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ITEM NO. 1-A           ( For Judgment )

           COURT No.5     SECTION  XVIA

              S U P R E M E   C O U R T   O F   I N D I A                            RECORD OF PROCEEDINGS

Arbitration Petition No. 6 of 2007

M/s Nandan Biomatrix Limited ..   Applicant     Versus

D 1 Oils Limited ..   Non-applicant                          

DATE : 11/02/2009      This matter was called on for pronouncement of                        judgment today.  

                                                                                For Appellant(s) Mr. SUK. Sagar, Adv.

Ms. Bina Madhavan, Adv. for M/s Lawyer's Knit & Co.,Advs.

   For Respondent(s) Mr. Ashwani Kumar, Adv.

              ---

Hon'ble Mr. Justice S.H. Kapadia pronounced the judgment.  

All  disputes  and  differences  between  the  parties  should  be  referred  to

Singapore International Arbitration Centre, which would nominate an Arbitrator from

its panel to decide all disputes and differences.

The Arbitration Application No. 6 of 2007 is made absolute with no order as

to costs.

[ S. Thapar ]     PS to Registrar

 [ Indu Satija ]    Court Master  

[ Signed reportable judgment is placed on the file ]

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IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

ARBITRATION APPLICATION NO.6 OF 2007

    M/s. Nandan Biomatrix Limited    … Applicant (s)

                   versus

    D 1 Oils Limited        … Non-applicant(s)

J U D G M E N T

S. H. KAPADIA, J.

1. This application under sub-section (5) and (9) of Section 11

of the Arbitration and Conciliation Act, 1996 (for short,  “the 1996

Act”) has been filed with a prayer to appoint an Arbitrator  in terms

of clause 15.1 of the Agreement dated 10.8.04 entered into by and

between the applicant and the non-applicant.

2. The facts leading to filing of this application may be briefly

noticed.

3. The applicant is  inter alia engaged in the business of seed

cloning  and  production,  nursery  development  and  propagation,

plantation  management  and  maintenance  and  the  cultivation  of

medicinal plants.  On 10.8.04 the applicant and the non-applicant

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entered  into  seed  supply  agreement  (Supply  Agreement)  through

which  the  applicant  agreed  to  establish  nurseries  and  prepare

seedling  (seed)  catering  to  the  requirement  of  non-applicant.

According  to  the  said  Agreement  the  non-applicant  promised  to

make an investment  of  Rs.299.35 lakhs with  the applicant.   The

Supply  Agreement  inter  alia  contained an  arbitration  clause 15.1

which reads as under:

“15.1.  Any  dispute  that  arises  between  the  parties

shall  be  resolved  by  submitting  the  same  to  the

institutional arbitration in India under the provisions

of Arbitration and Conciliation Act, 1996.”

4. Applicant  herein  entered  into  a  Joint  Venture  Agreement

with non-applicant on 30.09.04.  The said Agreement contemplated

incorporation of a Joint Venture Company.  This second Agreement

did not  contain an arbitration clause.   It  may be noted that  the

applicant has no claim against the non-applicant under the second

Agreement.   

5. Besides the Joint Venture Agreement dated 30.9.04, a third

Agreement was also entered into on 26.11.04 called as Research and

Development Agreement (“R & D Agreement”, in short).  

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6. In  short,  there  existed  three  Agreements  at  the  relevant

time.   The first  was the Supply Agreement.   The second was the

Joint  Venture Agreement.   The Third was R & D Agreement.   In

between  the  Joint  Venture  and  R  &  D  Agreements  there  is

Termination Agreement dated 16.10.04.  Although the applicant has

no  claim under  the  Joint  Venture  Agreement,  it  is  necessary  to

mention  that  there  were  three  Agreements  by  and  between  the

parties because one of the contentions raised by the non-applicant

in  its  counter  (at  page  109  of  the  paper  book  of  Arbitration

Application) to the effect that if the applicant genuinely believed that

the Supply Agreement had not been terminated by the Termination

Agreement dated 16.10.04, it would not have entered into the R & D

Agreement under which the applicant had received £40 thousand.   

7. To sum up the chronology of events it may be stated that

the Supply Agreement came to be executed on 10.8.04.  The Joint

Venture Agreement came to be executed on 30.9.04.  However, on

16.10.04 a Termination Agreement allegedly has been entered into

by and between the parties.  After Termination Agreement, parties

executed R & D Agreement on 26.11.04.

