3F Industries Ltd. v. Transparent Technologies Solutions
2025-01-24
DHIRAJ SINGH THAKUR
body2025
DigiLaw.ai
JUDGMENT : Dhiraj Singh Thakur, C.J. This is an application filed under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) for reference of the disputes for arbitration by an independent Arbitrator. Briefly stated, the material facts are as under : 2. The applicant claims to be engaged in the business of bakery fats, fats for frozen desserts, etc., which are sold within and outside the country. The respondent, it is stated, also is a Company registered under the Companies Act, 1956, and engaged in the business of equipment such as spray coolers, industrial dryers, flue gas desulphurization systems, bag filters, homogenizers etc. 3. The applicant claims that it invited offers for design, supply and commissioning of equipment in its factory at Pantapalem Village in SPSR Nellore District. The respondent responded by making the offer to the applicant vide email, dated 25.10.2018. The said offer, among others, contained clause 28 dealing with arbitration and clause 29 dealing with jurisdiction, which are reproduced hereunder: “28 . Arbitration: In the event of any dispute or difference between the parties arising out of this contract, the same shall unless amicably settled, be referred to three arbitrators, one to be appointed by each party to the contract and the 3rd Presiding Arbitrator appointed by the two arbitrators. Arbitrators will be selected from the Fellows of Institution of Engineers (India). The decision of the majority of the Arbitrators shall be final and binding on both the parties. The arbitration proceedings shall commence once any one party to the contract communicates to the other party regarding invocation of arbitration agreement along with the name of the nominee joint arbitrator. The other party shall appoint its nominee joint arbitrator within a period of 30 days from the date of receipt of communication regarding invocation of arbitration agreement. In the event of failure by the other party to appoint it's nominee joint arbitrator as aforesaid, the nominee joint arbitrator appointed while invoking the arbitration agreement shall act as the sole arbitrator and the arbitration proceedings shall continue as directed by the sole arbitrator. The arbitration proceedings shall take place at Pune, Maharashtra, India. This agreement is for arbitration within the meaning of the Arbitration and Conciliation Act 1996, including any statutory re-enactment or any other modification thereof. 29.
The arbitration proceedings shall take place at Pune, Maharashtra, India. This agreement is for arbitration within the meaning of the Arbitration and Conciliation Act 1996, including any statutory re-enactment or any other modification thereof. 29. Jurisdiction : All contracts between purchasers and ourselves are deemed to be entered into in India at Pune, Maharashtra and are therefore, subject to the jurisdiction of courts in India at Pune unless otherwise specifically agreed in written by TTSPL.” 4. The applicant claims that based on the offer of the respondent, the applicant gave conditional acceptance of the said offer by a counter offer in the form of a purchase order, dated 20.10.2018, with certain modified terms and conditions via email, dated 25.10.2018, which according to the applicant were accepted without any demur and thus proceeded to make a request for payment from the applicant so that the contract could be performed. The conditional acceptance of the counter offer made by the applicant through its asset purchase order, dated 20.10.2018, at the very bottom of the said purchase order as a matter of fine print, talked about jurisdiction as under: “JURSIDICTION: all disputes are subject to Tadepalligudem jurisdiction only” 5. The applicant claims that disputes have arisen between the parties in reference to the contract in question and since there is an arbitration agreement, they have to be referred to for adjudication in terms of clause 28 of the said contract. It is stated that a notice invoking the arbitration clause was sent to the respondent and the respondent having failed to nominate its Arbitrator during the prescribed 30 days, had lost its right to appoint such an Arbitrator and hence the present petition. It was urged by learned counsel for the applicant that although in the offer made by the respondent, the arbitration was subject to the jurisdiction of the Courts at Pune, yet, in their purchase order, dated 20.10.2018, since the disputes were subject to the Tadepalligudem jurisdiction, this Court would have the jurisdiction to appoint an Arbitrator under Section 11 of the Act and to further nominate an Arbitrator. 6. Learned counsel for the respondent, on the other hand, has vehemently opposed the present application on the ground of jurisdiction.
6. Learned counsel for the respondent, on the other hand, has vehemently opposed the present application on the ground of jurisdiction. It was stated that all along, the parties had agreed that clause 28 pertaining to arbitration and clause 29 pertaining to jurisdiction to be the essential conditions of contract and the applicant had all along understood the said clauses to be an integral part of the contract between the parties. It is stated that by accepting the purchase order, the parties, much less the respondent, had never intended to supersede clause 28 and clause 29 with the fine print incorporated at the bottom of the purchase order, which envisaged all disputes to be subject to Tadepalligudem jurisdiction only, which is more a routine printed statement rather than the same being a condition arrived at by consensus ad idem. 7. Learned counsel for the respondent would also submit that the present application has been filed with a view to somehow defeat the arbitration award that has already been passed by an Arbitrator within the jurisdiction of the Courts at Pune. 8. From the material on record, it can be seen that legal notice, dated 17.02.2020, was issued by the respondent to the applicant herein calling upon the applicant to pay an amount of Rs.38,63,871/- along with 18% interest p.a. on account of the works and supplies made in the works executed as per the contract. This was subsequently followed by a notice, dated 17.03.2020, issued by the respondent upon the applicant invoking the arbitration clause 28 and informing the applicant regarding nomination of one Mr.Sanjay Eknath Joshi as their nominee Arbitrator. The notice further called upon the applicant to appoint their nominee Arbitrator within thirty days period. Notice, dated 17.03.2020, was responded to by the applicant vide their reply notice, dated 12.07.2020, inviting the respondent for an amicable settlement. In this regard, clause 28 was relied upon by the applicant. 9. Clause 28 of the contract was relied upon by the applicant to bring home the point that clause 28 envisaged a two tier dispute resolution: the first step being the amicable settlement, and the second step being arbitration. The applicant informed the respondent that since the amicable settlement proceedings had not been exhausted or resorted to, the arbitration proceedings would be premature at that stage. 10.
