Full Judgment Text
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CASE NO.:
Arbitration Petition 1 of 2007
PETITIONER:
CITIBANK, N.A.
RESPONDENT:
TLC MARKETING PLC & ANR.
DATE OF JUDGMENT: 05/10/2007
BENCH:
LOKESHWAR SINGH PANTA
JUDGMENT:
JUDGMENT
O R D E R
ARBITRATION APPLICATION [C] NO.1 OF 2007
1. The applicant-Citibank, N.A. preferred this application
under Sections 11(5), 11(10) and 11(12) read with Section 10
of the Arbitration and Conciliation Act, 1996 [hereinafter
referred to as ’the Act’] praying for appointment of sole
Arbitrator in an ’international commercial arbitration’ in terms
of Section 2(f) of the Act, to adjudicate the dispute between the
parties.
2. The applicant-Citibank, is a national banking association
duly constituted, registered and in existence in accordance
with the laws of the United State of America now in force and
having its head office at 399 Park Avenue, Borough of
Manhattan, City of New York and having an office in India
among other places at Citigroup Centre, G. C-61, Bandra-
Kurla Complex, Bandra (East), Mumbai. The applicant-
Citibank, being engaged in banking business in India
pursuant to licences and approvals from relevant authorities
including Reserve Bank of India, inter alia, issues Credit and
Debit Cards collectively [hereinafter referred to as ’Citibank
Cards’].
3. The respondent No.1-TLC Marketing PLC (for short ’TLC’],
is a company incorporated under the provisions of the laws in
force in the United Kingdom having its registered office at 54,
Banker Street, London WIU 7BU. TLC is a company engaged
in the business of marketing and selling inter alia leisure, life-
style and travel services.
4. The respondent No.2-Wunderman India Pvt. Ltd. (for
short ’WIPL’] is an Indian company incorporated under the
provisions of the Companies Act, 1956 and has its registered
office at Kalpataru \026 Synergy, 2nd Floor, Opp. Grand Hyatt, Off
Western Highway, Vakola, Santa Cruz (East), Mumbai.
Respondent No.2-WIPL is an exclusive marketing and fulfilling
agent of respondent No.1-TLC for the Indian sub-continent.
5. The applicant-Citibank states that the respondents-TLC
and WIPL are the alter ego of each other and their interests are
identical, co-existent and co-terminus and for all practical
purposes they are one party and their obligations are joint and
several in respect of the subject-matter of the present
application. It is the case of the applicant-Citibank that in
September, 2005, both the respondents-TLC and WIPL
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had approached the Citibank and made a series of claims and
representations about their expertise, background, financial
wherewithal and intent to associate with the applicant-
Citibank to implement a Scheme to reward and acknowledge
the valued association of loyal customers of the applicant-
Citibank. The respondents-TLC and WIPL represented to the
applicant-Citibank that they were the promoters and incentive
companies operating in various markets around the world and
they could offer their clients fabulous consumer propositions
and the corresponding service to support such promotions in
order to help their clients to meet their objectives such as
customer retention, loyalty, etc. etc. Respondent No.2-WIPL
further represented to the applicant-Citibank that its
proposition was designed to meet the expectations desired to
be achieved by the applicant-Citibank. It is pleaded by the
applicant-Citibank that relying upon the said claims,
assurances and representations made by the respondents-TLC
and WIPL, as regards their expertise in handling such
arrangements, a tripartite agreement was entered into between
the parties on 04.10.2005. The agreement became operational
w.e.f. 01.10.2005 and was to be valid till 31.08.2006.
6. It is pleaded by the applicant-Citibank that under the
Scheme it was agreed to by the parties to the agreement that
the eligible credit card customers of the applicant-Citibank,
having fulfilled certain specific criteria, were entitled to ’Free
return flight vouchers’ on air routes within India subject to the
applicable terms and conditions. As and when, any of the
customers of the applicant-Citibank qualified/fulfilled the
eligibility criteria he/she would get a voucher from the
applicant-Citibank. The customers, after the receipt of the
vouchers, had the option to voluntarily complete the details
required in the voucher including the choice of three
destinations and three dates of travel but not earlier than 30
days from the date of signing the voucher and sending the
same to the applicant-Citibank. The respondent No.2-WIPL
was required to perform various tasks including, but not
limited to contacting the customer, checking seat availability,
confirming the booking request according to preferences and
sending confirmation to customers of their preference of travel
date/destination. The applicant-Citibank and the respondents
- TLC and WIPL agreed to the Scheme called the "Fly for Sure"
programme, which was envisaged by the applicant-Citibank to
be effective from 01.10.2005 until 31.12.2005. The applicant-
Citibank contracted for buying 1,00,000 return air-ticket
vouchers from the respondents-TLC and WIPL in anticipation
of the success of the Scheme for a consideration of Rs.432/-
plus applicable taxes per voucher and, accordingly, had paid
for the same in accordance with Appendix-II of the agreement.
