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     C/IAAP/50/2018                                 CAV JUDGMENT DATED: 05/08/2022




               IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

               R/PETN. UNDER ARBITRATION ACT NO. 50 of 2018

==========================================================

D MARS HOSPITALITY PRIVATE LIMITED Versus NIVA INFRASTRUCTURE PRIVATE LIMITED ========================================================== Appearance:

MR. NAVIN PAHWA, SENIOR ADVOCATE WITH MRS SANGEETA N

MR. K.G. SUKHWANI, ADVOCATE WITH MR. PARAS K SUKHWANI(8284)

==========================================================

CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR

Date : 05/08/2022

CAV JUDGMENT

1. The petition is filed under section 11(6) of the

Arbitration and Conciliation Act, 1996 (hereinafter referred

to as 'the Act' for short) by petitioner seeking appointment of

a sole Arbitrator to adjudicate the dispute that has arisen

between the parties contending inter alia that under the

Memorandum of Understanding (hereinafter referred to as

'MOU' for short) dated 03.07.2010 entered into between

petitioner and respondent which refers to a Collaboration-

cum-Development Agreement dated 27.12.2007 entered into

between respondent Company and one Backbone Enterprises

Limited (for short 'BEL'), petitioner and respondent had

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entered into MOU dated 03.07.2010, whereunder respondent

agreed to construct three star business hotel out of the land

which was subject matter of Collaboration-cum-Development

Agreement between the respondent - Company and BEL and

dispute has arisen between parties in that regard.

2. It is contended that petitioner was informed by

respondent of certain disputes having arisen between the

respondent and BEL pending before the Arbitral Tribunal,

which resulted in an award being passed on 28.07.2012,

whereunder it is noticed that 35.55% of the land equivalent

to 14,901 sq. yards is to be parted in favour of petitioner and

sale deed is not executed by BEL.

3. Petitioner also claims to have got issued a notice on

18.05.2017 calling upon the respondent to execute registered

sale deed in respect of land admeasuring 4786.80 sq. mtrs.

which was not accepted by respondent and even after issuing

legal notice dated 03.10.2017 by invoking Clause 6 of MOU,

respondent had called upon the respondent to appoint an

Arbitrator and on its failure, petitioner is seeking for

appointment of a sole Arbitrator.

C/IAAP/50/2018 CAV JUDGMENT DATED: 05/08/2022

4. Respondent on being notified, has appeared and filed

reply denying averments made in the petition and has

admitted entering into MOU dated 03.07.2010 with

petitioner. It is contended that hotel building which was

agreed to be constructed by respondent for petitioner was at

the cost and land component, one amongst the various cost

components to be paid by petitioner during the course of

implementation of MOU and as such, transfer of lands cannot

be dealt with in isolation without considering other

commercial aspects of MOU. Respondent has also raised the

plea that petitioners have never communicated to the

respondent of their intention to proceed with implementation

of MOU and they have shown their readiness only for

payment of land component part of the total hotel project

costs if land is registered in respondent's favour but no

affirmation is shown for implementing MOU in totality.

Hence, they have sought for dismissal of the petition.

5. I have heard arguments of learned Senior Advocate

Mr. Navin Pahwa appearing for petitioner and Mr. K.G.

Sukhwani, learned Advocate appearing for respondent.

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Perused the case papers.

6. A Collaboration-cum-Development Agreement came

to be entered into between respondent - Company and BEL

on 27.12.2007 which discloses that BEL is the owner of

Freehold Non-agricultural land admeasuring 35,048.16 sq.

mtrs. or 41,917 sq. yards situated at City Survey No. 1868,

Ward No. 9, Rajkot City at Canal Road, popularly known as

Rajkot Textile Mill Land. Under the said Collaboration

agreement, owners of the land namely BEL had agreed to

allow respondent to develop the subject land for the purpose

of commercial complex subject to various stipulations

contained in the said agreement. Pursuant to the same, MOU

came to be entered into between petitioner and respondent

on 03.07.2010, whereunder respondent agreed to construct a

three star business hotel on the land admeasuring 4,786.80

sq. mtrs. out of the total land it had agreed to develop and

respondent had also agreed to transfer the built up property

of three star hotel together with proportionate land in favour

of petitioner for a total consideration of Rs. 63.56 crores, out

of which, the price of the land was fixed at Rs. 16.10 crores.

Petitioner claims to have paid a sum of Rs. 4,74,51,000/- to

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the respondent pursuant to said MOU.

7. The respondent is said to have informed the

petitioner that certain disputes had arisen between them and

the owner of the land viz. BEL which is said to have been

referred to an Arbitral Tribunal. The said dispute is said to

have resulted in an award being passed on 28.07.2012, under

which it was recorded that both the parties therein namely

BEL (owner of the land) and respondent herein having agreed

to part with 35.55% of the subject land in favour of

respondent which is equivalent to 14,901.50 sq. years and

owner of BEL was directed by the Arbitral Tribunal to

execute the sale deed in favour of respondent.

