10. Mr. Gupta submits that the agreement is only between two parties i.e.
'lender' being the defendant no.1 and the 'borrower' being the defendant
no.3. Nowhere, in the said agreement, the names of the plaintiffs
appear in any capacity to make them as party to the arbitration
agreement. He submits that merely because the signatures of the
plaintiffs were obtained by the defendant no.1 by perpetrating fraud,
the plaintiffs cannot be said to be 'parties' to the agreement.
11. Mr. Swatarup Banerjee, Learned Counsel representing the defendant
no.1 submits that after detailed verification and credit analysis of the
defendant no.3, the defendant no.1 sanctioned a loan facility to the
defendant no. 3 on 25th July, 2023, which was accepted by all the
parties. The facility agreement was also signed by all the parties
including the plaintiffs. The defendant no.3 was the primary applicants
to the facility agreement and the plaintiffs and others are the co-
applicants of the loan agreement. Through the facility agreement dated
25th July, 2023, the defendant no.1 has extended a credit facility of Rs.
2,00,00,000/- and all the parties have executed the agreement by
affixing digital signatures.
12. Mr. Banerjee submits that the agreement contains arbitration clause
and all the parties to the suit except CIBIL are the parties to the
agreement. He submits that the plaintiffs instead of invoking the
provisions of the arbitration clause in the agreement have filed the suit
before this Court by making CIBIL a party to the suit only to avoid
arbitration.
13. Mr. Banerjee submits that with respect to the claims between the
plaintiffs and the defendants, CIBIL is not a necessary party and the
plaintiffs have not prayed for any relief against CIBIL.
14. Mr. Banerjee submits that the borrowers failed to repay tranches of
credit facilities granted against the invoice dated 31st July, 2023 and
have committed default under the facility agreement due to which the
defendant no.1 recalled the loan and called upon the borrowers to
repay the amount which had fallen due.
15. Mr. Banerjee submits that the defendant no.1 had filed an application
under Section 9 of the Arbitration and Conciliation Act, 1996 for grant
of interim order against the borrowers but in the said application, the
defendant no.3 has filed an affidavit stating that an amount of Rs.
2,00,00,000/- in terms of the invoice dated 31st July, 2023, had
already been paid. Taking into consideration the Hon'ble Court
dismissed the application filed by the defendant no.1. He submits that
from the affidavit of the defendant no.3 itself reveals that an amount of
Rs. 99,44,000/- is still remains unpaid.
16. Mr. Banerjee submits that the allegations of fraud, which has been
stated in the plaint clearly demonstrates that the plaintiffs do not
dispute the agreement per se being invalid or not in existence but
alleges that the plaintiff's digital signatures have been obtained by
fraud. He submits that the validity and existence of the agreement is
not in dispute.
17. Mr. Banerjee submits that as the agreement contains arbitration clause
and the parties are required to be referred to arbitration, thus no
interim order can be passed as prayed for by the plaintiffs.
18. The plaintiffs have filed the suit praying for the following reliefs:
"(a) The said purported document dated 25th July
2023 be adjudged null, void and not binding upon
the plaintiffs;
(b) Alternatively, the purported document dated
25th July, 2023 be adjudged to be voidable and
duly avoided by the plaintiffs;
(c) Decree for delivery up and cancellation of the
purported document dated 25th July, 2023;
(d) Alternatively to prayers (a), (b) and (c) above,
declaration that the purported agreement dated
25th July, 2023 has stood discuarged by accord
and satisfaction;
(e) Perpetual injunction restraining the defendants
from disseminating any information to any third
party that the plaintiffs are alleged defaulters or
from intimating to the defendant no.2 that the
plaintiffs are defaulters;
(f) Mandatory injunction be issued upon the
defendant no.2 to forthwith remove the plaintiffs'
names as defaulters of any loan of the defendant
no.1;
(g) Receiver;
(h) Injunction;
(i) Attachment;
(j) Costs;
(k) Such further and/or other relief or releifs."
19. The document which the plaintiffs pray for declaring as null and void is
the Facility Agreement dated 25th July, 2023. Clause 15 of the said
agreement reads as follows:
"15. GOVERNING LAW, JURISDICTION AND
ARBITRATION
15.1 This Agreement shall be construed in
accordance with the laws of India and subject to
the arbitration clause below, shall be subject to the
exclusive jurisdiction of the competent courts
situated in Kolkata.
