Telangana High Court
Drb Infrastructure Private Limited vs Mrs.Lishi Yapu on 27 July, 2022
Author: B. Vijaysen Reddy
Bench: B. Vijaysen Reddy
THE HON'BLE SRI JUSTICE B. VIJAYSEN REDDY
ARBITRATION APPLICATION No.180 of 2021
ORDER:
This application is filed to appoint an arbitrator under Section 11 (4) to (6) of the Arbitration and Conciliation Act, 1996 (for short 'the Act'), to resolve the disputes between the applicant and the respondent.
2. The applicant is engaged in the business of construction of Infrastructure Projects such as Roads, Irrigation Projects and Buildings. It is claimed that the respondent has approached the application with a proposal to take machinery of the applicant situated at a road project in the State of Aurnachal Pradesh on hire basis. The applicant and the respondent negotiated the terms and conditions of hiring the plant and machinery of the applicant by the respondent and after due negotiations an agreement dated 12.12.2020 was entered into by them. The said agreement dated 12.12.2020 was effective for a period of eleven months from 01.11.2020. It was agreed between the parties that in the event of default in punctual payment of the monthly sums to be paid by the respondent for a period of two months, the applicant may determine the said agreement. The respondent failed to adhere to the terms of the agreement and as per the said agreement, the respondent is required to pay monthly rent of Rs.50,00,000/- 2 plus GST. The monthly rent is payable on or before 5th calendar day of every succeeding month and the rent for the first month is due on or before 05.12.2020. The respondent started using the plant and machinery of the applicant from 01.11.2020 on the mutual understanding that an agreement will be entered between the parties.
3. According to the applicant, the respondent failed to pay the security deposit as agreed and also failed to pay the monthly rents in terms of the said agreement dated 12.12.2020. In violation of the terms of the agreement, the respondent started paying monthly rent in piece meal basis at different dates after expiry of the agreed date i.e. on or before 5th of every calendar month. The respondent failed to pay Rs.1,33,26,000/- during the period from November 2020 to March 2021 against actual dues of Rs.2,50,00,000/-. In spite of repeated request of the applicant to the respondent to pay arrears of rent, the respondent failed to pay the rent as agreed. As per clause 8.2 of the agreement, the applicant may determine the hiring without any notice and it shall be lawful for him to retake possession of the said machinery in the event the respondent commits default in punctual payment of the agreed monthly sums for two months or if the respondent fails to observe and perform the terms and conditions of the agreement. In view of the overdue of rent for more than two months by March 2021 itself, 3 the applicant terminated the agreement vide its letter dated 07.04.2021 calling upon the respondent to deliver the plant and machinery to its designated representative named therein,
4. However, the respondent refused to deliver possession of the plant and machinery to the applicant or to the representative of the applicant and continued using the same highhandedly. The applicant approached the III Additional Chief Judge, City Civil Court, Hyderabad, in OP.No.44 of 2021 under Section 9 of the Act to appoint an Advocate Commissioner directing him to take custody of the machinery of the applicant from the respondent to protect the said machinery from misuse by respondent. The said Court appointed an Advocate Commissioner to prepare an inventory and to take custody of the machinery. The Advocate Commissioner went to the project site on 20.07.2021 to execute the warrant issued by the Court. However, the respondent refused to allow the Advocate Commissioner to make inventory and take custody of the machinery. The Court below issued direction to the local Superintendent of Police to provide assistance to the Advocate Commissioner in executing the warrant. In spite of the same, the respondent did not cooperate with the Advocate Commissioner when he went to the site on 06.10.2021. However, the Advocate Commissioner could take custody of few items of machinery. When the Advocate Commissioner again visited the project site on 4 08.102.021, the local police expressed inability to provide security and asked him to leave the project site. Therefore, the Advocate Commissioner could not execute the warrant.
5. Clause 14 of the Agreement dated 12.12.2020 provides for resolution of disputes through arbitration. The applicant invoked the arbitration clause by issuing notice dated 24.07.2021 nominating V.S.R. Avadhani (Retired District Judge) as its arbitrator calling upon the respondent to appoint its arbitrator within a period of 30 days from the date of receipt of notice. Notice dated 24.07.2021 issued under Section 21 of the Act was delivered by email to the respondent on the same day. Another notice was sent by way of registered post with acknowledgement due on 02.08.2021. As the respondent did not reply to the notice to the applicant, even after expiry of 30 days as per Section 11(4) of the Act, the instant application was filed.
6. Learned counsel for the applicant submitted that clause 14.1 of the agreement provides for reference of dispute to arbitration by appointment of two arbitrators i.e. one to be nominated by each party, who would appoint an umpire.
7. Heard Mr. P. Somasekhara Naidu, learned counsel for the applicant and Mr. K.M. Mahantha, learned counsel appearing for Mr. Debashis Dey, learned counsel on record for the respondent. 5
8. Learned counsel for the respondent submitted that though detailed counter is filed disputing the claim of the applicant, he confines his argument only on the point of jurisdiction. According to the learned counsel, the Courts at Hyderabad do not have jurisdiction to decide the dispute. As per law of land, more particularly, under Section 20 of the Code of Civil Procedure, only the High Court of Assam or Arunachal Pradesh have jurisdiction to appoint an arbitrator. The applicant has cleverly chosen the forum, which is convenient to the applicant. Learned counsel further submitted that though the venue of arbitration is shown as Hyderabad and Courts at Hyderabad will have jurisdiction, since the agreement is executed in Arunachal Pradesh and financial transactions have taken place at Assam and Arunachal Pradesh, this Court cannot be approached for appointment of arbitrator. The applicant company is seeking appointment of arbitrator from a place, which is not a neutral venue and the same cannot accepted.