According to the applicant-Citibank, it was the responsibility
of the respondents-TLC and WIPL to ensure fulfillment of the
Scheme to the satisfaction of the customers. It is stated that
under the Scheme, 35,000 card members of the applicant-
Citibank were found to be eligible for availing of the ’free
return air-ticket’ to be provided by the respondents-TLC and
WIPL. The applicant-Citibank forwarded the vouchers
completed by the eligible and interested card members to
respondent No.2-WIPL in accordance with the procedure
agreed to by the parties. The vouchers/requests forwarded by
the applicant-Citibank were to be honoured by the
respondents-TLC and WIPL by conducting themselves in a
manner as stipulated under the agreement. It is further
stated that the respondents-TLC and WIPL could only have
offered alternative dates or destinations to the customer(s)
after having obtained the consent of the said customer(s)
towards such alterations.
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7. It is also stated that at the initial stage the operation and
implementation of the Scheme progressed as per the
agreement between the parties. However, since January, 2006
the applicant-Citibank started receiving complaints from its
eligible customers indicating deficiencies on the part of the
respondents-TLC and WIPL. Both the respondents seemed to
have started indulging in a number of questionable practices,
such as deliberately not fulfilling/honouring their
commitments which they had made to the eligible
customers/card members in the ’booking confirmation’ by
calling them on the dates close to their travel dates and forcing
them to postpone dates of travel and further pressurizing the
customers/card members into opting for destinations and
dates not preferred/requested for and cancelling the original
’booking confirmations’. The applicant-Citibank through
various communications has brought all the complaints to the
notice of the respondents-TLC and WIPL and repeatedly
requested both of them to discharge their commitments as
contained in the agreement. It is stated that in spite of
repeated communications being sent by the representatives
and officials of the applicant-Citibank to the respondents-TLC
and WIPL, they merely gave assurances and no actual
measures were undertaken by the respondents to solve such
complaints of the customers. The applicant-Citibank indicated
various instances of breaches of the terms of the agreement
which were being repeatedly committed by the respondents-
TLC and WIPL that needed to be remedied, failing which the
applicant-Citibank stood in a position of incurring irreparable
losses, loss of goodwill and reputation along with the
possibility of being subjected to various proceedings that were
being threatened by the affected customers. The responses
dated 30.04.2006 and 04.05.2006 received from the legal
counsel of respondent No. 1-TLC indicated that the
respondents have found the Scheme to be ’over sold’ and
allegedly to be commercially unviable to honour the
commitments and there was a clear indication in the said
responses of abdication on the part of the respondents-TLC
and WIPL of their responsibilities and obligations under the
agreement inasmuch as new conditions to perform the
obligations were set out which suggested payment of further
amount which was de hors the terms of the agreement itself.
It is also submitted that in the circumstances created by the
respondents-TLC and WIPL, the applicant-Citibank vide its
letter dated 10.05.2006 informed the respondents-TLC and
WIPL of the termination of their involvement under the
agreement w.e.f. 10.05.2006 which was necessitated due to
the acts of omission and commission on their part and
continued loss of goodwill and reputation of the applicant-
Citibank. The applicant-Citibank, subsequent to the
termination of the involvement of the respondents-TLC and
WIPL under the agreement, was compelled to take the
remedial action of providing return air-tickets to its eligible
customers/card holders. In view of the failure of the
respondents-TLC and WIPL to perform their respective
obligations in terms of the agreement and in order to resolve
the disputes, the applicant-Citibank issued a legal notice
dated 15.07.2006 through its counsel to the respondents-TLC
and WIPL, thereby invoking the provisions of Clause 10 of the
agreement dealing with the resolution of disputes which have
arisen between the parties. The applicant-Citibank in the said
notice suggested the name of Hon’ble Mr. Justice S. P.
