Bombay High Court
Efkon (India) Pvt. Ltd. And Anr vs M.B. Gajbhiye And 2 Ors on 27 August, 2015
Bench: A. K. Menon
habeeb 1 ARBAP No. 108.12
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPLICATION NO. 108 OF 2012
1. M/s. Efkon (India) Pvt. Ltd.
a Private Limited Company Incorporated
under the Companies Act, 1956
having its registered address at 701,
Tower B. HCC 247 Park, Hincon House,
L.B.S. Marg, Vikhroli (W) Mumbai 400 083.
2. E-Logistics Pvt. Ltd.,
a Private Limited Company Incorporated
under the Companies Act, 1956 having its
registered address At No. 44, 1st Main Road,
Gandhinagar Adyar, Chennai 600 020. .. Petitioners
V/s.
1. Mr. M. B. Gajbhiye,
Asstt. Post Master General (Mails),
Office of the Chief Post Master General
Maharashtra Circle, Mumbai - 400 001.
2. Department of Post [India],
Office of the Chief Postmaster General,
Maharashtra & Goa Circle,
Mumbai 400 001.
3. The State of Maharashtra. .. Respondents
...
Mr. Atul Singh a/w Mr. Amit Jajoo i/b. M/s. PKA Advocates
for applicant No. 1.
Mr. A. M. Sethna a/w. Mr. P. S. Gujar for Respondent Nos. 1 and 2.
Mr. D. A. Nalawade, Govt. Pleader a/w Mr. U. S. Upadhyay, AGP for
respondent No. 3.
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habeeb 2 ARBAP No. 108.12
CORAM : A. K. MENON, J.
RESERVED ON : AUGUST 24, 2015.
PRONOUNCED ON : AUGUST 27, 2015
JUDGMENT :
This Arbitration Application is filed under Section 11 of
the Arbitration and Conciliation Act, 1996, and seeks the
appointment of a sole Arbitrator. The petition as initially filed was
by two petitioners Efkon (India) Pvt. Ltd., and E-Logistics Pvt Ltd,.
The respondents are the Assistant Post Master General (Mails), the
Department of Post India and the State of Maharashtra. At the
request of the applicants they were allowed to delete respondent
no. 3-the State, vide order dated 9th May 2012. The record reveals
that a notice invoking arbitration was first issued to the respondent
on 9th May 2012. Thereafter Writ Petition No. 319 of 2012 was
filed by the applicant in respect of the same subject matter. This
Writ Petition was withdrawn by the applicant on 23 rd February
2012, with liberty to invoke the arbitration Clause. This is how the
present application came to be filed. This application continued to
remain pending for no apparent reason. It was taken up for
hearing in June 2015. However there was a change in the
Advocates representing the applicants and the present Advocates
habeeb 3 ARBAP No. 108.12
have entered appearance recently but only on behalf of petitioner
no. 1.
2. The petitioners seek the appointment of an Arbitrator
pursuant to clause 23 of the Agreement dated 12th November,
2009, executed between the applicant no. 2 and Respondent No.
2 . Clause 23 reads as follows;
"23. Arbitration :
"If any difference arises concerning this Agreement, its
interpretation or the payment to be made there under, the same
shall be settled by mutual consultations and negotiations. If
attempts for conciliation do not yield any results within a period of
30 days, either of the parties may make a request to the other party
for submission of the dispute for decision by an arbitral tribunal
containing a Sole Arbitrator to be appointed by mutual agreement
by the DOP. The arbitration proceedings shall take place at
Mumbai and shall be conducted in English. The provisions of
Arbitration and Conciliation Act, 1996 and the rules framed there
under and in force shall be applicable to such proceedings."
3. The agreement is originally entered between the
respondent no. 2 - Department of Posts (DOP) and Applicant no. 2-
E-logistics under which applicant no.2 supplied certain GPRS based
hand held devices with inbuilt thermal printers, cameras and
support systems in order to record delivery of mail. The
respondent No. 1 by a letter dated 4 th July 2011, informed the
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petitioner that a total of 70 devices supplied during the pilot
project may be taken back as they were not desirous of continuing
usage of the devices. In response to the said letter the applicants
jointly addressed a letter dated 21 st July 2011 (Exh. D) alleging
arbitrary and unreasonable action on the part of the Respondent
No.1. The letter records that the agreement dated 12 November,
2009, entered into between M/s. E-logistics and DOP. The
Agreement does not provide for its termination.
4. The appellant contended that applicant no. 2 Efkon was
awarded the contract thereafter a tendering process and being the
successful tenderer the applicant jointly requested the respondents
to immediately withdraw their letter of 4th July 2011, and continue
usage of the hand held devices supplied by them. They also
demanded payment of Rs. 16,01,437/- towards the value of
invoices submitted by E-logistics to DOP as also further sums of
money as compensation. They jointly requested the respondents
No. 1 and 2 to comply with the Agreement failing which they
reserved their right to take appropriate legal action. The applicants
have jointly invoked provisions of clause 23 of the Agreement.
