Tirupati Balaji Furnaces Pvt Ltd vs Shri Jaswant Singh S/O Shri Ram ...
2022 Latest Caselaw 4814 Raj/2

     HIGH COURT OF JUDICATURE FOR RAJASTHAN
                 BENCH AT JAIPUR

          S.B. Arbitration Application No. 69/2019

1.   Tirupati Balaji Furnaces Pvt Ltd., Having Its Registered
     Office At B-35(I And II) Riico Industrial Area, Khuskhera,
     Bhiwadi, 301019 Through Its Director Shri Vishal Yadav
2.   Vinod Kumar Yadav S/o Shri Balbir Yadav, Presently
     Residing At House No. 38A, Milan Wali Colony, Gurugram
     122001 (Haryana)
3.   Vishal Yadav S/o Shri Rohtash Yadav, Presently Residing
     At House No. 38A, Milan Wali Colony, Gurugram 122001
     (Haryana)
4.   Vinay Yadav S/o Shri Rohtash Yadav, Presently Residing
     At House No. 38A, Milan Wali Colony, Gurugram 122001
     (Haryana)
                                                             ----Petitioners
                                Versus
1.   Shri Jaswant Singh S/o Shri Ram Kanwar, R/o House No.
     17, Sector -1, Rewari, Haryana-123104
2.   Shri Sanjay Kumar Yadav S/o Late Shri Kartar Singh, R/o
     Pd-15, Malibu Town, Sohna Road, Gurugram, Haryana
     122001
3.   Shri Naveen Yadav S/o Shri Mahaveer Singh, R/o 433/3,
     Rajeev Colony, Gurugram Haryana 122001
4.   Shri Sumit Kumar Yadav S/o Shri Jaswant Singh, R/o
     House no. 705, Sector-3, Rewari, Haryana 123104
5.   Shri Birender Singh S/o Shri Ram Kanwar, R/o House No.
     705, Sector-3, Rewari, Haryana-123104
6.   Shri Naresh Kumar Yadav, Huf Karta S/o Shri Ram
     Kanwar, R/o House No. 705, Sector-3, Rewari, Haryana-
     123104
7.   Smt. Neetu Yadav W/o Shri Rajesh Yadav, R/o House No.
     23, Sector-75, Gurugram, Haryana-122001
8.   Shri Abhishekh Yadav S/o Shri Rohtas Singh Yadav, R/o
     Alaknanda-812, Jalyaya Jowet, Sector-56, Gurugram,
     Haryana 122001
9.   Shri Varun Yadav S/o Late Shri Kartar Singh, R/o Pd-15,
     Malibu Town, Sohna Road, Gurugram Haryana 122001


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           And At R/o House No. 38A, Miyan Wali Colony, Gurgaon,
           Haryana-122001, Director Of M/s Tirupati Balaji Furnaces
           Pvt. Ltd.
10.        Shri Praveen Kumar S/o Shri Virender Singh, R/o House
           No. 704, Sector 3, Rewari, Hariyana 123104
11.        Shri Sunder Yadav S/o Shri Amar Singh, R/o Village
           Kherki Daula, Gurgaon, Haryana - 122001
12.        Shri Yoginder Singh S/o Late Shri Sube Singh, R/o House
           No. 109, Sector 46, Gurugram, Haryana 122001
                                                                       ----Respondents

For Petitioner(s) : Mr. Rajendra Kumar Salecha with Ms. Tanisha Khulichandani and Mr. Abhishek Wadhwa For Respondent(s) : Mr. Pankaj Gupta Mr. Puneet Singhvi Mr. Kailash Chand Darji

HON'BLE MR. JUSTICE PANKAJ BHANDARI

Order

ORDER RESERVED ON :: 06/07/2022 ORDER PRONOUNCED ON :: 14/07/2022

1. The applicant has filed this arbitration application under

Section 11(6) of the Arbitration and Conciliation Act, 1996

(hereinafter referred to as "the Act of 1996") seeking appointment

of a sole arbitrator for resolution of the disputes between the

parties.

2. It is pleaded in the application that a Memorandum of

Understanding (hereinafter referred to as "the MOU") was

executed between the parties on 07.10.2017. Clause 13 of the

MOU provided that in case of any dispute, the same shall be

settled by mutual negotiations and failing which the dispute shall

be referred to arbitration as per the provisions of the Act of 1996.

