If the parties fail to agree on the arbitrator within thirty days then such appointment shall be made by the Chief Justice: High Court Of New Delhi

The present petition under Section 11(5) of the Arbitration and Conciliation Act, 1996 seeks appointment of a Sole Arbitrator, which is containing an arbitration agreement in Clause 11, And the same issue was held in the judgement passed by a single bench judge comprising HON’BLE MR. JUSTICE SANJEEV NARULA, in the matter M/S POOJA INFOTECH PVT. LTD. & ORS  V.  M/S PRABHUPREM INFOTECH PVT. LTD. & ORS dealt with an issue mentioned above.

Petitioners No. 2 and 3 are directors of Petitioner No. 1 company. Respondent No. 5 is the wife of Petitioner No. 2 and Respondent No. 6 is the brother of Petitioner No. 3. The Petitioners No. 2-3 and Respondents No. 5-6 [Seller]hold the complete shareholding in Petitioner No. 1 company. No relief is sought by the Petitioners against Respondents 5 and 6.

Petitioner No. 1 was allotted and leased a plot of land from the Greater Noida Industrial Development Authority, 1,01,114.27 sq. meters bearing Plot No. 19, Sector K.P.-V, Greater The Transaction: ARB.P. 573/2020 Page 3 of 15 Noida (West), Gautam Budh Nagar, Uttar Pradesh. The Buyers and Sellers entered into a Memorandum of Understanding dated 31st July 2014 for transferring Sellers’ shareholding in Petitioner No. 1 company to the Buyers, for a consideration of Rs. 84.43 crores.

On 27th December 2015, a Settlement Agreement was entered into between all the Petitioners and Respondents (except Respondent No. 3) wherein it was agreed that the MoU stood terminated and cancelled and the parties would be restored to pre-MoU status [‘Settlement’]. In terms thereof, the Buyers claimed a refund of Rs. 21 crores from the Sellers, and in return offered repossession of the project land. Subsequently, the Petitioners vide notice invoking arbitration dated 18th October 2019, called upon the contesting Respondents to pay compensation to the tune of Rs. 25 crores, or in the alternative, settle disputes in terms of Clause 11 of the Settlement

Mr Sanat Kumar, Senior Counsel for the Respondents, led the arguments on behalf of the Buyers and at the outset, strongly objected to the maintainability of the present petition on the ground that the claims raised by the Petitioners are non-arbitrable as well as time-barred, and thus, cannot be referred to arbitration.

Meanwhile, Reliance placed by the Petitioners on the MoU for raising any claims against the contesting Respondents is barred because of novation of the contract under Section 62 of the Indian Contract Act, 1872. The present proceedings have only been initiated to stall the claims of the Respondents No. 1-4 as made by them in various criminal complaints.

Mr Sanjay Goswami, counsel for the Petitioners, while relying upon the Settlement, controverted the objections of the Respondents, as follows;

  • The jurisdiction of the Court in Section 11 of the Act is limited to examining the existence of an arbitration agreement.
  • Regardless, the Petitioners are not bound by the Settlement because:
  1. Sellers were subjected to extortionist methods/ coercion to unwillingly sign the Settlement.
  2. The Settlement was then intentionally not made available to the Petitioners for a prolonged period.

     c.That apart, the amount of refund claimed by the Buyers was never received by the Petitioners, and accordingly, is not refundable.

The existence of the arbitration agreement contained in the Settlement is not in controversy. The contesting Respondents’ objections are two-fold. First, they contend that claims urged by the Sellers are barred by limitation, and hence, should not be referred to arbitration. Later, the court does not find merit in the arguments advanced by the contesting Respondents on these issues.

The further court also observed the recent case which was held in, The Supreme Court in BSNL v. Nortel Networks (supra), and also keeping in view the aforenoted principle in matters relating to the objection of limitation, we have to determine whether the instant case falls in that category of exceptional cases or not.

Accordingly, Hon’ble Mr Justice J.R. Midha, (Retd.) Former Judge of this Court is appointed as the Sole Arbitrator to adjudicate the disputes between the parties concerning the MoU dated 31st July 2014 and the Settlement Agreement dated 27th December 2015. The parties are directed to appear before the learned Arbitrator, as and when notified. This is subject to the learned Arbitrator making necessary disclosures under Section 12(1) of the Act and not being ineligible under Section 12(5) of the Act. ARB.P. 573/2020. The learned Arbitrator will be entitled to charge his fees in terms of the provisions of the Fourth Schedule appended to the Act.

The court perused the facts and argument’s presented, it thought that- “It is clarified that the Court has not examined any of the claims of the parties and all the rights and contentions of the parties on merits are left open. Both the parties shall be free to raise their claims/counterclaims before the learned Arbitrator following the law. 20. Because of the above, the present petition is allowed and stands disposed of”.

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Judgment Reviewed by: Mandira BS

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