Gea Energy System (India) Ltd. 443, Anna Salai, Teynampet, Chennai v. ITOSTROJ, Litosrojska,
2005-03-11
R.BALASUBRAMANIAN
body2005
DigiLaw.ai
Judgment :- 1. The plaintiff is the applicant. Pending suit, the plaintiff wants an interim order restraining the first respondent from proceeding with the arbitration proceedings as contemplated under Article 7 of the contract agreement dated 26.09.2002/15.11.2002. Heard Mr. K. Alagirisamy learned senior counsel appearing for the applicant and Mr. Arvind P Datar learned senior counsel appearing for the first respondent. 2. The immediate cause of action for the suit as well as for this application is the termination notice dated 21.07.2004 issued by the defendant to the plaintiff. Apart from terminating the contract agreement dated 15.11.2002, the defendant had also made it very clear his intention to submit his claim for damages, costs and penalties to the Arbitration Committee for adjudication as provided under Article 7.2.5 of the contract agreement and in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. In the plaint the plaintiff prays for a declaration that the termination notice dated 21.07.2004 is null and void as it is not in accordance with the terms of the contract agreement dated 26.09.2002/15.11.2002; for a permanent injunction restraining the defendant from invoking Article 7.5.4 of the agreement referred to above and proceed with the arbitration proceedings as per the said Article and for a mandatory injunction directing the defendant to accept and take the fabricated st ay rings. The sum and substance of the argument of Mr. K. Alagirisamy learned senior counsel appearing for the applicant/plaintiff is that, there is no concluded contract on arbitration and therefore the defendant (first respondent) must be injuncted from proceeding with the threatened arbitration proceedings. In elaborating this argument, the learned senior counsel appearing for the applicant/plaintiff took me through the agreement styled as “contract agreement”, to which the plaintiff and the defendan t are parties; the addendum to the contract agreement dated 26.09.2002 and the telefax dated 15.11.2002. According to him, in the addendum to the contract agreement, the plaintiff had made it clear that Laws of India alone would govern the terms of the contract and the place of jurisdiction for arbitration shall be Chennai.
According to him, in the addendum to the contract agreement, the plaintiff had made it clear that Laws of India alone would govern the terms of the contract and the place of jurisdiction for arbitration shall be Chennai. Therefore the submission is that, though Article 7.5.4 of the contract agreement speaks about settlement of disputes with the Rules of Conciliation and Arbitration of the International Chamber of Commerce; three arbitrators being appointed in accordance with the said Rules; arbitration to take place in Ljubljana, Slovenia; where the Rules referred to above are silent, the supplementary Swiss Laws shall be applied and the language of the arbitration to be in English, yet in view of the addendum, which accompanied the contract agreement, this court must hold that there is no valid agreement for arbitration. Mr. Arvind P Datar learned senior counsel appearing for the defendant (first respondent) would contend that the contract agreement was signed by the plaintiff on 26.09.2002, which he sent with the addendum; the defendant signed the agreement on 15.11.2002 and sent it back with his telefax dated 15.11.2002; under the telefax, the defendant made it clear to the plaintiff that the addendum to the contract agreement would be discussed later by them. The defendant had not signed in the addendum. Therefore the submission is that the addendum sent by the plaintiff to the defendant was not agreed to by the defendant and in fact, he h ad made it clear that the discussion in regard thereto would be taken up only later. Inasmuch as the contract agreement only stands signed between the parties to the suit, it must be held to be valid. Relying upon Article 1.3 of the contract agreement, it is next submitted that after signing the contract, no other text, document, etc.., shall have any force or effect whatsoever, or may, in any way whatsoever, be taken into consideration in the interpretation of the terms and conditions of the contract and so addendum relied upon by the plaintiff cannot even be looked into. 3. In the context of the above arguments, the question that follows is, on the above three documents, is there a valid and concluded contract between the parties agreeing to have arty dispute referred to arbitration.
