MANJULA DINESH RITA AND 3 ORSversusLOKMANYA MULTIPURPOSE CO OPERATIVE SOC LTD

                                                                                 904-CARBP-239-2023.doc


                                     IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                         ORDINARY ORIGINAL CIVIL JURISDICTION
                                              IN ITS COMMERCIAL DIVISION

                                COMMERCIAL ARBITRATION PETITION NO. 239 OF 2023

                        1)      Manjula Dinesh Rita                          ]
                                601, 6th Floor, Bhavya Building,             ]
                                                                             ]
                                5th Road, Opp. Jain Temple, Khar             ]
                                (West), Mumbai 400 052.                      ]

                        2)      Komal Bhadresh Nissar                        ]
                                                                             ]
                                A/301, 3rd Floor, Saraswati Tower,           ]
                                Vasudev Mishra Marg, Andheri (East),         ]
                                Mumbai 400 069.                              ]

                                                                             ]
                        3)      Niral Nimesh Satra
                                                                             ]
                                A/201, 2nd Floor, Mangal Villa, Tejpal       ]
                                Road, Dwarkadish Mandir, Vile Parle          ]
                                East Mumbai 400 057.                         ]

                                                                             ]
                        4)      Bhavya Dinesh Rita                           ]
                                601, 6th Floor, Bhavya Building, 5th Road,   ]
                                Opp. Jain Temple, Khar (West),               ]
                                Mumbai 400 052.                              ]    ...Petitioners

                                              Versus
                        1)      Lokmanya Multipurpose Co-operative           ]
                                Society Ltd, having its branch office at     ]
                                                                             ]
                                Ground Floor, Bhavya Sphurthy CHSL           ]
                                7/620, Kastur Park, Shimpoli Road,           ]
                                Borivali (West), Mumbai 400 092.             ]    ...Respondent No.1

                        2)      Mitesh Champakbhai Rita                      ]
                                Flat No. 5, 2nd Floor, Haji Mansion,         ]
                                                                             ]    ...Respondent No.2
                                5th Road, Khar (West), Mumbai - 400 052      ]
           Digitally
           signed by
           SAJAKALI
SAJAKALI   LIYAKAT
LIYAKAT    JAMADAR
JAMADAR    Date:
           2026.09.16
           18:39:21
           +0530


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                           ——————
Mr. Rushabh Sheth a/w Mr. Parth Parikh i/b Mr. Dhiren H. Shah for the
Petitioners.
Mr. Avinash B. Avhad a/w Mr. Mahesh V. Rawool a/w Mr. Anuj Kathed and
Mr. Sachin Gawade i/b Mr. Dinesh Khaire for the Respondent No. 1
Ms. Riddhi Dhamecha i/b Miloni Gala for the Respondent No. 2.
                             ——————

                      CORAM                    :   SHARMILA U. DESHMUKH J.
                      RESERVED ON              :   AUGUST 07, 2026.
                      PRONOUNCED ON :              SEPTEMBER 16, 2026

JUDGMENT :

1.     By this Petition filed under Section 34 of the Arbitration and

Conciliation Act, 1996 (for short, “Arbitration Act”), the Petitioners

impugn the Award dated 7th March, 2022 passed by the Learned

Arbitrator appointed under Section 84 of the Multi State Co-operative

Societies Act, 2002, directing the Petitioners and Respondent No.2 to

jointly      and   severally   pay   to   the      Respondent   No.1,   sum   of

Rs.18,95,34,034.10 together with interest @ 18% per annum and

additional penal interest @ 2% per annum from 12 th October, 2020 till

the date of complete realization of the amount, with costs of

Rs.2,00,000/- within 30 days from the date of the award.

2.     The case set out in the Petition is that the Petitioners No. 1 to 4

are the legal heirs of one Dinesh Shamji Rita, who expired on 6 th May,

2018. Petitioner No.1 is the widow of the deceased and one of the

guarantors to the loan of Rs.1,50,00,000/- disbursed by the Respondent


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No. 1 to the deceased Dinesh Rita. Petitioners No. 2 to 4 are the children

of the deceased. The Respondent No.1 is a Multi Purpose Co-operative

Society Limited, registered under the Multi State Co-operative Societies

Act, 2002 (for short, “MSCS Act”), having its head office at Belgaum and

a branch office at Borivali (West), Mumbai.

3.     In the year 2012, the deceased Dinesh Rita had approached the

Borivali (West) branch of the Respondent No.1 for sanction of cash

credit facility with a limit of Rs.1,50,00,000/- to meet the working capital

requirement for his construction business. The loan application was

submitted on 27th February, 2012 and Petitioner No.1 and Respondent

No 2 stood as guarantors for the said credit facility. The credit facility of

Rs.1,50,00,000/- was sanctioned on 22nd March, 2012 and the

disbursements were made subsequently. Apart from the guarantees

executed by Petitioner No.1 and Respondent No.1, Flat No.101,

admeasuring 591.67 square feet carpet area, along with the terrace and

three parking spaces of the building known as Laxmi Palace, situated at

Khar (West), Mumbai was mortgaged as additional security with the

Respondent No. 1.

4.     It is claimed that the Respondent No.1 alleged that in September,

2012, the Respondent No.1 and the deceased Dinesh Rita were in the

process of starting a joint venture and Respondent No.1 had paid a sum

of Rs.3,00,00,000/- to the deceased as investment. There was discussion


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between the deceased and Respondent No.1 on 25 th May, 2015 about

restructuring the grant of Rs.3,00,00,000/- into a separate credit facility

on the condition that the deceased would offer additional security by

30th June, 2015 and would close the earlier cash credit facility of

Rs.1,50,00,000/- by payment along with interest by 31 st July, 2015. The

Petitioners claim that they were not informed by the deceased about

the additional credit facility, nor had they executed any documents such

as guarantees or undertakings in favour of the Respondent No.1, and no

additional security was offered by the deceased, which was stated to be

the condition for restructuring the grant of Rs.3,00,00,000/- into a

separate credit facility.

