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Precision Cars India Private Limited v. Porsche Middle East And Africa ; F.z.e. & Another

Precision Cars India Private Limited v. Porsche Middle East And Africa ; F.z.e. & Another

(High Court Of Rajasthan)

Civil Misc. Appeal No. 1720 of 2012 | 04-05-2012

Nisha Gupta, J.

1. This misc. appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 against the order dated 28.4.2012 passed by Addl. District & Sessions Judge No. 9, Jaipur Metropolitan the application filed under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act of 1996) has been dismissed.

2. The short facts of the case are that appellant-Company is a private limited company registered under the Companies Act and is exclusive importer of cars, accessories and spare parts of the respondent companies for the entire Indian markets. The appellant-company entered into an agreement vide agreement dated 8.6.2007 for an indeterminable period with respondent No. 1, i.e. Porsche Middle East and Africa (hereinafter referred to at PME) to sell new Porsche multipurpose sports vehicles, original spare parts, accessories etc.

3. Respondent No. I sent a notice vide e-mail to the appellant-company whereby it was mentioned that respondent-I wishes to terminate the contract with the appellant-company which was executed on 8.6.2007 and the contract will automatically terminate after the period of 12 months, i.e. on 28.2.2012.

4. The clause 14.8 of the agreement clearly stipulates that any dispute arising out of or in connection with an agreement including the existence, validity, application or termination of this agreement shall be referred to arbitration in accordance with rules of London Court of International Arbitration. It has been further stipulated in clause 14.9 that execution and interpretation of the contract shall be subject to the laws in force in the Emirates of Dubai and clause 14.8.3 stipulates that the place at which the arbitration takes place shall be the Kingdom of Bahrain. Therefore, the appellant filed an application under Section 9 of the Act of 1996 to restrain the respondent companies from terminating the contract entered between the parties vide agreement dated 8.6.2007 and the termination notice which was issued in contravention of the terms and conditions of the contract and also against the laws of UAE. The Addl. District & Sessions Judge No. 9, Jaipur passed the ex parte order whereby it was directed to the respondent companies not to terminate the agreement without obtaining the approval from the committee as specified under the laws of UAE. Subsequently, after hearing the rival contentions of both the parties, the application under Section 9 of the Act of 1996 has been rejected and hence this appeal.

5. Heard learned counsel for the parties and perused the relevant documents which have been placed on record by both the parties.

6. Today, this matter was listed on the application for taking additional documents on record but with the consent of both the parties, documents have been taken on record and the matter has been heard finally.

7. The contention of the present appellant is that the termination notice is not valid. The learned trial court has not rightly appreciated the law laid down in the case reported in Bhatia International v. Bulk Trading S.A. and anr. (2002(4) SCC 105) and erroneously applied the case of Videocon Industries Ltd. v. Union of India and anr. (2011) 6 SCC 154) and Dozco India Private Limited v. Infracore Company Limited (2011) 6 SCC 179 [LQ/SC/2010/1096] ) and the learned Judge was wrong in holding that the law of UAE under Federal Law No. (2) of 2012 are not applicable to the present dispute. The termination notice has been given in contravention of the agreement.

8. Per contra, the contention of the respondent is that case of Bhatia International (supra) has been further clarified in the cases of Videocon Industries Ltd. and Dozco India Private Limited (supra). The notice of termination was rightly given and by e-mail dated 8.3.2011, it has been confirmed and accepted by the appellant. The learned trial court has rightly held that courts of India have no jurisdiction to hear any dispute arising out of the agreement in question. It was also submitted that the respondent company has entered into another agreement with Volkswagen Group Sales India Private Limited referred to in the correspondences between the parties as the NSC for import of its vehicle into India and agreement has been entered into on 1.3.2012 between the respective parties and they cannot be forced to continue its commercial contract with the appellant beyond the date of termination of agreement, i.e. 31.3.2012.

