JUDGMENT
S. H. KAPADIA, J.
1. This application under sub-section (5) and (9) of Section 11
of the Arbitration and Conciliation Act, 1996 (for short, "the 1996
Act") has been filed with a prayer to appoint an Arbitrator in terms
of clause 15.1 of the Agreement dated 10.8.04 entered into by and
between the applicant and the non-applicant.
2. The facts leading to filing of this application may be briefly
noticed.
3. The applicant is inter alia engaged in the business of seed
cloning and production, nursery development and propagation,
plantation management and maintenance and the cultivation of
medicinal plants. On 10.8.04 the applicant and the non-applicant
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entered into seed supply agreement (Supply Agreement) through
which the applicant agreed to establish nurseries and prepare
seedling (seed) catering to the requirement of non-applicant.
According to the said Agreement the non-applicant promised to
make an investment of Rs.299.35 lakhs with the applicant. The
Supply Agreement inter alia contained an arbitration clause 15.1
which reads as under:
"15.1. Any dispute that arises between the parties
shall be resolved by submitting the same to the
institutional arbitration in India under the provisions
of Arbitration and Conciliation Act, 1996."
4. Applicant herein entered into a Joint Venture Agreement
with non-applicant on 30.09.04. The said Agreement contemplated
incorporation of a Joint Venture Company. This second Agreement
did not contain an arbitration clause. It may be noted that the
applicant has no claim against the non-applicant under the second
Agreement.
5. Besides the Joint Venture Agreement dated 30.9.04, a third
Agreement was also entered into on 26.11.04 called as Research and
Development Agreement ("R & D Agreement", in short).
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6. In short, there existed three Agreements at the relevant
time. The first was the Supply Agreement. The second was the
Joint Venture Agreement. The Third was R & D Agreement. In
between the Joint Venture and R & D Agreements there is
Termination Agreement dated 16.10.04. Although the applicant has
no claim under the Joint Venture Agreement, it is necessary to
mention that there were three Agreements by and between the
parties because one of the contentions raised by the non-applicant
in its counter (at page 109 of the paper book of Arbitration
Application) to the effect that if the applicant genuinely believed that
the Supply Agreement had not been terminated by the Termination
Agreement dated 16.10.04, it would not have entered into the R & D
Agreement under which the applicant had received #40 thousand.
7. To sum up the chronology of events it may be stated that
the Supply Agreement came to be executed on 10.8.04. The Joint
Venture Agreement came to be executed on 30.9.04. However, on
16.10.04 a Termination Agreement allegedly has been entered into
by and between the parties. After Termination Agreement, parties
executed R & D Agreement on 26.11.04.
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8. There is no dispute regarding execution of the Supply
Agreement, the execution of the Joint Venture Agreement and the
execution of R & D Agreement. The dispute is regarding the
execution of the Termination Agreement dated 16.10.04. The
dispute is regarding the effect of that Termination Agreement by
which purportedly the Supply Agreement stood terminated. The
dispute is also whether in view of the specific clauses mentioned in
the Termination Agreement, all claims ceased to exist.
9. The entire controversy revolves around the purported Deed
of Termination dated 16.10.04.
The claim of the applicant
10. The claim made by the applicant concerns willful breach of
obligations by the non-applicant under the Supply Agreement.
