Delhi High Court: In a petition seeking appointment of an arbitrator, Jasmeet Singh, J., referred to Cox & Kings Ltd. v. SAP India (P) Ltd., 2023 SCC OnLine SC 163 and opined that the Court in Section 11 of the Arbitration and Conciliation Act, 1996 (‘the Act’) was only required to see the existence of arbitration clause and the issue of non-signatory should be left open for the arbitral tribunal to decide. The Court further stated that the fact that whether Respondents 3-5 could be bound by the loan agreement and could be impleaded as parties to arbitral proceedings was left open for the Arbitral Tribunal to decide. Thus, the Court referred the parties to arbitration for adjudication of their dispute arising from the loan agreement, and appointed Justice Ali Mohammad Magray, Retired Chief Justice of Jammu and Kashmir High Court, as a sole arbitrator to adjudicate the disputes between the parties.
Background
In the present case, the loan agreement was executed between Moneywise Financial Services Pvt. Ltd., petitioner and Respondent 1. Respondent 2 also signed the loan agreement dated 01-05-2019 as a guarantor. Further, clause 27 of the loan agreement, which was related to arbitration, provided that any dispute in connection with the loan agreement, or any breach , which could not be settled by mutual negotiation between the parties, should be finally settled by arbitration conducted in accordance with the Act by a sole arbitrator.
Thus, petitioner filed present petition seeking appointment of an arbitrator. Petitioner stated that as respondents failed to pay the outstanding dues of petitioner, petitioner issued loan recall notice invoking arbitration on 27-04-2023 to respondents. It was stated by petitioner that Respondent 3-5 are needed to be impleaded as parties to the arbitration proceedings as they were signatories with the loan agreement. Petitioner further submitted that the present case was squarely covered by Cox & Kings Ltd. v. SAP India (P) Ltd., 2023 SCC OnLine SC 163 (‘Cox and Kings case’).
Analysis, Law, and Judgment
The Court opined that in the present case, Respondent 1 and 2 were the parties to the loan agreement and there could not be any doubt regarding loan agreement being valid and binding between petitioner and Respondents 1 and 2. The Court referred to Cox and Kings case (supra) and opined that the Court in Section 11 of the Act was only required to see the existence of arbitration clause and the issue of non-signatory should be left open for the arbitral tribunal to decide.
Further, regarding Respondents 3-5, the Court opined that prima facie, Respondents 3-5 were a veritable party to the loan agreement as they were connected with the loan documents and form part of the loan transactions. Respondent 3-5 had assured petitioner regarding the execution of the loan documents and provided a security to the petitioner towards the loan transaction.
The Court further stated that the fact that whether Respondents 3-5 could be bound by the loan agreement and could be impleaded as parties to arbitral proceedings was left open for the Arbitral Tribunal to decide. The Arbitral Tribunal would also decide whether SMC Global Securities Limited was a proper and necessary party to the arbitral proceedings.
Thus, the Court referred the parties to arbitration for adjudication of their dispute arising from the loan agreement, and appointed Justice Ali Mohammad Magray, Retired Chief Justice of Jammu and Kashmir High Court, as a sole arbitrator to adjudicate the disputes between the parties. The Court stated that the arbitration would be held under the aegis of the Delhi International Arbitration Centre, Delhi High Court, Shah Road, New Delhi. The Court requested arbitrator to furnish a declaration in terms of Section 12 of the Act. The Court further clarified that all the rights and contentions of the parties, including as to the arbitrability of any of the claim, any other preliminary objection, as well as claims on merits of the dispute of either of the parties, were left open for adjudication by the arbitrator. The parties should approach the arbitrator within two weeks from the date of order.
[Moneywise Financial Services (P) Ltd. v. Dilip Jain, 2024 SCC OnLine Del 1896, Order dated 26-02-2024]
Advocates who appeared in this case :
For the Petitioner: Aditya Srinivasan, Mehvish Khan, Rishabh Kanojiya, Advocates;
For the Respondents: Purushottam Kr. Jha, A Pani, Advocates
Buy Arbitration and Conciliation Act, 1996 HERE
