Waverly Private Limited vs Diverdsey India Private Limited
2016 Latest Caselaw 318 Bom

    dgm                           1                                       app-407-15.sxw


                IN THE  HIGH COURT OF JUDICATURE AT BOMBAY
                    ORDINARY ORIGINAL CIVIL JURISDICTION




                                                                                
                                   APPEAL NO. 407 OF 2015




                                                        
                                            IN
                      ARBITRATION  PETITION NO.958 OF 2012
                                             WITH




                                                       
                    NOTICE OF MOTION (L) NO. 1796 OF 2015  




                                             
    Waverley  Private Limited       ig            )
    having  its registered office  at             )
    Showroom No.2, Girton  School  Lane, )
                                  
    Nugegoda,  Sri Lanka.                         )      ..      Petitioner
        


           Versus
     



    Diversey  India Private Limited               )
    having its registered office at               )





    501, 5th Floor,  Ackruti  Centre Point,       )
    MIDC Central Road, Andheri (E),               )
    Mumbai 400 093                                )      ..      Respondent





    Mr.Vishal  Talsania a/w Ms. Mansi Patel i/by  M/s.Thakore Jariwala & 
    Associates for the Petitioner 
    Mr.M.P.S.   Rao,   Senior   Advocate     a/w   Mr.   Nilesh   Khandray       i/by 
    M/s.Mallar Law Consulting for the Respondent
                       


                                                                                        1/21



          ::: Uploaded on - 05/03/2016                  ::: Downloaded on - 06/03/2016 00:02:17 :::
     dgm                           2                                            app-407-15.sxw


                                      CORAM:    ANOOP V. MOHTA AND 
                                                G. S. KULKARNI,  JJ. 




                                                                                     
    CLOSED FOR JUDGMENT ON:                    February 9,  2016 




                                                             
    PRONOUNCED ON                 :            March  04,   2016

    JUDGMENT (Per Anoop V. Mohta, J.)

Rule, returnable forthwith. Heard finally.

The Appellant (original Respondent) has challenged

judgment dated 9 June 2015 by invoking Section 37 of the Arbitration

and Conciliation Act, 1996 (for short "the said Arbitration Act").

3 The learned Judge, by impugned judgment/order, allowed

Section 34 Application filed by the original Claimant/Respondent and

passed the following order :

"The impugned award dated 4th May 2012 in so far as

the issue of jurisdiction rendered in paragraph 17.1 (i)

of the impugned award holding that the arbitral

tribunal has no jurisdiction to hear the claimant's

claim for the sum of USD 37,505.60 claimed in the

invoices listed in Annexure B of the request for

dgm 3 app-407-15.sxw

Arbitration dated 20th July 2010 is set aside. Rest of

the award is upheld. No order as to costs.

At the request of the learned counsel appearing

for the respondent, operation of the order passed

today is stayed for a period of two weeks from today."

4 The learned Judge has recorded the relevant facts for the

purposes of deciding the issue in paragraphs 2 to 9, 12, 13 to 15, 19

to 22, which read thus :

"2. Prior to June 2005, the respondent was acting

as a distributor for the petitioner in certain areas

earmarked in Sri Lanka. There was no written agreement

between the parties prior to June 2005. On 14 th June

2005, the parties entered into an agreement for sale of

products manufactured by the petitioner which were to be

distributed by the respondent in the earmarked territory

in Sri Lanka. On 13th June 2006, the first agreement

came to an end.

3. During the period from 14th June 2006 to 31st

dgm 4 app-407-15.sxw

March 2007, the products of the petitioner continued to be

distributed in the territory of Sri Lanka. No agreement

was signed for the said period of 14 th June 2006 to 31st

March 2007 between the parties.

4. On 1st April 2007, the petitioner and the

respondent entered into an agreement. The said agreement

was to be operated for a period of two years ending 31 st

March 2009.

