Delhi High Court
M/S Variety Book Depot vs Snab Publishers Pvt. Ltd. on 27 January, 2014
Author: Vipin Sanghi
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 17.01.2014
% Judgment delivered on: 27.01.2014
+ O.M.P. 66/2014
M/S VARIETY BOOK DEPOT ..... Petitioner
Through: Mr. P.V. Kapur, Senior Advocate
along with Mr. Abhijat, Mr. V.K.
Nagrath, Mr. Aaditya Vijay Kumar,
Mr. Abhay Verma, Mr. Siddhant
Kapur & Mr. Harsh, Advocates.
versus
SNAB PUBLISHERS PVT LTD ..... Respondent
Through: Mr. Sanjeev Anand, Ms. Kajal
Chandra, Ms. Prachi Gupta, Ms.Renu
Kumar, Mr. Anish Khanna, Ms. Swati
Sinha & Mr. Shubham Tripathi,
Advocates.
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
JUDGMENT
VIPIN SANGHI, J.
Caveat No.51/2014
1. The caveator has appeared. The caveat stands discharged.
I.A. No. 919/2014
2. Exemption allowed, subject to all just exemptions. The application
stands disposed of.
O.M.P. No. 66/2014
3. Issue notice. Learned counsel for the respondent caveator accepts
notice.
4. I have heard learned senior counsel for the petitioner as also the
learned counsel for the respondent and proceed to disposed of the present
objection petition under Section 34 of the Arbitration and Conciliation Act,
1996 (the Act) preferred by the petitioner to assail the award dated
30.09.2013 rendered by Mr. Justice Mukul Mudgal, Former Chief Justice,
Punjab & Haryana High Court in respect of disputes which arose between
the parties. Before proceeding to deal with the specific objections raised by
the petitioner, I consider it appropriate to set out a few background facts.
5. The petitioner is engaged in the business of distribution of books &
magazines. The respondent is engaged in the business of publishing of
books. Since the year 1993, there have been business transactions &
dealings between the parties. The respondent publisher approached the
petitioner distributor in the year 1994 for distribution of their books
"Vegetarian Wonders". No formal distribution agreement was executed
between the parties. However, it was agreed between the parties that the
petitioner will be the distributor for the sale of the books of the respondent
publisher. It was further agreed that payment was to be made by the
petitioner distributor within 90-180 days from the date of invoice raised by
the respondent for the books supplied by the respondent.
6. On 09.09.2008, the parties entered into an agreement - being a
distribution agreement. In early 2009, disputes arose between the parties
and the business dealings came to a halt. The supply of book by the
respondent publisher/ claimant, to the petitioner, stopped. The distribution
agreement came to an end. The respondent/claimant claimed that the
petitioner owed an amount of Rs.1,94,85,233.20/- to it. The respondent
claimed that during the period August to December 2009, the petitioner
returned stock of unsold books to the respondent/claimant worth
Rs.1,07,60,808.60/-, leaving an outstanding balance of Rs.87,78,424.60/-.
The respondent issued a demand notice dated 08.05.2010 claiming the
aforesaid amount along with interest @ 18% per annum. Thereafter, the
respondent preferred a civil suit being C.S.(O.S.) No.2600/2010 before this
Court for recovery of Rs.1,10,16,922.87/- with interest against the petitioner
herein.
7. The petitioner preferred an application being I.A. No. 1771/2011
under Section 8 of the Act. In this application, the petitioner, inter alia,
contended that the parties had entered into the distribution agreement on
09.09.2008, which contained an arbitration agreement. The petitioner
claimed that the respondent had approached the Court with unclean hands
and without disclosing the said arbitration agreement.
8. This application was allowed by the Court. The Court directed that
the parties may jointly name an Arbitrator within four weeks. It was left
open to the parties to invoke Section 11 of the Act, in case they are not able
to agree on an Arbitrator.
9. Since the parties could not agree on an Arbitrator, the respondent
preferred an application under Section 11 of the Act being Arb.P.
No.210/2011, which was allowed on 20.07.2011 and the learned Arbitrator
was appointed as a Sole Arbitrator to adjudicate the disputes between the
parties. The respondent, accordingly, preferred its claim before the
Arbitrator.
