Calcutta High Court
Tata Capital Limited vs Ashutosh Sau And Anr on 21 April, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
ORDER OC-110
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
AP-COM/235/2025
TATA CAPITAL LIMITED
VS
ASHUTOSH SAU AND ANR.
BEFORE:
The Hon'ble JUSTICE SHAMPA SARKAR
Date: 21st April 2025.
Appearance:
Mr. Ankush Majumdar, Adv.
...for petitioner.
1. Despite service, none appears on behalf of the respondents. The affidavit
of service is taken on record. The matter proceeds in the absence of the
respondents.
2. This is an application under Section 9 of the Arbitration and Conciliation
Act, 1996. Clause 23 of the agreement for business loan contains the
arbitration clause. 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 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 business loan
agreement stood transferred by virtue of the order of the National
Company Law Tribunal, Mumbai. The respondent defaulted in payment of
2
the loan. A loan recall notice for payment of final dues was issued on 25 th
February 2025.
3. Despite the issuance of the loan recall notice, no payment was made. The
dispute resolution clause provides that the disputes will be resolved by
arbitration and the place of the arbitration will be Kolkata. It appears that
the petitioner issued a loan recall notice on 25 th February 2025, which
was duly received by the respondent. Even if the petitioner is a non-
signatory to the application, the petitioner has acquired all rights,
liabilities, agreements, business assets etc. of Tata Capital Financial
Services Ltd. with effect from January 1, 2024, by virtue of the order of
appropriate forum.
4. Hence, the petitioner has approached this court. The borrower did not
respond to the loan recall notice. Upon merger of the two companies, the
petitioner has been vested with all rights, liabilities, assets etc of the
erstwhile lender. Thus, the application in my, prima facie view, is
maintainable at the instance of the petitioner. Even if, the petitioner is a
non-signatory, but in view of the merger, the petitioner can invoke
arbitration as the successor of the erstwhile lender. In the recital of the
agreement for business loan, the expression "lender" included its heirs,
successors and assigns.
5. 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:-
3
"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 Case 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 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
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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.”
6. In the matter ofChloro 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 (2ndEdn.) 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 .”
7. 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:-
5
“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.”
8. 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 on
this issue is left to the learned Arbitrator.
9. A, prima facie, case has been made out. An ad interim injunction is
issued, restraining the respondent Nos.1 and 2 from alienating, disposing
off and/or changing the nature and character of the hypothecated asset
being One JCB Excavator, Asset Model – JS 81, Engine No. –
4H.2188/1820434, Chassis Number – 2778757.
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10. This interim order shall continue for a period of two months.
11. The petitioner shall take steps in accordance with the terms of the dispute
resolution clause.
12. Fresh service be effected upon the respondents along with a copy of this
order. The respondents are at liberty to pray for variation, vacation
and/or modification of the aforementioned order.
13. Let the matter appear in the monthly list of June 2025.
(SHAMPA SARKAR, J.)
S. Kumar / R.D. Barua
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