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MED - ARB PROBLEM

1. Artifact is a jewellery store/showroom in Dehradun. Later on it duly incorporated itself as


a company under the provisions of the Companies Act.
2. Critan deals in jewellery and exclusive retailing and is a renowned name in the jewellery
market. It is duly incorporated as a company under the provisions of the Companies Act,
under the title Critan & Co.
3. Critan and Artifact entered into an agreement before Artifact got itself incorporated as a
company.
4. The agreement between Critan and Artifact was that, Critan & Co. would supply its
goods for displaying in the showroom.
5. Initially, on 01-10-2005, the said agreement was for 10 years, extendable for 5 years and
then, further 5 years and so on, until and unless, the company revokes such agreement for
any reason, whatsoever.
6.

There was a clause in the said agreement, which reads as under :- "Any dispute,
disagreement or question arising out of and in connection with this Agreement shall be
referred to Arbitration in accordance with the Arbitration and Conciliation Act, 1996 or
any of its successor legislations/ordinances. In the event of there being any proceedings
before the Court, jurisdiction shall be vested with the Courts of Bangalore City."

7. During the course of such business, the sole proprietors of firm was converted into a
company under the name and style of M/S Artifact & Co., whereof Miss Ritu Bagaria
became the Managing Director along with his associates.
8. The cause of action depicted arose, when the Private Limited Company of Ms. Bagaria
created the encumbrance on the goods, so displayed in the showroom, with the Punhab
National Bank for creating/ enhancing the credit limit.
9. Feeling annoyed, the Critan Company brought a suit before the Civil Court seeking the
decree of declaration with the prayer that the defendants have no right/power to create the
charge/lien on plaintiffs stocks of the goods and thus, creating/enhancing the credit limit
is illegal and void.
10. Defendants resisted such Suit by way of moving an application under Order 7 Rule 11of
CPC read with Section 8 of the Arbitration Act on the plea that if the Arbitration Clause
was existing in the agreement, so entered into between the parties, then the matter would
have been referred to the Arbitral Tribunal, as has been contemplated under Section 8 of
the Arbitration and Conciliation Act, 1996.
11. The provision of Section 8 (1) though was existing from before but it was amended by a
substituted provision w.e.f. 23.10.2015, whereby, it has been mandatory to a Judicial

Authority to refer the parties to Arbitration, unless it finds that prima facie no valid
arbitration agreement exists.
12. The High Court ordered that the disputes be settled by Arbitration. It also ordered that all
the jewellery supplied by Critan & Co. to Miss Bagaria in her inventory be listed as there
may be many ways to dispose of or remove such items worth crores of rupees from the
shop.

Submitted By:
Siddhant Manral (Drafter)
A11911112072
Sec B, 9th Sem

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