Bombay High Court
Ramavtar Babulal Jajodia And Anr vs Hon'Ble Mr. Shyam Lalani And 5 Ors on 2 August, 2016
Author: R.D. Dhanuka
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L) NO.752 OF 2016
1. Ramavtar B. Jajodia )
Villa No.5, Gen A.K. Vaidya Marg, )
Goregaon (East), Mumbai 400 097. )
2. Mrs.Santosh Ramavtar Jajodia )
Villa No.5, Gen A.K. Vaidya Marg, )
Goregaon (East), Mumbai 400 097. ) .. Petitioners
Versus
1. Hon'ble Mr.Shyam Lilani )
Ld.Sole Arbitrator, having his address )
at 304, Mangal Bhavan,Corner of 14th )
Road, P.D. Hinduja Marg, Khar (W), )
Mumbai - 40 052. )
2. Mr.Rajeev Anand )
Flat No.86, Movie Tower, Oshiwara, )
Lokhandwala Complex, Andheri (W), )
Mumbai- 400 053. )
3. Mr.Inder Bhan Bhasin )
30-31, Merry Niketan, Mount Merry,)
Bandra (West), Mumbai - 400 050. )
4. Smt. Lavesh Inder Bhan Bhasin )
30-31, Merry Niketan, Mount Merry,)
Bandra (West), Mumbai - 400 050. )
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5. Mr.Vinay Inder Bhan Bhasin )
30-31, Merry Niketan, Mount Merry,)
Bandra (West), Mumbai - 400 050. )
6. Aaress Real Estate Private Limited)
A Company incorporated under the )
Companies Act, 1956 having its )
registered office at Aakash House, )
Santacruz Airport Side, Marble Market)
Western Express Highway,Vile Parle(E))
Mumbai - 400 099. ) .. Respondents
---
Mr.M.S.Doctor, Senior Advocate a/w Mr.Atul Singh a/w Mr.Ratnaveer
Singh i/by M/s.AVS Legal for the petitioners.
Mr.Arif Bookwala, Senior Advocate a/w Mr.Rishabh Shah a/w Ms.Shirin
Shaikh a/w Mr.Abbas Mandviwala i/by M/s.Raval Shah & Co. for the
respondent nos.2 to 5.
---
CORAM : R.D. DHANUKA, J.
RESERVED ON : 27th July 2016 PRONOUNCED ON : 2nd August 2016 Judgment :-
. By this petition filed under Section 14(2) of the Arbitration and Conciliation Act, 1996 (for short "the Arbitration Act"), the petitioners have prayed for termination of mandate of the learned sole arbitrator, the respondent no.1 herein on account of his alleged failure to act without undue delay in the arbitral proceedings commenced on 2nd July 2012 between the petitioners and the respondent nos.2 to 6. Some of the relevant facts for the purpose of deciding this petition are as under :-::: Uploaded on - 02/08/2016 ::: Downloaded on - 03/08/2016 00:41:48 :::
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2. It is the case of the petitioners that the petitioners are having approximately 12.5% shareholdings of Aakash Lavlesh Leisure Private Limited (for short "the said company"). The petitioners are co-
shareholders of the said company with the respondent nos.2 to 5. The respondent no.6 is a company incorporated under the provisions of the Companies Act, 1956 and holds 50% shares of the said company.
