S.N. PRASAD versus MONNET FINANCE LTD. AND ORS.

S.N. PRASAD versus MONNET FINANCE LTD. AND ORS.

As there was no arbitration agreement between the lender company and appellant as defined under Section 7(4)(a), (b) or 7(5) of the Arbitration and Conciliation Act, 1996, the claim against the appellant could not be referred to arbitration nor could any award be made against him; both arbitration awards as against the appellant are liable to be set aside.

Parties
Appellant: S.N. Prasad; Respondent: Monnet Finance Ltd.; Respondent: Hitek Industries (Borrower); Respondent: Prem Prakash Verma
Jurisdiction
India
Judgment Date
22 October 2010
Procedural Posture
Civil Appeal / Final Appellate Judgment
Outcome
Appeals allowed (in part, in so far as appellant is concerned), arbitration awards against appellant set aside.
Legal Topics
Arbitration Agreement, Non Signatory Parties, Award Validity, Joint Guarantee Liability
Arbitration Arbitration Agreement Non Signatory Parties Award Validity Joint Guarantee Liability

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Parties

S.N. Prasad

Appellant

Monnet Finance Ltd.

Respondent

Hitek Industries (Borrower)

Respondent

Prem Prakash Verma

Respondent

Procedural Posture

Civil Appeal / Final Appellate Judgment

Legal Issues

  1. 1 Whether a guarantor who is not a party to the loan agreements containing arbitration clause can be subjected to arbitration award
  2. 2 Existence of arbitration agreement under Arbitration and Conciliation Act, 1996

Ratio Decidendi

As there was no arbitration agreement between the lender company and appellant as defined under Section 7(4)(a), (b) or 7(5) of the Arbitration and Conciliation Act, 1996, the claim against the appellant could not be referred to arbitration nor could any award be made against him; both arbitration awards as against the appellant are liable to be set aside.

Court Disposition

Appeals allowed (in part, in so far as appellant is concerned), arbitration awards against appellant set aside.

Orders

  • Impugned High Court order and arbitral awards set aside as against appellant.
  • If lender company wishes to enforce guarantee, it may proceed in accordance with law.