On 11 September 2025, the Calcutta High Court, presided over by Justice Arindam Mukherjee, delivered a crucial order in the case of Beevee Enterprises & Ors. v. L&T Finance Limited. The dispute arose from a business loan agreement where the lender’s unilateral appointment of an arbitrator became the central point of contention.
Background
The borrowers, Beevee Enterprises and others, had availed a loan under an SME Business Loan Agreement dated 22 June 2024. The agreement contained an arbitration clause empowering the lender (L&T Finance) to appoint a sole arbitrator. Acting on that clause, the lender appointed Mr. Shyam Bihari Sharma as arbitrator.
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The arbitrator passed an order of attachment before judgment under Section 17 of the Arbitration and Conciliation Act, 1996. Challenging this, the borrowers appealed before the High Court under Section 37 of the Act, arguing that the appointment itself was invalid under settled Supreme Court precedents such as TRF Ltd. v. Energo Engg. Projects Ltd. (2017) and Perkins Eastman v. HSCC (India) Ltd. (2020).
Their key contention: since the arbitrator was appointed solely by the lender, the process was tainted and therefore void.
Court's Observations
Justice Mukherjee agreed with the borrowers submission. He noted that,
"any Principal Officer of the respondent company who had appointed the present Arbitrator had become ineligible to appoint being directly related to a party. The appointment of the Arbitrator is, therefore, void."
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Once the appointment was held void, all subsequent proceedings by the arbitrator including the order of attachment were declared null. However, the Court clarified that the arbitration agreement itself remained valid. The invalidity was only with respect to the unilateral appointment mechanism.
Both parties expressed willingness to proceed before a fresh arbitrator appointed by the Court.
Appointment of New Arbitrator
Exercising powers under Section 14 and 15 of the Arbitration Act, the Court terminated the mandate of the previous arbitrator and appointed Mr. Raj Ratna Sen, barrister and advocate of the Bar Library Club, as the new sole arbitrator.
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The Court fixed his lump sum remuneration at ₹2,00,000, to be shared equally between the borrowers and the lender. The arbitration will begin de novo (afresh), and Kolkata was designated as the venue.
Interim Protection and Security Direction
Even while striking down the earlier order, the Court considered the lender’s plea for interim protection. L&T Finance claimed dues exceeding ₹10 lakh, pointing out defaults on installments and warning that recovery might become difficult.
Justice Mukherjee held that under Section 9 of the Arbitration Act, the Court could step in to secure the lender’s interests.
"I am inclined to direct the appellants not to operate the bank accounts without leaving a balance sum of Rs. 2,50,000/- until further orders," he ordered.
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Thus, while the arbitrator’s order was invalidated, the Court itself imposed a protective measure, restraining the borrowers from reducing their bank balances below ₹2.5 lakh.
Decision
Summing up, the High Court:
- Terminated the mandate of the lender-appointed arbitrator.
- Appointed Mr. Raj Ratna Sen as the substitute arbitrator.
- Directed that arbitration proceedings start afresh.
- Restrained the borrowers from operating their bank accounts without leaving a minimum balance of ₹2.5 lakh, pending the arbitrator’s decision.
The appeal was accordingly disposed of.
Case Title: Beevee Enterprises & Ors. v. L & T Finance Limited
Case No.: APOT 208 of 2025; IA No. GA 1 of 2025
