Jk Argi Genetics Limited v. Rajasthan State Seeds Corporation Limited
2017-08-18
MOHAMMAD RAFIQ
body2017
DigiLaw.ai
JUDGMENT Mohammad Rafiq, J. - This application under section 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996 has been filed by petitioner praying for appointment of sole Arbitrator to adjudicate the dispute between the petitioner and respondent. 2. Mr. R.P. Singh, learned senior counsel for petitioner, submitted that the respondent floated a tender dated 07.05.2012 for procurement of kharif certified/notified variety seeds and invited parties to submit tender forms. The petitioner participated in the tender process and was declared as the lowest bidder. The respondent placed supply orders on the petitioner by issuing nine letters of intent for supply of various types of seeds. Consequent to the letters of intent, four agreements dated 06.06.2012, 06.06.2012, 13.06.2012 and 18.06.2012, respectively, were executed between the petitioner and the respondent for supply of seeds. The said agreements contained Clause 29 as arbitration clause. The petitioner effected delivery of seeds on the respondent on various dates including 10.06.2012, 11.06.2012, 12.06.2012, 13.06.2012, 14.06.2012, 15.06.2012 and 16.06.2012. The respondent did not raise any objection with regard to quality or quantity of the material supplied by the petitioner. The petitioner raised invoices on the respondent towards the aforesaid supplies made, for a total sum of Rs. 24,33,50,000/-, which were duly received and accepted by the respondent. The respondent failed to release the payment in respect of the said invoices. The petitioner sent reminders to the respondent to release the payment. The respondent released only part payment of Rs. 6,11,42,000/-. The petitioner continued to remind the respondent to release the remaining amount of Rs. 18,22,08,000/-, but the respondent did not pay any heed thereto. The petitioner, in addition to the said outstanding amount, is also entitled to receive the security deposit of Rs. 1,21,67,665/- lying with the respondent. 3. It is submitted that the respondent, vide letters dated 23.07.2013, 21.10.2013 and 15.01.2014, asked the petitioner to take back certain quantity of seeds, which was lying in its possession unused. The petitioner vide letters dated 04.08.2013 and 27.10.2013 communicated to the respondent that the stock of seeds sought to be returned after two years was of no utility to the petitioner in as much as the same had been rendered useless. However, the respondent insisted that the petitioner should have collected the seeds and disposed off.
The petitioner vide letters dated 04.08.2013 and 27.10.2013 communicated to the respondent that the stock of seeds sought to be returned after two years was of no utility to the petitioner in as much as the same had been rendered useless. However, the respondent insisted that the petitioner should have collected the seeds and disposed off. The respondent verbally represented that in case the petitioner collects the stock of unused seeds, it would expedite the release of balance payment. Based on such representation, the petitioner collected the stock of seeds worth Rs. 54,92,576/- from the respondent at its costs in January, 2015. It is submitted that since the said stock was rendered useless due to passage of time, the petitioner had no option but to dispose off the said stock by burning it. Despite that, the respondent failed to release the payment. The petitioner sent a letter dated 21.03.2016 to the respondent requesting for release the outstanding amount due under the agreements. The respondent was liable to pay to the petitioner an amount of Rs. 19,43,75,665/- towards outstanding principal balance amount along-with interest on the said amount at the rate of 18% per annum. The petitioner, vide letter dated 19.11.2016, invoked arbitration under Clause 29 of the Agreements. Thus, the disputes have arisen between the parties as the respondent, despite admitting its obligation and liability to pay for seeds supplied to it by the petitioner and despite making part payment, has failed to pay the balance outstanding amount of Rs. 19,43,75,665/- due and payable by it, under the agreements. The respondent vide letter dated 11.01.2017 replied to the said notice and in derogation of the provisions of the Act of 1996, referred the dispute between the parties to its Chairman for arbitration. The petitioner objected to the said reference of the matter to the Arbitrator stating that the appointment of Chairman of the respondent as an Arbitrator is contrary to Section 12(5) of the Act of 1996. 4. Mr. Anuroop Singhi, learned counsel for respondent, opposed the application and submitted that all the four agreements are in respect of different products. Three agreements are of different dates and involves different quantities of seeds. All the agreements give rise to different and independent cause of action. Therefore, a common and joint application for four different agreements cannot be filed and this court ought not to entertain the same.
