no postal registered article bearing no.5165 addressed to her was received and consequently delivered to her at her address.

49. The information sought in the letter by Indira Anand under the Right to Information Act also resulted in, she being informed that letter no.5166 addressed to her had not been received at the concerned post office. Ex.C50 marked on the side of the creditor suggests that registered letter no.5166 was delivered to Indira Anand on 22.10.2008.

50. PLW1, Gopalakrishnan in his chief examination swore that he was asked to look after the personal financial affairs of K.Bharathi and hence he was award of the fact of the present claim. He was asked to look after any correspondence and documentation on behalf of K.Bharathi and he was left to handle matters, since K.Bharathi was a housewife. He deposed that K.Bharathi received no communication from the creditor in regard to the transaction prior to 20.12.2008. On 03.12.2008 he noticed that some shares in Sun TV Network held by Indira Anand were being traded by the creditor in the stock market. On inquiry he found that the shares held by her were being traded by the creditor. He informed K.Bharathi of the sale of the pledged shares of Indira Anand. She thereupon filed the suit C.S.No.1177 of 2008 in the High Court of Madras.

51. In the claim by Indira Anand, he deposed that he was asked to look after some of the personal financial matters of Indira Anand. He was aware of the facts of the present transaction. He was assigned the task of looking after the correspondence and documentation pertaining to the transaction on her behalf. He deposed that Indira Anand did not receive any notice from the creditor till 20.12.2008. On or about 03.12.2008 he found that shares held by Indira Anand in Sun TV Network were being sold by the creditor and he informed her of the development. She filed a suit C.S.No.1172 of 2008 in the High Court of Madras. In cross examination the residential addresses of Indira Anand and K.Bharathi were brought out. He was asked about the telephone of Anand Cine Services. He was asked specifically on what basis he has deposed in paragraph 9 of his chief examination that Indira Anand did not receive any notice after documentation till 20.12.2008. He replied that if any notice has been received by her, he would have been intimated of it immediately and the copy of the notice sent over to him. He was questioned whether Indira Anand had received any notice after 20.12.2008. He stated that he did not remember the date but he knew that some recall notices were received after that date. He denied the suggestion that he was not incharge of the personal financial matters of Indira Anand and K.Bharathi and he replied that he was definitely Incharge of the affairs relating to the borrowings from Indiabulls.

52. PLW2 deposed in chief examination that he had joined the employment of Gemini Group sometime in May, 1991. He had personally delivered Ex.PL24 letter dated 09.12.2009 from Bharathi to the concerned Post Master. In response, Bharathi had received a communication Ex.PL 2.dated 20.02.2009. In cross examination, he deposed that he had advised K.Bharathi to send Ex.PL24 letter. He answered that he delivered the letter to the person sitting in the counter at the post office. He clarified that there were a number of counters and the acknowledgement of the letter is contained in the copy of the letter itself. He deposed that he did not send a similar letter on behalf of Indira Anand. Asked why he did not, he deposed that he advised Indira Anand to send a letter under the Right to Information Act. That was because the Adyar Post Office declined to receive the request seeking information whether the letter was received and delivered. No endorsement of refusal was made by the Adyar Post Office. He stated that he could produce the letter sent under the Right to Information Act. He stated that the letter from Indira Anand was taken by a person sent by him whereas he took the letter personally to the Alwarpet Post Office. He stated that Indira Anand had not received any reply to the application under Right to Information Act till then. He deposed that Indira Anand did not make a complaint and had sought information only under the Right to Information Act. When he was shown Ex.C50 and asked whether that was the reply to the complaint of the Indira Anand, he stated that it was seen addresses to the creditor and did not appear to be on the complaint of Indira Anand. The receipt for sending the registered letter no.5165 and 5166 were put to the witnesses and he agreed that they appeared to be the receipts for sending two letters. He admitted that the letter dated 03.03.2010 (Ex.C50) did mention that registered letter no.5166 was delivered. After he was recalled, he deposed in cross examination that K.Bharathi had not taken any steps subsequent to the receipt of Ex.PL25. The copy of the letter dated 12.01.2010 sent by Indira Anand to the Senior Post Master was marked as Ex.PL31. He deposed that no response had been received for that letter.

53. The creditor has mainly relied upon the presumption arising out of the letter being duly addressed and delivered to the Post Master as registered article for being delivered to the addressee. It has also relied on the fat that neither Indira Anand nor K.Bharathi had come forward to give evidence regarding the non-receipt of the letter. No other direct evidence about the service of the letter is attempted and the creditor has rested by producing the letter that the notice had been received for being sent as registered letters. On behalf of the pledgors, supported by the debtor, it is pointed out that Ex.C8 was the only letter relating to these transactions that was allegedly sent by registered post and all other letters had been sent either by e-mail or fax and that fact was itself suspicious. It is also contended, that no dispatch registered maintained by a leading financial enterprise like the creditor had been produced to establish that as a matter of fact these letters were dispatched on the concerned dates to the respective addressees. It is contended that the letter Ex.PL38 produced by Indira Anand and the letter Ex.PL25 produced by K.Bharathi from the respective Post Offices rebut the presumption arising out of the letters being duly addressed and posted. These documents show that the letter had not been received at the addresses' end. As regards the notice said to have been sent to K.Bharathi, it is pointed out that Bharathi had made a prompt complaint regarding non-receipt of the letter and had been informed that no such letter was received for delivery to her. It is pointed out that Ex.C50 relied on by the creditor only showed that registered letter no.5166 addressed to Indira Anand had been delivered but no such letter showing that registered letter no.5165 addressed to K.Bharathi had been delivered to K.Bharathi has been produced. It is therefore submitted that in any event, K.Bharathi had rebutted the presumption of service of Ex.C8 letter, if any available to the creditor and there is no direct evidence available to show the delivery of the letter to K.Bharathi. CW1 was not competent to speak about the notice and no one from the office of the creditor connected with the correspondence and its dispatch has been examined and no registered has been produced to establish the dispatch.

54. It appears to me that the cases of service of the letter Ex.C8 on Indira Anand and on K.Bharathi stand on different footing. As far as the notice to Indira Anand is concerned, in addition to the presumption available, the creditor had also produced Ex.C50 to show that the concerned notice had been served on Indira Anand. No doubt, by recourse to Ex.PL31 and Ex.PL38, Indira Anand had attempted to show that no such letter had been delivered to her. But the letter relied on only sought information under the Right to Information Act. Indira Anand has also not given evidence. In this situation, it would be proper to draw the presumption that Ex.C8 was served on Indira Anand, in the absence of adequate rebuttal of that presumption.

55. Regarding the notice that has been sent to K.Bharathi, registered article no.5165, Bharathi had made a specific complaint of not receiving such a letter within the time provided therefor, and she had received the reply that no such letter had been received by the Post Office at Chennai for being delivered to her. The creator had also not been able to produce any material corresponding to Ex.C50 to show that registered article no.5165 addressed to K.Bharathi had been delivered to her. In the light of Ex.PL25, the absence of any record from the side of the creditor corresponding to Ex.C50 and in the absence of any attempt to lead evidence by the creditor to show that the letter Ex.C8 was, in fact, dispatched from the office of the creditor by examination of any one connected with that activity in the office, I find that the circumstances are sufficient to rebut the presumption arising out of the duly addressing of the letter and its delivery to the Post Office in Delhi. There can be no doubt that a presumption that is available under section 114 of the Evidence Act, can be rebutted by evidence or even by a counter presumption. Ex.PL25 rebuts, the presumption. The mere non-examination of K.Bharathi by itself is not sufficient to discredit the effect of Ex.PL25 received by her from the concerned postal authorities. Her conduct in immediately complaining of non-receipt of Ex.C8 is also significant. On the whole, I am satisfied that Ex.C8, recalling the loan, had not been served on K.Bharathi. I thus find on this issue that Ex.C8 letter must be taken to have been served on Indira Anand and that it is not proved to have been served on K.Bharathi.

56. The question whether Ex.C8 notice given to Indira Anand is valid has now to be considered. As far as K.Bharathi is concerned, I have found that it is not proved that the notice of recall of the loan Ex.C8 was given to her. So the question of validity of the notice to her does not arise. The question has to be considered whether Ex.C8 can be treated as a valid notice to the concerned pledgor before sale of the shares pledged by her.

