D.K. Jain. J. - (1.) This is a petition under Sections 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996 (for short 'the Act') for appointment of an Arbitrator for adjudication of the disputes which are stated to have arisen between the parties to this petition.
(2.) Since the case has had a chequered history, it would be appropriate to narrate the background facts, giving rise to this petition, in detail: On 13th April 1998, the Andhra Pradesh Tourism Development Corporation Ltd. (hereinafter referred to as the "Corporation"), a statutory body owned and controlled by the State of Andhra Pradesh, awarded a lease in favour of one M/s Goldstone Engineering Ltd., presently known as Goldstone Teleservices Ltd. (hereinafter referred to as the "Goldstone") for a piece of land for development of the existing Hotel Ritz as a "Heritage Grand" category hotel, as notified by the Department of Tourism, Government of India. On 8th November 1999,. Goldstone entered into an agreement with respondents No. 1, 2 and 3 (hereinafter referred to as the "BSN Group") by which they agreed to execute the said project through a new company known as M/s Varsha Hill Fort Resorts Pvt. Ltd. (for short "Varsha"), respondent No. 4 in this petition. As per the said agreement BSN Group agreed to acquire 74% of equity in Varsha whilst Goldstone agreed to retain 26% of equity in the said Company. On 17th May 2001, the Corporation executed a lease deed for the said site in favour of Varsha. The lease provided in extenso the rights and obligations of the parties with respect to the project. Clause 12(u) of the lease deed provided that there would be no change in the constitution of the Lessee viz. Varsha, without the prior consent of the Corporation and Clause 21 thereof -- the non-assignability clause, provided that neither of the parties to the lease deed shall directly or indirectly sell, transfer, assign or otherwise part with the whole or part of their respective interest and/or benefits or obligations under the lease deed in any manner whatsoever to any other person or party without obtaining the prior written consent of the Corporation. On 29thNovember 2002, Goldstone and BSN Group entered into yet another agreement whereby the latter agreed to take over the entire stake of Goldstone in Varsha. The Corporation felt that agreements dated 8th November 1999 and 29thNovember 2002 were in breach of the terms of the lease deed dated 17th May 2001 as no written consent of the Corporation had been sought prior to the purported change of shareholding in Varsha, on 4th August 2003, a notice for termination of the lease deed was issued to Varsha. According to the petitioner, in order to prevent the Corporation from resuming possession of the hotel site, on 22nd November 2003 the shareholders of Varsha, i.e. Goldstone and BSN Group, invited the petitioner to take over shareholding of Varsha, subject to the prior approval of the Corporation. A meeting of the Board of Directors of Varsha was held on 22nd November 2003, where, according to the petitioner, three Directors, namely, B.S. Neelkanta (respondent No. 1), Mr. P. Rameshbabu and Mrs. B. Renuka (respondent No. 2) were present. Minutes of the meeting were duly drawn wherein it was recorded that the petitioner shall be investing funds to the tune of Rs. 15 to 18 crores in the form of equity in Varsha. It was also resolved that the proposal approved by the Board shall be subject to the approval by the Corporation and the execution of the relevant documents. In furtherance of the said Resolution, Varsha requested the Corporation to accord permission for change in the shareholding pattern in favour of M/s Anil Kumar & Associates (hereinafter referred to as "AKA"). The Corporation granted the permission vide their letter dated 10th December 2003. Pursuant to Corporation's approval, an agreement dated 19th January 2004 was entered into between AKA, BSN Group comprising Mr. B.S. Neelkanta, Mrs. B. Renuka, Amogh Hotels Ltd. and Varsha respectively as parties of the first, second and third part, whereunder BSN Group agreed to transfer 19,68,300 shares in Varsha to AKA under the terms and conditions of the said agreement. The said agreement was signed on behalf of AKA by Anil Kumar, the petitioner herein and a resident of great Britain, Mr. B.S. Neelkanta (Respondent No. 1) and Mrs. B. Renuka (Respondent No. 2). The agreement contained the following arbitration clause: 41. Any dispute, difference or controversy of whatever nature howsoever arising under, out of or in relation to this agreement between the parties and so notified in writing by either party to the other (the Dispute) in the first instance shall be attempted to be resolved amicably by them. If the parties are unable to do so, such dispute shall be referred to arbitration by a sole Arbitrator mutually agreed by the parties to the dispute. In the event the parties are unable to agree on an Arbitrator with 15 days, then the arbitrator shall be nominated by Managing Director of APTDCL on the request of any party. The arbitration shall be governed by the provisions of Arbitration and Conciliation Act, 1996 and the venue of arbitration shall be at Hyderabad, and shall be conducted in English Language. Any decision or award resulting from arbitration shall be final and binding upon the parties. The said agreement was followed up by another agreement dated 23rd January 2004 between AKA represented by Mr. Anil Kumar, Goldstone, BSN Group represented by Mr. B.S. Neelkanta, respondent No. 1 in this petition, and Varsha, represented again by Mr. B.S. Neelkanta, as its Director. Under the said agreement, AKA agreed to purchase 1,00,000 equity shares of Varsha held by Goldstone for a consideration of Rs. 10 lacs. As a result of the aforesaid two agreements, AKA became entitled to acquire 74% equity stake in Varsha whilst the equity shareholding of BSN Group stood reduced to 26%. As per agreement dated 23rd January 2004, upon transfer of shares of Goldstone to