Judgment :- 1. These Original Petitions are filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity, “the Act”) challenging the award of the Arbitration dated 26.11.2008. While the Third Respondent before the Arbitrator ahs filed O.P NO.426 of 2006, Respondents 1 and 2 have filed O.P. No.121 of 2010. 2. For the sake of convenience, the parties are referred to as per their rank before the Arbitrator. 3. 1. It is based on a Hire Purchase Agreement entered between the claimant and the First Respondent for purchase of a second hand truck TATA LPT 1997 Model bearing registration No. NL-01-A-5940 by obtaining finance to the tune of Rs. 4,50,000/- under an agreement dated 22.9.2000, for which Respondents 2 and 3 stood as guarantors, the claimant had claimed an amount of Rs. 7,04,881/- with interest at the rate of 36% per annum and initiated Arbitration proceedings. 3.2 It is stated that when the First Respondent was unable to repay the amount, he has surrendered the vehicle before the claimant within one year and at the request of the claimant, who is stated to have introduced one Ahmed Koya, a Novation Agreement was entered between the First Respondent and the said Ahmed Koya and the said deed was stated to have been handed over to the claimant after obtaining signatures of the said Ahmed Koya and the First Respondent and therefore, according to the Respondents by virtue of the Novation Agreemetn, the original Hire Purchase Agreement dated 22.9.2000 stood terminated and the entire arbitration is without jurisdiction. 3.3 It is stated that thereafter the claimant has sold the vehicle for an amount of Rs. 1,50,000/- and according to the Respondent, the sale was effected without finding out the correct value. It is the case of the Respondents that the claimant has not accounted for the amounts paid by the First Respondent towards installments and the sale has been effected for a meagre amount, which, according to the Respondents, is a bias. 3.4 Before the Arbitrator, the claimant has examined one witness and marked 20 documents, while on the side of the Respondents, one witness was examined and four documents were marked. 3.5. The Arbitrator has passed an award on 26.11.2008 allowing the claim of the claimant, by directing the Respondents to jointly and severally pay an amount of Rs. 3.4 Before the Arbitrator, the claimant has examined one witness and marked 20 documents, while on the side of the Respondents, one witness was examined and four documents were marked. 3.5. The Arbitrator has passed an award on 26.11.2008 allowing the claim of the claimant, by directing the Respondents to jointly and severally pay an amount of Rs. 5,54,881/- with interest at the rate of 9% per annum from the date of filing of the claim, till the date of realization, apart from ordering arbitration expenses and costs. It is against the said award, the present Original Petitions are filed by the respective Respondents. 3.6 The award is challenged by the Respondent on various grounds, including that the same has been passed on mere surmises; that the legal Principle of Novation has been ignored; that the claimant has made an unlawful claim with mala fide intention and the Valuation Certificate itself has been obtained by fraud for selling the vehicle for a very low amount; and that the award is one sided. 4.1. It is the contention of the learned Counsel for the Respondents that when once the First Respondent has paid six installments and thereafter a new contract was entered with Ahmed Koya, the original Hire Purchase Agreement comes to an end and therefore, there is no Hire Purchase Agreement in existence and hence, the award is bad in law. 4.2. It is the further case of the Respondents that during the pendency of the Arbitration, the claimant has sold the vehicle which is stated to be valuing Rs. 5,75,000/-at a low price of Rs. 1,50,000/- and therefore, it is not a fair value and in spite of the same, the Arbitrator has directed the payment of the amount of Rs. 5,54,881/- with interest at the rate of 9% per annum and it is their contention that no sale has in fact taken place. 4.3. The learned Counsel for the Respondents to substantiate their contention about the first legal point about novation would rely upon a letter dated 15.11.2002, marked as Ex.C5, to show that by conduct the claimant has accepted the novation and formation of new contract and in fact, the contract has been concluded by the conduct of the parties and signature was only a formality. In this regard, they would rely upon the judgment in Aloka Base v. Parmatma Devi and others, 2008 (6) CTC 509 (SC):, to show that by the conduct of the claimant in not raising objection to the decision taken for the purpose of entering into a new contract, a new contract is deemed to have been entered. 4.4. The Novation Deed does not contain any Arbitration clause and therefore, according to the learned Counsel for the Respondents, the Arbitrator should have rejected the claim of the claimant and in this regard, they would rely upon the judgment in Sundaram Finance Limited v. State of kerala and another, 1966 (2) SCR 823. 