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Siddhi Vinayak Industries Pvt. Ltd. v/s Virgoz Oils & Fats PTE Ltd. & Another

    G.A. No. 640 of 2009, C.S. No. 61 of 2009

    Decided On, 13 August 2010

    At, High Court of Judicature at Calcutta


    For the Petitioner: ------. For the Respondents: ------.

Judgment Text

K.J. Sengupta, J

The Plaintiff?s application made on Notice of Motion dated 13th March 2009 is for basically for obtaining order of injunction against both the defendants from proceeding with Arbitration agreement. This application is taken out in connection with the above suit which is filed for following reliefs:

a) The communication dated 25th February, 2009 being Annexure ?F? hereto be adjudged void, delivered up and cancelled;

b) Perpetual injunction restraining the respondent No.1 from taking any step or further step on the basis of the request for arbitration dated 23rd January, 2009 or any other similar request;

c) Perpetual injunction restraining the respondent no.1 from taking any step or further step by way of commencement of Arbitration arising out of the 4 (four) proposed sales contracts dated 22nd July, 2008, 23rd July, 2008, 6th August, 2008 and 7th August, 2008;

d) Perpetual injunction restraining the respondent No.1 from taking any step or further step in connection with the reference commenced by them on the basis of the alleged arbitration agreement in the said 4 (four) proposed sales contracts;

e) Decree for Rs. 10 crores as pleaded in paragraphs 27 above;

f) The proposed sale contracts dated 22nd July, 2008, 23rd July 2008, 6th August, 2008 and 7th August, 2008 being Nos. SG/08/0556/07BO4, 615/08BO4 and 622/08BO1 being Annexure ?A? hereof and the letters issued in furtherance thereof be adjudged void and be delivered up and cancelled;

g) Receiver;

h) Injunction;

i) Attachment;

j) Costs;

k) Such further and/or other relief or reliefs.

The case made out by the plaintiffs in the petition is summarized hereunder:

The plaintiff/ petitioner has been carrying on business of import and sale of fats oil of diverse nature. The first respondent is engaged in the business of various kinds of fats and oils having its base in Singapore. In usual course of business between the period of December 2007 to July 2008 the petitioner had imported from the first respondent about 2000 mt. tons of various kinds of oils into India. For such purpose there has been a contractual agreement and after completion of the aforesaid import the plaintiff never did enter into any further business with the first defendant. Thereafter the first defendant through the brokers wanted to enter into further transaction for sale of edible oils with the petitioner in or about 22nd July, 23rd July, 28th July, 6 August, 7th August 2008. The first respondent made correspondences with the plaintiff. By those correspondences merely a proposal was made for sale of further 2000 mt. tons palm oil at a price mentioned in the said proposal. In the said four proposals it was mentioned if the plaintiffs agrees then the confirmation with the signature of the plaintiff should be mailed back to the first defendant. The plaintiff/ petitioner never accepted such proposal with confirmation as asked for. In spite of such factual position the first defendant unilaterally on 27th August, 23rd September, 25th September and 9th October 2009 through the said brokers again forwarded vessel-nomination to the plaintiff, but the petitioner did not accept the same, on the contrary over telephone the brokers were informed that since there was no contract between the parties nor had the petitioner purchased any goods from the first respondent there is no point of acting upon such vessel-nomination. In spite of the aforesaid communication to the broker over telephone the said two brokers once again on 23rd September 2008 forwarded e-mails purported to have been sent by first respondent concerning the said proposed contract whereby the shipment to be so extended. On receipt of the said e-mails dated 24th September 2008, the plaintiff/ petitioner intimated to the said broker that there has been no contract, as such question of shipment did not and could not arise. . It was thought that both the respondents would put all things at rest, unfortunately first respondent as well as two brokers wrote letters alleging breach of obligation on the part of the plaintiff. On 28th February 2009 the plaintiff received a communication dated 25th February 2009 from the respondent No. 2, namely The Palm Oil Refineries Association of Malayasia requested plaintiff/petitioners to nominate an Arbitrator. The petitioner was surprised to receive such letter as the respondent No. 2 had no authority to make such request to the plaintiff. Therefore such letter of request for nomination of Arbitrator issued by the respondent No. 2 is illegal, null and void, in as much as the Respondent No. 1 had no right to refer alleged dispute to arbitrator by reason of the fact that there had and still has been no concluded contract nor there has been any existence of arbitration agreement.

