Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 202/2016
SHINE TRAVELS & CARGO PVT. LTD ..... Petitioner
Through: Mr Manish Vashisht with Mr A. K.
Pandey, Mr Sameer Vashisht and Mr
Vikas Kumar Sharma, Advocates.
versus
MITISUI PRIME ADVANCED COMPOSITE
INDIA LTD ..... Respondent
Through: Mr Siddharth Bawa, Advocate.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
O R D E R
% 27.07.2016
VIBHU BAKHRU, J (ORAL)
1. The petitioner has filed the present application under Section 11 of the
Arbitration and Conciliation Act, 1996 (hereinafter „the Act‟), inter alia,
praying that a Sole Arbitrator be appointed to adjudicate the disputes and
claims as raised by the petitioner in terms of the Agreement dated
09.08.2011.
2. Mr Manish Vashisht, the learned counsel appearing for the petitioner
referred to a copy of the Agreement dated 09.08.2011 and also drew the
attention of this Court to Clause 14 of the said Agreement (Arbitration
Clause). He also referred to the legal notice dated 12.08.2015 whereby the
petitioner had called upon the respondent to pay to the petitioner a sum of
` 18,26,79,927/- along with interest and further cost of ` 1,00,000/- failing
which the disputes would be referred to the Sole Arbitrator in terms of the
ARB.P. 202/2016 Page 1 of 9
Agreement. He also referred to a letter dated 29.09.2015 sent by the
respondent in response to the aforesaid notice and drew the attention of the
Court to sub para (g) of para 2 of the said letter whereby respondent had
expressly admitted that it had agreed to continue to avail the services at the
rates specified in the Second Service Agreement as an interim measure even
though the term of the said Service Agreement had expired.
3. Mr Manish Vashisht also referred to the decision of the Supreme
Court in Bharat Petroleum Corporation Ltd. v. The Great Eastern
Shipping Co. Ltd.: 2008 1 SCC 503 in support of his contention that where
the services under an agreement are extended even after expiry of the term
of the agreement between the parties, the dispute arising therefrom are
subject to resolution in terms of the arbitration clause contained in the
agreement.
4. Mr Siddharth Bawa, the learned counsel for the respondent countered
the arguments advanced on behalf of the petitioner and submitted that since
it was an admitted case that the term of the Agreement in question had
expired, on 31.08.2014, the Arbitration Clause contained therein had also
perished. He submitted that availing of the services on similar terms and
conditions would not extend the validity of the arbitration agreement which
expires with the term of the written agreement. He further referred to the
decisions of this Court in R. C. Aggarwal v. Delhi Tourism &
Transportation Development Corporation Ltd.: 2003 (66) DRJ 92 - and
Interocean Shippng (I) Pvt. Ltd. v. Ashish Dhull : 133 (2006) DLT 77 - in
support of his contention that the disputes arising after expiry of the term of
an agreement would not be arbitrable. He further referred to Section 7 of the
ARB.P. 202/2016 Page 2 of 9
Act and submitted that certain parameters are required to be met for a valid
arbitration agreement and one of the parameters is that the arbitration
agreement should be in writing. He contended that the arbitration clause in
an agreement would perish with that agreement; and unless a further
agreement is executed in writing, there could be no arbitration agreement
between the parties.
5. I have heard the learned counsel for the parties.
6. At the outset, it is necessary to refer to Clause 14 of the Agreement
between the parties which reads as under:-
“14. ARBITRATION
If any question, issue, difference or dispute arises between the
Parties as to the interpretation of this Agreement or as to the
duties or liabilities of either Party hereunder or as to any
matter or thing arising out of or under this Agreement, the
same shall be referred to and settled by a sole Arbitrator to be
appointed by both parties. The Arbitration proceedings shall
be conducted at New Delhi, India in accordance with the
Indian Laws (both Substantive and Procedural) under the
Arbitration and Conciliation Act, 1996. The award of such
arbitration shall be final and binding upon both parties hereto,
and may be entered in any court having jurisdiction over the
party against whom the award is rendered or the assets
thereof.”
