{"id":33750,"date":"2008-11-06T00:00:00","date_gmt":"2008-11-05T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/ms-comed-chemicals-ltd-vs-c-n-ramchand-on-6-november-2008"},"modified":"2016-11-08T06:32:05","modified_gmt":"2016-11-08T01:02:05","slug":"ms-comed-chemicals-ltd-vs-c-n-ramchand-on-6-november-2008","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/ms-comed-chemicals-ltd-vs-c-n-ramchand-on-6-november-2008","title":{"rendered":"M\/S Comed Chemicals Ltd vs C.N.Ramchand on 6 November, 2008"},"content":{"rendered":"
Supreme Court of India<\/div>\n
M\/S Comed Chemicals Ltd vs C.N.Ramchand on 6 November, 2008<\/div>\n
Author: C Thakker<\/div>\n
Bench: C.K. Thakker<\/div>\n
                                                  REPORTABLE\n\n\n            IN THE SUPREME COURT OF INDIA\n             CIVIL ORIGINAL JURISDICTION\n\n         ARBITRATION PETITION NO. 17 OF 2007\n\n\nM\/S COMED CHEMICALS LTD.         ... PETITIONER\n\nVERSUS\n\nC.N. RAMCHAND                     ... RESPONDENT\n\n\n\n\n                    J U D G M E N T\n<\/pre>\n
C.K. THAKKER, J.\n<\/p>\n<\/p>\n
1.         The present petition is filed by the<\/p>\n
petitioner under Section 11 of the Arbitration<\/p>\n
and      Conciliation    Act,   1996   (hereinafter<\/p>\n
referred to as “the Act”) praying to Hon’ble<\/p>\n
the Chief Justice of India to appoint third<\/p>\n
Arbitrator     as   Presiding   Arbitrator   or    to<\/p>\n
appoint Sole Arbitrator as deemed fit in the<\/p>\n
facts and circumstances of the case.
\n                                                                          2<\/span><\/p>\n
2.         It is the case of the applicant that<\/p>\n
it is a Company known as M\/s Comed Chemicals<\/p>\n
Ltd. registered under the Indian Companies Act,<\/p>\n
1956.     Mr.       Ashwani      Kapil        is    the    authorized<\/p>\n
signatory who has approached this Court.                          It is<\/p>\n
stated in the application that the Company is<\/p>\n
doing business in chemicals in the field of<\/p>\n
bio-technology.            To   expand        the     business,     the<\/p>\n
Company    floated         a    subsidiary          company   in    the<\/p>\n
name and style of Comed Biotech Ltd.                          For the<\/p>\n
said purpose, it entered into a Memorandum of<\/p>\n
Understanding (`MoU’ for short) and appointed<\/p>\n
Dr.     C.N.        Ramchand      (respondent             herein)    on<\/p>\n
September       4,     2003       for     the       development      of<\/p>\n
products       in    the    field       of    bio-industries        and<\/p>\n
manufacturing and marketing of such products.<\/p>\n
After various meetings and negotiations, terms<\/p>\n
and     conditions         were     finalized           between     the<\/p>\n
parties    and       the    respondent          was    appointed     as<\/p>\n
Director (Technical) by the applicant Company.<\/p>\n
A copy of the agreement has been annexed to the<\/p>\n
Application.          MoU       also         provided      that     the
\n                                                                           3<\/span><\/p>\n
respondent will work full time with the Company<\/p>\n
at least for next eight years from the date of<\/p>\n
signing       of    the    agreement.          According      to     the<\/p>\n
Company, it invested large amount in the new<\/p>\n
adventure          and      paid         substantial         sum      as<\/p>\n
remuneration to the respondent for the work.<\/p>\n
3.         It is the allegation of the Company<\/p>\n
that the respondent did not take interest in<\/p>\n
work and failed to attend Board Meetings held<\/p>\n
in May and June, 2004 in spite of prior notice<\/p>\n
and information in advance about such meetings.<\/p>\n
A    notice     was      issued     by    the    Company      to    the<\/p>\n
respondent         on     July    14,     2004    asking      him    to<\/p>\n
remain present at the Board Meeting scheduled<\/p>\n
to be held on July 30, 2004.                      The respondent,<\/p>\n
however, sent a Letter of Resignation on July<\/p>\n
17, 2004. The Company has alleged that not only<\/p>\n
the     respondent         wanted        to    quit    the    Company<\/p>\n
before completing the work assigned to him in<\/p>\n
violation          of    the     agreement,           but    he     also<\/p>\n
instigated other subordinate staff-workers to<\/p>\n
leave     the       organization.             Resultantly,         other
\n                                                                   4<\/span><\/p>\n
staff members also resigned. In view of the<\/p>\n
large investment by the Company, it refused to<\/p>\n
accept     the       resignation    of        the   respondent.<\/p>\n
There was correspondence and exchange of legal<\/p>\n
