Bhagawati Gases Limited (BGL) v. Hindustan Copper Limited
2016-08-19
MOHAMMAD RAFIQ
body2016
DigiLaw.ai
ORDER : 1. This application under Section 11 of the Arbitration and Conciliation Act, 1996 (for short, 'the Act of 1996') has been filed by M/s Bhagawati Gases Limited, Jhunjhunu, inter-alia, with prayer that sole arbitrator be appointed for resolving its dispute with the non-applicant Hindustan Copper Limited. 2. Facts of the case are that an agreement was entered into between the applicant and non-applicant on 05.05.2005 with the former agreeing to supply gaseous oxygen and liquid oxygen to the latter at their Khetri Copper Complex Smelter Plant. Clause 15 of the agreement provided for reference of the dispute between the parties to the sole arbitrator or a person appointed jointly by the Chairman of HCL and the applicant-BGL. It was further stipulated that the provisions of the Act of 1996 shall apply and that the award of the arbitrator shall be final. The Arbitrator shall be competent to decide whether any matter, dispute or difference referred to him falls within the purview of arbitration. 3. A dispute arose between the parties when the applicant claimed payment from the non-applicant for balance amount of minimum off-take guarantee for the period from 12.02.2009 to 12.02.2010 and the minimum off-take guarantee for the period from 12.02.2010 to 13.09.2011. The petitioner has been raising debit notes every month on account of the amount due by the respondent for minimum off-take guarantee. When the respondent denied the payment, the petitioner, by letter dated 19.10.2011 requested the respondent to appoint arbitrator in terms of arbitration agreement. The respondent, by letter dated 17.09.2011, denied the claim of the petitioner inter-alia contending that no dispute existed relating to minimum off-take guarantee and further denied to refer the dispute to the arbitrator. The respondent thereupon instituted a civil suit titled Hindustan Copper Limited Vs. Bhagwati Gases Limited before the City Civil Court, Kolkata, in which he prayed for declaration that the notice dated 19.10.2011 sent by the petitioner (defendant in the suit) is void-ab-initio and nullity. Further prayer was also made for permanent injunction restraining him from giving any further effect to the said letter/notice dated 19.10.2011. 4. The respondent has contested the application by filing reply thereto. The respondent has stated that amount as claimed by applicant has already been paid and now no dispute survives. There was a prolonged discussion for settlement of dispute.
Further prayer was also made for permanent injunction restraining him from giving any further effect to the said letter/notice dated 19.10.2011. 4. The respondent has contested the application by filing reply thereto. The respondent has stated that amount as claimed by applicant has already been paid and now no dispute survives. There was a prolonged discussion for settlement of dispute. After discussion, petitioner wrote a letter on 06.05.2009 to the General Manager, KCC, that he will charge minimum off-take guarantee claim at the rate of Rs.45,00,000/- per month for a period of 12 months or till the smelter plant restarts operation, whichever was earlier, effective from 10.00 AM of 12.02.2010. It was also proposed that in case smelter plant remains closed beyond 12 months from February, 2009, then the applicant will not charge anything after 12 months under minimum off-take guarantee clause no.6.1. Proposal made by applicant by aforesaid letter was again reconsidered by high level committee on 16.07.2009 in which Mr. T.C. Rana, Plant Manager, was also present as representative of applicant. In the said meeting, it was agreed that minimum off-take guarantee will be charged at the rate of Rs.36,00,000/- per month instead of Rs.45,00,000/- per month. The applicant consented thereto vide letter dated 21.07.2009. It was further agreed that payment would be made only for 12 months with effect from 12.02.2009. Operation of the smelter plant was suspended with effect from 09.12.2008 itself and since then it never became operational. 5. Mr. R.K. Agarwal, learned senior counsel appearing for applicant, argued that the purchase agreement for supplying gaseous oxygen and liquid oxygen at KCC Smelter was executed between the parties and Clause 15 thereof provides a remedy of arbitration. The applicant served on the Chairman-cum-Managing Director of the respondent Hindustan Copper Limited, a notice dated 19.10.2011 demanding balance amount of claim under minimum off-take guarantee for the period from 12.02.2009 to 12.02.2010. Clause 15 of the purchase agreement executed between the applicant and non-applicant specifically provided that any dispute or difference arising out of or in connection with the work or any operation covered by the contract and any dispute in connection with the agreement entered into between HCL/KCC and BGL, including any dispute or difference relating to the interpretation of the agreement or any clause thereof, shall be referred to sole arbitration of a person appointed jointly by the Chairman of HCL and BGL.