Under the said agreement, the petitioner

appointed the respondent as its distributor in the

Institutional and Industrial Channels of Trade for the

purpose of selling or otherwise for the products of the

petitioner in the specified territory on the terms and

conditions set out therein. Under the said agreement, the

respondent was granted 75 days' credit from the date of

invoicing for the products purchased from the petitioner

and the respondent was to establish Letter of Credit or TT

to avail the said credit facility. Under clause 6.3 of the

agreement, either party could terminate the said agreement

without being required to assign any reason at any time

by giving the other party 90 days prior written notice.

dgm 5 app-407-15.sxw

5. Clause 6.1 of the said agreement is extracted

as under :-

"6.1 Term- The terms of this Agreement commences on the Effective Date and continues in force for a period of two years, unless earlier terminated as provide therein or where it is mutually agreed by both parties to terminate this Agreement if both parties to

agree in writing the term of this Agreement may be extended for another one year term on the same terms and conditions unless otherwise mutually agreed upon."

6. Clause 9.1 of the said agreement provided for

arbitration which is extracted as under :-

"9.1 Law and Legal Proceedings - This Agreement and the

relationship of the parties hereunder : will be governed by and interpreted in accordance with the laws of India without regard to its principles respecting the conflicts of laws. Application of the U N Convention on the International Sale of Goods is hereby rejected Any and all disputes, claims and controversies between the parties

arising out of or relating to this Agreement, the alleged breach of this Agreement and the rights and obligations of the parties hereunder

shall be resolved exclusively by binding arbitration. Arbitration shall be administered by the International Chamber of Commerce which shall apply its international commercial arbitration rules as modified by this Agreement. The decision of any such arbitrator(s) shall be final and judgment on the award rendered may be entered in

any Court having jurisdiction thereof. Such Arbitrator(s) shall have the authority to impose all manner of remedies.Arbitration proceedings shall be conducted in Mumbai, India in the English Language."

7. On 6th April 2008, the respondent by its email

addressed to the petitioner, terminated the agreement dated

1st April 2007 however made effective from 1st September

2008. In the said email, the respondent requested the

dgm 6 app-407-15.sxw

petitioner to make an arrangement to purchase the balance

stocks including the demonstration equipments and the

spare parts and informed that the respondent would settle

the dues of the petitioner as well. It is the case of the

petitioner that the petitioner was unable to appoint another

distributor/agent for sale of its products in the specified

territory in Sri Lanka.

8.

On 27th August 2008, a meeting was held

between Mr. Sukrit Ghosh, the then Sales & Marketing

Manager of the petitioner and Mr.Gnana Samaratunga,

Managing Director of the respondent. The said meeting

was also attended by Mr. Nikhil Sawant, Director -

Healthcare & Hospitality of the petitioner. It is the case of

the petitioner that in the said meeting, the parties agreed

that the respondent would continue as an agent and/or

distributor of the products of the petitioner at least until

20th September 2008. It is the case of the petitioner that the

said record of discussion what was transpired on 27th

August 2008 was spelt out in the three emails all dated

4th September 2008 that were exchanged between the

dgm 7 app-407-15.sxw

parties.

9. On 4th September 2008, the respondent sent

an email to the petitioner at 10.39 a.m. recording that it

was agreed that the respondent would distribute the

chemicals of the petitioner and act as a distributor for one

more month ending 20th September 2008. In the said

email, it was also recorded that it was further agreed that

the petitioner would find a new distributor during the

said period and would ensure that the stocks and

chemicals were taken over from the respondent after due

payments during the said period.

12. It is the case of the petitioner that under the

said extended agreement, the petitioner supplied the

goods to the respondent for the period from September

2008 upto 25th October 2008 under the cover of invoices

drawn in the name of the respondent. During that period,

the petitioner raised invoices in the name of the respondent

and all documents of title such as invoice, bills of lading

dgm 8 app-407-15.sxw

etc. were all duly accepted by the respondent as

agent/distributor and also further caused the goods to be

sold in the specified areas in Sri Lanka.

