Gaurav Mittal vs Govind Saran Mittal And Others
2017 Latest Caselaw 5711 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Court No. - 59
 

 
Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 44 of 2010
 

 
Applicant :- Gaurav Mittal
 
Opposite Party :- Govind Saran Mittal And Others
 
Counsel for Applicant :- Swapnil Kumar
 
Counsel for Opposite Party :- A.K.Gupta,Abhijit Banerjee,Rahul Sahai
 

 
Hon'ble Yashwant Varma,J.

Heard Sri Swapnil Kumar, learned counsel for the petitioner and Sri Rahul Sahai and Sri Santosh Kumar Singh, learned counsels who have appeared for the opposite parties.

This application styled as being one under Section 11(6) of the Arbitration and Conciliation Act, 1996 Act seeks referral of disputes inter partes to an arbitral tribunal to be comprised of a sole arbitrator.

The agreement for referral of disputes to arbitration is contained in a partnership deed said to have been executed on 15 April 2005. The partnership deed relates to the business of "Anjana Sari Centre" in which the present petitioner and the opposite parties Nos. 1, 2 and 3 are also shown as partners. It appears that by a notice dated 19 February 2010, the petitioner put the opposite parties to notice and sought dissolution of the firm as well as for rendering of accounts. This notice was followed by a subsequent notice dated 22 February 2010 in terms of which the petitioner sought the assent and concurrence of the opposite parties to the appointment of one Anil Kulshreshtha, Advocate to act as the sole arbitrator. The respondents by their reply dated 19 March 2010 did not accede to this request and raised various objections to the demand of the petitioner seeking rendering of accounts as well as dissolution of the firm. It is in the above backdrop that the instant application came to be preferred before this Court.

On this petition notices were issued to the opposite parties who are represented by counsel and have also filed their counter as well as supplementary counter affidavits.

The submission of Sri Kumar, learned counsel for the applicant, was that the partnership deed does carry an arbitration clause in terms of clause 16 thereof and that there has been an admitted failure on the part of the respondents to concur upon the appointment of the sole arbitrator. His submission was that no consensus could be arrived at between parties on the constitution of the arbitral tribunal and therefore, circumstances do exist for this Court to exercise the powers conferred by Section 11.

Sri Sahai, learned counsel appearing for the respondents along with Sri Santosh Kumar Singh, has however submitted that the prayers as made in this petition need not be granted since admittedly, the firm of which the petitioner claims to be a partner forms subject matter of an arbitral award which came to be rendered on 19 June 2007. This award according to Sri Sahai was assailed by the father of the present petitioner by instituting proceedings under Section 34 which came to be dismissed by the District Judge. Against the said order of dismissal, the father of the petitioner is stated to have preferred a First Appeal From Order which is pending consideration before this Court. The submission of Sri Sahai was that since this award provides for the business of the partnership firm in question going to one Anil Mittal, there is an evident eclipse of the rights of the petitioner in terms of the award rendered and therefore, no occasion arises for this Court to refer the dispute for arbitration. The further submission of Sri Sahai was that as long as the said appeal remains pending on the board of this Court, the ends of justice would merit the disposal of this application being deferred till such time as the appeal is decided.

Countering the aforesaid submissions, Sri Kumar contended that admittedly the award relied upon is not inter partes and at least the present petitioner was not party to the said arbitral proceedings. He further submits that no proceedings for annulment of the said award were taken by the petitioner since he was not a party to the arbitral proceedings. Sri Kumar further contended that even otherwise, the applicant is not even required to lay a challenge to the said award since the same was an outcome of a reference made by parties other than the petitioner. He drew the attention of the Court to the fact that the reconstituted partnership came into existence on 15 April 2005 and the reference which culminated in the rendering of the award in question itself had been made after the partnership had come into existence. He submitted that whether the award would bring to an end all rights and claims of the petitioner and whether it would be liable to be viewed as being a final and binding adjudication of the claims of the petitioner are all aspects which would merit adjudication by the arbitrator and need not be gone into by this Court while considering an application under section 11 (6). It is these rival submissions which fall for determination.

The nature of the power which the Court exercises under Section 11 are well defined and stand duly enumerated in various decisions rendered by this Court as well as the Supreme Court. These decisions also lay down the principles which must govern the exercise of power by the Chief Justice or his nominee while considering an application under Section 11. While considering an application under Section 11 and deciding whether circumstances warrant reference of disputes to arbitration, the seminal considerations which must weigh with the Court is the existence of an arbitration agreement and a failure on the part of parties to constitute an arbitral tribunal in accordance with a procedure that may be agreed upon. The primary function discharged and performed by the Court acting as the nominee of the Chief Justice is to fill the gap, remedy the default, overcome the lack of consensus and effect an appointment of an arbitrator to enable a speedy referral and resolution of the dispute. Of course since the power so exercised is in one sense itself adjudicatory, it is open to the Court to consider certain jurisdictional issues such as whether there exists a live dispute, whether there has been a full and final satisfaction of claims or whether parties stand discharged from their obligations.

