FAO (COMM) 221/2024 Page 1 of 18

$~

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Judgment reserved on: 08.09.2026

Judgment pronounced on: 16.09.2026

Judgment uploaded on: 16.09.2026

# CNR No. DLHC010810302024

+ FAO (COMM) 221/2024

MATSYA FINCAP PVT LTD .....Appellant

Through: Ms. Nikita Kumari, Adv.

versus

MOHD HASSINUDDIN .....Respondent

Through: Mr. Amit Sinha, Adv.

CORAM:

HON'BLE MR. JUSTICE ANIL KSHETARPAL

HON'BLE MS. JUSTICE SHAIL JAIN

J U D G M E N T

ANIL KSHETARPAL , J.:

1. The present Appeal under Section 37 of the Arbitration and

Conciliation Act, 1996 [hereinafter referred to as the „A&C Act‟],

read with Section 13 of the Commercial Courts Act, 2015, assails the

order dated 31.08.2024 [hereinafter referred to as the „Impugned

Order‟] passed by the learned District Judge-05 (Commercial Court),

Central District, Tis Hazari Courts, Delhi in OMP (COMM)

No.7/2024, whereby the learned District Judge allowed the Petition

under Section 34 of the A&C Act [hereinafter referred to as „Section

34 Petition‟] and set aside the ex-parte arbitral award dated

12.10.2020 [hereinafter referred to as the „Award‟] passed by the

learned Sole Arbitrator, Sh. Manohar Lal Saini, Advocate.

FAO (COMM) 221/2024 Page 2 of 18

2. The principal challenge raised by the Appellant before this

Court is that the learned District Judge had no territorial jurisdiction to

entertain the Section 34 Petition as the Award was made at Alwar,

Rajasthan. The Appellant further contends that the Section 34 Petition

was barred by limitation and that the learned Sole Arbitrator had been

named in the arbitration agreement itself and, therefore, his

appointment was bilateral and not unilateral. It is also contended that

the learned District Judge erred in applying the provisions of the

Rajasthan Money-Lenders Act, 1963 [hereinafter referred to as

„Money-Lenders Act‟], to the Appellant, which is stated to be a Non-

Banking Financial Company (‟NBFC‟) registered with the Reserve

Bank of India („RBI‟).

3. The controversy, therefore, essentially concerns the territorial

jurisdiction of the Court entertaining the Section 34 Petition, the

validity of the constitution of the arbitral tribunal, and the applicability

of the Money-Lenders Act to the transaction in question.

FACTUAL MATRIX:

4. The relevant facts, necessary for adjudication of the present

Appeal, may be briefly noticed.

5. The Appellant is a finance company which had advanced a

business loan of Rs.2,00,000/- to Mr. Allahuddin s/o Mr. Islamuddin

under a Loan Agreement dated 07.05.2019 [hereinafter referred to as

the „Loan Agreement‟]. The Respondent herein is stated to have

executed a Deed of Guarantee, undertaking to repay the outstanding

amount in the event of default by Mr. Allahuddin in repayment of the

said loan. As recorded in the Award, the Respondent was required to

FAO (COMM) 221/2024 Page 3 of 18

repay a total amount of Rs.2,34,000/- in ninety (90) daily instalments.

The said agreement also provided for late payment charges at the rate

of 36% per annum in the event of default.

6. Disputes arose between the parties on account of alleged

defaults in repayment of the loan. The Appellant invoked the

arbitration clause and proceedings were initiated before Sh. Manohar

Lal Saini, Advocate, who acted as the Sole Arbitrator.

7. The arbitral proceedings were conducted in the absence of the

Respondent. The learned Sole Arbitrator proceeded ex parte and, vide

Award dated 12.10.2020, awarded a sum of Rs.5,18,600/- in favour of

the Appellant, along with interest at the rate of 18% per annum from

01.07.2020 till realization, besides costs of the arbitral proceedings.

8. The Award records that the subject matter of the arbitration

arose out of the Loan Agreement. It further records that the Appellant

had sent a Letter of Intent for appointment of the learned Sole

Arbitrator and that the learned Arbitrator had thereafter issued an

acceptance letter. The Award was made, sealed and signed at Alwar,

Rajasthan on 12.10.2020. The office of the learned Sole Arbitrator

was also at Alwar, Rajasthan.

