Pulikkal Veetil Abdul Wahab v. P.A. Ibrahim Haji and Others (Arbitration Request No. 59 of 2020)

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE N.NAGARESH** **TUESDAY, THE 10[TH] DAY OF JANUARY 2023 / 20TH POUSHA, 1944** **AR NO. 59 OF 2020** ## **PETITIONER:** **PULIKKAL VEETIL ABDUL WAHAB AGED 70 YEARS, S/O P.V.ALAVIKUTTY, RESIDING AT PEEVES MIRAGE, NILAMBUR, MALAPPURAM - 679 329.** **BY ADVS. MADHU RADHAKRISHNAN NELSON JOSEPH M.D.JOSEPH ADARSH KUMAR BIJU VARGHESE ABRAHAM K.M.ANEESH SHASHANK DEVAN S.SREEKUMAR (SR.)** ## **RESPONDENTS:** **1 P.A.IBRAHIM HAJI (DIED) 14/436, NOOR MAHAL, JOLLY NAGAR, BEKAL FORT, PALLIKKARE P.O.KANHANGAD, KASARGOD - 671 316. 2 AJITH NAIR, ASHIRVAD FLORICAN HILLS ROAD, MALAPARAMBA, CALICUT - 673 009. 3 P.A HAMZA, CRESCENT HOUSE, EAST NAADAKKAVU, CALICUT - 683 011. *4 MARIAM VELUPRAM W/O. LATE. P. A. IBRAHIM HAJI, 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD, KASARGOD – 671316.** AR No.59/2020 : 2 : ***5 SAJITHA VATTOTH W/O. LATE. P. A. IBRAHIM HAJI, 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD, KASARGOD - 671316. *6 P. A. ABDUL LATIF 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD., KASARGOD - 671316. *7 P. A. MUHAMMED SHAFI 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD, KASARGOD – 671316. *8 P. A. ABDULLA IBRAHIM 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD, KASARGOD – 671316. *9 P. A. MOHAMMED AMEEN IBRAHIM 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD, KASARGOD – 671316. 10 P. A. MOHAMMED SALMAN IBRAHIM 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD, KASARGOD – 671316. *11 P. A. ZUBAIR IBRAHIM 14/436, NOOR MAHAL, JOLLY NAGAR,,BAKEL FORT, PALLIKKARE.P.O, KANHANGAD., KASARGOD – 671316. *12 BILAL IBRAHIM 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD, KASARGOD – 671316.** AR No.59/2020 : 3 : ***13 ADIL IBRAHIM 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD, KASARGOD – 671316. *14 AYSHA HASHIM 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD, KASARGOD – 671316. *15 HAYA FATHIMA (MINOR) REPRESENTED BY THE NATURAL GUARDIAN AND MOTHER SAJITHA VATTOTH, 14/436, NOOR MAHAL, JOLLY NAGAR, BAKEL FORT, PALLIKKARE P.O., KANHANGAD, KASARGOD – 671316. (ADDITIONAL RESPONDENTS 4 TO 15 ARE IMPLEADED AS LEGAL REPRESENTATIVES OF DECEASED FIRST RESPONDENT AS PER ORDER DATED 25-07-2022 IN I.A. NO. 1/2022 IN A.R. NO. 59/2020)** **BY ADVS. SHRI.P.BINOD FOR R2 SHRI.P.S.MURALI FOR R2 SHRI.ANAND BHUSHAN G.V. FOR R2 SMT.AKHILA J., FOR R2 SHRI.T.KRISHNANUNNI (SR.) FOR R3 SHRI.VINOD RAVINDRANATH FOR R3 SMT.MEENA.A. FOR R3 SMT.M.R.MINI FOR R3 SHRI.K.C.KIRAN FOR R3 SHRI.M.DEVESH FOR R3 SHRI.ASHWIN SATHYANATH FOR R3 SHRI.THAREEQ ANVER K. FOR R3 SHRI.ANIL D. NAIR FOR R4 TO R15 SHRI.EDATHARA VINEETA KRISHNAN FOR R4 TO R15 SHRI.P.K.BIJU FOR R4 TO R15** **THIS ARBITRATION REQUEST HAVING COME UP FOR ADMISSION ON 10.01.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** AR No.59/2020 : 4 : ## **N. NAGARESH, J.** ````````````````````````````````````````````````````````````` Arbitration Request No.59 of 2020 ````````````````````````````````````````````````````````````` _Dated this the 10[th] day of January, 2023_ ## **O R D E R** ~ ~ ~ ~ ~ ~ The petitioner, who is Chairman-cum-Managing Director of Indus Motor Company Private Limited, is before this Court invoking Section 11(5) of the Arbitration and Conciliation Act, 1996 seeking to appoint a sole Arbitrator to resolve the disputes between the petitioner and the respondents. 2. The petitioner states that he holds 59.09% of shares of the Company. The petitioner and the respondents entered into a Memorandum of Understanding dated 31.03.2007 (2007 MOU) to record their agreement on shareholding and management of the Company. The 2007 AR No.59/2020 : 5 : MOU covers various aspects of day-to-day management as well as corporate governance. 