C.M.P.No.159/2018

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 2ND

DAY OF JANUARY, 2019

BEFORE

HON’BLE MR.JUSTICE DINESH MAHESHWARI, CHIEF JUSTICE

CIVIL MISCELLANEOUS PETITION NO.159 OF 2018

BETWEEN: 1. MR. M.N. KUMAR, S/O. LATE M.J. NARASIMHA MURTHY, AGED ABOUT 48 YEARS, RESIDING AT NO.620, 6TH 'B' MAIN ROAD, J.P. NAGAR, III PHASE, BANGALORE-560 078. 2. MR. R. VENKATA KRISHNA, S/O. MR. G.REDDEPPA, AGED ABOUT 45 YEARS, RESIDING AT VILLA NO.003, PRESTIGE OZONE, NEAR FORUM VALUE MALL, WHITEFIELD MAIN ROAD, WHITEFIELD, BANGALORE - 560 066. 3. MR. C.S. MOHAN, S/O. LATE C.V. SRINIVASA RAO, AGED ABOUT 58 YEARS, RESIDING AT 'BRIHATI', NO. 318, 7TH MAIN ROAD, 6TH SECTOR, HSR EXTENSION, BANGALORE - 560 034. ... PETITIONERS (BY SMT. JAYNA KOTHARI, SENIOR ADVOCATE FOR SHRI ROHAN KOTHARI, ADVOCATE)

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AND:

LGCL PROPERTIES PRIVATE LIMITED, A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, HAVING ITS REGISTERED OFFICE AT NO.12/1, REST HOUSE ROAD, BANGALORE - 560 001 REPRESENTED BY ITS AUTHORIZED SIGNATORY, MR. GIRISH PURUVANKARA. . . . RESPONDENT (BY SHRI. B.S. RADHANANDAN, ADVOCATE)

---

THIS CIVIL MISCELLANEOUS PETITION IS FILED

UNDER SEC.11(5) OF THE ARBITRATION AND CONCILIATION

ACT 1996, PRAYING TO APPOINT A SOLE ARBITRATOR AND

REFER ALL DISPUTES THAT HAVE ARISEN BETWEEN THE

PARTIES OUT OF MEMORANDUM OF AGREEMENT DATED:

14.06.2012, TO THE ARBITRAL TRIBUNAL FOR

ADJUDICATION; AWARD COST OF THE PROCEEDINGS IN

FAVOUR OF THE PETITIONERS AND AGAINST THE

RESPONDENT AND PASS ANY SUCH OTHER AND FURTHER

ORDERS AS THIS HON'BLE COURT MAY DEEM FIT, JUST AND

PROPER IN THE INTEREST OF JUSTICE AND EQUITY.

THIS PETITION HAVING BEEN RESERVED FOR

ORDERS, COMING ON FOR PRONOUNCEMENT OF ORDERS,

THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

By way of this application under Section 11 of the

Arbitration and Conciliation Act, 1996 (‘the Act of 1996’), the

petitioners have made the request for appointment of

Arbitrator to adjudicate upon and decide all their disputes with

the respondent, arising out of, and relating to, the

Memorandum of Agreement dated 14.06.2012 (Annexure-B).

2. The petitioners submit that they had entered into

a Joint Development Agreement (‘JDA’) with the respondent

on 16.04.2012, which was registered on 14.06.2012, for

development of the schedule property into 38 residential

apartments; and on the date of registration, i.e., on

14.06.2012, the parties also entered into a Memorandum of

Agreement (‘MoA’) for marketing and sale of the aforesaid

residential apartments. It is pointed out that subsequently, on

18.06.2012, a Supplementary Agreement was also executed,

which amended certain terms and conditions of the JDA.

