Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 250/2012
LETS ENGINEERING & TECHNOLOGY
SERVICES PVT. LTD. ..... Petitioner
Through: Mr. Sanjay Goswami, Advocate
versus
MANOJ DAS ..... Respondent
Through: Mr. Arunav Patnaik, Advocate
CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL
J U D G M E N T
: REVA KHETRAPAL, J.
1. By way of this petition filed under Section 11(5) of the
Arbitration and Conciliation Act, 1996, the Petitioner – LETS
Engineering Technology Services Pvt. Ltd. (for short “LETS”) prays
for appointment of an independent Sole Arbitrator to decide the
claims of LETS as set out in the petition against the Respondent, viz. ,
Digital Analysis and Software Solutions (for short “DASS”) arising
out of the disputes which have arisen between LETS and DASS.
2. The facts as narrated in the petition are as follows. LETS is
since long been engaged in execution of outsourced Digital Analysis
and Software Solutions for its customers in UK, USA and other
countries, and has certain indigenously developed proprietary
Solutions, Designs, Analysis and Software for Geographical Mapping
ARB. P. 250/2012 Page 1 of 25
services, in which LETS is the pioneer and trend setter in India.
Somewhere in the year 2004, LETS started sub-outsourcing some of
its overseas assignments and job works to DASS with the clear
understanding that the Technical Know How and Digital Analysis
including GIS Mapping, etc., and Software Solutions of LETS were
all Copyrights and the Proprietary Data and Software of LETS, in
which DASS would have no Intellectual Property Rights and would
not be authorized to use the same for any purposes other than
purposes of job work for LETS, for which it would receive
remuneration in Indian Rupees.
3. LETS asserts that over the period DASS’s ambition soared and
without informing LETS, it set up a new company under the name of
Weaver Bird Engineering and Technology Pvt. Ltd. and under the
guise of a separate company, without disclosing the setting up of the
same to LETS, started competing with LETS by using their Technical
Know How, and Copyrighted Digital Analysis Software and
Customer Data and started approaching customers of LETS in UK,
Europe and USA for soliciting business from them. From January,
2010 onwards, the business turnover of LETS suddenly dropped
substantially on account of the diversion of its business by DASS to
the newly incorporated company M/s. Weaver Bird Engineering and
Technology Pvt. Ltd., which by conservative estimates amounted to
an average of ` 30 lacs per month (approx) from a single customer,
i.e., BLOM AEROFILMS, U.K.
4. LETS alleges that it suffered losses of a minimum of ` 2.5
crores in terms of business revenue in the period intervening January,
ARB. P. 250/2012 Page 2 of 25
2010 to October, 2010 alone and in this regard also issued to DASS
th
an e-mail dated 20 September, 2010. After discounting what it owed
to DASS, LETS claimed from DASS the balance amount of
` 2,30,06,080/- as compensation/damages for breach of contract and
infringement of their Intellectual Property Rights, including
Copyrights, etc. in the Digital Analysis and Software Solutions and
Customer Database by its legal notice dated 01.11.2010. DASS did
not choose to reply, but instead chose to issue a spate of legal notices
to LETS on the same lines, viz. , notice dated 01.10.2010, 14.12.2010
and 03.09.2011, which were duly replied by LETS. Thereafter,
DASS proceeded to initiate a winding up petition against LETS,
which was left with no alternative but to seek settlement of its claims
along with the interest due through the process of arbitration, in terms
of the Contract Agreement dated 04.11.2009 vide the mail of LETS,
which had been ratified and confirmed by DASS through its e-mails
dated 16.11.2009 and 19.11.2009 on all clauses including the
arbitration clause. The petitioner accordingly got served upon the
respondent a legal notice dated 31.01.2012, seeking resolution of the
disputes through arbitration. The respondent chose not to reply to the
said notice.
5. In the circumstances, the present petition was instituted by
th
LETS on 6 July, 2012, to which DASS filed a reply in which it was
contended that the petition was an abuse of the process of law and
deserved dismissal as there exists no Arbitration Agreement as
contemplated under the Arbitration and Conciliation Act, 1996 (for
short “the Act”) governing the relationship between the parties. It
ARB. P. 250/2012 Page 3 of 25
was further submitted that from a perusal of Article 7 of the draft
Agreement annexed by LETS to the petition, it is clear that the said
draft Agreement would only have come into force from the effective
date of signing of the same. That such an eventuality never arose as
the said draft Agreement was not signed between the parties due to
disagreement on certain terms contained therein. Consequently, the
reliance placed by LETS on the arbitration clause in the said draft
Agreement in order to maintain an application under Section 11(5) of
the Act is without any foundation or basis. It is also submitted that
for a document to be considered as a valid Arbitration Agreement
under Section 7(4)(b) of the said Act, the same ought to contain a
bilateral record of consent of both/all parties to it, but from a perusal
of the E-mail dated 04.11.2009 and from various other
correspondences between the parties, it is more than clear that DASS
had never given its consent to be bound by the said draft Agreement.
In fact, from a mere perusal of the e-mails exchanged subsequent to
04.11.2009, annexed by LETS to the petition, being E-mails dated
16.11.2009 and 19.11.2009, two E-mails dated 20.11.2009 and the E-
mail dated 05.12.2011, it becomes crystal clear that the said document
(Marketing Agreement), being relied upon by LETS was just a draft
Agreement which was subject to change since there was disagreement
between the parties with regard to the terms of the same. Finally, it is
submitted that the present petition has been filed by way of
counterblast to the winding up petition filed by DASS against LETS
and since there exists no valid and legally binding Arbitration
Agreement between the parties, the petition is liable to be dismissed.
ARB. P. 250/2012 Page 4 of 25
6. Rejoinder to the aforesaid reply was filed by LETS denying the
averments made in the reply and reiterating the contents of the
petition.
7. Mr. Sanjay Goswami, learned counsel for LETS contends that
the dealings between LETS and DASS were governed by the
Marketing Agreement. The E-mail correspondence between the
parties contained the said Marketing Agreement which was
exchanged between the parties and the terms of which were accepted
by DASS in its response regarding the said Agreement, except minor
clarifications being sought on certain issues. The exchange of E-
mails and their attachments as well as the response mails by DASS
clearly constitute written contract between the parties and the entire
dealings and transactions between the parties were governed by the
terms of the said contract which was exchanged between the parties.
The E-mail of LETS dated 04.11.2009 contained the revised contract
as per the modifications and the same was acknowledged by DASS
by its mail dated 19.11.2009, which acknowledged the General
Agreement between the parties and raised queries about certain
clauses of the same. There was, however, no objection of any nature
expressed by DASS as regards Arbitration Clause 13.2 of the said
Agreement which was impliedly accepted by DASS. The entire basis
of the working between LETS and DASS was the said
Agreement/Contract and the various clauses of the same. DASS,
therefore, cannot dispute the existence of the arbitration clause
between the parties, which reads as follows:
ARB. P. 250/2012 Page 5 of 25
“13.2 In case of any dispute or difference arising out of
this Agreement on any issue and cannot be amicably
settled between the Parties, the same shall be referred to
arbitration under the provisions of Arbitration and
Conciliation Act 1996 as then in force. The place of such
Arbitration shall be at New Delhi. The parties
acknowledge that disputes between them shall be solely
settled by arbitration.”
8. The main stay of the rebuttal arguments of Mr. Arunav Patnaik,
learned counsel on behalf of DASS was as follows. The E-mails
exchanged between the parties were clearly reflective of the position
that the Marketing Agreement/Contract was not a signed Agreement
and the signing thereof had been held up with the consensus of the
parties. It was this unsigned Marketing Agreement/Contract which
contained the arbitration clause. The basis of all the transactions
between the parties were the work orders and the work orders did not
contain an Arbitration Clause nor it is the case of LETS that the work
orders contain an Arbitration Clause.
9. Learned counsel for LETS placed reliance on the decisions of
the Hon’ble Supreme Court rendered in:-
(i) Shakti Bhog Foods Limited vs. Kola Shipping Limited,
(2009) 2 SCC 134.
(ii) Smita Conductors Ltd. vs. Euro Alloys Ltd., (2001) 7
SCC 728.
(iii) Great Offshore Limited vs. Iranian Offshore
Engineering and Construction Company, (2008) 14
SCC 240.
