Sunil Kumar Agarwal vs Sri Govind Ram Agarwal & Ors

Ashis Kumar Chakraborty, J.

In this application, under Section 11(6) of the Arbitration and Conciliation Act, 1996, as amended by the Act 3 of 2016 (in short, “the Act of

1996â€), the petitioner has prayed for appointment of an arbitrator in place and stead of one of the joint arbitrators of the arbitral tribunal named by the

parties. The petitioner has also prayed that if necessary, appointment this Court would appoint a third arbitrator to constitute the arbitral tribunal and

adjudicate upon the disputes between the parties herein in terms of the arbitral agreement dated March 20, 2012 as mentioned hereinafter.

The respondent no. 1 is the father of the petitioner and the respondent nos. 2 and 3 are the brothers of the petitioner. As the members of the same

family, the petitioner and the respondents have some common business and properties. On March 20, 2012 the parties herein entered into an

arbitration agreement for adjudication of the disputes which may arise, between themselves at any time in the future towards, relating to the division of

their family assets and properties including their businesses through arbitration by Sri Ishwar Chand Gupta and Sri Manoj Kumar Bhura. Thereafter,

on July 16, 2012 the parties held a meeting among themselves, in presence of the said joint arbitrators and entered into an agreement for amicable and

mutually agreeable partition of the various properties owned by the family, sale of their residential house at 23/1, Mandeville Gardens and division of

the companies belonging to the members of their family. The minutes of the said meeting held on July 16, 2012 (which is also described as the

memorandum of understanding) is signed by all the parties and the joint arbitrators has been disclosed as Annexure- “B†to the petition. Clause 16

of the said minutes of the meeting dated July 16, 2012 provides as follows:

“16. The Parties hereby agree and undertake that the rights and obligations of the Parties as provided in this memorandum of understanding is not

merely an agreement to agree, but is valid and binding on the Parties and may be enforced , through specific performance or otherwise.â€​

According to the petitioner, he himself has discharged all the obligations stipulated in the minutes of the said meeting dated July 16, 2012 but the

respondent nos.2 and 3 in spite of having obtained the benefit thereof, have refused to discharge their obligation. Therefore, disputes have arisen

between the parties, which are required to be adjudicated upon by the joint arbitrators named in the said agreement dated March 20, 2012. By a letter

dated February 22, 2017 the petitioner requested the said joint arbitrators to enter upon reference and to adjudicate the disputes between the parties

herein relating/to the minutes of the said meeting held on July 16, 2012. However, by a letter dated March 22, 2017 one of the joint arbitrators namely,

Manoj Kumar Bhura expressed his inability to arbitrate and proceed with the matter any further. Thus, by a communication dated March 9, 2017

addressed to the respondents, the petitioner proposed the name of an advocate of this Court to be appointed as an arbitrator in place of Manoj kumar

Bhura.

However, by a letter dated March 20, 2017 the respondent no. 3 alleged that the arbitrators named in the said agreement dated March 20, 2012 had

never acted as arbitrators but they acted as joint facilitators/negotiators and helped the parties in reaching a settlement which has been recorded in the

minutes of the meeting held on July 16, 2012. The respondent no.3 further claimed that the relationship between the parties is now governed by the

said minutes of the meeting held on July 16, 2012, there is no arbitration clause in the settlement minutes and, as such, the question of appointing any

arbitrator does not arise. According to the petitioner, the disputes between the parties herein is covered by the said arbitration agreement dated March

20, 2012 but as one of the named joint arbitrators Sri Manoj Kumar Bhura has expressed his inability to act as an arbitrator and the parties have failed

to agree to name the arbitrator in place and stead of the said Sri Bhura, this Court would appoint a fit and independent person as the second arbitrator

of the arbitral tribunal for adjudication upon the disputes between the parties. The petitioner has also prayed, if necessary, this Court may appoint a

third arbitrator to constitute the arbitral tribunal.

