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L&T Finance Ltd., (formerly L&T Housing Finance Ltd.,) Chennai v/s Rajalakshmi Paper Mills Pvt. Ltd., Tiruppur & Others

    Arb O.P.(Com. Div.) No. 28 of 2022

    Decided On, 23 February 2022

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE M. SUNDAR

    For the Petitioner: M. Arunachalam, Advocate. For the Respondents: -------



Judgment Text

(Prayer: Arbitration Original Petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, to appoint a sole Arbitrator to adjudicate upon the differences and disputes between the parties under the said agreement dated 30.01.2014 in respect of Loan Agreement bearing No.CHNHL13000332 and Supplementary Loan Agreement bearing No.CHNHL13000444.)

1. Captioned ‘Arbitration Original Petition’ [hereinafter ‘Arb OP’ for the sake of convenience and clarity] has been presented in this Court on 06.01.2022 under Section 11(6) of ‘The Arbitration and Conciliation Act, 1996 (Act 26 of 1996)’ [hereinafter ‘A and C Act’ for the sake of brevity, convenience and clarity].

2. Section 11(6) of A and C Act will apply in cases where an appointment procedure has been agreed upon by the parties and the same has failed either because one of the parties failed to act in accordance with the procedure or because there is a dead lock in two arbitrators reaching appointment about third arbitrator. Third failure is where the person or institution fails to perform any function entrusted to him under the agreed procedure.

3. In the case on hand, an arbitration agreement between the parties i.e., arbitration agreement within the meaning of Section 2(1)(b) read Section 7 of A and C Act is in the form of a clause in an ‘agreement captioned ‘HOME LOAN AGREEMENT’ dated 30.01.2014’ [hereinafter ‘said agreement’ for the sake of convenience and clarity]. Clause is Article-12 captioned ‘ARBITRATION’ and the same reads as follows:

‘ARTICLE-12: ARBITRATION

12.1 Without prejudice to any other rights available to the Lender under any other Statute to enforce the Security interest/take action against the Borrower/Property, any dispute or difference or claim that arises between parties or any of them touching or concerning this Agreement or any conditions herein/therein contained or as to the rights, duties or liabilities of parties hereto or any of them either during the continuance of the Agreement or after the completion or termination or purported termination hereof shall be referred to Arbitration by a sole Arbitrator, to be appointed by the Lender, according to the provisions of Arbitration and Conciliation Act, 1996 and rules thereunder and any amendment thereto from time to time;

12.2 It is agreed between the parties hereto that nothing contained in Section 17 of Arbitration and Conciliation Act, 1996 shall in any way affect the rights of any of or preclude the parties to/from seek/seeking such interim relief/s in any Court of competent jurisdiction, including interim relief u/s. 9 of the Arbitration and Conciliation Act, 1996 and the rules framed thereunder, if in the opinion of the party seeking relief. Such application for interim relief/s is necessary in order to protect the assets/Assets and/or the rights of the party seeking relief and/or in aid of the arbitration;

12.3 The award of the arbitrator shall be a written award and shall be final, conclusive & binding on all the parties whether on question of law or of fact;

12.4 In the event of death refusal, negligence, inability, incapability of the persons so appointed to act as the sole arbitrator a new arbitrator shall be appointed by the Lender;

12.5 The venue of arbitration shall be Mumbai/New Delhi or such other place as may be determined at the sole discretion of the Lender and Courts in Mumbai/New Delhi or such other place shall have exclusive jurisdiction;

12.6 Notwithstanding anything contained hereinabove, in the event of the law being made or amended so as to bring the Lender under the Securitization Act or the DRT Act, or any other special legislation to enable the Lender to enforce the security under the Securitization Act or proceed to recover dues from the Borrower under the DRT Act the arbitration provisions hereinbefore contained shall at the option of the Lender cease to have any effect and if arbitration proceedings are commenced but no Award is made, then at the option of the Lender, such proceedings shall stand terminated and the mandate of the Arbitrator shall come to an end, from the date of the making of the law or the date when amendment becomes effective or the date when the Lender exercises the option of terminating the mandate of Arbitrator the case may be.’

4. On the date of presentation of the captioned Arb OP, petitioner had not issued notice to respondent triggering the arbitration clause though a notice was sent subsequently.

5. Failure in one of three possible ways adumbrated in sub-section (6) of Section 11 of A and C Act is the cause of action for a petition under Section 11(6) of A and C Act. Law is well settled that cause of action should precede legal proceedings and it cannot be ex post facto.

6. Faced with the above situation, learned counsel sought leave of this Court to withdraw the captioned Arb OP but made a plea that the rights of the petitioner may please be preserved to present a fresh Arb OP with the same or similar prayer. A careful perusal of Article-12 brings to light that there is an agreed procedure and learned counsel very fairly submits that Section 11 route was taken in the light of Perkins principle being ratio laid down by Hon’ble Supreme Court in the case of Perkins Eastman Architect

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s DPC and Another v. HSCC (India) Ltd reported in 2019 SCC OnLine SC 1517, this Court deems it appropriate to not to express any view or opinion on this submission in this order. 7. Captioned Arb OP is closed as withdrawn preserving all the rights of the parties more particularly petitioner, leaving open all the questions between the parties and particularly preserving rights of the petitioner to come up with a petition afresh with similar/same prayer if there is a need to do so. 8. Captioned Arb OP is disposed of in the aforesaid manner. There shall be no order as to costs.
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