Form No.J.(2) IN THE HIGH COURT AT CALCUTTA Civil Appellate Jurisdiction Original Side Present : The Hon’ble Justice Ashim Kumar Banerjee And The Hon’ble Justice Shivakant Prasad A.P.O. No.35 of 2015 A.P. No.408 of 2008 OCOT No.5 of 2015 Yash Traders Vs. M/s Inspiration Cloths and For the Appellant : For the Respondent : Mr. Sakya Sen, Senior Advocate Mr. Sunil Singania, Advocate Mr. Tapas Chatterjee, Advocate Ms. Nilanjana Adhya, Advocate Mr. Abhijit Chatterjee, Senior Advocate Mr. Amitesh Banerjee, Advocate Mr. Bablu Baral, Advocate Heard on : April 9 and 10, 2015. Judgment on : April 21, 2015 ASHIM KUMAR BANERJEE.J: CURTAIN RAISER: The parties entered into an agreement for sale of garments. The agreement would provide, the appellant would place order on the respondent and the respondent would supply the same. The appellant would remain responsible for payment within thirty days from the date of shipment without any deduction, in exchange they would get an incentive of 7.5% of the FOB value against timely payments received by the respondent. In effect, it was an agency and/or dealership agreement by and between the parties under which the appellant was responsible for shipment of the goods abroad in exchange of commission or incentive. Accordingly, the respondent exported goods to Italy, after giving due credit to the sums paid by the respondent, a sum of US dollars 24,296.90 equivalent to Indian Rs.122696.55 became due and payable. The dispute arose by and between the parties when the respondent demanded outstanding sums from the appellant that the appellant denied. The respondent filed a civil suit before the City Civil Court for money decree for Rs.9,48,143.55 whereas the appellant referred the dispute to the arbitration of Bharat Chamber of Commerce as according to them, the agreement stipulated an arbitration clause. The appellant filed an application for stay of the civil suit under Section 8 of the Arbitration and Conciliation Act that the City Civil Court dismissed vide judgment and order dated April 30, 2004. On appeal, the Division Bench set aside the order of dismissal of the application under Section 8. The Apex Court, by an order dated December 8, 2005, initially stayed the arbitration proceeding. The Apex Court ultimately held, the suit and the arbitration would involve different subject of controversy and as such the same could proceed independently. Accordingly, Bharat Chamber of Commerce continued with the arbitration. Respondent correspondence with the never appeared Tribunal inter-alia, however, challenging made the competency of the Tribunal to deal with the subject issue. The Tribunal ultimately published an award that became subject matter of an application under section 34 of the Arbitration and Conciliation Act. The learned Judge allowed the said application and set aside the award holding it vitiated under Section 34(2)(a)iii of the said Act of 1996. Being aggrieved, the appellant preferred the instant appeal that we heard on the above mentioned dates. JUDGMENT
AND ORDER
IMPUGNED: The appellant relied on the arbitration clause incorporated in the invoice. Learned Judge observed, according to Section 7 an arbitration agreement must be in writing, unilateral insertion of the arbitration clause in the invoice would not constitute an agreement in writing hence, there was no valid arbitration agreement and the award would have no consequence in the eye of law. His Lordship also criticized the award being a non-reasoned one. According to His Lordship, it would be hit by the provisions of Section 34. The appellant relied on the rules of the Chamber of Commerce that the learned Judge observed, would have no application particularly when the language of Section 31(3)(a) was clear on the issue obligating the Tribunal to give reason to support the award. Such statutory provisions could not be given a go-by to the rules of the Chamber of Commerce. His Lordship set aside the award. Before the learned Judge, the respondent sought to contend, the decision of the Apex Court holding that there was no arbitration clause, would lead to the conclusion, there could be no arbitration clause and as such the arbitration held by the Tribunal would have no consequence. The learned Judge held, such contention was fallacious in view of the clear finding of the Supreme Court, two sets of documents would govern the field, one set would give rise to the civil suit and the other set would be involved in arbitration. The Apex Court did not decide the said issue pertaining to the arbitration proceeding. The Apex Court only observed, the set involved in the suit would have no arbitration clause and would have no nexus with the other proceeding being the arbitration proceeding. Hence, the learned Judge held in favour of the appellant on such issue. CONTENTIONS: Mr. Sakya Sen learned Counsel appearing for the appellant advanced argument in support of the appeal. Mr. Sen would contend, an agreement in writing would not mean only a formal agreement signed by both parties, a written offer followed by an acceptance would also constitute an agreement. Whether there was any valid agreement or not, would depend upon the conduct of the parties and the documents exchanged between them. The learned Judge, according to Mr. Sen, possibly overlooked this aspect. On the question of reasoning, he would rely upon Section 31(3) to contend, if there was any agreement to the contrary, the law would take a back seat and the statutory provision to assign reason, would not be in operation. Elaborating his argument Mr. Sen would contend, the appellant placed order, the respondent supplied goods. The order placed by the respondent and/or the invoices would contain the arbitration clause to the following effect “All disputes pertaining to this transaction, if any, will be subject to arbitration rules and regulations of Bharat Merchants Chamber”.. This particular clause was duly printed on each of the invoices involved in the present lis. The respondent never objected to the same, rather acted upon such invoices. Hence, the agreement to arbitration was complete. On the aspect of reasoning, he would also rely upon the aforesaid clause that would bind the parties. The clause would provide, the rules of Chamber would apply. As per the Chamber Rules, no reason need be given hence, the award could not be faulted. He would rely upon the following decisions:
1. Mcdermott International Inc Vs. Burn Standered Co. Limited and Others reported in 2006 Supreme Court Cases Volume- XI Page- 181.
