Bombay High Court
Transport Corporation Of India Limited ... vs Leap India Private Limited on 26 July, 2022
Bench: G.S. Patel, Gauri Godse
7-IAL-22227-2022-COMAPL-22036-2022.DOC
Arun
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL APPELLATE DIVISION
COMM ARBITRATION APPEAL (L) NO. 22036 OF 2022
IN
INTERIM APPLICATION (L) NO. 14998 OF 2022
IN
COMM ARBITRATION PETITION NO. 567 OF 2021
WITH
INTERIM APPLICATION (L) NO. 22227 OF 2022
IN
COMM ARBITRATION APPEAL (L) NO. 22036 OF 2022
IN
INTERIM APPLICATION (L) NO. 14998 OF 2022
IN
COMM ARBITRATION PETITION NO. 567 OF 2021
Transport Corporation of India Limited & Anr ...Appellants
Versus
LEAP India Private Limited ...Respondent
Dr Abhinav Chandrachud, with Ajay Panicker, i/b Ajay Law
ARUN Associates, for the Appellants.
RAMCHNDRA
SANKPAL Mr Sharan Jagtiani, Senior Advocate, with Ankit Lohia, Aditi
Digitally signed by
Bhat, HN Thakore, Kunal Parekh and Nirali Shah, i/b Dua
ARUN RAMCHNDRA
SANKPAL
Date: 2022.07.28
Associates, for the Respondent.
09:31:28 +0530
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CORAM G.S. Patel &
Gauri Godse, JJ.
DATED: 26th July 2022 PC:-
1. The Appeal, ostensibly under Section 37 of the Arbitration and Conciliation Act ("the Arbitration Act"), takes exception to an order of 23rd June 2022. The Appellants, Transport Corporation of India Limited ("TCI") were the Respondents before the learned Single Judge in a Section 9 Commercial Arbitration Petition No. 567 of 2021 filed by the Respondent to the Appeal, LEAP India Private Limited ("LEAP"). The impugned order was made on an Interim Application LEAP filed seeking a clarification of an earlier order of 26th October 2021 made by the learned Single Jude on the Section 9 Commercial Petition itself.
2. There is no doubt that TCI and LEAP have known each other for some time. There was between them a Letter of Intent ("the 2016 LoI") dated 1st December 2016. This related to certain goods described as "wooden pallets". It is undisputed that the 2016 LoI did not have an arbitration clause at all.
3. Then there was an Agreement of 26th October 2017. This dealt with an entirely distinct set of products, Foldable Large Containers ("FLC"; "the 2017 Agreement"). The 2017 Agreement did have an arbitration clause 23.1. It is reproduced in various portions in the Appeal record. We will take it from page 314 Page 2 of 17 26th July 2022 7-IAL-22227-2022-COMAPL-22036-2022.DOC which is part of the 26th October 2021 order that the learned Single Judge made on the Section 9 Petition.
23. Dispute Resolution/Arbitration 23.1 Any dispute between the parties would be referred to persons at the higher levels in the respective organizations and if the dispute is still not resolved, the same shall be referred to arbitration and the provisions of the Arbitration & Conciliation Act, 1996 shall apply. However, the parties are also free to approach Court for settlement of disputes in the court having Mumbai jurisdiction.
4. The Section 9 Petition made claims both in respect by the FLCs covered by an arbitration agreement and the wooden pallets under the 2016 LoI (which did not have an arbitration clause). Importantly, the prayers in the Section 9 petition were only under the 2017 Agreement. The body of the Petition had a narrative about the 2016 LoI, and said that it required a formal agreement. Then it said that pursuant to the LoI, the parties entered into the 2017 Agreement. The Petition did not say that the 2017 Agreement was in completion of the 'formal agreement' requirement of the 2016 LoI, or that the 2016 LoI had been subsumed and stood covered by the 2017 Agreement.
5. On 9th August 2021, LEAP moved its Section 9 Petition. Mr Panicker appeared for TCI and relayed his instructions that the Pallets did belong to LEAP, but had been returned and were not in TCI's custody. He sought time to file an Affidavit saying so.
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6. While the matter was then adjourned to 23rd August 2021, the Court granted an ad-interim injunctive relief in the usual form from creating third party rights etc in respect of the pallets described in Exhibit "B" to the Petition. Exhibit "B" to the Section 9 Petition has a long list of items. The wooden pallets form part of it.
