Madras High Court
A.R.Shridharan vs M/S.Vak Engineering Pvt Ltd on 9 November, 2022
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
Arb.O.P.(Comm.Div.) No.363 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 09.11.2022
CORAM
THE HONOURABLE MR.JUSTICE SENTHILKUMAR RAMAMOORTHY
Arb.O.P.(Comm.Div.) No.363 of 2022
A.R.Shridharan ... Petitioner
vs.
1.M/s.VAK Engineering Pvt Ltd.,
Rep. by its Director,
Mr.Rajesh Malhotra
No.294, Thambuchetty Street,
Chennai – 600 001.
2.M/s.SAS Hotels and Enterprises Ltd,
Rep. by Authorised Signatory
Mr.T.S.S.Krishnan,
No.3, Mangesh Street,
T.Nagar, Chennai – 600 017. ... Respondents
PRAYER: Arbitration Original Petition filed under Section 11(6)(a) of the
Arbitration and Conciliation Act, 1996, pleased to appoint an arbitrator to
arbitrate the disputes between the petitioner and respondents arising out of
Memorandum of Understanding dated 30.12.2013.
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Arb.O.P.(Comm.Div.) No.363 of 2022
For Petitioner : Mr.C.Umashankar
For Respondents : Mr.Aravind Srevatsa
for M/s.Aswin Prassnna A.S.
For R-1
Mr.Vishnu Mohan
for M/s.R.Parthasarathy for R-2
ORDER
The petitioner seeks the constitution of an arbitral tribunal to resolve disputes arising out of the MoU dated 30.12.2013 between the petitioner and the respondents herein. The petitioner states that the MoU dated 30.12.2013 was preceded by MoU dated 19.03.2011 between the petitioner and the first respondent. Since issues arising thereunder could not be resolved, the subsequent MoU of 30.12.2013 was entered into. By citing clause 21 thereof, it is submitted that the parties agreed to resolve disputes through arbitration.
2. Before presenting this petition, the petitioner issued a notice dated 07.05.2022 under Section 21 of the Arbitration and Conciliation Act, 1996(the Arbitration Act) to both the respondents. The first respondent 2/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.363 of 2022 replied thereto on 25.05.2022 and stated that criminal proceedings are pending as between the parties and that it is not appropriate to invoke the arbitration clause in the MoU at this juncture. The second respondent received the notice but did not reply thereto. The present petition is filed in the facts and circumstances.
3. Learned counsel for the petitioner invited my attention to the MoU dated 30.12.2013. With specific reference to clause 5 thereof, he pointed out that the MoU envisaged the payment of a total sum of Rs.6,95,00,000/- to the petitioner. Out of the said sum, the petitioner received a sum of about Rs.2,95,00,000/- but the remaining sum of Rs.4,00,00,000/- was not paid. According to learned counsel, the petitioner fulfilled the obligations specified in the sub-clauses of clause 5 in relation to the receipt of consideration in the installments provided for therein. Therefore, the petitioner was constrained to issue the notice under Section 21 of the Arbitration Act.
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4. Learned counsel for the first respondent opposes this petition on several grounds. The first ground is that the Section 21 notice is vague and does not indicate the nature of the dispute or the claims that the petitioner proposes to make. The second objection is on the ground that any monetary claim or other claim under the MoU is hopelessly barred by limitation. The third contention is that the MoU describes both the petitioner herein and one Mr.A.R.Kannan, the brother of the petitioner, as the parties of the second part. The said A.R.Kannan was not joined as a party to this petition and the Section 21 notice was also not issued on behalf of both persons.
5. Learned counsel for the second respondent also contends that the Section 21 notice is vague. By drawing reference to the MoU, learned counsel points out that the limited obligation of the second respondent is to develop the land. After developing the land, the second respondent is required to hand over 15000 sq.ft. of super built up area to the petitioner, but this obligation is subject to and contingent upon the parties executing a separate agreement. In effect, the contention is that this MoU is no more 4/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.363 of 2022 than an agreement to agree as regards the obligation of the second respondent vis-a-vis the petitioner.
6. All the parties agreed that the MoU contains an arbitration clause. Clauses 21 and 22 of the MoU are set out below:
“21. The parties hereby agree that they shall settle any issue amongst them arising out of this MOU by way of Mediation and if the issues are not resolved by Mediation, the parties shall resort to Arbitration.
