1 Arb OP No.2792 of 2014
IN THE COURT OF THE III ADDITIONAL CHIEF JUDGE, CITY CIVIL COURT
AT ; HYDERABAD
TUESDAY DATED THIS THE 14TH DAY OF JUNE, 2022
Present : Sri K. Kalyan Chakravarthy,
III Addl. Chief Judge,
Arb OP No. 2792 of 2014
Between : Sri Kanakadurga Automobiles Limited, Incorporated under the Companies Act 1956 rep. by its Director Sri DSP Reddy, S/o D.V.Ramana reddy, aged : 56 yrs, Having its Regd office at 62951, Krishna Plaza, Khairtabad, Hyderabad. … Petitioner A N D
1. Honda Motorcycle and Scooter India Pvt Ltd, rep. by its Assistant Manager (Sales) No.82624/A/1, Ground Floor, MB Towers, Banjara Hills, Road No.10, Hyderabad, Telangana – 500 034 (India).
2. Honda Motorcycle and Scooter India Pvt Ltd, rep. by its Zonal Manager, No.82624/A/1, Ground Floor, MB Towers, Banjara Hills, Road No.10, Hyderabad, Telangana – 500 034 (India).
3. Honda Motorcycles and Scooters India Ltd, Incorporated under Companies act, 1956 Having its regd Office at : Plot No.1, Sector 3, IMT Manesar, Dist – Gurgaon, Haryana – 122 050 (India) Rep. by its President and C.E.O.
.. Respondents
This petition is coming on this day before me for final hearing in the presence of Sri K. Papi Reddy, Advocate for the petitioner and of Sri B.
Panduranga Reddy, Advocate for the respondents and the matter having stood over for consideration and this court delivered the following :
O R D E R
1.This petition is filed under Section 9 of Arbitration and Conciliation Act seeking direction to the respondent to continue the regular supplies of vehicles., as per the indent of the petitioner in terms of Arbitration Agreement dt.10.01.2005 by withdrawing the appropriate amount from the petitioner bank or on receipt of payment towards the cost of supplies pending the proposed
Arbitration proceedings are finally adjudicated or resolved.
2 Arb OP No.2792 of 2014
2.The averments of the petition in brief are : a.The petitioner is a company incorporated in the Companies Act on 13.01.1999 and commenced its business from 15.07.1999 onwards. The object of the plaintiff is the business of auto engineer manufacturer, trader, distributor, dealers from motor cycles, scooters etc., After commencement of the business petitioner applied for two wheeler dealership Honda Motor Cycles and Scooters
India Ltd to do the dealership business in the name of petitioner in Vijayawada.
After completion of formalities the petitioner got the dealership for city of
Vijayawada in 2001 and in pursuance of the above, obtained lease of premises
No.40148 in Vijayawada and entered into dealership contract on 15.09.2001.
In addition to the same petitioner also obtained lease of premises bearing No12 148 by spending huge amount in establishing the workshop and service center by expecting the respondent company is well reputed in the entire world and shall also consider the dealers interest. Incidentally petitioner is first dealer of the respondent in the combined State of Andhra Pradesh and 2nd in all over
India.
b.As per the agreement between the petitioner and respondent on 10.01.2005, the clause 5 deals with the caption of ‘Non exclusive dealership’ in which respondent company retained discretion from entering into or continuing any dealership agreement with any other person within the same city or location for sale of products of resale. By virtue of said clause the respondent is disentitled to permit any other dealer to open any workshop, having permitted by petitioner or any other dealer to establish and run the workshop by virtue of dealership agreement. Initially respondent collected Rs.1.50 lakhs as security 3 Arb OP No.2792 of 2014 deposit from the petitioner and later enhanced it Rs.4.50 lakhs. Under clause 11, the respondent company is to give necessary information relating to sale, service of the products and particularly assurance of the respondent company to support the dealer. As per Clause 11.4 deals with for supply of products as per the availability is dealt and respondent shall use all reasonable endeavors to supply the products to meet the dealers projected sales. The word projected sale connotes the option of the dealer but no compulsion to fix sale target and slow moving vehicles. On the inexisting of the respondent the second dealership agreement was entered on 10.01.2005 where all the covenants have been reiterated and there is no change of any covenants or obligations.
c.To comply the dealership agreement, the petitioner approached HDFC
Bank, Vijayawada branch for sanction of inventory funding limit and got sanctioned. This initial I.F limit at the inception was of Rs. Lakhs, where the respondent company use to withdrew the proportionate amount along with transport charges on the account of the petitioner company relating to supply of the vehicles. The respondent used to withdrew the amount in respect of cost of the vehicles under transport, besides other charges before the load is dispatched from its premises. In deed, the commission on each such vehicle is less paid to the dealers, keeping every dealer to believe that in near future the demand for Honda Activa shall increase, yielding more profits to the dealers. But against this concept, the respondent company never used to comply the demand of the petitioner and on other hand used to dump the slow moving vehicles against the wish of the petitioner. The executive officials of the respondent indulged in various irregularities for selfish means, gains and consequently 4 Arb OP No.2792 of 2014 given new dealership at 7 places and also allowed to open the new workshops within the permissible limits of the petitioner, which act effected on the business of the petitioner and also multiplied in huge loss. The acts of the executives established, the breach of the clause 5 of the dealership agreement.
