*IN THE HIGH COURT OF DELHI AT NEW DELHI % + CS(COMM) No.1145/2016 & IA No.10192/2016 (under Order Date of decision:
7. h October, 2016 XXXIX Rule 1&2 CPC) U CAN FLY LIMITED, TRADING AS LYCAFLY ..... Plaintiff Through: Mr. Abhimanyu Bhandari & Ms. Kartika Sharma, Advs. Versus AVA SPA HOLIDAYS (I) PVT LTD & ANR ..... Defendants Through: Mr. Sachin Dutta, Sr. Adv. with Mr. Gaurav Chauhan and Mrs. Jasneet Kaur, Advs. CORAM:-
"HON’BLE MR. JUSTICE RAJIV SAHAI ENDLAW IA No.12666/2016 (of D-1 u/S8of Arbitration & Conciliation Act, 1996) 1. The applicant/defendant No.1, before filing first statement on the substance of the dispute, has filed this application for disposal of the suit by reference to arbitration.
2. The counsel for the plaintiff/non-applicant appears on advance notice and considering the nature of the application, need for reply is not felt and the counsels have been finally heard thereon.
3. The plaintiff/non-applicant has instituted the suit for recovery of Great Britain Pounds (GBP) 257,247.39 with interest from the two defendants jointly and severally. CS(COMM) No.1145/2016 Page 1 of 19 4. The applicant/defendant No.1 has filed this application pleading that the subject matter of this suit is subject of an arbitration agreement between the plaintiff/non-applicant and the applicant/defendant No.1.
5. Though Section 8(2) of the Arbitration and Conciliation Act, 1996 (Arbitration Act) provides that the application shall not be entertained unless it is accompanied by the original arbitration agreement or by a duly certified copy thereof but the instant application is not accompanied with the original arbitration agreement or any certified copy thereof.
6. It has as such been enquired from the senior counsel for the applicant / defendant no.1 as to why the application should be entertained.
7. The senior counsel for the applicant/defendant No.1 states that the need to file the arbitration agreement was not felt since the plaintiff/non- applicant has already filed the same.
8. Arbitration Clause is mostly contained in the contract from which the suit arises and which contract, again mostly, is filed by the plaintiff. Section 8(2) however uses a peremptory language, making it mandatory for the application under Section 8(1) to be accompanied with the original arbitration agreement or certified copy thereof and bars the application from CS(COMM) No.1145/2016 Page 2 of 19 being entertained if not so accompanied with original arbitration agreement or certified copy thereof. The only inference is that even if the plaintiff has filed the arbitration agreement, the application under Section 8(1) will not be entertained if not compliant with Section 8(2).
9. The application is thus liable to be rejected.
10. However since the same will not come in the way of the defendant no.1 applying again, after complying with Section 8(2), and because there are several judgments to the contrary, it is deemed expedient to also adjudicate the application on merits.
11. The claim of the plaintiff/non-applicant in the suit is on the facts below mentioned: (i) that the defendant No.2 Mr. Aditya Bahl being the Director of the applicant/defendant No.1 represented to the plaintiff/non-applicant that he is the pioneer in the world of providing air chartered services and that he fully controls the applicant/defendant No.1; (ii) that the plaintiff/non-applicant on the basis of representations made by the defendant No.2/non-applicant signed “Acceptance CS(COMM) No.1145/2016 Page 3 of 19 Contract” dated 8th July, 2016, at pages 124 and 137 of Part-III file, sent by the defendant No.2/non-applicant and paid advance monies to the defendant no.1 / applicant; (iii) that the defendants however after receiving advance from the plaintiff/non-applicant enhanced the price from that earlier represented and owing whereto the charter offered by the defendants was not accepted by the plaintiff/non-applicant and upon the failure of the defendants to refund the advance received, the suit has been filed.
12. The “Acceptance Contract” dated 8th July, 2016, besides in clauses A to C thereof providing for charter cost and payment terms etc., in Clause D thereof provides as under: “D) CANCELLATION Rules:-
"1) Mentioned on www.privatecharter.in” 13. This application under Section 8 of the Arbitration Act has been filed relying upon the arbitration clause on the website www.privatecharter.in.
