Delhi High Court
Ascend Capital Services Pvt. Ltd. & Ors vs Laxmi Foils Pvt. Ltd on 17 February, 2026
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 22.01.2026
Judgment pronounced on: 17.02.2026
+ ARB.P. 1126/2025, I.A. 18454/2025 (Delay of 31 days in Re-
filing of the petition) & I.A. 1797/2026 (Delay of 2 days in
filing the rejoinder)
ASCEND CAPITAL SERVICES PVT. LTD. & ORS.
.....Petitioners
Through: Mr. Jayant Mehta, Senior
Advocate with Mr. Ashish
Verma, Mr. Saksham Thareja,
Mr. Akhil Ranganathan and Mr.
Pallav Arora, Advocates.
versus
LAXMI FOILS PVT. LTD. .....Respondent
Through: Ms. Malvika Trivedi, Senior
Advocate along with Mr.
Sanyam Khetarpal and Ms. Lisa
Sankrit, Advocates.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
% JUDGMENT
HARISH VAIDYANATHAN SHANKAR, J.
1. The present Petition, under Section 11(6) of the Arbitration
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and Conciliation Act, 19961, has been filed seeking the appointment
of a sole Arbitrator for the purpose of adjudication of disputes stated
to have arisen between the parties in relation to the Facilities
Agreement dated 21.02.20222.
2. As stated in the Petition, in or around March 2022, the
Respondent Company was engaged in the business of manufacturing
and trading aluminium hot rolled products, aluminium cold rolled
products and aluminium sheets, foils, etc. It is further stated in the
Petition that the Petitioners had, from time to time, granted credit
facilities/unsecured loans for the purpose of the Respondent
Company‟s capital expenditure and general corporate expenses.
3. Thereafter, a Tripartite Share Purchase Agreement dated
03.02.20223 was entered into between the erstwhile shareholders,
Respondent and one OMAT Business Pvt. Ltd., which is the fully-
owned subsidiary of OFB Tech Pvt. Ltd.
4. Consequently, in order to discharge the liabilities of the
Respondent Company under the credit facilities/unsecured loans
granted by the Petitioners, OFB Tech Pvt. drafted and shared a
Facilities Agreement vide email dated 07.02.2022.
5. It is further stated in the Petition that loans were also granted by
the erstwhile shareholders of the Respondent Company, and in view
thereof, two Facilities Agreements were drafted by OFB Tech Pvt.
Ltd., being “Project Laxmi-USL (Shareholders as Lenders)” and
“Project Laxmi-USL (Non-shareholders as Lenders)”.
6. It is stated that the Facilities Agreement in the present case,
1
Act
2
Agreements
3
Share purchase agreement
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being Project Laxmi- USL (Non-Shareholder as Lenders), was duly
executed by the Petitioners and delivered to the Respondent and to its
parent company, OFB Tech Pvt. Ltd., on 21.02.2022.
7. It is stated in the Petition that the Agreement envisaged the
Arbitration Clause being Clause 7.7, which reads as under:
“7.7 Arbitration
7.7.1. If any dispute arises amongst the Parties in relation to or in
connection with this Agreement (including in respect of the
validity, interpretation, implementation or alleged breach of any
provision of this Agreement) (a “Dispute”), the Parties shall
attempt to resolve such Dispute amicably through discussions
amongst the senior executives of the Parties.
7.7.2. Arbitration. In the case of failure by the Parties to resolve the
Dispute in the manner set out in Clause 7.7.1 above within 30
(thirty) days from the date when the Dispute arise, the Dispute
shall be finally settled by arbitration in accordance with the
Arbitration and Conciliation Act, 1996. All arbitration proceedings
shall be conducted in the English language. The seat and venue of
arbitration will be Delhi.
7.7.3. Each Party shall appoint 1 (one) arbitrator each, and the 3rd
(third) arbitrator shall be appointed by the 2 (two) arbitrators so
appointed (the “Arbitration Tribunal”).
7.7.4. Enforcement. The arbitral award(s) rendered by the
Arbitration Tribunal shall be made in writing and shall be final and
binding upon the Parties and shall set out the reasons for the
Arbitration Tribunal‟s decision.”
8. It is further stated that upon the culmination of the Facilities
Agreement, a total principal amount of Rs. 24,69,134/- came to be the
amount repayable by the Respondent Company to the Petitioners.
9. Upon the failure of the Respondent Company to discharge its
liability and repay the aforenoted amounts, the Petitioners issued legal
notices dated 20.07.2022 and 26.07.2022 demanding that the
Respondent Company repay the credit facility amounts.
