Kotak Mahindra Bank Ltd. v. Williamson Magor and Co. Ltd. and Anr.

14 Another decision relied upon by Mr. Kamat is of the Delhi High Court, in the case of HDFC Bank Ltd vs. Satpal Singh Bakshi, which has reiterated the principle of non-arbitrable disputes, with reference to the right in rem and right in personam, which is an interest protected solely against the specific individuals and which are traditionally considered to be amenable to arbitration, whereas those creating rights in rem are required to be adjudicated by the Courts and the tribunals, being unsuited for private arbitration. The decision of the Apex Court in case of Eureka Forbes Limited vs. Allahabad Bank and ors, (2010) 6 SCC 193, which revolve around the term ‘debt’ as defined under Section 2(g) of the Act, 1993, is also pressed into service. The argument advanced was peculiar, as it was contended that the appellant was neither a borrower, nor there was any privity of contract between it and the Bank, and the objection was raised that money claimed from them was not a debt and therefore, rigors of recovery proceedings under the provisions of Recovery Act could not be enforced against the appellant. The Apex Court though found the submission at first blush to be sound and acceptable, it interpreted the words in Section 2(g) and has observed as under: “64. On a plain analysis of the above stated judgment of this Court, it is clear that the word "debt" under Section 2(g) of the Recovery Act is incapable of being given a restricted or narrow meaning. The legislature has used general terms which must be given appropriate, plain and simple meaning. There is no occasion for the Court to restrict the meaning of the word "any liability". "any person" and particularly the words "in cash or otherwise. Under Section 2(g), a claim has to be raised by the Bank against any person which is due to the Bank on account of/ in the course of any business activity undertaken by the Bank. In the present case, the Bank had admittedly granted financial assistance to Respondents 2 and 3, who in turn had hypothecated the goods, plants and machinery in favour of the Bank. There cannot be any dispute before us that the goods in question have been sold by the appellant without the consent of the Bank. Respondents 2 and 3 have hardly raised any dispute and resistance to the claim of the Bank. In fact, even before this Court there is no representation on their behalf. The documentary and oral evidence on record clearly established that the Bank has raised a financial claim upon the principal debtor, as well as upon the person who had inter-meddled and/or at least dealt with the charged goods without any authority in law. Not only this, the appellant had sold the hypothecated goods and stocks by public auction, despite the fact the appellant had due knowledge of the fact that the goods were charged in favour of the Bank.” The facts of the case, as laid before the Apex Court would clearly reveal that the goods were hypothecated to the Bank and the appellant, though had no knowledge prior to the sale of goods that they were hypothecated, cannot claim advantage as if this is permitted, it was held that it would defeat the very object and purpose of the Act as a party, which had pledged or mortgaged properties in favour of the Bank and then transfer such properties in favour of a third party, and in the event, the Bank takes action under the Recovery Act, they would raise an objection that there is no privity of contract or it is not a debt. It was thus held that this would tantamount to travesty of justice and frustrate the legislative object and intent of the Recovery Act. Ultimately, the term ‘debt’ defined in a wider manner, would definitely cover any liability for a ascertained sum of money and include a debt payable in any kind but not include a “judgment debt”. In the above case, the claim of the bank relatable to the hypothecated goods was held to be within the jurisdiction of the Tribunal exercising its power under Section 17 of the Recovery Act.

