Madras High Court

M/S.Shriram City Union Finance ... vs S.Kumarudeen on 20 April, 2022

                                                                   Arb.O.P (Comm.Div.) No.112 of 2022

                                  IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                  Dated : 20.04.2022

                                                      CORAM

                                      THE HON'BLE MR.JUSTICE M.SUNDAR

                                        Arb.O.P (Comm.Div.) No.112 of 2022

                    M/s.Shriram City Union Finance Limited,
                    A Company having its Registered Office at
                    No.123, AngappaNaicken Street,
                    Chennai 600 001; And Branch Office at:
                    No.12, Ramaswamy Street,
                    T.Nagar, Chennai 600 017.
                    rep by its Authorised Signatory,
                    Mr.P.Siva Kumar                                           ...Petitioner
                                                     Vs
                    1. S.Kumarudeen
                       S/o.Sahul Amid.

                    2. K.Amina,
                       W/o.Kumarudeen.                                        …Respondents

                              Arbitration Original Petition filed under Section 11(6) of the
                    Arbitration and Conciliation Act, 1996 to appoint a sole Arbitrator to
                    decide the dispute/claim between the petitioner and the respondent in
                    accordance with Clause 18 of the Loan Agreement dated 28.09.2018.

                              For Petitioner  :      Mr.M.Aravind Subramaniam
                              For Respondents :      Mr.K.Sankaran
                                                     for Mr.M.Syed Ibrahim




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                                                                         Arb.O.P (Comm.Div.) No.112 of 2022

                                                          ORDER

This order will dispose of the captioned 'Arbitration Original

Petition' ['Arb.OP'].

2. This order has to be read in conjunction with and in continuation

of earlier proceedings made in the listing on 17.03.2022, which reads as

follows:

'Captioned 'Arbitration Original Petition' [hereinafter 'Arb OP' for the sake of convenience and clarity] has been presented on 19.01.2022 purportedly under Section 11(6) of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)' [hereinafter 'A and C Act' for the sake of convenience and clarity] with a prayer for appointment of a sole Arbitrator.

2. Mr.M.Aravind Subramaniam, learned counsel for sole petitioner who is before this Court submits that the captioned Arb OP is predicated on clauses 18 and 19 of a 'loan agreement dated 28.09.2018' [hereinafter 'primary contract' for the sake of convenience and clarity].

3. Learned counsel submits that sole petitioner and two respondents are signatories/parties to primary contract. Clauses 18 and 19 of the primary contract read as follows:

'18. Arbitration and Dispute Settlement

a) Without prejudice to the Lender's right available to it under the SARFAESI Act, 2002, all disputes, differences and/or claims, arising out of this https://www.mhc.tn.gov.in/judis

Arb.O.P (Comm.Div.) No.112 of 2022

Agreement, whether during its subsistence or thereafter, shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any other statutory modification or re-enactment for the time being in force and shall be conducted by a sole arbitrator to be appointed by the Lender. The applicable law shall be Indian laws. In the event of incapacity or resignation or death of the sole arbitrator so appointed, the Lender shall be entitled to appoint another arbitrator in place of the earlier arbitrator, and the proceedings shall continue from the stage at which the predecessor had left.

b) 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/ies, in accordance with the Award passed by the Arbitrator.

c) The venue of Arbitration shall be as specified in Schedule 1 hereto and the proceedings shall be conducted in English Language.

d) The Borrower and Guarantor hereby agree and confirm that the Lender shall be permitted to invoke the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and any amendments thereto in order to recover its dues under this Agreement from the Borrower/Guarantor.

19. Jurisdiction and Governing Law Subject to the Arbitration Clause mentioned https://www.mhc.tn.gov.in/judis

Arb.O.P (Comm.Div.) No.112 of 2022

above, this Agreement shall be governed and construed in accordance with the substantive laws of India and the parties hereto submit to the exclusive jurisdiction of the Courts, situate at the place as specified in schedule 1 hereto.'

4. Learned counsel submits that the aforementioned clauses 18 and 19 in primary contract serve as an arbitration agreement between the sole petitioner and two respondents i.e., 'arbitration agreement' within the meaning of Section 2(1)(b) read with Section 7 of A and C Act.

