1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION Amk ARBITRATION PETITION NO. 449 OF 2009 Mr. Deepak s/o. Shivkumar Bhary .. Petitioner Vs. Heart & Soul Entertainment Ltd. .. Respondent Mr. A. M. Saraogi for the Petitioner. Petitioner in person. WITH ARBITRATION PETITION NO. 920 OF 2010 Heart & Soul Entertainment Ltd. .. Petitioner Vs. Mr. Deepak s/o. Shivkumar Bhary & Ors. .. Respondent s Petitioner in person. Mr. A. M. Saraogi for the Respondents. CORAM : MRS. R. S. DALVI, J. Date of reserving the order : 5th July, 2010. Date of pronouncing the order : 14th July, 2010 P.C. 1. These Petitions relate to the agreement between the parties to refer their dispute to arbitration and the consequent application for interim relief pending arbitration proceeding as well as for challenging the Award in the Arbitration Petitions. 2. The parties are producer and director of a film. They entered into an agreement for making a film under their 2 respective roles on 20th February, 2006. Thereafter they entered into a further agreement called an addendum on 7th November, 2006. 3. Under the initial agreement the producer was required to pay the director, amounts as stated therein. The director declared that no person has got a claim against him which may be a ground for objection to the registration of the film with any of the trade organizations or any other persons. Even if that was so, it was required to be settled by the director to the satisfaction of the producer at the cost of the director. 4. The film was directed and produced. The producer had to make payment to the director. However the producer could not obtain any distribution agency to distribute the film in view of various pending claims of those distributors against the director. Hence the producer’s film could not be registered. 5. Under the addendum the parties inter alia agreed to refer their dispute to arbitration. The relevant arbitration clause is as follow :- (16) That in case of any dispute or difference arising out of the interpretation of this Agreement it shall be referred to the Arbitrator in compliance with the Arbitration Act, 1940. 6. Both the parties agree (and it has been observed in one of the orders passed in one of these Petitions also) that the Arbitration and Conciliation Act, 1996 (the Act) is the relevant Act governing the parties. The producer who appears in person and Mr. Saraogi who appears on behalf of the director have referred to and argued upon the provisions of the Act of 1996. 3 7. The producer sought to refer his dispute to Arbitration. He by his Advocate’s letter dated 18.09.2008 sought reference before the arbitrator Mr. Anand Pujari Advocate of this Court. He requested consent of the arbitrator to act as such. He sent a copy of such reference to the director. 8. On 03.10.2008 Mr. Saraogi on behalf of the director replied to the arbitrator and the producer’s Advocate that he objected to his appointment as a sole arbitrator and stated that the arbitration clause had consequently been waived by the parties as per an oral arrangement and documentary arrangement between them. 9. The arbitrator proceeded with the arbitration on 22.10.2008 as a preliminary hearing. The Advocate for the producer appeared. The director or his Advocate failed to appear. The producer filed his statement of claim. He was directed to serve a copy upon the director. The director was given liberty to file his written statement/reply within two weeks to the statement of claim. The parties were directed to exchange documents. The hearing of the arbitration was adjourned to 18.11.2008. The arbitrator sent a copy of the minutes of the meeting to the Advocates for both the parties on 23.10.2008. 10. Mr. Saraogi on behalf of the director again wrote his letter to the arbitrator stating that the director had not consented to his appointment. It may be mentioned that the director failed to take any other steps in arbitration. He failed to himself apply for appointment of any arbitrator under Section 11 of the Act. 11. With regard to the appointment of an arbitrator, my attention has been drawn to Section 11 (5) of the Act which runs 4 this : (5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. 12. Mr. Saraogi contends that the producer did not file an application in this Court for appointment of an arbitrator after he on behalf of director did not accept the arbitrator appointed by the producer. The producer who appears in person contends that if the director did not consent to the appointment of the arbitrator chosen by the producer he had to appoint his own arbitrator and inform the producer in that behalf and if that was not agreeable to the parties he was enjoined to file petition for appointment of arbitrator. 