5.     On 16th September, 2019, a legal notice was issued by the

Respondent No1 to the Petitioners alleging sanction of credit facility of

Rs.4,50,00,000/- to the deceased and an outstanding debt of

Rs.15,57,26,637/. The Respondent No.1 made claims on other

properties of the deceased which were not mortgaged. The legal notice

was responded by the Petitioner’s Advocate's reply dated 3 rd October,

2019, denying their liability. There was further exchange of

correspondence re-iterating their respective stands.

6.     On 9th December, 2020, an undated notice along with Arbitration

Case No.76 of 2020 dated 12th October, 2020 was received from the

learned Arbitrator, calling upon the Petitioners to remain present at the


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Arbitrator's office on 14th December, 2020 in Belgaum, Karnataka. As

the documents appended to the statement of claim were not served to

the Petitioners, a legal notice was addressed on 7 th December, 2020 to

the Respondent No.1 and the learned Arbitrator, requesting them to

provide a copy of the documents to prepare the reply to the claim. By

communication dated 9th December, 2020, the Respondent No.1 refused

to provide copies of the documents on the ground that the same could

be obtained by the Petitioners from the learned Arbitrator on the next

date of hearing in the arbitration proceedings. A reminder was sent on

11th December, 2020, which also challenged the jurisdiction of the

Arbitrator as no part of the cause of action had arisen in Belgaum. No

further communications were received by the Petitioners and the

impugned award dated 7th March, 2022 was forwarded on 25 th March,

2022 by the Respondent by letter dated 14 th March, 2022. Hence the

present Petition.

7.     To the Petition, an affidavit-in-reply has been filed by the

Respondent No.1, contending that the deceased Dinesh Rita had

approached the Borivali (West) branch of the Respondent No.1 and

requested sanction of cash credit facility of Rs.4,50,00,000/- and loan

application for Rs.4,50,00,000/- was submitted on 5 th August, 2012. The

first disbursement of Rs.1,50,00,000/- was availed on 10 th April, 2012,

and the subsequent disbursement of Rs.3,00,00,000/- was made on 22 nd


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March, 2012. Petitioner No.1 and Respondent No.2 herein were

guarantors of the loan facility, which was also secured by way of a

registered mortgage. Since the Petitioners failed to clear the

outstanding loan, the arbitration was initiated under Section 84 of the

MSCS Act at Belgaum, Karnataka against the deceased Dinesh Rita

through his legal heirs. Along with the notice, the Petitioners were also

served with the statement of claim, however, the Petitioners denied

the receipt of the documents annexed with the statement of claim and,

instead of appearing in the arbitral proceedings, have addressed

communication demanding the documents. It is stated that the

Petitioners did not participate in the proceedings and, therefore, the

arbitral proceedings were ordered to proceed ex-parte. It is stated that

the arbitral proceedings were held in Belgaum, Karnataka, as the head

office of the Respondent No.1 is situated at Belgaum, Karnataka, and

the award has been passed by relying upon the evidence produced by

the Respondent.

8.     Mr. Sheth, learned counsel appearing for the Petitioners, submits

that the cash credit facility sanctioned was to the tune of

Rs.1,50,00,000/- in favour of the deceased Dinesh Rita,to which

Petitioner No.1 and Respondent No.2 were guarantors.           He would

further point out the recitals and covenants of the mortgage deed,

executed by the deceased to contend that the mortgage was in respect


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of overdraft facility of Rs.1,50,00,000/-.   He submits that a sum of

Rs.3,00,00,000/- was advanced as investment by the Respondent No.1

for starting joint venture and there are no documents produced to

substantiate the grant of credit facility of Rs 4,50,00,000/. He would

further point out the alleged minutes of the meeting held on 25 th May,

2015, recorded on the letter-head of Respondent No.1, where the

deceased is mentioned as representative of Bhavya Infrastructure

Industries Private Limited. He submits that the endorsement on the

minutes of the meeting is by the deceased on behalf of the private

limited company and not in his individual capacity. He has taken this

Court through the contents of the minutes recorded of meeting held on

25th May, 2015 to contend that there was no document produced to

substantiate that the conditions as agreed were met by the deceased

and separate cash credit account was opened to impose the liability of

Rs 4,50,00,000/.

9.     He submits that the arbitral award does not record the existence

of the said document and despite thereof, the learned arbitrator has

considered the disbursement under a loan facility of Rs.4,50,00,000/-

and not Rs.1,50,00,000/-. He would further point out that the legal

notice dated 16th September, 2019 addressed by Respondent No.1 to

the Petitioners, acknowledges that a sum of Rs.13,00,000/- has been

paid by the deceased, whereas the award ignores the payment made


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and mechanically grants the entire sum along with interest. He would

submit that pertinently, there is no mention of the alleged minutes of

the meeting dated 25th May, 2015 in the said legal notice.

10.    He would further point out that the specific stand of the

Petitioners was of denial of further loan facility of Rs.3,00,00,000/- and

therefore the said fact was required to be proved by leading cogent

evidence.

11.    He would further submit that no notice invoking arbitration was

received by the Petitioners. He submits that there is no disclosure as

mandated under Section 12(1) of the Arbitration Act received from the

Arbitral Tribunal. He submits that the documents annexed to the

statement of claim was not served upon the Petitioners and despite

several communications were not served upon the Petitioners. He

submits that the arbitral award refers to service by substitution and,

without any inquiry or efforts as regards the normal mode of service,

Respondent No.1 was permitted to effect substituted service in one

newspaper, which is treated as good service.

