Bombay High Court
Parle Agro Pvt Ltd vs Shree Aqua Purifier Pvt Ltd on 12 February, 2021
Author: G. S. Patel
Bench: G.S. Patel
13-ARBPL2017-2021 WITH ARBAPL1821-2021.DOC
Arun
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (L) NO. 2017 OF 2021
WITH
ARBITRATION APPLICATION (L) NO. 1821 OF 2021
Parle Agro Pvt Ltd ...Petitioner
Versus
Shree Aqua Purifer Pvt Ltd ...Respondent
Mr Hiren Kamod, with Rubin Vakil with Amritha Vyas, i/b Gajria & Co, for the Petitioner.
Mr PS Gujar, for Respondent No.1.
Mr Raju U Shinde, with Tamil Selvi Laxman, for Respondent No.2, Bank of India.
CORAM: G.S. PATEL, J
DATED: 12th February 2021
PC:-
1. This is a Petition under Section 9 of the Arbitration and Conciliation Act, 1996 with an accompanying Application under Digitally signed Section 11.
by ARUN RAMCHANDRAARUN SANKPAL
RAMCHANDRA
SANKPAL Date:
2021.02.15
12:47:01
+0530
2. The Petition is, at least as regards, Respondents Nos. 2 and 3, more than somewhat ambitious. These are the branch and head office of the Banh of India ("dkBOI"). There were fnancial transactions between the BOI and the 1st Respondent, Shree Aqua Page 1 of 13 12th February 2021 13-ARBPL2017-2021 WITH ARBAPL1821-2021.DOC Purifer Private Limited ("dkShree Aqua Purifer"). The banh has a claim for unpaid dues and it has pursued its remedies in law. Shree Aqua Purifer is a franchisee of the Petitioner, Parle Agro Private Limited ("dkParle Agro").
3. Parle Agro says that it has a money claim (apart from others) against Shree Aqua Purifer. It has come to hnow that the BOI has issued a public notice seehing to auction some assets of Shree Aqua Purifer. Therefore in prayer clause (c), Parel Agro seehs a direction that the BOI must deposit an amount equivalent to Parle Agro's claim from the surplus proceeds of any auction sale that the BOI conducts.
4. Such a relief is not possible in a Section 9 proceeding. Claims of this nature by a fnancial institution are covered by the SARFAESI Act and other dedicated statutes. If Parle Agro is indeed a creditor, secured or unsecured, of Shree Aqua Purifer, it must mahe an appropriate application before a jurisdictionally competent forum. A relief under Section 9 Petition is not possible against BOI.
5. Indeed, I will now exercise my discretion and direct the immediate deletion of Respondents Nos. 2 and 3 as parties to the Section 9 Petition.
6. As far as Shree Aqua Purifer is concerned, they were represented by their learned Advocate, Mr Gujar, on the last occasion. He is present in Court today. He states that he has attempted to obtain instructions from the person in charge of Shree Page 2 of 13 12th February 2021 13-ARBPL2017-2021 WITH ARBAPL1821-2021.DOC Aqua Purifer, a Surat-based entity. Mr Gujar e contacted Shree Aqua Purifers' representative on the phone. He has received no instructions either oral or written.
7. It is not possible to fnd fault with Mr Gujar. He has done all that would reasonably be expected of him. If, despite service of notice and being contacted by its own Advocate, Shree Aqua Purifer does not care to respond or instruct its own Advocate, then it is alone responsible for the consequences that must inevitably follow.
8. I see no reason why Mr Gujar should any longer be troubled if Shree Aqua Purifer conducts itself in this fashion vis-à-vis him. Mr Gujar is discharged as an Advocate for Shree Aqua Purifer. I will only request him to communicate a copy of this order by courier and by email/WhatsApp to Shree Aqua Purifer.
9. I must note my appreciation of Mr Gujar's courtesy in appearing today despite having no instructions at all.
10. What remains now is to consider the order under Section 9 against Shree Aqua Purifer. There is documentation to establish the Franchise Agreement dated 5th May 2012 between Parle Agro, one of the country's largest and most signifcant beverage manufacturers, and Shree Aqua Purifer as a franchisee. A copy of that Agreement is annexed at Exhibit "dkA" from page 21. The arbitration provision is to be found in clause 46 at page 35. It provides for an arbitration in Mumbai by a Sole Arbitrator.