7. On 26th October 2021 the parties were before the learned Single Judge. A copy of this order is from pages 313 to 317. The order reads:
"1. The above Arbitration Petition has been filed under Section 9 of the Arbitration and Conciliation Act, 1996 ("Act"), seeking certain reliefs. I must mention that ad- interim relief is already granted in favour of the Petitioner, vide order dated 9 August 2021.
2. Today when the matter called out, the parties agreed that disputes have arisen between them under an Agreement for Hire of packaging product and supply services dated 26 October 2017 (for short "said Agreement"). The arbitration agreement between the parties can be found at Clause 23 of the said Agreement, which reads thus:-
"23. Dispute Resolution/Arbitration: 23.1 Any dispute between the parties would be referred to persons at the higher level in the respective Organizations and if the dispute is still not resolved, the same shall be referred to arbitration and the provisions of the Arbitration and Conciliation Act, 1996 shall apply. However, the parties are also free to approach Court for settlement of disputes in the court having Mumbai Jurisdiction."Page 4 of 17
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3. The above clause contemplates that the disputes between the parties are required to be referred to persons at higher levels in the respective Organizations before the disputes can be referred to an arbitration. It is, in these circumstances, that the parties have agreed to adopt this course of action, before going to arbitration. For this purpose, and to see if the disputes can be amicably resolved, the Petitioner nominates and appoints Mr. Sujit Cherian (Strategic Coach) and Mr. Samit Sinha (Collections Head) as the representatives of the Petitioner and Respondents nominate and appoint Mr. Rajesh Agarwal (AVP) and Mr. Prashant Nayak (DGM) as is its representatives.
4. Both parties have agreed that in the event the disputes are not resolved amicably on or before 30 November 2021, then in that event, the parties have agreed to refer their disputes and differences to arbitration as contemplated under Clause 23 reproduced earlier. The parties have further agreed that to decide the aforesaid disputes, Mr. Farhan Dubash, an advocate of this court, be appointed as a Sole Arbitrator to adjudicate the disputes and differences between the Petitioner and the Respondents, arising out of the said Agreement dated 26 October 2017.
5. It is accordingly ordered that in the event, the disputes between the parties are not amicably resolved by 30 November 2021, then the disputes shall be resolved through the process of arbitration. For the purposes of arbitration, the following order is passed :
(a) By consent of the parties, Mr. Farhan Dubash, an advocate of this Court, is hereby appointed as a Sole Arbitrator to decide the disputes and differences between the Petitioner and the Respondents arising out of and/or in connection with and/or in relation to the said Agreement dated 26 October 2017;Page 5 of 17
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(b) A copy of this order will be communicated to the learned Sole Arbitrator by the advocates for the Petitioner within a period of one week from today;
(c) The learned Sole Arbitrator is requested to forward his Statement of Disclosure under Section 11(8) read with Section 12(1) of the Act to the advocates for the Petitioner, so as to enable them to file the same in the Registry of this Court. The Registry of this Court shall retain the said Statement on the file of this application and a copy of the same shall be furnished by the advocates for the Petitioner to the advocates for the Respondents;
(d) The parties have agreed that the above Section 9 petition shall be converted into an application under Section 17 of the Act, which shall be heard and disposed of by the Arbitral Tribunal. All affidavits filed in the Section 9 petition shall be treated as affidavits filed in the converted Section 17 application. If the parties seek to file any further affidavit/s and/or document/s, they may do so, but only with leave of the Arbitral Tribunal. It is further agreed that pending the disposal of the converted Section 17 application, the ad-interim order granted by this court on 9 August 2021 shall continue;
(e) The parties shall appear before the learned Sole Arbitrator on such date and at such place as he nominates to obtain appropriate directions with regard to fixing a schedule for completing pleadings etc. The Arbitral Tribunal shall give all further directions with reference to the arbitration and also as to how it is to proceed; (f ) Contact and communication particulars shall be provided by both sides to the learned Sole Arbitrator within a period of one week from today. This information shall include a valid and functional email address as well as mobile numbers of the respective advocates;
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(g) The parties agree that all arbitral costs and the fees of the Arbitrator will be borne by the two sides equally and will be subject to the final Award that may be passed by the Tribunal;
(h) The parties immediately consent to a further extension of six months to complete the arbitration should the learned Sole Arbitrator find it necessary; (I) The parties have agreed that the venue and seat of the arbitration will be in Mumbai.
