NILESH C SANGHANI Vs. RAKESH V ZANGDA

JUDGEMENT

(1.) The short question that arises for consideration in the present case is whether there is binding and enforceable arbitration agreement between the parties within the scope of which disputes/ claims of the applicants can be referred to the arbitral forum in accordance with the provisions of Arbitration and Conciliation Act, 1996, hereinafter referred to as "the Act".

(2.) In the year 1986, applicant No. 1 and respondent No. 1 being friends entered into a partnership concern under the name and style of "softbite" for developing and marketing software. Thereafter it was converted into a private limited company by inducting another person Mr Raju Shah and each one of the persons was holding 33 1/3% share for carrying on the business activities. Somewhere in 1999, Mr Raju Shah withdrew from the company and the business of the private limited company under the same name and style was carried out by the parties being equal share holders of the company. Some disputes and differences arose between the parties, which according to the applicants, was settled in the year 2002-2003. This led to the intervention by one Niranjan Nanawati, a leading Stock Broker, which was acceptable to both parties as they had trust and confidence in him. As a result of the intervention of the said person, an agreement was arrived at between the parties and applicant no. 1 submitted his resignation as Director of respondent No. 4 company. This resignation was submitted to respondent No. 4 but was obviously, upon fulfillment of the conditions mentioned in the letter dated 31st march 2003. This letter was accepted and signed by respondent No. 1 on behalf of the company and witnessesed by Mr. Niranjan nanawati and Mr. Raju Shah. One of the conditions in the said letter was that in case of any dispute in valuation, Mr. Nanawati's decision will be final. As a result of the nonfulfillment of the condition by respondent No. 1 a suit was filed on the Original Side of this court being Suit No. 2551 of 2004, which is stated to be still pending. As the subject matter of the suit in relation to valuation of shares of the company was beyond the scope of the suit, according to the applicants, it needed to be resolved through arbitration under the sole arbitration of Mr. Niranjan nanawati in terms of the agreement.

(3.) Reply on behalf of respondent Nos. 2, 3 and 4 was filed and while disputing the facts averred in the application, it was stated that applicant No. 1 was required to pay a sum of Rs. 24 lacs at the rate of Rs. 1 lac per month for 24 months, as he had shown his willingness to obtain rights to market window software with two years NOC, which he had developed at the cost of the company. Applicant No. 1 was also in occupation of the premises Nos 102 to 104 owned by the company, which is agreed to be sold at market value and as per the agreement, the applicants were to pay Rs. 35. 50 lacs towards the said office premises. It was stated that the shares had been valued correctly. It was also stated that Mr. Nanawati had no right or authority to act as arbitrator much less as the sole arbitrator. Besides these factual denials, the principal objection taken by the respondents is that the suit for declaration is pending before the Court. The said suit has been filed for declaration that letter Exhibit A to the application is valid, binding, subsisting contract and specific performance thereof. Thus there is no arbitration agreement between the parties and that the application under section 11 of the Act is not maintainable.