3. It is submitted that as per the JDA, the petitioners

and the respondent were entitled for equal share in the

aforesaid 38 apartments; and in this regard, the petitioners

had also executed a Power of Attorney on 16.04.2012

authorising the respondent to do the needful for execution of

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the project as also for selling the proposed apartments to the

buyers. It is further submitted by the petitioners that as per

the JDA, the residential project was to be completed within a

period of 24 months from the date of receiving the

commencement certificate, with a grace period of 6 months.

4. It is yet further submitted that as per clause 1.2 of

the MoA, the respondent was to commence marketing of the

petitioners' share of apartment in the manner that after sale of

3 units falling to its share of apartments, for every next sale of

one apartment of its share, the respondent was to sell one

apartment falling to the share of the petitioners; and in that

regard, though the respondent introduced two prospective

buyers for the sale of apartments of the petitioner’s share, the

said transactions did not go through at the instance of the

buyers.

5. The grievance stated in this petition is that

despite repeated requests, the respondent did not market the

apartments falling to the share of the petitioners but continued

to sell their share of apartments; and then, the respondent

issued a letter dated 07.09.2015 for terminating the MoA,

while stating that the petitioners' failure to finalise sale

transactions with the prospective buyers had hampered the

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respondent's efforts to sell their share of apartments and thus,

the petitioners were free to sell their share of apartments by

themselves.

6. The petitioners submit that by the letter dated

16.09.2015, they requested the respondent to withdraw the

said letter dated 07.09.2015 as the unilateral withdrawal of the

MoA was not accepted by them; the petitioners also sent

several follow-up communications seeking progress of

construction and update on the marketing efforts but the

respondent again issued a letter dated 25.04.2017 stating that

the MoA was terminated as the petitioners did not come

forward to sign the agreement in favour of the prospective

buyers. Therefore, the petitioners issued a legal notice dated

29.06.2017 invoking the arbitration clause in the MoA dated

14.06.2012 and proposed the name of Justice V.

Jagannathan to conduct the arbitration. However, the

respondent, in its reply dated 26.07.2017, denied all the

claims of the petitioners and refused to have the matter

referred to arbitration.

7. With reference to the facts aforesaid, the

petitioners submit that in view of the respondent having failed

to nominate the Arbitrator as per the agreement, this Court

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may appoint an independent Arbitrator to adjudicate upon the

dispute between the parties.

8. The respondent has submitted in its statement of

objections that the scope of MoA dated 14.06.2012 was very

narrow and the same was executed only to facilitate the

marketing of apartments falling to the share of the petitioners

with the assistance of the developer (respondent); and that,

except sourcing the customers to the land owners, there was

no other duty cast on the developer. The respondent would

submit that whenever the customers were sourced/procured,

the land owners never used to co-operate for the reasons

best known to them and because of their refusal to negotiate,

the sale of apartment falling to the share of the developer

became an issue and in the given circumstances, the

respondent-developer had no option but to intimate the

petitioners about termination of the said agreement dated

14.06.2012. The respondent would further submit that MoA

dated 14.06.2012, being not a concluded contract, cannot be

specifically performed and hence, there is no arbitrable

dispute between the parties. The respondent has also taken

the plea that the petitioners have belatedly approached the

Court inasmuch as the arbitration agreement was terminated

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way-back on 07.09.2015, but the petitioners did not seek

arbitration at the relevant time.

9. The respondent has further submitted that even

after the termination on 07.09.2015, the petitioners again

requested the respondent for assistance in selling the

apartments falling to their share; and as per request, the

respondent again took steps to sell three apartments but, for

the purchasers being not ready, the respondent itself

undertook to buy the said three apartment on mutually agreed

terms; and hence, an agreement of sale dated 05.03.2016

was entered into and certain advances were also paid.

