Case: M/s. Groupe Chimique Tunisien SA Vs. M/s. Southern Petrochemicals Industries Corpn. Ltd

is that the petitioner having denied the arbitration agreement before the Jordanian Court, cannot now contend that there is an arbitration agreement. Respondent also contends that in the absence of any letter from the petitioner specifically referring to or agreeing to arbitration and in view of petitioners denial of the existence of arbitration agreement in its pleadings before the Jordanian Court, there is no consensus ad idem between the parties to refer the disputes to arbitration and therefore there cannot be any reference to arbitration. 6. Whether there is an arbitration agreement or not, has to be decided with reference to the contract documents and not with reference to any contention raised before a court of law after the dispute has arisen. Reference to pleadings before the Jordanian Courts would have been relevant if the plea was that the arbitration agreement between the parties is contained in the exchange of statement of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other (as contemplated under section 7(4)(c) of the Act.) Be that as it may, Section 2(b) of the Act defines arbitration agreement as meaning an agreement referred to in Section 7 (extracted below): "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 in (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c) 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. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract." 7. The purchase orders placed by the respondent on 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, the 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 under section 7(5) of the Act and there is an arbitration agreement between the parties as per clause 15 of the FAI terms. 8. 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. 9. It is true that the petitioner had contended before the Jordanian Court that there was no arbitration agreement between the parties. But the said contention was not accepted and the suit filed by the petitioner has been dismissed on the ground of want or jurisdiction. Thereafter, on reconsidering the matter and taking legal advice, with reference to the contentions of the respondent, the petitioner has now proceeded on the basis that an arbitration agreement exists between the parties. If, on account of mistake or wrong understanding of law, a party takes a particular stand (that is, there is no arbitration agreement), he is not barred from changing his stand subsequently or estopped from seeking arbitration. (See U.P. Rajkiya Nirman Nigam Ltd. vs. Indore (P) Ltd. - 1996 (2) SCC 667 - where the contention based on estoppel was negatived while considering a reserve situation). 10. In regard to limitation, the petitioner submitted that having regard to the acknowledgements contained in the series of letters written by Respondent requesting for time and the acknowledgements contained in the balance-sheets where these amounts are shown as due and outstanding, the petitioners claim is not barred by limitation. It is, however, unnecessary to examine this aspect as the learned counsel for the respondent fairly conceded that this is a question which can be examined by the Arbitral Tribunal, in the event of a reference to arbitration being made. It is now well-settled that the limitation is an issue that can be considered and decided by the Arbitral Tribunal. 11. The next question is whether the respondent has lost its right to appoint its nominee to the Arbitral Tribunal in view of its failure to comply with the demand of the petitioner to appoint the arbitrator within 30 days from the date of receipt of notice dated 30.8.2005. It is apparent that the respondent did not appoint an Arbitrator as it was under a bona fide impression that there cannot be an arbitration. Further without prejudice to its contentions, it has nominated its Arbitrator. 12. Section 10 of the Act provides that the number of Arbitrators shall not be even. The arbitrations clause provides that the dispute shall be referred to two Arbitrators and in the event of Arbitrators not agreeing then an Umpire to be appointed by the Arbitrators in writing before proceeding to the reference. Having regard to section 10 of the Act, the Arbitral Tribunal shall consist of three Arbitrators (one to be appointed by each of the two parties and the Presiding Arbitrator).

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]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 arbitration9. It is true that the petitioner had contended before the Jordanian Court that there was no arbitration agreement between the parties. But the said contention was not accepted and the suit filed by the petitioner has been dismissed on the ground of want or jurisdiction. Thereafter, on reconsidering the matter and taking legal advice, with reference to the contentions of the respondent, the petitioner has now proceeded on the basis that an arbitration agreement exists between the parties. If, on account of mistake or wrong understanding of law, a party takes a particular stand (that is, there is no arbitration agreement), he is not barred from changing his stand subsequently or estopped from seeking arbitration. (See U.P. Rajkiya Nirman Nigam Ltd. vs. Indore (P) Ltd.1996 (2) SCC 667 where the contention based on estoppel was negatived while considering a reserve situation)10. In regard to limitation, the petitioner submitted that having regard to the acknowledgements contained in the series of letters written by Respondent requesting for time and the acknowledgements contained in thes where these amounts are shown as due and outstanding, the petitioners claim is not barred by limitation. It is, however, unnecessary to examine this aspect as the learned counsel for the respondent fairly conceded that this is a question which can be examined by the Arbitral Tribunal, in the event of a reference to arbitration being made. It is nowd that the limitation is an issue that can be considered and decided by the Arbitral Tribunal