High Court · 2021

Arb. O.P. (Com. Div.) No.1 of 2025IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 12.02.2025CORAMTHE HON'BLE Mr. JUSTICE ABDUL QUDDHOSEArb.O.P (Com.Div.) No.1 of 2025Tata Capital Ltd.,Rep. herein by its Authorised Representative / Power AgentMr.Manoj. M.... Petitioner VsM/s.K.G. Denim Ltd.,CIN : L17115TZ1992PLC003798,Then Thirumalai,Jadyampalayam,Mettupalayam,Coimbatore – 641 302. ...Respondent Prayer : Arbitration Original Petition (Commercial Division) filed under Section 11(4) of the Arbitration and Conciliation Act, 1996 for the following reliefs :-a) Appoint an Arbitrator to adjudicate the disputes between the petitioner and the respondent in terms of the Agreement for Term Loan, dated 30th November 2021 andb) Direct the respondent to pay the costs 1/10 https://www.mhc.tn.gov.in/judis Arb. O.P. (Com. Div.) No.1 of 2025For petitioner : Mr. J.R. JayantFor Respondent : Mr.S.R. RaghunathanORDERThis petition has been filed under Section 11 of the Arbitration and Conciliation Act, 1996, seeking for appointment of an arbitrator by this Court. 2. The petitioner is a non banking financial institution. They have lent money to the respondent through a term loan agreement dated 30.11.2021. There seems to be a dispute between the parties arising out of the said agreement. The term loan agreement dated 30.11.2021 contains an arbitration clause and the same is extracted hereunder :-12. ArbitrationIf any dispute, difference or claim arises between any of the Obligors and the Lender in connection with the Facility or as to the interpretation, validity, implementation or effect of the Facility Documents or as to the rights and liabilities of the parties under these T & Cs or alleged breach of the Facility Documents or anything done or omitted to be done pursuant to the Facility Documents, the same shall be settled by arbitration by a sole arbitrator to be appointed as per the procedure below and to be held at such place as agreed by the 2/10 https://www.mhc.tn.gov.in/judis Arb. O.P. (Com. Div.) No.1 of 2025parties in Serial No.18 of Annexure 1 hereto of the Agreement. The party invoking the arbitration (Claimant) shall address a notice to the other party (“respondent”) suggesting the names of not more than three arbitrators, all of whom shall be either retired judges of the District Court, High Court or the Supreme Court or a lawyer having minimum 10 years' relevant experience. The respondent shall either :(i) Confirm in writing acceptance of one amongst the proposed names as the sole arbitrator to the claimant within a period of ten (10) days from the date of notice (“Notice Period”); or (ii) Convey objection, if any, in writing to the Claimant, against the proposed names of the sole arbitrator within the said Notice period.However, if the Claimant does not receive any response from the respondent within the said Notice Period, the Claimant shall be entitled to nominate any one person from amongst the proposed three names as the sole arbitrator and such arbitrator shall be deemed to be appointed by both the Parties. In the event, the respondent conveys its objection as per (ii) above then the sole arbitrator will be appointed by a Court having jurisdiction. The arbitration shall be conducted under the provisions of the Arbitration and Conciliation Act, 1996 together with its amendments, any statutory modifications or re-enactment thereof for the time being 3/10 https://www.mhc.tn.gov.in/judis Arb. O.P. (Com. Div.) No.1 of 2025in force. The arbitration proceeding shall be conducted in English language. The award of the arbitrator shall be final and binding on all parties concerned. The cost of arbitration shall be borne by the Obligors. 3. The petitioner has invoked the arbitration as per the arbitration clause by issuing a notice to the respondent on 30.09.2024 as per the provisions of Section 21 of the Arbitration and Conciliation Act, 1996. A reply has been received by the petitioner from the respondent on 07.10.2024 denying their liability to pay as they claim that they are protected under the rehabilitation scheme of the Reserve Bank of India. A re-joinder has also been issued by the petitioner to the said reply on 06.11.2024 denying the contentions of the respondent. Since there is no consensus between the parties with regard to the name of the arbitrator and since the respondent has not consented for arbitration, the petitioner has filed this petition under Section 11 of the Arbitration and Conciliation Act, 1996 seeking for appointment of an arbitrator. 4. A counter has been filed by the respondent before this Court stating that since they are protected under a Relief Package Scheme as per the Master directions, dated 17.10.2018 issued by Reserve Bank of 4/10 https://www.mhc.tn.gov.in/judis Arb. O.P. (Com. Div.) No.1 of 2025India (Relief measures for areas affected by natural calamities), 2018, and the relevant extract of Master Directions, RBI (Non-Banking Financial Company Scale Based Regulation), 2023, dated 19.10.2023 and as per the relief measures propounded by SLBC committee, the dispute raised by the petitioner is not an arbitrable dispute and therefore, the question of appointment of an arbitrator by this Court does not arise. The respondent has also stated that they have already filed a writ petition before this Court in W.P. No.3117 of 2025 seeking for a Mandamus to the petitioner herein to implement the Relief Package Scheme of the Reserve Bank of India as stated supra and that they had obtained an interim order from the writ Court, dated 31.01.2025, through which, their interest has been protected, restraining the petitioner from taking any coercive steps to recover the dues from the respondent. 