Anil Kumar vs B.S. Neelkanta & Ors

The Corporation withdrew its order cancelling lease deed and signed a supplemental lease deed dated 21st February 2004 with Varsha. The supplemental lease deed recorded the shareholding pattern of Varsha as on that date as Anil Kumar & Associates holding 74% equity shares and Mr. B.S. Neelkanta holding 26% of the equity share capital of Varsha. The said supplemental agreement was signed by the petitioner on behalf of Varsha as its director. The stand of the petitioner is that in furtherance of the said arrangement, he engaged the services of an architect in London to prepare the plans for construction of the Ritz hotel and on 14th March 2004, executed two contracts, being a management agreement and a technical services agreement with Meridien S.A. It appears that as per the understanding between AKA, Varsha and Goldstone, the shares of Varsha, which were to be acquired by AKA under agreements dated 19th January 2004 and 23rd January 2004 were actually subscribed by a 7 Company known as M/s India International Construction Private Ltd. (for short "IICL"), purportedly belonging to a group called the "Progressive Group".

On 1st October 2005, the petitioner received a letter from the Corporation seeking certain clarifications of documents attached with the letter on the change in shareholding pattern of Varsha. According to the petitioner, it was only on receipt of this letter from the Corporation that he came to know that BSN Group and Varsha were trying to create rights in the so-called "progressive group", the said group having acquired shares in Varsha. Thereafter, some correspondence ensued between the Corporation and the petitioner with which I am not directly concerned.

3.On 22nd November 2005, the petitioner filed a petition under Section 9 of the Act before the City Civil Court at Hyderabad seeking certain interim reliefs including a direction to Varsha to maintain status quo in connection with the terms and conditions of lease agreement dated 17th May 2001, as amended by supplemental lease deed dated 21st February 2004. Eventually, on 17th December 2005, the petitioner through his Advocate sent a letter to Varsha and the BSN Group calling upon them to confirm the appointment of an Arbitrator within 15 days of the said letter, in terms of the arbitration agreement. Since no reply to the said notice was received, vide his letter dated 30th January 2006, the petitioner approached the Corporation requesting 10 them to nominate an Arbitral Tribunal as per the arbitration agreement dated 19th January 2004. The respondents as also the Corporation having failed to appoint an Arbitrator, the petitioner filed a petition under Section 11(6) of the Act before Hon'ble the Chief Justice of High Court of Andhra Pradesh for appointment of an Arbitrator. Vide order dated 6th February 2007, rejecting the objections raised by the respondents, the learned Single Judge of the High Court allowed the petition and appointed a former Judge of this Court as the sole Arbitrator.

14.It is clear from the above extracted paragraph that in order to set into motion the arbitral procedure, the Chief Justice or his designate has to decide the issues, if raised, regarding: (i) territorial jurisdiction;

(ii) existence of an Arbitration Agreement between the parties and (iii) whether the claim made by the applicant was a dead one in the sense that the parties have already concluded the transaction by recording satisfaction of their mutual rights and obligations or have recorded satisfaction regarding their financial claims. Nevertheless, the Court made it clear that at that stage it may not be possible to decide whether a live claim made, is one which comes within the purview of the arbitration clause and this question should be left to be decided by the Arbitral Tribunal on taking evidence. It is, therefore, plain that 18 purely for the purpose of deciding whether the arbitral procedure is to be set into motion or not, the Chief Justice or his designate has to examine and record his satisfaction that an Arbitration Agreement exists between the parties and that in respect of the agreement a live issue, to be decided between the parties, still exists. On being so satisfied, he may allow the application and appoint an Arbitral Tribunal or a sole Arbitrator, as the case may be. However, if he finds and is convinced that the claim is a dead one or is patently barred by time or that he lacks territorial jurisdiction, he may hold so and decline the request for appointment of an Arbitrator.

15.Having examined the whole matter in the light of afore-noted principles, I am of the opinion that the petition deserves to be allowed. From the material placed on record by the parties, it appears to me that: (i) there are disputes between the parties on the issues/claim raised by the petitioner and countered by the respondents, including whether the claim still subsists or has been extinguished as alleged by the respondents, which cannot be resolved without evidence; (ii) there is an Arbitration Agreement in Clause 41 of agreement dated 19th January 2004, to which the petitioner is a party along with the respondents. The Arbitration Agreement is in clear terms and brings 19 within its ambit the disputes sought to be raised by the petitioner:

16.For the foregoing reasons, the petition is allowed and Mr. Justice M. Jagannadha Rao, a former Judge of this Court is appointed as the sole Arbitrator to adjudicate upon the claims/disputes raised by the 20 petitioner, subject to his consent and such terms as he may deem fit and proper. It goes without saying that the learned Arbitrator shall deal with the matter uninfluenced by the observations made by the High Court of Andhra Pradesh in its order dated 6th February 2007 or in this order, on the rival stands of the parties.

17.The Registry is directed to communicate this order to the learned Arbitrator to enable him to enter upon the reference and give his Award as expeditiously as practicable. The petition stands disposed of with no order as to costs.

MAY 07, 2010