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10. Further, the Petitioners herein, along with the erstwhile
shareholders of the Respondent Company, preferred a Petition under
Section 7 of the Insolvency and Bankruptcy Code, 2016, before the
learned National Company Law Tribunal4, which came to be
dismissed vide Order dated 05.07.2023 on the ground of there being
pre-existing disputes.
11. Thereafter, the Petitioners sent a notice invoking arbitration
under Section 21 of the Act on 25.02.2025; however, despite receipt
thereof, the Respondent failed to act in accordance with the agreed
procedure for appointment of an arbitrator, thereby necessitating the
present Petition before this Court.
SUBMISSIONS ON BEHALF OF THE PARTIES:
12. At the outset, learned Senior Counsel, Ms. Malvika Trivedi,
appearing on behalf of the Respondent, would state that there exists no
valid Arbitration Clause which would satisfy the requirement of an
arbitration agreement under Section 7 of the Act.
13. She would contend that, in fact, the said Agreement, and as is
evidenced by the e-mail dated 07.02.2022, was only a draft and was
not the final Agreement and had only been sent for the purpose of
discussion and was never acted upon. She would further submit that
the present Petition that has been preferred by the Petitioners herein
does not have the signed Agreement, as has been alleged by the
Petitioners herein, and in view thereof, the Agreement sought to be
enforced herein never came into existence.
14. She would further rely upon the Order passed by the learned
4
NCLT
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NCLT dated 05.07.2023 and, in particular, Paragraphs 11, 17 & 18 of
the same to contend that the learned NCLT has also given a finding
that there was, in fact, no debt owed by the said Laxmi Foils Private
Limited to the lenders from the promoter group. The relevant portion
of the Order dated 05.07.2023 passed by the learned NCLT reads as
under:
“11……On bare perusal of the Agreement (ibid), it is observed that
the said Facility Agreement is un-dated. Therefore, it cannot be
determined when this Facility Agreement was indeed executed by
and between the parties herein.
****
17. From the aforesaid facts, events, and analysis, we observe that
the alleged debt claimed by the Applicants is doubtful since (a) the
Facility Agreement relied upon by the Applicants in support of
their debt is un-dated, (b) as per the Provisional Balance Sheet of
the Respondent as of 04.03.2022 (which has been signed and
authenticated by the Applicant No. 1 and 6 themselves), the
unsecured loan owed to the Directors and Shareholders of the
Respondent Company is shown as „Nil‟, (c) the new management
of the respondent has reportedly paid an amount of
Rs.7,96,88,812/-out of the total consideration of Rs.10,62,51,750/-
to the all the shareholders and the debt of the Respondent is
discharged in terms of Clause 6.5 of the Share Purchase Agreement
dated 03.02.2022, and (d) the Respondent had shown cogent
reasons, by bringing on record the Section 8 Demand Notices
issued to it as the reason for non-payment of the balance amount of
Rs.2,65,62,937/-.
18. Thus, in our considered view, Applicants No. 1-10 have failed
to prove the existence of any debt that is crystallized or exists
beyond any doubt. As regards the alleged debt claimed on behalf of
non-shareholders/Applicants No. 11 to 14, it is noticed that their
default amount is less than the minimum threshold amount of Rs. 1
Crore prescribed under Section 4 of IBC 2016. Hence, we have no
option but to reject the Application. The Application is accordingly
dismissed.”
15. Learned Senior Counsel for the Respondent would also submit
that the present Petition, and disputes, if any, that they pertain to,
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could always be raised in the arbitration proceeding that is pending
between the parties in respect of the Share Purchase Agreement.
16. Learned Senior Counsel for the Respondent would also rely
upon the balance sheet, which is signed on 04.03.2022, to contend
that, as on that date, there was absolutely no mention of the unsecured
loans as sought to be raised by the Petitioners.
17. Learned Senior Counsel would further submit that the Notice
invoking Arbitration, as annexed with the present Petition, is neither
on behalf of the Petitioners nor does it contain any
reference/allegations/submissions qua the alleged outstanding amount
payable to the Petitioners. A bare perusal of the memo parties and the
Notice sent on behalf of the parties would establish the same.
18. Per Contra, learned Senior Counsel appearing on behalf of the
Petitioners would refer to the e-mail dated 07.02.2022 and the
annexure thereof, which is titled as the “Facilities Agreement”. He
would state that this annexure to the e-mail came to be signed by the
parties therein, and the same contains an arbitration clause, which is
Clause 7.7 of the said Agreement and resultantly, prima-facie there is
an arbitration agreement that is in existence and in view of the
judgement passed by the Hon‟ble Supreme Court in SBI General
Insurance Co. Ltd. v. Krish Spinning5, this Court would have to
necessarily refer the matter to arbitration.
