Case: Rodemadan India Limited Vs. International Trade Expo Centre Limited

ny has a lease of the land situated at Plot No., Sector62, Noida from the New Okhla Industrial Development Authority for a period of ninety years. The Respondent wanted to construct and develop an Exhibition Centre on the said land. There were negotiations between they and the, as a result of which an exclusive Management Agreement was arrived at on 29.10.2003. Under the said agreement, the Petitioner was granted the exclusive right to manage the said plot of land for a period of ten years from the date on which Vacant Possession was handed over to it. Certain other terms as to payments were agreed to between the parties. Two clauses, 8.0 and 8.1 of the said agreement, which are of relevance, are as under:"8.0 In the event of breach of warranties by any of the parties the other party can seek relief by way of specific performance of the contract8.1 Arbitration: Any dispute, controversy or claim arising out of or in relation to this exclusive Management Agreement shall be settled by a panel of three arbitrators (the Arbitration Panel" in accordance with the provisions of the Arbitration and Conciliation Act, 1996. ITEC and Rodemandan shall appoint one arbitrator each and such arbitrators shall, within seven days of their appointment, designate a third person to act as the chairman and the presiding arbitrator. The arbitral proceedings shall take place in Delhi and shall be conducted in the English language. Any such dispute, controversy or claim submitted for arbitration shall be considered a commercial dispute arising under the Arbitration and Conciliation Act, 1996. The award of the Arbitration Panel shall be a reasoned one, and shall be final and binding on the Parties."3. Certain disputes had arisen between the parties, as a result of which, on 16.3.2005 the Petitioner filed an application under Section 9 of the Act before the High Court of Delhi (OMP No. 98/2005) and obtained an order directing the Respondent to maintain status quo with regard to the possession and title of the said plot of land4. On 8.4.2005, the Petitioner sent a legal notice to the Respondent invoking Clause 8.1 of the said agreement. By the said notice invoking arbitration, the Petitioner appointed Dr. L.M. Singhvi, Senior Advocate, as its nominee arbitrator in terms of the Management Agreement and requested the Respondent to nominate its arbitrator in terms of the said clause within a period of thirty days from the date of receipt of the notice. It was clarified in the said notice that since the agreement provided for Indian Law as the applicable law, an Indian jurist had been appointed. It was stated that this would not be deemed or construed to be a waiver of the Petitioners right to have the third or Presiding Arbitrator from a neutral country (i.e. other than India and Cyprus), the arbitration invoking being an "International Commercial Arbitration" within the meaning of Section 2(1)(f) of the Act. On 4.5.2005, the Respondent replied to the said notice of the Petitioner, raising several contentions, inter alia taking the stand that there was no arbitration agreement in existence. Nonetheless, it appointed Justice S.C. Jain, a retired Judge of the Allahabad High Court as its nominee arbitrator "without prejudice" to their right to challenge the validity of the arbitration proceedings. By a letter dated 20.5.2005, Justice Jain accepted his appointment as an arbitrator. However, since the two arbitrators were not able to arrive at a consensus with regard to the appointment of the Presiding Arbitrator/ Chairperson of the Arbitral Tribunal, the Petitioner moved this application under Section 11(6) of the Act on 29.8.2005 for appointment of a Presiding Arbitrator/Chairperson of the Arbitral Tribunal.

