Delhi High Court
International Hispacol S.A vs Castmaster Enterprise Pvt Ltd on 18 February, 2015
Author: Indermeet Kaur
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Order: 18.02.2015
+ CS(OS) 1309/2012
INTERNATIONAL HISPACOL S.A ..... Plaintiff
Through Mr.Amit Bansal, Mr. Saurabh
Bindal, Ms.Madhu Sweta and Mr.
Rohit Jain, Advocates.
versus
CASTMASTER ENTERPRISE PVT LTD ..... Defendant
Through Mr.Sandeep Sethi, Sr.Adv. with
Mr.Vineet Jhanji, Advocate.
CORAM:
HON'BLE MS. JUSTICE INDERMEET KAUR
INDERMEET KAUR, J. (oral)
I.A.No.1455/2014
1 This is an application filed by the defendant under Section 45 of
the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the
said Act) seeking reference of their disputes (subject matter of the suit)
I.A.No.1455/2014 in CS(OS) 1309/2012 Page 1 of 12
to Arbitration. Submission is that the parties are governed by Part-II
and under Section 45 of the said Act where there is an "international
commercial arbitration" {within the meaning of Section 2 (f) of the said
Act} therefore proceedings before this Court cannot continue.
2 Application has been opposed.
3 Learned counsel for the plaintiff submits that there is no dispute
to the proposition that the Joint Venture Agreement between the parties
dated 05.7.2008 is an "international commercial arbitration" within the
meaning of Section 2(f) of the said Act but it is disputed that the
provisions of Section 45 of the said Act are applicable.
4 After some arguments, both the parties concede that the present
application be treated as an application under Section 8 of the said Act.
5 Pleadings are complete.
6 Learned counsels for the parties also agree that no fresh pleadings
are required. Accordingly, arguments have been heard on the merits of
this application.
I.A.No.1455/2014 in CS(OS) 1309/2012 Page 2 of 12
7 Learned counsel for the defendant has drawn attention of this
Court to the Joint Venture Agreement dated 05.7.2008. This agreement
was entered into in Spain on the said date. The parties were
CASTMASTER ENTERPRISES PRIVATE LIMITED (plaintiff) and
INTERNATIONAL HISPACOLD S.A. (defendant). HISPACOLD is a
leading manufacturer of climate system for passenger transport vehicles
and has considerable experience in the field of manufacture supply of
these products. CASTMASTER HISPACOLD PRIVATE LIMITED is
a reputed supplier of automotive components, systems and other
automotive products to original equipment manufacturers in the Indian
automotive sector such as TATA Motors, Suzuki, Honda, Yamaha and
Mazda and had developed considerable goodwill and reputation for its
products. Parties, in principle, had agreed to collaborate together in the
development of a company (Corporation) to serve as a legal entity in
order to undertake design, development, manufacture, assemble, market,
sale and service of the complete range of HISPACOLD products,
present and future, manufactured or commercialized by HISPACOLD.
I.A.No.1455/2014 in CS(OS) 1309/2012 Page 3 of 12
8 Clause 2 of this agreement deals with the organization of the
Corporation. Clause 2.1 deals with its formation and reads as under:
"2.1 Formation:
The parties shall cause the Corporation to be incorporated
in India as a private limited company limited by shares in
accordance with the Act, and to be called "CASTMASTER
HISPACOLD PRIVATE LIMITED".
or any other similar name that may be approved by the Registrar
of Companies, New Delhi. All preliminary expenses incurred for
forming and registering the Corporation and all expenses
incurred after the formation of the Corporation incidental to the
establishment of the Corporation and its office etc. shall be borne
and paid by the Corporation."
9 Clause 2.3 defines the purpose of the Joint Venture Agreement.
10 Clauses 2.3.1 and 2.3.2 read herein as under:
"2.3.1. The objects of the Corporations shall be set down in
its Memorandum of Association and shall include to design,
develop, manufacture, assemble, market, sell and service of
Products, in the Territory under a trade name such as
"HISPACOLD-CASTMASTER" or any other name agreeable to
parties and to obtain satisfactory economic benefits for the
Parties.
I.A.No.1455/2014 in CS(OS) 1309/2012 Page 4 of 12
2.3.2. The Corporation shall be managed and operated in
accordance with prudent financial and business principles and
with reference to an objective of profitability."
11 Under Clause 2.4 it was agreed that the Corporation would sell
the products in the Territory which meant India, Nepal, Bhutan,
Bangladesh and Srilanka.
