Karnataka High Court
Amar Enterprises vs Sunrich Energy Pvt Ltd on 13 August, 2009
Author: Ajit J Gunjal
Bench: Ajit J Gunjal
IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 13% DAY OF AUGUST 2009 BEFORE . THE HON'BLE Mr. JUSTICE AJIT J GUNJAL CIVIL MISCELLANEOUS PETITION Ne.97 OF 2008 BETWEEN: Amar Enterprises, No.25, Amar Tower, ist Cross, Gandhinagar, __ Bangalore-560 069, - . Represented by its' Proprietor, se Mr. H.P.Amarziath. ooo a PETITIONER (Sri P. Ramprased, Adv. for Sri B.C 'Viruvengadam, Adv.) AND: _ Sunrich Energy Pvt. Ltd.,.- Registered Office at . No. 124-B, Mittal Court, 224 -.. Nariman Point, Mumbai-400 021 Represented by its Chairman. _ Sunrich Energy Pvt. Ltd., Operation Office at .., Buite Ne.2, Municipal Ind. Estate _ 'D.S.Marg, Worli -. Mumbei-400 018, . Represented by its Chairman. .. .RESPONDENT . (Sri Sukumar Patjoshi, Adv. for Amaresh N.Law Assts., -- _Advs.) This CMP filed under Section 11(5) of the Arbitration and Conciliation Act, 1996 praying to appoint an Arbitrator in terms and Article 11 of the Saleand purchase FOB Contract dated 11.10.2007 which is at Annexure-A to resolve the disputes through arbitration, award costs of the petition in the interest. of 7 justice and equity. Court made the following: ORDER
This petition is filed under | Section a of 'the Arbitration Act, 1996 for short, the Act.
2. The matrix of the petit sisi SS is as follows:
Pursuant to. an. agreement dated 11.10.2007 petitioner entered into. 'contract, with respondent for supply of 40,000 metric tons of j iron ore fines. It is not in dispute that the respondent had remitted a sum of . Rs.1,62,50, 000/-. Another sum of Rs.1,75,00,000/- as
- advance ol two ) days, i.e., 17.10.2007 and 30.10.2007.
It appears, due to certain circumstances beyond the oo | control of the petitioner as well as the respondent, the
- : contract stood terminated. It is also the specific case of the petitioner that the contract was terminated on
-- 27.11.2007. Nevertheless, the petitioner sent a tax invoice for 987] metric tons of iron ore fines. It appears, after the termination of the contract, there was hi renegotiation of the prices, inasmuch as, the price fixed was Rs.3500/- per metric ton. According _ cc the 7 petitioner, the renegotiated price was Rs. 3,000/- 'per 7 metric ton. On the basis of a notice, a copy of which is s to be found at Annexure- D, the claim was made for :
Rs.2,91,96,048.96ps. Thereafter a series of correspondences have» taken . place between the petitioner as well as the respondent. Copy of the agreement is Priduioed.@ at Annexure 2 . which certainly contains an arbitral clause at Article 11. The first of the communication is, to be found ¢ at Annexure-B issued by the respondent indicating 'that the contract is mutually terminated. | "it appears that the termination of the contract is accepted by the petitioner, a copy of which is at Annexure- C. - During this interregnum it appears, =. petitioner had given open cheque to the respondent as a mats - part performance guarantee. Since, the value of the : suppiied material to the extent of 9871 Metric Ton a worked out to Rs.2,38,50,000/-, the balance of amount of Rs.99,00,000/- was with the petitioner. Pursuant to the communication dated 6% December 2007 at Annexure-H, the petitioner permitted the respondent to encash the open cheque for a sum of Rs.99, 00,2 000 /-. But however, it appears, the respondents. "have - encashed a sum of Rs.99,00 000/- with» "another : additional sum of Rs.4,50 090/-. - 'The commmnication | also indicates that as per the renegotiated termas, the bills are raised and will be sent to the respondent, This was replied by the respondent indicating that it is only at the behes st of the petitioner, the amount was withdrawn. | . "The petitioners s claim is that certain insinuating 1 remarks were made by the respondent pursuant' to the « communication dated 12 December 2007 at Annexure- K. This prompted the petitioner from . 7 issuing 1B notice at ~ Annexure- M. Annexure-M would indicate that "the petitioner has claimed a sum of _Rs.57,96,048.96 which according to them is the ws outstanding dues towards supply of iron ore fines and also damages for libel and slander. They would . 7 incidentally also suggest that they would proceed to
