1 IN THE HIGH COURT OF BOMBAY AT GOA APPLICATION FOR APPOINTMENT OF ARBITRATOR NO. 4 OF 2007. 1. Tulip Hotels Pvt. Ltd., a Company incorporated under the Companies Act, 1956 and having its Registered Office at Chandermukhi, Nariman Point, Mumbai – 400 021. 2. Dr. Ajit B. Kerkar, of Mumbai Indian Inhabitant, residing at Flat No.31,11 Navroji Mansion, Nathalal Parekh Marg, Mumbai .... Applicants. Versus 1. Trade Wings Ltd., a public limited company registered under the Companies Act, 1 of 1956 and having its Registered office at 6, Mascarenhas Building, M.G. Road, Panaji, Goa 40301 and Corporate Office at 18/20 K. Dubhash Marg, Fort, Mumbai – 400 023. 2. Dr. Shailendra P. Mittal, of Mumbai residing at Mittal Bhavan 62-A, Peddar Road, Mumbai 400 026. 3. Trade Wings Hotel Ltd., a company incorporated under the Companies Act 1 of 1956 and having its registered office at, Mascarenhas Building, M.G.Road, Panaji, Goa 403 001. ..... Respondents. Mr.Ashpi Chinoy, Senior Advocate with Mr.P. S. Rao, Advocate for the Applicants. 2 Mr.Haresh Jagtiani, Senior Advocate with Mr. E.O.Mendes with Mr.Hameed Kadiani with Mr.Anil D'Souza, Advocates for the respondent. Coram :- R.M.S.KHANDEPARKA,J. Date : - 19th March, 2008. ORAL ORDER : 1. Heard. By the present application, the applicants are seeking appointment of suitable arbitrator in terms of Section 11(6) of the Arbitration and Conciliation Act, 1996. 2. At the outset, the preliminary objection is sought to be raised on behalf of the respondents to the effect that in terms of arbitration clause in the agreement between the parties it was necessary for the parties firstly to try to resolve the dispute through the intervention of conciliator appointed by the parties to the dispute in terms of the provisions of the Arbitration and Conciliation Act, 1996 hereinafter referred as 'the said Act'. Only in case of failure to resolve the dispute by conciliation, the same could have been referred for arbitration. In the case in hand, according to the respondents such dispute has never been referred for conciliation. And even assuming that any dispute was referred for conciliation, it can not be said to have been referred for conciliation in terms of the provisions of the said Act. Besides there is nothing on record to show that the dispute which is said 3 to have been referred to conciliation was the same dispute which is now sought to be referred to arbitration. On the other hand, it is the contention on behalf of the applicants that the respondents themselves have filed a suit alleging that MOU has come to an end and has sought a declaration to that effect. In those circumstances, the question of going for conciliation does not arise and in any case, efforts to settle the dispute was made with the intervention of Mr. Om Navani and the same is apparent from the letter dated 4th April 2006 on behalf of the respondents to the applicants. As regards the subject matter of dispute, it is nowhere the case of the respondents that the dispute which is sought to be referred for arbitration was not the same dispute which was referred for conciliation by Mr. Om Navani and, therefore, there is nothing on record to suggest that the dispute which is sought to be referred to arbitration is beyond the scope of conciliation proceedings before Mr.Navani. 3. The arbitration clause in the agreement between the parties read thus, “All dispute and differences between the parties hereto in respect of any matters and except those relating to the fundamental matters in respect of which the parties have been given affirmative vote, stated in this Agreement shall first be tried to be resolved through the intervention of a conciliator appointed by the parties to the dispute, who shall initiate through conciliation to resolve the dispute. If, 4 however, the dispute is not resolved within one month after the matter of dispute is referred to the conciliator for conciliation, the same shall be referred for arbitration to panel of arbitrators comprising of arbitrator appointed by each party to the dispute and the arbitrator so appointed may appoint one more arbitrator as a Umpire, however, the total number of arbitrators shall be 3 numbers. The conciliation and arbitration proceeding shall be governed by the Arbitration and Conciliation Act 1996(26 of 1996). The venue of conciliation and arbitration proceeding shall be in the city of Mumbai. The award given by the Umpire shall be final and binding on all the parties to the arbitration.” 