Karnataka High Court
M/S. Schindler India Private Limited vs M/S. Meda Constructions on 12 September, 2024
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COMAP No. 205 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF SEPTEMBER, 2024
PRESENT
THE HON'BLE MRS JUSTICE ANU SIVARAMAN
AND
THE HON'BLE MR JUSTICE G BASAVARAJA
COMMERCIAL APPEAL NO. 205 OF 2024
BETWEEN:
M/S. SCHINDLER INDIA PRIVATE LIMITED
HAVING ITS OFFICE AT
AXIS SAI JYOTHI, 3RD FLOOR,
NO.785, 15TH CROSS ROAD,
PHASE 1, SARAKKI EXTENSION,
J.P. NAGAR, BENGALURU - 560078.
...APPELLANT
(BY SRI. SUNIL P.P, ADVOCATE)
AND:
M/S. MEDA CONSTRUCTIONS,
A PARTNERSHIP FIRM
Digitally signed HAVING ITS REGISTERED OFFICE AT
by NANDINI D MEDA HEIGHTS PROJECTS,
Location: High
Court of S.NO.104/4, 104/6 AND 104/1B,
Karnataka
NEAR AET JUNCTION, DODDA KANNAHALLI,
BANGALORE - 560035
REP. BY ITS PARTNER
V. SARATH KUMAR REDDY,
ALSO AT:
H.NO.8/2/268/1/D/A, PLOT NO.7,
ARORA COLONY ROAD, NO.3,
BANJARA HILLS, HYDERABAD-500034.
...RESPONDENT
(BY SRI. SUMMITH S., ADVOCATE)
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COMAP No. 205 of 2024
THIS COMAP IS FILED UNDER SECTION 13(1-A) OF THE
COMMERCIAL COURTS ACT, 2015 PRAYING TO SET ASIDE THE
IMPUGNED ORDER DATED 18.03.2024 (ANNEXURE-A) PASSED
IN COM.OS.NO.863/2023 BY LEARNED LXXXVIII ADDITIONAL
CITY CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT, AT
BENGALURU, DISMISSING THE APPLICATION FILED BY THE
APPELLANT UNDER SECTION 8 OF THE ARBITRATION AND
CONCILIATION ACT, 1996.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 29.08.2024 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, BASAVARAJA J.,
PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MRS JUSTICE ANU SIVARAMAN
and
HON'BLE MR JUSTICE G BASAVARAJA
CAV JUDGMENT
(PER: HON'BLE MR JUSTICE G BASAVARAJA)
1. This appeal is preferred challenging the order dated 18th March, 2024 passed in Com.OS No.863 of 2023, by the learned LXXXVII Additional City Civil Judge, Commercial Court, Bengaluru.
2. Brief facts of the case are that the appellant is a Company incorporated under the Companies Act 1956, having its registered office at Mumbai and branch office at Bangalore. The appellant is engaged in the business of manufacturing Elevators, Escalators and Moving-walks, etc. The respondent is a partnership firm Engaged in the business of development of residential buildings, apartments, etc. Respondent being -3- COMAP No. 205 of 2024 satisfied with the benchmark reputation, brand, and excellence of the products manufactured by the appellant, approached the appellant for purchase of Elevators. Upon initial discussion, the appellant provided a detailed offer for supply and installation of 10 elevators pairing model number Schindler-3000 on the terms and conditions mentioned in the offer letter dated 23rd November, 2021. Accepting the said offer letter, the respondent further executed the contract dated 24th November 2021 with the Appellant. Therefore, the letter of offer dated 23rd November, 2021 has been duly accepted by the respondent in its entirety without any reservations. Further, it is submitted that pursuant to issue of the offer letter and contract, the respondent made payment of Rs.20,70,000/- which is 10% of the contract value as advance, which was duly acknowledged by the opponent. Further 40% of the contract value was required to be made by the respondent before commencing manufacturing and within the price validity period mentioned in the offer letter dated 23rd November, 2021. However, the respondent failed to make the requisite payment within the time mentioned therein. Further, it is submitted that since there was a price variation due to increase in raw materials and such other aspects, the appellant communicated -4- COMAP No. 205 of 2024 the same by way of e-mail to the respondent regarding escalation of price. However, the respondent did not accept the said price. The respondent has suppressed its default and had filed suit in Com.OS No.863 of 2023 in order to harass the appellant claiming refund of Rs.20,70,000/- with interest at 18% amounting to Rs.5,89,950/- and other reliefs. It is submitted that Clause 20 of offer letter dated 23rd November 2021, provide for resolution of disputes and controversies amicably through mediation. However, if the dispute is not resolved in such manner, the clause stipulates that it should be referred to a Sole Arbitrator appointed as per legal process in accordance with Arbitration and Conciliation Act, 1996. It is contended that the commercial court lack jurisdiction in view of aforementioned clause and as such an application came to be filed by the appellant under Section 8 of the Arbitration and Conciliation Act 1996, seeking to refer the parties to the arbitration in terms of the arbitration clause. The respondent filed statement of objections seeking to dismiss the Application. The commercial court, vide order dated 18th May 2024, dismissed the Application filed by the appellant under section 8 of the Act. Assailing the said order, the appellant has preferred the present appeal.
