Suits involving the enforcement of mortgages constitute non-arbitrable rights in rem, necessitating resolution through public courts rather than arbitration.

SANDEEP V. MARNE, J.

1) The Defendants have filed the present Application for reference of the dispute in the Suit to Arbitration.

2) Plaintiff has filed the present Suit for enforcement of mortgage under Section 8 of the Arbitration and Conciliation Act, 1996 (the Arbitration Act). Defendant Nos.1 to 4 have appeared in the Suit and have filed the present Application seeking reference of dispute raised in the Suit to Arbitration under the provisions of Section 8 of the Arbitration Act. Defendant No.1 and his partners are developers appointed for redevelopment of Defendant No.5- Society under Development Agreement dated 28 February 2014 and Supplemental Development Agreement dated 16 March 2021. Plaintiff extended various credit facilities to Defendant No.1 under various loans/facility Agreements as security. Defendant No.1 created mortgage in favour of the Plaintiff in respect of certain rights derived under the Development Agreement. According to Defendant Nos.1 to 4, Clause-34 of the Loan Agreements and Clause-24 of the Indenture of Mortgage contains clause for resolution of disputes through Arbitration. Accordingly, Defendant Nos.1 to 4 have filed the present Application under Section 8 of the Arbitration Act for reference of the dispute to Arbitrator.

3) Ms. Nangare, the learned counsel appearing for Applicants/ Defendant Nos.1 to 4 would submit that the Suit is not maintainable in view of existence of express Agreement between the parties for resolution of disputes through Arbitrator. That the claim of the Plaintiff is not independent but flows entirely out of Development and Supplemental Development Agreements. That the mortgage and credit facilities are also premised on the said Development Agreements. That Plaintiff’s alleged rights are inextricably tied to the underlying contracts which contains an Arbitration clause. That Plaintiff itself has relied on Development Agreement and Supplemental Development Agreement executed between Defendant No.1 and Defendant No 5-Society and the society have founded its Suit on rights derived from Development Agreement, the Plaintiff cannot deny or escape the obligation to have their disputes resolved through Arbitration.

4) Ms. Nangare would rely on judgment of the Apex Court in M.D. Frozen Foods Exports Private Limited and Others Versus. Hero Fincorp Limited, (2017) 16 SCC 741 in support of her contention that a claim of money by a bank or a financial institution cannot be treated as a ‘right in rem’, which has an inherent public interest and would thus not be arbitrable. That Plaintiffs alleged right to recover money from Defendant Nos.1 to 4 is a right in personem and clearly arbitrable. She would rely upon judgment of the Apex Court in Vidya Drolia and Others Versus. Durga Trading Corporation,(2021) 2 SCC 1 in support of her contention that though rights in rem are not arbitrable, subordinate rights that arise from right in rem are arbitrable. She would submit that Plaintiff is seeking enforcement of subordinate right even if it is momentarily accepted that right of redemption of mortgage is right in rem. She would also rely upon judgment of this Court in Aditya Birla Finance Limited Versus. Paul Packaging Private Limited, 2024 SCC Online Bom 3682 in support of her contention that enquiry by a Court under Sections 11 and 7 is identical and beyond conducting enquiry into existence of arbitration clause, the Court cannot decide any further issues which need to be left to be decided by the arbitrator. She would also rely upon judgment of the Apex Court in P.R. Shah Shares and Brokers (P) ltd. Versus. B.H.H. Securities (P) Ltd. and others, [(2012) 1 SCC 594]. in support of her contention that when claims against multiple parties are interconnected and based on same transactions, there is no bar to consolidate them before a single Arbitral Tribunal.

5) Ms. Nangare, would further submit that Plaintiff has deliberately impleaded Defendant No.5-Society to the present Suit for the pur