Madras High Court
M/S.Cholamandalam Investment ... vs M/S.Aryaa Krishna Automotives ... on 18 August, 2022
Arb.O.P(Com.Div.)No.276 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 18.08.2022
CORAM
THE HONOURABLE Mr.JUSTICE M.SUNDAR
Arb.O.P.(Com.Div.)No.276 of 2022
M/s.Cholamandalam Investment and Finance Company Limited
No.45, Justice Basheer Ahmed Sayeed Building
IInd Floor, 2nd Line Beach, Moore Street
Parrys, Chennai-600 001.
Represented by its Authorised Signatory ... Petitioner
vs.
1. M/s.Aryaa Krishna Automotives Pvt. Ltd..,
D.No.792B/30, Kolagallu
Besides FCI Godown, Bellary
Karnataka - 583 103.
2. Mr.Jayaprakash Naidu G
S/o.G.P.Venkata Naidu
H.No.158, Hospet Road
Bellary, Karnataka - 583 104. ... Respondents
Arbitration Original Petition filed under Sections 11(6)(a) of the
Arbitration and Conciliation Act, 1996 praying to
(a) appoint a sole Arbitrator to adjudicate the dispute arising under
Loan Agreement No.XVFPHOS00003032807 dated 19.06.2019 between
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the petitioner and the respondents as per the Loan Agreement
No.XVFPHOS00003032807 dated 19.06.2019;
For Petitioner : Mr.D.Pradeep Kumar
For Respondents : No Appearance
*****
ORDER
This order will now dispose of the captioned 'Arbitration Original
Petition' [hereinafter 'Arb OP' for the sake of brevity, convenience and
clarity].
2. This order has to be read in conjunction with and in continuation
of earlier proceedings made in the first listing of the captioned Arb OP
before this Court on 04.07.2022 and proceedings of learned Master dated
16.08.2022 wherein and whereby service was completed qua first
respondent. To be noted, service qua second respondent was completed
earlier before this Court.
3. Aforementioned proceedings of this Court dated 04.07.2022 and
proceedings of learned Master dated 16.08.2022 read as follows:
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Proceedings dated 04.07.2022 made by this Court:
'Captioned 'Arbitration Original Petition' [hereinafter
'Arb OP' for the sake of convenience and clarity] has been
presented in this Court on 13.06.2022 with a prayer for
appointment of a sole Arbitrator.
2. Mr.D.Pradeep Kumar, learned counsel on record for
sole petitioner who is before this Court submits that the
captioned Arb OP has been presented under Section 11 of
'The Arbitration and Conciliation Act, 1996 (Act 26 of 1996)'
[hereinafter 'A and C Act' for the sake of brevity, convenience
and clarity] and it is predicated on clause 29 of an
agreement captioned 'Loan Agreement' dated 19.06.2019.
To be noted, the aforementioned agreement dated 19.06.2019
shall hereinafter be referred to as 'primary contract' for the
sake of convenience and clarity.
3. Elaborating on the above, learned counsel submits
that primary contract is a loan agreement wherein the
petitioner which is 'Non-Banking Financial Company'
[hereinafter 'NBFC' for the sake of convenience and clarity]
is a lender, respondents 1 and 2 are borrower and co-
borrower respectively (to be noted, first respondent is a
juristic person i.e., Private Limited Company and second
respondent is a natural person).
4. Learned counsel also draws the attention of this
Court to the aforementioned clause 29 of primary contract
captioned 'ARBITRATION' and clause 30 of primary
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contract captioned 'JURISDICTION' and the same read as
follows:
'29 ARBITRATION: All disputes, differences and/or
claims arising out of this Agreement whether during its
subsistence or there after shall be settled by arbitration in
accordance with the provisions of the Arbitration and
Conciliation Act, 1996 or any statutory amendments thereof
and shall be referred to the Sole Arbitration of an Arbitrator
nominated by the Company. The award given by such
Arbitrator shall be final and binding on all parties to this
Agreement. In the event of an appointed arbitrator dying or
being unable or unwilling to act as arbitrator for any reason,
the Company, on such death of the arbitrator or his inability
or unwillingness to act as arbitrator, shall appoint another
person to act as arbitrator. Such person shall be entitled to
proceed with the reference from the stage left by his
predecessor. The venue of arbitration proceedings shall be
at Chennai or such other place/location/city which the
Company at its discretion may decide from time to time.'