The petitioner addressed various letters to the respondent, more specifically letter dt. 06.02.2002 reminding previous assurances that all losses shall be recovered in case of which the petitioner bright future with sufficient business profits. On 28.10.2012 the petitioner sent another letter to the Regional Office of the respondent, complaining the behaviour of the then area in charge by name
Sachin Jain. The respondent neither reported nor taken action against the erring executive official but rather vindicated the petitioner. Several times petitioner represented the respondent that stock of slow moving vehicles is very alarming every month, though the same is reported to the area executives, but the dispatch of slow moving vehicles is continued. Finally on 09.04.2013 the same has been recorded in writing to the area executive. In fact in continuation of the said letter, petitioner being represented by its director, had a meeting at the
Zonal Office of the respondent and explained the grievance of all dealers for dumping slow moving vehicles against the demand of dealers for supply of fast moving vehicles. It appears to have disturbed the officers of the respondent, who ultimately developed the negative attitude and instructed the area executives to give less evolution score, despite of best efforts in its maintenance of the showroom and workshops.
d.The connected workshop lease premises to the petitioner dealership was expired by efflux of time in 2008 and despite of permission, sought by the 5 Arb OP No.2792 of 2014 petitioner, referring the proposed new workshop premises to the approval of the respondent company, but respondent remaining silent for a considerable period.
On continuation persuasion from the petitioner for approval of workshop premises, the respondent forced to convene a joint meeting at its Regional Office on 12.08.2014, wherein the officials of the respondent company claimed that the obligation rests upon the petitioner company to sell all category of vehicles manufactured by the company irrespective of its efficiency and public demand.
e.The respondent without issuing any notice or without referring the matter to arbitration as contemplated in clause 28 of the dealership agreement, acted in an arbitrary capricious manner by sending a mail on 26.11.2014 contending that dispatch planning has been currently kept on hold. Immediately petitioner raised objections by giving reply on the same day at 7.17 PM seeking to plan for dispatches immediately with an assurance to comply all steps as suggested by the respondent and further sought to arrange new meeting. On receipt of reply by petitioner a meeting was scheduled on 01.12.2014 wherein the respondent alleged vague grounds for evaluation score is less than 60%. In fact evaluation score points are in the nature of arbitrary act and its officials concerned shall act under the influence of the officials of the respondent company. It is understood by the petitioner through its officials that respondent somehow intended to terminate the dealership and putting all efforts on one and some other pretext to the petitioner company. Even to take a drastic penal step such as holding supplies by respondent not only amounts to breach of arbitration clause but shall yield in huge further loss. Surprisingly the e.mail dt.10.12.2014 forwarded by the first respondent to the petitioner show 6 Arb OP No.2792 of 2014 appreciation of efforts of the petitioner and consequently payment of incentive towards better performance of the petitioner. However, the bank limits, investment made on the dealership besides the new workshop costs, lease amounts unnecessary supply of slow moving vehicles etc., shows the selfish trade business of the respondent driving the most of the dealers to their bad fate of financial condition.
f.Petitioner company so far invested Rs.4.50 crores and obtained additional financial assistance from Indian Bank to a tune of 6.5 crores under working capital limits and due to sudden arbitrary capricious act of holding the supply of vehicles or withholding the opening of workshop besides creating idleness to the staff, the reputation of the petitioner company shall be at stake resulting in huge financial losses in paying salaries to the employees and incurring other over heads. There is no clause in dealership agreement to withhold the dispatch of the vehicles. But the respondent acted in arbitrary and unilateral manner by withholding the supplies of stocks in violation of dealership agreement. If at all there is any dispute arose respondent ought to have arbitration clause of the dealership agreement but contra stopped the supply of stocks and thus jeopardized the very existence of the business of the petitioner company. Be that is so petitioner is constrained to invoke arbitration clause No.28 of the dealership agreement against the unilateral action taken in violation of dealership agreement, which is unlawful act of the respondent. In those circumstances there is no other alternative except to approach the court by way of present petition. Hence to direct the respondent to continue the regular supply of the vehicles as per indent of the petitioner by withdrawing appropriate 7 Arb OP No.2792 of 2014 amount from the petitioner bank or on receipt of payment towards cost of supply.