notices between the parties.                  It is, however,<\/p>\n
not necessary to enter into the details thereof<\/p>\n
in the present proceedings.\n<\/p>\n
4.         By    a    communication      dated      August   12,<\/p>\n
2005, the applicant through his advocate sent a<\/p>\n
notice to the respondent for appointment of an<\/p>\n
arbitrator in accordance with Clause 12 of MoU<\/p>\n
and informed him that the applicant-Company had<\/p>\n
decided to appoint Ramesh H. Nanavati, retired<\/p>\n
District       Judge     as   his     arbitrator.            The<\/p>\n
applicant called upon the respondent to state<\/p>\n
whether he was agreeable to the said name.                   It<\/p>\n
also stated that if he was not agreeable, he<\/p>\n
could suggest any other name and\/or appoint an<\/p>\n
arbitrator for resolving the dispute failing<\/p>\n
which    the     applicant    would      be    constrained    to<\/p>\n
take appropriate action in accordance with law.<\/p>\n
The respondent through his advocate informed
\n                                                              5<\/span><\/p>\n
the Company on September 12, 2005 that he was<\/p>\n
not agreeable to the arbitrator suggested by<\/p>\n
the   Company.    He,    however,       suggested     three<\/p>\n
names. At Sl. No. 1, there was a name of Dr.<\/p>\n
Sandeep H. Shah, President, Indian Psychiatric<\/p>\n
Association.\n<\/p>\n
5.        In view of non-agreement between the<\/p>\n
applicant   and   respondent,      the    Company     filed<\/p>\n
Arbitration    Application   No.    9    of    2006   under<\/p>\n
Section 11 of the Act in the High Court of<\/p>\n
Gujarat   at   Ahmedabad   requesting         the   Hon’ble<\/p>\n
Chief Justice of the High Court to appoint an<\/p>\n
arbitrator. Notice was issued to the respondent<\/p>\n
who filed his reply. In the reply, he asserted<\/p>\n
that he is a `British national’ and hence any<\/p>\n
question of arbitration between the applicant-<\/p>\n
Company which is registered in India and the<\/p>\n
respondent-British      national    would      fall   under<\/p>\n
`International     Commercial       Arbitration’         as<\/p>\n
defined in Section 2(1)(f) of the Act and under<\/p>\n
Section 11(9) of the Act, it would be within<\/p>\n
the power and authority of the Chief Justice of
\n                                                              6<\/span><\/p>\n
India to deal with and decide such application<\/p>\n
and the Chief Justice of a High Court has no<\/p>\n
jurisdiction to entertain the application.               In<\/p>\n
support of the contention that he is a British<\/p>\n
national,    the    respondent   submitted      requisite<\/p>\n
material which went to show that he is British<\/p>\n
national.    In view of the above contention, the<\/p>\n
Company sought permission from the High Court<\/p>\n
to withdraw the petition so as to enable the<\/p>\n
Company to make appropriate application to the<\/p>\n
Hon’ble Chief Justice of India. The permission<\/p>\n
sought for was granted and the application was<\/p>\n
disposed of as withdrawn.\n<\/p>\n
6.         The Company then approached this Court<\/p>\n
by filing the present application on May 22,<\/p>\n
2007.      Hon’ble    the   Chief    Justice    of    India<\/p>\n
designated me as his nominee to deal with and<\/p>\n
decide     the     application      preferred    by     the<\/p>\n
Company.     Notice was issued to the respondent<\/p>\n
pursuant    to   which   he   appeared    and    filed    a<\/p>\n
counter-affidavit on February 12, 2008.                 The
\n                                                                 7<\/span><\/p>\n
Registry was directed to place the matter for<\/p>\n
hearing.\n<\/p>\n
7.         I have heard the learned counsel for<\/p>\n
the parties.\n<\/p>\n
8.         Learned       counsel    for    the     applicant-<\/p>\n
Company submitted that the application deserves<\/p>\n
to be allowed by appointing a third arbitrator<\/p>\n
as   Umpire       or   sole   arbitrator      in    view   of<\/p>\n
difference        between     the   applicant       and    the<\/p>\n
respondent and failure to come to an agreement<\/p>\n
to appoint an arbitrator acceptable to both the<\/p>\n
parties.     It    was    stated    that    the    applicant<\/p>\n
appointed Ramesh H. Nanavati, retired District<\/p>\n
Judge as his arbitrator since the controversy<\/p>\n
related    to     interpretation      of    agreement      and<\/p>\n
legal issues were involved.                The respondent,<\/p>\n
however, did not agree and suggested another<\/p>\n
name. The applicant could not agree to that<\/p>\n
name because of absence of legal background on<\/p>\n
the part of the person sought to be appointed.<\/p>\n
The Company, therefore, invoked Section 11 of<\/p>\n
the Act by going to the High Court of Gujarat.