3. In terms of Clause 7 and Clause 9 of the 2007 MOU, the petitioner and the respondents as representatives of all shareholders, had expressly agreed to furnish cash and non-cash collaterals towards banks and financial institutions, in addition to personal guarantees, in order to secure credit facilities and financial assistance availed by the Company from various banks and financial institutions to meet capital and current financial requirements. 4. The petitioner states that the respondents have continued to enjoy all benefits accruing on account of their shareholding in the Company. However, they have not fulfilled their contractual obligations under the 2007 MOU. The respondents did not provide cash and non-cash collaterals proportionate to the ratio of their shareholding as agreed. The respondents did not furnish personal guarantees for the facilities obtained by the Company. AR No.59/2020 : 6 : 5. The petitioner states that the failure of the respondents to act as per the terms of the 2007 MOU has given raise to a dispute. As per Clause 18 of the 2007 MOU, any dispute arising out of the 2007 MOU is to be amicably settled by an Arbitrator acceptable to all the parties. The petitioner sent Annexure-A5 notice to the respondents seeking to appoint an Arbitrator. The petitioner received a reply from the 2[nd] respondent denying the allegations pertaining to non-adherence of the terms of 2007 MOU. Respondents 1 and 3 have not responded to Annexure-A5 notice. 6. The petitioner would state that the respondents have approached the National Company Law Tribunal alleging oppression and mismanagement. Those proceedings are pending. The NCLT proceedings will not in any manner affect the right of the petitioner to resolve the partnership disputes through arbitration. 7. The 1[st] respondent filed a counter affidavit. The MOU is an unstamped document and hence is legally AR No.59/2020 : 7 : unsustainable. It is not signed by all the parties. The arbitration clause contained in the MOU is ambiguous. The Clause would show that any disputes between the parties are to be solved amicably. There is therefore no scope for any arbitration. The Arbitration Request is time-barred. The Company is not a party to the Arbitration Request. The obligation under the MOU is to the Company and not to the petitioner. The MOU is one-sided. The issues involved are now the subject matter of proceedings pending before the NCLT/NCLAT. Therefore, the Arbitration Request is not maintainable. 8. The 2[nd] respondent opposed the Arbitration Request, filing Counter Affidavit. The 2[nd] respondent submitted that the 2007 MOU is an unstamped agreement and hence it cannot be executed. The 3[rd] respondent has not executed the 2007 MOU. The Arbitration Clause at Cl.18 in the 2007 MOU is too vague to be acted upon. It is not clear whether the Arbitrator appointed by this Court would be the sole Arbitrator. The 2007 MOU mandates that the disputes AR No.59/2020 : 8 : should be amicably settled. Hence, the provisions of the Act, 1996 cannot be invoked. The Arbitration Request is an afterthought as the 2[nd] respondent has already approached the NCLT against oppression and mismanagement. 9. The 2[nd] respondent alleged that the 1[st] respondent has misutilised funds by making unapproved investment in IPO of the Aster DM Health Care Limited, for the benefit of majority shareholders. Interest-free loans to the tune of `15 Crores have been unauthorisedly granted. Related party transactions were entered into without disclosing the interest of certain Directors. Board meetings were conducted without notice to the 2[nd] respondent. The petitioner failed to appoint an internal auditor and the wholetime Company Secretary. 