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The Comedy Store v/s Horseshoe Entertainment & Hospitality Pvt. Ltd.

    Arbitration Petition (L) No. 738 of 2016 & 739 of 2016
    Decided On, 11 August 2016
    At, High Court of Judicature at Bombay
    By, THE HONOURABLE MR. JUSTICE R.D. DHANUKA
    For the Petitioner: Rajiv Kumar, Senior Advocate a/w Amit Jamsandekar a/w Vishal Maheshwari a/w Dhiraj Mhetre a/w Zaibaa Thingna i/by M/s.Khaitan Legal Associates, Advocates. For the Respondent: Zal Andharujina a/w Rahul Dwarkadas a/w Dharam Sharma i/by M/s. Dharam & Co., Advocates.


Judgment Text
1. By these petitions filed under Sections 14 and 15 of the Arbitration and Conciliation Act, 1996 (for short 'the Arbitration Act'), the petitioner has impugned the orders dated 12th April 2016 and 14th ay 2016 terminating the arbitration proceedings and seeks appointment of a sole arbitrator in substitution of erstwhile arbitral tribunal.

2. There is no dispute that the parties had entered into a Share Subscription and Shareholder's Agreement dated 13th November 2008 and a Trademark License Agreement dated 25th November 2008. The dispute arose between the parties. The petitioner invoked the arbitration agreements recorded in both the aforesaid agreements. On 26th September 2013, the erstwhile tribunal was constituted. The tribunal directed for an advance payment from the parties towards their fees and other administrative charges to the tune of USD 25000 each under both the agreements respectively.

3. On 30th May 2014, the respondent filed an application under Section 38 of the Arbitration Act contending that due to its bad financial condition, it was unable to pay its share of the fees and therefore, ought to be exempted from paying its share of the erstwhile tribunal's fees. The erstwhile tribunal rejected the application on 10th July 2014. The tribunal, thereafter, directed the petitioner to pay share of advance of the respondent in the sum of USD 25000 each under both the agreements totalling to USD 50000. The petitioner accordingly paid the contribution of their share in the sum of USD 50000 as advance to the arbitral tribunal.

4. It appears that the presiding arbitrator by email dated 18th March 2016 made further demand of deposit in the sum of USD 15000 each towards arbitrators' fees and expenses on or before 31st March 2016. It is the case of the petitioner that since the email on which the email was sent by the presiding arbitrator for deposit of further USD 15000 was not operational and thus the petitioner had no notice of the demand made on 18th March 2016. On 1st April 2016, the presiding arbitrator addressed another email demanding further deposit of USD 15000 on behalf of the respondent on or before 6th April 2016. The said email was sent on incorrect email ID and was forwarded to the petitioner only on 1st April 2016. The petitioner vide their advocate's letter dated 6th April 2016 made a request to the arbitral tribunal for extension of time to pay additional amount in the sum of USD 15000 on behalf of themselves and another USD 15000 on behalf of the respondent. 5. On 8th April 2016, the learned presiding arbitrator sent an email to the advocates for the petitioner stating that the request for extension of time to pay the fees of USD 30000 was under consideration but clarified that the email should not be treated as an extension of time. It is the case of the petitioner that whilst the advocates of the petitioner were in process of remitting the amount as demanded by the arbitral tribunal, the arbitral tribunal passed an order dated 12th April 2016 terminating the proceedings under Section 38 (2) of the Arbitration Act.

6. The petitioner thereafter made an application on 13th April 2016 for recall of the order of termination dated 12th April 2016. On 14th May 2016, the arbitral tribunal rejected the said application for recall of the termination order. Both these orders are the subject matter of these two petitions filed by the petitioner under Sections 14 and 15 of the Arbitration Act.

7. Learned senior counsel for the petitioner invited my attention to the annexures to the arbitration petitions including the order of termination of the proceedings passed by the arbitral tribunal and also the order dated 14th May 2016 rejecting the application for recall of the order of termination dated 12th April 2016. He submits that the petitioner had already deposited the amount in terms of Section 31(8) of the Arbitration Act with the arbitral tribunal. He submits that the respondent deliberately did not pay their contribution of fees and deposit to the arbitral tribunal though they are equally liable to the pay such deposit. The petitioner thus was required to pay contribution of deposit of the respondent in the sum USD 50000. He submits that the petitioner had requested for sometime to pay further deposit as directed by the arbitral tribunal. He submits that the impugned order passed by the arbitral tribunal terminating the proceedings and refusing to grant extension of time is totally harsh and contrary to Section 38 read with Section 31(8) of the Arbitration Act. He submits that the present proceedings filed under Sections 14 and 15 of the Arbitration Act for declaration that the mandate of the arbitral tribunal is not terminated and for setting aside the orders dated 12th April 2016 and 14th May 2016 are maintainable.

8. Mr.Andharujina, learned counsel appearing for the respondent, on the other hand, submits that since the orders passed by the arbitral tribunal on 12th April 2016 and 14th May 2016 thereby terminating the arbitration proceedings and rejecting the application for recall of the order dated 12th April 2016 are absolutely clear, these petitions filed under Sections 14 and 15 of the Arbitration Act are not maintainable. He submits that there is no controversy whether arbitration proceedings were terminated by the said order dated 12th April 2016 and thus Section 14(2) of the Arbitration Act does not apply.

