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GK Developments Pvt Ltd., Represented by its Managing Director, Karthick Gunasekaran, Chennai v/s RIO International, Rep. by Managing Partner, Mallikarjunan, Chennai

    Arb.O.P (Com.Div) No. 302 of 2022
    Decided On, 24 August 2022
    At, High Court of Judicature at Madras
    By, THE HONOURABLE MR. JUSTICE M. SUNDAR
    For the Petitioner: D. Senthil Kumaar, Advocate. For the Respondent: S. Arivazhagan, M. Venkatesh, Advocates.


Judgment Text
(Prayer: Arbitration Original Petition filed under Section 11(6) of The Arbitration and Conciliation Act, 1996 praying to (i) Appoint an Arbitrator to adjudicate the disputes between the petitioner and Respondent in terms of the Agreement dated 14.06.2019 at Chennai; and (ii) Direct the respondent to pay costs.)

M. Sundar, J.

1. This order will now dispose of the captioned matter.

2. This order has to be read in conjunction with and in continuation of proceedings made by this Court in the listing on 13.07.2022, which reads as follows:

Captioned 'Arbitration Original Petition' [hereinafter 'Arb OP' for the sake of convenience and clarity] presented in this Court on 23.06.2022 under Section 11 of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)' [hereinafter 'A and C Act' for the sake of convenience and clarity] with a prayer for appointment of an Arbitrator is predicated on clause 12 of an Agreement dated 14.06.2019 between the petitioner-Company and respondent-Firm. This 14.06.2019 agreement shall hereinafter be referred to as 'primary contract' for the sake of convenience and clarity.

2. Mr.D.Senthil Kumar, learned counsel on record for petitioner submits that primary contract is for provision of financial assistance to the respondent on the understanding that respondent would allocate civil works to the petitioner when the respondent gets orders to do such works. It is submitted that the petitioner-Company is carrying on business of development of property / civil works contractor and that the respondent- Firm is in the business of sourcing and business implementation mostly regarding Government works / contracts.

3. Aforementioned clause 12 of primary contract reads as follows:

‘12. Any disputes between the parties arising out of or connected with this agreement shall be referred to and finally determined by arbitration under a sole arbitrator to be agreed between the parties hereto. The Arbitration shall be held as per the provisions of the Arbitration and Conciliation Act, 1996 and shall be held in Chennai in the English language. The arbitral award shall be final and binding upon the parties.'

4. Learned counsel for the petitioner submits that there is an addendum to primary contract being an addendum dated 07.09.2020 but that does not contain a arbitration clause. It is not necessary to dilate much on this and it would suffice to say that the captioned Arb OP is predicated on the aforementioned clause 12 of primary contract which serves as an Arbitration Agreement between the petitioner-Company and respondent-Firm i.e., 'Arbitration Agreement' between the parties within the meaning of Section 2(1)(b) read with Section 7 of A and C Act. Learned counsel submits that arbitrable disputes erupted between the petitioner-Company and respondent-Firm when the primary contract was worked as the respondent-Firm allegedly became due / liable to return financial assistance, cheque given by the respondent-Firm was dishonoured. This broadly stated inter alia is the arbitrable dispute between the parties.

5. Learned counsel submits that a notice dated 12.05.2022 was sent to a member of Bar requesting the member of Bar to act as Hon'ble Arbitrator. Normally, this cannot be construed as a trigger notice. However, in this case post 12.05.2022 letter the proposed arbitrator has sent a communication dated 17.05.2022 inter alia to the respondent-Firm, the respondent has replied vide communication dated 30.05.2022 refusing to give consent for appointment of sole Arbitrator and respondent has stated that absent consent, the Arbitrator cannot proceed with the arbitral proceedings. This has necessitated the presentation of captioned Arb OP in this Court on 23.06.2022 is learned counsel's say. Respondent has been put on notice about the invocation of arbitration clause, it is quite possible to treat the captioned Arb OP as one for substitution if need be is learned counsel's further say.