3. On 22nd November 2006, an agreement was executed between the petitioners and the respondent nos.2 to 6 on the terms and conditions set out in the said agreement whereby the petitioners sold and transferred 50% shareholding of the respondent no.6 to the respondent nos.2 to 5. The dispute arose between the parties with respect to the management of affairs of the said company. On 13 th June 2012, the respondent nos.2 to 5 issued a notice to the petitioners calling upon them to do various acts. On 2nd July 2012, the respondent nos.2 to 5 invoked arbitration clause contained in the agreement dated 22 nd November 2006 and appointed the respondent no.1 as a sole arbitrator to adjudicate upon the dispute between the parties. On 13 th July 2012, the learned arbitrator accepted his appointment as a sole arbitrator to adjudicate upon the dispute between the petitioners and the respondent nos.2 to 5. Learned arbitrator accordingly vide their letter dated 13 th July 2012 fixed a preliminary hearing of the arbitration on 25 th July 2012. On 19th July 2012, the petitioners replied to the letter dated 13 th June 2012 addressed by the respondent nos.2 to 5 and denied the allegations made therein. The petitioners called upon the respondent nos.2 to 5 to withdraw the said notice.
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4. On 25th July 2012, learned arbitrator held a preliminary meeting. It is the case of the petitioners that in the said meeting before the learned arbitrator, the petitioners had expressed their unwillingness to proceed with the arbitration before the learned arbitrator and prayed that the learned arbitrator shall recuse himself from adjudication of the dispute. It is the case of the petitioners that without taking a stand on the objections raised by the petitioners, the learned arbitrator did not issue any direction in the said preliminary meeting.
5. On 27th July 2012, the respondent nos.2 to 5 filed an application under Section 17 of the Arbitration Act before the learned arbitrator inter alia praying for various interim measures against the petitioners herein. On 30th July 2012, the petitioners addressed a letter to the learned arbitrator to place on record that the petitioners had serious reservations as to the impartiality of the learned arbitrator. In the said application, the petitioners alleged that the learned arbitrator was the Advocate and Solicitors of Juhu Milliennium Club (M/s.Aakash Lavlesh Leisure Private Limited) and was an interested party in the matter. It was alleged that the learned arbitrator was also Advocate and Solicitors of the petitioners herein but since last 3 to 4 years, he was not handling the personal cases of the petitioners herein and was looking after the personal cases/matters of the respondent no.2 and had very close relations with the respondent nos.2 to 5.
6. It was alleged that there was a doubt of integrity in the matter and thus the petitioners objected for appointment and proceeding before the learned arbitrator. It is further alleged in the said application that since 2006 till the filing of the application, many changes took ::: Uploaded on - 02/08/2016 ::: Downloaded on - 03/08/2016 00:41:48 ::: ppn 5 arbpl-752.16 (j).doc place including the relations between the parties and atmosphere and in view of the circumstances existed that gave rise to justifiable doubt as to the independence or impartiality of the learned arbitrator. It was alleged that on many occasions, the learned arbitrator had disclosed and confirmed that though the petitioners were closed to him, the respondents herein were more closer to him and the respondent no.2 used to meet the learned arbitrator frequently at the late evenings and he had soft corner for the respondent no.2. Learned arbitrator did not decide the said application dated 30th July 2012.
7. On 9th January 2016, a notice was issued by the petitioners calling for a Board of Directors' meeting of the said company on 15th January 2016. It is the case of the respondent nos.2 to 5 that the said notice was received by the respondent nos.2 to 5 on 9 th January 2016. On 11th January 2016, the respondent no.2 addressed a letter to the learned arbitrator for urgent relief for restraining the petitioners herein from acting upon the board resolution dated 29th May 2016 of the said company. It is the case of the respondent nos.2 to 5 that on 12 th January 2016, the respondent no.2 addressed a letter to the petitioners not to hold a meeting on 15th January 2016.
8. On 13th January 2016, the learned arbitrator addressed a letter to the petitioners and referred to a copy of the letter dated 11th January 2016 made by the respondent no.2 intimating the petitioners that the petitioner no.1 all of sudden without consent and knowledge of the Lavlesh Group had called for a board meeting on 15th January 2016 in which one of the items on the Agenda was to approve the minutes of the resolution passed on 29th May 2012 and had accordingly sought ::: Uploaded on - 02/08/2016 ::: Downloaded on - 03/08/2016 00:41:48 ::: ppn 6 arbpl-752.16 (j).doc intervention of the learned arbitrator to hear their application dated 27th July 2012 for interim reliefs. In the said letter addressed by the learned arbitrator, the learned arbitrator recorded that the petitioner no.1 and the respondent no.2 had agreed to mutually settle the dispute among themselves and had requested that in the meantime, no further date be fixed and accordingly, no further hearing had been fixed by the learned arbitrator till date.
