In the High Court of Judicature at Madras Dated: 26/04/2005 Coram The Hon'ble Mr. Justice P. Sathasivam and The Hon'ble Mr. Justice S.K. Krishnan O.S. Appeal No.70 of 2005 And CMP.No.6454 of 2005 M/s. GEA Energy System (India) Ltd., 443, Anna Salai Teynampet, Chennai 600 018. .. Appellant -Vs- 1.LITOSTROJ E.I., Litostrojska 40 Sl-1001 Ljubljana, P.O.308 Slovenija Rep. By Mr. V. Subramanian Branch Office at 4/1 Karunanidhi Street Mettupalayam, Chennai 600 033. 2.Canara Bank Mount Road Branch, Royala Towers, Anna Salai, Chennai 600 002. 3.Tamil Nadu Electricity Board Head Quarters Office, N.P.K.R.R. Maligai 144, Anna Salai, Mount Road Chennai 600 002. (R.2 and R.3 are given up) .. Respondents Original Side Appeal preferred under Order XXXVI Rule 2 of Original Side Rules against the order dated 11.03.2005 made in Original Application No.931 of 2004 in C.S.No.904 of 2004, on the file of this Court. !For appellant : Mr. R. Muthukumarasamy,Sr.Counsel For Mr. G. Sundaram ^For respondents : Mr. Arvind P. Datar, Sr. Counsel For Mr. Karthikeyan for R.1 :JUDGMENT
(Judgment of the Court was delivered by P. Sathasivam,J., )
By consent of both the parties, the main appeal itself is
taken up for disposal.
2. The above original side appeal has been filed against the order of
the learned single Judge dated 11.03.2005 made in O.A.No.931 of 2004 in
C.S.No.904 of 2004, in and by which the learned Judge, after finding that the
applicant / plaintiff has not made out a case for interim order, dismissed the
said application.
3. The plaintiff in C.S.No.904 of 2004 is the applicant. He filed
the said suit against the defendant/ first respondent in this appeal for
declaration that the termination notice dated 21.07.2004 is null and void and
for permanent injuncti ing the defendant from invoking the Arbitration Clause
7.5.4 of the contract agreement dated 26.09.2002 / 15.11.2002 as well as for
mandatory injunction for fulfilling the contractual obligation as per the
contract agreement dated 26.09.2002 / 15.11.2002. Pending suit, the plaintiff
/ applicant filed O.A.No.931 of 2004, praying for interim injunction
restraining the first respondent from proceeding with the arbitration
proceedings as contemplated under Article 7 of the Contract Agreement dated
26.0 9.2002 / 15.11.2002. The said application was resisted by the first
respondent by filing counter statement. The learned Judge, by the impugned
order, after finding that there is a valid agreement between the parties,
which contains arbitration clause, and hence, no injunction as claimed can be
granted, dismissed the said application. Questioning the same, present appeal
has been filed.
4. Heard Mr. R. Muthukumarasamy, learned senior counsel for the
appellant and Mr. Arvind P. Datar, learned senior counsel for the contesting
first respondent.
5. The case of the appellant/petitioner is that the Contract
Agreement dated 26.09.2002 / 15.11.2002 was signed by the petitioner at
Chennai and it was forwarded to the first respondent together with the
addendum which, inter alia, contains the clauses regarding the law applicable
and the place of jurisdiction for arbitration. The first respondent though
not signed the addendum, expressed that the matters covered by the addendum
will be discussed later. Therefore, there is no consensus with regard to
arbitration proceedings, such as venue of arbitration and the law applicable
to arbitration proceedings. In the absence of such consensus, it is the case
of the petitioner that there is no concluded Agreement regarding arbitration
such as, the venue and the law governing arbitration proceedings. Or in the
alternative, since the first respondent did not strike off Article 13 of the
Contract at the time of signing, it has to be presumed that the first
respondent has agreed to the contents of addendum.
