IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE Present : The Hon’ble Justice Soumen Sen C.S.626 of 1990 Green Distributors Vs. U.P. Seeds & Tarai Development Corporation Ltd. For the plaintiff : Mr. Arindam Sinha, Ms. Sutapa Sanyal, Mr. Syamantak Banerjee, Mr. T. Aich For the defendant : Mr. Arijit Banjerjee, Mr. Sabyasachi Chowdhury, Mr. R.L. Mitra, Ms. Priyanka Dhar Heard on :
10. 06.2013, 24.06.2013, 01.07.2013, 02.07.2013, 03.07.2013, 04.07.2013, 04.07.2013 Judgment on :
17. h July, 2013 Soumen Sen, J.:- The plaintiff has filed the suit on July 27, 1990 for recovery of sum of Rs.6,87,222.37p. from the defendant on account of commission charges. The plaintiff was appointed in the year 1981 by the defendant as distributor for sale of different kinds of seeds for the territory of West Bengal on, inter alia, the following terms and conditions:- a) The plaintiff would keep in deposit with the defendant Rs.5,000/- as security to be returned by the latter on termination of the distributorship, with interest at the rate of 10 per cent per annum. b) The plaintiff would procure orders sell the said goods to the dealers appointed by the defendant at the rates and on the terms to be specified by the defendant. c) The plaintiff would be entitled to a commission on the sale proceeds of the said goods at the rates varying from 2 ½ per cent to 4 ¼ per cent payable by the defendant on or after 30th June every year. d) The plaintiff would cause of the said goods to be delivered from the godown of the defendant at Calcutta. In terms of the aforesaid agreement, the plaintiff deposited a sum of Rs.5,000/- as security money. The plaintiff since September, 1981 until June 30, 1990 acted as distributor of the defendant and during that period procured orders for sale of the said goods and sold the same to the dealers appointed by the defendant at diverse places. The plaintiff contended that the plaintiff had discharged its duties and obligations under the said agreement and became entitled to agreed commission on the sale proceeds of the said goods at the rates varying from 2 ½ to 4 ¼ per cent. The defendant from time to time had paid some commission and after giving credit for all the payments received as on June 30, 1990 a sum of Rs.5,29,050,97 p. remained due and payable by the defendant to the plaintiff as the balance of the agreed commission. The plaintiff contended that the plaintiff is entitled to interest at the rate of 18 per cent per annum on the said amounts of commission from the respective dates when such commission became payable and had relied upon Schedule “A”. and Schedule “B”. of the Plaint to show that a sum of Rs.6,87,222.37p. became due and payable along with interest so calculated as on 30th June, 1990. In spite of repeated demands, requests and reminders the defendant has failed, neglected and refused to pay the aforesaid sum. In view thereof, the plaintiff filed this suit for recovery of a sum of Rs.6,87,222.37p. due and payable as on 30th June, 1990 along with interest. The defendant entered appearance and filed its written statement. In the written statement, the defendant contended that this Court has no jurisdiction to try, receive and determine the suit. The defendant contended that initially one Pashupati Das & Sons (P) Ltd. (hereinafter referred to as the “said company”.) was appointed as a distributor of the defendant for the State of West Bengal during period 1970 to 1980 on terms and conditions which were agreed upon between the parties. The members of Das family, namely, Usha Kanta Das, Abani Kanta Das, Manoranjn Das, Pashupati Das, Amiya Kanti Das amd Chitta Ranjan Das were at all material times the Directors of the said Company. In the year 1981, the defendant published an advertisement entered in the State of West Bengal for appointment of Distributor of its seeds. The said company by a letter dated 23rd February, 1981 submitted its offer and agreed to act as a distributor of the defendant. Thereafter, the parties were negotiating and ultimately on representation made by Amiya Kanti Das that Das family would take up distributorship of seeds in whole of West Bengal under the name and style “Green Distributors”. and are agreeable to deposit the requisite security money as also advanced payment, the said plaintiff was appointed as a distributor for the State of West of Bengal. It was contended that the plaintiff has, in fact, the alter-ego of the said limited Company and on a clear representation that the said limited Company in effect would function as a distributor under a new name the defendant had agreed to appoint the plaintiff as its distributor in the State of West Bengal instead and place of the said company. The appointment of the plaintiff as a distributor was also on the basis of a representation made by the said company that they were facing labour trouble and it would not be possible for the said company to continue with the business because of such labour unrest. In view of the close association of the plaintiff with the said company the defendant had agreed to appoint the plaintiff as its sole distributor in the State. The defendant used to maintain open mutual and current account with the said company and on conciliation of the accounts as on July 1, 1987 a sum