- appoint an arbitrator without prejudice to his right to initiate criminal complaint. This was replied by the hh
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respondent, a copy of which is produced at Annexure-N, categorically denying the claim of the petitioner. 'They ., would also contend that there is no ves ; os and no dispute has arisen between the : partios for : appointing any arbitrator. They would also indicate that : the petitioner has not suggested their t nominee. Hence, the question of acceding to. 'their request for appointment of an arbitrator would not 'arise. Since the respondent. did u sot consent tor, appointment of an arbitrator, this petition i is 5 filed. ; |
3. Learned counsel. appearing for the petitioner submits that. undisputedly there is an arbitral clause in _ 'the agreement, He would pointedly refer to Article 11 of | the contract. He submits that since there is a serious dispute as sto: the entitlement of the amount, the matter is required to be referred to an arbitrator. He would a, "press into service the ruling of the Apex Court in oe M/S.KONKAN RAILWAY CORPORATION LTD., AND _-... ANOTHER Vs. M/S.RANI CONSTRUCTION P. LTD. reported in AIR 2002 8C 778 as well as NIMET a | LTD. reported in 2000(6) SCALE 500 to buttress his contention that once there is an arbitral clause there is. no option but for this Court to refer the matter to an:
arbitrator.
4. This argument of the petitioner 1s : seriously contested by the respondent. or. 'Sukumar, jearned counsel appearing for the respondent St tbaaits that both the petitioner | as well és s respondent by rautual consent have terminated, the contract which would necessarily mean that. the s 'said. contract . is not in existence. He further submits that the aim of the petitioner is on the basis of the renegotiated. price at Rs.3000/- per metric ~~ ton whereas the agreed price under the contract was ; Rs. 3, 500 per metric ton. Indeed, he would submit that the claim of the petitioner is that the iron ore fines eon was to be 'supplied at Rs. 2, 100/- per metric ton. Sum
-- and spbstance of his argument is that in the absence of oe 'any contract reducing the renegotiated terms and the
-- earlier contract having been given a go-by, the question of appointing an arbitrator, in the circumstances, would not arise.
5. I have given my anxious consideration to the submissions made by both the learned coun sel. "The -- petitioner and the respondent is not at all a opted, 'The . contract discloses that th<« "petitioner was. to supply 40,000 metric ton at the rate.. of Rs. 3 1700) per 'metric ton. It is also not in dispute that the Parties have agreed upon the: mode of settlement if a 1 dispute arises, inasmuch as, "there is. an arbitral 'lause. Indeed, the contract. also envisages 'that if there is any amendment or modification to 'the contract, it shall be reduced in writing and: subject to 'confirmation by the contracting os parties, which would. necessarily mean that if there is
- any modification in the terms of the contract, the same is required 10 be amended. To that extent, there is no
- difficulty. 'The difficulty would arise only after the exchange of two communications between the petitioner > as: well as the respondent. Annexure-B is a 7 communication issued by the respondent on 26.11.2007 informing the petitioner that they have
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11.10.2007. Indeed, this communication is accepted by the petitioner, a copy of the same is to be found at Annexure-C. [It is useful to extract the contents of. Annexure-C which is a short one and reads thus:
"As per your letter dated 26/ 11 / 2007, T on | behalf of Amar Enterprises hereby. inform a you that due to logistical. & local problem we are not in position 'to carry cn. the contract and so we hereby terminate /cancel our above said. contract with | immediate effect. We have delivered you 1 0000 MT cargo as per our" contract and we will not be delivering further » cargo to you as the contract stands cancelled which please note." | A reading of these two communications would clearly 7 indicate 'that both the petitioner as well as the respondent | have terminated the contract which would 7 necessarily mean that the terms would also vanish
- "along with the terms of the contract.
