M/S Volvo Financial Services (India) Private Limited Vs M/S S S Constructions

M/S VOLVO FINANCIAL SERVICES (INDIA) PRIVATE LIMITED FORMERLY KNOWN AS M/S. VOLVO ASSET FINANCE INDIA PRIVATE LIMITED HAVING ITS CORPORATE OFFICE AT NO. 65/2, BAGMANE TECH PARK BLOCK-A, 5^TH FLOOR PARIN BUILDING C. V. RAMAN NAGAR BENGALURU - 560 093 REPRESENTED BY ITS AUTHORISED SIGNATORY MR. VARADARAJ

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…APPELLANT

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(BY SRI ANANT MANDGI, SENIOR ADVOCATE FOR SRI PATIL J.M, ADVOCATE)

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AND:

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M/S. S.S. CONSTRUCTIONS PLOT NO.87-JUBILEEHILLS- ROAD NO.72 PRASHASAN NAGAR SRI VETA HATCHERIES

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HC-KAR

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HYDERABAD TELANGANA - 500 033 REPRESENTED BY ITS MANAGING PARTNER MR. ALTHURU SAHINI REDDY

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MR. ALTHURU SAHINI REDDY S/O. MR. ALTHURU GIRISH REDDY AGED ABOUT 29 YEARS NO. 8-2-293/82/NI/41 ROAD NO. 10C MLA, MP COLONY NEAR DIAMOND HOUSE HYDERABAD TELANGANA - 500 033

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…RESPONDENTS

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THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13 (1A) OF THE COMMERCIAL COURTS ACT, 2015 PRAYING TO SET ASIDE THE ORDER DATED 24.10.2025 PASSED BY THE LEARNED LXXXIV ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, (DEDICATED COMMERCIAL COURT), BENGALURU, IN COM.A.A.NO.368/2025, IN ALLOWING THE APPLICATION FILED BY THE RESPONDENTS IN IA NO.3 UNDER ORDER 39 RULE 4 OF THE CODE OF CIVIL PROCEDURE, 1908, AND ALLOW THIS COMMERCIAL APPEAL WITH COSTS AND GRANT SUCH OTHER RELIEFS AS THIS HON'BLE COURT MAY DEEM FIT TO GRANT IN THE CIRCUMSTANCES OF THE CASE.

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THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

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HC-KAR

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CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE and HON'BLE MR. JUSTICE C.M. POONACHA

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ORAL JUDGMENT

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(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)

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The appellant has filed the present appeal under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 [ A&C Act ] impugning an order dated 24.10.2025 passed by the learned LXXXIV Additional City Civil and Sessions Judge, at Bengaluru [ Commercial Court ] in IA No.3 in Com. A.A No.368/2025, captioned M/s Volvo Financial Services (India) Private Limited v. M/s. S S Constructions and another.

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The respondents had filed the said application seeking

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vacation of the ex parte order dated 06.09.2025, whereby the learned Commercial Court had appointed a receiver to take possession of the schedule assets and hand over the same to the appellant company. It is material to note that the said order was passed ex parte .

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The appellant had filed an application ‒ I.A No.2 before the Commercial Court claiming that it had sanctioned a loan of `9,95,96,000/- to the respondents under various loan accounts.

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The respondents were liable to pay a sum of `56,48,924/- towards the same, however, had failed to do so. It was alleged that the respondents were now selling their assets, which were hypothecated to the appellant. In view of the aforesaid contentions, on 06.09.2025, the learned Commercial Court had passed the following order:

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"I.A.No.1 is allowed. Production of original documents dispensed with at this stage.

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Further I.A.No.2 is also allowed. One Mr. Varadaraj, of the petitioner company is appointed as the Receiver to take interim possession of schedule assets from the respondents or from whomsoever's possession same are found with the assistance of the jurisdictional police and to handover it to petitioner company, who shall retain said equipments till disposal of this case.

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The applicant shall comply procedure U/Or.39 Rule 3A of CPC. Office to issue aforesaid order of appointment Receiver only after compliance of aforesaid provisions.

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Issue notice on main petition to Respondent, if PF and copies are furnished, R/by 26.09.2025."

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The respondents filed an application seeking vacation of the

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aforesaid stay order in return of the assets, being IA No.3 in Com.A.A No.368/2025, which was allowed. The learned Commercial Court found that the petitioner had suppressed material facts. It had not disclosed that an arbitral award dated

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01.08.2024 – which was rendered pursuant to the appellant recalling the loan advanced – was the subject matter of challenge before the Commercial Court in Gurgaon in ARB-169-2024 and the said arbitral award had been stayed. The appellant had joined the said proceedings. However, the interim stay had been extended. Thus, although the appellant was fully aware regarding the challenge to the arbitral award, it did not disclose the same. The learned Commercial Court also faulted the appellants in not mentioning that all the three Master Loan cum Hypothecation cum Guarantee Agreements [ loan agreements ] had expressly provided that the courts mentioned in Schedule 1 to the agreements would have exclusive jurisdiction over any dispute arising in connection with the loan agreements or in any other transaction documents. Schedule 1 to the agreements had mentioned the jurisdiction of the court as Gurgaon.

