Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on : May 24, 2016
Judgment pronounced on : June 03, 2016
+ ARB.P. 592/2015 & I.A. No.2689/2016
DATAWIND INNOVATIONS PRIVATE LIMITED ..... Petitioner
Through Mr.Mohit Chaudhary, Adv. with
Ms.Damini Chawla & Mr.Kunal
Sachdeva, Advs.
versus
INDUS MOBILE DISTRIBUTION PRIVATE LIMITED & ORS.
..... Respondents
Through Mr.Amit Chadha, Sr. Adv. with
Mr.K.S. Mahadevan,
Mr.Krishnakumar R.S., Mr.Vijay
Anand & Mr.Dilpreet Singh, Advs.
+ O.M.P.(I) 531/2015 & I.A. No.2690/2016
DATAWIND INNOVATIONS PRIVATE LIMITED ..... Petitioner
Through Mr.Mohit Chaudhary, Adv. with
Ms.Damini Chawla & Mr.Kunal
Sachdeva, Advs.
versus
INDUS MOBILE DISTRIBUTION PRIVATE LIMITED & ORS.
..... Respondents
Through Mr.Amit Chadha, Sr. Adv. with
Mr.K.S. Mahadevan,
Mr.Krishnakumar R.S., Mr.Vijay
Anand & Mr.Dilpreet Singh, Advs.
CORAM:
HON'BLE MR.JUSTICE MANMOHAN SINGH
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 1 of 14
MANMOHAN SINGH, J.
1. Datawind Innovations Pvt. Ltd., the petitioner has filed two
petitions, one being Arb.P.No. 592/2015 under Section 11 of the
Arbitration and Conciliation Act, 1996 for the appointment of sole
Arbitrator and another being O.M.P. (I) No. 531/2015 under Section 9
of the Arbitration and Conciliation Act, 1996 seeking various reliefs.
nd
In O.M.P. (I) No. 531/2015 on 22 September, 2015 the interim
protection was granted restraining the respondent transferring,
alienating or creating any third party interest in respect of property
No.281, TKK Road, Alwarpet, Chennai-600018 till the next date of
hearing .
2. The brief facts as per petition are that the petitioner is engaged
in the manufacture, marketing and distribution of Tablets, Mobile
phones and accessories. The petitioner has its registered office at J-
8/1457, Opposite New Amritsar, GT Road, Amritsar, Punjab. As per the
petitioner, it has a branch office which is located at 292, Jood Bagh,
Kotla, Mubarakpur, New Delhi and Khasra No. 605, Near Tata Telco
service station, A-block, Village Rangpuri, New Delhi-110037. The
petitioner was admittedly supplying the goods to the respondents at
Chennai from New Delhi.
2.1 The respondent No.1 and respondent No. 2-4 in June, 2014
approached the petitioner and had expressed earnest desire to
do business with the petitioner as its ‘Retail chain Partner’.
2.2 The petitioner started supplying the manufactured products to
th
respondent No.1 from 26 June, 2014. The petitioner was a firm
beliver of non-credit business but respondents No.2-4 along with
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 2 of 14
one Mr. Ashok Gupta allured the petitioner by painting a rosy
picture of respondent-Company’s financial health and started the
business on credit.
2.3 In the month of July, petitioner provided several goods to the
respondents on credit basis. The respondents did not adhere to
the due date with regards to the payments. Vide several emails
st st rd
dated 21 August, 2014, 1 September, 2014, 3 September,
th
2014 and 12 September, 2014. The petitioner reminded the
respondents of the payments to be made, whereby the liability to
pay the said amount.
2.4 In September, the total amount due was Rs. 4.86 crores, of
rd th
which Rs. 3.75 crores was due on 3 September. Till 11
September, respondents paid only Rs. 80 lacs out of the due
amount of Rs. 3.75 crores. In order to secure its interest,
petitioner suggested to enter into a written Retail Chain Partner
Agreement with respondent No.1 enumerating the mode, time of
payment and also for mechanism for settlement of disputes.
th
Thus an Agreement dated 25 October, 2014 was signed by the
parties.
