2017 (11) TMI 2061 - HC - Indian Laws

Challenge to arbitration award under Section 34 of the Arbitration and Conciliation Act - borrowers would dispute the rate of interest arguing that only simple interest at the rate of 12 % per annum was payable and not 24% per annum as claimed by the company in arbitration - whether the agreed rate of interest being 24% is liable to be substituted with the rate of interest at 12%, which, according to the borrowers, is more acceptable? - HELD THAT - A perusal of the award reveals that all factual aspects of the matter as raised by the parties have been adverted to and adjudicated upon by the Arbitrator prior to arriving at the conclusion that the borrowers are liable to pay the outstanding dues to the company along with the contracted rate of interest at 24% from the date of claim till the date of realization. The sole dispute raised by the borrowers and canvassed is with regard to the rate of interest, being usurious. The allegations of fraud on the part of the company have been noted and adjudicated upon by the Arbitrator and it is not proposed to re-visit the same. The thrust of the appeal is solely on the rate of interest that has been found by the Arbitrator to be the agreed contracted rate warranting no interference at this juncture. The view taken is based on an appreciation of the relevant facts and the terms of the agreements between the parties and, is liable to be confirmed as regards the levy of interest for the period from date of claim till date of award, being 27.12.2014. The grounds of challenge under Section 34(2) are narrow in scope and do not permit a re-appreciation of evidence. The proper course of action for the petitioner, if it was really aggrieved by the order of the tribunal rejecting the interim application, was to have challenged the same. This was however not done and the facts have thus attained finality. The Original Petition stands dismissed.

Summary

Issues:
Challenge to arbitration award under Section 34 of the Arbitration and Conciliation Act; Dispute over rate of interest in loan agreements; Allegations of fraud and inchoate loan documents.

Analysis:

1. The petition was filed challenging an arbitration award passed by the sole arbitrator, where the borrowers were respondents and the company was the claimant. The borrowers had availed a loan from the company, which was later disputed, leading to arbitration proceedings. The company sought interest at 24% per annum on the unpaid dues.

2. The borrowers disputed the rate of interest, claiming only 12% was payable. They alleged that the loan agreements were fraudulent, with signatures obtained on blank documents filled in by the company. An application for expert verification of signatures was dismissed earlier.

3. The arbitrator passed a final award holding the borrowers liable to pay a specific amount with interest at 24%. The borrowers acknowledged the loan but questioned the interest rate, offering to settle if interest was 12%.

4. The company's counsel argued that previous court orders had addressed the interest rate issue, and the borrowers failed to comply. A Supreme Court judgment was cited to support the company's position.

5. The main issue before the court was whether to substitute the agreed 24% interest rate with 12%. The borrowers alleged fraud in the loan documents, which was previously considered by the arbitrator. The court found no grounds to interfere with the arbitrator's decision on interest rate.

6. Citing the Supreme Court judgment, the court confirmed the award, emphasizing the limited scope of challenging arbitral awards under Section 34 of the Act. The court dismissed the petition, upholding the arbitration award without costs.