Manifest Intention To Arbitrate Is A Sine Qua Non For Filing An Application Under S.9 Before The Commencement Of The Arbitration: Madras High Court

The Single Bench of Justice M. Sundar held that manifest intention to arbitrate is a jurisdictional fact that must precede the application under S. 9 of the Act. It also held that Court would only appoint the receiver when the applicant is successful in demonstrating that the property is in imminent danger of waste.

Facts

The parties entered into a loan agreement. The agreement had an arbitration clause. The respondent failed to make the monthly payments in terms of the loan agreement. The applicant filed 14 applications under S. 9 of the A&C Act requesting the Court to appoint a receiver to take possession of the vehicle which was financed out of the said loan.

Contention of the Applicant

The applicant sought interim relief on the following grounds:

• In terms of the agreement, the applicant is entitled to take over the possession of the vehicle when the default occurs.
• The respondent has failed to make payments as provided under the agreement thereby, a default has occurred.
• The applicant has served a notice invoking arbitration on the respondent and the arbitration is in reasonable contemplation.
• The remedy before the arbitrator would not be efficacious.

Analysis by the Court

The Court held that the manifest intention to arbitrate is a sine qua non for filing an application under S. 9 before the commencement of the arbitration. No interim relief can be granted if the intention to arbitrate is missing.

The Court held that the applicant had no intention to arbitrate as the default happened more than two years ago and the applicant has taken no steps since then. The Court held that the respondent could have terminated the agreement on non-payment by the payment.

"The applicant-said NBFC could have terminated said loan agreement and/or taken any other steps in the direction of invocation of arbitration, not having done anything for two years, this Court is unable to persuade itself to believe that there is manifest intention to arbitrate."

The Court held that the notice of arbitration is only an afterthought and the same has not been served on the respondent yet. The Court further held that if the argument of the respondent is to be accepted that it has served a notice under S. 21, then the remedy before the Court is barred by S. 9(3) of the A&C Act and the applicant has failed to show how the remedy before the arbitrator would be inefficacious.

The Court held that manifest intention to arbitrate is a jurisdictional fact that must precede the application under S. 9 of the Act. It also held that Court would only appoint the receiver when the applicant is successful in demonstrating that the property is in imminent danger of waste.

The Court further held that the relief claimed by the respondent if allowed would amount to the substitution of arbitration as nothing would remain to be arbitrated upon if the said property is taken over and sold.

Accordingly, the Court rejected the application for interim reliefs.

Case Title: M/s Cholamandalam Investment and Finance Company Ltd. v. Harkhabhai Amarshibhai Vaghadiya,

Case No: Arb. Appln. No. 40 of 2022.

Date: 16.02.2022

Counsel for the Applicant: M.S. Krishnan, Senior Advocate and D. Pradeep Kumar, Advocate.

Citation: 2022 Livelaw (Mad) 171

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