Three agreements are of different dates and involves different quantities of seeds. All the agreements give rise to different and independent cause of action. Therefore, a common and joint application for four different agreements cannot be filed and this court ought not to entertain the same. Learned counsel submits that this application deserves to be dismissed as barred by limitation. The agreements pertain to the period of June, 2012, pursuant to which the supply of defective and substandard seeds were made. Umpteen number of complaints were received from farmers across the State of Rajasthan during the visit of the erstwhile Chairman of the respondent to various parts of the State and therefore an inquiry committee was constituted, which conducted detailed inspection of various fields in different parts of the State, and submitted its report dated 31.10.2012 and it was found therein that the seeds are of substandard and defective quality. It is submitted that an FIR No. 76/2013 was lodged on 19.02.2013 at Police Station Ashok Nagar, Jaipur, in which the police filed negative final report and the respondent challenged the same by filing protest petition in the court concerned, which is pending consideration. 5. Learned counsel submitted that it is established that the dispute arose with respect to the quality of seeds and payment of the same much prior to three years from filing of the present application in the year 2017 and thus the present application is barred by limitation and there cannot be said to be any live dispute existing as on date. It is submitted that even if the date of notice dated 19.11.2016 is considered, then also the present proceedings are time barred and there cannot be any live dispute existing as on date. 6. Learned counsel further submitted that for the same issue, criminal proceedings are pending consideration before the court of Metropolitan Magistrate No. 23, Jaipur, and therefore this application is liable to be dismissed. That apart, this application has been filed by concealing and suppressing various material facts including the most germane and pivotal fact that as a consequence to the defective and substandard quality of seeds, an FIR was lodged against the petitioner for offence under Sections 420, 467, 468 and 471 of the Indian Penal Code. The ''bajra'' seeds supplied by the petitioner were highly defective and of substandard quality and thus no payment towards the same was made. 7.
The ''bajra'' seeds supplied by the petitioner were highly defective and of substandard quality and thus no payment towards the same was made. 7. Mr. R.P. Singh, learned senior counsel, rejoined and submitted that the objection of the respondent in respect of a joint application seeking constitution of Arbitral Tribunal to adjudicate the disputes between the parties with regard to four agreements is misconceived in view of the settled proposition of law laid down by the Supreme Court in P.R. Shah, Shares and Stock Brokers Private Limited v. BHH Securities Private Limited and Others - (2012) 1 SCC 594 , wherein it was held that the parties cannot be denied the benefit of a single arbitration on the ground that the arbitration agreements between the said parties are contained under two different contracts inasmuch as the same would lead to multiplicity of proceedings and conflicting decisions. The present matter relates to a parent/master contract in the form of a tender dated 07.05.2012 floated by the respondent. The respondent executed four agreements, which were essentially in the form of purchase orders, which expressly incorporated the terms and conditions of the same tender i.e. the said agreements contained identical terms except for the quantity demanded. The said terms also included the identical arbitration clause. The arbitration clause was a part of the parent tender, which was incorporated in all the agreements. The dispute emanate from a single composite transaction, which integrally connects all the four agreements between the parties, which originate from the parent tender. 8. Learned counsel further submitted that even the respondent has treated the transaction of supply of subject seeds by the petitioner pursuant to four agreements as a single composite transaction inasmuch as a consolidated part payment has been released by the respondent on 06.12.2013. The respondent while requesting the petitioner to collect the unused quantity of seeds has again not differentiated the stock of unused seeds on the basis of agreements or on the basis of supplies made thereunder. The documents/records in respect of the entire transaction are common and integrally connected, the relevant evidence to be adduced during trial is also common, the witnesses to be examined are common and therefore it will only be just and proper to permit the parties to participate in a single arbitration for speedy adjudication of the disputes. 9.
