ZENITH DRUGS & ALLIED AGENCIES PVT. LTD. REPRESENTED BY ITS MANAGING DIRECTOR, SHRI UDAY KRISHNA PAUL versus M/S. NICHOLAS PIRAMAL INDIA LTD.

Citation: [2019] 10 S.C.R. 360 · Decided: 30-07-2019 · Supreme Court of India · Bench: R. BANUMATHI · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2019] 10  S.C.R.
ZENITH DRUGS & ALLIED AGENCIES PVT. LTD.
REPRESENTED BY ITS MANAGING DIRECTOR,
SHRI UDAY KRISHNA PAUL
v.
M/S. NICHOLAS PIRAMAL INDIA LTD.
(Civil Appeal No. 4430 of 2009)
JULY 30, 2019
[R. BANUMATHI AND A.S. BOPANNA, JJ.]
Arbitration and Conciliation Act, 1996 – s.8 – Power to refer
parties to arbitration where there is an arbitration agreement – RPIL
appointed the appellant company as its clearing and forwarding
agent for period of 3 years by agreement dated 01.05.1997 – The
said agreement contained arbitration clause – RPIL informed
appellant that it was getting merged with respondent Company-NPIL
and therefore, the subsisting agreement between them stood
terminated – Appellant filed suit contending that agreement with
RPIL was valid, subsisting, legal and continuing – In the said suit,
parties compromised the matter – In terms of the said compromise,
respondent made payment of Rs. 23,50,000/- to the appellant and
also as a part of compensation package appointed the appellant as
its stockist for their products – Again, dispute arose between the
parties – Respondent filed criminal complaint u/ss.420, 406, 409
and 403 r/w. 34 IPC against the appellant – Appellant filed money
suit against the respondent claiming compensation for rupees twenty
crores alleging financial loss and loss of goodwill – Respondent
filed application u/s.8 of the Act for referring the parties to
arbitration in money suit, relying upon the Arbitration clause in
agreement dated 01.05.1997 – Trial Court dismissed the application
u/s. 8 of the Act – In revision, High Court referred the dispute to
arbitration – On appeal, held: On perusal of the compromise deed,
it is clear that the parties have substituted a new agreement by way
of compromise – When parties have settled their differences and
compromised the matter, in the dispute subsequently arising between
the parties, arbitration clause in the prior agreement cannot be
invoked – Since, the agreement dated 01.05.1997 and compromise
are different, the arbitration clause in agreement dated 01.05.1997
[2019]  10 S.C.R. 360
  360
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cannot be read into the terms of the compromise as per which the
parties have entered into a new arrangement – Further, since
respondent has also challenged the compromise decree alleging it
was obtained by inducement and fraud, in view of the same, the
parties cannot be referred to arbitration – The High Court erred in
proceeding under the footing that dispute falls within the ambit of
agreement dated 01.05.1997 – Thus, impugned judgment of the High
Court set aside.
Allowing the appeal, the Court
HELD: 1. From a reading of the terms of the compromise
deed dated 11.12.2001, it is clear that the parties have substituted
a new agreement by way of compromise.  As per the agreement
dated 01.05.1997, the appellant was the clearing and forwarding
agent for the entire north-eastern region; whereas under the
terms of the compromise, the appellant has been appointed as
stockist of the company only for Guwahati and Agartala and not
as clearing and forwarding agent for north-eastern region.  The
clauses in the compromise memo also clearly state that the
appellant handed over all the stocks of goods to the respondent-
Company.  The appellant had also handed over the entire
documents in their possession both used and unused as well as
sales tax documents, road permit, ‘C’ forms from stockists and
other documents.  When the parties have settled their differences
and compromised the matter, in the dispute subsequently arising
between the parties, arbitration clause in the prior agreement
cannot be invoked.  Since the agreement dated 01.05.1997
(agreement for appointing the appellant as clearing and forwarding
agent) and the compromise (appointing the appellant as stockist)
are different, the arbitration clause in the agreement dated
01.05.1997 cannot be read into the terms of the compromise as
per which the parties have entered into a new arrangement and
this has not been kept in view by the High Court.  The High
Court erred in holding that the existence of the arbitration clause
has been admitted by the appellant-Company and it is for the
arbitrator to decide under Section 16 of the Arbitration and
Conciliation Act, 1996 whether the arbitration clause applied to
the subject matter of the suit or not. [Para 13] [369-E-H;
370-A-B]
ZENITH DRUGS & ALLIED AGENCIES P. LTD. REP. BY ITS  MANAGING
    DIRECTOR  v. M/S. 

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