of Rs.2,92,910.30 p. became due and payable by the said company to the defendant. When the dispute arose, the defendant had offered to pay a sum of Rs.2,36,140.94 p. after adjustment of a sum of Rs.2,92,910.30 p. receivable on account of the transactions between the said company and the defendant no.1. The defendant, in effect, pleaded set off. Apart from the aforesaid, the defendant relied upon Clauses 34 and 35 of the General Terms and Conditions for appointment of distributor as a ground for ouster of jurisdiction of this Court. Mr. Arijit Banerjee, the learned Counsel appearing with Mr. Sabyasachi Chowdhury on behalf of the defendant argued that the defendant is entitled to recover a sum of Rs.2,92,910.30 p. from the plaintiff since the plaintiff, in fact, is an alter-ego of the said company. The learned Counsel invited this Court to apply the doctrine of lifting of corporate veil to sustain its claim of set off against the plaintiff. It was argued that Mr. Amiya Kanti Das, the sole witness on behalf of the plaintiff in his deposition has clearly accepted the aforesaid position. The defendant in its written statement denied the plaintiff’s claims. The defendant stated that during the period 1970 to 1980 one Pashupati Das & Sons (P) Ltd. acted as a Distributor of the defendant for the State of West Bengal. The entire shareholding of the said private limited company (hereinafter referred to as “Pashupati”.) at all material times was held by the members of the Das family viz. Usha Kanta Das, Abani Kanta Das, Amiya Kanti Das and Chitta Ranjan Das who were also the Directors of Pashupati. In the year 1981 the defendant published an advertisement for appointment of Distributor of its seeds. By a letter dated February 21, 1981 Pashupati offered itself as Distributor. Pursuant to discussions and negotiations by a letter dated March 23, 1981 the defendant informed Pashupati that the latter had been appointed as the defendant’s Distributor for West Bengal in the year 1981 and called upon Pashupati to make necessary deposit of security money and make payment of 10% advance against requirements of Pashupati of Kharif seeds before March 1981. Pashupati was also called upon to fill in a prescribed application form and under cover of the said letter a draft agreement was also forwarded to Pashupati so that the formal agreement could be prepared and signed on behalf of Pashupati. In the negotiations and discussions Pashupati was represented by the aforesaid members of the Das family and/or some of them. At a meeting dated August 28, 1981 it was represented on behalf of the aforesaid members of the Das family that they were unable to take up the distributorship in the name of Pashupati by reason of labour trouble being faced by Pashupati but they were ready and willing to do so under a new name. It was also represented that the distributorship would be taken up by a partnership firm constituted by the aforesaid members of the Das family who were shareholders and Directors of Pashupati. Subsequently, Amiya Kanti Das by a letter dated 1st September, 1981 informed the defendant that the Das family was agreeable to take up distribution of the defendant’s seeds in West Bengal in new name and style. It was stated in the letter that Das family would be able to open their bank account on finalization of their partnership deed. Thereafter, a letter dated September 7, 1981 was issued on behalf of Das family forwarding thereunder the necessary security deposit as also advance payment and intimating that the distributorship of the defendant in West Bengal would be carried on by the Das family under the name and style of M/s. Green Distributors and that the deed of partnership relating to the said firm was yet to be finalized and would be sent to the defendant immediately on finalization thereof. Thus the said members of the Das family represented to the defendant that Pashupati and the plaintiff were both family business of the Das family and so inextricably linked up and connected with each other so as to in reality form part of the said concern. It was thus argued that the aforesaid course of events and the evidence on record would clearly establish that the plaintiff is the alterego of the said company and, accordingly, the claim against the said company is recoverable from the plaintiff. In this regard he has relied upon the following decisions:- I) LIC Vs. Escorts Ltd. (1986(1) SCC 24.(Para 90); II) State of UP Vs. Renu Sagar Co. (AIR 198.SC 173.(Para 63, 65 and 66); III) New Horizon Ltd. Vs. Union of India. (1995(1) SCC 47.(Para 27 to
37) IV) Delhi Development Authority Vs. Skippers Construction Co. Private Ltd. (AIR 199.SC 200.(Para 24 to 28); V) Calcutta Chromotype Ltd. Vs. Collector of Central Excise, Calcutta. (1998 (3) SCC 68.(Para 12 and 13); VI) Subhra Mukherjee Vs. Bharat Coking Coal Ltd. (2000 (3) SCC 31.(Para 11); VII) Kapila Hingorani Vs. State of Bihar (2003 (6) SCC Page 1 (Para 25 to 27); VIII) Jai Narain Parasrampuria Vs. Pushpa Devi Saraf (2006 (7) SCC 75.(Para 48 to
