Kerala High Court
6 vs Ramesh Chander And
Author: P.N.Ravindran
Bench: P.N.Ravindran
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN
WEDNESDAY, THE 1ST DAY OF JANUARY 2014/11TH POUSHA, 1935
AR.No. 48 of 2013 ()
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APPLICANT:
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M/S.ROHINI GLOBAL MERCHANDISE PVT. LTD.
REP. BY G.SOMAN, MANAGING DIRECTOR
ROHINI NAGAR COLLEGE JUNCTION, PULAMAN, KOTTARAKKARA
KOLLAM DIST
BY ADVS.SRI.N.DHARMADAN (SR.)
SMT.D.P.RENU
OPPOSITE PARTY
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M/S.SANDS INFRATECH DEVELOPERS INDIA PVT.LTD.
DIVISION OF S & S GROUP, NO.2 & 5
SANDS PLAZA, VIGNAN NAGAR MAIN ROAD
BANGALORE-560 037 REPRESENTED BY ITS MANAGING DIRECTOR
V.SUNIL KUMAR.
R1 BY ADV. SRI.R.RAJEEV (MELEVILA)
R1 BY ADV. SRI.K.BABU RAJAN
R1 BY ADV. SRI.T.A.SREE KUMAR
R1 BY ADV. SRI.K.JALADHARAN
THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON
01.01.2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:
RKC
A.R.NO.48/2013
APPENDIX
APPLICANT'S ANNEXURES:
I TRUE COPY OF AGREEMENT DT.29.7.2009 EXECUTED BY APPLICANT
AND OPPOSITE PARTY
II TRUE COPY OF AGREEMENT DT.3.3.2012 EXECUTED BY APPLICANT
AND OPPOSITE PARTY
III TRUE COPY OF AGREEMENT DT.23.8.2012 EXECUTED BY APPLICANT
AND OPPOSITE PARTY
IV TRUE COPY OF NOTICE DT.20.7.13 BY OPPOSITE PARTY
V TRUE COPY OF THE REPLY DT.NIL BY OPPOSITE PARTY'S LAWYER
VI TRUE COPY OF NOTICE DT.5.8.2013 BY APPPLICANT
VII TRUE COPY OF LETTER DT.15.8.13 BY APPLICANT
OPPOSITE PARTY'S ANNEXURES:
R1 TRUE COPY OF THE BROCHURE WITH PHOTO
R2 TRUE COPY OF THE PROHIBITION ORDER DATED 26.3.13 ISSUED BY
VILLAGE OFFICER, EDAMULACKAL
R3 TRUE COPY OF THE REPLY NOTICE DATED 26.8.2013 SENT BY THE
OPPOSITE PARTY
R4 TRUE COPY OF STATEMENT OF ACCOUNTS OF BOTH BUILDINGS.
RKC
TRUE COPY
PAT JUDGE
"CR"
P.N.RAVINDRAN, J.
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Arbitration Request No.48 of 2013
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Dated this the 1st day of January, 2014
ORDER
The prayer in this arbitration request filed under sections 11 (5) and 11(8) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act" for short) is for the appointment of a sole Arbitrator to adjudicate the disputes and differences between the applicant and the opposite party, arising out of Annexure-I agreement. The brief facts of the case are as follows:-
2. The applicant entered into the original of Annexure-I agreement dated 29.7.2009 with the respondent for the construction of two separate multi storied hotel buildings at Anchal and Kunnikode in the State of Kerala. The time for completion of the construction was fixed as 12 months from 29.7.2009. The work was however not completed within the stipulated period of 12 months.
Annexure-II supplementary agreement dated 3.3.2012, followed by Annexure-III supplementary agreement dated 23.8.2012 were executed, extending the time for completion till 10.12.2012. The work was however not completed. The applicant thereupon caused Annexure-IV notice dated 20.7.2013 to be issued to the Managing Director of the respondent calling upon him to complete the A.R.No.48 of 2013 ..2..
