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2004 DIGILAW 165 (CAL)

PRAJA ENTERPRISES v. KARNATAKA SOAPS AND DETERGENT LTD

2004-03-09

ASHIM KUMAR BANERJEE

body2004
ASHIM KUMAR BANERJEE, J. ( 1 ) THIS is an. application made under section 8 of the Arbitration and Conciliation Act, 1996 filed by the sole defendant. ( 2 ) ON an invitation of a tender made by the defendant ihe plaintiff submitted its tender on February 17. 1997. After Ihe tender was opened on March 15, 1997 parlies entered into negotiations. Ultimately, by a fax dated 28/29th March. 1997 the plaintiff withdrew its offer and expressed their inability to negotiate any further as would appear from page 30 of the Affidavit-in-opposition. After the offer was withdrawn the defendant by their telefax dated March 31, 1997 confirmed the original offer of the plaintiff and sent the purchase order for their signature and return. The purchase order stipulates an arbitration clause. The said purchase order also stipulates the following : "confirmation : The duplicate copy of the Purchase Order should be returned to us. duly signed by you, failing which the bills will not be passed by us in time. Purchase order and the terms and conditions forming part therein should be accepted into Qualified acceptance and acceptances under assumptions, presumptions and imaginary circumstances will not be accepted by us. The Purchase Order communicated io the supplier and retransmitted to and received by the Company, unconditionally without any counter proposal alone shall become legally operative and effective. " ( 3 ) AS the plaintiff had already withdrawn its offer they did not return the Purchase Order duly confirmed by them. The plaintiff had three other transactions with the defendant wherein admitted sums were due and payable. The defendant stopped making payment in respect of three other purchase Orders in view of the plaintiffs reluctance to comply with 4th purchase Order. Hence the suit. ( 4 ) IN the suit the plaintiff claimed a decree for Rs. 13. 20,069. 37 paise being the sum admittedly due under the undisputed three purchase orders as well as for declaration that the plaintiff is not obliged to perform 4th Purchase Order and for other reliefs. ( 5 ) THE present application has been made by the defendant under section 8 of the Act of 1996 on the ground that since the 4th Purchase order contained an arbitration clause the dispute between the parties must be referred to arbitration in terms or the said arbitration clause. ( 6 ) MR. ( 5 ) THE present application has been made by the defendant under section 8 of the Act of 1996 on the ground that since the 4th Purchase order contained an arbitration clause the dispute between the parties must be referred to arbitration in terms or the said arbitration clause. ( 6 ) MR. J. K- Mitra, learned senior counsel appearing in support of the said application submits that under the original tender condition the offer must be kept alive for a period of 45 days and as such the plaintiff could not have withdrawn their offer before expiry of the said period of 45 days. Since the plaintiff was not entitled to withdraw their offer on March 29. 1997 which was within the stipulated period of 45 days, the acceptance of the offer made on March 31, 1997 was valid and the same amounted to a concluded contract between the parties and as such the dispute involved In the present litigation should be referred to arbitration as the arbitration clause is embedded in the said contract. ( 7 ) MR. Mitra, further submits that whether there has been a concluded contract or not which contained an arbitration clause is a subject matter to be decided by the Arbitrator under Section 16 of the said Act. 1996. He submits that on a plain reading of the entire Act and its true spirit, it would depict that the legislature thought it fit to oust the jurisdiction of the Court when the parties agreed to refer the dispute to arbitration. He further submits whether valid arbitration agreement is existing between the parties or not is also a subject matter to be decided by the arbitrator as enunciated in the said. Act. ( 8 ) MR. Ranjan Bachawat. learned counsel appearing for the plaintiff opposing the said application submits that since the original three purchase orders although contained arbitration clause did not become a subject matter of the dispute, the defendant is net entitled to invoke section 8 on the basis of the 4th Purchase Order which was not even a concluded contract. Mr. Ranjan Bachawat. learned counsel appearing for the plaintiff opposing the said application submits that since the original three purchase orders although contained arbitration clause did not become a subject matter of the dispute, the defendant is net entitled to invoke section 8 on the basis of the 4th Purchase Order which was not even a concluded contract. Mr. Bachawat has heavily relied on Clause 2 of the conditions attached to the Purchase Order which stipulates that on a confirmation not being made by the other party duly signed and returned to the grantor, it cannot amount to a concluded contract and as a corollary the arbitration clause made therein cannot be invoked. ( 9 ) AS and by way of alternative submission Mr. Bachawat contends that assuming the other three purchase orders contained arbitration clausses the disputes between the parties as raised in the Plaint cannot be segregated as according to him the dispute covering the 4th Purchase order does not have any arbitration clause and as such part of the elaim or par! of the dispute cannot be referred to arbitration under Section 8. ( 10 ) RELIANCE has been placed by Mr. Bachawat in this regard on the decision of the Apex Court in the case of Sukanya Hoktings (F) Ltd. vs. Jayesh H Pandya and Anr. , reported in (2003) 5 SCC P. 531. Paragraphs 12 to 1. 