ETOILE CREATIONS Vs. SARL DNSET DECO
Supreme Court of India (Full Bench (FB)- Three Judge)
Arbitration Case, 4 of 2015, Judgment Date: Jul 25, 2016
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
ARBITRATION APPLICATION (CIVIL) NO. 4 OF 2015
ETOILE CREATIONS …Petitioner
Versus
SARL DANSET DECO ...Respondent
J U D G M E N T
R. BANUMATHI, J.
In this petition under Section 11(5) read with Section 11(9) of
the Arbitration and Conciliation Act, 1996, the petitioner prays for the
appointment of a sole arbitrator for adjudication of disputes that have
arisen between the parties in relation to ‘Buyers Agreement’ dated
18.10.2012 executed between them.
2. Briefly stated case of the petitioner is as under:- Petitioner
is a proprietorship firm having its registered office at C-291, Suraj Mal
Vihar, Delhi. The petitioner is engaged in the business of manufacturing
of products relating to home furnishing and upholstery etc., exclusively
for the respondent since 2000. The respondent-SARL DANSET DECO is a
concern having its office at 240 Rue De La Lys 59250, Halluin, France which
is engaged in the business of purchase and sale of the product relating to
home furnishing and upholstery and is the buyer of the products
manufactured by the petitioner. Accordingly, a ‘Buyers Agreement’ was
executed on 18.10.2012 at New Delhi between the petitioner and the
respondent. As per the aforesaid agreement, the petitioner has been
selling/supplying its aforesaid products and the respondent has been
buying/purchasing the products for resale/sale in the territory of France.
There was a long business relationship since 2000, even prior to execution
of the agreement and the petitioner was regularly supplying the products to
the respondent. At the time of execution of the aforesaid agreement, it
was acknowledged that the respondent owes a total amount of Euro 367814.80
as the outstanding amount. The details of the outstanding dues have been
mentioned in Schedule-I of the ‘Buyers Agreement’. The petitioner has
alleged that as per the terms and conditions of the ‘Buyers Agreement’
dated 18.10.2012, the respondent did not release the said outstanding
amount within seven days of the agreement. Despite numerous reminders for
the payment of dues through e-mails, SMS messages exchanged between the
parties during November 2012 to April 2013 and subsequent legal notices
sent to the respondent, the respondent failed to pay the admitted dues of
the petitioner.
3. Clause 2.2 of the ‘Buyers Agreement’ imposed a restriction upon
the petitioner from supplying its product to any other person/firm or
company, in the territory of France. On the other hand, the respondent
agreed and assured that the products ordered during each year of the term
shall not fall short of the target provided in Schedule-II of the said
agreement. In the event of the failure to meet such target, the agreement
stipulated termination of restriction so imposed upon the petitioner.
Petitioner supplied various materials to the respondent at different points
of time against various orders. The respondent cancelled a few orders to
the tune of Euro 272368.25. The respondent committed breach of the terms
and conditions of the ‘Buyers Agreement’ because cancelled orders were not
restored. Thus, the respondent is liable to compensate the petitioner for
cancelling orders and reimburse for cost and damages incurred in procuring
material worth Euro 272368.25, just prior to the date of shipment and also
for preparing samples as per the request of the respondent dated 25.05.2012
and 26.07.2012. As per Clause 4.1 of the ‘Buyers Agreement’, the respondent
shall not purchase/obtain/ deal with the products or any goods that compete
with them, for sale from any person, firm or company in India other than
the petitioner. The respondent not only cancelled the orders, but also in
violation of Clause 4.1 of the ‘Buyers Agreement’ dated 18.10.2012,
purchased the same products worth approximately Euro 700000 from M/s.
Chahat Exports, 148-A, Basement, Deep Complex, Near Maharani Bagh, New
Delhi and Dhruv Overseas, 4502, Dau Bazar, Cloth Market, Fateh Puri, Delhi.
Placing such orders with other firms, according to petitioner, is a
violation of terms and conditions of the terms of the ‘Buyers Agreement’
which stipulates commitment between the parties for five years to maintain
the business relations; but the respondent by diverting those orders to
another agency has clearly breached the terms and conditions of the
agreement. Petitioner sent legal notices dated 08.05.2013, 04.07.2013 and
06.07.2013 calling upon the respondent to pay unpaid invoices to the tune
of Euro 393916.95 and also unpaid invoices to the tune of Euro 209580.63 of
M/s Creative International (another partnership firm of the petitioner)
alongwith interest at the rate of 24% per annum.
4. As the respondent did not make the payment of the invoices, the
petitioner invoked arbitration clause agreed in Clause 14 of the ‘Buyers
Agreement’ for the appointment of three arbitrators, one to be nominated by
each party and the third to be appointed by the two appointed arbitrators.
As per Clause 14 of the ‘Buyers Agreement’, the petitioner sent a statutory
notice dated 14.08.2013, nominating on his behalf Mr. Subhash Chandra, LLM,
Higher Judicial Services (V.R.S.), Member Judicial, Railway Claims Tribunal
(Retd.) as an arbitrator. Petitioner requested the respondent to nominate
its arbitrator so as to enable these arbitrators nominated by the parties
to further nominate the presiding arbitrator and constitute an arbitral
tribunal.