5. The learned counsel for the petitioner would submit that even as per the relief package issued by Reserve Bank of India, as on the cut-off date mentioned therein, there must be no outstanding amount due and payable by the respondent to the petitioner. He would submit that in the instant case, as on the cut-off date, outstanding dues are payable by the respondent to the petitioner and therefore, the said Relief Package 5/10 https://www.mhc.tn.gov.in/judis Arb. O.P. (Com. Div.) No.1 of 2025Scheme, which is relied upon by the respondent is not applicable and therefore, the petitioner has approached this Court seeking for appointment of an Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 and hence the petition is maintainable. 6. On the other hand, the learned counsel for the respondent would rely upon the Relief Package Scheme of the RBI which has been filed as documents along with the counter. Admittedly, there is a cut-off date mentioned therein. The petitioner claims that as on the cut-off date, there are outstanding dues payable by the respondent to the petitioner. However, the same has been disputed by the respondent, as seen from the submissions made by the learned counsel for the respondent. The writ Court has granted an interim order in W.P. No.3117 of 2025 only for a limited relief viz., that no coercive steps shall be taken against the respondent in this petition. The writ Court has not granted stay of arbitration as per the arbitration clause contained in the agreement between the parties. Even though the writ petition is still pending on the file of this Court and the prayer sought for in the writ petition by the respondent is for implementation of the rehabilitation package relied upon by the respondent through their counter filed before this Court in 6/10 https://www.mhc.tn.gov.in/judis Arb. O.P. (Com. Div.) No.1 of 2025this petition, the issue that has been raised by the respondent can very well be agitated by the respondent before the arbitrator once, he is appointed by this Court under Section 11 of the Arbitration and Conciliation Act, 1996. The respondent does not dispute the existence of the arbitration agreement between the parties. They only dispute the existence of an arbitrable dispute. However, the petitioner denies the same by stating that before the cut-off date stipulated by the RBI in their Relief Package Scheme, monies were still outstanding from the respondent and therefore the said Relief Package Scheme will not apply to the case of the respondent. Such a dispute cannot be decided by this Court while deciding an application under Section 11 of the Arbitration and Conciliation Act. 7. This Court while deciding an application under Section 11 of the Arbitration and Conciliation Act, 1996 will have to only see, on a prima facie basis, the existence of an arbitration clause. When admittedly there exists an arbitration clause and when the petitioner has satisfied the statutory requirements of issuing notice under Section 21 of the Arbitration and Conciliation Act, 1996, prior to the filing of this petition, this Court will have to necessarily appoint an arbitrator under Section 11 7/10 https://www.mhc.tn.gov.in/judis Arb. O.P. (Com. Div.) No.1 of 2025of the Arbitration and Conciliation Act. If at all, the respondent still wants to raise any dispute with regard to the contentions as raised in the counter filed before this Court they can very well raise the same either by filing an application under Section 16 of the Arbitration and Conciliation Act or through their counter filed in the main arbitral claim lodged by the petitioner before the arbitrator appointed by this Court.For the foregoing reasons this Court does not find any merit in the objections raised by the respondent through their counter filed before this Court. For the foregoing reasons, this Arbitration Original Petition is allowed as prayed for by issuing the following directions :-a) This Court appoints Hon'ble Ms. Justice Indira Banerjee, former Judge of Supreme Court of India, residing at B-339, Lake Gardens, Kolkatta – 700 045 (Mobile 9560808777) as the sole Arbitrator to adjudicate the dispute between the parties arising out of the aforesaid agreement.(b) The Arbitrator shall be paid his /her remuneration / fees in accordance with the 4th schedule of the Arbitration and Conciliation Act, 1996.8/10 https://www.mhc.tn.gov.in/judis Arb. O.P. (Com. Div.) No.1 of 2025(c) Both the parties shall equally share the arbitrator's fees.(d) The Arbitrator shall conduct the arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and shall complete the arbitration within the specified time as prescribed under the said Act.12.02.2025Index: Yes/ No Speaking order / Non speaking orderNeutral citation : Yes / Novsi29/10 https://www.mhc.tn.gov.in/judis Arb. O.P. (Com. Div.) No.1 of 2025ABDUL QUDDHOSE, J.vsi2Arb.O.P (Com.Div.) No.1 of 202512.02.202510/10