Rodemadan
India Limited Vs. International Trade Expo Centre Limited [2006] Insc 208 (17 April 2006)
B.N.
Srikrishna B.N Srikrishna, J.
This
is an application under Section 11(6) of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as "the Act") for appointment of a
Presiding Arbitrator/ Chairperson of the Arbitral Tribunal under the
arbitration agreement. It has been placed before me as the person designated by
the Chief Justice to act under Section 11(6) of the Act.
The
Respondent-Company has a lease of the land situated at Plot No. A-11,
Sector-62, Noida from the New Okhla Industrial Development Authority for a
period of ninety years. The Respondent wanted to construct and develop an
Exhibition Centre on the said land. There were negotiations between the
Petitioner-Company and the Respondent-Company, as a result of which an
exclusive Management Agreement was arrived at on 29.10.2003. Under the said
agreement, the Petitioner was granted the exclusive right to manage the said
plot of land for a period of ten years from the date on which 'Vacant
Possession' was handed over to it. Certain other terms as to payments were
agreed to between the parties. Two clauses, 8.0 and 8.1 of the said agreement,
which are of relevance, are as under:
"8.0
In the event of breach of warranties by any of the parties the other party can
seek relief by way of specific performance of the contract.
8.1
Arbitration: Any dispute, controversy or claim arising out of or in relation to
this exclusive Management Agreement shall be settled by a panel of three
arbitrators (the "Arbitration Panel") in accordance with the
provisions of the Arbitration and Conciliation Act, 1996. ITEC and Rodemadan
shall appoint one arbitrator each and such arbitrators shall, within seven days
of their appointment, designate a third person to act as the chairman and the
presiding arbitrator. The arbitral proceedings shall take place in Delhi and shall be conducted in the
English language. Any such dispute, controversy or claim submitted for arbitration
shall be considered a commercial dispute arising under the Arbitration and
Conciliation Act, 1996. The award of the Arbitration Panel shall be a reasoned
one, and shall be final and binding on the Parties." Certain disputes had
arisen between the parties, as a result of which, on 16.3.2005 the Petitioner
filed an application under Section 9 of the Act before the High Court of Delhi
(OMP No. 98/2005) and obtained an order directing the Respondent to maintain
status quo with regard to the possession and title of the said plot of land.
On
8.4.2005, the Petitioner sent a legal notice to the Respondent invoking Clause
8.1 of the said agreement. By the said notice invoking arbitration, the
Petitioner appointed Dr. L.M. Singhvi, Senior Advocate, as its nominee
arbitrator in terms of the Management Agreement and requested the Respondent to
nominate its arbitrator in terms of the said clause within a period of thirty
days from the date of receipt of the notice. It was clarified in the said
notice that since the agreement provided for Indian Law as the applicable law,
an Indian jurist had been appointed. It was stated that this would not be
deemed or construed to be a waiver of the Petitioner's right to have the third
or Presiding Arbitrator from a neutral country (i.e. other than India and
Cyprus), the arbitration invoked being an "International Commercial
Arbitration" within the meaning of Section 2(1)(f) of the Act.
On
4.5.2005, the Respondent replied to the said notice of the Petitioner, raising
several contentions, inter alia taking the stand that there was no arbitration
agreement in existence. Nonetheless, it appointed Justice S.C. Jain, a retired Judge of the Allahabad High Court as its
nominee arbitrator "without prejudice" to their right to challenge
the validity of the arbitration proceedings. By a letter dated 20.5.2005,
Justice Jain accepted his appointment as an arbitrator. However, since the two
arbitrators were not able to arrive at a consensus with regard to the
appointment of the Presiding Arbitrator/ Chairperson of the Arbitral Tribunal,
the Petitioner moved this application under Section 11(6) of the Act on
29.8.2005 for appointment of a Presiding Arbitrator/ Chairperson of the
Arbitral Tribunal.