construction and furnishing of the hotel project at Kunnikode within 30 days and the hotel project at Anchal within 60 days of receipt of the notice, failing which he was cautioned that appropriate legal proceedings will be initiated. Upon receipt of Annexure-IV notice, the respondent caused Annexure-V notice dated nil to be issued denying and disputing the allegations in Annexure-IV notice and informing the applicant that subject to the conditions and stipulations therein, they are willing to complete the projects within six months. The applicant thereupon sent Annexure-VI notice dated 5.8.2013 wherein the petitioner requested the respondent to co- operate with it for nominating a qualified sole Arbitrator to decide the disputes between the parties. Later, the applicant issued Annexure-VII supplementary letter dated 15.8.2013 wherein it was also mentioned that the applicant will be filing an application in this Court seeking the nomination of a retired judge as sole Arbitrator to decide the disputes between the parties. The instant arbitration request was thereafter filed on 11.9.2013 seeking the following reliefs:-
"(a) to appoint sole Arbitrator to adjudicate the disputes and differences between the applicant and opposite party, 1st party and 2nd party in the agreement Annexure-I raising about non settlement of the disputes and the claims set out in the suit notice and pre-arbitration notice in accordance with sec.11(5), (6) & (8) of the Arbitration and Conciliation Act, 1996.A.R.No.48 of 2013
..3..
(b) grant costs of this application to be paid by the opposite party to the applicant."
It is contended that as the opposite party did not co-operate for an amicable settlement of the dispute even after receipt of notices and the opposite party did not send a reply indicating whether they are willing for a settlement of the disputes through an Arbitrator, it has become necessary to seek the appointment of an Arbitrator by recourse to the provisions contained in section 11 of the Act.
3. The opposite party has entered appearance and filed a counter affidavit dated 25.10.2013. In paragraph 14 thereof the opposite party has raised a contention that there is no valid agreement between the parties to refer the dispute to arbitration. After extracting the arbitration clause contained in Annexure-I agreement dated 29.7.2009 it is contended that there is no agreement to refer the dispute between the parties to arbitration, that the word 'OR' used in clause 16 of Annexure-I agreement indicates that reference to arbitration is only optional and therefore, the request for the appointment of an Arbitrator is not maintainable. The applicant has filed a reply affidavit dated 2.11.2013 and the opposite party has filed an additional counter affidavit dated 19.11.2013 raising various other contentions.
4. I heard Sri.N.Dharmadan, learned Senior Advocate appearing for the petitioner and Sri.K.Babu Rajan, learned counsel A.R.No.48 of 2013 ..4..
appearing for the respondent. Sri.N.Dharmadan, learned Senior Advocate appearing for the applicant contended referring to clause 16 of Annexure-1 agreement that disputes have arisen between the parties regarding the performance of Annexure-1 agreement, that notwithstanding repeated requests, the opposite party has not agreed for the appointment of a sole arbitrator in terms of the arbitration clause contained in the agreement entered into between the parties and therefore it has become necessary for the applicant to move this Court seeking the appointment of an Arbitrator. The learned Senior Counsel contended that as disputes have arisen between the parties and the agreement between the parties contains an arbitration clause, the applicant is entitled to have a qualified sole arbitrator appointed to resolve the disputes between the parties. The learned counsel also invited my attention to a few passages from Russel on Arbitration and contended that there is mutuality in the arbitration clause contained in the agreement between the parties and therefore the stand taken by the opposite party in its counter affidavit that there is no arbitration agreement between the parties is without any merit.
5. Per contra Sri.K.Babu Rajan, learned counsel appearing for the opposite party contended referring to the terms and stipulations in clause 16 of Annexure-1 agreement that the stipulations therein A.R.No.48 of 2013 ..5..
do not disclose an obligation to refer disputes to arbitration, but only a possibility of the parties agreeing to arbitration in future, that the main attribute of an arbitration agreement namely consensus ad idem to refer the disputes to arbitration is missing in clause 16 and therefore it is not an arbitration agreement as defined in section 7 of the Act. The learned counsel contended referring to the first part of clause 16 of the agreement that it only contemplates that the parties can if they so desire refer the disputes to the arbitration and does not mandate that the dispute between the parties can be resolved only by arbitration and therefore as the clause in the contract requires the parties to arrive at further agreement to go for arbitration as and when disputes arise, clause 16 cannot be said to be an arbitration agreement binding on the parties.
6. I have considered the submissions made at the Bar by learned counsel appearing on either side. I have also gone through the pleadings and the materials on record. There is no dispute about the fact that disputes and differences have arisen between the parties. There is also no dispute about the genuineness and authenticity of Annexure-1 agreement. Clause-16 of Annexure-1 agreement which contains the arbitration clause relied on by the learned counsel appearing for the applicant reads as follows:
In the event of breach of the terms of this agreement by any of the first party or the second party, the one who A.R.No.48 of 2013 ..6..
breaches is liable for all losses and all the aggrieved parties shall be entitled to specific performance and also be entitled to recover all losses and expenses incurred as a consequence of such breach from the party committing the breach. [OR] The same shall be referred to a sole arbitrator qualified in the same field to be chosen by both the parties and the sole arbitrator's award shall be final and binding on both the parties. The place of arbitration shall be at Kerala alone.
