1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION APPLICATION NO.52 OF 2007 Lalit Timothy D souza ’ .. Applicant And Pravin Shetty ... Respondent Mr.Ashish Kamat a/w Mr.Ranjit Shetty a/w Mr.Luckyraj Inorkar i/b M/s.Hariani & Co. for the applicant Mr.Swapnil Bangur with Ms.Sonal Awasthi a/w Mr.Parikshit Desai i/b Mrs.Vinod Mistry for the respondent CORAM : S.J. VAZIFDAR, J. DATED : 14th JULY, 2010 P.C.: 1. This is an application under section 11 of the Arbitration and Conciliation Act, 1996 for the appointment of an Arbitrator. 2. A conducting agreement dated 24.10.01 was executed by the parties. It is important to note that the term of the agreement was from 01.03.2001 to 28.02.2006. The significance is that according to the applicant, the agreement had been entered into between the parties prior to execution of the written agreement. The compensation payable by the respondent was Rs.30,000/- per month. Clause 15 of 2 the conducting agreement which relates to arbitration reads as under :- 15. “ Any differences and disputes that may arise between the parties hereto in respect of the terms of this Agreement and/or in connection with the business given to the conductor for conducting and/or any other points in connection with the terms of this agreement or relating to the business, then in that case, such differences and disputes shall be referred to arbitration of sole arbitrator named herein namely Mr.Sundar G. Bhandary and that the decision of the sole Arbitrator named herein above shall be final and binding on both parties and the parties agree that they shall not challenge the same or prefer any appeal in respect thereof.” 3. (A) There is no dispute that the conducting agreement was executed by the parties and that it contains the said arbitration agreement. The applicant s case is that the parties had also entered into a further ’ agreement inter alia on the terms and conditions contained in a letter dated 30.03.2001 addressed by the applicant to the respondent. The letter refers to a conducting agreement entered into between the parties for a period of at least 5 years from 01.03.2001 to 28.02.2006. This obviously refers to the agreement which was already in place but was reduced to writing and executed on 24.10.2001. In this regard, it 3 is significant to note that the respondents had issued a cheque in the sum of Rs.10.0 lacs in March 2001 which was dishonoured on 26.04.2001 when presented and also on 02.05.2001 when it was presented again. Thereafter, a further cheque dated 07.06.2001 was issued which was also dishonoured on 08.06.2001. It was finally cleared only on 11.06.2001. This explains why the agreement was executed on 24.10.2001. (B) The agreement refers to the details of the conducting agreement including the fact that the compensation was Rs.30,000/- payable on or before the 10th day of each month. The applicant refers to various other equipment usually found in a restaurant, belonging to him lying in the premises and stated that the respondent would be allowed to use the same on payment of compensation of Rs.70,000/- per month during the period of conducting the business and in addition to “ ” “ the sum of Rs.30,000/- agreed to be paid as royalty p.m. for conducting the hotel business.” (C) According to the applicant, the respondent confirmed the letter by signing the same at the foot thereof. 4. The respondent, however, alleges that this agreement is fabricated. Suffice it to note that this letter dated 30.03.2001 does not expressly contain an arbitration clause. The applicant s case is that the terms ’ 4 and conditions of this letter form an inherent and integral part of the said conducting agreement dated 24.10.2001. 5. Disputes and differences having arisen between the parties, the applicant by its advocate s letter dated 21.12.2006 invoked the ’ arbitration clause. It was further stated that the Arbitrator named in the Arbitration clause had represented the applicant in various litigations and that therefore, it would not be feasible to refer the matter to him. The applicant, therefore suggested the name of another arbitrator and called upon the respondent to concur in his appointment. 6. It was contended that this application is premature in as much as the applicant has approached this court under section 11 without following the procedure contained in the arbitration clause. It was contended that as the Arbitrator was named in the arbitration clause, it was not open to the applicant unilaterally to suggest the name of another Arbitrator or even to make an application under section 11. 7. This contention namely, that the application is premature is not pleaded. Even otherwise, I do not find it well founded. The applicant fairly and openly himself discloses the fact that the Arbitrator named in the arbitration clause had appeared for him in several litigations. The applicant had no objection to the named Arbitrator. This fair and 5 honest gesture is sought to be turned against the applicant. On a query as to whether the respondent was willing to agree to the Arbitrator named in the arbitration clause, the answer was in the negative. This was despite the fact that the respondent stated that he had nothing against the Arbitrator named in the arbitration clause. 8. In this view of the matter, it was not necessary for the Arbitrator to make this application where an arbitration clause itself provides the name of the Arbitrator, there is no question of a party making an application under section 11 at all. The party is entitled to proceed with the arbitration in accordance with the agreement before the Arbitrator named in the arbitration clause. In the present case, even though the letter dated 21.12.2006 suggests the name of another Arbitrator, it is clear that there was no attempt on the part of the applicant to avoid referring the disputes to the named Arbitrator. It was merely a disclosure made bona fide. The invocation therefore, of the Arbitration Clause is not bad and is still valid and subsisting. It was open to the applicant to proceed with the arbitration before the Arbitrator named in the arbitration clause on the basis of this letter of invocation itself. I, however, do not intend disposing of this application on this basis alone. 9. It is contended on behalf of the respondents that the question whether the letter dated 30.03.2001 is fabricated or not, ought to be decided by 6 this court before allowing the application. The submission was based on the judgment of the Supreme Court in the case of SBP and Co. vs. Patel Engineering Ltd. and Another reported in (2005) 8 Supreme Court Cases 618. 