M/S Amardeep Developers Pvt Ltd vs Oswal Chemicals & Fertilizers Ltd ...
2008 Latest Caselaw 1185 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI


+                        Arb.P.319/2006

%                              Date of decision : 30.07.2008


M/S AMARDEEP DEVELOPERS PVT LTD          ....... Petitioner
                Through: Mr Vijay Sharma, Advocate.


                                  Versus


OSWAL CHEMICALS & FERTILIZERS LTD ....... Respondents

& ANOTHER Through : Mr Rajiv Bansal, Mr Harshit Aggarwal and Mr Prashant Mehra for Respondent No.2.

Respondent No.1 ex parte.

CORAM :-

HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

     1. Whether reporters of Local papers may
        be allowed to see the judgment?                      YES

     2. To be referred to the reporter or not?               YES

     3. Whether the judgment should be reported              YES
        in the Digest?


RAJIV SAHAI ENDLAW, J

1. The petitioner has applied for appointment of arbitrator under

Section 11(6) of the Arbitration and Conciliation Act, 1996. The

petitioner claims to have entered into an agreement with the

respondent No. 1 (Oswal Chemicals and Fertilizers Limited) for

carrying out the work of civil construction at the factory of the

respondent No.1 at Paradeep, Orissa. It is further the case of the

petitioner that after the completion of the work, the said factory of the

respondent No.1 at Paradeep, Orissa has been disposed of to the

A.A.319/2006 Page no. 1 of 6 respondent No.2, Indian Farmers Fertilizers Cooperative Limited

(IFFCO) in the month of September, 2005. The petitioner claims

monies to be due to it under the contract aforesaid with the

respondent No.1. The said contract/agreement between the petitioner

and the respondent No.1 is stated to be containing an arbitration

agreement. The petitioner has filed before this court a letter dated 1st

June, 1998 of the respondent No.1 to the petitioner in this regard. The

said letter contains a clause as under :

"Arbitration :

In case of any dispute which can not be settled by mutual negotiations, the matter shall be referred for Arbitration in accordance with Indian Arbitration and consultation Act 1996 or any statutory modifications or enactment thereof for the time being in force. The venue for Arbitration in all cases shall be Delhi and shall be conducted in English only."

2. The petitioner claims to have got issued a legal notice dated 5 th

January, 2006 to the respondent No.1 calling upon the respondent

No.1 to agree on the appointment of Justice Usha Mehra (Retd) as the

arbitrator. A copy of the said legal notice is claimed to have been sent

to the respondent No.2 also. Though the respondent No.2 in its reply

had denied service of the said legal notice but during the course of

hearing the counsel for the respondent No.2 has stated that the

service of the notice dated 5th January, 2006 on the respondent No.2

may be accepted. Since, neither the respondent No.1 nor the

respondent No.2 replied to the legal notice aforesaid got sent by the

petitioner, the petitioner applied to this court for appointment of

arbitrator.

A.A.319/2006 Page no. 2 of 6

3. The respondent No.1 did not appear to contest the petition in

spite of service and was proceeded ex parte vide order dated 2 nd May,

2007. The respondent No.2 filed reply and contested the petition. It

is, inter alia, the stand of the respondent No.2 that there is no

arbitration agreement between the petitioner and the respondent

No.2 and the petitioner has no claim against the respondent No.2 and

hence no arbitrator vis-à-vis respondent No.2 can be appointed. The

respondent No.2 has alongwith its reply also filed the sale agreement

dated 13th March, 2006 between the respondent No.1 and the

respondent No.2. The counsel for the respondent No.2 placed reliance

on Sandeep Kumar and Others v Master Ritesh and Others

(2006) 13 SCC 567 and Sumitomo Corporation v CDC Financial

Services (Mauritius) Ltd & Ors 2008(2) R.A.J. 1 (SC).

