Calcutta High Court
M/S. Eastern Metec Pvt Ltd vs W.B. Precision Engineering Solution ... on 6 August, 2018
Author: Ashis Kumar Chakraborty
Bench: Ashis Kumar Chakraborty
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
A.P. No. 246 of 2018
M/S. EASTERN METEC PVT LTD.
Vs.
W.B. PRECISION ENGINEERING SOLUTION LTD.
BEFORE:
The Hon'ble JUSTICE ASHIS KUMAR CHAKRABORTY
For the petitioner: Mr. Anindya Basu, Advocate
Mr. Supriya Ranjan Saha, Advocate
For the respondent : Mr. M.R. Sarbadhikary, Advocate
Judgment on : 06.08.2018
Ashis Kumar Chakraborty, J.
In this application under Section 11(6) of the Arbitration & Conciliation Act, 1996, as amended by Act 3 of 2016 (in short "the Act of 1996"), the petitioner has prayed for appointment of an arbitrator to adjudicate upon the disputes between the parties relating to the purchase order dated January 12, 2016.
The brief facts which are necessary to be considered for deciding this application are that on January 12, 2016 the petitioner issued the purchase order being no. EMPL/1530/2015- 16/SM-SG/361 (hereinafter referred to as 'the said purchase order') upon the respondent for supplying certain materials mentioned therein pertaining to Ordnance Factory, Muradnagar.
The terms and conditions under which the respondent had to supply the materials were mentioned in the said purchase order. Clause 17 of the said purchase order provided that all differences and disputes arising between the parties therein shall be referred to arbitration, which shall be in accordance with the provisions of the Act of 1996. While issuing the said purchase order, the petitioner requested the respondent to sign and return a copy thereof as confirmation of its acceptance of the terms and conditions mentioned therein.
According to the petitioner, the respondent failed to supply the materials in terms of the said purchase order and it is entitled to recover various amounts from the respondent, including the price paid for the said materials. Since, the respondent refused to pay the claims of the petitioner various differences and disputes have arisen between the parties arising out of and/or relating to the said purchase order. By a notice dated September 04, 2017 the petitioner, through its advocate invoked the arbitration agreement between the parties contained in the said purchase order. However, by a letter dated September 22, 2017 the respondent, through its advocate refused to participate in any arbitration and claimed payment to Rs.3,07,499.50 from the petitioner. Thus, the petitioner has filed this application under Section 11(6) of the Act of 1996 seeking appointment of Arbitrator by this Court.
At the very outset, Mr. Sarbadhikary, learned counsel appearing for the respondent, raised an objection to the maintainability of this application by the petitioner. According to him, although while issuing the said purchase order dated January 12, 2006 the petitioner requested the respondent to sign and return a copy of the same as a confirmation of acceptance of the terms and conditions mentioned in the said purchase order but the respondent did not comply with such request. It was argued that in view of the provisions contained in Section 7 of the Act a valid arbitration agreement must be in writing and signed by the parties but in the present case, when there is no arbitration agreement between the parties signed by the respondent and the respondent did not return the purchase order endorsing its acceptance of the terms stipulated therein, there is no valid arbitration agreement which can be enforced by the petitioner.
In support of such contention, the learned counsel for the respondent cited a Single Bench decision of this Court in the case of ITC Classic Finance Ltd. -versus- Grapco Mining and Co. Ltd. reported in AIR 1997 CAL 397. He also relied on the decisions of the Supreme Court in the case of M. Dayanand Reddy -versus- A.P. Industrial Infrastructure Ltd. reported in AIR 1993 SC 2268, Wellington Associates Ltd. -versus- Kirit Mehta reported in AIR 2000 SC 1379, N. Radhakrishnan -versus- Maestro Engineers and Ors. reported in (2010) 1 SCC 72 and Elite Engineering And Construction (HYD.) Private Limited vs. Techtrans Construction India Private Limited reported in 2018(2) CHN (SC) 101 and an order dated June 9, 2010 passed by a learned Single Judge of this Court in A.P. No. 493 of 2018 (Himal Iron & Steel Pvt. Ltd. -vs-Shyam Dri Power Ltd.).
However, Mr. Anindya Basu, learned counsel appearing for the petitioner submitted that the respondent cannot dispute the issuance of the said purchase order in its favour by the petitioner, containing the clause for adjudication of any dispute arising between the parties therein be referred to arbitration under the Act of 1996. By referring to the supplementary affidavit filed by the petitioner, Mr. Basu drew the attention of the Court to the letter dated January 20, 2016 issued by the respondent to the petitioner acknowledging the receipt of the said purchase order and stating that the scope of their work is as per the said purchase order. In the said letter there was no denial by the respondent about the term contained in clause 7 of the said purchase order providing for adjudication of the disputes between the parties through arbitration. It was submitted that on March 14, 2016 the respondent raised two invoices upon the petitioner for the materials supplied in terms of the said purchase order. Further, in its electronic mail dated November 16, 2016 the respondent informed the petitioner of the personnel engaged by it at to Ordnance Factory, Muradnagar for supplying the materials in terms of the said purchase order. It was further submitted that even in its letter dated September 22, 2017 addressed to the petitioner the respondent asserted to have supplied the materials in terms of the said purchase order dated January 12, 2016. Urging all these facts, the learned counsel for the petitioner emphasised that in the present case, there is no scope of any doubt that the said purchase order dated was a concluded contract between the parties and the respondent has acted upon the same. It was urged that as per the provisions contained in section 7(4)(b) of the Act of 1996 an arbitration agreement even though in writing, need not be signed by the parties if the recording of the agreement is provided by exchange of letters, telex, telegrams and other means of telecommunication. Relying on the decision of the Supreme Court in the case of Govind Rubber Limited vs. Louis Dreyfus Commodities Asia Private Limited, reported in (2015) 13 SCC 477 the petitioner submitted that the parties being ad idem with regard to the contract through the said purchase order, the mere fact that the respondent did not sign the said purchase order cannot absolve it from the arbitration clause contained in the said purchase order. It was stressed that in this case, from the correspondence exchanged between the parties and the invoices raised by the respondent on the petitioner, it can be safely inferred that there had been a meeting of minds between the parties and they were ad idem to the terms of the purchase order, which contained the forum of disputes resolution through arbitration under the Act of 1996. Thus, according to the petitioner, neither of the decisions cited by the respondent have any application in the present case.