8. Undisputedly, petitioner herein was not a party to

the said Arbitral proceedings and claims to have acquired

knowledge of Arbitral Tribunal's award in 2016. Petitioner

has also contended in the petition that respondent had

informed the petitioner about sale deed having not been

executed by BEL in its favour and as soon as it is executed

further action pursuant to MOU could be taken.

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9. In the aforesaid background, petitioner got issued a

notice dated 18.05.2017 calling upon the respondent to

execute a registered sale deed in respect of land

admeasuring 4786.80 sq. mtrs. as agreed to under MOU in

favour of petitioner. It is stated that said notice was not

replied to by respondent and it is said to have been followed

by issuance of another notice dated 03.10.2017 invoking

Clause 6 of MOU under which the parties are said to have

agreed for resolution of their disputes by arbitration. The

said notice was replied to by the respondent on 30.11.2017

(Annexure - F), whereunder respondent is said to have

informed the petitioner that after making certain payment, it

had not paid the installments as agreed to under MOU and as

such said MOU was terminated and after lapse of seven

years, the notice was got issued.

10. Learned Senior Advocate Mr. Navin Pahwa

appearing for the petitioner has reiterated the grounds urged

in the petition and has contended that dispute is an arbitrable

dispute and both the parties have agreed under the MOU

dated 03.07.2010 to refer the dispute to arbitration by

appointing one Arbitrator from each side who in turn would

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nominate an umpire and as such dispute that has arisen

between the parties requires to be resolved by constitution of

an Arbitral Tribunal.

11. Per contra, learned advocate Mr. Sukhwani

appearing for respondent would contend that petition as filed

is not maintainable and it is presented by a person who is

incompetent. It is further contended that petitioner is

seeking to revive a cause of action which is time barred by

invoking arbitration clause of MOU dated 03.07.2010 and

hence, he prays for rejection of petition.

12. Having heard the learned advocates appearing for

the parties, it is noticed that there is no dispute between the

parties about execution of MOU dated 03.07.2010. Clause 6

of the said agreement provides for resolution of disputes

between the parties, if any, that would arise under the said

agreement - MOU to be resolved by arbitration. Arbitration

agreement reads as under : -

"Clause 6 - If any dispute arises for the works mentioned in the said memorandum, it shall be resolved by appointing three neutral - arbitrators by both the parties and the Hon'ble Court shall not be approached until the said outcome of such

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arbitrators and work shall not be stopped. The parties are bound to do the work in stipulated time- limit and to pay and receive the payment as work gets completed."

13. A plain reading of the above clause or agreement

would indicate that if there were any dispute arising under

MOU dated 03.07.2010, both parties have agreed for

resolution of such disputes through arbitration by appointing

one Arbitrator from each side who in turn would appoint an

umpire. Though several contentions have been raised with

regard to arbitrablity of disputes, I am of the considered view

that said aspect cannot be in the realm of consideration by

this Court adjudicating a claim for appointment of an

Arbitrator under section 11(6) of the Act.

14. The Hon'ble Apex Court in the case of Bharat

Sanchar Nigam Limited and Another versus Nortel

Networds India Private Limited reported in (2021) 5 SCC

738, has held that while exercising jurisdiction under Section

11 of the Act as the judicial forum, the court may exercise the

prima facie test to screen and knockdown ex facie meritless,

frivolous, and dishonest litigation. Limited jurisdiction of the

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Courts would ensure expeditious and efficient disposal at the

referral stage. At the referral stage, the Court can interfere

"only" when it is "manifest" that the claims are ex facie time

barred and dead or there is no subsisting dispute requiring to

be adjudicated.

15. By referring to its earlier judgment the Hon'ble Apex

Court in the case of Vidya Drolia and Others versus

Durga Trading Corporation reported in (2021) 2 SCC 1,

has held the issue of limitation would normally a mixed

question of facts and law and would lie within the domain of

the Arbitral Tribunal. The said issue of limitation would go to

the maintainability or admissibility of the claim, which has to

be necessarily decided by the Arbitral Tribunal itself. It has

also been held that : -

"40. The issue of limitation, in essence, goes to the maintainability or admissibility of the claim, which is to be decided by the arbitral tribunal. For instance, a challenge that a claim is time-barred, or prohibited until some pre-condition is fulfilled, is a challenge to the admissibility of that claim, and not a challenge to the jurisdiction of the arbitrator to decide the claim itself."