15 While dealing with the preliminary objection of Mr. Kamat, Mr. Jagtiani, on behalf of the applicant would asseverate that the applicant is not merely a lender here, but the Bank has acted as a financial Investor and when it exercised the option as per the agreement, it expected a reciprocal obligation on part of the respondents and therefore, it is erroneous to assume that the claim of the applicant would strictly fall within the ambit of Section 17 of the Recovery of Debts and Bankruptcy Act, 1993, on the premise that the Tribunal constituted under the said Act is empowered to entertain and decide the obligations of the Bank and Financial Institutions for recovery of debts due to them. The learned senior counsel would lay emphasis on the word ‘Recovery of Debts’ and his submission is, the claim of the applicant Bank is not merely for recovery of ‘Debts’ but, what he sought through the distinct demand notices is the specific performance of the terms of the Agreement dated 12/04/2018, which made it imperative for the respondents to act, once the Put Right is exercised by the investor, and it shall then purchase either by itself or through a third party, at the option of the investor, part or all of the Investor shares, and in this connection, the consideration to be paid for the Put Shares, as prescribed under the agreement was to be higher of the fair market value, or a price equal to a sum of INR 62 per equity share plus IRR @ 16% per annum from the execution date till the date of Option Exercise Notice, being the Put Price. While stretching his argument ahead, he submit that the applicant has invested the amount of Rs. 14,88,00,000/- in the Company and acquired 24,00,000 shares thereof and in terms of the Put Option, it was imperative on part of the respondent no.1 to buy the shareholding at Rs.62/- per share plus 16% IRR per annum and this transaction was secured by a Deed of Guarantee executed by respondent no.2. However, when the Put Option was exercised, the company failed to buy the shares and/or cost the third party to buy the same in accordance with the Transaction Documents and this constrained the Bank, which by the demand notice dated 2/12/2019, asked the respondent no.2 to comply with the first respondent’s obligations under the ‘Transaction Documents’ within 15 days. Since there was failure to discharge the obligation, what is ultimately sought by the Bank is payment of the amount outstanding as per the agreement, by way of Put Price along with 16% IRR cost etc. Pithily put, the argument of learned senior counsel is, he is not seeking recovery of the debts due and payable to it as a bank/financial institution, but what he ultimately seek is specific performance of the terms of the agreement dated 12/04/2018. Further Mr. Jagtiani would submit that on the Put up Option being exercised, the agreement contemplated the consideration to be paid for the Put up Shares was flexible i.e. it was expected to be the higher of the fair market value or price equal to the sum of INR 62 per equity share along with IRR as agreed and therefore, it is not simply a lending transaction by the applicant in favour of the respondent no.1 Company, which has resulted in an action to recover its debts.

16 In this backdrop, Mr. Jagtiani would therefore submit that the unequivocal principle as laid down in Vidya Drolia (supra) on the aspect of non-arbitrability of disputes is not the question for consideration here, as it is settled position of law that when the subject matter of the dispute is expressly, or by necessary implication is non-arbitrable, as per the mandate of the statute, the arbitrator cannot embark upon such disputes. According to him, the law laid down in Vidya Drolia (Supra) in paragraph no.56 and 57 unequivocally has settled the position of law by providing that the DRT Act is a complete Code by itself as far as recovery of debt is concerned, which provides for various modes of recovery and the debt due under the recovery certificate can be recovered in manner prescribed. The DRT Act provides for adjudication of disputes as far as ‘debt due’ are concerned and it covers secured and unsecured debts and therefore, the claims which are covered by DRT Act are nonarbitrable, and there is a prohibition against waiver of jurisdiction of DRT by necessary implication as a legislation has over returned the contractual rights to Arbitration, but as per Mr. Jagtiani, his claim is not for recovery of ‘Debt’ but is of specific performance.

17 On going through the authorities relied by Mr. Kamat in case of United Bank of India as well as in case of Eureka Forbes Ltd (Supra) I fail to understand how this exposition of law, assist the respondents, as though the term ‘debt’ would mean any liability, which is claimed as due from any person by a bank, the arrangement between the parties will have to be given its due effect, as it may not cover every situation, where money is due and payable to a bank. It is only when the amount becomes due and payable on account of the bank being a lender and the other party, being a borrower and when the amount advanced is due and payable to the bank in the course of its lending activity or any other act incidental thereupon, it would fall within the term ‘Debt’. In order to construe whether the liability contemplated is a ‘debt’, it is imperative that the pleadings in the plaint should be analyzed, and from its examination, if it is possible to hold that the jurisdiction of the Tribunal is ousted, then the issue of nonarbitrability cannot be pressed into service. Though the term ‘debt’ intent to cover an existing obligation to pay a sum of money now or in future, it is not every obligation which would fall within its ambit.

