Delhi District Court
Tokai Engineering Private Limited vs Material Movell (India) Pvt. Ltd on 11 January, 2021
Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
IN THE COURT OF SH. ARUN SUKHIJA,
ADDITIONAL DISTRICT JUDGE - 07, (CENTRAL DISTRICT)
TIS HAZARI COURTS, DELHI.
MCA NO.: 12/2019
UNIQUE CASE ID NO.: 80/2019
IN THE MATTER OF :
Tokai Engineering Private Limited
Having Office at Plot No. 1226,
Sector 4, Urban Estate,
Gurgaon122001. ....Appellant
VERSUS
Material Movell (India) Pvt. Ltd.
Regd. Office at 3640, 1st Floor,Chawri Bazar,
Opp. Standard Sweets, Delhi06. ....Respondent
APPEAL FOR SETTING ASIDE THE IMPUGNED ORDER DATED 21.11.2019 PASSED BY LD. CIVIL JUDGE IN APPLICATION UNDER SECTION 8 OF THE ARBITRATION & CONCILIATION ACT, 1996 Date of institution of the Appeal : 13/12/2019 Date on which Judgment was reserved : 16/12/2020 Date of Judgment : 11/01/2021 :: J U D G M E N T :: The Appellant was Defendant and the respondent was Plaintiff before the Ld. Trial Court. The appellant and respondent are MCA No.12/2019 Page 1 of 11 Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
respectively referred in this Judgment according to the original status before the trial court. This appeal is filed by the defendant challenging the order dated 21/11/2019, whereby, the application under Section 8 of the Arbitration and Conciliation Act, 1996 was dismissed by the Ld. Trial Court. The Perusal of plaint reveals that plaintiff has filed the suit for recovery basically on the basis of following three invoices:
(i) Invoice dated 13/09/2016 for a sum of Rs. 42,964/
(ii) Invoice dated 04/10/2016 for a sum of Rs. 80,555/
(iii) Invoice dated 04/10/2016 for a sum of Rs. 10,416/ The plaintiff has claimed a total sum of Rs.1,33,935/ towards balance outstanding on the supply of aforesaid goods to the defendant. The plaintiff has also claimed an amount of Rs.44,877/ on the premise that defendant has not given CForms for the year 201516 and 201617. The plaintiff has claimed a sum of Rs.1,78,812/ as due and payable by the defendant towards aforesaid three invoices and CForms, which were not handedover by the defendant to the plaintiff. The plaintiff has also claimed interest @ 24% per annum w.e.f. 27/10/2016. Thus, the plaintiff had claimed a total sum of Rs.2,87,292/ which includes aforesaid amount of Rs.1,78,812/ and an interest amount of Rs. 1,08,480/. Para no. 3 of the plaint reveals that it is the case of plaintiff that the defendant used to place oral order for purchase of trolley and PU wheels upon the plaintiff at his Delhi registered office.
The defendant has filed written statement as well as an application under Section 8 of the Arbitration and Conciliation Act MCA No.12/2019 Page 2 of 11 Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
read with Section 151 CPC before the Ld. Trial Court. As per the written statement, on merits, the case of the defendant in nutshell is that the plaintiff has supplied the defective material and therefore, there was no question of issuance of CForms. It is further case of the defendant that fact of the defective material was brought before plaintiff and plaintiff has settled the entire amount with the defendant for a sum of Rs. 22,489/ and the said amount was paid towards full and final settlement. The plaintiff in the suit has claimed that last payment of Rs. 22,489/ was received by the plaintiff from defendant.
In the application under Section 8 of the Arbitration and Conciliation Act, 1996, the defendant has claimed that the defendant has given the purchase orders to the plaintiff, and on the said basis, the plaintiff has supplied the goods of aforesaid three invoices, which were claimed by the Plaintiff in the suit. The defendant has placed only one purchase order and AnnexureA of the said purchase order, there is last clause i.e. clause no. 29 on which heavy reliance is placed by the defendant/appellant. The said clause is reproduced hereunder: "All questions relating to the validity, construction & performance of the aboveagreed clauses shall be governed by and construed in accordance with the laws in India and subject to Mumbai jurisdiction only. Arbitration, if any, shall be conducted in accordance with the arbitration and conciliation act, 1996. Arbitration proceedings shall take place in Mumbai, India only."
