Vidya International Charitable Trust v. Team Front Line Ltd

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** ## **THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN** **FRIDAY, THE 30TH DAY OF AUGUST 2013/8TH BHADRA, 1935** ## **AR.No. 20 of 2013 ()** **-----------------------------** ## **PETITIONER(S):** **--------------------------** **VIDYA INTERNATIONAL CHARITABLE TRUST THALAKKOTTUKARA P.O. THRISSUR DISTRICT 680 501 REPRESENTED BY ITS SECRETARY SABU SOUMIAN.** ## **BY ADV. SRI.M.P.SREEKRISHNAN** ## **RESPONDENT(S):** **--------------------------** **M/S. TEAM FRONT LINE LTD G-182, PANAMPILLY NAGAR COCHIN - 682 036 REPRESENTED BY ITS DIRECTOR SHAJU DAVID.** **BY ADV. SRI.LELLULAL T.G.THUNDATHIL** **THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 30-08-2013, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** ## **tss** ## **AR. NO.20/2013** ## **APPENDIX** ## **PETITIONERS ANNEXURES** **A:- ATTESTED COPY OF THE TRUST DEED DTD. 14.9.2000.** ## **B:- COPY OF THE PROPOSAL DTD. 10.1.2012.** **C:- THE ATTESTED COPY OF THE AGREEMENT DTD. 22.2.2012 ENTERED IN TO BETWEEN THE TRUST AND THE RESPONDENT.** ## **D:- COPY OF THE PURCHASE ORDER.** **E:- COPY OF THE LETTER DTD. 22.9.2012 ISSUED BY FINANCE DIRECTOR OF THE TRUST.** **F:- COPY OF THE LETTER DTD 9.10.2012.** **G:- COPY OF THE LETTER DTD. 3.12.2012 OF FINANCE DIRECTOR OF THE TRUST.** **H:- COPY OF THE REPLY DTD. 17.1.2013 OF THE RESPONDENT.** ## **RESPONDENTS ANNEXURES** **R1:- COPY OF THE E-MAIL LETTER DTD. 7.3.2012 SENT BY THE REPRESENTATIVE OF THE PETITIONER TO THE REPRESENTATIVES OF THE RESPONDENT.** **R2:- E-MAIL COPY OF THE MINUTES OF THE STEERING COMMITTEE MEETING HELD ON 2.4.20123.** ## **R3:- E-MAIL COPY OF THE MINUTES OF THE MEETING HELD ON 18.4.2012.** **R4:- E-MAIL LETTER DTD. 20.4.2012 SENT BY THE REPRESENTATIVE OF THE PETITIONER TO THE REPRESENTATIVES OF THE RESPONDENT.** ## **R5:- E-MAIL COPY OF THE MINUTES OF THE MEETING HELD ON 11.5.2012.** **TRUE COPY** ## **P.A. TO JUDGE** **tss** ## **P.N.RAVINDRAN** , **J. --------------------------Arbitration Request No.20 of 2013 -------------------------Dated this the 30[th] day of August, 2013** ## **O R D E R** The prayer in this arbitration request, filed under section 11(5) of the Arbitration and Conciliation Act, 1996 is to appoint an Arbitrator to resolve the disputes between the petitioner on the one hand and the respondent on the other. The brief facts of the case are as follows:- 2. The petitioner and the respondent had entered into the original of Annexure-C agreement dated 22.2.2012 for the purpose of implementing an enterprise resource planning software to integrate the multi entity/campus operations of the petitioner trust and its subsidiaries on to a single computer system/platform. Inter alia it was stated in the agreement that the project shall be completed within five months from the date of the purchase order. Annexure-D purchase order was placed on 22.2.2012. Within five months therefrom, the project was not completed. The petitioner thereupon sent Annexure-E letter dated 22.9.2012 to the Director of the respondent company informing him that the respondent has failed to meet the project timelines and commitments and therefore the 2 A.R.No.20/2013 petitioner is left with no option but to server the agreement and to reimburse the cost and expenses already incurred by the petitioner. The respondent sent Annexure-F letter dated 9.10.2012 in reply calling upon the petitioner not to abandon the project. The petitioner thereupon sent Annexure-G letter dated 3.12.2012 to the respondent invoking clause 30 of Annexure-C agreement and suggesting the name of Sri.N.K.Vijayan, a former District and Sessions Judge as the sole Arbitrator. Upon receipt of the said letter, the respondent sent Annexure-H letter dated 17.1.2013 wherein inter alia it was stated that the respondent is not agreeable for the appointment of Sri.N.K.Vijayan, as the Arbitrator. The respondent also called upon the petitioner to create a favourable atmosphere to complete the project and to perform the respondent's part of the contract. The instant arbitration request was filed on 31.5.2013, shortly thereafter. 