Mr. Ranjit
Kumar, learned Senior Counsel for the Respondent, has raised a preliminary
objection that the petition has been filed by the Petitioner-Company through
Mr. Roger Shashoua, authorized representative of the Petitioner-Company, but
verified and signed by Mr. Raj Manek holding a Power of Attorney from Mr. Roger
Shashoua. The contention is that the Power of Attorney only permits Mr. Raj Manek
to represent Mr. Roger Shashoua in his personal capacity but does not empower
him to represent the Petitioner-Company. Mr. R.F. Nariman, learned Senior Counsel
for the Petitioner, has drawn our attention to Exhibit P/R-2 filed along with
the rejoinder. The document Exhibit P/R-2, which is a certificate by Mr. Roger Shashoua,
Director of the Petitioner-Company, clarifies that Mr. Raj Manek is duly
authorized to represent him in his personal capacity as well as the
Petitioner-Company:
"before
any court or other judicial authority or any other concerned authority to file
petitions, applications, documents etc. and to appoint any advocate in
connection thereto and to do all acts, deeds and things that the above Mr. Raj Manek
may deem fit and proper in pursuance thereof." In view of this document, I
find no substance in the contention.
Mr. Ranjit
Kumar, learned Senior Counsel for the Respondent, raised a further preliminary
contention that in view of the decision of the Constitution Bench in SBP &
Co. v. Patel Engineering Ltd. , it has now been conclusively held that the
power exercised by the Chief Justice or his designate under Section 11(6) of
the Act, is not an administrative but a judicial power and that the designate
of the Chief Justice has to judicially determine the issues arising under
Section 11(6) of the Act. He contends that under Article 145 of the
Constitution of India, the Supreme Court is empowered to frame "rules for
regulating generally the practice and procedure of the Court", and under
Clause (2), the minimum number of Judges, who were to sit for any purpose, is
also to be fixed by the rules. The Supreme Court has framed rules known as the
Supreme Court Rules, 1966 (hereinafter referred to as "the Rules").
Under Order VII Rule 1 of the Rules, "Every cause, appeal or matter shall
be heard by a Bench consisting of not less than two Judges nominated by the
Chief Justice". Exception is made for those matters specifically provided thereunder,
which could be heard by a Judge sitting singly nominated by the Chief Justice.
The contention is that since a petition under Section 11(6) of the Act is not
specifically enumerated under the proviso to Order VII Rule 1 of the Rules,
such a petition would have to be heard by a Bench consisting of not less than
two Judges.
In my
view, this contention is entirely misconceived for two reasons.
In the
first place, Article 145 of the Constitution itself proceeds by declaring that
the provisions of the Article were "subject to the provisions of any law
made by Parliament". The Act is definitely a "law made by
Parliament" and it does not prescribe that a petition under Section 11(6)
has to be heard by a Bench consisting of at least two Judges. Second, the power
under Article 145 of the Constitution and the Rules framed thereunder, are
intended to govern the practice and procedure of the Supreme Court. I am unable
to persuade myself to believe that, the power exercisable by the Chief Justice
under Section 11(6) of the Act is the power of the Supreme Court under the
Constitution. My first impression on this issue is also confirmed by the
judgment of this court in Patel Engineering (supra), where it was observed
that:
"It
is common ground that the Act has adopted the UNCITRAL Model Law on
International Commercial Arbitration, but at the same time, it has made some
departures from the Model Law.
Section
11 is in the place of Article 11 of the Model Law. The Model Law provides for
the making of a request under Article 11 to "the court or other authority
specified in Article 6 to take the necessary measure". The words in
Section 11 of the Act are "the Chief Justice or the person or institution
designated by him". The fact that instead of the court, the powers are
conferred on the Chief Justice, has to be appreciated in the context of the
statute. "Court" is defined in the Act to be the Principal Civil
Court of original jurisdiction of the district and includes the High Court in exercise
of its ordinary original civil jurisdiction. The Principal Civil Court of
original jurisdiction is normally the District Court. The High Courts in India exercising ordinary original civil
jurisdiction are not too many.
