Madhya Pradesh High Court
M/S R.K. Centre A Proprietorship ... vs Innovative Ideals And Services (India) ... on 29 January, 2025
Author: Milind Ramesh Phadke
Bench: Milind Ramesh Phadke
1
IN THE HIGH COURT OF MADHYA PRADESH
AT G WA L I O R
BEFORE
HON'BLE SHRI JUSTICE MILIND RAMESH PHADKE
ARBITRATION CASE No. 83 of 2023
M/S R.K. CENTRE A PROPRIETORSHIP CONCERN ACTING
THROUGH ITS PROPRITOR MR RAJESH GUPTA
Versus
INNOVATIVE IDEALS AND SERVICES (INDIA) LIMITED
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Appearance:
Shri Praveen Surange, learned counsel for the applicant.
None for the respondent.
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Reserved on : 07/01/2025
Delivered on : 29/01/2025
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This petition having been heard and reserved for orders,
comiing on for pronouncement this day, the Hon'ble Shri Justice
Milind Ramesh Phadke pronounced/passed the following:
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ORDER
The present application under Section 11(6) of Arbitration and Conciliation Act, 1996 has been filed before this Court for appointment of an Arbitrator in wake of the arbitration clause in the agreement dated 19.03.2019 executed between the parties, wherein it is provided under clause 11 that on the event of disagreement or dispute between the Agent and the Company, in connection with this agreement or its execution, the same will be settled in an amicable 2 manner and if no settlement could be reached within 30 days, the same shall be referred to the sole Arbitrator who shall be appointed by both "Company" and "Agent" in accordance with the Arbitration and Conciliation Act, 1996 or any other statutory amendment thereof and the place of Arbitration shall be at Mumbai.
2. The aforesaid application has been preferred before this Court in the light of clause 12 of the agreement, wherein it is agreed between the parties that the Courts at Mumbai and Gwalior will have the exclusive jurisdiction in respect of the subject matter of the said agreement and since though a dispute/disagreement has arisen between the parties and even after service of legal notice dated 22.05.2023, which had been admitted by the other side vide its reply dated 19.06.2023 the dispute/disagreement has not been resolved, therefore, invoking clause 11 of the agreement the present application has been filed.
3. Short facts of the case are that the present applicant is a proprietorship concern having its principal office situated at Lashkar, Gwalior, Madhya Pradesh and non applicant is a limited company registered at Mumbai. The non applicant/company for establishing and expanding their business in Gwalior approached the applicant for appointing it as CNF Agent (Consignee and Forwarding Agent) for 3 stocking and dispatching to distributors the "Inoyo/Aaxxa/Ryte"
products, including Mobile Handset, LED TV, Smart Phones and other accessories and for the same the CNF Agent Agreement dated 19.03.2019 was signed and executed between them.
4. As per the terms and conditions of the said agreement, the non-applicant was to dispatch the goods on door delivery basis to the applicant at Gwalior for the purpose of clearing, storing, handling and forwarding on behalf of the non-applicant and to cover the average inventory to be maintained by the applicant, and as per clause 4 of the CNF Agreement, the applicant was required to deposit a sum of Rs.21,00,000/- (Rupees Twenty-One Lakhs) as refundable security deposit, which was duly deposited in the bank account of the non- applicant vide cheque no. 305 through RTGS for a sum of Rs.2,01,035.40/- (Two Lakhs One Thousand Thirty-Five and Forty Paisa) on 07.03.2019 and vide cheque no. 332 through RTGS for a sum of Rs.19,00,064.90/- (Rupees Nineteen Lakhs Sixty-Four and ninety paisa) on 08.04.2019.
5. As per clause 4 of the agreement, the non applicant was to provide a return on the investment made by the applicant in accordance with Annexure I of the CNF Agreement and as per Annexure I, the non applicant was liable to pay an interest @ 12% 4 P.A. (1% per month) on the refundable security deposit amount followed by commission @1.5% per month fixed for monthly turnover, 1% reimbursement of security deposit and commission @ 1% p.m. fixed for monthly turnover. The present applicant in accordance with the said clause, duly raised payout bills and upon failure of the non-applicant to render the payouts in the due contractual time, the applicant telephonically and vide emails dated 25.06.2019, 07.07.2019, 08.08.2019, 16.08.2019, 28.08.2019, 30.08.2019, 10.09.2019 and 13.09.2019 repeatedly requested for the payment of the contractually due payouts. However, the non-applicant did not clear any amount and astray the applicant by giving false hopes and timelines for clearing the payouts.
6. Since the non-applicant had failed to make payment even after several repeated requests the applicant vide email dated 20.09.2019, terminated the CNF Agreement and requested for the repayment of the Refundable Security Deposits and the pending payouts. Thereafter, the applicant had also sent a letter dated 26.09.2019 terminating the CNF Agreement, which was received by non-applicant on 30.09.2019.