5. The petitioner filed a petition before the Commercial Court in
Lille to seize all the bank accounts of the respondent with the banks
Caisse d’ Epargne, GCE Trade and HSBC bank alongwith all money, values
and/or bonds held by these banks on behalf of the respondent. The court’s
bailiffs seized a total amount of Euro 48000 in HSBC bank on 11.10.2013 and
Caisse d’ Epargne on 14.10.2013 in compliance to order of Appellate Court,
Douai, France dated 25.09.2014. The petitioner filed a claim before the
Tribunal-DE-COMMERCIAL DE LILLE METROPOLIS, France for recovery of debt
amounting to Euro 393916.95, the Tribunal however dismissed the claim of
the petitioner vide its order dated 30.01.2014. Petitioner then filed an
Appeal No. Minute:14/389/RG 14/01147 before the Appellate Court, Douai,
France against the order dated 30.01.2014 passed by the President of the
Commercial Court of LILLE, which also came to be dismissed by its judgment
dated 25.09.2014. The appellate court declared the appeal inadmissible on
the issue of jurisdiction in view of the arbitration agreement and also
held that there was no emergency to approach the court instead of seeking
remedy under the Arbitration Agreement. According to the petitioner, the
aforesaid disputes and differences have arisen in India, are covered by the
terms and conditions of the ‘Buyers Agreement’ and are to be resolved by
the arbitrator in view of the arbitration clause 14 of the ‘Buyers
Agreement’. Hence, the petitioner has filed this petition invoking the
arbitration clause 14 of the ‘Buyers Agreement’ for appointment of a sole
arbitrator in terms of ‘Buyers Agreement’ dated 18.10.2012 qua recovery of
Euro 393916.95 payable to the petitioner alongwith interest at the rate of
24% per annum.
6. As per the Office Report dated 06.04.2016, counsel for the
petitioner has on 23.02.2016 filed an affidavit of dasti service alongwith
proof of service on respondent and proposed respondents and the service of
notice is complete.
7. We have heard the learned counsel for the petitioner at some
length. Despite service of notice, respondent has chosen not to appear.
The material facts are not in dispute that ‘Buyers Agreement’ was executed
between the parties on 18.10.2012. Clause 14 of the said agreement
provides for settlement of dispute in relation to the agreement by way of
arbitration. Clause 14 reads as under:-
“14. Arbitration
14.1 Any dispute, difference, controversy or claim (“Dispute”) arising
between the Parties out of or in relation to or in connection with this
Agreement, or the breach, termination, effect, validity, interpretation or
application of this Agreement or as to their rights, duties or liabilities
hereunder, shall be settled by the Parties by mutual negotiations and
agreement. If, for any reason, such Dispute cannot be resolved amicably by
the parties, the same shall be referred to and settled by way of
arbitration proceedings by three arbitrators, one to be nominated by each
Party and the third to be appointed by the two appointed arbitrators. The
arbitration proceedings shall be held in accordance with the Arbitration
and Conciliation Act, 1996, or any subsequent enactment or amendment
thereto (the “Arbitration Act”) by a sole arbitrator appointed by the First
Party. The decision of the arbitrator shall be final and binding upon the
Parties. The venue of arbitration proceedings shall be Delhi. The
language of the arbitration and the award shall be English.”
8. As is evident from the averments in the petition, disputes have
actually arisen between the parties in relation to the agreement and in
view of clause 14 such disputes could be resolved only by way of
arbitration. Whether the respondent is bound to pay Euro 393916.95
alongwith interest at the rate of 24% per annum; whether the respondent has
committed breach of Clause 2.2 of the agreement in cancelling the orders;
whether the respondent is liable to compensate for cancelling the orders
and reimburse the cost and damages incurred by the petitioner; whether the
respondent acted in violation of Clause 4.1 of ‘Buyers Agreement’ dated
18.10.2012 by diverting the orders to another agency and, if so, whether
the respondent is liable to compensate the petitioner and such other
incidental questions can be examined only by the arbitrator. When an
arbitration agreement exists between the parties, the present petition
under Section 11 (5) read with Section 11 (9) of the Arbitration and
Conciliation Act, 1996, shall have to be allowed with appropriate
directions.
9. In the result, we allow this petition and appoint Mr.
Justice Kailash Gambhir, a Former Judge, Delhi High Court as a Sole
Arbitrator for adjudication of the disputes that have arisen between the
parties in relation to the ‘Buyers Agreement’ dated 18.10.2012 executed
between them. We leave it open for the parties to make their claims and
counter claims in relation to the agreement aforementioned before the
Arbitrator. All contentions otherwise open to the parties on facts and in
law shall be open to be urged before the arbitrator. The arbitrator shall
fix his own fee. The petition, is accordingly, allowed with the above
directions leaving the parties to bear their own costs. Parties are
directed to appear before the arbitrator on 14.09.2016.
……………………….CJI.
(T.S.THAKUR)
…………………………..J.
(R.BANUMATHI)
..…………………………J.
(UDAY UMESH LALIT)
New Delhi;
July 25, 2016