The present application has been opposed by the respondent nos. 2 and 3 who have filed their respective affidavit-in-opposition. The said respondents

have alleged that the present application is not maintainable, inter alia, on the ground that Section 10 of the Act of 1996 mandatorily requires the

number of arbitrators shall not be an even number. Thus, according to the said respondents in the present case, the arbitration agreement dated March

20, 2012 providing for the arbitral tribunal to comprise only two arbitrators named therein is not a valid agreement. The second ground urged by the

said respondents is that the minutes of the said meeting dated July 16, 2012 which is sought to be enforced by the petitioner is an independent

agreement disputes under which cannot be referred to the arbitral tribunal constituted by the arbitral agreement dated March 20, 2012. The petitioner

has filed his separate affidavit in reply denying the material allegations made by the respondents in their respective affidavit-in-opposition.

Mr. Sabyasachi Chowdhury, learned counsel appearing for the petitioner submitted that by the said agreement dated March 20, 2012 the parties herein

have themselves constituted the arbitral tribunal comprising two arbitrators and in view of the provisions of Section 4 of the Act of 1996 they shall be

deemed to have waived their right to raise any objection to the constitution of the arbitral tribunal on the ground of not conforming to the procedure

stipulated in Section 10 of the same Act. In support of such contention, reliance was placed on behalf of the petitioner on the decision of the Supreme

Court in the case of Narayan Prasad Lohia -vs- Nikunj Kumar Lohia & Ors. reported in (2002) 3 SCC 572. Mr. Chowdhury further contended that in

the instant case the said arbitration agreement dated March 20, 2012 is valid and the parties had agreed to refer all the disputes relating to division of

the joint family immovable properties and the respective businesses/companies controlled by them to the arbitration by the joint arbitrators and, as

such, the disputes arisen between the parties relating to implementation of the said minutes of the meeting dated July 16, 2012 can only be adjudicated

upon through arbitration by the arbitral tribunal. Urging all these grounds, learned counsel appearing for the petitioner pressed the prayer made by the

petitioner in this application for appointment of an arbitrator in place and stead of the said Sri Manoj Kumar Bhura. He further submitted that if it is

necessary, this Court may also appointment a third arbitrator, to be the presiding arbitrator of the arbitral tribunal.

On the other hand, Mr. Anirban Roy, learned counsel appearing for the respondent no. 3 raised strong objection to the maintainability of this

application. He first submitted that in this case, the petitioner has prayed for appointment of an arbitrator, in place and stead of Sri Manoj Kumar

Bhura for constitution of the arbitral tribunal to enforce the rights and obligations of the parties under the said minutes of the meeting dated July 16,

2012. According to Mr. Roy, although the said arbitration agreement dated March 20, 2012 contemplated that all the matters in dispute relating to the

claims of either of the parties shall be referred to arbitration and the award of the joint arbitrators shall be final, but the said minutes of the meeting

dated July 16, 2012 signed by all the parties records the unanimous decision taken by the parties herein for sale of the residential house at 23/1,

Mandeville Gardens and division of their family businesses carried on through various companies and firm. He further submitted that clause 16 of the

said minutes of the meeting dated July 16, 2012, which is a memorandum of understanding between the parties, in clear and unambiguous term records

that the rights and obligations of the parties provided thereunder is not merely an agreement to agree, but the same are valid and binding on the parties

and may be enforced through specific performance or otherwise. It was emphasised that with the execution of the said memorandum of

understanding dated July 16, 2012 the terms and conditions whereof are valid and binding upon the parties and can be enforced through specific

performance against each other, there exists no dispute to be adjudicated upon by the arbitral tribunal under the said agreement dated March 20, 2012.

According to Mr. Roy when the rights and obligations of the parties under the said minutes of the meeting dated July 16, 2012 is capable of being

specifically performed there is no scope for the arbitral tribunal to adjudicate upon any dispute between the parties and consequently, the present

application is not maintainable. He further submitted that in any event, when Section 10 of the Act of 1996 mandatorily requires the number of

arbitrators of an arbitral tribunal shall not be an even number, the agreement dated March 20, 2012 contemplating the arbitral tribunal to be two

arbitrators is not a valid arbitration agreement and none of the parties can enforce such invalid agreement. He further submitted that it is settled law

that waiver is a question of fact and the same must be pleaded and proved by the party. He strenuously contended that in the present case when the

petitioner has not made any pleading of waiver of the mandatory requirement of Section 10 of the Act of 1996, he is not entitled to urge the said plea

at the time of hearing of this application only. In this regard, learned counsel for the respondent no. 3 relied on the decision of the Supreme Court in

the case of V.M. Salgaocar and Bros. â€"vs- Board of Trustees of Port of Marmagao and Anr. reported in (2005) 4 SCC 613.

