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2015 DIGILAW 939 (RAJ)

Narain Das Mukhija v. Seven Arts Pictures

2015-04-27

BELA M.TRIVEDI

body2015
JUDGMENT : 1. The applicant has filed the present application, under Section 11 of the Arbitration and Conciliation Act (hereinafter referred to as ‘the said Act’) seeking appointment of an independent arbitrator to adjudicate upon the disputes having arisen between the parties. 2. The short facts necessary for deciding the present application are that the applicant is a film financer and the respondent is carrying on the business of production of cinematographic films. The respondent having approached the applicant to finance for the production of the film ‘Chupa Rustam’, the applicant had agreed to finance a sum of Rs.1,06,75,000/- to the respondent. It appears that thereafter the production of the film was stopped for want of funds, and the agreement dated 8/4/1998 was entered into between the parties, known as “World Right Agreement”. Copy of the said agreement is produced on record at Annexure-3. It appears that thereafter again some differences and disputes arose between the parties, and another agreement with reference to the said “World Right Agreement” was entered into between the parties on 21/7/2001 (Annexure-4) in respect of the said film. In the said agreement dated 21/7/2001, it was agreed that if any disputes or differences arose between the parties in respect of the said film or otherwise howsoever, the same shall be referred to the sole arbitrator Mr. C.B. Wadhwa, Advocate, whose decision/award shall be final/binding upon the parties. According to the applicant, despite the terms of settlement as mentioned in the said agreement dated 21/7/2001, the respondent continued to commit breach of the agreement, and therefore the applicant served a notice dated 19/11/203 (Annexure-7), calling upon the respondent to make the payment of outstanding amounts including the royalty of music sales. The respondent however through its Advocate sent a reply dated 29/12/2003 (Annexure-8) contending interalia that the agreement signed on 21/7/2001 had provided for execution of the deed of assignment, which was neither prepared nor executed and therefore the said agreement was neither operative nor binding. It appears that thereafter certain correspondence ensued between the parties, and ultimately the applicant through his Advocate wrote a letter dated 15/3/2004 (Annexure-12) to the named arbitrator Mr. C.B. Wadhwa requesting him to enter upon the reference, invoking the arbitration clause (viii) as envisaged in the agreement dated 21/7/2001. It appears that thereafter certain correspondence ensued between the parties, and ultimately the applicant through his Advocate wrote a letter dated 15/3/2004 (Annexure-12) to the named arbitrator Mr. C.B. Wadhwa requesting him to enter upon the reference, invoking the arbitration clause (viii) as envisaged in the agreement dated 21/7/2001. Thereafter also certain notices and replies were exchanged between the parties, and the applicant finally requested the arbitrator vide the letter dated 12/8/2008 to proceed further in the matter. 3. It further appears that the arbitrator vide the letter dated 24/9/2008 (Annexure-23) informed the applicant and the respondent about the fixing of the first date of hearing on 8/10/2008. The applicant accordingly filed the statement of claims along with the documents before the said arbitrator on 8/10/2008, however the respondent did not attend the said proceedings on that date and the arbitrator adjourned the proceedings. The respondent thereafter sent a letter dated 18/3/2009 (Annexure-24) to the arbitrator through its Advocate requesting him not to act as the arbitrator for the reasons stated therein. However, the said request was turned down by the Arbitrator Mr. Wadhwa as per the order dated 15/5/2009. The arbitrator thereafter appears to have adjourned the proceedings from time to time, and ultimately vide the letter dated 12/6/2009 informed the applicant that due to his advanced age, it was not possible for him to act as an arbitrator in the matter. The said letter is on record at Annexure-27. The said arbitrator having withdrawn from his office, the applicant has filed the present application, seeking appointment of an arbitrator under Section 11 of the said Act. 4. The respondent has resisted the present application by filing the reply raising preliminary objections contending interalia that there was no arbitration clause/agreement in the agreement dated 8/4/1998, and hence the application itself was not maintainable. It is further contended that the said agreement dated 8/4/1998 had already come to an end on account of the terms of settlement having taken place on 21/7/2001 at Mumbai, however, the said settlement provided that a