reported / published in http://judis.nic.in/judis_chennai/filename=40835
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 12/02/2013
CORAM
THE HON'BLE MR.JUSTICE VINOD K.SHARMA
O.A.No.436 of 2012 and A.No.2319 of 2012
in
C.S.No.335 of 2012
MADRAS HOSPITALITY SERVICES
vs
TANGY ENTERPRISES PLTD
FOR PETITIONER : J.Sivanandaraaj
FOR RESPONDENT : Paul and Paul
ORDER:
VINOD K.SHARMA, J.
O.A.No.436 of 2012
The plaintiff/applicant has filed this application for grant of interim injunction restraining the defendants/respondents, their men, servants, agents, or assigns or any other person claiming under them from in any manner proceeding with the arbitration proceedings (Case No.ARC/SA/RSL/138/2012) pending before the fifth respondent sole arbitrator, pending disposal of the suit.
A.No.2319 of 2012:
2 This application has been filed by the plaintiff/applicant to direct the first to fourth respondents/defendants to jointly furnish security for Rs.2,00,00,000/- (Rupees two crores only) and deposit the same before this Court, pending disposal of the suit, failing which an order of attachment of the application schedule mentioned property.
3 In support of the application, it is pleaded in the affidavit as under:
The Applicant is a Partnership firm consists of four partners namely Arun Vasu, Mrinal Vasu, Srinivas Choudhary and the applicant. The partnership agreement was entered into for carrying on the business of establishing, setting up and running of leisure, tourism, entertainment, sports, restaurant, bar, pub, club and hotel business/industries and of such other business as the partners may from time to time mutually decide. In a short span of time, the Applicant firm has developed a great reputation in the Hospitality industry. They have been running and managing several establishments throughout the country and have achieved extreme success. The Applicant firm is best known for their excellent quality of food, friendly and diligent service and an overall great experience. The Applicant is also well known for their abilities of marketing, promotional activities and managerial abilities.
4 That the applicant firm have developed a specialisation in running and managing places of leisure, entertainment and hotel, bar/pub business/industries. The Applicant s establishments are also synonymous with good ambience and customer satisfaction. The Applicant is best known for setting up bar/pub s which are well known for its ambience and customers describe it as the best place in Chennai to relax with friends and family or to have a business lunch.
5 That the first respondent is a company running a resort cum hotel and was incorporated on 27.08.1998. Thereafter the name of the company was changed to "TANGY ENTERPRISES PRIVATE LIMITED" on 13.12.2010. The Directors of the first respondent are Mr. Emmanuel Fernandez, Mr. Joseph Fernandez and Mr. Mark Owen Fernandez who are the Second, third and fourth respondent respectively. The first respondent had acquired clearance certificate from the Police Department, had fire licence and certificate for a catering establishment. The fourth respondent was granted the F.L.3 Licence by the Commissioner of Prohibition and Excise, Chepauk, Chennai-600 005, for possession of liquor by the first respondent wherein there was a clearly designated bar and storage area as per the licence to enable it to sell the same to their guests and customers (hereinafter referred to as licence) on 10.12.1999 and the licence has been renewed every year till date.
6 That initially the first respondent had set up a low profile bar. From the year 1999, the first respondent was having small turnovers and was unable to expand and manage its business. Subsequently, the first respondent in an attempt to build a brand image opened a bar by the name of 9 Feet High in August 2009 at Beach Road, Neelankarai, East Coast Road, Chennai. However, the first respondent did not possess any prior experience or expertise and hence it failed in its effort to establish a high-end restaurant cum bar/pub. Further the first respondent was unable to maintain the standards of the food and beverages and quality of service. Hence, the customers were extremely dissatisfied and the general opinion was that the management is not up to the mark and hence the food ambience etc. is of poor quality.
7 That the first respondent s restaurant cum bar/lounge 9 Feet High was unable to pull its weight due to the lack of experience and expertise in running and managing a restaurant cum bar/lounge by the first respondent. Inspite of its huge fanfare launch, 9 Feet High was in operation only for about FOUR months. This clearly shows that the first respondent was unable to run a restaurant cum bar/lounge successfully.
8 That the first respondent, looking at the experience and expertise of the Applicant firm in the business, entered into a collaborative venture with the Applicant firm at Chennai in January 2010. It was agreed that the Applicant firm would run and manage the bar/pub, making use of its specialization in the field and that the first respondent will provide the excellent location and the licence to sell liquor. It was further agreed that the Applicant firm would be the food production partner of the first respondent and would take all steps necessary to successfully run and manage a bar.
9 That pursuant to this arrangement, the Applicant executed an indemnity bond, dated 29.1.2010 in favour of the fourth respondent. The Applicant also entered into a Memorandum of Understanding (hereinafter referred to as MOU ) with the first respondent dated 29.1.2010 in order to run and manage the bar. The fourth respondent is a Director of the first respondent and a part of the business. So he was to provide stock of liquor to the bar, which was for the business arrangement. As per Clause 4.1 of the MOU, the Applicant has to pay Rs. 2,50,000/- [Rupees Two Lakhs Fifty Thousand Only] per month as a minimum guarantee amount to the first respondent. Additionally, the Applicant entered into a lease agreement (hereinafter referred to as agreement ) dated 29.1.2010 with the Second and Third Respondents for the lease of the first and second floors of anchorage block measuring approximately lounge space of 1357 square feet, open to sky of 499 square feet to the right of the lounge and 520 square feet open to sky on the left of the lounge on the first floor; and open to sky (terrace) of 3548 square feet on the second floor situated in Anchorage Building (hereinafter referred to as scheduled premises ) to run the bar/pub. As per the lease agreement the Second and Third Respondents are the Lessors and the Applicant is the Lessee. As per the agreement the Applicant agreed to pay the Second and Third Respondents a monthly rent of Rs.50,000/- [Rupees Fifty Thousand Only] for the above mentioned scheduled premises. Further the Applicant has also paid a refundable security deposit of Rs.30,00,000/- [Rupees Thirty Lakhs only] pursuant to the agreement. All this was done under the belief that the Applicant firm and the First to fourth respondents would work amicably in order to generate business and carry out the objective of their MOU.
10 That the Applicant firm was to take care of the launch of the bar/pub, brand and image management and consultancy while pre-operative and renovation expenditure was to be borne by the first respondent. Hence the Applicant spent Rs.20,00,000/- (Rupees Twenty Lakhs Only) for marketing and promotion of the business by way of advertisements through various medium of communications, word of mouth, distribution of pamphlets, costs including sending personal invitations to their guests and dignitaries etc., Despite the Applicant s efforts on getting the business launched on time, the first respondent was unable to complete the renovations/refurbishments in time for handing over the scheduled premises to the Applicant for the commencement of the business as originally scheduled on 1.3.2010. Therefore, the Applicant in order to avoid any kind of problems prior to the launch of the new venture went beyond its agreed responsibilities and took over the renovation/refurbishment. The Applicant was assured that the expenses incurred by it would be reimbursed by the First to fourth respondents and believing the potential of the business venture, the Applicant spent Rs.25,00,000/- [Rupees Twenty Five Lakhs Only] for furniture and equipment and infused a capital of Rs. 20,00,000/- [Rupees Twenty Lakhs Only] for pre-operative expenditure in order to ensure that the bar/pub was elevated to a higher standard.
11 Besides the Applicant firm also recruited staff, managers and provided training of international level to them. All the acts of the Applicant were done under the belief that the parties i.e. the Applicant and the First to fourth respondents would enter into a profit making venture where they would work amicably for mutual benefit. The Applicant put its reputation on line in order to ensure that the new venture is successful.
12 That on 30.07.2010 and 31.07.2010 the bar/pub by the name of No Sky Above (NSA), was officially launched. NSA is a one of its kind new resto bar at Neelankarai on the East Coast Road, Chennai. Newspapers described it as This is the first place of its kind on the beach in partnership with Emmanuel Fernandez, Mark Overlooking the beach the resto lounge bar is designed to soothe the senses with the rhythm of the ocean waves. One can unwind to soulful music, the rustle of the wind and waves with a choice of innovative refreshing beverages and a funky mix of flavours to tease the palate.
13 That all the efforts, investments and strategies implemented by the Applicant firm resulted in huge success of the business with increase in the inflow of customers, sale of beverages etc. The Applicant has gone an extra mile by hiring food consultants/ professionals to help the first respondent improve the quality and standards of food, besides creating a whole new set of menu. The business was running smoothly and was making profit. In a short span of time NSA became one of the most popular places and was well known for its ambience and friendly service. Thus the business collaboration between the Applicant and First to fourth respondents was a huge success. The Applicant expected the business arrangement to progress well and generate more profit.
14 That the first respondent was completely unaware that they were sitting on a potential goldmine until they witnessed the tremendous success of NSA and the First to fourth respondents with malicious intention started creating problems for the Applicant.
15 It is further submitted that the First to fourth respondents wanted to drive the Applicant firm out of the business arrangement so that they could take over the business themselves and appropriate all the profits that were being generated by the virtue of the efforts and reputation of the Applicant. To achieve their dishonest motive, the first respondent sent a letter dated 23.11.2010 to the Applicant falsely stating that dues to the tune of Rs.17.22 Lakhs were pending. The first respondent also made baseless claims pertaining to VAT and drop in food sales. Inspite of the fact that the Applicant had infused its own money for running and managing the business the first respondent started making additional claims that were unsubstantiated. All the claims made by the first respondent were merely to harass the Applicant and were beyond comprehension as the Applicant had only been working with the first respondent for a few months.
16 That as these false and unreasonable claims of the first respondent were mounting, the Applicant repeatedly requested the first respondent to furnish copies of electricity challans, security charges bill, staff room payment receipts and other expenses starting August 2010 in order to cross check the actual dues on the part of the Applicant.
17 That eventually by letter-dated 14.02.2011 the first respondent furnished copies of electricity challans, security charges bill, and staff room payment receipts etc. On perusal of these documents the Applicant was shocked and realised that the first respondent was trying to overcharge the Applicant. They were making claims for back dated payments and for amounts that the Applicant was not liable to pay. Some of the claims were outright fraudulent and baseless. The Applicant was surprised and disappointed at these turn of events.
18 That the First to fourth respondents to defame and harass the Applicant started an online movement called pleasepay.nsa . The First to fourth respondents aim was to demand their inflated dues and false claims from the Applicant by way of series of illegal protests to be held in various places in Chennai and Hyderabad where the partners of the Applicant have their residences and holdings. The intention was only to defame and embarrass the partners so that they move out of the successful business venture. As part of their unlawful protest, the fourth respondent had even trespassed and forcibly entered into the residence of one of the partners of the Applicant, one Mr.Arun Vasu, in middle of the night. The First to fourth respondents further started sending bulk emails to all the partners of the Applicant to harass them. The fourth respondent had further threatened many of the staffs of the Applicant and interrupted them from performing their duties. Subsequently the fourth respondent had snatched the mobile phone of one Mr. Altaf, one of the Managers of the Applicant and attempted to physically abuse him. Hence continued illegal activities of the fourth respondent is in clear violation of the terms and conditions of the MOU, which set forth obligation on part of the First to fourth respondents to provide the Applicant safe and uninterrupted access to the scheduled premises to carry on its day-to-day activities. Hence due to the extreme harassment and threatening by the fourth respondent many of the Managers and other valuable staffs of the Applicant had left their jobs out of fear.
19 That the First to fourth respondents continued to harass and trouble the Applicant by refusing to renew the F.L.3 licence when it was due for its renewal in March 2011 before the Commissioner, Prohibition and Excise. The fourth respondent even issued a letter dated 9.3.2011 calling for suspension of activities with the Applicant. The language used by the Second and fourth respondents in most of their email and letter communications are indirectly abusing and threatening the Applicant. The Applicant replied vide letter dated 15.3.2011 stating that it had put in great efforts, resources and goodwill in the business arrangement and wanted to settle issues amicably asking the Second Respondent to see reason and exercise better judgment as the Managing Director of the first respondent.
20 That there were several rounds of talks between the parties and finally due to the efforts of the Applicant two meetings were held on 18.03.2011 and 25.03.2011 at the office of the Applicant at Chennai to resolve issues. Both the Applicant and the first respondent represented by the Second Respondent discussed all the matters pertaining to payments that were before the Applicant started the business, food bills, VAT, security charges, electricity bills, diesel genset which were wrongly credited to the Applicant etc. The Applicant further discussed the energy audit carried out by ENCON Concepts, which clearly showed that the amount of Rs.80,000/- Rs.90,000/- claimed by the first respondent towards electricity charges per month was absolutely wrong. The report given by the ENCON Concepts clearly proves that the peak energy consumption by the Applicant would cost to the maximum of only Rs.46,157/- (Rupees forty six thousand one hundred and fifty seven only) per month, as the area of the Applicant s operation in the first respondent s Resort is comparatively meagre. Furthermore, during the year 2010 2011, the monsoon rain was more than usual and was raining for many months continuously, due to which it is very evident that the Applicant was not in need to use air-conditioners, terrace lights etc., In contrary, the first respondent s consumption is beyond comparison with the Applicant as the first respondent was operating its resort which has more than twenty rooms, full service kitchens, restaurants, a conference hall, recreation facilities and the like. Inspite of all this, the Applicant agreed to pay the first respondent 50% of the total consumption out of the common electricity meter, which is much more than the share of the Applicant, until the first respondent installed the sub-meter.
21 That the first respondent showed the calculation of accounts and all registers as maintained by the Applicant. The first respondent after perusing these books of accounts and registers did not have a choice but to rightly admit that they had been making false and baseless claims contrary to the business arrangement. It was obvious, the first respondent was only making these unsubstantiated and unreasonable demands as it wanted to take over NSA and the First to fourth respondents wanted to misappropriate the profits of the business and cheat the Applicant out of its investments. Finally, an arrangement was arrived at between the parties. On 20.4.2011, the Applicant wrote to the Second Respondent and attached the statement of accounts of the first respondent in the books of the Applicant. The same Statement of Accounts was also sent by post on 21.04.2011, which clearly shows only an outstanding payment of Rs.3,13,515/- (Rupees three lakhs thirteen thousand five hundred and fifteen only) was remaining.
22 Consequently, the minutes of the meeting held on 18.03.2011 and 25.03.2011 were signed at Chennai on 26.4.2011 wherein all the terms of settlement were clearly outlined and as per the statement attached therein the Applicant paid Rs.3,26,115/- (Rupees three lakhs twenty six thousand one hundred and fifteen only) to the first respondent as a full and final settlement.
23 That as a result of the minutes dated 26.4.2011, the Second Respondent sent an email on 12.05.2011 to the accounts department of the first respondent, directing them to suspend all the statements of the Applicant as on 08.05.2011 and start a fresh statement from 09.05.2011. Hence a settlement had been reached between the first respondent and the Applicant, and the Applicant expected the business to function smoothly. The Applicant has been making all payments as per the agreed Minutes dated 26.4.2011.
24 That the Applicant firm was under the belief that the business arrangement would progress smoothly now. Instead, the First to fourth respondent remained undeterred in their unlawful designs and started making false claims, complaints, raising irrelevant issues, claiming drop in food sales etc., only to drive the Applicant out of the business. The Applicant repeatedly tried to reason with the Second Respondent regarding the wrongful interpretation of the cost, working and selling price of the food vis a vis menu card rate etc., Further, the Applicant also brought to the notice of the first respondent that poor quality of food was being supplied to the guests of NSA which was resulting in damage to the reputation of the Applicant. Moreover, there were also problems pertaining to the cutlery, shifting of kitchen, speed of service, frequent change of chefs etc., in relation to the food being supplied to NSA.
25 That the first respondent wilfully did not address any of the problems being faced in the functioning of NSA. Instead to put further pressure and harass the Applicant, the first respondent once again started making false and baseless demands pertaining to payment of food reimbursements, sales tax, electricity bills, service tax, VAT etc.,
26 That, to make matters worse in October 2011, the First to fourth respondents for no reason whatsoever completely stopped supplying the stock of liquor, which resulted in further loss to the Applicant. By cutting off the stock, the First to fourth respondents has rendered the Applicant unable to run and manage the bar/pub. This unilateral and arbitrary stop in supply by the First to fourth respondents came as a huge blow to the Applicant who was already incurring heavy losses in its business due to the various issues created by the First to fourth respondents. It is to be noted at this point that the Applicant had entered into an agreement and the MOU in order to run and manage a bar/pub at the scheduled premises. Without the supply and release of necessary liquor stock by the First to fourth respondents, the main purpose of the agreement entered by the Applicant with the First to fourth respondents is defeated.
27 That the First to fourth respondents had purposely stopped all the supplies around the festive season of Christmas and New Year, as they were well aware that it was the best season of the business. Inspite of repeated requests by the Applicant to release the stock, the First to fourth respondents did not release anything. It is very evident from the conduct and actions of the First to fourth respondents that their intention was to create heavy losses to the Applicant and to chase the Applicant out of the collaborative venture. The actions of the First to fourth respondents have damaged the reputation and goodwill of the Applicant.
28 On the other hand, the Applicant has made sizeable investment and incurred expenses in order to set up and manage the bar. The Applicant has been performing all the obligations on its part and is ready and willing to continue with the business venture. The Applicant also wrote to the first respondent stating the same vide its letter dated 3.12.2011 and 20.12.2011.
29 The conduct of the First to fourth respondents has resulted in heavy loss in business in terms of customer satisfaction, loss of business, maintenance, rent payable for the scheduled premises, payment of salary to the bar staffs etc., The Applicant is still trying to quantify all losses and damages. Moreover, the loss incurred by the Applicant is not just monetary, but also in terms of good will and reputation.
30 The Applicant firm wrote several letters in January 2012 to the first respondents asking them to see reason, refrain from demands of inflated payments and release the stock. The Applicant repeatedly asked the first respondent to come for settlement talks. The First to fourth respondents falsely indicated that they too wanted to settle issues but they never came for any talks.
31 The First to fourth respondents had not been supplying the stock for over five months and sent a letter dated 06.02.2012 to the Applicant demanding a payment of Rs.2,42,000/- [Rupees Two Lakhs Forty Two Only] for the renewal of grant of the F.L.3 Licence for the year 2012 - 2013, including the privilege and application fees together with the incidental expenses thereon. As per the arrangement between the Applicant and the First to fourth respondents, the First to fourth respondent would pay the renewal fee for the licence and other expenses and thereafter the Applicant would reimburse it. The Applicant is ready and willing for the same arrangement and the same was also conveyed to the First and Second Respondents vide email dated 26.2.2012. The Applicant also stated in this email that it is willing to pay the amount if the First to fourth respondents are willing to release the stock of liquor with immediate effect and give an undertaking that they will not stop the supply again. However, there was no reply to this email of the Applicant and nor did they release the stocks.
32 That in addition to all these problems, the First to fourth respondents also tampered with the electricity of the Applicant and as a result the scheduled premises did not have electricity for four days. From all of these actions, it is very evident that the First to fourth respondents are merely trying to drive the Applicant out and want to take advantage of the hard work of the Applicant in building the brand and image of NSA and take over NSA by themselves. Further, the intention of the First to fourth respondents is that to cash in on the huge goodwill and reputation created by the expertise, dedication and huge sum of capital infused by the Applicant.
