Beevee Enterprises & Ors vs L & T Finance Limited
2025 Latest Caselaw 2507 Cal/2

Calcutta High Court

Beevee Enterprises & Ors vs L & T Finance Limited on 11 September, 2025

Author: Arindam Mukherjee

Bench: Arindam Mukherjee

  IN THE HIGH COURT AT CALCUTTA
               ORDINARY ORIGINAL CIVIL JURISDICTION
                         ORIGINAL SIDE
Before:
THE HON'BLE JUSTICE ARINDAM MUKHERJEE


                            APOT 208 OF 2025
                           IA NO. GA 1 OF 2025

                      BEEVEE ENTERPRISES & ORS.
                                     VERSUS
                         L & T FINANCE LIMITED


For the Appellants               :    Ms. Kruti Bhavsar (VC),
                                      Mr. Jnanada Prosad Roy,
                                      Mr. Nepesh Majhi.
                                                              ...... Advocates

For the Respondent               : Mr. Paritosh Sinha

Ms. Shrayashee Das, Mr. Rohan Kr. Thakur, ...... Advocate Heard on : 11.09.2025

Judgement On : 11th September, 2025

ARINDAM MUKHERJEE, J,:

1. This is an appeal under Section 37 (2) (b) of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as 'the 1996 Act') arising

out of an order dated 23rd May, 2025 passed by the Learned Arbitral Tribunal granting an order of attachment before judgment under Section

17 of the said Act.

2. The arbitration agreement in the instant case is contained as Clause 8 of

the SME Business Loan Agreement dated 22 nd June, 2024 (hereinafter

referred to as the said "agreement") a copy whereof is annexed at page 15

of the stay application. The arbitration clause (hereinafter referred to as

the "Arbitration agreement") does not provide for any named Arbitrator

but says that "All disputes, differences and/or claims arising out of or in

relation to this Agreement shall be settled by arbitration in accordance

with the provisions of the Arbitration and Conciliation Act, 1996 or any

statutory amendments thereof and the same shall be referred to

arbitration by a sole arbitrator to be nominated/appointed by the

Lender". The lender in the instant case means the respondent.

3. The appellants by referring the arbitration agreement say that the

Arbitrator has been appointed unilaterally by the respondent which is

impermissible in view of the amendment to the 1996 Act brought into

effect in 2015 and the subsequent pronouncements of the Supreme

Court in respect thereof. The Learned Arbitrator was ineligible to act in

view of the ratio laid down in the judgments reported in 2017 (8) SCC

377 [TRF Ltd. v. Energo Engg. Projects Ltd.] and 2020(20) SCC 760

[Perkins Eastman Architects DPC v. HSCC (India) Ltd. & Anr.] The

ratio laid down wherein has been consistently followed even thereafter.

4. On a perusal of grounds contained in the Memorandum of Appeal, it

appears that the appellants have challenged the order impugned mainly

on the grounds that the Arbitrator who had passed the said order was

not validly appointed. Although, there is no direct assertion in any one of

the grounds that the order impugned is without jurisdiction yet on a

conjoint reading of these grounds, the normal corollary is that the order

impugned is without jurisdiction. The appellants, however, in the stay

application have admitted to have received the notice under Section 21 of

the 1996 Act, the Statement of Claim, the Section 17 application, the

evidence on behalf of the respondent and the order impugned which are

either annexed to the stay application or to the Memorandum of Appeal.

The only substantive challenge to the order impugned on merit is that

the learned Arbitrator did not give an opportunity of hearing to the

appellants.

5. At this juncture several recourse were open to the appellants. The

appellants could have filed an application under Section 16 of the 1996

Act to challenge the jurisdiction of the Arbitrator. This course, probably

was not followed as the appellants had to participate in the arbitration

proceedings if the Arbitrator hold in favour of his jurisdiction leaving the

appellants to challenge the award on such ground at the Section 34

stage in the event an award was made and published. It was also open to

the appellants to file an application under Section 11(6) or an application

under Section 14 of the 1996 Act. The appellants without adopting any of the aforesaid course filed the appeal under Section 37 (2) (b) of the

1996 Act. The appellants, however, did not participate in the arbitration

proceedings for which it can be contended that the appellants have

waived their right to challenge.

