Karnataka High Court
M/S Kavya Projects Pvt Ltd vs M/S Altran Technologies India Pvt Ltd on 27 June, 2019
Author: B.Veerappa
Bench: B. Veerappa
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 27TH DAY OF JUNE, 2019
BEFORE
THE HON' BLE MR. JUSTICE B. VEERAPPA
CIVIL MISCELLANEOUS PETITION No.113/2018
BETWEEN:
M/S KAVYA PROJECTS PVT. LTD.,
H-807, NAGARJUNA RESIDENCY,
NCC URBAN GACHIBOWLI,
HYDERABAD-500032.
REP. BY ITS AUTHORIZED SIGNATORY,
SRI.K.S.R.CHANDRAMOULI.
... PETITIONER
(BY SRI V. PRASAD RAO, ADVOCATE FOR
SRI SAMPATH BAPAT, ADVOCATE)
AND:
M/S ALTRAN TECHNOLOGIES INDIA PVT. LTD.,
RMZ ECOSPACE, 2ND FLOOR, BLOCK 9B,
LAND MARK-PRITECH SEZ,
BELLANDUR VILLAGE,
VARTHUR HOBLI,
BENGALURU-560103.
REP. BY ITS DIRECTORS.
... RESPONDENT
(BY SRI GURURAJ, D.M., ADVOCATE FOR
SRI SHARATH CHANDRASHEKAR, ADVOCATE)
.....
THIS CMP IS FILED UNDER SECTION11(4) & (6) READ
WITH SECTION 11(8) OF THE ARBITRATION AND CONCILIATION
ACT 1996, PRAYING TO APPOINT AN ARBITRATOR ON BEHALF
OF THE RESPONDENT OR APPOINT A SOLE ARBITRATOR TO
RESOLVE THE DISPUTES AND OUTSTANDING ISSUES
BETWEEN THE PARTIES IN ACCORDANCE WITH THE
PROVISIONS OF AGREEMENT DATED:28/08/2014 AND IN
CONSONANCE WITH ARBITRATION AND CONCILIATION ACT,
1996 IN THE INTEREST OF JUSTICE.
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THIS CMP COMING ON FOR ADMISSION THIS DAY, THE
COURT MADE THE FOLLOWING:
ORDER
The petitioner filed the present Civil Miscellaneous Petition under the provisions of Section 11(4) and (6) of the Arbitration and Conciliation Act, 1996, seeking appointment of sole arbitrator to resolve the disputes and outstanding issues between the parties in accordance with the provisions of the agreement dated 28.08.2014 entered into between the parties.
2. It is the case of the petitioner that petitioner is a Private Limited Technology Company registered under the Companies Act, 1956, having its registered office at Hyderabad. The petitioner is in the field of providing technical know-how on design, research and development to provide procurement, construction/ erection and technical services for all types of engineering electronic and/or electrical businesses. The 3 respondent is a private limited company incorporated under the Companies Act, 1956, having its registered Office at Bengaluru and is engaged in providing consultation and engineering services to other potential clients. The petitioner company carries on its business through M/s Kavya India Business and has a fair name in the market. The respondent desired to buy M/s Kavya India Business for certain sum of money payable in a certain manner as indicated in the agreement entered into on 28.08.2014 at Bengaluru. The total purchase price of M/s Kavya India Business was `13,47,20,000/- under three heads i.e., (i) Base purchase price, (ii) Deducted base purchase price and the (iii) Escrowed purchase price and the entire amount was liable to be paid as contemplated in the agreement. The respondent paid an amount of `9.46 crores and the balance amount of `4,01,20,000/- is yet to be paid. While the process was on, the petitioner had transferred software valued at `1.6 crores and the same is also not 4 paid. Inspite of repeated reminders, the respondent neither paid the outstanding dues, nor replied to the demand notice. Therefore, petitioner was forced to issue legal notice to the respondent as contemplated under the provisions of Section 11(5) of the Arbitration and Conciliation Act, 1996, on 20.12.2017. The respondent did not reply to the said notice. Therefore, the petitioner is before this Court for the relief sought for.