12.    He submits that under Section 24 of the Arbitration Act,

Respondent No.1 is bound to serve upon the Petitioners a complete

copy of the statement of claim along with the documents and, as the

request was denied, the Petitioners did not have a meaningful




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opportunity to present their case, which violates Sections 18 and 34(2)

(a)(iii) of the Arbitration Act.

13.    Taking the Court through the impugned award, he submits that

the award is completely unreasonable, unintelligible and contrary to

Section 31(3) of the Arbitration Act. He submits that there is no

discussion on the evidence and no reasons given for awarding the

amount of Rs.18,95,34,034.10 in favour of Respondent No.1. He submits

that the impugned award accepts the case of Respondent No.1 that a

cash credit facility of Rs.4,50,00,000/- was advanced without there being

any loan document on record. He would submit that there is no

reasoning as to how Petitioner No.1 and Respondent No.2, who were

guarantors only in respect of a loan facility not exceeding

Rs.1,50,00,000/-, became liable in respect of the principal loan amount

of Rs.4,50,00,000/-.

14.    He submits that considering the provisions of Section 84 of the

MSCS Act, the legal heirs of the deceased, i.e., Petitioners No. 2 to 4,

who are not even members, are made jointly and severally liable. He

submits that there is no discussion as to the liability of legal heirs for

debts of deceased and no material on record to show inheritance by

legal heirs. He submits that the arbitral award is passed in contravention

of Section 37 of the MSCS Act. In support, he relies upon the following

decisions.


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      i.  Ssangyong Engineering & Construction Co. Ltd.           V/s.
      National Highways Authority of India (NHAI)1.
      ii.Delhi Metro Rail Corporation Ltd.         V/s. Delhi Airport
      Metro Express Private Ltd2.
      iii. Associate Builders V/s. Delhi Development Authority3.
      iv. Dyna Technologies Pvt. Ltd. V/s. Crompton Greaves Ltd. 4
      v.  Neerja Realtors Pvt. Ltd. V/s. Janglu (dead) through Legal
      Representative5.
      vi. Sunil Poddar & Ors. V/s. Union Bank of India6.

15.        Per contra, Mr. Avhad, learned counsel appearing for Respondent

No.1, would submit that the arbitrator is the master of the quality and

quantity of evidence and           no interference under Section 34 is

warranted. He would submit that the notice issued by the arbitrator is

not undated, as the date of 6th December, 2020 is mentioned below

signature of arbitrator. He would submit that no bona fide attempt was

made by the Petitioners to participate in the proceedings, and only

communications were addressed seeking documents, despite service of

statement of claim. He submits that the Petitioners ought to have

appeared before the Arbitrator and sought necessary documents. He

submits that complete copy of the papers and proceedings was served

upon the Petitioners, who received the documents at the same address

1   (2019) 15 SCC 131
2   (2024) 6 SCC 357
3   (2015) 3 SCC 49
4   (2019) 20 SCC 1
5   (2018) 2 SCC 649
6   (2008) 2 SCC 326


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at which the award was sent. He submits that there was no

communication            addressed   to the      Arbitrator seeking necessary

documents, which has been noted in the impugned award.

16.     He would point out the finding in the impugned award that the

Petitioners should have attended in person or through an authorized

agent during the 5 adjournments, excluding the lock-down period, and

collected copies of the required documents. He submits that the notice

of hearing makes it clear that no postal correspondence will be

entertained by the Arbitrator and, therefore, the only course which was

available to the Petitioners was to appear before the Arbitrator.

17.      He submits that there can be no challenge to the arbitral award

as the Petitioners did not participate in arbitration proceedings. He has

taken the Court through the findings in the impugned award to contend

that the learned Arbitrator has considered the oral and documentary

evidence on record to hold that a cash credit of Rs.4,50,00,000/- was

disbursed under the cash credit loan account carrying interest as well as

penal interest. He submits that as there was no contest, the evidence

went uncontroverted and the award came to be rightly passed.

18.     Mr. Avhad would submit that the decision in the case of Quippo

Construction Equipment Private Limited versus Janardan Nirman

Private Limited7, in the identical facts, has held that once the Petitioner

7   2020 AIR (SC) 2038


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was served with the pleadings as well as the notice with a direction to

remain present before the learned Arbitrator and having chosen not to

do so, the Petitioner is itself to be blamed for an ex-parte award. He

would submit that the Hon'ble Apex Court has held that a party in such a

case cannot take undue advantage of its failure to appear before the

Arbitrator and defend its case.

19.    He would further point out that the decision in the case of

Rajlaxmi Multistate Credit Co-operative Society Limited versus

Gajanand Vasant Shirbhate8, by the Coordinate Bench, has held that

the appointment of an Arbitrator under Section 84 of the MSCS Act

does not require the consent of the Respondent and the same is valid.

He would point out that the Court has also considered the issue of

whether the guarantors are amenable to arbitration and it is held that

the guarantors cannot escape liability merely by claiming non-

membership, as they have voluntarily assumed such liability by signing

binding legal documents.

20.    As the entire arbitration proceedings were conducted at

Belgaum, Karnataka, a query was raised by the Court on the jurisdiction

of this Court, to which the parties have addressed arguments at length.

21.    Mr. Sheth would contend that the arbitration was statutory

arbitration under Section 84 of the MSCS Act and the appointment of

8   2025 DGLS (Bom.) 3407


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the Arbitrator was by the Central Registrar. He submits that neither the

MSCS Act nor the rules framed thereunder provide for designation of a

seat or venue and there is no discussion in the arbitral award which

defines or designates a seat for the purpose of the arbitral proceedings.

He has taken this Court through Section 84(5) of the MSCS Act and Rule

30 of the Rules framed thereunder and would submit that the test to

be applied is the Court which would have jurisdiction in context of

Section 2(1)(e) of the Arbitration Act.