57. I have already set out the purport of Ex.C8 notice. It does refer to loan recall as a subject dealt with therein and calls upon the debtors to repay the entire amount due within five days of receipt of that notice. It also asserts that all steps for recovery will be taken if the payment is not made. It is true that it does not specifically call upon the pledgors to make good the amount and inform them that the shares pledged by them will be sold on failure to repay the loan. But, the notice Ex.C8 cannot be considered inadequate, though one may say that it could have been more specific as far as the pledgors are concerned. After all, the pledgors were not the debtors and they had only offered the shares held by them as security. But then, as pointed out on behalf of the creditor, the debtors were the son of one of them and the son-in-law of the other and PLW1 and PLW2 who were looking after their affairs, were also looking after the interests of the debtors. I am, therefore, of the view that Ex.C8 is adequate to be treated as a valid notice of recall, though inadequate as a notice invoking the pledge. It is operative as against the pledgor, Indira Anand, but not against the pledgor K.Bharathi, on whom it is not proved to have been served. This issue is thus answered." iv) On Issue No.20, finding recorded on appreciation of evidence by the Hon'ble Arbitrator held, that there was arrears in interest and that the debtors aware of the fact, that their conduct in not responding to the creditor in writing weakens their plea in absence of recall of the loan ad on lack of notice prior to the enforcing the security, but it was held, that the creditor should have issued specific formal notices to the debtors recalling the loan after giving them a reasonable time to repay . Five days' time to repay can hardly be called reasonable considering the magnitude of the loan and the circumstances obtaining. v) On Issue No.21, finding recorded reads as under:

66. In view of the conclusion arrived at by me that the default in payment of interest can be taken advantage of by the creditor to recall the entire loan, on the failure of the debtor to pay the interest that fell due on 26.9.2008, I find on this issue that the loan is due and repayable as on 12.11.2008 when the creditor got transferred the shares to its name from that of the pledgors acting on the pledge agreements and the powers of attorney. It was, thereafter, that the creditor started selling the shares. Therefore, on this issue it has to be found that the loan had become due and repayable on the date of the sale of the collateral securities, the pledged shares. vi) Issue No.2: The finding was that as far as the debtors are concerned, the creditor was justified in proceeding to sell the shares subject to the validity or otherwise of the sale held on 19.12.2008. It is therefore dealing with the finding Nos.5 & 6. Similarly, the stand of pledgors was also dealt with Issue Nos.5 and 6. vii) On Issue Nos.5 & 6, the Hon'ble Arbitrator took note of Section 176 of the Contract Act, and thereafter held as under: "90. On an appreciation of the evidence available, I am satisfied that if not before, atleast by 11.20 AM on 19.12.2008, the share-broker had information about the orders of injunction passed by the High Court of Madras in suits filed by Indira Anand and K. Bharathi. The creditor also had that information. Even if the case of SBW2 is accepted that sufficient details were not available, the information was sufficient to put the share broker on enquiry to ascertain as to what exactly were the orders passed and whether it would not be violating the orders of injunction if it proceeded to sell the shares later that day. E.PL17 which was faxed, did contain information about filing of the suit by Indira Anand, that the creditor and the share broker and the two debtor firms were parties and that an order of injunction had been passed and requesting the creditor and the share broker to honour the order of injunction. There is othing to sow that the creditor did not get information from the fax messages sent to it. Ex.C44 shows it received it. No one on the side of the creditor is examined to explain what happened to the fax messages. The creditor is a primary credit institution and the share broker is a leading share broking company, as seen from paragraph 3 of Ex.PL34 counter-affidavit. The creditor, as I have noticed earlier, was in addition, a bailee and an agent of the pledgors. The pledgors are housewives and the creditor had a duty to protect their interests, in the circumstances of the case. By not trying to understand (assuming their story of the message not having adequate information is acceptable, I find it difficult to accept it, considering that these were the only outstanding transactions with the companies of DW1, subsisting at that stage supported by the two pledges-) the scope of the orders passed by the High Court of Madras before proceeding with the sale of shares on 19.12.2008, the creditor had acted, if not recklessly atleast with lack of care. It cannot be forgotten that the creditor was the bailee of the shares and also the power of attorney holder of the pledgors. The position of the share broker was worse. The admissions of the sBW2 show that he was aware that the fax messages did not relate to any other transaction the pledgors are claimed to have with it. Then the fax message could have related only to the disputed transactions. SBW2 is seen to be an experienced employee originally of the creditor and then of the share broker. In the circumstances, I find that the share broker has acted without adequate care, some what recklessly and regardless of consequences in selling the shares on 19.12.2008.

91. In this context, I must also notice the fact that at 10.30 AM that day, the creditor had issued a notice to the debtor to top up the security by way of a margin call notice. If the pledgors plead that this was a re-assurance to them that sale of balance shares will not take place, in the circumstances they could not be faulted. The issue of margin call notice after receipt of the earlier fax message regarding an order of injunction passed by the High Court atleast would have created an impression in the minds of the debtor and the pledgors that the creditor intended to give them a chance to settle the dues. Though CW1 has stated that even after a notice of recall is issued, routine margin call notices would be issued, the same has not been substantiated with reference to any material and even if accepted, cannot alter the situation in view of the orders of injunction passed by the High Court and the faxes sent to the creditor at 9.15 AM on 19.12.2008.

92. Thus, on a consideration of all the materials available before me, I am satisfied that the sale was held on 19.12.2008 by the Share-broker after coming to know of the order of injunction passed by the High Court of Madras and that the creditor who also became aware of the order of injunction before the sales were held in the afternoon of 19.12.2008, did not do anything to stop or postpone it.

93. The creditor and share broker have a case that the communication received from counsel for pledgors through fax did not contain enough details. This plea cannot be accepted in full in the context of the evidence I have discussed earlier. The fax communication clreadly indicated that suits hve been filed by the plledgors an that orders of injunction have been passed in the interim applications filed by the. As far as the creditor and the share-broker are concerned, the only transaction with the pledgors pending with them at the relevant time, was the pledge of shares in respect of the two loans advanced to M/s. Green Garden and M/s. Manoharamma Hotel & Investments P.Ltd. The shares pledged to secure the loan of M/s. Manoharamma Hotel & Investments P.Ltd were locked-in at the relevant time. The only other transaction the pledgors had with the creditor at the relevant time, was the pledge of shares to secure the loan advanced to M/s. Green Garden P. Ltd. The process of selling those shares was going on. The creditor cannot, therefore, pretend that the order of injunction might have related to some other transaction between the parties. The evidence of CW1 is not even competent in regard to the denial of knowledge of the oders of injunction because he was not dealing with the day to day affairs in that sense. As far as the share broker is concerned, the share broker had been instructed to sell the shares of Sun TV Network pledged by the pledgor to the creditor and the share broker was selling them in lots on 02.12.2008, on 15.12.2008, on 16.12.2008 and had been instructed to sell the balance shares as well. Therefore, when the share broker got information about the order of injunction passed by the High Court of Madras, it was the plain duty of the sharebroker to inquire about the nature of the order before going ahead with the sale of shares. The fax communications received clearly put the share-broker on notice and any bona fide share broker would have made a bona fide inquiry to understand the scope of the order of injunction, if there was any doubt about it or confusion over it, before proceeding to sell the shares later that day. I have, therefore, no hesitation, on the evidence available, in holding that the share broker was aware of the orders of injunction passed in favour of the pledgors and had acted recklessly in proceeding to sell the shares without even bothering to verify the nature of the restraint imposed by the orders of injunction. The creditor also acted without adequate care, consistent with its position also as the pledgee and agent of the pledgors.

94. The pledgors have attacked the sale of shares on 19.12.2008 in the afternoon, on another ground. They have pleaded that whereas the sale of smaller quantities of shares on 02.12.2008, 15.12.2008 and 16.12.2008 took significant time for completion, the sale of 1.04. crore shares on 19.12.2008 was completed in a time span of 15 seconds. The fact that shares were sold within 15 seconds in not in dispute and is also established by the order books produced. According to the pledgors the sale was fraudulent and was not as bona fide sale through the stock exchange. In its answer to the claim, the creditor stated that it was wrong to state that the sale was a fraud. Sale of shares was under the Securities Contract and Regulations Act and was a market sale and not an off-marked sale. The prices were not and could not be fixed between the buyer and the seller. The sales were made at the notified rates of the stock exchange. The sale was a bona fide one. To establish their claim, the pledgors have relied on the trade time given in the contract note of the creditor to show that the sale order was placed at 13.34.38 hours and the entire sales were executed within 15 seconds from the time of punching the sale order in the trade system of the stock exchange. As noticed already, this fact is not disputed by the creditor and the share-broker, except to point out that the sales were as per norms of the stock exchange.

95. In its answer to the claim, the share-broker, in addition to contending that any complaint in regard to the sale of shares should be raised before the appropriate statutory authority, has pleaded that there is no collusion and that there was no conspiracy or fraudulent action on the part of the share-broker has not specifically pleaded an answer to the claim of the pledgors that the sale held on 19.12.2008 was not a bona fide and ordinary one, nor has the share-broker pleaded anything about the sale of more than one crore shares within a time span of 15 seconds.

