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

2. The facts, in brief; as stated by petitioner are as follows:2.1) Petitioner is a company incorporated under the laws of Tunisia. The respondent placed purchase orders dated 10.11.2000, 17.11.2000, 4.12.2000, 20.12.2000 and 13.7.2001 on the petitioner for supply of various quantities of Phosphoric Acid. Each purchase order stipulated the quantity to be supplied, the price, the payment terms and shipment particulars. Al the purchase orders stated that all other terms and conditions are as per FAI terms (that is, the "Fertilizer Association of India and Conditions for Sale and Purchase of Phosphoric Acid"). Clause 15 of FAI terms provided for settlement of disputes by arbitration2.2) The petitioner effected the supplies in pursuance of the purchase orders and raised invoices for such supplies. The respondent failed to pay the invoice amounts aggregating to US $ 1,50,15,913.38 in respect of the supplies against the said purchase orders, and went on seeking extension of time for making payment on the ground of financial difficulties2.3) The petitioner, therefore, filed a suit in the Amman Court of First Instance, Jordan, in Case No. 223/2002 for recovery of the amounts due. The respondent contested the jurisdiction of the said court, firstly, on the ground that the courts at Jordan did not have jurisdiction and, secondly, on the ground that there was an arbitration agreement between the parties, as per clause 15 of the FAI terms. The Amman Court of First Instance, dismissed the petitioners case on 20.3.2003 on the ground of lack of jurisdiction. The petitioner challenged the same before the Amman Court of Appeal in case No. 1229/2003 which was also dismissed on 25.6.20032.4) The petitioner issued a statutory notice dated 2.8.2004 demanding payment of the amount due with interest @ 7.5% per annum. On respondents failure to pay, the petitioner filed a petition for winding up in Company Petition No. 276/2004 on the file of the High Court of Madras, which is pending. The petitioner also issued a notice dated 30.8.2005 through its counsel informing the respondent that the disputes and differences between the parties on account oft of amounts due by the respondent shall have to be settled by arbitration in terms of clause 15 of FAI terms and appointed Mr. Justice D.P. Wadhwa, former Judge, Supreme Court of India, as its Arbitrator, and called upon the respondent to appoint its Arbitrator in terms of the arbitration clause within 30 days of the receipt of the notice. The petitioner also informed the respondent that if the respondent failed to comply, appropriate proceedings will be initiated. In spite of it, the respondent did not comply, necessitating the filing of this petition for appointment of an second Arbitrator of the Arbitral Tribunal for adjudication and settlement of the claims3. The respondent entered appearance and has filed its counter, resisting the petition on the following grounds:(i) The petitioner, having denied before the Jordanian Courts (Amman Court of First Instance and Amman Court of Appeals), the existence of arbitration agreement between the parties, is estopped from contending in this petition, that there is an arbitration agreement between the parties, or that the disputes should be settled by arbitration(ii) The claim of the petitioner is barred by limitation as the amounts claimed are in respect of goods dispatched as per the Bills of Lading dated 19.11.2000, 28.11.2000, 10.12.2000, 22.12.2000 and 13.7.2001, and the last of the correspondence from Respondent was on 17.4.2002(iii) The petitioners contention that there is an arbitration agreement between the parties in accordance with clause 15 of the FAI terms is not tenableWithout prejudice to the said contention, the respondent has submitted that in the event of this Court coming to the conclusion that there is a binding arbitration agreement, Mr. Justice S. Ratnavel Pandian, former Judge of the Supreme Court, be nominated as its nominee on the Arbitral Tribunal.

Court's reasoning:
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