Telstar Construction Pvt. Ltd. vs Abhyudaya Co. Operative Bank Ltd. — Arbitration | Bombay HC (2025)

Telstar Construction Pvt. Ltd. vs Abhyudaya Co. Operative Bank Ltd. — Arbitration | Bombay HC (2025)

What the court decided

AI extract

Outcome

None — the Commercial Arbitration Application was dismissed and no Sole Arbitrator was appointed.

Issue for consideration

Whether Clause 23 of the WCTL Agreement constitutes an arbitration agreement between the Applicant and the Respondent fulfilling the requirements of Section 7 of the Arbitration and Conciliation Act, 1996, so as to empower the Court to appoint a Sole Arbitrator under Section 11. +1 more

Court's answer

Clause 23 of the WCTL Agreement is not an arbitration clause and does not fulfill the requirements of an arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.

Ratio / Principle

Clause 23 of the WCTL Agreement is in the nature of an authority or Power of Attorney granted by the Applicant to the Respondent to discharge certain duties on its behalf; it is not, and cannot be read as, an arbitration agreement.

Key takeaways

The powers under Clause 23 include appointment of advocates to compromise or refer matters to arbitration on behalf of the Applicant; on this characterisation the Court held the clause is not, and cannot be read as, an arbitration agreement.ratio¶25
The Applicant's reliance on clause 10.7 of the Assignment Agreement is misplaced: the Assignment Agreement is between the Respondent and Edelweiss, and the Applicant, having no privity to that Agreement, cannot invoke it.ratio¶25

Detailed headnote1 paragraphs

Bombay High Court (Ordinary Original Civil Jurisdiction), COMM. ARBITRATION APPLICATION NO.250 OF 2025, decided 3rd October 2025 by GAUTAM A. ANKHAD, J. — Telstar Constructions Pvt. Ltd. v. Abhyudaya Co-operative Bank Ltd. The Applicant sought appointment of a Sole Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, relying conjointly on Clause 23 of the Working Capital Term Loan Agreement dated 9th November 2011 (WCTL Agreement) and clause 10.7 of the Assignment Agreement dated 18th March 2019 between the Respondent bank and Edelweiss Asset Reconstruction Company Ltd. HELD: (i) Clause 23 of the WCTL Agreement is not an arbitration clause and does not fulfill the requirements of an arbitration agreement under Section 7 of the Act; it is in the nature of an authority or Power of Attorney granted by the Applicant to the Respondent to discharge certain duties on its behalf, including appointment of advocates to compromise or refer matters to arbitration on the Applicant's behalf, and cannot be read as an arbitration agreement; (ii) reliance on clause 10.7 of the Assignment Agreement is misplaced, as that Agreement is between the Respondent and Edelweiss and the Applicant has no privity to it and cannot invoke it. Application dismissed — no arbitration agreement exists between the parties.

11-CARAP-250-25.doc

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

Digitally signed by BALAJI BALAJIGOVINDRAO GOVINDRAOPANCHAL PANCHAL Date: 2025.10.04 16:36:19 +0530

COMM. ARBITRATION APPLICATION NO.250 OF 2025

Telstar Constructions Pvt. Ltd.

.. Applicant

Vs. Abhyudaya Co-operative Bank Ltd. .. Respondent

...

Mr. Cherag Balsara a/w Ms. Vrushali L. Maindad, Advocates for the Applicant.

Mr. Rajeev Kumar Pandey a/w Mr. Madhur Rai & Mr. Sachin Kanse i/by PRS Legal, Advocates for the Respondent.

...

CORAM : GAUTAM A. ANKHAD, J. DATE : 3^rd OCTOBER 2025.

P.C. :

The Applicant has filed this Application under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of a Sole Arbitrator under the Agreement of Working Capital Term Loan dated 9^th November 2011 (“ WCTL Agreement ”) and Assignment Agreement dated 18^th March 2019.

Mr. Balsara, learned counsel for the Applicant submits that the Respondent had sanctioned the loan facility under agreement dated 18^th November 2011. Disputes arose between the parties. Meanwhile, the Respondent executed an Assignment Agreement with Edelweiss Asset Reconstruction Company Ltd. (“ Edelweiss ”) on 18^th March 2019. He relies upon:-

(i) Clause 23 of the loan agreement, which reads as under :-

“23. The Borrower/s hereby appoint the Abhyudaya Co-op. Bank Ltd., its Assignor attorney in its name and on its behalf to demand, sue for, receive and recover and give effectual discharges for all or any of the book and

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11-CARAP-250-25.doc

other debts hereby hypothecated and for that purpose to file suit and declare plaints, affidavits, to employ Solicitors and Advocates to compromise and refer to arbitration and to do all such acts and things as could have been done by the Borrower/s in the matter of recovery of the said debts.”

(ii) Arbitration agreement at clause 10.7 of the Assignment Agreement between the Respondent and Edelweiss.

He submits that a conjoint reading of these two clauses gives rise to an arbitration agreement between the parties herein and empowers this Court to appoint a Sole Arbitrator to adjudicate upon the disputes between the parties.

Mr. Rajeev Kumar, learned counsel for the Respondent opposes the Application and submits that there is no arbitration agreement between the parties. Clause 23 cannot be read as a arbitration agreement and seeks dismissal of the Application.

I have heard the learned counsels for the parties. Clause 23 of the WCTL Agreement is not an arbitration clause. It does not fulfill the requirements of an arbitration agreement under Section 7 of the Act. It is in the nature of authority or Power of Attorney that is granted by the Applicant to the Respondent to discharge certain duties on its behalf. This includes appointment of advocates to compromise or refer matters to arbitration on behalf of the Applicant. This clause, in my view, is not and cannot be read as an arbitration agreement. Mr. Balsara’s reliance on clause 10.7 of the Assignment Agreement is also misplaced. The Assignment Agreement is between the Respondent and Edelweiss. It cannot be invoked by the Applicant, as it has no privity to the said Agreement.

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11-CARAP-250-25.doc

In view thereof, there is no merit in this Application. Commercial Arbitration Application No.250 of 2025 is dismissed.

[GAUTAM A. ANKHAD, J.]

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