Karnataka High Court
Mr Shreans Daga vs I B M India Private Limited on 15 October, 2020
Author: S R.Krishna Kumar
Bench: S.R.Krishna Kumar
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IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 15TH DAY OF OCTOBER, 2020
BEFORE
THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR
CIVIL MISCELLANEOUS PETITION NO.184 OF 2019
BETWEEN:
1. MR. SHREANS DAGA
S/O LATE PRAMOD DAGA
AGED 44 YEARS
DAGA HOUSE, KOHTI BAZAR, BETUL
MADHYA PRADESH 460 001
PRESENTLY R/A. D7, 17TH FLOOR, MITTAL
GRANDEUR, KHATAU ROAD, CUFFE
PARADE,MUMBAI - 400 005.
2. MR. NIRJA DAGA
S/O VINOD KUMAR HARACHAND DAGA
AGED 42 YEARS
DAGA HOUSE,KOTHI BAZAR, BETUL
MADHYA PRADESH - 460 001
PRESENTLY R/A. CLUSTER 22, VILLA 15
393 (W-SUBMETER) JUMEIRAH ISLANDS
AL TANYAH FIFTH, P.O. BOX - 28429
DUBAI - UAE.
3. MR. KAUSHIK DAGA
S/O PARSHVA KUMAR DAGA
AGED 36 YEARS
DAGA HOSUE, KOTHI BAZAR, BETUL
MADHAY PRADESH - 460 001
PRESENTLY R/A. FLAT NO. 4301, 43RD FLOOR,
SOUTHTOWER IMPERIAL TOWERS
M.P. MILLS COMPUND NEXT TO MAHENDRA HEIGHTS
TARDEO, MUMBAI - 400 034.
4. MR. VARUN DAGA
S/O LATE PRAMOD DAGA
AGED 33 YEARS
DAGA HOUSE, KOTHI BAZAR, BETUL
MADHYA PRADESH - 460 001
PRESENTLY R/A.C-207/208
2
ASHOK TOWERS CHSL, DR.S.S.RAO
ROAD, PAREL, MUMBAI - 400 012.
5. MRS.RASHI DAGA
D/ O HASTI MAL JAIN
AGED 38 YEARS
PRESENTLY R/A.C-207/208
ASHOK TOWERS CHSL, DR.S.S.RAO
ROAD, PAREL, MUMBAI - 400 012.
PETITIONERS ARE REPERSENTED BY THEIR
POWER OF ATTORNEY HOLDER
MR. ABHINAYA KULKARNI
S/O PRAKASH G. KULKARNI
AGED 31 YEARS
R/AT 403, ADONIS, ADONIS AGUSTUSCHS LTD.,
DEONARPADA ROAD, NEAR TELECOM FACTORY
DEONAR, MUMBAI - 400 088.
...PETITIONERS
(BY SRI. MANMOHAN.P.N ., ADVOCATE)
AND:
I.B.M. INDIA PRIVATE LIMITED
A COMPANY INCORPORATED UNDER THE
PROCISION OF COMPANIES ACT - 1956
HAVING ITS REGISTERED OFFICE AT NO. 12
SUBRAMANYA ARCADE,
BANNERGHATTA MAIN ROAD
BENGALURU - 560 029.
AND
OFFICE AT LEVEL 3, BLOCK A, EMBASSY
GOLD LINKS BUISNESS PARK,
BENGALURU - 560 071.
...RESPONDENT
(BY SRI.LOMESH KIRAN, ADVOCATE)
THIS C.M.P. IS FILED UNDER SECTION 11(6) OF THE
ARBITRATION AND CONCILIATION ACT 1996, PRAYING TO
ALLOW THIS PETITION AND APPOINT AN ARBITRATOR FOR AN
ON BEHALF OF THE RESPONDENT AS PER CLAUSE 13.08 OF
THE SHARE PURCHASE AGREEMENT DATED: 26.10.2016
( PRODUCED AS ANNEXURE-A) AND PASS SUCH OTHER
ORDERS AS DEEMED FIT INT HE FACTS AND CIRCUMSTANCES
OF THE CASE, IN THEINTEREST OF JUSTICE AND EQUITY.
THIS C.M.P. COMING ON FOR ADMISSION THIS DAY, THE
COURT MADE THE FOLLOWING:-
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ORDER
In this petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act' for short), petitioners seek appointment/constitution of an arbitral tribunal in terms of Clause 13.08 of the Share Purchase Agreement dated 26.10.2016 (Annexure-A) executed between the petitioners and the respondent.
