SARFAESI And Arbitration Proceedings Can Proceed Parallely As Nature Of Both Proceedings Is Distinct: Bombay High Court

The Bombay High Court bench of Justice Advait M Sethna has affirmed that SARFAESI proceedings are in the nature of enforcement proceedings, while arbitration is in the context of an adjudicatory proceedings. A careful perusal of the record makes it clear that there is an arbitral clause contained in loan agreement dated 13 September 2018 which states that all claims or disputes arising out of or in relation to the loan agreement shall be settled by arbitration,a former judge of the Supreme Court or the High Court shall act as sole arbitrator and the place/venue of arbitration shall be Mumbai. In view thereof, it was observed that “it is not necessary to delve into the issue of unilateral appointment of an arbitrator who is now ineligible to act in terms of the decisions of the Supreme Court in Perkins Eastman Architects DPC and Another vs. HSCC Limited, 2020.” The primary objection raised by the respondent which relates to the very invocation of the arbitration clause by the applicant in light of the pending proceedings before DRT. The SARFAESI proceedings and arbitration proceedings thus can proceed parallely.” It was observed that in view thereof, such objection raised by the respondent, touching upon the very invocation of arbitration clause by the applicant, runs contrary to the above decision of the Supreme Court, wherein no uncertain terms, it has been held that both proceedings under SARFAESI and arbitration can go hand in hand. Ltd., and Ors., 2024 the Bombay High Court while noting the judgment of the Supreme Court in Interplay between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, 2024 has observed that “in Interplay, the Hon'ble Supreme Court has held that the scope of examination under section 11 should be confined to the existence of an arbitration agreement on the basis of Section 7 of the Act.” The court in the above case further observed that similarly, the validity of an arbitration agreement, in view of Section 7 of the Act, should be restricted to the requirement of formal validity such as the requirement that the agreement be in writing.