3. The petitioner has averred that on account of the failure of the respondent to implement the project within the stipulated period of five months from the date of the purchase order, disputes and differences have arisen between the petitioner on the one hand and the respondent on the other, that the respondent was also not agreeable for the appointment of Sri.N.K.Vijayan, as the Arbitrator and therefore it has become necessary to move this Court seeking the A.R.No.20/2013 3 appointment of an Arbitrator. The respondent has entered appearance and fled a counter affidavit. In paragraph 12 thereof the respondent has contended that the petitioner cannot invoke clause 30 of Annexure-C agreement in view of clause 20 thereof which reads as follows: _“A steering committee will be formed with nominees from both the OWNER and the CONTRACTOR, who would be entrusted with the evaluation of status of the project, discuss any issues, suggest mitigation plans and also document the reason for the delay._ 4. The respondent has proceeded to state that before proceeding to invoke clause 30, the petitioner ought to have invoked clause 20 and only if the discussions contemplated in clause 20 fail, clause 30 of the agreement will come into the picture. The respondent has also averred that if the steering committee contemplated in clause 20 had met and discussed the issue, the steering committee would have been convinced of the reason for the delay and that the petitioner has instead of invoking clause 20, invoked the arbitration clause. In paragraph 13 of the counter affidavit, the respondent has averred that clause 30 of the arbitration agreement cannot be invoked because of clause 31 thereof, which reads as follows: _“In case the arbitration under the arbitration clause of this agreement is unsuccessful then all disputes arising out of or in any way connected with this agreement shall be under the jurisdiction of the courts at Thrissur,_ A.R.No.20/2013 4 _Kerala.”_ 5. It is contended that clause 31 is a provision which detracts from the arbitration clause and therefore clause 30 will not be an arbitration clause. It is contended that as clause 31 provides an option to the parties to approach the courts at Thrissur seeking reliefs in case clause 30 becomes unsuccessful, clause 30 is rendered invalid. In short, it is contended that there is no valid arbitration clause in Annexure-C agreement and therefore, the petitioner cannot move this Court seeking the appointment of an Arbitrator. 6. I heard Sri.M.P.Sreekrishnan, learned counsel appearing for the petitioner and Sri.T.G.Lellulal, learned counsel appearing for the respondent. The learned counsel appearing for the petitioner contended with reference to the various letters produced along with the arbitration request that the project was not implemented within the stipulated time on account of the breach committed by the respondent, that disputes and differences have arisen between the parties, that the petitioner has also terminated the agreement and invoked the provisions of the agreement to recoup the loss suffered by the petitioner, that the respondent has in Annexure-H letter taken the stand that it does not want to abandon the project, that time is not the essence of the contract, that the delay in progress of the project was A.R.No.20/2013 5 solely due to the non co-operation of the petitioner and that it has not violated any of the terms of the contract, that the correspondence between the parties would show that there is a dispute between the parties and therefore, clause 30 of the agreement is attracted. Referring to the contentions raised in paragraphs 12 and 13 of the counter affidavit filed by the respondent, the learned counsel appearing for the petitioner contended that clause 20 of Annexure-C agreement does not deal with resolution of disputes but only deals with the formation of a steering committee to evaluate the status of the project and to discuss issues regarding the project status and also the reasons for the delay, that in the instant case, there is admittedly delay and therefore the agreement was terminated and consequently, no reliance can be placed on clause 20 to contend that the arbitration clause cannot be invoked before the steering committee goes into the dispute between the parties. The learned counsel contended that clause 30 of the arbitration clause does not stipulate that it will come into operation only if discussions by the steering committee fail and therefore for that reason also no reliance can be placed on clause 20 of the agreement to contend that the arbitration clause cannot be invoked. Referring to clause 31 of the agreement learned counsel appearing for the petitioner contended that clause 31 deals with the A.R.No.20/2013 6 post arbitration scenario and therefore it cannot be relied on to contend that clause 30 of the agreement cannot be enforced. 