18 The Banking Regulation Act, 1959 which defines “Banking” in Section 5(b) is sufficiently indicative as in terms of 5(b) of the Regulation Act “ banking” means accepting, for the purpose of lending or investment, of deposits of money from the public repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise. Thus, for the purpose of Banking Regulation Act, a definite meaning is assigned to term “Banking”. But a banking company, as defined in Section 2(c) is competent to transact the business of banking in India and it may do all over any of the activities specified in Section 6(1) and its various sub-clauses. The form of business in which the banking companies may engage would cover distinct activities, one of which may be borrowing, raising or taking up of money, lending or advancing of money either upon or without security, drawing, making, accepting, discounting, buying, selling, collecting and dealings in bills of exchange, promissory notes, bills of lading, debentures, scrips and other Instruments and Securities whether transferable or negotiable or not. It may cover acquiring, holding, issuing on commission, underwriting and dealing in stocks, funds, shares, debentures, debenture stock bonds, obligations, securities and investments of all kinds; purchasing and selling of bonds, scrips or other form of securities, negotiating of loans and advances etc. It may also extent to contracting for public and private loans and negotiating and issuing the same. Apart from this, it may also cover the following activities as contemplated under Section 6 providing forms of business in which the banking companies may engage: “e) Carrying on and transacting every kind of guarantee and indemnity business; f) managing, selling and realizing any property which may come into the possession of the company in satisfaction or part satisfaction of any of its claims; g) acquiring and holding and generally dealing with any property or any right, title or interest in any such property which may form the security or part of the security for any loans or advances or which may be connected with any such security; h) undertaking and executing trusts; i) undertaking the administration of estates as executor, trustee or otherwise;” Thus, the canvass of a ‘Banking Company’ is far wider than what is contemplated under Section 2(g) of the Act.

19 Mr. Kamat has also attempted to invoke the principle of law laid down by the Division bench of the Bombay High Court on 21/07/2022 in the case of ICICI Bank Ltd vs. SREI Multiple Asset Investment Trust, which would reveal that the Suit was filed for recovery of debt, and when a point of jurisdiction, based on Section 18 of the Recovery of Debts and Bankruptcy Act, 1993, was raised, the argument premised on assertion that the Suit is nothing but one by ICICI for recovery of debt. The counsel for ICICI Bank accepted that its claim is a debt and covered by Section 2(g) and hence the jurisdictional ouster under Section 18 applied. Considering that the subject matter jurisdiction which goes to the root of the court’s jurisdiction, the Division Bench speaking through Justice Patel rightly held that: “jurisdictional ouster clauses are not be construed in such a manner as to allow them to constantly bypassed.” The argument was, therefore, foreclosed on the issue since the bank accepted its claim to be a debt, and once it was so declared, the Division Bench proceeded on the said footing, as the amount due and payable being the debt and dealt with the jurisdictional ouster under Section 18 by applying the principle laid down in the pronouncement of the Apex Court in case of Eureka Forbes (supra), where it was held that Section 2(g) is of the widest amplitude and does not admit of confinement to any particular form of transaction, liability, or entity and must receive its plain meaning.

20 The judgments cited by learned senior counsel Mr. Kamat are thus distinguishable and have to be read with the peculiar facts involved and though there may not be any doubt in my mind by following the authoritative pronouncements by the Apex Court in case of Eureka Forbes and United Bank of India (supra), in the wake of the primary object of the enactment in form of Act, 1993 and in establishment of Tribunal for expeditious adjudication and recovery of debts due to the Bank and Financial institution, as far as the present case is concerned since it is not merely a claim for recovery of debt but, it is a claim for specific performance and with the issue of the option to be exercised and the possibilities which will have to be ascertained after exercising the Put Option, I apprehend whether the Debt Recovery Tribunal, with it’s limited power conferred under Section 19, shall be competent to deal with a claim for specific performance. Hence the first objection raised by Mr. Kamat stands rejected.