7. It is not disputed that the parties had agreed that the disputes as to the
interpretation of the Agreement or as to the duties or liabilities of either
party or any matter arising out of or under the agreement in question, would
be referred to and settled by the Sole Arbitrator to be appointed by the
ARB.P. 202/2016 Page 3 of 9
parties. It is also an admitted case that the respondent continued to avail all
the services under the said Agreement even beyond its term. Infact, the
respondent expressly stated in its letter dated 29.09.2015 that " till such time
a fresh Agreement is entered into with mutually agreed rates and period of
Agreement, our Client agreed to continue to avail services at the rates
specified in the Second Service Agreement, as an interim measure. Your
Client agreed to the interim measure and continued to provide services at
the rates stated in the Second Service Agreement."
8. It is thus an admitted case that the contractual relationship between
the parties continued even after 31.08.2014, that is, even after the term of the
Agreement had expired. It is also not disputed that the services were availed
at the same rates as specified in the Agreement.
9. By virtue of the Arbitration and Conciliation (Amendment) Act, 2015,
sub section (6A) has been introduced in Section 11 of the Act, which reads
as under:-
“6A. The Supreme Court or, as the case may be the High
Court, while considering any application under sub-section (4)
or sub-section (5) or sub-section (6), shall notwithstanding any
judgment, decree or order of any Court, confine to the
examination of the existence of an arbitration agreement.”
10. Since it is not disputed that the contractual relationship between the
parties continued and there existed an Arbitration Agreement, the contention
that the Arbitration Clause had perished cannot be accepted. The question
whether the disputes raised in the present petition are arbitrable under the
said Clause is a matter for consideration by the Arbitral Tribunal and the
ARB.P. 202/2016 Page 4 of 9
parties would be at liberty to agitate the said issue before the Arbitral
Tribunal.
11. There can be no dispute that an arbitration agreement is required to be
in writing; the same is an essential condition under Section 7 of the Act. In
the present case, there is no dispute that the Arbitration Agreement is in
writing. The only question is whether the Arbitration Agreement has
perished even though the parties continued to implement the Agreement,
albeit , without any written extension.
12. In the present case, the parties had entered into the Agreement in
question on 09.08.2011 and the duration of the Agreement was agreed to be
till 31.08.2014. In terms of the Agreement, the respondent had appointed the
petitioner to provide the following services:-
" (a) Warehouse Receiving & Issuing
(b) Warehouse Operation
(c) Raw Material preparation for production
(d) Delivery to customer"
13. The Agreement further provided for the price payable to the Petitioner
for its services. The Agreement further provided that the petitioner would
raise invoices and charges relating to the services and the same would be
paid by the respondent. Admittedly, the aforesaid contractual relationship
did not end on 31.08.2014 even though the duration of the Agreement was
till 31.08.2014. It is an admitted case that the parties continued the
relationship thereafter; the petitioner continued to provide the services and
the respondent continued to avail the same at the rates as agreed to in terms
of the Agreement. According to Mr Bawa, although the Agreement could
ARB.P. 202/2016 Page 5 of 9
continue for all other purposes as there was no bar for the parties to contract
orally but the same would not apply to the arbitration clause which
necessarily has to be in writing.
14. In my view, the aforesaid contention cannot be accepted. There is no
requirement that extension of an arbitration clause, which is in writing, must
also be reaffirmed in writing even though the parties continue to extend the
principal agreement orally. Section 7 mandates that the arbitration
agreement must be in writing and this condition is satisfied if the principal
agreement containing an arbitration clause is in writing.
15. In Bharat Petroleum Corporation Ltd v. The Great Eastern
Shipping Co. Ltd , (Supra) the Supreme Court considered a case where a
„Time Charter Party‟ was entered into between Bharat Petroleum
Corporation Ltd. (BPCL) and Great Eastern Shipping Company (GESC).
The said agreement dated 06.05.1997 was entered into for letting on hire
vessels for a period of two years from 22.09.1996 to 30.06.1997 and from
1.7.1997 to 30.06.1998. Before the charter party came to an end, the same
was extended for a further period of one month with an option of two further
extensions for a period of 15 days each. Thus, undisputedly, the charter
party was extended till 31.08.1998. However, it was not in dispute that the
vessels in question continued to be let out to BPCL even subsequent to
31.08.1998. Certain disputes arose between the parties and GESC issued a
notice calling upon BPCL to pay a sum of ` 4,39,47,517/- as charter hire
charges in respect of vessel Jag Praja for the period from 01.09.1998 to
31.08.1999 within a period of 15 days or treat the said notice as a notice for
arbitration. There was some correspondence exchanged between the parties
ARB.P. 202/2016 Page 6 of 9
and an Arbitral Tribunal was constituted. Claims and counter claims was
also filed before the Arbitral Tribunal. One of the issues framed by the
Tribunal was whether it had jurisdiction to adjudicate upon the disputes
between the claimant (GESC) and respondent (BPCL) for the period
September, 1998 to August, 1999 in respect of vessel Jag Praja . The
Tribunal also struck an issue as to whether the charter party dated 6.5.1997
had come to an end by efflux of time on 30.08.1999.
