IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE EIGHTEENTH DAY OF JUNE TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE A.GOPAL REDDY and THE HON'BLE MR JUSTICE S. ASHOK KUMAR WRIT PETITION NO : 96 of 2008 Between: 1 M/s. Naveen Additives Ltd, a company incorporated under provisions of the companies Act 1956, having its registered office at Street No.1, SC 20 Mahadevpur village, Bibinagar Mandal, Nalgonda District rep by its M.D Sri B.S.K. Prasad, S/o Late B Anjaih age 63 years, occupation M.D of petitioner company r/o plot no B6, S.F.C colony, Venkatagiri, Jubilee Hills, Hyderabad-500045 2. B.Shiva Krishna Prasad S/o Late B.Anjaih Age 63 Years occupation M.D of petitioner No.1 company r/o plot no B6, S.F.C colony, Venkatagiri, Jubilee Hills Hyderabad-500045 ..... PETITIONERS AND 1.M/s Technology Development Board, A Govt of India Undertaking the control of Department of science &Technology, Ministry of Science & Technology WINF A, ground floor, Vishwakarma Bhavan, Shahidyee Singh Marg, NEW DELHI-110016 represented by its Secretary. 2. M/S State Bank of India rep by its Chief Manager, Nacharam Branch, Nacharam Branch, Nacharam R.R.District. 3. M/S State Bank of India Stressed Assets Management Branch, 1-1-78, 1st Floor , SBI Building Near Secunderabad H.P.O, rep. by it's General Manager, Rashtrapathi Road Secunderabad 500003. 4. The Debts Recovery Tribunal, Hyderabad Branch rep. by its presiding Officer , Vth Floor, Palace Heights Building , ABID Road Hyderabad.500001. 5. Sri Ajay Sinha , S/o not known to petitioners, Member (Legal) Authority for Advance Ruling Ministry of Finance, Department of revenue, 5th Floor , N.B.M.C Building, Yeshwant place, Chanakyapuri, NEW DELHI - 110021. 6. Indian Institute of Petroleum a National Laboratory a central Govt. undertaking under the Control of Ministry of Petroleum Govt of India Mukrampura Dehradun, Uttaranchal State. 7. A.P. Industrial Development Corporation, 1st floor, Parishram Bhavan , Basheerbagh, HYDERABAD 500029. 8. Risk Capital Technologies Corporation a Govt of India - Undertaking now renamed I.F.C.I Venture Capital Funds Ltd Rep. by its Managing Director, 16th Floor, I.F.C.I Towers, 61, Nehru place, NEW DELHI 110019. 9. M/S Dimensions Consulting (PVT) Ltd rep: by its MANAGING DIRECTOR; Asset Manager of M/S Technology Development board NEW DELHI- (R-1 above) , 604, Tower B Global Business Park, Mehranli Gurgoan Rd Gurgoan. Haryana State -122102. .....RESPONDENTS Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a Writ order or direction of more particularly one in the nature of a Writ of Mandamus or any appropriate writ to declare the appointment of Respondent No.5 by Respondent No.1as sole arbitrator in Material Document No.1 as a nullity being without jurisdiction contrary to law, procedurally and substantively ultra vires and unenforceable while directing the parties viz., petitioners Respondent No.1 to Respondent No.3 and Respondent No.6 to Respondent No.8 to appoint arbitrators or direct the appointment of a sole arbitrator while granting stay of all or any proceedings by the respondents including adjudication of OA No 27//2003 on the file of the 4th Respondent / DRT against the petitioners pending Arbitration proceedings and to pass such further or other orders Counsel for the Petitioner: MR.K.RAVINDER REDDY Counsel for the Respondent No.1: MR.A.RAJASHEKAR REDDY (ASST SOLICITOR GENERAL) The Court made the following : THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLE SRI JUSTICE S. ASHOK KUMAR WP No.96/2008 ORAL ORDER: (Per Hon’ble Sri Justice A.Gopal Reddy) By means of filing this writ petition under Art. 226 of the Constitution of India, the petitioners seek a writ of Mandamus declaring the appointment of respondent No.5 as sole arbitrator by the first respondent as nullity being without jurisdiction, contrary to law, procedurally and substantively ultra vires and unenforceable; and directing the petitioners, respondents 1 to 3 and respondents 6 to 8 to appoint arbitrators by granting stay of all proceedings including adjudication of OA No.27/2003 pending before Debts Recovery Tribunal, Hyderabad Branch. The first petitioner, M/s. Naveen Additives Ltd., a Company incorporated within the meaning of the Companies Act, 1956 having its registered office at Hyderabad is engaged in the manufacture of Sodicum Sulphonate, calcium sulphonate and extreme pressure additives (hereinafter referred to as “the petitioner-company”). 