7. The first limb of clause 16 does not constitute an arbitration clause. It only recognizes a right in the aggrieved party to seek specific performance against the party in breach and to recover the loss and expenses incurred by it as a consequence of the breach, from the party committing the breach. The second limb of clause 16 stipulates that alternatively the same shall be referred to a sole arbitrator qualified in the same field to be chosen by both the parties. It is also stipulated that the sole arbitrator's award shall be final and binding on both the parties. Read as a whole, clause 16 would indicate that reference of the disputes between the parties to the agreement to arbitration is not obligatory but optional. The Apex Court has in Jagdish Chander Vs. Ramesh Chander and Others [2007 (5) SCC 719] held that a clause in a contract can be considered as an arbitration agreement only if, an agreement to refer disputes or differences to arbitration is expressly or impliedly spelt out from the clause. The Apex Court also held that while there is no specific form for an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration A.R.No.48 of 2013 ..7..
and not merely contemplate the possibility of going for arbitration. It was held that when there is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration, there is no valid and binding arbitration agreement. The Apex Court also held that use of words such as, "parties can if they so desire, refer their disputes to arbitration," or "in the event of any dispute, the parties may also agree to refer the same to arbitration," or "any dispute between the parties if they so agree shall be referred to arbitration," do not constitute an arbitration agreement, but merely indicate a desire or hope to have the disputes settled by arbitration, or a tentative agreement to explore arbitration as a mode of settlement, if and when a dispute arises. It was held that any agreement in a clause or a clause in an agreement requiring or contemplating a further consent or consensus before reference to arbitration, is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future.
8. Paragraph 16 of the arbitration agreement which was the subject matter of the decision in Jagdish Chander Vs. Ramesh Chander and Others [2007 (5) SCC 719] is extracted below:
"(16) If during the continuance of the partnership or at any time afterwards any dispute touching the partnership arises between the partners, the same shall be mutually decided by the partners or shall be referred for arbitration if A.R.No.48 of 2013 ..8..
the parties so determine."
9. The Apex Court accepted contention that clause 16 is not an arbitration agreement and held that the main attribute of an arbitration agreement namely consensus ad idem to refer the disputes to arbitration is missing in clause 16 and therefore, it is not an arbitration agreement. In Wellington Associates Ltd. V. Kirit Mehta [AIR 2000 SC 1379] the Apex Court held that subsection (1) of section 7 of the Act postulates an agreement which necessarily or mandatorily requires the appointment of an Arbitrator/Arbitrators and that section 7 of the act does not cover a case where the parties agree that they may go to a suit or that they may also go to arbitration.
10. In the instant case, it is evident from a reading of clause 16 of Annexure-1 agreement that it is not obligatory for the parties to seek a resolution of their disputes by recourse to arbitration. It only gives an option to the parties to refer their disputes to a sole arbitrator if they agree later. Applying the tests laid down by the Apex Court in Wellington Associates Ltd. V. Kirit Mehta [AIR 2000 SC 1379] and Jagdish Chander Vs. Ramesh Chander and Others [2007 (5) SCC 719] I am persuaded to take the view that the main attribute of an arbitration agreement namely consensus ad idem to refer disputes to arbitration is missing in clause 16 of A.R.No.48 of 2013 ..9..
Annexure-1 agreement. As noticed by the Apex Court in Jagdish Chander Vs. Ramesh Chander and Others [2007 (5) SCC 719] clause 16 does not make it obligatory for both the parties to have the disputes and differences resolved by recourse only to arbitration. It only contemplates the possibility of the parties going for arbitration. Clause 16 of Annexure -1 agreement requires the parties to arrive at a further agreement to go for arbitration. The request made by the applicant to the appointment of an arbitrator cannot therefore be entertained.
I accordingly hold that the relief prayed for in the instant application cannot be granted. The arbitration request fails and is accordingly dismissed but without prejudice to the right of the applicant to institute other appropriate proceedings seeking redressal of its grievances. I make it clear that, I have not expressed any opinion on the merits of the rival contentions and the question whether it was the applicant or the respondent who had committed breach of contract, is kept open.
Sd/-
P.N.RAVINDRAN, JUDGE.
rkc.