ETOILE CREATIONSversusSARL DANSET DECO

                             [2016] 3 S.C.R. 478



A                          ETO!LE CREATIONS
                                       v.
                           SARL DANSET DECO
                (Arbitration Application (Civil) No. 4of2015)
B                               JULY 25, 2016
     [T.S. THAKUR, CJI, R. BANUMATHI AND UDAY UMESH
                           LALIT, JJ.]
           Arbitration and Conciliation Act, 1996: s.11 (5) rlw s. 11 (9) -
    Petition for appointment of sole arbitrator - In the instant case, it is ·
c   evident from the petition that the disputes arose between the parties
    and in view of arbitration agreement, disputes could be resolved
    only by way of arbitration - Thus, petition is allowed - A Former
    Judge of Delhi High Court appointed as a sole arbitrator for
    adjudication of disputes.
D         Allowing the petition, the Court
          HELD: L As is evident from the averments in the petition,
    disputes have actually arisen between the parties in relation to
    the agreement and in view of Clause 14 such disputes could
    be resolved only by way of arbitration. Whether the
E   respondent is bound to pay Euro 393916.95 alongwith interest
    at the rate of 24% per annum; whether the respondent has
    committed breach of Clause 2.2 of the agreement in- cancelling
    the orders; whether the respondent is liable to compensate for
    cancelling the orders and reimburse the cost and damages
    incurred by the petitioner; whether the respondent acted in
F
    violation of Clause 4.1 of 'Buyers Agreement' dated 18.10.2012
    by diverting the orders to another agency and, if so, whether
    the respondent is liable to compensate the petitioner and
    such other incidental questions can be examined only by the
    arbitrator. When an arbitration agreement exists between the
G   parties, the present petition under Section 11 (5) read with
    Section 11 (9) of the Arbitration and Conciliation Act, 1996,
    shall have to be allowed with appropriate directions. A
    Former Judge, Delhi High Court is appointed as a Sole
    Arbitrator for adjudication of the disputes that have arisen
    between the parties in relation to the 'Buyers Agreement' dated
H
                                    478
          ETOILE CREATIONS v. SARL DANSET DECO                                  479



18.10.2012 executed between them. [Paras 8, 9) [482-E-H; 483-                   A
A-BJ
       CIVIL ORIGINAL JURISDICTION : Arbitration Application
(Civil) No. 4 of2015
       Vivek Gupta, Adv. for the Petitioner.
                                                                                 B
       The Judgment of the Court was delivered by
       R. BANUMATHI, J. I. In this petition under Secti0)1 11 (5) read
with Section 11 (9) of the Arbitration and Conci Iiation Act, 1996, the
petitioner prays for the appointment of a sole arbitrator for adjudication
of disputes that have arisen between the parties in relation to 'Buyers          c
Agreement' dated 18. I 0.20 I 2 executed between them.
       2. Briefly stated case of the petitioner is as under:- Petitioner is a
proprietorship firm having its registered office at C-29 I, Suraj Mal Vihar,
Delhi. The petitioner is engaged in the business of manufacturing of
products relating to home furnishing and upholstery etc., exclusively for        D
the respondent since 2000. The respondent-SARL DANSET DECO is
a concern having its office at 240 Rue De La Lys 59250, Halluin, France
which is engaged in the business of purchase and sale of the product
relating to home furnishing and upholstery and is the buyer of the products
manufactured by the petitioner. Accordingly, a 'Buyers Agreement' was
                                                                                 E
executed on I 8.10.20 I 2 at New Delhi between the petitioner and the
respondent. As per the aforesaid agreement, the-petitioner has been
selling/supplying its aforesaid products and the respondent has been
buying/purchasing the products for resale/sale in the territory of France.
There was a long business relationship since 2000, even prior to execution
of the agreement and the petitioner was regularly supplying the products         F
to the respondent. At the time of execution of the aforesaid agreement,
it was acknowledged that the respondent owes a total amount of Euro
367814.80 as the outstanding amount. The details of the outstanding
dues have been mentioned in Schedule-I of the 'Buyers Agreement'.
The petitioner has alleged that as per the terms and conditions of the
 'Buyers Agreement' dated 18.10.2012, the respondent did not release             G
the said outstanding amount within seven days of the agreement. Despite
numerous reminders for the payment of dues through e-mails, SMS
messages exchanged between the parties during November 2012 to April
 2013 and subsequent legal notices sent to the respondent, the respondent
failed to pay the admitted dues of the petitioner.                               H
480             SUPREME COURT REPORTS                           [2016] 3 S.C.R.