stamp deed of assignment in respect of the said picture would be prepared by Mr. C.B. Wadhwa, Advocate, and the same would be signed by the parties within seven days from the date of settlement. C.B. Wadhwa, Advocate, and the same would be signed by the parties within seven days from the date of settlement. The said deed of assignment having not been prepared and signed, the said settlement dated 21/7/2001 remained a tentative arrangement, which was neither effective nor operative or binding. The respondent has also contended that the agreement dated 8/4/1998, and the settlement dated 21/7/2001 having taken place at Mumbai, the film ‘Chupa Rustam’ having been made at Mumbai, both parties and the arbitrator being at Mumbai, all the payments having been made and received at Mumbai, and Mr. C.B. Wadhwa, Advocate having declined to act as the arbitrator at Mumbai, no cause of action or part cause of action had arisen within the jurisdiction of this Court, and therefore this Court has no jurisdiction to entertain the present application. 5. The applicant has filed the rejoinder to the reply filed by the respondent, and the respondent has filed the surrejoinder to the rejoinder filed by the applicant. 6. The learned counsel Ms. Sukriti Kasliwal for the applicant taking the Court to the agreement dated 8/4/1998, and the agreement dated 21/7/2001 submitted that the subsequent agreement was executed by the parties with reference to the earlier agreement dated 8/4/1998, and the subsequent agreement did not supersede the earlier agreement. According to her, the subsequent agreement provided for the arbitration clause naming the sole arbitrator Mr. C.B. Wadhwa, Advocate, who was ultimately referred the disputes, which arose between the parties, however he having expressed his inability to act as the arbitrator, the present application has been filed. She further submitted that apart from the fact that as per condition No.22 of the agreement dated 8/4/1998, the parties had agreed that only the appropriate courts in Jaipur shall have the jurisdiction to entertain the matter in dispute between the parties, and the part of cause of action had also arisen within the jurisdiction of this Court, all payments having been made by cheques/demand draft of bank situated at Jaipur to the applicant by the respondent. Pressing into service the provisions contained in Section 42 of the said Act, she submitted that only this Court had the jurisdiction to entertain the application under Section 11. Pressing into service the provisions contained in Section 42 of the said Act, she submitted that only this Court had the jurisdiction to entertain the application under Section 11. She has relied upon the decision of the Delhi High Court in case of A.K. Jaju vs. Avni Kumar, AIR 2003 Delhi 364 to submit that in absence of specific mention in the subsequent agreement having the effect overriding the first agreement, the subsequent agreement should be treated as the continuation of the first agreement. Relying upon the decision of Mumbai High Court in case of Smt. Satya Kailashchandra Sahu & Ors. vs. Vidarbha Distillers, Nagpur & Ors, AIR 1998 Bombay 210, she submitted that if the named person in the agreement refused to act as arbitrator, the procedure under Section 11 of the Act is required to be followed. Ms. Kasliwal has also relied upon the decision of Apex Court in case of A.B.C. Laminart Pvt. Ltd. & Anr. vs. A.P. Agencies, Salem, (1989) 2 Supreme Court Cases 163 to submit that part of cause of action could be said to have arisen where money is expressly or impliedly payable under the contract and therefore, the Court at Jaipur in whose jurisdiction the part of action had arisen would have the jurisdiction to entertain the present application. 7. Per contra, the learned Senior Counsel Mr. A.K. Sharma vehemently submitted that the present application invoking clause 22 of the agreement dated 8/4/1998 for appointment of arbitrator is not maintainable, as the said agreement did not contain the arbitration clause. According to him, the said agreement had already come to an end, on the parties having made settlement on 21/2/2001, however as per the said settlement also, a stamped deed of assignment of the said film was required to be prepared by Mr. C.B. Wadhwa, Advocate, and the same was to be signed by both the parties within a period of seven days, and the same having not been done, the said terms of settlement remained a tentative arrangement only. Mr. Sharma relying upon section 20 of the CPC submitted that no cause of action or part of cause of action had arisen in the jurisdiction of this Court, and that the parties cannot confer jurisdiction even by consent to the Court which otherwise would not have the jurisdiction to entertain the suit or the application. Mr. Sharma relying upon section 