ARB. P. 250/2012 Page 6 of 25
(iv) Visa International Limited vs. Continental Resources
(USA) Limited, (2009) 2 SCC 55.
(v) Trimex International FZE Limited ,Dubai vs. Vedanta
Aluminium Limited, India, (2010) 3 SCC 1.
(vi) Unissi (India) Private Limited vs. Post Graduate
Institute of Medical Education and Research, (2009) 1
SCC 107.
10. Learned counsel for DASS, on the other hand, relied upon the
judgments rendered in:-
(i) Indowind Energy Ltd. vs. Wescare (I) Ltd. and Anr.,
AIR 2010 SC 1793.
(ii) M.M. Aqua Technologies Ltd. vs. Wig Brothers
Builders and Anr., 95 (2002) DLT 818 (DB).
(iii) P.T. Tirtamas Comexindo vs. Delta International
Limited and Anr., 2001 (2) ARB LR 630 (Cal).
(iv) Bharat Sanchar Nigam Limited vs. Telephone Cables
Limited, (2010) 5 SCC 213.
(v) M.R. Engineers and Contractors Private Limited vs.
Som Datt Builders Limited, (2009) 7 SCC 696.
(vi) U.P. Rajkiya Nirman Nigam Ltd. vs. Indure Pvt. Ltd.
and Others, (1996) 2 SCC 667.
11. In view of the controversy raised between the parties and in
order to resolve the same, it would be useful at this juncture to
reproduce the e-mails relied upon by the parties to buttress their
respective contentions, which have been enclosed as annexures to the
petition, those relevant being collectively enclosed as Annexure A7:-
ARB. P. 250/2012 Page 7 of 25
Harish Sharma
From: Kishore das [kishore.das@sar-group.com]
Sent: Monday, December 05, 2011 2:22 PM
To : harish@luminousets.com
Subject: FW: Contract Agreement
Attachments: Vendor Agreement_DASS.doc
Importance: High
Fyi…
From : pawan sachdeva [mailto:pawans@luminousets.com]
Sent: Wednesday, November 04, 2009 3:30 PM
To: Manoj Das
Cc: kishored@luminousets.com
Subject: Contract Agreement
Importance: High
Dear Manoj Ji,
As per your discussions with Kishore sir, the contract agreement has
been modified, please find attached the same document and make
arrangement to sent us a signed copy of the same asap.
Regards
Pawan
MARKETING AGREEMENT
…………………………
----Original Message---
From: pawan sachdeva
To: Manoj Das
Cc: kishored@luminousets.com
ARB. P. 250/2012 Page 8 of 25
Sent: Monday, November 16, 2009 7:23 PM
Subject: Contract Agreement & Work Order Format
Dear Manoj Ji,
As directed please find attached the final contract agreement and
work order format. Based on our today’s discussions I have further
refined both the documents to be on a mutual acceptable level.
Please provide a signed copy of the agreement asap.
Regards
Pawan..
From: Manoj Kumar Das
To: pawan sachdeva
Cc: kishored@luminousets.com
Sent: Thursday, November 19, 2009 7:58 PM
Subject: Re: Contract Agreement & Work Order Format
Dear Pawanji, please look into the following few lines from Work
Order & General Agreement...
Regarding Work Order: 01. The Expected date of Delivery should be
on mutually agreed basis, not imposed categorically (as we have
informed a fixed no of resource involved in your project)...
LETS Comments: The expected delivery date will be stated by LETS,
after discussing with DASS and would be inline with the fixed number
of resources involved in our project.
2. See the clause 4(b)...Inspection means inhouse data checking or
inspection in DASS premises..?please clarify..
LETS Comments: It has always been inhouse and will continue to be
that, the same has been specified in the WO.
03. Clause 3(c) Lets is entitled to claim liquidated damage to the
ARB. P. 250/2012 Page 9 of 25
extent of total project cost from the vendor-Not Agreed..
LETS Comments: As the expected delivery date is mutually
agreed/discussed it is expected that DASS completes the delivery in
atleast 10 days delay. If this needs to be scrapped then point one will
not be mutually agreed.
04) Clause 5(b), what is quality and effort detail..as it is assessed
internally for our internal purpose.
LETS Comments: We have scraped this clause, we are only
concerned with the quality of the data delivered to LETS.
05) If there is deviation in quality and time both what is the penalty
clause(as..I think once quality is a issue than definitely it needs time
to check it once again which may lead to delay), as per me there
should be one..
LETS Comments: Incase DASS delivers low quality output as the first
delivery which delayed from the executed delivery date then both
penalties would be levied.
Incase the first delivery timeline is fine and quality is rejected the re-
delivery date again shall be mutually agreed.
6) Doubt: Rejection are based on what %ge basis, (otherwise a single
st nd rd
error may lead to rejection), so that it is declared as 1 , 2 , 3
rejection.
LETS Comments: As was discussed on your visit to Naraina our Q&P
is working on setting the acceptance/rejection benchmarks, which
would be realistic and acceptable to all. The first analysis report
received by you from Charu says there were ~33 errors per sqkm for
a ~28 sqkm city and the city has been accepted at LETS, clearly
proves the point that single error would not lead to rejection.
Regarding Agreement: AS per clause 2.6 includes time to time..., so
extra cost is there to implement time to time modification..so what
abt this.. or define the quality from the beginning based on which
dass will raise the quotation..
2) clause 3.2 only ..no other sum ..other sum may be service
ARB. P. 250/2012 Page 10 of 25
tax..please note..
3) clause 4.4 ..look for the second sentence, may be a problem..
NB: To implement the quality it needs some revision of the previous
pricing..Please look into it.
Regards,
Manoj
----Original Message----
From: pawan sachdeva
To: Manoj Kumar Das
Cc: kishored@luminousets.com
Sent: Friday, November 20, 2009 1:04 PM
Subject: Re: Contract Agreement & Work Order Format
Dear Manoj Ji,
I have added my comments in the work order observation below, also
attached the updated WO. Regarding the Contract agreement your
comments have been forwarded to our legal/commercial authorities
who would comment on the same.
You may hold onto the agreement as of now BUT as per our
legal/commercial dept. having the WO in place is mandatory to
process the invoices going forward.
I would look forward to your acceptance on the WO latest by
tomorrow so that I can pass on all the related WOs to DASS by
Monday and confirm the same with a copy of it to our concerned
dept. Monday is the strict deadline I have.
Do let me know if you still have any issues.
Thanx
Pawan..
ARB. P. 250/2012 Page 11 of 25
From: Manoj Kumar Das [mailto:manoj@digitalinfosoft.com]
Sent: Friday, November 20, 2009 4:55 PM
To: pawan sachdeva
Cc: kishored@luminousets.com
Subject: Re: Contract Agreement & Work Order Format
Dear Pawanji, Regarding agreement it is ok..we will make it
later..Please look into the Sl. Nos. of previous mail of work order
heading..May be these things are not considered....
Regarding Work Order :01. The Expected date of Delivery should be
on mutually agreed basis, not imposed categorically (as we have
informed a fixed no of resource involved in your project).
03. Clause 3(c) Lets is entitled to claim liquidated damage to the
extent of total project cost from the vendor-Not Agreed..
05) If there is deviation in quality and time both what is the penalty
clause (as..I think once quality is a issue than definitely it needs time
to check it once again which may lead to delay), as per me there
should be one..
6) Doubt: Rejections are based on what %ge bases, (otherwise a
st nd rd
single error may lead to rejection), so that it is declared as 1 , 2 3
rejection.
Best Regards,
Manoj..
Harish Sharma
From: Kishore das [kishore.das@sar-group.com]
Sent: Monday, December 05, 2011 2:23 PM
To: harish@luminousets.com
Subject: FW: Contract Agreement & Work Order Format
From : pawan sachdeva [mailto:pawans@luminousets.com]
Sent: Friday, November 20, 2009 5:03 PM
ARB. P. 250/2012 Page 12 of 25
To: Manoj Kumar Das
Cc: kishored@luminousets.com
Subject: Re: Contract Agreement & Work Order Format
Manoj Ji I had added my comments in your original mail in a
different color against each point.
12. From the aforesaid, the following question arises for
consideration:-
(i) Whether the arbitration clause between the two parties,
viz. , LETS and DASS could be considered as a binding
Arbitration Agreement on DASS, which is not a
signatory to the said Agreement?