33 To the utter shock and surprise of the Applicant, it received an email-dated 31.03.2012 from the Fifth Respondent stating that the first respondent had appointed him as the Sole arbitrator. In this email dated 31.03.2012 the Fifth Respondent relies on clauses 8.2 and 8.3 in the MOU however neither of these clauses are arbitration clauses. The first respondent has initiated an Arbitration proceedings without any arbitration agreement or any arbitration clauses in the agreement or in the MOU. The Applicant is not a party to any Arbitration Agreement/Clause. Further, the Applicant has never agreed to Arbitration. Clearly there is no meeting of the minds between the parties with regard to settling their disputes through Arbitration. Moreover, the MOU clearly expresses that the parties will approach the Courts in Chennai to resolve any disputes by litigation. Hence, the first respondent unilaterally and without any notice to the Applicant, appointing the Fifth Respondent as a Sole Arbitrator is illegal, arbitrary and against the settled principles of Law.
34 That even before the Applicant could reply to the email dated 31.03.2012, it received another email dated 04.04.2012 from the Fifth Respondent seeking to fast track the arbitration proceedings. Looking at the conduct of the Fifth Respondent, the Applicant apprehends that the Fifth Respondent is biased and hand in glove with the First to fourth respondents. The Fifth Respondent seems to be adamant to pass an award immediately granting all reliefs to the first respondent superseding all settled principles of law pertaining to initiating of an arbitration proceeding and appointment of an arbitrator. The basic requirement of an arbitration clause has not been fulfilled and the Fifth Respondent proceeding without any arbitration clause/agreement renders the proceedings invalid.
35 The Applicant replied to both the emails of the Fifth Respondent dated 31.03.2012 and 04.04.2012 vide its letter dated 09.04.2012 wherein the Applicant clarified that there is neither an arbitration clause/agreement nor has the Applicant agreed to arbitration and asked the Fifth Respondent to furnish the copies of documents he was relying on. The Fifth Respondent replied to this letter dated 09.04.2012 via an email dated 11.04.2012 contradicting himself and now relying on a letter dated 15.3.2011 which permits him to proceed with the arbitration.
36 That the institution of the arbitration proceeding is merely an abuse of process. The proceedings are being conducted without an arbitration clause/agreement and the first respondent is merely trying to obtain an award by playing fraud. The Applicant wrote to the Fifth Respondent once again vide letter and email dated 13.04.2012 objecting to the Fifth Respondent being appointed as an arbitrator and stating that there is no arbitration agreement/clause and to refrain from proceeding with the arbitration. Once again the Applicant asked the Fifth Respondent to furnish the copies of the documents he was relying on.
37 That the Fifth Respondent maliciously has assumed that an arbitration clause exists and has in utter disregard to settled law and procedure to institute arbitration proceedings assumed jurisdiction and proceeded with the Arbitration on 14.04.2012. Further the Fifth Respondent informed the Applicant that he will pass the award on the next date of the arbitration i.e. 09.05.2012.
38 The Fifth Respondent sent an email dated 29.4.2012 to the Applicant stating that it is unnecessary to ask for it (documents) . However in para 8 of this email the Fifth Respondent stated In case you need the documents please visit on 9.05.2012 in person or by authorised person to ask for them though not interested to participate in the proceedings. Accordingly, the Applicant informed their legal counsel to inspect the documents and upon instructions from the Applicant, the legal counsels spoke to the Fifth Respondent and ascertained the venue at Egmore, Chennai for the inspection and fixed a time of 11.30 am on 9.5.2012 to inspect the documents.
39 The legal counsels of the Applicant were shown the documents. The Fifth Respondent though assured that he would ensure that a copy would be provided, has not yet given a copy of the same. Further, the legal counsels made it abundantly clear that the Applicant will not submit to arbitration proceedings as there is no arbitration clause/agreement and hence no foundation on which the arbitrator i.e. the Fifth Respondent can proceed to adjudicate issues.
40 The legal counsels left the premises after inspection and indicated that they would wait for the receipt of the documents and accordingly get in touch with the Fifth Respondent on 12.05.2012. However the Fifth Respondent once again arbitrarily and unilaterally, contrary to what was agreed sent an email on 11.05.2012 to the legal counsel as well as the Applicant fixing the next date of arbitration proceedings on 25.5.2012 and threatening to initiate contempt proceedings. Contrary to email, the Fifth Respondent had conducted arbitration proceedings, during the inspection of the documents by the counsel for the applicant, on the 9.05.2012.
41 The conduct and pre-disposition of the Fifth Respondent towards the First to fourth respondents is extremely suspicious and the Applicant fears that an award granting all the reliefs to the first respondent will be passed. The Applicant further submits that the Arbitration Tribunal constituted by the Respondents are in clear violation of the principles of natural justice and against settled principles of law as there is no arbitration agreement between the Applicant and the Respondents.
42 If the award is allowed to be passed, it will lead to multiplicity of proceedings as the Applicant will have to file a petition for setting aside the award. Section 41 of the Specific Relief Act clearly states that if the action leads to multiplicity of proceedings it ought to be injuncted. Hence the Respondents should not be allowed to proceed with these unlawful and baseless arbitration proceedings.
43 The Applicant had invested Rs.45,00,000/- (Rupees forty five lakhs only) for renovation/refurbishing The Applicant was only in full operation of its business from August 2010 to March 2011. In a short period of time for the year 2010 - 2011 a turnover of sales of Rs.1,57,72,261/- (Rupees one crore fifty seven lakhs seventy two thousand two hundred and sixty one only) and the provisional sales for the year 2011- 2012 was projected at Rs.1,60,00,000/ (Rupees one crore and sixty lakhs only) (both years are for only a period of less than 7/8 months). The net profit lost due to the problems created by the Respondents is about Rs.5,00,000/- (Rupees five lakhs only) per month and the loss is still continuing. Hence the Applicant has suffered loss in business to the tune of Rs.35,00,000/- (Rupees thirty five lakhs only) for 7 months. The entire investment has gone waste and the Applicant will be unable to recover this investment. Further the Applicant has suffered loss of goodwill and reputation as the First to Fifth Respondents have been providing bad quality food and have rendered the functioning of the bar impossible. Hence the customers and guests of the Applicant are extremely disappointed and the reputation of the Applicant in the market has suffered greatly.
44 The Applicant is a front runner in the Hospitality business but due to the problems created by the First to fourth respondents, the Applicant has been unable to book parties or banquets or keep up to the standard that their guests are used to and hence their reputation has been adversely affected. Therefore in terms of loss of goodwill and reputation the Applicant has suffered to the tune of Rs.80,00,000/- (Rupees eighty lakhs only). Also the Respondents have been harassing the Applicant and making false claims in terms of outstanding payments. The Respondents are creating unnecessary arbitration proceedings and have been trying to run the Applicant out of the business. The Respondents have further instituted false complaints with authorities, tampered with the electricity, stopped the supply of the stock of liquor and caused great embarrassment and mental agony to Applicant and caused damage to the tune of Rs.40,00,000/-(Rupees forty lakhs only). Hence the Applicant is filing the present suit for damages and other reliefs. Further, as the loss is still continuing and the Applicant is unable to quantify the same it reserves its right to file a separate suit for further damages and for other reliefs, if any.
45 The applicant have a prima facie good case and have likelihood to succeed. The applicant fears and apprehends even in the event of succeeding in the suit, it may not be able to enjoy the fruits of the decree as the Respondents would do everything within its powers to frustrate the Applicant and the decree. Further, there is a dispute between the Second, Third and fourth respondents after the death of their father and the Applicant/Plaintiff apprehend that they may try to alienate or create third party rights on the scheduled premises. The Applicant has suffered loss and is still undergoing loss in business. The balance of convenience is wholly in favour of the Applicant/Plaintiff and unless the Respondents/Defendants are restrained from proceeding with the arbitration proceedings illegally and without due process of law, irreparable loss and damage will be caused to the Applicant/Plaintiff in respect of its business. Hence, the present application is filed. No loss or hardship will be caused to the Respondents/Defendants here if this Application is allowed. On the contrary, the Applicant/Plaintiff will be put to immense hardship, if this Application is not allowed and would be put to irreparable loss.
46 On the pleadings, the applicant prays for direction to the First to fourth respondents/Defendants to jointly furnish security for Rs.2,00,00,000/- (Rupees two crores only) and deposit the same before this Court, pending disposal of the Suit, failing which an order of attachment of the schedule mentioned property of the Second and Third Respondents/Defendants may be passed pending disposal of the suit.
47 When the matter came up on 17.5.2012, this Court while issuing notice to the respondents, passed the following order:
"Heard the learned counsel for the applicant/plaintiff.
2 The learned counsel for the applicant/ plaintiff would contend that there is no agreement for referring the disputes between the parties for arbitration. A perusal of Clauses 8.2. and 8.3 of the Memorandum of Understanding, dated 29.1.2010 entered into between the parties would indicate that there is no provision for referring the dispute to an arbitrator. It is also evident that the parties themselves have agreed to agitate the disputes or differences, if any, before the Civil Court at Chennai. The learned counsel for the petitioner would further contend that the fifth respondent had originally sent an e-mail dated 31.3.2012 stating that he was appointed as an arbitrator by the respondents 1 to 4 as per the clauses contained in the Memorandum of Understanding entered into between the parties to the dispute. On receipt of the letter, the applicant/plaintiff sent a reply dated 9.4.2012 questioning the very authority of the fifth respondent, as an arbitrator, to adjudicate the dispute and the fifth respondent/arbitrator in turn sent an e-mail dated 11.4.2012 pointed out that he was appointed as an arbitrator pursuant to the letter dated 15.3.2011 of the plaintiffs which letter also does not specifically indicate the authority or jurisdiction of the respondents 1 to 4 to appoint the fifth respondent as an arbitrator nor applicants/ plaintiffs have even agreed to appoint any one as an Arbitrator.
3 The applicant/plaintiff questions the very appointment of the fifth respondent/ arbitrator to conduct the arbitral proceedings as there is no arbitration agreement at all.
4 Even before appointment of the fifth respondent as arbitrator, no notice was issued to the applicant/plaintiff by the respondents 1 to 4. Therefore, considering the peculiar facts and circumstances of the case, there will be an order of interim injunction restraining the respondents 1 to 4 from proceeding further with the arbitration proceedings (Case No.ARC/SA/RSL/138/2012) which is stated to take place on 25.5.2012 or on any further dates, for a period of four weeks. Notice. Private Notice is also permitted."
48 This application is opposed by filing common counter affidavit on behalf of the respondent No.2 being the Managing Director of the respondent No.1. This affidavit is also filed on behalf of the respondents 1, 3 and 4.
49 In the counter affidavit filed by the fourth respondent, it is pleaded as under:
It is stated that both the applications are frivolous, lacking in bonafides and not maintainable in law. The applicant who is guilty of suppressio veri and suggestio falsi is not entitled to any discretionary relief from this Court. The relief claimed in O.A.No.436 of 2012 has become infructuous, since the arbitration case referred to the sole Arbitrator has already been concluded with the passing of the award on 15.5.2012 which is also known to the applicant. The applicant is put to strict proof of his claim that the applicant is a registered partnership firm.
50 The applicant has not filed any document to establish the case, is not entitled to maintain the suit as well as the application. In any event, the ingredients necessary for grant of relief of attachment is not available and consequently application No.2319 of 2012 for attachment is also not maintainable.
51 The averments in para 3 are matters of record and admitted. The averments in para 4 are misleading and incorrect. The respondent had commenced the resort in 1998 in which the bar was a small part. The resort as a whole comprised of rooms, restaurants, bar, swimming pool etc., apart from facilities for banquetes, conferences and residential training programmes for Corporates. In March 2008, this respondent has launched "Nine Feet High" which was a successful venture fully owned and operated by the first respondent. It was on account of the success of this venture, the applicant together with one Mr.G.Vinod Reddy had approached the first respondent seeking to partner and operate a pub at the resort. The claim that this respondent was unable to maintain standards of food, beverages and quality of service is mischievous and completely baseless. The food as well as the ambience of the pub was very much appreciated by the clientele.
52 With regard to the averments in para 6, this respondent was misled by the applicant s Managing Partner who was controlling and running a successful pub at Chennai. It was only later that the respondent came to know that the said Managing Partner was not directly involved in the venture and was only a minor stake holder in the venture. The fact that the respondent wanted the applicant to provide the food would clearly show that the claim that the respondent was unable to maintain the standards of the food made earlier is false. The applicant s Managing Partner was fully convinced about the respondent's ability to live upto international standards well before entering into the understanding. In fact, the applicant's partners have at several occasions paid strong accolades to the respondent for the excellent food supplied by the respondent.
53 The averments in para 7 are substantially correct. However, the claim that the applicant had paid a sum of Rs.30,00,000/- (Rupees thirty lakhs only) as security deposit pursuant to the lease agreement is false and denied. The applicant had paid only Rs.20,00,000/- (Rupees twenty lakhs only), and requested the respondent to accept the same as they claimed that they had some difficulty in raising the funds at that stage. Since the remaining amount was agreed to be paid subsequently, in good faith, this respondent accepted the same.
54 With regard to the averments in para 8, it is submitted that contrary to the tall claims made by the applicant in this paragraph, the applicant was unable to raise sufficient funds for the venture, which is evident from the facts stated in the preceding paragraphs that out of the security deposit of Rs.30,00,000/- (Rupees thirty lakhs only) due and payable by the applicant, the applicant could only raise Rs.20,00,000/- (Rupees twenty lakhs only). The applicant is put to strict proof of the alleged expenditure incurred by them. In fact, the applicant had at many occasions requested this respondent to intervene on account of their non payment of dues to their vendors. Accordingly, this respondent had taken steps to sort out the issues for which the applicant's Managing Director had also sent SMSs appreciating the efforts taken by the respondent to help sort out the complications and problems of the applicant.
55 The averments in para 9 regarding the inauguaration of the pub "No Sky Above" belonging to this respondent managed by the applicant is admitted.
56 With regard to the averments in para 10, it is submitted that while the applicant claims that the business was a "huge success" on one hand, on the other hand, the applicant never furnished details of the gross sales to the respondent inspite of repeated reminders, in order to prevent the respondent from computing the amount due and payable by the applicant to the respondent calculated at 15% of the gross sales in the event the sale is above Rs.15,00,000/- (Rupees fifteen lakhs only) as provided in clause 4.2 of the MOU.
57 The averments in para 11 are false, defamatory and made for the purpose of this case. The applicant who from the beginning had no intention of paying the amounts rightfully due to this respondent and have always been struggling for finances and defaulting in payments to third parties as well as to this parties as well as to this respondent is painting a different picture before this Court. The respondent's letter, dated 23.11.2010 would show the correct position of the fact and that the applicant has admittedly not responded to the said letter sent by registered post would clearly show the true colours of the applicant.
58 The averments in para 12 are denied. It is submitted that the respondents have been giving bills periodically to the applicants. This would be evident from the fact that no requests were ever made for the bills by the applicant, since the inception of the Memorandum of Understanding until 28.01.2011 when the applicant's Manager by an email first made such a request for bills.
59 The averments in para 13 are denied. The applicant is put to strict proof of the same. It is submitted that all demands were raised only as per the terms agreed flowing from the MOU. Further, right from inception, the respondent had periodically sent statements numbering MHS statement 01 dated 31.7.2010 to MHS statement 20D dated 27.2.2012 to the applicant under proper acknowledgement.
60 The averments in para 14 are denied. It is submitted that the applicant was unable to face the financial pressures caused solely due to their several commitments and mismanagement. At a meeting with the applicant's Managing Partner in mid-January 2011, the fourth respondent was informed that he was bogged down by several health ailments which were life threatening. The applicant's Managing Partner even stated that he had to leave back to his native place for urgent medical treatment and directed the fourth respondent to contact Mr.Arun Vasu, another partner of the applicant for assistance, co-ordination and payment, in future. The said Mr.Arun Vasu used delaying tactics after which the fourth respondent tried to contact Mr.Srinivas Choudary who is the brother of the applicant's Managing Partner and also another partner of the applicant. Being in another state, he was inaccessible in person and not responsive when contacted. In these circumstances, with no solution in sight for the mounting dues the respondents were left in a quandary and was forced to find some means of forcing the applicant realise their fault and pay up the dues. Hence the respondent opened an email id "pleasepay.nsa@gmail.com too correspond only with the partners and those connected with the applicant in order to hasten the payments. There was nothing illegal about the same and the averments are false and contrary to the truth. At no time, did the respondents pose any threat to the staff of the applicant. In fact, the respondents had assisted the applicant's staff in every way possible. However, there was no reciprocal response.
61 That one of the Managers of the applicant had promised to submit details pertaining to sales and purchase figures as required by the Excise department which is a mandatory requirement for renewal of the FL3 licence and he kept delaying for over two months. The Excise department officials had threatened to reject and close the renewal file due to want of these details. The applicant produced the records only after repeated persuasion by the respondents since the respondents' reputation and licence was at stake. The respondents are respectable persons in society and would never resort to either physical or verbal abuses to anyone. It is false to state that the applicant's Managers were leaving because of the threats and harassment of the respondents. The four Managers who had worked during that short tenure, left due to conflict and misunderstanding with applicant's Managing Partner and differences in operation styles with the applicant.
62 The averments in para 15 are false. It is submitted that the FL3 licence fee was paid in time and applied for the year 2011-12 by the applicants. At no time was the applicant ever denied or troubled for the renewal of licence. The seeking of sales, purchase and other details by the respondent which the applicant firm was required to furnish is what the applicant is claiming to be harassment.
63 It is pertinent to mention herein that the applicant's employees at the bar did not even use a peg measure and were pouring drinks based on the presumptive minds of its bartenders. When the respondents learnt of this blatant violation, a licensed peg measure was purchased by the respondent and given to the applicant as the Tamil Nadu Liquor (Licence and permit) Rules 1981 Act very clearly stipulates that it is mandatory that every licenced Permit Room holds and uses a valid or validated peg measure at all times. The Act also clearly stipulates that the valid Peg Measure certificate is always displayed in the Bar. By failure to ensure that a valid peg measure and its certificate was present, the applicant exposed their claims of prefessionalism. The averments that the language used by the respondent in their letters and email communication was threatening and abusive are false and misleading. It was the applicant who, in all its correspondence took pains to belittle the respondents by nasty statements and remarks.
64 The averments in para 16 are false and misleading. It is submitted that even though there were several rounds of talks, the applicant never showed any intention to solve issues permanently. The energy audit was done unilaterally by the applicant and this was never shared with the respondent at any time. In fact, a study of the said energy audit report as submitted by the applicant before this Court clearly shows that the operating time per day for air conditioners was 3.5 hours only. In reality, it ran for close to 20 hours a day. More so, on big events and other night parties etc., additional loads were used that were never taken into account for by the said audit team. Again, a closer scrutiny of the said Audit Report clearly states that the figures given were not conclusive but "Possible". Such was the quality of the so called energy audit conducted by the applicant.
65 It is false to state that the respondent demanded 50% of the Resort Consumption. In line with the MOU, a sub-meter was installed by the respondent and given to the account of the applicant. The applicant in order to create a situation conducive to themselves sabotaged the sub-meter and then claimed helplessness. The respondent submits that the only load for the entire building where the Bar is located is EB service No:294:017:187 wherein a restaurant, kitchen, conference hall, ED's office room and rooms under renovation are located. Apart from this is the Bar and areas occupied by the applicant. The statement made by the applicant is that of one trying to "pass the buck" or making the respondent to pay for the applicant's use.
66 The averments in para 17 are denied. The applicant at no time showed any registers or accounts. Neither did it give any audited reports as it ought to have done under the MOU, despite written request by respondents.
67 The averments in para 18 are admitted. Even going by the statement in the plaint, the applicant does admit that dues were payable to the respondent. At no time was there any allegation made of false and wrongful accounts. The claims of the applicant are an after-thought only to avoid paying up their dues. A closer scrutiny of the applicant's statement will reveal that no attempt was made by the applicant to pay statutory dues such as VAT.
