High Court of Delhi was dealing with the petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, petitioner seeks appointment of a Sole Arbitrator in terms of Clause 23.16 of the Dealership Agreement dated 15th February 2018.
Brief Facts:
The petitioner is a manufacturer of two-wheelers/spares and entered into a dealership arrangement with respondent No. 1 which sells two wheelers on retail basis and services the same, vide agreement dated 17th February 2003. The said authorized dealership agreement was renewed on 15th February 2018. The respondent Nos. 2 and 3 being the Directors of respondent No. 1 stood as guarantors to the dealership arrangement vide the Guarantee Deeds dated 31st December 2005. The respondents defaulted in payments for goods purchased by the respondent No. 1 and despite initiation of negotiations and discussions to amicably resort the disputes, the disputes could not be resolved and despite assurances, including expressly assuring repayments inter alia vide their letters dated 29th May 2019, 13th March 2020 and email dated 17th July 2020 and the balance confirmation letter dated 1st October 2020, the respondents failed to make the payments. Further, to the petitioner’s knowledge, some of the properties of the respondents were sold/attached as dues of other parties were not satisfied by the respondents. The petitioner thus invoked arbitration as per the agreement vide its notice dated 12th October 2020 to which the respondents replied vide letter dated 17th November 2020.
Respondent’s Contention:
Learned Counsel for the respondent submitted that the respondent Nos. 2 and 3 are not signatories to the dealership agreement dated 15th February 2018 and no liability on the respondent Nos. 2 and 3 can be enforced in terms of the deed of Guarantee dated 31st December 2005 as the same was time barred. It was submitted that the notice invoking arbitration dated 12th October 2020 was premature, therefore, no cause of action arises against the respondents.
It was submitted that in case, this Court holds that an Arbitrator is required to be appointed in terms of the Arbitration Agreement between the parties, then, he has instructions to state that instead of three-member arbitration panel, a Sole Arbitrator be appointed as prayed for by the petitioner.
HC’s Observations:
After hearing both the sides Court stated that the authorized dealership agreement dated 15th February 2018 does not provide for reference of disputes through arbitration to the PHD Chamber of Commerce & Industry as provided under the agreement dated 17th February, 2003 but firstly by settlement through friendly consultations and negotiations and if no settlement is arrived at in terms of Article 23.16(a) of the Agreement within thirty days of one party delivering a notice of the disputes or differences to the other party, then the disputes are to be resolved by arbitration in accordance with the provisions of Article 23.16.
HC stated that the seat of arbitration is provided at New Delhi and thus, a valid arbitration agreement exists between the parties and hence, this Court has jurisdiction to entertain the present petition. HC observed that a perusal of the emails exchanged between the parties would reveal that repeatedly, the petitioner raised the issue of balance payment. Though there is no admission of the liability by the respondent, however, the communications and discussions between the parties have not fructified leading to petitioner issuing notice invoking arbitration. Hence, it cannot be said that the notice invoking arbitration dated 12th October 2020 is premature and the petition is liable to be dismissed on this count.
HC relied upon the case of Vidya Drolia & Ors. vs. Durga Trading Corporation & Ors. where the SC held that the ambit of Court's jurisdiction at the reference stage was restricted to prima facie finding that there exists an arbitration agreement that is not null and void, inoperative or incapable being performed. The key rationale for holding that the Courts' review of the arbitration agreement should be limited to a prima facie standard is the principle of competence.
HC Held:
After evaluating submissions made by both the parties the Court held that “whether the deeds of Guarantee subsist or not, making the respondent Nos. 2 and 3 personally liable or not, is an issue which has to be gone into by the Arbitrator and cannot be decided in the present petition. The period of limitation and subsistence of the deeds of guarantee in this case would be a mixed question of fact and law to be decided by the learned Arbitrator. In view of the discussion above, this Court finds that the petitioner has made out a case for appointment of a Sole Arbitrator in terms of Clause 23.16 of the Authorized Dealership Agreement dated 15th February 2018.”
Case Title: Hero Moto Corp Ltd. v. Upper India Trading Co. (Delhi) Pvt Ltd & Ors.
Bench: Hon'ble Ms. Justice Mukta Gupta
Citation: ARB.P. 783/2021
Decided on: 25th March, 2022
Read Judgment @Latestlaws.com
Picture Source :
