High Court of Punjab and HaryanaARB/115/2016dismissed

M/S Trident Limited v. Anand Talc And Stratite Pvt Ltd

2016-10-18Mr. Justice M.M. Aggarwal16 pages

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!"#$%& &# %!$ where it is inter alia held that even a buyer of goods from a micro enterprise can refer its claims to arbitration against a

micro enterprise. The learned Single Judge also rejected the contention that an arbitration agreement between the parties which is governed by the Arbitration & Conciliation Act, 1996 cannot override the provisions relating to arbitration under the +"&& $" 9 -

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It is also important to note that the purchase order is attached to this communication. It bears the same number as the number of the purchase order mentioned in the e mail, namely, PO No.5500108812.

Mr. Jain, learned counsel appearing on behalf of the respondent, however, contended that the arbitration agreement is ineffective and inoperative as it has not been signed by both the parties thereto. He submitted that under the provisions of the Act only an arbitration agreement signed by the parties is valid. The submission is not well founded. 7.

It is not necessary under the Arbitration & Conciliation Act, 1996 (for short 'the Act of 1996') for an arbitration agreement to be signed by the parties. Sections 2(b) and 7 of the Act of 1996 read as under:

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Sub section (1) of Section7 merely defines an arbitration agreement. Sub section (2) merely states that an arbitration agreement may be in the form of an arbitration clause in the contract or in the form of a separate agreement. The purchase order is a contract. The purchase order communicated by the e mail dated 22.09.2014 incorporated the terms and conditions contained in the attachment thereto. The terms and conditions, therefore, formed a part of the purchase order. A contract in terms, thereof, had been arrived at for the respondent accepted the same and acted pursuant thereto having actually supplied the goods and raised its invoices in respect thereof. Sub section (2) merely requires the arbitration agreement to be in writing. It does not require either the contract or the arbitration clause contained therein to be signed. A valid contract between the parties under the Contract Act does not have to be signed.

Admittedly the arbitration agreement in this case containing the terms and conditions, which form the part of the purchase order, is in writing.

Sub section (4) of Section 7 provides the circumstances in which an arbitration agreement is considered to be in writing. Clause (a) of sub section (4) is only one of the circumstances which fulfill the requirement of an arbitration agreement being in writing. Clause (a) of sub section (4) provides that the arbitration agreement is in writing if it is contained in a document signed by the parties. It does not even imply that it

is mandatory for an arbitration agreement to be signed by the parties. The case before me falls under clause (b) of sub section (4) of section 7 for the arbitration agreement is contained in an e mail which falls within the meaning of the words "other means of telecommunication through electronic means" which provide a record of the agreement. An e mail is a communication through electronic means.

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The case before me also falls under sub section (5) of Section 7 of the Act of 1996. The purchase order is a contract. There is a reference in this contract to a document i.e. the attachment to the e mail and that document admittedly contains an arbitration clause. The terms and conditions attached to the e mail is a document. Accordingly, the attachment to the e mail is the document referred to in the purchase order i.e. the e mail itself and that document i.e. the attachment contains an arbitration clause. Sub section (5) of Section 7 recognizes the doctrine of incorporation of one document into another. Neither of these documents is required to be signed by the parties thereto. Once the Court comes to the conclusion that the contract is entered into and that contract contains an arbitration agreement, it is sufficient to constitute a valid agreement to refer the disputes and differences between the parties to arbitration. 11.

In the circumstances the arbitration clause quoted above is valid subsisting and binding between the parties. 12.

Mr. Jain submitted that under the provisions of the +"&& $" 9 -

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0 , any arbitration between the parties must be under the provisions of that Act and not under the provisions of the Act of 1996. He further contended that in view of

Section 24 of the MSMED Act, the aforesaid provisions have an overriding effect.

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In support of this contention Mr. Jain, relied upon sub sections

(3) and (4) of Sections 18 and 24 of the MSMED Act. It is, however, necessary to consider few other provisions of the MSMED Act as well. They read as under:

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Mr. Sharma, the learned Senior counsel appearing on behalf of the petitioner on the other hand contended that the aforesaid provisions only apply where there is no arbitration agreement between the parties. He contended that in any event, the arbitration referred to in the aforesaid provisions is limited to cases falling under section 17, namely, in relation to the interest payable by the buyer to the supplier. In this regard he relied upon section 18 which provides that the reference to the Micro and Small

Enterprises Facilitation Council is to be made "with regard to any amount due under section 17" and section 17 in turn only pertains to the buyer's liability to pay the supplier the amount with interest as provided under section 17. There is no reference to a claim by the buyer against the supplier. The provisions that follow sub section (1) of Section 18 also relate to Sections 16, 17 and 18(1) and go no further. Thus, according to Mr. Sharma, the power under sub section (3) of Section 18 to take up the dispute for arbitration itself or to refer it to any institution or centre providing alternate dispute resolution services for such arbitration is only in cases where there is no arbitration agreement between the parties and alternatively is limited to cases falling under sections 16 and 17 of the Act.

Sub section (3) of Section 18 of the MSMED Act, therefore, according to him does not in any manner whatsoever affect the petitioner i.e. the supplier's right to make a claim against the buyer i.e. the respondent in this case. He contended that sub section (4) does not increase the ambit of Sub section (3) of the MSMED Act. Firstly sub section (4) relates to the territorial jurisdiction. Secondly the words "under this section" make it clear that it is in relation to disputes referred to in section 18 which in turn are relatable to sections 16 and 17 of the MSMED Act. In any event there is no other provision which deals with the buyer's rights against the supplier. 15.

Mr. Sharma relied upon a judgment of the Division Bench of the Bombay High Court in case of +'

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The judgment undoubtedly supports Mr. Sharma's contentions. 16.

Mr. Jain on the other hand relied upon a judgment of a Division Bench of Allahabad High Court in +0 3,

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supplier filed a claim petition before the Uttar Pradesh Micro and Small Enterprises Facilitation Council for the recovery of the price of the goods sold and delivered to the buyer. The buyer filed an application under section 8 of the Act of 196 stating that there was an arbitration agreement between the parties. The Council, however, proceeded with the reference made to it under the provisions of the MSMED Act. The petitioner i.e. the purchaser filed a petition before the Allahabad High Court for a writ of certiorari to quash the proceedings before the Uttar Pradesh Micro and Small Enterprises Facilitation Council and a direction to the council to decide the objections filed under section 8 of the Act of 1996. The Division Bench rejected the petition in view of the aforesaid provisions of the Act. However, the issue as to whether the supplier's right to invoke the arbitration agreement is effected by the MSMED Act did not fall for consideration. However, Mr. Sharma's submission do not appears to have been raised before the Division Bench of the Allahabad High Court. 17.

I do not wish to express any view on either of these judgments as I find that I am bound by the judgment of the learned Single Judge of this Court in

!"#$% & &# % !$ In that case the petitioner challenged the order passed by the Chairman of the Council before which the third respondent had sought conciliation under the provisions of the MSMED Act. The proceedings were challenged before the learned Single Judge. Failing conciliation the third respondent sought arbitration also under section 18(3) of the MSMED Act. The learned Judge inter alia held:

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The judgment supports the respondent's case. It is necessary to note, however, that an appeal was filed against the judgment being LPA No. 492 of 2012 which by an order dated 09.09.2013 was admitted. The Division Bench, however, stayed the proceedings under the MSMED Act observing that the appeal raises a number of important issues. 19.

The matter undoubtedly raises important issues under the two Acts, namely, the +"&& $"9 -

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