Madras High Court
M/S.Topaz Promoters vs Vijay R. Vakaharia on 5 November, 2025
Author: N.Anand Venkatesh
Bench: N.Anand Venkatesh
Arbitration Original Petition (Com.Div.) No.392 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 05.11.2025
CORAM
THE HONOURABLE MR.JUSTICE N.ANAND VENKATESH
Arbitration Original Petition (Com.Div.) No.392 of 2025
1.M/s.Topaz Promoters
A registered Partnership Firm,
having office at No.14, Lynwood Lane,
Mahalingapuram, Nungambakkam,
Chennai - 600 034.
represented through its Partner,
Mr.S.Sivakumar
2.M/s.R V & Associates
A registered Partnership Firm,
having office at No.14, Lynwood Lane,
Mahalingapuram, Nungambakkam,
Chennai - 600 034.
represented through its Partner,
Mr.S.Sivakumar .... Petitioners
Vs.
1.Vijay R. Vakaharia
S/o.Late Ramanlal Vakharia
Hindu, Aged about 62 years,
Having office at
No.1, Whites Road, Royapettah,
Chennai - 600 014.
2.Vijay Kumar H.U.F,
represented by its Karta Mr.Vijay R. Vakharia,
Hindu, Aged about 62 years,
Having office at
No.1, Whites Road, Royapettah,
Chennai - 600 014. .... Respondents
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Arbitration Original Petition (Com.Div.) No.392 of 2025
Arbitration Original Petition (Com.Div.) filed under Section
11(6) of the Arbitration and Conciliation Act, 1996, praying to appoint
Mr.Yashod Vardhan, Senior Advocate, High Court, Madras, having
office No.21(8), 7th Main Road, Raja Annamalaipuram, Chennai - 600
028 as Sole Arbitrator in terms of Arbitration Clause in MOU dated
10.01.2024, in terms of Section 11(6) of the Arbitration and Conciliation
Act, 1996, as the nominee arbitrator of the respondent.
For Petitioners : Mr.N.P.Vijay Kumar
For Respondents : Mr.S.K.Srinivasan
*****
ORDER
This petition has been filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996 [for brevity 'the Act'] for
appointment of a Sole Arbitrator in terms of the Memorandum of
Understanding dated 10.01.2024.
2. The case of the petitioners is that the respondents had
approached the petitioners seeking financial assistance. The loan amount
was disbursed to the tune of Rs.4.0069 crores. As a security for the said
loan, the respondents have also pledged their documents. The loan
amount was disbursed in two instalments on 19.09.2018 and 25.03.2019.
3. The respondents failed to repay the amount and as a result,
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Arbitration Original Petition (Com.Div.) No.392 of 2025
there were outstanding dues. Hence, the respondents approached the
petitioners to settle the outstanding dues as a one time settlement. It is
stated that the respondents, at that point of time, have sought release of
the documents given as security. At this juncture, both parties entered
into a Memorandum of Understanding dated 10.01.2024.
4. As per the terms and conditions, the respondents will have to
fulfill the payment obligation and the petitioners also agreed to release
the documents given to them as security.
5. The further case of the petitioners is that the respondents
have failed to make payment as per the Memorandum of Understanding.
The Memorandum of Understanding itself contemplates referring the
dispute to the Sole Arbitrator. Hence, a trigger notice dated 12.11.2024
under Section 21 of the Act was issued by the petitioners by suggesting
the name of a Sole Arbitrator. On receipt of the same, the respondents
gave a reply on 09.12.2024 by denying the claims made by the
petitioners. It is under these circumstances, the present petition came to
be filed before this Court.
6. A common counter affidavit has been filed by respondents.
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Arbitration Original Petition (Com.Div.) No.392 of 2025
The respondents have taken a stand that the Memorandum of
Understanding is a forged and fabricated document and therefore, the
same cannot be relied upon for the purpose of referring the dispute to the
Sole Arbitrator. It is further stated that this document was created on the
connivance between the petitioner and one Mr.Lalit Surana, who is a
Chartered Accountant, only with an intent to cheat and defraud the
respondents. Therefore, apart from denying the liability, the respondents
have also questioned the very Memorandum of Understanding dated
10.01.2024 stating that it is a forged and fabricated document and that the
entire claim is vitiated by fraud. Accordingly, the respondents have
sought for dismissal of this petition.
