Yogi Agarwal Vs. M/S
Inspiration Clothes & U & Ors.  INSC 2055 (1 December 2008)
Reportable IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION SPECIAL LEAVE PETITION[C]
NO.29333/2008 [CCNO.15612/2008] Yogi Agarwal .......... Petitioner M/s.
Inspiration Clothes & U, and Ors. .......... Respondents
O R D E R R.
V. Raveendran J.
of an application under Section 8 of the Arbitration and Conciliation Act, 1996
(`the Act' for short), filed by the defendants in a money suit (filed by the
first respondent herein against three defendants, that is, third respondent
company, and its two directors namely, petitioner and second respondent),
affirmed by the High Court, has led to the filing of this special leave petition.
For convenience, we will refer to the parties by their rank in the suit.
is a delay of 182 days in filing this petition. The only reason assigned by the
petitioner, a seasoned businessman, to explain the delay is that he was
confused by diverse opinions about filing of special leave petition. The
explanation is neither satisfactory nor sufficient to condone the delay. Even
assuming that the delay is condonable, we find that the special leave petition
is liable to be rejected on merits.
plaintiff filed the suit on 9.9.2003 for recovery of Rs.9,48,143 with interest
allegedly due in regard to (i) price of two consignments supplied by plaintiff
to the nominees of the first defendant company and (ii) value of nine samples
made available by the plaintiff to defendants.
In the said suit,
defendants made an application dated 17.12.2005 under section 8 of the Act, for
referring the parties to arbitration. To show the existence of arbitration
agreement, the defendants relied upon three invoices of `Yash Traders', a
proprietary concern of the second defendant (petitioner herein), dated
2.11.1999, 22.6.2001 and 11.2.2003 in regard to the sale of cotton fabric by
the said Yash Traders to the plaintiff containing the following note: "All
disputes pertaining to this transaction if any will be subject to the
Arbitration Rules & Regulations of Bharat Merchant Chamber". The
defendants alleged that the said invoices were accepted by the plaintiff thus
resulting in a binding arbitration agreement.
trial court noted that there was no arbitration agreement in regard to the suit
transactions and that the defendants wanted the three invoices (containing a
provision for arbitration) relating to some other transactions to be treated as
an arbitration agreement between parties in regard to the suit transactions. It
examined the three invoices and held that the said invoices could not be
treated as containing an arbitration agreement within the meaning of Section 7
of the Act, as the invoices were signed only by `Yash Traders' and not by the
plaintiff. The said decision has been affirmed by the High Court.
petitioner has filed this special leave petition, contending that to constitute
a valid arbitration agreement, a document containing the arbitration agreement
need not be signed by all parties. According to the petitioner, if an invoice
signed by the seller is acknowledged or accepted or acted upon by the buyer, a
term in the invoice providing for arbitration will be an "arbitration
agreement" as between the seller and the buyer, irrespective of whether
the buyer signed the document or not. We do not propose to examine the said
contention as it does not really arise for consideration in this case.
fundamental lacuna in the claim of defendants for reference to arbitration is
the absence of an arbitration agreement between the parties, in regard to the
suit transactions. The three invoices containing a provision for arbitration
relied upon by the petitioner (second defendant), do not relate to the suit
transactions at all.
The plaintiff, as
noticed above, filed a suit for recovery of the amounts allegedly due in regard
to some samples supplied by him to the defendants and certain supplies made to
the nominees of the first defendant company. The three invoices relied on by
the defendants, on the other hand, relate to sale of goods by the proprietary
concern of second defendant to the plaintiff. The said invoices have nothing to
do with the suit transactions. Such unconnected documents cannot be pressed
into service to claim the existence of an arbitration agreement.
a defendant invokes section 8 of the Act by alleging existence of an
arbitration agreement, he should establish that such arbitration agreement
related to, or is applicable to, the suit transaction/contract. The parties may
enter into different contracts at different points of time or may enter into a
series of unrelated transactions.
It is possible that
in regard to some, they may provide for arbitration and in regard to others,
may not provide for arbitration. Obviously, the existence of an arbitration
agreement with reference to some other transaction/contract to which plaintiff
was or is a party, unconnected with the transactions or contracts to which a
suit relates, cannot be considered as existence of an `arbitration agreement'
in regard to the suit transactions/contracts. When sections 7 and 8 of the Act
refer to the existence of an arbitration agreement between the parties, they
necessarily refer to an arbitration agreement in regard to the current dispute
between the parties or the subject matter of the suit. It is fundamental that a
provision for arbitration, to constitute an arbitration agreement for the
purposes of sections 7 and 8 of the Act, should satisfy two conditions.
Firstly, it should be
between the parties to the dispute. Secondly, it should relate to or applicable
to the dispute.
this case, neither of the two conditions was satisfied. Firstly, the suit
related to transactions said to have taken place between plaintiff and first
defendant company and its two directors, whereas the documents put forth as
containing the arbitration agreement related to some transactions between a
proprietary concern of second defendant and plaintiff. Secondly, the provision
for arbitration is not contained in any contract or document relating to the
suit transactions, but contained in documents relating to some unconnected
independent transactions. It is significant that, in their application under
section 8 of the Act, the defendants did not even allege that there was an
arbitration agreement in regard to the subject matter of the suit. What they
alleged was that `subject matter of the suit' was similar to or identical with
the `subject matter of the arbitration agreement'.
That does not entitle
them to seek relief under section 8 of the Act. As there was no `arbitration
agreement', the requirements of section 7 were not met.
there is no arbitration agreement with reference to the subject-matter of the
suit filed by the plaintiff (first respondent herein), rejection of the
application filed by defendants under Section 8 of the Act, does not call for
interference. The special leave petition is, therefore, dismissed both on the
ground of delay and on merits.
(R V Raveendran)