Delhi High Court
M/S Damco India Private Ltd vs M/S Samtel Glass Limited & Ors. on 4 February, 2013
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of decision: 4th February, 2013 + CS(OS) 2650/2011 & IA No.2574/2012 (of the defendant no.1 u/S 8 of the Arbitration & Reconciliation Act, 1996). M/S DAMCO INDIA PRIVATE LTD. ..... Plaintiff Through: Mr. Atul Y. Chitale, Sr. Adv. with Mr. Dhruv Madan & Mr. Karan Kanwal, Advs. versus M/S SAMTEL GLASS LIMITED & ORS. .... Defendants Through: Mr. Sanjay S. Chhabra, Adv. D-1. CORAM :- HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW RAJIV SAHAI ENDLAW, J 1.
The plaintiff has sued under Order 37 of the CPC for a decree in the sum of Rs.40,48,927.11p against the four defendants jointly and severally pleading:-
(a). that the defendant no.1 Company acting through its Material Manager Mr. Manoj K. Sharma impleaded as defendant no.4 had entered into a contract dated 1st May, 2010 with the plaintiff whereunder the plaintiff had agreed to transport the goods manufactured by the defendant no.1 Company, raw material or any other commodity, to and fro Kota, to any other location;CS(OS) 2650/2011 Page 1 of 9
(b). that though initially the defendant no.1 Company made payment for the services provided by the plaintiff on regular basis but thereafter started making lump-sum payments at regular intervals against the outstanding invoices of the plaintiff;
(c). that as on 9th May, 2011, payment under as many as ten invoices of the total value of Rs.50,48,927.11p was due to the plaintiff;
(d). that the defendant no.1 Company made part payment of Rs.10 lacs on 2nd May, 2011 with the assurance to pay the balance shortly and leaving a balance of Rs.40,48,947.11 due to the plaintiff;
(e). that the defendants no.2&3 namely Mr. S.K. Kaura and Mr. Atul Aggarwal, President and Zonal Head (Finance) of the defendant no.1 Company, in emails acknowledged and confirmed the liability to the plaintiff and assured payment but no payments were made;
2. Summons for appearance were issued to the defendants. However appearance was filed on behalf of the defendant no.1 Company only. No appearance was filed on behalf of the defendant no.2 despite service. The order dated 8th August, 2012 records the statement of the counsel for the defendant no.1 Company that the defendants no.3&4 were no longer in the employment of the defendant no.1 Company; they were ordered to be served CS(OS) 2650/2011 Page 2 of 9 by publication and were so served and there is no appearance on their behalf as well;
3. The defendant no.1 Company after appearance, filed this application under Section 8 of the Arbitration and Conciliation Act, 1996. Summons for judgment were however ordered to be served on the defendant no.1 Company and were served. The defendant no.1 Company has filed an application for leave to defend which application of the defendant no.1 Company was ordered to be kept in sealed cover awaiting the outcome of the application under Section 8.
4. The senior counsel for the plaintiff and the counsel for the defendant no.1 Company have been heard on the application under Section 8 of the Arbitration Act.
5. The Agreement dated 1st May, 2010 between the plaintiff and the defendant no.1 Company filed by the defendant no.1 Company along with the application and also filed by the plaintiff along with its documents, in Article IX thereof provides for arbitration as under:-
"Any dispute arising out of or in connection with this Agreement shall be resolved by arbitration under the Arbitration and Conciliation Act, 1996, to be conducted by sole arbitrator who shall be appointed at the sole discretion of SGLK. The award given by sole arbitrator shall be final & binding on both the parties hereto."CS(OS) 2650/2011 Page 3 of 9
The defendant no.1 Company is referred to as SGLK in the said Agreement.
6. The senior counsel for the plaintiff does not dispute the existence of the Arbitration Agreement. His contention however is that the matter is not referable to arbitration since the plaintiff in the present suit has made the claim not only against the defendant no.1 Company with whom the plaintiff has an Arbitration Agreement but also against the defendants no.2 to 4. Reliance is placed on Sukanya Holdings Pvt. Ltd. Vs. Jayesh H. Pandya AIR 2003 SC 2252. It is contended that since the entire subject matter of the suit i.e. the claim of the plaintiff not only against the defendant no.1 Company but also against the defendants no.2 to 4 with whom there is no Arbitration Agreement, is not subject matter of arbitration, no case for reference of the parties to arbitration is made out. Reliance is placed on Booz Allen and Hamilton Inc Vs. SBI Home Finance Limited (2011) 5 SCC 532 to contend that the scope of Section 8 is much wider than Section 11 and that the Court ought to refuse an application under Section 8 if the subject matter of the suit is capable of adjudication only by a Court. It is contended that the claim of the plaintiff jointly and severally against the four defendants can be adjudicated only by the Court.
7. It is further contended that the plaintiff in any case has become entitled to a decree for recovery of monies against the defendants no.2 to 4 on their not entering appearance within the prescribed time and it will lead to inconsistencies if the suit on the basis of the same transactions is decreed CS(OS) 2650/2011 Page 4 of 9 against the defendants 2 to 4 and in so far as the defendant no.1 Company is concerned, the parties are referred to arbitration.
8. The senior counsel for the plaintiff has alternatively argued that the parties ought not to be referred to arbitration as clause aforesaid in the Agreement, is for arbitration by a nominee of the defendant no.1 Company and in whom the plaintiff has no faith. It is argued that the plaintiff has no objection to the matter being referred to arbitration if the defendant no.1 Company were to agree to an independent arbitrator. It is yet further argued that the application of the defendant no.1 Company for leave to defend has not been filed within time.
