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ARB.P. 1101/2025
Date of Decision: 12.09.2025 IN THE MATTER OF:
AXIS FINANCE LIMITED HAVING BRANCH OFFICE AT 85-A, 1ST & 2ND FLOOR, RISHYAMOOK BUILDING, PANCHKUIAN ROAD, NEW DELHI - 110001 ........PETITIONER
Through: Ms.Vanshika Garg, Advocate.
JUDGMENT
1. LAXMAN PRALHAD CHAVAN (BORROWER) S 32 HISSA NO 12B, HISSA NO 13/1 HISSA NO 7 FINGST PUNE MAHARASHTRA 411048 ALSO AT: 902, 9TH FLOOR, KINGSTON ELYSIA, SR. NO. 32, PISOLI ROAD, PUNE, MAHARASHTRA-411060
2. PUSHPA LAXMAN CHAVAN (CO-BORROWER) S 32 HISSA NO 12B HISSA NO 13/1 HISSA NO 7 FINGST PUNE MAHARASHTRA 411048...... RESPONDENTS Through: None. HON'BLE MR.
JUSTICE PURUSHAINDRA KUMAR KAURAV JUDGEMENT PURUSHAINDRA KUMAR KAURAV, J. (ORAL)
1. The present petition has been filed under Section 11(6) of the KUMAR KAURAV Arbitration and Conciliation Act, 1996 (the Act) by the petitioner, seeking appointment of an Arbitrator to adjudicate upon the disputes that have arisen between the parties under the Loan Agreement dated 31.10.2019 (Loan Agreement).
2. Learned counsel for the petitioner has filed the affidavit of service, which is extracted as under:- ―AFFIDAVIT OF SERVICE OF SHIKHAR GUPTA S/O SH.
MAHESH GUPTA, AGED ABOUT 30 YEARS, HAVING OFFICE AT 16, 2ND FLOOR, WAZIRPUR, INDUSTRIAL AREA, DELHI-110052. I, do hereby solemny affirm and declare as under:
1. That I am the Counsel for the Petitioner in the captioned matter and hence, I am competent to swear the present Affidavit.
2. That the accompanying Petition being Re-filed online through E-filing before this Hon'ble Court on July 26, 2025.
3. That the copy of the said Petition has been duly served upon the Respondents on their email ID i.e. chavanlaxman5906@gmail.com on 26.07.2025 from my email address office@advsglegal.in.
4. I state that the said email was delivered and has not bounced or received back as undelivered. Copy of the said email is enclosed herewith.‖
3. It appears that despite service, no one has appeared on behalf of the respondent. The Court has, therefore, decided to proceed with the matter.
4. The facts of the case would indicate that the petitioner is a nonbanking finance institution, and is engaged in the business of providing loan/credit facilities. As per the case set up by the petitioner, respondent no.1 is a borrower and respondent no.2 is a co-borrower. Respondent no.1 is stated to have approached the petitioner with a request for sanctioning of the said personal loan facility and in pursuance thereto, the petitioner executed the Loan Agreement for an amount of Rs.23,70,351/-. According to the petitioner, it sanctioned and disbursed the said loan to the respondent on the terms and conditions contained in the said agreement, wherein, the respondents were obligated to repay the loan in monthly instalments on or before the 5th of every month over a period of 139 months.
5. It is further stated by the petitioner that the respondent defaulted in fulfilment of its repayment obligations, and the petitioner was constrained to send loan recall notice/ demand notice dated 09.07.2024 to the respondents demanding repayment of an amount of Rs.21,45,446/-, due as on the said date. Due to the respondent’s continued default and obstructions, the petitioner was constrained to issue a legal notice dated 09.05.2025 for invocation of arbitration under Clause 28(c) of the Loan Agreement calling upon the respondent to pay the outstanding amount of Rs. 19,97,931/- along with interest pendente lite from the date of default within a period of 30 days from the receipt of said notice.
