M/S Moneywise Financial Services Private Limited v. Lakshya Polytex Private Limited

1. The present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter ‘the A&C Act’) seeks constitution of an arbitral tribunal to adjudicate the disputes between the parties in the context of a Loan Agreement dated 20.10.2018 (hereinafter ‘the Agreement’). SACHIN DATTA, J. (ORAL)

2. The respondent no.1 i.e. Lakshya Polytex Private Limited is the principal borrower under the said Agreement whereas the respondent no(s) 2 to 4 are the co-borrowers. A perusal of the Agreement which is filed as document no.2 alongwith the present petition, reveals, prima facie, that the same was duly executed. The same also contains an arbitration clause which reads as under:- “ARBITRATION 10.[1] Any disputes, differences, controversies and questions directly or indirectly arising at any time hereafter between the Parties or their respective representatives or assigns, arising out of or in connection with this Agreement (or the subject matter of this Agreement), including, without limitation, any question regarding its existence, validity, interpretation, construction, performance, enforcement, rights and liabilities of the Parties, or termination ("Dispute"), shall be referred to a sole arbitrator duly appointed by the Lender. The language of the arbitration shall be English. The seat of the arbitration shall be at New Delhi and the language of proceedings shall he English. The award rendered shall be in writing and shall set out the reasons for the arbitrator's decision. The costs and expenses of the arbitration· shall be borne equally by each Party, with each Party paying for its own fees and costs including attorney fees, except as may be determined by the arbitration tribunal. Any award by the arbitration tribunal shall be final and binding.”

3. None appears for the respondent no(s). 1 and 2 despite notice.

4. Learned counsel for respondent no(s). 3 and 4 submits that although the respondent no. 3 was initially a director of the respondent no.1/company, he had resigned from the said post and thereafter his father had joined as the director of the respondent company. He submits that the respondent no(s). 3 and 4 never agreed to be co-borrower/s nor had they signed the Agreement in question.

5. On a prima facie conspectus, this Court is satisfied that the Agreement was executed. It is undisputed that pursuant to the Agreement, loan amount was also disbursed by the petitioner to the respondent no.1. In Fujifilm India Pvt. Ltd. vs Rahul Lumba Proprieter of M/S Rahul Enterprises, ARB. P 769/2024 where one of the parties to the agreement sought to deny it signatures on the agreement, it was held by Coordinate Bench of this Court as under:

final adjudication, even on this question, to the arbitral tribunal. The relevant observations of the Court are as follows:

6. In the present case, Document No.2 annexed to the petition is stated to be a copy of the Distributorship Agreement. It purportedly bears the stamp and signature of the respondent on each page, as also at the end of the Agreement. The disputes raised by the respondent, as to the veracity of the document, would require evidence to be led and a factual determination to be returned. This task must be left to the arbitrator as, prima facie, there appears to be an agreement between the parties providing for resolution of disputes by arbitration.

6. The contention of the respondent no(s). 3 that the said respondent cannot be fastened with any liability on the basis that he resigned as director of the respondent company even prior to the Agreement being entered into, is also an aspect which can be considered by a duly constituted arbitral tribunal. Even the issue as to whether the claim/s sought to be raised in the arbitral tribunal are barred by limitation or not (as contended by the learned ” counsel for respondent no.3), is an aspect that can be adjudicated by a duly constituted arbitral tribunal. In Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 1996 & the Indian Stamp Act, 1899, In re, 2023 SCC OnLine SC 1666, the Supreme Court has held as under: -

7. Furthermore, in terms of the judgment in Perkins Eastman Architects DPC v. HSCC (India) Ltd (2020) 20 SCC 760, TRF Limited v. Energo Engineering Projects Ltd, (2017) 8 SCC 377 and Bharat Broadband Network Limited v. United Telecoms Limited, 2019 SCC OnLine SC 547, it is incumbent on this Court to appoint an independent sole arbitrator to adjudicate the disputes between the parties.

8. Accordingly, Mr. Shashank Dewan, Advocate (Mob. No.: +91

9999130505) is appointed as the Sole Arbitrator to adjudicate the disputes between the parties.

9. Needless to say, the respondents including respondent no(s). 3 and 4 shall be entitled to raise appropriate objections as regards arbitrability/jurisdiction before the learned arbitrator which shall be considered by the learned sole arbitrator in accordance with law. The learned sole arbitration shall make an endeavour to decide the said objection at the very outset.