Provisions of the Act of 1996 and the Rules framed thereunder were specifically made applicable. 6. Learned senior counsel for applicant argued that the applicant had to engage the workers and paid their wages/salary. The applicant also set up a plant and despite initial agreement between the parties and despite respondent having agreed to purchase the gases in gaseous oxygen and liquid oxygen form, the respondent had failed to make payment of minimum off- take guarantee amount and this caused enormous amount of loss to the applicant and thus applicant is entitled to claim the amount of damages from the respondent as per residuary clause of prayer. 7. Mr. R.K. Agarwal, learned senior counsel, submitted that mere writing of a letter dated 21.07.2009 did not amount to discharge of contract. Even if it is assumed that the applicant agreed to accept the amount towards off-take guarantee at the rate of Rs.36,00,000/- per month rather than Rs.45,00,000/-, there are still certain issues, which are of paramount consideration between the parties. The applicant, apart from praying for appointment of arbitrator also additionally prayed that any other order as may be deemed fit and proper in the facts and circumstances of the case may also be passed. In the residuary prayer clause, it is prayed that applicant be held entitled to claim damages from the respondent for delay in implementation of the agreement. 8. Learned senior counsel for applicant, in support of the case, also relied on judgment of the Supreme Court in Rajesh Verma Vs. Ashwani Kumar Khanna, 2016 (3) Arb.LR 50 (SC), Indowind Energy Limited Vs. Wescare (India) Limited and Another – (2010) 5 SCC 306 and M/s. National Insurance Co. Ltd. Vs. Baljit Kaur and Others – AIR 2004 SC 1340 . 9. Per contra, Mr. Alok Kumar, learned counsel for respondent, argued that there does not exist any arbitral dispute between the parties. Minimum off-take guarantee is not a profit to be given to the applicant but was compensation to the loss he otherwise would have suffered because of omission on part of respondent to place order and receive minerals. Operation of smelter plant was suspended with effect from 09.12.2008 and thereafter it never became operational. If shelter was not upgrading, there was no need for the respondent to bye oxygen.
Operation of smelter plant was suspended with effect from 09.12.2008 and thereafter it never became operational. If shelter was not upgrading, there was no need for the respondent to bye oxygen. In any case, the respondent has paid to applicant the minimum off-take guarantee at the rate of Rs.36,00,000/- per month for as long as 12 months with effect from 12.02.2009 and in this manner a total sum of Rs.4,32,00,000/- has been paid to the applicant towards full and final payment of claim. 10. Learned counsel for the respondent, in support of his arguments, cited a constitution bench judgment of the Supreme Court in SBP & Co. Vs. Patel Engineering Ltd. and Another – (2005) 8 SCC 618 , and submitted that the Supreme Court in that case held that the Chief Justice and his designate, while functioning under Section 11(6) of the Act, is bound to decide whether (1) he has jurisdiction, (2) there is a valid arbitration agreement in terms of Section 7, (3) the person before him with the request, is a party to the arbitration agreement, and (4) there is a dispute/live claim subsisting which is capable of being arbitrated upon. Thus the Chief Justice or his designate has to also decide whether there is a dispute or live claim under the purview of arbitration agreement or it should be left to be decided by the arbitral tribunal on taking evidence, along with merits of the claims involved. Clearly, the Chief Justice or his designate can also decide question whether the claim was a dead one or a long barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. 11. Learned counsel for the respondent argued that the applicant has concealed the fact that a consensus was arrived at between the parties with regard to minimum off-take guarantee amount to reduce the same from Rs.45,00,000/- per month to Rs.36,00,000/- per month and thereby the applicant has tried to overreach the process of the court. 12. The applicant, pursuant to his agreement, started raising bill of off-take guarantee at the rate of Rs.36,00,000/- and accordingly payment was made. Thus a total sum of Rs.4,32,00,000/- was made towards full and final payment of claim. 13.