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8. There  is  no  dispute  regarding  execution  of  the  Supply

Agreement, the execution of the Joint Venture Agreement and the

execution  of  R  &  D  Agreement.   The  dispute  is  regarding  the

execution  of  the  Termination  Agreement  dated  16.10.04.   The

dispute is  regarding  the  effect  of  that  Termination Agreement  by

which  purportedly  the  Supply  Agreement  stood terminated.   The

dispute is also whether in view of the specific clauses mentioned in

the Termination Agreement, all claims ceased to exist.   

9. The entire controversy revolves around the purported Deed

of Termination dated 16.10.04.

The claim of the applicant

10. The claim made by the applicant concerns willful breach of

obligations  by  the  non-applicant  under  the  Supply  Agreement.

Applicant says that they have exhausted all the available remedies

before approaching this Court for appointment of Arbitrators under

Section 11 of the 1996 Act.  It is their submission that the Supply

Agreement dated 10.8.04 has not been terminated by the purported

Termination Agreement dated 16.10.04.  It is their claim that the

alleged Deed of Termination is brought about by the non-applicant

by forging the signatures of its Directors only to avoid the liabilities

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and obligations under the Supply Agreement between the parties.  It

is their claim that the existence of the Termination Agreement came

to  be  noticed  by  them  only  on  24.5.05  when  the  non-applicant

representatives forwarded the alleged Termination Agreement.  It is

only  then  that  they  noticed  that  the  document  was  false  and

fabricated.  The applicant’s claim that the Termination Agreement

was not signed by two of its Directors whose signatures had been

forged and that in any event the said two Directors had no authority

to sign the said Agreement.  In fact a criminal complaint has been

registered  on  1.9.05  in  Hyderabad  and  the  same  is  under

investigation.  The applicant claims that they have also forwarded

the  forged  document  to  a  private  investigating  agency  with  the

specimen  signatures  of  their  two  Directors  together  with  the

admitted signatures which, according to the applicant, reveals that

the signatures on the Termination Agreement were forged between

16.10.04 being the date of the Termination Agreement and 24.5.04

being the date on which the applicant noticed the existence of the

Termination Agreement  for  the first  time.   There  has been lot  of

correspondence  between  the  parties  on  the  basis  of  which  the

claimant claims damages for not being paid for supply of Jatropha

seedlings.  In short, the claim for damages is for reimbursement of

expenses incurred by the applicant as part of the total investment

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under  the  Supply  Agreement.   It  may  be  noted  that  in  the

Arbitration  Application,  the  claim  for  damages  based  on

reimbursement  of  expenditures  incurred  by  the  applicant  is

confined  to  the  Supply  Agreement.   However,  in  the  Written

Statement, the claim refers to the Supply Agreement as well as the

R  & D Agreement.   In  this  connection,  it  is  alleged that  in  the

original R & D Agreement dated 26.11.04, there was no arbitration

clause, however, in the R & D Agreement read with the modification

in the form of Addendum dated 9.4.05, an arbitration clause was

incorporated.  The claim of the applicant is set out in its letter dated

17.6.05 by which the applicant has claimed compensation in respect

of  breach  of  obligations  by  the  non-applicant  under  the  Supply

Agreement and under the R & D Agreement.  It is also set out in the

letter  dated 4.7.05.  By notice dated 10.8.05 the applicant  called

upon the non-applicant  to agree for appointment  of  M/s.  Jupiter

Legal Services Pvt.  Ltd.  to conduct arbitration under 1996 Act to

which the non-applicant did not agree.  Suffice it to state that after

exhausting  all  available  remedies  the  applicant  have  approached

this Court for appointment of Arbitrators under Section 11 of the

1996 Act.

Response of the non-applicant

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11. By way of counter, non-applicant at the outset submits that

the Supply Agreement did not provide for arbitration by reference to

any particular institution nor did it provide for the rules framed by

any  particular  institution  and,  therefore,  the  expression

“institutional  arbitration”  used  in  clause  15.1  of  the  Supply

Agreement  is  vague  and/or  uncertain  and/or  incapable  of  being

made certain  and,  therefore,  clause  15.1  was  void  under  Indian

Contract Act and consequently the Arbitration Application was not

maintainable under Section 11 of the 1996 Act.  It is further stated

that  the  Arbitration  Application  was  liable  to  be  dismissed as  it

sought  an  appointment  of  an  Arbitrator  in  respect  of  claims  for

which there was no arbitration agreement between the parties.  In

this  connection,  reliance  was  placed  on  the  Joint  Venture

Agreement which does not provide for arbitration.  Similarly reliance

was placed on the R & D Agreement to show that it was a separate

agreement which did not provide for arbitration nor was there any

reference  to  clause  15.1  mentioned  in  the  Supply  Agreement.

