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Allahabad High Court · body

2017 DIGILAW 204 (ALL)

SWIPE SPIRE v. SAMSUNG ELECTRONIC COMPANY LTD.

2017-01-16

ASHWANI KUMAR MISHRA

body2017
JUDGMENT Hon’ble Ashwani Kumar Mishra, J.—This application has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 for reference of dispute to arbitrator, which is said to have arisen between the applicant and the respondent No. 1 company. 2. As per the averments made in the affidavit, filed in support of the application, the applicant, which is a partnership concern, was appointed as a distributor of the respondent company in the year 2005. Pursuant to it, it proceeded to distribute mobile phones of the respondent company in its area. Various sale invoices etc. have been brought on record to indicate that the applicant continued to perform function of distributor since the year 2005. It is further stated in the affidavit that in the year 2009, respondent No. 6 was appointed as zonal distributor of respondent No. 1 company. It is alleged that one Shantanu Singh, acting on behalf of respondent No. 1 company, sent a draft agreement to the applicant with a request to sign it and sent the same with requisite stamp. This letter dated 10.8.2009 alogwith the draft agreement has been brought on record as Annexure -1 to this affidavit. This draft agreement contains an arbitration clause. The applicant submits that it had sent the duly signed draft agreement as per the direction contained in the letter dated 10.8.2009 to the company. The applicant states that it continued to act as the distributor and for such purposes subsequent transactions and monthly reports have been brought on record. 3. It is claimed that the distributorship of the applicant was terminated on 25.5.2012 which gave rise to a dispute between the parties. The applicant sent a notice in terms of Clause-12 of the agreement, requiring the respondent company to appoint an arbitrator. This notice was replied by the company, stating that there is no previty of contract between the parties nor there exists any arbitration agreement, pursuant to which an arbitrator could be appointed. Aggrieved by such action, the applicant has filed the present application for appointing an arbitrator. 4. A counter-affidavit has been field by the company disputing the existence arbitration agreement between the parties. So far as the copy of draft agreement sent vide letter dated 10.8.2009 is concerned, the company states that the duly signed agreement was never received by it nor it was ever signed by them. 4. A counter-affidavit has been field by the company disputing the existence arbitration agreement between the parties. So far as the copy of draft agreement sent vide letter dated 10.8.2009 is concerned, the company states that the duly signed agreement was never received by it nor it was ever signed by them. Although, there is no specific denial about sending of letter dated 10.8.2009 by the company but there is a positive and specific denial with regard to receiving of any such agreement or entering into an arbitration agreement between the company and the applicant. 5. Sri Rakesh Pandey, learned counsel appearing for the company has also taken the Court through draft agreement in order to contend that the agreement relied upon by the applicant relates to installation of a software, which cannot be said to be a distributorship agreement between the parties, even otherwise. 6. Sri S. Shekhar who appears for respondent No. 6 has also adopted similar stand and existence of arbitration agreement has been disputed. 7. In rejoinder, Sri S.K. Chaturvedi Advocate has relied upon the judgment of the Apex Court in Unissi (India) (P) Ltd. v. Post Graduate Institute of Medical Education and Research, (2009) 1 SCC 107 , to contend that execution of an agreement, in writing is not mandatory, and if it could be inferred from the conduct of the parties that there was an agreement to refer their dispute to arbitrator, then the non execution of formal agreement would not be fatal. 8. In order to resolve the controversy, transaction as a whole will have to be seen. The applicant contends that it has been acting as a distributor on behalf of the respondent company since the year 2005. There is, however, no distributorship agreement brought on record of this petition. It appears that when the matter was heard earlier by this Court, similar issue cropped up and therefore, this Court passed following orders on 7.10.2015 : “The applicant to clarify and establish whether there was a distributorship agreement or not for selling the products which was distinct and separate from one that was made whereas the present agreement is confined only to the installation of certain services and their maintenance. He may do so within two weeks by way of an affidavit. List after two weeks”. 9. He may do so within two weeks by way of an affidavit. List after two weeks”. 9. The applicant, in categorical terms has stated that there exists no other agreement except the draft agreement annexed as Annexure-1. 10. From the materials placed, this Court finds that though there is a specific averment on behalf of the applicant that it has been acting as a distributor on behalf of the company since 2005 but no such distributorship agreement is on record. Unless it is shown that parties have resolved to get their dispute relating to distributorship settled through arbitrator, this Court would not be justified in appointing an arbitrator. The factum of even draft agreement is seriously disputed. It is apparent from the materials brought on record that the parties have actually not signed the draft agreement in terms of Section 7 of the Act. The agreement which has been relied upon even if is taken into consideration, merely acknowledges existence of the applicant as a distributor. In the draft agreement, which is enclosed, the applicant is shown to be a second party with following description : “M/s. Swift Spire, a proprietorship Company having its ‘ principal place of business’ at C/o Caltex Lubricants-10, Prakash Enclave Behind Sheil Autos, Agra through its Proprietor Mr. Ravi, hereinafter referred to as ‘the Distributor’, which expression shall unless repugnant to the context or meaning thereof include its successors, legal executors and assigns of the second part.” 11. This agreement refers to the respondent company as the first party which had appointed respondent No. 6 as the zonal distributor. The agreement further mentions that the zonal distributor has appointed the distributors to distribute the products to various retail outlet. The draft agreement further narrates that the distributor has agreed for installation of software to integrate its supply chain distributor network. The term of the agreement, as is contained in the draft agreement, reads as Under : “Software : (a) Upon request of the Distributor, the Company has agreed to get the Software installed in the premises of the Distributor upon the terms and conditions contained in this Agreement. (b) It is expressly declared that the Software is being installed at the request of the Distributor and the Company shall not be responsible if the Distributor or any third party suffers any loss/damage as a result of installation of the Software or its use”. 