AKA, all Directors of Varsha, representing Goldstone were to resign from the Board of Directors of Varsha and AKA was entitled to nominate its directors on the Board of Varsha. The Corporation withdrew its order cancelling lease deed and signed a supplemental lease deed dated 21stFebruary 2004 with Varsha. The supplemental lease deed recorded the shareholding pattern of Varsha as on that date as Anil Kumar & Associates holding 74% equity shares and Mr. B.S. Neelkanta holding 26% of the equity share capital of Varsha. The said supplemental agreement was signed by the petitioner on behalf of Varsha as its director. The stand of the petitioner is that in furtherance of the said arrangement, he engaged the services of an architect in London to prepare the plans for construction of the Ritz hotel and on 14th March 2004, executed two contracts, being a management agreement and a technical services agreement with Meridien S.A. It appears that as per the understanding between AKA, Varsha and Goldstone, the shares of Varsha, which were to be acquired by AKA under agreements dated 19th January 2004 and 23rd January 2004 were actually subscribed by a Company known as M/s India International Construction Private Ltd. (for short "IICL"), purportedly belonging to a group called the "Progressive Group". On 31st August 2005, the petitioner received an email from one Mr. Ashish Kumar attaching a copy of letter dated 22nd August 2005 addressed by Varsha to the petitioner, advising the petitioner that Varsha was contemplating to issue a public notice for the information of the general public that petitioner's association with the hotel project had been terminated and that promoter group, including the BSN Group did not require petitioner's support and association with the hotel project. It was alleged that the petitioner had not invested a single rupee in the project, thus hampering the progress of the hotel project and that the promoter group viz. the BSN group, was forced to mobilize the requisite resources in the form of debt and equity. The petitioner was also informed that he was no longer representing Varsha as its director. A separate email dated 5th September 2005 addressed by Mr. B.S. Neelkanta (respondent No. 1), purportedly on behalf of Varsha, was sent to Le Meridien, informing them that their agreement with Varsha regarding the hotel project had been terminated. As expected, vide his advocate's letter dated 23rdSeptember 2005, the petitioner objected to the termination of his association with Varsha, as conveyed to him vide respondent No. l's letter dated 22nd August 2005 and asserted that he, through his nominee and associate IICL is a stake holder of 74% equity in Varsha and would take steps to seek registration of the said shareholding in his own name. The relevant portion of the reply is extracted below: My client has fully honored his obligations under the Agreement and has through his nominee made substantial investments into the Company. My client is the approved investor in the Company and pursuant to his assurances given to the Andhra Pradesh Tourism Development Corporation Ltd., that Corporation signed the Supplementary Lease Deed dated 21st February, 2004. The said Supplementary Lease is signed by my client as the Director of the Company. As you are fully aware the Andhra Pradesh Tourism Development Corporation Ltd. was holding the Company in breach of the Lease Agreement and had issued a notice terminating the Lease Deed. The notice of cancellation was withdrawn and a Supplemental Lease executed in favour of the Company pursuant to the request and representations made by any client. Further the Corporation has approved my client holding 74% of the Capital and my client has the first preemptive right and option to purchase the 26% shares held by the BSN Group as defined in the Agreement of 19th January, 2004. The BSN Group is obliged to first offer the sale of those shares to my client and is further obliged not to sell those shares to any other party. My client accordingly exercises his rights to purchase the said 26% shares held by the BSN Group directly in his own name. On 1st October 2005, the petitioner received a letter from the Corporation seeking certain clarifications of documents attached with the letter on the change in shareholding pattern of Varsha. According to the petitioner, it was only on receipt of this letter from the Corporation that he came to know that BSN Group and Varsha were trying to create rights in the so-called "progressive group", the said group having acquired shares in Varsha. Thereafter, some correspondence ensued between the Corporation and the petitioner with which I am not directly concerned.
(3.) On 22nd November 2005, the petitioner filed a petition under Section 9 of the Act before the City Civil Court at Hyderabad seeking certain interim reliefs including a direction to Varsha to maintain status quo in connection with the terms and conditions of lease agreement dated 17th May 2001, as amended by supplemental lease deed dated 21stFebruary 2004. Eventually, on 17th December 2005, the petitioner through his Advocate sent a letter to Varsha and the BSN Group calling upon them to confirm the appointment of an Arbitrator within 15 days of the said letter, in terms of the arbitration agreement. Since no reply to the said notice was received, vide his letter dated 30th January 2006, the petitioner approached the Corporation requesting them to nominate an Arbitral Tribunal as per the arbitration agreement dated 19th January 2004. The respondents as also the Corporation having failed to appoint an Arbitrator, the petitioner filed a petition under Section 11(6) of the Act before Hon'ble the Chief Justice of High Court of Andhra Pradesh for appointment of an Arbitrator. Vide order dated 6th February 2007, rejecting the objections raised by the respondents, the learned Single Judge of the High Court allowed the petition and appointed a former Judge of this Court as the sole Arbitrator.;