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2019 (3) TMI 354 - HC - Companies LawValidity of Arbitral Award - Default in repayment of mortgaged loan - Held that - Having not disclosed the factum of the pendency of the Company Petition to the Arbitrator and not disclosed the order of winding up to the learned Single Judge hearing the Arbitration Petition, the Appellant cannot turn around and seek to invalidate the Award on the ground of non-compliance of Section 446 - If according to the Appellants the learned Single Judge should not have proceeded with the matter because of the order of winding up, the Appellants should have brought this to the notice of the learned Single Judge. Having remained silent, not even filing a reply to the Arbitrator, the Appellants are attempting to nullify the Award of the admitted liability by putting forth an argument which has no basis. The legislative policy and the series of decisions of this Court and the Apex Court envisages a lean towards upholding the Arbitral Awards. In the present case what we have before us is a clear case of debtors refusing to pay back the loan. The Arbitrators gave ample opportunity to file reply yet the Appellants did not do so. The challenge raised on the same ground against the Respondent in identical circumstances stands concluded against the Appellants up to the Apex Court. The sole contentions advanced by the Appellants cannot be accepted - appeal dismissed.
Issues:
1. Challenge to the order dismissing the Arbitration Petition and confirming the Award. 2. Interpretation of Sections 441(2) and 446(1) of the Companies Act, 1956. 3. Compliance with legal procedures in the context of winding up and arbitration proceedings. 4. Admissibility of arguments related to winding up in challenging the Arbitral Award. 5. Upholding the Arbitral Award and legal precedents favoring enforcement. Analysis: 1. The Appellant challenged the order dismissing the Arbitration Petition and confirming the Award rendered by a sole arbitrator. The Respondent, a financial services provider, had lent a substantial sum to the Borrowers who defaulted on repayment. The Arbitrator, after due process, directed the Appellants to pay the outstanding amount with interest. The Appellants contested the Award under Section 34 of the Arbitration and Conciliation Act, 1996, leading to the present Appeal. 2. The Appellants argued that the winding up of Birla Power Solutions, one of the Borrowers, affected the validity of the Arbitral Award. They contended that Sections 441(2) and 446(1) of the Companies Act, 1956, were not complied with, rendering the Award legally flawed. The Appellants raised concerns about the timing of the winding up order and its impact on the arbitration proceedings, emphasizing the need for adherence to statutory provisions in such cases. 3. The Court examined the sequence of events, highlighting the dates of key actions such as the loan agreement, termination, arbitration award, and winding up. Section 441(2) was discussed regarding the commencement of winding up, while Section 446 dealt with legal proceedings upon a winding up order. The Court emphasized the importance of procedural compliance and the protection of creditors' interests in cases involving winding up and arbitration. 4. The Court rejected the Appellants' argument regarding the impact of winding up on the Arbitral Award. It noted that the Appellants failed to disclose the winding up petition during arbitration or before the Single Judge, undermining their attempt to invalidate the Award based on non-compliance with Section 446. The Court emphasized the need for parties to raise relevant issues at the appropriate stages of legal proceedings to ensure fairness and procedural regularity. 5. Upholding the Arbitral Award, the Court cited legal precedents favoring enforcement and the legislative policy supporting arbitration outcomes. The Court emphasized the debtors' obligation to repay the loan, the Appellants' failure to engage effectively in the legal process, and the consistent dismissal of challenges to the Award up to the Apex Court. Ultimately, the Court dismissed the Appeal, affirming the order of the learned Single Judge and upholding the Arbitral Award based on the facts and legal principles presented.
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