MCA No.12/2019 Page 3 of 11 Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
On the basis of aforesaid clause, the defendant claimed that there is an arbitration clause between the parties. It is well settled law that there should be an arbitration agreement between the parties, in terms of Section 7 of the Arbitration and Conciliation Act, in order to invoke the arbitration clause. The purchase order which was placed by the plaintiff contains the description of the goods which the defendant was required to purchase from the plaintiff. However, at the bottom of the purchase order in one of the column, it is written that it contains standard terms and conditions as per enclosed AnnexureA and AnnexureA is the part of purchase order. First of all, the defendant has placed only one purchase order dated 24.09,16, although, the plaintiff is claiming the amount through three invoices. The purchase order which is placed by the plaintiff on record shows the value of goods of Rs.70,200/ only. The plaintiff is claiming an amount of Rs.1,33,935/ towards the aforesaid three invoices. Further, the invoices which were admitted by the defendant in his written statement, although, taken the defence that the defective material was supplied, reveals that there is clause in the said invoices that all disputes will be settled according to Delhi Jurisdiction. The arbitration clause, which the defendant was relying upon, is itself is vague. It says arbitration, if any. Further, the purchase order speaks about the Mumbai Jurisdiction. The invoices, which were admittedly drawn upon the defendant, reveal that all the disputes will be settled according to Delhi Jurisdiction. The invoices were issued by the Plaintiff subsequently to the alleged purchase order.
MCA No.12/2019 Page 4 of 11 Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
There should be, first of all, consensusadidem between the parties for invoking the arbitration clause.
The basic purchase order contains only the description of goods which was placed upon the plaintiff by defendant. Thereafter, in the admitted invoices, it is written that all disputes will be settled according to Delhi Jurisdiction. The plaintiff has never agreed upon any Arbitration clause. If, there was any Arbitration clause then in the invoice, it ought to have written that Arbitration, will be done in Delhi and all disputes will be settled as per the Delhi Jurisdiction as per said invoices. The perusal of the said invoices reveals that there was no consensus ad idem between the parties with respect to Arbitration clause, as claimed by the defendant. As far as consensus ad idem is concerned, this Court has profit to refer relevant portion of paras no.25 to 28 of the Judgment passed by our own Hon'ble High Court in Priknit Retails Ltd. & Ors. Vs. Aneja Agencies in OMP (COMM) No. 374/2016 & IA no.
9569/2016 D.O.D. 22.03.2018: "25. It is also necessary to refer to Section 7 of the Act, which reads as under: "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.
MCA No.12/2019 Page 5 of 11 Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
(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 or other means of telecommunication 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."
26. Section 7(4) of the Act makes it explicitly clear that an arbitration agreement would be in writing, if it is contained in a document signed by the parties; or contained in exchange of letters, telex, telegrams or other means of telecommunications, which provides a record of the agreement; or in an exchange of Statements of Claim and Defence in which the existence of the agreement is alleged and not denied. In the present case, none of the three clauses of Section 7(4) of the Act are satisfied. The arbitration clause is not signed by any party. It is MCA No.12/2019 Page 6 of 11 Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
also not possible to accept that the said agreement was embodied in exchange of letters, telex, telegrams or other means of telecommunication. An exchange of such communications, which record the agreement between the parties to refer the disputes to arbitration, would be sufficient to fulfil the requisites of Section 7 of the Act. However, it is necessary that such an agreement between the parties is discernible without any ambiguity.
27. Mere fact, that the delivery of goods had been accepted, would not imply that petitioner no.1 had also agreed to the arbitration clause. As stated above, the said agreement is inchoate inasmuch as the blanks were never filled in. Further, the agreement remained unsigned. The contention, that petitioner no.1 had not disputed the invoices would necessarily mean that petitioner no.1 had also agreed to the arbitration agreement, is unmerited. This is so because in order to communicate its acceptance to the arbitration clause, petitioner no.1 would require acknowledgement of the goods in the form as indicated in the invoices and further also affix its signatures. Admittedly, petitioner no.1 has neither signed the arbitration agreement nor communicated its acceptance to the same.
28. It is well settled that the arbitration agreement is a separate and an independent agreement, although it may be embodied in as a clause in the main agreement. In the present case, the respondent seems to have acknowledged this distinction and, therefore, had provided a separate receipt at the bottom of the invoice. This was separate from the main invoice. This receiptcumarbitration MCA No.12/2019 Page 7 of 11 Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
agreement was not executed by the parties and, thus, it is not possible to accept that an arbitration agreement existed between the parties.
(Portions bolded in order to highlight) This Court has also profit to refer relevant portion of paras No.22, 27 to 29 of the Judgment passed by our own Hon'ble High Court in Parmeet Singh Chatwal & Ors Vs. Ashwani Sahani in OMP No. 1445/2014 & I.A.No.22669/2014 D.O.D. 14.02.2020: "22. The legal position that follows is that what is required to be ascertained is the intention of the parties to settle their disputes through arbitration. The essential attribute of an arbitration agreement is that it must be expressly or impliedly spelt out from a clause in the agreement that there is an agreement to refer their disputes/differences to arbitration.