96. The pledgors, though included the name of one A.S.Kumar in the list of witnesses and also filed an affidavit in chief examination by him subsequently, gave him up on the alleged ground that he had been got at by the representative of the creditor and the share-broker. Of course, this case has also been suggested to the witnesses of the share broker. But they have examined Dr.S.Karthikeyan, as PLW3. PLW3 in his chief examination has deposed that he holds a Ph.D in the field of Management (Finance) and he has experience of more than 20 years in stock marked dealing, with market operations, compliance and legal aspects. He had worked for some stock brokers and was the Executive Director of Coimbatore Commodity Limited, a Member of Multi-commodities Exchange of India Limited and National Commodity and Derivative Exchange of India Limited. He was also a visiting faculty for finance in various universities and educational institutions. He was a Director of Coimbatore Capital Limited. He has deposed that he had researched and secured statement of bulk deals done in the Bombay Exchange on 19.12.2008, SEBI Regulations dealing with bulk and block deals, volumes of business transacted in Sun TV Netwok shares at BSE during the period 2008-2010 and the price data for that period and news reports in respect of acquisition and subsequent disposal of shares in Sun TV Network by Nalanda India fund Limited. Having analysed the transaction in question, he was of the considered opinion that the sale effected on 19.12.2008 was not a normal market transaction but was a pre-negotiated deal and appeared to be one put through with undue haste. He has also deposed the reasons for supporting such a conclusion. His reasons are based on active and passive orders, time priority, matching priority regarding price and time and the orders and order-matching logic in Bombay Exchange. He has also dealt with the order book and touch-line. He has deposed that on 1.12.2008, to sell 8,30,359 shares of Sun TV Network, it took around 4 hours, 45 minutes in NSE and in BSE for sale of 3,07,559 shares, it took 3 hours 41 minutes. On the contrary, on 19.12.2008, the sale of 1,04,04,640 shares took only 15 seconds. The sell order was placed at 13.34.38 hrs and the sale was completed at 13.34.53 hrs. He deposed that the short duration at which such a large quantity was successfully sold in the market clearly showed that there were passive buy orders in the system, well before the sell order was placed by the creditor. He also deposed about the practice that may be normally followed by a person who wants to sell a large quantity of shares. He pointed out that on other dates, multiplier orders were placed at different points of time but only a single order was placed here for the sale of the entire quantity. He has also given details of the number of shares of Sun TV Network sold in BSE in the years 2008,2009 and 2010. He gave his opinion that the average volume of business and the extraordinary business done on 19.12.2008, clearly indicted that the trade might have been done in a pre-planned manner. In his opinion, the buyers should have been privy to the information from the seller that a large quantity of shares will be sold by them that day. The buyers were asked to place buy-orders at the lowest permitted price on that date. After assembling the buyers at the buy-side the entire sell order was pumped-in by indiabulls with the lowest possible sell price as the price of the sell order and that had resulted in execution of trades at the same time, within 15 seconds. He also deposed that the purchaser or is broker had gone to the market on 19.12.2008, with a buy-order for such a large quantity, which would normally be not available for sale at all in the market for Sun TV Network shares with full knowledge that there will be a sell order of this nature. This was apparent from the fact that within 15 seconds of the placing of the order, the order was executed.

97. In cross examination of the witnesses on behalf of the creditor, it was brought out that Counsel for the pledgors had contacted the witness and had given him the facts about the dispute and that he had known that counsel for 4-5 years. It was also brought out that he had gone through the records of the case which were provided to him by counsel for the pledgors. Counsel had come to Coimbatore had met him and provided him with the relevant records. His experience in legal matters was confined to arbitration and awards as a client and also as a trading Member of the Stock Exchange. He had come to know the counsel for the pledgors, a he was handling the cases of the company with which he was involved, in the High Court of Madras. He also deposed that he had given to an Advocate and in the Court of law. He had not given any written opinion to counsel for the pledgors other than the filing of his affidavit by way of chief examination in this Arbitration. He had finalized the opinion and filed it in the shape of an affidavit and he had sent it by courier for being filed. To a question by the Arbitrator, he stated that he had drafted an affidavit in the chief examination on his own and he had e-mailed it to counsel for the pledgors, who gave him the 'go-ahead' sign and he filed the affidavit. To a specific question, he answered that the contract notes given by the creditor and the share-broker were shown to him. For the aspects on which he had spoken, the contract notes were sufficient. It was not necessary to see the other documents in the arbitration proceedings. He denied the suggestion that his opinion was only based on what counsel for the pledgors had told him about the proceedings. His opinion was based on his search for relevant information and formation of opinion. His opinion was based on information from NSE.India.com and BSE.India.com. He did not know DW1. To a question whether as an expert it did not occur to him that he must get the full facts before giving his opinion, he has stated that his opinion was asked regarding the possibility of sale of certain quantum of shares in the market and he gave his opinion on that. For that, other information was not necessary. He agreed that it was possible to sell shares based on earlier purchase order of shares exhibited on the screen. He deposed that this was not a case of in-sider trading. He reiterated his opinion that the buyer should have been privy to information from the seller on that particular day. His opinion was based on the fact that India bulls could not have otherwise sold more than a crore of shares within 15 seconds. To a suggestion that apart from what he has mentioned earlier, there was no other basis for forming such an opinion he deposed that he had taken into account the volume traded, the volume of shares delivered in Sun TV Network during the three years period, he had considered relevant. He deposed that from his experience in the share market, such a large quantum of shares of Sun TV network could not but have been sold because there is a relationship between the open buy orders and the volume of business in that security. In this case, the quantum sold could not have passive buy orders readily available for absorption. He was asked a question based on the price volume charts of BSE and NSE, marked Ex.C5 & C6, and he deposed that he had studied those charts before giving his opinion. He was asked questions on what were the rates on different dates as per those charts and answers elicited. Then he was asked whether in that context, he could explain his statement that the sales on 19.12.2008 were done in a pre-planned manner. He deposed that in normal market environment, the market forces decide the price, so predicting, the price will remain difficult. The quantum of shares that were unloaded was abnormal and beyond the average volume of business done in BSE in Sun TV Network. Absorption of such a large quantity which was very abnormal with respect to the average volume of business done in Sun TV Network shares led to the conclusion drawn by him. The sale order was placed by the share broker at one lot with one order number and order time. Within 15 seconds of the sale order, the entire quantity of shares were sold successfully. This indicated that buyers remained with passive buy orders in the trading system of BSE well before the sale was placed for such a large quantity and thus, further strengthened his conclusion. He deposed that one of the sales of shares by Kalanidhi Maran on 14.12.2007, was a bulk sale and the other was, a block sale. He also deposed that though 30 lakh shares were sold by Indiabulls in one order, it was not reported and that was a violation of SEBI Regulations. The rest of the quantities were sold in retail, so no reporting was necessary. Regarding such sales in a pre-planned manner if the party complained to SEBI, it would initiate action. He had not suggested to counsel for the pledgors that the remedy of his clients was in SEBI. He deposed that the pledgors could not move SEBI because the shares had got transferred to the name of the creditor earlier. It was not possible to expect the creditor to make a complaint. He denied the suggestion that he was deposing as he did because counsel for the pledgors was his counsel.

98. In cross examination on behalf of the share broker, he answered that the share broker has acted as a broker in this case and the witnesses himself had worked as stock broker for about 15 years in all. In a normal situation, it was correct to say that a selling broker would not know about the purchasing broker or the purchaser while trading in a stock exchange. He admitted that as on 19.12.22008, owner of the disputed shares was the creditor which possessed the shares in its depository account. He admitted that the normalcy of a transaction, was linked to legitimacy of ownership. He denied the suggestion that he had given an opinion in this case without being aware of the legitimate owner of the shares. He deposed that he was able to see in the contract notes that the sale was made within 15 seconds covering existing market buy orders and two large quantums at a lower price. Since the contract issued by the creditor, was backed by the share-broker, he was of the opinion that the shares were lying at the credit of the depository account of the creditor. For a valid reason, a share-broker can refuse to execute an order of his client. Valid reasons would be, want of margin and if the order would affect the market significantly for non-compliance with regulatory requirements. On being asked, which regulation was violated in the case on hand, he answered that from the information available in the BSE website and the contract note issued by the share-broker, 30 lakh shares sold in a single trade amounting to more than 0.5% of the share capital had not been reported as a bulk deal since as per the then existing regulation, a single trade cannot be broken into pieces and allotted multiple clients. The reporting requirement had not been complied with by the buyer and that was the violation. There was no violation of any regulation regarding the sale of 70 lakh shares. In answer to a question regarding what he has stated in paragraph 3.7 of his chief examination and how he justified his inference he deposed that from his experience such large quantity of buy-order cannot be seen in the trading system as it will pull up substantially the price of the concerned stock. Moreover, the average trading volume and delivery of volumes were much lower than that involved in that transaction. Institutional Investors will not expose themselves in the market with such a single large order in a normal market condition. He explained how he came t the conclusion in paragraph 3.6 of his chief examination that the buyers were asked to place the buy-orders at the lowest possible price. He has stated that by the study of the quantities and the price movement for a period of 2 = years and not the circuit filter fixed by the exchange, it was possible to know that on a particular date, what are the pending buy-orders and selling orders in a script. He had used the expression passive order on the basis of the speed at which the sale was got executed through a single sell-order. He denied the suggestion that his assertions were not based on clear knowledge of the security marked, SEBI or Exchanged Regulations.