2.5 The model of business as agreed between the parties was that
first a purchase order was to be issued by the respondent No.1
to petitioner seeking delivery of items; thereafter the items were
dispatched by the petitioner from Delhi using services of FEDEX
courier. The products delivered against a Proof of Delivery
receipt. As provided in Clause 5(d) if the Agreement, the
respondent No.1 had to make payments through banking
channels within 45 days from receipt on the invoice from the
client.
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 3 of 14
2.6 But the respondents again defaulted in making the payments
despite the aforesaid Agreement. Respondents never made
payment on time and repeated extensions were sought by them.
th
Vide email dated 13 November, 2014, the petitioner intimated
the respondents about the outstanding due at the cost of
th
repetition but it was of no avail. On 8 January, 2015, another
reminder was sent by the petitioner, with total outstanding of Rs.
5.5 crores and after various communications and repeated
reminders, respondents made a payment to the tune of Rs. 40
lacs approx to the petitioner in the month of January, 2015
despite the outstanding due being above Rs. 5 crore.
3. It has come on record that the respondents agreed to settle the
th
entire account by virtue of payment vide cheque dated 27 February,
2015, bearing No. 007315, drawn on HDFC Bank payable at par at all
the branches. The said cheque was for Rs. 4 Crores. However, upon
the presentation of the cheque, it was informed by the concerned Bank
that the said cheque given by the respondents bore forged signatures
and was dishonoured as per the version of the petitioner.
4. It is not in dispute that the petitioner filed a complaint bearing
DD No. 51B against the respondents for an act of dishonest
inducement, cheating, forgery and criminal breach of trust. However,
police refused to take any action and the petitioner was constrained to
file a complaint under Section 156(3) Cr.P.C.
st
On 31 March, 2015, on respondent’s request the cheque
bearing No. 7315 was again presented to the Bank. However, the said
cheque was dishonoured again, with the following reason: “Payment
was stopped by the Drawer”. It is pertinent to note here, that vide
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 4 of 14
th
order dated 27 May, 2015, complaint bearing CC No. 30/1/2015 was
allowed by the learned MM, Saket, New Delhi whereby the concerned
DHO was directed to register a case against the respondents treating
the contents of the complaint as FIR and investigate into the matter.
5. As the petitioner came to know that the respondents are selling
their property bearing No. 281, TKK Road, Alwarpet, Chennai – 600018
to third parties, in order to restrain the respondents from doing so,
petitioner filed a petition under Section 9 of Arbitration and Conciliation
Act, 1996 being OMP (I) No. 531/2015 before the High Court of Delhi
nd
at New Delhi. Vide Order dated 22 September, 2015 of Delhi High
Court respondents were restrained from creating any third party rights
in the said property.
6. It is alleged by the petitioner that, till date the respondents have
been in default of the admitted outstanding dues of Rs. 5 crores with
the due interest and no effort in any way has been made by the
respondents to pay the said amount. Thus petitioner vide legal notice
th
dated 25 September, 2015 invoked the Arbitration Clause in terms of
th
the Clause 18 of the Contract Agreement dated 25 October, 2014,
and suggested the name of Retd. Justice H.R. Malhotra as the sole
th
Arbitrator. But by letter dated 15 October, 2015, the said
appointment of the learned Arbitrator was opposed by the counsel for
respondents.
7. As the main plea of the respondent was that the petitioner
supplied defective products which were lying at Chennai, with the
consent of the parties, an order was passed by this Court directing the
petitioner to visit Chennai and find out the quantum of defective
material if any with the respondent. Counsel for the petitioner has
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 5 of 14
informed that the settlement could not be arrived as approximately
only six hundred defective mobiles were found at the premises of the
respondent at Chennai. As the respondent failed to pay the
outstanding amount which is more than five crores, both the petitions
be decided on merit.
8. At the time of hearing, both the parties have made their
submissions on the issue of territorial jurisdiction which is main plea of
the respondents. The jurisdiction is invoked by the petitioner by
stating that all the necessary bundle of facts forming ‘cause of action’
in the present matter arose in the jurisdiction of this Court i.e. New
Delhi.
