A unilateral right of appointment for an arbitrator in an arbitration agreement is impermissible; however, notice of intent to arbitrate, even when lacking technical precision, can suffice for proceeding under Section 11 of the Arbitration Act.

JUDGMENT

[VIA VIDEO CONFERENCING]

Sanjeev Narula, J. (Oral):--The Petitioner-lender seeks adjudication of disputes that have arisen in relation to a loan transaction with the Respondent-borrower. Since the Arbitration Clause, as worded, gives unilateral right of appointment to the Petitioner-lender, which is impermissible under the scheme of the Arbitration and Conciliation Act, 1996 [hereinafter, `the Act'], the present petition has been filed under Section 11 (4) and 11(6) of the Act for appointment of an independent Sole Arbitrator.

BRIEF FACTS

2. The facts leading up to the filing of the present petition are encapsulated in brief, as follows: -

2.1. The parties entered into a Loan and Hypothecation Agreement dated 31st July, 2018 for a sum of Rs. 1,65,15,000/-. The loan was disbursed in two tranches, which were identified under separate loan account numbers. In order to secure the loan, Respondent No. 2 (Mr. Dhirendra Kumar Mishra) and Respondent No. 3 (Mr. Satya Prakash), being Directors of Respondent No. 1-Company, executed two separate Guarantee Agreements also dated 31st July, 2018, in their personal capacity, undertaking to repay the entire dues, as and when demanded by the Petitioner.

2.2 The Arbitration Agreement contained in Clause 53 of the afore-noted Loan and Hypothecation Agreement and Clause 13 of the Guarantee Agreements, is identical. The same is extracted hereinbelow: -

"53. This Agreement shall be governed by, and construed in accordance with, the laws of India. All disputes, differences and or claims arising out of these presents or in any way touching or concerning the same or as to construction, meaning or effect or as to the rights and liabilities of the Parties hereto shall be settled through arbitration to be held in accordance with the provisions of the Arbitration and Conciliation Act. 1996 as amended from time to time or any other or further Act of the Parliament that may be enacted in relation to arbitration proceedings Arbitration proceedings as aforesaid between the Parties shall be referred to a sole arbitrator to be appointed by the lender at its absolute discretion in the event of death, refusal, neglect, inability sir incapability of a person s nominated appointed to act as the sole arbitrator, the lender may at its absolute discretion, appoint another person instead as the new arbitrator. The arbitration proceedings shall be conducted in the English language. The award passed by the arbitrator shall be final and binding on all the Parties concerned. The costs of arbitration shall be borne by the Party(ies) as determined in the arbitration award. The arbitration proceedings, at the Lender's sole discretion, shall be held either in Delhi National Capital Region or Mumbai. The courts in Delhi/National Capital Region or Mumbai at the Lender's sole discretion, shall have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and the Borrower irrevocably submits to the jurisdiction of those courts."

2.3 The Petitioner contends that Respondent No. 1 has defaulted in repayment of the loan. The installments envisaged in the repayment schedule to the Loan and Hypothecation Agreement have not been paid. An amount of Rs. 1,91,03,322/- is alleged to be due and payable as on 30th December, 2020.

2.4 On 13th May, 2019, notices for "facility cancellation/acceleration" was issued to all the Respondent