13. Section 7 defines an “arbitration agreement” and the various
legally recognized modes of entering into the same. For the facility
of reference the said Section is extracted below:-
“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 in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or
other means of telecommunication which provide a
record of the agreement; or
ARB. P. 250/2012 Page 13 of 25
(c) an exchange of statements of claim and
defence in which the existence of the agreement is
alleged by one party and not denied by the other.
(5) The reference in a contract to a document
containing an arbitration clause constitutes an
arbitration agreement if the contract is in writing and the
reference is such as to make that arbitration clause part
of the contract.”
14. The term “arbitration agreement” is defined under Section2(b)
of the Act as an agreement referred to in Section 7. Section 7(3)
specifically stipulates that an “arbitration agreement” shall be in
writing. Sub-sections (4) and (5) of Section 7 stipulate that an
“arbitration agreement” will be considered to be in writing if it is
contained in:
(a) a document signed by the parties [sub-section 4(a) of
Section 7]; or
(b) an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the
agreement [sub-section 4(b) of Section 7]; or
(c) an exchange of statements of claim and defence in which
the existence of the agreement is alleged by one party
and not denied by the other [sub-section 4(c) of Section
7].
(d) a contract between the parties making a reference to
another document containing an arbitration clause
indicating a mutual intention to incorporate the said
ARB. P. 250/2012 Page 14 of 25
arbitration clause from such other document into the
contract [sub-section (5) of Section 7];
15. From the above conspectus of what would constitute an
“arbitration agreement” in writing, it is clear that in the present case it
is the provisions of Section 7(4)(b) that are sought to be relied upon
by LETS. It is the case of LETS that it was by an exchange of E-
mails, which is a mode of telecommunication, that an Arbitration
Agreement was entered into between LETS and DASS and it is these
E-mails which provide a record of the Agreement between the parties.
Indubitably, DASS is not a signatory to the Marketing Agreement
sent by E-mail dated 04.11.2009 and thus the only aspect which is to
be considered is whether DASS had affirmed and approved of the
said Agreement and/or acted in terms of the said Agreement and
whether an Arbitration Agreement can be spelt out to have come into
existence from the exchange of E-mails between the parties. If DASS
had acknowledged or confirmed in any correspondence between the
parties the Arbitration Agreement contained in the Marketing
Agreement or indicated that it is bound by the Arbitration Agreement,
the inevitable corollary would be that the contention of DASS that it
was not bound by the Arbitration Agreement would deserve outright
rejection. On the other hand, if LETS is unable to substantiate its
contention that by an exchange of E-mails DASS had provided a
record of the Arbitration Agreement between the parties, the prayer of
LETS for appointment of an Arbitrator would be liable to be rejected.
16. The E-mails between the parties when viewed through the
aforesaid lens, in the opinion of this Court, clearly indicate the
ARB. P. 250/2012 Page 15 of 25
existence of an Arbitration Agreement between the parties. It is not
in dispute that there existed a draft Marketing Agreement containing
an arbitration clause between the parties, being Clause 13.2, that this
Agreement was e-mailed as an attachment to the E-mail dated
November 04, 2009 by LETS to DASS with the request by LETS to
DASS to make arrangement to send a signed copy of the same as
soon as possible, and that a few days later, i.e., on November 16,
2009, LETS again e-mailed to DASS “The final contract agreement
and work order format” stating:
“Based on our today’s discussions I have further refined
both the documents to be on a mutual acceptable level.
Please provide a signed copy of the agreement
asap.”
17. Three days’ later, i.e., on November 19, 2009, DASS sent an E-
mail to LETS to look into certain lines of the Work Order and
General Agreement, but the said E-mail nowhere refers to the
Arbitration Clause. Regarding the General Agreement, DASS sought
modification of clauses 2.6, 3.2 and 4.4 to a limited extent and
requested LETS to look into the matter. The necessary inference is
that no dispute was raised by DASS with regard to the Arbitration
Clause contained in the Agreement.
18. The next E-mail is dated November 20, 2009 sent by LETS to
DASS emphasizing the urgency of having the Work Order in place so
as to enable processing of invoices and stating that DASS “may hold
onto the agreement as of now” . DASS’s reply to this E-mail is
ARB. P. 250/2012 Page 16 of 25
contained in E-mail dated November 20, 2009, which begins by
stating:
“Regarding agreement it is ok…we will make it
later…Please look into the Sl. nos. of previous mail of
work order heading….”
19. From the aforesaid, it is clear that the parties were ad idem with
regard to all the clauses including the arbitration clause contained in
the Marketing Agreement attached with E-mail dated 04.11.2009
except Clauses 2.6, 3.2 and 4.4 referred to in E-mail dated 19.11.2009
and thus the existence of a valid Arbitration Agreement in writing
cannot be refuted. The provisions of Section 7 of the Act envisage
that the existence of an Arbitration Agreement can be inferred from a
document signed by the parties, or an exchange of letters, telex,
telegrams, or other means of telecommunication which provide a
record of the Agreement. In the present case, the exchange of E-
mails, the contents of which have been reproduced hereinabove is not
denied by DASS. In the circumstances, the contention of DASS that
there was no Arbitration Agreement between the parties is therefore
wholly unacceptable. DASS had clearly refuted certain Clauses in the
subject Agreement, but as regards the Arbitration Clause there was no
controversy between the parties at any stage. At this stage, for DASS
to turn around and dispute the existence of the Arbitration Agreement
between the parties would be both unwarranted and unjustified.
20. It is also not in dispute that various work orders were placed by
LETS upon DASS and that DASS had catered to the aforesaid work
orders until disputes arose between the parties. The transactions
ARB. P. 250/2012 Page 17 of 25
between the parties were clearly premised on the Marketing
Agreement and for this reason also it would not be open to DASS at
this juncture to contend that there was no consensus between the
parties with regard to the Arbitration Agreement.
21. In the case of Visa International Limited (supra) , relied upon
by the counsel for the petitioner, the Hon’ble Supreme Court opined:-
“18. That an arbitration agreement is not required to
be in any particular form has been reiterated in more
than one decision. [See Bihar State Mineral Development
Corpn. 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. What is required to be
decided in an application under Section 11 of the Act is
whether there is any arbitration agreement as defined in
the Act? It needs no reiteration that Section 7 of the Act
does not prescribe any particular form and it is
immaterial whether or not expression “arbitration” or
“arbitrator” or “arbitrators” has been used in the
agreement.”
22. In Unissi (India) Private Limited (supra) , also relied upon by
the counsel for the petitioner, while interpreting the provisions of
Section 7 of the Act, the Hon’ble Supreme Court relying upon its
earlier decisions held that although no formal Agreement was
executed, the tender documents indicating certain conditions of
contract contained an arbitration clause. The appellant had given his
tender offer, which was accepted and the appellant acted upon it.
Thus, in view of Section 7 of the Act, the Arbitration Agreement did
exist and therefore the matter was required to be referred to an
ARB. P. 250/2012 Page 18 of 25
Arbitrator for decision and the Respondent could not be allowed to
wriggle out from the Arbitration Agreement.
23. In a well considered and erudite judgment rendered in Trimex
International FZE Limited, Dubai (supra) , the Hon’ble Supreme
Court after gleaning the various E-mails exchanged between the
parties including an E-mail attaching the draft contract, which
remained unsigned, opined as follows:-
“44. From the materials placed, it has to be ascertained
whether there exists a valid contract with the arbitration
clause. It is relevant to note that on 15-10-2007 at 4.26
p.m. the petitioner submitted a commercial offer wherein
Clause 6 contains the arbitration clause i.e. “this
contract is governed by Indian law and arbitration in
Mumbai courts”. At 5.34 p.m. though the respondents
offered their comments, as rightly pointed out by Mr K.K.
Venugopal, no comments were made in respect of the
“arbitration clause”. It is further seen that at 6.04 p.m.,
the petitioner sent a reply to the comments made by the
respondent. Again, on 16-10-2007 at 11.28 a.m., though
the respondents suggested certain additional information
on the offer note, here again no suggestion was made
with regard to the arbitration clause.
Paras 45 to 48 …………………..
