SupremeToday Landscape Ad
Back
Next
Judicial Analysis Court Copy Headnote Facts Arguments Court observation
Listen Audio Icon Pause Audio Icon
judgment-img

2018 Supreme(AP) 442

IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
RAMESH RANGANATHAN, J.
Hemant B. Prasad and Ors. - Appellant
Versus
Perfect Solutions - Respondent
Application No. 516 of 2016 in Arbitration Application No. 20 of 2010
Decided On : 08-06-2018

Advocates:
Advocate Appeared:
For the Appellant : P.S.P. Suresh Kumar
For the Respondent: B. Nalin Kumar

Headnote:

Arbitration and Conciliation Act, 1996 – Section 15(2) – Arbitration agreement – Seeking appointment of an arbitrator – Partnership agreement – Applicants herein entered into a partnership agreement with respondent with a view to carry on business of designing, developing, assembling, manufacturing and selling of uninterrupted power supply systems, inverters, power regulation devices etc – Pursuant to partnership deed a Memorandum of Understanding was entered whereby the respondent took up the responsibility of undertaking research and development activities and design work of tools and dyes etc – Development activities and design works were to be completed by April, 2008. Certain disputes arose between the parties, resulting in the applicants issuing a legal notice calling upon the respondent to return unused cheques drawn on Development Credit Bank – Respondent issued a reply – As disputes arose between parties, applicants sent a notice, to the respondent on 13.10.2008, to refer the disputes to arbitration – On ground that there was no response from the respondent, Arbitration Application was filed by the applicants before this Court seeking appointment of an arbitrator – Held, There exists an arbitration agreement and, since Section 11(5) requires parties to mutually agree on the appointment of an arbitrator and, only on failure or refusal to so agree, to approach the High Court, a similar procedure must be followed in the appointment of a substitute arbitrator also – As noted hereinabove, the respondent is entitled, in terms of Clause 22 of the agreement read with Sections 11(5) and 15(2) of 1996 Act, to be consulted by applicant in appointment of a substitute arbitrator, even if they had failed to agree on the appointment of an arbitrator earlier. It is only if they refuse or fail to agree to the appointment of the person, suggested by applicant, as the substitute arbitrator, within thirty days of receipt of such a request from the applicant, would the applicant then be entitled to invoke the jurisdiction of High Court, under Section 11(5) read with Section 15(2) of Act, requesting it to appoint a substitute arbitrator in the place of the deceased arbitrator – Present application, filed even before the applicant has requested respondent to agree to appointment of a substitute arbitrator in the place of the deceased arbitrator, is therefore not maintainable. Needless to statue that this order shall not disable applicant from requesting the respondent to convey their consent to the appointment of a substitute arbitrator, in the place of deceased arbitrator, and if respondent refuses or fails to convey its consent within thirty days of such a request being received, to then invoke jurisdiction of High Court seeking appointment of substitute arbitrator – Application is dismissed. (Paras 25, 26 and 27)

ORDER :

RAMESH RANGANATHAN, J.

1. The respondent herein is engaged in the business of assembling and manufacturing of power supply systems. The applicants herein entered into a partnership agreement with the respondent on 16.06.2006, with a view to carry on business of designing, developing, assembling, manufacturing and selling of uninterrupted power supply systems, inverters, power regulation devices etc. Pursuant to the partnership deed dated 16.06.2006, a Memorandum of Understanding was entered into on 02.12.2007 whereby the respondent took up the responsibility of undertaking research and development activities and design work of tools and dyes etc. The development activities and design works were to be completed by April, 2008. Certain disputes arose between the parties, resulting in the applicants issuing a legal notice on 18.09.2008 calling upon the respondent to return the unused cheques drawn on Development Credit Bank Limited, Abids, Hyderabad. The respondent issued a reply notice on 27.09.2008. As disputes arose between the parties, the applicants sent a notice, to the respondent on 13.10.2008, to refer the disputes to arbitration. On the ground that there was no response from the respondent, Arbitration Application No. 20 of 2010 was filed by the applicants before this Court seeking appointment of an arbitrator.

2. In its order, in Arbitration Application No. 20 of 2010 dated 23.08.2010, this Court observed that the parties to the application were parties to the partnership deed; from the pleadings it was evident that a dispute had arisen out of the partnership deed; such dispute necessitated reference to arbitration in view of Clause 22 of the partnership deed providing for such a recourse; pendency of O.S. No. 220 of 2010, filed by the respondent before the II Additional Chief Judge, City Civil Court, Hyderabad, for dissolution of the partnership and for rendition of accounts, did not create any impediment in appointing an arbitrator to resolve the disputes; the scope of enquiry under Section 11 was limited, and was confined only to whether there was an arbitration agreement in existence between the parties; whether the party, which had approached the Court seeking appointment of an Arbitrator, was a party to the said agreement; and whether the Court had jurisdiction to appoint the arbitrator; and, in such circumstances, the objection raised by the respondent, for appointment of an arbitrator, was unsustainable. Sri S. Ramakrishna Reddy, a retired District Judge, was appointed as the sole arbitrator.

3. The sole arbitrator issued notice to the parties. The applicants claim that they had filed their claims statement before the sole arbitrator, and the respondent had filed their objections/counter thereto. Aggrieved by the order of this Court in Arbitration Application No. 20 of 2010 dated 23.8.2010, appointing an arbitrator, the respondent approached the Supreme Court filing S.L.P.(C) No. 32581 of 2010. While stay of the order, in Arbitration Application No. 20 of 2010 dated 23.08.2010, was initially granted, the SLP was subsequently dismissed on 16.02.2016, and the earlier interim order was vacated. In its order in S.L.P.(C) No. 32581 of 2010 dated 16.02.2016, the Supreme Court, while condoning the delay in filing the counter-affidavit, observed that they were not inclined to interfere with the impugned order of the High Court. The SLP was dismissed, and all interim orders stood vacated. The applicants, thereafter, came to know that the sole arbitrator expired on 14.02.2016, and claim that the news of his demise was published in a Telugu Magazine. As a result of the order passed by the Supreme Court, dismissing the SLP preferred against the order in Arbitration Application No. 20 of 2010 dated 23.08.2010, the applicant and the respondents were required to resolve their disputes through arbitration. The fact, however, remains that, in the interregnum, the sole arbitrator appointed by this Court passed away.

4. The pre












































Click Here to Read the rest of this document

1
2
3
4
5
6
7
8
9
10
11
SupremeToday Portrait Ad
supreme today icon
logo-black

An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers

Please visit our Training & Support
Center or Contact Us for assistance

qr

Scan Me!

India’s Legal research and Law Firm App, Download now!

For Daily Legal Updates, Join us on :

whatsapp-icon Back to top