Dismissed

Rubyorganics Pvt. Ltd. v. Sai Mirra Innopharm Pvt. Ltd.

Bombay HC21 Sept 2013NMS/3551/2011

Case brief

AI extract

What is this about?

In a Notice of Motion under Section 8 of the Arbitration and Conciliation Act, 1996, the High Court of Bombay dismissed the defendants' attempt to refer disputes in a summary suit to arbitration. The court held that the invoices forming the subject matter were not issued under the agreements containing arbitration clauses, precluding referral.

What did the court decide?

Notice of Motion dismissed with no order as to costs.

Rubyorganics Pvt. Ltd. Vs Sai Mirra Innopharm Pvt. Ltd. — Company and Corporate | Bombay HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

¶5

NOTICE OF MOTION NO. 3551 OF 2011 IN

¶6

SUMMARY SUIT NO. 2602 OF 2009

¶7

M/s.Ruby Organics Pvt. Ltd. ) A Private Limited Company, registered ) under Companies Act, 1956 having its ) Regd.Office at 11-A, Sandeep Park, ) Deonar, Mumbai – 400 088 ) ..... Plaintiffs

¶8

VERSUS

¶9

M/s.Sai Mirra Innopharm Pvt. Ltd. ) A Private Limited Company, registered ) Under Companies Act, 1956, carrying on ) Business at 23, Lattice Bridge Road, ) Adyar Chennai – 600 020 ) ..... Defendants

¶10

Mr.Vinod Tayade, i/b. Mr.Anil Desai for Applicant in Notice of Motion/Defendants.

¶11

Mr.Sanjay Jain, i/b. A.V.Jain & Associates for the Respondents/Plaintiffs.

¶12

CORAM : R.D. DHANUKA, J. DATED : 21^st SEPTEMBER, 2013

¶13

P.C.

¶14

By this Notice of Motion, defendants seek that dispute between the plaintiffs and the defendants be referred to the arbitration as per the provisions of section 8 of the Arbitration and Conciliation Act, 1996. Some of the relevant facts for the purpose of deciding this Notice of Motion are summarized as under :-

¶15

On 26^th May, 2006, an agreement was entered into between the plaintiffs and the defendants for supply of products described as per Annexture 2. Annexture 2

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to the said agreement refers to one product viz. Pepciflam Tablets of pack size 10 x 10 at transfer price of Rs.11.43. Clause 13 of the said agreement provides for arbitration in case of dispute or differences if arisen between the parties. Clause 13 of the said agreement is extracted as under :-

¶20

Any dispute or difference which may at any time arise between the parties hereto As to the construction meaning or effect hereof or as to any clause, matter or thing Herein contained or as to the rights or liabilities of the parties hereunder shall. If can not be amicably resolved, be referred to Arbitration under and in accordance with and subject to provisions of the Arbitration and Conciliation Act, 1996 or any statutory modifications or re-enactment thereof any the award's is any such arbitration shall be made rule of the High Court of Judicature at Chennai. The Venue of such Arbitration shall be in Chennai.

¶21

Clause 4 of the said agreement provides for period of payment to be made within 30 to 45 days from the date of delivery. It was provided that the said agreement may be varied from time to time by mutual agreement.

¶22

On 25^th May, 2006 an agreement was entered into between the defendants herein and M/s.Ruby Biotech Private Limited, a sister-concern of the plaintiffs. Under the said agreement, the said company agreed to sell the product viz. trabical on the terms and conditions recorded in the said agreement. Even the said agreement contained an arbitration clause recorded in paragraph 13.

¶23

Learned counsel appearing on behalf of the defendants submit that various supplies are effected by the plaintiffs from time to time based on these two agreements. Disputes if any having arisen between the plaintiffs and the defendants, parties are thus required to be referred to the arbitration in view of

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section 8 of the Arbitration and Conciliation Act, 1996. Defendants filed Notice of Motion (661 of 2010) in this summary suit under section 8 of the Arbitration and Conciliation Act, 1996 for referring the parties to the arbitration. In the said Notice of Motion, defendants had annexed a copy of the agreement entered into between the sister-concern of the plaintiffs and the defendants. By an order dated 28^th November, 2011 passed by this court, this court recorded the statement made by the learned counsel of the defendants that the said agreement was not between the parties to the suit and in the light of the said statement, defendants sought liberty to withdraw the said Notice of Motion with liberty to file fresh Notice of Motion. This court by the said order dismissed the said Notice of Motion as withdrawn with liberty as prayed for.

