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HIGH COURT OF DELHI
FAO (OS) (COMM) 28/2021 & CM APPLs. 6425-27/2021 &
6845/2021 MEWA MISHRI ENTERPRISES PRIVATE LIMITED .....Appellant
Through: Mr. Asutosh Lohia, Advocate and Mr. Rohan Dewan, Advocate.
Through: Ms. Anushree Kapadia, Advocate.
Date of Decision: 23rd February, 2021
HON'BLE MS. JUSTICE ASHA MENON
JUDGMENT
1. The appeal has been heard by way of video conferencing.:
2. Present appeal has been filed challenging the judgment and order dated 01st “36. While exercising Section 9 jurisdiction, therefore, it is not for this Court to examine, in detail, the disputes between the petitioner and the respondent regarding the alleged shortfall in quality or quantity of the cashew nuts. The issue is highly December, 2020 passed in OMP(I) COMM No. 255/2020. The learned Single Judge in the impugned judgment and order has held as under:- 2021:DHC:691-DB debatable. The respondent contends that the imported cashew nuts were sub-standard, as their out-turn was less than the minimum prescribed out-turn of 48 lbs. The petitioner contends, per contra, that the difference in the outturn was minimal i.e. merely 3 lbs whereas, on the other hand, the nut count of the imported cashew nuts was much lower than the maximum prescribed 190 Nos. per kg, which indicated that the cashew nuts were superior, rather than inferior, in quality. This is a dispute which this Court, in exercise of its Section 9 jurisdiction, cannot possibly adjudicate. It would have to be examined by the learned Arbitral Tribunal, duly constituted in accordance with the contract between the parties. xxxx xxxx xxxx xxxx 44……In other words, the respondent took possession of Lot A of the cashew nuts, did not make any payment to the petitioner thereagainst and went on to dispose of the entire Lot A of cashew nuts without either seeking the permission of the petitioner, prior thereto, or even, for that matter, informing the petitioner, after disposing of the cashew nuts, that it had done so. Ms. Kapadia is correct in her submissions that it is for the first time, in its response to the present petition, that the respondent informed the petitioner that it had disposed of the cashew nuts in Lot A.
45. Clearly, therefore, a prima facie, case is made out, in favour of the petitioner, as regards the alleged illegality, on the part of the respondent, in failing to make any payment, to the petitioner, for Lot A and in disposing of the entire Lot, without even informing the petitioner.
48. Ordinarily, no doubt, this proposition, as advanced by Mr. Lohia, is correct. Where there is a disputed claim, interim protection, by way of securing the amount in dispute, at a prearbitral stage, would be justified only where there is a danger of the arbitral proceedings, being frustrated, were such deposit not directed. There are, however, no absolutes in law, and the Court is, on occasion, required to tailor the relief to the facts which appear before it. In my prima facie view, the facts in the present case are glaring. Mr. Lohia has not been able to show me any provision, in the Sales Contract between the petitioner and the respondent, which entitled the respondent to withhold the payment against the cashew nuts covered by Lot A. Prima facie, I am constrained to observe that the respondent appears to have treated itself as the self-professed arbiter of the law, so far as the payment qua the said Lot of cashew nuts was concerned. Not only did the respondent take possession of the cashew nuts without making any payment, it has chosen not to make any payment to the petitioner for the said Lot of cashew nuts till date, and went on to dispose of the cashew nuts, without ever communicating, to the petitioner, any adverse test report in respect thereof, or even informing the petitioner to the fact that it was intending to dispose of the cashew nuts.
50. Even apropos Lot B, RBS had tested the said Lot prior to their being cleared from the customs area and it was after having seen the said test report and having made payment against the said Lot, that the respondent chose to clear the goods from the customs area and remove the cashew nuts to its godown. No doubt, the respondent sought to aver, thereafter, that the cashew nuts were found to be defective. The petitioner has, on the other hand, disputed this allegation and has also submitted that there was nothing to indicate that the cashew nuts, the photograph of which was forwarded by the respondent to the petitioner, actually belonged to Lot B. This, in any case, would be a matter to be examined, on the basis of evidence in the arbitral proceedings and I cannot venture any opinion thereon in exercise of my jurisdiction under Section 9 of the 1996 Arbitration Act. Even if, it were to be assumed, arguendo, that Lot B was defective, I am unable, prima facie, to see how the respondent could have appropriated, to itself, the cashew nuts in Lot A, without any adverse report qua the said Lot and with no other reasonable justification whatsoever.
51. Given the extreme nature of the circumstances in the present case, and the prima facie, unconscionable manner in which the respondent had acted, qua Lot A of the cashew nuts imported by it, I am of the opinion that the prayer of the petitioner for a direction to the respondent, to secure the amount payable to the petitioner against the said Lot, is merited. The manner in which the respondent has chosen to take possession of Lot A of the cashew nuts, without making any payment to the petitioner, and has chosen to dispose of the cashew nuts, without communicating the said fact to the petitioner, informing the petitioner of such disposal even after it was made, and reserving disclosure in that regard till the filing of a response to the present petition, casts serious doubt on its conduct. It cannot be said, therefore, that if the petitioner seeks securing of the amount due to it against Lot A, the apprehension of the petitioner in that regard is unfounded.
