Dismissed

Trivitron Health Care Pvt. Ltd. v. Fresenius Medical Care

Madras HC5 Oct 2010OA/153/2010

Case brief

AI extract

What is this about?

This court dismissed applicants' applications under Section 9 of the Arbitration and Conciliation Act for lack of jurisdiction, ruling that a choice of German substantive and procedural law impliedly excluded the Act's operation.

What did the court decide?

All applications (O.A.No.153 and A.Nos.758 to 760 of 2010) are dismissed. No costs.

Trivitron Health Care Pvt. Ltd. Vs Fresenius Medical Care — Arbitration | Madras HC (2010)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED: 20/04/2011

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CORAM

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THE HON'BLE MR.JUSTICE VINOD K.SHARMA

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O.A.No.153 of 2010 and A.Nos.758 to 760 of 2010

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ORDER :

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VINOD K.SHARMA.J.,

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This order shall dispose off O.A.No.153 of 2010, A. Nos. 758 to 760 of 2010, moved by M/s. Trivitron Health Care Pvt. Ltd.

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In O.A.No.153 of 2010, the prayer made is to pass an order of injunction, restraining the respondent to do any business by themselves or by appointing any new distributor during the period and pass such further or other orders as this Hon'ble Court may deem fit and proper in the circumstances of the case.

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In A.No.758 of 2010, the prayer made is to direct the respondent to pay to the applicant the undisputed amount of US$1,50,378.96/- (US Dollar One Lakh Fifty Thousand Three Hundred Seventy Eight and Ninety Six Paise only), the commission amount under the agreement or in the alternative deposit the same till final disposal of the application.

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In A.No.759 of 2010, the prayer made is to pass an order directing the respondent to furnish security to the tune of US$4,18,503.96/- (US Dollar Four Lakhs Eighteen Thousand Five Hundred Three and Ninety Six paise only) to the satisfaction of the applicant within a time to be fixed by this Court.

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Whereas, in A.No.760 of 2010, the prayer made is to direct the respondent to furnish the account statements from the period January 2009 till date within a time to be fixed by this Court.

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The applicant commenced his business in the year 1997 with a view to provide solutions to specialists in healthcare with world-class MT products and services. The applicant is the largest medical technology brand of Indian origin and the only company providing 3600 healthcare solutions in all the five segments of medical technology i.e. Medical Equipment, Medical Devices, Diagnostics, Consumables and Healthcare IT. The applicant has 20 offices across the country at Chennai, New Delhi, Coimbatore, Pondicherry, Hyderabad, Chandigarh, Nagpur, Ahmedabad, Cochin, Lucknow, Jaipur, Bangalore, Kolkata, Pune and Mumbai.

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There are 200 distributors / dealers in India and 400 professional employees providing 24 hours helpline for technical support and best office logistics and customer support infrastructure in all office locations. The applicant also has office at Sri Lanka, Nepal and UAE and are taking steps to enter market in Africa and South East Asian markets. The applicant company was marketing their products to various consumers throughout India initially by themselves and later on by appointing

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distributors.

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The respondent company M/s.Fresenius Medical Care Deutschland Gmbh, approached the applicant in the year 1999, with an offer for exclusive distribution in respect of respondent company's Haemodialysis products, which includes HD machines, dialysers, blood tubings and acute therapy CRRT machines and consumables. An agreement was executed in December, 1999, initially for a period of three years, which was periodically renewed. Last renewal was on 22.03.2006.

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The agreement provided as under:

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"a. The agreement was entered into with exclusive right to distribute the products only mentioned in the agree ment as contractual product.

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b. The agreement was exclusively for distribution in contractual territory i.e. India south (Tamilnadu, Pondicherry, Kerala, Andhra Pradesh and Karnataka, India West (Mumbai, Maharastra, Goa and Gujarat and Srilanka).

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c. The agreement provides for exclusive prohibition in clause 5 with regard to competitive products.

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d. The agreement also provides a clause for commission.

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e. The agreement provides for arbitration clause under clause 9(4) in case of any dispute."

