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Delhi High Court
M/S Religare Finvest Limited vs M/S Surya Silk Mills & Ors on 13 May, 2025
Author: Sachin Datta
Bench: Sachin Datta
$~J
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment pronounced on: 13.05.2025
+ ARB.P. 779/2024
M/S RELIGARE FINVEST LIMITED ..... Petitioner
Through: Ms. Taniya Bansal, Ms. Meenakshi.
S, Ms. Sandipa Bhattacharjee, Advs.
versus
M/S SURYA SILK MILLS & ORS. ..... Respondents
Through: Mr. Ankit Shah, Mr. Tarun Arora,
Advs.
+ ARB.P. 780/2024
M/S RELIGARE FINVEST LIMITED ..... Petitioner
Through: Ms. Taniya Bansal, Ms. Meenakshi.
S, Ms. Sandipa Bhattacharjee, Advs.
versus
M/S SURYA SILK MILLS & ORS. ..... Respondents
Through: Mr. Ankit Shah, Mr. Tarun Arora,
Advs.
CORAM:
HON'BLE MR. JUSTICE SACHIN DATTA
JUDGMENT
1. The present petitions have been filed under Section 11(6) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘A&C
Act’), seeking appointment of a Sole Arbitrator for resolution of disputes
that have arisen out of Loan Agreements dated 27.02.2016 and 31.03.2015,
executed between the petitioner and the respondents in ARB.P. 779/2024
and ARB.P. 780/2024 respectively.
Signature Not Verified
ARB.P. 779/2024 & 780/2024 Page 1 of 19
Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
16:23:18
2. Loan Agreement dated 27.02.2016 (ARB.P. 779/2024) contains an
arbitration clause in the following terms –
“21. ARBITRATION AND JURISDICTION
21.1 Any and all disputes, claims, differences arising out of or in
connection with this Agreement and the Schedule/s attached hereto or the
performance of this Agreement shall be settled by arbitration to be
referred to a sole arbitrator to be appointed by the RFL and the award
thereupon shall be binding upon the Parties to this Agreement. The
Arbitration shall be held in accordance with the provisions of the
Arbitration and Conciliation Act, 1996 and any statutory amendments
thereof. The place of the arbitration shall be in Delhi. The proceeding of
Arbitration tribunal shall be conducted in English language. Each Party
shall bear cost of representing its case before the Arbitrator. Costs and
charges of Arbitrator to be shared equally unless otherwise provided for
in the award.
21.2 The Borrower(s) further agree that all claims, differences and
disputes, arising out of or in relation to dealings/transaction made in
pursuant to this Agreement including any question of whether such
dealings, transactions have been entered into or not, shall be subject to
the exclusive jurisdiction of the courts at Delhi only.”
3. Loan Agreement dated 31.03.2015 (ARB.P. 780/2024) contains an
arbitration clause in the following terms –
“20. ARBITRATION AND JURISDICTION
Any and all disputes, claims, differences arising out of or in connection
with this Agreement and the Schedule/s attached hereto or the
performance of this Agreement shall be settled by arbitration to be
referred to a sole arbitrator to be appointed by the RFL and the award
thereupon shall be binding upon the Parties to this Agreement. The
Arbitration shall be held in accordance with the provisions of the
Arbitration and Conciliation Act, 1996 and any statutory amendments
thereof. The place of the arbitration shall be in Delhi. The proceeding of
Arbitration tribunal shall be conducted in English language. Each Party
shall bear cost of representing its case before the Arbitrator. Costs and
charges of Arbitrator to be shared equally unless otherwise provided for
in the award.
20.1 The Borrower(s) further agree that all claims, differences and
disputes, arising out of or in relation to dealings/transaction made in
pursuant to this Agreement including any question of whether suchSignature Not Verified
ARB.P. 779/2024 & 780/2024 Page 2 of 19
Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
16:23:18
dealings, transactions have been entered into or not, shall be subject to
the exclusive jurisdiction of the courts at Delhi only.”
