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2007 (5) TMI 654 - HC - Companies LawPetition filed u/s 34 of the Arbitration and Conciliation Act 1996 (The Act) - Validity of award made by sole arbitrator - no arbitration agreement between the parties - Violates provisions of The Limitation Act, 1963 and Sick Industrial Companies (Special Provisions) Act, 1985 and The Arbitration and Conciliation Act, 1996 - Issue Regarding Existence of an Arbitration Agreement - HELD THAT - In the present case, the Petitioner herein made his offer when it placed the purchase order dated 13.2.1997 upon the Respondent which, inter-alia, contained Clauses 10 and 11 as aforesaid. Clause 10, specifically made any other terms or conditions, contained in any document of the respondents that were in addition to, or in contradiction to those contained therein, inapplicable to the contract unless they were specifically agreed to by the petitioner in writing. Clause 11 subjected all disputes to jurisdiction of Delhi Courts. The respondent acted on this offer by effecting supplies of the goods, and at the same time raised an invoice dated 6.3.1997 for ₹ 1,49,866.17 which contained condition No. 4. The inclusion of terms and conditions at the back of the invoice, unilaterally issued by the Respondent while effecting delivery of the goods in terms of the Petitioner's purchase order, would not bind the Petitioner. The purchase order itself made it clear that the Petitioner did not intend to refer its disputes to arbitration in respect of the resulting transaction arising out of the said purchase order. Arbitration was clearly contra indicated when the Petitioner's purchase order itself stated that Any dispute arising out of this contract shall be subject to the jurisdiction of Courts in Delhi The Respondent was well aware that the Petitioner had shunned arbitration, yet the Respondent acted in furtherance of the said purchase order by effecting supplies. The signature by the petitioners agent on the respondents copy of the invoice cannot tantamount to acceptance of the respondents so called offer for arbitration. The signatures in such a situation were evidently an acknowledgment of receipt of the goods and nothing more. There is another aspect of the so- called Arbitration Agreement contained in condition No. 4 of the Respondents invoice. Thus, I find that there was in fact no arbitration agreement between the parties and that the arbitrator appointed by the Paper Merchants Association (Regd.), Delhi had no jurisdiction to adjudicate the disputes between the parties in relation to the contract in question. The arbitrator has completely misdirected himself in dealing with the aforesaid specific objection as to his jurisdiction. Issue of Limitation - The Purchase Order dated 13.2.1997 clearly stipulates that the payment was to be made in 90 days of the date of dispatch of goods. There is no averment in the claim petition that any goods were supplied beyond 31.7.1997 (the principal amount claimed before the Arbitrator was the total claimed to be outstanding as on the said date). Thus, time began to run in this case not later than 31-7-97 (or 90 days thereafter at the latest) which date was not denied by the Respondent No. 1 in his rejoinder filed before the Arbitrator. Proceedings, if any, ought to have been initiated before the expiry of three years from that date. However, the Arbitration commenced in January, 2001. The giving of C' Form by the petitioner on 16-1-2000 does not have the effect of postponing the due date of payment under the contract. Therefore, unless the Respondent makes out a case of extension of limitation under the provisions of the Limitation Act, the proceedings were clearly barred by time. Form 'C' given by the Petitioner to the Respondent on 16.1.2000 be considered to be an acknowledgment? - Firstly, there is no acknowledgement of a present and subsisting liability. The said form can at the most be treated as an acknowledgement of the goods received under the contract of supply of goods and the price fixed to be paid for them. Whether or not payments were effected thereafter, or any amount remains due or outstanding cannot be inferred from the said 'C' form in the facts and circumstances of this case. Secondly, no intention to acknowledge a liability can be inferred from the contents of the said 'C' form. Thirdly, one cannot establish a jural relation of debtor and creditor from the contents of the said 'C' form. Thus, the essential requirements for a writing to constitute acknowledgment are missing from this document. (see Hansa Industries (P) Limited v. MMTC Ltd 2004 (7) TMI 379 - HIGH COURT OF DELHI . Thus, the Arbitrator clearly erred in treating 16.1.2000 as the date of commencement of limitation. In view of the provisions contained in The Limitation Act, and the authorities cited, I find no force in the contention of the Respondent that the claim before the Arbitrator was within the period of Limitation. The said 'C' Form does not constitute an acknowledgment within the meaning of Section 18 of the Limitation Act and the Arbitrator misapplied the law on this aspect as well. I, Therefore, set aside the impugned award as being contrary to Public Policy of India.
Issues Involved:
1. Existence of an arbitration agreement. 2. Violation of public policy of India. 3. Limitation of the claim. Detailed Analysis: Issue Regarding Existence of an Arbitration Agreement: The petitioner challenged the arbitrator's jurisdiction, arguing there was no arbitration agreement between the parties. The arbitrator based his jurisdiction on Clause 4 of the respondent's invoice, which stated that disputes would be resolved by the Paper Merchants Association. However, the court found that the petitioner's purchase order explicitly rejected any additional terms unless agreed in writing, and subjected all disputes to the jurisdiction of Delhi courts. The court held that the respondent's unilateral inclusion of arbitration terms on the invoice did not bind the petitioner, as there was no mutual agreement or "consensus ad idem." The court concluded that there was no enforceable arbitration agreement, and the arbitrator had no jurisdiction to adjudicate the disputes. Issue of Limitation: The petitioner argued that the respondent's claim was time-barred under the Limitation Act. The arbitrator had incorrectly assumed that the limitation period started from the date the 'C' form was issued, treating it as an acknowledgment of debt. The court clarified that suits for the recovery of goods' price are governed by Articles 14 & 15 of the Limitation Act, starting from the date of delivery or the expiry of the credit term. In this case, the last delivery was made by 31.7.1997, and the arbitration commenced in January 2001, well beyond the three-year limitation period. The court also held that the 'C' form did not constitute an acknowledgment of a subsisting liability, as it only acknowledged past transactions without indicating a present debt. Therefore, the claim was time-barred. Violation of Public Policy of India: The court found that the award violated public policy by misapplying the law on limitation and jurisdiction. The arbitrator had misdirected himself regarding the existence of an arbitration agreement and the calculation of the limitation period, leading to an erroneous award. Conclusion: The court set aside the impugned award, ruling that there was no valid arbitration agreement, the claim was time-barred, and the award was contrary to the public policy of India.
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