3.After receiving notice the respondents 1 to 3 filed counter with the following averments.
a.The petition averments are not correct and petitioner is put proof of those averments. It is true petitioner was appointed as dealer by third respondent for the city of Vijayawada under dealership agreement dt.15.09.2001 for a period of three years. The said dealership agreement was renewed on 10.01.2005 for another three years which expired by 09.01.2008. Thereafter petitioners dealership is not renewed. As per clause 5 of the agreement dt.10.01.2005 it is clear that the respondent is not entering into or continuing any similar agreement with any other person within the same location. Thus non executive clause is misinterpreted and hence entire averments are misconceived and baseless. Of the said clause shows that agreement was on an non exclusive deal and do business with the petitioner company. As on date there are 55 dealers existing in the State of Andhra Pradesh which have been inaugurated and doing business with the respondent in terms of agreement since then. All such averments of the petitioner are an after thought somehow raised issues which are not maintainable in the eye of law.
b. As per clause 12 of the agreement sales targets of the petitioner are affixed. The petitioner had never followed the same and tried to create undue pressure on respondent to get easy moving vehicles which is breach of terms of agreement. The conduct is clearly against the intent of planned sales target 8 Arb OP No.2792 of 2014 which was set after mutual agreement and discussion. The petitioner intends to extract undue benefits arm twisting and filing frivolous and untenable claims.
The petitioner is bent upon to pressurize the respondent in supply of vehicles by dictating terms which is clearly against the respondent company’s policy and standards. The petitioner never used to make payments of his pending loans on time. The petitioner inventory funding account was regularly over due for which
HDFC Bank, Vijayawada created pressure on the third respondent company to have them cleared. However, petitioner never used to follow the sale target lines for which regular communications and reminders were sent to the executives of the respondents from time to time. As per clause 5 of the agreement respondent is entitled to appoint any number of dealers as well as open new workshops. Thus, there is no such alleged breach of agreement as committed by the respondent. The respondent company is open to make new networks as per market demands and situation which is clear from clause 5 of the dealership agreement. The petitioner always assured the respondent that he will follow the Honda policy, principle and practice which he did not due course and that resulted increase in consumer complaints, lack of workshop, delay in payments to planned loads.. The petitioner has deliberately chosen not to follow the respondent instructions and guidelines. The executives of the respondent are working to promote the sales and service of HMSI through the dealers. In the same manner under any stretch of imagination, any type of complaints against the executives of the respondents are untenable and unsustainable. In fact the executives of the respondent visiting the petitioners showroom from time to time and assisting the petitioner to improve the sales of the product to provide best services to its customers.
9 Arb OP No.2792 of 2014 c. There is no concept like slow moving vehicles or fast moving vehicles as claimed in the petition. The respondent company manufacturing the vehicles as per market potential and demand. No such concept of selected models is mentioned even in the dealership agreement. As per clause 2.2 of the agreement the dealer is appointed to promote and sell all products supplied by the respondents. The period of dealership was expired by afllux of time of lease in 2008 and the petitioner never came forward to enter into the fresh dealership agreement. The petitioner had requested for site change but never came up with any site or layout to shift. Thus without any layout or site, no fresh dealership is possible. The petitioner only shaded site in 2014 and by that time he had failed in evolution score for fourth consecutive time. The LOI mail mentioned for date is only having attachment for layout and schedule of completion to review the situation.
d.In terms of dealership agreement, product means all two wheelers supplied already or to be supplied by the company to the dealer, which may inter alia be any model, model variation and/or model year, engine capacity, transmission type, body type and colour variation Supply of vehicles to dealers is as per market potential and sale target. Petitioner thus cannot demand from the respondent any specific product which is in clear violation of sales target and breach of terms of dealership agreement. In view of the petitioners failure of financial constraints as contemplated in the dealership agreement the respondent was forced to supply the loads kept on hold. The dispatch of the vehicles were put on hold due to various reasons which was justified and attributable to the petitioner. The petitioner had delayed in making timely 10 Arb OP No.2792 of 2014 payment for the planned loads. There was lack or no initiative to promote the sale of the all models although potential was there in the market. Due to continuous poor dealer evaluation score also dispatch load was put on hold.
Since there was no dispute between the parties there are no clause for invocation of arbitration. The Respondent always supported the petitioner to reach sales targets as planned. There has been sincere attempts to accommodate petitioner to reach the targets and in fact several rounds of meetings were taken place and respondent put endeavor to give all support in this regard.
e.The respondent being a statutory body established under the Companies
Act appointed various dealers throughout India and doing the business without any complaints whatsoever manner from any of the dealer except the petitioner herein. In the same manner the respondent is doing business with the petitioners’ strictly in accordance with the terms and conditions of the dealership agreement dt. 10.01.2005. So the question of violations or alleged breach of agreement by respondents does not arise. Since the respondents were acted in terms and conditions of dealership agreement, there is no reason for any grounds to raise arbitration disputes at any stage. The petitioner with an intention to bring disrepute and goodwill of the respondent company made all the false and baseless allegations. The respondent strictly binding on the agreed terms and conditions of the dealership agreement, as such there is no cause action to file the present petition. In those circumstances to dismiss the petition.
