M/S Greenbilt Industries Private ... vs M/S A B Dinesh Concrete Private Limited
2025 Latest Caselaw 1499 Cal/2

Calcutta High Court

M/S Greenbilt Industries Private ... vs M/S A B Dinesh Concrete Private Limited on 27 March, 2025

Author: Shampa Sarkar

Bench: Shampa Sarkar

                       IN THE HIGH COURT AT CALCUTTA
                             (Commercial Division)
                                ORIGINAL SIDE


Present: Hon'ble Justice Shampa Sarkar


                            AP (COM) 421 of 2024

              M/S GREENBILT INDUSTRIES PRIVATE LIMITED
                                VS
              M/S A B DINESH CONCRETE PRIVATE LIMITED


For the petitioner :                            Mr. Kumarjit Banerjee, Adv.
                                            Ms. Sanchari Chakraborty, Adv.

For the respondent :                     Mr.Sourav Kumar Mukherjee, Adv.

Ms. Falguni Jana, Adv.

Ms. Sahana Pal, Adv.

Mr. SouhardyaMitra, Adv.

Hearing concluded on: 15.01.2025 Judgment on: 27.03.2025

Shampa Sarkar, J.:-

1. This is an application for appointment of a learned

Arbitrator for settlement of disputes which allegedly arose out of

a transaction for acquisition of the petitioner's ACC block

manufacturing unit, by the respondent. The petitioner contended

that this Court must appoint an arbitrator, in view of the

termination of the arbitration proceeding by Sri Prabir Gupta,

petitioner's nominee, on April 20, 2023.

2. According to the petitioner, the respondent wanted to take

over the entire ACC block manufacturing plant situated at Karga

village, post office Jamgaon (M), District Durg (CG), which was

approximately 25 kilometres from Raipur city. The respondent

approached the petitioner sometime in October 2020. Various

terms and conditions regarding the aforementioned sale and

takeover were allegedly discussed and an oral agreement was

arrived at. It was agreed that, the assets, plants and machinery

would be taken over by the respondent for a consideration of

Rs.21 crores. The respondent would pay an advance of Rs.3

crores, which would be forfeited, in the event the respondent

failed to perform its obligations. It was further agreed that, until

the substantive agreement for sale and handover of the plant was

prepared and finalized, the respondent would be allowed to run

the said plant during the interregnum and for that purpose,

occupational charge of Rs.4 per square feet, per month, would be

payable to the respondent, from the date of handing over of

physical possession. Once the physical possession was handed

over, the respondent would be able to apply for various statutory

permits and licenses, including registration under the Goods and

Services Tax Act. In terms of the oral agreement, a written

agreement dated December 7, 2020, was signed by the parties.

The physical possession was handed over on December 10, 2020,

and part payment of Rs.2,80,00,000/- out of the agreed advance

of Rs.3 crores, was made by the respondent. The bank

transactions stood testimony to such fact.

3. The petitioner's further case was that, the parties reduced

the terms and conditions of the substantive agreement into a

Memorandum of Understanding (in short the said MOU) dated

February 9, 2022. The said MOU contained an arbitration clause.

The memorandum of understanding was circulated by email. The

director of the respondent had forwarded the final draft copy of

the MOU to the petitioner, via e-mail, for finalization. As the

petitioner did not raise any objection, for all practical purposes,

the draft MOU should be treated as the final MOU and the

conduct of the parties clearly displayed such intention. The

respondent failed to pay the balance of the agreed advance, the

remaining consideration upon finalization of the MOU and the

occupational charges for the interregnum. Disputes cropped up

between the parties.

4. It was further alleged that, by the end of the year 2020, the

respondent abandoned the plant without any notice to the

petitioner. On April 3, 2023, one Mr. Ashok Kumar Agarwal, a

director of the respondent, who was at the helm of affairs of the

respondent company, and one Mr. Aditya Agarwal, a director of

the petitioner company, mutually agreed to invoke the arbitration

clause contained in the MOU, which had been sent via email to

the petitioner, by the respondent, on February 9, 2022. In the

agreement dated April 3, 2023, the parties nominated their

arbitrators, that is, the respondent nominated Sri Bijoy Kumar

Tibrewal and the petitioner nominated Sri Prabir Gupta.