14. The counsel for the plaintiff opposes the application by contending that the contents titled “Terms and Conditions”, of the said website, filed at CS(COMM) No.1145/2016 Page 4 of 19 pages 125 to 129 of Part-III file, are under different heads viz. “Standard Charter Terms”, “Parties”, “Definitions”, “Charter”, “Refunds and Cancellation”, “Charter Price and Payment”, “Aircraft and Crew”, “Traffic Documents”, “Flight Times, Loading and Embarkation”, “Obligations of the Charterer”, “Exclusion of Liability / Indemnity”, “Termination”, “Effect of Default”, “Liability of the Charterer”, “Set-Off and Application of Moneys”, “General”, and finally “Arbitration, Applicable Law and Jurisdiction”. It is contended that the reference to the website in the “Acceptance Contract” in the clause titled “Cancellation Rules” can incorporate in the “Acceptance Contract” only the Cancellation Rules on the website and not the other terms and conditions as contained therein.
15. Finding prima facie merit therein, it has been enquired from the senior counsel for the applicant/defendant No.1, as to how arbitration clause on the website of the defendant no.1 / applicant can be said to be incorporated in the “Acceptance Contract” signed by the parties, so as to bind the parties.
16. The senior counsel for the applicant/defendant No.1 has argued that the terms and conditions on the website have to be read in the Acceptance Contract. CS(COMM) No.1145/2016 Page 5 of 19 17. I have considered the aforesaid contention of the senior counsel for the defendant no.1 / applicant.
18. Section 7 of the Arbitration Act is as under: “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 [including communication through electronic means]. 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.” CS(COMM) No.1145/2016 Page 6 of 19 19. The „Acceptance Contract‟ which alone is signed by the parties admittedly does not provide for arbitration. Arbitration is provided for on the website of the defendant No.1. For the arbitration clause on the website to qualify as an arbitration agreement in writing, the reference to the website containing an arbitration clause in the “Acceptance Contract” singed by the plaintiff and the defendant no.1 is to be such as to make that arbitration clause part of the “Acceptance Contract”.
20. The “Acceptance Contract” refers to the website only in Clause „D‟ thereaof as aforesaid and nowhere else. The website as aforesaid, contains besides the rules as to cancellation, also the general terms and conditions of Charter by the defendant no.1. Under the head “Refunds and Cancellation”, the website provides as under: “REFUNDS AND CANCELLATION If the Charterer wishes to cancel any Flight(s) after confirmation of the related Agreement, the following rates will be paid immediately by the Charterer to PrivateCharter as agreed compensation for such cancellation: No Refund is given if cancelled 72 Business Hours prior to Departure. No Refund is given in case of part booking, not confirmed within 100 Business Hours prior to the departure date. CS(COMM) No.1145/2016 Page 7 of 19 No refund is given due to any delay in making payment on the part of the Charterer. The Charterer will be liable to pay damages to PrivateCharter due to No Show on the date and time of flying, or occurred by PrivateCharter due to above cancellations done by the Charterer.” 21. Under the head “Cancellation” on the website and which is clubbed with “Refunds”, there is no mention of reference of disputes arising from such cancellation to arbitration. On the contrary, arbitration is provided under a separate head as under: “ARBITRATION, APPLICABLE LAW AND JURISDICTION1 Any disputes and difference, if any, concerning the interpretation of the terms of this Agreement and / or any acts or omissions, claim or demand arising out of this Agreement shall be resolved through Mediation and Conciliation within 90 days from the date of receipt of the intimation of the same by one party to the other. In case of failure to resolve the dispute through mediation and conciliation within 60 days, the same shall be resolved through arbitration as per the Provision contained under the Arbitration and Conciliation Act, 1996 and / or the rules framed there under. The PrivateCharter will nominate the names of three arbitrators and the Charterer shall elect one out of the three suggested names to be appointed as a single Arbitrator to adjudicate upon the disputes and the decision of the Arbitral Tribunal shall be final, binding and conclusive for all intents and purposes and such arbitration shall be held only at New Delhi and the official language of such arbitration shall be English Language. CS(COMM) No.1145/2016 Page 8 of 19 2. That the Jurisdictional Courts of New Delhi alone shall have the sole and exclusive jurisdiction over the dispute arising out of this contract between PrivateCharter and the Charterer.
