pvr 1 aa161-11 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION APPLICATION NO.161 OF 2011 Y.T.Entertainment Ltd. ...Applicant vs. 1.Mrs.Nasreen Azam Khan & Anr. ...Respondents --- Mr.H.N.Thakore with Mr.Ali Rizvi i/b. Thakore Jariwala & Co., for Applicant. Mr.Alok Bagla with Ms.Sneha Bohra i/b. Bagla Dandekar & Co., for Respondents. --- CORAM: D.K.DESHMUKH, J. DATED: 11th November,2011. P.C.:- 1. Heard. This is an application filed under Section 11 of the Arbitration and Conciliation Act. According to the applicant, the arbitration clause is contained in agreement dated 26.12.2007. The arbitration clause reads as under:- “19. If any dispute arises amongst the parties hereto during pvr 2 aa161-11 the subsistence of this Agreement or thereafter in connection with the validity interpretations implementation or alleged material breach of any provision of this Agreement the parties shall endeavor to settle such disputes amicably. In case of failure by the parties to resolve the dispute in any manner set out above within 30(Thirty) days from the date when the dispute arose, the dispute shall be referred to an Arbitration of a retired Judge of the Mumbai High Court to be jointly appointed by both the parties at the cost of the Producers under the Arbitration and Conciliation Act,1996 and any statuary modification or re- enactment thereof for the time being in force and the decision shall be binding on both the parties and/or their legal heir or representatives. The place of the court of arbitration shall be Mumbai. The arbitration shall be governed by the Arbitration & Conciliation Act,1996 & shall be in the English language. The arbitrator/arbitral panel shall pvr 3 aa161-11 also decide on the costs of the arbitration proceedings.” The arbitration clause was invoked by the applicant by letter dated 27.9.2010. It is paragraph 2 of that letter which is relevant which reads as under:- “2. We on our client’s behalf have to state that though arbitration clause to the Agreement makes reference to retired High Court Judge. In view of the cost constraint, our client is desirous of having the dispute resolved by arbitration through a Counsel. Our client therefore nominate and constitute Mr.Rahul Chitnis as an Arbitrator in the matter. We request you to concur with the said appointment.” 2. The case of the petitioner is that there is an agreement entered into dated 26.12.2007 between M/s.R F C Ltd. which was previously the name of the applicant and M/s.Risk Design & Advertising Ltd. The respondent nos.1 and 2 are the Directors of that pvr 4 aa161-11 company. The applicants relied on clause 8 of the agreement which reads as under:- “8. Notwithstanding anything contained in this Agreement the Producers and their Managing Director Vishram Sawant and the Director Prashant Sawant & Mr.Nasreen A Khan shall also personally responsible and liable to pay all the moneys due to the Negative Right Holders under this Agreement including the principal amount, compensation, cost, interest, commission, charges etc. latest by the DUE DATE (unless extended by mutual consent) – TIME BEING THE ESSENCE OF THIS AGREEMENT.” According to the applicant, the respondents who are Directors of the company had made themselves personally liable by this clause. According to the applicant, as default was committed by the company, the liability of the respondents arose and therefore, the arbitration clause was invoked. The arbitration application is opposed by the respondents. According pvr 5 aa161-11 to them, they are not the parties to the arbitration agreement. 3. An application under Section 11 of the Arbitration and Conciliation Act for appointment of Arbitrator can be made by one party to the arbitration agreement against the another party to the agreement. The term “party” is defined by Section 2(h) of the Arbitration & Conciliation Act, to mean a party to an arbitration agreement. Sub-section 1 of Section 7 of the Act lays down “’arbitration agreement’ means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.” Thus, in order that an application under Section 11 of the Act can be made against a person, it must be shown that he is a party to the agreement. Perusal of the agreement dated 26.12.2007 wherein according to the petitioner arbitration clause is contained shows that it is an agreement entered into between the petitioner and a company by name M/s.Risk Design & Advertising Ltd. In that agreement there is a clause which makes the pvr 6 aa161-11 respondents alongwith one Mr.Vishram Sawant liable to the petitioner. Merely, because on behalf of M/s.Risk Design & Advertising Ltd. agreement is signed by Mr.Prashant Sawant and Mr.Nasreen A.Khan, they do not become parties to the agreement. The agreement is between two companies to which no individual is a party. Therefore, so far as the liability alleged to have been incurred by the respondents though contained in the contract dated 26.12.2007, the respondents are not parties to that agreement and therefore, not parties to the arbitration clause. The second reason, according to me, as to why an arbitrator cannot be appointed in the present application is that clause 19 of the agreement on which reliance is placed as arbitration clause contemplates that the Arbitrator shall be a retired Judge of this Court to be jointly appointed by both the parties. Thus, the agreement provides the procedure for appointment of Arbitrator viz. that the parties shall make and endure to agree on appointment of one of the retired Judges of this Court as Arbitrator. Perusal of the provisions of Section 11 of the Act shows that when the parties have agreed at a procedure for appointment of Arbitrator, pvr 7 aa161-11 failure of the parties to agree on appointment of one Arbitrator, an application is to be made to the Chief Justice under Section 11 of the Act. Thus a party gets right to make an application under Section 11 of the Act only on failure of the other party to agree to the appointment of Arbitrator as per the procedure agreed between the parties. Therefore, in view of the terms in which the arbitration clause in the present case is couched, it was for the petitioner to write to the respondents and suggests a name of one of the retired Judges of this Court, failure of the respondents to agree to the name suggested by the petitioner within a period of 30 days would give cause of action to the petitioner to apply to this Court for appointment of Arbitrator. What is further to be seen is that in terms of the provisions of sub section (8) of Section 11 of the Act when the Chief Justice or his nominee makes appointment of Arbitrator, he is under a duty to have due regard to any qualifications required of the arbitrator by the agreement of the parties. Therefore, even if this Court has to make appointment of Arbitrator, the Court will have to appoint a Retired Judge of this Court as Arbitrator. In the pvr 8 aa161-11 present case what has been done by the applicant is that by letter dated 27.9.2010 instead of suggesting name of a retired Judge of this Court, the petitioner sought modification of the arbitration clause by substituting the retired Judge of this Court by a Counsel and also suggested name of a lawyer to be an Arbitrator. This letter cannot, in my opinion, be called a letter making request to the other side to agree to the appointment of Arbitrator in accordance with the arbitration clause. This is a letter which seeks modification in the arbitration clause. Failure of the respondents to respond to such a letter, therefore, would not give cause of action to the applicant to file the present application. Taking overall view of the matter, therefore, the application has to be rejected. It is accordingly rejected. (D.K.DESHMUKH, J.) ---