19. Learned Senior Counsel for the Petitioner would also draw the
attention of this Court to the pages of the said agreement wherein all
the parties were listed in Schedule 1, where the lenders have signed, as
also the relevant page where one Mr. Rajesh Jain has signed as
5
(2024) 12 SCC 1
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Director of Laxmi Foils Private Limited.
20. As respects the signed copy of the Agreement not being
annexed to the present Petition, as well as the irregularity in Notice
invoking Arbitration, the learned Senior Counsel for the Petitioners
would fairly submit that at the time of the filing of the present
Petition, certain vital documents came to be inadvertently missed and
the same have been duly filed along with Rejoinder filed by the
Petitioners.
ANALYSIS:
21. This Court has heard learned counsel for the parties at length
and, with their able assistance, carefully perused the pleadings and the
documents placed on record.
22. At the outset, it is apposite to note that the legal position
governing the scope and standard of judicial scrutiny under Section
11(6) of the Act is no longer res integra. A three-Judge Bench of the
Hon‟ble Supreme Court in Krish Spg (supra), after taking into
consideration the authoritative pronouncement of the seven-Judge
Bench in Interplay Between Arbitration Agreements under
Arbitration Act, 1996 & Stamp Act, 1899, In re6, comprehensively
delineated the contours of judicial intervention at the stage of Section
11 of the Act. The excerpt of Krish Spg (supra) reads as under:
“(c) Judicial interference under the 1996 Act
110. The parties have been conferred with the power to decide and
agree on the procedure to be adopted for appointing arbitrators. In
cases where the agreed upon procedure fails, the courts have been
vested with the power to appoint arbitrators upon the request of a6
(2024) 6 SCC 1
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party, to resolve the deadlock between the parties in appointing the
arbitrators.
111. Section 11 of the 1996 Act is provided to give effect to the
mutual intention of the parties to settle their disputes by arbitration
in situations where the parties fail to appoint an arbitrator(s). The
parameters of judicial review laid down for Section 8 differ from
those prescribed for Section 11. The view taken in SBP &
Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 and affirmed in Vidya
Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 that Sections 8
and 11, respectively, of the 1996 Act are complementary in nature
was legislatively overruled by the introduction of Section 11(6-A)
in 2015. Thus, although both these provisions intend to compel
parties to abide by their mutual intention to arbitrate, yet the scope
of powers conferred upon the courts under both the sections are
different.
112. The difference between Sections 8 and 11, respectively, of the
1996 Act is also evident from the scope of these provisions. Some
of these differences are:
112.1. While Section 8 empowers any “judicial authority” to refer
the parties to arbitration, under Section 11, the power to refer has
been exclusively conferred upon the High Court and the Supreme
Court.
112.2. Under Section 37, an appeal lies against the refusal of the
judicial authority to refer the parties to arbitration, whereas no such
provision for appeal exists for a refusal under Section 11.
112.3. The standard of scrutiny provided under Section 8 is that of
prima facie examination of the validity and existence of an
arbitration agreement. Whereas, the standard of scrutiny under
Section 11 is confined to the examination of the existence of the
arbitration agreement.
112.4. During the pendency of an application under Section 8,
arbitration may commence or continue and an award can be passed.
On the other hand, under Section 11, once there is failure on the
part of the parties in appointing the arbitrator as per the agreed
procedure and an application is preferred, no arbitration
proceedings can commence or continue.
113. The scope of examination under Section 11(6-A) is confined
to the existence of an arbitration agreement on the basis of Section
7. The examination of validity of the arbitration agreement is also
limited to the requirement of formal validity such as the
requirement that the agreement should be in writing.
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114. The use of the term “examination” under Section 11(6-A) as
distinguished from the use of the term “rule” under Section 16
implies that the scope of enquiry under Section 11(6-A) is limited
to a prima facie scrutiny of the existence of the arbitration
agreement, and does not include a contested or laborious enquiry,
which is left for the Arbitral Tribunal to “rule” under Section 16.
The prima facie view on existence of the arbitration agreement
taken by the Referral Court does not bind either the Arbitral
Tribunal or the Court enforcing the arbitral award.