9. The Respondent thereafter preferred the Section 34 Petition

before the learned District Judge, Central District, Tis Hazari Courts,

Delhi, challenging the Award. The Respondent, inter alia, contended

that the aforesaid loan agreement was void on account of the rate of

interest stipulated therein and that the learned Sole Arbitrator had been

unilaterally appointed by the Appellant. It was also contended that the

FAO (COMM) 221/2024 Page 4 of 18

learned Arbitrator was repeatedly appointed by the Appellant in

similar matters.

10. The learned District Judge, vide the Impugned Order, accepted

the challenge to the Award. The learned District Judge held that the

rate of interest contemplated under the agreement was contrary to the

maximum rate prescribed under the Money-Lenders Act and,

consequently, the agreement itself was rendered void. The learned

District Judge further held that the appointment of the learned Sole

Arbitrator was unilateral and that there was no subsequent express

agreement in writing between the parties, after the disputes had arisen,

waiving the applicability of Section 12(5) of the A&C Act.

11. The proceedings before the learned District Judge also merit

notice. Respondent No.1 was duly served with notice of the Section

34 Petition on 29.01.2024 and again on 14.02.2024, but did not enter

appearance or file any Reply. On 12.03.2024, the learned District

Judge accordingly proceeded against Respondent No.1 ex parte and

closed its right to file Reply. Respondent No.2, the learned Sole

Arbitrator, was also served on 30.01.2024 but did not appear or

produce the arbitral record despite repeated directions. The orders

dated 24.04.2024, 18.05.2024, 04.06.2024 and 24.07.2024 record the

continued absence of Respondent No.2 and the non-production of the

arbitral record.

12. Aggrieved by the Impugned Order, the Appellant has preferred

the present Appeal.

FAO (COMM) 221/2024 Page 5 of 18

CONTENTIONS OF THE PARTIES:

13. Heard learned counsel representing the parties and, with their

able assistance, perused the record.

14. Learned counsel representing the Appellant has made the

following submissions:

i. Learned District Judge erred in entertaining the Section

34 Petition as the Award was passed at Alwar, Rajasthan and,

consequently, only the Courts at Alwar could exercise

jurisdiction over a challenge to the Award. Reliance has been

placed upon the judgment of the Supreme Court in BGS SGS

SOMA JV v. NHPC Ltd.

1

ii. The Section 34 Petition was filed beyond the period

prescribed under Section 34(3) of the A&C Act and learned

District Judge failed to determine the question of limitation.

iii. Learned Sole Arbitrator was specifically named in the

arbitration clause forming part of the agreement executed

between the parties. According to the Appellant, it merely

invoked the agreed arbitration clause and referred the dispute to

the arbitrator already named by the parties. Therefore, the

appointment cannot be characterised as unilateral.

iv. There was no relationship between the learned Sole

Arbitrator and the Appellant falling within the categories

specified in the Seventh Schedule to the A&C Act.

1

(2020) 4 SCC 234

FAO (COMM) 221/2024 Page 6 of 18

Consequently, according to the Appellant, Section 12(5) of the

A&C Act was not attracted and no subsequent waiver was

required.

v. The Money-Lenders Act has no application to an NBFC

registered with the RBI. Reliance is placed upon the judgment of

the Supreme Court in Nedumpilli Finance Company Limited v.

State of Kerala & Ors.

2

15. Per contra, learned counsel representing the Respondent, while

supporting the Impugned Order, has made the following submissions:

i. The Award itself records that the Appellant appointed the

learned Sole Arbitrator vide letter dated 18.08.2020. Thus, the

appointment was not the result of any consensual constitution of

the tribunal after the dispute had arisen, but was made by the

Appellant itself.

ii. Learned Sole Arbitrator was repeatedly appointed by the

Appellant in similar matters and that the learned District Judge

was justified in taking note of such circumstances while

examining the legality of the constitution of the arbitral tribunal.

iii. The absence of a post-dispute express agreement in

writing waiving the applicability of Section 12(5) is fatal to the

appointment, in view of the judgment of the Supreme Court in

Bharat Broadband Network Limited v. United Telecoms

Limited

3

.

