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2014 Supreme(Mad) 27
High Court of Judicature at Madras
R. SUBBIAH, J.
M/s. Castrol India Limited & Another
Versus
M/s. Apex Tooling Solutions represented by its Managing Partner, J. Suresh & Others
Application No. 5597 of 2013 in C.S. No. 162 of 2013
Decided on: 03-01-2014
For the Applicant:M/s. Udwadia Udeshi & Argus, Advocate.
For the Respondents:R. Selvakumar, Advocate.
Headnote:(a). Arbitration and Conciliation Act, 1996, Sec 7 and 8- Dispute arose between the parties pertaining to a Distribution agreement- Plaintiff filed a suit claiming compensation-Defendant requested that dispute should be settled by arbitration as an arbitration clause was present in the agreement- it was held that the said clause was not a valid arbitration clause as it only gave Defendant the right to either move to the court or go for an arbitration-therefore application of Defendant to refer the dispute to arbitration stands dismissed.
(b). Arbitration and Conciliation Act, 1996, Sec 7 and 8- A clause in an agreement as per which the Managing Director (M.D) of one party is made arbitrator in case a dispute arises is not a valid arbitration agreement because the M.D is an employee of a party and as per Principles of Natural Justice, no man shall be a judge in his own cause.
(c). Arbitration and Conciliation Act, 1996, Sec 7 and 8- Madras High Court Original Side Rules, Order 4 Rule 5 – Applicability of Limitation u/s 8 of the Act – It was held that Sec 8 only prescribes a condition that the application should be filed before filing of the statement of claim – there is no specific time limit provided for in the Act therefore delay cannot be taken as a ground for dismissing an application u/s 8.
R. Subbiah, J.
1. The present application has been filed by defendants 8 and 2 under Order 14 Rule 8 of O.S. Rules read with Section 8 of the Arbitration and Conciliation Act, 1996 to direct the plaintiff and defendants 8 and 2 to go for arbitration before the Sole Arbitrator, viz., the Managing Director, M/s. Castrol India Limited, having its registered office at Technopolis Knowledge Park, Mahakali Caves Road, Andheri (East), Mumbai-400 093 and Southern Region Office at Rayala Towers, 5th Floor, 781-785 Anna Salai, Chennai-2.
2. The applicants herein are defendants 8 and 2 in the suit. The first respondent is the plaintiff and the other respondents viz., respondents 2 to 8 are defendants 1, 3, 4, 5, 6, 7 and 9 respectively.
3. For the sake convenience, the parties will be referred to as per their ranking in the suit.
4. The plaintiff has filed the present suit as against all the defendants for recovery of a sum of Rs.57,15,401/- being compensation for the monetary loss suffered by the plaintiff due to breach of terms and conditions of distributorship pursuant to the distributorship agreement dated 26.12.2009 and also for other consequential reliefs.
5. On appearance, defendants 8 and 2 have filed the present application under Order 14 Rule 8 of O.S. Rules read with Section 8 of the Arbitration and Conciliation Act, 1996. The averments made in the affidavit in support of the application, in nutshell, are as follows:-
(a) An agreement dated 26.12.2009 was entered into between the 8th defendant and the plaintiff for distribution of the products of defendants 8 and 2 in the territory therein specified and on the terms and conditions contained therein. The said agreement was terminated by defendants 8 and 2 vide their letter dated 16.9.2013. Now, the plaintiff has filed the present suit to recover damages aggregating to Rs.57,15,401/- purporting to be the plaintiff's claim for compensation for the monetary loss alleged to have been suffered by the plaintiff due to the alleged breach of terms and conditions of distributorship pursuant to the distributorship agreement dated 26.12.2009 and also for permanent injunction and for other reliefs.
(b) The present suit was filed by the plaintiff against the defendants based on the alleged breach of contract between the plaintiff and defendants 8 and 2. Admittedly, the said agreement made a provision for the manner in which the disputes and differences arising between the plaintiff and defendants 8 and 2 are to be settled. Clause 23 of the said agreement provides the parties to refer any dispute which arises between them to an arbitrator. Now, the alleged disputes have arisen between the plaintiff and defendants 8 and 2 only in connection with the said agreement. An arbitration clause contained in the Distributorship agreement specifically enjoins upon the parties to have the disputes adjudicated in the manner contained therein, viz., either by approaching the Court of competent jurisdiction only in the city where the said agreement was entered into or by reference of such dispute and differences to the arbitration of the Managing Director of the Company. The said agreement specifically provides that defendants 8 and 2 alone shall have the right to exercise any of the said two options and hence, defendants 8 and 2 exercise the said option to refer the disputes to the arbitration to the Managing Director of the defendant company as specifically provided in the said agreement. The said agreement was entered into between defendants 8 and 2 and the plaintiff and the disputes that have arisen between the parties relate to the rights of the parties under the said agreement. Hence, the impleading of defendants 1, 3, 4, 5, 6, 7 herein as parties to the suit by the plaintiff is clearly intended to avoid reference of disputes to arbitration. Defendants 1, 3, 4, 5, 6, 7 are not necessary parties to the suit. Defendants 3 to 7 are all former employees of defendants 8 and 2. None of the said defendants
