2023 (6) TMI 252 - CALCUTTA HIGH COURT

Insufficient stamped agreement - reference of matter to arbitration - non-joinder of the Special Purpose Vehicle (SPV), namely Orissa Steel Expressway Private Limited, which a party to the Option Agreement containing the arbitration clause - Corporate Insolvency Resolution Process (CIRP) commenced on March 30, 2017, that is, after the Option Right accrued in favour of the petitioner on January 13, 2017 - exercise of option - HELD THAT:- From the definitions as provided in the Option Agreement itself, there cannot be any doubt that the agreement, under Clause 10(a), was to be effective from the date of execution and was to remain in full force and effect until the earlier of three contingencies. It is undisputed that out of the three contingencies, the first, being expiration of the Option Period, was the earliest, since there was no settlement date or mutual termination - the Option Period, as per Clause 1.1.26, means the period starting from the Option Start Date and ending immediately after the completion of the Concession Period.

The notice dated July 29, 2011, on which the petitioner seeks to rely, was long before the Option Period. As such, the same cannot count, by any stretch imagination, as the exercise of Option under the Option Agreement.

In the present case, the petitioner having admittedly not done so, the question of applicability of Clause 10(b) does not arise at all. Hence, the argument of the petitioner, that upon service of the notice on July 29, 2011 the obligations under the Agreement crystallised and were to continue in force until fulfilment even though such obligations may fall beyond the Option Period, falls flat. In the absence of any notice being served within the time as contemplated in the agreement, there did not arise any question at any point of time for the obligations under the agreement to continue. Hence, the petitioner’s argument of its rights having crystallised with the notice dated July 29, 2011 is not tenable in the eye of law and in the context of the agreement. Such unilateral notice of the petitioner did not even constitute any agreement between the parties to give rise to obligations on the part of the respondent.

Following the principles in Vidya Drolia [2020 (12) TMI 1227 - SUPREME COURT], the dispute sought to be raised by the petitioner is not maintainable and, hence, non-arbitrable. Even by limiting the interference of Court under Section 11 to a prima facie review of the dispute, the dispute sought to be referred is patently ‘deadwood’ and non-arbitrable. Thus, a reference to arbitration of such a dispute, which is ex facie not maintainable, would merely be a futile exercise.

Insofar as the non-impleadment of the SPV, Orissa Steel Expressway Private Limited is concerned, the same could be termed as a curable defect. Although the SPV was a signatory to the Option Agreement and a proper party to the present application, the question of curing such defect became infructuous ab initio in view of the application under Section 11 not being maintainable.

The present application under Section 11 of the Arbitration and Conciliation Act, 1996 is not maintainable in law and in terms of the Option Agreement itself, as amended - Application dismissed.