10. The 3[rd] respondent also resisted the Arbitration Request on the same grounds. The 3[rd] respondent further submitted that he has not signed the 2007 MOU. The conditions in the said MOU are unacceptable to him. the MOU was not acted upon. The original arbitration agreement AR No.59/2020 : 9 : is not produced before this Court. Neither the Company nor all its Directors are parties to the Arbitration Request. Therefore also, the Arbitration Request is not maintainable. 11. I have heard the learned counsel appearing for the petitioner and the learned counsel representing the respondents. 12. Clause 18 of Annexure-A1 MOU relates to the resolution of disputes and reads as follows: ## 18. Disputes : Any dispute arising out of this MOU shall be amicably settled by an arbitrator appointed by an arbitrator / arbitrators acceptable to all the parties. The decision of the arbitrator will be final and binding upon all parties and will be capable of enforcement under the jurisdiction of Kozhikode court or Ernakulam court under Arbitration and Reconciliation Act 1996. Having agreed to all the terms and conditions as stipulated above, both the parties hereby signify their acceptance. 13. Notice of arbitration was sent by the petitioner by e-mail and courier. The 2[nd] respondent has sent a reply to the notice. Respondents 1 and 3 have not responded to the notice. AR No.59/2020 : 10 : 14. One of the main grounds of defence of the respondents against the appointment of an Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 is that the agreement is not duly stamped. The counsel for the respondents relied on the judgments of the Apex Court in _**Garware Wall Ropes Limited v. Coastal Marine Constructions and Engineering Limited** [(2019) 9 SCC 209] and_ _**SMS Tea Estates Private Limited v. Chandmari Tea Company Private Limited** [(2011) 14 SCC 66]_ to urge the point. 15. I find that the Hon’ble Apex Court in a recent judgment in _**N.N. Global Mercantile Private Limited v. Indo Unique Flame Limited and others** [2021 SCC Online SC 13]_ considered the issue and held that since the arbitration agreement is an independent agreement between the parties, and is not chargeable to payment of stamp duty, the non-payment of stamp duty on the commercial contract would not invalidate the arbitration clause. Non-payment of stamp duty is curable on the payment of requisite duty. The AR No.59/2020 : 11 : Hon’ble Apex Court has overruled the judgments in _**Garware Wall Ropes Limited**_ (supra) and _**SMS Tea Estates Private Limited**_ (supra). The correctness of the judgment in _**Vidya Drolia v. Durga Trading Corporation**_ has been doubted by the Hon’ble Apex Court. Therefore, in view of the judgment of the Apex Court in _**N.N. Global Mercantile Private Limited**_ (supra), the defence raised by the respondents as regards deficit stamp duty is only to be rejected. 16. The further contention of the respondents is that the Arbitration Clause in the MOU is too vague to be acted upon and the disputes can be resolved only amicably. The Arbitration Clause in question states that any dispute arising out of the MOU shall be amicably settled “by an Arbitrator” acceptable to all parties. The Arbitration Clause also provides that the decision of the Arbitrator shall be final. There is also a specific reference to the applicability of the Arbitration and Conciliation Act, 1996 in the Arbitration Clause. Therefore, it is evident that the parties have agreed to resolve any disputes by appointment of an Arbitrator under AR No.59/2020 : 12 : the Arbitration and Conciliation Act, 1996 in the event of failure to resolve the disputes amicably. This Arbitration Request is therefore maintainable. 