¶28

Learned counsel appearing for the defendants placed reliance on the judgment of the Supreme Court in case of Branch Manager, M/s.Magma Leasing & Finance Ltd. and Another vs. Potluri Madhavilata and Another reported in AIR 2010 SC 488 in support of his submission that since arbitration agreement is recorded between the parties, dispute if any, between the parties has to be referred to the arbitration and this suit is not maintainable. Paragraphs 22 to 24 of the said judgment reads thus :-

¶29

An analysis of Section 8 would show that for its applicability, the following conditions must be satisfied: (a) that there exists an arbitration agreement; (b) that action has been brought to the court by one party to the arbitration agreement against the other party; (c) that the subject matter of the suit is same as the subject matter of the arbitration agreement; (d) that the other party before he submits his first statement of the substance of the dispute, moves the court for referring the parties to arbitration; and (e) that along with the application the other party tenders the original arbitration agreement or

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duly certified copy thereof.

¶34

Section 8 is in the form of legislative command to the court and once the pre-requisite conditions as aforestated are satisfied, the court must refer the parties to arbitration. As a matter of fact, on fulfillment of conditions of Section 8, no option is left to the court and the court has to refer the parties to arbitration.

¶35

There is nothing on record that the pre-requisite conditions of Section 8 are not fully satisfied in the present case. The trial court, in the circumstances, ought to have referred the parties to arbitration as per arbitration Clause 22.

¶36

Mr.Jain, learned counsel appearing for the plaintiffs on the other hand submits that agreement dated 25^th May, 2006 is admittedly entered into between the another company and the defendants. It is submitted that when these facts were brought to the notice of this court in the earlier notice of motion taken out by the defendants, that Notice of Motion was withdrawn with liberty to file fresh Notice of Motion. It is submitted that after withdrawing the said Notice of Motion, defendants have not only annexed copy of the agreement between the plaintiffs and the defendants but also has annexed copy of the agreement between M/s.Ruby Biotech Private Limited and the defendants in this Notice of Motion.

¶37

As far as agreement dated 26^th May, 2006 which is entered into between the plaintiffs and the defendants is concerned, it is submitted by the learned counsel that one of the invoice which is subject matter of the summary suit was issued by the plaintiffs even much prior to the date of the said agreement dated 26^th May, 2006. Learned counsel would submit that all the supplies effected by the plaintiffs to the defendants which are subject matter of various tax invoices and are subject

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matter of this suit are issued not under any of these two agreements but are independent transactions. In support of this plea, learned counsel invited my attention to the invoices which are annexed to the plaint which do not refer to agreement dated 26^th May, 2006 entered into between the plaintiffs and the defendants.

¶42

Learned counsel also submits that in the said agreement dated 26^th May, 2006, there is no provision for payment of interest. It is submitted that the said agreement dated 26^th May, 2006 records the terms and conditions including the name of the product and the rate whereas the tax invoices which are issued by the plaintiffs for the goods in question are not under the said agreement entered into between the parties. It is submitted that the claims which are subject matter of this suit are not based on the agreement entered into between the parties but are an independent transactions.

¶43

Mr.Jain placed reliance on the judgment of the Supreme Court in case of Sukanya Holdings (P) Ltd. vs. Jayesh H.Pandya and another reported in (2003) 5 SCC 531 in support of his submission that if it is not possible to bifurcate the subject matter of the suit with the claim which may be arising out of the arbitration agreement, court cannot refer parties to arbitration under section 8 of the Arbitration and Conciliation Act, 1996. Paragraphs 16 and 17 of the said judgment reads thus :-

¶44

The next question which requires consideration is-even if there is no provision for partly referring the dispute to arbitration, whether such a course is possible under Section 8 of the Act? In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action that is to say the subject matter of the suit or in some cases

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bifurcation of the suit between parties who are parties to the arbitration agreement and others is possible. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation of the subject matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it follows that bifurcation of the subject matter of an action brought before a judicial authority is not allowed.

