Madras High Court
Unknown vs India Envelopes Limited on 22 February, 2021
O.P.No.250 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 22.02.2021
CORAM
THE HONOURABLE Ms. JUSTICE P.T. ASHA
O.P.No.250 of 2020
&
O.A.No.1083 of 2019 & A.No.9274 of 2019
1.Vijay Cotton & Fibre Co, a registered partnership Firm
Having its Office at
Ground Floor, Cotton Exchange Building,
S-25 & S-27, Cotton Green (East),
Mumbai – 400 033
2.Vijay Cotton & Fibre LLP
Limited Liability Partnership Having its Office at
Ground Floor, Cotton Exchange Building,
S-25, S-27, Cotton Green (East)
Mumbai – 400 033
3.Satyam Agro Industries
A Partnership Firm
having its place of business at
Main Road, Ozhar, District Barwani – 451 449
4.Sundaram Industries
A Partnership Firm
having its place of business at
3, Pratapganj, Sendhwa – 451 666
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O.P.No.250 of 2020
5.Shivam Cot Fibers Pvt Ltd
A Private Limited Company
Having its Office at
Maulana Azad Marg, Sendhwa – 451 666
6.Satyam Cotex Pvt Ltd.
A Private Limited Company
Having its Office at
1, Pratapganj, Sendhwa – 451 666
7.Shivam Cotton Corporation
A Partnership Firm
having its place of business at
Maulana Azad Marg, Sendhwa – 451 666
8.Natraj Cotton Pvt Ltd
A Private Limited Company
383, AT Post, Tasma, Tq.,
Hadgaon – 431 713
Maharashtra
9.Satyam Fibres
A Sole proprietorship
having its place of business at
Main Road, Ozhar, District Barwani – 451 449 ... Petitioners
Vs.
India Envelopes Limited
Represented by its Managing Director
Mr.B.Ramachandran
Having its office at No.14, Venugopal Pillai Road,
Chidambaram – 608 001 ... Respondent
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O.P.No.250 of 2020
Prayer: The Petition is filed under Section 11 (6) A of the Arbitration and
Conciliation Act, 1996 to constitute Single Member Arbitral Tribunal to
adjudicate / resolve the disputes between parties, in accordance with
provisions of Section 11 (6) of the Arbitration and Conciliation Act.
For Petitioners : Mr.N.P.Vijay Kumar
For Respondent : Mr.R.Murali
ORDER
The above petition is filed to appoint a sole arbitrator to adjudicate
the disputes arising out of a Tripartite Agreement dated 03.08.2017
between the petitioners and the respondent herein. The petitioners would
seek the appointment of an arbitrator for the following reasons.
2. The petitioners who are traders in Cotton bales had entered into
an agreement with the National Sewing Thread Company Limited, herein
after referred to, for the sake of brevity as the NSTCL.
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O.P.No.250 of 2020
3. The petitioners have been supplying cotton bales to the NSTCL
for a very long period and from 2014 – 2015, the NSTCL started delaying
the payment of the dues to the petitioners. The petitioners have learned
that the NSTCL have borrowed heavily from the Banks and Financial
institutions to which huge amounts were due.
4. As on 30.06.2017, the NSTCL owed a sum of Rs.8,33,58,974/- to
the petitioners herein. Each of the petitioners were entitled to specified
sums of money. In order to repay these amounts, a Tripartite Agreement
was entered into between the petitioners, the NSTCL and the respondent
herein, which is the sister concern of the NSTCL. The respondent had
undertaken to sell their properties and discharge the amounts to the
petitioners. The agreement also contained an arbitral clause under which
the parties had agreed to resolve their dispute through medium of
arbitration. The petitioners would submit that the assurance given in the
Tripartite Agreement was observed in the breach. Therefore, the
petitioners had invoked the arbitration clause by their letter dated
28.10.2019 and had appointed Mr.Yashod Vardhan, Senior Counsel as the
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O.P.No.250 of 2020
sole arbitrator. However, the respondent had not sent any response to the
said appointment.
5. Meanwhile, the petitioners have filed O.A.No.1083 of 2019 and
A.No.9274 of 2019 seeking for an interim protection against the
respondent. Since the respondent had not come forward to agree to the
name of the arbitrator suggested, the petitioners have filed an instant
Original Petition. This Court had passed an interim order of injunction
dated 10.03.2020 restraining the respondent from alienating or
encumbering the properties referred to in the Tripartite Agreement. This
interim order has been extended till date.
6. The respondent has filed a counter stating that the petitioners
have filed their claim before the Insolvency Resolution Professional who
has been appointed by the NCLT and having chosen to move the NCLT,
the petitioners cannot seek to have the arbitrator appointed. They had also
raised a plea that the Tripartite Agreement is not stamped and therefore no
claim can be made on the basis of the said deed.
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O.P.No.250 of 2020
7. Mr.N.P.Vijay Kumar learned counsel appearing on behalf of the
petitioners would submit that as per the Tripartite Agreement the
respondent was bound to sell the property and pay the dues to the debtors.
