IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC THURSDAY, THE 4TH FEBRUARY 2010 / 15TH MAGHA 1931 AR.No. 26 of 2009() --------------------------- APPLICANT ---------------- M/S.STABLE MAGNET WIRE PVT.LTD. PLOT NO.4, COCHIN SPECIAL ECONOMIC ZONE, COCHIN-682 037, REPRESENTED BY ITS GENERAL MANAGER, MR.K.JITENDRAN BY ADV. MR.JOSEPH KODIANTHARA, MR.MATHEWS K.UTHUPPACHAN, MR.TERRY V.JAMES. RESPONDENT(S): -------------------------- 1. M/S.ELMAG WIRES LIMITED, II/837,CHEMICAL INDUSTRIAL ESTATE, AROOR 688 534, REP.BY THE MANAGING DIRECTOR. 2. MR.JOSE THOMAS, G245, PANAMPILLY NAGAR, COCHIN-682 036. 3. MR.JIMMY JOSE, G245, PANAMPILLY NAGAR, COCHIN-682 036. 4. MRS.LEENA JOSE, W/O.JOSE THOMAS, G245, PANAMPILLY NAGAR, COCHIN-682 036. 5. MR.BOBBY JOSE, G245, PANAMPILLY NAGAR, COCHIN-682 036. 6. SOLVAR WIRES PVT LTD.,(FORMERLY SOUTHERN ELECTROMAG PRIVATE LIMITED) II/538, CHEMICAL INDUSTRIAL ESTATE, AROOR 688 534, REP.BY THE MANAGING DIRECTOR. R1 TO R6 BY ADV. MR.ABRAHAM MATHEW (VETTOOR). THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 04/02/2010, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: rs. ANTONY DOMINIC, J ....................... A.R.26/2009 ....................... Dated this the 4th day of February, 2010 ORDER 1. This application is made under Section 11 of the Arbitration Conciliation Act, praying for appointment of an arbitrator to resolve the dispute between the applicant and the respondents. 2. According to the applicant, as per Annexure-A1 agreement, it had purchased certain assets belonging to the 1st respondent herein. Clause 27 of the said agreement provided for arbitration of disputes in the event any such dispute arise between the parties, out of or in connection with the interpretation or implementation of the said agreement. 3. According to the applicant, disputes arose between the parties and applicant nominated Justice V.Bhaskaran Nambiar (Rtd.). Thereafter, on behalf of the respondents, by Annexure-A9 of the 6th respondent, Justice R.Rajendra Babu (Rtd.) was nominated. Accordingly the Arbitration Tribunal was constituted by the aforesaid arbitrators, who also appointed Justice P.K.Shamsuddin, (Rtd.), as the third arbitrator as provided in A.R.26/09 2 Clause 27 of the agreement. Arbitration Tribunal commenced proceedings and thereupon Annexure-A11 preliminary objection was filed by respondents 1 and 2 in the Arbitration proceedings, who are respondents 1 and 2 in this application. In paragraph 5 and 6 of the preliminary objection, it was contended that since that the nomination made by the 6th respondent cannot be assumed or construed that all respondents have nominated their arbitrator and therefore, according to them, the Arbitration Tribunal was not properly constituted and it lacked jurisdiction to proceed with the Arbitration. The matter was considered by the Arbitration Tribunal and the objection raised against the constitution of the Arbitration Tribunal was upheld. Justice R.Rajendra Babu, who was nominated by the 6th respondent, withdrew from the proceedings and with that the appointment of the third arbitrator also became invalid. Then facts are recorded in Annexure-A12 proceedings. 4. Thereafter the applicant herein issued Annexure-A13 notice stating that they have already nominated Justice V.Bhaskaran Nambiar as their arbitrator and required the respondents to A.R.26/09 3 nominate their arbitrator in terms of Clause 27 of the agreement. Annexure-14 is the reply issued by the Managing Director of the 1st respondent, who is also the 2nd respondent herein. According to the 2nd respondent, they are required to nominate their arbitrator only if the applicant validly nominates its arbitrator. It was stated that with Annexure-A12 proceedings of the Arbitration Tribunal, appointment of Justice Bhaskaran Nambiar, also got invalidated and therefore, in the absence of a fresh nomination made by the applicant, they are not obliged to nominate their arbitrator. It was on receipt of Annexure-A14, this Arbitration Request was filed. 5. According to the learned counsel appearing for the applicant, since dispute arose between the parties, they had appointed their arbitrator, and the appointment remains in force even now. It is stated that therefore, the stand taken in Annexure-14 is incorrect and that since the respondents have not appointed their arbitrator in terms of the agreed procedure of the arbitration as contained in Clause 27 of Annexure-1, this Court should appoint an arbitrator. A.R.26/09 4 6. In the counter affidavit filed by the respondents, several contentions are raised. However, when the case was argued learned counsel for the respondents confined his submissions to three points. 