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Judgment
Harish Tandon, J.—This revisional application is directed against an order No. 21 dated December 15, 2009 passed by the learned Judge, 12th Bench, City Civil Court at Calcutta in Title Suit No. 980 of 2007 by which an application u/s 8 of the Arbitration and Conciliation Act, 1997 is allowed. The Plaintiff Company who is basically engaged in a business of iron and steel decided to diversify its business for manufacturing and marketing of the fishing nets. The defendants/opposite parties are dealing in a machines meant for the purpose of manufacturing the fishing nets and were approached by the plaintiff/petitioner to submit the quotation containing the specification, rates and others terms and conditions. Admittedly, the quotation was submitted on October 26, 2005 by the defendant No. 1/opposite party No. 1 which was duly accepted by putting the signature by the plaintiff/petitioner. It would be relevant to quote the said quotation letter dated October 26, 2005 which reads thus:
To M/s. Shiv Om Polynets P. Ltd. Tel. 0891-2561704
Dear Sir,
We thank you for interest shown in our Products. As desired Please find enclosed herewith our detailed offer. Our offer consist of the following Annexures.
(1) Offer for Net Machines
(2) Spares Parts list
(3) Terms and Conditions
(4) Main Features and Technical Specifications.
We trust you will find our offer in line with your requirement. However, in case you want any clarifications, kindly do not hesitate to contact us.
Thanking you and looking forward to receiving your valued order.
For & on behalf of Marine Fabrics
According to the plaintiff/petitioner, although, the said offer was accepted and confirmed but a cheque for a sum of Rs. 3,50,000/- as a by way of advanced deposit was also forwarded to the opposite party No. 1, in spite of the same, the supply of machine could not be made within the agreed period for which the plaintiff/petitioner cancelled the said contract and demanded the refund of the advanced deposit together with an interest at the rate of 12% per annum. The opposite party No. 1 having failed to pay the said advanced deposit despite the cancellation of the said agreement, the plaintiff/petitioner filed a Title Suit No. 980 of 2007 before the City Civil Court, Calcutta for a decree of declaration that the cancellation of contract dated October 26, 2005 is valid and legal and the defendant/opposite party have no right to forfeit the sum of Rs. 3,50,000/- so advanced and further prayed for a decree for a sum of Rs. 4,62,250/-.
The defendant/opposite party filed an application u/s 8 of the Arbitration and Conciliation Act, 1996 for referring the disputes to a named arbitrator under the Contract as the parties have decided to resolve the dispute by arbitration. The bone of contention in the said application is that the general conditions of sale of the defendant No. 1 contains an arbitration clause and the letter of quotation dated October 26, 2005 clearly stipulates that the said offer is subject to the general conditions of sale and, therefore, there exist a valid arbitration agreement and the dispute should be referred to an arbitration as the Civil Court''s Jurisdiction is barred.
The plaintiff/petitioner refuted the above contentions by taking a plea that although the quotation letter dated October 26, 2005 clearly indicates that it is subject to the general conditions of sale but the copy of the general conditions of sale was not included therein and, therefore, is not binding upon the plaintiff/petitioner. Another defence taken is that the said general conditions of sale is not signed by the plaintiff/petitioner and, therefore, cannot be said to be a valid agreement so as to bind the plaintiff/petitioner.
On the other hand, the defendant/opposite party denies that the general conditions of sale was not included in the said quotation letter which culminated into a valid agreement upon acceptance of the terms and conditions mentioned therein and categorically asserted that those were attached to the said quotation letter and the plaintiff/petitioner was made aware of the same.
The learned Advocate appearing for the petitioner submits that the arbitration agreement is defined u/s 7 of the Arbitration and Conciliation Act, 1997 (For short the said Act) which means an agreement by the party to submit to the arbitration all or certain disputes which have arisen or may arise between them in respect of a defined legal relationship whether contractual or not and may be in the form of an arbitration clause in a contract or in the form of separate agreement which must be in writing signed by the parties or in the form of an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of agreement or an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other, it can also be by way of a reference to make that arbitration clause.
Therefore, various modalities to constitute a valid arbitration agreement is comprehensively provided u/s 7 of the said Act and unless those conditions exist in an agreement containing an arbitration clause or by any other means, the parties could not be referred to an arbitration and the Court is competent to decide the dispute.