4. At the outset, it is noticed that the factual matrix is identical in both
the petitions. The only difference is that there are two separate loan
agreements, hence two petitions have been filed. For the sake of
convenience, the reference to the facts as noted, unless the context indicates
otherwise, are the facts as obtaining in ARB.P. 779/2024.
5. The dispute arises from a financial facility availed by respondent no.
1, M/s. Surya Silk Mills, along with Co-borrowers (respondents no. 2 to 7),
who had approached the petitioner in 2016 seeking a Loan Against Property
(LAP). The petitioner sanctioned a loan of Rs. 2,60,00,000/- (Rupees Two
Crore Sixty Lakhs only), repayable in 120 months at an interest rate of
12.5% p.a., through Loan Account No. XMORSUR00071339. The loan was
secured by creation of security interest on a property bearing the description
“All that piece and parcel of Bangla No. 8, Amikunj, T.Y.P.NO.: 5, F.P. NO.
123, Athwa, Ghod Dod Road Surat, Gujarat, 395007”.
6. It is submitted that starting in 2018, the respondents began defaulting
on repayment obligations under the Loan Agreement. As a result, on
15.11.2018, the petitioner issued a loan recall and arbitration invocation
notice, and initiated arbitration proceedings by unilaterally appointing an
Arbitrator. The Arbitral Tribunal was constituted in January 2019. Although
respondents challenged the unilateral appointment of the arbitrator by
moving an application under Sections 12 and 13 of the A&C Act, the
objection was dismissed by the arbitrator.
7. During the course of arbitral proceedings, the loan account of the
Signature Not Verified
ARB.P. 779/2024 & 780/2024 Page 3 of 19
Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
16:23:18
respondents was classified as a Non-Performing Asset (NPA) on
31.01.2019, in accordance with RBI guidelines, due to continued default.
Subsequently, a demand notice dated 13.02.2019 was issued under Section
13(2) of the SARFAESI Act, 2002, calling upon the respondents to repay an
outstanding sum of Rs. 5,22,98,311.22/- across the two loan accounts
bearing numbers XMORSUR00071339 (ARB.P. 779/2024) and
XMORSUR00059477 (ARB.P. 780/2024)
8. Upon non-payment, the petitioner took physical possession of the
secured property on 13.10.2020 in accordance with and in compliance with
the Order dated, 29.01.2020 passed by the District Magistrate, Surat passed
under Section 14 of the SARFAESI Act, 2002. A notice for sale dated
16.07.2021 was then issued in accordance with Rule 8(6) of the Security
Interest (Enforcement) Rules, 2002, scheduling a public auction for
06.08.2021.
9. The auction was conducted on 06.08.2021 and the property was sold
for Rs. 4,85,10,000/-. Upon receipt of the full sale consideration, a sale
certificate dated 07.10.2021 was issued to the auction purchaser.
10. Meanwhile, the respondents challenged the SARFAESI measures
before the Debt Recovery Tribunal (DRT-II), Ahmedabad, by filing
Securitization Application No. 382 of 2020, titled Surya Silk Mills vs.
Religare Finvest Limited & Ors. An interim stay granted by DRT on
26.10.2021 against registration of conveyance deed in favour of the auction
purchaser was vacated on 27.02.2023, allowing the petitioner to proceed
under SARFAESI Act. The sale was made subject to final outcome of the
said application, which remains pending.
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ARB.P. 779/2024 & 780/2024 Page 4 of 19
Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
16:23:18
11. Subsequently, the arbitration proceedings stood terminated on
19.04.2022 upon expiration of the arbitrator’s mandate.
12. It is submitted that despite the auction under the SAFAESI Act, the
full outstanding loan amount could not be recovered. It is submitted that as
of 21.05.2024, a balance of Rs. 1,70,37,983.56/- remained due.
13. Since the outstanding dues remained unpaid even after the property
was auctioned, the petitioner issued a fresh invocation notice dated
15.01.2024 under Section 21 of the A &C Act. However, the respondents
have failed to reply.
14. Now the petitioner had approached this Court seeking the
appointment of an independent sole arbitrator under Section 11(6) of the
Act.
