NIMET RESOURCES INC Vs. ESSAR STEELS LIMITED

JUDGEMENT

(1.) These three petitions have been filed under Section 11(5) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act'). The facts and questions of law arising in these petitions are common. For purposes of convenience, I will advert to the facts of Arbitration Petition No. 19 of 2000.

(2.) The averments in the petition, in brief, are as under: Nimet Resources Inc. is a company incorporated in Canada and is engaged in trading of metals conducting its business through its agent, the second petitioner. They claim that they entered into certain transactions with M/s. Essar Steels Ltd. in Arbitration Application No. 19 of 2000 on August 20, 1998 for sale and supply of about 100 metric tons of Ferro Vanadium through its agent, the second Petitioner. Under the said contract, the Petitioner was to deliver different quantities of metal on different dates between September, October and November, 1998. The respondent was to make the payment by opening appropriate letters of credit in respect of each delivery and in the said sales contract, there is an arbitration agreement to the effect that that the disputes arising out of the agreement shall be submitted to arbitration under the COMEX and/or the Institute of Scrap Recycling Industries and/or the L.M.E., as the case may be. The confirmation letter was also sent by the second Petitioner acknowledging execution of the contract between the first Petitioner and the respondent. Thereafter, the purchase order dated August 25, 1998 was issued and the respondent opened a letter of credit on October 15, 1998 but failed to open further letters of credit for ensuring payment of the balance quantity of about 80 tons of Ferro Vanadium. There was some correspondence between the parties subsequently. The respondent, on Feburary 25, 1999, denied the liability to make payment and the very existence of the sales contract dated 20-8-1998 purportedly entered into between the parties on the basis that the sales contract has not been signed by it or on its behalf and thereafter stated that the sales contract, having not been signed, there existed no dispute and hence no arbitration would be accepted. The Petitioner contends that the fact that the respondent opened a letters of credit for 20 tons of Ferro Vanadium itself would indicate that the respondent had acted upon the terms of the sales contract and the correspondence between them also would reveal that the respondent's acceptance of the sales contract. Thus the Petitioner contends that a dispute exists between them and clause 10 of the contract between the parties indicates an agreement providing for resolution of the disputes between the parties by arbitration and venue thereof being in the event of their failure to resolve the disputes under the COMEX and/or the Institute of Scrap Recycling Industries and/or the L.M.E. Rules. The Petitioner indicated in the notice sent on February 10, 1999 to choose a venue for the arbitration failing which the Petitioner was free to choose the same. The respondent denied the existence of the sales contract by its reply dated February 25, 1999 and, therefore, the present application was made.

(3.) The respondent has filed a reply to this petition on 24-8-2000 denying the existence of any agreement between the parties to submit to arbitration any disputes between them and denied any legal relationship between them. The stand of the respondent is that it did not accept the sales contract dated 20-8-1998 and the alleged contract itself bears out that it was not signed by the respondent nor was the same confirmed in any other manner. The respondent did not execute any sale of confirmation. In these circumstances, the question for consideration is whether the powers under Section 11 of the Act should be exercised or not. The stand of the Petitioner is that Section 16 of the Act empowers the arbitral Tribunal to rule on its own as well as on objection with regard to the existence or validity of the arbitration agreement while diametrically opposite stand is taken by the other side.