Bharucha, Former Chief Justice of India, to act as the sole
Arbitrator.
8. In response to the legal notice dated 15.07.2006 of the
applicant-Citibank, respondent No. 1-TLC vide its
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communication dated 14.08.2006 and respondent No. 2-WIPL
vide its communication dated 11.08.2006 not only repudiated
the claim of the applicant-Citibank, but also declined to accept
the nomination of Hon’ble Mr. Justice S. P. Bharucha, Former
Chief Justice of India, as the sole Arbitrator. They
recommended the disputes to be referred to arbitration
comprising of three arbitrators, one nominated by each of the
three parties to the agreement. They proposed the name of
Hon’ble Mr. Justice M. H. Kania, Former Chief Justice of
India, to be appointed as an Arbitrator.
9. In the above stated premises, the applicant-Citibank has
now filed the present application praying for the appointment
of sole Arbitrator in terms of the agreement and the law.
10. In response to the application, respondent No. 1-TLC
submitted that the Scheme offered by the applicant-Citibank
to its qualified card members was not the Scheme contracted
for in the agreement and, therefore, in any event there could
be no liability on respondent No.1-TLC for any alleged loss or
damage under the agreement. It is stated that the application
is not maintainable inasmuch as no valid notice invoking
arbitration under Section 21 of the Act has at all been issued
and notice dated 15.07.2006 does not even state as to what
are the losses alleged to have been suffered which the
applicant-Citibank seeks to claim in the arbitration
proceedings. The said notice is very vague as no particular
dispute or claim is sought to be referred to and it does not
state what, if any, losses were caused to the applicant as a
result of the alleged breach of the agreement. It is also
submitted that the terms of the agreement are limited to the
provisions of warranties, confidentiality, indemnification,
governing law and obligations of parties arising prior to the
expiration or termination. There is no valid or binding
arbitration clause in existence on and with effect from
10.05.2006, i.e. the date of wrongful repudiation of contract by
the applicant-Citibank, which was accepted by the
respondents, therefore, there exists no dispute that needs
reference to the arbitration. It is contended that the
respondents-TLC and WIPL are separate and different
companies incorporated in different jurisdictions, with
different ownership and control and under no circumstances
can they be treated as one party. It is clarified that the
applicant-Citibank did not strictly incorporate the terms of
Appendix-V to the agreement in its offer to its card members,
but offered a Scheme in material variation without the consent
of respondent No. 1-TLC, a fact which came to its knowledge
only after the offer was sent out by the applicant-Citibank.
Further, it is stated that the conditions required for
satisfaction of Sections 11(5), 11(10) and 11(12) of the Act are
not satisfied by the applicant-Citibank and, therefore, on the
above-stated premises, the application is liable to be
dismissed.
11. Shri T. R. Ramachandran, Business Manager-Credit
Cards of the applicant-Citibank in rejoinder affidavit has
reiterated and reasserted the averments made in the
arbitration application and repudiated the defence pleaded by
respondent No. 1-TLC in its counter affidavit. It is submitted
that notwithstanding the obligations of the respondents-TLC
and WIPL as provided for in the agreement, they had
repeatedly refused to take action to correct the breaches of the
agreement as intimated by the applicant-Citibank. Further, in
the e-mail dated 21.04.2006 sent by Mr. Sean Langley
(Operations Director), followed by communication dated
04.05.2006 sent through counsel, respondent No. 1-TLC had
offered two "options" for proceeding, each of which would have
modified substantially the prior agreement without addressing
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or correcting the breaches cited by the applicant-Citibank, i.e.
failing to rectify their failure to provide return tickets to the
eligible customers/card members as envisaged under the
agreement and as such the offer in question per se
tantamounts to a fundamental breach of the agreement on the
part of the respondents-TLC and WIPL. It is also stated that
irrespective of the number of the customers who would have
redeemed their vouchers, in terms of Clause 7 and, in
particular, Appendix-I to the agreement, it was clearly the
responsibility of the respondents-TLC and WIPL to ensure
fulfillment of the Scheme to the satisfaction of the customers.
12. No counter has been filed by respondent No.2-WIPL.
13. I have heard learned counsel for the parties and perused
the record.
