Mercedes-Benz EQS Loan Default: Madras HC Appoints Arbitrator To Hear Lender’s ₹1.2-Crore Claim

In brief

The question

1. Whether the parties’ Loan Agreement contained a valid arbitration agreement covering their disputes.

The court held

The Court allowed the petition and appointed Hon’ble Mr. Justice R. Balasubramanian, former Judge of the Madras High Court, as sole arbitrator.

It also directed

The arbitrator must file a Section 12 disclosure before entering upon the reference.

Chennai was fixed as the seat and venue, and the proceedings were directed to be conducted under the aegis of the Madras High Court Arbitration Centre under its 2017 Rules.

All claims, counterclaims, defences, and contentions on the merits were left open; there was no order as to costs.

01Facts

The petitioner, an NBFC, extended a loan of ₹1.55 crore to the respondents to finance a Mercedes-Benz vehicle under a Loan Agreement and Deed of Hypothecation dated 17 August 2023.

pp. 2–4

Following repayment defaults, the petitioner issued a recall notice demanding ₹1,20,82,646.56, then invoked arbitration under Section 21 of the Arbitration and Conciliation Act, 1996, on 18 May 2026 and proposed a sole arbitrator.

pp. 2–4

The respondents did not reply to the invocation notice.

pp. 2–4

After service of court notice in this Section 11(6) petition, they did not appear or file a counter-affidavit, and the matter proceeded ex parte.

pp. 2–4

02Issues

i.1. Whether the parties’ Loan Agreement contained a valid arbitration agreement covering their disputes.

p. 4

ii.2. Whether, in the circumstances, the Court should appoint a sole arbitrator under Section 11(6) of the Act.

pp. 4–5

03Law Applied

Section 11(6) of the Arbitration and Conciliation Act, 1996, provides for court appointment of an arbitrator where the agreed appointment procedure has not resulted in an appointment.

pp. 3–5

Section 21 concerns commencement of arbitral proceedings upon receipt of a request to refer a dispute to arbitration.

pp. 3–5

Section 12 requires an arbitrator to make the prescribed disclosure.

pp. 3–5

The Court also applied Clause 76 of the Loan Agreement, which provided for disputes to be referred to a sole arbitrator and designated Chennai as the venue.

pp. 3–5

The judgment cites no precedents.

Provisions in the judgment · 3 · Linked ones open on LawLens

Arbitration and Conciliation Act, 1996 Section 11 Section 21 Section 12

04Reasoning

The Court found that Clause 76 contained an express arbitration agreement and that the petitioner had served a Section 21 notice invoking arbitration.

pp. 3–5

The respondents neither concurred with the petitioner’s proposed nomination nor appeared to contest the petition.

pp. 3–5

On that record, the Court accepted the existence of an arbitrable dispute and considered appointment of an independent sole arbitrator appropriate.

pp. 3–5

05Holding

The Court allowed the petition and appointed Hon’ble Mr. Justice R. Balasubramanian, former Judge of the Madras High Court, as sole arbitrator.

pp. 5–6

The arbitrator must file a Section 12 disclosure before entering upon the reference.

pp. 5–6

Chennai was fixed as the seat and venue, and the proceedings were directed to be conducted under the aegis of the Madras High Court Arbitration Centre under its 2017 Rules.

pp. 5–6

All claims, counterclaims, defences, and contentions on the merits were left open; there was no order as to costs.

pp. 5–6

LawLens.Madras High Court

Original Court PDF