Therefore, on the aforestated inter alia   grounds, the non-applicant

submits that the Arbitration Application was not maintainable.   

12. On merits, the non-applicant has stated in its counter that

prior  to 16.10.04 parties  were involved in discussions relating to

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commercial necessity warranting variation in the terms of Supply

Agreement resulting in the applicant agreeing to execute a deed of

variation dated 14.10.04.  That deed did not meet the requirements

of the parties.  Therefore, it was suggested to the applicant by the

non-applicant that the Supply Agreement be terminated.  According

to  the  non-applicant,  there  was  correspondence  in  that  regard

through internet between the parties.  That correspondence showed

that  the  applicant  had  received  the  Deed  of  Termination  on

16.10.04.   That  correspondence  showed  that  the  applicant  had

agreed to terminate the Supply Agreement and had in fact signed

the Termination Agreement and the same was mutually accepted by

both the parties.  Therefore,  the non-applicant has denied all the

allegations  of  the  applicant  in  regard  to  the  invalidity  and  the

illegality of the Deed of Termination dated 16.10.04.  According to

the non-applicant,  the contentions raised by the applicant stating

that  the Deed of Termination has not  been executed, that  it  was

forged and in any event that it was signed by Directors who were

not authorized to sign was an after-thought.  According to the non-

applicant, it was agreed between the parties that the Joint Venture

Agreement  would  supersede  the  Supply  Agreement.   The  Joint

Venture  Agreement  would  replace  the  Supply  Agreement.   The

applicant could not have pursued the Joint Venture Agreement on

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and after it came to replace the Supply Agreement.  According to the

non-applicant, the applicant continued to pursue the Joint Venture

Agreement.   According  to  the  non-applicant,  the  applicant  was

specifically  advised  not  to  act  in  furtherance  of  the  Supply

Agreement  till  the  Joint  Venture  Company is  incorporated.   The

Termination Agreement was signed by the parties with the intention

that such execution would void the Supply Agreement.  According to

the non-applicant,  the correspondence between the parties shows

that the applicant was fully aware of the Termination Agreement.  It

shows that  the  Deed was signed on 16.10.04.  It  shows that  all

issues/claims  under  the  Supply  Agreement  stood resolved.   The

correspondence  shows  that  after  16.10.04,  the  parties  discussed

implementation  of  the  Joint  Venture  Agreement  rather  than  the

Supply Agreement.  Lastly, according to the non-applicant, it would

be commercially inconsistent and illogical for parties to enter into R

& D Agreement while the Supply Agreement still continues to exist.

According to the non-applicant, it was highly inconceivable that the

parties would have entered into R & D Agreement if it thought that

the Supply Agreement was still in existence or if it thought that the

Joint Venture Agreement was legally binding.  According to the non-

applicant,  the  Supply  Agreement  dated  10.8.04  stood  validly

terminated on 16.10.04, that  the Joint  Venture Agreement  dated

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30.9.04  consisted  of  heads  of  terms  only  whereas  the  R  &  D

Agreement  dated 26.11.04 stood implemented.   According  to  the

non-applicant, amounts have been received by the applicant under

the third Agreement.  That, the applicant had failed to meet their

obligations under the R & D Agreement.  That, the applicant was in

breach  of  the  R  &  D  Agreement.   That,  under  the  Deed  of

Termination  dated  16.10.04  all  claims  in  respect  of  alleged

expenditure for alleged supply of seedlings stood satisfied/ceased.

For  the  aforestated  reasons,  the  non-applicant  submits  that  the

Arbitration Application No.6 of 2007 deserves to be dismissed with

costs.