Admittedly, the letter dated October 26, 2005 constitutes a valid agreement. The plaintiff/petitioner did not dispute that there is no contract between the parties but what is tried to be contended to come out of the rigour on Section 8 of the said Act is that the general conditions of sale was not attached to the said letter nor there exists any signature on the said general conditions of sale so as to constitute a valid arbitration agreement. One could have on a bare look of the said letter that it contains four annexures namely (1) Offer for Net Machines (2) Spares Parts list (3) Terms and Conditions (4) Main Features & Technical Specifications. The offer in the form of quotation not only contains the specification of the machine and the rates but also terms and conditions which is of much relevance and, therefore, it would be profitable to quote the same:
To M/s. Shiv Om Polynets Pvt. Ltd. Tel. 0891-2561704
QUOTATION
Sr. PART DESCRIPTION Qty Rate/each Amo
No
lacs lacs
Double Knot Fishing Net Machines Easily Converted into Single Knot.
(1) Model Mint Fishnet Machine Spool Dia 180mm with standard accessories and spare parts including spool winder Machine of three spindles with independent Motor for each spindle.
D 10-42, 10mm pitch 412 Shuttles 2 14.25 28.50 Min/Max/Working for Nylon Mono filament yarn 0.20 to 0.40 mm.
Between 17 to 25 RPM.
Terms & Conditions:
(a) 25% Advance, Balance payment by demand draft payable at kolhapur in any scheduled bank.
(b) Delivery in 6-7 months after receipt purchase order and advance.
(c) Insurance and transport to be covered by buyer.
(d) Above offer valid for 30 days from above date.
(e) Subject to General Conditions of Sale.
(f) Taxes MST 15.3% extra, or CST against form C in due course.
(g) All other taxes applicable as per Government rules will be levied/payable at the time of delivery.
(h) Presently Excise duty is nil.
(i) The buyer has option of taking delivery of one machine.
(j) Both buyer and seller shall have the right to assign the agreement in favour of their relatives or associates.
For & on behalf of Marine Fabrics
It is undisputed that the salient features of terms and conditions are incorporated in the said quotation letter whereas the full terms and conditions is attached to the said quotation letter wherein clause 9 clearly stipulates; "the said quotation is subject to the general conditions of sale attached herewith."
Let me now find out how far the plea of non-annexation of the general conditions of sale to the said offer is sustainable. In paragraph 4(b) of the affidavit-in-opposition to an application u/s 8 of the said Act, the plaintiff/petitioner says that it is seeking the relief on the basis of the said letter of offer dated October 26, 2005 which culminated into a valid contract upon acceptance thereof. The document annexed as Marked "A" contains the letter, quotation and the terms & conditions but not the general conditions of sale, although, in the quotation as well as the terms & conditions, it is abundantly indicated that the offer is subject to the general conditions of sale; even Clause 9 of the terms and conditions says that the said quotation is subject to the general conditions of sale attached herewith. The plaintiff/petitioner was quite aware of the aforesaid conditions but did not raise any objection before the cancellation of the contract or institutions of the suit that the general conditions of sale was not attached with the said offer letter.
Mr. Utpal Bose, the learned Advocate appearing for the petitioner vehemently submits that to constitute a valid arbitration agreement, the documents must be signed and, therefore, the general conditions of sale having not signed by both the parties cannot form a valid arbitration agreement. In support of the aforesaid contention, he relies upon section 7(2), (3) & (4) of the said Act which defines the arbitration agreement.
Mr. Suchit Kumar Banerjee, the learned Advocate appearing for the defendant/opposite party submits that the contract is not disputed which contains that the said contract is subject to the general terms and conditions containing an arbitration clause. He further submits that if the price is offered subject to restrictions and conditions, such offer is conditional and having accepted the same, the parties cannot resile therefrom and placed reliance upon a judgment of the Apex Court in case of K.R.C.S. Balakrishna Chetty and Sons and Co. Vs. The State of Madras, , M.V. Shankar Bhat and Another Vs. Claude Pinto Since (Deceased) by Lrs. and Others, and in case of K.T. Plantation Pvt. Ltd. and Another Vs. State of Karnataka, He strongly relied upon section 7(5) of the said Act to contend that if a reference in a contract to a document containing an arbitration clause exist, it constitutes an arbitration agreement if the contract is in writing and the reference is such to make that arbitration clause part of the contract. By contending so he submits that the contract is admitted which contains that the same is subject to the general conditions of sale containing an arbitration clause and, therefore, it constitutes a valid arbitration agreement. He, therefore, contends that even if the general Conditions of sale does not have the seal and signature of the parties but the reference is made in the contract signed by both the parties, a valid arbitration agreement exists.
