M/S Fujifilm India Pvt. Ltd. vs M/S L.S. Industries Ltd.
2014 Latest Caselaw 2786 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                   Judgment pronounced on: May 29, 2014

+                                   ARB.P. 249/2012

        M/S FUJIFILM INDIA PVT LTD               ..... Petitioner
                       Through   Ms.Neha Kapoor, Adv.

                           versus

        M/S L.S INDUSTRIES LTD                            ..... Respondent
                       Through           Mr.Rohit Sharma, Adv.

        CORAM:
        HON'BLE MR.JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J.

1. The present petition has been filed by the petitioners under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") for appointment of an Arbitrator.

2. Brief facts for the purpose of adjudication of the present petition are that by virtue of a Distributor Agreement dated 4 th January, 2011 the petitioner had appointed the respondent as its distributor. The business between the parties continued smoothly for sometime but for the last more than one year, there were some disputes between the parties.

3. It is the case of the petitioner that the respondent had avoided to make outstanding payment of the petitioner despite repeated requests. Various correspondences were exchanged between the parties for amicable settlement and at one point of time the respondent informed the

petitioner via email dated 9th August, 2011 to encash the bank guarantee and to adjust the amount towards the outstanding dues.

4. It has been stated by the petitioner that an amount of Rs.1,91,46,429/- was outstanding besides the amount of interest and other charges, after adjusting the amount recovered by encashing the bank guarantee of Rs.30 lacs. It is stated that vide email dated 9th August, 201, the respondent also authorised the petitioner to deposit the security cheque amount to Rs.50 lacs each lying with the petitioner as security to clear the outstanding. However, on presentation of the cheques by the petitioner, all of them either got dishonoured or the payment was stopped by the drawer. Accordingly, complaint against the respondent was filed under Section 138 of the Negotiable Instruments Act.

5. It is further stated that the respondent has avoided to provide the statutory declaration forms under CST (i.e. Form C) against the goods purchased by them on concessional rate of sales tax from the petitioner from time to time. The petitioner averred that in case the respondent avoids to provide the relevant C-Forms, the petitioner shall be liable to pay higher tax/CST, and also interest thereon shall be levied by the competent VAT/Sales Tax authority, which amount may be more than Rs.4 crore due to default made by the respondent in performance of its obligation to provide relevant C-Forms to the petitioner.

6. It is averred that the respondent has avoided to pay the claims of the petitioner despite repeated demands and has initiated a frivolous litigation in the civil court of Chandigarh, which is barred as per the Act.

Aggrieved thereof the petitioner filed the present petition for appointment of Arbitrator for adjudication of the disputes.

7. The respondent has filed written submissions in the present matter. It has been stated by the respondent that the petition is not maintainable since the petitioner did not issue any notice to the respondent invoking the arbitration clause. The invocation of arbitration clause by the petition vide a notice dated 12th March, 2014 issued during pendency of the present proceedings cannot cure the inherent defect which renders arbitration petition non maintainable.

8. It is contended that the petition is premature because the respondent had filed a Civil Suit No. 20 of 2012 against the petitioner before Civil Judge, Junior Division in Chandigarh where the petitioner has filed an application under Section 8 of the Act, which is pending adjudication. The respondent has filed a reply to the petitioner's application in that suit and taken the plea that no arbitration agreement dated 4th January, 2011 had been entered into between the petitioner and the respondent. Therefore, the present petition is even otherwise not maintainable.

9. Before dealing with the submission of the parties, Clause 19 which contains the Arbitration Clause reads as under :

"19.1 If any dispute or differences arises between the parties hereto during the subsistence of this agreement or thereafter, in connection with the validity, interpretation, termination, implementation or alleged breach of any provisions of this agreement or regarding any question relating thereto, the parties hereto shall endeavour to settle their dispute or difference amicably. In the event that they are enable to agree to an amicable solution to the dispute

and difference, the party hereto shall refer such dispute or difference for arbitration as per arbitration clause 19.2 hereunder.

19.2 Upon failure to amicably settle (as provided under Clause 19.1) within a period of sixty (60) Business Days from raising of the dispute or difference, the dispute or difference shall be referred to arbitration of the Delhi Civil Court.