5. of the said judgement being relevant herein are quoted below: "12. For Interpretation of Section 8. Section 5 would have no bearing because it only contemplates that te the matters governed by Part 1 of the Act. the judicial authority shall not interveue except where so provided in the Act. Except Section 8, there is ne other provision in the Act that in a pending suit, the dispute is required" to be referred to the arbitrator. Further, the matter is not required to be referred to the Arbitral Tribunal, if (1) the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; (2} in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or (3) sueh application is not accompanied by the original arbitration agreement or duly certified copy thereof. This would, therefore, mean that the arbitration Art does not oust the jurisdiction of the civil court to decide the dispute in a case where parties to the arbitration agreement do not take appropriate steps as contemplated under sub-sections (1) and (2) of Section 8 of the Act. 13. Secondly, there is no provision in the Aet that when the subject matter of the soft includes subject-matter of the arbitration agreement as wen as ether disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject matter of the suit to the arbitragers. 14. Thirdly, there is no provision as to what is- required to be done in a case where some parties to the suit are not parties to the arbitration agreement. As against this, under Section 24 of the arbitration Act, 1940, some of the parties to a suit could apply that the matters in difference between them be referred to arbitration and the court may refer the same to arbitration provided that the same can be separated from the rest of the subject matter of the suit. The section also provides that the suit would continue so far as it relates to parties who have not joined in such application. 15. The relevant language used in Section 8 is "in a matter which is the subject of an arbitration agreement". The court is required to refer the parties to arbitration. Therefore, the suit should be in respect of a matter which the parlies have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a suit is commenced "as to matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of section 8. The words "a matter" indicate that the entire subject-matter of the suit should be subject to arbitration agreement. ( 11 ) RELYING on the aforesaid decision Mr. Bachawat contends that the instant application is misconceived arid is liable to be and should be dismissed. The words "a matter" indicate that the entire subject-matter of the suit should be subject to arbitration agreement. ( 11 ) RELYING on the aforesaid decision Mr. Bachawat contends that the instant application is misconceived arid is liable to be and should be dismissed. Considering the rival contentions of the parties and considering the principles of law laid down by the Apex Court in the case of Sukanya holdings (supra), in my view, this court while entertaining an application under Section 8 must adjudicate atleast, prima facie, that there has been a valid arbitration agreement between the parties. The prerequisite of section 8 is to produce the original arbitration agreement or a duly certified copy. That has not been done in the instant case. However, on the basis of the xerox copy of 4th Purchase Order annexed to the pleadings it would ex facie appear that there has been no such contract entered into by and between the parties as Clause 2 of the said Purchase Order has not been complied with by the parties which is an admitted position derived from the facts pleaded in the respective pleadings. ( 12 ) HENCE, I am unable to refer the dispute to arbitration on the basis of the 4th Purchase Order. Mr. Mitra has contended that although on the other three purchase orders there was no dispute, mere non-payment of money is a dispute, which should be referred to arbitration on the basis of three other Purchase Orders. Assuming Mr. Mitra's argument is correct, even then, I cannot refer the dispute to arbitration which would be contrary to the principles of law laid down in the case of Sukanya holdings (supra) on the subject matter of dispute. as I have understood from the pleadings, is the 4th Purchase order on the basis of which the payment in respect of other three Purchase Orders has been with held. ( 13 ) IN the result, this application fails and is hereby dismissed. There would be no order as to costs. ( 14 ) SINCE the sole defendant is appearing before me I expedite the hearing of the suit. Written Statement be filed within three weeks from date, Cross-order for discovery within three weeks thereafter and inspection forthwith. Let the suit appear in the Monthly List of June, 2004 before the appropriate regular bench. ( 14 ) SINCE the sole defendant is appearing before me I expedite the hearing of the suit. Written Statement be filed within three weeks from date, Cross-order for discovery within three weeks thereafter and inspection forthwith. Let the suit appear in the Monthly List of June, 2004 before the appropriate regular bench. ( 15 ) THE directions for expeditious hearing of the suit would, however, not prejudice the application made by the plaintiff under Chapter 13a of the High Court Original Side Rules. ( 16 ) ALL parties concerned are to act on a xerox signed copy of this dictated Order on the usual undertakings. Application dismissed