Delhi High Court
Carrier Airconditioning & ... vs M/S Linc Digital Systems Pvt. Ltd. & Ors. on 9 April, 2009
Author: Ajit Prakash Shah
Bench: Chief Justice
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.A. 41/2007
CARRIER AIRCONDITIONING & REFRIGERATION LTD. ..... Petitioner
Through: Mr. Samir Chugh, Adv.
Versus
M/S LINC DIGITAL SYSTEMS PVT. LTD. & ORS. ..... Respondents
Through: Mr. Mayur P. Shah, Adv.
CORAM:
HON'BLE THE CHIEF JUSTICE
ORDER
% 09.04.2009 The applicant appointed the first respondent as an authorized sales and service dealer of the products of the appellant company vide Dealership Agreement dated 10.1.1998. The agreement was for a period of one year and any further renewal was to be as per mutual agreement. The agreement was terminated by the applicant vide notice dated 23.10.2003. The agreement contains an arbitration clause. The applicant served a notice on the respondents dated 11.10.2006 enumerating therein the disputes, which had arisen between the parties. As there was no named arbitrator, the applicant proposed the names of three persons giving the option to the respondent to appoint anyone of them as the arbitrator. By reply dated 8.11.2006, the respondents denied the liability as well as the subsistence of the arbitration agreement and declined to appoint the arbitrator. Hence the applicant has approached this court under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter, for brevity's sake, referred to as the Act).
2. The application is opposed by the respondents on two grounds. First, it is contended that there is no enforceable arbitration agreement Arb.A. No. 41 of 2007 1 as contemplated by Section 7 of the Act. Secondly it is alleged that the claim is barred by limitation.
3. In so far as the first contention is concerned, it was urged on behalf of the respondents that there was only an oral agreement to continue the contract with the terms and conditions described in the expired agreement. In view of the provisions of Section 7 of the Act, the agreement could be renewed/extended only by a written agreement. The requirement of having the written agreement cannot be bypassed by a mutual understanding or an oral agreement. The contention is without any merit. The agreement contains a specific provision for renewal of the contract on the basis of the mutual agreement. In the reply dated 8.11.2006, the respondents had categorically admitted that the dealership agreement was extended and renewed from time to time and renewed upto 2001. In their reply to the termination letter dated 23.10.2003, it was not the case of the respondents that the agreement was not renewed but on the contrary it was stated that the abrupt termination of the contract caused to them tremendous financial loss as well as damage to their goodwill, reputation and image. By letter dated 28.1.2003, the respondents had requested for grant of dealership for Surat under different dealer code so as to segregate the two operations. It is evident from the letter of request of the respondent that besides running business of the applicant at Ahmedabad on the basis of dealership agreement mutually renewed from year to year, the respondents wanted dealership for Surat also and it is not now open for the respondents to contend that the dealership agreement was not renewed. It is also seen from the records that the respondent had executed an Agreement of Representation and Warranties in favour of the applicant on 15.4.2000/ 20.4.2000. The correspondence placed on record as Arb.A. No. 41 of 2007 2 well as the subsequent conduct of the parties show that the dealership agreement was renewed from time to time and therefore an arbitration agreement did exist between the parties. The conduct of the parties, as evidenced by various letters, shows that the parties continued to bind themselves by the terms and conditions contained in the dealership agreement which obviously included the arbitration clause.
4. In this connection, a reference may be made to the decision of the Supreme Court in Bharat Petroleum Corporation Ltd. v. Great Eastern Shipping Co. Ltd. (2008) 1 SCC 503. In that case, the question before the Court was whether on the expiry of the extended period of charter hire, the charter party came to an end and the arbitration agreement between the parties perished with it. Answering the question in the negative and dismissing the appeal, the Supreme Court held:
"19. It is, no doubt, true that the general rule is that an offer is not accepted by mere silence on the part of the offerree, yet it does not mean that an acceptance always has to be given in so many words. Under certain circumstances, the offeree's silence, coupled with his conduct, which takes the form of a positive act, may constitute an acceptance
- an agreement sub silentio. Therefore, the terms of a contract between the parties can be proved not only by their words but also by their conduct.
20. ..... The conduct of the parties, as evidenced in the said correspondence and, in particular the appellant's silence on the respondent's letters dated
5.11.1998 and 4.1.1999, coupled with the fact that they continued to use the vessel, manifestly goes to show that except for the charter rate, there was no other dispute between the parties. They accepted the stand of the respondent sub silentio and thus, continued to bind themselves by other terms and conditions contained in the charter party dated 6.5.1997, which obviously included the arbitration clause."
5. Under the circumstances, the argument raised by the respondents that the renewal can be only by written agreement has to be rejected.
Arb.A. No. 41 of 2007 3
6. Coming then to the question of limitation, it is clearly seen that the termination of the contract was on 23.10.2003 and the arbitration notice was given on 11.10.2006, i.e. within a period of three years. Therefore, the argument that the claim was barred by limitation has to be rejected.
7. Justice A.D. Singh (Retd.) is appointed as the sole arbitrator to arbitrate upon the disputes between the parties.
8. With the above observations, the Arbitration Application stands disposed of.
CHIEF JUSTICE APRIL 09, 2009 Pk Arb.A. No. 41 of 2007 4