6. Prima facie case has been made out for issue of notice. Issue notice to respondent returnable in a fortnight i.e., returnable by 27.07.2022. Private notice permitted.

7. List on 27.07.2022. 13.07.2022'

3. Aforementioned 13.07.2022 proceedings shall now be read as an integral part and parcel of this order. This also means that short forms, abbreviations and short references used in the earlier proceedings dated 13.07.2022 will be continued to be used in the instant order also for the sake of convenience and clarity.

4. Today, Mr.D.Senthil Kumaar, learned counsel for sole petitioner- Company and Mr.S.Arivazhagan along with Mr.M.Venkatesh, learned counsel for the lone respondent-Firm are before this Court.

5. Both learned counsel adverting to aforementioned 13.07.2022 proceedings, submit that the facts and dates have been correctly captured in the same.

6. Be that as it may, learned counsel for respondent very fairly submits that the respondent-Firm has no objection to appointment of an Arbitrator of the choice of this Court. This makes the task of disposal of captioned Arb OP fairly simple. Before doing that, this Court deems it appropriate to mention that a legal drill under Section 11 of A and C Act usually perambulates within the statutory perimeter sketched by sub-section (6A) thereat, which reads as follows:

'(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.'

7. Aforementioned sub-section (6A) of Section 11 of A and C Act came up for consideration before Hon'ble Supreme Court in oft quoted Mayavati case law i.e., Mayavati Trading Pvt. Ltd vs Pradyuat Deb Burman reported in (2019) 8 SCC 714. Relevant paragraph is paragraph 10 and the same reads as follows:

'10. This being the position, it is clear that the law prior to the 2015 Amendment that has been laid down by this Court, which would have included going into whether accord and satisfaction has taken place, has now been legislatively overruled. This being the position, it is difficult to agree with the reasoning contained in the aforesaid judgments, as Section 11(6-A) is confined to the examination of the existence of an arbitration agreement and is to be understood in the narrow sense as has been laid down in the judgment in Duro Felguera SA.'

(underlining made by this Court to supply emphasis and highlight)

8. Aforementioned paragraph 10 of Mayavati case law takes this Court to Duro Felguera case law i.e., Duro Felguera S.A. Vs Gangavaram Port Limited reported in 2017 (9) SCC 729, relevant paragraphs are paragraph Nos.47 and 59, which read as follows:

'47. What is the effect of the change introduced by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as "the 2015 Amendment") with particular reference to Section 11(6) and the newly added Section 11(6-A) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act") is the crucial question arising for consideration in this case.

59. The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. and Boghara Polyfab. This position continued till the amendment brought about in 2015. After the amendment, all that the Courts need to see is whether an arbitration agreement exists – nothing more, nothing less. The legislative policy and purpose is essentially to minimize the Courts intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected.'

9. From the narrative thus far, it is clear that in the case on hand there is no disputation about the existence of arbitration agreement between the parties i.e., Clause 12 of primary contract [agreement dated 14.06.2019] which serves as arbitration agreement between the parties.

10. It is made clear that the consent of respondent is restricted to appointment of Arbitrator by this Court i.e., a Arbitrator of this Court's choice

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and no other concession and consent has been made qua lis. As regards the lis, all questions, all rights and contentions of both parties are left open to be canvassed before Hon'ble Arbitrator to be appointed infra. 11. Hon'ble Mr.Justice K.P.Sivasubramaniam (Retd.,), former Judge of this Court, residing at No.47, Pulla Avenue, Shenoy Nagar, Chennai – 30 (Mob:94447 01312) is appointed as sole Arbitrator. Hon'ble sole Arbitrator is requested to enter upon reference qua primary contract i.e., Agreement dated 14.06.2019, adjudicate upon the arbitrable disputes that have arisen between the parties and render an award by holding sittings in Chennai. Fee and expenses of the Hon'ble Arbitrator shall be governed by Madras High Court Arbitration Centre (MHCAC) (Administrative Cost and Arbitrator's Fees) Rules 2017. 12. Captioned Arb.OP is disposed of in aforesaid manner. There shall be no order as to costs.
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