According to the respondent, the petitioners again turned

around and expressed that they were not interested in selling

and hence, on 13.05.2016, the said agreement of sale was

also terminated at the instance of the petitioners, who

refunded to the amount to the developer/purchaser. The

respondent has taken the plea of novation of the terms of

agreement in view of the said sale agreement dated

05.03.2016. These averments, being the main plank of the

case of the respondent could be noticed for ready reference

as under:

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“5...It is pertinent to state that the said Sale Agreement was entered on 5.3.2016, but on 13.5.2016 it was cancelled. Therefore, it is clear that MOA dated 14.6.2012 was terminated and the said terms of the Agreement was novated by agreeing to Sale Agreement dated 5.3.2016. But strangely in the year 2017, they want to claim that the termination is bad. Hence the Petitioners want the reference of the said MOA dated 14.6.2012 to arbitration, though the said MOA dated 14.6.2012 does not exist and it was also not acted upon and got novated by virtue of Agreement of sale dated 5.3.2016. Interestingly the said Agreement of Sale dated 5.3.2016 does not contain the Arbitration clause and therefore the jurisdiction under Section 11 of Arbitration and Conciliation can not be acted upon. Hence, the present proceedings is not maintainable for the aforesaid reasons.”

10. The petitioners have filed rejoinder to the

statement of objections with the submissions that the MoA is

a concluded contract and could be specifically performed. It

is contended that there is an arbitrable dispute as the

agreement was unilaterally terminated by the respondent

without complying with its obligations under the said MoA. It is

further contended that in the statement of objections, the

respondent has admitted that it had unilaterally terminated the

MoA; and that for a valid termination, a substituted agreement

ought to have been executed either before or at the time of

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the termination of the MoA. According to the petitioners, the

averment that the MoA dated 14.06.2012 was novated and

substituted by new sale agreements dated 05.03.2016 is

completely baseless; and the said agreements would reveal

that the parties are not the same. It is contended that the

aforesaid agreements were independent agreements, which

were executed almost one year after the unilateral termination

of MoA by the respondent and such agreements were

cancelled on 13.05.2016.

11. During the course of submissions, a memo has

also been filed on behalf of the respondent pointing out that

so far the agreement of sale is concerned, the signed

agreement dated 05.03.2016 had been only one, whereby

three apartments were agreed to be sold to M/s LGCL Urban

Homes (India) LLP.

12. Learned counsel for the parties have made their

submissions in conformity with the pleadings taken in this

matter. Learned counsel for the petitioners would submit that

even subsequent to the filing of this petition, several attempts

have been made by the petitioners to resolve the matter

amicably, but the respondent has avoided to resolve the

dispute. Learned counsel would further submit that as per the

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arbitration clause in the MoA dated 14.06.2012, all the

disputes between the parties need to be referred to

arbitration; and that the termination of agreement dated

14.06.2012 was a unilateral action on the part of the

respondent, which had not been mutually agreed to by the

parties. Learned counsel has strenuously contented that the

sale agreement dated 05.03.2016 cannot be considered to be

novation of MoA dated 14.06.2012 for the said sale

agreement being an independent transaction and that too with

a different entity and not the respondent.

13. Per contra, learned counsel for the respondent

would submit that the MoA dated 14.06.2012 stood

terminated on 07.09.2015 and then, the petitioners

consciously entered into such agreement for sale of the

property on 05.03.2016. According to the learned counsel, the

effect of the said transaction dated 05.03.2016 had been that

the petitioners had not only accepted the termination but even

acted upon the same. Learned counsel for the respondent

has submitted, in the alternative, that in any case, the sale

agreement dated 05.03.2016, amounts to novation of the

contract whereby, the apartments falling in the share of the

petitioners were agreed to be sold by the petitioners

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themselves and that had effectively over-ridden the MoA

dated 14.06.2012. The learned counsel has relied upon the

decisions in Chloro Controls India Private Limited v.

Severn Trent Water Purification Inc. and Ors. : (2013) 1

SCC 641; Young Achievers v. IMS Learning Resources

Pvt. Ltd. : (2013) 10 SCC 535; and Larsen and Toubro

Limited v. Mohan Lal Harbans Lal Bhayana : (2015) 2 SCC

461 to contend that in view of novation of the agreement by

the subsequent agreements, the clause in the original

agreement for appointment of arbitrator cannot be invoked.