13. The present dispute was in respect of invoices

substantially drawn during the period September 2008

until October 2008. It is the case of the petitioner that

some time in the month of January 2009, reconciliation

of the accounts between the parties in respect of the goods

of the petitioner sold and delivered from the period June,

2005 to 25th October 2008 took place. The said statement

of account dated 31st January 2009 showed balance of

USD 19.96 which was admitted and acknowledged as

payable by the respondent to the petitioner and another

statement of account which disclosed that a sum of US$

41363.93 was agreed to be payable by the respondent to

the petitioner. The said statement of account was duly

signed and/or initialed by the parties. It was the case of the

petitioner that all statements of accounts were signed and/or

initialed by the Managing Director of the respondent.

     dgm                           9                                           app-407-15.sxw


             14.              On         17th   March   2009, the respondent




                                                                                     

addressed a letter to the petitioner and made a claim of

US$ 4899495.05 for the period July 2005 to October

2009 on the alleged ground that there was a delay of

delivery due to mismanagement of operation in the

transaction by the petitioner.

15. On 23rd July 2009, the petitioner addressed a

letter to the respondent informing that after considering

the liabilities of the petitioner, balance of US$ 40607.93

was found payable by the respondent to the petitioner.

19. Before the learned arbitrator, the petitioner

filed a statement of claim, inter alia, praying for a sum of

USD 41,332.94 with interest @21% p.a. or at such other

rate as the learned arbitrator would deem appropriate and

for costs.

20. The respondent filed their reply and counter-

claim. In the said reply, the respondent raised a plea of

jurisdiction of the learned arbitrator to adjudicate upon the

dgm 10 app-407-15.sxw

claim of the petitioner for USD 41,332.94 on the ground

that the said part of the claim was related to the period after

31st August 2008. The respondent also made a counter-

claim against the petitioner for the sum of Sri Lankan

Rupees Rs.5,224,588.97 (equivalent to USD 47,496.26)

towards alleged financial losses caused to the respondent by

the petitioner.

21.

The learned arbitrator framed four issues

including the issue whether the claim of the petitioner

would fall within the ambit of arbitration clause. The

petitioner had also made an application before the learned

arbitrator to adduce the additional affidavit of Mr.Sukrit

Ghose after closure of hearing.

22. On 4th May 2012, the learned arbitrator

made an award holding that the learned arbitrator had no

jurisdiction to hear the claim of the petitioner for the sum

of USD 37,505.60 claimed in the invoices listed in

Annexure B of the request for arbitration dated 20 th July

2010. The learned arbitrator allowed the claim of the

dgm 11 app-407-15.sxw

petitioner for USD 3,827.34 with simple interest @ 9% p.a.

from 14th October 2009 i.e. from the date of demand for

payment till the date of the award and simple interest

@18% p.a. from the date of the award till the date of

payment. The learned arbitrator also held that he had no

jurisdiction to hear the counter-claim of the respondent

for the sum of Sri Lankan Rupees 5,224,588.97. The

learned arbitrator directed both the parties to bear their

own costs and expenses of the said arbitration. The

respondent did not challenge any part of the award dated

4th May 2012. The petitioner, however, has challenged the

said award dated 4th May 2012 in so far as the claim of

the petitioner in respect of USD 41332.96 is concerned

which was rejected by the learned arbitrator on the ground

of jurisdiction in this petition."

5 By noting the rival contentions of the parties, including

referring to the judgments so cited, apart from the pleadings and the

respective evidence led by the parties recorded the reasons, to set

aside the arbitral award, which we are in agreement, after going

through the whole pleadings so read and referred by the parties.

dgm 12 app-407-15.sxw

Paras 51 to 53 of the judgment read thus:

"51. A perusal of the award clearly indicates

that the learned arbitrator though did not render

any finding that the said three emails all dated 4 th

September 2008 exchanged between the parties were

fabricated or did not exist and on the contrary

referred to the said emails in paragraph 13.10 of the

agreement, the learned arbitrator held that even if

there was an oral agreement as alleged by the

claimant, such an oral agreement was outside the

terms of the agreement dated 1 st April 2007. In my

view the award shows ex facie contradictions and

patent illegality on the face of the award. Once the

learned arbitrator had not rejected those three emails

all dated 4th September 2008 and had referred to the

said emails in the impugned award for rejecting the

claim of the petitioner, the learned arbitrator could

not have taken a view that even if there was an oral

agreement, such agreement was outside the terms of

the agreement dated 1st April 2007. Since the

dgm 13 app-407-15.sxw

agreement was arrived at by exchange of emails, in

my view, there could not have been any oral

agreement between the parties. In this case,

discussions arrived at between the parties in the

meeting held on 27 th August 2008 were recorded by

exchange of emails. A perusal of Section 6.1 of the

agreement also makes it clear that the parties in

writing could extend the said agreement dated 1 st

April 2007 for another one year on the same terms

and conditions unless and until mutually agreed

upon. In this case, the parties agreed that the said

agreement dated 1st April 2007 would be continued

till 20th September 2008 and even beyond. In my

view, the said three emails clearly extended the

agreement dated 1st April 2007 prior to the letter of

termination having come into effect.

