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Judgment
Laxmi Narain Mittal, J.—Defendant No. 1-Bank has filed this revision petition under Article 227 of the Constitution of India impugning order dated 20.01.2011 (Annexure P-1), passed by the trial court, thereby dismissing application (Annexure P-2) filed by defendant No. 1 u/s 8 of the Arbitration and Conciliation Act, 1996 (in short - "the Act"). Suit has been filed by respondent No. 1-plaintiff against petitioner and proforma respondents No. 3 and 4 as defendants No. 1 to 3 and against respondent No. 2 as defendant No. 4. Defendant No. 4 had taken loan from defendant No. 1 Bank for finance of a truck, for which the plaintiff stood guarantor. Plaintiff has filed suit seeking declaration that the loan agreement dated 08.11.2006 (Annexure P-3) stands terminated and the plaintiff stands exonerated from the said agreement. Plaintiff also claimed injunction restraining the defendants from taking any action on the basis of said loan agreement.
Defendant No. 1, in its application (Annexure P-2), alleged that in view of arbitration clause in paragraph 23 of the loan agreement (Annexure P-3), the matter has to be referred to Arbitrator and accordingly, defendant No. 1 has appointed defendant No. 3 as sole Arbitrator.
Learned trial court, vide impugned order (Annexure P-1), has dismissed application (Annexure P-2) filed by defendant No. 1, who has, therefore, filed this revision petition to assail the said order.
I have heard counsel for the parties and perused the case file.
Counsel for the petitioner contended that in view of arbitration clause contained in the agreement, application u/s 8 of the Act, filed by defendant No. 1-petitioner, should have been allowed by the trial court as provision to Section 8 of the Act is mandatory. Reliance in support of this contention has been placed on an unreported judgment of this Court in the case of Induslnd Bank Ltd. and another v. Manjeet Singh and another, passed in C.R. No. 2457 of 2012, which was decided on 08.07.2013.
On the other hand, counsel for contesting respondents contended that defendant No. 3-Arbitrator is based at Chennai and is conducting the arbitration proceedings there, whereas plaintiff-guarantor and defendant No. 4-borrower are residents of Kaithal, and therefore, Arbitrator may be appointed at Kaithal or nearby station at Ambala.
Counsel for the petitioner, having sought instructions, pursuant to order dated 14.01.2013, submitted that the petitioner is not ready to appoint Arbitrator at Kaithal or Ambala because according to the agreement itself, venue of the arbitration is at Chennai. Counsel for the petitioner also submitted that loan was disbursed by the petitioner Bank at New Delhi.
I have carefully considered the matter.
In view of arbitration clause contained in the agreement, there is no escape from the conclusion that application (Annexure P-2) filed by the petitioner has to be allowed because provision of Section 8 of the Act is mandatory. This view finds support from judgment passed in the case of Indusind Bank Ltd. (supra).
However, as noticed herein before, the petitioner has its Registered Office at New Delhi. It has been sued as defendant No. 1 at the address of New Delhi and the instant revision petition has also been filed with the same address. The loan, according to the petitioner, was also disbursed at New Delhi. Plaintiff-guarantor and defendant No. 4-borrower are residents of Kaithal. In these circumstances, there is no justification for conducting the arbitration proceedings at Chennai, where the plaintiff and defendant No. 4 cannot effectively defend the arbitration proceedings. They shall suffer irreparable loss and injury if the arbitration proceedings are conducted at Chennai.
Keeping in view all the circumstances, the petitioner is, therefore, given option to get the arbitration proceedings conducted either at Kaithal or Ambala, as submitted by counsel for respondents No. 1 and 2 or at New Delhi, where the petitioner''s Registered Office is located and where the loan was disbursed or even at Chandigarh, as per option submitted by counsel for the petitioner.
Impugned order of the trial court, dismissing application (Annexure P-2) u/s 8 of the Act, suffers from illegality and jurisdictional error because mandatory provision of Section 8 of the Act has been violated by the trial court. Resultantly, the instant revision petition is allowed. Impugned order (Annexure P-1) passed by the trial court is set aside. Application (Annexure P-2) filed by the petitioner is allowed and the dispute is ordered to be referred to the Arbitrator, in accordance with arbitration clause, contained in the loan agreement with modification that arbitration proceedings shall be conducted at either of following places i.e. Kaithal, Ambala, New Delhi or Chandigarh at the option of the petitioner.
Civil Miscellaneous applications, if any pending, stand disposed of as infructuous.