Axis Finance Limited v. Prashant Harichandra Sonawne
$~3 * IN THE HIGH COURT OF DELHI AT NEW DELHI Date of Decision: 29.05.2026 + AXIS FINANCE LIMITED .....Petitioner Through:
Mr.
Abu John Mathew, Advocate.
versus PRASHANT HARICHANDRA SONAWNE .....Respondent Through:
None.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN SHANKAR % JUDGEMENT (ORAL) 1.
In view of Notification No. 77/I-G-4/Genl.-I/DHC dated 26.05.2026, whereby the matters fixed for 28.05.2026 were directed to be taken up on 29.05.2026, the present matter is taken up today. 2.
The present Petition, filed under Section 11(6) of the Arbitration and Conciliation Act, 19961, seeks the appointment of a Sole Arbitrator to adjudicate upon the disputes stated to have arisen inter se the parties in terms of Clause 14 of the Personal Loan Agreement dated 12.10.20222, as executed between the parties. The relevant clause, being Clause 14 of the Agreement, reads as follows:
"14.
Arbitration:
(i) All disputes, differences and/or claim or questions arising out of these presents or in any way touching or concerning the same or as to constructions, meaning or effect thereof or as to the right, obligations and liabilities of the parties 1 Act 2 Agreement
hereunder shall be referred to and settled by arbitration, to be held in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory amendments thereof, of a sole arbitrator to be nominated by the Lender, and in the event of death, unwillingness, refusal, neglect, inability or incapability of a person so appointed to act as an arbitrator, the Lender may appoint a new arbitrator to be a sole arbitrator. The arbitrator shall not be required to give any reasons for the award and the award of the arbitrator shall be final and binding on all parties concerned. The arbitration proceedings shall be held Mumbai/Delhi.
(ii) Notwithstanding anything to the contrary contained herein, any dispute, controversy or claim arising out of or relating to this contract, including its construction, meaning, scope or validity thereof, shall be resolved and settled by arbitration under the Arbitration and Conciliation Act, 1996 (as amended) which may be administered electronically under Online Dispute Resolution (ODR), in accordance with its Dispute Resolution Rules ("Rules").
(iii) The parties consent to carry out the aforesaid proceedings electronically via the email addresses and / or mobile numbers as per Axis Finance records, updated from time to time.
(iv) The parties agree that the aforesaid proceedings shall be carried out by a sole arbitrator appointed under the Rules. The juridical seat of arbitration shall be Delhi/Mumbai, India and the aforesaid proceedings shall be subject to the exclusive jurisdiction of the competent courts in Delhi/Mumbai, India. The language of arbitration shall be English. The law governing the arbitration proceedings shall be Indian law. The decision of the arbitrator shall be final and binding on the parties"
3.
Material on record reveals that the statutory requirement of notice under Section 21 of the Act stands duly complied with by the Petitioner vide Notice dated 05.02.2024.
4.
Perusal of the Order sheets reflects that notice was issued in the present Petition vide Order dated 17.03.2026 and Order dated 08.05.2026 reflects that the Respondent was duly served and, subsequent to completion of service, the matter had been listed today for appearance on behalf of the Respondent; however, none appeared
on his behalf, nor has any reply been filed even today. 5.
In view of the aforesaid, and considering that all statutory requirements stand fulfilled, this Court is of the view that despite due service, the Respondent has chosen neither to enter an appearance nor participate in the present proceedings. Accordingly, this Court finds no impediment in referring the disputes arising inter se the parties to Arbitration.
6.
At this juncture, it is also apposite to note that the legal position governing the scope and standard of judicial scrutiny under Section 11(6) of the Act is no longer res integra. A three-Judge Bench of the Hon'ble Supreme Court in SBI General Insurance Co. Ltd. v. Krish Spinning3, after taking into consideration the authoritative pronouncement of the seven-Judge Bench in Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act, 1899, In re4, comprehensively delineated the contours of judicial intervention at the stage of Section 11 of the Act. The excerpt of Krish Spg (supra) reads as under:- "(c) Judicial interference under the 1996 Act
110. The parties have been conferred with the power to decide and agree on the procedure to be adopted for appointing arbitrators. In cases where the agreed upon procedure fails, the courts have been vested with the power to appoint arbitrators upon the request of a party, to resolve the deadlock between the parties in appointing the arbitrators.
