Allowed

Sri. Godugu Shikari Naveen Kumar v. M/s. Krishna Sai Hospitality and another

Telangana HC23 Oct 2024ARBAPPL/72/2023

Case brief

AI extract

What is this about?

The High Court allowed the application for appointment of a sole arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996. The Court held that where the precise date of denial causing accrual of right to arbitrate is unclear, the principle that the Court should refer matters on prima facie evidence applies, rejecting the limitation objection without going into merits.

What did the court decide?

Application allowed; Justice M. Seetharam Murthy appointed as sole arbitrator pending dispute between Applicant and Respondents.

Sri. Godugu Shikari Naveen Kumar Vs M/s. Krishna Sai… — Company and Corporate | Telangana HC (2024)

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[³¹⁶⁶ ]

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I : I

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IN THE HIGH COURT^{FOR THE STATEOF TELANGANA} AT HYDERABAD

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WEDNESDAY, THE TWENry^{THIRD DAY OF OCTOBER} TWO THOUSAND AND^{TWENry FOUR}

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PRESENT

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THE HONOURABLE^{SRI JUSTICE T.VINOD KUMAR}

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ARBITRATION APPLICATI^{ON NO: 72OF2023}

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Between:

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Sri. Godugu Shikari Naveen^{Kumal S/9 (1i.sJr-na.-Q9du.gu,.Age^d^ab^out38 yrs,} Occ. Part"ner^(M/s. KRISHNA^{SAIHOSPITALITY),+l No 1-33, Sai Nagar'} ttear Sai Baba'Temple^{Malkajgiri,Medchal-lr/lalkajgiriDistrict-500047'}

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...Applicants

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AND

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1 M/s. KRISHNA SAI HOSPITALITY^{Representingby its ManaglngPartner,. Sri'} Mi. Lj. vrrii riran, slo. U.^{Dharma nbjuRged about 36 yr.s'} 999^Managing Partner, registered office^{at H.No.l-3212SaiNagar, Malkajgiri'Medchal-} Malkajgiri District.

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2 Sri. Mr. U. Vamsi Kiran,^{S/o.U. DharmaRajuAgedaboul36yrs,Occ'} lrlinaoino Partner. of M/s.Krishna^{Sai Hospitality, Rlo 2-631214' Bhavqni} . it;;r"d6*.' st.Anns P.G.College,^{Mallapur' Uppal, Medchal-Malkajgiri} fiGirict-soofi7o. And^{also Office at OYoRooms, Plot No 2, SyN-o.l,-^} Kamalanagar, I\Iedipally^{Village, Grampanchayath, Ghatkesar-500062'}

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Respondent No.1 &²

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Arbitration Application^{filedunder section 11 (6) of the Arbitrationand} Conciliation Act 1gbb^{R/w scheme for Appointment of Arbitrator 2000,praying} that the High court^{may be pleasedto appoint a soleArbitrator for the purpose of} adjudicatio"n of the diiputes^{that arose between the Applicant hereinand the} Respondent, in terms of^{DEED OF PARTNERSHIPdated 27 062018'}

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Counsel for the Petitioner^{: Sri N A Jairaj}

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Counsel for the Respondent:^{Sri YateendraRaju}

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The Court made the following:^ORDER

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TIIE HON'BLE^{SRI JUSTTCET. VINOD KUMAIT} ARBITR^{ATTONAPPLICATTONNo.72 of 2023}

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ORDER:

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The present^{Arbitration Applicationis tlled under Section} 1 l(5) of the^{Arbitrationand Concitiation Act' i996(hereinafter'the} Act, 1996') for^{appointmcnt of a sole arbitrator to resolvethe} disputes^{betu'een the} Parties'

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Heard Mr.^{N.A.Jai Raj, Iearncd Counsel for the Applicant} and Mr.^{YateendraRaju, learned counsel for the Respondents'}

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The applioant^{and the respondentherein entereclinto a} partnership under^{the name and style of M/s' KrishnaSai} Hospitalities^{vlde parlnershipdeed dated27'06 2018'}

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lt is the case^{ofthe applicant hereinthat initiallythe business} of the partnersliip^{firm functionedsmoothly; that in the last rveek} of November^{2019, when the applicantherein had requestedthe} respondent No.2^{herein to produceall accountdelails'the} respondent No.2^{had postponedthe same; and that'-hereafter} disputes arose^{between thc parties fhus' the applicant herein had} issued a legal^{notice dated 13.07 2022 to the respondents herein'}

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invoking clause 19 of the partnership deed dated 27.06.2018, to refer the disputes to arbitration for rendition of accounts. It is contended thaL the present arbitration application was hlcd as the respondents herein had failed to leply to the notice dated 13.07.2022 despite receiving the same on 21.07.2022.

