The existence of an arbitration clause in an agreement, the arbitrability of disputes, and the fulfillment of necessary ingredients for the appointment of an arbitrator under the Arbitration Act are crucial in determining the referral of disputes to arbitration.

ORDER

Chandra Dhari Singh, J. (Oral)

ARB.P. 382/2023

1. The instant petition under Section 11(5) of the Arbitration and Conciliation Act, 1996 (hereinafter "Arbitration Act") has been filed on behalf of petitioners seeking the following reliefs:

" A. Pass an order to appoint a sole arbitrator to adjudicate all disputes between the Parties arising out of the Memorandum of Settlement dated 09.05.2022;

B. Pass such other and/or further orders as this Hon'ble Court may deem Fit and proper in the facts and circumstances of the case."

2. Mr. Sandeep Sethi and Mr. Arvind Varma, the learned senior counsels appearing on behalf of the petitioners submitted that the petitioner no. 1 is the strategic investor in the petitioner no. 2 Company, while the respondent no. 1 and 2 are the former promoters of the said Company.

3. It is submitted that a Share Subscription and Share Holders' Agreement was executed between the petitioner no. 1 and the respondent no. 1 and 2 on 27th May 2016. The respondents were responsible to supervise day-to-day affairs of the petitioner no. 2. During the period of the Agreement, several disputes arose between the parties, including breach of non-compete and non-solicitation obligations breach of audit rights, breach of confidentiality, breach of affirmative voting rights etc.

4. Subsequently, attempts were made by both the parties to settle the disputes and accordingly, a Memorandum of Settlement and Share Purchase Agreements was executed between the parties on 9th May 2022, which categorically enumerated respondents' obligations, to resolve the disputes between the parties. It is submitted that the respondent did not act in accordance with the Memorandum of Settlement and Share Purchase Agreements and hence, the petitioners issued Notices dated 22nd June 2022 and 8th August 2022 intimating the breaches to the respondents. It is submitted that the respondents, instead of curing the breaches, replied to the Notices without showing sufficient cause or cure for the said breaches.

5. It is submitted that, therefore, the petitioners sought invocation of arbitration proceedings and appointment of arbitrator by way of issuing the Notice dated 10th September 2022 in terms of Clause 79 of the Memorandum of Settlement, however, the parties could not agree upon an Arbitrator.

6. Therefore, the petitioners are before this Court seeking the appointment of an arbitrator for adjudication of disputes between the parties.

7. Mr. Rajshekhar Rao, the learned senior counsel for the respondents vehemently opposed the contentions raised in the instant petition, however, he has no objection if an arbitrator is appointed to adjudicate the disputes between the parties arising out of their contractual relations.

8. Heard the learned counsel for the parties and perused the record.

9. The parties before this Court entered into the Memorandum of Settlement and Share Purchase Agreements dated 9th May 2022, wherein a provision has been made for adjudication of any dispute amongst the parties by way of arbitration. The said provisions, i.e., under Clause 78 and 79, of the Memorandum are reproduced hereunder:

"XX. DISPUTE RESOLUTION

78. All disputes or differences between parties in respect of or arising out of this Agreement including breach ("Disputes"), shall at the first instance be resolved through good faith negotiations between the Parties; which negotiations shall begin promptly after a Party has delivered to the other Party a written request for such consultation.

79. If the Parties are unable to resolve the Dispute in question within twenty one (21) Business Days of the commencement of negotiations in terms of Clause 78, the Dispute shall, unless the Parties otherwise agree in writing, be referred to arbitration in accordance with the Arbitration and Conciliation Act, 1996. The dispute shall be submitted for arbitration to a sole arbitrator to be jointly appointed by the Parties."

10. The bare language of the Clauses shows that the