Allowed

Rti Austria Gmbh v. M/S.Shriram Epc L

Madras HC15 Feb 2018A/6421/2017

Case brief

AI extract

What is this about?

The applicant sought security for undisputed debt arising from a pre-bid agreement. The court held the Madras High Court was the correct forum for the Section 9 application based on the respondent's registered office in Chennai, distinguised conflicting case law, noted admitted liability via correspondence, and granted a four-week order to furnish security by bank guarantee or immovable property p

What did the court decide?

Respondent directed to furnish security of 210,000 Euros by bank guarantee or immovable property within four weeks, valid till arbitration concludes.

Rti Austria Gmbh Vs M/S.Shriram Epc L — Arbitration | Madras HC (2018)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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(ORDINARY ORIGINAL CIVIL JURISDICTION) THURSDAY THE 15TH DAY OF FEBRUARY 2018 THE HON'BLE DR. JUSTICE ANITA SUMANTH

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A. No.6421 of 2017

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In the matter of Arbitration and Conciliation Act, 1956 (Act 20 of 1990);

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And

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In the matter of Pre-Bid Agreement dated 27.03.2012 between M/s. Shriram EPC Limited and RTI Austria GmbH (Formerly known as Rabmer Rohrtechnik GmbH and Sekisui SPR Austria GmbH)

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RTI Austria GmbH Formerly known as Rabmer Rohrtechnik GmbH And also as Sekisui SPR Austria GmbH) Having registered office at Bruckbachweg 23A-4203 Altenberg Bei Linz Austria Represented by its Authorized Signatory Mr.Manfred Sieghartsleitner : Applicant

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Vs.

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M/s. Shriram EPC Limited Sigappi Achi Building 4th Floor, 18/3, Rukmini Lakshmipathy Road Egmore, Chennai 600 008 Also having office at

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309-10-11, DLF Chennai City Court Near Shikanderpur Metro Station Gurgaon, Haryana 122002. :Respondent

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Application praying that this Hon'ble Court be pleased to pass orders directing the respondent to furnish security to an extent of Rs.1,54,41,475.61/(Euros 210,000/- due and payable by the Respondent to the applicant in respect of the royalty charges payable to the Applicant under the pre-bid agreement dated 27.03.2012.

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This application coming on this day before this court for hearing the court made the following order:-

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The applicant is incorporated under the laws of Austria, engaged in the areas of civil engineering, specifically inspection, cleaning, repair and the trenchless rehabilitation of pipeline networks of all kinds. The respondent is a company providing project management and engineering, procurement and

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construction services in the area of water infrastructure, mining and mineral power and metallurgy.

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A tender was floated by the Delhi Jal Board in

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2012 for the 'Rehabilitation of Two Sewers at Rohthak Road by CIPP Structural Lining Method' (in short, 'the project'). The respondent identified the applicant

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herein as having the necessary technical expertise and

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know-how to complete the project and approached the applicant to provide the expertise in this regard in order that the respondent may participate in the tender.

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A consortium thus came to be formed as between the applicant and the respondent for collaborating upon and participating in the project. A pre-bid agreement was executed on 27.03.2012.

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Clause 3.2 of the agreement provides for 3% to

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be paid by the respondent as a royalty for the support to be extended by the applicant.

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The said clause reads as follows:

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'3. OBLIGATIONS OF THE PARTIES........

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3.1.....

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3.2. For the support the Joint Venture will offer a royalty commission of 3% to RABMER for their support to participate and win this tender. As minimum amount a fee of 210.000 € is agreed .......'

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Invoices dated 19.05.2014 and 31.05.2016 have

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been raised by the applicant calling upon the respondent to remit the royalty of € 36,000.00 and €

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174,000.00 respectively, but there have been defaults in the settlement of the same.

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The agreement between the parties provides for

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resolution of disputes by way of arbitration in terms of Clause 10 reading as follows:

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'DISPUTES

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In the event of any disputes between the PARTIES under the AGREEMENT such disputes shall be settled if possible by amicable negotiations. If settlement can not be reached by negotiation than the dispute shall be referred solely and exclusively to arbitration for the final and binding decision as soon as the proceeding party has expressly informed in writing the other parties of its decision to start arbitration proceedings.

