Hughes Communications India Limited v. Indian Institute of Management Kozhikode

A.R.No.8/2019 1 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE SMT. JUSTICE P.V.ASHA** **FRIDAY, THE 15TH DAY OF JANUARY 2021 / 25TH POUSHA, 1942** ## **AR.No.8 OF 2019** ## **PETITIONER:** **HUGHES COMMUNICATIONS INDIA LIMITED, REPRESENTED BY ITS AUTHORIZED SIGNATORY MS.DAMINI SRIVASTAVA, HAVING ITS REGISTERED OFFICE AT 1, SHIVJI MARG, WESTEND GREENS, NEW DELHI 1100037.** **BY ADVS. ANKUR MAHINDRO SRI.A.ARUNKUMAR** ## **RESPONDENT:** **INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE, HAVING ITS REGISTERED OFFICE AT: IIMK CAMPUS P.O. KOZHIKODE, KERALA 673 570.** **R1 BY ADV. SRI.M.GOPIKRISHNAN NAMBIAR R1 BY ADV. SRI.K.JOHN MATHAI R1 BY ADV. SRI.JOSON MANAVALAN R1 BY ADV. SRI.KURYAN THOMAS R1 BY ADV. SRI.PAULOSE C. ABRAHAM** **THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 06.01.2021, THE COURT ON 15.01.2021 PASSED THE FOLLOWING:** A.R.No.8/2019 2 ## _**P.V.ASHA, J**_ **.** **-----------------------------------------------------** A.R. No.8 of 2019 ---------------------------------------------------- _Dated this the 15[th] day of January, 2021_ ## _**O R D E R**_ The applicant claims to be the largest satellite service operator in India, engaged in the business of offering satellite based interactive on-site learning educational courses via VSAT/other telecom media network. The applicant had entered into Annexure C agreement dated 20.12.2001 with the respondent based on which the respondent institute was conducting an executive postgraduate programme (EPGP) in Management on interactive on-site learning platform at various locations through the applicant's VSAT and multimedia network. Certain provisions in the agreement were amended on 30.08.2002 and 4.6.2004, which are also part of Annexure C. It is stated that the 2 years' programme is conducted in 4 semesters on interactive online learning platform, utilising the programmes developed by the applicant. 2. It is stated that a programme description sheet (PDS) was signed between the parties on 22.06.2012 for the EPGP batch 5 of the respondent No.5, in tune with the terms of agreement between them. The applicant raised Annexure E invoice dated 14.09.2015 for a sum of Rs.33,00,300/- upon the respondent towards the infrastructure based charges for the second year electives. Since the respondent did not pay the charges as claimed, the applicant issued Annexure H A.R.No.8/2019 3 lawyer notice on 28.03.2017 demanding the balance payment of a sum of Rs.28,28,340/-. But the Chief Administrative Officer of the respondent by Annexure I reply dated 18.4.2017 informed that payment was made in accordance with the provisions in the PDS. The applicant states that there was an inadvertent mistake in the PDS as the break up of IOL hours and in-campus hours for second year were not given in it though it was evident from academic hand book published by the EPGP. Thereafter, another notice Annexure J was issued on 09.06.18 demanding payment due to the applicant. The respondent did not respond to it. On 11.7.2018 the applicant sought for initiation of conciliation proceedings for settlement of the issue in tune with Article 12.3 of the Annexure C agreement, issuing Annexure K notice. But the respondent did not respond to that also. Thereupon, the applicant issued Annexure D notice on 11.9.2018 requesting for appointment of an Arbitrator in accordance with Article 12.3 of Annexure C agreement within a period of 30 days. The respondent thereupon issued Annexure L reply stating that Annexure C agreement expired in the year 2006 and each EPGP is governed by the provisions in the respective PDS executed between the parties and payment due to the applicant is already made in tune with the PDS. The applicant has thereupon filed this application under Section 11(6) of the Arbitration and Conciliation Act,1996, for appointment of an Arbitrator stating that the respondent failed to appoint an Arbitrator in accordance with Article 12.3 of Annexure C agreement. 3. The respondent filed a counter affidavit stating that there is no provision for arbitration in the PDS governing the EPGP 5 and that Annexure C A.R.No.8/2019 4 agreement in which provision for arbitration available in Article 12.3 was in force only till 2006 and it does not govern the programme conducted in 2012 for which the applicant had submitted Annexure E invoice in 2015. It is stated that for each programme conducted by the applicant for the respondent a programme description sheet (PDS) is executed between the applicant and the respondent and the transactions between them are governed by the terms and conditions contained in each of the PDS. It is stated that Annexure R1(a) was the PDS executed between them on 22.6.2012 in respect of the EPGP Batch 5. According to the respondents, Annexure R1(a) PDS provides for the programme description, target segment, programme USP, duration, fees payable, course scheduled and revenue share; the disputes which arose with respect to the invoice dated 14.09.2015 pertain to infrastructural charges as per the PDS dt.22.6.2012 for the specialisation programmes EPGP 5 only. It is stated that the arbitration request is not maintainable since there is no provision for arbitration in the agreement Annexure R1(a) governing the transaction in dispute. Annexure C agreement based on which the Arbitration request is filed, ceased to have any effect on completion of 5 years in the year 2006. It is stated that the amount due to the applicant in accordance with Annexure R1(a) is already paid towards the service rendered by it, as stated in Annexure L reply to the applicant. 