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It is relevant to refer to some of the averments made in the petition filed by the appellant company under Section 9 of the A&C Act. We consider it apposite to set out the following extracts from the said petition:

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"13. It is submitted that, the Respondents herein had undertaken to repay the Loan, along with the interest accruing thereon, in terms of the Agreement. The Loan was required to be repaid on stipulated dates as per the repayment schedule mentioned in the agreement without any default. However, contrary to what was agreed the Respondents failed to clear the outstanding in spite of repeated requests, reminders and demands by the Petitioner Company, the Respondents failed, refused and neglected to make payment thereby attracting overdue charges and other contractual levies as per the terms and conditions governing the said facility.

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14. It is submitted that, upon the Respondents failing to meet the credit obligations as required under the loan agreements, the Petitioner with no other option left had re-terminated the facilities and had issued loan recall notices to the Respondents to repay the entire outstanding in respect of the above-mentioned loan accounts on 5.2.2024 and thereafter appointed the Arbitrator to resolve the dispute issuing the reference notice on 26.3.2024. Thereafter the claim was presented before the arbitrator and the same was not contested and the award dated 01/08/2024 was passed. After passing the award the respondents admitted the liability, however requested to regularize the loan account, the same permitted and loan accounts had got normalized.

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15. It is submitted that again the Respondents failed to meet the credit obligations as required under the loan agreements, the Petitioner with no other option left had re-called the above loans and issued loan recall notices to the Respondents to repay the entire outstanding in respect of the above-mentioned loan accounts. The copies of the loan recall Notices dated 26/03/2025 along with postal receipts are produced herewith as Annexure -K(colly).

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16. As on 30/07/2025 the Respondents are still liable to pay a consolidated amount of Rs.3,56,00,204/(Rupees Three Crore Fifty-Six Lakh Two Hundred and Four Only). The Copies of the Statement of accounts

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along with the foreciosure statements are produced herewith and marked as Annexure - L(colly).

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xxx xxx xxx

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It is submitted that the Petitioner Company with no other option left, in order to adjudicate the dispute and also to recover the dues had issued an Appointment of Arbitrator notice dated 03/05/2025 and the tribunal is constituted and the matter is sub judice. The Copy of the Appointment of Arbitrator notice dated 03/05/2025 along with the postal receipts & Returned Postal Cover is produced herewith as Annexure-M(colly)."

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A plain reading of the aforesaid averments indicate that the

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appellant had invoked the arbitration clause under the loan agreements and had unilaterally appointed an arbitrator to adjudicate the disputes. The appellant had presented the claim before the Arbitral Tribunal which had culminated in an arbitral award dated 01.08.2024. It is the appellant's case that thereafter, it had entered into some agreement for "regularising the loan". However, the respondents had failed to meet their credit obligations. Thus, the loan amount had been recalled. However, as noted above, the loan had already been recalled. The appellant had already made its claim and had secured an arbitral award in its favour. Prima facie , the arbitration agreement had worked itself out and the remedy available to the appellant was to enforce the said

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award. However, it appears that the appellant had once again issued notices for recall of the loan as done earlier and had once again appointed an arbitrator. The application under Section 9 sought for an interim measure for protection.

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The appellant had specifically stated that the arbitral tribunal is constituted and according to the appellant, the matter was “ sub judice” before the arbitral tribunal. Since the loan was recalled earlier; notice under Section 21 of the A&C Act was issued; the arbitrator was appointed; and the arbitral tribunal had delivered an award. Clearly, it would not be open for the appellant to once again appoint an arbitrator to seek an award for recovery of the loan.

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If there was any settlement arrived at or arrangement entered into after the arbitral award dated 01.08.2024 was rendered, it would be necessary to examine whether any dispute regarding the said settlement was covered under the arbitration agreement. The said question is required to be considered at the threshold.

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It is also relevant to refer to the averments made in the present appeal before this Court. The appellant had claimed that

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the arbitral award dated 01.08.2024 had become infructuous. We consider it apposite to set out the following extract from the Memorandum of Appeal:.

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"15. The Appellant submits that as per the above clause the Lender identified the venue of the Arbitration is at Bangalore and thereafter appointed the Arbitrator to resolve the dispute by issuing the reference notice on 26.3.2024. Thereafter the claim was presented before the arbitrator and the same was not contested and the award dated 01/08/2024 was passed. After passing the award the respondents admitted the liability and requested to regularize the loan account, the same was permitted and loan accounts had got normalized and the award passed by the arbitrator rendered infructuous in view of the regularization of the accounts.