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One or more arbitrators appointed in accordance with the said rules shall finally settle all disputes arising out of and connection with this agreement under the rule of consolation and arbitration of the international chamber of commerce.

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The Arbitration shall take place at India. The Arbitration shall be conducted in English language and the same decision shall define about cost and expenses to be borne in respect of the proceedings.

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The parties shall continue to full fill their obligations borne by the contract and Agreement during the arbitration.

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While SHRIRAM shall act as CONSORTIUM representative and counter-part of CLIENT for all the communication between the CONSORTIUM and the same CLIENT, the same representative may however, authorize any PARTY or PARTIES to communicate directly with the CLIENT in relation to dispute arising upon their own responsibility.

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In such case the PARTY or PARTIES concerned shall promptly send to the CONSORTIUM LEADER copies of all the correspondence to and from CLIENT.'

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This application seeks a direction to the respondent to furnish security for an amount of €210,000 or Rs.1,54,41,475.61 due and payable in respect of royalty charges under the terms of pre-bid agreement dated 27.03.2012.

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Heard the submissions of

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Mr.P.V.Balasubramaniam, learned counsel for the

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applicant and Mr.Suresh, learned counsel appearing for the respondent and carefully perused the documents and case law.

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Mr.Suresh, at the outset, would contest the

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maintainability of the application. The contract stipulates the seat of arbitration to be India. Since the cause of action arose in Delhi, the appropriate Courts to hear the application, according to Mr.Suresh, are the Courts at Delhi.

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Mr.Balasubramaniam would argue that the respondent has its registered office in Chennai and as

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such the present application is maintainable.

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On merits, the case of the applicant is that the outstanding as per invoices dated 19.05.2014 and

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31.05.2016 for amounts of € 36,000 and € 174,000 are

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admitted liabilities.

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Learned counsel for the applicant draws my attention to a series of correspondences between the parties, where the respondent has not only admitted the liability but has been continuously seeking time for repayment. While accepting liability for € 36,000, Mr.Suresh objects to the demand for € 174,000 stating that the parties were in the process of negotiating a settlement of the liability of the respondent.

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Having heard the learned counsel, my decision on the matter is as follows:

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As regards the aspect of maintainability, Clause 10 of the agreement between the parties only fixes the seat of Arbitration to be India without specifying a specific Court within India as being the competent Court to entertain the application. The principles governing the determination of appropriate Court as set out Section 15 to 20 of the Civil Procedure Code would thus have to be imported to the present matter to determine the appropriate court to hear and adjudicate upon the application. (See Shinago Holdings Private

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Limited V. M.Ethiraj (2017 (5) CTC 430). There is no dispute thus far.

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The contention of the respondent is that the Courts in Delhi would be the more appropriate Courts to hear the matter seeing as the project was both awarded and executed in Delhi. However, the respondent, which is named as a lead partner of the consortium in the Joint Venture Agreement dated 05.12.2012 that demarcates the roles as between the parties, has its registered office in Egmore, Chennai.

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In the present case, in accordance with the

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clause for arbitration, the India office of the International Chamber of Commerce has been approached for initiating proceedings for arbitration. This does nor however throw any light on the case of either party as to whether the seat would be Chennai or Delhi and such decision would have to be arrived at applying the settled position in law as discussed below.

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The Supreme Court in the case of Indus Mobile Distribution Private Limited V. Datawind Innovations Private Limited and others ( (2017) 7 SCC 678), wherein, the Supreme Court extracts from a judgment of the

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Constitutional Bench of the Supreme Court in the case

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of Bharat Aluminum Company V. Kaiser Aluminium Technical Services Inc. ((2016) 4 SCC 126), reiterates the settled position that in proceedings for arbitration two Courts would have jurisdiction: one, the Court in the place where the proceedings for arbitration are conducted and two, the Court where the cause of action arose.