7. Upon receipt of the email for termination of the CNF Agreement dated 20.09.2019, non-applicant sent a letter dated 5 24.09.2019 titled as "CNF Agreement Closure" wherein it was stated that due to the "current adverse market scenario," non-applicant is unable to continue sale services in the entire region including the area for which the applicant was appointed as CNF agent, thus terminated the CNF agreement with the effect from 30.09.2019. In the said closure notice dated 24.09.2019, non-applicant has assured to reimburse the payouts and return on investments at the earliest to the applicant. Even after the said assurance, the non-applicant failed to clear the pending payouts along with the refundable Security Deposits amounting to Rs.21,00,000/- (Rupees Twenty-One Lakhs Only).
8. On account of non-applicant's vague promises and deliberate failure to perform the contractual commitments, the applicant was left with no recourse but to avail the legal remedy and hence had sent a legal notice dated 15.11.2019, demanding the pending payouts and refundable security deposits along with interest. The non-applicant vide reply dated 09.12.2019 informed about the internal mismanagement in the non-applicant/company and further requested to give the stock statement. The applicant vide its reply dated 16.12.2019 provided the necessary information required by the non- applicant, but even after providing all the details and documents as demanded by the non-applicant, the non-applicant inspite of clearing 6 the pending payouts and refundable security deposit directed the applicant to sell the stock. During the dire times of COVID-19, with the proprietor of the applicant being hospitalized, the applicant begged the non-applicant to at-least clear the pending payouts, to which the non-applicant cleared only a meager sum of Rs. 2,00,000/- (Rupees Two Lakhs).
9. The applicant again requested the non-applicant for payment of the payouts and refundable security deposit amount to which no heed was paid and later when the applicant informed the non-applicant about availing the legal remedies, the non-applicant vide their email dated 12.03.2021 offered a One-Time settlement amounting to Rs.9,50,000/- (Rupees Nine Lakhs Fifty Thousand). The applicant considering the situation vide their email dated 21.03.2021 decided to bear the heavy loss and proposed the one-time settlement amount to be Rs. 11,00,000/- (Rupees Eleven Lakh only) with the specific precondition of depositing the entire amount in the bank account of the applicant on or before 31.03.2021, but the non-applicant again failed to adhere to the said time line of 31.03.2021. Instead, non-applicant vide email dated 14.04.2021 proposed another one Time Settlement amount of Rs. 9,00,000/- (Rupees Nine Lakhs only) to be paid in nine equal monthly installments, however, the non-applicant again failed to 7 honor the said commitment.
10. The applicant, vide their email dated 05.07.2021, fixed the payment schedule, the non-applicant, vide email dated 03.08.2021, replied and stated that the non-applicant shall pay committed one-time settlement amount in 38 installments of Rs.25,000/- (Rupees Twenty- Five Thousand) each. Disagreeing with the aforesaid proposal vide reply dated 05.08.2021 the applicant requested the non applicant to honor the payment schedule of 09 installments and cautioned that if this time the proposal is not honored, the One Time Settlement shall be treated as null and void and the original liability shall ispo facto prevail but the non applicant did not pay any heed to the aforesaid email.
11. The applicant again vide email dated 03.09.2022, strictly directed the non-applicant to repay the entire amount till 15.09.2022 and surprisingly, this time the non-applicant vide its email dated 09.09.2022 shifted the blame of non-compliance of the said agreement on the applicant, therefore, the present applicant sent a final legal notice dated 17.12.2022 claiming the entire amount of Rs. 26,93,518/- (Rupees Twenty-Six Lakhs Ninety- Three Thousand Five Hundred, Eighteen) to which the non-Applicant again paid no heed, thus, the applicant was left with no other choice but to invoke clause 11 of the 8 said CNF Agreement for referring the dispute to Arbitrator and for that a notice was sent on 22.05.2023 in accordance with provisions of Arbitration and Conciliation Act, 1996 for the appointment of the arbitrator to resolve the present dispute and proposed the name of Justice A.K. Shrivastava (Retired), Former Judge, High Court of M.P. as sole Arbitrator vide agreement dated 19.03.2019.
12. The non-applicant vide reply dated 19.06.2023 to the notice of arbitration dated 22.05.2023 denied the appointment of Arbitrator proposed by the applicant, though admitted all the facts regarding dispute and its resolution, thus, the applicant had preferred the present application.
