Sri Shyamal Gupta, Member
Aggrieved with the impugned order, this Appeal is preferred by Shriram Transport Finance Co. Ltd.
The complaint case was filed by the Respondent alleging forceful repossession of the subject vehicle by the musclemen of the Appellants. As the Appellants did not contest the case before the Ld. District Forum, the impugned order was passed.
Ld. Advocate for the Appellant submitted that before filing of the complaint case, due arbitration proceedings was initiated by them and as the Respondent did not turn up before the Ld. Advocate, an ex parte order was passed and in view of this the impugned order was bad in law.
Before deliberating on this issue, let me append below some of the pertinent opinions which assumes great significance.
In Halsbury's Laws of England, Fourth Edition, Vol. 2 Page 590, page 306 it has been stated as under:
"Where the arbitrator proposes to proceed with the reference notwithstanding the absence if one of the parties, it is advisable that he should give that party distinct notice of his intention to do so. If reasonable excuse for not attending the Kvm ARBP304.14 appointment can be shown, the court will set aside an award made by an arbitrator who has proceeded ex parte."
In Russell on Arbitration, Nineteenth Edition, page 271 the following passage appears.
" Notice of intention to proceed ex parte- In general, the arbitrator is not justified in proceeding ex parte, without giving the party absenting himself, due notice. It is advisable to give the notice in writing to each of the parties or their solicitors. It should express the arbitrator's intention clearly, otherwise the award may be set aside. An ordinary appointment for a meeting with the addition of the word" "Peremptory" marked on it is, however, sufficient.
If the arbitrator declines to proceed on the first failure to attend a peremptory appointment, and gives another appointment, he is not authorised to proceed ex-parte at the second meeting, unless the appointment for it was also marked "peremptory" or contained a similar intimation of his intention."
In this connection, it may not be out of place to mention here that Article 25 of the UNCITRAL Model Law is incorporated in Section 25. In Russell on Arbitration, 20th Edition at page 263, it is stated as follows:
" In general, an arbitrator is not justified in proceeding ex parte without giving the party absenting himself due notice.
It is advisable to give the notice in writing to each of the parties of their solicitors. It should express the arbitrator's intention clearly, otherwise the award may be set aside."
This principle was adopted by Hon’ble Calcutta High Court in Juggilal Kamlapat v. General Fibre Dealers Ltd. AIR 1955 Calcutta 354(DB), wherein the Hon’ble Court has been pleased to held that if a party fails to attend the arbitration hearing on the due date and time, the arbitrator is at liberty to proceed ex parte, though it is advisable that he should give that party notice of his intention to proceed ex parte.
On a reference to the arbitration award it appears that due notice was served upon the Respondent. However, he did not appear before the Ld. Arbitrator for which the decree was passed ex parte. It is, however, significant to note that, no such documentary proof is adduced from the end of the Appellants to show that before proceeding ex parte, the Ld. Arbitrator duly cautioned the Respondent about the possibility of proceeding ex parte with the matter. Since the Respondent was deprived of the principle of natural justice, I hold that initiation of the complaint case was not bad in law.
That apart, it is also important to keep in mind that the instant complaint case was filed accusing the Appellants of resorting to unfair trade practice. Since this aspect assumes great significance and comes well within the purview of consumer dispute, it does not appear to me that by adjudicating the complaint case, the Ld. District Forum committed any legal infirmity.
Undisputedly, the Respondent committed default in making payment of EMIs within time and therefore, the Appellants were well within their right to repossess the hypothecated vehicle. However, we cannot be oblivious of the fact that law of the land does not permit any individual company to employ Goondas to repossess the vehicle.
It appears, RBI has penciled Fair Business Code for NBFCs vide its Circular dated 01-07-2011. According to this guideline, NBFCs must have a built in re-possession clause in the contract/loan agreement with the borrower which must be legally enforceable. To ensure transparency, the terms and conditions of the contract/loan agreement should also contain provisions regarding: (a) notice period before taking possession; (b) circumstances under which the notice period can be waived; (c) the procedure for taking possession of the security; (d) a provision regarding final chance to be given to the borrower for repayment of loan before the sale / auction of the property; (e) the procedure for giving repossession to the borrower and (f) the procedure for sale / auction of the property. A copy of such terms and conditions must be made available to the borrowers in terms of circular wherein it was stated that NBFCs may invariably furnish a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans, which may form a key component of such contracts/loan agreements.
Unfortunately, the repossession clause contained in the Hypothecation agreement in question runs counter to the RBI guideline. Needless to say, for this simple reason, this is not enforceable in law. There is nothing to show that before repossessing the vehicle in question, due notice was served upon the Respondent.
On the other hand, on an in-depth scrutiny of the impugned order I find that, on due consideration of every probable aspects, the Ld. District Forum passed a well balanced order. In view of this, I refrain from interfering with the same in any manner whatsoever. The Appeal is dismissed as such. No costs.
