Karnataka High Court
Mc. Gans Ooty School Of Architecture vs National Institute Of Fashion ... on 3 September, 2018
Author: Chief Justice
Bench: Dinesh Maheshwari
C.M.P.No.161/2017
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 3RD DAY OF SEPTEMBER, 2018
BEFORE
HON'BLE MR.JUSTICE DINESH MAHESHWARI, CHIEF JUSTICE
CIVIL MISCELLANEOUS PETITION NO.161 OF 2017
BETWEEN:
Mc. GAN'S OOTY SCHOOL OF ARCHITECTURE
REPRESENTED BY ITS CHAIRMAN AND
SRI ANGALA PARAMESHWARI EDUCATION TRUST
THROUGH ITS AUTHORISED REPRESENTATIVE-
SRI N. MURALIKUMARAN
NO.5/635, PERAR KOTAGIRI
OOTY-643 002
TAMILNADU.
... PETITIONER
(BY SRI SURESH S. LOKRE, ADVOCATE)
AND:
NATIONAL INSTITUTE OF FASHION TECHNOLOGY
(NIFT)
REPRESENTED BY ITS DIRECTOR
SITE NO.21, NIFT CAMPUS
27TH MAIN, SECTOR 1,
HSR LAYOUT
BANGALORE-560 102
KARNATAKA.
... RESPONDENT
(BY SRI K.P. GAUTAM, ADVOCATE)
---
THIS CIVIL MISCELLANEOUS PETITION IS FILED
UNDER SECTION 11 OF THE ARBITRATION AND
CONCILIATION ACT 1996, PRAYING THIS HON'BLE COURT TO
ALLOW THE ABOVE PETITION AND ORDER THE
C.M.P.No.161/2017
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APPOINTMENT OF A SOLE ARBITRATOR FOR THE
RESOLUTION OF DISPUTES BETWEEN THE PETITIONER AND
THE RESPONDENT IN TERMS OF THE CLAUSE 4 OF THE
MEMORANDUM OF UNDERSTANDING DATED: 18/03/2015 &
ETC.
THIS PETITION COMING ON FOR ADMISSION THIS DAY,
THE COURT, MADE THE FOLLOWING:
ORDER
By way of this application under Section 11 of the Arbitration and Conciliation Act, 1996 ('the Act of 1996'), the petitioner has made the request for appointment of Arbitrator to adjudicate upon and decide all its disputes with the respondent, arising out of, and relating to, the Memorandum of Understanding ('MOU') dated 18.03.2015.
Put in brief, the relevant facts are that the petitioner, said to be an institution rendering education in design and architecture, entered into an MOU with the respondent for the purpose of academic support. It is the case of the petitioner that a sum of Rs.20,00,000/- was paid to the respondent under the said MOU but the respondent, by way of paper publication dated 21.05.2015, without any prior intimation or notice, unilaterally withdrew the academic support to the petitioner-Institution. Being aggrieved, the petitioner filed C.M.P.No.161/2017 -3- A.A.No.163/2015 seeking injunction against the respondent. In the said application, the District Court, by its order dated 23.05.2015, granted ad interim exparte temporary injunction against the respondent.
It is further submitted that prior to and subsequent to the aforementioned order in A.A.No.163/2015, a series of legal notices and reply notices were exchanged between the parties. It was finally on 29.05.2015 that the petitioner addressed a notice to the respondent invoking the arbitration clause to settle the disputes. Subsequently, the petitioner again addressed a notice dated 21.04.2017 to the respondent, proposing the name of a Retired District Judge from Bangalore, to be appointed as the Sole Arbitrator in terms of clause 4.1. of the MOU but the respondent, in their reply notice dated 23.05.2017, declined the name proposed by the petitioner on the ground that the proposed appointment was not mutually agreed upon between the parties and thus, again shifted the burden on the petitioner to suggest other names. It is further submitted that the respondent having failed to co-operate in nominating and appointing the Arbitrator as per the MOU, this Court may appoint an C.M.P.No.161/2017 -4- independent Arbitrator to adjudicate upon the disputes between the parties.
Learned counsel for the respondent has submitted that the MOU relied upon by the parties, had already been terminated due to consistent breach of financial obligations by the petitioner and as such, there exists no arbitration agreement between the parties. It is also submitted that the petitioner has failed to make good the breach despite being served with the communication dated 16.04.2015 through e-mail. Learned counsel has, therefore, emphasized on the submissions that the MOU in question having already been terminated and carrying no legal sanctity, the petitioner is not entitled to seek appointment of an arbitrator thereunder. Learned counsel has relied upon the decision in United Bank of India vs. Ramdas Mahadeo and Ors; (2004) 1 SCC 252, in support of his contentions.