68 The averments in para 19 are misleading. It is submitted that the purpose of the internal email by the second respondent' with a copy to the applicant was merely to temporarily "suspend" the running statement and not to waive the same. This was done based on the request of the applicant to the respondent to give them a chance to make good the old payments from future business accruals, with a promise to pay the new amounts (i.e. From 9.5.2011) promptly. A reading of the sequential statements issued till the very end would show that the suspended account was always present and any credits of the applicant was debited in the suspended account as and when paid by the applicant. The applicant has also made use of the Geneset, garbage clearance and beach cleaning benefits but failed to remit its dues inspite of the applicant agreeing to do so.
69 The averments in para 20 are incorrect and false. The respondent had only demanded the legitimate dues which was scuttled by the applicant. Further, the problems pertaining to cutlery were self-created by the applicant due to poor mismanagement of the applicant's staff. With poor food sales, it was impractical and ineffective to run two kitchens and hence after according due notice, the respondent shut down the temporary kitchen and functioned from the main kitchen. The absence of the proper service boys led to poor speed of service which the applicant ought to take onus and responsibility. In the entire tenure of the applicant in operations, only once was the chef temporarily substituted since the existing Chef had been sent abroad for training in the art of manual noodle-making. Hence, the statements of failure of the respondent made by the applicant are far-fetched and far from the truth.
70 The averments in para 21 are incorrect. All claims made by the respondent are clear and sent under the proper channel of correspondence.
71 The averments in para 22 are incorrect. It is submitted that the liquor for the applicant is made through the TIN number allotted to the respondent. The monthly returns and payment of VAT pertaining to liquor sales is filed by means of Form J and this ought to have been done by the applicant as per the MOU. The applicant, on their failure to file the said returns led the Enforcement Wing of the VAT department onto us (being the Licence Holders and Tin A/c No.). On intimation that the applicant had a MOU to run the Permit Room and the fact that the applicant was responsible to file the returns and pay the VAT, the Enforcement Cell informed the respondent that the fact that liquor was being purchased, sold, taxes collected and not remitted to the Government tantamount to an illegal act that ought to have our TIN No. suspended. This was intimated to the applicant, whose accounts were then inspected and based on the sworn statement of the applicant's representative Mr.G.Vijay Saanath he acknowledges that Form J had never been filed from 31.3.2010 to date. So also, in the case of food the applicant ought to have paid VAT at 12.5% which was billed. Towards this, the applicant had remitted Rs.1.7 lakhs with the hope of suppressing the balance payment.
72 The averments in para 23 are misleading. It is submitted that despite letters being sent highlighting the lacuna in the operations of the applicant like a) VAT issue, b) Police issue, c) Service tax issue, the respondent took all possible steps to encourage the applicant to come for meetings, to which the applicant made every excuse to avoid the meetings, fearing grave consequences in line with the Indemnity Bond executed by the applicant's Managing Partner dated 29.1.2010. It is further submitted that the respondents are law abiding, honest and cultured people who cannot be seen continuing to support the illegal acts of the applicant. That too, with one of the applicant's Partners making use of his Diplomatic immunity to escape from any sort of punishment from the authorities. The applicant is trying to paint the respondent in dark shades only to hide their own illegal acts and violations.
73 The avermens in para 24 denied. It is submitted that the applicant has surreptitiously failed to produce before the Court, the letters addressed by the respondent to the applicant on various dates which speaks volumes of the wrong doings of the applicant. By not producing the respondents letters to the applicant, it is clear that the applicant had approached this Court with unclean hands and the sole intention of hoodwinking this Court. A mere reading of the respondents letters sent to the applicant, will prove that the applicant had failed to rectifying and correcting the errors and omissions committed by the applicant alone.
74 The averments in para 25 are denied, the applicant is put strict proof of the same. It is submitted that the applicants alone are liable and responsible for the illegal acts and follies committed by them. The averments in para 26 are denied. It is submitted that the statement "settlement talks" as made by the applicant in the plaint itself shows that dues did exist from the side of the applicant. However, it is false to state that the applicant repeatedly asked the respondent to come for settlement talks. All along with, it was the respondents who had been vociferous through letters asking for the applicant to come for a meeting. But the applicant cited various pre-occupations to avoid the meeting.
75 The averments in para 27 are denied. It is submitted that the non payment of dues by the applicant led to the respondent writing a letter dated 6.2.2012 requesting the applicant to pay a sum of Rs.2.42 lakhs towards FL3 Licence and other fees. This was done only because the applicant had to pay the Licence fee as per the MOU. The applicant, as a matter of habit had again taken it upon themselves to ride on the kindness of the respondent and interpret the "arrangement "to suit their wrong doings.
76 The averments in para 28 are denied. It is false to state that the respondent tampered with the electricity connection. The respondents do not benefit from in any way extending injustice to others. Even as late as 29.5.2012, the respondents Managing Partner sent a telegram to the fourth respondent on the issue of Electricity and Water, to which it was immediately checked and a reply refuting the allegations of the applicant was sent on 31.5.2012. The respondents have given utmost respect to the MOU and will never go against any agreed obligations.
77 The averments in para 29 are denied. Since there was no response to any of the respondents letters and the fact that there was no intention on the part of the applicant to resolve the issues in hand, the respondent by virtue of the Clauses of the Memorandum of Understanding and communications exchanged, referred the matter for arbitration. It is false to state that the MOU clearly expresses that the parties will approach the Courts in Chennai to resolve any disputes by litigation. Clause 8.2 very clearly stipulates that "Both parties agree to use best efforts to amicable resolve any disputes or differences between them before resorting to litigation before resorting to litigation before the Courts at Chennai." Further, in line with the ongoing issues, the applicant's Managing Partner expressed and authorized the respondent's Managing Director by means of an official correspondence dated 15.3.2011 to refer the matter for arbitration. Private notice was issued to the applicant on the arbitration vide notice dated 8.4.2012. Hence, it is false to state that the first respondent appointed the Arbitrator without notice to the applicant.
78 The averments in para 30 reference is drawn to part 3 (proceedings) on the Arbitral Award in Case No.ARC-SA-RSL-138/2012 dated 15.5.2012. A reading of page 31, 32 and 33 of the same will show that the respondents request for FAST TRACK ARBITRATION" was rejected and that the record of the proceedings by the observer dated 14.4.2012 and 9.5.2012 showed no hastle by the Sole Arbitrator to pass the award. Rather, due to the incapacity and unprofessionalism of the applicant's Managing Partner, the award was passed after giving sufficient opportunities to the applicant. To state that the basic requirement of an arbitration clause has not been fulfilled is false and untrue.
79 The averments in para 31 are denied. Mere reading of the relevant correspondences, together with Part 1 (General) C.Constitution of the Tribunal C(i) to (xi) of the Arbitral Award in case No.ARC-SA-RSL-138/2012 dated 15.5.2012 will suitably answer to the averments made by the applicant that there is neither an arbitration clause/agreement nor has the plaintiff agreed to arbitration...."
80 The averments in para 32 is denied. The statement that the applicant wrote to the 5th respondent with a copy to the respondent on 13.4.2012 is referred to herewith. In it, the applicant's Managing Partner had categorically stated therein that:
"14. We are presently awaiting advise from our lawyers to your notices/emails and the legal position. They are closed due to the Tamil New Years day on the 14th April, 2012 and hence cannot advise us before the said date. In all probability, they may be in a position to provide us the appropriate advise by 30th April 2012. Given this position and in view of your suggestion in para VII b we request you to refrain from proceeding with any hearing on 14th April on until 30th April".
81 The said letter of the applicant stated to have been sent on 3.4.2012 did not reach either the respondent or the 5th respondent before the first hearing on 14.4.2012 at 11.00 hrs and hence the first hearing was conducted without the presence of the applicant. Further, the applicant acknowledged receipt of the sole arbitrator's notice dated 31.3.2012 and it only for the applicant to be blamed for the delay in consulting the applicant's lawyers. Further, unknown to the contents of the applicant's letter dated 13.4.2012 the 5th respondent adjourned the proceedings to 9.5.2012. As stated in the applicant's letter dated 13.4.2012 to the 5th respondent, the applicant failed to get back to the 5th respondent by the 30th April 2012, by which it can be implied that the applicant is participating in the arbitral proceedings.
82 The averments in para 33 are denied. It is submitted that though the applicant acknowledged receipt of the letter from the Sole Arbitrator as early as 31.3.2012, the applicant chose to reply only on 13.4.2012, just one day before the first hearing of the Arbitration proceedings. In other words, the applicant confirmed that the applicant would revert by 30.4.2012 on the Arbitration issue. The applicant did not respond by the date as stated by the applicant himself and hence it was implied that the applicant had accepted and would participate in the Arbitral proceedings.
83 The averments in para 34 are denied. It is submitted that all documents were sent to the applicant by proof of delivery and hence the applicant's averment on viewing the documents was only to find ways of derailing the Arbitral proceedings. It is imperative to note here that all along the applicant had been trying to sabotage any attempt by the respondent to seek justice only because of the huge legitimate amounts owed by the applicant to the respondent.
84 The averments in para 35 are denied. The Claims Document was sent to the applicant and an affidavit of service was submitted to the Arbitral Tribunal. The request for the set of documents by the applicant's counsel was vague and baseless. Even so, the applicant's counsel argued the matter before the Arbitral Tribunal and consequently to state that the applicant would not submit to arbitration proceedings is incorrect.
85 The averments in para 36 are not to the knowledge of this respondent. The averments in para 37 are denied. The presumptions of the applicant and the applicants failure to represent before the Arbitral Tribunal has only led the applicant to feel that the conduct between the first respondent and the fifth respondent is extremely suspicious. It is pertinent to state that the applicant's Managing Partner had always behaved in doubt of even his own partners. The averments in para 38 are denied. At the time of Arbitration proceedings, there was no multiplicity of proceedings. Further, with the Arbitral Award being passed on 15.5.2012 the Arbitration Proceedings had come to an end.
86 The averments in para 39 are denied. The averments made by the applicant are false and without any basis. The applicant escaped severe repercussions on several occasions only due to the timely response and goodwill that the respondent holds. The fourth respondent reserves his right to proceed against the first respondent based on the Indemnity Bond furnished by the first applicant in favour of the fourth respondent. The grounds will solely be based on that what is stated in the Indemnity Bond itself.
87 With regard to the averments in para 40, the respondents letters sent to the applicant for which there is valid acknowledgment has been wilfully suppressed by the applicant and a mere reading of the letters will expose the applicant that has led to the respondent being put under severe mental trauma and agony. In other words, it is evident that the applicant has approached this Court with unclean hands. Therefore, the defendant has prayed for dismissal of both the applications.
88 The defendants/respondents opposed the application on the plea that the respondent No.5, sole Arbitrator has concluded the arbitration proceedings and passed an award on 15.5.2012 and therefore, this application has been rendered infructuous, as remedy with the plaintiff/applicant now is to challenge the award under the Arbitration & Conciliation Act.
89 It was also contended by the learned counsel for the respondents that the present suit as well as application is not maintainable, as the civil Court cannot interfere with arbitration proceedings, as the remedy with the plaintiff/applicant if any, is to challenge the award under Sec.34 of the Arbitration and Conciliation Act, and not by filing civil suit.
90 It was also vehemently contended that the plaintiff/ applicant having submitted to jurisdiction of the Arbitrator, it is now estopped from challenging the jurisdiction of the respondent No.5.
91 The learned counsel for the plaintiff/applicant vehemently contended that the suit filed by the plaintiff/applicant is maintainable, as the proceedings hold by respondent No.5 are totally void, as the respondent No.5 did not have any jurisdiction to enter reference for want of arbitration agreement. Therefore, Sec.5 of the Act would not be attracted in this case.
92 The learned counsel for the plaintiff/applicant referred to proceedings of the respondent No.5 wherein it was recorded, that the respondent is given one more opportunity for their objection if any, to be filed before the Arbitrators on 25.5.2012 at 11.00 sharp at the same venue at ICSA No.107, Pantheon Road, Chennai 8. This order was passed by the alleged Arbitrator on 10.5.2012. The learned counsel for the plaintiff/applicant also referred to the order passed by this Court staying further proceedings before the learned Arbitrator.
93 The contention is that the award passed on 15.5.2012 therefore is nothing but a waste paper having been passed in violation of order of injunction and that too, before the date fixed for filing of objections.
94 It was also contended by the learned counsel for the plaintiff/applicant that this Court has the jurisdiction to entertain and try suit as framed, as section 5 cannot be a bar to maintainability of the suit or this application, as the arbitration proceedings being void, the award, dated 15.5.2012 is totally null and void. In support of this contention, the learned counsel for the plaintiff/applicant placed reliance on the judgments of the Hon'ble Supreme Court in (2005)8 SCC 618 (S.B.P. & co. v. Patel Engineering), (2003)12 SCC 140 (C.D.C. Financial & B.P.L. Communications) , A.I.R. 2004 P & H 276 Pappu Rice Mills v. Punjab State Coop. Supply & Marketing Federation.
95 But these judgments have no relevance to the facts of the present case, as the dispute in this case is with regard to validity of the arbitral award having been passed without jurisdiction, for want of arbitration agreement/clause.
96 The question with regard to the jurisdiction of the civil Court was considered by the Constitutional Bench of the Hon'ble Supreme Court in Dhulabhai Etc. vs. State of Madhya Pradesh and another (A.I.R. 1969 SC 78) wherein after considering the relevant judgments on the point, the Constitutional bench was pleased to lay down as under:
"35. Neither of the two cases of Firm of Illuri Subayya or Kamla Mills can be said to run counter to the series of cases earlier noticed. The result of this inquiry into the diverse views expressed in this Court may be stated as follows:
(1) Where the statute gives a finality to the orders of the special Tribunals the civil courts' jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure.
(2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.
Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the Tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not.
(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals.
(4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.
(5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegality collected a suit lies.
(6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry.
(7) An exclusion of the jurisdiction of the civil court is not readily to be inferred unless the conditions above set down apply."
97 The Full Bench of the Hon'ble Punjab and Haryana High Court in the State of Haryana vs. Vinod Kumar and others (A.I.R. 1986 (Punjab) 407) was pleased to lay down as under:
"5. Broadly speaking there are two types of judgments/orders, namely judgments in rem and judgments in personam. The former binds the whole world whereas the latter binds only the parties. The judgments/orders in rem are the ones passed by the authorities or the Courts exercising the jurisdiction such as insolvency, admiralty and matrimonial. The jurisdiction exercised by the authorities under the Punjab Act is not of such a nature that the orders passed under it would bind the public at large. Obviously they are the judgments/orders in personam. The fundamental principle as to their nature is that they only bind the parties to it or the persons names therein. So far as the person who is neither a party nor named in such an order is concerned, the order in the eye of law is ineffective and non est and as such he is under no obligation to take proceedings to get it set aside. Strictly speaking the terms 'void' or 'voidable' when used qua a judgment or an order would be relevant when a person is a party or named in the judgment or the order because it is only such a person who can take proceedings to get it declared void or set aside as the case may be. On the other hand a person who is not a party would have no right to get the order set aside or declare it void as the order would be binding on the persons who are party or named therein and his remedy would be only to get a declaration that the order was ineffective and non est so far as he is concerned. In Dhaunkal Sheo Ram's case (AIR 1970 Punj & Har 431) (FB) (supra) this basic principle was not taken notice of and instead, if we may say so with due respect to the learned judges, the reasoning proceeded on an erroneous basis that as the collector had the jurisdiction to determine the surplus area of the landowner, the non-issuance of notice to the tenant would not render its order void and the order was binding on the latter. If the landowner includes in his reserved area any land which is on lease, the tenant would have a right to be heard because the order of reservation necessarily clothes the landowner with a right to eject him from such an area. If the landowner does not include any area on lease with the tenants, the latter would have no right of being heard and the order of determination of the surplus area of the landlord would be perfectly valid even when passed at their back. The order of the Collector including the area under lease in the reserved area of the landowner though would be within jurisdiction but would not bind any tenant whose area has been included in the reserved area unless he is issued a notice or is named in the order of the Collector. Somewhat similar question arose in State of Punjab v. Amar Singh, 1974 Pun LJ 74: (AIR 1974 SC 994) and the rule laid down in Dhaunkal Sheo Ram's case (AIR 1970 Punj & Har 431) (supra) stands impliedly overruled by the decision in that case. What happened there was that Smt. Lachhman was a big landowner on the prescribed date i.e. April 15, 1953. Her son-in-law, Amar Singh, and his brother Indraj claiming themselves to be tenants of the area other than the reserved area of the landowner filed an application under S. 18 of the Punjab Act for its purchase and the same was allowed by the Assistant Collector, the competent authority. On the basis of the sale certificate the said tenants claimed themselves to be the owners of the area purchased by them before the Collector during the proceedings concerning the determination of the surplus area of the landowner. One of the pleas raised on behalf of the State was that it being not a party to the proceedings under S. 18 of the Punjab Act, was not bound by the order of the prescribed authority allowing the purchase to the tenants of the area which but for that purchase formed part of the surplus area of the land-owner. It may be noticed here that under the provisions of S. 18(2) of the Punjab Act, when an application is made in writing to the Assistant Collector, by a tenant for purchasing the area of a big landowner, he is required to issue notice to the landowner and to all other persons interested in the said land. If the area sought to be purchased by the tenant did not form part of his permissible area or he has been settled thereon after the appointed date i.e. April 15, 1953, such area would form part of the surplus area and the State would be obviously an interested party entitled to notice under the said section before the purchase application is allowed. According to rule laid down in Daunkal Sheo Ram's case (AIR 1970 Punj & Har 431) (FB) (supra), the order of purchase passed in favour of the tenant without notice to the State would be binding on the State and only voidable at its instance because the prescribed authority had the jurisdiction to try such an application and allow it under S. 18 of the Punjab Act. But the Supreme court in Amar Singh's case (AIR 1974 SC 994) (supra) held that the State, which was seriously prejudiced by the order but was not a party to it, would not be bound by that order. It was further held that the State which was not a party to the proceedings did not have a right of appeal because ordinarily the rule is that only a party to the suit adversely affected by the decree or any of his representative-in-interest can file an appeal or petition for review as would be evident from paragraph 32 reproduced below that:
"An order like Annexure 'a' ordinarily binds the parties only and here the State which is the appellant is seriously prejudiced by the order but is not a party to it. Therefore, it cannot bind the State proprio vigore. It was argued by Shri Dhingra that the State could have moved by way of appeal or review and got the order set aside if there was ground and that not having done so it was bound by the order. As a matter of fact, the State, which is not a party to the proceedings, does not have a right of appeal. The ordinary rule is that only a party to a suit adversely affected by the decree or any of his representatives-in-interest may file an appeal. Under such circumstances a person who is not a party may prefer an appeal with the leave of the appellate Court' if he would be prejudicially affected by the judgment and if it would be binding on him as res judicata under Explanation 6 to section 11' (see Mulla Civil Procedure Code, 13th Edn. vol. 1 p. 421). Section 82 of the Punjab Tenancy Act, 1887, which may perhaps be invoked by a party even under the Act, also speaks of applications by any party interested. Thus no right of review or of appeal under section 18 can be availed of by the State as of right."
