Katyayini Paper Mills Pvt.Ltd. vs Directorate General Of Supplies & ...
2018 Latest Caselaw 2587 Del

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*     IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                            Date of decision: 25.04.2018
+     ARB. P. 359/2017
      KATYAYINI PAPER MILLS PVT.LTD.                    ..... Petitioner
                     Through     Mr.Apar Gupta, Mr.Ravinder Singh,
                                 Ms.Garima Jain and Ms.Disha Gupta,
                                 Advs.
                          versus
      DIRECTORATE GENERAL OF
      SUPPLIES & DISPOSAL & ANR.                   ..... Respondents
                     Through     Mr.Bhagvan Swarup Shukla, CGSC
                                 with Mr.Kamaldeep and Mr.Shambhu
                                 Chaturvedi, Advs. for DGS&D.
                                 Mr.P.S.Khurana, Mr.Gighati Sushant
                                 Gupta,    Mr.Rajiv        Mishra      and
                                 Ms.Shruti Sharma, Advs. for R-2.

      CORAM:
      HON'BLE MR. JUSTICE JAYANT NATH

JAYANT NATH, J. (ORAL)

1. This petition is filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 seeking constitution of an arbitral tribunal to resolve the disputes between the parties.

2. The case of the petitioner is that it was empanelled with respondent No.1(DGS&D) for supply of Maplitho Printing Paper on fixed rates as per a yearly rate contract dated 19.01.2016. It is also stated that DGS&D (General Terms & Conditions) is applicable to the case. Clause 26 of the Rate

Contract read with clause 23 of the General Terms and Conditions contain an arbitration clause.

3. Thereafter, the petitioner entered into an agreement dated 30.12.2016 with respondent No.2. Pursuant to this agreement, respondent No.2 on 10.01.2017 placed an order for supply of the first lot of 600MT White Maplitho Printing Paper with Water Mark of Board's Insignia for the Printing of Text Book. This was followed by a supply order through online portal of respondent No.1 on 12.01.2017. The case of the petitioner is that on 18.01.2017 he requested respondent No.2 to make alternative arrangements for the supply order as the petitioner could not start production before the arrival of the Engineers abroad for fixing the machine. However, respondent No.2 on 20.01.2017 responded to the said request of the petitioner threatening that it would take action against the petitioner in terms of the agreement dated 30.12.2016.

4. The petitioner on 24.01.2017 wrote to respondent No.2 seeking to invoke the arbitration clause relying upon clause 23 of the General Terms and Conditions of the DGS&D and clause 26 of the Rate Contract for reference to arbitration. Another communication was sent by the petitioner on 16.05.2017 to respondent No.2 requesting for reference to arbitration. As respondent no.2 took no steps, the present petition was filed.

5. I have heard learned counsel for the parties.

6. Learned counsel for the petitioner relies upon Clause 26 of the Rate Contract dated 19.01.2016 to contend that under this clause the sole arbitrator had to be appointed by DGS&D/respondent No.1. He submits that this is the applicable clause even vis-à-vis respondent No.2 in view of the

Supply Order dated 12.01.2017. He further states that the supply order dated 12.01.2017 provides that the Rate Contract shall apply to the order.

7. Learned counsel for respondent No.1 has however submitted that there are two independent agreements executed by the petitioner i.e. one with respondent No. 1 which is the Rate Contract dated 19.01.2016 and the second agreement with respondent No.2 dated 30.12.2016. He submits that it is only in case a dispute arises out of the Rate Contract that the said Agreement dated 19.01.2016 will apply and respondent No.1 would be a proper party. He submits that in the present case, the dispute is between the petitioner and respondent No. 2 and hence, the Rate Contract dated 19.01.2016 has no application and respondent No.1 is neither a necessary nor a proper party.

8. Learned counsel for respondent No.2 has reiterated the contention of learned counsel for respondent No.1. He further submits that the document which would apply to the parties is the agreement dated 30.12.2016 between the petitioner and respondent No.2 which has a separate arbitration clause, namely, Clause 26. He further submits that in terms of Clause 28 of the said Agreement, the courts only at Mohali would have territorial jurisdiction to adjudicate the disputes as the seat of arbitration would be Mohali (Punjab).

