Important Point – Section 9(3) does not operate as an ouster clause insofar as courts’ powers are concerned.

BADAR DURREZ AHMED, J.

1. The present appeal is directed against the judgment and/or order dated 26.08.2016 delivered by a learned Single Judge of this Court in OMP(I) (COMM) 153/2016 which was a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the said Act’). The present appeal has been preferred under Section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (hereinafter referred to as ‘the Commercial Courts Act’) read with Section 37 of the said Act.

2. The said petition under Section 9 of the said Act was filed by the appellant seeking interim directions. It was, inter alia, prayed that the respondent (Mahle) be restrained from terminating the alleged distribution agreement dated 17.03.2016 (hereinafter referred to as ‘the said distribution agreement’) or from acting in furtherance of its (Mahle’s) communication dated 21.04.2016. It was also prayed on behalf of the appellant that Mahle should be restrained from dealing with automotive parts which were stuffed in the container (TEMU682885-2) which had been imported by Mahle. As noted by the learned Single Judge, in effect, the appellant sought specific performance of the distribution agreement and thereby sought to restrain Mahle from effectively carrying on any business of selling automotive parts in India, except through the appellant as its exclusive distributor.

3. The appellant is an Indian company and is engaged in the manufacture and sale of automotive parts, including pistons, piston pins, piston rings, engine bearings and bushes, cylinder liners and sleeves and air cooled blocks. Mahle is also an Indian company and is, inter alia, engaged in the manufacturing of engine components for automotive and off-road vehicles. The bone of contention between the parties is with regard to an alleged distribution agreement dated 17.03.2016. The appellant claims that the distribution agreement was entered into and was a binding contract with Mahle for exclusively distributing Mahle’s specified products in India. The respondent/Mahle took the stand that no binding contract had resulted and that the alleged distribution agreement dated 17.03.2016 only remained a draft.

4. The sequence of events leading up to the filing of the petition under Section 9 of the said Act needs to be set out. Initially, an agreement dated 21.11.2006 had been entered into between Mahle Trading (Shanghai) Company Limited (which was a company incorporated in China and engaged in the manufacture of automotive parts) and the appellant. Under that agreement, the appellant was appointed as the authorized distributor of motorcycle pistons in the territories of India, Nepal, Sri Lanka and Bangladesh. That agreement was valid for a period of five years from January 2007 to December 2011.

5. On 01.01.2014, the respondent/Mahle (which is an Indian company) entered into a distribution agreement with the appellant, whereby the appellant was appointed as an exclusive distributor for the territory of India in respect of certain specified products of Mahle and by the same agreement Mahle had agreed not to appoint or seek to appoint any other retailer or dealer in the territory of India. That agreement was for a period of one year, that is, till 31.12.2014. Clause 7.2 of that agreement provided for an automatic renewal of the agreement for an additional period of one year and thereafter, unless either party gave a notice six months prior to the expiry of the said term indicating its intention not to renew.

6. On 24.06.2015, Mahle sent a notice to the appellant in terms of the said Clause 7.2 exercising its right not to renew the agreement on its expiration on 31.12.2015. From these facts, it is clear that Mahle had indicated its intention not to renew the agreement dated 01.01.2014 beyond 31.12.2015. In point of fact, a memorandum of understanding was entered into between the appellant and Mahle on 29.09.2015