Calcutta High Court
Srei Equipment Finance Limited vs Gayatri Granite Industries And Ors on 19 June, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
ORDER OCD-21
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
AP-COM/457/2025
SREI EQUIPMENT FINANCE LIMITED
VS
GAYATRI GRANITE INDUSTRIES AND ORS.
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 19th June 2025.
Appearance:-
Mr. Swatarup Banerjee, Adv.
Mr. Sariful Haque, Adv.
Mr. Rajib Mullick, Adv.
Ms. Shambhavi Jha, Adv.
...ford petitioner.
Mr. Abhrajit Mitra, Sr. Adv.
Mr. Satadeep Bhattacharyya, Adv.
...for respondents.
1. This is the second application for appointment of a learned arbitrator filed
before this Court in terms of clause 9.11 of the Master Facility Agreement
dated January 1, 2019. As per the dispute resolution clause, any dispute
or difference arising out of or in connection the contract during its
subsistence or thereafter between the parties, including any dispute or
difference relating to the interpretation of the agreement or any clause
thereof, shall be settled by arbitration in accordance with the Arbitration
and Conciliation Act, 1996 and the rules framed thereunder. The dispute
shall be referred to the arbitration of a sole arbitrator to be appointed by
the petitioner company, upon intimation to all the parties to the
agreement. The proceeding was agreed to be held in Kolkata. The
respondent No.1 is the borrower and the respondent Nos.2 to 6 are the
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guarantors who had allegedly entered into two guarantee agreements and
stood as personal guarantors in terms of those guarantee agreements.
2. The petitioner carries on business, inter alia, of providing financial
assistance. The execution of the agreement was concluded within the
jurisdiction of this Court, at the corporate office of the petitioner. The
personal guarantee agreements incorporate the arbitration clause
contained under clause 9.11 of the Master Facility Agreement, by
reference. The agreement had four repayment schedules and under each
repayment schedule, Rs.11,25,00,000/- was disbursed. Excavators and
DG sets were secured against the said loan.
3. A deed of assignment was executed by the petitioner with the Bank of
India. All receivables together with rights, benefits, powers, risks,
guarantees and indemnities contained in the documents, including the
corresponding securities, were assigned to the Bank of India. A servicer
agreement was thereafter executed between Bank of India and the
petitioner. The petitioner was, inter alia, given the duty to manage, collect,
process and receive payment of the receivables on behalf of Bank of India.
4. Under such circumstances, as the respondent no.1 allegedly failed to
repay the loan and as the servicer agreement allowed the petitioner to
enforce the aforesaid facility agreement and terms and conditions thereof
against the defaulter, a demand notice was issued.
5. The petitioner also terminated the agreement vide notice dated November
15, 2022 and corrigendum dated January 9, 2023. Allegedly, the
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respondents did not respond to the notices. A notice invoking arbitration
was sent on 16th March, 2023. The petitioner thereafter filed an
application for appointment of an arbitrator vide AP No. 378 of 2023. The
said application was permitted to be withdrawn with liberty to file afresh
by order dated July 19, 2023. Thereafter, another notice invoking
arbitration was issued on February 20, 2025. The respondents, however,
replied to the said notice and denied the claims. Although the arbitration
clause provides for appointment of a sole arbitrator by the petitioner
company, in view of the provision of law under Section 12(5) of the said
Act, this application has been filed before this Court.
6. Mr. Mitra, learned senior advocate appearing on behalf of the
respondents, prays for an opportunity to file an affidavit in opposition to
bring on record certain factual aspects with regard to repayment by the
respondent No. 1, errors in calculation, improper invocation of the clause
etc. It is submitted that the affidavit will disclose the frivolity of the claim
of the petitioner.
7. This Court is of the view that the contentions of Mr. Mitra of having paid
back part of the loan and that, there were miscalculations, are factual
aspects and must be raised before the learned arbitrator. The issue of
limitation and the claim being time barred must also be decided by the
learned Arbitrator.
8. Mr. Mitra’s further contends that, the petitioner could not have enforced
the claim as a servicer. The servicer was only an agent of Bank of India.
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Such action by the agent was barred under various laws, including the
Recovery of Debts due to Banks and Financial Institutions Act, 1993
(RDBI Act).
