Esys Information Technologies ... vs M/S Polaris Retail Infotech Ltd.
2009 Latest Caselaw 3673 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                  A.A. No.234/2009

%                                Date of decision:10.09.2009

ESYS INFORMATION TECHNOLOGIES PVT. LTD.           ....Petitioner
                       Through: Mr. Asit Tewari, Advocate.

                               Versus

M/S POLARIS RETAIL INFOTECH LTD.                  ... Respondent
                       Through: Mr. Vijay Sharma, Advocate.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?   Yes

2.    To be referred to the reporter or not?   Yes

3.    Whether the judgment should be reported
      in the Digest?  Yes


RAJIV SAHAI ENDLAW, J.

1. Petition under Section 11 of the Arbitration Act, 1996 is

preferred with respect to an agreement dated 1st September, 2005

between the parties containing an arbitration clause. Clause 7.8 of

the said agreement, inter-alia provides that upon any dispute or

difference arising under the agreement, the parties shall endeavour

to resolve the same through mutual negotiations and in the event of

failure of such dialogue/discussions/negotiations the matter shall be

referred to a binding arbitration under the Arbitration & Conciliation

Act, 1996. Notice of the petition was issued to the respondent. The

counsel for the respondent appeared before this court on 4th

September, 2009 and today and sought time for filing the reply.

2. Proceedings under Section 11 of the Act for appointment of

arbitrator, cannot be conducted as other proceedings before the

court. The scope of enquiry in these proceedings is limited as

recently reinstated in National Insurance Co. Ltd. Vs. Boghagra

Polyfab Pvt. Ltd. AIR 2009 SC 170. The scope of enquiry in these

applications as laid down in the said judgment is only to determine

(i) whether the appropriate High Court has been approached; (ii)

whether there is an arbitration agreement; and (iii) whether the

party who has applied, is a party to, such an agreement. The Chief

Justice or his designate has the discretion to, also entertain but

which he is not bound to entertain, whether the claim is a dead (a

long barred claim) or a live claim and whether the parties have

concluded the contract/transaction by recording satisfaction of their

mutual rights and obligations or by receiving the final payment

without objection. The Chief Justice or his designate is not entitled to

determine whether the claim falls within the arbitration clause and

the merits of any claim involved in the arbitration.

3. It will thus be found that the submissions on the scope of

enquiry involved in these applications under Section 11 of the Act

can be made even without filing reply and the parties/counsels

cannot claim time to file reply as a matter of right. It is worthwhile to

mention that this stage is but a precursor to the determination of

disputes and if this stage is unduly lengthened, it will have a

cascading delay on the dispute resolution between the parties. The

parties opt for arbitration instead of mechanism of ordinary courts,

hoping that the same would be quicker than the time taken in the

courts. By following the procedure as followed for other legal

proceedings in these petitions also, the dominant purpose of

"expediency" in arbitration will be lost. Thus a party/counsel served

with a notice of an application under Section 11 of the Act, even if

unable to file reply, ought to come prepared to address on the

merits. If the court thereafter finds that anything is required to be

stated on affidavit the court may grant time for the same. However,

as a matter of routine adjournments cannot be sought.

4. The counsel for the respondent then stated that his reply is

ready and was allowed to hand over the same in the court and the

same has been taken on record. The counsels have been heard.

5. The counsel for the respondent has not disputed the agreement

dated 1st September, 2005 or the arbitration clause therein. He has

opposed the application on three grounds. Firstly, it is contended

that the claim is barred by time. Secondly, it is contended that the

disputes raised are not covered by the arbitration agreement.

Thirdly, it is urged that the petitioner, on the material before the

court itself has no claims as raised against the respondent and thus

no purpose will be served in appointing the arbitrator.

6. The agreement between the parties was of the appointment of

the petitioner as a dealer on a non-exclusive basis of the respondent,

for promoting the software solutions developed by the respondent.

