Ashish Mehrotra and Others vs Metrocorp and Others

Aravind Kumar, J.—Heard Smt. Nalina Mayegowda, learned counsel appearing for petitioners and Sri D. Ravishankar, learned counsel appearing with the leave of the court on behalf of Sri Naveen Gudikote. Perused the records.

Petitioners herein are seeking for appointment of an arbitrator contending inter alia that under the agreement dated 19/12/2006 which was entered into between the parties, certain disputes have arisen in respect of the said agreement and said agreement provides for resolution of disputes by arbitration. It is stated pursuant to the said arbitration agreement between the parties, petitioners have invoked the arbitration clause contained in the agreement dated 19/12/2006 which was entered into between the parties after disputes have arisen in respect of the said agreement and petitioners have issued notice and called upon the respondents to appoint an arbitrator to arbitrate the disputes and differences that have arisen between the parties as agreed thereunder and respondents have also been notified that if they fail to respond to said notice within 30 days, petitioners would be initiating appropriate proceedings before court for such appointment. It is also stated that notice issued to respondent No. 1 has been returned as party having left the address and same has been returned to sender by the postal authorities. Other respondents are duly served as could be seen from the postal acknowledgment. Subsequently thereafter wards petitioners have filed the present petition under Section 11(5) of the Act seeking for appointment of a arbitrator.

Respondent No. 1 has filed statement of objections contending inter alia: (1) 1st respondent has assigned its right to the assignee under the agreement dated 4/3/2009 and without the said assignee being made a party, proceedings in question cannot be initiated or proceeded against 1st respondent; (2) 1st respondent being entitled to appoint an arbitrator, under clause No. 17, petitioners herein cannot be permitted to seek for appointment of arbitrator without exhausting the contractual obligation; (3) notice issued to 1st respondent is not duly served and as such there is no cause of action for the petitioners; and for the reasons indicated in the statement of objections, 1st respondent has sought for rejection of the petition.

Having heard the learned advocates appearing for the parties and on perusal of the records, this court is of the considered view that none of the objections raised by 1st respondent are tenable and they are liable to be rejected for the following reasons:

1st respondent is not disputing the fact of agreement having been entered into with the petitioners on 19/12/2006 - Annex. A. Said agreement provides for an arbitration clause and it reads as under:

"17) Arbitration: In the event of breach of the terms of this Agreement to Sell or in the event of any differences or disputes arising between the parties in regard to this Agreement or any matter relating thereto, the same shall be referred to a Sole Arbitrator appointed by the VENDOR and his decision shall be final and binding upon the parties and such Arbitration shall be held in accordance with the Provisions of the Arbitration & Conciliation Act of 1996."

A bare reading of above clause would clearly indicate that in the event of any breach of the terms of the agreement or any differences or dispute arising between the parties, same is required to be referred to an arbitrator by the "Vendor". Vendor is defined under said agreement to be M/s. "Metrocorp" i.e., 1st respondent herein. Said clause would also indicate that arbitration is to be held in accordance with the provisions of the Arbitration & Conciliation Act, 1996. It is by virtue of said arbitration agreement, petitioners have called upon the respondents to appoint an arbitrator to arbitrate the disputes and differences that have arisen between the parties. In the legal notice dated 12/9/2013 - Annex. D issued by the petitioners, they have notified respondents as under:

"Be notified that, our Clients are therefore constrained to invoke the arbitration clause contained in the Agreement to Sell and in furtherance thereof, our Clients hereby issue this notice and call upon you to appoint an Arbitrator to arbitrate the disputes and differences that have arisen between our Clients and you. Our clients hereby call upon you to confirm the appointment of Arbitrator within a period of 30 days of receipt of this notice, failing which, our Clients will be constrained to indicate appropriate action under law. "

(Emphasis supplied)

A bare reading of the above averment made in the legal notice would leave no doubt in the mind of this court about petitioners having discharged their contractual obligation. Petitioners herein have been called upon the respondents to appoint an arbitrator to arbitrate the dispute obviously for the reason the arbitration clause provides for the "vendor" to appoint an Arbitrator. Pursuant to said notice, respondents have not appointed any arbitrator. To stave off the claim of petitioners, 1st respondent "Vendor" has claimed that it has not received said notice issued by petitioners and as such before this court it is contended by the 1st respondent that right vested in the 1st respondent under clause 17 cannot be frustrated by petitioners by invoking Section 11(5) of the Act and it is contended that alleged notice issued by the petitioner as per Annex. D has not been received and as such 1st respondent exercising its right under clause 17 of the agreement did not arise at all and petition is premature. Said contention put-forth by 1st respondent requires to be considered with utmost circumspection for the simple reason that Section 3(1)(b) of the Arbitration Act, provides that wherever any a written communication is to be forwarded by the parties to the agreement, if it is otherwise agreed, the written communication is deemed to have been received, if it is sent to the addressee''s last known place of business, habitual residence or mailing address by registered letter or by any other means which provides a record. In this regard petitioners have made available the postal cover which has been returned by the postal authorities with a postal endorsement to the effect "Party left R/Sender 28/6/2013 AA". The said notice dated 12/9/2013 has been forwarded to the last known address of the 1st respondent by the petitioners and it has been dispatched by registered post acknowledgment due. Perusal of the statement of objections filed by respondent No. 1 does not indicate about the 1st respondent having at any point of time intimated the petitioners of any change of address or the said firm having carried on business at any other place which was also notified to the petitioners or being within their knowledge. In that view of the matter this court is of the considered view that service of notice dated 12/9/2013 on 1st respondent being insufficient as contended by Mr. Ravishankar, cannot be accepted and said contention stands rejected. In view of the same it has to be necessarily held that option given to the vendor under clause 17 of the agreement having been failed to be made use of by the 1st respondent, 1st respondent cannot be heard to contend that its right has been either truncated or defeated. Said contention also deserves to be rejected and accordingly it stands rejected.

Thus the only issue which remains to be considered is, as to whether an arbitrator requires to be appointed or not. In view of the fact that petitioner had intimated the respondents to appoint an arbitrator as provided under clause 17 of the said agreement and respondents having failed to do so, this court in exercise of power vested under Section 11(5) of the Act, is of considered view that an arbitrator requires to be appointed. It is made clear that no opinion is expressed with regard to the merits of the claim and all contentions are kept open. It is also made clear that the views expressed by this court is for the limited purpose of appointing of arbitrator only.

Hence I proceed to pass the following:

(i) Civil Misc. Petition is hereby allowed and Hon''ble Mr. Justice K.N. Keshavanarayana, Former Judge, High Court of Karnataka, is hereby appointed as sole arbitrator to adjudicate the dispute between the parties.

(ii) It is made clear that parties shall be governed by the rules of the Arbitration Center, Bangalore, and the Arbitration Center is also directed to obtain prior consent of the arbitrator appointed herein above in Form No. IV as required under Sub-sec. (8) of Section 11 of the Arbitration & Conciliation (Amendment) Ordinance Act, 1996.