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2022 DIGILAW 2819 (MAD)

Cholamandalam Investment and Finance Company Limited, Represented by its Authorised Signatory, Chennai v. Aryaa Krishna Automotives Pvt. Ltd. , Karnataka

2022-08-18

M.SUNDAR

body2022
JUDGMENT (Prayer: 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.XVFPHOS00003032806 dated 19.06.2019 between the petitioner and the respondents as per the Loan Agreement No.XVFPHOS00003032806 dated 19.06.2019.) 1. 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: 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 coborrower respectively (to be noted, first respondent is a juristic person i.e., Private Limited Company and second respondent is a natural person). 4. 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 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 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. 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.' Proceedings dated 16.08.2022 made by learned Master: 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 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 subsection (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 ]. 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 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 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 subsection (6A) thereat. 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 subsection (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 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 : preeti@jmlegal.in is appointed as sole 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 : preeti@jmlegal.in is appointed as sole Arbitrator. Learned sole Arbitrator is requested to enter upon reference, qua primary contract i.e., Loan Agreement dated 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.276 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 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.