The main legal point established in the judgment is that the jurisdiction of the Arbitrator to adjudicate the matter concerning the recovery of a loan amount through sale of mortgaged property was upheld, and the appeal was dismissed as being not maintainable.

Manmohan Singh, J.

1. The above mentioned appeal has been filed by the appellants under Section 37(2) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act’) against the order dated 12th January, 2016 passed by Shri Gaurav Dubey, Arbitrator under Section 16 of the Act in Arbitration matter/Ref. no. RFL/Mortgage/L-1/177 titled as ‘M/s Religare Finvest Ltd. v. Ashwin Bharat Khater & Ors.’ for setting aside the said order. The contents of the order are reproduced here as under:-

“ORDER

12.01.2016

1. The respondents no. 1, 3, 5 and 6 have moved an application under Section 16 of Arbitration and Conciliation Act, 1996 thereby seeking dismissal of claimants petition on the ground that the enforcement of right by claimant through this arbitration proceedings is a right in rem and the same cannot be executed through present arbitration proceedings because the arbitration is an enforcement of right of personal rights. Further it is submitted by the respondents that claimant is seeking recovery of award through sale of the mortgaged property i.e. entire building (1st to 7th Floor) Imperial Windsor, Plot 25, Vallabhnagar CHS, North South Road 3, Juhu Scheme, Mumbai-400056, therefore, as per the provisions of Transfer of Property Act read with order 34 CPC, the action can only be enforced through courts of law and not by Arbitration Tribunal which is a private fora.

2. The claimant has filed its reply to the application of respondents. The claimant states that all respondents are co-borrower and now they cannot run from their liability to repay the loan amount Further claimant states that present proceedings relates to recovery of loan amount which respondents have taken from the claimant company and now respondents are trying to create confusion by corelating it with mortgage of property.

3. Heard the arguments and gone through the pleadings of the parties. The case of the claimant is for recovery of loan amount which even the respondent has admitted that they have availed loan facility from the claimant company to the tune of Rs.8 Crore. It has been further admitted by the respondents that they failed to repay the loan installments.

4. This tribunal is not satisfied with the plea of respondent that the present petition pertains to litigation of right in rem and not right in personam because the loan transaction is between two companies and it is a personal liability of the company to repay the loan amount An agreement to mortgage does not involve any right in rem but creates only a personal obligation.

5. In the light of the above findings, the Application of the Respondent under Section 16 of Arbitration and Conciliation Act, 1996 stands dismissed.

GAURAV DUBEY

Sole Arbitrator”

2. The brief facts leading to the filing of the present appeal are as follows:

2.1 In February 2010, the respondent granted a loan of Rs.8 crores to M/S Daisy Holdings Private Limited and to Sh.Avinash Bharat Khater against mortgage of immovable property i.e. entire building (1st to 7th Floor), Imperial Windsor, Plot 25, Vallabhnagar CHS, North South Road 3, Juhu Scheme, Mumbai 400056 through loan agreement and a registered mortgage deed dated 16th February 2010 and 17th February 2010 respectively to which appellant Nos. 1 to 4 were co-borrowers/guarantors.

2.2 The said loan facility was to be repaid in 144 EMIs of Rs. 10,87,370/- each which were to be paid till May, 2015. However, the same was not repaid.

2.3 The respondent by its letter dated 13th October, 2015 appointed Sh.Gaurav Dubey, Advocate as Arbitrator who entered into the said Reference and issued notice to the appellants dated 16th October, 2015 whereby the appellants were supposed to enter appearance on 26th October, 2015. However, the said notice was posted to the appellants on 21st October, 2015 and reached to the appellants only on 25th October, 2015.

2.4 The appellants put in appearance before the Arbitrator and moved an application under Section 16 of the Act, thereby ch