High Court of Himachal Pradesh referred a company dispute to arbitration under Section 8 of the Arbitration & Conciliation Act after an arbitrator failed to be mutually appointed per MoU, appointing Advocate Anand Sharma upon party consent.
Appoint Advocate Anand Sharma as arbitrator to adjudicate the dispute between petitioners and respondents.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
| Arb. Case No. 83 of 2017 Decided on: May 1, 2018 |
|---|
| ________________________________________________________________ Nand Lal Sharma and another …Petitioners Versus |
| Yash Pal Goel and others …Respondents |
| ________________________________________________________________ Coram: Hon’ble Mr. Justice Sandeep Sharma, Judge. |
| ________________________________________________________________ Whether approved for reporting?1Yes. |
| ________________________________________________________________ For the Petitioners **:**Mr. Arun Kumar, Advocate. |
| **For the Respondents :**Mr. Vir Bahadur Verma, Advocate, for respondents No. 1 to 4. |
| Mr. Vijay Arora, Advocate, for respondent No. 5. |
| ________________________________________________________________ Justice Sandeep Sharma, Judge(oral) |
By way of instant application filed under Order 8 of the Arbitration & Conciliation Act, 1996, prayer has been made to refer the dispute to an arbitrator in terms of Memorandum of Understanding (Annexure A).
2. Necessary facts as emerge from the record are that petitioners constituted a company in the name and style of M/s Curehealth Pharmaceutical Private Ltd. at Village Deothi, Tehsil and District Solan, Himachal Pradesh, however, petitioners being Directors of the company referred to herein above, agreed to transfer the company to respondents No. 2 to 4 in terms of Memorandum of Understanding dated 5.6.2017 (Annexure A).
1 Whether reporters of the local papers may be allowed to see the judgment?
2
Company detailed herein above alongwith liabilities of the Bank came to be transferred /handed over to new Directors i.e. respondents No.1 to 4. Since new Directors/respondents No. 1 to 3 failed to comply with terms and conditions of the Memorandum of Understanding (MoU) arrived at inter se parties, dispute arose between the parties. Petitioners, in terms of MoU issued a notice to the respondents through their counsel, but they were unable to settle the dispute inter se them. Petitioners invoked clause 20 i.e. arbitration clause with a prayer to refer the dispute to an arbitrator to be appointed with the mutual consent. Arbitration clause 20 of the MoU provides as under:
3. Since both the parties failed to nominate /appoint a commonly known person as an arbitrator in terms of clause 20 of the MoU, Annexure A, petitioners approached this Court in the instant proceedings, praying therein for appointment of an arbitrator.
4. Respondents No.1 to 4 by way of detailed reply filed to the aforesaid petition, refuted the claim of the petitioners and claimed that since petitioner have failed to disclose true facts to this Court, they are not entitled to any relief as prayed for in the
3
present petition. Otherwise also, bare perusal of reply suggests that in terms of MoU arrived inter se parties, respondents undertook to take liability of Company, owned and started by petitioners.
5. Mr. Vir Bahadur Verma, learned counsel representing respondents No. 1 to 4, while inviting attention of this Court to the reply filed on behalf of aforesaid respondents, stated that though no cause of action has accrued in favour of the petitioners, however, for proper adjudication of the dispute, if any, inter se parties, respondents No.1 to 4 have no objection in case one of the persons, named in the reply to the petition is appointed as an arbitrator.
6. Mr. Vijay Arora, learned counsel representing respondent No. 5 states that at present, petitioners owe an amount more than ` 15.00 Crore to the Bank and as such rights of the Bank to recover outstanding amount may also be protected. He further disclosed to this Court that for the recovery of outstanding amount from respondent No.4 Company as well as its Directors, proceedings under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) stand already initiated.
