Calcutta High Court
Ruchi Soya Industries Limited vs Avr Storage Tank Terminal Pvt. Ltd. & Anr on 5 December, 2016
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
O-54
GA No. 2992 of 2016
GA No. 3079 of 2016
GA No. 3190 of 2016
CS No. 241 of 2016
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
RUCHI SOYA INDUSTRIES LIMITED
Versus
AVR STORAGE TANK TERMINAL PVT. LTD. & ANR.
BEFORE:
The Hon'ble JUSTICE SANJIB BANERJEE
Date : 5th December, 2016.
Appearance:
Mr. Kuljeet Rawat, Adv.
Mr. Anuj Singh, Adv.
Mr. S. E. Huda, Adv.
Mr. Ranjan Deb, Sr. Adv.
Mr. Rajarshi Dutta, Adv.
Mr. Ravi Asope, Adv.
Mr. P. K. Dutta, Sr. Adv.
The Court : There are four applications in all in the suit, three of them in the list and one due to appear next month.
The first of the applications, GA No.2992 of 2016, is by the plaintiff seeking an order in the nature of a mandatory injunction for 1000 MT crude degummed soyabean oil to be supplied to it by the defendants pursuant to an agreement of 2 August 3, 2016 against which a letter of credit was opened by the plaintiff and which was encashed by the second defendant seller. The second application, GA No.3079 of 2016, is by the plaintiff again for an order in the nature of attachment before judgment. The third application, GA No.3190 of 2016, is the second defendant's application under Section 8 of the Arbitration and Conciliation Act, 1996. The other application, GA No.3421 of 2016, which is treated as on the day's list by consent of the parties and dealt with herein, is by the first defendant for the rejection of the plaint or the effective dismissal of the suit against the first defendant for the plaint not disclosing any cause of action against such defendant.
The plaintiff claims that it entered into an agreement for purchase of 1000 MT crude degummed soyabean oil with the second defendant and opened a letter of credit of value of in excess of Rs.6.20 crore for such purpose. By or about August 29, 2016, the second defendant had encashed the letter of credit and received the payment thereunder, but failed to effect supply of the oil to the plaintiff. According to the plaintiff, the agreement between the plaintiff and the second defendant was that the supply would be effected by the first defendant on the instructions of the second defendant. However, the plaintiff has not been able to demonstrate any document or otherwise by which the first defendant can be shown to be a party to such arrangement or of the first defendant having agreed to honour any commitment for supply of oil that may have been made by the second defendant to the first defendant.
The plaintiff says that its repeated notices issued in the beginning of September, 2016 went unheeded before a reply was issued on or about September 12, 2016, wherein the second defendant claimed that a sum in excess of Rs.6.75 3 crore was due from the plaintiff to the second defendant in respect of one or more previous transactions. The essence of the second defendant's reply was that at the time that the agreement of August 3, 2016 was entered into between the plaintiff and the second defendant, the plaintiff had also promised to square up the other transactions under which a sum of about Rs.6.75 crore was due from the plaintiff to the second defendant. The second defendant has even asserted in the affidavits filed herein that the second defendant was under no obligation to release 1000 MT of oil to the plaintiff without first the sum of Rs.6.75 crore in respect of previous transactions being paid by the plaintiff.
As far as the first defendant's application is concerned, there appears to be substance therein that notwithstanding the averments in the plaint, the cause of action against the first defendant may be tenuous. It is evident that though the plaintiff has alleged that the first defendant was liable to make the supply of 1000 MT of oil on behalf of the second defendant, there is no evidence in support of such assertion. It cannot be clearly said that the plaint does not disclose any cause of action; but only that the allegations against the first defendant are not substantiated by any document emanating from the first defendant or the like.
On the basis of the statements contained in the plaint, the claim against the first defendant cannot be rejected out of hand; though, it must be said that it seems highly unlikely that the plaintiff may be able to establish anything against the first defendant. Accordingly, GA No.3421 of 2016 is disposed of by directing the plaintiff to furnish security to the tune of Rs.5 lakh with the Registrar, Original Side, for the plaintiff to be entitled to prosecute the suit any further against the first defendant. If the deposit is not made within the time as directed hereafter, the suit will stand dismissed for default as against the first defendant. 4
In the event no decree is passed individually against the first defendant, the deposit will abide by the order as to costs that may be passed at the final stage of the suit. If the first defendant is held to have been obliged to make the delivery to the plaintiff, the entire deposit together with the interest accrued thereon will be refunded to the plaintiff.