16. The Arbitral Tribunal came to the conclusion that they had no
jurisdiction to decide the reference as the arbitration clause invoked was
contained in the agreement dated 6.5.1997 which was valid only up to
31.08.1998 and the disputes between the parties related to the period
subsequent to 31.08.1998. The said decision was challenged by GESC
before the Bombay High Court and the award made by the Arbitral Tribunal
was set aside by the learned Single Judge. By an order dated 01.03.2005, the
learned Single Judge, inter alia , held that the Arbitral Tribunal had the
jurisdiction to adjudicate the disputes between the parties as the vessel
continued to be hired by BPCL for the period subsequent to 31.08.1998. The
aforesaid order passed by the Bombay High Court was impugned before the
Supreme Court. The Supreme Court, inter alia , considered the question,
“ whether on the expiry of the extended period of charter hire on 31-08-1998,
charter party dated 6-5-1997 came to an end and the arbitration agreement
between the parties perished with it? ” The Court examined the conduct of
the parties and held that the principle of sub silentio was clearly attracted in
the case as even though no agreement was signed between the parties and
there was no exchange of correspondence after some time, nonetheless
ARB.P. 202/2016 Page 7 of 9
BPCL continued to use the vessel on hire under the time charter dated
6.5.1997. The Supreme Court held that the conduct of the parties and in
particular BPCL in respect of certain correspondences indicated that except
for the charter rate there was no other dispute between the parties. The
Supreme Court finally concluded that the arbitration clause of the said
charter party continued to operate since the vessel continued to remain with
BPCL.
17. In the present case, there is no dispute that the contractual agreement
between the parties was extended; the petitioner continued to render the
services and the respondent admittedly continued to accept the said services
on the terms under the Agreement in question. In view of this admitted
position, the respondent‟s contention that there was no arbitration agreement
cannot be accepted.
18. The decisions of this Court relied upon by Mr Bawa are not applicable
to the facts of the present; principally for the reason that in those cases there
was a serious dispute as to whether the contract (which contained the
arbitration clause) had been extended by the parties. In Interocean
Shippling (I) Pvt. Ltd. v Ashish Dhull ( Supra ), this Court found that the
contract between the parties was entered into for a period of three years. The
contract in question was an employment contract which had come to an end
and thereafter the employees were employed on varying terms and
conditions. The Court also accepted that under the employment contract in
question, the employees were treated as trainees and such period could not
be extended. Thus the parties in that case had serious disputes as to whether
the employees had rendered services on the terms and conditions under the
ARB.P. 202/2016 Page 8 of 9
contract in question after the said contract came to an end. Similarly, in R.C.
Aggarwal v Delhi Tourism & Transportation Development Corporation
Ltd. ( supra ), there was a serious dispute whether the agreement could itself
be extended. In that case, the respondent had requested the plaintiff to enter
into or renew the agreement and had further enclosed a draft agreement
along with its communication. In response thereto, the plaintiff had
unequivocally stated that he was no more interested in entering into or
renewing the agreement on the same terms and conditions. The facts in the
present case are materially different from the facts in those cases as there is
no dispute between the parties that the petitioner continued to render
services and the respondent continued to avail them in terms of the
agreement between them even after the said Agreement had expired.
19. Accordingly, the petition is allowed.
20. Mr Rakesh Siddhartha (Retired ADJ) (Mobile 9910384657) is
proposed to be appointed as the Sole Arbitrator. However, in terms of
Section 11(8) of the Act it would be necessary to obtain a disclosure in
writing from the prospective Arbitrator as required under Section 12(1) of
the Act. Accordingly, the Registry is directed to communicate the copy of
this order to Mr Rakesh Siddhartha with a request to furnish the disclosure
required under Section 12(1) of the Act within a period of two weeks from
today.
21. List on 07.09.2016.
VIBHU BAKHRU, J
JULY 27, 2016
MK/pkv
ARB.P. 202/2016 Page 9 of 9