2. I have heard learned counsel for the petitioners and learned counsel for the respondent and perused the material on record.
3. Learned counsel for the petitioners, in addition to reiterating the various contentions urged in the petition and referring to the documents produced by the petitioners invites my attention to the arbitration clause at Section 13.08 of the Share Purchase Agreement at Annexure-A dated 26.10.2016. It is submitted that in pursuance of the same, the petitioners issued an arbitration notice dated 28.08.2018 at Annexure-Q appointing its nominee arbitrator and calling upon the respondent to appoint its nominee 4 arbitrator for the purpose of referring the dispute to arbitration. However, instead of complying the same, the respondent issued an untenable reply at Annexure-R dated 14.09.2018.
4. In the first instance, petitioners approached this Court under Section 11(6) of the Act by filing CMP No.362/2018. However, since both petitioners and respondent were making efforts to amicably settle the dispute, petitioners withdrew the petition with liberty to file a fresh petition as can be seen from order dated 22.02.2019 passed by this Court in the said CMP No.362/2018. Subsequently, despite repeated efforts by the petitioners to resolve the issue amicably between the parties as can be seen from the correspondence at Annexure-T to Annexure-AB during the period April 2019 to June 2019, the parties could not arrive at a amicable settlement. It is therefore contended that the petitioners were left with no option but to approach this Court by way of the present petition.
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5. Learned counsel for the petitioners submits that in the present petition, this Court on 19.03.2020 permitted the petitioners to approach the jurisdictional Deputy Commissioner of Stamps/Competent Authority for adjudication and payment of stamp duty on the aforesaid Share Purchase Agreement dated 26.10.2016 and to obtain the requisite Certificate from the Authorities. Pursuant thereto, the petitioners approached the Authorities and paid the deficit stamp duty and penalty on the Share Purchase Agreement. Upon receipt of the deficit stamp duty and penalty, the Authorities issued the requisite Certificate dated 27.08.2020 and receipt dated 27.08.2020 which have been produced by the petitioners along with a memo dated 31.08.2020. It is submitted that the petitioners have not only complied with the aforesaid order dated 19.03.2020 passed by this Court, but also the procedure indicated by the Apex Court in the case of 'SMS Tea Estates Pvt. Ltd, vs. Chandmari Tea Company Pvt. Ltd.,', (2011) 14 SCC 66 and in the case of 'Garware Wall Ropes Ltd., vs. Coastal Marine Constructions and Engineering Ltd', (2019) 9 SCC 209. It is therefore 6 submitted that there is no impediment for this Court to act upon the arbitration clause contained in the Share Purchase Agreement at Annexure-A and appoint/constitute an arbitral tribunal in terms of Clause 13.08 of the Agreement.
6. Adverting to the contention raised by the respondent with regard to the petition being premature since the petitioners had not exhausted the pre-arbitration mediation mechanism/process stipulated in Clause 13.08 prior to initiation of arbitral proceedings, learned counsel for the petitioners submits that the undisputed correspondence between the parties as can be seen from Annexure-T to Annexure-AB during the period April 2019 to June 2019, the petitioners had made sufficient efforts to arrive at a amicable settlement by informal mediation as stipulated in Clause 13.08 of the Agreement. It was only upon failure of the informal mediation attempted between the parties as can be seen from the correspondence that the petitioners were constrained to approach this Court by way of the present petition and as such, the contention of the 7 respondent that the petitioners had not exhausted the pre- arbitration mechanism/process was misconceived and untenable. It was therefore submitted that the present petition is to be allowed and an arbitral tribunal be appointed/constituted in terms of Clause 13.08 of the Share Purchase Agreement.
7. Per contra, learned counsel for the respondent in addition to reiterating various contentions urged in the Statement of Objections and documents submits that notwithstanding the payment of deficit stamp duty and penalty by the petitioners and obtaining a Certificate from the Authorities, it was incumbent upon the petitioners to pay the stamp duty and penalty before the Share Purchase Agreement could be acted upon by this Court. Secondly, it was contended that the pre-arbitration mechanism/process contemplated in Clause 13.08 necessarily requires reference of the dispute to informal mediation by both parties and the request for arbitration could be made only after the period of sixty days after the dispute is submitted/referred to such informal mediation. In this 8 context, it is submitted that it was not in dispute that there was no reference to an informal mediation by either of the parties and in the absence of exhausting the said pre- arbitration procedure/mechanism, the present petition is pre-mature and is liable to be rejected on this ground also. Learned counsel places reliance to the following judgments in support of his contentions:
i) SMS Tea Estates Pvt. Ltd., Vs.