As far as the second defendant's application under Section 8 of the said Act of 1996 is concerned, a copy of a document dated August 3, 2016 has been appended to the relevant application. It is the second defendant's case that the original of such document is not available with the second defendant. The clause in such document of August 3, 2016 that the second defendant presses into service reads as follows:
"This contract is made in Varanasi and subject to the Indian Arbitration and Conciliation Act, 1996, the court(s) in Varanasi will have exclusive jurisdiction."
The second defendant says that in as much as such relevant clause refers to the Act of 1996 (even though incorrectly) it is implied that the parties to the agreement, being the plaintiff and the second defendant, had agreed that the disputes between them arising out of the relevant agreement would be resolved by arbitration. The second defendant also refers to the choice of forum evident from the relevant clause, though no prayer has been carried in GA No. 3190 of 2016 in furtherance of the alleged forum selection clause.
Though courts are liberal in construing what would amount to an arbitration agreement between the parties, it would be foolhardy to read an agreement providing for the parties to refer certain disputes to arbitration into a clause merely because such clause refers to the statute governing arbitrations in this country.
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At any rate, the clause is not that the contract would be governed by the Act of 1996. In connection with the choice of forum, the clause says that subject to the Act of 1996 Courts in Varanasi would have exclusive jurisdiction. Even if the clause had said that the contract between the parties thereto would be governed by the said Act of 1996, the Court may have given a second thought to the second defendant's assertion of an arbitration agreement. But the focus of the clause is the forum of choice and it is in such context that the statute has been referred to.
There is no statutory form of an arbitration agreement. However, before the parties to an agreement can be said to have agreed to a private forum or to have ousted the jurisdiction of the sovereign forum, a conscious decision in such regard must be evident from the agreement or from other surrounding circumstances that Section 7 of the Act of 1996 permits to be taken cognizance of. It is not a matter that can be taken lightly: there is, simultaneously, conferment of jurisdiction on a private forum and the ouster of the regular court's jurisdiction. To treat the clause cited by the second defendant as an arbitration agreement would require a lot to be guessed as to the states of the minds of the persons who executed the document on behalf of the relevant parties.
If there had been, for instance, a similar clause in any previous agreement and the parties had, in fact, gone to an arbitral reference upon disputes pertaining to the matrix contract arising therein, the same clause would have conveyed a different meaning than what appears from a plain reading thereof. The clause does not appear to be, nor should it be regarded as, reflecting an arbitration agreement between the parties upon disputes arising in respect of the commercial matters covered by the previous part of the document. 6
GA No. 3190 of 2016 is dismissed.
In view of the stand taken by the defendants, no immediate order can be passed in favour of the plaintiff for an interlocutory mandatory direction for supply of 1000 MT crude degummed soyabean oil. It is not even clear as to whether the second defendant has the requisite quantity of oil available to effect the supply demanded by the plaintiff. As noticed above, as of now the plaintiff has not been able to establish any legal obligation on the part of the first defendant to supply 1000 MT of oil or any part thereof to the plaintiff. As a consequence, GA No. 2992 of 2016 is disposed of without any order.
What remains is the plaintiff's application for an order in the nature of attachment before judgment. The plaintiff has placed copiously from both the oppositions filed by the second defendant and the replies thereto by the plaintiff. A couple of sentences in the plaintiff's reply amount to a complete denial of its liability to pay any money to the second defendant outside of the money paid under the agreement of August 3, 2016. However, elsewhere in the affidavit there is a reference to some money of the second defendant being retained by the plaintiff against a possible claim by Customs or other authorities. Copies of e- mails appended to the petition reveal that a sum in excess of Rs. 4 crore has been retained by the plaintiff against the price of goods due to the second defendant in respect of a previous transaction. It is also evident that the plaintiff agreed to pay interest on such amount. There is a dispute between the second defendant and the plaintiff as to the rate of interest that ought to be paid. The plaintiff pays interest at 9.75% per annum on quarterly basis and the second defendant insists that since the money has not been deposited but has been used by the plaintiff in 7 its business, the second defendant is entitled to interest at higher, commercial rates.
Though the second defendant has asserted that its claim against the plaintiff is to the tune of Rs. 6.75 crore, there is no document other than the internal communication exchanged between some officers of the second defendant in support of such quantum of claim. Even in the relevant document, it appears that the amount retained by the plaintiff is about Rs. 4.06 crore. There are several other heads of claim shown in the internal communication between the officials of the second defendant. But much credence cannot be given to the other entries in the list of the second defendant's claims, particularly since the heads of claim indicated in such document are prefaced by the following line:
"Ruchi has sent us a legal notice so lets (sic,let's) also try and reply to that."
