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Madhya Pradesh High Court
Five Star Business Finance Ltd Through ... vs Jeeran Bi on 16 January, 2026
NEUTRAL CITATION NO. 2026:MPHC-IND:1609
1 AA-205-2025
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE PAVAN KUMAR DWIVEDI
ON THE 16th OF JANUARY, 2026
ARBITRATION APPEAL No. 205 of 2025
FIVE STAR BUSINESS FINANCE LTD THROUGH AMIT
SHRIVASTAVA
Versus
JEERAN BI AND OTHERS
Appearance:
Shri Surendra Kumar Gupta, learned counsel for the appellant.
Shri Manish Kumar Vijaywargiya, learned counsel for respondent
No.1.
ORDER
Heard on I.A. No.10071 of 2025, which is an application for
condonation of delay.
There is a delay of 76 days in filing the appeal.
Learned counsel for the appellant submits that the delay in filing the
present appeal was caused because the head office / registered office of the
appellant company is situated at Chennai. After the order came to the
knowledge of the appellant, certified copy was obtained and the local office
at Bhopal contacted the head office / registered office for permission to file
the appeal.
Considering the reasons mentioned in the application, I.A. No.10071
of 2025 is hereby allowed. The delay in filing the present appeal is
condoned.
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2. The present appeal has been filed by the appellant under Section 37
of the Arbitration and Conciliation Act, 1996 being aggrieved by the order
dated 12.04.2025 passed in an execution petition filed under Section 36 of
the Arbitration and Conciliation Act read with Order XXI Rule 11 of the
Code of Civil Procedure, 1908.
3. The facts of the case are that the appellant is a Public Limited Non-
Banking Financial Company incorporated under the provisions of the
Companies Act, 1956 and regulated by the Reserve Bank of India. The
appellant is engaged in the business of providing financial facilities in the
form of loans secured by mortgage.
4. The respondents approached the branch office of the appellant for a
finance facility against the property proposed to be mortgaged. Accordingly,
a loan agreement was executed on 18.11.2020 pursuant to which a loan of
Rs.2,25,000/- was sanctioned and disbursed, repayable in EMIs together with
interest at the rate of Rs.24.54.% per annum. The loan agreement contained a
dispute resolution clause. Upon default by the respondents in repaying the
loan in terms of the loan agreement, the appellant invoked the arbitration
clause and opted for institutional arbitration with the Council for Kovise
Foundation Conflict Resolution International (for short "KFCRI") for
appointment of sole arbitrator.
4.1 The said institution after following the established procedure,
appointed one Shri S.R. Periyasammy, Advocate vide letter dated 31.05.2023
as the sole arbitrator for adjudicating the dispute between the appellant and
the respondents.
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4.2 Despite granting ample opportunities to the respondents to
participate in the arbitration proceedings by issuing registered notices, they
failed to appear before the learned arbitrator. Neither did they raise any
objections on the merits of the issue nor did they raise any objection to the
appointment of the arbitrator nominated by KFCRI. Consequently, the
learned arbitrator passed an ex parte award dated 21.09.2023 directing
repayment of an amount of Rs.2,69,047.31/- along with interest at the rate of
24.54% per annum from 07.03.2023 in favour of the appellant.
4.3 Even after the passing of the said award, the respondents failed to
make payment. Accordingly, after the expiry of the period prescribed for
challenging the award, the appellant filed an execution application under
Section 36 of the Arbitration and Conciliation Act, 1996 read with Order
XXI Rule 11 of the Code of Civil Procedure, 1908 before the learned II
Additional District Judge, Biaora, District Rajgarh, which was registered as
EX AB 6/2024.
4.4 The said Court initially issued notices to the respondents in the
execution proceedings, however, the respondents failed to appear therein.
Despite the same, the executing Court by referring to various judgments of
the High Court and even of the Hon'ble Supreme Court, suo motu dismissed
the execution application by the impugned order passed on 12.04.2025
holding that the arbitrator had been appointed unilaterally and that the award
passed by the sole arbitrator was invalid due to lack of inherent jurisdiction.
Consequently, the award passed by the sole arbitrator was held to be
unenforceable. Being aggrieved by the said order passed by the executing
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Court, the present appeal has been filed.
5. Learned counsel while arguing on the question of sustainability of
the impugned order submits that the executing Court could not have suo
motu annulled the arbitral award when no party to the arbitration agreement
had challenged the same on the ground of ineligibility of the arbitrator in
terms of Section 12(5) of the Arbitration and Conciliation Act, 1996.
5.1 He further submits that an award passed in arbitration proceedings
can be set aside only by way of an application under Section 34 of the
Arbitration and Conciliation Act, 1996.
5.2 In the present case, neither the appointment of the arbitrator nor
the arbitral award on merits was challenged by the respondents. Therefore,
the execution proceedings could not have been dismissed suo motu by the
executing Court. In support of his submissions, learned counsel has placed
reliance on a Division Bench order of this Court dated 05.12.2024 passed in
a bunch of appeals including AA No.131 of 2024 in the case of Akme
Fintrade (India) Ltd. vs. Seema Jain and Others and connected matters.
