Bombay High Court
Archetype India Construction ... vs The Bombay Dyeing And Mfg. Co. Limited on 29 June, 2012
Author: D.Y.Chandrachud
Bench: D.Y.Chandrachud
1 ARBAP.237.2008
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPLICATION NO.237 OF 2008
Archetype India Construction Consultants
Private Limited Applicant
versus
The Bombay Dyeing and Mfg. Co. Limited Respondent
Mr.Hemant Prabhulkar i/by Juris Consultus for applicant.
Mr.Zal Andhyarujina i/by M/s.Crawford Bayley & Co. for respondent.
CORAM : DR.D.Y.CHANDRACHUD, J.
DATE : 29 June 2012 PC :
1. The application under section 11 of the Arbitration and Conciliation Act, 1996 is based on an arbitration clause contained in an agreement dated 23 January 2008 entered into between the applicant and the respondent. Under the agreement, the respondent was appointed to render design and project management services. Clause 9.2 of the agreement contains an arbitration agreement in the following terms :
"9.2 In case of failure to resolve the dispute and/or differences amicably, the dispute and/or difference shall be referred to a sole Arbitrator for adjudication thereof. The Arbitration proceedings shall be governed by the Arbitration and Conciliation Act, 1996 or any amendment thereto. The Arbitration proceedings shall be held in Mumbai, India. The proceedings of arbitration shall be in English language."
2. An affidavit-in-reply has been filed in this proceeding. The principal defense is two fold. Firstly it has been submitted on the basis 1 of 5 ::: Downloaded on - 09/06/2013 18:43:10 ::: 2 ARBAP.237.2008 of the facts pleaded in the affidavit-in-reply that the agreement that was executed with the respondent, was vitiated by fraud and collusion as between a whole-time director of the respondent (Mr.M.K.Singh) and the applicant. Based on the law laid down by the Supreme Court in N.Radhakrishnan Vs. Maestro Engineers and others1, it has been urged that since there are serious allegations of fraud and mal-practice, these cannot be arbitrated upon and will have to be tried in a suit before a Court of competent jurisdiction. Reliance is also placed on a decision of this Court dated 7 January 2011 in Ivory Properties & Hotels Pvt.Ltd. Vs. Nusli Neville Wadia 2. Secondly it has been submitted that the respondent has instituted a suit, Suit No.677 of 2009, on the Original Side of this court seeking to avoid the very agreement, inter alia, which forms the subject matter of the arbitration application on the ground of fraud. The applicant is the third defendant to the suit. The applicant who has filed a written statement in the suit, did not file an application under section 8(1) no later than before submitting its first statement on the substance of the dispute. In the circumstances, it has been submitted that the respondent seeks to avoid the same agreement which forms the subject matter of the Arbitration application on the basis of an allegation of fraud which has been set up in the reply to the arbitration application. In these circumstances, it has been urged that the arbitration application is misconceived and must be dismissed.
3. The respondent has instituted a suit on the Original Side of this Court seeking, inter alia, the following reliefs :
"(a) That this Hon'ble Court be pleased to Order and Declare that the said Agreements between the Plaintiff and 1 [(2010)1-SCC-72] 2 Arbitration Application No.123 of 2008 2 of 5 ::: Downloaded on - 09/06/2013 18:43:10 ::: 3 ARBAP.237.2008 the Defendant are voidable and that the Plaintiff has avoided the same;
(b) that this Hon'ble Court be pleased or Order and Declare that the Defendants are jointly and severally liable to pay the Plaintiff damages in a sum of Rs.803.83 lakhs with interest as more particularly stated in the Particulars of Claim (Exhibit "GG" hereto);
(c) that this Hon'ble Court be pleased to order and Direct the Defendants (jointly and severally) to repay the Plaintiff a sum of Rs.803.83 lakhs with interest @ 18% p.a., as more particularly stated in the Particulars of claim (Exhibit "GG" hereto).
Specific averments have been made in the suit on the basis of which the respondent (the plaintiff to the suit) has set up a case of fraud and collusion as against the applicant to these proceedings, who is the third defendant to the suit. The other defendants to the suit are M.K.Singh (the first defendant) and the holding Company of the applicant, which is a corporate body registered under the laws of Hongkong.
4. Section 8(1) of the Arbitration and Conciliation Act, 1996 stipulates that a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than before submitting his first statement on the substance of the dispute, refer the parties to the arbitration. The applicant has filed a written statement in the suit instituted by the respondent in this Court. No application was admittedly filed under Section 8(1) of the Act before submitting the first statement on the substance of the dispute before this Court. The claim on the basis of which the arbitration application under section 11 has been filed, is founded on the agreement between the parties dated 23 January 2008.
3 of 5 ::: Downloaded on - 09/06/2013 18:43:10 ::: 4 ARBAP.237.2008 That is the very agreement which forms the subject matter of the suit instituted by the respondent and which is sought to be avoided on the ground of fraud and collusion. As a result of the failure of the applicant to file an application under Section 8(1), the suit cannot be referred to arbitration. Allowing the application under Section 11 will result in a parallel proceeding in which the claim is based on the same agreement which the respondent claims to be vitiated on account of fraud and collusion. That would be impermissible.
5. Apart from what is stated above, having regard to the law laid down by the Supreme Court in N.Radhakrishnan Vs. Maestro Engineers (supra), the allegations of fraud have to be tried before an ordinary civil court. Moreover, the applicant having failed to move an application under section 8(1) before it filed its first statement on the substance of the dispute and having now filed a written statement in the suit, it is evident that the suit would have to proceed to trial. In that view of the matter, there would be no occasion to have proceedings before the Arbitral Tribunal based on an agreement, the legitimacy of which forms the subject matter of the suit which has been instituted by the respondent.
6. For these reasons, I am of the view that the arbitration application would not be maintainable and would accordingly have to be dismissed. The arbitration application shall accordingly stand dismissed. There shall be no order as to costs.
(DR.D.Y.CHANDRACHUD, J.) M.S.Thatte 4 of 5 ::: Downloaded on - 09/06/2013 18:43:10 ::: 5 ARBAP.237.2008 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIIVIL JURISDICTION ARBITRATION APPLICATION NO.238 OF 2008 Archetype India Construction Consultants Private Limited Applicant versus The Bombay Dyeing and Mfg. Co. Limited Respondent Mr.Hemant Prabhulkar i/by Juris Consultus for applicant. Mr.Zal Andhyarujina i/by M/s.Crawford Bayley & Co. for respondent.
CORAM : DR.D.Y.CHANDRACHUD, J.
DATE : 29 June 2012 PC :
1. Learned counsel for the applicant and the respondent state that the facts of the present case are similar to those of Arbitration Application No.237 of 2008 (save and except the fact that the Contract is dated 1 December 2006).
2. In the circumstances and since no other point has been raised separately in the present proceedings by either side, the Arbitration application would stand dismissed for the reasons stated by the Court in the companion Arbitration Application No.237 of 2008.
(DR.D.Y.CHANDRACHUD, J.) M.S.Thatte 5 of 5 ::: Downloaded on - 09/06/2013 18:43:10 :::