Research › Search › Judgment

Andhra High Court · body

2009 DIGILAW 197 (AP)

Gajulapalli Chenchu Reddy v. Koyyana Jaya Lakshmi

2009-03-24

NOOTY RAMAMOHANA RAO

body2009
ORDER This is an Application moved seeking intervention for constituting the Arbitral Tribunal and for referring the disputes between the parties for their resolution. 2. It is the case of the Applicant that a Memorandum of Understanding has been entered into by and between the Applicant and the sale Respondent on 25-04-2007 at Visakhapatnam, whereunder the Applicant herein has offered to purchase lands of an extent of 49 acres situate at various survey numbers of Cheepurupalli Mandal, Vijayanagaram District, from the respondent, at the rate of RS.4,60,000/- per acre. He has also paid a sum of Rs.20.00 lakhs, receipt of which money, the respondent has acknowledged in the Memorandum of Understanding itself. The Memorandum of Understanding required the respondent to get approval for the said 49 acres within 12 months time. The balance sale consideration is liable to be paid by the Applicant at the time of delivery of possession and execution of a regular sale deed. The respective mutual obligations arising therefrom have also been spelt out. Clause 9 of the said Memorandum of Understanding reads as under: "9) ARBITRATION: The First Part and the Second Part shall made every effort to resolve amicably by direct informal negotiation any disagreement or dispute arising between them in connection with this Memorandum of understanding. If both the parties are unable to resolve the dispute either Parties may require that tile dispute be referred to a common arbitrator." However, the Applicant through his legal notice dated 28-01-2007 intimated the Respondent that he ;s not interested any more in purchasing tile scheduled property from tile Respondent and hence, requested the Respondent to propose the name of an Arbitrator to settle tile disputes. The Respondent replied thereto en 13-08-2007 pointing out that It is the Applicant herein, who is at fault and is not coming forward for completion of the transaction. The various factual and other averments made in tile notice dated 28-07-2007, are squarely disputed. The Applicant maintained silence for nearly one year and then again took up the matter with the respondent on 15-07-2008 nominating one Sri J.V.N. Raja Sekhar of Tekkali, Srikakulam District, as Arbitrator. The various factual and other averments made in tile notice dated 28-07-2007, are squarely disputed. The Applicant maintained silence for nearly one year and then again took up the matter with the respondent on 15-07-2008 nominating one Sri J.V.N. Raja Sekhar of Tekkali, Srikakulam District, as Arbitrator. The Applicant also called upon the opposite Party to appear before the said Arbitrator on 20-07-2008 at 10-00 a.m. On 21-07-2008, the Respondent has stoutly resisted the said attempt and called upon the Applicant to perform the rest of his obligations arising from out of the Memorandum of Understanding, instead of raising disputes. At that stage, the Applicant herein has received a communication dated 01-08-2008 from Sri J.V.N. Raja Sekhar of Tekkali, intimating him that the said Arbitrator is not willing to act as such. Hence, the Applicant through his communication dated 03-08-2008, suggested to the Respondent. names of three Advocates at Vijayanagaram, one of whom to be chosen, so as to appoint him as the common Arbitrator for resolving the disputes. In response there to, the Respondent has disputed the existence of an arbitration agreement between the parties for having their disputes resolved through the mechanism of arbitration. However, the Applicant went ahead and nominated Sri P. Seshadri, Advocate, Vijayanagaram, as Arbitrator and on that very day, the said Arbitrator Sri P. Seshadri, sought for willingness of both the parties for acting as Arbitrator in the matter. Complaining of failure on the part of the Respondent in not giving her consent for Sri P. Seshadri to act as the Arbitrator, the Applicant instituted the present Application on 24-09-2008. 3. Pursuant to the notice issued on 14-10-2008, the Respondent entered appearance in the matter and pointed out that there is no arbitration agreement between the parties for securing resolution of their disputes and that the procedure adopted by the applicant is not in conformity of the requirements of Section 11 of the Arbitration and Conciliation Act, 1996 (henceforth referred to as 'the Act'), to enable him invoke the jurisdiction of this Court. 