2

Civil Appeal No.5233/2012

3

(2019) 5 SCC 755

FAO (COMM) 221/2024 Page 7 of 18

iv. Learned District Judge correctly applied the provisions of

the Money-Lenders Act to the transaction and rightly held the

agreement to be unenforceable in view of the rate of interest

stipulated therein.

16. No other submissions have been advanced by learned counsel

representing the parties.

ANALYSIS AND FINDINGS:

17. Before examining the rival contentions, it is necessary to

delineate the scope of appellate interference under Section 37 of the

A&C Act. The jurisdiction under Section 37 is narrower than that

under Section 34 and is essentially supervisory in nature. The

appellate Court is concerned with examining whether the Court

exercising jurisdiction under Section 34 has acted within the statutory

limits and applied the correct legal principles. It is not open to the

appellate Court to reappreciate evidence or interfere merely because

another view on the facts or merits is possible.

18. The aforesaid principles are well settled by the Supreme Court

in McDermott International Inc. v. Burn Standard Co. Ltd. & Ors.

4

;

MMTC Ltd. v. Vedanta Ltd.

5

; Punjab State Civil Supplies

Corporation Ltd. v. Sanman Rice Mills

6

and, by the three-Judge

Bench in UHL Power Company Ltd. v. State of Himachal Pradesh

7

.

Interference is therefore warranted only where the order under Section

4

(2006) 11 SCC 181

5

(2019) 4 SCC 163

6

2024 SCC OnLine SC 2632

7

(2022) 4 SCC 116

FAO (COMM) 221/2024 Page 8 of 18

34 discloses a jurisdictional error, patent illegality, manifest perversity

or failure to exercise jurisdiction in accordance with law.

19. The rival submissions are accordingly examined within the

aforesaid limited scope, to determine whether the learned District

Judge committed any such error while exercising jurisdiction under

Section 34 of the A&C Act.

20. The first contention raised by the Appellant concerns the

territorial jurisdiction of the learned District Judge. It is contended that

since the Award was made and signed at Alwar, the Courts at Alwar

alone had jurisdiction to entertain a Section 34 Petition.

21. There can be no quarrel with the proposition that where the

parties have designated a particular place as the juridical seat of

arbitration, the Courts exercising supervisory jurisdiction over such

seat would ordinarily have exclusive jurisdiction in respect of

proceedings arising under Part I of the A&C Act. The judgment of the

Supreme Court in BGS SGS SOMA JV (supra) lays down the said

principle.

22. However, the Appellant cannot succeed merely by relying upon

the fact that the Award bears the place of execution as Alwar. The

place where an Award is signed is not, by itself and in every case,

determinative of the juridical seat. The question has to be examined

from the terms of the arbitration agreement and the circumstances in

which the arbitral proceedings were conducted.

23. It is also significant that the objection as to territorial

jurisdiction was not pursued before the learned District Judge by

FAO (COMM) 221/2024 Page 9 of 18

Respondent No.1, which, despite service, did not enter appearance in

the Section 34 proceedings and was proceeded ex parte. The

Appellant, which seeks to assail the jurisdiction of the learned District

Judge before this Court, has not placed on record any material to

demonstrate that the question of territorial jurisdiction was raised

before the learned District Judge or that the Court was invited to

adjudicate upon the same. The Appellant cannot, after having

remained absent from the proceedings before the learned District

Judge, seek to assail the Impugned Order on a jurisdictional objection

which was neither urged nor adjudicated upon by that Court.

24. It is also relevant that, in the present case, the Appellant‟s office

is situated in Delhi, the Guarantee Agreement was executed at Delhi,

and the Respondent also resides in Delhi. Further, for execution of the

Award, the Appellant had itself filed an Execution Petition before the

Court at Delhi, which came to be dismissed on 08.05.2024 on the

ground that the Arbitrator had been unilaterally appointed.

25. In any event, the mere fact that the Award was made and signed

at Alwar does not, in itself, establish that the Courts at Alwar alone

had jurisdiction. As noticed hereinabove, the arbitral record was not

produced before the learned District Judge despite repeated directions

to the learned Sole Arbitrator. The Appellant, having chosen not to

participate in the Section 34 proceedings despite service, cannot now

seek to rely upon the absence of the arbitral record to advance an

objection as to territorial jurisdiction which it did not place before the

learned District Judge.

