AKSHAY FOOD PARK LTD. Vs. FOOD KARNATAKA LIMITED

JUDGEMENT

(1.) This is an appeal preferred under Sec. 37(1)(a) of the Arbitration and Conciliation Act, 1996 read with Sec. 13(1A) of the Commercial Courts Act, 2015, against the order dtd. 19/3/2024 of the LXXXIV Additional City Civil and Sessions Judge (CCH-85) rendered in I.A.No.III in Commercial O.S.No.504/2023. The appellants were the defendants in the suit; they had filed the IA seeking for referring the Parties to Arbitration in terms of clause 16.2 of the Joint Venture Agreement dtd. 30/8/2004, which is referred to in the Loan Agreement dtd. 23/5/2007. The I.A. was dismissed. Hence, this appeal.

(2.) The case of the appellants before the Commercial Court was that Article 1.1.c of the loan agreement dtd. 23/5/2007 refers to the Joint Venture Agreement dtd. 30/8/2004. The Memorandum and Articles of Association of the borrower also specifically stated that the Joint Venture Agreement should be read as part and parcel of the Articles of Association. It is contended that the Joint Venture Agreement contained an Arbitration Clause and therefore the parties ought to have been referred to Arbitration.

(3.) The learned counsel appearing for the appellants submits that the appellant-company itself had been incorporated in pursuance to the Joint Venture Agreement and the defendants had disputed the liability to pay the amount under the loan agreement and therefore, the dispute having arisen in terms of the Joint Venture Agreement, the parties ought to have been referred for Arbitration. It is further contended that the Joint Venture Agreement provided for setting up of an Agro Food Park at Hiriyur in Chitradurga District with Joint Venture capital to be provided by the plaintiff. A Joint Venture Company was to be incorporated as a Public Limited Company for carrying out the said project. The plaintiff had agreed to invest in the share capital of the Joint Venture Company so as to provide financial assistance for carrying out the project. It was pursuant to the said agreement that the appellant - Company was incorporated and further agreements including the loan agreement which formed the subject matter of the suit was entered into between the parties. It is stated that instead of investing in the share capital of the Joint Venture Company, the plaintiff thereafter advanced an interest free unsecured loan to the Company. It is therefore contended that the Company itself having been incorporated in pursuance to the Joint Venture Agreement, the arbitration clause in the Joint Venture Agreement ought to have been considered as a part of the subsequent agreements entered into between the parties as well.