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Issues: (i) Whether the dispute concerning enforcement of the put option and the related monetary claim was non-arbitrable on the ground that it fell within the recovery jurisdiction of the Debt Recovery Tribunal; (ii) Whether the guarantor, though not a signatory to the principal agreement, could be bound to the arbitration arising from the transaction documents; (iii) Whether the arbitration agreement was inoperative for want of adequate stamp duty.
Issue (i): Whether the dispute concerning enforcement of the put option and the related monetary claim was non-arbitrable on the ground that it fell within the recovery jurisdiction of the Debt Recovery Tribunal.
Analysis: The dispute was examined as one arising from a transaction in which the bank acted not merely as a lender, but as an investor under a contractual put-option arrangement. The claim was treated as one for enforcement of contractual obligations and specific performance of the transaction documents, not as a straightforward recovery of a debt advanced in the ordinary course of lending. On a prima facie scrutiny at the Section 11 stage, the dispute was found not to be covered by the statutory recovery forum so as to oust arbitration.
Conclusion: The objection based on non-arbitrability and exclusive jurisdiction of the Debt Recovery Tribunal was rejected, in favour of the petitioner.
Issue (ii): Whether the guarantor, though not a signatory to the principal agreement, could be bound to the arbitration arising from the transaction documents.
Analysis: The deed of guarantee was read with the investment agreement as part of a single commercial arrangement. The guarantor had undertaken obligations co-extensive with the promoter company's obligations and the transaction documents evinced a common subject-matter and interlinked obligations. On that construction, the guarantor could not avoid the arbitral process merely by relying on the absence of a separate arbitration clause in the guarantee deed.
Conclusion: The objection that the guarantor could not be impleaded in arbitration was rejected, in favour of the petitioner.
Issue (iii): Whether the arbitration agreement was inoperative for want of adequate stamp duty.
Analysis: The stamp-duty objection was tested against the character of the document and the nature of the transaction. The agreement was held to fall within the provision dealing with purchase or sale of shares, and not within the provision invoked for creation of an obligation or right of monetary value. The court further held that the instrument was sufficiently stamped and that no legal infirmity disabled reliance on the arbitration clause.
Conclusion: The objection of insufficient stamping was rejected, in favour of the petitioner.
Final Conclusion: The court held that the arbitration clause could be acted upon, appointed the respondents' nominee arbitrator, and left the parties to work out the merits before the arbitral tribunal.
Ratio Decidendi: At the Section 11 referral stage, the court applies only a prima facie test to non-arbitrability and may refer the dispute to arbitration where the claim is grounded in a composite commercial transaction and is not demonstrably covered by the special statutory forum.
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