3. The respondent filed statement of objections, though not disputed the execution of the agreement dated 28.08.2014, but contended that in terms of clause 13.3 of the agreement i.e., Governing Law:
Jurisdiction: Arbitration:-, the dispute shall be referred to and finally resolved by arbitration conducted in accordance with the arbitration rules of Singapore International Arbitration Centre, in force at such time when the dispute is referred to arbitration. The 5 Tribunal shall consist of three arbitrators, one to be appointed by the buyer, the second to be appointed by the seller and the promoters with the third arbitrator to be appointed by the first two arbitrator so appointed. It is further contended that as per Rule 11 of the Singapore International Arbitration Centre Rules, if a party fails to make a nomination of an arbitrator within 14 days of receipt of a party's nomination of an arbitrator, or within the period otherwise agreed between the parties, the President of Singapore International Arbitration Centre is empowered to appoint an arbitrator on behalf of such defaulting party.
Therefore, the present petition filed under the provisions of Sections11(4) and 11(6) of the Arbitration and Conciliation Act, 1996, is not maintainable and this Court has no jurisdiction to grant the relief and therefore, sought to dismiss the petition. 6
4. I have heard the learned counsel for the parties to the lis.
5. Sri Prasad Rao for Sri Sampat Bapat, learned counsel for the petitioner, reiterating the grounds urged in the petition, contended that there is no dispute with regard to agreement dated 28.08.2014 entered into between the parties and there exists an arbitration clause 13.3. The petitioner has complied the provisions of Section 11(5) of the Arbitration and Conciliation Act, 1996, by issuing legal notice to the respondent, but no reply has been given by the respondent. Therefore, he sought to allow the petition. In support of his contentions, learned counsel relied upon the judgment of the Hon'ble Supreme Court in the case of Indus Mobile Distribution Private Limited vs. Datawind Innovations Private Limited and others reported in (2017)7 SCC 678.
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6. Per contra, Sri Gururaj for Sri Sharath Chandrashekar, learned counsel for the respondent, reiterating the averments made in the statement of objections, at the outset, contended that the petition filed under the provisions of Section 11(4) and (6) of the Arbitration and Conciliation Act, 1996, is not maintainable and this Court has no jurisdiction to appoint an arbitrator, in view of clause 13.3 of the agreement dated 28.08.2014 entered into between the parties and sought to dismiss the petition. In support of his contentions, learned counsel relied upon the judgment of the Hon'ble Supreme Court in the case of Iron and Steel Co. Ltd. vs. Tiwari Road Lines reported in (2007)5 SCC 703.
7. Having heard the learned counsel for the parties, it is undisputed fact that the petitioner and the respondent had entered into an agreement on 28.08.2014 and the total purchase price of M/s Kavya 8 India Business was `13,47,20,000/- under three heads i.e., (i) Base purchase price, (ii) Deducted base purchase price and the (iii) Escrowed purchase price and the entire amount was liable to be paid as contemplated in the agreement. According to the petitioner, respondent paid an amount of `9.46 crores and the balance amount of `4,01,20,000/- is not yet paid. While the process was on, the petitioner had transferred software valued at `1.6 crores and the same is also not paid. It is also not in dispute that violation of conditions was brought to the notice of the respondent by the petitioner by issuing legal notice as contemplated under the provisions of Section 11(5) of the Arbitration and Conciliation Act, 1996, as long back as on 20.12.2017 and specifically stated in the notice that, 'your stoic silence fortifies our client's apprehension that you are not inclined to pay to its lawful amounts which are long overdue. It is further evident that you are not inclined to resolve the dispute amicably as contemplated in the Business Transfer 9 Agreement dated 28.08.2014. Hence, disputes have arisen in conjunction with and in furtherance of Business Transfer Agreement which you have failed to address'. In the said notice the petitioner also nominated its arbitrator in terms of clause 13.3(c) and
(d) of the Agreement and requested the respondent to nominate its nominee within 15 days. Admittedly, the said legal notice is not replied nor responded to by the respondent.
8. Clause 13.3 of the Business Transfer Agreement dated 28.08.2014 reads as under:
13.3 Governing Law; Jurisdiction; arbitration,
(a) This Agreement shall be governed by and construed according to the laws of India.
