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TMI Blog2010 (5) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... reinafter referred to as the Goldstone ) for a piece of land for development of the existing Hotel Ritz as a Heritage Grand category hotel, as notified by the Department of Tourism, Government of India. On 8th November 1999,. Goldstone entered into an agreement with respondents No. 1, 2 and 3 (hereinafter referred to as the BSN Group ) by which they agreed to execute the said project through a new company known as M/s Varsha Hill Fort Resorts Pvt. Ltd. (for short Varsha ), respondent No. 4 in this petition. As per the said agreement BSN Group agreed to acquire 74% of equity in Varsha whilst Goldstone agreed to retain 26% of equity in the said Company. On 17th May 2001, the Corporation executed a lease deed for the said site in favour of Varsha. The lease provided in extenso the rights and obligations of the parties with respect to the project. Clause 12(u) of the lease deed provided that there would be no change in the constitution of the Lessee viz. Varsha, without the prior consent of the Corporation and Clause 21 thereof -- the non-assignability clause, provided that neither of the parties to the lease deed shall directly or indirectly sell, transfer, assign or otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Britain, Mr. B.S. Neelkanta (Respondent No. 1) and Mrs. B. Renuka (Respondent No. 2). The agreement contained the following arbitration clause: 41. Any dispute, difference or controversy of whatever nature howsoever arising under, out of or in relation to this agreement between the parties and so notified in writing by either party to the other (the Dispute) in the first instance shall be attempted to be resolved amicably by them. If the parties are unable to do so, such dispute shall be referred to arbitration by a sole Arbitrator mutually agreed by the parties to the dispute. In the event the parties are unable to agree on an Arbitrator with 15 days, then the arbitrator shall be nominated by Managing Director of APTDCL on the request of any party. The arbitration shall be governed by the provisions of Arbitration and Conciliation Act, 1996 and the venue of arbitration shall be at Hyderabad, and shall be conducted in English Language. Any decision or award resulting from arbitration shall be final and binding upon the parties. The said agreement was followed up by another agreement dated 23rd January 2004 between AKA represented by Mr. Anil Kumar, Goldstone, BSN Group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingle rupee in the project, thus hampering the progress of the hotel project and that the promoter group viz. the BSN group, was forced to mobilize the requisite resources in the form of debt and equity. The petitioner was also informed that he was no longer representing Varsha as its director. A separate email dated 5th September 2005 addressed by Mr. B.S. Neelkanta (respondent No. 1), purportedly on behalf of Varsha, was sent to Le Meridien, informing them that their agreement with Varsha regarding the hotel project had been terminated. As expected, vide his advocate's letter dated 23rdSeptember 2005, the petitioner objected to the termination of his association with Varsha, as conveyed to him vide respondent No. l's letter dated 22nd August 2005 and asserted that he, through his nominee and associate IICL is a stake holder of 74% equity in Varsha and would take steps to seek registration of the said shareholding in his own name. The relevant portion of the reply is extracted below: My client has fully honored his obligations under the Agreement and has through his nominee made substantial investments into the Company. My client is the approved investor in the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner approached the Corporation requesting them to nominate an Arbitral Tribunal as per the arbitration agreement dated 19th January 2004. The respondents as also the Corporation having failed to appoint an Arbitrator, the petitioner filed a petition under Section 11(6) of the Act before Hon'ble the Chief Justice of High Court of Andhra Pradesh for appointment of an Arbitrator. Vide order dated 6th February 2007, rejecting the objections raised by the respondents, the learned Single Judge of the High Court allowed the petition and appointed a former Judge of this Court as the sole Arbitrator. 4. Aggrieved by order dated 6th February 2007, respondent No. 4 in this petition, filed a Special Leave Petition (C) No. 5493 of 2007. This Special Leave Petition was subsequently amended with the permission of this Court, incorporating the objection of the respondent with regard to the jurisdiction of the High Court to entertain the petition under Section 11(6) for appointment of an Arbitrator. The stand of the said respondent was that the dispute, if any, involved International Commercial Arbitration and, therefore, the jurisdiction to appoint an Arbitrator vested in the Chief Justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt petition on 25th August 2008 was deferred with a view to await the decision in those appeals (Civil Appeal Nos. 5645-5647 of 2007 and 5642-5644 of 2007), which were disposed of on 22nd May 2009 as the withdrawal of the original application under Section 11(6) of the Act filed by the petitioner before the High Court was allowed. The effect of the said order is that the order passed by the High Court on petitioner's application under Section 11(6) has been set at naught. 8. I have heard learned Counsel for the parties. 9. Mr. Rajiv Sawhney, learned Senior Counsel appearing for the petitioner, strenuously urged that in terms of agreement dated 19th January 2004, it was agreed that the petitioner and his associates would acquire 74% of equity in Varsha, they having fulfilled their part of the obligation under the said agreement by contributing towards 74% of the equity, respondent No. l, in breach of the said agreement, has by notice dated 22nd August 2005 sought to unilaterally terminate petitioner's association with Varsha for no rhyme or reason. It was argued that not only the dispute with regard to the validity of the said notice is a live issue, even the genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings. 11. It is manifest from the pleadings that the parties are ad idem that there is an Arbitration Agreement between them vide Clause 41 of agreement dated 19th January 2004, but the contention of the respondents is that there is no live issue requiring resolution by arbitration. 12. Thus, the question that falls for consideration before me is whether the dispute regarding termination of relationship between Varsha and the petitioner is dead one in the sense that on alleged allotment of equity in favour of an associate of the petitioner, agreement dated 19th January 2004 has worked itself out and no live issue in terms of the said agreement subsists? 13. The controversy in regard to the nature of function to be performed by the Chief Justice or his designate under Section 11 of the Act has been set at rest by a Bench of seven Judges of this Court in SBP case (supra). It has been held, per majority, that the function performed by the Chief Justice or his nominee under the said Section is a judicial function. Defining as to what the Chief Justice or his designate is required to determine while dealing with an application under Section 11 of the Act, P.K. Balasubramanyan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge it may not be possible to decide whether a live claim made, is one which comes within the purview of the arbitration clause and this question should be left to be decided by the Arbitral Tribunal on taking evidence. It is, therefore, plain that purely for the purpose of deciding whether the arbitral procedure is to be set into motion or not, the Chief Justice or his designate has to examine and record his satisfaction that an Arbitration Agreement exists between the parties and that in respect of the agreement a live issue, to be decided between the parties, still exists. On being so satisfied, he may allow the application and appoint an Arbitral Tribunal or a sole Arbitrator, as the case may be. However, if he finds and is convinced that the claim is a dead one or is patently barred by time or that he lacks territorial jurisdiction, he may hold so and decline the request for appointment of an Arbitrator. 15. Having examined the whole matter in the light of afore-noted principles, I am of the opinion that the petition deserves to be allowed. From the material placed on record by the parties, it appears to me that: (i) there are disputes between the parties on the issues/claim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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