Gauhati High Court
M/S River Valley Tea Company Private ... vs Assam Gas Company Limited on 25 June, 2012
Author: Ujjal Bhuyan
Bench: Ujjal Bhuyan
1
IN THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM, NAGALAND, MEGHALAYA, MANIPUR,
TRIPURA, MIZORAM AND ARUNACHAL PRADESH)
Arb. Pet. No. 14 of 2011
Petitioner :
M/s. River Valley Tea Company Private
Limited, a Company incorporated under
the Companies Act, 1956, having its
office at Bishmile, P.O. Chabua, District-
Dibrugarh, Assam, being represented by
its Director Shri Mahendra Kumar
Agarwalla, son of Sri Parashuram
Agarwalla.
By Advocates :
Mr. D.K. Mishra, Sr. Adv.
Mr. S. Banik, Adv.
Ms. B. Sarma, Adv.
Respondent :
Assam Gas Company Limited, A Government of Assam undertaking and incorporated under the Companies Act, 1956, having its registered office at Duliajan, District-Dibrugarh, Assam.
By Advocate :
Mr. K. H. Choudhury, Sr. Adv.
BEFORE THE HON'BLE MR. JUSTICE UJJAL BHUYAN.
Date of hearing : 25th June, 2012.
Date of Judgment : 25th June, 2012.
J U D G M E N T AND O R D E R(oral)
This is an application under Section 11(5) of the Arbitration and Conciliation Act, 1996 (the Act).
[2] The petitioner is a private limited company carrying on the business of manufacture of tea. The respondent Assam Gas Company Limited Arb. Pet. No. 14 of 2011 Page 1 of 9 2 (respondent company) is a wholly owned State Government undertaking engaged mainly in the business of processing and transportation of natural gas to the industrial consumers situated in Upper Assam. [3] An agreement dated 23-02-2005 was entered into between the respondent company and the petitioner as per the terms and conditions of which the respondent company would supply natural gas to the petitioner for consumption mainly for the purpose of production of tea at its factory. As per Clause 20, the agreement would remain valid and binding on both the parties for period of five years from the date of commencement of supply of gas by the respondent company to the petitioner and that on expiry of such period, both the parties may enter into a fresh agreement for transportation of gas with revised transmission cost.
[4] The supply of gas by the respondent company to the petitioner commenced on 08-08-2005 and, therefore, in terms of Clause-20, the agreement remained valid till 08-08-2010.
[5] By a letter dated 24-06-2010, the respondent company informed the petitioner that since the agreement would expire on 08-08-2010, the parties may enter into a fresh agreement subject to acceptance by the petitioner of the terms and conditions mentioned in the said letter, which included deposit of an amount of Rs. 2,67,500.00. The petitioner informed the respondent company by letter dated 16-07-2010 that it was willing to sign the fresh agreement subject to certain changes suggested. A demand draft for Rs. 2,67,500/- was enclosed with the said letter. In the said letter, the petitioner sought for certain clarification from the respondent company including about transmission charge and the capital investment amount. Arb. Pet. No. 14 of 2011 Page 2 of 9 3 [6] The deliberation and correspondence between the parties that followed did not resolve the issue which resulted in the petitioner requesting the respondent company to supply gas in accordance with the mechanism provided in the agreement dated 23-02-2005. The respondent company, however, insisted on imposition of new rates.
[7] As the difference between the two sides could not be resolved, the petitioner filed application under Section 9 of the Act before the learned District Judge at Dibrugarh to restrain the respondent company from discontinuing supply of gas to the petitioner and for other connected reliefs. The said petition was registered as Misc. (Arb.) No. 2 of 2010. The learned District Judge by order dated 09-08-2010 after observing that the dispute between the parties can be resolved by the Board of Directors of the respondent company and the representative of the petitioner including its lawyer, as per the arbitration clause, directed that, until the said process is initiated by the parties, status-quo as on 07-08-2010 in the matter of supply of industrial gas by the respondent company to the petitioner should be maintained.
[8] Thereafter the petitioner vide letters dated 23-08-2010 and 03- 01-2011 (Annexures-J & K) requested the respondent company to refer the dispute between them for arbitration in terms of Clause 18 of the agreement dated 23-02-2005 but such request was rejected by the respondent company by its letter dated 24-01-2011.