15. It is submitted by the petitions that the scope of enquiry under Section
11(6) of the Act is limited to the existence of an arbitration agreement
between the parties, and other disputes, including those regarding
arbitrability or maintainability, fall within the jurisdiction of the arbitral
tribunal. Reliance is placed on the judgment of the Supreme Court in SBI
General Insurance Co. Ltd. v. Krish Spinning, 2024 SCC OnLine SC 1754
16. While countering the objection raised by respondent no. 4 that the
present invocation is barred due to the petitioner’s earlier initiation of
arbitration proceedings through its letter dated 15.11.2018 and subsequent
failure to seek an extension of the arbitrator’s mandate, which expired on
19.04.2022, it is submitted by the petitioner that the arbitrator previously
appointed was unilaterally nominated by the petitioner, a practice that has
been recognised impermissible by the Supreme Court in Perkins Eastman
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Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
16:23:18
Architects DPC v. HSCC (India) Ltd., 2019 SCC OnLine SC 1517 and
Central Organisation for Railway Electrification v. M/s ECI SPIC SMO
MCML (JV) A Joint Venture Company, 2024 INSC 857. In light of these
authoritative pronouncements, the initial appointment was legally
unsustainable and non-est in law. Consequently, the question of seeking an
extension under Section 29A of the Arbitration and Conciliation Act, 1996,
did not arise.
17. It is submitted that the respondents’ reliance on the judgment of the
Supreme Court in HPCL Bio-Fuels Ltd. v. Shahaji Bhanudas Bhad, 2024
SCC OnLine SC 3190, is misplaced. It is submitted that the observations in
HPCL cannot be construed as imposing an absolute prohibition on invoking
the same arbitration clause more than once, particularly where the earlier
proceedings are non-est. The Petitioner relies on the Hon’ble Supreme
Court’s ruling in Perkins (supra) and the Division Bench judgment of the
Delhi High Court in Govind Singh v. Satya Group Pvt. Ltd., 2023 SCC
OnLine Del 37.
18. It is further submitted that the current invocation is based on a fresh
and distinct cause of action, i.e., the recovery of the outstanding balance
amounting to ₹2,19,03,252 /- as on 21.01.2024, after adjusting the proceeds
of the secured asset sold under the SARFAESI Act. Hence, the petitioner is
not reviving an old claim but seeking adjudication of a new dispute arising
after partial recovery.
19. In order to substantiate its arguments, reliance has been placed on
Dolphin Drilling Ltd. v. ONGC, (2010) 3 SCC 267, Parsvnath Developers
Ltd. v. Rail Land Development Authority, 2018 SCC OnLine Del 12399
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ARB.P. 779/2024 & 780/2024 Page 6 of 19
Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
16:23:18
and Panipat Jalandhar NH1 Tollway (P) Ltd. v. NHAI, 2022 SCC OnLine
Del 108.
20. It is further submitted that the judgments cited by respondent no. 4,
Fedbank Financial Services Ltd. v. Narendra H. Shelar, 2020 SCC
OnLine Bom 5252, and Raj Chawla & Co. v. Mine Media & Information
Services, 2023 SCC OnLine Del 520, are distinguishable as in those cases,
there was no new cause of action after closure of earlier proceedings. In
contrast, here the SARFAESI recovery led to a partial repayment, and the
current claim relates to the remaining balance, arising post-sale.
21. At last it is submitted that the present application is well within the
limitation period prescribed under the Limitation Act, 1963. Moreover it is
submitted that the present invocation of arbitration is based on a separate
and distinct cause of action. The earlier invocation related to the entire
outstanding financial facilities, whereas post-termination of the earlier
arbitration, the petitioner exercised its rights under the SARFAESI Act,
2002. The secured asset was sold on 07.10.2021, and the remaining
outstanding dues after such sale gave rise to the current dispute.
Consequently, a fresh notice invoking arbitration was issued on 15.01.2024,
and the present Section 11 petition followed. Therefore, this invocation is
based on a fresh dispute and a distinct cause of action, and is not time-
barred.
