Jes & Ben Groupo Pvt. Ltd. & Ors. v. HELL Energy Magyarország Kft. (Hell Energy Hungry Ltd.) & Anr.

At a glance

Parties

Jes & Ben Groupo Pvt. Ltd., Harpreet Sachdeva and a sub-distributor (plaintiffs) v. HELL Energy Magyarország Kft. (Hell Energy Hungary Ltd.) and its India National Sales Director (defendants)

Case no.

CS(COMM) 257/2019 (I.A. 8948/2019), High Court of Delhi

Court

High Court of Delhi at New Delhi, Justice Sanjeev Narula

Forum and rules

Application under Section 45 of the Arbitration and Conciliation Act, 1996 (Part II, Chapter I: New York Convention)

Treaty

Clause 10.13 of the Exclusive Distribution Agreement of 4 October 2017 (arbitration at the Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, Budapest)

Sector

Beverages distribution (energy drinks)

Outcome

Application allowed (23 September 2019). Plaintiff No. 1 and Defendant No. 1 were referred to arbitration in Budapest, and the plaint was rejected as to the other parties.

Amount

The plaintiffs said they had invested about Rs. 8 crores and claimed losses of Rs. 2 crores per month. The court ordered the plaintiffs to pay Defendant No. 1 costs of Rupees Two Lakhs within four weeks.

The dispute

Jes & Ben Groupo Pvt. Ltd. is a New Delhi importer and distributor of food and beverages. On 4 October 2017 it signed an Exclusive Distribution Agreement with HELL Energy Magyarország Kft., a Hungarian company, for 'Hell Energy' drinks in India. HELL Energy terminated the agreement in March 2019 under Clause 9.2.5, on the ground that the distributor had failed to meet 75% of its Annual Order Volume. The distributor, its director Harpreet Sachdeva and a sub-distributor then sued in the Delhi High Court. They sued HELL Energy and its India National Sales Director, seeking an injunction, cancellation, a declaration, rendition of accounts and damages. HELL Energy applied under Section 45 of the Arbitration and Conciliation Act, 1996 to have the suit dismissed and the parties referred to arbitration under Clause 10.13. The plaintiffs argued four points: (1) the clause was void under Section 28 of the Indian Contract Act and contrary to public policy; (2) the case involved fraud and parties who had not signed the agreement; (3) Budapest was an inconvenient forum; and (4) the clause was a standard-form term imposed by a party with greater bargaining power.

Key holdings

1. Under Section 45 the court takes only a prima facie view of whether the arbitration agreement is null and void, inoperative or incapable of being performed. It does not examine whether the main contract is legal or valid. ¶¶ 8–10
2. An agreement to arbitrate is not contrary to public policy. It is saved by Exception 1 to Section 28 of the Indian Contract Act, 1872. ¶ 12
3. The plaint contains no real allegation of fraud. The suit is about wrongful termination and breach of contract. Fraud was raised only to get around the arbitration clause, and the alleged malpractices and the claim that the terms were onerous are questions for the arbitrators. ¶¶ 15–17
4. The non-signatory parties were added through clever drafting to avoid Section 45. Defendant No. 2 was sued only as the representative of Defendant No. 1, and there is no privity of contract with him. Relying on Chloro Controls, the court held that the disputes can be referred to arbitration and that the arbitral tribunal may decide whether Defendant No. 2 can be joined. ¶¶ 18–19
5. Forum non conveniens does not make a dispute non-arbitrable, and neither does the cost of arbitrating in Budapest. The parties chose the Hungarian Chamber of Commerce in Budapest themselves. ¶¶ 20–22
6. Unequal bargaining power cannot be used to avoid arbitration in a commercial contract between businesses. The agreement was negotiated, not a standard-form contract. ¶ 22
7. Plaintiffs Nos. 2 and 3 have no cause of action of their own, so the plaint is rejected as to them and as to Defendant No. 2. Plaintiff No. 1 and Defendant No. 1 are referred to arbitration, and the plaintiffs pay Defendant No. 1 costs of Rupees Two Lakhs. The operative paragraph cites the clause as 'Clause No. 10.3'; the clause quoted earlier in the judgment is 10.13. ¶¶ 23–24

Procedural history

1. 4 October 2017Exclusive Distribution Agreement signed between Jes & Ben Groupo and HELL Energy.
2. 25 March 2019HELL Energy terminated the agreement under Clause 9.2.5. The judgment also refers to the termination as dated 29 March 2019 in the account of the plaint.
3. 2019The plaintiffs filed suit CS(COMM) 257/2019. Defendant No. 1 filed I.A. 8948/2019 under Section 45 of the Arbitration and Conciliation Act.
4. 17 July 2019The court heard the application and reserved judgment.
5. 23 September 2019Judgment: the application is allowed and the parties are referred to arbitration in Budapest. The plaint is rejected as to Plaintiffs Nos. 2 and 3 and as to Defendant No. 2, and costs of Rs. 2 lakhs are awarded.

Tribunal, counsel and experts

Decided by

• Sanjeev Narula Judge, High Court of Delhi

For the claimant

Mohit Chaudhary · Garima Sharma · Balwinder Singh · Kunal Sachdeva

For the respondent

Sachin Datta · Bindra Rana · Nihit Nagpal · Anuj Jhawar · Samir Malik · Iti Agarwal · Paritosh Goel

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Keywords

• Hell Energy
• energy drinks
• exclusive distribution agreement
• Section 45 Arbitration and Conciliation Act
• referral to arbitration
• New York Convention
• Hungarian Chamber of Commerce and Industry
• Budapest seat
• Section 28 Indian Contract Act
• allegations of fraud
• non-signatory
• group of companies doctrine
• forum non conveniens
• unequal bargaining power
• prima facie review
• null and void, inoperative or incapable of being performed
• rejection of plaint
• India

Summary generated with AI from the published documents — refer to the award for the authoritative text.