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2019 Supreme(Cal) 133
IN THE HIGH COURT OF CALCUTTA
SOUMEN SEN, J.
IFGL REFRACTORIES LTD. - Appellant
Versus
LINDSAY INTERNATIONAL PVT LTD. - Respondent
Arbitration Petition No. 413 of 2017
Decided on : 22-01-2019
Advocate Appeared:
Anindya Kr Mitra, Adv., Soumabho Ghose, Adv., Anshumala Bansal, Adv., Tanmoy Chakravarty, Adv., Arti Bhattacharyya, Adv., S.K. Kapoor, Adv., Rudraman Bhattacharya, Adv., Priyanka Prasad, Adv., Ayan Roy, Adv., S.R. Kakrania, Adv.
Headnote:
The Court held that the amendment to Section 11(6A) of the Arbitration and Conciliation Act, 1996 (the 1996 Act) by the Arbitration and Conciliation (Amendment) Act, 2015 (the 2015 Amendment Act) has changed the basis of law for consideration of applications under Section 11 of the 1996 Act and has laid down that consideration of such applications should be made only by considering the question of existence of the arbitration agreement. The Court further held that the 2015 Amendment Act is prospective in nature and does not have retrospective effect.
Fact of the Case:
The petitioner, IFGL Exports Limited, filed an application under Section 11 of the 1996 Act for appointment of an arbitrator in terms of an agreement dated 1st September, 2010. The respondent, Lindsay and two of its shareholders/directors, filed a suit against 42 defendants, including IFGL Exports Ltd., in which IFGL Exports Ltd. invoked arbitration for the purpose of adjudicating their alleged claims against Lindsay on account of payment for goods sold and delivered. The respondent opposed the application, contending that in deciding the present application, the frame of the suit filed by Lindsay against 42 defendants, which include the present petitioner, is required to be taken into consideration. The respondent further submitted that the disputes concern 45 parties in total and there is no arbitration agreement covering all the parties. The respondent also argued that Section 11(6A) of the 1996 Act is ultra vires the constitution.
Finding of the Court:
The Court held that the 2015 Amendment Act has changed the basis of law for consideration of applications under Section 11 of the 1996 Act and has laid down that consideration of such applications should be made only by considering the question of existence of the arbitration agreement. The Court further held that the 2015 Amendment Act is prospective in nature and does not have retrospective effect. The Court also held that Section 11(6A) of the 1996 Act is intra vires the constitution.
Issues: 1. Whether the 2015 Amendment Act has changed the basis of law for consideration of applications under Section 11 of the 1996 Act? 2. Whether the 2015 Amendment Act is retrospective in nature? 3. Whether Section 11(6A) of the 1996 Act is ultra vires the constitution?
Ratio Decidendi: The Court held that the 2015 Amendment Act has changed the basis of law for consideration of applications under Section 11 of the 1996 Act and has laid down that consideration of such applications should be made only by considering the question of existence of the arbitration agreement. The Court further held that the 2015 Amendment Act is prospective in nature and does not have retrospective effect. The Court also held that Section 11(6A) of the 1996 Act is intra vires the constitution.
Final Decision: The Court allowed the application and appointed Hon'ble Justice Jyotirmay Bhattacharya, former Chief Justice, High Court, Calcutta as the sole arbitrator.
SOUMEN SEN, J.
1. This is an application under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter "the 1996 Act") for appointment of an Arbitrator in terms of an agreement dated 1st September, 2010.
2. The petitioner claims to be an unpaid vendor. The petitioner contends that the respondent placed twelve purchase orders on the petitioner for supply of refractory products along with general terms and conditions governing the same. The consignee to whom such products were to be delivered would be specified in such purchase orders. The petitioner has disclosed copies of such purchase orders and the general terms and conditions of the respondent which were accepted by the petitioner. It is stated that each and all of the purchase orders disclosed in the petition expressly refer to the general terms and conditions of supply of the respondent bearing no. LIPL/IFGL/GCTS/10-01 dated 1st September, 2010 and amendment no.1 thereto made by the respondent.
3. The general terms and conditions for supply prepared by the respondent and which formed part of the contract between the parties, inter alia, contain an arbitration clause in Clause 19, which reads:
"19.1 In case BUYER and SELLER fails to reach an agreement on any dispute, controversy, interpretation of any terms, claim arising out of or in connection with General Terms & Conditions of Supply and Purchase Order or the breach, termination shall be settled by arbitration in accordance with the Rules of Arbitration of the Indian Arbitration & Conciliation Act, 1996.
19.2 Both BUYER and SELLER shall each select an arbitrator and the two (2) arbitrators thus chosen shall select an Umpire.
19.3 The award of the arbitrator(s) or Umpire, as the case may be, shall be final and binding upon the parties.
19.4 The venue of arbitration shall at Kolkata, India and the Courts in Kolkata shall have the exclusive jurisdiction.
19.5 Except for the matter which is specifically under arbitration the parties shall continue to perform their respective other obligations under any and all Purchase Orders."
4. A certified copy of the agreement dated 1st September, 2010 is annexed to the petition.
5. The petitioner contends that it had supplied materials in terms of the purchase orders supported by bills of lading obtained by the petitioner from the shipping companies in the name of the respondent as shipper/consignor and in the name of the party nominated by the respondent as consignee and other documents, namely, Customs endorsed invoices-cum-packing list of the respondent, shipping bills, invoices raised by the petitioner upon the respondent and bill of export duly endorsed by the Customs Authorities. The petitioner states that the respondent has accepted each and all of the invoices of the petitioner in respect of the aforesaid purchase orders without any demur. The prices mentioned in the purchase orders were mentioned in foreign currency, mostly Euro and/or Dollars and also other currencies depending on the country where the goods were supplied. It is stated in the petition that on comparison between the price at which the respondent received the export orders from the overseas buyers and the price as quoted in the purchase orders issued by the respondent on the petitioner, it would appear that the respondent has kept a margin of 4.50% as their profit and placed purchase orders on the petitioner @ 95.50% of the price at which the respondent received the export orders from their overseas buyers.
6. The petitioner contends that in terms of the purchase orders, within three working days of receipt of payment by the respondent from the foreign buyers, the respondent was to effect payment to the petitioner in Indian rupees equivalent to the amount of foreign currency mentioned in the purchase orders. The respondent by email sent on 28th October, 2016 has admitted that Rs. 4.21 crore has been received from the overseas buyers to the account of IFGL Group. Out of the admitted amount of Rs. 4,