9. The foremost and main objection of the present appellant is that the case of Bhatia Internation (supra) has been wrongly interpreted by the court below and in view of the law laid down in the case of Bhatia International (supra), the courts in India have jurisdiction to entertain the application under Section 9 of the Act of 1996 and applying the ratio of Videocon Industries Ltd. and Dozco India Private Limited (supra), The court below has committed a grave error. It was also submitted by the learned counsel for the appellant that the law laid down in Bhatra International case (supra) was verdict by three Judges Bench, whereas the cases decided in Videocon Industries Ltd. and Dozco India Private Limited (supra) are the pronouncement by the smaller number of Judges, and smaller number of Judges cannot overrule the law laid down by the Larger Bench and to fortify his argument, he has placed reliance on Union of India and anr v. Raghubir Singh (Dead) by LRs. Etc. (AIR 1989 SC 1933 [LQ/SC/1989/332] ) wherein it has been held as under:

"29. We are of opinion that a pronouncement of law by a Division Bench of this Court is binding on a Division Bench of the same or a smaller number of judges, and in order that such decision be binding; it is not necessary that it should be a decision rendered by the Full Court or a Constitution Bench of the Court. We would, however, like to think that for the purpose of imparting certainty and endowing due authority decisions of this Court in the future should be rendered by Division Benches of at least three Judges unless, for compelling reasons, that is not conveniently possible."

10. Further reliance has been placed on Official Liquidator v. Dayanand and others (2008) 10 SCC 1 [LQ/SC/2008/2207] ) where rule of precedent has been. explained. It is not in dispute that pronouncement of law by the Division Bench could not be overruled by the same or smaller number of Judges, but in the present scenario, the law laid down in the case of Bhatiya International (supra) has not been overruled by the law laid down in the cases of Videocon Industries Ltd. and Dozco India Private Limited (supra). Rather, in the cases of Videocon Industries Ltd. and Dozco India Private Limited (supra), the law laid down in the case of Bhatiya International (supra) has been further explained. In the case of Videocon Industries Ltd. (supra), the learned Apex Court has considered the law laid down by the three Judges Bench in the case of Bhatiya International (supra) and concluding para may be quoted here which reads as under:

"32. To conclude, we hold that the provisions of Part I would apply to all arbitration and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part 1. In cases of International commercial arbitration held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provisions, in part I, which is contrary to or excluded by that law or rules will not apply."

11. And while considering the case of Hardey Oil & Gas Ltd. v. Hindusthan Oil Exploratioh Co. Ltd. (2006) 1 Guj. L.R. 658, it was held by the Apex Court that the learned Sessions Judge did not have jurisdiction to entertain the petition filed u/Sec. 9 of the Act of 1996 because all the parties had agreed that the law governing the arbitration will be the English laws. In the case of Hardy Oil and Gas Ltd. (supra) the matter has been elaborately discussed and LCIA Arbitration Rules have been considered and explained.

12. In the present case in hand, it is not in dispute that clause 14.8 of the agreement clearly stipulates that any dispute arising out of or in connection with an agreement including the existence, validity, application of termination of this agreement shall be referred to arbitration in accordance with rules of London Court of International Arbitration. In Bhatiya Internationals case (supra) it has been specifically held that the provisions of Part I of the Act of 1996 would apply unless the parties by agreement, express or implied exclude all or any of its provision. In that case, the law or rules chosen by the parties would prevail. This ratio has also been further clarified by the Apex Court in the cases of Videocon Industries Ltd. and Dozco India Private Ltd. (supra). It is not in dispute that here the parties have adopted the English law for governing the arbitration agreement and have expressly excluded the applicability of Indian laws and once the parties have agreed to govern by any other law than the India Law, the provisions of Section 9 of the Act of 1996 cannot be invoked.

13. The contention of the present appellant is that the ratio laid down in the case of Bhatia International (supra) has not been rightly appreciated by the trial court is unacceptable. A composite reading of these three pronouncements by the Honble Apex Court goes to show that the ratio held in the case of Bhatia International (supra) has been further explained in the cases of Videocon Industries Ltd. and Dozco India Private Ltd. (supra) and in the present case, the parties have expressly adopted the English law for governing the arbitration agreement and when specific exclusion has been agreed by the parties, the Indian courts will not have any jurisdiction over the arbitration dispute.