'30. JURISDICTION : This Agreement has been
accepted and executed by the Company at Chennai and all
covenants, terms and conditions hereof including payments
shall be observed and performed at Chennai and Borrower
and Guarantor specifically agree, subject to the arbitration
clause contained herein, that Courts in Chennai alone shall
have exclusive jurisdiction over any matter arising out of or
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concerning this Agreement.'
5. It is submitted by learned counsel for sole petitioner
that the aforementioned clauses read together serve as
Arbitration Agreement between the petitioner and two
respondents i.e., Arbitration Agreement between the parties
within the meaning of Section 2(1)(b) read with Section 7 of A
and C Act. It is submitted that disputes arose i.e., arbitrable
disputes arose between the petitioner and respondents as the
respondents committed default in repayment. This resulted
in the petitioner triggering the arbitration agreement by
issue of a notice dated 15.02.2020. It is further submitted
that an 'Arbitral Tribunal' [hereinafter 'AT' for the sake of
brevity] was constituted i.e., nominated by petitioner-NBFC
but as the respondents raised objections, sole Arbitrator
recused himself in and by proceedings dated 22.04.2022.
This has necessitated the presentation of the captioned Arb
OP in this Court is learned counsel's say.
6. Prima facie case for issue of notice has been made
out.
7. Issue notice to respondents returnable by three
weeks i.e., returnable by 25.07.2022. Private notice
permitted.
8. List on 25.07.2022.'
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Proceedings dated 16.08.2022 made by learned Master :
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4. Aforementioned orders / proceedings have to be read as an
integral part and parcel of this order. This also means that short forms,
short references and abbreviations used in the earlier proceedings will
continue to be used in the instant order also for the sake of convenience
and clarity.
5. Today, Mr.D.Pradeep Kumar, learned counsel on record for sole
petitioner company i.e., NBFC is before this Court. Learned counsel
points out that names together with full/complete addresses of both
respondents as in the short and long cause titles of captioned Arb OP are
duly shown in the cause list.
6. Names of both respondents called out aloud thrice in Court and
adjoining corridors. No response. This Court is informed that the
respondents have not chosen to enter appearance through any counsel.
7. Before proceeding further, this Court deems it appropriate to
make it clear that there are four facets qua a legal drill under Section 11 of
A and C Act. One facet is a codified statutory perimeter and other three
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facets have been put in place by judicial pronouncements. This statutory
facet of a legal drill under Section 11 of A and C Act is vide 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.'
8. Aforementioned sub-section (6A) of Section 11 of A and C Act
came up for consideration before Hon'ble Supreme Court in oft-quoted
Mayavati Trading case law [Mayavati Trading Pvt. Ltd vs Pradyuat Deb
Burman reported in (2019) 8 SCC 714]. To be noted 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
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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)
9. Aforementioned paragraph No.10 of Mayavati Trading case law
takes this Court to Duro Felguera principle i.e., ratio in Duro Felguera
S.A. Vs Gangavaram Port Limited reported in 2017 (9) SCC 729,
relevant paragraphs in Duro Felguera case law are paragraph Nos.47, 59
and the same read as follows:
'47. What is the effect of the change introduced by the
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
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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.'
10. The above means that a legal drill under Section 11 of A and C
Act should perambulate within the statutory perimeter sketched by sub-
section (6A) thereat. In the case on hand, respondents though duly served
and though names together with full/complete addresses as in the short and
long cause titles are duly shown in the cause list, they have not chosen to
come before this Court and dispute the existence of arbitration agreement
between the parties i.e., clauses 29 and 30 of primary contract. Therefore,
there is no impediment for appointment of sole Arbitrator. However, it is
deemed appropriate to mention the other three facets. The other three
facets are N.N.Global principle [N.N.Global Mercantile Pvt. Ltd., Vs.
