JUDGMENT
S.N. Kapoor, J.
1. Heard the learned Counsel for the parties.
2. The brief facts which have given rise to this appeal are that under an agreement between the parties, the respondent paid a sum of Rs. 50,000/- for supply of certain goods, the appellant accepted the same but failed to supply any goods.
3. Clauses 3 and 7 A, B and C of the agreement dated 7th May, 1998 read as under:
3. TERMS OF SALE
All sales of Company’s products to Distributor shall be made pursuant to this agreement at such prices and on such terms as Company shall establish from time to time on at least thirty (30) days notice. All prices are FOB Company’s location. Company agrees to properly pack all items for shipment. Risk of loss due to damage or destruction of Company’s products shall be insured by the company for the benefit of the Distributor and the cost of insurance shall be born by the Company. Company will select the shipper unless Distributor requests a reasonable alternative. All orders are subject to acceptance by Company. Except as otherwise expressly agreed by Company in advance, this agreement shall control all aspects of the dealings between Company and Distributor with respect to the Company’s products and any additional or different terms in any distributor order are hereby rejected.
7. SALES AND MERCHANDISING POLICIES
A. Company may establish sales quotas, giving reasonable regard to past performance and market potential of Company’s products from time to time. Distributor agrees to such personnel by Company in recognition of superior performance.
B. Sales quota, in the amount of Fifty Thousand Rupees (Rs. 50,000/-) for the month of May, 1998 and for the months of June, July, August and September, 1998 Sales’quota will be Rupees One Lac (Rs. 1,00,000/-) per month which will be the minimum requirement of the Rs. 2,00,000/- (Two Lakhs) per month which will be the minimum requirement of the Company and the distributor hereby agrees and undertakes to purchase such a minimum amount merchandise, on regular monthly bases, commencing May 1, 1998.
C. Company will provide Distributor with merchandising assistance from time to time in the form of advertising programs, product and sales training and sales promotions. Distributor agrees fully to use such assistance in carrying out Company’s Merchandising and sales promotion policies. Company will also provide available technical support, product brochures and literature and training to Auto Life Line Personnel on an on-going basis.
4. In terms of the agreement, a sum of Rs. 50,000/- was paid on 25th May, 1998. That cheque was encashed according to the plaintiff, nothing was supplied and for that one reason suit for recovery of Rs. 2,00,000/- was filed. It is nowhere the case of the respondent that the respondent supplied any goods in terms of the agreement to the plaintiff. It is also not the case of the respondent that these Rs. 50,000/- were given by way of security in terms of the agreement. The respondent/appellant on nth February, 1999 moved an application under Section 8 without disclosing the specific disputes and relied upon the Clause ’23’ of the agreement:
“23. GOVERNING LAW
Any disputes between the Company and the distributor shall be resolved amicably. In the event the parties to this agreement were unable to resolve the differences, then it will be settled through the binding arbitration as per Indian Arbitration Act 1996. To enforce all provisions of this agreement Courts in Delhi shall have exclusive jurisdiction to determine all disputes arising between the Company and the Distributor.
5. The learned Trial Court dismissed this application on the basis of two judgments in M/s. Pearl Hosiery Mills, Ludhiana v. Union of India and Anr. and Hindustan Copper Ltd. v. Assam Bearing Agencies, as well as and . In so far as judgment in M/s. Pear/ Hosiery Mills, Ludhiana v. Union of India and Anr. is concerned, it is worthwhile to reproduce Para ‘8’ of the judgment:
8. In the judgments mentioned earlier, i.e., Punjab and Delhi judgments, reference has been made to the necessity, for stating the exact difference and exact dispute in the application itself and in fact reference has been made to the judgment in Grover, J. in Dwarka Nath Kapur v. Rameshwar Nath, (1966) 68 Pun LR (D) 91 where it was held that if the differences or dispute is not specified in the application under Section 34 then the application should be rejected in liming. I do not go so far. I feel the Court can in its discretion allow the applicant to specify the matter to be referred to arbitration even if not initially clearly stated in the application for stay. However, the party applying for stay should ordinarily be able to state in the application for stay the exact reasons why stay of the suit is prayed for, I am hence prepared to agree to the view that the difference or dispute should be quite obvious to the Court when deciding the question of stay, and when it is not obvious to the Court when deciding the question of stay, and when it is not obvious that there is such a dispute or difference, or where such dispute or difference, or where such dispute or difference does not fall within the scope of the arbitration clause then the stay has to be refused.
6. In this case it is required to be seen as to whether the points of disputes were obvious or not ? The plaintiff-respondent claimed a sum of Rs. 50,000/- and further claimed loss/damages/interest amounting to Rs. 1,50,000/-, on the basis of the allegations that no goods were supplied. If the respondent-plaintiff filed an application for reference to arbitration then the disputes were obvious and M/s. Pearl Hosiery Mills, Ludhiana v. Union of India and Anr., may not be of any help to the respondent-plaintiff.
