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2019 DIGILAW 33 (ORI)

Ridhi Sidhi v. Levis Strauss (India) Pvt. Ltd.

2019-01-11

K.S.JHAVERI

body2019
JUDGMENT : K.S.JHAVERI, J. 1. By way of this arbitration proceeding under Section 11 of the Arbitration and Conciliation Act, 1996; a poor petitioner, in terms of justice, has approached this Court on 03.02.2012 and notice was issued by this Court on 12.09.2014. 2. Time and again the matter was adjourned. The opposite parties appeared before this Court and filed counter affidavit only on 02.02.2018 after lapse of four years. Thereafter the matter was taken up by this Court on 21.12.2018 and the same is heard today. 3. Shri S.S. Padhy, learned counsel for the petitioner has pointed out that the dispute can be resolved between the parties in view of the arbitration clause, which reads as under: "28.11.2 Any controversy or claim arising out of, or relating to, this Agreement or the breach of this Agreement shall be referred to arbitration under the Arbitration and Conciliation Act of 1996, by a sole arbitrator mutually acceptable to Franchisee and LS failing which by three (3) arbitrators i.e. one each appointed by Franchisee and LS and the third appointed by the two (2) arbitrators so appointed by Franchisee and LS. The arbitrator shall be a person of professional repute who is not directly or indirectly connected with any of the Parties to this Agreement. The place of arbitration shall be Bangalore, India. The language to be used in the arbitration proceedings shall be English. The award of the arbitration proceedings will be final and binding on the Parties to the Agreement." 4. Pursuant to the above arbitration clause, the opposite party No.1 was given an undated notice under Annexure-4 regarding settlement of the dispute through Arbitration, under Clause 28.11.2. of the Franchise Agreement dated 11.02.2011. Thereafter by notice on 09.09.2011, the said undated notice was replied and dispute was raised by the opposite party in paragraph-3,4 and 5, which reads as under: "3. Please be notified that R.S. being in constant default of the Franchise Agreement and failing to act prudently and diligently as required in a business of such nature had caused considerable concern to our client. In the circumstances and with the intention of mitigating further damage, our client considered it appropriate that the relationship of the parties under the Franchise Agreement be terminated in due course. Our client's internal email communication dated May 31,2011 merely indicates such intention. In the circumstances and with the intention of mitigating further damage, our client considered it appropriate that the relationship of the parties under the Franchise Agreement be terminated in due course. Our client's internal email communication dated May 31,2011 merely indicates such intention. It goes without saying that the Franchise Agreement was not specifically terminated by our client vide email communication dated May 31,2011. This e-mail was forwarded to R.S. by an employee of our client with the intention of communicating our client's concerns and thought processes with regard to the matter. R.S. vide email communication dated June 01, 2011, immediately suggested that in the interest of both parties the Franchise Agreement ought to be terminated and specifically instructed one Mr. Satya to abstain from placing orders with our client for further stocks. The tenor of the said e-mail, subsequent correspondence between the parties and the subsequent conduct of the parties clearly go to show that the parties had indeed mutually consented for the termination of the Franchise Agreement. Therefore, the Franchise Agreement has been terminated by mutual consent of the parties. R.S. is therefore estopped from contending otherwise. 4. In the above circumstances there cannot be a dispute as to whether our client terminated the Agreement illegally or not. Therefore, a reference to arbitration citing such a nonexistent dispute is not maintainable in law. Please note that this reply is issued without prejudice to our client's right to seek and claim all its dues either by way of recoveries or damages against R.S. with regard to all defaults and breaches committed by R.S. 5. Without prejudice to the above, please note that our client does not accept your nomination of Mr. Anup Narayan Mohanty, Advocate, as the Sole Arbitrator. Despite the above, in the event you insist on the formation of a three member arbitral tribunal as contemplated in Clause 28.11.2 of the Franchise Agreement and thereby appoint your nominee arbitrator, our client will be constrained to appoint an arbitrator and defend the consequent arbitration, holding R.S. solely responsible for the costs and consequences thereof. You may notify us in this regard." 5. You may notify us in this regard." 5. Pursuant to the notice as stated above, the opposite parties appeared and filed their reply raising question of jurisdiction of this Court on the ground that in view of clause, the place of arbitration was Bangalore and, therefore, in view of various judgments of the Hon'ble Supreme Court, the exclusive jurisdiction is in Karnataka High Court and not of Orissa High Court. 6. From the record, it seems that the agreement executed on the Stamp Paper was purchased from West Bengal and performed at Cuttack all throughout. 7. Mr. S. Sourav, learned counsel for the opp. parties relies upon the following decisions: 1. Balaji Coke Industry Private Limited vs. Maa Bhagabati Coke Gujarat Private Limited, (2009) 9 SCC 403 [Paragraphs-24, 25 and 30] 2. Swastik Gases Private Limited vs. Indian Oil Corporation Limited, (2013) 9 SCC 32 [Paragraph-53] 8. For ready reference it will not be out of place to reproduce here Clause-18 which is a part of paragraph-8 of the judgment in Swastik Gases (supra). Paras-7, 8, 32 and 53 of the said judgment are reproduced hereunder: "7. We have heard Mr. Uday Gupta, learned counsel for the appellant and Mr. Sidharth Luthra, learned Additional Solicitor General for the Company. The learned Additional Solicitor General and the learned counsel for the appellant have cited many decisions of this Court in support of their respective arguments. Before we refer to these decisions, it is apposite that we refer to the two clauses of the agreement which deal with