Madras High Court
M/S.Cholamandalam Investment And ... vs M/S.Swadesh Green Infra Ltd on 4 September, 2025
Author: N.Anand Venkatesh
Bench: N.Anand Venkatesh
2025:MHC:2164
Arbitration Application No.488 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 04.09.2025
CORAM
THE HONOURABLE MR.JUSTICE N.ANAND VENKATESH
Arbitration Application No. 488 of 2025
M/s.Cholamandalam Investment and Finance Company Limited,
'Chola Crest', C 54 & 55, Super B-4
Thiru Vi Ka Industrial Estate,
Guindy, Chennai - 600 032.
Represented by its Authorised Signatory. .... Applicant
Vs.
1. M/s.Swadesh Green Infra Ltd.,
C-201, Nariana Industrial Area Phase - I,
New Delhi- 110 028.
2. Mr.Ravi Gupta
3. Mr.Salil Gupta
4. Ms.Meena Gupta ... Respondents
5. Adhunik Niryat Ispta Limited,
Address:208-210, Sushma Tower D- Block,
Central Market Prashant Vihar Delhi,
New Delhi- 110 085.
6. Bhagat Ram Chunni Lal
7. Dharuv International - 07AEQPG3840J1ZA,
Address: Y8- Block, Loha Mandi, Naraina,
New Delhi - 110 028, Delhi, India.
8. Faiz Iron Trader: 07ANDPM9627R1Z5
Address: G/F E 39/1 New Seelampur Delhi
Shahdara Delhi 110 053, New Delhi - 110 053.
9. Jai Bhole Steel Tubes Private Limited,
1/16
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Arbitration Application No.488 of 2025
Address: 502, Overlock Road Distt Ludhiana
Punjab - 141 003.
10. Overseas Metalhub Private Limited,
Address: Plot AT KH 8392102& 11, Delhi West Delhi,
Delhi - 110 041.
11. Super Star Steels Private Limited,
Address: Jaspal Bangar Road VPO Kanganwal,
Ludhiana Punjab.
12. U V Ispat Private Limited,
Address: Y -223/2 Loha Mandi Naraina,
New Delhi, Delhi - 110 028.
13. Vedanta Electricals Private Limited,
Address: Khasra No.155/360 & 155/361 Industrial Area,
Pooth Khurd North West Delhi - 110 039. .... Garnishees
PRAYER: To pass an order prohibiting the garnishees from
making payment of a sum of Rs.1,71,20,121.97 or any amount to the
respondents or to their men, agents, representatives or to anyone claiming
on respondents behalf and restrain the respondents or their men, agents,
representatives or anyone claiming on respondents behalf from receiving
a sum of Rs.1,71,20,121.97 or any amount from the garnishees and
further direct the garnishees to deposit the sum of Rs.1,71,20,121.97 or
any amount to the credit of the above application.
For Applicant : Mr.D.Pradeep Kumar
For Respondents : Mr.Vishnu Mohan [R1 to R4]
Ms.Nandhini Agarwal [R5]
R9 & R10 [give up]
R7, R8, R11 to R13-set exparte
ORDER
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Arbitration Application No.488 of 2025
This application has been filed under Section 9 of the
Arbitration and Conciliation Act, 1996 [for brevity, hereinafter referred to
as 'the Act'] for prohibiting the garnishees from making the payment of a
sum of Rs.1,71,20,121.97 to the respondent or to their men, agents,
representatives or to anyone claiming on respondents' behalf and restrain
the respondents or their men, agents, representatives or anyone claiming
on respondents' behalf from receiving the sum of Rs.1,71,20,121.97/- or
any amount from the garnishees and further direct the garnishees to
deposit the sum of Rs.1,71,20,121.97/- or any amount to the credit of the
above application.
2. Heard Mr.D.Pradeep Kumar, learned counsel for the
applicant, Mr.Vishnu Mohan, learned counsel for the respondents 1 to 4
and Ms.Nandhini Agarwal, learned counsel for the fifth respondent.