22. The respondent no. 4 while objecting to the appointment of a sole
arbitrator has submitted as under –
i. It is submitted that the petitioner had already invoked
arbitration by issuing a legal notice dated 15.11.2018, wherein
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ARB.P. 779/2024 & 780/2024 Page 7 of 19
Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
16:23:18
it demanded repayment of ₹2,31,48,941.63 /-. Without awaiting
a response from the respondents, the petitioner, by letter dated
29.11.2018, unilaterally appointed a sole arbitrator, Mr. Raj
Kumar Sharma, Retired ADJ.
ii. The respondents, vide reply dated 19.12.2018, raised specific
objections to the unilateral appointment of the arbitrator and
denied the allegations made in the notice. A formal challenge
was also filed under Sections 12(3), 13(1), and 13(2) of the Act,
questioning appointment of the arbitrator. However, the Ld.
Arbitrator dismissed the said challenge by order dated
20.05.2019 and proceeded with the matter.
iii. It is submitted that the mandate of the said arbitrator expired on
19.04.2022, in terms of Section 29A(4) of the Act. Despite the
expiry, the petitioner failed to seek an extension of the mandate
or approach the Court under Section 29A(5). It is submitted that
the petitioner, by its inaction, effectively abandoned its claims.
iv. Respondent no. 4 submits that, having abandoned its claims,
the petitioner is now barred from re-invoking the arbitration
clause. Reliance is placed on the decision of the Supreme Court
in M/s HPCL Biofuels Ltd. v. M/s Shahaji Bhanudas Bhad,
2024 SCC OnLine SC 3190 which held that once a party
unconditionally withdraws the arbitration petition without
seeking liberty to refile, a second invocation is impermissible.
v. Further reliance is placed on ANTRIX Corporation Ltd. &
Anr. v. Devas Multimedia Pvt. Ltd. (2014) 11 Supreme Court
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Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
16:23:18
Cases 560, where the Supreme Court observed that “Once the
power has been exercised under the Arbitration Agreement
there is no power left to, once again, refer the same disputes to
arbitration under Section 11 of the 1996 Act, unless the order
closing the proceedings is subsequently set aside.”.
vi. It is the respondent’s case that the petitioner had an available
statutory remedy under Section 29A of the Act, which includes
the power of the Court not only to extend the mandate of the
arbitrator but also to substitute the arbitrator, if required.
Therefore, there was no necessity for the petitioner to file a
fresh application under Section 11. Reliance is placed on the
recent judgment in Rohan Builders (India) Pvt. Ltd. v. Berger
Paints India Ltd., 2024 SCC OnLine SC 2494, where the
Supreme Court clarified that recourse under Section 29A can
serve as a complete remedy and observed that “Section 29A(6)
does not support the narrow interpretation of the expression
“terminate”. It states that the court – while deciding an
extension application under Section 29A (4) – may substitute
one or all the arbitrators. Section 29A (7) states that if a new
arbitrator(s) is appointed, the reconstituted arbitral tribunal
shall be deemed to be in continuation of the previously
appointed arbitral tribunal. This obliterates the need to file a
fresh application under Section 11 of the A & C Act for the
appointment of an arbitrator.”
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ARB.P. 779/2024 & 780/2024 Page 9 of 19
Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
16:23:18
vii. Reliance has also been places on Raj Chawla And Co. Stock
And Share Brokers Vs. M/S Nine Media and Information
Services Ltd. 2023 SCC OnLine Del 520, Fedbank Financial
Service Ltd Through Its Ao Zahid Sultan Versus Narendra H
Shelar, Through Lrs & Ors, 2020 SCC Online Bom 5252 and
Swadesh Kumar Agarwal Vs Dinesh Kumar Agarwal And
Others (2022) 10 SCC 235.
viii. It is the case of the respondent no. 4 that the petitioner is
attempting to reinvoke arbitration after nearly two years of
inaction since the expiry of the mandate of the arbitrator on
19.04.2022.
ix. Respondent no. 4 submits that the petitioner has already
recovered a sum of ₹4.85 Crores through enforcement
proceedings under the SARFAESI Act, 2002. This amount is
significantly higher than the original claim of₹2.31 C rores.