51) It was argued that the plaintiff cannot refer and rely upon the terms and conditions for distributors for the purpose of establishing his right in the suit but avoiding the other clauses of the said agreement in denying its liability to the defendant. In this Connection he has relied upon the following decision reported in AIR 199.SC 35.(R.N. Gosain Vs. Yaspal Dhir) Mr. Banerjee argued that in view of Clause 35 of the General Terms and Conditions as applicable to the appointment of distributorship, this Court has no territorial jurisdiction to try and receive the suit. In this regard he has relied upon the following decisions:I) A.B.C. Laminart Pvt. Ltd. Vs. A.P. Agencies (AIR 198.SC 1239.1989(2) SCC 16.(Para 5,6,8,10,16,21 and 22); II) Man Roland Druckimachinen AG Vs. Multicolour Offset Ltd. & Anr (2004(7) SCC 44.(Para 9 and
18) Mr. Banerjee submitted that the plaintiff has admitted in evidence in answer to Question No.201 of Cross-examination that the plaintiff would abide by the General Terms and Conditions content of forum selection clause in Clause 35. It is immaterial if any agreement has been formally executed between the parties. The plaintiff has disclosed the said agreement and, in fact, based its claim on the basis of the clauses mentioned in the said General Terms and Conditions. Accordingly, the said clauses of the agreement including the clause with regard to forum selection would apply in proprio vigore and the plaintiff cannot escape the said clause. On this aspect Mr. Banerjee relied upon AIR 195.SC 81.Para 7 (Jugal Kishore Rameshwardas v. Mrs. Goolbai Hormusji) and AIR 198.Cal 202 Para 2 (Das Consultants Pvt. Ltd. v. National Mineral Development Corporation Ltd.). It was argued that in view of the fact that the plaintiff is an alter-ego of the said company, namely, M/s. Pashupati Das & Sons Pvt. Ltd., the defendant is entitled to claim set off against dues of the plaintiff to extent of Rs.2,92,910.30/- It was submitted that even if the principle of legal set off may not apply in the strict sense of the term but the plaintiff is entitled to an equitable set off in terms of Order 8 Rule 6 of the Code of Civil Procedure. Mr. Banerjee relied upon the following decisions in support of such contention:I) AIR 193.Cal 277 (Jitendra Nath Ray v. Jnananda Kanta Das Gupta); II) 40 CWN 75.(Hari Ananda Shaha Poddar & Ors. v. Mohummad Esahak Mia); III) AIR 195.Trav-Co 239 (Aiyappan Pillai Krishna Pillai v. Narayanan Padmanabhan & Ors.); IV) AIR 195.Patna 73 (Sheobachan Pandey & Anr. v. Madho Saran Choubey & Ors.); V) AIR 199.Del 355 (Cofex Exports Ltd. v. Canara Bank) Mr. Arindam Sinha, the learned Counsel appearing on behalf of the plaintiff submitted that the agreement based on forum selection clause mentioned in Clause 35 of the General Terms and Conditions is misconceived. It was submitted that Clause 34 of the said General Terms and Conditions refers to resolution of dispute by arbitration whereas Clause 35 gives an exclusive jurisdiction to the Civil Court in the District of Nainital. When the plaintiff instituted the suit in this Court, an application was made by the defendant under Section 34 of the Arbitration Act, 1940. The defendant did not get any order for stay of the suit. The suit continued. The trial commenced and the proceedings continued. Thereafter, in the written statement filed by the defendant, the defendant did not raise any issue with regard to arbitrability of the said dispute. On the contrary, the defendant contended in Paragraph 12 of the said Written Statement that this Hon’ble Court has no jurisdiction to entertain, try and determine the instant suit by reason of Civil Court in the District of Nainital having exclusive jurisdiction in the matter and where admittedly a part of the cause of action had also arisen. The said clause would be applicable only when the dispute relates to any matter not covered or related directly or indirectly to the contract contained in terms and conditions for distribution. The defendant cannot take different stand in respect of the agreement pleaded by the plaintiff. Once the defendant had filed an application under Section 34 of the Arbitration Act, 1940, the defendant clearly proceeded on the basis that the said dispute is arbitrable and arising out of the terms and conditions of the contract. The defendant is unable to establish that the plaintiff and the defendant had executed any contract which contains Clauses 34 and 35 of the General Terms and Conditions. The learned Counsel refers to the agreement that was entered into between the Company and the defendant no.1 following acceptance of the General Terms and Conditions which specially contains the aforesaid clause. The plaintiff was appointed in September, 1981 as the distributor of the defendant for the sale of the said food-grains in the State of West Bengal on terms and conditions as pleaded in the Plaint and it is an admitted position that no written contract was executed by and between the parties. It was further submitted that in the appeal preferred by the defendant in the said Section 34 proceeding before the Hon’ble Supreme Court an order was passed on 10th January, 1994 observing that the suit shall be disposed of on merit and the criminal proceedings initiated by the defendant no.1 against the respondent in Nainital was remain stayed till the disposal of the suit. It was argued that Clauses 34 and 35 of the General Terms and Conditions are severable in nature and unless there is a consensus ad idem