Mr. Roy further submitted that in paragraph 20 of the decision in the case of Narayan Prasad Lohia (supra), the Supreme Court held that since the

respondent nos. 1 and 2 did not raise any objection to the composition of the arbitral tribunal, as provided of Section 16, they must be deemed to have

waived their right to object. According to him, in the instant case when the respondent no. 3 has raised the objection to the composition of the arbitral

tribunal being contrary to the mandatory provisions in Section 10 of the Act of 1996 at the threshold he cannot be deemed to have waived his right to

raise objection to the composition of the arbitral tribunal. It was submitted by the respondent no. 3 that the decision of the Supreme Court in the case

of Narayan Prasad Lohia (supra) relied by the petitioner has no application in the present case. Mr. Roy further contended that even in the case of

Duro Felguera, S.A. â€"vs- Gangavaram Port Ltd. reported in (2017) 9 SCC 729, the Supreme Court has held that in spite of incorporation of sub-

section (6-A) to Section 11 of the Act of 1996, while deciding an application under sub-section (6) of Section 11 of the Act the Court has to satisfy

itself about the existence of a valid arbitration agreement. In this regard, he relied on paragraph 48 of the said decision of the Supreme Court in the

case of Duro Felguera (supra). The respondent no. 2 adopted the submissions advanced by Mr. Roy appearing for the respondent no.3.

I have considered the facts of the case and the arguments of the learned counsel appearing for the respective parties. The first question that falls for

consideration in this case is whether any dispute exists between the parties, which are covered by any arbitration agreement. If the answer to the said

first question is found to be in the affirmative, then the next question arises whether, the said arbitration agreement dated March 20, 2012 providing for

the arbitral tribunal comprising only two members, is valid and enforceable. By the arbitration agreement dated March 20, 2012 the parties herein

appointed Sri Iswar Chand Gupta and Sri Manoj Kumar Bhura, as the joint arbitrator to adjudicate the disputes referred to them relating to the claims

of either of the parties for division of their family assets and properties, including the family companies. Clause 2 of the said arbitration agreement

provided that all matters in dispute relating to the claims of either of the parties shall be referred to the final determination and award of the joint

arbitrators. As per clause 9 of the said agreement, for the purpose of final determination of the share of each party to the agreement, the arbitrator

may take such evidence and make such inquiries, as they deem proper including valuation of the property. Clauses 13 and 14 of the said agreement

provided for the finality of the arbitral award by the joint arbitrators and that within one month from the passing of the award, the same shall be filed in

the Court and the decree could be obtained in terms of the award.

However, on July 16, 2012 in a meeting held by themselves, in presence of the joint arbitrators, the parties themselves resolved for the partition of the

properties owned by the family in a cordial, mutually agreeable and amicable way which is treated as a memorandum of understanding. From a

reading of the minutes of the meeting held on July 16, 2012 it is clear beyond any doubt that in the said meeting the parties themselves agreed and

stipulated the final terms of partition of the family properties and businesses carried on through different companies amongst themselves. By clause 16

of the said minutes of the meeting dated July 16, 2012 the parties agreed and accepted their rights and obligations provided in the said minutes to be a

memorandum of understanding which is valid and binding upon all of them and the same also enforceable through specific performance. In these

facts, I am convinced to accept the contention raised by the respondent nos. 2 and 3 that with the decisions arrived at by the parties themselves on

July 16, 2012 as recorded in the minutes of the said meeting, being Annexure â€" “C†to the petition and particularly in view of clause 16 thereof,

there exists no dispute which can be referred to arbitration as per the arbitration agreement dated March 20, 2012.

Although, I also find prima facie substance in the contention raised by the respondent nos. 2 and 3 with regard to the invalidity of the said arbitration

agreement dated March 20, 2012, but in view of my above finding with regard to the first question in the negative, in the present case it is not

necessary to give a decision on the validity of the said arbitration agreement. For the reasons as aforesaid, the application, A.P.No.199 of 2017 stands

rejected. There shall, however, be no order as to costs. Urgent certified copies of this judgement, if applied for, be made available to the parties

subject to compliance with all requisite formalities.