14. The learned counsel for the respondent has also placed reliance on the judgment reported in the case of Yograj Infrastrlucture Limited v. Ssang Yong Engineering and construction Company Limited (2011) 9 SCC 735 [LQ/SC/2011/1160] ) where same controversy has been resolved by the Apex Court.

15. The contention of the present appellant is that the provisions of LCIA Arbitration Rules, column No. 25.3 provides that any party can apply to any State Court or other judicial authority for interim or conservatory measures but ample power has been given by rule 25.1 to the concerned arbitral tribunal to provide security, preservation, storage, sale or other disposal of the property and when the relief can be sought under rule 25.1 and looking to the ratio of Bhatia International, Videocon Industries Ltd. and dozco India Private Ltd. (supra) where provisions of LCIA Arbitration Rules have been dealt with and it has been held that when there is a exclusion clause regarding applicability of the laws between the parties, the courts situated in India has no jurisdiction to entertain the petition under Section 9 of the Act of 1996.

16. The learned trial court has also considered the rival contentions of the parties and after having considered these three judgments of the Apex Court, has held that the Indian courts have no jurisdiction to entertain the petition under Section 9 of the Act of 1996 and there is no infirmity in the reasoning and conclusion arrived at by the court below.

17. Apart from this, the court below has considered the merit of the case in spite of lack of jurisdiction, hence this finding regarding jurisdiction has no bearing on the case.

18. The other contention of the present appellant is that the notice is against the arbitral agreement and the learned trial court has not considered the facts in right perspective. The balance of convenience lies in their favour. The appellant-company has captured a good image in the Indian markets and termination of agreement will create irreparable loss to the appellant- company. The business between the parties are still continued after the notice of termination and deliveries of goods yet to be made in May, 2012 and it goes to show that the notice of termination has been waived. It has also been con- tended by the appellant that no reason has been assigned for the termination.

19. The contention of the respondent is that clause 13.2 of the agreement gives right to either party to terminate the agreement subject to 12 months notice and there is no necessity to narrate any reason for termination of the agreement and by exercising option given under clause 13.2, notice has been given to the appellant and which was never objected by the appellant and special reference has been made regarding letter dated 8.3.2011, wherein the appellant himself has accepted the notice of termination and it was communicated by the appellant that all aspects of the consequences of termination and contract will be fully respected by both the parties and the appellant-company has further asked that there will be a letter of good conduct from the respondent clearly stating that the distribution is being transferred to NSC due to internal restructure and not due to any lack of performance of the present appellant and it was also asked by the appellant that the draft of the certificate shall be shared and agreed in advance as well. Hence the letter dated 8.3.2011 of the appellant clearly reveals that he has accepted the notice of termination and nothing has been objected by him at first instance. The agreement has already been terminated on 31.3.2012 and the respondents have entered into a contract with NSC which has been clearly accepted by the appellant in the letter dated 8.3.2011. 12 months time has been given to both the parties to settle their dues, accounts and obligations. Stipulated time period has already been lapsed and it has been mentioned in the letter dated 8.3.2011 of the appellant that now distribution is transferred to NSC which is the contention of the respondent also. When the agreement has already been terminated and new importer has been appointed, the wheels cannot be turned back by an interim order.

20. The contention of the present appellant is that still they are dealing with the respondent-company and supply has to be made till May, 2012. The respondent has answered this query that in original agreement, there are arrangements for notice period and reference has been made of column No. 13.5 which reads as under:

"In the event that the agreement is terminated, PME is authorised but not obliged to cancel, in part or in full, orders already placed with PME by the Local Importer. The local importer shall transfer orders which he has already received to PME, or to a third party named and accordingly transfer all down payments and advance payments which he has received in cash or in any other form.