6. Even if for the sake of arguments it may be accepted that the impugned order is only voidable and will be binding on the respondents unless it is got declared void or set aside can it be said that the only remedy open to them is to approach the authorities under the Punjab Act and the remedy of a regular suit would be barred by the provisions of S. 25 of the Punjab Act. The law has been well-established in this regard and was enunciated by the Privy council in Secretary of State v, Mask & Co., AIR 1940 PC 105 thus:
"xx xx xx xx
xx xx xx It is settled law that the exclusion of the jurisdiction of the Civil Courts is not to be readily inferred but that such exclusion must either be explicitly expressed or clearly implied. It is also well settled that even if jurisdiction is so excluded, the Civil Courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with, or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.
xx xx xx
The said rule was reiterated by the Supreme Court in Katikara Chintamani Dora v. Guatreddi Annamanaidu, AIR 1974 SC 1069 in the following words:
"There is an express bar to the jurisdiction of the Civil Court to adjudicate upon the question whether 'any inam village', is an 'inam estate' or not, and to the extent of the question stated in S. 9(1). Madras Act 26 of 1948, the jurisdiction of the Settlement Officer and of the Tribunal are exclusive. But this exclusion of the jurisdiction of the Civil Court would be subject to two limitations. First, the Civil Courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. The second is as regards the exact extent to which the powers of statutory tribunals are exclusive."
7. The most authoritative pronouncement by the Supreme Court in this regard was made in Kamala Mills Ltd. v. State of Bombay, AIR 1965 SC 1942 by a 7-Judge Bench as under:--
" xx xx xx xx
Whenever it is urged before a Civil Court that its jurisdiction is excluded either expressly or by necessary implication to entertain claims of a civil nature, the Court naturally feels inclined to consider whether the remedy afforded by an alternative provision prescribed by a special statute is sufficient or adequate. In cases where the exclusion of the Civil Courts jurisdiction is expressly provided for, the consideration as to the scheme of the statute in question and the adequacy or the sufficiency of the remedies provided for by it may, be relevant but cannot be decisive. But where exclusion is pleaded as a matter of necessary implication, such considerations would be very important, and in conceivable circumstances, might even become decisive. If it appears that a statute creates a special right or a liability and provides for the determination of the right and liability to be dealt with by tribunals specially constituted in that behalf and it further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, it becomes pertinent to enquire whether remedies normally associated with actions in Civil Courts are prescribed by the said statute or not."
The matter was again considered at a great length by 5 Judge Bench of the Supreme Court in Ram Swarup v.Shikar Chand, AIR 1966 SC 893. In this case the provisions of Ss. 3(4) and 16 of the U.P. (Temporary) Control of Rent and Eviction Act, 1947 were under consideration. Although the provisions of the said section expressly barred the jurisdiction of the Civil Courts still it was held that if the order was passed in violation of the statutory provisions or the principles of natural justice the order would be open to challenge in Civil Court. Paragraphs 12 and 13 which contain the ratio and the precise rules laid down, read as under:--
" One of the points which is often treated as relevant in dealing with the question about the exclusion of Civil Courts jurisdiction is whether the special statute which, it is urged, excludes such jurisdiction, has used clear and unambiguous words indicating that intention. Another test which is applied is: does the said statute provide for an adequate and satisfactory alternative remedy to a party that may be aggrieved by the relevant order under its material provisions: Applying these two tests it does appear that the words used in S. 3(4) and S. 16 are clear. Section 16 in terms provides that the order made under this act to which the said section applies shall not be called in question in any Court. This is an express provision excluding the Civil Courts jurisdiction, S. 3(4) does not expressly exclude the jurisdiction of the Civil Courts but in the context, the inference that the Civil Courts jurisdiction is intended to be excluded, appears to inescapable. Therefore, we are satisfied that Mr. Goyal is right in contending that the jurisdiction of the Civil Courts is excluded in relation to matters covered by the orders included within the provisions of S. 3(4) and S. 16.
This conclusion, however, does not necessarily mean that the plea against the validity of the order passed by the District Magistrate, or the Commissioner, or the State Government can never be raised in a Civil Court. In our opinion, the bar created by the relevant provisions of the Act excluding the jurisdiction of the Civil Courts cannot operate in cases where the plea raised before the Civil Court goes to the root of the matter and would, if upheld, lead to the conclusion that the impugned order is nullity. Take for instance, the case of an order purported to have been passed by a District Magistrate who is not a District Magistrate in law. If it is shown by a party impeaching the validity of the order in a Civil Court that the order was passed by a person who was not a District Magistrate, the order in law would be a nullity and such a plea cannot be ruled out on the ground of the exclusion of the jurisdiction of the Civil Court. Similarly, if an order granting permission to a landlord is passed by a District Magistrate of one District when the property in question is situated in another district outside his jurisdiction, a party would be entitled to urge before a Civil Court that the permission purported to have been granted by the District Magistrate is wholly invalid and a nullity in law. Let us take another case to illustrate the position. If S. 3 had provided that before a District Magistrate grants permission to the landlord to sue his tenant, he shall issue notice to the tenant and give him an opportunity to represent his case before the application of the landlord is dealt with on the merits and in the face of such a statutory provision, the District Magistrate grants permission ex parte without issuing notice to the tenant in such case, the failure of the District Magistrate to comply with the mandatory provision prescribed in that behalf would render the order passed by him completely invalid and a plea that an order has been passed by the District Magistrate without complying with the mandatory provision of the Act, would be open for examination before a Civil Court. Likewise, in the absence of such a statutory provision, if it is held that the proceedings before the appropriate authorities contemplated by S. 3 are in the nature of quasi judicial proceedings and they must be tried in accordance with the principles of natural justice and it is shown that in a given case an order has been passed without notice to the party affected by such order, it would be open to said party to contend that an order passed in violation of the principles of natural justice is a nullity and its existence should be ignored by the Civil Court. Such a plea cannot, in our opinion be excluded by reason for the provision contained in S.3(4) and S. 16 of the Act".
It was further observed in paragraph 18 that the earlier decision of the Supreme Court in Kamala Mills case (AIR 1965 SC 1942) (supra) fully supports the view taken by them. In the face of this authoritative pronouncement there is no room for any doubt that if an order is passed by a tribunal of limited jurisdiction without issuing a notice to the concerned party, the order would be a nullity and open to challenge in the Civil Court even if the statute expressly bars the jurisdiction of the Civil Court to entertain a suit to challenge the validity or legality of the order passed by such a tribunal. This question was once against considered by a Constitution Bench of the Supreme Court in Dhulabhai v. State of Madhya Pradesh, AIR 1969 SC 78 and the seven principles contained in the judgment of the learned Chief Justice were enunciated. The scope of the observations made and the rule laid down in Kamala Mill's case (supra) came under specific consideration of the Bench and it was observed that the Special Bench (in Kamala Mills case) refrained from either accepting the dictum of Mask Co's case 67 Ind App 222; (AIR 1940 PC 105) or rejecting it, to the effect that even if jurisdiction is excluded by a provision making the decision of the authorities final the Civil Court have jurisdiction to examine into case where the provisions of the particular Act are not complied with. The jurisdiction of the Civil Court to try the suits against the order passed by the Tribunal of Special Jurisdiction in violation of the provision of the statue or principles of natural justice was thus upheld even though the jurisdiction of Civil Court to question the legality or validity of the orders of the Tribunal was expressly barred by the statute.
8. Though according to the rule laid down in Amar Singh's case (AIR 1974 SC 994) (supra) respondent had no right to file either an appeal or a petition for review or revision against the impugned order of the Collector to which they were not parties, but even if it may be accepted for the sake of argument that they could file an appeal with the permission of the Appellate Authority or move for review even then it cannot be said that the concurrent or alternative remedy of fining a suit for getting the declaration that the impugned order was non est so far as they were concerned would be barred by the provisions of the said S. 25 of the Punjab Act. It is well-established that in the case of alternative or concurrent remedies it is open to the party to choose anyone of them. The existence of the remedy under the Act, if any, therefore, would not bar the remedy of the suit if it otherwise was available to the respondent. Not a single case could be cited by the learned counsel for the State at the bar wherein it may have been held that the remedy of suit by a person who is not a party to the order nor has been served with any notice, for declaration that such an order was non est so far as he was concerned was held to be barred even though the validity and legality of the orders passed were expressly stated to be not open to challenge under the statute. All the decisions relied upon by the learned counsel for the State were such in which the suit was filed by the person who was a party before the Tribunal of exclusive jurisdiction. The observations made in all those decisions therefore, have to be therefore, have to be understood in the context of the situation available there and in none of these decisions as observed in Dhaunkal Sheo Ram's case (AIR 1940 Punj & Har 431) (FB) (supra) the rule laid down in Mask Co's case (AIR 1940 PC 105) (supra) was adversely commented upon. We would., therefore, hold that the present suit was not barred by the provisions of S. 25 of the Punjab Act and answer the question referred to Full Bench in the affirmative."
98 The conduct of respondent No.5 in entering reference in absence of arbitration agreement being without jurisdiction and contrary to provisions of Arbitration and Conciliation Act itself leads to conclusion that this Court has the jurisdiction to entertain and try the suit, as the proceedings by the respondent No.1 being void are not covered under the arbitration and Conciliation Act.
99 On being questioned as to whether there is arbitration agreement which could give jurisdiction to the respondent No.5 to enter reference to decide the dispute between the parties, the learned counsel for the respondents referred to Clause 8 of the lease agreement entered into between Mr.Joseph Fernandaz and M/s.Madras Hospitality Services which reads as under:
"VIII DISPUTE RESOLUTION:
8.1 Any and all correspondence made or notices to be sent or required to be made under this MOU shall be in writing, signed by the Party giving such notice (claim or demand) and shall be delivered personally or by registered mail, to the other Party at its address set forth herein below or at such other address as such other Party may subsequently notify. All notices shall be deemed given when delivered at the following address:
Madras Hospitality Services
Address No.6, Cathedral Road, Chennai 600086
Attention: Mr.Jagadish I
Buena Vista Beach Resort & Club Private Limited
8.2 Both parties agree to use best efforts to amicable resolve any disputes or differences between them before resorting to litigation before the Courts at Chennai.
8.3 The rights and remedies of either party hereunder shall not be mutually exclusive (i.e. the exercise of one or more of the provisions hereof shall not preclude the exercise of any other provisions hereof.) Each party confirms that damages at law will be an inadequate remedy for a breach or threatened breach of this MOU and agree that, in the event of a breach or threatened breach of any provision hereof, the respective rights and obligations hereunder shall be enforceable by specific performance, injunction or other equitable remedy, but nothing herein contained is intended to, nor shall it, limit or affect any rights of law or by statute or otherwise of any party aggrieved as against the other for a breach or threatened breach of any provision hereof, it being the intent of the parties that the respective rights and obligations of the parties be enforceable in equity as well as at law."
100 The dispute resolution as stipulated in the Memorandum of Understanding entered into between the plaintiff and the first defendant, cannot be said to be arbitrary agreement by any stretch of imagination. Rather, Clause 8.2 clearly stipulates that in absence of amicable settlement between the parties, the litigation will be before the Court at Chennai and not by way of arbitration.
101 It is well settled law that arbitration agreement is the very foundation on which the jurisdiction of the arbitration to Act rests, and where that is not in existence at the time when arbitration enters reference, the proceedings are totally without jurisdiction and this defect cannot be cured by the appearance of the parties in these proceedings, even if it was without protest, because consent cannot confer jurisdiction. Reference in support can be made to judgment of Hon'ble Supreme Court in Waverly Jute Mills Co.Ltd. And another vs. Raymon and Co. (India) Pvt. Ltd. (A.I.R. 1963 SC 90)
102 It is also well settled law that acquiesce by parties or participation by parties in a proceeding before the Arbitrator cannot confirm the jurisdiction, nor parties can be estopped from challenging the jurisdiction.
The Hon'ble Supreme Court in U.P.Rajkiya Nirman Nigam Ltd. vs. Indure Pvt. Ltd. and others (1996)2 SCC 667) was pleased to lay down as under:
"Where the contract is in a number of parts it is essential to the validity of the contract that the contracting party should either have assented to or taken to have assented to the same thing in the same sense or as it is sometimes put, there should be consensus ad idem.
In the present case, the counter-offer made by the respondent cannot be said to have been accepted by the appellant by conduct.
The material alterations effected by the respondent in the draft agreement made a world of difference in the matter.
Thereby, there was no consensus ad idem on the material terms of the contract which contains several clauses.
In the absence of any consensus ad idem on the material terms of the contract to be entered into between the parties, there emerged no concluded contract.
Apart from the draft agreement and the counter proposal, there was no independent contract for reference to arbitration.
It is not possible to accept the view that an agreement had emerged between the parties, from the correspondence and from submission of the tenders to the Board."
103 Therefore, it can be safely be held that the plaintiff has made out a prima facie case. The respondent No.5 did not have jurisdiction to enter reference or pass an award, therefore, proceedings and passing of award are patently void having no force of law. The balance of convenience is also in favour of the applicant. The applicant is likely to suffer irreparable loss if the injunction as prayed for is not granted.
104 Now, we are left with question as to what relief can be granted to the applicant in view of the passing of the award, dated 15.5.2012.
105 It is proved on record that the respondent No.5 had fixed the next date of arbitration proceedings on 25.5.2012, whereas the stand of the respondent is that the award was passed on 15.5.2012 which prima facie seems to ante dated to defeat the rights of the plaintiff/applicant. This Court cannot be mute spectator to illegalities of the respondent No.5 who did not act bonafidely and made deliberate attempt and intentional attempt to over reach this Court in view of the injunction granted on 17.5.2012.
No explanation is forthcoming from the respondent as to how the award could be passed on 15.5.2012 when the last date for filing objection was fixed as 25.5.2012. The award therefore, is nothing but an deliberate and intentional attempt to overreach this Court therefore, fraud on the Court. The respondents therefore, cannot take any advantage of the award, dated 15.5.2012.
106 Otherwise also, in view of the law laid down by the Hon'ble Supreme Court in Waverly Jute Mills Co.Ltd. and another vs. Raymon and Co. (India) Pvt. Ltd. (A.I.R. 1963 SC 90), the award is nothing but nullity having no force of law, for want of arbitration agreement.
107 It is only in the case of valid arbitration agreement that this Court does not interfere with arbitration proceedings or award passed in exercise of civil jurisdiction. Once the proceedings are held to be void and a nullity, jurisdiction of this Court is not ousted and this Court can set aside null and void award, passed without jurisdiction in exercise of civil jurisdiction.
108 Keeping in view of the fact that the petitioner has made out prima facie case and balance of convenience is also in favour of the applicant and also in view of the fact that there is order of injunction by this Court restraining the respondent No.5 from proceeding with the arbitration proceedings, an attempt was made to overreach this Court, therefore, relief is modified and application is allowed by setting aside the award, dated 15.5.2012 by declaring it to be null and void and further restraining the respondent No.5 to proceed with the arbitration proceedings during the pendency of the suit.
109 The award is otherwise also hit by the principle of lis pendence, as the suit was filed prior to the passing of the award. Therefore, rights of the applicant are also protected under the principle of lis pendence. A party cannot be left remedyless. The respondent No.5 inspite of serious allegations has not chosen to file any counter. The allegations against the respondent No.5 therefore go unrebutted.
110 It has been brought to the notice of this Court that the respondent No.5 is running illegal institution to conduct arbitration proceedings unilaterally without the consent of both parties. This case proves this fact. Furthermore, keeping in view of the fact that the respondents have tried to overreach this Court by passing award, dated 15.5.2012 even though, the application for injunction was pending in this Court. O.A.No.436 of 2012 is allowed with exemplary costs. The costs are assessed at Rs.2,00,000/- (Rupees two lakhs only) to be paid by the respondent No.5, to the Tamil Nadu Legal Services Authority, High Court, Madras.
111 A.No.2319 of 2012:
The plaintiff/applicant in a suit for damages, has filed this application under Order 14 Rule 8 of the O.S. Rules read with Order 38 Rule 5 of C.P.C. to direct the respondents 1 and 4, to jointly furnish security for a sum of Rs.2,00,000/- (Rupees two lakhs only) failing which to order attachment of schedule mentioned property.
112 In support of this application, besides reproducing factual averments made in the plaint, the grounds with regard to furnishing security read as under:
"The applicant had invested Rs.45,00,000/- (Rupees forty five lakhs only) for renovation/refurbishing.
The applicant was only in full operation of its business from August 2010 to March 2011.
In a short period of time for the year 2010 2011 a turnover of sales of Rs.1,57,72,261/- (Rupees one crore fifty seven lakhs seventy two thousand two hundred and sixty one only) and
the provisional sales for the year 2011 2012 was projected at Rs.1,60,00,000/- (both years are for only a period of less than 7/8 months).
The net profit lost due to the problems created by the respondents is about Rs.5,00,000/- (Rupees five lakhs only) per month and the loss is still continuing.
Hence the applicant has suffered loss in business to the tune of Rs.35,00,000/- (Rupees thirty five lakhs only) for seven months.
The entire investment has gone waste and the applicant will be unable to recover this investment.
Further, the applicant has suffered loss of goodwill and reputation as the first to fifth respondents have been providing bad quality food and have rendered the functioning of the bar impossible.
Hence, the customers and guests of the applicant are extremely disappointed and the reputation of the applicant in the market has suffered greatly.
The applicant is a front runner in the Hospitality business but due to the problems created by the first to fourth respondents the applicant has been unable to book parties or banquets or keep up to the standard that their guests are used to and hence their reputation has been adversely affected.
Therefore, in terms of loss of goodwill and reputation the applicant has suffered to the tune of Rs.80,00,000/- (Rupees eighty lakhs only).
Also, the respondents have been harassing the applicant and making false claims in terms of outstanding payments.
The respondents are creating unnecessary arbitration proceedings and have been trying to run the applicant out of the business.
The respondents have further instituted false complaints with authorities, tampered with the electricity, stopped the supply of the stock of liquor and caused great embarrassment and mental agony to applicant and caused damage to the tune of Rs.40,00,000/- (Rupees forty lakhs only).
Hence, the applicant is filing the present suit for damages and other reliefs.
Further, as the loss is still continuing and the applicant is unable to quantify the same it reserves its right to file a separate suit for further damages and for other reliefs, if any.
40 The applicant have a prima face good case and have likelihood to succeed. The applicant fears and apprehends even in the event of succeeding in the suit, it may not be able to enjoy the fruits of the decree as the respondents would do everything within its powers to frustrate the applicant and the decree.
Further, there is a dispute between the second, third and fourth respondents after the death of their father and the applicant/plaintiff apprehend that they may try to alienate or create third party rights on the scheduled premises.
The applicant has suffered loss and is still undergoing loss in business. The balance of convenience is wholly in favour of the applicant/plaintiff and unless the respondents/defendants are restrained from proceeding with the arbitration proceedings illegally and without due process of law irreparable loss and damage will be caused to the applicant/ plaintiff in respect of its business.
Hence, the present application. No loss or hardship will be caused to the respondents/defendants if this application is allowed. On the contrary, the applicant/plaintiff will be put to immense hardship, if this application is not allowed and would be put to irreparable loss.
113 The averments even if taken on face value do not satisfy the requirement of Order 38 Rule 5 of C.P.C.
It is yet to be determined whether the plaintiff/applicant will be entitled to damages as claimed.
Otherwise also, there is no averments regarding any overtact on the part of the respondents in disposing of the property to defeat the decree to be passed in favour of the applicant/plaintiff.
In absence of any material showing the steps being taken to dispose of the property with intention to defeat the decree to be passed, no order under Order 38 Rule 5 of C.P.C. can be passed as prayed.
114 Consequently, A.No.2319 of 2012 being totally misconceived, and void of any merit is ordered to be dismissed, but, with no order as to costs.
