2021 (6) TMI 277 - Tri - Companies Law

Stay on present proceedings - reference of parties to Arbitration in light of mandate of Section 8 of Arbitration and Conciliation Act, 1996 - original agreement is executed but frustrated later on - performance of contract came to an end - Sections 241-242 of The Companies Act, 2013 - HELD THAT - In case of, BRANCH MANAGER, MAGMA LEASING FINANCE LTD. AND ANR. VERSUS SMT. POTHURI MADHAVILATA AND ANR. 2009 (9) TMI 592 - SUPREME COURT , it is decided that if the original agreement is executed but frustrated due to repudiation/frustration/breach etc., it is performance of contract that has come to an end, but contract if still valid, arbitration clause operates for the purposes of resolution of disputes - In the amendment in the Arbitration and Conciliation Act of the year 2015, the specific word is mentioned as 'shall'. The power of referral court can be exercised even if there is previous court judgment to the contrary. The court must refer parties to arbitration unless it thinks that a valid arbitration agreement does not exist. This matter can be referred to arbitration. The parties are at loggerheads since 2006 onwards and have probably approached every judicial forum to seek reliefs. We see that during the process some parties have left for heavenly abode, some have reached super-senior/senior citizen status and those recently getting involved in this unending litigation, are young generation, who should walk the road of living peaceful life rather than wasting time, energy and money on litigations, which can be resolved amicably. The parties are referred to arbitration as prayed for in the application.

Issues Involved:
1. Application of Section 8 of the Arbitration and Conciliation Act, 1996.
2. Validity and subsistence of the Definitive Agreement (DA) dated 31.03.2006.
3. Applicability of res judicata.
4. Distinction between statutory and contractual reliefs.
5. Allegations of fraud and misrepresentation.
6. Issue of proper stamping of the arbitration agreement.
7. Jurisdiction and powers of the Arbitral Tribunal.

Issue-wise Detailed Analysis:

1. Application of Section 8 of the Arbitration and Conciliation Act, 1996:
The application was filed under Section 8 of the Arbitration and Conciliation Act, 1996, seeking to stay the present proceedings and refer the parties to arbitration. The Tribunal emphasized the legislative intent behind the 2015 amendment to the Act, which aimed to bring maximum issues under the umbrella of arbitration, thus lessening the burden of litigation, cost, and time. The Tribunal noted that the amendment uses the word "shall," indicating mandatory referral to arbitration unless a valid arbitration agreement does not exist.

2. Validity and Subsistence of the Definitive Agreement (DA) dated 31.03.2006:
The Tribunal observed that both the Memorandum of Understanding (MoU) dated 21.12.2005 and the DA dated 31.03.2006 were valid and subsisting. The DA contained an arbitration clause (Clause 29) requiring disputes to be referred to arbitration. The Tribunal noted that the DA had not been declared null and void by any court or tribunal, and the parties had acted upon the agreement, indicating its validity.

3. Applicability of Res Judicata:
The non-applicant argued that the principles of res judicata applied, citing previous orders by the National Company Law Appellate Tribunal (NCLAT) which found the reliefs sought to be statutory in nature. However, the Tribunal concluded that res judicata did not apply as the Arbitral Tribunal had not passed any interim or final award, and the issues had not been previously adjudicated.

4. Distinction between Statutory and Contractual Reliefs:
The non-applicant contended that the reliefs sought in the company petition were statutory and could not be granted by an Arbitral Tribunal. The Tribunal, however, determined that the arbitration would address the rights and duties under the MoU and DA, which were contractual in nature. The statutory reliefs in the company petition would depend on the findings of the Arbitral Tribunal.

5. Allegations of Fraud and Misrepresentation:
The non-applicant argued that the arbitration agreement was vitiated by fraud and misrepresentation. The Tribunal referred to judgments by the Supreme Court, which held that issues of fraud or misrepresentation could be decided by the Arbitral Tribunal. The Tribunal concluded that the allegations of fraud did not preclude arbitration.

6. Issue of Proper Stamping of the Arbitration Agreement:
The non-applicant raised the issue of the arbitration agreement not being properly stamped. The Tribunal referred to the Supreme Court judgment in M/s. N.N. Global Mercantile Private Limited, which clarified that non-payment of stamp duty on a commercial contract does not invalidate the arbitration agreement. Thus, the issue of stamping did not affect the arbitrability of the agreement.

7. Jurisdiction and Powers of the Arbitral Tribunal:
The Tribunal emphasized that the Arbitral Tribunal has the jurisdiction to decide on the arbitrability of disputes, including whether it has the power to arbitrate the dispute. The Tribunal noted that the arbitration clause in the DA covered all disputes arising from the agreement, and thus, the matter could be referred to arbitration.

Conclusion:
The Tribunal allowed the application, referring the parties to arbitration as prayed for. The Tribunal highlighted the importance of resolving disputes amicably and expeditiously through arbitration, in line with the legislative intent and judicial precedents. The application was disposed of in terms of the above order.

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