4.5. As far as the sale effected by the claimant is concerned, it is their submission that when the valuation was obtained on 26.7.2003, on the same day the sale was effected and there was no intimation to the Respondents about the sale and no paper publication has been effected and the name of the purchaser has also not been disclosed. Therefore, according to the learned Counsel for the Respondent, the sale should be treated as sham and nominal. 4.6. It is their submission that the claimant has not filed any statement of accounts, but has claimed additional finance charges. 5.1. On the other hand, it is the contention of Mr. K. Rajasekaran, learned Counsel for the claimant that the Arbitrator has analyzed the entire issue and on fact has given a decision and under Section 34 of the Act, there cannot be reappraisal of the evidence by this Court. 5.2. It is his submission that there was no new contract entered at all and there was no novation. The preparatory talk entered cannot be stated to be a concluded contract and it is stated that the vehicle has never been transferred to the said Ahmed Koya. To substantiate his contention, he would rely upon the judgment in Lata Construction and others v. Dr Rameshchandra Ramniklal Shah and another, 2000 (1) SCC 586 . 5.3. He would also rely upon the judgment in United Bank of India v. Ramadas Mahadeo Prashad and others, to substantiate that a Memorandum of Understanding cannot be equated to a contract. 5.4. He would also rely upon a judgment of a Division Bench of the Kerala High Court reported in k. Appukuttan Panicker and another v. S.K.R.A.K.R . 5.3. He would also rely upon the judgment in United Bank of India v. Ramadas Mahadeo Prashad and others, to substantiate that a Memorandum of Understanding cannot be equated to a contract. 5.4. He would also rely upon a judgment of a Division Bench of the Kerala High Court reported in k. Appukuttan Panicker and another v. S.K.R.A.K.R . Athappa Chettiar and others, AIR 1966 Ker. 303 , to state that for the purpose of novation there must be an agreement between the parties. 6. I have heard the learned Counsel for the Respondents and the claimant, referred to the award and various documents filed and given my anxious thought to the issue involved in this case. 7. The case of the claimant before the Arbitrator has been that the total finance granted to the Respondents was Rs. 6,52,500/-repayable in 36 installments at the rate of Rs. 18,125/- commencing from 22.9.2000 up to 22.8.2003 and from the seventh installment onwards there has been a default committed by the Respondents and a notice was issued by the claimants demanding a sum of Rs. 5,50,253/- and as on 14.4.2003, there was a balance amount of Rs. 7,04,381/- outstanding and after the claim statement was filed on 17.7.2003, a Memo was filed before the Arbitrator stating that the vehicle was sold after obtaining valuation report for an amount of Rs. 1,50,000/- and thereafter, the claim has been restricted to Rs. 5,54,881/- after adjusting the said amount of sale consideration. 8. On the other hand, it has been the main defence of the Respondents before the Arbitrator that there was no Arbitration Agreement in existence due to the reason that a novation of contract has been entered on 1.7.2002 by the First Respondent with Ahmed Koya at the instance of the claimant and the said Ahmed Koya is stated to have taken over the liabilities of the Respondent by purchasing the vehicle. 9. For the purpose of substantiating the contention about novation, the Respondents have relied upon a letter of the claimant dated 15.11.2002 addressed to the First Respondent, marked as Ex.C5, which reads as follows: “ I am in receipt of your letter dated 12.11.2002. 9. For the purpose of substantiating the contention about novation, the Respondents have relied upon a letter of the claimant dated 15.11.2002 addressed to the First Respondent, marked as Ex.C5, which reads as follows: “ I am in receipt of your letter dated 12.11.2002. During the discussions which was had with your representative and the representative of the proposed hirer at our Calicut branch during June 2002, it had been decided that the proposed hirer will take over the liability under your contract on the existing terms. He had committed to start payment of the EMIs from the 22nd of June 2002 by paying at least 4 EMIs. He had, however, sought time to clear the overdue of Rs. 2,18,875/- in a phased manner and had offered to pay delay charges at 36% for the same. It had been agreed that the assignment of the vehicle in the name of the new hirer will be done by us at the party’s expenses after the initial payments are made by the new hirer. You are aware that none of the above commitments have been met. The documents for the new contracts have been pending with the proposed hirer for a very long time. Almost six months have elapsed from the time the discussions have taken place and the overdue had also increased by six months which the new hirer would need to pay immediately.” (emphasis supplied) In the said letter of the claimant, the Respondents have relied upon the words “it had been decided that the proposed hirer will take over the, liability under your contract on the existing terms”. 