21. This clause clearly takes care of situations during notice period and contention of the appellant that notice of termination has been waived is not sustainable.

22. The respondent has placed reliance on the judgment reported in the case of B.L. Shreedhar and ors. v. K.M. Munireddy (dead) (2003) 2 SCC 355 [LQ/SC/2002/1294 ;] wherein it has been held when one by his words or conduct wilfully caused another to believe of a certain state of things, the former is precluded from showing the existence of a particular state of facts. In the present case, the present appellant has accepted the notice of termination. Now he is estopped from saying that he should not face the consequence of termination. Both the parties have acted on the notice of termination and now it does not lie in the mouth of the appellant to object on the notice of termination.

23. The other contention of the respondent is that the conduct of the present appellant dis-entitles him from equitable relief. Earlier he has filed application -under Section 9 of the Act of 1996. The interim relief has been denied to him. The application has been withdrawn by him and the second application has been submitted. The contention of the present appellant is that in his petition he has clearly stated that earlier he has filed an application under Section 9 of the Act of 1996 which was withdrawn.

24. It is true that the appellant has disclosed the fact that earlier petition under Section 9 of the Act of 1996 has been filed and the same was withdrawn, but the fact that on earlier occasion, the interim relief has been denied to him, has been suppressed by the present appellant and this fact has not been considered by the court below also. The suppression of this material fact that on earlier occasion interim relief has been denied to the present appellant, is significant while considering the question of granting equitable relief to the appellant. The appellant is guilty of suppressing the material facts and on this count alone, equitable relief should be denied to him. The further fact which goes against the present appellant is that notice of termination has been given to him on 1.3.2011. He has received the notice on 7.3.2011 and he has further communicated with the respondent on 8.3.2011 but the first application has been filed by the appellant in March, 2012 after lapse of one year. Meaning thereby when notice period is virtually going to be finished, he has started the dispute, which clearly shows his intention. He is guilty of delay and no reasonable explanation has been given why he has waited for about an year. This fact alone is sufficient to deny him equitable relief.

25. Objection has also been taken regarding application of UAE law and reliance has been placed on article (28) of the Federal Law (2) of 2010 and it has been alleged before the trial court that the material reason for termination of agency should be shown and the litigant party could not come before the court unless issues referred to the Committee of commercial agencies which will be constituted under Article 27.

26. Word "Agent" in the Federal Law No. (2) of 2010 reads as under:

"a natural person that bears the nationality of the UAE or a corporate person that is wholly owned by national natural persons that is authorised under the commercial agency contract to represent the Principal to distribute, sell, offer or provide acommodity or service inside the UAE for a commission or profit."

27. A bare reading of above goes to show that the rule applies only when the agent must be UAE National or the company is 10096 owned by a UAE National. The contract must be in Arabic and it must be registered in the commercial agency registered by the UAE Ministry of Economy and, admittedly, the agreement in dispute does not fulfil any of the above requirement. The contention of the appellant is not well sounded. The definition of Agent clearly suggests that the appellant could not claim the protection of the provision regarding giving any material reason or referred the matter to the Committee, rather the agreement dated 8.6.2007, clause 13.2 gives either party a right to terminate the agreement without disclosing any reason.

28. The other contention of the present appellant is that relief has been denied to him looking to the provisions of Section 41 and 14 of the Specific Relief Act and it has been submitted that in appropriate cases, in spite of the provisions of Section 41 and 14 of the Specific Performance of the Act, relief under Section 9 of the Act of 1996 can be given and reliance has been placed on Adhunik Steels Ltd. v. Orissa Manganese and Minerals (P) Ltd. (2007) 7 SCC 125 [LQ/SC/2007/877] ) wherein it was held that at the end of transaction it was not possible to assess the compensation that might be payable to Adhunik Steels Limited and hence the interim relief has been awarded.

