Delhi High Court
M/S Hero Exports vs M/S Tiffins Barytes on 2 September, 2008
Author: S.Ravindra Bhat
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ A.A.No.121/2008
Dated 02.09.2008
M/S HERO EXPORTS ..... Petitioner
Through : Mr. Amit S. Chadha, Sr. Advocate
with Mr. Nikilesh R and Ms. Puspha, Advocates
versus
M/S TIFFINS BARYTES ..... Respondent
Through : Mr. Tomy Sebastian, Sr. Advocate
with Ms. Kiran Suri and Ms. Kirti Mishra,
Advocates
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
1. Whether reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported
in the Digest?
Mr. Justice S. Ravindra Bhat (Oral)
1. The petitioner claims an order for appointment of an arbitrator.
Reliance has been placed on Memorandum of Understanding entered into
with the respondent on 08.07.2007 which contains the following arbitration
clause:
"In the event of any future disputes including any
disputes, doubt or question that may or shall arise between
the said PARTIES or their administrators, or legal
representatives or successor-in-interest, either arising out
AA No.121/2008 Page 1
of this MOU, including but not limiting to the interpretation
of this MOU, then every such dispute, doubt or question
shall be referred to the Arbitration of a Sole Arbitrator, and
in accordance with the provisions of the Arbitration and
Conciliation Act, 1996. The venue of the Arbitration shall
be at New Delhi."
2. The petitioner adverts to certain transactions whereby the respondent
had represented that it owned mines at Bellary and that it could generate
about 500,000 metric tonnes per annum. The petitioner alleges having paid
Rs.14.5 crores to the respondent pursuant to an understanding concerning
supply of iron ore. It is alleged that the respondent did not honour the
commitment and also did not return the money. The petitioner, therefore,
alleges that a Memorandum of Understanding containing an arbitration
clause was entered into with the respondent on 08.07.2007. In terms of the
said agreement, it is alleged that the respondent agreed to pay Rs.9.5 crores
in a time bound manner. The petitioner alleges that cheques were issued to
it; however, all of them were dishonoured except one cheque for Rs.1 crore.
On the strength of these allegations, the petitioner seeks appointment of an
arbitration under Section 11 of the Arbitration and Conciliation Act, 1996.
3. The respondent contends that the Memorandum of Understanding was
procured under coercion and extortion and therefore unforceable. It is
alleged that cheques and Memorandum of Understanding were signed on the
date alleged when the respondent was forced to do so with the connivance
of a police officer. The respondent adverts to a complaint having been
lodged in that regard with the Police at Chennai on 23.07.2007. It also relies
AA No.121/2008 Page 2
upon a notice dated 24.07.2007 whereby the invalidity of Memorandum of
Understanding was set up.
4. It is urged by the respondent that Chennai Police has filed the charge-
sheet before the competent Court on 02.07.2008 and the Court has taken
cognizance and issued a notice/summons to the accused. It is also urged
that the respondent has recently filed a suit seeking declaration that the
Memorandum of Understanding is not binding and also sought recovery of
Rs.6.5 crores. On the basis of these contentions, it is submitted that the
Court should desist from passing the order under Section 6 of the Act.
Learned counsel further relies upon the judgment of the Supreme Court,
reported as India Household and Health Care Ltd. Vs. LG Household and
Healthcare Ltd. (2007) 5 SCC 510.
5. The factual narrative indicates that the respondent is setting up nullity
of the document which contains the arbitration clause. Yet, interestingly,
the said respondent issued the arbitration notice on 24.07.2007. Of course,
that notice also adverts to the Memorandum of Understanding being void.
However, the claim for arbitration cannot be ignored by this Court.
6. The jurisdiction of an arbitrator to decide upon arbitrability of the
dispute after considering evidence, in terms of Section 16 of the Arbitration
and Conciliation Act, 1996, is no longer undeniable. The respondent itself
invoked the arbitration clause, even while impeaching the validity of the
Memorandum of Understanding. This Court is of the opinion that till date,
there is finding of any criminal court - even charges have not been framed
AA No.121/2008 Page 3
against the petitioner. In such circumstances, the Court cannot refuse to
exercise its discretion.
7. As far as the order in Household and Healthcare Ltd case (supra) is
concerned, no doubt some observations were made by the Supreme Court
about fraud vitiating agreements and being a valid defence where
appointment of arbitrator is sought. Significantly however, the court rested
its decision on the non-obstante provisions, i.e. Section 45 of the Act,
concerning international arbitration, for this case such considerations do
not exist. Furthermore, departure of the respondents' plea would mean
giving credence to interested and unadjudicated allegations, which would be
destructive of the speedy mechanism contemplated under the Act.
8. For the above reasons, this Court is of the opinion that the objections
of the respondent are insubstantial, and cannot hinder the Court from
appointing an Arbitrator. However, nothing in this order shall be construed
as precluding the respondent from setting up a case of invalidity of the
Memorandum of Understanding, or the non-existence of the same, as the
case may be, in accordance with law.
9. Subject to the observations, in the preceding paragraph, the Court
hereby appoints Mr. Justice P.K. Balasubramaniam, (Retd. Judge of the
Supreme Court), Chairman, E. Committee, Room No.313, IIIrd floor, Lok
Nayak Bhawan, Khan Market, New Delhi, PH: 24632072, 22774177, as Sole
Arbitrator to adjudicate the inter se disputes between the parties. The
learned Arbitrator shall fix his fees and indicate other terms.
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10. The petition is allowed in the above terms. No costs.
Order Dasti.
S. RAVINDRA BHAT, J.
SEPTEMBER 02, 2008
mb
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