The applicant informed the respondent that since the amicable settlement proceedings had not been exhausted or resorted to, the arbitration proceedings would be premature at that stage. 10. What is important to note at this stage is that in their reply notice, dated 12.07.2020, the applicant had relied upon clause 28 without any exception, which clause 28 specifically envisaged that “the arbitration proceedings would take place at Pune, Maharashtra, India.” By their further communication, dated 10.08.2020, the applicant made an offer with a view to amicably settle the disputes and further informed the respondent that in case of failure of the amicable settlement proceedings, the said communication should be deemed to be a notice invoking arbitration from the end date of the amicable settlement offer. In this communication also, the applicant reproduced clause 28 as contained in the contract. It thus becomes clear that the action of the applicant in not only accepting clause 28 in its entirety and further invoking the said clause without any exception in its communications referred to hereinabove, clearly goes to show that there was consensus ad idem on not only the manner in which the disputes were required to be resolved through the mechanism of arbitration but also the consensus that the arbitration proceedings would be conducted at Pune. 11. The communications issued by the applicant at no point of time indicated that the jurisdiction would be shifted to a place other than Pune in terms of clause 29, which otherwise appears to have been agreed terms of the contract between the parties. Acceptance of a purchase order reflecting machinery and the amount, which one party undertakes to pay another, is only limited to the extent to which a purchase order simpliciter in the normal course would relate to. 12. Insofar as the clauses with regard to resolution of disputes through the mechanism of arbitration, place of arbitration and the jurisdiction and the seat of arbitration cannot even remotely be connected to the purchase order, dated 20.10.2018. 13.
12. Insofar as the clauses with regard to resolution of disputes through the mechanism of arbitration, place of arbitration and the jurisdiction and the seat of arbitration cannot even remotely be connected to the purchase order, dated 20.10.2018. 13. The words in the purchase order, which are contained as fine print at the bottom of the said purchase order even below to the spaces where the applicant or its signatory had appended its signatures does not even in the least suggest that it was in supersession of clause 28 insofar as it related to the conduct of arbitration proceedings at Pune or for that matter, clause 29 which envisaged the vesting of the jurisdiction in the Courts at Pune. 14. In fact, clause 29 of the contract dealing with jurisdiction specifically had envisaged that the contract would be subject to the jurisdiction of courts in India at Pune unless otherwise specifically agreed in written by TTSPL There is nothing placed on record that the respondent had at any point of time in writing agreed to the change of jurisdiction of the Courts from Pune to Tadepalligudem. In fact, in their notice, dated 18.08.2020, the applicant informed the respondent that it had nominated Dr.S. Nagabhushana Rao as their nominee Arbitrator and further informed the respondent that “rest of the procedure shall be as per the arbitration agreement in the contract”. Para No.3 of the said notice as served upon the respondent is reproduced hereunder: “3. Triggering of Notice Invoking Arbitration: Further, as stated in our Notice dated 10-Aug-2020, effective today, the Arbitration Notice is invoked. As per the Contract, we have nominated Dr. S. Nagabhushana Rao, Ph.D., FlE, as our nominee Arbitrator. Further, as per the Contract, you are required to nominate your nominee Arbitrator within 30 days from today. The third & presiding Arbitrator would be appointed by these two nominated Arbitrators to establish a three Arbitrators Tribunal. Rest of the procedure shall be as per the arbitration agreement in the Contract .” 15. The fine print on which the applicant is trying to place reliance as contained in the purchase order does not constitute either the arbitration agreement much less does it convey Tadepalligudem to be the seat of arbitration, which would otherwise confer jurisdiction on this Court to entertain the present application under 11 of the Act. 16.
The fine print on which the applicant is trying to place reliance as contained in the purchase order does not constitute either the arbitration agreement much less does it convey Tadepalligudem to be the seat of arbitration, which would otherwise confer jurisdiction on this Court to entertain the present application under 11 of the Act. 16. Be that as it may, the present application is not maintainable on account of lack of jurisdiction. The arbitration application is, accordingly, dismissed with costs of Rs.50,000/- to be deposited with the A.P. State Legal Services Authority to be utilized for the benefit of children, who suffer from visual and hearing impairment. Costs be deposited positively within a period of two months from the date of this order. Miscellaneous applications, pending, if any, shall stand closed.