11 Arb OP No.2792 of 2014
4.The petitioner filed rejoinder to the counter with the following averments in brief :
a.The vague contention of the respondent that dealership is expired on 09.1.2008 do not complied the agreed terms of clause 9 of the dealership agreement. Clause 9, 25 and 28 of agreement are to be read together, which rather explore the terms that even the silence of parties on expiry of 3 year does not seize to effect the contract, unless covenant 9 (2) is complied by either of the parties. Clause 25(2) imposes specific times, where either of the parties shall be competent to terminate the contract, provided the specific obligations on the parties shall comply with specific time. The clause 28 of
Dealership agreement dispel the terms of Arbitration, where it is agreed by parties that all disputes, claims arising out of this agreement or any breach of termination shall be settled by arbitration. The combined reading of Clause
No.9, 25 and 28 will say by virtue of clause 9(4), that issuance of notice is mandatory for either of the parties, where any of the parties does not wish to extend the Agreement. In a similar way the clause 25(1) says that the agreement may be terminated by either of the parties by giving 30 days advance written notice, with or without assigning any reason. The language under clause 28 relating to the termination, shall supersede the specified terms under clause 25(2). Clause 5 of the agreement, relating to non exclusive dealership, which shall not permit the company to induce any dealer, under the pretext of market demand for the district and thereby making the dealer to invest huge amount for establishment of showroom and thereafter allowing some others to enjoy such benefits at the cost of dealer, after gaining the demand for products. However, 12 Arb OP No.2792 of 2014 the non exclusive clause under 5 is concerned with sale of products but shall not effect on the workshop for the service of products by the dealer.
b.In the middle of 2000, new dealership of the petitioner for the area of
Krishna District, to open the showroom for the sale and service at Vijayawada was confirmed by issue of Letter of Intent. The petitioner spent huge amount for selection of showroom premises and to provide all amenities with sufficient infrastructure made the showroom ready from January,2001 and waited for supplies to inaugurate the showroom. The first showroom was opened in
Bangalore on 19.07.2001 and the petitioner’s showroom was opened on 20.07.2001 at Vijayawada and started the commencement of business from that day onwards. Simultaneously the workshop was also inaugurated on same day abutting to the showroom. From the date of opening of showroom and workshop in July, 2001 to the middle of 2012, a single problem was never allowed to be raised from the respondent. The respondent officials developed some oblique object for not acting to their tunes. The supplies were not as per the indent of petitioner to meet the market demand, which in fact was developed on the efforts of petitioner. Due to the rapid increase of sales, the petitioner sought the permission to open workshop at other place and occupied the workshop premises, expanding the showroom. Thereafter the respondent who did not sanction the permission to run the workshop.
c.Every year the data is being collected from Transport Authorities, by the dealer, specifying the particulars of different kinds of two wheeler registrations asnd the dealers shall incur the advertising cost through vide publicity. The 13 Arb OP No.2792 of 2014 dealers shall get only 4.5% commission on the basic cost of the vehicles, out of which the petitioner on an average maintain 150 to 180 members of staff but when the demand of the vehicles are increased from 2011 onwards, the respondents with a malafide, fraudulent object and to shut the mouth of old dealers, started appointing new dealers and thereafter to divert the dealer, whoever, insist to provide the minimum profit to meet the expenses of publicity, showroom cost and staff maintenance charges. Despite of submission of plans by the dealers to the company, which is named as “Niguri” but the ASTM of the petitioner/dealer. However, neither there is any specific agreement nor consent between the company and petitioner/dealer and the Annual Sales Target is always on unilateral basis finalized by the respondent, by dumping all types of vehicles against the market demand with a sole object to introduce number of models at the cost of dealers. During the past3 to 4 years, the petitioner did not acknowledge ASTM but requested to revise certain terms but it never happened, as such, the process remained for the sake of document but never implemented.
The differential treatment of officials of respondent, given to old dealer than the new dealer, resulted in deterioration of business of old dealer, particularly like petitioner, who are crying for proper care by making supply of vehicles, which has got demand in the marked.
d.The respondent made all false accusations, including about alleged pressure on the company to clear the alleged liabilities of petitioner. After withdrawal of amount from the account of petitioner from HDFC bank, the vehicles shall be dispatched from the factory/godown premises, but not as contended by respondent. Initially as per the instructions of respondent the 14 Arb OP No.2792 of 2014 petitioner had taken all measures in maintaining, cash amount of Rs.50 lakhs, which shall be transferred to the respondent against the proposed vehicles dispatch and later it was enhanced from time to time to the ultimate limit of
Rs.2 crores 75 lakhs. This limit was misused by the respondent by dumping slow moving or less demand vehicles in the market, on which the petitioner suffered loss in paying interest on account of delay in sales and for discounting the vehicle for sale to attract the customers, as such, after several protests and finally the petitioner again cut short the limits to the existing of Rs.50 lakhs after seeing the attitude of respondent.
e.It is claimed by the respondent, as if it is entitled to appoint any dealer or open new workshops. Neither the dealership agreement nor any other written contract empowers the respondent to open any new workshop. The evaluation system at first instance is not supported by the terms and conditions or the existing agreement does not specify any evaluation process in scoring the dealers performance. It should be meant to understand the gaps between dealer and respondent and should not be an axing sword on the dealer. The evaluation is carried by the same staff of the respondent who deal day to day with the dealer.