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The agreement executed between the parties provided that the agreement was to be exclusively construed and governed by the laws of the Federal Republic of Germany. Clause 9(2) and 9(4) of the agreement reads as under:

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9 (2) Applicable law

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a) The agreement is exclusively construed and governed by the laws of the Federal Republic of Germany. The version in English language is the original text and generally authoritative in case of disputes arising from the Agreement or its interpretation.

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b) As far as there is no other arragement and it does not inflict with binding law, business between Manufacturer and Distributor is done exclusively according to the standard business conditions of Manufacturer which apply in the current version and which Manufacturer uses as a basis for his business with other customers; the current standard business conditions of Manufacturer are attached to this Agreement as enclosure-7.

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It is understood between the contractual parties that � even if Manufacturer expressively refers to his standard business conditions � those are insignificant for the contractual relationship with Distributor and that exclusively the standard business conditions of Distributor are authoritative.

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9(4) Arbitration Clause

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a) The parties agree concurrently that the arbitration agreement is a commercial business for both parts and that none of the parties is engaged in trades according to Article 4 HGB (German Commercial Code).

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b) All legal actions from this agreement shall be finally decided by the following arbitration court under exclusion of a court of law. The arbitration is also liable for the decision whether this Agreement is valid.

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c) The arbitration court consists of two arbitrators and one umpire. All three persons must be qualified to exercise the functions of a judge. They must not be partners and/or in a top position at one of the contractual parties.

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d) Each party names an arbitrator. The party petitioning arbitration notifies the counterpart by registered mail of the appointment of an arbitrator stating his case and requests the other party to appoint his arbitrator within two weeks. The term commences with the day of the mailing of the registered mail at the post office.

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e) If the adverse party does not meet the request in due time the President of the Handelskammer Frankfurt am Main (Chamber of Commerce Frankfurt am Main) appoints on the request of the petitioning party an arbitrator for the defaulting party.

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f) Several persons on the one or the other side must agree upon one arbitrator.

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g) The arbitrators appoint an umpire. If this is not effected within two weeks from the appointment of the last of the two arbitrators, the President of the Handelskammer Frankfurt am Main (Chamber of Commerce Frankfurt am Main) appoints an umpire on the request of one of the parties the umpire.

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h) If one arbitrator is no longer available, the party which appointed him shall appoint another arbitrator and inform the adverse party by registered mail with advice of delivery.

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If the party fails to honour this obligation d) applies accordingly. If the umpire is no longer available, f) applies accordingly.

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i) The arbitration court is seated at the location of Manufacturer. The responsible Landgericht (German regional court) is also responsible in the sense of Article 1050 ZPO (German Code of Civil Procedure).

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j) The arbitration court proceeds according to Article 1042 ZPO (German Code of Civil Procedure), in other respects the procedure is formed at the court's complete discretion.

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k) The umpire has the position of president of the arbitration court. He shall give written notice to the parties about the constitution of the arbitration court and shall require the petitioning party to lodge a complaint including possible exhibits within two weeks in two office copies for the adverse party and/or his attorney to represent the party in action and one copy for each the arbitrator and the umpire, by registered mail/advice of delivery. The umpire is responsible for the preparation of the proceeding. He arranges the dates after consulting with the parties and/or their litigation agent, invites them for the oral hearing by registered mail, provides for a recording clerk, leads the oral hearings by voting and shall render a written award seting forth reasons.

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l) The arbitration court ought to, if possible, produce a settlement by arbitration between the parties.

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m) The arbitral award must be signed by the arbitrators and the umpire personally under indication to the place and the time. Five original copies have to be issued at least.

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n) The arbitration court decides about the costs of the arbitration proceeding according to Article 91 ZPO (German Code of Civil Procedure).

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o) The arbitration court fixes the value of the matter in dispute on its complete discretion.

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p) The arbitration court fixes in confirmity with the arbitration decision the costs of the unsuccessful to the successful party.

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q) The fees of the attorney are according to the applicable German laws.

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r) When constituting the arbitration court the arbitrators give full power to the umpire to serve the arbitration on the parties and/or their representatives and after this service to lay it down at the registry of the Landgericht (German regional court) responsible for the seat of Manufacturer. The umpire proceeds accordingly."