49. In the light of the details which have been
extracted in the earlier paragraphs, I am unable to
accept the stand of the respondent. It is clear that if the
intention of the parties was to arbitrate any dispute
which arose in relation to the offer of 15-10-2007 and the
acceptance of 16-10-2007, the dispute is to be settled
through arbitration. Once the contract is concluded
orally or in writing, the mere fact that a formal contract
has to be prepared and initialled by the parties would not
affect either the acceptance of the contract so entered
ARB. P. 250/2012 Page 19 of 25
into or implementation thereof, even if the formal
contract has never been initialled.
Paras 50 to 56 ……………………..
57. ………………………… It is essential that the
intention of the parties be considered in order to
conclude whether the parties were ad idem as far as
adopting arbitration as a method of dispute resolution
was concerned. In those circumstances, the stand of the
respondent that in the absence of signed contract, the
arbitration clause cannot be relied upon is liable to be
rejected.
Paras 58 and 59 …………………………
60. It is clear that in the absence of signed agreement
between the parties, it would be possible to infer from
various documents duly approved and signed by the
parties in the form of exchange of e-mails, letter, telex,
telegrams and other means of telecommunication. ”
23. Adverting to the precedents relied upon by Mr. Arunav
Patnaik, the learned counsel for the respondent, the same are clearly
distinguishable. In Indowind Energy Ltd. (supra) , the facts leading
to controversy were totally different in as much as the agreement was
executed between Wes Care (I) Ltd. (respondent therein) and Subuthi
Finance Ltd., but disputes in respect of which reference was sought
had arisen between Wes Care and Indowind. The respondent (Wes
Care) had filed the petition under Section 11 inter alia on the ground
that the agreement was entered into by Subuthi as promoter of
Indowind and also described Indowind as its nominee. Referring to
Clause 11 of the agreement which required the Board of
ARB. P. 250/2012 Page 20 of 25
Directors/shareholders of Wes Care, Subuthi and Indowind to
expressly approve the agreement, the Hon’ble Supreme Court held
that in the absence of a ratification, approval, adoption or
confirmation of the agreement by Indowind, it could not be said that
Indowind was a party or signatory to the agreement. In the
circumstances, the order appointing an arbitrator with regard to
claims of Wes Care against Indowind was set aside. Pertinently, the
Court noted that it was not the case of Wes Care that any exchange of
letters, telex, telegrams or other means of telecommunication referred
to and provided a record of any Arbitration Agreement between the
parties, and held that it was not sufficient for the petitioner in an
application under Section 11 to show that there existed an oral
contract between the parties.
24. In M.M. Aqua Technologies Ltd. (supra) , relied upon by the
learned counsel for the Respondent, also a similar controversy had
arisen, that is, the disputes had arisen between the petitioner and two
respondents, while the arbitration agreement was only between the
petitioner and the first respondent. The learned Single Judge
accordingly appointed arbitrator referring the disputes between the
petitioner and the first respondent only to arbitration on the ground
that there did not exist any arbitration agreement between the
petitioner and the second respondent. The petitioner preferred a Writ
Petition against the order of the learned Single Judge, which was
dismissed holding that:-
ARB. P. 250/2012 Page 21 of 25
“………
there cannot be any doubt whatsoever that before the
Chief Justice or any other body designated by him take
recourse to exercise the said power (power under Section
11 of the Act) the existence of an arbitration agreement is
imperative.”
25. In P.T. Tirtamas Comexindo (supra) , the High Court of
Calcutta after noting that there was an oral Agreement followed by a
fax message sent by the Respondent to the Appellant, which
contained the Arbitration Clause and it was not the case of the
Respondent before the Trial Court that the fax message was the
Agreement, opined as follows:-
“37. The underlying requirement under Section 7(4) is
that (i) there must be an agreement, and (ii) it must be in
writing. The simplest from is covered by Section 7(4)(a) -
namely a signed document signed by both parties. This
would satisfy both requirement of consensuality and a
bilateral record of such consensus. For the same reason
an exchange of statements of claim and defence where
one party alleges the existence of the arbitration clause
and the other does not deny it in writing, would also be
an arbitration agreement under Section 7(4)(c). Read in
this context, it is clear that the “record" required in
Section 7(4)(b) is a bilateral record of consent. This
would exclude a situation where the consent of either one
of the parties is not recorded. Thus a mere response in
writing to a telephonic message would not do. It would
be a unilateral record of the act of one of the parties. On
this interpretation it would follow that there was in fact
no arbitration agreement is envisaged under Section 7 of
the Act.”
The facts of the aforesaid case are, therefore, clearly
distinguishable from the facts of the present case, as in the present
ARB. P. 250/2012 Page 22 of 25
case there exists a written agreement between the Petitioner and the
Respondent which is evident from the E-mails exchanged between the
parties.
26. The facts in the case of Bharat Sanchar Nigam Limited
(supra) are also altogether distinguishable. The Arbitration
Agreement was available only in regard to the “contract”, but only
when a purchase order was placed a “contract” would be entered; and
only when a “contract” was entered into, the general conditions of
contract including the arbitration clause would become a part of the
contract. If a purchase order was not placed, the general conditions of
contract did not become a part of the contract. In other words, as held
by the Hon’ble Supreme Court in the said case, the arbitration clause
contained in the general conditions of contract “was not an
Arbitration Agreement in praesenti, during the bidding process, but a
provision that was to come into existence in future, if a purchase
order was placed”. The dispute raised was with regard to a claim for
damages for non-placement of a purchase order. In such
circumstances, the Supreme Court held that in the absence of a
purchase order the Arbitration Agreement was non-existent.
27. Likewise, the decision of the Hon’ble Supreme Court in M.R.
Engineers and Contractors Private Limited (supra) was on
altogether different facts. The Supreme Court in the said case was
dealing with sub-section (5) of Section 7 of the Act, which is an
enabling provision and which sets out the legislative intent to import
an arbitration clause from another document, merely on reference to
such document in the contract by conscious acceptance of the
ARB. P. 250/2012 Page 23 of 25
arbitration clause from another document by the parties as a part of
their contract. The decision, in fact, highlights the difference between
reference to another document in a contract and incorporation of
another document in a contract, by reference, and the fact that when
there is a reference to a document in a contract, the Court has to
consider whether the reference to the document is with the intention
of incorporating the contents of that document in entirety into the
contract including the arbitration clause contained therein, or with the
intention of adopting or borrowing specific portions of the said
document for application to the contract. It concluded as follows:-
(SCC, Page 706)
“22. A general reference to another contract will not be
sufficient to incorporate the arbitration clause from the
referred contract into the contract under consideration.
There should be a special reference indicating a mutual
intention to incorporate the arbitration clause from
another document into the contract. The exception to the
requirement of special reference is where the referred
document is not another contract, but a standard form of
terms and conditions of trade associations or regulatory
institutions which publish or circulate such standard
terms and conditions for the benefit of the members or
others who want to adopt the same.”
28. In U.P. Rajkiya Nirman Nigam Ltd. (supra) also, on facts the
Hon’ble Supreme Court came to the conclusion that there was no
written Agreement for submitting the existing or future differences to
arbitration, which is a pre-condition and further that the original
contract itself was not a concluded contract and there existed no
Arbitration Agreement for reference of disputes to the Arbitrators.
ARB. P. 250/2012 Page 24 of 25
The Court noted that apart from the draft Agreement and counter
proposal, there was no other document and in the absence of
consensus ad idem it could not be held that an Arbitration Agreement
existed between the parties.
29. In view of the aforesaid discussion and on an overall
conspectus of the facts and the law as discussed above, I have no
hesitation in concluding that the present case falls within the scope
and ambit of Section 7(4)(b) of the Act as that there exists between
the parties an Arbitration Agreement in writing, which is borne out
from the record of correspondence and E-mails exchanged between
the parties. This being so, the inevitable corollary is that the disputes
between the parties must be referred to arbitration. In view of the fact
that the arbitration clause does not provide for any named Arbitrator,
I appoint Justice Y.K. Sabharwal, Retired Chief Justice of India to
adjudicate upon the disputes between the parties. The learned
Arbitrator shall fix his own fees. Parties shall appear before the
th
learned Arbitrator on 4 February, 2013 in order to enable the learned
Arbitrator to proceed with the matter.
