This order records the appointment of a sole arbitrator under Section 11(5) of the Arbitration Act, 1996. It holds that the identity dispute between the petitioner and respondent regarding indemnity for labor dues is arbitrable, allowing the Original Petition.
Appointment of Mr. Yashod Vardhan as the sole arbitrator to adjudicate the dispute.
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.
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IN THE HIGH COURT OF JUDICATURE AT MADRAS
CORAM
THE HONOURABLE DR.JUSTICE ANITA SUMANTH
O.P. No.533 of 2017
GTN Enterprises Limited (formerly known as M/s.Packworth Udyog Limited) 3rd Floor, Palai Towers, M.G.Road, Ravipuram, Kochi - 682016 .. Petitioner
-vs-
M/s.Veejay Lakshmi Textiles Limited Sengalipuram, N.G.G.O. Colony, P.O., Coimbatore - 641 022. .. Respondent
Prayer: Petition filed under Section 11(5) of the Arbitration & Conciliation Act, 1996 to appoint a sole arbitrator to adjudicate upon the disputes between the parties.
For Petitioner : Mr.Rahul Balaji For Respondent : Mr.S.Jayaraman
O R D E R
This petition seeks the appointment of a Sole Arbitrator to resolve the disputes between the petitioner and respondent.
i) The respondent was running a spinning unit in Udumalpet with an installed capacity of 8304 spindles.
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ii) On 12.02.2003, the respondent issued orders discharging 12 employees from employment and the workers raised an Industrial dispute before the Labour Court, Coimbatore, challenging the same.
iii) A Memorandum of Understanding (MoU) was entered into by the respondent with the petitioner on 22.12.2004 under which the respondents' spinning unit was agreed to be sold as a going concern to the petitioner.
iv) The MoU documented the factum of existing disputes between the
management and 12 employees and the undertaking of the respondent to settle all pending liabilities in this regard.
v) Thereafter, sale deeds dated 19.01.2005 and a Slump Sale Agreement dated 31.01.2005 were entered into between the parties.
vi) Simultaneously, the parties executed a deed of indemnity
providing that should any liabilities transpire in relation to the sale effected by the respondent to the petitioner, then the respondent would unequivocally indemnify the petitioner in that regard.
vii) The petitioner was impleaded as a party to the labour dispute. On
27.11.12, the Labour Court, Coimbatore, set aside the termination of the services of nine workmen directing the reinstatement of the workmen with continuity of service and full backwages. The award
was published on 02.07.13. The award was passed as against both the respondent as well as the petitioner holding the respondent liable
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upto the date of transfer of ownership being 31.01.05 and the petitioner liable for the period thereafter.
viii) The petitioner had been issued notice to appear before the Labour Court but, inspite of initially engaging counsel to represent it, did not pursue the matter further and had been set exparte.
ix) The respondent entered into a settlement with the workers on 27.08.13 in terms of section 18(1) of the Industrial Disputes (ID) Act. x) A Computation Petition (CP) was filed by the workers before the Labour Court on 08.11.13.
xi) The respondent settled the workmen as per the award passed against it and the matter has attained finality as regards this aspect of the award.
xii) In December 2014, the petitioner filed a petition belatedly to set aside the award passed by the Labour Court that was dismissed on 06.07.15 making various adverse remarks about the conduct of the petitioner and the attempts made by it to avoid liability to the workmen.
xiii) Pending adjudication on the CP before the Labour Court, the petitioner filed writ petitions in W.P.Nos.24724 and 24725 of 2015 challenging award dated 27.11.12, arraying the respondent as the
11th respondent. A stay of operation of the award was granted by the Court on 11.08.15 upon condition that 50% of the back wages
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awarded be deposited in court on or before 25.10.2016.
xiv) Further negotiations took place with the unions representing the employees and an amount of Rs.32,00,000/- was arrived at as full and final settlement to the employees after efforts at mediation by the High Court.
xv) On 26.10.2015, the CP was withdrawn as settled and consequently, the writ petitions were withdrawn by the petitioner as well.
the petitioner is entitled to the amount of Rs.32,00,000/- paid to the workers and has made several efforts to recover the same from the respondent. The petitioner, he would say, is bound to be reimbursed
in the light of clause 18 of the MOU wherein the respondent specifically undertakes to settle all liabilities relating to and arising from the disputes with the workers terminated prior to transfer of the unit to the petitioner. The requests and demands of the petitioner in this regard were to no avail in the light of the categorical denial of the respondent in this regard. Since the efforts for resolution of the disputes failed, a request for arbitration was made in terms of the arbitration agreement, clause 11 of the MoU between the parties.
