Calcutta High Court
Tata Capital Limited vs M/S Apap Trading Private Limited And Ors on 29 July, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
OCD 9
ORDER SHEET
AP-COM/542/2025
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
TATA CAPITAL LIMITED
VS
M/S APAP TRADING PRIVATE LIMITED AND ORS.
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 29th July, 2025.
Appearance:
Mr. Jit Ray, Adv.
Mr. Aharnish Ghosh, Adv.
...for the petitioner
Ms. Setu Das Roy, Adv.
...for the respondent
The Court: This is an application for appointment of an arbitrator on the
strength of clause 9 of the agreement for business loan. The petitioner submits
that it is a non-banking finance company. In terms of the order of the National
Company Law Tribunal, Mumbai, Tata Capital Financial Services Limited and
Tata Cleantech Capital Limited merged with Tata Capital Limited. Thus, all the
properties, assets, rights, benefits, interest, duties, obligations, liabilities,
contracts, agreements, securities etc. of those two companies were transferred to
the petitioner with effect from January 1, 2024. Tata Capital Finance Services
Limited sanctioned a loan in favour of the respondent. The agreement stood
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transferred by virtue of the order of the National Company Law Tribunal,
Mumbai. The respondent defaulted in payment of the loan. A loan recall notice
was issued on March 18, 2025. Despite the issuance of the loan recall notice, no
payment was made.
In the recital of the agreement for business loan, the expression "lender"
includes its heir, successors and assigns. The dispute resolution clause provided
that disputes arising out of the said agreement, would be resolved by arbitration
and the place of arbitration would be Kolkata. The petitioner had issued a notice
invoking arbitration on April 30, 2025, which was duly received by the
respondent. Even if the petitioner is a non-signatory to the agreement, the
petitioner acquired all rights, liabilities, agreement, business assets etc. of Tata
Capital Financial Services Ltd. with effect from January 1, 2024, by virtue of the
order of an appropriate forum.
The petitioner also submits that nomination of an Arbitrator from the panel
supplied by the petitioner company, is no longer permissible under law and the
petitioner has thus, approached this court.
Ms. Setu Das Roy appears for the respondent. Ms. Das Roy submits that
the merger was never informed to the respondent. That the calculation of the
dues was faulty. The petitioner is a non-signatory.
I find that the notice invoking arbitration clearly indicated the mode and
manner in which the petitioner has acquired right under the agreement and had
stepped into the shoes of Tata Capital Financial Services Ltd. The said notice was
received by the respondent. The respondent did not object to the said notice. The
same was not responded to.
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The other issues raised by Ms. Das Roy with regard to the computation and
consequences thereof on the claim of the petitioner etc. shall be raised before the
learned Arbitrator. In my prima facie view, even if the petitioner is a non-
signatory, in view of the merger, the petitioner can invoke arbitration as the
successor of the erstwhile lender.
In the matter of Ajay Madhusudan Patel v. Jyotrindra S. Patel, reported in
(2025) 2 SCC 147, the Hon'ble Apex Court held as follows:-
"82. An important factor to be considered by the courts and tribunals is
the participation of the non-signatory in the performance of the underlying
contract. In this regard, it was observed in Cox & Kings [Cox & Kings
Ltd. v. SAP India (P) Ltd., (2024) 4 SCC 1 : (2024) 2 SCC (Civ) 1 : (2024)
251 Comp Cas 680] as follows : (SCC pp. 75-77, paras 123 & 126-27)
"123. ... The intention of the parties to be bound by an arbitration
agreement can be gauged from the circumstances that surround the
participation of the non-signatory party in the negotiation,
performance, and termination of the underlying contract containing
such agreement. The Unidroit Principle of International Commercial
Contract, 2016 [Unidroit Principles of International Commercial
Contracts, 2016, Article 4.3.] provides that the subjective intention of
the parties could be ascertained by having regard to the following
circumstances:
(a) preliminary negotiations between the parties;
(b) practices which the parties have established between themselves;
(c) the conduct of the parties subsequent to the conclusion of the
contract;
(d) the nature and purpose of the contract;
(e) the meaning commonly given to terms and expressions in the trade
concerned; and
(f) usages.
