ORAL ORDER
1. The petitioner seeks appointment of an arbitrator to resolve disputes arising between the petitioner and the respondent out of an agreement dated 01.05.2009 This prayer is opposed by the respondent.
2. Facts in brief are as follows:
The respondent is the developer of the infrastructure and other facilities in Special Economic Zone (‘SEZ for short) situated at Kandla. Such SEZ is governed by the provisions made in the Special Economic Zone Act, 2005 (hereinafter to be referred to as ‘the Act of 2005). A letter of allotment was issued by the Union of India, Ministry of Commerce and Industry subject to certain terms and conditions. On the basis of the letter of allotment, the petitioner entered into a lease agreement with the respondent on 01.05.2009 On the premise that the petitioner had not commenced its commercial activity within the time permitted and thereby breached the essential condition of the letter of allotment, the Development Commissioner, Union of India issued a letter dated 02.04.2012 canceling allotment of the petitioner.
3. The petitioner challenged such order of cancellation dated 02.04.2012 before this Court by filing Special Civil Application No. 963 of 2013. Besides challenging certain provisions of the Act of 2005 and the rules made thereunder, the main prayer of the petitioner was for quashing and setting aside the cancellation of allotment order dated 02.04.2012 The consequential prayer for extension of validity of the letter of approval was also made. This petition came to be dismissed by Division Bench of this Court by judgement dated 03.07.2013 Against such judgement, the petitioner preferred a review petition which also came to be dismissed on 17.09.2013 Learned counsel, Mr. Chudgar for the petitioner stated that the petitioner is in the process of preferring further appeal before the Supreme Court.
4. In view of cancellation of allotment by the Commissioner, the respondent also cancelled the lease deed under its communication dated 03.10.2012 In the said communication, besides cancelling the lease, the respondent also raised a demand for payment of Rs. 18,80,623/- towards various charges such as lease rent, maintenance charges and interest. At this stage, the petitioner, in order to invoke the arbitration clause contained in the lease agreement issued a notice dated 12.01.2013 through its Advocates and called upon the respondent to appoint an arbitrator in terms of Section 42 of the Act of 2005. The petitioner in the said notice also referred to Clause 26 of the lease agreement which pertained to arbitration.
5. The respondent has filed a detailed reply and opposed the prayer for appointment of an arbitrator mainly on two grounds. Firstly, it is contended that the petitioner had approached the High Court challenging cancellation of the allotment letter. Cancellation of lease agreement is only a natural corollary to the cancellation of letter of allotment and there is thus no surviving dispute which needs to be arbitrated.
6. The second ground, on which the petition is opposed is the mode of securing appointment of an arbitrator in terms of the arbitration clause 26 in the lease agreement and Section 42 of the Act of 2005 which envisage appointment of an arbitrator by the Central Government. This petition according to the respondent is, therefore, not maintainable.
7. It is not in dispute that the lease agreement contained an arbitration clause which read as under:
“26.0 Jurisdiction and Arbitration
26.1 In accordance with Section 29 of the Act the State Government may with the concurrence of the Chief Justice of the High Court designate one or more courts
(i) to try all suits of a civil nature arising in any Special Economic Zone in the State;
(ii) to try notified offences committed in any Special Economic Zone in the State.
26.2 No court other than the court designated under Section 23(1) of the Act shall try any suit or conduct the trial of any such notified offence.
26.3 As per Section 42 of the Act, any dispute of a civil nature arising among two or more entrepreneurs or between the Developer and the Lessee in a Special Economic Zone and the court or the courts to try suits in respect of such disputes have not been designated under Section 23(1) fo the Act, such dispute shall be referred to the arbitration. Provided that no dispute shall be referred to the arbitration on or after the date of the designation of the court or courts under Section 23(1).
26.4 Where a dispute has been referred to arbitration under sub section 1 of Section 42 of the Act, the same shall be settled or decided by the Arbitrator to be appointed by the Central Government.
26.5 Save as otherwise provided under the Act, the provisions of the Arbitration and Conciliation Act, 1996 shall apply to such arbitration.”
8. Clause 26.3 of the Arbitration clause is substantially adopted from Section 42 of the Act 2005 which reads as under:
“42. Reference of dispute:-
(1) Notwithstanding anything contained in any other law for the time being in force, if-
(a) any dispute of civil nature arise among two or more entrepreneurs or two or more Developers or between an entrepreneur and a Developer in the Special Economic Zone; and
(b) the court or the courts to try suits in respect of such, dispute had not been designated under sub section(1) of Section 23, such dispute shall be referred to arbitration:
Provided that no dispute shall be referred to the arbitration on or after the date of the designation of court or courts under sub section(1) of section 23.
(2) Where a dispute has been referred to the arbitration under sub-section(1), the same shall be settled or decided by the arbitrator to be appointed by the Central Government.
(3) Save as otherwise provided under this Act, the provisions of the Arbitration and Conciliation Act, 1996 (26 or 1996) shall apply to all arbitration under this Act as if the proceedings for arbitration were referred in settlement or decision under the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996).
9. Section 51 of the Act 2005 gives the provisions of the said act overriding effect over anything inconsistent contained in any other law for the time being in force or in any instrument having effect by virtue of any law. In view of such statutory and contractual provisions, if one revert back to the first objection of the respondent, to my mind, it cannot be stated that no arbitrable dispute survives. The dispute that the petitioner seeks to raise against the present respondent for the purpose of arbitration is whether the cancellation of the lease agreement is valid and consequently the recoveries raised by the respondent could be effected. It is ofcourse true that in the notice for appointment of arbitrator there is no specific challenge to the recovery sought. Nevertheless this would be a direct effect of questioning the cancellation of the lease. Whether the petitioner has a strong case on the dispute so sought to be raised is not my subject matter in the present petition. The fact of the matter is that the disputes have arisen and the parties had agreed to go before an arbitrator, in case any dispute arising out of the said agreement. Whether the cancellation of the lease agreement cannot be questioned legally once the allotment letter is can celled by the Development Commissioner need not be gone into by me for two reasons. Firstly, as stated by the counsel for the petitioner, the decision of this Court regarding validity of cancellation of the letter of allotment has not yet achieved finality. Such decision is open to challenge and I am told is in the process of being questioned. What would be the outcome of such proceedings, if so instituted, cannot be foreseen in the present proceedings. Secondly, even if such decision achieves finality, what would be its impact on the cancellation of lease agreement should be allowed to be judged by the arbitrator since that would be entering in the realm of considering the rival contentions on the very dispute which is arbitrable namely, validity of the cancellation of lease agreement.
10. Having said so I cannot turn down the second contention of the respondent that even in case of arbitrable dispute the parties had decided to a certain procedure for appointment of an arbitrator. Not only in the agreement, Section 42 of the Act 2005 also envisages a certain specific procedure namely selection of the arbitrator by the Central Government. Sub Section(2) of Section 42 of the Act 2005 provides that where dispute has been referred to the arbitration under Sub Section(1), the same shall be settled or decided by the arbitrator to be appointed by the Central Government. In terms of Section 11(6) of the Act, therefore, it would not be possible for me to grant the request of the petitioner for appointment of an arbitrator since the parties had decided to a different procedure for securing an arbitrator, in case the dispute arose.
11. Under the circumstances, I leave it open to the petitioner to approach the Central Government for securing appointment of an arbitrator. If such a request is made I am sure the Central Government shall give its due consideration as provided under Section 42(2) of the Act 2005 and Clause 26 of the lease agreement.
12. With the above observations, this petition is disposed of.
Comments