Rajendrabhai Alias Samirbhai ... vs Chandrajitbhai Natvarlal Shah
2021 Latest Caselaw 16585 Guj

     C/IAAP/41/2021                                CAV JUDGMENT DATED: 22/10/2021




               IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

               R/PETN. UNDER ARBITRATION ACT NO. 41 of 2021


FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI     sd/-
==========================================================

1 Whether Reporters of Local Papers may be allowed YES to see the judgment ?

 2 To be referred to the Reporter or not ?                                YES

 3 Whether their Lordships wish to see the fair copy                       NO
   of the judgment ?

 4 Whether this case involves a substantial question                       NO
   of law as to the interpretation of the Constitution
   of India or any order made thereunder ?

========================================================== RAJENDRABHAI ALIAS SAMIRBHAI NATVARLAL SHAH Versus CHANDRAJITBHAI NATVARLAL SHAH ========================================================== Appearance:

MR KAMAL TRIVEDI SR. ADVOCATE assisted by MR ANAL S SHAH(3988) for the Petitioner(s) No. 1,2 for the Respondent(s) No. 3,4 MR NILESH A PANDYA(549) for the Respondent(s) No. 1,2 ==========================================================

CORAM:HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI

Date : 22/10/2021

CAV JUDGMENT

1. By way of this Arbitration Petition under Section 11 of the Arbitration and Conciliation Act, 1996, the petitioners have prayed for following reliefs :-

"7(A) That this Hon'ble Court be pleased to appoint any Retired Judge of this Hon'ble Court as Second Arbitrator to constitute the Arbitral Tribunal in accordance with provisions of Section 11 of the

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Arbitration and Conciliation Act, 1996 for adjudicating the disputes and differences existing between the parties;

(B) Such other and further reliefs as may be deemed fit and proper in the facts and circumstances of the case may be granted in favour of the petitioners."

2. The case in brief is that petitioner no. 1 and respondent no. 1 are brothers whereas petitioner nos. 2 to 4 and respondent nos. 2 to 4 are their respective family members. The petitioners as well as the respondents were jointly carrying business of manufacturing and marketing of building construction products, trading and/or supplying building material and/or construction products and/or construction and development of the land. For the purpose said business, the petitioners and respondent nos. 1 to 4 jointly formed several partnership firms and setup private limited company. Over a period of time, the petitioners and respondent nos. 1 to 4 acquired several immovable properties. While some of the properties were independently acquired and held in own name by the respective parties, there were some properties jointly acquired and held by the petitioners and respondent nos. 1 to 4 either in the course of business or otherwise.

2.1. It is the case of the petitioners that certain disputes and differences arose with regard to operation of the joint business and the management therein, including share, right or interest in immovable properties acquired and held jointly. With a view to maintain harmony and the family peace and dignity, the petitioners and respondent nos. 1 to 4 decided to resolve their inter se disputes and differences amicably with the support of the well wishers and friends. As a result of this, recorded their mutually agreed terms in handwritten documents prepared in Gujarati in the presence of the parties. The said handwritten document was without any duress and coercion signed by the respective parties and then it was decided that formal agreement be prepared by an Advocate/Solicitor and

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be executed containing all terms and conditions and the procedure for division of businesses and properties. In view of such understanding, Memorandum of Agreement (MOA)/Family Arrangement came to be executed on 02.01.2014 by the petitioners and the respondents for division of the joint business and joint properties. The said MOA/Family Arrangement was executed in counter-parts, and each copy was deemed to be original thereof. The petitioners have asserted that as per the said MOA/Family Arrangement, the business and properties coming to the share of the petitioners was higher than those of respondent nos. 1 to 4 and as such, it was agreed and recorded that the petitioners shall pay to respondent nos. 1 to 4 a mutually agreed sum arrived at after taking the value of the business and the properties coming to the share of respondent nos. 1 to 4 and the difference of the said value was to be paid by the petitioners to respondent nos. 1 to 4 in installments over a period of four years from the date of execution of the MOA/Family Arrangement.

2.2. It is the case of the petitioners that though the said MOA/Family Arrangement was prepared as per the Gujarati handwritten document which, respondent no. 1 had duly signed. Respondent nos. 1 to 4 raised an issue and insisted that since the petitioners would get their share of the properties and business immediately, on execution of the said agreement and the respondents would receive the difference of the valuation/consideration in installments over a period of four years, the petitioners must offer an adequate security for securing payment of the consideration by the petitioners under the said arrangement. Due to such insistence of respondents, it was decided that the petitioners would secure the payment of consideration by offering security by way of designating an immovable property having market value equivalent or more amount. As a result of this, another MOA/Family Arrangement was executed simultaneously on 02.01.2014 with an additional security clause, but

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without modification of other clauses contained in the original agreement.

2.3. The second version of MOA/Family Arrangement, with security clause was also signed and executed on 02.01.2014 by the parties and it was decided between the parties that any dispute/difference relating to the scope, effect, execution, interpretation and implementation of the MOA/ Family Arrangement would be referred to arbitration to be conducted by one Shri Akshaybhai Arvindbhai Kothari; Shri Vikrambhai Ugarchand Shah and Shri Prashantbhai Bipinchandra Shah and the decision by majority has been agreed to be final and binding on both the side. The said arbitration clause in the first version of the MOA/Family Arrangement dated 02.01.2014 is contained in Clause 28 wherein, in second version of MOA/Family Arrangement, due to insertion of additional security clause, incorporated at Clause no. 19 in verbatim as that of first version of the agreement.

2.4. After the said execution of the agreement as stated above, and after part implementation thereof, the respondents herein, filed Special Civil Suit No. 597 of 2014 on 14.11.2014 before the court of Civil Judge (S.D.) Vadodara, inter alia praying for declaration and permanent injunction, partition and cancellation of documents. The respondents have also joined all the three Arbitrators as agreed upon as party defendants. The petitioners in the said suit proceedings filed by the respondents preferred an application below Exhibit-10 under Section 8 of the Arbitration and Conciliation Act, 1996 for seeking reference to the arbitration about their disputes. Pursuant to the order dated 25.11.2014 passed by this Court, in Special Civil Application No. 17060 of 2014, the said application Exhibit-10 under Section 8 of the Act was heard on merit and after detailed hearing, the application was allowed vide order dated 12.12.2014, by the learned 10th Additional Senior Civil Judge and

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Additional Chief Judicial Magistrate, Vadodara.