9. The contention of the respondents on merit is that the products
supplied by the petitioner to the respondents under Agreement were
defective. The respondents committed several other breaches and is
therefore not entitled to the reliefs sought. The reasons are mentioned
in the grounds (a) to (i) of the reply. Many pleas were taken however
it is not denied by the respondents having issued the cheques by the
respondents which were dishonoured. One fails to understand, if the
entire stock was defective, where was the occasion for the respondents
to issue the cheque in view of meeting between the parties. In any
case, these are the issues which will ultimately have to be decided by
the Arbitral Tribunal.
10. One of the main preliminary objections of the respondents is that
this Court does not have the territorial jurisdiction to entertain and
hear the present petition.
11. Mr. Mohit Chaudhary learned counsel for the petitioner submits
that part of cause of action has arisen in New Delhi. At best it can be
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 6 of 14
concluded by this Court that Courts in New Delhi and Chennai have the
territorial jurisdiction in view of the material placed on record. As far as
exclusive jurisdiction of Mumbai is concerned, it is submitted by him
that any cause of action has ever arisen in any part of Maharashtra.
Mere selling of goods by the respondents as alleged would not give the
benefit of jurisdiction in the absence of any part of cause of action
which is only has arisen at New Delhi and Chennai.
12. Mr. Chaudhary submits that the nature of business between the
parties included shipping of mobile phones, tablets etc. from New Delhi
to Chennai which were received by respondent and were to be sold in
retail. After collecting the amount, the same was required to be
remitted back to the petitioner, less the profit accruing to respondents
as the petitioner is invoking the territorial jurisdiction on the following
reasons:
a) The regional office of Petitioner Company is in New Delhi
b) All sale transactions took place from New Delhi
c) All purchase orders were raised to Delhi office of Petitioner
Company viz. property bearing Khasra No.605, Near Tata Telco
Service Station, A-Block, Village Rangpuri, New Delhi –
110037.
d) Goods were dispatched from New Delhi office.
e) Meetings between the representatives of parties was
conducted in New Delhi
f) Godown, showroom and office of Petitioner is in New Delhi
g) Disputes arose in New Delhi.
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 7 of 14
13. Mr. Amit Chadha, learned senior counsel has on the said issue of
territorial jurisdiction made the submission that the Agreement for
th
Retail Chain Partner dated 25 October, 2014 between the parties was
entered into in Chennai. It was to be performed in Chennai and
Maharashtra since the goods (under the Agreement) were sold by the
petitioner at these two places. All payments under the Agreement were
made by the respondent at Amritsar and lastly the Registered Office of
the respondent is located at Chennai from where they are only carrying
on business. in Delhi this is not denied by the petitioner anywhere in
the petition. Even as per clause 19 of the Agreement also stipulates
that all disputes arising out of, or in connection with the Agreement
shall be subject to the exclusive jurisdiction of the Courts in Mumbai
only .
14. In view of these reasons, Mr. Chadha, learned senior counsel
submits that Courts in Delhi would have no jurisdiction to entertain and
try the present petition as parties have agreed to confer jurisdiction
upon a particular place, the injunction of other Courts is excluded. He
referred the following decisions in support of his submission:-
a) In B.E. Simoese Von Staraburg Niedenthal & Another v.
Chhattisgarh Investment Limited, (2015) 12 SCC 225 has
dealt with all the earlier decisions and has held that where the
agreement between the parties restricted jurisdiction to only one
particular court, that court alone would have jurisdiction. Any
petition preferred to courts outside the exclusive court agreed to
by the parties would also be without jurisdiction.
b) Swastik Gases Private Limited v. Indian Oil Corporation
Limited , (2013) 9 SCC 32, paras 7, 28 and 57, where the same
view was taken.
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 8 of 14
15. It is a private contract, clause 18 of the agreement reads as
under:-
18. D ispute Resolution Mechan ism:
Arbitration : In case of any dispute or differences arising
between Parties out of or in relation to the construction,
meaning, scope , operation or effect of this Agreement or
breach of this Agreement, Parties shall make efforts in
good faith to amicably resolve such dispute.
If such dispute or difference cannot be amicably resolved
by the Parties ( "Dispute ") within th irty (30) days of its
occurrence, or such longer time as mutually agreed either
Party may refer the dispute to the designated senior
officers of the parties.