15.2 In the event of any dispute of difference
between the parties under this Agreement,
including in relation to the construction or
interpretation of this Agreement or as to the rights,
duties, liabilities of the Parties arising out of this
Agreement, the dispute or difference shall be
resolved through arbitration, which shall be
administered by an institution recognized by the
government of India for dispute resolution, such
institution will appoint the arbitrator for conducting
the arbitration proceedings in accordance with its
rules for conduct of arbitration proceedings under
the Arbitration and Conciliation Act, 1996 as may
be amended from time to time. The arbitration
proceedings shall be conducted preferably through
online means or otherwise through conventional
means in English language. The arbitral award
shall be final and binding on the Parties. The seat
and venue of arbitration (if conducted through
conventional means) shall be at Kolkata.
15.3 The award given by the arbitrator shall
be final and binding on the Parties to this
Agreement. The cost of the arbitration shall be
borne with by the Party/Parties, in accordance
with the award passed by the arbitrator."
20. The contention raised by the plaintiffs that the plaintiffs have not
executed any agreement but the defendant no.3 misused the OTP
provided by the plaintiffs and used the digital signatures of the
plaintiffs in the said agreement without the consent of the plaintiffs.
The defendant no.1 had filed an application under Section 9 of the
Arbitration and Conciliation Act, 1996. In the said proceeding, the
plaintiffs were also made as party respondent. In the affidavit filed by
the defendant no.3 in the said proceeding, it had disclosed documents
showing that the defendant no.3 had deposited the principal amount of
Rs. 2,00,00,000/-. In the said case also, the plaintiffs have taken stand
that the signatures appearing in the said documents were obtained
without the consent of the plaintiffs and the plaintiffs are not the
beneficiaries of the loan amount.
21. In the Sanction letter dated 25th July, 2023, the name of the plaintiffs
is appearing as co-applicant nos. 3, 4 and 5. In the schedule of term
the name of principal borrower is recorded as Vedanta Limited and in
column 14, the details for notice and communication, the names of the
defendant no.3 along with the plaintiffs are also mentioned.
22. Mr. Gupta relied upon the judgment in the case of Vingro Developers
Pvt. Ltd. Vs. Nitya Shree Developers Pvt. Ltd. through its Principal
Officer and Others reported in 2024 SCC OnLine Del 486 and
submitted that the defendant no.3 is the principal borrower and the
plaintiffs were not the beneficiaries of the said loan and the signatures
were not obtained in the document with the consent of the plaintiffs
thus, the plaintiffs cannot be referred to arbitration.
23. Mr. Banerjee relied upon the judgment in the case of Avitel Post
Studioz Limited and Others Vs. HSBC PI Holdings (Mauritius)
Limited reported in (2021) 4 SCC 713 and submits that the only
allegation of fraud which has been raised by the plaintiffs is that the
defendants without the consent of the plaintiffs have obtained digital
signatures in the document. The plaintiffs have not initiated any
criminal case against any of the defendants for committing an offence
for forgery. Mr. Banerjee relied upon the guidelines for usage of digital
signatures in e-Governance wherein in question no.11, it is stated that:
"Q11. Is it possible for someone to use
your Digital Signature without your
knowledge?
It depends upon the how the signer has kept
his private key. If private key is not stored
securely, then it can be misused without the
knowledge of the owner. As per the IT Act, 2000,
the owner of the private key will be held
responsible in the Court of Law for any electronic
transactions undertaken using his/her PKI
credentials (public/private keys)."
24. In the case of Avitel Post Studioz Limited and Others (supra), the
Hon'ble Supreme Court held that:
"24. Chandrachud, J., in a separate
judgment, referred to the judgment in N.
Radhakrishnan and then held :
"40. The above extract from the judgment
in N. Radhakrishnan relies extensively on the
view propounded in Abdul Kadir. The decision
in Abdul Kadir arose under the Arbitration Act,
1940 and was in the context of the provisions
of Section 20. In Abdul Kadir, this Court
emphasised that sub-section (4) of Section 20
of the Arbitration Act, 1940 left a wide
discretion in the court. In contrast, the scheme
of the 1996 Act has made a radical departure
from the position under the erstwhile
enactment. A marked distinction is made in
Section 8 where no option has been left to the
judicial authority but to refer parties to
arbitration. Abdul Kadir explains the position
under the Arbitration Act, 1940. The present
legislation on the subject embodies a
conscious departure which is intended to
strengthen the efficacy of arbitration.
43. Hence, the allegations of criminal
wrongdoing or of statutory violation would not
detract from the jurisdiction of the Arbitral
Tribunal to resolve a dispute arising out of a
civil or contractual relationship on the basis of
the jurisdiction conferred by the arbitration
agreement."
25. Chandrachud, J. then cautioned against
the use of N. Radhakrishnan case as a precedent,
and distinguished it as follows:
"45. The position that emerges both
before and after the decision in N.