The respondent for evaluation score, brought up 1 to 4 versions from the beginning of the production to the end of 2014. The latest version prescribes the evaluation process matrix, which consists with 4 stages. The revised 4th version introduced by respondent in the month of August, 2014, consist the evaluation process matrix with 4 cycles/stages. The time limit prescribed in the table for the 2nd evaluation to be made 6 months after the 1st evaluation score.
On first evaluation, a letter of improvement is to be sent if the dealer score is 15 Arb OP No.2792 of 2014 less than 60 marks and that letter is to be signed b;y the Zonal head, relating to sales and service. The time limit between the second and third evaluation score is 3 months. In case of scoring less than 60 marks, a caution notice is to be issued by the Regional head sales and service. The third evaluation inspection is to be made by the Zonal Head sales and service and if the dealer gets less than 60 marks, a letter of warning is to be sent to the dealer by the Operation Head sales and service. The 4th and final evaluation is to be made by the regional head sales and service on expiry of 3 months of 3rd evaluation, letter of termination is to be sent to the dealer through President and CEO. None of the version No.1 to 4 are being made as a part of the dealership agreement, so as to consider the less evaluation score as a ground for termination or for taking any action, much less to withhold the supply of vehicles. Added to above, the alleged consumer complaint, delay in payments to planned loads is false for the reasons stated supra. The respondent by not giving permission to open new workshop and having given Letter Of Intent on 21.01.2014 through e.mail and again keeping in abeyance on 24.11.2014 coupled with other known facts, constrained the petitioner to file present petition.
f.The dealer cannot be overloaded with new products by fixing more targets or can be interlinked with all products. Indeed the public will get the satisfaction after going through the performance and on seeing the condition of the vehicles. Dumping number of models into the market at the cost of dealers by collecting in advance amounts from their banks and without looking, whether it was sold or not and again redumping in next month definitely jeopardize the financial ability of dealers. However, in the dealership agreement there is no 16 Arb OP No.2792 of 2014 specified quota, fixing on any of the dealer. There is no word “ALL’ prior to the word products supplied” in clause2(2) of dealership agreement. The respondent having received site change map with proposed establishment of workshop, through e.mail correspondence and having made interse correspondence between the Area in charge Service on 27.05.2010 is called for, which show the allegations of the respondent is false.
g.The balance sheet of the company is suffice to say how they made money with less investment and diverting huge amount to their nation after squeezing the dealers to sustain in loss. Though the dealership agreement specify about the responsibility to pay the cost of transport charges from the place of manufacture to the place of dealer, but collected the charges even violating their obligation as contemplated under clause 2(d) of dealership agreement. This aspect was wrongly reflected in the balance sheet of respondent which shows their deal in snatching not only profits but also from the amounts invested by the dealers. There is no balance in the contention of the respondent to say that the dealer cannot demand for any specific product, this obligation is suffice and gives a scope for making discrimination among dealer to dealer. Indeed, there is no financial failure on the part of the petitioner, who has some other business avocations and also possess sufficiently to deal or to invest the necessary amounts for fair business. The petitioner never forced the respondent to keep the loads on hold, except raising a protest against the supply of slow moving vehicles (less demand in market) and for the encashment of funds from the bank account. The respondent never supported the petitioner by supplying the vehicles as per the demand made by petitioner based on market. Even the 17 Arb OP No.2792 of 2014 minutes of the several rounds of meetings are called for, it shall establish the requests and fair demand of the petitioner.
h.From the beginning, the respondents after withdrawal of cost of proposed supply of vehicles only used to dispatch vehicles at their whims and fancies and against the option of the petitioner. Because of the supply of slow moving vehicles and its blocking for months together and ultimately the dealers are compelled to sell at lesser price than the purchased cost. The respondent never allowed the petitioner to do the business in terms of agreement. When clause
No.28 of the agreement is specific with regard to any termination is to be referred to an arbitrator and the evil conduct of the respondent and its officials can be seen as how they are disobeying the interim orders by non supplying the vehicles, despite of written request and show cause notices for their contemptuous acts. The conduct of the respondent is very clear for their arbitrary termination of the dealership, through their letter dt.24.01.2015. The respondents intentionally committed default to gain unlawfully by pressing the voice of any dealer and further without any respect for law abruptly, arbitrarily in a capricious manner terminated the dealership on 24.01.2015 even disobeying the directions of the court in supply of the vehicles. In those circumstances to allow the petition and grant the reliefs as claimed in the petition.