with regard to such severable parts of contract, the plaintiff cannot be non-suited on the basis of forum selection clause. It was the lack of mutuality which would not sustain a claim made by the defendant either with regard to arbitrability or forum selection clause and in this respect he relied upon AIR 198.SC 208.at page 2093 (Ramji Dayawala & Sons (P.) Ltd. v. Invest import). It was submitted that the plaintiff was appointed as a distributor in September, 1981. Pashupati Das & Sons Pvt. Ltd. was a distributor of the defendant company for whole of West Bengal and the said distributorship agreement was terminated by the defendant on 26th November, 1980. There was written agreement between the said company and the defendant. After termination of the said business, the said company faced labour trouble and the Limited Company was not at all interested to start business but when the defendant approached the plaintiff and requested him to take up distributorship. The same was reconsidered and the plaintiff agreed to start business under a new partnership. It was argued that the witness on behalf of the plaintiff has categorically stated in his evidence that there was no connection with the previous Limited Company and from the very beginning of the business of the defendant Corporation, the plaintiff did not sign any agreement with them. The understanding was that though no agreement was signed, the defendant would pay the overriding commission of the business as per their terms and conditions and they had been paying commission from the year 1981-82 to 198889. It was surprising that the defendant did not invoke the bank guarantee furnished by the Limited Company during continuations of the distributorship which course was open to the defendant before or after termination of the agency for realization of its alleged due of Rs.2,92,910.30/-. The defendant allowed the bank guarantee to lapse. There was no understanding or agreement between the plaintiff and the defendant that the plaintiff would assume any liability on account of alleged dues owned from the Limited Company to the defendant. It was submitted that when the identity of both the entities were known to the defendant since inception and the defendant has dealt with the plaintiff as an independent entity, the doctrine of corporate veil cannot be applied. The plaintiff and the Limited Company are two separate entities and always treated to be so by the defendant. Accordingly, it is argued that the plaintiff is not entitled to claim either a legal or an equitable set off against the dues of the plaintiff. On the contrary, relying upon the statements furnished by the defendant and the stand taken by them in this proceeding, it would appear that the defendant admitted the entire dues of the plaintiff and in view of such admission, the plaintiff is entitled to a decree for the entire sum. Mr. Sinha relied upon AIR 197.SC 172.(Thiru John V. Subramhamanyan Vs. The Returning Officer & Ors.) to remind this Court of the well-settled proposition that an admission if clearly made is the best evidence against the party making it and though not conclusive, shifts the onus on to the maker on the principle that “what a party himself admits to be true may reasonably be presumed to be so and until the presumption is rebutted the fact admitted must be taken to be established.”
. Mr. Sinha contended that it is well-settled that there cannot be admission and avoidance at the same time. they should be permitted. They cannot co-exist not The defendant while accepting that a sum little over Rs.500000/- is due and payable by the defendant to the plaintiff with a mala fide and fraudulent intention raised a stale demand it alleged to have against the Limited Company in order to deny the legitimate dues of the plaintiff. The parties with their eyes wide open have entered into an arrangement and have conducted themselves in terms of the said arrangement and at this stage the said plea of set off was raised without any basis and with the sole intention of denying its liability. On the issue raised with regard to Exhibit 10, namely, the terms and conditions for distributors, it was argued that the said document was tendered in evidence by the defendant during the examination-inchief of the witness and Exhibit 10 was never put to the witnesses of the plaintiff during cross-examination and not even it was suggested during the cross-examination that the plaintiff was appointed on the basis of Exhibit 10 and, accordingly, it was not open to the defendant to argue that the said Exhibit 10 forms the basis of the agreement under which the plaintiff was appointed as a distributor. The learned Counsel has referred to the clear enunciation of law in this regard in the famous Carapiet’s case reported in AIR 196.Cal 359 (A.E.G. Carapiet v. A.Y. Derderian) where the Hon’ble Division Bench held that the Counsel is bound to do when cross-examining that he must put to each of his opponent’s witnesses in turn, so much of his own case as concerns that particular witness or in which the witness had any share. After the commencement of the trial on 15th December, 2004 the following issues were framed for consideration and disposal of the suit:“1. Is the suit maintainable in its present form?.