20 of the CPC submitted that no cause of action or part of cause of action had arisen in the jurisdiction of this Court, and that the parties cannot confer jurisdiction even by consent to the Court which otherwise would not have the jurisdiction to entertain the suit or the application. He has relied upon the decision of Apex Court in case of Interglobe Aviation Limited vs. N. Satchidanand, (2011) 7 SCC 463 in this regard. Relying upon the decision of Apex Court in case of Swastik Gases Private Limited vs. Indian Oil Corporation Limited (2013) 9 SCC 32 he submitted that when it comes to the question of territorial jurisdiction relating to the application under Section 11, Section 20 of the CPC is relevant and the applicant having failed to make out the case under any of the clauses of Section 20 of the Code, this Court would not have the jurisdiction to entertain the present application. He has further relied upon the decision in case of Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Ind. (2012) 9 SCC 552 to submit that the term subject matter of the arbitration is different from the term subject matter of the suit and for the purpose of giving jurisdiction to the Court in respect of the arbitration, the definition of Section 2(1)(e) of the said Act has to be relied upon. Lastly, Mr. Sharma submitted that the respondent had also raised the objection before the arbitrator Mr. C.B. Wadhwa, Advocate, with regard to his authority to proceed further with the proceedings, as there was no valid arbitration agreement in force, and this Court also can not appoint any arbitrator. 8. Now, so far as the existence of the arbitration clause is concerned, it cannot be gainsaid that arbitration agreement can be in the form of an arbitration clause in the contract itself or in the form of a separate agreement. Section 2(1)(b) of the said Act defines “arbitration agreement” to be an agreement referred to in Section 7, and Section 7 states that an “arbitration agreement” is 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, whether contractual or not. It has to be in writing. It has to be in writing. It also states that the agreement is in writing if it is contained in any of the clauses i.e. clauses (a) to (c) of subsection (4) of Section 7 of the Act. Once this ingredients are satisfied, there would be a binding arbitration agreement between the parties, and the aggrieved party could invoke the jurisdiction of the concerned Court under Section 11(6) of the said Act. As held by the Apex Court in case of Shakti Bhog Foods Ltd. vs. Kola Shipping Ltd., (2009) 2 SCC 134 , the existence of an arbitration can be inferred from a document signed by the parties or exchange of e-mails, letters, telex, telegram or other means of telecommunication, which provide a record of the agreement. It is also held by the Apex Court in case of Visa International Ltd. vs. Continental Resources (USA) Ltd., (2009) 2 SCC 55 that no party can be allowed to take advantage of inartistic drafting of an arbitration clause in any agreement as long as clear intention of parties to go for arbitration in case of any future disputes is evident from the agreement and material on record including surrounding circumstances. 9. In the instant case, it is not disputed that initially the parties had entered into the agreement called “World Right Agreement” dated 8/4/1998 (Annexure-3) in respect of the film ‘Chupa Rustam’ and thereafter had further entered into an agreement dated 21/7/2001 (Annexure-4) with reference to the first agreement. It is true that the arbitration clause is contained in the subsequent agreement dated 21/7/2001 only, and that the same was not there in the first agreement dated 8/4/1998. However, it is required to be noted that in the subsequent agreement dated 21/7/2001, a clear reference is given to the first agreement i.e. “World Right Agreement” dated 8/4/1998, and that the terms of settlement were also mentioned therein, which were also signed by both the parties. Thus, the subsequent agreement being in continuation and with reference to the first agreement, both will have to be read harmoniously for the purpose of deciding the present application filed by the applicant under Section 11 of the said Act. 10. Of course, it has been sought to be submitted by the learned Senior Counsel Mr. A.K. Sharma for the respondent that as per the agreement dated 21/7/2001, Mr. 10. Of course, it has been sought to be submitted by the learned Senior Counsel Mr. A.K. Sharma for the respondent that as per the agreement dated 21/7/2001, Mr. C.B. Wadhwa, Advocate had to prepare the main terms as contained in the said agreement on the stamped deed of assignment, and said deed of assignment having not been prepared and signed by the parties, the said agreement had remained to be a tentative arrangement and