Mnish Mehta vs India Cements Capital And Finance Ltd. And 2 Ors.

CNR No : HCBM020135622014

2026:BHC-OS:23458

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 1469 OF 2014
Manish Mehta
Age : 45 years, Occupation : Businessman,
Residing at Amarswarup, Bhaji Mandi,
Itwari, Nagpur, Maharashtra – 440 002. .. PETITIONER
V E R S U S
1. India Cements Capital &
Finance Limited
(formerly known as Arunal Sugars
Finance Limited, a company
incorporated under the Companies Act,
1956, and having its registered office at
Dhun Building, 827, Anna Salai,
Chennai 600 002, and Corporate Office
at 38, Sterling Road, Chennai 600 034.
2. M/s. Munis Forge Limited
Registered Office at 258,
Small Factory Area,
Bagadganj, Nagpur,
Tahsil & District – Nagpur.
3. Shri. Rajendra Kumar Mehta
R/o. Flat No. 205,
Swapnlok Building,
Near Big Bazar, Hiwari Nagar,
Nagpur – 440 008. .. RESPONDENTS
Adv. Nidhi Chauhan , Advocate for the Petitioner.
Adv. Saakshi Jha a/w. Adv. Manish M. Bohra i/b. M/s. A. S. Khan &
Associates, for Respondent No. 1.
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CORAM : ARUN R. PEDNEKER, J.
th
RESERVED ON : 13 OCTOBER 2026
th
PRONOUNCED ON : 29 OCTOBER 2026
JUDGMENT :-
1. By the present Petition, the Petitioner challenges the arbitral award
dated 04.08.2012 passed by the Sole Arbitrator in relation to Hire Purchase
Agreement No. 4922, executed between the parties on 07.01.1998.
2. The Petitioner is the guarantor for the loan facility extended by
Respondent No. 1 to Respondent No. 2. Respondent No. 1 invoked
arbitration under Clause 24(A) of the Agreement on 21.05.2003 and filed
Statements of Claim dated 14.08.2003 and 27.08.2003.
3. Respondent No. 2 filed its Written Statement, and Respondent No.
1/Claimant filed its Rejoinder Affidavit on 16.08.2004. Respondent No. 1
filed its Affidavit of Evidence on 05.07.2005, and the Petitioner filed its
Written Statement/Reply on 21.07.2006, with a prayer to treat the same as an
Affidavit-in-Chief.
4. It is stated that the matter was reserved for judgment on 30.01.2008.
However, the Sole Arbitrator passed an Award dated 04.08.2012. It is
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contended that the Award was not served upon the Petitioner. Consequently,
Arbitration Petition (L) No. 1931 of 2013 was filed before this Court seeking
certified copies of the Award. By an order dated 19.03.2014, this Court
recorded that the Arbitrator had tendered a packet containing a certified copy
of the Award, which the Petitioner received for the first time on that date.
5. Challenging the award before this Court under Section 34 of the
Arbitration Act the learned Counsel for the Petitioner Ms. Nidhi Chauhan
submits as under :
I) The impugned Award is unreasoned and, therefore, patently illegal
under Section 34(2A) of the Act. Learned Counsel submits that the
Arbitrator has not dealt with the objections raised by the Petitioner in its
Affidavit-in-Reply-cum-Examination-in-Chief. The said objections are
recorded in Paragraph 9 of the Award; however, no findings have been
rendered on any of them. Thus, the Award suffers from this infirmity, being
in contravention of Section 31(3) of the Arbitration Act, and is liable to be
set aside.
II) The Arbitrator failed to consider the contents of the Hire Purchase
Agreement (HPA) and to adjudicate upon the crucial evidence on record. It
is submitted that the HPA was executed on stamp paper in Madras, whereas
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the stamp paper from Maharashtra is unnumbered. There is also an internal
page in the HPA on the unnumbered stamp paper from Maharashtra. The
names of the owners mentioned in the HPA and the Deed of Guarantee are
different. There are anomalies in the execution of the HPA and the Deed of
Guarantee, both dated 07.01.1998. The stamp paper is dated 01.08.1996, i.e.,
18 months prior to the execution of the documents. It is submitted that,
under Section 52-B of the Maharashtra Stamp Act, if a stamp paper is not
utilized within six months of its purchase, it is to be treated as invalid.