7. Per contra, Sri.T.G.Lellulal, learned counsel appearing for the respondent reiterated the averments in the counter affidavit and contended relying on the decision of the Apex Court in **Jagdish chnder v. Ramesh Chander** (2007 (5) SCC 719) that clause 31 of agreement detracts from the arbitration clause and therefore the arbitration clause cannot be invoked. The learned counsel also contended referring to and relying on clause 20 of the agreement and the contents of Annexure-F and Annexure-H letters that the respondent was always willing to go ahead with the project, that the reasons for the delay can be gone into by the steering committee contemplated under clause 20 of the agreement and therefore, without resorting to the remedy provided in clause 20 of the agreement, the petitioner has invoked clause 30 and even assuming that clause 30 of the agreement survives and is enforceable, reference to arbitration can be made only thereafter. 8. I have considered the submissions made at the bar by the learned counsel on either side. I have also gone through the pleadings and the materials on record. I shall first deal with the question whether clause 20 of Annexure-C agreement stands in the way of the A.R.No.20/2013 7 petitioner from invoking clause 30 thereof. All that clause 20 stipulates is that a steering committee formed with nominees from both the owner and the contractor (the petitioner and the respondent) to evaluate the status of the project can discuss issues, suggest mitigation plans and also document the reasons for delay. Clause 30 which is extracted above does not stipulate that before the arbitration clause is invoked the parties should avail the services of the steering committee. From a plain reading of clause 30 of Annexure-C agreement, it is evident that any dispute between the parties relating to the interpretation of the various clauses of the agreement or its implementation shall be referred to the decision of a sole Arbitrator on mutual consent. Clause 30 does not stipulate that arbitration can be had only after the procedure contemplated in clause 20 turns out to be unsuccessful. On the other hand it is evident from Annexure-E letter sent by the petitioner and also the terms and stipulations in AnnexureG letter that the petitioner has decided to terminate the agreement and has demanded reimbursement of the cost and expenses incurred by it. A dispute has thus arisen between the petitioner and the respondent regarding the non-implementation of the project. In such circumstances, I am of the considered opinion that clause 20 of Annexure-C agreement cannot be relied on to non-suit the petitioner. A.R.No.20/2013 8 9. That takes me to the question whether clause 31 of Annexure-C agreement detracts from the arbitration clause. All that clause 31 stipulates is that in case arbitration is unsuccessful, all disputes arising out of or in any way connected with the agreement shall be under the jurisdiction of the courts at Thrissur in the State of Kerala. The principal contention raised by the learned counsel appearing for the respondent is that this clause detracts from the arbitration clause. Reliance is placed on the decision of the Apex Court in **Jagdish Chander v. Ramesh Chander and Others** (2007 (5) SCC 719). The Apex Court has in **Jagdish Chander v. Ramesh Chander and Others** (supra) held as follows: “ _8. This Court had occasion to refer to the attributes or essential elements of an arbitration agreement in_ _**K.K.Modi v. K.N.Modi** (1998 (3) SCC 573),_ _**Bharat Bhushan Bansal v. U.P. Small Industries Corpn. Ltd** (1999 (2) SCC 166), and_ _**Bihar State Mineral Development Corpn. v. Encon builders (I)(P) Ltd** (2003 (7) SCC 418). In_ _**State of Orissa v. Damodar Das** (1996 (2) SCC 216) this court held that a clause in a contract can be construed as an “arbitration agreement” only if an agreement to refer disputes or differences to arbitration is expressly or impliedly spelt out from the clause. We may at this juncture set out the wellsettled principles in regard to what constitutes an arbitration agreement:_ _(i) The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes, it is arbitration agreement. While there is no specific form of an arbitration agreement,_ A.R.No.20/2013 9 _the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration. Where there is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration, there is no valid and binding arbitration agreement._ _(ii) Even if the word “arbitration” and “Arbitral Tribunal (or arbitrator)” are not used with reference to the process of settlement or with reference to the private tribunal which has to adjudicate upon the disputes, in a clause relating to settlement of disputes, it does not detract from the clause being an arbitration agreement if it has the attributes or elements of an arbitration agreement. They are: (a) The agreement should be in writing. (b) The parties should have agreed to refer any disputes (present or future) between them