The said application was moved ex parte on 20th March 2009 before the learned Interlocutory Judge, and Hon?ble Justice Patherya was pleased to pass a restrain order prima facie observing that there was no arbitration agreement existing between the parties. However, on returnable date after hearing the parties the said interim order of injunction vacated,. The plaintiff/petitioner being aggrieved by the said order of vacating interim injunction preferred appeal and the Appeal Court by its judgment and ordered dated 7th September 2009 dismissed the same and affirm the order of vacating interim order.

On 27th April 2009 the learned Interlocutory Judge while vacating order of injunction gave direction for filing affidavit in opposition by the respondents. It appears that on 17th June 2009 extension was granted to file affidavit in opposition by two weeks and affidavit in reply by two weeks thereafter. In spite of such direction being given on two occasions no affidavit in opposition has been filed.

In this situation this matter has come up for hearing before this Court. Before the matter is taken up for hearing Mr. Uttam Bose learned Counsel for the plaintiff/petitioner submits that his client already filed Special Leave Petition in the Hon?ble Supreme Court of India against the judgment and order of dismissal of appeal by the Division Bench. It is informed that the said appeal is likely to be heard any day in the next week. Therefore, he requested that hearing of this matter be deferred. However, I do not defer hearing of the matter since appeal was preferred against the ad interim order before the Hon?ble Supreme Court, as there has been no restrain order from hearing the matter finally.

Mr. Bose further submits that practically all points have been decided by the learned Trial Judge while vacating the interim order thereafter by the Division Bench by considering factual and legal position,. Thereafter there has been no factual change.

He submits that without taking note of the earlier judgment and order of the learned Trial Judge and also that of the Division Bench, I should apply my mind independently to consider the mater. I feel it should be done so without looking into the said judgment and orders passed earlier, I examine this matter afresh. The sum and substance of the contention of Mr. Bose drawing my attention to the document annexed to the petition is that there has been no concluded contract though there has been a proposal in writing by the first defendant by four communications for sale and supply of an aggregate quantity of 2000 mt. tons of palm oil. The terms and conditions with regard to supply, shipment, unloading, mode of payment, and measure for adjudication of dispute if arise in future, are embodied in the said letter. At the bottom of each and every communication it has been specifically mentioned that this contract will be a conclusive deal only when the plaintiff/petitioner will make a confirmation by signing and sealing the same.

Mr. Bose wants me to accept that this communication was merely a proposal and at the negotiation stage. Factually this document was never signed and sealed as such there has been no concluded contract naturally there could not be any existence of any arbitration agreement. Naturally there was no reason to activate the second defendant for initiating arbitration against the plaintiff/petitioner. There has been no jural relationship to fasten the plaintiff with any liability, the alleged breach of contract by the first respondent through its brokers is baseless therefore, the arbitration is also unfounded. It is settled position of law that when there is no existence arbitration agreement the Court will pass an order of injunction considering the balance of convenience on the question of principle of forum convenience.

Mr. Ranjan Bachawat submits pointing out to the last portion of each and every letter, that it has been made clear even if sale confirmation is not made by the plaintiff the validity will not be affected once it is received. Even after receiving all these communications followed by other documents the plaintiff/petitioner have not recorded protest nor denied this contract being conclusive so also the arbitration agreement, which is deemed to have been entered into by and between the plaintiff and the first respondent as per provisions of Section 7 of Arbitration and Conciliation Act 1996. He also submits that the Division Bench with great details both on fact and law discussed this matter and in fact it has been decided finally and nothing is left for decision of this Court as there has been no subsequent change in the situation. He also informs orally that the agreement provides for appointment of Arbitrator although the plaintiff has not sent any nomination for Arbitrator.

After hearing the learned Counsel for the parties and considering the statement and averment and the accompanying documents without being influenced by the earlier findings of both the Courts I find only point is to be decided at this interlocutory stage is as to whether there has been factual concluded contract upon reading the documents or not, and sequally whether there has been creation of arbitration agreement or not.

