Citation:
CS(OS)(COMM) 92 of 2020 & I.A.2712 of 2020
Date of Order:
October28, 2022
Bench:
Honourable Mr.Justice Amit Bansal
Parties:
Plaintiff - Sorin Group Italia S.R.L
Defendant – Neeraj Garg
SUBJECT
The dispute in this case was related to non-payment of dues by the defendant after purchasing goods from the plaintiff. The plaintiff filed a suit for recovery of this money along with pendentelite and future interest. Following this, the defendant filed an application under Section 45 of the A&C Act for referring the dispute to arbitration. The Sole Distribution Agreement entered into by the parties were also looked into by the Court. Based on this it was held that though two disputes arising out of the same agreements being determined by different forums would lead to an anomalous situation, the choice of the parties is to be given supremacy and only disputes contemplated under the arbitration clause can be referred to arbitration. The present petition was dismissed.
IMPORTANT PROVISIONS
- Clause 15 (2) (a) and (b) of the Sole Distribution Agreement – This clause in the agreement entered into by both parties provided for reference to arbitration in case of dispute arising in respect of termination of the agreement or any connected relief for compensation and stipulated for remedy before the Court of Law for all other reliefs.
- Section 45 of the Arbitration & Conciliation Act- This section deals with the power of a judicial authority to refer parties to arbitration.
OVERVIEW
- This application was filed on behalf of the defendant under Section 45 of the Arbitration and Conciliation Act,1996 (A&C Act) seeking that the parties be referred to arbitration and the plaint in the present suit be rejected.
- Sorin, who is the plaintiff, and the defendant had entered into a Sole Distribution Agreement on 1st July, 2017 by which, the defendant placed a purchase order on Sorin who was to supply certain goods. Sorin supplied the said goods under the purchase order and raised three invoices on the defendant. Since the defendant failed to make full payment in terms of the said invoices, Sorin has filed the present suit as a summary suit, under Order XXXVII of the Civil Procedure Code seeking recovery of the balance payment in respect of the invoices raised by Sorin on the defendant.
- Upon summoning them, the defendants filed an application under Section 8 of the A&C Act and an application seeking leave to defend. The application under Section 8 of the A&C Act was later withdrawn on 5th May, 2022 with liberty to file an application under Section 45 of the A&C Act. It is pursuant to this liberty that the present application has been filed. Notice in this application was issued to Sorin on 31st May, 2022 and reply has been filed in his behalf.
- The defendant claimed to have a counter claim against Sorin which would also be covered under the arbitration clause. A legal notice invoking arbitration in respect of the counter claim was issued by the defendant to Sorin on 2nd May, 2022 to which Sorin had not responded.
ISSUES RAISED
- Whether a dispute falling within the 'excepted matters' category can be referred to arbitration.
- Whether the subject matter of the suit was recovery of money for the invoices issued by the plaintiff on the defendant or was it related to the termination of the agreement between the parties.
- Whether it was permissible for the parties to provide for remedies before different forums for disputes arising out of the same agreement.
ARGUMENTS ADVANCED BY THE DEFENDANTS
- It was pointed out be the defendants that the dispute raised in the present suit is covered by the relevant clauses of the Agreement between the parties in relation to dispute resolution and choice of law in case of any such situation. Thus the parties ought to be referred to arbitration under Section 45 of the A&C Act.
- The disputes in this case are related to claims for compensation and non-extension of the Agreement.
- Clause 15.2(b) of the Agreement between the parties permits filing of cases in any court with competent jurisdiction, only when the injunctive relief is claimed. As this was not applicable in the present case, the suit was not maintainable.
- As the defendant also has a counter claim against Sorin, it would lead to absurd results if the claims under the present suit and the counter claim were adjudicated by two different judicial authorities.
ADVANCED BY THE RESPONDENT
- It was argued by the petitioner that Clause 15.2(a) is only relevant to the disputes arising out of termination of the contract, grounds for termination (including expiration), potential claims for indemnification or compensation thereof. Thus, the current dispute does not come under this clause.
- The dispute in the present suit is regarding the balance payment to be done towards unpaid invoices of the defendant. It is covered under Clause 15.2(b).
- Clause 15.2(b) is not confined to the cases in which injunctive reliefs are sought, but are applicable to suits regarding recovery of money, like the present suit.
- The defendant has the liberty to invoke arbitration in terms of Clause 15.2(a)(ii) of the Agreement, independent of the proceedings in the present suit.
JUDGEMENT ANALYSIS
- In light of relevant judgements it was noted that while considering an application under Section 8 or Section 45 of the A&C Act, the Court is required to hold a preliminary enquiry as to whether the dispute is arbitrable or not and come to a prima facie view. This is to prevent the parties from being forced to arbitrate when the matter is non-arbitrable.
- Thus it was held that a preliminary enquiry ought to be held in the present case so as to determine whether the subject matter of the plaint is arbitrable or not, or to determine whether it falls within the scope of ‘excepted matters’.
- It is clear that the parties intended that if a dispute relating to termination or grounds of termination (including expiration) arises between the parties, the same would be referred to arbitration.
- The amounts that were sought recovery were not related to any indemnification or compensation sought by Sorin from the defendant but were solely based on the unpaid invoices of Sorin.
- According to Clause 15.2(b), it said that regarding all disputes other than those covered under Clause 15.2(a), the exclusive jurisdiction would vest in the courts located in the Milan, Italy. An option was also given to Sorin to invoke jurisdiction of any other court having competent jurisdiction, to file proceedings relating to injunctive relief or from recovering money from the defendant.
- The Court disagreed of the interpretation of the defense counsel who submitted that only suits relating to injunctive relief can be filed before this Court. The scope of a suit for recovery and that for injunctive relief is entirely different. Thus the present suit was maintainable before this Court.
- The Court also pointed out that the parties had consciously decided to have different forums for adjudication of different disputes under the Agreement. The arbitration mechanism was chosen only in case of disputes arising out of termination or expiration of the contract and any other cases, the jurisdiction was given to civil courts. In arbitration, choice of the parties has to be given supremacy. If the parties have consciously chosen two separate remedies in respect of different disputes under the Agreement, it should be respected.
CONCLUSION
Thus the Court concluded that the dispute in the present suit which was regarding recovery of balance payment on the unpaid invoices raised by Sorin on the defendant, falls under the “excepted matters” category in the clause and is therefore, not arbitrable as per the arbitration clause in the Agreement entered into between the parties. The present suit was maintainable before this Court. Therefore, the Court dismissed the current petition as no merit could be found in it.
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