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The case of the applicant is that the revenues and business during the pendency of the agreement increased from 3 crores in 2000 to Rs.36.50crores in 2008-2009, due to hardwork of the applicant. The applicant, under the agreement, is entitled to the commission on the sale effected. The amount due to the applicant towards commission is US$1,50,378.96/- (US Dollar One Lakh Fifty Thousand Three Hundred Seventy Eight and Ninety Six paise only), which is admitted by the respondent in the account statement summary dated 12.03.2009.

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The applicant, after supply, was necessarily to maintain the machine during the warranty period and extended warranty period and in order to fulfill this obligation entered into Annual Maintenance Contract with the consumer, so as to maintain the machinery in workable condition. The maintenance contract is exclusive between the applicant and the customers. It is admitted that the respondent is not a party to this agreement.

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It is the case of the applicant that under Clause-12 of the agreement executed between the parties, that repairs and services fell exclusively on the applicant, as it was not for the manufacturer to maintain the equipment.

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The amount due under maintenance contract is US$76,000/- (US Dollar Seventy Six Thousand only), which is apart from the outstanding receivable for the supplies amounting to US$ 1,92,125/-( US Dollar One Lakh Ninety Two Thousand One Hundred Twenty Five only).

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The agreement was terminated on 31.12.2008. The case of the applicant is that though the respondent agreed to be fair in settlements of the account, it has deliberately refused to pay the commission amount, and illegally took over the maintenance contract, without being assigned by the applicant, that too, in absence of distributor agreement between the applicant, its customer and the respondent, empowering the respondent to carry out the maintenance for the balance period. The respondent is deducting the amount towards maintenance charges from the commission payable to the applicant, thereby depriving the applicant the payment due to it.

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It is under these conditions, that the applicant filed the applications referred to above, under Section 9 of the Arbitration and Conciliation Act.

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The applications are opposed by the respondent on the ground that this Court has no jurisdiction to entertain and try these applications, as by implication, the parties agreed to exclude part-1 of the Arbitration and Conciliation Act, as substantive as well as procedural law is governed by the Republic of Germany.

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In view of the law laid down by this Court in O.A.Nos.155 to 157 of 2011 (Financial Software & Systems Pvt.Ltd. vs. ACI Worldwide Corp.) decided on 12.04.2011, this Court will have no jurisdiction to entertain and try these applications, as parties to agreement have made substantive law of Republic of Germany to be applicable to agreement and also accepted the procedural law and seat of arbitration to be at Germany, which means that impliedly, parties had agreed to exclude the

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operation of part-1 of the Arbitration and Conciliation Act.

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Mr.M.Kabir, learned Senior Counsel, appearing on behalf of the applicant, vehemently contended that reading of arbitration clause reproduced herein above, does not exclude part-1 of the arbitration and conciliation act, therefore, keeping in view the fact that sales of equipment took place in India, and the annual maintenance contracts were also entered into in India, therefore, in view of the law laid down by the Hon'ble Supreme Court in Bhatia International vs. Bulk Trading S.A. and another, [2002 (4) SCC 105], Venture Global Engineering vs. Satyam Computer Services Ltd and another, [2008 (4) SCC 190], and the judgment of the Hon'ble Delhi High Court in the case Shin Satellite Public Company Limited vs. Jain Studios Limited, [2008 (Suppl.2) Arb.LR242 (Delhi)], the judgment of the Hon'ble Bombay High Court in the case of Perma Container (UK) Line Ltd vs. Perma Container Line (India) Pvt. Ltd. and Ors. [2010 (2) Arb. LR 133 (Bombay)] of (supra), Indtel Technical, the provisions of Section 9 of the Arbitration and Conciliation Act would be applicable, and this Court has the jurisdiction to entertain and try present applications.

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This contention of the learned Senior Counsel cannot be accepted. This Court, in the case of Financial Software & Systems Pvt.Ltd. vs. ACI Worldwide Corp.) (supra) has considered the judgment of the Hon'ble Supreme Court in the case of Bhatia International vs. Bulk Trading S.A. and another, (supra) and Venture Global Engineering vs. Satyam Computer Services Ltd and another,while holding that when substantive and procedural law is of foreign countries, then part-1 of the Arbitration and Conciliation Act would impliedly stand excluded.

