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Rangarajan Narayanan & Others v/s Quest Global Engineering Services Private Limited, Represented by Their Director, Bangalore & Others

    Civil Misc Petition No. 342 of 2021
    Decided On, 08 June 2022
    At, High Court of Karnataka
    For the Petitioners: Harish Narasappa , Sr. Counsel, Poornima Hatti, Advocate. For the Respondents: R1, C.K. Nanda Kumar, Sr. Counsel, M.D. Jidesh Kumar, Abhishek Bagga, Advocates.

Judgment Text
(Prayer: The Civil Misc. Petition filed Under Sec.11(6) of the Arbitration and Conciliation Act 1996, praying this Hon’ble Court to appoint an arbitrator on behalf of the Respondent, in order to help constitute the arbitral tribunal and adjudicate all disputes arising between the petitioners and respondent in relation to spa dated 23/01/2018 produced at Annexure-A and etc.)

1. The petitioners are before this Court seeking for the following reliefs:

a. Appoint an arbitrator on behalf of the respondent, in order to help constitute the Arbitral Tribunal an adjudicate all disputes arising between the petitioners and Respondent in relation to SPA dated 23.01.2018 produced at Annexure-A;

b. Grant costs of this petition to the petitioner; and

c. Grant such other reliefs as the Hon'ble Court deems fit in the circumstances of the case in the interests of justice and equity.

2. Initially the above proceedings was filed by the Petitioners against respondent No.1 seeking for the above reliefs it is subsequently that the other respondents were impleaded in these proceedings on an application filed by Respondent No.1

3. The petitioners and respondents no. 2 to 18 on the one hand and the respondent No.1 on the other are stated to have entered into a Share Purchase Agreement (SPA) on 22.03.2018 whereunder the terms of agreement and covenants as agreed between the parties have been reduced into writing.

4. The contention of the petitioner is that there were certain disputes which had arisen under the said SPA inasmuch as the respondent No.1 itself had issued a notice dated 24.01.2021 making certain demand of money from the petitioners which was replied to by the respondent denying the liability. Thereafter, upon exchange of notices between the parties, the CMP No. 342 of 2021 petitioners invoked the arbitration clause as contained in the SPA in Clause 15 and appointed Sri.G. Pramod Nair, learned Senior Counsel as their nominee Arbitrator vide their notice dated 05.07.2021. Since no reply was received to the said notice, the petitioners have approached this Court.

5. Upon notice being served on respondent No.1, respondent No.1 has filed a statement of objections contending that in terms of Clause 15.1 being the dispute resolution clause it was but required that the parties shall explore an amicable settlement of the dispute for a period of 30 days. Since the said mandatory requirement has not been fulfilled petition filed for the appointment of an arbitrator was premature and as such, the petition is liable to be dismissed.

6. When the matter had come up before this Court on 18.11.2021 since there was heavy reliance placed by CMP No. 342 of 2021 the counsel for the respondent No.1 on the aforesaid Clause 15.1, the parties were directed to explore the possibility of amicable settlement in terms of the said clause within a period of four weeks and to report the outcome of such talks on the next date of hearing and the matter came to be adjourned to 17.01.2022. The matter was thereafter listed on 21.02.2022, when the case was adjourned at the request of respondent No.1's counsel, thereafter, respondent No.1 filed an application in I.A.No.1/2022 for impleading respondent Nos.2 to 18 to these proceedings. The said application came to be allowed and respondent Nos.2 to 18 were brought on record. It was also brought to the notice of this Court that the talks had failed.

7. It is in the above background that Sri. Harish.B.N., learned Senior Counsel appearing for the petitioners would submit that there is a compliance of the requirement of Clause 15 including Clause 15.1. The CMP No. 342 of 2021 amicable discussions have failed and the petitioners and respondents Nos.2 to 18 who have been subsequently added, categorically denied any settlement and as such he submits that the arbitration clause is to be given effect to and the Arbitral Tribunal constituted.

8. Per contra, Sri. C.K.Nandakumar, learned counsel appearing for respondent No.1 would submit that if at all there have been any settlement talks which occurred it is only between respondent No.1 and petitioner Nos.1 to 7. There are no talks which occurred between respondent No.1 on the one hand and respondent Nos.2 to 18 on the other. Therefore, there is a complete non-compliance of the requirement of Clause 15.1, without such compliance the matter cannot be referred to arbitration. He submits that the requirement of Clause 15.1 being mandatory, it is a condition precedent to be satisfied before the matter can be referred to arbitration and the present situation which has arisen is that insofar as petitioner Nos.1 to 7 Clause 15.1 has been complied with and insofar as respondent Nos.2 to 18 requirement of Clause 15.1 has not been complied with. The arbitration proceedings cannot be split and therefore, in this background, he submits that in view of non-compliance of Clause 15.1 insofar as respondents Nos.2 to 18 are concerned will make the petition liable to be dismissed.