52. I am not inclined to accept the submission of

the learned counsel for the respondent that even if those

three emails were exchanged, the same were not in

dgm 14 app-407-15.sxw

accordance with Section 6.1 of the agreement on the ground

that the extension if at all could only be for one year and

not for smaller period. A plain reading of Section 6.1

clearly indicates that the parties could mutually agree upon

the extension even for a period of less than one year.

53. In my view, the finding of the learned

arbitrator that in view of the respondent having given

90 days' prior written notice as per clause 6.3 of the

agreement, the agreement is validly terminated with

effect from 1st September 2008 is totally perverse

and discloses patent illegality. In my view, since the

parties had already agreed to extend the period of

the agreement dated 1st April 2007, the said letter of

termination did not come into effect and was given a

go-bye."

6 The learned Judge even read and referred the contents of

the emails including the supporting evidence led by the parties and

given the finding of facts in this regard in paragraph 55 which reads

dgm 15 app-407-15.sxw

thus:-

"55. A perusal of the record makes it clear that

the respondent never made any such allegations in any

of the correspondence exchanged between the parties.

Be that as it may, since the respondent admitted that

the consignments were sent by the petitioner and

bill of lading were issued in the name of the

respondent, the respondent had to accept those

documents, it is clear that both the parties had acted

upon all such transactions having taken place after

31st August 2008. The respondent did not examine

M/s. Jayes Investment (Pvt) Ltd. in support of their

case before the learned arbitrator. The respondent

also did not examine Ms.Rashmi from whose email

ID, the said two emails were sent to the petitioner.

Since the respondent had accepted the documents

issued by the petitioner post 31st August 2008 and

had acted upon such transactions, it is clear that the

agreement dated 1st April 2007 was duly extended

by the parties as recorded in the said emails. I am

dgm 16 app-407-15.sxw

thus not inclined to accept the submission of the

learned counsel for the respondent that any of such

emails were fabricated or were of no consequence."

7 The law revolving around Section 7(4)(b) of Arbitration

Act is very clear whereby exchange of letters, telex, telegrams or

other means of communication also amounts to an arbitration

agreement in writing. The parties, as recorded through the exchange

of emails, recorded the agreements thereby all the terms and

conditions of the agreement dated 1 April 2007 of the basic

arbitration agreement got extended. Therefore, the conclusion that

through these three emails, the parties have agreed and extended the

contractual obligation and in fact acted accordingly need no

interference. Having once extended the agreement in toto, any

dispute between the parties for the transaction based upon the same

required to be adjudicated on the basis of main agreement itself. The

finding, therefore, based upon the facts and the law of Bharat

Petroleum Corporation Ltd v. Great Eastern Shipping Co Ltd 1 and

further in Trimex International FZE Limited, Dubai v. Vedanta

1 AIR 2008 SC 357

dgm 17 app-407-15.sxw

Aluminium Limited, India2 support the reasons which we also find is

well within the frame work of law and the record.

8 The Supreme Court in Oil and Natural Gas Corporation

Limited v. Western Geco International Limited3 has observed as under:

"39 No less important is the principle now recognised

as a salutary juristic fundamental in administrative law

that a decision which is perverse or so irrational that no

reasonable person would have arrived at the same will

not be sustained in a court of law. Perversity or

irrationality of decisions is tested on the touchstone of

Wednesbury Principle in Associated Provincial Picture

Houses Ltd v. Wednesbury Corpn. (1948) 1 KB 223 :

(1947) 2 All ER 680 (CA)."