10. The petitioner, apart from defending the said claim, preferred a
counter-claim. The defences raised by the petitioner were firstly, that the
claims of the respondent were not arbitrable. It was contended that the basis
for computation of the claims of the respondent, is an amount - allegedly
due from the petitioner to the respondent, prior to the execution of the
distribution agreement dated 09.09.2008. In terms of clause 17 of the
distribution agreement, only such disputes and differences were arbitrable
which arose between the parties out of the said agreement. The further
defence of the petitioner was that the claims of the respondent were barred
by limitation. The case of the petitioner was that from 1993, the petitioners
have been distributing the books published by Ms. Neeta Mehta on
consignment-to-consignment basis without any written contract governing
the parties. All the payments and liabilities of the petitioner were promptly
paid. Since the respondent was selling the books directly to third parties,
thereby bypassing the petitioner, to curb such acts of the respondents, the
parties entered into a formal agreement which was reduced into writing vide
agreement dated 09.09.2008. The petitioner claimed that the respondent
continued to act in breach of the agreement by making direct sales to third
party while bypassing the petitioner. Such sales were not invoiced through
the petitioner to ensure minimum margin of 10% to the petitioner. When the
respondent was confronted with such breach of agreement, the respondent
stopped supply of books abruptly and unilaterally, even though the
distribution agreement continued to be valid and subsisting. The petitioner
claimed loss of reputation and goodwill in the market on account of
stoppage of supply of books by the respondent. The petitioner claimed that
it had to resort to offering a 50% discount on all the titles published by the
respondent. The said offer was made in the nature of distress sale.
11. The Arbitral Tribunal framed the following issues:
"1. Whether the claims of the claimant are barred by
limitation?
2. Whether any of the claims of the claimant is not
arbitrable as alleged by the respondent?
3. Whether any of the counter claims is not arbitrable as
alleged by the claimant?
4. Whether both the parties are entitled to the sums claimed
as per the Claim and Counter Claim."
The parties led their respective evidence before the Tribunal. The witnesses
of the parties were cross-examined by the opposite party.
12. The Tribunal returned the finding that the claim of the respondent was
not barred by limitation. The Arbitral Tribunal also held that the claims of
the claimant were arbitrable under the arbitration agreement and by the
learned Arbitrator. So also, the counter-claims were held to be arbitrable.
The learned Arbitrator allowed the respondent's claims to the extent of
Rs.87,78,424.60/-. The petitioner's counter-claim was also allowed to the
extent of Rs.46,70,318/-. Consequently, the respondent claimant was held
entitled to a sum of Rs.41,08,106.60/-. In case the amount was paid within
eight weeks, the same were not to carry interest. Otherwise, interest has
been awarded @ 18% per annum from the date of the award.
13. The first submission of learned senior counsel for the petitioner is that
the distribution agreement dated 09.09.2008 in clause 2 provided that the
buyers and distributors have "now jointly decided to execute an agreement
for smooth functioning in future" [emphasis supplied]. He submits that this
agreement, therefore, was applicable only in respect of future dealings on
and from the date of execution of the distribution agreement dated
09.09.2008. The said distribution agreement did not pertain to the past
transactions undertaken by the parties under their oral arrangement. He
submits that clause 17 of the distribution agreement, which contains the
arbitration agreement, states that 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 nature of the clauses
hereof, or any rights and entitlements of the respective parties, or anything
done or omitted to be done pursuant hereto ... ... ... ... ... shall be referred
to the arbitration of a sole arbitrator ... ... ... ..." [emphasis supplied].
14. Mr. Kapur submits that on a conjoint reading of clauses 15 & 17, it is
clear that claims of the respondent for the period before the distribution
agreement was entered into, were not arbitrable. Mr. Kapur submits that the
respondent raised its claim on the basis of a ledger account maintained by
the respondent, which showed a debit opening balance of
Rs.1,81,89,037.70/- as on 09.09.2008, i.e. the date of the distribution
agreement. He submits that on this basis the respondent had drummed up its
claim before the Arbitral Tribunal. He submits that the claim of
Rs.1,81,89,037.70/-, if any, arose prior to the execution of the distribution
agreement and the same was not arbitrable as it pertained to the supplies
made prior to the execution of the distribution agreement.
15. Mr. Kapur submits that the respondent had made an application under
Section 11(6) of the Act for appointment of an Arbitrator. As per clause 17
of the arbitration agreement dated 09.09.2009, the Arbitrator could not have
travelled beyond the scope of the said arbitration agreement and adjudicated
the respondent's claims pertaining to the period prior to 09.09.2009.
16. Mr. Kapur further submits that the petitioner had specifically denied
before the Arbitral Tribunal in its pleadings, that it owed a sum of
Rs.1,94,85,233.20/- or any other amount. In this regard, reference is made
to the statement of claim and the corresponding reply of the petitioner. Mr.
