Telangana High Court

M/S. Agri Gold Foods And Farm Products ... vs M/S. Vedavaag Systems Ltd., Vsl on 23 October, 2024

Author: K. Lakshman

Bench: K. Lakshman

         HONOURABLE SRI JUSTICE K. LAKSHMAN

         ARBITRATION APPLICATON No.11 OF 2024

ORDER:

Heard Sri Naga Deepak learned counsel representing Sri M.P

Kashyap, learned counsel for the Applicant, and Sri V. Gopala Rao

Amancharla, learned counsel for the Respondent.

2. The present Arbitration Application is filed under Section 11

(6) of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Act,

1996') for appointment of a sole arbitrator to adjudicate the disputes

between the parties.

3. The Government of India, pursuant to its intention of creating

a National Population Register, directed the formation of a consortium

of Central Public Sector Undertakings (CBSUs) consisting of Bharat

Electronic Limited, Bangalore (BEL), Electronic Corporation of India

Limited, Hyderabad (ECIL) and ITI Limited, Palakkad (ITI). This

consortium of CPSUs issued a request for quotation dated 01.10.2010

and a subsequent Corrigendum No.2, dated 20.10.2010.

4. The Applicant, Respondent and AVVAS Infotech Private

Limited (Hereinafter referred to as 'AVVAS') decided to form a

consortium and submitted quotation pursuant to the request for

quotation issued by the said CBSUs.

5. The Applicant, Respondent and AVVAS Infotech formed a

consortium of which Respondent was nominated to be the prime

vendor (Leader) and remaining two companies are consortium

partners. A tripartite agreement dated 26.05.2011 was entered by the

Applicant, Respondent and AVVAS for the said purpose. The said

consortium participated in the aforesaid request for quotation issued

by the said CPSUs. A tentative offer dated 11.01.2011 was made by

the CPSUs. The same was agreed by the consortium vide e-mail dated

13.01.2011.

6. A letter of intent dated 06.04.2011 was also issued. The

Respondent acting on behalf of the consortium, received a purchase

order from ECIL vide its order dated 18.04.2011 for Guntur,

Machilipatnam and Tirupati Centres. Therefore, the Applicant,

Respondent and AVVAS, have entered in tripartite agreement dated

26.05.2011 for the purpose of execution of the said purchase order on

specific terms and conditions mentioned therein.

7. As per Clause No.3.1 of the said tripartite agreement dated

26.05.2011, it was agreed by the Applicant, Respondent and AVVAS

that the Respondent shall be the prime vendor and the Applicant shall

provide necessary finances and The AVVAS shall provide all men,

material resources including the hardware and software and the

infrastructure, to establish the Data Centres and collection of data

from all the Districts covered under the purchase order.

8. Clause No.5 of the said tripartite agreement deals with the

'revenue sharing'. Clause No.8 deals with 'Governing law and

Jurisdiction including Arbitration.'

9. It is also apt to note that the value of the project was Rs.75.46

Crores. The AVVAS was assigned with the responsibility of

execution of project and to carry out operations. The Applicant was

assigned the role of financial partner. As per the terms of the said

tripartite agreement, the Applicant had paid an advance of 1.5 Crores

to the Respondent and also invested on the project significantly.

10. The Applicant further contended that the project was short-

closed/pre-closed by the Central Government abruptly just after

completion of 30% of the BDE and BME work. The balance work of

BDE and BME was cancelled besides withdrawing the LRUR work

by ECIL in December, 2014. The Respondent retained an amount of

Rs.1.08 Crores out of the amount received from ECIL by December,

2014 and not remitted either to the Applicant or to AVVAS. There is

outstanding amount of Rs.80+Lakhs which was to be received from

ECIL as on 31.03.2021 and this amount was also received by the

Respondent in June, 2021 and not remitted to the Applicant.

11. The Applicant contended that during various meetings held

with the Respondent on several occasions and also on 28.01.2020 held

between the Directors of Respondent, the Directors of AVVAS and in

the last meeting held on 22.07.2023, Respondent promised that it will

pay all the amounts retained by him. But Respondent failed to remit

the said amount despite several request and reminders. Respondent

also avoided to open the escrow account as stipulated in tripartite

agreement and utilizing the amounts as and when received from ECIL

without passing on the same to the Applicant or to AVVAS Infotech.

An amount of Rs.1.5 Crores paid to the Respondent initially as an

advance. Since the project was abruptly closed by the ECIL, the

Respondent is supposed to refund the same to the Applicant as per the

tripartite agreement, dated 26.05.2011. Thus, an amount of

Rs.3,38,26,212/- with interest from 01.01.2015 is due from the

Respondent and remaining outstanding.

12. The Applicant made several requests including vide last

letter dated 29.08.2023. There is no response from the Respondent.

