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2016 DIGILAW 411 (GUJ)

Aryan Associates v. Solutions 4 Energy Pvt. Ltd.

2016-02-19

AKIL ABDUL HAMID KURESHI

body2016
JUDGMENT : Akil Abdul Hamid Kureshi, J. 1. This petition is filed for appointment of an arbitrator to decide disputes between the petitioner and the respondent, which, according to the petitioner, have arisen out of a contract dated 01.02.2008. This arbitration petition is strongly opposed by the respondent on the ground that no such agreement was ever executed by the respondent-company. 2. Brief facts are as under: Case of the petitioner is that, under an agreement dated 01.02.2008, the petitioner agreed to supply digested slurry to the respondent-company for a period of five years w.e.f. February-2008 for a total estimated amount of Rs. 1.5 crores. This document contained arbitration clause in following manner: "6. Arbitration and Jurisdiction:-- All disputes that cannot be settled by Mutual Negotiations shall be referred to arbitration, according to the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof in force at that time. The venue of such arbitration shall be at the Vadodara office of the company. All the causes of action relating to this agreement, if any, shall be deemed to have arisen within the jurisdiction of the courts at Vadodara, Gujarat State. Any amendments or alteration to this agreement shall be valid only if set down in writing and signed by the parties to this contract." 3. Case of the petitioner further is that, pursuant to such contract, the petitioner supplied slurry to the respondent-company from time to time as per the demand raised. Respondent also paid part of the amount. However, substantial amount remained unpaid. After sending email to the respondent to make regular and full payment when the respondent failed to do so, the petitioner issued notice dated 30.10.2014 to the respondent-company for appointment of an arbitrator. In such notice, the petitioner referred to and relied on the said agreement dated 01.02.2008. 4. In response to such notice, the respondent replied under their advocate's letter dated 12.11.2014 and denied the company having ever executed the said agreement dated 01.02.2008. In fact, it was conveyed that, the company had not executed any agreement for purchase of slurry from the petitioner. At several places, the respondent-company disputed very existence of the said agreement dated 01.02.2008. 5. The petitioner, thereupon, filed this arbitration petition. In fact, it was conveyed that, the company had not executed any agreement for purchase of slurry from the petitioner. At several places, the respondent-company disputed very existence of the said agreement dated 01.02.2008. 5. The petitioner, thereupon, filed this arbitration petition. Heavy reliance is placed by the counsel for the petitioner on the said agreement dated 01.02.2008 which purports to carry the signature of one Shri Mehul Buddhadev, who was, at the relevant time, one of the Directors of the respondent-company. Petitioner also pointed out that the running accounts maintained by the respondent-company pertaining to the petitioner would clearly demonstrate that large quantity of digested slurry was supplied by the petitioner to the respondent, for which, part payment was also made. According to the counsel for the petitioner, thus, there is clear indication of existence of agreement, pursuant to which, even the respondent received slurry supplied by the petitioner. Counsel also placed reliance on the email correspondence made by the petitioner with respondent-company, in which, issue of unpaid dues was raised. 6. Basing reliance on the decisions of Supreme Court in case of Hythro Power Corporation Ltd. vs. Delhi Transco Ltd., reported in 2003 (8) SCC 35 counsel submitted that, there was an arbitration clause in the agreement. In case of dispute, the issue can still be left for the arbitrator to decide. In the present case, however, the evidence on record would clearly suggest existence of such agreement. 7. On the other hand, the case of the respondent is that, no such agreement was ever executed. The signature of Shri Mehul Buddhadev is not genuine. In any case, mere signature on last page of the document would not establish that the contract was actually executed. The petitioner himself was a Director of the respondent-company for a short while and, therefore, the correspondence and stationery of the respondent-company could have been misused. The case of the respondent-company further is that the petitioner should be asked to produce the original document only upon which, his request for appointment of an arbitrator can be considered. Counsel for the respondent submitted that the said document dated 01.02.2008 does not inspire confidence. Though it is recorded that the respondent would purchase slurry from the petitioner for a total cost of Rs. 1.5 crores, the rate, at which the same would be supplied, is nowhere mentioned. The agreement is otherwise unregistered. Counsel for the respondent submitted that the said document dated 01.02.2008 does not inspire confidence. Though it is recorded that the respondent would purchase slurry from the petitioner for a total cost of Rs. 1.5 crores, the rate, at which the same would be supplied, is nowhere mentioned. The agreement is otherwise unregistered. Relying on the decision of Supreme Court in case of Bharat Rasiklal Ashra vs. Gautam Rasiklal Ashra and Anr., reported in (2012) 2 SCC 144 counsel submitted that unless existence of arbitration agreement is established, the Chief Justice or his designate would not appoint arbitrator. The arbitrator cannot decide whether there was a concluded contract containing arbitration clause. Such findings must be that of the Chief Justice or his designate before the arbitrator is appointed. 