5. In terms of the agreement dated April 3, 2023, the date of

the arbitration was proposed to be held on April 20, 2023, at

Kolkata, subject to acceptability by the arbitrators. According to

the petitioner, on the appointed day, neither the respondent nor

the arbitrator appointed by the respondent, attended the sitting

and as such, the mandate of the arbitral tribunal stood

terminated. The minutes of the meeting scheduled on April 20,

2024, at 4.30 p.m. recorded such termination by the nominee of

the petitioner. Thereafter, the petitioner issued a demand letter

on September 14, 2023. The said demand letter was replied to by

the respondent. The respondent denied all the disputes and

claims of the petitioner. The petitioner then issued a notice under

Section 15(2) of the Arbitration and Conciliation Act, 1996, by

appointing a substitute arbitrator, that is, a senior Advocate of

the Calcutta High Court.

6. In reply to the said letter, the respondent raised various

objections and also disputed the nomination of the substitute

arbitrator. The respondent also denied the existence of an

arbitration agreement.

7. However, it is the contention of the petitioner that, the

respondent also disputed the claims which indicated that there

was a subsisting dispute between the parties and the dispute

should be settled by arbitration. Accordingly, the petitioner has

approached this court for appointment of an arbitrator, in terms

of clause 12.3 of the MOU dated February 9, 2022.

8. Mr. Banerjee, learned Advocate for the petitioner submitted

that the MOU dated December 7, 2020, was entered into as an

interim arrangement, to facilitate handing over of the physical

possession and operational control to the respondent. The parties

did not intend the same to be the final MOU with regard to the

sale of all the assets and terms and conditions of such sale. Such

agreement was entered into, to make it easy for the respondent to

obtain statutory permits, licenses and apply for GST registration.

Later, the respondent reduced the terms and conditions of the

substantive agreement into writing and the MOU dated February

9, 2022, was circulated via email.

9. Exchange over email was a valid and accepted form of

execution of an arbitration agreement. Clause 12.3 of the said

MOU constituted a valid and binding arbitration clause between

the parties, in terms of Section 7 (4) (b) of the Arbitration and

Conciliation Act, 1996, (hereinafter referred to as the said Act).

Clause 12.3 of the said MOU was a valid and a separate

agreement. Even if, the MOU was invalidated for any other

reason, the arbitration agreement continued to be a separate and

independent agreement between the parties.

10. According to Mr. Banerjee, the parties acted on the basis of

the MOU dated February 9, 2022. The promoters/directors

representing the parties entered into an agreement on April 3,

2023, for appointment of arbitrators. The first sitting could not

be held on April 20 2023, due to the absence of the respondent

and its nominated arbitrator. However, the petitioner's nominated

arbitrator was present. When the mandate terminated, the

petitioner issued a notice under Section 15(2) of the said Act of

1996, requesting the respondent to nominate a substitute

arbitrator. By an email dated February 1, 2024, the respondent

had admitted the existence of the MOU dated February 9, 2022.

It would be evident from a bare perusal of the aforementioned

email that, the respondent did not dispute the existence of the

MOU but, alleged that the MOU was a product of

misrepresentation and fraud. Such allegation that the MOU was

a product of misrepresentation and fraud, was also an arbitrable

dispute and this court must appoint a learned Arbitrator to

arbitrate upon all issues, including the objection raised by the

respondent with regard to the validity of the said MOU, in view of

the termination of the arbitral proceeding.

11. Mr. Banerjee relied on the following decisions:-

i. Cox and Kings Ltd. vs. SAP India Pvt. Ltd. and Another, reported

in (2024) 4 SCC 1.

ii. Mahanagar Telephone Nigam Ltd. vs. Canara Bank and Others,

reported in (2020) 12 SCC 767.

12. The learned Advocate for the respondent submitted that, the

petitioner had committed fraud and had misled the respondent,

which in turn led to the communication of the draft MOU. The

respondent had been defrauded in respect of the plant sought to

be purchased, which resulted in huge financial loss. Such loss

was recoverable from the petitioner. It was further urged that,

this court did not have the jurisdiction to entertain the

application. According to the respondent, the said MOU had not

been executed between the parties. Various blank spaces had

been left in the draft MOU which were never filled up by the

parties. Such omissions would indicate that the draft MOU was

never finalized and the parties did not sign the same by

incorporating all relevant information and details in the draft

MOU.

13. The MOU of dated December 7, 2020 was executed between

the parties. The same was duly signed by the parties. The same

did not contain any arbitration clause. The parties acted upon

the said instrument. In the MOU of December 7, 2020, the

courts of Bhubaneswar were to have jurisdiction. The alleged

MOU of February 9, 2022, remained in a draft form, which was

incomplete. There were no further documents which would show

that the terms had been finalized. The said MOU was sent by

email on February 9, 2022, to enable the petitioner to make the

necessary corrections and also for further discussion with Mr.