So in
most of the States the court concerned would be the District Court. Obviously,
Parliament did not want to confer the power on the District Court, to entertain
a request for appointing an arbitrator or for constituting an Arbitral Tribunal
under Section 11 of the Act. It has to be noted that under Section 9 of the
Act, the District Court or the High Court exercising original jurisdiction, has
the power to make interim orders prior to, during or even post-arbitration. It
has also the power to entertain a challenge to the award that may ultimately be
made. The framers of the statute must certainly be taken to have been conscious
of the definition of "court" in the Act. It is easily possible to
contemplate that they did not want the power under Section 11 to be conferred on
the District Court or the High Court exercising original jurisdiction. The
intention apparently was to confer the power on the highest judicial authority
in the State and in the country, on the Chief Justices of the High Courts and
on the Chief Justice of India." In short, the power under Section 11(6) is
the power of a designate referred to under the Section and not that of the
Supreme Court, albeit that it has now been held to have judicial
characteristics by reason of the judgment in Patel Engineering (supra). Since
this is the power of the Chief Justice and not the power of the Supreme Court,
the specification in Order VII Rule 1 of the Rules as to the minimum number of
Judges, would have no application thereto. If the argument of the learned
counsel is right, then even the Chief Justice cannot pass such an order unless
he is sitting in a Bench with one or more companion Judge. No such intention is
evidenced by Parliament in enacting Section 11(6) of the Act. Since Parliament
has enacted a law under which the power is exercisable by the Chief Justice or
his designate, who could be "any person or institution", I do not
think that the requirement of Order VII Rule 1 of the Rules would apply to such
a situation at all. The contention is, therefore, rejected.
The
Respondent's main opposition to this petition is on the ground that there is no
arbitration agreement in existence since the Management Agreement was merely a
proposal, which was subject to approval of the shareholders of the company;
that a meeting was called for the shareholders of the company at which the said
proposal was put forward for approval and was specifically rejected by a
resolution passed by the shareholders; that the nomination of Justice Jain was
without prejudice to the rights and contentions of the Respondent and that this
petition was misconceived and untenable as the High Court of Delhi would have
exclusive jurisdiction in the matter, as it had already been moved under
Section 9 of the Act. For the said reasons, the Respondent has sought dismissal
of this petition.
Before
examining the facts of the present petition, it is necessary to encapsulate the
conditions necessary for the exercise of the designate's power under Section
11(6) and the judicial determinations necessary by the designate at the stage
of Section 11(6). In addition to the conditions already enumerated in the
Section, the judgment in Patel Engineering (supra) provides that:
"The
Chief Justice or the designated judge will have the right to decide the
preliminary aspects as indicated in the earlier part of this judgment. These
will be his own jurisdiction to entertain the request, the existence of a valid
arbitration agreement, the existence or otherwise of a live claim, the
existence of the condition for the exercise of his power and on the
qualifications of the arbitrator or arbitrators" Further, it has also been
held that determination of certain preliminary jurisdictional issues is
mandatory for the designate:
"It
is necessary to define what exactly the Chief Justice, approached with an
application under Section 11 of the Act, is to decide at that stage. Obviously,
he has to decide his own jurisdiction in the sense whether the party making the
motion has approached the right High Court. He has to decide whether there is
an arbitration agreement, as defined in the Act and whether the person who has
made the request before him, is a party to such an agreement. It is necessary
to indicate that he can also decide the question whether the claim was a dead
one; or a long barred claim that was sought to be resurrected and whether the
parties have concluded the transaction by recording satisfaction of their
mutual rights and obligations or by receiving the final payment without
objection. It may not be possible at that stage, to decide whether a live claim
made, is one which comes within the purview of the arbitration clause.
It
will be appropriate to leave that question to be decided by the Arbitral
Tribunal on taking evidence, along with the merits of the claims involved in
the arbitration. The Chief Justice has to decide whether the applicant has
satisfied the conditions for appointing an arbitrator under Section 11(6) of
the Act." I am, therefore, required to decide whether the preliminary
conditions necessary for the exercise of the designate's power under Section
11(6) are satisfied, especially whether there exists a valid arbitral
agreement.