In view of the contention of the respondent for rejection of this application as mentioned above I find it to be expedient to consider the scope and effect of section 7 of the Act of 1996, which is extracted below :
"S.7. Arbitration agreement.- (1) In this Part, "arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in -
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams [including communication through electronic means] which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract."
A bare reading of the above provisions would show that an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement but the same shall be in writing, which is the mandatory requirement. The provisions of clauses (a), (b) and (c) of sub-section (4) of section 7 of the Act of 1996 manifest that it is not a mandatory requirement for an arbitration agreement to be signed by all the parties. As per clause (b) of sub-section (4) of section 7 of the Act of 1996, an arbitration agreement can be culled out from an exchange of letters, telex, telegrams, or other means of telecommunications, which provide a record of the agreement. As held by the Supreme Court, in the case of Govind Rubber Limited (supra) while construing an arbitration agreement or arbitration clause, the Courts have to adopt a pragmatic and not a technical approach and a commercial document having an arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than invalidate it. In the said case, the Supreme Court further held that when after considering the facts of a case, if the intention of the parties can safely be inferred that there had been a meeting of minds between the parties and they were ad idem to the terms of the contract, which contains the forum of disputes resolution through arbitration the parties are bound by such arbitration agreement. According to the petitioner, none of the decisions relied by the respondent has any application in this case.
In his reply the learned counsel for the respondent did not make any submission on the decision of the Supreme Court in the case Govind Rubber Ltd.(supra) cited by the petitioner. He also did not dispute the tax invoices issued by the respondent to the petitioner or the correspondence exchanged between the parties as wre referred to by the petitioner.
Considering the materials on record, I find that in the present case the respondent not only raised its invoices upon the petitioner for supplying the materials in terms of the said purchase order, even by its letter dated September 22, 2017 the respondent claimed that it had supplied the materials in terms of the said purchase order. Thus, the intention of the parties, as appearing from the said documents, can safely be inferred that there had been a meeting of minds between the parties and they were ad idem to the terms of the said purchase order, which contained the arbitration clause. Accordingly, I find no merit in the contention made by the respondent that it is not bound by the said arbitration clause contained in clause 17 of the said purchase order.
In the case of ITC Classic Finance Ltd. (supra), a learned Single Judge was dealing with an application under Section 8 of the Act of 1996 filed by the plaintiff against the two defendants. In the said case, the learned Single Judge found that both the defendants were not parties to the arbitration agreement and consequently, the disputes involved in the suit could not be referred to arbitration. In the case of Wellington Associates Ltd. (supra), the Supreme Court found that contract in question allowed the parties to adjudicate the disputes between them by way of suit, as well as by arbitration agreement and, as such, it was held that there was not intention of the parties that the arbitration was the sole remedy for adjudication of their disputes. In the case of N. Radhakrishnan (supra), the Supreme Court held that when the disputes between the parties require detailed investigations and production of elaborate evidence such dispute cannot be decided in arbitration and the same has to be tried by the Court. By the unreported Single Bench decision of this Court in the case of Himal Iron & Steel (P) Ltd.(supra), an application under Section 11(6) of the Act of 1996 was rejected on the ground of absence of any request by the applicant to the respondent for setting up of the Arbitral Tribunal and the applicant had threatened the respondent to institute Court proceedings and not to invoke arbitration agreement. Therefore, as submitted by the petitioner neither of the said decisions cited by the respondent have any application in the present case.
For the reasons as aforesaid, the petitioner's prayer in this application is allowed. Mr. Amitabha Ghosh, Advocate of Bar Library Club (1st Floor) is appointed as the sole Arbitrator to adjudicate upon the disputes between the parties arising out or relating to an agreement under the said purchase order dated January 12, 2016.
The learned Arbitrator shall be free to fix his remuneration and to engage a secretarial staff for the purpose of conducting the arbitral proceeding.
The fees of the learned Arbitrator and the remuneration of the secretarial staff shall be borne by the parties in equal share.
The learned Arbitrator is requested to make and publish his award within a period of ten months from completion of the pleadings of the respective parties.
There shall, however, be no order as to costs.
Urgent certified copy of this judgement, if applied for, be made available to the parties subject to compliance with all requisite formalities.
(ASHIS KUMAR CHAKRABORTY, J.)