7. There were certain judgments under the old 1940 Act which certainly referred that the dispute should be specified. In some cases, the applications wore rejected earlier for non-specification of the disputes. But now the things have changed. The approach is not technical but justice oriented. That is reflected in the judgment of this very Court in M/s. Prasad & Co. v. Satish Gupta and Anr., , Justice Lahoti, as his Lordship then was observed in Para ‘8’ and in that case, case of M/s. Pearl Hosiery Mills, Ludhiana v. Union of India was considered and the following observations were made :
8. Secondly, it is contended by the plaintiff’s Counsel that the application u/s. 34 of the Arbitration Act does not state the disputes between the parties and the defendants readiness and willingness to refer the disputes to arbitration. Reliance is placed on M/s. National Small Ind. Corp. Ltd., New Delhi v. M/s. Punjab Tin Printing, and M/s. Pearl Hosiery Mills v. Union of India, . Both the cases do not have any applicability to the case at hand. The disputes do exist. They are set out in the plaint. The application has to be read in the light of the plaint. As per arbitration agreement the plaintiffs should have sought for reference of dispute to arbitration. A reading of the application filed by the defendants and willingness turn having the disputes resolved by arbitration.
8. Before proceeding further Section ‘8’ of the Arbitration and Conciliation Act, 1996 is required to be seen :
“8. Powers to refer parties to arbitration where there is an arbitration agreement –
(1) A judicial authority before which an action is brought in a matter which 'is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in Sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof, (3) Notwithstanding that an application has been made under Sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.
9. Learned Counsel for the respondent did refer to a judgment of this Court recently delivered in Monporte Impex Pvt. Ltd. c. Harveen Bali & Ors., . It is apparent in that, in that case judgment of Justice Lahoti was not brought to the knowledge of the Court. Besides it appears that reference to Union of India v. Birla Cotton Spinning and Weaving Ltd., , that the existence of such a dispute or difference could be pointed out from any documentary material or contemporary dealings between the parties, and this judgment has been referred in Monporte Impex Pvt. Ltd. v. Harveen Ball (supra). Therefore, this judgment also does not lay down that everything is required to be specifically mentioned only in the application.
10. Learned Counsel for the respondent further submits that in Sub-clause (1) when the first statement on the substance of dispute had been made thereafter Sub-section (1) would not be attracted. She also contends that when the notice was replied no such contention was raised, and reply to notice was the first statement on the substance of the dispute. I think the learned Counsel has stretched the things too far by tearing of the phrase out of the context. If the phrase when submitting the first statement on the substance of the dispute” is read without the context in which it has been made, then the reply to the notice could certainly be taken as statement of the substance of the dispute. But if it is read Along with the phrase “if a period so applies not later then when submitting is first statement” then it could mean the first statement of the substance of the dispute could be made before the Court only and not in reply to a notice. Consequently, I do not find any force in the submissions of learned Counsel for the respondent.
11. As regards the submission that the dispute should be specifically specified, neither Section ‘8’ nor Section ’11’ states in so many words that the disputes are required to be so specified and further if disputes are not specified then the application should be rejected. This is such a lacuna which could be made up at any point of time even before the Arbitrator for the plaintiff knows what he claims and when the application under Section 8 is filed, then the respondent obviously denies the claim of the plaintiff arid the dispute become obvious. This submission is also required to be seen in the present day context where arbitration is to be encouraged and not discouraged by adopting a hyper-technical approach.
12. In the aforesaid circumstance, it is obvious that order of the Additional District Judge cannot be sustained. But, at the same time one has to adopt a pragmatic approach, in matters like the present one, where there is likelihood of abuse of the arbitration clause. In this case the appellant has admittedly taken Rs. 50,000/-. It was not the amount of security. No goods were supplied in terms of the agreement. Obviously, the plaintiff/respondent is claiming the amount, but also claiming like ‘Merchant of Venice’ not only Rs. 50,000/- with interest but Rs. 1,50,000/- over and above the same. I feel that in order to do substantial justice in between the parties it would be desirable that while allowing the appeal the appellant should be directed to deposit an amount of Rs. 1,00,000/- with the Registrar of this Court and out of this amount of Rs. 50,000/- plus 18% interest per annum thereon from the date of deposit i.e. 25th May, 1998 till 25th September 2002, shall be paid to the respondent on filing security to the satisfaction of Registrar General of this Court. The amount shall be deposited within one week and the same shall be paid to the respondent on filing security as aforesaid. The appeal is allowed subject to deposit of Rs. One Lakh accordingly.
13. Parties are left to bear their own costs.