Therefore, the debt stands discharged, and no further claims
survive under the same cause of action. Arbitration proceedings
cannot now be pursued for a satisfied claim.
x. Relying on SBI General Insurance Co. Ltd. v. Krish Spinning
(supra), the respondent argues that courts can examine the
validity of the arbitration clause while considering appointment.
Since the Petitioner’s claim stands satisfied, the arbitration
clause itself is rendered ineffective.
23. It is an admitted fact that the present petition concerns a second
invocation of the arbitration clause of the Loan Agreement. The arbitration
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Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
16:23:18
clause was earlier invoked by the petitioner vide notice dated 15.11.2018,
wherein the petitioner sought reference of disputes to arbitration. However,
the said proceedings were terminated due to expiry of the arbitrator’s
mandate, and no application for extension was filed by the petitioner under
Section 29A of the A&C Act. The petitioner has now issued a fresh notice
invoking arbitration dated 15.01.2024.
24. The primary objection raised by the respondent no. 4 is that the
petitioner, by failing to seek extension of the arbitrator’s mandate in the
earlier proceedings, effectively abandoned its claims. Consequently, it is
contended that a second invocation of the arbitration clause is legally
impermissible. In support of this contention, reliance is placed on the
judgment of the Supreme Court in HPCL Bio-Fuels Ltd. v. Shahaji
Bhanudas Bhad, 2024 SCC OnLine SC 3190 wherein it was held that a
second application under Section 11(6) of the Act is not maintainable when
the earlier application was withdrawn unconditionally, without seeking
liberty to refile. The relevant portion of the judgment is reproduced as
under-
“66. If that is so, the unconditional withdrawal of a Section 11(6)
petition amounts to abandoning not only the formal prayer for
appointing an arbitrator but also the substantive prayer for commencing
the actual arbitration proceedings. It amounts to abandoning the
arbitration itself. It results in abandonment of the notional ‘arbitration
proceeding’ that had commenced by virtue of Section 21 and thus
amounts to an abandonment of a significant nature. Therefore, it is all
the more important to import and apply the principles underlying Order
23 Rule 1 of the CPC to abandonment of applications under Section
11(6).”
25. The legal position is well settled that an arbitration clause can be
invoked multiple times, provided a fresh or continuing cause of action
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Digitally Signed
By:ABHISHEK THAKUR
Signing Date:16.05.2025
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exists. There is no bar to successive invocations of an arbitration agreement
to address subsequent disputes or claims.
26. In Dolphin Drilling Ltd. v. ONGC, (2010) 3 SCC 267, the Supreme
Court addressed a similar issue where the arbitration agreement was invoked
a second time. The respondent therein argued that the clause was a one-time
measure. However, the Court rejected this contention, holding as under –
“3. Mr Gaurav Agrawal, learned counsel appearing for the respondent,
accepted the provision for arbitration vide Clause 28 of the agreement
dated 17-10-2003. He also acknowledged that the dispute(s) raised by
the applicant in the arbitration notice dated 29-1-2008 arose under the
agreement dated 17-10-2003 and was/were fully arbitrable.
Nevertheless, he resisted the applicant’s prayer to refer the dispute(s)
raised in the arbitration notice dated 29-1-2008 to arbitration on the
plea that the applicant had already invoked the arbitration clause albeit
in connection with a different dispute earlier arising under the
agreement.
xxx xxx xxx
8. The plea of the respondent is based on the words “all disputes”
occurring in Para 28.3 of the agreement. Mr Agrawal submitted that
those two words must be understood to mean “all disputes under the
agreement” that might arise between the parties throughout the period of
its subsistence. However, he had no answer as to what would happen to
such disputes that might arise in the earlier period of the contract and
get barred by limitation till the time comes to refer “all disputes” at the
conclusion of the contract. The words “all disputes” in Clause 28.3 of
the agreement can only mean “all disputes” that might be in existence
when the arbitration clause is invoked and one of the parties to the
agreement gives the arbitration notice to the other. In its present form
Clause 28 of the agreement cannot be said to be a one-time measure and
it cannot be held that once the arbitration clause is invoked the remedy of
arbitration is no longer available in regard to other disputes that might
arise in future.”
