Karnataka High Court
Ecom Gill Coffee Trading Private ... vs M/S Vittal Cashew Industries on 11 January, 2024
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NC: 2024:KHC:1595
WP No. 11292 of 2020
C/W WP No. 11311 of 2020
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 11TH DAY OF JANUARY, 2024
BEFORE
THE HON'BLE MRS JUSTICE M G UMA
WRIT PETITION NO.11292/2020(GM-CPC)
C/W
WRIT PETITION NO.11311/2020
IN WP.NO.11292/2020:
BETWEEN:
ECOM COMMODITIES INDIA PRIVATE LIMITED,
A COMPANY WITHIN THE MEANING OF
THE COMPANIES ACT, 2013,
HAVING ITS REGISTERED OFFICE AT.
ECOM HOUSE, 489/11, BOREWELL ROAD,
WHITEFIELD, BENGALURU- 560 066
REPRESENTED BY ITS AUTHORISED
SIGNATORY SRI SHAILENDRA SINGH,
SON OF GABAR SINGH GUSAIN,
AGED ABOUT 32 YEARS.
...PETITIONER
(BY SRI MANU PRABHAKAR KULKARNI, ADV. FOR
A/W MATHUVANTHY MATHAVAN, ABRAHAM JOSEPH
Digitally AND MANOJ J. RAIKAR, ADVOCATES)
signed by
MANJANNA E
Location: High AND:
Court of
Karnataka
1. M/S VITTAL CASHEW INDUSTRIES
A PARTNERSHIP FIRM, HAVING ITS
PRINCIPAL PLACE OF BUSINESS AT,
B109, INDUSTRIAL ESTATE,
BAIKAMPADY MANGALURU- 575 011
AND ALSO AT. GAJANANA CHAMBERS,
NEAR SATHYA SAI MANDIR,
HOSDURG, KASARGOD - 671 315,
KERALA. REPRESENTED BY ITS PARTNER,
SRI H. GANESH KAMATH SON OF
H. SATEESH KAMATH,
AGED ABOUT 42 YEARS.
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NC: 2024:KHC:1595
WP No. 11292 of 2020
C/W WP No. 11311 of 2020
2. M/S GAJANANA TRADERS
A PARTNERSHIP FIRM, HAVING ITS
PRINCIPAL PLACE OF BUSINESS
AT GAJANANA CHAMBERS,
NEAR SATHYA SAI MANDIR,
HOSDURG, KASARGOD- 671 315
KERALA, REPRESENTED BY ITS PARTNER,
SRI H. GANESH KAMATH, SON OF
H. SATEESH KAMATH, AGED ABOUT 42 YEARS.
3. M/S VITTAL IMPEX
A PARTNERSHIP FIRM, HAVING ITS
PRINCIPAL PLACE OF BUSINESS AT,
NEAR SATYA SAI MANDIR
HOSDURG, KANHANGAD,
KASARGOD- 671 315, KERALA.
AND ALSO AT:
4B, ISMAIL COMPLEX, GIN FACTORY ROAD,
THOOTHUKUDI, TAMIL NADU - 628 002
REPRESENTED BY ITS PARTNER
SRI H. GANESH KAMATH SON OF
H. SATEESH KAMATH, AGED
ABOUT 42 YEARS.
4. SRI H.GANESH KAMATH
SON OF H. SATEESH KAMATH,
AGED ABOUT 42 YEARS,
B 109 INDUSTRIAL ESTATE,
BAIKAMPADY, MANGALURU- 575 011.
5. SRI M. TUKARAM PRABHU
SON OF M. MADHAVARYA PRABHU,
AGED ABOUT 43 YEARS, SOLE PROPRIETOR OF
M. MADHAVARAYA PRABHU
4- 174, JEEVOTHAM, MUDUPERAR,
MANGALURU- 574 166, KARNATAKA.
...RESPONDENTS
(BY SRI UDAY SHANKAR R.M., ADV. FOR R1 TO R4;
SRI K.C.SUDARSHAN, ADV. FOR R5)
THIS WP IS FILED UNDER ARTICLES 226 AND 227 PRAYING
TO ISSUE A WRIT OF CERTIORARI OR ANY OTHER APPROPRIATE
WRIT, ORDER OR DIRECTION CALLING FOR THE RECORDS OF THE
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NC: 2024:KHC:1595
WP No. 11292 of 2020
C/W WP No. 11311 of 2020
SUIT IN COMMERCIAL O.S.NO.145/2020 DISMISSED BY THE
LEARNED LXXXII ADDL. CITY CIVIL AND SESSIONS JUDGE,
BENGALURU (COMMERCIAL COURT) (CCH-83). TO ISSUE A WRIT OF
CERTIORARI OR ANY OTHER APPROPRIATE WRIT, ORDER OR
DIRECTION CALLING FOR THE ORDER DATED 15.09.2020 IN
COMMERCIAL O.S.NO.145/2020 PASSED BY THE LEARNED LXXXIII
ADDL. CITY CIVIL AND SESSIONS JUDGE, BENGALURU
(COMMERCIAL COURT) (CCH - 83) IN RESPECT OF I.A.NO.V
(ANNEXURE "A") AND CONSEQUENTLY SET ASIDE THE SAME. TO
ISSUE A WRIT OF MANDAMUS OR ANY OTHER APPROPRIATE WRIT,
ORDER OR DIRECTION DIRECTING THE LEARNED LXXXII ADDL. CITY
CIVIL AND SESSIONS JUDGE, BENGALURU (COMMERCIAL COURT)
(CCH-83) TO RESTORE THE SUIT IN COMMERCIAL O.S.NO.145/2020
AND PROCEED WITH THE TRIAL AND ETC.,
IN WP.NO.11311/2020:
BETWEEN:
ECOM COMMODITIES
INDIA PRIVATE LIMITED,
A COMPANY WITHIN THE MEANING OF
THE COMPANIES ACT, 2013,
HAVING ITS REGISTERED OFFICE AT.