2. Has this Court jurisdiction to proceeding with the suit?.
3. Is the suit barred by limitation?.
4. Are Pashupati Das & Son’s Pvt. Ltd. and the plaintiff alter ego to each other?.
5. Is the defendant entitled to any sort of set off against the claim of the plaintiff?.
6. Is the plaintiff entitled to decree as prayed for?.
7. To what other relief or reliefs is the plaintiff entitled?.”. During argument issue nos. 1 and 3 were not pressed. Let me not consider the issue with regard to jurisdiction of this Court to proceed to the suit. It is the case of the defendant that this Court ordinarily would have jurisdiction to try and determine the suit but for Clause 35 of the General Terms and Conditions for appointment of distributor. The plaintiff is bound by such forum selection clause. The onus is on the defendant to establish it. The defendant has relied upon Exhibit 10, namely, the General Terms and Conditions for appointment of distributor in order to establish that the Civil Court at Nainital is the only Court where dispute has to be adjudicated. In order to sustain a plea based on such forum selection clause, it has to be established that the plaintiff and defendant have agreed that they would be governed by the terms and conditions contained in Exhibit 10. The ouster of jurisdiction has to be strictly construed since all Civil Courts will have jurisdiction to decide all civil matters unless by statute or otherwise their jurisdiction is excluded. Similarly, in a contract containing forum selection clause which results in ouster of one Court and preference of one Court to the other when both the Courts are having undoubted jurisdiction to try and determine the suit is to be strictly construed. The jurisdiction clause is a severable clause and on this, the parties should be ad idem. In the decisions referred to by Mr. Banerjee, namely, A.B.C. Laminart Pvt. Ltd. (supra) and Man Roland Druckimachinen AG (supra) it would appear that the agreements containing the forum selection clause have been duly executed by the parties and there was no dispute with regard to the execution of such agreements. It was based on a written contract duly executed by the parties. In so far as the other two decisions are concerned, namely, AIR 195.SC 81.(Jugal Kishore Rameshwardas v. Mrs. Goolbai Hormusji) and AIR 198.Cal 202 (Das Conulstants Pvt. Ltd. v. National Mineral Development Corporation Ltd.) it was held that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties, and it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established. In Jugal Kishore (supra) the appellant was a share-broker carrying on business in the city of Bombay and a member of the Native Share and Stock Broker’s Association of Bombay. The dispute arose between the share broker and his client with regard to sale of certain shares. The client respondent repudiated the contracts by which the share broker appellant purchased certain shares to square the outstanding sales of the respondent and send the relative contract notes to his respondent. The respondent declined to confirm the transactions and, accordingly, the share broker applied to the said Stock Brokers Association in pursuance of a clause in the contract notes which is as follows:“In event of any dispute arising between you and me/us of this transaction the matter shall be referred to arbitration as provided by the Rules and Regulations of the Native Share and Stock Brokers’ Association”.. In deciding as to whether the arbitration clause in the contract note constitutes an arbitration agreement, the Hon’ble Supreme Court held as follows:“(7) It may be argued that if the contract note is only intimation of a sale or purchase on behalf of the constituent, then it is not a contract of employment, and that in consequence, there is no agreement in writing for arbitration as required by the Arbitration Act. But it is settled law that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties, and that it is sufficient if the terms, are reduced to writing and the agreement of the parties thereto is established. Though the respondent alleged in her petition that she had not accepted the contract notes, Ex. A, she raised no contention based thereon either before the City Civil Judge or before the High Court, and even, in this Court the position taken up by her counsel was that Ex. A constituted the sole repository of the contracts, and as they were void, there was no arbitration clause in force between the parties. We accordingly hold that the contract notes contained an agreement in writing to refer disputes arising out of the employment of the appellant as broker to arbitration and that they fell outside the scope of S.6 of Act 8 of 1925, that the arbitration proceedings are accordingly competent, and that the award made therein is not open to objection on the ground that Ex. A is void.”
. It was found that though the respondent alleged in her petition before the Hon’ble Supreme Court that she did not accept the contract notes, Exhibit A, she raised no contention based thereon either before the City Civil Judges or before the High Court, and even the Hon’ble Supreme Court, the position taken up by her Counsel was that Exhibit A constituted the sole repository of the contracts, and as they were void, there was no arbitration clause in force between the parties. The Hon’ble Supreme Court construing Section 2(a) of the Arbitration Act, 1940 held as follows:“It is settled law that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties, and it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established.”
. In Das Consultants Pvt. Ltd. (supra) a dispute arose with regard to determination of the existence of the arbitration agreement as referred to in Paragraph 2 of the petition filed before the Hon’ble Court. The Late former Chief Justice of India before His Lordship’s elevation to the Hon’ble Supreme Court considered this aspect of the matter in Paragraph 2 of His Lordship’s Judgement which is reproduced hereinbelow:“2. It is necessary to decide the controversy to determine the question, firstly, whether there was any arbitration agreement. not it is clear that there is no arbitration agreement which is signed by both the parties. It is not necessary that the arbitration agreement should be signed. All that is necessary is that there should be an agreement for arbitration reduced to writing. This will be clear from a reference to Section 2(a) of the Arbitration Act. Therefore, it is necessary to have a written agreement to submit present or future differences to arbitration whether the arbitrator is named or not. Sec. 2(a) does not enjoin that the arbitration agreement should be signed by both the parties. This position has already been made clear by the decision of the Supreme Court in the case of Banarasidas v. Cane Commissioners, AIR 196.SC 1417.Therefore, it is necessary to find out whether there was a concluded arbitration agreement. In the first letter dated 20th March, 1976 the respondent had stated: “Six copies of the agreement were left with us”.. They went on to say, “the following discrepancies were noticed in the copes compared to earlier draft already agreed upon by you.”
