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REPORTABLE  

IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION

ARBITRATION APPLICATION (CIVIL) NO. 4 OF 2015

ETOILE CREATIONS                     …Petitioner Versus

SARL DANSET DECO              ...Respondent

J U D G M E N T

R. BANUMATHI, J.

In this petition under Section 11(5) read with Section

11(9) of the Arbitration and Conciliation Act, 1996, the petitioner

prays for the appointment of a sole arbitrator for adjudication of

disputes that have arisen between the parties in relation to ‘Buyers

Agreement’ dated 18.10.2012 executed between them.

2. Briefly  stated  case  of  the  petitioner  is  as  under:-

Petitioner  is  a  proprietorship  firm having  its  registered  office  at

C-291, Suraj Mal Vihar, Delhi.  The petitioner is engaged in the

business of manufacturing of products relating to home furnishing

and upholstery etc., exclusively for the respondent since 2000.  The

respondent-SARL DANSET DECO is a concern having its office at

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240 Rue De La Lys 59250, Halluin, France which is engaged in the

business  of  purchase  and  sale  of  the  product  relating  to  home

furnishing  and  upholstery  and  is  the  buyer  of  the  products

manufactured by the petitioner. Accordingly, a ‘Buyers Agreement’

was executed on 18.10.2012 at New Delhi between the petitioner

and the respondent.  As per the aforesaid agreement, the petitioner

has  been  selling/supplying  its  aforesaid  products  and  the

respondent  has  been  buying/purchasing  the  products  for

resale/sale in the territory of France.  There was a long business

relationship since 2000, even prior to execution of the agreement

and  the  petitioner  was  regularly  supplying  the  products  to  the

respondent.  At the time of execution of the aforesaid agreement, it

was acknowledged that the respondent owes a total amount of Euro

367814.80  as  the  outstanding  amount.  The  details  of  the

outstanding dues have been mentioned in Schedule-I of the ‘Buyers

Agreement’. The petitioner has alleged that as per the terms and

conditions  of  the  ‘Buyers  Agreement’  dated  18.10.2012,  the

respondent  did  not  release  the  said  outstanding  amount  within

seven days of the agreement.  Despite numerous reminders for the

payment  of  dues  through  e-mails,  SMS  messages  exchanged

between  the  parties  during  November  2012  to  April  2013  and

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subsequent legal  notices sent to the respondent,  the respondent

failed to pay the admitted dues of the petitioner.   

3. Clause  2.2  of  the  ‘Buyers  Agreement’  imposed  a

restriction upon the petitioner from supplying its product to any

other person/firm or company, in the territory of France.  On the

other hand, the respondent agreed and assured that the products

ordered during each year  of  the term shall  not  fall  short  of  the

target provided in Schedule-II of the said agreement.  In the event

of  the  failure  to  meet  such  target,  the  agreement  stipulated

termination  of  restriction  so  imposed  upon  the  petitioner.

Petitioner supplied various materials to the respondent at different

points of time against various orders.  The respondent cancelled a

few  orders  to  the  tune  of  Euro  272368.25.   The  respondent

committed  breach  of  the  terms  and  conditions  of  the  ‘Buyers

Agreement’ because cancelled orders were not restored. Thus, the

respondent  is  liable  to  compensate  the  petitioner  for  cancelling

orders and reimburse for cost and damages incurred in procuring

material worth Euro 272368.25, just prior to the date of shipment

and also for preparing samples as per the request of the respondent

dated 25.05.2012 and 26.07.2012. As per Clause 4.1 of the ‘Buyers

Agreement’, the respondent shall not purchase/obtain/ deal with

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the products or any goods that compete with them, for sale from

any person,  firm or company in India other than the petitioner.

The respondent not only cancelled the orders, but also in violation

of  Clause  4.1  of  the  ‘Buyers  Agreement’  dated  18.10.2012,

purchased the same products worth approximately Euro 700000

from M/s. Chahat Exports, 148-A, Basement, Deep Complex, Near

Maharani Bagh, New Delhi and Dhruv Overseas, 4502, Dau Bazar,

Cloth Market, Fateh Puri, Delhi.  Placing such orders with other

firms, according to petitioner, is a violation of terms and conditions

of  the  terms  of  the  ‘Buyers  Agreement’  which  stipulates

commitment  between  the  parties  for  five  years  to  maintain  the

business relations; but the respondent by diverting those orders to

another agency has clearly breached the terms and conditions of

the  agreement.  Petitioner  sent  legal  notices  dated  08.05.2013,

04.07.2013  and 06.07.2013 calling  upon the  respondent  to  pay

unpaid invoices to the tune of Euro 393916.95 and also unpaid

invoices  to  the  tune  of  Euro  209580.63  of  M/s  Creative

International (another partnership firm of the petitioner) alongwith

interest at the rate of 24% per annum.

4. As  the  respondent  did  not  make  the  payment  of  the

invoices, the petitioner invoked arbitration clause agreed in Clause

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14  of  the  ‘Buyers  Agreement’  for  the  appointment  of  three

arbitrators, one to be nominated by each party and the third to be

appointed by the two appointed arbitrators.  As per Clause 14 of

the ‘Buyers Agreement’, the petitioner sent a statutory notice dated

14.08.2013, nominating on his behalf Mr. Subhash Chandra, LLM,

Higher Judicial Services (V.R.S.), Member Judicial, Railway Claims

Tribunal  (Retd.)  as  an  arbitrator.  Petitioner  requested  the

respondent  to  nominate  its  arbitrator  so  as  to  enable  these

arbitrators  nominated  by  the  parties  to  further  nominate  the

presiding arbitrator and constitute an arbitral tribunal.