22.    He submits that the original borrower and guarantors reside in

Mumbai, the loan was sanctioned from the office of Respondent No.1

in Mumbai, the documents were executed in Mumbai, the mortgaged

property is situated in Mumbai and, therefore, the entire cause of action

has arisen in Mumbai. He submits that under Section 2(1)(e), the Courts

in Mumbai would alone have jurisdiction had the same been a suit claim

and, merely because the Respondent No.1’s head office is in Belgaum,

Karnataka, without any cause of action arising there, the district court

there would not have jurisdiction.

23.    He would further submit that Belgaum, Karnataka is not a seat

designated by the parties, but is only a convenient venue selected for

conducting the arbitral proceedings and there is no express designation

of the venue at Belgaum for it to become a juridical seat of the arbitral

proceedings. He would further point out the arbitral award to indicate


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that the award in the heading states ‘sitting at Belgaum’, which is a

mere recital of a place which cannot constitute a seat for the purposes

of Section 2(1)(e) of the Arbitration Act. To support his case on

jurisdiction, he relies upon the following decisions.

      i.     BGS SGS Soma JV vs. NHPC LTD9.
      ii.  The National Highways Authority of India, Govt. of India
      vs. Dinesh Singh10.
      iii. GEA Westfalia Seperator India Pvt. Ltd. vs. SVS Aqua
      Technologies LLP11.
      iv. United India Insurance Company Ltd. vs. Eastern Bulk
      Company Ltd.12
      v. Gurumahima Heights Co-operative Housing Society Ltd.
      vs. M/s. Admirecon Infrastructure Pvt. Ltd.13
      vi. King Chariot through its sole proprietor Mrs. Neelima
      Suri vs. Tarun Wadhwa14.
      vii. Patel Roadways, Bombay vs. Prasad Trading Company15.

24.        Mr. Avhad would rely upon the decision of GEA Westfalia

Seperator India Pvt. Ltd. vs. SVS Aqua Technologies LLP (supra), which

is also relied upon by Mr. Sheth on the issue of jurisdiction, to contend

that this Court would not have jurisdiction as the said decision has held

that the place where arbitration proceedings were conducted was held

as the juridical seat.


9  2020 4 SCC 234
10 Arbitration Appeal No. 99 of 2021 decided on 7th May, 2025 before the Madhya Pradesh High Court.
11 2025 SCC Online Bom 3157
12 2019 SCC Online Bom 1404
13 Interim Application No. 3305 of 2022 in Comm. Arbitration Petition No. 130 of 2022 decided on 26th
   April, 2023 before the Bombay High Court
14 2024 SCC Online Del 4039
15 1991 4 SCC 270


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25.    Dealing first with the issue of jurisdiction, the arbitration in the

present case is statutory arbitration under Section 84 of the MSCS Act.

Section 84 of MSCS Act provides for reference of dispute of the nature

specified therein amongst the classes specified therein to arbitration.

Sub Section (5) of Section 84 of MSCS Act applies the provisions of

Arbitration and Conciliation Act, 1996 (for short “Arbitration Act”)

except as otherwise provided in MSCS Act. Under the enactment, the

power to appoint the arbitrator vests in an authority created by the

statute itself. The statutory reference to arbitration does not involve

jurisdictional aspect and there is no designation of seat or venue of the

arbitrator. Section 34 of Arbitration Act provides recourse to a Court

against the arbitral award, which would be a Court as defined in Section

2(1)(e) of Arbitration Act as under:

       “(e) “Court” means—

       (i) in the case of an arbitration other than international
       commercial arbitration, the principal Civil Court of original
       jurisdiction in a district, and includes the High Court in exercise
       of its ordinary original civil jurisdiction, having jurisdiction to
       decide the questions forming the subject-matter of the
       arbitration if the same had been the subject-matter of a suit, but
       does not include any Civil Court of a grade inferior to such
       principal Civil Court, or any Court of Small Causes; ”


26.    The Court is therefore defined as principal Civil Court of original

jurisdiction which would have jurisdiction over the subject matter of the

arbitration, if the same would have been subject matter of suit. In the

present case, the entire cause of action has arisen in Mumbai, however,


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sittings were held by the Learned Arbitrator in Belgaum, Karnataka.

Section 20 of Arbitration Act governs the place of arbitration and reads

as under:

              “20. Place of arbitration.
              (1) The parties are free to agree on the place of
              arbitration.
              (2) Failing any agreement referred to in sub-section (1),
              the place of arbitration shall be determined by the arbitral
              tribunal having regard to the circumstances of the case,
              including the convenience of the parties.

              (3) Notwithstanding sub-section (1) or sub-section (2), the
              arbitral tribunal may, unless otherwise agreed by the
              parties, meet at anyplace it considers appropriate for
              consultation among its members, for hearing witnesses,
              experts or the parties, or for inspection of documents,
              goods or other property.”


27.    In BGS SGS Soma JV vs. NHPC LTD (supra) a three Judge Bench

of the Hon’ble Apex Court has held that the expression ‘subject

matter of the arbitration’ used in clause (e) of sub-section (1) of

Section 2 of the Arbitration Act has a reference and connection with

the process of dispute resolution and hence it refers to a court which

would essentially be a court of the ‘seat’ of the arbitration process.

Referring to provisions of Section 20 of the Arbitration Act and after

considering the ratio of Constitution Bench Judgment in BALCO Vs.