. Therefore, certain agreement was agreed upon between the parties and certain draft was there. They pointed out that in the draft sent by the petitioner, they had noticed that there were some discrepancies and they had pointed that out. They said that they had sent back the agreement after making the correction and that agreement contained an arbitration clause. The arbitration clause was therefore transformed into writing. That is not disputed. If one goes into the letter dated 20th March, 1976 one will find that those were the terms agreed upon by the petitioner and the respondent. The said agreed terms again contained a clause that the agreement would be deemed to have come into force with effect from 1st of June, 1972, and all obligations and responsibilities of the parties to the agreement would be deemed to have commenced from the above date. The agreement also stipulated that certain letters including the letter of indent should be deemed to form an integral part of the agreement.”
. It would, thus, appear that there was a “concluded arbitration agreement”. which contains arbitration clause. Moreover, it was on interpretation of Section 2(a) of the Arbitration Act, 1940 and the letters exchanged by and between the parties relating to the letters of indent the Hon’ble Court concluded that there was a concluded arbitration agreement. In the instant case, the jurisdiction of a Civil Court to try all suits of a civil nature should be in terms of the provisions of the Code of Civil Procedure and the agreement between the parties. Section 9 of the Code mentions that the Court shall have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is expressly or impliedly barred. The jurisdictions of the Courts are defined in Sections 16 to 20 of the Code. In order to give preference of one Court to the other which means exclusion of one Court which otherwise is competent to try and receive the suit has to be strictly construed when there is no dispute that both the Courts would otherwise have jurisdiction to decide the lis. In order to oust one Court and give preference of one to the other, the Court is required to be satisfied that the parties have agreed in writing that a particular Court should have exclusive jurisdiction over all disputes under the agreement. Therefore, what is first required is to be established is that there is concluded agreement between the parties containing a forum selection clause. Analogy of Section 2(a) of the Arbitration Act, 1940 cannot be extended while considering a plea based on ouster of jurisdiction of a Civil Court in absence of a concluded contract. In the instant case, the terms are not reduced to writing and the agreement of the parties thereto not established. In view of lack of mutuality and failure to establish that the parties have agreed to resolve their disputes only at Nainital such submissions cannot be accepted. Moreover, in order to attract the jurisdiction of the Civil Court at Nainital, it has to be a dispute in respect of all matters not covered by the said agreement. The defendant, on the one hand, contended that the disputes are covered under Clause 34 of the General Terms and Conditions and, on the other hand, relied upon Clause 35 in order to oust the jurisdiction of this Court. Moreover, the defendant has failed to establish that the parties have entered into a concluded agreement containing such forum selection clause during the continuation of the said distributorship business or that the plaintiff was made aware that the parties would be governed by the said agreement and the parties would be bound by the said agreement. There is no evidence on record to show that at any point of time the parties have agreed to be bound by the terms of the said General Terms and Conditions. Accordingly, this Court is not inclined to accept the argument based on Clause 35 of the said agreement. In any event, it appears that this Court was directed by the Hon’ble Supreme Court to decide the suit on merits. A decision on merit, in my view, would mean a decision on substantive issues as opposed to technically collateral issues. In the Law Lexicon, 3rd Edition, P. Ramanatha Aiyar, Page 1121, the word “merit”. was defined as under:“The word “merits”. should be understood as meaning the strict legal rights of the parties, as contradistinguished from those questions of mere practice which every Court regulates for itself, and from all matters which depend upon the discretion or favour of the Court. Where the word is used in speaking of the determination of a prosecution on the merits it implies a consideration of substance, not of form; of legal rights, not of mere defects of procedure, or the technicalities thereof.”