One
more issue needs appraisal here: what kind of evidence is the designate under
Section 11(6) required to place reliance on to arrive at a finding on the
preliminary jurisdictional issues? According to the judgment in Patel
Engineering (supra):
"For
the purpose of taking a decision on these aspects (preliminary jurisdictional
issues), the Chief Justice can either proceed on the basis of affidavits and
the documents produced or take such evidence or get such evidence recorded, as
may be necessary. We think that adoption of this procedure in the context of
the Act would best serve the purpose sought to be achieved by the Act of
expediting the process of arbitration, without too many approaches to the court
at various stages of the proceedings before the Arbitral tribunal."
Accordingly, I am given wide discretion to decide what evidence oral or
documentaryis necessary for me to make an effective finding on the preliminary
jurisdictional issues.
That
an agreement dated 29.10.2003 was signed by the Directors of the
Respondent-Company for and on behalf of the Respondent as well as by the
Directors of the Petitioner-Company for and on behalf of the Petitioner is not
in dispute. What is in dispute is that, subsequent thereto, the said agreement
has been repudiated in an Extraordinary General Meeting alleged to have been
held on 14.9.2004. It is further alleged that the Management Agreement dated 29.10.2003,
which was signed by the Directors of the Petitioner on the one hand and the
Directors of the Respondent on the other hand was merely a proposal subject to
approval of the shareholders of the Respondent-Company. Certain documents are
placed on record and my attention has been drawn thereto in support of this
stand of the Respondent.
The
Petitioner, however, has emphatically denied that any resolution was passed in
the Board Meeting of 14.9.2004, as alleged, by which the Management Agreement
has been repudiated or rendered ineffective. One Roger Shashoua, who is a major
shareholder and Director of the Petitioner- Company, is also a major
shareholder and Director of the Respondent- Company, had personal knowledge as
to the affairs of the Respondent- Company and, therefore, the Petitioner is
aware that no such Extraordinary General Meeting of the Respondent-Company was
held on 14.9.2004 at all, as alleged. However, in support of his stand, Mr. Ranjit
Kumar drew my attention to copies of certain resolutions purporting to the
extract of the resolution passed on 14.9.2004 at 11:00 A.M. in an Extraordinary General Meeting held at Business
Centre, Hotel Park Royal Intercontinental, Nehru Place, New
Delhi. This
resolution is vehemently disputed by Mr. Nariman, appearing for the
Petitioner-Company.
It is
not possible to accept the correctness of the disputed documents or to proceed
on the footing that there was such a resolution passed in an Extraordinary
General Meeting by which the Management Agreement of 29.10.2003 was not
approved and, therefore, resolved to be treated as null and void. Mr. Ranjit
Kumar then suggested that he be given an opportunity to lead evidence,
including oral evidence to substantiate his stand.
Exercising
the discretion granted to me in Patel Engineering (supra), I decline Mr. Ranjit
Kumar's request as I do not believe that oral evidence is necessary to
determine the present issue. I decline to do so for even if the power under
Section 11(6) be judicial in the sense of requiring a judicial determination by
the designate of the Chief Justice, it surely does not render the designate of
the Chief Justice into a trial court.
Mr. Ranjit
Kumar then placed reliance on Clause (6) of the Minutes of the Meeting of the
Respondent-Company dated 29.10.2003 in which there was a Resolution passed with
regard to 'Management Agreement', which inter alia reads as under:
"6.
Management Agreement Mr. Roger Shashoua proposed to grant a (sic) exclusive
Management Agreement to Rodemadan India Ltd. to manage the upcoming expocentre
on a minimum guarantee basis. The way the Expocentre will have confirmed income
from the beginning and will enjoy the worldwide experience of Rodemadan India
Ltd. The Board members agreed to the proposals, subject to statutory approvals.