Court's reasoning:
7. In my view, this contention is entirely misconceived for two reasons. In the first place, Article 145 of the Constitution itself proceeds by declaring that the provisions of the Article were "subject to the provisions of any law made by Parliament". The Act is definitely a "law made by Parliament" and it does not prescribe that a petition under Section 11(6) has to be heard by a Bench consisting of at least two Judges. Second, the power under Article 145 of the Constitution and the Rules framed thereunder, are intended to govern the practice and procedure of the Supreme Court. I am unable to persuade myself to believe that, the power exercisable by the Chief Justice under Section 11(6) of the Act is the power of the Supreme Court under the ConstitutionSince this is the power of the Chief Justice and not the power of the Supreme Court, the specification in Order VII Rule 1 of the Rules as to the minimum number of Judges, would have no application thereto. If the argument of the learned counsel is right, then even the Chief Justice cannot pass such an order unless he is sitting in a Bench with one or more companion Judge. No such intention is evidenced by Parliament in enacting Section 11(6) of the Act. Since Parliament has enacted a law under which the power is exercisable by the Chief Justice or his designate, who could be "any person or institution", I do not think that the requirement of Order VII Rule 1 of the Rules would apply to such a situation at all. The contention is, therefore, rejected9. The Respondents main opposition to this petition is on the ground that there is no arbitration agreement in existence since the Management Agreement was merely a proposal, which was subject to approval of the shareholders of the company, that a meeting was called for the shareholders of the company at which the said proposal was put forward for approval and was specifically rejected by a resolution passed by the shareholders; that the nomination of Justice Jain was without prejudice to the rights and contentions of the Respondent and that this petition was misconceived and untenable as the High Court of Delhi would have exclusive jurisdiction in the matte, as it had already been moved under Section 9 of the Act. For the said reasons, the Respondent has sought dismissal of this petition20. Under Section 300, such a Director is precluded from taking any part in the discussion of the Board of Directors nor allowed to vote with regard to a resolution touching upon such a contract. Learned counsel contended that Mr. Roger Shashoua was interested in the contract, and therefore, the Management Contract was null and void because an interested director had voted thereupon21. To say that least, the argument appears to be one of sheer desperation, in my view. It is nobodys case that Mr. Roger Shashoua is a party to the Management Agreement. The Management Agreement is between they and the. Merely because Mr. Roger Shashoua happens to be a Director of they as well as, a shareholder in the, I do not think that the provisions of Sections 299 or 300 of the Companies Act were attracted to the situation, which required approval of the Government22. The next contention raised by Mr. Ranjit Kumar is that the Petitioner is attempting to obtain specific performance when specific performance of the contract cannot be granted in arbitral proceedings. In fact, this contention has been squarely rejected by the judgment of this Court in Olympus Superstructures Pvt. Ltd. vs. Meena Vijay Khetan and others (1999) 5 SCC 651 )23. Further, it was urged that Clauses 8.0 and 8.1 of the Management Agreement are mutually exclusive and, therefore, the relief for specific performance cannot be asked for and since no consideration had been paid the contract was void and unenforceable. In my view, these are not issues to be considered in a petition under Section 11(6) of the Act, as they can all be raised during the arbitral proceedings24. In short, I am not satisfied that the arbitral agreement was vitiated on any of the grounds, averred by Mr. Ranjit Kumar. I am satisfied that there exists a valid arbitration agreement which contemplates that all disputes between the parties under that agreement be referred to arbitration25. Finally, it is contended that as recourse had been taken by the Petitioner under Section 9 of the Act to obtain interim relief by moving the Delhi High Court by their Original OMP No. 98/2005 dated 24.3.2005, by reason of Section 42 of the Act that court alone could have jurisdiction upon the arbitral tribunal. In my view, this contention has no merit as I have held earlier, neither the Chief Justice nor his designate under Section 11(6) is a "court" as contemplated under the Act. Section 2(1)(e) of the Act defines the expression "court". The bar of jurisdiction under Section 42 is only intended to apply to a "court" as defined in Section 2(1)(e). The objection, therefore, has no merit and is rejected26. The situation is one of a dispute between the Petitioner, which is a foreigncompanyand the Respondentand is therefore, an "International Commercial Arbitration" within the meaning of Section 2(1)(f) of the Act. There is a dispute between the parties where both parties are subject to an arbitration agreement. Further, the appointed arbitrators have failed to reach an agreement upon a Chairperson/ Presiding Arbitrator of the Arbitral Tribunal. Hence, I am satisfied that all the preliminary conditions specified in Section 11(6) and Patel Engineering (supra) have been met.