Kaiser Aluminum Technical services Inc.16, the Hon’ble Apex

Court underscored the distinction between sub-section (1) and (2) of

Section 20 of Arbitration Act on one hand and sub section (3) of

Section 20 on the other hand to hold that sub-section (2) of Section
16 (2012) 9 SCC 552


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20 refers to the ‘jurisdictional seat’ whereas sub-section (3) refers to

‘venue’ of arbitration. The Hon’ble Apex Court in BGS SGS Soma JV

vs. NHPC LTD (supra) thereafter proceeded to discuss the tests for

determination of ‘seat’ of arbitration. It is held in Para 61 and 82 of

the judgment thus:

             “61. It will thus be seen that wherever there is an
             express designation of a “venue”, and no
             designation of any alternative place as the “seat”,
             combined with a supranational body of rules
             governing the arbitration, and no other significant
             contrary indicia, the inexorable conclusion is that
             the stated venue is actually the juridical seat of the
             arbitral proceeding.

             82. On a conspectus of the aforesaid judgments,
             it may be concluded that whenever there is the
             designation of a place of arbitration in an
             arbitration clause as being the “venue” of the
             arbitration proceedings, the expression “arbitration
             proceedings” would make it clear that the “venue”
             is really the “seat” of the arbitral proceedings, as
             the aforesaid expression does not include just one or more
             individual or particular hearing, but the arbitration
             proceedings as a whole, including the making of an award
             at that place. This language has to be contrasted with
             language such as “tribunals are to meet or have
             witnesses, experts or the parties” where only hearings are
             to take place in the “venue”, which may lead to the
             conclusion, other things being equal, that the venue so
             stated is not the “seat” of arbitral proceedings, but only a
             convenient place of meeting. Further, the fact that the
             arbitral proceedings “shall be held” at a particular venue
             would also indicate that the parties intended to anchor
             arbitral proceedings to a particular place, signifying
             thereby, that that place is the seat of the arbitral
             proceedings. This, coupled with there being no other
             significant contrary indicia that the stated venue is merely
             a “venue” and not the “seat” of the arbitral proceedings,
             would then conclusively show that such a clause
             designates a “seat” of the arbitral proceedings. In an
             international context, if a supranational body of rules is to
             govern the arbitration, this would further be an indicia that
             “the venue”, so stated, would be the seat of the arbitral
             proceedings. In a national context, this would be replaced



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             by the Arbitration Act, 1996 as applying to the “stated
             venue”, which then becomes the “seat” for the purposes
             of arbitration.”
                                             (emphasis supplied)


28.    The Hon’ble Apex Court has held that wherever there is an

express designation of a ‘venue’ and no designation of any alternative

place as the ‘seat’, the stated venue is actually the juridical seat of the

arbitral proceedings. It is further held that whenever there is

designation of a place of arbitration in an arbitration clause as being the

‘venue’ of the arbitration proceedings, the expression ‘arbitration

proceedings’ would make it clear that the ‘venue’ is really the ‘seat’ of

the arbitral proceedings.

29.    In the present case, the heading of the arbitral award mentions

“Sitting at Belgaum”. Section 20(2) of Arbitration Act provides for

determination of place of arbitration by the arbitral Tribunal having

regard to the circumstances of the case including the convenience of

the parties. The provision implies application of mind by the Learned

Arbitrator which would demonstrate a conscious determination of the

place of arbitration by the Learned Arbitrator. There is no material on

record to demonstrate the exercise being conducted as contemplated

under Section 20(2)     of Arbitration Act. The holding of sittings at

Belgaum is relatable to convenient place of meeting under Section 20(3)

of Arbitration Act. As there is no express designation of venue or seat


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under the statutory scheme or determination under Section 20(1) or

20(2) of Arbitration Act, the fallback is Section 2(1)(e) of Arbitration

Act, which would essentially be the court of the ‘seat’ of the arbitration

process.

30.    In the case of GEA Westfalia Separator India Private Limited vs

SVS Aqua Technologies LLP (supra), the Co-ordinate Bench was

considering the issue of territorial jurisdiction in case of arbitration

proceedings conducted by the Facilitation Council under the provisions

of Section 18 of Micro, Small and Medium Enterprises Development Act,

2006 (“MSMED Act”). In the context of statutory arbitration, it noted

the provisions of Section 2(1)(e) of Arbitration Act and held that it was

the Facilitation Council in Pune that statutorily had territorial

jurisdiction and the principal court with original jurisdiction would be

the Court at Pune.

31.    The learned Single Judge was considering the statutory

arbitration conducted under Section 18 of the MSMED Act, which itself

provides for the jurisdiction of the Facilitation Council in sub section (4)

of Section 18 of the MSMED Act, within whose jurisdiction the supplier

is located. As there was statutory territorial jurisdiction, the learned

Single Judge held that Pune was the seat of arbitration.

32.    In the present case, under MSCS Act, there is no conferment of

statutory territorial jurisdiction. The original borrower and the


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guarantors have their place of residence in Mumbai. The office of

Respondent No.1 from where the loan was sanctioned is situated in

Mumbai. The loan agreement and the mortgage deed were executed in

Mumbai, and the mortgaged property is also situated in Mumbai. There

is no designation of seat or venue at Belgaum and no part of cause of

action arises in Belgaum, Karnataka where the Learned Arbitrator has

held its sittings. The Court as contemplated under Section 2(1)(e) of

Arbitration Act, would therefore be the Court in Mumbai having

supervisory jurisdiction.

33.    Coming to the merits of the case, alongwith the notice dated 6 th

December, 2020, the statement of claim was served upon the

Petitioners sans the documents appended to the statement of claim.

Perusal of the list of documents annexed to the statement of claim

would indicate that about 17 documents relied upon by the Respondent

No.1 which includes promissory note of Rs 3,00,00,000/, loan

agreement, registered mortgage deed, letter of guarantee etc.