30. Petition stands disposed of in the above terms.
REVA KHETRAPAL
(JUDGE)
January 04, 2013
km
ARB. P. 250/2012 Page 25 of 25
+ ARB.P. 250/2012
LETS ENGINEERING & TECHNOLOGY
SERVICES PVT. LTD. ..... Petitioner
Through: Mr. Sanjay Goswami, Advocate
versus
MANOJ DAS ..... Respondent
Through: Mr. Arunav Patnaik, Advocate
CORAM:
HON'BLE MS. JUSTICE REVA KHETRAPAL
J U D G M E N T
: REVA KHETRAPAL, J.
1. By way of this petition filed under Section 11(5) of the
Arbitration and Conciliation Act, 1996, the Petitioner – LETS
Engineering Technology Services Pvt. Ltd. (for short “LETS”) prays
for appointment of an independent Sole Arbitrator to decide the
claims of LETS as set out in the petition against the Respondent, viz. ,
Digital Analysis and Software Solutions (for short “DASS”) arising
out of the disputes which have arisen between LETS and DASS.
2. The facts as narrated in the petition are as follows. LETS is
since long been engaged in execution of outsourced Digital Analysis
and Software Solutions for its customers in UK, USA and other
countries, and has certain indigenously developed proprietary
Solutions, Designs, Analysis and Software for Geographical Mapping
ARB. P. 250/2012 Page 1 of 25
services, in which LETS is the pioneer and trend setter in India.
Somewhere in the year 2004, LETS started sub-outsourcing some of
its overseas assignments and job works to DASS with the clear
understanding that the Technical Know How and Digital Analysis
including GIS Mapping, etc., and Software Solutions of LETS were
all Copyrights and the Proprietary Data and Software of LETS, in
which DASS would have no Intellectual Property Rights and would
not be authorized to use the same for any purposes other than
purposes of job work for LETS, for which it would receive
remuneration in Indian Rupees.
3. LETS asserts that over the period DASS’s ambition soared and
without informing LETS, it set up a new company under the name of
Weaver Bird Engineering and Technology Pvt. Ltd. and under the
guise of a separate company, without disclosing the setting up of the
same to LETS, started competing with LETS by using their Technical
Know How, and Copyrighted Digital Analysis Software and
Customer Data and started approaching customers of LETS in UK,
Europe and USA for soliciting business from them. From January,
2010 onwards, the business turnover of LETS suddenly dropped
substantially on account of the diversion of its business by DASS to
the newly incorporated company M/s. Weaver Bird Engineering and
Technology Pvt. Ltd., which by conservative estimates amounted to
an average of ` 30 lacs per month (approx) from a single customer,
i.e., BLOM AEROFILMS, U.K.
4. LETS alleges that it suffered losses of a minimum of ` 2.5
crores in terms of business revenue in the period intervening January,
ARB. P. 250/2012 Page 2 of 25
2010 to October, 2010 alone and in this regard also issued to DASS
th
an e-mail dated 20 September, 2010. After discounting what it owed
to DASS, LETS claimed from DASS the balance amount of
` 2,30,06,080/- as compensation/damages for breach of contract and
infringement of their Intellectual Property Rights, including
Copyrights, etc. in the Digital Analysis and Software Solutions and
Customer Database by its legal notice dated 01.11.2010. DASS did
not choose to reply, but instead chose to issue a spate of legal notices
to LETS on the same lines, viz. , notice dated 01.10.2010, 14.12.2010
and 03.09.2011, which were duly replied by LETS. Thereafter,
DASS proceeded to initiate a winding up petition against LETS,
which was left with no alternative but to seek settlement of its claims
along with the interest due through the process of arbitration, in terms
of the Contract Agreement dated 04.11.2009 vide the mail of LETS,
which had been ratified and confirmed by DASS through its e-mails
dated 16.11.2009 and 19.11.2009 on all clauses including the
arbitration clause. The petitioner accordingly got served upon the
respondent a legal notice dated 31.01.2012, seeking resolution of the
disputes through arbitration. The respondent chose not to reply to the
said notice.
5. In the circumstances, the present petition was instituted by
th
LETS on 6 July, 2012, to which DASS filed a reply in which it was
contended that the petition was an abuse of the process of law and
deserved dismissal as there exists no Arbitration Agreement as
contemplated under the Arbitration and Conciliation Act, 1996 (for
short “the Act”) governing the relationship between the parties. It
ARB. P. 250/2012 Page 3 of 25
was further submitted that from a perusal of Article 7 of the draft
Agreement annexed by LETS to the petition, it is clear that the said
draft Agreement would only have come into force from the effective
date of signing of the same. That such an eventuality never arose as
the said draft Agreement was not signed between the parties due to
disagreement on certain terms contained therein. Consequently, the
reliance placed by LETS on the arbitration clause in the said draft
Agreement in order to maintain an application under Section 11(5) of
the Act is without any foundation or basis. It is also submitted that
for a document to be considered as a valid Arbitration Agreement
under Section 7(4)(b) of the said Act, the same ought to contain a
bilateral record of consent of both/all parties to it, but from a perusal
of the E-mail dated 04.11.2009 and from various other
correspondences between the parties, it is more than clear that DASS
had never given its consent to be bound by the said draft Agreement.
In fact, from a mere perusal of the e-mails exchanged subsequent to
04.11.2009, annexed by LETS to the petition, being E-mails dated
16.11.2009 and 19.11.2009, two E-mails dated 20.11.2009 and the E-
mail dated 05.12.2011, it becomes crystal clear that the said document
(Marketing Agreement), being relied upon by LETS was just a draft
Agreement which was subject to change since there was disagreement
between the parties with regard to the terms of the same. Finally, it is
submitted that the present petition has been filed by way of
counterblast to the winding up petition filed by DASS against LETS
and since there exists no valid and legally binding Arbitration
Agreement between the parties, the petition is liable to be dismissed.
ARB. P. 250/2012 Page 4 of 25
6. Rejoinder to the aforesaid reply was filed by LETS denying the
averments made in the reply and reiterating the contents of the
petition.
7. Mr. Sanjay Goswami, learned counsel for LETS contends that
the dealings between LETS and DASS were governed by the
Marketing Agreement. The E-mail correspondence between the
parties contained the said Marketing Agreement which was
exchanged between the parties and the terms of which were accepted
by DASS in its response regarding the said Agreement, except minor
clarifications being sought on certain issues. The exchange of E-
mails and their attachments as well as the response mails by DASS
clearly constitute written contract between the parties and the entire
dealings and transactions between the parties were governed by the
terms of the said contract which was exchanged between the parties.
The E-mail of LETS dated 04.11.2009 contained the revised contract
as per the modifications and the same was acknowledged by DASS
by its mail dated 19.11.2009, which acknowledged the General
Agreement between the parties and raised queries about certain
clauses of the same. There was, however, no objection of any nature
expressed by DASS as regards Arbitration Clause 13.2 of the said
Agreement which was impliedly accepted by DASS. The entire basis
of the working between LETS and DASS was the said
Agreement/Contract and the various clauses of the same. DASS,
therefore, cannot dispute the existence of the arbitration clause
between the parties, which reads as follows:
ARB. P. 250/2012 Page 5 of 25
“13.2 In case of any dispute or difference arising out of
this Agreement on any issue and cannot be amicably
settled between the Parties, the same shall be referred to
arbitration under the provisions of Arbitration and
Conciliation Act 1996 as then in force. The place of such
Arbitration shall be at New Delhi. The parties
acknowledge that disputes between them shall be solely
settled by arbitration.”
8. The main stay of the rebuttal arguments of Mr. Arunav Patnaik,
learned counsel on behalf of DASS was as follows. The E-mails
exchanged between the parties were clearly reflective of the position
that the Marketing Agreement/Contract was not a signed Agreement
and the signing thereof had been held up with the consensus of the
parties. It was this unsigned Marketing Agreement/Contract which
contained the arbitration clause. The basis of all the transactions
between the parties were the work orders and the work orders did not
contain an Arbitration Clause nor it is the case of LETS that the work
orders contain an Arbitration Clause.
9. Learned counsel for LETS placed reliance on the decisions of
the Hon’ble Supreme Court rendered in:-
(i) Shakti Bhog Foods Limited vs. Kola Shipping Limited,
(2009) 2 SCC 134.
(ii) Smita Conductors Ltd. vs. Euro Alloys Ltd., (2001) 7
SCC 728.
(iii) Great Offshore Limited vs. Iranian Offshore
Engineering and Construction Company, (2008) 14
SCC 240.