7. Having heard the parties and perused the pleadings and documents adduced on record, this Court has no doubt that matter is required to be referred to arbitration in terms of Clause
4
20 of the MoU for adjudication of the dispute inter se parties. From the pleadings adduced on record by the petitioners and respondents No. 1 to 4, there is no doubt that dispute has arisen inter se parties and as such, matter is required to be referred to arbitration. Parties have not been able to nominate a commonly known person with mutual consent, as such, this Court while exercising powers under Section 8 of Arbitration & Conciliation Act, is required to appoint an arbitrator in terms of Clause 20 of the Act. As far as contention raised by Mr. Vijay Arora that rights and interests of the Bank to recover the outstanding amount needs to be protected, this Court need not pass any specific direction in this regard, because admittedly action/proceedings under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) already stand initiated. In the arbitration proceedings, an arbitrator is only required to decide the dispute having arisen inter se parties to the MoU and not with third party.
8. Recently Hon’ble Apex Court in Duro Felguera, S.A .
v. Gangavaram Port limited, (2017) 9 SCC 729, while dealing with case filed under Section 11 of the Arbitration & Conciliation Act for appointment of arbitrator has held that after the amendment, all that the court needs to see is that whether an arbitration agreement exists –nothing more, nothing less, because the legislative policy and purpose is essentially to
5
minimize the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11 (6) (A) ought to be respected. Relevant paras of aforesaid judgment are reproduced herein below:-
“58. This position was further clarified in National Insurance Company Limited v. Boghara Polyfab Private Limited. To quote: (SCCp.283, para22)
"22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.
22.1. The issues (first category) which the Chief Justice/his designate will have to decide are: (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement.
22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long-barred) claim or a live claim.
(b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.
22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:
(i) Whether a claim made falls within 43 the arbitration clause (as for example, a matter which is reserved for final decision of a
6
departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration."
9. It is quite apparent from the aforesaid provision of law and law laid down by the Hon’ble apex Court supra, this Court is only required to see whether an agreement exists or not. Necessarily, it is not required to take into consideration all other ancillary issues raised on behalf of the opposite party, who is opposing the appointment of an Arbitrator.
10. Consequently, in view of fair stand adopted by Mr. Vir Bahadur Verma, learned counsel representing respondents No.1 to 4, this Court without going into merits of the case, deems it proper to refer the matter to arbitration in terms of Clause 20 of the MoU. At this stage, learned counsel representing the petitioners and respondent No.5 stated that instead of the persons named in the reply, an advocate from Shimla may be appointed as an arbitrator as it would be convenient to all the parties. Mr. Vir Bahadur Verma, learned counsel representing respondents No.1 to 4 is not averse to aforesaid request of petitioners and respondent No.5.
7
11. Accordingly, with the consent of parties, present petition is allowed. Mr. Anand Sharma, Advocate, HP High Court , who is present in the Court, is appointed as an arbitrator to adjudicate upon the dispute inter se parties. His consent/declaration under Section 11 (8) of the Act ibid has been obtained and is placed on record. Mr. Anand Sharma has no objection to his appointment as an arbitrator in the present matter. He is requested to enter into reference within a period of two weeks from the date of receipt of a copy of this order. It shall be open for the learned arbitrator to determine his own procedure with the consent of the parties. Otherwise also, entire procedure with regard to fixing of time limit for filing pleadings or passing of award stands prescribed under Sections 23 and 29A of the Act.
12. Needless to say, award shall be made strictly as per provisions contained in Arbitration & Conciliation Act. A copy of this order shall be made available to the learned arbitrator named above, by the Registry of this court within one week enabling him to take steps for commencement of the arbitration proceedings within stipulated period.
13. The petition is disposed of.
(Sandeep Sharma) Judge
May 1, 2018 vikrant
3 issues framed by the court
Whether the Court can refer a dispute between parties to arbitration under Section 8 where parties could not mutually appoint an arbitrator per the MoU.
Whether the Court should examine the merits of the dispute before referring the matter to arbitration.
Whether the Court can appoint an arbitrator from the designated city of Shimla upon consent of parties.
Colour shows how this judgement treated each authority
Duro Felguera, S.A. v. Gangavaram Port LimitedFollowed¶18
(2017) 9 SCC 729 · Who else cites this
National Insurance Company Limited v. Boghara Polyfab Private LimitedRelied on¶22
National Insurance Company Limited v. Boghara Polyfab Private Limited, (SCCp.283, para22)
2 provisions across 1 enactments
Nand Lal Sharma
Yash Pal Goel
Sandeep Sharma
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