FAO (COMM) 221/2024 Page 10 of 18

26. The next contention concerns the alleged limitation of the

Section 34 Petition. Section 34(3) prescribes a period of three (03)

months from the date on which the party making the application had

received the arbitral award, with a further period of thirty (30) days

being available where sufficient cause is shown. The commencement

of the period is, therefore, linked to receipt of the Award and not

merely to the date on which the Award was made.

27. In the present case, the Respondent specifically pleaded that he

had not been served with the Award and had come to know of the

Award during the execution proceedings. The Section 34 proceedings

were thereafter instituted by the Respondent. At the cost of repetition,

it is material to note that, despite service of the Section 34 Petition, the

present Appellant did not enter appearance before the learned District

Judge and was proceeded ex parte on 12.03.2024. The orders passed

thereafter also record that the Appellant did not file any reply to the

Section 34 Petition.

28. The Appellant has also not demonstrated that this objection was

raised before the learned District Judge despite due service of the

Section 34 Petition. More importantly, the Appellant has not placed

before this Court any material establishing the precise date on which

the Respondent received the signed copy of the Award so as to

demonstrate that the Section 34 Petition was ex facie beyond the

statutory period prescribed under Section 34(3) of the A&C Act. In

the absence of such material, and particularly when the Respondent

had pleaded that knowledge of the Award was acquired subsequently

during the execution proceedings, the mere date of the Award cannot,

by itself, establish that the Section 34 Petition was barred by

FAO (COMM) 221/2024 Page 11 of 18

limitation. The Appellant, having remained absent despite service and

having not placed the relevant material before the learned District

Judge, cannot now seek to make good that omission in the present

proceedings under Section 37 of the A&C Act.

29. The principal issue which arises for consideration is the validity

of the constitution of the arbitral tribunal. Section 12(5) of the A&C

Act provides that notwithstanding any prior agreement to the contrary,

a person whose relationship with the parties, counsel or the subject

matter of the dispute falls within any of the categories specified in the

Seventh Schedule shall be ineligible to be appointed as an arbitrator.

The proviso permits the parties, subsequent to disputes having arisen,

to waive the applicability of Section 12(5) by an express agreement in

writing.

30. The Appellant seeks to distinguish the present case from cases

of unilateral appointment by contending that the name of Sh. Manohar

Lal Saini was already incorporated in the arbitration agreement and,

therefore, the parties had mutually agreed upon his appointment.

31. It is correct that the mere pre-designation of an arbitrator in an

arbitration agreement cannot, by itself, be treated as invalid. Party

autonomy permits parties to agree in advance upon a procedure for

constitution of the arbitral tribunal, subject to the statutory

requirements of independence and impartiality. However, the Court

must examine the actual procedure followed in constituting the arbitral

tribunal and not merely the nomenclature employed by a party.

32. In the present case, the Award itself records that the Appellant

sent a Letter of Intent to appoint the learned Sole Arbitrator and that

FAO (COMM) 221/2024 Page 12 of 18

the learned Arbitrator thereafter issued an acceptance letter. The

Award further specifically records that “the Claimant appointed the

undersigned to adjudicate these disputes vide letter dated

18.08.2020”.

33. It is relevant in this context that the learned Sole Arbitrator was

served with notice of the Section 34 Petition on 30.01.2024 and was

repeatedly directed by the learned District Judge to produce the

arbitral record. Despite such service and repeated directions, the

arbitral record was not produced before the learned District Judge. The

orders dated 16.02.2024, 12.03.2024, 24.04.2024, 04.06.2024 and

24.07.2024 record the continued non-appearance of the learned Sole

Arbitrator and the non-production of the arbitral record.

34. Thus, on the material available before this Court, the

constitution of the arbitral tribunal, after the dispute had arisen, was

brought about by an act of the Appellant. The mere fact that the name

of the learned Arbitrator was contained in the agreement does not, by

itself, establish that the subsequent appointment was bilateral,

particularly when the Respondent neither participated in the

constitution of the tribunal nor consented to the appointment after the

dispute had arisen.

