GLOBAL TRADE FINANCE LTD Vs. SUDARSHAN OVERSEAS LIMITED

JUDGEMENT

(1.) In this Notice of Motion the relief claimed by Defendant No. 1 is that the Court should refer the parties to Arbitration. This request is based upon the plea that all conditions of Section 8 of the Arbitration and Conciliation Act, 1996 (for short the Act) are satisfied and complied with. Once they are so complied with, then, there is no alternative but to refer the parties to arbitration.

(2.) It is not in dispute that the Plaintiffs have filed the instant Suit against Defendant No. 1 which is a Company incorporated under the Companies Act, 1956 and Defendant No. 2 who has given his Personal Guarantee for the monies lent and advanced by the Plaintiff to Defendant No. 1 under various facilities as more particularly set out in the plaint. The principal relief in the plaint is that this Court should pass a decree in favour of the Plaintiff against the Defendants in the sum more particularly mentioned in prayer Clauses (a) and (b) of the plaint so also Defendant Nos. 1 and 2 be ordered and directed to specifically perform their obligations set out in the letter of sanction dated 21st June 2007.

(3.) Mr. Y.P. Narula, learned Senior Counsel appearing in support of this Notice of Motion, which has been moved on behalf of the First Defendant, contended that the Suit claim is based upon documents, inter-alia, Global Accounts Receivable Management Agreement and Import Factoring Agreement copies of which are annexed as Annexures 'C-1' and 'C-2' to the plaint. He submits that a perusal of these agreements would indicate that as far as the agreement at Annexure 'C-1' is concerned, there is an arbitration clause and in that behalf he invites my attention to Clause 23 of the agreement at Annexure 'C-1'. He submits that the letter of guarantee dated 5th September 2007 must be seen in the backdrop of the agreements at Annexures 'C-1' and 'C-2' respectively. He submits that the letter of guarantee recites that in consideration of the Plaintiffs' sanctioning in favour of the Company (D-1) Trade Finance Facility under the agreements in question in the event, the Company fails or neglects or refuses for any reasons whatsoever to pay to the Plaintiffs the amount under the facility including any additional limits granted under the agreements, then, the Guarantor - Defendant No. 2 guarantees to make payment of such amounts. Therefore, according to Mr. Narula, letter of guarantee cannot be seen de-hors the agreements at Annexures 'C-1' and 'C-2' but must be construed as part and parcel thereof. Therefore, joinder of the guarantor - Defendant No. 2 is of no consequence at all. Once, there is a Arbitration Agreement under the agreements between the Plaintiff and Defendant No. 1 and when all conditions laid down in Section 8 are satisfied, then, this Court must refer the parties to arbitration in terms of the aforementioned clause. The Suit and the Notice of Motion moved by the Plaintiffs therein cannot then proceed and must be dismissed.