9. The learned arbitrator directed the petitioners not to approve the board resolution dated 29th May 2012 till such time the matter was moved. Learned arbitrator, however, made it clear that in the event, the petitioners were aggrieved by the said direction restraining the petitioners, the petitioners may move the learned arbitrator after giving four working days' notice to the respondent nos.2 to 5 with a copy endorsed to the learned arbitrator. It is the case of the petitioners that a copy of the said application dated 11th January 2016 made by the respondent nos.2 to 5 was not served upon the petitioners. It is also the case of the petitioners that since the learned arbitrator had passed the said order ex parte with a direction to give four working days' notice for vacating the said ad-interim order, it has become impossible for the petitioners to move or vacate the ad-interim order prior to the date of the meeting which was scheduled to be held on 15th January 2016.
10. On 19th April 2016, the petitioners submitted their reply to the said application filed by the respondent nos.2 to 5 under Section 17 of the Arbitration Act. The petitioners also filed another application before the learned arbitrator on 21st April 2016 under Section 16 read with Section 13 of the Arbitration Act. Once again the petitioners filed ::: Uploaded on - 02/08/2016 ::: Downloaded on - 03/08/2016 00:41:48 ::: ppn 7 arbpl-752.16 (j).doc an application on 18th May 2016 before the learned arbitrator through their advocate contending that no schedule had been fixed in the subject arbitration for proceeding with the application dated 21 st April 2016 filed on behalf of the petitioners herein despite a lapse of almost a month from the date of filing of the application and requested the learned arbitrator to fix a schedule for the hearing of the said application on any day within the next 15 working days as the learned arbitrator may deem fit. The petitioners also prayed that the learned arbitrator be pleased to rule on the said application dated 21st April 2016. The copy of the said letter was addressed to the respondent nos.2 to 6.
11. On 23rd May 2016, the learned arbitrator addressed a letter to the parties and issued various directions including the direction to file statement of claim by the respondent nos.2 to 5 herein on or before 10th June 2016, reply, if any, filed by the petitioners on or before 25 th June 2016 and fixed the hearing on 5 th August 2016. In the said notice, the learned arbitrator stated that all the applications shall be heard along with the claim statement. In the said notice, the learned arbitrator once again alleged that since the parties had agreed to mutually settle the dispute amongst themselves, no further hearing had been fixed by him till date. It was further alleged that without intimating that the mediation between the parties had failed, M/s.AVS Legal, advocates representing the petitioners had referred to the application dated 21st April 2016 filed by the petitioners with a request to fix a schedule for hearing of the said application. Learned arbitrator stated that since he shall be leaving for out of Mumbai and shall be returning at the end of month of May 2016, it was difficult for him to accept the request of the petitioners to fix a date within next 15 days.
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12. On 22nd June 2016, the petitioners filed this petition under Section 14 (2) of the Arbitration Act for various reliefs.
13. Mr.Doctor, learned senior counsel appearing for the petitioners invited my attention to various correspondence exchanged between the parties and the learned arbitrator and the applications made by the parties before the learned arbitrator. He submits that there was no settlement between the parties though suggested by the learned arbitrator in the first meeting itself. He submits that the respondent nos.2 to 5 had already filed the application under Section 17 of the Arbitration Act for interim measures within two days of the meeting held by the learned arbitrator on 25th July 2012. He invited my attention to the application made by the petitioners on 30th July 2012 before the learned arbitrator placing their strong objection for proceeding with the arbitration matter filed by the respondent nos.2 to 5 on the ground that the learned arbitrator was an interested party in the matter and was representing the petitioners in the past as well as the respondent no.2 and had very a close relations with the respondents.