9. Heard Sri. Harish B.N., learned Senior Counsel for the petitioner and Sri. C.K.Nandakumar, learned counsel for the respondents and perused the papers.

10. Clause 15 which is the arbitration clause, on which basis all the aforesaid arguments have been advanced is reproduced hereunder for easy reference.

"15.1. If any dispute or difference arises between any of the Parties during the subsistence of this Agreement or thereafter, in connection with the validity, interpretation, implementation, or alleged breach of any provision of this Agreement or regarding any question, including the question as to whether the termination of this Agreement by any Party hereto has been legitimate, the Parties shall endeavour to settle such dispute amicably. The attempt to bring about an amicable settlement is concerned to have failed as soon as one of the Parties, after reasonable attempts, which attempt shall continue for not less than 30 (thirty) days, gives a written notice thereof of 30 (thirty) days to the other party in writing.

15.2. All disputes, differences or claims arising out of or in connection with this Agreement including, any question regarding its existence, validity, construction, performance, termination or alleged violation which is not resolved under Clause 15.1 shall be referred to and finally resolved by arbitration under the (Indian) Arbitration and Conciliation Act, 1996, which are deemed to be incorporated by reference in this Clause 15. The seat and legal place of arbitration shall be Bengaluru, India. The tribunal shall consist of 3 (three) arbitrators. Within 21 (twenty-one) Business Days after one Party has served a written notice, in the event of written notice being served prior to Closing, the Sellers and the Company on the one hand and the Purchaser on the other shall each appoint 1 (one) arbitrator and in the event of the written notice being served following Closing, the Sellers on the one hand and the Purchaser and the Company on the other shall each appoint 1 (one arbitrator), The 2 (two) arbitrators so appointed shall appoint a 3rd (third) arbitrator within 7 (seven) Business Days of the appointment of last of the 2(two) arbitrators, failing which the 3rd (third) arbitrator shall be chosen in accordance with the (Indian) Arbitration and Conciliation Act, 1996 and such 3rd (third) arbitrator shall act as chairman. The language of arbitration shall be the English language. "

11. A perusal of Clause 15.1 indicates that whenever there is a dispute between the parties (which covers almost all kinds of disputes that may arise between the parties), the parties shall endeavor for the settlement of disputes amicably. An attempt is to be made to bring about an amicable settlement which would be considered to have failed as soon as one of the parties after reasonable attempts for not less than 30 days gives a written notice thereof of 30 days to other party in writing.

12. In the present case, it is not in dispute that as per the orders of this Court petitioners and respondent No.1 had met and there is no amicable resolution which has been arrived at and the settlement talks have failed. The dispute which is raised is only insofar as respondent Nos.2 to 18, that there is no settlement talks which have occurred between Respondent no.1 and Respondent No. 2 to 18.

13. The point to be noted is that it is the petitioners who had come before this Court who have complied with all the requirements of Clause 15.1, even if the submission of Sri.C.K.Nandakumar, learned Senior counsel for respondent No.1 is accepted, it is the persons who have been impleaded in this proceedings at the instance of respondent No.1 with whom the amicable resolution talks have not occurred. If not for the impleading application filed by respondent No.1 this question could never have been raised, since it is the Respondent No.1 who has impleaded Respondent No. 2 to 18, it was the obligation of Respondent No.1 to comply with the requirements of clause 15.1, attempts in this regards to have been made by Respondent No.1, having not done so, respondent no.1 cannot now be heard to say that there is no compliance with the requirement of Clause 15.1 as regards Respondents no.2 to 18 who have been impleaded on the basis of an application filed by Respondent No.1.

14. Be that as it may, even after the impleading application was allowed Miss. Poornima Hatti has accepted notice for respondent Nos.2 to 18 and she undertakes to file vakalathnama. Thus it is the same counsel on record as also the same Senior Counsel who has appeared for the petitioners also appear for respondent Nos.2 to 18.

15. This is one more classic case of one of the parties trying to overreach the arbitration clause and delay the initiation of arbitration proceedings. It is but required that the arbitral proceedings are commenced at the earliest without brooking any delay sought to be occasioned by one of the parties.

