Shree Balaji Motors v. Hero Motocorp Ltd

1. The present petition has been filed on behalf of the petitioner under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of arbitrator for redressal of disputes between the parties arising qua the Dealership Agreement dated 27th February, 2018.

2. Learned counsel appearing on behalf of the petitioner submitted that the petitioner is a registered partnership firm having its registered office at A-1, 1/25, Sai Kutir Society, Opp. J.H. Ambani School, University Road,Surat, Gujarat - 395007. The petitioner is engaged in marketing and servicing of two wheelers alongwith their accessories.

3. It has been submitted on behalf of the petitioner that the respondent is a company having its registered office at The Grand Plaza, Plot No. 2, Nelson Mandela Road, Vasant Kunj, Phase II, New Delhi- 110070 and also at 34 Basant Lok, Vasant Vihar, New Delhi- 110057.

4. It has been submitted that the petitioner and the respondent entered into an agreement on 27th February, 2018, wherein, the petitioner was appointed as a non-exclusive authorized dealer for the distribution, sale, and servicing of respondent's goods and parts. It is further submitted that the said agreement was duly executed between the parties.

5. It has been submitted that in the year 2018, the authorized representative of the respondent i.e., Dhru Automobiles having its registered office at Opposite Centre Point, Ring Road, Surat-395002 approached the petitioner and requested to take over the business. It is further submitted that as stipulated by the Dealership Agreement, the petitioner contacted Mr. Pradeep Nair, a representative of the respondent, who was notified of the contacts between the petitioner and Dhru Automobiles. On a subsequent phone call between the petitioner and Mr. Pradeep Nair, the petitioner was instructed to settle Dhru Automobiles's debts, following which he was to be granted complete control.

6. It has been submitted on behalf of the petitioner that subsequent to the discussions between the petitioner, the respondent and Dhru Automobiles, the petitioner and Dhru Automobiles entered into a Memorandum of Understanding ("MOU") on 30th May, 2018 wherein it was agreed that the business of Dhru Automobiles would be conducted as a joint venture in the name of the petitioner. Furthermore, both parties agreed that Dhru Automobiles alone would run the company location. This arrangement was to be in effect for a period of one year, with both parties sharing earnings and losses equally.

7. It has been submitted on behalf of the petitioner that according to the MOU, the petitioner was expected to introduce a capital of 100 lacs by 31st July, 2018, the said figure was to be paid to the respondent in order to settle Dhru Automobiles' outstanding debts. It is submitted that Mr. Pradeep Nair, who represented the respondent, was properly notified of the 100 Lacs payment.

8. It is submitted on behalf of the petitioner that instead of acknowledging the payments made by the petitioner, the respondent began harassing the petitioner in terms of recovery of alleged sums under the Dealership Agreement and even threatened to terminate the same for the reasons best known to the respondent.

9. It is further submitted on behalf of the petitioner that malice in the actions of the respondent is further supported by the fact that in June 2019, despite carrying out business operations on the instructions of Mr. Pradeep Nair, a representative of the respondent, the petitioner learned of the unauthorized sale of Rs. 31.09 Lacs made by Dhru Automobiles through some brokers and agents without informing the petitioner. The aforementioned sale clearly violates the conditions of the MOU. As Dhru Cars failed to account for the aforementioned money in the joint venture, the petitioner was compelled to inform Mr. Pradeep Nair vide email dated 28th June, 2019 of the aforementioned embezzlement.

10. It has been submitted on behalf of the petitioner that the credit limit of the petitioner was reduced from 5 Crores to 1 Crore vide email dated 12th October, 2020, notwithstanding the petitioner's observance of the Dealership Agreement's payment conditions and subsequent behaviour requirements. It is further submitted that as a counterblast to the numerous reasonable requests made by the petitioner, the respondent issued a show cause notice on 1st December, 2021 threatening to terminate the Dealership Agreement. Furthermore, the said notice was in complete ignorance of the substantial debt owing by the respondent to the petitioner. The malafide is further supported by the fact that the respondent has unlawfully terminated the delivery since September 2020, which has severely impacted the petitioner's company.

11. Learned counsel for the petitioner submitted that the attempt to settle the disputes amicably between the parties, had failed and therefore, the petitioner was constrained to invoke the arbitration clause vide notice dated 28th February, 2022. It is further submitted that respondent in response to the said notice declined the claims of the petitioner on false and frivolous grounds.

12. Learned counsel for the respondent appearing on advance notice vehemently opposes the averments made in the instant petition however, fairly conceded that the disputes arising out of the said Dealership Agreement are arbitral in nature and has no objection if an independent arbitrator is appointed by this Court for redressal of disputes between the parties.

13. Heard the learned counsel appearing for the parties and perused the record.

14. As agreed on behalf of the learned counsel appearing for the parties, this Court finds it appropriate to appoint a sole arbitrator for adjudication of disputes between the parties arising out of the Dealership Agreement dated 27th February, 2018. Hence, the following order.

(i) Justice Shiva Kirti Singh, Former Judge Supreme Court of