Gujarat High Court
Institute For Plasma Research (Ipr) vs Milman Thinfilms Pvt Ltd on 29 January, 2016
Author: Akil Kureshi
Bench: Akil Kureshi
O/IAAP/45/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
PETN. UNDER ARBITRATION ACT NO. 45 of 2015
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INSTITUTE FOR PLASMA RESEARCH (IPR)....Petitioner(s)
Versus
MILMAN THINFILMS PVT LTD....Respondent(s)
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Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Petitioner(s) No. 1
MR MK VAKHARIA, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
Date : 29/01/2016
ORDER
1. Petitioner seeks appointment of an arbitrator to resolve the disputes between the petitioner and the respondent in following background:
2. Petitioner, an institution for Plasma Research, is an autonomous institution under the Department of Atomic Energy, Government of India. Respondent is registered under the Companies Act and is in the business of surface coatings and manufactures and supplies film coating system to industries. The petitioner and the respondent entered into an agreement dated 10.08.2005 which was titled as "Technical Knowhow and License Agreement". Under such agreement, the petitioner Plasma Research Institution would provide certain technology Page 1 of 8 HC-NIC Page 1 of 8 Created On Wed Feb 03 01:22:07 IST 2016 O/IAAP/45/2015 ORDER and the knowhow to the respondent on agreed terms, which included payment of royalty. The agreement contained an arbitration clause in following terms:
"Article 15: Arbitration 15.1 In the event of a dispute arising between FCIPT & Milman as the first action towards resolution of such dispute, all pertinent facts will be placed before an impartial erudite and experienced individual chosen by both parties for arbitration. It the judgement of this individual does not satisfy one or both parties the dispute, will be finally settled under the provisions of arbitration and reconciliation act 1996, or its reenactment, amendment as the case maybe. However, the jurisdiction in any case shall be Ahmedabad."
3. In working out of such contractual terms, disputes arose between the parties. According to the petitioner, the respondent did not submit full accounts and even after termination of the agreement, continued using the knowhow which was, according to the petitioner, opposed to the terms of the contract. On 12.08.2014, the advocates of the petitioner served a legal notice to the respondent, in which, it was stated as under :
"In the light of the above, in the first instances, it may be noted that the duration of the agreement is over and you have been unauthorizedly using the technology of our client which tantamounts to infringement on your part. The duration of the agreement having come to an end, it is now not open to you to use the technology of our client.
By this notice, in the first instance, we call upon you to desist from using our client's technologyor its variants plasma ion Page 2 of 8 HC-NIC Page 2 of 8 Created On Wed Feb 03 01:22:07 IST 2016 O/IAAP/45/2015 ORDER nitriding,plasma carbonitriding/nitrocarburising/oxynitriding, etc. Derivatives of FCIPT Plasma Nitriding Technology cannot be used in any form. As per the information from our client, you have also been using HV Isolated Temperature card [developed by FCIPT]. You should stop using such derivatives forthwith for Plasma Nitriding or any other system.
We also call upon to provide to our client the duly audited accounts and Sales Record/reportsfrom the date of contract till today as per the requirement of the above contract, within 21 days from the receipt of this notice. You are also strongly advised to remove the advertisement and stop canvassing in any form related to the said technology from your website etc. Upon failure on your part to comply with the above referred demands, our client will be constrained to initiate appropriate legal proceedings as may be advised without any other or further correspondence in this behalf."
4. The respondent replied to such notice under communication dated 09.01.2015 disputing the allegations made against the respondent.
5. After further communication between the parties, on 07.04.2015, the petitioner served a notice to the respondent invoking arbitration clause as under:
"A conjoint reading of the various correspondences exchanged between you and our client as also the above referred correspondence reveals that there is a dispute between your and our client. Your attention is drawn to Article 15 of the agreement, which requires disputes to be resolved through the process enumerated therein. As per the requirement of Article Page 3 of 8 HC-NIC Page 3 of 8 Created On Wed Feb 03 01:22:07 IST 2016 O/IAAP/45/2015 ORDER 15.1 in the event of such a dispute having arien, the first action towards resolving all such dispute, all pertinent facts are required to be placed before an impartial erudite and experienced individual chosen by both parties for arbitration. We therefore on behalf of our client call upon you to agree to appointment of Prof. Shri Abhijit Sen (IPR-S.Chandrasekhar Chair) being an impartial experienced person to resolve the dispute as per Clause 15.1.
You are advised to give your consent within 21 days from the receipt of this letter, failing which our client would be constrained to initiate appropriate proceedings under the provisions of the Arbitration and Conciliation Act, 1996 without any further notice."
6. The respondent replied to such notice under communication dated 30.05.2015 and conveyed as under:
"5] Referring to Paragraph No. 2 of your notice which yet persists the existence of dispute, my Client is however willing to cooperate for best interest of justice and lasting fair resolution. In this respect, however, my client denies consent to appointment of Prof. Shri Abhijit Sen as the sole arbitrator, apprehending unfair bias and impartiality as Shri Sen happens to be a bonafide employee and thus beneficiary of Institute for Plasma Research.
