The Punjab and Haryana High Court upholds an Arbitrator’s award passed in Toto in absence of a written statement of defence by the opposite party.

The High Court of Punjab and Haryana has dismissed an appeal under section 37 of the Arbitration and Conciliation Act, 1996 (for short “the 1996 Act”). The Appeal assailed the order and judgment dated 17.11.2023 passed by the Court of learned Additional District Judge, Kaithal, vide which the petition preferred by the appellants under Section 34 of the 1996 Act, was dismissed. Along with the petition under Section 34 of the 1996 Act, objections filed by the appellants in the execution petition preferred by the decree-holder (DH), were also dismissed.

The respondent invited tenders for leasing out its rice mills. The appellants, along with others, submitted their bids along with earnest money of Rs.5 lakh as per the terms and conditions of the tender notice. The offer of the appellants was accepted for a total lease money of Rs.26.01 lakh. Thereafter, agreement dated 01.10.2016 was also executed, wherein the terms and conditions for running the rice mill were enumerated.

The possession of the rice mill was taken over by the appellants on 01.10.2016. As per the terms and conditions of the agreement, the appellants were to deposit security of Rs.5 lakh in addition to the earnest money. The same was paid by way of a cheque but was dishonoured. Other installments were also not paid, nor any response was given to various notices issued by the respondent. A criminal complaint under Section 138 of the Negotiable of Instruments Act, 1881 was also instituted. Finally the arbitration proceedings were initiated for recovery of an amount of Rs.26.01 lakhs on account of loss suffered by the respondent due to noncompliance of the terms and conditions of the agreement and tender notice by the appellants.

During the arbitration proceedings, no written statement of defence was submitted through the representative of the appellants who appeared before the Arbitral Tribunal and made verbal submissions. Accordingly, the arbitration proceedings concluded in favour of the respondent. The award was accordingly passed in favour of the respondent and against the present appellants and the claim was accepted in toto. 

Aggrieved by the award, a petition under Section 34 was preferred by the appellants, which was also dismissed by the Court of learned Additional District Judge, Kaithal, stating that since the appellants had not bothered to file any written statement of defence, no fault could be found with the award. Aggrieved by the said decision, the Appellant filed an appeal under section 37 of the 1996 Act before the High Court.
 
The High Court held thus:

“This Court does not find any reason to interfere in the decision taken on the petition under Section 34, as also in the award in view of the judgments referred to in the preceding paragraph, as also in view of the fact that the appellants did not even bother to contest the claim of the respondent by filing written statement of defence or leading evidence. Once neither the written statement of defence was filed, nor any evidence was led, no illegality was committed in considering the claim of the respondent, the evidence led by it and accepting the same, of course upon finding the same to be meritorious.”

Gaurav Rice Industries vs. The Haryana State Coop. Supply and Marketing Fed. Limited