16. In light of aforestated authoritative principles of law

laid down by the Hon'ble Apex Court, the dispute in this

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proceedings gets narrowed down namely namely it requires

to be examined whether petition is liable to be dismissed as it

involves jurisdictional and admissibility issue as well as

limitation or the issue of limitation alone or the said issue is

also to be decided by the Arbitral Tribunal itself. The answer

to this question can be found in paragraph 38 and 39 of the

judgment in the matter of Bharat Sanchar Nigam Limited

and Another versus Nortel Networds India Private

Limited (supra). Insofar as jurisdictional and admissibility

issue is concerned, it has been held by Hon'ble Apex Court

that issue of "jurisdiction" pertains to the power and

authority of the arbitrators to hear and decide a case.

However, admissibility issue relates to procedural

requirements such as breach of pre-arbitration requirements,

which are required to be decided by the Court referring the

matter for arbitration or to an Arbitral Tribunal. It has been

further held that : -

"38. Limitation is normally a mixed question of fact and law, and would lie within the domain of the arbitral tribunal. There is, however, a distinction between jurisdictional and admissibility issues. An issue of 'jurisdiction' pertains to the power and authority of the arbitrators to hear and decide a case. Jurisdictional issues include objections to the competence of the arbitrator or tribunal to hear a dispute, such as lack of consent, or a dispute falling outside the scope of the

C/IAAP/50/2018 CAV JUDGMENT DATED: 05/08/2022

arbitration agreement. Issues with respect to the existence, scope and validity of the arbitration agreement are invariably regarded as jurisdictional issues, since these issues pertain to the jurisdiction of the tribunal.

39. Admissibility issues however relate to procedural requirements, such as a breach of pre-arbitration requirements, for instance, a mandatory requirement for mediation before the commencement of arbitration, or a challenge to a claim or a part of the claim being either time-barred, or prohibited, until some pre- condition has been fulfilled. Admissibility relates to the nature of the claim or the circumstances connected therewith. An admissibility issue is not a challenge to the jurisdiction of the arbitrator to decide the claim."

17. In the instant case, there is no disputes with regard

to parties having entered into a MOU dated 03.07.2010 and

both the parties having agreed under the said agreement to

resolve their disputes by resorting to alternative dispute

redressal mechanism namely Arbitration. Hence, it cannot be

gainsaid by the respondent that petition itself is to be

dismissed on the ground that there being no arbitrable

disputes or the matter is not required to be referred to

arbitration.

18. In the instant case, neither any reply notice nor any

reply affidavit is filed to the petition by the respondent.

Respondent has raised a plea that claim of the petitioner

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being time barred. Even otherwise according to petitioner,

the respondent had informed of there being a dispute

between itself and owner of land of BEL which had landed

before the Arbitral Tribunal and same having got crystallized

by way of an award dated 28.07.2012 of which petitioner

claims had no knowledge has not been. Petitioner not being

party to the said proceedings, denied by the respondent in its

rejoinder. Even, if denied it would fall within the four corners

of "disputed question of fact" which requires to be

adjudicated by the Arbitral Tribunal and prayer for reference

of the dispute to an Arbitral Tribunal cannot be denied on the

sole basis of the plea now raised by the respondent and claim

of petitioner cannot be nipped at the bud. To put it

differently, this is an issue which requires to be resolved by

the Arbitral Tribunal based on pleadings. Infact, respondent

has not only denied MOU having been entered into with

petitioner but has also accepted that a sum of Rs. 1 crore

(petitioner claims to have paid Rs. 4.47 crore) having been

received. However, respondent claims that further amounts

ought to have been paid by the petitioner. The fact that after

MOU dated 03.07.2010 came into existence, the dispute that

C/IAAP/50/2018 CAV JUDGMENT DATED: 05/08/2022

had arisen between respondent herein and the owner of

subject land BEL was being adjudicated by the Arbitral

Tribunal which resulted in an award being passed on

28.07.2012 cannot be ignored. However, petitioner claims to

have acquired knowledge of such award having been passed

by the Arbitral Tribunal only in 2016. This again is an issue

which is based on facts and same will have to be thrashed out

in the Arbitral proceedings.

19. For the reasons afore-stated, I proceed to pass

following :

ORDER

(i) Arbitration Petition is ALLOWED.

(ii) Shri Akil Kureshi, Former Chief Justice, High Court

of Rajasthan, Residing at : Akil Villa, Swastik Society-B,

Navrangpura, Ahmedabad - 380009, is hereby appointed

as sole Arbitrator to resolve the dispute between the

parties in accordance with the Arbitration Centre

(Domestic and International), High Court of Gujarat

C/IAAP/50/2018 CAV JUDGMENT DATED: 05/08/2022

Rules, 2021. Both parties would also be governed by

said Rules.

(iii) Registry is directed to communicate this order

to the sole arbitrator forthwith by speed post.

          (iv)     Costs made easy.




                                                   (ARAVIND KUMAR,CJ)
AMAR SINGH