Mr. Bachawat has rightly pointed out that each and every letter containing the terms and conditions of the contract mentioning following language:

?Please stamp, sign and return one copy of this sales confirmation by facsimile transmission to us upon its receipt confirmation. The validity of this contract will be unaffected by the non-return of the counter confirmation duly signed by your goodself.?

It appears from each and every communication with identical language is used with detailed terms and conditions as regard quantity of the goods to be shipped, shipping port, unloading port, mode of payment, discharge, terms of insurance coverage, payment of demurrage, import duty and above all dispute resolution mechanism by arbitration by the rules of the second respondent. Admittedly these four letters were received by the plaintiff/petitioner and did not raise any objection nor the confirmation was also sent. Under those circumstances I am of the prima facie view going by the language as mentioned above starting with the words ? The validity of this contract will be unaffected by the non-return of the counter confirmation duly signed by your goodself? has bound the parties whether it is factually signed or not for such formality hardly matters as all the acts and conduct of both the parties have settled the deal for sale and purchase of 2000 mt. tons of palm oil.

It is not necessary under the law that the contract has to be inferred from a formal document with signature and authentication. There are cases where even with oral agreement pending documentation or even a draft agreement is treated to be a binding one, and this contract can be enforced.

In this connection a decision of the Supreme Court in the case of K. Siramulu v. Aswatha Naravana & Ors. Reported in AIR 1968 SC 1028 is perfect guidance. In paragraph 3 the Apex Court as a statement of law accepting the English decision ruled that mere reference to a future formal contract will not prevent a binding obligation between the parties. The fact that the parties referred to the preparation of an agreement by which the terms agreed upon are to be put in a mere formula does not prevent existence of a binding contract?

Of course in this judgment in the same paragraph it has been mentioned this is not the inflexible rule of law for infering a conclusive contract. It depends upon each and every individual facts and circumstances of the case. It has also been observed if it appears from the act and conduct of the parties nothing is left to be done except a formal shape of the agreement then such oral agreement or draft agreement can be enforced.

Here factually the plaintiff/ petitioner despite receipt of those communication neither confirmed nor denied nor replied them in any way. Thereafter it appears that this first respondent either through its agents or through its brokers made shipment ready did everything on their part and asking for furnishing letter of credit for making payment. Series of communications were made demanding for furnishing letter of credit. In spite of receipt of these communications either through broker or from first defendant itself the plaintiff petitioner did not deny the existence of the said agreement.

Lastly the matter was referred to, before the first respondent had nominated their choice of the Arbitrator in terms of the agreement. The claim was made before the second respondent. On receipt of the said request the plaintiff /petitioner was asked to send their nomination of Arbitrator and also to file their counter statement or claim, as machinery of Arbitration proceeding has been activated. The plaintiff/petitioner for the first time by a communication dated 24th September 2008 being annexure ?d? to the petition to the broker of the first respondent stated that the first r

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espondent or its broker had not consulted the plaintiff /petitioner. The language of the said communication suggests no denial of acceptance of the aforesaid communication or agreement or even arbitration agreement. In this situation I am unable to accept the submission of Mr. Bose that there has been no concluded contract. I am of the prima facie view that there had been a concluded contract naturally arbitration agreement also does exist. Whether the plaintiff/petitioner had purchased or not or whether there was any breach on its part or not can be decided by the Arbitrator. It is now well settled principle when the Court finds that there has been existence of arbitration agreement factually it does not restrain the parties from proceeding with the arbitration proceeding particularly foreign arbitration. The plea of harassment and oppressive action on the part of the defendant in this petition is hardly appreciated by this Court when the contract had been concluded with a complete understanding that venue of arbitration would be at Malayasia and Malayasian law will be made applicable, either of parties herein cannot be allowed to back out from this obligation. It has now become law by a large number of decisions of Apex Court as well as of this Court in this situation anti arbitration injunction cannot be granted. Hence this application is dismissed. However, the aforesaid finding is not intended to be made a precedent for either of the parties for relying in any proceeding or at the time of the trial of the suit if it is called for. There will be no order as to costs.