[9] In the meanwhile, the learned District Judge, Dibrugarh by subsequent order dated 26-04-2011 disposed of Misc.(Arb.) No. 2 of 2010 by ordering continuation of the status quo order passed on 09-08-2010 on Arb. Pet. No. 14 of 2011 Page 3 of 9 4 payment of charges by the petitioner according to consumption and as per earlier rate.
[10] The petitioner thereafter filed application before this Court under Section 11(5) of the Act, which was registered as
Arb. Pet. No. 8 of 2011. On 27-05-2011 it was submitted on behalf of the petitioner that in terms of the arbitration Clause 18 of the agreement, the petitioner would nominate an authorized representative and approach the Board of Directors of the respondent company to appoint an arbitrator to resolve the dispute. On such submission being made, the arbitration petition was dismissed on withdrawal with liberty to the petitioner to approach this Court again, if necessary, in case the Board of Directors of the respondent company do not appoint the Arbitrator.
[11] The petitioner thereafter issued letter dated 07-06-2011 to the Board of Directors of the respondent company with the request to refer the dispute to arbitration and in this connection nominated Sri Sudeb Goswami, Advocate of Dibrugarh Bar Association as its authorized representative. The respondent company did not respond to the said communication of the petitioner dated 07-06-2011.
[12] Aggrieved, the petitioner has filed the present petition with the prayer to appoint arbitrator to resolve the dispute between the parties. [13] The respondent company has filed its counter affidavit objecting to the aforesaid prayer of the petitioner. In the counter affidavit it is contended that the agreement dated 23-02-2005 having expired on 08-08- 2010, there is no subsisting agreement between the parties. Therefore, the Arb. Pet. No. 14 of 2011 Page 4 of 9 5 question of referring the dispute to arbitration as per Clause 18 of the said agreement does not arise.
[14] Mr. D. K. Mishra, learned Sr. counsel appearing for the petitioner submits that the respondent company had suffered avoidable and excess expenditure by extending undue benefit to a private party at the cost of the consumers. He contends that this would be reflected from the audit report of the respondent company for the period 2006-07 to 2008-09. He submits that the respondent company taking advantage of its monopoly position in the business of transportation and supply of gas to the industrial consumers had imposed an excessive price on the petitioner, which the respondent company further wants to enhance now. He submits that this has resulted in a dispute between the parties, which requires to be resolved by interpreting Clause 20 through the arbitration mechanism as provided in Clause-18 of the agreement dated 23-02-2005. The learned Sr. counsel submits that the arbitration clause or the arbitration agreement can stand independently of the commercial agreement dated 23-02-2005 and the fact that the validity of the agreement dated 23-02-2005 has come of an end would have no bearing on the arbitration clause.
[15] Mr. K. H. Choudhury, learned Sr. counsel appearing for the respondent company on the other hand makes two fold submissions. Firstly, he submits there is no dispute between the parties, the dispute in price fixation will arise only after execution of the new agreement. Secondly, the agreement dated 23-02-2005 having come to an end, the arbitration clause forming part of that agreement has also come to an end. He submits that the petitioner cannot base its claim on the clause of an agreement which is no longer in force. Additionally, he submits that the respondent company is only Arb. Pet. No. 14 of 2011 Page 5 of 9 6 a transporter of gas and the price of gas is fixed by other agencies like the Central Government, Oil India Ltd. etc. As the respondent company cannot fix the price of gas supplied to the petitioner, the question of resolution of the dispute as to fixation of price of the gas supplied to the petitioner does not arise.
[16] The rival submissions made at the Bar have received the due consideration of the Court.
