AI Drafter 
TaxTMI 
TaxTMI 
2019 (1) TMI 1810
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....ories. The respondent from time to time placed order on the petitioner for supply of refractories/refractory materials. 5. In terms of a purchase order dated 12th March, 2015, the petitioner was required to supply one set of refractories for coke oven battery No. 6 consisting of silica bricks, fire clay bricks and mortars at a price of US$ 7,933,094/- only for the respondent and/or its nominated consignee. The petitioner was required to manufacture the said refractories and deliver them on FOB Mumbai basis as per Incoterms 2010. 6. The said purchase order dated 12th March, 2015, inter alia, contains an arbitration clause and/or arbitration clauses, and the same are set out hereinbelow for ease of reference: "Clause 8.4 Applicable law and dispute settlement The Buyer and the Seller agree that any dispute or difference, which may arise out or in connection with this order, shall be amicably settled through mutual discussion. In case Buyer and Contractor fail to reach an agreement on any dispute, controversy, interpretation of any terms, claim arising out of or in connection with this order or the breach, termination shall be settled by arbitr....
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....petitioner claiming diverse reliefs. In the suit, the respondent had alleged that there was an exclusive agreement between the respondent and the petitioner to the extent that the petitioner could supply materials and/or products to Arcelor Mittal Companies worldwide only through the respondent and not otherwise. It is alleged that the petitioner had acted in derogation of such exclusive agreement. The petitioner, however, had denied existence of any such arrangement and/or agreement between the parties. The petitioner has referred to an order passed by this Court on 17th February, 2017 in G.A. No. 117 of 2017 filed by this respondent, along with two others as co-plaintiffs, in the suit claiming diverse reliefs. In the said order, it was observed, at the interlocutory stage, that there is no prohibition clause in the contract in respect of the supplies made by the petitioner to the plaintiffs and the plaintiffs were directed to release the past and the present dues to each of the vendors in accordance with the directions contained in such order. The petitioner initially filed an interlocutory application being G.A. No. 2210 of 2017 praying, inter alia, for an order directing the re....
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....wards the price of the goods sold and delivered by the petitioner to the respondent under the purchase order dated 12th March, 2015. 10. It is submitted that the frame of the suit cannot be a consideration for not appointing an arbitrator for the disputes arising out of the said purchase order. The law requires the Court to be satisfied only with the existence of the arbitration agreement. The respondent does not dispute the existence of the arbitration clause. Accordingly, an arbitrator ought to be appointed. 11. Per contra, Mr. S.K. Kapoor, the learned Senior Counsel appearing for the respondent submits that having regard to the frame of the suit, the dispute cannot be referred to arbitration. The dispute sought to be raised by the petitioner cannot be decided in isolation. The causes of action of the plaintiffs against the defendant in the suit are for breach of agreement and the claim of the petitioner cannot be severed and tried separately. The disputes are interconnected. The plaintiffs have categorically stated in the plaint that the present petitioner is not entitled to directly negotiate with the Arcelor Mittal Companies or to effect direct supply to such companies b....
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....tract and not even recognized its existence in the transaction which however later on the petitioner reneged and entered into direct negotiation with the defendant No. 5 in the suit; and thereby acted in violation of the binding contractual obligation between the parties. This is an important factor which the court is required to take into consideration before deciding as to whether the dispute shall be referred to arbitration. 13. Mr. Kapoor has relied on the aforementioned set of facts to contend that since the purchase order dated 12th March 2015 is relevant to the main dispute in the suit, the dispute regarding the purchase order cannot be separated from the suit and tried separately. If this is done, it may result in bifurcation of the subject matter as well as result in different and contrary decisions. In this regard, it is submitted that the principles enshrined in Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya and Anr. reported in (2003) 5 SCC 531 would apply to the present situation. In this context, reliance is also placed on India Household and Healthcare Ltd. v. LG Household and Healthcare Ltd. reported in (2007) 5 SCC 510 (paragraphs 21-22) and Tulip Hotels Pvt. Lt....
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....f this case, the Court should apply the doctrine of estoppel by election and in this context, has relied on Transcore v. Union of India reported in (2008) 1 SCC 125 (paragraph 64) and Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. and Ors. reported in 2011 (5) SCC 532 (paragraph 29) for the proposition that "whether a party has waived his right to seek arbitration and subjected himself to the jurisdiction of the court, depends upon the conduct of such party in the suit". In this context, reference has also been made to the principles of waiver and estoppel enshrined in section 4 of the Act. In addition, the learned Senior Counsel has relied upon the following decisions - i) Mussammat Gulab Koer v. Badshah Bahadur reported in 10 CLJ 420 : 13 CWN 1197; ii) Mani Lal Guzrati v. Harendra Lal Roy reported in (1910) 12 CLJ 556; iii) Scarf v. Jardine reported in 1882 (7) AC 345; iv) Jai Singh v. Union of India and Ors. reported in 1977 (1) SCC 1; 16. The respondent has also contended that this petition ought to be dismissed right at the outset on the ground of fraud since the written statement filed in the suit has not been disclosed by the petit....