19.3 The place of the arbitration shall be Delhi."

10. The respondent has not denied the fact that at one point of time the respondent made the suggestion to encash the bank guarantee of Rs.30 lac which in fact later on has encashed. The respondent sent its email dated 9th August, 2011 to the petitioner to adjust the said amount not only that the respondent also authorised to adjust the inventory stock which is allegedly Rs.20 lac against the outstanding amount so that the liabilities be reduced. By the same email, the respondent authorized the petitioner to deposit the security cheque amount of Rs.50 lac lying with the petitioner in order to clear the outstanding. When the said cheque was presented, the same was dishonoured. Notice was duly issued and thereafter, the petitioner has made complaint under Section 136 of N.I. Act which is still pending.

11. The respondent has also avoided to provide the statutory declaration forms under CST (i.e. Form C) against the goods purchased by them on concessional rate of sales tax from the petitioner from time to time. He availed the benefit of concessional rate of tax but avoided to provide relevant C-Form to the petitioner despite of repeated reminders and request both verbal and in writing by the petitioner vide email dated

20th February, 2012 annexed as Annexure P-2. He avoided the relevant C-Forms, the petitioner shall be liable to pay higher tax/CST and also interest thereon as shall be levied by the competent VAT/Sales Tax authority, which amount may be more than Rs.4 crores due to default made by respondent in performance of its obligation to provide relevant C-Forms to the petitioner.

12. The respondent avoided to pay the claims of the applicant despite repeated demands and has initiated a frivolous litigation in civil court of Chandigarh, which is barred as per Act for which a petition under Section 8 of Act had already been filed by the applicant in the said suit.

13. As far as filing of suit by the respondent is concerned, the petitioner has correctly filed an application under Section 8 of the Act in view of arbitration clause. In view of existence of Arbitration Clause, the suit filed by the respondent is not maintainable. The venue of the arbitration is in Delhi. The other plea raised by the respondent is without any basis that there is no valid agreement between the parties. The respondent in view of agreement has himself communicated to the petitioner for adjustment of various amount. The submissions are totally flimsy and afterthought. The decision referred by the respondent's counsel does not help the case of the respondent in view of the nature of the arbitration clause. Even during the pendency of present petition, the petitioner has made another request to the respondent to clear the outstanding otherwise the petitioner is invoking the arbitration clause, however the respondent here is avoiding to go for arbitration by raising the frivolous plea. The petition is pending for the two years. Even the respondent has failed to file the reply despite of

expiry of more than one years. That itself amounts to service of notice to invoke the arbitration. The requisite notice has now also been sent during the pendency of petition. Statutory period is already passed. The receipt of notice is not denied by the respondent. There is no positive response from the side of the respondent except raising the technical point which has no application in law. The issue of validity of agreement if raised, is to be adjudicated by the learned Arbitrator. Prima facie, this Court finds that there is no force in the submission of the respondent as the respondent himself has made payment and adjusted certain amounts in terms of agreement.

14. Therefore, in the light of abovesaid facts and circumstances, the prayer of this matter is allowed. Justice V.K. Jain, a retired Judge of this Court (R/o B-6, Dr. Zakir Hussain Marg, New Delhi-110003, Mobile No. 9650116555) is appointed as sole Arbitrator to adjudicate upon all the disputes and differences between the parties as mentioned in this petition. The parties are at liberty to file their claims and counter-claims which will be decided in accordance with law. The Arbitrator shall conduct the proceedings under the provisions of Act. Total fees of the learned Arbitrator at this stage is fixed at Rs.2 lac which shall be paid by both the parties in equal proportion. As prayed, the learned Arbitrator is requested to render the Award at an early date as according to counsel for both parties very small dispute is involved. The parties shall appear before the learned Arbitrator on 10th June, 2014 for direction.

The petition is disposed of in the above said terms.

A copy of this order be communicated to the learned Arbitrator by the Registry forthwith and also to both parties. Dasti under the signatures of Court Master.

(MANMOHAN SINGH) JUDGE MAY 29, 2014