Learned counsel for the respondent would further submit that

even if sole Arbitrator is appointed, it would be a mere

formality as the arbitration clause in the MoA dated

14.06.2012 stands cancelled/terminated and as there is no

arbitral dispute between the parties.

14. Having given thoughtful consideration to the rival

submissions and having examined the record with reference

to the law applicable, this Court is unable to find any

substance in the submissions on behalf of the respondent;

and this Court is clearly of the view that the arbitration

agreement continues to bind the parties and, therefore, the

disputes between them deserve to be referred to arbitration.

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15. In essence, the case of respondent is that the

MoA dated 14.06.2012 stands cancelled and hence, the

arbitration clause has perished with the same; and that the

said sale agreement dated 05.03.2016 amounts to novation of

the contract and the petitioners cannot seek arbitration under

the MoA dated 14.06.2012.

16. The scope and extent of enquiry in this

application under Section 11 of the Act of 1996, remains

limited to the question as to whether there exists an arbitration

agreement between the parties [vide sub-section (6-A) of

Section 11]1. Even before insertion of the said sub-section (6-

A) to Section 11 of the Act of 1996 by the Amendment Act of

2015, the scope of enquiry in these proceedings had been

delineated by the Supreme Court in various decisions

including those in SBP & Co. v. Patel Engg. Ltd.: (2005) 8

SCC 618 and National Insurance Co. Ltd. v. Boghara

Plygab (P) Ltd.: (2009) 1 SCC 267. For ready reference, the

following passage from the decision in Boghara Polyfab (P)

Ltd. may be usefully extracted as under:-

1 Sub-section (6-A) of Section 11 of the Act of 1996 reads as under:-

(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.

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“22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.

22.1. The issues (first category) which the Chief Justice/his designate will have to decide are:

(a) Whether the party making the application has approached the appropriate High Court.

(b) Whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement.

22.2. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:

(a) Whether the claim is a dead (long-barred) claim or a live claim.

(b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.

22.3. The issues (third category) which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal are:

(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision

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of a departmental authority and excepted or excluded from arbitration).

(ii) Merits or any claim involved in the arbitration.”

17. Applying the principles and the mandate

aforesaid, the only question calling for determination in this

case is as to whether there exists an arbitration agreement

between the parties.

18. The arbitration clause, being Clause 13 in the

Memorandum of Agreement dated 14.06.2012, reads as

under:

“13. ARBITRATION

Any dispute, controversy or difference which may arise between the parties hereto in connection with this agreement or for any breach thereof shall first be settled amicably by the parties hereto. In the event that it may not be possible, the dispute shall be referred to an arbitrator to conciliate between the Parties. The Arbitrator so appointed shall conduct the proceedings in accordance with the Arbitration and Conciliation Act, 1996. The seat of arbitration shall be at Bangalore and be subject to jurisdiction of Bangalore Court. The fees of the Arbitrators and other arbitration expenses shall be borne half and half by the Owners and the Developer hereto. The Owners and the Developer hereby also agree that arbitration under this clause shall be a condition precedent to any right of action under the contract."

19. The respondent, however, would submit that the

arbitration clause no longer exists for the reason that MoA

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dated 14.06.2012 was terminated and/or got novated by virtue

of the agreement of sale dated 05.03.2016. According to the

respondent, the said agreement of sale dated 05.03.2016

does not contain arbitration clause and, therefore, the

petitioners are not entitled to invoke the jurisdiction under

Section 11 of the Act of 1996. The submissions are bereft of

substance.