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11. The franchise was in respect of the Petitioner's registered trade marh BAILEY for the territories of Goa and Konhan in relation to pached or bottled drinhing water.
12. There was also an Addendum dated 1st April 2015 that extended the initial term of the Franchise Agreement by a further three-year period from the original three-year term. Then there was a second Addendum with a further three-year extension and this is dated 31st March 2018. The franchise was thus fnally extended to 31st March 2021. The relief sought is in respect of the principal Franchise Agreement read with two Addenda.
13. The Franchise Agreement required Shree Aqua Purifer to acquire at its cost the necessary machinery and raw material from vendors pre-approved by Parle Agro and, importantly for our purposes today, to pay a defned franchise fee on an annual basis.
14. Apparently, things went reasonably well until 2019 when Shree Aqua Purifer began defaulting in payment of the annual franchise fees. On 18th May 2019, there was a balance due of a little over Rs. 14 lahhs. Parle Agro sent an email demanding payment.
15. It also appears that Shree Aqua Purifer purchased some material as required by Franchise Agreement in respect of which Parle Agro raised an invoice on 7th June 2019, for an amount a little over Rs. 8.5 lahhs inclusive of GST.
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16. There were also other purchases of raw materials in a smaller amount of about Rs. 15,000/-. The goods under these purchases were delivered to Shree Aqua Purifer. The invoices remained unpaid.
17. The legal requirement in regard to plastic waste, and which would include used plastic pachaged drinhing water bottles, is that Parle Agro must appoint vendors to collect these waste PET bottles. In the present case it appears that Shree Aqua Purifer is liable to pay certain amounts as recycling charges. This amount is also not very high, roughly about Rs.25,000/- or so. But tahen together, this means that large amounts were still outstanding. Despite promises, Shree Aqua Purifer did not clear the dues. There was an amount of Rs. 25 lahhs promised by 25th December 2019 and a balance amount of Rs. 11,80,296/- on a deferred payment basis. Minutes to this effect were drawn up on 3rd December 2019. Yet Shree Aqua Purifer defaulted.
18. Then there was further correspondence in 2020 and ultimately on 12th June 2020 Parle Agro demanded payment of the then outstanding amount of Rs.31,99,671/- with interest of Rs.11,67,429/- within 21 days. There is no reply. There is no compliance.
19. It is on this basis that Parle Agro seehs interim relief. The frst prayer is for a deposit of the entire amount of Rs. 43,67,100/-. In the alternative solvent security is sought. Then there is a prayer for an Page 5 of 13 12th February 2021 13-ARBPL2017-2021 WITH ARBAPL1821-2021.DOC injunction restraining Shree Aqua Purifer from disposing of its assets and fnally there is a prayer for disclosure.
20. The admitted facts mahe out a strong enough prima facie case. The balance of convenience is with the Petitioner. It is the franchisor. The most essential and fundamental requirement of the Franchise Agreement -- payment of franchise fees -- has not been met. There can be no equities in favour of the 1st Respondent.
21. The recent decision of the Division Bench of this Court (RD Dhanuha and VG Bhisht JJ) in Essar House Private Limited v Arcellor Mittal Nippon Steel India Ltd1 mahes it clear that there is no requirement that for such relief an iron-clad case under Order 38 Rule 5 of the Code of Civil Procedure, 1908 ("dkCPC") must be made out (or, if not argued, that the Court must hunt for it). The Division Bench reaffirmed the principle that has long been settled, and restated repeatedly, but which seem to be reagitated in the wrong way again and again. The Division Bench said in the clearest terms that the principles of the CPC, including especially Order 38 Rule 5, are guides to a Section 9 Court and the order it mahes under that Section, not fetters upon the Court's discretion.
22. That decision also dealt with the question of whether a deposit can be ordered. The Division Bench held if there is no plausible defence prima facie, the Petitioner is shown to have a good chance of succeeding in arbitration, and the defence is moonshine, then order of deposit to secure the entire claim can indeed be made.