The Arbitrator failed to record the admissions made by Respondent
No. 1 regarding the existence of the machinery and the fact that no legal
steps were taken during the years 1998–1999.
III) The invocation of arbitration is invalid. Respondent No. 1 relied upon
a letter dated 23.04.2003. However, a plain reading of Section 21 of the
Arbitration Act envisages that arbitral proceedings commence on the date on
which the request for referring the dispute to arbitration is received by the
Respondent. The Arbitrator failed to ascertain whether such notices were
served upon the Respondents / present Petitioner, as the postal receipts and
acknowledgments of receipt were not placed on record.
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It is submitted that, after the issuance of the notice under Section 21 of
the Arbitration Act, the Respondents issued a winding-up notice dated
22.05.2003 under Section 439 of the Companies Act. This indicates that the
Respondents were unclear as to which remedy ought to be pursued for
resolution of the dispute. The letter dated 23.04.2003 merely contemplated
the possibility of invoking arbitration. Further, the primary requirement of
the notice being received by the Petitioner herein was not fulfilled.
It is further submitted that the notice was issued after five years from
the date of the last outstanding payment. It is also submitted that the Award
was reserved for judgment on 30.01.2008 but was passed only on
04.08.2012, i.e., after a delay of more than four years. The Arbitrator failed
to record any reasons for the said delay.
IV) It is submitted that the Petitioner stands discharged as a surety owing
to a variance in the contract. The Petitioner retired from Munis Forge on
28.09.2006 and, therefore, is not liable under the purported Deed of
Guarantee. Respondent Nos. 1 and 2 varied the terms of the contract by a
letter dated 17.09.1998, whereby the schedule of delivery was amended. The
said amendment was not communicated to the Petitioner. Accordingly, it is
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submitted that, under Section 133 of the Indian Contract Act, 1872, the
surety stands discharged from the alleged liability owing to the variance in
the terms of the contract.
It is submitted that, in view of the multiple irreconcilable anomalies in
the Award, the impugned Award dated 04.08.2012 is patently illegal, is
contrary to the public policy of India, and is liable to be set aside.
6. The learned counsel for the Petitioner relies upon the following
Judgments as follows :
A) Gorkha Security Services vs. Directorate of Health Services 2026
SCC Online Del 3253.
B) OPG Power Generation Pvt. Ltd. Vs. Enexio Power Cooling
Solutions India Pvt. Ltd. And Anothers 2025 2 SCC 417.
C) Associates Builders vs. Delhi Development Authority 2015 3
SCC 49.
D) Vishal Projects Pvt. Ltd. vs. M/s Vishal Structurals Pvt. Ltd &
Ors 2025 INSC 507.
7. Per contra, learned Counsel for the Respondent Ms. Saakshi Jha
submits that the Petition does not disclose any ground contemplated under
Section 34 of the Arbitration and Conciliation Act, 1996. In response to the
submissions made by the Petitioner, learned Counsel for the Respondents
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submits that the arbitration was invoked in accordance with Clause 24(A) of
the Hire Purchase Agreement dated 07.01.1998, at the instance of the
Claimant, after issuing notices to the borrowers and the guarantors.
8. It is submitted that mere delay in passing the Award does not, by itself,
render the Award perverse or liable to be set aside. The delay must be
examined in the factual context of the proceedings and cannot mechanically
be treated as a ground for nullifying an otherwise valid Arbitral Award.
9. It is submitted that mere delay in passing an Award, without
demonstrating any independent statutory infirmity, does not constitute a
standalone ground under Section 34 of the Arbitration and Conciliation Act,
1996, for setting aside the Award.
10. It is further submitted that the arbitral proceedings were duly invoked
under Section 21 of the Arbitration and Conciliation Act, 1996. The
Respondents had communicated their intention to commence the arbitral
proceedings. It is further submitted that the appointment of the Arbitrator
was in accordance with the Agreement and was never challenged in a timely
manner.
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11. It is submitted that the Petitioner ought to have challenged the
appointment of the Arbitrator by availing the remedy under Section 13 of the
Arbitration Act. It is further submitted that an application under Section 13
was filed belatedly; however, the same was dismissed.