2.5. The named Arbitrators Shri Akshaybhai Arvindbhai Kothari and Shri Vikrambhai Ugarchand Shah informed the petitioners that they would not like to act as arbitrators in view of the allegations levelled against them and because of the conduct of respondent no. 1 have shown disinclination to act as Arbitrators. Further, the respondents herein by challenging the order dated 12.12.2014 passed below Exhibit-10 by filing petition being Special Civil Application No. 27 of 2015 and after hearing at length, vide order dated 08.05.2015, the petition came to be dismissed and the order passed below Exhibit-10 was confirmed.

2.6. Feeling aggrieved by and dissatisfied with the said order, the respondents herein filed Special Leave Petition (C) CC No. 9160 of 2015 before the Hon'ble Apex Court, challenging the decision delivered by this Court dated 08.05.2015 and since the respondents had certain reservations about the named Arbitrators, before the Hon'ble Supreme Court, the parties agreed to appoint three independent Arbitrators and accordingly, the Hon'ble Apex Court vide order dated 20.07.2015 granted two weeks time to settle the dispute amicably, failing which the parties were directed to give names of three Arbitrators for resolution of disputes. The matter was then listed on 03.08.2015 and after hearing, Special Leave Petition came to be dismissed by the Hon'ble Supreme Court. Even, after the order passed by the Hon'ble Supreme Court on 03.08.2015, respondent nos. 1 to 4 did not take any step to proceed with the arbitration pursuant to the original order dated 12.12.2014 and accordingly, respondent nos. 1 to 4 had failed to fulfill their obligation under MOA/Family Arrangement. As a result of this, vide letter dated 31.08.2015, the petitioner have invoked arbitration clause and appointed Hon'ble Mr. Justice C.K. Buch (Retd.) as its Arbitrator and called upon respondent nos. 1 to 4 to appoint their

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arbitrators if so desired, within a period of 30 days from the date of receipt of letter. In view of this development, the respondents vide letter dated 29.09.2015 appointed one Smt. Induben Natvarlal Shah (Mother of petitioner no. 1 and respondent no. 1) as their arbitrator. In view of the fact that the respondents have already appointed their Arbitrator, the petitioners through their advocate addressed a letter on 05.10.2015 to Hon'ble Mr. Justice C.K. Buch (Retd.), requesting the Hon'ble Arbitrator to proceed in consultation with Arbitrator Smt. Induben Natvarlal Shah appointed by the respondents for appointment of Presiding Arbitrator and constitution of Arbitral Tribunal in accordance with the provisions of the Arbitration and Conciliation Act, 1956. Thereafter, letter dated 03.11.2015 of Hon'ble Mr. Justice C.K. Buch (Retd.) was received by the petitioners informing that both the appointed Arbitrators were unable to agree on the names of the Presiding Arbitrator for constitution of Arbitral Tribunal. As a result of this, the petitioners filed IAAP No. 78 of 2015 under Section 11 of the Act for appointment of a Presiding Arbitrator. Vide order dated 22.01.2016, the petition came to be disposed of with a request to Hon'ble Justice Shri M.B. Shah, Former Judge, Supreme Court of India to act as a Presiding Arbitrator, however, according to the petitioners, through oversight instead of the words "to act as Presiding Arbitrator", words "to act as a Sole Arbitrator" were transcribed. Hence, the learned advocate on behalf of the petitioners filed a Note for Speaking to Minutes for necessary correction and the same was accordingly disposed of vide order dated 29.01.2016.

2.7. It is further the case of the petitioners that pursuant to the order of Hon'ble Court, the Arbitral Tribunal convened and put the arbitration proceedings in motion. The respondents filed their claim statement and when the matter was posted for hearing, an application for filing of the written statement and counter claim, the Arbitrators were of the

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unanimous view that the disputes between the parties to be amicably settled. Hence, the Tribunal fixed a meeting for amicable settlement of the disputes on 19.05.2016. In view of the aforesaid suggestion of the Tribunal, the parties met for settlement on 19.05.2016, but after some discussion and deliberation, they arrived at an amicable settlement which came to be recorded on 19.05.2016. The said settlement agreement/ consent terms were signed by respondent no. 1 and petitioner no. 1 and on behalf of their respective family members in the presence of their advocates and Arbitrators of the Arbitral Tribunal. The said agreement by virtue of which, it was agreed that the petitioners shall pay an additional amount of Rs.14 crores to the respondents over and above the consideration of Rs.32.50 crores mentioned in original MOA/Family Arrangement. A new time schedule for payment of total amount of installments was also agreed. However, all other terms and conditions of MOA/Family Arrangement were to operate without any modification. The duly signed consent terms dated 19.05.2019 were placed before the Arbitral Tribunal and the parties requested the Hon'ble Tribunal to pass a consent award and to conclude the arbitration proceedings. The said broad terms and settlement agreement are also stated by the petitioners in para 2.19 reflecting on page 10 of the petition memo, which reads as under :-

(i) The petitioners herein (Respondents before the Arbitral Tribunal) agreed to pay additional amount of Rs.14 crores;

(ii) The additional amount was to be paid in 11 installments starting from 1st November, 2016 and ending on 1st November, 2021;

(iii) In case the Respondents desire to get the property offered as security for payment of amount by the Respondent to the Respondents herein (Claimants before the Arbitral Tribunal) as per clause no. 19 of the MOU, an unconditional bank guarantee will have to be furnished. However, separate bank guarantee will be furnished for each installment remaining payable as on the day on which the security land is released;

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(iv) The Respondents shall not be permitted to create any third party rights in the land given as security before releasing the land from security;

(v) In case of default in making payment of the installment amount, the respondents shall have no right to raise any objection if the Claimants intend to realize the amount payable under the MOA by sale of land offered as security;

(vi) Even if the Respondents put up construction or develop the land offered as security, it will be open for the Claimant to take the possession of the entire land upon default of the Respondents in making payment of installments;

(vii) The parties agreed to abide by other remaining conditions as agreed by MOA dated 02.01.2014;

(viii) The parties have agreed to withdraw the proceedings initiated against each other and shall issue joint public notice and the cost of the notice shall be borne by the claimants."