12.02.2013
Index: Yes/No
Internet:Yes/No
vaan
VINOD K.SHARMA, J.
vaan
Pre-Delivery common order in
O.A.No.436 of 2012 &
A.No.2319 of 2012 in
C.S.No.335 of 2012
Dated: 12.02.2013
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 12/02/2013
CORAM
THE HON'BLE MR.JUSTICE VINOD K.SHARMA
O.A.No.436 of 2012 and A.No.2319 of 2012
in
C.S.No.335 of 2012
MADRAS HOSPITALITY SERVICES
vs
TANGY ENTERPRISES PLTD
FOR PETITIONER : J.Sivanandaraaj
FOR RESPONDENT : Paul and Paul
ORDER:
VINOD K.SHARMA, J.
O.A.No.436 of 2012
The plaintiff/applicant has filed this application for grant of interim injunction restraining the defendants/respondents, their men, servants, agents, or assigns or any other person claiming under them from in any manner proceeding with the arbitration proceedings (Case No.ARC/SA/RSL/138/2012) pending before the fifth respondent sole arbitrator, pending disposal of the suit.
A.No.2319 of 2012:
2 This application has been filed by the plaintiff/applicant to direct the first to fourth respondents/defendants to jointly furnish security for Rs.2,00,00,000/- (Rupees two crores only) and deposit the same before this Court, pending disposal of the suit, failing which an order of attachment of the application schedule mentioned property.
3 In support of the application, it is pleaded in the affidavit as under:
The Applicant is a Partnership firm consists of four partners namely Arun Vasu, Mrinal Vasu, Srinivas Choudhary and the applicant. The partnership agreement was entered into for carrying on the business of establishing, setting up and running of leisure, tourism, entertainment, sports, restaurant, bar, pub, club and hotel business/industries and of such other business as the partners may from time to time mutually decide. In a short span of time, the Applicant firm has developed a great reputation in the Hospitality industry. They have been running and managing several establishments throughout the country and have achieved extreme success. The Applicant firm is best known for their excellent quality of food, friendly and diligent service and an overall great experience. The Applicant is also well known for their abilities of marketing, promotional activities and managerial abilities.
4 That the applicant firm have developed a specialisation in running and managing places of leisure, entertainment and hotel, bar/pub business/industries. The Applicant s establishments are also synonymous with good ambience and customer satisfaction. The Applicant is best known for setting up bar/pub s which are well known for its ambience and customers describe it as the best place in Chennai to relax with friends and family or to have a business lunch.
5 That the first respondent is a company running a resort cum hotel and was incorporated on 27.08.1998. Thereafter the name of the company was changed to "TANGY ENTERPRISES PRIVATE LIMITED" on 13.12.2010. The Directors of the first respondent are Mr. Emmanuel Fernandez, Mr. Joseph Fernandez and Mr. Mark Owen Fernandez who are the Second, third and fourth respondent respectively. The first respondent had acquired clearance certificate from the Police Department, had fire licence and certificate for a catering establishment. The fourth respondent was granted the F.L.3 Licence by the Commissioner of Prohibition and Excise, Chepauk, Chennai-600 005, for possession of liquor by the first respondent wherein there was a clearly designated bar and storage area as per the licence to enable it to sell the same to their guests and customers (hereinafter referred to as licence) on 10.12.1999 and the licence has been renewed every year till date.
6 That initially the first respondent had set up a low profile bar. From the year 1999, the first respondent was having small turnovers and was unable to expand and manage its business. Subsequently, the first respondent in an attempt to build a brand image opened a bar by the name of 9 Feet High in August 2009 at Beach Road, Neelankarai, East Coast Road, Chennai. However, the first respondent did not possess any prior experience or expertise and hence it failed in its effort to establish a high-end restaurant cum bar/pub. Further the first respondent was unable to maintain the standards of the food and beverages and quality of service. Hence, the customers were extremely dissatisfied and the general opinion was that the management is not up to the mark and hence the food ambience etc. is of poor quality.
7 That the first respondent s restaurant cum bar/lounge 9 Feet High was unable to pull its weight due to the lack of experience and expertise in running and managing a restaurant cum bar/lounge by the first respondent. Inspite of its huge fanfare launch, 9 Feet High was in operation only for about FOUR months. This clearly shows that the first respondent was unable to run a restaurant cum bar/lounge successfully.
8 That the first respondent, looking at the experience and expertise of the Applicant firm in the business, entered into a collaborative venture with the Applicant firm at Chennai in January 2010. It was agreed that the Applicant firm would run and manage the bar/pub, making use of its specialization in the field and that the first respondent will provide the excellent location and the licence to sell liquor. It was further agreed that the Applicant firm would be the food production partner of the first respondent and would take all steps necessary to successfully run and manage a bar.
9 That pursuant to this arrangement, the Applicant executed an indemnity bond, dated 29.1.2010 in favour of the fourth respondent. The Applicant also entered into a Memorandum of Understanding (hereinafter referred to as MOU ) with the first respondent dated 29.1.2010 in order to run and manage the bar. The fourth respondent is a Director of the first respondent and a part of the business. So he was to provide stock of liquor to the bar, which was for the business arrangement. As per Clause 4.1 of the MOU, the Applicant has to pay Rs. 2,50,000/- [Rupees Two Lakhs Fifty Thousand Only] per month as a minimum guarantee amount to the first respondent. Additionally, the Applicant entered into a lease agreement (hereinafter referred to as agreement ) dated 29.1.2010 with the Second and Third Respondents for the lease of the first and second floors of anchorage block measuring approximately lounge space of 1357 square feet, open to sky of 499 square feet to the right of the lounge and 520 square feet open to sky on the left of the lounge on the first floor; and open to sky (terrace) of 3548 square feet on the second floor situated in Anchorage Building (hereinafter referred to as scheduled premises ) to run the bar/pub. As per the lease agreement the Second and Third Respondents are the Lessors and the Applicant is the Lessee. As per the agreement the Applicant agreed to pay the Second and Third Respondents a monthly rent of Rs.50,000/- [Rupees Fifty Thousand Only] for the above mentioned scheduled premises. Further the Applicant has also paid a refundable security deposit of Rs.30,00,000/- [Rupees Thirty Lakhs only] pursuant to the agreement. All this was done under the belief that the Applicant firm and the First to fourth respondents would work amicably in order to generate business and carry out the objective of their MOU.
10 That the Applicant firm was to take care of the launch of the bar/pub, brand and image management and consultancy while pre-operative and renovation expenditure was to be borne by the first respondent. Hence the Applicant spent Rs.20,00,000/- (Rupees Twenty Lakhs Only) for marketing and promotion of the business by way of advertisements through various medium of communications, word of mouth, distribution of pamphlets, costs including sending personal invitations to their guests and dignitaries etc., Despite the Applicant s efforts on getting the business launched on time, the first respondent was unable to complete the renovations/refurbishments in time for handing over the scheduled premises to the Applicant for the commencement of the business as originally scheduled on 1.3.2010. Therefore, the Applicant in order to avoid any kind of problems prior to the launch of the new venture went beyond its agreed responsibilities and took over the renovation/refurbishment. The Applicant was assured that the expenses incurred by it would be reimbursed by the First to fourth respondents and believing the potential of the business venture, the Applicant spent Rs.25,00,000/- [Rupees Twenty Five Lakhs Only] for furniture and equipment and infused a capital of Rs. 20,00,000/- [Rupees Twenty Lakhs Only] for pre-operative expenditure in order to ensure that the bar/pub was elevated to a higher standard.
11 Besides the Applicant firm also recruited staff, managers and provided training of international level to them. All the acts of the Applicant were done under the belief that the parties i.e. the Applicant and the First to fourth respondents would enter into a profit making venture where they would work amicably for mutual benefit. The Applicant put its reputation on line in order to ensure that the new venture is successful.
12 That on 30.07.2010 and 31.07.2010 the bar/pub by the name of No Sky Above (NSA), was officially launched. NSA is a one of its kind new resto bar at Neelankarai on the East Coast Road, Chennai. Newspapers described it as This is the first place of its kind on the beach in partnership with Emmanuel Fernandez, Mark Overlooking the beach the resto lounge bar is designed to soothe the senses with the rhythm of the ocean waves. One can unwind to soulful music, the rustle of the wind and waves with a choice of innovative refreshing beverages and a funky mix of flavours to tease the palate.
13 That all the efforts, investments and strategies implemented by the Applicant firm resulted in huge success of the business with increase in the inflow of customers, sale of beverages etc. The Applicant has gone an extra mile by hiring food consultants/ professionals to help the first respondent improve the quality and standards of food, besides creating a whole new set of menu. The business was running smoothly and was making profit. In a short span of time NSA became one of the most popular places and was well known for its ambience and friendly service. Thus the business collaboration between the Applicant and First to fourth respondents was a huge success. The Applicant expected the business arrangement to progress well and generate more profit.
14 That the first respondent was completely unaware that they were sitting on a potential goldmine until they witnessed the tremendous success of NSA and the First to fourth respondents with malicious intention started creating problems for the Applicant.
15 It is further submitted that the First to fourth respondents wanted to drive the Applicant firm out of the business arrangement so that they could take over the business themselves and appropriate all the profits that were being generated by the virtue of the efforts and reputation of the Applicant. To achieve their dishonest motive, the first respondent sent a letter dated 23.11.2010 to the Applicant falsely stating that dues to the tune of Rs.17.22 Lakhs were pending. The first respondent also made baseless claims pertaining to VAT and drop in food sales. Inspite of the fact that the Applicant had infused its own money for running and managing the business the first respondent started making additional claims that were unsubstantiated. All the claims made by the first respondent were merely to harass the Applicant and were beyond comprehension as the Applicant had only been working with the first respondent for a few months.
16 That as these false and unreasonable claims of the first respondent were mounting, the Applicant repeatedly requested the first respondent to furnish copies of electricity challans, security charges bill, staff room payment receipts and other expenses starting August 2010 in order to cross check the actual dues on the part of the Applicant.
17 That eventually by letter-dated 14.02.2011 the first respondent furnished copies of electricity challans, security charges bill, and staff room payment receipts etc. On perusal of these documents the Applicant was shocked and realised that the first respondent was trying to overcharge the Applicant. They were making claims for back dated payments and for amounts that the Applicant was not liable to pay. Some of the claims were outright fraudulent and baseless. The Applicant was surprised and disappointed at these turn of events.
18 That the First to fourth respondents to defame and harass the Applicant started an online movement called pleasepay.nsa . The First to fourth respondents aim was to demand their inflated dues and false claims from the Applicant by way of series of illegal protests to be held in various places in Chennai and Hyderabad where the partners of the Applicant have their residences and holdings. The intention was only to defame and embarrass the partners so that they move out of the successful business venture. As part of their unlawful protest, the fourth respondent had even trespassed and forcibly entered into the residence of one of the partners of the Applicant, one Mr.Arun Vasu, in middle of the night. The First to fourth respondents further started sending bulk emails to all the partners of the Applicant to harass them. The fourth respondent had further threatened many of the staffs of the Applicant and interrupted them from performing their duties. Subsequently the fourth respondent had snatched the mobile phone of one Mr. Altaf, one of the Managers of the Applicant and attempted to physically abuse him. Hence continued illegal activities of the fourth respondent is in clear violation of the terms and conditions of the MOU, which set forth obligation on part of the First to fourth respondents to provide the Applicant safe and uninterrupted access to the scheduled premises to carry on its day-to-day activities. Hence due to the extreme harassment and threatening by the fourth respondent many of the Managers and other valuable staffs of the Applicant had left their jobs out of fear.
19 That the First to fourth respondents continued to harass and trouble the Applicant by refusing to renew the F.L.3 licence when it was due for its renewal in March 2011 before the Commissioner, Prohibition and Excise. The fourth respondent even issued a letter dated 9.3.2011 calling for suspension of activities with the Applicant. The language used by the Second and fourth respondents in most of their email and letter communications are indirectly abusing and threatening the Applicant. The Applicant replied vide letter dated 15.3.2011 stating that it had put in great efforts, resources and goodwill in the business arrangement and wanted to settle issues amicably asking the Second Respondent to see reason and exercise better judgment as the Managing Director of the first respondent.
20 That there were several rounds of talks between the parties and finally due to the efforts of the Applicant two meetings were held on 18.03.2011 and 25.03.2011 at the office of the Applicant at Chennai to resolve issues. Both the Applicant and the first respondent represented by the Second Respondent discussed all the matters pertaining to payments that were before the Applicant started the business, food bills, VAT, security charges, electricity bills, diesel genset which were wrongly credited to the Applicant etc. The Applicant further discussed the energy audit carried out by ENCON Concepts, which clearly showed that the amount of Rs.80,000/- Rs.90,000/- claimed by the first respondent towards electricity charges per month was absolutely wrong. The report given by the ENCON Concepts clearly proves that the peak energy consumption by the Applicant would cost to the maximum of only Rs.46,157/- (Rupees forty six thousand one hundred and fifty seven only) per month, as the area of the Applicant s operation in the first respondent s Resort is comparatively meagre. Furthermore, during the year 2010 2011, the monsoon rain was more than usual and was raining for many months continuously, due to which it is very evident that the Applicant was not in need to use air-conditioners, terrace lights etc., In contrary, the first respondent s consumption is beyond comparison with the Applicant as the first respondent was operating its resort which has more than twenty rooms, full service kitchens, restaurants, a conference hall, recreation facilities and the like. Inspite of all this, the Applicant agreed to pay the first respondent 50% of the total consumption out of the common electricity meter, which is much more than the share of the Applicant, until the first respondent installed the sub-meter.
21 That the first respondent showed the calculation of accounts and all registers as maintained by the Applicant. The first respondent after perusing these books of accounts and registers did not have a choice but to rightly admit that they had been making false and baseless claims contrary to the business arrangement. It was obvious, the first respondent was only making these unsubstantiated and unreasonable demands as it wanted to take over NSA and the First to fourth respondents wanted to misappropriate the profits of the business and cheat the Applicant out of its investments. Finally, an arrangement was arrived at between the parties. On 20.4.2011, the Applicant wrote to the Second Respondent and attached the statement of accounts of the first respondent in the books of the Applicant. The same Statement of Accounts was also sent by post on 21.04.2011, which clearly shows only an outstanding payment of Rs.3,13,515/- (Rupees three lakhs thirteen thousand five hundred and fifteen only) was remaining.
22 Consequently, the minutes of the meeting held on 18.03.2011 and 25.03.2011 were signed at Chennai on 26.4.2011 wherein all the terms of settlement were clearly outlined and as per the statement attached therein the Applicant paid Rs.3,26,115/- (Rupees three lakhs twenty six thousand one hundred and fifteen only) to the first respondent as a full and final settlement.
23 That as a result of the minutes dated 26.4.2011, the Second Respondent sent an email on 12.05.2011 to the accounts department of the first respondent, directing them to suspend all the statements of the Applicant as on 08.05.2011 and start a fresh statement from 09.05.2011. Hence a settlement had been reached between the first respondent and the Applicant, and the Applicant expected the business to function smoothly. The Applicant has been making all payments as per the agreed Minutes dated 26.4.2011.
24 That the Applicant firm was under the belief that the business arrangement would progress smoothly now. Instead, the First to fourth respondent remained undeterred in their unlawful designs and started making false claims, complaints, raising irrelevant issues, claiming drop in food sales etc., only to drive the Applicant out of the business. The Applicant repeatedly tried to reason with the Second Respondent regarding the wrongful interpretation of the cost, working and selling price of the food vis a vis menu card rate etc., Further, the Applicant also brought to the notice of the first respondent that poor quality of food was being supplied to the guests of NSA which was resulting in damage to the reputation of the Applicant. Moreover, there were also problems pertaining to the cutlery, shifting of kitchen, speed of service, frequent change of chefs etc., in relation to the food being supplied to NSA.
25 That the first respondent wilfully did not address any of the problems being faced in the functioning of NSA. Instead to put further pressure and harass the Applicant, the first respondent once again started making false and baseless demands pertaining to payment of food reimbursements, sales tax, electricity bills, service tax, VAT etc.,
26 That, to make matters worse in October 2011, the First to fourth respondents for no reason whatsoever completely stopped supplying the stock of liquor, which resulted in further loss to the Applicant. By cutting off the stock, the First to fourth respondents has rendered the Applicant unable to run and manage the bar/pub. This unilateral and arbitrary stop in supply by the First to fourth respondents came as a huge blow to the Applicant who was already incurring heavy losses in its business due to the various issues created by the First to fourth respondents. It is to be noted at this point that the Applicant had entered into an agreement and the MOU in order to run and manage a bar/pub at the scheduled premises. Without the supply and release of necessary liquor stock by the First to fourth respondents, the main purpose of the agreement entered by the Applicant with the First to fourth respondents is defeated.
27 That the First to fourth respondents had purposely stopped all the supplies around the festive season of Christmas and New Year, as they were well aware that it was the best season of the business. Inspite of repeated requests by the Applicant to release the stock, the First to fourth respondents did not release anything. It is very evident from the conduct and actions of the First to fourth respondents that their intention was to create heavy losses to the Applicant and to chase the Applicant out of the collaborative venture. The actions of the First to fourth respondents have damaged the reputation and goodwill of the Applicant.
28 On the other hand, the Applicant has made sizeable investment and incurred expenses in order to set up and manage the bar. The Applicant has been performing all the obligations on its part and is ready and willing to continue with the business venture. The Applicant also wrote to the first respondent stating the same vide its letter dated 3.12.2011 and 20.12.2011.
29 The conduct of the First to fourth respondents has resulted in heavy loss in business in terms of customer satisfaction, loss of business, maintenance, rent payable for the scheduled premises, payment of salary to the bar staffs etc., The Applicant is still trying to quantify all losses and damages. Moreover, the loss incurred by the Applicant is not just monetary, but also in terms of good will and reputation.
30 The Applicant firm wrote several letters in January 2012 to the first respondents asking them to see reason, refrain from demands of inflated payments and release the stock. The Applicant repeatedly asked the first respondent to come for settlement talks. The First to fourth respondents falsely indicated that they too wanted to settle issues but they never came for any talks.
31 The First to fourth respondents had not been supplying the stock for over five months and sent a letter dated 06.02.2012 to the Applicant demanding a payment of Rs.2,42,000/- [Rupees Two Lakhs Forty Two Only] for the renewal of grant of the F.L.3 Licence for the year 2012 - 2013, including the privilege and application fees together with the incidental expenses thereon. As per the arrangement between the Applicant and the First to fourth respondents, the First to fourth respondent would pay the renewal fee for the licence and other expenses and thereafter the Applicant would reimburse it. The Applicant is ready and willing for the same arrangement and the same was also conveyed to the First and Second Respondents vide email dated 26.2.2012. The Applicant also stated in this email that it is willing to pay the amount if the First to fourth respondents are willing to release the stock of liquor with immediate effect and give an undertaking that they will not stop the supply again. However, there was no reply to this email of the Applicant and nor did they release the stocks.
32 That in addition to all these problems, the First to fourth respondents also tampered with the electricity of the Applicant and as a result the scheduled premises did not have electricity for four days. From all of these actions, it is very evident that the First to fourth respondents are merely trying to drive the Applicant out and want to take advantage of the hard work of the Applicant in building the brand and image of NSA and take over NSA by themselves. Further, the intention of the First to fourth respondents is that to cash in on the huge goodwill and reputation created by the expertise, dedication and huge sum of capital infused by the Applicant.
33 To the utter shock and surprise of the Applicant, it received an email-dated 31.03.2012 from the Fifth Respondent stating that the first respondent had appointed him as the Sole arbitrator. In this email dated 31.03.2012 the Fifth Respondent relies on clauses 8.2 and 8.3 in the MOU however neither of these clauses are arbitration clauses. The first respondent has initiated an Arbitration proceedings without any arbitration agreement or any arbitration clauses in the agreement or in the MOU. The Applicant is not a party to any Arbitration Agreement/Clause. Further, the Applicant has never agreed to Arbitration. Clearly there is no meeting of the minds between the parties with regard to settling their disputes through Arbitration. Moreover, the MOU clearly expresses that the parties will approach the Courts in Chennai to resolve any disputes by litigation. Hence, the first respondent unilaterally and without any notice to the Applicant, appointing the Fifth Respondent as a Sole Arbitrator is illegal, arbitrary and against the settled principles of Law.