\n                                                                     8<\/span><\/p>\n
But   in     view     of     objection      raised      by    the<\/p>\n
respondent that he is a British national, the<\/p>\n
application was withdrawn and thereafter the<\/p>\n
applicant has approached this Court.                    It was,<\/p>\n
therefore, prayed that the petition deserves to<\/p>\n
be    allowed         by     either      appointing          third<\/p>\n
arbitrator       as   Umpire     or    by   appointing        sole<\/p>\n
arbitrator       to   deal    with     dispute    between      the<\/p>\n
parties.\n<\/p>\n
9.         The        learned         counsel         for      the<\/p>\n
respondent, on the other hand, submitted that<\/p>\n
the present application is not maintainable.<\/p>\n
According to him, there is no dispute arising<\/p>\n
out   of     legal         relationship        considered      as<\/p>\n
commercial covered by clause (f) of Section 2<\/p>\n
(1) of the Act and hence the provisions of the<\/p>\n
Act would not apply to the case on hand.                       It<\/p>\n
was   also    submitted         that     the     agreement     in<\/p>\n
substance,       provides     for     supply     of   technical<\/p>\n
know-how and expertise for payment of `fees’<\/p>\n
and there is no element of `commerce’ which<\/p>\n
could attract the provisions of the Act.                        It
\n                                                                      9<\/span><\/p>\n
was     also     urged        that        the   respondent      was<\/p>\n
appointed by the Company as an employee and the<\/p>\n
relation between the Company and the respondent<\/p>\n
was of master and servant and to such cases,<\/p>\n
the Act has no application. Clause (12) of the<\/p>\n
Agreement       on    which    strong       reliance    had    been<\/p>\n
placed    by     the    Company       cannot     be    termed   as<\/p>\n
`arbitration         clause’.        In     absence    of    legal,<\/p>\n
valid     and        enforceable          arbitration       clause,<\/p>\n
applicant-Company has no right to approach this<\/p>\n
Court.     It was, therefore, submitted that the<\/p>\n
application deserves to be dismissed.<\/p>\n
10.        Having heard the learned counsel for<\/p>\n
the parties, in my opinion, the petition should<\/p>\n
be allowed.          Clause (f) of sub-Section (1) of<\/p>\n
Section    2    of     the    Act    defines     “International<\/p>\n
Commercial Arbitration” and reads thus;<\/p>\n
        (f)      “international      commercial
\n        arbitration”     means  an  arbitration
\n        relating to disputes arising out of
\n        legal        relationships,     whether
\n        contractual or not, considered as
\n        commercial under the law in force in
\n        India and where at least one of the
\n        parties is–
\n                                                                    10<\/span><\/p>\n
(i)     an individual who is a national of,
\n        or   habitually   resident   in, any
\n        country other than India; or<\/p>\n
(ii)    a    body    corporate which   is
\n        incorporated in any country other
\n        than India; or<\/p>\n
(iii) a company or an association or a body
\n      of    individuals    whose     central
\n      management and control is exercised
\n      in any country other than India; or<\/p>\n
(iv)    the Government of a foreign country.<\/p>\n
11.          Chapter      II    of   the   Act    deals    with<\/p>\n
“Arbitration Agreement” and declares that all<\/p>\n
disputes arising between the parties would be<\/p>\n
governed by the provisions of the Act.                  Chapter<\/p>\n
III    provides        for     “Composition      of    Arbitral<\/p>\n
Tribunal”. Section 10 enacts that the parties<\/p>\n
are free to determine number of arbitrators,<\/p>\n
but such number shall not be an even number.<\/p>\n
In    case    of   failure      to   determine        number   of<\/p>\n
arbitrators,           the     Arbitral    Tribunal       shall<\/p>\n
consist      of    a    sole   arbitrator.        Section      11<\/p>\n
relates      to    appointment       of    arbitrators.        It<\/p>\n