27. In this context, I may also look at a judgment of a Coordinate Bench of this court in the case of Taipack Ltd. & Ors. V. Ram Kishore Nagar Mal (supra) where the court was interpreting an arbitration clause which was printed on the invoice and stated as follows: "In case of any dispute the judgment of the Tribunal of any other authority appointed by the Paper Merchants Association (Regd.) Delhi will be final and binding."
28. This court had held that the aforesaid clause is not an arbitration clause. It held as follows: "20. The signature by the petitioners agent on the respondents copy of the invoice cannot tantamount MCA No.12/2019 Page 8 of 11 Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
to acceptance of the respondents so called offer for arbitration. The signatures in such a situation were evidently an acknowledgment of receipt of the goods and nothing more. There is another aspect of the so called Arbitration Agreement contained in condition No. 4 of the Respondents invoice. The said condition in the invoice firstly does not use the expression 'arbitration' or 'arbitrator'. Secondly, the Respondent does not even make a reference to the "Constitution and Regulations" of the Paper Merchants Association (Regd.), Delhi. Consequently, it is difficult to accept that the Petitioner ever became aware of, or agreed to refer its dispute with the Respondent and relation to the contract in question to arbitration by the Paper Merchants Association (Regd.), Delhi. The condition No. 4 appears to be incomplete and rather vague. Pertinently, Regulation XXX of the Paper Merchants Association states that the clause, above clause No. 2 in bold words, has to be printed by the Merchant on its invoice, for it to bind the outsider. However, what is printed by the Respondent on its invoice as condition No. 4 is nowhere close to the boldly printed text in Regulation XXX. It also appears that the arbitration contemplated in Regulation XXX is in respect of disputes of nonpayment "between member to member or member to outsider". It is not in respect of disputes of nonpayment from an outsider and a member, which is the case in hand. In response to the invoice sent by the respondent with the condition No. 4 as aforesaid, there was no exchange of letters, telegrams or any other means of telecommunication in writing from the side of the petitioner to the respondent where from the consent of the petitioner to the conditions contained on the reverse of the invoice could be inferred."
MCA No.12/2019 Page 9 of 11 Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
29. The above judgments would support the finding recorded above, namely, that the signatures affixed on the invoice are only the acknowledgement of receipt of goods and nothing more. Such a clause would not be an Arbitration Agreement. The Parties were not ad idem. As there is no Arbitration Agreement, the Award and the Proceedings to that extent are vitiated.
(Portions bolded in order to highlight) Even the Arbitration clause, which was relied upon by the defendant, does not clearly envisaged that the parties were intending to refer the matter to Arbitration in reference to their disputes, as it was written in the Arbitration clause that Arbitration, if any. This Court is of the considered opinion that the Arbitration, if any, means that there should be consensus ad idem between the parties for arriving an Arbitration agreement but the said agreement has not been arrived at between the parties. Furthermore, the claim of the plaintiff's claim is not limited to the aforesaid three invoices, which were claimed by the Plaintiff, but also the nongiving of CForms to the tune of Rs. 44,877/. Moreover, the defendant has only placed only one purchase order.
There is no infirmity in the order passed by the Ld. Trial Court except the observation made by the Ld. Trial Court that in the arbitration clause there is no reference of number of the Arbitrator to be appointed by the parties. As per Section 10(1) and 10(2) of the Arbitration and Conciliation, 1996, the parties are free to determine the number of arbitrators, provided that such number MCA No.12/2019 Page 10 of 11 Tokai Engineering Pvt. Ltd. V. Material Movell (India) Pvt. Ltd.
shall not be an even number and failing the determination referred to in subsection (1), the arbitral tribunal shall consist of a sole arbitrator. However, there is no merit in the present appeal. In my considered view, in view of the detailed discussions made hereinabove, the appeal deserves to be dismissed. Accordingly, the appeal is dismissed. Parties shall bear their respective costs of litigation qua this appeal.
The copy of this Judgment may kindly be sent forthwith to the Ld. Trial Court alongwith the record of Trial Court.
Appeal file be consigned to record room after due compliance. Announced through video conferencing on this 11th Day of January, 2021.
(ARUN SUKHIJA)
ADJ07 (Central)
Tis Hazari Courts, Delhi
MCA No.12/2019 Page 11 of 11