2014 (11) TMI 1138 - SC - Indian Laws

Supreme Court Upholds Arbitration Clause in Joint Venture Dispute

Demerara Distilleries Pvt. Ltd. & Ors. Versus Demerara Distillers Ltd.

The Supreme Court appointed a former judge as the sole Arbitrator to resolve disputes arising from a Joint Venture Agreement, dismissing respondent's ... Directions for appointment of an Arbitrator - proceedings under Arbitration and Conciliation Act - Held that:- Though one B.S. Kanda had signed the Agreement on behalf of M/s Kanda and Associates, the said entity also consist of the petitioners Nos. 2, 3 and 4. In the aforesaid situation, though the present petition under Section 11(6) of the Act may not be maintainable at the instance of the first petitioner, there is no reason to doubt the maintainability thereof at the instance of the petitioners Nos. 2, 3 and 4. The reliance placed on the decision of the Bombay High Court in Venkatrao A. Pai v. Narayanlal Bansilar & Ors. [1960 (8) TMI 94 - BOMBAY HIGH COURT], to contend that if two or more parties join in an action, dismissal of the action qua one petitioner entails the dismissal qua the others as well is wholly misplaced. No such ratio is discernible in the aforesaid judgment. For the aforesaid reasons, the objections raised by the respondent - Company to the present petition must fail. Shri Justice B.Sudershan Reddy, a former judge of this Court is appointed as the sole Arbitrator. All disputes including the disputes raised in the present petition are hereby referred to the learned sole Arbitrator. The learned Arbitrator shall be at liberty to fix his own fees/ remuneration/other conditions in consultation with the parties. Issues:1. Appointment of Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.2. Signatories to the Agreement containing the Arbitration Clause.3. Premature invocation of the Arbitration Clause.4. Arbitrability of the disputes.5. Maintainability of the petition at the instance of the petitioners.6. Appointment of the sole Arbitrator.Analysis:Issue 1: Appointment of Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996:The petitioners filed an application seeking directions for the appointment of an Arbitrator to resolve disputes arising from a Joint Venture Agreement. The respondent failed to nominate an Arbitrator, leading the petitioners to approach the court under Section 11(6) of the Act. The court found the objections raised by the respondent to be without merit and appointed a former judge of the Supreme Court as the sole Arbitrator to resolve the disputes.Issue 2: Signatories to the Agreement containing the Arbitration Clause:The respondent contended that the petitioners were not signatories to the Agreement containing the Arbitration Clause, as it was signed by M/s Kanda and Associates, not the Joint Venture Company and the individual petitioners. However, the court found that the petitioners, who were part of M/s Kanda and Associates, had the right to invoke the Arbitration Clause, dismissing the respondent's objection.Issue 3: Premature invocation of the Arbitration Clause:The respondent argued that the invocation of the Arbitration Clause was premature as per the Agreement terms, requiring mutual discussions and mediation before Arbitration. However, the court noted that attempts at resolving disputes through discussions and mediation would be futile at that stage, leading to the appointment of an Arbitrator to address the issues effectively.Issue 4: Arbitrability of the disputes:The respondent claimed that the disputes were not arbitrable and sought winding-up of the Company. The court disagreed, stating that the disputes regarding equity participation and technology dissemination were arbitrable under the Agreement. The court found no valid reason to prevent the invocation of the Arbitration Clause.Issue 5: Maintainability of the petition at the instance of the petitioners:While the first petitioner was the Joint Venture Company, born out of the Agreement, the court found that the individual petitioners, who were part of M/s Kanda and Associates, had the right to maintain the petition. The court dismissed the respondent's objections regarding the maintainability of the petition.Issue 6: Appointment of the sole Arbitrator:The court appointed a former judge of the Supreme Court as the sole Arbitrator to resolve all disputes, including those raised in the petition. The Arbitrator was given the authority to determine fees, remuneration, and other conditions in consultation with the parties to ensure an expeditious resolution of the disputes.In conclusion, the Supreme Court appointed the sole Arbitrator to address the disputes arising from the Joint Venture Agreement, dismissing the objections raised by the respondent and affirming the maintainability of the petition by the individual petitioners.