99. No opinion evidence to counter the evidence of PLW3 was attempted either by the creditor or by the share-broker. SBW1 examined on behalf of the share-broker did not deal with this aspect in his evidence in chief examination. In cross examination on behalf of the pledger, he denied that Nalanda India Fund was a client of the share-broker. As a broker, the share-broker only executed instructions from its client, the creditor. They have no role in deciding the quantum to be sold. He reitereated that he had gone by the instructions for the sales held on 15.12.2008 and 16.12.2008 regarding the quantum. He had to check as to how many times the share-broker got instructions to sell from the creditor. The transactions were kept in the form of contract notes. It was a standard operating procedure in operations and it had not been changed in three years. He denied the suggestion that he had pre-arranged with Nalanda India fund for the sale of shares on 19.12.2008. He also denied that the sale was for a pre-arranged price. When he was asked whether the sale of shares on 19.12.2008 was not an unnatural one, he parried the question by stating that he did not understand the meaning of the expressions "unnatural". He admitted that the share-broker had been fined by SEBI, especially in the face of innumerable rules and regulations. To a question by the arbitrator drawing the attention of the witnesses to para 3.3 of the chief examination of PLW3 to the effect that the sale of more than one crore shares on 19.12.2008, in such a short span of time would have been only by way of passive sale, he answered that the stock market being very dynamic there are precedents where large transactions have been executed in a short period of time. Hence, the present could not be said to be a suspicious transaction. When he was asked a question whether he could give information about any such instance of sale of such large number of shares in such a short time, he answered he could not remember off hand. He admitted that Chennai branch of his office had come to know about the orders of injunction when a fax was sent to them on 19.12.2008.

100. SBW2 the other witnesses examined on behalf of the share-broker did not depose anything about the sale of shares on 19.12.2008 in his examination.

101. CW1 deposed in this chief examination that the Bombay Stock Exchange reported the sale of 1,04,04,640 shares as a bulk deal because the said sale had achieved a particular percentage of shares during the day which triggered such notification. There was no prior agreement between the creditor and any other party including the purchasers of the shars. If an order for purchase was appearing on the terminal, a party was entitled to sell the share. It was not possible to know the buyer before hand. In cross examination on behalf of the debtors, he denied the suggestion that he had got the pledged shares sold in collusion with the share-broker. He also denied the suggestion that he did not realize the proper value for the sasle of the pledged shares. He denied the suggestion that the creditor had knowledge of the order of injunction passed by the High court of Madras, before the sale of the pledged shares on 19.12.2008, instructions for sale could normally be given by the Operations Head. He would have to check up as to who was the Operations Head at the relevant time. He denied the suggestion that the sale on 19.12.2008 was based on a joint decision taken by him and SBW1. He also denied the suggestion that the sale of shares on 19.12.2008 was a pre-orchestrated arranged sale.

102. On an appreciation of the evidence, thus available, I find that the credentials of PLW3 to depose on the relevant aspects could not be seriously challenged. Nor could his qualification and experience successfully questioned. In his evidence, he has clearly deposed the reasons for his coming to the conclusion that the sale held on 19.12.2008 could not have been a normal one. Having heard the evidence of the witness and watched his demeanor during examination, I am inclined to give credence to his version that he had studies the relevant materials before he came to the conclusion that he has deposed to. He has referred to circumstances that could lead to the conclusion that the sales on 19.12.2008 were in a sense, pre-arranged sales. His evidence that normally orders for purchase of such huge quantity would not be available in the market in cases like the one concerned with sale of shares of SUN TV Network has not been rebutted, nor has it been discredited in cross examination. I am therefore, inclined to accept his evidence to find that the sale of more than a crore of shares within 15 seconds in the stock exchange on 19.12.2008 might have been pre-arranged sale as indicated by the witness. A finding in a dispute of this nature has to be on preponderance of probabilities, and applying that yardstick, I see no reasons to discard the evidencing PLW3. For the purpose of this arbitration, it has to be found that the sale of shares on 19.12.2008 was not a bona fide or regular one.

103. On behalf of the creditor it is contended that the question of contempt or violation of orders of injunction in terms of Order 39 Rule 2A of the Code of civil procedure within the purview of High Court of Madras and that the application for taking action for alleged violation the orders of injunction have not been sent to the Arbitrator for arbitration and had been retained by the High court. Obviously, any question of contempt or violation of the order of injunction and the punishment, if any, in that regard is that for the Court that had issued the order of injunction. As an arbitrator, I am not concerned with it. But it is not possible to accept the argument that the arbitrator cannot go into the question of the propriety of the sale of shares on 19.12.2008, on the basis of the sales that were effected after the creditor and the share-broker had become aware of the orders of injunction. All disputes between the parties have been referred to the Arbitrator for arbitration. One of the disputes is about the sales of shares on 19.12.2008 and their validity and one of the grounds in that behalf, is that the sales were effected in spite of the orders of injunction passed in that behalf by the High Court of Madras brought to the notice of the creditor and the share-broker. That aspect of the case is certainly within the ambit of the Arbitration and hence the jurisdiction of the Arbitrator. I am, therefore, not inclined to accept the argument on behalf of the creditor that I cannot consider the question whether the sales of shares have been effected after being made aware of the orders of injunction passed by the High Court of Madras in suits filed by the pledgors, though I may have to consider whether adequate information was furnished in that regard. All that I am concerned with is the question whether the sales held on 19.12.2008 were bona fide and regular and whether the pledgors would be entitled to any compensation for that act of sale on the part of the creditor and the share-broker in this proceeding, in view of my conclusion that it would not be possible to nullify the sale of shares in the absence of the purchasers before me even if I have jurisdiction to do so. Suffice it to say; that I overrule the contention of the creditor that I am precluded from considering whether the sales were inspite of the knowledge of the orders of injunction passed by the High Court.

104. On behalf of the share-broker,it is contended that any compliant regarding sale of shares has to be pursed under the relevant regulations and they are not within the purview of the arbitration. In this arbitration, I am not concerned with either nullifying of the sale of shares or the question whether any action is warranted against the share broker for the sale of shares. This arbitration is concerned with the dispute regarding the validity of the sales of shares as also of their fairness, and that is the subject matter of dispute between the parties in this arbitration agreed to by all the parties including the share-broker. To that limited extent, jurisdiction has been conferred on the arbitrator by the parties in the context of the Arbitration and Conciliation Act and to that extent the Arbitrator is competent to decide whether the share-broker had dealt fairly with the pledgors and whether the pledgors would be entitled to be compensated for any improper action on the part of the share-broker in the matter of sales of shares on 19.12.2008. I therefore, overrule that objection raised on behalf of the share-broker." viii) The Issue No.3 was decided against the pledgors and the debtors. ix) On Issue Nos.2 and 17, it was held, that sale of shares on 02.12.2008, 15.12.2008 and 16.12.2008 by the creditor was not authorized or illegal as against it. The sale on 19.12.2008 was on a different footing in view of the interference of the Court and not on this ground , therefore, it was held, that the creditor cannot be held to be guilty of conversion in the circumstances in selling the pledged shares from 02.12.2008 onwards. x) On Issue No.21, the finding recorded is as under:

108. I have already held that there was a default in payment of interest by the debtor which gave room to the creditor to sell the collateral securities, the pledged shares. I have also found that the debtor had not taken steps to rectify the default in payment of interest. Though the creditor could have acted more prudently in selling the shares as found by me earlier, on this issue, it has to be found that the loan had fallen due for default in payment of interest, when the creditor started selling the shares. xi) Issue Nos. 9 to 12 were taken up together and it was held, that the pledgors have a cause of action against the share broker and that the existence of a privity of contract between the parties was not essential considering the nature of the claim and the scope of the arbitration agreed and that the pledgors are entitled to relief as against the share broker. xii) On Issue No.7 & 8, the finding recorded was that there was no specific evidence of the loss said to have been suffered by the debtor except the general claim that the shares were sold for a lesser value than that was prevalent on the respective dates and accordingly decided this issue against the debtors. xiii) On Issue No.14 and 24, the Hon'ble Arbitrator recorded, that the creditor was entitled to simple interest on the loan amount only at 21% p.a. from the date of the loan and the creditor was not entitled to enhanced interest in the circumstances of the case. xiv) On Issue Nos.13 & 15, the Hon'ble Arbitrator held, that interest has to be awarded at 21% p.a. and, a recalculation of the balance amount due has to be undertaken. It was therefore held, that creditor was not entitled recover the sum of Rs.83,70,42,866.78 with interest at 28% p.a. or at a higher rate as claimed and the amount was to be recalculated at 21% p.a. from the date of the loan and the recoveries credited on the respective dates and the balance outstanding has to be struck as on the date of the filing of the claim by the creditor. The future interest @ 18% was granted. xv) On Issue Nos.18, 22, 26 and 27, the findings recorded read as under: Issue No.18:

134. Nothing was argued in this aspect. The debtors will be entitled to have the compensation awarded to the pledgors as agaisnt the creditor set off against what is found to be due as on the date of the claim. The debtors and the pledgors will also be entitled to an equitable direction that the compensation awarded to the pledgors against the share broker should be recovered by the creditor from the share-broker and adjusted towards the amounts due as on 13.10.2009. The debtors are not entitled to any other set off. Issue No.22:

135. In view of my finding that the amount has to be recalculated with interest at 21% per annum from the date of the loan till 13.10.2009 and credits given to the other amounts referred to above, no further direction for accounting is called for. This issue is answered thus. Issue No.26:

136. In the light of my finding on issues 8 and 9 and the other relevant issues, the pledgors are entitled to have an award for the amount of compensation awarded to them against the creditor and the share broker subject to the order that the creditor is entitled to set off, those amounts towards amounts due to it as recalculated as per this award. Issue No.27:

137. The debtors are not entitled to any relief other than the correct working out of the amount due from them on a recalculation and after adjustment of the compensation awarded to the pledgors as against the balance amount due from them. The creditor can proceed against the other securities only after the balance amount as per this award is calculated and the debtors are given an opportunity to pay off that amount. On the debt as per this award being satisfied, the creditor will forthwith release the mortgages it has taken. If the balance remains unpaid, the creditor can proceed against the mortgaged property. xvi) On Issue No.28, the finding recorded was that the creditor was entitled to recover the balance amount due from the debtors on a recalculation of the amount as indicated in the findings on the relevant issues and the creditor would be entitled to proceed against the properties mortgaged and to recover the balance amount. The costs of proceedings are also granted to the creditor and the cost was as agreed to in the memo of agreement.