8. In view of the stand adopted by the respondent-company, that the agreement dated 01.02.2008 was never executed, I had first required the petitioner, under order dated 30.10.2015, to state on affidavit who, according to the petitioner, had signed such document. When the petitioner in such affidavit disclosed the name of the Director of the respondent-company, I had required the respondent-company to file affidavit of such person which was done on 07.12.2015, in which, he has stated that he had never signed the so-called agreement dated 01.02.2008 and, it appears that the petitioner had fabricated the said document. 9. In view of such developments, on 29.01.2016, after hearing learned advocates for the parties, I decided to send the document for the opinion of the handwriting expert to compare the signature contained therein with the original admitted signature of Shri Mehul Buddhadev. Accordingly, Shri Mehul Buddhadev had, in presence of the Registrar of this Court, given his specimen signature which was sent alongwith the copy of the said document dated 01.02.2008 for comparison. The Registry has, today, placed a report dated 18.02.2016 alongwith which a letter of the Assistant Director, Document Division, Directorate of Forensic Science dated 17.02.2016 is annexed. In such letter, it is stated that as per the Gujarat Police Manual Volume III Rule 167(13), Xerox copy will not be examined without its original as scientifically, the line quality of signature/writings cannot be studied in a xerox copy. 10. In such letter, it is stated that as per the Gujarat Police Manual Volume III Rule 167(13), Xerox copy will not be examined without its original as scientifically, the line quality of signature/writings cannot be studied in a xerox copy. 10. Having thus made an attempt to verify the genuineness of the signature on the said agreement dated 01.12.2008 and having failed in doing so, I must answer the question whether in such a situation, matter is required to be referred to arbitrator or not? In this context, one must recall, the petitioner does not have the original of the said document dated 01.02.2008. The petitioner claims that the original is retained by the respondent. However, this would not further the case of the petitioner when the petitioner is unable to produce such a document and validity of which is seriously disputed by the respondent. I must have some firm grounds to believe that the agreement in question was actually executed. In absence of any such agreement, there would be no question of referring the issues for arbitration since it is this very agreement, which contains an arbitration clause. In other words, if the agreement never came into existence nor would the arbitration clause. The decision of Supreme Court in case of Hythro Power Corporation Ltd. vs. Delhi Transco Ltd. (supra) was referred to before the Constitution Bench in case of SBP & Co. Vs. Patel Engineering Ltd. reported in (2005) 8 SCC 618 wherein reliance was almost entirely placed on the earlier decision in case of Konkan Railway Corporation Ltd. and Ors. vs. Mehul Construction co. reported in (2000) 7 SCC 201 . The decision in case of Konkan Railway Corporation Ltd. and Ors. vs. Mehul Construction Co. came to be overruled by the later decision in case of SBP & Co. Vs. Patel Engineering Ltd. (supra). The majority view was that the Chief Justice or his designate, when approached with application under Section 11 of the Act, has to decide his own jurisdiction in the sense that whether the party making the motion has approached the right High Court. He also has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made request before him is a party to such an agreement. He also has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made request before him is a party to such an agreement. He has to decide whether the applicant has satisfied the conditions for appointment of an arbitrator under Section 11(6) of the Act for the purpose of taking a decision. On these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded as may be necessary. 