ARB. P. 250/2012 Page 6 of 25
(iv) Visa International Limited vs. Continental Resources
(USA) Limited, (2009) 2 SCC 55.
(v) Trimex International FZE Limited ,Dubai vs. Vedanta
Aluminium Limited, India, (2010) 3 SCC 1.
(vi) Unissi (India) Private Limited vs. Post Graduate
Institute of Medical Education and Research, (2009) 1
SCC 107.
10. Learned counsel for DASS, on the other hand, relied upon the
judgments rendered in:-
(i) Indowind Energy Ltd. vs. Wescare (I) Ltd. and Anr.,
AIR 2010 SC 1793.
(ii) M.M. Aqua Technologies Ltd. vs. Wig Brothers
Builders and Anr., 95 (2002) DLT 818 (DB).
(iii) P.T. Tirtamas Comexindo vs. Delta International
Limited and Anr., 2001 (2) ARB LR 630 (Cal).
(iv) Bharat Sanchar Nigam Limited vs. Telephone Cables
Limited, (2010) 5 SCC 213.
(v) M.R. Engineers and Contractors Private Limited vs.
Som Datt Builders Limited, (2009) 7 SCC 696.
(vi) U.P. Rajkiya Nirman Nigam Ltd. vs. Indure Pvt. Ltd.
and Others, (1996) 2 SCC 667.
11. In view of the controversy raised between the parties and in
order to resolve the same, it would be useful at this juncture to
reproduce the e-mails relied upon by the parties to buttress their
respective contentions, which have been enclosed as annexures to the
petition, those relevant being collectively enclosed as Annexure A7:-
ARB. P. 250/2012 Page 7 of 25
Harish Sharma
From: Kishore das [kishore.das@sar-group.com]
Sent: Monday, December 05, 2011 2:22 PM
To : harish@luminousets.com
Subject: FW: Contract Agreement
Attachments: Vendor Agreement_DASS.doc
Importance: High
Fyi…
From : pawan sachdeva [mailto:pawans@luminousets.com]
Sent: Wednesday, November 04, 2009 3:30 PM
To: Manoj Das
Cc: kishored@luminousets.com
Subject: Contract Agreement
Importance: High
Dear Manoj Ji,
As per your discussions with Kishore sir, the contract agreement has
been modified, please find attached the same document and make
arrangement to sent us a signed copy of the same asap.
Regards
Pawan
MARKETING AGREEMENT
…………………………
----Original Message---
From: pawan sachdeva
To: Manoj Das
Cc: kishored@luminousets.com
ARB. P. 250/2012 Page 8 of 25
Sent: Monday, November 16, 2009 7:23 PM
Subject: Contract Agreement & Work Order Format
Dear Manoj Ji,
As directed please find attached the final contract agreement and
work order format. Based on our today’s discussions I have further
refined both the documents to be on a mutual acceptable level.
Please provide a signed copy of the agreement asap.
Regards
Pawan..
From: Manoj Kumar Das
To: pawan sachdeva
Cc: kishored@luminousets.com
Sent: Thursday, November 19, 2009 7:58 PM
Subject: Re: Contract Agreement & Work Order Format
Dear Pawanji, please look into the following few lines from Work
Order & General Agreement...
Regarding Work Order: 01. The Expected date of Delivery should be
on mutually agreed basis, not imposed categorically (as we have
informed a fixed no of resource involved in your project)...
LETS Comments: The expected delivery date will be stated by LETS,
after discussing with DASS and would be inline with the fixed number
of resources involved in our project.
2. See the clause 4(b)...Inspection means inhouse data checking or
inspection in DASS premises..?please clarify..
LETS Comments: It has always been inhouse and will continue to be
that, the same has been specified in the WO.
03. Clause 3(c) Lets is entitled to claim liquidated damage to the
ARB. P. 250/2012 Page 9 of 25
extent of total project cost from the vendor-Not Agreed..
LETS Comments: As the expected delivery date is mutually
agreed/discussed it is expected that DASS completes the delivery in
atleast 10 days delay. If this needs to be scrapped then point one will
not be mutually agreed.
04) Clause 5(b), what is quality and effort detail..as it is assessed
internally for our internal purpose.
LETS Comments: We have scraped this clause, we are only
concerned with the quality of the data delivered to LETS.
05) If there is deviation in quality and time both what is the penalty
clause(as..I think once quality is a issue than definitely it needs time
to check it once again which may lead to delay), as per me there
should be one..
LETS Comments: Incase DASS delivers low quality output as the first
delivery which delayed from the executed delivery date then both
penalties would be levied.
Incase the first delivery timeline is fine and quality is rejected the re-
delivery date again shall be mutually agreed.
6) Doubt: Rejection are based on what %ge basis, (otherwise a single
st nd rd
error may lead to rejection), so that it is declared as 1 , 2 , 3
rejection.
LETS Comments: As was discussed on your visit to Naraina our Q&P
is working on setting the acceptance/rejection benchmarks, which
would be realistic and acceptable to all. The first analysis report
received by you from Charu says there were ~33 errors per sqkm for
a ~28 sqkm city and the city has been accepted at LETS, clearly
proves the point that single error would not lead to rejection.
Regarding Agreement: AS per clause 2.6 includes time to time..., so
extra cost is there to implement time to time modification..so what
abt this.. or define the quality from the beginning based on which
dass will raise the quotation..
2) clause 3.2 only ..no other sum ..other sum may be service
ARB. P. 250/2012 Page 10 of 25
tax..please note..
3) clause 4.4 ..look for the second sentence, may be a problem..
NB: To implement the quality it needs some revision of the previous
pricing..Please look into it.
Regards,
Manoj
----Original Message----
From: pawan sachdeva
To: Manoj Kumar Das
Cc: kishored@luminousets.com
Sent: Friday, November 20, 2009 1:04 PM
Subject: Re: Contract Agreement & Work Order Format
Dear Manoj Ji,
I have added my comments in the work order observation below, also
attached the updated WO. Regarding the Contract agreement your
comments have been forwarded to our legal/commercial authorities
who would comment on the same.
You may hold onto the agreement as of now BUT as per our
legal/commercial dept. having the WO in place is mandatory to
process the invoices going forward.
I would look forward to your acceptance on the WO latest by
tomorrow so that I can pass on all the related WOs to DASS by
Monday and confirm the same with a copy of it to our concerned
dept. Monday is the strict deadline I have.
Do let me know if you still have any issues.
Thanx
Pawan..
ARB. P. 250/2012 Page 11 of 25
From: Manoj Kumar Das [mailto:manoj@digitalinfosoft.com]
Sent: Friday, November 20, 2009 4:55 PM
To: pawan sachdeva
Cc: kishored@luminousets.com
Subject: Re: Contract Agreement & Work Order Format
Dear Pawanji, Regarding agreement it is ok..we will make it
later..Please look into the Sl. Nos. of previous mail of work order
heading..May be these things are not considered....
Regarding Work Order :01. The Expected date of Delivery should be
on mutually agreed basis, not imposed categorically (as we have
informed a fixed no of resource involved in your project).
03. Clause 3(c) Lets is entitled to claim liquidated damage to the
extent of total project cost from the vendor-Not Agreed..
05) If there is deviation in quality and time both what is the penalty
clause (as..I think once quality is a issue than definitely it needs time
to check it once again which may lead to delay), as per me there
should be one..
6) Doubt: Rejections are based on what %ge bases, (otherwise a
st nd rd
single error may lead to rejection), so that it is declared as 1 , 2 3
rejection.
Best Regards,
Manoj..
Harish Sharma
From: Kishore das [kishore.das@sar-group.com]
Sent: Monday, December 05, 2011 2:23 PM
To: harish@luminousets.com
Subject: FW: Contract Agreement & Work Order Format
From : pawan sachdeva [mailto:pawans@luminousets.com]
Sent: Friday, November 20, 2009 5:03 PM
ARB. P. 250/2012 Page 12 of 25
To: Manoj Kumar Das
Cc: kishored@luminousets.com
Subject: Re: Contract Agreement & Work Order Format
Manoj Ji I had added my comments in your original mail in a
different color against each point.
12. From the aforesaid, the following question arises for
consideration:-
(i) Whether the arbitration clause between the two parties,
viz. , LETS and DASS could be considered as a binding
Arbitration Agreement on DASS, which is not a
signatory to the said Agreement?
