Arb.P. 6/2010 BEFORE HON’BLE THE CHIEF JUSTICE MR. MADAN B. LOKUR The parties had entered into a Memorandum of Understanding on 27th March , 2008. In terms of the MoU, the respondent and other directors of the Umrongso Cement Limited decided to resign from the Directorship of the Company and also t o transfer their share holding as well as the shares of other existing sharehold ers of the Company to a new management represented by the petitioners. The parties also decided to enter into an understanding for handing over /taking over the entire management as well as all assets and liabilities of the Company as a going concern and, that is why, the MoU was entered into between th e parties. One of the terms of the MoU was that the respondent agreed to hand over the Company’s management to the petitioners and also to transfer all the shares of the existing share holders to the petitioners or their nominees against a lum p sum consideration of Rs.4.25 crores reduced by liabilities against the Company , known or unknown. According to the petitioners, in pursuance of the MoU they issued severa l cheques to the respondent and photocopies of those cheques are filed along wit h this petition under Section 11(6) of the Arbitration and Conciliation Act, 199 6. It appears that an amount of Rs.3.10 crores was paid to the respondent. The respondent was required by the MoU to clear certain dues of Banks/Financial Institutions, statutory liabilities etc. It appears that the respondent did not perform his part of the obligations and, therefore, the petitioners did not make further payments to the respondent. Since the terms of the MoU were not being fulfilled by the respondent, a notice was sent by the petitioners to the respondent on 16th March, 2010 to the effect that certain disputes have arisen between the parties, inasmuch as, the respondent did not perform his part of the obligations under the MoU including t he transfer of shares of the Company as one part of the obligations. In the said notice, the petitioners sought the appointment of arbitrator s to resolve the disputes between the parties. The demand for arbitration was ma de in view of Clause 20 of the MoU, which reads as follows :- 20. THAT all dispute, differences and/or claims arising out of this MoU shal l be settled by arbitration in accordance with the provisions of the Indian Arbi tration Act, 1940 or any statutory Amendment thereof. The receipt of the notice dated 16th March, 2010 is not in dispute. There was no reply to the notice dated 16th March, 2010 and since no arb itrators were appointed by the respondent, the present petition was filed under Section 11(6) of the Act for the appointment of arbitrators. The respondent has filed its reply and one of the principal contentions urged before me is that the Company is undergoing an enquiry under the provision s of the Sick Industries Companies (Special Provisions) Act, 1985 (for short the SICA) and, as such, in view of Section 22(1) thereof, the present matter ought not to proceed any further. Submissions have also been made on the merits of the case and I propose to deal with them a little later. Insofar as the contention under Section 22 of the SICA is concerned, the re is no doubt that a reference against the Company is pending under Section 16 of that Act. However, Section 22 does not prohibit the parties from resolving th eir disputes under the Arbitration and Conciliation Act, 1996. There is a prohib ition against the continuation of proceedings for the winding up of the industri al company, for execution, distress or the like against any of the properties of the industrial company or for the appointment of a receiver etc. Initiation of arbitration proceedings is not prohibited, but whether the award, if it is in fa vour of the petitioners, can be enforced or not is a moot point with which I am not concerned. Under the circumstances, I am not in agreement with learned counsel for the respondent that the present matter should not proceed any further in view of Section 22(1) of the SICA. Learned counsel for the respondent also referred to Section 22(3) of the SICA. That sub-section provides that the Board for Industrial and Financial Rec onstruction (for short the BIFR) may by order declare with respect to a sick ind ustrial company that the operation of all or any of the contracts, assurances of property, agreements, settlements, etc. to which such sick industrial company i s a party shall remain suspended or that all or any of the rights, privileges, o bligations and liabilities accruing or arising thereunder before the date of the order shall remain suspended. This sub-section enables the BIFR to pass appropr iate orders and prohibit or stay the terms of the MoU which is the subject matte r of consideration of this petition. In the event the BIFR decides to suspend th e operation of the MoU, subject matter of this petition, it may prohibit the arb itration proceedings from going ahead, but as yet we have not reached that situa tion. Under the circumstances, the preliminary submission made by learned coun sel for the respondent for suspension of the present proceeding is rejected. On merits, it is submitted by learned counsel for the respondent that th ere is no enforceable agreement between the parties and, as such, there is no qu estion of the appointment of an arbitrator. I am afraid that this argument is not open to learned counsel for the re spondent. There is no dispute that an MoU has been entered into between the part ies and that MoU contains certain terms and conditions including a clause to ref er disputes between the parties to arbitration. Admittedly, there are disputes b etween the parties and, as long as the MoU subsists, which it does today, the di sputes between the parties can be referred to arbitration. I am, therefore, not in agreement with learned counsel for the respondent that there is no MoU or any question of appointment of arbitrator. It is then contended by learned counsel for the respondent that in the d emand notice dated 16th March, 2010, the petitioners have demanded the appointme nt of three arbitrators. While this is so, it does not preclude me from appointi ng only one arbitrator in terms of Section 11(6) of the Arbitration and Concilia tion Act, 1996. The petitioners may have asked for the appointment of three arbi trators (including a Principal Arbitrator), but that does not take away the sum and substance of the notice dated 16th March, 2010, which is really for the appo intment of an arbitrator to adjudicate the disputes between the parties. Under the circumstances, I am not in a position to accept the contention of learned counsel for the respondent that the notice dated 16th March, 2010 is not a valid notice. It is finally contended by learned counsel for the respondent that the s ole purpose of the petition and indeed the notice dated 16th March, 2011 issued by the petitioners is for taking over the management of the Company. I am afraid, this is not the correct position. A reading of the notice d ated 16th March, 2011 clearly shows that the obligations under the MoU have not been fulfilled by the respondent, as alleged by the petitioner. One of the oblig ation not fulfilled, as alleged by the petitioner, is the transfer of shares of the Company. There are other disputes between the parties which have resulted in the present petition being filed for the adjudication of those disputes through arbitration. In this context, learned counsel for the petitioners has drawn my attent ion to the obligations that the respondent is required to fulfill in terms of th e MoU, that is, to negotiate with the Bank and Financial institutions, statutory authorities and the Assam State Electricity Board in respect of outstanding lia bilities of the Company so as to enable the petitioner to start production of th e industrial undertaking. In view of the above, it is not correct to say that the intention of the petitioners is only to take over the management of the Company. That may be one of the intentions, but the primary intention in this case is to have the disput es between the parties adjudicated through arbitration. Under the circumstances, I have no option but to allow this petition, wh ich I do. Hon’ble Mr. Justice Aftab Hussain Saikia, Chief Justice (Retd.), Jammu and Kashmir High Court is appointed as the Sole Arbitrator to adjudicate the di spute between the parties. Needless to say, it is open to the respondent to raise all objections be fore the learned Arbitrator as may be permissible in law. The arbitration petition stands disposed of in the above terms.