14. It is submitted that the petitioners had also expressed their doubt about integrity in the matter. It is submitted that till date, the learned arbitrator did not decide the said application made under Sections 12 and 13 of the Arbitration Act. It is also submitted that the learned arbitrator should not proceed with the arbitration matter in view of justifiable doubt raised by the petitioners about independence or impartiality of the learned arbitrator due to various reasons recorded in the said application. It is submitted that admittedly after holding the said preliminary meeting on 25th July 2012 in which the learned arbitrator did ::: Uploaded on - 02/08/2016 ::: Downloaded on - 03/08/2016 00:41:48 ::: ppn 9 arbpl-752.16 (j).doc not issue any direction, the learned arbitrator did not have any arbitration meeting till date. He submits that the arbitration agreement was admittedly invoked by the respondent nos.2 to 5 on 2 nd July 2012 and the learned arbitrator had accepted his appointment on 13 th July 2012. He submits that till date, no further meetings are held by the learned arbitrator.
15. It is submitted by the learned senior counsel that the learned arbitrator has not even bothered to decide the application made by the petitioners under Sections 12 and 13 for last four years. He submits that it is thus clear that the learned arbitrator failed to act without undue delay in the matter during the period of last four years. He submits that there was no question of any settlement of the dispute which is apparent in view of the application under Section 17 of the Arbitration Act having been filed by the respondent nos.2 to 5 within two days of the learned arbitrator holding a preliminary meeting on 25th July 2012.
16. It is submitted by the learned senior counsel that though the petitioners have made an application on 18th May 2016 requesting the learned arbitrator to decide upon the application filed by the petitioners, the learned arbitrator has directed that the said application would also be decided along with statement of claim in the meeting proposed to be held on 5th August 2016. It is submitted by the learned senior counsel that though the petitioners had expressed various doubts about independence or impartiality of the learned arbitrator in the application as far back as on 30th July 2012, the learned arbitrator neither decided the said application expeditiously under Section 12 read with Section 13 of the Arbitration Act nor made any disclosure which he was required to ::: Uploaded on - 02/08/2016 ::: Downloaded on - 03/08/2016 00:41:48 ::: ppn 10 arbpl-752.16 (j).doc make under Section 12 of the Arbitration Act which was likely to give rise to justifiable doubts as to his independence or impartiality. He submits that the learned arbitrator even did not disclose about his professional relations with the parties and his closeness with the respondent nos.2 to 5 even till date.
17. Reliance is placed on Section 13 of the Arbitration Act by the learned senior counsel in support of his submission that the learned arbitrator had to decide the challenge made by the petitioners pointing out the circumstances which existed that gave rise to justifiable doubts as to his independence or impartiality expeditiously.
18. It is lastly submitted by the learned senior counsel that the manner in which the learned arbitrator had proceeded with the application under Section 17 of the Arbitration Act made by the respondent nos.2 to 5 ex parte and directed the petitioners to give four working days' notice for making an application for vacating the ad-interim order which four days would expire after the proposed board meeting of the said company also clearly indicates that the learned arbitrator would not be independent or impartial in the matter in so far as the petitioners are concerned.
19. Learned senior counsel for the petitioners submits that in these circumstances, the mandate of the learned arbitrator be terminated forthwith and any independent arbitrator be appointed by this Court as this Court may deem fit.
20. Mr.Bookwala, learned senior counsel for the respondent nos. 2 to 5 on the other hand submits that the petitioners themselves have ::: Uploaded on - 02/08/2016 ::: Downloaded on - 03/08/2016 00:41:48 ::: ppn 11 arbpl-752.16 (j).doc made application under section 16 read with sections 12 and 13 before the learned arbitrator and had requested the learned arbitrator to fix an early date for deciding the said application. He submits that pursuant to the said application made by the petitioners, the learned arbitrator has already fixed a meeting on 5th August, 2016 for deciding all the pending applications including the said application filed by the petitioners on 21 st April, 2016 along with claims. He submits that since the learned arbitrator has not decided the said application and has already fixed a date for hearing at the request of the petitioners on 5 th August, 2016, this petition filed under section 14 of the Arbitration Act is not maintainable.