52. In these peculiar circumstances, I am of the opinion that prayer (e) in the petition deserves to be allowed.
53. Accordingly, the present petition is allowed in terms of prayer (e) thereof. The respondent is directed to deposit, with the equivalent to US$ 133,878.31, by way of a cross cheque/demand draft, within a period of eight weeks from today. Such deposit, as and when made, shall be retained by the Registry in an interest bearing fixed deposit, and shall be subject to further orders to be passed either by this Court or by the Arbitral Tribunal to be constituted in accordance with this judgment.”
3. At the outset, Mr. Asutosh Lohia, learned counsel for the appellant submits that this Court had no territorial jurisdiction to entertain and decide Section 9 application filed by the respondent-petitioner herein.
4. He contends that the e-mails exchanged between the parties, in particular, on 16th May, 2020 show that the respondent-petitioner had agreed to the disposal of the cashewnuts in Lot ‘A’ against the defects in cashewnuts in Lot ‘B’ and the alleged excess payment made by the appellant towards the cashew nuts in Lot B. The e-mails referred to by Mr. Asutosh Lohia are reproduced hereinbelow:- “From: Saravjeet Talwar Sent: Saturday, May 16, 2020 12.03 PM To: Healthy Bites, Roland Dsouza Cc: Ashjeet Talwar Subject: Re-Regarding Tanzanian RCN Abhishek, I am completely surprised by our phone call. Sad that you did not want to settle even though you have goods in your name as security. I expected better because whatever is your claim, it can at best be 300-400 dollars per ton, not more. Additionally you have paid detention and rents which can be usd 20000 which comes to around usd 200 per ton. Total claim say can be usd 500, 600 or even 709 per ton. That is why I said keep 50% of the cargo and allow for loading only two trucks. That also you refused. Remember that honesty pays always. Regards/S Talwar AST Enterprises Inc., 909 Palladium Tower, Cluster ‘C’, Jumeirah Lakesh Towers, Dubai, U.A.E., Tel +971 4 4495300 Fax + 971 4 4495338 From: Saravjeet Talwar,talwar @astenterprises.ae> Date: Saturday, 16 May 2020 at 10:33 AM To: Healthy Bites mewamishri@gmail.com, Rolandroland@astenterpirse.ae Subject: Re: Regarding Tanzanian RCN Abhishekji, Refer telecom. As explained we are you have great relationship since so many years. I AM CATEGORICALLY ASSURING YOU THAT EVERY RUPEE LOSS SHALL BE COMPENSATED FOR. Kindly allow the lifting and within max 3 days buyer will remit the funds. You need not worry because this is not the end of the business. We are a responsible company not to let down any buyer if we have made a mistake. As explained Roland came to India specifically for your cargo. Also we released the documents without payment. If we had anything in our mind we would not have released the same. We did so because we have full trust in you. So please let good sense prevail and we shall satisfy you 100%. Your cooperation is requested in these tough and difficult times and we shall make sure you will earn out of us, not loose even in future business. Thanking you in advance for your understanding. Regards/S Talwar”
5. Mr. Lohia also submits that the learned Single Judge committed an error in law in disregarding the WhatsApp messages exchanged between the parties, in particular, even those messages which had been admitted by the respondent.
6. He lastly submits that the learned Single Judge failed to apply the test of Order XXXVIII Rule 5 CPC while directing the appellant herein to deposit the entire amount claimed by the respondent herein.
7. Having heard Mr. Lohia this Court is of the opinion that the jurisdiction of an Appellate Court while hearing an appeal against application under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act, 1996”) is very limited as the appeal is against exercise of discretion by the learned Single Judge. In such appeals, the Appellate Court does not substitute its own discretion except where the discretion is shown to have been exercised arbitrarily or capriciously or perversely or where the Court has ignored the settled principles of law. An appeal against the exercise of discretion is said to be an appeal on principle as held in Wander Ltd. and Another Vs. Antox India P. Ltd., 1990 (Supp) SCC 727. Consequently, the appellate Court will not reassess the material and seek to reach a conclusion different from the one reached by the trial court below if the one reached by that Court was reasonably possible on the material.
8. This Court is also of the view that since the registered office of the appellant is in Delhi and there is no exclusive jurisdiction clause in the Agreement, this Court has jurisdiction to entertain the respondentpetitioner’s application under Section 9 of the Act, 1996.
9. This Court is in agreement with the finding of the learned Single Judge that in view of the Proviso to Section 2(2) of the Act, 1996, this Court had the jurisdiction to hear and decide Section 9 application filed by the respondent-petitioner. The conclusion of learned Single Judge is reinforced when the unamended Section 2(2) of the Act, 1996 is contrasted with the proviso inserted vide Amendment Act of 2016. The unamended Section 2(2) and the Proviso inserted subsequently are reproduced hereinbelow:- A) Section 2(2) of Act, 1996 before the amendment:- “2. Definitions.- (2)This Part shall apply where the place of arbitration is in India.” B) Section 2(2) of Act, 1996 as amended by Amendment Act of 2016:- “2. Definitions.- (2) This part shall apply where the place of arbitration is in India: [Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and [clause(b)] of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognized under the provisions of Part II of this Act.]