21 Dealing with the second objection of Mr. Kamat that respondent no.2 cannot be pulled into arbitration, as the first agreement dated 12/04/2018 is between applicant and the respondent no.1 and the arbitration is sought to be invoked on the basis of the said agreement, I have given anxious consideration to the same. When the ‘Deed of Guarantee’, another document forming part of the transaction is minutely perused, it is evident that it is a guarantee executed by the respondent no.2 Aditya Khaitan referred to as the ‘Guarantor’ at the request and for the benefit of the respondent no.1 Williamson Magor and Company Ltd, the promoter company and the deed of guarantee is executed in favour of Kotak Mahindra Bank Ltd i.e. applicant. The Deed of Guarantee is a Tripartite arrangement between the Guarantor, the Promoter company, and the Investor and it clearly contemplate that the investor company relying upon the representations projected by the promoter and the promoter company has subscribed to the shares (Investor Shares) of the McNally Bharat Engineering company Ltd. The promoter company, being a promoter and a shareholder of the company and keenly interested in having the investor company to stay invested, to the extent of Investor Shares is provided with an option exercisable at its sole and absolute discretion, to require the promoter company to purchase all or some of the Investor Shares, subject to the Terms and Conditions set out in the agreement dated 12/04/2018. To the understanding, between the applicant bank as a Investor and the Promoter Company the respondent no.1, the respondent no.2 agreed to act as a guarantor through the deed of guarantee, by particularly agreeing as below: “(d) The Guarantor being the Promoter of the Promoter Company has agreed to secure the said Obligations of the Promoter Company by providing an unconditional and irrevocable personal guarantee in favour of the Investor Company. The Guarantor has financial and other interests in the Company and will derive substantial benefit from the subscription of the Shares by the Investor Company.” The Deed of Guarantee has incorporated a specific understanding, that the guarantor is intended to be legally bound with his obligations, which shall, at all times, include any debt and monetary liabilities of the promoter company, owed to the investor company under any agreement in any capacity irrespective of whether any debt or liability exists in present or would arise in future, is actual, ascertained, owed or incurred etc. The nature of security was underlined by the guarantor’s acknowledgment i.e. guarantee shall be a continuity in favour of the investor company, till the full and final discharge of the obligations by the guarantor and the promoter company under any agreement and shall not be determined by the guarantor except in the manner provided therein. The various clauses of deed of guarantee therefore, leave no scope of respondent no.2 being not liable, in discharge of the obligations stipulated in the letter of guarantee.

22 The argument of Mr. Kamat that there is no arbitration clause in the deed of guarantee and therefore respondent no.2 cannot be bound by arbitration is an argument equally without any merit. Merely because clause no. 13 in the deed of guarantee, which prescribe the governing law and jurisdiction, do not refer to arbitration, by its conspicuous exclusion, it cannot be the basis of the argument that respondent no.2 cannot be a party to the arbitration proceedings. In any case this is an argument, too late in the day to be advanced, as my attention is invited to an analogous stand being taken by respondent no.2 in Section 9 petition filed by the applicant before this Court, seeking interim measures against the promoter company, as well as the guarantor, and a statement was made jointly on behalf of the respondent no.1 and 2, that they shall submit to an injunction as prayed in the petition and even, respondent no.1 also agreed to make disclosure. Apart from this, Mr. Jagtiani has placed before me further order passed by the Single Judge, in the very same petition and while considering the relief sought, the deed of guarantee was brought into play, which had the effect of Mr. Khaitan agreeing to fulfill, the Put up Obligations himself in case Williamson Magor, the Company did not fulfill its contractual obligations. Justice Gautam Patel dealt with an akin submission advanced on behalf of Khaitan i.e. respondent no.2 in the following words: “9 Then Clause 13 tells us that the guarantee is covered by Indian law and then says it is subject to the exclusive jurisdiction of competent Courts in Mumbai alone. Mr. Kamat would have it- and this is what his Affidavit in Reply says- that this clearly means that Khaitan has signed no arbitration agreement and no arbitration is possible against Khaitan. The submission is that the guarantee is personal. Khaitan may have been the chairperson of Williamson Magor. But that is irrelevant. He himself has not signed the principal or master agreement. His guarantee is a separate contract and must be separately construed.” While dealing with the said submission, the principle laid down by the Supreme Court in Cholro Controls India Pvt Ltd vs Severn Trent Water Purification INC & Ors, (2013) 1 SCC 641 was invoked, to answer, whether Khaitan is bound by the arbitration agreement. While dealing with the document in question i.e. a letter of guarantee and particularly by referring to clause no. 15.2, which specifically stipulated that the guarantee “together with the definitive agreement” constitutes and contains an entire agreement and understanding amongst the parties with respect to the subject matter and supersedes all previous communications, it was held that the matter squarely fell within the Chloro Control framework, of one document being part and parcel, which is referred to as ‘umbrella’ or ‘the master agreement’. As a consequence of the elaborate decision, the conclusion was derived by Justice Patel in his usual fervor, in the following words: “15 Can I meaningfully make the kind of distinction Mr Kamat invites me to do? What is the basis of this distinction, other than saying that Mr Jagtiani must show the intention? There is nothing at all. As opposed to this, there is precisely the commonality of subject-matter that Cheran Properties and Chloro Controls contemplate, between Williamson Magor's obligation and the and the exactly corresponding assumption by Khaitan of the very obligation. Khaitan's obligation is simply a fail-safe or a fall-back position, to do exactly what Williasmson Magor had agreed to do; not a jot more, and not a whit less. The submission of Mr Kamat must be repelled. Khaitan is bound by the arbitration agreement.”