3. The rights and obligations of the parties shall be construed in all respects in accordance with the Laws of India.” 22. The question which arises for adjudication is whether an arbitration clause contained in a document, in this case a website, would constitute an arbitration agreement in writing between the parties merely because of reference to the said document i.e. the website in the “Acceptance Contract” signed by the plaintiff and the defendant no.1. I am in this judgment presuming a website to be a document and not discussing the said aspect as no arguments have been addressed thereon.
23. Though Section 7(5) of the Arbitration Act provides that reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement and applying the said part, the reference in the “Acceptance Contract” signed by the plaintiff and the defendant no.1 to the website containing an arbitration clause would constitute an arbitration agreement but Section 7(5) of the Arbitration Act further provides that the reference should be such as to make that arbitration clause part of the contract. Thus, notwithstanding the arbitration clause contained on the CS(COMM) No.1145/2016 Page 9 of 19 website referred to in the “Acceptance Contract” in writing and signed by the plaintiff and the defendant no.1, the said arbitration clause would not constitute an arbitration agreement between the plaintiff and the defendant no.1 unless the reference in the “Acceptance Contract” to the arbitration clause is such as to make arbitration clause on the website part of the contract.
24. I am of the view that in the aforesaid state, the reference in the “Acceptance Contract” to the website is not such so as to make an arbitration clause contained on the website a part of the “Acceptance Contract”.
25. Parties, by agreeing to arbitration, agree to oust the jurisdiction of the available judicial system of the land for adjudication of their disputes. Needless to state that the parties cannot be said to have agreed to submit to arbitration the disputes which may arise between them unless they are ad idem on the said aspect. I have wondered whether the plaintiff and the defendant no.1 can be said to be ad idem on reference of their disputes to arbitration from mention of the website containing the arbitration clause in the clause of the “Acceptance Contract” providing for “Cancellation Rules” and with the “Cancellation Rules” forming a distinct clause of the general CS(COMM) No.1145/2016 Page 10 of 19 terms and conditions contained on the website. If the intention of the defendant no.1 / applicant had been that all the terms and conditions on its website should bind whosoever may be availing the charter service from the defendant no.1, nothing prevented the defendant no.1 / applicant from so expressly providing in the “Acceptance Contract” which the defendant no.1 / applicant forwarded to the plaintiff for signing.
26. It is not as if the “Acceptance Contract” only provides for the aircraft type or the date of travel or the charter cost. The “Acceptance Contract” is also found to provide i) that the prices mentioned therein are estimate and based on distance and approximate cruising speed of the aircraft in nil wind conditions and any delay / diversion due to bad weather or re-fuelling purposes or unserviceable runway etc. had not been taken into consideration and the final invoice will be based on all the said aspects; ii) that the costs indicated in the “Acceptance Contract” included only the aircraft rental, crew salary, maintenance, insurance, route, navigation charges etc.; iii) that the defendant no.1 did not hold itself responsible for non-operation of charter for unforeseen reasons; iv) that if the flight does not take off from the originating station for force majure reasons, full amount will be forfeited; v) that if the aircraft cannot land at the destination due to deterioration in CS(COMM) No.1145/2016 Page 11 of 19 weather and the flight has to return or diverted, charges thereof will be payable; vi) that the defendant no.1 will not be responsible for any technical snag which cannot be rectified.
27. These are general conditions of charter and it is thus not as if the “Acceptance Contract” by its very nature was not to be or could not be treated as a contract and necessarily had to be read along with the terms and conditions contained on the website. The “Acceptance Contract” is found to be a complete contract in itself, capable of being enforced. It is only on the aspect of “Cancellation Rules” that it provided that the same would be as mentioned on the website.