2nd petitioner is the Managing Director of the petitioner-company. The petitioner-company entered into a loan agreement with the first respondent-Technology Development Board having its office at New Delhi on 24-3-1998, wherein the first respondent agreed to lend a sum not exceeding Rs.270 lakhs to the petitioner-company on the terms and conditions contained therein. According to the petitioner-company, the total project cost is Rs.840 lakhs. Out of the said amount, the equity amount of petitioner- company and others is Rs.350 lakhs; and debt of Technology Development Board is Rs.315 lakhs; State Bank of India Rs.135 lakhs; & IFCI Venture Capital Fund Ltd., is Rs.40 lakhs. R-1-Technology Development Board enhanced its loan component to Rs.315 lakhs from Rs.270-00 as agreed earlier. The petitioner-company created pari passu charge over the assets of the company as per the provisions of the Loan Agreement with State Bank of India. Out of the sanctioned term loan, State Bank of India had released only Rs.80 lakhs. As the petitioner-company failed to repay the loan amount released, State Bank of India moved DRT by filing OA No.27/2003. As the petitioner-company failed to make repayment of principal amount and interest thereon as per agreed terms as entered in the loan agreement dt.24-3-1998, the first respondent by letter dt.5-9- 2007 appointed fifth respondent, Sri Ajoy Sinha, Member (Legal), Authority for Advance Ruling, Income-Tax as the Sole Arbitrator to resolve the disputes. Questioning the same, the present writ petition has been filed. Learned counsel for the petitioner strenuously submits that the petitioner-company availed loan on creating pari passu charge with the second respondent-State Bank of India and the second respondent filed OA No.27/2003 before the Debt Recovery Tribunal, Hyderabad Branch for recovery of the amount due, wherein the petitioner-company filed an application-No.845/2005 seeking reference of the claims and counter claims of the adversary parties to arbitrator and on which no orders were passed by the Tribunal. In view of the same, appointment of arbitrator by the first respondent including proceedings initiated pursuant to the appointment letter of the first respondent dt.5-9-2007 has to be stayed till the disposal of IA by the DRT. Learned counsel for the first respondent submits that the first respondent–Board is a Government of India undertaking having its head office at Delhi and it sanctioned loan on entering into a loan agreement dt.24-3-1998 which provides arbitration clause to resolve the disputes and the Courts at Delhi alone will have jurisdiction with regard to the disputes arising out of the agreement, the present writ petition filed is not maintainable. It is not in dispute, Art. X of the Loan Agreement dt.24-3-1998 provides arbitration and Courts at Delhi will alone have exclusive jurisdiction in all matters concerning the agreement including any matter arising out of the arbitration proceedings or any award made therein. In view of the agreement between the parties that Courts at Delhi alone will have exclusive jurisdiction, this court will not have any territorial jurisdiction to entertain the writ petition in view of the law declared by the Apex Court in KUSUM INGOTS & ALLOYS LIMITED v. UNION OF INDIA[1] and ALCHEMIST LIMITED V. STATE BANK OF SIKKIM[2] Once arbitrator is appointed by exercising Article-X of the loan agreement, the petitioner-company, if aggrieved by any appointment of arbitrator, has to work out his remedies under the Arbitration Act before the Courts at Delhi alone. We do not see any merit in the contention advanced by the learned counsel for the petitioner. The writ petition fails and is accordingly dismissed. No costs. _______________ A.GOPAL REDDY, J. ________________ S. ASHOK KUMAR, J Dt. 18-6-2008 KMR [1] AIR 2004 SCW 2766 [2] AIR 2007 SCW 2023