The documents/records in respect of the entire transaction are common and integrally connected, the relevant evidence to be adduced during trial is also common, the witnesses to be examined are common and therefore it will only be just and proper to permit the parties to participate in a single arbitration for speedy adjudication of the disputes. 9. Learned counsel submitted that as per own saying of the respondent, the Investigating Agency has filed the final report in the F.I.R. before the competent court and that the petitioner has till date not received any summon in respect thereof, therefore, there was no question of concealment. Learned counsel submitted that as per the report dated 09.10.2012 of the Department of Agriculture, Government of Rajasthan, Jhunjhunu, the uneven performance of ''bajra'' crop was due to late sowing/less moisture in soil, late rains, no usage of DAP, SSP and Urea, no weeding done etc. Further, pursuant to the directions issued by the Commissionerate of Agriculture, Jaipur, Rajasthan, on 17.03.2013, the ''bajra'' seeds supplied by the petitioner were examined at the Seeds Examination Laboratory, Kota and Chittorgarh. The ''Observation'' of the Office of the Agriculture Research Officer (Botany) expressly records that the quality was standard. The quality of seeds supplied was never deficient. 10. Learned counsel submitted that the objection raised by the respondent in respect of the applicability of the Amendment Act, 2015 is misconceived and contrary to Section 26 of the Amendment Act, 2015, which expressly provides that the said Amendment Act shall apply in relation to arbitral proceedings commenced on or after the commencement of the said Act. Admittedly, the Amendment Act came into force on 23.10.2015 and the arbitral proceedings in the present case commenced on 19.11.2016 and therefore the said Act will apply in the present case. 11. Having heard learned counsel for the parties and perused the material on record, I must begin with observing that at the stage of proceedings under Section 11 of the Act of 1996, this court is only required to examine as to whether there exists a valid arbitration agreement between the parties but the court is not required to delve into the merits of the dispute and other issues in respect of the maintainability of the claims as the same lies exclusively within the domain of the arbitral Tribunal.
It is clear that there exists a dispute between the parties and that there is also an arbitral clause in the agreements executed between the parties. Clause 29 of the agreement is exactly identically worded in all four agreements. It provides that if there arises any dispute between the parties, the Chairman, RSSCL will be arbitrator and the decision of the arbitrator will be binding on both the parties. Since the respondent has failed to appoint the Arbitrator despite demand of the petitioner vide notice dated 19.11.2016 within 30 days, they have in any case forfeited the right to appoint the Arbitrator. In view of the provisions contained in Section 12(5) of the Amendment Act, 2015, the Chairman, Rajasthan State Seeds Corporation Limited, Jaipur, now cannot act as an Arbitrator. Indisputably all the four agreements are between the same parties and they contain similar clause in respect of arbitration. There is no impediment in law for filing a common application for appointment of Arbitrator. The objection that one single application cannot be filed by the petitioner in respect of four agreements cannot be entertained and further argument that one single Arbitrator cannot be appointed, is noted to be rejected. 12. The Supreme Court in P.R. Shah, supra, while dealing with somewhat similar objection, in para 18 and 19 of the report, observed thus:- "18. In this case, the first respondent had a claim for Rs. 36,98,354.73 jointly against second respondent and the appellant. According to the first respondent, it entered into the transaction with second respondent on the instructions of the appellant and on the understanding that the appellant will also be liable and in fact, the appellant accepting its liability, had also paid Rs. 13 lakhs as part-payment. It is not disputed that appellant and second respondent were closely held family companies managed by the same person (Ms. Kanan C. Sheth). According to appellant the share holdings in appellant was Kanan C. Seth:1,05,000 shares, Chetan M. Sheth:45,000 shares and Jasumati P. Shah:1,50,000 shares and the shareholdings in second respondent company was Kanan C. Sheth:100 shares and Chetan M. Sheth:100 shares. 19.