6. The Court takes note of the Clause 28(c) of the Loan is extracted below, for reference:- ―Notwithstanding sub-clause (a) above, the Lender may, at its option choose to settle any disputes which may arise out of or in connection with this Agreement by referring the same to arbitration in accordance with the (Indian) Arbitration Act, 1996 as amended from time to time. The arbitral tribunal shall comprise of a sole arbitrator appointed by the Lender. The arbitration shall be held at Mumbai and/or Delhi as may be determined by the Lender and the proceedings of such arbitration shall be conducted in English. The Parties hereby also agree that the decision of the arbitrators shall be final and binding. The Parties hereby also agree that the cost of the arbitration shall be borne by the parties in accordance with the directions of the Arbitrator.‖
7. The law with respect to the scope and standard of judicial scrutiny under Section 11(6) of the Act has been fairly well settled. This Court in Pradhaan Air Express Pvt Ltd v. Air Works India Engineering Pvt Ltd[1], as well, has extensively dealt with the scope of interference at the stage of Section 11. Furthermore, this Court, recently, in Axis Finance Limited Vs. Mr. Agam Ishwar Trimbak[2] has held that the scope of inquiry under Section 11 of the Act has been limited to a prima facie examination of the existence of an arbitration agreement. Further, it was also reiterated that the Objections relating to the arbitrability of disputes are not to be entertained by a referral Court acting under Section 8 or 11 of the Act. The relevant extract of the aforesaid decision reads as under: -
19. In In Re: Interplay, the Supreme Court confined the analysis under Section 11 of the Act to the existence of an arbitration agreement and under Section 8 of the Act to the existence and validity of an arbitration agreement. Under both the provisions, examination was to be made at the touchstone of Section 7 of the Act. Further, issues pertaining to the arbitrability of the dispute fell outside the scope of both Section 11(6A) and Section 8 of the Act. The material part of the judgement of the Supreme Court in In Re: Interplay reads as under:
164. The 2015 Amendment Act has laid down different parameters for judicial review under Section 8 and Section 11. Where Section 8 requires the referral Court to look into the prima facie existence of a valid arbitration agreement. Section 11 confines the Court’s jurisdiction to the examination of the existence of an arbitration agreement. Although the object and purpose behind both Sections 8 and 11 is to compel parties to abide by their contractual understanding, the scope of power of the referral Courts under the said provisions is intended to be different. The same is also evident from the fact that Section 37 of 2025 SCC OnLine Del 3022 2025:DHC:7477 the Arbitration Act allows an appeal from the order of an arbitral tribunal refusing to refer the parties to arbitration under Section 8, but not from Section 11. Thus, the 2015 Amendment Act has legislatively overruled the dictum of Patel Engineering (supra) where it was held that Section 8 and Section 11 are complementary in nature. Accordingly, the two provisions cannot be read as laying down a similar standard. 165. The legislature confined the scope of reference under Section 11(6A) to the examination of the existence of an arbitration agreement. The use of the term ―examination‖ in itself connotes that the scope of the power is limited to a prima facie determination. Since the Arbitration Act is a self-contained code, the requirement of ―existence‖ of an arbitration agreement draws effect from Section 7 of the Arbitration Act. In Duro Felguera (supra), this Court held that the referral Courts only need to consider one aspect to determine the existence of an arbitration agreement – whether the underlying contract contains an arbitration agreement which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement. Therefore, the scope of examination under Section 11(6A) should be confined to the existence of an arbitration agreement on the basis of Section 7Similarly, the validity of an arbitration agreement, in view of Section 7, should be restricted to the requirement of formal validity such as the requirement that the agreement be in writing. This interpretation also gives true effect to the doctrine of competence-competence by leaving the issue of substantive existence and validity of an arbitration agreement to be decided by arbitral tribunal under Section 16. We accordingly clarify the position of law laid down in Vidya Drolia (supra) in the context of Section 8 and Section 11 of the Arbitration Act.
166. The burden of proving the existence of arbitration agreement generally lies on the party seeking to rely on such agreement. In jurisdictions such as India, which accept the doctrine of competencecompetence, only prima facie proof of the existence of an arbitration agreement must be adduced before the referral Court. The referral Court is not the appropriate forum to conduct a minitrial by allowing the parties to adduce the evidence in regard to the existence or validity of an arbitration agreement. The determination of the existence and validity of an arbitration agreement on the basis of evidence ought to be left to the arbitral tribunal. This position of law can also be gauged from the plain language of the statute. 167. Section 11(6A) uses the expression ―examination of the existence of an arbitration agreement.‖ The purport of using the word ―examination‖ connotes that the legislature intends that the referral Court has to inspect or scrutinize the dealings between the parties for the existence of an arbitration agreement. Moreover, the expression ―examination‖ does not connote or imply a laborious or contested inquiry. On the other hand, Section 16 provides that the arbitral tribunal can ―rule‖ on its jurisdiction, including the existence and validity of an arbitration agreement. A ―ruling‖ connotes adjudication of disputes after admitting evidence from the parties. Therefore, it is evident that the referral Court is only required to examine the existence of arbitration agreements, whereas the arbitral tribunal ought to rule on its jurisdiction, including the issues pertaining to the existence and validity of an arbitration agreement. A similar view was adopted by this Court in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd.‖ [Emphasis supplied]
