D. Mars Hospitality Private Limited v. Niva Infrastructure Private Limited
2022-08-05
ARAVIND KUMAR
body2022
DigiLaw.ai
JUDGMENT : 1. The petition is filed under section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act' for short) by petitioner seeking appointment of a sole Arbitrator to adjudicate the dispute that has arisen between the parties contending inter alia that under the Memorandum of Understanding (hereinafter referred to as 'MOU' for short) dated 03.07.2010 entered into between petitioner and respondent which refers to a Collaboration-cum-Development Agreement dated 27.12.2007 entered into between respondent Company and one Backbone Enterprises Limited (for short 'BEL'), petitioner and respondent had entered into MOU dated 03.07.2010, whereunder respondent agreed to construct three star business hotel out of the land which was subject matter of Collaboration-cum-Development Agreement between the respondent - Company and BEL and dispute has arisen between parties in that regard. 2. It is contended that petitioner was informed by respondent of certain disputes having arisen between the respondent and BEL pending before the Arbitral Tribunal, which resulted in an award being passed on 28.07.2012, whereunder it is noticed that 35.55% of the land equivalent to 14,901 sq. yards is to be parted in favour of petitioner and sale deed is not executed by BEL. 3. Petitioner also claims to have got issued a notice on 18.05.2017 calling upon the respondent to execute registered sale deed in respect of land admeasuring 4786.80 sq. mtrs. which was not accepted by respondent and even after issuing legal notice dated 03.10.2017 by invoking Clause 6 of MOU, respondent had called upon the respondent to appoint an Arbitrator and on its failure, petitioner is seeking for appointment of a sole Arbitrator. 4. Respondent on being notified, has appeared and filed reply denying averments made in the petition and has admitted entering into MOU dated 03.07.2010 with petitioner. It is contended that hotel building which was agreed to be constructed by respondent for petitioner was at the cost and land component, one amongst the various cost components to be paid by petitioner during the course of implementation of MOU and as such, transfer of lands cannot be dealt with in isolation without considering other commercial aspects of MOU.
It is contended that hotel building which was agreed to be constructed by respondent for petitioner was at the cost and land component, one amongst the various cost components to be paid by petitioner during the course of implementation of MOU and as such, transfer of lands cannot be dealt with in isolation without considering other commercial aspects of MOU. Respondent has also raised the plea that petitioners have never communicated to the respondent of their intention to proceed with implementation of MOU and they have shown their readiness only for payment of land component part of the total hotel project costs if land is registered in respondent's favour but no affirmation is shown for implementing MOU in totality. Hence, they have sought for dismissal of the petition. 5. I have heard arguments of learned Senior Advocate Mr. Navin Pahwa appearing for petitioner and Mr. K.G. Sukhwani, learned Advocate appearing for respondent. Perused the case papers. 6. A Collaboration-cum-Development Agreement came to be entered into between respondent - Company and BEL on 27.12.2007 which discloses that BEL is the owner of Freehold Non-agricultural land admeasuring 35,048.16 sq. mtrs. or 41,917 sq. yards situated at City Survey No. 1868, Ward No. 9, Rajkot City at Canal Road, popularly known as Rajkot Textile Mill Land. Under the said Collaboration agreement, owners of the land namely BEL had agreed to allow respondent to develop the subject land for the purpose of commercial complex subject to various stipulations contained in the said agreement. Pursuant to the same, MOU came to be entered into between petitioner and respondent on 03.07.2010, whereunder respondent agreed to construct a three star business hotel on the land admeasuring 4,786.80 sq. mtrs. out of the total land it had agreed to develop and respondent had also agreed to transfer the built up property of three star hotel together with proportionate land in favour of petitioner for a total consideration of Rs. 63.56 crores, out of which, the price of the land was fixed at Rs. 16.10 crores. Petitioner claims to have paid a sum of Rs. 4,74,51,000/- to the respondent pursuant to said MOU. 7. The respondent is said to have informed the petitioner that certain disputes had arisen between them and the owner of the land viz. BEL which is said to have been referred to an Arbitral Tribunal.