5.During enquiry on behalf of the petitioner Exs P.1 to P3 marked. On behalf of the respondents Exs R..1 & R.2 marked.
18 Arb OP No.2792 of 2014
6.Heard both sides.
7.Now the point for consideration is :
1. Whether the petitioner can seek direction against the respondents for supply the vehicles as per the agreement dt. 10.01.2005 as claimed in the petition?
2. Whether this court got jurisdiction to grant the relief claimed in the petition?
3. To what relief?
8. POINTS 1 & 2 ::
1. Whether the petitioner can seek direction against the respondents for supply the vehicles as per the agreement dt. 10.01.2005 as claimed in the petition?
2. Whether this court got jurisdiction to grant the relief claimed in the petition?
The counsel for the petitioner submitted that there is no dispute about petitioner entering into dealership with respondent and in fact originally the petitioner is the only dealer in entire Southern India for supply of Honda branded motor vehicles. He further submitted that even though there are several models from Honda Motor vehicle, only some of the models got demand in the market and some of them are not purchased but the respondents instead of supplying the vehicles on demand, intentionally started sending the vehicles which have no demand in the public, even though the respondents are supposed to maintain the parity regarding the vehicles supplied and because of this discrimination the petitioner sustained loss and regarding the same several times meeting was held with the respondents, but they did not cooperate and all of a sudden issued termination notice even though as per the clause in the 19 Arb OP No.2792 of 2014 dealership agreement termination notice shall be given in advance for one month. He further submitted that in fact earlier the petitioner received appreciation letter from the company but subsequently abruptly issued termination notice vide Ex P.3 on 24.01.2015 which is against the dealership agreement. He further submitted that Ex P.2 is filed to show that the petitioner sent mail to the respondents explaining financial situation because of the flop models sent to the petitioner but even then without considering the same the termination notice was issued.
9. Coming to the point of jurisdiction the counsel for the petitioner submitted that the dealership agreement is very vague regarding the arbitration procedure because as per clause 28.5 the seat of arbitration is New Delhi wherein clause 28.6 again it is shown as if the courts at Gurgaon alone have exclusive jurisdiction and these two clauses are contradictory each and other as such on those clauses the respondents cannot rely and cannot claim that only courts at Gurgaon got jurisdiction under Section 42 of Arbitration &
Conciliation Act. He further submitted that initially the petitioner preferred OP
before the Hon’ble High Court Judicature at Hyderabad but suppressing the
same the respondents preferred OP before the Hon’ble High Court of Punjab and
Haryana and got appointed arbitrator and on coming to know about the same the petitioner preferred a petition before the Hon’ble High Court at Punjab and
Haryana explaining about the petition filed before the Hon’ble High Court of
Judicature at Hyderabad and then Hon’ble Punjab and Haryana High court stopped the proceedings. He further submitted that as per Section 42 of
Arbitration & Conciliation Act already arbitration proceedings were initiated at 20 Arb OP No.2792 of 2014
Hyderabad, the respondent cannot initiate the proceedings in the High court of
Punjab & Haryana and for that reason the petition filed by the respondent before
High court of Punjab & Haryana shall fail. He further submitted that the petitioner is sustaining loss because of the abrupt termination order as the petitioner invested lot of amount for the purpose of running the showroom and workshop and in those circumstances to direct the respondents to supply the vehicles as per the dealership agreement dt. 10.01.2005.
10.In support of the contention of the petitioner the counsel for the petitioner relied on the judgment of Hon’ble Supreme Court of India between Hindustan
Construction Company Ltd Vs. NHPC Ltd & another Transfer OP No. 3053
of 2019 and Civil Appeal No. 1987/2020, wherein the Hon’ble Supreme Court of India while making discussing about Section 42 of Arbitration & Conciliation
Act, at para 4 discussed about the judgment of Hon’ble Supreme Court of
India between BGS SGS Soma JV vs. NHPC Ltd and at para 5 observed that ; “This was made in the backdrop of explaining para 96 of the Balco (supra), which judgment read as a whole declares that once the seat of arbitration is designated, such clause then becomes an exclusive jurisdiction clause as a result of which only the courts where the seat is located would then have jurisdiction to the exclusion of all other courts.”
Para 6 observed that :
“Given the finding in this case that New Delhi was the chosen seat of the parties, even if an application was first made to the Faridabad court, that application would be made to a court without jurisdiction. This being the case, the impugned judgment is set aside the following BGS SGS Soma 21 Arb OP No.2792 of 2014
JV (supra), as a result of which it is the courts at New Delhi alone which would have jurisdiction for the purposes of challenge to the Award.”