2.8. The grievance of the petitioners is that even after signing the subsequent settlement agreement/consent terms on 19.05.2016, in presence of Arbitrators of the Tribunal, the respondents by way of application on 01.06.2016 made a dishonest attempt, according to the petitioners, to seek modification of the settlement agreement/consent terms under the guise of rectification of the error. The said application was not entertained and the Arbitral Tribunal on 03.06.2016 passed a consent award and concluded the arbitration proceedings.

2.9. The petitioners have further asserted in the petition that subsequent to the passing of the award, the petitioners diligently discharged their obligations. The petitioners have made payment of installments to the respondents, however, the respondents did not honour their part of the obligation and have scrupulously committed several acts in violation of the terms of the MOA/Family Arrangement despite several requests by petitioner no. 1 to respondent no. 1 through their authorized representative

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from time to time, respondent no. 1 did not act as per clause 23 of the MOA and award, out of total 36 parcels of joint properties which were to be released/transferred in favour of the petitioners by the respondents, only deed and documents in respect of 20 parcels of lands have been executed by the respondents over a period of time till 01.04.2020. However, about the documents/deed in respect of 16 parcels of lands, the same remained to be executed. Time and again, the request were made by the petitioners, but on one pretext or the other, the respondents have chosen not to proceed to act in consonance with the terms of the MOA/Family Arrangement as well as have chosen not to maintain spirit of consent award which has been passed by the Arbitral Tribunal. As a result of this, on 27.11.2020, the petitioners requested the respondents to execute deed/documents in respect of left out parcels of lands coming to the share of the petitioners under the MOA/Family Arrangement, but in spite of having received such request, the respondents did not comply with the terms of the MOA/Family Arrangement and gave evasive reply on 30.11.2020. Having realized that the respondents had no intention at all to fulfill their part of the agreement, a notice was given on 05.12.2020, calling upon the respondents to forthwith comply with the terms of MOA/ Family Agreement, consent award, failing which, appropriate action will be initiated. In anticipation, the respondents once again would institute legal proceedings to stall further implementation. The respondents filed caveat application first before the civil court stating that the disputes which have arisen between the parties and gave reply on 13.12.2020 against the letter written by the petitioners.

2.10. It is further the case of the petitioners that for the purpose of enforcing the consent award, the petitioners also filed execution application before the appropriate court, however, on account of non fulfillment of terms of the MOA/Family Arrangement and consent award,

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the petitioners sustained heavy loss in their business, hence, issued one another notice on 16.12.2020 afresh, invoking arbitration agreement contained in clause 29 of the second version of MOA/Family Arrangement and appointed Hon'ble Ms. Justice H.N. Devani, Former Judge, Gujarat High Court to act as an Arbitrator to decide and adjudicate upon the disputes and differences existing between the parties. The petitioners also called upon the respondents to appoint second Arbitrator within a period of 30 days from the date of receipt of the notice. Though notice dated 16.12.2020 is served the respondents, they have failed to appoint second Arbitrator within a period of 30 days and the same having not been replied, but later on, respondent nos. 1 and 2 through their lawyer have replied inter alia alleging that the arbitration agreement stands exhausted and by taking such dishonest stand, a reply was also given by respondent no. 4 on 18.01.2021 through her lawyer. In view of the aforesaid situation which is prevailing amongst the parties to the proceedings, the petitioners have filed present Arbitration Petition under Section 11 of the Act for appointing Hon'ble Judge which is mentioned in para 4 of the application and sought the aforesaid reliefs as contained in para 7(A).

3. This petition when was placed before the Court, at initial stage, learned advocate Mr. Nilesh Pandya, appearing for respondent nos. 1 and 2 had sought time to submit reply and by recording such request on 19.03.2021, the Court on 19.03.2021 placed the matter for hearing on 09.04.2021. Thereafter, it was placed before this Court for hearing on 06.08.2021 and with a view to take proper instructions, again learned advocate Mr. Nilesh Pandya had requested for some time and then the matter was lastly placed for hearing on 03.09.2021 wherein, both the learned advocates appearing for the respective sides have requested the Court to hear the matter at the stage from where the same is pending.

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Accordingly, considering the request, the Court has taken up the matter for hearing.

4. Learned Senior Advocate Mr. Kamal Trivedi assisted by Mr. Anal Shah, learned advocate appearing on behalf of the petitioners has submitted that if the chronology of events is to be construed, the dispute which is arising is in respect of original agreement dated 02.01.2014 and subsequent agreements which are merely a consequential documents and as such, the original clause can be said to be still in force, as a result of which, the present petition is filed under Section 11 of the Arbitration and Conciliation Act. Learned Senior Advocate Mr. Trivedi has submitted that the very purpose of bringing arbitration statue is to see that the overall resolution can take place in a broadly amicable manner, and here in the instance case, the parties have acted upon to a substantial extent in respect of MOA/Family Arrangement dated 02.01.2014. It is only on account of one lapse in respect of non payment of 10 th installment, the problem arose between the parties, otherwise, upto 9 th installments, the petitioners have paid sizeable amount pursuant to the arrangement accepted by the parties and further non-payment which took place, is not on account of default on the part of the petitioners and under the instructions, learned Senior Advocate Mr. Trivedi has submitted that even now, the respondents can take steps for withdrawal of the said installments, but taking advantage of such situation, the respondents cannot take dishonest stand.

4.1. While issuing notice, without prejudice on 16.12.2020, non compliance on the contrary on account of respondents to a substantial extent which has constrained the petitioners to initiate execution proceedings and the petitioners have suffered a substantial loss. It has been submitted that in compliance of the settlement and consent terms which took place pursuant to the original agreement, the petitioners have paid

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installments as per the agreed schedule and corresponding obligation the respondents have not discharged. By referring to a chart on page 248 of the petition compilation, upto 9th installments on 1st November, 2020, the amount is paid and only 10th and 11th installments are due and payable for which the petitioners have shown inclination, but on account of extraneous reasons, the respondents have chosen to deviate, which has constrained the petitioners to approach this Court by way of present petition.