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The seat of the proceedings for arbitration await the decision of the ICC in Delhi and upon commencement thereof, such seat of Arbitration will determine one appropriate Court.

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As regards the cause of action, the project has been awarded and executed in Delhi under the supervision of the project office of the consortium. However, the registered office of the respondent, admittedly, is in Chennai. The joint venture agreement that designates the respondent as the lead partner of the consortium sets out the legal name and address of the lead partner to be Shriram EPC Ltd (SEPC), Sigappi Achi Building, Door No.18/3, 1^st Floor, Rukmani Lakshmipathi Road (Marshall Road), Egmore, Chennai – 600 008, India with the address of the project office

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hand written thereunder. However, it is not disputed by the respondent that its registered office is located at Chennai. Accordingly, this Court has jurisdiction to hear the matter and the application is, consequently, held to be maintainable.

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The Calcutta High Court in Hukum Raj Sajjan Raj Kumbat V. E'L Dorado Guarantee Limited ( (2002) 2 CALLT431(HC) and the High Court of Delhi in Sthapati Engineers and Builders V. Central Building Research Institute and Anr. (1997 (1) ARBLR 533 (Delhi)) have also taken a similar view in regard to the above issue.

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Mr.Suresh relies on a decision of the Division Bench of this Court in Dynasty Developers Private Limited V. Jumbo World Holdings ( AIR 2008 Mad 119). The decision, at paragraph states as follows:

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'19.......Moreover, the learned Judge was much concerned and swayed by the words 'if the same had been the subject matter of the suit' appearing in Section 2(1)(e) of the Act. According to the learned Judge the leave would

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be necessary in case this Court has jurisdiction over the part of the cause of action only and as no suit could be filed without leave, no application under the Act under the similar circumstances could be

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entertained without leave under Clause 12 of the Letters Patent. The analogy of 'suit' given in Section 2(1)(e) of the Act only gives us guideline to find out the right court. The word 'suit' acts as an indicator and points out which court will be competent court to entertain the application under the Act. Section 2(1)(e) does not treat an 'application' under the Act as a 'suit' and the application under the Act remains an application. As a matter of fact, if a civil suit is filed covering the subject matter of an arbitration agreement, the Act makes it obligatory for the Court to refer the parties to arbitration in terms of the arbitration agreement. Therefore, it cannot be contended that the Act intended that an application under the Act and the civil suit should be treated on the same footing. It has been consistently held that the applications under the Arbitration Act cannot be equated with civil suit......'

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The observations of the Division Bench as extracted above have been rendered in the context of whether leave to sue has to be obtained by an applicant in the filing of an application under section 9 of the Act. The relevance of the above observations have to read in context with the judgments of the Supreme Court in the case of BALCO and Indus as extracted above. Even so, the proper Court having jurisdiction to

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entertain the present application would continue to be

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the Madras High Court and this case really does not advance the case of the respondent.

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As regards the merits, two invoices have been raised, the first dated 19.05.2014, for a sum of € 36,000.00, being 3% of the technical fee in accordance with item 4.1 of the agreement dated 27.03.2012 and the other dated 08.06.2016 for a sum of € 174,000.00, both amounting to € 210,000 being the minimum royalty stipulated under the Agreement.

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Some of the correspondences exchanged between the parties is extracted below and leave me in no doubt that liability of the respondent to the extent of € 210,000 has been admitted.

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E-mail dated 05.08.2015 is as follows:

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'Von:Srikanth V [mailto:[email protected]] Gesendet:Mittwoch, 05.August 2015 13:01 An:Manfred Sieghartsleitner<Manfred [email protected]> Cc:'Chandrasekaran R S'[email protected]; 'sriramraju' < [email protected]>; 'Ramal Ramal' [email protected] Betreff:RE:Royalty payment before 2^nd week of July

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Dear Manfred,

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Sorry for the belated reply. I was on travel too. We have had a rough time the last couple of months with some very weak inflows with the banks also tightening the screws. However we anticipate some quantum improvements in the coming weeks. Request you please to give us a further fortnight's time to make the remittance.

