JUDGMENT

1. The present petition has been filed under Article 227 of the Constitution of India challenging the order dated 20.11.2024 (hereafter ‘impugned order’) passed by the learned Arbitrator.

2. By the impugned order, the learned Arbitrator rejected the application under Section 16(3) read with Section 32(2)(c) of the Arbitration and Conciliation Act, 1996 (‘Act’), preferred by the petitioner, seeking termination of the arbitral proceedings on the ground that the disputes are non-arbitrable for the reason that the contract entered into between the parties was void ab initio, and that the assets which are subject matter of the proceedings have been provisionally attached by the Enforcement Directorate under Section 5 of the Prevention of Money Laundering Act, 2002 (‘PMLA’).

3. The brief facts of the case are as follows:

3.1. The petitioner and Respondent No.2 are the partners of Respondent No.4 LLP. It is the case of Respondent No.1 (claimant before the learned Arbitrator) that Corporate Insolvency Resolution Proceedings pertaining to Respondent No.3, which was principally engaged in the milling, branding and marketing of rice having plants in two locations–Amritsar and Bahalgarh, was pending before the learned National Company Law Tribunal. Respondent No.1 was also engaged in the milling, processing, trading and exporting of rice. An agreement had been entered into between Respondent No.1 and Respondent No.3 whereunder Respondent No.3 agreed to make available part of its processing facilities as well as storage facilities at Bahalgarh on job work basis to Respondent No.1. Under a similar agreement, Respondent No.1 was also put in possession and permitted use of the Amritsar Facility.

3.2. Respondent No.4 LLP participated in the said insolvency proceedings and filed a resolution plan. The same was approved on 12.09.2020, whereafter, to discharge its obligations under the resolution plan, Respondent No.4 along with its partners, including the petitioner, approached Respondent No.1 seeking financial assistance. In pursuance to the same, a Facility Agreement dated 30.09.2019 (hereafter ‘Facility Agreement’) was executed between the parties whereunder financial assistance of ₹130 crores was extended to Respondent No.4 LLP, for the purpose of making payments to the creditors of Respondent No.3. It is claimed that the amount was extended as Respondent No.1 already being in possession and use of the Bahalgarh and Amritsar Units, was desirous of purchasing the same.

3.3. Subsequently, a further amount of ₹16 crores was extended to Respondent No.4 LLP. The entire shareholding of Respondent No.3 stood transferred to Respondent No.4 LLP. It is claimed by Respondent No.1 that the respondents had breached their obligations by attempting to create charge/ encumbrance in violation of several clauses of the Facility Agreement after having already benefited from the huge financial assistance extended by Respondent No.1.

3.4. Respondent No.1 invoked the arbitration clause contained in the alleged Facility Agreement and filed an application under Section 11 of the Act. In pursuance thereof, the learned Arbitrator was appointed by another Bench of this Court on 09.12.2021. The argument in

relation to non-existence of the arbitration agreement was agitated in the said proceedings, however, it was noted that the parties will be at liberty to raise all arguments, including in relation to existence of the arbitration agreement before the learned Tribunal.

3.5. The statement of claim as well as the statement of defence cum counter claim was filed before the learned Sole Arbitrator. The pleadings were completed, issues were framed and evidence affidavits were filed by the parties.

3.6. When the arbitral proceedings were in the middle of cross-examination of Respondent No.2, the representatives of the Respondent No.1 including Mr. Paramjeet (CW-2) and Mr. Rakesh Gulati (CW-1) as well as Respondent No.2 were arrested by ED. A provisional attachmen