27. Similarly, in Panipat Jalandhar NH1 Tollway Pvt. Ltd. v. NHAI,
2022 SCC OnLine Del 1, this Court observed as under –
“47. In the opinion of this Court multiple arbitrations can exist if the
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By:ABHISHEK THAKUR
Signing Date:16.05.2025
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cause of action continues or arises after constitution of a tribunal. This
Court is informed that disputes pertaining to the year 2013 are pending
before first arbitral tribunal. The suspension and termination of
Concession Agreement in question are subject matter of consideration
before the second arbitral tribunal. The petitioner has not been able to
establish that the disputes, resolution of which is sought under the
proposed third arbitral tribunal, cause of action thereof arose post
suspension and termination of Concession Agreement. This fact is further
substantiated by the language of Notice dated 4th June, 2021 invoking
arbitration, which clearly stipulates that for resolution of differences
which were subject matter of Notice of Dispute dated 25th October, 2019,
the constitution of third arbitral tribunal is sought, which is already
under consideration before the second arbitral tribunal and so, in the
considered opinion of this court, it would lead to multiple observations
and findings by two different tribunals, which cannot be permitted.”
28. Even in HPCL Biofuels (supra), the Court clarified that a second
invocation is barred only if the earlier application was based on the same
cause of action and withdrawn without liberty. However, if a fresh cause of
action arises subsequently, the arbitration clause can be re-invoked. The
relevant portion of the judgment is reproduced as under –
“52. One important aspect that needs to be kept in mind while applying
the principles of Order 23 Rule 1 to applications under Section 11(6) of
the Act, 1996 is that it will act as a bar to only those applications which
are filed subsequent to the withdrawal of a previous Section 11(6)
application filed on the basis of the same cause of action. The extension
of the aforesaid principle cannot be construed to mean that it bars
invocation of the same arbitration clause on more than one occasion. It
is possible that certain claims or disputes may arise between the parties
after a tribunal has already been appointed in furtherance of an
application under Section 11(6). In such a scenario, a party cannot be
precluded from invoking the arbitration clause only on the ground that it
had previously invoked the same arbitration clause. If the cause of action
for invoking subsequent arbitration has arisen after the invocation of the
first arbitration, then the application for appointment of arbitrator
cannot be rejected on the ground of multiplicity alone.”
29. In the present case, the respondent no. 4 contends that no fresh cause
of action exists. However, it is noticed that at the time of the first invocation,
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By:ABHISHEK THAKUR
Signing Date:16.05.2025
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the petitioner’s claims pertained to recovery of entire outstanding as on
09.11.2018 under the loan agreement. During the pendency of the earlier
arbitration, proceedings under the SARFAESI Act were initiated, pursuant
to which the petitioner recovered ₹4,85,10,000/- through public auction of
the secured assets of the respondents.
30. The petitioner now claims that despite the recovery under SARFAESI
(which is a development subsequent to the earlier invocation), a substantial
amount of ₹ 2,29,33,699.001 remains outstanding, and seeks to recover this
through the present arbitration. It is the petitioner’s case that in the peculiar
factual context, a fresh cause of action arose in its favor for invoking
arbitration.
31. In light of the above factual matrix, and considering the limited scope
of judicial intervention under Section 11 of the Act, this Court is of the view
that the issue/s as to (i) whether the present invocation is pursuant to any
fresh cause of action; (ii) whether the claim/s sought to be raised in the
present arbitration are maintainable or not (in the light of alleged
abandonment of the earlier arbitration; or for any other reason), are mixed
questions of facts and law, and ought to be adjudicated by the arbitral
tribunal. This Court in Parsvnath Developers Limited and Another v. Rail
Land Development Authority, 2018 SCC OnLine Del 12399 has observed
as under –
“10. In my opinion, the existence of the Arbitration Agreement itself is
not in dispute. The dispute is whether the claim now sought to be raised
by the petitioner would be barred by the principles of Order II Rule 2 of
the CPC and/or principles of res judicata and/or estoppel. It cannot be
denied that an Arbitration Agreement can be invoked a number of times
and does not cease to exist only with the invocation for the first time. The
Supreme Court in Dolphin Drilling Ltd. v. Oil and Natural GasSignature Not Verified
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Corporation Ltd., (2010) 3 SCC 267, has held as under:
“8. The plea of the respondent is based on the words “all
disputes” occurring in Para 28.3 of the agreement. Mr.