5.3 Apart from the aforesaid submissions, learned counsel for the
appellant also placed reliance on an order passed by the High Court of
Judicature at Madras in the case of M/s Sundaram Finance Limited vs. S.M.
Thangaraj and Others in CRP No.5197/2024.
5.4 Learned counsel for the appellant further submitted as a general
proposition of law, that an executing Court cannot go behind the decree
unless it is shown that the decree was passed by Court inherently lacking
jurisdiction and is therefore a nullity. In support of this proposition, he placed
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reliance on the judgments of the Hon'ble Apex Court in the case of Vasudev
Dhanjibhai Modi vs. Rajabhai Abdul Rehman and Others i n (1970) 1 SCC
670; ONGC Limited vs. M/s Modern Construction and Company in (2014) 1
SCC 648 and in the case of Shivshankar Gurgar vs. Dilip in (2014) 2 SCC
5.5 Learned counsel further submitted that once an arbitral award is
passed, it becomes final and binding in terms of Section 35 of the Arbitration
and Conciliation Act, 1996 and that the scope of judicial interference is
limited and can be exercised only in proceedings instituted under Section 34
of the said Act. In support of this contention, reliance was placed on the
judgment of the Hon'ble Apex Court in the case of Fuerst Day Lawson Ltd.
vs. Jindal Exports Limited in (2011) 8 SCC 333 .
6. On the other hand, learned counsel for the respondent(s) supported
the impugned order by placing reliance on the findings recorded by the
executing Court. He submitted that the executing Court after considering
various judgments of the Hon'ble Apex Court and different High Courts has
held that an arbitrator appointed without the consent of the other party lacks
jurisdiction and consequently, an award passed by such arbitrator is not
binding.
6.1 It was further submitted that, in the present case, no consent was
obtained from the respondents and the award was passed in an ex parte
manner. Therefore, the said award is not binding and the order passed by the
executing Court calls for no interference.
7. Heard learned counsel for the parties and perused the record.
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8. A perusal of the impugned order would show that the executing
Court dismissed the execution proceedings primarily on the grounds that the
arbitration proceedings were conducted ex parte and that the arbitrator was
appointed unilaterally thereby holding that the arbitral award was not
enforceable. However, while arriving at this conclusion, the executing Court
remained oblivious to the express provisions of the Arbitration and
Conciliation Act, 1996. Section 12(5) of the said Act provides that certain
persons are ineligible to be appointed as arbitrators; however, the
proviso thereto permits waiver of the applicability of the said sub-section by
an agreement between the parties.
8.1 In the present case, the respondents did not challenge the
appointment of the arbitrator. The arbitrator issued repeated notices to
respondents; however, they failed to respond to the same. Consequently, the
arbitrator proceeded to pass an ex parte award. Once, such award is passed, it
attains finality and becomes binding on the parties and persons claiming
under them in terms of Section 35 of the Act of 1996. The only remedy
available against an arbitral award is under Section 34 of the Act of 1996.
Section 34 provides that recourse to a Court against an arbitral award may be
made only by an application for setting aside such award in accordance with
sub-sections (2) and (3) thereof. Thus, an arbitral award can be challenged
only by way of an application under Section 34 of the Act of 1996 and
strictly on the grounds enumerated therein.
8.2 In the present case, the respondents never challenged the arbitral
award by filing an application under Section 34 of the Act of 1996. As such,
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the award has attained finality and is binding upon the respondents.
9. The Hon'ble Apex Court while considering the issue as to whether
an executing Court can go behind the decree has held in Vasudev Dhanjibhai
Modi (Supra) that an executing Court cannot go behind the decree unless it is
shown that the decree was passed by a Court inherently lacking jurisdiction
and is, therefore, a nullity.
10. As regards the finding of the executing Court, it has observed that
the award under execution specifically mentions that the company in whose
favour the award was passed had appointed the sole arbitrator. However, the
award does not mention anywhere that the consent of the respondents was
obtained for such appointment. On this basis, the impugned order has been
passed.
10.1 This by itself cannot be a ground for refusing execution as the
nomination of a person to act as sole arbitrator cannot be held to be illegal
ipso facto in the absence of any objection to such appointment.
10.2 In fact, the reliance placed by the executing Court on the
judgment of the Hon'ble Apex Court in the case of Dharma Prathisthanam
vs. Madhok Construction (P) Ltd. in (2005) 9 SCC 686 is misplaced. The
said case was decided on an entirely different set of facts and law. In that
case, the arbitration proceedings were conducted under the Arbitration Act,
1940 and after the sole arbitrator passed the award, an application under
Sections 14 and 17 of the said (now repealed) Act was filed for making the
award a rule of the Court.
