Mr.R.Sathyanarayanan vs Mrs.Bharathi Aravazhi
2022 Latest Caselaw 13925 Mad

                                                                          Arb.O.P (Com.Div.) No.317 of 2022

                                    IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                     DATED : 04.08.2022

                                                             CORAM

                                         THE HON'BLE MR. JUSTICE M.SUNDAR

                                              Arb.O.P (Com.Div.) No.317 of 2022


                     1. Mr.R.Sathyanarayanan

                     2. Mrs.S.Purnima

                     3. Mr.M.C.Kaleeswaran

                     4. Mrs.P.Gunasundary                                         ... Petitioners
                                                       Vs.

                     1. Mrs.Bharathi Aravazhi

                     2. Mr.A.Prabagaran                                    ... Respondents

                                  Arbitration Original Petition filed under Section 11(6) of the
                     Arbitration and Conciliation Act, 1996 praying to appoint an arbitrator to
                     adjudicate the disputes between the Petitioners and Respondents in terms of
                     the partnership deed dated 01.01.2019 at Chennai and to direct the
                     respondents to pay costs.
                                  For Petitioners        : Mr.D.Senthil Kumar

                                  For Respondents        : Mr.V.R.Appaswamee
                                                         ORDER

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This order will now dispose of captioned matter.

2. This order has to be read in conjunction with and in continuation of

earlier proceedings made in the previous listings on 15.07.2022 and

29.07.2022, which read as follows:

'Proceedings made on 15.07.2022

'Captioned 'Arbitration Original Petition' [hereinafter 'Arb OP' for the sake of convenience and clarity] has been presented in this Court on 29.06.2022 under Section 11 of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)' [hereinafter referred to as 'A and C Act' for the sake of convenience, clarity and brevity] with a prayer for appointment of a sole Arbitrator.

2. Mr.D.Senthil Kumar, learned counsel for four petitioners submits that the captioned Arb OP is predicated on clause 12 of a 'Partnership Deed dated 01.01.2019' [hereinafter 'primary contract' for the sake of convenience and clarity]. To be noted, originally there was a partnership constituted by 8 individuals vide partnership deed dated 11.12.2018, 2 individuals retired and therefore primary contract dated 01.01.2019 came to be executed creating a new partnership firm. This means that there are six partners qua primary contract.

3. Adverting to the primary contract, learned counsel submits that partnership was primarily for carrying on business in Blue

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Metal in the name and style 'M/s.Jayavelan Bluemetals', when the partners started doing business, financial assistance was taken from Banks and financial institutions etc., but there was difficulty in repayment owing to alleged non-cooperation on the part of the respondents. It is not necessary to dilate any further on this aspect of the matter and it will suffice to say that this is the main arbitrable dispute that has erupted qua primary contract. Aforementioned clause 12 of primary contract reads as follows:

'12. Any dispute or difference between the partners arising in regard to the construction or terms of this deed or any party there of or in respect of the accounts or of the rights and liabilities of the partners under this deed or any other matter relating to the partnership, shall be referred to arbitration, each party appointing one arbitrator or the partners mutually agreeing upon to a single arbitrator and the provisions of the Indian Arbitration Act 1940 and any statutory modification thereof shall apply.'

4. A careful reading of the aforementioned clause which serves as Arbitration Agreement between the parties i.e., 'Arbitration Agreement' within the meaning of Section 2(1)(b) read with Section 7 of A and C Act makes it clear that it provides for Arbitration by either a five member Arbitral Tribunal or a sole Arbitrator by consent.

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5. Owing to the aforementioned arbitrable dispute, the petitioners initially appointed an Arbitrator and the Arbitrator put the respondents on notice. As the respondents have been put on notice, arbitration clause stands invoked is learned counsel's say. However, the respondent replied vide letter dated 11.06.2022 stating that they do not agree for Arbitrator suggested by the petitioners.

6. Prima facie case for issue of notice has been made out.

7. Issue notice to respondents returnable in a fortnight i.e., returnable by 29.07.2022. Private notice permitted.

8. List on 29.07.2022.' ' Proceedings made on 29.07.2022

Read this in conjunction with and in continuation of earlier proceedings made in the previous listing on 15.07.2022.

2. There is no representation for petitioners. However, Mr.R.Sasikumar, learned counsel representing Mr.V.R.Appaswamee, counsel on record for respondents who is before this Court submits that he represents both the respondents and learned counsel requests for a short accommodation to get instructions and revert to this Court. Request acceded to.

List on 04.08.2022.'

3. The aforementioned proceedings made in 15.07.2022 and

29.07.2022 listings shall now be read as an integral part and parcel of this

order. This means that the abbreviations, short forms and short references

used in the earlier proceedings will continue to be used in the instant order

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also (obviously for the sake of convenience and clarity).

4. In the hearing today, Mr.V.R.Appaswamee, learned counsel on

record for respondents submits that the respondents have invested

substantial sums of money in the partnership firm qua primary contract.

Learned counsel also submits that the respondents are not responsible for

alleged difficulties in repayment to banks and financial institutions.