1 2021 SCC OnLine Bom 149.
Page 6 of 1312th February 2021 13-ARBPL2017-2021 WITH ARBAPL1821-2021.DOC On my reading of the Division Bench order, the position in law is that in such a case an order of deposit not only can be made, but ought to be made.2
23. In this view of the matter, and having regard to the fact that there is no dispute that I can tell about the amounts due and relative positions of the parties. I will mahe an order today in terms of prayer clauses (a), (b), (d) and (e), which read thus.
(a) That pending the hearing and fnal disposal of the arbitral proceedings and the mahing and publishing of the Arbitral Award and its enforcement, this Hon'ble Court be pleased to pass an order directing Respondent No. 1 to deposit a sum of Rs.43,67,100/- as per the Particulars of Claim in this Hon'ble Court;
(b) That in the alternative to prayer clause (a) above, pending the hearing and fnal disposal of the arbitral proceedings and the mahing and publishing of the Arbitral Award and its enforcement, this Hon'ble Court be pleased to pass an order directing Respondent No. 1 to furnish solvent security to satisfy the claim of the Petitioner of Rs.
43,67,100/- as set out in the Particulars of Claim;
(d) That pending the hearing and fnal disposal of the arbitral proceedings and the mahing and publishing of the Arbitral Award and its enforcement, this Hon'ble Court be pleased to pass an order and injunction restraining Respondent No. 1, its agents, servants, employees, 2 See also: (1) Valentine Maritime Ltd v Kreuz Subsea Pte Ltd & Anr, 2021 SCC OnLine Bom 75, both on the question of Order 38 Rule 5 and that an order of deposit to secure the claim can indeed be made under Section 9 (paragraphs 88, 95 to 97 and 101); and (2) Jagdish Ahuja & Anr v Cupino Ltd, 2020 SCC OnLine Bom 849 (paragraphs 6 and 7), also on these two points.
Page 7 of 1312th February 2021 13-ARBPL2017-2021 WITH ARBAPL1821-2021.DOC representatives, assigns and/or any other person/s claiming under them from transferring, selling, encumbering, disposing of and/or in any manner dealing with the movable and immovable assets of Respondent No. 1.
(e) That pending the hearing and fnal disposal of the present Petition, this Hon'ble Court be pleased to pass an order directing Respondent No.1 to disclose on oath, the details and particulars of the immovable assets and the movable asset of Respondent No.1, including but not limited to banh accounts, DEMAT accounts, shares, stochs, cash in hand, etc. owned by or belonging to Respondent No.1, either singly or jointly with any person or entity or to which the Respondent No.1 is entitled."
24. The deposit of Rs.43,67,100/- is to be made with the Prothonotary and Senior Master on or before 5th March 2021. Upon deposit, the amount is to be invested by the Prothonotary and Senior Master until further orders of this Court or the Arbitral Tribunal as the case may be.
25. In the alternative to a deposit, it is open to the 1st Respondent to furnish a banh guarantee in favour of the Prothonotary & Senior Master in the full amount and which must also cover interest at the demanded rate. That banh guarantee is to be hept alive without requiring further orders of the Court until otherwise ordered by this Court or by an Arbitral Tribunal.
26. The Petitioner is not permitted to withdraw the amount deposited or to seeh encashment and payment under the banh guarantee, but must apply to the arbitral tribunal for leave to do so.
Page 8 of 1312th February 2021 13-ARBPL2017-2021 WITH ARBAPL1821-2021.DOC Any such application will be decided on its merits uninfuenced by any observations in this order.
27. The Disclosure Affidavit is also to be fled by 5th March 2021 before the learned Sole Arbitrator.
28. Mr Kamod says that arbitration has been invohed by a separate notice dated 25th July 2020. The Section 11 Application is also listed on board.
29. The Section 11 Application has been served on 22nd January 2021 along with the Section 9 Petition. In the facts and circumstances set out above there can be no further delay. The arbitration clause admits of no dispute. I am not leaving it to the Petitioner to nominate an Arbitrator but will appoint an Arbitrator of this Court. I will nominate Ms Megha Chandra, learned Advocate of this Court to be the Sole Arbitrator to decide the disputes and differences between the parties.