Immediately on 7th December, 2020, the Petitioners addressed a

communication to the branch manager of Respondent No.1-bank,

stating that no documents as mentioned in the list of documents have

been received, and to provide copies of the documents to enable the

Petitioners to file their reply to the same. The response of Respondent

No.1 does not deny non supply of documents and instead calls upon the


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Petitioners to obtain the copies from Arbitrator on the scheduled date

of hearing. The repeated request on 11 th December, 2020 with copy

endorsed to the Learned Arbitrator was met with the same response.

34.    The notice with the Arbitrator’s signature dated 6 th December,

2020 was served upon the Petitioners intimating the date of hearing on

14th December, 2020 at Belgaum. The parties are residing at Mumbai

and the hearing was scheduled in Belgaum during the COVID 19

pandemic. After the issuance of the first notice of hearing, no further

notices of the meetings of arbitration were issued to the Petitioners.

The impugned Award has been passed on 7 th March, 2022 and mentions

about five adjournments excluding the lock down period. The

arbitration proceedings were therefore adjourned from time to time

without any notice of subsequent hearings given to the Petitioners. The

Learned Arbitrator ordered the arbitration proceedings to proceed ex-

parte without giving any notice to the Petitioners. The impugned Award

refers to the Affidavit of evidence filed by the Regional Manager of the

Respondent No.1 alongwith documents. There is no service of Affidavit

of evidence and documents upon the Petitioners.

35.    As noted above, immediately upon receiving the notice of

arbitration, the Petitioners called upon the Respondent No.1 to furnish

the documents, which request was declined contending that the copies

can be obtained from the Learned Arbitrator. The impugned Award


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refers to the communications addressed by the Petitioners seeking the

documents from the Respondent No.1 and expresses disapproval of the

copy of communication seeking documents being endorsed to the

Arbitrator. The Learned Arbitrator holds that the Petitioners should

have attended in person or through authorised agent and collected

copy of required documents. In this context, the provisions of Section 24

of Arbitration Act are relevant and Sub-section (3) of Section 24 reads as

under:

       “(3) All statements, documents or other information supplied to, or
       application made to, the arbitral Tribunal by one party shall be
       communicated to the other party and any expert report or evidentiary
       document on which the arbitral Tribunal may rely in making its decision
       shall be communicated to the parties.”

36.    The duty is cast on the party producing documents before the

arbitral Tribunal to supply the same to the other party. The non

compliance of Section 24(3) of Arbitration Act deprived the Petitioners

of a full opportunity to present its case as mandated by Section 18 of

Arbitration Act. Surprisingly, the Learned Arbitrator instead of taking

appropriate note of the non compliance and issuing necessary

directions to supply copies opines about requirement of personal

attendance     by    the    Petitioners.    In   Ssangyong       Engineering     &

Construction Co. Ltd.        V/s. National Highways Authority of India

(NHAI) (supra), the Hon’ble Apex Court considered the ground of

challenge under Section 34 (2)(a)(iii) of Arbitration Act. It noted the



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provisions of Section 18 and Section 24(3) of Arbitration Act and held in

paragraph 51 as under:

        “51. Sections 18, 24(3), and 26 are important pointers to what is
        contained in the ground of challenge mentioned in Section 34(2)(a)(iii).
        Under Section 18, each party is to be given a full opportunity to present
        its case. Under Section 24(3), all statements, documents, or other
        information supplied by one party to the arbitral tribunal shall be
        communicated to the other party, and any expert report or document
        on which the arbitral tribunal relies in making its decision shall be
        communicated to the parties. Section 26 is an important pointer to the
        fact that when an expert’s report is relied upon by an arbitral tribunal,
        the said report, and all documents, goods, or other property in the
        possession of the expert, with which he was provided in order to
        prepare his report, must first be made available to any party who
        requests for these things. Secondly, once the report is arrived at, if
        requested, parties have to be given an opportunity to put questions to
        him and to present their own expert witnesses in order to testify on the
        points at issue.”

37.    Section 34(2)(a)(iii) of Arbitration Act presents a ground to set

aside the award where the party making the application was not given

proper notice of the appointment of arbitrator or of the arbitral

proceedings or was unable to present his case. As to what would

constitutes failure to give proper notice or inability of opportunity to

present his case is relatable to Section 18 and Section 24(3) of

Arbitration Act.

38.    Applying the settled position of law to the facts of present case,

the failure to supply the necessary documents including Affidavit of

Evidence     to the Petitioners, failure to give notice of subsequent

hearings and failure to intimate the minutes of the arbitration meetings

constitutes denial of proper opportunity to the Petitioners to present




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their case and vitiates the award under Section 34(2)(a)(iii) of the

Arbitration Act.

39.    The Respondent No.1’s claim was based on advancing of cash

credit facility of Rs 4,50,00,000/ to the deceased Dinesh Rita secured by

mortgage of Flat No 101 and guaranteed by the Petitioner No.1 and

Respondent No 2 dated 10th April, 2012. The Letter of Guarantee

executed by the Petitioner No.1 and Respondent No.2 was for sum of Rs

1,50,00,000/. The mortgage deed executed by the deceased mentions

the overdraft facility of Rs 1,50,00,000/.

40.    The impugned Award restates the contents of the Affidavit of

Evidence of the Respondent No.1’s witness and holds in paragraph 12

as under:

       “ 12. The entire deposition of the Regional manager Shri Ramesh Shirsat
       and the documents including the statement of account Exh P 16 is gone
       uncontested although ample opportunity was given to them. In such
       circumstances the Disputant Society deserves the order in their favour
       as under:

                                      ORDER

              The Opponents 1(i) who is also Opponent No.3, Opponent
       No.1(ii) , Opponent No.1(iii), Opponent No.1(iv) and Opponent No.2
       shall jointly and severally pay to the Disputant Society a sum of
       Rs.18,95,34,034.10Ps (Rupees eighteen crores ninety five lakhs thirty
       four thousand thirty four and ten paises only) together with interest @
       18% p.a. and additional penal interest @ 2% p.a. from 12/10/2020 till
       the date of complete realisation of the amount, with costs of
       Rs.2,00,00,000/- (Rupees two lakhs only) within 30 days from the date of
       this award.
              If the Opponents fail to comply with the award then the
       Disputant Society will be free to execute the award in terms of law.
              The signed copy of the award shall be furnished to the parties
       present.
       Belgaum, 7th March 2022.”