29. Per contra, the respondent has placed reliance on the judgments reported in the cases of Central Bank of India Ltd., Amritsar v. Hartford Fire Insurance Co. Ltd. (AIR 1965 SC 1288 [LQ/SC/1964/228] ), Percept D Mark (India) (P) Ltd. v. Zaheer Khan & Anr. (2006) 4 SCC 227 [LQ/SC/2006/242] ), Indian Oil Corporation v. Amritsar Gas Service (1991) 1 SCC 533 [LQ/SC/1990/735] ) and Classic Motors v. Maruti Udyog (65 (1997) DLT 166 [LQ/DelHC/1996/1089] ) wherein it has been held that grant of injunction resulted in compelling specific performance of a contract for personal, confidential and fiduciary service is barred under Section 14 of the Specific Relief Act, 1963. There shall not be specific performance of the contract for personal service and where the appellant could be fully compensated, the equitable relief of injunction should not be granted. A composite reading of these pronouncements of the Apex Court goes to show that the provisions of Sections 41 and 114 of the Specific Performance of the Act ipso facto does not bar the remedy under Section 9 of the Act of 1996 but looking to the particular facts and circumstances of the case the court will decide the question of granting interim relief under Section 9 of the Act of 1996. In the case in hand, it is not in dispute that it is a commercial contract which is personal and have some fiduciary service. The notice to terminate has been received by the present appellant a year back and the respondent has already appointed another importer. In light of above facts the court below has rightly declined to grant equitable relief to the present appellant.

30. The contention of the appellant is that no cogent or material reason has been assigned for termination of the agreement. It has been stated in the notice of March, 2011 that PME wants to re-structure the business in India, which cannot be termed as a material reason. The contention of the respondent is that according to clause 13.2 of the agreement, there is no requirement to give any reason for termination of the agreement and it was further contended by the respondent that other reasons have already been narrated in the notice dated 1.3.2011 and when he has a right to terminate the agency without affording any reason, it cannot be read as a right to terminate for a reasonable cause and reliance has been placed on Central Bank of India Ltd., Amritsar (supra), the respondent has every right to terminate agreement vide clause 13.2 which reads as under:

"13.2 Either party has the right to terminate this agreement subject to twelve months notice to the end of the month."

31. It is implicitly clear from the above clause that there is no requirement to assign any reason to terminate the agreement. Hence the contention of the appellant is unacceptable.

32. The respondent has further placed reliance on the judgments reported in the cases of Colgate Palmolive (India) Limited v. Hindustan Lever Ltd. (1997) 7 SCC 735), Kishorsinh Ratansinh Jadeja v. Maruti Corporation k Ors. (2009) 11 SCC 229 [LQ/SC/2009/767] = 2010(1) RLW 101 (SC)) and Rameshwari Devi v. Nirmala Devi & Ors. (2011) 8 SCC 249 [LQ/SC/2011/812] ) wherein general principles of granting injunction have been enumerated.

33. Looking at the above, the learned court below has rightly held that to entertain the petition under Section 9 of the Act of 1996, the courts situated in India have no jurisdiction.

34. Further more, the appellant has not come with clean hands. He has suppressed the material facts from the court. He is guilty of delay and on first instance, the notice of termination has not been objected. Looking at the above facts, the interim relief has been rightly denied to him. There is no reason to interfere in the reasoning and conclusion arrived at by the Court below and this misc. appeal is liable to be dismissed.

35. In view of the above, this misc. petition is hereby dismissed.

Appeal dismissed.

Advocate List
  • For the Appellant Ashok Gaur, Sr. Advocate with Nitit Jain, Ajatshatru Singh, Advocates. For the Respondents A.K. Sharma, Sr. Advocate with Sumit Nag, Piyush ANag, Ranchit Sharma, Advocates.
Bench
  • HON'BLE MRS. JUSTICE NISHA GUPTA
Eq Citations
  • 2013 (3) RLW 2304 (RAJ)
  • LQ/RajHC/2012/752
Head Note

Contract — Specific performance — Held, no injunction can be granted to compel specific performance of contract for personal service — Specific Relief Act, 1963, S. 9