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IN THE HIGH COURT AT CALCUTTA
Krishna Rao, J.
Orissa Metaliks Pvt. Ltd. – Petitioner
Versus
SBW Electro Mechanics Import Export Corporation – Respondent
IA No: GA 2 of 2021 In CS 109 of 2020
Decided On : 22-06-2023
ARBITRATION - [SECTION 45 OF THE ARBITRATION AND CONCILIATION ACT, 1996] - [CLAUSE 19 OF THE PURCHASE AGREEMENT] - Whether the arbitration agreement between the parties is vague, uncertain and incapable of being made certain and therefore invalid? Held that: (i) There is no element of vagueness and uncertainty in Clause 19 of the contract, as regard the intent of the parties to arbitrate in the event of any dispute arising out of the contract. (ii) Section 45 of the Arbitration and Conciliation Act, 1996 mandates that a Judicial Authority, when seized of an action in a manner in respect of which the parties have made an agreement referred to Section 44 of the Act of 1996, shall, at the request of one of the party or person claiming to or under the agreement, referred to parties to arbitration is when the Judicial Authority finds that the said agreement is prima facie found to be null and void, inoperative or incapable of being performed. (iii) In the present case, the plaintiff has only mentioned that the purported arbitration agreement allegedly entered between the parties is vague, uncertain and incapable of being made certain therefore it is invalid. (iv) Clause 19 of the contract contains no ambiguity and clearly evinces the intention of the parties to arbitrate. (v) The question raised by the plaintiff does not fall within the exception under Section 45 of the Act of 1996.
Fact of the Case:
Plaintiff filed a suit for the recovery of Rs. 11,93,93,474/- against the defendant for rejection of defective goods supplied by the defendant, difference in weight of the goods supplied, liquidated damage due to delay in supply of goods, loss and damages suffered due to supply of defective and incomplete products. The defendant filed an application for referring the matter to arbitration on the ground that the supply of goods by the defendant was in terms of the agreement dated 27th October, 2016 and Clause 19 of the said agreement provides for arbitration, the suit is not maintainable and the dispute is to be referred for arbitration in terms of Section 45 of the Arbitration and Conciliation Act, 1996.
Finding of the Court:
The court held that there is no element of vagueness and uncertainty in Clause 19 of the contract, as regard the intent of the parties to arbitrate in the event of any dispute arising out of the contract. The court further held that the question raised by the plaintiff does not fall within the exception under Section 45 of the Act of 1996.
Issues: Whether the arbitration agreement between the parties is vague, uncertain and incapable of being made certain and therefore invalid?
Ratio Decidendi: The court relied on the following principles: (i) Section 45 of the Arbitration and Conciliation Act, 1996 mandates that a Judicial Authority, when seized of an action in a manner in respect of which the parties have made an agreement referred to Section 44 of the Act of 1996, shall, at the request of one of the party or person claiming to or under the agreement, referred to parties to arbitration is when the Judicial Authority finds that the said agreement is prima facie found to be null and void, inoperative or incapable of being performed. (ii) The words ‘null and void’ may be interpreted as referring to those cases where the arbitration agreement is affected by some invalidity right from the beginning, such as lack of consent due to misrepresentation, duress, fraud or undue influence, (iii) The words ‘inoperative ‘can be said to cover those cases where the arbitration agreement has ceased to have effect, such as revocation by the parties. (iv) The words ‘incapable of being performed’ would seem to apply to those cases where the arbitration cannot be effectively set into motion. This may happen where the arbitration clauses is too vaguely worded, or other terms of the contract contradict the parties’ intention to arbitrator, as in the case of the so-called co-equal forum selection clauses.
Final Decision: The court allowed the application and dismissed the suit.
JUDGMENT :
K rishna Rao, J.
1. The defendant has filed the present application under Section 45 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as Act of 1996) praying for referring the instant suit to arbitration in terms of Clause 19 of the agreement and for dismissal of the suit.
2. The plaintiff has filed the suit against the defendant for recovery of amount of Rs. 11,93,93,474/- along with interest at the rate of 18% per annum on account of rejection of defective goods supplied by the defendant, difference in weight of the goods supplied, liquidated damage due to delay in supply of goods, loss and damages suffered due to supply of defective and incomplete products.
3. The plaintiff and the defendant entered into a Purchase Agreement No. OMPL-BF2-IM-0003 dated 27th October, 2016 for design, manufacturing and supply of centrifugal blower, Model D1600-3, its allied accessories for 350 cum, blast furance-2 to be installed at the premises of OMPL.
4. The plaintiff has made payment of the entire contract price of USD 18,00,000 to the defendant but the defendant failed to deliver the goods in terms of the contract. The defendant failed to supply goods of the required quality and the consignments supplied were short in weight by 36.338 MT. The equipment that is the blower and its efficiency and function was dependent on weight of the material. The equipment supplied by the defendant was deficient weight and become unusable.
5. When the plaintiff attempted to assemble the equipment and put it to use, the following transpired :
b. 1st December, 2018 itself, fire was observed in the soft starter panel, which again resulted in blower tripping.
c. Excess consumption of coke was required to maintain furnace hearth temperature which showed inherent manufacturing defect.
d. Excess consumption of power and coke as a result of the manufacturing deficiency.
6. The defendant has filed the instant application for referring the matter for arbitration on the ground that the supply of goods by the defendant was in terms of the agreement dated 27th October, 2016 and Clause 19 of the said agreement provides for arbitration, the suit is not maintainable and the dispute is to be referred for arbitration in terms of Section 45 of the Arbitration and Conciliation Act, 1996.
7. Mr. Jishnu Chowdhury, Learned counsel representing the plaintiff submits that the plaintiff has filed the instant suit on the ground that the purported agreement allegedly entered between the parties is vague, uncertain and incapable of being made certain therefore it is invalid and thus the plaintiff has no recourse to arbitration.
8. Mr. Chowdhury submits that as per the agreement, the venue of the arbitration is at Singapore while the law governing arbitration would be the “International Arbitration Law”. There is nothing known as the International Arbitration Laws and submits that:
b. The parties have consciously agreed not to allow Singapore laws to govern the arbitration. The substantive and procedural laws governing arbitration is not law of Singapore.
c. Parties have agreed that international arbitration laws will govern. There is nothing known as International Arbitration laws.
d. Without contrary indicia or a contrary intention, if it was simply stated that the arbitration would be held at Singapore, then, Singapore laws would have govern the arbitration, it would be substantive law and procedural law.
e. The parties have agreed that international arbitration law would apply, in the absence of any body of law known as the International arbitration laws, the agreement is null and void. The agreement is also inoperative and incapable of being performed. There cannot be arbitration without any governing law. Since, the governing law has
An arbitration agreement is not vague, uncertain or incapable of being made certain merely because it does not specify the law governing the arbitration.
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Arbitration - Place of arbitration - Arbitral tribunal may, after consulting the ICADR, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts o....
Point of Law : There was concurrent jurisdiction conferred on the courts ceased with subject matter in dispute and the courts where arbitration was carried out.
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