4.2. By referring to the conduct of the respondents, the petitioners realized that their intention is now not to fulfill their obligation, which has given rise to the present controversy and as such, learned Senior Advocate Mr. Trivedi has submitted that now, since in principle substantial grievances are already resolved, the left out grievance in respect of consent terms and award which have been deduced in writing, there arose a need to appoint an Arbitrator, hence, the present petition. By referring to certain averments, an attempt is made to see that this left out grievance be resolved through an Arbitrator who may be appointed. Learned Senior Advocate Mr. Trivedi has submitted that it is not understandable as to how the stand is taken that since the original consent terms are culminated into consent award, the Arbitration Clause stated to have been exhausted. According to learned Senior Advocate Mr. Trivedi, law is other way round and to substantiate that, learned Senior Advocate Mr. Trivedi has relied upon the decision of the Apex Court in the case of Dolphin Drilling Limited v. Oil and Natural Gas Corporation Limited reported in (2010) 3 SCC 267. By referring to the observations contained in para 3 to 10, a request is made that the stand of the respondents that the Arbitration Clause is exhausted is not tenable and, therefore, the relief can be considered by this Court as prayed for in para 7(A). Learned Senior Advocate Mr. Trivedi has reiterated that since all these detailed controversies which have arisen between the parties, can still be examined

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by the Tribunal which may be constituted by appointing any retired Judge of this Court as second Arbitrator, no much emphasis is made, but to substantiate the request, the documents attached to the petition compilation have been referred to and relied upon.

4.3. Learned Senior Advocate Mr. Trivedi, however, has reiterated to grant the relief as prayed for in the petition, and has drawn attention of this Court to the original MOA/ Family Arrangement which took place between Rajendrabhai Group and Chandrajitbhai Group dated 02.01.2014 and has referred to Clause 2; Clause - 4; Clause - 10; Clause - 12 and then has specifically referred to Clause - 17 and by referring to Clause- 18 and Clause - 19, it has been submitted that the respondents have not discharged their obligation in respect of the settlement which took place. Pursuant to this agreement, a need arise to approach this Court by way of present petition. In the said agreement, Clause - 29 is specifically referred to, which the Court deems it proper to reproduce hereunder :-

"29. Any dispute and/or difference arising out of this MOA-Family Arrangement including any dispute/difference relating to the scope, effect, execution, interpretation and implementation of the MOA- Family Arrangement shall be settled by way of mediation by Shri Akshaybhai Arvindbhai Kothari, Shri Vikrambhai Ugarchand Shah and Shri Prashant Bipinchandra Shah. The decision by majority shall be final and binding upon the parties. Each party shall be entitled to appear to through Advocate or duly authorized representative. The language of proceedings shall be in English. The proceedings of the mediation shall be governed by the Arbitration and Conciliation Act, 1996 or any statutory amendment, modification or reenactment thereof."

4.4. According to learned Senior Advocate Mr. Trivedi, the matter went right upto the Hon'ble Supreme Court and the Hon'ble Supreme Court has also vide order dated 20.07.2015, expressed to resolve the dispute and for that, purpose time was granted to appoint the arbitrators to resolve their

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dispute which is reflecting on page181. Later on, after referring to various orders passed in Arbitration Petition No. 78 of 2015 on 22.01.2016 and 29.01.2016, Mr. Trivedi has submitted that in view of this development, the Arbitral Tribunal consisting of Former Judge Supreme of Court of India Hon'ble Mr. Justice M.B. Shah, Presiding Arbitrator, Hon'ble Mr. Justice C.K. Buch (Retd.) and Ms. Induben M. Shah Co-Arbitrators was pleased to record the settlement arrived at on 19.05.2016, which is produced on record of the paper book compilation from page 247 onward. A further attention is drawn to a communication dated 27.11.2020, written by Rajendra N. Shah to Shri Chandrajit N. Shah and Smt. Hetalben C. Shah pointing out that on account of technical reason of the Bank, the cheque for last installment was not cleared, despite repeated requests not to enter into any former paper work, a simple request was made to redeposit, but the same has not been responded in right spirit just to generate further controversy and that is how, when the petitioners have substantially fulfilled their part of performance pursuant to the consent award, it is hardly fair on the part of the respondents to take the stand to deviate from such appointment which has been finalized on account of this conduct, and the need arose for the petitioners to invoke jurisdiction of this Court under Section 11 of the Act and accordingly, learned Senior Advocate Mr. Trivedi has requested to grant the relief as prayed for in the petition.

5. As against this, Mr. Nilesh Pandya, learned advocate appearing on behalf of the respondents as a caveator has vehemently opposed the stand taken by learned Senior Advocate and has submitted that the petition itself is not maintainable in view of the fact that the earlier arbitration proceedings have already been concluded and culminated into award by consent and in response thereto, the present agreement produced at page 55 has also been executed as a part of complete settlement and to that

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effect, a signed agreement is also referred to by learned advocate Mr. Pandya dated 19.05.2016 produced at page 247 of the petition compilation and as such, in view of the this subsequent events, the present request may not be entertained. It has further been contended that this very petitioners have already filed execution proceedings under Section 34 of the Act in the Civil Court at Vadodara for enforcement and implementation of the consent award dated 19.05.2016 and same is pending and in that eventualities as well, the present petition under Section 11 of the Act is not maintainable. Apart from that, learned advocate Mr. Pandya has submitted that in respect of the settlement terms in the form of award dated 19.05.2016 if there remain any grievance, the petitioners have an alternative efficacious remedy, as a result of which, also the petition does not deserve to be entertained. Respondent nos. 1 and 2 have already substantially complied with the award and according to them, no grievance any more survives and even if it is left out, this petition is not an appropriate remedy according to learned advocate Mr. Pandya, on the contrary, Mr. Pandya has stated that the petitioners committed breach of the consent award given by the Arbitral Tribunal on 19.05.2016 and as such, the respondents would reserve their right to file appropriate proceedings in accordance with law. The entertainment of this petition on the contrary creates multiplicity of the proceedings, especially when for enforcement, the petitioners themselves have submitted an execution petition. Possibly different view may emerge if a separate Arbitral Tribunal is constituted. As a result of this, there is hardly any merit in favour of the petitioners so far as this relief is concerned. It has been further contended that earlier Arbitral Tribunal came to be appointed by virtue of Clause 29 of the original agreement, which, by subsequent events, said clause has been exhausted in its entirety and as such, seeking of second Arbitration is impermissible in law. According to learned advocate Mr. Pandya, the earlier arbitration proceedings have already

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been finalized and as such, the initial arbitration clause by virtue of subsequent event, cannot be allowed to be resorted to once it is exhausted, the same cannot be repeatedly resorted to. Hence, on this count alone, the petition deserves to be dismissed.