5. All the rights and contentions of the parties are expressly kept open, to be adjudicated before the Tribunal, except as regards the existence and validity of the arbitration agreement. To be fair to the parties, neither party disputed the existence and validity of the arbitration agreement.
6. The above Section 9 petition is disposed of in the aforesaid terms. However, there shall be no order as to costs.
7. All parties to act on an authenticated copy of this order digitally signed by the Personal Assistant/Private Secretary/Associate of this Court.
8. Two aspects must be noted. First, there is no mention in this order of the 2016 LoI. The only reference in the order, and more than once, is to the 26th October 2017 Agreement.
9. Before this Advocates for the parties had signed Consent Minutes of the order. These are at pages 311 to 312 and they read thus:
CONSENT MINUTES OF ORDER Page 7 of 17 26th July 2022 7-IAL-22227-2022-COMAPL-22036-2022.DOC
1. The parties agree and confirm that a dispute has arisen under Agreement for Hire of packaging product and supply of services dated 26th October 2017 ("Said Agreement") and Clause 23 therein provides for the resolution thereof. The said clause 23 reads as under:
"23. Dispute Resolution/Arbitration: 23.1 Any dispute between the parties would be referred to persons at the higher level in the respective Organizations and if the dispute is still not resolved, the same shall be referred to arbitration and the provisions of the Arbitration and Conciliation Act, 1996 shall apply. However, the parties are also free to approach Court for settlement of disputes in the court having Mumbai Jurisdiction."
2. The Parties agree that in terms of Clause 23.1 of the said Agreement, disputes are required to referred to persons at higher levels in the respective organizations of the parties for an amicable resolution. Without prejudice to the contentions of both parties, the Petitioner hereby nominates and appoints Mr Sujit Cherian, (Strategic Coach) and Mr Samit Sinha (Collections Head) as the representatives of the Petitioner and the Respondent hereby nominates and appoints Mr Prashant Nayak (Deputy General Manager) and Mr Rajesh Agarwal (Assistant Vice President) as its representative to attempt to amicably resolve the disputes.
3. It is agreed that in the event the disputes are not resolved through the higher level representatives in the respective organizations of the parties on or before 30th November 2021, then in that event, the matter shall stand referred to Arbitration. Mr Farhan Dubash, is accordingly appointed as the Sole Arbitrator to adjudicate and decide upon the disputes and differences between the parties under the said Agreement.
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4. All the contentions of both the parties are specifically kept open to be resolved either through the said higher levels representatives of both the parties or through arbitration as stated above.
5. It is agreed that the present Petition under Section 9 of the Arbitration & Conciliation Act, 1996 will be treated, heard and disposed off as an application under Section 17 of the Act. All the affidavits filed in the Section 9 Petition will be treated as affidavits filed in the Section 17 application. Liberty to apply to the Learned Sole Arbitrator for leave to file further affidavit."
10. In arbitration, TCI contended that the wooden pallets covered by the 2016 LoI were not the subject matter of the 2017 Agreement and disputes between the parties under the 2016 LoI had never been referred to arbitration.
11. LEAP came back to the learned Single Judge with the Interim Application (L) No. 14998 of 2022 on which the learned Single Judge made the order assailed before us.
12. Mr Jagtiani raised a threshold objection that the Appeal is not maintainable in view of the restricted provisions of Section 13 of the Commercial Courts Act read with equally restricted provisions of the Section 37 of the Arbitration Act. The impugned order, he submits is not one that by itself grants or refuses relief under Section 9.