Chandmari Tea Company Pvt. Ltd., -
(2011) 14 SCC 66
ii) Garware Wall Ropes Ltd., Vs. Coastal
Marine Constructions & Engineering
Ltd., - (2019) 9 SCC 209
iii) Dharmaratnakara Rai Bahadur Arcot
Narainswamy Mudaliar Chattram and
Other Charities and Others Vs. Bhaskar Raju and Brothers and Others - (2020) 4 SCC 612
iv) Mahadeva Vs. The Commissioner Mysore City Corporation and Others -
ILR 2003 KAR 1653
v) Suman Vs. Vinayaka and Others - (2014)
2 AIR Kant R 761
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vi) M/s Bangalore Ice Factory Vs. Sri.B.S.
Venkatram - W.P.No.16063/2011 c/w
10397/2012 dated 24.04.2013.
vii) Government of Andhra Pradesh and Ors.
Vs. P. Laxmi Devi - (2008) 4 SCC 720
viii) Savithramma R.C. Vs. Vijaya Bank and Ors. - ILR 2015 KAR 1984
ix) K. Amarnath Vs. Puttamma - ILR 1999 KAR 4634
x) Sandra Lesley Anna Bartels Vs. P. Gunavathy - ILR 2013 KAR 368
xi) Lalithamma Alias Lalitha Bai Vs. T.R. Ramakrishna - (2016) 4 Kant LJ 438
xii) J.S. Paramesh Siddegowda Vs. Smt. Indramma V. Murthy - AIR 2008 Kar 172
xiii) Sri. H. Murigappa Vs. Sri. B. Hayavadana Hatwar and Ors. - W.P.No.46433/2013 dated 04.11.2015
xiv) Smt. Huchamma and Others Vs. Sri. Chandrashekar @ Hanumantharaju - AIR 2014 Kar 133 10
xv) Trustees of H.C. Dhanda Trust Vs. State of Madhya Pradesh and Ors. - 2020 SCC OnLine SC 753 xvi) Digambar Warty and Ors. Vs. District Registrar and Chief Controller of Revenue and Ors - ILR 2013 KAR 2099 xvii) Iron & Steel Co.Ltd., Vs. Tiwari Road Lines - (2007) 5 SCC 703 xviii) Simpark Infrastructure Pvt. Ltd., Vs. Jaipur Municipal Corporation - 2013(3) RLW 2133 (Raj.) xix) Sushil Kumar Bhardwaj Vs. Union of India - Delhi High Court - A.A. No.389/2006 dated 17.03.2009
8. I have given my anxious consideration to the rival submissions and perused the material on record.
9. The material on record clearly indicates that the existence of the arbitration clause at Clause 13.08 of the Share Purchase Agreement executed between the petitioners and respondent is not in dispute. It is also not in dispute that prior to filing of the petition, petitioners had issued the arbitration notice at Annexure-Q dated 11 28.08.2018 invoking Clause 13.08 and appointing its nominee arbitrator and that the respondent having issued a reply at Annexure-R dated 14.09.2018 repudiating the claim of the petitioners, the petitioners filed the present petition.
10. There is no gain saying that subsequent to the amendment to the Act by Amending Act 3/2016 w.e.f 23.10.2015 whereby Section 11(6-A) was inserted, the scope of adjudication by this Court in the present petition under Section 11(6) of the Act is confined, restricted and limited to examination of the existence of an arbitration agreement and all other issues are to be left open to be decided by the arbitral tribunal. This position has been elaborated and reiterated by the Apex Court in the case of Mayavathi Trading Pvt. Ltd., vs. Pradyuat Deb Burman - (2019) 8 SCC 714.
11. It is also relevant to state that the Apex Court in the cases of SMS Tea Estates Pvt. Ltd., and Garware Wall Ropes Ltd., supra has held that before acting upon an arbitration clause in an agreement, it is necessary that 12 this Court comes to the conclusion that the agreement is sufficiently stamped. In this context, it is relevant to state that by its order dated 19.03.2020, this Court permitted the petitioners to pay the deficit stamp duty and penalty to the Authorities and obtain the requisite receipt and certificate in this regard evidencing payment by the petitioners. It is not in dispute that pursuant thereto, petitioners paid the deficit stamp duty and penalty and has produced the requisite receipt and certificate issued by the Authorities. The aforesaid order dated 19.03.2020 passed by this Court has attained finality and become conclusive and binding upon the parties including the respondent. It follows therefrom that the said order dated 19.03.2020, payment of deficit stamp duty and penalty by the petitioners and issuance of certificate and receipt by the Authorities evidencing such payment is sufficient compliance of the procedure indicated by the Apex Court in SMS Tea Estates Pvt. Ltd., and Garware Wall Ropes Ltd., cases supra.
