ARBAPPL/190/2022 of M/s Abhishek Business Private Limited Vs M/s Blue Nile Developers Pvt Ltd on 29 December 2023

ORDER:

The Applicant filed this application under Section 11 (5) and (6) ofthe Arbitration and Conciliation Act, 1996 (R/w settiement of appointmentof arbitrator), 1996 (for short "the Act") to appoint a sole arbitrator toadjudicate the claims and disputes between the applicant and respondentpursuant to the "Memorandum of Understanding" (brevity "MOU") dated19.o7.2072.

Factual Matrix:

2. The Applicant is a company incorporated under the IndianCompalies Act, 1956, engaged in various business aclivities, such as,supply of industrial goods, commcrcial goods, household goods,construction material, agriculture and wholesale trading. The applicantsubmits that in 2012, t}:,e Respondent had approached the Applicant forinvestment in a rea-l estate project named ["Pebble ]Beach Villas" inVisakhapatnam. Accordingly, "MOU" was entered by both the parties on79.O7 .2012, stipulating the [joint ]development of the project witr]. a 25o/oequity investment by the Applicant. The project has to be completed withina period of 24 months. The Applicant invested an amount of more than Rs.7,50,00,000/- crores in the said project in three tranches. But, disputeswere arose with regat-d to land documentation, delays in approvals, and l5R,.lAA.No.190 of 2022

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discrepancies arose. The Respondent failed to [provide ]required [project]information. Upon scrutiny, it was discovered that [project ][funds ]weremisappropriated by the directors. The Applicant initiated [insolvency]proceedings before NCLT (National Company Law Tribuna.l), which werelater withdrawn with a liberty to approach appropriate tribunal by itsorder dated Oa.O9.2022.

2.1 That the applicant has demanded the respondent to return track theinvestment made by it along with interest and further stated that it is nolonger interested in [jointly ]developing the said project with the respondentand also issued legal notice dated 74.O4.2O2O demanding the respondentto pay a sum of Rs.2,25,00,000/ - with interest on the ground thatrespondent failed to adhere to the terms and conditions mentioned in"MOU". Despite of several promises, respondent did not repay the fullinvestment made by the applicant and the project was a-lso stalled. At thatstage, applicant got issued notice dated 14.O7.2022 invoking thearbitration clause IV-9 of "MOU" nominating Sri. B.Prakash Rao Retd.High Court Judge, as tJle sole arbitrator. However, respondent has notgiven consent nor issued any reply. Hence, the applicant filed presentapplication.

3. Respondent frled counter denying the allegations inter aliocontending that the claim made by the applicant for repayment of Rs.

2,25,OO,OOOl- with interest@18% from 2015, [is time barred and ][the cause]of action arose in 2015 arrd suit for [recovery ][of ][money ][shall ][be ][frled ][within]3 years, i,e., on and before [2018. The "MOU" ][is ][not ][properly ][stamped ][as]per the provisions of Indian Stamp Act, [1899 (for ][short, ].'the [Act') unless]and until such deficit stamp [duty ][paid through ][proper ][procedure ][under]the Act. Applicant is not entitled [to ][seek ][any ][reiief ][much ][less ][the relief ][of]appointment of arbitrator basing upon [the ][above ][said ][document.]

Heard Sri Sri Sheelam Ashok Reddy, [[learned ][counsel ]][[counsel ]][[for ][the]][[the]]

4. Heard Sri Sri Sheelam Ashok Reddy, [[learned ][counsel ]][[counsel ]][[for ][the]][[the]]applicant and Sri. P. Ramesh [babu, ][Iearned counsel ][for ][the]respondent.