The counsel for the respondent has urged that the agreement

between the parties being of 1st September, 2005, the limitation of

three years therefrom expired on 31st August, 2008 and the present

petition filed on 30th May, 2009 is barred by time. The petitioner has

pleaded that the petitioner had made payments to the respondent

conditionally and upon the goods being found to be not marketable,

became entitled to return the said goods to the respondent and to

claim refund of the monies paid to the respondent. The counsel for

the respondent has not argued anything whatsoever of the claim

made in the petition being barred from the cause of action

therefrom. The only argument is that since the petition has been

filed after more than three years from the date of the agreement, the

claim is a dead one and the petition is not maintainable. However,

the transactions between the parties always start after the

agreement and the period of limitation cannot be counted from the

date of the agreement. The respondent, in the reply to the legal

notice got issued by the petitioner prior to the institution of this

petition also had taken the same defence only to the demand of the

petitioner for agreeing on a sole arbitrator. The respondent has in its

reply handed over today also, treated the limitation as commencing

from the date of the agreement only. In the absence of the counsel

for the respondent showing anything that the claim for refund is

barred by time, no defence of the claim being a long dead one or a

time barred one is made out.

7. On the claims being not covered by arbitration the counsel for

the respondent has drawn attention to the recitals in the agreement

wherein it is mentioned that the respondent is in a position to license

and provide service of its "software solutions such as Retail Excel". It

is also stated in Clause 1 of the agreement that the respondent has

appointed the petitioner as its authorized dealer to market the

respondent's IT solutions "such as Retail Excel". Thereafter, it is

stated that "the product, service and solution that are covered by

this agreement is limited to Retail Excel, unless otherwise agreed

explicitly in writing by the parties". The counsel for the respondent

has also drawn attention to the petition wherein it is pleaded that the

claims of the petitioner against the respondent for refund are not

only with respect to Retail Excel but also with respect to another

software solution of the respondent titled "Billing Basic Master

Refund Standard". It is urged that since Billing Basic Master Refund

Standard software is not the subject matter of the agreement

aforesaid containing an arbitration clause, the claims of the

petitioner against the respondent with respect to the said software

are not arbitrable. It is further urged that the petitioner has not filed

any writing whereby the software Billing Basic Master Refund

Standard of the respondent was agreed to be included in the

agreement.

8. Upon enquiry, the counsel for the respondent admits that the

software Billing Basic Master Refund Standard is also of the

respondent and was provided to the petitioner. It is also admitted

that no separate agreement was entered into between the parties

with respect to the said software.

9. As noticed above in the agreement, Retail Excel is only

mentioned as one of the softwares of the respondent with respect

whereto the petitioner was appointed as the dealer. It is significant

that the petitioner had in the legal notice under Section 11 (5) of the

Act issued prior to the petition also referred to the other software

and the respondent had in the reply to the legal notice while

admitting having supplied the said software also to the petitioner,

not contended that the disputes with respect thereto were not

arbitrable. In fact, it was contended that the disputes with respect

to the said softwares also were barred by time counted from the

agreement deed 1st September, 2005. The respondent thus admitted

that the supplies of the other software were also in terms of the

agreement containing the arbitration clause. In view of the said

stand of the respondent in the reply to the legal notice, no merits are

found in the said contention of the respondent also.

10. The counsel for the respondent has lastly urged that in the

written statement between the parties there is no provision

whatsoever for the respondent to refund the monies to the petitioner

or to take back the software. However, this defence of the

respondent would be on the merits of the dispute and under Section

11 of the Act cannot be gone into.

11. Axiomatically, the petition is allowed. The parties having been

unable to mutually decide on the appointment of the sole arbitrator,

Mr. Amitabh Narayan, Advocate, Chamber No.112, Lawyers

Chamber, Delhi High Court, New Delhi -110 003 [Ph. No.23384939

& 23265269 (R)] is appointed as the arbitrator to adjudicate the

disputes in terms of the arbitration agreement. Since the claims of

the petitioner are of approximately Rs.30 lacs, the consolidated fee

of the arbitrator is fixed at Rs.40,000/- besides out of pocket

expenses. However, in the facts of the case, the fee and other

expenses of the arbitration be borne in the first instance by the

petitioner alone, subject to award as to costs. It is clarified that this

court has herein above expressed view on the plea of limitation only

to the extent raised and if any other plea of limitation is raised, the

same shall be open for adjudication in arbitration.

The petition is disposed of.

The parties to appear before the arbitrator with prior

appointment on 22nd September, 2009.

RAJIV SAHAI ENDLAW (JUDGE)

September 10th, 2009.

PP