6. It is apparent from the aforesaid arbitration agreement that the

appointment of an arbitrator has to be exclusively by the Lender

(respondent) and does not provide for any window for the borrower

(appellants) to take part in the appointment procedure. The arbitration

agreement has no named Arbitrator to be appointed from the side of the

respondent (Lender) that gives it absolute authority to appoint an

arbitrator. The appointment, therefore, has to be made by any Principal

Officer of the respondent duly authorized for such purpose. In view of the

provisions of Section 12(5) of the 1996 Act read with the fifth schedule

thereto read in the light of the judgments in TRF (supra) and Perkins

(supra) clearly demonstrate that any Principal Officer of the respondent

company who had appointed the present Arbitrator had become ineligible

to appoint being directly related to a party. The appointment of the

Arbitrator is, therefore, void.

7. Once it is held that the appointment of the Arbitrator is void, all

subsequent proceedings before the Arbitrator is nullity. The order

impugned also suffers from the same invalidity.

8. Posed with this question, the respondent (lender) says that the lender is

willing to go before any Arbitrator to be appointed by this Court upon terminating the mandate of present Arbitrator. The appellants

(borrowers) are also agreeable to go before an Arbitrator that may be

appointed by the Court. The respondent, however, prays for an interim

protection, till the arbitrator who may be appointed enters into reference

particularly in view of the ensuing puja vacation.

9. The respondent says that in the instant case the petitioners had

admittedly availed a loan from the respondent. There has been according

to the respondent a default on the part of the appellants which resulted

in the arbitration proceeding and the filing of the application under

Section 17 of the 1996 Act wherein the order impugned has been passed

being one for attachment before judgment based on the materials placed

on record before Arbitrator. Even if, the mandate of the Arbitrator is

terminated, the materials placed before the Arbitrator is on record before

this Court as annexure to the stay application on considering which an

interim protection can be given to the respondent. The appellants have

deliberately not changed the order on merits to avoid the rigours of the

finding of the Arbitrator after considering the materials on record.

The appeal is, therefore, against an order granting an interim

measure under Section 17 of the 1996 Act. Under Section 17 of the 1996

Act, a party as in the instant case, the respondent applied before the

Arbitrator for an interim measure for securing the amount in dispute in

arbitration. This provision is pari materia to the provisions of Section 9

of the 1996 Act where for the same relief a party has the right to approach the principal Civil Court of Original Jurisdiction. It is also

settled position of law that a respondent can support a decree even

without preferring an appeal under Order 41 Rule 22 of CPC.

10. The respondent says that a sum in excess of Rs. 10,03,656/- is due and

payable by the appellants to the respondent only against defaulted

installments. There is a further claim for future installments since the

loan has been called of. Additional amounts thereto has accrued under

the terms of the agreement. A chart in this regard with a copy to the

appellants is placed before the Court and is taken on record. The

appellant should secure at least a portion thereof and the parties can

agitate their respective claim and counter claim before the newly

appointed Arbitrator.

11. The appellant, however, says that they are not liable to secure any part of

the claim in the facts of the case since the order was without jurisdiction

and in any event the appellants are not in a position to pay any

installment.

12. The respondent says in view of the default and the stand taken by the

appellants that they are not in a position to pay any installment, this

Court being the principal Civil Court applying the provisions of Section 9

of the 1996 Act should direct the appellants not to operate their bank

accounts without leaving a substantial balance.

The Court while exercising jurisdiction under Section 37 and Section 9

are the same. Even if, the order of the arbitrator is held to be without jurisdiction as he did not have the jurisdiction to enter into reference and

pass the order of attachment before judgment under Section 17 of the

1996 Act yet under Section 9 of the 1996 Act, this Court can grant an

interim protection till the parties agitate their respective claim and counter

claim before the Arbitrator.

The provision of Order 41 of CPC allows the Appellate Court to direct

security.