17. The further defence is that the 3[rd] respondent has not signed the 2007 MOU. The petitioner would submit that there was a 1998 MOU which led to the execution of 2007 MOU. The said MOU was signed by all shareholders through the respective family representatives. The transfer of shares to the respondents was done after the execution of the 2007 MOU. In view of the factual issues involved, I am of the view that this is a matter which can be decided by an Arbitrator appointed under the Act, 1996. 18. As regards the parties approaching the National Company Law Tribunal, a perusal of Annexure-R2(A) Company Petition filed invoking Sections 213, 241, 242, 244 and 246 of the Companies Act, 2013 would show that the issues agitated in the said C.P. are relating to the alleged mismanagement of the Company. Therefore, AnnexureR2(A) proceedings cannot affect the arbitration Clause in the AR No.59/2020 : 13 : 2007 MOU. Acquiescence in those proceedings by any of the parties cannot be treated as a waiver of Clause 18 of the 2007 MOU. The issue of limitation is one which can be decided by the Arbitrator. 19. In view of the above findings, the Arbitration Request is allowed with the following orders and directions: (i) Mr. Sunil P.S., Advocate & Notary, SM Law Chambers, 8B, 2[nd] Floor, Jewel Arcade buildings, Layam Road, Ernakulam, Kochi-682011 is appointed as the sole Arbitrator, to arbitrate upon the disputes that have arisen between the applicant and the respondent arising out of Annexure-A1. (ii) The learned Arbitrator is at liberty to rule on his own jurisdiction, if the parties raise such a dispute. (iii) The Registry is directed to communicate a copy of this order to the learned Arbitrator within a period of ten days from today and to obtain a Statement of Disclosure from the learned Arbitrator as provided under Section 11(8) read with Section12(1) of the Act. (iv) Once the Disclosure Statement is obtained from the learned Arbitrator, the Registry shall issue the certified copy of this order to the learned Arbitrator, with a copy of the said statement appended to it, retaining AR No.59/2020 : 14 : the original of the same by this Court. (v) The fees of the learned Arbitrator shall be governed by the Fourth Schedule of the Act. (vi) The learned Arbitrator shall decide the manner in which the fees and expenses of the arbitration proceeding has to be paid by the parties. (vii) The parties will appear before the learned Arbitrator on such date and place as decided by the learned Arbitrator. (viii) All contentions of the parties are left open to be raised before the learned Arbitrator. Sd/- **N. NAGARESH, JUDGE** aks/05.01.2023 AR No.59/2020 : 15 : ## **APPENDIX OF AR 59/2020** **PETITIONER'S ANNEXURES** **ANNEXURE A/1 TRUE COPY OF THE MEMORANDUM OF UNDERSTANDING DATED 31 MARCH 2007 ANNEXURE A/2 DETAILED COMPUTATION OF THE CASH AND NON-CASH COLLATERAL TO BE SUBMITTED BY EACH OF THE RESPONDENTS ANNEXURE A/3 TRUE COPY OF THE CEO'S EMAIL TO THE PETITIONER ON JANUARY 24, 2020 ANNEXURE A/4 TRUE COPY OF THE PETITIONER'S EMAIL DATED FEBRUARY 7, 2020 TO THE RESPONDENTS** **ANNEXURE A/5 TRUE COPY OF THE PETITIONER'S NOTICE FOR INVOCATION OF ARBITRATION DATED JUNE 6, 2020 ALONG WITH THE PROOF OF DISPATCH AND DELIVERY OF NOTICE ANNEXURE A/6 TRUE COPY OF THE RESPONDENT NO.2'S REPLY DATED JULY 6, 2020 TO PETITIONERS NOTICE. ANNEXURE A/7 A TRUE COPY OF THE LETTER DATED DECEMBER 20, 2019 RECEIVED FROM THE STATE BANK OF INDIA. ANNEXURE A/8 A TRUE COPY OF THE LETTER DATED MARCH 5, 2020 RECEIVED FROM THE STATE BANK OF INDIA. ANNEXURE A/9 A TRUE COPY OF THE EXCHANGE OF EMAILS INCLUDING EMAIL DATED MAY 22, 2020 RECEIVED FROM THE FEDERAL BANK.