inoperative, and therefore the arbitration clause contained in the said agreement also could not be relied upon. In this regard, it is pertinent to note that there is nothing in the said agreement dated 21/7/2001 to suggest that if the main terms were not put in the deed of assignment by Mr. C.B. Wadhwa, the said agreement would be treated as inoperative or non-executable. On the contrary, as per clause (viii) of the said agreement, it was agreed that if any difference or dispute arises between the parties in respect of the said film or otherwise, the same shall be referred to the sole arbitrator Mr. C.B. Wadhwa, whose decision /award shall be final and binding upon the parties. It is needless to say that in view of Section 16 of the said Act, even if the validity of the agreement containing the arbitration clause is disputed, the parties could still rely upon the arbitration clause which is a separate and independent agreement between the parties. As such, all matters including the issue as to whether the main contract was void or voidable can also be referred to the arbitration, otherwise it would be very easy for the parties to avoid arbitration, by raising objection that the contract was void or in-executable. In this regard, a very pertinent observations made by the Apex Court in case of Swiss Timing Limited vs. Commonwealth Gams 2010 Organising Committee, (2014) 6 SCC 677 are required to be reproduced hereunder- “25. As noticed above, the concept of separability of the arbitration clause/agreement from the underlying contract has been statutorily recognised by this country under Section 16 of the Arbitration Act, 1996. Having provided for resolution of disputes through arbitration, parties cannot be permitted to avoid arbitration, without satisfying the Court that it will be just and in the interest of all the partiesnot to proceed with the arbitration. Having provided for resolution of disputes through arbitration, parties cannot be permitted to avoid arbitration, without satisfying the Court that it will be just and in the interest of all the partiesnot to proceed with the arbitration. Section 5 of the Arbitration Act provides that the Court shall not intervene in the arbitration process except in accordance with the provisions contained in Part I of the Arbitration Act. This policy of least interferencein arbitration proceedings recognises the general principle that the function of courts in matters relating to arbitration is to support arbitration process. A conjoint reading of Section 5 and Section 16 would make it clear that all matters including the issue as to whether the main contract was void/voidable can be referred to arbitration. Otherwise, it would be a handy tool available to the unscrupulous parties to avoid arbitration, by raising the bogey of the underlying contractbeing void”. 11. Since the subsequent agreement dated 21/7/2001 was entered into between the parties with reference to the first agreement dated 8/4/1998 and in respect of the same film ‘Chupa Rustam’, and since the second agreement contained the arbitration clause to refer the disputes in respect of the said film or otherwise to the sole arbitrator Mr. C.B. Wadhwa, and since both the agreements have been duly signed by both the parties, there remains no shadow of doubt that there was a valid arbitration clause contained in the second agreement clearly reflecting the intention of the parties to abide by the decision of the arbitrator, and therefore the applicant was entitled to invoke the said clause for the purpose of seeking appointment of arbitrator under Section 11(6) of the said Act. 12. Further, It is not disputed that the disputes having arisen between the parties, the applicant had requested the arbitrator Mr. C.B. Wadhwa, who was named in the agreement dated 21/7/2001, to enter into the reference, invoking the said agreement clause (viii) of the said agreement, and that the said arbitrator had also called upon the respondent to attend the proceedings. It is true that the respondent had raised the objection about the maintainability of the said proceedings, and the authority of the said arbitrator to arbitrate the disputes. However, the respondent had not denied the execution of the agreement dated 21/7/2001 at any time. It is true that the respondent had raised the objection about the maintainability of the said proceedings, and the authority of the said arbitrator to arbitrate the disputes. However, the respondent had not denied the execution of the agreement dated 21/7/2001 at any time. Merely because the main terms of settlement were not put on stamped paper, it could not be said that the arbitration clause contained in the said agreement had ceased to exist or had become inoperative. In the opinion of the Court, the applicant had rightly invoked the Clause (viii) of the said agreement requesting the named arbitrator Mr. Wadhwa to enter the reference, and the applicant had rightly filed the present application for appointment of the new arbitrator, on the named arbitrator Mr. Wadhwa having expressed his inability to act as the arbitrator to arbitrate the disputes. Ms. Kasliwal for the applicant has rightly relied upon the decision of the Bombay High Court in case of Smt. Satya Kailashchandra Sahu (supra), in which it has been held interalia that when an arbitration agreement makes a provision for appointment of named persons as arbitrators and when the named persons refused to act as arbitrators, the arbitration clause is not wiped out. What is exhausted is the authority of the named persons to act as arbitrators. 13. The learned Senior Counsel Mr. A.K. Sharma has also seriously raised the objection with regard to the jurisdiction of this Court to appoint the arbitrator by submitting that the agreements in questions were executed in Mumbai, all the transactions had taken place in Mubmai, both the parties were from Mumbai, and the applicant had also referred the dispute to the named arbitrator at Mumbai, and therefore only the competent Court at Mumbai would have the jurisdiction to entertain the application under Section 11 of the said Act. The Court does not find any substance in the said submission inasmuch as, both the parties had agreed in the first agreement dated 8/4/1998 that only the appropriate Court in Jaipur shall have the jurisdiction to entertain and try any suit or matter in dispute between the parties relating to the agreement. The Court does not find any substance in the said submission inasmuch as, both the parties had agreed in the first agreement dated 8/4/1998 that only the appropriate Court in Jaipur shall have the jurisdiction to entertain and try any suit or matter in dispute between the parties relating to the agreement. It is settled proposition of law that where two Courts or more have jurisdiction under CPC to try a suit or proceeding, an agreement between parties that the dispute shall be tried in any one of such Courts is not contrary to public policy. Beneficial reference of decision in case of New Moga Transport Co. vs. United India Insurance Co., (2004) 4 SCC 677 , may be made in this regard. It is also held in the said decision that normally under Clauses (a) to (c) of Section 20, the plaintiff has a choice of forum and cannot be compelled to go to place of residence or business of the defendant, and that he can file a suit at a place where cause of action wholly or in part arises. It is also settled legal position that Section 20 of the Civil Procedure Code would be relevant for the purpose of deciding the jurisdiction relating to the application under Section 11 of the said Act. Beneficial reference of the decision in case of Swastik Gases Private Limited vs. Indian Oil Corporation Limited(supra) be made in this regard. Since it is stated by the applicant that he is permanent resident of Jaipur and all the payments were made by the cheques or demand drafts of the Bank situated at Jaipur to the applicant, part of cause of action could be said to have arisen within the jurisdiction of this Court. The decision of Apex Court in case of Interglobe Aviation Limited vs. N. Satchidanand (supra) relied upon by the learned Senior Counsel Mr. Sharma has no application to the facts of the present case. It is true that the parties cannot by agreement confer the jurisdiction on a Court which otherwise does not have the jurisdiction, however when two or more Courts have jurisdiction to try the proceedings, an agreement that the disputes shall be tried by one of such Courts, would be a valid agreement. It is true that the parties cannot by agreement confer the jurisdiction on a Court which otherwise does not have the jurisdiction, however when two or more Courts have jurisdiction to try the proceedings, an agreement that the disputes shall be tried by one of such Courts, would be a valid agreement. In the instant case, both the parties having agreed to submit to the jurisdiction of the Courts at Jaipur and even otherwise part of cause of action having arisen within the jurisdiction of this Court, the objection of the learned Senior Counsel Mr. Sharma with regard to the jurisdiction of this Court cannot be accepted. 14. In that view of the matter, the present application deserves to be allowed and is accordingly allowed. Hon’ble Mr. Justice Mahesh Bhagwati (Retd.), R/o.L-44, Sukh Shanti, Income Tax Colony, Durgapura, Jaipur is hereby appointed as the arbitrator to resolve the disputes between the parties. The cost of arbitration proceedings and the arbitration fees shall be as per the Rajasthan High Court Arbitration Manual. A copy of this order be sent to Hon’ble Mr. Justice Mahesh Bhagwati (Retd.).