10. The judgment of the SBP and Co. vs. Patel Engineering Ltd. and Anr. (supra) is of no assistance to the respondent. It in fact supports the applicant s case. In para 39 relied upon by Mr.Bangur, the learned ’ counsel for the respondent, the Supreme Court held as under: 39. “ 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 the request 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 a live 7 claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the arbitral tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral tribunal. (emphasis supplied) ” 11. It is important to note that the Supreme Court held that it is not possible at the stage of an application under section 11 to decide whether a live claim made, is one which comes within the purview of the arbitration clause. The existence of the arbitration clause namely Clause 15 of the conducting agreement is admitted. The question whether the claim which are made on the basis of the letter dated 30.03.2001 comes within the purview thereof, or not, must be left for the decision of the Arbitrator. All the contentions of the respondent 8 relating to the genuineness or otherwise thereof, are kept open. 12. This position is in fact further fortified by the following observations in the judgment of the Supreme Court in the case of National Insurance Company Ltd., vs. Boghara Polyfab Private Ltd reported in (2009) 1 Supreme Court Cases 267 :- 22. “ Whether the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he 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. 22.1. The issues (first category) which Chief Justice/his designate will have to decide are: (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under section 11 of the Act, is a 9 party to such an agreement. 22.2 The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the arbitral tribunal) are: (a) Whether the claim is a dead (long barred) claim or a live claim. (b) Whether the parties have concluded the contract/ transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. 22.3 The issues (third category) which the Chief Justice/his designate should leave exclusively to the arbitral tribunal are : (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration.” (emphasis supplied) It is important to note that it is held that the issue whether the claim made falls within the Arbitration Clause or not, should be left exclusively to the Arbitral Tribunal. 10 13. In any event, the scope of the present arbitration clause is wide enough probably intentionally so, to take within its ambit the disputes relating to the contents and existence of the said letter dated 30.03.2001. 14. Clause 15 does not restrict the Jurisdiction of the Arbitrator to the disputes and differences in respect of the terms of agreement dated 24.10.2001 but also in connection with the business given to the respondent and / or any other points in connection with the terms of the agreement or relating to the business. The nature of the contents of the letter dated 30.03.2001 would fall within the ambit of the arbitration clause. Whether what is stated therein is correct or not and whether the document is genuine or not, is another matter which must be left for the decision of the Arbitrator. 15. For this reason, it is not necessary for me to express any opinion as to the genuineness of the letter dated 30.03.2001. I have, therefore, not referred to Exhibits 2 and 3 of the affidavit in reply which was relied upon for the purpose of establishing that the letter dated 30.03.2001 is fabricated. 16. It was then submitted that the Arbitration Clause only covers disputes and differences which would arise after the execution of the document namely 24.10.2001 and not those which arise prior to that. 11 17. The arbitration clause is very wide. It covers inter alia any disputes and differences between the parties in respect of the terms of the agreement. Further, as noted earlier, the agreement was already in place prior to the execution of the agreement. Thus, there are aspects which must be left to the Arbitrator to decide. 18. The next defence of the applicant is that the claim was barred by limitation. Relying upon paragraph 39 of the judgment of the Supreme Court in the case of SBP and Co. vs. Patel Engineering Ltd. and Another reported in (2005) 8 Supreme Court Cases 618 cited above, it was contended that the question of limitation should also be decided by this court. 19. The words used in the judgment are (long-barred) claims . In “ ” National Insurance Company Ltd., vs. Boghara Polyfab Private Ltd reported in (2009) 1 Supreme Court Cases 267 the Supreme Court in para 22.2 held that this issue namely whether the claim is (long- “ barred) claim or a live claim may be decided by the Chief Judge / ” “ ” his designate. I was persuaded to exercise my discretion in deciding the question of limitation in the present matter. I do not consider it necessary to decide the question of limitation in this application. Suffice it to state that in the facts and circumstances of the present case, I am not inclined to decide this issue. It certainly is not a clear cut case in this regard. There is but a bare averment in the affidavit 12 in reply that the claim is barred by limitation. The tenure of the agreement was from 01.03.2001 to 28.02.2006. The arbitration was invoked on 21.12.2006. Thus, in any event, the entire claim is not barred by limitation. Whether even a part of it is barred by limitation or not, in the facts of the present case must be left to the decision of the Arbitrator. It will be open for the parties to adduce evidence which may or may not save the bar of limitation, if any. 20. The nature of the allegations of fraud in this case do not warrant a dismissal of the application. Moreover, the allegations of fraud are made essentially by the respondent against the applicant. 21. In the result, the issues which have to be decided in an application under section 11 as stipulated in para 22.1 of the judgment of the Supreme Court in the case of National Insurance Company Ltd., vs. Boghara Polyfab Private Ltd reported in (2009) 1 Supreme Court Cases 267 (supra) are satisfied. It is not even suggested that the applicant has not approached the appropriate High Court. The existence of the arbitration agreement is not denied. Whether the claim based on the letter dated 30.03.2001 falls within the arbitration clause or not, is a matter which, as stated in para 22.2 of the Judgment, the Arbitral Tribunal must decide. 13 22. In view of the fact that the respondent has not raised any objection about the Arbitrator named in the Arbitration Clause and the applicant has merely with a view to show his bona fides, agreed to refer the matter to another arbitrator, I see no reason to refer the matter to another arbitrator. 23. In the circumstances, application is made absolute as prayed. The Arbitrator named in the Arbitration Clause is appointed as the sole arbitrator. This order is stayed upto and including 30.09.2010.