states that in case of failure on the part of<\/p>\n
the    parties     in    arriving     at   an    agreement     to
\n                                                           11<\/span><\/p>\n
appoint an arbitrator, an application may be<\/p>\n
made to the Chief Justice of India in case of<\/p>\n
International Commercial Arbitration so that an<\/p>\n
appropriate order may be passed for appointment<\/p>\n
of arbitrator.     It is on the basis of the above<\/p>\n
provision that the applicant-Company has filed<\/p>\n
this application.\n<\/p>\n
12.      I find no substance in the preliminary<\/p>\n
objection raised by the learned counsel for the<\/p>\n
respondent that there is no arbitration clause<\/p>\n
in the Agreement.      Clause 12 of the agreement<\/p>\n
which provides for arbitration reads thus;<\/p>\n
      12.   If    there    be   any   dispute
\n      pertaining to meaning of this MoU or
\n      of any nature, will be solved and
\n      decided by appointing an independent
\n      Arbitrator acceptable to all the
\n      parties and if not solved by him can
\n      be referred to court of law and for
\n      which   the    jurisdiction   will   be
\n      Vadodara.\n<\/p>\n<\/p>\n
13.      Bare    reading     of   the   above     clause<\/p>\n
leaves   no    room   for   doubt   that   it    is   an<\/p>\n
`arbitration     clause’    and   expressly     declares
\n                                                                         12<\/span><\/p>\n
that any dispute pertaining to MoU would be<\/p>\n
solved and decided by an arbitrator.<\/p>\n
14.          I     am    also      unable     to        uphold     the<\/p>\n
argument of the learned counsel that there is<\/p>\n
no International Commercial Arbitration.<\/p>\n
The    learned           counsel     for      the        respondent<\/p>\n
submitted that there is no `commercial’ element<\/p>\n
in the agreement and what was agreed between<\/p>\n
the parties was to provide `technical know-how’<\/p>\n
and `expertise’ to the applicant-Company for<\/p>\n
which the respondent was to be paid `fees’.<\/p>\n
15.          The learned counsel in this connection<\/p>\n
referred          to    Kamani     Engineering          Corporation<\/p>\n
Ltd.     &       Ors.    v.      Societe     De     Traction       Et<\/p>\n
D’Electricite Societe Anonyme, & Ors., AIR 1965<\/p>\n
Bom 114, Josef Meisaner GMBR & Co. v. Kanoria<\/p>\n
Chemicals & Industries Ltd. & Anr., AIR 1986<\/p>\n
Cal 45 and Mukesh H.Mehta & Ors. v. Harendra<\/p>\n
Mehta,       (1998)      92   Comp   Cases        402.      It     was<\/p>\n
submitted         by    the   counsel      that    in    the     above<\/p>\n
cases,       it    has    been    held     that     if    the     work<\/p>\n
undertaken by a person is of a professional
\n                                                                        13<\/span><\/p>\n
character      and      does    not   involve        business      or<\/p>\n
trade, the contract cannot be said to be of<\/p>\n
`commercial’ nature.              Such contract does not<\/p>\n
involve       business     or    trade    and        there    is   no<\/p>\n
element of participation in commercial activity<\/p>\n
or in profit.           Remuneration, if any, is in the<\/p>\n
nature of `fees’. A person scrupulously keeps<\/p>\n
himself away from any commercial relationship.<\/p>\n
As    such,    provisions       relating        to    arbitration<\/p>\n
agreement          in     the     field        of      commercial<\/p>\n
arbitration are not attracted to these cases.<\/p>\n
16.       It       may,    however,       be    profitable         to<\/p>\n
refer   to     a    decision     of   this      Court    in    R.M.<\/p>\n
Investment & Trading Co. Pvt. Ltd. v. Boeing<\/p>\n
Co. & Anr.,<\/a> (1994) 4 SCC 541.                  There this Court<\/p>\n
was called upon to consider the provisions of<\/p>\n
Foreign      Awards      (Recognition      and       Enforcement)<\/p>\n
Act, 1961.         The question before the Court was<\/p>\n
whether       there       was    commercial          relationship<\/p>\n
between the parties as defined in Section 2 of<\/p>\n
the Act and whether the Act would apply. In<\/p>\n