13. Despite pronouncement of the judgments as aforesaid holding the

appointment of the Arbitrator to be void, the arbitration agreement

between the parties in any event remains in subsistence. If the authority

of appointment by the lender gets withdrawn then the Court becomes

entitled to appoint an Arbitrator. This appointment ordinarily takes place

under the provisions of Section 11(b) of the 1996 Act on an application

being made by any of the parties. However, in a case where the Arbitrator

has already been appointed and the Court is invited to decide upon the

mandate of the Arbitrator, the Arbitrator shall be substituted by another

Arbitrator in the event his mandate is terminated. This is done under

Section 14 of the 1996 Act when the Arbitrator is de jure or de facto

unable to perform his functions. The Court under Section 14 can appoint

a substitute Arbitrator without even sending the parties to file a formal

application under Section 11(b) for appointment of an Arbitrator after

terminating the mandate of the Arbitrator already appointed.

14. In the instant case, the parties have agreed to the termination of the

mandate and as such under Section 15, this Court is empowered to

appoint a substitute arbitrator without relegating the parties to file an

application under Section 11 (6) of the 1996 Act for appointment of

arbitrator. This is also more acceptable proposition as the whole object of

the 1996 Act is for a resolution of dispute with minimum interference of

the Court. In any event, this Bench is competent to appoint an arbitrator

under Section 11(6) of the 1996 Act as the delegate of the Hon'ble the

Chief Justice of this Court. In view of the aforesaid, the mandate of the

Arbitrator Mr. Shyam Bihari Sharma stands terminated under the

provisions of Section 14 and 15 of the 1996 Act. Mr. Raj Ratna Sen, a

barrister and an advocate being a member of the Bar Library Club is

appointed as the Sole Arbitrator invoking the provisions of Section 15 of

the 1996 Act in his place and stead to enter into reference afresh and

adjudicate all disputes arising out of the agreement dated 22 nd June,

2024. The arbitration proceedings shall commence de novo and the

Arbitrator shall have to comply with all other requirement under the 1996

Act. The learned Arbitrator so appointed shall be entitled to a lump sum

remuneration Rs.2,000,00/- in view of the ratio laid down in 2024 (4)

SCC 481 [ONGC Ltd. v. Afcons Gunanusa JV.] The remuneration shall

be shared equally by the appellants and the respondent. The Arbitrator

shall be entitled to secretarial assistance which along with all other expenses in conducting the arbitration shall be borne by the parties in

equal share. The venue of the Arbitration shall be at Kolkata.

15. This brings us to the next issue as to whether a Court while exercising

jurisdiction in an appeal under Section 37(2)(b) of the 1996 Act which

arises out of an order under Section 17 of the 1996 Act can pass an order

directing security as an interim measure as prayed for by the respondent.

16. In the instant case the appeal has been preferred under the provisions of

Section 37(2)(b) of the 1996 Act against an interim order passed by the

Arbitrator under the provisions of Section 17(ii)(b) and (d) of the said Act.

The provisions of Section 17(ii)(b) and (d) of the 1996 Act are pari materia

with the provisions of Section 9(ii) (b) and (d) of the said Act. There are

only two striking difference between the said two provisions. Application

under Section 9 of the 1996 Act has to be filed before the Principal Civil

Court of Original Jurisdiction which includes the high Court in exercise of

Ordinary Original Jurisdiction while that under Section 17 of the said Act

has to be filed before the Arbitrator. An application under Section 9 of the

1996 Act can be filed till such time an award is not put into execution

under Section 36 of the said Act while an application under Section 17 of

the said Act can be filed till the Arbitrator does not become functus officio.

Similarly, an appeal under Section 37 lies to a Court authorized by law to

hear appeals from original decree of the Court passing the order. In the

instant case going by the provisions of Section 2(e)(i) of the 1996 Act, the

suit could have been filed before the City Civil Court at Calcutta having both territorial and pecuniary jurisdiction going by the provision of

Sections 9 and 15 of CPC. An appeal from order or decree passed by the

City Civil Court at Calcutta lies to this Court. The appellants have

accepted the jurisdiction of this Court to be the appellate forum which

incidentally is also the forum having jurisdiction to entertain an

application under Section 9 of the 1996 Act having the territorial and

concurrent pecuniary jurisdiction with the City Civil Court at Calcutta

going by the facts of the instant case.

