Bombay High Court
Tata Capital Housing Finance Limited vs Inderjeet Sahni on 2 February, 2026
2026:BHC-OS:2987
Neeta Sawant CARAPL-35431 OF 2025
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION APPLICATION (L) NO.35431 OF 2025
Tata Capital Housing Finance Limited .....APPLICANT
: VERSUS :
Inderjeet Sahni and others ....RESPONDENTS
WITH
COMMERCIAL ARBITRATION PETITION (L) NO.35458 OF 2025
Tata Capital Housing Finance Limited ..... PETITIONER
: VERSUS :
Inderjeet Sahni and others ....RESPONDENTS
Mr. Aseem Naphade with Mr. Nikhil Mehta i/b KMC Legal Venture, for
Applicant/Petitioner.
Mr. Aman Vijay Dutta (Through VC) with Mr. Hitanshu Patil & Mr.
Indranil Maity i/b Mr. Vinayak Pandit, for Respondents.
Digitally
signed by
NEETA
CORAM : SANDEEP V. MARNE, J.
NEETA SHAILESH
SHAILESH
SAWANT
SAWANT
Date:
Reserved On: 22 JANUARY 2026.
2026.02.02
18:41:30
+0530
Pronounced On: 02 FEBRUARY 2026.
Judgment :
1) Applicant/Petitioner-Lender has filed the present proceedings
for appointment of an Arbitrator and for interim measures before
commencement and during pendency of arbitral proceedings.
Commercial Arbitration Application (L) No.35431 of 2025 is filed under
Section 11 of the Arbitration and Conciliation Act, 1996 (Arbitration
Act) for appointment of Arbitrator pursuant to clause 12 of the Loan
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Agreement for adjudication of disputes and differences between the
parties. Commercial Arbitration Petition (L) No.35458 of 2025 is filed
under Section 9 of the Arbitration Act seeking interim measures against
Respondents to restrain them from selling, transferring, alienating,
encumbering, creating third party rights or parting with possession of
the mortgaged asset with further direction for demarcation thereof and
for appointment of Court Receiver. Petitioner has also sought direction
for disclosure of assets of the Respondents with consequential order for
stay on creating third party rights in respect of such disclosed assets.
FACTS
2) Petitioner is an incorporated entity engaged inter alia in the
business of providing finance. Respondent No.1 is the principal borrower
and Respondent Nos.2 to 4 are the co-borrowers in respect of credit
facilities sanctioned and dispersed by the Petitioner to them. Respondent
No.5 is the proprietary concern of Respondent No.1. Petitioner has
sanctioned loan of Rs. 2,24,00,000/- to Respondent Nos.1 to 4 under its
product name "Home Equity". In pursuance of sanction and disbursement
of loan, Respondents created a charge on land bearing Kh No.174/13
Area 0.115 H. situated at Tatibandh, Raipur, Chhattisgarh State. Loan
Agreement has been executed on 27 November 2019 between the
Petitioner and the Respondents. Petitioner claims that Respondents have
also executed a Memorandum of Entry in favour of the Petitioner. During
currency of tenure of the loan, Respondents requested for restructuring
of the credit facilities and accordingly, Petitioner granted new
restructured loan amount of Rs.2,34,08,671/- on 12 June 2021.
According to the Petitioner, Respondents were irregular in repayment of
the loan and committed defaults which led to classification of their loan
account as Non-Performing Asset (NPA). Petitioner issued demand notice
dated 6 February 2023 under Section 13(2) of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (SARFAESI Act) calling upon Respondents to pay outstanding
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amount of Rs. 2,73,61,794/-. On account of failure on the part of
Respondents to pay the demanded amount, Petitioner approached
District Magistrate for taking over physical possession of the mortgaged
property. By order dated 31 July 2025, Petitioner's Application under
Section 14 of the SARFAESI Act was allowed and order was made for
physical possession of the mortgaged property. Respondents filed
Securitization Application No.874 of 2025 before Debts Recovery
Tribunal (DRT) at Jabalpur. According to the Petitioner, no relief has
been granted in favour of the Respondents in the said Securitization
Application. Petitioner issued loan recall notice/invocation notice dated
27 May 2025 to the Respondents calling them upon to pay amount of
Rs.3,84,43,629/-. Respondents did not reply to the said notice.
3) In the above background, Applicant has filed Commercial
Arbitration Application (L) No.35431 of 2025 under Section 11 of the
Arbitration Act for appointment of Arbitrator. Commercial Arbitration
Petition (L) No.35458 of 2025 is filed under Section 9 of the Arbitration
Act seeking interim measures in terms of following prayers:-
a. That pending the hearing the final hearing and disposal of arbitration
proceedings between the parties and till execution of the Award, this
Hon'ble Court be pleased to pass an order of injunction restraining the
Respondents from selling, transferring, alienating, encumbering,
creating third party right, title or interest or parting with possession of
the property viz. Kh. No: 174/13, Area 0.115 Hectare, Situated At.:
Tatibandh, Raipur, P.C. No: 103, RIC: Raipur-I, Tahsil & Dist.: Raipur
(C.G.) Chattisgarh-492 001, more particularly described in Exhibit
hereto;
b. That pending the hearing the final hearing and disposal of arbitration
proceedings between the parties and till execution of the Award, this
Hon'ble Court be pleased to pass an order directing the Respondents to
clearly demarcate the property which is mortgaged with the Petitioner in
the presence of Court Receiver and to appointing the Court Receiver, as
receiver of the mortgaged property viz: Kh. No: 174/13, Area 0.115
Hectare, Situated At.: Tatibandh, Raipur, P.C. No: 103, RIC: Raipur-I,
Tahsil & Dist.: Raipur (C.G.) Chattisgarh-492 001, more particularly
described in Exhibit C hereto with all powers under Order XL Rule 1 of
the Code of Civil Procedure, 1908;
c.That pending the hearing the final hearing and disposal of arbitration
proceedings between the parties and till execution of the Award, this
Hon'ble Court be pleased to direct the Respondents to make disclosure as
to whether any third party has been occupying the mortgaged property
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and the agreement arrangement under which the said third party has
been occupying the mortgaged property as also the rent being derived
there from. The Respondents and/ or 3rd party be directed to deposit the
rent/license fees for occupation of the mortgaged property described in
Exhibit C hereto in Court, with further liberty to the Petitioner to have
withdrawn the same.
d. That this Hon'ble Court be pleased to pass an order directing the
Respondents to disclose on oath all their assets and properties both
moveable and immoveable whether held jointly or singly, encumbered or
uncembered;
e. That this Hon'ble Court be pleased to pass an order restraining the
Respondents from selling, transferring, alienating, encumbering,
creating third party right, title or interest or parting with possession of
the properties so disclosed by the Respondents which in terms of prayer
clause(d) above;
f. That pending the hearing the final hearing and disposal of arbitration
proceedings between the parties and till execution of the Award, this
Hon'ble Court be pleased to pass an order appointing the Court Receiver,
as receiver of the properties as which may be disclosed by the
Respondents pursuant to prayer clause (d) above with all powers under
Order XL Rule 1 of the Code of Civil Procedure, 1908;
g. For interim and ad-interim reliefs in terms of prayer clauses (a) to(f)
above;
h. For costs;
i. For such other and further reliefs as this Hon'ble Court may deem fit
and proper in the circumstances of the case and in the interest of justice.
4) Respondents have appeared through Advocates and have
filed Affidavit in Reply opposing the Application and the Petition. Since
pleadings are complete, both the proceedings are taken up for hearing
and disposal.
SUBMISSIONS
5) Mr. Aseem Naphade, the learned counsel appearing for the
Applicant/Petitioner submits that there is arbitration clause in the loan
agreement and there is valid invocation of notice under Section 21 of the
Arbitration Act. He relies on para-5 of notice dated 27 May 2025 which
contained request for reference of disputes to arbitration specifying
statutory requirements under Section 21 of the Arbitration Act.
Alternatively, he submits that Section 9 proceedings can be maintained
even before invocation of arbitration clause.
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6) Mr.Naphade further submits that Clause 12 of the Loan
Agreement clearly contains arbitration clause which provides for seat of
arbitration in the cities of Mumbai/Delhi/Kolkata/Chennai with choice
left to the Applicant to decide one out of the four cities for holding of
arbitration. That the words 'arbitration to be held' deployed in Clause 12
of the Loan Agreement clearly indicates that the same is a reference to
the seat of arbitration and not the venue. That arbitration agreement is
premised upon party autonomy and parties are free to decide the place of
arbitration. That Section 2(e)(i) of the Arbitration Act defines Court as
Court having jurisdiction as per the parameters of the suit, but the said
provision has no application to the present case as the parties have
designated the seat of arbitration and by virtue of Section 20(1) the
arbitration has to be held in Mumbai. He relies upon judgment of the
Apex Court in BGS SGS Soma Versus. NPHC Limited 1.
7) Mr. Naphade submits that the Petitioner is constrained to file the
present proceedings in the light of peculiar facts and circumstances of
the case where the Petitioner is unable to take position of the mortgaged
property on account of its amalgamation with adjacent properties. That
therefore the order passed by the District Magistrate permitting the
Petitioner to take over possession of the mortgaged land has remained on
a piece of paper. That therefore making interim measures under Section
9 of the Arbitration Act for identification of property through Court
Receiver is necessary.
8) Mr. Naphade further submits that the objection of limitation
raised by the Respondent-borrowers is baseless. That limitation is always
a mixed question of law and fact. That in any case, the loan account of
Respondent is classified as NPA on 3 January 2023 and that therefore
the claim would be within limitation. In any case, the loan is repayable in
180 monthly installments and therefore the claim is otherwise within
limitation.
1
(2020) 4 SCC 234
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9) Mr. Naphade further submits that initiation of proceedings
under the SARFAESI Act is not a bar for invocation of arbitration. That
proceedings under the SARFAESI Act are enforcement proceedings
whereas the proceedings under the Arbitration Act are adjudicatory
proceedings. He relies upon judgment of the Apex Court in M.D. Frozen
Foods Exports Pvt. Ltd. And others vs. Hero Fincorp Ltd 2 and of this
Court in Tata Motors Finance Solution Ltd Versus Naushad Khan 3.
