Delhi High Court
Maruti Udyog Limited vs Mahalaxmi Motors Ltd. And Anr. on 5 December, 2001
Equivalent citations: 95(2002)DLT290, 2002(61)DRJ398
Author: J.D. Kapoor
Bench: J.D. Kapoor
JUDGMENT J.D. Kapoor, J.
1. Admittedly the suit for recovery has been confined to the admitted liability of Rs. 7.63 crores. The documents referred to and relied upon by the plaintiff in this regard are as follows:-
(i) Letter dated 5th April, 1997 by defendant No. 1. The relevant para of the same is as under:-
"As per the details given above, the shortfall in my vehicle purchase accounts with Maruti Udyog Limited totals to Rs. 763.22 lacs as of close of 31.03.1997. As per my earlier communication, I propose to make good the above shortfall with the following schedule:
By 10.04.97 : Rs. 50.00 lacs By 25.04.97 : Rs. 100.00 lacs By 25.05.97 : Rs. 200.00 lacs By 25.05.97 : Rs. 213.22 lacs
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Rs. 763.22
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(ii) Minutes of the meeting dated 5th April, 1997 between plaintiff and defendant. Relevant portion of the same is reproduced as below:-
"MML also provided a letter No. 021/MML/97 dated 5.4.1997 wherein they admitted that there was a shortfall of Rs. 7.63 cr."
(iii) Affidavit filed by Shri M.C. Mehta as a Managing Director of the defendant company before Andhra Pradesh High Court in CW No. 947/98. The relevant part of the affidavit is as under:-
"In this instance also the petitioner company had on its own given the particulars of the amounts due from it to the compliant company by its letter dated 5th April, 1997 wherein it accepted a liability of Rs. 763.22 lakhs and also gave the repayment schedule. Prior to that it gave a list of all the pending customers at Hyderabad and Vijaywade. In fact vehicles have been delivered to meet of these in the said list, and deliveries are still on to the remaining persons. The complainant company had been delivering these vehicles through other dealers as with the advent of this dispute with the petitioner company it terminated its dealership."
"It is respectfully submitted that after the petitioner company gave the said undertaking to pay off the due about Rs. 763.22 lakhs, there has been a change in thinking in the concerned officials of the complainant company had they started making exaggerated claims over the above the amounts actually due to it from customer bookings. As far as the petitioner company is concerned it also made funds available to honour its commitment to the complaint company and took a draft for the said amount in May 1997 itself which is to the knowledge of the complainant company."
2. The defendants have resorted to the arbitration clause of the dealership agreement between the parties. Admittedly there is no dispute that dealership agreement contains an arbitration clause in the form of clause 57 which is to the following effect:
"If any difference or dispute, except a dispute pertaining to Termination, shall arise between the parties hereto as to the construction or true intent and meaning of any of the terms and conditions herein contained or as to any payment to be made in pursuance hereof or as to any other matter arising out of or connected with or incidental to those presents or as to the rights, duties and obligation of either party, such difference or dispute whenever and so often as the same shall arise, shall be referred to the Indian Council of Arbitration, New Delhi under their rules for the time being in force and the award in pursuance thereof shall be binding on the parties."
3. It is settled law that the arbitration clause can be invoked only when there are differences and disputes with regard to certain payments or breach of obligations of the respective parties of the terms of the agreement. However wherever there is an admitted liability, the arbitration clause cannot be invoked. The very connotation "admitted liability" suggests that there are no disputes or differences with regard to the said admitted liability.
4. The extracts of the letter dated 5th April, 1997, the minutes of the meeting and the affidavit filed by Mr.M.C. Mehta in his capacity as Managing Director of the defendant No. 1 company leave no manner of doubt that not only the defendant No. 1 had accepted the liability of 7.63 crores towards the plaintiff but also undertook to discharge the liability by making the payment through Installments.
5. What is material for the purpose of Section 8 of the Arbitration Act is that there should be existence of difference or disputes with regard to a particular liability arising out of the terms of the agreement. If the liability is acknowledged and admitted it does not come within the meaning and ambit of disputes and differences.
6. In view of the foregoing reasons the application under Section 8(1) of the Arbitration and Conciliation Act, 1996 cannot be allowed as arbitration clause is not invokable in respect of admitted liability.
7. The application is hereby dismissed.
Section 2477/19988. List on 14th March, 2002.