3. The case of the applicant is that they are in the business of
providing financial facilities, invoice discounting etc. The respondents 1
to 4 approached the applicant and sought invoice discounting facility. The
first respondent entered into invoice discounting agreement dated
04.10.2022 and availed the facility for a sum of Rs.3,00,00,000/- on terms
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Arbitration Application No.488 of 2025
and conditions set out in the agreement. The respondents 2 to 4 are the
guarantors. The tenure of the facility was for 12 months and the credit
period was 120 days and the interest rate is 10%. It was agreed that the
respondents will pay penal charges in the event of any default.
4. The first respondent availed the facility and the amount was
disbursed during the period from 28.06.2024 to 30.09.2024. The
respondents defaulted in the repayment of the amount. Hence, the
applicant sent a notice dated 05.02.2025 recalling the facility, but the
respondents did not pay the amount due to the applicant. As on
05.03.2025, the applicant is claiming for a sum of Rs.1,71,20,121.97
under the agreement along with interest.
5. The applicant was in the progress of taking steps to initiate
arbitration proceedings. In the meantime, the applicant has approached
this Court seeking for a garnishee order on the ground that the
respondents 1 to 4 have raised several invoice/bills with the garnishees
and the garnishees are liable to pay several amounts to respondents 1 to 4
and the applicant wants to prohibit the garnishees from making such
payment to the respondents 1 to 4 to the tune of Rs.1,71,20,121.97.
6. A counter affidavit has been filed by the first respondent.
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Arbitration Application No.488 of 2025
The first respondent has taken a stand that the applicant has referred to
the agreement dated 04.10.2022, whose term expired and whereas, the so
called disbursement that was made subsequently in the year 2024 is not
covered by the said agreement and therefore, the very reliance placed
upon by the applicant on the agreement dated 04.10.2022 goes against the
case of the applicant and as a result, the application filed under sections 9
of the Act is not maintainable. The first respondent has taken a further
ground that the applicant has not made out a prima facie case and the
balance of convenience is not in favour of the applicant and if any such
garnishee order is passed, the respondents will be in irreparable hardship
and therefore, the present application does not meet the standards for
passing an interim order under Section 9 of the Act.
7. It is also stated that the trigger notice under Section 21 of the
Act was issued on 11.06.2025 for appointment of an arbitrator. Thus, if at
all the applicant has any right to claim for such interim measure, it can be
done by way of filing an application before the Arbitral Tribunal. Thus,
the respondents have sought for dismissal of this application.
8. The fifth respondent has filed a counter affidavit and taken a
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Arbitration Application No.488 of 2025
stand that no amount is due and payable by the fifth respondent to the
first respondent.
9. This Court has carefully considered the submissions made on
either side and the materials available on record.
10. When the matter came up for hearing on 31.07.2025, this
Court after hearing the counsel for the first respondent passed the
following order:
"Pleadings are complete in this application. The
first respondent/borrower has claimed that this application
is not maintainable for the following reasons:
(a) The period of the contract, namely, Invoice
Discounting Agreement dated 04.10.2022, is only for a
period of 12 months from 04.10.2022 as seen from the
schedule to the said agreement. However, disbursal was
done to the first respondent only in the year 2024, which is
beyond the period stipulated under the Invoice Discounting
Agreement dated 04.10.2022.
(b) The arbitration clause contained in the
Invoice Discounting Agreement dated 04.10.2022 will not
cover the claim made by the applicant in this application,
since the period of 12 months prescribed under the Invoice
Discounting Agreement dated 04.10.2022 has already come
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Arbitration Application No.488 of 2025
to an end.
2. The learned counsel for the applicant seeks
time to get further instructions. Post the matter on
11.08.2025."
11. Pursuant to the above order, the applicant has filed
additional typed set of papers. In the additional typed set of papers, the
applicant has relied upon the amendment to invoice discounting
agreement dated 07.12.2023. As per this agreement, the applicant is
trying to establish that the period of the agreement expires one year from
07.12.2023 and the entire terms and conditions as contained in the
original agreement dated 04.10.2022 was made part and parcel of this
agreement and it is during the subsistence of this agreement, the
disbursement was made to the first respondent from 28.06.2024 to
30.09.2024.
12. The learned counsel appearing on behalf of the respondents
1 to 4 submitted that the period of 12 months of the invoice discounting
agreement dated 04.10.2022 has already come to an end and at the best,
the amendment to invoice discounting agreement dated 07.12.2023 can
only be taken to be a complete replacement or novation of the earlier
agreement or in other words, a new agreement was entered into between
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Arbitration Application No.488 of 2025
the parties and in this agreement, there is no arbitration clause. Therefore,
the arbitration clause that was contained in the earlier agreement cannot
be read into the amendment agreement dated 07.12.2023.