Kanan C. Sheth). According to appellant the share holdings in appellant was Kanan C. Seth:1,05,000 shares, Chetan M. Sheth:45,000 shares and Jasumati P. Shah:1,50,000 shares and the shareholdings in second respondent company was Kanan C. Sheth:100 shares and Chetan M. Sheth:100 shares. 19. If A had a claim against B and C, and there was an arbitration agreement between A and B but there was no arbitration agreement between A and C, it might not be possible to have a joint arbitration against B and C. A cannot make a claim against C in an arbitration against B, on the ground that the claim was being made jointly against B and C, as C was not a party to the arbitration agreement. But if A had a claim against B and C and if A had an arbitration agreement with B and A also had a separate arbitration agreement with C, there is no reason why A cannot have a joint arbitration against B & C. Obviously, having an arbitration between A and B and another arbitration between A and C in regard to the same claim would lead to conflicting decisions. In such a case, to deny the benefit of a single arbitration against B and C on the ground that the arbitration agreements against B and C are different, would lead to multiplicity of proceedings, conflicting decisions and cause injustice. It would be proper and just to say that when A has a claim jointly against B and C, and when there are provisions for arbitration in respect of both B and C, there can be a single arbitration." 13. The Patna High Court in The State of Bihar and Another v. Gulabi Devi and Others - 1986 SCC OnLine Pat 254 , rejected similar objection by observing in Para 14 of the report thus, "14. Coming to the question of joint award arising out of different agreements, in my view, in law there is no such bar. It is true that section 20 of the Act and other sections of the Arbitration Act also use the expression ''agreement'' in singular which indicates, as submitted by the Learned Counsel for the appellant, that dispute arising out of one agreement is a dispute in itself.
It is true that section 20 of the Act and other sections of the Arbitration Act also use the expression ''agreement'' in singular which indicates, as submitted by the Learned Counsel for the appellant, that dispute arising out of one agreement is a dispute in itself. This, however, does not mean that several disputes arising out of several agreements cannot be disposed of in one arbitration proceeding, particularly, when it relates to the same transaction as in this case. In this appeal, particularly, the agreements arise out of a single tender and thus can really be classified as a single dispute arising out of a single agreement. Had these agreements been in the name of different parties, as submitted by the Learned Counsel for the appellant, the situation might have been different but both the parties being same in all the agreements and the agreements relating to a single tender; I see no legal disability in their being disposed of by a single arbitration proceeding because the totality of the claims had to be examined for the purposes of giving an award. This apart, this objection is seeing the light of the day for the first time in this Court. I, therefore, do not find any ground to efface the award on this ground." 14. In view of the fact that all four agreements are between the same parties and are identically worded and more significantly, considering the fact that the tender dated 07.05.2012 was common in respect to the entire work, which has been awarded to the petitioner by different four agreements, ideal would be to appoint one single arbitrator. The tender was in the nature of contract for procurement of certified/notified variety seeds. Respondent issued several letters of intent to the petitioner, containing uniform terms and conditions of the tender, which clearly shows that letter of intent had identical terms. All the four different agreements executed between the parties were essentially in the form of purchase orders. The respondent thus himself has treated the transaction of supply of seed by the petitioner pursuant to said four agreements as a single composite transaction. The objection raised by the respondent is therefore liable to be overruled. 15. In view of the above, present application succeeds and is accordingly allowed. Hon''ble Mr.
The respondent thus himself has treated the transaction of supply of seed by the petitioner pursuant to said four agreements as a single composite transaction. The objection raised by the respondent is therefore liable to be overruled. 15. In view of the above, present application succeeds and is accordingly allowed. Hon''ble Mr. Justice G.S. Singhvi, Former Judge, Supreme Court of India, R/o M-11, 1st Floor, South Extension, Part-II, New Delhi (Telephone No. 011-41004164) is hereby appointed as an independent sole arbitrator to resolve the disputes between the parties. Payment of the costs of arbitration proceedings and the arbitration fees shall be made as per the Fourth Schedule of the Arbitration and Conciliation (Amendment) Act, 2015 read with Manual of Procedure for Alternative Dispute Resolution, 2009 of this Court, as amended from time to time. 16. A copy of this order be sent to Hon''ble Mr. Justice G.S. Singhvi, R/o M-11, 1st Floor, South Extension, Part-II, New Delhi (Telephone No. 011-41004164), for needful.