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Northern Arc Capital Limited, Represented by its authorized signatory, Kamal Kumar, Chennai v/s Powerful Technologies Limited, New Delhi

    Original Petition No. 155 of 2021
    Decided On, 04 August 2022
    At, High Court of Judicature at Madras
    For the Petitioner: C. Kaveen, Pawan Jhabakh, Advocates. For the Respondents: -----.

Judgment Text
(Prayer: Original Petition filed under Section 11(5) of the Arbitration and Conciliation Act, 1996 to appoint an arbitrator to resolve the dispute between the petitioner and the respondents based on the Facility Agreement dated 30th January 2019.)

1. Captioned 'Original Petition' [hereinafter 'OP' for the sake of convenience and clarity] has been presented in this Court on 10.02.2021 under Section 11(5) of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)' [hereinafter 'A and C Act' for the sake of convenience, clarity and brevity] with a prayer for appointment of an Arbitrator.

2. Mr.C.Kaveen, learned counsel representing Mr.Pawan Jhabakh, learned counsel on record for sole petitioner who is before this Court submits that the captioned OP is predicated on clause 15 {Captioned 'JURISDICTION AND GOVERNING LAW'} of a 'contract dated 19.01.2019 {styled / captioned 'FACILITY AGREEMENT'}' [hereinafter 'primary contract' for the sake of convenience, clarity and brevity].

3. Aforementioned clause 15 of primary contract reads as follows:


15.1 This Agreement shall be governed and construed in accordance with the laws of India and subject to the provisions of Clause 15.2, the Parties hereby submit to the exclusive jurisdiction of Courts and tribunals at Chennai. The submission to the jurisdiction of the Courts and tribunals of Chennai is for the benefit of the Lender only and shall not (and shall not be construed so as to) limit the right of the Lender to take proceedings in any other Court of competent jurisdiction, nor shall the taking of proceedings by the Lender in any one or more jurisdictions preclude the taking of proceedings by the Lender in any other jurisdiction (whether concurrently or not) if and to the extent permitted by law.

15.2 If any dispute arises between the parties hereto during the subsistence of this Agreement or thereafter, in connection with the validity, interpretation, implementation or alleged breach of any provision of this Agreement, the dispute shall be referred to a sole arbitrator who shall be a neutral and suitably qualified third party appointed by the Lender.

15.3 The place of arbitration shall be Chennai. The arbitration proceeding shall be governed by the Indian Arbitration and Conciliation Act, 1996. The arbitration proceedings shall be conducted in English and the arbitral award shall be recorded in writing.'

4. Clause 15 of primary contract extracted and reproduced supra serves as arbitration agreement between the petitioner and respondent companies is learned counsel's say. To be noted, petitioner and respondent companies are two contracting parties qua primary contract and aforementioned clause 15 serves as arbitration agreement being 'arbitration agreement' within the meaning of Section 2(1)(b) read with Section 7 of A and C Act.

5. Adverting to primary contract, it is submitted that transaction between the parties is in the nature of financial assistance / lending. It is not necessary to dilate more on these aspects of the matter as the captioned OP is under Section 11 of A and C Act and the scope of a legal drill under Section 11 of A and C Act is limited (there would be a little more discussion about scope of a Section 11 legal drill, elsewhere infra in this order).

6. Learned counsel submits that when the primary contract was operated, it ran into rough weather as the respondent company allegedly committed default in repayment. This broadly is the arbitrable dispute between the parties. To be noted, this is not a exhaustive adumbration of arbitrable disputes between the parties.

7. Owing to eruption of aforementioned arbitrable dispute between the parties, petitioner issued a 'notice dated 16.10.2020' [hereinafter 'trigger notice' for the sake of convenience and clarity] invoking the arbitration clause is learned counsel's further say. It is submitted that there was difficulty in having the trigger notice served on the noticees, captioned OP was presented in this Court, Hon'ble predecessor single Judge ordered notice and permitted private notice to be taken out vide proceedings / order dated 22.02.2021. Captioned OP was listed before learned Master for completion of service on sole respondent and learned Master of this Court has now posted the captioned OP before this Court in and by proceedings dated 02.08.2022 which reads as follows:

'O.P.No.155 of 2021


Paper publication effected on 09.09.2021 in Express Network Newspaper in English and in Jansatta in Hindi mentioning the hearing date 20.09.2021 in New Delhi Edition. Publication effected as per order of this Court. Affidavit of service and paper publications verified. Service completed. Post before the Hon'ble Judge's Court.'

8. In the light of the narrative thus far, this Court deems it appropriate to accede to petitioner's prayer for appointment of sole Arbitrator and the reasons are as follows:

(a) A legal drill under Section 11 of A and C Act has to perambulate within the statutory perimeter sketched by subsection (6A) of Section 11 of A and C Act which reads as follows:

'(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.'

