M/S. Snab Publishers Pvt. Ltd. vs M/S Variety Book Depot
2011 Latest Caselaw 2461 Del

*               HIGH COURT OF DELHI : NEW DELHI
               Judgment reserved on: April 05, 2011
              Judgment pronounced on: May 09, 2011

+                       CS (OS) No. 2600/2010
                            IA No.17395/2010
                           IA No.1771/2011 &
                             IA No.1772/2011

%     M/s. Snab Publishers Pvt. Ltd.        ...     Plaintiff
                      Through: Ms. Kajal Chandra and Ms.
                                  Prachi Gupta, Advocates.

                                 versus
      M/s Variety Book Depot                  ... Defendant.
                      Through:      Mr. Abhijat and Ms. Fareha
                                    Ahmad Khan, Advocates.
CORAM:

HON'BLE MR. JUSTICE SUNIL GAUR


1.       Whether the Reporters of local
         papers may be allowed to see
         the judgment?

2.       To be referred to Reporter or                 No.
         not?

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

SUNIL GAUR, J.

IA No.1771/2011 (u/S. 8 of Arbitration & Conciliation Act)

1. In this suit for recovery of Rs.1,10,16,922.87p. with interest,

defendant has come up with this application to invoke the

Arbitration Clause as contained in the Agreement of 9th

September, 2008 seeking reference of the dispute raised herein CS(OS) No. 2600/2010 Page 1 as well as the proposed counter claims of the defendant, to an

Arbitrator who is to be appointed jointly by the parties to this suit.

2. Plaintiff-company is engaged in the business of printing and

publishing of books and the defendant firm is in the business of

distribution and bankings and the business dealings between the

parties related back to the year 1994 when the plaintiff/publisher

had approached the defendant for distribution of the books

"Vegetarian Wonders" etc. Initially there was no formal written

agreement between the parties and in the usual and ordinary

course of business on account payments were being made by the

defendant to the plaintiff who had been maintaining a running

account which was continuous, mutual, open and current.

However, the present suit is based upon Invoices, which is said to

be a written contract.

3. As per the plaintiff, in the year 2009 disputes arose

between the parties and the business dealings came to a stand

still as the defendant withdrew itself from the distributorship and

the plaintiff had stopped supplying the cookbooks. On 14th

September, 2009 defendant is said to have conveyed through e-

mail to the plaintiff that it is no longer exclusive distributor of the

books of the plaintiff. Plaintiff claims the defendant vide letter of

10th October, 2010 had confirmed the liability to pay

CS(OS) No. 2600/2010 Page 2 Rs.87,78,424.60p as on 31st March, 2010 to the plaintiff. On the

aforesaid amount, plaintiff has claimed interest @ 18% w.e.f.

2009 upto December, 2010 i.e. the suit amount.

4. Upon being served, instantly defendant has come up with

this application, which has been responded to by the plaintiff who

in the reply filed has asserted that the claim in the suit pertains

to a period prior to September, 2008 when there was no written

agreement between the parties and so the Arbitration clause in

the Distribution Agreement of 9th September, 2008 (Annexure-A)

cannot be invoked and the dispute herein is beyond the purview

of the aforesaid Distribution Agreement of 9th September, 2008

(Annexure-A).

5. Clause 17 of the aforesaid Distribution Agreement of 9th

September, 2008 (Annexure-A) contains an Arbitration Clause

which is comprehensive one. It reads as under:-

"ARBITRATION: In the event of any dispute, difference or claims arising between the parties hereto in connection with this agreement or the construction or interpretation of any of the clauses hereof, or any rights and entitlements of the respective parties, or anything done or omitted to be done pursuant hereto the parties shall first endeavour to amicably settle such disputes, differences or claims, failing which the same shall be referred to the arbitration of a sole Arbitrator jointly appointed by both the parties under the provisions of the Arbitration and Conciliation Act, 1996 as amended from time to

CS(OS) No. 2600/2010 Page 3 time or any statutory replacement thereof. The arbitration proceedings shall be held at New Delhi a place to be mutually agreed between the parties. The provision of this clause shall survive the period/termination of this agreement."

6. The conditions which are required to be satisfied for

invoking Section 8 of the Arbitration and Conciliation Act, 1996

have been spelt out by the Apex Court in P.Anand Gajapathi Raju

v. P.V.G.Raju (Dead), AIR 2000 SC 1886 which reads as under:-

"(5) The conditions which are required to be satisfied under Sub-sections (1) and (2)of Section 8 before the Court can exercise its powers are:

             (1)       there is an arbitration agreement;

             (2)       a party to the agreement brings an action
                       in the Court against the other party;

             (3)       subject matter of the action is the same as
                       the subject matter of the arbitration
                       agreement;

             (4)       the other party moves the Court for

referring the parties to arbitration before it submits his first statement on the substance of the dispute."

7. The mandate of the Apex Court in Hindustan Petroleum

Corpn. Ltd. v. Pinkcity Midway Petroleums AIR 2003 SC 2881 is as

under:-

"It is clear from the language of the Section, as interpreted by the Constitution Bench judgment in Konkan Railway (supra) that if there is any objection as to the applicability of the arbitration clause to the facts of the case, the same will have to be raised before the concerned Arbitral Tribunal."

CS(OS) No. 2600/2010 Page 4

8. Upon having heard learned counsel for the parties on this

application and on perusal of the records of this case, I find that

the existence of Distribution Agreement of 9th September, 2008

(Annexure-A) and of its containing Arbitration Clause is not in

dispute. However, what is required to be determined is whether

the subject matter of this suit comes within the ambit of the

aforesaid Distribution Agreement (Annexure-A).

