Madras High Court
M/S.Ktc Automobiles Private ... vs M/S.Hyundai Motor India Limited on 7 March, 2022
C.M.A.No.462 of 2022
IN THE HIGH COURT OF JUDICATURE OF MADRAS
DATED : 07.03.2022
CORAM:
THE HONOURABLE Ms. JUSTICE P.T. ASHA
C.M.A.No.462 of 2022
and
C.M.P.No.3359 of 2022
M/s.KTC Automobiles Private Limited
registered office at YMCA Road,
Calicut – 673 001.
represented by its
Managing Director
Mr.P.V.Nidhish,
KTC Automobiles Private Limited,
Guruvayoor Road,
Ponkunnam,
Thrissur – 680 002. ... Appellant/Respondent/Claimant
Vs.
M/s.Hyundai Motor India Limited,
Plot No.G-I, SIPCOT Industrial Park,
Irungattukottai,
Sriperumbudur Taluk,
Kancheepuram District – 602 117,
Tamil Nadu. … Respondent/Applicant/Respondent
1/16
https://www.mhc.tn.gov.in/judis
C.M.A.No.462 of 2022
Prayer: Civil Miscellaneous Appeal is filed under Section 37 of the
Arbitration and Conciliation Act, 1996, to set aside the order dated
25.01.2020 in I.A.No.1 of 2019 in Arbt.No.1 of 2019 passed by the
learned Sole Arbitrator comprising of Mr.S.Sambandham, District
Judge (Retd.).
For Appellant : Mr.Piyo Harold Jaimon
JUDGMENT
Aggrieved by the order of the sole Arbitrator in rejecting the
claim which did not form part of the dispute submitted for arbitration,
the claimant is before this Court.
2.The brief facts are as follows:
The claimant is a Transporter established as early in the year
1958 and headquartered in Kozhikode, Kerala. The claimant is having
a national presence. The claimant would submit that they are amongst
the top five road transporter organisation in the Country owning a fleet
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C.M.A.No.462 of 2022
of over 1000 Trucks and 75 buses and also moving over 10,000 tonnes
of cargo across the Country everyday. The group had diversified into
multifaceted activities. The claimant Company was originally a
partnership firm, which in the year 2004, was converted into a Private
Limited Company. In the year 1999, they entered the automobile
Industry in Kerala through Hyundai, Mitsubishi Motors, Ford,
Mahindra three wheelers and Honda two wheelers. It is in fact the
reputation and clientèle as well as the goodwill which was so strong
that the car manufacturers wanted to enter into a Dealership Agreement
with them.
3.It appears that in the year 1999, the claimant and the respondent
had entered into a Dealership Agreement. The petitioner and the
original partnership firm, KTC Automobiles Private Limited had
entered into an Agreement on 20.05.1999 for selling the products of the
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respondent. The Dealer Territory Addendum as set out in Annexure -
IV to the Agreement covered are as follows:
“CALICUT, MALAPURAM, WYNAD, KANNUR,
KASARGODE.
OPEN AREA : TRICHUR, PALAKKAD”
4.Thereafter, it appears that the respondent had issued a letter of
Intent for the dealership at Trichur on 27.10.1999. A Letter of Intent
dated 22.10.1999 was signed by the parties. Under the Agreement
dated 20.05.1999, the parties had agreed to refer all their disputes for
resolution to a sale consideration who was to be appointing as a
Managing Director of the respondent. After the firm had converted
into a Private Limited Company, the parties had entered into a
Dealership Agreement dated 10.04.2006, covering the territory of the
Trichur and Palakkad and a similar Dealership Agreement of the same
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date for the territory exclusively for Kannur. Without traversing into
the details and the same is not relevant for the issue on hand.
