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2019 Supreme(Del) 1544
IN THE HIGH COURT OF DELHI
SANJEEV NARULA, J.
Libra Automotives Private Limited - Petitioner
Versus
BMW India Private Limited & Another - Respondent
ARB.P. No. 163 of 2019
Decided On : 09-07-2019
For the Petitioner:Vinam Gupta, Arjit Oswal, Advocates.
For the Respondents:Dayan Krishnan, Sr. Advocate, Diwakar Maheshwari, Karun Mehta, Yugam Taneja, Advocates.
The main legal point established in the judgment is that the arbitration clauses in separate agreements must be adhered to, and directing parties to go for a composite arbitration under a sole Arbitrator would amount to rewriting the terms of the agreements agreed between the parties.
Headnote:
Arbitration - Appointment of Sole Arbitrator - Arbitration and Conciliation Act, 1996 - Section 11(6) - Dealership Agreements - Financing Agreements - Hypothecation Deeds - Floorplan Agreement - Spare Agreement - Agreements referred to in the judgment
Fact of the Case:
The Petitioner, a company engaged in the business of purchasing and selling BMW automobiles, sought the appointment of a sole Arbitrator for adjudicating disputes alleged to have arisen under various agreements executed with Respondent Nos. 1 and 2. The Respondents failed to convey their consent/objection for the appointment of the Arbitrator, leading the Petitioner to approach the Court.
Finding of the Court:
The Court found that the present petition was misconceived and untenable in law. It noted that the relationship between the parties, the disputes, and the arbitration clauses in the agreements were separate and distinct. The Court dismissed the petition, emphasizing that the dismissal did not preclude the parties from exercising their remedy under the relevant provisions of the agreements for invoking the arbitration clause and seeking the appointment of the Arbitral Tribunal in accordance with the mechanism provided under the Agreements.
Issues: The issues revolved around the appointment of a sole Arbitrator for adjudicating disputes arising from the Dealership Agreements, Financing Agreements, and Hypothecation Deeds executed between the Petitioner and Respondent Nos. 1 and 2.
Ratio Decidendi: The Court held that the arbitration clauses in the agreements were separate and distinct, and directing the parties to go for a composite arbitration under a sole Arbitrator would amount to rewriting the terms of the dealership agreement agreed between the parties. The Court emphasized the need for adherence to the choice of the Arbitrator or the mechanism for constituting the Arbitral Tribunal as envisaged by the Arbitration Agreement.
Final Decision: The Court dismissed the petition, clarifying that the dismissal did not preclude the parties from exercising their remedy under the relevant provisions of the agreements for invoking the arbitration clause and seeking the appointment of the Arbitral Tribunal in accordance with the mechanism provided under the Agreements.
JUDGMENT :
1. The present Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) has been filed seeking appointment of a sole Arbitrator for adjudicating the disputes alleged to have arisen under the Agreements executed between the Petitioner and Respondent Nos. 1 and 2.
Brief Background
2. The Petitioner is a company incorporated under the Companies Act, 1956 and has been engaged in the business of purchasing and selling BMW automobiles and associated products ("BMW Group products") under various agreements with the Respondents.
3. Respondent No.1, BMW India Private Limited ("BMW India"), is engaged in the business of manufacturing, assembling, wholesaling cars to various dealers on principal to principal basis and authorizing them to sell BMW Group Products to end customers.
4. Respondent No. 2, BMW India Financial Services Private Limited is licensed as a Non-Banking Financial Corporation under the Reserve Bank of India Act, 1934. It provides financing services to the dealers appointed by Respondent No.1, for the purposes of establishing and running its dealership business.
5. The relevant facts are that Petitioner was appointed as a dealer of the BMW Group Products in terms of various agreements executed between the Petitioner and the Respondent Nos. 1 and 2, including the Principal dealership agreement dated 1st January 2018 executed between the Petitioner and Respondent No. 1 ("Dealership Agreement"). In addition to the Dealership Agreement, Petitioner has also executed the following ancillary agreements with Respondent No. 1:
(i) Novation dated 12th April 2016, to the Letter of Intent dated 21st December 2015 (“Novated LoI”);
(ii) Interim Dealer Agreement dated 19th May 2016 ("Interim Dealer Agreement") extended on 13th January 2017 till 31st March 2017.
(iii) Deferred Payment Facility Agreement dated 21st June 2016 ("DPA"); and
(iv) Hypothecation Deed dated 20th June 2016.
6. Apart from above mentioned agreements executed with Respondent No. 1, Petitioner has also entered into financing agreements with Respondent No. 2 for the purposes of carrying out its exclusive business of dealership in BMW Group Products. The details of such agreements are:
(i) Floorplan Financing Agreement dated 21st June 2016 ("Floor Agreement");•
(ii) Spare Parts Financing Agreement dated 11th July 2016 ("Spare Agreement"); and
(iii) Hypothecation Deeds dated 21st June 2016 and 11th July 2016 ("Hypothecation Deeds").
These agreements executed between the Parties are collectively referred to as "the Agreements".
7. In accordance with the terms of the Agreements, Petitioner furnished a bank guarantee dated 21st June 2016 worth INR 7 Crores ("Bank Guarantee"), jointly in favour of Respondent Nos. 1 and 2. This was later extended vide letters dated 14th June 2017 and 21st June 2018 and subsequently the Bank Guarantee was encashed on 2nd November 2018.
8. The limited prayer in the present petition is for appointment of a Sole Arbitrator for adjudication of the disputes that have arisen between the Petitioner and the Respondents in relation with the Agreements. Petitioner contends that the Respondents have acted in a totally unfair and whimsical manner in the performance of the Agreements and have committed breaches having failed to adhere to the terms of the Agreements. The demands raised by Respondents are unreasonable and unsubstantiated. The Petitioner has invoked the arbitration clause under the Agreements, vide letter dated 24th January 2019 and 28th January 2019 and has requested the Respondents to either agree to appointment of a common Arbitrator to decide all the disputes in a tripartite arbitration or approach the Delhi International Arbitration Centre for appointment of a sole Arbitrator. Despite the receipt of the notice, the Respondents have failed to convey their consent/objection for the a