12. It is submitted that, having failed to challenge the constitution or
appointment of the Arbitrator at the relevant stage, the Petitioner cannot now
seek to resurrect the same objection indirectly through a Petition under
Section 34 of the Arbitration Act. It is further submitted that, prior to the
Arbitration and Conciliation (Amendment) Act, 2015, the Act contained no
provision equivalent to sub-section (5) of Section 12 or the Seventh
Schedule. The parties were free, under Section 11(2), to agree on the
procedure for appointing the Arbitrator, and an appointment made in
accordance with the agreed procedure was valid. The only avenues for
challenge were under Sections 12(3) and 13, which required the challenge to
be made within 15 days, and Section 16(2), which required a plea
challenging the jurisdiction of the Arbitral Tribunal to be raised no later than
the submission of the Statement of Defence.
13. It is submitted that the Amendment Act, 2015, is prospective and not
retrospective in its operation, as held in Bhadra International (India Private
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Limited) vs. Airport Authority of India, reported in AIR OnLine 2026 SCC
44.
14. It is submitted that the Award was duly communicated to the
Petitioner. It is further submitted that the contents of the Award demonstrate
that the contentions raised by the Petitioner were considered. The Arbitrator
considered the respective contentions of the parties and arrived at findings
after considering the material placed before him.
15. It is further submitted that the Arbitration Petition be dismissed.
16. Having considered the rival submissions and examined the material on
record, the core issue that arises for consideration before this Court is as
follows :-
i) Whether, the Arbitrator was appointed in accordance with the terms of
the contract ? If not, whether the non-raising of objection by the Petitioner
within time, would amount to waive of objection to the appointed
Arbitrator ?
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ii) Whether, the Award passed by the Arbitrator is an unreasoned Award
and thus suffers from patent illegality ?
iii) Whether, there was a delay in pronouncing the Award and, if so,
whether the Award is liable to be set aside on that ground in the present
case ?
17. At the outset, it can be seen that the Arbitrator was appointed by the
Respondent. The present arbitral proceedings predate the Arbitration and
Conciliation (Amendment) Act, 2015. If there was any defect in the
appointment of the Arbitrator, the Petitioner ought to have raised an
objection at the initial stage, while filing the Reply. Failure to raise such an
objection amounts to a waiver of the right to challenge the procedure
adopted for the appointment of the Arbitrator.
18. This Court in the case of State of Maharashtra vs. Morya
infrastructure Private Limited in paragraph Nos. 29, 33 and 34 held as
under :
29. The Hon'ble Supreme Court in Quippo Construction
Equipment Limited v. Janardan Nirman Private Limited,
(2020) 18 SCC 277, while affirming the legal position in
Narayan Prasad Lohia v. Nikunj Kumar Lohia, (2002) 3
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SCC 572, has held that Sections 10 and 16 of the Arbitration
and Conciliation Act, 1996 are required to be read
conjointly. It has been held that if a party does not raise an
objection under Section 16 with regard to the constitution of
the arbitral tribunal, such party shall be deemed to have
waived its right to object under Section 4 of the Act.
33. It has thus been clarified that a challenge to the composition
of the arbitral tribunal must be raised before the tribunal
itself under Section 16(2), not later than the submission of
the statement of defence. Section 16 further makes it clear
that such a plea can be raised even by a party who has
appointed or participated in the appointment of an
arbitrator. However, if no objection is raised within the
prescribed time, Section 4 operates as a deemed waiver of
the right to object.
34. Thus, from conjoint reading of Sections 10, 16 and 4, it is
evident that an objection to the composition of the arbitral
tribunal is a matter which is derogable and must be raised
in the manner and within the time prescribed under Section
16(2), failing which the party is precluded from raising such
objection at a subsequent stage.
Thus, the objection that the Arbitrator was not appointed in accordance with
the terms of the contract cannot be raised at later stage, as the same was not
raised before the submission of statement of defence before the Arbitrator
and the parties have participated before the arbitrator. It appears that
objection was raised later, during the pendency of proceedings as regards the
eligibility of the Arbitrator which was rejected.
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19. In the present case, the Arbitral Award was pronounced more than four
and a half years after the conclusion of arguments. The matter was reserved
for Judgment on 30.01.2008, but the Award was passed only on 04.08.2012,
i.e., after a delay of more than four and half years. The Arbitrator has also
failed to record any reasons for the delay.
