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TMI Blog2019 (7) TMI 2014X X X X Extracts X X X X X X X X Extracts X X X X ..... principal basis and authorizing them to sell BMW Group Products to end customers. 4. Respondent No. 2, BMW India Financial Services Private Limited is licensed as a Non-Banking Financial Corporation under the Reserve Bank of India Act, 1934. It provides financing services to the dealers appointed by Respondent No. l, for the purposes of establishing and running its dealership business. 5. The relevant facts are that Petitioner was appointed as a dealer of the BMW Group Products in terms of various agreements executed between the Petitioner and the Respondent Nos. 1 and 2, including the Principal dealership agreement dated 1st January 2018 executed between the Petitioner and Respondent No. 1 ("Dealership Agreement"). In addition to the Dealership Agreement, Petitioner has also executed the following ancillary agreements with Respondent No. 1: (i) Novation dated 12th April 2016, to the Letter of Intent dated 21st December 2015 ("Novated LoI"); (ii) Interim Dealer Agreement dated 19th May 2016 ("Interim Dealer Agreement") extended on 13th January 2017 till 31st March 2017. (iii) Deferred Payment Facility Agreement dated 21st June 2016 ("DPA"); and (iv) Hypothecation Deed da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent Nos. 1 and 2 have filed Petitions under Section 9 of the Act being a) O.M.P. (I) (COMM) No. 25 of 2019 and b) OMP (I) (COMM) No. 9 of 2019. Both the Parties hold each other responsible for breach of the Agreement and have monetary claims. There is thus no denying of the fact that the parties have to now take recourse to the dispute resolution mechanism for adjudication of their claims and counter claims arising out of or in relation to the Agreements in question. Therefore, the question before the Court is whether the prayer in the present petition can be allowed in the facts and circumstances of the present case. 11. The factual narrative clearly discloses that there are two separate and distinct set of agreements between the parties. The Petitioner had entered into a Dealership Agreement dated 1st January 2018 only with Respondent No. 1 and in that regard, several other Agreements were executed, as enumerated in para 5 above. For the purpose of financing, Petitioner executed separate and distinct agreements enumerated in para 6 above. The principal financing agreements dated 21st June 2016 and other inter related agreements are executed between the Petitioner and Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings shall be in English and will be conducted in accordance with the Indian Arbitration and Conciliation act 1996 and the rules made thereunder and/or any amendments thereof (the "Rules"). 13.4.4 The arbitration shall be conducted in New Delhi only and the language of the arbitration shall be English. 13.4. 6 In connection with the arbitration, the courts at Delhi will have exclusive jurisdiction of enforcement of the Award, and/or applications for interim reliefs. However, BMW may, at its, option, file proceedings in any other court of competent jurisdiction. " Deferred Payment Facility Agreement (DPA) (Executed between Petitioner and Respondent No. 1) "18. LAW AND JURISDICTION [. . .] 18.2 All disputes, differences, disagreements, controversies or claims arising out of or in connection with this Deferred Payment facility Agreement shall be settled amicable through consultation between the Parties. If the Parties fail to reach an amicable settlement within 15 days of a written request for such consultation being served by either Party on the other, all such disputes and differences arising out of or in relation to this Deferred Payment Facility Agreement, including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from any arbitration conducted hereunder. The arbitral tribunal shall award the prevailing party, as determined by such arbitral tribunal, all its costs and fees. For the purpose of this Agreement, the expression 'costs and fees ' shall mean and include all reasonable pre-award expenses of the arbitration including the arbitrator's fees, administrative fees, travel expenses, out-of pocket expenses such as copying and telephone, court costs and lawyers' fees, The Parties hereto agree to be bound by any award or order including the arbitral tribunal in the manner laid out hereinabove. " Hypothecation Deed dated 20.06.2016 (Executed between Petitioner and Respondent No.1 and 2) "44. All disputes, differences, disagreements, controversies or claims arising out of or in connection with this Deed shall be settled amicable through consultation between the Parties. If the Parties fail to reach an amicable settlement within 15 days of a written request for such consultation being served by either Party on the other, all such disputes and differences arising out of or in relation to this Deed, including the validity, effect and interpretation thereof, shall be resolved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iding all the disputes in a tripartite arbitration or approach the Delhi International Arbitration Centre under the aegis of this Court. 