R.N. Aggarwal, J.
(1) On 6th June 1980 the Golden Tobacco Company Limited and Sikkim Tobacco Pvt. Ltd. registered under the Sikkim Companies Act entered into an agreement of collaboration for manufacture of cigarettes. The Golden Tobacco Company was to provide technical know-how and services and assistance in construction, establishment and operation of plant for manufacture of cigarettes. The agreement is a detailed document. The following are the relevant terms of the agreement :
(6)STL will purchase and acquire all machinery, plant and equipment and spare parts as may be considered necessary. However, Gtc agrees to provide machineries on loan to Stl, free of rental, machines for making cigarettes and machines for packing such cigarettes as per schedule given below : 1.One number-Molins Mark Viii, cigarette making machine. 2. One number-Milins Mark V, cigarette making machine. 3. One number-M-2 Packer. 4. One number-AMF 3-279 Packer. GTC hereby agrees to dispatch such machines from Bombay by Road Transport within 15 days of receipt of advise from still staling that necessary infra-structure for installation and operation of the machines on arrival is ready. The infra-structure means, suitable water-proof covered puce space, power connection, water connection, suitable amendment of capacity certificate for full utilisation of these machines, and other Government permissions, if any, for going into production are available, and necessary supporting equipment are installed and/or produced. These machines on loan shall be capable of producing minimum of 15/20 million cigarettes per month on 2 shift basis based on GTC's efficiency standards. The above machines will be provided by Gtc on a loan basis, and on the conditions that still will not have any lien on the machinery nor still shall be entitled to make any change on the said machines except with the written permissions of GTC. It is expressly understood that Gtc is the sole owner of the machines. still agrees to reach a target of 45/50 million cigarettes within three months of commencement of production by them.
(7)STL shall try to equip itself with its own machinery as soon as possible, in which case the machines given on loan by Gtc will be returned to Gtc, on still and Gtc mutually agreeing for such return.
(8)STL hereby agrees and undertakes not to use machinery loaned by Gtc for the purpose of manufacture of cigarettes other than the cigarettes agreed to be sold to Gtc except a maximum of 10% of still brands Gtc will not be liable to pay any charges for cigarettes carrying Stc brands.
(14)STL will not enter into any other contract for manufacture of other cigarettes with a third party in India or abroad during the continuance of this agreement except with the prior written consent given by Gtc by a resolution passed by Gtc in a meeting of its Board of Directors. Gtc in turn will not enter into any similar agreement for the manufacture of cigarettes with parties in Sikkim, Bhutan, North Bengal and North Bihar, during continuance of this agreement except with the written consent given by still by a resolution passed by still in a meeting of its Board of Directors.
(19)If any question or dispute or doubt shall at any time arise between the parties under this agreement either during the continuance of this agreement or thereafter disputes, difference and-doubts so arisen shall be referred to arbitration. The arbitration shall be conducted in accordance with the rules of the Indian Council of arbitration.
(20)The provisions of this agreement shall be construed, interpreted and governed by the Law of Sikkim. '
(2) The agreement on behalf of Golden Tobacco Company is signed by its Managing Director Shri Dipak Kumar Poddar and on behalf of Sikkim Tobacco (P) Ltd. by its Chairman Sbri R. Narayanan, Ias and Managing Director Shri B.K. Shrestha. We may notice here that the Sikkim Industrial Development and Investment Corporation Ltd. has 49% equity holding of Sikkim Tobacco Pvt. Ltd.
(3) The parties commenced the manufacture of cigarettes under the aforesaid agreement in 1981.
(4) On 10th October 1983 the Golden Tobacco Company made a report against Shri B.K. Shrestha under sections 406 and 420 of the Indian Penal Code alleging that by a letter dated 31st May 1983 Shri B.K. Shrestha was to close down the factory and return the machines by 30thAugustl983 at New Delhi but he had not done so and in violation of his letter dated 31st May 1983 he was trying to dishonestly misappropriate and convert to his own use the machines. A prayer also was made for the seizure of the case property.
