Madhya Pradesh High Court
M/S Brij Rani Hospitalities Pvt Ltd ... vs M/S Shotz Hospitalites Pvt Ltd on 30 August, 2017
1
HIGH COURT OF MADHYA PRADESH: BENCH: INDORE
(SINGLE BENCH: HON.MR.JUSTICE PRAKASH SHRIVASTAVA)
ARBITRATION CASE NO.24/2016
M/s. Brij Rani Hospitalities Pvt. Ltd
Vs.
M/s.Shotz Hospitalities Pvt. Ltd through its Director and others
For applicant: Shri Harsh Virmani, learned counsel.
For respondent
No 2,3 and 4 : Shri Pankaj Bagadia, learned counsel.
For respondent
No.5: Shri P.S.Kushwaha, learned counsel.
For respondent
No.6: Shri Sameer Athawale, learned counsel.
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ORDER
(Passed on 30th August, 2017) [1] This application u/S.11(6) of the Arbitration and Conciliation Act has been made for appointment of the independent Arbitrator for resolving the dispute between the parties. [2] The case of the applicant is that the applicant after taking loan had constructed a multi storied building at Vijay Nagar, Indore to carry out hotel business in the name and style of hotel Ambrosia. The applicant had entered into an hotel operation agreement with the respondents on 1/4/2013 for running the aforesaid hotel for 11 years under which the respondent company was required to pay a sum of Rs.4,50,000/- per month to the applicant for five years and thereafter the amount enhanced by 5% for next six years. The 2 grievance of the applicant is that the respondents had committed default in payment of the monthly amount and had severely damaged the fixtures and furniture of the hotel and according to the applicant, on 8/8/2014 the respondents No.5 and 6 on behalf of respondent No.1 company had expressed their inability to operate the hotel and handed over the vacant possession to the applicant and had unilaterally terminated the agreement dated 1/4/2013. The applicant had sent the legal notice dated 4/4/2016 invoking the arbitration clause and proposing the name of a retired Judge of the High Court as their Arbitrator, but the request of the applicant was not accepted, therefore, present application has been filed. [3] The respondent No.2 to 4 have filed their reply taking a stand that they are not a party to the agreement and that the applicant had acted in collusion with the respondent No.5. A further plea has been raised that they were mislead by respondent No.5 and thereafter respondent No.3 and 4 had retired from the Directorship of the company on 29/5/2013. The claim has also been opposed on merit and further plea has been taken that the applicant after taking back of the possession of the hotel premises from respondent No.1 on the ground of non payment of rent has again granted lease to one M/s.Vishwa Mangal Trade Mart Pvt. Ltd through the respondent No.5 by agreement dated 7/2/2015, hence a fraud has been alleged against the applicant and respondent No.5.
[4] The respondent No.5 has filed separate reply taking the stand 3 that the management of the hotel was done after the agreement on the instruction of respondent No.2 to 4 and that the respondent No.5 was only a witness in the agreement dated 1/4/2013 and was mischievously appointed as Director in the respondent No.1 company by the respondent No.2 to 4 and has been allotted 10% share in the pretext of partnership. Further plea has been raised that the agreement dated 1/4/2013 has been mutually terminated by the applicant and the respondent No.3 and 4. Thereafter the respondent No.5 was approached for fresh agreement which has been executed on 28/11/2014 and 7/2/2015.
[5] The respondent No.6 by filing a separate reply has raised an objection that he is not a party to the agreement nor he was a Director of the company at the time of execution of the agreement, therefore, against him the arbitration proceedings cannot continue. The similar plea of fraud has been raised by respondent No.6 as also against respondent No.5 as has been raised in the reply of respondent No.2 to 4 and it has been pleaded that the previous agreement was terminated between the parties mutually and amicably, therefore, no question of payment of balance rent arises. The applicant has suppressed the fact of entering into new agreement on 28/11/2014.
[6] Learned counsel for applicant submits that arbitration agreement exists between the parties and the dispute has arisen, therefore, independent arbitrator be appointed for resolving the 4 dispute.
[7] Learned counsel for respondent No.2 to 4 submits that the said respondents are not party to the agreement and that the certified copy of the agreement has not been filed and there was fraud and collusion between the applicant and respondent No.5 and subsequently the agreement dated 1/4/2013 has been cancelled and the fresh agreements dated 7/2/2015 and 28/11/2014 Annexure R/6 and R/7 have been executed which do not contain the arbitration clause, therefore, the prayer made in the present application cannot be granted.
[8] Learned counsel for respondent No.5 and 6 have submitted that they are not party to the agreement and have signed the agreement only as witnesses, therefore, arbitration proceedings cannot continue against them.