Learned counsel for the respondent has also submitted that apart from concealing the aforementioned defaults, the petitioner has not divulged the fact that he has filed a writ petition in W.P.No.1061/2017, which is currently pending before the Madras High Court, for quashing the order of the C.M.P.No.161/2017 -5- respondent impounding Rs.20,00,000/- which was deposited with them at the time of execution of the MOU. It is contended that similar petitions would not be maintainable before any other Court.
Heard learned counsel for the parties and examined the record.
Though learned counsel for the respondent has placed his submissions on the merits of the case, but has not put to much contention the fact that the MOU between the parties indeed contains an arbitration clause for resolution of the disputes. The arbitration clause, being Clause 4 in the MOU, reads as under:
"4.1. In case of any disputes/differences of opinion in respect of any of the above clauses between any of the above parties, including interpretation thereof, the decision of a committee comprising of the Chairman/Chairperson McGAN's and that of the Director General, NIFT, New Delhi shall be final. In the event the said committee does not resolve the dispute, a mutually agreed sole arbitrator shall be appointed, and the decision of the arbitrator will be binding on both the parties. The said Arbitrator shall have the jurisdiction to arbitrate on all and any disputes arising out of interpretation, implementation, execution, etc. of the present Agreement between all the parties. 4.2. The venue of arbitration shall be at Bengaluru. The Arbitration and Conciliation Act, C.M.P.No.161/2017 -6- 1996, shall govern the arbitration proceedings and the Rules and procedure framed there under."
The case of United Bank of India v. Ramdas Mahadeo (supra) relied upon by the learned counsel for the respondent seems to have no bearing on the present case. The crux of the aforementioned case is that an MOU was entered into for the purpose of recording a compromise/settlement between the parties but since the terms of the MOU were vague, it resulted in exchange of series of correspondences for clarifications of certain doubts. Thus, there was no consensus between the parties with regard to the terms and conditions of the MOU. Hence, the Court was of the view that there was no concluded contract nor was there any novation. The said decision, having difference of facts as also the involvement of different issues, is of no application to the present matter.
The present application is filed under Section 11 of the Act of 1996 seeking appointment of independent Arbitrator. In terms of existing Section 11 of the Act of 1996 after the amendment by the Arbitration and Conciliation (Amendment) Act, 2015, the scope of inquiry in such a request is confined to C.M.P.No.161/2017 -7- the examination of existence of arbitration agreement, per sub-Section 6A thereof, that reads as under:
"(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement."
The existence of arbitration agreement in this matter, as noticed above, is apparent on the face of the record. As to what had been the effect of exchange of other communications between the parties or the fact of filing of other writ petition by the petitioner before the Madras High Court, are all the matters to be examined in the arbitration proceedings and not in the present application.
From the material placed on record, it is evident that the petitioner issued notice proposing for appointment of Arbitrator. However, the respondent, apart from declining the name proposed by the petitioner, did not take any steps for appointing an Arbitrator as required by the aforesaid arbitration agreement between the parties.
When the parties stand at conflict and the disputes do exist, which have not been resolved; and for the reason of C.M.P.No.161/2017 -8- failure of the procedure for appointment of Arbitrator, it is just and proper that an independent arbitrator be appointed to adjudicate upon and decide the disputes between the parties, including their claims, counter claims and objections.
Now, learned counsel for the parties have fairly agreed to the appointment of a Retired District Judge, namely, Shri H.M. Bharthesh to act as an Arbitrator to resolve the disputes between the parties under the provisions of the Act of 1996, as per the Rules governing the Arbitration Centre at Bengaluru.
Accordingly, this petition is disposed of by appointing Shri H.M. Bharthesh, a Retired District Judge, to enter into the said reference and to act as an Arbitrator in the present case in the Arbitration Centre, Bengaluru, as per the Rules governing the said Arbitration Centre.
In the interest of justice, it is made clear that the Arbitrator shall adjudicate upon and decide all the disputes between the parties including their claims, counter claims and objections relating to the agreement in question. The requirements of the Arbitration and Conciliation Act, 1996, [as C.M.P.No.161/2017 -9- amended by the Arbitration and Conciliation (Amendment) Act, 2015], shall be complied with by all the concerned.
Needless to observe that all the questions arising between the parties in this matter shall remain open for determination in the arbitration proceedings.
A copy of this order be sent to the Arbitration Centre, Khanija Bhavan, Bengaluru, for proceeding further in the matter on administrative side and also to Shri H.M. Bharthesh, on the address available with the said Arbitration Centre, Bengaluru.
Sd/-
CHIEF JUSTICE ca