that case, an Indian Company entered into an
\n                                                                    14<\/span><\/p>\n
agreement with a Company registered in USA. The<\/p>\n
Indian Company agreed to provide Boeing with<\/p>\n
consultancy       services     for        sale    of    Boeing<\/p>\n
Aircraft in India.          Agreement for purchase of<\/p>\n
two Boeing Aircrafts was executed.                 A dispute<\/p>\n
arose and the appellant claimed compensation<\/p>\n
and remuneration for consultancy services.                    In<\/p>\n
view    of    arbitration     clause,      the    matter     was<\/p>\n
referred to arbitrator.             It was contended by<\/p>\n
the     foreign     Company        that    there       was     no<\/p>\n
`commercial element’ and hence the application<\/p>\n
was liable to be dismissed.\n<\/p>\n
       17.        This Court, however, rejected the<\/p>\n
contention. It was held that the agreement to<\/p>\n
render consultancy service by the appellant to<\/p>\n
the respondent was `commercial’ in nature and<\/p>\n
there was commercial relationship between the<\/p>\n
parties.\n<\/p>\n
             18.Referring     to    earlier      cases,      this<\/p>\n
Court stated;\n<\/p>\n
       “It is not disputed that the sale of
\n       aircraft by Boeing to customers in
\n                                                       15<\/span><\/p>\n
      India    was     to     be    a    commercial
\n      transaction. The question is whether
\n      rendering of consultancy services by
\n      RMI for promoting such commercial
\n      transaction as consultant under the
\n      Agreement     is     not    a     “commercial
\n      transaction”. We are of the view that
\n      the High Court was right in holding
\n      that    the      agreement       to     render
\n      consultancy services by RMI to Boeing
\n      is commercial in nature and that RMI
\n      and Boeing do stand in commercial
\n      relationship with each other. While
\n      construing the expression “commercial”
\n      in Section 2 of the Act it has to be
\n      borne   in    mind     that    the    Act   is
\n      calculated and designed to subserve
\n      the      cause         of       facilitating
\n      international       trade   and      promotion
\n      thereof    by     providing     for     speedy
\n      settlement of disputes arising in such
\n      trade through arbitration and any
\n      expression or phrase occurring therein
\n      should receive, consistent with its
\n      literal    and     grammatical      sense,   a
\n      liberal construction.” [See: Renusagar
\n      Power Co. Ltd. v. General Electric Co.
\n      (SCC<\/a> at p. 723-24 : SCR at p. 492) and
\n      Koch Navigation Inc. v. Hindustan
\n      Petroleum Corpn. Ltd.6 (SCC<\/a> at p.<\/p><\/blockquote>\n
\n      262 : SCR at p. 75).]\n          The     expression     \"commercial\"\n      should,   therefore,    be    construed\n<\/pre>\n
      broadly having regard to the manifold
\n      activities which are integral part of
\n      international trade today”.\n<\/p><\/blockquote>\n
                            (emphasis supplied)<\/p>\n<\/blockquote>\n
19.        It was further observed;\n<\/p>\n
                                                             16<\/span><\/p>\n
      “While   construing   the   expression
\n      `commercial relationship’ in Section 2
\n      of the Act, aid can also be taken from
\n      the Model Law prepared by UNCITRAL
\n      wherein relationships of a commercial
\n      nature       include       “commercial
\n      representation    or    agency”    and
\n      `consulting'”.\n<\/p><\/blockquote>\n
20.         Now,    UNCITRAL          Model    Law      on<\/p>\n
International Commercial Arbitration as adopted<\/p>\n
by    the     United       National      Commission    on<\/p>\n
International      Trade     Law   defines    the     term<\/p>\n
`commercial’ thus;\n<\/p><\/blockquote>\n
             “The term `commercial’ should be
\n       given a wide interpretation so as to
\n       cover    matters     arising     from   all
\n       relationship of a commercial nature,
\n       whether      contractual        or     not.