5. The record does not reveal any response to this letter of
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21st July 2011 nor does it disclose any reason why applicant No. 1 -
M/s, Efkon (India) Pvt. Ltd., ("Efkon") was a signatory to the letter
since the Agreement was admittedly awarded to applicant no. 2 -
E-logistics. The reason for Efkon being a signatory to the letter
becomes evident from a subsequent letter dated 9 th September
2011, addressed by the Advocate for Efkon (Exh. E). In this
advocate's notice Efkon contended that the discontinuation of use
of the hand held devices amounts to cancellation of the
modernization project itself. Efkon contended that application
software for the project was developed by both the applicants and
both applicants provided training to about 100 postmen for the use
of the hand held devices and after this experience the DOP had
requested the E-logistics to start procurement of 450 hand held
devices for Phase - II of the project. It is their further case that
based on such specific instruction 450 hand held devices for Phase
- II of the project were procured but the DOP - respondent no. 2 for
reasons best known to them, did not provide the list of post offices
where the 450 hand held devices were to be deployed. Accordingly
Efkon reserved their rights and reiterated that the said legal notice
habeeb 6 ARBAP No. 108.12
should be treated as notice for arbitration under clause 23. It
further recorded that failure to reply to the letter within the
prescribed time would entitle the applicant No. 1 - Efkon to file a
suit against the Respondent No. 2.
6. After receipt of the legal notice from Efkon on
11th October 2011, a meeting was fixed between E-logistics and the
respondent no. 2. A record of the meetings is to be found in the
letter dated 1st November 2011, written by E-logistics to the DOP.
However there was no response to the same.
7. Mr. Atul Singh, learned counsel appearing for the
applicants submitted that in the affidavit of reply filed on behalf of
the respondent nos. 1 and 2 the department of post has adopted a
curious stand. On the one hand they state that the agreement was
not assignable and therefore the first applicant could not have filed
the present application at all. Reliance is placed on clauses 16, 17
and 21 of the agreement. However, without prejudice to this
contention the respondents express willingness to submit to
arbitration.
8. Mr. Singh learned counsel for the applicants pointed
out that the applicant no. 1 was the beneficiary of an Assets and
habeeb 7 ARBAP No. 108.12
Business Purchase Agreement dated 15th April 2010 (ABPA), by
virtue of which applicant no. 2 - E-logistics Pvt. Ltd had sold the
"Transferred Business" to the present applicant no. 1 - Efkon India
Pvt. Ltd., for a purchase consideration mentioned in Article 3. The
expression Transferred Business is defined in the agreement of
business purchase as follows;
"Transferred Business" means the VTS Business and/or Fleet
Management and Transport Exchange Business and all the assets
and liabilities thereof to be transferred to the Buyer as more
particularly set out in the Clause 2.1.
9. Clause 2.1 which further defines transfered of business
reads as follows ;
"2.1 Agreement to Sell and Purchase
Subject to the provisions of this Asset and Business
Purchase Agreement on the Closing Date, the Seller sell, transfer,
convey, assign and deliver as the case may be to the Buyer and the
Buyer shall purchase, acquire, accept and receive as the case may
be, from the Seller, all the Transferred Business free and clear from
all encumbrances."
10. It is therefore evident that the entire business including
customer contracts and balance order values have been transferred
by the E-logistics to Efkon. Mr. Singh learned counsel for the
applicant states that by the virtue of the ABPA, Efkon stepped into
habeeb 8 ARBAP No. 108.12
the shoes of E-logistics and therefore was entitled to the benefit of
the Agreement. Even assuming specific performance of the
Agreement dated 12th November 2009 cannot be enforced, by
virtue of the ABPA the applicant no. 1 was still entitled to seek the
benefit of the receivables. He therefore submitted that invocation
of clause 23 has been made jointly by both the applicants as
evident from the letter dated 21st July 2011 (Exh. D) which is
signed by both the applicants.
11. Mr. Singh pressed for appointment of an arbitrator
especially since the respondents have in their affidavit in reply
stated that without prejudice to their rights and contentions they
are willing to submit to arbitration.
12. Mr. Sethna learned counsel for the respondents
submitted that although a without prejudice statement has been
made that the respondent no. 2 is willing to make a reference to
arbitration, his principal opposition to the application is on the
basis that the agreement is not assignable. He relied upon the
provisions of Clauses 16, 21 and 23 of the agreement of 12 th
November 2009. Mr. Sethna, pointed out that clause 16 clearly
provided that the vendor E-logistics was solely responsible for the
habeeb 9 ARBAP No. 108.12
execution of the work and that the Department of Posts would only
deal with E-logistics and no other party during the contract period.