12. The applicant, pursuant to his agreement, started raising bill of off-take guarantee at the rate of Rs.36,00,000/- and accordingly payment was made. Thus a total sum of Rs.4,32,00,000/- was made towards full and final payment of claim. 13. Learned counsel, in support of the arguments, has also relied on judgments of the Supreme Court in Union of India Vs. Hari Singh – (2010) 15 SCC 201 , State of Maharashtra Vs. Nav Bharat Builders – 1994 Supp. (3) SCC 83, M/s P.K. Ramaiah and Company Vs. Chairman and Managing Director, National Thermal Power Corporation – 1994 Supp (3) SCC 126, Nathani Steels Ltd. Vs. Associated Corporations – 1995 Supp (3) SCC 324 and National Insurance Company Limited Vs. Boghara Polyfab Private Limited – (2009) 1 SCC 267 . 14. I have given my anxious consideration to rival submissions and perused the material on record. 15. Question in the present case is not whether the issue is live or not as it is that whether there at all exists any dispute in view of the understanding arrived at between the parties. Applicant earlier agreed to charge minimum off-take guarantee claim amount at the rate of Rs.45,00,000/- per month for a period of 12 months or till the smelter plant restarts operation, whichever is earlier, effect from 10.00 a.m. Of 12.02.2009. But subsequently, pursuant to such understanding, by letter dated 21.07.2009, it agreed to charge the minimum off-take guarantee claim amount at the rate of Rs.36,00,000/- per month for a period of 12 months or till the smelter plant restarts operation, whichever is earlier with effect from 12.02.2009. And, the applicant was actually paid towards off-take guarantee claim amount at the rate of Rs.36,00,000/- per month with effect from 12.02.2009, thus a total sum of Rs.4,32,00,000/- has been paid to the applicant. 16. In National Insurance Company Limited Vs. Boghara Polyfab Private Limited – (2009) 1 SCC 267 , the Supreme Court held that whether a contract has been discharged by performance is a mixed question of fact and law, and if there is a dispute in regard to that question, that is arbitrable.
16. In National Insurance Company Limited Vs. Boghara Polyfab Private Limited – (2009) 1 SCC 267 , the Supreme Court held that whether a contract has been discharged by performance is a mixed question of fact and law, and if there is a dispute in regard to that question, that is arbitrable. In an application under Section 11 of the Act of 1996, the preliminary issues that may arise for consideration by the Chief Justice of his designate, can be into three categories, first category consists of issues which the Chief Justice or his Designate is bound to decide; second category consists of issues which he can also decide, that is issues which he may choose to decide; and third category consists of issues which should be left to the Arbitral Tribunal to decide. The issues falling in second category, are - whether the claim is a dead (long barred) claim or a live claim, and 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 cases falling in third category are - whether a claim made falls within the arbitration clause, and merits or any claim involved in the arbitration. In para 25 of the report, it was held by the Supreme Court that when a contract has been fully performed, there is a discharge of the contract by performance, and the contract comes to an end. Then there cannot be any dispute and consequently, there cannot obviously be reference to arbitration of any dispute arising from a discharged contract. It was held that where both the parties to a contract confirm in writing that the contract has been fully and finally discharged by performance of all obligations and there are no outstanding claims or disputes, courts will not refer any subsequent claim or dispute to arbitration. 17. In Speech and Software Technologies (India) Private Limited Vs. Neos Interactive Limited – (2009) 1 SCC 475 , also it was held by the Supreme Court that the preliminary issues to be considered by the Chief Justice of his designate are (1) existence of arbitration agreement, (2) territorial jurisdiction, (3) whether there are live issues to be referred to the arbitrator, and (4) whether application is filed within the period of limitation prescribed by the law.
If the court finds that the arbitration agreement does not exist or is rescinded, then the prayer for referring the dispute to the arbitrator will have to be rejected. 18. In Union of India Vs. Hari Singh, supra, a supplementary agreement was executed between the parties, of which no reference was given in the legal notice, which was served upon the General Manager, Northern Railways, Baroda House, New Delhi, pursuant to which he received the entire amount due to the contractor respondent. The respondent contractor did not even mention fact of entering into supplementary agreement with applicant, in the legal notice and receiving the amount of Rs.2,07,49,099/-. The Supreme Court observed that he deliberately suppressed the material facts and thereafter filed an arbitration case before the High Court of Punjab and Haryana, which by impugned judgment, referred the claim to Arbitrator. It was held by the Supreme Court that when the parties, by supplementary agreement, obtained full and final discharge after paying the entire amount, which was due and payable to the contractor, he would thereafter not be justified in invoking arbitration clause because there was no arbitral dispute for reference to the arbitrator. 19. In State of Maharashtra Vs. Nav Bharat Builders, supra, in execution of agreement for construction work, a dispute arose between the parties with regard to labour escalation charges and certain other items. The contractor laid suit for filing the agreement for reference of the disputes to the arbitrator. During pendency of the suit, under a mutual agreement, the contractor agreed to accept for labour escalation charges, an amount calculated in accordance with certain specified principles and to withdraw the suit in respect of labour escalation unconditionally, it was held that in such circumstances, no arbitrable dispute survived in respect of labour escalation and the contractor could not question the correctness of the amount quantified. 20. The Supreme Court in M/s P.K. Ramaiah and Company, supra, while dealing with the case where the contractor gave voluntary and unconditional acceptance of payment in full and final settlement of the contract, held that subsequent claim for further amounts in respect of the same work was not an arbitrable dispute.