ECOM HOUSE, 489/11, BOREWELL ROAD,
WHITEFIELD, BENGALURU- 560 066
REPRESENTED BY ITS AUTHORISED
SIGNATORY SRI SHAILENDRA SINGH,
SON OF GABAR SINGH GUSAIN,
AGED ABOUT 32 YEARS.
...PETITIONER
(BY SRI MANU PRABHAKAR KULKARNI, ADV. FOR
A/W MATHUVANTHY MATHAVAN, ABRAHAM JOSEPH
AND MANOJ J. RAIKAR, ADVOCATES)
AND:
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NC: 2024:KHC:1595
WP No. 11292 of 2020
C/W WP No. 11311 of 2020
1. M/S VITTAL CASHEW INDUSTRIES
A PARTNERSHIP FIRM, HAVING ITS
PRINCIPAL PLACE OF BUSINESS AT,
B109, INDUSTRIAL ESTATE,
BAIKAMPADY MANGALURU- 575 011
AND ALSO AT. GAJANANA CHAMBERS,
NEAR SATHYA SAI MANDIR,
HOSDURG, KASARGOD - 671 315,
KERALA. REPRESENTED BY ITS PARTNER,
SRI H. GANESH KAMATH SON OF
H. SATEESH KAMATH,
AGED ABOUT 42 YEARS.
2. M/S GAJANANA TRADERS
A PARTNERSHIP FIRM, HAVING ITS
PRINCIPAL PLACE OF BUSINESS
AT GAJANANA CHAMBERS,
NEAR SATHYA SAI MANDIR,
HOSDURG, KASARGOD- 671 315
KERALA,
REPRESENTED BY ITS PARTNER,
SRI H. GANESH KAMATH, SON OF
H. SATEESH KAMATH, AGED ABOUT 42 YEARS.
3. M/S VITTAL IMPEX
A PARTNERSHIP FIRM, HAVING ITS
PRINCIPAL PLACE OF BUSINESS AT,
NEAR SATYA SAI MANDIR
HOSDURG, KANHANGAD,
KASARGOD- 671 315, KERALA.
AND ALSO AT:
4B, ISMAIL COMPLEX,
GIN FACTORY ROAD, THOOTHUKUDI,
TAMIL NADU - 628 002
REPRESENTED BY ITS PARTNER
SRI H. GANESH KAMATH SON OF
H. SATEESH KAMATH, AGED
ABOUT 42 YEARS.
4. SRI H.GANESH KAMATH
SON OF H. SATEESH KAMATH,
AGED ABOUT 42 YEARS,
B 109 INDUSTRIAL ESTATE,
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NC: 2024:KHC:1595
WP No. 11292 of 2020
C/W WP No. 11311 of 2020
BAIKAMPADY, MANGALURU- 575 011
5. SRI M. TUKARAM PRABHU
SON OF M. MADHAVARYA PRABHU,
AGED ABOUT 43 YEARS,
SOLE PROPRIETOR OF
M. MADHAVARAYA PRABHU
4- 174, JEEVOTHAM, MUDUPERAR,
MANGALURU- 574 166,
KARNATAKA.