10) Lastly, Mr. Naphade submits that Respondents are in default
in repayment of the loan and that as on 2 October 2025, huge amount of
Rs.4.05 crores is outstanding. That Petitioner is a mortgagee pursuant to
Memorandum of Entry Dated 6 December 2019. That on account of
amalgamation of mortgaged properties with other properties of
Respondent No.1, it is necessary to appoint Court Receiver for identifying
the properties and to handover its possession to the Applicant. He would
accordingly pray for making both the Application, as well as the Petition,
absolute in terms of prayers made therein.
11) Mr. Aman Dutta, the learned counsel appearing for
Respondents would submit that the Application filed under Section 11 of
the Arbitration Act is not maintainable as there is no cause of action for
the referral proceedings. That notice dated 27 May 2025 is not a notice
invoking arbitration. It merely asserts possibility of arbitral proceedings
as the notice nowhere called upon Respondents to participate in
appointment of an arbitrator in accordance with the 'agreed procedure'
within the meaning of sub-sections (5) or (6) of Section 11 of the
Arbitration Act read with Clause 12 of the Loan Agreement. That the
notice does not even refer to an automatic invocation or triggering of the
arbitration clause. Relying on judgment of the Apex Court in Adavya
Projects Private Limited Versus. M/s. Vishal Structurals Private Limited
4
& Ors he submits that an Application under Section 11 of the
2
2017 (16) SCC 741
3
2023 SCC Online Bom 2716
4
(2025) 9 SCC 686
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Arbitration Act can lie only after the proposed Respondent fails to act as
per the agreed procedure. That notice under Section 21 of the Arbitration
Act is not an empty formality and forms the yardstick to determine
whether claims raised are within the applicable period of limitation. In
absence of such a notice within the meaning of Section 21 of the
Arbitration Act, the cause of action itself cannot be deemed to have
arisen for the purpose of Section 11 of the Arbitration Act.
12) Mr. Dutta further submits that this Court does not have
territorial jurisdiction to entertain either Application under Section 11 or
Petition under Section 9 of the Arbitration Act. That arbitration clause
does not designate 'a seat' of arbitration, it merely specifies cities of
Mumbai/Delhi/Kolkata/Chennai as 'venues' suited to the convenience of
the Applicant, which venues are related to Section 20(3) of the
Arbitration Act. Absence of any specified 'seat' can further be gathered
from blank space under Clause 13 of Annexure-I to the Agreement. That
even otherwise, use of the words 'as may be decided by the Lender in
accordance with the provisions of Arbitration and Conciliation Act, 1996 '
in the latter part of the clause clarifies that such specification of venue is
subject to the provisions of Arbitration Act and the judicial
pronouncements thereon. In the other words, merely specifying that
Arbitral proceedings would be 'held' at a certain place would not ipso
facto confer jurisdiction on Courts of such place. He relies upon judgment
of the Apex Court in Ravi Ranjan Developers Private Ltd. Versus. Aditya
Kumar Chatterjee 5 in support of his contention that in absence of agreed
'seat' of arbitration, Application for appointment of Arbitrator would lie
only where the cause of action has arisen. That in the present case, the
entire cause of action has arisen at Raipur where the Loan Agreement is
executed and where the alleged mortgaged assets are located.
Respondents are permanent residents of and carry on business in Raipur.
That Applicant itself has invoked proceedings under the SARFAESI Act
before the Debts Recovery Tribunal at Jabalpur which exercises
5
2022 SCC OnLine SC 568
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jurisdiction over the subject matter of the suit. That in Ravi Ranjan
Developers (supra) the Apex Court has held that Section 11 Application
must meet the basic tenets of territorial nexus as laid down in the Code of
Civil Procedure, 1908 by harmoniously interpreting Sections 2(1)(e) and
Section 11 of the Arbitration Act. That the principle of party autonomy
cannot be overstretched to mean that parties can confer jurisdiction on
Courts which otherwise has no jurisdiction or nexus whatsoever with the
subject matter of the dispute.
13) Mr. Dutta further submit that the judgment in Ravi Ranjan
Developers is rendered by the Apex Court after noting the ratio of the
judgment in BGS SGS Soma (supra). That the two judgments are not at
variance with each other. While BGS SGS Soma is rendered after
conclusion of arbitration in question with consent of the parties, whereas
Ravi Ranjan Developers is rendered before commencement of arbitration.
That the decision in BGS SGS Soma refers to a specified venue as opposed
to a randomised suite or menu of geographical locations as is the case in
with Clause 12 in the instant case. Far from designating a juridical seat
or place within the meaning of Section 20(1) of the Arbitration Act, all
that Clause 12 does is to specify the list of venues to suit the convenience
of Applicant depending on where the borrower is situated. That this is
referrable to Section 20(3) of the Arbitration Act. That though BGS SGS
Soma goes on to hold that whenever there is express designation of a
venue of arbitration, the same would amount to an exclusive designation
as the seat, these observations are subject to the recognized principle in
paragraph 46 that arbitral autonomy cannot extend to confer jurisdiction
on a Court which does not otherwise possess jurisdiction. That the
decision in Ravi Ranjan Developers fills in the lacuna qua jurisdiction
under Section 11, a provision which stands on a different footing from
that contained in Section (2)(1)(e) of the
Arbitration Act.
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14) Mr. Dutta further submits that the present proceedings are
not maintainable in the light of exercise of remedy of initiation of
proceedings under SARFAESI Act by the Applicant/Petitioner. That
Applicant has already secured protective order under Section 14 of the
SARFAESI Act and can enforce remedies qua the reliefs of demarcation
before the DRT in the pending proceedings. Having elected to choose its
remedies under the SARFAESI Act and having participated in the
adjudicatory proceedings before the DRT without demur, Applicant is
estopped from seeking a reference to arbitration, much less any interim
measures. That instant proceedings have been commenced by the
Applicant not only after exercise of remedies under Sections 13 and 14 of
the SARFAESI Act but well after initiation of adjudicatory proceedings
under Section 17 of the SARFAESI Act has been set in motion by the
Respondents before the DRT. He submits that the judgment of Apex Court
in M.D. Frozen Foods (supra) is declared to be bad law in Vidya Drolia
and others Versus. Durga Trading Corporation6. That the Apex Court has
expressly held that claims of banks and financial institutions covered
under the DRT are not arbitrable. That the judgment cited by the
Petitioner/Applicant in Tata Motors Finance Ltd. (supra) is
distinguishable as the Petitioner in those proceedings did not undertake
any measure under the SARFAESI Act and it was only in this context
that this Court took the view that the reference to arbitration was
maintainable.
15) Lastly, Mr. Dutta would submit that the claims of the
Applicant are patently barred by limitation. That Respondents' account
was classified as None Performing Asset (NPA) with effect from 3
November 2021 which was communicated to them on 22 December 2021
and notice was undisputably not withdrawn. That therefore cause of
arbitration arose on 22 December 2021 at the very latest. That therefore,
the period of limitation has expired. That no steps under Clause 12 of the
Loan Agreement were taken by the Applicant until 6 November 2025 or
6
2021 (2) SCC 1
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27 May 2025. That the period of limitation expired within three years of
3 November 2021. Even if notice dated 27 May 2025 is treated as
invocation notice under Section 21 of the Arbitration Act, the invocation
was time barred.
16) On above broad submissions, Mr. Dutta would pray for
dismissal of the Application and the Petition.
REASONS AND ANALYSIS
17) The disputes and differences between the parties have
arisen out of the Loan Agreement dated 27 November 2019. Perusal of
the Loan Agreement would indicate that loan of Rs.2,24,00,000/- was
sanctioned to the Respondents under the heading 'Home Equity' which
was repayable in monthly equated instalments of Rs.2,54,598/- in 180
months. It is Petitioner's case that Respondents have defaulted in
repayment of the loan. The Loan Agreement indicates that charge on the
subject land is created in favour of the Applicant by the borrowers. The
Applicant also claims execution of separate deed of equitable mortgage in
respect of subject land. Respondent No. 1 has executed Affidavit agreeing
to demarcate the mortgaged land, which is amalgamated with his other
lands.
18) The Applicant initially initiated proceedings under
SARFAESI Act and issued notice under Section 13(2) on 6 February
2023. Upon failure of the Respondents to pay the demanded amount,
Applicant has secured an order dated 31 July 2025 from District
Magistrate, Raipur for securing physical possession of the subject land. It
is Petitioner's case that it is unable to secure physical possession of the
subject land on account of non-demarcation thereof.
19) Respondent Nos.1 to 4 have also filed Securitization
Application before DRT Jabalpur challenging the demand notices dated
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22 December 2021 and 6 February 2023 as well as symbolic possession
notice issued under Section 13(4) of the SARFAESI Act. They have also
questioned declaration of their account as NPA. They have also
challenged order of District Magistrate dated 31 July 2025. However, it
appears that no orders are passed in favour of Respondent Nos.1 to 4 by
DRT till date.
20) It is in the above background that Application under Section
11 for appointment of an Arbitrator and Petition under Section 9 of the
Arbitration Act for interim measures is filed by the Applicant/Petitioner.
21) Respondent Nos.1 to 4 have sought to raise four objections to
both the proceedings viz. i) that there is no valid invocation of arbitration
clause, ii) that this Court does not have territorial jurisdiction to
entertain the proceedings, (iii) that reference to arbitration is not
maintainable nor any interim measures can be made in the light of
exercise of alternate remedy under SARFAESI Act by the Applicant and
because of participation in DRT proceedings without demur and (iv)
claim of the Applicant being barred by limitation. I proceeded to examine
each of the four objections sought to be raised by the Respondent Nos.1 to
4.
NON-INVOCATION OF ARBITRATION
22) Applicant claims to have invoked arbitration vide notice
dated 27 May 2025. It is a composite notice demanding amount of
Rs.4,33,51,518/- as well as stating that disputes and differences would
deem to have arisen between parties in the event of failure to repay the
outstanding amount and that the same shall be referred to arbitration.