4. In view of these contentions, the first and foremost question that is required to be determined is whether there is an arbitration agreement between the parties at all or not, as existence of an arbitration agreement is a requisite condition precedent for referring the disputes that arise amongst the parties for resolution through arbitration. 5. 4. In view of these contentions, the first and foremost question that is required to be determined is whether there is an arbitration agreement between the parties at all or not, as existence of an arbitration agreement is a requisite condition precedent for referring the disputes that arise amongst the parties for resolution through arbitration. 5. The Act has provided for, in Section 7, as to how an arbitration agreement between the parties can be culled out or construed. Sub-section (1) of Section 7 of the Act points out that an arbitration agreement means, an agreement by the parties to submit to arbitration all or certain disputes, which have arisen or which may arise between them in respect of a defined legal relationship. The predominant requirement, therefore, is the meeting of minds between the parties, to have their disputes resolved by way of submitting to the jurisdiction of an Arbitral Tribunal. Sub-section (2) of Section 7 of the Act made the position clear that an "arbitration agreement" may be in the form of an arbitration clause in a contract or it could be in the form of a separate agreement itself. Sub-section (3) of Section 7 of the Act, sets out that an arbitration agreement is needed to be in writing. Sub-section (4) of Section 7 of the Act, is relevant for our enquiry and it reads as follows: "(4) An arbitration agreement is in writing if it is contained in - (a) a document signed by the parties: (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other." The learned counsel for the Applicant places reliance upon the contents of Clause-(c), referred to supra, and submits that, all through, in the notices sent up by him, the Applicant has been alleging the existence of an arbitration agreement, while the other Party had maintained silence and, thus, has not denied any such arbitration agreement. Therefore, according to the learned counsel, existence of an arbitration agreement cannot be called in dispute, at this stage Per contra, the learned counsel for the Respondent has placed reliance upon a judgment of the Supreme Court in Jagdish Chander v. Ramesh Chander and others and contended that in the absence of an agreement between the parties, to have their disputes resolved through the mechanism of arbitration and thus, expressing their willingness to subject themselves to the jurisdiction of the Arbitrator, the Applicant herein cannot have the Arbitral Tribunal constituted by invoking the jurisdiction of the Designate Judge of the Chief Justice. 6. Before proceeding further, the following facts require to be noticed. 7. The Memorandum of Understanding has been entered by and between the parties on 25-04-2007. The Respondent offered for sale a compact block of agricultural land of 49 acres, which the Applicant has agreed to purchase at the rate of Rs.4,60.000/• per acre. The Applicant has also paid an amount of Rs.20.00 lakhs at the time of entering into the Memorandum of Understanding, the receipt of which money has been acknowledged and evidenced by the Memorandum of Understanding. Sub-clause (a) of Clause-5 of the Memorandum 01 Understanding required the First Part, i.e., the Respondent, to get the approval for the 49 acres within 12 months from the date of entering into the Memorandum of Understanding without in so many words specifying what that approval is all about. Mutual obligations of the parties and the expenses to be borne by them respectively, have been provided for in Clauses - 6 and 7. Clause - 8 of the Memorandum of Understanding has dealt with the duration of the Memorandum of Understanding and it is specifically set out therein that the duration is up to 12 months during which period, the Parties shall complete the necessary formalities. 8. Apparently, the Applicant herein has mistaken the 30 days period provided for securing extension of the duration of the Memorandum of Understanding, to be the time within which the mutual obligations are required to be performed by the parties. That is the reason why in the notice dated 28-07-2007, towards the end of Paragraph No.4, the Applicant asserted that the duration of time provided for completion of the of transactions, as 30 days and that it has expired. That is the reason why in the notice dated 28-07-2007, towards the end of Paragraph No.4, the Applicant asserted that the duration of time provided for completion of the of transactions, as 30 days and that it has expired. The Respondent, in reply, disputed the correctness of the averments contained in the notice dated 