If the dispute cannot be amicably resolved by such officers
within thirty (30) days from date of referral or within such
longer time as mutually agreed, such dispute shall be
finally settled by arbitration conducted under the provisions
of the Arbitration and Conciliation Act, 1996 by reference to
a sole Arbitrator which shall be mutually agreed by the
parties. Such arbitration shall be conducted at Mumbai in
English language.
The arbitration award shall be final and the judgment
thereupon may be entered in any court having jurisdiction
over the parties hereto or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement, as the case may be. The Arbitrator shall have
the power to order specific performance of the Agreement.
The arbitration award shall be final and the judgment
thereupon may be entered in any court having jurisdiction
over the parties hereto or application may be made to such
court for a judicial acceptance of the award and an order
and an order of enforcement as the case may be. The
Arbitrator shall have the power of order specific
performance of the Agreement.
Each party shall bear its own costs of the Arbitration.”
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 9 of 14
16. As far as conducting of arbitration in Mumbai is concerned, the
petitioner has no objection to the same. It is submitted that any
retired Hon’ble Judge of this Court be appointed who may conduct the
proceedings in Mumbai.
17. The main issue before the Court is as to whether in view of
existence of clause 19 of the agreement this Court has got the
territorial jurisdiction to entertain the petition under Section 9 of the
Act.
18. Clause 19 of the agreement reads as under:
“19. All disputes & differences of any kind whatever arising
out of or in connection with this Agreement shall be subject
to the exclusive jurisdiction of courts of Mumbai only.”
19. It appears from the said clause that the exclusive jurisdiction is
stipulated in case of any dispute and difference at Mambai.
20. Mr. Chaudhary argues that it is a private contract between the
parties, the same cannot confer jurisdiction to a Court at Mumbai
which otherwise has no jurisdiction to entertain the matter and is in
contravention of Section 28 of the Indian Contract Act. The cause of
action or even part of cause of action has not arisen in Mumbai. It is
private contract. Parties themselves select the jurisdiction of the Court
which otherwise as per settled law would not have the jurisdiction.
21. It is also case of the petitioner that the purchase orders were
issued by the respondent company to petitioner upon New Delhi
address. Reference is drawn to tax invoices which clearly show that the
goods are sent by petitioner from Delhi to Chennai. Even the purchase
orders are issued by respondents at the Delhi address of the petitioner.
Further, the deliveries which are made by the petitioner using services
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 10 of 14
of Fedex, indicates that the shipper namely petitioner is situated at
Rangpuri, Delhi and all the shipments are booked at Delhi. Even the
credit note filed by the respondents indicates that the respondent is
dealing with New Delhi address of the petitioner.
The above said facts and material placed on record, Mr.
Chaudhary submits that the same indicates that part of cause of action
has arisen at New Delhi thus, in terms of Section 20 CPC, courts at
New Delhi do have jurisdiction to entertain the present petition as both
the conditions of exclusive and alone would not be applicable as in the
facts of present case, only Chennai or Delhi Court, would have the
jurisdiction to entertain the present petitions.
22. With regard to the cause of action for filing the present
proceedings are concerned, it is settled law that in private contract,
parties cannot confer jurisdiction by themselves to a Court which
otherwise as per law has no jurisdiction or any cause of action to
entertain the case. As per facts and material placed on record, it is
evident that in Maharashtra, no cause of action has arisen. In case
entire gamut of the disputes is examined, it appears that three courts
i.e. Chennai Court, Delhi Court or Amritsar have cause of action to
entertain the present petition. The only hurdle in the matter is coming
in the way of petitioner is pertaining to clause 19 of the agreement.
From the material placed on record, I do not find any material to show
that Mumbai Courts have any cause of action with regard to the
disputes and differences. It is settled law that in case more than one
Court has jurisdiction, it is for the petitioner’s prerogative to file the
petition. No doubt, if prima facie the cause of action would have been
in Mumbai only then Mumbai Court would have jurisdiction because of
exclusive jurisdiction. But there is no cause of action.
