Madras HC Appoints Arbitrator In Mercedes-Benz Car Loan Dispute Over Lender’s Rs 18 Lakh Dues Claim

The petitioner financed the respondents’ purchase of a Mercedes-Benz vehicle under a loan agreement dated 18 June 2021, secured by a deed of hypothecation.

After repeated defaults, the petitioner issued a recall notice demanding the outstanding amount and later invoked arbitration under Section 21 of the Arbitration and Conciliation Act, 1996.

The notices were returned as “Refused.”

The petitioner then applied under Section 11(6) for appointment of a sole arbitrator.

Despite service, the respondents did not appear and were set ex parte.

The agreement’s Clause 66 provided for arbitration in Tamil Nadu and stated that the sole arbitrator would be appointed by the lender.

The Court applied Section 11(6) of the Arbitration and Conciliation Act, 1996, which permits the Court to appoint an arbitrator where a party fails to act as required under the agreed appointment procedure.

It also referred to Section 21, under which arbitration is invoked by a request for referral of the dispute to arbitration, and Section 12(1), requiring an arbitrator to disclose circumstances relevant to independence and impartiality before entering upon the reference.

The Court identified Clause 66 as the parties’ arbitration agreement.

The Court found that the signed loan agreement established an arbitration agreement, the unpaid dues constituted an arbitrable commercial dispute, and the petitioner had issued a notice invoking arbitration under Section 21.

The respondents’ non-appearance left the petitioner’s assertions uncontroverted.

Concluding that it had jurisdiction under Section 11(6), the Court appointed an independent sole arbitrator rather than giving effect to Clause 66’s lender-appointment provision.

Mr. Naveen Kumar Murthy, Advocate, was appointed sole arbitrator to decide the disputes under the loan agreement.

He was directed to file a disclosure under Section 12(1); Chennai was fixed as the seat and venue; and the arbitration was directed to proceed under the auspices and rules of the Madras High Court Arbitration Centre.

The parties’ claims, defences, and contentions on the merits were left open, with no order as to costs.