4. The applicant has filed a reply/rejoinder refuting the contentions in the counter affidavit. It is stated that the conduct of the parties would show that the programmes have been conducted in deference of the terms of the Annexure C agreement. It is stated that there is no mention in the PDS about infrastructure A.R.No.8/2019 5 charges or hourly rate to be levied. Based on the disputed invoice the respondent has made part payment towards infrastructure charges only and that charges are calculated on the basis of the number of hours agreed upon in the PDS and it was being revised from time to time based on oral understanding between the parties to continue the obligations as per successive PDS; PDS does not provide anything about the manner in which the services are to be provided by the applicant; it can only be treated as a supplementary agreement or additional work order. The respondent continued to avail the services of the applicant beyond the period of the basic agreement of 2001; neither party has considered at any point of time that the agreement is to be terminated; the applicant continued to provide its services and the respondent continued to avail the same even after 2006; the PDS only defines revenue share between the parties, provides for number of hours required for a programme and defines the obligations of applicant and respondents qua the students. The PDS can only be found to be an additional work order and it cannot be segregated from the parent agreement, as the obligation of the parties is given only in the attachments B and C of the agreement, where procedure, role and responsibilities of the programmes are stated; PDS does not provide for the rate for infrastructure charges, the procedure for conducting the courses; PDS is part of the programmes listed in Annexure A to the parent agreement and it was being executed even during the currency of the parent agreement; the meaning of the key terms like certification, effective date, programme, registered participants etc. is given only in the parent agreement and the provisions in the PDS can be construed only with the help of the parent agreement for which it should continue A.R.No.8/2019 6 to be in force; PDS does not provide for a right of terminating the agreement; PDS is silent over various terms which can be understood from the basic agreement only; the intention of the parties was to continue the agreement and their subsequent conduct was also in tune with that; therefore, PDS as well as the agreement are to be read together. Referring to Article 3 which provides for the manner in which programme ordering, delivery and acceptance, rejection and correction are to be done, Article 4 which provides for Attachment C where procedure, role, responsibilities and obligations of the parties for the applicant conducting the programme are given, which provides for the provision for the applicant to enroll the registered participants etc., the attachment A which comprises the list of programmes, Attachment B which provides for the payment of charges payable to the applicant for different services, fees, revenue share, expenses, infrastructure expenses, etc. It is stated that in the absence of Annexure C agreement, there is no independent existence for the PDS. It is claimed that the notices dated 11.6.2018 and 11.7.2018 were never responded and the contents of those notices which referred to the agreement dt.20.12.2001 are not refuted. 5. According to the learned counsel for the applicant, if at all there is any dispute with reference to the existence of the agreement or the non applicability of the agreement, it is for the Arbitrator to decide the same. Relying on the judgments in _**Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd** : (2020) 2 SCC 455_ and _**Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman** : (2019) 8 SCC 714_ Sri. Ankur Mahindro, the learned Counsel for the applicant, argued that since the execution of Annexure C agreement is not disputed, it is necessary that an Arbitrator is appointed. A.R.No.8/2019 7 6. At the same time, the definite case of the respondent is that after 2006, the agreement does not have any force and there is no provision for arbitration in the Annexure R1(a) PDS, which alone governs the dispute in question. Relying on the judgment in _**M/s Brightstar Tele Communications India Ltd. v. M/s Iworld Business Solutions Pvt Ltd**_ : 2018 SCC Online Del 13071 the learned Counsel for the respondent argued that the Annexure C agreement does not have any connection with the transaction covered by Ext.R1(a) PDS and in the absence of any provision for arbitration therein or any reference to the relevant provision contained in the parent agreement, the Arbitration Request is to be rejected. 