. In view thereof the said issue is answered against the defendant and in favour of the plaintiff. The argument based on lifting of corporate veil to justify an equitable set off also appears to be misconceived. In this regard, reference may be made to the depositions of the parties. Learned Counsels on both sides have extensively referred to Question Nos.117 to 175 and 201 in the Cross-examination of Amiya Kanti Das and Question Nos.29,52-55, 59, 60, 63, 67-71, 73, 76, 87, 88, 84, 95, 108, 109, 111, 112, 136 in the examination-in-chief of Sarjeet Singh. It appears from the analysis of the evidence of the said witnesses that the defendant has terminated the agency of the Limited Company on 26th November, 1980 and it was incumbent upon the said defendant at the time of termination to settle the accounts between the parties. The said terms and conditions provide that in the event of breach of agreement and/or any terms and/or any conditions by the distributor, the Corporation shall forfeit the security deposit and revoke the distributorship (Clause 12). The said sum of Rs.2,92,910.30 if at all it was due from Pashupati was against seeds supplied before November 26, 1980. The duration of the distributorship is for one year from the date of signing of the agreement. It is not in dispute that the Corporation entered into an agreement in writing with the Limited Company containing such clauses. The Corporation also received security deposit by way of Bank guarantee bearing No.30/80 dated 16th September, 1980 for Rs.15 lakhs issued by United Bank of India, Dharmatala Brach for supply of seeds on credit. During cross-examination of Mr. Sarjeet Singh, the said witness admitted that such a claim of Rs.2,92,910.30/- was detected in August 1980 (Q.22 to 27 in cross-examination). The witness, however, stated that both the concerns were related to the Das family and, therefore, these transactions went on mutually. The said witness, however, had failed to explain the reason for not realizing the alleged dues of Rs.2,92,910.30/- prior to termination or soon thereafter when the fact remains that the defendant was having a subsisting bank guarantee of Rs.15 lakhs. Although it was open for the defendant to realize its dues from the Limited Company before or soon after the termination by invoking the bank guarantee, the defendant did not take any steps. The evidence on record would not show that there had been dealings and transactions between the company and the plaintiff after termination of the contract. The Corporation was required and obliged under Clause 12 of the said terms and conditions to settle the accounts and if required forfeit the security deposit and revoke the distributorship for any breach of agreement. Clause 7(b) of the General Terms and Conditions clearly stipulates that in the event of termination of this contract for any reason, the distributor shall settle all its accounts or recoverable statement sent by the Corporation within 30 days. In the event of a distributor neglecting or failing to settle accounts within the stipulated period, an account certified by the Corporation shall be deemed to be absolutely final and conclusive for all purposes. The distributor shall also submit an account clearance certificate from all the dealers attached to him within the above-stipulated period. Accordingly, the Corporation ought to have settled the accounts in terms of the aforesaid clause with the limited company and the accounts produced showing certain amounts recoverable from the company would also not show that the parties, namely, the Corporation and Company maintaining any open current mutual and continuous account and continued with their relationship thereafter. The claim against the said company on the face of it appears to be stale. In the absence of the company in this proceeding the veracity of the claim by the defendant against the plaintiff cannot be gone into and decided. On the contrary it would appear that during negotiation with the plaintiff, the defendant required the plaintiff to deposit a sum of Rs.5000/- as security deposit and as an advance Rs.1,50,000/- for reservation of 500 M.T. of wheat seeds. It would, thus, go to show that the plaintiff was treated as a separate entity otherwise there would not have been any requirement for the plaintiff to furnish security deposit of Rs.5000/-. The defendant has relied upon Exhibits 6 and 7 in order to establish its claim of set off. Exhibit 6 is a statement of accounts of the plaintiff wherefrom it appears that from October, 1981 till September, 1990 there were transactions. Exhibit 7 relates to a statement of account of the Limited Company. From the said statement of accounts it would appear that as on 30th June, 1983, sum of Rs.2,92,910.30/- was due and payable by Limited Company to the defendant. Simultaneously, the plaintiff was functioning as a distributor and paid the commission. There is no evidence on record which would show that the defendant prior to 20th June, 1987 raised any issue with regard to Rs.2,92,910.30/- receivable from the Limited Company. The defendant for the first time on 20th June, 1987 made an attempt to adjust the said debit balance out of the distributor’s commission for 1984-85 and 1985-86 payable to Green Distributors following disputes raised by the plaintiff with regard to payment of its commission which had resulted in the filing of the present suit. The plaintiff at no point of time had accepted the liability on behalf of the Limited Company and the same would be evident from the documents disclosed and the evidence adduced on behalf of the plaintiff. Mr. Banerjee has made strenuous attempt to impress upon the Court that identity of the two entities as one is established from the evidence of Mr. Amiya Kanti Das. It was submitted that Mr. Amiya Kanti Das during his Cross-examination in answer to Question No.201 has admitted the said position. In order to appreciate this argument, Question No.201 and the answers given are set out hereinbelow:“201. Kindly look at the copy of the letter in paragraph 3, you were requested to do certain things. Did you do that?. /No.(Witness volunteers :- From the very beginning of the business with the defendant the plaintiff did not sign any agreement with them. The understanding was that though the agreement was not signed the defendant would pay the overriding commission of the business as per their terms and conditions and they had been paying that commission from the year 1981-82 to 1988-89.)”. This answer read with other answers given by the plaintiff does not show that there is any formal agreement was entered into between the parties. agreement Since inception the understanding was that though no was signed the defendant would pay the overriding commission of the business as per their terms and conditions. As mentioned earlier, the defendant cannot apply all the terms and conditions for appointment of distributor including the jurisdiction and arbitration clause without a written formal agreement as is required under the general terms duly signed by the parties. The evidence would only show that the parties have agreed as to the rate of the commission to be paid by the defendant to the plaintiff. Unlike Section 2(a) of the Arbitration Act, 1940 the terms and conditions for distributors being Exhibit 10 on which reliance was placed by the parties, it requires a written agreement duly signed as mentioned in Clauses 5 and 6 thereof which are reproduced hereinbelow:“5. The agreement shall be executed by the distributor and the Corporation. These terms and conditions would be annexed to the agreement and shall form part of the agreement.
6. The distributorship shall commence from the date of signing of the agreement and shall be valid for one year unless withdrawn or terminated as per clause 7. The terms and conditions as revised by the Corporation from time to time shall also form part of the agreement.”