33. The Hon'ble Arbitrator accordingly passed the following award:

141. I award to Indira Anand, the pledgor, a sum of Rs.7 Crores against M/s.Induabulls Financial Services, the creditor, and a sum of Rs.3 crores against M/s.Indiabulls Securities Ltd., the share broker, to be adjusted against the balance sum due to the creditor as per this award, as on 13.10.2009.

142. I award to K.Bharathi, the pledgor, a sum of Rs.23 crores against M/s.Indiabulls Financial Services, the creditor and a sum of Rs.10 crores against M/s.Indiabulls Securities Ltd., the share broker, to be adjusted against the balance sum due to the creditor as per this award, as on 13.10.2009.

143. I award to the debtors the right to have the amount due from them to the creditor recalculated on the basis that the interest due to the creditor is at 21% per annum from the date of the loan till 13.10.2009 and thereafter at 18% per annum till recovery.

144. I award to the creditor the right to recover the balance amount due to it under the transaction in terms of the directions contained in this Award. The creditor is given the right to recover Rs.13 crores from the share-broker and adjust the same against the debt due from the debtors, if need be, by execution of this Award. The creditor is entitled to proceed against the properties mortgaged for the balance calculated as per this Award and subject to the directions regarding appropriation contained in it. The creditor will release the mortgage forthwith on this award to it being satisfied.

145. The share-broker is directed to pay the sum of Rs.13 crores awarded to the pledgors as against it, to the creditor within three weeks of this Award failing which this award will be executed and the amount recovered by the creditor.

146. This Award is thus made and proclaimed on this, the 18th day of February, 2012 at Chennai, the venue of this Arbitration.

1) O.P.No.272 of 2012 i) The petitioners in this Original Petition have challenged the award on the ground, a) that it was agreed between the parties, that the award should be passed within a period of six months of the commencement of the proceedings and the Hon'ble Arbitrator was to pass the award latest by 19.12.2010, whereas the award was passed after 14 months, which has prejudiced the right of the petitioner. a.1) This ground deserves to be noticed to be rejected, non only on the ground, that it was not pressed, but also for the reason that it is totally misconceived and cannot be the ground to set aside the award. b) that the findings recorded by the Hon'ble Arbitrator are perverse in holding that it was open to the creditors to recall the loan for not having paid interest in time. b.1) This ground is again totally misconceived, as the Hon'ble Arbitrator has recorded this finding on appreciation of terms of the agreement, therefore by no stretch of imagination, can be said to be perverse. c) that once notice under Section 176 of the Indian Contract Act was held to be invalid, the same was irregular and voidable, therefore it was not open to the Hon'ble Arbitrator to have not ordered restitution of shares by granting inadequate compensation. c.1) This ground is again not sustainable in law, as admittedly in the alternative the relief claim was for payment of price of shares, which has accordingly been done. It may also be noticed here, that learned Senior Counsel fairly conceded that the award passed by the Hon'ble Arbitrator was just and fair. ii) Consequently, I find no merit in this Original Petition, which is accordingly ordered to be dismissed.