28-07-2007. Thus, obviously noticing the discrepancy, the Applicant had preferred to maintain silence for nearly one-year period and then made the request for consent for arbitration, only on 15-07-2008 by issuing a notice, which attempt was resisted by the Respondent through reply dated 21-07-2008. If the Applicant had truly construed that there is in existence, an arbitration agreemol11 between the parties, then, he could not have rushed in making appointment of an Arbitrator even before expiry of 30 days period from 15-07-2008. Therefore, the only time the Respondent was really required to assert her position as to the existence of arbitration agreement or lack of it, was when the Applicant has thrust the choice of three names on her to choose one of them to be the Arbitrator through his notice dated 03-08-2008. At that stage, the Respondent, through reply dated 25-08-2003, has disputed the existence of an arbitration agreement itself. 9. The above narration of the facts therefore, clearly does not lend support to the contention of the learned counsel for the Applicant that the Respondent has not denied the existence of an arbitration agreement in the exchange of statements of claim and defence, even if one were to stretch the notices sent up by the Applicant to the status of a "statement of claim". A statement of claim or defence is normally understood as the one submitted by the respective Parties before the Arbitral Tribunal and it is not the same that can be found in acrimonious exchange of allegations contained in the form of notices. Therefore, I have no hesitation to reject the contention canvassed by the learned counsel for the Applicant that the case of the Applicant is covered by the stipulation found in sub- clause (c) of sub-section (4) of Section 7 of the Act. 10. It is now important to notice as to how the Supreme Court has dealt with the issue of existence of an arbitration clause and as to how it was to be culled out. 11. 10. It is now important to notice as to how the Supreme Court has dealt with the issue of existence of an arbitration clause and as to how it was to be culled out. 11. In Jagdish Chander's case cited (1 supra), the Supreme Court has taken into consideration the views expressed earlier by a learned Designate Judge of the Chief Justice of India, in Wellington Associates Limited v. Kirit Mehta, (2000) 4 SCC 272 , wherein the learned Designate Judge considered the import of the expression; "may be referred to arbitration", as not meaning, the existence of an arbitration agreement itself, but, such expression as merely an enabling Provision for securing a fresh consent amongst the Parties for referring the disputes to arbitration. In Jagdish Chander's case cited (1 supra), the so-called arbitration clause employed the following crucial expressions "shall be referred for arbitration if the parties so determine". The same was construed by the Supreme Court that it was indicating the requirement of the parties to reach a decision by application of mind by the Parties at the relevant stage. It has now been settled firmly that clauses like "if they so desire, refer their disputes to arbitration", "the parties may also agree to refer the same to arbitration", "should consider settlement by arbitration", as not agreements of arbitration by themselves, but, merely expecting the parties to secure fresh consent or consensus for reference of disputes to arbitration. 12. In view of the settled legal principles in the Judgment cited (1 supra), it becomes now clear that the crucial expressions found in Clause – 9 of the Memorandum of Understanding, which sets out that if both the parties are unable to resolve the disputes, either parties "may require" that the dispute be referred to a common Arbitrator, is nothing but a requirement to secure a fresh consent or consensus amongst them at a later point of time. And, no such consent or consensus has been accorded by the Respondent in the instant case. 13. Thus, it is to be construed that there is no arbitration agreement existing between the parties. As already noticed supra, existence of an arbitration agreement is the pre-requisite for invocation of the jurisdiction of the Designate Judge for constituting the Arbitral Tribunal and failure of the same, does not clothe the Designate Judge with necessary power to entertain the Application. 14. As already noticed supra, existence of an arbitration agreement is the pre-requisite for invocation of the jurisdiction of the Designate Judge for constituting the Arbitral Tribunal and failure of the same, does not clothe the Designate Judge with necessary power to entertain the Application. 14. For the above, the Application stands dismissed. No costs.