Blue Star Ltd. v. Z-Square Shopping Mall Pvt. Ltd.
2018-04-20
SURYA PRAKASH KESARWANI
body2018
DigiLaw.ai
JUDGMENT : Surya Prakash Kesarwani, J. 1. Heard Sri Vikram Bhalla, learned counsel for the applicant and Sri Udayan Nandan, learned counsel for the respondent. 2. This application under section 11(5) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) has been filed for appointment of an Arbitrator. 3. Learned counsel for the applicant submits that there is an agreement in the form of work order between the parties which contains an arbitration clause. This fact has been admitted by the respondent in their reply dated 2.4.2013 sent to the applicant in response to the notice dated 21.3.2013. He submits that apart from the above, copy of the agreement filed as Annexure-2 to the application, was a communication by fax and the reference made therein to the tender documents etc. stands affirmed by Clause 2(a) of the reply of the respondent dated 2.4.2013. Thus, the aforesaid papers shall constitute an agreement in writing between the parties containing an arbitration clause under Section 7 of the Act. 4. Learned counsel for the respondent submits that the agreement does not bear the signature of the parties, although it appears to have been exchanged through fax. Since, it does not bear the signature of the parties, therefore, it is not an agreement within the meaning of Section 7 of the Act. He submits that even if an arbitration clause has been quoted in the reply dated 2.4.2013, yet it shall not constitute an agreement containing an arbitration clause. He submits that Original Suit No. 123 of 2012 was filed by the respondent against the applicant in the Court of Civil Judge (Sr. Division), Kanpur Nagar on the same set of dispute, hence the present application is not maintainable. Since, the suit has been filed by the State, as aforesaid, therefore, the appropriate course for the applicant would be to approach the civil court concerned where the civil suit is pending to seek appointment of an Arbitrator under Section 8 of the Act. He submits that although the aforesaid suit was dismissed for non prosecution but a restoration application has been filed, which is pending. 5. Learned counsel for the applicant submits that the restoration application has also been rejected. Thereafter, the respondent has filed another restoration application. 6. I have carefully considered the submissions of the learned counsel for the parties. 7.
He submits that although the aforesaid suit was dismissed for non prosecution but a restoration application has been filed, which is pending. 5. Learned counsel for the applicant submits that the restoration application has also been rejected. Thereafter, the respondent has filed another restoration application. 6. I have carefully considered the submissions of the learned counsel for the parties. 7. The submission of the learned counsel for the opposite party, as noted above, has no substance. 8. Before I enter to examine the facts of the present case in the light of the provisions of the Act, it would be appropriate to quote the provisions of Section 7 of the Act, as under : "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 tele communication [including communication through electronic means] which provide a record of the agreement. (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." 9. In paragraph 5 of the application, the applicant referred to an agreement dated 12.10.2007 and also filed a copy thereof as Annexure-2. In paragraph Nos. 6, 7 and 8 of the application, the applicant referred to several clauses of the agreement. These paragraphs have been replied by the opposite party in paragraph no. 4 of the counter affidavit in which he raised objection that the agreement does not contain the signature of the opposite party. In paragraph no. 9 of the application, the applicant has quoted the arbitration clause as contained in the aforesaid agreement.