9. The admitted fact is that respondent No.2 is not a signatory to the Rate Contract dated 19.01.2016. What the learned counsel for the petitioner has argued is that in view of the Supply Order dated 12.01.2017, the terms and conditions of the Rate Contract entered into with respondent No.1 are applicable to the Supply Order issued by respondent No.2. The relevant clause relied upon by the petitioner of the Supply Order dated 12.01.2017 reads as follows:-

"This order which is intended for the supply of the stores detailed in the schedule below in accordance with the terms and conditions of the directorate general of the supplies & disposals rate/contract mentioned above and in any manner specified herein, shall operate to create a specific contract between the contractor (with whom the contract referred to and the requisition are placed) on the part and the President of India on the other part.)"

10. Reliance of the learned counsel for the petitioner on the above quoted clause of the supply order dated 12.01.2017 is misplaced. The language of the said clause does not help the petitioner. The said clause cannot be read to supersede the arbitration clause contained in agreement dated 30.12.2016 between the petitioner and respondent no.2.

11. Even otherwise, for the sake of completeness, I may look at arbitration clause as contained in the General Conditions of Contract Form DGS&D. Clause 23.1 reads as follows:

"23. RESOLUTION OF DISPUTES:

23.1 In the event of any question, dispute or difference arising under these conditions or any Special Conditions of Contract, or in connection with this Contract (except as to any matters the decision of which is specially provided for by these or the special conditions) the same shall be referred to the sole arbitration of an officer in the Ministry of Law, appointed to be the arbitrator by the Directorate General of Supplies & Disposals as per Clause 24 of Conditions of Contract Form DGS&D 68 (Revised)."

12. A perusal of the above clause would show that only disputes arising under the special conditions stated therein or in connection with the contract (between the petitioner and respondent No.1) shall be referred to arbitration. It is obvious that the disputes in the present case are between the petitioner and respondent No.2. There is no claim of the petitioner against respondent

No.1. Clearly Clause 23.1 of the above contract form of DGS&D does not apply.

13. I may now look at the Agreement between the petitioner and respondent No.2 dated 30.12.2016. A perusal of this agreement would show that only clauses 3 and 4 mention about DGS&D Rules and Regulations. Under Clause 3, the petitioner is forbidden from entering into any fresh agreement at basic price of DGS&D at the lower rate with anyone during the period of the contract. Under Clause 4 rates are to apply as per norms of DGS&D. Other than that, there is no attempt to connect this agreement with any of the terms and conditions of DGS&D.

14. Clauses 26 and 28 of the said agreement read as follows:-

"26. In case of any dispute arising out of this Agreement, the Board Authorities, would act as an Arbitrator and his decision shall be final and binding on both the parties.

xxx

28. In case of any dispute between the Board and the Supplier- Mill that not settled by way of arbitration referred to in Clause 27, the jurisdiction of Court of law shall be Mohali Court."

15. In the present case, the documents on record clearly show that the dispute is between the petitioner and respondent No.2. Disputes arose pursuant to the order placed by respondent No.2 on 10.01.2017 followed by the order placed on the portal of the petitioner on 12.01.2017. Thereafter, the petitioner has refused to supply the goods. Respondent No.2 has hence threatened to take legal action. On 24.1.2017 the petitioner has written to respondent No.2 invoking the Arbitration Clause.

16. Agreement between the petitioner and respondent No.2 clearly provides that in case of a dispute, Board Of Authorities shall act as an arbitrator. Clause 28 of the agreement states that the jurisdiction shall be of the courts at Mohali. The arbitration has to take place in terms of the aforesaid two clauses, namely, clause 26 and 28 of the agreement between the petitioner and respondent No.2 dated 30.12.2016. As Clause 28 of the agreement clearly states that the jurisdiction shall be of the courts at Mohali, it is clear that the parties intended that the seat of arbitration would be at Mohali. In this context reference may be had to the judgment of the Supreme Court in Indus Mobile Distribution Private Ltd. vs. Datawind Innovations Pvt. Ltd. & Ors., (2017) 7 SCC 678, The Supreme Court held as follows:

20.A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction - that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Section 16 to 21 of the Code of Civil Procedure be attracted. In arbitration law however, as has been held above, the moment "seat" is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties."

Hence, the seat of arbitration would be Mohali.

17. In view of the arbitration clause as noted above and the legal position as settled by the Supreme Court in the above noted judgment, it would follow that the courts at Mohali would have exclusive jurisdiction to decide the matter. Accordingly, the courts in Delhi have no territorial jurisdiction to entertain this petition.

18. The petition is dismissed with liberty to the petitioner to approach the appropriate court for the same relief.

(JAYANT NATH) JUDGE

APRIL 25, 2018 rb

corrected and released on 12.6.2018