...RESPONDENTS
(BY SRI UDAY SHANKAR R.M., ADV. FOR R1 TO R4;
SRI K.C.SUDARSHAN, ADV. FOR R5)
THIS WP IS FILED UNDER ARTICLES 226 AND 227 PRAYING
TO ISSUE A WRIT OF CERTIORARI OR ANY OTHER APPROPRIATE
WRIT, ORDER OR DIRECTION CALLING FOR THE RECORDS OF THE
SUIT IN COMMERCIAL O.S.NO.145/2020 DISMISSED BY THE
LEARNED LXXXII ADDL. CITY CIVIL AND SESSIONS JUDGE,
BENGALURU (COMMERCIAL COURT) (CCH-83). TO ISSUE A WRIT OF
CERTIORARI OR ANY OTHER APPROPRIATE WRIT, ORDER OR
DIRECTION CALLING FOR THE ORDER DATED 15.09.2020 IN
COMMERCIAL O.S.NO.145/2020 PASSED BY THE LEARNED LXXXIII
ADDL. CITY CIVIL AND SESSIONS JUDGE, BENGALURU
(COMMERCIAL COURT) (CCH - 83) IN RESPECT OF I.A.NO.V
(ANNEXURE "A") AND CONSEQUENTLY SET ASIDE THE SAME. TO
ISSUE A WRIT OF MANDAMUS OR ANY OTHER APPROPRIATE WRIT,
ORDER OR DIRECTION DIRECTING THE LEARNED LXXXII ADDL. CITY
CIVIL AND SESSIONS JUDGE, BENGALURU (COMMERCIAL COURT)
(CCH-83) TO RESTORE THE SUIT IN COMMERCIAL O.S.NO.145/2020
AND PROCEED WITH THE TRIAL AND ETC.,
THESE PETITIONS, COMING ON FOR FINAL HEARING, THIS
DAY, THE COURT MADE THE FOLLOWING:
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NC: 2024:KHC:1595
WP No. 11292 of 2020
C/W WP No. 11311 of 2020
ORDER
The plaintiff in Commercial OS.No.145/2020 on the file of the learned LXXXII Addl. City Civil and Sessions Judge, Bengaluru (Commercial Court (CCH-83) has preferred WP.No.11292/2020 impugning the order dated 15.09.2020 allowing IA No.5 filed by respondent No.5 under Section 8 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') and referring the dispute between the parties to Arbitration as per Clause No.35 in the processing agreement dated 17.01.2019 and consequently dismissing the suit of the plaintiff as not maintainable.
2. The plaintiff in the very same suit has preferred WP.No.11311/2020 impugning the order dated 15.09.2020 allowing IA No.4 filed by respondent Nos.1 to 4 under Section 45 of the Act and referring dispute to Arbitration as per the clauses in the agreements dated 12.04.2018, 26.04.2018 and 31.05.2018 and consequently dismissing the suit of the plaintiff as not maintainable.
3. Plaintiff has filed the suit OS.No.145/2020 seeking the relief of permanent injunction and for recovery of money based on the agreement entered into with respondent Nos.1 to -7- NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 4 alleging that respondents have violated the terms and conditions of the agreement dated 02.11.2018. It is also contended that respondent No.5 who had entered into the agreement with the plaintiff on 15.10.2019 has committed breach of contract and therefore, the plaintiff is entitled for relief including compensation by way of damages.
4. The suit was resisted by respondent Nos.1 to 5. Respondent Nos.1 to 4 have filed IA No.4 under Section 45 of Arbitration and Conciliation Act seeking referring the dispute to the Arbitration on the ground that as per terms of agreement dated 12.04.2018, 26.04.2018 and 31.05.2018 the dispute is to be resolved through Arbitration and therefore, plaintiff cannot maintain the suit.
5. Similarly respondent No.5 filed IA No.5 under Section 8 of the Act contending that in view of clause 35 in the processing agreement dated 17.01.2019 dispute between the parties is to be referred to the Arbitration. As such the suit is not maintainable.
6. The Trial Court after taking into consideration the contentions raised by both parties passed the impugned orders -8- NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 vide separate orders dated 15.09.2020 allowing both the applications. While allowing IA No.4 field by respondent Nos.1 to 4 under Section 45 of the Act it is held that as per agreements dated 12.04.2018, 26.01.2018 and 31.05.2018 the dispute between the plaintiff and respondent Nos.1 to 4 is to be referred to the Arbitration. Accordingly, IA No.5 filed by respondent No.5 under Section 8 of the Act, the dispute between the plaintiff and respondent No.5 is referred to the Arbitration as per clause 35 in the processing agreement dated 17.01.2019. Therefore, it is held that the suit of the plaintiff is not maintainable. The plaintiff has preferred these writ petitions seeking grant of writ of certiorari to quash these orders passed by the Trial Court.
7. Heard Sri. Manu Prabhakar Kulkarni, learned counsel petitioner and Sri.Uday Shankar, learned counsel respondent Nos.1 to 4 and Sri. K.C.Sudarshan, learned counsel for respondent No.5.
8. Learned counsel for the petitioner/plaintiff contended that plaintiff has filed the suit OS.No.145/2020 against respondent No.1 to 5 seeking perpetual injunction -9- NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 restraining the respondents from accessing, removing, processing or altering the stock or raw cashew nuts (herein after referred to as 'RCN' for brevity) and cashew nut kernels (herein referred to as 'CNK' for brevity) at the factory premises of respondent No.5 situated at Mangalore, directing respondent No.5 to handover the entire stock of RCN and CNK laying in his factory premises and restraining him from preventing the plaintiff to have access to the factory premises and to direct respondent Nos.1 to 4 to pay jointly and severally sum of Rs.6,25,34,653/- with interest at 18% per annum till realization. Respondent Nos.1 to 4 have appeared before the trial Court but they have not filed written statement. On the other hand, respondent Nos.1 to 4 have filed IA IV under Section 45 of the Arbitration Act. Similarly respondent No.5 had filed IA V under Section 8 of the Act seeking to refer the dispute for Arbitration. The Trial Court allowed both the applications, referred the dispute to arbitration and dismissed the suit of the plaintiff. Therefore, the plaintiff is before this Court.