17. An issue as to lack of jurisdiction of a Court has to be taken at the

threshold, as such an issue can even be waived. This is the precise reason

as to why the Appellate or the Revisional Court under Section 21 of the

Code of Civil Procedure, 1908 (in short 'CPC') does not entertain an

objection to jurisdiction being raised for the first time before it.

In the instant case the jurisdiction of the Arbitrator has fallen for

consideration in the instant appeal filed under Section 37(2)(b) of the 1996

Act due to change in law as discussed hereinabove. As discussed above,

the appellants have neither invoked the jurisdiction of this Court under

Section 14 or 15 of the 1996 Act nor have challenged the order of the

Arbitrator on merits.

18. An appeal before a Civil Court in absence of any other procedure laid

down is governed by the provisions of CPC. The power and authority

subscribed to an appellate Court under CPC is very wide as provided under order 41 Rule 24 may determine the case finally where evidence on

record is found to be sufficient.

The Appellate Court under the normal situation going by the provisions

of CPC can do the following depending upon the nature of the order

appealed against:-

i) If the appeal is against a final order disposing of an application

the Appellate Court can-

a) Set aside the order and remand back the matter for hearing.

b) Set aside the order and take up to itself the responsibility to

dispose of the appeal and the application wherefrom the

order under appeal emanates.

c) Modify the order under appeal and can relegate the

outstanding issues to the Court or forum against the order

of which the appeal has arisen or can by modifying the order

dispose of the appeal and the application the order wherein

is assailed in the appeal.

ii) If the appeal arises out of an interim order passed in an

application then the Court can-

a) Set aside the order as a whole and send the parties to the

Court/forum against whose order the appeal arises for final

adjudication.

b) Modify the order and relegate the parties to the Court/forum

against whose order the appeal has been preferred for final

decision on the outstanding issues.

iii) In a case where the final or the interim order is challenged on

the ground of jurisdiction of the Court/forum from the order

whereof the appeal emanates, then the Court can set aside the

order and relegate the parties to proceed before the appropriate

forum. If the appeal is against an interim order, then the

Appellate Court in an appropriate case after considering the

factual aspect of the matter can pass certain order or direction

exercising its inherent power to strike a balance between the

parties till they finally agitate the matter before the Competent

Court/forum. This power has to be, however, examined with

great caution.

19. The applicability of CPC to an arbitration case before the Court is

although not excluded like a proceeding before the Arbitral Tribunal as

provided in Section 19 of the 1996 Act but there remains a doubt as to

which provisions are applicable since the reference by a Bench of the

Hon'ble Supreme Court as in the case reported in 2017(2) SCC 37

[Mahanagar Telephone Nigam Ltd. v. Applied Electronics Ltd.] upon

hearing disagreed with the ratio laid down in 2002 (5) SCC 510 [ITI Ltd.

v. Siemens Public Communications Network Ltd.] wherein it was held

that provisions of CPC are applicable to arbitration proceedings before the Court to a Larger Bench is still pending. This has also cast a doubt about

the view expressed by the Hon'ble Supreme Court in the judgment

reported in 2007(6) SCC 798 [Arvind Constructions Co. (P) Ltd. v.

Kalinga Mining Corporation & Ors.] holding that principle of Order 39

Rule 1 and 2 are applicable where a party is seeking injunction under

Section 9 of the 1996 Act in accordance with the provisions of Specific

Relief Act, 1963. The applicability of the provisions of CPC to arbitration

proceedings before the Court during the pendency of the above reference

again fell for consideration in the judgment reported in 2019 (8) SCC 112

[Pam Developments (P) Ltd. v. State of West Bengal] wherein it has

been laid down that the provisions of CPC will be followed as a guidance

whereas the provisions of the Arbitration Act are essentially to be applied

first and the Court is also to see that the provisions of the Arbitration Act

is not rendered inapplicable. This is more so, as the Arbitration Act is a

self-contained Code but no procedure for hearing of the appeal arising

from orders or awards have laid down in the said Act.