This Court in Sahyadri Earthmovers v. L and T Finance Ltd 4 has

recorded as under with regard to the basic parameters for the

Arbitrator to follow, apart from other the following clauses are

2 (2010) 3 SCC 1 3 (2014) 9 SCC 263 4 2011 (4) Mh. L. J. 200

dgm 18 app-407-15.sxw

relevant for this case :

"CPC & Evidence Act

(xviii) Though Code of Civil Procedure and the Evidence Act are not applicable strictly, (section 19), but the settled principles do apply. The power of Arbitral Tribunal to determine the admissibility,

relevance, materiality and weight of any evidence just cannot be overlooked.

Substantial laws-customs-commercial usages and

practice

(xx) The Arbitrator is bound by the substantive laws of the land as well as procedural laws and practice and principle apart from the custom and usage of the trade

referring the business and commerce between the parties, in all respects.

To Analyse the evidence and the record

(xxi) The Arbitrator is required to consider all the

material and evidence/documents placed by the parties on record read with the evidence led by the parties. The Arbitrator is, therefore, bound to analyse and appreciate the same by giving proper and correct

interpretation of terms of the contract subject to provisions of law, before passing reasoned interim or final award. The Arbitrator to pass reasoned interim and/or final award, unless agreed otherwise.

The Doctrines to be followed

(xxiii) The Arbitrator cannot disregard the substantive and procedural law. The Arbitrator is therefore bound to take note of law; of interpretation, precedent, obiter dicta, ratio decidendi, Estoppel, acquiescence, waiver and res judicata, public policy,

dgm 19 app-407-15.sxw

natural justice, fair play and equity."

9 We find no reason to disturb the finding so recorded that

the Petitioner had proved the existence and contents of the three

emails. The reconciliation statement duly signed by the parties

further confirm the same covering the transactions after 31 August

2008. Mere termination, through a notice, that itself cannot be the

reason to dislodge the claim so raised based upon the agreed clauses.

The agreement expired by efflux of time is also unacceptable, having

once extended the same, through the email which is permissible mode

of written arbitration agreement on same earlier terms and conditions.

The parties, as recorded, have in fact acted upon. The typing error

and/or any error in the email that itself, in the present facts and

circumstances, cannot be the reason to overlook the other contents of

the same. The learned Judge has, therefore, has taken note of the

totality of the facts and circumstances and provided the finding while

reversing the award passed by the Arbitral Tribunal to the extent so

recorded above.

    10              In the present case and as recorded by the learned Judge 







     dgm                           20                                           app-407-15.sxw

that the finding recorded by the learned Arbitrator are perverse, illegal

and as this is not a case of appreciation of evidence. On the contrary,

the finding is that the learned Arbitrator refused to exercise

jurisdiction by holding that the Petitioner was not entitled for claim by

overlooking the emails and the contents thereof supported by

evidence and, therefore, the Arbitrator's finding is apparent on the

face of the record was illegal and perverse. The judgments, therefore,

of Ravindra Kumar Gupta and Company v. Union of India 5; Ropa

Plastics Pvt Ltd v. IPN Pakcaging Pvt Ltd.,6 and in M/s. Bhavani Cotex v.

M/s. C.A. Galiakotwala & Co Pvt. Ltd7, rightly observed, are of no

assistance.

11 Therefore, taking overall view of the matter and

considering the power and scope of Appellate Court under Section 37 of Arbitration Act and we have also noted that the reason provided by

the learned Judge is well within the frame work of law and the record. Recently, the Supreme Court in M/s.Chebrolu Enterprises v. Andhra Pradesh Backward Class Coop.Finance Corpn Ltd in Civil Appeal No.8918/2015 on

28.10.2015 has reinforced thus "This Court or even the Appellate Court would not look into the finding of facts unless they are perverse.". No case is made out to interfere with the impugned judgment .

5 (2010) 1 SCC 409 6 2014 (3) Mh. L. J. 150 7 Unreported judgment dt. 21.01.2014 in Arb. Pet. No.314/2013 by Bombay High Court

dgm 21 app-407-15.sxw

12 In the result, the Appeal is accordingly dismissed. Rule

stands discharged. There shall be no order as to costs.

12 In view of dismissal of Appeal, Notice of Motion (L) No.

1796 of 2015 does not survive and stands disposed of accordingly.

                                           
    (G. S. KULKARNI, J.)
                                    ig            (ANOOP V. MOHTA, J.)