IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF DECEMBER, 2019 BEFORE THE HON’BLE Mr. JUSTICE B. VEERAPPA CMP No. 376/2018 BETWEEN :
Sri. Vinod G. Jain S/o. M. Gautham Chand Aged about 39 years No. 80, BHS Road Rangarao Road Cross Shankarpuram Bangalore – 4. … PETITIONER (By Sri. Mallikarjun N.K., Adv., for Sri. Prasad H.C., Adv.) AND :
Doddaballapur Integrated Textile Park Limited Registered office at SW-51, Apparel Park Phase-II, KIADB Industrial Area Doddaballapur – 561 203 By its Chairman. … RESPONDENT (By Sri. S. Vivekananda, Adv., for VGB Associates, Advs.) This CMP is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 with a prayer to appoint an arbitrator on the panel of arbitrators at the Bangalore Arbitration Centre to decide the dispute between the petitioner and the respondent vide Annexure A and etc.
This CMP coming on for Admission this day, the Court passed the following;
O R D E R Petitioner has filed the present civil miscellaneous petition under the provisions of Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter for the sake of brevity referred to as the Act) for appointment of sole arbitrator to adjudicate the dispute in terms of clause 9 of sub-lease agreement dated 10.11.1996 entered into between the parties.
2. It is the case of the petitioner that Doddaballapura Integrated Textile Park was constituted as a special purpose which was allotted 48 acres of land by KIADB at Apparel Park Industrial Area, II Phase, Doddaballapur. The respondent is provided subsidy by Government of India and Government of Karnataka. When the development of Textile Park was underway, the owners of 7 acres and 4 guntas which was notified by KIADB and allotted to the respondent was the subject matter of W.P. No. 14713/2006 and the same was allowed and the notification was quashed by the order dated 08.02.2008. Aggrieved by the said order, the KIADB filed an appeal in W.A. No. 639/2008. Said appeal came to be dismissed with a compromise and it was agreed to make over 1.20 acres of land to the land owners and retain 5.24 acres for the park.
3. The petitioner and the respondent entered into sub-lease agreement dated 10.11.2016. Possession of the industrial plot was handed over to the petitioner. Though the petitioner was not liable to pay the infrastructure and development charges, he was called upon to pay Rs.18.00 lakhs and it was paid under compulsion by the petitioner. It is the further case of the petitioner that thereafter he came to know that the respondent had used up the subsidy granted by the Government of India and Government of Karnataka for formation of industrial plots. Though the petitioner was not liable to pay the infrastructure and other charges the respondent illegally and unlawfully collected the same.
4. In the meanwhile petitioner has sold the shares held by him to one Ms. Riza Fathima. Thereafter a notice came to be issued on 23.04.2018 calling upon the respondent to refund Rs.18,00,000/-. The sub-lease entered into between the petitioner and respondent did not contemplate payment of infrastructure costs. In view of the illegal demand and collection of Rs.18,00,000/- by the respondent, dispute arose between the parties. Therefore, petitioner issued legal notice on 12.09.2018 suggesting his own nominee as arbitrator. Respondent by reply dated 12.10.2018 disputed the liability. Therefore, the present civil miscellaneous petition is filed for the relief as sought for.
5. Respondent has filed statement of objections contending that in view of the admission made by the petitioner that he has sold his shares to one Ms. Riza Fathima and also transferred the plot to her, agreement between the petitioner and the respondent got terminated. It is further contended that the amount contributed towards infrastructure development are sunk costs incurred for the infrastructure development and the members are not eligible and entitled to claim the same back. On account of the property, the share valuations have gone up and the same would have been recovered by the petitioner by sale of the shares at a much higher price than face value. It is further contended that the respondent company was incorporated with the object of promoting and developing textile industry. Grants have been given by both the Central and State Governments.
The respondent company has availed loan to an extent of Rs.31.37 crores for completion of building construction and providing other infrastructure facilities to members. It is further contended that the petitioner is not entitled to the amount claimed and sought to dismiss the civil miscellaneous petition.
