Shriram Transport Finance Company Limited Vs Narender Singh (Delhi High Court)
Summary: The Delhi High Court dismissed an appeal filed by Shriram Transport Finance Company Limited under Section 37 of the Arbitration and Conciliation Act, 1996, challenging the District Judge’s judgment dated 17.12.2020, which had set aside an arbitral award dated 16.07.2019. The District Judge had found that the arbitration proceedings suffered from two fundamental defects: non-compliance with Section 21, concerning notice of commencement of arbitration, and failure by the sole arbitrator to make the mandatory disclosure required under Section 12. The dispute originated from a vehicle loan agreement dated 16.09.2014 involving finance of Rs. 6,00,000. Following repayment disputes, the finance company repossessed and sold the vehicle and subsequently demanded Rs. 4,70,248 from the borrower. The company appointed Shri B.L. Garg, a retired Additional District Judge, as sole arbitrator. The arbitral proceedings resulted in an award directing payment of Rs. 4,70,248, interest at 18% per annum and costs of Rs. 12,000. The borrower challenged the award, alleging lack of proper notice, denial of an adequate opportunity to participate and failure to disclose the arbitrator’s repeated appointments by the finance company.
The High Court first examined the validity of the challenge under arbitral awards under Section 34″ target=”_blank” rel=”noopener”>Section 34 and rejected the finance company’s objection regarding limitation. Although the arbitral award was pronounced on 16.07.2019, the borrower received it by post on 20.07.2019 and filed objections on 18.10.2019. The Court held that the application was filed within the prescribed three-month period under Section 34(3). Turning to Section 21, the Court considered the company’s demand letter dated 20.09.2018 and its subsequent appointment letter dated 27.09.2018. The demand letter merely required repayment within seven days and stated that arbitration would be initiated upon default. It did not identify the proposed arbitrator or provide particulars of the appointment procedure, and there was no evidence establishing its receipt by the borrower. The appointment letter naming the sole arbitrator was addressed only to the arbitrator and was never communicated to the borrower. Consequently, neither communication satisfied the statutory requirement of notice for commencement of arbitral proceedings.
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