13. He relies on the decision of a Division Bench of this Court in Shailendra Bhadauria & Ors v Matrix Partners India Investment Page 9 of 17 26th July 2022 7-IAL-22227-2022-COMAPL-22036-2022.DOC Holdings LLC & Ors.1 The Division Bench held that the Appeals before it were not maintainable inter alia relying on the decisions of the Supreme Court in Fuerst Day Lawson Limited v Jindal Exports Limited2 and the decision of the Supreme Court in Kandia Export Corporation v OCI Corporation.3
14. We do not think this will be of much assistance to the Respondents before us. The reason is that the 26th October 2021 order, although it appointed an arbitrator, was not an order under Section 11 at all but was clearly an order made on a Section 9 Petition. It said in paragraph 5 that if parties did not resolve their disputes by a certain date then arbitration would commence. It also continued the ad-interim protection and referred the Section 9 Petition to arbitration. Those orders could only have been made under Section 9 and never under Section 11. The impugned order is only a clarification of the previous order of 26th October 2021. It is actually no different from a situation where a clarification is sought minutes after the order was pronounced and is included almost as a post script at the end of a principal order. Such an objection could not have been taken in that situation. It cannot be taken now.
15. The more substantive argument before us relates to whether there could have been a reference of the disputes under the 2016 LoI to arbitration at all.
1 2018 SCC OnLine Bom 13804.
2 (2011) 8 SCC 333.
3 (2018) 14 SCC 715.
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16. Dr Chandrachud is, we believe, correct in saying that absent an express written consent of the parties, no such reference to arbitration was possible. Such a reference in a distinct contract which does not have an arbitration agreement can not be swept into arbitration by implication, even necessary implication. It makes no difference that the Petition included claims under the 2016 LoI. As we have seen, the entire Petition seeks reliefs only under the 2017 Agreement. It does not say that the 2016 LoI is subsumed in the 2017 Agreement. There is no assertion of any situation along the lines found in Chloro Control (I) Pvt Ltd v Severn Trent Water Purifications Inc & Ors4 where one agreement is a master, mother or controlling Agreement. These are two separate contracts though between the same parties. They relate to different goods.
17. Section 7 of the Arbitration Act reads thus:
7. Arbitration agreement.--
(1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in--
(a) a document signed by the parties;
4 (2013) 1 SCC 641.
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(b) an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
18. There is simply no arbitration agreement in regard to the 2016 Pallets Agreement.
19. In the impugned order the learned Single Judge accepted the contentions made by LEAP and concluded that even in the Affidavit in Reply to the Section 9 Petition, TCI did not contend that the wooden pallets were the subject matter of an agreement without an arbitration clause and could not be referred to arbitration. With great respect to the learned single Judge, we believe this was an error. It was for LEAP, the Section 9 Petitioner, to show clearly that the wooden pallets would be covered by 2017 Agreement and therefore by its arbitration clause. There is no such clear averment in the Section 9 petition. Merely asserting that the parties entered into the 2017 Agreement 'pursuant' to the 2017 Pallets LoI is insufficient. The necessary averment would have had to have been that the 2016 LoI was substituted by or merged into the 2017 Agreement and not just "pursuant to it". It would also have to be Page 12 of 17 26th July 2022 7-IAL-22227-2022-COMAPL-22036-2022.DOC shown that if the 2017 Agreement was "pursuant" to the 2016 LoI then the wooden pallets also formed part of the 2017 Agreement and that the parties carried on business regarding the wooden pallets on the terms and conditions set out not in the 2016 LoI but those in the 2017 Agreement. The words "pursuant to it" might have been loosely used to only mean "afterwards".
20. With respect, we are not convinced that, in the clarificatory order under challenge, the learned Single Judge could have concluded that the two contracts are intrinsically interconnected. That was for the Petitioner to demonstrate in the arbitration petition itself, and that had to be done by something more than merely making a claim. Otherwise, the disputes under the 2016 LoI could not have been referred to arbitration.
21. The stand taken by LEAP appears to us to be an exceedingly dangerous one and contrary to something fundamental to arbitration law. Parties must be shown to be ad idem including most importantly in consenting to arbitration as a dispute resolution mechanism and thereafter in the choice of the arbitrator or in the mechanism agreed for appointing an arbitrator. The arbitrator himself is a creature of the agreement or the contract and therefore there has to be a consensus. This consent cannot, we believe, especially in view of Section 7, be arrived at by necessary implication or inference or on the basis of a non-traverse. Indeed in a situation like this what was required was a detailed pleading by LEAP, seeking Section 9 relief, to show that there now existed between the parties only the 2017 Agreement and that the 2016 LoI Page 13 of 17 26th July 2022 7-IAL-22227-2022-COMAPL-22036-2022.DOC was either worked out with no claim remaining (which was not the case), or that it was fully encompassed by the 2017 Agreement. There was no such pleading. A respondent cannot be expected to traverse a pleading not made.