A            3. Clause 2.2 of the 'Buyers Agreement' imposed a restriction
      upon the petitioner from supplying its product to any other person/firm
      or company, in the territory of France. On the other hand, the respondent
      agreed and assured that the products ordered during each year of the
      term shall not fall short of the target provided in Schedule-II of the said
      agreement. In the event of the failure to meet such target, the agreement
B
      stipulated termination of restriction so imposed upon the petitioner.
      Petitioner supplied various materials to the respondent at different points
      oftime against various orders. The respondent cancelled a few orders
      to the tune of Euro 272368.25. The respondent committed breach of the
      terms and conditions of the 'Buyers Agreement' because cancelled orders
c     were not restored. Thus, the respondent is liable to compensate the
      petitioner for cancelling orders and reimburse for cost and damages
      incurred in procuring material worth Euro 272368.25, just prior to the
      date of shipmetit and also for preparing samples as per the request of
      the respondent dated 25.05.2012 and 26.07.2012. As per Clause 4.1 of
      the 'Buyers Agreement', the respondent shall not purchase/obtain/ deal
D
      with the products or any goods that compete with them, for sale from
      any person, firm or company in India other than the petitioner. The
      respon,dent not only cancelled the orders, but also in violation of Clause
      4.1 of the 'Buyers Agreement' dated 18.10.2012, purchased the same
      products worth approximately Euro 700000 from M/s. Chahat Exports,
E      148-A, Basement, Deep Complex, Near Maharani Bagh, New Delhi
      and Dhruv Overseas, 4502, Dau Bazar, Cloth Market, Fateh Puri, Delhi.
      Placing such orders with other firms, according to petitioner, is a violation
      of terms and conditions of the terms of the 'Buyers Agreement' which
      stipulates commitment between the parties for five years to maintain the
      business relations; but the respondent by diverting those orders to another
 F
      agency has clearly breached the terms and conditions of the agreement.
      Petitioner sent legal notices dated 08.05.2013, 04.07.2013 and 06.07.2013
      calling upon the respondent to pay unpaid invoices to the tune of Euro
      393916.95 and also unpaid invoices to the tune of Euro 209580.63 of Ml
       s Creative International (another partnership firm of the petitioner)
 G     alongwith interest at the rate of 24% per annum.
             4. As the respondent did not make the payment of the invoices,
      the petitioner invoked arbitration clause agreed in Clause 14 of the' Buyers
      Agreement' for the appointment of three arbitrators, one to be nominated
      by each party and the third to be appointed by the two appointed
 H    arbitrators. As per Clause 14 of the 'Buyers Agreement', the petitioner
          ETOILE CREATIONS v. SARL DANSET DECO                                  481
                    [R. BANUMATHI, J.]

sent a statutory notice dated 14.08.2013, nominating on his behalf Mr.           A
Subhash Chandra, LLM, Higher Judicial Services (V.R.S.), Member
Judicial, Railway Claims Tribunal (Retd.) as an arbitrator. Petitioner
requested the respondent to nominate its arbitrator so as to enable these
arbitrators nominated by the parties to further nominate the presiding
arbitrator and constitute an arbitral tribunal.
                                                                                 B
        5. The petitioner filed a petition before the Commercial Court in
Lille to seize all the bank accounts of the respondent with the banks
Caisse d' Epargne, GCE Trade and HSBC bank alongwith all money,
values and/or bonds held by these banks on behalf oftlic: respondent.
The court's bailiffs seized a total amount of Euro 48000 in HSBC bank
on 11.10.2013 and Caisse d' Epargne on 14.10.2013 in compliance to               c
order ofAppellate Court, Douai, France dated 25.09.2014. The petitioner
filed a claim before the Tribunal-DE-COMMERCIAL DE LILLE
METROPOLIS, France for recovery of debt amounting to Euro
393916.95, the Tribunal however dismissed the claim of the petitioner
vi de its order dated 30.01.2014. Petitioner then filed an Appeal No.            D
Minute: 14/3 89/RG 14/0114 7 before the Appel late Court, Douai, France
against the order dated 30.01.2014 passed by the President of the
Commercial Court of LILLE, which also came to be dismissed by its
judgment dated 25.09.2014. The appellate court declared the appeal
inadmissible on the issue ofjurisdiction in view of the arbitration agreement
and also held that there was no emergency to approach the court instead          E
of seeking remedy under the Arbitration Agreement. According to the
petitioner, the aforesaid disputes and differences have arisen in India,
are covered by the terms and conditions of the 'Buyers Agreement' and
are to be resolved by the arbitrator in view of the arbitration clause 14 of
the 'Buyers Agreement'. Hence, the petitioner has filed this petition            F
invoking the arbitration clause 14 of the 'Buyers Agreement' for
appointment of a sole arbitrator in terms of' Buyers Agreement' dated
18.10.2012 qua recovery of Euro 393916.95 payable to the petitioner
alongwith interest at the rate of24% per annum·.
        6. As per the Office Report dated 06.04.2016, counsel for the
petitioner has on 23.02.2016 filed an affidavit of dasti service alongwith       G
proof of service on respondent and proposed respondents and the service
of notice is complete.
      7. We have heard the learned counsel for the petitioner at some
length. Despite service of notice, respondent has chosen not to appear.
The material facts are not in dispute that 'Buyers Agreement' was                H
482            SUPREME COURT REPORTS                           [2016] 3 S.C.R.