5. The  petitioner  filed  a  petition  before  the  Commercial

Court in Lille to seize all the bank accounts of the respondent with

the  banks  Caisse  d’  Epargne,  GCE  Trade  and  HSBC  bank

alongwith all money, values and/or bonds held by these banks on

behalf of the respondent.  The court’s bailiffs seized a total amount

of Euro 48000 in HSBC bank on 11.10.2013 and Caisse d’ Epargne

on 14.10.2013 in compliance to order of Appellate Court,  Douai,

France dated 25.09.2014.  The petitioner filed a claim before the

Tribunal-DE-COMMERCIAL  DE  LILLE  METROPOLIS,  France  for

recovery  of  debt  amounting  to  Euro  393916.95,  the  Tribunal

however dismissed the claim of the petitioner vide its order dated

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30.01.2014.  Petitioner then filed an Appeal No. Minute:14/389/RG

14/01147 before the Appellate Court,  Douai,  France against  the

order dated 30.01.2014 passed by the President of the Commercial

Court of LILLE,  which also came to be dismissed by its judgment

dated  25.09.2014.   The  appellate  court  declared  the  appeal

inadmissible on the issue of jurisdiction in view of the arbitration

agreement and also held that there was no emergency to approach

the  court  instead  of  seeking  remedy  under  the  Arbitration

Agreement.  According to the petitioner, the aforesaid disputes and

differences  have  arisen  in  India,  are  covered  by  the  terms  and

conditions of the ‘Buyers Agreement’ and are to be resolved by the

arbitrator  in  view  of  the  arbitration  clause  14  of  the  ‘Buyers

Agreement’.  Hence, the petitioner has filed this petition invoking

the arbitration clause 14 of the ‘Buyers Agreement’ for appointment

of  a  sole  arbitrator  in  terms  of  ‘Buyers  Agreement’  dated

18.10.2012  qua  recovery  of  Euro  393916.95  payable  to  the

petitioner alongwith interest at the rate of 24% per annum.   

6. As per the Office Report dated 06.04.2016, counsel for

the petitioner has on 23.02.2016 filed an affidavit of dasti service

alongwith proof of service on respondent and proposed respondents

and the service of notice is complete.     

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7. We have heard the learned counsel for the petitioner  at

some length.  Despite service of notice, respondent has chosen not

to  appear.  The  material  facts  are  not  in  dispute  that  ‘Buyers

Agreement’  was  executed  between  the  parties  on  18.10.2012.

Clause 14 of the said agreement provides for settlement of dispute

in relation to the agreement by way of arbitration.  Clause 14 reads

as under:-

“14. Arbitration

14.1 Any dispute, difference, controversy or claim (“Dispute”) arising between the Parties out of or in relation to or in connection with this Agreement, or the breach, termination, effect,  validity, interpretation  or  application  of  this  Agreement  or  as  to  their rights,  duties  or  liabilities  hereunder,  shall  be  settled  by  the Parties by mutual negotiations and agreement.  If, for any reason, such  Dispute  cannot  be  resolved  amicably  by  the  parties,  the same  shall  be  referred  to  and  settled  by  way  of  arbitration proceedings  by three  arbitrators,  one to  be  nominated by  each Party  and  the  third  to  be  appointed  by  the  two  appointed arbitrators.   The  arbitration  proceedings  shall  be  held  in accordance with the Arbitration and Conciliation Act, 1996, or any subsequent  enactment  or  amendment  thereto  (the  “Arbitration Act”) by a sole arbitrator appointed by the First Party. The decision of the arbitrator shall be final and binding upon the Parties.  The venue of arbitration proceedings shall be Delhi.  The language of the arbitration and the award shall be English.”

8. As  is  evident  from  the  averments  in  the  petition,

disputes have actually arisen between the parties in relation to the

agreement and in view of clause 14 such disputes could be resolved

only by way of arbitration.  Whether the respondent is bound to

pay  Euro  393916.95  alongwith  interest  at  the  rate  of  24% per

annum; whether the respondent has committed breach of Clause

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2.2  of  the  agreement  in  cancelling  the  orders;  whether  the

respondent is liable to compensate for cancelling the orders and

reimburse  the  cost  and  damages  incurred  by  the  petitioner;

whether the respondent acted in violation of Clause 4.1 of ‘Buyers

Agreement’  dated  18.10.2012 by diverting  the  orders  to  another

agency and, if so, whether the respondent is liable to compensate

the petitioner and such other incidental questions can be examined

only  by  the  arbitrator.  When  an  arbitration  agreement  exists

between the parties, the present petition under Section 11 (5) read

with Section 11 (9) of the Arbitration and Conciliation Act, 1996,

shall have to be allowed with appropriate directions.

9. In  the  result,  we  allow  this  petition  and  appoint

Mr. Justice Kailash Gambhir, a Former Judge, Delhi High Court as

a Sole Arbitrator for adjudication of the disputes that have arisen

between  the  parties  in  relation  to  the  ‘Buyers  Agreement’  dated

18.10.2012 executed between them. We leave it open for the parties

to  make  their  claims  and  counter  claims  in  relation  to  the

agreement  aforementioned  before  the  Arbitrator.  All  contentions

otherwise open to the parties on facts and in law shall be open to

be urged before the arbitrator.  The arbitrator shall fix his own fee.

The  petition,  is  accordingly,  allowed  with  the  above  directions

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leaving the parties to bear their own costs.  Parties are directed to

appear before the arbitrator on 14.09.2016.

……………………….CJI.                (T.S.THAKUR)

…………………………..J.          (R.BANUMATHI)

..…………………………J.          (UDAY UMESH LALIT)

New Delhi; July 25, 2016

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