Ashok Agarwal. Although, the alleged draft MOU contained an

arbitration clause, but as the said MOU was neither finalized nor

executed between the parties, the arbitration clause could not be

said to be binding. The same could not be treated as an

enforceable clause.

14. With regard to the document dated April 3, 2023, the

learned Advocate stated that the said document could not be

treated as an arbitration agreement in respect of companies. It

did not partake the characteristic of an arbitration agreement.

The document had been signed by Mr. Ashok Kumar Agarwal and

Mr. Aditya Agarwal in their individual capacities. They never

represented the respective companies between whom the subject

MOU had been allegedly executed. Even assuming that the draft

MOU had an independent arbitration clause, but as the MOU of

2020 had the forum selection clause and the MOU circulated in

2022, was in furtherance to the MOU of 2020, the forum

selection clause in the MOU of 2020, would prevail. According to

Section 11(12)(b) of the 1996 Act, the application should have

been filed before the High Court of Odisha, as the respondent

carried on business at Odisha and there was a forum selection

clause. The MOU of 2020 was executed in Odisha. The plant was

situated at Chattisgarh and no part of the cause of action had

arisen within the jurisdiction of the Calcutta High Court.

15. The respondent further submitted that the petitioner issued

a notice dated September 14, 2023, which did not mention

anything about the arbitration clause. Had the petitioner believed

that the draft MOU had been finalized and clause 12.3 was a

binding arbitration agreement between the parties, in that event,

in the demand notice dated September 14, 2023, the petitioner,

would have mentioned the existence of the arbitration clause.

The sitting on April 20, 2023, which was allegedly attended by

the petitioner and the arbitrator nominated by the petitioner, was

not connected to the subject transaction.

16. It was further submitted that a complaint was filed by the

respondent in the Paharpur police station against the petitioner

and its office bearers in respect of the draft MOU circulated in

2022, on the ground that the same was the creature of fraud and

misrepresentation. The police authorities failed to register the

FIR and the respondent was compelled to file a proceeding before

the learned J.M.F.C (O) Bhubaneswar vide I.C.C case No.3652 of

2023. The learned court directed the police authorities to register

the complaint petition and to report compliance to the learned

court.

17. The issue is whether this court can refer the dispute to

arbitration on the strength of the alleged draft MOU forwarded

via e-email by the respondent, to the petitioner, on February 9,

2022.

18. Admittedly, the MOU of December 7, 2020 was signed and

executed by and between the parties as a step towards

acquisition of the ACC block manufacturing plant of the

petitioner, by the respondent. The said MOU contained various

clauses, including a forum selection clause. It did not contain an

arbitration clause. Clause 9 of the agreement provided that

competent courts at Bhubaneswar, within which the agreement

had been made, would have exclusive jurisdiction. It appears that

a mail was sent by one Laba Kumar Shaha dated February 9,

2022, to the representative of the petitioner/director, which

stated as follows:-

"The final draft MOU is attached here with, if any clarification, please discuss with Ashokji."

19. The said email is dated February 9, 2022, but the

attachment that is, the final draft MOU, which has been relied

upon, is dated ______ day of November 2020, at Raipur. The

blank space remained unfilled.

20. Thus, the said MOU does not appear to have been finalized

with the correct date and month. It was circulated, according to

the petitioner, on February 9, 2022. The MOU contains various

blank spaces, which were not filled in by the parties. These blank

spaces were with regard to vital information relating to the

identity of the representatives of the respondents, the

approximate amount of loan which was availed of by the

respondent, modalities of takeover, the outstanding liability, the

consideration for purchase of assets, the bank liability, mode of

payment in the first, second, third phase, etc.

21. The arbitration clause is quoted below:-

"12.3 All disputes or claims arising between the Parties hereto during the subsistence of this MOU or thereafter, in connection with this MOU, including but not limited to disputes relating to the validity, interpretation, performance, breach, termination, rescission or nullity thereof as well as pre or post contractual obligations, even if such claims are based on other legal grounds than this MOU, shall be finally settled by arbitration in accordance with the Arbitration and Conciliation Act 1996 and Rules made thereunder."

22. The said clause does not provide a forum. The last page of

the said MOU does not contain the signatures of the parties and

the witnesses. The schedules to the said MOU were left blank.

23. Thus, it appears that the said MOU was at the draft stage.

The necessary incorporation of facts and figures were not made.