7. Heard Mr.N.P.Vijay Kumar, learned counsel for petitioners
and Mr.S.K.Srinivasan, learned counsel for respondents.
8. This Court, after hearing the learned counsel appearing on
either side on 27.10.2025, directed learned counsel for petitioners to
produce the original copy of the Memorandum of Understanding dated
10.01.2024 to ascertain the genuineness of the document. Accordingly,
the original Memorandum of Understanding dated 10.01.2024 was placed
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Arbitration Original Petition (Com.Div.) No.392 of 2025
before this Court.
9. Learned counsel for respondents submitted that the Chartered
Accountant had breached his fiduciary capacity and has misled the
respondents and the respondents have never entered into any agreement
with the petitioners and the respondents did not even know the
petitioners. Therefore, learned counsel for respondents reiterated that the
Memorandum of Understanding dated 10.01.2024 is vitiated by fraud and
hence, no orders can be passed under Section 11 of the Act.
10. In the considered view of this Court, simple allegations of
fraud need not foreclose a petition filed under Section 11 of the Act.
However, serious allegations of fraud i.e. fraud as regards the very
agreement itself may require scrutiny on a case to case basis. Useful
reference can be made to the judgment of the Apex Court in Managing
Director, Bihar State Food and Civil Supply Corporation Limited v.
Sanjay Kumar [2025 SCC Online Sc 1604].
11. In view of the above, when a Court exercises its jurisdiction
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Arbitration Original Petition (Com.Div.) No.392 of 2025
under Section 11 of the Act, there is a small window of scrutiny with
regard to considering as to whether the agreement itself has been created
by means of playing fraud. However, a roving enquiry cannot be
conducted in this regard and the Court can only consider the prima facie
materials.
12. After hearing the learned counsel on either side, this Court
wanted to satisfy itself as to whether there was any such Memorandum of
Understanding between the parties and hence, directed learned counsel
for petitioners to produce the original Memorandum of Understanding
dated 10.01.2024. Accordingly, the same has been placed before this
Court.
13. The specific case of the respondents is that signatures were
subscribed in blank papers and the same has been misused by filling up
those papers. That apart there is absolutely no communication between
the petitioners and the respondents.
14. The original Memorandum of Understanding dated
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Arbitration Original Petition (Com.Div.) No.392 of 2025
10.01.2024 does not prima facie reveal that it is forged and fabricated
document. Signatures are found in every page and whether the signatures
were obtained in the blank papers and the matter was thereafter filled up
is an issue, which can be gone into only by the Sole Arbitrator. Hence,
the scrutiny made by this Court does not result in a definite conclusion
that fraud has been played as regards the very agreement itself. More than
this, this Court cannot conduct any roving enquiry while dealing with a
petition under Section 11 of the Act.
15. In the light of the above discussion, this Court will keep this
issue open and it is left open to the Sole Arbitrator to deal with specific
grounds raised by the respondents on its own merits and in accordance
with law.
16. On the materials placed before this Court, this Court finds
that there is a valid agreement between the parties under Section 7 of the
Act and it contains an arbitration clause.
N.ANAND VENKATESH, J.
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Arbitration Original Petition (Com.Div.) No.392 of 2025
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17. In the light of the above discussion, this Court appoints
Mr.P.B.Sampath Kumar, Advocate, No.10, North Boag Road, CB
Narasiman Road, 18th Street, T.Nagar, Chennai - 17 [Mobile No.93810
17455], as the Sole Arbitrator and the Sole Arbitrator is requested to
adjudicate the arbitral disputes that had arisen between the parties and
render arbitral 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 Sole Arbitrator
shall be in accordance with the Madras High Court Arbitration Centre
(MHCAC) (Administrative Cost and Arbitrator's Fees) Rules 2017.
Accordingly, this petition is disposed of.
05.11.2025
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Arbitration Original Petition (Com.Div.) No.392 of 2025
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