9. Learned counsel for the respondent relied upon the following decisions of the Supreme Court viz. INDUS MOBILE DISTRIBUTION PRIVATE LIMITED v. DATAWIND INNOVATIONS PRIVATE LIMITED1 and RAVI RANJAN DEVELOPERS PVT. LTD. v ADITYA KUMAR CHATTERJEE2. 1 (2017) 7 SCC 678 2 2022 SCC OnLine SC 568 6
10. On the other hand, learned counsel for the applicant relied upon the decision of the Supreme Court in BRAHMANI RIVER PELLETS LIMITED v. KAMACHI INDUSTIRES LIMITED3.
11. In INDUS MOBILE DISTRIBUTION PRIVATE LIMITED's case (1 supra) it was held in para 19 as under:
"19. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction - that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Section 16 to 21 of the CPC be attracted. In arbitration law however, as has been held above, the moment "seat" is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties."
12. By relying on the above observation of the Supreme Court, the learned counsel for the respondent contends that Hyderabad is not a neutral venue and thus, the Courts at Hyderabad including the High Court does not have jurisdiction to entertain the 3 (2020) 5 SCC 462 7 application. This contention of the learned counsel is wholly without merit. The observation of the Supreme Court only deals with the concept of neutral venue, which means parties can agree upon such venue where not part of cause of action has arisen. In the instant case, there is no agreement between the parties for conducing arbitral proceedings in a neutral venue.
13. The judgment in RAVI RANJAN DEVELOPERS PVT. LTD.'s (2 supra) is not applicable to the facts of this case because the dispute therein was in connection with a development agreement in respect of a immovable property situated at Muzaffarpur in Bihar. In that backdrop, the following observations were made in paras 47 and 48 therein, wherein reads as under:
"47. It is well settled that, when two or more Courts have jurisdiction to adjudicate disputes arising out of an arbitration agreement, the parties might, by agreement, decide to refer all disputes to any one Court to the exclusion of all other Courts, which might otherwise have had jurisdiction to decide the disputes. The parties cannot, however, by consent, confer jurisdiction on a Court which inherently lacked jurisdiction, as argued by Mr. Sinha.
48. In this case, the parties, as observed above did not agree to refer their disputes to the jurisdiction of the Courts in Kolkata. It was not the intention of the parties that Kolkata should be the seat of arbitration. Kolkata was only intended to be the venue for arbitration sittings. Accordingly, the Respondent himself approached the District Court at Muzaffarpur, and not a Court in Kolkata for interim protection under Section 9 of the A&C Act. The Respondent 8 having himself invoked the jurisdiction of the District Court at Muzaffarpur, is estopped from contending that the parties had agreed to confer exclusive jurisdiction to the Calcutta High Court to the exclusion of other Courts. Neither of the parties to the agreement construed the arbitration clause to designate Kolkata as the seat of arbitration. We are constrained to hold that Calcutta High Court inherently lacks jurisdiction to entertain the application of the Respondent under Section 11(6) of the Arbitration Act. The High Court should have decided the objection raised by the Appellant, to the jurisdiction of the Calcutta High Court, to entertain the application under Section 11(6) of A&C Act, before appointing an Arbitrator.
As seen from the above observations, the Supreme Court held that Kolkata was venue for arbitration and not a seat of arbitration, thus, the High Court in Kolkata lacked inherent jurisdiction to entertain the application under Section 11(6) of the Act.
14. In the present case, as per clause 14 of the agreement between the parties herein agreed that 'Hyderabad' shall be seat and venue of arbitration. In BRAHMANI RIVER PELLETS LIMITED's case (3 supra), relied upon by the learned counsel for the applicant, it was held in paras 18 and 19 as under:
"18. Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the present case, the parties have agreed that the "venue" of arbitration shall be at 9 Bhubaneswar. Considering the agreement of the parties having Bhubaneswar as the venue of arbitration, the intention of the parties is to exclude all other courts. As held in Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. [(2013 9 SCC 32], non-use of words like "exclusive jurisdiction", "only", "exclusive", "alone" is not decisive and does not make any material difference.
19. When the parties have agreed to have the "venue" of arbitration at Bhubaneswar, the Madras High Court erred in assuming the jurisdiction under Section 11(6) of the Act. Since only Orissa High Court will have the jurisdiction to entertain the petition filed under Section 11(6) of the Act, the impugned order is liable to be set aside."
Thus, in view of the above, the respondent herein, who agreed for Hyderabad as seat and venue, cannot be allowed to contend that Hyderabad is not a neutral venue and that no part of cause of action has arisen in Hyderabad. The dispute herein is not relating to immovable property. The dispute is regarding payment of rent towards plant and machinery and delivery of possession thereof. The rental agreement dated 12.12.2020 shows that the parties have signed the same at Hyderabad. Thus, part of cause of action arose at Hyderabad and it cannot be said that the Courts at Hyderabad lack inherent jurisdiction to entertain this application.
15. In view of the same, arbitration application is allowed. Sri Justice G. Krishna Mohan Reddy, Retired High Court Judge, 10 is appointed as arbitrator to adjudicate the claims and disputes between the parties and to pass an award in accordance with law.
16. The learned Arbitrator is entitled to fees as per the rates specified in the Fourth Schedule to the Act of 1996, inserted by Act 3 of 2016 with effect from 23.10.2015, which shall be borne by both parties in equal shares.
The miscellaneous petitions pending, if any, shall stand closed. There shall be no order as to costs.
____________________ B. VIJAYSEN REDDY, J July 27, 2022 DSK