\n       Relationship of a commercial nature
\n       include, but are not limited to, the
\n       following transactions;         any   trade
\n       transaction     for     the    supply    or
\n       exchange    of     goods    or    services;
\n       distribution     agreement;      commercial
\n       representation or agency; factoring
\n       leasing,    construction       of    works;
\n       consulting; engineering, licensing;
\n       investment,       financing;       banking;
\n       insurance; exploitation agreement or
\n       concession; joint venture and other
\n       forms   of    industrial     or    business
\n       cooperation; carriage of goods or
\n       passengers by air, sea, rail or
\n       road.” [Foot-note to Article 1 (1)]
\n                                                               17<\/span><\/p>\n
                                             (emphasis
\n        supplied)<\/p>\n<\/blockquote>\n
21.        Before      more   than   three    decades,    in<\/p>\n
Union of India v. D.N. Revri & Co.,<\/a> (1976) 4<\/p>\n
SCC 147, this Court stated;\n<\/p><\/blockquote>\n
      “It must be remembered that a contract
\n      is a commercial document between the
\n      parties and it must be interpreted in
\n      such a manner as to give efficacy to
\n      the contract rather than to invalidate
\n      it. It would not be right while
\n      interpreting a contract, entered into
\n      between two lay parties, to apply
\n      strict rules of construction which are
\n      ordinarily applicable to a conveyance
\n      and   other   formal   documents.  The
\n      meaning of such a contract must be
\n      gathered by adopting a common sense
\n      approach and it must not be allowed to
\n      be thwarted by a narrow, pedantic and
\n      legalistic interpretation”.\n<\/p><\/blockquote>\n<\/blockquote>\n
22.        Very recently, in Citibank N.A. v. TLC<\/p>\n
Marketing PLC & Anr.,<\/a> (2008) 1 SCC 481, this<\/p>\n
Court    held   that    commercial    contract     must   be<\/p>\n
broadly construed with a view to give efficacy<\/p>\n
to such contract rather than to invalidate it.\n<\/p><\/blockquote>\n
Clauses    of   the     contract     must    be   liberally<\/p>\n
interpreted.        Narrow     and   technical    approach
\n                                                                     18<\/span><\/p>\n
should     be    avoided.        [see    also     Russel        on<\/p>\n
Arbitration (1997); p.60]<\/p>\n
23.        The other issue which has been raised<\/p>\n
by the learned counsel for the respondent is<\/p>\n
that     the    respondent       was    appointed        as     an<\/p>\n
employee by the applicant-Company and there is<\/p>\n
relationship of master and servant between the<\/p>\n
parties.       A contract in question is a contract<\/p>\n
of employment to which the Act does not apply.<\/p>\n
The submission of the Company, on the other<\/p>\n
hand, is that looking to the agreement as a<\/p>\n
whole, it cannot be said that the respondent<\/p>\n
was a mere employee.             The relevant clauses of<\/p>\n
the agreement go to show that it was a contract<\/p>\n
of trade and business, which is a commercial<\/p>\n
transaction       and     Clause        12     clearly        gets<\/p>\n
attracted.\n<\/p>\n
24.        It    has    not      been    disputed    by        the<\/p>\n
applicant-Company         that     if    the    contract        is<\/p>\n
merely of an employment and the relationship<\/p>\n
between the parties is of master and servant,<\/p>\n
the    matter    cannot     be    referred      to   Arbitral
\n                                                                        19<\/span><\/p>\n
Tribunal.          But if the respondent is engaged by<\/p>\n
the     applicant        Company       to     perform     functions<\/p>\n
which are inextricably linked with functions<\/p>\n
which could be undertaken by a businessman or<\/p>\n
by     a   Company       and    such        activities     form    an<\/p>\n
integral       part      of    his     activities,       there     is<\/p>\n
element       of    `commerce’.             In   that    case,    the<\/p>\n
provisions of the Act would clearly apply.<\/p>\n
25.         In     the   instant       case,      the    respondent<\/p>\n
has been appointed as Director (Technical) and<\/p>\n
has    been    allotted        40%   equity       shares    in    the<\/p>\n