4. The plain reading of the above clause would undoubtedly disclose that the matter can be referred to the arbitration in terms of the provisions of the said Act only after failure in the conciliation proceedings. The clause specifically states that the party shall first try to resolve the dispute through intervention of a conciliator. It also states that if the dispute is not resolved by the conciliation within one month after being referred to the conciliator, the same shall be referred to the arbitration. In other words, the agreement between the parties clearly requires that the arbitration proceedings shall be preceded by the conciliation proceedings and even the subject matter of dispute which can be referred to the arbitration should be the same dispute which is referred for conciliation. The subject matter of the dispute which can be referred to arbitration cannot be different from it nor it can be enlarged 5 after failure of conciliation. The scope of arbitration would depend upon the scope of dispute which is referred to conciliation. Otherwise, there was no reason for the parties to use the expression “ the same shall be referred to arbitration.” The words ''the same'' clearly refers to the dispute which has been the subject matter of the conciliation. The expression “ first be tried ” also discloses that the party should try to resolve the dispute by way of conciliation before the matter is referred to arbitration. The clause also provides that the proceedings before the conciliator shall be in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and not otherwise. It is settled law that when the parties agree for a specific procedure and mode for settlement of their dispute by way of arbitration and also prescribes certain pre- condition to be complied with for referring the matter to arbitration, the parties are required to comply with those pre-conditions and only then refer the matter to the arbitration. The parties having agreed for settlement of their dispute by way of conciliation and then by the arbitration in terms of the said Act, the party approaching the Court for appointment of arbitrator U/s.11(6) of the said Act has to make out a case of compliance of pre-requisite in terms of the said clause. 5. It is vehemently argued on behalf of the petitioner that the parties had already referred the matter for conciliation to Mr. Om Navani and in this regard attention is sought to be drawn to the letter 6 dated 4th April, 2006. The said letter dated 4th April, 2006 was written by Mr. P.A. Chotrani and addressed to Ms Vaneja, Tulip Star Hotel Ltd., Mumbai wherein it was stated that thus : “We are in receipt of your letter today addressed to Dr. Mittal. Dr.Mittal is not in the town and would be back by the early next week. As informed by me vide my letter dated 29th March 2006 and as mentioned to you on the phone that Dr. Mittal and his father Mr. Parmeshwar Mittal has requested to Mr. Om Navani to intervene and to resolve the matter.” 6. My attention was also sought to be drawn to the letters dated 3.11.2006 and 15.11.2006 by Dr. Shailendra P. Mittal addressed to Mr. Om Navani. In the first letter, it was stated that Dr. Shailendra Mittal had received payment of Rs. 1 Crore 20 Lacs and Rs. 30 Lacs by way of two cheques from Mr. Om Navani and Mr. Anantraman at Belvedere Club and the same was accepted at the request of Mr. Om Navani without prejudice to the rights and contentions of Dr. Shailendra P. Mittal. The second letter records the reminder about the condition pertaining to the payment for acquiring assets of Trade Wing Hotels Ltd. in terms of the minutes of the meeting held on 19th October, 2005 and about the correspondence between the parties and about forwarding the calculation of payments due to Dr.Shailendra P. Mittal and the total amount of Rs. 15.47 Crores being due as per the balance sheet of March 7 2006. The said two letters thus, undoubtedly refers to acceptance or receipt of certain amount and calculation about the amount due and payable to Dr. Shailendra P. Mittal. It is, however, not understood nor anywhere it is explained as to how the dispute sought to be raised under the present application is the same as that of the subject matter of those two letters. In the absence of necessary materials in this regard, inspite of the same being relevant factors to be revealed, it cannot be said that either there is compliance of pre-requisite of the arbitration clause or that the subject matter of so called conciliation proceedings and the subject matter which is sought to be referred in arbitration is one and the same. 7. Apart from the above letters, no other material has been brought to my notice which could disclose either the nature of the dispute which was sought to be resolved with the intervention of Mr. Om Navani nor