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2017 Supreme(Del) 4352
IN THE HIGH COURT OF DELHI AT NEW DELHI
S.P.GARG, J.
M/S Shree Ganesh Metals – Plaintiff
Versus
Glencore International AG & anr. – Defendants
CS(COMM) No. 154 of 2017
Decided On : 02-11-2017
For the Plaintiff :Mr. V.K.Garg, Sr. Advocate with Ms. Noopur Dubey and Mr. Anupam Kirti, Advocates.
For the Defendant :Mr. Ciccu Muklupadhyan, Sr. Advocate with Ms. Priyanka Sharma and Mr. Gautam Saroop, Advocates, Mr. Rizwan with Mr. Sharique Hussain, Advocates
The main legal point established in the judgment is that for the enforcement of an arbitration agreement, there must be a clear intention and acceptance of the terms by both parties. Mere reference of contract number in communications is not sufficient to imply consent to the arbitration clause.
Headnote:
Arbitration Agreement - Sale-Purchase Agreement - Arbitration & Conciliation Act, 1996, Section 45 - 29.2, 32.2 - The court discussed the existence of an arbitration agreement between the parties and the validity of the arbitration clause in the 2016 contract. It highlighted the importance of clear intention and acceptance of terms for the enforcement of an arbitration agreement. The court found that the application to invoke the arbitration clause was unmerited and dismissed it.
Fact of the Case:
The defendant filed an application under Section 45 of the Arbitration & Conciliation Act, 1996, to invoke an arbitration agreement in a suit for Declaration, Permanent Injunction, and Recovery of $12 lacs filed by the plaintiff. The defendant claimed that the 2016 contract between the parties contained an arbitration clause and sought to refer the plaintiff to arbitration.
Finding of the Court:
The court found that no concluded contract with an arbitration clause came into existence between the parties in the 2016 contract. It emphasized the importance of clear intention and acceptance of terms for the enforcement of an arbitration agreement. The court dismissed the application to invoke the arbitration clause.
Issues: The main issue was the existence and validity of the arbitration agreement in the 2016 contract, and whether the parties had a clear intention and acceptance of the terms for the enforcement of the arbitration agreement.
Ratio Decidendi: The court held that for an arbitration agreement to be enforced, there must be a clear intention and acceptance of the terms by both parties. Mere reference of contract number in communications was not sufficient to imply consent to the arbitration clause. The court emphasized the need for a specific and clear intention to incorporate an arbitration clause from another document into the contract.
Final Decision: The court dismissed the application under Section 45 of the Act to invoke the arbitration clause, finding it unmerited.
S.P.GARG, J.
IA No. 4550/2017 (u/S 45 of the Arbitration & Conciliation Act, 1996, filed by defendant No.1)
1. In a suit for Declaration, Permanent Injunction and Recovery of $ 12 lacs (Rs. 8 crores approximately) filed by the plaintiff against the defendants, application under Section 45 of the Arbitration & Conciliation Act (hereinafter referred to as ‘The Act’) has been filed on behalf of the defendant No.1 to invoke arbitration agreement. It is contested by the plaintiff.
2. Defendant No.1’s case in the application is that in the previous agreements dated 20.04.2011 (‘First 2011 contract’), 01.07.2011 (‘Second 2011 contract’), 23.11.2011 (‘Third 2011 contract’) and 11.01.2012 (‘2012 contract’), there were arbitration agreement between the parties. The parties were desirous of entering into a further agreement in 2016 for sale-purchase of 6000 metric tons of zinc from March 2016 to February 2017. The business modalities were initially reduced into writing in an e-mail dated 10.03.2016 (hereinafter ‘Business Confirmation E-mail’). It set out the commercial terms such as quality, quantity, quotational period, delivery term, price, payment, value of the letter of credit, performance bank guarantee amongst others. Besides the commercial terms, it recorded, “All other terms and conditions as per last contract between GIAG and Shree Ganesh Metals.”
3. It is further averred that by its e-mail dated 11.03.2016, the plaintiff expressly agreed to and accepted all terms of the Business Confirmation save and except the term relating to provisional pricing. The plaintiff responded :
“We confirm the same terms as said just one thing that provisional price of both, either the LC or invoice will be average of last 5 LME days.”
4. Pursuant to the written confirmation from the plaintiff, agreement dated 11.03.2016, being contract No.061-16-12115-S (‘2016 contract’) incorporating all the terms of the ‘Business Confirmation E-mail’ and the plaintiff’s e-mail dated 11.03.2016 was entered into (Annexure D). It is urged that the 2016 contract, similar to all previous contracts between the parties, provided for resolution of disputes through arbitration vide clause 32.2. Not only that, the said agreement was acted upon and various correspondences, raising of invoices, letter of credit etc. occurred subsequent to that between the parties. Subsequently, differences and disputes arose between the parties and the plaintiff acted in breach of terms of 2016 contract. The applicant was constrained to encash the standby letter of credit of USD 1,003,000. Since there was an ‘arbitration agreement’ between the parties within the meaning of Section 44 read with Section 2(f) of the Act read with Article II of the First Schedule of the Act, this Court has no jurisdiction to entertain the plaintiff’s suit. The parties are governed by the 2016 contract. The plaintiff has not challenged the ‘arbitration agreement’ it being null and void or inoperative. Prayer has been made to refer the plaintiff to arbitration to be held in accordance with Rules of London Court of International Arbitration as provided in the ‘arbitration agreement’ contained in clause 32.2 of the 2016 contract.
5. In the reply to the IA, it is vehemently pleaded that there was no ‘arbitration agreement’ between the parties as required under Section 7 of the Act. Terms and conditions referred under the agreement dated 11.03.2016 were neither accepted nor concluded as the said agreement was never signed by the plaintiff/non-applicant. There was no question of acceptance of arbitration clause for adjudication of any dispute. E-mail dated 10.03.2016 is of no consequence as it was written by Glencore India Pvt. Ltd. and not by defendant No.1. It is further urged that business modalities were initially reduced into writing in the e-mail dated 10.03.2016. The issue to refer the dispute to arbitration was neither discussed nor approved by the plaintiff any time. No valid ‘arbitration agreement’ came i