13. Section 7 defines an “arbitration agreement” and the various
legally recognized modes of entering into the same. For the facility
of reference the said Section is extracted below:-
“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 in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or
other means of telecommunication which provide a
record of the agreement; or
ARB. P. 250/2012 Page 13 of 25
(c) an exchange of statements of claim and
defence in which the existence of the agreement is
alleged by one party and not denied by the other.
(5) The reference in a contract to a document
containing an arbitration clause constitutes an
arbitration agreement if the contract is in writing and the
reference is such as to make that arbitration clause part
of the contract.”
14. The term “arbitration agreement” is defined under Section2(b)
of the Act as an agreement referred to in Section 7. Section 7(3)
specifically stipulates that an “arbitration agreement” shall be in
writing. Sub-sections (4) and (5) of Section 7 stipulate that an
“arbitration agreement” will be considered to be in writing if it is
contained in:
(a) a document signed by the parties [sub-section 4(a) of
Section 7]; or
(b) an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the
agreement [sub-section 4(b) of Section 7]; or
(c) an exchange of statements of claim and defence in which
the existence of the agreement is alleged by one party
and not denied by the other [sub-section 4(c) of Section
7].
(d) a contract between the parties making a reference to
another document containing an arbitration clause
indicating a mutual intention to incorporate the said
ARB. P. 250/2012 Page 14 of 25
arbitration clause from such other document into the
contract [sub-section (5) of Section 7];
15. From the above conspectus of what would constitute an
“arbitration agreement” in writing, it is clear that in the present case it
is the provisions of Section 7(4)(b) that are sought to be relied upon
by LETS. It is the case of LETS that it was by an exchange of E-
mails, which is a mode of telecommunication, that an Arbitration
Agreement was entered into between LETS and DASS and it is these
E-mails which provide a record of the Agreement between the parties.
Indubitably, DASS is not a signatory to the Marketing Agreement
sent by E-mail dated 04.11.2009 and thus the only aspect which is to
be considered is whether DASS had affirmed and approved of the
said Agreement and/or acted in terms of the said Agreement and
whether an Arbitration Agreement can be spelt out to have come into
existence from the exchange of E-mails between the parties. If DASS
had acknowledged or confirmed in any correspondence between the
parties the Arbitration Agreement contained in the Marketing
Agreement or indicated that it is bound by the Arbitration Agreement,
the inevitable corollary would be that the contention of DASS that it
was not bound by the Arbitration Agreement would deserve outright
rejection. On the other hand, if LETS is unable to substantiate its
contention that by an exchange of E-mails DASS had provided a
record of the Arbitration Agreement between the parties, the prayer of
LETS for appointment of an Arbitrator would be liable to be rejected.
16. The E-mails between the parties when viewed through the
aforesaid lens, in the opinion of this Court, clearly indicate the
ARB. P. 250/2012 Page 15 of 25
existence of an Arbitration Agreement between the parties. It is not
in dispute that there existed a draft Marketing Agreement containing
an arbitration clause between the parties, being Clause 13.2, that this
Agreement was e-mailed as an attachment to the E-mail dated
November 04, 2009 by LETS to DASS with the request by LETS to
DASS to make arrangement to send a signed copy of the same as
soon as possible, and that a few days later, i.e., on November 16,
2009, LETS again e-mailed to DASS “The final contract agreement
and work order format” stating:
“Based on our today’s discussions I have further refined
both the documents to be on a mutual acceptable level.
Please provide a signed copy of the agreement
asap.”
17. Three days’ later, i.e., on November 19, 2009, DASS sent an E-
mail to LETS to look into certain lines of the Work Order and
General Agreement, but the said E-mail nowhere refers to the
Arbitration Clause. Regarding the General Agreement, DASS sought
modification of clauses 2.6, 3.2 and 4.4 to a limited extent and
requested LETS to look into the matter. The necessary inference is
that no dispute was raised by DASS with regard to the Arbitration
Clause contained in the Agreement.
18. The next E-mail is dated November 20, 2009 sent by LETS to
DASS emphasizing the urgency of having the Work Order in place so
as to enable processing of invoices and stating that DASS “may hold
onto the agreement as of now” . DASS’s reply to this E-mail is
ARB. P. 250/2012 Page 16 of 25
contained in E-mail dated November 20, 2009, which begins by
stating:
“Regarding agreement it is ok…we will make it
later…Please look into the Sl. nos. of previous mail of
work order heading….”
19. From the aforesaid, it is clear that the parties were ad idem with
regard to all the clauses including the arbitration clause contained in
the Marketing Agreement attached with E-mail dated 04.11.2009
except Clauses 2.6, 3.2 and 4.4 referred to in E-mail dated 19.11.2009
and thus the existence of a valid Arbitration Agreement in writing
cannot be refuted. The provisions of Section 7 of the Act envisage
that the existence of an Arbitration Agreement can be inferred from a
document signed by the parties, or an exchange of letters, telex,
telegrams, or other means of telecommunication which provide a
record of the Agreement. In the present case, the exchange of E-
mails, the contents of which have been reproduced hereinabove is not
denied by DASS. In the circumstances, the contention of DASS that
there was no Arbitration Agreement between the parties is therefore
wholly unacceptable. DASS had clearly refuted certain Clauses in the
subject Agreement, but as regards the Arbitration Clause there was no
controversy between the parties at any stage. At this stage, for DASS
to turn around and dispute the existence of the Arbitration Agreement
between the parties would be both unwarranted and unjustified.
20. It is also not in dispute that various work orders were placed by
LETS upon DASS and that DASS had catered to the aforesaid work
orders until disputes arose between the parties. The transactions
ARB. P. 250/2012 Page 17 of 25
between the parties were clearly premised on the Marketing
Agreement and for this reason also it would not be open to DASS at
this juncture to contend that there was no consensus between the
parties with regard to the Arbitration Agreement.
21. In the case of Visa International Limited (supra) , relied upon
by the counsel for the petitioner, the Hon’ble Supreme Court opined:-
“18. That an arbitration agreement is not required to
be in any particular form has been reiterated in more
than one decision. [See Bihar State Mineral Development
Corpn. 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. What is required to be
decided in an application under Section 11 of the Act is
whether there is any arbitration agreement as defined in
the Act? It needs no reiteration that Section 7 of the Act
does not prescribe any particular form and it is
immaterial whether or not expression “arbitration” or
“arbitrator” or “arbitrators” has been used in the
agreement.”
22. In Unissi (India) Private Limited (supra) , also relied upon by
the counsel for the petitioner, while interpreting the provisions of
Section 7 of the Act, the Hon’ble Supreme Court relying upon its
earlier decisions held that although no formal Agreement was
executed, the tender documents indicating certain conditions of
contract contained an arbitration clause. The appellant had given his
tender offer, which was accepted and the appellant acted upon it.
Thus, in view of Section 7 of the Act, the Arbitration Agreement did
exist and therefore the matter was required to be referred to an
ARB. P. 250/2012 Page 18 of 25
Arbitrator for decision and the Respondent could not be allowed to
wriggle out from the Arbitration Agreement.
23. In a well considered and erudite judgment rendered in Trimex
International FZE Limited, Dubai (supra) , the Hon’ble Supreme
Court after gleaning the various E-mails exchanged between the
parties including an E-mail attaching the draft contract, which
remained unsigned, opined as follows:-
“44. From the materials placed, it has to be ascertained
whether there exists a valid contract with the arbitration
clause. It is relevant to note that on 15-10-2007 at 4.26
p.m. the petitioner submitted a commercial offer wherein
Clause 6 contains the arbitration clause i.e. “this
contract is governed by Indian law and arbitration in
Mumbai courts”. At 5.34 p.m. though the respondents
offered their comments, as rightly pointed out by Mr K.K.
Venugopal, no comments were made in respect of the
“arbitration clause”. It is further seen that at 6.04 p.m.,
the petitioner sent a reply to the comments made by the
respondent. Again, on 16-10-2007 at 11.28 a.m., though
the respondents suggested certain additional information
on the offer note, here again no suggestion was made
with regard to the arbitration clause.
Paras 45 to 48 …………………..