14. Mr. R. S. Suri, learned counsel appearing for the
applicant contended that Citibank had received various
complaints from thousands of its eligible customers indicating
series of deficiencies on the part of the respondents-TLC and
WIPL in implementation of the Scheme offering ’Free return
flight voucher’ and ’World for free destinations’ to such
Citibank card- members, who have fulfilled certain specified
criteria on selective domestic air routes in India and the
applicant-Citibank taking serious note of the said complaints,
sent various communications and repeatedly requested the
respondents-TLC and WIPL to comply with the terms of the
agreement, but both the respondents have failed to settle the
dispute amicably. He submitted that in order to save its
goodwill, reputation and high standards of service and to
mitigate the damages directly resulting from the breach of the
terms of the agreement, the applicant-Citibank was compelled
to take the remedial action of providing return air tickets to its
eligible customers/card members, the expenses of which were,
of course, to be borne by both the respondents as provided in
the agreement and the circumstances created by the
respondents-TLC and WIPL manifestly provided grounds for
termination of the agreement under Clause 23 and having
invoked the arbitration Clause 10, the applicant-Citibank had
issued notices under Clause 24 to both the respondents
requesting them to resolve the disputes/differences under the
Act through a sole Arbitrator in terms of Section 10(2) of the
Act.
15. Mr. A. K. Ganguli, learned Senior Advocate appearing on
behalf of respondent No.1-TLC, resisted the aforesaid
submissions of Mr. R. S. Suri. According to Mr. Ganguli, the
applicant-Citibank has made vague assertion of existence of
dispute and has not identified or pointed out as to what
exactly is the dispute or precise claim, which has arisen for
invoking the arbitration clause, but despite the
communications and representations made by respondent
No.1-TLC to the applicant-Citibank to spell out the disputes
which are referable to arbitration, no valid notice invoking
arbitration clause has at all been issued to the respondent.
He submitted that notice dated 15.07.2006 issued by the
applicant-Citibank is vague as it does not state as to what are
the obligations which were breached and what, if any, loss was
caused as a result of such alleged breaches to the applicant-
Citibank. He next contended that the respondents-TLC and
WIPL are separate and different companies incorporated in
different jurisdictions, with different ownership and control
and under no circumstances can they be treated as one party
as contended by the applicant-Citibank. He finally prays for
the dismissal of the application. In support of the submission
that there must be a precise dispute raised by the parties,
reliance is placed in the case of Major (Retd.) Inder Singh
Rekhi v. Delhi Development Authority [(1988) 2 SCC 338]. I
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have the advantage of going through the said judgment in
which it is held by this Court that the existence of dispute is
essential for appointment of an arbitrator under Section 8 or a
reference under Section 20 of the Arbitration Act, 1940. There
can be a dispute only when a claim is asserted by one party
and denied by other on whatever grounds. Mere failure or
inaction to pay does not lead to the inference of the existence
of dispute. Further, it is observed that whether in a particular
case a dispute has arisen or not has to be found out from the
facts and circumstances of the case. The proposition of law is
well known and well-settled in the cited case but the said
decision does not fully advance the case of the respondents-
TLC and WIPL, in any manner, in the facts and circumstances
of the present case.
16. Mr. Soli J. Sorabjee, learned senior counsel appearing on
behalf of respondent No.2-WIPL, has sought to support the
arguments of Mr. Ganguli. He made an alternative argument
that if this Court is inclined to accept the prayer of the
applicant-Citibank, then the dispute, if any, arising out of the
agreement dated 04.10.2005 may be referred to an arbitral
tribunal comprising of three arbitrators and
selection/appointment of the third arbitrator may be left to the
choice of the two named arbitrators already nominated by the
applicant-Citibank and the respondents-TLC and WIPL jointly.
I am afraid to accept this submission. A composition of the
arbitral tribunal comprising of three arbitrators, in my
considered opinion, is not necessary or expedient nor it can be
said to be fair and reasonable in the larger interests of the
parties because such an order may lead to burdening the
parties to bear extra amounts of money in prosecuting the
arbitral proceedings which as per the objectives of the Act are
less expensive and more efficacious remedy to the parties to
settle their disputes.