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3. Sri Sunil P.P, learned counsel appearing for the appellant submits that the impugned order dated 18th May 2024 passed by the commercial court is illegal, arbitrary, erroneous, and contrary to law and facts. It is submitted that the commercial court has committed an error in treating the contract dated 24th November 2021 is an independent contract, though the same was required to be read in tandem with the order dated 23rd November 2021, and hence the impugned order is unjust and perverse. He submitted that the commercial court failed to appreciate that the contract dated 24th November 2021 explicitly refer to offer letter dated 23rd November 2021, and the specifications of the elevators provided in the offer and contract are identical and never there is a reference in the contract that it is an independent contract and as such the order is bad in the eye of law and requires to be set aside. The commercial court failed to appreciate that the offer dated 23rd November 2021 constitutes a contract- cum-offer signifying that the document in question is not mere offer, but also includes other set of terms and conditions. These terms and conditions encompass a combination or a joint obligation of the parties, and the same has been accepted by both the parties. Therefore, the document extents beyond -6- COMAP No. 205 of 2024 merely specifying the price of a commodity but includes other aspects that collectively constitute an entire agreement between the parties. The learned Counsel would further submit that the commercial court failed to appreciate the document which is admitted by the respondent having observed that the copy of the contract/offer letter was produced by the respondent along with the plaint in the commercial suit and this admission ought to have invoked the doctrine of estoppel against the respondent nearby, barring it from denying the facts and contents of the said document. The commercial court has rightly arrived at finding that the signature is not a necessary component of the arbitration agreement, however, the commercial court fell short of applying the same principle as laid down by the Hon'ble Supreme Court and has gravely erred in holding that the terms of the offer letter are not binding on the properties since the respondent is not relying on the said document for seeking refund of the amount paid. it is submitted that since the commercial court had arrived at the finding that signature is not a necessary component of arbitration agreement, as per the dictum of the Supreme Court, it ought to have dismissed the objection of the respondent and should have applied the right law and thereby allowed the -7- COMAP No. 205 of 2024 application filed by the appellant. However, the commercial court has erroneously arrived at a conclusion contrary to established law and facts, and the same being per incuriam deserves to be set aside.
4. Further, the learned Counsel would submit that the contract dated 24th November 2021, which the respondent claims as the only binding document, is notably silent on the standard terms and conditions of a commercial contract. It is settled principle of law that an offer, when acted upon, becomes a contract legally binding and enforceable by law, and as such the respondent having acted on the offer by incorporating the price summary in the said of a letter into the contract and subsequently made payment of 10% advance against the same, has made a valid acceptance to the entire terms and conditions of the offer crystallising into a binding contract between both the parties and hence the utterance of the respondent regarding a counter offer is unsustainable in the eye of law. On all these grounds, learned Counsel sought to allow the appeal. To substantiate his arguments, he relied on the following decisions:
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1. BOOZ ALLEN AND HAMILTON INC. v. SBI HOME FINANCE LIMITED AND OTHERS (2011)5 SCC 532;
2. MR. SANJIV PRAKASH v. SEEMA KUKREJA (2021)9 SCC 732;
3. CARAVEL SHIPPING SERVICES PVT. LTD. v.
PREMIER SEAFOODS EXIM PVT. LTD.
MANU/SC/1252/2018;
4. GOVIND RUBBER LIMITED v. LOUIDS DREYFUS COMMODITIES ASIA PRIVATE LIMITED MANU/SC/1209/2014.
5. As against this, the learned counsel for the respondent Sri Sumit S Madhusudhan, would support the order passed by the commercial court submitting that the offer letter dated 23rd November 2021 itself crystallises into a Contract and was not duly executed between the parties. In fact, the respondent sent its own contract and counter offer, which was agreed upon and crystallised into an agreement on 24th November 2021. It is a trite law that counter-offers materially alters the original offer and the only agreement executed by the parties is the agreement dated 24th November 2021, which does not appear an "arbitration agreement". Further, he would submit that the commercial court has rightly observed that the authorities relied upon by the appellant could not advance the case of the appellant inasmuch as the requirement of duly signed arbitration agreement was done away with, was -9- COMAP No. 205 of 2024 distinguished on facts. In that, the party refusing to rely on an assigned document for the purposes of arbitration could not rely on it for the purpose of cause of action and therefore cannot blow hot and cold at the same time. To substantiate his arguments, he relied upon the following decisions.:
