HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Arbitration Application No. 69/2019
1. Tirupati Balaji Furnaces Pvt Ltd., Having Its Registered
Office At B-35(I And II) Riico Industrial Area, Khuskhera,
Bhiwadi, 301019 Through Its Director Shri Vishal Yadav
2. Vinod Kumar Yadav S/o Shri Balbir Yadav, Presently
Residing At House No. 38A, Milan Wali Colony, Gurugram
122001 (Haryana)
3. Vishal Yadav S/o Shri Rohtash Yadav, Presently Residing
At House No. 38A, Milan Wali Colony, Gurugram 122001
(Haryana)
4. Vinay Yadav S/o Shri Rohtash Yadav, Presently Residing
At House No. 38A, Milan Wali Colony, Gurugram 122001
(Haryana)
----Petitioners
Versus
1. Shri Jaswant Singh S/o Shri Ram Kanwar, R/o House No.
17, Sector -1, Rewari, Haryana-123104
2. Shri Sanjay Kumar Yadav S/o Late Shri Kartar Singh, R/o
Pd-15, Malibu Town, Sohna Road, Gurugram, Haryana
122001
3. Shri Naveen Yadav S/o Shri Mahaveer Singh, R/o 433/3,
Rajeev Colony, Gurugram Haryana 122001
4. Shri Sumit Kumar Yadav S/o Shri Jaswant Singh, R/o
House no. 705, Sector-3, Rewari, Haryana 123104
5. Shri Birender Singh S/o Shri Ram Kanwar, R/o House No.
705, Sector-3, Rewari, Haryana-123104
6. Shri Naresh Kumar Yadav, Huf Karta S/o Shri Ram
Kanwar, R/o House No. 705, Sector-3, Rewari, Haryana-
123104
7. Smt. Neetu Yadav W/o Shri Rajesh Yadav, R/o House No.
23, Sector-75, Gurugram, Haryana-122001
8. Shri Abhishekh Yadav S/o Shri Rohtas Singh Yadav, R/o
Alaknanda-812, Jalyaya Jowet, Sector-56, Gurugram,
Haryana 122001
9. Shri Varun Yadav S/o Late Shri Kartar Singh, R/o Pd-15,
Malibu Town, Sohna Road, Gurugram Haryana 122001
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And At R/o House No. 38A, Miyan Wali Colony, Gurgaon,
Haryana-122001, Director Of M/s Tirupati Balaji Furnaces
Pvt. Ltd.
10. Shri Praveen Kumar S/o Shri Virender Singh, R/o House
No. 704, Sector 3, Rewari, Hariyana 123104
11. Shri Sunder Yadav S/o Shri Amar Singh, R/o Village
Kherki Daula, Gurgaon, Haryana - 122001
12. Shri Yoginder Singh S/o Late Shri Sube Singh, R/o House
No. 109, Sector 46, Gurugram, Haryana 122001
----Respondents
For Petitioner(s) : Mr. Rajendra Kumar Salecha with Ms. Tanisha Khulichandani and Mr. Abhishek Wadhwa For Respondent(s) : Mr. Pankaj Gupta Mr. Puneet Singhvi Mr. Kailash Chand Darji HON'BLE MR. JUSTICE PANKAJ BHANDARI Order ORDER RESERVED ON :: 06/07/2022 ORDER PRONOUNCED ON :: 14/07/2022
1. The applicant has filed this arbitration application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act of 1996") seeking appointment of a sole arbitrator for resolution of the disputes between the parties.
2. It is pleaded in the application that a Memorandum of Understanding (hereinafter referred to as "the MOU") was executed between the parties on 07.10.2017. Clause 13 of the MOU provided that in case of any dispute, the same shall be settled by mutual negotiations and failing which the dispute shall be referred to arbitration as per the provisions of the Act of 1996. It is also pleaded in the application that a legal notice was issued (Downloaded on 18/07/2022 at 09:19:57 PM) (3 of 8) [ARBAP-69/2019] on 16.03.2019 to make the payment of demanded amount and in case of non-compliance, to refer the disputes to the sole arbitrator. A reply was received from the non-applicants wherein they declined appointment of the sole arbitrator.
