Allowed

Newstoday (P) Ltd., v. Md. Shaikh Refeeque S/o Md.Shaik Asadullah

Telangana HC14 Mar 2011ARBAPPL/135/2010

Case brief

AI extract

What is this about?

The court held that an arbitration clause survives even if a contract is alleged to be discharged. It ruled that the dispute over contract termination and compensation claims was arbitrable. An arbitrator, Sri J. Anil Kumar, was appointed to adjudicate the matter.

What did the court decide?

Appointment of Sri J. Anil Kumar as arbitrator to decide the disputes arising from the agreement; arbitration application allowed.

Newstoday (P) Ltd., Vs Md. Shaikh Refeeque S/o Md.Shaik… — Arbitration | Telangana HC (2011)

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THE HON’BLE Ms. JUSTICE G.ROHINI

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Arbitration Application No. 135 of 2010

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Date: 14.03.2011

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Between:

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Newstoday (P) Ltd., TV Division, Hyderabad.

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…Applicant

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And

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Md. Shaik Rafeeque and another.

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…Respondents

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THE HON’BLE Ms. JUSTICE G.ROHINI

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Arbitration Application No. 135 of 2010

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O R D E R :

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The 1^st respondent herein was offered to work as “Trainee Copy Editor/Reporter” in the Head Office of the Applicant Company on a stipend of Rs.7,500/- per month. As per the offer of appointment dated 01.03.2008, the period of training shall be one year with effect from the date of joining and the 1^st respondent was required to execute an undertaking/service agreement to serve the organization for a minimum period of three years as a pre-condition of employment.

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Having accepted the offer, the 1^st respondent along with respondent No.2, who stood as surety for the due performance and observance of the terms and conditions, including that in case the 1^st respondent fails to perform his obligation during the training period, the applicant company shall be compensated in a sum of Rs.1 Lakh, executed an agreement dated 10.03.2008. Accordingly, the applicant issued letter of appointment dated 17.03.2008 and the 1^st respondent joined the services of the applicant as a trainee on 17.03.2008.

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Alleging that the 1^st respondent during the period of training absented himself without any sanctioned leave or intimation with effect from 01.06.2009, the applicant sent a letter dated 09.06.2009 advising the 1^st respondent to report to training. In spite of the receipt of the said letter, the 1^st respondent neither reported to training nor sent any communication to the applicant. Hence, show cause notice dated 23.07.2009 was issued by the applicant calling upon the 1^st respondent to show cause as to why he should not be discharged from training. Having received the said notice, the 1^st respondent got issued a legal notice dated 13.08.2009 contending that though the 1^st respondent had completed the training period of one year, the applicant did not take him into employment and therefore, both the respondents 1 and 2 were discharged from their liabilities under the agreement dated 10.03.2008. The applicant sent another show cause

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notice dated 18.11.2009 through e-mail alleging that the applicant had voluntarily left the training on his own accord and calling upon him to show cause as to why the compensation amount of Rs.1 Lakh should not be recovered from him. As the 1^st respondent failed to respond, the applicant by letter dated 22.01.2010 discharged the 1^st respondent from training without prejudice to their right to recover the compensation amount of Rs.1 Lakh. Both the respondents 1 and 2 were also called upon to pay the compensation amount within a fortnight of the receipt of the said letter.

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Thereafter the applicant got issued a legal notice dated 14.6.2010 invoking the arbitration clause under the Agreement dated 10.03.2008 alleging that the respondents committed breach of articles of agreement and also failed to pay the compensation as per the stipulated terms and conditions and the same constituted a dispute. In the said notice, dated 14.6.2010 the applicant nominated Sri C.K.Prakash, advocate as Arbitrator and called upon the respondents to give their consent within 30 days from the date of receipt of the said notice. As there was no response, the present application is filed under Section 11 (5) & (6) of the Arbitration and Conciliation Act, 1996 (fort short, ‘the Act’) seeking to appoint an Arbitrator and refer the dispute for arbitration.

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A counter-affidavit has been filed on behalf of respondents 1 and 2 in which the execution of the agreement and the appointment of the 1^st respondent as a trainee have not been disputed. However, while denying the allegation that the 1^st respondent had absented from training from 01.06.2009, it is stated that the entire training period of one year was successfully completed by the 1^st respondent on 16.03.2009 itself. Even thereafter the 1^st respondent continued for another two months as a trainee. However the applicant did not provide him employment as promised under the contract. Hence the 1^st respondent was constrained to leave the applicant’s organization.