6. I have heard the learned counsel for the parties and perused the records carefully.
7. Sri. Mallikarjun, learned counsel for petitioner reiterating the contentions raised in the petition has contended that there is no dispute with regard to the sub- lease agreement entered into between the parties dated 10.11.2016 and the existence of the arbitration clause in the said agreement. According to the petitioner he is not liable to pay Rs.18.00 lakhs towards infrastructure and development charges. In view of the pressure by the respondent he has paid the said amount. In spite of repeated requests and legal notice issued, the respondent has not refunded the said amount. Therefore, learned counsel for petitioner sought to allow the civil miscellaneous petition.
8. Per contra, Sri. S. Vivekananda, learned counsel for respondent while reiterating the contentions taken in the objections statement would contend that the petitioner is not entitled for refund of the amount as he has sold his shares to one Ms. Riza Fathima and transferred the plot to her. By virtue of the same, the agreement between the petitioner and respondent came to be terminated. Pursuant to the issuance of shares to the subscriber by the company, the company shall allot to the subscriber the plot or plots along with work shed in the textile park upon the terms and conditions contained in the lease and license agreement to be entered into between the subscriber and the company wherein the subscriber shall have license to use of the plot or plots along with work shed and the infrastructure and administrative facilities in the textile park and shall be bound to pay all fees as may be levied by the company from time to time in relation thereto. Therefore, the learned counsel for respondent sought to dismiss the civil miscellaneous petition.
9. Having heard the learned counsel for parties, it is not in dispute that the parties have entered into sub-lease agreement dated 10.11.2016. Both the parties have duly signed the said document as contemplated under Section 7 of the Act. Clause 9 of the said agreement stipulates for arbitration and the same reads as under:
9) Arbitration (i) The parties shall seek to resolve, in good faith, any dispute, controversy, claim or breach arising out of or in relation to this Agreement include any dispute as to the existence or validity of this Agreement, by amicable arrangement, negotiation and/or compromise. Either Party shall send the other Party a notice in writing intimating the other Party of any dispute, controversy, claims or breach as to the existence or validity of this Agreement (“Dispute Notice”). In the event the Parties fail to resolve the same by amicable arrangement, negotiation and/or compromise within a period of thirty days from the receipt of the Dispute Notice, either party may submit the dispute to a final and binding arbitration in accordance with following clauses: The arbitration proceedings shall be conducted in accordance with the Arbitration and Conciliation Act, 1996 and the rules made thereunder for the time being in force, as amended from time to time. The arbitration panel shall consist of a sole arbitrator appointed by both the Parties, or in case of disagreement as to the appointment of the sole arbitrator, to a panel of 3 (three) arbitrators. Each Party to the dispute shall nominate one arbitrator and the two arbitrators so nominated shall appoint a third arbitrator, who shall preside the arbitration proceedings. The venue of arbitration shall be Doddaballapur or such other place as may be agreed to between the Parties in writing.
(ii) The Arbitrator’s award shall be final and binding on all the Parties and shall be substantiated in writing. The Arbitration shall also decide on the costs of the Arbitration proceedings. The Parties hereto shall submit to the Arbitrator’s award and the award shall be enforceable in any competent Court of law.
(iii) It is hereby expressly provided that any breath of duty committed by any of the Parties to this Agreement, leading to the termination of this Agreement or giving rise to invocation of arbitration proceedings under this Section, shall not be construed as an act of oppression committed by the Party committing such breach on the other Party within the meaning of the Companies Act, 1956.
10. It is not in dispute that the petitioner issued legal notice as contemplated under Section 11(5) of the Act. The contentions raised by the respondent in the statement of objections that when once the petitioner has sold his shares to one Ms. Riza Fathima and transferred the plots as well as the shares, amount towards infrastructure has to be paid by the person who purchased the plots and the shares. In view of the aforesaid admitted facts, there is no impediment for this Court to appoint an arbitrator to adjudicate the dispute between the parties leaving open all the contentions raised by the respondent in the statement of objections to be adjudicated by the arbitrator. Learned counsel for the parties agreed that the venue of arbitration will be Arbitration Centre, Bengaluru.
11. In view of the above, Civil Miscellaneous Petition is allowed. Sri. N.N. Dharwadkar, former District Judge is appointed as sole arbitrator to adjudicate the dispute between the parties in terms of clause 9 of the sub-lease agreement dated 10.11.2016 entered into between the parties.
12. Registry is directed to send a copy of this order to the learned Arbitrator and to the Arbitration Centre, Bengaluru forthwith.
Sd/- JUDGE LRS