6. The first respondent has terminated the contract by issuing notice
dated 21.07.2004 without any valid reason and without complying with the
pre-requisites of the contract dated 26.09.2002 / 15.11.2002. In reply to the
notice of termination, the applicant has conveyed its refusal to accept the
termination and also informed the first respondent by letters dated 24.07.2004
and 27.07.2004 that the applicant would always be ready and willing to perform
its part as per the terms of the Contract dated 26.09.2002/15.11.2002. Though
originally an order of ad-interim injunction was granted in O.A.No.931 of 2004
restraining the first respondent from proceeding with arbitration proceedings,
the said order was vacated and the application was dismissed on 1 1.03.2005 on
the ground that the interim prayer is beyond the scope of the suit. The case
of the petitioner is that the reasoning of the learned Judge and the ultimate
order dismissing the injunction application cannot be sustained, as there is
no valid agreement between the parties regarding arbitration.
7. Mr. R. Muthukumarasamy, learned senior counsel appearing for the
appellant, after taking us through the Contract Agreement between the
plaintiff and defendant dated 26.09.2002/15.11.2002, addendum, various
correspondences between the parties and the ultimate order of the learned
Judge, would contend that in view of Article 13 of the Agreement, the addendum
should be read along with the main Agreement and the same is binding on both
the parties, including the first respondent. He also contended that if the
addendum is not agreeable, the main contract will become unenforceable.
8. On the other hand, Mr. Arvind P. Datar, learned senior counsel
appearing for the contesting first respondent would submit that in view of the
fact that the addendum has not been signed and agreed to by the first
respondent, in the absence of consensus ad-idem, the main agreement dated
26.09.2002 / 15.11.2002 would bind both the parties and so, the terms relating
to the law and place of jurisdiction for arbitration referred to therein would
govern the parties.
9. In order to appreciate the rival contentions, it is useful to
refer certain Articles of the Contract. Article 1.3 reads as under:-
“1.3: After the signing of the CONTRACT, no other text, document or data
except as herein specified, shall have any force or effect whatsoever, or may,
in any way whatsoever, be taken into consideration in the interpretation of
the terms and conditions of the CONTRACT.”
Article 7.2 speaks about termination of the contract. Article 7.5 speaks
about disputes. Articles 7.5.1, 7.5.4 and 13 which are relevant for the
purpose of this case read as under:-
“7.5.1: This CONTRACT shall be governed, exclusively by the Swiss Law. Any
disputes and differences which may arise in connection with the execution of
the contract during its lifetime should be settled in an amicable way.
7.5.4: In case the above disputes and differences could not be settled in an
amicable way by intervention of the management of companies involved, they
shall be finally settled in accordance with the rules of Conciliation and
Arbitration of the International Chamber of Commerce. Three arbitrators
appointed in accordance with said rules shall carry their mission in
accordance with the said Rules and shall on their behalf, make a final
decision which shall be binding for both Purchaser and Subcontractor.
Article 13: The addendum to this agreement shall form part of the Contract.
”
10. The appellant / subcontractor has signed the said agreement on
26.09.2002 and the first respondent / purchaser has signed the same on
15.11.2002. Addendum to the Contract Agreement between LITOSTROJ and M/s.
GEA Energy System (India) Ltd., dated 26.09.2002 contains 7 Clauses, out of
which, Clauses 5 and 6 are relevant.
“5. This contract is subject to the laws of India.
6. The place of jurisdiction for Arbitration shall be Chennai. ”
11. Though the appellant/subcontractor signed the addendum on 26.09
.2002 itself, admittedly, the same was not signed by the 1st respondent
herein/purchaser. Mr.R.Muthukumarasamy, learned senior counsel for the
appellant by drawing our attention to Article 13 would submit that the
addendum though not signed by the purchaser / first respondent herein, is a
part of the Contract; accordingly, as per Clauses 5 and 6 of the addendum, the
Contract is subject to the laws of India and the jurisdiction for arbitration
proceedings, if any, shall be at Chennai and in such a circumstance, the
arbitration proceedings at Slovenia cannot be proceeded with and the learned
Judge ought to have granted injunction. In support of his claim, he very much
relied on the decisions of the Supreme Court in the cases of Ramji Dayawaka &
Sons (P) Ltd., vs. Invest Import reported in AIR 1981 S.C. 2085 and U.P.
