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2024 DIGILAW 1619 (GUJ)

Kesoram Industries Ltd. v. Magotteaux Industries Pvt. Ltd.

2024-07-25

PRANAV TRIVEDI, SUNITA AGARWAL

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JUDGMENT : PRANAV TRIVEDI, J. 1. The present appeal preferred under Section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act, 2015 read with Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Arbitration Act”), read with Section 96 of the Code of Civil Procedure, 1908 assailing the correctness and validity of the order dated 11.10.2022 passed by the learned Principal Senior Civil Judge, Commercial Court, Gondal (hereinafter referred to as "the learned court") in Commercial Suit No.01 of 2022, wherein the learned court rejected the application below Exhibit 8 filed by the appellant under Section 8 of the Arbitration Act. 2. The facts leading to the filing of the present appeal is that the appellant is a Public Limited Company registered under the Companies Act, 1956 and is governed by the provisions of Companies Act, 2013. The appellant is engaged in the business of manufacturing and sale of cement. The opponent No.1 is manufacturer and supplier of various types of solutions for cement industries. 2.1. The appellant had shown an intention to purchase certain goods from the opponent. In view of the same, quotation was provided by the opponent. After going through the necessary formalities, the appellant had issued Purchased Order No. VC/U1/DNP/HO/222 dated 03.09.2020 to the opponent for supply of Coal Mill and Roller for Coal Mill. It is the case of the appellant that Clause 21 of the Purchase Order provides for reference for dispute to Arbitration. The Purchase Order was accepted by the opponent and resultantly culminated in supply of materials by the opponent. It is the case of the appellant that the products supplied were defective and despite repeated requested, the appellant failed to remove the defects. The appellant was insisting on partial payments, whereas the opponent insisted for full payment and accordingly, dispute arose between the parties. 2.2. In wake of such dispute, opponent filed Commercial Suit No.01 of 2022 before the learned court against the appellant as well as against its Directors and other officers for recovery to the tune of Rs.24,11,414/- with interest. On service of summons of the suit, appellant filed an application below Exhibit 8 under Section 8 of the Arbitration Act for reference of the disputes to Arbitration. On service of summons of the suit, appellant filed an application below Exhibit 8 under Section 8 of the Arbitration Act for reference of the disputes to Arbitration. The opponent filed its reply to the application, inter alia, making several submissions against application made under Section 8 of the Arbitration Act. The learned court, after hearing both the parties, passed the impugned order dated 11.10.2022, by which the application under Section 8 was rejected. This order below Exhibit 8 in rejecting the application by the appellant has culminated into filing of present appeal. 3. We have heard Mr. Kunal J. Shah, learned advocate with Mr. Devarsh Trivedi, learned advocate for Gandhi Law Associates for the appellant and Ms. Gargi R. Vyas, learned advocate appearing for the opponents. 4. Mr. Kunal Shah, learned advocate for the appellant has submitted that the application below Exhibit 8 is rejected primary on two grounds. The first ground is that there are additional parties to the suit. Therefore, the learned court has observed that the suit involves parties other than appellant and opponent, i.e., the officials of the appellant and the officials of the opponent, and therefore, dispute cannot be referred to the Arbitration. The opponent herein has cleverly filed a suit before the Gondal Court and arraigned not only company as defendant but also its impleaded its officials, and therefore, the learned court has come to a conclusion that dispute cannot be referred to the Arbitration. It is submitted that if such in propriety is permitted, the very object of the Arbitration Act would fail. It was further submitted that the issue is no more res integra with judgment of Hon'ble Apex Court, which is in the case of Ananthesh Bhakta represented by Mother Usha A. Bhakta & Ors. versus Nayana S. Bhakta & Ors. reported in (2017) 5 SCC 185 . The second point of observation by the learned court is doubting the Purchase Order. When the Purchase Order is produced by the opponents themselves, then there was no question of doubting Purchase Order. In wake of such submission, Mr. Kunal Vyas, learned advocate for the appellant has prayed to allow the First Appeal. 5. Per contra, Ms. The second point of observation by the learned court is doubting the Purchase Order. When the Purchase Order is produced by the opponents themselves, then there was no question of doubting Purchase Order. In wake of such submission, Mr. Kunal Vyas, learned advocate for the appellant has prayed to allow the First Appeal. 