Issues which arise for determination

13. Having  regard  to  the  pleadings  and  contentions,  the

following issues arise for consideration:

(a) Whether  there  exists  a  valid  arbitration

agreement between the parties.

(b) Whether there exists a live claim between the

parties.

14. It is now well-settled that the power exercised by the Chief

Justice of India or the designated judge under Section 11(6) of the

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1996 Act is not an administrative power. [See: M/s. S.B.P. & Co. v.

M/s. Patel Engineering Ltd. & Anr. – (2005) 8 SCC 618]

Findings  on  Issue  No.(a)  –  Whether  there  exists  a  valid arbitration agreement between the parties

15. The disputed arbitration clause in the present case is clause

15.1, mentioned in the Supply Agreement, which is reproduced as

under:

“15.1.  Any  dispute  that  arises  between  the  parties

shall  be  resolved  by  submitting  the  same  to  the

institutional arbitration in India under the provisions

of Arbitration and Conciliation Act, 1996.”

16. Arbitration  agreement  is  defined  under  Section  7  of  the

1996 Act.   It does not prescribe any particular form as such.  In

terms of the said provision, arbitration agreement means:

“Section 7 - Arbitration agreement  

(1)  In  this  Part,  "arbitration  agreement"  means  an agreement by the parties  to submit  to arbitration all  or certain  disputes  which  have  arisen  or  which  may arise between them in respect of a defined legal  relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration  clause  in  a  contract  or  in  the  form  of  a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained

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in-

(a) a document signed by the parties;

17. This Court in Rukmanibai Gupta v. Collector, Jabalpur &

Ors.  –  (1980)  4  SCC 556, has held that  what  is required to be

ascertained, while construing a clause is : whether the parties have

agreed that if disputes arise between them in respect of the subject

matter of contract such dispute shall be referred to arbitration, then

such an arrangement would spell out an arbitration agreement.   

18. In  M. Dayanand Reddy v.  A.P.  Industrial  Infrastructure

Corporation Limited & others – (1993) 3 SCC 137, this Court has

held that  an arbitration clause is not required to be stated in any

particular form.  If the intention of the parties to refer the dispute to

arbitration can be ascertained from the terms of the agreement, it is

immaterial  whether  or  not  the  expression  “arbitration”  or

“arbitrator” or “arbitrators” has been used in the agreement.

19. The  Court  is  required,  therefore,  to  decide  whether  the

existence of an agreement to refer the dispute to arbitration can be

clearly ascertained in the facts and circumstances of the case.  This,

in turn, may depend upon the intention of the parties to be gathered

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from  the  correspondence  exchanged  between  the  parties,  the

agreement in question and the surrounding circumstances.  What is

required is to gather the intention of the parties as to whether they

have agreed for resolution of the disputes through arbitration. What

is required to be decided in an application on Section 11 of the 1996

Act is : whether there is an arbitration agreement as defined in the

said Act.

20. Mr. H.L. Tikku, learned senior counsel appearing on behalf

of the non-applicant submitted that clause 15.1 did not contain any

arbitration clause, that clause 15.1 was vague as it did not provide

for arbitration by reference to any particular institution nor did it

provide  that  the  rules  framed by  any  particular  institution  shall

govern the arbitration between the parties.  According to the learned

senior  counsel,  in  absence  of  a  reference  to  any  particular

institution providing for arbitration or in absence of rules framed by

it,  the expression “institutional arbitration” used in clause 15.1 of

the  Supply  Agreement  was  vague  and/or  uncertain  and/or

incapable of being made certain.

21. I do not find any merit in the above contentions raised on

behalf of the non-applicant.  The question which needs to be asked

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is  :  what  did the  parties  intend at  the  time  of  execution of  the

Supply Agreement dated 10.8.04?  What did the parties intend when

clause 15.1 came to be incorporated in the said Supply Agreement?

The answer to the said questions undoubtedly is that any dispute

that may arise between the parties shall be resolved by submitting

the  same  to  the  Institutional  Arbitration  in  India  under  the

provisions of the 1996 Act.  It may be mentioned that the name of a

specific institution is not indicated in clause 15.1.  The 1996 Act

does not  prescribe  any  form  for  an  arbitration  agreement.   The

arbitration agreement is not required to be in any particular form.

[See : Bihar State Mineral Development Corporation & Another v.