10. Consequently, the jurisdiction of this Court to entertain Section 9 application in the present case will not be ousted merely because the seat of arbitration is outside India. In fact, to oust the jurisdiction of this Court, a specific ‘ouster clause’ or ‘exclusive jurisdiction clause’ is required – which admittedly is absent in the present case.
11. Further, in the present case, it is an admitted position that though respondent-petitioner had delivered two Lots of cashewnuts being Lot A and Lot B to the appellant and the agreed terms required the appellant to make payment of each Lot before taking delivery, yet the appellant had made payment for Lot B only. During the hearing before the learned Single Judge, it transpired that Lot ‘A’ had been sold by appellant and the entire consideration had been appropriated by the appellant without any written instruction permitting the appellant to appropriate Lot A by sale against alleged overpayment made against Lot B.
12. This Court is prima facie of the view that the e-mails referred to by Mr. Lohia seem to have been sent by the respondent-petitioner under coercion as the demurrage was increasing by the day and till the respondentpetitioner agreed to refund the ten percent advance amount, the appellant in whose name the Bill of Entry had been issued, refused to lift the Lot A goods. Prima facie, it seems plausible that Lot A was released by the respondent-petitioner without receiving payment to avoid escalating demurrage charges. Moreover, the emails and communications between the parties do not prove in any manner that the respondent-petitioner had allowed the appellant to dispose of the cashewnuts in Lot A after taking delivery or that Lot A was given free in lieu of the alleged defects in Lot B.
13. This Court is in agreement with the prima facie finding of the learned Single Judge that the appellant has acted in an ‘unconscionable manner’ qua Lot A goods as though the appellant has received Lot A, yet it has not made any payment towards the said Lot. Consequently, no ground for interference with the impugned order is made out.
14. However, we are in agreement with the submission of Mr. Lohia that there is no absolute bar on the use of WhatsApp messages in any legal proceedings subject to facts of each case and the applicable rules of evidence. But, the issue of admissibility of said messages can be examined only by the designated Arbitration Resolution Mechanism i.e. arbitrator.
15. This Court is also of the opinion that Section 9 grants wide powers to the Courts in granting an appropriate interim order based on the relevant facts of the case. Even though exercise of such powers is premised on the underlying principles of Orders XXXVIII and XXXIX of the C.P.C., yet the Court is not unduly bound by the text of these provisions. A Coordinate Bench of this Court in Ajay Singh v. Kai Airways Private Limited, 2017 SCC OnLine Del 8934 has held as under:- “27. Though apparently, there seem to be two divergent strands of thought, in judicial thinking, this court is of the opinion that the matter is one of the weight to be given to the materials on record, a fact dependent exercise, rather than of principle. That Section 9 grants wide powers to the courts in fashioning an appropriate interim order, is apparent from its text. Nevertheless, what the authorities stress is that the exercise of such power should be principled, premised on some known guidelines - therefore, the analogy of Orders 38 and 39. Equally, the court should not find itself unduly bound by the text of those provisions rather it is to follow the underlying principles. In this regard, the observations of Lord Hoffman in Films Rover International Ltd. v. Cannon Film Sales Ltd. (1986) 3 All ER 772 are fitting: “But I think it is important in this area to distinguish between fundamental principles and what are sometimes described as ‘guidelines’, i.e. useful generalisations about the way to deal with the normal run of cases falling within a particular category. The principal dilemma about the grant of interlocutory injunctions, whether prohibitory or mandatory, is that there is by definition a risk that the court may make the ‘wrong’ decision, in the sense of granting an injunction to a party who fails to establish his right at the trial (or would fail if there was a trial) or alternatively, in failing to grant an injunction to a party who succeeds (or would succeed) at trial. A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’ in the sense I have described. The guidelines for the grant of both kinds of interlocutory injunctions are derived from this principle.”
16. In any event, this Court’s jurisdiction under Section 9 is to support the arbitration and to ensure that if an Award is passed by the arbitrator, the same is executable and is not rendered infructuous. Accordingly, this Court directs the appellant to either deposit the entire claimed amount in cash with the Registry of this Court or to furnish a bank guarantee equivalent to US$ 133,878.31 to the satisfaction of the Registrar General of this Court within six weeks. To balance the equities, this Court directs that in the event the respondent-petitioner’s claim is rejected by the arbitral tribunal, then the appellant shall be entitled to claim reimbursement of bank guarantee charges as well as loss of interest that it may have incurred in depositing the money or in providing the bank guarantee. It is however clarified that the Arbitrator shall pass an Award on its own merits without being influenced by any observation/ direction/finding either of the learned Single Judge or of this Court. To the aforesaid extent, the impugned order is modified.
17. With the aforesaid direction, present appeal and applications stand disposed of.
18. The order be uploaded on the website forthwith. Copy of the order be also forwarded to the learned counsel through e-mail. MANMOHAN, J ASHA MENON, J FEBRUARY 23, 2021 Js/AS