49. In the light of the details which have been
extracted in the earlier paragraphs, I am unable to
accept the stand of the respondent. It is clear that if the
intention of the parties was to arbitrate any dispute
which arose in relation to the offer of 15-10-2007 and the
acceptance of 16-10-2007, the dispute is to be settled
through arbitration. Once the contract is concluded
orally or in writing, the mere fact that a formal contract
has to be prepared and initialled by the parties would not
affect either the acceptance of the contract so entered
ARB. P. 250/2012 Page 19 of 25
into or implementation thereof, even if the formal
contract has never been initialled.
Paras 50 to 56 ……………………..
57. ………………………… It is essential that the
intention of the parties be considered in order to
conclude whether the parties were ad idem as far as
adopting arbitration as a method of dispute resolution
was concerned. In those circumstances, the stand of the
respondent that in the absence of signed contract, the
arbitration clause cannot be relied upon is liable to be
rejected.
Paras 58 and 59 …………………………
60. It is clear that in the absence of signed agreement
between the parties, it would be possible to infer from
various documents duly approved and signed by the
parties in the form of exchange of e-mails, letter, telex,
telegrams and other means of telecommunication. ”
23. Adverting to the precedents relied upon by Mr. Arunav
Patnaik, the learned counsel for the respondent, the same are clearly
distinguishable. In Indowind Energy Ltd. (supra) , the facts leading
to controversy were totally different in as much as the agreement was
executed between Wes Care (I) Ltd. (respondent therein) and Subuthi
Finance Ltd., but disputes in respect of which reference was sought
had arisen between Wes Care and Indowind. The respondent (Wes
Care) had filed the petition under Section 11 inter alia on the ground
that the agreement was entered into by Subuthi as promoter of
Indowind and also described Indowind as its nominee. Referring to
Clause 11 of the agreement which required the Board of
ARB. P. 250/2012 Page 20 of 25
Directors/shareholders of Wes Care, Subuthi and Indowind to
expressly approve the agreement, the Hon’ble Supreme Court held
that in the absence of a ratification, approval, adoption or
confirmation of the agreement by Indowind, it could not be said that
Indowind was a party or signatory to the agreement. In the
circumstances, the order appointing an arbitrator with regard to
claims of Wes Care against Indowind was set aside. Pertinently, the
Court noted that it was not the case of Wes Care that any exchange of
letters, telex, telegrams or other means of telecommunication referred
to and provided a record of any Arbitration Agreement between the
parties, and held that it was not sufficient for the petitioner in an
application under Section 11 to show that there existed an oral
contract between the parties.
24. In M.M. Aqua Technologies Ltd. (supra) , relied upon by the
learned counsel for the Respondent, also a similar controversy had
arisen, that is, the disputes had arisen between the petitioner and two
respondents, while the arbitration agreement was only between the
petitioner and the first respondent. The learned Single Judge
accordingly appointed arbitrator referring the disputes between the
petitioner and the first respondent only to arbitration on the ground
that there did not exist any arbitration agreement between the
petitioner and the second respondent. The petitioner preferred a Writ
Petition against the order of the learned Single Judge, which was
dismissed holding that:-
ARB. P. 250/2012 Page 21 of 25
“………
there cannot be any doubt whatsoever that before the
Chief Justice or any other body designated by him take
recourse to exercise the said power (power under Section
11 of the Act) the existence of an arbitration agreement is
imperative.”
25. In P.T. Tirtamas Comexindo (supra) , the High Court of
Calcutta after noting that there was an oral Agreement followed by a
fax message sent by the Respondent to the Appellant, which
contained the Arbitration Clause and it was not the case of the
Respondent before the Trial Court that the fax message was the
Agreement, opined as follows:-
“37. The underlying requirement under Section 7(4) is
that (i) there must be an agreement, and (ii) it must be in
writing. The simplest from is covered by Section 7(4)(a) -
namely a signed document signed by both parties. This
would satisfy both requirement of consensuality and a
bilateral record of such consensus. For the same reason
an exchange of statements of claim and defence where
one party alleges the existence of the arbitration clause
and the other does not deny it in writing, would also be
an arbitration agreement under Section 7(4)(c). Read in
this context, it is clear that the “record" required in
Section 7(4)(b) is a bilateral record of consent. This
would exclude a situation where the consent of either one
of the parties is not recorded. Thus a mere response in
writing to a telephonic message would not do. It would
be a unilateral record of the act of one of the parties. On
this interpretation it would follow that there was in fact
no arbitration agreement is envisaged under Section 7 of
the Act.”
The facts of the aforesaid case are, therefore, clearly
distinguishable from the facts of the present case, as in the present
ARB. P. 250/2012 Page 22 of 25
case there exists a written agreement between the Petitioner and the
Respondent which is evident from the E-mails exchanged between the
parties.
26. The facts in the case of Bharat Sanchar Nigam Limited
(supra) are also altogether distinguishable. The Arbitration
Agreement was available only in regard to the “contract”, but only
when a purchase order was placed a “contract” would be entered; and
only when a “contract” was entered into, the general conditions of
contract including the arbitration clause would become a part of the
contract. If a purchase order was not placed, the general conditions of
contract did not become a part of the contract. In other words, as held
by the Hon’ble Supreme Court in the said case, the arbitration clause
contained in the general conditions of contract “was not an
Arbitration Agreement in praesenti, during the bidding process, but a
provision that was to come into existence in future, if a purchase
order was placed”. The dispute raised was with regard to a claim for
damages for non-placement of a purchase order. In such
circumstances, the Supreme Court held that in the absence of a
purchase order the Arbitration Agreement was non-existent.
27. Likewise, the decision of the Hon’ble Supreme Court in M.R.
Engineers and Contractors Private Limited (supra) was on
altogether different facts. The Supreme Court in the said case was
dealing with sub-section (5) of Section 7 of the Act, which is an
enabling provision and which sets out the legislative intent to import
an arbitration clause from another document, merely on reference to
such document in the contract by conscious acceptance of the
ARB. P. 250/2012 Page 23 of 25
arbitration clause from another document by the parties as a part of
their contract. The decision, in fact, highlights the difference between
reference to another document in a contract and incorporation of
another document in a contract, by reference, and the fact that when
there is a reference to a document in a contract, the Court has to
consider whether the reference to the document is with the intention
of incorporating the contents of that document in entirety into the
contract including the arbitration clause contained therein, or with the
intention of adopting or borrowing specific portions of the said
document for application to the contract. It concluded as follows:-
(SCC, Page 706)
“22. A general reference to another contract will not be
sufficient to incorporate the arbitration clause from the
referred contract into the contract under consideration.
There should be a special reference indicating a mutual
intention to incorporate the arbitration clause from
another document into the contract. The exception to the
requirement of special reference is where the referred
document is not another contract, but a standard form of
terms and conditions of trade associations or regulatory
institutions which publish or circulate such standard
terms and conditions for the benefit of the members or
others who want to adopt the same.”
28. In U.P. Rajkiya Nirman Nigam Ltd. (supra) also, on facts the
Hon’ble Supreme Court came to the conclusion that there was no
written Agreement for submitting the existing or future differences to
arbitration, which is a pre-condition and further that the original
contract itself was not a concluded contract and there existed no
Arbitration Agreement for reference of disputes to the Arbitrators.
ARB. P. 250/2012 Page 24 of 25
The Court noted that apart from the draft Agreement and counter
proposal, there was no other document and in the absence of
consensus ad idem it could not be held that an Arbitration Agreement
existed between the parties.
29. In view of the aforesaid discussion and on an overall
conspectus of the facts and the law as discussed above, I have no
hesitation in concluding that the present case falls within the scope
and ambit of Section 7(4)(b) of the Act as that there exists between
the parties an Arbitration Agreement in writing, which is borne out
from the record of correspondence and E-mails exchanged between
the parties. This being so, the inevitable corollary is that the disputes
between the parties must be referred to arbitration. In view of the fact
that the arbitration clause does not provide for any named Arbitrator,
I appoint Justice Y.K. Sabharwal, Retired Chief Justice of India to
adjudicate upon the disputes between the parties. The learned
Arbitrator shall fix his own fees. Parties shall appear before the
th
learned Arbitrator on 4 February, 2013 in order to enable the learned
Arbitrator to proceed with the matter.
30. Petition stands disposed of in the above terms.
REVA KHETRAPAL
(JUDGE)
January 04, 2013
km
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