9. The next submission of the learned counsel for the respondent is that even if this Court comes to the conclusion that the orders dated 12th April 2016 and 14th May 2016 can be set aside by this Court by exercising the powers under Section 14(2) of the Arbitration Act, he submits that this Court cannot appoint an arbitrator in these proceedings. He submits that the proper remedy of the petitioner in that event would be to follow the procedure for appointment of an arbitrator under the arbitration agreements entered into between the parties and in accordance with Section 11 of the Arbitration Act.

10. In so far as the first submission of the learned counsel for the respondent is concerned, a perusal of the order dated 12th April 2016 passed by the arbitral tribunal indicates that the arbitration proceedings are terminated by the arbitral tribunal on the ground that further deposit demanded by the arbitral tribunal was not paid by the petitioner. The petitioner had made an application for extension of time. It is not in dispute that though the respondent was also directed to pay their contribution of fees and deposit with the arbitral tribunal in the preliminary meeting held by the arbitral tribunal, the respondent admittedly did not deposit any contribution of fees with the arbitral tribunal. The arbitral tribunal accordingly directed the petitioner to pay contribution of fees and deposit on behalf of the respondent also. It is not in dispute that pursuant to the said order passed by the arbitral tribunal, the petitioner had made further deposit of sum of USD 50000 on behalf of the respondent with the arbitral tribunal.

11. In my view, the request of the petitioner for extension of time to deposit further USD 15000 for itself and USD 15000 on behalf of the respondent in the facts and circumstances of this case was fair and reasonable. In my view, the arbitral tribunal thus already having received the amount of deposit initially made by the petitioner could have considered the application for extension of time made by the petitioner in depositing the amount as directed by the arbitral tribunal. I am inclined to consider the submission of the learned senior counsel for the petitioner that though the learned advocates for the petitioner were in process of making deposit of the further amount, the arbitral tribunal in the meanwhile terminated the proceedings. The arbitral tribunal could not have passed such harsh and unreasonable order thereby terminating the arbitration proceedings for delay of few days on the part of the petitioner to pay contribution of further deposit not only on behalf of itself but also on behalf of the respondent.

12. In so far as the submission of Mr.Andharujina, learned counsel for the respondent that since there is no controversy as to whether the arbitration proceedings are terminated or not and thus Section 14(2) of the Arbitration Act is not attracted in the facts and circumstances of this case is concerned, in my view, there is no merit in this submission of the learned counsel for the respondent. The arbitral tribunal has rejected the application for extension of time to make further deposit. Whether such request was justifiable on the part of the petitioner or not and whether the order passed by the arbitral tribunal rejecting the said request was fair and reasonable or not, in my view, the controversy remained whether the order of termination of the proceedings passed by the arbitral tribunal was proper or not which can be adjudicated upon by this Court under Section 14(2) of the Arbitration Act. In my view, a party who has not paid its part of the contribution of deposit with arbitral tribunal cannot be allowed to raise such technical objection. The objection is totally devoid of merit and is accordingly rejected.

13. In so far as the second submission of Mr.Andharujina, learned counsel for the respondent that even if the impugned orders dated 12th April 2016 and 14th May 2016 terminating the arbitration proceedings and rejecting the application for recall of the order dated 12th April 2016 are set aside, this Court cannot appoint an arbitrator in substitution of the erstwhile arbitral tribunal is concerned, in my view, Mr.Andharujina, learned counsel for the respondent is right in his submission. Even if this Court allows the prayer clause (a) of the arbitration petition, in my view, the arbitration agreements still survive and are not perished upon the termination of the arbitration proceedings by the arbitral tribunal.

14. Be that as it may, this Court is of the view that the orders dated 12th April 2016 and 14th May 2016 passed by the arbitral tribunal are not fair and reasonable orders and ought not to have been passed in the circumstances stated aforesaid. In my view, the petitioner will have to adopt appropriate procedure for appointment of an arbitrator in accordance with the procedure agreed by the parties in the arbitration agreements and in accordance with the provisions of the Arbitration Act. In my view, the arbitration agreements can be re-invoked by the petitioner since this Court has set aside the orders dated 12th April 2016 and 14th May 2016. Even if the said orders would not have been set aside by this Court, the petitioner could still invoke the arbitration agreements in accordance with the pro

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cedure agreed by the parties in the arbitration agreements recorded in the aforesaid two contracts. 15. Learned senior counsel for the petitioner submits that the petitioner will take appropriate steps for appointment of substitute arbitral tribunal in accordance with law. Statement is accepted. 16. I therefore pass the following order:- (a) Arbitration Petition (L) Nos.738 of 2016 and 739 of 2016 are allowed in terms of prayer clause (a); (b) The prayer clause (b) is rejected. The petitioner however would be at liberty to take steps to apply for appointment of arbitral tribunal in accordance with the procedure agreed by the parties in the arbitration agreements and in accordance with the provisions of the Arbitration and Conciliation Act, 1996; (c) Prayer clause (c) does not survive and is rejected; (d) Arbitration petitions are disposed of in aforesaid terms; (e) There shall be no order as to costs; 17. Place the Notion of Motion (L) Nos.2189 of 2016 and 2208 of 2016 in Arbitration Petition (L) Nos.738 of 2016 and 739 of 2016 respectively on board for 'hearing and final disposal' in due course.
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