In case there were no buyers, the property could also be purchased by the
petitioners or their nominees and the sale consideration be used towards
dues of the petitioners and the balance to be handed over to the
respondent. The learned counsel would submit that this assurance has
been observed in the breach and further the respondent has not made any
arrangement to repay the amounts to the petitioners.
8. Mr.R.Murali, learned counsel appearing on behalf of the
respondent would submit that though it is a Tripartite Agreement the
petitioners have not chosen to show the NSTCL as a party. Further, a
reading of clause 16 of the Tripartite Agreement would clearly
demonstrate that the sale in favour of the petitioners was not mandatory
since in the event of the respondent refusing to execute the sale deed then
the petitioners are entitled to be repay the sum assured. He would
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O.P.No.250 of 2020
therefore argue that the respondent has not offered to sell the property.
9.The learned counsel would further argue that since the Tripartite
Agreement refers to the properties it has to be necessarily stamped and
being an unstamped document, the petitioners cannot rely upon the same.
He would rely upon the Judgment in N.N.Global Mercantile Private
Limited Vs. Indo Unique Flame Limited and others reported in 2021
SCC Online SC 1018.
10. Mr.Vijay Kumar would reply that considering the fact that no
right is sought to be exercised on the suit property and as the agreement
does not grant any right to the property, the argument that the document
has to be stamped is puerile. He would submit that the agreement is
simplicitor for the recovery of money.
11. Heard the learned counsels and perused the papers.
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O.P.No.250 of 2020
12. The two defenses put forward by the respondent is as follows:
(i) Claim already pending before the NCLT
(ii)Tripartite Agreement not stamped.
13. The proceedings before the NCLT does not in any manner bar
the petitioners from exercising the rights to have their disputes resolved
through arbitration. The parties under the agreement had agreed that any
dispute would be resolved through Arbitration. The dispute has now
arisen regarding repayment as agreed.
14. The second defense that the documents in question is not
adequately stamped cannot be countenanced since no right in favour of the
petitioners is created over the immovable properties in this agreement. On
the contrary it is only an agreement under which the respondent had
undertaken to pay the amounts due by NSTCL, their sister concern. The
agreement details how the respondent would clear the outstanding.
15. The respondent have themselves stated in their counter in
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O.P.No.250 of 2020
O.A.No.1083 of 2019 that there was no intent to create a security when the
said agreement was created. The agreement merely quantifies the amount
payable and states that the respondent would sell the property and repay
the dues of each petitioners and the remaining amount was to go to the
respondent. Clause 16 of the agreement provides that in case the
respondent fails to execute to sell the property to the third party then the
petitioners would be entitled to purchase the property and after adjusting
their outstanding pay the balance sale consideration to the respondent.
16. In the light of these recitals, it is very clear that the documents in
question does not create any right in the immovable properties and
therefore does not required to be stamped. Admittedly, there is a dispute
between the petitioners and the respondent with regard to the very
payment. The case of the respondent is that having moved the claim
before the Insolvency Resolution Professional the petitioners cannot
initiate arbitral proceedings. However, the petitioners would contend that
it is the NSTCL which is before the NCLT and in respect of which the IRP
has been appointed. The petitioners are seeking to invoke the arbitration
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O.P.No.250 of 2020
clause in the Tripartite Agreement since the respondent has failed to
honour their commitment under this agreement. Therefore, the petitioners
would submit that the pendency of the proceedings before the Insolvency
Resolution Professional would not be a bar for arbitral proceedings. They
have also dispelled the claim that a right in property has been created
under the memorandum of understanding.
17. Therefore, considering the fact that parties have agreed to
resolve the disputes through arbitration I appoint Mr.Yashod Vardhan,
Senior Counsel as the arbitrator. This arbitrator was named by the
petitioners and the learned counsel for the respondent would submit that in
the event of the Court rejecting his contentions then he has no objection to
the appointment of Mr.Yashod Vardhan, Senior Counsel as the arbitrator.
Since this Court has rejected the contentions of the respondent regarding
the arbitral tribunal, I hereby appoint Mr.Yashod Vardhan, Senior
Advocate, No.21 (8), VII th Main Road, Raja Annamalaipuram, Chennai –
600 028, Mob: 9841075397, as the Arbitrator.
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O.P.No.250 of 2020
i) The arbitrator may, after issuing notice to the parties and upon
hearing them, pass an award as expeditiously as possible, preferably within
a period of six months from the date of entering reference. It is open to the
respondent to raise all legal objections as to the validity of contract.
ii) The arbitrator is at liberty to fix the remuneration and other
incidental expenses as per law.
iii) The proceedings may be conducted under the aegis of the
Madras High Court Arbitration Centre and in accordance with the Madras
High Court Arbitration Rules.
16. The Original Petition is ordered leaving the parties to bear their
own costs. Interim order already granted shall continue till the arbitral
proceedings conclude. Consequently, the application in A.No.9274 of
2019 is closed giving liberty to the applicants to move the arbitral
Tribunal. No costs.
22.02.2021
Internet : Yes/No
Index :Yes/No
Speaking / Non-Speaking
kan
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O.P.No.250 of 2020
P.T. ASHA. J,
kan
O.P.No.250 of 2020
22.02.2021
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