9. As per plaintiff's own showing the disputes arose between

the parties in the year 2009. Plaintiff's suit is essentially based

upon the crucial averments as contained in paragraph No.8 of the

plaint which require to be noticed. Paragraph No.8 of the plaint

reads as under:-

"In the year 2009, disputes arose between the parties and business dealings came to a stand still. As the Defendant withdrew itself from the distributorship, the Plaintiff stopped supplying books. On 14.09.2009, the Defendant also through their e-mail admitted that the Defendant is no more the Exclusive Distributor of the Plaintiff.

Though the business transactions were over between the Parties but the Defendant owed a sum of Rs.1,94,95,233.20/- to the Plaintiff. During the period of August to December, 2009, the Defendant returned the stock of unsold books to the tune of a sum of Rs.1,07,60,808.60/- leaving an outstanding sum of Rs.87,78,424.60/- towards the books supplied by the plaintiff to the defendant. Thus, leaving an outstanding of a sum of Rs.87,78,424.60/- along with interest @ 18% due and payable to the plaintiff."

CS(OS) No. 2600/2010 Page 5

10. The first document relied upon by the plaintiff is the ledger

account of the defendant maintained by the plaintiff and this

ledger account relates to the period from 1st April, 2009 upto 17th

September, 2009. The Credit Notes relied upon by the plaintiff,

also pertain to the year 2009. Aforesaid averments and

documentary evidence is of the period which is post Distribution

Agreement of 9th September, 2008 (Annexure-A). Simply

because some invoices of the pre-Distribution Agreement of 9th

September, 2008 (Annexure-A) have been placed on record,

would not take the plaintiff's claim beyond the purview of the

Distribution Agreement of 9th September, 2008 (Annexure-A)

which contains an Arbitration Clause. Essentially, plaintiff's claim

in this suit is based upon the ledger account of the year 2009

which is clearly covered by the Distribution Agreement of 9th

September, 2008 (Annexure-A).

11. The Distribution Agreement of 9th September, 2008

(Annexure-A) clearly acknowledges that the business relations

between the parties relate back to the year 1993 and for the

smooth functioning of the same in future this agreement is being

executed. As per Clause 11 of the aforesaid Distribution

Agreement of 9th September, 2008 (Annexure-A) proper and

regular account of the business handled by the parties to this suit

CS(OS) No. 2600/2010 Page 6 is required to be maintained. This agreement was initially for a

period of 5 years.

12. Upon plain reading of the plaint and the aforesaid

Distribution Agreement of 9th September, 2008 (Annexure-A), it is

found that the terms and conditions mutually agreed between the

parties on the pre-Agreement period and a post-Agreement

period in question were the same as is evident from the

averments made in paragraph No.4 of the plaint and the

Distribution Agreement of 9th September, 2008 (Annexure-A) in

question. There was no redefining of the terms and conditions on

which business relations of the parties proceeded during the

post-Agreement period. Strictly speaking, this aspect is not

required to be dwelt upon, as the plaintiff cannot be permitted to

improve upon his case as set out in paragraph No.8 of the plaint

as noted above. Thus, it is abundantly clear that the subject

matter of this suit comes within the purview of the Distribution

Agreement of 9th September, 2008 (Annexure-A) in question and

the defendant is justified in invoking the Arbitration Clause

contained therein, to seek resolution of the disputes raised in

these proceedings.

13. Where the existence of the Arbitration Agreement is not in

dispute, Court's intervention should be minimal as the Arbitral

CS(OS) No. 2600/2010 Page 7 Tribunal is competent to rule on its jurisdiction as per Section 16

of the Arbitration and Conciliation Act, 1996. This is the mandate

of law and so this Court is not required to declare whether the

disputes herein comes within the jurisdiction of the Arbitral

Tribunal which is required to be constituted jointly by the parties

to the suit. Therefore, the observations made in this Order are

purely tentative and the Arbitrator so named by the parties would

be free to decide upon his competence to adjudicate upon the

disputes on the subject matter of this suit and the proposed

counter claim by the defendant.

14. This application is accordingly allowed and the parties to

the suit are referred to an Arbitrator to be named by the parties

jointly, within four weeks. Needless to say that in the event of

default by either side in agreeing upon an Arbitrator, then it shall

be open to either party to invoke Section 11 of the Arbitration

and Conciliation Act, 1996.

15. With observations as aforesaid, this application is disposed

of while refraining to comment upon the merits of the disputes

raised herein.

IA Nos. 17395/2010 (u/O. 39 R. 1&2 of the CPC) and IA No.1772/2011 (u/O. 39 R. 4 of the CPC)

16. In view of the orders passed in IA No.1771/2011 parties are

left to invoke Section 17 of the Arbitration and Conciliation Act,

CS(OS) No. 2600/2010 Page 8 1996 or to take recourse to Section 9 of the Arbitration and

Conciliation Act as the case may be. Till such a recourse is taken,

the interim order of status quo as granted on 22 nd September,

2010 shall continue to operate.

17. With aforesaid observations, both these applications are

disposed of.

CS (OS) No.2600/2010

18. In view of the orders passed in IA No.1771/2011, this suit is

disposed of while referring the parties to an Arbitrator to be

jointly appointed by the parties to the suit.

19. This suit and the IAs stand disposed of accordingly.

Sunil Gaur, J.

May 09, 2011
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