6. This takes us to the next communication issued os by the petitioner to the respondent which does not spell out anything. The demand by the petitioner for the first time is made on 06.12.2007. Indeed, the petitioner appears to have taken up a_ cudgel 'inst "the respondent for negotiating a sum of Rs. 99, co 000. 'on : s, the basis of an open cheque. Indeed, a 'perusal of the. said communication would indicate and permit the respondents to recover the said sum of Rs. 99, 00, 0,000/- by presenting the cheque on 1 Bh 'December. "Insofar as the other claim of Rs.4,50 1900/- is. Seoricerned, it is stated that they do not pay the said amount to some other concerned as 'they have some kind of a privilege with them. Nevertheless it. appears the respondents have withdrawn astm of Rs.99,00,000/- and also a sum - 1 oF R8.4,50 50,000/- 'The demand for the balance of _ amount if any is made in the last paragraph indicating that they would be raising the bills on the renegotiated terms. 'The second of the communication by them dated * - 10. 12 2007 clearly spells out that the respondents have | : - received a sum of Rs.57,96,048.96/-. Hence, there is a ; 7 'demand for the refund of the said excess amount. This has been replied by the respondents. Indeed, one will have to see whether an arbitral clause exists to refer the 10 matter to an Arbitrator which is a must _ when proceedings are initiated under Section 1] 1 of the Act. i is no doubt true that in the case of M/e.KONKAK _ RAILWAYS and NIMET RESOURCES INC, the. 'Apex Court has ruled that it is enough if there is an arb! tral - | clause and it is not necessary | for the Courts tc go into the merits or the survival of an arbitral clause. That decision has been later explained by the Apex Court in the case of 'SBP "AND COMPANY Vs. PATEL ENGINEERING UMeTED AND ANOTHER reported in 2003 7 sc 610. With: "reference to the said decision one will have to examine - whether the arbitral clause in | the contract dated Vi. 10.2007 survives. The
- comeapundence which is referred to would clearly . disciose that both the petitioner and the respondent | 7 have decided to terminate the contract which would _ . necessarily mean that the terms of the contract become _ non-extinct. The Apex Court in the case of UNION OF
- INDIA Vs. KISHORILAL GUPTA AND BROS. reported . in 1989 SCR 493 with reference to the termination of 4 li the contract with an arbitral clause and the survival thereof as observed thus: | "Uninfluenced by authorities or case- law, 'the. Mo logical outcome of the eariicr di scussion would be that the arbitration clause perished - _--
with the original contract. Whether the said : | clause was a substantive: term or & collateral one, it was none the less en integral part' of the contract, which had no 'existence de hors the contract. It was intended to cover all the disputes arising under the conditions of, or in connection with, the 'contracts. Though the phraseoicgy was of the. widest amplitude, it. is incor: peivable thai the parties intended its 'survival, even. after the contract was mutuaily rescinded and substituted by a
- 'new agreenient. The fact that the new
-- contract not only did not provide for the : a survival of the arbitration clause but also the . - circumstance that it contained both substantive and procedural terms indicating that the parties gave up the terms of the old ~~ contracts, including the arbitration clause."
In the case on hand, it is to be noticed that both the petitioner as well as the respondent pursuant to the two
--_-- I. ff a 12 contract which would necessarily mean that the terms of the contract would also vanish and stand obliterated. - The claim of the petitioner is on the basis of a _ renegotiated terms of the contract which certainuy is not :
reduced to writing, inasmuch as, 'the claim of the :
petitioner is that it is Rs.3 000/ but the claim of the respondent is that it is. ~Rs. 2, 100/-. "No new terms of contract are made available. The renegotiated price is gathered only "from the" "correspondences inter se between the petitioner and tine respondent if there is no new contrac t in respect of negotiated price and in the absence of an arbitral clause once the earlier contract stands rescinded, i am of the view that the question of . | granting the request of the petitioner would not arise. 7, Indes eed, a contention is raised by the learned counsel 'for the petitioner that m one of the "correspondences the respondent had agreed that the Oe _ contract was not terminated but however, that stray ~~ sentence will not advance the case of the petitioner, em EE OLE NEE NY TT B respondent have proceeded on the footing that the earlier contract dated 11.10.2007 stands obliterated. Bo Consequently, the petition does net merit -- consideration and accordingly stands dismissed. itis _ open for the petitioner to work-out his remedies in an appropriate forum.
. | 'Sd/3 Judge AL