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Srikanth'

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Then again, e-mail dated 02.12.2015 reiterates

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the admission as follows:

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'Von:Srikanth V [mailto:[email protected]] Gesendet:Mittwoch, 02. Dezember 2015 09:59 An:Manfred Sieghartsleitner<Manfred [email protected]> Cc: [email protected]; [email protected]; [email protected] Betreff:Re:Royalty payment before 2^nd week of July

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Dear Manfred,

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We earnestly intend to settle your dues. We are going thru a prolonged rough time. Please trust us and give us some more time. We will ensure that the whole amount is settled progressively by March 2016. Thanks and regards Sent from my BlackBerry 10 smartphone.' 25. The respondent, on 03.03.2016 assures part payment in the second week of April 2016 in the following terms:

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'Von:Srikanth V [mailto:[email protected]] Gesendet: Donnerstag,03. Marz 2016 13:10 An:Manfred Sieghartsleitner<Manfred.Sieghartsleitner@se kisuispr.com> Cc: [email protected]; [email protected]; [email protected] Betreff:Re:Royalty payment before 2^nd week of July Dear Manfred,

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We will start with some payment in the 2^nd week of April and square of the balance (amount to be agreed upon after making the first payment, as indicated by you earlier) within six months thereof. Srikanth'

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Pursuant to the receipt of letter dated 08.06.2016 reiterating the demand vide invoices dated 19.05.2014 and 31.05.2016 for an amount of €210,000, further re-assurance for payment is made by the respondent, as evidenced by e-mails dated 24.08.2016 and 04.10.2016, as follows:

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'Von:Srikanth V [mailto:[email protected]] Gesendet: Mittwoch, 24. August 2016 10:19 An:Manfred Sieghartsleitner<manfred.sieghartsleitner@r ti.eu> Cc: [email protected] R sc[email protected]; Sriram ED [email protected]; [email protected]; [email protected] Betreff:Re: WG: Payment default Dear Manfred, We have discussed this internally and have taken a positive view towards this. We are going through a restructuring process which will conclude end September. We are extremely sorry to have not responded to your recent mails. We shall revert with a concrete schedule of payment shortly after the restructuring is completed. Please bear with us.

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Thanks and regards' 'Von:Srikanth V [mailto:[email protected]] Gesendet: Dienstag, 04, Oktober 2016 11:56 An:Manfred Sieghartsleitner<manfred.sieghartsleitner@r ti.eu>

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Cc: [email protected] R sc[email protected]; [email protected]>; [email protected]; [email protected] Betreff:Re: WG: Payment default Dear Manfred, Thanks for your wishes. The restructuring has been finalized as of Sep 2016. I am travelling as I write this mail. Will let you know the schedule when I am back next week and after consulting our CFO. Pl be rest assured that we will start paying up within this calendar year. I hope your word on renegotiating the dues still stands good. Thanks and regards Srikanth' 27. By mail dated 08.11.2016, the respondent, in fact, states that the payment of the first instalment has been initiated in the following terms:

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'Von:Srikanth V [mailto:[email protected]] Gesendet: Dienstag, 08, November 2016 10:05 An:Manfred Sieghartsleitner<manfred.sieghartsleitner@r ti.eu> Cc: [email protected] r sc[email protected]; [email protected]; [email protected] Betreff:Re: RE: Debt collection procedure Dear Manfred, I have invited your first installment. Awaiting for the fund allocation from finance department for this month. I will let you know on the balance schedule by the week end. Srikanth'

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In so far as no payment was forthcoming

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despite the assurance made on 08.11.16, the applicant sought details of the payment said to have been made

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vide emails dated 17.11.2016 and 24.11.2016. The

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respondents' reply is as follows:

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Am 25.11.2016 um 09:56 schrieb Srikanth Varadhan [email protected]:

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Sorry! Will provide on Monday.