There was no response from the respondent and the petitioner is thus before this court with the present prayer in terms of section 11(5) of
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the Act for appointment of arbitrator.
of section 25FF of the ID Act are quoted and relied upon in this regard. Learned counsel would emphasize the position that the ID Act was a special enactment and would have to take precedence over the applicability of the Arbitration and Conciliation Act.
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contains Clause 11 providing as follows:
11. All the employees of the industrial undertaking which is the subject matter of the sale, shall continue to be the employees of the said Undertaking, but will become employees of the Transferee Company from 31.1.2005. The Transferee Company is free to negotiate and arrive at any new settlement with the workers of the undertaking. If, as a result of such settlement, if the employees become eligible for any benefit under Section 25FF, then such liabilities will be on account of the Transferee Company.
The Transferor Company has agreed to settle any pending liabilities for workers of the Undertaking who have been discharged/terminated/dismissed before 31.1.2005. This will also include the claims relating to pending cases by 12 workmen who have been terminated before 30.1.2005.'
between the petitioner and respondent on the one hand and the workers on the other has been decided by the Labour court applying the provisions of section 24FF of the ID Act and as such nothing further survives in the matter to be arbitrated upon so as to attract the arbitration agreement between the parties. The claim raised by the petitioner now relates to the reimbursement of a sum of Rs.32,00,000/- remitted by it to the workers as dues payable for the period after the date of transfer of undertaking of the unit to it, being 31.3.2005. According to Mr.Jayaraman, the question of
reimbursement would not arise in the light of section 25FF of the Industrial Disputes Act as per which the respondent ceased to be an
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employer of the terminated employees as on 31.3.2005 when the transfer of the mill to the petitioner was effected. Mr.Jayaraman would emphasize that the Industrial Disputes Act is a special enactment and the dispute as regards the parties stands resolved by the Labour Court. There can, according to him, be no further adjudication upon the issue and the award passed by the Labour court and the consequent settlement between the parties is the last word on the matter. He also relies on the judgment of the Supreme Court in the case of A.Ayyasamy V. A. Paramasivam and others ((2016) 10 SCC 386) to the effect that fraud has been played upon the parties by the petitioner herein and as such it is not entitled to the relief sought for by it in this petition.
respectively. The stage of Industrial adjudication is over and closed. However, the dispute in the present case is entirely different and falls,
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in my opinion, within the realm of a commercial dispute between the petitioner and the respondent that is certainly subject to the process of arbitration.
18. Any deeds or disputes arising out of this Slump Sale Agreement or any matter arising out of it either at the time of its execution or at the time of Transferee Company taking possession of the Industrial undertaking, such deeds or disputes, shall be settled by mutual discussions between the parties. If however, such a settlement be not possible, then and only then shall such disputes be referred to arbitration under Arbitration and Conciliation Act, 1996 and any amendments or reenactments thereof.
is what is questioned by the respondent. A reading of the clause shows that it is worded widely and contains no exceptions of any nature. In the light of the discussion above I hold that the arbitration
agreement is applicable to the resolution of the dispute raised by the petitioner and the same constitutes an arbitrable dispute.
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satisfaction in this regard is recorded above. The objection on limitation is however, one that impinges on the merits of the claim sought to be made and is reserved to be raised as an objection before the Tribunal, if the respondent so chooses.
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receipt of a copy of the order. The Arbitrator is at liberty to fix his remuneration and other incidental expenses.
18.12.2017
sl
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Dr.ANITA SUMANTH,J.
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O.P. No.533 of 2017
18.12.2017
3 issues framed by the court
Whether the agreement to arbitrate in the settlement arrangement applies to the dispute regarding reimbursement of funds paid by the petitioner.
Whether the Industrial Disputes Act precludes arbitration over the commercial dispute between the parties.
Whether the Arbitration Court has the jurisdiction to appoint an arbitrator despite the respondent's contentions.
Colour shows how this judgement treated each authority
Anakapalle Co-operative Agricultural and Industrial Society Ltd vs Workmen and othersReferred¶49
(AIR 1963 SC 1489) · Who else cites this
A.Ayyasamy V. A. Paramasivam and othersReferred¶62
((2016) 10 SCC 386) · Who else cites this
1 provisions across 1 enactments
GTN Enterprises Limited
M/s. Veejay Lakshmi Textiles Limited
Dr. Anita Sumanth
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