Clause (5) of the notice dated 27 May 2025 reads thus :-
5. In the event of failure to repay the outstanding dues as mentioned
above, dispute and difference would deemed to have been arisen and the
same shall be referred for arbitration proceedings as per the terms
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mentioned in the Loan Agreement. Further, Our Client will share the
status of non-payment of the loan facility with CIBIL (Credit Information
Bureau of India Limited) and to declare you notice borrower as
"defaulter"
23) According to the Applicant, notice dated 27 May 2025 is a
valid notice for invocation of arbitration within the meaning of Section 21
of the Arbitration Act. On the other hand, it is the contention of
Respondents that it is not a notice invoking arbitration.
24) Section 21 of the Arbitration Act provides thus:
21. Commencement of arbitral proceedings.--
Unless otherwise agreed by the parties, the arbitral proceedings in
respect of a particular dispute commence on the date on which a request
for that dispute to be referred to arbitration is received by the
respondent.
25) Thus, under Section 21 of the Arbitration Act, the Arbitral
proceeding commence on the date on which request for the dispute to be
referred to arbitration is received by the Respondent. The provision is
relevant mainly for computing the period of limitation. Section 21 does
not require issuance of any notice as such and what is required is receipt
of a "request" for reference of dispute to arbitration. In the present case,
while simultaneously demanding outstanding loan amount from the
Respondents, the Applicant specifically made known to them that dispute
and differences would deem to have been arisen in the event of failure to
repay the outstanding dues. It was further stated that such dispute and
difference shall be referred to arbitration proceedings as per the terms
mentioned in the Loan Agreement. Respondents complain that the notice
nowhere calls upon Respondents to participate in appointment of an
Arbitrator in accordance with "agreed procedure" within the meaning of
Sections 11(5) or (6) of the Arbitration Act. Perusal of the arbitration
Clause 12 in the Loan Agreement indicates that no specific procedure is
agreed between the parties for making reference to arbitration. The
clause merely provides that any dispute, differences or claim arising
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between the parties in connection with the loan shall be settled by
arbitration in accordance with the Arbitration Act. Furthermore, the
Applicant had authority to appoint the arbitrator and it was not
necessary to seek concurrence of the Respondents in appointment.
However considering the law on the issue of unilateral appointment of
arbitrator, Applicant has filed the present Application rather than
making appointment unilaterally. No specific procedure was required to
be followed for making a request within the meaning of Section 21 of the
Arbitration Act for reference of disputes to arbitration.
26) By notice dated 27 May 2025, Respondents were made
aware that if outstanding loan amount was not repaid, the
dispute/difference would automatically arise between the parties and
that the same shall be referred to arbitration. In the light of this specific
intimation given to the Respondents, it was not necessary for the
Petitioner to again issue a notice requiring Respondents to participate in
appointment of an Arbitrator. As a matter of fact, the Apex Court in the
recent decision in Bhagheeratha Engineering Ltd. vs. State of Kerala 7 has
held that failure to issue notice under Section 21 of the Arbitration Act is
not to be fatal to a party if the claim is otherwise valid and arbitrary. The
Apex Court held in paras 13,14,16 and 17 as under :-
QUESTIONS FOR CONSIDERATION:--
13. In the above background, the questions that arises for consideration are (a)
whether the High Court by the impugned order was justified in holding that the
Arbitral Tribunal was appointed at the request of the State to adjudicate dispute
No. 1 only? (b) Was the non-issuance of a notice under Section 21 of the A&C Act
by the appellant fatal for it to pursue its claim before the Arbitrator?
ANALYSIS AND REASONING:--
14. In our opinion, the High Court totally erred in setting aside the award on the
basis that the appointment of the Tribunal was only to adjudicate dispute No. 1.
The High Court also erred in holding that the non-issuance of notice under
Section 21 of the A&C Act by the appellant with regard to dispute no. 2 to 4 was
fatal for it to pursue its claim before the arbitrator. The High Court erred in
holding that the Arbitral Tribunal exceeded its jurisdiction in deciding the entire
dispute. We say so for the following reasons:
7
2026 SCC OnLine SC 5
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xxx
16. Secondly, the object of Section 21 of A&C Act, is only for the purpose of
commencement of arbitral proceedings is also well settled. Section 21 is
concerned only with determining the commencement of the dispute for the
purpose of reckoning limitation. There is no mandatory prerequisite for issuance
of a Section 21 notice prior to the commencement of Arbitration. Issuance of a
Section 21 notice may come to the aid of parties and the arbitrator in
determining the limitation for the claim. Failure to issue a Section 21 notice
would not be fatal to a party in Arbitration if the claim is otherwise valid and the
disputes arbitrable. In ASF Buildtech Private Limited v. Shapoorji Pallonji &
Company Private Limited, one of us, J.B. Pardiwala J., felicitously put the
principle thus:--
163. The marginal note appended to Section 21 of the 1996 Act makes it
abundantly clear that the notice to be issued thereunder is for the
purpose of "commencement of arbitration proceedings". The substantive
provision further makes it clear that the date on which a request/notice
of invocation for referring a dispute is received by the respondent, would
the date on which the arbitral proceedings in respect of a particular
dispute commences. The words "particular dispute" assume significance
in the interpretation of this provision and its underlying object. It
indicates that the provision is concerned only with determining when
arbitration is deemed to have commenced for the specific dispute
mentioned in the notice. The language in which the said provision is
couched is neither prohibitive or exhaustive insofar as reference of any
other disputes which although not specified in the notice of invocation
yet, nonetheless falls within the scope of the arbitration agreement. The
term "particular dispute", does not mean all disputes, nor does it confine
the jurisdiction of the Arbitral Tribunal which is said to be one
emanating from the "arbitration agreement" to only those disputes
mentioned in the notice of invocation, as it would tantamount to reading
a restriction into the jurisdiction of the Arbitral Tribunal to the bounds of
the notice of invocation instead of the arbitration agreement. Thus, there
is no inhibition under Section 21 of the 1996 Act for raising any other
dispute or claim which is covered under the arbitration agreement in the
absence of any such notice. Section 21 is procedural rather than
jurisdictional it does not serve to create or validate the arbitration
agreement itself, nor is it a precondition for the existence of the
Tribunal's jurisdiction, but merely operates as a statutory mechanism to
ascertain the date of initiation for reckoning limitation.
165. Section 23 sub-section (1) places an obligation upon the claimant to
state the facts supporting his "claim", the points at issue and the relief or
remedy sought by way of its statement of claim, before the Arbitral
Tribunal. Notably, the legislature, in the first part of the said sub-section,
has deliberately and consciously used the term "claim" as opposed to
"particular dispute" employed in Section 21 of the 1996 Act. Although, it
could be said that the term "particular dispute" under Section 21
connotes a larger umbrella within which the term "claim" under Section
23 would be subsumed, thereby suggesting that there is no scope to
deviate from what was sought to be referred by the notice of invocation,
we do not think so. We say so because, the requirement for providing the
points at issue and the relief or remedy sought that exists in sub-section
(1) of Section 23 of the 1996 Act is patently absent in Section 21 of the
1996 Act, which clearly shows that the scope and object of these two
provisions are at variance to each other. Further, this sub-section does
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not stipulate either explicitly or implicitly, that such "claim" must be the
same or in tandem with the "particular dispute" in respect of which the
notice of invocation was issued under Section 21 of the 1996 Act. This
distinction in terminology is neither incidental nor redundant; rather, it
reflects a conscious legislative design to demarcate the procedural
objective of Section 21 from the substantive function sought or the
framing of issues served by Section 23. Unlike Section 23, Section 21
does not require any articulation of the relief its sole purpose is to
indicate when arbitration is deemed to have commenced, for the limited
purpose of computing the limitation period.
169. Any restriction on the nature or content of claims, counterclaims,
or set-offs in arbitration must be sourced solely from the express
language of Section 23 and not from Section 21. Section(s) 21 and 23 of
the 1996 Act although overlap in some aspects with each other in terms
of the claims that would ordinarily be referred to the Tribunal more often
than not tend to coincide, yet they are by no means tethered together in
such a manner that neither of them can survive without one another.
The latter serves only a procedural function and does not condition or
limit the Tribunal's jurisdiction to adjudicate claims that may not have
been specifically invoked at the threshold stage. To read such a
limitation into the statutory scheme would run contrary to both the text
and the object of the Act."
More recently in Adavya Projects Private Limited v. Vishal Structurals Private
Limited, this Court reiterating the purpose and significance of a notice under
Section 21 had the following to observe:--
"24. At this point, it is important to note this Court's decision in State of
Goa v. Praveen Enterprises [State of Goa v. Praveen Enterprises, (2012)
12 SCC 581] wherein it was held that the claims and disputes raised in
the notice under Section 21 do not restrict and limit the claims that can
be raised before the Arbitral Tribunal. The consequence of not raising a
claim in the notice is only that the limitation period for such claim that is
raised before the Arbitral Tribunal for the first time will be calculated
differently vis-à-vis claims raised in the notice. However, non-inclusion
of certain disputes in the Section 21 notice does not preclude a claimant
from raising them during the arbitration, as long as they are covered
under the arbitration agreement. Further, merely because a respondent
did not issue a notice raising counterclaims, he is not precluded from
raising the same before the Arbitral Tribunal, as long as such
counterclaims fall within the scope of the arbitration agreement."
17. At this stage, it is appropriate to refer to the following passage from the
decision of this Court in Indian Oil Corporation Ltd. v. Amritsar Gas
Service which reinforces our holding:--
"15. The appellant's grievance regarding non-consideration of its
counter-claim for the reason given in the award does appear to have
some merit. In view of the fact that reference to arbitrator was made by
this Court in an appeal arising out of refusal to stay the suit under
Section 34 of the Arbitration Act and the reference was made of all
disputes between the parties in the suit, the occasion to make a counter-
claim in the written statement could arise only after the order of
reference. The pleadings of the parties were filed before the arbitrator,
and the reference covered all disputes between the parties in the suit.