Applicant says that they have exhausted all the available remedies
before approaching this Court for appointment of Arbitrators under
Section 11 of the 1996 Act. It is their submission that the Supply
Agreement dated 10.8.04 has not been terminated by the purported
Termination Agreement dated 16.10.04. It is their claim that the
alleged Deed of Termination is brought about by the non-applicant
by forging the signatures of its Directors only to avoid the liabilities
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and obligations under the Supply Agreement between the parties. It
is their claim that the existence of the Termination Agreement came
to be noticed by them only on 24.5.05 when the non-applicant
representatives forwarded the alleged Termination Agreement. It is
only then that they noticed that the document was false and
fabricated. The applicant's claim that the Termination Agreement
was not signed by two of its Directors whose signatures had been
forged and that in any event the said two Directors had no authority
to sign the said Agreement. In fact a criminal complaint has been
registered on 1.9.05 in Hyderabad and the same is under
investigation. The applicant claims that they have also forwarded
the forged document to a private investigating agency with the
specimen signatures of their two Directors together with the
admitted signatures which, according to the applicant, reveals that
the signatures on the Termination Agreement were forged between
16.10.04 being the date of the Termination Agreement and 24.5.04
being the date on which the applicant noticed the existence of the
Termination Agreement for the first time. There has been lot of
correspondence between the parties on the basis of which the
claimant claims damages for not being paid for supply of Jatropha
seedlings. In short, the claim for damages is for reimbursement of
expenses incurred by the applicant as part of the total investment
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under the Supply Agreement. It may be noted that in the
Arbitration Application, the claim for damages based on
reimbursement of expenditures incurred by the applicant is
confined to the Supply Agreement. However, in the Written
Statement, the claim refers to the Supply Agreement as well as the
R & D Agreement. In this connection, it is alleged that in the
original R & D Agreement dated 26.11.04, there was no arbitration
clause, however, in the R & D Agreement read with the modification
in the form of Addendum dated 9.4.05, an arbitration clause was
incorporated. The claim of the applicant is set out in its letter dated
17.6.05 by which the applicant has claimed compensation in respect
of breach of obligations by the non-applicant under the Supply
Agreement and under the R & D Agreement. It is also set out in the
letter dated 4.7.05. By notice dated 10.8.05 the applicant called
upon the non-applicant to agree for appointment of M/s. Jupiter
Legal Services Pvt. Ltd. to conduct arbitration under 1996 Act to
which the non-applicant did not agree. Suffice it to state that after
exhausting all available remedies the applicant have approached
this Court for appointment of Arbitrators under Section 11 of the
1996 Act.
Response of the non-applicant
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11. By way of counter, non-applicant at the outset submits that
the Supply Agreement did not provide for arbitration by reference to
any particular institution nor did it provide for the rules framed by
any particular institution and, therefore, the expression
"institutional arbitration" used in clause 15.1 of the Supply
Agreement is vague and/or uncertain and/or incapable of being
made certain and, therefore, clause 15.1 was void under Indian
Contract Act and consequently the Arbitration Application was not
maintainable under Section 11 of the 1996 Act. It is further stated
that the Arbitration Application was liable to be dismissed as it
sought an appointment of an Arbitrator in respect of claims for
which there was no arbitration agreement between the parties. In
this connection, reliance was placed on the Joint Venture
Agreement which does not provide for arbitration. Similarly reliance
was placed on the R & D Agreement to show that it was a separate
agreement which did not provide for arbitration nor was there any
reference to clause 15.1 mentioned in the Supply Agreement.
Therefore, on the aforestated inter alia grounds, the non-applicant
submits that the Arbitration Application was not maintainable.
12. On merits, the non-applicant has stated in its counter that
prior to 16.10.04 parties were involved in discussions relating to
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commercial necessity warranting variation in the terms of Supply
Agreement resulting in the applicant agreeing to execute a deed of
variation dated 14.10.04. That deed did not meet the requirements
of the parties. Therefore, it was suggested to the applicant by the
non-applicant that the Supply Agreement be terminated. According
to the non-applicant, there was correspondence in that regard
through internet between the parties. That correspondence showed
that the applicant had received the Deed of Termination on
16.10.04. That correspondence showed that the applicant had
agreed to terminate the Supply Agreement and had in fact signed
the Termination Agreement and the same was mutually accepted by
both the parties. Therefore, the non-applicant has denied all the
allegations of the applicant in regard to the invalidity and the
illegality of the Deed of Termination dated 16.10.04. According to
the non-applicant, the contentions raised by the applicant stating
that the Deed of Termination has not been executed, that it was
forged and in any event that it was signed by Directors who were
not authorized to sign was an after-thought. According to the non-
applicant, it was agreed between the parties that the Joint Venture
Agreement would supersede the Supply Agreement. The Joint
Venture Agreement would replace the Supply Agreement. The
applicant could not have pursued the Joint Venture Agreement on
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and after it came to replace the Supply Agreement. According to the
non-applicant, the applicant continued to pursue the Joint Venture
Agreement. According to the non-applicant, the applicant was
specifically advised not to act in furtherance of the Supply
Agreement till the Joint Venture Company is incorporated. The
Termination Agreement was signed by the parties with the intention
that such execution would void the Supply Agreement. According to
the non-applicant, the correspondence between the parties shows
that the applicant was fully aware of the Termination Agreement. It
shows that the Deed was signed on 16.10.04. It shows that all
issues/claims under the Supply Agreement stood resolved. The
correspondence shows that after 16.10.04, the parties discussed
implementation of the Joint Venture Agreement rather than the
Supply Agreement. Lastly, according to the non-applicant, it would
be commercially inconsistent and illogical for parties to enter into R
& D Agreement while the Supply Agreement still continues to exist.
