Madras High Court
M/S.Choice Trading Corporation ... vs M/S.S.P.Enterprises on 13 September, 2023
Author: Abdul Quddhose
Bench: Abdul Quddhose
Arb.OP.(comdiv) No.334 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 13.09.2023
CORAM
THE HONOURABLE MR.JUSTICE ABDUL QUDDHOSE
Arb.O.P.(Com.Div.) No.334 of 2023
M/s.Choice Trading Corporation Private Limited,
302, Third floor, Akshaya Shanthi, Anna Salai,
Chennai, Tamil Nadu – 600002.
Rep. By its Authorised Signatory Mr.Thomas Jose .. Petitioner
-vs-
1.M/s.S.P.Enterprises,
A partnership firm,
having office at Flat No.B4,
Sri Sai Residency,
Gomathy Nagar, Mini Bye Pass Road,
Nellore, Andhra Pradesh – 524 003.
2.Mr.Sabila Prasad Reddy,
Managing Partner M/s.S.P.Enterprises .. Respondents
Petition under Section 34 of the Arbitration and Conciliation Act,
1996, has been filed seeking to set aside the arbitral award dated 06.12.2022
bearing A.F.No.187 passed by the Sole Arbitrator/Justice K.N.Basha in its
entirety.
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https://www.mhc.tn.gov.in/judis
Arb.OP.(comdiv) No.334 of 2023
For Petitioner : Mr.T.M.Mano
For Respondents : Ms.Hema Srinivasan
ORDER
This petition has been filed under Section 34 of the Arbitration and Conciliation Act, 1996 (in short “the Act”) challenging the impugned arbitral award dated 06.12.2022 passed by the Sole Arbitrator.
2. There is a dispute between the petitioner and the respondents arising out of a Joint Farming Agreement (in short “JFA”) dated 03.12.2012. Under the JFA, the respondents had to supply shrimp cultivated by them to the petitioner for export purposes. The petitioner had sent a communication on 22.08.2013 to the respondents expressing its interest and consent for mutual termination of the JFA dated 03.12.2012 with immediate effect. Thereafter, the petitioner sent a letter dated 22.12.2015 to the respondents stating that all attempts of resolving the dispute have failed and they have informed the exact amount of money owed by the respondents to the petitioner at Rs.5,11,77,252/-. A reply dated 2/14 https://www.mhc.tn.gov.in/judis Arb.OP.(comdiv) No.334 of 2023 03.09.2016 was also sent by the respondents denying the allegations of the petitioner and they have also stated that the petitioner has terminated the contract unilaterally. The petitioner has invoked arbitration in accordance with the arbitration clause by sending a notice to the respondents on 09.11.2016. Thereafter, since there was no consensus between the parties, this Court had appointed the sole arbitrator to adjudicate the dispute under Section 11 of the Act. The sole arbitrator acted upon the reference and passed the impugned arbitral award dated 06.12.2022 rejecting the claim of the petitioner on the ground of limitation. Aggrieved by the same, this petition has been filed under Section 34 of the Act.
3. The following are the undisputed facts:-
(a) A letter of termination dated 22.08.2013 was issued by the petitioner to the respondents expressing its interest and consent for mutual termination of the JFA dated 03.12.2012 with immediate effect. In the same letter, the petitioner has also intimated the respondents that in respect of the settlement of accounts, they would be pleased to discuss the same with the respondents and arrive at an amicable settlement at the earliest.3/14
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(b) The petitioner, after more than 2 years from the date of letter of termination to the respondents, sent another letter dated 22.12.2015 stating that all attempts of resolving the dispute have failed and they have informed the exact amount of money owed by the respondents to the petitioner at Rs.5,11,77,252/-.
(c) A reply dated 03.09.2016 was sent by the respondents denying the allegations of the petitioner and they have stated that the petitioner has terminated the agreement unilaterally on 22.08.2013.
(d) The petitioner has invoked arbitration in accordance with the arbitration clause contained in the JFA dated 03.12.2012 only by its letter dated 09.11.2016, which is beyond the period of 3 years from the letter of termination issued by the petitioner, which is dated 22.08.2013.
(e) The Arbitration invocation letter dated 09.11.2016 sent by the petitioner was received by the respondents on 23.12.2016.