20. The effect of In Re: Interplay was further explained by a Three Judge Bench of the Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning[3] wherein the Court declared Vidya Drolia and NTPC Ltd.’s findings qua scope of inquiry under Section 8 and Section 11 of the Act to no longer be compatible with modern principles of arbitration. The material portions of the judgement read as under: ―114. In view of the observations made by this Court in In Re: Interplay (supra), it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else. For this reason, we find it difficult to hold that the observations made in Vidya Drolia (supra) and adopted in NTPC v. SPML (supra) that the jurisdiction of the referral Court when dealing with the issue of ―accord and satisfaction‖ under Section 11 extends to weeding out ex-facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision in In Re: Interplay (supra). … 118. Tests like the ―eye of the needle‖ and ―ex-facie meritless‖, although try to minimise the extent of judicial interference, yet they require the referral Court to examine contested facts and appreciate prima facie evidence (however limited the scope of enquiry may be) and thus are not in conformity with the principles of modern arbitration which place arbitral autonomy and judicial non-interference on the highest pedestal.‖ [Emphasis supplied]
21. Similarly, in BGM and M-RPL-JMCT (JV) v. Eastern Coalfields Ltd[4]
2025 SCC OnLine SC 1471 the Supreme Court succinctly explained the effect of In Re: Interplay on a Referral Court’s powers under Section 11 of the Act. The relevant part of the judgement is as under:
15. … (a) Section 11 confines the Court's jurisdiction to the examination regarding the existence of an arbitration agreement. (b) The use of the term ―examination‖ in itself connotes that the scope of the power is limited to a prima facie determination.
(c) Referral Courts only need to consider one aspect to determine the existence of an arbitration agreement — whether the underlying contract contains an arbitration agreement which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement. Therefore, the scope of examination under Section 11(6-A) should be confined to the existence of an arbitration agreement on the basis of Section 7. Such a legal approach will help the Referral Court in weeding out prima facie non-existent arbitration agreements.
(d) The purport of using the word ―examination‖ connotes that the legislature intends that the Referral Court has to inspect or scrutinise the dealings between the parties for the existence of an arbitration agreement. However, the expression ―examination‖ does not connote or imply a laborious or contested inquiry. (e) The burden of proving the existence of arbitration agreement generally lies on the party seeking to rely on such agreement. Only prima facie proof of the existence of an arbitration agreement must be adduced before the Referral Court. The Referral Court is not the appropriate forum to conduct a minitrial by allowing the parties to adduce the evidence in regard to the existence or validity of an arbitration agreement. The determination of the existence and validity of an arbitration agreement on the basis of evidence ought to be left to the Arbitral Tribunal. (f) Section 16 provides that the Arbitral Tribunal can ―rule‖ on its jurisdiction, including the existence and validity of an arbitration agreement. A ―ruling‖ connotes adjudication of disputes after admitting evidence from the parties. Therefore, when the Referral Court renders a prima facie opinion, neither the Arbitral Tribunal, nor the Court enforcing the arbitral award is bound by such a prima facie view. If a prima facie view as to the existence of an arbitration agreement is taken by the Referral Court, it still allows the Arbitral Tribunal to examine the issue in depth. [Emphasis supplied]
22. Thus from the above-mentioned authorities it is clear that a Court’s scope of inquiry under Section 11 of the Act has been limited to a prima facie examination of the existence of an arbitration agreement while the adjudication under Section 8 is to be made for both existence and validity. Further, the examination so undertaken under both the said provisions must be within the confines of Section 7 of the Act. Objections relating to arbitrability of disputes are not to be entertained by a referral Court acting under Section 8 or 11 of the Act.‖
8. In view of the fact that disputes have arisen between the parties and there is an arbitration clause in the contract, this Court appoints Mr. George Pothan Poothicote (Mobile No. +91-8130959645, e-mail id:gpp@georgepothan.com) as the sole Arbitrator.
9. The Sole Arbitrator may proceed with the arbitration proceedings, subject to furnishing to the parties the requisite disclosures as required under Section 12 of the Act.
10. The Sole Arbitrator shall be entitled to fee in accordance with the IV Schedule of the Act or as may otherwise be agreed to between the parties and the learned Sole Arbitrator.
11. The parties shall share the arbitrator's fee and arbitral cost, equally.
12. All rights and contentions of the parties in relation to the claims/counter claims are kept open, to be decided by the Sole Arbitrator on their merits, in accordance with law.
13. Needless to state, nothing in this order shall be construed as an expression of opinion of this Court on the merits of the controversy. All rights and contentions of the parties in this regard are reserved. Let the copy of the said order be sent to the newly appointed Arbitrator through the electronic mode as well.
14. Accordingly, the instant petition stands disposed of.
PURUSHAINDRA KUMAR KAURAV, J SEPTEMBER 12, 2025 Nc/amg