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Delhi High CourtIndian Cases

Rite Approach Group Ltd. vs Rosoboronexport on 25 May 2004

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Delhi High Court
Rite Approach Group Ltd. vs Rosoboronexport on 25 May, 2004
Equivalent citations: 2004(3)ARBLR316(DELHI), 111(2004)DLT816, 2004(75)DRJ104
Author: R.C. Chopra
Bench: R.C. Chopra
JUDGMENT

R.C. Chopra, J.

1. The petitioner, a Company incorporated and based in Singapore has filed this petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as `the Act’ only) against the respondent, a Russian State owned Company seeking injunction against the respondent from collecting from Government of India the price of the two helicopters supplied by it without setting apart a sum of Rs.28.8 crores being commission to the petitioner at the rate of 16% of the price. Prayers have also been made for injuncting the Government of India from making full payment of the two helicopters to the respondent and also from restraining the respondent from delivering the helicopters to the Government of India. It is also prayed that a Receiver be appointed to collect on behalf of the petitioner the aforesaid commission from the Government of India which is claimed by the petitioner for services rendered to the respondent in regard to the supply of helicopters to the Government of India.

2. The facts relevant for the disposal of this petition, briefly stated, are that according to the petitioner, it is in the business of acting as Agent of various foreign Companies for negotiating and concluding contracts on their behalf. The Company known as “M/s. Russian Technologies” was a Russian Public Sector Company which merged with a Company known as “FSUE Promexport” in September, 2000 and subsequently the said “FSUE Promexport” merged with the respondent/Company. All the three Companies have been/are wholly owned by the Government of Russia. The respondent has its office at Moscow. According to the petitioner, in 1999-2000, M/s. Russian Technologies approached the petitioner for procuring orders in India for supply of helicopters to Border Security Force, Ministry of Home Affairs. The petitioner agreed to act as an agent of the Company and thereafter started approaching the Ministry of Home Affairs, Government of India, so as to ensure that the orders for the supply of the helicopters manufactured by M/s. Kazan Helicopters Ltd., of Soviet Republic were placed on M/s. Russian Technologies. Various meetings were held and ultimately in terms of the contract between the petitioner and M/s. Russian Technologies, the Ministry of Home Affairs, Government of India agreed to purchase six helicopters from M/s. Russian Technologies for a total sum of Rs.180 crores. According to the petitioner, a Memorandum of Understanding was signed in March, 2000 and a Letter of Credit was opened in June, 2003. The petitioner alleged that the said contract was a result of the petitioner’s efforts at the instance of M/s. Russian Technologies which subsequently merged with the respondent and as such the respondent cannot deny commission to the petitioner. The manufacturers M/s. Kazan Helicopters Ltd., informed the petitioner that they had issued instructions to the respondent to release commission due to the petitioner but in spite of it, vide communication dated 23rd December, 2002, the respondent has disputed that commission is due to the petitioner from them. In the Agency Agreement dated 14th April, 2000, there was an Arbitration Clause, according to which the disputes between the principal and agent were to be referred to the Arbitration Court under the Chamber of Commerce and Trade of Russian Federation and as such the present petition under Section 9 for the aforesaid injunctions/restraints to secure the amount due to the petitioner towards commission.

3. The respondent in its reply has denied and disputed the petitioner’s right to any injunction/relief on various grounds, inter alia, that there never existed any contract between the petitioner and respondent; that the respondent never appointed the petitioner as agent and never had any dealings with it; that M/s. Russian Technologies was an independent entity which ceased its activities after 30th June, 2001; that the sale of helicopters by respondent to Government of India was based on independent negotiations having no connection whatsoever with the negotiations which might have taken place between the petitioner and M/s. Russian Technologies; that the sale of helicopters by the respondent was not to Border Security Force but to the Ministry of defense. It is pleaded that the Agreement dated 14th April, 2000, between the petitioner and M/s. Russian Technologies was never performed and the Border Security Force did not place any order for the subject matter of the said contract. According to the respondent, the Ministry of Home Affairs and Ministry of defense are separate and independent Ministries under the Government of India and the contract between the Ministry of defense and the respondent was entered into on 17th December, 2000 for supply of 16 helicopters and not four helicopters as mentioned in the Agreement dated 14th April, 2000 between the petitioner and M/s. Russian Technologies. It is also pleaded that the petitioner has taken no steps to initiate arbitration which has to take place in Russia under the laws of Russia and as such the present petition is not maintainable. It is further pleaded that the respondent being a State owned Company doing business with various Governments around the world has large assets in Russia. It is a profit making Company engaged in the business of exporting armaments and military equipments and as such the apprehension of the petitioner that in case interim order is not passed, it would be left with no remedy is without any basis. It is also pleaded that the Agreement between M/s. Russian Technologies and the petitioner does not bind the respondent in terms of Article 7.2 of the said Agreement itself which had stated that the Agreement becomes void when the principal, customer or agent cease by any reason their activity, including force majeure circumstances, liquidation and bankruptcy, and if by that moment the principal and the agent do not have any claims against each other. It is also pleaded that M/s. Russian Technologies on account of its merger and subsequent liquidation had ceased its activities before the supply of the helicopters and as such the petitioner has no cause of action. It is clarified that the supply of helicopters by the respondent to the Ministry of defense is on account of independent negotiations and a different contract and there is a Clause as per the policy of the Government of India that in respect of the orders placed by Ministry of defense, no agent can be employed by a party for the purpose of intercession, facilitation or in any way recommendation to the Government of India or any of its functionaries for the Award of any contract. The said Clause is contained in Article 17 of the Contract entered into between the respondent and the Ministry of defense, a copy of which is Annexure R-2. It is also pleaded that the helicopters agreed to be supplied to Border Security Force under the contract between the petitioner and M/s. Russian Technologies were different and the helicopters being supplied by the respondent to Ministry of defense are different although the manufacturer thereof is the same. It is disputed that the petitioner has any right to claim any commission from the respondent and as such entitled to interim relief as prayed. The petitioner has filed a rejoinder to the reply controverting the averments made therein.