Accordingly, the counter-claim could not be made at any earlier stage.
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Refusal to consider the counter-claim for the only reason given in the
award does, therefore, disclose an error of law apparent on the face of
the award. However, in the present case, the counter-claim not being
pressed at this stage by learned counsel for the appellant, it is
unnecessary to examine this matter any further."
(emphasis added)
27) Mr.Dutta has relied upon judgment of the Apex Court in
Adavya Projects Pvt. Ltd. (supra) in support of his contention that the
Application under section 11 of the Arbitration Act can lie only after the
proposed Respondents fail to act as per agreed procedure. In my view
however, the ratio of judgment has no application in the present case. In
the case before Apex Court the notice was issued only to Respondent No.1
and not to Respondent Nos.2 and 3 who were sought to be impleaded as
parties to arbitral proceedings. The Apex Court held that considering the
purpose behind issuance of Section 21 notice, non-service of notice under
Section 21 of the Arbitration Act to Respondent Nos.2 and 3 did not
automatically bar their impleadment as parties to arbitral proceeding.
Also, the judgment in Adavya Projects Pvt. Ltd. has been considered by
the Apex Court in Bhagheeratha Engineering Ltd. (supra) and it is held
that failure to issue notice under Section 21 is not fatal. The judgment
thus, far from assisting the case of the Respondents, actually militates
against them.
28) Also, the present case does not involve failure to follow
agreed procedure. The issue here is about request made under Section 21
of the Arbitration Act. The notice under Section 21 of the Arbitration Act
is necessary mainly for the purpose of deciding whether the claims are
within the period of limitation. Considering the purpose of issuance of
request under Section 21 of the Arbitration Act, in my view, failure to call
upon Respondents to participate in appointment of Arbitrator would not
mean that there is no invocation of arbitration in the present case. The
objection accordingly deserves to be rejected.
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TERRITORIAL JURISDICTION
29) Respondent Nos.1 to 4 have challenged jurisdiction of this
Court to try and entertain the reference proceedings and also the Petition
for interim measures. It is contended that the arbitration clause does not
designate seat of arbitration but merely specified
Mumbai/Delhi/Kolkata/Chennai as venues to the convenience of the
Applicant. They contend that since the Loan Agreement is executed in
Raipur, the mortgaged properties are situated in Raipur and
Respondents are residents/carry on business in Raipur, Bombay High
Court does not have jurisdiction to appoint arbitrator or to consider the
Petition for making interim measures. To decide the objection, it would be
necessary to consider arbitration agreement in Clause-12 of the loan
agreement. :-
12. Dispute Resolution:-
If 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 the Facility Documents 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 to be held in [Mumbai/Delhi/Kolkata/Chennai] as may be
decided by the Lender in accordance with the Arbitration and
Conciliation Act, 1996, or any statutory amendments thereto and shall
be referred to a sole arbitrator to be appointed by the Lender. The award
of the arbitrator shall be final and binding on all parties concerned. The
arbitration proceedings shall be in English language. Cost of arbitration
shall be bome by the Obligors.
Notwithstanding anything contained hereinabove, the Lender reserves
the right to, at its option, also enforce the security under the
Securitization and Reconstruction of Financial Assets and Enforcement
of Security Interest Act, 2002 ("SARFAESI) Act") or proceed to recover
dues from the Obligors under the SARFAESI Act and/or the Recovery of
Debts Due to Banks and Financial Institutions Act, 1993 ("DRT Act")
30) Clause-13 relating to jurisdiction is also relevant which
reads thus :-
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13. Jurisdiction:-
Subject to Clause 12 above, the Parties hereto agree that ail disputes
arising out of and/or in relation to this Agreement, shall be subject to
exclusive jurisdiction of the courts/tribunals as set out in Serial No. 13 of
Annexure 1 hereto. The Lender may, however, in its absolute discretion
commence any legal action or proceedings arising out of this Agreement
in any other court, tribunal or other appropriate forum and the Obligors
hereby consent to that jurisdiction.
31) Thus, under Clause-12 of the Loan Agreement, the parties
agreed that the disputes, differences or claims arising between them
shall be settled by arbitration to be held in
Mumbai/Delhi/Kolkata/Chennai, as may be decided by the lender, and
shall be referred to sole arbitrator appointed by the lender. Though the
Applicant had exclusive authority to appoint the arbitrator, it has filed
application under Section 11 of the Arbitration Act for appointment of
arbitrator instead of unilaterally appointing the Arbitrator under Clause-
12 considering the development of law on the subject of unilateral
appointment of arbitrator.
32) Under Clause-12, parties have agreed that the arbitration
shall be held in Mumbai/Delhi/Kolkata/Chennai and it was left to the
Applicant to choose one out of the four places for holding of arbitration.
Applicant has chosen Mumbai as the place where the arbitration would
be held and accordingly has filed the Application for appointment of
arbitrator before this Court.
33) Under Clause-13 of the Loan Agreement, parties agreed that
the disputes arising out of or in relation to the Loan Agreement, shall be
subject to exclusive jurisdiction of the Courts/Tribunals as set out in
Serial No.13 of Annexure-1. However, the column at Serial No.13 in
Annexure-1 relating to jurisdiction is left blank. Thus, there is no
agreement between the parties on territorial jurisdiction. However,
Clause-13 further stipulates that the lender may, at his absolute
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discretion, commence any legal action or proceedings arising out of the
agreement in other court, tribunal or other appropriate forum and the
borrowers consented to that jurisdiction. Since the law is well settled that
the parties cannot, by agreement, confer jurisdiction on a Court, the
latter part of Clause-13 vesting discretion in favour of the Applicant to
choose the court/tribunal/forum of its choice is not helpful in deciding the
issue of territorial jurisdiction.
34) In my view, the issue of territorial jurisdiction of this Court
to entertain reference proceedings hinges squarely on the issue whether
the cities specified in Clause-12 are 'seats' or 'venues' of arbitration. If
those cities are held to be seat of arbitration, then this Court would
undoubtedly have jurisdiction to entertain and decide reference
proceedings as Mumbai is one of the places where the arbitration is
agreed to be held. If on the other hand, those cities are held to be venues
of arbitration, according to the borrowers, the reference proceedings will
have to be filed before Chhattisgarh High Court where the cause of action
has arisen. As of now, I am not discussing the principle of venue
becoming seat of arbitration.
35) Mr.Dutta has strenuously relied on judgment of the Apex
Court in Ravi Ranjan Developers (supra) in support of his contention that
arbitration clause containing similar stipulation has been interpreted by
the Apex Court to mean that the agreed place was merely a venue and
reference proceedings can only be filed in High Court within whose
jurisdiction either the cause of action has arisen or where the Defendant
resides or carries on the business. In Ravi Ranjan Developers, a
Development Agreement was executed and registered between the
appellant and respondent therein for development of property situated in
Muzaffarpur in Bihar. The Development Agreement contained
arbitration clause as under :-
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"37. That in case of any dispute or difference between the parties arising
out of and relating to this development agreement, the same shall be
settled by reference of the disputes or differences to the Arbitrators
appointed by both the parties and such Arbitration shall be conducted
under the provisions of the Indian Arbitration and Conciliation Act, 1996
as amended from time to time and the sitting of the said Arbitral
Tribunal shall be at Kolkata."
36) The Respondent therein had terminated the Development
Agreement and filed petition under Section 9 of the Arbitration Act in the
Court of District Judge, Muzaffarpur seeking interim measures.
Respondent invoked arbitration clause and filed application under
Section 11 of the Arbitration Act for appointment of arbitrator before the
Calcutta High Court. After withdrawal of that application, fresh
application under Section 11(6) of the Arbitration Act was filed in the
Calcutta High Court. The appellant challenged territorial jurisdiction of
Calcutta High Court to decide the application under Section 11(6) of the
Arbitration Act. Respondent defended the objection contending that the
parties had agreed for jurisdiction of Kolkata and that therefore the
application was rightly filed before Calcutta High Court. The High Court
allowed the application and constituted Arbitral Tribunal. In Appeal
before the Apex Court, the issue was whether the Calcutta High Court
had jurisdiction to entertain the application filed by the Respondent for
appointment of arbitrator. The Apex Court has ruled in favour of the
Appellant holding that the Development Agreement was executed and
registered outside the jurisdiction of Calcutta High Court and that the
agreement pertained to development of property located in Muzaffarpur.
It was held that appellant also had registered office at Patna outside the
jurisdiction of Calcutta High Court. It was further held that no part of
cause of action had arisen within the jurisdiction of Calcutta High Court.
The Apex Court thereafter considered the contention raised on behalf of
the Respondent that the seat of arbitration was in Kolkata and therefore
Calcutta High Court alone had jurisdiction to decide application under
Section 11(6) of the Arbitration Act. The Apex Court has negatived the
contention holding that Kolkata was agreed only as a venue and not seat
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of Arbitral Tribunal. The Apex Court accordingly set aside the order of
the High Court holding that Calcutta High Court did not have jurisdiction
to entertain the reference proceedings.
37) After having gone through the findings recorded by the Apex
Court in the judgment in Ravi Ranjan Developers, it is seen that the first
part of the judgment decides the issue of jurisdiction with reference to
cause of action and holds that no suit could have been filed in a court over
which Calcutta High Court had jurisdiction on account of location of
immovable property in Muzaffarpur, execution of agreement in
Muzaffarpur and residence/business of the appellant at Patna. The Apex
Court held in paras-20, 23, 24 and 25 as under :-
20. The question in this case is, whether the Calcutta High Court had
territorial jurisdiction to pass the impugned orders. The answer to the
question has to be in the negative for the reason that the Development
Agreement was admittedly executed and registered outside the
jurisdiction of the High Court of Calcutta, the agreement pertains to
development of property located in Muzaffarpur outside jurisdiction of
the Calcutta High Court. The Appellant has its registered office in Patna
outside the jurisdiction of Calcutta High Court. The Appellant has no
establishment and does not carry on any business within the jurisdiction
of the Calcutta High Court. As admitted by the Respondent, no part of the
cause of action had arisen within the jurisdiction of Calcutta High Court.