Encon Builders (I) (P) Ltd. - (2003) 7 SCC 418].  What is required

is to gather  the intention of  the parties as to whether  they have

agreed for  resolution of  the disputes through arbitration.   In my

view,  in  the  present  case,  the  parties  unequivocally  agreed  for

resolution of the disputes through Institutional Arbitration and not

through an ad hoc arbitration.  Therefore, in my view, there exists a

valid arbitration agreement between the parties vide clause 15.1 in

the Supply Agreement dated 10.8.04.  The first issue is accordingly

answered in favour of the applicant and against the non-applicant.

Findings  on  Issue  No.(b)  –  whether  there  exists  a  live  claim between the parties

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22. On going through the pleadings and the case of the parties

before me, I find that the following amongst other points indicate

that there exists a live claim between the parties.  As can be seen

from the above facts,  in this dispute there are three agreements.

The first is the Supply Agreement.  The second is the Joint Venture

Agreement.  The third is the R & D Agreement.  It is the case of the

non-applicant that vide the Termination Agreement dated 16.10.04,

the Supply Agreement stood terminated.  It is the case of the non-

applicant that the Termination Agreement has been signed by two of

the Directors of the applicant company.  It is the case of the non-

applicant that the Termination Agreement was signed by the parties

with  the  express  intention  that  such  execution  would  void  the

Supply  Agreement.   It  is  the  case  of  the  non-applicant  that  the

intention behind entering R & D Agreement was to put an end to

the Supply Agreement.  It is the case of the non-applicant that in

view  of  the  Termination  Agreement,  the  claim  of  the  applicant

towards  alleged  expenditure  incurred  by  it  stood

extinguished/waived/satisfied.  It is the case of the non-applicant

that the Termination Agreement indicates accord and satisfaction of

all the claims of the parties under the Supply Agreement.  It is the

case of the non-applicant that under the Deed of Termination any

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claim on account of alleged expenditure stood extinguished.   

23. Having regard to the claim made by the applicant and the

response  of  the  non-applicant,  number  of  issues  arises  for

determination.  Some of them are as follows, namely, whether the

Deed of Termination stood forged as claimed by the applicant?  If

not, whether it has been signed by the two Directors who were not

authorized to sign on behalf of the applicant?  Effect of the R & D

Agreement  and  its  implementation  on  the  Supply  Agreement?

Whether Joint Venture Agreement replaced the Supply Agreement?

Whether the Supply Agreement should be read along with the Joint

Venture Agreement and the R & D Agreement or whether the Supply

Agreement  should be read  as a  stand-alone  item?   Whether  the

claim for alleged expenditure incurred by the applicant for supply of

seedlings  under  the Supply Agreement  stood extinguished by the

Deed of Termination dated 16.10.04?  Whether claims, if any, under

the  Supply  Agreement  had  ceased  in  view  of  the  Termination

Agreement dated 16.10.04?   

24. In my view,  if  these questions are to  be looked into,  the

conclusion is that the case involves a live claim between the parties.

The  applicant  has  claimed  compensation/damages  for  supply  of

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seeds to the non-applicant under the Supply Agreement.  This is the

basic claim made on behalf of the applicant.   Accordingly, Issue No.

(b) is also answered in favour of the applicant and against the non-

applicant.     

25. Before concluding, it may be mentioned that the applicant

has given an undertaking to this Court to withdraw the criminal

complaint instituted by it,  if  the matter is referred to arbitration.

That criminal complaint registered as FIR No.902 of 2005 has been

filed in the Court of Additional Chief Metropolitan Magistrate No.XIV

at Hyderabad.  The complaint has been filed under Section 200 for

offences punishable under Section 406, 420, 468, 471 r/w 120B of

Indian  Penal  Code.   Applicant  undertakes  to  withdraw  the  said

complaint.   Registry  is  directed  to  take  the  Undertaking  dated

7.2.09 on record.   

26. In the light of the foregoing discussion, I am of the opinion

that  all  disputes  and  differences  between  the  parties  should  be

referred to Singapore International Arbitration Centre, which would

nominate  an Arbitrator  from its  panel  to  decide all  disputes and

differences.                  

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27. Accordingly the Arbitration Application No.6 of 2007 is made

absolute with no order at to costs.

……………………………J.                                             (S.H. Kapadia)

New Delhi; February 11, 2009.