(b) Aforementioned sub-section (6A) of Section 11 of A and C Act came up for consideration before Hon'ble Supreme Court in oft-quoted Mayavati Trading case law [Mayavati Trading Pvt. Ltd vs Pradyuat Deb Burman reported in (2019) 8 SCC 714]. To be noted, relevant paragraph in Mayavati Trading case law is paragraph No.10 and the same reads as follows:

'10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgments, as Section 11(6- A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment in Duro Felguera SA.'

(underlining made by this Court to supply emphasis and highlight)

(c) Aforementioned paragraph No.10 of Mayavati Trading case law takes this Court to Duro Felguera principle i.e., Duro Felguera S.A. Vs Gangavaram Port Limited reported in 2017 (9) SCC 729, relevant paragraphs in Duro Felguera case law are paragraph Nos.47, 59 and the same read as follows:

'47. What is the effect of the change introduced by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as "the 2015 Amendment") with particular reference to Section 11(6) and the newly added Section 11(6-A) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act") is the crucial question arising for consideration in this case.


59. The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. and Boghara Polyfab. This position continued till the amendment brought about in 2015. After the amendment, all that the Courts need to see is whether an arbitration agreement exists – nothing more, nothing less. The legislative policy and purpose is essentially to minimize the Courts intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected.'

(d) In the case on hand, the respondent company has not chosen to come before this Court and dispute the existence of arbitration agreement. Therefore, issue of examination of existence of arbitration agreement stands answered in favour of petitioner;

(e) In addition to the aforementioned statutory facet of Section 11 of A and C Act, two other statutory facets have been put in place by judicial pronouncements. They are Nortel principle [Bharat Sanchar Nigam Limited and another Vs. Nortel Networks India Private Limited reported in (2021) 5 SCC 738] and N.N.Global principle [N.N.Global Mercantile Pvt. Ltd., Vs. Indo Unique Flame Ltd., and others reported in 2021 SCC Online SC 13]. Nortel principle turns on ex facie barred by limitation plea and N.N.Global principle turns on arbitration clause being contained in an agreement which is unstamped / insufficiently stamped / not registered when it is compulsorily registrable. Suffice to say that neither Nortel nor N.N.Global issues arise in the case on hand as the respondent has not chosen to come before this Court and raise any of these issues;

(f) As regards a section 11 petition, every endeavor has to be made to dispose of the same within a period of 60 days from the date of service of notice on the opposite party. Hon'ble Supreme Court in a recently rendered order i.e., order dated 19.05.2022 in Shree Vishnu Constructions Vs. The Engineer in Chief Military Engineering Service & Ors. has emphasized the need for expeditious disposal of section 11 petitions and two very significant observations have been made by Hon'ble Supreme Court in Shree Vishnu Constructions case law and the same read as follows:

'..... Therefore, if the arbitrators are not appointed at the earliest and the applications under Sections 11(5) and 11(6) of the Arbitration Act are kept pending for a number of years, it will defeat the object and purpose of the enactment of the Arbitration Act and it may lose the significance of an effective Alternative Dispute Resolution Mechanism. If the Commercial disputes are not resolved at the earliest, not only it would affect the commercial relations between the parties but it would also affect economy of the country. It may affect the ease of doing business in the country.'

'..... The litigant may lose the faith in the justice delivery system, which may ultimately affect not only rule of law but commerce and business in the country. Therefore, the applications under Sections 11(5) and 11(6) of the Arbitration Act and other applications, either for substitution and/or change of the Arbitrator have to be decided and disposed of at the earliest.'

9. In the light of the narrative thus far, Hon'ble Dr.Justice Vineet Kothari (Retd.), Former Acting Chief Justice, Gujarat High Court, residing at No.947, 11th D Road, Sardarpura, Jodhpur, Rajasthan - 342 003, Mobile No.9480822552, Phone No: 291-2433947, Email ID : kotharivineet@gmail.com is appointed as sole Arbitrator. Though Hon'bl

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e Arbitrator is based in Rajasthan, Hon'ble Arbitrator has offered his service to 'Madras High Court Arbitration Centre under the aegis of this Court' [hereinafter 'MHCAC' for the sake of convenience and clarity]. To be noted, this is mentioned, vide arbitration agreement between the parties (particularly clause 15.3) place of arbitration shall be Chennai. However, it is made clear that it is open to Hon'ble Arbitrator to conduct arbitration proceedings in virtual mode i.e., on a Video Conferencing platform if the same is deemed appropriate and convenient. Hon'ble sole Arbitrator is requested to enter upon reference qua primary contract between the parties i.e., contract dated 19.01.2019 {styled / captioned 'FACILITY AGREEMENT'}, adjudicate upon arbitrable disputes that have arisen between the petitioner and respondent companies qua primary contract render an Arbitral Award by adopting Madras High Court Arbitration Proceedings Rules 2017 and fee of Hon'ble sole Arbitrator shall be governed by the Madras High Court Arbitration Centre (MHCAC) (Administrative Cost and Arbitrator's Fees) Rules 2017. 10. Captioned OP is disposed of in the aforesaid manner. There shall be no order as to costs.