Ramesh Nanji Thakkar And Anr vs M/S. Modi Builders And Ors
2021 Latest Caselaw 4740 Bom

               IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                            CIVIL APPELLATE JURISDICTION

                ARBITRATION PETITION (STAMP) NO.92563 OF 2020
Ramesh Nanji Thakkar and Anr.                                  .. Petitioners
            Vs.
Modi Builders and Ors.                                         .. Respondents


Mr. Vivek Kantawala, with Mr. Amey Patil, i/by Vivek Kantawala & Co., for the
Petitioners.
Mr. G.S. Godbole, with Mr. Rohan Sawant and Adv. A. Vibhute, for the
Respondents.

                                                 CORAM : A. K. MENON, J.

DATED : 16TH MARCH 2021.

P.C. :

1. This arbitration petition, filed under Section 11 of the Arbitration and

Conciliation Act, 1996, proceeds on the basis that the petitioners and the

respondents had entered into an agreement described as "Venture Capital

Agreement" dated 16th April 2004, copy of which is at Exhibit-A to the

petition. Under the agreement, the 2 nd party decided to introduce capital for

the purposes of development of real estate and in that respect a sum of Rs.1.50

crores is said to have been entrusted with the respondent no.1, as provided in

clause (2) of the agreement.

2. It is the case of the petitioners that disputes have since arisen between

the parties and the petitioners became entitled to invoke arbitration, which

they did by letter dated 14th January 2020, copy of which is at Exhibit-C to

the petition.

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3. The respondents have opposed this application. The execution of the

agreement is not in dispute. Three defences that have been canvassed before

me today; firstly, on the point of limitation that the claim is expressly barred

by limitation in view of the fact that clause (4)(a) of the agreement provides

for a lock-in period of 24 months. Clause (4)(a) of the agreement provides as

follows :-

"(4)(a). The First Party agrees to refund the amount introduced and entrusted to it as the Venture Capital for the said project to the Second Party after a lock in period of twenty four months from introduction thereof, as per mutual agreement."

4. According to Mr. Godbole, who appears for the respondents, upon

expiry of the period of 24 months, the period of limitation starts and thus

effective from 15th April 2006, limitation period should be computed and the

invocation of arbitration is therefore belated. The claim is clearly barred by

limitation. Mr. Godbole submits even after his appointment, the Arbitrator

cannot decide the issue of limitation in view of the notification dated 30 th

August 2009 amending the Arbitration and Conciliation Act, 1996 and

deleting sub-section 6(a) in Section 11, the contention being that it is now for

the High Court to decide the issue of limitation and the issue cannot be

decided by the Arbitrator.

5. Secondly, it is contended that the document is not stamped in

accordance with the provisions of the Bombay Stamp Act, 1958. The

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petitioners have proceeded on the basis that the document containing

arbitration clause is an agreement, which records the transaction between the

parties and therefore attracts Article 5 and Article 5(h), which provides for

payment of a sum of Rs.100/- effective from 1 st July 2004 and by that

reckoning, the agreement is duly stamped with Rs.50/- being executed on the

stamp-paper of Rs.50/-. The amendment to Article 5(h) was brought into

effect only on 1st July 2004 i.e. after the execution of the agreement on 16 th

April 2004. Thus, it is the petitioners' case, as canvassed by Mr. Kantawala,

that the agreement is properly stamped; whereas, Mr. Godbole contends that

the agreement is an "Acknowledgment of Debt" and ought to be stamped in

accordance with Article 1.

6. Thirdly, Mr. Godbole submitted that the amount received under the

agreement has been repaid in August, 2007 and therefore nothing is due and

payable, the contention being that there is no cause for invoking the

arbitration as on present date.

7. As far as the first issue is concerned, the Supreme Court in the decision

of Bharat Sanchar Nigam Ltd. and Anr. Vs. Nortel Networks India Pvt. Ltd.,

2021 SCC OnLine SC 207, has as recently as March 10, 2021 observed that

the notification dated 30 th August 2019 has not been brought into effect.

Thus, the amendment not having been brought into effect, the matter

continues within the scope of the arbitral tribunal to decide and it is not for

the High Court to decide it pursuant to the amendment. This judgment would

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hold the field and hence the issue of limitation can be decided by the arbitral

tribunal.

8. Mr. Godbole's contention that the document is unstamped is also

unsustainable. I am unable to accept the contention of the respondents that

the agreement is required to be stamped under Article 1. The document is

clearly an agreement, which records the parties' understanding and it clearly

falls within Article 5, not falling within any of its sub-clauses (a) to (g), but

would fall under the residual provision of article (h) and to that extent, I am

in agreement with Mr. Kantawala that the respondents' objection has no

merit.

9. As far as the plea of repayment is concerned, that is a matter of

evidence and is a defence on merits. This court is not required to consider the

defence on merits and that will be decided by the arbitral tribunal.

10. In these circumstances, it becomes obvious that the arbitral tribunal, as

contemplated under the agreement and under clause (8)(i), is required to be

constituted. The question is whether in the circumstances, the tribunal is to

consist of one or three arbitrators. Mr. Godbole on behalf of the respondents

has submitted that the tribunal was to consist of three arbitrators; however I

am unable to accept this submission in view of the fact that the agreement

does not specify the number of Arbitrator or lay down any procedure for

appointment of the arbitral tribunal. Clause (8)(i) reads as follows :-

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"(8)(i). In the event of any disputes and / or differences arising between the parties hereto, out of and / or relating to any matter herein, and / or the terms and conditions of this agreement, the same shall be referred to the Arbitral Tribunal to be named by each of the parties, which shall be governed under the provisions of the Arbitration and Conciliation Act, 1996 and whose decision shall be final, conclusive and binding upon the parties hereto."

11. Thus, clause (8)(i) read with the fact that the invocation of arbitration

vide letter dated 14th January 2020 clearly envisages appointment of a Sole

Arbitrator. Consent and concurrence of the respondents was sought in that

letter of invocation. In reply to the invocation, the respondents' Advocate's

letter dated 18th February 2020 is silent on the aspect of concurrence with

any one name suggested by the petitioners. On the other hand, the

respondents deny the existence of such an agreement and therefore the

existence of the arbitration agreement between the parties.

12. This contention is required to be rejected in view of the clear admission

that the agreement had been executed and the fact that the amounts due

under the agreement have been repaid. There is also nothing in the clause (8)

(i) which suggests reference to a three member tribunal. The understanding

of the petitioners also was that a Sole Arbitrator is required to be appointed,

hence the nomination of one of two persons. The response of the respondents

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is one of total denial. I am unable to accept the respondents' contention that

clause (8)(i) of the agreement contemplates a three member tribunal. In view

of the same, I am of the view that the petition is liable to be allowed.

13. In view of the above, I pass the following order :-

(i) Dr. Shalini Phansalkar-Joshi, Former Judge of this court,

is appointed as Sole Arbitrator to adjudicate upon

claims and counter claims, if any,

(ii) The learned Arbitrator is requested to file her disclosure

statement under Section 11(8) and Section 12(1) within

a period of three weeks from today with the Registrar

(Judicial-I) and provide copies to the parties.

(iii) Parties to appear before the Sole Arbitrator on a date to

be fixed by her as per her convenience.

(iv) Fees payable to the Sole Arbitrator will be in accordance

with the Bombay High Court (Fee Payable to

Arbitrators) Rules, 2018.

(v) Arbitration Petition is disposed in the above terms.

(vi) No costs.

(A. K. MENON, J.)

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