The same does not appear to be a complete document. Even for

argument's sake, if it is accepted that the communication of the

draft MOU via email and non-response of the petitioner to the

draft MOU, amounted to acquiescence by conduct, this court

does not find that the parties had agreed to confer jurisdiction

either to this court or to courts at Kolkata. The cause of action

arose at Odisha and Raipur/Chattisgarh.

24. The alleged agreement dated April 3, 2023, which has been

relied upon by the petitioner as a subsequent agreement between

the parties regarding nomination of their arbitrators, does not

contain any reference to the final MOU of November, 2020, which

was circulated by email dated February 9, 2022. It is in the

nature of a declaration, which is extracted here under for

convenience.

"To Whom It May Concern

This is to establish that following parties have met on 03.04.2023 and it has been mutually decided between them to nominate and appoint 2 persons (one person each to be nominated by each party) as arbitrators to form an arbitration panel with the intention to solve the pending matted between Sri Ashok Kumar Agarwal (First Party) and Aditya Agarwal (Second Party)

The date of arbitration is proposed to be 20.04.2023 at Kolkata (Subject to acceptability by the arbitrators)

person Nominated by Sri Ashok Kumar Agarwal:

Sn Bijay Kumar Tibrewal (Contact No. 9437053993)

Person Nominated by Sri Aditya Agarwal:

Sn Prabir Gupta (Contact No: 7003703495)

Both the arbitrators may involve a third person as arbitrator, if required by them, to which both the parties shall have no objection

All decisions taken by the arbitrators shall be final and binding upon both the parties.

The costs of such arbitrators shall be borne by nominating parties. Any other costs, if any, to De borne as decided by the arbitrators."

25. The said document does not reveal that the disputes

discussed were in relation to the subject final draft MOU of

November 2020. The parties thereto were not the companies. The

document was executed to solve the pending matters between

Ashok Kumar Agarwal and Aditya Agarwal. The said agreement

mentions that arbitration will be held at Kolkata, subject to

acceptance by the arbitrator. There is nothing on record to

connect the said document to the subject MOU. There is nothing

on record to show that the arbitrator accepted Kolkata as the

place/seat/venue.

26. The document indicates that the parties, that is, Ashok

Kumar Agarwal and Aditya Agarwal had mutually decided to

constitute an arbitral tribunal. Each party nominated an

arbitrator with the intention to solve pending matters between

Ashok Kumar Agarwal and Aditya Agarwal. The subject

transaction or the final draft MOU of November 2020, circulated

on February 9, 2022, was not between Aditya Agarwal and Ashok

Kumar Agarwal, but between the petitioner and the respondent,

which are both private limited companies and juristic persons.

The companies are separate entities and the agreement between

Ashok and Aditya to settle their disputes, cannot bind the parties

to the proceeding.

27. On the date of the sitting, i.e., April 20, 2023, the nominee

of the petitioner was present along with Mr. Aditya Agarwal, but

neither Ashok nor Ashok's nominee was present. Accordingly, the

proceeding was terminated. The demand letter dated September

14, 2023, which was issued by the learned Advocate of the

petitioner much after the circulation of the email, does not

contain any mention or reference to the arbitration clause.

28. The same was a demand notice by which the learned

Advocate for the petitioner had mentioned the MOU of December

7, 2020, and raised various allegations against the respondent,

including non-payment of the balance of the advance, non-

payment of occupational charges and abandonment of the plant

without any notice or reason. The petitioner alleged that the

respondent had been in occupation of the plant from December

10, 2020 to December 2022, but suddenly vacated the premises

without any prior information or notice. The relevant portion of

the demand notice is quoted below, for convenience:-

"As per the terms and condition of an oral agreement, which was arrived in trust and good faith will with the long standing business relationship with you as in ABDCPL. you wanted to purchase our said Manufacturing plant with all its assets and Manufacturing Unit. It was also decided that you will advance a sum of Rs. 3 crores as token money which can be forfeited in case you fail to perform the terms of the agreement. It was further decided that you will be allowed to run the said Manufacturing unit till the time of the final sale was not done/executed (maximum 12 months from the date of MOU) and for that you will pay my client Occupational charges of Rs. 4/-

per sq. feet per month payable on or before the 10th day of that month. You also further agreed that all the rates and taxes, statutory charges, will be borne by you from the date of taking over the possession. And all government formalities and insurance which was necessary for running such manufacturing unit and personnel including menial staff will be taken out by you.