The ratio laid down in Pam Development (supra) has been considered

and appeared even in the judgment reported in 2025(4) SCC 641

[Central Organisation for Railway Electrification v. ECI SPIC SMO

MCML (JV)]. The provisions of CPC are applicable to arbitration

proceeding before Court to the extent as held in Pam Development

(supra).

20. Thus, even though the reference as to applicability of the provisions of

CPC to arbitration proceedings before Court is pending in the reference

but for the ratio laid down in Pam Development (supra) and ECI SPIC

(supra) it can be said that provisions of CPC can be used as a guidance

without rendering the provisions of 1996 Act inapplicable and there is no

inconsistency between the two provisions.

21. This gives rise to an ancillary question as to whether in absence of an

application under Section 9 of the 1996 Act, this Court whether in an

appeal under Section 37(2)(b) of the said Act pass an order directing the

appellant to secure any amount. The answer to this question lies in the

nature of the order appealed against. It has one part which relates to

jurisdiction of the Arbitrator to pass such order, the other part relates to

the merits of the order based on facts of the case. It is correct as discussed

above that ordinarily Court while setting aside the order in appeal on

jurisdiction issue does not pass any further order except in an appropriate

case. The appellants are all either residing or working for gain or carries

on business outside the jurisdiction of this Court. The said agreement

clearly provides in Clause 3.2(d) that the respondent can call upon the

appellants to provide for security to secure the loan. The appellants have

asked for stay of the order impugned. Even if the order is set aside on the

ground of jurisdiction the Court while disposing the appeal impose

condition in exercise of powers under Order 41 of CPC which is not

inconsistent with any of the provisions of 1996 Act or the materials on record. The respondent is a Non-Banking Financial Company which

operates on the basis of the license issued by the Reserve Bank of India

(RBI) under Section 45JA of the Reserve Bank of India Act, 1949. In case

of default of any loan, the respondent is accountable to several statutory

authorities and banks. The Court, therefore, even in the absence of any

application under Section 9 of the 1996 Act can pass necessary direction

to the appellants to furnish security.

22. Applying the provisions of Section 9 of the 1996 Act when the order

under appeal relates to money claim and substantial material are on

record, I am inclined to direct the appellants not to operate the bank

accounts, the details whereof are provided in the order under appeal,

without leaving a balance sum of Rs.2,50,000/- until further orders being

passed by the Arbitral Tribunal by holding that the respondent has been

able to make out a prima facie case and the balance of convenience and

inconvenience is in favour of the respondent.

23. In applying the provisions of Section 9 of the 1996 Act, the rigours of

Order 38 Rule 5 or Order 39 Rule 1 and 2 of CPC will not come in the way

as Section 9 of 1996 Act provides for interim measure, the 1996 Act is a

self-contained Code and that the provisions of the 1996 Act are to be

applied first as held in Pam Development (supra). There is also no

jurisdictional issue as this Court has the competence to hear an

application under Section 9 of the 1996 Act on considering the territorial

jurisdiction and pecuniary limit involved in the case.

24. In the aforesaid facts and circumstances, the appellants and each one of

them are restrained by an order of injunction from operating its bank

accounts, the particulars whereof are provided at Page 11 of the

Memorandum of Appeal without leaving an aggregate balance of Rs.

2,50,000/-. The appellants may choose to keep the said sum of Rs.

2,50,000/- in one single account or in part in different accounts to

aggregate value of which is Rs.2,50,000/- until further orders passed by

the Learned Arbitrator.

25. The appeal and the connected application accordingly stand disposed of.

26. Urgent photostat certified copy of this judgment be supplied to the

parties, if applied for, upon compliance of all requisite formalities.

(ARINDAM MUKHERJEE, J.)

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