5.1. Learned advocate Mr. Pandya has submitted that the reliance which has been placed by learned Senior Advocate Mr. Trivedi on a decision reported in Dolphin Drilling Limited (supra) the factual details if closely perused, the same is not at all amenable or of any assistance to the petitioners and those general observations can never be treated as precedent, more particularly, when the background of the present facts is altogether different. Hence, the present petition being meritless, the same deserves to be dismissed.

6. In re-joinder, learned Senior Advocate Mr. Trivedi has submitted affidavit-in-rejoinder and reiterated that there is an existence of valid and binding arbitration agreement and clause contained in MOA/Family Arrangement dated 02.01.2014 and present controversy has also been off- spring of the dispute amongst the parties related to such original agreement and as such, also the stand taken by the respondents is misconceived and impermissible. According to learned Senior Advocate Mr. Trivedi the respondents were put to notice that the consent award is not fully complied with by the respondents and resultantly the dispute arose on account of such non compliance for which, the petitioners have suffered a loss of damages. The petitioners are legally entitled to claim compensation from the respondents towards the loss or damage on account of breach of terms of the consent award and as such, it is always open for the petitioners to seek remedy under Section 11 of the Act. Learned Senior Advocate Mr. Trivedi has reiterated that the peculiar background of this fact would lead to a situation where arbitration clause

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no. 29 is valid and still surviving and binding upon the parties and the dispute and difference arose can still be adjudicated and settled by the arbitration hence, requested the Court to grant the relief as prayed for. Learned Senior Advocate Mr. Trivedi has further submitted that the observations made by the Hon'ble Supreme Court in a decision referred to by the petitioners are applicable with full force and the stand of the respondents is impermissible. In that view of the matter, there is hardly, any substance in the preliminary objection which has been raised. Be that as it may, it cannot be said in any way that because the Arbitral Tribunal has declared consent award and if difference is arising from that, the parties cannot resort to original arbitration clause. It cannot be said that the said clause is exhaustive in any manner. Hence, the relief prayed for deserves to be granted.

7. Having heard the learned advocates appearing for the respective parties and having gone through the material on record, the only circumstance on which the relief deserves to be examined is whether by virtue of subsequent event, can it be said that the original arbitration clause contained in the initial document can further be utilized for the purpose of resolving the dispute or whether the same can be said to be continued to operate even after the declaration of consent award and for that consideration first of all the Court would like to closely peruse the undisputed position which is prevailing on record.

7.1. That the original agreement does contain arbitration clause namely clause 29 reflecting on page 49/55 of the petition compilation. The Arbitral Tribunal finally came to be constituted. It further emerges from the record that the said Arbitral Tribunal is consisting of the following members to act as Arbitrators :-

"(1) Hon'ble Mr. Justice M.B. Shah, (Former Judge, Hon'ble Supreme Court of India).

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(2) Hon'ble Mr. Justice C.K. Buch (Former Judge, Gujarat High Court).

(3) Smt. Induben Natvarlal Shah (Arbitrator)."

7.2. This Arbitral Tribunal exhaustively examined the grievance between the parties to resolve the dispute by virtue of which, the settlement agreement and the consent terms came to be arrived at between the parties reflecting on page 247 of the petition compilation and the said settlement terms appear to have been signed by both the sides reflecting on page 249. This settlement terms signed by the parties have culminated into the consent award and the said consent award dated 03.06.2016 is reflecting on page 250 of the petition compilation, which is again accepted by both the sides, signed by all the parties to the proceedings, including the Hon'ble members of the Arbitral Tribunal.

7.3. From the aforesaid award, it appears that the parties have acted substantially in respect of their corresponding duties to comply the terms of the settlement and consent award, but in between, some grievance arose on account of which the proceedings appear to have been initiated for enforcement of terms of consent award dated 19.05.2015 which are stated to be pending in the court of learned civil court at Vadodara, which fact is not in dispute. At the same time, the record emerges that for alleging non compliance with the terms, these petitioners have filed an execution application as well, of course, the said proceedings have not been much emphasized, nonetheless, the proceedings have been initiated is not in dispute. Learned advocate Mr. Pandya has also submitted that one of the parties to the proceedings has now already filed an application under Section 34 of the Act even after filing of the present petition and as such, in this set of circumstance, it appears that this circumstances have arisen after full- fledged adjudication before the Arbitral Tribunal.

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7.4. Since this is an application under Section 11 of the Act, the Court at the moment is not concerned as to who committed breach and to what extent, but it appears that pursuant to the consent award, both the sides have failed to discharge their function to their respective extent. Now for this dispute, which has arisen, at this stage whether, it is amenable to go back to the original clause 29 of initial agreement of 2014 or not, is a question for consideration before this Court in light of the aforesaid undisputed facts so also to examine the applicability of the decision which has been relied upon by learned Senior Advocate Mr. Trivedi deserves to be considered.