Learned counsel for the applicant submits for the applicant submits the applicant submits applicant submits [[that ][the ][applicant]][[the ][applicant]][[applicant]]

5. Learned counsel for the applicant submits for the applicant submits the applicant submits applicant submits [[that ][the ][applicant]][[the ][applicant]][[applicant]]has entered into "Memorandum of [Understanding' ][on]company 19th JuIy, 2Ol2 wiLh the respondent [intending ][to ][jointly ][develop ][the]project under the name and style of ["Peddle Beach ][Villas' with a ][25o/o]equity investment by the Applicant. The [completion ][of ][said project ][within]24 months from the date of granting of [plan ][of ][approval. The respondent]has committed several illegal activities, including [gross ][mismanagement]and also misappropriation of funds and the respondent [failed ][to ][repay the]principa-l amount of Rs. 1,2O,73,000/- along with 187o interest from 2015.In 20i8, the respondent made a partial payment of Rs. 80,00,O00/- [which]was credited towards the interest on the principal amount. Thereafter, [the]

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respondent has not paid any further payment, resulting in default on boththe principal ald accrued interest and the respondent liable to [pay ]a totalamount of Rs. 2,25,O0,OO0/- inclusive of the principal sum and interest atthe rate of l8o/o.

6. He further contended that in spite of several requests made by theapplicant through mails, respondent did not repay the amounts and atthat stage, the applicant got issued a legal notice dated 14.04.2020demanding the respondent to pay a sum of Rs. 2,25,00,000/- includinginterest. Regardless of the said notice, the respondent has neithercomplied with the said demands nor replied to the said notice. Having leftwith no other alternative, the applicant had issued notice dated14.07.2022 invoking arbitration clause IV-9 of "MOU" nominating retiredHigh Court Judge as arbitrator. However, the respondent neither givenconsent nor issued any reply. He further contenled whether claim made bythe applicants within the period of limitation or not and whether the"MOU" is required stamp duty or not those aspects will be decided by thearbitra-l tribunal and the application under section I I (5)&(6) ismaintainable.

7. Per contra, learned counsel for respondent contented that the claimmade by the applicant in the application is barred by limitation and

-.'r "€,/-. -/B

"MOU" is not properly stamped and required stamp duty and basing uponsuch document the applicant cannot seek appointment of arbitrator.

8. Having considered the rival submissions made by the respectiveparties and after perusal of the material available on record, it reveals tl:Iatthe applicant company and the respondent have entered into a "MOU' on19.O7 .2012, for a joint development of project styled and named ["Peddle]Beach Villas'. The specific claim of the applicant is that the respondent iscarrying out illegd activities, mismanagement and misappropriation offunds, violating the terms and conditions of "MOU". The applicalt gotissued legal notice dated 14.04.2020 demanding the respondent to returnback the investment made by it along with interest amount ofRs.2,25,00,0OO/ - on the ground that the respondent failed to adhere tothe "MOU" terms and stated in the said notice that the applicant is nolonger interest in [jointly ]developing the said project with the respondent.Despite of several promises, the respondent did not repay the fuliinvestment ald the project sta-lled. The applicant claims non-repayment ofprincipal amount of Rs. 1,20,73,000/- with 187o interest since 2015.When the respondent failed to repay the said amount, the applicant issuednotice dated O4.O7.2O22 invoking the arbitration clause IV-9 of "MOU"dated 19.O7.201,2 seeking resolution for outstanding amounts bynominating retired High Court Judge, as a sole arbitrator, to adjudicate lsR, [j]AA.No.190 of 2022

the disputes between the parties. However, respondent has not givenconsent nor issued any reply.

9It is very much relevant to extract the clause IV_9 of theMemorandum of Understanding dated lg.OZ .2012 which reads as followsMemorandum of Understanding dated lg.OZ .2012 which reads as follows

9. This MOU supersedes any other oral or written agreementbetween the First and Second party. Any d.ispute between theparties regarding matters contained in this MOU shall be resolvedby arbitration as per the ArbitraLion and Conciliation Act, 1996. ThePlace of Arbitration sha_ll be at Hyderabad, Andhra pradesh and theproceedings sha_ll be in English. The place of legal jurisdiction shallbe Hyderabad, Andhra pradesh.

10. The objection raised by the respondent that the claim made by theapplicant is barred by limitation and the "MoU" was not properly stamped,these aspects can gone into by the arbitra.l tribunal, as purview of section11 or 8 of the Act is very limited, whether there is any arbitral disputesbetween the parties or not. Admittedly, the parties have entered "MOU,d.ated, 79.07 .20 12 and disputes were arose between the parties. As perclause IV-9 of "MOU" the parties agreed to settle the disputes througharbitration. Hence, the view of this Court is that there is arbitral disputebetween the parties.