4. The counsel for the petitioner has during the hearing

referred to clauses 2.3.2, 5.1.2, 7.1.6, 7.1.16, 12.1 and to schedule D

of the Sale Agreement dated 13th March, 2006 between the

respondent No.1 and the respondent No.2. Admittedly, there is no

arbitration agreement in writing between the petitioner and the

respondent No.2. The argument of the counsel for the petitioner,

however, is that since the respondent No.2 has purchased the factory

premises of the respondent No.1, construction whereon was carried

out by the petitioner, the petitioner has become entitled to

realize/recover the amounts from the respondent No.2 as well. The

counsel for the petitioner has neither pleaded nor argued (as in fact

he could not) that the respondent No.2 is the assignee of the

respondent No.1 with respect to the agreement with the petitioner.

A.A.319/2006 Page no. 3 of 6 In fact, the plea and the argument is that the respondent No.2 is a

necessary party and reliance in this regard was also sought to be

placed on Order 1 Rule 7 of the CPC. It was further argued that the

respondent No.2 had, in fact, taken over claims of several others

similarly situated as the petitioner, against the respondent No.1 and

for this reason the respondent No.2 ought to be answerable for the

claims of the petitioner as well.

5. The jurisdiction to appoint an arbitrator to adjudicate the

disputes between the parties stems from the existence of arbitration

agreement. In the absence of an arbitration agreement between the

parties, this court under Section 11 has no jurisdiction to appoint an

arbitrator. On the averments and arguments of the counsel for the

petitioner alone, no case for appointment of arbitrator to adjudicate

the claims, if any, of the petitioner against the respondent No.2 is

made out.

6. Even otherwise a perusal of the Sale Agreement dated 13th

March, 2006 between the respondent No.1 and the respondent No.2

shows that under the said agreement, the respondent No.1 had sold of

its phosphate fertilizer manufacturing complex at Paradeep, Orissa

consisting of movable and immovable properties to the respondent

No.2. Under Clause 2.3.2 of the Agreement, it was provided that the

respondent No.2 was not assuming any other liabilities/obligations of

the respondent No.1 save those mentioned in the agreement. Counsel

for the petitioner agrees that the liability/obligation, if any, of the

A.A.319/2006 Page no. 4 of 6 respondent No.1 to the petitioner is not mentioned in the agreement.

The agreement clearly provides that respondent No.2 would not be

liable for any liabilities pertaining to the period prior to 1st October,

2005. The counsel for the petitioner states that the liability of the

respondent No.1 to the petitioner is of a period prior to 1st October,

2005.

7. Clauses 5.1.2., 7.1.6 and 12 of the Agreement contain an

indemnity furnished by the respondent No.1 as vendor to the

respondent No.2 as purchaser with respect to any demands/claims

made by third party against the respondent No.2 which the

respondent No.2 had not undertaken. The counsel for the petitioner

submitted that since the respondent No.2 could under the said

indemnity clause recover the amounts claimed by the petitioner, from

the respondent No.1, the respondent No.2 became liable for the

claims of the petitioner. Merely because the respondent No.2 for its

protection has taken indemnities from the respondent No.1 would not

make the respondent No.2 liable for the claims, if any, of the

petitioner against the respondent No.1 and which under the

agreement did not stand assigned to the respondent No.2.

8. The respondent No.1 company is stated to be still exiting.

Merely by sale of an asset by the respondent No.1 to the respondent

No.2, the respondent No.2 would not become liable for the claims, if

any of the petitioner, against the respondent No.1. The petitioner is,

therefore, not entitled to invoke the arbitration against the

respondent No.2. The petition in so far as against the respondent

A.A.319/2006 Page no. 5 of 6 No.2, is dismissed.

9. As aforesaid, the petitioner has on the documents filed

made out a case for appointment of an arbitrator vis-à-vis respondent

No.1. The petitioner had earlier suggested the name of Justice Usha

Mehra (Retd) as the arbitrator. I appoint Justice Usha Mehra (Retd)

as the sole arbitrator to adjudicate the claims of the petitioner against

the respondent No.1 Oswal Chemicals & Fertilizers Ltd. The

Arbitrator would fix her own fee in consultation with the parties.

The petition stands disposed of.

                                               RAJIV SAHAI ENDLAW
                                                    (JUDGE)

July 30, 2008
M




A.A.319/2006                                              Page no. 6 of 6