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IN THE HIGH COURT OF JUDICATURE AT MADRAS
THE HONOURABLE MR.JUSTICE R.SUBRAMANIAN, THE HONOURABLE MRS.JUSTICE R.KALAIMATHI
The Chief Executive, Arignar Anna Sugar Mills – Appellant
Versus
R.Raghavendran Resolution Professional for M/s.Thiru.Arooran Sugars Ltd. and ors. – Respondents
O.S.A.No.8 of 2014 and C.M.P.No.12349 of 2022
Decided On : 22-12-2023
ARBITRATION - DISPUTE RESOLUTION - Arbitration and Conciliation Act, 1996, Section 2(a), Section 7 - The court discussed the definition of an 'arbitration agreement' under Section 2(a) and the requirements for a valid arbitration agreement as per Section 7 of the Arbitration and Conciliation Act, 1996. It was determined that Clause 9 of the MOU did not constitute a binding arbitration agreement as it lacked the necessary consensus and mechanism for arbitration. The court emphasized that the arbitrator could not adjudicate his own cause, leading to the conclusion that the award was set aside.
Fact of the Case:
The appellant, Arignar Anna Sugar Mills (AASM), filed an appeal against the order that set aside an arbitral award concerning a Memorandum of Understanding (MOU) with Thiru Arooran Sugars Limited (TASL) regarding the supply of sugarcane. The dispute arose when TASL failed to draw the agreed quantity of sugarcane, leading AASM to invoke Clause 9 of the MOU for arbitration. The learned single judge ruled that Clause 9 was not an arbitration agreement and set aside the award.
Finding of the Court:
The court found that Clause 9 of the MOU did not provide a valid arbitration agreement as it did not express a clear intention to refer disputes to arbitration. The court agreed with the lower court's conclusion that the arbitrator could not act as a judge in his own cause, thus validating the decision to set aside the arbitral award.
Issues: 'Whether Clause 9 of the MOU constitutes an arbitration agreement.', 'Whether the second respondent could act as an arbitrator over the dispute.', 'Whether TASL committed a breach of the MOU.'
Ratio Decidendi: The court held that for an arbitration agreement to be valid, it must demonstrate a clear intention by the parties to submit disputes to arbitration, which Clause 9 failed to do. Additionally, the arbitrator's role in the dispute was compromised by the potential for bias, as he was involved in the decision-making process regarding the MOU.
Final Decision: The Original Side Appeal was dismissed, and the arbitral award was set aside, allowing the parties to pursue their claims in an appropriate forum.
JUDGMENT :
R.KALAIMATHI, J.
PRAYER: This Original Side Appeal is filed under Order XXXVI Rule 1 of Original Side Rules read with clause 15 of the Letters Patent against the Order and decreetal Order passed by this Court dated 22.11.2012 made in Arb.O.P.No.550 of 2010.
Appellant has preferred the present Original Side Appeal under Section 37 of the Arbitration and Conciliation Act, 1996, aggrieved by the order passed in Arb.O.P.No.550 of 2010, dated 22.11.2012.
2. For the sake of brevity, the appellant (Arignar Anna Sugar Mills) will be referred to as AASM. The first respondent (Thiru Arooran Sugars Limited) will be referred to as TASL. The second and third respondents will be referred to as per their litigative status.
3. The third respondent has been impleaded by this Court. The third respondent has taken over the business of the first respondent by a Scheme approved by the National Company Law Tribunal (NCLT- II), Chennai under Insolvency and Bankruptcy proceedings initiated against TASL.
4. The learned single Judge set aside the award passed by the second respondent dated 01.09.2009, by holding that Clause 9 of Memorandum of Understanding (MOU) dated 18.07.2006 is not an arbitration agreement within the purview of Arbitration and Conciliation Act. Learned Judge further held that the second respondent cannot be judge of his own cause and set aside the award. Aggrieved by the said order, this appellant AASM has preferred the present appeal.
5. To appreciate the short facts that has led to the present dispute, reference is made to Clause 9 of MOU, dated 18.07.2006, entered between AASM and TASL.
6. The second respondent had issued a Circular dated 03.03.2006, to the Special Officer / Administrator / Chief Executive of Co-operative Sugar Mills permitting them to enter into MOU with Private Sugar Mills which includes TASL. On the strength of the said Circular AASM and TASL entered into an MOU dated 18.07.2006. In terms of the MOU, AASM would supply 1,00,000 MTS., of sugarcane to TASL for crushing for the crushing season 2006 - 07. But, as per the terms of MOU, TASL did not draw entire quantity of 1,00,000 MTS., of cane from AASM.
7. Aggrieved by such non drawal, AASM raised a dispute before the second respondent in terms of Clause – 9 of the MOU.
8. TASL filed its counter statement along with preliminary objections regarding maintainability of the proceedings on the following grounds;
ii) Objection regarding the second respondent to act as an arbitrator.
iii) that MOU dated 18.07.2006 stood terminated.
9. The sole Arbitrator / second respondent passed an award dated 01.09.2009 holding that the MOU was not cancelled and it is enforceable between the parties.
10. Aggrieved by the award, TASL filed the Arbitration Original Petition in A.O.P.No.550 of 2010 under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the arbitral award dated 01.09.2009 passed by the Commissioner of Sugar in Arbitration Claim No.17742/Cane 2 /2008.
11. After hearing the arguments, the learned single Judge held that Clause 9 of MOU does not amount to an Arbitration Agreement and that the Arbitrator cannot act as a Judge of his own cause. The learned single Judge set aside the Arbitral award on the above said two grounds.
12. The learned Senior counsel appearing for the appellant would contend that the MOU did not get terminated and TASL lifted only 46,602 MTS., of sugarcane instead of 1,00,000 MTS., thereby committing breach of condition in the MOU. He would further contend that neither party to MOU withdrew the agreement and the agreement did not get terminated, as per the letter of Commissioner of Sugar, dated 26.09.2006.
13. The learned Senior counsel further contended that the Circular dated 03.03.2006, issued by the Director of Sugar is only instruction, but AASM is an independent body governed by the rules and regulations passed by the Board of Tamil Nadu
An arbitration agreement must clearly express the parties' intention to submit disputes to arbitration, and an arbitrator cannot adjudicate disputes involving his own decisions to avoid bias.
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The sufficiency of stamp duty payment rendered the document admissible, and the named arbitrator was disqualified, leading to the appointment of Hon’ble Shri Justice K. K. Lahoti as Arbitrator.
Article 20 of the Concession Agreement constitutes an arbitration agreement despite its mediation label, featuring binding decision-making attributes and fulfilling statutory requirements.
The MoU constituted novation of the 2014 Contract, and the tribunal does not have the jurisdiction to entertain disputes under the arbitration clause contained in the 2014 Contract.
Court has limited jurisdiction under Section 11 of Arbitration and Conciliation Act, 1996.
The main legal point established in the judgment is that the absence of specific terms like 'arbitration' or 'arbitrator' in the clauses and the provision of departmental remedies indicated the absen....
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