Notwithstanding the provisions of Clause 13.3(c) below, each of the parties hereby submits to the exclusive jurisdiction of the courts of competent jurisdiction in Bangalore, Karnataka insofar as it relates to any Party seeking to obtain injunctive or equitable relief from such Bangalore court of 10 competent jurisdiction without the posting or the need to post any bond or other security.
(b) If any dispute, controversy or claim among the Parties arises out of or in connection with this Agreement, including the breach, termination or invalidity hereof ('Dispute'), the Parties shall use all reasonable endeavors to negotiate with a view to resolving the Dispute amicably.
(c) If a party gives the other parties notice that a Dispute has arisen (a' Dispute Notice') and the Parties are unable to so resolve the Dispute amicably within 15 (fifteen) days of the date of service of the Dispute Notice (or such longer period as the Parties may mutually agree prior thereto), then the Dispute shall be referred to and finally resolved by arbitration conducted in accordance with the arbitration rules, of the Singapore International Arbitration Centre, inforce at such time when the dispute is referred to arbitration.
(d) The tribunal shall consist of 3(three) arbitrators, 1(One) to be appointed by the Buyer, the second to be appointed by the Seller and the Promoters, with the third arbitrator to be appointed by the first 2(two) arbitrators so appointed. The arbitral 11 award shall contain reasons and shall be final and binding on the Parties and the Parties waive irrevocably any rights to any form of appeal, review or recourse to any state or other judicial authority in India or elsewhere, insofar as such waiver may validity be made.
(e) The venue of the arbitration shall be Bangalore, India. The language of the arbitration shall be English.
(f) The parties shall bear their own legal and other costs and expenses necessary to the dispute, which has been submitted to arbitration in accordance with this Clause 13.3, without prejudice to the arbitrator's right to award costs or require any party to the arbitration to pay the costs and expenses of another party thereto.
(g) Any arbitration proceeding hereunder shall be conducted on a confidential basis.
(h) The provisions of this Clause 13.3 shall survive any termination of this Agreement for any reason.
9. Though learned counsel for the respondent Sri Gururaj tried to persuade this Court that the arbitrator 12 has to be appointed under the Singapore International Arbitration Centre Rules a careful perusal of the entire agreement reveals that there is no clause incorporated in the agreement about appointment of arbitrator under Singapore International Arbitration Centre Rules. Clause 13.3 (d) of the agreement stipulates that the Tribunal shall consist of three arbitrators, one to be appointed by the buyer, the second to be appointed by the seller and the promoters with the third arbitrator to be appointed by the first two arbitrator so appointed. Clause 13.3 (e) specifies that the venue of the arbitration shall be Bengaluru, India. The language of the arbitration shall be English. The entire agreement conditions does not stipulate appointment of an arbitrator under the Singapore International Arbitration Centre Rules, as alleged. However, once an arbitrator is appointed, it is needless to observe that the arbitrator has to adjudicate the proceedings under the Singapore International Arbitration Centre Rules only. Apart from 13 this, it was the duty of the respondent to issue reply to the legal notice issued by the petitioner. Though learned counsel for the respondent submits that the notice was not served on the respondent, as soon as the respondent received notice from this Court, appeared and contested the matter. Therefore, the contention of the learned counsel for the respondent cannot be accepted.