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41.    In Dyna Technologies Pvt. Ltd.           V/s.    Crompton Greaves Ltd.

(supra), the Hon’ble Apex Court considered the issue of requirement of

reasoned award. It noted the provisions of Section 31(3) of Arbitration

Act and held in paragraphs 34 and 35 as under:

       “34. The mandate under Section 31(3) of the Arbitration Act is to have
       reasoning which is intelligible and adequate and, which can in
       appropriate cases be even implied by the Courts from a fair reading of
       the award and documents referred to thereunder, if the need be. The
       aforesaid provision does not require an elaborate judgment to be
       passed by the arbitrators having regards to the speedy resolution of
       dispute.


       35.     When we consider the requirement of a reasoned order three
       characteristics of a reasoned order can be fathomed. They are: proper,
       intelligible and adequate. If the reasoning in the order are improper,
       they reveal a flaw in the decision-making process. If the challenge to an
       award is based on impropriety or perversity in the reasoning, then it can
       be challenged strictly on the grounds provided under Section 34 of the
       Arbitration Act. If the challenge to an award is based on the ground that
       the same is unintelligible, the same would be equivalent of providing no
       reasons at all. Coming to the last aspect concerning the challenge on
       adequacy of reasons, the Court while exercising jurisdiction under
       Section 34 has to adjudicate the validity of such an award based on the
       degree of particularity of reasoning required having regard to the
       nature of issues falling for consideration. The degree of particularity
       cannot be stated in a precise manner as the same would depend on the
       complexity of the issue. Even if the Court comes to a conclusion that
       there were gaps in the reasoning for the conclusions reached by the
       Tribunal, the Court needs to have regard to the documents submitted
       by the parties and the contentions raised before the Tribunal so that
       awards with inadequate reasons are not set aside in casual and cavalier
       manner. On the other hand, ordinarily unintelligible awards are to be set
       aside, subject to party autonomy to do away with the reasoned award.
       Therefore, the courts are required to be careful while distinguishing
       between inadequacy of reasons in an award and unintelligible awards.“



42.    The impugned Award fails on all requirements of reasoned award.

There is no discussion and no findings on the oral and documentary

evidence produced by the Respondent No.1. The Learned Arbitrator has



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merely restated the contents of the affidavit of evidence and referred

to the documents produced without any discussion on the evidence and

has accepted the claim of the Respondent No.1 of sum of

Rs.18,95,34,034.10.


43.    The learned Arbitrator has ignored vital evidence that letter of

guarantee by the Petitioner No.1 and the Respondent No.2 was for a

sum not exceeding Rs.1,50,00,000/-. It also ignored that the loan

application executed by the deceased, to which the Petitioner No.1 and

Respondent No.2 had guaranteed, was for a sum of Rs.1,50,00,000/-.

The learned Arbitrator has also ignored that the mortgage deed

executed by the deceased was for securing the overdraft facility of

Rs.1,50,00,000/-. The collateral security and guarantee was in respect of

facility of Rs 1,50,00,000/ and the guarantors have been held jointly and

severally liable for the credit facility of Rs 4,50,00,000/ with interest and

penalty. The impugned Award suffers from perversity and is patently

illegal.

44.    Coming to decision cited by Mr. Avhad, In the case of Quippo

Construction Equipment Private Limited versus Janardan Nirman

Private Limited, (supra) the Hon'ble Apex Court was concerned with the

issue of place of arbitration. In that case, the Respondent had failed to

participate in proceedings before the arbitrator and did not raise any



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submission that the arbitrator did not have jurisdiction, in which case

the Respondent is deemed to have waived all such objections. Though in

present case, Mr. Sheth would also argue on the objection to jurisdiction

being raised in Petitioner’s communication, this Court has not found the

said contention as a ground to set aside the impugned award.

45.    In the case of Jamboo Kumar Jain and Another Versus Tata

Capital Financial Services Limited and Ors.17, the learned Single Judge

of this Court was considering the challenge to the award on the ground

that no notices were ever received by the Petitioners therein of the

hearing of the arbitral proceedings. In that case, there was a dispute

about the service of the notices upon the Petitioners. The learned

Single Judge perused the record, which indicated that the Petitioners

had been served with a copy of the statement of claim and also various

notices, along with minutes of meetings from time to time, from the

learned arbitrator at the address mentioned in the letters addressed by

the Petitioners themselves. The learned Single Judge observed that

there was acknowledgment of the receipt of statement of claim and

receipt of various minutes of meetings by the Petitioners. It noted that

the grievance of the Petitioners was that the objections raised in those

letters, Section 16 of the Arbitration Act was required to be first

decided by the arbitrator and, till such objections were decided by the

17 2015 (3) Bom. C.R. 571


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learned arbitrator, the Petitioners would not appear in any of the

meetings. The learned Single Judge further observed that only after

rendering several opportunities to the Petitioners, the learned

arbitrator had proceeded ex-parte, and the learned arbitrator had made

it clear time and again that if the Petitioner chooses to remain absent,

the learned arbitrator would proceed with the matter ex-parte against

the Petitioners, which minutes of the meetings were forwarded and

duly received by the Petitioners. The learned Single Judge held that

once the Petitioners were served with the pleadings as well as the

notices, and in spite thereof, have chosen not to file any written

statement and not to remain present, the Petitioners themselves have

to be blamed for an ex-parte award.