These paragraphs have been replied by the opposite party in paragraph no. 4 of the counter affidavit in which he raised objection that the agreement does not contain the signature of the opposite party. In paragraph no. 9 of the application, the applicant has quoted the arbitration clause as contained in the aforesaid agreement. This paragraph has been replied by the opposite party in paragraph-5 of the counter affidavit stating that the agreement does not contain the signature of the opposite party or any of its Director and employees, therefore, the said agreement dated 12.10.2007 cannot bind the opposite party or any of its Director. Thus, the opposite party has neither denied the existence of the document (agreement) filed as Annexure-2 to the application nor it disputed the arbitration clause but its sole objection is that it has not been signed by the opposite party. The aforesaid agreement has been sent by fax by the opposite party to the applicant on its letter-head bearing reference of the following documents: 1. Tender documents. 2. Our clarification e-mail dated 17.8.07. 3. Our offer ref: RK/SPO/NFT-71/T&C-1 dated 19.9.07 & RK/SPO/NFT-74/PB-1 dated 19.9.07. 4. Our letter of Intent dated September 21, 2007. 5. Your e-mails dated 24.9.07, 27.9.07 & 29.9.07. 6. Your detailed price Break-up via letter dated October 4, 2007. 10. The documents mentioned in the agreement dated 12.10.2007 sent by fax, have been admitted by the opposite party as evident from its reply dated 2.4.2013 sent by it in reply to the notice of the applicant dated 21.3.2013. In para-2 of the aforesaid reply dated 2.4.2013, the opposite party has not only mentioned the documents mentioned in the above referred agreement, but also quoted the arbitration clause, as under : "That all the contents of your notice dated 21.03.2013 are denied and your reputed client has not informed you the correct facts which are as under and your client has not informed you about the "work order" against which your client took the work and accepted all the conditions mentioned in the work order. This work order was finally made after exchange of many faxes and mails between the companies. (a) That it is also significantly worth mentioning that final work order against which the work was accepted by your client is the base. The final work order was awarded with reference to following documents mentioned below :- "1. Tender Documents 2.
This work order was finally made after exchange of many faxes and mails between the companies. (a) That it is also significantly worth mentioning that final work order against which the work was accepted by your client is the base. The final work order was awarded with reference to following documents mentioned below :- "1. Tender Documents 2. Our clarification e-mail dated 17.08.07 3. Our offer ref: RK/SPD/NFT-71/T & C-1 dated 19.09.07 & RK/SPD/NFT-74/PB-1 dated 19.09.07 4. Our Letter of Intent dated September 21, 2007 5. Your e-mails dated 27.09.07, 27.09.07 & 29.09.07 6. Your detailed Price Break-up via letter dated October 4, 2007." And the arbitration clause in the "work order" categorically mentions:- "In the event of any dispute or differences between the parties arising howsoever from this contract the same shall unless amicably settled, be referred to the arbitrator as mutually agreed, in case of any court case the jurisdiction shall lie at Kanpur." The conditions mentioned in the work order supersede all the conditions mentioned in the earlier documents." 11. Thus, in view of the agreement dated 12.10.2007, referred to above and sent by fax by the opposite party to the applicant and own reply of the opposite party dated 2.4.2013 mentioning certain documents and the arbitration clause of the applicant, leaves no manner of doubt that even if the parties to the agreement, have not signed the agreement, yet it clearly spells out from correspondence exchanged between the parties that they entered into an agreement dated 12.10.2007, which contains an arbitration clause. It is further evident that the applicant has requested the opposite party by notice dated 21.3.2013 to resolve the dispute with reference to the arbitration clause of the agreement dated 12.10.2007 by appointment of an Arbitrator. The intention of the parties, as appearing from the correspondence including the reply of the opposite party dated 24.3.2013, as aforementioned, clearly indicates a meeting of mind between the parties that they were ad-idem to the terms of contract which contained the forum of dispute resolution by Arbitrator. The opposite party was having clear knowledge of the aforesaid agreement, which was acted upon. The agreement contained an arbitration clause which was also well within the knowledge of the opposite party. Whether an Arbitration Agreement must be signed by the parties? 12.
The opposite party was having clear knowledge of the aforesaid agreement, which was acted upon. The agreement contained an arbitration clause which was also well within the knowledge of the opposite party. Whether an Arbitration Agreement must be signed by the parties? 12. The provisions of Section 7 of the Act, came up for consideration before Hon'ble Supreme Court in Govind Rubber Limited vs. Louis Dreyfus Commodities, Asia Private Limited, (2015) 13 SCC 477 (Paragraph Nos. 12, 16, 17, 22 and 23). The Hon'ble Supreme Court held as under : "12. There may not be any dispute with regard to the settled proposition of law that an agreement even if not signed by the parties can be spelt out from correspondence exchanged between the parties. However, it is the duty of the Court to construe correspondence with a view to arrive at the conclusion whether there was any meeting of mind between the parties which could create a binding contract between them. It is necessary for the Court to find out from the correspondence as to whether the parties were ad idem to the terms of contract. 15. A Perusal of the aforesaid provisions would show that in order to constitute an arbitration agreement, it need not be signed by all the parties. Section 7(3) of the Act provides that the arbitration agreement shall be in writing, which is a mandatory requirement. Section 7(4) states that the arbitration agreement shall be in writing, if it is a document signed by all the parties. But a perusal of Clauses (b) & (c) of Section 7(4) would show that a written document which may not be signed by the parties even then it can be arbitration agreement. Section 7(4)(b) provides that an arbitration agreement can be culled out from an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement. 16. On Reading the provisions it can safely be concluded that an arbitration agreement even though in writing need not be signed by the parties if the record of agreement is provided by exchange of letters, telex, telegrams or other means of telecommunication. Section 7(4)(c) provides that there can be an arbitration agreement in the exchange of statements of claims and defence in which the existence of the agreement is alleged by one party and not denied by the other.
