India: Delhi High Court Rules That One Cannot Say That An Arbitration Clause Is Of No Consequence During A Dispute

Last Updated: 7 March 2018
Article by S.S. Rana & Co. Advocates

The Delhi High Court on September 15, 2017 passed a judgement in the case Uday Chand Jindal v. Galgotia Publications Pvt. Ltd.1, holding that when a party has signed an agreement which includes an arbitration clause then, during any dispute, the party cannot say that the arbitration clause is of no consequence in respect of grievance towards any of the clauses of the agreement.

Brief Facts of the case and proceedings before the Copyright Board:

  • The Appellant claimed to be the author of several books and had given some of those books to the Respondent for publication. It is the claim of the Appellant that the Respondent fraudulently ripped certain chapters from the book "Engineering Mechanics (UPTU) by U. C. Jindal" and bound those with another book without permission from the author. The Appellant further claimed that the Respondent also re-printed the Appellant's books but never paid any royalty to him despite various reminders.
  • The matter was first presented before the Copyright Board by the Appellant, wherein the Respondent submitted that there was no assignment in terms of Section 19 of the Copyright Act, 1957. The Respondent further submitted before the Copyright Board that there was an arbitration clause in the agreement entered between the parties for the books and therefore, any dispute qua those books is liable to be adjudicated by an arbitrator through the process of arbitration and not the Copyright Board. The Appellant asserted that the work titled "Mechanical Engineering UPTU" without any permission is in violation of the author's special right provided under section 57(b) of the Copyright Act and that the arbitration clause was only with regard to interpretation or enforcement of the agreement and not in the case of revocation and only the Copyright Board had the statutory powers in that regard.
  • The Copyright Board, on the point of arbitration clause, held that the petitioner (Appellant herein) has failed to prove that the terms of the agreement with the Respondent are harsh and therefore, the remedy under the arbitration clause in the agreements lies with the arbitrator. So far as the jurisdiction for remedy for breach of moral rights under Section 57(1) (b), the Copyright Board held that the same does not lie with the Board.
  • Aggrieved by the above order of the Copyright Board, the Appellant preferred the present appeal before the Delhi High Court.

Appellant's Submissions:

The Appellant, i.e., Mr. Uday Chand Jindal contended that the order of the Copyright Board must be set-aside, and made the following submissions:

1. That although there was an arbitration clause in the agreement, the appellant had filed the petition before the Copyright Board for seeking relief with regard to the harshness of one of the clauses of the agreement, which according to the appellant should have been heard and decided by the Copyright Board, but the Board had dismissed the petition by referring the parties to arbitration only. The said Clause of the agreement is reproduced herein below:

"The author agrees that he will not during the continuance of the agreement without the written consent of the publisher write, print or publish or cause to be written, printed or published, any other edition of the work, revised, enlarged, abridged, adapted, or otherwise, or any book of a character that might interfere with or inure the sale of the work."

2. Reliance was placed on Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya2, wherein provisions of Section 5, 8 and 11 were referred:

"Section 5. Extent of judicial intervention.

Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.

Section 8. Power to refer parties to arbitration where there is an arbitration agreement. (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."

3. That despite there being an arbitration agreement, the Respondent had not filed an application under Section 8 and 11 of the Arbitration and Conciliation Act, 1996, for referring the dispute to the Arbitrator in a pending proceeding, but had chosen to contest the matter by filing its written statement to the appellant's petition. Therefore, as per the appellant, the respondent has waived its right under Section 4 of the Arbitration Act for referring the dispute to the Arbitrator.

Respondent's Submissions:

The counsel for the Respondent, i.e., Galgotia Publications Pvt. Ltd., refuting the assertions made by the Appellant, made the following submissions

  • That there is a specific arbitration clause 19 in the memorandum of agreement entered into between the parties with respect to settlement of any dispute by way of arbitration. Thus, any dispute arising between the parties was to be settled by way of arbitration alone. Clause 19 of the said Memorandum of Agreement is reproduced herein below:
    "All differences or disputes arising out of or in connection with the interpretation or enforcement of this agreement shall be settled by arbitration in Delhi and will be subject thereto the Courts in Delhi in accordance with the Indian Arbitration Act."
  • Reliance was also placed by the Respondent on HDFC Bank Ltd. v. Satpal Singh Bakshi3 wherein it was held that for determination of disputes the State does provide the medium of alternate forums, but while doing so, it recognizes that it is not the only means for determination of the resolution of conflicts between the parties. The parties are given the freedom to choose a forum, alternate to and in place of regular court or judicial system for decision of their inter se disputes. Therefore, even when the matter is pending in the court, parties to the dispute are given freedom to resort to conciliation, mediation and also arbitration.

Decision of the Delhi High Court:

On consideration of the submissions and case laws filed by the parties, the Delhi High Court held that, as regards the claim of royalty, the money or claim itself of the Appellant is on the basis of the agreement entered between the parties and the same is the subject matter of the dispute, which could be resolved only in the arbitration proceedings. The court further held that since both parties had expressly agreed to the said arbitration clause, the Appellant cannot be permitted to say that the arbitration clause was of no consequence in respect of the grievance towards any clause of the agreement including its harshness, if any. That, alone, would defeat the very effect of the said arbitration clause which was mutually acceptable between the parties. Thus, the Delhi High Court dismissed the appeal.

Footnotes

1 RFA No. 8 of 2009 Reported in 2017 (72) PTC 492 (Del.)

2 (2003) 5 SCC 531.

3 (2012) 193 DLT 203

For further information please contact at S.S Rana & Co. email: info@ssrana.in or call at (+91- 11 4012 3000). Our website can be accessed at www.ssrana.in

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