Aggrawal submitted that those two words must be understood
to mean “all disputes under the agreement” that might arise
between the parties throughout the period of its subsistence.
However, he had no answer as to what would happen to such
disputes that might arise in the earlier period of the contract
and get barred by limitation till the time comes to refer “all
disputes” at the conclusion of the contract. The words “all
disputes” in Clause 28.3 of the agreement can only mean “all
disputes” that might be in existence when the arbitration
clause is invoked and one of the parties to the agreement
gives the arbitration notice to the other. In its present form
Clause 28 of the agreement cannot be said to be a one-time
measure and it cannot be held that once the arbitration
clause is invoked the remedy of arbitration is no longer
available in regard to other disputes that might arise in
future.”
11. The question whether the claim of the petitioner would be barred by
the principles of res judicata or estoppel or by Order II Rule 2 of the
CPC are not matters to be considered by this Court while exercising its
jurisdiction under Section 11 of the Act. (Indian Oil Corporation Ltd. v.
SPS Engineering Ltd., (2011) 3 SCC 507)).
12. The legislature by amending the Act by way of the Arbitration and
Conciliation (Amendment Act) 2015 and the insertion of Section 11 (6A)
of the Act has also restricted the scrutiny of the Court at the stage of
adjudicating an application under Section 11 of the Act only to the
existence of the Arbitration Agreement.
13. In view of the above, I see no impediment in appointing a nominee
Arbitrator for the respondent to adjudicate the disputes that are sought to
be raised by the petitioners in relation to the abovementioned
Development Agreement. In such proceedings, all objections of the
respondent shall remain open and it would be for the Arbitral Tribunal to
decide the same, may be as primary issues.”
32. Furthermore, the unilateral appointment of the previously appointed
arbitrator is not in dispute. In light of the authoritative pronouncements of
the Supreme Court in TRF Ltd. v. Energo Engineering Projects Ltd.,
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Signing Date:16.05.2025
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(2017) 8 SCC 377, Perkins Eastman Architects DPC v. HSCC (India) Ltd.,
(2020) 20 SCC 760, and Bharat Broadband Network Ltd. v. United
Telecoms Ltd., 2019 SCC OnLine SC 547 and Central Organisation for
Railway Electrification v. M/s ECI SPIC SMO MCML (JV) A Joint
Venture Company, 2024 INSC 857, it is now a settled proposition of law
that any unilateral appointment of an arbitrator by one of the parties is
legally invalid and void ab initio. Such an appointment is treated as non-est
in the eyes of law.
33. In the context of a Section 11 petition being filed after unilateral
appointment of an arbitrator, this Court in Fiitjee Ltd. v. Ashish Khare &
Anr., 2023 SCC OnLine Del 1189, held as under –
“27. Sub-section (2) of Section 15 of the Act states that where the
mandate of an arbitrator terminates, a substitute arbitrator shall be
appointed in accordance to the rules that were applicable to the
appointment of the arbitrator being replaced. In the present case, as the
arbitration agreement provides for appointment of a sole arbitrator by
the petitioner, the said arbitrator could not have been appointed in view
of the judgment of the Supreme Court in Perkins Eastman Architects
DPC v. HSCC (India) Ltd.7 The petitioner has, therefore, rightfully
approached this Court for appointment of an arbitrator.
xxx xxx xxx
35. It is made clear that the arbitrator shall undertake the arbitration
proceedings afresh. Any proceedings that had been undertaken by the
earlier arbitrator shall be treated as non-est. In such arbitration
proceedings all objections of the respondents shall remain open and the
learned arbitrator shall decide the same remaining uninfluenced by any
observation made hereinabove.”