Kapur submits that the learned Arbitrator has simply accepted the said entry
of debit balance as on 09.09.2009, made by the respondent claimant
unilaterally, without there being any proof of the said amount being payable
by the petitioner to the respondent. Mr. Kapur submits that only by
implication, the Arbitral Tribunal has concluded that the petitioner was
indebted to the respondent as on 09.09.2009 to the tune of
Rs.1,81,89,037.90/-. Consequently, the submission of Mr. Kapur is that
there was no evidence before the learned Arbitrator to return the finding that
Rs.1,81,89,037.90/- was outstanding and payable as on 09.09.2009 by the
petitioner to the respondent.
17. The next submission of Mr. Kapur is that the claim for the said
amount was barred by limitation. He submits that the account being
maintained by the respondent was not a mutually open and current account.
This position has been accepted by the learned Arbitrator as well, in the
impugned award. He submits that Article 15 of the Schedule to the
Limitation Act was applicable, since the claim was in respect of the goods
supplied. The said Article reads as follows:
Description of suit Period of Time from
limitation which period
begins to run
"15. For the price of goods Three When the
sold and delivered to be paid years. period of credit
for after the expiry of a fixed expires."
period of credit.
18. Mr. Kapur submits that the period of credit was 90-180 days, and
even if the said period were to be counted for, the claim of the respondent
was barred by limitation. Mr. Kapur submits that the respondent invoked
arbitration only on 12.07.2011. On that date, the claim of the respondent for
the amount due for supplies made beyond three years was barred by
limitation.
19. Mr. Kapur submits that while awarding the counter claim towards
10% commission on sales directly made by the respondent to third parties,
the learned Arbitrator had allowed the same only for the period up to
30.09.2011. He submits that the contract was not terminable, as held by the
learned Arbitrator himself - which finding has not been challenged by the
respondent and, therefore, the contract remained in force up till 08.09.2013.
The petitioner would, therefore, be entitled to 10% commission on third
parties sales up till 08.09.2013, and not only up till 30.09.2011.
20. On the other hand, learned counsel for the respondent submits that
only one account was maintained between the parties in respect of all the
transactions. It is not that separate accounts were maintained before the
execution of the formal distribution agreement on 09.09.2008, and for the
period thereafter. Learned counsel for the respondent submits that in
response to the suit filed by the plaintiff for recovery of money - which
included the amount due as on 09.09.2008, it is the petitioner who had come
up with an application under Section 8 of the Act claiming that the subject
matter of the suit is entirely covered by the Arbitration Agreement. He
submits that the petitioner cannot blow hot and cold at the same time. At
the behest of the petitioner, this Court had disposed of the suit, leaving it
open to the parties to proceed in arbitration. The Court had also returned a
finding with regard to the arbitrability of the claims in the suit. That
finding has attained finality. He submits that since no arbitrator could be
appointed by consent, the respondent had invoked Section 11 of the Act.
The finding of the Court with regard to arbitrability of the respondent's
claim in the suit having attained finality, cannot be whittled down by the
fact that the respondent invoked Section 11 of the Act for appointment of an
Arbitrator. He submits that the respondent had preferred the same claims
before the learned Arbitrator as had been made in the suit and the counter
claim.
21. Learned counsel for the respondent has further argued that the
conduct of the petitioner itself shows that the petitioner also was of the view
that the transactions for the period prior to the execution of the distribution
agreement were covered by the arbitration agreement. He submits that the
petitioner himself filed an application for discovery and production of books
of accounts, cash books and ledgers, invoice, bills and other documents in
the custody and possession of the respondent claimant, with respect to the
sale of books undertaken by the respondent for the period between
01.01.2008 till date. He submits that the reason why the petitioner asked
for discovery of the said information, for the period even prior to
09.09.2008 - when the distribution agreement was executed, was because
the petitioner was also of the same view that the disputes/counter claims for
the period prior to 09.09.2008 was covered by the arbitration agreement.
He submits that the petitioner is, therefore, estopped from now contending
to the contrary. He submits that the aforesaid application of the petitioner
was allowed by the learned Arbitrator on 20.09.2011, and a Chartered
Accountant was appointed to inspect the accounts of the
claimant/respondent in respect of sales made by the claimant from
01.01.2008 till date.