46.     The learned Single Judge referred to the decision in the case of

Sohan Lal Gupta versus Asha Devi Gupta18, where the Hon'ble Apex

Court has held that for constituting a reasonable opportunity, the

following conditions are required to be observed :

        “1)   Each party must have notice that the hearing is to take place.
        2)    Each party must have a reasonable opportunity to be present at
        the hearing, together with his advisers and witnesses.
         3)   Each party must have the opportunity to be present throughout
        the hearing.
        4)    Each party must have a reasonable opportunity to present
        evidence and argument in support of his own case.
        5)    Each party must have a reasonable opportunity to test his
        opponent's case by cross-examining his witnesses, presenting rebutting
        evidence, and addressing oral argument.

18 A.I.R. 2004 (8) S.C. 856


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        6)     The hearing must, unless the contrary is expressly agreed, be the
        occasion on which the parties present the whole of their evidence and
        argument.”

47.     It also noted paragraphs 16 and 17 of the decision which reads as

under :

         “16. We are fortified with our view from the judgment of Allahabad
         High Court in (Thakur Singh v. Kandai) 4, A.I.R. 1935 Allahabad 852
         wherein it was held when the party on receiving the first notice by
         which he was asked to appear before the arbitrator to participate in the
         proceeding fails to appear then the arbitrator has to direct that he shall
         proceed with the reference ex-parte. This does not entitle the
         arbitrator to straightaway award the claim against the defaulting party
         ex-parte. Whereas the Calcutta and Delhi High Courts expressed that
         when a party fails to appear on receiving the notice, the Arbitrator in
         such case should give notice of his intention to proceed ex-parte. In
         case of failure to issue such notice expressing his intention to proceed
         ex-parte, such failure may vitiate the award unless it is apparent that
         such failure has not caused any prejudice to the party against whom the
         ex-parte award has been made by the Arbitrator. See (Jaggilal
         Kamlapat v. General Fibre Dealers)5, AIR 1955 Calcutta 354; (Lovely
         Benefit Chit Fund and Finance (P) Ltd. v. Puran Dutta)6, AIR 1983 Delhi
         413. However, Punjab and Haryana High Court also expressed the same
         view in (Premlal v. Om Prakash)7 AIR 1956 Punjab 187 , namely,
         arbitrator should adopt the similar procedure before proceeding with
         the case ex-parte and passing an award ex-parte.

         17. Since we have satisfied that the arbitrator has not indicated that
         failure of the appellant's appearance on the fixed date he will not only
         decide jurisdictional issue and proceed with the claim of the
         respondent/applicant and pass ex-parte award, appellant was denied a
         reasonable opportunity to contest the claim. Hence, the award passed
         is in violation of principles of natural justice, is liable to be set aside. We
         accordingly do so. Since no other point with regard to jurisdiction of the
         arbitrator to entertain the dispute has been urged before us, it is not
         necessary for us to decide the jurisdiction of the arbitrator, which he
         already ruled he has jurisdiction to entertain the dispute.”

48.     The learned Single Judge also noted the decision of the Delhi

High Court in the case of M/s. Lovely Benefit Chit Fund Finance Pvt.

Ltd. Vs. Puran Dutt Sood and Others 19 in paragraph 17, which reads as

under :
19 10. A.I.R. 1983 Delhi 413


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        “17. Learned counsel appearing for the petitioners placed reliance on
        the judgment of the Delhi High Court in case of (M/s.Lovely Benefit Chit
        Fund & Finance Pvt.Ltd. vs. Puran Dutt Sood and others)10, AIR 1983
        Delhi 413 and in particular paragraph (11) thereof and submits that the
        arbitrator should fix another date for hearing and give notice to the
        defaulting party of his intention to proceed ex-parte on a specified
        date, time and place and even after notice if the defaulting party does
        not take part in the proceedings the Arbitrator may proceed in his
        absence. It is submitted that since the learned arbitrator did not issue
        any notice making it clear that he would proceed with the matter ex-
        parte on the alleged date of hearing, the award deserves to be set
        aside. Paragraph (11) of the said judgment of Delhi High Court in case
        of M/s.Lovely Benefit Chit Fund & Finance Pvt.Ltd. (supra) reads thus :-

              “11. From these authorities, it is apparent that an Arbitrator
              ought not to proceed ex parte against a party if he has
              failed to appear at one of the sittings. The Arbitrator should
              fix another date for hearing and give notice to the
              defaulting party, of his intention to proceed ex pane on a
              specified date time and place. Even after notice if the
              defaulting party does not take part in the proceedings the
              Arbitrator may proceed in his absence”.



49.    Applying the said legal position to the facts of the present case,

the decision, in fact, would assist the case of the Petitioners herein. In

the present case, apart from the first notice which was issued, there

were no subsequent notices of hearing before the arbitrator given to

the Petitioners, and neither the minutes of the meeting nor the affidavit

of evidence was served upon the Petitioners. It is only when there is

conformity with service of notices and documents, that the Petitioners

would be precluded from raising any grievance based on Award being

ex-parte Award.

50.    The position of law, as is evident from the various decisions which

were considered by the learned Single Judge, is that a notice is required



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to be given by the arbitrator of his intention to proceed ex-parte, and

even after notice, if there is no participation, the arbitrator may proceed

in the absence of the defaulting party. In the present case, there is a

complete go-by to the principles of natural justice, as after giving the

first notice, no further notices were given, and the arbitrator has

proceeded ex-parte.

51.      In light of the discussion above, the impugned award is,

unsustainable and is hereby quashed and set aside. The Arbitration

Petition succeeds.

52.    Interim applications, if any, does not survive for consideration and

stands disposed.


                                            [SHARMILA U. DESHMUKH, J.]




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