17. In the backdrop of the above narrated factual situation
and respective contentions of the parties, the question that
arises for consideration of this Court is whether in view of the
various communications followed by reminders and legal
notices sent by the applicant-Citibank to the respondents-TLC
and WIPL whereby certain serious instances of complaints
having been received from the eligible customers/card
members regarding deficiencies in services rendered to them
and other disputes/differences as set out in Appendix-II of the
agreement and also having failed to provide ’Free return flight
voucher’ in relation to "Fly for Sure" programme in accordance
with the provisions of Appendix-I to the agreement, an
arbitration clause contained in the agreement could be
invoked.
18. The tripartite agreement made by and entered into
between the parties on 04.10.2005 is not in dispute. The
agreement came into force w.e.f. 01.10.2005 and was valid till
31.08.2006, which could be extended by mutual consent on
such terms as parties mutually agree in writing as per Clause
3.1 of the agreement. It appears from the record that
respondent No.2-WIPL approached the applicant-Citibank and
expressed its keen desire to be appointed as the Fulfillment
Agency for implementation of ’Free return flight voucher’ and
’World for Free destinations’ Scheme of the applicant-Citibank
and providing related services to the customers in terms of
Clause 4 of the agreement. Respondent No. 1-TLC had agreed
to ensure the performance by WIPL of its obligations under
Clause 6 of the agreement. In terms of Clause 8, on
representation having been made by the respondents to the
applicant-Citibank, the parties had entered into the agreement
on exclusive basis on the terms and conditions contained in
the Appendix(s) and Enclosures attached and incorporated by
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reference as an integral part of the agreement. In order to
appreciate the controversy in this matter, it is, therefore,
necessary to refer to the relevant clauses of the arbitration
agreement in relation to the dispute or controversies arising
out of the said agreement. Clause 2.2 deals with "Services"
and Clause 2.3 defines "Free return flight voucher", whereas
"World for Free destinations" is defined in Clause 2.4.
19. Clause 4 of the agreement dealing with "Services" reads
as under:-
"4. WIPL shall be liable and responsible
to provide services to the Citibank and its
customers in accordance with the
provisions of Appendix-I hereto.
TLC shall be liable and responsible for
ensuring that WIPL provides the services
to Citibank and its customers in
accordance with the provisions of this
Agreement including Appendix-I hereto."
20. Clause 7 of the Agreement envisages General obligation
of WIPL and TLC.
21. Clauses 7.1, 7.2 and 7.2.2 read as under:-
"7.1 WIPL shall be solely responsible to
provide services to Citibank and its
customers in accordance with the
provisions of Appendix-I. WIPL shall
provide the effective services as per the
Appendix-I to the customers of Citibank
and act in the interest of both Citibank
and its customers. WIPL hereby
indemnifies Citibank and shall keep
Citibank safe, harmless and indemnified
from time to time and at all times
hereafter, from and against (i) all loss,
harm and injury suffered or incurred by
Citibank, (ii) all claims, demands,
customer complaints, suits, actions
and/or proceedings either civil or
criminal in nature, made or adopted
against Citibank and (iii) all costs,
charges and expenses suffered or
incurred by Citibank directly or indirectly
on account of or as a consequence of
WIPL failing to fulfill any of its obligations
under this Agreement and/or failing to
fulfill all or any of its responsibilities and
obligations under this Agreement and
Appendix-I hereto.
7.2 WIPL and TLC hereby undertake to be
solely liable and responsible, to the
exclusion of Citibank, for all claims,
demands, disputes, suits, actions and/or
proceedings either civil or criminal in
nature arising out of non-fulfillment of
any of their obligations or responsibilities
arising under this Agreement and the
Appendix-I hereto.
7.2.2 \005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005\005..
WIPL shall be solely and absolutely
responsible for providing the Services and
for issuing the free return flight vouchers
in accordance with the provisions of
Appendix-I, to the customers of Citibank
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as also for ensuring that the carriers with
which it has entered into any
arrangements in pursuance of this
Agreement, strictly comply with their
obligations and accept the honour of all
return free flight vouchers issued to the
customers of Citibank in pursuance of
this Agreement."
22. Clause 10 of the agreement is the arbitration clause,
which is to the following effect:-
"10. The parties hereby agree that any
controversy, claim or dispute arising out
of the interpretation, application or in
connection with this Agreement which
cannot be resolved amicably, shall be
conclusively resolved by arbitration
under Indian Arbitration and
Conciliation Act, 1996 and any
amendments made thereto. The place of
arbitration shall be Mumbai and the
arbitration shall be conducted in
English language only. This Agreement
shall be governed by Indian Laws and
shall be amenable to the exclusive
jurisdiction of courts in Mumbai only."
