2008 (12) TMI 793 - SC - Companies Law

Appointment of a sole Arbitrator under Section 11(6) of the Arbitration and Conciliation Act 1996 - interpretation of Article VI in the said agreement which according to the applicant contains the Arbitration Clause - existence of valid arbitration agreement between the parties or not - existence of live claim between the parties or not. Whether there exists a valid arbitration agreement between the parties? - HELD THAT - In the present case the parties did not agree upon any particular procedure for the appointment of the arbitrator. Clause VI provides that disputes arising out of the agreement which could not be settled amicably shall be finally settled in accordance with the provisions of the Act. Whether the parties have agreed to resolve their disputes by arbitration or through conciliation? - HELD THAT - What is required to be gathered is the intention of the parties from the surrounding circumstances including the conduct of the parties and the evidence such as exchange of correspondence between the parties. The respondent in none of its letters addressed to the applicant suggested that the dispute between the parties is required to be settled through conciliation and not by arbitration. In response to the applicant s letter invoking the arbitration clause the respondent merely objected to the names inter-alia contending the suggested arbitration would not be cost effective and the demand for arbitration itself was a premature one. Is there any material available on record suggesting that the parties intended to resolve their disputes through conciliation on failure to settle the disputes amicably among themselves? - HELD THAT - The arbitration clause states that the disputes arising out of the agreement which cannot be settled amicably to be finally settled in accordance with the Arbitration and Conciliation Act 1996. Therefore the provisions of the said Act will govern the appointment of Arbitrator the reference of disputes and the entire process and procedure of arbitration from the stage of appointment of arbitration till the award is made and executed/given effect to. The provisions of the said Act would meet the requirement of checklist of the matters enumerated in the treatise. Once the parties agree for resolution of dispute in accordance with the Arbitration and Conciliation Act 1996 the said Act will take care of the entire processes and procedure. Be that as it may when the specific intention of the parties is clearly evident from the arbitration clause the same cannot be treated as vague on the ground that it does not satisfy the suggested checklist of all matters to be considered while drafting an arbitration agreement. Whether invocation of Article VI providing for arbitration is premature? - HELD THAT - The exchange of letters between the parties undoubtedly discloses that attempts were made for an amicable settlement but without any result leaving no option but to invoke arbitration clause. Whether there is any live issue between the parties? - HELD THAT - It is amply clear from the facts as pleaded and as well as from the exchange of correspondence between the parties that there has not been any satisfaction recorded by the parties with respect to their claims. There has been no mutual satisfaction arrived at between the parties as regards the dispute in hand. The claims are obviously not barred by any limitation. It is thus clear that there is a live issue subsisting between the parties requiring its resolution. Thus a clear case is made out for appointment of an arbitrator to decide the disputes between the parties - application allowed.

Issues Involved:
1. Whether there exists a valid arbitration agreement between the parties?
2. Whether there exists a live claim between the parties?

Issue-Wise Detailed Analysis:

1. Whether there exists a valid arbitration agreement between the parties?

The applicant filed an application under Section 11(5) and (9) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator as per Clause VI of the agreement dated 15.2.2005. The respondent entered into a Memorandum of Understanding (MOU) with Orissa Mining Corporation Ltd. (OMC) for setting up an integrated aluminium complex and proposed a joint venture with the applicant. The MOU dated 14.2.2005 and the subsequent agreement dated 15.2.2005 between the applicant and the respondent included an arbitration clause for dispute resolution.

The respondent contended that the agreement was inchoate and not enforceable as an arbitration agreement. However, the court noted that the respondent did not dispute the existence of the arbitration clause but rather the validity of the agreement itself. The court emphasized that an arbitration agreement need not be in any particular form, as long as the intention to refer disputes to arbitration is clear. The disputed clause in the agreement stated: "Any dispute arising out of this agreement and which cannot be settled amicably shall be finally settled in accordance with the Arbitration and Conciliation Act, 1996."

The court referred to precedents, including Rukmani Bai Gupta v. Collector of Jabalpur and M. Dayanand Reddy v. A.P. Industrial Infrastructure Corp. Ltd., to support the view that the intention of the parties to refer disputes to arbitration can be inferred from the agreement and surrounding circumstances. The court concluded that the arbitration clause in the agreement was valid and enforceable, as it clearly indicated the parties' intention to resolve disputes through arbitration.

2. Whether there exists a live claim between the parties?

The court examined whether there was a live issue between the parties that warranted arbitration. The respondent argued that the disputes were not identified and that the arbitration demand was premature. The court reviewed the correspondence between the parties, which revealed attempts to resolve the disputes amicably but without success. The respondent's letter dated 15.9.2006 acknowledged ongoing discussions and efforts to further the objectives of the agreement, but also highlighted the applicant's alleged failures.

The court cited Mustill and Boyd's definition of a dispute and noted that a difference of opinion regarding future performance of the contract constitutes a live issue. The court found that there was a genuine dispute between the parties, as evidenced by the exchange of letters and the respondent's allegations against the applicant. The court emphasized that the existence of a dispute was sufficient to initiate arbitration proceedings.

Conclusion:

The court held that there was a valid arbitration agreement between the parties and a live issue requiring resolution through arbitration. Consequently, the court appointed Hon'ble Shri Justice Dr. A.S. Anand, former Chief Justice of India, as the sole arbitrator to decide the disputes between the parties arising out of the agreement. The application was allowed, and the arbitrator was given the liberty to fix his fee in the matter.

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