3. In the context of the above arguments, the question that follows is, on the above three documents, is there a valid and concluded contract between the parties agreeing to have arty dispute referred to arbitration. Even at the outset, I would like to state that the plaintiff had not prayed for any declaration in the suit that there is no valid contract between the parties and even if there is a valid contract between the parties, there is no concluded agreement for referring the dispute to arbitration. It is a well settled principle in law that any interim order to be granted pending suit cannot be outside the scope of the suit itself. A Division Bench of this court in the judgment reported in 1958 (1) M.L.J. 303 = (1958) 71 L.W. 211 ( Aboobucker v. Kunhamoo ) had held as follows: “An interim relief is granted to a person in any cause on the footing that he is prima facie entitled to the right claimed in the main relief the interim relief.” “Hence an interim relief sought for during the pendency of a suit could not be greater in scope than what could be granted in the suit itself after the party has established his right to that relief.” A learned Judge of this court in the case reported in 1978 T.L.N.J. 206 ( Madras Motors Finance & Guarantee Co Ltd. v. R. Dhanam ) was dealing with the case where pending suit there was an order directing the revision petitioner to return the vehicle. In that suit the plaintiff asked for a declaration that only a specified sum alone was due and payable by the plaintiff to the defendant in respect of the hire purchase agreement; for a declaration that the seizure of the vehicle is illegal and for a permanent injunction restraining the defendant from selling the suit vehicle in any manner. The learned Judge found that even when the suit was decreed in toto, the plaintiff cannot recover possession as there was no prayer for recovery of possession. On those facts, the learned Judge held that the plaintiff cannot achieve in an interlocutory application what he will not be able to achieve by succeeding in the suit, if at all he succeeds in the suit. In 1991 (1) L.W. 564 ( St.
On those facts, the learned Judge held that the plaintiff cannot achieve in an interlocutory application what he will not be able to achieve by succeeding in the suit, if at all he succeeds in the suit. In 1991 (1) L.W. 564 ( St. Aleysius Anglo Indian Higher Secondary School v. Association for Protection of Education ) this court had to deal with the case where in the suit the relief asked for is for a declaration and permanent injunction. There was no prayer for a consequential decree for refund of the amount collected in excess. However, in an interlocutory application filed in that suit, a prayer for refund of the amount was asked for. A learned Judge of this court in that context held that as the prayer for refund in the interlocutory application travels beyond the scope of the suit, the court has no jurisdiction to pass such an order during the pendency of the suit when there is no prayer in the plaint itself. A Division Bench of this court in the judgment reported in 1996 1 L.W. 418 ( Bishop-in-Office of C.S.I, Vellore diocese, etc. v. Jayakaran Joseph & Others ) held that a relief cannot be granted interlocutorily if it not possible to grant the same in the main proceedings. As already stated, the plaintiff had not asked for any declaration on the invalidity of the contract itself and even if there is such a contract, it does not contain a valid arbitration clause. On the other hand, he wants to have the contract agreement dated 26.09.2002/15.11.2002 to be kept alive for further execution of the work entrusted to it under that contract. Precisely, that is the first relief prayed for by the plaintiff in the suit. Therefore the court must proceed at this stage on the legal assumption that the plaintiff is not challenging the very validity of the contract itself but on the other hand, the plaintiff is challenging the act of the defendant in terminating the said contract. If such a relief as prayed for is granted in a contract agreement between the plaintiff and the defendant, which since stands terminated, it would revive the contract for further performance.
If such a relief as prayed for is granted in a contract agreement between the plaintiff and the defendant, which since stands terminated, it would revive the contract for further performance. Unless the plaintiff prays for a declaration that there is no concluded contract between the parties after arbitration, the question of granting a prohibitory injunction restraining the defendant from proceeding with the arbitration, which is a part of the contract itself, cannot be legally granted. In other words, in the absence of a declaratory relief as referred to above, a legal difficulty may arise for the court to grant the relief of permanent injunction as prayed for in the suit itself. Therefore on the principles of law laid down by this court in the judgments referred to earlier, this court is of the opinion that when the relief of permanent injunction prayed for in the suit itself may not be legally granted in the absence of a declaratory relief when there exists no concluded contract of arbitration, this court may not be in a position to grant the interim relief as prayed for. In other words, if granting of the relief of permanent injunction in the suit itself is open to a legal hurdle, there cannot be an interim order pending suit ignoring such legal hurdle. 4. There is no dispute that the contract agreement was signed by the plaintiff on 26.09.2002 at Chennai and sent to the defendant. To this signed contract agreement (signed by the defendant) the addendum dated 26.09.2002 signed by the plaintiff was enclosed. At the foot of the addendum, it is stated that the addendum to this agreement shall form a part of the contract dated 26.09.2002. Article 7.5.4 of the contract agreement deals with arbitration and the Article reads as hereunder: “In case the above disputes and differences could not be settled in an amicable way by intervention of the management of companies involved, they shall be finally settled in accordance with the rules of Conciliation and Arbitration of the international Chamber of Commerce. Three arbitrators appointed in accordance with said rules shall carry their mission in accordance with the said Rules and shall on their behalf, make a final decision which shall be binding for both Purchaser and Subcontractor. Arbitration shall take place in Ljubljana Slovenia. Where the said rules are silent the complementary Swiss Law shall be applied.
