2008 (10) TMI 629 - SC - Indian Laws

Whether there is a valid arbitration agreement in terms of Section 7 of the Arbitration and Conciliation Act, 1996? Whether the person before him with the request is a party to the arbitration agreement? Whether there was no dispute subsisting which was capable of being arbitrated upon?

Summary

Issues Involved:
1. Appointment of an arbitrator under Section 11(6) and (9) of the Arbitration and Conciliation Act, 1996.
2. Validity and existence of the Joint Venture Agreement (JVA) and the arbitration clause.
3. Scope of disputes covered under the arbitration clause.
4. Jurisdiction and powers of the arbitrator.

Detailed Analysis:

1. Appointment of an Arbitrator under Section 11(6) and (9) of the Arbitration and Conciliation Act, 1996:
The petitioner filed a petition for the appointment of an arbitrator under Section 11(6) and (9) of the Arbitration and Conciliation Act, 1996. The petitioner and respondent had entered into a JVA which contained an arbitration clause (Article 14.3) stipulating that disputes should be referred to an arbitrator appointed by mutual agreement. The petitioner invoked this clause and proposed the name of Justice J.C. Gupta, but the respondent refused, leading to the present petition.

2. Validity and Existence of the Joint Venture Agreement (JVA) and the Arbitration Clause:
The petitioner argued that the JVA was valid and contained a binding arbitration clause. The respondents contended that the JVA was terminated and thus invalid, rendering the arbitration clause non-existent. The court held that despite the termination of the JVA, the arbitration clause remained valid for resolving disputes arising out of or in relation to the JVA.

3. Scope of Disputes Covered Under the Arbitration Clause:
The petitioner sought a refund of various amounts paid under the JVA, including capital investments and working expenses. The respondents argued that some claims did not arise from the JVA but from separate agreements involving sister concerns. The court referred to the JVA, which allowed affiliates to make contributions on behalf of the parties, thus including such payments within the scope of the arbitration clause. The court distinguished this case from Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, noting that the disputes were between parties to the arbitration agreement and related to the JVA.

4. Jurisdiction and Powers of the Arbitrator:
The court emphasized that the arbitrator could adjudicate disputes related to the JVA, including financial contributions and working expenses. However, the arbitrator could not order the winding up of the company, as this power is vested in the court under the Companies Act. The court cited Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. to support this point but clarified that the arbitrator could determine the company's functionality and address dues and liabilities.

Conclusion:
The court appointed Justice V.N. Khare, retired Chief Justice of the Supreme Court, as the sole arbitrator to adjudicate the disputes arising out of the JVA. The court's observations were limited to deciding whether the disputes should be referred to arbitration and did not address the merits of the claims. The petition was disposed of accordingly.