any other material which could reveal the consent of both the parties to the proceeding for settlement of dispute by conciliation by Mr. Om Navani. Merely because in the letter 4.4.2006, it was stated on behalf of the respondents that Dr. Mittal and his father Parameshwar Mittal had requested Mr. Om Navani to intervene and resolve the matter, it cannot be said that the same was with reference to the dispute which is sought to be referred under the present application for arbitration. As already seen above, the arbitration clause clearly 8 requires that the subject matter to be referred to the arbitration shall be the same as it had been referred to conciliation. Apart from the subject matter being the same, it is also necessary that the conciliation proceeding must have been conducted in terms of the said Act. When the parties have chosen a particular procedure for settlement of the dispute in conciliation proceedings, it is not permissible for one of the parties to choose any other procedure for the conciliation proceedings nor can unilaterally make amends to such procedure. It is not the case of the applicants in the said application that there has been prior compliance of the pre-requisite in relation to the conciliation proceedings in terms of the said Act in relation to the dispute which is sought to be referred to the arbitration. 8. It was vehemently argued on behalf of the applicants that it is for the respondents to raise the dispute and to point out that the dispute sought to be referred to the arbitration is beyond the scope or the subject matter of the one which was referred to the alleged conciliation proceedings. Firstly, as already observed above, there is nothing on record to show as to what was the subject matter or scope of the dispute, even assuming it was referred to conciliator to Mr. Om Navani. Secondly, that the respondents had agreed for reference of any dispute to Mr. Om Navani for conciliation. Unilateral request by the Doctor Mittal and his father to Mr. Om Navani to intervene and to resolve the 9 matter cannot amount to referring the dispute to conciliation in terms of the provisions of the said Act. Even otherwise, the contention that the burden is upon the respondents to point out that the dispute sought to be referred to arbitration is beyond of one which was referred to the alleged conciliation cannot be accepted when the arbitration agreement itself provides that the reference of the matter for conciliation is the pre- requisite for the appointment of the arbitrator for the adjudication of dispute by way of arbitration. It is essential for the applicants to plead and establish that the said pre-requisite has been duly complied with and the dispute which is sought to be referred to arbitration is the same dispute which was referred to conciliation proceedings. 9. The decision which is sought to be relied upon on behalf of the applicants rather than rendering any assistance to the applicants supports the plea raised on behalf of the defence. In para. no. 39 of the decision in S.B.P. & Company Versus Patel Engineering Ltd. and Another, reported in (2005)8 S.C.C. 618 which is sought to be relied on on behalf of the applicants, it was held that : “ 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 request 10 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 the live claim made, is one which comes within the purview of the arbitration clause.” Obviously, therefore, while considering the application U/s.11(6), it is also necessary to look into the question as to whether the claim is a dead one or even is barred-one as well as “whether the parties have concluded the transactions by recording satisfaction of their mutual rights and obligations.” The decision of the Apex Court would disclose that when the parties agree that the arbitration proceedings shall be preceded by conciliation proceedings, it would be necessary for the Court U/s.11(6) of the Arbitration and Conciliation Act, 1996 while dealing with the application thereunder to ascertain as to whether in such conciliation proceedings the parties have recorded satisfaction of their mutual rights and obligations pursuant to the efforts made by the conciliator. In case of such satisfaction having been recorded, the question entertaining the application U/s.11(6) of the said Act would not arise. 