22. Learned counsel submits that even if it were to be accepted for the
sake of argument, that the disputes pertaining to the period up to 09.09.2008
were not covered by the arbitration agreement, the petitioner had himself
acted so as to rope in the said disputes within the ambit of arbitration
agreement and, therefore, the petitioner cannot resile from the same.
23. On the aspect of limitation, the submission of learned counsel for the
respondent is that the respondent had communicated the statement of
account to the petitioner vide email dated 26.06.2009 (Annexure A6 at page
106 of the document file). The petitioner, however, did not dispute the same
at any stage. He further submits that the respondent had sought the balance
confirmation from the petitioner on 10.10.2010 for the period up to
31.03.2008. This balance confirmation was acknowledged by the petitioner,
while confirming that an amount of Rs. 51,71,158.90/- was due from the
petitioner to the respondent as on 31.03.2008. On 10.10.2010, the petitioner
had also confirmed the balance due from the petitioner to the respondent as
on 31.03.2009 at Rs. 54,92,584.90/-. Similarly, on 10.10.2010, the
petitioner had also confirmed the balance outstanding, as on 31.03.1990, at
Rs. 87,78,424.60/-. In this regard, reference is made to the document filed
as Annexure A-10 (at pages 178 to 183 of the documents file). Learned
counsel submits that the petitioner never disputed the said balance
confirmations drawn up by the respondent, and never reverted back to say
that the said amounts were not due on the dates indicated in these
certificates.
24. Learned counsel for the respondent has also placed reliance on the
cross-examination of the petitioner's witnesses which shall be referred to a
little later.
25. Learned counsel for the respondent submits that it is Article 26 of the
Schedule to the Limitation Act which is applicable in the facts of this case,
and not Article 16 as sought to be urged by the petitioner. Article 26 reads
as follows:
"26. For money Three When the accounts are
payable to the years stated in writing signed
plaintiff for by the defendant or his
money found to agent duly authorised in
be due from the this behalf, unless where
defendant to the the debt is, by a
plaintiff on simultaneous agreement
accounts stated in writing signed as
between them aforesaid, made payable
at a future time, and
then when that time
arrives."
26. On the aspect of termination, learned counsel for the respondent
submits that the arbitral tribunal has, after examining the factual position
and the correspondence exchanged between the parties, concluded that it
was a case of abandonment of the agreement by the parties and,
consequently, the submission of learned senior counsel for the petitioner
that the counter claim should have been awarded for the period up to
08.09.2013 has no merit.
27. In his rejoinder, learned counsel for the petitioner has argued that the
stand of the petitioner was that the petitioner had not acknowledged the
amounts as being due, as claimed by the respondent in its own balance
confirmation certificates. The signatures on the said certificates was not an
acknowledgement with regard to the correctness of the contents of the said
documents, but only an acknowledgement of receipt of the said documents
by the petitioner. He submits that arbitral tribunal has not returned any
finding with regard to the balance confirmation certificates. He submits that
the arbitral tribunal has itself held that the agreement was not legally
terminable.
28. Having heard learned counsel for the parties, and perused the Award
and the documents relied upon by them, I am of the view that there is no
merit in the present objection petition.
29. On the aspect of limitation, the learned Arbitrator, no doubt, holds
that the accounts between the parties was not a mutual, open and current
account. However, the learned Arbitrator has held that the final amount due
from the petitioner as on 31.03.2010 shown in the ledger account of the
respondent/ claimant was within limitation, as it was a "running account,
since 1993 and the payments were made by the" petitioner within 90 to 180
days within receipt of the claimant's invoices.
30. At this stage, I may observe that the ledger account filed before the
learned Arbitrator by the respondent showed that the petitioner made ad-hoc
payments from time to time. The last of such payments was made on
07.07.2009 for Rs.2 Lakhs. It is well-settled that such ad-hoc payments of
outstanding dues tantamount to an acknowledgement under Section 18 of
the Limitation Act. [see J.C. Budhiraja Vs. Chairman Orissa, Mining
Corporation Limited & Another, (2008) 2 SCC 444]
31. The learned Arbitrator observed, and rightly so, that the petitioner's
plea stating that the amount claimed by the respondent includes the amount
being due prior to 12.07.2008 cannot be sustained, as throughout the period
from 1993 to 2010 the invoices had been raised and correspondingly
payments have been made by the petitioner herein. Therefore, the amounts
shown as credit balance in the claimant's accounts prior to 12.07.2008 must
have been paid of through the various successive payments made by the
petitioner herein. In a running ledger account entries cannot be looked into
isolation.