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 11 of 14
23. The Supreme Court in the case of A.B.C. Laminart (P) Ltd. v.
A.P. Agencies wherein it was held as under:-
“16. So long as the parties to a contract do not oust the
jurisdiction of all the courts which would otherwise have
jurisdiction to decide the cause of action under the law it
cannot be said that the parties have by their contract
ousted the jurisdiction of the court. If under the law
several courts would have jurisdiction and the parties
have agreed to submit to one of these jurisdictions and
not to other or others of them it cannot be said that there
is total ouster of jurisdiction. In other words, where the
parties to a contract agreed to submit the disputes arising
from it to a particular jurisdiction which would otherwise
also be a proper jurisdiction under the law their
agreement to the extent they agreed not to submit to
other jurisdictions cannot be said to be void as against
public policy. If on the other hand the jurisdiction they
agreed to submit to would not otherwise be proper
jurisdiction to decide disputes arising out of the contract it
must be declared void being against public policy. Would
this be the position in the instant case?
24. Para 96 of Bharat Aluminium Co. v. Kaiser Aluminium
Technical Services & ors., reported in (2012) 9 SCC 552 also helps
the case of the petitioner in view of the peculiar facts and
circumstances to some extent wherein it is held:
“In our opinion, the provision in Section 2(1)( e ) has to be
construed keeping in view the provisions in Section 20
which give recognition to party autonomy. Accepting the
narrow construction as projected by the learned counsel
for the appellants would, in fact, render Section 20
nugatory. In our view, the legislature has intentionally
given jurisdiction to two courts i.e. the court which would
have jurisdiction where the cause of action is located and
the courts where the arbitration takes place.”
The Supreme Court in case of Balco (supra) thus was of the view
that in a situation like present both the Courts would have jurisdiction
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 12 of 14
i.e. the Court within whose jurisdiction the subject matter of the suit is
situated and the courts within the jurisdiction of which the dispute
resolution i.e. arbitration is located.
25. Under these circumstances, the restriction of exclusive
jurisdiction would not apply in the present case despite clause 19 of
the Agreement as no actual cause of action or part of cause of action
has arisen in Mumbai. At the best three other courts as mentioned
earlier would have territorial jurisdiction. As the cause of action has
also arisen in New Delhi. The prayer made in the petition is liable to be
allowed.
26. Accordingly, Justice S.N. Variava, Retired Judge of Supreme
Court (Phone 022-22835970 & 22836958) is appointed as sole
Arbitrator to adjudicate the disputes between the parties. The parties
are allowed to file the claim(s) and counter claim(s) before the Arbitral
Tribunal. The Arbitrator shall ensure the compliance of the provisions
of Arbitration and Conciliation (Amendment) Act, 2015 before
commencing the arbitration. The fees of the learned Arbitrator shall be
in terms of the schedule of the Amended Act. The venue of the
arbitration proceedings would be Mumbai.
27. As far as the prayer made in the petition under Section 9 of the
nd
Act is concerned, the interim order passed on 22 September, 2015 is
made absolute during the pendency of arbitration proceedings because
of the reasons that the despite of receiving the goods from the
petitioner and no payment against the bills was made. The only plea of
the respondents is that the goods were defective. If all the goods
supplied by the petitioner were defective, where are those goods? It
was verified as per two orders passed by this court. Only six hundred
defective pieces are available with the respondents. The petitioner time
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 13 of 14
and again agreed to replace them but the respondents are bent upon
not to make the payment. The respondents have not denied the fact
that the cheque of Rs.4 crores issued by them was dishonoured. As of
today more than Rs.5 crores are due. The liberty is granted to the
petitioner to move any fresh application for recovery of the said
amount, however, when it is moved, the same would be decided as per
merit.
28. It is clarified that prima facie view is taken. No final opinion is
expressed by this Court. Both the parties would be entitled to raise
their claims and counter-claims before Arbitral Tribunal who would
decide the matter without the influence of this order.
29. Both the petitions are disposed of accordingly. Dasti.
(MANMOHAN SINGH)
JUDGE
JUNE 03, 2016
Arb.P. No.592/2015 & OMP (I) No.531/2015 Page 14 of 14