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In the case of Shin Satellite Public Company Limited vs. Jain Studios Limited, (supra), the Hon'ble High Court of Delhi, did not consider the issue involved in this case. The reading of judgment of the Hon'ble Delhi High Court shows that application, under Section 9 was entertained, as there was no express or implied exclusion of part-1 of the Act or any other provisions, therefore, the judgment of the Hon'ble Delhi High Court would have no application to the facts of the present case.

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Similarly, the Hon'ble High Court of Bombay, in the case of Perma Container (UK) Line Ltd vs. Perma Container Line (India) Pvt. Ltd. and Ors. (supra), has not taken note of the judgment of the Hon'ble Supreme Court in the case of Dozco India P.Ltd. vs. Doosan Infracore Co. Ltd, therefore, is to be treated as per incuriam. In any case, the judgment would not be binding on this Court, in view of the law laid down by this Court in the case of Financial Software & Systems Pvt.Ltd. vs. ACI Worldwide Corp. (supra).

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An attempt was made by the learned Senior Counsel to contend, that judgment of the Hon'ble Supreme Court in the case of Dozco India P.Ltd. vs. Doosan Infracore Co. Ltd, was the case where the Court was dealing with the application under Section 11 of the Arbitration and Conciliation Act and did not consider the jurisdiction of the Court under Section 9 of the Act, therefore, would be incuriam.

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This contention of the learned Senior Counsel deserves to be noticed to be rejected for the reason that the Hon'ble Supreme Court categorically laid down, that in case substantive law as well as procedural law is agreed to be of the foreign country, then it would amount to implied exclusion of part-1 of the Arbitration and Conciliation Act. Therefore, application under Section 9 of the Act would also not be maintainable.

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Learned Senior Counsel for the applicant also contended that there is no dispute with regard to US$1,50,378.96/- (US Dollar One Lakh Fifty Thousand Three Hundred Seventy Eight and Ninety Six Paise only), as this amount is admitted by the respondent to be payable, therefore, there is no question of invoking arbitration under the agreement dated 22.03.2006, and the dispute in that case

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would fall under the annual maintenance contract, and the performance guarantee, therefore, this Court would have the jurisdiction, as the jurisdiction under maintenance contract is of this Court.

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This contention again is totally misconceived. In absence of invoking of arbitration clause, under agreement dated 22.03.2006, no application under Section 9 of the Arbitration and Conciliation Act would be competent, as the orders for interim measure under Section 9 can be passed only, in the pending arbitration proceedings or intended arbitration proceedings.

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As regard the annual maintenance contract is concerned, the respondent is not the party to said contract, therefore, in absence of arbitration agreement between the parties, there could be no arbitration, with regard to any dispute under annual maintenance contract between the parties. In absence of jurisdiction of arbitral tribunal to entertain the dispute under agreement, will also bar to filing of the application under Section 9, as pre-requisite for maintaining the petition under Arbitration and Conciliation Act, is the existence of arbitration agreement.

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Even if the sake of argument, the respondent has taken to be the third party qua the maintenance contract, still the dispute with respondent, if any, has to be governed by the agreement entered into between the parties, which is governed by substantive or procedural laws of Germany, thus ousting the jurisdiction of this Court.

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The pleadings in the applications also show that the respondent is acting on the rights vested under agreement executed between the parties dated 22.03.2006, whether the respondent could act in the manner complained of, is to be determined by the arbitrations under the agreement, qua which this Court has no jurisdiction.

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VINOD K.SHARMA,J., ar

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Consequently, holding that this Court has no jurisdiction to entertain these applications, all the applications are ordered to be dismissed. No costs.

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20.04.2011 Index: Yes Internet: Yes ar

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O.A.No.153 of 2010 and A.Nos.758 to 760 of 2010

Trivitron Health Care Pvt. Ltd. v. Fresenius Medical Care

Case brief

What is this about?

What did the court decide?

Trivitron Health Care Pvt. Ltd. v. Fresenius Medical Care

Case brief

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