The Court emphasized the Arbitrator's jurisdiction to interpret Contract terms and upheld the Award based on the plausible interpretation of 'outstanding dues' under the Term Loan Agreement.

JUDGMENT

Navin Chawla, J. (Oral)

1. This petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act') challenging the Arbitral Award dated 22.09.2022 passed by the learned Sole Arbitrator.

2. In a nutshell, the facts leading to the present petition are as under:

a) The respondent by its Sanction Letter dated 26.07.2018 had sanctioned a Term Loan Facility for an aggregate amount of Rs.10 Crores in favour of the petitioners.

b) In terms of the Sanction Letter, a Term Loan Agreement dated 28.07.2018 was executed between the petitioner no.1 and the respondent no.1. Simultaneously, the petitioner nos.2 and 3 executed a Letter of Guarantee dated 28.07.2018, and the petitioner no.1 executed a Deed of Hypothecation dated 28.07.2018.

c) Claiming that the petitioner no.1 had defaulted in making the payment of the due installments, the respondent issued a Loan Recall Notice dated 09.12.2019, also invoking the Arbitration Agreement as contained in Clause 19.4 of the Term Loan Agreement.

d) The respondent thereafter issued another notice dated 27.07.2020, invoking arbitration not only under Clause 19.4 of the Term Loan Agreement, but also under Clause 29 of the Letter of Guarantee dated 28.07.2018.

e) The respondent thereafter filed a petition under Section 11 of the Act, being ARB.P. 58/2021 titled Tata Capital Financial Services Limited v. Bell Finvest (India) Limited & Ors.. This Court by its order dated 03.02.2021 was pleased to appoint a Sole Arbitrator.

f) The learned Sole Arbitrator has by the Impugned Award directed as under:

"23. In the above mention facts and law, the Award is accordingly passed in favour of the Claimant and against the Respondents, as under:

a) Since the Respondent No. 1 has failed to make payment to the Claimant, the Respondent Nos. 2 (Mr. Chirag Rathod) and Respondent no. 3 (Mr. Bhupesh Rathod) are liable to pay the entire outstanding amount of Rs.7,91,46,873/- as on 09.04.2021 together with applicable and additional interest from 10.04.2021 till its actual realization under the Term Loan Agreement dated 28.07.2018 and the Letter of Guarantee dated 28.7.2018 given by the Respondent no. 2 and Respondent no. 3 to the Claimant.

b) Claim for Legal Costs, charges and other expenses is allowed along with fee of the Arbitrator.

c) The Respondents have filed the affidavits of Respondent no. 2 -- one is before the final hearing and another one after the reserve of order, whereby the baseless, improper, incorrect averments are made and also inappropriate language is used, therefore, the Respondents are burdened with costs of Rs.30,000/- (Rupees thirty thousand only) which shall be deposited by Respondent no.2 with the Delhi High Court Mediation Centre within the period of five weeks. Copy of receipt shall be given to the counsel for the Claimant after the deposit, which is not paid."

3. The learned senior counsel for the petitioners submits that the learned Sole Arbitrator has erred in his interpretation of the Term Loan Agreement. He submits that in terms of Clause 12 of the Term Loan Agreement, in the event of default, it is only the 'outstanding dues' that can be claimed by the respondent, that is, only the installments that remained due and payable from the petitioners as on that day could have been claimed by the respondent in the arbitration proceedings. He submits that it is only upon termination of the Facility Agreement and as provided in Clause 11.3 of the Term Loan Agreement, that the respondent can demand immediate repayment 'of all outstanding moneys advanced under the Facility'.

4. He submits that the learned Sole Arbitrator has placed reliance on Clause 9 of the Term Loan Agreement which relates to the prepayment of the Facility and, in the facts of the case, had no application. He submits that even otherwise, the scope and ambit of a clause on prepayment of the Loan Facility would be entirely different from an event of default. He submits that the