111. Section 11 of the 1996 Act is provided to give effect to the mutual intention of the parties to settle their disputes by arbitration in situations where the parties fail to appoint an arbitrator(s). The parameters of judicial review laid down for Section 8 differ from those prescribed for Section 11. The view taken in SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 and affirmed in Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 that Sections 8 and 11, respectively, of the 1996 Act are complementary in nature 3 (2024) 12 SCC 1 4 (2024) 6 SCC 1
was legislatively overruled by the introduction of Section 11(6-A) in 2015. Thus, although both these provisions intend to compel parties to abide by their mutual intention to arbitrate, yet the scope of powers conferred upon the courts under both the sections are different.
112. The difference between Sections 8 and 11, respectively, of the 1996 Act is also evident from the scope of these provisions. Some of these differences are:
112.1. While Section 8 empowers any "judicial authority" to refer the parties to arbitration, under Section 11, the power to refer has been exclusively conferred upon the High Court and the Supreme Court.
112.2. Under Section 37, an appeal lies against the refusal of the judicial authority to refer the parties to arbitration, whereas no such provision for appeal exists for a refusal under Section 11. 112.3. The standard of scrutiny provided under Section 8 is that of prima facie examination of the validity and existence of an arbitration agreement. Whereas, the standard of scrutiny under Section 11 is confined to the examination of the existence of the arbitration agreement.
112.4. During the pendency of an application under Section 8, arbitration may commence or continue and an award can be passed. On the other hand, under Section 11, once there is failure on the part of the parties in appointing the arbitrator as per the agreed procedure and an application is preferred, no arbitration proceedings can commence or continue.
113. The scope of examination under Section 11(6-A) is confined to the existence of an arbitration agreement on the basis of Section
7. The examination of validity of the arbitration agreement is also limited to the requirement of formal validity such as the requirement that the agreement should be in writing.
114. The use of the term "examination" under Section 11(6-A) as distinguished from the use of the term "rule" under Section 16 implies that the scope of enquiry under Section 11(6-A) is limited to a prima facie scrutiny of the existence of the arbitration agreement, and does not include a contested or laborious enquiry, which is left for the Arbitral Tribunal to "rule" under Section 16. The prima facie view on existence of the arbitration agreement taken by the Referral Court does not bind either the Arbitral Tribunal or the Court enforcing the arbitral award.
115. The aforesaid approach serves a twofold purpose - firstly, it allows the Referral Court to weed out non-existent arbitration agreements, and secondly, it protects the jurisdictional competence of the Arbitral Tribunal to rule on the issue of existence of the arbitration agreement in depth.
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117. In view of the observations made by this Court in Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC 1, it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else. For this reason, we find it difficult to hold that the observations made inVidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 and adopted inNTPC Ltd. v. SPML Infra Ltd., (2023) 9 SCC 385 that the jurisdiction of the Referral Court when dealing with the issue of "accord and satisfaction" under Section 11 extends to weeding out ex facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision inInterplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC 1.
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119. The question of "accord and satisfaction", being a mixed question of law and fact, comes within the exclusive jurisdiction of the Arbitral Tribunal, if not otherwise agreed upon between the parties. Thus, the negative effect of competence-competence would require that the matter falling within the exclusive domain of the Arbitral Tribunal, should not be looked into by the Referral Court, even for a prima facie determination, before the Arbitral Tribunal first has had the opportunity of looking into it.
120. By referring disputes to arbitration and appointing an arbitrator by exercise of the powers under Section 11, the Referral Court upholds and gives effect to the original understanding of the contracting parties that the specified disputes shall be resolved by arbitration. Mere appointment of the Arbitral Tribunal does not in any way mean that the Referral Court is diluting the sanctity of "accord and satisfaction" or is allowing the claimant to walk back on its contractual undertaking. On the contrary, it ensures that the principle of arbitral autonomy is upheld and the legislative intent of minimum judicial interference in arbitral proceedings is given full effect. Once the Arbitral Tribunal is constituted, it is always open for the defendant to raise the issue of "accord and satisfaction" before it, and only after such an objection is rejected by the Arbitral Tribunal, that the claims raised by the claimant can be adjudicated.
121. Tests like the "eye of the needle" and "ex facie meritless", although try to minimise the extent of judicial interference, yet they require the Referral Court to examine contested facts and appreciate prima facie evidence (however limited the scope of enquiry may be) and thus are not in conformity with the principles of modern arbitration which place arbitral autonomy and judicial non-interference on the highest pedestal.