Three arbitrators appointed in accordance with said rules shall carry their mission in accordance with the said Rules and shall on their behalf, make a final decision which shall be binding for both Purchaser and Subcontractor. Arbitration shall take place in Ljubljana Slovenia. Where the said rules are silent the complementary Swiss Law shall be applied. Arbitration shall be conducted in the English language.” The plaintiff had not scored off this Article. But by the addendum, he had made an offer that the place of jurisdiction of arbitration shall be at Chennai. It may also be noticed that Article 7.5.1 says that the contract shall be governed exclusively by the Swiss Law. For that also, the plaintiff took an exception in the addendum to the effect that the contract is subject to the Laws of India. In addition to the above exceptions taken, the addendum also contains some other alterations/variations. This contract agreement and the addendum, both signed by the plaintiff, on reaching the defendant, had definitely received its attention at his end. The defendant had simply signed the contract agreement at his end on 15.11.2002 without altering any of the terms of the said contract agreement. Not only that, by his telefax dated 15.11.2002, the defendant made it abundantly clear that the terms of the addendum to the contract agreement, would be discussed later. The defendant had not signed the addendum. One can understand, if the defendant agreeing to the contents of the addendum had altered the contract agreement and signed it. He had not chosen to do so. But instead, he had signed the contract agreement at his end as sent to him and in addition to that, he had sent his telefax, which, in sum and substance, definitely shows that the defendant did not agree for the addendum and he wanted to have a discussion on that later on. 5. To sustain his argument that on the established facts of this case there is no concluded contract, the learned senior counsel for the applicant brought to my notice the following judgments of the Honble Supreme Court of India namely, (a) 1964 (vol.
5. To sustain his argument that on the established facts of this case there is no concluded contract, the learned senior counsel for the applicant brought to my notice the following judgments of the Honble Supreme Court of India namely, (a) 1964 (vol. 1) SCR 19 ( Michael Golodetz & Others v. Serajuddin & Company ); (b) AIR 1981 S.C. 2085 ( Ramji Dayawala & Sons (P) Ltd. v. Invest Import ); (c) Judgment Today 1995 (2) SC 322 ( U.P. Rajkiya Nirman Nigam Ltd. v. Indure Pvt. Ltd. & Others ); and (d) A.I.R. 1999 SC 504 ( Rickmers Verwaltung Gimb H v. Indian Oil Corporation Ltd. ) In the first case referred to above, a suit was instituted on the original side of the Calcutta High Court for a declaration that the written contract is void and for a perpetual injunction restraining the opposite party from taking steps in purported enforcement of the stated contract and for other reliefs. The opposite party moved an application before the Calcutta High Court under section 34 of the Arbitration Act, 1940 to stay the suit on the ground that the parties have agreed to refer the dispute to arbitration. The Honble Supreme Court of India held that the court is not obliged to grant stay merely because the parties have, even under a commercial contract, agreed to submit their dispute in a matter to an Arbitration Tribunal in a foreign country and it is for the court, having regard to all the circumstances, to arrive at a conclusion whether sufficient reasons are made out for refusing to grant stay. The Supreme Court proceeded to dispose of the case on the basis that there is an arbitration clause and infact the plaintiff in that case wanted to have the entire contract to be declared as null and void. In the second case referred to above, the Indian contractor - party to the agreement, filed a suit on the original side of the Calcutta High Court to recover money due and payable to him under the subcontract from the opposite party. The foreign contractor filed an application in that suit that as the contract between the parties contained an arbitration clause, the suit should be stayed. The Indian contractor denied that there was any concluded agreement between the parties to refer the disputes arising out of the sub-contract to arbitration.
The foreign contractor filed an application in that suit that as the contract between the parties contained an arbitration clause, the suit should be stayed. The Indian contractor denied that there was any concluded agreement between the parties to refer the disputes arising out of the sub-contract to arbitration. On the facts available in that case, it was found as follows: “The sub-contract had been signed by the Indian contractor and the foreign contractor; Article 12 of the contract recites an arbitration agreement for a foreign arbitral Tribunal to arbitrate; on the day when the Indian contractor signed the sub-contract, he was in Belgrade; on the same day, the Indian contractor sent his letter dated 10.07.1961 to the foreign contractor, who was also at Belgrade, stating that though he had signed the contract, he had objected to the clause of arbitration to be in that agreement, which was deleted from their earlier revised draft sent; on reaching India, the Indian contractor sent a cable on 13.07.1961 reminding the foreign contractor about the letter dated 10.07.1961 and the foreign contractor did not send any reply either to the letter or to the cable.” On those established facts, it was held as follows: “Now, once it is admitted and established that the letter and the cable were received by the respondent, ordinarily if the contents of the letter and cable are not acceptable to respondent, a reply to that effect is naturally expected. Contention is that respondent accepted the change in arbitration clause proposed by the appellant sub silentio coupled with the subsequent conduct. It is a fact that the respondent did not write back saying that if the arbitration agreement was not acceptable to the appel lant the sub-contract would not be acceptable as a whole to the respondent. On the contrary, after a specific objection only with regard to arbitration agreement in the sub-contract Ext. A by the appellant, the respondent allowed the appellant to proceed further with the implementation and execution of the sub-contract, without controverting what the appellant had stated in the letter and the cable. This would unmistakably show that the respondent accepted the alteration as suggested by the appellant in that the arbitration agreement was deemed to have been deleted from the sub-contract Ext.