21. It is submitted by the learned senior counsel for the respondent nos. 2 to 5 that the learned arbitrator was a named arbitrator in the agreement entered into between the parties. The petitioners thus could not have raised any objection about his appointment made as per arbitration agreement. He submits that in any event, since the challenge to the arbitrator made by the petitioners in their application is not yet decided by the learned arbitrator and a meeting has already been fixed on 5th August, 2016 for deciding the same, this court cannot go into the allegations made by the petitioners against the learned arbitrator at this stage. Learned senior counsel placed reliance on the judgment of Delhi High Court in case of Maharaji Educational Trust & Anr. vs. M/s.S.G.S. Constructions & Developers Pvt. Ltd. 2012 SCC Online Del 796 and in particular paragraphs 16 to 18 in support of his submission that since the application filed by the petitioners under sections 12, 13 and 16 is pending before the learned arbitrator, application under section 14(2) of the Arbitration Act is not maintainable.
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22. Insofar as the alleged delay in proceedings with the arbitral proceedings by the learned arbitrator is concerned, it is submitted by the learned senior counsel that the matter was adjourned to enable the parties to settle the disputes. He submits that if according to the petitioners there was any delay on the part of the learned arbitrator in proceeding with the arbitration proceedings, the petitioners also did not take any steps knowing well that the matter was adjourned for settlement. He submits that in any event since the petitioners themselves have requested the learned arbitrator to proceed with the matter and to first decide the application filed by them under section 16 read with sections 12 and 13 and pursuant to the said request, the learned arbitrator has now already issued various directions for filing pleadings and has already fixed a date for deciding those applications, the petitioners have acquiesced and given up their allegations of alleged delay in proceedings with the arbitration proceedings.
23. Insofar as submission of the learned senior counsel for the petitioners that the learned arbitrator did not give any notice before granting an ad-interim measures in favour of the respondent nos. 2 to 5 is concerned, it is submitted that the said issue cannot be decided by this court in this petition filed under section 14 of the Arbitration Act. It is submitted by the learned senior counsel that his client is not agreeable to the suggestion of the learned senior counsel for the petitioners that any other arbitrator of the choice of this court be appointed in substitution of the respondent no.1.
24. Mr.Doctor, learned senior counsel for the petitioners in rejoinder submits that in view of the serious allegations of bias and about ::: Uploaded on - 02/08/2016 ::: Downloaded on - 03/08/2016 00:41:48 ::: ppn 13 arbpl-752.16 (j).doc the conduct of the learned arbitrator made by the petitioners, this court shall terminate the proceedings and shall appoint an independent arbitrator.
REASONS AND CONCLUSIONS :-
25. There is no dispute that the the respondent nos. 2 to 5 had invoked the arbitration agreement on 2nd July 2012. The learned arbitrator accepted his appointment on 13th July 2012. The learned arbitrator had held a preliminary meeting on 25 th July 2012. In the said meeting admittedly the learned arbitrator did not issue any direction. It is the case of the respondent nos.2 to 5 that the learned arbitrator made suggestion to the parties to try and amicably resolve the dispute between the parties. A perusal of the letter/notice dated 23rd May 2016 addressed by the learned arbitrator to the parties indicates that the learned arbitrator has recorded that the petitioners no.1 and respondent no.2 in the meeting held on 25 th July 2012 had agreed to mutually settle the disputes amongst themselves and accordingly no further hearing had been fixed by the learned arbitrator till the said notice dated 23 rd May 2016 fixing the next date of hearing on 5th August 2016 was issued by the learned arbitrator. The learned arbitrator had referred to the said agreement between the parties to mutually settle the disputes amongst themselves in the ad-interim order passed by the learned arbitrator on 13th January 2016 also.