4. The learned counsel for the petitioner drew the attention of this Court to the arbitration clause contained in the JFA dated 03.12.2012 and would submit that only after the petitioner notifies the respondents of the 4/14 https://www.mhc.tn.gov.in/judis Arb.OP.(comdiv) No.334 of 2023 amount payable by the respondents, the cause of action for the arbitral claim will arise. He would submit that since the notification as per Clause 6.2 of the JFA dated 03.12.2012 was made by the petitioner only on 22.12.2015, the arbitration invocation notice sent by the petitioner on 09.11.2016 is well within the period of limitation.
5. He also drew the attention of this Court to the impugned arbitral award and would submit that the arbitrator has ignored the fact that the petitioner had notified the claim amount to the respondents only on 22.12.2015 and therefore, the arbitrator ought to have held that the claim is well within the period of limitation, as the arbitration invocation notice was sent as early as on 09.11.2016. He would also further submit that between 22.08.2013, the date of letter of termination, and 22.12.2015, the date of intimating the quantum of claim to the respondents, there was settlement talks going on between the parties and only after the settlement talks failed, the petitioner was constrained to send a letter to the respondents on 22.12.2015 intimating the quantum of claim. He, therefore, submits that the cause of action for initiating the arbitration is different from the cause of 5/14 https://www.mhc.tn.gov.in/judis Arb.OP.(comdiv) No.334 of 2023 action for the dispute. But, according to him, the said fact was not considered by the arbitrator.
6. On the other hand, the learned counsel for the respondents would submit that the arbitrator was correct in holding that the claim is barred by limitation. She would also contend that having terminated the contract on 22.08.2013 itself, the initiation of arbitration by the petitioner by its arbitration invocation notice dated 09.11.2016 is barred by limitation. She would also submit that even assuming that settlement talks were going on between the parties, that will not extend the period of limitation.
7. In support of her contentions, she would also rely upon Section 77 of the Act and she would submit that Section 77 is also not mandatory, but is only directory in nature. She would also rely upon the order passed by this Court in the case of M.Rajkumar Vs. The Superintending Engineer (NH) and others [MANU/TN/3851/2023]. Further, she would also submit that Clause 6.2 of the JFA dated 03.12.2012, which deals with the notification of the dispute, is not mandatory. According to her, the parties 6/14 https://www.mhc.tn.gov.in/judis Arb.OP.(comdiv) No.334 of 2023 shall only endeavor to settle the dispute amicably and therefore, it is not mandatory in nature. She also drew the attention of this Court to the impugned arbitral award and would submit that being a well considered award with regard to limitation issue, the scope for interference by this Court under Section 34 of the Act is not possible.
DISCUSSION
8. Admittedly, the petitioner had sent a letter of termination dated 22.08.2013 to the respondents, under which, they have expressed their interest and consent for mutual termination of JFA dated 03.12.2012 with immediate effect. In the very same letter, they have also stated that with respect to the settlement of accounts, they would be pleased to discuss the same and arrive at an amicable settlement at the earliest. As seen from the aforementioned letter of termination, it is clear that the contract, namely, JFA dated 03.12.2012, has been terminated with immediate effect i.e. from 22.08.2013 itself. Therefore, there has arisen a dispute between the parties on 22.08.2013 itself and the cause of action for the said dispute also arose from the said date. The petitioner has thereafter communicated to the 7/14 https://www.mhc.tn.gov.in/judis Arb.OP.(comdiv) No.334 of 2023 respondents only on 22.12.2015. In the said communication, the petitioner has stated that all attempts of resolving the dispute have failed and they have notified the exact amount of money owed by the respondents to the petitioner at Rs.5,11,77,252/-. A reply has also been sent by the respondents to the said letter on 03.09.2016 denying all the allegations contained in the letter of the petitioner dated 22.12.2015 and they have also stated that the petitioner has unilaterally terminated the agreement on 22.08.2013.
9. The arbitrator, under the impugned arbitral award, has also observed that there has been an inordinate delay in notifying the claim amount by the petitioner to the respondents. The arbitration clause was invoked by the petitioner only through its arbitration invocation notice dated 09.11.2016, which is beyond the period of 3 years from the date of termination of the contract, which is on 22.08.2013.