1. M.R. ENGINEERS & CONTRACTORS (P) LTD. v.
SOM DATT BUILDERS LTD. (2009)7 SCC 696;
2. JAGDISH CHANDER v. RAMESH CHANDER (2007)5 SCC 719.
6. Having heard on both sides and perusal of papers and the decisions relied upon by both the parties, the following points arises for our consideration:
1. Whether the appellant has made out a ground to interfere with the order passed by the commercial court?
2. What order?
7. Our answer to the above points or as under:
Point No.1: in the negative;
Point No.2: as per final order.
Regarding Point No.1
8. We have examined the material placed before this court. The plaintiff M/s. Medha Constructions has filed Suit
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COMAP No. 205 of 2024against the respondent for recovery of advance amount of Rs.20,70,000/- with interest at the rate of 18% per annum. The defendant entered appearance and filed detailed written statement, contending that the escalation in price is in accordance with the terms of offer letter dated 23rd November 2021, on the basis of which the contract was entered into between the parties. It is stated that due to delay in the plaintiff releasing further payment as per the contract agreement, there was a delay in installation of the lifts which resulted in price escalation and when defendant sought for price increase validly in terms of the offer letter, the plaintiff refused the price raise and without terminating the contract, awarded the contract to the third-party, it is contended that since the contract work could not be completed due to the default on the part of the plaintiff itself, the defendant is entitled not only to forfeit the advance amount but can also claim excess amount in terms of the offer letter and reserving right to claim the additional sums and contending that advance amount is forfeited and hence prayed for dismissal of suit. It is further contended that contract agreement between the parties dated 24th November 2021 was entered into pursuant to offer letter dated 23 November 2021, and the contract was nothing
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COMAP No. 205 of 2024but unconditional and complete acceptance of the offer and therefore the terms of the offer letter part of the agreement between the parties. The offer letter contains arbitration clause and therefore it is contended that the suit is not maintainable and the parties have to be referred to arbitration under section 8 of Arbitration and Conciliation Act. The plaintiff made a counter offer and thereby parties entered into binding contract, viz. contract agreement dated 24th November, 2021. Thereby it is contended that the terms of offer letter do not constitute binding agreement between the parties but is only the terms of the contract agreement which is binding and since the contract agreement does not contain arbitration clause, in fact, there is no valid arbitration agreement between the parties and hence to reject the application.
9. We have examined the offer letter issued by the appellant to the plaintiff dated 23rd November 2021, and also the contract agreement between the parties dated 24th November 2021, which is produced along with the plaint. A perusal of the offer letter discloses that it, admittedly, contains arbitration clause. However, contract agreement dated 24th November 2021 does not contain arbitration clause. The offer letter is signed only by the defendant and not signed by the
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COMAP No. 205 of 2024plaintiff. The commercial court has observed that in view of the decision of the Hon'ble Supreme Court in the case of CARAVEL SHIPPING SERVICES PVT. LTD. v. PREMIER SEAFOODS EXIM PVT. LTD. rendered in C.A. No.10800-801 of 2018 decided on 29th October, 2018; and in the case of GOVIND RUBBER LTD v. LOUIDS DREYFUS COMMODITIES ASIA PRIVATE LIIMITED rendered in C.A.No.11438 of 2014 decided on 16th December, 2014, the agreement need not be signed by the parties. It is sufficient if it is in writing. It is not in dispute that the main concluded contract between the parties is dated 24th November 2021. The Letter in question dated 23rd November 2021 is only an offer letter signed by the defendant and the same is not accepted by the plaintiff. However, there is a reference as to this offer letter in the contract agreement dated 24th November 2021. Mere reference as to offer letter number 0302489704 dated 23rd November 2021, is not sufficient to come to the conclusion that all the terms and conditions of the offer letter were incorporated in the concluded contract dated 24th November 2021. Therefore, it is clear that there was no meeting of minds between the parties to include the arbitration clause into the contract signed on 24th November, 2021. The
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COMAP No. 205 of 2024Commercial Court, at paragraphs 17 to 21, has assigned proper reasons to dismiss the Application.
10. Upon examination and consideration of the entire material and record, we do not find any error in the conclusion arrived at by the commercial court and the same does not call for interference. Accordingly, we answer point number 1 in the negative.
Regarding Point No.2
11. For the aforestated reasons and discussions, we proceed to pass the following:
ORDER Appeal dismissed.
Sd/-
(ANU SIVARAMAN) JUDGE Sd/-
(G BASAVARAJA) JUDGE lnn