11.The respondent counsel submitted that even according to the terms of dealership agreement without any fault there being respondent can terminate the contract with 30 days notice and in fact agreement was also executed in 2005 that is for 3 years and there after no fresh agreement was executed and so it does not matter whether the termination notice was issued with 30 days gap or issued immediately. He further submitted that this court have no jurisdiction to entertain this petition because as per the dealership agreement only the courts have no jurisdiction to entertain this petition because as per the dealership agreement only the courts at Gurgaon got jurisdiction and suppressing the said fact the petitioner filed petition before Hon’ble High Court
Judicature at Hyderabad and then the respondent rightly approached the
Hon’ble High Court for Punjab & Haryana seeking appointment of arbitrator. He
further submitted that regarding the contract for the petitioner is concerned, there is evaluation of work of the petitioner by giving rating and the petitioner continuously failed to achieve require rating and can not sell the target and because of that reason the respondent issued termination notice. He further submitted that there are similar facts between the petitioner and respondent in another case between both the parties and in that case also the present petitioner filed AOP No. 653/2012 under Section 9 of Arbitration & Conciliation
Act and the same was disposed off by XXV Additional Chief Judge, City Civil
Court, Hyderabad vide Ex R.1 opined that the court have no jurisdiction to grant any relief in the said case. He further submitted that the facts in that case and 22 Arb OP No.2792 of 2014 present case are identical and facts are identical. Further more the terms of the dealership agreement are also one and the same. He further submitted that the petitioner suppressing the clause 28.5 and 28.6 of the dealership agreement to create jurisdiction filed petition before the Hon’ble High Court of judicature at
Hyderabad and thereafter basing on Section 42 of Arbitration & Conciliation Act filed the petition before the present court, as such this court have no jurisdiction to grant any relief.
12.In support of the contention of the respondent the counsel for the respondent relied on the following decisions:
1. ‘Decision between Swastik Gases Private Ltd Vs. Indian Oil
Corporation Ltd, reported in (2013) 9 Supreme Court Cases 32, wherein the Hon’ble Supreme Court of India while making discussion at para 32 observed that :
“For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkatta. It is a fact that while providing for jurisdiction clause in the agreement the words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” have not been used but this, in our view, is not decision and does not make any material difference. The intention of the parties – by having Clause 18 in the agreement is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkatta alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like
Clause 18 in he agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary.
This legal maxim means that expression of one is the exclusion of another.
By making a provision that the agreement is subject to the jurisdiction of 23 Arb OP No.2792 of 2014 the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract act in any manner.” 2.Decision between Indus Mobile Distribution Private Limited Vs. Datawind
Innovations Private Limited and others reported in (2017) 7 Supreme
Court Cases 678 wherein the Hon’ble Supreme Court of India while discussing about Section 2(1)(e), Section 42 of Arbitration and Conciliation Act, at para 19 observed that :
“A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is skin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear the jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil
Procedure which applies to suits filed in courts, a reference to “seat” is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction –that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Sections 16 to 21 of CPC be attracted. In arbitration law however, as has been held above, the moment “seat” is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties.” 24 Arb OP No.2792 of 2014
3. Decision between Brahmani River Pellets Limited Vs. Kamachi Industries
Limited reported in (2020) 5 Supreme Court Cases 462, wherein the Hon’ble
Supreme Court of India while making discussion about decision Swastik Gases
Private Ltd and decision in Indus Mobile Distribution Pvt Ltd case cited as 1 & 2 by the respondent herein, at para 19 held that :
“When the parties have agreed to have the “venue” of arbitration at
Bhubaneswar, the Madras High Court erred in assuming the jurisdiction under Section 11(6) of the Act. Since only the Orissa High Court will have the jurisdiction to entertain the petition filed under Section 11(6) of the
Act, the impugned order is liable to be set aside.”
13.Before going to factual aspects it is necessary to look into the legal aspect of jurisdiction of this court. No doubt the respondent did not plead in the counter that this court have no jurisdiction. But, However, that does not mean that the jurisdiction is vested with this court. Point of jurisdiction is a technical point which can be raised at any stage of the proceedings even without pleading.
The first and foremost point is that the petitioner is claiming that clause 28.5 and 28.6 of the Ex P.1 dealership agreement are inconsistent with each other and because of the reason the respondent cannot rely on those clauses and when the petitioner is invoked the jurisdiction of the Hon’ble High Court
Judicature at Hyderabad under Section 11 of the Arbitration & Conciliation Act, only courts under the jurisdiction of Hon’ble High Court Judicature at
Hyderabad got jurisdiction to grant any relief claimed under Section 9 of the
Arbitration and Conciliation Act. However, this court is not accepting the contention of the petitioner’s counsel regarding clause 28.5 and 28.6 mentioned in Ex P.1 dealership agreement. The clause 28.5 is dealing about seat of 25 Arb OP No.2792 of 2014 arbitration, 28.6 dealing about jurisdiction of the court. So those two clauses are read together, it is clear that the petitioner as well as respondent wanted the arbitration proceedings shall be held at New Delhi, whereas they vested the jurisdiction by either for appointment of arbitrator or other for incidental proceedings with the courts at Gurgaon. Further clause 28.6 it is specifically mentioned that no other courts have jurisdiction to deal with any dispute between the parties. So there is no such inconsistency between clause 28.5 and 28.6 as claimed by the petitioner. It is clear that courts at Gurgaon have got jurisdiction for either appointment of arbitrator or to grant of other reliefs under Arbitration and Conciliation Act, whereas the arbitrator have to conduct the arbitration proceedings at New Delhi.
