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2011 Supreme(MP) 399
MADHYA PRADESH HIGH COURT
ALOK ARADHE, J.
Shin-Etsu Chemical Co. Ltd. – Petitioner
Versus
Vindhya Telelinks Ltd. & others – Respondent
Writ Petition No. 4197 of 2009
Decided On: 19.05.2011
The arbitration clause is treated as an agreement independent of the other terms of the contract, and the court must take a prima facie view of the matter while deciding the application under Section 45 of the Arbitration and Conciliation Act, 1996.
Headnote:
Arbitration - Tripartite Dispute - Section 45 of the Arbitration and Conciliation Act, 1996 - Summary of Acts and Sections: Section 45 of the Arbitration and Conciliation Act, 1996
Fact of the Case:
The case involved disputes arising from long-term sale and purchase agreements between the parties, governed by the laws of Japan, with an arbitration clause at Tokyo, Japan. The respondent failed to renew letters of credit, leading to a legal dispute and civil suits.
Finding of the Court:
The trial court declined to refer the dispute to arbitration, citing it as tripartite. The appellate court remanded the matter to the trial court, directing it to decide the application under Section 45 of the Act in accordance with the majority view expressed by the Supreme Court in a related case.
Issues: The main issues were whether the dispute was tripartite, the validity of the arbitration clause, and the proper interpretation of Section 45 of the Arbitration and Conciliation Act, 1996.
Ratio Decidendi: The court held that the trial court's decision was incorrect and that the appellate court's remand order was in excess of jurisdiction. It further emphasized that the arbitration clause is independent of the main contract and that the dispute should be referred to arbitration in accordance with the arbitration clause.
Final Decision: The court set aside the orders of the trial court and the appellate court, and referred the dispute to arbitration in terms of the arbitration clause contained in the agreements.
1. In this batch of writ petitions since common questions of law and facts arise, they were heard analogously and are being decided by this order.
2. In W. P. No. 4197/09 and W. P. No. 4199/09, Shin Etsu Chemicals Co. Ltd., (hereinafter 2006 passed by IVth Additional District Judge, Rewa in Civil Appeal No. 24/06 and Civil Appeal No. 25/06 and have sought for a direction to refer the dispute in terms of the arbitration clause contained in the agreement executed between the parties.
3. In W. P. No. 18746/09, Vindhya Telelinks Ltd., and its sister concern Optic Fibre have challenged the findings recorded in paragraphs 18, 20 and consequential portion of para 26 of the order dated 30-11-2006 passed by IVth Additional District Judge in Civil Appeal No. 24/06 wherein it has been held that dispute sought to be referred for arbitration is not tripatite. In the aforesaid writ petitions, a direction is sought to remand the matter to the appellate Court to adjudicate the issue of existence of the triparite dispute de novo. Similarly, in W. P. No. 18957/06, Birla Ericson Optical Ltd., and Optic Fibre, Goa have challenged the validity of the order dated 30-11-2006 passed by IVth Additional District Judge, Rewa in Civil Appeal No. 25/06 wherein the petitioners have assailed the findings recorded in paragraphs 18, 20 and the petitioner has challenged the validity of the orders dated 30-11-2011referred to as consequential portion of para 26 of the said order.
4. In order to appreciate the challenge to the aforesaid orders, few relevant facts need mention which are stated infra. Two long term sale and purchase agreements dated 23-1-2001 and 24-1-2001 were executed between the petitioner, Vindhya Telelinks Ltd., (hereinafter referred to the respondent No.1 and its sister concern namely Birla Ericsson Optical Ltd., a raw the respondent No.2 for purchase of hereinafter referred to as material used for manufacture of optical fibre. Clause 10 of general terms and conditions forming part of the agreements provide that the agreements shall be governed by and construed and interpreted under the laws of Japan. Clause 10 further provides that all disputes arising out of or in relation to the agreements which cannot be settled by mutual accord, would be settled by arbitration at Tokyo, Japan, in accordance with rules and procedures of Japan Commercial Arbitration Association. The payments for purchased under the agreement were to be made by irrevocable and without recourse automatic revolving letters of issued by State Bank of India, Satna. The said letters of credit were intially valid for a period of one year and its validity could be extended up to maximum of four times. The petitioner under the areements commenced the shipment of preform from October, 2001 which continued till March, 2002. The respondent No. 2 by a communication dated 22-4-2002 proposed that the agreements be amended so as to reduce the supply of preform to 175 kgs. The respondent No.2 agreed to purchase the balance quantity of Preform in the months of April, 2003 to September, 2003 in addition to 350 kgs., agreed to be purchased in those months. The respondent No.2 further agreed to open separate letter of credit for additional quantities for the months of April, 2003 to September, 2003.
5. However, the respondent No.2 did not carry out the amendment to original letter of credit. The petitioner vide fax message dated 11-10-2002 asked the respondent No. 2 to ensure that letters of credit are renewed. Thereafter, by another fax message dated 16-10-2002, the petitioner informed the respondent No.2 that shipment of Preform for the month of October, 2002 was being despatched. The respondent No. 2 vide fax message dated 21-10-2002 informed the petitioner that issues raised by the petitioner in its fax message dated 16-10-2002 is between the petitioner and the State Bank of India and the petitioner should sort out the issue with the State Bank of India failing which, the respondent