115. The aforesaid approach serves a twofold purpose — firstly, it
allows the Referral Court to weed out non-existent arbitration
agreements, and secondly, it protects the jurisdictional competence
of the Arbitral Tribunal to rule on the issue of existence of the
arbitration agreement in depth.
****
117. In view of the observations made by this Court in Interplay
Between Arbitration Agreements under the Arbitration Act, 1996
& the Stamp Act, 1899, In re, (2024) 6 SCC 1, it is clear that the
scope of enquiry at the stage of appointment of arbitrator is limited
to the scrutiny of prima facie existence of the arbitration
agreement, and nothing else. For this reason, we find it difficult to
hold that the observations made in Vidya Drolia v. Durga Trading
Corpn., (2021) 2 SCC 1 and adopted in NTPC Ltd. v. SPML Infra
Ltd., (2023) 9 SCC 385 that the jurisdiction of the Referral Court
when dealing with the issue of “accord and satisfaction” under
Section 11 extends to weeding out ex facie non-arbitrable and
frivolous disputes would continue to apply despite the subsequent
decision in Interplay Between Arbitration Agreements under the
Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC
1.
****
119. The question of “accord and satisfaction”, being a mixed
question of law and fact, comes within the exclusive jurisdiction of
the Arbitral Tribunal, if not otherwise agreed upon between the
parties. Thus, the negative effect of competence-competence would
require that the matter falling within the exclusive domain of the
Arbitral Tribunal, should not be looked into by the Referral Court,
even for a prima facie determination, before the Arbitral Tribunal
first has had the opportunity of looking into it.
120. By referring disputes to arbitration and appointing an
arbitrator by exercise of the powers under Section 11, the Referral
Court upholds and gives effect to the original understanding of the
contracting parties that the specified disputes shall be resolved by
arbitration. Mere appointment of the Arbitral Tribunal does not in
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any way mean that the Referral Court is diluting the sanctity of
“accord and satisfaction” or is allowing the claimant to walk back
on its contractual undertaking. On the contrary, it ensures that the
principle of arbitral autonomy is upheld and the legislative intent of
minimum judicial interference in arbitral proceedings is given full
effect. Once the Arbitral Tribunal is constituted, it is always open
for the defendant to raise the issue of “accord and satisfaction”
before it, and only after such an objection is rejected by the
Arbitral Tribunal, that the claims raised by the claimant can be
adjudicated.
121. Tests like the “eye of the needle” and “ex facie meritless”,
although try to minimise the extent of judicial interference, yet they
require the Referral Court to examine contested facts and
appreciate prima facie evidence (however limited the scope of
enquiry may be) and thus are not in conformity with the principles
of modern arbitration which place arbitral autonomy and judicial
non-interference on the highest pedestal.
122. Appointment of an Arbitral Tribunal at the stage of Section 11
petition also does not mean that the Referral Courts forego any
scope of judicial review of the adjudication done by the Arbitral
Tribunal. The 1996 Act clearly vests the national courts with the
power of subsequent review by which the award passed by an
arbitrator may be subjected to challenge by any of the parties to the
arbitration.
*****
126. The power available to the Referral Courts has to be construed
in the light of the fact that no right to appeal is available against
any order passed by the Referral Court under Section 11 for either
appointing or refusing to appoint an arbitrator. Thus, by delving
into the domain of the Arbitral Tribunal at the nascent stage of
Section 11, the Referral Courts also run the risk of leaving the
claimant in a situation wherein it does not have any forum to
approach for the adjudication of its claims, if its Section 11
application is rejected.
127. Section 11 also envisages a time-bound and expeditious
disposal of the application for appointment of arbitrator. One of the
reasons for this is also the fact that unlike Section 8, once an
application under Section 11 is filed, arbitration cannot commence
until the Arbitral Tribunal is constituted by the Referral Court. This
Court, on various occasions, has given directions to the High
Courts for expeditious disposal of pending Section 11 applications.
It has also directed the litigating parties to refrain from filing bulky
pleadings in matters pertaining to Section 11. Seen thus, if the
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Referral Courts go into the details of issues pertaining to “accord
and satisfaction” and the like, then it would become rather difficult
to achieve the objective of expediency and simplification of
pleadings.
128. We are also of the view that ex facie frivolity and dishonesty
in litigation is an aspect which the Arbitral Tribunal is equally, if
not more, capable to decide upon the appreciation of the evidence
adduced by the parties. We say so because the Arbitral Tribunal
has the benefit of going through all the relevant evidence and
pleadings in much more detail than the Referral Court. If the
Referral Court is able to see the frivolity in the litigation on the
basis of bare minimum pleadings, then it would be incorrect to
doubt that the Arbitral Tribunal would not be able to arrive at the
same inference, most likely in the first few hearings itself, with the
benefit of extensive pleadings and evidentiary material.”