16.10 crores. Petitioner claims to have paid a sum of Rs. 4,74,51,000/- to the respondent pursuant to said MOU. 7. The respondent is said to have informed the petitioner that certain disputes had arisen between them and the owner of the land viz. BEL which is said to have been referred to an Arbitral Tribunal. The said dispute is said to have resulted in an award being passed on 28.07.2012, under which it was recorded that both the parties therein namely BEL (owner of the land) and respondent herein having agreed to part with 35.55% of the subject land in favour of respondent which is equivalent to 14,901.50 sq. years and owner of BEL was directed by the Arbitral Tribunal to execute the sale deed in favour of respondent. 8. Undisputedly, petitioner herein was not a party to the said Arbitral proceedings and claims to have acquired knowledge of Arbitral Tribunal's award in 2016. Petitioner has also contended in the petition that respondent had informed the petitioner about sale deed having not been executed by BEL in its favour and as soon as it is executed further action pursuant to MOU could be taken. 9. In the aforesaid background, petitioner got issued a notice dated 18.05.2017 calling upon the respondent to execute a registered sale deed in respect of land admeasuring 4786.80 sq. mtrs. as agreed to under MOU in favour of petitioner. It is stated that said notice was not replied to by respondent and it is said to have been followed by issuance of another notice dated 03.10.2017 invoking Clause 6 of MOU under which the parties are said to have agreed for resolution of their disputes by arbitration. The said notice was replied to by the respondent on 30.11.2017 (Annexure - F), whereunder respondent is said to have informed the petitioner that after making certain payment, it had not paid the installments as agreed to under MOU and as such said MOU was terminated and after lapse of seven years, the notice was got issued. 10. Learned Senior Advocate Mr.
10. Learned Senior Advocate Mr. Navin Pahwa appearing for the petitioner has reiterated the grounds urged in the petition and has contended that dispute is an arbitrable dispute and both the parties have agreed under the MOU dated 03.07.2010 to refer the dispute to arbitration by appointing one Arbitrator from each side who in turn would nominate an umpire and as such dispute that has arisen between the parties requires to be resolved by constitution of an Arbitral Tribunal. 11. Per contra, learned advocate Mr. Sukhwani appearing for respondent would contend that petition as filed is not maintainable and it is presented by a person who is incompetent. It is further contended that petitioner is seeking to revive a cause of action which is time barred by invoking arbitration clause of MOU dated 03.07.2010 and hence, he prays for rejection of petition. 12. Having heard the learned advocates appearing for the parties, it is noticed that there is no dispute between the parties about execution of MOU dated 03.07.2010. Clause 6 of the said agreement provides for resolution of disputes between the parties, if any, that would arise under the said agreement - MOU to be resolved by arbitration. Arbitration agreement reads as under : - "Clause 6 - If any dispute arises for the works mentioned in the said memorandum, it shall be resolved by appointing three neutral - arbitrators by both the parties and the Hon'ble Court shall not be approached until the said outcome of such arbitrators and work shall not be stopped. The parties are bound to do the work in stipulated time limit and to pay and receive the payment as work gets completed." 13. A plain reading of the above clause or agreement would indicate that if there were any dispute arising under MOU dated 03.07.2010, both parties have agreed for resolution of such disputes through arbitration by appointing one Arbitrator from each side who in turn would appoint an umpire. Though several contentions have been raised with regard to arbitrablity of disputes, I am of the considered view that said aspect cannot be in the realm of consideration by this Court adjudicating a claim for appointment of an Arbitrator under section 11(6) of the Act. 14.
Though several contentions have been raised with regard to arbitrablity of disputes, I am of the considered view that said aspect cannot be in the realm of consideration by this Court adjudicating a claim for appointment of an Arbitrator under section 11(6) of the Act. 14. The Hon'ble Apex Court in the case of Bharat Sanchar Nigam Limited and Another versus Nortel Networds India Private Limited reported in (2021) 5 SCC 738 , has held that while exercising jurisdiction under Section 11 of the Act as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the Courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere "only" when it is "manifest" that the claims are ex facie time barred and dead or there is no subsisting dispute requiring to be adjudicated. 15. By referring to its earlier judgment the Hon'ble Apex Court in the case of Vidya Drolia and Others versus Durga Trading Corporation reported in (2021) 2 SCC 1 , has held the issue of limitation would normally a mixed question of facts and law and would lie within the domain of the Arbitral Tribunal. The said issue of limitation would go to the maintainability or admissibility of the claim, which has to be necessarily decided by the Arbitral Tribunal itself. It has also been held that : - "40. The issue of limitation, in essence, goes to the maintainability or admissibility of the claim, which is to be decided by the arbitral tribunal. For instance, a challenge that a claim is time-barred, or prohibited until some pre-condition is fulfilled, is a challenge to the admissibility of that claim, and not a challenge to the jurisdiction of the arbitrator to decide the claim itself." 16. In light of aforestated authoritative principles of law laid down by the Hon'ble Apex Court, the dispute in this proceedings gets narrowed down namely namely it requires to be examined whether petition is liable to be dismissed as it involves jurisdictional and admissibility issue as well as limitation or the issue of limitation alone or the said issue is also to be decided by the Arbitral Tribunal itself.
