2007 Supreme(SC) 1283

2007(7) Supreme 252
Supreme Court of india
Lokeshwar Singh Panta, JJ.
Citi Bank, N.A. — Petitioner
versus
TLC Marketing PLC & Anr. — Respondents
Arbitration Petition 1 of 2007
Decided on : 05-10-2007

important point
When the parties fail to determine the number of arbitrators, section 10(2) of the Arbitration and Conciliation Act, 1996 applies.

Headnote:(a)Arbitration and Conciliation Act, 1996 – Section 8 and 20 – There can be a dispute only when a claim is asserted by one party and denied by other on whatever grounds – Mere failure or inaction to pay does not lead to the inference of the existence of dispute –Whether in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case. (Para 15)

       (1988) 2 SCC 338 – Distinguished.

       (b)Arbitration and Conciliation Act, 1996 – Section 11(6) – The contract is a commercial document and must be interpreted in a manner to give efficacy to the contract rather than to invalidate it – Narrow technical approach is not proper – Clause 10 of the arbitration imports in itself all disputes and the arbitration agreement cannot be said to be as vague or uncertain as to be unenforceable – In view of the instances of breaches of the terms and conditions of the relevant clauses of the agreement coupled with the breaches of specific obligations and responsibilities and having regard to the words used in Clause 10 of the agreement as also the respondent accepting existence of arbitration agreement by suggesting the matter to be referred to an arbitral tribunal of three members, one to be appointed by each party; the matter deserves to be referred to arbitration. (Para 28)

       (c)Arbitration and Conciliation Act, 1996 – Sections 10(1) and 10(2) – Having regard to the fact that the parties have failed to determine an even number of arbitrators as per the provisions of Section 10(1) of the Act, the requirement of Section 10(2) of the Act is fully attracted in the present proceedings, and the arbitration agreement is deemed to be one providing for a sole arbitrator – Sole arbitrator appointed. (Paras 29 and 30)

       Facts of the case:

       The applicant-Citibank, is a national banking association duly constituted, registered and in existence in accordance with the laws of the United State of America now in force and having its head office at 399 Park Avenue, Borough of Manhattan, City of New York and having an office in India among other places at Citigroup Centre, G. C-61, Bandra-Kurla Complex, Bandra (East), Mumbai. The applicant-Citibank, being engaged in banking business in India pursuant to licences and approvals from relevant authorities including Reserve Bank of India, inter alia, issues Credit and Debit Cards collectively [‘Citibank Cards’].

       The respondent No.1-TLC Marketing PLC (for short ‘TLC’), is a company incorporated under the provisions of the laws in force in the United Kingdom having its registered office at 54, Banker Street, London WIU 7BU. TLC is a company engaged in the business of marketing and selling inter alia leisure, life-style and travel services.

       The respondent No.2-Wunderman India Pvt. Ltd. (for short ‘WIPL’) is an Indian company incorporated under the provisions of the Companies Act, 1956 and has its registered office at Kalpataru Synergy, 2nd Floor, Opp. Grand Hyatt, Off Western Highway, Vakola, Santa Cruz (East), Mumbai. Respondent No.2-WIPL is an exclusive marketing and fulfilling agent of respondent No.1-TLC for the Indian sub-continent.

       The applicant-Citibank, relying upon the claims, assurances and representations made by the respondents-TLC and WIPL, as regards their expertise in handling proposed arrangements, a tripartite agreement was entered into between the parties on 04.10.2005. The agreement became operational w.e.f. 01.10.2005 and was to be valid till 31.08.2006.