23. Subject to the pecuniary or other limitations prescribed by any law,
suits for recovery of immovable property or determination of any other
right to or interest in an immovable property or compensation for wrong
to immovable property, is to be instituted in the Court, within the local
limits of whose jurisdiction, the property is situated. Certain specific
suits relating to immovable property can be instituted either in the Court
within the limits of whose jurisdiction the property is situated, or in the
Court within the local limits of whose jurisdiction the Defendant actually
or voluntarily resides or carries on business.
24. All other suits are to be instituted in a Court, within the local limits of
whose jurisdiction the Defendant voluntarily resides or carries on
business. Where there is more than one Defendant, a suit may be
instituted in the Court within whose jurisdiction any of the Defendants
voluntarily resides or carries on business. A suit may also be instituted
in a Court within whose jurisdiction the cause of action arises either
wholly or in part.
25. In the present case, no suit could have been filed in any Court over
which the Calcutta High Court exercises jurisdiction, since as stated
above, the suit admittedly pertains to immovable property situated at
Muzaffarpur in Bihar, outside the territorial jurisdiction of the Calcutta
High Court and admittedly, no part of the cause of action had arisen
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within the territorial jurisdiction of the Calcutta High Court. The
Appellant who would be in the position of Defendant in a suit, neither
resides nor carries on any business within the jurisdiction of the Calcutta
High Court.
38) The Apex Court thereafter drew distinction between Court
under Section 2(1)(e) of the Arbitration Act and High Court exercising
jurisdiction under Section 11(6) for appointing an Arbitrator and held in
pars-26, 27 and 28 as under :-
26. Of course, under Section 11(6), an application for appointment of an
Arbitrator necessarily has to be moved in the High Court, irrespective of
whether the High Court has the jurisdiction to decide a suit in respect of
the subject matter of arbitration and irrespective of whether the High
Court at all has original jurisdiction to entertain and decide suits. As
such, the definition of Court in Section 2(1)(e) of the A&C Act would not
be applicable in the case of a High Court exercising jurisdiction under
Section 11(6) of the A&C Act to appoint an Arbitrator/Arbitral Tribunal.
27. At the same time, an application under Section 11(6) of the A&C Act
for appointment of an Arbitrator/Arbitral Tribunal cannot be moved in
any High Court in India, irrespective of its territorial jurisdiction. Section
11(6) of the A&C Act has to be harmoniously read with Section 2(1)(e)
of the A&C Act and construed to mean, a High Court which exercises
superintendence/supervisory jurisdiction over a Court within the
meaning of Section 2(1)(e) of the A&C Act.
28. It could never have been the intention of Section 11(6) of the A&C
Act that arbitration proceedings should be initiated in any High Court in
India, irrespective of whether the Respondent resided or carried on
business within the jurisdiction of that High Court, and irrespective of
whether any part of the cause of action arose within the jurisdiction of
that Court, to put an opponent at a disadvantage and steal a march over
the opponent.
39) The Apex Court in Ravi Ranjan Developers (supra)
thereafter considered the contention raised on behalf of the Respondent
therein that the seat of arbitration was at Kolkata and that therefore
Calcutta High Court had jurisdiction to appoint an arbitrator. The Apex
Court held in paras-43 to 48 as under:
43. This Court has perused the Development Agreement. The contention
of the Respondent in the Affidavit in Opposition, that the parties to the
arbitration agreement had agreed to submit to the jurisdiction of
Calcutta High Court, is not correct. The parties to the arbitration
agreement only agreed that the sittings of the Arbitral Tribunal would be
in Kolkata. Kolkata was the venue for holding the sittings of the Arbitral
Tribunal.
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44. In Union of India v. Hardy Exploration and Production (India) Inc. a
three Judge Bench of this Court held that the sittings at various places
are relatable to venue. It cannot be equated with the seat of arbitration
or place of arbitration, which has a different connotation.
45. In Mankastu Impex Private Limited v. Airvisual Limited 2 a three
Judge Bench of which one of us (Hon. A.S. Bopanna, J) was a member,
held:
"19. The seat of arbitration is a vital aspect of any arbitration
proceedings. Significance of the seat of arbitration is that it
determines the applicable law when deciding the arbitration
proceedings and arbitration procedure as well as judicial review
over the arbitration award. The situs is not just about where an
institution is based or where the hearings will be held. But it is all
about which court would have the supervisory power over the
arbitration proceedings. In Enercon (India) Ltd. v. Enercon
GmbH [Enercon (India) Ltd. v. Enercon GmbH, (2014) 5 SCC 1:
(2014) 3 SCC (Civ) 59], the Supreme Court held that: (SCC pp. 43
& 46, paras 97 & 107)
"[T]he location of the seat will determine the courts that will have
exclusive jurisdiction to oversee the arbitration proceedings. It
was further held that the seat normally carries with it the choice
of that country's arbitration/curial law."
20. It is well settled that "seat of arbitration" and "venue of
arbitration" cannot be used interchangeably. It has also been
established that mere expression "place of arbitration" cannot be
the basis to determine the intention of the parties that they have
intended that place as the "seat" of arbitration. The intention of
the parties as to the "seat" should be determined from other
clauses in the agreement and the conduct of the parties."
46. In this case, the Development Agreement provided that the sittings
of the Arbitral Tribunal would be conducted in Kolkata. As observed
above, the parties never agreed to submit to the jurisdiction of Calcutta
High Court in respect of disputes, nor did the parties agree upon Kolkata
as the seat of arbitration. Kolkata was only the venue for sittings of the
Arbitral Tribunal.
47. It is well settled that, when two or more Courts have jurisdiction to
adjudicate disputes arising out of an arbitration agreement, the parties
might, by agreement, decide to refer all disputes to any one Court to the
exclusion of all other Courts, which might otherwise have had
jurisdiction to decide the disputes. The parties cannot, however, by
consent, confer jurisdiction on a Court which inherently lacked
jurisdiction, as argued by Mr. Sinha.
48. In this case, the parties, as observed above did not agree to refer
their disputes to the jurisdiction of the Courts in Kolkata. It was not the
intention of the parties that Kolkata should be the seat of arbitration.
Kolkata was only intended to be the venue for arbitration sittings.
Accordingly, the Respondent himself approached the District Court at
Muzaffarpur, and not a Court in Kolkata for interim protection under
Section 9 of the A&C Act. The Respondent having himself invoked the
jurisdiction of the District Court at Muzaffarpur, is estopped from
contending that the parties had agreed to confer exclusive jurisdiction to
the Calcutta High Court to the exclusion of other Courts. Neither of the
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parties to the agreement construed the arbitration clause to designate
Kolkata as the seat of arbitration. We are constrained to hold that
Calcutta High Court inherently lacks jurisdiction to entertain the
application of the Respondent under Section 11(6) of the Arbitration
Act. The High Court should have decided the objection raised by the
Appellant, to the jurisdiction of the Calcutta High Court, to entertain the
application under Section 11 (6) of A&C Act, before appointing an
Arbitrator.
40) The Apex Court thus held that the Development Agreement
provided that the sittings of the Arbitral Tribunal would be conducted at
Kolkata and parties never agreed to submit to jurisdiction of Calcutta
High Court nor they agreed upon Kolkata as the seat of arbitration.
Moreover, the Apex court considered the effect of respondent himself
approaching the District Court at Muzzafapur Nagar for seeking interim
measures under Section 9 of the Arbitration Act and held that he was
estopped from contending that the parties had agreed to confer exclusive
jurisdiction on Calcutta High Court. Thus, in Ravi Ranjan Developers the
Apex Court has held that the arbitration agreement merely agreed for
holding of sittings of arbitration at Kolkata and that therefore parties had
merely agreed for venue and not the seat. Since there was no agreement
on seat, the Apex Court considered the place where the cause of action
had arisen, where the property was situated and where the appellant was
residing/carrying on business for deciding the jurisdiction and
accordingly held that Calcutta High Court did not have jurisdiction to
appoint arbitrator. Also the judgment is rendered in the peculiar facts of
the case where the Respondent therein had invoked jurisdiction of
Muzaffarpur District Court by filing Section 9 Petition and thereafter
proceeded to contend that the Calcutta High Court had the exclusive
jurisdiction.
41) Before proceeding further, it must be noted that attention of
the Apex Court in Ravi Ranjan Developers was brought to the judgment
in BGS SGS Soma (supra) and the judgment is noted in para-39 and
distinguished holding that the same related to application of Part-I of the
Arbitration Act to international commercial arbitration where the seat of
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arbitration was not in India. However, BGS SGS Soma, is a judgment
delivered by three Judge Bench of the Supreme Court. The judgment
holds that where the arbitration agreement is silent on 'seat' but
stipulates the 'venue', the 'venue' can be treated as the 'seat'. It has held
in para-82 off the judgment as under :-
82. On a conspectus of the aforesaid judgments, it may be concluded that
whenever there is the designation of a place of arbitration in an
arbitration clause as being the "venue" of the arbitration proceedings, the
expression "arbitration proceedings" would make it clear that the "venue"
is really the "seat" of the arbitral proceedings, as the aforesaid
expression does not include just one or more individual or particular
hearing, but the arbitration proceedings as a whole, including the
making of an award at that place. This language has to be contrasted
with language such as "tribunals are to meet or have witnesses, experts
or the parties" where only hearings are to take place in the "venue",
which may lead to the conclusion, other things being equal, that the
venue so stated is not the "seat" of arbitral proceedings, but only a
convenient place of meeting. Further, the fact that the arbitral
proceedings "shall be held" at a particular venue would also indicate that
the parties intended to anchor arbitral proceedings to a particular place,
signifying thereby, that that place is the seat of the arbitral proceedings.