The word "subject to" has been defined in Blacks Law Dictionary, 5th Edition as--liable, subordinate, subservient, inferior, obedient to; governed or effected by; provided that; provided; answerable for. Therefore, it conveys an idea of something yielding place to another to which it is made subject.
In case of K.R.C.S. Balakrishna Chetty and Sons & Co. (supra), the Apex Court was considering the matter relating to the exemption granted under the Madras General Sales Tax Act which provides that a licence obtained u/s 5 of the said Sales Tax Act is exempted from assessment u/s 3 thereof on sale of the cotton yarn and handloom cloth, subject to such restrictions and conditions as may be prescribed. In such perspective, it is held the use of the word subject to effectuates the intention of the legislature to mean conditional upon.
In case of M.V. Shankar Bhat & Anr. (supra), the Apex Court was considering the conclusiveness of the contract if an agreement provides that it is subject to rectification by others and it is held that there cannot exist a concluded contract if it is dependent upon something as condition precedent.
In case of K.T. Plantation Pvt. Ltd. & Anr. (supra), the constitutional bench was considering the legal validity of section 110 of the Karnataka Land Reforms Act, 1961 and held that Section 107 thereof is made subject to section 110 and, therefore, it convenes the idea of yielding to the provision of which it is made subject.
To my mind, the instant case rests upon different aspect. The plaintiff/petitioner says that in absence of a signature of the parties to the general conditions of sale containing an arbitration clause, the valid arbitration agreement cannot be presumed whereas the defendant/opposite party says that the reference in a contract which contains an arbitration clause forms a valid arbitration agreement.
To bring down to a narrow compass whether section 7(2), (3) & (4) is applicable in the present case or the matter should be decided by taking recourse to the provision u/s 7(5) of the said Act. The letter of offer dated October 26, 2005 contains certain annexures. From the quotation appended to the said letter clearly indicates that the said offer is subject to the general conditions of sale whereas the terms and conditions appended thereto and admitted by the plaintiff/petitioner, also provide that the said offer is subject to the general conditions of sale attached therewith. Clause 20 of the general conditions of sale contains an arbitration clause which in terms of the provisions contained u/s 7(5) of the said Act forms a valid arbitration agreement.
In the above perspective, reliance can be safely made upon a judgment of the Supreme Court in case of Groupe Chimique Tunisien SA Vs. Southern Petrochemicals Industries Corpn. Ltd., where it is held:
The purchase orders placed by the respondent with the petitioner are the contracts between the parties and they are subject to FAI Terms which contain the arbitration clause. Sub-section (5) of section 7 specifically provides that where there is reference in a contract (in this case, the purchase order) to a document containing an arbitration clause (in this case, FAI Terms), such reference constitutes an arbitration agreement, if the contract is in writing and the reference is such as to make that arbitration clause a part of the contract. The case squarely falls u/s 7(5) of the Act and there is an arbitration agreement between the parties as per clause 15 of FAI Terms.
The respondent next contended that in the invoices for the supplies, there is no reference to FAI Terms or arbitration agreement and, therefore, the disputes are not arbitrable. As noticed above, the purchase orders are the contracts. Invoice is a document which is prepared with reference to the supplies made under the contract. When the contract (purchase order) incorporates an arbitration agreement by reference, the invoice need not contain a provision for arbitration.
(Emphasis Supplied)
Therefore, there is no hesitation in holding that there exists a valid arbitration agreement. Section 8 of the said Act which is mandatory creates an embargo on the judicial authority to entertain any action brought before it which is a subject matter of an arbitration agreement but to refer the parties to the arbitration.
Therefore, this Court does not find that the impugned order suffers from any infirmities and/or illegalities. The revisional application is devoid of merit and is, therefore, dismissed. However, there shall be no order as to costs.
Urgent photostat certified copy of this order, if applied for, be given to the parties on priority basis.