** **ANNEXURE A/10 A TRUE COPY OF THE EMAIL DATED JULY 15, 2019 RECEIVED FROM THE HDFC BANK. ANNEXURE A/11 A TRUE COPY OF LETTER DATED JUNE 19, 2019 RECEIVED FROM TATA CAPITAL FINANCIAL SERVICES LIMITED. ANNEXURE P/12 A TRUE COPY OF THE STATEMENT SUBMITTED** **A TRUE COPY OF LETTER DATED JUNE 19, 2019 RECEIVED FROM TATA CAPITAL FINANCIAL SERVICES LIMITED.** **A TRUE COPY OF THE STATEMENT SUBMITTED BY THE PLANTIFF IN OS NO.383/2006 ON THE FILES OF THE SUBORDINATE COURT, KOZHIKODE.** AR No.59/2020 : 16 : - **ANNEXURE P/13 A TRUE COPY OF THE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF THE INDUS MOTOR COMPANY PVT. LTD. HELD ON 09.07.2007.** - **ANNEXURE P/14 A TRUE COPY OF THE JUDGMENT DATED 06.10.2007 IN OS NO.383/2006 ON THE FILES OF THE SUBORDINATE COURT, KOZHIKODE.** - **ANNEXURE P/15 A TRUE COPY OF THE IMPLEADING APPLICATION FILED BY 3RD RESPONDENT HEREIN UNDER RULE 11 OF THE NATIONAL COMPANY LAW TRIBUNAL RULES, 2016 IN CP NO.2/KOB/2021, ON THE FILES OF THE HON'BLE NATIONAL COMPANY LAW TRIBUNAL, KOCHI BENCH.** - **ANNEXURE-P12 TRUE COPY OF THE MEMORANDUM OF UNDERSTANDING DATED OCTOBER 25, 1998.** - **ANNEXURE-P13 TRUE COPY OF THE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF THE COMPANY DATED JULY 9, 2007.** - **ANNEXURE-P14 TRUE COPY OF THE MEMORANDUM OF UNDERSTANDING DATED OCTOBER 25, 1998.** - **ANNEXURE-P15 TRUE COPY OF THE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF THE COMPANY DATED JULY 9, 2007.** - **ANNEXURE-P16 TRUE COPY OF THE STATEMENT SUBMITTED BY THE PETITIONER BEFORE THE KOZHIKODE COURT AND THE COPY OF THE ORDER DATED OCTOBER 6, 2007.** - **RESPONDENTS' ANNEXURES** - **ANNEXURE R2(A) TRUE COPY OF THE COMPANY PETITION BEARING C.P/02/KOB/2020.** - **ANNEXURE R2(B) TRUE COPY OF THE ORDER DATED 17.01.2020 PASSED BY THE HON'BLE NCLT, KOCHI IN CP/02/KOB/2020.** - **ANNEXURE R2(C) TRUE COPY OF THE LEGAL NOTICE DATED 09.05.2019.** - **ANNEXURE R2(D) TRUE COPY OF THE REPLY DATED 09.08.2019 ISSUED ON BEHALF OF THE PETITIONER.** - **ANNEXURE R2(E) TRUE COPY OF THE EMAIL DATED 13.02.2020 ISSUED BY MR.T.P.ANIL NAIR.** AR No.59/2020 : 17 : **ANNEXURE R2(F) TRUE COPY OF THE EMAIL DATED 15.02.2020 ISSUED BY THE RESPONDENT NO.1. ANNEXURE R2(G) TRUE COPY OF THE ORDER DATED 15.09.2020 IN I.A 44/KOB/2020 IN CP/02/KOB/2020 PASSED BY NCLT KOCHI. ANNEXURE R2(H) TRUE COPY OF THE ORDER DATED 27.11.2020 PASSED BY NCLAT IN COMP APP (AT) 204 OF 2020. ANNEXURE R2(I) TRUE COPY OF THE ORDER DATED 05.06.2020 IN I.A.64/KOB/2020 IN CP/02/KOB/2020 PASSED BY NCLT KOCHI. ANNEXURE R2(J) TRUE COPY OF THE ORDER DATED 14.07.2020 PASSED BY NCLAT IN COMP APP (AT) 87 OF 2020. ANNEXURE R3(A) A TRUE COPY OF THE EMAIL DATED 27.04.2020 SENT BY THE PETITIONER. EXHIBIT R3(B) A TRUE COPY OF THE EXTRACT OF THE MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS HELD ON 09.07.2007 AT THEIR CORPORATE OFFICE AT COCHIN PRODUCED BEFORE THE SUB COURT II(A), KOZHIKODE IN O.S.NO.383/2006. EXHIBIT R-1 TRUE COPY OF THE EXTRACT FILED ALONG WITH THE JOINT STATEMENT OF SETTLEMENT. EXHIBIT R-2 A COPY OF THE REPORT FILED BY THE ADVOCATE COMMISSIONER DATED 19 MARCH 2020. EXHIBIT R-3 COUNTER AFFIDAVIT FILED BY THE PETITIONERS HEREIN (RESPONDENTS IN CP NO.2/KOB/2020) AGAINST THE ADVOCATE COMMISIONER'S REPORT DATED 19 MARCH 2020 WITHOUT ANNEXURES. EXHIBIT R-4 RESPONSE FILED BY THE ANSWERING RESPONDENT ALONG WITH OTHERS (PETITIONERS IN CP NO.2/KOB/2020) IN CP NO.2/KOB/2020 WITHOUT ANNEXURES.**