23. Clause 23 deals with "Termination of the
Agreement" and reads as under:-
"23. Termination \026 Citibank may
terminate this Agreement upon 30 days’
prior notice to WIPL and TLC in this
behalf.
In the event that either Citibank on the
one part and WIPL and TLC on the other
part shall, at any time during the term of
this Agreement, commit any material
breach of any requirement, obligation and
covenant and warranty herein contained,
and shall fail to remedy such breach
within 7 (seven) days after written notice
thereof, the other party(ies) may at
its/their discretion, and in addition to
any other remedy that might be available
in law or equity, terminate this
Agreement by written notice to such
effect\005\005\005"
24. Clause 24 of the agreement prescribes giving of notice by
either party.
25. The obligations and responsibilities on the part of the
parties to the agreement are incorporated in Appendix-I, which
inter alia envisaged that respondent No. 2-WIPL shall be liable
and responsible for ensuring that it would provide the required
services to the applicant-Citibank and its eligible
customers/card members in accordance with the terms of the
agreement. The satisfactory service to be rendered by the
respondents-TLC and WIPL was the material obligation on
their part as per the terms of the agreement and it was a pre-
requisite condition that the applicant-Citibank would pay a
commission of cost of tickets in terms of Appendix-II to the
agreement. Further, the respondents-TLC and WIPL jointly
and severally undertook to indemnify the applicant-Citibank
from and against all costs, charges and expenses suffered or
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incurred by the applicant-Citibank, directly or indirectly, on
account of or as a consequence of the respondents-TLC and
WIPL failing to fulfill any of their responsibilities and
obligations under the agreement read with Appendix-I thereto.
Under the "Fly for Sure" programme envisaged in the
agreement, 35,000 card members of the applicant-Citibank
were found to be eligible to avail the opportunity of the ’Free
return flight voucher’ to be provided by respondents-TLC and
WIPL. The applicant-Citibank forwarded the vouchers
completed by the eligible and interested card members to
respondent No. 2-WIPL in accordance with the procedure as
agreed by the parties. The vouchers/requests forwarded by
the applicant-Citibank were to be honoured by the
respondents jointly by conducting themselves in a manner as
stipulated under the agreement, including issuing ’return air-
tickets’ towards any one of the three dates, for any one of the
three destinations, as indicated by the customers. The
respondents-TLC and WIPL could only have offered further or
other alternative dates or destinations to the customers and
35,000 card members after having obtained their consent
towards such alterations. The material documents placed on
record would show that the applicant-Citibank requested the
respondents-TLC and WIPL to comply with the terms of the
agreement in regard to the complaints of eligible customers
indicating series of deficiencies in services on the part of the
respondents-TLC and WIPL. However, in spite of repeated
communications being sent by the representatives and officials
of the applicant-Citibank to the respondents-TLC and WIPL,
they merely made assurances and no actual measures were
undertaken by them to rectify their acts of omission and
commission. The applicant-Citibank in various
communications (copies whereof are placed on record of these
proceedings) including courier \026 e-mail notice dated
10.05.2006 (Annexure A-8) has given specific instances of
disputes and differences that have arisen between the
applicant-Citibank on the one hand and the respondents-TLC
and WIPL on the other hand which are to be resolved by the
arbitral tribunal in terms of the arbitration Clause 10 of the
agreement. Legal notice dated 15.07.2006 (copy Annexure A-
9) as envisaged under the agreement and the provisions of the
Act has been issued by the legal firm of the applicant-Citibank
to the respondents-TLC and WIPL suggesting the name of
Hon’ble Mr. Justice S. P. Bharucha, Former Chief Justice of
India, to be appointed as the sole Arbitrator. In response
thereto, respondent No.2-WIPL vide registered A.D. \026 fax - e-
mail - courier dated 11.08.2006 denied all the allegations of
the applicant-Citibank averred in the said communications
and notice dated 15.07.2006. Respondent No.2-WIPL also
stated that all the alleged allegations made in the notice or
made by way of any prior correspondence shall be dealt with
by it by way of a comprehensive reply or by way of a counter
claim, if any arbitration proceedings are likely to be initiated
by the applicant-Citibank. Respondent No.2-WIPL, however,
recommended that the disputes be referred to an arbitral
tribunal comprising of three arbitrators to be nominated by all
the three parties to the agreement, namely, the applicant-
Citibank and the respondents-TLC and WIPL respectively.