9. The next contention of Mr. Mitra is that the personal guarantee
agreements were separate agreements and disputes against the
guarantors ought to have been invoked under the said agreement and not
by way of reference to the Master Facility Agreement. Further, Section 19
of the Limitation Act was referred to in respect of the contention that Mr.
Banerjee has failed to refer to any document which would show that,
between the time the debt became due and the notice invoking arbitration,
payment had been made. The petitioner was not entitled to any extended
period of limitation in claiming the amount.
10. This Court, as the referral court, is satisfied that there is an arbitration
clause in the Master Facility Agreement duly signed by the petitioner and
the borrower. Whether the petitioner was acting as an agent of Bank of
India or has an independent right to invoke the clauses contained in the
Master Facility Agreement, is a matter of evidence and to be decided by
the learned Arbitrator. The said issue is kept open to be urged before the
learned arbitrator. With regard to the issue of limitation, this Court finds
that last month for repayment of the loan was January 2023 in respect of
all four repayment schedules. It is contended that the last payment was
received sometime in September 2022. The termination notice was in
November 2022 and by a corrigendum on January 9, 2023. The first
5
notice invoking arbitration was dated March 16, 2023. Thereafter, the
petitioner approached this Court and the first application was disposed of
with liberty to proceed afresh. Accordingly, the second notice invoking
arbitration was issued on February 20, 2025. The law is well settled that,
the issue of limitation being a mixed question of law and fact should be
decided by the learned arbitrator.
11. The other contention of improper invocation by reference to only Master
Facility Agreement, does not impress the Court. It appears that both the
personal guarantee agreements incorporate the arbitration and
jurisdiction clause contained in the Master Facility Agreement under
clauses 34, 35 and 36. Moreover, the guarantors have also replied to the
notice invoking arbitration. The jurisdiction of the referral court is limited.
12. Reference is made to the decision of the Hon’ble Apex Court in Aslam
Ismail Khan Deshmukh vs ASAP Fluids Private Limited and Another
reported in (2025) 1 SCC 502. The relevant part is quoted below:-
“50. As evident from the aforesaid discussion and especially in
light of the observations made in Krish Spg. [SBI General Insurance
Co. Ltd. v. Krish Spg., (2024) 12 SCC 1 : 2024 SCC OnLine SC
1754] , this Court cannot conduct an intricate evidentiary enquiry
into the question of when the cause of action can be said to have
arisen between the parties and whether the claim raised by the
petitioner is time-barred. This has to be strictly left for the
determination by the Arbitral Tribunal. All other submissions
made by the parties regarding the entitlement of the petitioner to
4,00,000 and 2,00,010 equity shares in Respondent 1 company
are concerned with the merits of the dispute which squarely falls
within the domain of the Arbitral Tribunal.
51. It is now well-settled law that, at the stage of Section 11
application, the referral Courts need only to examine whether the
arbitration agreement exists — nothing more, nothing less. This
6approach upholds the intention of the parties, at the time of
entering into the agreement, to refer all disputes arising between
themselves to arbitration. However, some parties might take undue
advantage of such a limited scope of judicial interference of the
referral Courts and force other parties to the agreement into
participating in a time-consuming and costly arbitration process.
This is especially possible in instances, including but not limited
to, where the claimant canvasses either ex facie time-barred claims
or claims which have been discharged through “accord and
satisfaction”, or cases where the impleadment of a non-signatory to
the arbitration agreement is sought, etc.
52. In order to balance such a limited scope of judicial interference
with the interests of the parties who might be constrained to
participate in the arbitration proceedings, the Arbitral Tribunal
may direct that the costs of the arbitration shall be borne by the
party which the Tribunal ultimately finds to have abused the
process of law and caused unnecessary harassment to the other
party to the arbitration.”
13. The issue of joinder or mis-joinder of parties etc. goes to the very root of
the jurisdiction of the learned arbitrator and such issue can also be raised
before the learned arbitrator. . In the decision of the Hon’ble Supreme
Court in ASF Buildtech Pvt. Ltd. Vs. Shapoorji Paloonji reported in
2025 SCC OnLine SC 1016, it was decided that the issues of joinder,
non-joinder, mis-joinder etc. are also within the domain of the learned
Arbitrator. The relevant portions are quoted below:-
“113. It is well within the jurisdiction of the Arbitral Tribunal to decide
the issue of joinder and non-joinder of parties and to assess the
applicability of the Group of Companies Doctrine. Neither in Cox and
Kings (I) (supra) nor in Ajay Madhusudhan (supra), this Court has said
that it is only the reference courts that are empowered to determine
whether a non-signatory should be referred to arbitration. The law
which has developed over a period of time is that both ‘courts and
tribunals’ are fully empowered to decide the issues of impleadment of a
non-signatory and Arbitral Tribunals have been held to be preferred
forum for the adjudication of the same.