to the decision of a private tribunal. (c) The private tribunal should be empowered to adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it. (d) The parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them._ _(iii) Where the clause provides that in the event of disputes arising between the parties, the disputes shall be referred to arbitration, it is an arbitration agreement. Where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement. But where the clause relating to settlement of disputes, contains words which specifically exclude any of the attributes of an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement. For example, where an agreement requires or permits an authority to decide a claim or dispute without hearing, or requires the authority to act in the interests of only one of the parties, or provides that the decision of the authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of the authority, he may file a civil suit seeking relief, it cannot be termed as an arbitration agreement._ _(iv) But mere use of the word “arbitration” or “arbitrator” in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example, use of words, such as “parties can, if they so desire,_ A.R.No.20/2013 10 _refer their disputes to arbitration” or “in the event of any dispute, the parties may also agree to refer the same to arbitration” or “if any dispute arise between the parties, they should consider settlement by arbitration” in a clause relating to settlement of disputes, indicate that the clause is not intended to be an arbitration agreement. Similarly, a clause which states that “if the parties so decide, the disputes shall be referred to arbitration” or “any disputes between parties, if they so agree, shall be referred to arbitration” is not an arbitration agreement. Such clauses merely indicate a desire or hope to have the disputes settled by arbitration, or a tentative arrangement to explore arbitration as a mode of settlement if and when a dispute arises. Such clauses require the parties to arrive at a further agreement to go to arbitration, as and when the disputes arise. Any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration, is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future.”_ 10. In sub para (iii) of paragraph 8 of the aforesaid decision, which is relied on by the learned counsel appearing for the respondent, the Apex Court has held that where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement, but where the clause relating to settlement of disputes, contains words which specifically exclude any of the attributes of an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement at all. In paragraph 8(iv) the Apex Court held that mere use of the word “arbitration” or “arbitrator” in a clause will not make it an arbitration agreement, if it requires or contemplates a further or A.R.No.20/2013 11 fresh consent of the parties for reference to arbitration. It was held that any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration, is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future. 11. The short question is whether clause 31 of Annexure-C agreement detracts from clause 30 thereof. In my opinion, nothing contained in clause 31 of Annexure-C agreement detracts from clause 30 thereof. Clause 30 of the agreement does not stipulate that it is subject to clause 31. All that it stipulates is that in case arbitration is unsuccessful, all disputes arising out of or in any way connected with the agreement shall be under the jurisdiction of the courts at Thrissur in the State of Kerala. Clause 31 of Annexure-C agreement only identifies the court which has jurisdiction namely the court at Thrissur. On the terms of clause 31 it will come into operation if the arbitration under the arbitration clause of the agreement is unsuccessful. The respondent cannot therefore contend that clause 30 is not an arbitration clause. I accordingly over rule the said contention as well. 12. It is evident from the pleadings and the materials on record that the respondent is not agreeable to the choice made by the petitioner. In such circumstances, as the parties have not been able to A.R.No.20/2013 12 agree upon the Arbitrator, I deem it appropriate to appoint Sri.P.L.Norbert, District Judge (Retd.) 'Nin's Aedis', Sastha Temple Road, Palluruthy, Kochi-06 as the Arbitrator. I accordingly appoint Sri.P.L.Norbert, District Judge (Retd.) 'Nin's Aedis', Sastha Temple Road, Palluruthy, Kochi-06 as the Arbitrator to resolve the disputes between the petitioner on the one hand and the respondent on the other arising out of Annexure-C agreement. **P.N.RAVINDRAN, (JUDGE)** vps A.R.No.20/2013 13 A.R.No.20/2013 14