This would unmistakably show that the respondent accepted the alteration as suggested by the appellant in that the arbitration agreement was deemed to have been deleted from the sub-contract Ext. A.” I have to state with great respect that such strong facts available in that case are totally wanting in the case on hand. 6. In the third case, the facts are as follows: “The appellant went before the court of first instance under section 33 of the Arbitration Act, 1940 for a declaration that there exists no agreement containing an arbitration clause; the appellant, without signing the draft agreement dated 22.06.1984, sent it to the respondent for signature; on 27.06.1984 the respondent sent a counter proposal deleting clause (10) of that agreement and materially altering clause (12); he had signed it; dispute arose; the respondent sent a notice claiming damages contending that there was no arbitration agreement between the parties and later on, he sent a notice nominating an arbitrator.” In that context, the Supreme Court went into the question as to whether there is a valid contract between the parties for referring the dispute to arbitration. On the facts of that case namely, the court describing the act of the respondent before it by sending back the draft agreement by deleting clause (10) and by materially altering clause (12) being only in the nature of counter proposal; the communication from the appellant either accepting or refuting it and in the context of the other facts, held that there was no concluded contract between the parties containing an arbitration clause. The facts available in that case are not the facts available in the case on hand. In the last judgment, the Honble Supreme Court of India held that while deciding the question whether any agreement can be spelt out from the correspondence between the parties, the cardinal principle to remember is that it is the duty of the court to construe correspondence with a view to arrive at a conclusion whether there was any meeting of mind between the parties, which would create a binding contract between them. It is also said in that judgment that the court is not empowered to create a contract for the parties by going outside the clear language used in the correspondence.
It is also said in that judgment that the court is not empowered to create a contract for the parties by going outside the clear language used in the correspondence. I have referred to the terms of the contract agreement and the addendum, both signed by the plaintiff on 26.09.2002 and sent to the defendant; the defendant signing the contract agreement alone on 15.11.2002 and sending the telefax dated 15.11.2002 telling the plaintiff that the addendum could be discussed later. On the facts available in this case, I cannot but hold that the contract agreement dated 26.09.2002/15.11.2002 is valid and it contains an arbitration clause. The addendum signed by the plaintiff and sent to the defendant along with the contract agreement is only in the nature of counter proposal. The defendant had not accepted the counter proposal. It is evident from the fact that he had not signed in the addendum. In addition to that, he made it definite that on the counter proposal contained in the addendum, he would have a discussion later with the plaintiff. The defendant had signed in the contract agreement only. The contract agreement was put into force and the plaintiff had definitely done work for and on behalf of the defendant under that contract agreement. There were several minutes of meeting disclosed by the plaintiff himself. In none of those minutes of meeting the issue as to arbitration and detailed in the addendum had been taken up for discussion. If the plaintiff, on receipt of the telefax dated 15.11.2002 from the defendant did not accept the contract without the arbitration clause being finalized, it would have been a different matter. But he, accepting the contract agreement dated 26.09.2002 and 15.11.2002, acted upon it and did work. Under Article 1.3 of the contract agreement, once the contract is signed, no other text, document, etc., shall be taken into consideration in the interpretation of the terms and conditions of the contract. As already stated, the plaintiff wants to have the contract agreement revived. Therefore Article 1.3 would come in the way of this court taking into account the addendum dated 26.09.2002 in interpreting one of the terms of the contract namely, Article 7.5.4. In other words, prima facie it is seen that there is a valid contract agreement between the parties to the suit, which contains an arbitration clause. 7.
Therefore Article 1.3 would come in the way of this court taking into account the addendum dated 26.09.2002 in interpreting one of the terms of the contract namely, Article 7.5.4. In other words, prima facie it is seen that there is a valid contract agreement between the parties to the suit, which contains an arbitration clause. 7. For all the reasons stated above, I find that the plaintiff has not made out a case for any interim order to be granted as prayed for in this application and this application stands dismissed with no order as to costs.