5.It appears that the respondent had issued a show cause notice
dated 29.06.2015 to the claimant contending that the sale performance
has not been upto the mark and the fund infusion had also not
increased, as a result of which, the sale performance was poor. The
show cause notice also states that the infrastructure had not been
improved and was in a poor shape. Apart from that, the area in which
the spare parts were kept had not been moved from the main showroom
to ensure space for the better display of cars. Therefore, the respondent
had called upon the petitioner to show cause as to why the Dealership
Agreement dated 10.04.2006 executed for establishing a Non-exclusive
Dealership at Thrissur should not be terminated. A reply dated
08.07.2015 was issued by the claimant narrating their performance and
also contending that the respondent had encroached an unauthorised
service station and sales operation to operate close to the claimants
outlet which had dented the sales and service. Therefore, the claimant
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C.M.A.No.462 of 2022
had requested the respondent to renew the Dealership Agreement and
increased their market share in Thrissur and Calicut. On 11.08.2015,
the Dealership Agreement was terminated. By their letter dated
09.09.2015, the claimant had invoked the arbitration agreement
requesting the respondent to appoint a sole Arbitator and also requested
them to permit the claimant to continue to function until all the issues,
claims and disputes relating to the dealership agreement and its
unilateral termination was resolved. After receiving the letter
requesting appointment of the sole Arbitator, the respondent Company
vide letter dated 23.09.2015 had informed the claimant that
Mr.S.Sambandham, District Judge, (Retd), was appointed as the sole
Arbitrator to arbitrate the dispute relating to the Dealership Agreement
between them for non-exclusive agreement at Thrissur. Thereafter, by
letter dated 19.10.2015, the petitioner had addressed the respondent
with a request to renew the dealership at Calicut and Kannur for next
three years. They had also requested the respondent to withdraw
the 'Open Territory Status' at Kannur and not appoint an
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C.M.A.No.462 of 2022
additional dealer in Kannur for next three years as also for Calicut
District. This letter was issued without prejudice to the rights and
claims in the event, of the respondent succeeding in the Arbitration
proceedings initiated by the respondent. A letter dated 21.12.2015 was
issued by the respondent to the petitioner pointing out that the
dealership at Calicut and Kannur was falling short and directing them
to improve their performance.
6.By a show cause notice dated 10.03.2016, the respondent had
informed the petitioner to show cause as to why the dealership at
Kannur may not be terminated, in view of the poor performance in
sales, inventory gap, requirement of funds, unauthorised sales outlets,
manpower and poor infrastructure, etc.,
7.The claimant herein had submitted his reply through mail dated
23.03.2016 requesting a further period for submitting a detailed action
plan and roadmap with system for improving the same. However, by
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letter dated 03.06.2016, the dealership at Kannur was terminated. This
was followed by the show cause notice dated 01.07.2016 with
reference to the Calicut. A reply dated 16.07.2016 was sent by the
claimant and ultimately, by letter dated 22.08.2016, the dealership at
Calicut was terminated. The Arbitrator who had been appointed to
adjudicate the disputes had directed the parties to appear before him on
23.02.2019 though he had been appointed as an Arbitrator on
23.09.2015. The claimant thereafter filed their claim statement dated
04.07.2019 in respect of all the Dealership Agreement.
8.After receiving the claim statement, the respondent had come
forward with a petiton under Section 16 of the Arbitrator and
Conciliation Act, seeking to dismiss the claim statement filed with
reference to the claimants pertaining to the territories other than
Thrissur. In the affidavit filed in support of the said petition, the
respondent had submitted that the request for arbitration has been only
made with reference to the termination of the dealership at Thrissur.
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The show cause notice with reference to the above territory had been
issued on 29.06.2015 to which a reply dated 08.07.2015 was issued by
the claimant and thereafter, the respondent had terminated the
dealership vide letter dated 08.11.2015. The claimant vide their e-mail
dated 11.09.2015 had called upon the respondent to appoint an
Arbitrator and accordingly, an Arbitrator was appointed by the
respondent vide their letter dated 29.03.2015. The termination of the
dealership at Kannur and Calicut had taken place only thereafter and
there was no demand for referring the termination of these dealerships
to the sole Arbitrator. The respondent would submit that the Arbitrator
can decide only the disputes that have been referred to him and he
cannot travel beyond the reference. The inclusion of the claim with
reference to Kannur and Calicut without making a request for the same
is definitely without jurisdiction and therefore, the Arbitral Tribunal
did not have the jurisdiction to entertain the claim with reference to
Kannur and Calicut and also other two locations at Palakkad and
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Kodunganallur and therefore, they sought for dismissal of the appeal
relating to the other Districts other than Thrissur.
9.A counter was filed by the respondent in which they would
plead that the closure of the Dealership at Thrissur had a cascading
effect, as a result of which, the Dealership at Kannur and Calicut had
been affected. That the poor performance was directly related to the
termination of the dealership at Thrissur which is evident from the
communication from the parties. The inclusion of these disputes are
very much interlinked with the arbitration clause.