¶49

Secondly, such bifurcation of suit in two parts, one to be decided by the arbitral tribunal and other to be decided by the civil court would inevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing the cost of litigation would be frustrated by such procedure. It would also increase the cost of litigation and harassment to the parties and on occasions there is possibility of conflicting judgments and orders by two different forums.

¶50

It is not in dispute that agreement dated 25^th May, 2006 is not between the plaintiffs and the defendants. Earlier Notice of Motion in which reliance was placed by the defendants on the agreement dated 25^th May, 2006 was allowed to be withdrawn with liberty to file fresh Notice of Motion after accepting the submission made by the learned counsel appearing for the defendants that the said agreement was not between the parties.

¶51

In so far as agreement dated 26^th May, 2006 is concerned, on perusal of the terms and conditions of the said agreement and the invoices which are subject matter of this summary suit, it is clear that the terms and conditions incorporated in the invoices between the plaintiffs and the defendants are different than the terms and conditions recorded in the agreement dated 26^th May, 2006 entered into between the parties. Plaintiffs have also made claims in respect of other products

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which are not referred to in the said agreement dated 26^th May, 2006. On perusal of these invoices, it is also clear that there is no reference to the agreement dated 26^th May, 2006 in any of the invoices annexed to the plaint.

¶56

In the judgment of the Supreme Court in case of Branch Manager, M/s.Magma Leasing & Finance Ltd. (supra) , it is held that one of the conditions for referring the parties to the arbitration under section 8 of the Arbitration and Conciliation Act, 1996 is that not only the action brought to the court by the arbitration agreement is against other party against the arbitration agreement but the subject matter of the suit also shall be the same as the subject matter of the arbitration agreement. In my view, since the claim made in the summary suit is based on the invoices which are not issued under the agreement dated 26^th May, 2006 entered into between the parties which records the arbitration agreement, mandatory condition under section 8 of the Arbitration and Conciliation Act is not satisfied. In my view parties to this suit thus cannot be referred to the arbitration.

¶57

On perusal of the invoices annexed to the plaint which are subject matter of the suit, it is clear that none of these invoices are based on any of the agreements whether dated 26^th May, 2006 or 25^th May, 2006. In my view subject matter of this suit is not the subject matter of arbitration agreement as the invoices issued and goods sold are not under agreement dated 26^th May, 2006 which contained arbitration agreement.

¶58

Even if, an attempt is made to bifurcate the transactions which are subject matter of this suit proceedings on the premise that supplies are effected by the plaintiffs based on the agreement dated 26^th May, 2006 entered into between the plaintiffs and the defendants and the agreement dated 25^th May, 2006 entered into

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between the sister-concern of the plaintiffs and the defendants, it is not possible to split the claim made by the plaintiffs in the suit and thus parties cannot be referred to the arbitration under section 8 of the Arbitration and Conciliation Act, 1996.

¶63

In so far as agreement dated 25^th May, 2006 is concerned, even if it is assumed for the sake of argument that any item which is referred in the said agreement dated 25^th May, 2006 are sold by the plaintiffs to the defendants and can be bifurcated, in my view since the plaintiffs are not party to the said agreement dated 25^th May, 2006 which records the arbitration agreement, that agreement recorded between the parties to the said agreement cannot be extended in respect of the dispute if any having arisen between the plaintiffs and the defendants in this suit in accordance with section 7 of the Arbitration and Conciliation Act, 1996.

¶64

In my view, Notice of Motion is thoroughly misconceived and is dismissed There shall be no order as to costs.

¶65

[R.D. DHANUKA, J.]

Rubyorganics Pvt. Ltd. v. Sai Mirra Innopharm Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Rubyorganics Pvt. Ltd. v. Sai Mirra Innopharm Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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