14. Learned counsel for the Petitioner has also argued that there is a nexus between the Agreements. The cars and other BMW products were supplied to the Petitioner under the interim Dealership Agreement dated 19th May 2016 and then under the permanent Dealership Agreement dated 1st January 2018. Such products were financed by both the Respondents under the financing agreements. To show the nexus, learned Counsel also referred to various Clauses of the Agreements indicating that there is a cross reference in the Floor Plan Financing Agreement (FFA) to the Deferred Payment Agreement (DPA). It is further argued that there are interconnecting and overlapping disputes in relation to the various agreements with the Respondents who are group companies and therefore there is a need for a composite tripartite Arbitration. The disputes between the parties are overlapping and have a common nexus and it would be highly impractical for the Petitioner to raise its grievance or adduce separate evidence before different Tribunals which are mutually exclusive of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement under the Floor Plan Financing Agreement, which is the principal agreement for the financing scheme between the parties. The said agreement was entered into between Petitioner and Respondent No. 2. 17. Furthermore, in the Dealership Agreement, Respondent No. 2 is not a party and likewise Respondent No. 1 is not a party to the Financing Agreements. The Arbitration Clauses are only contained in Hypothecation Deeds and Spare part financing agreements. These clauses also provide for a different mechanism for the constitution of the Arbitral Tribunal; The Hypothecation Deed dated 20th June 2016, provides for the Arbitral Tribunal consisting of three Arbitrators. Under the Hypothecation Deed dated 11th July 2016, the parties have agreed for a sole Arbitrator. The same is the situation under the Hypothecation Deed dated 21st June 2016. 18. In this view of the matter, directing the parties to go for a composite arbitration under a sole Arbitrator would amount to rewriting the terms of the dealership agreement agreed between the parties. It can also not be ignored that the invocation of the arbitration agreement is also misconceived. The invocation notice is unspecific and not as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the governing Board. In the case of a dispute between a member and a non-member, no such institutional appeal is available. The appellant contends that the valuable right of appeal was denied by holding a joint arbitration against the appellant and the second respondent. 18. In this case, the first respondent had a claim for Rs 36,98,354.73 jointly against the second respondent and the appellant. According to the first respondent, it entered into the transaction with the second respondent on the instructions of the appellant and on the understanding that the appellant will also be liable and in fact, the appellant accepting its liability, had also paid Rs 13 lakhs as part-payment. It is not disputed that the appellant and the second respondent were closely held family companies managed by the same person (Ms. Kanan C. Sheth). According to the appellant the share holdings in the appellant was Kanan C. Seth: 1,05,000 shares, Chetan M. Sheth: 45,000 shares and Jasumati P. Shah: 1,50,000 shares and the shareholdings in the second respondent Company was Kanan C. Sheth: 100 shares and Chetan M. Sheth: 100 shares. 19. If A had a claim against B and C and there was an arbitration agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue independently. Fundamental feature of an arbitration agreement is that there is an understanding between the parties to adopt alternate mechanism for the adjudication of the future disputes that arise between them. The law does not prescribe any standard form of arbitration agreement and the parties are free to agree upon a procedure and designate the private forum where the parties would like to go in case the disputes and differences arise between them. Thus, there is to be consensus ad-idem between the parties regarding the choice of the forum. The Supreme Court in certain judgments, has held that in certain exceptional circumstances the Court has a power to make an appointment of the Arbitrator, notwithstanding the choice of the specified forum agreed between the parties. However, at the first instance, the effort of the Court would be to ensure that the parties adhere to the choice of the Arbitrator or to the mechanism for constituting the Arbitral Tribunal as envisaged by the Arbitration Agreement. It is also noteworthy that, the Supreme Court in Indian Oil Corporation Ltd. v. Raja Transport Pvt. Ltd., (2009) 8 SCC 520, Union of India v. Singh Builders Syndicate, (2009) 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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