10.The Arbitral Tribunal by order dated 25.01.2020 had allowed
the said application by stating that the disputes with reference to
Kannur and Calicut had not been referred to the Arbitral Tribunal and it
was only the dealership with reference to Thrissur that had been
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C.M.A.No.462 of 2022
referred to. Challenging this order, the appellant/claimant is before this
Court.
11.The main ground on which the claimant would seek to rest his
case is that the dealership at Thrissur, Kannur and Calicut is so
interlinked that the termination of one affected the sales of other area.
That apart, a contract itself contemplates that once the dealership is
terminated the remaining unsold auto mobiles would be transferred to
the other dealership which would clearly show that the Contract was
composite contract.
12.Mr.Piyo Harold Jaimon, learned counsel for the appellant
would raise the above issues and relied upon a Judgment of the Hon'ble
Supreme Court in AmeetLalchand Shah and others v. Rishabh
Enterprises and another [(2018) 5 SCC 678] that a hyper technical
ground should not be used to refuse the adjudication of disputes qua
arbitration. The learned Judge had observed that although there were
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different agreements involving several parties it pertains to the single
commercial project and all the four agreements and all the parties have
referred the disputes to the Arbitrator. He would submit that since the
dealership and the operations of each of the areas was interlinked the
disputes would be squarely covered by this Judgment.
13.Heard the learned counsel appearing on behalf of the appellant
and perused the papers.
14.A perusal of the show cause notice which was the precursor
for the termination letter clearly indicates that the respondent herein
had issued a show cause notice with reference to the dealership
Agreement dated 10.04.2006 for non-exclusive dealership at Thrissur.
The show cause notice had been warned the claimant as follows.”
“Under these circumstances, we hereby call
upon you to show cause within seven (7) days from the
date of receipt of this Show Cause Notice as to why
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the Dealership Agreement dated 10.04.2006 executed
with you for establishing a Non-Exclusive Dealership
at Thrissur should not be terminated. Failure to
submit you explanation within the time stipulated
above will be construed that you have no valid
explanation to offer and we will be constrained to
proceed further as per the terms of the Dealership
Agreement.”
15.To this, a reply dated 08.07.2015 had been issued by the
claimant herein. Once again the subject referred to therein was “Reply
to your show cause notice for Hyundai Dealership at Thrissur”. The
termination letter dated 11.08.2015 once again specified that the
termination was with reference to the non-exclusive dealership at
Thrissur under a Dealership Agreement dated 10.04.2006. The
response to this termination letter dated 09.09.2015 by the claimant
also referred only to the dealership at Thrissur. Much after the
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appointment of the Arbitrator, the dealership at Calaicut was terminated
vide letter dated 22.08.2016 and the dealership at Kannur was
terminated vide letter dated 03.06.2016. Each of the termination letter,
detailed the dealership in respect of which the termination was issued.
The claimant was therefore put on notice about the dealership that was
terminated. The sole Arbitrator has been appointed only with reference
to dealership at Thrissur much before the termination of the dealership
at Kannur and Calicut. There is no request for referring the dispute
pertaining to the dealership at Kannur and Calicut to the arbitration.
16.Section 21 of the Arbitration and Conciliation Act, provides
that the arbitral proceedings would commence with a request being
made by an aggrieved party to the respondent. In the case on hand,
such request has been made only with reference to the dealership at
Thrissur. No request has been made with reference to the dealership at
Calicut and Kannur. Without a request being made, neither the
Arbitrator nor the respondent could assume the dispute. The Judgment
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of the Hon'ble Supreme Court quoted by the respondent would not
apply to the facts on hand as all the Contracts are distinct or
independent. Therefore, I see no reason to interfere with the order
passed by the sole Arbitrator.
Accordingly, this Civil Miscellaneous Appeal is dismissed. No
costs. Consequently, connected Miscellaneous Petition is closed.
07.03.2022
Index : Yes/No
Internet : Yes/No
Speaking order / Non speaking order
mps
https://www.mhc.tn.gov.in/judis
C.M.A.No.462 of 2022
P.T. ASHA, J,
mps
C.M.A.No.462 of 2022
and
C.M.P.No.3359 of 2022
07.03.2022
https://www.mhc.tn.gov.in/judis