The Applicant obtained information from ECIL under RTI Act. As per

the said information, ECIL has paid an amount of Rs.6,83,77,432/-

was paid on 25.09.2019, Rs.10,08,84,595/- on 07.08.2021 and

Rs.7,88,05,830/- on 15.09.2021 to the Respondent. The balance

amount to be paid is Rs.8,11,039/-. Therefore, amount received by

respondent lastly was on 15.09.2021, thereafter, despite sending the

notice including request made in the meeting dated 22.07.2023 and

letter dated 29.08.2023, Respondent did not pay the said amount.

Therefore, invoking arbitration clause, the Applicant has issued notice

dated 22.11.2023 proposing Sri H.Krishna Mohan, Advocate as

Arbitrator. According to the Applicant, there are disputes between the

Applicant, Respondent with regard to the said tripartite agreement

dated 26.05.2011 and they are arbitrable disputes. Vide reply letter

dated 27.11.2023, Respondent informed the Applicant that the claim

made by the Applicant is fictitious and Respondent is not liable to pay

any amount to the Applicant. According to the Applicant, Respondent

is due and liable to pay an amount of Rs.3,38,26,212/-. Therefore, it

has filed the present application under Section 11(6) of the Act, to

adjudicate all the disputes between the Applicant and Respondent.

13. Respondent filed counter contending that the claim made by

the Applicant is barred by limitation. AVVAS vide letter dated

24.03.2021 informed the Respondent that it is solely responsible and

liable for any claim that may arise in future in respect of any

outstanding statutory payment, any performance or any obligation,

from the government or any sub-vendor/sub-contractor or any other

person including their banker, partners of the firm or erstwhile

partners of the firm. The AVVAS has also indemnified in respect of

all costs, claims, compensation, interest or liabilities whatsoever

arising in respect of the aforesaid purchase orders.

14. In view of the said letter and the responsibility taken by

AVVAS, Respondent is not due and liable to pay any amount to the

Applicant. The claim is barred by limitation. The contract was

foreclosed since long back. The said AVVAS is a group company of

M/s. Agrigold and applicant is also a group company of the said Agri-

gold group which was wound up as per the order dated 06.04.2021,

NCLT Bengaluru Branch. The applicant suppressed the said fact.

15. There are no disputes much less arbitrable disputes between

the parties and the same was resolved wayback on 24.03.2021. All the

claims against the Respondent were indemnified by the AVVAS

group company of the Applicant. With the said submissions,

respondent sought to dismiss the present application.

16. Both Sri Naga Deepak learned counsel representing Sri M.P

Kashyap, learned counsel for the Applicant and Sri V. Gopala Rao

Amancharla, learned counsel for the Respondent made their

submissions basing on the aforesaid pleadings.

17. The aforesaid rival contentions would reveal that the

Applicant, Respondent and AVVAS entered into tripartite agreement

dated 26.05.2011 for the purpose of execution of purchase order dated

18.04.2011 in respect of Guntur, Machilipatnam and Tirupati Centres

executed by ECIL. They have formed into consortium. As per the

said agreement, Respondent shall be the prime vendor, the Applicant

shall provide necessary finances and the AVVAS shall provide all

men, material resources including the hardware and software and the

infrastructure, to establish data centres and collection of data from all

the Districts covered under the purchase order. Clause No.4 of the said

agreement deals with 'Steering Committee', Clause No.5 deals with

the 'revenue sharing'.

18. It is also not in dispute that the project was short-closed/pre-

closed by the Central Government just after completion of 30% of

BDE and BME work. The balance work of BDE and BME was

cancelled besides withdrawing the LRUR work, by ECIL in

December, 2014. According to the Applicant, it has paid an amount of

Rs.50,00,000/- to respondent initially as advance payment. Since the

project was abruptly closed by ECIL, Respondent has to refund the

said amount to the Applicant as per the said agreement.

19. It is the specific contention of the Applicant that though the

project was short-closed in December, 2014, ECIL has paid an

amount of Rs.6,83,77,433/- on 25.09.2019, Rs.10,08,84,595/- on

07.08.2021 and Rs.7,88,05,830/- on 15.09.2021 to the Respondent and

the balance amount to be paid is Rs.8,11,039/-. Thus, according to the

Applicant, Respondent received an amount of Rs.7,88,05,830/- lastly

on 15.09.2021 from ECIL.

20. It is also the specific contention of the Applicant that even

prior to the said last payment, it has been requested the Respondent to

pay the said amount as received from ECIL. A meeting was held on

28.01.2020 between the Directors of Respondent and AVVAS. Latest

meeting was held on 22.07.2023. Respondent promised that it will pay

the amount as retained by it. The Applicant vide letter dated

29.08.2023 requested to pay the said amount. Despite receiving the

said letter, respondent did not act upon the same. Therefore,

According to the Applicant, the claim made by it is well within the

limitation and it is not barred by limitation as alleged by the

Respondent.

21. Ergo, vide notice dated 22.11.2023, the Applicant invoked

arbitration clause and proposed the name of

Sri H.Krishna Mohan, Advocate as an arbitrator. Vide reply dated

22.11.2023, Respondent denied the said claim.

