9911796707
TMI Blog2000 (4) TMI 755X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1,70,000 shares) of C.M.M. Ltd. The shares were having face value of Rs. 10 per share. They were agreed to be acquired by the petitioners at a premium of Rs. 20 per share. The cumulative value amounted to Rs. 51 lakhs 1.70 lakhs x Rs. 30 per share). The shares were to be held by the petitioners for a period of one year from the date of subscription. It was stated that the respondent agreed and undertook to compulsorily purchase back from the petitioners the said shares after the expiry of the said period in the following manner (i) under the Ist agreement, 85,000 with an assured return at the rate of 35 per cent per annum, and (ii) under the 2nd agreement, 85,000 with an assured return as the rate of 29 per cent per annum. It was stated that the respondent agreed that upon default by the respondent, the respondent would be liable to pay penal interest at 3 per cent per annum from the date of subscription till actual date of payment. Pursuant to the above agreements, a 'subscription agreement' was later entered into on 25-9-1995 between the petitioner (the subscriber), the respondent-promoter and the C.M.M. company. 3. On 26-9-1995, Sigma Credit and Capital Services (P.) Ltd., w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpretation put by the respondent on the arbitration clause was not correct. The respondent sent a further reply on 21-6-1999. Petitioner's lawyers sent a rejoinder on 2-7-1999. Thereafter, the present petition was filed under section 11 of the Act seeking the appointment of arbitrator/arbitrators. 5. In this petition before me, the respondent filed a reply and the petitioner thereafter filed a rejoinder. The learned counsel for the petitioner Shri U.A. Rana submitted that the word 'may' used in clause 5 of the agreement was to be read, in the context, as 'shall' and that, in any event, in view of section 16 of the Act, the question of the 'existence' of the arbitration agreement was a matter to be decided by the arbitral tribunal and not by me. A point was raised by the petitioner in the rejoinder based on Ador Samia Ltd. v. Peekay Holdings Ltd. [1999] 8 SCC 572 that the action of the Chief Justice of India or his designate under section 11(6) was an admini- strative act and did not amount to the exercise of any judicial function. Nor would the Chief Justice of India or his designate have any trappings of a judicial authority, while acting under section 11. The counsel also submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel submits that the question whether clause 5 extracted above tantamounts to a dispute as to 'existence' of the arbitration agreement 4 is a question which can be decided only by the arbitral Tribunal in view of section 16 of the Act that it cannot be decided by me. That section read as follows : "Section 16: - Competence of arbitral Tribunal to rule on its jurisdiction-(1) The arbitral Tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,- (a )an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b)a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (2) A plea that the arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral Tribunal is exceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n him. 12. Thus, it is clear from section 33 of the old Act, 1940 that any question as to the 'existence' of the arbitration agreement was to be decided only by application to the Court and not by the arbitrator. This disability on the part of the arbitrator has now been removed by section 16 of the new Act. Now section 16 has conferred power on the arbitral Tribunal to decide whether there is an 'existence' an arbitration clause. 13. But, it must be noted that the language employed by section 16 of the new Act shows that the said provision is only an enabling one which,-unlike section 33 in the old Act of 1940,-now permits the arbitral tribunal to decide a question relating to the 'existence' of the arbitration clause. This section corresponds to Article 16 of the UNCITRAL Model Law and Article 21of the UNCITRAL Arbitration Rules. While article 16 of the Model Laws says that the arbitral Tribunal may rule on its own jurisdiction, article 21 of the Rules states that the 'arbitral tribunal shall have power to rule' on these questions. Such power given to the arbitral tribunal is also referred to as 'Kompetenz - kompetenz". 14. The more important question however is whether sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, also, there is no point in appointing an arbitrator and asking him to decide the question as to the existence of the arbitration clause. But, I may point out that there can be some other situations where the question as to the "existence" of an arbitration clause can be decided by the arbitrator. Take a case where the matter has gone to the arbitrator without the intervention of an application under section 11. Obviously, if the question as to the existence of the arbitration clause is raised before the arbitral Tribunal, it has power to decide the question. Again in a case where the initial existence of the arbitration clause is not in issue at the time of section 11 application but a point is raised before the arbitral Tribunal that the said clause or the contract in which it is contained has ceased to be in force, then in such a case, the arbitrator can decide whether the arbitration clause has ceased to be in force. A question may be raised before the arbitrator that the whole contract including the arbitration clause is void. Now section 16 of the New Act permits the arbitral Tribunal to treat the arbitration clause as an independent clause and section 16 says that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract. The words in sub-section (1) of section 7, "means an agreement by the parties to submit to arbitration", in my opinion, postulate an agreement which necessarily or rather mandatorily requires the appointment of an arbitrator/arbitrators. Section 7 does not cover a case where the parties agree that they "may" go to a suit or that they "may" also go to arbitration. 17. Thus, unless the document filed by the party before the Chief Justice of India or his designate is an 'arbitration agreement' as defined in section 7 as explained above, requiring a reference in a mandatory sense, no reference, in my view, can be made to the arbitral Tribunal. It is, as already stated, indeed implicit - if an objection is raised by the respondent before the Chief Justice of India or his designate that the so called arbitration clause is not an arbitration clause at all falling within section 7 - that such a question will have to be decided in the proceedings under section 11of the Act. Therefore, the contention raised by the learned counsel for the petitioner that the question - whether clause 5 of the agreement amounts to an arbitration clause - is to be decided only by the arbitral Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 together, I am of the view that it is not the intention of the parties that arbitration is to be the sole remedy. It appears that the parties agreed that they can "also" go to arbitration also in case the aggrieved party does not wish to go to a civil court by way of a suit. But in that event, obviously, fresh consent to go to arbitration is necessary. Further, in the present case,the same clause 5, so far as the Venue of arbitration is concerned, uses word 'shall'. The parties, in my view, must be deemed to have used the words 'may' and 'shall' at different places, after due deliberation. 20. A somewhat similar situation arose in B.Gopal Das v. Kota Straw Board AIR 1971 Raj. 258. In that case the clause read as follows : "That in case of any dispute arising between us, the matter may be referred to arbitrator mutually agreed upon and acceptable to you and us." It was held that fresh consent for arbitration was necessary. No doubt, the above clause was a little clearer there than in the case before me. In the above case too, the clause used the word 'may' as in the present case. The above decision is therefore directly in point. 21. Before leaving the above case decided by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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