Madras High Court
M/S.Tata Capital Financial ... vs M/S.Aravindhuja Motors Pvt. Ltd on 12 August, 2022
Arb.O.P (Com.Div) No.339 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 12.08.2022
Coram
THE HONOURABLE MR. JUSTICE M.SUNDAR
Arb.O.P (Com.Div) No.339 of 2022
M/s.Tata Capital Financial Services Limited
having its registered office at 12th Floor, Tower A
Peninsula Business Park, Ganpatrao Kadam Marg,
Lower Parel, Mumbai - 400 013.
Having one of its branch office at
TATA Capital Financial Services Limited
1st Floor, Contennial Square, No.6
Dr.Ambedkar Salai, Kodambakkam
Chennai - 600 024 ... Petitioner
vs.
1. M/s.Aravindhuja Motors Pvt. Ltd.,
Represented by its Director
D.Aravind Prabhu
No.17, Shanmuganar Salai
Shanmuga Nagar, Chennai Puranagar
Thiruverkadu, Chennai - 600 077.
2. Mr.D.Aravind Prabhu
3. Mrs.A.Induja ... Respondents
Petitioner filed under Section 11(6) of the Arbitration and
Conciliation Act, 1996 to appoint a sole Arbitrator to adjudicate upon the
differences and disputes between the parties under the said agreement
dated 06.05.2019.
For Petitioner : Mr.M.Arunachalam
*****
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Arb.O.P (Com.Div) No.339 of 2022
ORDER
This order will now dispose of captioned matter.
2. This order has to be read in conjunction with and in continuation
of earlier proceedings made in the previous listings on 29.07.2022, which
reads as follows:
'Proceedings dated 29.07.2022
'Captioned 'Arbitration Original Petition' [hereinafter
'Arb.O.P.' for the sake of convenience and clarity] has been
presented in this Court on 22.06.2022 under Section 11 of 'The
Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)'
[hereinafter referred to as 'A and C Act' for the sake of
convenience, clarity and brevity] with a prayer for appointment
of a sole Arbitrator.
2. Mr.M.Arunachalam, learned counsel for sole
petitioner-company who is before this Court submits that the
captioned Arb.O.P. is predicated on Clause-12 of an agreement
captioned 'Channel Finance Agreement' dated 09.09.2016
[ renewed on 06.05.2019]. This Channel Finance Agreement
shall hereinafter referred to as 'primary contract' for the sake
of convenience.
3. Aforementioned Clause 12 [captioned 'Arbitration'] of
the primary contract reads as follows :
'12. Arbitration
If any dispute, difference or claim arises between any
of the Obligors and the Lender in connection with the
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Arb.O.P (Com.Div) No.339 of 2022
Facility or as to the interpretation, validity,
implementation or effect of the Facility Documents or
as to the rights and liabilities of the parties under the
Facility Documents or alleged breach of the Facility
Documents or anything done or omitted to be done
pursuant to the Facility Documents, the same shall be
settled by arbitration to be held at the place as
mentioned at Serial No.17 of Annexure 1 hereto, in
accordance with the Arbitration and Conciliation Act,
1996, or any statutory amendments thereto and shall
be referred to a sole arbitrator to be appointed by the
Lender. The award of the arbitrator shall be final and
binding on all parties concerned. The arbitration
proceedings shall be in English language. Cost of
arbitration shall be borne by the Obligors.'
4. This Court is of the view that Clause 13 as well as Sl.
Nos.17 and 18 of Annexure I of 'primary contract' are relevant.
Clause 13 of the primary contract and a scanned reproduction
of Sl Nos.17 and 18 of Annexure I are as follows :
'13.Jurisdiction
Subject to Clause 12 above, the Parties hereto agree
that all disputes arising out of and/or in relation to this
Agreement, shall be subject to exclusive jurisdiction of
the courts/tribunals as set out in Serial No.18 of
Annexure 1 hereto. The Lender may, however, in its
absolute discretion commence any legal action or
proceedings arising out of this Agreement in any other
court, tribunal or other appropriate forum and the
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Arb.O.P (Com.Div) No.339 of 2022
Obligors hereby consents to that jurisdiction.'
'Sl.Nos.17 and 18 of Annexure 1':
5.Aforementioned clauses [hereinafter 'arbitration
clause' in singular for the sake of brevity] serves as Arbitration
Agreement between the petitioner and third respondent i.e.,
'Arbitration Agreement' within the meaning of Section 2(1)(b)
read with Section 7 of 'A and C' Act is learned counsel's say. It
is submitted by the learned counsel for petitioner that the
primary contract was for a loan of Rs.2.5 crores and the
primary contract is a Loan-cum-Guarantee Agreement. The
arbitrable dispute in very simple terms is, according to the
petitioner-company, the respondents had committed default in
repayment of loan, to be noted this is not an exhaustive
adumbration of arbitrable disputes.