Mr. Sethna relied on clause 17 of the Agreement and contended
that the Agreement has not been amended in any manner since
clause 17 requires that any amendment or alteration or change
could be effected only by a written agreement signed by the
parties. In the present case no written modification was ever
requested or made and hence there was no question of applicant
no. 1 - Efkon India Pvt. Ltd., claiming rights under the Agreement.
13. Mr. Sethna pointed out that the Agreement contained
an express prohibition against assignment of the work or any part
thereof to any person. There is no question of the assignment
taking effect under the ABPA without the written consent of the
Department of the posts. He therefore submits that the application
is liable to be dismissed.
14. Mr. Singh in rejoinder however submitted that the
definition of Vendor in the E-logistics agreement included the
successors of E-logistics and its assigns where the context so
permitted. He submitted that in the present case contents of clause
21 should be interpreted in the context of subletting of the work.
habeeb 10 ARBAP No. 108.12
The claim in the impending arbitration did not pertain to
assignment of the work or subletting of the work. On the other
hand Mr. Singh submitted that the assignment contemplated was of
the Agreement in its entirety and not only the scope of work
defined in clause 2 of the agreement. He therefore submitted that
assignment of the agreement in its entirety is not prohibited and
the Agreement itself was assigned under the ABPA and the Efkon
India Pvt. Ltd., would be entitled to benefit of clause 23 as it
stepped into the shoes of E-logistics.
15. Having heard the parties at length, I am of the view
that there is no merit in the contentions of the Applicants.
According to me Efkon-applicant no. 1 was well aware of the
serious difficulties in their path. Merely contending that the 'work'
has not been sublet or assigned but the entire Agreement has been
assigned is of no avail. On a reading of the correspondence and
pleading of the application itself it is clear that the claim of the
applicants is seek specific performance of the Agreement and in the
alternative damages. On reading the demand notice dated 9 th
September 2011, in particular, it is clear that the applicants have
not given up their case for specific performance. They seek to
habeeb 11 ARBAP No. 108.12
enforce the E-logistics Agreement dated 12 th November 2012
and/or claim damages.
16. Faced with the difficulties posed by clause 16 and 17
read with clause 21 it became evident to the applicants particularly
the applicant no. 1 - Efkon that the Agreement could not have
been assigned without the express written consent of the
department of Post and in absence of such consent in writing there
was no means by which the contract could be assigned Efkon or
any benefit thereunder being assigned to Efkon. In anticipation of
this road block the applicants proceeded to address a joint letter on
21st July 2010, without making any direct reference to the aspect of
assignment. Whereas the letter of 21 st July was a joint letter
addressed by both the applicants, the demand notice dated 9 th
September 2011, was addressed only on behalf of Efkon. In this
demand notice they contended that both the applicants
E-logistics and Efkon had provided training to 100 postmen.
The letter refers to the fact that the contract was awarded to E-
logistics.
17. The contention that both the applicants were involved
habeeb 12 ARBAP No. 108.12
in the training of postmen leads me to believe that the part of the
work under the Agreement may have been sublet to Efkon,
obviously without the consent of the respondent.
18. The provision for training is to be found in clause 13 of
the Agreement which required that E-logistics would train the staff
members for using the hand held devices. All training work was to
be carried out by the Vendor E-logistics. There is no scope for
considering a unilateral assignment of E-logistics obligations given
the wording of clause 13 and therefore for this reason also it is not
possible to accept the submission of the applicants that the
expression Vendor and the context in which it is used would admit
to the involvement of Efkon.
19. Furthermore the ABPA is dated 15 th April 2010 i.e.
barely 5 months after the E-logistics Agreement was entered into.
The relevant correspondence starting with the letter dated 4 th July
2011, reveals that even as the letter was written the assignment of
the business from E-logistics Pvt. Ltd., to Efkon India Pvt. Ltd., may
have taken place. This is evident from the effective date of the
Assets Business Purchase Agreement i.e. 15 th April 2010. The
assignment of business therefore took effect more than a year
habeeb 13 ARBAP No. 108.12
before, the correspondence was exchanged between the parties.
While an assignment of the business of E-logistics in general, may
have taken effect as aforesaid, under the ABPA, the contract
between the Department of Posts and E-logistics could not have
been assigned without the express consent of the Department of
Posts.
20. In the circumstances the first applicant Efkon India Pvt.
Ltd., cannot claim benefit in the Agreement dated 12th November
2009, and there is no question of their being entitled to, invoke the
arbitration agreement embodied in clause 23. For the aforesaid
reason, there is no merit in the above Arbitration Application and I
pass the following order.
i) The application is dismissed.
ii) The applicants will be at liberty to adopt appropriate
proceedings as may be advised without being affected by any
observation in this Judgment.
iii) There will no order as to costs.
(A. K. MENON, J.)