. The defendant has failed to establish that agreement has been executed between the parties. Consequently, the terms and conditions for distributors cannot be relied in order to non-suit the plaintiff on the ground of forum selection clause. Amiya Kanti Das in his evidence has categorically submitted that the plaintiff had never accepted the liability of the Limited Company. To lift, tear or pierce the corporate veil means to ignore the corporate personality of an incorporated company with a view to ascertaining the human personality hiding behind the façade of the corporate garb, when especially the said façade is used as a disguise by the human beings who try to conceal their identity after perpetrating some wrong or fraud in the guise of the company. It is argued that the company and the partnership firm are being managed and controlled by the members of Das Family and having regard to the fact that there is an admitted due of Rs.2,92,910.30/- from Pashupati, the said amount should be allowed to be adjusted against the claim of the plaintiff. The Corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded, or where associated companies are so inextricably connected as to be, in reality, actually a part of one concern. (Tata Engineering & Locomotive Co. Ltd. Vs. State of Bihar, AIR 196.SC 40.Life Insurance Corpn of India Vs. Escorts Ltd., AIR 198.SC 1370.The corporate veil should not be pierced simply by reason of the fact that a group of companies operate as a single economic entity. The courts will only lift the veil where it is clear that the purpose of the corporate entity is to evade – (i) limitations imposed by law and (ii) such rights of relief against the owner as third parties already possess. (Adams v. Cape Industries plc. (1991) 1 All ER 92.Courts have lifted the corporate veil when the veil is assumed to perpetuate a fraud. Where there is a fraud or a deliberate breach of trust the courts exhibit a willingness to pierce the corporate veil. Secondly, when the corporate veil is a mere sham or façade concealing true facts, the lifting of the veil is justified. The meaning of the term ‘sham’ was elaborated upon in the case of Snook v. London and West Riding Investments Ltd. (1967) 2 QB 78.CA (Civ Div). Acts done or documents executed by the parties which were intended by them to give third parties or the courts an appearance of creating between the parties legal rights and obligations distinct from the actual legal rights and obligations which the parties intended to create. The same principle of lifting the corporate veil in the event of fraud being perpetuated is also reiterated in the case of Vodafone International Holdings B.V. Vs. Union of India (UOI) and Anr. (2012(1) S.C.R.
573) In the instant case, it appears that some of the shareholders of the company are also the partners of the plaintiff but the fact remains that the plaintiff was constituted after the termination of the agency agreement of the limited company and the defendant has treated the plaintiff as a separate entity distinct from the limited company. Moreover, the plaintiff was required to pay security deposits as a condition precedent for continuing with the arrangement and act as distributor in the State of West Bengal. The defendant did not allege that there is any fraud of the plaintiff at the time of taking the distributorship business or subsequently. The identity of the partners of the plaintiff as well as that of the limited company were known to the defendant when the plaintiff was appointed as distributor. In view thereof, the said doctrine piercing the corporate veil would not apply in the instant case. Since the defence of legal and equitable set off is dependent on an affirmative answer on the doctrine of lifting of corporate veil in favour of the defendant and having regard to the fact that the said question was answered in the negative, there is no requirement to go into this aspect. It is, however, sufficient to mention that in a claim based on legal and equitable set off the following conditions are to be satisfied:(i) Both the claims must arise out of the same transaction, or are so connected that they can be regarded as parts of the same transaction; and (ii) It would be inequitable to drive the defendant to a separate suit. If the above conditions are fulfilled, an equitable set-off may be allowed by the court in its discretion for ascertained or even unascertained sum of money. One of the conditions to claim legal set off is that the due should be legally recoverable. If the claim of the defendant is barred by the law of limitation no set off can be pleaded. It would appear from the Exhibit 7 that the claim against the Limited Company is expressly barred by limitation. There is no dispute that a sum of Rs.5,29,050.97/- is due and payable by the defendant to the plaintiff as on 31st March, 1990. The defendant has claimed a set off of Rs.2,92,910.30/- and accepted its liability to the extent of Rs.2,36,140.94/-. In view of findings arrived at that the defendant is not entitled to claim a set off for the aforesaid amount the plaintiff is entitled to claim the said sum of Rs.5,29,050.97/Accordingly, the plaintiff shall be entitled to a decree for a sum of Rs.5,29,050.97/-. Since the claim is arising out of a commercial transaction, the plaintiff shall be entitled to interest at the rate of 8 per cent per annum (simple) from the date of institution of this suit till realization. The suit is decreed accordingly. draw up the decree expeditiously. The Department is directed to Mr. Arijit Banerjee, learned Counsel appearing on behalf of the defendant, prays for stay of operation of the judgment and decree. The same is considered and refused. Urgent xerox certified copy of this judgment, if applied for, be given to the parties on usual undertaking. (Soumen Sen, J.)