6. Be that as it may, learned counsel submits that a
communication dated 20.01.2022 was sent to an individual who
has been nominated as an Arbitrator by the petitioner-
company. Learned counsel points out that copies of this
communication have been marked to the respondents. Learned
counsel submits on instructions that the respondents have
received this 20.01.2022 communication on 22.01.2022. It is
submitted that this communication is in accordance with the
agreed procedure qua arbitration agreement.
7. Learned counsel submits that pursuant to the
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Arb.O.P (Com.Div) No.339 of 2022
aforementioned notice, the Arbitrator nominated by the
petitioner-company entered upon reference but on objection
being raised by the respondents, the learned Arbitrator recused
himself in and by proceedings dated 28.05.2022. This has
necessitated the presentation of captioned Arb.O.P. in this
Court is the learned counsel's say. Learned counsel submits
that even if the captioned Arb.O.P. is to be construed as a
prayer for substitution of the Arbitrator under Section 15(2) of
'A and C Act', the language in which Section 15(2) is couched
makes it clear that the rules that were applicable originally for
appointment of Arbitrator who is being replaced will have to be
applied and therefore, the captioned Arb.O.P. has been
presented under Section 11(6) of A and C Act.
8. Prima facie case made out for issue of notice. Issue
notice to the respondents returnable in a fortnight i.e.,
returnable by 12.08.2022. Private notice is permitted.
List on 12.08.2022.'
3. Aforementioned proceedings shall now be read as an integral
part and parcel of this order. This means that the short forms,
abbreviations and short references used in the previous proceedings will
continue to be used in the instant order also for the sake of convenience
and clarity.
4. Adverting to aforementioned proceedings, Mr.M.Arunachalam,
learned counsel for the petitioner-company submits that all three
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Arb.O.P (Com.Div) No.339 of 2022
respondents have since been duly served. To be noted, an 'Affidavit of
Service' ['AOS'] has been filed and names of all three respondents
together with full/complete addresses as in the short and long cause titles
have been shown in the cause list but there is no representation for the
respondents. Names called out aloud thrice but there is no response.
This Court is informed that no counsel has entered appearance on behalf
of three respondents.
5. The aforementioned scenario means that the respondents have
not chosen to come before this Court to dispute the existence of
arbitration agreement i.e., Clause 12 of primary contract or in other
words, Clause 12 of the agreement captioned 'Channel Finance
Agreement' dated 09.09.2016 [ renewed on 06.05.2019].
6. A legal drill under Section 11 shall perambulate within the
statutory perimeter sketched by sub-section (6A) thereat, which reads as
follows:
'(6A) The Supreme Court or, as the case may be, the High
Court, while considering any application under sub-section (4) or
sub-section (5) or sub-section (6), shall, notwithstanding any
judgment, decree or order of any Court, confine to the examination
of the existence of an arbitration agreement.'
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Arb.O.P (Com.Div) No.339 of 2022
7. The aforementioned sub-section (6A) of Section 11 came up for
consideration before Hon'ble Supreme Court in oft-quoted Mayavati
Trading case law [Mayavati Trading Private Limited Vs. Pradyuat Deb
Burman reported in (2019) 8 SCC 714], relevant paragraph in Mayavati
Trading case law 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)
8. Aforementioned paragraph 10 of Mayavati Trading case law
takes this Court to Duro Felguera, S.A case law [Duro Felguera, S.A.
Vs. Gangavaram Port Limited reported in (2017) 9 SCC 729], relevant
paragraphs in Duro Felguera case law are paragraphs 47, 59 and the
same read as follows:
'47. What is the effects of the change introduced by the
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Arb.O.P (Com.Div) No.339 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. (supra) and Boghara Polyfab (supra). 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
Court’s intervention at the stage of appointing the arbitrator
and this intention as incorporated in Section 11 (6A) ought to
be respected. '
9. Two other facets of Section 11 put in place by way of judicial
pronouncements are N.N.Global and Nortel principles. N.N.Global
principle is ratio laid down by Hon'ble Supreme Court in N.N.Global
Mercantile Pvt. Ltd., Vs. Indo Unique Flame Ltd., and others reported
in 2021 SCC Online SC 13 and it turns on arbitration clause being
contained in a contract which is insufficiently stamped/unstamped /not
registered when it is compulsorily registrable. Nortel principle is ratio
laid down by Hon'ble Supreme Court in Bharat Sanchar Nigam Limited
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Arb.O.P (Com.Div) No.339 of 2022
and another Vs. Nortel Networks India Private Limited reported in
(2021) 5 SCC 738 and it turns on a plea of the lis being ex facie barred
by limitation. As the respondents have not chosen to come before this
Court to raise these issues, those questions do not arise in the case on
hand.