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....the petitioner in the plaint are not arising out of any arbitration agreement. The claim is on account of damages. Even in considering an application under Section 8 of the Arbitration and Conciliation Act, the judicial authority is required to satisfy itself that the action brought constitutes matters which are the subject of an arbitration agreement. In the instant case, the causes of action pleaded in the plaint against the petitioner are not the subject matter of any arbitration agreement. Accordingly, the reference to Section 8 of the Arbitration and Conciliation Act is misconceived. Moreover, the reference to Sukanya Holdings (supra) would be of no relevance as Sukanya Holdings (supra) deals with bifurcation of claims and subject matter of disputes whereas in the instant case the dispute with regard to the purchase order is an independent cause of action and has no bearing to the cause of action as pleaded in the suit. Mr. Saha submits that there is no arbitration agreement amongst all the parties to the suit aggregating 45 in number comprising of the three plaintiffs on the one hand and the 42 defendants including the petitioner herein on the other hand. The decision in Suka....
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....d report, the Arbitration and Conciliation (Amendment) Bill, 2003 was introduced in the Rajya Sabha on 22nd December, 2003. The said Bill was referred to the Department-related Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice for examination and Report. The said Committee, submitted its Report to the Parliament on 4th August, 2005, wherein the Committee recommended that since many provisions of the said Bill were contentious, the Bill may be withdrawn and a fresh legislation may be brought after considering its recommendations. Accordingly, the said Bill was withdrawn from the Rajya Sabha. 3. On a reference made again in pursuance of the above, the Law Commission examined and submitted its 246th Report on "Amendments to the Arbitration and Conciliation Act, 1996" in August, 2014 and recommended various amendments in the Act. The proposed amendments to the Act would facilitate and encourage Alternative Dispute Mechanism, especially arbitration, for settlement of disputes in a more user-friendly, cost effective and expeditious disposal of cases since India is committed to improve its legal framework to obviate in disposal of cases. 4....
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....ed, two decisions of the Hon'ble Supreme Court were ruling the field. The first decision is SBP and Co. v. Patel Engg. Ltd. reported at (2005) 8 SCC 678 and the second decision is National Insurance Company Limited vs. Boghara Polyfab (P) Ltd. reported at (2009) 1 SCC 267. 23. In SBP & Co. (supra) under the unamended provision, a seven-Judge Constitution Bench has laid down the considerations for appointment of an arbitrator by the Chief Justice or designate in paragraphs 37, 39 and 47 which state:- "37. ....... There have been cases where claims for appointment of an arbitrator based on an arbitration agreement are made ten or twenty years after the period of the contract has come to an end. There have been cases where the appointment of an arbitrator has been sought, after the parties had settled the accounts and the concerned party had certified that he had no further claims against the other contracting party. In other words, there have been occasions when dead claims are sought to be resurrected. There have been cases where assertions are made of the existence of arbitration agreements when, in fact, such existence is strongly disputed by the other side who app....
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....ied under Section 11 of the Act, is a party to such an agreement. The issues (second category) which the Chief Justice/his designate may choose to decide (or leave them to the decision of the arbitral tribunal) are: (a) Whether the claim is a dead (long barred) claim or a live claim. (b) Whether the parties have concluded the contract/transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection. The issues (third category) which the Chief Justice/his designate should leave exclusively to the arbitral tribunal are: (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration." 25. In a fairly recent decision of the Hon'ble Supreme Court in Duro Felguera, S.A. Vs. Gangavaram Port Limited reported at (2017) 9 SCC 729, it was observed that the position of law as laid down in SBP & Co. (supra) and Boghara Polyfab (supra) shall continue till the amendment was brought about in 2....
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....on agreement". (emphasis supplied) 28. Section 4 of the Act refers to rights which are non-derogable. If it appears to the court that the petitioner with the knowledge of the arbitration clause had participated in a suit or other proceeding and invited an adjudication of the dispute on merits other than by way of arbitration, it would be unwise to refer the parties to arbitration merely on the basis that there is a valid arbitration agreement between the parties as it would disentitle such party to apply to the court for reference of the dispute to arbitration. The doctrine of election in this context would mean the choice of forum. The Civil Court ordinarily has plenary jurisdiction to decide all civil disputes. The parties by agreement cannot confer a jurisdiction on a civil court which it otherwise does not possess. However, the parties may in an agreement decide the choice of forum. In the instant case, the parties have agreed to decide their dispute arising out of the purchase order to be resolved in arbitration. In a given situation where notwithstanding the existence of arbitration agreement, if a party approaches a civil court and the other party does not object to th....