20. The Supreme Court in M/s P.K. Ramaiah and Company, supra, while dealing with the case where the contractor gave voluntary and unconditional acceptance of payment in full and final settlement of the contract, held that subsequent claim for further amounts in respect of the same work was not an arbitrable dispute. In Nathani Steels Ltd., supra, it was held by the Supreme Court that once a dispute is amicably settled between the parties finally, arbitration clause cannot be invoked by a party to resolve the same unless settlement is first set aside by the appropriate court. 21. It is trite that while dealing with the question whether the claim in question was a live one and/or not and barred by limitation and whether there exists power of Chief Justice or his designate to record prima facie satisfaction and leave the question to be decided by Arbitral Tribunal on taking evidence along-with the merits of the claims involved, the Supreme Court in Shree Ram Mills Ltd. Vs. Utility Premises (P) Ltd. - (2007) 4 SCC 599 , held that if the Chief Justice does not decide the issue whether the claim is a dead one, in that event, it is for him to locate such issue and record his satisfaction that such issue exists between the parties. 22. The Supreme Court in Gayatri Project Ltd. Vs. Sai Krishna Construction – (2014) 13 SCC 638 , held that issuance of full and final discharge/settlement voucher/no-dues certificate, does not preclude arbitration when the said full and final settlement itself is disputed and on facts, the issue is to be determined on appreciation of evidence since it is open to two interpretations, which of the two circumstances is ultimately accepted will have to be decided by appropriate forum. 23. The Supreme Court in Indowind Energy Limited, supra, relied on by learned counsel for applicant, has only observed that before appointment of arbitrator, Chief Justice or his designate has to consider whether the party making application approached appropriate court, and whether there is existence of arbitration agreement and whether party that has applied for appointment of arbitrator is party to such agreement. The proceedings being summary in nature, wider examination of the matter is not warranted.
The proceedings being summary in nature, wider examination of the matter is not warranted. The Supreme Court in Rajesh Verma, supra, observed that it is a settled principle of law that jurisdiction of Court under Section 11 of the Act is limited and confined to examine as to whether there is an arbitration agreement between the contracting parties and, if so, whether any dispute has arisen between them out of such agreement which may call for appointment of arbitrator to decide such disputes. Both the relied judgments in Indowind Energy Limited, supra, and Rajesh Verma, supra, do not in any manner help the applicant. 24. It is surprising that applicant in the application did not disclose the fact about consensus arrived at between the parties for receiving reduced amount of minimum off-take guarantee at the rate of Rs.36,00,000/- per month. In the course of argument, learned senior counsel for the applicant sought to explain this omission by stating that a copy of the plaint filed by the respondent before the City Civil Court, Kolkata, in which all these facts were disclosed, was enclosed with the application. Such an explanation cannot be accepted. The applicant was duty obliged to disclose all the facts. Be that it may, in view of the fact that applicant itself agreed to accept the amount of minimum off-take guarantee, reduced from Rs.45,00,000/- to Rs.36,00,000/-, per month for a period of 12 months, or till the smelter plant restarts operation and actually received such amount, the total of which comes to Rs.4,32,00,000/-, there cannot be said to exist any live dispute between the parties as to refer the same to arbitration. 25. I am not inclined to entertain the application only because while making prayer on merits the applicant also additionally prayed that any other relief which this court may deem fit and proper in the facts and circumstances of the case, may also be granted. An arbitrator in the scope of Section 11(6) of the Act, cannot be appointed on the basis of residuary prayer without there being any articulated dispute and specific claim. 26. In view of the above discussion, the application is dismissed.