3. Reply to the application has been filed by the respondents. It is stated in the reply by the non-applicants that the matter was filed before the National Company Law Tribunal (hereinafter referred to as "the NCLT") and reply was filed by the non- applicants. Respondent Nos.11 and 12 have agreed for appointment of the sole arbitrator. However, respondent Nos.2, 3, 4, 8 and 9 have objected to the appointment of an arbitrator and have prayed for dismissal of the arbitration application.
4. In the reply filed by respondent Nos.2, 3, 4, 8 and 9, it is mentioned that the matter was filed before the NCLT and that the applicants have concealed material facts. It is also stated in the reply that the applicants after service have appeared before the NCLT and no application was filed for reference of the dispute to appoint an arbitrator, hence, it can be deduced that the applicants have waived the arbitration clause. It is after taking many opportunities, the applicants have filed an application under Section 8 of the Act of 1996 before the NCLT and the NCLT is having exclusive jurisdiction to resolve the dispute and the applicants deliberately to escape from the order of the NCLT wherein the applicants have been directed to pay a sum of Rs.46 lakhs, have filed the present application.
5. Non-applicant No.7 has filed preliminary objection stating therein that she is not a signatory to the arbitration agreement, hence, non-signatory to the MOU cannot be forcefully subjected to the agreement in which she was not a party. The applicants have (Downloaded on 18/07/2022 at 09:19:57 PM) (4 of 8) [ARBAP-69/2019] filed rejoinder to the preliminary objection raised by the non- applicant No.7 - Ms. Neetu Yadav wherein it is mentioned that the non-applicant No.7 arrayed herself as appellant No.7 in Appeal No.140/59/ND/02018 before the NCLT, hence, she cannot now claim that she is not a signatory to the MOU. Rejoinder with regard to the reply filed by the non-applicant Nos.2, 3, 4, 8 and 9 has also been filed by the applicants.
6. It is contended by the counsel for the applicants that there is an arbitration clause and therefore, the applicants are entitled to have a right to appoint an arbitrator for resolving the dispute, which has arisen between the parties. Counsel for the applicants has placed reliance on Vidya Drolia Versus Durga Trading Corporation: (2021) 2 SCC 1 and Firm Ashok Traders & Anr. Versus Gurumukh Das Saluja & Ors.: (2004) 3 SCC 155.
7. It is contended by the counsel for the non-applicants that the dispute was pending before the NCLT and no application was filed with regard to there being an arbitration clause and only after passing of more than one year, an application has been moved by the applicants before the NCLT that there is an arbitration clause under Section 8(1) of the Act of 1996. It is also contended that the NCLT is ceased with the matter and since the applicants have not filed the application within the time prescribed under Section 8(1) of the Act of 1996 and have submitted to the jurisdiction of the NCLT, an arbitrator cannot be appointed by the Court. It is further contended that non-applicant No.7 was not a signatory to the arbitration agreement, hence, she cannot be made a party to the arbitration proceedings. Counsel for the non-applicants has placed reliance on Mahesh Kumar Versus Rajasthan State Road Transport Corporation, Jodhpur: C.R.P. No.309/2005 decided by (Downloaded on 18/07/2022 at 09:19:57 PM) (5 of 8) [ARBAP-69/2019] this Court on 29.07.2005 and Srei Infrastructure Finance Ltd. Versus Bhageeratha Engineering Ltd. & Ors.: 2009 (3) Arb.LR 342 (Gauhati).
8. I have considered the rival contentions of the counsel for the parties and have carefully perused the material on record.
9. It would be appropriate to quote the provisions of Section 8 of the Act of 1996, which reads as under:-
"8. Power to refer parties to arbitration where there is an arbitration agreement--1[(1)A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.] (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:2
[Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.] (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."