This, coupled with there being no other significant contrary indicia that
the stated venue is merely a "venue" and not the "seat" of the arbitral
proceedings, would then conclusively show that such a clause designates
a "seat" of the arbitral proceedings. In an international context, if a
supranational body of rules is to govern the arbitration, this would
further be an indicia that "the venue", so stated, would be the seat of the
arbitral proceedings. In a national context, this would be replaced by the
Arbitration Act, 1996 as applying to the "stated venue", which then
becomes the "seat" for the purposes of arbitration.
42) If Kolkata was the 'venue' of arbitration in Ravi Ranjan
Developers and if there was silence as to the 'seat' in the arbitration
clause, then venue could have been treated as the seat following the
judgment in BGS SGS Soma. However, the Apex Court has proceeded to
decide the issue of jurisdiction in Ravi Ranjan Developers by holding that
Kolkata could not be treated as seat of arbitration and that jurisdiction
would depend on the place where the cause of action arose and the
appellant therein resided. Does this mean that the Supreme Court has
made a departure from the principle of venue being treated as seat
discussed in BGS SGS Soma? However, in recent three Judge Bench
judgment in Arif Azim Co. Ltd. Vs. Micromax Informatix FZE 8 the Apex
8
(2025) 9 SCC 750
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Court has reiterated the ratio of the judgment in BGS SGS Soma and has
held as under:
58. Thus, this Court in BGS SGS SOMA [BGS SGS SOMA JV v. NHPC, (2020) 4
SCC 234 : (2020) 2 SCC (Civ) 606] laid down a three-condition test as to when
"venue" can be construed as "seat" of arbitration. The conditions that are re-
quired to be fulfilled are as under:
(i) The arbitration agreement or clause in question should designate or men-
tion only one place;
(ii) Such place must have anchored the arbitral proceedings i.e. the arbitral
proceedings must have been fixed to that place alone without any scope of
change; and
(iii) There must be no other significant contrary indicia to show that the
place designated is merely the venue and not the seat.
59. Where the aforesaid conditions are fulfilled, then the place that has been des-
ignated as "venue" can be construed as the "seat" of arbitration. It is clarified
that, while applying the aforesaid test, it must be borne in mind that where a
supranational body of rules has been stipulated in an arbitration agreement or
clause, such stipulation is not to be regarded as a contrary indicium, such stipu-
lation does not mean that no seat has been designated rather such stipulation is
a positive indicia that the place so designated is actually the "seat".
60. The aforesaid test was approvingly applied by this Court in Mankastu Impex
(P) Ltd. v. Airvisual Ltd.[Mankastu Impex (P) Ltd. v. Airvisual Ltd., (2020) 5
SCC 399 : (2020) 3 SCC (Civ) 278] and it was held that where the reference to a
place in the arbitration agreement is not simply as "venue" and rather a refer-
ence as place for final resolution by arbitration, such place shall be construed as
the seat of arbitration.
43) In my view, however, it is not necessary to delve deeper into
this aspect as Mumbai can be treated as one of the seats agreed by the
parties for holding arbitration.
44) Section 20 of the Arbitration Act deals with the place of
arbitration. Sub-section (1) of Section 20 provides for agreement by
parties on the place of arbitration and sub-section (2) provides for
determination of place of arbitration by the Tribunal. As contra-distinct
from the 'place' of arbitration which becomes the seat, sub-section (3) of
Section 20 dealt with the 'venue' at which the Arbitral Tribunal may
meet, according to the convenience of the parties.
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45) In the present case, the language employed in Clause-12 of
the Loan Agreement is, ' the same shall be settled by arbitration to be
held in Mumbai/Delhi/Kolkata/Chennai'. Thus, the parties have agreed
that the arbitration shall be 'held' inter-alia at Mumbai. This is
contradistinct from the language employed in arbitration clause in Ravi
Ranjan Developers where the clause stipulated that 'sitting of the said
Arbitral Tribunal shall be at Kolkata'. Thus, the parties in Ravi Ranjan
Developers agreed that the 'sitting' of the Tribunal shall be conducted at
Kolkata. As against this, here parties have agreed that the arbitration
shall be 'held' in Mumbai. I am therefore of the view that the seat of the
arbitration in the present case is 'Mumbai'. The four places of
Mumbai/Delhi/Kolkata/Chennai agreed by the parties in Clause-12 are
not the convenient venues. They are seats of arbitration. As observed
above, the Applicant had the choice of deciding where the arbitration
shall be held out of the four chosen cities. The Applicant has chosen
Mumbai as the place where arbitration shall be held. Accordingly,
Mumbai is the seat of arbitration.
46) Once Mumbai is treated as the seat of arbitration, resolution
of issue of jurisdiction becomes easy and Mr. Dutta also does not
seriously dispute that if seat of the arbitration is at Mumbai, this Court
would have jurisdiction to decide the reference proceedings. In several
judgments such as BGS SGS Soma, and Hindustan Constructions Co. Ltd
Versus. NHPC Ltd and another 9, it is held that once the seat of
arbitration is designated, the same operates as an exclusive jurisdiction
clause and only the court within whose jurisdiction the seat is located
would have jurisdiction to the exclusion of all other Courts.
47) Accordingly, the objection raised by Mr. Dutta to the
jurisdiction of this Court to decide reference proceedings or to entertain
Petition under Section 9 of the Arbitration Act for interim measures, is
accordingly repelled.
9
2020 4 SCC 310
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OBJECTION OF NON-ARBITRABILITY
48) Respondents-borrowers have contended that since the
Applicant has invoked the remedy under the SARFAESI Act, it is
precluded from seeking reference to arbitration. Reliance is placed on
judgment of the Apex Court in Vidya Drolia (supra) in support of the
contention that claims of the banks and financial institutions covered
under the Recovery of Debts Due to Banks and Financial Institutions
Act,1993 (RDDB Act) are not arbitrable.
49) On the other hand, the Applicant has relied on judgment of
the Apex Court in M.D. Frozen Foods in support of his contention that
exercise of remedy under the SARFAESI Act is not a bar for adjudication
of disputes in arbitration. In M.D. Frozen Foods one of the issues before
the Apex Court was whether arbitration proceedings initiated by the
Respondent therein can be carried on along with SARFAESI proceedings
simultaneously. The issue is answered by the Apex Court holding in
paras-29 to 33 as under :-
29. The aforesaid two Acts are, thus, complementary to each other and it
is not a case of election of remedy.
30. The only twist in the present case is that, instead of the recovery
process under the RDDB Act, we are concerned with an arbitration
proceeding. It is trite to say that arbitration is an alternative to the civil
proceedings. In fact, when a question was raised as to whether the
matters which came within the scope and jurisdiction of the Debt
Recovery Tribunal under the RDDB Act, could still be referred to
arbitration when both parties have incorporated such a clause, the
answer was given in the affirmative. 13 That being the position, the
appellants can hardly be permitted to contend that the initiation of
arbitration proceedings would, in any manner, prejudice their rights to
seek relief under the SARFAESI Act.
31. The discussion in the impugned order 3 refers to a judgment of the
Full Bench of the Delhi High Court in HDFC Bank Ltd. v. Satpal Singh
Bakshi 13 opining that an arbitration is an alternative to the RDDB Act.
In that context, the learned Single Judge 3 has rightly held that this Full
Bench judgment 13 does not, in any manner, help the appellants but, in
fact, supports the case of the respondent. The jurisdiction of the civil
court is barred for matters covered by the RDDB Act, but the parties still
have freedom to choose a forum, alternate to, and in place of the regular
courts or judicial system for deciding their inter se disputes. All disputes
relating to the "right in personam" are arbitrable and, therefore, the
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choice is given to the parties to choose this alternative forum. A claim of
money by a bank or a financial institution cannot be treated as a "right in
rem", which has an inherent public interest and would thus not be
arbitrable.
32. The aforesaid is not a case of election of remedies as was sought to be
canvassed by the learned Senior Counsel for the appellants, since the
alternatives are between a civil court, Arbitral Tribunal or a Debt
Recovery Tribunal constituted under the RDDB Act. Insofar as that
election is concerned, the mode of settlement of disputes to an Arbitral
Tribunal has been elected. The provisions of the SARFAESI Act are thus,
a remedy in addition to the provisions of the Arbitration Act. In
Transcore v. Union of India 16 it was clearly observed that the
SARFAESI Act was enacted to regulate securitisation and reconstruction
of financial assets and enforcement of security interest and for matters
connected therewith. Liquidation of secured interest through a more
expeditious procedure is what has been envisaged under the SARFAESI
Act and the two Acts are cumulative remedies to the secured creditors.
33. SARFAESI proceedings are in the nature of enforcement
proceedings, while arbitration is an adjudicatory process. In the event
that the secured assets are insufficient to satisfy the debts, the secured
creditor can proceed against other assets in execution against the
debtor, after determination of the pending outstanding amount by a
competent forum.
50) While the issue before the Apex Court in M.D. Frozen Foods
was with regard to interplay between the provisions of the Arbitration
Act and SARFAESI Act, the issue before the Apex Court in Vidya Drolia
was slightly different. However, it appears that while delivering the
judgment in M.D. Frozen Foods, the Apex Court took note of the Full
Bench judgment of Delhi High Court in HDFC Bank Ltd. Versus. Satpal
Singh Bakshi10 in which it was opined that arbitration is an alternative
to the RDDB Act.
