THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.89 of 2010 (Dated : 17-10-2011) Between: M/s. Shri Vijaya Gimpex Mining Pvt. Ltd. …Applicant A n d Sri K.Seshadri Naidu and another …Respondents THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.89 of 2010 ORDER: This arbitration application has been taken out by M/s. Shri Vijaya Gimpex Mining Private Limited under sub-sections (4) and (6) of Section 11 of the Arbitration & Conciliation Act, 1996 read with para 3(1)(c) of the Scheme for Appointment of Arbitrators to appoint an arbitrator for resolution of the disputes between the parties relatable to Feldspar Ore Raising Agreement and Agreement for Sale of Mineral Ore, dated 29th August 2006. 2. The case of the applicant, in brief, is:- 2(a) The applicant is a company incorporated and registered under the Companies Act, 1956 having its registered office at 181 Linghi Street, Chennai 600 001. The applicant company is engaged in the business of mining, processing and marketing of various minerals like Feldspar, Quartz etcetera in the State of Andhra Pradesh as well as in other parts of the country. The 1st respondent owns a mining lease over an extent of 20 acres in Sy.No.1 of Gouthapur village, Balanagar Mandal, Mahaboob Nagar District. The 2nd respondent is the power of attorney of the 1st respondent. 2(b) The applicant, and the 1st respondent represented by the 2nd respondent as power of attorney holder, entered into a Feldspar Ore Raising Agreement (hereinafter referred to as “the FOR Agreement”) on 29-8-2006. The agreement period is two years. The period is renewable on mutually agreed terms. They entered into an agreement for Sale of Mineral Ore on the even date. The period of the agreement is two years and the agreement shall stand renewed for further periods of like duration on the same terms and conditions, except the consideration which shall be determined depending upon the market prices and the remaining deposits of ore in the said mine which can be economically exploited. The applicant started drilling operation in the land covered under the FOR Agreement on 17-5-2007 to explore the available mineral deposit. People from Gouthapur village came to the drilling site and obstructed the drilling operations. The villagers even went to the extent of warning the workers engaged by the applicant company. Thereupon, the applicant company filed a report before the Station House Officer, Balanagar P.S., which formed the basis for registering a case in Crime No.106 of 2007. As per Clause 4.3.7, the leaseholder shall be responsible to address and resolve any problems caused by the local people or villagers for the performance of the agreement by the applicant company and to give his full support and cooperation in the performance of the activities contemplated in this agreement. Because of the obstruction of the villagers, the applicant could not resume the work. The respondents failed to resolve the local problems and thereby, committed breach of the terms of the FOR Agreement. The applicant paid Rs.20,00,000/- to the respondents under an agreement for sale of Mineral Ore, dated 29-8-2006. 2( c) The applicant issued legal notices dated 18-3-2010, 8-4- 2010 and 5-10-2010 demanding the respondents to refund the amount of Rs.24,98,088/-. Since the respondents failed to refund the amount, the applicant invoked arbitration clause in the FOR Agreement and the agreement for sale of Mineral Ore and issued notice dated 10-5-2010 proposing Mr.S.V.S.Chowdary, Advocate as arbitrator on its behalf and calling upon the respondents to nominate arbitrator of their choice. Since the respondents failed to nominate the arbitrator on their behalf, the applicant has filed this application seeking the prayer sated supra. 3. Notice to the respondents came to be ordered on 10-8- 2010. The respondents entered appearance and filed counter affidavit. 4. It is stated in the counter affidavit that the procedure for invoking arbitration clause and composition of the arbitral tribunal in the FOR Agreement and the Mineral ore sale agreement are distinctive and therefore, common application is not maintainable. The 2nd respondent is neither a necessary nor proper party to the arbitration application in his individual capacity. The tenure of the FOR Agreement expired in the year 2008 itself. Therefore, the claim of the applicant relatable to the FOR Agreement is barred by limitation in which case, question of referring the disputes to the arbitrator relatable to the said agreement does not arise. Even by the date of notice invoking arbitration clause in the FOR Agreement, the claim of the applicant is barred by limitation. The earlier notices dated 18-3- 2010, 8-4-2010 and 24-3-2008 do not save limitation. With regard to refund of the amount paid under the agreement of sale, the claim of the applicant is premature as the agreement of sale has not been terminated nor expired by afflux of time. 5. The applicant filed reply affidavit. It is stated in the reply affidavit that the 2nd respondent is G.P.A Holder of the 1st respondent and he participated in the negotiations and signed on the agreements as General Power of Attorney of the 1st respondent and therefore, he is a necessary party to the application. 6. Heard Sri C.Kodandaram, learned Senior Counsel appearing for the applicant and Sri V.Srinivas, learned counsel appearing for the respondents. 