12 Clause 4.1 deals with the intellectual property rights of the
Corporation. The functions and obligations of the plaintiff
(HISPACOLD) and that of the defendant (CASTMASTER) were
defined in Clauses 5 and 6.
13 Clause 9 contains the dispute resolution and arbitration clause.
Relevant extract reads hereinafter as under:
"9. DISPUTE RESOLUTION AND ARBITRATION
In the event of any dispute, differences or claims arising
between the Parties to this Agreement or in any way relating to
any terms, conditions or provisions herein mentioned, or in the
construction or interpretation of any of the Clauses herein, the
Parties shall use their best consultations and conciliation between
one director each of HISPACOLD AND CASTMASTER.
In the event no amicable settlement is reached by the
Parties hereto within thirty (30) days, the dispute shall be
referred to arbitration, to be conducted under the provisions of
I.A.No.1455/2014 in CS(OS) 1309/2012 Page 5 of 12
the (Indian) Arbitration and Conciliation Act, 1996. The place
and venue shall be for Arbitration, FICCI Building, Tansen Marg,
New Delhi-110001. Each party hereto shall have the right to
appoint one (1) arbitrator each, with a third arbitrator to be
appointed with the mutual consent of the two (2) arbitrators. The
decision of the arbitrators shall be entered as a final judgment in
any court of competent jurisdiction, in Delhi.
Notwithstanding the provision that any disputes or controversies
between the Parties relating to, or arising out of this Agreement
shall be referred to and settled by an arbitration, the Parties may
seek any such temporary or provisional relief or remedy including
injunctions, provided for by the laws of the Republic of India,
which would ordinarily be available in an action based upon such
disputes or controversy in the absence of an agreement for
arbitration.
The arbitration award rendered by the arbitrators shall be final
and binding upon the Parties hereto. The language of the
arbitration proceedings shall be English. The Parties shall each
bear their own legal costs, and the fees and expenses of the
arbitration shall be borne equally by the Parties, unless otherwise
decided by the arbitrators."
14 Termination clause was contained in Clause 20.
15 This is the gist of the agreement highlighted by the parties.
I.A.No.1455/2014 in CS(OS) 1309/2012 Page 6 of 12
16 The counsel for the defendant has drawn attention of this Court to
an e-mail exchanged between the parties on 06.2.2009. This e-mail was
sent by defendant no.2 to the plaintiff; the reply was also forwarded by
the plaintiff to the defendant. This mail stated that the parties had
agreed that the new company (Corporation) HISPACOLD-
CASTMASTER would come into legal existence soon. Counsel for the
defendant has also placed reliance upon a communication dated
19.11.2009
written by the plaintiff to the defendant wherein the plaintiff
had terminated the Joint Venture Agreement dated 05.7.2008 holding
that it is not binding upon the parties. Learned senior counsel for the
defendant states that this letter was actually an ineffective
communication as the Joint Venture Agreement between the parties had
in fact not taken off and as such, its cancelation does not arise. The
trump card of the defendant is the legal notice sent by the counsel for the
plaintiff to the defendant on 08.9.2011. Attention has been drawn to
para 2 and 3 of the said notice. Relevant extract herein read as under:
"5.In furtherance of the aforesaid agreement and during the
course of business, you the Noticee required certain quantities of
HVAC Units from our Client to be delivered to Ashok Leyland for
installation in the DTC buses. That our Client had duly supplied
the requisite HVAC Units to you the Noticee for which you had
duly received the payment from Ashok Leyland. That our Client
raised certain invoices for supply of HVAC Units to you the
Noticee, the details which are stated below:
Invoice No. Date N A/C units Amount Overdue
in euro Payment
Date
2008008804 19.12.2008 5 x12S 21,500 17.04.2009
2009000912 & 27.02.2009 24x 12 S 1,02,200 25.06.2009
2009000913
20091030 31.10.2009 Components 11,640 21.01.2010
Subtotal 1,24,700
international
Hispacold S.A.
Total 1,36,340
(including the
invoice of
Hispacold
Suzhou)
Pursuant thereto, several reminders were sent by our Client but
you the Noticee have not yet responded to the same and no
payment has been received by our client against the aforesaid
invoices till date."
17 It is this contention in the legal notice which has been vehemently
highlighted by the learned senior counsel for the defendant to submit
that it was in furtherance of the Joint Venture Agreement dated
05.7.2008 that the plaintiff has supplied goods to the defendant and the
claim of the plaintiff seeking recovery of the money based on those
invoices are admittedly even as per the case of the plaintiff in
continuation of the aforenoted Joint Venture Agreement.
