The four petitioners seek reference of their dispute with the three respondents to the sole Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as an "Act") in view of arbitration agreement contained in the deed of agreement dated 16.6.2007 entered into between the parties.
The company M/s. Bajaj Carpet Industries Limited having its registered office in Amritsar, Punjab and a manufacturing unit in Greater NOIDA and one in Pune is dealing in manufacturing and supply of carpets. The respondents were the shareholders and the directors of the said company. They entered into an agreement dated 16th June 2007 with the petitioners whereunder they agreed to retire as directors and to transfer their rights as shareholders in the above company in favour of the petitioners with the understanding that the petitioners henceforth would take over as shareholders/ directors and management control of the company.
The aforesaid agreement inter alia provided:
i) that the respondents would not directly or indirectly compete with the petitioners by setting up similar industry;
ii) that the responsibility of satisfying Income Tax, Wealth Tax, Excise and Labour dues shall be upon the petitioners. However, the hidden or other liability in relation to the above upto the period 30th September 2006 shall be the responsibility of the respondents;
(iii) that any dispute with regard to terms of the agreement will be referred to the arbitrator to be appointed as per the Act and the decision of the Arbitrator shall be final and binding upon the parties.
The petitioners contend that the respondents have breached the conditions no. 7 and 9 of the above agreement by setting up a similar industry in the neighbourhood and have also not cleared the liability in respect of the certain dues as enumerated in clause 9 of the agreement and as such a bona-fide dispute in relation to the above agreement had arisen between the two sets of parties. The said dispute is referable to the arbitration but the respondents have ignored the notice of the petitioners dated 4.6.2011 wherein the petitioners not only demanded the settlement of the dispute and its reference to the Arbitrator but also suggested a name for appointment of an Arbitrator.
All the three respondents jointly filed short counter affidavit dated 13th March 2012 contending that the petition seeking appointment of an Arbitrator is not maintainable before this Court in view of Section 10 of the Companies (Court) Rules, 1956 as the registered office of the company is situate in Amritsar, and the cause of action for the dispute seeking appointment of Arbitrator had arisen only at Delhi.
Thereafter, respondent no. 1 filed an independent counter affidavit dated 4th April 2012 reiterating the two grounds disputing the jurisdiction of this Court and accepting that the agreement was executed at New Delhi but contending that there is no breach of condition no. 7 of the agreement. The petition seeking appointment of Arbitrator is also not maintainable as it has not been filed on behalf of the company.
A separate counter affidavit has been filed by respondents no. 2 and 3 dated 12.8.2012 disputing the maintainability of the petition and that the agreement does not bear their signatures.
The petitioners have filed rejoinder affidavit to the above three counter affidavits.
Apart from the above pleadings of the parties, the respondents have filed a supplementary affidavit sworn on 13th March 2013 contending that paragraphs no. 7 and 8 of the agreement specifically mention that the arbitration proceedings will be held at Delhi. Therefore, the Delhi court alone would have jurisdiction over the matter.
In response to the said supplementary affidavit, a supplementary rejoinder affidavit has been filed by the petitioners.
I have heard Sri Praveen Kumar, learned counsel for the petitioners and Sri Vijay Prakash learned counsel appearing for the respondents.
The primary argument of the learned counsel for the petitioners is that as the agreement contains an arbitration clause and certain conditions therein have been violated the dispute in relation thereto is liable to be referred to the sole arbitrator. Since the parties have failed to appoint an Arbitrator, the Court alone is competent to refer the dispute to an independent and impartial Arbitrator.
Sri Vijay Prakash, learned counsel for the respondents has resisted the appointment of an Arbitrator contending that no agreement as alleged was executed between the parties; the agreement, if any, is not registered; petitioners in their individual capacity can not maintain the petition for appointment of an Arbitrator; and High Court at Allahabad has no territorial jurisdiction to entertain a petition under Section 11 of the Act.
At the outset, I first deprecate the practice of filing of successive counter affidavits in opposition by the same person and party. This is a peculiar habit which has recently been developed by the counsel practising in this Court. They keep filing affidavits after affidavits on behalf of the same party, little releasing the confusion they create in the handling of the case. They even fail to stick to the stand taken by the party in the earlier affidavit. In these circumstances, on the analogy of the principle that a person cannot maintain successive writ petitions for the same cause of action, its is held that a same person can not file successive counter affidavits in rebuttal to the averments made in the petition.
The petitioners have filed a copy of the agreement dated 16th June 2007. It has been executed between the retiring Directors/Shareholders of the company M/s. Bajaj Carpet Industries Limited who were represented by one of the Directors Surendra Bajaj respondent no. 1 and one Ishwar Singh representing all the petitioners who were to be the new shareholders and Directors of the company.