10. Even though the petitioner may claim that only due to the 8/14 https://www.mhc.tn.gov.in/judis Arb.OP.(comdiv) No.334 of 2023 settlement talks between parties between 22.08.2013, the date of letter of termination, and 22.12.2015, the date of notifying the claim amount to the respondents, the petitioner did not initiate arbitration, this Court is of the considered view that when there is no admission of liability by the respondents, the question of extending the period of limitation will not arise. Clauses 6.1, 6.2 and relevant portion of 6.3 of JFA dated 03.12.2012, which the petitioner relies upon for the purpose of saving limitation, read as follows:-
“6. Resolution of Disputes:
6.1. No proceedings Any disputes between the parties shall be settled in the manner as provided for under this Clause 6 (except interim proceedings seeking interlocutory relief).
6.2. Notification of Dispute Upon failure of the parties to resolve the disputes amicably, a party claiming that a dispute has arisen shall notify the other party to the dispute giving details of the dispute and the parties shall endeavor to settle the dispute amicably, failing which, arbitration in accordance 9/14 https://www.mhc.tn.gov.in/judis Arb.OP.(comdiv) No.334 of 2023 with Clause 6.3 below shall be conducted.
6.3. Arbitration Clause
a) Subject to Clause 6.1 and 6.2 above, the parties shall be entitled to refer the dispute to binding arbitration under the Arbitration and Conciliation Act, 1996.”
11. As seen from the aforementioned clauses, it only states that a party claiming that a dispute has arisen shall notify the other party to the dispute giving details of the dispute and the parties shall endeavor to settle the dispute amicably, failing which, arbitration in accordance with clause 6.3 shall be conducted. It does not stipulate that the cause of action for the claim arises only from the date of notification of the dispute by the petitioner to the respondents.
12. Admittedly, a dispute has arisen between the parties on 22.08.2013 itself. When the petitioner had expressed its interest and consent for mutual termination of the JFA dated 03.12.2012 with immediate effect, the petitioner ought to have initiated arbitration in accordance with 10/14 https://www.mhc.tn.gov.in/judis Arb.OP.(comdiv) No.334 of 2023 the arbitration clause contained in the JFA dated 03.12.2012 within the period of 3 years from 22.08.2013. However, the petitioner has invoked arbitration in accordance with the arbitration clause only on 09.11.2016 by issuing a notice to the respondents as per the provisions of Section 21 of the Act, which is beyond the period of 3 years from 22.08.2013. There is no acknowledgment of liability made by the respondents in the arbitration. All along, the respondents have only disputed the claim of the petitioner as seen from the documentary evidence available on record before the arbitrator. The arbitrator has framed several issues and one of the issues framed by him was with regard to plea of limitation. The arbitrator has also rightly held that the claim is barred by limitation due to the aforementioned reasons.
13. Even assuming that the conciliation talks were held between the parties to resolve the dispute amicably, it does not prevent the petitioner to initiate arbitration to save limitation. This Court in a decision relied upon by the learned counsel for the respondents in the case of M.Rajkumar's (cited supra) has also held that the provision of Section 77 of the Act is not mandatory, but is only directory. Section 77 of the Act reads as follows:- 11/14
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14. Therefore, it is clear that the settlement talks between the parties will not extend the period of limitation, unless and until there is an admission of liability by the respondents to the claim made by the petitioner. Since there is no admission of liability on behalf of the respondents, after 22.08.2013, the date on which the petitioner had terminated the contract, and the petitioner having initiated the arbitration only on 09.11.2016, the claim of the petitioner before the arbitrator is barred by limitation. The learned arbitrator has rightly held that the claim is barred by limitation. 12/14 https://www.mhc.tn.gov.in/judis Arb.OP.(comdiv) No.334 of 2023
15. There is no patent illegality committed by the arbitrator and the award is not opposed to public policy. Only based on evidence available on record, the Arbitrator has rightly held the claim to be barred by limitation.
16. For the foregoing reasons, there is no merit in this petition and accordingly, it is dismissed. No Costs.
13.09.2023 rkm Index:yes/no Neutral citation: yes/no Speaking/non-speaking 13/14 https://www.mhc.tn.gov.in/judis Arb.OP.(comdiv) No.334 of 2023 ABDUL QUDDHOSE, J.
rkm Arb.O.P.(Comm.Div.) No.334 of 2023 11.09.2023 14/14 https://www.mhc.tn.gov.in/judis