22. Perusal of the record, would also reveal that vide order

dated 06.04.2021, the National Company Law Tribunal, Bangalore,

wound up the AVVAS. According to the Respondent, the said

AVVAS is a group company of M/s. Agrigold group. It is a factual

aspect which this Court cannot consider and it is for the Arbitrator, to

consider the said aspect.

23. The Respondent placed reliance on the letter dated

24.03.2021, issued by the AVVAS to the Respondent wherein it is

stated that it is solely responsible and liable for any claim that may

arise in future in respect of any outstanding statutory payment, any

performance or any obligation, from the government or any sub-

vendor/sub Contractor or any other person including their banker,

partners of the firm or erstwhile partners of the firm. It also indemnify

the Respondent in respect of all costs, claims, compensation, interest

or liabilities whatsoever arising in respect of the purchase order Nos.J-

4549, J-4552 and J-4553 all dated 18.03.2024 executed by ECIL.

24. As discussed supra, the Applicant, Respondent and AVVAS

private limited entered into the said tripartite agreement dated

26.05.2011. But the said undertaking or letter dated 24.03.2021 was

issued by AVVAS to the Respondent. Admittedly, the Applicant is

not a party to the same. Therefore, Respondent cannot say that in view

of the said responsibility and indemnity by AVVAS, it is not liable to

pay any amount to the Applicant. However, it is also a factual aspect

which this Court, being referral Court, cannot consider the same in the

present application and it is for the Arbitrator to consider the same.

25. As discussed supra, according to the Applicant, Respondent

has to pay an amount of Rs.3,38,26,412/- and according to the

respondent, it is not liable to pay any amount. Therefore, this Court,

being the referral Court, cannot decide the said aspect.

26. Learned counsel for the Respondent placed reliance on the

principle laid down by the Apex Court in M/s Arif Azim Company

Limited vs. M/s Aptech Limited 1 wherein three Judge Bench of

Apex Court considered the scope of High Court under Section 11(6)

of the Act and limitation etc. Placing reliance on its earlier judgments,

the Apex Court held that while considering the issue of limitation in

relation to a petition under Section 11(6) of the Act, 1996, the Courts

should satisfy themselves on two aspects by employing a two-pronged

test - first, whether the petition under Section 11(6) of the Act, 1996

is barred by limitation; and secondly, whether the claims sought to be

arbitrated are ex-facie dead claims and are thus barred by limitation on

the date of commencement of arbitration proceedings. If either of

these issues are answered against the party seeking referral of disputes

to arbitration, the court may refuse to appoint an arbitral tribunal,

27. Thus, the scope of this Court being referral Court under

Section 11(6) of the Act, is very limited. If there is even iota of

2024 INSC 155

suspicion, this Court cannot refer the dispute to the Arbitral Tribunal.

But, in the present case, there is no suspicion at all.

28. As discussed supra, according to the Applicant, Respondent

has received an amount of Rs.10,08,84,595/- on 07.08.2021,

Rs.7,88,05,530/- on 15.09.2021 and Rs.6,83,77,432/- on 25.09.2019,

the last payment. Two meetings on 20.01.2020 and 22.07.2023 were

also held between the Directors of the Applicant and Respondent and

also AVVAS. Applicant vide letter dated 29.08.2023 requested

Respondent to pay the aforesaid amount lastly. Despite receiving and

acknowledging the said amount, there was no response from the

Respondent. Therefore, the Applicant has issued notice dated

22.11.2023 invoking arbitration clause proposing Sri H.Krishna

Mohan, as an Arbitrator. Vide letter dated 27.11.2023, Respondent

denied the said claim.

29. Claim No.8 of the said tripartite agreement, dated

26.05.2011 deals with 'Governing law and Jurisdiction' including

arbitration and the same is reproduced hereunder:-

CLAUSE 8: GOVERNING LAW & JURISDICTION

8.1 For all purposes of this agreement, the governing law shall be as applicable to Andhra Pradesh, India and the Courts in Hyderabad alone shall have exclusive jurisdiction.

8.2 Any difference or dispute between the parties to this Agreement, arising under, from, out of or in any manner connected to this Agreement, shall be amicably settled in a spirit of mutual cooperation and common cause. If any such difference or dispute remains unresolved, such dispute shall be referred for resolution to a Sole Arbitrator, in terms of the Arbitration and Conciliation Act, 1996. The venue of the Arbitral Proceedings will be Hyderabad, A.P., India. The language of the Arbitral Proceedings shall be English.

30. As discussed supra, this Court is of the considered view that

there are disputes between the Applicant and Respondent and the

same are arbitral disputes. Arbitrator has to resolve the said disputes

and the claim is not barred by limitation as alleged by the Respondent.

31. Whether AVVAS Infotech Private Limited is a group

company of Agri Gold or not, is a factual aspect to be decided by the

Arbitrator himself. The undertaking/Indemnity dated 24.03.2021

issued by AVVAS is also an aspect to be considered by the Arbitrator.

32. In the light of the aforesaid discussion, this Court is of the

considered view that there are disputes between the Applicant and

Respondent and the same are arbitrable disputes.