7. The first contention raised by the learned counsel for the respondents was that Annexure-R1(F) is the plaint in O.S.No.915/09 filed by them before the Sub Court, Ernakulam, seeking to declare Clause 15 of Annexure-1 agreement invalid. The contention is that since one of the claims made is based on Clause 15 of the agreement, so long as the Suit is pending, the arbitration cannot be proceeded with. Secondly, it was contended that as per Clause 11 read with 1.8 of Annexure-1 agreement, an expert has to be appointed in the event there is any dispute between the parties and that in the absence of an appointment of an expert, for resolving the issue relating to Clause 11 of Annexure-1 agreement, request for arbitration is misconceived. Thirdly, according to the learned counsel for the respondents, Clause 27 of the agreement itself provides for A.R.26/09 5 friendly discussions between the parties and arbitration is permissible only in the event friendly discussions fail. Counsel contends that friendly discussions were not even attempted and therefore, request for initiating arbitration proceedings is premature. 8. The fact that there is an agreement between the parties and that the agreement between the parties provide for arbitration vide Clause 27 of Annexure-A1 are not in dispute. From the submissions made by the learned counsel for the respondents, it is evident that existence of dispute between the parties is also not disputed. The question is whether in the light of the objections raised by the learned counsel for the respondents, request by the applicant is liable to be considered. 9. The first objection raised by the counsel for the respondents against the appointment of arbitrator is the pendency of O.S.915/09. A reading of the plaint shows that prayer sought for is a declaration that Clause 15 of Annexure-A1 agreement is invalid. It is seen that one of the claims raised by the applicant in A.R.26/09 6 Annexure-A6 and A8 notices as also in the claim statement, is under Clause 15 of the agreement. If the plaintiffs in the Suit wanted to prevent the applicant herein from pursuing their remedies on the basis of Clause 15 of the agreement, they ought to have made an application in that behalf before the Civil Court and should have obtained appropriate interlocutory orders. Admittedly, no such application has been made and the Civil Court also did not pass any such order. This means as at present, Clause 15 of the agreement remains effective and binding, in which event, no fault can be found on the part of the applicant in having raised the claim under Clause 15 of the agreement. It is also relevant that in Annexure-A5 judgment rendered by a Division Bench of this Court in an appeal filed by the respondents themselves, this Court has held that disputes arising under Clause 15 of the agreement, are matters to be dealt with in the arbitration proceedings. Therefore, the contention now raised relying on Clause 15 of the pendency of the Suit is misconceived and that does not prevent the applicant from seeking the appointment of an arbitrator. A.R.26/09 7 10. The other contention raised by the counsel for the respondents is that in terms of Clause 11 read with 1.8 of Annexure-1 agreement, an expert is to be appointed. It is argued by the counsel for the applicant that Clause 11 of the agreement deals with the preparation of Net Assets Statement. It is stated that Net Assets Statement has already been prepared and according to him, there is no dispute about the Net Assets Statement and the claim is that after preparation of the Net Assets Statement, when machineries were handed over, several items were missing. This submission, prima facie is, factually correct. If so, there is no ground to decline an order appointing an arbitrator. This is a factual issue which can be decided only on evidence and therefore, I leave it open to the petitioner urge this contention before the arbitrators, who shall, if raised, deal with this contention. 11. Insofar as the last contention, viz., that not even an attempt was made for friendly discussions between the parties, learned counsel for the respondents has pointed out that this very issue has been dealt with by this Court in Annexure-10 judgment in A.R.26/09 8 W.P.(C).35351/2008 where it has been held that the possibilities of friendly consultation was over and therefore, the arbitration was to commence. In the light of that finding, this contention also is to be rejected. 12. In the result, objections raised by the respondents are unsustainable and the applicant is entitled to have the arbitrator appointed. Accordingly, I appoint Justice P.Krishnamoorthy, retired Judge of this Court as the arbitrator. It will be open to the arbitrators to appoint the third arbitrator as contemplated in Clause 27 and proceed with the arbitration, and publish the award. ANTONY DOMINIC, Judge mrcs