28. No person / trader of reasonable intelligence in my view, on signing such an “Acceptance Contract”, also understand that he / she is thereby consenting to the arbitration clause contained on the website. Whenever, while entering into the contract, the intention is to bind the other party to the standard terms and conditions of the first party, the contract expressly provides that the other terms and conditions shall be as per the standard terms and conditions either contained in a separate document or as available to the public at large as in the case of Directorate General of Supplies and CS(COMM) No.1145/2016 Page 12 of 19 Disposal (DGSND), other governmental agencies and government. The defendant no.1 however, while drafting its standard form “Acceptance Contract”, shied away from so providing therein that the other terms and conditions thereof will be as per the website and cannot be permitted to, when the disputes have arisen, spring a surprise and claim arbitration.
29. Reliance in this regard can be placed on Alimenta S.A. Vs. National Agricultural Co-operative Marketing Federation of India Ltd. (1987) 1 SCC615laying down “when the incorporation clause refers to certain particular terms and conditions, only those terms and conditions are incorporated and not the arbitration clause….normal incidents of terms and conditions of supply are those which are connected with supply, such as, its mode and process, time factor, inspection and approval, if any, reliability for transit, incidental expenses etc.” It was held that the arbitration clause is not a term of supply and there is no necessity in law that when a contract is entered into for supply of goods, the arbitration clause must form part of such a contract. Accordingly, only those terms and conditions were held to have been incorporated into the second contract and not the arbitration cause. Similarly here, the “Acceptance Contract” which the defendant no.1 made the plaintiff sign, cannot incorporate therein the arbitration clause on CS(COMM) No.1145/2016 Page 13 of 19 its website by referring to the website under the clause “Cancellation Rules”. Thereby, only the terms and conditions of the website as pertain to cancellation and which are specified on the website in a separate clause would get incorporated in the “Acceptance Contract”.
30. Reliance may also be placed on M. Dayanand Reddy Vs. A.P. Industrial Infrastructure Corporation Ltd. (1993) 3 SCC137laying down that “the intention to refer to arbitration by such incorporation must be clear and specific…. The question whether or not the arbitration clause contained in another document is incorporated in the contract, is always a question of construction….this depends on the intention of the parties to be gathered from the relevant documents and surrounding circumstances....In the absence of clear intention of both the parties, agreement for arbitration cannot and should not be inferred”.
31. Reference in this context may be made to Owners and Parties Interested in the Vessel M.V. “Baltic Confidence” Vs. State Trading Corporation of India Ltd. (2001) 7 SCC473also concerned with the incorporation of arbitration clause in a Standard Charter Party Agreement in a contract of carriage of goods and where the arbitration clause was held to CS(COMM) No.1145/2016 Page 14 of 19 have so stood incorporated. However the Bill of Lading in that case read as follows “All terms and conditions, liberties and exceptions of the Charter Party, dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated.” The defendant no.1 herein however deviated from inserting such a clause in its contract and having done so cannot be heard to contend that the arbitration clause on its website stands incorporated in the “Acceptance Contract”.
