Delhi High Court
Ion Exchange (India) Ltd. vs Panasonic Electric Works Co. Ltd. And ... on 23 December, 2014
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 23rd December, 2014.
+ ARB.P. 662/2014
ION EXCHANGE (INDIA) LTD. ..... Petitioner
Through: Mr. Amey Nargolkar and Mr.
Aaditya Vijaykumar, Advocates.
Versus
PANASONIC ELECTRIC WORKS CO. LTD.
AND ANR ..... Respondents
Through: None.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The petitioner has filed this petition under Section 11(6)(a) of the
Arbitration and Conciliation Act, 1996 (Arbitration Act) impleading
Panasonic Electric Works Co. Ltd., Japan (hereinafter called „Panasonic
Japan‟) as respondent No.1 and Panasonic India Pvt. Ltd. (hereinafter called
„Panasonic India‟) as respondent No.2 thereto, and pleading:
(i) that Panasonic Japan through the Panasonic India, in the year
2010, approached the petitioner to discuss the possibility of a
business venture / relationship and alliance;
(ii) that during the course of negotiation, a Mutual Non-Disclosure
Agreement dated 6th December, 2010 was executed between the
ARB.P.No.662/2014 Page 1 of 12
petitioner and Panasonic India, whereunder each of them agreed that
any confidential information exchanged during the course of
negotiation will not be used for any other purpose;
(iii) that thereafter on 14th September, 2011 two agreements were
executed between the petitioner and "the respondents"; one being a
Sales Agreement and other being a Development Agreement;
(iv) that under the Development Agreement, the petitioner was to
develop the three models of water purifiers in terms of Annexure A to
the agreement and once the water purifier was developed, the
petitioner was required to manufacture the said water purifiers, as per
the Sales Agreement;
(v) that the Development Agreement also contained a dispute
resolution system by which all disputes, differences or controversies
were to be finally settled under the London Council of International
Arbitration (LCIA) India Arbitration Rules, with the seat of
arbitration being New Delhi, India;
(vi) that the Sales Agreement also contained an arbitration clause
which mandated that all disputes and differences would be
mandatorily resolved by arbitration;
ARB.P.No.662/2014 Page 2 of 12
(vii) that the Sales Agreement was to come into effect only, once the
product was developed and approved by the respondents;
(viii) that though the petitioner over the next two years, at a huge
cost and expense, developed the product as per the Development
Agreement, inspite of breaches by the respondents of their part of the
Development Agreement, but subsequently, in or about November,
2012, the petitioner became aware of the dishonest intentions of the
respondents, when the respondents failed to shift the manufacturing
unit to India;
(ix) that in May, 2013, a meeting was held between the parties to
work out the costing and on 28th May, 2013 it was decided to
terminate "the previous agreement and the petitioner was required to
submit a revised costing"; it was further agreed that if the revised
costing was agreed to between the parties, then the parties will
execute a fresh agreement and the petitioner will not be entitled to
development costs, if revised costing was not agreed to, then the
petitioner would be entitled to be compensated;
(x) that the parties could not arrive at a consensus as to the revised
costing and "the respondents wrongfully terminated the Sales
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Agreement";
(xi) that "the respondent is liable to pay a sum of Rs.90,21,930/-
towards non-payment of certain invoices and development costs,
besides being liable to pay unliquidated damages and would be
further liable to pay Rs.1,59,41,517.84 to VSE, for the costs incurred
by it";
(xii) that the petitioner filed a petition under Section 9 of the
Arbitration Act being O.M.P. No.150/2014;
(xiii) that "the respondents are liable to pay the petitioner and its sub-
contractors a sum of Rs.2.5 crores, besides unliquidated damages";
(xiv) that the petitioner vide its letter dated 9th August, 2014 to the
respondents invoked the arbitration clause;
(xv) that a vague reply was sent by the respondent No.1;
(xvi) that another notice dated 17th November, 2014 was got sent by
the petitioner, calling upon the respondents to appoint an Arbitrator
mutually;
(xvii) that however the respondents failed to appoint an Arbitrator;
(xviii) that the seat of arbitration being at New Delhi, India and
otherwise under Section 42 of the Arbitration Act, this Court has
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jurisdiction.
