IMPORTANT POINT
The court upheld the doctrine of kompetenzkompetenz, allowing the Arbitral Tribunal to rule on its own jurisdiction, and emphasized the importance of arbitration clauses in agreements.

JUDGMENT :

Krishna Rao, J.

1. This is an application filed by the defendant under Section 8 for referring the parties to the suit for Arbitration in terms of the clause of the agreement dated 16th April, 2008.

2. The plaintiff has filed the Civil Suit No. 118 of 2021 against the defendant for a decree of Rs. 1,29,39,103/-along with interest at the rate of 12% per annum. The plaintiff is carrying the business of stockiest and distributor of consumer goods. The defendant is carrying the business of manufacturing in diverse ayurvedic, herbal and cosmetic goods under the name and style of “Shahnaz Ayurvedics” and “Shahnaz Herbals” as a sole proprietor of the business.

3. The defendant had entered into an agreement on 16th April, 2008 with the plaintiff by appointing the plaintiff as distributor of its goods in the Territory of the “State of West Bengal”. The agreement entered between the plaintiff and the defendant was for the period of 36 months from 1st April, 2008 to 31st March, 2011.

4. The defendant claims that the agreement was extended by virtue to mutual consent of the parties and the said agreement is still in force and the relationship between the parties were governed by the terms stipulated in the agreement dated 16th April, 2008. The agreement is a standard form of contract used by the defendant for the purpose of appointing distributors for sale of its manufactured goods all over the country. Only the name of the distributor and the date of execution which may vary from agreement to agreement.

5. The agreement contained a specific clause of arbitration, according to which, all the disputes arising out of the said agreement shall be first attempted to be settled by an amicable negotiation within twenty business days or within such later date, as might be unanimously agreed upon by the parties. On failure to reach a settlement by the said period, the dispute may be referred to arbitration and the arbitral award shall be final and binding upon the parties.

6. Mr. Dyutiman Banerjee, Learned Advocate representing the defendant submitted that the plaintiff has admitted that though the agreement having its date of expiry on 31st March, 2011 but the agreement was extended by virtue of mutual consent of the parties. He submits that the arbitration clause read with the forum selection clause contained in the agreement, elects New Delhi as the situs of the arbitration, thus limiting the jurisdiction of all other courts in respect of any dispute arising out of the said agreement.

7. Mr. Banerjee submits that the claims made by the plaintiff in the plaint is solely on the basis of the agreement which is a continuation of the agreement and thus the claim of the plaintiff can be resolved by an arbitrator as stipulated in the agreement.

8. Mr. Banerjee relied upon the judgment in the case of (Roshin Lal Gupta & Sons Pvt. Ltd. -vs-Delhi Tourism and Transportation Development Corporation & Anr.) reported in 2009 (109) DRJ 456 and submitted that the Delhi High Court held that the arbitration clause constitutes a self-contained contract collateral or ancillary to the underlying or “main” contract. Under the doctrine of implied terms, it has long been held that an arbitration agreement can continue to be implied as one of the terms of the relationship between the parties after the formal expiry of an agreement between them containing an arbitration clause.

9. Mr. Banerjee relied upon the judgment in the case (M.R. Engineers and Contractors Private Ltd. -vs-Som Datt Builders Limited) reported in (2009) 7 SCC 696 and submitted that the Hon’ble Supreme Court had summarized the scope and intent of Section 7(5) of the Arbitration and Conciliation Act, 1996 which reads as follows :

“24. The scope and intent of Section 7(5) of the Act may therefore be summarised thus:

(i) An arbitration clause in another document, would get incorporated into a contract by reference, if the following conditions are fulfilled:

(1) the contract should contain a clear reference