13. In order to substantiate the above submission, the learned
counsel relied upon the judgment of the Apex Court in the case of NBCC
(India) Limited Vs. Zillion Infra projects Private Limited reported in
2024 7 SCC 174 and specific reliance was placed upon paragraph 17 of
the judgmnet, which is extracted hereunder:
"17. It could thus be seen that this Court has held
that when the parties enter into a contract, making a
general reference to another contract, such general
reference would not have the effect of incorporating the
arbitration clause from the referred document into the
contract between the parties. It has been held that the
arbitration clause from another contract can be
incorporated into the contract(where such reference is
made), only by a specific reference to arbitration clause. It
has further been held that where a contract between the
parties provides that the execution or performance of that
contract shall be in terms of another contract(which
contains the terms and conditions relating to performance
and a provision for settlement of disputes by arbitration),
then, the terms of the referred contract in regard to
execution/performance alone will apply, and not the
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Arbitration Application No.488 of 2025
arbitration agreement in the referred contract, unless there
is special reference to the arbitration clause also."
14. In answer to the above submission, the learned counsel for
the applicant submitted that consensus ad-idem between the parties
should be understood from the amendment to the invoice discounting
agreement dated 04.10.2022, which was entered into between the parties
on 07.12.2023. The learned counsel emphasised on clause (4) of the
agreement and for proper appreciation, the same is extracted hereunder:
"4. Other than the replacement of schedule with
the one provided herein below all other terms and
conditions of the Earlier agreement (except for those which
are inconsistent with the amendments/modifications carried
out herein) shall remain in full force/effect and binding
upon the parties, unless otherwise modified in writing by
the parties."
15. The learned counsel submitted that it is not a case where
there was a mere reference to the earlier agreement dated 04.10.2022 and
the parties had specifically agreed that the entire terms and conditions of
the earlier agreement will remain in force/effect and it will be binding
upon the parties in this agreement and what was amended was only the
period of the agreement and the schedule to the agreement and everything
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else remained intact. The learned counsel therefore submitted that the
judgment of the Apex Court that was relied upon by the learned counsel
for the respondents 1 to 4 will not apply to the facts of the present case.
16. On carefully considering the above submissions, it is
necessary for this Court to bestow its attention on the specific terms of
the amendment agreement dated 07.12.2023. In this agreement, there was
a specific mention about the earlier agreement dated 04.10.2022, which
was for a period of 12 months from 04.10.2022. That agreement,
specifically contained an arbitration clause, which is clause No.27 in that
agreement. While understanding the terms of the agreement, the Court
need not trouble itself with the nomenclature given to the agreement and
it is important to carefully understand the consensus ad idem between the
parties. The parties have specifically agreed that except the replacement
of the schedule from the earlier agreement, all other terms and conditions
of the earlier agreement will remain in full force/effect and it will bind
upon the parties. This would only meant that instead of physically
incorporating all those terms and conditions in the amendment agreement,
the parties have agreed to keep all those terms and conditions intact even
in the amendment agreement and they have understood that by virtue of
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this amendment agreement, only the schedule is changed and the tenure
of the agreement is fixed for 12 months from 07.12.2023.
17. In the judgment that was relied upon by the learned counsel
for the respondents 1 to 4, the Apex Court found that there was a mere
reference to an earlier agreement and hence, the Apex Court by relying
upon the earlier judgment in the case of M.R.Engineers & Contractors
(P) Ltd., Vs. Som Datt Builders Ltd reported in 2009 7 SCC 696 came to
a conclusion that such reference to an earlier agreement at the best will
only provide for performance of the contract in terms of that agreement
and the arbitration clause will not be automatically applied unless it is
physically incorporated in the fresh agreement. In the case in hand, the
parties have not merely referred to the earlier agreement but they have
specifically agreed that the entire terms and conditions of the earlier
agreement will remain in full force even in the amendment agreement
dated 07.12.2023. Therefore, the respondents 1 to 4 cannot wriggle out of
this agreement and take a stand that there is no arbitration clause in the
agreement and consequently, the application is not maintainable under
Section 9 of the Act.