20. The significant features of the present case are

that the parties i.e., the petitioners on one hand and the

respondent LGCL Properties Private Limited on the other,

consciously entered into the JDA on 16.04.2012, whereby and

whereunder the petitioners i.e., the owners and the

respondent i.e., the developer, agreed that the respondent

shall develop the schedule property by constructing the

apartments at the cost of the developer. Thereafter, the

parties consciously made and executed the MoA dated

14.06.2012 whereby, the petitioners appointed the respondent

as their agent for marketing their share of apartments

constructed on the schedule property. In this agreement, it

was specifically agreed to between the parties that the

disputes, controversies or differences shall first be settled

amicably and failing such settlement, would be referred to

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arbitration. On 18.06.2012, another agreement was also

executed that supplemented the terms and conditions of the

JDA. On 16.04.2012, General Power of Attorney was also

executed by the petitioners in favour of the respondent; and a

Sharing Agreement was further executed on 19.06.2014.

Read as a whole, the nature of dealings between the parties

had been clear that by virtue of the JDA and the instruments

supplemental thereto, the respondent was to develop the

property belonging to the owners i.e., the petitioners but then,

in continuity of, or rather sequel to, such dealings, the parties

executed the MoA, whereby and whereunder, the respondent

was appointed as agent for marketing the petitioners' share of

apartments and this MoA carried the arbitration clause for

settlement of disputes. This agreement, MoA, was sought to

be unilaterally done away with by the respondent under the

communication dated 07.09.2015 on the allegations that

though the respondent had identified the buyers for the

apartments falling to the share of the petitioners but the

petitioners had not finalised any of the transactions, which

hindered the progress of the project where the respondent

was unable to proceed with the sale of its apartments. The

said communication was countered and resisted by the

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petitioners and then, there had been several exchange of

communications, with the parties sticking to their respective

stands.

21. It is difficult to accept the contention that by the

aforesaid communication dated 07.09.2015, the MoA got

terminated and the arbitration clause also perished with the

same. The said communication dated 07.09.2015 had been

the unilateral action of the respondent and there is nothing in

the agreement (MoA) to suggest that any party thereto could

unilaterally terminate the same.

22. Equally baseless is the contention on the part of

the respondent that the petitioners accepted such termination

of MoA and acted differently when they entered into the sale

agreement dated 05.03.2016. As regards the aforesaid

transaction dated 05.03.2016, it is apparent from the

submissions made by the parties that in the first place, three

different agreements were proposed to be executed between

the petitioners on one hand and M/s. LGCL Urban Homes

(India) LLP, a Limited Liability Partnership firm, on the other;

whereby and whereunder, some of the apartments were

proposed to be sold by the petitioners to the said entity i.e.,

M/s LGCL Urban Homes (India) LLP. The respondent has

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clarified that there had been ultimately only one agreement

dated 05.03.2016 for sale of three apartments. However, it is

not in dispute that even the said agreement was cancelled on

13.05.2016.

23. Though it appears that the address of the said

entity i.e., M/s LGCL Urban Homes (India) LLP is the same as

that of the respondent Company and even the authorised

signatory of said entity and the respondent appears to be the

same person yet, for the purpose of contractual obligations

and rights, it is difficult to accept that the said entity has been

the same as the respondent. This apart, even if it be assumed

that the petitioners entered into the agreement to sell some of

the apartments falling in their share to any person or even to

the respondent itself, it cannot be said that by such an action

or attempted dealing, the MoA dated 14.06.2012 stood

annulled or that the alleged termination and/or novation of

MoA was accepted by the petitioners.

24. In other words, even if it be assumed that the

sale agreement dated 05.03.2016 was executed because

respondent himself undertook to buy three apartments from

the owners and the name of the said entity may not make any

difference, yet, by virtue of such a transaction, the MoA dated

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14.06.2012 cannot be treated as having been annulled

altogether. First, there has not been any mutually signed

written agreement between the parties, terminating the MoA

and secondly, such termination cannot be a matter of

inference.