Section 7(4)(c) provides that there can be an arbitration agreement in the exchange of statements of claims and defence in which the existence of the agreement is alleged by one party and not denied by the other. If it can be prima facie shown that the parties are at ad idem, then the mere fact of one party not signing the agreement cannot absolve him from the liability under the agreement. In the present day of E-commerce, in cases of internet purchases, tele purchases, ticket booking on internet and in standard forms of contract, terms and conditions are agreed upon. In such agreements, if the identity of the parties is established, and there is a record of agreement it becomes an arbitration agreement if there is an arbitration clause showing ad idem between the parties. Therefore, signature is not a formal requirement under Section 7(4)(b) or 7(4)(c) or under Section 7(5) of the Act. 17. We are also of the opinion that a commercial document having an arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than invalidate it. On the principle of construction of a commercial agreement, Scrutton on Charter Parties (17th Edition, Sweet & Maxwell, London, 1964) explained that a commercial agreement has to be construed, according to the sense and meaning as collected in the first place from the terms used and understood in the plain, ordinary and popular sense (See Article 6 at page 16). The learned Author also said that the agreement has to be interpreted in order to effectuate the immediate intention of the parties. Similarly, Russel on Arbitration (21st Edition) opined, relying on Astro Vendeor Compania Naviera SA vs. Mabanaft GmbH, that the Court should, if the circumstances allow, lean in favour of giving effect to the arbitration clause to which the parties have agreed. The learned Author has also referred to another judgment in Paul Smith Ltd. vs. H and S International Holdings Inc. in order to emphasize that in construing an arbitration agreement the Court should seek to "give effect to the intentions of the parties." (See page 28 of the book). 22. The principles laid down by the House of Lords in Cairncross vs. Lorimer, were approved of by the Judicial Committee in Sarat Chunder Dey vs. Gopal Chunder Laha.
in order to emphasize that in construing an arbitration agreement the Court should seek to "give effect to the intentions of the parties." (See page 28 of the book). 22. The principles laid down by the House of Lords in Cairncross vs. Lorimer, were approved of by the Judicial Committee in Sarat Chunder Dey vs. Gopal Chunder Laha. We may also take the liberty of reading a passage from another Privy Council decision where the general principle applicable to such cases is stated. "...On the whole, therefore, their Lordships think that the Appellant, having a clear knowledge of the circumstances on which he might have founded an objection to the arbitrator proceeding to make their award, did submit to the arbitration going on; that he allowed the arbitrators to deal with the case as it stood before them, taking his chance of the decision being more or less favourable to himself; and that it is too late for him, after the award has been made, and on the application to file the award, to insist on this objection to the filing of the award." (Chowdhri Murtaza Hossein vs. Bibi Bechunnissa, IA p. 220) It is true that the question in the present case is a question of competence of the arbitrator which in a sense is a question of jurisdiction, but it is not like the jurisdiction of a Court, because the jurisdiction of arbitrators is derived from consent of the parties. 23. It is clear that for construing an arbitration agreement, the intention of the parties must be looked into. The materials on record which have been discussed hereinabove make it very clear that the appellant was prima facie acting pursuant to the sale contract issued by the respondent. So, it is not very material whether it was signed by the second respondent or not." (Emphasis supplied by me) 13. In Rukmanibai Gupta vs. Collector, (1980) 4 SCC 556 (Para-6), Hon'ble Supreme Court held that Arbitration agreement is not required to be in any particular form. What is required to be ascertained is whether the parties have agreed that if the dispute arise between them in respect of the subject matter of contract such dispute shall be referred to arbitration, then such an arrangement would spell out an arbitration agreement. 14.