10. It is true that an application under Section 8(1) of the Act of 1996 has to be filed at the initial stage before submission of the (Downloaded on 18/07/2022 at 09:19:57 PM) (6 of 8) [ARBAP-69/2019] first statement on substance of the dispute, however, the application has been filed with delay. Application under Section 8(1) of the Act of 1996 is still pending before the NCLT. The moot question, which arises before the Court, is whether pending disposal of the application under Section 8(1) of the Act of 1996, can the Court proceed to dispose of the application under Section 11(6) of the Act of 1996. From bare perusal of sub-section (3) of Section 8 of the Act of 1996, it is evident that even if an application is pending, arbitration can be commenced, continued and an award can also be passed, meaning thereby that pendency of an application under Section 8(1) of the Act of 1996 does not debar the Court from appointing an arbitrator and even an award can be passed pending proceedings under Section 8(1) of the Act of 1996. It is also evident that Sections 8 and 11 of the Act of 1996 both have similar scope of judicial interference. As per Section 8, it is the judicial authority before whom a dispute is placed, which has to refer the matter for arbitration whereas sub- section (6) of Section 11 of the Act of 1996 comes into play when parties have failed to appoint an arbitrator with regard to arbitration agreement and the Court is then empowered to appoint an arbitrator. Admittedly, in the MOU, there is an arbitration clause i.e. Clause 13, which reads as under:
"13. In case of any dispute that may arise between the parties of this MOU the same shall be settled by mutual negotiations and failing which the dispute(s) shall be referred to Arbitration as per the provisions of the ARBITRATION AND CONCILIATION ACT, 1996."
11. The Apex Court in Vidya Drolia (supra) has dealt in detail with the meaning of non-arbitrability as well as the scope and ambit of jurisdiction of the Court at the referral stage when an (Downloaded on 18/07/2022 at 09:19:57 PM) (7 of 8) [ARBAP-69/2019] objection of non-arbitrability is raised on an application under Sections 8 and 11 of the Act of 1996. The Apex Court held that the Court under Section 8/11 has to refer a matter to arbitration or appoint an arbitrator, as the case may be, unless the party has established a prima facie (summary findings) case of non- existence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding. The Apex Court has also held that the subject matter of arbitrability cannot be decided at the stage of Sections 8 and 11 of the Act of 1996, unless it is a clear case of deadwood. The Apex Court has further observed that if the validity of the arbitration agreement cannot be determined on prima facie basis then the Court should refer the matter. The Apex Court used the expression "when in doubt, do refer" to convey the same.
12. From bare perusal of the arbitration clause, it is evident that any dispute that arises between the parties to the MOU was first required to be settled through mutual negotiations and failing which the dispute(s) shall be referred to arbitration. The parties therefore clearly intended that the dispute has to be referred to arbitration, if by mutual negotiations the dispute is not resolved. The pendency of the proceedings before the NCLT will not debar this Court from appointing an arbitrator under Section 11(6) of the Act of 1996 as there is no bar under Section 11 of the Act of 1996 and the Courts dealing with the matter of appointment of arbitrator under Section 11 cannot give a restricted meaning to the powers provided for under Section 11 of the Act of 1996 as Section 8 only gives an additional power to the judicial authority to refer the dispute to an arbitrator. It does not debar the Courts from exercising the powers under Section 11 of the Act of 1996, (Downloaded on 18/07/2022 at 09:19:57 PM) (8 of 8) [ARBAP-69/2019] which is evident from the wordings used in Section 11 of the Act of 1996.
13. As far as objection with regard to non-applicant No.7 is concerned, it is evident from bare perusal of the MOU that non- applicant No.7 is not a signatory to the MOU, however, she has filed an appeal and she is a signatory in the appeal before the NCLT. Therefore, it is deemed appropriate that it would be for the arbitrator to decide as to whether he has jurisdiction with regard to lis relating to non-applicant No.7. The arbitration application thus deserves to be allowed and the same is, accordingly, allowed. The non-applicants would be free to raise their objections before the arbitrator.
14. This Court appoints Mr. Justice S.S. Kothari (Retired), A/1- 301, VT Apartments, V.T. Road, Mansarovar, Jaipur - 302020, as an arbitrator to decide the dispute.
15. The appointment of the sole arbitrator is subject to the declarations being made under Section 12 of the Arbitration and Conciliation Act, 1996 with respect to the independence and impartiality, and the ability to devote sufficient time to complete the arbitration within prescribed period.
16. The arbitrator shall be entitled to lay down fees as provided under Manual of Procedure for Alternative Disputes Resolution, 2009 as amended from time to time.
17. Registry is directed to intimate Mr. Justice S.S. Kothari (Retired) and obtain his formal consent.
(PANKAJ BHANDARI),J SUNIL SOLANKI /PS (Downloaded on 18/07/2022 at 09:19:57 PM) Powered by TCPDF (www.tcpdf.org)