22. The parties herein agree to appoint Mr. Justice K.P.Sivasubramaniam, Retired Judge, High Court, Madras as the sole arbitrator to decide on reference by the parties herein in respect of any difference/difficulty or in the implementation of the terms of this MOU for the decision of the Arbitrator and in the event of such decision in the above circumstances by the aforesaid Arbitrator shall be binding on the parties herein. The proceedings of the Arbitration will be in Chennai and the language of the Arbitration is in English.''
7. The principal ground on which this petition is opposed is that the Section 21 notice is vague. On perusal of the Section 21 notice, the said 5/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.363 of 2022 notice refers to breach of the MoU by the respondents. While some details are provided, the objection of the respondents on this ground is not completely devoid of merit. However, the Section 21 notice cannot be looked at in isolation. If the said notice is examined in the context of the MoU, the obligations of the respective parties are specified clearly therein. Therefore, the petition cannot be rejected on the ground that the Section 21 notice is vague.
8. As regards the contention that the claims of the petitioner are barred by limitation, the Hon'ble Supreme Court, in Vidya Drolia v. Durga Trading Corporation, (2021) 2 SCC 1, held that a request for arbitration should not be rejected, if there is an arbitration agreement between the parties, unless the claims are manifestly non-arbitrable and that the power to reject should be exercised for the limited purpose of removing deadwood. In Bharat Sanchar Nigam Limited v. Nortel Networks India Private Limited, (2021) 5 SCC 738, the Hon'ble Supreme Court held that a claim which is ex facie barred by limitation may be rejected but not otherwise. In paragraph 47 thereof, it was held as under:-
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https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.363 of 2022 ''47. It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non-arbitrable, that the court may decline to make the reference. However, if there is even the slightest doubt, the rule is to refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal.''
9. Learned counsel for the first respondent relied upon the judgment of the Hon'ble Supreme Court in Vishram Varu & Co. v. Union of India, represented by the General Manager, South Eastern Railway, Kolkata, 2022 SCC Online SC 487, particularly paragraphs 7 and 11 thereof, to contend that the present claims are ex facie barred by limitation. In that case, the arbitration clause was invoked about 32 years after the relevant work was completed. In those facts and circumstances, the request for constitution of an arbitral tribunal was rejected. In this case, the MOU provides for the payment of a sum of Rs.6,95,00,000/- to the petitioner in installments. The payment of each installment is made conditional on the fulfillment of the obligations specified therein. While the petitioner asserts that he fulfilled the obligations specified therein, the first respondent 7/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.363 of 2022 refutes such contention and claims that the petitioner failed to fulfill the obligations and is, consequently, liable to refund the amounts received under the MOU. In these circumstances, it cannot be concluded that the claims are ex facie barred by limitation.
10. The objection that Mr.A.R.Kannan was not joined as a party was countered by learned counsel for the petitioner by pointing out that the MoU itself records that Mr.A.R.Kannan had executed a power of attorney in favour of the petitioner and is represented by him. The said explanation is not entirely satisfactory inasmuch as the said A.R.Kannan should have been made a party to the present petition, albeit represented by the agent. However, this is not a reason to reject the petition.
11. The other objection of learned counsel for the second respondent is on the ground that the second respondent's obligation is triggered only upon the fulfillment of other obligations and that it is subject to the execution of a separate agreement. Any disputes relating thereto also should be raised and resolved before the arbitral tribunal. 8/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.363 of 2022
12. Accordingly, subject to the right of the respondents to raise objections in relation to limitation or any other issues before the arbitral tribunal, the petitioner is entitled to succeed. The arbitration clause names the arbitrator and therefore the appointment should be made in conformity with such stipulation.
13. For the reasons set out above, Arb.O.P.(Comm.Div.) No.363 of 2022 is allowed by appointing Mr. Justice K.P.Sivasubramaniam, retired Judge of this Court, No.47, Pulla Avenue, Shenoy Nagar, Chennai – 600 030(Mobile No.94447 01312), as the sole arbitrator. The sole arbitrator is called upon to enter upon reference and adjudicate the dispute. The fees and expenses in relation to the arbitral proceedings may be fixed by the arbitral tribunal in consultation with the parties.
09.11.2022 Index : Yes / No Internet : Yes / No rrg 9/10 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.363 of 2022 SENTHILKUMAR RAMAMOORTHY,J rrg Arb.O.P.(Comm.Div.) No.363 of 2022 09.11.2022 10/10 https://www.mhc.tn.gov.in/judis