'Deemed Service' Cannot Cure Defect In Service Of Arbitration Notices: Bombay High Court

The Bombay High Court has recently held that the legal presumption that arbitration notices have been served cannot be mechanically invoked where there is no proof that the notices actually reached the parties. Setting aside an arbitral award, the court observed:

Justice Arif S. Doctor also quashed an April 4, 2025 judgment of the District Judge, Pune. The District Judge had dismissed the borrowers' challenge to an arbitral award passed in favour of Abhyudaya Co-operative Bank Ltd. in a loan recovery dispute.

"In my considered view, that conclusion is not borne out from the arbitral record. The very foundation for invoking deemed service is absent. Where the record itself reveals repeated failures of service, unexplained references to an unidentified “second address”, and no proof whatsoever of actual communication reaching the Appellants, the deeming provisions under Section 3 cannot be mechanically invoked to cure the defect.", the court ruled.

The dispute arose after the bank invoked arbitration on August 11, 2023 in relation to a loan transaction. The arbitral tribunal passed an award in the bank's favour on November 6, 2023.

The borrowers challenged the award before the District Judge. They contended that they had never received notice of the arbitrator's appointment or of the arbitral proceedings. The District Judge rejected their challenge, holding that service was deemed to have been effected under the Arbitration and Conciliation Act. The borrowers then approached the High Court.

After independently examining the arbitral record, the court found that the borrowers had not been effectively served with either the notice appointing the arbitrator or notices relating to the arbitral proceedings. It noted that the bank admittedly possessed the first borrower's email address. Despite this, no attempt was made to serve any arbitration notice through email.

"The material placed before me clearly indicates that the Appellants were not effectively served with either the notice of appointment of the learned Arbitrator or the notices relating to the arbitral proceedings. Indeed, the record suggests that no genuine or meaningful attempt was made to secure such service.", the court ruled.

It also found that the arbitral record did not disclose what the alleged "second address" of the first borrower was. Nor did it explain how that address had been identified or from what material the arbitrator concluded that service had been effected there.

The court further held that the postal endorsement "Intimation delivered" against the second borrower, without anything more, could not constitute proof of effective service.

After going through the arbitral record, the court found no documentary material showing actual service on either borrower. It observed that repeated postal endorsements indicating unsuccessful attempts at service could not, in the facts of the case, be treated as sufficient compliance with the requirements of natural justice or the Arbitration and Conciliation Act.

"On an independent scrutiny of the arbitral record, I find no documentary material evidencing actual service upon either of the Appellants. The Respondents have not appeared to point out anything to the contrary. The repeated postal endorsements indicating unsuccessful attempts at service could not be treated as sufficient compliance with the requirements of natural justice or the Arbitration and Conciliation Act, 1996, given the facts of the present case.", the court noted.

The court also noted that the respondents had not appeared before it despite being served and given ample opportunity to contest the appeal. As a result, the borrowers' assertions regarding the absence of service remained uncontroverted.

Disagreeing with the District Judge's reasoning, the court held that the arbitral record did not support the conclusion that there had been valid initial service followed by deemed service.

It found that repeated failures of service, unexplained references to an unidentified second address, and the absence of proof that any communication had actually reached the borrowers meant the foundation for invoking deemed service was absent.

The court accordingly allowed the appeal. It set aside both the District Judge's judgment dated April 4, 2025 and the arbitral award dated November 6, 2023.

For Appellants: Gaurav Sharma a/w Rushikesh Bhadre, Hrutik Chavan and Soham Salunke