4. I have heard learned counsel for petitioner and learned counsel for respondent. I have gone through the records.

5. In this petition, several questions in regard to the privity of contract between the parties and responsibility of respondent to discharge the liabilities of M/s. Russian Technologies arise. Firstly, it does not appear that the helicopters being supplied by the respondent to the Ministry of defense are under the same contract by which M/s. Russian Technologies was contemplating to supply helicopters to the Ministry of Home Affairs. The helicopters to be supplied by M/s. Russian Technologies were only six in number whereas the helicopters to be supplied by the Ministry of defense are 16. The models of the helicopters are also different. Not only this, the agreement between the Ministry of defense and the respondent vide Article 17 as referred above clearly stipulates that there shall be no agent for the purpose of intercession, facilitation or in any way recommendation to the Government of India or any of its functionaries for the award of the contract by Ministry of defense. This Clause flies directly in the face of the claim of the petitioner that it was acting as an Agent in the contract of supply. It is also noticed that the agreement between the petitioner and M/s. Russian Technologies, stipulated in Article 7.2 thereof that the agreement would become void if the principal, customer or agent cease by any reason, their activity including force majeure circumstances, liquidation and bankruptcy and if by that time the principal or agent does not have any claim against the other. Moreover, by the time M/s. Russian Technologies merged with “FUSE Promexport” in September, 2000 and ceased its activities, no contract for supply of helicopters had come into existence. The prayer of the petitioner to injunct the respondent from receiving the price of the helicopters supplied by it to the Ministry of defense appears to be pre-mature also for the reason that an agent becomes entitled to his commission only after the completion of the contract and receipt of the price by the supplier and not prior thereto.

6. Last but not the least, the petitioner’s prayer, under Section 9 of the Act, has to be declined on a further ground that the respondent is admittedly a State owned undertaking of the Government of Russia having sufficient assets as well as operations. The prayer made by the petitioner is para materia similar to a prayer for attachment before judgment as envisaged in Order 38 Rule 5 of the CPC which is granted only when the Court is satisfied that a defendant with intent to obstruct or delay the execution of a decree that may be passed against him is about to dispose of the whole or part of his property or is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court.

7. It is true that Section 9 of the Act does not embody ingredients of Order 38 Rule 5 of the CPC nor the conditions laid in Order 38 Rule 5 of the CPC can be read into Section 9 of the Act but for exercising discretion there under, the Court can take guidance from the provisions of Order 39 as well as Order 38 of the CPC. A judgment of this Court in “M/s. Global Company Vs. M/s. National Fertilizers Ltd.” and a judgment of the Bombay High Court titled “National Shipping Company Vs. Sentrans Industries Limited” in Appeal No.852/2003 expressed a similar view. This Court, therefore, taking clue from the provisions of Order 38 Rule 5 of the CPC has no hesitation in holding that there are no good grounds for issuing interim reliefs as prayed by the petitioner for the reason that the respondent is a Company owned by the Russian Government and as such there appears to be no danger to the execution of the Decree if the Arbitrator holds that the petitioner is entitled to commission as claimed.

8. As discussed hereinbefore, the parties are raising so many disputes in regard to the claim of the petitioner and as such, only after the award of the Arbitrator, it would be clear as to whether the petitioner is entitled to any commission or not from the respondent on account of the supply of the helicopters by respondent to the Ministry of defense. The letter written by the manufacturer of helicopters to respondent regarding payment of commission to petitioner is not binding on the respondent Company. Therefore, there are no good grounds to pass restraint orders against the respondent from receiving and Government of India from releasing the payments and thereby jeopardies the deal regarding supply of the helicopters which appear to be urgently required. The respondent appears to be not willing to supply the same without full payment from Government of India.

9. Accordingly, this Court finds that the petition filed by the petitioner has no merit and there are no sufficient grounds for grant of any of the reliefs as prayed.

10. The petition stands dismissed accordingly.

11. The interim orders passed by this Court stand vacated.