Rajkiya Nirman Nigam Ltd., vs. Indure Pvt., Ltd., reported in JT 1996 (2) SC
322. In AIR 1981 SC 2085 (cited supra), it is pointed out that where the
contract is in a number of parts, it is essential to the validity of the
contract that the contracting party should either have assented to or should
be taken to have assented to the same thing in the same sense or as it is
sometimes put, there should be consensus ad idem. It is further held that
apart from this, a party may be taken to have assented, if he has so conducted
himself as to be estopped from denying that he has so assented. Their
Lordships also held that, even apart from this, it would still be open to the
party contending negation to prove that he had not accepted a part of the
original agreement. In the latter case, i.e., in JT 1996 (2) SCC 322, their
Lordships have held that in the absence of consensus ad idem on the material
terms of the contract to be entered into between the parties, there emerged no
concluded contract.
12. The learned senior counsel submitted that since Article 13 has
not been complied with, there is no consensus ad idem on the material terms of
the Contract, which contains several clauses. Pointing out the principles
laid down therein, it is argued that in the absence of consensus ad idem to
the contract to be entered into between the parties, there is no concluded
contract; hence, the claim that Swiss law alone is applicable and the
arbitration is to take place in Slovenia cannot be sustained.
13. In this regard, Mr. Arvind P. Datar, learned senior counsel
appearing for the contesting first respondent rightly pointed out that first
of all the addendum was not accepted by the purchaser; hence, the purchaser
did not sign the addendum and consequently, it sent an E-Mail stating that
regarding addendum to the Contract Agreement, they will discuss it later. As
pointed out by Mr. Arvind P. Datar, though Article 13 refers that addendum
is a part of the Contract, the fact remains that since the addendum was not
acceptable, the purchaser / one of the party did not sign the same. As a
matter of fact, it is brought to our notice that though the purchaser informed
the subcontractor that the addendum will be discussed later, the subcontractor
has not taken further action to discuss the altered conditions mentioned in
the addendum. In such a circumstance, though there is no dispute with regard
to proposition of law as enunciated in those decisions, the same are not
applicable to the case on hand.
14. Though it was seriously argued that in view of Article 13 of the
Contract, the addendum shall form part of the Contract, as discussed earlier,
not only the purchaser, the first respondent herein has not accepted the terms
in the addendum, particularly Clauses 5 and 6 by signing the same, but also
conveyed that the terms in addendum to the Contract will be discussed later.
In such a circumstance, as rightly contended by Mr. Arvind P. Datar, and
accepted by the learned single Judge that there is a valid agreement dated
26.09.2002 and 15.11.20 02 and the addendum cannot be enforced. Apart from
this, as rightly observed by the learned Judge, the plaintiff is not
challenging the very validity of the contract, but is questioning the act of
defendant in terminating the said contract. To put it clear, unless the
plaintiff seeks declaration that there is no concluded contract dated 26.0
9.2002 / 15.11.2002 between the parties, as rightly observed by the learned
Judge, the injunction cannot be granted in respect of arbitration and legal
proceedings in Slovenia. Inasmuch as we have already concluded that the
Contract Agreement dated 26.09.2002 / 15.11.2002 is valid and it provides
arbitration clause, the arbitration proceedings cannot be restrained by way of
injunction by this Court. Had the first respondent / defendant accepted the
addendum, undoubtedly, the plaintiff could have pursued its suit and also
prayed for injunction from initiating legal steps as well as arbitration
proceedings at Slovenia. For the reasons stated above, addendum cannot be
enforced by the appellant. All these aspects have been considered and rightly
rejected by the learned Judge. In view of the above discussion by us and on
perusal of the relevant clauses of the agreement, addendum, plaint averments
etc., we concur with the conclusion of the learned Judge and we are unable to
appreciate the contentions raised by the learned senior counsel for the
appellant. Accordingly, the original side appeal fails and the same is
dismissed. No costs. Consequently, connected CMP., is also dismissed. It is
made clear that the conclusion of the learned Judge and the confirmation order
by us are only prima facie for the disposal of the injunction application.
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