11. In case of Indowind Energy Limited vs. Wescare (India) Limited and Anr., reported in (2010) 5 SCC 306 when the Chief Justice of the High Court allowed the application under Section 11 of the Act and appointed a sole arbitrator holding that he was prima facie a party to the arbitration agreement and was bound by it, the Supreme Court reversed the judgment of the High Court appointing the arbitrator holding that the Chief Justice or his designate is required to decide existence of arbitration agreement between the parties finally. Mere prima facie findings as to existence of arbitration agreement is not contemplated under the Act. It was observed as under: "23. In so far as the issue of existence of arbitration agreement between the parties, the learned Chief Justice or his Designate is required to decide the issue finally and it is not permissible in a proceeding under section 11 to merely hold that a party is prima facie a party to the arbitration agreement and that a party is prima facie bound by it. It is not as if the Chief Justice or his Designate will subsequently be passing any other final decision as to who are the parties to the arbitration agreement. Once a decision is rendered by the Chief Justice or his Designate under section 11 of the Act, holding that there is an arbitration agreement between the parties, it will not be permissible for the arbitrator to consider or examine the same issue and record a finding contrary to the finding recorded by the court. This is categorically laid down by the Constitution Bench in SBP. Therefore the prima facie finding by the learned Chief Justice that Indowind is a party to the arbitration agreement is not what is contemplated by the Act." 12. This is categorically laid down by the Constitution Bench in SBP. Therefore the prima facie finding by the learned Chief Justice that Indowind is a party to the arbitration agreement is not what is contemplated by the Act." 12. In case of Speech and Software Technologies (India) Private Limited vs. Neos Interactive Limited reported in (2009) 1 SCC 475 , it is observed that it is well settled that the arbitration agreement is a condition precedent before exercise of powers under Section 11(6) of the Act. 13. In case of Bharat Rasiklal Ashra vs. Gautam Rasiklal Ashra and Anr. (supra), the Supreme Court, in this context, observed as under: "16. The learned counsel for the first respondent next submitted that if the Chief Justice or his designate is required to examine the allegations of fabrication and forgery made by a party in regard to the contract containing the arbitration agreement, before appointing an arbitrator under section 11 of the Act, the proceedings under the said section will cease to be a summary proceedings, and become cumbersome and protracted, necessitating recording of evidence, thereby defeating the object of the Act. In our considered view this apprehension has no relevance or merit. Existence of a valid and enforceable arbitration agreement is a condition precedent before an arbitrator can be appointed under section 11 of the Act. When serious allegations of fraud and fabrication are made, it is not possible for the Court to proceed to appoint an arbitrator without deciding the said issue which relates to the very validity of the arbitration agreement. Therefore the fact that the allegations of fraud, forgery and fabrication are likely to involve recording of evidence or involve some delay in disposal, are not grounds for refusing to consider the existence of a valid arbitration agreement." 14. The above decisions would demonstrate that before making appointment of an arbitrator, it is necessary to hold that there was an arbitration agreement between the parties. In absence of any such findings, appointment of an arbitrator would not be possible. 15. In the present case, as noted, the petitioner is not able to produce the original document. The xerox copy does not permit proper investigation into genuineness of the signature. In absence of any such findings, appointment of an arbitrator would not be possible. 15. In the present case, as noted, the petitioner is not able to produce the original document. The xerox copy does not permit proper investigation into genuineness of the signature. Even otherwise, the respondent, in addition to disputing signature, has also contended that, no such agreement was ever executed and the petitioner being an erstwhile Director of the respondent-company, it is possible that the stationery of the company was misused. In view of such serious allegations, in absence of any reliable evidence of execution of the said agreement, it is simply not possible to hold that the petitioner and the respondent entered into the contract, as alleged. 16. Mere supply of goods by the petitioner and receipt thereof by the respondent would not necessarily establish execution of the agreement. It is not unknown in industrial circles where goods are supplied and received without detailed written contracts. In the emails, which are produced on record, there is no direct reference to the agreement dated 01.02.2008. When the petitioner referred to such agreement in the notice for appointment of an arbitrator, the respondent immediately disputed existence of such an agreement. 17. Under the circumstances, this arbitration petition is dismissed. However, this would not preclude the petitioner from filing a civil suit for all his claims. It will be decided unmindful of any of the observations made in this order.