A     executed between the parties on 18.10.2012. Clause 14 of the said
      agreement provides for settlement of dispute in relation to the agreement
      by way of arbitration. Clause 14 reads as under:-
            "14. Arbitration
            14.1       Any dispute, difference, controversy or claim
B           ("Dispute") arising between the Parties out of or in relation
            to or in connection with this Agreement, or the breach,
            termination, effect, validity, interpretation or application of
            this Agreement or as to their rights, duties or liabilities
            hereunder, shall be settled by the Parties by mutual
c           negotiations and agreement. If, for any reason, such Dispute
            cannot be resolved amicably by the parties, the same shall
            be referred to and settled by way of arbitration proceed in gs
            by three arbitrators, one to be nominated by each Party
            and the third to be appointed by the two appointed arbitrators.
            The arbitration proceedings shall be held in accordance with
D           theArbitration and Conciliation Act, 1996, or any subsequent
            enactment or amendment thereto (the "Arbitration Act")
            by a sole arbitrator appointed by the First Party. The decision
            of the arbitrator shall be final and binding upon the Parties.
            The venue of arbitration proceedings shall be Delhi. The
E           language of the arbitration and the award shall be English.'"
             8. As is evident from the averments in the petition, disputes have
      actually arisen between the parties in relation to the agreement and in
      view of clause 14 such disputes could be resolved only by way of
      arbitration. Whether the respondent is bound to pay Euro 393916.95
 F    alongwith interest at the rate of24% per annum; whether the respondent
      has committed breach of Clause 2.2 of the agreement in cancelling the
      orders; whether the respondent is liable to compensate for cancelling
      the orders and reimburse the cost and damages incurred by the petitioner;
      whether the respondent acted in violation of Clause 4.1 of 'Buyers
      Agreement' dated 18.10.2012 by diverting the orders to another agency
G     and, if so, whether the respondent is liable to compensate the petitioner
      and such other incidental questions can be examined only by the arbitrator.
      When an arbitration agreement exists between the parties, the present
      petition under Section 11 (5) read with Section 11 (9) of the Arbitration
      and Conciliation Act, 1996, shall have to be allowed with appropriate
H     directions.
          ETOILE CREATIONS v. SARL DANSET DECO                                  483
                    [R. BANUMATHI, J.]

       9. In the result, we allow this petition and appoint Mr. Justice         A
Kai lash Gambhir, a Former Judge, Delhi High Court as a Sole Arbitratqr
for adjudication of the disputes that have arisen between the parties in
relation to the 'Buyers Agreement' dated 18.10.2012 executed between
them. We leave it open for the parties to make their claims and counter
claims in relation to the agreement aforementioned before the Arbitrator.
                                                                                 B
All contentions otherwise open to the parties on facts and in law shall be
open to be urged before the arbitrator. The arbitrator shall fix his own
fee. The petition, is accordingly, allowed with the above directions leaving
the parties to bear their own costs. Parties are directed to appear before
thearbitratoron 14.09.2016.
                                                                                 c
Devika Gujral                                               Petition allowed.