7. I have considered the contentions raised by both sides. The dispute raised by the respondent is over the enforceability of Annexure C agreement between the parties at the relevant point of time when the EPGP 5 was conducted pointing out the expiry of period of agreement. The invoice in dispute was raised by the applicant in the year 2015 claiming payment in respect of a PDS issued in 2012. The only agreement which provides for arbitration in the event of disputes between the parties is Annexure C and the provision for arbitration is Article 12.3 therein. The execution of the said agreement is not under dispute. Article 12.3 reads as follows: _“12.3: Arbitration: In the event of any dispute or difference arising out of or in connection with this Agreement as to the interpretation or any other matter then in such event the Parties shall resolve such dispute or difference first by mutual discussions and if any dispute or difference arising out of this agreement or interpretation of this agreement, it shall be referred to Arbitration to be conducted in accordance with the Indian Arbitration and Conciliation Act, 1996._ A.R.No.8/2019 8 _The arbitration shall be referred to a mutually acceptable arbitrator whose decision shall be binding upon both the parties._ _In case the parties are unable to agree upon a mutually acceptable arbitrator then the dispute or difference shall be referred to an Arbitration Panel of three arbitrators; one each to be appointed by both the parties and the third arbitrator to be appointed by the two arbitrators and the third arbitrator so appointed shall act as the chairman of the Arbitration panel._ _The arbitration will be held in Calicut and conducted in the English language. The Parties to the dispute will instruct the Arbitrators to render a decision within 30 days of the date of their appointment. The cost of arbitration shall be shared equally by both the parties and the decision of the arbitration shall be final and binding on the parties.”_ It is relevant to note that applicant had sent Annexure K notice on 11.07.2018 initiating conciliation proceedings specifically referring to Clause 12.3 of Annexure C agreement informing the respondent that on failure to resolve the dispute the applicant would invoke the arbitration clause. The respondent did not respond to that notice. It is only after Annexure D notice requesting for appointment of Arbitrator was issued, the respondent chose to inform the applicant in Annexure L notice that the agreement of 2001 is not in force. The same contention is raised before this Court also. 8. However, in view of the contentions raised by the respondent it is necessary to have a look at clause 9 of Annexure C dated 20.12.2001, which determined the validity period, which reads as follows: _“Article 9: Term_ _Unless terminated pursuant to Article 10 hereof, this agreement shall come into force from the date of its execution and remain in force for a term of five (5) years from the effective date as defined herein above. The agreement may be renewed for further period on such terms and conditions as may be mutually decided by the parties. However commercial terms may be revised upwards every twelve months from the effective date in tune with escalation of_ A.R.No.8/2019 9 _cost in real terms, on mutual cost.”_ Article 10 deals with termination for breach of covenants in the agreement or for convenience within the validity period of the agreement. As stated by the respondent, the validity period of the agreement was for 5 years which expired in 2006. At the same time, it permitted renewal on agreement between parties. The contention of the applicant is that it was mutually agreed to renew and that the intention of the parties and the conduct of the parties would show that the parties continued to act upon it, discharging each other's obligations by providing/availing the services in tune with the parent agreement. However, this is denied by the respondent in Annexure L notice and in the counter affidavit. It is seen that renewal of Annexure C agreement is not made in writing. But it would appear that the respondent continued to provide the EPGP availing the services of the applicant even after the expiry of 5 years though PDS was being executed. 9. Under Section 11(6A) this Court is required to see only whether an arbitration agreement is in existence between the parties. Section 11 (6A) of the Arbitration and Conciliation Act, 1996 reads as follows: _“11_ _**(6-A)** The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement.”