The main legal point established in the judgment is that the borrower's invocation of arbitration was without jurisdiction, and the resulting arbitration proceedings and award were invalid.

JUDGMENT :

1. The petitioner-Indian Bank initially approached this Court by challenging an ‘interim measure award passed by the respondent no.1-Morris Samuel Christian in Arbitration Case No.23 of 2020. Subsequently, pending the petition, it appears that the respondent no.1- Sole Arbitrator passed the final award dated 24.11.2020. By the aforesaid award, the suit of the respondent no.2 was allowed and the term loan which is the subject matter of the award, was interfered with.

2. Facts in brief indicate as under:

2.1 The petitioner bank pursuant to a request for a credit facility by way of a term loan of Rs.20 lakhs issued a term loan sanction letter dated 02.05.2016 in favour of M/s.Ekta Enterprise – the respondent no.2 for the purposes of procurement of machines and raw-material relating to bakery items. It is the case of the petitioner that the respondent no.2 defaulted in payment of this loan and therefore being declared as a nonperforming asset on 01.10.2019, on 15.10.2019, a notice under Section 13(2) of the Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 (‘SARFAESI Act’ for short) for recovery of Rs.19,60,214/- was issued. Having failed to pay the amount, a notice under Section 13(4) of the SARFAESI Act was issued on 18.01.2020, by which, it was proposed to conduct a symbolic possession of the immovable properties of the respondent no.2 which were mortgaged to the bank.

2.2 Aggrieved by these notices, the respondent no.2 approached the respondent no.1 Shri Morris Samuel Christian ‘Sole Arbitrator’ who by an interim award dated 11.11.2020 granted a stay of the notices under the SARFAESI Act. This led the petitioner to file the present petition. Pending the petition, since the final award was passed by way of an amendment, the award passed on 24.11.2020 is also challenged.

3. Mr.Neeraj Vasu learned counsel for the petitioner would make the following submissions:

3.1 It is the case of the petitioner that without invoking the remedy available to the respondent no.2 of approaching the Debt Recovery Tribunal under Section 17 of the SARFAESI Act, the respondent no.2 invoked the jurisdiction of the Sole Arbitrator.

3.2 Mr.Vasu would submit that it is well recognized that an arbitrator can be appointed only when the parties to the contract mutually agree to such appointment, that too, if there is a stipulation for arbitration in a contract entered into between the parties. He would submit that neither is there a contract between the parties and more so, the contract never provided for an arbitration clause so as to subject the dispute referred to at the hands of the respondent no.2 to arbitration.

3.3 Alternatively assuming for the sake of the argument that there was a contract which did stipulate an arbitration clause, no appointment can be made without resorting to the provisions of Section 11 of the Arbitration Act.

3.4 Mr.Vasu would take the Court through the sanction letter, the terms thereto, the mortgaged deed entered into between the parties and the relevant notices issued by invoking the provisions of the SARFAESI Act to take over the symbolic possession of the properties of the respondent no.2. He would submit that this was a pure case of a bank being the creditor and the respondent no.2 who had availed of such loan and based on the outstanding amounts that the respondent no.2 owed to the bank, provisions of the SARFAESI Act were invoked and the Arbitration and Conciliation Act, 1996, had no role to play in the mechanism to resolve the dispute.

4. Mr.Shailesh Raval learned counsel appearing for the borrower/respondent no.2 would make the following submissions:

4.1 He would take the Court through Civil Application No.2 of 2021 filed by the respondent no.2 with a prayer to vacate the stay on the execution filed by the respondent which is pending before the City Civil Court, Bhadra.

4.2 He would submit that the respondent no.2/applicant of Civil Application No.2 of 2021 was admitt