10. The letter is in fact a reply to an earlier letter written by the First Respondent dated 12.11.2002, marked as Ex.C6, addressed to a representative of the claimant, which is stated to be in furtherance of a discussion between the representative of the First Respondent – Manoj, who is the Second Respondent and who stood as a guarantor, with Ahmed koya in the Calicut branch of the claimant on 12.7.2002, in the presence of one Sujatha Ramadas, representative of the claimant. A reading of the said letter shows that the said Ahmed Koya and Manoj, the guarantor of the First Respondent, have signed a Novation Deed and after that Ahmed Koya has taken delivery of the vehicle, undertaking to pay the installments regularly. A reading of the said letter shows that the said Ahmed Koya and Manoj, the guarantor of the First Respondent, have signed a Novation Deed and after that Ahmed Koya has taken delivery of the vehicle, undertaking to pay the installments regularly. In the said letter dated 12.11.2002, marked as Ex.c.5 the First Respondent has stated as follows: “As per the decision of the above said discussion I, Mr. Ahammed Koya and his guarantor signed the Novation Deed prepared by your Thrissur Branch. After This, Mr. Koya has taken the vehicle from Mr. Devassy and made it a very good condition by spending about One Lakh Rupees. As per the discussion Mr. Koya should remit the installments on 22nd of every month.” It is in response to that letter, the claimant in the letter dated 15.11.2002, marked as Ex.C5, has used the above said words that “it had been decided that the proposed hirer writ take over the liability under your contract on the existing terms”. 11. However, the Novation Agreement dated 1.7.2002, marked as Ex.R1, entered by the said Ahmed Koya, who has been referred to as a promise, the First Respondent, who has been referred to as Erstwhile Hirer, and one K.K. Aboobachar, who stood as guarantor to Ahmed Koya, to and in favour of the claimant, being the Promise, even though has been signed by the said three individuals, has not been signed by the claimant, who is entitled to the benefit under the Novation Agreeemtn, being the Promisee. 12. Under these circumstances, when the claimant has not signed the Novation Agreement, marked as Ex.R.1, to insist that there has been a formation of new contract, the Respondents totally relied upon the letter dated 15.11.2002, marked as Ex.C5, and that has been considered by the Arbitrator. In fact, the Arbitrator has in detail discussed about the various documents as well as the evidence by analysis and having taken note of the fact that the said Ahmed Koya himself has not been examined as a witness and considering the specific averment made by Respondents 1 and 2 in the Counter Affidavit stating” when the First Respondent contacted Mr. Ahmed Koya, he told that as per the terms of a agreement, the Claimant’s Company has not transferred the vehicle in his name and only after the transfer of the vehicle in his name, he has to start remitting the installments towards the loan amount”, has come to a conclusion, in my view correctly, that in such circumstance the Novation Agreement has not come into existence at all. The Arbitrator has correctly found on evidence that the Novation Agreement, marked as Ex.R.1, loses its entire significance and the conduct of the claimant can never be treated as agreeing to the terms of the novation at all. 13. In fact, more significantly, the Arbitrator has also referred to Exs. C15 an dC17, which are the letters written by the First Respondent on 23.8.2002, 12.3.2003 and 23.3.2003 to the claimant, much after the Novation Agreement dated 1.7.2002, in which Respondents have agreed to pay the dues under hire Purchase Agreement, marked as Ex.C2. The Arbitrator has also referred to the admission of R.W.I. in the cross-examination to the effect that the Novation Agreement was not signed by the claimant and rejected the plea of novation, which, in my considered view, is a factual finding given by the Arbitrator after analysis of evidence and the same can never be treated as either perverse or illegal, so as to enable this Court to interfere under Section 34 of the Act. 14. As far as the next aspect regarding the sale of the vehicle by the claimant for a lesser price, attributing mala fide against the claimant, in fact the valuation report filed by the Respondents dated 16.5.2007, marked as Ex.R.4, which is much after the sale effected, states that the valuation should be around Rs. 5,75,000/- if the vehicle is well maintained and the same has been rightly rejected by the Arbitrator on the ground that the same is vague without noting about the condition of the vehicle. Again, the Arbitrator has found that even in this regard Ahmed Koya is the proper person to tell about the real situation and in as much as the Respondents have not taken any steps to examine him, it can never be said that there has been a mala fide attitude on the part of the claimant. Again, the Arbitrator has found that even in this regard Ahmed Koya is the proper person to tell about the real situation and in as much as the Respondents have not taken any steps to examine him, it can never be said that there has been a mala fide attitude on the part of the claimant. Further, the Arbitrator has found that R.W.1 has admitted in evidence that the vehicle was not in good condition and therefore, the Arbitrator has relied upon Ex. C20, valuation report filed on behalf of the claimant dated 26.7.2003, in which the valuation of