16. I am of the considered opinion that if there is any delay in commencement of the arbitral proceedings the very purpose, intent and motive behind the introduction of the Arbitration and Conciliation Act, 1996 is lost.

17. The UNCITRAL model of arbitration was adopted in our country so as to enable speedy reference to arbitration and speedy arbitration.

18. In the present case it is clear that insofar as the petitioners are concerned the requirement of Clause 15.1 have been complied with. Insofar as respondent Nos.2 to 18 are concerned it is the very same counsel who appears for the petitioners who represents respondent Nos.2 to 18 and who has categorically stated that there is no resolution which is going to be possible more so since petitioner No.4 is also the duly constituted attorney and representative of respondent Nos.2 to 18.

19. An email dated 25.01.2022 has been handed over across the bar dated 25.01.2022 which is stated to be in reply to the notice dated 18.01.2022, which notice have been produced along with the impleading application.

20. The contention in the impleading application was that other sellers that is respondent Nos.2 to 18 have an interest in the business transaction and therefore, they are necessary parties to the proceedings. Upon the submissions made by both the learned counsel, the said application was allowed, with the consent of both the counsel.

21. The email dated 25.1.2022 would categorically indicate that a reply has been sent to the notice dated 18.01.2022 that both the principal sellers being petitioner Nos.1 to 7 and other sellers being respondent Nos.2 to 18 would like to convey that they do not wish to proceed any further and prefer that the dispute is adjudicated by arbitration. From the time said email was sent to, now there is a lapse of nearly 5 months, during which period of time respondent No.1 has not done anything but only waited to raise this contention during the course of arguments being heard by this court, it at all the respondent No.1 was interested in holding talks for the amicable resolution of the dispute respondent No.1 could have made efforts towards the same which has not been done. Having not done so, and raising this matter now after having filed the impleading application to implead Respondents 2 to 18, in my considered opinion is nothing less than malafide and taken up to delay the initiation of arbitral proceedings.

22. Another peculiar fact which is required to be taken note of in the present matter is that the dispute arose on account of notice of claim which has been issued by respondent No.1 on 20.04.2021 which had been issued to petitioner Nos.1 to 7 as also to respondent Nos.2 to 18. Thus the genesis of the dispute being the notice of claim by respondent No.1, the respondent No.1 did not choose to invoke the arbitration clause under Clause 15 but it was the petitioners who had been constrained to bring about the closure to the matter by invoking the arbitration clause. Thereafter, there were discussions which were held for an amicable settlement between petitioners Nos.1 to 7 and respondent No.1 and insofar as respondents Nos.2 to 18 are concerned the aforesaid email dated 25.01.2022 categorically indicates that they are not interested in any further talks and the matter should proceed for adjudication by way of arbitration.

23. A perusal of Clause 15.1 which has been extracted herein above would indicate that whenever any party wants amicable settlement that party should make all reasonable attempts to arrive at such amicable settlement which is extended for a period of 30 days. In the present case, apparently there are no steps which have been taken by respondent No.1 for amicable settlement except to state that respondent Nos.2 to 18 have not come forward for amicable settlement. If at all respondent No.1 was interested in such an amicable settlement, respondent No.1 should have written letters and reminders requesting r

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espondents Nos.2 to 18 to come forward for discussion. The manner in which on first occasion, the issue has been raised as regards no discussion made with petitioner Nos.1 to 7 and the manner in which now the issue has been raised as regards no discussion with respondent Nos.2 to 18, which leads to the only conclusion that respondent No.1 only wants to delay the initiation of arbitration proceedings. I do not find any reason to accept the said submission, more so when there is no denial of the arbitration clause and all the arguments addressed is only as regards interpretation of the arbitration clause and not otherwise. 24. In view of the above, I pass the following order: ORDER i. Petition is allowed. ii. The petitioners having already appointed the nominee the said Arbitrator will also be the nominee of respondent Nos.2 to 18, as per the submissions of Shri. B N Harish, learned senior counsel. iii. Respondent No.1 is directed to appoint its nominee arbitrator within a period of 15 days from today. If not done the Petitioners are at liberty to revive this petition. iv. Nominee of the petitioners/respondent Nos.2 to 18 and nominee of the respondent No.1 shall together appoint presiding Arbitrator within 15 days thereafter. v. Registry to send a copy of this order to Sri Pramod Nair, learned Senior Counsel who has been nominated by the petitioners as their nominee Arbitrator. vi. I.A.No.2/2022 does not survive for consideration and accordingly, stands dismissed.