25. The decision cited on behalf of the respondent,

operating in different fact situations and on different principles,

have no application to the present case. The decision in

Chloro Controls India Private Ltd. (supra) was rendered on

the basic question as to whether, in a case of multiple

agreements signed between the parties, where some

agreements contained an arbitration clause and others did

not; and the parties were not identically common, reference of

dispute as a whole or in part could be made to the Arbitral

Tribunal under Section 45 of the Act of 1996, particularly

where the parties to an agreement were claiming under or

through another person who was a party to the arbitration

agreement. In that context and on that question, the Supreme

Court explained the principle, inter alia, in the following:

"71. Though the scope of an arbitration agreement is limited to the parties who entered into it and those claiming under or through them, the courts under the English law have, in certain cases, also applied the “group of companies

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doctrine”. This doctrine has developed in the international context, whereby an arbitration agreement entered into by a company, being one within a group of companies, can bind its non- signatory affiliates or sister or parent concerns, if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates. This theory has been applied in a number of arbitrations so as to justify a tribunal taking jurisdiction over a party who is not a signatory to the contract containing the arbitration agreement. [Russell on Arbitration (23rd Edn.)] 72. This evolves the principle that a non-signatory party could be subjected to arbitration provided these transactions were with group of companies and there was a clear intention of the parties to bind both, the signatory as well as the non-signatory parties. In other words, "intention of the parties" is a very significant feature which must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties."

26. In the case of Young Achievers (supra), the

parties had earlier entered into agreements dated 01.04.2007

and 01.04.2010, but subsequently entered into new

agreement titled "exit paper" dated 01.02.2011, which did not

carry any arbitration clause. After extracting the relevant

portion of the "exit paper", the Supreme Court held that it was

nothing but a pure and simple novation of original contract by

mutual consent. In that context and factual background, the

Supreme Court said:

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"7. The exit paper would clearly indicate that it is a mutually agreed document containing comprehensive terms and conditions which admittedly does not contain an arbitration clause. We are of the view that the High Court is right in taking the view that the case on hand, is not a case involving assertion by the respondent of accord a satisfaction in respect of the earlier contracts dated 1-4-2007 and 1-4-2010. If that be so, it could have referred to the arbitrator in terms of those two agreements going by the dictum in Union of India v. Kishorilal Gupta and Bros. This Court in Kishorilal Gupta case examined the question whether an arbitration clause can be invoked in the case of a dispute under a superseded contract. The principle laid down is that if the contract is superseded by another, the arbitration clause, being a component part of the earlier contract, falls with it. But where the dispute is whether such contract is void ab intio, the arbitration clause cannot operate on those disputes, for its operative force depends upon the existence of the contract and its validity. The various other observations were made by this Court in the abovementioned judgment in respect of “settlement of disputes arising under the original contract, including the dispute as to the breach of the contract and its consequences”. Principle laid down by the House of Lords in Heyman v. Darwins Ltd. was also relied on by this Court for its conclusion. The collective bargaining principle laid down by the US Supreme Court in Nolde Bros. case would not apply to the facts of the present case.

8. We may indicate that so far as the present case is concerned, parties have entered into a fresh contract contained in the exit paper which does not even indicate any disputes arising under the original contract or about the settlement thereof, it is nothing but a pure and simple novation of the original contract by mutual consent. Above being the factual and legal

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position, we find no error in the view taken by the High Court. The appeal, therefore, lacks merit and stands dismissed, with no order as to costs."

27. Similarly, in the case of Larsen and Toubro

Limited (supra), there had been supplementary agreements

after the original agreement and the Court found that the

original agreement had undergone material change. Having

regard to the changed scenario, the Supreme Court observed

as follows:

"15. While narrating the aforesaid events, we have also commented on the effects of the three supplementary agreements and impact thereof on Clause 25. It is too obvious, from the reading of the relevant clauses in the supplementary agreements, that there could not have been any arbitration between the appellant and the respondent, at this stage. Clause 25 of the original agreement has undergone material change. The modalities of raising arbitration are completely novated. As per the modified understanding between the parties, which is so eloquently recorded in writing, in the first instance, the claims of the respondent are to be taken up by the appellant with SCOPE. For pressing those claims and in order to ensure their proper adjudication, the respondent is supposed to assist and cooperate with the appellant in pursuing the arbitration. In that sense, at this stage, the appellant and the respondent are on one side who have to put up a joint fight with SCOPE. It is only after the award is rendered in the arbitration between the appellant and SCOPE and something remains, which may qualify as a dispute between the appellant and the respondent, that there can be an arbitration in