the vehicle has been given by a professional value as approximately Rs. 1,25,000/-, by explaining the condition of the vehicle. The said Valuation Certificate, which has been marked as Ex.C.200 and relied upon by the Arbitrator, is as follows: “ Valuation Certificate Dated: 26.7.2003 1. the undersigned valuer, have on this date inspected the vehicle detailed below so as to ascertain its present market value and submit this report to those who are concerned with the same: Inspection Particulars Request for inspection made by: India Cements Capital & Finance Ltd., Thrissur Place of Inspection : Ollur Vehicle Particulars Regn No : NL-OI/A-5940 Dated of Regn : 24.6.97 Regd. Owner : Mr. A. Karthikeyan : Pozhayannur, Thrissur Dist. Chassis No. : 396005 GTQ 204415 Engine No : 69C 621 00983 Make/Model : TATA LPT 2516/TC/97 Type of body : Open Class of vehicle : HGV (National Permit) Gross vehicle weight : 32500 Kg Unladen weight : 9500 Kg Road tax paid : Up to 31.12.02 (Period Expired) Seating Capacity : 3 In all HPA with : India Cement Capital & Fin. Led. Thrissur Odometer reading : 473881 Kms. Comments on the Condition of: Condition of the engine is very weak having no oil pressure and oil leak through head gasket, value cover, crank case etc. Gear box is noisy while shifting and all the gears not engaging properly. All four side suspension leaf sets are having broken leaf springs. All ten Tyres on the vehicle are in worse condition with a broken spare wheel. The battery of the vehicle is fully discharged and all lamps & fittings are rusted. The entire body of the vehicle rusted, cracked at places and in bad condition i.e., Overall condition of the vehicle is very worse. All ten Tyres on the vehicle are in worse condition with a broken spare wheel. The battery of the vehicle is fully discharged and all lamps & fittings are rusted. The entire body of the vehicle rusted, cracked at places and in bad condition i.e., Overall condition of the vehicle is very worse. Approximate Market Value based on the above & on the basis of my professional experience is Rs. 1,25,000/- (Rupees: One lakh twenty five thousand only). I declare that the above report has been submitted on the basis of my own observation and study of the vehicle/asset and without prejudice to any person/circumstances.” There is absolutely no illegality on the part of the Arbitrator in relying upon the said document to come to a conclusion that it is not as if the sale has been effected by the claimant for a lesser price. Therefore, on the said significant factual aspect also, there is no doubt in my mind to accept the contention of the claimant that the arbitration award can never be treated as illegal or perverse, so as to enable this Court to interfere. 15. The law is well settled that while exercising the powers under Section 34 of the Act, this Court cannot sit as an Appellant Court for re-appreciating the evidence. As long as the preponderance of probabilities of evidence has been duly considered by the Arbitrator in a proper manner, the award can never be said to be vitiated by misconduct or by any other factor, warranting interference by this Court. Merely because there can be some other view on appreciation of evidence, the same cannot be a ground for interference by this Court. 16. On the facts of the present case, I have no hesitation to come to a conclusion that the presence of novation agreement or formation of a new contract as per the provisions of Section 62 of the Indian Contract Act has not been proved by the respondents by any acceptable evidence. Merely because in a preliminary discussion the claimant has participated by such letter, which has been marked as Ex.C5, it does not mean that he has subscribed to the Novation Agreement, Ex.R.1. 17. The Arbitrator is the sole judge of the quality as well as the quantity of evidence and the Court under Section 34(2) of the Act cannot substitute its view. 17. The Arbitrator is the sole judge of the quality as well as the quantity of evidence and the Court under Section 34(2) of the Act cannot substitute its view. On the face of it, there is nothing to come to a conclusion that the Arbitration award is against the substantial provisions of law or unreasonable or shocking the conscience of the Court, which was the view of the Supreme Court in Delhi Development Authority v. M/s. R.S. Sharma and Co., New Delhi, wherein the Supreme court has enumerated by referring to various judgments on this issue under Section 34(2) of the Act, as follows: “12. From the above decisions, the following principles emerge: (a) An Award, which is- (i) Contrary to substantive provisions of law; or (ii) The provisions of the Arbitration and Conciliation Act, 1996; or (iii) Against the terms of the respective contract; or (iv) Patently illegal; or (v) Prejudicial to the rights of the parties, is open to interference by the Court Under Section 34(2) of the Act. (b) Award could be set aside if it is contrary to (a) Fundamental policy of Indian law; or (b) The interest of India; or (c) Justice or morality; (c) The Award could also be set aside if it is so unfair and unreasonable that is chocks the conscience of the Court. (d) It is open to the Court to consider whether the Award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.” 