12. Having not challenged the order dated 19.03.2020 passed by this Court, the respondent is 13 estopped from contending that the deficit stamp duty and penalty paid by the petitioners and the receipt and certificate issued by the Authorities are not sufficient for this Court to act upon the arbitration clause contained in the Share Purchase Agreement at Annexure-A. Under these circumstances, I am of the considered opinion that the said contention urged on behalf of the respondent deserves to be rejected.
13. It is needless to state that the petitioners are at liberty to take steps to recover the stamp duty paid by him from the respondent in accordance with the provisions of the Stamp Act. So also all the contentions of the respondent in this regard are also kept open.
14. Insofar as the contention urged by the respondent with regard to the petition being premature since the dispute was not referred to informal mediation by the parties prior to filing of the present petition is concerned, as rightly contended by the learned counsel for the petitioners, the aforesaid correspondence at Annexure-T to Annexure-AB during the period April 2019 to 14 June 2019 clearly indicates that all efforts by both parties to arrive at an amicable settlement did not yield the desired results and consequently, directing the petitioners to once again get the dispute referred to informal mediation before approaching this Court would be an exercise in futility. At any rate the said contention of the respondent regarding referring the dispute to informal mediation is obviously for the purpose of enabling the parties to resolve the dispute through the process of mediation itself without approaching the arbitral tribunal in the first instance itself.
15. Keeping this objective in mind, I deem it fit and proper to direct the dispute to be referred to mediation before the parties are directed to approach the arbitral tribunal. However, in order to expedite the matter, the reference to mediation and thereafter to the arbitral tribunal in case of failure of mediation is to be directed in this order itself. Accordingly, even this contention urged on behalf of the respondent with regard to the petition being premature deserves to be rejected.
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16. Insofar as the decisions cited by the learned counsel for the respondent are concerned, the said judgments are not applicable to the peculiar fact situation obtaining in the instant case, in particular the arbitration clause No.13.08 of the Share Purchase Agreement as well as the order dated 19.03.2020 passed by this Court which has attained finality and as such no reliance can be placed upon the said decisions by the learned counsel for the respondent in support of his contentions.
17. In the result, I pass the following:
ORDER
i) Petition is hereby allowed.
ii) In the first instance, the dispute between the petitioners and respondent is referred to mediation by appointing the following Mediator to resolve the dispute between the parties.
Sri.N.Prashanth Chandra, Advocate, No.1432/2, 'SLR Arcade', I Floor, Krishna Devaraya Road, Opp. to KASSIA Building, Vijayanagar, Bengaluru-40 Mobile No: 98807 37800 16
iii) The learned Mediator is directed to mediate and resolve the dispute between the parties within a period of two months from the date of the first session/sitting of mediation.
iv) The fees payable to the learned Mediator is tentatively fixed at Rs.50,000/- to be shared equally by both petitioners and respondent.
v) In the event the dispute between the parties does not get resolved by mediation as stated supra, the matter shall stand referred to the Arbitration and Conciliation Centre, Khanija Bhavan, Bengaluru to take up the matter for arbitration.
vi) Learned Mediator is directed to submit a status report to this Court.
vii) In the event of failure of mediation, the learned Mediator shall also forthwith send a copy of the report to this Court as well as to the Arbitration and Conciliation Centre, Khanija Bhavan, Bengaluru to take further steps in the matter for arbitration. 17
viii) Upon receipt of a failure report by the learned Mediator, the arbitration centre is directed to proceed with arbitration by constituting an arbitral Tribunal comprising of three members as hereunder:
a) Sri. Justice V.Jagannathan, former Judge of this Court is appointed as a nominee Arbitrator of the petitioners.
b) Sri. Justice Ashok B. Hinchigeri, former Judge of this Court is appointed as nominee Arbitrator of the respondent.
c) Both the aforesaid nominee
Arbitrators shall in turn appoint a
presiding Arbitrator and thereafter, the arbitral tribunal shall enter upon reference and proceed with the matter.
ix) All claims and contentions of any of the parties including jurisdiction, limitation, etc., are left/kept open to be decided by the Arbitral Tribunal.
x) Registry is directed to return all original documents produced by any of the parties after obtaining Photostat copies of the same. 18
xi) Registry is directed to communicate this order to the learned Mediator as well as to the Arbitration Centre forthwith.
Subject to the aforesaid directions, petition stands allowed.
Sd/-
JUDGE Mds/-