_ A three Judge Bench of the Apex Court in the judgment in _**Mayavati Trading (P)**_ _**Ltd. v. Pradyuat Deb Burman** : (2019) 8 SCC 714_ held that after the 2015 amendment the requirement under Section 11(6A) is confined to the examination of the existence of an arbitration agreement. While reiterating the same, the Apex Court in the judgment in _**Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd** : (2020) 2 SCC 455,_ held that all other preliminary issues A.R.No.8/2019 10 are left to be decided by the arbitrator under Section 16. It was further held as follows: _**“7.11.** The doctrine of “kompetenz-kompetenz”, also referred to as “compétencecompetence”, or “compétence de la recognized”, implies that the Arbitral Tribunal is empowered and has the competence to rule on its own jurisdiction, including determining all jurisdictional issues, and the existence or validity of the arbitration agreement. This doctrine is intended to minimise judicial intervention, so that the arbitral process is not thwarted at the threshold, when a preliminary objection is raised by one of the parties. The doctrine of kompetenz-kompetenz is, however, subject to the exception i.e. when the arbitration agreement itself is impeached as being procured by fraud or deception. xxx”_ 10. In the present case, the existence of Annexure C is admitted. But whether it continued to exist after a period of 5 years is disputed, stating that PDS is executed by the parties. On a perusal of the Annexure R1(a) which relates to the EPGP 5, it is doubtful whether it can have an independent existence without the support of any other agreement like Annexure C defining and fixing the terms between the parties, stipulating the procedure for providing the services etc. In the judgment in _**Iworld Solutions**_ ' case ( _supra_ ) relied on by the respondent, the issue raised was entirely different. In the present case the question of independent existence of Ext.R1(a) requires consideration for determining the issue arising in this case. Therefore, I am of the view that whether Annexure C and the provision for arbitration therein would be applicable for resolving the dispute should be a matter for the Arbitrator to consider as a preliminary issue, in the peculiar circumstances of the case. 11. Therefore, _Sri. Amir Ali, Former District Judge, DD Silverstone Apartments, Flat No.13 D, Vaduthala P.O, Kochi – 682 023_ , is appointed as the Arbitrator to resolve the disputes between the parties. The applicant shall obtain a A.R.No.8/2019 11 disclosure statement from the Arbitrator as provided in Section 11(8) of the Arbitration and Conciliation Act, 1996, original of which shall be retained by the Registry. Certified copy of this order need be issued only on production of the disclosure statement. A copy of the same shall be appended to the certified copy of this order. The Arbitration Request is allowed accordingly. _Sd/-_ _**(P.V.ASHA, JUDGE)**_ _**rtr/**_ A.R.No.8/2019 12 ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** |**ANNEXURE A**|**A TRUE COPY OF THE APPLICANT COMPANY**| |---|---| ||**DOCUMENTS SUCH AS MEMORANDUM OF**| ||**ASSOCIATION, ARTICLES OF ASSOCIATION,**| ||**CERTIFICATE OF INCORPORATION.**| |**ANNEXURE B**|**A TRUE COPY OF THE BOARD RESOLUTION**| ||**DATED 23.1.2018.**| |**ANNEXURE C**|**A TRUE COPY OF THE AGREEMENT DATED**| ||**20.12.2001.**| |**ANNEXURE D**|**A TRUE COPY OF THE NOTICE DATED**| ||**11.9.2018.**| |**ANNEXURE E**|**A TRUE COPY OF THE INVOICE NO.**| ||**9180059863 DATED 14.9.2015.**| |**ANNEXURE F**|**TRUE COPIES OF THE EXTRACT OF EMAIL**| ||**COMMUNICATIONS BETWEEN THE PARTIES**| ||**REGARDING PAYMENT.**| |**ANNEXURE G**|**A TRUE COPY OF THE LEDGER MAINTAINED BY**| ||**THE APPLICANT.**| |**ANNEXURE H**|**A TRUE COPY OF THE NOTICE ISSUED BY THE**| ||**APPLICANT COMPANY TO THE DIRECTOR OF**| ||**THE RESPONDENT FOR MAKING PAYMENT.**| |**ANNEXURE I**|**A TRUE COPY OF THE REPLY SUBMITTED BY**| ||**THE RESPONDENT TO THE APPLICANT'S LEGAL**| ||**COUNSEL.**| |**ANNEXURE J**|**A TRUE COPY OF THE DEMAND NOTICE DATED**| ||**9.6.2018 ALONG WITH PROOF OF DELIVERY**| ||**ISSUED BY THE APPLICANT.**| |**ANNEXURE K**|**A TRUE COPY OF THE LAWYER NOTICE ISSUED**| ||**BY THE APPLICANT'S LAWYER TO THE**| ||**RESPONDENT DEMANDING PAYMENT OF**| ||**OUTSTANDING DUES ISSUED BY THE**| ||**APPLICANT ALONG WITH POSTAL RECEIPT AND**| ||**DETAILS OF THE TRACKING OF THE**| ||**CONSIGNMENT.**| |**ANNEXURE L**|**A TRUE COPY OF THE REPLY DATED**| ||**8.10.2018 BY THE RESPONDENT.**| |A.R.No.8/2019|13| |---|---| |**ANNEXURE M**|**EMAIL DATED 4TH JULY 2006 SENT BY THE**| ||**RESPONDENT TO THE APPLICANT IN**| ||**PURSUANCE OF THE AGREEMENT DATED**| ||**20.12.2001.**| |**ANNEXURE N**|**EMAIL DATED 16TH OCTOBER 2006 SENT BY**| ||**THE RESPONDENT TO THE APPLICANT IN**| ||**PURSUANCE OF THE AGREEMENT DATED**| ||**20.12.2001.**| |**RESPONDENT'S EXHIBITS**|| |**ANNEXURE-R1(a)**|**TRUE COPY OF THE PROGRAM DESCRIPTION**| ||**SCHEDULE DATED 22.06.2012 EXECUTED BY**| ||**THE APPLICANT AND THE RESPONDENT.**|