subsidiary Company (Comed Bio-Tech Ltd.). Over<\/p>\n
and above that, he was to be paid salary and<\/p>\n
other benefits in lieu of services rendered by<\/p>\n
him.       Para 3 of the Agreement required the<\/p>\n
respondent               to          undertake              certain<\/p>\n
responsibilities.\n<\/p>\n
26.         They are as under;\n<\/p>\n
       “Responsibility of DR. C.N. RAMCHAND<\/p>\n
1.     Will be responsible for the selection
\n       of   machineries,   instruments,  staff
\n       selection including technical staff and
\n       arrange for the same.\n<\/p>\n
                                                         20<\/span><\/p>\n
2.    He   will    arrange   for    successful
\n      operation of the research center.<\/p>\n
3.    To arrange and coordinate with the
\n      group companies in the area of the
\n      product planning, product development
\n      and arrange for the stage up the level
\n      of the launching in the market.\n<\/p>\n
4.    He will be chief executive officer in
\n      the   Comed   Bio  Tech Ltd.   in  al
\n      operational matters.\n<\/p>\n
5.    He will be responsible to develop new
\n      bio molelcules as per the discussion
\n      with his utmost care integrity.\n<\/p>\n
27.        The    applicant-Company     wanted      to<\/p>\n
venture into the field of bio-technology which<\/p>\n
was not previously chartered or traversed by it<\/p>\n
(novel bio-products). The respondent possessed<\/p>\n
special knowledge and to get the benefit of<\/p>\n
such research and expertise, an agreement had<\/p>\n
been entered into by the parties and respondent<\/p>\n
had been appointed Director of the subsidiary<\/p>\n
Company.\n<\/p>\n
28.        Now,   it   is   well   settled   that    a<\/p>\n
Director is not a mere employee or servant of<\/p>\n
the Company. In Lee v. Lee’s Air Framing Ltd.,<\/p>\n
1961 AC 12, it was held that a Director is a
\n                                                                        21<\/span><\/p>\n
controller of the company’s affairs and is not<\/p>\n
a mere servant of the Company.                  Such Director<\/p>\n
may    have   to    work   also    as    an    employee       in    a<\/p>\n
different          capacity.       Gower        and      Davies’<\/p>\n
Principles of Modern           Company Law,           (17th   Edn.<\/p>\n
pp. 370-76) also deals with duties of Director<\/p>\n
viz-a-viz as an employee of the Company and<\/p>\n
makes it clear that a Director per se cannot be<\/p>\n
said    to    be    an   employee       or    servant    of    the<\/p>\n
Company.\n<\/p>\n
29.          In    Ram   Pershad    v.       Commissioner          of<\/p>\n
Income Tax, New Delhi<\/a> (1972) 2 SCC 696, this<\/p>\n
Court held that a Managing Director may have a<\/p>\n
dual capacity.           He may be both, a Director as<\/p>\n
well as an Employee.\n<\/p>\n
 30.         The Court stated;\n<\/p>\n
       “7. Though an agent as such is not a
\n       servant, a servant is generally for
\n       some purposes his master’s implied
\n       agent,   the   extent  of  the   agency
\n       depending upon the duties or position
\n       of the servant. It is again true that
\n       a director of a company is not a
\n       servant but an agent inasmuch as the
\n       company cannot act in its own person
\n       but has only to act through directors
\n       who    qua   the   company  have    the
\n                                                   22<\/span><\/p>\n
      relationship  of   an  agent   to  its
\n      principal. A Managing Director may
\n      have a dual capacity. He may both be a
\n      Director as well as employee. It is
\n      therefore evident that in the capacity
\n      of a Managing Director he may be
\n      regarded   as  having  not   only  the
\n      capacity as persona of a director but
\n      also has the persona of an employee,
\n      as an agent depending upon the nature
\n      of his work and the terms of his
\n      employment. Where he is so employed,
\n      the relationship between him as the
\n      Managing Director and the Company may
\n      be similar to a person who is employed
\n      as a servant or an agent for the term
\n      “employed” is facile enough to cover
\n      any of these relationships. The nature
\n      of his employment may be determined by
\n      the articles of association of a
\n      company and\/or the agreement if any,
\n      under which a contractual relationship