2. A perusal of the documents filed by the petitioner, showed:
(a) that the Mutual Non-Disclosure Agreement dated 6th
December, 2010 supra was between the petitioner and Panasonic
India, as specifically pleaded by the petitioner also; though the same
provided for arbitration of a sole Arbitrator to be appointed with
mutual consent of parties, but the said agreement was for the period
of negotiation only;
(b) though the petitioner had vaguely pleaded that both the
agreements dated 14th September, 2011 were between the petitioner
and the "respondents" but one of the agreements dated 14th
September, 2011 i.e. the Sales Agreement, was between the petitioner
and the Panasonic India and though executed in Mumbai, provides for
arbitration of an Arbitral Tribunal of three Arbitrators, of which one
is to be appointed by each of the parties and the third by the
Arbitrators nominated by the petitioner and Panasonic India, with the
venue of arbitration at New Delhi and in accordance with the
Arbitration Act; and,
(c) the other agreement dated 14th September, 2011 titled
"Development Agreement" is between the Panasonic Japan on the
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one hand and the petitioner on the other hand and provides for the
resolution of disputes under the LCIA India Arbitration Rules, with
the number of Arbitrators being one and the seat or legal place of
arbitration being New Delhi, India and the agreement being governed
in accordance laws of India.
3. The matter came up first before this Court yesterday i.e. 22 nd
December, 2014, when it was enquired from the counsel for the petitioner,
whether not the mutual Non-Disclosure Agreement has ceased to exit /
operate upon the two agreements dated 14th September, 2011 being signed
and whether not the arbitration clause contained in the Mutual Non-
Disclosure Agreement is now of no avail.
4. The counsel for the petitioner replied in the affirmative.
5. It was next enquired from the counsel for the petitioner, whether not
the disputes for adjudication whereof the petitioner is now seeking
appointment of Arbitrator, are under the two separate agreements, one
between the petitioner and Panasonic India and other between the petitioner
and the Panasonic Japan and whether not Panasonic India and Panasonic
Japan are separate legal entities.
6. The counsel for the petitioner again replied in the affirmative.
ARB.P.No.662/2014 Page 6 of 12
7. It was next enquired from the counsel for the petitioner, as to how one
petition under Section 11(6)(a) has been filed with respect to two different
agreements executed by the petitioner with two different entities and
providing for different modes of arbitration. It was yet further enquired, as
to what were the LCIA India Arbitration Rules (the same have not been
filed by the petitioner) and whether the petitioner thereunder has taken any
steps for invoking the arbitration and as to whether without taking the said
requisite steps, petitioner can file a petition under Section 11(6) of the Act.
It was yet further enquired, whether not the arbitration under the
Development Agreement with Panasonic Japan is an international
commercial arbitration within the meaning of Section 2(1)(f) of the
Arbitration Act.
8. The counsel for the petitioner though agreeing with each of the
aforesaid, contended that the disputes under the two agreements are
intermingled and common and having two arbitration proceedings before
different Arbitral Tribunals would unnecessarily increase the costs, to the
prejudice of the petitioner, and thus the petitioner has filed this petition to
have a common Arbitral Tribunal appointed for adjudication of disputes
under both the agreements and for adjudication of claims of the petitioner
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against both, Panasonic India and Panasonic Japan. Reliance in this regard
was placed on paras 65, 66 and 67 of Chloro Controls (I) P. Ltd. Vs. Severn
Trent Water Purification Inc. (2013) 1 SCC 641 and on the order dated 18th
May, 2012 of a Co-ordinate Bench of this Court in ARB.P. No.69/2012
titled GMR Ambala Chandigarh Expressways Pvt. Ltd. Vs. National
Highways Authority of India.
9. However, a perusal of the judgment aforesaid showed that in Chloro
Controls (I) (P). Ltd. supra, the Supreme Court observed that though
normally arbitration takes place between persons who have been parties to
both, the arbitration agreement as well as the substantive contract
underlining that agreement but it does occasionally happen that the claim is
made against or by someone who is not originally named as a party and
though the same creates some difficult situations, but they are not absolute
obstructions to the law / arbitration agreement and arbitration is possible
between a signatory to an arbitration agreement and a third party, though the
onus is heavy to show that such third party is claiming through or under the
signatory party as contemplated under Section 45 of the Arbitration Act. It
was further held that though the scope of an arbitration agreement is limited
to the parties who entered into it but in certain cases the "Group of
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Companies Doctrine" has also been applied and a non-signatory could be
subjected to arbitration provided these transactions with group of companies
and there was a clear intention to bind both, the signatory as well as the non-
signatory parties. It was further held that the intention of the parties is a
very significant feature which must be established before the scope of
arbitration can be said to including the signatory as well as the non-
signatory parties. As far as GMR Ambala Chandigarh Expressways Pvt.