       Under the scheme it was agreed to by the parties that the eligible credit card customers of the applicant-Citibank, having fulfilled certain specific criteria, were entitled to ‘Free return flight vouchers’ on air routes within India subject to the applicable terms and conditions. As and when, any of the customers of the applicant-Citibank qualified/fulfilled the eligibility criteria he/she would get a voucher from the applicant-Citibank. The customers, after the receipt of the vouchers, had the option to voluntarily complete the details required in the voucher including the choice of three destinations and three dates of travel but not earlier than 30 days from the date of signing the voucher and sending the same to the applicant-Citibank. The respondent No.2-WIPL was required to perform various tasks including, but not limited to contacting the customer, checking seat availability, confirming the booking request according to preferences and sending confirmation to customers of their preference of travel date/destination. The applicant-Citibank and the respondents - TLC and WIPL agreed to the Scheme called the “Fly for Sure” programme, which was envisaged by the applicant-Citibank to be effective from 01.10.2005 until 31.12.2005. The applicant-Citibank contracted for buying 1,00,000 return air-ticket vouchers from the respondents-TLC and WIPL in anticipation of the success of the Scheme for a consideration of Rs.432/- plus applicable taxes per voucher and, accordingly, had paid for the same in accordance with Appendix-II of the agreement. According to the applicant-Citibank, it was the responsibility of the respondents-TLC and WIPL to ensure fulfillment of the Scheme to the satisfaction of the customers. It is stated that under the Scheme, 35,000 card members of the applicant-Citibank were found to be eligible for availing of the ‘free return air-ticket’ to be provided by the respondents-TLC and WIPL. The applicant-Citibank forwarded the vouchers completed by the eligible and interested card members to respondent No.2-WIPL in accordance with the procedure agreed to by the parties. The vouchers/requests forwarded by the applicant-Citibank were to be honoured by the respondents-TLC and WIPL by conducting themselves in a manner as stipulated under the agreement. It is further stated that the respondents-TLC and WIPL could only have offered alternative dates or destinations to the customer(s) after having obtained the consent of the said customer(s) towards such alterations.

       At the initial stage the operation and implementation of the Scheme progressed as per the agreement between the parties. However, since January, 2006 the applicant-Citibank started receiving complaints from its eligible customers indicating deficiencies on the part of the respondents-TLC and WIPL. Both the respondents seemed to have started indulging in a number of questionable practices, such as deliberately not fulfilling/honouring their commitments which they had made to the eligible customers/card members in the ‘booking confirmation’ by calling them on the dates close to their travel dates and forcing them to postpone dates of travel and further pressurizing the customers/card members into opting for destinations and dates not preferred/requested for and cancelling the original ‘booking confirmations’. The applicant-Citibank through various communications has brought all the complaints to the notice of the respondents-TLC and WIPL and repeatedly requested both of them to discharge their commitments as contained in the agreement. It is stated that in spite of repeated communications being sent by the representatives and officials of the applicant-Citibank to the respondents-TLC and WIPL, they merely gave assurances and no actual measures were undertaken by the respondents to solve such complaints of the customers. The applicant-Citibank indicated various instances of breaches of the terms of the agreement which were being repeatedly committed by the respondents-TLC and WIPL that needed to be remedied, failing which the applicant-Citibank stood in a position of incurring irreparable losses, loss of goodwill and reputation along with the possibility of being subjected to various proceedings that were being threatened by the affected customers. The responses dated 30.04.2006 and 04.05.2006 received from the legal counsel of respondent No. 1-TLC indicated that the respondents have found the Scheme to be ‘over sold’ and allegedly to be commercially unviable to honour the commitments and there was a clear indication in the said responses of abdication on the part of the respondents-TLC and WIPL of their responsibilities and obligations under the agreement inasmuch as new conditions to perform the obligations were set out which suggested payment of further amount which was de hors the terms of the agreement itself. In the circumstances created by the respondents-TLC and WIPL, the applicant-Citibank vide its letter dated 10.05.2006 informed the respondents-TLC and WIPL of the termination of their involvement under the agreement w.e.f. 10.05.2006 which was necessitated due to the acts of omission and commission on their part and continued loss of goodwill and reputation of the applicant-Citibank. The applicant-Citibank, subsequent to the termination of the involvement of the respondents-TLC and WIPL under the agreement, was compelled to take the remedial action of providing return air-tickets to its eligible customers/card holders. In view of the failure of the respondents-TLC and WIPL to perform their respective obligations in terms of the agreement and in order to resolve the disputes, the applicant-Citibank issued a legal notice dated 15.07.2006 through its counsel to the respondents-TLC and WIPL, thereby invoking the provisions of Clause 10 of the agreement dealing with the resolution of disputes which had arisen between the parties.

       Findings of the Court:

       In view of the parties failing to determine the number of arbitrators, section 10(2) of the Act applies.

       Result : Petition disposed of by appointing sole arbitrator.