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No counter affidavit has been filed by the respondents herein.

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Learned Counsel for the respondents herein contends that the disputes are bared by limitation, since the alleged disputes have arisen in the year 2019.

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I have taken note of their respective contcntions.

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Before delving into the issue at hand, it is relevant to note that the role of the Courl under Section 1l of the Act, 1996 is extremely limited, and the Court is ordinarily to reiegate parties to arbitration. However, in all cases where the agreement provides for arbitration, disputes cannot be mechanically referred to the doorstep of an arbitrator- The Court while making a reference is required to apply its mind to the preliminary issues, more particularly when the oppositc parly raises an objection with regard

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to claims^{being moonshineand ex-facieban'ed by limitation 'fhe} Supreme^{Courlin Vitlyu Droliov' Durga Tratling Corpn"l-reld as}

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under

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"244.^{Beforlwe pafl, the conclusior.rs reached' withrespectLo} Questiorl^{L, are:}

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244.1. Sections^{8 and I 1 of the Act have the same ambitr'vith} respect^{to jr rd icial intcrfercrtce'}

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244.2. ual su ect-matt€r^{arb it} hili nnot be decided the ta of tion 8 or ll of the Ac unl siti a lear case of deadwood.

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2 he court ndc Sec ons 8 an 11 has to r er a matt r a itra olr or to^a oint an arb rator a the asc ma i lt has tabl hed a nma c summa fin tn case of non-cxl stcnce f valid arbitrati na ment bv su ma lv rtra stron c eth hc is en^{tled to s} ch findins. 44.4. The urt sho^ld cr tcr if th idi oI' c rb tio men t cannot d erm ined on a rima fa te ts as laid down bov l.e. "rvhenⁱⁿ ou do t'er".

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244.5.^{Ttre scope ofthe cotlrt to cxanlinc the prima lacic validityo1'} an arbitration^{agreententinL:ludesonly:}

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244.5.1. Whethcr^{the arhitrationagrecmcntwas in rvriting'f or}

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244.5.2.^{Whcther thc arbitrationagrcement was containcdin} exchange^{of letters,telccommunic:r tion' ctc'?}

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244.5.3. Whether^{the core contractual ingredientsquathc} arbitration^{agreemcnt u'erefirlfllled?}

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24l.5.4.Onrareoccasions,whetherlhcsubjccl-mattcrofdisputeis albitrable?"

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'^{(2021) 2 scc I(2021)I scc (civ) s'19}

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Thus, lrom the afbresaid position of law it is clear that the issue of limitation can be looked into at the referral stage, if the claims appear to be stale and ex-facie deadwood.

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On the issue of commencement o[ the period of limitation, it is settled law that the period of limitation starts to run from the day right to sue accrues^(See: Bharat Sanchar Nigam Ltd. und Ors.^Vs. Nortel Networks India Pvt. Lttt2 and Genten Infra Proiects Private

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Limited vs. Balagoni Balraj GourF).

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The Supreme Court in B and T AG Vs. Ministry of Defencea , held that the right to sue accrues from the breaking point at^which any reasonable party would abandon efforts for arriving at^a settlement.^'l'he relevant observations ate as under:

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"44. The albresaid obscrvations make it very clear that what is important for the Court is to find out what was the "Breaking Point"^at which^any reasonable party would have abandoned cfforts at arriving^{at a settlement} and contemplated refcrral ofthe dispute for arbitration.