Radhakrishnan is that successive decisions of
this Court have given effect to the binding
precept incorporated in Section 8. Once there
is an arbitration agreement between the
parties, a judicial authority before whom an
action is brought covering the subject-matter of
the arbitration agreement is under a positive
obligation to refer parties to arbitration by
enforcing the terms of the contract. There is no
element of discretion left in the court or judicial
authority to obviate the legislative mandate of
compelling parties to seek recourse to
arbitration. The judgment in N.
Radhakrishnan has, however, been utilised
by parties seeking a convenient ruse to avoid
arbitration to raise a defence of fraud:
45.1. First and foremost, it is necessary
to emphasise that the judgment in N.
Radhakrishnan does not subscribe to the
broad proposition that a mere allegation of
fraud is ground enough not to compel parties
to abide by their agreement to refer disputes
to arbitration. More often than not, a bogey of
fraud is set forth if only to plead that the
dispute cannot be arbitrated upon. To allow
such a plea would be a plain misreading of
the judgment in N. Radhakrishnan. As I have
noted earlier, that was a case where the
appellant who had filed an application under
Section 8 faced with a suit on a dispute in
partnership had raised serious issues of
criminal wrongdoing, misappropriation of
funds and malpractice on the part of the
respondent. It was in this background that
this Court accepted the submission of the
defendant that the arbitrator would not be
competent to deal with matters 'which
involved an elaborate production of
evidence to establish the claims relating to
fraud and criminal misappropriation'. Hence,
it is necessary to emphasise that as a matter
of first principle, this Court has not held that a
mere allegation of fraud will exclude
arbitrability. The burden must lie heavily on a
party which avoids compliance with the
obligation assumed by it to submit disputes to
arbitration to establish the dispute is not
arbitrable under the law for the time being in
force. In each such case where an objection on
the ground of fraud and criminal wrongdoing
is raised, it is for the judicial authority to
carefully sift through the materials for the
purpose of determining whether the defence is
merely a pretext to avoid arbitration. It is only
where there is a serious issue of fraud
involving criminal wrongdoing that the
exception to arbitrability carved out in N.
Radhakrishnan may come into existence.
45.2. Allegations of fraud are not alien to
ordinary civil courts. Generations of Judges
have dealt with such allegations in the context
of civil and commercial disputes. If an
allegation of fraud can be adjudicated upon in
the course of a trial before an ordinary civil
court, there is no reason or justification to
exclude such disputes from the ambit and
purview of a claim in arbitration. The parties
who enter into commercial dealings and agree
to a resolution of disputes by an arbitral forum
exercise an option and express a choice of a
preferred mode for the resolution of their
disputes. The parties in choosing arbitration
place priority upon the speed, flexibility and
expertise inherent in arbitral adjudication.
Once parties have agreed to refer disputes to
arbitration, the court must plainly discourage
and discountenance litigative strategies
designed to avoid recourse to arbitration. Any
other approach would seriously place in
uncertainty the institutional efficacy of
arbitration. Such a consequence must be
eschewed."
25. The plaintiffs have only taken the ground of fraud that the defendant
no.3 has misused the OTP provided by the plaintiffs and the said OTP
was used for digital signatures of the plaintiffs and the plaintiffs had
never consented for the said signatures. The defendant no.3 is not
denying the agreement. The defendant no.3 has paid an amount of Rs.
2,00,00,000/- during pendency of the application under Section 9 of
the Arbitration and Conciliation Act, 1996. The agreement and other
documents contained digital signatures of the plaintiffs. The stand
taken by the plaintiffs that the defendants have frequently and without
the consent of the plaintiffs obtained the digital signatures of the
plaintiffs and the plaintiffs are not the beneficiaries of the loan can be
raised before the arbitrator. As regard that the CIBIL is not the party to
the agreement but the plaintiffs have made the CIBIL as the defendant
no.2 in the present suit, this Court finds that the only claim made by
the plaintiffs against the CIBIL is for removing the name of the plaintiffs
as defaulters of any loan of the defendant no. 1. If the plaintiffs succeed
in the arbitration proceeding, automatically, the plaintiffs can request
the CIBIL for removal of their name as defaulters of the loan of the
defendant no.1. This Court finds that the plea raised by the plaintiffs in
the present suit, the same can be agitated before the Arbitrator. This
Court also finds that the plaintiffs have not initiated any criminal
proceeding on the allegation of fraud against the defendants.
26. Considering the above, this Court finds that the disputes raised by the
plaintiffs are duly covered under Clause 15.2 of the Facility Agreement.
Thus the parties to the suit are referred to arbitration for adjudication
of dispute in terms of Clause 15.2 of the Facility Agreement dated 25th
July, 2023.
27. G.A. (Com) No. 2 of 2025 is allowed. G.A. (Com) No. 1 of 2025 along
with C.S. (Com) No. 55 of 2025 are accordingly dismissed.
(Krishna Rao, J.)