51) In Vidya Drolia, the Apex Court did not agree with the view
of the Delhi High Court in HDFC Bank Ltd Versus. Satpal Singh Bakshi
(supra) and proceeded to overrule the same. In Vidya Drolia, the Apex
Court has ruled that the claims of banks and financial institutions
covered under the RDDB Act are not arbitrable as the interpretation
otherwise would deprive and deny the banks and financial institutions of
specific rights including the modes of recovery specified under the RDDB
Act. The Apex Court held in paragraph-58 of the judgment as under :-
10
2012 SCC Online Del 4815
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58. Consistent with the above, observations in Transcore on the power of
the DRT conferred by the DRT Act and the principle enunciated in the
present judgment, we must overrule the judgment of the Full Bench of
the Delhi High Court in HDFC Bank Ltd. v. Satpal Singh. Bakshi, which
holds that matters covered under the DRT Act are arbitrable. It is
necessary to overrule this decision and clarify the legal position as the
decision in HDFC Bank Ltd. has been referred to in M.D. Frozen Foods
Exports (P) Ltd. but not examined in light of the legal principles relating
to non-arbitrability. The decision in HDFC Bank Ltd. holds that only
actions in rem are non-arbitrable, which as elucidated above is the
correct legal position. However, non-arbitrability may arise in case of the
implicit prohibition in the statute, conferring and creating special rights
to be adjudicated by the courts/public fora, which right including
enforcement order/provisions cannot be enforced and applied in case of
arbitration. To hold that the claims of banks and financial institutions
covered. under the DRT Act are arbitrable would deprive and deny these
institutions of the specific rights including the modes of recovery
specified in the DRT Act. Therefore, the claims covered by the DRT Act
are non-arbitrable as there is a prohibition against waiver of jurisdiction
of the DRT by necessary implication. The legislation has overwritten the
contractual right to arbitration.
(emphasis added)
52) Thus in Vidya Drolia, the judgment in M.D. Frozen Foods
(dealing with the interplay between Arbitration Act and SARFAESI Act)
is apparently not overruled. Also the judgment in Vidya Drolia seeks to
protect the interests of banks and financial institutions covered by RDDB
Act by not depriving them of remedies that are available under that Act
merely because there is arbitration clause in the loan agreement. The
Apex Court has ruled that the legislation (RDDB Act) has over written
the contractual right of arbitration. In my view, therefore the contention
sought to be raised by the Respondent-Borrowers that the judgment of
the Apex Court in MD Frozen Foods is overruled in Vidya Drolia does not
appear to be correct position.
53) Like arbitration proceedings, even proceedings under the
RDDB Act are adjudicatory in nature as the arbitrator or the DRT
adjudicates the claim of the banks or financial institutions. On the other
hand, the remedy under the SARFAESI Act is merely in the nature of
enforcement where no adjudication takes place. This is yet another
reason why mere initiation of proceedings under the SARFAESI Act
cannot be a ground for not permitting adjudicatory proceedings under
the Arbitration Act and vice versa. However, when it comes to RDDB Act,
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there is statutory overwriting of arbitration agreement between the
parties. The moment bank or a financial institution is covered under the
RDDB Act, arbitration cannot be conducted for adjudication of such
claims of such banks or financial institutions merely on the strength of
arbitration clause in the Loan Agreement. The idea behind such
prohibition is that there cannot be two 'adjudications' in respect of same
claim. Since SARFAESI proceedings are not adjudicatory in nature, but
are merely for enforcement, initiation of the same would not bar
adjudication of Applicant's claims in arbitration.
54) Mr. Naphade has placed on record Notification dated 18
December 2015 issued by the Ministry of Finance, Department of
Financial Services, under which Applicant has been notified to be
'financial institution' for the purpose of SARFAESI Act. However, he has
clarified that the Applicant has not been notified as a 'financial
institution' under the RDDB Act. Respondent-borrowers have also not
placed any Notification on record nor have even pleaded in the Petition
that the Applicant is a 'financial institution' notified under the RDDB Act.
Since Petitioner is not covered by RDDB Act, the ratio of the judgment in
Vidya Drolia, would not apply and Applicant's remedy to arbitrate would
continue to survive.
55) The issue as to whether the non-banking financial company
covered under the SARFAESI Act can maintain an Original Application
before DRT arose for consideration before a Single Judge of this Court in
ECL Finance Ltd Versus. Mr. Harikishan Shankarji Gudipati Alias Dr.
Gogika Harikishan and others11, in which this Court has held in
paragraphs-24, 25 and 26 as under :-
24. I have considered the oral as well as the written submissions of the
Learned Advocates for the parties. The principal thrust of the
submissions made on behalf of the Respondents is that the decree is
required to be transferred to the DRT under the provisions of Section 31
of the RDB Act. On the other hand, the Petitioner contends that the
11
2016 SCC Online Bom 15898
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provisions of the RDB Act do not apply to the Petitioner. It is not in
dispute that the RDB Act would apply to such banks and financial
institutions as defined under the said Act. The term "financial institution"
is defined under Section 2(h) of the RDB Act as under:
Section 2(h) "Financial Institution" means
"(i) a public financial institution within the meaning of Section 4A
of the Companies Act, 1956 (1 of 1956);
(ii) such other institution as the Central Government may,
having regard to its business activity and the area of its
operation in India by notification, specify"
25. Although the Respondent has in the written submission made a
vague reference to the definition of a Public Financial Institution under
the Companies Act, 2013, there is nothing on record to show that the
Petitioner is a Public Financial Institution. There is nothing on record to
show, nor was it contended by the Respondents that the Petitioner is
notified by the Central Government under Sub-Section (2) of Section 4-A
of the Companies Act or that the Petitioner is notified by the Central
Government under the provisions of the Companies Act, 2013 as a
"Public Financial Institution".
26. Similarly, there is no notification by which the Petitioner is notified
to be a Financial Institution under the provisions of the RDB Act. By the
Notification dated 5 th August 2016, the Petitioner is notified as a
"Financial Institution" only under the provisions of Section 2(1)(m) (iv)
read with Section 31A of SARFAESI Act. The said Notification is not
issued under the provisions of RDB Act. Thus, it is clear that the
Petitioner is not a "Financial Institution" under the provisions of the RDB
Act and consequently, the provisions of the same would not apply. The
contention therefore that the decree is required to be transferred to the
DRT under RDB Act is untenable.
56) Thus, mere notification as a financial institution under
Section 2(1)(m)(iv) read with Section 31A of the SARFESI Act does not
mean that such entity automatically becomes a financial institution
under the RDDB Act. It must be clarified here that the reporter (SCC)
has erroneously put a remark on the report that the judgment has been
reversed by the Apex Court. The judgment of learned Single Judge of this
Court in ECL Finance Ltd. (supra) was in two parts. In the first part, this
Court ruled that mere notification of an entity as a financial institution
under the SARFAESI Act does not make it automatically a financial
institution under the RDDB Act. In the second part, the Single Judge of
this Court dealt with Contempt Petition and after recording prima-facie
finding of breach of undertaking, admitted the Contempt Petition. An
intra-court Appeal under Section 19 of the Contempt of Courts Act, 1971
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was filed by the aggrieved parties challenging obviously only that part of
the judgment which admitted the Contempt Petition. The Appeal Court
admitted the Appeal leaving open the issue of maintainability to be
considered at the time of final hearing. Aggrieved by the order of the
Appellate Court admitting the Appeal, the Appellant filed further Appeal
before the Apex Court challenging the order of admission of the Appeal. It
was submitted before the Apex Court by the Respondent therein that the
Single Judge had considered the merits of the case and had already made
his mind to punish the respondent therein and that therefore appeal
would lie against the order of the learned Single Judge. The Apex Court
accordingly set aside the order of the Appeal Court admitting the Appeal
holding that the same was not maintainable. The Apex Court requested
the learned Single Judge of this Court to consolidate the execution
petition and contempt proceedings to determine the exact amount
payable by the Respondents in terms of the decree. It therefore cannot be
contended that the entire judgment of the learned Single Judge of this
Court in ECL Finance Ltd. is reversed by the Apex Court.
57) Thus, the law appears to be well settled that mere
notification of an entity as a financial institution under the SARFAESI
Act does not make it a financial institution under the RDDB Act. Since the
Petitioner is not notified as financial institution under the RDDB Act, the
ratio of the judgment in Vidya Drolia would not be attracted in the
present case and the Applicant is free to exercise the remedy of
arbitration notwithstanding initiation of SARFAESI proceedings.
58) The issue of SARFAESI proceedings not operating as a bar
for conduct of arbitration proceedings has been considered by the
learned Single Judge of this Court in Tata Motors Finance Solutions Ltd.
(supra) in which the issue is captured in the first paragraph of the
judgment as under :-
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The respondents in these proceedings have raised a fundamental
objection regarding jurisdiction of this Court to entertain the two
petitions filed under Section 9 of the Arbitration and Conciliation Act,
1996 (Arbitration Act) and an application under Section 11 thereof, on
the ground that the petitioner - applicant in these proceedings is a
'financial institution' covered under the provisions of the Securitisation
and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (SARFAESI Act), further claiming that the petitioner
ought to proceed under the SARFAESI Act and that the remedy of
arbitration cannot be invoked by the petitioner at all.
59) This Court answered the issue in paragraphs-35 to 38 as
under :-
35. As regards the contention raised on behalf of the respondents that
arbitration cannot be resorted to as the petitioner has referred to the
RDDB Act and SARFAESI Act in the agreement itself, reserving liberty to
invoke the provisions of the said statutes, this Court finds that mere
reference to the said statutes cannot inure to the benefit of the
respondents. As noted hereinabove, the SARFAESI Act is concerned only
with the enforcement process after the adjudicatory process through
arbitration is completed. Therefore, reference to the SARFAESI Act in
the agreements cannot be a bar for the petitioner to invoke arbitration.
The reference to RDDB Act in the agreements is limited to the extent
that, if in future, there is a change in law and the petitioner is included
under the definition of 'financial institution' under the RDDB Act, the
petitioner has reserved its right to proceed under the RDDB Act. As on
today, the petitioner is admittedly not notified as a 'financial institution'
under the RDDB Act, and therefore, the adjudicatory process of
arbitration is clearly available to the petitioner, in the light of the above-
quoted arbitration clause in the agreements executed between the
parties. Thus, the said contention raised on behalf of the respondents is
also without any substance.
36. A perusal of the above-quoted arbitration clause indicates that in
case of disputes arising between the parties, the adjudicatory process of
arbitration has to be resorted to. The petitioner, in the present case, has
indeed invoked arbitration. This Court finds that there are arbitrable
disputes that have arisen between the parties and that therefore, both
the petitions under Section 9 and the application under Section 11 of the
Arbitration Act can certainly be entertained.
37. In the light of the above, the objection regarding jurisdiction raised
on behalf of the respondents is rejected.