Resolved
that the management contract with Rodemadan India Ltd. for the management of
the centre be approved by all board members present subject to statutory
approvals from the respective authorities, if any." There is no dispute on
this resolution. Admittedly, the Director of the Petitioner-Company had
attended this meeting and, in fact, it is pursuant to this resolution that the
Management Agreement dated 29.10.2003 was entered into between the Petitioner
and the Respondent. Mr. Ranjit Kumar contended that the said resolution proved
that the Management Contract was "subject to statutory approval from the
respective authorities, if any".
According
to him, Mr. Roger Shashoua is a Director of Rodemadan India Limited (the
Petitioner-Company) and another company, known as, Rodemadan Holdings Ltd., and
also a shareholder in the Respondent- Company. He contends that Section 299 of
the Companies Act, 1956 contemplates that:
"Every
director of a company who is in any way, whether directly or indirectly, concerned
or interested in a contract or arrangement, or proposed contract or
arrangement, entered into or to be entered into, by or on behalf of the
company, shall disclose the nature of his concern or interest at a meeting of
the Board of directors".
Under
Section 300, such a Director is precluded from taking any part in the
discussion of the Board of Directors nor allowed to vote with regard to a
resolution touching upon such a contract. Learned counsel contended that Mr.
Roger Shashoua was interested in the contract, and therefore, the Management
Contract was null and void because an interested director had voted thereupon.
To say
the least, the argument appears to be one of sheer desperation, in my view. It
is nobody's case that Mr. Roger Shashoua is a party to the Management
Agreement. The Management Agreement is between the Petitioner-Company and the
Respondent-Company. Merely because Mr. Roger Shashoua happens to be a Director
of the Petitioner-Company as well as, a shareholder in the Respondent-Company,
I do not think that the provisions of Sections 299 or 300 of the Companies Act
were attracted to the situation, which required approval of the Government.
The
next contention raised by Mr. Ranjit Kumar is that the Petitioner is attempting
to obtain specific performance when specific performance of the contract cannot
be granted in arbitral proceedings. In fact, this contention has been squarely
rejected by the judgment of this Court in Olympus Superstructures Pvt. Ltd. v. Meena
Vijay Khetan and ors.
Further,
it was urged that Clauses 8.0 and 8.1 of the Management Agreement are mutually
exclusive and, therefore, the relief for specific performance cannot be asked
for and since no consideration had been paid the contract was void and
unenforceable. In my view, these are not issues to be considered in a petition
under Section 11(6) of the Act, as they can all be raised during the arbitral
proceedings.
In
short, I am not satisfied that the arbitral agreement was vitiated on any of
the grounds averred by Mr. Ranjit Kumar. I am satisfied that there exists a
valid arbitration agreement which contemplates that that all disputes between
the parties under that agreement be referred to arbitration.
Finally,
it is contended that as recourse had been taken by the Petitioner under Section
9 of the Act to obtain interim relief by moving the Delhi High Court by their
Original Petition OMP No. 98/2005 dated 24.3.2005, by reason of Section 42 of
the Act that court alone could have jurisdiction upon the arbitral tribunal. In
my view, this contention has no merit as I have held earlier, neither the Chief
Justice nor his designate under Section 11(6) is a "court" as
contemplated under the Act. Section 2(1)(e) of the Act defines the expression
"court". The bar of jurisdiction under Section 42 is only intended to
apply to a "court" as defined in Section 2(1)(e). The objection,
therefore, has no merit and is rejected.
The
situation is one of a dispute between the Petitioner, which is a foreign
company and the Respondent and is therefore, an "International Commercial
Arbitration" within the meaning of Section 2(1)(f) of the Act.
There
is a dispute between the parties where both parties are subject to an
arbitration agreement. Further, the appointed arbitrators have failed to reach
an agreement upon a Chairperson/ Presiding Arbitrator of the Arbitral Tribunal.
Hence, I am satisfied that all the preliminary conditions specified in Section
11(6) and Patel Engineering (supra) have been met.
In the
result, I allow the petition and appoint Justice Arun Kumar, a retired Judge of
the Supreme Court of India, as the Chairman/ Presiding Arbitrator of the
Arbitral Tribunal, subject to his consent and on such terms as he fixes.
The
petition is accordingly allowed with no order as to costs.
Back