It is also pleaded in the application that a legal notice was issued

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on 16.03.2019 to make the payment of demanded amount and in

case of non-compliance, to refer the disputes to the sole

arbitrator. A reply was received from the non-applicants wherein

they declined appointment of the sole arbitrator.

3. Reply to the application has been filed by the respondents. It

is stated in the reply by the non-applicants that the matter was

filed before the National Company Law Tribunal (hereinafter

referred to as "the NCLT") and reply was filed by the non-

applicants. Respondent Nos.11 and 12 have agreed for

appointment of the sole arbitrator. However, respondent Nos.2, 3,

4, 8 and 9 have objected to the appointment of an arbitrator and

have prayed for dismissal of the arbitration application.

4. In the reply filed by respondent Nos.2, 3, 4, 8 and 9, it is

mentioned that the matter was filed before the NCLT and that the

applicants have concealed material facts. It is also stated in the

reply that the applicants after service have appeared before the

NCLT and no application was filed for reference of the dispute to

appoint an arbitrator, hence, it can be deduced that the applicants

have waived the arbitration clause. It is after taking many

opportunities, the applicants have filed an application under

Section 8 of the Act of 1996 before the NCLT and the NCLT is

having exclusive jurisdiction to resolve the dispute and the

applicants deliberately to escape from the order of the NCLT

wherein the applicants have been directed to pay a sum of Rs.46

lakhs, have filed the present application.

5. Non-applicant No.7 has filed preliminary objection stating

therein that she is not a signatory to the arbitration agreement,

hence, non-signatory to the MOU cannot be forcefully subjected to

the agreement in which she was not a party. The applicants have

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filed rejoinder to the preliminary objection raised by the non-

applicant No.7 - Ms. Neetu Yadav wherein it is mentioned that the

non-applicant No.7 arrayed herself as appellant No.7 in Appeal

No.140/59/ND/02018 before the NCLT, hence, she cannot now

claim that she is not a signatory to the MOU. Rejoinder with

regard to the reply filed by the non-applicant Nos.2, 3, 4, 8 and 9

has also been filed by the applicants.

6. It is contended by the counsel for the applicants that there is

an arbitration clause and therefore, the applicants are entitled to

have a right to appoint an arbitrator for resolving the dispute,

which has arisen between the parties. Counsel for the applicants

has placed reliance on Vidya Drolia Versus Durga Trading

Corporation: (2021) 2 SCC 1 and Firm Ashok Traders & Anr.

Versus Gurumukh Das Saluja & Ors.: (2004) 3 SCC 155.

7. It is contended by the counsel for the non-applicants that the

dispute was pending before the NCLT and no application was filed

with regard to there being an arbitration clause and only after

passing of more than one year, an application has been moved by

the applicants before the NCLT that there is an arbitration clause

under Section 8(1) of the Act of 1996. It is also contended that

the NCLT is ceased with the matter and since the applicants have

not filed the application within the time prescribed under Section

8(1) of the Act of 1996 and have submitted to the jurisdiction of

the NCLT, an arbitrator cannot be appointed by the Court. It is

further contended that non-applicant No.7 was not a signatory to

the arbitration agreement, hence, she cannot be made a party to

the arbitration proceedings. Counsel for the non-applicants has

placed reliance on Mahesh Kumar Versus Rajasthan State Road

Transport Corporation, Jodhpur: C.R.P. No.309/2005 decided by

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this Court on 29.07.2005 and Srei Infrastructure Finance Ltd.

Versus Bhageeratha Engineering Ltd. & Ors.: 2009 (3) Arb.LR

342 (Gauhati).

8. I have considered the rival contentions of the counsel for the

parties and have carefully perused the material on record.

9. It would be appropriate to quote the provisions of Section 8

of the Act of 1996, which reads as under:-

"8. Power to refer parties to arbitration where there is an arbitration agreement--1[(1)A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.]

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:

[Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.]

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."