7.5. In the case case in which learned Senior Advocate Mr. Trivedi has relied upon a decision in the case of Dolphin Drilling Limited (supra), an application under Section 11(6) of the Act was submitted for seeking appointment of Arbitrator on the premise that an agreement was entered into on 17.10.2003. Along with service, clause 28 of the agreement was containing arbitration clauses, period of agreement was noted on 13.02.2007 and on being called upon by the respondent - Company to provide further service till 10.04.2007 in which, it was entitled to be paid additional comparable rates under the agreement. The grievance was with regard to the other number of invoices which were raised, but not paid. Hence, a notice was given on 29.01.2008 for invoking arbitration on the disputes set out in the notice. In that context, the Hon'ble Supreme Court was examining the issue, whether Clause 28 of the agreement was a one time measure or not and the Hon'ble Supreme Court was examining the plea of respondents based upon the words "all disputes" occurring in para 28.3 of the said agreement, wherein, it was submitted that those two words must be understood to mean "all disputes under the agreement" that might arise between the parties throughout the period of its subsistence. But, in

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view of the fact that there was no answer as to what would happen to such dispute, that might have arisen in earlier period of the contract and got barred by limitation till the time comes to refer "all disputes" at the conclusion of the contract and, therefore, in that context, according to the said facts situation, the Hon'ble Supreme Court opined that Clause 28 of the agreement cannot be said to be a one time measure and cannot be held that once arbitration clause is invoked, remedy of arbitration is no longer available in regard to other disputes that might arise in future. So in peculiar set of circumstance of the said case, the Hon'ble Supreme Court opined with regard to said Arbitration Clause 28.

7.6. Here, undisputedly, the original MOA/Family Arrangement dated 02.01.2014 was made operational by both the respective parties to the agreement and situation was remedied by the parties by exhausting Arbitration Clause 29 as it has been reflecting earlier, the dispute between the parties related to this issue as held by Hon'ble Supreme Court in the year 2015 wherein, pursuant to the order dated 20.07.2015, the observations contained in the said decision were followed by appointment of the Arbitral Tribunal, which can be seen from the orders, which have been passed in the month of January, 2016 and after validly constituted Arbitration Tribunal consisting of three independent Arbitrators, the issue was resolved between the parties for which settlement agreement has been entered into, signed by the parties and to a substantial extent has been acted upon and later on, the said settlement agreement (consent terms reflecting on page 247) has culminated into a consent award, which is signed by the Arbitral Tribunal declared on 03.06.2016 at Ahmedabad and as such, the facts situation prevailing in case on hand are quite distinct from what has been projected in the earlier decision of the Dolphin Drilling (supra). Hence, any observations which has been made in different contextual circumstances, cannot be applied as straight-jacket

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formula.

7.7. Here, in addition to the said Arbitral award passed in specific terms, the parties have discharged their respective obligations to some extent and in between some lapse appears to have occurred for which, undisputedly, the execution proceedings are initiated by the petitioners and the same are stated to be pending for consideration. Keeping this stand in mind, the recent decision delivered by the Hon'ble Supreme Court in the case of Zenith Drugs & Allied Agencies Pvt. Ltd., represented by its Managing Director Shri Uday Krishna Paul v. M/s. Nicholas Piramal India Ltd., reported in 2019 (10)Scale 142, was also, since relevant to some extent, the Court would like to consider. Some few relevant observations contained in para nos. 7 to 22, the Court would like to incorporate hereunder and these observations have been made in light of the series of decisions delivered in past by the Hon'ble Supreme Court. Hence, the Court deems it proper to reproduce hereunder :-

"7. We have heard Mr. Manish Goswami, learned counsel appearing on behalf of the appellant and Mr. Hrishikesh Baruah, learned counsel appearing on behalf of the respondent.

8. The learned counsel for the appellant contended that the High Court erred in saying that the appellant-plaintiff admitted the existence of the arbitration clause and the High Court failed to take note that compromise decree dated 24.12.2001 in Suit No.241 of 2001 was in full and final settlement of the dispute between the parties. It was inter alia contended that a substantial and bona fide part of the claim was outside the scope of arbitration clause and when dispute is not covered by the arbitration clause, the same cannot be referred to arbitration. Placing reliance upon Yogi Agarwal v. Inspiration Clothes & U and Others (2009) 1 SCC 372 and Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya and Another (2003) 5 SCC 531, the learned counsel for the appellant submitted that in order to refer the parties to arbitration, the dispute must relate to the contract in respect of which the parties have agreed to refer to arbitration.

Taking us through the pleadings and relief sought for in the subsequent suit in Money Suit No.73 of 2003, learned counsel for the appellant submitted that the dispute is exclusively determinable by the

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trial court and the High Court erred in referring the parties to arbitration. It was also submitted that the High Court did not keep in view that the respondent has challenged the very compromise decree dated 24.12.2001 on the ground of inducement and fraud by filing a petition and the same is still pending.

9. Per contra, the learned counsel for the respondent submitted that the factum of arbitration clause in the agreement dated 01.05.1997 is admitted by the appellant and the appellant is seeking compensation on account of illegal termination of clearing and forwarding agent agreement and the issue continues to be arbitrable. It was also submitted that the compromise deed dated 11.12.2001 in Title Suit No.241 of 2001 was obtained by the appellant Company through false inducement and practising fraud upon the respondent Company and if the fraud played by the appellant was known to the respondent Company, the respondent would not have been a party to the aforesaid compromise deed and the said compromise decree having been obtained by practising fraud is a nullity and void ab-initio. Learned counsel further submitted that the dispute raised by the appellant is touching upon the presents. of the agreement dated 01.05.1997 and the High Court rightly set aside the order of the trial court and referred the parties to arbitration.

10. We have carefully considered the rival contentions and perused the impugned judgment and materials on record. The following points arise for determination in this appeal:-

(i) Whether the High Court was right in referring the parties to arbitration by observing that the appellant- Company admits the existence of arbitration clause in the agreement dated 01.05.1997?

(ii) Whether the appellant is right in contending that the dispute raised in the Money Suit No.73 of 2003 is not covered by the arbitration clause and cannot be referred to arbitration?