2) O.P.No.228 of 2012 i) Learned Senior Counsel appearing for the petitioner vehemently contended, that the impugned award passed by the Hon'ble Arbitrator cannot be sustained in law, as it is contrary to the fundamental policy of Indian law and patently illegal, as it is outcome of misrepresentation of law and outcome of misreading of evidence on record. That the Hon'ble Arbitrator wrongly came to the conclusion, that the notice issued for sale of pledged shares was not a valid notice under Section 176 of the Contract Act. ii) Learned Senior Counsel referred to Ex.C8, "Loan Recall Notice" issued to respondents 1 to 3 and respondents 6 & 7 for recall of loan and payment of outstanding amount. The notice clearly disclosed the intention of the creditors to sell the securities. iii) The reading of the notice shows, that the pledgors were informed about the outstanding amount as on 30.09.2008 and was called upon to repay it within five days of issuance of letter. It was made clear, that failure to pay the aforesaid amount within time stipulated above would result in initiation of legal proceedings and also to enforce/invoke/liquidate/sell/transfer/dispose off the securities provided to or created in favour of the creditor for securing the payment/repayment of amount payable under the loan agreement without further notice. The contention therefore was, that this notice satisfied the requirement of Section 176 r/w 177 of the Indian Contract Act. iv) In support of this contention, learned Senior Counsel placed reliance on the judgment of this Court in the case of Kesarimal vs. Gundatathula Suryanarayanmurthy and another, AIR 192.Madras 1022, wherein it was laid down as under: "The power of sale is conferred on the pawnee to be exercised for his benefit according to his discretion in order to realize the debt due to him for which the pledge is a standing security. In order to exercise the power of sale all that the pawnee need do is to give reasonable notice of the intended sale. If he does so he requires no further authorization or permission of the pawnor to effect the actual sale and he is not thereafter bound to sell the pledged goods within a reasonable time after expiry of the period mentioned in the notice." v) Reliance was placed on the judgment of this Court in Srinivasulu Naidu (died) and others vs. Gajaraj Mehtra and Sons, 1990-1-L.W.86, wherein it was held, that the sale notice contemplated under Section 176 of the Contract Act, is only an intimation of the proposed sale by the pawnee and it it is not necessary that such a notice must be preceded by another notice informing the pawnee that if he does not pay the amount the pledged articles will be sold, and that the sale notice should have been signed by the pawnee and the amount due must be mentioned therein. The only requirement of Section 176 is that the pawnor should be given reasonable notice of the sale. vi) This Court in the above said case was pleased to lay down as under: "5. It is next argued by the learned Counsel that first a separate notice ought to have been given intimating the plaintiff the amount due from him and that the defendant proposed to have the sale. But Section 176 is not to that effect at all. To repeat, what all the section says is that a reasonable notice of sale must be given to the pawner. In this connection the learned Counsel reads out three decisions viz., (1) Sri Rama Finance Corporation, Bobbili, Sri Kakulam District A Partnership Firm By Their Managing Partner Sri. C.V. Seetharamaswamy v. Chatla Yellaiah Reddi and two others (1976) 1 A.W.R.107; (2) Prabhat Bank Ltd. and Anr. v. Baby Ram ; and (3) Sri Raja Kakral puni Venkata Sudarsana Sundara Narasayyamma Gam (Died By Lrs. v. The Andhra Bank Ltd. Vijayawada and Ors. (1960) 1 A.W.R.234. But I do not see any one of there decisions in support of the contention of the learned Counsel. In the first case, viz., Sri. Rama Finance Corporation Bobbeli v. Chajla Yellaiah Reddi (1976) 1 An.W.R.107, it is held that: "A pledgee is entitled to pray for sale of goods through Court, though he is entitled under Section 176 of the Contract Act to sell them himself without reference to the Court, but before he proposes to sell, the pledgee should give notice to the pledger about the intended sale." In the second case viz. Prabhat Bank Ltd. v. Baby Ram , it is laid down that, "A notice of the character contemplated by Section 176 cannot be implied. Such notice must be clear and specific in its language and must indicate the intention of the pawner to dispose of the security." In the third case viz., Sri. Raja Kakral Puni Venkatasudarsana Sundara Narasayyamma Gam v. The Andhra Ltd. (1960) 1 An.W.R. 234, it is ruled that, "On a plain reading of Section 176 of the Contract Act, it is clear that before exercising the power of sale the pawner should give to the pledger reasonable notice of the sale (of the pledged thing) Section 176 is mandatory and even if there is a term in the contract of pledge to waive notice, still, the pledge is not relieved of his obligation to give notice before the sale of pledged articles." Now, there is no doubt that a notice of sale is mandatory, but in this case a notice in fact has been sent. The above decisions cited by the learned Counsel only emphasise that a reasonable notice must be given. That is the' very language of the section to which we have referred above. As against these decisions Mr. T.R. Mani, learned Counsel, appearing for respondent-defendant relies on (1) "Kesarimal v. Gundabathula Suryanarayanamurthy and Anr. A.I.R. 1928 Mad.1022 according to which: The pawner of sale is conferred on the pawnee to be exercised for his benefit according to his discretion in order to realise the debt due to him for which the pledge is a standing security. In order to exercise the power of sale all that the pawnee need to is to give reasonable notice of the intended sale. If he does so he requires no further authorization of permission of the pawner to effect the actual sale and he is not thereafter bound to sell the pledged goods within a reasonable time after expiry of the period mentioned in the notice. (2) Motilal v. Lakshmichand A.I.R. 1943 Nag.162 wherein it is decided that: "An omission to state the specific amount due in the notice does not make the notice invalid if a fair inference can be drawn that the debtor had means to know what the amount due would be." (3) Sankaranarayana Iyer Saraswathy Ammal v. The Kottayam Bank Ltd. A.I.R. 1950 Travancore-Cochin 66 which states that. The expression 'he may sell the thing pledged on giving reasonable notice of the sale' in Section 176 only means an intimation of the intention to sell and not that a sale should be arranged before hand and due notice of all details given to the pawner. Where the notice contained an unequivocal indication of the pawner's intention to sell the security (shares) if the debt was not paid within 7 days and the pawner had notice of it, the legal requirements of a valid notice are satisfied. and (4) "Hulas Kunwar v. Allahabad Bank Ltd." A.I.R. 1958 Cal. 644 wherein it is held that, The sale in Section 176 means the intended sale and not the sale that has been actually arranged by the pawnee. The law does not require that the pawner should arrange for the sale beforehand and then give the pawner a notice of the date, time and place of that sale. All that is necessary is that a notice should be given of the pawner's intention to sell in default of payment by the pawner within a specified date. The reasonable notice of the sale under Section 176, therefore, does not require specification of the date, time and place of the sale. These decisions cited by the learned Counsel for the respondent-defendant strongly supports the view expressed by me above to the effect that the sale notice contemplated under Section 176 is only an intimation of the proposed sale by the pawner and it is not necessary that such a notice must be preceded by another notice informing the pawner that if he does not pay the amount the pledged articles will be sold, and that the sale notice should have been signed by the pawnee and the amount due must be mentioned therein. As pointed out by the learned Counsel for the respondent-defendant in Ex.A.24 the date, time and place of sale have been correctly mentioned. From the above discussion it is manifest that there is no merit in the contention raised by the learned Counsel for the appellant-plaintiff. Accordingly I find no merit in the second appeal. The result is: The second appeal is dismissed with costs." vii) Reliance was thereafter placed on the judgment of the Hon'ble High Court of Punjab in M/s.Grison Knitting Works and others vs. Laxmi Commercial Bank Ltd., and others, AIR 196.Punjab 98, laying down, that a notice which makes a demand for payment of the amount for which the goods are pledged and in default informs the pledgor that the pledgee would sell the goods is not rendered invalid by reason of the fact that it refers to another debt and demands payment thereof. In the said case, it was also held, that notice giving pawnor six days for payment was held to be not unreasonable. viii) Reliance was also placed on the Hon'ble Full Bench Judgment of Travancore Cochin in Sankaranarayana Iyer Saraswathy Amal vs. The Kottayam Bank Ltd., AIR (37) 1950 Travancore Cochin 66, wherein it was laid down as under: "8. We are now, no doubt, bound by the statute, but the provisions of that statute relevant for our present purpose have never been understood to be any the different from the English common law rules relating to pledges. We are therefore unable to accept the contention that the statutory requirement of a reasonable notice of the sale has not been complied with in this case. In the light of the law as stated above, it is difficult to accept the view taken in the case relied on the appellant's learned Advocate in support of this part of the case viz., Nandalal v. Dasarathi, A.I.R. (19) 1932 Cal. 534 at p.535: (59 Cal 1052), that the form of the notice in that case did not confirm to law. The notice stated that failing payment by the day fixed the pawnee shall arrange for sale of the hypothecated stock. It was said that such a notice should contain more definite particulars and that what such particulars shold be must depend upon the peculiar facts of each case. Whatever that be on closer examination it would be seen that the decision in that case turned on whether the notice of demand gave the pawnors hardly 48 hours to liquidate the debt and the notice itself never reached them. They had closed down their business and the pawnee Bank despatched the notice to their former place of business after they had left the place and their whereabouts unknown. The sale too was not held in such a way as to be above suspicion. That case cannot therefore, be of much use to the appellant in this case. Here Ex.F contains an unequivocal indication of the Bank's intention to sell the shares if occasion demanded it; the appellant had notice of it and what he did was to attempt to gain more time so that the sale may be held when the share market was more favourable. The lower Court's decision that the legal requirements of a valid notice are satisfied in this case has therefore to be upheld." ix) Learned Senior Counsel for the petitioners also referred to the postal receipts, showing despatch of notice of recall and intention of sale (Ex.C49 & 50), to contend that the letter was duly delivered to the addressee and notice was also served, therefore the finding of the Hon'ble Arbitrator cannot be sustained in law. x) It was also vehemently contended, that the documents and evidence led on record clearly shows, that not only the notice in terms of Section 176 was issued, but was duly served as presumption of service can be drawn in view of Section 114 of the Evidence Act r/w Section 27 of the General Clauses Act . xi) Learned Senior Counsel further contended, that the Hon'ble Arbitrator wrongly came to the conclusion, that the loan transaction between the parties was composite transaction. This finding, according to the learned Senior Counsel, is contrary to the record, as admittedly two loan agreements were executed under which loan was granted to different and distinct companies. xii) It was also contended by the learned Senior Counsel, that the award suffers from patent illegality, as the Hon'ble Arbitrator wrongly came to the conclusion, that the petitioners were not entitled to increase interest. The contention of the learned Senior Counsel was, that the Hon'ble Arbitrator in terms of the provisions of Arbitration and Conciliation Act was bound by the agreed terms of the contract for the period prior to the reference, therefore once the parties had agreed for payment of additional rate of payment, the Hon'ble Arbitrator, being creation of agreement, was bound to grant the same interest, and could not record, that the interest demanded was not payable or was not correct. xiii) That the Hon'ble Arbitrator recorded a finding that debtors had not specifically disputed the right of creditor to increase the rate of interest, therefore, the award being contrary to the agreed terms can be said to be against public policy, therefore, liable to be set aside. xiv) In support of this contention, reliance was placed by the learned Senior Counsel on the judgment of the Hon'ble Supreme Court in the case of State of Haryana and others vs. S.L.Arora and company, (2010) 3 SCC 690."23. The difference between clauses (a) and (b) of section 31(7) of the Act may conveniently be noted at this stage. They are : (i) Clause (a) relates to pre-award period and clause (b) relates to post- award period. The contract binds and prevails in regard to interest during the pre-award period. The contract has no application in regard to interest during the post-award period. (ii) Clause (a) gives discretion to the Arbitral Tribunal in regard to the rate, the period, the quantum (principal which is to be subjected to interest) when awarding interest. But such discretion is always subject to the contract between the parties. Clause (b) also gives discretion to the Arbitral Tribunal to award interest for the post-award period but that discretion is not subject to any contract; and if that discretion is not exercised by the arbitral Tribunal, then the statute steps in and mandates payment of interest, at the specified rate of 18% per annum for the post- award period. (iii) While clause (a) gives the parties an option to contract out of interest, no such option is available in regard to the post-award period. In a nutshell, in regard to pre-award period, interest has to be awarded as specified in the contract and in the absence of contract as per discretion of the Arbitral Tribunal. On the other hand, in regard to the post-award period, interest is payable as per the discretion of the Arbitral Tribunal and in the absence of exercise of such discretion, at a mandatory statutory rate of 18% per annum.

24. As there is some confusion as to what section 31(7) authorizes and what it does not authorize, we will attempt to set out the legal position regarding award of interest by the arbitral tribunals, as emerging from section 31(7) of the Act. 24.2 The authority of the arbitral tribunals to award interest under section 31(7)(a) is subject to the contract between the parties and the contract will prevail over the provisions of section 31(7)(a) of the Act. Where the contract between the parties contains a provision relating to, or regulating or prohibiting interest, the entitlement of a party to the contract to interest for the period between the date on which the cause of action arose and the date on which the award is made, will be governed by the provisions of the contract, and the arbitral tribunal will have to grant or refuse interest, strictly in accordance with the contract. The arbitral tribunals cannot ignore the contract between the parties, while dealing with or awarding pre-award interest. Where the contract does not prohibit award of interest, and where the arbitral award is for payment of money, the arbitral tribunal can award interest in accordance with Section 31(7) (a) of the Act, subject to any term regarding interest in the contract." xv) Learned Senior Counsel for the respondents opposed this petition, by vehemently contending, that the alleged "Loan Recall Notice" was not received by Mrs.A.Indira Anand and Mrs.K.Bharathi, which is clear from PL25 and PL38. The reference was made to the finding recorded by the Hon'ble Arbitrator to the effect, that presumption letter posted on correct address is deemed to have been served as envisaged under Section 27 of the General Clauses Act stood rebutted by the petitioner. It was contended, that it was proved by Ex.D1 to Ex.D4, that notice was not served on the pledgors, as there was no cross examination, when the witness was examined. That the notice Ex.C8 could not be said to be sufficient notice under Section 176 of the Contract Act, in view of the law laid down by the Hon'ble Allahabad High Court in Prabhat Bank Ltd and another vs. Babu Ram, AIR 196.Allahabad 134, wherein it was laid down as under: "6. Section 176 of the Contract Act provides that if the pawner makes a default in payment of the debt in respect of which the goods were pledged, the pawner may bring a suit against the pawner upon the debt, or he may sell the thing pledged on giving the pawner reasonable notice or the same. The contention that notice of the contemplated sale to the pawner should be inferred from his letter dated 13-8-1948, cannot hold water inasmuch as the said letter does not disclose that a reasonable notice had been given by the pawnee to the pawner to sell the securities. A notice of the character contemplated by Section 176 cannot be implied. Such notice has to be clear and specific in language indicating the intention of the pawnee to dispose of the security. No such intention was disclosed by the Bank in any letter to the respondent.