23 Mr. Kamat make a feeble attempt to invite my attention to para 38 of the order, which record, that the view expressed is prima facie, for the purposes of the order under Section 9 and he would urge that, the observations would not bind this Court. I do not think that I can subscribe to such a view. For the purpose of conferring the interim measures as prayed under Section 9 petition, Justice Patel has considered the purport of the “Transactions” entered between the parties, so as to ultimately decide upon whether the applicant Bank is entitled for the interim measures as sought. This necessarily required the learned Single Judge to consider both the transactions entered on the same date and while deciding upon the prayer for the claim of little more than 23 crores, a specific argument advanced on behalf of the respondent no.2 Khaitan, was turned down with a finding being recorded in the backdrop of the understanding between the parties and by construing the effect of the ‘Deed of Guarantee’ and the injunction granted operated against the respondent no.1 as well as respondent no.2, in form of restrain imposed, on transferring any immovable properties or assets as well as the disclosures. This argument must be therefore turned down, being foreclosed in Section 9 Petition. Worth it to note that the order passed by Justice Patel was carried in an Appeal before the Division Bench, which was disposed off on 22/10/2021, with a liberty being conferred to file review petition seeking review of the order dated 5/03/2021, with a clarification that no stay has been granted in the impugned order and the review is pending.

24 Coming to the third objection of Mr. Kamat in respect of the agreement comprising, of the arbitration clause not having been sufficiently stamped, it is to be noted that the first agreement dated 12/04/2018 is affixed with a stamp of Rs.15,000/-, whereas the deed of guarantee is executed on a nonjudicial stamp paper of Rs.500/-. Admittedly, the deed of guarantee do not contain the arbitration clause.

25 The objection of Mr. Kamat is, the document in question must be levied with a stamp duty in terms of Section 5(h)(A)(iv) of the Maharashtra Stamp Act, 1958 and it is apposite to reproduce the said provision: “5. Agreement or its records or Memorandum of an agreement-... (h) (A) if relating to- …

(iv) creation of any obligation, right or interest and having monetary value, but not covered under any other article- (a) If the amount agreed does not exceed rupees ten lakhs -0.[1] per cent of the amount agreed in the contract subject to minimum of rupees 100 (b) In any other case- 0.[2] per cent of the amount agreed in the contract.” Mr. Kamat would also invoke Section 18(1) of the Act, which reads thus: “18(1) Every instrument chargeable with duty executed only out of this State may be stamped within three months after it has been first received in this State.” As per the learned senior counsel, on the agreement dated 12/04/2018, as per the valuation of the agreement in the sum of Rs. 14,88,00,000/- (24 lakh Shares X Rs.62 per share), the stamp duty payable would be Rs. 2,97,600/- (0.[2] per cent of Rs. 14,88,00,000). According to him, on the deed of guarantee, similar stamp duty should be paid i.e. in the sum of Rs. 2,97,600/- separately. Apart from this, it is liable for levy of penalty on late payment of stamp duty, is his argument.