According to the non-applicant, it was highly inconceivable that the
parties would have entered into R & D Agreement if it thought that
the Supply Agreement was still in existence or if it thought that the
Joint Venture Agreement was legally binding. According to the non-
applicant, the Supply Agreement dated 10.8.04 stood validly
terminated on 16.10.04, that the Joint Venture Agreement dated
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30.9.04 consisted of heads of terms only whereas the R & D
Agreement dated 26.11.04 stood implemented. According to the
non-applicant, amounts have been received by the applicant under
the third Agreement. That, the applicant had failed to meet their
obligations under the R & D Agreement. That, the applicant was in
breach of the R & D Agreement. That, under the Deed of
Termination dated 16.10.04 all claims in respect of alleged
expenditure for alleged supply of seedlings stood satisfied/ceased.
For the aforestated reasons, the non-applicant submits that the
Arbitration Application No.6 of 2007 deserves to be dismissed with
costs.
Issues which arise for determination
13. Having regard to the pleadings and contentions, the
following issues arise for consideration:
(a) Whether there exists a valid arbitration
agreement between the parties.
(b) Whether there exists a live claim between the
parties.
14. It is now well-settled that the power exercised by the Chief
Justice of India or the designated judge under Section 11(6) of the
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1996 Act is not an administrative power. [See: M/s. S.B.P. & Co. v.
M/s. Patel Engineering Ltd. & Anr. - (2005) 8 SCC 618 ]
Findings on Issue No.(a) - Whether there exists a valid
arbitration agreement between the parties
15. The disputed arbitration clause in the present case is clause
15.1, mentioned in the Supply Agreement, which is reproduced as
under:
"15.1 . Any dispute that arises between the parties
shall be resolved by submitting the same to the
institutional arbitration in India under the provisions
of Arbitration and Conciliation Act, 1996."
16. Arbitration agreement is defined under Section 7 of the
1996 Act. It does not prescribe any particular form as such. In
terms of the said provision, arbitration agreement means:
"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
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in-
(a) a document signed by the parties;
17. This Court in Rukmanibai Gupta v. Collector, Jabalpur &
Ors. - (1980) 4 SCC 556, has held that what is required to be
ascertained, while construing a clause is : whether the parties have
agreed that if disputes 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.
18. In M. Dayanand Reddy v. A.P. Industrial Infrastructure
Corporation Limited & others - (1993) 3 SCC 137, this Court has
held that an arbitration clause is not required to be stated in any
particular form. If the intention of the parties to refer the dispute to
arbitration can be ascertained from the terms of the agreement, it is
immaterial whether or not the expression "arbitration" or
"arbitrator" or "arbitrators" has been used in the agreement.
19. The Court is required, therefore, to decide whether the
existence of an agreement to refer the dispute to arbitration can be
clearly ascertained in the facts and circumstances of the case. This,
in turn, may depend upon the intention of the parties to be gathered
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from the correspondence exchanged between the parties, the
agreement in question and the surrounding circumstances. What is
required is to gather the intention of the parties as to whether they
have agreed for resolution of the disputes through arbitration. What
is required to be decided in an application on Section 11 of the 1996
Act is : whether there is an arbitration agreement as defined in the
said Act.
20. Mr. H.L. Tikku, learned senior counsel appearing on behalf
of the non-applicant submitted that clause 15.1 did not contain any
arbitration clause, that clause 15.1 was vague as it did not provide
for arbitration by reference to any particular institution nor did it
provide that the rules framed by any particular institution shall
govern the arbitration between the parties. According to the learned
senior counsel, in absence of a reference to any particular
institution providing for arbitration or in absence of rules framed by
it, the expression "institutional arbitration" used in clause 15.1 of
the Supply Agreement was vague and/or uncertain and/or
incapable of being made certain.
21. I do not find any merit in the above contentions raised on
behalf of the non-applicant. The question which needs to be asked
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is : what did the parties intend at the time of execution of the
Supply Agreement dated 10.8.04? What did the parties intend when
clause 15.1 came to be incorporated in the said Supply Agreement?