9. Learned counsel contended that respondent Nos.1 to 4 have entered into a contract to get the 'RCN' from Africa,
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 African countries through 'Ecom Agrotrate Limited, United Kingdom' (hereinafter referred to as 'Ecom UK' for brevity). The plaintiff was not a party to the said agreement. As per the agreement, the 'RCN' was consigned to India. When the consignment was midway, respondent Nos.1 to 4 expressed their inability to pay the amount to 'Ecom UK' as agreed under the contract. Therefore, the plaintiff entered the scean and received the consignment. The plaintiff agreed to purchase half of the consignment. The remaining half was to be released in favour of respondent Nos.1 to 4. A separate agreement was entered into between the plaintiff and respondent Nos.1 to 4 in this regard.
10. Learned counsel submitted that in the meantime, the plaintiff had already entered into an agreement with respondent No.5 to process 'RCN'. Since the plaintiff had agreed to purchase the consignment sent by E.com UK to respondent Nos.1 to 4, respondent Nos.1 to 4 have agreed to process 'RCN' through respondent No.5. Accordingly, respondent No.5 agreed to process the 'RCN' for respondent Nos.1 to 4 as well. It was agreed between respondent Nos.1 to 4 and plaintiff not to lift the processed cashew nuts without
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 permission of the plaintiff. The possession of cashew nuts was held by respondent No.5. But in violation of terms and conditions of the said agreement, respondent Nos.1 to 4 lifted processed cashew nuts without prior notice or permission of the plaintiff. Defendant No.5 permitted respondent Nos.1 to 4 to lift the stock behind the back of the plaintiff. Thereby, respondents have contravened terms of the agreements dated 09.10.2019 to 14.10.2019. Hence, the plaintiff filed the suit.
11. Learned counsel further submitted that even though the respondent Nos.1 to 4 rely on six agreements entered into between them with 'Ecom UK' from 12th April 2018 to 31stMay 2018, plaintiff is not a party to the same. Therefore, there is no consensus ad idem or mutual agreement between E.com UK and the plaintiff. The plaintiff is not a subsidiary to E.Com UK. Both the companies are registered independently and therefore, agreement of respondent Nos.1 to 4 with 'E.Com UK' is not binding on the plaintiff. It has entered into two separate agreements on 02.11.2018 termed as side agreements, where there is specific recital to resolve the dispute through the Court.
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12. Learned counsel also submitted that there was exchange of several mails from 3rd October 2014 to 14th October 2014 between plaintiff and respondent Nos.1 to 4 modifying the above said two side agreements. The parties have agreed for modification of the terms that the 'RCN' are to be processed through respondent No.5. Therefore, respondent No.5 is also bound by the agreement in question. Since under two side agreement entered into between the parties, there is a clear procedure to resolve the disputes only through the Court, the respondents could not have sought for referring the matter to the Arbitration. Strangely, respondent Nos.1 to 4 have sought for referring the dispute for Arbitration under Section 45 of the Arbitration Act to resolve the dispute based on the recitals in the agreement that was entered into by respondent Nos.1 to 4 with E.com UK'. When the plaintiff is not a party to the said agreement, and the recitals therein do not bind the plaintiff, the application was liable to be dismissed.
13. Learned counsel also submitted that respondent No.5 filed the application under Section 8 of Arbitration and Conciliation Act seeking reference of the dispute to the Arbitration placing reliance on the recitals in the processing
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 agreement held by him with the plaintiff exclusively, which is altogether a different agreement. When the plaintiff and respondent Nos.1 to 4 jointly entered into another agreement specifically agreeing for processing 'RCN', which is the subject matter of the dispute and when there is no Arbitration clause in the said agreement, respondent No.5 could not have filed the said application. Therefore, the Trial Court should have dismissed both the applications as not maintainable. Ignoring the objection raised by the plaintiff, the Trial Court allowed both the applications and dismissed the suit filed by the plaintiff, which is called in question in these writ petitions.
14. Learned counsel submitted that in the recital found in the agreement which was entered into with respondent No.5 dated 17.01.2019, there is reference to the word 'Arbitration'. But there is no intention on the part of the parties to refer the dispute to the Arbitration. There was no intention to confer jurisdiction with the arbitrator, but on the other hand, it is specifically stated that all the dispute is to be resolved by the Courts in Bengaluru. Meaning thereby, intention of the parties is to approach the Civil Court and not referring the matter for Arbitration.
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15. Learned counsel contended that as per clause 5.8, and 5.9 in the first side agreement dated 02.11.2018 entered into between the plaintiff and respondent Nos.1 to 4 the law governing the agreement is the Indian Law and not the International Law of contract and the intention of the party is made clear for referring the dispute for resolution to the Courts in Bengaluru in respect of all the disputes arising out of the agreement. Therefore, the intention of the parties was made very clear in this agreement.