35. The distinction sought to be drawn by the Appellant between a

named arbitrator and a unilateral appointment is, therefore, of no

assistance in the facts of the present case. A named arbitrator may

validly constitute the tribunal where the designation itself represents

the parties‟ mutual and continuing consent to such constitution.

However, where the record demonstrates that one party alone invokes

FAO (COMM) 221/2024 Page 13 of 18

the clause and appoints the named person after the dispute has arisen,

the Court is required to examine the appointment in the context of the

statutory safeguards contained in the A&C Act.

36. The Supreme Court in TRF Limited v. Energo Engineering

Projects Limited

8

, and subsequently in Bharat Broadband Network

Limited (supra), has emphasised the mandatory nature of the

statutory restrictions governing eligibility and the requirement of an

express written waiver contemplated under the proviso to Section

12(5) of the A&C Act. The principle that a party interested in the

outcome of the dispute cannot unilaterally constitute the arbitral

tribunal has also been recently reiterated by the Supreme Court in

Bhadra International (India) Pvt. Ltd. & Ors. v. Airport Authority of

India

9

. The aforesaid authorities underscore that party autonomy,

though fundamental to arbitration, cannot be exercised in a manner

which permits one party to retain exclusive control over the

constitution of the arbitral tribunal.

37. The said principle has also been applied by this Court in Kotak

Mahindra Bank Limited v. Narendra Kumar Prajapat

10

, where it

was held that a party‟s failure to object to the appointment of a sole

arbitrator cannot, in the absence of the statutory requirements, be

construed as a waiver of its right under Section 12(5) of the A&C Act.

38. The same principle would apply with greater force where the

record demonstrates that the tribunal was constituted entirely at the

instance of one party and the opposite party neither participated in the

8

(2017) 8 SCC 377

9

Civil Appeal Nos.37-38/2026

10

2023 SCC OnLine Del 3148

FAO (COMM) 221/2024 Page 14 of 18

appointment nor subsequently waived its objection in the manner

contemplated by the statute.

39. In the present case, there is admittedly no express agreement in

writing executed by the Respondent, after the disputes had arisen,

waiving the applicability of Section 12(5) or expressly consenting to

the appointment of the learned Sole Arbitrator.

40. The Appellant‟s submission that no waiver was necessary since

the learned Arbitrator had no relationship with the Appellant falling

within the Seventh Schedule proceeds on a misconception of the issue

which arose before the learned District Judge. The question was not

merely whether the learned Arbitrator had a specific relationship

enumerated in the Seventh Schedule. The Court was also required to

examine whether the arbitral tribunal had been constituted through a

procedure consistent with the statutory requirement of neutrality and

independence.

41. The record further discloses that the same learned Arbitrator

had been appointed by the Appellant in a number of proceedings

arising out of similar transactions. The learned District Judge has

taken note of the material placed before it in connected execution

proceedings concerning the appointment of the same Arbitrator. It is

also relevant to notice that this Court had occasion to consider a

matter concerning the same Appellant and the same learned Sole

Arbitrator in EFA (COMM) No.8/2024 captioned Matsya Fincap Pvt.

Ltd. v. Govind Lal. The controversy in the said Appeal, however,

arose in the context of the validity of an arbitration agreement

contained in an acknowledgement letter and the effect of the absence

FAO (COMM) 221/2024 Page 15 of 18

of the Appellant‟s signature thereon. The said decision, therefore, does

not directly determine the question arising for consideration in the

present Appeal.

42. The said decision is nevertheless noticed as part of the factual

background, particularly since it concerned the same Appellant and

the same learned Sole Arbitrator. The question of validity of the

constitution of the arbitral tribunal in the present case, however, has to

be determined independently on the basis of the arbitration agreement

and the manner in which the learned Sole Arbitrator came to be

appointed.

43. The mere fact that the same Arbitrator may have been appointed

in several proceedings cannot, by itself, establish statutory ineligibility

under the Seventh Schedule to the A&C Act. The significance of the

said circumstance has to be assessed along with the manner in which

the tribunal was constituted in the present case and the absence of any

post-dispute express agreement in writing waiving the applicability of

Section 12(5) of the A&C Act.