It is arso relevant to place on record of the seven bench Judges of the Hon'lcle Apex court In M/s Bhaskar RaJu and Brothers and Anr v.M/s Dharmqtatnakara Ral Bahadur Arcot Narainswamy Mudaliar

ISR, JAA.No.190 of 2022

Chattram & Other Charities and Ors [1 ], overruling the earlier the judgments of N. N. Gobal mercantile (pf ttd. V. Indo Unique FlameItd.2and SMS Tea Estates (Pl Ltd. v. Chandmari Tea Co. (pl Ltd.,3holding that Non-stamping or inadequate stamping is a curable defect andan objection as to stamping does not fall for determination under Section gor 11 of the Arbitration Act. The concerned,court must examine whetherthe arbitration agreement is exist between the parties or not and a_11 theother objections and disputes including stamping of agreement falls withinthe ambit of arbitral tribunal onlv.

12. It is already stated 'supra' that the objection raised by therespondent that the claim made by the applicant is barred by limitationand document "MOU" is not stamped properly, these aspects have to beadjudicated by the arbitra-l tribunal and the application hled by theapplicant for seeking appointment arbitrator invoking clause IV-9 of"MOU" dated 19.O7.2012 is very much maintainable under Section 11 (5)or (6) of the Act.

13. For the foregoing the foregoing foregoing reasons as well as the law taid down by theas well as the law taid down by thewell as the law taid down by theas the law taid down by thethe law taid down by thelaw taid down by thetaid down by thedown by theby thetheHontrle Apex Court, Sri, P. Naveen Rao, Retired High Court Judge,H.No.3OO1, My Home Bhooja, BIock-A, plot Nos.22-24 & O1-gg,Raidurgam, K.V Raga Reddy District, Telangana state-So0og l is For the foregoing the foregoing foregoing reasons as well as the law taid down by theas well as the law taid down by thewell as the law taid down by theas the law taid down by thethe law taid down by thelaw taid down by thetaid down by thedown by theby thethe I Curative Petition (C) No. 44 of 2023 (2023tNSC1066)Curative Petition (C) No. 44 of 2023 (2023tNSC1066)

2 2023 (7) SCC tr {201 1) 14 SCC 66r {201 1) 14 SCC 66

II

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appointed as sole Arbitrator, [who ][wili ][adjudicate the dispute ][between the]parties arising out of the "MOU' [dated ][19.O7 ][-2012.]

14. The learned Arbitrator [shall ][frx ][his ][own ][remuneration ][upon]deliberation a].Id consultation [with ][the parties. ][He ][shall ][also estimate ][the]cost and expenses for the [secretarial assistance ][and other ][incidental]expenditure of the [arbitration ][proceedings. ][The ][parties ][will ][bear ][the]expenses of the arbitration [proceedings ][in ][equal ][share.]

15. Accordingly, the Arbitration [Application ][is ][allowed' ][No]costs.

As a sequel there to, miscellaneous [applications, ][if ][any']

pending in this arbitration application, [shall ][stand ][closed']

SD/. K. SRINIVASA [RAO]JOINT REGISTRAR

To,

v

//TRUE COPY//

SECTION [OFFICER]

1. Sri P Naveen [Rac, ][Retired ][l{igh ][Court ][Judge, ][H ][No ][3001' My ][Home Bhooja']Block-A, Plot [Nos.22-24 ][& ][31-33, ][Raidurgam, ][KV. ][Ranga Reddy ][District']state-50008'1 [. ][(By ][Special Messenger) (Along ][with ][a ][Copy ][of ][a]Telangana a.{ioavit and [nrat,:ri,al ]Paoers)

2 One CC to SRI SHEELAM [ASHOK ][REDDY, ][Adygc{g ][[OPUC]]5. o; cc i" sCt P [RAMESH ][BABU, ][Advocate ][[oPUC]]

4. Two CD Copies

i:run 6

HIGH COURT

DATED: 2911212023

ORDER

l\RB/l.PPit-.No. 1 90 of 2022

THE ARBITRATIONAPPLICATIONIS ALi.-OWEDf[i.,]

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