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....ly so as to ensure that the Court returns a finding with certainty and on the correct premise of law and fact as it has the effect of depriving the party of its right of reference to arbitration. But once the Court finds that the agreement is valid then it must make the reference, without any further exercise of discretion {refer General Electric Co. v. Renusagar Power Co. [(1987) 4 SCC 137]}. These are the issues which go to the root of the matter and their determination at the threshold would prevent multiplicity of litigation and would even prevent futile exercise of proceedings before the arbitral tribunal. 84. The issue of whether the courts are empowered to review the existence and validity of the arbitration agreement prior to reference is more controversial. A majority of the countries admit to the positive effect of kompetenz kompetenz principle, which requires that the arbitral tribunal must exercise jurisdiction over the dispute under the arbitration agreement. Thus, challenge to the existence or validity of the arbitration agreement will not prevent the arbitral tribunal from proceeding with hearing and ruling upon its jurisdiction. If it retains jurisdiction, ....
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....by its own showing in the plaint has not treated the purchase order as invalid or even remotely alleged that the purchase order is null and void. 33. The purchase order contains an arbitration clause. The existence of the purchase order is not in dispute. What could be the reason or plausible defence for not releasing the price of the goods sold and delivered under the purchase order is not a relevant consideration at this stage to decide an application for appointment of an arbitrator. The plaintiff in their wisdom may frame a suit with multiple parties and multiple causes of action but such of the parties in the suit whose agreements with the plaintiffs contain arbitration clauses and are desirous of seeking independent reference of their dispute to arbitration cannot be prevented from seeking such reference, particularly in view of the language of Section 11(6A) of the Act. The considerations for Section 8 and Section 11 of the Act are entirely different. 34. The scheme of the Arbitration Act, 1940 and the 1996 Act before the recent amendment has been considered in Kalpana Kothary v. Sudha Yadav reported at (2002) 1 SCC 203, where it is observed - "8......... In s....
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....arbitrator and refer their disputes to him, or failing agreement, file an application under section 11 of the Act for appointment of an arbitrator. The judicial authority 'referring the parties to arbitration' under section 8 of the Act, has no power to appoint an arbitrator. It may however record the consent of parties to appoint an agreed arbitrator. 39. Reliance was placed upon certain observations in the decision of the House of Lords in Heyman v. Darwins Ltd.-- 1942 AC 356. We extract below the paragraph containing the relied upon observations: "The law permits the parties to a contract to include in it as one of its terms an agreement to refer to arbitration disputes which may arise in connection with it, and the court of England enforce such a reference by staying legal proceedings in respect of any matter agreed to be referred "if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission." Arbitration Act, 1889, sec. 4. Where proceedings at law are instituted by one of the parties to a contract containing an arbitration clause and the other party, founding on the clause, applies for a stay,....
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....ng made. The obvious intention of this provision is that neither the filing of any suit by any party to the arbitration agreement nor any application being made by the other party under section 8 to the court, should obstruct or preclude a party from initiating any proceedings for appointment of an arbitrator or proceeding with the arbitration before the Arbitral Tribunal. Having regard to the specific provision in section 8(3) providing that the pendency of an application under section 8(1) will not come in the way of an arbitration being commenced or continued, we are of the view that an application under section 11 or section 15(2) of the Act, for appointment of an arbitrator, will not be barred by pendency of an application under Section 8 of the Act in any suit, nor will the Designate of the Chief Justice be precluded from considering and disposing of an application under Section 11 or 15(2) of the Act." (emphasis supplied) 37. The expression "first statement on the substance of the dispute" came up for consideration before the Hon'ble Supreme Court in Rashtriya Ispat Nigam Ltd. v. Verma Transport Co. reported in (2006) 7 SCC 275. It is stated therein: ....
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....the Act read:- "A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration." 41. The amended provision came up for consideration in Ameet Lalchand Shah and others vs. Rishabh Enterprises and another. The decision in Sukanya Holding (supra) was considered in the light of the aforesaid amendment. On consideration of the amended Section 8 of the Act, it was held: "29. Principally four amendments to Section 8(1) have been introduced by the 2015 Amendments - (i) the relevant "party" that is entitled to apply seeking reference to arbitration has been clarified/amplified to include persons claiming "through or under" such a party to the arbitration agreement; (ii) scope of examination by the judicial authority is restricted to a finding whether "no valid arbitration agreement exists" and the nature of examination by the judicial authority is clarified to be on a "prima facie" basis; (iii) the cut-off date by which an application under Section 8 is to be presented has b....
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....ion agreement is null and void. 31. The language of amendment to Section 8 of the Act is clear that the amendment to Section 8(1) of the Act would apply notwithstanding any prayer, judgment, decree or order of the Supreme Court or any other Court." (emphasis supplied) 42. The reference to Section 8 of the Act and the decisions on the said Section have been referred to only for the limited purpose of understanding whether the considerations for referring the dispute of the parties to arbitration is the same as that of a proceeding under section 11 of the Act. The considerations are completely different. 43. The objection to the appointment of an arbitrator in the present case, amongst others, appears to be the filing of written statement by the respondent in the suit. This is, in view of the aforesaid discussion, not a relevant consideration for appointment of an arbitrator under Section 11 of the Act. 44. In view of the amendment and Duro Felguera (supra), all the questions which could have been decided by the Court previously in an application under Section 11 of the Arbitration and Conciliation Act, 1996 have been taken away and the Court is now denuded....