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16. The Appellant submits that again the Respondents failed to meet the credit obligations as required under the loan agreements, the Appellant with no other option left had re-called the above loans and issued loan recall notices to the Respondents to repay the entire outstanding in respect of the above-mentioned loan accounts. The copies of the loan recall Notices dated 26/03/2025 along with postal receipts are produced herewith as Annexure - L(colly) , it is further submitted that as per the procedure the appellant initiated the fresh arbitration proceedings and issued the reference notice to the respondents regarding the appointment of arbitrator, however the respondents did not claim the same and it was returned to sender with postal shara 'UNCLAIMED'. The copies of the Notice and returned Covers are hereby produced as Annexure - M .

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19. The Appellant submits that after service of summons, respondents entered appearance and filed application in I.A.No.3 for vacating the interim order on the ground that they have challenged the award dated 01/08/2024 in Claim Petition No.12204/2024 at

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Gurugram and the same is stayed by the said court. The Copy of the Application seeking vacating of the interim order and the documents produced along with the same is produced herewith as Annexure-R . The Appellant Company had filed their detailed objections along with memo accompanying documents in support of their case and sought for dismissal of the IA No.3 specifically contending that the award challenged by the respondents had rendered infructuous and they have filed it before the wrong court, since the venue of the arbitration was at Bangalore and the Bangalore courts will have jurisdiction and even if they challenge the award the respondents should have filed before the courts at Bangalore not at Gurugram. The Copy of the objections filed by the Appellant to I.A.No.3 and the documents produced along with the same is produced herewith as Annexure-S."

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The appellant did not disclose before the learned Commercial Court that the respondents had filed a petition under Section 34 of the A&C Act challenging the arbitral award dated 01.08.2024 and the said award had been stayed. The appellant's stand before the learned Commercial Court as well as in this appeal is that the said arbitral award had become infructuous.

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We also note that there is a serious controversy whether the Commercial Court in Bengaluru would have the jurisdiction considering clause 16 of the loan agreements expressly provides that "the courts mentioned in Schedule 1 shall have exclusive jurisdiction over any dispute arising out of this Agreement and/or

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the other Transaction Documents." However, it is not necessary to address the said question as the same is pending consideration before the learned Commercial Court.

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The learned Commercial Court had noted the said contentions and observed that the same has to be adjudicated at a later stage. The interim order obtained by the appellant had been vacated on the ground that the appellant had suppressed the material facts. The said finding cannot be faulted. The learned Commercial Court had noted that the respondents had challenged the arbitral award in Gurgoan and the learned Commercial Court had stayed the impugned arbitral award dated 01.08.2024. The Commercial Court also noted that subsequent to the order dated 21.08.2025 passed by the Commercial Court, Gurgoan, the appellant had joined those proceedings. However, pending consideration of rival contentions, the Commercial Court, Gurgaon had extended the interim order. These facts were not disclosed by the appellant in its petition under Section 9 of the A&C Act. Undisputedly, it was necessary for the appellant to have made full disclosure of the material facts for seeking any equitable relief.

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In our view, the failure to disclose the material facts relevant to the challenge to the arbitral award, is relevant for considering whether the appellant is entitled to any interim relief.

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It appears that the respondents have challenged the arbitral award dated 01.08.2024 on the ground that it is non est . It appears that the appellant had unilaterally appointed the arbitrator who had delivered the award dated 01.08.2024. The averments made in the petition and the present appeal indicate that the appellant has once again unilaterally appointed an arbitrator. It is now well settled that unilateral appointment is not permissible by the parties. Considering that the appellant had sought interim measures for protection in aid of the said arbitral proceedings, the challenge raised by the respondents to the arbitral award – which was not disclosed by the appellant – would be material.

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The learned counsel appearing for the appellant had referred to Section 9 of the A&C Act and submitted that the appellant is also entitled to seek interim measures of protection after an arbitral award is rendered. There is no cavil with the aforesaid proposition.

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He submitted that the appellant's application under Section 9 of the A&C Act ought to be construed as seeking interim measures of protection pending enforcement of the arbitral award dated 01.08.2024.

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The aforesaid contention is ex facie inconsistent with the averments made in the present appeal. According to the appellant, the award dated 01.08.2024 has been rendered "infructuous". Clearly, it would be difficult to accept that the interim measures of protection are required to be granted till the enforcement of the said award. The appellant's application under Section 9 of the A&C Act is in the aid of the arbitral proceedings, which the appellant claimed were sub judice before the arbitrator. As it is apparent from the averments made in paragraph 19 of the said application (which is also quoted herein above) that there is a serious question whether fresh arbitration proceedings would lie by issuing fresh notice under issued Section 21 of the A&C Act while the challenge to the earlier arbitration award is pending.

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In view of the above, we find no ground to interfere with the impugned order. We, however, clarify that all observations made in the present order is solely for the purposes of considering the

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