A designated place for arbitration does not create an arbitration agreement absent clear consent to arbitrate.

Axis Finance sanctioned a ₹100 crore term loan facility to Inspira Enterprise India Limited.

The parties executed a Term Loan Agreement dated 22 November 2022 and an Indenture of Mortgage dated 24 November 2022.

After the Respondent repaid the outstanding principal and interest and the Applicant issued a No Dues Certificate, the Applicant demanded ₹1,15,85,747 as penal interest for alleged non-compliance with facility conditions.

The Applicant invoked arbitration under Clause 14.5 of the Agreement, read with Schedule I, and applied under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator.

The Respondent disputed the existence of an arbitration agreement and also raised limitation.

1. Whether Clause 14.5 of the Term Loan Agreement, read with Schedule I, constituted a valid arbitration agreement between the parties.

2. Whether the Applicant’s claim was time-barred.

Section 11 of the Arbitration and Conciliation Act, 1996 permits appointment of an arbitrator where an arbitration agreement exists between the parties; such an agreement must satisfy the requirements of Section 7, including a clear intention to submit disputes to arbitration.

A reference to “arbitration” or an arbitral place, without operative language showing an obligation to arbitrate and a binding adjudicatory process, is insufficient.

The Court relied on South Delhi Municipal Corpn. v. SMS Ltd., which requires clear intent to arbitrate and a binding adjudicatory process; Alchemist Hospitals Ltd. v. ICT Health Technology Services India Pvt. Ltd., which holds that the substance of the clause, not merely the use of the word “arbitration,” determines whether an arbitration agreement exists; and Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture and Jagdish Chander v. Ramesh Chander, which require words demonstrating a determination and obligation to arbitrate.

The Court also referred to Bangalore Electricity Supply Co. Ltd. v. E.S. Solar Power (P) Ltd. for the principle that contractual intention must be derived from the words used.

Clause 14.5 addressed governing law, jurisdiction, venue objections and the Lender’s ability to initiate proceedings in other competent courts or tribunals, but did not require disputes to be referred to arbitration or provide for an arbitral tribunal’s binding decision.

The definition of “Legal Proceedings” and Schedule I’s designation of Mumbai as the “Place for Arbitration” did not supply the missing operative agreement to arbitrate.

Nor could the later demand notice or the parties’ earlier correspondence create such an agreement, as those communications did not unequivocally record consent to arbitration.

The Court therefore found no concluded arbitration agreement.

Because that finding disposed of the Section 11 application, it did not decide the limitation issue.

It left the parties’ substantive claims and contentions, including the limitation issue, open for pursuit before the otherwise competent forum in accordance with law.

There was no order as to costs.