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respect of those disputes between these two parties. We are, therefore, of the opinion that the High Court is not correct in holding that Clause 25 of the original agreement in unamended form holds the field. In fact, even the respondent knew fully well that the said clause had been drastically altered by supplementary agreements. It is for this reason that in Prayer (a) of the application under Section 11 of the Act filed by the respondent, it has itself acknowledged this change by mentioning that the arbitrator be appointed in terms of Clause 25 of the contract agreement dated 3-3-1988 “as modified by supplementary agreements dated 31-1-1990 and 6-2-1995”. What, however, is lost sight of by the respondent in the process, is that the modification in Clause 25 did not permit the respondent to move this kind of application for appointment of arbitrator between the parties, at that stage."

28. To sum up, it is clear that in Chloro Controls India

Private Limited (supra), there were multiple agreements

between the parties though some of them did not contain

arbitration clause; in Young Achievers (supra), there had been

replacement of the original agreement with the subsequent

"exit paper" and hence, it was a pure and simple novation of

original contract; and in Larsen and Toubro Limited (supra)

the modalities of raising arbitration were completely novated

by the supplementary agreements. None of the decisions

aforesaid advance the cause of respondent in this application;

rather, on the applicable principles, they could only operate

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against the respondent. Therefore, the contentions urged on

behalf of the respondent stand rejected.

29. From the material placed on record, it is evident

that the petitioners issued notice invoking the arbitration

clause in the MoA, but the respondent in their response to the

legal notice denied the existence of any arbitral dispute and

did not take steps for appointment of Arbitrator as required by

the aforesaid arbitration agreement between the parties.

30. The parties having agreed to have all the

controversies to be adjudicated by way of arbitration in

connection with the agreement or even for breach thereof,

there is no escape for the respondent that the matter

deserves to be referred to arbitration. Of course, all other

aspects of the matter are left open to be examined and

adjudicated by the Arbitrator.

31. In other words, when the parties stand at conflict

and the disputes do exist, which have not been resolved; and

for the reason of failure of the procedure for appointment of

Arbitrator, it is just and proper that an independent arbitrator

be appointed to adjudicate upon and decide the disputes

between the parties, including their claims, counter-claims

and objections.

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32. Having regard to the nature of dispute, it appears

appropriate that a former High Court Judge be appointed to

act as an Arbitrator to resolve the disputes between the

parties under the provisions of the Act of 1996, as per the

Rules governing the Arbitration Centre at Bengaluru.

33. Accordingly, this petition is disposed of by

appointing Shri Justice K.N. Keshavanarayana, Former High

Court Judge, to enter into the reference and to act as an

Arbitrator in the present case in the Arbitration Centre,

Bengaluru, as per the Rules governing the said Arbitration

Centre.

34. In the interest of justice, it is made clear that the

Arbitrator shall adjudicate upon and decide all the disputes

between the parties including their claims, counter-claims and

objections relating to the agreement in question. The

requirements of the Arbitration and Conciliation Act, 1996, [as

amended by the Arbitration and Conciliation (Amendment)

Act, 2015], shall be complied with by all the concerned.

C.M.P.No.159/2018

- 26 -

35. Needless to observe that all the questions arising

between the parties in this matter shall remain open for

determination in the arbitration proceedings.

36. A copy of this order be sent to the Arbitration

Centre, Khanija Bhavan, Bengaluru, for proceeding further in

the matter on administrative side and also to Shri Justice

K.N. Keshavanarayana, on the address available with the said

Arbitration Centre, Bengaluru.

Sd/-

CHIEF JUSTICE

VGH/ca