[9] Having heard the learned counsel for parties and on perusal of the record, it is noticed that the execution of the agreement dated 1/4/2013 Annexure P/2 is not in dispute. The said agreement was executed between the applicant and the respondent No.1 company through the authorized person Manish Rai (respondent No.3) and Rishi Rai (respondent No.2). The agreement contains following arbitration Clause:-
fookn ,oa fooknksa dk fuiVkjk %& 1- nksuksa i{k vkilh lgefr ls bl ckr ij lger gksrs dh ;fn bl vuqca/k ds ikyu esa ;k vuqca/k ds fu"iknu esa ;k vuqca/k ls mRiUu fdlh Hkh izdkj ds fookn dk fuiVkjk loZizFke vkilh lgefr ls gy djus dk iz;kl djsaxs ,oa fookn mRiUu gksus ds 30 fnol ds vanj ;fn fookn dk fuiVkjk vkilh lgefr ls ugha gksrk gS rks mDr 5 fookn vkfcZVª'ku ds ek/;e ls fd;k tkosxk tks fd mDr vkfcZVª'ku vkfcZVª'ku ,.M dauflfy,'ku ,DV ds varxZr lapkfyr gksxhA 2- vkfcZVª'ku VªhC;wuy esa ,d vkfcZVªVs j jgsxkA ftldh fu;qDr djus dk vf/kdkjh izFkei{k ,oa f}rh;i{k dh vkilh lgefr ls gksxkA vkfcZVª'ku VªhC;wuy dh 'kgj bUnkSj fookn dh lquokbZ djsxkA [10] The agreement has duly been signed by the respondent No.2 and 3 on behalf of respondent No.1 on each page, hence the contention of the learned counsel for respondent No.2 and 3 that they are not party to the agreement cannot be accepted. [11] So far as respondent No.5 and 6 are concerned, they have signed the agreement merely as witnesses, therefore, unless anything further is pointed out against them they cannot be held to be party to the agreement.
[12] The objection of the respondents that certified copy of the agreement dated 1/4/2013 has not been filed, cannot be sustained because the applicants have not disputed execution of the said agreement and subsequently the applicant has placed on record certified copy of the said agreement.
[13] The objection of the respondent No.2 to 4 that in the subsequent agreement dated 7/2/2015 Annexure R/6 and 28/11/2014, there is no arbitration clause, therefore, the Arbitrator cannot be appointed has no merit because the agreement Annexure R/6 and R/7 are not between the same parties, but it is between the applicant and one M/s.Vishwa Mangal Trade Mart Pvt. Ltd which was not a party to the earlier agreement, therefore, it cannot be held 6 that the earlier agreement dated 1/4/2013 has been substituted and superseded by the agreement Annexure R-6 and R-7. Though the respondent No.2 to 4 have also raised the plea that the respondent No.5 had colluded with the applicant had committed fraud, but such a plea does not relate to the fraud in the execution of the agreement, therefore, the benefit of the judgment in the matter of India Household and Healthcare Ltd Vs. LG Household and Healthcare Ltd. (2007) 5 SCC 510 cannot be granted to the respondents. The allegation is not such which required detailed investigation and production of elaborate evidence, but such an allegation can be decided by the Arbitrator.
[14] The respondents are claiming the benefit of the judgment of the supreme court in the matter of N.Radhakrishnan Vs. Maestro Engineers & Others (2010) 1 SCC 72 but in that case serious allegation of fraud and malpractices committed in account books and manipulation of finances of partnership firm were made, therefore, the Hon'ble Court took the view that the matter need not be tried by the Arbitrator, but the present case stands on different footing.
[15] In the matter of A.Ayyasamy Vs. A.Paramasivam & others (2016) 10 SCC 386, it has been made clear that mere allegation of fraud simplicitor is not a ground to nullify the effect of the arbitration agreement between the parties and arbitration clause need not be avoided and parties can be relegated to arbitration where simple 7 allegations of fraud touching upon the internal affairs of party inter se that has no implication in public domain. Hon.Justice Chandrachud in the concurring judgment has further held that the statutory scheme does not make any specific provision excluding any category of disputes terming them as non arbitrable. Hence mere allegation of fraud is not sufficient to detract the parties from the obligation to submit their disputes to Arbitration and only where court finds serious issue of fraud involving criminal wrongdoing then exception to arbitrability may come into existence, therefore, heavy burden lies on the parties to establish that the dispute is not arbitrable under law.
[16] In the matter of India Household & Healthcare Ltd Vs. LG Household & Healthcare Ltd (2007) 5 SCC 510 there was allegation that the agreement was obtained by fraud and the suit challenging existence of the agreement concerned as having been fraudulently obtained was pending, but no such condition exists in the present case.
[17] Having regard to the aforesaid, I am of the opinion that the objection raised by the respondents for rejecting the application u/S.11(6) are not sustainable.
[18] Considering the circumstances of the case, I am of the opinion that an independent Arbitrator need to be appointed for resolving the dispute between the parties to the agreement. 8 Accordingly, I propose to appoint Justice S.P. Khare (Retired High Court Judge) as independent arbitrator.
[19] Let the declaration in terms of Section 11(8) and 12(1) of the amended Arbitration Act in the prescribed form as contained in 6th Schedule of the Act be obtained from the proposed Arbitrator by the Principal Registrar of this Court before the next date of hearing. [20] List on 26th September, 2017.
(PRAKASH SHRIVASTAVA) JUDGE VM