38. The petitioner has claimed interim measures in the backdrop of the
material placed on record to indicate the defaults on the part of the
respondents in repayment of loans advanced for purchase of vehicles.
The subject vehicles were hypothecated with the petitioner. The
respondents have not been able to dispute the fact that they have indeed
defaulted. In such a situation, there is enough material placed on record
on behalf of the petitioner to show that, unless interim measures, as
prayed on behalf of the petitioner, are granted, there is likelihood of the
respondents dealing with the subject vehicles, including creating third
party rights, which would unnecessarily complicate the matters, pending
resolution of disputes through arbitration.
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60) Mr. Dutta has attempted to distinguish the judgment in Tata
Capital Finance Solutions by contending that the Petitioner therein had
not undertaken any measure under the SARFAESI Act and that therefore
it was held that bar under Section 34 of the Arbitration Act would not
apply in the facts and circumstances of that case. It is well settled
position that judgment is an authority for what it decides and not what
can be logically deduced therefrom. [SEE: Commissioner Of Customs
(Port), Chennai Versus. Toyata Kirloskar Motor Pvt. Ltd. 12 and
Secundrabad Club and Others Versus. CIT-V and Another 13]. The ratio of
the judgment in Tata Capital Finance Solutions Ltd (supra) is that non-
notification of a financial institution under the RDDB Act enables it to
exercise the remedy of arbitration. The judgment cannot be read to mean
that an exposition of law is made therein that the moment SARFAESI
remedy is exercised, a financial institution is precluded from
undertaking adjudicatory measures under the Arbitration Act.
61) Mr. Dutta has relied upon judgment of Division Bench of
Delhi High Court in Tata Capital Housing Finance Ltd. Versus. Shri
Chand Construction And Appatment Pvt. Ltd. And others 14 in support of
his contention that a financial institution has an option to enforce
security under the SARFESI Act and the moment that option is
exercised, the arbitration agreement ceases to have effect. However, the
judgment is rendered in the light of peculiar facts of that case where the
arbitration clause provided that in the event of change in the legal status
of Tata Capital Housing Finance Ltd. (TCHFL) or any change or
amendment in law or notification and TCHFL is brought under the
purview of SARFAESI Act or RDDB Act enabling TCHFL to enforce the
security under the SARFAESI Act or proceed to recover dues under the
SARFAESI Act/RDBB Act, the arbitration provision shall be at option of
TCHFL and shall cease to have any effect. It was further agreed that if
12
(2007) 5 SCC 371
13
(2024) 18 SCC 310
14
Manu-DE-3216 2021
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arbitration proceedings were initiated but no award was made, the
proceedings can be terminated in the event of TCHFL being notified
under the SARFAESI Act or RDDB Act at the option of TCHFL. It is in the
light of the above facts that the Division Bench of the Delhi High Court
held that the moment TCHFL exercised the option of enforcing security
under the SARFAESI Act, the option of arbitration could be abandoned at
the will of the Appellant. The Division Bench held that such option was
not available with the Respondent therein. Therefore, the Delhi High
Court upheld the order of the learned Singe Judge holding the arbitration
clause to be invalid. In the present case, the arbitration clause is entirely
different and therefore the judgment of the Delhi High Court in Tata
Capital Housing Finance Ltd. (supra) would have no application to the
present case.
LIMITATION
62) Another objection raised by the Respondent-borrowers while
opposing reference proceedings is that the claims in respect of which
reference is sought are patently barred by limitation. Here there appears
to be some factual dispute between the parties. According to the
Respondent-borrowers, the account was classified as NPA on 3 November
2021. On the other hand, it is the contention of the Applicant that the
account was classified as NPA on 3 January 2023. The Applicant's
contention is borne out from notice dated 6 February 2023, para-3 of
which reads thus :-
3. You/All has/have defaulted repayment of the aforesaid Loan in
violation of the sanction terms, loan documents and other terms agreed
upon and the account has been classified as "non-Performing asset as
defined in Section 2(of of the act on 03-01-2023 (date the account was
classified as NPA).
63) In my view, there appears to be factual dispute about the
exact date on which the account was classified as NPA. The question is a
mixed question of law and fact in the present case and it would be
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inappropriate to deny reference by recording a definitive conclusion that
the claim is barred by limitation. The issue is therefore left open to be
decided in the arbitral proceedings.
64) In my view therefore, reference proceedings need to be made
absolute by constitution of the arbitral tribunal.
INTERIM MEASURES
65) So far as, the petition filed under Section 9 of the Arbitration
Act is concerned, Petitioner faces a unique conundrum where it is unable
to take physical possession of the mortgaged assets since there is a
failure on the part of the Respondent-Borrowers to demarcate the
mortgaged land. According to the Petitioner, the mortgaged property is
amalgamated with the other properties and Respondent No.1 had
specifically agreed to demarcate the same. My attention is invited to the
Affidavit dated 30 November 2019 executed by Respondent No.1 in
which it is stated as under:-
That four boundaries are not mentioned in the sale-deed and the
boundaries on side are as per engineer map provided which has been
self-attested. That the properties amalgamated with my adjacent
properties, I shall separate the property as and when required by TCH
FL.
66) It is complained by the Applicant that in enforcement
proceedings, it is unable to demarcate the land and secure its possession.
It is therefore contended that appointment of Court Receiver is necessary
who can take assistance of local surveyor for the purpose of demarcation
of the mortgaged property.
67) In my view therefore, prima-facie case is made out for grant
of interim measures against the Respondents under Section 9 of the
Arbitration Act. The interim measures sought in Section 9 Petition
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cannot be directed to be adjudicated by the Arbitrator since a private
commissioner/receiver appointed by Arbitrator would not be in a position
to secure demarcation of land for the purpose of handing over physical
possession thereof to the Applicant. According to the Applicant, an
amount of Rs. 4,05,88,153/- was due and payable by the borrower as on 2
October 2025. It is therefore necessary to preserve the subject matter of
arbitration by making necessary interim measures. The borrowers are
apparently taking disadvantage of inability of Petitioner to secure
physical possession of mortgaged property on account of failure on the
part of Respondent No.1 to fulfil the obligation of demarcating the same.
Respondent No.1 is thus taking advantage of his own wrong.
Respondents are also required to be restrained from alienating or
creating third party rights in the mortgaged property during pendency of
the arbitral proceedings. In my view, therefore a perfect case is made out
for directing interim measures against the Respondents.
ORDER
68) Thus the Application filed under Section 11 and Petition filed under Section 9 of the Arbitration Act succeed and I proceed to pass the following order :-
i. Ms. Pooja Khandeparkar, an Advocate of this Court is appointed as the Sole Arbitrator to adjudicate upon the disputes and differences between the parties arising out of the Loan Agreement referred to above. The contact details of the Arbitrator are as under :
Mobile. No :- 9821289160 Office Address :- 01-202, 2 Floor, Hamam House, Ambalal Doshi Marg, Fort, Mumbai.
Email ID :- [email protected] ____________________________________________________________________________ PAGE NO. 38 of 40
2 February 2026 ::: Uploaded on - 02/02/2026 ::: Downloaded on - 02/02/2026 20:34:00 ::: Neeta Sawant CARAPL-35431 OF 2025 ii. A copy of this order be communicated to the learned sole Arbitrator by the Advocate for the Applicant within a period of one week from the date of uploading of this order. The Applicant shall provide the contact and communication particulars of the parties to the Arbitral Tribunal alongwith a copy of this order.
iii. The learned sole Arbitrator is requested to forward the statutory Statement of Disclosure under Section 11(8) read with Section 12(1) of the Act to the parties within a period of 2 weeks from receipt of a copy of this order.
iv. The parties shall appear before the learned sole Arbitrator on such date and at such place as indicated by her, to obtain appropriate direction with regard to conduct of the arbitration including fixing a schedule for pleadings, examination of witnesses, if any, schedule of hearings etc. v. The fees of the sole Arbitrator shall be as prescribed under the Bombay High Court (Fee Payable to Arbitrators) Rules, 2018 and the arbitral costs and fees of the Arbitrator shall be borne by the parties in equal portion and shall be subject to the final Award that may be passed by the Tribunal.
vi. During pendency of arbitral proceedings and till making of an award, there shall be ad-interim measures in terms of prayer clauses (a) and (b) of Section 9 Petition, which read thus :-
a. That pending the hearing the final hearing and disposal of arbitration proceedings between the parties and till execution of the Award, this Hon'ble Court be pleased to pass an order of injunction restraining the Respondents from selling, transferring, alienating, encumbering, creating third party right, title or interest or parting with possession of the property viz. Kh. No: 174/13, Area 0.115 Hectare, Situated At.:
Tatibandh, Raipur, P.C. No: 103, RIC: Raipur-I, Tahsil & Dist.: Raipur (C.G.) Chattisgarh-492 001, more particularly described in Exhibit hereto;
b. That pending the hearing the final hearing and disposal of arbitration proceedings between the parties and till execution of the Award, this Hon'ble Court be pleased to pass an order directing the Respondents to clearly demarcate the property which is mortgaged with the Petitioner in the presence of Court Receiver and to appointing the Court Receiver, as ____________________________________________________________________________ PAGE NO. 39 of 40 2 February 2026 ::: Uploaded on - 02/02/2026 ::: Downloaded on - 02/02/2026 20:34:00 ::: Neeta Sawant CARAPL-35431 OF 2025 receiver of the mortgaged property viz: Kh. No: 174/13, Area 0.115 Hectare, Situated At.: Tatibandh, Raipur, P.C. No: 103, RIC: Raipur-I, Tahsil & Dist.: Raipur (C.G.) Chattisgarh-492 001, more particularly described in Exhibit C hereto with all powers under Order XL Rule 1 of the Code of Civil Procedure, 1908;
69) With the above directions, both Arbitration Application as well as Arbitration Petition are disposed of. There shall be no order as to costs.
[SANDEEP V. MARNE, J.] ____________________________________________________________________________ PAGE NO. 40 of 40 2 February 2026 ::: Uploaded on - 02/02/2026 ::: Downloaded on - 02/02/2026 20:34:00 :::