Arbitration and Conciliation Act, 1996:
s.11 – Application under – Seeking appointment of sole arbitrator – Sustainability of – 37 Purchase Orders placed by respondent in favour of applicant – Parties also entered into agreement dated 31.03.2018 relating to same transaction – Application for appointment of arbitrator by applicant relying on Clause 7 of the 37 Purchase Orders – Plea of respondent that entire transaction was governed by agreement dated 31.03.2018 which was an ‘Umbrella Agreement’ and as per Clause 23 thereof, Arbitral Tribunal had already been constituted by International Chamber of Commerce (ICC) – Held: In view of the nature of dispute that has been raised by the applicant with regard to the price and terms of payment including recovery etc., the parties would be governed by Clause 23 of the agreement dated 31.03.2018 and not by Clause 7 of Purchase Orders – Therefore, Special leave Petition as regards the applicant’s grievance against Constitution of Arbitral Tribunal by ICC is also not liable to be entertained.
Dismissing the Arbitration Application and the Special Leave Petition, the Court
HELD:
Arbitration Petition (Civil) No. 15 of 2020:
1. Since the transaction entered into between the parties and the dispute having arisen not being in dispute; further arbitration Clause 7 of the 37 separate purchase orders being explicit; in a normal circumstance no other consideration would have been necessary in the limited scope for consideration in an application under Section 11 of the Act, 1996. However, in the present case the fact remains that undisputedly an Agreement dated 31.03.2018 is also entered into between the parties relating to the very same transaction which is referred to as the “Umbrella Agreement” by the respondent and as “Pricing Agreement” by the applicant. The said agreement also makes provision for resolution of disputes through arbitration in the manner as indicated therein. [Para 7][1042-G-H; 1043-A]
2. A perusal of the documents reveals that in the present case the applicant had not initiated the process of invoking the arbitration clause. On the other hand a notice dated 13.03.2020 (Annexure A-41) was issued on behalf of the respondent by its attorney to the applicant referring to the breach of the agreement dated 31.03.2018 (Umbrella agreement/Pricing agreement) and as per the procedure provided under Clause-23 of the said agreement an opportunity was provided to amicably resolve the matter; failing which it was indicated that the respondent would approach the International Chamber of Commerce (ICC) in 30 days. It is in reply to the said notice dated 13.03.2020 issued by the Respondent on 13.04.2020, the applicant herein disputed the claim put forth by the respondent under the Agreement dated 31.03.2018 referring to it as the Pricing Agreement. Further, the applicant thereafter referred to the nature of their claim and thereon proceeded to indicate that the constitution of the Arbitral Tribunal and conduct of arbitration proceeding shall be in accordance with Clause-7 of the contract terms forming part of and governing all individual contracts. [Para 9][1045-C-F]
3. In the above backdrop, when both, the purchase order as also the Pricing Agreement subsists and both the said documents contain the arbitration clauses which are not similar to one another, in order to determine the nature of the arbitral proceedings the said two documents will have to be read in harmony or reconciled so as to take note of the nature of the dispute that had arisen between the parties which would require resolution through arbitration and thereafter arrive at the conclusion as to whether the instant application filed under Section
11 of the Act, 1996 would be sustainable so as to appoint an arbitrator by invoking Clause-7 of the purchase order; more particularly in a situation where the Arbitral Tribunal has already been constituted in terms of Clause-23 of the agreement dated 31.03.2018. [Para 10][1045-G-H; 1046-A]
4. A close perusal of Paras 6, 7, 8 and 9 of the reply by the applicants dated 13.4.2020 would indicate that the reference made by the applicant with regard to the price and the terms of the payment governing individual contracts is with reference to the Pricing Agreement which in fact is the Agreement dated 31.03.2018. In that context, the terms 5, 8, 9 and 10 of the Pricing Agreement would indicate that it provides for the mechanism relating to purchases and sales; final price, payment of provisional price and adjustment of advance, determination of the final sale price and monthly accounting and payment. On taking note of the same, a perusal of the contract terms in the purchase order relied upon by the applicant does not provide for such determination of pricing except the purchase order referring to the price of the quantity ordered for and the special terms relating to provisional price etc. Therefore, in that circumstance the nature of dispute raised by the applicant themselves in the reply notice dated 13.04.2020 will indicate that those aspects are to be determined in terms of the provisions contained in the Agreement dated 31.03.2018 which resultantly will be relevant for payment to be made under each of the purchase order. Therefore, even if disputes are raised relating to the contract terms, the pricing, deductions etc. will relate to the main agreement and the Arbitral Tribunal constituted thereunder can go into other issues if any arises under the contract terms of the individual purchase order as well. [Para 12][1047-C-F]
5. It is not correct to say that the Pricing Agreement dated 31.03.2018 cannot be deemed to have applied to the earlier purchase orders, as the transaction in fact had commenced as far back as on 08.08.2017 and 21 purchase orders were placed up to 30.03.2018 i.e. prior to 31.03.2018 i.e. the date on which the Pricing Agreement was executed. Clause-20(a) of the Agreement dated 31.03.2018 provides that the Agreement shall commence on 31.03.2017 and end on 31.03.2021. This clearly indicates that it was the intention of the parties that the terms contained in the Agreement would govern all transactions, including those which had commenced from 08.08.2017. Further it is noticed that the parties were earlier governed by an Agreement dated 19.06.2017 which was for a fixed quantity of 2000 MT of the produce while the present agreement, according to the parties was on a long term basis fixing the time period for which it was valid and the individual purchase orders will have to be taken note for the specific quantity ordered for under each of the transactions, the price of which was to be ultimately determined as provided under the Pricing Agreement. [Para 13][1047-G-H; 1048-A-C]
6. Thus, when admittedly the parties had entered into the agreement dated 31.03.2018 and there was consensus ad-idem to the terms and conditions contained therein which is comprehensive and encompassing all terms of the transaction and such agreement also contains an arbitration clause which is different from the arbitration clause provided in the purchase order which is for the limited purpose of supply of the produce with more specific details which arises out of Agreement dated 31.03.2018; the arbitration clause contained in Clause-23 in the main agreement dated 31.03.2018 would govern the parties insofar as the present nature of dispute that has been raised by them with regard to the price and the terms of payment including recovery etc. In that view, it would not be appropriate for the applicant to invoke Clause-7 of the purchase orders more particularly when the arbitration clause contained in the Agreement dated 31.03.2018 has been invoked and the Arbitral Tribunal has already been appointed on 22.06.2020. [Para 14][1048-D-F]
Olympus Superstructures Pvt. Ltd. v. Meena Vijay Khetan & Ors. (1999) 5 SCC 651 : [1999] 3 SCR 490 – relied on.
SLP (C) NO. 10264 OF 2020:
7. The petitioner claiming to be aggrieved by the constitution of the Arbitral Tribunal under the Agreement dated 31.03.2018, has filed the suit seeking a decree of declaration that the arbitration clause-23 of the Pricing Agreement dated 31.03.2018 is null and void and in that context has sought for the ancillary relief in the suit. In the said suit the petitioner has moved the ‘Notice of Motion’ seeking for an interlocutory order of injunction against the Arbitral Tribunal constituted by the ICC. The prayer for interim order has been rejected and the ‘Notice of Motion’ has been dismissed. The appeal to the Division Bench has been admitted for consideration though the plea for grant of interim order was declined. There is no reason to interfere with the same, more particularly keeping in view conclusion on the same subject matter while addressing the rival contentions in the Arbitration Application No.15/2020. [Paras 15-16][1049-AD]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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