10. As regards the appointment of Arbitrator, sub-section (13) of
Section 11 of A and C Act makes it clear that an application for
appointment of Arbitrator shall be disposed of by the Court as
expeditiously as possible and an endeavour shall be made to dispose of
the matter within 60 days from the date of service of notice on the
opposite party. To be noted, sub-section (13) of Section 11 of A and C
Act reads as follows:
'(13) An application made under this section for
appointment of an arbitrator or arbitrators shall be disposed
by the Supreme Court or the High Court or the person or
institution designated by such Court, as the case may be, as
expeditiously as possible and an endeavour shall be made to
dispose of the matter within a period of sixty days from the
date of service of notice on the opposite party. '
(underlining made by this Court for ease of
reference and for highlighting/supplying emphasis)
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Arb.O.P (Com.Div) No.339 of 2022
11. De hors sub-section (13) of Section 11 of A and C Act,
Hon'ble Supreme Court vide order dated 19th May 2022 made in Special
Leave Petition (C) No.5306 of 2022 [Shree Vishnu Constructions Vs.
The Engineer in Chief Military Engineering Service & Ors.]
emphasized the need to dispose of Section 11 applications expeditiously.
Two significant observations of Hon'ble Supreme Court in Vishnu
Constructions case law are as follows:
'..... Therefore, if the arbitrators are not appointed
at the earliest and the applications under Sections 11(5)
and 11(6) of the Arbitration Act are kept pending for a
number of years, it will defeat the object and purpose of
the enactment of the Arbitration Act and it may lose the
significance of an effective Alternative Dispute Resolution
Mechanism. If the Commercial disputes are not resolved
at the earliest, not only it would affect the commercial
relations between the parties but it would also affect
economy of the country. It may affect the ease of doing
business in the country.'
'..... The litigant may lose the faith in the justice
delivery system, which may ultimately affect not only rule
of law but commerce and business in the country.
Therefore, the applications under Sections 11(5) and
11(6) of the Arbitration Act and other applications, either
for substitution and/or change of the Arbitrator have to
be decided and disposed of at the earliest.'
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Arb.O.P (Com.Div) No.339 of 2022
12. To be noted, Hon'ble Supreme Court has also directed the
Registry of the Supreme Court to circulate the aforementioned Vishnu
Constructions order to Registrar General of High Courts. Therefore, this
Court is of the view that it would be pointless to wait for the respondents.
This is more so in the light of the fact that in a Section 11 legal drill, lis
is not decided, dispute is not resolved and only the 'Alternate Dispute
Resolution'' ['ADR'] mechanism is kick started.
13. In this view of the matter, Mr.T.N.Rajagopalan, Advocate with
address for communication at GF-2, Sri Lakshmi Apts., 4/23, Rangiah
Garden Street, Mylapore, Chennai - 600 004, Mob: 98844 59893, E-
mail:[email protected] is appointed as sole Arbitrator.
Learned Arbitrator is requested to enter upon reference qua primary
contract i.e., 'Channel Finance Agreement dated 09.09.2016 [ renewed on
06.05.2019]', adjudicate the arbitrable disputes that have arisen between
the parties by holding sittings in 'Madras High Court Arbitration and
Conciliation Centre under the aegis of this Court' (MHCAC), make an
award in accordance with the Madras High Court Arbitration
Proceedings Rules, 2017 and fee of the learned Arbitrator shall be as per
Madras High Court Arbitration Centre (MHCAC) (Administrative Cost
and Arbitrator's Fees) Rules 2017.
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Arb.O.P (Com.Div) No.339 of 2022
Captioned Arb.OP is disposed of in the aforesaid manner. There
shall be no order as to costs.
12.08.2022
gpa
Speaking/non-speaking
Index : Yes/No
Note: Registry is directed to communicate a copy of this order
forthwith to
1. Mr.T.N.Rajagopalan,
Advocate
GF-2, Sri Lakshmi Apts.,
4/23, Rangiah Garden Street,
Mylapore, Chennai - 600 004,
Mob: 98844 59893,
E-mail:[email protected]
2. The Director
Tamil Nadu Mediation Conciliation Centre
-cum- Ex-Officio Member
Madras High Court, Arbitration Centre
Chennai - 104.
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Arb.O.P (Com.Div) No.339 of 2022
M.SUNDAR.J.,
gpa
Arb.O.P (Com.Div) No.339 of 2022
12.08.2022
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