Karnataka High Court
M/S Gimplex Limited vs M/S Arunodaya Minerals on 22 April, 2013
Author: A.S.Bopanna
Bench: A S Bopanna
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 22ND DAY OF APRIL, 2013
BEFORE
THE HON'BLE MR. JUSTICE A S BOPANNA
CIVIL MISCELLANEOUS PETITION NO.144/2011
Between:
1. M/s. Gimpex Limited
A company incorporated under
0the provisions of the
Companies Act, 1956
2. M/s. Gimpex Metal Limited
A company incorporated under
the provisions of the
Companies Act, 1956
Both the petitioner Nos.1 and 2
Having their registered offices at
No.282, Linghi Chetty Street
Chennai - 600 001
and rep. by their
Authorized representative
Mr. T.S. Ramaswamy ...Petitioners
(By Smt. Nalini Chidamabaram, Sr.Counsel for
Sri Sajan Poovayya, Adv. for
M/s. Poovayya & Company)
And:
1. M/s. Arunodaya Minerals
A registered partnership firm
Having its registered offices at
No.289, III Ward, Hospet Post
Bellary District
Rep. herein by its Partners
The respondent Nos.2 to 4
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2. Sri M Venu
Aged Major
Partner, Arunodaya Minerals
3/289, Tirumalangar
Hospet - 583 201
3. Sri Vikram Nikkam
Aged Major
Partner, Arunodaya Minerals
Nikkam Complex
Sandur- 583 119
4. Mrs. M Rukminidevi
Aged Major
Partner, Arunodaya Minerals
Behind Mubarak Theatre
Agadi Mareppa Compound
Bellary
5. Mr. Veerendra
Aged Major
Partner, Arunodaya Minerals
11/B, K.H.B. Colony,
Cantonment
Bellary -583 104 ...Respondents
(By Sri K Shashikiran Shetty, Adv. for
M/s. Shetty & Hegde Associates for R3 & R4
R1 & R2 - Served
Petition against R5 dismissed as abated
v/o dt.11.07.2012)
This Civil Miscellaneous Petition is filed under Section
11 (5) of Arbitration and Conciliation Act, 1996, with a
prayer to appoint a sole arbitrator for adjudication of
disputes that have arisen between the petitioners in
agreement dated 08.04.2004 as enumerated in Annexure C,
D and E and the respondents.
This Civil Misc. Petition having been reserved for
orders, is coming on for pronouncement this day, the Court
pronounced the following:
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ORDER
The petitioners are before this Court seeking that a sole arbitrator be appointed for adjudicating the disputes that has arisen between the petitioners and the respondents.
2. The brief facts are that the petitioner No.1 is a private limited company and is engaged in the business of mining, processing of minerals and ores, export- import of raw and processed mineral. The petitioner No.2 is also a private limited company and is engaged in the business of Iron ore procurement, processing and export. The respondent No.1 which is a registered partnership firm of which the respondents No.2 to 5 are the partners is also involved in the business of mining. The respondent No.1 has applied for mining lease under the Mines and Minerals (Development and Regulations) Act ('MMDR' Act for short). In relation to the said mining activities of the petitioners and the respondents, they entered into a Memorandum Of Understanding (MOU) dated 08.04.2004. Simultaneously a contract for 4 sale of ore/mineral was also entered. In addition, a contract for extraction of ore of even date was executed. The petitioner No.1 is said to have paid a sum of Rs.1,50,00,000/- (One crore and fifty lakhs) as advance for purchase of 60% of mineral produced every year. The said payments were made through demand drafts, the payment of which is stated to have been acknowledged under clause 4(b)(i) of the MOU. Certain other dispute with regard to the overlap of the area by the lease being granted in favour of another mining company has also been referred to, which resulted in the terms of the instant agreement not being performed.
3. The first respondent referring to that aspect of the matter is stated to have issued a notice dated 13.07.2007 seeking to terminate the agreement and forfeit the amount which had been received by stating that they had incurred loss in that regard. The petitioners have also referred to the application in A.A.No.9/2008 filed under Section 9 of the Arbitration and Conciliation Act seeking for interim measure which 5 is pending consideration. The petitioners in that context have invoked the arbitration clause by issuing the notice dated 16.01.2009 suggesting a panel from whom one arbitrator could be appointed. The respondents by their reply dated 04.02.2009 had not consented to the same, but had raised other contentions. The petitioners are therefore before this Court in this petition.
4. The respondents have filed their objection statement. They have opposed the appointment of arbitrator by contending that the agreements dated 08.04.2004 entered into between the parties is illegal in view of Rule 37 of the Mineral Concession Rules, 1960 ('MC Rules' for short) and as such it is contended that the arbitration clause therein cannot be invoked since such clause in an illegal and void agreement would not be available.
5. The respondents have also contended that in view of the report of the Central Empowered Committee and the report of the Hon'ble Lokayukta, such transfer 6 of lease and raising contracts are held to be contrary to law. In that regard, it is contended that the agreements itself would disclose that in clauses 7, 8 and 9 of Annexure-C and clauses 5, 6, 7 and 8 of Annexure-B, the agreement is in the nature of transfer of lease and the work is being entrusted to raising contractor which is contrary to the MC Rules and the amount agreed to be paid to the mining transporter is also invalid. In that view, when the parties have entered into an illegal contract, the terms of the same also cannot be enforced. Hence, the appointment of arbitrator in respect of the disputes stated to have arisen under the same would not arise. In addition, the respondents have also referred to the nature of the claim made by the petitioners in order to dispute the same. Hence it is contended that the petition is liable to be dismissed.