6] Referring to Article 15.1 of the Technical Know-how and License Agreement, which requires an impartial erudite and experienced individual to be appointed as the arbitrator for purpose of dispute resolution, my Client calls upon you to agree to the appointment of any single person among the following distinguished individuals for resolution of dispute purported by you:
(a) Prof. K.L.Chopra (Ex. Director, IIT Kharagpur) Page 4 of 8 HC-NIC Page 4 of 8 Created On Wed Feb 03 01:22:07 IST 2016 O/IAAP/45/2015 ORDER
(b) Prof.S.S.Major (Professor, Department of Physics, IIT Bombay)
(c) Dr. Murali Shastry (Director, Innovation, DSM; Ex Scientist, NCL Pune]
(d) Prof. Indranil Manna (Director, IIT Kanpur)"
7. At that stage, the petitioner filed this arbitration petition. This petition is opposed by the respondent on the ground that the said Clause 15 of the agreement first requires an attempt to resolve the disputes through the impartial and experienced individual chosen by both sides. Only thereafter, the arbitration proceedings can be resorted to. According to the respondent, therefore, stage for appointment of an arbitrator has not arrived. Second limb of the respondent's argument is that notice dated 07.04.2015 cannot be treated as one for appointment of an arbitrator.
8. Both the contentions cannot be accepted. Firstly, as noted, Clause 15 of the agreement pertained to arbitration and it provided that, in the event of a dispute arising between the parties, as a first action towards resolution of such dispute all pertinent facts will be placed before an impartial erudite and experienced individual chosen by both parties for arbitration. The clause further provides that, if the judgement of this individual does not satisfy one or the other parties, the dispute will be finally settled under the provisions of the Arbitration and Conciliation Act, 1996. The reference to such impartial experienced individual to be chosen by both parties thus is for Page 5 of 8 HC-NIC Page 5 of 8 Created On Wed Feb 03 01:22:07 IST 2016 O/IAAP/45/2015 ORDER arbitration. It is true that in the first portion of this sentence, it is referred that, as the first action towards resolution of the disputes such reference would be made. Nevertheless, the later expression, that the issue will be placed before such person "for arbitration" is significant and in clear terms refers to the task of such individual as that of arbitration. Thus, the proceedings that such a person would engage to resolve the disputes would be in the nature of arbitration. It is, in this context, that the later expression "that the judgement of such an individual does not satisfy one or both the parties, the dispute would be finally settled under the provisions of the Arbitration and Conciliation Act" has to be seen. Here again, the term used is the judgement that the individual may render. If the judgement does not satisfy one or the other party, as per this agreement, the dispute would be finally settled under the provisions of the Arbitration and Conciliation Act. The only reconciliation between the two sentences would be that the person to be so chosen by two sides would be the sole arbitrator and, if the decision of the arbitrator aggrieves one or the other side, the same would be called in question in terms of the Arbitration and Conciliation Act, 1996. Any other interpretation would render either the first or the later sentence redundant. Reference to the proceedings before the chosen individual as one of the arbitrator and his decision being one in the nature of judgement, in my opinion, would clinch the issue. The contention of the counsel for the respondent that such a person would only be a conciliator cannot be accepted since a conceliator would never render a judgement and the question of Page 6 of 8 HC-NIC Page 6 of 8 Created On Wed Feb 03 01:22:07 IST 2016 O/IAAP/45/2015 ORDER one or the other party being dissatisfied with such a judgement would not arise. Thus, seen the notice of the petitioner dated 07.04.2015 was clearly one for appointment of an arbitrator. As noted, there were exchanges between the parties referring to several disputes arising out of the agreement. In this context, the petitioner in the said notice dated 07.04.2015 asserted that the respondent may agree the appointment of Shri Abhijit Sen as an impartial experienced person to resolve the disputes as per Clause 15.1. It was added that the respondent should give such consent within 21 days from the receipt of the letter, failing which, the petitioner would be constrained to initiate appropriate proceedings under the provisions of the Arbitration and Conciliation Act, 1996 without any further notice.
9. Two things thus immediately emerge. Firstly, that the petitioner suggested the name of Professor Shri Abhijit Sen as an arbitrator and called upon the respondent to consent to such a name, failing which, the petitioner would be constrained to proceed in terms of the Arbitration and Conciliation Act. Secondly, the respondent also in the reply dated 13.05.2015 understood the notice in such terms when, in para 5, it was conveyed that the respondent denies consent to appointment of Professor Abhiji Sen as a sole arbitrator, "apprehending unfair bias and impartiality as Professor Abhijit Sen appears to be the bonafide employee and thus beneficiary of institution for Plasma Resarch". Thus, even the respondent understood the notice of the petitioner dated 07.04.2015 as one for appointment Page 7 of 8 HC-NIC Page 7 of 8 Created On Wed Feb 03 01:22:07 IST 2016 O/IAAP/45/2015 ORDER of an arbitrator in terms of Clause 15 of the agreement.
10. Though I do not accept the interpretation of the respondent of the said Clause 15 of the agreement even if such an interpretation is accepted, it can easily be seen that there is undisputedly an arbitration agreement which would be, according to the respondent, resorted to once the attempt to resolve the disputes by the impartial experienced individual fails. In the present case, when the parties failed to even agree on who such impartial experienced individual would be, the first requirement of the arbitration clause must be seen to have been satisfied. It is not as if only when such individual renders his judgement that the parties can resort to arbitration. Such interpretation would be too literal, too rigid and plainly not emerging from the reasonable and conjoint reading of the arbitration clause.
11. Being a technical matter, let the parties deliberate on the person who may be requested to act as sole arbitrator. For such purpose S.O. to 12.02.2016.
(AKIL KURESHI, J.) Jyoti Page 8 of 8 HC-NIC Page 8 of 8 Created On Wed Feb 03 01:22:07 IST 2016