VBC 1 arp32.10-14.1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE ARBITRATION PETITION NO.32 OF 2010 Soma Textile SEZ Pvt.Ltd. ...Petitioner. Vs. Maharashtra Industrial Development Corporation. ...Respondent. .... Mrs.Kiran Bhagalia i/b.Smt.Chitra Phadake for the Petitioner. Ms.Sneha Phene with Ms.Rujuta V.Masurkar i/b. Little & Co. for the Respondent. ..... CORAM : DR.D.Y.CHANDRACHUD, J. January 14, 2011. P.C. : A Project Development and Implementation Agreement was entered into by the Petitioner with the Respondent on 6 August 2008. Clause 7.2 provides for a reference of disputes to arbitration before an arbitral tribunal consisting of three arbitrators, one each to be nominated by the parties. The Petitioner terminated the contract by a notice dated 4 July 2009. The Petitioner raised claims by letters dated 4 July 2009 and 9 July 2009. 2. The only defence which is urged at the hearing of the Arbitration Petition is that there was an accord and satisfaction. VBC 2 arp32.10-14.1 This submission is based on a letter of undertaking furnished by the Petitioner to the Respondent on 27 August 2009 which reads as follows: “Sub: Development of an Integrated Textile Special Economic Zone at Kagal – Reg. Ref: 1) Our letter No.Soma/Pune/Kagal-SEZ/11/2009 dated 04.05.2009 2) Our letter No.Soma/Pune/Kagal-SEZ/18/2009 dated 04.07.2009 3) Our letter No.Soma/Pune/Kagal-SEZ/11/2009 dated 09.07.2009 With reference to the above we hereby withdraw our claim for the interest and the associated expenses as claim in our above referred letter. Further we hereby do undertake not to claim the payment made to the consultant and also not to proceed legally in this regard. We request you to please refund the amount due to us immediately.” 3. Before dealing with the submission of the Respondent that there was an accord and satisfaction, it is necessary to refer to the judgment of the Supreme Court in National Insurance Co. Ltd. vs. Boghara Polyfab Pvt. Ltd.1 The Supreme Court has held that three categories of issues may arise: (i) Issues which the Chief Justice or his Designate is bound to decide under Section 11 of the Arbitration and Conciliation Act, 1996; (ii) Issues which he 1 AIR 2009 SC 170 VBC 3 arp32.10-14.1 can also decide, that is, issues which he may choose to decide; and (iii) Issues which should be left to the arbitral tribunal to decide. The second category of issues which the Chief Justice or his designate may choose to decide or leave to the arbitral tribunal to decide, includes whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. In the present case, the undertaking by the Petitioner dated 27 August 2009 refers to three letters, namely, 4 May 2009, 4 July 2009 and 9 July 2009. The Petitioner has withdrawn the claims (i) for interest and (ii) for the associated expenses claimed in the aforesaid letter. Moreover, the Petitioner agreed not to claim the payment made to the consultant and not to proceed legally in this regard. In the letter dated 4 July 2009, the Petitioner raised the following expenses: “(i) Refund of land premium paid Rs.27,62,62,500/- (Rupees Twenty seven crores sixty two lacs sixty two thousand and five hundred only) on 16th April 2008. (ii) Project Development Expenses paid to IDFC of Rs. 3,48,26,000/- (Rupees Three crores Forty-eight lacs twenty six thousand only) on 16th April 2008 and Service Tax thereon of Rs.43,04,493/- totaling Rs.3,91,30,493/- (Rupees three crores ninety one lacs thirty thousand four hundred and ninety three only). VBC 4 arp32.10-14.1 (iii) Interest on land premium and PDE stated above at SBI PLR plus 2% from the dates of our payment till the date of release. (iv) Release of Bank Guarantees for Rs.3,00,00,000/- (Rupees Three crores only) towards performance security favouring Maharashtra Industrial Development Corporation valid for 5 years. (v) All other associated expenses like initial tender expenses, Bank Guarantee Commission paid to Banks including margin money interest, JVC formation expenses, advances paid to consultants, expenditure during the period till final settlement, Loss of profits etc. totaling about Rs.10 crores.” Of the aforesaid claims, it is common ground that the land premium has been refunded to the Petitioner. Counsel appearing on behalf of the Petitioner submits that what the undertaking dated 27 August 2009 covers is the interest mentioned at item (iii) and all the other associated expenses referred to in item (v) above. 4. Similarly, in a letter dated 9 July 2009, the following two claims have been made: “Refund of land premium paid Rs.27,62,62,500/- (Rupees Twenty seven crores sixty two lacs sixty two thousand and five hundred only) on 16th April 2008. Refund of Project development Expenses paid to IDFC of Rs.3,91,30,493/- (Rupees three crores ninety one lacs thirty thousand four hundred and ninety three only).” VBC 5 arp32.10-14.1 According to the Petitioner, the refund of project development expenses has not been given up by the undertaking dated 27 August 2009. Counsel appearing on behalf of the Respondent has stated before the Court that the agreement between the parties does not specifically refer to IDFC as the consultant. In that view of the matter, it would, in my view, be appropriate if the question as to whether there was an accord and satisfaction by virtue of the undertaking dated 27 August 2009 is left to the arbitral tribunal to decide. This is not a case where ex-facie, on the material on record, the Court can conclude that there was an accord and satisfaction in respect of all the claims which are sought to be raised by the Petitioner. Counsel appearing on behalf of the Petitioner has specifically stated that the Petitioner would not press before the arbitral tribunal the claim on account of interest and associated expenses and would not claim any payment made to the consultant as stated in the undertaking. The only dispute which were stated now to subsist in paragraph 9 of the Petition is as regards the project development expenses which is incurred by the Petitioner under the agreement and the interest thereon. VBC 6 arp32.10-14.1 5. The Petitioner has by its notice dated 16 April 2010 nominated Mr.R.G.Kulkarni, former Secretary (Irrigation) and Chartered Engineer as its arbitrator. The Respondent having failed to nominate the arbitrator until the date of the institution of these proceedings, it would be appropriate and proper for this Court, in the exercise of the jurisdiction under Section 11 to do so. The arbitration agreement is not in dispute. Disputes have arisen between the parties and there has been an invocation of the arbitration agreement. -6. In the circumstances, the Arbitration Petition shall stand disposed of by appointing Hon’ble Shri Justice S.N.Variava, former Judge of the Supreme Court of India, as the second Arbitrator. The Learned Arbitrator would now proceed to complete the arbitral tribunal. 7. The Arbitration Petition is accordingly disposed of. 8. The Registrar (Judicial-I) shall forthwith communicate a VBC 7 arp32.10-14.1 copy of this order to the sole arbitrator together with a memorandum of address of parties. ( Dr.D.Y.Chandrachud, J.)