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IN THE HIGH COURT OF DELHI
Prateek Jalan, J.
Panasonic India Private Ltd. - Appellant
Versus
Shah Aircon - Respondent
Arb.P. 621 of 2021
Decided On : 11-10-2022
Arbitration - Appointment of Arbitrator - Arbitration and Conciliation Act, 1996 - Section 11 - Clause XXIV and XXV of the Distribution Agreement - [Section 11 of the Arbitration and Conciliation Act, 1996] - [Clause XXIV and XXV of the Distribution Agreement] - The court held that the arbitration clause in the Agreement constituted a binding agreement to refer disputes to arbitration, and the Court had jurisdiction to entertain the petition. The Court appointed an arbitrator to adjudicate the disputes between the parties under the Agreement.
Fact of the Case:
Panasonic filed a petition seeking appointment of an arbitrator to adjudicate disputes arising from an Agreement with Shah Aircon. The disputes included alleged unpaid invoices and claims raised by both parties against each other. Shah Aircon had filed a civil suit seeking rendition of accounts and permanent injunction, which was pending before the Civil Court. Panasonic made an application in the suit for reference to arbitration under Section 8 of the Act.
Finding of the Court:
The Court found that the arbitration clause in the Agreement constituted a binding agreement to refer disputes to arbitration, and the Court had jurisdiction to entertain the petition. The Court appointed an arbitrator to adjudicate the disputes between the parties under the Agreement.
Issues: The issues included the validity of the arbitration clause, the bar of limitation on Panasonic's claims, and the jurisdiction of the Court to entertain the petition.
Ratio Decidendi: The Court held that the arbitration clause in the Agreement constituted a binding agreement to refer disputes to arbitration, and the Court had jurisdiction to entertain the petition. The Court also held that the issues of limitation and liability on merits were best reserved for adjudication by the arbitrator.
Final Decision: The petition succeeded, and the Court appointed an arbitrator to adjudicate the disputes between the parties under the Agreement. The Court left all rights and contentions of the parties on maintainability, arbitrability of the claims under the Agreement, and on merits of the claims, open for adjudication by the arbitrator. There was no order as to costs.
JUDGMENT
1. By way of this petition under Section 11 of the Arbitration and Conciliation Act, 1996 [hereinafter referred to as "the Act"], the petitioner [hereinafter referred to as "Panasonic"] seeks appointment of an arbitrator to adjudicate disputes which have arisen between the parties under an Agreement dated 05.09.2016, entitled "Distribution Agreement" [hereinafter referred to as "the Agreement"].
Facts
2. By way of the Agreement, Panasonic was to sell electronic goods to the respondent [hereinafter referred to as "Shah Aircon"], which, according to Panasonic, is a proprietorship firm dealing in electronic goods. The Agreement contains clauses1 with regard to jurisdiction and dispute resolution in the following terms:
"XXIV. GOVERNING LAW: This Agreement and all PO under this Agreement shall be exclusively governed by and construed in accordance with the laws of India, without regard to choice of law principles. All issues relating to appointment of arbitrator or any petition or application to be made to the Court under the applicable arbitration law or any Arbitration Award or any issue arising out of such arbitration proceedings shall be subject to the exclusive jurisdiction of Courts at New Delhi only.
XXV. ARBITRATION: The parties will attempt to settle any dispute, claim or controversy arising out of this Agreement through consultation and negotiation in good faith and in a spirit of mutual co-operation. If those attempts fail, then either Party can refer the disputes, issues or claims arising out of or relating to this Agreement for arbitration by a sole arbitrator who shall be appointed by the Managing Director of the Panasonic. The arbitration proceedings shall be held in New Delhi, conducted in English, and shall be subject to the provisions of the Arbitration and Conciliation Act 1996. The Arbitrator shall give a reasoned award. In the event the Appoint Authority fails to act or appoint a sole arbitrator, then either Party can have the sole arbitrator appointed under the provisions of the Arbitration and Conciliation Act, 1996. The use of any ADR procedure will not be construed under the doctrines of laches, waiver or estoppels to affect adversely the rights of either party, and nothing in this Section will prevent either party from resorting to judicial proceedings if (1) good faith efforts to resolve the dispute under these procedures have been unsuccessful, or (2) interim relief from a court is necessary to prevent serious and irreparable injury to one party or to others." [Emphasis supplied.]
3. Panasonic's claims arise out of alleged unpaid invoices which were raised by it for electronic goods sold to Shah Aircon. In the course of correspondence between the parties, claims were raised by both parties against each other. The correspondence commences with a legal notice dated 20.08.2020, sent on behalf of Shah Aircon, in which it claimed that it was appointed as an authorized distributor of Panasonic for District Faridabad, Haryana. It was further alleged that after the distributorship was given to Shah Aircon, Panasonic sold goods to some dealers directly, and the bills were made in the name of Shah Aircon. Shah Aircon claimed to have suffered losses to the tune of approximately Rs.29 lacs due to Panasonic, and also alleged that Panasonic sold goods worth of approximately Rs.20 lacs to third parties in the name of Shah Aircon, but payment for the same was not received by it.
4. After further correspondences, including a legal notice dated 07.09.2020, sent on behalf of Shah Aircon, Panasonic addressed a communication through counsel dated 05.10.2020 to Shah Aircon, demanding a sum of Rs.37,29,976/-, and invoked the arbitration clause contained in the Agreement in the event Shah Aircon failed to pay the amount mentioned therein. Shah Aircon replied to the said letter on 29.10.2020, stating inter alia that the demand notice was sent with an intention to not pay the legal dues which Panasonic owed to Shah Ai
The use of 'may' in arbitration agreements indicates optionality rather than obligation, requiring mutual consent for arbitration to be valid.
An arbitration agreement must evidence an unambiguous intention to refer disputes to arbitration, and mere use of the word 'arbitration' is not sufficient to construe an agreement as an arbitration a....
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