16. Learned counsel has also contended that the second side agreement dated 02.11.2018. Where there is a similar clause i.e., clause No.5.9 and 5.10 to apply the law of India and dispute resolution is within the exclusive jurisdiction of Courts in Bengaluru. Therefore, respondent Nos.1 to 4 could not have relied on the agreement entered into by them with 'Ecom UK' to refer the dispute for Arbitration.
17. Learned counsel further submitted that in respect of the processing agreement dated 17.01.2019 held with respondent No.5 by respondent Nos.1 to 4 and the plaintiff, the recitals found therein disclose that it was not the intention of
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 the either parties to refer the dispute for Arbitration. Clause 35 and 36 make the intention of the parties very clear that the dispute was agreed to be resolved only through Courts within the exclusive jurisdiction of High Court of Karnataka. Therefore, even respondent No.5 could not have filed the application under Section 8 of the Arbitration and Conciliation Act.
18. He further submitted that Section 8 empowers the Court to refer the parties to the Arbitration where there is Arbitration agreement. Such agreement shall be clear and it shall be in writing. But recitals in processing agreement make the intention of the parties very clear to resolve the dispute through the intervention of the Court and not through Arbitration. Under such circumstances, the Trial Court should have dismissed both the applications but had proceeded to allow the applications without any basis. Hence, he prays for allowing both the petition.
19. Learned counsel for the petitioner further contended that admittedly there are two different contracts dated 17.01.2019 and 15.10.2019 with respondent No.5. In the agreement dated 17.01.2019, there was an Arbitration clause.
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 The agreement dated 15.10.2019, which refers to the cashew nut consignment which is the subject matter of the suit, there is no Arbitration clause. Clause 36 of the said agreement is very clear. He further submitted that two different agreements were entered into, one with respondent Nos.1 to 4 and one with respondent No.5. The plaintiff filed the suit for the relief claimed against respondent Nos.1 to 5. Under such circumstances. There cannot be split in the cause of action. The Court could not have allowed the application to refer the dispute to the Arbitration. Moreover, the Arbitrator cannot grant equitable relief of perpetual injunction but it is within the exclusive jurisdiction of the Civil Court.
20. Learned counsel placed reliance on the decision of Hon'ble Apex Court in Cox and Kings Ltd., Vs.SAP India Pvt. Ltd. & Anr.1 in support of his contention that the Doctrine of group of companies is not applicable in India, nor it binds non-signatory, to the contract. Based on the above decision, learned counsel contended that as held by the Hon'ble Apex Court, an agreement to refer dispute to Arbitration must be in a written form and the agreement in question will not bind the 1 2023 SCC online SC 163
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 non-signatory, unless there is an agreement to that effect. Since the plaintiff herein is not a signatory nor a party to the agreement with 'Ecom UK', it is not bound by the terms of agreement entered into between respondent Nos.1 to 4 and 'Ecom UK'. Accordingly, he prays for allowing the writ petition.
21. Per contra, learned counsel for the respondent opposing the petition submitted that while admitting that side agreements dated 02.11.2018 was between the plaintiff and respondent Nos.1 to 4 and failure of respondent Nos.1 to 4 to pay 'Ecom UK' the amount that was agreed, as the name itself suggests that they are only the side agreements but not main agreements. The main agreement was between respondent Nos.1 to 4 and 'Ecom UK'. Plaintiff has not paid any amount for procuring the 'RCN'. But it was 'Ecom UK' which directed to release the consignment in favour of the plaintiff. Under such circumstances, plaintiff is bound by the terms and conditions of the agreement between the respondent Nos.1 to 4 and 'Ecom UK'. Learned counsel for the respondent submitted that when there was an arbitration clause in the agreement that was entered into with 'Ecom UK', the plaintiff cannot deny the same.
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22. Learned counsel for respondent No.5 opposing the petition submitted that admittedly there was processing agreement between plaintiff and respondent No.5 which is dated 17.01.2019. As per clause 35, the dispute is to be referred to the Arbitration in Bengaluru. The intention of the parties that could be made out from reading clause 35 and 36 of the said agreement, make it clear that the parties intended to go for Arbitration.
23. Learned counsel further submitted that, the Arbitration is to be encouraged even when the intention of the parties is not very clear. In support of his contention, he placed reliance on the decisions of the Hon'ble Apex Court in "Indtel Technical Services Pvt.Ltd Vs. W.S.Atkins Rail Ltd2 to contend that even though recitals in the processing agreement is not happily worded, the intention of the parties to go for Arbitration is very explicit and the same is to be taken into consideration. Otherwise, there was no reason as to why there appears the word 'Arbitration'.
2 (2008) 10 SCC 308
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24. Learned counsel further submitted that in the light of the agreement i.e., E-mail dated 15.10.2019, respondent No.5 is only a processor and he entered into an agreement with respondent Nos.1 to 4. Therefore, the claim against respondent No.5 could be Arbitrated. The Trial Court on proper appreciation of all these facts and circumstances, allowed the applications, which do not call for any interference by this Court. Hence, prays for dismissal of petition.