26 Dealing with this contention, Mr. Jagtiani would dispute that the document in question deserve to be stamped with a duty in terms of Section 5(h)(A)(iv) as he would submit that clause (iv) clearly stipulate that the creation of any obligation, right or interest having monetary value, but not covered under the other article and according to him, Article 5(b)(ii) of the Indian Stamp Act, 1899, applicable in West Bengal would incur Stamp Duty @ 0.50 for every Rupees 5000/-, whereas in the State of Maharashtra, under the Maharashtra Stamp Act, 1958, the stamp duty would computed under Article 5(c)(ii) as under: (c) “If relating to purchase or sale of shares, scrips, stocks, bonds, debentures, debenture stock or any other marketable security of the like nature in or of any incorporated company or other body corporate- (ii) in any other case @ of Rs.1.00 for every 10,000/-.”

27 According to Mr. Jagatiani, the document on being brought in Maharashtra would be liable for levy of Rs. 14,880/considering the existing agreement, which involve an amount of Rs. 14,88,00,000/-, and stamp duty of 15,000/- is already paid on the first agreement. Further, according to the applicant the stamp duty paid on deed of guarantee as Ad-valorem stamp duty was already paid on the principle instrument and as per Section 4 of the Indian Stamp Act, 1899, which provides for Ad-valorem Stamp Duty only on principle instrument in a contract for sale and stamp duty of Rs. 2 on the secondary instrument forming part of the same transactions. Mr. Jagtiani is right in submitting that the agreement in question would fall within the scope of 5(c) of Schedule-I, as it relate to purchase or sale of shares, stocks, and 5(h)(A)(iv), an entry in respect of creation of any obligation right or interest with a monetary value contemplated, would not cover the said instrument of investment in Shares of the company. If the instrument involved fall within the purview of 5(c)(ii), it cannot fall within the purview of 5(h)(A)(iv). Hence, I find no merit in the submission of Mr. Kamat that the document is not adequately stamped and therefore, an arbitration clause contained in the said agreement cannot be acted upon. Apart from this, it would be sufficient to note that the stamp duty will have to be determined on the basis of the transaction and its value indicated in the instrument and not on the prospective value as Section 21 of the Maharashtra Stamp Act, clearly prescribe that when an instrument is chargeable with ad-valorem duty in respect of any stock, or of any marketable or other security, such duty shall be calculated on the value of such stock or security according to the average price or value thereof, on the day of execution of the instrument. Consequently, I hold that the instrument/ document in question dated 12/04/2018, which is the basis for invoking arbitration is affixed with adequate stamp duty and suffers from no legal infirmity.

28 By this time, the position of law on the scope of the court at the pre-referral stage under Section 11 of the Act is well settled. In the wake of insertion of sub-section 6(A) to Section 11 of the Act, in case of Duro Felgura, S.A vs Gangavaram Port Ltd (2017) 9 SCC 729, it is held that the jurisdiction of the Court pursuant to the amendment is limited to examining whether an arbitration agreement exists between the parties- ‘nothing more nothing less’. Once again in Vidya Drolia (Supra) the principle of prima facie test on existence of an arbitration agreement came to be reiterated, by leaving the question of arbitrability to be decided by the arbitrator. Following the principle, the arbitral tribunal would be the first authority to decide the questions of non-arbitrability, the law is crystalized by the Apex Court in case of NTPS Ltd (supra) where it is held that court may not refer parties to arbitration when it is clear that the case is manifestly an ex-facie non-arbitrable. The eye of the needle test is laid down by the bench headed by the Hon’ble Chief Justice of India Dr. Justice D.Y. Chandrachud: “25. Eye of the Needle: The above-referred precedents crystallise the position of law that the pre-referral jurisdiction of the courts under Section 11(6) of the Act is very narrow and inheres two inquiries. The primary Inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant's privity to the said agreement. These are matters which require a thorough examination by the referral court. The secondary inquiry that may arise at the reference stage itself is with respect to the nonarbitrability of the dispute.” Further in paragraph 27 the following observation is pertinent and it reads thus: “27. The standard-of scrutiny to examine the nonarbitrability of a claim is only prima facie. Referral courts must not undertake a full review of the contested facts; they must only be confined to a primary first review and let facts speak for themselves. This also requires the courts to examine whether the assertion on arbitrability is bona fide or not. The prima facie scrutiny of the facts must lead to a clear conclusion that there is not even a vestige of doubt that the claim is non-arbitrable. On the other hand, even if there is the slightest doubt, the rule is to refer the dispute to arbitration.