The answer to this question can be found in paragraph 38 and 39 of the judgment in the matter of Bharat Sanchar Nigam Limited and Another versus Nortel Networds India Private Limited (supra). Insofar as jurisdictional and admissibility issue is concerned, it has been held by Hon'ble Apex Court that issue of "jurisdiction" pertains to the power and authority of the arbitrators to hear and decide a case. However, admissibility issue relates to procedural requirements such as breach of pre-arbitration requirements, which are required to be decided by the Court referring the matter for arbitration or to an Arbitral Tribunal. It has been further held that : - "38. Limitation is normally a mixed question of fact and law, and would lie within the domain of the arbitral tribunal. There is, however, a distinction between jurisdictional and admissibility issues. An issue of 'jurisdiction' pertains to the power and authority of the arbitrators to hear and decide a case. Jurisdictional issues include objections to the competence of the arbitrator or tribunal to hear a dispute, such as lack of consent, or a dispute falling outside the scope of the arbitration agreement. Issues with respect to the existence, scope and validity of the arbitration agreement are invariably regarded as jurisdictional issues, since these issues pertain to the jurisdiction of the tribunal. 39. Admissibility issues however relate to procedural requirements, such as a breach of pre-arbitration requirements, for instance, a mandatory requirement for mediation before the commencement of arbitration, or a challenge to a claim or a part of the claim being either time-barred, or prohibited, until some precondition has been fulfilled. Admissibility relates to the nature of the claim or the circumstances connected therewith. An admissibility issue is not a challenge to the jurisdiction of the arbitrator to decide the claim." 17. In the instant case, there is no disputes with regard to parties having entered into a MOU dated 03.07.2010 and both the parties having agreed under the said agreement to resolve their disputes by resorting to alternative dispute redressal mechanism namely Arbitration. Hence, it cannot be gainsaid by the respondent that petition itself is to be dismissed on the ground that there being no arbitrable disputes or the matter is not required to be referred to arbitration. 18. In the instant case, neither any reply notice nor any reply affidavit is filed to the petition by the respondent.
Hence, it cannot be gainsaid by the respondent that petition itself is to be dismissed on the ground that there being no arbitrable disputes or the matter is not required to be referred to arbitration. 18. In the instant case, neither any reply notice nor any reply affidavit is filed to the petition by the respondent. Respondent has raised a plea that claim of the petitioner being time barred. Even otherwise according to petitioner, the respondent had informed of there being a dispute between itself and owner of land of BEL which had landed before the Arbitral Tribunal and same having got crystallized by way of an award dated 28.07.2012 of which petitioner claims had no knowledge has not been. Petitioner not being party to the said proceedings, denied by the respondent in its rejoinder. Even, if denied it would fall within the four corners of "disputed question of fact" which requires to be adjudicated by the Arbitral Tribunal and prayer for reference of the dispute to an Arbitral Tribunal cannot be denied on the sole basis of the plea now raised by the respondent and claim of petitioner cannot be nipped at the bud. To put it differently, this is an issue which requires to be resolved by the Arbitral Tribunal based on pleadings. Infact, respondent has not only denied MOU having been entered into with petitioner but has also accepted that a sum of Rs. 1 crore (petitioner claims to have paid Rs. 4.47 crore) having been received. However, respondent claims that further amounts ought to have been paid by the petitioner. The fact that after MOU dated 03.07.2010 came into existence, the dispute that had arisen between respondent herein and the owner of subject land BEL was being adjudicated by the Arbitral Tribunal which resulted in an award being passed on 28.07.2012 cannot be ignored. However, petitioner claims to have acquired knowledge of such award having been passed by the Arbitral Tribunal only in 2016. This again is an issue which is based on facts and same will have to be thrashed out in the Arbitral proceedings. 19. For the reasons afore-stated, I proceed to pass following : ORDER i) Arbitration Petition is ALLOWED.
However, petitioner claims to have acquired knowledge of such award having been passed by the Arbitral Tribunal only in 2016. This again is an issue which is based on facts and same will have to be thrashed out in the Arbitral proceedings. 19. For the reasons afore-stated, I proceed to pass following : ORDER i) Arbitration Petition is ALLOWED. ii) Shri Akil Kureshi, Former Chief Justice, High Court of Rajasthan, Residing at : Akil Villa, Swastik Society-B, Navrangpura, Ahmedabad - 380009, is hereby appointed as sole Arbitrator to resolve the dispute between the parties in accordance with the Arbitration Centre (Domestic and International), High Court of Gujarat Rules, 2021. Both parties would also be governed by said Rules. iii) Registry is directed to communicate this order to the sole arbitrator forthwith by speed post. iv) Costs made easy.