25. It is the contention of the petitioner in W.P.No.11311/2020 that petitioner is a Company within the meaning of Companies Act having its registered office at Bengaluru, inter alia engaged in the business of procuring cashew nuts, processing the same and selling it as kernels, both domestically and for exports. It is also the contention of the petitioner that its group of Company Ecom-UK had agreed to sell approximately 2300 MT of RCN to respondent Nos.1 to 4 and they have entered into an agreement in that regard. It is stated that when the consignment sent by Ecom-UK to respondent Nos.1 to 4 was midway, respondent Nos.1 to 4 were unable to make payment for entire consignment. They could make payment only in respect of 414 MT of RCN. Since
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 respondent Nos.1 to 4 were unable to pay for remaining 1900 MT of RCN, the original agreement with Ecom-UK was abandoned and fresh contract was entered into by respondent Nos.1 to 4 with the petitioner wherein 1194.81 MT of RCN could be released in favour of the petitioner and the remaining 733.49 MT of RCN to be released in favour of respondent Nos.1 to 4 without insisting for further payment.
26. Admittedly the petitioner and respondent Nos.1 to 4 have entered into two side agreements dated 02.11.2018 for release of RCN without insisting payment. Therefore, it is stated that the agreement entered into with respondent Nos.1 to 4 by the petitioner was independent of the agreement entered into by them with Ecom-UK. It is further stated that from 02.11.2018 to 14.10.2019, respondent Nos.1 to 4 were able to purchase only 257 MT of RCN from the petitioner due to their inability to purchase the remaining extent of RCN. The parties have once again negotiated and entered into an arrangement as per e-mail dated 09.10.2019 and 14.10.2019.
27. It is also the contention of the petitioner that it had entered into an independent agreement with respondent No.5
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 on 17.01.2019 for the purpose of processing his own stock of cashew nuts. Subsequently, when the petitioner entered into an agreement with respondent Nos.1 to 4, it was agreed between the parties where respondent No.5 undertook to process cashew nuts which were subject matter of the side agreements. Respondent Nos.1 to 4 failed to abide by their obligation containing e-mails dated 09.10.2019 and 14.10.2019 as they could purchase only a small quantity of RCN. There were breach of contract in respect of cashew nuts which were remaining in the factory of respondent No.5, which were belonging to the petitioner. It is alleged by the petitioner that, respondent Nos.1 to 4 in collusion with respondent No.5 illegally removed a portion of the stock from respondent Nos.5's factory without the knowledge or permission of the petitioner and therefore, the petitioner as plaintiff filed the suit in O.S.No.145/2020 before the trial court seeking grant of permanent injunction against the respondents from accessing, removing, processing or altering the stock of RCN and cashew kernels at factory premises of defendant No.5, directing defendant No.5 to handover the entire stock of RCN lying in its factory premises and decree against defendant Nos.1 to 4 to
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 pay a sum of Rs.6,25,34,653/- with interest at the rate of 18% p.a.
28. The defendants have appeared before the trial court. Respondent Nos.1 to 4 have filed I.A.No.4 under Section 45 of the Act. Similarly, respondent No.5 filed I.A.No.5 under Section 8 of the Act seeking reference of the disputes between the petitioner and respondents for arbitration in terms of the agreement entered into between Ecom-UK and respondent Nos.1 to 3. The trial court allowed both the applications and referred the disputes to arbitrator. Being aggrieved by the same, the plaintiff/petitioner is before this court.
29. The short question that is to be considered by this court is, as to whether there was any arbitration agreement between the parties to the lis to refer the dispute for arbitrator or not?
30. The word 'arbitration agreement' is defined under Section 2(b), as the agreement referred to in Section 7 of the Arbitration and Conciliation Act, 1996. As per Section 7 of the Act arbitration agreement means, an agreement by the parties to submit to arbitration all or certain disputes which have arisen
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 or which may arise between them in respect of a defined legal relationship, whether contractual or not. As per sub-section (3), the arbitration agreement shall be in writing and as per sub- section (4)(a), the document must be signed by the parties. Section 8 of the Act refers to the power to refer parties to arbitration where there is an arbitration agreement.
31. Part II of the Act deals with enforcement of certain foreign awards and Chapter 1 is New York Convention Awards. Section 45 refers to the power of judicial authority to refer parties to arbitration notwithstanding anything contained in Part 1 or in the Code of Civil Procedure, where a judicial authority when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration.
32. Whenever, a party refers to an agreement, it should be a valid agreement made by free consent of parties competent to contract for a lawful consideration and with a lawful object. If such an agreement contains an arbitration
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 clause where the parties agreed to submit the dispute between them for decision of an arbitration and if the agreement was in writing and signed by the parties, both parties are bound by the same and dispute between them is to be resolved by the arbitrator.
33. With these backgrounds, let me consider the agreement between the parties when respondents are seeking to refer the dispute to the arbitration either under Section 8 or under Section 45 of the Act.