32. It is also pertinent to note that the respondent had instituted the civil
suit for recovery in the year 2010. The petitioner had invoked the
arbitration agreement by moving an application under Section 8 of the Act
during the pendency of the suit. The respondent had made its claim well
within the period of limitation in the year 2010 itself. The question of
limitation is a mixed question of fact and law. The learned Arbitrator has
considered the evidence produced before him and on that basis concluded
that the claim was not barred by limitation. This finding of the Arbitral
Tribunal does not disclose any error, much less a patent illegality. The view
taken is a plausible and, possibly, the only correct view in the matter.
Therefore, I do not find any error, much less a patent error, or illegality in
the award on the finding of the learned Arbitrator relating to the aspect of
limitation.
33. With regard to the petitioner's submission that the disputes/claims of
the respondent were not arbitrable, as they pertained for the period prior to
09.09.2008, the undisputed position is that the respondent preferred a suit
being CS(OS) No. 2600/2010 before this Court for recovery of Rs.
1,10,16,922.87. The claim in this suit included the claim for the period
prior to the execution of the distribution agreement dated 09.09.2008. The
petitioner itself invoked the arbitration agreement by claiming that the claim
in the suit was entirely covered by the arbitration agreement. The averments
made by the petitioner in the said application are relevant. In para 6 of this
application being I.A. No. 1771/2011, the petitioner stated as follows:
"That in respectful submission of the Defendant the dispute
sought to be raised by the Plaintiff by way of the present suit
is entirely and squarely covered by the said arbitration
agreement. The action brought before this Hon'ble Court by
the Plaintiff is a matter which is properly and entirely the
subject of the said arbitration agreement and the same is
required to be referred to arbitration of a sole arbitrator as
agreed to by the parties in terms of Section 8 of the
Arbitration and Conciliation Act, 1996. The parties having
consciously elected to have their disputes adjudicated upon by
the alternative dispute redressal of arbitration, the plaintiff
cannot be permitted to continue with the present suit."
[Emphasis supplied]
34. The prayer made in this application was as follows:
"Allow the present application and refer the disputes raised by
the Plaintiff against the Defendant by way of the present suit
and all other disputes which may have been subject matter of
a Counter-claim by the Defendant, if the present suit were
maintainable, to the arbitration of a learned sole arbitrator to
be appointed jointly by the parties in terms of the arbitration
agreement contained in the Agreement dated 09.09.2008
(Annexure 'A') executed inter-se the parties."
(Emphasis supplied)
35. This application was allowed by the Court on 09.05.2011. It is
pertinent to note that, at that stage, the respondent opposed the petitioner's
application and, consequently, the Court specifically considered the issue
"whether the subject matter of this suit comes within the ambit of the
aforesaid distribution agreement (Annexure-A)". The Court, while
concluding that the claim in the suit filed falls within the ambit of the
arbitration agreement contained in the distribution agreement, observed as
follows:
"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 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."
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).
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 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."
[Emphasis supplied]
36. I may observe that this was a judicial order, which was accepted by
both the parties. In fact, the same came to be passed at the behest of the
petitioner, on the petitioner's application under Section 8 of the Act. This
order has attained finality, whereby a judicial finding was returned that the
scope of the arbitration agreement contained in the distribution agreement
dated 09.09.2008 covers the entire claim of the respondent in the suit.
37. Consequently, I am of the view that it was not open to the petitioner
to urge before the Arbitral Tribunal, much less is it open to the petitioner to
urge before this Court, that the claims of the respondent were not arbitrable.
The aforesaid finding is res judicata. I also find merit in the respondent's
submission that the petitioner is estopped by its conduct from claiming that
the claims of the respondent were beyond the scope of the arbitration
agreement and, consequently, the tribunal did not have the jurisdiction to
deal with the same. As noticed above, the petitioner, itself, sought to raise
its counter claim for commission, for the period which included the period
prior to the execution of the distribution agreement. The petitioner moved
an application to seek discovery of documents/records of the respondent
with regard to direct sales made by the respondent for the period beginning
01.04.2008, and the said application was allowed. This clearly shows that
the petitioner also treated the arbitration agreement as covering the
transactions of the parties prior to the date of the execution of the
distribution agreement. Having submitted to the jurisdiction of the arbitral
tribunal to adjudicate its claims/counter claims for the period prior to the
date of execution of the distribution agreement, it does not lie in the mouth
of the petitioner to claim that the tribunal did not have the jurisdiction to
deal with the respondent's claim prior to 09.09.2008.
