CASE NO.: Arbitration Petition 25 of 2005 PETITIONER: Rodemadan India Limited RESPONDENT: International Trade Expo Centre Limited DATE OF JUDGMENT: 17/04/2006 BENCH: B.N. Srikrishna JUDGMENT:
J U D G M E N T
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.