18 Learned counsel for the defendant has placed reliance upon a
judgment of this Court reported as 93(2001) DLT 374 Ramesh Chander
Vs. Jagdish Chander & Ors. to support his arguments that the rule of
interpretation in an arbitration agreement is to give a positive meaning
to it and the underlying intent and object has to be gathered from the
terms of the document. Submission being that the conduct of the parties
and the communication exchanged between them clearly show that the
parties had entered into a Joint Venture Agreement and the present
transaction is clearly covered by that agreement; since the dispute is
arbitral, the present suit is not maintainable.
19 This position is disputed. Learned counsel for the plaintiff does
not dispute the legal notice sent by the counsel for the plaintiff to
defendant on 08.9.2011. His submission, however, is that it the terms
and conditions of the agreement which have to be looked into to decide
and conclude as to whether the claim of the plaintiff in the present suit is
covered by the Joint Venture Agreement or not. Submission being
reiterated that the present suit is a suit for recovery based on four
invoices dated 19.12.2008, 27.02.2009, 27.02.2009 and 30.10.2009
which are independent transactions which the plaintiff had with the
defendant and have no concern with the arbitration agreement. As per
the plaintiff goods were received by the defendant for which four
invoices dated 19.12.2008, 27.02.2009, 27.02.2009 and 30.10.2009 had
been issued; Payment for these goods had not been made by the
defendant. The gist of the plaint is based on this amount which the
plaintiff has to recover from the defendant.
20 The scope and applicability of Section 8 of the said Act has been
considered by various judicial pronouncements. Essential ingredients
for invocation of Section 8 are:
(i) That there is an arbitration clause
(ii) A party to the arbitration agreement brings an action in
court against other party;
(iii) The subject matter of the action be same as subject matter
of the arbitration agreement: and
(iv) The other party moves the court for referring the parties to
arbitration before he submits his first statement on the
substance of the dispute.
All these conditions must co-exist.
21 This Court is foremost concerned with sub-clause (iii) i.e. the
subject matter of action in the present suit and the subject matter of the
arbitration agreement. The Joint Venture Agreement has been detailed
above. The gist of this Joint Venture was that the parties had agreed that
a third company (Corporation) be created which will sell the goods of
the plaintiff in the market i.e. in the territory in India, Nepal, Bhutan,
Bangladesh and Srilanka. This agreement even as per the defendant did
come into effect, it did not take off.
22 The ambit of the present suit can in no manner be equated with
the terms contained in the arbitration agreement. The arbitration
agreement had been entered into between the parties to make a third
company i.e. the Corporation to sell the goods of the plaintiff to be
marketed by the defendant in India. It was nowhere connected with the
independent supply of the goods made by the plaintiff to the defendant
on the dates as aforenoted. The relevant language used in Section 8 is -
"in a matter which is the subject matter of an arbitration agreement";
therefore, the suit should be in respect of "a matter" which the parties
have agreed to refer and which comes within the ambit of arbitration
agreement. Where, however, a suit is commenced - "as to a matter"
which lies outside the arbitration agreement and even through it is
between the same parties, there is no question of application of
Section 8. The word "a matter" clearly indicates that the entire subject
matter of the suit should be a subject of the arbitration agreement as
well.
23 It is this backdrop, this Court has to consider the prayer made by
the defendant in his application filed under Section 8 of the 1996 Act.
This application is filed in a suit filed by the plaintiff for recovery of
money. Arbitration clause contained in the Joint Venture Agreement is
invoked, but not a single dispute is delineated which would arise out of
this agreement. The arbitration clause in the agreement categorically
states that those disputes or differences arising between the parties to
this agreement or in any way relating to any terms, conditions or
provisions having mentioned or in the constructions or interpretation of
any of the clauses herein, the same shall be settled by arbitration.
24 The present suit is a suit for recovery of 1,36,340 Euros which is
the outstanding payment raised by way of these invoices along with
interest; it is an independent supply of goods by the plaintiff to the
defendant. In no manner can it be said that the dispute raised in the
present suit would be covered by the Joint Venture Agreement. This is a
clear case where the dispute is not covered by the arbitration clause; the
suit has to proceed. Application is without any merit. It is dismissed.
CS(OS) 1309/2012
25 Written statement be filed by the defendant within four weeks
from today with advance copy to the plaintiff who may file rejoinder
before next date.
26 List on 08.7.2015.
INDERMEET KAUR, J
FEBRUARY 18, 2015
ndn