38. A perusal of the impugned Award itself shows that the learned
Arbitrator has dealt with the aforesaid issue as Issue No. 2. On this aspect,
the learned Arbitrator has, inter alia, observed;
"In my view there has been no ambiguity on the point that the
parties always maintained only one account of each other since
1993. Even when the Distribution Agreement was drawn, the
only clause mentioned in it was that both parties shall maintain
proper and regular account of the business.
Even if it assumed that fresh books of accounts were
made from the date of signing of the agreement, the very act of
recording the first entry as balance carried forward implies
that the amount was due and hence to be paid by the
respondent. In case the intention of the parties was to start a
fresh ledger account all together, then the amount due as on
9.9.2008 should have been paid by the Respondent on that very
date and a fresh ledger should have been made. The
Respondent itself had asked for the record of the Third Party
sales of the Claimant to be ascertained by the independent CA
appointed by this Tribunal from the period 1.1.2008 till
20.09.2011, showing that the plea of non-inclusion of the
period before 9.9.2008 was an afterthought.
In any event it has been demonstrated by the claimant
that the entire dispute being part of the civil suit filed by the
Claimant has been referred to Arbitration by the Hon'ble
High Court after the Respondent itself in its Section 8
Application sought such reference to be made. Thus this
gave the Tribunal the jurisdiction to decide the matter as a
whole."
(Emphasis supplied)
39. In the light of the aforesaid discussion, it cannot be said that the
learned Arbitrator has taken an implausible view in the matter. Learned
Arbitrator has taken into consideration relevant and germane aspects which
have been discussed hereinabove. The view taken by the arbitral tribunal is
a plausible view, and, even otherwise, appears to be the correct view. On
this aspect, there is no error found in the Award calling for its interference.
40. The objection of Mr. Kapur that the arbitral tribunal has, without any
evidence concluded - by mere implication, that an amount of
Rs. 1,81,89,037.90/- was owed by the petitioner to the respondent as on
09.09.2008 also has no merit. The arbitral tribunal has addressed the
aforesaid aspect in the above quotation. The tribunal has also taken note of
the respondent's submission that for the purpose of settlement of accounts,
post the decision to terminate the agreement, statement of account was sent
by the claimant to the petitioner herein along with its email dated
26.06.2009. On 24.11.2009, the petitioner herein sent an email to the
respondent/claimant regarding settlement of account. The petitioner herein
vide letter dated 28.05.2010 refuted the claim made by the
respondent/claimant only to the extent that, according to him, the
respondent/claimant was doing direct sales of which he did not have the
complete and proper details and accounts. The arbitral tribunal also takes
note of the respondent's assertion, that it had filed a complete ledger
account for the period 01.04.2007 to 31.03.2010 along with all supporting
documents. Clause 11 of the distribution agreement was also taken note of,
which required both the parties to keep and maintain proper and regular
account of the business handled. This clause reads as follows;
"11. That both the parties shall keep and maintain proper and
regular account of the business handled."
41. The arbitral tribunal notes that the petitioner did not produce the
books of accounts/statement of account as maintained by it, despite
admitting in the cross-examination of the petitioner's witness that he
maintained books of account which were audited and were available in his
office. The relevant portion of the deposition dated 11.01.2013 has been
extracted in the Award itself. The Tribunal also takes note of the
respondent's submission that the petitioner, in its cross-examination,
admitted the receipt of the statement of account from the
respondent/claimant, and also admitted that the parties used to reconcile the
accounts annually. The said witness stated that the last reconciliation was
done in the first week of April, 2009. The Tribunal also notes the
respondent's submission, that the petitioner could not point out what was
disputed by him in the statement of account sent to the petitioner by the
respondent/claimant. The Tribunal takes note of the cross-examination of
the petitioner's witness, conducted on 11.01.2013. The respondent also
sought to invoke Section 114(1) of the Evidence Act, since the petitioner
deliberately did not produce the account books/statement of business
dealings between the parties maintained by the petitioner, as obliged under
the distribution agreement. The said records had not been produced despite
the petitioner agreeing to produce the same during the petitioner's
deposition recorded on 11.01.2013, and despite being called upon to
produce the same by the respondent/claimant letter dated 07.02.2013. The
Tribunal also takes note of the decisions relied upon by the
respondent/claimant in support of this submission. The respondent's
submission that the production of the same would have been unfavourable
to the petitioner has been noticed.