\n      between the Director and the company
\n      has been brought about, whereunder the
\n      Director is constituted an employee of
\n      the company, if such be the case, his
\n      remuneration will be assessable as
\n      salary under Section 7. In other
\n      words, whether or not a Managing
\n      Director is a servant of the company
\n      apart from his being a Director can
\n      only be determined by the article of
\n      association and the terms of his
\n      employment”.\n<\/p><\/blockquote>\n
31.       The Court then referred to Anderson v.<\/p>\n
James Sutherland (Peterhead) Limited where Lord<\/p>\n
Normand at p. 218 said:\n<\/p>\n
                                                                 23<\/span><\/p>\n
      “… the managing director has two
\n      functions and two capacities. Qua
\n      Managing Director he is a party to a
\n      contract with the company, and this
\n      contract    is    a   contract    of
\n      employment; more specifically I am
\n      of opinion that it is a contract of
\n      service and not a contract for
\n      service.”\n<\/p><\/blockquote>\n
32.      Thus, from settled legal position as<\/p>\n
also from the functions to be performed by the<\/p>\n
respondent,    I   hold    that    the   respondent        was<\/p>\n
working in dual or double capacity, i.e. (i)<\/p>\n
as an employee, and (ii) as a Director.                     In<\/p>\n
the later capacity, however, he was the Chief<\/p>\n
Executive Officer of the subsidiary Company<\/p>\n
and had to look after all operational matters.<\/p>\n
The   functions    to   be   performed        by   him    were<\/p>\n
supervisory    and      related    to    policy      making<\/p>\n
decisions in the affairs of the Company, as<\/p>\n
observed by this Court in Ram Pershad. Any<\/p>\n
dispute between the applicant-Company and the<\/p>\n
respondent    would,      therefore,     be    covered      by<\/p>\n
Clause 12 of the Agreement which provides for<\/p>\n
arbitration.       Hence,    the    contention       of    the<\/p>\n
learned counsel for the respondent that the
\n                                                                                              24<\/span><\/p>\n
 respondent was merely an employee and there<\/p>\n
 was no element of business, trade or commerce<\/p>\n
 has no substance and must be rejected.<\/p>\n
33.        For    the     foregoing             reasons,                     in          my<\/p>\n
opinion, the application filed by the Company<\/p>\n
must be allowed by holding that the case is<\/p>\n
covered by clause (f) of sub-section (1) of<\/p>\n
Section    2     of     the    Act.     It         is          a        case             of<\/p>\n
International         Commercial      Arbitration                          and           is<\/p>\n
covered by Clause 12 of MoU.                     Since there is a<\/p>\n
dispute    between       the    parties,             it         has           to         be<\/p>\n
decided by an arbitrator. The clause extracted<\/p>\n
hereinabove      provides       for    an         arbitrator                       i.e.<\/p>\n
sole arbitrator and hence only one arbitrator<\/p>\n
should be appointed. I, therefore, appoint Mr.<\/p>\n
Madhukar       Fanse,     retired       Judge,                 City             Civil<\/p>\n
Court,    Ahmedabad       as    the    sole             arbitrator                       to<\/p>\n
decide the dispute between the parties.<\/p>\n
                                      ……………………………………………J.
\n                                      (C.K. THAKKER)
\n NEW DELHI,
\n November 06, 2008.\n<\/p>\n
25<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India M\/S Comed Chemicals Ltd vs C.N.Ramchand on 6 November, 2008 Author: C Thakker Bench: C.K. Thakker REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION ARBITRATION PETITION NO. 17 OF 2007 M\/S COMED CHEMICALS LTD. … PETITIONER VERSUS C.N. RAMCHAND … RESPONDENT J U D G M E N T […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-33750","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nM\/S Comed Chemicals Ltd vs C.N.Ramchand on 6 November, 2008 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/ms-comed-chemicals-ltd-vs-c-n-ramchand-on-6-november-2008\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"M\/S Comed Chemicals Ltd vs C.N.Ramchand on 6 November, 2008 - 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