Insofar as the present case is concerned the existence of an arbitration agreement is not in dispute. The fact that the parties have failed to concur on the appointment and constitution of an arbitral tribunal is also admitted. In view thereof, this Court is of the considered view that the preludial and pre eminent factors which would set the provisions of section 11 into motion exist.

That leaves the Court to only consider the impact of the award which is stated to have been rendered and which deals with the business of the partnership in question. The issue which therefore the Court is called upon to consider is whether the existence of this award would warrant a dismissal of the application under section 11 itself.

As noticed above [and as was also submitted by Sri Kumar] this award has been rendered in proceedings to which the applicant was not a party. The award is an outcome of a reference made by parties other than the applicant. This reference was made admittedly after the partnership came to be constituted on 19 April 2005. The applicant is also not a party to the first appeal which is pending before this Court nor did he choose to institute any proceedings under Section 34 to challenge the said award. The issue of whether this award would operate as a full and final settlement or an authoritative adjudication and pronouncement of rights of the parties inter se is an issue which would, in the considered view of this Court, merit consideration and adjudication by the arbitrator. This simply because the issue itself is evidently debatable and would warrant the consideration of various aspects including but not limited to the rights of non parties to seek reference, the power of the arbitrator to rule upon the business of an entity which allegedly was not represented, the effect of the petitioner not being a party to such proceedings. A consideration of these issues would necessarily entail the leading of evidence, both oral and documentary as well as a detailed examination of the claims raised by respective parties. In view of the above, a decision on these aspects would clearly be unwarranted at the stage of deciding an application under Section 11(6) of the Act. In the facts of the present case and bearing in mind the nature of the submissions advanced this Court is of the firm view that a declaration or ruling upon the merits of the claims of the respective parties on this aspect would be wholly inappropriate. The Court deems it apposite to refer to the following observations as they appear in the decision rendered by the Supreme Court in Indian Oil Corporation Vs. SPS Engg. Ltd.1

"14. To find out whether a claim is barred by res judicata, or whether a claim is "mala fide", it will be necessary to examine the facts and relevant documents. What is to be decided in an application under Section 11 of the Act is whether there is an arbitration agreement between the parties. The Chief Justice or his designate is not expected to go into the merits of the claim or examine the tenability of the claim, in an application under Section 11 of the Act. The Chief Justice or his designate may however choose to decide whether the claim is a dead (long-barred) claim or whether the parties have, by recording satisfaction, exhausted all rights, obligations and remedies under the contract, so that neither the contract nor the arbitration agreement survived. When it is said that the Chief Justice or his designate may choose to decide whether the claim is a dead claim, it is implied that he will do so only when the claim is evidently and patently a long time-barred claim and there is no need for any detailed consideration of evidence. We may elucidate by an illustration: if the contractor makes a claim a decade or so after completion of the work without referring to any acknowledgment of a liability or other factors that kept the claim alive in law, and the claim is patently long time-barred, the Chief Justice or his designate will examine whether the claim is a dead claim (that is, a long time-barred claim). On the other hand, if the contractor makes a claim for payment, beyond three years of completing of the work but say within five years of completion of work, and alleges that the final bill was drawn up and payments were made within three years before the claim, the Court will not enter into a disputed question whether the claim was barred by limitation or not. The Court will leave the matter to the decision of the Tribunal. If the distinction between apparent and obvious dead claims, and claims involving disputed issues of limitation is not kept in view, the Chief Justice or his designate will end up deciding the question of limitation in all applications under Section 11 of the Act.

16. The question whether a claim is barred by res judicata, does not arise for consideration in a proceeding under Section 11 of the Act. Such an issue will have to be examined by the Arbitral Tribunal. A decision on res judicata requires consideration of the pleadings as also the claims/issues/points and the award in the first round of arbitration, in juxtaposition with the pleadings and the issues/points/claims in the second arbitration. The limited scope of Section 11 of the Act does not permit such examination of the maintainability or tenability of a claim either on facts or in law. It is for the Arbitral Tribunal to examine and decide whether the claim was barred by res judicata. There can be no threshold consideration and rejection of a claim on the ground of res judicata, while considering an application under Section 11 of the Act." (emphasis supplied)

The issue which falls for determination may be considered from yet another angle. In essence the award which has been rendered on 19 June 2007 is sought to be read and deployed as a defence by the respondents. This issue by its very nature would merit consideration by the arbitrator. Similarly what would be the impact or effect of the petitioners not assailing the said award would also be an issue which would merit consideration by the arbitral tribunal. These and other issues which the respective parties urged and raised touch and relate to the merits of the dispute and really does not detract from the existence of an arbitration agreement or the evident and admitted failure on the part of parties to concur on the constitution of an arbitral tribunal.

For all the aforesaid reasons, this Court turns down the objections taken to the grant of this application.

Accordingly the Court proposes the name of Hon. Mr. Justice Devendra Pratap Singh (Retd.), resident of 4-A Minto Road, Allahabad to act as the sole arbitrator for resolution of disputes between the parties. The Registry shall consequently issue notice to the proposed arbitrator for submission of his consent and disclosures as envisaged under Section 11 (8) of the Act.

List this petition again on 27 November 2017 by which time the consent of the proposed arbitrator may be obtained.

Order Date :- 25.10.2017

LA/-