11. In the agreement dated 01.05.1997 between the appellant- company and RPIL, the appellant was appointed as clearing and forwarding agent for the entire north-eastern region. Clause 17 of the said agreement contains the arbitration clause which reads as under:-

"In the event of dispute arising between the parties out of the subject contained herein or touching upon these presents during pendency of this Agreement or thereafter the same shall be referred to Arbitration Act Bombay as provided under the Rules and

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Regulations of the subject of Arbitration framed by the Bombay Chamber of Commerce and the competent court in Mumbai alone shall have jurisdiction in the matter. "

12. The respondent did not accede to the request of the appellant for withdrawing the termination letter and hence, the appellant filed Title Suit No.241 of 2001 inter alia praying for declaration that the contract between the appellant and the respondent-RPIL was valid, subsisting and continuing. The appellant also sought for declaration that the respondent cannot terminate the appellant as clearing and forwarding agent in any manner in case of RPILs merger with NPIL and sought for permanent injunction. As pointed our earlier, the said Title Suit No.241 of 2001 ended in compromise and compromise decree was passed on 24.12.2001. As per the said compromise, an amount of Rs.23,50,000/- was paid by RPIL to the appellant by way of four demand drafts being (i) Draft No.215684 for Rs.7,50,000/-;

(ii) Draft No.215682 for Rs.6,70,000/-; (iii) Draft No.215683 for Rs.6,20,000/-; and (iv) Draft No.215685 for Rs.3,10,000/-, all dated 04.01.2001 drawn on Allahabad Bank, Panbazar, Guwahati. As a part of compensation package, the respondent appointed the appellant as stockist of the company at Guwahati and Agartala. In terms of the compromise, the appellant has handed over all the documents to the respondent. The relevant portion of the terms of compromise reads as under:- .

"....

(iv) The defendant No.3 by letter dated 07.12.2001 has appointed the plaintiff as a stockist of the company at Guwahati and Agartala as part of compensation package.

(v) The plaintiff has handed over all the stocks of goods to the defendants company and the company has already started lifting the stocks from the custody of the plaintiff and expected to clear by 11th December, 2001. The plaintiff has also handed over entire documents including L/R in possession, files, records and Sales Tax documents such as both utilized and unutilized sales tax documents (1) Road Permit; (2) Despatched Note; (3) C Forms; (4) F Forms; (5) C Forms from stockists and papers to the defendants relating to the C & F Agency under defendants No.1; (6) All previous records starting from November, 1994 till date has also been handed over to the plaintiff; (7) Software supplied and datas of computer is also taken and PC left after complete deletion of programme of RPIL."

13. From a reading of the above terms of the compromise deed dated 11.12.2001, it is clear that the parties have substituted a new

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agreement by way of compromise. As per the agreement dated 01.05.1997, the appellant was the clearing and forwarding agent for the entire north-eastern region; whereas under the terms of the compromise, the appellant has been appointed as stockist of the company only for Guwahati and Agartala and not as clearing and forwarding agent for north-eastern region. The clauses in the compromise memo also clearly state that the appellant handed over all the stocks of goods to the respondent-Company. The appellant had also handed over the entire documents in their possession both used and unused as well as sales tax documents, road permit, C forms from stockists and other documents. When the parties have settled their differences and compromised the matter, in the dispute subsequently arising between the parties, arbitration clause in the prior agreement cannot be invoked. Since the agreement dated 01.05.1997 (agreement for appointing the appellant as clearing and forwarding agent) and the compromise (appointing the appellant as stockist) are different, the arbitration clause in the agreement dated 01.05.1997 cannot be read into the terms of the compromise as per which the parties have entered into a new arrangement and this has not been kept in view by the High Court. The High Court erred in holding that the existence of the arbitration clause has been admitted by the appellant-Company and it is for the arbitrator to decide under Section 16 of the Act whether the arbitration clause applied to the subject matter of the suit or not.

14. The parties can be referred to arbitration in an application filed under Section 8 of the Act only if the subject matter of the action before the judicial authority relates to dispute which is the subject matter of the arbitration agreement. As per Section 8 of the Act, the following conditions have to be satisfied for referring the parties to arbitration:-

(i) there is an arbitration agreement;

(ii) a party to the agreement brings an action in the court against the other party;

(iii) subject-matter of the action is the same as the subject-matter of the arbitration agreement;

(iv) the opposite party applies to the judicial authority for referring the parties to arbitration before it submits his first statement on the substance of the dispute.

An application under Section 8 of the Act can be made only if the

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subject matter of the suit is also the same as the subject matter of arbitration. In other words, only those disputes which are specifically agreed to be resolved through arbitration can be the subject matter of arbitration; and upon satisfaction of the same, the Court can refer the parties to arbitration.

15. Observing that filing application under Section 8 of the Act should relate to the arbitration agreement or to be applicable to the dispute, in Yogi Agarwal v. Inspiration Clothes and U and Others (2009) 1 SCC 372, it was held as under:-

"9. When a defendant invokes Section 8 of the Act by alleging existence of an arbitration agreement, he should establish that such arbitration agreement related to, or is applicable to, the suit transaction/contract. The parties may enter into different contracts at different points of time or may enter into a series of unrelated transactions. It is possible that in regard to some, they may provide for arbitration and in regard to others, may not provide for arbitration. Obviously, the existence of an arbitration agreement with reference to some other transaction/contract to which the plaintiff was or is a party, unconnected with the transactions or contracts to which a suit relates, cannot be considered as existence of an "arbitration agreement" in regard to the suit transactions/contracts.

16. In the present case, the compromise decree does not contain any arbitration clause. The subsequent Suit No.73 of 2003 has been filed by the appellant due to failure of the respondent Company to appoint the appellant as stockist of their products in Guwahati and Agartala and the same has caused substantial loss to the appellant. In the said suit, the appellant also alleged that due to illegal act of the respondent, the appellant has to face the criminal trial unnecessarily due to which the appellant has sustained heavy loss both financially and mentally and also it resulted in loss of goodwill and reputation of the appellant and therefore, the appellant claimed compensation of rupees twenty crores from the respondent. The suit claim is not covered by the arbitration.

