Case Note & Summary
The petitioner, L&T Finance Limited, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim relief against the respondents, Manoj Pathak and Vinod Chaturvedi, who were guarantors for a loan taken by Usher Agro Limited from Axis Bank. The loan was assigned to the petitioner in 2013. The respondents executed a Deed of Guarantee dated 15th October 2013 in favor of Axis Bank and IDBI Trusteeship Services Limited (ITSL), which contained an arbitration clause. The petitioner argued that the guarantee deed was assigned to it along with the loan, and that the respondents were bound by the arbitration clause. The respondents raised preliminary objections, including that the guarantee deed was not signed by the petitioner, and therefore there was no arbitration agreement between the petitioner and the respondents. The court agreed with the respondents, holding that the guarantee deed was executed in favor of Axis Bank and ITSL, not the petitioner. The deed was not signed by the petitioner, and there was no evidence of assignment or novation of the guarantee to the petitioner. The court also rejected the petitioner's argument that an exchange of emails constituted an arbitration agreement, as the emails did not contain an arbitration clause. The court dismissed the petition as not maintainable, with no order as to costs.
Headnote
A) Arbitration Law - Section 9 Petition - Privity of Contract - Requirement of Arbitration Agreement - The court considered whether a Section 9 petition can be maintained against guarantors when the guarantee deed containing the arbitration clause is not signed by the petitioner-creditor. Held that the guarantee deed was not signed by the petitioner, and there was no arbitration agreement between the petitioner and the respondents. The petition was dismissed as not maintainable. (Paras 1-20) B) Arbitration Law - Section 7 of Arbitration and Conciliation Act, 1996 - Definition of Arbitration Agreement - The court examined the requirement of an arbitration agreement in writing under Section 7. Held that the guarantee deed was not signed by the petitioner, and the exchange of emails did not constitute an arbitration agreement between the petitioner and the respondents. (Paras 14-20) C) Contract Law - Guarantee - Privity of Contract - The court analyzed whether the petitioner, as assignee of the loan, could enforce the guarantee deed against the guarantors. Held that the guarantee deed was executed in favor of Axis Bank and ITSL, not the petitioner, and there was no novation or assignment of the guarantee to the petitioner. (Paras 10-13)
Issue of Consideration
Whether a petition under Section 9 of the Arbitration and Conciliation Act, 1996 can be maintained against guarantors when the guarantee deed containing the arbitration clause is not signed by the petitioner-creditor and there is no arbitration agreement between the petitioner and the guarantors.
Final Decision
The petition is dismissed as not maintainable. No order as to costs.
Law Points
- Arbitration agreement must be in writing and signed by parties or contained in exchange of documents
- Privity of contract essential for invoking arbitration
- Guarantee deed not signed by creditor does not create arbitration agreement between creditor and guarantor
- Section 7 of Arbitration and Conciliation Act 1996 requires arbitration agreement to be in writing
- Section 9 petition cannot be maintained without arbitration agreement between parties
