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ARB.P. 180/2025 Date of Decision: 28.07.2025
IN THE MATTER OF:
IIFL FINANCE LIMITED .....Petitioner
Through: Mr. Rajinder Mathur, Mr. Tarun Mathur, and Mr. Akshat Singhal, Advs.
Through: Mr. Ajay Kumar and Mr. Rohit, Adv.
JUDGEMENT
PURUSHAINDRA KUMAR KAURAV, J. (ORAL)
JUDGMENT
1. Heard learned counsel appearing for the parties.
2. The sole objection of the respondent to the instant petition is with respect to the unilateral appointment of the arbitrator by the petitioner herein.
3. Learned counsel for the respondent, however, submits that he has no such objection(s) if the learned arbitrator is appointed by the Court. He further objects to the calculations placed on record by the petitioner.
4. It is seen that there exists a valid arbitration clause in the agreement dated 21.08.2019, in Clause 20, which reads as under:-
KUMAR KAURAV court/tribunal of the city/place in which the branch of IIFL from where the Disbursement has been made is situate, provided that the exclusivity aforesaid shall bind the Borrower and IIFL shall be entitled to pursue the same in any other court of competent Jurisdiction at any other place; such dispute shall be referred to arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996 as may be amended, or its re-enactment, by a sole arbitrator, appointed by IIFL. The arbitration proceedings shall- be conducted in English language and held at the place more particularly mentioned in the SCHEDULE of the present agreement hereunder. The costs of such arbitration shall be borne by the losing Party or otherwise as determined in the arbitration award If a party is required to enforce an arbitral award by legal action of any kind, the party against whom such legal action is taken shall pay all reasonable costs and expenses and attorney's fees, including any cost of additional litigation or arbitration taken by the party seeking to enforce the award.”
5. The law with respect to the scope and standard of judicial scrutiny under Section 11(6) of the 1996 Act has been fairly well settled. This Court, as well, in the order dated 24.04.2025 in case of ARB.P. 145/202, titled as Pradhaan Air Express Pvt Ltd v. Air Works India Engineering Pvt Ltd, has extensively dealt with the scope of interference at the stage of Section
11. The Court held as under:-
2024 SCC OnLine SC 1754 2 2023 SCC OnLine SC 1666. issue of “accord and satisfaction” under Section 11 extends to weeding out ex-facie non-arbitrable and frivolous disputes would not apply after the decision of Re: Interplay. The abovenoted paragraph no.114 in the case of SBI General Insurance Co. Ltd reads as under:-
11. Ex-facie frivolity and dishonesty are the issues, which have been held to be within the scope of the Arbitral Tribunal which is equally capable of deciding upon the appreciation of evidence adduced by the parties. While considering the aforesaid pronouncements of the Supreme Court, the Supreme Court in the case of Goqii Technologies (P) Ltd. v. Sokrati Technologies (P) Ltd.5, however, has held that the referral Courts under Section 11 must not be misused by one party in order to force other parties to the arbitration agreement to participate in a timeconsuming and costly arbitration process. Few instances have been delineated such as, the adjudication of a non-existent and malafide claim through arbitration. The Court, however, in order to balance the limited scope of judicial interference of the referral Court with the interest of the parties who might be constrained to participate in the arbitration proceedings, has held that the Arbitral Tribunal eventually may direct that the costs of the arbitration shall be borne by the party which the Arbitral Tribunal finds to have abused the process of law and caused unnecessary harassment to the other parties to the arbitration.
12. It is thus seen that the Supreme Court has deferred the adjudication of aspects relating to frivolous, non-existent and malafide claims from the referral stage till the arbitration proceedings eventually come to an end. The relevant extracts of Goqii Technologies (P) Ltd. reads as under:-
21. Before we conclude, we must clarify that the limited jurisdiction of the referral courts under Section 11 must not be misused by parties in order to force other parties to the arbitration agreement to participate in a time consuming and costly arbitration process. This is possible in instances, including but not limited to, where the claimant canvasses the adjudication of non-existent and mala fide claims through arbitration.
22. With a view to balance the limited scope of judicial interference of the referral courts 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. Having said that, it is clarified that the aforesaid is not to be construed as a determination of the merits of the matter before us, which the Arbitral Tribunal will rightfully be equipped to determine.”
13. In view of the aforesaid, the scope at the stage of Section 11 proceedings is akin to the eye of the needle test and is limited to the extent of finding a prima facie existence of the arbitration agreement and nothing beyond it. The jurisdictional contours of the referral Court, as meticulously delineated under the 1996 Act and further crystallised through a consistent line of authoritative pronouncements by the Supreme Court, are unequivocally confined to a prima facie examination of the existence of an arbitration agreement. These boundaries are not merely procedural safeguards but fundamental to upholding the autonomy of the arbitral process. Any transgression beyond this limited judicial threshold would not only contravene the legislative intent enshrined in Section 8 and Section 11 of the 1996 Act but also risk undermining the sanctity and efficiency of arbitration as a preferred mode of dispute resolution. The referral Court must, therefore, exercise restraint and refrain from venturing into the merits of the dispute or adjudicating issues that fall squarely within the jurisdictional domain of the arbitral tribunal. It is thus seen that the scope of enquiry at the referral stage is conservative in nature. A similar view has also been expressed by the Supreme Court in the case of Ajay Madhusudan Patel v. Jyotrindra S. Patel”6.
6. Upon considering the submissions made by learned counsel appearing for the parties, and in view of the existence of an Arbitration clause in the agreement dated 21.08.2019, the Court deems it appropriate to appoint an arbitrator.
7. Accordingly, Mr. Ishaan Seth, Advocate (Mobile No.- 8527509899, e-mail id- ishaan.seth2000@gmail.com) is appointed as the sole Arbitrator.
8. The arbitration would take place under the aegis of the Delhi International Arbitration Centre (DIAC) and would abide by its rules and regulations. The learned Arbitrator shall be entitled to fees as per the Schedule of Fees maintained by the DIAC.
9. The learned arbitrator is also requested to file the requisite disclosure under Section 12 (2) of the Act within a week of entering on reference.
10. The registry is directed to send a receipt of this order to the learned arbitrator through all permissible modes, including through e-mail.
11. All rights and contentions of the parties in relation to the claims/counter-claims are kept open, to be decided by the learned Arbitrator on their merits, in accordance with law.
12. Needless to say, nothing in this order shall be construed as an expression of opinion of this Court on the merits of the controversy between the parties. Let a copy of the said order be sent to the Arbitrator through electronic mode as well.
13. Accordingly, the instant petition stands disposed of.
PURUSHAINDRA KUMAR KAURAV, J JULY 28, 2025/P/SP