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Thus it is contended that after completion of the training period, the respondents were not bound by the conditions of the agreement dated 10.03.2008 and therefore it is not open to the applicant to avail the arbitration clause. While pleading that the 1^st respondent himself had rescinded the contract due to the breach of agreement by the applicant, it is further contended that there is no arbitrable dispute between the applicant and the respondents and therefore the application is misconceived.

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I have heard the learned counsel for the applicant and perused the material available on record. I have also heard the 1^st respondent, who appeared in person.

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Clause 16 of the agreement dated 10.03.2008 which provides for arbitration reads as under:

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“In the event of any dispute (including any Industrial Dispute) or difference which may arise between parties or their representatives with regard to the constitution, meaning and effect of this deed or any part thereof or their respective rights and liabilities thereunder, the same shall be referred to the sole arbitration of an arbitrator to be nominated and whose award shall be final and binding on the parties. The provisions of the Arbitration and Conciliation Act, 1996 shall govern the Arbitration Proceedings.”

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The law is well-settled that the Chief Justice or his designate when approached with an application under Section 11 of the Act has to consider whether he has jurisdiction in relation to the contract, whether there is an arbitration agreement, whether the applicant is a party to the agreement and whether an arbitrable dispute subsists [ vide SBP & COMPANY v. PATEL ENGINEERING LIMITED^[1] ] . It is further explained in NATIONAL INSURANCE CO. LTD. v. BOGHARA POLYFAB PVT. LTD .^[2] that even where the contract comes to an end on account of repudiation, frustration, breach etc., it is the performance of the contract that has come to an end but the contract is still in existence for certain limited purposes, in respect of the disputes arising

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under it or in connection with it and the arbitration clauses in those contracts operate in respect of those purposes.

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Hence the contention of the respondents that the contract itself came to an end and therefore the arbitration clause is not available cannot be countenanced.

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It is also relevant to note that under the agreement dated 10.03.2008 the 1^st respondent had agreed to work as Copy Editor/Reporter for a continuous period of three years including the period of training. As per the terms and conditions of the said agreement the 1^st respondent has to undergo “on-the-job training” for a period of one year from the date of his joining, however, the applicant is at liberty to extend the said period of training for any further period if the company deems such extension is necessary. On completion of the period of training the 1^st respondent has to work in the applicant company for a continuous period of two years on such terms and conditions as are decided by the company. Admittedly, the 1^st respondent joined on 17.03.2008 and the period of one year was completed on 16.03.2009. It is also not in dispute that even after the completion of the one year period, the 1^st respondent was continued as a trainee for a further period of more than two months.

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According to the applicant, the performance of the 1^st respondent was not satisfactory and therefore, the period of training was extended and thus he was still continuing as a trainee and he was also receiving the stipend of Rs.7,500/- even after the completion of the initial period of one year. It is alleged by the applicant that the 1^st respondent had absented himself without any intimation from 01.06.2009 onwards, and therefore after giving show-cause notice he was discharged from training without prejudice to the right of the applicant to recover compensation amount.

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On the other hand, the 1^st respondent contends that since the applicant had failed to take him in the employment after the completion

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of the one year training period, the 1^st respondent himself had rescinded the contract.

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As held in SBP & COMPANY’s case (1 supra) such a dispute can be left to be decided by the Arbitrator on taking evidence along with the merits of claims involved in the arbitration. Since the applicant is disputing the plea of the respondents that the contract is discharged on account of breach of terms and conditions by the applicant, the question whether there was discharge of contract or not itself constitutes an arbitrable dispute.

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For the aforesaid reasons, this Court is of the opinion that Clause-16 of the Agreement, dated 10.03.2008 which provides for arbitration survives even in the event of discharge/cancellation of the agreement and the question whether there was discharge of contract or not apart from the applicant’s claim for compensation of Rs.1 Lakh has to be resolved by arbitration as agreed upon by the parties.

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Hence I deem it appropriate to appoint an Arbitrator to decide the disputes arising out of the contract dated 10.03.2008 between the applicant and the respondents.

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Accordingly Sri J. Anil Kumar, a practising advocate (13577), is hereby appointed as arbitrator. It is open to the learned arbitrator to fix his fee. Both the parties shall file their claims before the Arbitrator and the further proceedings shall be taken up in accordance with law. Arbitration Application is accordingly allowed. No costs.

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G. ROHINI, J

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Date: 14.03.2011 KLP

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[1] (2005) 8 SCC 618

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[2] (2009) 1 SCC 267

Newstoday (P) Ltd., v. Md. Shaikh Refeeque S/o Md.Shaik Asadullah

Case brief

What is this about?

What did the court decide?

Newstoday (P) Ltd., v. Md. Shaikh Refeeque S/o Md.Shaik Asadullah

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

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