Point of Law :
Arbitration is usually limited to parties who have consented to the process, either by agreeing in their contract to refer any disputes arising in the future between them to arbitration or by submitting to arbitration when a dispute arises. A party who has not so consented, other referred to as a third party or a non-signatory to the arbitration agreement, is usually excluded from the arbitration. There are however some occasions when such a third party may be bond by the agreement to arbitrate. For example, . . . assignees and representatives may become a party to the arbitration agreement in place of the original signatory on the basis that they are successors to that party’s interest and claim “through or under” the original party. The third party can then be compelled to arbitrate any dispute that arises.”

ORDER :

This application is filed under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’), seeking to appoint any person as sole arbitrator as per the arbitration agreement dated 30.09.2009, and the first and second supplementary agreements dated 13.03.2010 and 14.03.2011, entered into between the parties.

2. As per the arbitration application, the 1st applicant is M/s Shakthi Concrete Industries Limited and the 2nd applicant is Mr. Kanagiri Gyam Sagar, who is the Managing Director of the 1st applicant – company. The case of the 2nd applicant is that, he along with his family members, promoted and incorporated the 1st applicant – company. The 3rd respondent is M/s SCIL Infracon Private Limited and it is represented through its Principal Officer.

3. The 1st respondent is M/s HBL Powers Systems Limited and the 2nd respondent is the Chairman and the Director of the 1st respondent – company. The 4th respondent is the person, who purchased 500 shares of 3rd respondent – company, from the 1st respondent – company.

4. In the affidavit filed in support of the arbitration application it is stated that the 1st applicant was holding 49,50,000 equity shares in the 3rd respondent – company and there also other share holders, holdings equity shares in the said company. The 1st applicant agreed to sell 29,50,000 shares out of its 49,50,000 in the 3rd respondent – company, and the other share holders in the said company also agreed to sell their shares to the 1st respondent - company, and accordingly agreement dated 30.09.2009 was executed between the parties. Subsequently, by virtue of the first supplementary agreement dated 13.03.2010, the 1st applicant – company agreed to sell its 10,00,000 equity shares out of the balance shares held by it, and by virtue of the second supplementary agreement dated 14.03.2011, agreed to sell the remaining equity shares of 10,00,000. Thus, by virtue of the original agreement dated 30.09.2009, and the two supplementary agreements dated 13.03.2010 and 14.03.2011, the 1st applicant agreed to sell 49,50,000 equity shares held by it in the 3rd respondent – company, to the 1st respondent – company.

5. It is further stated that in pursuance of the agreement dated 30.09.2009, the 1st respondent paid Rs.1,00,00,000/- (Rupees one crore), and subsequently on 12.1.2010 and 5.2.2010 paid Rs.19,50,000/- (Rupees nineteen lakhs, fifty thousand only) and Rs.3,50,000/- (Rupees three lakhs fifty thousand only) respectively. Though the 1st applicant is following up with respondents 1 and 2 for payment of the balance of agreed sale consideration, on one pretext or the other, payment has not been made.

6. That though the balance payment has not been made, the 1st applicant executed transfer deeds relying on the assurances of respondents 1 and 2, that the said transfer deeds will not be acted upon without payment of the agreed sale consideration. The grievance of the applicants is that without payment of agreed sale consideration as assured, based on the transfer deeds executed by the 1st applicant, the 1st respondent caused transfer of these shares by manipulating the statutory records.

7. The further case of the applicants is that as the 1st respondent failed to pay the balance of sale consideration, which Rs.1,88,30,656/- (Rupees one crore, eighty eight lakhs, thirty thousand, six hundred and fifty six), and interest on the said amount, in spite of several requests, and as the agreements provide for resolving of the disputes arising out of the said agreement through arbitration, they issued notice dated 23.07.2013, invoking arbitration clause and appointing Mr. C. Ramachandram, Chartered Account as their nominee arbitrator and further informing that in case the respondents are not agreeable with the said arbitrator, to communicate the name of their nominee arbitrator. Thereafter, the applicants also filed AOP.No.727 of 2013 on 17.04.2013 under Section 9 of the Act. To the arbitration notice iss