Madras High Court Appoints Arbitrator In Mercedes-Benz Financial Services' ₹1.55 Crore Loan Dispute

The Madras High Court, on 4 November, allowed a petition filed by Mercedes-Benz Financial Services India Private Limited and appointed former High Court judge Justice R. Balasubramanian as sole arbitrator to resolve its dispute with Kamco Chew Food Private Limited and its co-borrower Singh over a vehicle loan of Rs. 1.55 crore.

Chief Justice Sushrut Arvind Dharmadhikari held that the existence of a valid arbitration agreement and arbitrable disputes warrants the appointment of a sole arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. The Bench observed:

“In view of the valid arbitration clause, the existence of arbitrable commercial disputes, and the failure of the respondents to respond or enter an appearance, this Court finds it appropriate to allow the petition and appoint an independent sole arbitrator”.

Mercedes-Benz Financial Services, a registered non-banking financial company, extended a loan facility to Kamco Chew Food as borrower and Singh as co-borrower to purchase a Mercedes-Benz EQS 580 4MATIC.

The parties executed a loan agreement and deed of hypothecation on 17 August 2023. The borrowers agreed to repay the loan in 48 monthly instalments totalling Rs. 1,87,91,687.

After the borrowers defaulted on repayments, the lender issued a loan recall notice on 29 December 2025, terminating the agreement and demanding immediate payment of Rs. 1,20,82,646.56, outstanding as of 22 December 2025. The borrowers failed to pay the amount.

On 18 May 2026, Mercedes-Benz Financial Services issued a notice under Section 21 of the Act, invoking the arbitration clause and nominating a sole arbitrator. Although the borrowers received the notice, neither responded nor agreed to the proposed nomination.

Subsequently, the lender approached the High Court under Section 11(6) of the Act, seeking appointment of a sole arbitrator under Clause 76 of the loan agreement.

The borrowers also received notices in the court proceedings but failed to appear, either personally or through counsel. They did not file counter-affidavits contesting the lender's claims, following which the Court proceeded ex parte.

Examining Clause 76, the Court found that the parties had expressly agreed to refer all claims and disputes arising under the agreement to a sole arbitrator, with Chennai designated as the exclusive venue. It also found that the lender had fulfilled the procedural requirement of serving an arbitration notice under Section 21.

It held that the existence of the arbitration agreement and the arbitrable nature of the disputes justified the appointment. It accordingly allowed the petition.

Therefore, the Bench directed Justice Balasubramanian to make the disclosure required under Section 12 of the Act before commencing the arbitration. It designated Chennai as the seat and venue of arbitration and directed that the proceedings be conducted under the aegis of the Madras High Court Arbitration Centre in accordance with the Madras High Court Arbitration Proceedings Rules, 2017.

It stated that the fees and administrative costs will be governed by the Centre's rules, and left all claims, counterclaims and defences open for the arbitrator to decide on merits and made no order as to costs.

Accordingly, the High Court appointed Justice Balasubramanian as sole arbitrator.

Appearances for petitioner (Mercedes-Benz Financial Services India Private Limited): Advocate D. Pradeep Kumar.