Prima Facie Existence of Arbitration Agreement is Sufficient to Appoint Arbitrator Under Section 11 of the Act

The Petitioner, a housing finance company, sanctioned a home loan to Respondent Nos. 1 and 2 via a sanction letter dated 29.07.2017

The parties executed a Home Loan Agreement and a Tripartite Agreement (including Respondent No. 3, the developer) to finance a property in Gurugram

Following defaults in monthly installments, the Petitioner classified the account as a Non-Performing Asset and issued a Loan Recall Notice on 03.12.2021

As of 19.06.2024, the outstanding amount was Rs. 51,95,678/-

The Petitioner invoked the arbitration clauses via a Section 21 notice on 22.06.2024; however, the parties failed to mutually appoint an arbitrator, leading to the filing of the present petition under Section 11 of the Arbitration and Conciliation Act, 1996

1. Whether a sole arbitrator should be appointed under Section 11 of the Act to adjudicate the disputes arising from the Loan Agreement and Tripartite Agreement.

The court primarily applied Section 11 of the Arbitration and Conciliation Act, 1996, regarding the appointment of arbitrators

the judicial scope of inquiry under Section 11 is strictly confined to the prima facie examination of the existence of a valid arbitration agreement, as established in SBI General Insurance Co. Ltd. v. Krish Spinning (2024)

requirements for arbitrator disclosures under Section 12(2) of the Act

The Court observed that Respondent Nos. 1 and 2 failed to appear despite being served through substituted service, while Respondent No. 3 appeared and consented to the appointment of an arbitrator

The Court found that a valid arbitration agreement existed between the parties within the Home Loan and Tripartite Agreements, and the Petitioner had properly invoked the same under Section 21

Applying the limited scope of inquiry mandated by Section 11, the Court determined there was no impediment to the reference as the parties were ad idem regarding the mechanism for dispute resolution and the prima facie existence of the agreement was undisputed

The Court directed the arbitration to be conducted under the aegis of the Delhi International Arbitration Centre (DIAC) with fees as per the DIAC schedule

It held that all pleas regarding arbitrability, jurisdiction, and limitation remain open for the arbitrator to decide independently

The Arbitrator was directed to furnish disclosures under Section 12(2) within two weeks of entering the reference