5. Be that as it may, adverting to the case file, learned counsel submits that 'notice invoking arbitration agreement dated 23.03.2021' [hereinafter 'trigger notice' for the sake of convenience and clarity] was issued. Arbitration was triggered and claim petition dated 06.10.2021 was filed by the petitioner but respondents filed a memo dated 27.10.2021 objecting to the nomination of sole Arbitrator, resulting in sole Arbitrator making proceedings dated 24.11.2021 recusing himself, necessitating the presentation of captioned Arb OP in this Court is learned counsel's say. This may well be a case for substitution under Section 15(2) read with Section 14(1)(b) of A and C Act, even if that be so, this Court still has jurisdiction and powers and may be treated as a case of quoting wrong provision of law is learned counsel's say.

6. Be that as it may, prima facie case made out for issue of notice.

7. Issue notice to respondents returnable in a fortnight i..e, returnable by 31.03.2022. Private notice permitted.

8. List on 31.03.2022.

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Arb.O.P (Comm.Div.) No.112 of 2022

3. Thereafter, the captioned Arb.OP progressed vide listings on

31.03.2022 and 11.04.2022 but it is not necessary to extract and reproduce

the proceedings in those listings as they are routine proceedings.

4. Aforementioned 17.03.2022 proceedings shall be read as an

integral part and parcel of this order. Short forms, abbreviations and short

references used in the aforementioned proceedings dated 17.03.2022 will

continue to be used in this order also for the sake of convenience and

clarity.

5. Today, Mr.M.Aravind Subramaniam, learned counsel for sole

petitioner and Mr.K.Sankaran, learned counsel appearing on behalf of

Mr.M.Syed Ibrahim, counsel on record for both the respondents are before

this Court. From the submissions made by learned counsel on both sides,

it comes to light that there is no disputation or contestation about the

existence of arbitration agreement i.e., clauses 18 and 19 in the primary

contract. However, it is made clear that there are

disputations/contestations regarding the claim of the petitioner which has

to be adjudicated upon by the Arbitrator who is to be appointed by this

order.

6. The scope of a legal drill under Section 11 of A and C Act is https://www.mhc.tn.gov.in/judis

Arb.O.P (Comm.Div.) No.112 of 2022

largely confined to examination of existence of arbitration agreement

owing to sub-section (6A) thereat. This principle has been laid down by

Hon'ble Supreme Court in oft-quoted Mayavati Trading case law being

Mayavati Trading Pvt. Ltd vs Pradyuat Deb Burman reported in (2019) 8

SCC 714. In Mayavati Trading case law, relevant paragraph is paragraph

No.10 and the same reads as follows:

'10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgments, as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment in Duro Felguera SA.' (underlining made by this Court to supply emphasis and highlight)

7. Aforementioned paragraph No.10 of Mayavati Trading case law

takes us to Duro Felguera principle i.e., M/s.Duro Felguera S.A. Vs

M/s. Gangavaram Port Limited reported in 2017 (9) SCC 729, relevant

paragraphs in Duro Felguera case are paragraph Nos.47 and 59 and the

same read as follows:

'47. What is the effect of the change introduced by the

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Arb.O.P (Comm.Div.) No.112 of 2022

Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as "the 2015 Amendment") with particular reference to Section 11(6) and the newly added Section 11(6-A) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act") is the crucial question arising for consideration in this case.' ' 59. The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. and Boghara Polyfab. This position continued till the amendment brought about in 2015. After the amendment, all that the Courts need to see is whether an arbitration agreement exists – nothing more, nothing less. The legislative policy and purpose is essentially to minimize the Courts intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected.'

8. Be that as it may, both learned counsel submit that the possibility

of settlement is being explored. This order will not impede settlement talks

owing to Section 30 of A and C act.

9. In the light of the narrative thus far, Hon'ble Mr.Justice

G.Rajasuria (Retd.,), former Hon'ble Judge of this Court, residing at

No.31, III Cross, Brindavanam, Puducherry (Mob: 94450 00864) is

appointed as sole Arbitrator. Hon'ble sole Arbitrator is requested to enter

upon reference, adjudicate the arbitrable disputes that have arisen between

the petitioner and respondent qua primary contract i.e., loan agreement

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Arb.O.P (Comm.Div.) No.112 of 2022

dated 28.09.2018 by holding sittings in 'Madras High Court Arbitration

and Conciliation Centre under the aegis of this Court' (MHCAC) in

accordance with Madras High Court Arbitration Proceedings Rules 2017

and fee of the Hon'ble Arbitrator shall be in accordance with the Madras