5. Per contra, Ms. Gargi J. Vyas, learned advocate appearing for the opponent has submitted that the intention to arbitrate is not established because prior to the Purchase Order there is another document, which is the quotation which was circulated by the plaintiff, i.e., the appellant herein. The quotation that was circulated clearly stated that there is no intention to arbitrate and if there is any dispute, the parties will go to the seller’s jurisdiction which is either Rajkot or Delhi. Even after the Purchase Order, invoice is issued, which again does not have an arbitration clause. Therefore, even as per subsequent invoice, the dispute will go to the seller’s jurisdiction. It was further submitted by Ms. Vyas, learned advocate that the Purchase Order stipulates for an institutional arbitration. However, the federation which is referred to as an institutional arbitration does not exist any more. Therefore, invoking the arbitration clause will be difficult. 6. Having heard learned counsels for the respective parties and having gone through the material on record, the first point for consideration is in regard with correctness of the learned court in observing that there were additional parties to the suit, and therefore, the dispute cannot be referred to the Arbitration. The Purchase Order was a contract between the two companies, i.e., the appellant and the opponent and there is a clear cut reference to the Arbitration. Suffice it to say that the opponent cannot be permitted to get away from the binding arbitration clause by merely adding officials of companies to the suit. This issue is also no more res integra pursuant to the judgment of the Hon'ble Court in case of Ananthesh Bhakta represented by Mother Usha A. Bhakta & Ors. (supra). The observation of the learned court in rejecting the application on ground of addition of other parties i.e. officials of companies, therefore, cannot be sustained. 7. The next contention raised by Ms. Vyas, learned advocate was that there is no arbitration clause in the quotation as well as in the invoice. (supra). The observation of the learned court in rejecting the application on ground of addition of other parties i.e. officials of companies, therefore, cannot be sustained. 7. The next contention raised by Ms. Vyas, learned advocate was that there is no arbitration clause in the quotation as well as in the invoice. The Purchase Order was issued in furtherance of the quotation and therefore, wherein there was no intention to arbitrate. The arbitration clause in the Purchase Order, therefore, cannot invoked by any of the parties. The said arguments of the learned advocate does not appeal to us for the simple reason that the quotation is only a preliminary statement which contains information for both the sides about the product and its sale prices etc. It will not override the contract which is the Purchase Order. In the contract entered into between the parties by way of Purchase Order contains an arbitration clause and the parties having agreed to the terms contained therein, its terms and conditions which contained arbitration clause would be binding on the parties. Any document signed or exchanged previous or subsequent to the concluded contract, will not result eclipsing the arbitration clause contained in the Purchase Order. The Purchase Orders issued by the appellant constituting the main agreement between the parties containing terms and conditions on which the goods had to be supplied by the opponent to the appellant, such as the description of the goods to be supplied, the quantity, the rate at which they were to be supplied, the delivery schedule, the tax and fees schedule is the concluded contract. The argument as canvassed by Ms. Vyas, learned advocate for the opponent, therefore, cannot be sustained. 8. The last aspect of the submission made by the learned advocate was with regard to invocation of arbitration. It was contended that as the Institutional Chamber which is referred to in the arbitration clause as the forum to arbitrate is not existing right now, therefore, the invocation of the arbitration clause itself is in serious doubt. Such argument is to rejected outrightly as baseless, inasmuch as, the proportionality as to how to invoke arbitration clause can be gone into through Section 11 of the Arbitration Act. The only parameter to understand is that about the existence of an arbitration clause. Such argument is to rejected outrightly as baseless, inasmuch as, the proportionality as to how to invoke arbitration clause can be gone into through Section 11 of the Arbitration Act. The only parameter to understand is that about the existence of an arbitration clause. If yes, the modality as to how it is to be invoked, such arbitration clause can always be looked into. Therefore, the argument of Ms. Vyas, learned advocate on the invocation of arbitration agreement is meritless. 9. The last argument is with regard to genuineness of the Purchase Order. The Purchase Order is produced along with the suit by the opponents themselves. Even the advocate for the opponents has candidly agreed on infirmity of such finding by the learned court. Once the Purchase Orders were produced by the opponents, the learned court could not have rejected the application under Section 8 of the Act by doubting the genuineness of the said document. 10. In view of the observations mentioned hereinabove, the present First Appeal requires to be allowed. The order dated 11.10.2022 passed by the learned Principal Senior Civil Judge, Commercial Court, Gondal in Commercial Suit No.01 of 2022, below Exhibit 8 is hereby quashed and set aside. First Appeal is allowed, accordingly. No order as to costs. 11. In view of the order passed in the main matter, connected Civil Application stands disposed of.