44. The contention that the Respondent had waived his objection by

not participating in the arbitral proceedings is equally untenable. The

statutory requirement under the proviso to Section 12(5) is an express

agreement in writing executed after the disputes have arisen. No such

agreement has been placed on record. In this regard, it is also relevant

that the arbitral record was not produced before the learned District

Judge despite repeated directions to the learned Sole Arbitrator. The

absence of such record cannot be used to presume a waiver which the

statute expressly requires to be in writing.

FAO (COMM) 221/2024 Page 16 of 18

45. The next issue concerns the applicability of the Money-Lenders

Act. The learned District Judge has held that the Appellant fell within

the definition of a „money-lender‟ under Section 2(10) of the said Act

and that the interest stipulated under the aforesaid loan agreement

exceeded the maximum rate prescribed by the State Government. The

learned District Judge consequently held the agreement to be invalid

in view of Section 29(3) of the said Act read with Sections 23 and 24

of the Indian Contract Act, 1872.

46. The Appellant has relied upon the judgment of the Supreme

Court in Nedumpilli Finance Company Limited (supra), to contend

that a NBFC regulated by the RBI falls outside the regulatory field of

State money-lending legislation. The said judgment does recognise the

primacy of the regulatory framework governing RBI-regulated NBFCs

in the field occupied by the Reserve Bank of India Act, 1934.

However, the applicability of that principle to the present transaction

would necessarily depend upon the precise statutory framework, the

nature of the Appellant‟s registration and the extent to which the

provisions of the Money-Lenders Act are sought to be applied.

47. In the present proceedings under Section 37 of the A&C Act,

this Court is not required to undertake an independent determination

of the entire regulatory field in which the Appellant operates,

particularly when the Appellant did not participate in the Section 34

proceedings despite service and did not place its defence before the

learned District Judge. The present Appeal cannot be permitted to

become an occasion for the Appellant to supply the material or raise

objections which it chose not to place before the learned District

Judge.

FAO (COMM) 221/2024 Page 17 of 18

48. In any event, the finding regarding the constitution of the

arbitral tribunal is independently sufficient to sustain the setting aside

of the Award. Once the tribunal itself was constituted in a manner

inconsistent with the statutory scheme governing impartiality and

independence, the Award cannot be sustained merely by establishing

that one of the alternative findings returned by the learned District

Judge may require further examination.

49. The objection of the Appellant that the learned District Judge

proceeded in a mechanical manner by relying upon orders passed in

connected matters also does not merit acceptance. The Impugned

Order sets out the relevant provisions of the Money-Lenders Act,

examines the contractual rate of interest and separately considers the

validity of the appointment of the learned Sole Arbitrator. It is also

material that the Appellant, despite due service, did not appear before

the learned District Judge, did not file a reply to the Section 34

Petition and did not place before that Court the material which it now

seeks to rely upon in the present Appeal. The Appellant cannot,

therefore, assail the Impugned Order on the ground that the learned

District Judge did not consider submissions which were never

advanced before it.

50. It is settled that an arbitral award rendered by a tribunal

constituted contrary to the mandatory statutory requirements cannot be

sustained merely on the ground of party autonomy. Party autonomy is

subject to the statutory framework prescribed by the A&C Act. The

requirement of an independent and impartial tribunal is integral to the

arbitral process.

FAO (COMM) 221/2024 Page 18 of 18

51. Consequently, even if the contentions of the Appellant

regarding the applicability of the Money-Lenders Act or the territorial

jurisdiction of the learned District Judge were to be considered

independently, the finding regarding the constitution of the arbitral

tribunal furnishes an independent basis for sustaining the setting aside

of the Award. This Court, therefore, finds no ground to interfere with

the Impugned Order.

CONCLUSION:

52. In view of the foregoing discussion, the present Appeal is

devoid of merit. The Appellant has failed to demonstrate any

perversity, patent illegality or jurisdictional error in the Impugned

Order warranting interference under Section 37 of the A&C Act.

53. Accordingly, the present Appeal is dismissed. The Impugned

Order dated 31.08.2024 passed in OMP (COMM) No.7/2024 is

upheld.

ANIL KSHETARPAL, J.

SHAIL JAIN, J.

SEPTEMBER 16, 2026

s.godara/shah