calcutta high court

Calcutta High Court: While deciding an application under Section 8 of the Arbitration and Conciliation Act, 1996 (the Act), seeking arbitration based on the agreement, a single-judge bench comprising of Krishna Rao,* J., found that the plaintiff failed to establish a prima facie case of non-existence of the agreement. The Court deemed the arbitration clause in the agreement valid, and the parties were directed to arbitration based on the forum selection clause.

Brief Facts

In the instant matter, the plaintiff, a stockiest and distributor of consumer goods, entered into an agreement on 16-04-2008, with the defendant, who manufactures ayurvedic, herbal, and cosmetic goods. The agreement between the parties appointed the plaintiff as a distributor in the State of West Bengal for a period of 36 months, extending from 01-04-2008 to 31-03-2011. The plaintiff filed a civil suit against the defendant, seeking a decree of Rs. 1,29,39,103/- along with interest at 12% per annum. The defendant filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking arbitration based on the agreement dated 16-04-2008.

Parties’ Contentions

The defendant claimed that the agreement, originally for 36 months, was extended with mutual consent and is still in force. The agreement includes a clause specifying arbitration for dispute resolution. The defendant argued that the arbitration clause, along with the forum selection clause, designates New Delhi as the situs of arbitration, limiting the jurisdiction of other courts. It was emphasised that the plaintiff’s claim arises from the continued relationship governed by the terms of the agreement.

The plaintiff argued that the agreement was valid only until 31-03-2011, and the terms continued only until March 2014. The plaintiff claimed a new oral agreement was entered into in 2017. It was further contended that the defendant breached the agreement by appointing other distributors and changing the distributorship policy in West Bengal.

Court’s Analysis

The Court reviewed the evidence, including emails and correspondences between the parties, and concluded that the disputes are connected with the agreement dated 16-04-2008. The Court dismissed the plaintiff’s argument of a new oral agreement and stated that the disputes prima facie arises from the terms of the original agreement.

The Court relied on Roshin Lal Gupta & Sons (P) Ltd. v. Delhi Tourism & Transportation Development Corpn., 2009 SCC OnLine Del 502, to support the continuation of arbitration clauses after the formal expiry of an agreement and M.R. Engineers & Contractors (P) Ltd. v. Som Datt Builders Ltd., (2009) 7 SCC 696, to explain the scope and intent of Section 7(5) of the Arbitration and Conciliation Act, 1996, regarding the incorporation of arbitration clauses into contracts.

The Court emphasised on the doctrine of “kompetenz-kompetenz”, giving the Arbitral Tribunal the authority to rule on its own jurisdiction, including the existence and validity of the arbitration agreement. Referring to Section 16 of the Act, the Court asserted that all jurisdictional issues, including the existence and validity of the arbitration clause, are to be decided by the Arbitral Tribunal. The Court stated that “the purpose behind giving these powers to the Arbitral Tribunal is to minimise judicial interference in arbitration matters.”

“All jurisdictional issues including the existence and the validity of an arbitration clause can be gone into by the Arbitral Tribunal. In other words, the Arbitral Tribunal is competent to decide on its own competence.”

Court’s Decision

The Court allowed the defendant’s application under Section 8 of the Act, referring the parties to arbitration, and dismissed the civil suit.

[Suresh Dhanuka v. Shahnaz Husain, 2024 SCC OnLine Cal 643, order dated 24-01-2024]

*Judgment by Justice Krishna Rao

Advocates who appeared in this case:

Mr. Sabyasachi Chowdhury, Mr. Chayan Gupta and Mr. Rajesh Upadhyay, Counsel for the Plaintiff

Mr. Dyutiman Banerjee, Mr. Arnab Sinha, Mr. Soumajit Majumdar, Mr. Amartya Basu, Counsel for the Defendant

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