Document Fragment View

Matching Fragments

4) By letter of sanction dated 21 June 2007, SBI Global sanctioned to Rayalseema trade finance facilities upto the limit of Rs.15 crores subject to the condition of Petitioner alongwith Mr. Sudarshan Malhotra and Sunayana Malhotra, giving their personal guarantees. Petitioner as Director of Rayalseema was authorised to seek revision/enhancement of the trade finance facilities sanctioned vide letter dated 21 June 2007. Rayalseema executed Global Accounts Receivable Management Agreement (GARMA) and Import Factoring Agreement with SBI Global on 3 July 2007. Petitioner executed Deed of Guarantee dated 5 September 2007 in favour of SBI Global. At the request of Rayalseema, SBI Global realigned the credit facilities vide Letter of Sanction dated 13 September 2007 and factoring facility with the limit of Rs.20 crores. The credit facilities were realigned by sanction letter dated 22 November 2007 by enhancing maximum limit of factoring facilities to Rs.22 crores. There was further realigning of credit facilities by letter dated 25 February 2008 enhancing the limit of factoring facilities to Rs.25 crores. By further letter of sanction dated 29 May 2008, the limit of factoring facilities was enhanced to Rs.29 crores.

10) So far as the first objection is concerned, Mr. Jagtiani would submit that it is an elementary proposition that for liability to be foisted on a guarantor, lender must first establish that there is a subsisting debt owing from the principal debtor. That the learned _____________________________________________________________________________ PAGE NO. 6 of 40 TUESDAY, 23 NOVEMBER 2025 Neeta Sawant CARBP-778 OF 2024 Arbitrator has virtually absolved SBI Global from proving that there was any subsequent debt or liability in its favour from the principal debtor-Rayalseema. Inviting my attention to the findings recorded in para-15 of the Award, Mr. Jagtiani would submit that the finding that Rayalseema 'almost admitted the claim' indicates the cavalier manner in which the Arbitral Tribunal has dealt with the vital issue of burden of proof of SBI Global to prove existence of subsisting debt or liability of Rayalseema. That the expression 'almost admitted' actually means no admission. That the Arbitral Tribunal has not conducted any enquiry by discussing evidence on record for holding that there exists any subsisting debt or liability by Rayalseema towards SBI Global. That the finding of 'almost admission of claim' by Rayalseema is factually incorrect as both Rayalseema as well as Petitioner specifically denied any such liability.

12 (2003) 3 SCC 49 13 (1970) 1 SCC 60 14 (2019) 15 SCC 131 15 (2014) 9 SCC 263 _____________________________________________________________________________ PAGE NO. 11 of 40 TUESDAY, 23 NOVEMBER 2025 Neeta Sawant CARBP-778 OF 2024 On above broad submissions, Mr. Balsara would pray for dismissal of the Arbitration Petition.

REASONS AND ANALYSIS

18) Petitioner was a director of Second Respondent- Company-Rayalseema and is shown to have been a guarantor to the credit facilities availed by Rayalseema initially upto the limit of Rs.15 crores, which was gradually enhanced from time to time. On account of Rayalseema's failure to repay the outstanding loan amounts, SBI Global initially filed a suit in this Court, which was driven to arbitration by Petitioner Rayalseema by filing application under Section 8 of the Arbitration Act. Despite this Court rejecting the application, Petitioner and Rayalseema approached the Apex Court and secured an order for resolution of disputes through private arbitration.

23) In my view, the above contentions raised by the Petitioner arise out of skewed and myopic reading of the Arbitral Award. After setting out the facts, the Arbitral Tribunal has discussed the pleadings of the Petitioner and Rayalseema in paras- 15 to 17 of the Award. In para-15 of the Award, the Arbitral Tribunal has discussed the contents of the Statement of Defence filed by Rayalseema. It appears that the Arbitral Tribunal has perused the contents of the Statement of Defence of Rayalseema and has arrived at a finding that claim of SBI Global, as well as, execution of Deed of Guarantee dated 5 September 2007 by the Petitioner is admitted by Rayalseema. The Tribunal further contended that Rayalseema also admitted the liability to pay the amount to SBI Global. I have gone through the Statement of Defence filed by Rayalseema. Apart from raising few technical objections, _____________________________________________________________________________ PAGE NO. 14 of 40 TUESDAY, 23 NOVEMBER 2025 Neeta Sawant CARBP-778 OF 2024 Rayalseema has not asserted in its reply that it never availed any credit facilities from SBI Global. In fact, in para-8 of the Statement of Defence, Rayalseema admitted sanction of credit facilities vide letter dated 21 June 2007. Rayalseema further admitted sanctioning of guarantee dated 5 September 2007 by Petitioner in paras-12 to 14 of the Statement of Claim. I therefore do not find any perversity in the findings recorded by the Arbitral Tribunal about the claim being almost admitted by Rayalseema in the Statement of Defence. The admission by Rayalseema is possibly qualified by the learned Arbitrator by use of the words 'almost' on account of the fact that some disputes are raised by Rayalseema in the Statement of Defence. However, it cannot be contended that the phrase 'almost admitted' would mean exactly reverse eventuality as sought to be suggested by Mr. Jagtiani. The findings in the Award need to be read as a whole and a party cannot be permitted to pluck out a word in the Award for the purpose of suggesting perversity in the overall findings in the Award. On a true and meaningful reading of the Statement of Defence filed by Rayalseema, there can be no doubt to the position that three aspects viz. (i) sanction of credit facilities,