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Browse Law School Education ADR: Arbitration Important Arbitration Cases

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Now let’s discuss another interesting & new case which is Global Infonet Distribution Pvt. Ltd. v. Lenovo (India) Pvt. Ltd. which is a 2019 case.

BRIEF FACTS

The plaintiff executed respective Regional Distribution Agreement with Defendants 1 and 2 in this case for various territories.

Subsequently, Defendant 1 assessed the performance of the plaintiff and implemented direct distributorship arrangement whereby the plaintiff was to directly purchase the products from Defendant 1 and make payments through financial arrangements made through Defendant 3.

Later, after assessing the records of dealing and business with Defendants 1, 2 and 3 and taking note of the entire transactions, the plaintiff noted various losses and damages. The plaintiff filed a suit for recovery of a huge amount of money (Rs 17,70,39,462). Though, all the Distribution Agreements/Agreement entered between the plaintiff company and Defendants 1, 2 and 3 contained respective Arbitration Clause, the plaintiff filed the present suit.

The plaintiff pleaded in the present suit that the acts of the defendants are part of the same cause of action and it is just necessary that legal proceedings be initiated against the defendants jointly. It was further stated that different dispute resolution mechanisms and jurisdictions in three different agreements cannot be separately resorted to, by the plaintiff.

ISSUE:

The issues were:

Can disputes arising out of separate agreements having distinct clauses be referred to a joint arbitration under Section 8 of the Act, where such agreements form a composite transaction?

HELD:

The Delhi High Court held in this case that though the parties have entered into three different agreements there is clearly a commonality of facts which is as per the plaintiff binding the defendants together. The Court further held that it is the own case of the plaintiff in the plaint that Defendants 1, 2 and 3 are jointly and severally liable of the damages suffered by the plaintiff. It was also observed that the plaintiff had stated that the transactions of the plaintiff with the defendants in relation to the products of defendants are closely interrelated, fully interdependent and the defendants have acted in joint collusion by hatching an ingenious plan.

It was held that the plaintiff could not escape from the arbitration agreement. 

The Court relied on the Supreme Court judgement in Cheran Properties Limited v. Kasturi & Sons Limited and Ors., (2018) SCC Online SC 431, wherein it was held that the existence of a relationship between the parties, commonality of the subject matter and whether the agreement between the parties is a part of a composite transaction have to be seen. 

RATIO:

The ratio was that

Disputes arising out of separate agreements having distinct clauses can be referred to a joint arbitration under Section 8 of the Act, if the subject matter of the dispute involves a composite transaction, as seen in this case.

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