Dhanlaxmi Solvex Pvt. Ltd. vs Ashta Industries Ltd.

Prakash Shrivastava, J.—This arbitration case u/s 11(5) of the Arbitration and Conciliation Act, 1996 (for short "the Act") has been filed by applicant for appointment of sole independent arbitrator for resolving the dispute between the parties.

In brief, the claim of the applicant is that non applicant had established a solvent extraction plant at survey No. 561, village Chakrod, Kalapipal, District Shajapur after obtaining the financial assistance from the M.P. Financial Corporation. Since the non-applicant was unable to run the business properly, therefore, an agreement dated 13/4/2006 was executed between the applicant and non applicant containing the terms about supply of Soyabean seeds by the applicant to the non applicant and providing for processing of raw material by the non applicant alongwith other relevant terms. Thereafter MP Financial Corporation had granted permission to the applicant to enter upon the premises and process the raw material in the plant using plant and machinery of the non applicant. The supplementary agreement dated 28.3.2007 was executed between the parties giving priority right to the applicant to purchase the plant in question in case if the non applicant intends to sell the same. A lease agreement was also executed on 28/3/07 under which the non applicant had leased out storage tank and go-downs on payment of certain charges and the applicant was put in possession of the leased property. The non-applicant subsequently had entered into an agreement with the third party M/s. Ambika Solvex Ltd. with no intimation to the applicant which was protested by the applicant and since there was a dispute between the parties, therefore, the applicant gave notice dated 20.12.2007 for appointment of arbitrator. The notice was replied by the non applicant on 21/1/2008. Thereafter the present application has been filed.

Counsel for the non applicant opposing the application has raised an objection relating to non-joinder of necessary party submitted that subsequent purchaser M/s. Ambika Solvex Ltd. has not been impleaded. He has further submitted that the dispute is not arbitrable since the property in question has already been sold and that the District Judge while considering Section 9 application has already found against the arbitrability of the dispute.

I have heard learned counsel for the parties and perused the record.

In the present case, the agreement dated 13th April 2006 as also the supplementary agreement dated 28/3/2007 are not in dispute. The agreement dated 13/4/06 contains clause No. 27 as the arbitration clause which reads as under:

If any dispute of difference shall arise between the parties here unto as to the interpretation of this Agreement or any covenants or conditions thereof or as to the rights, duties or liabilities of any parties hereunder or as to any act, matter or thing arising out of or relating to or under this agreement (even though the agreement may have been terminated) the same shall be referred to a Sole Arbitrator as may be agreed upon or in case of disagreement each party will nominate the arbitrator and the arbitrator so nominated shall appoint another arbitrator to be the presiding officer. The arbitration will be conducted as per provisions of Arbitration and Conciliation Act, 1996 as amended from time to time. The arbitration shall take place at Indore."

It is also not in dispute that by way of supplementary agreement dated 28/3/2007 executed between the parties the applicant was given priority right to purchase the plant, in case if the non applicant intended to sell it. The record also reflects that subsequently by the registered sale deed dated 21/10/08, the non applicant has sold the plant to M/s. Ambika Solvex Ltd.

It is undisputed before this court that the dispute has arisen between the parties on account of subsequent sale of the plant by the non applicant to M/s. Ambika Solvex Ltd., since in terms of the supplementary agreement, the applicant had prior right of purchase. There is also some dispute about default of payment of rent and process initiated for cancellation of lease. In the notice for appointment of arbitrator dated 20/12/07, the applicant has stated about his possession on a part of the property and also asserted his right of pre-emption/right of performance contained in the supplementary agreement.

The first issue is whether the dispute about specific performance of contract is arbitrable. The applicant on the basis of supplementary agreement has either right to claim specific performance or to claim damages. The right of specific performance is a right in personam and is a contractual right. The arbitrator has power and jurisdiction to grant specific performance of contract. The Supreme court in the matter of Olympus Superstructures Pvt. Ltd. Vs. Meena Vijay Khetan and Others, has observed that there is no prohibition in Specific Relief Act, 1963 or in the Arbitration and Conciliation Act, 1996 that issues relating to specific performance of contract cannot be referred to arbitration. The arbitrator can decide the question of specific performance of contract. (See: Booz Allen and Hamilton Inc. Vs. SBI Home Finance Ltd. and Others, ).

The next issue is about the effect of subsequent sell of plant to third party. So far as the issue of arbitrability of the dispute in view of subsequent development of the alleged sale of the property by the non applicant to M/s. Ambika Solvex Ltd. is concerned, the Supreme court in the matter of Booz Allen and Hamilton Inc. Vs. SBI Home Finance Ltd. and Others, considering the scope of Sections 8 and 11 of the Act has taken the view that while considering an application u/s 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of arbitrability or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, he will leave the issue of arbitrability for the decision of the Arbitral Tribunal. If the arbitrator wrongly holds that the dispute is arbitrable, the aggrieved party will have to challenge the award by filing an application u/s 34 of the Act relying upon sub-section (2)(b)(i) of that section.

The third issue is about the effect of non-joinder of subsequent purchaser who is not a party to the contract in these proceedings. Needless to say that in the absence of the subsequent purchaser only those disputes will be considered and arbitrated by the arbitrator which will not effect the rights of the subsequent purchaser which are available to him under the law. In an appropriate case instead of granting relief of specific performance of contract the court or the arbitrator can always grant the relief of refund of money or other appropriate relief.

The objection of the non applicant based on the order of District Judge dated 27/9/08 passed in Arbitration Case No. 8/07 holding that dispute is not arbitrable, also has no merit since the said order has been set aside by the Division Bench of this Court by order dated 8/3/2011 passed in WP No. 6781/2008.

It is also worth noting that in response to the applicant''s notice dated 20/12/07, the non applicant had sent reply on 21/1/08 without raising any objection about arbitrability of the dispute but suggesting the name of one of the retired District Judge at Indore as arbitrator and since there was no consensus about the name of arbitrator therefore, the present application has been filed.

In these circumstances, considering the nature of controversy involved in the matter, I am of the opinion that it is a fit case where independent arbitrator needs to be appointed to resolve the dispute between the parties. Accordingly, I appoint Hon''ble Shri Justice S.P. Khare (Retired Judge of High Court of MP), R/o. Format A-1, 202, Sahanai Residency, A.B. Road, Indore (MP) subject to his consent and such terms as he may deem fit and proper.

Parties are directed to appear before the learned arbitrator on 04th August, 2014.

Registry is directed to communicate the order to the learned Arbitrator to enable him to enter upon the reference and give his award as expeditiously as possible.

Arbitration application is accordingly disposed off.

C.C. As per rules.