2. Mutta International Vs. Nandnandan Silk Mills Private Limited reported in 2007 Arbitration Law Reporter (Bombay) Volume- IV Page- 495.
3. CC. Alavi Haji Vs. Palpetty Muhammad and another reported in 2007 Volume- VI Supreme Court Cases Page- 555 4. WESCARE (India) Limited Vs. Subuthi Finance Limited and Another reported in 2008 Arbitration Law Reporter (Madras) Volume- IV Page- 278.
5. Yogi Agarwal Vs. Inspiration Clothes and U and Others reported in 2009 Supreme Court Cases Volume- I Page- 372.
6. Unissi (India) Private Limited Vs. Post Graduate Instute of Medical Education and Research reported in 2009 Supreme Court Cases Volume- I Page- 107. Per contra, Mr. Abhijit Chatterjee learned senior Counsel appearing for the respondent would contend, parties were never ad-idem on the arbitration clause hence, the same was not binding upon the parties specially the respondent. He would however, in his usual fairness admit, he never objected to such clause being incorporated in the invoice. According to him, the agreement must be entered into at the time of entering of the matrix contract; the invoice was a subsequent event that would be subsequent to the contract between the parties. Such subsequent event having unilateral incorporation of the clause would not be binding upon the parties. He would rely upon two Apex Court decisions:
1. State of Orissa and Others Vs. Bhagyadhar Dash reported in 2011 Volume- VII Supreme Court Cases Page- 406.
2. Karnataka Power Transmission Corporation Limited and Another Vs. Deepak Cables (India) Limited reported in 2014 Supreme Court Cases Page- 148 to support his contention. While distinguishing the decision cited at the bar on behalf of the appellant Mr. Chatterjee would contend, the decision in the case of Unissi (India) (supra) would not be applicable in view of difference in the factual scenario. In the said case the tender document itself incorporated an arbitration clause and by reason of acceptance of the tender that clause would bind the parties as observed by the Apex Court. In the present case, the clause came subsequently that too, without the consent of the other party hence, would not be applicable. On the question of service of notice he would contend, he received the notice subsequent to the final hearing before the Tribunal. He would also term the award as perverse having not recorded any minute as to what actually transpired at the hearing. He would lastly contend, the principles of natural justice would demand proper service of notice that was absent in the present case. While replying, Mr. Sen would distinguish the decision in the case of Karnataka Power (supra) to contend, it was a case of unilateral incorporation of the clause whereas in his case not only the respondent did not object to such clause being incorporated but also acted upon the said invoice. He would also distinguish the decision in the case of State of Orissa and Others Vs. Bhagyadhar Dash (supra) to contend, paragraph 20 to 25 would make a clear distinction, in that case the particular clause came up for interpretation that the Apex Court held not an arbitration clause. In the present case, the interpretation of the clause was not in dispute. The applicability of the same was in question. OUR VIEW: Before we go into the subject controversy let us deal with the cases cited at the bar. In the case of Karnataka Power (supra), the Apex Court dealt with the interpretation of Section 7 and held that the clause must convey that the parties had intention expressing consensual acceptance to refer the dispute to an arbitrator. In the case of State of Orissa (supra), the Apex Court interpreted the clause and came to conclusion, it was not an arbitration clause. In the case of Unissi (India) (supra), the Apex Court was of the view, even if there was no formal agreement executed by the parties having regard to the fact that the tender document contained an arbitration clause and the parties accepting tender would be bound by the same. The decision in the case of Yogi Agarwal (supra) would however, not have any relevance save and except, it dealt with the proceeding under Section 8 referred to above and came to conclusion, the subject matter of the suit was not covered by the arbitration agreement. The Apex Court was of the view that the subject matter of the suit and subject matter of the present arbitration were two different sets of transaction. In the case of Mcdermott International (supra), the Apex Court dealt with various issues on the Arbitration and Conciliation Act, particularly, dealing with the scope and ambit of the Court to set aside an award. Mr. Sen