***
126. Evaluating the involvement of the non-signatory party in the
negotiation, performance, or termination of a contract is an important
factor for a number of reasons. First, by being actively involved in the
performance of a contract, a non-signatory may create an appearance
that it is a veritable party to the contract containing the arbitration
agreement; second, the conduct of the non-signatory may be in
harmony with the conduct of the other members of the group, leading
the other party to legitimately believe that the non-signatory was a
veritable party to the contract; and third, the other party has
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legitimate reasons to rely on the appearance created by the non-
signatory party so as to bind it to the arbitration agreement.
***
127. … The nature or standard of involvement of the non-signatory in
the performance of the contract should be such that the non-signatory
has actively assumed obligations or performance upon itself under the
contract. In other words, the test is to determine whether the non-
signatory has a positive, direct, and substantial involvement in the
negotiation, performance, or termination of the contract. Mere
incidental involvement in the negotiation or performance of the
contract is not sufficient to infer the consent of the non-signatory to
be bound by the underlying contract or its arbitration agreement. The
burden is on the party seeking joinder of the non-signatory to the
arbitration agreement to prove a conscious and deliberate conduct of
involvement of the non-signatory based on objective evidence.”
In the matter of Chloro Controls India (P) Ltd. v. Severn Trent Water
Purification Inc., reported in (2013) 1 SCC 641, the Hon’ble Apex Court held
as follows:-
“70. Normally, arbitration takes place between the persons who have, from
the outset, been parties to both the arbitration agreement as well as the
substantive contract underlining (sic underlying) that agreement. But, it does
occasionally happen that the claim is made against or by someone who is not
originally named as a party. These may create some difficult situations, but
certainly, they are not absolute obstructions to law/the arbitration
agreement. Arbitration, thus, could be possible between a signatory to an
arbitration agreement and a third party. Of course, heavy onus lies on that
party to show that, in fact and in law, it is claiming “through” or “under” the
signatory party as contemplated under Section 45 of the 1996 Act. Just to
deal with such situations illustratively, reference can be made to the following
examples in Law and Practice of Commercial Arbitration in England (2nd Edn.)
by Sir Michael J. Mustill:
‘1. The claimant was in reality always a party to the contract, although
not named in it.
2. The claimant has succeeded by operation of law to the rights of the
named party.
3. The claimant has become a party to the contract in substitution for the
named party by virtue of a statutory or consensual novation.
4. The original party has assigned to the claimant either the underlying
contract, together with the agreement to arbitrate which it incorporates,
or the benefit of a claim which has already come into existence.”
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In the matter of Cox & Kings Ltd. v. SAP (India) (P) Ltd., reported in
(2025) 1 SCC 611, the Hon’ble Apex Court held as follows:-
“31.
****
169. In case of joinder of non-signatory parties to an arbitration agreement,
the following two scenarios will prominently emerge : first, where a
signatory party to an arbitration agreement seeks joinder of a non-
signatory party to the arbitration agreement; and second, where a non-
signatory party itself seeks invocation of an arbitration agreement. In both
the scenarios, the referral court will be required to prima facie rule on the
existence of the arbitration agreement and whether the non-signatory is a
veritable party to the arbitration agreement. In view of the complexity of
such a determination, the referral court should leave it for the Arbitral
Tribunal to decide whether the non-signatory party is indeed a party to the
arbitration agreement on the basis of the factual evidence and application
of legal doctrine. The Tribunal can delve into the factual, circumstantial,
and legal aspects of the matter to decide whether its jurisdiction extends to
the non-signatory party. In the process, the Tribunal should comply with
the requirements of principles of natural justice such as giving opportunity
to the non-signatory to raise objections with regard to the jurisdiction of
the Arbitral Tribunal. This interpretation also gives true effect to the
doctrine of competence-competence by leaving the issue of determination of
true parties to an arbitration agreement to be decided by the Arbitral
Tribunal under Section 16.”
Merger is a transaction that combines companies or assets. All assets and
liabilities of the merging companies are transferred to the surviving entity,
meaning that, the new combined company assumes all the rights and legal
obligations of both the original companies. Further adjudication is left to the
learned Arbitrator.
Under such circumstances, this Court refers the matter to arbitration by
appointing Ms. Sohini Chakraborty, Advocate [Mob. No. 9231661008] as the sole
arbitrator, to arbitrate upon the disputes. The learned Arbitrator shall comply
with the provisions of Section 12 of the Arbitration and Conciliation Act, 1996.
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The learned Arbitrator shall be at liberty to fix her remuneration as per the
schedule of Arbitration and Conciliation Act, 1996.
AP-COM 542 of 2025 is disposed of accordingly.
(SHAMPA SARKAR, J.)
B.Pal