Subir Kumar Mukhopadhyay vs. Kesoram Industries Limited

Facts

The petitioner, Mr. Subir Kumar Mukhopadhyay, was engaged by Kesoram Industries Limited under a contract of retainer-ship from June 1, 2015, with extensions. The last extension was for the Financial Year 2019-2020, with a monthly remuneration of Rs. 7,37,500. The petitioner's service concluded on July 12, 2019. Remuneration for May, June, and July 2019 remained unpaid. Kesoram Industries deducted TDS on the payable amounts. The petitioner also deposited Rs. 2,70,000 for GST. Despite requests, payment was not made. Kesoram Industries stated that its tyre business, including the unit where the petitioner was assigned, had been demerged into a new entity, Birla Tyres Limited, pursuant to an NCLT order dated November 8, 2019. The petitioner sought to invoke arbitration but faced issues with the nominated arbitrator and objections regarding the liability shifting to Birla Tyres Limited. The petitioner then filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, for the appointment of an arbitrator.

Held

The Court held that the contract of retainer-ship was indisputably with Kesoram Industries Limited. While the petitioner may have been deputed to work for the tyre division, which later became Birla Tyres, this did not extinguish the contractual arrangement with Kesoram Industries or the intention to arbitrate between them. The deduction of TDS by Kesoram Industries for the petitioner's remuneration and the actions taken by Kesoram Industries regarding the extension and acceptance of the petitioner's release further established the privity of contract. The Court found that the contractual arrangement was not exclusively with Birla Tyres, and the claim submitted by the petitioner before the Interim Resolution Professional for Birla Tyres had been withdrawn, negating the argument that the petitioner was pursuing claims against both entities simultaneously. Relying on the Supreme Court's decision in Duro Felguera S.A. vs Gangavaram Port Limited, the Court stated that under Section 11(6-A) of the Act, it only needed to examine the existence of an arbitration agreement. As an arbitration agreement existed between the petitioner and Kesoram Industries, the dispute was directed to be sent for arbitration. Mr. Ishaan Saha, Advocate, was appointed as the sole arbitrator.

Key Issues

1. Whether the arbitration agreement between the petitioner and Kesoram Industries Limited remains valid and enforceable, considering the demerger of Kesoram Industries Limited's tyre business into Birla Tyres Limited? (Section 11(6-A) of the Arbitration and Conciliation Act, 1996). Petitioner's arguments: The petitioner contended that his contract was always with Kesoram Industries Limited, and it was terminated by the same entity, thus retaining the right to pursue arbitration against it. The petitioner also highlighted that he had no knowledge of a claim lodged before the Interim Resolution Professional for Birla Tyres, which was later withdrawn. The deduction of TDS by Kesoram Industries further established the contractual relationship. Respondent's arguments: The respondent argued that it was no longer a party to the arbitration agreement as its tyre business had been demerged into Birla Tyres Limited. The NCLT order approving the scheme of arrangement stipulated that all debts, liabilities, and obligations were transferred to Birla Tyres Limited. The respondent asserted that any obligation related to the tyre business, including the petitioner's dues, became the responsibility of Birla Tyres Limited from the appointed date (January 1, 2019). The respondent also pointed out that Birla Tyres Limited had been admitted to CIRP, with a moratorium imposed.