20. The Hon’ble Supreme Court while dealing with the case of delay in
pronouncing the Arbitral Award, in the case of M/s. Lancor Holdings
Limited vs. Prem Kumar Menon reported in AIR OnLine 2025 SC 1153 in
Paragraph Nos. 19 and 20 held as under :
19. However, the undeniable fact remains that Section 34 of the
Act of 1996 does not postulate delay in the delivery of an
arbitral award as a ground, in itself, to set it aside. There is
no gainsaying the fact that inordinate delay in the
pronouncement of an arbitral award has several deleterious
effects. Passage of time invariably debilitates frail human
memory and it would be well-nigh impossible for an
arbitrator to have total recall of the oral evidence, if any,
adduced by witnesses; and the submissions and arguments
advanced by the parties or their learned counsel. Even if
detailed notes were made by the arbitrator during the
process, they would be a poor substitute to what is fresh in
the mind immediately after conclusion of the hearings in the
case. More importantly, such delay, if unexplained, would
give rise to unnecessary and wholly avoidable speculation
and suspicion in the minds of the parties. Absolute faith and
trust in the system is essential to make it work the way it is
intended to. Once that belief is shaken, it would lead to a
breakdown of that system itself. A situation that is to be
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eschewed at all costs.
20. That being said, we must also recognize that, in the usual
course, long delay in the passing of arbitral awards is not
the norm. However, when an instance of undue delay in the
delivery of an arbitral award occasionally crops up, given
the weighty preponderance of judicial thought on the issue
with which we are in respectful agreement, we are of the
considered opinion that each case would have to be
examined on its own individual facts to ascertain whether
the delay was of such import and impact on the final
decision of the arbitral tribunal, whereby that award would
stand vitiated due to the lapses committed by the arbitral
tribunal owing to such delay.
21. The Supreme Court in M/s. Lancor Holdings Limited (supra) has
observed that an inordinate delay in passing an arbitral award raises doubts
as to whether the Arbitrator has properly appreciated the evidence and
arguments. However, it has also observed that the Award does not, per se,
stand vitiated on account of such delay. The Court must examine the Award,
and each case must be assessed on its individual facts to determine whether
the delay has affected the Arbitrator’s examination of the material on record.
In the instant case, we find that the response of the Petitioner is referred to in
the Award. However, the same does not form part of the record, nor is it
dealt with by the Arbitrator.
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22. Learned Counsel for the Petitioner submits that the specific defence
raised before the Arbitrator pertains to Section 139 of the Indian Contract
Act, 1872, which provides for the discharge of a surety where the creditor’s
act or omission impairs the surety’s eventual remedy. Section 139 of the
Indian Contract Act, 1872, is reproduced below :
If the creditor does any act which is inconsistent with the
rights of the surety, or omits to do any act which his duty to
the surety requires him to do, and the eventual remedy of the
surety himself against the principal debtor is thereby
impaired, the surety is discharged.
23. It is submitted that the creditor deviated from the original agreement,
which provided for termination of the agreement upon the first default, and
that the period of limitation would have commenced from the date of such
default. However, Respondent No. 2 had offered a one-time settlement
(OTS) of the outstanding loan as early as 24.07.1999. At the time of the OTS
offer, Respondent No. 1 had claimed an outstanding amount of Rs.
30,35,706/-. Respondent No. 1 thereafter rejected the OTS offer after a lapse
of five years and levied penal interest at the rate of 36% on the outstanding
loan, thereby claiming an amount of Rs. 66,74,192/-.
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24. It is further submitted that the guarantor would not be liable to pay
amounts that could not be recovered by the lender due to negligence or
otherwise. The lender had also failed to encash the amount offered under the
one-time settlement. It is further submitted that Respondent No. 1 had
permitted the hirer to change the schedule for delivery of the machinery
under the Hire Purchase Agreement without the knowledge and consent of
the surety. This attracts Section 133 of the Indian Contract Act, 1872, as the
terms of the original agreement were varied without notice to the guarantor,
thereby attracting the provisions of the said Section. It is also submitted that
there was no notice invoking arbitration under Section 21 and the notice was
issued under Section 439 of Companies Act for winding up.
25. None of the aforesaid defences of the Petitioner has been addressed in
the discussion in the Arbitral Award. The Award is virtually unreasoned. It
merely records that Respondent No. 2 / present Petitioner had filed an
Affidavit-in-Chief and requested that the same be read as examination-in-
chief. However, in the subsequent paragraph, the Arbitrator records that
Respondent No. 2 had not led any evidence, while dealing with the
contention that the Claimant had not led any evidence.