34. The first side of agreement dated 02.11.2018 is between petitioner and respondent No.1. There is reference to Ecom-UK and it is stated that same is an affiliate to the petitioner which sold RCN to respondent No.1 for which Ecom- UK has not received complete payments. However, the RCN was delivered at the ports in India. Therefore, respondent No.1 entered into side agreement with the petitioner strictly in accordance with the terms and conditions specified under this agreement, i.e., side agreement dated 02.11.2019. Even though there is reference to Ecom-UK an affiliate of the petitioner, the terms of the agreement make it clear that
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 parties have agreed to abide strictly to the terms and conditions of the side agreement and not the agreement that was entered into between Ecom-UK and the respondent Nos. 1 to 4 The relevant clause for consideration are, clause 5.6, where the parties have agreed that no statement either oral or written made before signing the side agreement will vary or modify the terms of the agreement, unless the same is made in writing and signed by both the parties.
35. Clause 5.8 refers to governing laws i.e., law governing of Republic of India which shall govern the agreement and its provisions. Clause 5.9 refers to the dispute resolution jurisdiction and the parties to the agreement have agreed to submit to the exclusive jurisdiction of the courts in Bengaluru, Karnataka with respect to any and all disputes arising under or in connection with the side agreement. Therefore, the terms of the first side agreement dated 02.11.2018 make the intention of the parties very clear that they are submitting to the jurisdiction of the courts in Bengaluru for resolution of any or all the disputes arising out of the same.
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36. The second side agreement is also dated 02.11.2018 was entered into between the petitioner and respondent Nos.1 to 3, where under the parties have agreed that the petitioner shall facilitate processing of consignment of RCN which were received at the ports in India as detailed therein, the local sale of the same, price for local sale, payment for RCN, storage and re-purchase etc. As per clause 5.10, which refers to the dispute resolution jurisdiction, the parties to the agreement have agreed to submit to the exclusive first instance jurisdiction of the courts in Bengaluru in respect of any or all disputes arising under or in connection with the side agreement. Therefore, even as per second side agreement dated 02.11.2018, the intention of the parties is very clear that they submit to the jurisdiction of the courts at Bengaluru for resolution of any disputes.
37. The parties have referred to various e-mails including e-mails dated 09.10.2019 and 14.10.2019, but admittedly, the parties have not entered into any agreement with regard to the jurisdiction of the courts or about their intention to refer the dispute to the arbitrator. Hence, I am of the opinion that consideration of the contents of those e-mails
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 may not be necessary for deciding these writ petitions. The only point that is to be considered is, as to whether the parties are referred to arbitration for resolution of their disputes or whether the same is to be resolved by the trial court.
38. Admittedly, the petitioner entered into a processing agreement dated 17.01.2019 with respondent No.5. As per the terms of this agreement, the parties have agreed to process the RCNs supplied by the petitioner as first party to be processed by respondent No.5 as second party in processing factory situated at Mangalore. Clause 35 and 36 of the agreement read as under:
"35. In case of any arbitration or whatsoever between the first and second party, it will be settled in Bangalore".
36. In relation to any legal action or proceedings to enforce this agreement or to seek any equitable relief, including temporary and permanent injunction, if there is any anticipated breach of any obligation under this agreement, the parties irrevocably submit to the exclusive jurisdiction of Karnataka High Court."
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39. A bare reading of these clauses disclose that parties have agreed to settle their dispute within Bengaluru as per Clause 35 and they submit themselves to the exclusive jurisdiction of the Karnataka High Court as per Clause 36. If both these clauses are considered together, the intention of the parties to the agreement is very clear that they wanted to submit to the exclusive jurisdiction of the courts in Bengaluru and not to the arbitration. Even though there is reference to the word 'arbitration' in Clause 35, nothing could be read into it to derive a meaning that the parties have ever intended to settle their dispute through arbitration. If clause 35 is considered as a whole, the usage of the word 'arbitration' by the parties may at the most refer to any dispute or difference which have to be settled between the parties in Bengaluru. But by no stretch of imagination, the word 'arbitration' used therein can mean that the parties were intending to go for arbitration by referring to the dispute. If that was the intention of the parties, there was no need for the parties to submit to the exclusive jurisdiction of the Karnataka High Court for resolution of the disputes. If the parties were intended to resolve their dispute through arbitration, there was no need for them to
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 submit to the exclusive jurisdiction to the Karnataka High Court. Therefore, I am of the opinion that either in any of the side agreements dated 02.11.2018 or in processing agreement dated 17.01.2019, the parties have never agreed to refer their dispute to the arbitration for its resolution. On the other hand, the explicit word used in side agreements and also processing agreement between the petitioner and respondents make it abundantly clear that they intended to submit to the jurisdiction of the courts at Bengaluru for resolution of their disputes.