As per an oral agreement you applied to the Goods And Service Tax Department for registration and having a GST number from the said Plant office and for that a written agreement was finalized and signed by both the parties which showed thatyou were in occupation of the said factory. It was further agreed that you will be allowed to use the raw material and other setup of the Plant. You also agreed to pay my client commission on the production till the sale is completed. You also agreed to pay for the cost of Raw material used while manufacturing which were purchased by my client.

You were in physical occupation of the said plant from 10th December 2020 till 1* December 2022 for a considerable period but you vacated the premises without any prior information and / or notice. Besides this ABDPL has also created liabilities towards some local and outside labourers and contractor and some of other liabilities which you were liable to pay. But to the utter surprise of my client you failed to pay any amount toward taxes and other statutory dues, thus you have committed breach of trust and details of such taxes and other dues are given below.

Occupational Charges towards use of Factory Premises @ Rs. 4/- per sft for 243936 sft for 25 months as per Rent Chart including Interest @ 12% p.a.

Amount

26319196

Depreciation on Plant & Mach for 25 months as following:

01.12.2020 to 31.03.2021 8895810

01.04.2021 to 31.03.2022 23151346

01.04.2022 to 01.12.2022 13389195

Rent for using Misc Assets like Transformer, Weigh Bridge, Pallets, etc. lumpsum@ 2 lac per month for 25 months 5000000

Commission on production for offices ice, GST, etc.Rs. 100/- per CuM of Production 6000000

Rent for accommodation to 3 personnel staff 1125000 Damages 100000000 Loss of Interest for the period of 25 months 12500000 Mental Harrasement100000000

Unpaid Electricity Bill for the month of September-November 202210,02,151

Satutory Licenses for 2 years Pollution-Air & Water1500000 Water Board 1000000 Boiler 100000 Property Tax 100000 Pending Outstanding liabilities towards labourers 1000000

Raw Material Stock Consumed as on in Dec 2020 618250

Damages to Plant & Mach at the time of Exit3500000

TOTAL 305200948

On several occasions my client had requested you to pay the said amount but all their request had fallen onto your deaf ears. Having no option they once again requested u to pay, in lieu of the total outstanding amount.

By reason of your wrongful acts, delay and conducts, my client has suffered loss and damages in excess of Rs. 305200948 excluding Interest. Interest to be calculated at the rate of 12% p.a. for the period from 01.12.0220 to 01.12.2022, both of which you are liable to pay within 15 days from receipt of the said notice. You are also liable to pay a further interest at the rate of 12% p.a. till the date of recovery.

In the aforesaid facts and circumstances, I on behalf of my client call upon you to demand payment of amount as mentioned in above paragraph along with interest from you within 15 days from the date of receipt of this notice. In default my client will have no other alternative but to take appropriate proceeding both civil and criminal before appropriate court/ forum without giving you any further notice and you will be liable for all costs and consequences arising thereof."

29. The tenor of the said letter clarifies the position that, the

petitioner was asserting the terms and conditions of an oral

agreement and the signed agreement of December 7, 2020. The

last paragraph of the said letter indicates that the petitioner

would make the respondent liable by instituting civil and

criminal proceedings for the alleged breaches and consequences

thereof. The letter does not indicate at all that, there was any

arbitration clause between the parties and the petitioner was

going to invoke the said clause.

30. There does not appear to be any notice invoking arbitration.

On the contrary, reliance has been placed on the agreement of

3rd April 2023, in which Ashok Kr. Agarwal and Aditya Agarwal

had mutually agreed to resolve pending matters between

themselves, by a panel consisting of their nominated arbitrators,

and the meeting would be at Kolkata if accepted by the

arbitrators. The said document cannot be construed as an

arbitration agreement between petitioner and respondent

companies. The forum selection cannot be attributed to the

second MOU which was forwarded by e-mail. Moreover, the

proceeding was terminated by the nominee of Aditya Agarwal. It

was a case of termination and not recusal or withdrawal of the

learned Arbitrator.

31. In view of the discussions hereinabove and in the absence of

any jurisdiction/forum selection clause, the High Court at

Calcutta cannot act as the referral court in the instant case. The

cause of action did not arise within the jurisdiction of this court.

Receipt of a draft MOU at the office of the petitioner, cannot

confer any jurisdiction to this Court

32. In the facts and circumstances of this case, the judgments

relied upon by Mr. Banerjee, do not apply.

33. Under such circumstances, the application is dismissed.

34. This order will not prevent the petitioner from proceeding in

accordance with law, before the appropriate forum.

35. This order is restricted to the adjudication of this

application, seeking reference to arbitration by this Court.

36. There shall be no order as to cost.

(Shampa Sarkar, J.)