(5) A case under sections 406 and 420 of the Indian Penal Code was registered against the petitioner Shri B.K. Shrestha. A Metropolitan 149 Magistrate passed an order for issuance of non-bailable warrants against Shri B.K. Shrestha and for the seizure of the machinery. Pursuant to the said order a police party went to Sikkim and seized some machinery.
(6) On 7th November 1983 Shri B.K. Shrestha filed the present petition under Article 226 of the Constitution of India for the quashing of the report and for the stay of the proceedings. The petitioner had not imp leaded the complainant and on our order the complainant was imp leaded and he is represented by Shri Mehra, advocate. The complainant has filed his reply to the petition. Mr. Sodhi Teja Singh appears for the Delhi Administration as well as for respondents 1 to 3,
(7) The main emphasis of the Complainant is on the letter dated 31st May 1983 (annexure R-1). According to the complainant under the said letter the petitioner Shri B.K. Shrestha had agreed to close down the factory and return the machinery to the Golden Tobacco Company by 30th August 1983. It is further pointed out that Shri Shrestha also had under taken that in case he failed to return the machines the Golden Tobacco Company shall have power to take possession of the machines through the force of law both criminal and civil.
(8) We find from the agreement that the machines were given by the Golden Tobacco Company to Sikkim Tobacco Pvt. Ltd on certain conditions which are elaborated in the agreement dated 6th June 1980. Clause 19 of the agreement clearly provides that if at any time there is any dispute or doubt between the parties under the agreement either during the continuance of the agreement or thereafter the disputes, differences and doubts shall be referred to arbitration, and the arbitration shall be conducted in accordance with the rules of the Indian Council of Arbitration.
(9) Clause 20 provides that the provisions of the agreement shall be construed, interpreted and governed by the law of Sikkim.
(10) The petitioner does not admit the execution of the document (R-1) that is the letter dated 31st May 1983. Assuming for the sake of argument it is taken that the letter dated 31st May 1983 was written by Shri B.K. Shrestha it has to be read as supplementary to the agreement dated 6th June 1980 and all the disputes arising under the agreement or the letter dated 31st May 1983 are to be settled by an arbitrator. Clause 19 provides that disputes or differences arising during the continuation of the agreement or thereafter are to be referred to arbitration. Even if it be taken that the letter dated 31st May 1983 brought an end to the agreement dated 6th June 1980 the disputes are to be determined as provided in clause 19.
(11) We may add that R-1 purports to be signed, by Shri B.K. Shrestha on behalf of Sikkim Tobacco Pvt. Ltd., Golden Himal Investment (P) Ltd. and Himal Enterprises (P) Ltd. The agreement dated 6th June 1980 is between the Golden Tobacco Company and the Sikkim Tobacco Pvt. Ltd. The question whether the said document was written by Shri B.K. Shrestha on behalf of the Sikkim Tobacco Private Ltd. and how far it is binding shall have to be settled by the arbitrator.
(12) On the facts stated we are of the view that no offence under sections 406 and 420 Indian Penal Code . is made out. The dispute is purely of civil nature and it has to be determined by an arbitrator or a civil court.
(13) For the reasons stated we allow the petition and quash the report dated 10th October 1983.
(14) Mr. Mehra states that he may be granted three weeks' time to move the courts at Sikkim for adjudication of the disputes and during this time the parties should maintain status quo regarding the machines which were seized by the police on 30th October 1983. We direct that the parties shall maintain status quo regarding the machines which were seized by the police and which are lying sealed in a building at Rangpo for three weeks from today. We are informed by Dr. Singhvi, counsel for the petitioner, that the petitioner has already filed an application under sections 8 and 20 of the Arbitration Act in the court of the District Judge at Gangtok.
(15) A copy of this order be given dusty to both the parties.