7. Sri C.Kodandaram, learned senior counsel submits that execution of the FOR Agreement and the agreement of sale are not in dispute and the applicant could not proceed with mining operations in the area covered under the FOR Agreement because of the intervention of the local people and as per the terms of the FOR Agreement, the respondents being the lease holders were to resolve the issue with the local people and allow the applicant to carry on the mining operations. But the 1st respondent being the leaseholder failed to take any step to resolve the issue with the local people so as to enable the applicant to carry on the mining operations in the land covered under the FOR Agreement and thereby, disputes arose between the parties to the FOR Agreement, which are required to be resolved by taking recourse to the arbitration. He would also contend that the agreement of sale is contemporaneous to the FOR Agreement and both the agreements go together. Even though composition of the arbitral tribunal in the two agreements is not one and the same, common application is maintainable since the parties to the agreement are one and the same and the disputes in one agreement are in one way or the other connected to the disputes in the other agreement. He would further contend that under Section 21 of the Arbitration & Conciliation Act, 1996, the arbitral proceeding commence on the date on which a request is received by the respondents. Since by the date of the respondents receiving the request of the applicant, the claim is well within time and therefore, the application deserves to be allowed. 8. Learned counsel appearing for the respondents submits that two agreements are different and a separate procedure has been prescribed for invocation of the arbitration clause and even the composition of the arbitral tribunal is not one and the same under the two agreements and therefore, common application is not maintainable. He would further contend that the agreement for sale of Mineral ore is neither cancelled nor expired by afflux of time in which case, reference of dispute to the arbitrator is premature. 9. The FOR Agreement and the agreement for sale of Mineral Ore contain an arbitration clause. But composition of the arbitral tribunal in both the agreements is not one and the same. As per Article 10 of FOR Agreement, the Arbitral Tribunal shall consists of three arbitrators, one appointed by the leaseholder and one appointed by the Operator and the third appointed by the two arbitrators. Whereas as per Clause (14) of the agreement for sale of Mineral Ore, any dispute or differences arising out of the sale agreement shall be reconciled by arbitration. 10. As could be seen from the notice dated 10-5-2010, the applicant nominated Mr.S.V.S.Chowdary, Advocate as arbitrator on his behalf under Article 10.1.3 of the FOR Agreement. For better understanding, I may refer paragraph (6) of the notice, which reads as hereunder:- “ My client instructed me to issue notices by invoking the Arbitration clauses in two agreements to resolve the dispute. As per the article 10.1.3 of raising agreement and as per clause 14 of the mineral ore sale agreement the dispute has to be resolved by arbitration proceedings. Therefore, as per article 10.1.3 of raising agreement my client hereby nominate his nominee arbitrator Mr.S.V.S.Chowdary Advocate, Address is: 501, Bhavani Shakti, Plot No.118, Road No.2, Rajiv Nagar, Hyderabad- 500 045, Mobile No.098660 10103 as his choice of Arbitrator. Therefore now my client called upon both of you should nominate your choice of Arbitrator and specify his name and address within 30 days from the date of receipt of this Arbitration notice. So that both arbitrators can appoint third arbitrator to try this dispute”. 11. A reading of the above referred notice indicates that the applicant is conscious of invoking the arbitration clause in the FOR Agreement and nominating Mr.S.V.S.Chowdary as Arbitrator on its behalf. With regard to the agreement for sale of Mineral Ore, neither of the party terminated the agreement and the agreement still remains in force. Therefore, the notice issued by the applicant can be treated as invoking the arbitration clause in the F.O.R Agreement but not in the agreement of sale. The applicant is at liberty to invoke arbitration clause in the agreement of sale, by separate notice, if it is so advised. 12. The material brought on record indicates that the mining activity could not be carried out because of the intervention of the local people on 17-5-2007. As per the terms of the FOR Agreement, leaseholder shall address and resolve any problem caused by the local people or the villagers for the performance of the agreement by the operator and give his full support and cooperation. It is the contention of the applicant that the respondents failed to perform their obligation in resolving the problem with the local people. Anyhow, disputes have arisen between the parties relatable to the FOR Agreement. The disputes are required to be settled by way of arbitration, vide Article 10. The disputes arose on 17-5-2007 because of the intervention of local people. The applicant invoked arbitration clause in the FOR agreement on 10-5-2010, well within the period of limitation. Therefore, the dispute raised by the applicant relatable to the FOR Agreement cannot be said to be barred by limitation. 13. Accordingly, the application is partly allowed appointing Sri Justice Vaman Rao, a retired High Court Judge as Arbitrator on behalf of the respondents for resolution of disputes relatable to Feldspar Ore Raising Agreement dated 29-8-2006. The learned arbitrator is at liberty to fix his own professional fee. No costs. _____________________ B.SESHASAYANA REDDY, J Dt.17-10-2011 *RAR