Mr.Rajinder Mathur, Mr.Tarun Mathur and Mr.Akshat Singhal, Advocates v. LACECRAFT THROUGH ITS PROPRIETOR, SH. ROHIT PUNIA, S/

Through: Mr.Rajinder Mathur, Mr.Tarun Mathur and Mr.Akshat Singhal, Advocates. Versus LACECRAFT THROUGH ITS PROPRIETOR, SH. ROHIT PUNIA, S/0.- SH. RAM NARAYAN, OFFICE AT:- 2128, THIRD FLOOR, Signature Not Verified Signed By:AMIT KUMAR SHARMA Signing Date:04.08.2025 12:08:38 1 DHOBI WARA,KINARI BAZAR, CHANDNI CHWOK, DELHI-110006 ALSO AT:- MOHALLA GUJARAN, BIDASAR, WARD NO.l, BIDAS, CHURU, RAJASTHAN .... RESPONDENT Through: None. HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV JUDGEMENT PURUSHAINDRA KUMAR KAURAV, J. (ORAL)

1. The present petition has been filed under Section 11(5) of the Arbitration and Conciliation Act, 1996 (the 1996 Act) by the petitioner, seeking appointment of an Arbitrator, to adjudicate upon the disputes that have arisen between the parties under the Loan Agreement dated

26.09.2022.

2. Learned counsel for the petitioner has placed on record the sevice affidavit which reads as under:- “AFFIDAVIT OF SERVICE I, Akshat Singhal, Advocate S/o Sh. Neeraj Singhal at 129, Lawyer Chamber, Delhi High Court, New Delhi-110003, do hereby solemnly affirm and declare as under:-

1. That I am one of the Advocates for the Petitioner.

2. That I am fully conversant with the facts of the case and competent to depose to the facts of the case. Signature Not Verified Signed By:AMIT KUMAR SHARMA Signing Date:04.08.2025 12:08:38 2

3. That the complete paper book of the petition has bene sent to the Respondent by e-mail on 16.01.2025. The same has not been returned back.”

3. In view of the aforesaid, it is seen that despite service, no one appeared on behalf of the respondent. Even earlier proceedings also indicates that there has been appearances on behalf of the respondent through Mr.Sameer Srivastava, Advocate on 19.02.2025 and through Mr.Vinay Kumar, Advocate on 26.03.2025. Even today, there is no appearance on behalf of the respondent, despite the matter being called out in second round.

4. The facts of the case would indicate that the petitioner is a Non- banking Finance Company and is engaged in the business of financing for vehicles etc. from other portfolios. As per the case set up by the petitioner, it sanctioned a loan facility to the respondent for a sum Rs.3,00,000/- (Rupees Three Lakhs) and said loan amount was agreed to be paid by the respondent in 48 EMIs of Rs.8,812/- each as per terms of the said agreement. Accordingly, a Loan Agreement dated 26.09.2022 was executed between the parties. Thereafter, the respondent defaulted and neglected to pay various EMIs has also defaulted in adhering to the financial discipline in the repayment of the loan and despite sincere reminders and efforts, the respondent failed to make the payment and even did not respond to the various reminders.

5. Accordingly, the petitioner issued a Loan Recall Notice dated

17.05.2024 invoking the arbitration clause (Clause 20) of the SME Loan Agreement dated 26.09.2022, seeking the appointment of a Sole Arbitrator. Signature Not Verified Signed By:AMIT KUMAR SHARMA Signing Date:04.08.2025 12:08:38 3

6. The Court takes note of Clause 20 of the SME Loan Agreement dated

26.09.2022, which reads as under:- “Jurisdiction & Arbitration:

20. The Loan, this document/other documents, shall be governed by the laws of India. The pares hereto expressly agree that all disputes arising out of and/or relang to the Loan, this or any other Relevant document shall be subject to the exclusive jurisdicon of the court/tribunal of the city/place in which the branch of IIFL from where the Disbursement has been made is situate, provided that the exclusivity aforesaid shall bindthe Borrower and IIFL shall be entled to pursue the same in any other court of competent jurisdicon at any other place; such dispute shall be referred to arbitraon in accordance with the provisions of the Arbitraon and Conciliaon Act, 1996 as may be amended, or its re-enactment, by a sole arbitrator, appointed by IIFL. The arbitraon proceedings shall be conducted in English language and held at the place more parcularly menoned in the SCHEDULE of the present agreement hereunder. The costs of such arbitraon shall be borne by the losing Party or otherwise as determined in the arbitraon award If a party is required to enforce an arbitral award by legal aeon of any kind, the party against whom such legal aeon is taken shall pay all reasonable costs and expenses and aorney's fees, including any cost of addional ligaon or arbitraon taken by the party seeking to enforce the award.”

7. The law with respect to the scope and standard of judicial scrutiny under Section 11(6) of the 1996 Act has been fairly well settled. This Court as well in the order dated 24.04.2025 in the case of ARB.P. 145/2025 titled as Pradhaan Air Express Pvt Ltd v. Air Works India Engineering Pvt Ltd has extensively dealt with the scope of interference at the stage of Section

11. The Court held as under:- “9. The law with respect to the scope and standard of judicial scrutiny under Section 11(6) of the 1996 Act has been fairly well settled. The Supreme Court in the case of SBI General Insurance Co. Ltd. v. Krish Spinning1, while considering all earlier pronouncements including the 1 2024 SCC OnLine SC 1754 Signature Not Verified Signed By:AMIT KUMAR SHARMA Signing Date:04.08.2025 12:08:38 4 Constitutional Bench decision of seven judges in the case of Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 1996 & the Indian Stamp Act, 1899, In re 2 has held that scope of inquiry at the stage of appointment of an Arbitrator is limited to the extent of prima facie existence of the arbitration agreement and nothing else.

10. It has unequivocally been held in paragraph no.114 in the case of SBI General Insurance Co. Ltd that observations made in Vidya Drolia v. Durga Trading Corpn.3, and adopted in NTPC Ltd. v. SPML Infra Ltd.,4 that the jurisdiction of the referral court when dealing with the issue of “accord and satisfaction” under Section 11 extends to weeding out ex-facie non-arbitrable and frivolous disputes would not apply after the decision of Re: Interplay. The abovenoted paragraph no.114 in the case of SBI General Insurance Co. Ltd reads as under:- facie existence of “114. In view of the observations made by this Court in In Re: Interplay (supra), it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the the arbitration scrutiny of prima agreement, and nothing else. For this reason, we find it difficult to hold that the observations made in Vidya Drolia (supra) and adopted in NTPC v. SPML (supra) that the jurisdiction of the referral court when dealing with the issue of “accord and satisfaction” under Section 11 extends to weeding out ex-facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision in In Re: Interplay (supra).”

11. Ex-facie frivolity and dishonesty are the issues, which have been held to be within the scope of the Arbitral Tribunal which is equally capable of deciding upon the appreciation of evidence adduced by the parties. While considering the aforesaid pronouncements of the Supreme Court, the Supreme Court in the case of Goqii Technologies (P) Ltd. v. Sokrati Technologies (P) Ltd.5, however, has held that the referral Courts under Section 11 must not be misused by one party in order to force other parties to the arbitration agreement to participate in a time- consuming and costly arbitration process. Few instances have been delineated such as, the adjudication of a non-existent and malafide claim