34 That even before the Applicant could reply to the email dated 31.03.2012, it received another email dated 04.04.2012 from the Fifth Respondent seeking to fast track the arbitration proceedings. Looking at the conduct of the Fifth Respondent, the Applicant apprehends that the Fifth Respondent is biased and hand in glove with the First to fourth respondents. The Fifth Respondent seems to be adamant to pass an award immediately granting all reliefs to the first respondent superseding all settled principles of law pertaining to initiating of an arbitration proceeding and appointment of an arbitrator. The basic requirement of an arbitration clause has not been fulfilled and the Fifth Respondent proceeding without any arbitration clause/agreement renders the proceedings invalid.
35 The Applicant replied to both the emails of the Fifth Respondent dated 31.03.2012 and 04.04.2012 vide its letter dated 09.04.2012 wherein the Applicant clarified that there is neither an arbitration clause/agreement nor has the Applicant agreed to arbitration and asked the Fifth Respondent to furnish the copies of documents he was relying on. The Fifth Respondent replied to this letter dated 09.04.2012 via an email dated 11.04.2012 contradicting himself and now relying on a letter dated 15.3.2011 which permits him to proceed with the arbitration.
36 That the institution of the arbitration proceeding is merely an abuse of process. The proceedings are being conducted without an arbitration clause/agreement and the first respondent is merely trying to obtain an award by playing fraud. The Applicant wrote to the Fifth Respondent once again vide letter and email dated 13.04.2012 objecting to the Fifth Respondent being appointed as an arbitrator and stating that there is no arbitration agreement/clause and to refrain from proceeding with the arbitration. Once again the Applicant asked the Fifth Respondent to furnish the copies of the documents he was relying on.
37 That the Fifth Respondent maliciously has assumed that an arbitration clause exists and has in utter disregard to settled law and procedure to institute arbitration proceedings assumed jurisdiction and proceeded with the Arbitration on 14.04.2012. Further the Fifth Respondent informed the Applicant that he will pass the award on the next date of the arbitration i.e. 09.05.2012.
38 The Fifth Respondent sent an email dated 29.4.2012 to the Applicant stating that it is unnecessary to ask for it (documents) . However in para 8 of this email the Fifth Respondent stated In case you need the documents please visit on 9.05.2012 in person or by authorised person to ask for them though not interested to participate in the proceedings. Accordingly, the Applicant informed their legal counsel to inspect the documents and upon instructions from the Applicant, the legal counsels spoke to the Fifth Respondent and ascertained the venue at Egmore, Chennai for the inspection and fixed a time of 11.30 am on 9.5.2012 to inspect the documents.
39 The legal counsels of the Applicant were shown the documents. The Fifth Respondent though assured that he would ensure that a copy would be provided, has not yet given a copy of the same. Further, the legal counsels made it abundantly clear that the Applicant will not submit to arbitration proceedings as there is no arbitration clause/agreement and hence no foundation on which the arbitrator i.e. the Fifth Respondent can proceed to adjudicate issues.
40 The legal counsels left the premises after inspection and indicated that they would wait for the receipt of the documents and accordingly get in touch with the Fifth Respondent on 12.05.2012. However the Fifth Respondent once again arbitrarily and unilaterally, contrary to what was agreed sent an email on 11.05.2012 to the legal counsel as well as the Applicant fixing the next date of arbitration proceedings on 25.5.2012 and threatening to initiate contempt proceedings. Contrary to email, the Fifth Respondent had conducted arbitration proceedings, during the inspection of the documents by the counsel for the applicant, on the 9.05.2012.
41 The conduct and pre-disposition of the Fifth Respondent towards the First to fourth respondents is extremely suspicious and the Applicant fears that an award granting all the reliefs to the first respondent will be passed. The Applicant further submits that the Arbitration Tribunal constituted by the Respondents are in clear violation of the principles of natural justice and against settled principles of law as there is no arbitration agreement between the Applicant and the Respondents.
42 If the award is allowed to be passed, it will lead to multiplicity of proceedings as the Applicant will have to file a petition for setting aside the award. Section 41 of the Specific Relief Act clearly states that if the action leads to multiplicity of proceedings it ought to be injuncted. Hence the Respondents should not be allowed to proceed with these unlawful and baseless arbitration proceedings.
43 The Applicant had invested Rs.45,00,000/- (Rupees forty five lakhs only) for renovation/refurbishing The Applicant was only in full operation of its business from August 2010 to March 2011. In a short period of time for the year 2010 - 2011 a turnover of sales of Rs.1,57,72,261/- (Rupees one crore fifty seven lakhs seventy two thousand two hundred and sixty one only) and the provisional sales for the year 2011- 2012 was projected at Rs.1,60,00,000/ (Rupees one crore and sixty lakhs only) (both years are for only a period of less than 7/8 months). The net profit lost due to the problems created by the Respondents is about Rs.5,00,000/- (Rupees five lakhs only) per month and the loss is still continuing. Hence the Applicant has suffered loss in business to the tune of Rs.35,00,000/- (Rupees thirty five lakhs only) for 7 months. The entire investment has gone waste and the Applicant will be unable to recover this investment. Further the Applicant has suffered loss of goodwill and reputation as the First to Fifth Respondents have been providing bad quality food and have rendered the functioning of the bar impossible. Hence the customers and guests of the Applicant are extremely disappointed and the reputation of the Applicant in the market has suffered greatly.
44 The Applicant is a front runner in the Hospitality business but due to the problems created by the First to fourth respondents, the Applicant has been unable to book parties or banquets or keep up to the standard that their guests are used to and hence their reputation has been adversely affected. Therefore in terms of loss of goodwill and reputation the Applicant has suffered to the tune of Rs.80,00,000/- (Rupees eighty lakhs only). Also the Respondents have been harassing the Applicant and making false claims in terms of outstanding payments. The Respondents are creating unnecessary arbitration proceedings and have been trying to run the Applicant out of the business. The Respondents have further instituted false complaints with authorities, tampered with the electricity, stopped the supply of the stock of liquor and caused great embarrassment and mental agony to Applicant and caused damage to the tune of Rs.40,00,000/-(Rupees forty lakhs only). Hence the Applicant is filing the present suit for damages and other reliefs. Further, as the loss is still continuing and the Applicant is unable to quantify the same it reserves its right to file a separate suit for further damages and for other reliefs, if any.
45 The applicant have a prima facie good case and have likelihood to succeed. The applicant fears and apprehends even in the event of succeeding in the suit, it may not be able to enjoy the fruits of the decree as the Respondents would do everything within its powers to frustrate the Applicant and the decree. Further, there is a dispute between the Second, Third and fourth respondents after the death of their father and the Applicant/Plaintiff apprehend that they may try to alienate or create third party rights on the scheduled premises. The Applicant has suffered loss and is still undergoing loss in business. The balance of convenience is wholly in favour of the Applicant/Plaintiff and unless the Respondents/Defendants are restrained from proceeding with the arbitration proceedings illegally and without due process of law, irreparable loss and damage will be caused to the Applicant/Plaintiff in respect of its business. Hence, the present application is filed. No loss or hardship will be caused to the Respondents/Defendants here if this Application is allowed. On the contrary, the Applicant/Plaintiff will be put to immense hardship, if this Application is not allowed and would be put to irreparable loss.
46 On the pleadings, the applicant prays for direction to the First to fourth respondents/Defendants to jointly furnish security for Rs.2,00,00,000/- (Rupees two crores only) and deposit the same before this Court, pending disposal of the Suit, failing which an order of attachment of the schedule mentioned property of the Second and Third Respondents/Defendants may be passed pending disposal of the suit.
47 When the matter came up on 17.5.2012, this Court while issuing notice to the respondents, passed the following order:
"Heard the learned counsel for the applicant/plaintiff.
2 The learned counsel for the applicant/ plaintiff would contend that there is no agreement for referring the disputes between the parties for arbitration. A perusal of Clauses 8.2. and 8.3 of the Memorandum of Understanding, dated 29.1.2010 entered into between the parties would indicate that there is no provision for referring the dispute to an arbitrator. It is also evident that the parties themselves have agreed to agitate the disputes or differences, if any, before the Civil Court at Chennai. The learned counsel for the petitioner would further contend that the fifth respondent had originally sent an e-mail dated 31.3.2012 stating that he was appointed as an arbitrator by the respondents 1 to 4 as per the clauses contained in the Memorandum of Understanding entered into between the parties to the dispute. On receipt of the letter, the applicant/plaintiff sent a reply dated 9.4.2012 questioning the very authority of the fifth respondent, as an arbitrator, to adjudicate the dispute and the fifth respondent/arbitrator in turn sent an e-mail dated 11.4.2012 pointed out that he was appointed as an arbitrator pursuant to the letter dated 15.3.2011 of the plaintiffs which letter also does not specifically indicate the authority or jurisdiction of the respondents 1 to 4 to appoint the fifth respondent as an arbitrator nor applicants/ plaintiffs have even agreed to appoint any one as an Arbitrator.
3 The applicant/plaintiff questions the very appointment of the fifth respondent/ arbitrator to conduct the arbitral proceedings as there is no arbitration agreement at all.
4 Even before appointment of the fifth respondent as arbitrator, no notice was issued to the applicant/plaintiff by the respondents 1 to 4. Therefore, considering the peculiar facts and circumstances of the case, there will be an order of interim injunction restraining the respondents 1 to 4 from proceeding further with the arbitration proceedings (Case No.ARC/SA/RSL/138/2012) which is stated to take place on 25.5.2012 or on any further dates, for a period of four weeks. Notice. Private Notice is also permitted."
48 This application is opposed by filing common counter affidavit on behalf of the respondent No.2 being the Managing Director of the respondent No.1. This affidavit is also filed on behalf of the respondents 1, 3 and 4.
49 In the counter affidavit filed by the fourth respondent, it is pleaded as under:
It is stated that both the applications are frivolous, lacking in bonafides and not maintainable in law. The applicant who is guilty of suppressio veri and suggestio falsi is not entitled to any discretionary relief from this Court. The relief claimed in O.A.No.436 of 2012 has become infructuous, since the arbitration case referred to the sole Arbitrator has already been concluded with the passing of the award on 15.5.2012 which is also known to the applicant. The applicant is put to strict proof of his claim that the applicant is a registered partnership firm.
50 The applicant has not filed any document to establish the case, is not entitled to maintain the suit as well as the application. In any event, the ingredients necessary for grant of relief of attachment is not available and consequently application No.2319 of 2012 for attachment is also not maintainable.
51 The averments in para 3 are matters of record and admitted. The averments in para 4 are misleading and incorrect. The respondent had commenced the resort in 1998 in which the bar was a small part. The resort as a whole comprised of rooms, restaurants, bar, swimming pool etc., apart from facilities for banquetes, conferences and residential training programmes for Corporates. In March 2008, this respondent has launched "Nine Feet High" which was a successful venture fully owned and operated by the first respondent. It was on account of the success of this venture, the applicant together with one Mr.G.Vinod Reddy had approached the first respondent seeking to partner and operate a pub at the resort. The claim that this respondent was unable to maintain standards of food, beverages and quality of service is mischievous and completely baseless. The food as well as the ambience of the pub was very much appreciated by the clientele.
52 With regard to the averments in para 6, this respondent was misled by the applicant s Managing Partner who was controlling and running a successful pub at Chennai. It was only later that the respondent came to know that the said Managing Partner was not directly involved in the venture and was only a minor stake holder in the venture. The fact that the respondent wanted the applicant to provide the food would clearly show that the claim that the respondent was unable to maintain the standards of the food made earlier is false. The applicant s Managing Partner was fully convinced about the respondent's ability to live upto international standards well before entering into the understanding. In fact, the applicant's partners have at several occasions paid strong accolades to the respondent for the excellent food supplied by the respondent.
53 The averments in para 7 are substantially correct. However, the claim that the applicant had paid a sum of Rs.30,00,000/- (Rupees thirty lakhs only) as security deposit pursuant to the lease agreement is false and denied. The applicant had paid only Rs.20,00,000/- (Rupees twenty lakhs only), and requested the respondent to accept the same as they claimed that they had some difficulty in raising the funds at that stage. Since the remaining amount was agreed to be paid subsequently, in good faith, this respondent accepted the same.
54 With regard to the averments in para 8, it is submitted that contrary to the tall claims made by the applicant in this paragraph, the applicant was unable to raise sufficient funds for the venture, which is evident from the facts stated in the preceding paragraphs that out of the security deposit of Rs.30,00,000/- (Rupees thirty lakhs only) due and payable by the applicant, the applicant could only raise Rs.20,00,000/- (Rupees twenty lakhs only). The applicant is put to strict proof of the alleged expenditure incurred by them. In fact, the applicant had at many occasions requested this respondent to intervene on account of their non payment of dues to their vendors. Accordingly, this respondent had taken steps to sort out the issues for which the applicant's Managing Director had also sent SMSs appreciating the efforts taken by the respondent to help sort out the complications and problems of the applicant.
55 The averments in para 9 regarding the inauguaration of the pub "No Sky Above" belonging to this respondent managed by the applicant is admitted.
56 With regard to the averments in para 10, it is submitted that while the applicant claims that the business was a "huge success" on one hand, on the other hand, the applicant never furnished details of the gross sales to the respondent inspite of repeated reminders, in order to prevent the respondent from computing the amount due and payable by the applicant to the respondent calculated at 15% of the gross sales in the event the sale is above Rs.15,00,000/- (Rupees fifteen lakhs only) as provided in clause 4.2 of the MOU.
57 The averments in para 11 are false, defamatory and made for the purpose of this case. The applicant who from the beginning had no intention of paying the amounts rightfully due to this respondent and have always been struggling for finances and defaulting in payments to third parties as well as to this parties as well as to this respondent is painting a different picture before this Court. The respondent's letter, dated 23.11.2010 would show the correct position of the fact and that the applicant has admittedly not responded to the said letter sent by registered post would clearly show the true colours of the applicant.
58 The averments in para 12 are denied. It is submitted that the respondents have been giving bills periodically to the applicants. This would be evident from the fact that no requests were ever made for the bills by the applicant, since the inception of the Memorandum of Understanding until 28.01.2011 when the applicant's Manager by an email first made such a request for bills.
59 The averments in para 13 are denied. The applicant is put to strict proof of the same. It is submitted that all demands were raised only as per the terms agreed flowing from the MOU. Further, right from inception, the respondent had periodically sent statements numbering MHS statement 01 dated 31.7.2010 to MHS statement 20D dated 27.2.2012 to the applicant under proper acknowledgement.
60 The averments in para 14 are denied. It is submitted that the applicant was unable to face the financial pressures caused solely due to their several commitments and mismanagement. At a meeting with the applicant's Managing Partner in mid-January 2011, the fourth respondent was informed that he was bogged down by several health ailments which were life threatening. The applicant's Managing Partner even stated that he had to leave back to his native place for urgent medical treatment and directed the fourth respondent to contact Mr.Arun Vasu, another partner of the applicant for assistance, co-ordination and payment, in future. The said Mr.Arun Vasu used delaying tactics after which the fourth respondent tried to contact Mr.Srinivas Choudary who is the brother of the applicant's Managing Partner and also another partner of the applicant. Being in another state, he was inaccessible in person and not responsive when contacted. In these circumstances, with no solution in sight for the mounting dues the respondents were left in a quandary and was forced to find some means of forcing the applicant realise their fault and pay up the dues. Hence the respondent opened an email id "pleasepay.nsa@gmail.com too correspond only with the partners and those connected with the applicant in order to hasten the payments. There was nothing illegal about the same and the averments are false and contrary to the truth. At no time, did the respondents pose any threat to the staff of the applicant. In fact, the respondents had assisted the applicant's staff in every way possible. However, there was no reciprocal response.
61 That one of the Managers of the applicant had promised to submit details pertaining to sales and purchase figures as required by the Excise department which is a mandatory requirement for renewal of the FL3 licence and he kept delaying for over two months. The Excise department officials had threatened to reject and close the renewal file due to want of these details. The applicant produced the records only after repeated persuasion by the respondents since the respondents' reputation and licence was at stake. The respondents are respectable persons in society and would never resort to either physical or verbal abuses to anyone. It is false to state that the applicant's Managers were leaving because of the threats and harassment of the respondents. The four Managers who had worked during that short tenure, left due to conflict and misunderstanding with applicant's Managing Partner and differences in operation styles with the applicant.
62 The averments in para 15 are false. It is submitted that the FL3 licence fee was paid in time and applied for the year 2011-12 by the applicants. At no time was the applicant ever denied or troubled for the renewal of licence. The seeking of sales, purchase and other details by the respondent which the applicant firm was required to furnish is what the applicant is claiming to be harassment.
63 It is pertinent to mention herein that the applicant's employees at the bar did not even use a peg measure and were pouring drinks based on the presumptive minds of its bartenders. When the respondents learnt of this blatant violation, a licensed peg measure was purchased by the respondent and given to the applicant as the Tamil Nadu Liquor (Licence and permit) Rules 1981 Act very clearly stipulates that it is mandatory that every licenced Permit Room holds and uses a valid or validated peg measure at all times. The Act also clearly stipulates that the valid Peg Measure certificate is always displayed in the Bar. By failure to ensure that a valid peg measure and its certificate was present, the applicant exposed their claims of prefessionalism. The averments that the language used by the respondent in their letters and email communication was threatening and abusive are false and misleading. It was the applicant who, in all its correspondence took pains to belittle the respondents by nasty statements and remarks.
64 The averments in para 16 are false and misleading. It is submitted that even though there were several rounds of talks, the applicant never showed any intention to solve issues permanently. The energy audit was done unilaterally by the applicant and this was never shared with the respondent at any time. In fact, a study of the said energy audit report as submitted by the applicant before this Court clearly shows that the operating time per day for air conditioners was 3.5 hours only. In reality, it ran for close to 20 hours a day. More so, on big events and other night parties etc., additional loads were used that were never taken into account for by the said audit team. Again, a closer scrutiny of the said Audit Report clearly states that the figures given were not conclusive but "Possible". Such was the quality of the so called energy audit conducted by the applicant.
65 It is false to state that the respondent demanded 50% of the Resort Consumption. In line with the MOU, a sub-meter was installed by the respondent and given to the account of the applicant. The applicant in order to create a situation conducive to themselves sabotaged the sub-meter and then claimed helplessness. The respondent submits that the only load for the entire building where the Bar is located is EB service No:294:017:187 wherein a restaurant, kitchen, conference hall, ED's office room and rooms under renovation are located. Apart from this is the Bar and areas occupied by the applicant. The statement made by the applicant is that of one trying to "pass the buck" or making the respondent to pay for the applicant's use.
66 The averments in para 17 are denied. The applicant at no time showed any registers or accounts. Neither did it give any audited reports as it ought to have done under the MOU, despite written request by respondents.
67 The averments in para 18 are admitted. Even going by the statement in the plaint, the applicant does admit that dues were payable to the respondent. At no time was there any allegation made of false and wrongful accounts. The claims of the applicant are an after-thought only to avoid paying up their dues. A closer scrutiny of the applicant's statement will reveal that no attempt was made by the applicant to pay statutory dues such as VAT.