5. This Court is of the considered view that the aforementioned

submissions of learned counsel for respondents are on merits. This also

means that the aforementioned submissions have to be made before an

'Arbitral Tribunal' ['AT'] which will adjudicate upon and take a decision i.e.,

make an award. Therefore, captioned Arb.OP being a legal drill under

Section 11 of A and C Act, this Court refrains itself from expressing any

view or opinion on the merits of the matter, which in sum and substance is

the submissions of learned counsel for respondents. In other words, these

questions are left open to be decided by the Hon'ble AT which will be

appointed infra.

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6. Before doing that i.e., before appointing an sole Arbitrator, this

Court deems it appropriate to set out that a legal drill under Section 11 of A

and C Act should perambulate within the statutory perimeter sketched by

sub-section (6A) thereat, which reads as follows:

'(6A) The Supreme Court or, as the case may be, the High

Court, while considering any application under sub-section (4) or

sub-section (5) or sub-section (6), shall, notwithstanding any

judgment, decree or order of any Court, confine to the examination

of the existence of an arbitration agreement.'

7. Aforementioned sub-section (6A) came up for consideration before

Hon'ble Supreme Court in oft-quoted Mayavati Trading case law i.e.,

Mayavati Trading Private Limited Vs. Pradyuat Deb Burman reported in

(2019) 8 SCC 714, relevant paragraph in Mayavati Trading case law is

paragraph No.10 and the same reads as follows:

'10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively

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overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgments, as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment in Duro Felguera SA.' (underlining made by this Court to supply emphasis and highlight)

8. Aforementioned paragraph 10 of Mayavati Trading case law takes

this Court to Duro Felguera, S.A case law i.e., Duro Felguera, S.A. Vs.

Gangavaram Port Limited reported in (2017) 9 SCC 729, relevant

paragraphs in Duro Felguera case law are paragraphs 47, 59 and the same

read as follows:

'47. What is the effects of the change introduced by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as 'the 2015 Amendment' ) with particular reference to Section 11(6) and the newly added Section 11(6-A) of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as “the 1996 Act”) is the crucial question arising for consideration in this case.' '59. The scope of the power under Section 11 (6) of the 1996

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Act was considerably wide in view of the decisions in SBP and Co. (supra) and Boghara Polyfab (supra). This position continued till the amendment brought about in 2015. After the amendment, all that the Courts need to see is whether an arbitration agreement exists -

nothing more, nothing less. The legislative policy and purpose is essentially to minimize the Court’s intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11 (6A) ought to be respected. '

9. Besides aforementioned statutory facet of a Section 11 legal drill,

two other facets have been put in place by way of judicial pronouncements

vide N.N.Global and Nortel principles. N.N.Global principle is ratio laid

down by Hon'ble Supreme Court in N.N.Global Mercantile Pvt. Ltd., Vs.

Indo Unique Flame Ltd., and others reported in 2021 SCC Online SC 13

and it turns on arbitration clause being contained in a contract which is

insufficiently stamped/unstamped /not registered when it is compulsorily

registrable. Nortel principle is ratio laid down by Hon'ble Supreme Court in

Bharat Sanchar Nigam Limited and another Vs. Nortel Networks India

Private Limited reported in (2021) 5 SCC 738 and it turns on a plea of the

lis being ex facie barred by limitation. Those questions do not arise in the

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case on hand. Therefore, it will suffice that this Court perambulates within

sub-section (6A) of Section 11 of A and C Act.

10. From the narrative thus far, it is clear that there is no disputation

about the existence of the arbitration agreement i.e., Clause 12 of the

primary contract being Partnership Deed dated 01.01.2019.

11. In the light of the narrative thus far, Hon'ble Mr.Justice

N.Kirubakaran (Retd.), a former Judge of this Court, residing at No.36, 2nd

Cross Street, Rayala Nagar, Ramapuram, Chennai – 600 089, Mob: 94450

25454, E-mail: [email protected] is appointed as sole

arbitrator. Hon'ble sole Arbitrator is requested to enter upon reference qua

primary contract i.e., Partnership Deed dated 01.01.2019, adjudicate the

arbitrable disputes that have arisen between the petitioners and respondents

in the captioned Arb.OP qua primary contract and render an arbitral award

by holding sittings in the 'Madras High Court Arbitration Centre under the

aegis of this Court' (MHCAC) in accordance with the Madras High Court

Arbitration Proceedings Rules 2017 and fee of the Hon'ble Arbitrator shall

be as per Madras High Court Arbitration Centre (MHCAC) (Administrative

Cost and Arbitrator's Fees) Rules 2017.

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M.SUNDAR.J.,

gpa

12. Captioned Arb.OP disposed of in the aforesaid manner. There

shall be no order as to costs.

04.08.2022

Index : Yes / No gpa

Note: The Registry is directed to communicate this order forthwith to

1. Hon'ble Mr.Justice N.Kirubakaran (Retd.), Former Judge of Madras High Court, No.36, 2nd Cross Street Rayala Nagar, Ramapuram Chennai – 600 089 Mob: 94450 25454, E-mail: [email protected]

2.The Director Tamil Nadu Mediation and conciliation Centre

-cum- Ex Officio Member, Madras High Court Arbitration Centre Madras High Court, Chennai – 600 104.

Arb.O.P (Com.Div.) No.317 of 2022

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