40. The petitioner as plaintiff filed suit O.S.No.145/2020 before the trial court against respondent Nos.1 to 5 seeking permanent injunction and also for a decree against respondent No.1 to 4 for recovery of an amount of more than Rs.6.00 crores. The cause of action for filing the suit said to have arisen, as it is alleged that there was a breach of obligations contained in various agreements and e-mails referred to above by the respondents. Admittedly, petitioner has not entered into any agreement with respondent Nos.1 to 5 together. But one set of agreement entered into by the petitioner is with respondent Nos.1 to 3 and other agreement is with respondent
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 No.5 exclusively. Respondent No.5 is not bound by the terms of the agreement entered into between the petitioner and respondent Nos.1 to 3. Similarly, respondent Nos.1 to 3 are not bound by the terms of the agreement entered into between the petitioner and respondent No.5. Under such circumstances, it cannot be said that cause of action averred in the plaint could be split up between the respondents for referring it to the arbitration either under Section 8 or under Section 45 of the Act.
41. Learned counsel for the petitioner placed reliance on the decision of the Hon'ble Apex Court in Cox and Kings Ltd., (supra) where the Constitution Bench of the Apex Court considered the reference to determine the validity of the 'Group of Companies doctrine' in the jurisprudence of Indian arbitration and came to the conclusion as under:
"H. Conclusions:
a. xxxx;
b. xxxx;
c. xxxx;
d. Under the Arbitration Act, the concept of a "party" is distinct and different from the concept of "persons claiming through or under" a party to the arbitration agreement.
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 e. The underlying basis for the application of the group of companies doctrine rests on maintaining the corporate separateness of the group companies while determining the common intention of the parties to bind the non-signatory party to the arbitration agreement;
f. xxxx;
g. The group of companies doctrine has an independent existence as a principle of law which stems from a harmonious reading of Section 2(1)(h) along with Section 7 of the Arbitration Act;
h. xxxx;
i. xxxx;
j. The approach of this court in Choloro Controls (supra) to the extent that it traced the group of companies doctrine to the phrase "claiming through or under" is erroneous and against the well-established principles of contract law and corporate law;
42. One of the Hon'ble Judge constituting the Bench delivered a separate judgment concurring with the judgment delivered by majority view.
43. In view of the above, the contention of the respondents that group of companies doctrine could be made applicable to the present case and the petitioner is subsidiary to the Ecom-UK and is bound by the agreement that was entered into between Ecom-UK and respondent Nos.1 to 4 cannot accepted.
44. When the petitioner being a Company, is not directly a party to the agreement that was entered into
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 between Ecom-UK and respondent Nos.1 to 4, when there no unequivocal indication to indicate the common intent of all the parties concerned, a stranger or a third party to the agreement cannot be bound by the arbitration clause in an agreement for which he is not a signatory. Even if the expression of the words 'person claiming through or under' in Section 45 of the Act is to be taken into consideration, it is only persons who are in legal relationship through or under multiple party agreements to make non-signatory to an agreement a party to refer the disputes to the arbitration, provided the requirement under Sections 44 and 45 of the Act is satisfied. Thus, onus lies on the respondents to show that petitioner is claiming through or under Ecom-UK who is a signatory to the contract as contemplated under Section 45 of the Act. The decision relied on either by the petitioner or respondents make the position very clear that it is only an intention of the parties that loom large for referring the disputes to the arbitration. When the terms of agreement does not convey any such intention on the part of the parties to resolve their disputes by arbitration, neither Section 8 nor Section 45 of the Act could be invoked by the trial court to refer the dispute for arbitration.
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45. I have gone through the impugned order passed by the trial court allowing I.A.No.5 referring the dispute to the arbitration and consequently, dismissing the suit filed by the petitioner. The finding of the trial court that the intention of both the parties was clear to refer the dispute to the arbitration as per Clauses 35 and 36 of the processing agreement which are extracted above, according to me is erroneous.
46. Similarly, while passing order on I.A.No.4, the finding recorded by the trial court that petitioner is seeking the relief of permanent injunction and for recovery of money against respondent Nos.1 to 4 based on various agreements dated 12.04.2018, 26.04.2018 and 31.05.2018 between Ecom- UK and respondent Nos.1 to 3 is also erroneous. When the petitioner is basing his claim only on the agreements which are entered into between the petitioner and the respondents, the trial could not have formed an opinion that the relief claimed was on the basis of some other agreement entered into between respondent with a company which is not a party to the present suit. The trial court could not have referred the parties to the suit to the arbitration on the basis of so called arbitration clause found in the agreements referred to above for which
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NC: 2024:KHC:1595 WP No. 11292 of 2020 C/W WP No. 11311 of 2020 petitioner was never a party nor he is claiming any right under the same against the respondents.
47. In view of the above, I am of the opinion that the impugned order passed by the trial court on I.A.Nos.4 and 5 is erroneous and the same is liable to be set aside. Accordingly, I proceed to pass the following:
ORDER
i) Writ petitions are allowed.
ii) The impugned orders dated 15.09.2020 passed on I.A.No.4 filed under Section 45 of the Act and I.A.No.5 filed under Section 8 of the are set aside.
iii) Consequently, the suit in O.S.No.145/2020 is restored on the file of the LXXXII Additional City Civil & Sessions Judge, Bengaluru to decide the same, in accordance with law.
SD/-
JUDGE BH/MBS List No.: 1 Sl No.: 2