68 The averments in para 19 are misleading. It is submitted that the purpose of the internal email by the second respondent' with a copy to the applicant was merely to temporarily "suspend" the running statement and not to waive the same. This was done based on the request of the applicant to the respondent to give them a chance to make good the old payments from future business accruals, with a promise to pay the new amounts (i.e. From 9.5.2011) promptly. A reading of the sequential statements issued till the very end would show that the suspended account was always present and any credits of the applicant was debited in the suspended account as and when paid by the applicant. The applicant has also made use of the Geneset, garbage clearance and beach cleaning benefits but failed to remit its dues inspite of the applicant agreeing to do so.
69 The averments in para 20 are incorrect and false. The respondent had only demanded the legitimate dues which was scuttled by the applicant. Further, the problems pertaining to cutlery were self-created by the applicant due to poor mismanagement of the applicant's staff. With poor food sales, it was impractical and ineffective to run two kitchens and hence after according due notice, the respondent shut down the temporary kitchen and functioned from the main kitchen. The absence of the proper service boys led to poor speed of service which the applicant ought to take onus and responsibility. In the entire tenure of the applicant in operations, only once was the chef temporarily substituted since the existing Chef had been sent abroad for training in the art of manual noodle-making. Hence, the statements of failure of the respondent made by the applicant are far-fetched and far from the truth.
70 The averments in para 21 are incorrect. All claims made by the respondent are clear and sent under the proper channel of correspondence.
71 The averments in para 22 are incorrect. It is submitted that the liquor for the applicant is made through the TIN number allotted to the respondent. The monthly returns and payment of VAT pertaining to liquor sales is filed by means of Form J and this ought to have been done by the applicant as per the MOU. The applicant, on their failure to file the said returns led the Enforcement Wing of the VAT department onto us (being the Licence Holders and Tin A/c No.). On intimation that the applicant had a MOU to run the Permit Room and the fact that the applicant was responsible to file the returns and pay the VAT, the Enforcement Cell informed the respondent that the fact that liquor was being purchased, sold, taxes collected and not remitted to the Government tantamount to an illegal act that ought to have our TIN No. suspended. This was intimated to the applicant, whose accounts were then inspected and based on the sworn statement of the applicant's representative Mr.G.Vijay Saanath he acknowledges that Form J had never been filed from 31.3.2010 to date. So also, in the case of food the applicant ought to have paid VAT at 12.5% which was billed. Towards this, the applicant had remitted Rs.1.7 lakhs with the hope of suppressing the balance payment.
72 The averments in para 23 are misleading. It is submitted that despite letters being sent highlighting the lacuna in the operations of the applicant like a) VAT issue, b) Police issue, c) Service tax issue, the respondent took all possible steps to encourage the applicant to come for meetings, to which the applicant made every excuse to avoid the meetings, fearing grave consequences in line with the Indemnity Bond executed by the applicant's Managing Partner dated 29.1.2010. It is further submitted that the respondents are law abiding, honest and cultured people who cannot be seen continuing to support the illegal acts of the applicant. That too, with one of the applicant's Partners making use of his Diplomatic immunity to escape from any sort of punishment from the authorities. The applicant is trying to paint the respondent in dark shades only to hide their own illegal acts and violations.
73 The avermens in para 24 denied. It is submitted that the applicant has surreptitiously failed to produce before the Court, the letters addressed by the respondent to the applicant on various dates which speaks volumes of the wrong doings of the applicant. By not producing the respondents letters to the applicant, it is clear that the applicant had approached this Court with unclean hands and the sole intention of hoodwinking this Court. A mere reading of the respondents letters sent to the applicant, will prove that the applicant had failed to rectifying and correcting the errors and omissions committed by the applicant alone.
74 The averments in para 25 are denied, the applicant is put strict proof of the same. It is submitted that the applicants alone are liable and responsible for the illegal acts and follies committed by them. The averments in para 26 are denied. It is submitted that the statement "settlement talks" as made by the applicant in the plaint itself shows that dues did exist from the side of the applicant. However, it is false to state that the applicant repeatedly asked the respondent to come for settlement talks. All along with, it was the respondents who had been vociferous through letters asking for the applicant to come for a meeting. But the applicant cited various pre-occupations to avoid the meeting.
75 The averments in para 27 are denied. It is submitted that the non payment of dues by the applicant led to the respondent writing a letter dated 6.2.2012 requesting the applicant to pay a sum of Rs.2.42 lakhs towards FL3 Licence and other fees. This was done only because the applicant had to pay the Licence fee as per the MOU. The applicant, as a matter of habit had again taken it upon themselves to ride on the kindness of the respondent and interpret the "arrangement "to suit their wrong doings.
76 The averments in para 28 are denied. It is false to state that the respondent tampered with the electricity connection. The respondents do not benefit from in any way extending injustice to others. Even as late as 29.5.2012, the respondents Managing Partner sent a telegram to the fourth respondent on the issue of Electricity and Water, to which it was immediately checked and a reply refuting the allegations of the applicant was sent on 31.5.2012. The respondents have given utmost respect to the MOU and will never go against any agreed obligations.
77 The averments in para 29 are denied. Since there was no response to any of the respondents letters and the fact that there was no intention on the part of the applicant to resolve the issues in hand, the respondent by virtue of the Clauses of the Memorandum of Understanding and communications exchanged, referred the matter for arbitration. It is false to state that the MOU clearly expresses that the parties will approach the Courts in Chennai to resolve any disputes by litigation. Clause 8.2 very clearly stipulates that "Both parties agree to use best efforts to amicable resolve any disputes or differences between them before resorting to litigation before resorting to litigation before the Courts at Chennai." Further, in line with the ongoing issues, the applicant's Managing Partner expressed and authorized the respondent's Managing Director by means of an official correspondence dated 15.3.2011 to refer the matter for arbitration. Private notice was issued to the applicant on the arbitration vide notice dated 8.4.2012. Hence, it is false to state that the first respondent appointed the Arbitrator without notice to the applicant.
78 The averments in para 30 reference is drawn to part 3 (proceedings) on the Arbitral Award in Case No.ARC-SA-RSL-138/2012 dated 15.5.2012. A reading of page 31, 32 and 33 of the same will show that the respondents request for FAST TRACK ARBITRATION" was rejected and that the record of the proceedings by the observer dated 14.4.2012 and 9.5.2012 showed no hastle by the Sole Arbitrator to pass the award. Rather, due to the incapacity and unprofessionalism of the applicant's Managing Partner, the award was passed after giving sufficient opportunities to the applicant. To state that the basic requirement of an arbitration clause has not been fulfilled is false and untrue.
79 The averments in para 31 are denied. Mere reading of the relevant correspondences, together with Part 1 (General) C.Constitution of the Tribunal C(i) to (xi) of the Arbitral Award in case No.ARC-SA-RSL-138/2012 dated 15.5.2012 will suitably answer to the averments made by the applicant that there is neither an arbitration clause/agreement nor has the plaintiff agreed to arbitration...."
80 The averments in para 32 is denied. The statement that the applicant wrote to the 5th respondent with a copy to the respondent on 13.4.2012 is referred to herewith. In it, the applicant's Managing Partner had categorically stated therein that:
"14. We are presently awaiting advise from our lawyers to your notices/emails and the legal position. They are closed due to the Tamil New Years day on the 14th April, 2012 and hence cannot advise us before the said date. In all probability, they may be in a position to provide us the appropriate advise by 30th April 2012. Given this position and in view of your suggestion in para VII b we request you to refrain from proceeding with any hearing on 14th April on until 30th April".
81 The said letter of the applicant stated to have been sent on 3.4.2012 did not reach either the respondent or the 5th respondent before the first hearing on 14.4.2012 at 11.00 hrs and hence the first hearing was conducted without the presence of the applicant. Further, the applicant acknowledged receipt of the sole arbitrator's notice dated 31.3.2012 and it only for the applicant to be blamed for the delay in consulting the applicant's lawyers. Further, unknown to the contents of the applicant's letter dated 13.4.2012 the 5th respondent adjourned the proceedings to 9.5.2012. As stated in the applicant's letter dated 13.4.2012 to the 5th respondent, the applicant failed to get back to the 5th respondent by the 30th April 2012, by which it can be implied that the applicant is participating in the arbitral proceedings.
82 The averments in para 33 are denied. It is submitted that though the applicant acknowledged receipt of the letter from the Sole Arbitrator as early as 31.3.2012, the applicant chose to reply only on 13.4.2012, just one day before the first hearing of the Arbitration proceedings. In other words, the applicant confirmed that the applicant would revert by 30.4.2012 on the Arbitration issue. The applicant did not respond by the date as stated by the applicant himself and hence it was implied that the applicant had accepted and would participate in the Arbitral proceedings.
83 The averments in para 34 are denied. It is submitted that all documents were sent to the applicant by proof of delivery and hence the applicant's averment on viewing the documents was only to find ways of derailing the Arbitral proceedings. It is imperative to note here that all along the applicant had been trying to sabotage any attempt by the respondent to seek justice only because of the huge legitimate amounts owed by the applicant to the respondent.
84 The averments in para 35 are denied. The Claims Document was sent to the applicant and an affidavit of service was submitted to the Arbitral Tribunal. The request for the set of documents by the applicant's counsel was vague and baseless. Even so, the applicant's counsel argued the matter before the Arbitral Tribunal and consequently to state that the applicant would not submit to arbitration proceedings is incorrect.
85 The averments in para 36 are not to the knowledge of this respondent. The averments in para 37 are denied. The presumptions of the applicant and the applicants failure to represent before the Arbitral Tribunal has only led the applicant to feel that the conduct between the first respondent and the fifth respondent is extremely suspicious. It is pertinent to state that the applicant's Managing Partner had always behaved in doubt of even his own partners. The averments in para 38 are denied. At the time of Arbitration proceedings, there was no multiplicity of proceedings. Further, with the Arbitral Award being passed on 15.5.2012 the Arbitration Proceedings had come to an end.
86 The averments in para 39 are denied. The averments made by the applicant are false and without any basis. The applicant escaped severe repercussions on several occasions only due to the timely response and goodwill that the respondent holds. The fourth respondent reserves his right to proceed against the first respondent based on the Indemnity Bond furnished by the first applicant in favour of the fourth respondent. The grounds will solely be based on that what is stated in the Indemnity Bond itself.
87 With regard to the averments in para 40, the respondents letters sent to the applicant for which there is valid acknowledgment has been wilfully suppressed by the applicant and a mere reading of the letters will expose the applicant that has led to the respondent being put under severe mental trauma and agony. In other words, it is evident that the applicant has approached this Court with unclean hands. Therefore, the defendant has prayed for dismissal of both the applications.
88 The defendants/respondents opposed the application on the plea that the respondent No.5, sole Arbitrator has concluded the arbitration proceedings and passed an award on 15.5.2012 and therefore, this application has been rendered infructuous, as remedy with the plaintiff/applicant now is to challenge the award under the Arbitration & Conciliation Act.
89 It was also contended by the learned counsel for the respondents that the present suit as well as application is not maintainable, as the civil Court cannot interfere with arbitration proceedings, as the remedy with the plaintiff/applicant if any, is to challenge the award under Sec.34 of the Arbitration and Conciliation Act, and not by filing civil suit.
90 It was also vehemently contended that the plaintiff/ applicant having submitted to jurisdiction of the Arbitrator, it is now estopped from challenging the jurisdiction of the respondent No.5.
91 The learned counsel for the plaintiff/applicant vehemently contended that the suit filed by the plaintiff/applicant is maintainable, as the proceedings hold by respondent No.5 are totally void, as the respondent No.5 did not have any jurisdiction to enter reference for want of arbitration agreement. Therefore, Sec.5 of the Act would not be attracted in this case.
92 The learned counsel for the plaintiff/applicant referred to proceedings of the respondent No.5 wherein it was recorded, that the respondent is given one more opportunity for their objection if any, to be filed before the Arbitrators on 25.5.2012 at 11.00 sharp at the same venue at ICSA No.107, Pantheon Road, Chennai 8. This order was passed by the alleged Arbitrator on 10.5.2012. The learned counsel for the plaintiff/applicant also referred to the order passed by this Court staying further proceedings before the learned Arbitrator.
93 The contention is that the award passed on 15.5.2012 therefore is nothing but a waste paper having been passed in violation of order of injunction and that too, before the date fixed for filing of objections.
94 It was also contended by the learned counsel for the plaintiff/applicant that this Court has the jurisdiction to entertain and try suit as framed, as section 5 cannot be a bar to maintainability of the suit or this application, as the arbitration proceedings being void, the award, dated 15.5.2012 is totally null and void. In support of this contention, the learned counsel for the plaintiff/applicant placed reliance on the judgments of the Hon'ble Supreme Court in (2005)8 SCC 618 (S.B.P. & co. v. Patel Engineering), (2003)12 SCC 140 (C.D.C. Financial & B.P.L. Communications) , A.I.R. 2004 P & H 276 Pappu Rice Mills v. Punjab State Coop. Supply & Marketing Federation.
95 But these judgments have no relevance to the facts of the present case, as the dispute in this case is with regard to validity of the arbitral award having been passed without jurisdiction, for want of arbitration agreement/clause.
96 The question with regard to the jurisdiction of the civil Court was considered by the Constitutional Bench of the Hon'ble Supreme Court in Dhulabhai Etc. vs. State of Madhya Pradesh and another (A.I.R. 1969 SC 78) wherein after considering the relevant judgments on the point, the Constitutional bench was pleased to lay down as under:
"35. Neither of the two cases of Firm of Illuri Subayya or Kamla Mills can be said to run counter to the series of cases earlier noticed. The result of this inquiry into the diverse views expressed in this Court may be stated as follows:
(1) Where the statute gives a finality to the orders of the special Tribunals the civil courts' jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure.
(2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.
Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the Tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not.
(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals.
(4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.
(5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegality collected a suit lies.
(6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant enquiry.
(7) An exclusion of the jurisdiction of the civil court is not readily to be inferred unless the conditions above set down apply."
97 The Full Bench of the Hon'ble Punjab and Haryana High Court in the State of Haryana vs. Vinod Kumar and others (A.I.R. 1986 (Punjab) 407) was pleased to lay down as under:
"5. Broadly speaking there are two types of judgments/orders, namely judgments in rem and judgments in personam. The former binds the whole world whereas the latter binds only the parties. The judgments/orders in rem are the ones passed by the authorities or the Courts exercising the jurisdiction such as insolvency, admiralty and matrimonial. The jurisdiction exercised by the authorities under the Punjab Act is not of such a nature that the orders passed under it would bind the public at large. Obviously they are the judgments/orders in personam. The fundamental principle as to their nature is that they only bind the parties to it or the persons names therein. So far as the person who is neither a party nor named in such an order is concerned, the order in the eye of law is ineffective and non est and as such he is under no obligation to take proceedings to get it set aside. Strictly speaking the terms 'void' or 'voidable' when used qua a judgment or an order would be relevant when a person is a party or named in the judgment or the order because it is only such a person who can take proceedings to get it declared void or set aside as the case may be. On the other hand a person who is not a party would have no right to get the order set aside or declare it void as the order would be binding on the persons who are party or named therein and his remedy would be only to get a declaration that the order was ineffective and non est so far as he is concerned. In Dhaunkal Sheo Ram's case (AIR 1970 Punj & Har 431) (FB) (supra) this basic principle was not taken notice of and instead, if we may say so with due respect to the learned judges, the reasoning proceeded on an erroneous basis that as the collector had the jurisdiction to determine the surplus area of the landowner, the non-issuance of notice to the tenant would not render its order void and the order was binding on the latter. If the landowner includes in his reserved area any land which is on lease, the tenant would have a right to be heard because the order of reservation necessarily clothes the landowner with a right to eject him from such an area. If the landowner does not include any area on lease with the tenants, the latter would have no right of being heard and the order of determination of the surplus area of the landlord would be perfectly valid even when passed at their back. The order of the Collector including the area under lease in the reserved area of the landowner though would be within jurisdiction but would not bind any tenant whose area has been included in the reserved area unless he is issued a notice or is named in the order of the Collector. Somewhat similar question arose in State of Punjab v. Amar Singh, 1974 Pun LJ 74: (AIR 1974 SC 994) and the rule laid down in Dhaunkal Sheo Ram's case (AIR 1970 Punj & Har 431) (supra) stands impliedly overruled by the decision in that case. What happened there was that Smt. Lachhman was a big landowner on the prescribed date i.e. April 15, 1953. Her son-in-law, Amar Singh, and his brother Indraj claiming themselves to be tenants of the area other than the reserved area of the landowner filed an application under S. 18 of the Punjab Act for its purchase and the same was allowed by the Assistant Collector, the competent authority. On the basis of the sale certificate the said tenants claimed themselves to be the owners of the area purchased by them before the Collector during the proceedings concerning the determination of the surplus area of the landowner. One of the pleas raised on behalf of the State was that it being not a party to the proceedings under S. 18 of the Punjab Act, was not bound by the order of the prescribed authority allowing the purchase to the tenants of the area which but for that purchase formed part of the surplus area of the land-owner. It may be noticed here that under the provisions of S. 18(2) of the Punjab Act, when an application is made in writing to the Assistant Collector, by a tenant for purchasing the area of a big landowner, he is required to issue notice to the landowner and to all other persons interested in the said land. If the area sought to be purchased by the tenant did not form part of his permissible area or he has been settled thereon after the appointed date i.e. April 15, 1953, such area would form part of the surplus area and the State would be obviously an interested party entitled to notice under the said section before the purchase application is allowed. According to rule laid down in Daunkal Sheo Ram's case (AIR 1970 Punj & Har 431) (FB) (supra), the order of purchase passed in favour of the tenant without notice to the State would be binding on the State and only voidable at its instance because the prescribed authority had the jurisdiction to try such an application and allow it under S. 18 of the Punjab Act. But the Supreme court in Amar Singh's case (AIR 1974 SC 994) (supra) held that the State, which was seriously prejudiced by the order but was not a party to it, would not be bound by that order. It was further held that the State which was not a party to the proceedings did not have a right of appeal because ordinarily the rule is that only a party to the suit adversely affected by the decree or any of his representative-in-interest can file an appeal or petition for review as would be evident from paragraph 32 reproduced below that:
"An order like Annexure 'a' ordinarily binds the parties only and here the State which is the appellant is seriously prejudiced by the order but is not a party to it. Therefore, it cannot bind the State proprio vigore. It was argued by Shri Dhingra that the State could have moved by way of appeal or review and got the order set aside if there was ground and that not having done so it was bound by the order. As a matter of fact, the State, which is not a party to the proceedings, does not have a right of appeal. The ordinary rule is that only a party to a suit adversely affected by the decree or any of his representatives-in-interest may file an appeal. Under such circumstances a person who is not a party may prefer an appeal with the leave of the appellate Court' if he would be prejudicially affected by the judgment and if it would be binding on him as res judicata under Explanation 6 to section 11' (see Mulla Civil Procedure Code, 13th Edn. vol. 1 p. 421). Section 82 of the Punjab Tenancy Act, 1887, which may perhaps be invoked by a party even under the Act, also speaks of applications by any party interested. Thus no right of review or of appeal under section 18 can be availed of by the State as of right."