7. As regards the terms of the agreement dated 31-12-1946 under which the pawnee had been authorised to sell the securities in case the credit balance of the debtor fell below the margin, it could not avail the Bank in acting contrary to law. An agreement of this character would be inconsistent with the provisions of the Contract Act and, as such, would be wholly void and unenforceable.

8. I am, therefore, clearly of the opinion that the sale of the securities by the appellant Bank without reasonable notice to the respondent was bad and was not binding on hint. What is contemplated by Section 176 is not merely a notice but a 'reasonable' notice, meaning thereby a notice of intended sale of the security by the creditor within a certain date so as to afford an opportunity to the debtor to pay up the amount within the time mentioned in the notice. No such notice was ever given by the appellant to the respondent. There can thus he no escape from the conclusion that the sale of the securities by the appellant was against law and not binding on the respondent. The conclusion reached by the lower appellate court was, therefore, legally sound." xvi) It was further contended, that no explanation was forthcoming as to why respondent no.1, after issuing notice of five days, waited for 45 days till 12.11.2008 to invoke the pledged shares. That the notices were sent by the creditor on regular basis thereafter also. It was for this reason, that clear finding was recorded by the Hon'ble Arbitrator and that there was no notice to Mrs.K.Bharathi and that the notice issued to Mrs.Indira Anand could not be said to be a valid notice within the meaning of Section 176 of the Indian Contract Act. xvii) It was contended, that this stand was proved by Ex.PL38 by the postal authorities, which was obtained under RTI Act, confirming non delivery of notice. It was also contended, that finding of fact cannot be the question under Section 34 of the Arbitration and Conciliation Act. xviii) Learned Senior Counsel for the respondents also referred to the finding of the Hon'ble Arbitrator, that the sale on 19.12.2008 was prearranged and the same was based on unrebutted evidence of PSW3. It was on the appreciation of evidence, that the Hon'ble Arbitrator has held that the sale was irregular and the provisions of Section 176 of the Indian Contract Act, was not followed. xix) On consideration, I find that on appreciation of the documents, the Hon'ble Arbitrator has recorded a finding on Issue No.4. The finding recorded is that the notice Ex.C8, on which strong reliance has been placed by the petitioners could not be said to be the notice under Section 176 of the Contract Act, as it was only general a notice to the debtor to pay the amount. xx) This finding was recorded in view of the fact, that even after issuing Ex.C8, creditors kept on issuing further notices to the debtor to perform their obligation under the loan agreement. After issuance of notice, there was another notice issued for making good the security and also to pay the defaulted amount, therefore finding was recorded, that this could not be treated to be a notice invoking pledge, which is a finding of fact, which cannot be interfered with under Section 34 of the Arbitration and Conciliation Act. xxi) This Court in exercise of powers under Section 34 of the Arbitration and Conciliation Act, cannot interfere with the findings, merely on the ground, that other view was also possible. The judgment on which reliance was placed by the learned Senior Counsel for the petitioners cannot advance the case of petitioners to hold, that the findings by the Hon'ble Arbitrator are wrong, as this Court cannot reappraise the evidence to come to a different conclusion than the one arrived at by the Hon'ble Arbitrator, as this Court does not sit in appeal. This Court can interfere only if ground is made out as envisaged under Section 34 of the Arbitration and Conciliation Act. xxii) The reading of finding of the Hon'ble Arbitrator does not show, that the finding recorded is either perverse or contrary to law or against public policy. It may further be noticed here, that the Hon'ble Arbitrator also found, that Ex.C8 was even not proved, that it was not issued by the competent person, therefore, the impugned award cannot be said, that the award is against public policy. xxiii) The contention of the learned Senior Counsel for the petitioners that the award is bad, as the Hon'ble Arbitrator violated the terms of the agreement in not granting interest in terms agreed to between the parties, also cannot be accepted. It is not the case where interest has been granted by the Hon'ble Arbitrator against the terms of the agreement, but the Hon'ble Arbitrator merely decided the interest payable on interpretation of the terms of the agreement and in view of the evidence led before him. xxiv) The reading of the award clearly shows, that the Hon'ble Arbitrator took note of the fact, that the parties had agreed that the interest could be enhanced, therefore it was within the jurisdiction of the Hon'ble Arbitrator to go into the question whether there was any justification to claim interest at enhanced rate or interest was to be granted at agreed rate of interest. xxv) This finding of the Hon'ble Arbitrator cannot be said to be against public policy or contrary to the law, which may call for interference by this Court. xxvi) This Court also does not find any force in the contention of the learned Senior Counsel for the petitioners, that the Hon'ble Arbitrator committed error in holding transaction to be composite transaction. It may be noticed, that it is on appreciation of pleadings and evidence, that the Hon'ble Arbitrator was pleased to hold that transaction was the composite and furthermore keeping in view that two different companies were granted loan under two different agreements, the Hon'ble Arbitrator rightly passed two separate awards. This finding also cannot be said to be a finding against public policy or law to entitle the petitioners to invoke Section 34 to challenge the award. xxvii) The Hon'ble Supreme Court in the case of McDermott International Inc vs. Burn Standard Co. Ltd and others, (2006) 11 SCC 181.has been pleased to lay down as under: "48. The Section did not contain expression "error of law.". The same was added by judicial interpretation. While interpreting Section 30 of the 1940 Act, a question has been raised before the courts as to whether the principle of law applied by the arbitrator was (a) erroneous or otherwise or (b) wrong principle was applied. If, however, no dispute existed as on the date of invocation, the question could not have been gone into by the Arbitrator.

52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.

58. In Renusagar Power Co. Ltd. v. General Electric Co. [(1994) Supp 1 SCC 644], this Court laid down that the arbitral award can be set aside if it is contrary to (a) fundamental policy of Indian Law, (b) the interests of India; or (c) justice or morality. A narrower meaning to the expression 'public policy' was given therein by confining judicial review of the arbitral award only on the aforementioned three grounds. An apparent shift can, however, be noticed from the decision of this Court in Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (for short 'ONGC')[(2003) 5 SCC 705]. This Court therein referred to an earlier decision of this Court in Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly [(1986) 3 SCC 156.wherein the applicability of the expression 'public policy' on the touchstone of Section 23 of the Indian Contract Act and Article 14 of the Constitution of India came to be considered. This Court therein was dealing with unequal bargaining power of the workmen and the employer and came to the conclusion that any term of the agreement which is patently arbitrary and/ or otherwise arrived at because of the unequal bargaining power would not only be ultra vires Article 14 of the Constitution of India but also hit by Section 23 of the Indian Contract Act. In ONGC (supra), this Court, apart from the three grounds stated in Renusagar (supra), added another ground thereto for exercise of the court's jurisdiction in setting aside the award if it is patently arbitrary.

59. Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the court. Where the Arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merit of the matter.

60. What would constitute public policy is a matter dependant upon the nature of transaction and nature of statute. For the said purpose, the pleadings of the parties and the materials brought on record would be relevant to enable the court to judge what is in public good or public interest, and what would otherwise be injurious to the public good at the relevant point, as contradistinguished from the policy of a particular government. [See State of Rajasthan v. Basant Nahata, 112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement, is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See Pure Helium India (P) Ltd. v. Oil & Natural Gas Commission, (2003) 8 SCC 59.and D.D. Sharma v. Union of India (2004) 5 SCC 325].

113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award.

116. We may now look at clause 37 of the main contract entered into by and between ONGC and BSCL which reads as under: "37. Indirect and Consequential Damages:- Neither company nor contractor shall be liable to the other for any consequential damages, which shall include but not be limited to loss of revenue/ profits, loss or escape of product, etc."" xxviii) For the reasons stated and in view of the law laid down by the Hon'ble Supreme Court, I find no merit in this Original Petition. Accordingly, O.P.No.228 of 2012 is ordered to be dismissed.