Indo Unique Flame Ltd., and others reported in 2021 SCC Online SC
13], Nortel principle [Bharat Sanchar Nigam Limited and another Vs.
Nortel Networks India Private Limited reported in (2021) 5 SCC 738]
and NCC Principle [Indian Oil Corporation Limited Vs.NCC Limited
reported in 2022 SCC OnLine SC 896]. To be noted, N.N.Global
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principle pertains to arbitration clause being contained in an agreement
which is unstamped / insufficiently stamped / not registered when it is
compulsorily registrable. Nortel principle turns on the plea of lis being ex
facie barred by limitation. NCC principle turns on very clear and glaring
issues qua lis in contradistinction to debatable, disputable and reasonably
arguable (statable) case. None of these principles arise in the case on hand
as the respondents have not chosen to come before this Court and make
any submission. Therefore, this Court has no difficulty in coming to the
conclusion that there is no impediment in acceding to the prayer in
captioned Arb OP by appointing sole arbitrator. To be noted, this is an
order on merits and it is not a ex parte order. However, it is open to the
respondent/s to raise all / any issue/s before learned Arbitrator if the
respondent/s choose to go before the arbitrator.
11. In the light of the narrative thus far, Ms.Preeti Mohan, learned
Advocate, at No.5, 2nd Floor, 8th Street, R K Salai, Mylapore, Chennai -
600 004, Mobile No.99406 89973, Email ID : [email protected] is
appointed as sole Arbitrator. Learned sole Arbitrator is requested to enter
upon reference, qua primary contract i.e., Loan Agreement dated
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19.06.2019, adjudicate arbitrable disputes that have arisen between the
parties and make an award by holding sittings in the 'Madras High Court
Arbitration Centre under the aegis of this Court' (MHCAC) as per Madras
High Court Arbitration Proceedings Rules 2017 and fee of learned sole
Arbitrator shall be in accordance with the Madras High Court Arbitration
Centre (MHCAC) (Administrative Cost and Arbitrator's Fees) Rules 2017.
12. To be noted, there are 8 other similar Arb OPs on Board today
vide Arb O.P.(Com.Div.)Nos.275, 277 to 283 of 2022. The same learned
Arbitrator is being appointed in all the other Arb OPs. This means that 9
different 'Arbitral Tribunals' ['ATs'] are constituted. In this regard,
adverting to S.No.22 of THE FIFTH SCHEDULE of A and C Act, it is
submitted that it would apply only when the Arbitrator is appointed by one
of the parties or an affiliate of one of the parties and it will not apply to
appointment by the Court. It is made clear that same sole Arbitrator is
appointed in all 9 matters taking into account operational convenience and
also to avoid possible anomalies / conflict in awards in similar matters. To
be noted, this Court is informed that all 9 Arb OPs are similar, between the
same parties, lis are similar and there is practically no difference. This
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Court is informed that the claims qua all 9 Arb OPs put together is in the
region of Rs.66 Lakhs.
13. Captioned Arb OP is disposed of in the aforesaid manner. There
shall be no order as to costs.
18.08.2022
Speaking/Non-speaking order
Index : Yes / No
mk
To
1. Ms.Preeti Mohan, Advocate,
at No.5, 2nd Floor, 8th Street,
R K Salai, Mylapore,
Chennai - 600 004,
Mobile No.99406 89973,
Email ID : [email protected]
2. The Director
Tamil Nadu Mediation and Conciliation
Centre-cum-Ex-Officio Member
Madras High Court Arbitration Centre
Chennai - 104.
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M.SUNDAR, J.,
mk
Arb.O.P(Com.Div.)No.276 of 2022
18.08.2022
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