14.The respondent is relying on Ex R.1 order passed by the XXV Additional
Chief Judge, CCC, Hyderabad in in IA No. 2282/2015 in AOP No. 653/2015 between the present petitioner and respondent. That case was also on similar facts and in that case also the present petitioner sought relief under Section 9 of
Arbitration & Conciliation Act but where the present respondent moved a petition under Order VII Rule 10 CPC on the point of jurisdiction and the XXV
ACJ Court allowed the petition and returned the main case for want of jurisdiction. Ex R.2 is the order passed by the Hon’ble High Court for Punjab &
Haryana at Chandigarh appointed arbitrator. However, the petitioner filed copy of order to show that the Hon’ble High Court of Punjab & Haryana stopped the appointment of arbitrator because there the petitioner represented that already the petitioner moved a petition before the Hon’ble High Court Judicature at
Hyderabad. Whatever order passed under Ex R.1 is not binding on this court 26 Arb OP No.2792 of 2014 and the case on hand before this court shall be dealt depending on the facts of the present case but not basing on the order passed vide Ex R.1.
15.The decision relied by the counsel for the respondent making it clear that when parties choose jurisdiction of a particular court for initiation of proceedings, only that court got jurisdiction for appointment of arbitrator and for granting other reliefs and under Section 42 of Arbitration & Conciliation Act other courts jurisdiction is excluded. In the present case vide clause 28.6 of Ex
P.1 already both parties agreed that only courts at Gurgaon got jurisdiction.
Clause 28.5 is regarding the place of arbitration but not regarding jurisdiction of the court. Because of that reason, if the petition is aggrieved it have to move the petition before the Hon’ble High Court within whose jurisdiction Gurgaon is situated but not before any other High Court. The petitioner ignoring the clause 28.6, filed the petition for appointment of arbitrator before Hon’ble High Court of
Judicature at Hyderabad. The decisions 1 to 3 led by the respondent squarely applies to the present facts also because already in this case both parties agreed for jurisdiction of court at Gurgaon for deciding the dispute. Apart from it, in the decision of Hon’ble Supreme Court of India between State of West Bengal and others vs. Associated Contractor reported in 2015 SC 260, the Hon’ble
Supreme Court of India while making discussion at para 22, relied on Swastik
Gases Pvt Ltd vs. Indian Oil Corporation Ltd and held that” “where agreement between the parties admitted jurisdiction only one particular court, that court alone have jurisdiction as neither Section 31 (4) or Section 42 contains a non obstant clause wiping out by contrary agreement between the parties. Thus been held that applications prefer to 27 Arb OP No.2792 of 2014 court outside the exclusive jurisdiction agreed to by parties would also without jurisdiction.”
16.This decision is also making it clear that when parties agreed that a particular court is vested with jurisdiction then that court alone got jurisdiction for appointment of arbitrator or for grant of other reliefs but not other courts which are outside the jurisdiction. In the case on hand also as mentioned earlier, parties agreed that courts at Gurgaon got jurisdiction for deciding the dispute. In such case, this court have no jurisdiction to grant any relief under Section 9 of Arbitration & Conciliation Act, just because the petitioner moved petition under Section 11 before the Hon’ble High Court Judicature at
Hyderabad. Because of these reasons, this court is not inclined to go into the factual aspects and this court have no power to grant the relief claimed under
Section 9 of Arbitration & Conciliation Act. Accordingly these points are answered.
17. POINT No.3 : To what relief?
In the result, the petition is dismissed.
Dictated to the Stenographer, transcribed and typed him him, corrected
and pronounced by me in the open court, on this the 14th day of June, 2022.
Sd/ (K.Kalyan Chakravarthy) III Additional Chief Judge, City Civil Court, Hyderabad
Appendix of Evidence Witnesses Examined NIL 28 Arb OP No.2792 of 2014
Documents Marked
For the Petitioner :
Ex P.1 : Copy of Dealership Agreement dt. 10.01.2005
Ex P.2 : E.mail sent by petitioner to respondent.
Ex P.3 : Notice of Termination of dealer dt. 24.01.2015.
For Respondents :
Ex R.1 : Copy of Order in I.A No. 2282/2015 in Arbh OP No. 653/2015
dt. 18.12.2019 on the file of XXV Addl. Chief Judge, CCC, Hyderabad.
Ex R.2 : Order passed by the Hon’ble High Court for Punjab & Haryana at Chandigarh in Arb. Case No. 228 of 2015 dt. 01.02.2019.
Sd/ (K.Kalyan Chakravarthy) III Additional Chief Judge, City Civil Court, Hyderabad