42. The submission of petitioner before the Arbitral Tribunal, inter alia,
was that the petitioner had not issued the balance confirmation receipts. The
petitioner claimed that it had merely acknowledged the receipt of the
balance confirmation certificates/ receipts prepared by the respondent-
claimant.
43. A perusal of the impugned award shows that that the learned
Arbitrator has not accepted the petitioner's aforesaid submissions. He has
observed that only one account was being maintained by the parties since
1993. The parties had agreed under the distribution agreement, that both the
parties shall maintain proper & regular accounts of the business. The
learned Arbitrator does not believe the ipsit dixit of the petitioner that the
three balance confirmation receipts sent by the claimant to the petitioner did
not tantamount to confirmation of balance by the petitioner. The learned
Arbitrator has observed that though the said balance confirmation receipts
have been denied by the petitioner, the petitioner has not filed anything
before the Tribunal to show that the ledger account maintained by the
respondent/claimant showing the final amount being due on 31.03.2010, as
incorrect. The fact that the petitioner did not produce its ledger has been
taken note of, as a fact against the petitioner. Thus, the Tribunal has
appreciated the evidence led/ not led before him, which he alone was
entitled to do. The Tribunal also deals with the petitioner's submission -
that the petitioner had overpaid the respondent in respect of the sales made
after the date of the execution of the distribution agreement by observing
that "if the sales were less there was no reason for the respondent to pay
excess amount. This on the contrary, clearly establishes the case that the
parties had a running ledger account and no entry can be taken for
consideration in isolation".
44. The cross-examination of the petitioner's witness Mr. Om Arora is
revealing of the manner in which the petitioner has conducted itself while
dealing with the respondent. In his cross-examination of 11.01.2013, he
admits that he maintained all books of accounts of dealings with the
respondent, and that these are available in his office. He states that "I
maintained only one account of M/s Snab Publishers. These accounts
would reflect all the invoices raised by the claimant and the payment made
by me against those invoices. The ledger have not been filed in these
proceedings. I cannot say why the ledger has not been filed. I will most
likely be in a position to produce the ledger before the Arbitral Tribunal".
He states that "I used to reconcile my accounts with the claimant annually
and the last reconciliation must have been around 1st week of April 2009.
After April 2009, I have not received any statement of account from the
Claimant". The said witness, while answering questions relating to the
three balance confirmation certificates, states that they "are the letters from
the claimant certifying what was said to be due from me bear my signatures.
The signatures were to acknowledge the receipt of the said letters. I have
not disputed the contents of these letters and I would like to add that in fact
I have not confirmed the contents of these letters either".
45. Pertinently, the petitioner's witness denied having received the
statement of account sent by the respondent vide e-mail dated 26.06.2009
(AD/92). During his cross-examination, he was confronted with the
position that he had himself referred to an e-mail of the respondent dated
26.06.2009 in proceedings filed by him before the Company Law Board in
respect of Nita Mehta Culinary Academy Private Limited. When
confronted with the same, the witness stated that "The e-mail referred to in
para 17 of the affidavit is not the one which has been denied by me in entry
No. 28 in my admission/ denial affidavit. I am sure that the e-mail denied
by me in my affidavit of admission/ denial is not the same which was
referred to in para 17 of my affidavit of evidence. I must have gone through
the e-mail dated 26.06.2009 referred in para 17 before finalizing my
affidavit. I will endeavour to produce the e-mail dated 26.06.2009 referred
to in para 17 on the next date".
46. When this witness came for further cross-examination on 13.02.2013,
he stated that he has not been able to find the e-mail dated 26.06.2009
referred to in his affidavit at para 17, as he could not locate the said e-mail.
Thus, it appears that the denial by the petitioner, of the receipt of the e-mail
dated 26.06.2009 along with which the respondent sent statement of
accounts, was not believable. Pertinently, in his cross-examination recorded
on 13.02.2013, this witness states that the accounts sent to him (by the
respondent) were verbally disputed by him during his conversations with
Mr. Subhash Mehta. He admits that the accounts "were not disputed in
writing but since at that time our relationship was such that the accounts
were discussed verbally". He further admitted that "even after the disputes
started, and uptodate I have not sent a written rebuttal of the accounts as I
was discussing them verbally and thereafter Mr. Mehta also stopped
discussing them". He states that the procedure for reconciliation of the
accounts was by way of signing of the accounts by the claimant, and upon
deficiency being noticed by him, a correction would be carried out. He
states that he is not able to say as to what amount, if any, was owed by him
to the respondent claimant as per the last reconciliation in April 2009 "as it
is on record". He explains that the record means "both mine and the
claimant's records". He states that his investments are duly reflected in his
accounts - which he failed to produce.
