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2018 Supreme(Del) 808
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
PRIKNIT RETAILS LTD. & ORS - Petitioners
Versus
ANEJA AGENCIES - Respondent
O.M.P. (COMM) 374 of 2016 & IA No.9569 of 2016
Decided On : 22-03-2018
For the Petitioners:Mr Kamal Gupta, Mr Neeraj Gupta and Mr Anirudh Kanav, Advocates.
For the Respondent:Mr R. G. Srivastava with Mr. D. K. Goswami, Advocates.
The central legal point established in the judgment is the requirement for a valid and clear arbitration agreement, emphasizing consensus ad idem and clear communication and acceptance of the arbitration clause by both parties.
Headnote:
Arbitration - Jurisdiction - Act 1996, Section 34 - Summary of Acts and Sections: Arbitration and Conciliation Act, 1996, Section 34 - The court addressed the existence of an arbitration agreement between the parties, the validity of the arbitration clause contained in the invoices, and the jurisdiction of the Arbitral Tribunal. The court analyzed the requirements of Section 7 of the Act and the necessity for a valid arbitration agreement. The decision highlighted the importance of consensus ad idem and the need for clear communication and acceptance of the arbitration clause by both parties.
Fact of the Case:
The petitioners challenged an arbitral award, claiming no arbitration agreement existed between the parties. The respondent sought payment for goods supplied and invoked arbitration proceedings.
Finding of the Court:
The court found that no valid arbitration agreement existed between the parties, as the arbitration clause in the invoices was not filled in or signed by the petitioner, and there was no clear acceptance of the clause. The impugned award was set aside.
Issues: Existence of arbitration agreement, validity of arbitration clause, jurisdiction of Arbitral Tribunal
Ratio Decidendi: The court emphasized the necessity for a valid and clear arbitration agreement, as per the requirements of Section 7 of the Act. It highlighted the importance of consensus ad idem and clear communication and acceptance of the arbitration clause by both parties.
Final Decision: The petition was allowed, the impugned award was set aside, and the pending application was disposed of. Each party was left to bear their own costs.
VIBHU BAKHRU, J.
1. The petitioners have filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the Act’) impugning an arbitral award dated 20.03.2016 (hereafter ‘the impugned award’) passed by the Arbitral Tribunal comprising of three arbitrators (Panel no. 1 of Delhi Hindustani Mercantile Association - hereafter ‘the Arbitral Tribunal’).
2. By the impugned award, the Arbitral Tribunal has awarded a sum of Rs.1,72,63,398/-along with pendente lite interest and future interest at the rate of 15% per annum. The said amount of Rs.1,72,63,398/-comprises of a sum of Rs.98,84,438/- being the balance amount held to be payable by the petitioners in respect of goods purchased by the petitioner no.1; Rs.73,45,960/- as interest at the rate of 18% per annum till 21.12.2010; Rs.11,000/-as charges for the notice; and Rs.22,000/-as costs of the arbitration proceedings.
3. The petitioners claim that there is no arbitration agreement between the parties and, therefore, the Arbitral Tribunal had no jurisdiction to render the impugned award.
4. Briefly stated, the relevant facts necessary to address the aforesaid controversy are as under:-
4.1 The respondent is a registered partnership firm and is, inter alia, engaged in the business of sale and purchase of various kinds of fabric (suitings and shirtings). The respondent is also a member of the Delhi Hindustani Mercantile Association (Regd.). Petitioner no.1 is a company incorporated under the provisions of the Companies Act, 1956 and petitioner nos. 2 and 3 are directors of petitioner no.1 company.
4.2 The respondent firm claims that petitioner nos. 2 and 3 (who were arrayed as respondent nos. 3 & 4 before the Arbitral Tribunal) used to purchase fabrics in the name of M/s Priknit Apparels Pvt. Ltd. ( arrayed as respondent no.1 before the Arbitral Tribunal), on credit basis, from the respondent. Petitioner no.1 was arrayed as respondent no.2 before the Arbitral Tribunal. The respondent claimed that during the period 02.12.2006 to 12.06.2008, they supplied goods for a total value of Rs.2,25,82,801.90/-. The respondent submitted that it had received part payments from time to time. The respondent further claimed that it maintained the running account in its books in respect of the goods supplied and, as on 01.04.2009, a sum of Rs.1,58,84,458/- was due and payable by the petitioners. The respondent also stated that petitioner nos. 2 and 3 had issued number of cheques but the same were dishonoured on presentation. However, after much persuasion, the petitioners made a part payment of Rs.40 lakhs in installments during the period 17.07.2009 to 02.02.2010 and after adjustment of the said amount, a balance amount of Rs.1,18,84,438/-was due and payable by the petitioners along with interest.
4.3 Admittedly, M/s Priknit Apparels Pvt. Ltd. was converted to a public company with a changed name - M/s Priknit Retails Ltd. (petitioner no.1). Thus, petitioner no. 1 and M/s Priknit Apparels Pvt. Ltd. are essentially one and the same entity. Petitioner no.1 (through its directors) had issued 16 post dated cheques aggregating a sum of Rs.1,23,84,267/-in order to settle the principal amount along with part interest of Rs.73,45,960/-, but the same were also dishonoured on presentation. It is stated that the respondent has filed criminal complaint under Section 138 of the Negotiable Instruments Act, 1881, which are pending.
5. On 07.05.2011, the respondent referred the disputes to Delhi Hindustani Mercantile Association, which were then placed before the Arbitral Tribunal by the Secretary of the said Association in accordance with its bylaws. The respondent thereafter filed its Statement of Claims.
6. In the Statement of Claims, the respondent, inter alia, prayed for an amount of Rs.1,92,41,398/-which comprised of (i) Rs.1,18,84,438/-as principal amount; (ii) interest of Rs.73,45,960/-computed till 21.12.2010; and Rs.11,000/-as notice charges. In addition, the responde