12. (b) It is expressly declared that the Software is being installed at the request of the Distributor and the Company shall not be responsible if the Distributor or any third party suffers any loss/damage as a result of installation of the Software or its use”. 12. Clause-8 of the draft agreement also states that the agreement shall automatically terminate in the event of termination of distributorship appointment. From the facts which have been placed on record before this Court, it is apparent that the draft agreement, even if is relied upon, is merely an agreement entered into between the parties for the purpose of installation of Software to integrate the supply distribution network. The draft agreement cannot be treated to be a distributorship agreement between the parties. There is also nothing on record to show that the parties have resolved to get their dispute settled by way of an arbitrator in respect of dispute relating to distributor. The draft agreement, therefore, even if is taken to be an agreement, would not amount to existence of arbitration agreement for the dispute which is sought to be resolved, and for which the present application has been filed. 13. Hon’ble Apex Court has interpreted the provisions of Section 7(2) of the Act in following words : “12. Before we proceed further, we may examine Section 7 of the Act which runs as under : “Section 7 - Arbitration agreement (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in- (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.” 13. We have carefully examined the provisions made under Section 7 of the Act which deals with arbitration agreement. In Smita Conductors Ltd. v. Euro Alloys Ltd., 2001 (7) SCC 728 , Article II Para 2 of New York Convention came up for consideration before this Court. The provisions of Article II, Para 2 of New York Convention is in pari materia to the aforequoted provisions of Section 7 of the Act. The provisions of Article II, Para 2 of New York Convention is being quoted herein now. Para 2 runs as under : “Para 2 - The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.” This Court, while interpreting the aforequoted para 2 in the New York Convention held in para 6 at pages 734-735 in Smita Conductors (supra) the following : “6. What needs to be understood in this context is that the agreement to submit to arbitration must be in writing. What is an agreement in writing is explained by para 2 of Article II. If we break down para 2 into elementary parts, it consists of four aspects. It includes an arbitral clause (1) in a contract containing an arbitration clause signed by the parties, (2) an arbitration agreement signed by the parties, (3) an arbitral clause in a contract contained in exchange of letters or telegrams, and (4) an arbitral agreement contained in exchange of letters or telegrams. If an arbitration clause falls in any one of these four categories, it must be treated as an agreement in writing.In the present case, we may advert to the fact that there is no letter or telegram confirming the contract as such but there is certain correspondence which indicates a reference to the contract in opening the letters of credit addressed to the Bank to which we shall presently refer to. There is no correspondence between the parties either disagreeing with the terms of the contract or arbitration clause. There is no correspondence between the parties either disagreeing with the terms of the contract or arbitration clause. Apart from opening the letters of credit pursuant to the two contracts, the appellant also addressed a telex message on 23.4.1990 in which there is a reference to two contracts bearing Nos. S.142 and S. 336 in which they stated that they want to invoke force majeure and the arbitration clauses in both the contracts which are set forth successively and thus it is clear that the appellant had these contracts in mind while opening the letters of credit in the bank and in addressing the letters to the bank in this regard. May be, the appellant may not have addressed letters to the respondent in this regard but once they state that they are acting in respect of the contracts pursuant to which letters of credit had been opened and they are invoking the force majeure clause in these two contracts, it obviously means that they had in mind only these two contracts which stood affirmed by reason of these letters of credit. If the two contracts stood affirmed by reason of their conduct as indicated in the letters exchanged, it must be held that there is an agreement in writing between the parties in this regard. 16.It is an admitted position that the appellant had sent the agreement containing the arbitration clause, as per the format provided by the PGI, after duly signing the same on requisite value of stamp paper for signing of the same by the PGI. The PGI though admittedly received the same, did not send back the agreement to the appellant after signing it as per the agreement between the parties. PGI admittedly had used the machines for about an year and thereafter returned the same to the appellant. Subsequently, the bank guarantee furnished by the appellant for Rs. 2,13,160/- and the earnest money deposit of Rs. 45,000/- was encashed and forfeited by PGI”. 14. The aforesaid judgment will not come to applicant’s rescue in the peculiar facts and circumstances of the present case. The applicant has categorically admitted before this Court that apart from the draft agreement annexed alongwith the affidavit, there exists no other agreement between the parties. 45,000/- was encashed and forfeited by PGI”. 14. The aforesaid judgment will not come to applicant’s rescue in the peculiar facts and circumstances of the present case. The applicant has categorically admitted before this Court that apart from the draft agreement annexed alongwith the affidavit, there exists no other agreement between the parties. Applicant further admits that it was acting as a distributor from the year 2005 whereas this draft agreement has been sent to him only in the year 2009. Even if it be presumed that the applicant was acting as a distributor of the applicant, it would not be entitled to arbitrate the dispute unless it is shown that an arbitration agreement exists. This Court finds that no Arbitration agreement exists between the parties, pursuant to which a dispute of distributorship could be referred to Arbitrator as such, no direction can be issued to appoint an Arbitrator. 15. Arbitration Application is devoid of merits and is accordingly rejected.