Case Note & Summary
This judgment relates to a petition under Section 34 of the Arbitration and Conciliation Act, 1996 filed by Sanjeev Malhotra, a former director and shareholder of Rayalseema Commodities Ltd. (currently under liquidation), challenging an Arbitral Award dated 4 April 2024. The award was passed by Justice S.P. Kurdukar, a retired Supreme Court judge, in an arbitration arising out of credit facilities provided by SBI Global Factors Ltd. (formerly Global Trade Finance Ltd.) to Rayalseema. The dispute originated from a sanction letter dated 21 June 2007, whereby SBI Global sanctioned trade finance facilities up to Rs.15 crores, subject to personal guarantees from the petitioner and others. The petitioner executed a Deed of Guarantee on 5 September 2007. The facilities were subsequently enhanced to Rs.29 crores by May 2008. SBI Global claimed that as on 31 March 2011, Rs.28,16,51,442.87 was due under the domestic factoring facility and Rs.15,29,35,047.19 under the reverse factoring facility, totaling Rs.43,45,86,490.06. SBI Global filed Suit No. 1006 of 2009 in the Bombay High Court for recovery. The defendants sought reference to arbitration, which was dismissed, but on a special leave petition, the Supreme Court by consent order dated 18 January 2011 referred the disputes to arbitration. The Arbitral Tribunal allowed SBI Global’s claims, directing the petitioner and Rayalseema to jointly and severally pay the amounts with 18% interest per annum from 1 April 2011, to specifically perform the sanction letter obligations, and to pay costs of Rs.30,51,355. Aggrieved, the petitioner filed the present petition under Section 34. The petitioner raised four main objections: (i) the Arbitrator dispensed with the requirement of proving the principal debtor’s debt, relying on a finding that Rayalseema ‘almost admitted the claim’, which actually meant no admission; (ii) there was inordinate and unexplained delay—oral arguments concluded on 26 November 2019, and despite written submissions filed by 1 October 2022, the Award was passed only on 4 April 2024, after 18 months, relying on Anil Rai v. State of Bihar; (iii) the Arbitrator’s casual and cavalier approach constituted patent illegality; and (iv) several interim applications, including for bringing on record a forensic report suggesting forgery of the guarantee, and for deciding Section 27 and Section 16(3) and (4) applications, were not decided before the final Award. The judgment text provided is incomplete, and the court’s reasoning and final decision are not included. The court was expected to consider these grounds under Section 34 of the Arbitration Act.
Issue of Consideration
Whether the Arbitral Award dated 4 April 2024 is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on grounds of patent illegality, including failure to prove debt, inordinate delay, non-decision of interim applications, and procedural irregularities.
Case Details
2025 LawText (BOM) (12) 89
Commercial Arbitration Petition No. 778 of 2024
Mr. Haresh Jagtiani, Senior Advocate with Mr. V.N. Shingnapurkar, Mr. Harshad Shingnapurkar, Mr. Pushpvijay Kanoji, Mr. Pranay Kamdar, Mr. Ritwik Kulkarni and Mr. Dhananjay Nagarkar, for the Petitioner. Mr. Cherag Balsara with Mr. Ashish Mehta and Ms. Jovita Pareira i/b. Mr. Raj Kakde, for Respondent No.1. Mr. Mahesh Ayar, for Respondent No.2.
SBI Global Factors Ltd. & Rayalseema Commodities Ltd.
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Nature of Litigation
Petition under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside an arbitral award.
Remedy Sought
Petitioner (Sanjeev Malhotra) seeks to invalidate the Arbitral Award dated 4 April 2024 and consequently set aside the monetary and other reliefs granted to Respondent No.1 (SBI Global Factors Ltd.).
Filing Reason
The petitioner contends that the Arbitral Award is vitiated by patent illegality, lack of proof of debt, inordinate delay, non-decision of pending applications, and violation of natural justice.
Previous Decisions
Suit No. 1006 of 2009 was filed by SBI Global in Bombay High Court; Defendants' notice of motion for arbitration was dismissed on 20 Aug 2009; Supreme Court referred disputes to arbitration by consent order dated 18 Jan 2011; Arbitral Tribunal passed Award on 4 Apr 2024 allowing SBI Global's claims.
Issues
Whether the Arbitral Tribunal could dispense with the requirement of SBI Global proving the existence of a subsisting debt from the principal debtor before fixing liability on the guarantor.
Whether inordinate and unexplained delay in passing the Arbitral Award after conclusion of oral submissions renders the Award invalid under Section 34 of the Arbitration Act.
Whether the Arbitrator's non-decision of several interim applications filed by the Petitioner before passing the final Award amounts to violation of principles of natural justice and patent illegality.
Whether the Arbitral Tribunal's finding that the principal debtor 'almost admitted' the claim constitutes a perverse finding and patent illegality.
Submissions/Arguments
Petitioner argued that the Arbitrator dispensed with the need for SBI Global to prove the debt, which is elementary; the finding that Rayalseema 'almost admitted the claim' indicates a cavalier approach and actually means no admission; the Tribunal did not discuss evidence.
Petitioner contended that there was inordinate and unexplained delay: oral arguments concluded on 26 Nov 2019, and despite written submissions filed by 1 Oct 2022, the Award was passed only on 4 Apr 2024, after 18 months, relying on Anil Rai v. State of Bihar.
Petitioner submitted that the Arbitrator's casual and cavalier approach does not inspire confidence, constituting patent illegality.
Petitioner argued that several interim applications (amendment for forgery, forensic examination, taking on record Truth Labs report, Section 16 termination, Section 27 production, rehearing) were not decided, depriving the petitioner of opportunity to prove forgery.
Judgment Excerpts
Rayalseema ‘almost admitted the claim’
the expression ‘almost admitted’ actually means no admission
Petitioner had relied upon judgment of the Apex Court in Anil Rai v. State of Bihar
the learned Arbitrator has virtually absolved SBI Global from proving that there was any subsequent debt or liability
Procedural History
SBI Global filed Suit No. 1006 of 2009; Defendants moved Notice of Motion for reference to arbitration, dismissed on 20 Aug 2009; SLP filed in Supreme Court, consent order dated 18 Jan 2011 referring disputes to sole arbitrator Justice S.P. Kurdukar; SBI Global filed Statement of Claim; Rayalseema and Petitioner filed defence and counterclaim/WS; Petitioner's amendment application rejected on 25 Apr 2018; multiple applications filed by Petitioner (27 Jul 2018, 3 Oct 2019, 30 Apr 2022, 22 Sep 2023, 9 Jan 2024) remained undecided; Award passed on 4 Apr 2024; present Section 34 petition filed.
Acts & Sections
- Arbitration and Conciliation Act, 1996: 34, 16(3), 16(4), 27
- Civil Procedure Code, 1908: 151