18. A Division Bench of the Kerala High Court in K. Appukuttan Panicker and another v. S.K.R.A.K.R. Athappa Chettiar and others, AIR 1966 Ker. A Division Bench of the Kerala High Court in K. Appukuttan Panicker and another v. S.K.R.A.K.R. Athappa Chettiar and others, AIR 1966 Ker. 303 , has crystallized the Principal of Novation as a formation of new contract in which at least there should be one stranger to the original contract and the contract must be entered by mutual consent of all the parties, in the following words; “9…… It would therefore be impossible to come to the conclusion that there has been a novation, which means the extinguishment of the terms of an earlier contract and the creation of another between new persons at least one of whom was a stranger to the original contract and it is essential for the Principal of Novation to apply that there must be the mutual consent of all parties concerned.” By applying the dictum laid down in the above judgment regarding the established Principal of Novation under Section 62 of the Contract Act to the facts of the present case wherein the promises has never become a party to the agreement and there is nothing to presume that the claimant has given consent for such novation, it can never be said that there has been a formation of new contract in the place of the old contract. 19. The Supreme court has again explained the Concept of Novation under Section 62 of the Contract Act in Lata construction and others v. Dr. Rameshchandra Ramniklal Shah and another, 2000(1) SCC 586 ,a s follows: “9. We may, at this state, refer to the provisions of Section 62 of the Indian Contract Act which provides as under: “ 62. If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.” This provision contains the Principle of “Novation” of contract. One of the essential requirements or “Novation”, as contemplated by Section 62, is that there should be complete substitution of a new contract in place of the old. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract which would have the effect of rescinding or completely altering the terms of the original contract, has to be by agreement between the parties. A substituted contract should rescind or alter or extinguish the previous contract. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract which would have the effect of rescinding or completely altering the terms of the original contract, has to be by agreement between the parties. A substituted contract should rescind or alter or extinguish the previous contract. But if the terms of the two contracts are inconsistent and they cannot stand together, the subsequent contract cannot be said to be in substitution of the earlier contract.” That was also the view of the Supreme Court in United Bank of India vs. Ramadas Mahadeo Prashad and others, In this judgment, it was held that mere Memorandum of Understanding does not amount to a novation of contract. 20. Therefore, the principle has been culminated that there must be consent between all parties who are parties to the earlier contract, out of whom one or more should be new persons undertaking to take the responsibility by substituting the new contract to that of the old contract. When that is the basis, if the consent has not been obtained from one of the parties, it can never be said to be a formation of new contract, for it cannot be said that for the formation of a new contract under Section 62 of the Contract Act, the principles underlying the formation of a contract should be dispensed with. 21. The judgment relied upon by the learned Counsel for the respondents in Sundaram Finance Limited v. State of Kerala and another, 1966(2) SCR 828, has not application to the facts of the present case. That was a case where the Supreme Court was confronted with the nature of transactions involved, whether it is a finance transaction or dealership in motor vehicles and in those circumstances, it was held that the customer who remains in possession is the owner and the right of the financier was held to be mere right to seize the vehicle by way of licence to ensure compliance of the terms of the Hire purchase Agreement. 22. 22. An agreement can always be oral, which factum can be proved, provided it is in compliance of Section 10 of the Contract Act, which states that the agreement or contract shall be made by free consent by the parties competent to contract, for a lawful consideration and with a lawful object, and not expressly declared to be void under the provisions of the Contract Act. But the existence of such contract has to be proved whether it is oral or written and therefore, the Judgment relied upon by the learned Counsel for the Respondents rendered by the Supreme Court in Alka Boss v. Parmatma Devi and others, 2008 (6) CTC 509 (SC): is also not helpful to the case of the Respondents, especially when the Arbitrator has discussed elaborately to come to a conclusion that the formation of a new contract has not been proved on fact. In such circumstances, taking into consideration the totality of the situation, I am of the view that there is nothing warranting this Court to interfere with the impugned award passed by the Arbitrator and accordingly, the Original Petitions are dismissed and the award of the Arbitrator stands confirmed. No costs.