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114. In the case of Ajay Madhusudhan (supra), this Court, placing
reliance on Cox and Kings (I) (supra), has expressly held that Section
16 is an inclusive provision which comprehends all preliminary issues
touching upon the jurisdiction of the arbitral tribunal and the issue of
determining parties to an arbitration agreement goes to the very root of
the jurisdictional competence of the arbitral tribunal.
115. The case of Ajay Madhusudhan (supra) also recognizes that the
legal relationship between the signatory and non-signatory assumes
significance in determining whether the non-signatory can be taken to
be bound by the Arbitration Agreement. This Court also issued a caveat
that the ‘courts and tribunals should not adopt a conservative
approach to exclude all persons or entities who are otherwise bound by
the underlying contract containing the arbitration agreement through
their conduct and their relationship with the signatory parties. The
mutual intent of the parties, relationship of a non- signatory with a
signatory, commonality of the subject matter, the composite nature of
the transactions and performance of the contract are all factors that
signify the intention of the non-signatory to be bound by the arbitration
agreement’.
116. Recently, a coordinate bench of this Court in Adavya Projects Pvt.
Ltd. v. Vishal Strcturals Pvt. Ltd., 2025 INSC 507, also held that an
arbitral tribunal under Section 16 of the Act, 1996 has the power to
implead the parties to an arbitration agreement, irrespective of whether
they are signatories or non-signatories, to the arbitration proceedings.
This Court speaking through. P.S. Narasimha J. observed that since an
arbitral tribunal’s jurisdiction is derived from the consent of the parties
to refer their disputes to arbitration, any person or entity who is found
to be a party to the arbitration agreement can be made a part of the
arbitral proceedings, and the tribunal can exercise jurisdiction over
him. Section 16 of the Act, 1996 which empowers the arbitral tribunal
to determine its own jurisdiction, is an inclusive provision that covers
all jurisdiction question including the determination of who is a party
to the arbitration agreement, and thus, such a question would be one
which falls within the domain of the arbitral tribunal. It further
observed that, although most national legislations do not expressly
provide for joinder of parties by the arbitral tribunal, yet an arbitral
tribunal can direct the joinder of a person or entity, even if no such
provision exists in the statute, as long as such person or entity is a
party to the arbitration agreement. Accordingly, this Court held that
since the respondents therein were parties to the underlying contract
and the arbitration agreement, the arbitral tribunal would have the
8power to implead them as parties to the arbitration proceedings in
exercise of its jurisdiction under Section 16 of the Act, 1996. The
relevant observations read as under: –
“24. As briefly stated above, the determination of who is a party to
the arbitration agreement falls within the domain of the arbitral
tribunal as per Section 16 of the ACA. Section 16 embodies the
doctrine of kompetenz-kompetenz, i.e., that the arbitral tribunal
can determine its own jurisdiction. The provision is inclusive and
covers all jurisdictional questions, including the existence and
validity of the arbitration agreement, who is a party to the
arbitration agreement. and the scope of disputes referrable to
arbitration under the agreement. Considering that the arbitral
tribunal’s power to make an award that binds the parties is derived
from the arbitration agreement, these jurisdictional issues must
necessarily be decided through an interpretation of the arbitration
agreement itself. Therefore, the arbitral tribunal’s jurisdiction must
be determined against the touchstone of the arbitration
agreement.”
14. Under such circumstances, the application is disposed of by appointing
Hon’ble Justice Jyotirmay Bhattacharya, former Chief Justice of this
Court, to arbitrate upon the dispute between the parties. The learned
Arbitrator shall comply with the provisions of Section 12 of the Arbitration
and Conciliation Act, 1996. The learned Arbitrator shall be at liberty to fix
his remuneration as per the schedule of Arbitration and Conciliation Act,
1996. All questions raised by Mr. Mitra shall be available before the
learned arbitrator.
(SHAMPA SARKAR, J.)
S. Kumar / R.D. Barua / sb /JM