122. Appointment of an Arbitral Tribunal at the stage of Section 11 petition also does not mean that the Referral Courts forego any scope of judicial review of the adjudication done by the Arbitral Tribunal. The 1996 Act clearly vests the national courts with the power of subsequent review by which the award passed by an arbitrator may be subjected to challenge by any of the parties to the arbitration.
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126. The power available to the Referral Courts has to be construed in the light of the fact that no right to appeal is available against any order passed by the Referral Court under Section 11 for either appointing or refusing to appoint an arbitrator. Thus, by delving into the domain of the Arbitral Tribunal at the nascent stage of Section 11, the Referral Courts also run the risk of leaving the claimant in a situation wherein it does not have any forum to approach for the adjudication of its claims, if its Section 11 application is rejected.
127. Section 11 also envisages a time-bound and expeditious disposal of the application for appointment of arbitrator. One of the reasons for this is also the fact that unlike Section 8, once an application under Section 11 is filed, arbitration cannot commence until the Arbitral Tribunal is constituted by the Referral Court. This Court, on various occasions, has given directions to the High Courts for expeditious disposal of pending Section 11 applications. It has also directed the litigating parties to refrain from filing bulky pleadings in matters pertaining to Section 11. Seen thus, if the Referral Courts go into the details of issues pertaining to "accord and satisfaction" and the like, then it would become rather difficult to achieve the objective of expediency and simplification of pleadings.
128. We are also of the view that ex facie frivolity and dishonesty in litigation is an aspect which the Arbitral Tribunal is equally, if not more, capable to decide upon the appreciation of the evidence adduced by the parties. We say so because the Arbitral Tribunal has the benefit of going through all the relevant evidence and pleadings in much more detail than the Referral Court. If the Referral Court is able to see the frivolity in the litigation on the basis of bare minimum pleadings, then it would be incorrect to doubt that the Arbitral Tribunal would not be able to arrive at the same inference, most likely in the first few hearings itself, with the benefit of extensive pleadings and evidentiary material." (emphasis supplied) 7.
The decision in Krish Spinning (supra) thus unequivocally reiterates that the Referral Court, while exercising jurisdiction under Section 11 of the Act, is required to confine itself to a prima facie
examination of the existence of a valid Arbitration Agreement and nothing beyond.
The Court's role is facilitative and procedural, namely, to give effect to the parties' agreed mechanism of dispute resolution when it has failed, without embarking upon an adjudication of contentious factual or legal issues, which are reserved for the Arbitral Tribunal.
8.
In view of the law as laid down by the Hon'ble Supreme Court in Krish Spinning (supra), the scope of this Court's jurisdiction under Section 11 of the Act is extremely circumscribed. 9.
In view of the fact that the Agreement contains a valid Arbitration Clause and that the Petitioner invoked the Arbitration Agreement by issuing a notice dated 05.02.2024 under Section 21 of the Act, which was duly served upon the Respondent, the statutory requirement contemplated under Section 21 of the Act stands satisfied. Despite receipt of the said notice, the Respondent neither responded thereto nor took any steps towards the constitution of the Arbitral Tribunal. This Court, therefore, finds no impediment in appointing a Sole Arbitrator for adjudication of the disputes between the parties. 10.
Material on record indicates that the valuation of the subject matter of the present dispute is stated to be approximately Rs. 9 Lakhs.
11.
Accordingly, this Court hereby requests Ms. Niti Jain, Advocate (Mobile No.9899944170) as the learned Sole Arbitrator, to enter upon the reference and to adjudicate the disputes inter se the parties.
12.
The learned Arbitrator shall be entitled to a fee in accordance with the Fourth Schedule of the Act or as may otherwise be agreed to
between the parties and the learned Arbitrator. 13.
The learned Arbitrator is also requested to file the requisite disclosure as required under Section 12 (2) of the Act within one (01) week of entering the reference.
14.
The Registry is directed to send a copy of the said Order to the learned Arbitrator through all permissible modes, including through email. 15.
All rights and contentions of the parties in relation to the claims/counter-claims are kept open, to be decided by the learned Arbitrator on their merits, in accordance with law. 16.
Needless to state, nothing in this Order shall be construed as an expression of opinion of this Court on the merits of the controversy between the parties.
17.
Accordingly, the present Petition, along with pending Application(s), if any, stands disposed of in the above terms. HARISH VAIDYANATHAN SHANKAR, J.
MAY 29, 2026/tk/va/ma