26. Be that as it may, if according to the petitioners, the learned arbitrator was not proceeding with the matter without delay from July 2012 till June 2016, the petitioners also did not file any application before the learned arbitrator for termination of his mandate or before this court ::: Uploaded on - 02/08/2016 ::: Downloaded on - 03/08/2016 00:41:48 ::: ppn 14 arbpl-752.16 (j).doc under section 14(2) of the Arbitration Act. On the contrary the petitioners have now requested the learned arbitrator to fix an early date for deciding the application filed by the petitioners vide their application dated 18 th May 2016. It is not in dispute that the learned arbitrator has already fixed a meeting on 5th August 2016 vide his notice dated 23rd May 2016. It is also not in dispute that the respondent nos. 2 to 5 have already filed their statement of claim before the learned arbitrator on 9 th June 2016. In my view, in view of the inaction also on the part of the petitioners to apply for termination of the mandate of the learned arbitrator for last four years, this petition at the instance of the petitioners cannot be entertained on the ground that the learned arbitrator has failed to act without undue delay.
27. Insofar as the allegation made by the petitioners against the learned arbitrator in their application under sections 12, 13 read with section 16 of the Arbitration Act is concerned, though the first application was made by the petitioners on 30th July 2012 was not decided by the learned arbitrator, the petitioners also did not make any application before the learned arbitrator to decide the said application till a fresh application was filed by the petitioners before the learned arbitrator on 21st April 2016. A perusal of the record indicates that the petitioners themselves had applied before the learned arbitrator for fixing a date for deciding the said application early. In response to the said application, the learned arbitrator has already fixed the meeting on 5th August 2016 for deciding all pending applications filed by the parties including the said application filed under sections 12, 13 and 16. In my view the petitioners thus cannot be allowed to urge any delay on the part of the learned arbitrator at this stage.
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28. Insofar as judgment of Delhi High Court in case of Maharaji Educational Trust & Anr. (supra) relied upon by Mr.Bookwala, learned senior counsel for the respondent nos.2 to 5 is concerned, in my view the views taken by the Delhi High Court would assist the case of the respondent nos.2 to 5. I am in agreement with the views expressed by the Delhi High Court in the said judgment.
29. Insofar as serious allegation made by the petitioners against the learned arbitrator with a request to not to act as an arbitrator in various letters and application is concerned, the learned arbitrator has to decide the said application in accordance with law. In my view since the petitioners have made such allegations against the learned arbitrator and have already made an application under sections 12 and 13 which is pending before the learned arbitrator, this petition under section 14 the mandate of the learned arbitrator on such grounds is not maintainable. If the learned arbitrator does not accept the challenge made by the petitioners under sections 12 and 13, the remedy of the petitioners in that event would be to challenge the final award if the petitioners are aggrieved by the same. The allegations of the petitioners raising doubt about the independence and impartiality of the learned arbitrator cannot be gone by this court in this petition filed under section 14. I am thus not inclined to entertain this petition filed by the petitioners under section 14 of the Arbitration Act.
30. I therefore pass the following order :-
(a) Arbitration Petition (L) No.752 of 2016 is dismissed;
(b) This court has not expressed any views on the allegations made by the petitioners against the learned arbitrator. The learned arbitrator ::: Uploaded on - 02/08/2016 ::: Downloaded on - 03/08/2016 00:41:48 ::: ppn 16 arbpl-752.16 (j).doc is directed to decide the pending applications dated 30th July 2012 and 21st April 2016 filed by the petitioners before deciding the matter on merits in the meeting proposed to be held on 5 th August, 2016 or on any other convenient date but shall decide the same expeditiously;
(c) There shall be no order as to costs.
R.D. DHANUKA, J.
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