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In Law of Arbitration by Justice Bachawat at p. 549,^commcntingon Section 37, it is stated that subject to the Act l963,^{every arbitration must}

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'lzozrysscc;:a

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r Order in Arbitration Application No.5 of202l as affirmed by the Hon'ble Supreme Court in s.L.P.(C). No.14292^{of2023dared 31.03.2023.}

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nMANU/sc/o6GU2o23

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be commenoed^{rvirl.rinthc prescribecl perioil Just as in the case of actions} the clairn^is llot^{to bc brought afterthc expirationof a specified number} of years from^{the dare rvl'renthe causeof actionaccrues,so in the case of} arbitrations^{t[.re claim is not to be put forrvard aftertl.rc expilatiorofa} specified^{nutnberol yearsfrom the dateu'hcn the clairn accrttcs-Fot the} purpose of Section 37(1)^{"action" and "cause of arbitration" shor-rldbe} construed as^{arbiLration and causc of arbitrationThe causcof arbi:ration} arises when the^{claimant becomesentitled to raise the question' that is'} when the claimant^{acquires the rightto require arbitrationAn applrcation} Under Section^{1l of the Act 1996 is governedby Arlicle137 of fie} Schedule to^{Lhe Act 1963 and must be matleu'ithin 3 years from the date} when the right to^{applyflrst accrucsThere is no risht toADI)lv until} there is a clcar^{and un} c uivocal denial of that^rihth the Respondcnt. It^must ,^{thercfore. bc clear} that the claim^for arbitration must^{be raiscd assoonas thc causefor arbitrationarises} as in the casc of^{cause of action arisenin a civil action."}

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(emPhasis suPPlied)

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1 1. The^{position of law emerging from the above decisionis} that, a dispute arises^{when either of the parlies fail to perforn.rtheir} respective obligations.^{However,the right to sue/right to applygets} deferred to thc day^{whenany reasonable paftyabandons all eftbfts} of bona ficle^{rlegotiations. Such a day is the breakingpoint fiom} which limitation^runs.

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t2 Tl.re facts at hand^{shall be exatnined in the light of the settled} position of larv^{discussedas above.}

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The dispute resolution Clause in the^{'Deedof Partnership'}

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dated27.06.2018 is as under:

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" l9) In case of any disputes arising among the partners the same shall be referred to an arbilrator and the^decision of^{lhe arbitrdtor shall be} fnal^{and bindingon partners.'}

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In the facts at hand, the applicant herein^{contends that the} respondent No. 2 postponed to^produce statements^{of accountwhen} he had requcsted for the same in^{the last week of November,2019.} It is the case of the applicant that^{he could not follow up with the} matter with the respondent No.2^{due to the onset of COVID-l9;} and that when the applicant had thereafter^{askedthe respondent} No. 2 to pay the amounts due^{to him, the respondentNo.2 herein} had stated his inability to do^{so as there was a 'slow-down'of} business. However, the date^whenright to^{sueaccrued cannot be} determined as neither the applicant^{nor the respondenthad given} the exact date of denial.

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It is in these circutnstances, it^{would be appropriate to refer} disputes to arbitration when there is^{a doubt with regard to the} issue of limitation as held in^{Vidya Droliu'scase (supra). Thus,} this Court teBms it appropriate^{to referthe disputes to arbitration'}

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Needlcss to state that rvithor-rt any prejudice, the prrlics are at

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liberly to take all pleas available to them under the larv

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11 . Accordingly, arbitration application is allowcd. I hereby appoint Hon'ble Sri Justice M. Seetharam Murthi, fornter judge of the erstwltile High Court of Andlta Pradesh, Fktt No.602, A block, White House H. No.8-2-674/2 & 2A, Road No.13, Banjara Hills, Hyderahad - 500 034, Telangana Stsle as sole arbitrator to resolve the disputes between the Applicant and the Rcspondents The leamed arbitlator shall make necessary disclosure ir-r terms of the provisions of the Act and shall be entitled to charge fees as per Schedule IV of the Arbitration and Conciliation Act. 1996

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Pending miscellaneous petitions if any shall stand closed. No

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older as to costs

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Sd/. C.V. MALLIKARJUNA V MA JOINT REGI RAR

//TRUE COPY//

SECTION OFFICER

To,

'1. Sri Justice M. Seetharama lvlurthi, former^judge of the erstwhile High Court of Andhra Pradesh, Flat No.602, A block, White^{House H. No.8-2-67412} &24, Road No.13, Banjara Hills, Hyderabad - 500 034, Telangana State(along with a copy of affidavit and material^{papers) (By} Special messenger)

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