arbitration and jurisdiction. Clause 17 of the agreement is an arbitration clause which reads as under: 17. Arbitration If any dispute or difference(s) of any kind whatsoever shall arise between the parties hereto in connection with or arising out of this agreement, the parties hereto shall in good faith negotiate with a view to arriving at an amicable resolution and settlement. In the event no settlement is reached within a period of 30 days from the date of arising of the dispute(s)/difference(s), such dispute(s)/difference(s) shall be referred to 2 (two) arbitrators, appointed one each by the parties and the arbitrators, so appointed shall be entitled to appoint a third arbitrator who shall act as a presiding arbitrator and the proceedings thereof shall be in accordance with the Arbitration and Conciliation Act,1996 or any statutory modification or re-enactment thereof in force. The existence of any dispute(s)/difference(s) or initiation/ continuation of arbitration proceedings shall not permit the parties to postpone or delay the performance of or to abstain from performing their obligations pursuant to this Agreement. 8. The jurisdiction Clause 18 in the agreement is as follows: 18. Jurisdiction The agreement shall be subject to jurisdiction of the Courts at Kolkata. 32. For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like "alone", "only", "exclusive" or "exclusive jurisdiction" have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties - by having Clause 18 in the agreement - is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like Clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner. 53. Proceedings were initiated by the respondent in Shriram City Union Finance in Bhubaneswar (Odisha). An objection was taken by the appellant that the Court in Bhubaneswar had no jurisdiction to entertain the proceedings. However, the objection was not accepted by the trial Judge, Bhubaneswar. In appeal, the District Judge accepted the contention of the appellant that only the courts in Kolkata had jurisdiction in the matter. An objection was taken by the appellant that the Court in Bhubaneswar had no jurisdiction to entertain the proceedings. However, the objection was not accepted by the trial Judge, Bhubaneswar. In appeal, the District Judge accepted the contention of the appellant that only the courts in Kolkata had jurisdiction in the matter. In a civil revision petition filed before the Orissa High Court by the respondent, the order passed by the trial Court was affirmed with the result that it was held that notwithstanding the exclusion clause, the Civil Judge, Bhubaneswar (Odisha) had jurisdiction to entertain the proceedings." 9. Learned counsel for the opposite party has also relied upon a decision of the Hon'ble Supreme Court in the case of Indus Mobile Distribution Private Limited vs. Datawind Innovations Private Limited and others, (2017) 7 SCC 678 , wherein in paragraphs-19 and 20, the Hon'ble Court has held as under: "19. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction - that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Sections 16 to 21 of CPC be attracted. In arbitration law however, as has been held above, the moment "seat" is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties. 20. It is well settled that where more than one court has jurisdiction, it is open for the parties to exclude all other courts. For an exhaustive analysis of the case law, see Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd, (2013) 9 SCC 32 . 20. It is well settled that where more than one court has jurisdiction, it is open for the parties to exclude all other courts. For an exhaustive analysis of the case law, see Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd, (2013) 9 SCC 32 . This was followed in a recent judgment in B.E. Simoese Von Staraburg Niedenthal v. Chhattisgarh Investment Ltd., (2015) 12 SCC 225 . Having regard to the above, it is clear that Mumbai courts alone have jurisdiction to the exclusion of all other courts in the country, as the juridical seat of arbitration is at Mumbai. This being the case, the impugned judgment is set aside. The injunction confirmed by the impugned judgment will continue for a period of four weeks from the date of pronouncement of this judgment, so that the respondents may take necessary steps under Section 9 in the Mumbai Court. The appeals are disposed of accordingly." 10. I have heard Shri S.S.Padhy, learned counsel for the petitioner and Shri S. Sourav, learned counsel for the opp. parties. 11. Before proceeding with the matter, this Court is of the view of that there is no dispute that there has been dispute between the parties. Section 11 of the Arbitration and Conciliation Act, 1996 provides for "Appointment of Arbitrators", which reads as under: "11. Appointment of arbitrators. 1. A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. 2. Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. 3. Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators, shall appoint the third arbitrator who shall act as the presiding arbitrator. 4. If the appointment procedure in sub-section (3) applies and a. a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or b. the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court. 5. 5. Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court. 6. Where, under an appointment procedure agreed upon by the parties, - a. a party fails to act as required under that procedure; or b. the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or c. a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. 6-A The Supreme Court or, as the case may be, the High Court while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement. 6-B The designation of any person or institution by the Supreme Court or, as the case m ay be, the High Court, for the purpose of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court. 7. A decision on a matter entrusted by sub-section (4) or sub- section (5) or sub section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision. 8. 7. A decision on a matter entrusted by sub-section (4) or sub- section (5) or sub section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision. 