10.3 Significantly, those proceedings were not execution proceedings.
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In that factual and legal context, the Hon'ble Apex Court held that a unilateral
appointment or reference to arbitrator was impermissible, particularly
because the respondents therein had raised objection to the appointment of
the arbitrator.
10.4 In the present case, however, not only has the award been passed
under the provisions of the Arbitration and Conciliation Act, 1996 but there
has also been no objection whatsoever raised by the respondents at any stage
to the appointment of the arbitrator.
11. Similarly, the reliance placed by the executing Court on the
judgment of the Hon'ble Apex Court in the case of Bharat Broadband
Network Ltd vs. United Telecoms Ltd. in (2019) 5 SCC 755 , is also
misplaced, as the facts of the said case were entirely different.
11.1 In that case, Bharat Broadband Network Ltd. (BBNL) had itself
appointed a person as the sole arbitrator. Subsequently, in view of the
declaration of law by the Hon'ble Supreme Court in the case of TRF Ltd. vs.
Energo Engineering Projects Ltd. in (2017) 8 SCC 377 moved an application
before the arbitrator for his withdrawal from the proceedings so as to enable
the parties to approach the High Court for appointment of an arbitrator.
However, the sole arbitrator rejected the application filed by the very party
that had nominated him.
11.2 The matter thereafter travelled to the Hon'ble Apex Court, which
passed orders in the aforesaid factual context. Notably, in that case, no award
had been passed and there was a specific objection to the continuation of the
arbitrator.
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11.3 In the present case, no such circumstances existed prior to the
passing of the final award and even during the execution proceedings, no
specific objection has been raised by the respondents to the appointment of
the arbitrator.
12. Similarly, in the case of Perkins Eastman Architects DPC and
Another vs. HSCC (India) Ltd. reported in (2020) 20 SCC 760 , the issue
before the Hon'ble Apex Court pertained to the appointment of an arbitrator.
An application was filed before the Hon'ble Apex Court under Section 11(6)
read with Section 11(12)(a) of the Arbitration and Conciliation Act, 1996.
12.1 Thus, the facts of the said case are also entirely different. In none
of the above-mentioned three cases was the issue of execution of an arbitral
award involved.
12.2 A bare reading of the award (Annexure A-2) would show at the
very outset, that the sole arbitrator is not an employee of the award holder.
The award itself records that the sole arbitrator Shri S.R. Periyasammy is an
Advocate practising in Chennai.
12.3 One significant factor in the present case is that it was not the
award holder who nominated the sole arbitrator. Rather, in terms of the
arbitration clause contained in the agreement, the award holder filed an
application before Kovise Foundation Conflict Resolution International
(KFCRI) for appointment of sole arbitrator. On such request, the said
institution nominated the person to act as the sole arbitrator.
12.4 It is thus clear that the sole arbitrator was not nominated by
interested party nor was he connected in any manner with either of the
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parties. In fact, in the present case, the appointment was made by an
independent institution.
12.5 For this reason as well, the judgments of the Hon'ble Apex Court
referred to herein above are not applicable and the reasoning adopted by the
executing Court is unsustainable.
13. In the present case, inherent lack of jurisdiction could have been
established by the respondents only by showing that the arbitrator was
ineligible to act as such under Section 12 of the Arbitration and Conciliation
Act, 1996. No such plea was ever raised by the respondents. However, the
executing Court suo motu held that the arbitrator lacked jurisdiction solely
on the ground that the appointment was unilateral, which by itself does not
constitute a ground to infer inherent lack of jurisdiction.
14. In any event, the said issue already stands settled by a Division
Bench of this Court in the case of Akme Fintrade (India) Ltd. (Supra) ,
wherein it has been held in paras 4 and 5 as under :
"4. It is a settled law that Executing Court cannot go behind the
award or decree to modify or declare it void. The role of the
Executing Court is only to execute the award or decree. The
grounds available under Section 34 of the Act of 1996 are not
available to the Executing Court to declare any award void or set
aside. As per Section 35 of the Act of 1996 the arbitral award is
final and binding on the parties. Section 36(1) of the Act of
1996 says that where the time for making an application to set
aside the award under Section 34 has expired, the award shall be
enforceable.
5. Learned counsel appearing for respondents also submits that no
such objection was filed before Executing Court that award is not
executable and the Executing Court has suo moto passed an order
dismissing the execution proceeding. We are surprised and
shocked that how the impugned order has been passed declaring
the award void by dismissing the application for execution."
15. In the considered view of this Court, the executing Court
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committed a grave error of law in suo motu rejecting the execution
application(s). Accordingly, the impugned order dated 12.04.2025 is hereby
set aside and the matter is restored to the file of the executing Court for
passing appropriate orders in accordance with law.
16. With the aforesaid observations, the present appeal stands disposed
of.
Certified copy as per rules.
(PAVAN KUMAR DWIVEDI)
JUDGE
Anushree