22. The logic adopted by LEAP seems to be this: it says there was a 2016 LoI and then a 2017 Agreement. It does not show that the pallets are part of the 2017 Agreement. But it claims interim relief for both classes of goods. It seek no relief under the 2016 LoI -- and could not, because there is simply no arbitration agreement at all. Nobody refers to the 2016 LoI thereafter. Thus, without an essential pleading that an LoI without an arbitration clause is now subsumed and merged in an agreement with an arbitration clause, disputes under the 2016 LoI are sought to be taken to arbitration. The ad- interim order makes no difference in view of the statement made by TCI, that it had no pallets with it. The injunction was only against creating third party rights regarding those pallets.
23. We do not believe the reference to the Supreme Court decision in Ameet Lalchand Shah & Os v Rishabh Enterprises & Anr 5 was apposite. There it was specifically found that other agreement were ancillary or integrally connected. This had to be pleaded in the present Section 9 petition and clearly shown. That was not done. The parties may had business relations, but that is not enough. The present case is clearly on a distinct footing. A copy of the 2016 LoI is at page 89. It only refers to pallets and nothing else. It covers the supply of 1200*1000N, 1200*1000BN and 1200*1000E Pallets and 5 (2018) 15 SCC 678.
Page 14 of 1726th July 2022 7-IAL-22227-2022-COMAPL-22036-2022.DOC nothing else. All have agreed that the LoI covered wooden pallets. It is said to be a pallet pooling agreement. At the end (page 91), the 2016 LoI says that it is a legally binding agreement between both the parties and will be governed by the laws of India. All disputes are to be within the jurisdiction of courts in Gurugram. There is no mention of arbitration. It also says that a formal agreement is required within one year (which is the term of the LoI) and, if not done, the LoI ends and all pallets must be returned -- precisely what Mr Panicker told the Court had been done. The 2017 Agreement (copy at page 95) is for 'Hire of Packaging Products and Supply of Services'. It does not reference the 2016 LoI at all. It has two annexures. The first (pages 104-105) deals with products covered by the 2017 Agreement and the second (page 106) with the charges. The products covered by the 2017 Agreement are described in a table at paragraph 8 of Annexure 1 at page 105. There is no mention here of wooden pallets at all. The products covered are only Folding Large Containers including plastic pallets, sidewalls and top lids. LEAP's Section 9 petition covered everything, wooden pallets, FLCs and more. But the Petition does not explain how, despite the specific details in paragraph 8 of Annexure 1 to the 2017 Agreement, other products, including the wooden pallets from the 2016 LoI, were also included in the 2017 Agreement. If they had been included, the 2017 Agreement would have said so.
24. In the previous order of 26th October 2021 also there is no reference whatsoever to the 2016 LoI. More importantly, there is no mention that parties had agreed that their disputes regarding the 2016 LoI were agreed to be referred to arbitration. Merely because the Section 9 Petition dragged into its ambit all manner of claims Page 15 of 17 26th July 2022 7-IAL-22227-2022-COMAPL-22036-2022.DOC whether covered by the 2017 Agreement or outside it and the Petition was sent to the arbitrator could not mean that disputes that fell outside the arbitration agreement of the 2017 Agreement would be covered. That could only happen with express consent of both sides. Otherwise it meant only this: that those disputes relating to the products covered by 2017 Agreement would be sent to arbitration and the Section 9 Petition would be referred to arbitration to that extent. We do not think it is open to a Petitioner to bring into a Section 9 Petition dispute matters that are outside the contract and then claim that these are validly subjected to arbitration because the Section 9 Petition itself is to ordered to be dealt with by the arbitrator as an application for interim relief under Section 17.
25. We believe the impugned order to be erroneous. We do not see how by the impugned order the Court could have attributed to TCI a consent it did not give and a willingness it did not show.
26. The Appeal succeeds. The impugned order of 23rd June 2022 is set aside.
27. The arbitration will continue only in respect of the 2017 Agreement and the products that are the subject matter of that Agreement. If there is a governing protective order it will be to the extent of the products covered by the 2017 Agreement.
28. No costs.
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29. The pending Interim Application does not survive and dispose of as infructuous.
(Gauri Godse, J) (G. S. Patel, J)
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