13. The fact remains that the director neither appointed his own arbitrator, nor accepted the arbitrator appointed by the producer. The director failed to appear before the arbitrator upon notice issued by the arbitrator passing directions at the preliminary hearing. His case of waiver of the arbitration agreement by any oral or documentary arrangement was, therefore, not made out at all. 14. Under Section 16 (1) of the Act the arbitrator was competent to rule on his own jurisdiction as also the objection with respect to the existence of validity of the arbitration 5 agreement by reference to the arbitration clause itself. Section 16(1) runs thus :- CHAPTER IV JURISDICTION OF ARBITRAL TRIBUNALS 16. Competence of arbitral tribunal to rule on its jurisdiction – (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose, - (a) an arbitration clause which forms part of a contract whall be treated as an agreement independent of the other terms of the contract; and (b) -------- 15. The arbitrator proceeded with the hearing ex-parte. He passed an Award on 13th March, 2009. He considered his own jurisdiction in view of the objections taken as to the existence of the arbitration agreement. He rejected the director’s contention that the agreement was waived by oral or documentary arrangement. He also considered a suit filed by the director in the Bombay City Civil Court and an appeal therefrom applying for the stay of the arbitration which was not granted. He considered the agreement between the parties, the addendum thereto and the other documentary evidence of third party produced by the producer which remained uncontroverted. He considered the claim of the producer which was of Rs. 35.79 crores. He only granted the return on the investment made by the producer for the film directed by the director contained in his audited balance 6 sheet for the period 31.03.2008 and granted return of that investment of Rs. 3.26 crores. He also considered the procedure followed by the producer for invoking the arbitration and the procedure not followed by the director under the Act in accepting or refusing to submit to his arbitration by appointment of another arbitrator if his appointment was not acceptable. 16. The fact remains that the director did not either appoint an arbitrator or appear before the arbitrator appointed by the producer to make out his case on merits before him. The Award under these circumstances would otherwise not be validly challengeable. 17. Before reference of the dispute to arbitration the producer applied for interim reliefs under Section 9 of the Act in Arbitration Petition No. 590 of 2008 for furnishing security for injunction against transfer and alienation of the properties of the director and for appointment of Court Receiver of those properties. The Petition was filed on 06.08.2008. 18. In another petition filed by the producer being Arbitration Petition No. 590 of 2008 for interim reliefs of furnishing security, injunction against transfer and appointment of Court Receiver both the parties agreed and appointed their respective arbitrators for adjudicating their dispute. They agreed that those arbitrators shall appoint the third arbitrator by consent. They also agreed that those arbitrators shall file their Award within 12 weeks of that date. The director agreed to withdraw suit filed in the City Civil Court and the consequently proceedings arising therefrom. This agreement came to be recorded by my brother Judge Mr. Kathawala on 13th March, 2009. 7 19. It can be seen that though the producer did appear and conduct the arbitration proceeding ex-parte, he did agree that the dispute would be referred to three arbitrators on merits. Consequently the Arbitral Award passed upon the ex-parte proceeding cannot hold good. In fact the producer himself must submit to his own agreement and get his dispute adjudicated on merits before three arbitrators. 20. It may be mentioned that there are various allegations made by the parties with regard to certain anomalies but which need not to be considered in view of the producer’s own admission recorded by the Court in his own petition on 13th March, 2009. It may also be mentioned that in view of certain allegations I called for original papers and proceeding in Arbitration Petition No. 590 of 2008 which has been disposed of and I have seen the original order dated 13th March, 2009 signed by my brother Judge Mr. Kathawala. This Court cannot go behind or beyond an order already passed. Both the parties are bound by the said order. Both the parties must abide that order. 21. Mr. Saraogi on behalf of director who is present in Court makes a statement on instructions that he shall abide by the order dated 13th March, 2009. Under these circumstances the Arbitral Award challenged in Arbitration Petition No. 449 of 2009 is set aside. Arbitration Petition No. 449 of 2009 is disposed of accordingly. 22. The producer requires the deposit of Rs. 3 crores, security to the extent of Rs. 3 crores and disclosure of assets of the director in the petition filed by him being Writ Petition No. 920 of 2010. The director has filed his own affidavit and the affidavit of 8 his wife undertaking that they shall not dispose of three properties mentioned therein. Two of these properties belong to the director. The undertaking of the director in that behalf are accepted. One property belongs to the wife and the married daughters of the director. The wife is the first holder of the property as the owner. Her undertaking is also accepted. The producer contends that that is not sufficient because the flat belongs to not only the wife of the director but also his married daughters. 23. It is seen that two other properties are secured by the undertaking of the director. There is another flat licenced to the producer which is in his possession. Under these circumstances the undertaking of the wife of the director who is the first holder of the flat is accepted as sufficient security pending the adjudication of the dispute between the parties in arbitration. The bonafides or otherwise of any sale or transfer by the married daughters, who are not parties before the Court, shall be considered if and when the occasion arises. Writ Petition No. 920 of 2010 is disposed of accordingly. ( R. S. DALVI, J.)