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Arbitration Application No.488 of 2025
18. The above preliminary objection taken by the learned
counsel for respondents 1 to 4 is held against the respondents and it is
answered in favour of the applicant. The next issue is as to whether the
garnishee order has to be passed as was sought for by the applicant in this
application.
19. It is not in dispute that the disbursement was made to the
first respondent from 28.06.2024 to 30.09.2024 and as on 05.03.2025, a
total amount of Rs.1,71,20,121.97 was payable under the agreement. The
trigger notice under Section 21 of the Act has been issued on 11.06.2025
and the parties are in the process of appointment of an Arbitrator. In the
meantime, it came to the knowledge of the applicant that certain
payments are going to be made to respondents 1 to 4 by the other
respondents and hence, the applicant has sought for a garnishee order.
20. It is clear from the counter affidavit filed by the fifth
respondent and also submission made by the learned counsel for the
applicant that insofar as the respondents 5 and 6 are concerned, no
amount is payable by them to the respondents 1 to 4. Insofar as the
respondents 9 and 10 are concerned, notice was sent to them and it has
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Arbitration Application No.488 of 2025
been returned and the service has not been effected. Thus, effectively it
must be seen as to whether the payments that have to be made by
respondents 7, 8, 11 to 13 to the respondents 1 to 4 has to be stopped by
this Court considering the claim made by the applicant.
21. While deciding the application under Section 9 of the Act,
the Court must only be satisfied that there is manifest intention to
arbitrate on the side of the applicant. The law on this issue was settled by
the Apex Court in the case of Firm Ashok Traders and Anr. Vs.
Gurumukh Das Saluja and Ors. reported in 2004 3 SCC 155. As on
05.03.2025, a total amount of Rs.1,71,20,121.97 is due and payable by
the first respondent to the applicant. The amount that was disbursed by
the applicant to the first respondent is also evidenced by the purchase
invoice and the discounting facility availed and the apprehension of the
applicant is that if the amount that is due and payable to the first
respondent by the other respondents is paid, it will leave no security for
the applicant while seeking for recovery of the amount from the first
respondent for whom respondents 2 to 4 stood as security.
22. Taking into consideration the facts and circumstances of the
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case and the materials placed before this Court, now that the trigger
notice has been issued by the applicant in June, 2025, the parties can
proceed further with the process of appointing an arbitrator to resolve the
dispute. It is brought to the notice of this court by the learned counsel
appearing for the applicant that already the communication has been sent
to the institution and the institution has to appoint the arbitrator.
23. Per contra, Mr.Vishnu Mohan, learned counsel for
respondents 1 to 4 submitted that such unilateral appointment of the
arbitrator cannot take place unless the respondents agree to the name
suggested by the institution. Therefore, this issue is going to take some
time.
24. The claim made by the applicant towards the invoice
discounting facility that was utilised by the first respondent and the
disbursement that was made by the applicant is borne out by records.
Thus, the applicant has made out a prima facie case before this Court. If a
garnishee order is not passed, the monies due and payable by the
garnishees to the first respondent will be taken away by the first
respondent and spent. To that extent, the balance of convenience is in
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favour of the applicant. If the monies are kept as a security, the
respondents 1 to 4 will not suffer any irreparable loss or hardship since
the money can be withdrawn by the respondents if they ultimately
succeed. On the other hand, if the monies are paid to the respondents, it
will be utilised and thereby, the applicant will be deprived of an
opportunity to secure some amount payable by the garnishees to the
respondents and it will result in irreparable loss and hardship to the
applicant. Hence, there shall be a garnishee order as against respondents
7, 8, 11 to 13, who shall withhold the payments due and payable to the
applicant and they shall deposit the amount to the credit of this
application and this interim order will be in force till the arbitrator is
appointed and thereafter, it is left open to the parties to file an application
before the Arbitrator under Section 17 of the Act seeking for appropriate
interim relief.
N.ANAND VENKATESH, J.
mp
25. In the result, this application is allowed in the above terms.
04.09.2025
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Arbitration Application No.488 of 2025
Neutral Citation:Yes/No
Speaking Order/Non-speaking order
Note: Send for reporting in journals.
mp
Arbitration Application No.488 of 2025
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