[17] The dispute between the parties centers around the issue regarding fixation of price of the gas supplied or to be supplied by the respondent company to the petitioner. No doubt the earlier agreement dated 23-02-2005 has come to an end and the parties would now be required to enter into a fresh agreement for continuation of the gas supply, which is presently being continued on orders of the Civil Court. In the opinion of the Court, interpretation of Clause-20 of the agreement dated 23-02-2005 would have a definite bearing on the price fixation. Though Claupse 20 has already been referred to above, the same may now be noticed in detail and is therefore extracted in its entirety:
"20.00 TERMS:
This agreement shall be valid in force and binding on the COMPANY as well as the CONSUMER for a period of 5(Five) years from the date of commencement of supply of gas by the COMPANY to the CONSUMER. On expiry of this period of 5(Five) years both the COMPANY and the CONSUMER may enter into a fresh Agreement for the transportation of gas, and the transmission cost will be revised inter-alia keeping in view the depreciated cost of the pipeline by then and escalated cost of operation, maintenance, overheads, etc., the COMPANY may decide to impose premium on excess consumption of gas over the booked quantity at a later date, the same will be applicable to the CONSUMER."Arb. Pet. No. 14 of 2011 Page 6 of 9 7
[18] A careful reading of Clause 20 would indicate that the parties may enter into a fresh agreement for supply of gas for which the transmission cost of gas will be revised. Such revision will be done taking into account various factors such as depreciated cost of the pipe-line, escalated cost of operation, maintenance, overheads etc. [19] That leads us to the arbitration Clause-18, which may now be looked into. It provides that dispute or difference arising out of or in connection with the agreement dated 23-02-2005 including any dispute or difference regarding interpretation of any clause thereof shall be referred to the Board of Directors of the respondent company. For ready reference, the arbitration clause is quoted hereunder :
"18.00 ARBITRATION:
18.01 Any dispute of difference arising out of or in connection with this Agreement including any dispute or difference regarding its interpretation or any Clause thereof, shall be referred to the Board of Directors of Assam Gas COMPANY Limited. The CONSUMER will nominate a representative(s) and at the discretion of the CONSUMER a Lawyer, who will discuss about the disputed matters with the Board of Directors in a meeting. The decision arrived at by the Board shall be final and binding on the COMPANY as well as on the CONSUMER.
18.02 Notwithstanding dispute or difference which might have been referred to the arbitration as mentioned in Clause 17.01, all obligations under this Agreement shall continue to be fulfilled by both COMPANY and CONSUMER unless otherwise directed by the COMPANY in writing, except as provided expressly in the Agreement itself."
[20] From a perusal of the above, it is evident that a dispute or difference relating to interpretation of any clause of the agreement dated 23- 02-2005 can be referred to arbitration. The arbitration clause provides resolution of the referred dispute by the Board of Directors of the respondent Arb. Pet. No. 14 of 2011 Page 7 of 9 8 company. The consumer is required to nominate a representative and in his discretion a lawyer also to discuss the disputed matter with the Board of Directors. It further provides that the decision arrived at by the Board of Directors shall be final and binding on both the parties. Thus, it is clear that the arbitral authority is the Board of Directors of the respondent company. [21] In the opinion of the Court, the grievance raised by the petitioner would require interpretation of Clause 20 of the agreement dated 23-02-2005, which is covered by the arbitration clause. Though the learned counsel for the respondent company has submitted that the price of gas supplied by the respondent company is fixed by administrative decision of the Central Government and Oil India Limited and the respondent company cannot fix the price at its level, the same does not appear to be the correct position as Clause 20 itself says that the revised price of the gas supplied would depend on factors such as depreciated cost of the pipe-line, escalated cost of operation, maintenance, overhead etc.. Thus the base price of the gas may be fixed by external agencies such as the Central Government and Oil India Ltd. but there would be accretion to such price on account of the above factors which would ultimately determine the actual price of the gas supplied to the petitioner. This is where the dispute arises. [22] Coming to the objection of the respondent company that the principal agreement having come to an end, there is no scope for invoking the arbitration clause contained in such an agreement, it is a settled proposition that the arbitration clause can stand independently of the contract. Section 16(a) of the Act makes it clear that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract.
Arb. Pet. No. 14 of 2011 Page 8 of 9 9 [23] The above deliberation thus leads us to the conclusion that there is a dispute between the parties relating to interpretation of Clause 20 of the agreement dated 23-02-2005 which is covered by the arbitration Clause-18 thereof. As the respondent company has refused to refer the dispute to arbitration before its own Board of Directors within the stipulated period as provided under Section 11(5) of the Act, this petition is, therefore, allowed by directing that the Board of Directors of the respondent company shall decide the dispute between the parties by holding meeting or meetings with the nominee of the petitioner. For holding such arbitral proceeding, the Board of Directors shall devise its own procedure, however keeping the nominee of the petitioner informed. The first meeting shall be convened by the Board of Directors within a period of one month from the date of receipt of a certified copy of this order.
JUDGE d.de Arb. Pet. No. 14 of 2011 Page 9 of 9