6. I have heard Smt.Nalini Chidambaram, learned senior counsel for Poovaiah and Company on behalf of petitioners and Sri K.Shashikiran Shetty, learned 7 counsel for M/s Shetty and Hegde Assts on behalf of the respondents and perused the petition papers.
7. From the very nature of the contentions put forth on behalf of the respondents, the fact of the respondents having entered into the contract dated 08.04.2004 with the petitioners cannot be in dispute. Further , the petitioners relying upon the agreement at clause-4(b) (i) have referred to the payment made to the respondents amounting to a sum of Rs.1,50,00,000/-. The respondents by their notice dated 13.07.2007 (Annexure-F) have cancelled the agreement dated 08.04.2004 entered into between the petitioners and the respondents and have intimated the petitioners that the amount of Rs.1,50,00,000/- stands forfeited and a further sum of Rs.1,00,00,000/- has been demanded. In that circumstance, when the petitioners are seeking refund of the amount received by the respondents and the respondents are seeking to appropriate the same as being forfeited, certainly there is a dispute relating to the contract between the parties. Under the contract, 8 the parties have agreed vide clause-18 that in the event of any dispute relating to the contract, each of the parties are entitled to nominate one arbitrator who in turn would appoint the third arbitrator. Hence, the resolution of the dispute would have to be by arbitration.
8. The question for consideration however is as to whether the contention of the respondents that the appointment of the arbitrator cannot be resorted to in view of the agreement itself being illegal and void could be accepted. While adverting to the said contention, it would also have to be borne in mind that the instant petition is under Section 11(5) of the Act and the contention would have to be noticed only to that limited extent. The learned counsel for the respondents has relied on the decision in the case of S.B.P. & Company vs. Patel Engineering Ltd and another (AIR 2006 SC
450) to contend that the Chief Justice or the designated Judge will have to decide the preliminary aspects relating to the existence of valid arbitration agreement 9 before an arbitrator is appointed. The decisions in the case of Lachhoomal vs. Radheshyam (AWR(SC) 325) and in the case of Waverly Jute Mills Co. Ltd vs. Raymon and Co. (India) Pvt. Ltd (AIR 1963 SC 90) are also relied on to contend that a void agreement cannot be enforced and validity of the contract could be the subject matter of an agreement of arbitration in the same manner as a dispute relating to a claim made under the contract.
9. The learned senior counsel representing the respondents has on the other hand relied on the decision of a learned Single Judge of this Court in the case of M/s Compact Grihanirman vs. M/s. Kusum Alloys Ltd., (ILR 2007 Kar 3794) wherein it is held that even if the contract is null and void, arbitration clause in an agreement is treated independent of the terms of the contract and the dispute arising under such contract is referable to arbitration. The said decision is rendered after considering the decision of the Hon'ble Supreme Court in the case of SBP & Company 10 relied on by the learned counsel for the respondent. Learned senior counsel has also referred to a decision of the Hon'ble Division bench of this court in the case of M/s Lexicon Finance Ltd vs. Union of India Rep by its Principal Secretary & ors (ILR 2002 Kar 2050) wherein it is held that even if the contract is held to be null and void, it shall not invalidate the arbitration clause as it exists independently of the contract and it could be in force. The said decision is rendered after referring to the decision of Hon'ble Supreme Court in the case of Waverly Jute Mills relied on by the learned counsel for the respondent. Hence the applicability or otherwise of the said two decisions cited by the learned counsel for the respondent need not be discussed herein. The decision in the case of Lacchoomal relied on by the learned counsel for the respondents would not be of assistance inasmuch as the same is not rendered in the context of considering the validity of an arbitration clause but, is in the context of enforceability of an illegal and void contract which is not the scope of this proceeding.
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10. In addition to the above decisions, the learned senior counsel has also relied on the decisions in the case of News Today (P) Ltd, T.V.Division vs. S.Hariprasad and others [2009(4) ALT 657] and in the case of M/s Krebs Biochemicals and Industries Ltd. Vs. Nannapaneni Venkat Rao Co-operative Sugars Ltd & Ors (AIR 2009 AP 216) wherein the learned judges of the Andhra Pradesh High Court have also taken the view that the validity or otherwise of the contract is to be decided by the arbitrator and the contention in that regard would not take away the jurisdiction of the Court to appoint the arbitrator. The said decisions are also rendered after referring to the decisions of the Hon'ble Supreme Court relied on by the learned counsel for the respondent.
11. Hence, on a cumulative consideration of the legal position keeping in view the scope of Section 11 of the Act and the decision relied on by the learned senior counsel for the petitioner, there can be no doubt that 12 the mere contention of the respondents that the agreement entered into between the parties is null and void will not take away the jurisdiction of the Hon'ble Chief Justice or his designate to entertain the petition and consider the appointment of an arbitrator. The enforceability or otherwise of the agreement and/or the grant or refusal of the relief thereto are all issues which would be considered by the learned Arbitrator to be appointed by this Court. Hence, the contentions with regard to the validity of the agreement are left open.
12. In the result, the following ORDER
(i) The petition is allowed with no order as to costs.
(ii) Sri Justice Ajit J Gunjal, Former Judge of this Court, residing at No.95, 'Lakshmikunj', 7th Main, MCR Layout, Vijayanagar, Bangalore 560 040 is appointed as the sole arbitrator to resolve the dispute between the parties. 13
(iii) The petitioners may file the claim petition with the learned arbitrator who shall enter upon reference, issue notice to the respondents, settle the terms of arbitration and proceed with the same in accordance with law.
(iv) Registry to return the papers, if any sought for by the learned counsel for the parties.
Sd/-
JUDGE akc/bms