2002 (1) TMI 1248 - HC - Companies Law

Summary

Issues Involved:
1. Breach of contract obligations.
2. Appointment of an arbitrator.
3. Jurisdiction of the High Court under Section 9 of the Arbitration and Conciliation Act, 1996.
4. Interim relief under Section 9 of the Arbitration and Conciliation Act, 1996.

Detailed Analysis:

1. Breach of Contract Obligations:
The petitioners alleged that the respondents committed multiple breaches of the contract. These breaches included not properly setting up the office of the banking division (NTPL), failing to develop the manpower infrastructure, non-clarification of marketing strategy, and non-setting up of the testing lab. These breaches led to significant differences between the parties regarding the division of functional responsibilities, commitment to the product, and processes related to development, testing, customization, implementation, and after-sales service of the application software.

2. Appointment of an Arbitrator:
The agreement dated 22-2-2000 between the parties included a clause (Clause 12) for resolving disputes through discussions or an independent arbitrator. The petitioners issued a legal notice to the respondents on 8-6-2001, nominating Justice M.L. Shrimal as the arbitrator. The respondents acknowledged the existence of disputes and the necessity of arbitration but did not agree to the appointment of Justice M.L. Shrimal. Consequently, the petitioners filed an application seeking the court's intervention to appoint an arbitrator. The court appointed Sri Justice T.N.C. Rangarajan, a retired Judge, as the sole arbitrator to resolve the disputes.

3. Jurisdiction of the High Court under Section 9 of the Arbitration and Conciliation Act, 1996:
The petitioners sought interim relief under Section 9 of the Act, which was opposed by the respondents. The respondents argued that the High Court does not qualify as a 'Court' under Section 9 for granting interim relief. The court examined the definition of 'Court' as per Section 2(1)(e) of the Act, which refers to the principal Civil Court of original jurisdiction in a district and includes the High Court in exercise of its ordinary original civil jurisdiction. The court noted that the Andhra Pradesh High Court does not exercise ordinary original civil jurisdiction, and thus, it cannot be considered a 'Court' for the purposes of Section 9.

4. Interim Relief under Section 9 of the Arbitration and Conciliation Act, 1996:
The petitioners requested interim measures to restrain the respondents from terminating employees, closing or shifting the Jaipur office, and to direct the respondents to pay salaries and expenses until the arbitration proceedings are finalized. The court referenced Section 9, which allows a party to apply for interim measures before, during, or after arbitral proceedings. However, since the Andhra Pradesh High Court does not exercise ordinary original civil jurisdiction, it cannot grant such interim relief. The court rejected the interim relief application but allowed the petitioners to seek interim relief from the arbitrator.

Conclusion:
The court appointed Sri Justice T.N.C. Rangarajan as the sole arbitrator to resolve the disputes between the parties. The application for interim relief under Section 9 was rejected due to the High Court's lack of jurisdiction as defined under Section 2(1)(e) of the Act. The petitioners were directed to move the arbitrator for any interim relief. The arbitration application was accordingly disposed of.