Respondent No.2-WIPL, however, nominated Hon’ble Mr.
Justice M. H. Kania, Former Chief Justice of India, as its
nominee.
26. Respondent No. 1-TLC in its reply dated 14.08.2006 to
the notice dated 15.07.2006 sent by the Solicitors on behalf of
the applicant-Citibank, denied the unsubstantiated allegations
of non-fulfillment or breach of any obligation by it under the
agreement dated 04.10.2005 entered into between the parties.
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In reply, respondent No. 1-TLC states that notice invoking an
arbitration is not valid as the same does not comply with the
requirement of Section 21 of the Act applicable in India as it is
completely unclear from the contents of the notice as to what
disputes the applicant-Citibank has sought to be referred to
the arbitration and the applicant-Citibank first should provide
quantification of its alleged claims and disputes. However,
respondent No.1- TLC agrees to the suggestion of respondent
No.2-WIPL for appointment of arbitral tribunal comprising of
three members, one each to be appointed by the parties to the
agreement.
27. As noticed above, the disputes arising out of the
arbitration agreement between the parties are covered under
the definition of "international commercial arbitration" in
terms of Section 2(f) of the Act. The parties have entered into
an arbitration agreement as provided under Section 7 of the
Act. Section 10(1) of the Act provides that the parties are at
liberty to determine the number of arbitrators provided such
number shall not be an even number. In default of
determination referred to in sub-section (1), the arbitral
tribunal shall consist of a sole arbitrator in terms of Section
10(2) of the Act. Section 21 of the Act lays down that unless
otherwise agreed by the parties, the arbitral proceedings in
respect of a particular dispute would commence on the date
on which a request for that dispute to be referred to
arbitration is received by the respondent.
28. The contract is a commercial document and must be
interpreted in a manner to give efficacy to the contract rather
than to invalidate it. Narrow technical approach is not proper.
The above-extracted Clause 10 of the arbitration imports in
itself all disputes and the arbitration agreement cannot be said
to be as vague or uncertain as to be unenforceable. In Clause
10 of the agreement, the words "any controversy, claim or
dispute arising out of the interpretation, application or in
connection with this agreement which cannot be resolved
amicably" could embrace within its fold all matter which can
legitimately arise in connection with the agreement. The
arbitration clause does not put any cap on the powers of the
arbitrator to decide any particular claim or counter claim, the
details of which shall be submitted by the parties in their
pleadings before the arbitrator. The words contained in
Clause 10 are wide enough and as the question turned upon
the true interpretation of the contract and the parties have to
take recourse to the contract to establish their claim and
counter claim, if any, having regard to the fact that the
existence of an agreement is not denied and that there has
been an assertion of claim by the applicant-Citibank in the
forms of letters and notices issued to the respondents and
responses of TLC and WIPL thereto, the matter would be
arbitrable. The conduct of the respondents-TLC and WIPL
would show that on receipt of the communications and notices
of the applicant-Citibank, the same were not rejected outright
by them. The existence of arbitration agreement was accepted
and the matter, if any, was suggested to be referred to an
arbitral tribunal of three members, one to be appointed by
each party.
29. In view of the instances of breaches of the terms and
conditions of the relevant clauses of the agreement coupled
with the breaches of specific obligations and responsibilities
contained in the Appendix(s) and Enclosures attached and
incorporated by reference as an integral part of the agreement
and having regard to the words used in Clause 10 of the
agreement and having regard to the fact that the parties have
failed to determine an even number of arbitrators as per the
provisions of Section 10(1) of the Act, the requirement of
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Section 10(2) of the Act is fully attracted in the present
proceedings, in other words, the arbitration agreement deemed
to be one providing for a sole arbitrator.
30. In the above-said circumstances, taking into
consideration the fact that the disputes and differences
between the parties emanating from the contract are required
to be resolved through arbitration, Hon’ble Mrs. Justice Sujata
V. Manohar, retired Judge of this Court, is hereby appointed
to act as a sole Arbitrator.
31. The Arbitration Application, accordingly, stands disposed
of. There will be no order as to costs.