The Bombay High Court has granted an application under Section 11 of the Arbitration and Conciliation Act, 1996, allowing the appointment of a sole arbitrator to adjudicate disputes between Mangal Credit and Fincorp Limited and Ulka Chandrashekhar Nair arising from two mortgage deeds and related loan transactions. The respondent challenged the maintainability of arbitration by alleging forgery, fraud, and criminal acts concerning her signatures on the mortgage documents, and pointed to an ongoing FIR and a related civil suit declaring the documents void.
Justice Advait M. Sethna, however, reiterated that at the referral stage, the court’s role is confined to a prima facie assessment of the existence of an arbitration agreement, not a deep probe into disputed factual issues that are best left to the arbitral tribunal. The Court cites Managing Director Bihar State Food and Civil Supply Corporation Limited vs. Sanjay Kumar distinguishing “serious fraud” requiring a more thorough civil court trial from disputes still arbitrable under the competence-competence principle. Evidence on record, including bank statements and the mortgage deeds, supported a prima facie case for arbitration, with the Court holding that all objections on validity and arbitrability can be taken up by the tribunal as preliminary issues.
The Court found the agreement’s arbitration clause valid but overruled its provision for unilateral arbitrator appointment by the lender; instead, it appointed former Chief Justice Naresh H. Patil as sole arbitrator. All further interim and preliminary issues, including the allegations of fraud and settlement possibilities, are to be considered by the arbitrator. The Application was allowed and the matter referred accordingly, while a request by the respondent for stay of the order was denied.
Appearances:Â
Mr. Mr. Pankaj Jain, a/w Pradeep Purohit i/by P. D. Jain & Co., for the Applicant.
Reshant V . Shah, i/by Lex Conseiller Shah, for the Respondent