28. The limited scrutiny, through the eye of the needle, is necessary and compelling. It is intertwined with the duty of the referral court to protect the parties from being forced to arbitrate when the matter is demonstrably nonarbitrable. It has been termed as a legitimate Interference by courts to refuse reference in order to prevent wastage of public and private resources. Further, as noted in Vidya Drolia (supra), if this duty within the limited compass is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court. Therefore, this Court or a High Court, as the case may be, while exercising jurisdiction under Section 11(6) of the Act, is not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator, as explained in DLF Home Developers Limited v. Rajapura Homes Pvt. Ltd” In the wake of the aforesaid authoritative pronouncement, I have examined the prima facie case of nonarbitrability as set out by Mr. Kamat and I have arrived at a conclusion that the dispute do not fall within the special statute which has provided remedy for recovery of debts and since it is permissible for me to examine a prima facie case in the wake of the existing arbitration agreement and since I do not find ouster of the jurisdiction of the tribunal, I deem it appropriate to exercise the power under sub-section (6) of Section 11 of the Arbitration and Conciliation Act. In the wake of the existing arbitration clause in the agreement dated 18/04/2018 and since arbitration has been invoked by the applicant by appointing his nominee and the respondents having been called upon to appoint theirs, the applicant seek appointment of the nominee arbitrator on behalf of the respondent so that the two arbitrators so appointed shall nominate the third arbitrator. On exercising the power available in me under Subsection (6) of Section 11, I nominate the arbitrator for the respondent by the following order: TERMS OF APPOINTMENT (a) Appointment of Arbitrator: Mr. Swanand Ganoo, is hereby appointed as a nominee Arbitrator of the respondents to adjudicate the disputes and differences that have arisen between the parties out of the ‘Transaction Documents’ dated 18/04/2018. (b) Communication to Arbitrator of this order:-

(i) A copy of this order will be communicated to the

(c) Disclosure:- The Arbitrator, within a period of

15 days before entering the arbitration reference, shall forward a Statement of disclosure as per the requirement of Section 11(8) read with Section 12(1) of the Arbitration and Conciliation Act, 1996, to the Prothonotary & Senior Master of this Court, to be placed on record of this application, with a copy to be forwarded to both the parties.

(d) Contact and communication information of the parties: Contact and communication particulars are to be provided by both sides to the Arbitrator. This information shall include a valid and functional E-mail address as well as mobile numbers of the parties, participating in the process as well as of the Advocates. (e) Fees: The Arbitrator shall be entitled for the fees as per Bombay High Court (Fee Payable to Arbitrators) Rules, 2018 and the arbitral costs and fees of the Arbitrator shall be borne by the parties in equal portion and shall be subject to the final Award that may be passed by the Tribunal. (f) All rights and contentions of the parties are kept open. At this stage, learned counsel for the respondent seek stay of the judgment pronounced today, which I must necessarily decline, since I have considered the matter on merits and found the preliminary objection to be untenable and found the circumstances involved justifying the appointment of the nominee arbitrator on behalf of the respondents. Hence, prayer for stay is rejected. ( SMT.

BHARATI DANGRE, J.)