TERMS OF APPOINTMENT
(a) Appointment of Arbitrator: Ms Megha Chandra, learned Advocate, is hereby nominated to act as a Sole Arbitrator to decide the disputes and differences between the parties.
(b) Communication to Arbitrator of this order:
(i) A copy of this order will be communicated to the learned Sole Arbitrator by the Advocates Page 9 of 13 12th February 2021 13-ARBPL2017-2021 WITH ARBAPL1821-2021.DOC for the Petitioner within one weeh from the date this order is uploaded.
(ii) The Advocates for the Petitioner will forward an ordinary copy of this order to the learned Sole Arbitrator at the following postal and email addresses:
Arbitrator Ms Megha Chandra, Advocate
Address Office No. 1-C
Pushpam Building
Cawasjee Patel Street
Fort
Mumbai 400 001
Mobile 9372590230
Email [email protected]
(c) Disclosure: The learned Sole Arbitrator is requested to forward, in hard copy or soft copy (or both), the necessary statement of disclosure under Section 11(8) read with Section 12(1) of the Arbitration Act to Advocates for the parties as soon as possible. The Advocates for the Petitioners will arrange to fle the original statement in the Registry. If the statement is forwarded in soft copy, a print out of the covering email is also to be fled in the Registry.
(d) Appearance before the Arbitrator: Parties will appear before the learned Sole Arbitrator on such date and at such place as the learned Sole Arbitrator nominates to obtain appropriate directions in regard to fxing a schedule for completing pleadings, etc. Page 10 of 13 12th February 2021 13-ARBPL2017-2021 WITH ARBAPL1821-2021.DOC
(e) Contact/communication information of the parties:
Contact and communication particulars are to be provided by both sides to the learned Sole Arbitrator. The information is to include functional email addresses and mobile numbers.
(f ) Section 16 application: The respondent is at liberty to raise all questions of jurisdiction within the meaning of section 16 of the Arbitration Act. All contentions are left open.
(g) Interim Application/s:
(i) Liberty to the parties to mahe an interim
application or interim applications including (but not limited to) interim applications under Section 17 of the Arbitration & Conciliation Act, 1996 before the learned Sole Arbitrator. Any such application will be decided in such manner and within such time as the learned Sole Arbitrator deems ft.
(ii) The present Petition under Section 9 of the Arbitration Act for its remaining reliefs will be treated, heard, and disposed of as an application under Section 17 of the Act. All affidavits fled in the Section 9 petition will be treated as affidavits fled in the Section 17 application. Liberty to apply to the learned Sole Arbitrator for leave to fle further affidavits.Page 11 of 13
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(iii) The learned Sole Arbitrator is requested to dispose of all interim applications at the earliest.
(h) Fees: The arbitral tribunal's fees shall be governed by the Bombay High Court (Fee Payable to Arbitrators) Rules, 2018.
(i) Sharing of costs and fees: Parties agree that all arbitral costs and the fees of the arbitrator will be borne by the two sides in equal shares in the frst instance.
(j) Consent to an extension if thought necessary. Parties immediately consent to a further extension of up to six months to complete the arbitration should the learned Sole Arbitrator fnd it necessary.
(k) Venue and seat of arbitration: Parties agree that the venue and seat of the arbitration will be in Mumbai.
(l) Procedure: These directions are not in derogation of the powers of the learned Sole Arbitrator to decide and frame all matters of procedure in arbitration.
30. For completeness and good order the amendments to the Section 9, deleting the names of Respondents Nos. 2 and 3 are to be carried out forthwith in Court without need of reverifcation.
31. The Petition under Section 9 and the Application under Section 11 are disposed of in these terms. Liberty to the Petitioners to seeh the costs of this Petition as costs in arbitration, along with interest on costs if permissible in law.
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32. This order will be digitally signed by the Personal Assistant of this Court. All concerned will act on production of a digitally signed copy of this order.
(G. S. PATEL, J) Page 13 of 13 12th February 2021