Vipin Luthra & Anr. v. Doit Smart Hospitality India Pvt Ltd & Anr.

1. The present petition under Section 11 of the Arbitration and Conciliation Act, 1996 (the “A&C Act”) seeks constitution of the Arbitral Tribunal to adjudicate the dispute between the parties.

2. The disputes between the parties have arisen in the context of a Share Purchase Agreement (“SPA”) dated 17.04.2018, entered into between the petitioners and the respondents. In terms of the said SPA, the petitioners, inter alia, agreed to sell/transfer their shareholding in respondent no.2 to respondent no.1 for certain consideration.

3. The respondents have placed on record the original duly stamped SPA.

4. The petitioners, inter alia, claim alleged failure on part of the respondents to pay “adjusted consideration” equivalent to potential tax refunds in terms of Clause 3.[1] (b) read with Clause 5.1.[3] and other clauses of the SPA, and also alleged outstanding loan amount of Rs. 44,00,000/extended by petitioner no. l to respondent no.2. It is also averred that respondent no.1 being the purchaser was also obligated to facilitate the repayment of the entire loans standing in the accounts of respondent no.2.

5. The aforesaid Share Purchase Agreement dated 17.04.2018 contains an arbitration agreement in the following terms:

will be New Delhi, India. The arbitration proceedings will be conducted in the English language.

12.6. Each Party shall pay its own fees, disbursements and other charges, including legal fees, except as may be determined by the arbitral tribunal. The arbitral tribunal have the power to award interest on any sum awarded pursuant to the arbitration proceedings and such sum would carry interest, if awarded, until the actual payment of such amount. 12.[7] Save as required by Law or regulation, no Party or person involved in any way in the creation, coordination or operation of the arbitration of any Dispute may disclose the existence, content or results of the Dispute or any arbitration conducted under this Agreement in relation to that Dispute to a third party.”

6. The petitioners invoked the aforesaid arbitration agreement vide notice dated 01.11.2022, whereby the petitioners named its nominee arbitrator and called upon the respondents to name its nominee in terms of the aforesaid clause. Without prejudice to the same, the petitioners also sought waiver of the requirement of constitution of a three-member arbitral and requested the respondents to consider appointment of the arbitrator suggested by the petitioners as the Sole Arbitrator. No reply thereto is stated to have been sent by the respondents.

7. Learned counsel for the respondents whilst disputing the merits of the contentions of the petitioners does not dispute the existence of the arbitration agreement between the parties. Learned counsel strongly contends that the claim of the petitioners with respect to the alleged outstanding loan amount of Rs. 44,00,000/- is negated on a bare reading of the SPA, and being outside the scope thereof, and hence, non-arbitrable.

8. Since the existence of the arbitration agreement is not disputed, respective counsel for the parties are in agreement that a sole arbitrator be appointed to adjudicate the disputes between the parties subject to the respondents’ right to raise preliminary objections as regards jurisdiction/arbitrability/maintainability of claim(s) before the Arbitrator.

9. Accordingly, Ms. Preeti Goyal, Advocate (Mobile No.9821761687) is appointed as the Sole Arbitrator to adjudicate the disputes between the parties.

10. The respondents shall be entitled to raise preliminary objections as regards jurisdiction/arbitrability /maintainability of the claims which shall be decided by the arbitrator, in accordance with law, before adjudicating the claim(s) on merits. It is directed accordingly.

11. The learned Sole Arbitrator may proceed with the arbitration proceedings subject to furnishing to the parties requisite disclosures as required under section 12 of the A&C Act; and in the event there is any impediment to the appointment on that count, the parties are given liberty to file an appropriate application in this court.

12. The learned Sole Arbitrator shall be entitled to fee in accordance with Fourth Schedule to the A&C Act; or as may otherwise be agreed to between the parties and the learned Sole Arbitrator.