10. On behalf of the respondents my attention was drawn to 11 the decision of the Apex Court in Municipal Corporation Jabalpur and others versus Rajesh Construction Co.Ltd. Reported in (2007)5 SCC 344. In the said decision, the Apex Court referring to clause 29 of the agreement between the parties in the said case which provided that the parties have to approach the Chief Engineer for settling the dispute and on its failure the matter can be referred to arbitration, held that : “It is the duty of the Court to construe the arbitration agreement in any manner so as to uphold the same and, therefore, the Court could not have appointed the arbitrator in a manner which was inconsistent with the arbitration clause.” Therein the High Court had appointed the arbitrator ignoring the failure on the part of the parties to comply with the pre-requisite of referring the matter to the Chief Engineer, before approaching the Court for appointment of arbitrator. 11. Similar is the case in the matter of M.K. Shaha Engineers & Contractors Versus State of M.P., reported in (1999)2 SCC 594. The Apex Court therein had referring to the arbitration clause, held that: “The parties had intended to enter in the arbitration agreement for deciding all the questions and dispute arisen between them through arbitration and thereby concluding the jurisdiction of ordinary civil Courts. Such reference to arbitration, however, was required to be preceded by a decision of Superintendent Engineer and challenge to such decision within 28 days by party feeling aggrieved 12 therewith. The steps preceding coming into operation the arbitration clause though essentially are capable of being waived, the conduct in that regard should disclose such waiver.” Following the said decision, the learned Single Judge of the Kerala High Court in Nirman Sindia Versus M/s. Indal Electromelts Ltd., Coimbatore and others reported in AIR 1999 KERALA 440 and referring to the clause in the arbitration agreement between the parties before the Kerala High Court, had held that : “The parties had agreed to settle the dispute through arbitration and such reference to arbitration to be preceded by a decision of Engineer but without resorting to those essential or preceding steps for arbitration, the parties could not be allowed to invoke the arbitration clause.” 12. It is pertinent to note herein that in spite of a clear clause in the agreement that the arbitration proceedings shall be preceded by conciliation proceedings, without disclosing anything as regards the compliance of such pre-requisite, the applicants have approached this Court by the application U/s.11(6) of the said Act. It is true that there is a vague averment in the application to the effect that conciliation provisions are not attracted to the dispute and in any event conciliation, mediation by Mr.Om Navani had failed. Neither there is any specific averment to the effect that there is a proper compliance of the provisions of the said Act in relation to the conciliation proceedings prior to 13 approaching the Court for appointment of arbitrator under the said Act nor the fact which could reveal the compliance of pre-requisite for referring the matter to the arbitration has been disclosed in the application under consideration. Besides, factually also no conciliation proceedings have taken place between the parties in respect of the matter in dispute. In my considered opinion, therefore, there is no compliance of the pre-requisite for referring the matter to the arbitration in terms of clause 19.1 of the agreement between the parties. 13. The contention that the reference of the matter for conciliation at this stage, particularly in view of filing of the suit, is an empty formality, is devoid of substance. Merely because the parties have filed the suit that would not lead to a conclusion that the conciliation proceeding would be an exercise in futility. If the contention is accepted, it would virtually amount to pronouncing section 89 of the C.P.C. to be redundant. Section 89 of C.P.C. clearly provides that even after filing the suit, it is the duty of the Court to try to encourage settlement of the matter by adopting one of the procedure enumerated thereunder and such procedure includes the conciliation proceedings as well as mediation. Being so, merely because the respondents have filed the suit that itself would not lead to a conclusion that conciliation proceedings in the matter, which are required to be undertaken in view of the arbitration clause in the agreement between 14 the parties, would be of no use or would be without any effective solution. It is too pre-mature to make any comment in that regard. 14. For the reasons stated above, therefore, it is not necessary to go into the other points which are sought to be raised in the matter. It is apparent that the application U/s.11(6) of the said Act is pre-mature in the matter and, therefore, is liable to be rejected. R.M.S.KHANDEPARKAR,J. SMA