The answer to the said questions undoubtedly is that any dispute
that may arise between the parties shall be resolved by submitting
the same to the Institutional Arbitration in India under the
provisions of the 1996 Act. It may be mentioned that the name of a
specific institution is not indicated in clause 15.1. The 1996 Act
does not prescribe any form for an arbitration agreement. The
arbitration agreement is not required to be in any particular form.
[See : Bihar State Mineral Development Corporation & Another v.
Encon Builders (I) (P) Ltd. - (2003) 7 SCC 418]. What is required
is to gather the intention of the parties as to whether they have
agreed for resolution of the disputes through arbitration. In my
view, in the present case, the parties unequivocally agreed for
resolution of the disputes through Institutional Arbitration and not
through an ad hoc arbitration. Therefore, in my view, there exists a
valid arbitration agreement between the parties vide clause 15.1 in
the Supply Agreement dated 10.8.04. The first issue is accordingly
answered in favour of the applicant and against the non-applicant.
Findings on Issue No.(b) - whether there exists a live claim
between the parties
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22. On going through the pleadings and the case of the parties
before me, I find that the following amongst other points indicate
that there exists a live claim between the parties. As can be seen
from the above facts, in this dispute there are three agreements.
The first is the Supply Agreement. The second is the Joint Venture
Agreement. The third is the R & D Agreement. It is the case of the
non-applicant that vide the Termination Agreement dated 16.10.04,
the Supply Agreement stood terminated. It is the case of the non-
applicant that the Termination Agreement has been signed by two of
the Directors of the applicant company. It is the case of the non-
applicant that the Termination Agreement was signed by the parties
with the express intention that such execution would void the
Supply Agreement. It is the case of the non-applicant that the
intention behind entering R & D Agreement was to put an end to
the Supply Agreement. It is the case of the non-applicant that in
view of the Termination Agreement, the claim of the applicant
towards alleged expenditure incurred by it stood
extinguished/waived/satisfied. It is the case of the non-applicant
that the Termination Agreement indicates accord and satisfaction of
all the claims of the parties under the Supply Agreement. It is the
case of the non-applicant that under the Deed of Termination any
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claim on account of alleged expenditure stood extinguished.
23. Having regard to the claim made by the applicant and the
response of the non-applicant, number of issues arises for
determination. Some of them are as follows, namely, whether the
Deed of Termination stood forged as claimed by the applicant? If
not, whether it has been signed by the two Directors who were not
authorized to sign on behalf of the applicant? Effect of the R & D
Agreement and its implementation on the Supply Agreement?
Whether Joint Venture Agreement replaced the Supply Agreement?
Whether the Supply Agreement should be read along with the Joint
Venture Agreement and the R & D Agreement or whether the Supply
Agreement should be read as a stand-alone item? Whether the
claim for alleged expenditure incurred by the applicant for supply of
seedlings under the Supply Agreement stood extinguished by the
Deed of Termination dated 16.10.04? Whether claims, if any, under
the Supply Agreement had ceased in view of the Termination
Agreement dated 16.10.04?
24. In my view, if these questions are to be looked into, the
conclusion is that the case involves a live claim between the parties.
The applicant has claimed compensation/damages for supply of
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seeds to the non-applicant under the Supply Agreement. This is the
basic claim made on behalf of the applicant. Accordingly, Issue No.
(b) is also answered in favour of the applicant and against the non-
applicant.
25. Before concluding, it may be mentioned that the applicant
has given an undertaking to this Court to withdraw the criminal
complaint instituted by it, if the matter is referred to arbitration.
That criminal complaint registered as FIR No.902 of 2005 has been
filed in the Court of Additional Chief Metropolitan Magistrate No.XIV
at Hyderabad. The complaint has been filed under Section 200 for
offences punishable under Section 406, 420, 468, 471 r/w 120B of
Indian Penal Code. Applicant undertakes to withdraw the said
complaint. Registry is directed to take the Undertaking dated
7.2.09 on record.
26. In the light of the foregoing discussion, I am of the opinion
that all disputes and differences between the parties should be
referred to Singapore International Arbitration Centre, which would
nominate an Arbitrator from its panel to decide all disputes and
differences.
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27. Accordingly the Arbitration Application No.6 of 2007 is made
absolute with no order at to costs.
.................................J.
(S.H. Kapadia)
New Delhi;
February 11, 2009.