9. Per contra, the counsel for the defendant no.1 Company relies on the Division Bench judgment of the Bombay High Court in JSW Steel Ltd. Vs. JFE Shoji Trade Corporation MANU/MH/1515/2009 observing that a plaintiff, who adds unnecessary parties to the suit to circumvent an arbitration clause, should not be allowed to do so.
10. I have considered the rival contentions. As far as the plea of the plaintiff, of the application not succeeding owing to the arbitration agreed being of a nominee of the defendant no.1 Company is concerned, no merit is found therein. Admittedly the plaintiff has not even invoked arbitration as yet and the occasion for the defendant no.1 Company to nominate any arbitrator has not arisen. The plaintiff had admittedly agreed to the arbitration of the nominee of the defendant no.1 Company. The senior counsel for the plaintiff is unable to show or to even argue that such a clause is not a valid Arbitration Agreement. The apprehensions of the plaintiff, of CS(OS) 2650/2011 Page 5 of 9 the impartiality of the arbitrator to be nominated by the defendant no.1 Company, are premature. The Act provides recourse for such a situation if it arises. However at the stage of deciding an application under Section 8, this Court cannot presume that the plaintiff would have objection to the impartiality of the arbitrator to be nominated by the defendant no.1 Company. If the plaintiff has any objection to the arbitrator so nominated by the defendant no.1 Company, recourse thereto is under Section 12 of the Act and the same cannot be a ground for dismissal of the application.
11. The question, whether the leave to defend filed by the defendant no.1 Company is beyond the prescribed time, does not arise for consideration at this stage. If the suit, owing to the existence of the Arbitration Agreement, is not maintainable, the question of adjudicating whether the defendant no.1 is entitled to leave to defend or not does not arise.
12. The sole defence to the application under Section 8 of the Arbitration and Conciliation Act is of the claim of the plaintiff against the defendant no.1 being joint and several with the defendants no.2 to 4. I have perused the plaint. The claim of the plaintiff is for recovery of monies due under a written contract with the defendant no.1 Company. The defendants no.2 to 4 are employees of the defendant no.1 Company which is a juristic person and has to necessarily deal through natural persons. Merely because the defendants no.2 to 4, as employees of the defendant no.1 Company, dealt with the plaintiff, will not make them personally liable for the debts if any of the defendant no.1 Company. The said argument of the senior counsel for the plaintiff is contrary to the very concept of limited liability under the CS(OS) 2650/2011 Page 6 of 9 Companies Act, 1956. A minute combing of the plaint shows that the plaintiff has hesitated from even pleading that any of the defendants no.2 to 4 at any time agreed to make themselves personally liable for the debts of the defendant no.1 Company. The senior counsel for the plaintiff when confronted, has invited attention to the email dated 8th June, 2011 which is sent by the defendant no.3 and has argued that the defendant no.3 therein has used the word 'We' while assuring payment. However the said email is from the email account of the defendant no.3 at the address of the defendant no.1 Company and the defendant no.3 has signed the same as a Zonal Head of the defendant no.1 Company. There is nothing at all in the said email to show that the defendant no.3 had made himself jointly and severally liable with the defendant no.1 Company. In fact to pull the bluff of the plaintiff, it has been enquired from the senior counsel as to whom the said email is addressed. The same is addressed to one Mr. Rajesh Dadhich of the plaintiff. It has been put to the senior counsel for the plaintiff that if the said argument were to be accepted, then the promise if any of the defendant no.3 to make the payment is to Mr. Dadhich of the plaintiff and not to the plaintiff Company. There is no plausible answer. The same is the position qua the email dated 18th July, 2011.
13. The argument of the senior counsel for the plaintiff of there being any inconsistency suffers from a basic fallacy. It proceeds on the premise that merely because the plaintiff has filed the suit under Order 37 and the defendant has failed to enter appearance, a decree will follow. Only if the Court finds that a case under Order 37 is made out a decree is to be passed. In the present case, on the averments in the plaint and the documents filed CS(OS) 2650/2011 Page 7 of 9 therewith, no case of any liability of the defendants no.2 to 4 to the plaintiff is made out least under Order 37 of the CPC. The question of thus passing any decree against the defendants no.2 to 4 also does not arise. The argument of the senior counsel for the plaintiff that the defendant no.1 Company has no locus to contend that the plaintiff is not entitled to a decree against the defendants no.2 to 4 is again on the premise that the Courts, in the absence of the defendants, are merely to put their stamp of approval on the claims of the plaintiff. That is not the position in law.
14. This Court in W.P.I.L. Vs. N.T.P.C. Ltd. MANU/DE/0078/2009 and in Delhi Express Travels Pvt. Ltd. Vs. International Air Transport Association MANU/DE/0739/2009 and in Tandav Films Entertainment P. Ltd. Vs. Four Frames Pictures MANU/DE/2669/2009 has held that where non parties to the Arbitration Agreement but parties to the suit are neither necessary nor proper for adjudication of disputes, the law as laid down in Sukanya Holdings would not be applicable and the presence of such defendants would not come in the way of allowing application under Section 8 of the Arbitration Act.
15. The plaintiff is thus found to have a cause of action only against the defendant no.1 Company and not against the defendants no.2 to 4. The claim of the plaintiff against the defendants no.2 to 4 is dismissed. Decree sheet be drawn up. In so far as the claim of the plaintiff against the defendant no.1 Company is concerned, the same is the subject matter of arbitration and the parties are accordingly referred to arbitration.
CS(OS) 2650/2011 Page 8 of 916. The application is thus allowed and the suit in so far as against the defendant no.1 is concerned, is disposed of in terms of Section 8 of the Arbitration and Conciliation Act, 1996.
No costs.
RAJIV SAHAI ENDLAW, J FEBRUARY 4, 2013 pp..
CS(OS) 2650/2011 Page 9 of 9