10. It is true that an application under Section 8(1) of the Act of

1996 has to be filed at the initial stage before submission of the

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first statement on substance of the dispute, however, the

application has been filed with delay. Application under Section

8(1) of the Act of 1996 is still pending before the NCLT. The moot

question, which arises before the Court, is whether pending

disposal of the application under Section 8(1) of the Act of 1996,

can the Court proceed to dispose of the application under Section

11(6) of the Act of 1996. From bare perusal of sub-section (3) of

Section 8 of the Act of 1996, it is evident that even if an

application is pending, arbitration can be commenced, continued

and an award can also be passed, meaning thereby that pendency

of an application under Section 8(1) of the Act of 1996 does not

debar the Court from appointing an arbitrator and even an award

can be passed pending proceedings under Section 8(1) of the Act

of 1996. It is also evident that Sections 8 and 11 of the Act of

1996 both have similar scope of judicial interference. As per

Section 8, it is the judicial authority before whom a dispute is

placed, which has to refer the matter for arbitration whereas sub-

section (6) of Section 11 of the Act of 1996 comes into play when

parties have failed to appoint an arbitrator with regard to

arbitration agreement and the Court is then empowered to appoint

an arbitrator. Admittedly, in the MOU, there is an arbitration clause

i.e. Clause 13, which reads as under:

"13. In case of any dispute that may arise between the parties of this MOU the same shall be settled by mutual negotiations and failing which the dispute(s) shall be referred to Arbitration as per the provisions of the ARBITRATION AND CONCILIATION ACT, 1996."

11. The Apex Court in Vidya Drolia (supra) has dealt in detail

with the meaning of non-arbitrability as well as the scope and

ambit of jurisdiction of the Court at the referral stage when an

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objection of non-arbitrability is raised on an application under

Sections 8 and 11 of the Act of 1996. The Apex Court held that

the Court under Section 8/11 has to refer a matter to arbitration

or appoint an arbitrator, as the case may be, unless the party has

established a prima facie (summary findings) case of non-

existence of valid arbitration agreement, by summarily portraying

a strong case that he is entitled to such a finding. The Apex Court

has also held that the subject matter of arbitrability cannot be

decided at the stage of Sections 8 and 11 of the Act of 1996,

unless it is a clear case of deadwood. The Apex Court has further

observed that if the validity of the arbitration agreement cannot

be determined on prima facie basis then the Court should refer the

matter. The Apex Court used the expression "when in doubt, do

refer" to convey the same.

12. From bare perusal of the arbitration clause, it is evident that

any dispute that arises between the parties to the MOU was first

required to be settled through mutual negotiations and failing

which the dispute(s) shall be referred to arbitration. The parties

therefore clearly intended that the dispute has to be referred to

arbitration, if by mutual negotiations the dispute is not resolved.

The pendency of the proceedings before the NCLT will not debar

this Court from appointing an arbitrator under Section 11(6) of the

Act of 1996 as there is no bar under Section 11 of the Act of 1996

and the Courts dealing with the matter of appointment of

arbitrator under Section 11 cannot give a restricted meaning to

the powers provided for under Section 11 of the Act of 1996 as

Section 8 only gives an additional power to the judicial authority

to refer the dispute to an arbitrator. It does not debar the Courts

from exercising the powers under Section 11 of the Act of 1996,

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which is evident from the wordings used in Section 11 of the Act

of 1996.

13. As far as objection with regard to non-applicant No.7 is

concerned, it is evident from bare perusal of the MOU that non-

applicant No.7 is not a signatory to the MOU, however, she has

filed an appeal and she is a signatory in the appeal before the

NCLT. Therefore, it is deemed appropriate that it would be for the

arbitrator to decide as to whether he has jurisdiction with regard

to lis relating to non-applicant No.7. The arbitration application

thus deserves to be allowed and the same is, accordingly, allowed.

The non-applicants would be free to raise their objections before

the arbitrator.

14. This Court appoints Mr. Justice S.S. Kothari (Retired), A/1-

301, VT Apartments, V.T. Road, Mansarovar, Jaipur - 302020, as

an arbitrator to decide the dispute.

15. The appointment of the sole arbitrator is subject to the

declarations being made under Section 12 of the Arbitration and

Conciliation Act, 1996 with respect to the independence and

impartiality, and the ability to devote sufficient time to complete

the arbitration within prescribed period.

16. The arbitrator shall be entitled to lay down fees as provided

under Manual of Procedure for Alternative Disputes Resolution,

2009 as amended from time to time.

17. Registry is directed to intimate Mr. Justice S.S. Kothari

(Retired) and obtain his formal consent.

(PANKAJ BHANDARI),J

SUNIL SOLANKI /PS

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