17. Mr. Hrishikesh Baruah, learned counsel for the respondent submitted that clause 17 of the agreement dated 01.05.1997 covers all the disputes including any dispute arising between the parties that may touch upon the clauses of the agreement. It was submitted that the reading of the plaint filed by the appellant clearly shows that the disputes between the parties stem from the contractual agreement which touches upon the agreement dated 01.05.1997. Learned counsel further submitted that the words .touching upon these

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presents.. used in the agreement has wide meaning which not only relates to the dispute arising out of the appointment of the appellant as clearing and forwarding agent, but also any other dispute arising out of the same would necessarily fall within the ambit of ..touching upon these presents.. and the High Court rightly referred the parties to arbitration. In support of his contention, the learned counsel placed reliance upon P Ramanatha Aiyars Advanced Law Lexicon, 4 th Edition, Page 4876. The relevant portion relied upon reads as under:-

"The dictionary meaning of the word touching is in reference or relation to, respecting, regarding, or concerning and this meaning indicates that the disputes need not directly arise out of the business of the society; but that it is enough that it should have reference or relation to or concern the business of the society. M.S. Madhava Rao v. D.V.K. Surya Rao, AIR 1954 Mad 103, 107 (FB). [Madras Co- operative Societies Act (6 of 1932), S.51]"

In this regard, reliance was also placed upon in Deccan Merchants Cooperative Bank Ltd. v. Dalichand Jugraj Jain and Others AIR 1969 SC 1320 : [1969] 1 SCR 887, World Sport Group (Mauritius) Limited v. MSM Satellite (Singapore) PTE Limited (2014) 11 SCC 639.

18. Taking us through the pleadings in the Money Suit No.73 of 2003, the learned counsel for the respondent submitted that the various claims made in the Money Suit No.73 of 2003 relate to the alleged loss sustained by the appellant-plaintiff due to termination of the agreement dated 01.05.1997 necessarily falls within the ambit of ..touching upon these presents.. occurring in clause 17 of the agreement and therefore, the High Court rightly referred the parties to arbitration. Placing reliance upon Swiss Timing v. Commonwealth Games 2010 (2014) 6 SCC 677, the learned counsel submitted that to shut out arbitration at the initial stage would destroy the very purpose for which the parties had entered into arbitration agreement. It was submitted that when there is a clause for arbitration agreed by the parties, it is mandatory for the civil court to refer the disputes to an arbitrator. It was urged that in the present case, in view of clause 17 of the agreement dated 01.05.1997 and in view of the mandatory language of Section 8 of the Act, the High Court rightly referred the parties to arbitration.

19. Though some of the claims in the Money Suit No.73 of 2003 relate to the loss allegedly sustained by the appellant- plaintiff due to termination of the agreement dated 01.05.1997, other claims relate to the loss said to have been caused to the appellant-plaintiff subsequent

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to the compromise. According to the appellant-plaintiff, claim of Rs.1.40 crores relates to alleged loss caused due to the failure of respondent to appoint appellant-plaintiff as stockist at Guwahati and Agartala; claim relating to the alleged loss of goodwill and reputation; claim relating to the loss caused due to the mental pressure and legal proceedings and such other claims do not touch upon the agreement dated 01.05.1997. The learned counsel for appellant submitted that in the Money Suit No.73 of 2003, substantial part of the claim pertains to the events subsequent to non- compliance of the compromise memo which do not fall within the ambit of agreement dated 01.05.1997 and could be resolved only by the civil court.

20. As discussed earlier, by the agreement dated 01.05.1997, the appellant was appointed as clearing and forwarding agent of RPIL for the entire north-eastern region; whereas under the compromise memo, the appellant has been appointed as stockist of the respondent Company at Guwahati and Agartala which is entirely a different appointment though, as part of compensation package. Clause 17 of the agreement dated 01.05.1997 cannot be invoked regarding the agreement of the parties to appoint the appellant as stockist for Guwahati and Agartala pursuant to the compromise.

21. It is also pertinent to note that the respondent has challenged the compromise decree alleging that it has been obtained by inducement and fraud. In view of the allegations of fraud levelled by the respondent that the compromise decree is vitiated by fraud, the parties cannot be referred to arbitration. Observing that where there are allegations of fraud which are so complicated that it becomes absolutely essential that such complex issues can be decided only by the Civil Court on apprehension of the evidence adduced by the parties, in A. Ayyasamy v. A. Paramasivam and Others (2016) 10 SCC 386, it was held as under:-

"25. ..It is only in those cases where the court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by the civil court on the appreciation of the voluminous evidence that needs to be produced, the court can sidetrack the agreement by dismissing the application under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the

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agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration clause or the validity of the arbitration clause itself....

Since the respondent has raised the plea that the compromise decree is vitiated by fraud, the merits of such a plea could be decided only by the Civil Court upon consideration of the evidence adduced by the parties.

22. As discussed earlier, there is no arbitration clause relating to the dispute between the parties in not appointing the appellant as stockist and the claim of compensation towards loss of goodwill and reputation. The High Court erred in proceeding under the footing that the dispute falls within the ambit of the agreement dated 01.05.1997 and that the appellant-plaintiff admits the existence of the arbitration clause and the impugned judgment is liable to be set aside."

8. The aforesaid observations in the considered opinion of this court are such, whereby the Court can safely come to the conclusion that in the aforesaid peculiar background of facts, the petitioner cannot relate back to the original arbitration clause which has already been exhausted by passage of time and if there is any dispute or grievance with regard to performance or any obligation, pursuant to the consent award, a separate remedy is provided under the statute and the Court is posted with the facts even by learned Senior Advocate Shri Trivedi that the proceedings have been initiated before the competent forum where the grievance can be ventilated are not in dispute.

9. In that view of the matter, this Court is unable to accept the submissions of the learned Senior Advocate Mr. Trivedi and found that this is not a fit case in which, the relief as sought for can be granted. The Court has not expressed any opinion with regard the grievance about dispute raised in respect of the merit of the same. The Court has only examined whether in the facts and circumstances, a fresh arbitration can be allowed to be initiated on the basis of the original agreement of 2014.

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Hence, it goes without saying that it would be open for the either side to take out appropriate proceedings before the competent forum where the grievance if surviving can be ventilated.

10. With the aforesaid observations and directions, the present petition stands dismissed with no order as to costs.

sd/-

(ASHUTOSH J. SHASTRI, J) phalguni