10. Learned counsel for the respondent relied upon para 8 of the judgment of the Hon'ble Supreme Court in the case of Iron & Steel Co. Ltd. (supra), which reads as under:
8. In the present case the agreement executed between the parties contains an arbitration clause and clause 13.1 clearly provides that all disputes and differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of the contract or the breach thereof shall be settled by arbitration in accordance 14 with the Rules of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties. This clause is in accordance with sub-section (2) of Section 11 of the Act. There being an agreed procedure for resolution of disputes by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration sub-sections (3), (4) and (5) of Section 11 can have no application. The stage for invoking sub-section (6) of Section 11 had also not arrived. In these circumstances, the application moved by the respondent before the City Civil Court, Hyderabad, which was a designated authority in accordance with the scheme framed by the Chief Justice of the Andhra Pradesh High Court, was not maintainable at all and the City Civil Court had no jurisdiction or authority to appoint an arbitrator. Thus the order dated 31-3-2004 passed by the Chief Judge, City Civil Courts, Hyderabad, appointing a retired judicial officer as arbitrator is clearly without jurisdiction and has to be set aside.15
11. A careful perusal of the said paragraph of the judgment, it is categorically stated that, 'the dispute shall be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration and the award made in pursuance thereof shall be binding on the parties'. In the said case, Rules contemplated for the appointment of arbitrator in that case is applied. Admittedly, in the present case, for adjudication of dispute, Singapore International Arbitration Centre Rules is to be applied. But there is no clause mentioned in the agreement that the arbitrator shall be appointed under the Singapore International Arbitration Centre Rules. In the absence of any such clause in the agreement, the contention of the learned counsel for the respondent cannot be accepted and the judgment relied upon by the learned counsel for the respondent has no application to the facts and circumstances of the present case. 16
12. The Supreme Court, while considering the provisions of Section 2(1)(e), 42, 20, 9 and 11 of the Arbitration and Conciliation Act, 1996, in the case of Indus Mobile case (supra), reported in (2017)7 SCC 678 at paragraphs 11, 12, 15 and 19, has held as under:
11. In an instructive passage, this Court stated that an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause as follows: (Bharat Aluminium case [BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 :
(2012) 4 SCC (Civ) 810] , SCC p. 621, para
123) "123. Thus, it is clear that the regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being conducted. Such a court is then the supervisory court possessed of the power to annul the award. This is in keeping with the scheme of the international instruments, 17 such as the Geneva Convention and the New York Convention as well as the UNCITRAL Model Law. It also recognises the territorial principle which gives effect to the sovereign right of a country to regulate, through its national courts, an adjudicatory duty being performed in its own country. By way of a comparative example, we may reiterate the observations made by the Court of Appeal, England in C v. D [C v. D, 2008 Bus LR 843 : 2007 EWCA Civ 1282] wherein it is observed that: (Bus LR p.
851G, para 17) '17. It follows from this that a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award.' In the aforesaid case, the Court of Appeal had approved the observations made in A v. B [A v. B, (2007) 1 All ER (Comm) 591 : (2007) 1 Lloyd's Rep 237] wherein it is observed that: 18
'... an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy ... as to the validity of an existing interim or final award is agreed to be made only in the courts of the place designated as the seat of arbitration.'"
(emphasis in original)
12. The Constitution Bench's statement of the law was further expanded in Enercon (India) Ltd. v. Enercon GmbH [Enercon (India) Ltd. v. Enercon GmbH, (2014) 5 SCC 1 : (2014) 3 SCC (Civ) 59] . After referring to various English authorities in great detail, this Court held, following the Constitution Bench, as follows: (SCC p. 58, para 134) "134. It is accepted by most of the experts in the law relating to international arbitration that in almost all the national laws, arbitrations are anchored to the seat/place/situs of arbitration. Redfern and Hunter on 19 International Arbitration (5th Edn., Oxford University Press, Oxford/New York 2009), in Para 3.54 concludes that "the seat of the arbitration is thus intended to be its centre of gravity". In BALCO [BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810] (BALCO v. Kaiser Aluminium Technical Services Inc.) it is further noticed that this does not mean that all proceedings of the arbitration are to be held at the seat of arbitration. The arbitrators are at liberty to hold meetings at a place which is of convenience to all concerned. This may become necessary as arbitrators often come from different countries. Therefore, it may be convenient to hold all or some of the meetings of the arbitration in a location other than where the seat of arbitration is located. In BALCO [BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810] , the relevant passage from Redfern and Hunter has been quoted 20 which is as under: (SCC p. 598, para
75) '75. ... "The preceding discussion has been on the basis that there is only one "place" of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of reference or the minutes of proceedings or in some other way as the place or "seat" of the arbitration. This does not mean, however, that the Arbitral Tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is by no means unusual for an Arbitral Tribunal to hold meetings--
or even hearings--in a place other than the designated place of 21 arbitration, either for its own convenience or for the convenience of the parties or their witnesses....