32. That brings me to M.R. Engineers and Contractors Pvt. Ltd. Vs. Som Datt Builders Ltd. (2009) 7 SCC696 Supreme Court therein held “there is a difference between reference to another document in a contract and incorporation of another document in a contract, by reference. In the first case, the parties intend to adopt only specific portions or part of the referred document for the purposes of the contract. In the second case, the parties intend to incorporate the referred document in entirety, into the contract. Therefore when there is a reference to a document in a contract, the court has to consider whether the reference to the document is with the intention of incorporating the contents of that document in entirety into the contract, or with the intention of adopting or borrowing specific portions of the said document for application to the contract.... If a contract refers to a document CS(COMM) No.1145/2016 Page 15 of 19 and provides that the said document shall form part and parcel of the contract, or that all terms and conditions of the said document shall be read or treated as a part of the contract, or that the contract will be governed by the provisions of the said document, or that the terms and conditions of the said document shall be incorporated into the contract, the terms and conditions of the document in entirety will get bodily lifted and incorporated into the contract... On the other hand, where there is only a reference to a document in a contract in a particular context, the document will not get incorporated in entirety into the contract. For example, if a contract provides that the specifications of the supplies will be as provided in an earlier contract or another purchase order, then it will be necessary to look to that document only for the limited purpose of ascertainment of specifications of the goods to be supplied. The referred document cannot be looked into for any other purpose, say price or payment of price.” Applying the said principle, the “Acceptance Contract” between the plaintiff and the defendant no.1 refers to the website only in the context of “Cancellation Rules” and such a reference can incorporate only the “Cancellation Rules” as given on the website into the “Acceptance Contract” and not the other terms and conditions contained on the website. Supreme Court in the said judgment CS(COMM) No.1145/2016 Page 16 of 19 also held that “A general reference to another contract will not be sufficient to incorporate the arbitration clause from the referred contract into the contract under consideration. There should be a special reference indicating a mutual intention to incorporate the arbitration clause from another document into the contract”.
33. Mention may lastly be made of the dicta of the Supreme Court in S.N. Prasad Vs. Monnet Finance Ltd. (2011) 1 SCC320where, while holding that a guarantor for re-payment of loan was not bound by the arbitration clause contained in the loan agreement, the contention that the same would raise an anomalous situation, with two proceedings, one against the principal debtor and the other against the guarantor being required to be filed, was negatived observing that “the issue is not one of convenience and expediency. The issue is whether there was an arbitration agreement with the appellant” and the arbitration award insofar as against the guarantor was set aside.
34. The senior counsel for the applicant/defendant No.1 has also argued that the arbitration clause on the website is relatable to or has to be read into the “Cancellation Rules”. CS(COMM) No.1145/2016 Page 17 of 19 35. I am unable to understand the basis of the said argument. There is nothing in the clause under the head “Refund and Cancellation” on the website of the applicant/defendant No.1 which requires it to be necessarily read with the arbitration clause. It is not as if that the disputes arising from the claims for refund or for damages under the said clause have to be necessarily adjudicated by arbitration. As aforesaid, in the absence of arbitration agreement, the disputes, if any have to be adjudicated under the judicial system of land.
36. Though the senior counsel for the applicant/defendant No.1 has not argued but I may notice that the plaintiff in its list of documents has clubbed the printout of the website of the applicant/defendant No.1 filed at pages 125 to 129 of Part-III File with the “Acceptance Contract” at Serial No.19 thereof and in which, under the column “Details of Documents”, it is written “Copy of the Acceptance Contract between the plaintiff and the defendant No.1 Company”. The same has set me thinking. Whether the same should be construed as the plaintiff also admitting all the contents on the website to be part of the “Acceptance Contract”?. However, on further consideration, I am of the view that it cannot be so construed. The list of documents is not signed or verified by the plaintiff, though is signed by the counsels for the CS(COMM) No.1145/2016 Page 18 of 19 plaintiff. Judicial notice can also be taken of the fact that in chambers of most of the Advocates, the list of documents is prepared, either by experienced Court Clerks or by “Junior Lawyers”, who may not comprehend the effect of the description given in the list of documents of the documents annexed thereto. Thus, when no arbitration agreement has been found to exist, its existence cannot be inferred from the clubbing of the printout of the website with the “Acceptance Contract” in the list of documents.
37. Having not found any arbitration agreement, the need to go into the consequence of the claim of the plaintiff in this suit, besides against the defendant no.1, being also against the defendant no.2 who was not a party to the arbitration agreement, does not arise.
38. The application thus fails and is dismissed. OCTOBER07 2016 „bs/gsr‟/pp RAJIV SAHAI ENDLAW, J.
(corrected & released on 7th November, 2016) CS(COMM) No.1145/2016 Page 19 of 19