Telangana High Court
Sri G.V Ramana Murthy vs M/S Livewell Health Care Private Ltd., on 20 June, 2022
Author: A. Abhishek Reddy
Bench: A. Abhishek Reddy
THE HON'BLE SRI JUSTICE A. ABHISHEK REDDY
ARBITRATION APPLICATION No.70 OF 2021
ORDER:
This application is filed under Section 11(5) & (6) of the Arbitration and Conciliation Act, 1996 (for short 'the Act') read with Scheme for Appointment of Arbitrator, 1996, seeking appointment of sole Arbitrator.
2. The case of the applicants, in a nutshell, is that the applicants have extended a loan of Rs.25 lakhs on 05.04.2014 for which an agreement was also entered on the same day for making a refundable deposit of Rs.55 lakhs with a promise to pay interest @ 24% per annum on the said deposit. As the said amounts were not paid, in the month of January, 2016, respondent No.1 Company has entered into another Memorandum of Understanding dated 01.02.2016 with the applicants where it was agreed to pay Rs.90 lakhs to the applicants and in that regard (12) post-dated cheques were also issued to the applicants in pursuance of the resolution passed in the meeting dated 01.01.2016. After several demands by the applicants, an amount of Rs.25 lakhs was returned to the applicant for payment of amounts covered under Share Transfer Agreement dated 16.04.2016 and an amount of Rs.25 lakhs is paid towards the said account. As the amount assured under the MOU dated 01.02.2016 was not paid, a demand notice dated 09.01.2019 was issued by the 2 applicants for recovery of Rs.1,19,94,082/-. After reply received from respondent No.3, the applicants have filed C.O.S. No.21 of 2019 before the XXIV Additional Chief Judge, City Civil Court, Hyderabad. In the said suit, the Court below while allowing I.A. Nos.680, 682 and 683 of 2019 had referred the parties to arbitration. Hence, this Arbitration Application.
3. In this Arbitration Application, notices were served on respondents 1, 2, 3, 5 and 6. Notice sent to respondent No.4 returned served. On behalf of respondent Nos.1 to 3 and 5, Sri A. Venkatesh, learned counsel, entered appearance. In spite of service of notice, none appeared for respondent No.6. Hence, he is set ex parte.
4. Learned counsel for the applicants has stated that as per the Memorandum of Understanding (MOU) dated 01.02.2016, more particularly clause 10 thereof, the applicants got issued a legal notice dated 09.01.2019, to which respondent No.3 herein got issued a reply. Learned counsel for the applicants has further stated that instead of approaching the Arbitrator, as per the Arbitration Clause, the applicants have filed a civil suit being COS No.21 of 2019 wherein the respondents have filed I.A. Nos.680, 682 and 683 of 2019 under Section 8 of the Arbitration and Conciliation Act, 1996, invoking the Arbitration clause and the said I.As. were allowed by the 3 Commercial Court, Hyderabad, vide order dated 10.03.2020. When the applicants have given a legal notice seeking appointment of an Arbitrator, the respondents have not come forwarded. As such, the applicants are constrained to file the present application under Section 76 of the Act.
5. Per contra, the learned counsel appearing on behalf of the contesting respondents has stated that respondent Nos.3 to 6 herein are the Directors of the Company and that they are not the parties to the Memorandum of Understanding, dated 01.02.2016. Learned counsel has drawn the attention of the Court to the MOU dated 01.02.2016 to buttress his contention that applicant No.2 and respondent No.1 herein are the only parties to the MOU and therefore they have no objection for appointment of an Arbitrator to resolve the dispute between the parties to the MOU, but not the other respondents i.e. respondent Nos.2 to 6 herein. Learned counsel has further stated that respondent Nos.3 to 6 are only the Directors of the Company and they cannot be made parties to the Arbitration proceedings, when they are not parties to the MOU dated 01.02.2016 and prayed to dismiss the present Arbitration Application.
6. Perused the material on record.
7. A perusal of the documents, more particularly, the MOU dated 01.02.2016 filed by the applicants shows that applicant No.2 and the 4 respondent No.1 herein are the parties to the said MOU. Even though the legal notice dated 04.02.2021 was sent by the applicants to respondents herein, the applicants have chosen to file COS No.21/2019 before the XXIV Additional Chief Judge-cum- Commercial Court Judge, City Civil Court, Hyderabad, wherein the respondent Nos.1, 3, 5, 6 have filed petitions under Section 8 of the Act and the Court below vide order dated 10.03.2020 has allowed the said applications.
8. Therefore, having filed an application under Section 8, the respondents cannot contend that the Arbitrator cannot be appointed against respondent Nos.2 to 6. Irrespective of the fact whether they are parties to the MOU dated 01.02.2016 or not, admittedly, respondent No.1 Company is represented by respondent No.3 and the respondent Nos.4 to 6 are its Directors. Even the notice seeking appointment of the Arbitrator was issued to respondent Nos.1, 3, 4, 5, 6 and others. Except respondent No.3, other respondents have not given any reply denying the averments in the legal notice dated 09.01.2019. Even the respondent No.3 in his reply has stated that he has no objection for appointing an Arbitrator except that it cannot be fast track arbitration under Section 29-A of the Act. Therefore, this Court is of the opinion that present application needs to be allowed.
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9. In the result, the Arbitration Application is ordered appointing Sri Justice A. Rajasheker Reddy, retired Judge of this High Court, as the sole Arbitrator to arbitrate on the disputes between the applicants and the respondents and the said arbitrator shall enter on reference and proceed with, as enjoined by the Act.
10. The learned Arbitrator shall fix his remuneration as per the statutory provisions. He shall also fix the costs and expenses of the secretarial assistance for the arbitration proceedings upon deliberation and consultation with the parties. All the costs and expenses of the arbitration proceedings shall be borne by both the parties in equal share. The Learned Arbitrator is requested to complete arbitration proceedings, and pass an award at the earliest, preferably within six months from the date of commencement of the arbitral proceedings. It is made clear that this order does not preclude the respondents from raising any legally tenable objections as may be permissible under the law.
Miscellaneous Applications, if any, pending in the Arbitration Application, shall stand closed. No order as to costs.
_________________________ A. ABHISHEK REDDY, J Date : 20.06.2022 sur