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26. It is observed in the award that the defence raised was that the
Claimant had failed to prove the execution of the Hire Purchase Agreement
and that the stamp paper had been purchased at Madras. While dealing with
these allegations, the Arbitrator observed as follows: “On perusal of all the
allegations and contentions, I do not find any merit in the submissions made
by Respondent No. 2, for the reason that they are mere oral statements
unsupported by any evidence”. The Arbitrator has not dealt with any aspect
relating to the purchase of the stamp paper at Madras and interpolation of
papers or notice invoking arbitration or the liability of guarantor in view of
variation of Hire Purchase Agreement, if any.
27. The Award does not deal with the submissions made by the present
Petitioner/Respondent No. 2 before the Arbitrator. The Award, per se,
appears to have been affected by the inordinate delay of four and half years,
which has impaired the Arbitrator’s examination of the matter qua the
contentions raised specific to the guarantor. Thus, in the instant case,
applying the law laid down in the case of M/s. Lancor Holdings Limited
(supra) , this Court finds that the delay in passing the Award has affected the
Arbitrator’s examination of the material on record qua the material and
defence raised by the Petitioner, guarantor.
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28. The next question that arises for consideration is whether the award
can be set aside only to the extent of the guarantor, i.e., the Petitioner herein,
since the award has been challenged by the guarantor and not by the
borrower. The Supreme Court, in the case of Gayatri Balasamy Vs. ISG
Novasoft Technologies Limited, reported in (2025) 7 SCC 1 , while dealing
with the question of whether an arbitral award challenged under Sections 34
and 37 of the Arbitration and Conciliation Act, 1996, can be modified or set
aside in part, has made the following observations in Paragraph Nos. 87,
87.1 and 87.2 as under :-
87. Accordingly, the questions of law referred to by Gayatri
Balasamy are answered by stating that the Court has a
limited power under Sections 34 and 37 of the 1996 Act to
modify the arbitral award. This limited power may be
exercised under the following circumstances:
87.1. When the award is severable, by severing the "invalid"
portion from the "valid" portion of the award, as held in
Part II of our Analysis;
87.2. By correcting any clerical, computational or typographical
errors which appear erroneous on the face of the record, as
held in Parts IV and V of our Analysis;
29. The Delhi High Court, in the case of Komal Narula Vs. DMI Finance
Pvt. Ltd. and Another, reported in 2021 SCC OnLine Del 3698 , held that
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the arbitral award could be set aside insofar as the party challenging it was
concerned, on the ground that the said party had not received notice of the
appointment of the Arbitral Tribunal. However, the award was not interfered
with insofar as the other borrowers / parties were concerned.
30. This Court, in the case of Lokmanya Multi Purpose Co-operative
Society Ltd. v. Melwyn Anthony Vaz and Another, reported in 2026 BHC-
GOA:160 , in Appeal under Arbitration No. 19 of 2017, by order dated
30.01.2026, similarly applied the law laid down in Gayatri Balasamy
(supra) and Komal Narula (supra) and set aside the arbitral award only to
the extent of the guarantor who had challenged the award. Although the
amount was recoverable jointly from the borrowers and the other guarantors,
the Court held that, since the plea of violation of the principles of natural
justice had been raised only by the Petitioner therein, the award was liable to
be set aside only to that extent.
31. In the instant case, this Court finds that the Arbitrator has failed to
deal with the submissions of the guarantor, particularly those concerning the
discharge of his liability under Sections 133 and 139 of the Indian Contract
Act, 1872. The matter remained pending before the Arbitrator for more than
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four and a half years after the award was reserved, and the Arbitrator has
failed to consider and address the submissions advanced on behalf of the
Petitioner. In view of the above, the arbitral award is set aside only to the
extent of the Petitioner.
32. Accordingly, the impugned Arbitral Award is set aside to the extent of
the present Petitioner. The Arbitration Petition is disposed of accordingly.
(ARUN R. PEDNEKER, J.)
Digitally
signed by
SUFIYAN
EHTESHAM
SYED
Date:
2026.10.29
17:57:36
+0530
SUFIYAN
EHTESHAM
SYED
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