The Delhi High Court has upheld an arbitral award directing the repayment of a friendly loan, ruling that a delay of approximately fourteen months in the pronouncement of the award does not, by itself, render it liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 (“AC Act”). The Division Bench of Justice Anil Kshetarpal and Justice Amit Mahajan dismissed the appeal, observing that the Appellant failed to establish any prejudice caused by the delay.
The Court further held that an admission of loan liability in pleadings is sufficient to sustain an award, even if the underlying mortgage agreements are unregistered or sufficiently stamped, as such documents can be looked into for collateral purposes.
Background of the Case
The appeal, filed under Section 37 of the AC Act read with Section 13 of the Commercial Courts Act, 2015, challenged the order dated October 31, 2022, passed by the Commercial Court. The Commercial Court had dismissed the Appellant’s petition under Section 34 of the AC Act, thereby upholding the arbitral award dated November 15, 2019.
The dispute arose from a friendly loan of Rs. 6,00,000 advanced by the Respondent, Smt. Laxmi Maurya, to the Appellant, Om Prakash. The loan was secured by two agreements of mortgage dated December 19, 2011, and December 7, 2012. The Respondent claimed that upon the Appellant’s failure to adhere to the repayment schedule, she invoked the arbitration clause.
A Sole Arbitrator was appointed by the High Court on July 13, 2015. The Arbitrator passed an award in favor of the Respondent, directing the Appellant to pay the principal amount of Rs. 6,00,000, along with interest quantified at Rs. 3,15,000 for the period from April 8, 2012, to January 7, 2014. The award also granted future simple interest at 8% per annum, enhanced to 10% per annum if not paid within 90 days, and litigation costs of Rs. 35,000.
Arguments of the Parties
The Appellant contended that the award was vitiated by material irregularity and was in conflict with the public policy of India on several grounds:
- Delay in Pronouncement: The arbitral proceedings were concluded and reserved for award on September 27, 2018, but the award was passed only on November 15, 2019—a delay of approximately fourteen months. The Appellant argued that this unexplained delay impacted his right to a timely resolution.
- No Admission of Full Liability: The Appellant argued that he never admitted to receiving the entire Rs. 6,00,000 as a single loan. He claimed to have borrowed three separate amounts of Rs. 2,00,000 each, asserting that the first two were repaid and Rs. 1,05,000 was paid towards the third.
- Inadmissibility of Documents: The Appellant challenged the reliance on the mortgage deeds, arguing they were unregistered and insufficiently stamped.
- Nature of Property: It was urged that the property was in a JJ Resettlement Colony on Government land, preventing the creation of a lawful mortgage.
Per contra, the Respondent argued that the appeal was an attempt to seek re-appreciation of evidence. It was submitted that the award was based on the Appellant’s own admissions and cogent evidence.
Court’s Analysis and Findings
1. Delay in Pronouncement of Award
The Division Bench addressed the issue of delay by relying on the recent Supreme Court judgment in M/s. Lancor Holdings Limited v. Prem Kumar Menon & Ors. (2025 INSC 1277). The Court noted that mere delay is not a ground for setting aside an award unless it is “undue and unexplained and where its adverse effect is explicit, demonstrably impacting the reasoning, fairness, or validity of the award.”
Applying this principle, the Court observed:
“Applying the aforesaid settled legal position to the facts of the present case, this Court finds that the Appellant has failed to establish any prejudice or infirmity in the award attributable to the alleged delay.”
2. Admission of Liability
The Court rejected the Appellant’s contention regarding the non-admission of the loan. Upon perusing the written statement filed by the Appellant in the arbitral proceedings, the Bench noted a “categorical admission” of borrowing a sum total of Rs. 6,00,000 in different tranches.
Regarding the Appellant’s claim of repayment, the Court held:
“Onus to prove his assertion lay upon the Appellant, but he failed to discharge the same by leading cogent evidence. Consequently, the Arbitral Tribunal and the Commercial Court were justified in relying on the admissions made by the Appellant.”
3. Admissibility of Unregistered/Insufficiently Stamped Documents
The Court dismissed the objection regarding the mortgage deeds. It held that under Section 49 of the Registration Act, 1908, even unregistered documents can be relied upon for collateral purposes. Furthermore, regarding the stamp duty objection, the Court cited Section 36 of the Indian Stamp Act, 1899, which prohibits a party from questioning the admissibility of a document once it has been admitted in evidence.
The Court noted:
“Further, even in the absence of the agreement to mortgage, the Respondent has successfully established her claim, given the Appellant’s admission of borrowing Rs.6,00,000/- in tranches.”
Scope of Interference
Citing the Supreme Court’s decision in UHL Power Co. Ltd. v. State of H.P. (2022) 4 SCC 116, the Bench reiterated that the scope of appeal under Section 37 is “narrow” and “circumscribed.” The Court emphasized that it does not sit in appeal over findings of fact recorded by the Arbitral Tribunal unless there is patent illegality or substantial injustice.
Decision
Finding no perversity or illegality in the findings of the Arbitral Tribunal or the Commercial Court, the High Court dismissed the appeal and all pending applications.
Case Details
Case Title: Om Prakash v. Smt Laxmi Maurya
Case Number: FAO (COMM) 57/2023
Coram: Justice Anil Kshetarpal and Justice Amit Mahajan