34. The judgment in ANTRIX Corporation Ltd. & Anr. v. Devas
Multimedia Pvt. Ltd. (supra), as relied upon by respondent no. 4, is clearly
distinguishable on facts. In ANTRIX, the issue pertained to repeated
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invocation of arbitration on the same cause of action. In contrast, the central
contention of the petitioner in the present case is that a fresh and
independent cause of action has arisen, thereby justifying a second
invocation of the arbitration clause.
35. Similarly, the objections as regards the petitioner’s failure to seek an
extension of the mandate of the previous arbitrator, and the reliance placed
on Rohan Builders (India) Pvt. Ltd. v. Berger Paints India Ltd. (supra),
Raj Chawla and Co. Stock and Share Brokers v. M/s Nine Media and
Information Services Ltd. (supra), Fedbank Financial Services Ltd.
through its AO Zahid Sultan v. Narendra H Shelar through LRs & Ors.,
(supra), and Swadesh Kumar Agarwal Vs Dinesh Kumar Agarwal And
Others (supra) do not really apply in the present case. These decisions
pertain to scenarios where the parties sought to revive the same cause of
action. In contrast, the petitioner herein seeks a fresh invocation of the
arbitration clause based on a subsequent cause of action. Moreover, the
aforesaid relied upon cases did not involve any “unilateral appointment” of
the initially appointed arbitral tribunal (rendering the resultant proceedings
non-est)
36. In the above circumstances, it cannot be said that the present petition
is ex facie barred and/or that appointment of an arbitrator in these
proceedings is altogether precluded on account of the circumstances
highlighted by the respondent no. 4. These aspects require a detailed factual
evaluation in the light of the extant legal position, an exercise which is best
left to be conducted by a duly constituted arbitral tribunal.
37. The scope of examination in these proceedings is confined to
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ascertaining prima facie whether there exists an arbitration agreement. This
position has been comprehensively settled in Interplay between Arbitration
Agreements under the Arbitration & Conciliation Act, 1996 & the Indian
Stamp Act, 1899, In re, 2023 SCC OnLine SC 1666, and SBI General
Insurance Co. Ltd. v. Krish Spinning, 2024 INSC 532.
38. In the circumstances, since prima facie, there exists an arbitration
agreement between the parties, this Court is inclined to constitute an Arbitral
Tribunal to adjudicate the disputes between the parties.
39. Accordingly, Ms. Justice (Retd.) Deepa Sharma, former Judge, Delhi
High Court, (Mob.: +91 9910384631) is appointed as the Sole Arbitrator to
adjudicate the disputes between the parties.
40. It is made clear that all objections raised by the respondent no. 4
inter-alia:
(i) That the present arbitration is precluded on account of alleged
abandonment of the previous arbitration;
(ii) Whether the present arbitration can be considered to be founded
on any fresh cause of action;
(iii) Whether the claims are sought to be raised within limitation;
and any other objections that may be raised by the respondents, shall
be decided by the learned Arbitrator on its own merits. It is made
clear that the observations made in the present judgment are for the
limited purpose of considering whether an arbitral tribunal is required
to be constituted or not.
41. This judgment shall not influence the arbitrator for the purpose of
adjudging the preliminary/jurisdictional objections, raised by the respondent.
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42. It is further clarified that the arbitration under each Loan Agreement
shall be independent of each other even though a common learned arbitrator
has been appointed for the sake of convenience. It shall be open for the
learned arbitrator to have common hearings/ allow common evidence to be
adduced, as may be deemed appropriate.
43. All rights and contentions of the respondents in this regard are
expressly reserved.
44. The learned Sole Arbitrator may proceed with the arbitration
proceedings subject to furnishing to the parties the requisite disclosures as
required under Section 12 of the A&C Act.
45. The learned Sole Arbitrator shall be entitled to fee in accordance with
IVth Schedule to the A&C Act; or as may otherwise be agreed to between
the parties and the learned Sole Arbitrator.
46. Needless to say, nothing in this order shall be construed as an
expression of this court on the merits of the case.
47. The present petitions are disposed of.
SACHIN DATTA, J
MAY 13, 2025/sv
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