8. The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure I writing from the prospective arbitrators in terms of sub-section (1) of Section 12, and have due regard to - a. any qualifications required of the arbitrator by the agreement of the parties; and b. the contents of disclosure and other considerations as the appointment of an independent and impartial arbitrator. 9. In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. 10. The Supreme Court or, as the case may be, the High Court may make such scheme as said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) to it. 12. (a) Where the matters referred to in sub-sections (4), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to "Supreme Court, or as the case may be, the High Court" in those sub-sections shall be construed as a reference to the "Supreme Court"; and (b) where the matter referred to in sub-sections (4), (5), (6), (7), (8), and sub-section (10) arise in any other arbitration, the reference to "Supreme Court or, as the case may be, the High Court" within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate and, where the High Court itself is the Court referred to in that clause, to that High Court.. 13. 13. An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party. 14. For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule. Explanation.- For the removal do doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution." 12. The very object of Section 11 of the Act, 1996 is only to examine whether arbitrable dispute is there or not. Admittedly, the opposite parties are not disputing the arbitration clause and the dispute between the parties. 12.1. In this matter, I have not adjudicated upon the dispute. Mere reference of dispute to arbitrate, it will not be appropriate to defer it to other Court after six years, where only arbitrator is to be appointed. I have accepted his contention. Dispute is referred to arbitrator at Karnataka and even the arbitrator is appointed from Karnataka to reduce the cost of arbitration. 12.2. In that view of the matter, no prejudice is caused to the opposite parties. 13. Taking into consideration the very object to resolve the dispute amicably between the parties and the Act,1996 envisages that the dispute should be resolved through arbitration and since this petition was filed in 2012, it will not be appropriate for this Court to refer to the matter for want of jurisdiction after seven years because of the matter could not be taken up by the Court. 13.1. Further taking into consideration various judgments which are sought to be relied upon by the opposite parties, the Clause 18 referred to in the case of Swastik Gas (supra) is not reflected in the present agreement. 13.2. 13.1. Further taking into consideration various judgments which are sought to be relied upon by the opposite parties, the Clause 18 referred to in the case of Swastik Gas (supra) is not reflected in the present agreement. 13.2. If we take it, the stamp paper was purchased from West Bengal, the registered office of the opp. party-company is situated in Bangalore, Karnataka and all throughout the agency which has been performed contract i.e. the present applicant was at Cuttack. Therefore, majority cause of action in respect of the contract, which was terminated in the present case, arose exclusively in the place of Cuttack. Therefore, under the Civil Procedure Code, this Court has jurisdiction. 13.3. Merely because the place of arbitration has been referred to as Bangalore, it cannot oust the jurisdiction of this Court. If the applicant would have gone for civil suit, in my considered opinion, the Court at Cuttack has jurisdiction inasmuch as cause of action has arisen here, merely for the purpose of arbitration, the jurisdiction cannot be ousted. The civil dispute is governed by Section 9 of the Code of Civil Procedure. The cause of action is within Cuttack. 14. In that view of the matter, keeping in mind Section 9 of CPC, I have to apply the law as applicable to the individual. Merely because the present petitioner has chosen to invoke jurisdiction U/s.11 of the Arbitration & Conciliation Act, it should not be relegated to another High Court after seven years of pendency of this petition in absence of Clause-18 in the case of Swastik Gas (supra) is not reflected in the agreement. In my considered opinion, merely because the arbitration clause provided arbitration proceeding at Bangalore, it should not be relegated to the Bangalore Court for referring the matter under Section 11 of the Arbitration & Conciliation Act,1996. 15. This Court has given option to the counsel for the opposite party for arbitrator from Bangalore and since he did not agree, I have appointed the arbitrator. The contention of the learned counsel for the opposite party that the Orissa High Court has no jurisdiction, is misconceived since the whole cause of action is within the State of Odisha. If the case is referred to at the Bangalore Court and the arbitration is taken place there, both the parties have to incur heavy cost. The contention of the learned counsel for the opposite party that the Orissa High Court has no jurisdiction, is misconceived since the whole cause of action is within the State of Odisha. If the case is referred to at the Bangalore Court and the arbitration is taken place there, both the parties have to incur heavy cost. The endeavour and claim which has been made by the opp. parties are premature at this stage. 16. In that view of the matter, this Court appoints learned Government Advocate of Karnataka High Court as Arbitrator in the matter to resolve the dispute between the parties. It will be open for both the sides to raise the contentions before the Arbitrator. The venue of the arbitration shall be at Bangalore, Karnataka and the proceedings shall be conducted by the learned Arbitrator as per Rules prevailing in Karnataka. I have decided to appoint Arbitrator and no point is decided on merit. 17. The fees of the learned Arbitrator shall be as per the Fourth Schedule of the Arbitration and Conciliation (Amendment) Act, 2015. It shall be open to the parties to raise all such pleas as are available to them in law before the learned Arbitrator, who shall consider the same on merits and in accordance with law. 18. The ARBP stands disposed of accordingly. 18.1. Urgent certified copy of this order be granted on proper application. 18.2. This order be communicated to the learned Government Advocate of Karnataka High Court, forthwith.