The petitioners in paragraphs 3,4 and 5 of the petition have stated about the execution of the aforesaid agreement between the parties. The execution of the said agreement has not been denied by the respondents in their short counter affidavit rather they proceed on the assumption of the existence of the agreement. The respondents in paragraphs 6 and 7 of the short counter affidavit clearly state that the entire transaction was executed before a firm of Chartered Accountant at Delhi and therefore the cause of action, if any, arises at Delhi. It further states that the agreement annexed with the petition shows that stamp papers were purchased from Delhi and the agreement deed was executed at Delhi. It clearly suggests that the respondents accept the execution of the aforesaid agreement .
In the counter affidavits filed separately by respondent no. 1 and jointly by respondents no. 2 and 3 also there is no specific denial that the agreement was not executed between the parties. The counter affidavit filed by respondent no. 1 in paragraph 5 accepts the execution of the transaction at Delhi. In paragraph 7 it states that only the true photo copy of the agreement executed on 16.6.2007 has been enclosed with the petition as annexure 1 but the certified copy thereof has not been filed. Respondent no. 1 does not deny or dispute the existence of the said agreement. He in paragraph 11 further states that the agreement was executed in New Delhi. These averments made on his behalf unambiguously amount to an admission on part of the respondents that the agreement was executed between the parties. The mere fact that the original or the certified copy of the agreement has not been filed or that it has not been singed by all the respondents is not material for the reason that its due execution by their representative stands duly established. The respondents no. 2 and 3 do not allege that they have not authorized respondent no. 1 to enter into the said agreement with the petitioners.
In view of the above, the first argument of the respondents that no agreement was executed on 16.7.2007 is without any substance and is accordingly turned down.
The above agreement is undoubtedly not a registered deed. Section 7 of the Act which defines the arbitration agreement provides that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement but has to be in writing . It does not provide for its registration. Therefore, registration of the arbitration agreement is not mandatory in law.
The said agreement is between the petitioners and the respondents represented by Ishwar Singh and respondent no. 1respectively. The company M/s. Bajaj Carpet Industries Limited is not a party to the above agreement. Any breach of the said agreement would therefore be a dispute between the parties to the agreement and it will have nothing to do with the company. Therefore, the contention that the petition under Section 11 of the Act by the petitioners individually is not maintainable is misconceived.
This takes me to the territorial jurisdiction of this Court to entertain a petition under Section 11 of the Act.
As stated above, the petition is not on behalf of or against the company. Therefore, the registered office of the company would have no bearing over the territorial jurisdiction of the Court and Section 10 of the Companies (Court) Rules, 1956 would not come into play.
There is no clause in the agreement which excludes the jurisdiction of the courts in U.P. or confers exclusive jurisdiction upon the courts at Delhi for entertaining the dispute in relation to the said agreement or appointment of an Arbitrator.
The agreement only provides that the place of arbitration shall be Delhi which means that the arbitration, if any, has to be conducted at Delhi. It does not oust the jurisdiction of the Chief Justice of this Court to entertain application under Section 11 of the Act or to appoint an arbitrator.
Section 11 of the Act authorizes the Chief Justice or any person or institution designated by him to appoint of Arbitrator as provided therein. It further provides that where more than one request has been made before the Chief Justices of different High Courts or their designates, the Chief Justice or his designate before whom the request is made first shall alone be competent to decide the request. It does not lay down the territorial jurisdiction of the Chief Justice or his designate vis-a-vis the cause of action. The jurisdiction of the Chief Justice under Section 11 of the Act is not dependent or is restricted to the situs of the cause of action.
Thus, place of cause of action plays no material role for determining the territorial jurisdiction for moving petition under Section 11 of the Act.
Section 42 of the Act provides about the jurisdiction and states that the court before whom any application is made that court alone shall have the jurisdiction over the arbitration proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings. It means that the court where proceedings in respect to an arbitration agreement has been made first shall continue to exercise jurisdiction in all subsequent matters arising from the agreement or the arbitral proceedings.
There is nothing on record which may suggest that the parties have earlier moved in respect to the aforesaid arbitration agreement before other Court. Therefore, the present petition being the first and the only petition before the Chief Justice of this Court, it is competent and lacking in territorial jurisdiction for want of cause of action not arising within the jurisdiction of the Allahabad High Court.
In view of the aforesaid facts and circumstances, the objections raised by the respondents stand over ruled and since the petitioners have made out a case for referring the dispute in relation to the above agreement to the sole arbitrator, as a designate of the Chief Justice, I appoint Mr. Justice Janardan Sahai, former Judge of this Court, resident of plot no. 7, High Court Colony, Sector- 105, NOIDA Mobile No. 9415316955 as the sole Arbitrator to resolve the dispute between the parties.
Let a copy of this order be given to the learned Arbitrator with request to enter into arbitration forthwith.
SKS 5.8.2014