ARGUMENTS
13. Learned counsel for the applicant had referred to clause 11 of the agreement dated 19.03.2019 and had submitted that since the non applicant has utterly failed to obey the obligations to release the security deposit to the applicant within 30 days of the notice period, after termination of the agreement, which was terminated on 20.09.2019 and letter dated 26.09.2019, as per clause 10(e) of the agreement and even after repeated requests, which time and again were accepted but was not refunded and also had failed to repay the payout bills, the applicant was constrained to invoke clause 11 of the 9 said agreement, which dealt with arbitration and provides that on an event of disagreement or dispute between the parties arising in the connection with the agreement or its execution and if the same is not settled in an amicable manner, the matter shall be referred to the sole Arbitrator of the choice of the parties in accordance with the Arbitration and Conciliation Act, 1996 and since admittedly the non applicant though had admitted the fact of deposit of refundable security deposit of Rs.25,00,000/- (Rupees Twenty Five Lacs only) and had also accepted that the payout bills for the month of July, August and September, 2019 had not been paid to the applicant, in its reply to the notice for appointment of the Arbitrator as well as in reply to the present application and had not denied the very execution of the agreement or the arbitration clause therein, the present application deserves to be allowed and an arbitrator is required to be appointed.
14. None for the respondents, even after service of notice.
15. After hearing the counsel for the applicant and perusing the record, this Court finds that one CNF Agent agreement dated 19.03.2019 had been entered into between the parties for stocking and dispatching to the distributors the "Inoyo/Aaxxa/Ryte" products, including Mobile Handset, LED TV, Smart Phones and other accessories of the non-applicant. In the said agreement under clause 10 10 upon happening of certain events, the said agreement could be terminated and as per clause 10(e) in the event of termination of the agreement the non applicant was mandatorily required to release the security deposit to the applicant after deducting any amount recoverable from the applicant within 45 days from the date of termination.
16. Further, as per clause 11 of the said agreement, on an event of any disagreement or dispute between the parties in connection with agreement of its execution, the matter was agreed to be settled in an amicable manner and if no settlement could be reached within 30 days, the same shall be referred to the sole Arbitrator, appointed by the parties in accordance with the Arbitration and Conciliation Act, 1996.
17. In the reply though invocation of Arbitration under CNF agreement is stated/alleged to be falsely invoked but the factum of dispute which has been raised by the present applicant has been admitted. In paragraph 15 and 21, the date of termination of agreement of the CNF Agreement w.e.f. 30.09.2019 has been admitted and also had admitted that the applicant can recover the amount after selling the products, however the factum of non payment of the payout for the month of July, August and September, 2019, alongwith the refundable security deposit of Rs.21,01,000/- (Rupees Twenty One Lakhs One 11 Thousand Only) has been denied. For reference para 15 and 21 are quoted herein below:-
"15. With reference to Para no. 8 is partly correct, it is stated that Applicant had sent the letter dated 24'" September 2019, thereby terminating the CNF Agreement with effect from 30" September 2019. However, there was no assurance for any payments as wrongly claimed by Applicant it is true to suggest that Non- Applicant failed to make payment for the month of July, August and September2019, along with the refundable security deposit of Rs. 21,01,000/- (Rupees Twenty-One Lakhs One Thousand Only).
21. With reference to above contention of the Applicant, Non- Application says that, while the CNF agreement was terminated by the Applicant by its Notice dated26" September 2019 which was received on 30" September 2019. Thereafter, non-Applicant state that as his business suffered huge losses, which was very well known to Applicant, thereby agreed to accept "Inyo/Aaxxa/Ryte"
products which were available with non-applicant and agreed to sell the same to recover the amount paid under the CNF Agreement."
18. In the reply to the application the non applicant has also accepted the offers, which were made by it to the applicant.
19. Thus, when the non applicant itself had admitted receiving of all the notices of termination of CNF agreement and even admits about the matter being tried to be settled between them, but due to some constraints could not be settled, this Court finds that a disagreement/dispute exists between the parties and, therefore, this Court deems it fit to appoint an Arbitrator in wake of clause 11 of CNF Agreement dated 20.09.2019.
20. This Court, in the fitness of things, deems fit to appoint Shri Prashant Hiralal Chande, Advocate as Arbitrator in this case 12 (an Advocate on panel of Abritrators and Conciliators of High Court, Bombay vide Circular No.Rule/P-1615/Cir. No.16/2024), subject to declaration made under Section 12 of the Act 1996 (as amended) with respect to independence and impartiality of the arbitrator and the ability to devote sufficient time to complete the arbitration within the period specified under Section 29-A of the 1996 Act.
21. The arbitrator is at liberty to conduct the proceedings at a convenient venue as per the convenience of arbitrator and the parties. The arbitrator's fees will be paid as per the schedule of the Act 1996. Both the parties shall bear the cost of the arbitration equally.
22. Registry is directed to dispatch the copy of this order to Shri Prashant Hiralal Chande, Advocate for seeking consent at following address : 201, Camy House, 3 Dhus Wadi, Dhobi Talao, Marine Line East, Behind Our Lady of Dollours, Church, Mumbai, Maharashtra-400 002 (India).
23. List the case for consent of the said Arbitrator in the week commencing 17th February, 2025.
Certified copy as per rules.
(MILIND RAMESH PHADKE)
JUDGE
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Date: 2025.01.29 15:50:33 +05'30'