Infraline Technologies (I) ... vs India Internet Incubator Ltd. And ...
2002 Latest Caselaw 1893 Del

JUDGMENT

S. Mukerjee, J.

1. After the matter was argued for about two hours by the parties, at my suggestion, learned counsel for he parties have very fairly agreed to an interim arrangement along the lines of the order dated 21.6.2002 with modification to the extent that out of the salaries of the two Directors Shri Yogesh Garg and Shri Parveen Garg, the salary of one out of the two Directors will also form part of the monthly payment to be disbursed by way of cheques signed jointly by Mr. U. Parthasarthy and Mr. Yogesh Garg from Account No. 027200014827 maintained by HDFC Bank Ltd., Greater Kailash Part II, New Delhi-110 048.

2. This interim arrangement will continue till the conclusion of the arbitration proceedings.

3. Over and above the agreed portion of the order being passed today, I have to deal with a contentious issue between the parties. A grievance has been made by the Senior learned counsel for the respondent Mr. Kailash Vasdev that power to grant interim order under Section 9, can only be in contemplation of arbitration proceedings between the parties, and by not taking any steps in that direction, the petitioner has disentitled itself for the grant of any relief under Section 9 of the Act. He relies upon the judgment of the Supreme Court (Ms. Sundaram Finance Ltd.

M/s. NEPC India Ltd.) Mr. Sanjay Jain learned counsel for the petitioner, on the other hand, submits that the arbitration clause between the parties contemplates that in the first instance, effort has to be made for conciliation as a pre-cursor to arbitration and petitioner has been making efforts in that direction which have, however, not been reciprocated by the respondent.

4. Without entering into a detailed discussion of the contention and counter contentions on this aspect, more so, since there is an agreed order under Section 9 obviating the necessity for my commenting, even prima facie, on the issues involved, therefore, lest any observations operate to the prejudice of either of the parties, I consider it appropriate to confine myself to the following directions in the light of the judgment of the Apex Court in Sundaram Finance case, relevant portion whereof is quoted for convenience of reference:-

"20. When a party applies under Section 9 of the 1996 Act it is implicit that it accepts that there is a final and binding arbitration agreement in existence. It is also implicit that a dispute must have arisen which is referable to the arbitral tribunal. Section 9 further contemplates arbitration proceedings taking place between the parties. Mr. Subramaniam is, therefore, right in submitting that when an application under Section 9 is filed before the commencement of the arbitral proceedings the has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings if, at the time when the application under Section 9 is filed, the proceedings have not commenced under Section 21 of the 1996 Act. In order to give full effect to the words "before or during arbitral proceedings" occurring in Section 9 it would not be necessary that a notice invoking the arbitration clause must be issued to the opposite party before an application under Section 9 can be filed. The issuance of a notice may, in a given case, be sufficient to establish the manifest intention to have the dispute referred to arbitral tribunal but a situation may so demand that a party may choose to apply under Section 9 for an interim measure even before issuing a notice contemplated by Section 21 of the said Act. If an application is so made the Court will first have to be satisfied that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration. Once it is so satisfied the Court will have jurisdiction to pass orders under Section 9 giving such interim protection as the facts and circumstances warrant. While passing such an order and in order to ensure that effective steps are taken to commence the arbitral proceedings, the Court while exercising jurisdiction under Section 9 can pass conditional order to put the applicant to such terms as it may deem fit with a view to see that effective steps are taken by the applicant for commencing the arbitral proceedings. What is apparent, however, is that the Court is not debarred from dealing with an application under Section 9 merely because no notice has been issued under Section 21 of the 1996 Act."

5. Accordingly it is directed that the continuance of the order passed by me under Section 9 of the Arbitration and Conciliation Act, 1996 till the disposal of the arbitration, will be subject to the petitioner taking effective steps for commencement of arbitral proceedings. To avoid any unnecessary controversy on this aspect, I clarify that effective steps in the context of the present case would be that the petitioner make necessary demand for dispute resolution by arbitration, as contemplated by the arbitration clause which is admittedly contained in all of the various contracts between the parties, and suggesting atleast three names of retired Supreme Court/ High Court Judges to be considered for appointment as Sole Arbitrator, and in the event of there being no agreement regarding the person to act as Sole Arbitrator, ten to make necessary application before the Competent Court under Section 11 of the Arbitration and Conciliation Act, 1996 for obtaining the orders of the Competent Court in that behalf.

6. Needless to say, consider that the arbitration by any retired Judge, is bound to entail arbitrator's fee and also other expenses of the parties on travel, counsel's fee etc. or properly representing their case before the Arbitrator, the entire sitting fee as well as a reasonable amount towards the Advocates fee and other expenses, should be made available to both parties from the joint account of the petitioner company.

7. It has been pointed out by learned Senior Counsel for the respondent, that the venue of arbitration as stipulated in the agreements, is Mumbai. On the other hand, learned counsel for the petitioner Mr. Sanjay Jain submits that no useful purpose will be served by the parties going all the way to Mumbai for the arbitration considering that the Company is in Delhi and all the relevant record is also available in Delhi, and that in case any official of the respondent has to come from abroad, it will entail the same or almost same expenditure for them to participate in arbitration sittings at Delhi.

8. Since at this stage, the parties have been directed to initiate effective steps in accordance with the arbitration clause, I do not propose to observe on this aspect, leaving it to the parties to agree on the venue of the arbitration. In case the parties disagree, then Along with the other aspects, this will be considered by the Competent Court, dealing with the petition under Section 11 of the Arbitration and Conciliation Act, in accordance with law, and in the overall interests of expeditious conduct of the arbitration.