(emphasis supplied)
23. The decision in Krish Spg (supra) thus unequivocally reiterates
that the Referral Court, while exercising jurisdiction under Section 11,
is required to confine itself to a prima facie examination of the
existence of an arbitration agreement and nothing beyond. The Court‟s
role is facilitative and procedural, namely, to give effect to the parties‟
agreed mechanism of dispute resolution when it has failed, without
embarking upon an adjudication of contentious factual or legal issues,
which are reserved for the Arbitral Tribunal.
24. The Apex Court has further clarified that tests such as “ex facie
meritless” or “eye of the needle”, which necessitate an evaluation of
contested facts or a preliminary appreciation of evidence, are
inconsistent with the modern arbitration framework that accords
primacy to arbitral autonomy and restricts judicial interference.
Accordingly, while the Referral Court must ensure that a valid
arbitration agreement prima facie exists, all substantive objections,
including those relating to accord and satisfaction, limitation, or other
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jurisdictional issues, are to be raised before and decided by the
Arbitral Tribunal in the first instance, subject thereafter to statutory
remedies available under the Act.
25. In view of the law laid down by the Apex Court in Krish Spg
(supra), this Court, while exercising its powers under Section 11 of
the Act has to examine whether the pre-requisites as laid down in the
Act, which include there being a prima facie existence of a written
arbitration clause, the requirements of Section 11(6) of the Act being
fulfilled; disputes having arisen between the parties and valid
invocation of the Arbitration. Accordingly, after the perusal of the
documents, as annexed with the Rejoinder filed on behalf of the
Petitioners, this Court is of the view that the Petitioners herein have
sufficiently fulfilled the aforenoted conditions.
26. Further, learned Senior Counsel for the Respondent was
repeatedly queried as to whether, on the date when the alleged non-
existent Agreement was signed between the lenders or the promoter
groups and Mr. Rajesh Jain on behalf of Laxmi Foils Private Limited,
Mr. Jain was a director or not.
27. As is evident from the pleadings and also from the reluctance
on the part of the learned Senior Counsel for the Respondent to reply
to the said query, it is apparent that as on that date Mr. Rajesh Jain
was the Director for Laxmi Foils Private Limited. In view thereof, this
Court is of the opinion that it is established that prima facie there is an
arbitration Agreement in existence.
28. Keeping in mind the judgment of the Hon‟ble Supreme Court in
Krish Spg (supra), all other contentions raised by the Respondent can
be raised before the learned Arbitral Tribunal and since at this stage,
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this Court‟s scrutiny is limited to examining the prima facie existence
of an arbitration agreement there arises no occasion for this Court to
dwell into any of the factual aspects that the learned Senior Counsel
for the Respondent has sought to put across. All these issues are left
open to be taken before the learned Arbitral Tribunal.
29. In view of the fact that disputes have arisen between the parties
and there is an arbitration clause in the Agreement, this Court is
inclined to appoint an Arbitrator to adjudicate upon the disputes
between the parties.
30. It is stated that the disputed amount in the present case is
approximately Rs. 24,69,134/-.
31. Accordingly, Mr. Harshit Agarwal, Advocate, (Mob. No.
9811026362), is appointed as the Arbitrator to adjudicate the disputes
inter se the parties.
32. The learned sole Arbitrator may proceed with the arbitration
proceedings, subject to furnishing to the parties the requisite
disclosures as required under Section 12(2) of the Act within a week
of entering the reference.
33. The learned sole Arbitrator shall be entitled to fees in
accordance with the Fourth Schedule of the Act or as may otherwise
be agreed to between the parties and the learned sole Arbitrator.
34. The parties shall share the learned sole Arbitrator‟s fee and
arbitral costs equally.
35. All rights and contentions of the parties are kept open, to be
decided by the learned sole Arbitrator on their merits, in accordance
with law.
36. Needless to state, nothing in this order shall be construed as an
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expression of opinion of this Court on the merits of the controversy.
All rights and contentions of the parties in this regard are reserved.
37. The Registry is directed to send a receipt of this order to the
learned Arbitrator through all permissible modes, including through e-
mail.
38. Accordingly, the present Petition, along with pending
application(s), is disposed of in the aforesaid terms.
39. No order as to costs.
HARISH VAIDYANATHAN SHANKAR, J.
FEBRUARY 17, 2026/tk/va
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