Ltd. supra is concerned, the same is a consent order and thus cannot be used
as a precedent.
10. It was thus further enquired from the counsel for the petitioner, as to
how the judgment of the Apex Court in Chloro Controls (I) (P). Ltd. supra
could be said to be applicable in the present situation, where the petitioner,
on the same day entered into two separate and distinct agreements with two
different companies, even if belonging to the same group, and providing
separate mechanism for resolution of disputes. It was enquired, whether not
the same was counter indicative of the parties having intended as aforesaid.
It further appears that Section 45 of the Arbitration Act, to which reference
was made by the Supreme Court, being in Part II of the Act relating to
enforcement of foreign awards, may not be applicable in the present case
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which as per Section 2(2) of the Act is governed by Part I of the Arbitration
Act which applies where the place of arbitration is in India, as is the case
under both the agreements aforesaid.
11. The counsel for the petitioner yesterday sought an adjournment to
today, stating that the respondents will be approached to find out whether
they are agreeable to a composite arbitration under both the agreements.
Accordingly, the matter was adjourned to today.
12. The counsel for the petitioner today informed that the respondents are
not agreeable to a composite arbitration under both the agreements and
withdrew the petition with liberty to take separate steps under the two
separate and distinct agreements. However, later on, the counsel mentioned
the matter and stated that an order on merits may be made on this petition,
to enable the petitioner to approach the Supreme Court which may, in
exercise of its jurisdiction under Article 141 of the Constitution of India,
order for a composite Arbitral Tribunal.
13. This Court having been vested the power to appoint the Arbitrator
under Section 11 of the Arbitration Act, is bound thereby and cannot
appoint an Arbitrator otherwise than as prescribed therein. Vide Section
11(2), the parties are free to agree on a procedure for appointing the
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Arbitrator or Arbitrators; failing such agreement, Section 11(3) provides
that in an arbitration with three Arbitrators, each party shall appoint one
Arbitrator, and the two appointed Arbitrators shall appoint the third
Arbitrator and Section 11(4) provides that upon failing of either party to
appoint an Arbitrator, the appointment shall be made by the Chief Justice or
any person designated by him; Section 11(5) provides that failing any
agreement under Section 11(2), in an arbitration with sole Arbitrator, if the
parties fail to agree on the Arbitrator, the sole Arbitrator shall be appointed
by the Chief Justice or his designate. As per the said procedure, the
petitioner, for appointment of the sole Arbitrator under the Development
Agreement, governed by the LCIA India Arbitration Rules, is required to
approach LCIA i.e. London Council of International Arbitration and as per
the Sales Agreement is required to nominate an Arbitrator and call upon
Panasonic India to nominate its Arbitrator and neither of which steps have
been taken by the petitioner. The intention of the parties in the present case,
clearly was that the disputes if any of the petitioner with Panasonic India
and / or Panasonic Japan be adjudicated by separate mechanism with the
two, even if belonging to same group, being not party in each others
disputes. What the petitioner called upon the respondents jointly to do vide
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the notices preceding the petition, is to agree on a sole Arbitrator under both
the agreements.
12. The petition is thus clearly misconceived. This Court, as the
designate of the Chief Justice of this High Court, in exercise of powers
under Section 11, is not empowered to grant the relief claimed.
13. Before parting, mention may be made of the judgment of the Division
Bench of this Court (reported as Ion Exchange (India) Ltd. Vs. Panasonic
Electric Works Co. Ltd. 208 (2014) DLT 597) in a reference made by the
learned Single Judge in the Section 9 petition preferred by the petitioner,
though the counsel for the petitioner chose not to refer thereto or place on
record copy thereof and holding that this Court has territorial jurisdiction.
Though, from the judgment, the Section 9 petition appears to have been
preferred with respect to both agreement, but the question as considered
above does not appear to have been considered therein.
14. Accordingly, the petition is dismissed. The petitioner of course will
have liberty to take appropriate steps for invoking arbitration in accordance
with the two agreements.
No costs.
RAJIV SAHAI ENDLAW, J.
DECEMBER 23, 2014/bs (corrected and released on January 05, 2015) ARB.P.No.662/2014 Page 12 of 12