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2014 Supreme(Bom) 1678
High Court of Judicature at Bombay
R.D. DHANUKA, J.
Prakash Cotton Mills Pvt. Ltd. & Another
Versus
Vinod Tejraj Gowani & Others
Arbitration Application No. 107 of 2012 with Arbitration Application (L) No. 1180 of 2014
Decided on: 28-08-2014
For the Applicants:Virag Tulzapurkar, senior Advocate a/w Nikhil Sakhardande, Atul Daga, Vedangi Tulzapurkar i/b M/s Wadia Ghandy & Co., Advocates.
For the Respondents:R1, R3, F. E. D'vitre, Senior Advocate a/w S.V. Doijode, P.A. Kapadi, R.H. Daulat i/b M/s Doijode & Associates, R2, D.D. Madon, Senior Advocate a/w S.V. Doijode, P.A. Kapadi, R.H. Daulat i/b M/s Doijode & Associates, Advocates.
Headnote:
The court considered two arbitration applications filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, involving common issues. The applicants sought the appointment of a sole arbitrator to resolve disputes arising from two separate agreements: an agreement to agree to jointly develop properties and an agreement to constitute a partnership firm. The respondents challenged the maintainability of the applications and raised various objections, including limitation, arbitrability, and waiver of rights.
Fact of the Case:
The applicants, Kanha & Co., entered into an agreement with respondents Nos.1 and 2 on 25/03/1997. The agreement included an agreement to agree to jointly develop properties and an agreement to constitute a partnership firm, M/s Kanha & Co. Disputes arose between the parties, and the applicants issued notices invoking arbitration under Clause 34 of the agreement. The respondents did not nominate an arbitrator, and the applicants filed arbitration applications under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator. The respondents filed affidavits in reply, raising objections to the applications.
Finding of the Court:
The court examined the arbitration agreement, the notices invoking arbitration, and the objections raised by the respondents. The court held that the arbitration agreement existed and was not exhausted by the refusal of the named arbitrator to act. The court also held that the claims proposed to be made by the applicants were not ex facie barred by limitation and that the issue of limitation could be decided by the arbitral tribunal. The court further held that the claims sought by the applicants were not in rem and could be referred to arbitration. The court rejected the respondents' argument that the applicants had waived their rights by issuing a second notice and filing a second arbitration application.
Issues: 1. Whether the arbitration agreement existed and was enforceable. 2. Whether the claims proposed to be made by the applicants were barred by limitation. 3. Whether the claims sought by the applicants were in rem and could be referred to arbitration. 4. Whether the applicants had waived their rights by issuing a second notice and filing a second arbitration application.
Ratio Decidendi: 1. The court held that the arbitration agreement existed and was not exhausted by the refusal of the named arbitrator to act, relying on the provisions of Section 15(1)(a) of the Arbitration and Conciliation Act, 1996, which allows for the appointment of a substitute arbitrator in such circumstances. 2. The court held that the claims proposed to be made by the applicants were not ex facie barred by limitation, relying on the judgments of the Supreme Court in National Insurance Company Vs. Boghara Polyfab Pvt. Ltd. and State of Goa Vs. Praveen Enterprises, which held that the issue of limitation is not an issue that has to be decided in an application under Section 11 of the Act and that the issue of limitation can be decided by the arbitral tribunal. 3. The court held that the claims sought by the applicants were not in rem and could be referred to arbitration, relying on the judgment of the Supreme Court in Booz Allen and Hamilton Inc. vs. SBI Home Finance Limited and others, which held that actions in personam, which determine the rights and interests of the parties themselves in the subject matter of the case, are arbitrable, while actions in rem, which determine the title to property and the rights of the parties against all persons claiming an interest in that property, are not arbitrable. 4. The court held that the applicants had not waived their rights by issuing a second notice and filing a second arbitration application, as both the clauses invoked by the applicants in both matters were part of the same agreement and the intention of both parties that the dispute arising under the agreement has to be referred to the arbitrator was ex-facie clear.
Final Decision: The court appointed Shri Justice H.L. Gokhale, former Judge of the Supreme Court, as the sole arbitrator in both the arbitration applications and disposed of the applications in those terms, with no order as to costs.
1. By these two arbitration applications, the applicants seek appointment of sole arbitrator. Since the issues involved in both the proceedings are common, both the applications were heard together and are being disposed of by a common order. Some of the relevant facts for the purpose of deciding these two applications are as under.
2. On 25/03/1997 the applicants entered into an agreement with respondent Nos.1 and 2. The said agreement was described as 'Deed of Partnership.' It is the case of the applicants that by the said agreement the applicants and respondent Nos.1 and 2 constituted a partnership firm M/s Kanha & Company being respondent No.3 therein comprising of four partners. The agreement to agree joint development of the properties described therein was amongst the applicants, respondent Nos.1 and 2 and respondent No.3 and in any event for the benefit of respondent No.3. The said document is duly registered with the office of Sub Registrar of Assurances of Bombay.
3. Dispute arose between the parties. On 10/04/2008 the applicants addressed a letter to respondent Nos.1 and 2 and contended that under the said Partnership Deed dated 25/03/1997, the applicants had pooled their properties situated at Lower Parel in the partnership firm of M/s Kanha & Co. as their capital contribution in full and the funds required for the development and construction to be carried out on the said properties were to be brought in by respondent Nos.1 and 2 alone into the partnership firm which was to be treated as their capital contribution. In the said letter it was alleged that it was over ten years since the execution of the partnership deed and there had been no movement on the part of respondent Nos.1 and 2 to get plans for development of the said properties approved, obtain IOD and Commencement Certificate for commencing construction on the said properties as provided in the said partnership deed. The applicants informed that they needed to meet and discuss on the issue if the party have to maintain cordial relation.
4. Vide their letter 29/04/2011 addressed to respondent Nos.1 and 2, the applicants contended that under the agreement dated 25/03/1997, the parties had agreed to undertake joint development subject to the fulfillment of certain terms and conditions stated therein and though substantial time of more than 14 years had passed from the time the parties had entered into an agreement, there was unreasonable postponement, delay and failure on the part of respondent Nos.1 and 2 in the performance of their obligation and respondent Nos.1 and 2 had repudiated the performance of their contract. The applicants conveyed that the said agreement dated 25/03/1997 had stood/stands at an end.
5. The applicants issued a public notice on 15/07/2011 and 18/07/2011 stating that the applicants are the sole and absolute owners of the PCM property and the BDD property respectively and no one should deal with respondent Nos.1 and 2 or any other person in respect of those properties.
6. On 19/07/2011, the applicants received a letter from respondent Nos.1 and 2 alleging that the Parel properties had been brought into the common hotchpotch and ownership as well as possession of the said properties is with the partnership firm. It is contended by respondent Nos. 1 and 2 that the partnership firm continued to be in existence and had not come to an end.
7. On 30/09/2011 applicants through their advocates issued a notice to respondent nos.1 and 2 and contended that under an agreement dated 25/03/1997 the parties had agreed to enter into partnership for the joint development of properties as more particularly set out therein. It is stated that under the agreement the applicants had executed an agreement to agree to undertake joint development of the said properties subject and upon the fulfillment of certain terms and conditions by respondent Nos.1 and 2. It is stated that the agreement consists of two separate and independent contracts one pertain