What is required to be ascertained is whether the parties have agreed that if the dispute arise between them in respect of the subject matter of contract such dispute shall be referred to arbitration, then such an arrangement would spell out an arbitration agreement. 14. In Govind Rubber Limited (supra) Hon'ble Supreme Court has observed that it is equally well settled that while construing an arbitration agreement or arbitration clause, the courts have to adopt a pragmatic and nor a technical approach. 15. The contention of the applicant that the agreement was not signed by the parties, is of no consequence in view of the facts afore-noted and the provisions of Section 7(4) of the Act. Section 7(4) of the Act defines an agreement to be an arbitration agreement is in writing if it contained (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of tele communication [including communication through electronic means] 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. 16. In the present set of facts, as already noted above, the agreement dated 10.12.2007 was as result of exchange of agreement between the parties in writing by fax. The notice dated 21.3.2013 sent by the applicant and its reply dated 2.4.2013 sent by the opposite party clearly reveals the existence of the agreement containing an arbitration clause as alleged by the applicant and not denied by the opposite party. Section 7(3) of the Act, specifically provides that the agreement shall be in writing, which is mandatory requirement. Section 7(4) states that the arbitration agreement shall be in writing if it is contained in a document signed by all the parties, but a perusal of clauses (a)(b) (c) of Section 7(4) of the Act, would show that a written document which may not have been signed by the parties, even then it can be an arbitration agreement. Section 7(4)(b) specifically provides that an arbitration agreement can be culled out from the letters, telex, telegrams or other means of tele communication [including communication through electronic means] which provide a record of the agreement.
Section 7(4)(b) specifically provides that an arbitration agreement can be culled out from the letters, telex, telegrams or other means of tele communication [including communication through electronic means] which provide a record of the agreement. Thus, it can be safely concluded that an arbitration agreement need not be signed by the parties if the record of the agreement is provided by exchange of letters, telex, telegrams or other means of tele communication. Sub section 4(c) provides that there can be 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, if it can be prima-facie shown, as I find in the present case, that the parties are ad-idem, then the mere fact of one party not signing the agreement cannot absolve him from the liability under the agreement. Due to development of Science and Technology, the statutory recognition of agreement in circumstances mentioned in clauses (b) and (c) of Section 7(4) of the Act, can be easily understood in the present day of E-commerce and internet purchases, tele purchases, ticket booking on internet where agreements are entered in standard forms of contract and terms and conditions are agreed upon. In such agreement, if the identity of the parties is established and there is a record of agreement and if there is an arbitration clause showing that parties are ad-idem, then the signature is not a mandatory requirement under clauses (b) and (c) of sub-section (4) of Section 7 of the Act or under Sub-section (5) of Section 7 of the Act. 17. The above discussion leads to an irresistible conclusion that there is an agreement between the parties containing an arbitration clause and the applicant has demanded for appointment of an Arbitrator to resolve the dispute arising from the agreement, but the opposite party has failed to fulfill its obligation. Therefore, an Arbitrator needs to be appointed in exercise of powers conferred under Sub-Section (6) of Section 11 of the Act. 18. In view of the aforesaid, let Mr. Justice Sushil Harkauli, retired Judge of Allahabad High Court, resident of 4A, Rani Jhansi Marg, New Cantt., Allahabad (U.P.), Mobile No. 9839054944 and 8800443338 be appointed as an Arbitrator to resolve the dispute subject to his consent in terms of Sub-Section (8) of section 11 of the Arbitration and Conciliation Act, 1996. 19.
In view of the aforesaid, let Mr. Justice Sushil Harkauli, retired Judge of Allahabad High Court, resident of 4A, Rani Jhansi Marg, New Cantt., Allahabad (U.P.), Mobile No. 9839054944 and 8800443338 be appointed as an Arbitrator to resolve the dispute subject to his consent in terms of Sub-Section (8) of section 11 of the Arbitration and Conciliation Act, 1996. 19. The Registry is directed to obtain consent of the proposed arbitrator in terms of amended provisions of Sub-Section (8) of section 11 of the Arbitration and Conciliation Act, 1996, within a period of four weeks from today.