It may be more convenient for an Arbitral Tribunal sitting in one country to conduct a hearing in another country -- for instance, for the purpose of taking evidence.... In such circumstances each move of the Arbitral Tribunal does not of itself mean that the seat of arbitration changes. The seat of arbitration remains the place initially agreed by or on behalf of the parties." [Naviera case [Naviera Amazonica Peruana S.A. v.
Compania Internacional De Seguros Del Peru, (1988) 1 Lloyd's Rep 116 (CA)] (Naviera Amazonica Peruana S.A. v. Compania Internacional De Seguros Del Peru), Lloyd's Rep p.
121]' These observations have also been noticed in Union of India v. McDonnell Douglas Corpn. 22 [Union of India v. McDonnell Douglas Corpn., (1993) 2 Lloyd's Rep 48] "
(emphasis in original)
15. In a recent judgment in Eitzen Bulk A/S v. Ashapura Minechem Ltd. [Eitzen Bulk A/S v. Ashapura Minechem Ltd., (2016) 11 SCC 508 : (2016) 4 SCC (Civ) 251] , all the aforesaid authorities were referred to and followed. Para 34 of the said judgment reads as follows: (SCC pp. 520-21) "34. As a matter of fact the mere choosing of the juridical seat of arbitration attracts the law applicable to such location. In other words, it would not be necessary to specify which law would apply to the arbitration proceedings, since the law of the particular country would apply ipso jure. The following passage from Redfern and Hunter on International Arbitration contains the following explication of the issue:23
'It is also sometimes said that parties have selected the procedural law that will govern their arbitration, by providing for arbitration in a particular country. This is too elliptical and, as an English court itself held more recently in Breas of Doune Wind Farm it does not always hold true. What the parties have done is to choose a place of arbitration in a particular country. That choice brings with it submission to the laws of that country, including any mandatory provisions of its law on arbitration. To say that the parties have "chosen" that particular law to govern the arbitration is rather like saying that an English woman who takes her car to France has "chosen" French traffic law, which will oblige her to drive on the right-hand side of the road, to give priority to vehicles approaching from the right, and generally to obey traffic laws to which she may not be accustomed. But it would be an odd use of language to say this notional motorist had opted for 24 "French traffic law". What she has done is to choose to go to France. The applicability of French law then follows automatically. It is not a matter of choice.
Parties may well choose a particular place of arbitration precisely because its lex arbitri is one which they find attractive. Nevertheless, once a place of arbitration has been chosen, it brings with it its own law. If that law contains provisions that are mandatory so far as arbitration is concerned, those provisions must be obeyed. It is not a matter of choice any more than the notional motorist is free to choose which local traffic laws to obey and which to disregard.'"
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, 25 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 Sections 16 to 21 of 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.
13. It is also not in dispute that the transaction between the parties took place at Bengaluru and agreement is entered at Bengaluru on 28.08.2014 and both the parties agreed that the venue shall be at Bengaluru and the language of the arbitration shall be English. Therefore, the contention of the learned 26 counsel for the respondent that this Court has no jurisdiction to appoint an arbitrator, cannot be accepted.
14. In view of the aforesaid admitted facts, there is no dispute with regard to execution of agreement dated 28.08.2014, existence of arbitration clause in the said agreement and compliance of Section 11(5) of the Arbitration and Conciliation Act, 1996, and therefore, there is no impediment for this Court to appoint sole arbitrator, in the interest of justice to both the parties to resolve the dispute between the parties.
15. For the reasons stated above, Civil Miscellaneous Petition is allowed. Hon'ble Mr. Justice N.Kumar, Former Judge of this Court is appointed as sole arbitrator to adjudicate the dispute in terms of clause 13.3 of the Agreement dated 28.08.2014 entered into between the parties.
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16. Registry is directed to send copy of this Order to Hon'ble Mr. Justice N. Kumar, Former Judge of this Court, and the Arbitration Centre, forthwith.
17. All the contentions of both the parties are kept open to be urged before the arbitrator.
Sd/-
Judge kcm