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2016 DIGILAW 423 (UTT)

Virtuaal Retail Private Limited v. Titan Company Limited

2016-08-03

SERVESH KUMAR GUPTA

body2016
JUDGMENT : Servesh Kumar Gupta, J. In the interest of justice, Civil Revision No. 50/2016, being main filed by M/s Virtuaal Retail Private Limited, is under adjudication after considering the merits of Civil Revision No. 102/2016 as well simultaneously, filed by the same defendants, as the decision in the former (which has now been converted in an appeal) will decide the course of justice to be taken by this Court in the latter. 2. Shorn of unnecessary details, it transpires that plaintiff/respondent no. 1 M/s Titan Company Limited supplied the costly jewellery items to the defendants/revisionists under a franchise agreement entered into between the parties on 28.9.2005 and pursuant whereof the defendants, in the capacity of agents, had to sale such items, manufactured by M/s Titan Company Limited, in a showroom at Dehradun city. The bonhomie between the two continued for quite a long time, but it was disrupted when the defendants, as has been alleged in the averments of the plaint, mortgaged good number of such items worth rupees crores with the Punjab National Bank in order to enhance their overdraft limit and thus encumbrance was created on such items. When this fact came to the notice of plaintiff, it took exception of such an unusual and unthinkable act on the part of the defendants, which by any stretch of imagination could not have been contemplated under any of the stipulations of the franchise agreement. So, M/s Titan Company Limited initiated an Original Suit No. 669/2015 against its agents and bank seeking the decree, inter alia, of declaration to the effect that the defendants do not have any rights/powers to create the charge/lien of plaintiff’s stocks and hence any creation of charge/lien or its acceptance by the defendants no. 5 and 6 for grant of Credit facilities (for defendant no. 1) is illegal and void. Besides, a decree of permanent injunction was also sought to restrain the defendants, their associates, agents, servants, attorneys, etc. from selling, encumbering, transferring or creating any charge or third party interest or disposing/alienating any products/stocks of the plaintiff and further to restrain them from removing/destroying the assets or records of the plaintiff and also restrain them from opening/running the showroom at 9, Astley Hall, Rajpur Road, Dehradun in any manner or in any other name and at any other place. 3. 3. In addition to above, the plaintiff, inter alia, also prayed for the mandatory injunction to the effect that the defendants, their agents, servants, authorised representatives be directed to handover/restore all the stocks of the plaintiff in their power and possession and deposit the entire sale proceeds with them in the account of the plaintiff. 4. Plaintiff also sought the decree for damages for an amount of Rs. 15,26,21,010/- (rupees fifteen crores twenty six lakhs twenty one thousand and ten only) along with interest @ 12 per cent per annum with pedente lite and future interest in favour of the plaintiff and against the defendants jointly and severally. 5. Plaintiff also prayed for passing a preliminary decree and final decree of rendition of accounts/mandatory injunction against defendants jointly and severally and to direct the defendants to disclose the status of the assets of the plaintiff’s products/stocks including status of its possession/sale and also the status as on till date and also disclose all records, accounts and documents related to products/stocks of the plaintiff and the payment of whatsoever amount is found due to the plaintiff on accounting against the defendants jointly and severally along with pendente lite and future interest @ 12 per cent per annum taking into account the damages granted to the plaintiff. 6. No sooner did the notice was served upon the defendants, they came up with the objections more prominently seeking the rejection of the plaint under Order 7 Rule 11 CPC. Learned Trial Court, vide the impugned order dated 2.4.2016, rejected such application, whereagainst this Civil Revision No. 50 of 2016 (converted into appeal) was filed. 7. I have heard learned Senior Counsels for the parties and perused the papers on the record. 