would rely upon paragraph 55 and 56 that would deal with the issue of reasoning. The Apex Court was of the view that the reasons revealed the grounds on which the arbitrator reached the conclusion. The Tribunal has to give its reason on consideration of relevant materials however, the reasons was mandatory requirement “unless dispensed with by the parties”.. In the case of CC. Alavi Haji (supra), the Apex Court dealt with the issue of service of notice and held, when the statute did not require that the notice should be given only by post, the other modes would also be available. Mr. Sen would rely upon paragraph 14 where the Court acknowledged the incidence of “not available in the house”., “addressee not in station”., “house locked”. as good service. In the instant case, the arbitrator sent notice by under certificate of posting as well as registered post. The respondent claimed, they received the letter sent through under certificate of posting after the meeting whereas the arbitrator relied on the undelivered packet that came back from the postal authorities with the remark “intimation served, 06.03.2008, not claimed”.. Mr. Sen would also rely upon the Madrass High Court decision and the Bombay High Court decision. The Madrass High Court decision in the case of WESCARE (supra) would recognize an arbitration agreement even if the party did not sign. The learned Judge observed, “Signature is not a formal requirement of arbitration agreement”.. The Bombay High Court decision in the case of Mutta International (supra) relied on Mcdermott International (supra) to find out the meaning of “reason”.. Having regard to the law on the subject so discussed above, let us now go into the subject controversy. The parties had different transactions. The Apex Court recognized some of the transactions to be within the scope of the civil suit. The other part covering three invoices would admittedly have an arbitration clause printed thereon. The respondent never objected to such clause contemporaneously. Their objection came only when the Tribunal became active in dealing with the controversy. The respondent never appeared before the Tribunal, did not pursue their grievance raising the question of jurisdiction under Section 16 and permitted the Tribunal to proceed. The respondent never approached the Court to stop the arbitration proceeding. The proper course would have been to appear before the Tribunal and contest the proceeding under Section 16 questioning the authority and propriety of the Tribunal. They did not choose to do so. They allowed the Tribunal to function. We wonder how their belated objection on jurisdiction issue could be dealt with at this stage particularly considering the past conduct as discussed above. On the reasoning, we are of the view, Section 7 would make it clear, unless there was any agreement to the contrary reasoning was a must. Mr. Sen would rely upon the rules that would not compel the Tribunal to give reasons. However, there must be a specific agreement, in our view, to exclude the obligation to assign reason. The matter could be viewed from another angle. The statute would provide, reasoning was a must and absence of reason would vitiate the award. To deactivate the statutory provision, the parties must enter into a specific agreement to the said effect, merely because the rules of Chamber would be applicable, would not, if so facto operate as a bar on the statutory provision compelling the Tribunal to give reasons. The appeal thus succeeds in part. We reject the contention of the respondent, there was no arbitration agreement. We hold, the invoices would contain a valid arbitration clause that would be binding upon the parties hence; the Tribunal was within its power and authority to deal with the issue through the arbitration mechanism. We however, find fault with the award as it was without any reason. We send the award back to the Tribunal for supplementing the reason to support their award. Since the issue was long pending we would expect the Tribunal to act as expeditiously as possible. We also permit the Tribunal to hear the parties if they want any further hearing on the issue. We also permit the Tribunal to change or modify their award if they so think fit and proper, for doing substantial justice to the parties. The appeal is thus disposed of accordingly without any order as to costs. Shivakant Prasad J.
: I agree. (ASHIM KUMAR BANERJEE, J.) (SHIVAKANT PRASAD J.
) LATER:Stay of operation of the judgment is prayed for and the same is refused. (ASHIM KUMAR BANERJEE, J.) (SHIVAKANT PRASAD J.
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