Madras High Court

M/S.Shriram City Union Finance ... vs Mr.M.Kommula Srinivas on 9 June, 2022

                                                                          Arb.O.P (Com.Div.) No.50 of 2022


                                    IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                     DATED : 09.06.2022

                                                           CORAM

                                         THE HON'BLE MR. JUSTICE M.SUNDAR

                                               Arb.O.P (Com.Div.) No.50 of 2022

                     M/s.Shriram City Union Finance Limited
                     a Company having its Branch Office at
                     No.12, Ramaswamy Street, T.Nagar,
                     Chennai-600 017.
                     Rep. by its authorised Signator
                     Mr.P.Sivakumar                                                      ... Petitioner

                                                                  Vs.

                     1.           Mr.M.Kommula Srinivas

                     2.           Mrs.Kommula Lalitha Priyateja

                     3.           Mr.Pydiparthy Suresh Babu

                     4.           Mr.Kommula Madhava Rao

                     5.           Mrs.R.Kommula Suryavenkata Pushparatnam

                     6.           Mr.Alladasarat Babu

                     7.           Mrs.Allada Sri Sargni                           ... Respondents




                     1/13


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                                                                                  Arb.O.P (Com.Div.) No.50 of 2022


                                  Arbitration Original Petition filed under Section 11(6) of the
                     Arbitration and Conciliation Act, 1996,
                                  (a) to appoint any fit and competent person as an Arbitrator as per the
                     provisions of the Arbitration and Conciliation Act 1996, so as to adjudicate
                     the claim and the dispute between the petitioner and the respondents under
                     the Loan agreement dated 10.05.2019;
                                  (b) to direct the respondents to pay the cost of the petition;
                                           For Petitioner    :     Mr.R.Umashankar of
                                                                   M/s.Sri and Shankar Associates
                                           For Respondents :       Mr.A.Balamurugan
                                                                   representing Mr.K.Kannan


                                                             ORDER

Read this in conjunction with and in continuation of earlier

proceedings made in the previous listing on 10.02.2022 which reads as

follows:

'In the captioned 'original petition' ['OP'], Mr.R.Umashankar, learned counsel of M/s.Sri and Shankar Associates (Law Firm) on behalf of lone petitioner is before this Court.

2. Learned counsel submits that an arbitration clause between the parties being arbitration agreement within the meaning of Section 2(1)(b) read with Section 7 of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)',

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which shall hereinafter be referred to as 'A and C Act' for the sake of brevity and convenience is in the form of a clause in an 'agreement dated 10.05.2019 [caption Loan Agreement]' which shall hereinafter be referred to as 'said agreement'.

3. Clause 18 of said agreement reads 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 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

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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.'

4. Aforementioned clause 18 of said agreement takes us to Schedule 1 of said agreement and a scanned reproduction of Schedule 1 is as follows:

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5. A perusal of Schedule 1 makes it clear that the place of arbitration i.e., venue/seat is Chennai and Courts in Chennai are jurisdictional Courts. As there is an agreed procedure for appointment of an arbitrator, petitioner issued notice dated 30.09.2021 nominating an arbitrator is learned counsel's say.

6. Nominated arbitrator entered upon reference but thereafter recused himself from the matter in and by proceedings

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dated 16.11.2021 which reads as follows:

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7. As the nominated arbitrator has recused himself, the question as to whether the petitioner should seek substitution by taking recourse to Sections 15 and 14 of A and C Act arises. To

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be noted, the captioned OP has been presented in this Court under Section 11(6) of A and C Act. Learned counsel submits that the petitioner has come before this Court owing to Perkins principle being ratio laid down by Hon'ble Supreme Court in Perkins Eastman Architects DPC and another Vs. HSCC (India) Ltd., reported in 2019 SCC Online SC 1517.

8. Subject to the aforementioned point regarding the provision of law under A and C Act to which recourse should be taken, issue notice to all seven respondents returnable in three weeks i.e., returnable by 03.03.2022. Private notice permitted. Notice through all available electronic modes of services also permitted subject of course to proof being demonstrated.

9. List on 03.03.2022.'

2. Thereafter, the captioned matter was listed on 03.03.2022,

21.03.2022, 23.03.2022, 07.04.2022, 18.04.2022 and 21.04.2022. The

proceedings made in these listings are procedural and it is not necessary to

reproduce the same.

3. Aforementioned 10.02.2022 proceedings shall be read as an

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

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short references used in 10.02.2022 proceedings shall continue to be used in

the instant order also for the sake of convenience and clarity.

4. Today, Mr.A.Balamurugan, learned counsel representing

Mr.K.Kannan, counsel on record for all the seven respondents is before this

Court. Learned counsel submits that the claim of a little over Rs.3.98 Crores

(Rs.3,98,38,334/-) by the petitioner is clearly excessive. This turns on the

merits of the matter and is therefore outside the statutory perimeter of a legal

drill under Section 11 of 'The Arbitration and Conciliation Act, 1996 (Act

No.26 of 1996)' [hereinafter 'A and C Act' for the sake of convenience and

clarity]. To be noted, statutory perimeter of a legal drill qua Section 11 is

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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5. Aforementioned sub-section (6A) came up for consideration before

Hon'ble Supreme Court in oft-quoted judgment in 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 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)

6. Aforementioned Paragraph 10 of Mayavati Trading case law

takes this Court to Duro Felguera case law [Duro Felguera, S.A. versus

Gangavaram Port Limited reported in (2017) 9 SCC 729]. Relevant

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paragraph in Duro Felguera case law are paragraphs 47 and 59 and the

same read as follows:

'47. What is the effects 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. (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.

'

7. The narrative thus far will make it clear that the contestation of the

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learned counsel for respondents is qua merits of lis i.e., merits of arbitrable

disputes. This means that there is no disputation or disagreement about the

existence of Arbitration Agreement i.e., clause 18 of said agreement (loan

agreement dated 10.05.2019). As there is no disputation or disagreement

regarding the existence of Arbitration Agreement, this Court proceeds to

appoint a sole Arbitrator.

8. Hon'ble Mr. Justice V.Bharathidasan (Retd.), Former Judge of this

Court, residing at No.42 (NB) Greenways Road, Chennai - 600 028, Mob:

94443 83139 and 94455 00224, E-mail: [email protected] 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 respondents qua loan agreement dated 10.05.2019. Hon'ble

Arbitrator is requested to hold sittings in the 'Madras High Court Arbitration

and Conciliation Centre under the aegis of this Court' (MHCAC), render an

award as per Madras High Court Arbitration Proceedings Rules 2017 and

fee of the Hon'ble Arbitrator shall be as per Madras High Court Arbitration

Centre (MHCAC) (Administrative Cost and Arbitrator's Fees) Rules 2017.

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