6. Even if for the sake of arguments it may be accepted that the impugned order is only voidable and will be binding on the respondents unless it is got declared void or set aside can it be said that the only remedy open to them is to approach the authorities under the Punjab Act and the remedy of a regular suit would be barred by the provisions of S. 25 of the Punjab Act. The law has been well-established in this regard and was enunciated by the Privy council in Secretary of State v, Mask & Co., AIR 1940 PC 105 thus:
"xx xx xx xx
xx xx xx It is settled law that the exclusion of the jurisdiction of the Civil Courts is not to be readily inferred but that such exclusion must either be explicitly expressed or clearly implied. It is also well settled that even if jurisdiction is so excluded, the Civil Courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with, or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.
xx xx xx
The said rule was reiterated by the Supreme Court in Katikara Chintamani Dora v. Guatreddi Annamanaidu, AIR 1974 SC 1069 in the following words:
"There is an express bar to the jurisdiction of the Civil Court to adjudicate upon the question whether 'any inam village', is an 'inam estate' or not, and to the extent of the question stated in S. 9(1). Madras Act 26 of 1948, the jurisdiction of the Settlement Officer and of the Tribunal are exclusive. But this exclusion of the jurisdiction of the Civil Court would be subject to two limitations. First, the Civil Courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. The second is as regards the exact extent to which the powers of statutory tribunals are exclusive."
7. The most authoritative pronouncement by the Supreme Court in this regard was made in Kamala Mills Ltd. v. State of Bombay, AIR 1965 SC 1942 by a 7-Judge Bench as under:--
" xx xx xx xx
Whenever it is urged before a Civil Court that its jurisdiction is excluded either expressly or by necessary implication to entertain claims of a civil nature, the Court naturally feels inclined to consider whether the remedy afforded by an alternative provision prescribed by a special statute is sufficient or adequate. In cases where the exclusion of the Civil Courts jurisdiction is expressly provided for, the consideration as to the scheme of the statute in question and the adequacy or the sufficiency of the remedies provided for by it may, be relevant but cannot be decisive. But where exclusion is pleaded as a matter of necessary implication, such considerations would be very important, and in conceivable circumstances, might even become decisive. If it appears that a statute creates a special right or a liability and provides for the determination of the right and liability to be dealt with by tribunals specially constituted in that behalf and it further lays down that all questions about the said right and liability shall be determined by the tribunals so constituted, it becomes pertinent to enquire whether remedies normally associated with actions in Civil Courts are prescribed by the said statute or not."
The matter was again considered at a great length by 5 Judge Bench of the Supreme Court in Ram Swarup v.Shikar Chand, AIR 1966 SC 893. In this case the provisions of Ss. 3(4) and 16 of the U.P. (Temporary) Control of Rent and Eviction Act, 1947 were under consideration. Although the provisions of the said section expressly barred the jurisdiction of the Civil Courts still it was held that if the order was passed in violation of the statutory provisions or the principles of natural justice the order would be open to challenge in Civil Court. Paragraphs 12 and 13 which contain the ratio and the precise rules laid down, read as under:--
" One of the points which is often treated as relevant in dealing with the question about the exclusion of Civil Courts jurisdiction is whether the special statute which, it is urged, excludes such jurisdiction, has used clear and unambiguous words indicating that intention. Another test which is applied is: does the said statute provide for an adequate and satisfactory alternative remedy to a party that may be aggrieved by the relevant order under its material provisions: Applying these two tests it does appear that the words used in S. 3(4) and S. 16 are clear. Section 16 in terms provides that the order made under this act to which the said section applies shall not be called in question in any Court. This is an express provision excluding the Civil Courts jurisdiction, S. 3(4) does not expressly exclude the jurisdiction of the Civil Courts but in the context, the inference that the Civil Courts jurisdiction is intended to be excluded, appears to inescapable. Therefore, we are satisfied that Mr. Goyal is right in contending that the jurisdiction of the Civil Courts is excluded in relation to matters covered by the orders included within the provisions of S. 3(4) and S. 16.
This conclusion, however, does not necessarily mean that the plea against the validity of the order passed by the District Magistrate, or the Commissioner, or the State Government can never be raised in a Civil Court. In our opinion, the bar created by the relevant provisions of the Act excluding the jurisdiction of the Civil Courts cannot operate in cases where the plea raised before the Civil Court goes to the root of the matter and would, if upheld, lead to the conclusion that the impugned order is nullity. Take for instance, the case of an order purported to have been passed by a District Magistrate who is not a District Magistrate in law. If it is shown by a party impeaching the validity of the order in a Civil Court that the order was passed by a person who was not a District Magistrate, the order in law would be a nullity and such a plea cannot be ruled out on the ground of the exclusion of the jurisdiction of the Civil Court. Similarly, if an order granting permission to a landlord is passed by a District Magistrate of one District when the property in question is situated in another district outside his jurisdiction, a party would be entitled to urge before a Civil Court that the permission purported to have been granted by the District Magistrate is wholly invalid and a nullity in law. Let us take another case to illustrate the position. If S. 3 had provided that before a District Magistrate grants permission to the landlord to sue his tenant, he shall issue notice to the tenant and give him an opportunity to represent his case before the application of the landlord is dealt with on the merits and in the face of such a statutory provision, the District Magistrate grants permission ex parte without issuing notice to the tenant in such case, the failure of the District Magistrate to comply with the mandatory provision prescribed in that behalf would render the order passed by him completely invalid and a plea that an order has been passed by the District Magistrate without complying with the mandatory provision of the Act, would be open for examination before a Civil Court. Likewise, in the absence of such a statutory provision, if it is held that the proceedings before the appropriate authorities contemplated by S. 3 are in the nature of quasi judicial proceedings and they must be tried in accordance with the principles of natural justice and it is shown that in a given case an order has been passed without notice to the party affected by such order, it would be open to said party to contend that an order passed in violation of the principles of natural justice is a nullity and its existence should be ignored by the Civil Court. Such a plea cannot, in our opinion be excluded by reason for the provision contained in S.3(4) and S. 16 of the Act".
It was further observed in paragraph 18 that the earlier decision of the Supreme Court in Kamala Mills case (AIR 1965 SC 1942) (supra) fully supports the view taken by them. In the face of this authoritative pronouncement there is no room for any doubt that if an order is passed by a tribunal of limited jurisdiction without issuing a notice to the concerned party, the order would be a nullity and open to challenge in the Civil Court even if the statute expressly bars the jurisdiction of the Civil Court to entertain a suit to challenge the validity or legality of the order passed by such a tribunal. This question was once against considered by a Constitution Bench of the Supreme Court in Dhulabhai v. State of Madhya Pradesh, AIR 1969 SC 78 and the seven principles contained in the judgment of the learned Chief Justice were enunciated. The scope of the observations made and the rule laid down in Kamala Mill's case (supra) came under specific consideration of the Bench and it was observed that the Special Bench (in Kamala Mills case) refrained from either accepting the dictum of Mask Co's case 67 Ind App 222; (AIR 1940 PC 105) or rejecting it, to the effect that even if jurisdiction is excluded by a provision making the decision of the authorities final the Civil Court have jurisdiction to examine into case where the provisions of the particular Act are not complied with. The jurisdiction of the Civil Court to try the suits against the order passed by the Tribunal of Special Jurisdiction in violation of the provision of the statue or principles of natural justice was thus upheld even though the jurisdiction of Civil Court to question the legality or validity of the orders of the Tribunal was expressly barred by the statute.
8. Though according to the rule laid down in Amar Singh's case (AIR 1974 SC 994) (supra) respondent had no right to file either an appeal or a petition for review or revision against the impugned order of the Collector to which they were not parties, but even if it may be accepted for the sake of argument that they could file an appeal with the permission of the Appellate Authority or move for review even then it cannot be said that the concurrent or alternative remedy of fining a suit for getting the declaration that the impugned order was non est so far as they were concerned would be barred by the provisions of the said S. 25 of the Punjab Act. It is well-established that in the case of alternative or concurrent remedies it is open to the party to choose anyone of them. The existence of the remedy under the Act, if any, therefore, would not bar the remedy of the suit if it otherwise was available to the respondent. Not a single case could be cited by the learned counsel for the State at the bar wherein it may have been held that the remedy of suit by a person who is not a party to the order nor has been served with any notice, for declaration that such an order was non est so far as he was concerned was held to be barred even though the validity and legality of the orders passed were expressly stated to be not open to challenge under the statute. All the decisions relied upon by the learned counsel for the State were such in which the suit was filed by the person who was a party before the Tribunal of exclusive jurisdiction. The observations made in all those decisions therefore, have to be therefore, have to be understood in the context of the situation available there and in none of these decisions as observed in Dhaunkal Sheo Ram's case (AIR 1940 Punj & Har 431) (FB) (supra) the rule laid down in Mask Co's case (AIR 1940 PC 105) (supra) was adversely commented upon. We would., therefore, hold that the present suit was not barred by the provisions of S. 25 of the Punjab Act and answer the question referred to Full Bench in the affirmative."
98 The conduct of respondent No.5 in entering reference in absence of arbitration agreement being without jurisdiction and contrary to provisions of Arbitration and Conciliation Act itself leads to conclusion that this Court has the jurisdiction to entertain and try the suit, as the proceedings by the respondent No.1 being void are not covered under the arbitration and Conciliation Act.
99 On being questioned as to whether there is arbitration agreement which could give jurisdiction to the respondent No.5 to enter reference to decide the dispute between the parties, the learned counsel for the respondents referred to Clause 8 of the lease agreement entered into between Mr.Joseph Fernandaz and M/s.Madras Hospitality Services which reads as under:
"VIII DISPUTE RESOLUTION:
8.1 Any and all correspondence made or notices to be sent or required to be made under this MOU shall be in writing, signed by the Party giving such notice (claim or demand) and shall be delivered personally or by registered mail, to the other Party at its address set forth herein below or at such other address as such other Party may subsequently notify. All notices shall be deemed given when delivered at the following address:
Madras Hospitality Services
Address No.6, Cathedral Road, Chennai 600086
Attention: Mr.Jagadish I
Buena Vista Beach Resort & Club Private Limited
8.2 Both parties agree to use best efforts to amicable resolve any disputes or differences between them before resorting to litigation before the Courts at Chennai.
8.3 The rights and remedies of either party hereunder shall not be mutually exclusive (i.e. the exercise of one or more of the provisions hereof shall not preclude the exercise of any other provisions hereof.) Each party confirms that damages at law will be an inadequate remedy for a breach or threatened breach of this MOU and agree that, in the event of a breach or threatened breach of any provision hereof, the respective rights and obligations hereunder shall be enforceable by specific performance, injunction or other equitable remedy, but nothing herein contained is intended to, nor shall it, limit or affect any rights of law or by statute or otherwise of any party aggrieved as against the other for a breach or threatened breach of any provision hereof, it being the intent of the parties that the respective rights and obligations of the parties be enforceable in equity as well as at law."
100 The dispute resolution as stipulated in the Memorandum of Understanding entered into between the plaintiff and the first defendant, cannot be said to be arbitrary agreement by any stretch of imagination. Rather, Clause 8.2 clearly stipulates that in absence of amicable settlement between the parties, the litigation will be before the Court at Chennai and not by way of arbitration.
101 It is well settled law that arbitration agreement is the very foundation on which the jurisdiction of the arbitration to Act rests, and where that is not in existence at the time when arbitration enters reference, the proceedings are totally without jurisdiction and this defect cannot be cured by the appearance of the parties in these proceedings, even if it was without protest, because consent cannot confer jurisdiction. Reference in support can be made to judgment of Hon'ble Supreme Court in Waverly Jute Mills Co.Ltd. And another vs. Raymon and Co. (India) Pvt. Ltd. (A.I.R. 1963 SC 90)
102 It is also well settled law that acquiesce by parties or participation by parties in a proceeding before the Arbitrator cannot confirm the jurisdiction, nor parties can be estopped from challenging the jurisdiction.
The Hon'ble Supreme Court in U.P.Rajkiya Nirman Nigam Ltd. vs. Indure Pvt. Ltd. and others (1996)2 SCC 667) was pleased to lay down as under:
"Where the contract is in a number of parts it is essential to the validity of the contract that the contracting party should either have assented to or taken to have assented to the same thing in the same sense or as it is sometimes put, there should be consensus ad idem.
In the present case, the counter-offer made by the respondent cannot be said to have been accepted by the appellant by conduct.
The material alterations effected by the respondent in the draft agreement made a world of difference in the matter.
Thereby, there was no consensus ad idem on the material terms of the contract which contains several clauses.
In the absence of any consensus ad idem on the material terms of the contract to be entered into between the parties, there emerged no concluded contract.
Apart from the draft agreement and the counter proposal, there was no independent contract for reference to arbitration.
It is not possible to accept the view that an agreement had emerged between the parties, from the correspondence and from submission of the tenders to the Board."
103 Therefore, it can be safely be held that the plaintiff has made out a prima facie case. The respondent No.5 did not have jurisdiction to enter reference or pass an award, therefore, proceedings and passing of award are patently void having no force of law. The balance of convenience is also in favour of the applicant. The applicant is likely to suffer irreparable loss if the injunction as prayed for is not granted.
104 Now, we are left with question as to what relief can be granted to the applicant in view of the passing of the award, dated 15.5.2012.
105 It is proved on record that the respondent No.5 had fixed the next date of arbitration proceedings on 25.5.2012, whereas the stand of the respondent is that the award was passed on 15.5.2012 which prima facie seems to ante dated to defeat the rights of the plaintiff/applicant. This Court cannot be mute spectator to illegalities of the respondent No.5 who did not act bonafidely and made deliberate attempt and intentional attempt to over reach this Court in view of the injunction granted on 17.5.2012.
No explanation is forthcoming from the respondent as to how the award could be passed on 15.5.2012 when the last date for filing objection was fixed as 25.5.2012. The award therefore, is nothing but an deliberate and intentional attempt to overreach this Court therefore, fraud on the Court. The respondents therefore, cannot take any advantage of the award, dated 15.5.2012.
106 Otherwise also, in view of the law laid down by the Hon'ble Supreme Court in Waverly Jute Mills Co.Ltd. and another vs. Raymon and Co. (India) Pvt. Ltd. (A.I.R. 1963 SC 90), the award is nothing but nullity having no force of law, for want of arbitration agreement.
107 It is only in the case of valid arbitration agreement that this Court does not interfere with arbitration proceedings or award passed in exercise of civil jurisdiction. Once the proceedings are held to be void and a nullity, jurisdiction of this Court is not ousted and this Court can set aside null and void award, passed without jurisdiction in exercise of civil jurisdiction.
108 Keeping in view of the fact that the petitioner has made out prima facie case and balance of convenience is also in favour of the applicant and also in view of the fact that there is order of injunction by this Court restraining the respondent No.5 from proceeding with the arbitration proceedings, an attempt was made to overreach this Court, therefore, relief is modified and application is allowed by setting aside the award, dated 15.5.2012 by declaring it to be null and void and further restraining the respondent No.5 to proceed with the arbitration proceedings during the pendency of the suit.
109 The award is otherwise also hit by the principle of lis pendence, as the suit was filed prior to the passing of the award. Therefore, rights of the applicant are also protected under the principle of lis pendence. A party cannot be left remedyless. The respondent No.5 inspite of serious allegations has not chosen to file any counter. The allegations against the respondent No.5 therefore go unrebutted.
110 It has been brought to the notice of this Court that the respondent No.5 is running illegal institution to conduct arbitration proceedings unilaterally without the consent of both parties. This case proves this fact. Furthermore, keeping in view of the fact that the respondents have tried to overreach this Court by passing award, dated 15.5.2012 even though, the application for injunction was pending in this Court. O.A.No.436 of 2012 is allowed with exemplary costs. The costs are assessed at Rs.2,00,000/- (Rupees two lakhs only) to be paid by the respondent No.5, to the Tamil Nadu Legal Services Authority, High Court, Madras.
111 A.No.2319 of 2012:
The plaintiff/applicant in a suit for damages, has filed this application under Order 14 Rule 8 of the O.S. Rules read with Order 38 Rule 5 of C.P.C. to direct the respondents 1 and 4, to jointly furnish security for a sum of Rs.2,00,000/- (Rupees two lakhs only) failing which to order attachment of schedule mentioned property.
112 In support of this application, besides reproducing factual averments made in the plaint, the grounds with regard to furnishing security read as under:
"The applicant had invested Rs.45,00,000/- (Rupees forty five lakhs only) for renovation/refurbishing.
The applicant was only in full operation of its business from August 2010 to March 2011.
In a short period of time for the year 2010 2011 a turnover of sales of Rs.1,57,72,261/- (Rupees one crore fifty seven lakhs seventy two thousand two hundred and sixty one only) and
the provisional sales for the year 2011 2012 was projected at Rs.1,60,00,000/- (both years are for only a period of less than 7/8 months).
The net profit lost due to the problems created by the respondents is about Rs.5,00,000/- (Rupees five lakhs only) per month and the loss is still continuing.
Hence the applicant has suffered loss in business to the tune of Rs.35,00,000/- (Rupees thirty five lakhs only) for seven months.
The entire investment has gone waste and the applicant will be unable to recover this investment.
Further, the applicant has suffered loss of goodwill and reputation as the first to fifth respondents have been providing bad quality food and have rendered the functioning of the bar impossible.
Hence, the customers and guests of the applicant are extremely disappointed and the reputation of the applicant in the market has suffered greatly.
The applicant is a front runner in the Hospitality business but due to the problems created by the first to fourth respondents the applicant has been unable to book parties or banquets or keep up to the standard that their guests are used to and hence their reputation has been adversely affected.
Therefore, in terms of loss of goodwill and reputation the applicant has suffered to the tune of Rs.80,00,000/- (Rupees eighty lakhs only).
Also, the respondents have been harassing the applicant and making false claims in terms of outstanding payments.
The respondents are creating unnecessary arbitration proceedings and have been trying to run the applicant out of the business.
The respondents have further instituted false complaints with authorities, tampered with the electricity, stopped the supply of the stock of liquor and caused great embarrassment and mental agony to applicant and caused damage to the tune of Rs.40,00,000/- (Rupees forty lakhs only).
Hence, the applicant is filing the present suit for damages and other reliefs.
Further, as the loss is still continuing and the applicant is unable to quantify the same it reserves its right to file a separate suit for further damages and for other reliefs, if any.
40 The applicant have a prima face good case and have likelihood to succeed. The applicant fears and apprehends even in the event of succeeding in the suit, it may not be able to enjoy the fruits of the decree as the respondents would do everything within its powers to frustrate the applicant and the decree.
Further, there is a dispute between the second, third and fourth respondents after the death of their father and the applicant/plaintiff apprehend that they may try to alienate or create third party rights on the scheduled premises.
The applicant has suffered loss and is still undergoing loss in business. The balance of convenience is wholly in favour of the applicant/plaintiff and unless the respondents/defendants are restrained from proceeding with the arbitration proceedings illegally and without due process of law irreparable loss and damage will be caused to the applicant/ plaintiff in respect of its business.
Hence, the present application. No loss or hardship will be caused to the respondents/defendants if this application is allowed. On the contrary, the applicant/plaintiff will be put to immense hardship, if this application is not allowed and would be put to irreparable loss.
113 The averments even if taken on face value do not satisfy the requirement of Order 38 Rule 5 of C.P.C.
It is yet to be determined whether the plaintiff/applicant will be entitled to damages as claimed.
Otherwise also, there is no averments regarding any overtact on the part of the respondents in disposing of the property to defeat the decree to be passed in favour of the applicant/plaintiff.
In absence of any material showing the steps being taken to dispose of the property with intention to defeat the decree to be passed, no order under Order 38 Rule 5 of C.P.C. can be passed as prayed.
114 Consequently, A.No.2319 of 2012 being totally misconceived, and void of any merit is ordered to be dismissed, but, with no order as to costs.
12.02.2013
Index: Yes/No
Internet:Yes/No
vaan
VINOD K.SHARMA, J.
vaan
Pre-Delivery common order in
O.A.No.436 of 2012 &
A.No.2319 of 2012 in
C.S.No.335 of 2012
Dated: 12.02.2013