8. Learned Senior Counsel on behalf of the revisionists/defendants has strenuously drawn the attention of this Court towards Clauses 43 and 56 of the franchise agreement. It would be in the fitness of things to reproduce both these clauses hereinbelow:- “43. Any dispute, disagreement or question arising out of and in connection with this Agreement shall be referred to Arbitration in accordance with the Arbitration and Conciliation Act, 1996 or any of its successor legislations/ordinances. In the event of there being any proceedings before the Court, jurisdiction shall be vested with the Courts of Bangalore City. 56. Any dispute, disagreement or question arising out of and in connection with this Agreement shall be referred to Arbitration in accordance with the Arbitration and Conciliation Act, 1996 or any of its successor legislations/ordinances. In the event of there being any proceedings before the Court, jurisdiction shall be vested with the Courts of Bangalore City. 56. During the continuance of this Agreement, the Franchise shall not, except with the prior written permission of the Company, be entitled to transfer or dispose of or alienate the Showroom in any manner or enter into any arrangement as a result of which the use or possession of the Showroom or the carrying on of the business envisaged herein is in any manner jeopardised or affected. In the unlikely event of the Franchise selling, disposing of or alienating the said property to any other party in any manner, the transferee or successor as the case may be, shall be bound by the provisions of this Agreement and shall acquire the same subject to Company’s approval.” 9. Reference has also been made to Sections 5, 8 and 16 of the Arbitration and Conciliation Act, 1996. Section 5 mandates that notwithstanding anything contained in any other law for the time being in force, no judicial authority shall intervene in the matters governed by Part I of the Act, except where so provided in this Part. 10. Section 8, as amended of late w.e.f. 23.10.2015 by Act No. 3 of 2016, makes it all the more mandatory for the judicial authority to refer the matter to the arbitration, unless it finds that prima facie no valid arbitration agreement exists. 11. It was further argued that it is incumbent upon the judicial authority to refer this matter to the arbitral tribunal and, at any later stage of time, if the jurisdiction of such tribunal is agitated by the plaintiff, then such tribunal is competent to rule about its own jurisdiction, as envisaged under Section 16 of the Act. 12. Learned Senior Counsel for the revisionists/defendants has also relied upon a judgment of Hon’ble Apex Court rendered in Hindustan Petroleum Corporation Ltd. Vs. M/s Pinkcity Midway Petroleums, reported in 2003 (5) Supreme 88 . 12. Learned Senior Counsel for the revisionists/defendants has also relied upon a judgment of Hon’ble Apex Court rendered in Hindustan Petroleum Corporation Ltd. Vs. M/s Pinkcity Midway Petroleums, reported in 2003 (5) Supreme 88 . This precedent, to my mind, is not attracted in the present controversy for the reason that in such matter, the dispute had been referred to the arbitrator and when one of the parties objected regarding the competence of jurisdiction of the arbitral tribunal, then the Hon’ble Apex Court observed that it is well within the powers of such tribunal to make a finding about the competence of its jurisdiction in the matter in controversy vis-à-vis to the arbitral agreement. 13. Here, the controversy, which goes to the root of the question, is whether the nature of the dispute, which has been arisen between the parties herein, attracts the applicability of any of the above-cited clauses of such franchise agreement. Undoubtedly, Clause 43 talks about the reference of any dispute, disagreement or question arising out of and in connection with this agreement to the arbitration tribunal, but the language of this clause makes it abundantly clear that only such dispute, disagreement or question which arises out of and in connection with this agreement are referable to the arbitral tribunal, and not any other dispute or disagreement or question, which is of the nature altogether different from what has been delved in all or any of such stipulations of the franchise agreement. 14. Mortgaging of the items by the agents, which were supplied by their Principal, has nowhere been whispered in any of the stipulations of the franchise agreement. This action on the part of the defendants/revisionists was altogether different which could not have been contemplated or foreseen by other party (the Principal of the goods) at the time of entering into the agreement dated 28.9.2005. 15. In view of what has been set forth above, I find that there is no force in this appeal. It is hereby dismissed at the threshold. 16. As a consequence of the dismissal of the appeal (converted from Civil Revision No. 50 of 2016), the Civil Revision No. 102 of 2016, which has been filed challenging the issuance of Advocate Commissioner in order to ensure the availability of the jewellery items at the destination, also looses its legs and, therefore, it is also dismissed.