47. From the aforesaid statement of the petitioner's witness, it is
absolutely clear that the learned Arbitrator was completely justified in
holding that the petitioner was liable to the extent of Rs.87,78,424.60/-, as
on 31.03.2010.
48. Even otherwise, it is not open to the petitioner to advance any
submission on the aforesaid aspect, in view of the statement made by the
petitioner in paragraph 3 of the OMP, which reads as follows:
"3. That the Petitioner's challenge to the impugned Award is
confined to:-
(i) That the claims of the Respondent are not barred by
limitation.
(ii) The failure of the learned Sole Arbitrator to award the
Petitioner's claim for loss of business after having held
that the Agreement could not have been terminated
before 08.09.2013.
(iii) That the claims of the Respondent insofar as the same
pertained to a period prior to the execution of the
Agreement are arbitrable.
It is clarified that save and except the above no other finding or
conclusion arrived at by the learned Sole Arbitrator is being
challenged."
49. The submission of learned senior counsel for the petitioner that the
learned Arbitrator had returned a finding that the contract was not
terminable is not an unqualified finding. The learned Arbitrator has
analysed the correspondence exchanged between the parties, and their inter
se conduct. The Arbitrator takes note of the petitioner's letter dated
14.09.2009, which states that the petitioner desired to opt out of the
distribution agreement. In response to the letter of the petitioner dated
14.09.2009, the learned Arbitrator observed that there was no express
acceptance of termination by the respondent-claimant. However, the
conduct of the respondent by not supplying books after 02.08.2009 and then
issuing a demand notice dated 08.05.2010, as also the conduct of the
petitioner in returning the books has been interpreted by the learned
Arbitrator to mean that "the parties by their conduct had the intention to
terminate the said agreement and abandoned the agreement as hereinafter
described" (emphasis supplied). The learned Arbitrator then goes on to take
note of the relevant facts & circumstances which are as follows:
"The letter of the Respondent dated 14.09.2009, mentioning his
opting out of the Distribution agreement demonstrates existence
of disputes between the parties. The Claimant's letter dated
8.5.2010 being a demand notice clearly indicates that disputes
had arisen between the parties. The Claimant had stopped
supplying books to the Respondent after 2.8.2009 and the
Respondent returned the books till 05.01.2010. Thereafter no
transaction has been shown in the records submitted to the
Tribunal; hence this can be taken to be the last transaction
between the parties. It is evident from the conduct of the
parties that business transactions did come to a standstill.
Thereafter in the event of disputes arising between the parties,
this Civil Suit was filed by the Claimant before the Hon'ble
Delhi High Court and later Arbitration Petition before the
Hon'ble Delhi High Court, hence the present Arbitration
Proceedings for adjudication of the claim made by the
Claimant."
50. The aforesaid are findings of fact founded upon material & cogent
evidence. The Arbitrator is the final Arbiter of facts. It is for him to
appreciate the evidence before him. Under Section 19, the power of the
learned Arbitrator to conduct the proceedings in the manner he considers
proper "includes the power to determine the admissibility, relevance,
materiality and weight of any evidence". Such findings of fact, which are
based on cogent evidence, cannot be interfered with by this Court in
exercise of its jurisdiction under Section 34 of the Act. Consequently, there
is no merit in the petitioner's submission that the contract continued to
remain in force up till 08.09.2013.
51. Lastly, learned counsel for the petitioner has argued with regard to the
limitation of the counter-claim only upto the period 30.09.2011.
52. Though the dealings between the parties stopped and the learned
Arbitrator has concluded that the agreement stood abandoned in August
2009, the learned Arbitrator has assumed the period between 09.09.2008 to
30.09.2011 for computing the petitioner's 10% commission on sales directly
made by the respondent, on the premise that the respondent had flouted the
agreement. On that basis, the amount of Rs.46,70,318/- has been allowed
towards the petitioner's counter-claim. I find absolutely no error in this
finding and the petitioner, at least, can have no grievance in this regard. If
at all, the respondent could have assailed this finding on the ground that no
counter-claim was admissible in respect of the period after August 2009
since the contract stood abandoned in August 2009 itself.
53. For all the aforesaid reasons, I find absolutely no merit in this petition
and dismiss the same with Costs quantified at Rs.35,000/- to be paid to the
respondent within three weeks.
(VIPIN SANGHI)
JUDGE
JANUARY 27, 2014
B.S. Rohella
