Case Note & Summary
The petitioners, Harikishan Shankarji Gogikar and Millenium Technorbit Limited, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award dated 10th March 2014. The award directed the petitioners to pay Rs.25,36,675.17 with interest at 12.50% per annum from 1st June 2013 till payment, plus costs of Rs.7,500/-. The respondent, Reliance Home Finance Ltd., had advanced a loan to the petitioners, secured by a mortgage of property. The respondent filed a claim before the arbitral tribunal for recovery of the outstanding amount and enforcement of the mortgage. The petitioners argued that the claim for enforcement of mortgage was an action in rem and thus not arbitrable, relying on Booz Allen and Hamilton Inc. v. SBI Home Finance Limited (2011) 5 SCC 532. They also contended that the tribunal did not consider a payment of Rs.10,30,120/- made by them, and that the tribunal wrongly permitted the respondent to withdraw the mortgage relief on an oral application. The court rejected these arguments, holding that the primary claim was for money recovery (action in personam), and the mortgage was only collateral. The withdrawal of the mortgage relief did not affect the tribunal's jurisdiction. The court also noted that the tribunal had considered the alleged payment and found it not proved. Regarding the return of title deeds, the court observed that the petitioners could seek return only after satisfying the award. The petition was dismissed, and the award was upheld.
Headnote
A) Arbitration - Arbitrability - Mortgage Enforcement - Action in Rem vs. Action in Personam - The claim before the arbitral tribunal was for recovery of money based on a loan agreement, which is an action in personam, and the mortgage was only collateral security. The arbitral tribunal had jurisdiction to decide the money claim, and the withdrawal of the mortgage relief did not affect the award. (Paras 2-6) B) Arbitration - Withdrawal of Relief - Oral Application - The arbitral tribunal permitted the respondent to withdraw the relief of redemption of mortgage on an oral application. The court held that such withdrawal was permissible and did not vitiate the award. (Para 3) C) Arbitration - Consideration of Payments - The petitioners alleged that a payment of Rs.10,30,120/- was not considered. The court noted that the arbitral tribunal had considered the payments and found that the amount was not paid. (Para 3) D) Arbitration - Return of Title Deeds - The petitioners sought return of original documents deposited as security. The court held that since the award directed payment of the amount, the petitioners could seek return of documents only after satisfying the award. (Para 3)
Issue of Consideration
Whether an arbitral tribunal has jurisdiction to entertain a claim for enforcement of mortgage (action in rem) and whether the award is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996.
Final Decision
The court dismissed the petition and upheld the arbitral award dated 10th March 2014.
Law Points
- Arbitrability of mortgage enforcement claims
- distinction between action in rem and action in personam
- withdrawal of relief before arbitral tribunal
- consideration of payments made during arbitration
- return of title deeds upon satisfaction of award
