- 1 - rng IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.2824 OF 2009 in SUMMARY SUIT NO.2198 OF 2008 Cavendish Shipping Limited .. Plaintiff vs Falcon Marine Management Private Limited. Defendant .. Mr.Janak Dwarkadas,Sr.Counsel a/w Mr.Sharan Jagtiani & Mr.Girish Dave for Plaintiff Ms.Divya Gurbaxani i.b M/s Duttmenon Dunmorrsett for Defendants CORAM: R.V.MORE,J DATED: November 9, 2009 P.C. 1. Heard learned counsel for the respective parties. The Notice of Motion is taken out by the defendant for the following reliefs : a) that this hon’ble court be pleased to refer the parties to Arbitration under Section 8 of the Arbitration and Conciliation Act, 1996 and dispose of the Summary Suit in terms of such order or referral to arbitration. b) for the costs of the present Notice of Motion; and c) for such other and further reliefs as in the - 2 - nature and circumstances of the case, this Hon’ble Court may deem fit and proper. 2. The plaintiff filed above Summary suit under the provisions of Order XXXVII of the C.P.C. against the defendants for recovery of an amount of US $ 25030. The plaintiff is a private limited company registered under the laws of UK and is engaged in the business of providing finance. One Dallah Albaraka Investment Company Ltd (DAICO) is sister company of the plaintiff and both the plaintiff and the said Dallah Albaraka are 100 % subsidiaries of Dallah Albaraka (UK) Pvt.Ltd. M/s Polaris Marine Management Private Limtied is also a private limited company. This company is a joint venture between the plaintiff and Khajotia family both having 50 % share capital each. 3. In the year 1994, DAICO financed to one Constellation Shipping (Bahamas) Ltd, a shipping company owned by late Captain Khajotia for purchase of 5 marine shipping vessels. The outstanding loan was about US $ 2.50 million. 4. It was the case of the plaintiff that late Captain Khajotia approached DAICO to see whether DAICO would be interested in assisting him in improving the market conditions in the shipping industry to acquire further - 3 - vessels. DAICO accepted the proposal of late Captain Khajotia and the plaintiff was incorporated as a subsidiary company of Dallah Albaraka (UK) Ltd so as to implement its equity investment in the joint venture between the plaintiff and Polaris. To give effect to the above joint venture/proposal resulting in the incorporation of the defendant, the plaintiff and Polaris entered into share holders agreement dated 14.11.2000. By this agreement, the plaintiff and Polaris agreed to hold 50 % of the issued and paid up capital of the defendant. In pursuance of this agreement the plaintiff made equity investment of US dollars 1 million and US dollars 1,661,000 for acquisition of two vessels. 5. On 15.12.2003 the plaintiff and Polaris entered a Joint Venture Agreement which reinforced the original understanding between the parties that the prime objective of the plaintiff and the principal obligation of the late Captain Khajotia, Polaris and the defendant was to utilize the investment and financing provided by the plaintiff so as to set up and operate successful merchant shipping business and thereby generate revenues in the defendant and Polaris, which would be utilized to repay the investment (with a return of profits) and to return the loans advanced and to be advanced and the prior debts owed (also referred to as ‘old debts’) from - 4 - the late Captain Khajotia/Constellation Shipping to the plaintiff for and on behalf of DAICO. 6. It is the case of the plaintiff that in view of the ineffective operational and financial management of Khajotia family business began to incur substantial losses. Captain Khajotia demanded loans and financial assistance from the plaintiff towards day to day management and operational expenses of the vessels. Captain Khajotia for and behalf of defendant requested temporary loans of US dollars 2,50,000 from the plaintiff. The plaintiff thereafter on 15.1.2004 remitted to the account of the defendant loan amount of US dollars 1,50,000 and on 16.4.2004 further amount of US dollars 1,00,000 was remitted to the defendant’s account. The above amount was remitted to the defendant by way of interest free temporary loans. It is further case of the plaintiff that out of the loan amount mentioned above, the defendants repaid an amount of US dollars 2,24,970, keeping a balance of US dollars 25,030 as outstanding. The plaintiff’s case proceeds further that the outstanding amount of US dollars 25,030 is admitted by the defendants in various documents annexed to the plaint. In the above circumstances, above Summary Suit is filed by the plaintiff under the provisions of order XXXVII Rule 2 of the Code of Civil Procedure for recovery of the admitted amount of loan to the tune of US dollars - 5 - 25,030. 7. In this suit, the defendant took out a Notice of motion with a request to refer the parties to Arbitration under section 8 of the Arbitration and Conciliation Act, 1996. Learned counsel for the defendant relied upon the share holder’s agreement dated 14.11.2000 between the share holders of Falcon Marine Management Private Ltd; and especially clause 8.7 of the said agreement. It was submitted that since the parties specifically agreed to refer the dispute to an Arbitrator the suit is not maintainable. 8. Learned counsel for the plaintiff per contra submitted that an amount of Rs.2.50,000/- US $ was given to the defendant as a temporary loan. He also relied upon clause 8.7 of the share holder’s agreement and submitted that since the defendant is not a party to this agreement, the dispute cannot be referred to arbitration. He also relied upon the joint venture agreement dated 15.12.2003 at Exhibit C. 9. Having heard learned counsel for the respective parties, I do not find merit in the Notice of Motion for reasons stated below: Clause 8.7 of the share holder’s agreement reads as - 6 - follows : “All disputes and questions whatsoever which shall either during the subsistence of the company, or afterwards, arise between the parties touching this understanding or the construction or application thereof or any clause of thing herein contained or any account, valuation or division of assets, debts and liabilities to be made hereunder or as to any other matter in any way relating to the company business or the affairs thereof or the rights, duties or liabilities of any person under this deed, shall be referred to arbitration in accordance with and subject to the provisions of the Indian Arbitration and Conciliation Act, 1996 or any statutory modification or reenactment thereof for the time being in force. “ Parties to the said agreement are Polaris Marine Management Pvt.Ltd and Cavendish Shipping Limited i.e. the plaintiff. The defendant is not a party to the said agreement. A perusal of the above said clause reveals that the disputes and questions during the subsistence of the company or afterwards arising between the parties touching this understanding or construction or the application thereof is required to be referred to arbitration. Under section 8 of the Arbitration and Conciliation Act, 1996 only parties to the arbitration agreement can apply to the judicial authority for reference to arbitation. Under section 9 of the said Act even interim relief can be asked for only by the parties to the arbitration. Thus, if the arbitration clause incorporated - 7 - in clause 8.7 of the above agreement is considered in the light of the provisions of sections 8 and 9 of the Arbitration Act, then it is clear that the dispute which is subject matter of the present suit cannot be referred to arbitration. I also find substance in the argument of the learned counsel for the defendant that the relationship of the plaintiff and the defendant is regulated by the joint venture agreement dated 15.12.2003. Clause 11.8 of this agreement supercedes the previous agreement between the parties in relation to matters dealt with in this agreement. This joint venture agreement does not contain any arbitration clause. 10. In the above facts and circumstances, section 8 of the Arbitration and Conciliation Act cannot be invoked. Notice of motion is devoid of substance and the same is dismissed accordingly. R.V.More, J