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Pursuant to the above repeated efforts to recover the

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payments, the applicant wrote as follows:

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On 08-Dec-2016 4:52 PM, Manfred Sieghartsleitner [email protected] wrote:

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Dear Srikanth,

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Obviously and unfortunately, friendly communication with you doesn't lead to any results, you don't even bother to react to my e-mails.

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I will ask our debt collection agency to resume the debt collection procedure and get a lawyer for that. I'm really fed up now.

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Regards

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Mag.Manfred Sieghartsleitner Geschaftsfuhrender Gesellschafter Managing Director

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RTi Austria GmbH

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The following reply was then received from the respondent:

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Von: Srikanth Varadhan

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[mailto:[email protected]]

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Gesendet: Freitag, 09, Dezember 2016 06:10 An: Manfred Sieghartsleitner [email protected] Cc: Sriram ED [email protected]; [email protected]; [email protected];[email protected] Betreff:Re: Missing payment schedule/ Missing payments/ Missing reaction Dear Manfred,

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I am sorry I could not reply earlier. I have requested our finance department to release the first installment on top priority. We had some problems with our audit in booking your old invoice now as this involves FOREX which is being resolved now. Please hold any untoward action as we intend to pay up as indicated to you earlier and request you please to refrain from referring this account to the collection agency. I would request one final reprieve till this month end for us to pay the first installment. Thanks for patience. Srikanth

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Again a reminder and request for honouring the commitment was issued by the applicant on 02.01.17 to which the respondent states on 18.01.17 as follows:

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Von: Srikanth Varadhan [mailto:[email protected]] Gesendet: Mittwoch, 18 Janner 2017 05:11 An: Manfred Sieghartsleitner [email protected] Cc: Sriram ED [email protected]; [email protected]; [email protected]; [email protected]

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Betreff:Re: A W: Missing payment schedule/ Missing payments/ Missing reaction

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Will do by end of week sir.

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As there was no payment forthcoming as assured,

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the following communication was sent by the applicant on 25.01.2017:

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Dear Srikanth,

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How shall I assess this? You don't take me seriously, do you? I do have the impression that you are making fun of me. I won't accept this any much longer, you could at least have the decency to comment on the further delay which has taken place, and to keep your promise of payment. Don't you feel any shame? Looking forward to hearing from you, and receiving payment from you. Best Regards Manfred. ---------------------Mag.Manfred Sieghartsleitner Geschaftsfuhrender Gesellschafter Managing Director

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RTi Austria GmbH

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Since there was no response from the respondent, a legal notice was thereafter issued on 27.03.2017 calling upon the respondent to make payment to which there has been no reply. The arbitration clause has been invoked on 12.12.2017, pursuant to the filing of the present application.

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An attempt is made by Mr.Suresh to state that there has been no quantification of the liability and as such the present petition would, in addition to being non-maintainable, also be pre-mature. He would draw attention to email dated 4.10.2016 wherein the respondent refers to 'renegotiation' of the outstanding amount. According to him, the respondent awaited the result of such renegotiation and till such time it was completed, there could not be any demand on the respondent.

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I do not agree. The reference to renegotiation is unilateral and nothing has been brought on record by the respondent to establish that the applicant was, in fact, considering the same.

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The present application has been filed in terms of Section 9 to secure and protect the interests of the applicant pending arbitration. While the parties are at liberty to quantify the claims in the actual process of arbitration, the invoices raised to the extent of € 210,000, the unequivocal admission of liability by the respondent and most importantly, the repeated requests by the respondent for time for payment in the light of financial stringency, leave me in no doubt that the prayer in the present petition is well founded.

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A prima facie case has been made out by the applicant. The balance of convenience also is in favour of the applicant seeing as the amounts are outstanding since 2016. The pleadings in the petition to the effect that the respondent does not have the solvency to meet

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the demand raised is also supported by the emails of the respondent pleading time to effect payment on the ground of financial stringency and liquidity issues.

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Upon a consideration of the facts and

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circumstances as above, I direct the respondent to furnish security to the extent of € 210,000, by way of bank guarantee or immovable property, to the satisfaction of the applicant, within a period of four weeks from the date of receipt of a copy of this order.

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