3) O.P.No.258 of 2012 i) M/s.Indiabulls Securities Limited has challenged the award on the plea, that the Hon'ble Arbitrator committed error in construing that the FAX sent by the counsel for 6th and 7th respondents on 19.12.2008 at 11:20 a.m., as notice for injunction passed by the Hon'ble High Court in the suit filed by the said respondents. It was contended, that reading of FAX message clearly shows, that the letter did not contain any details or order of injunction passed by this Court. ii) Learned Senior Counsel for the petitioner referred to the cross examination to contend, that it was admitted by the witness, that FAX matter was not in fact exactly what was the order of injunction passed in O.A.No.1312 of 2008. Therefore, it was not open to the Hon'ble Arbitrator to travel beyond the evidence, to hold that the letter issued by counsel was sufficient to convey the order of injunction. iii) Therefore the finding is contrary to law laid down by the Hon'ble Supreme Court in the case of A.Venkatasubbiah Naidu vs. S.Challappan and others, 2000 (IV) CTC 358.wherein it has been laid down as under: "12. What would be the position if a court which passed the order granting interim ex parte injunction did not record reasons thereof or did not require the applicant to perform the duties enumerated in clauses (a) & (b) of Rule 3 of Order 39. In our view such an Order can be deemed to contain such requirements at least by implication even if they are not stated in so many words. But if a party, in whose favour an order was passed ex parte, fails to comply with the duties which he has to perform as required by the proviso quoted above, he must take the risk. Non-compliance with such requisites on his part cannot be allowed to go without any consequence and to enable him to have only the advantage of it. The consequence of the party (who secured the order) for not complying with the duties he is required to perform is that he cannot be allowed to take advantage of such order if the order is not obeyed by the other party. A disobedient beneficiary of an order cannot be heard to complain against any disobedience alleged against another party." iv) It was also vehemently contended, that the award against the petitioner cannot be sustained, being beyond the scope of reference inasmuch as while making reference, this Court had excluded the question of violation of injunction order for adjudication by the Court. v) The contention of the learned Senior Counsel therefore was that it was not open to the Hon'ble Arbitrator to go into the question whether there was any breach of injunction order and grant relief based on such finding. Therefore, the impugned order deserves to be set aside, being beyond the scope of reference. vi) Learned Senior Counsel for the petitioner vehemently contended, that respondents in this case failed to convey the nature of injunction, therefore, it could not be said that the petitioner had the knowledge of injunction. The Hon'ble Arbitrator ought to have seen, that it was for the respondent to communicate the order of injunction and prove the fact positively before any finding could be recorded, specially when contempt petition was still pending. This shows, that the Hon'ble Arbitrator had gone beyond the scope of reference. vii) Learned senior counsel vehemently contended, that no penalty could be imposed on the petitioner on the allegation of violation of injunction as question of violation of injunction was not referred. The petitioner was merely acting as per the rules and regulations under which the petitioner was bound to act on the direction of the creditors, in view of pledge agreement in its favour, but also the power of attorney from the pledgors. viii) Therefore, it was contended, that once it was not proved, that the petitioner had the knowledge of injunction, the award against the petitioner deserves to be set aside being beyond the scope of reference. ix) That the award was against law and public policy being in the nature of penalty, which could not be imposed against the petitioner, nor it was within the jurisdiction of the Hon'ble Arbitrator to impose penalty, as the jurisdiction is with SEBI to lay penalty on violation of regulations. x) It was the contention of learned senior counsel, that action of petitioner was governed by the relevant statutory provisions, which could be gone into only by SEBI and not by the Hon'ble Arbitrator. xi) On consideration, I find this petition to be totally misconceived. The reading of award shows, that the Hon'ble Arbitrator has not gone into the question of contempt, but has looked into the conduct of parties for the purpose of adjudicating the claim. It may be noticed here that for determining the claim by the party, the Hon'ble Arbitrator had to look into the conduct of the petitioner. It is not disputed that the petitioner was party to the reference, and had submitted to the jurisdiction of the Hon'ble Arbitrator. xii) The Hon'ble Arbitrator is the best Judge of law and facts, and in absence of finding being contrary to the public policy or perverse, no interference is called for action under Section 34 of the Arbitration and Conciliation Act. xiii) By way of detailed order, the Hon'ble Arbitrator has given good reasons for ordering compensation against the petitioner, the findings cannot be said to be perverse or contrary to any law or against public policy as contended. xiv) Consequently, O.P.No.258 of 2012 is ordered to be dismissed.

4) O.P.No.229 of 2012 i) The Hon'ble Arbitrator passed the second award in the matter of dispute between M/s.Indiabulls Housing Finance Limited vs Manoharamma Hotels & Investments (P) Ltd., and others. The Award passed reads as under: Issue No.11.

30. In view of my findings as above, I make the following award: (i)The creditor, M/s.Indiabulls Financial Services Ltd. is entitled to recover the balance loan outstanding after recalculating the amount due under the transaction in terms of the findings herein. In other words, the creditor will recalculate the amount due by calculating simple interest on the principal at 30% per annum from the date of the loan till 30.10.2009, when the Arbitrator entered on the reference, after giving credit to the payments made by the debtors towards interest and principal on the respective dates of payment and the dividend received on the shares and thereafter at 18% per annum till 12.10.2011 on which date a sum of Rs.72,05,97,260 was reported to be appropriated towards the principal by the creditor. The interest on Rs.72,05,97,260 will cease to run as on that date. The balance principal amount remaining due to the creditor with interest calculated as awarded will be claimed and communicated by way of statement to the debtors. If they have any objection, the debtors will object in writing in three weeks of receipt of the statement from the creditor. On expiry of that period, if no objections are received from the debtors, the creditor will claim that amount from the share-broker. The share-broker will withdraw that amount from the deposit and pay it over to the creditor. If the debtors raise any objection to the calculation, the parties with the help of counsel will endeavour to sort out the dispute. If it becomes necessary the parties are free to move the arbitrator by way of an application to resolve the dispute. It appears that the amounts now in deposit in the escrow account is more than sufficient to cover the balance due to the creditor. In case the amount in deposit is not sufficient to cover the amounts recalculated as per this Award, the creditor will be free to move the executing court to recover the balance by the sale of the remaining pledged shares and the mortgaged properties. (ii)The share-broker which is holding the money in escrow, will withdraw and disburse the amount that may be necessary out of the amount in deposit with interest to the creditor after the amount is recalculated according to this Award to the satisfaction of the creditor and the debtors. If any balance is remaining, that with the total interest the deposits have earned, will be made over by the share-broker to the pledgors, Indira Anand and K.Bharathi, within two weeks of paying off the balance amount due to the creditor. The share-broker will desist from selling any further shares, until otherwise ordered by the executing court in execution of this award. (iii)Since, it is seen that the balance amounts in deposit in the escrow account or that will be credited in the escrow account would be more than sufficient to cover the balance due to the creditor under this loan transaction, as per this award, in any event, the circumstances that necessitated the taking of additional security do not any more exist. Hence, I declare by way of this award that the mortgage over the property in Radhakrishnan Salai stands extinguished. The creditor is directed to return the documents of title and the mortgage deed duly cancelled to the mortgagor under that transaction within two weeks. (iv)On receipt of the balance amount due under the loan as recalculated as per this Award, the creditor will give a valid discharge of the mortgage of Manappakkam lands and transfer back to the names of the pledgors, the balance shares of Sun TV Network Ltd. still remaining in the name of the creditor under the pledge. If amounts remain due even after the payment by the share-broker as directed above, the creditor will be free to proceed in execution of this Award to recover the balance due on this loan transaction. (v)The parties had agreed while seeking settlement of the disputes by arbitration that they would share the costs in the proportion set down in the joint memo. The costs will hence be suffered by the parties on its terms.

31. The order in I.A.No.1 of 2011 dated 31.07.2011 and I.A.2 of 2011 dated 08.10.2011 and the affidavit dated 03.02.2012 filed by the share-broker will stand annexed to this award. This Award is thus proclaimed at Chennai on 18.02.2012. ii) The facts leading to passing of this award are also same as in the case of other Original Petitions. This Award has been challenged on the ground, that the Hon'ble Arbitrator has gone beyond the terms stipulated in the agreement and misapplied the law of India. It was contended, that the Hon'ble Arbitrator has failed to allow the increase in the rate of interest in terms of and as specifically provided for in the agreement. It was also contended, that it was not open to the Hon'ble Arbitrator to alter the rate of interest as claimed by the petitioner and in support of this contention, reliance was placed on the judgment of the Hon'ble Supreme Court in Central Bank vs. Ravindra, 2002 (1) SCC 367.iii) It was also contended, that it was not open to the Hon'ble Arbitrator to restrict the rate of interest to 30% p.a. even for the pre-reference period, therefore, the award is not sustainable. That the finding of the Hon'ble Arbitrator, that the additional security was offered by the borrower, is erroneous, as there was no documentary or any other evidence to show additional shares, which were offered as security. The parties had agreed that the security was to be maintained 250% of the amount outstanding. iv) It was further contended, that the Hon'ble Arbitrator wrongly held that two transactions were composite transactions and both loans were based on the two different sets of agreements. It was the stand, that the Hon'ble Arbitrator has misconstrued the facts. v) On consideration, I find no ground to interfere with the findings recorded by the Hon'ble Arbitrator. It cannot be said, that the Hon'ble Arbitrator has gone beyond the terms of agreement in awarding interest. The reading of award shows, that the interest has been awarded as per the agreed terms between the parties. The Hon'ble Arbitrator has only decided , that in view of the facts and circumstances of the case and the evidence recorded, it was not open to the petitioner to claim additional interest, which fell within the jurisdiction of the Hon'ble Arbitrator, therefore the award cannot be said to be against law or public policy as contended, by the learned senior counsel for the parties. vi) For the reasons stated above and reasons recorded for rejecting the contention raised to challenge the award, this Court finds no merit in this petition. Accordingly, O.P.No.229 of 2012 is ordered to be dismissed.

34. Consequently, all O.P.Nos.228, 229, 258 and 272 of 2012 are dismissed, but with no order as to costs. 30.04.2013 Index: Yes Internet: Yes ar VINOD K.SHARMA, J., ar Pre-Delivery Order in O.P.Nos.228, 229, 258 and 272 o”

30. 04.2013


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