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Monday, July 25, 2016

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.= 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.= 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. 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.

                                                                  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


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