It is evident from such line that the second defendant may have attempted to balance the amount of Rs. 6.20 crore for which repeated demands had been made by the plaintiff on the second defendant; and, thereby, make out a case of full adjustment of the payment made under the agreement of August 3, 2016 pertaining to the supply of 1000 MT of oil. Thus, apart from the figure of Rs. 4.06 crore, which appears to be corroborated by the documents appended to the plaintiff's petition, the rest of the heads of claim are, prima facie, found untenable and not taken note of for the present purpose.
The plaintiff has referred to two judgments reported at (2015) 1 Cal LT 361 and AIR 2008 SC 1170 for the principles governing an order in the nature of attachment before judgment.
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Though the second defendant has made a counter-claim for an amount in excess of the money paid by the plaintiff to the second defendant under the agreement of August 3, 2016, there is nothing to establish that there was any understanding between such parties that any previous payment outstanding from the plaintiff to the second defendant would be cleared before the supply under the subject agreement was effected by the second defendant. Yet, there is a virtual admission of the plaintiff having retained a sum in excess of Rs. 4 crore from the payment due from the plaintiff to the second defendant in respect of a previous transaction. At the highest, it is such amount of Rs. 4.06 crore that can be set off, in a manner of speaking, against the payment of Rs. 6.20 crore made by the plaintiff to the second defendant under the subject agreement. Merely because the second defendant claims a sum of Rs. 6.75 crore to be due to it from the plaintiff, without the second defendant being able to demonstrate that it was entitled to adjust the amount against the payment made by the plaintiff under the agreement of August 3, 2016, the plaintiff's claim cannot be seen to have been totally eclipsed.
The second defendant has a commercial relationship with the plaintiff and the degree of formality is evident from the fact that the payment under the agreement of August 3, 2016 was made by way of a letter of credit. It is difficult to accept that there was a simultaneous understanding as to adjustment or payment in respect of any previous transaction, particularly when the same is not reflected from any writing prior to the second defendant's response of September 12, 2016 to the several demands from the plaintiff to complete the supply under the agreement of August 3, 2016. Since an order in the nature of attachment before judgment requires high tests to be met, both as to the quality of the claim and as 9 to the inpecuniosity or ill-motive of the defendant, the defence of adjustment to the extent of Rs. 4.06 crore on account of the money retained by the plaintiff cannot be brushed aside. Equally, the second defendant cannot be permitted to retain the additional amount of Rs. 2.14 crore and wait for the trial in the suit which may take years to conclude.
Thus, if the plaintiff's claim of Rs. 6.20 crore is seen as a pure money claim, a sum of about Rs. 4.06 crore can be, tentatively, adjusted therefrom on account of the defence put up by the second defendant. There is, however, no defence in respect of the balance amount of Rs. 2.14 crore for which the second defendant has received payment under the relevant letter of credit from the plaintiff, but has not effected supply of even any reduced quantum of the said oil.
Accordingly, GA No. 3079 of 2016 is disposed of by requiring the second defendant to effect supply of 330 MT of crude degummed soyabean oil to the plaintiff within a week from date. If such supply is not effected within the time permitted, the second defendant will furnish cash security to the tune of Rs. 2.14 crore in favour of the Registrar, Original Side within three weeks from date. The injunction restraining the second defendant from dealing with or disposing of its AJC Bose Road office will continue till the time that the supply is effected in terms of this order or the security is furnished. If neither the oil is supplied nor the security furnished within the times indicated, there will be an order of injunction restraining the second defendant from withdrawing any money from any of its bank accounts without the express leave of this Court.
The deposit of Rs. 5 lakh as security for costs in respect of the first defendant should be made by the plaintiff with the Registrar, Original Side, within three weeks from date. The Registrar will invest such amount by way of a fixed 10 deposit with any nationalised bank having a branch within the vicinity of this Court. The fixed deposit will be held to the credit of this suit and for the specific purpose indicated earlier herein.
If the second defendant furnishes security of Rs. 2.14 crore, the Registrar will again invest the same by way of a fixed deposit with any nationalised bank having its branch within the vicinity of this Court. The money will be held to the credit of the suit and will abide by further orders in this suit.
There will be no order as to costs.
(SANJIB BANERJEE,J.) Gour Das/ S.Chandra