2014 (1) TMI 1811 - HC - Indian Laws

Permanent injunction to restrain the defendants from proceeding before Singapore International Arbitration Centre for arbitration - violation of Shareholders Agreement dated 6th October , 2011 and Master Agreement dated 24th August, 2012 - Held that - This Court held that no suit for such a relief can be entertained by the court when defendant No. 1 had prior thereto elected to refer the disputes for arbitration in the manner envisaged in the Shareholder Agreement. The legal position that follows aforesaid is that the issues that are raised by the plaintiff, namely, non compliance of Clause 12.3(a) and Clause 12.3(b) are issues which have to be gone into by the Arbitral Tribunal. Section 5 of the said Act takes away the jurisdiction of the civil court. The said statutory provision has to be given effect to. The present suit does not lie and is barred under Section 5 of the Arbitration & Conciliation Act and Section 34 and 41(i) (h) of the Specific Relief Act in terms of Order 7 Rule 11(d) of CPC, the present suit is barred by law and hence, the plaint is liable to be rejected. Accordingly, the application is allowed and the present suit is dismissed.

Summary

Issues:
1. Application under Order 7 Rule 11 of CPC for rejection of the plaint.
2. Suit filed for permanent injunction against arbitration proceedings.
3. Compliance with arbitration clause and procedural matters.
4. Jurisdiction of the court to decide on non-compliance with arbitration procedure.

Issue 1: Application under Order 7 Rule 11 of CPC
The plaintiff filed a suit seeking a decree for permanent injunction against the defendants from proceeding with arbitration at the Singapore International Arbitration Centre. The defendant filed an application under Order 7 Rule 11 of CPC seeking rejection of the plaint, arguing that the suit is not maintainable due to the presence of an arbitration clause.

Issue 2: Suit filed for permanent injunction against arbitration proceedings
The plaintiff alleged that the defendant bypassed the procedural steps outlined in the Shareholders Agreement before invoking arbitration, rendering the arbitration void. The defendant claimed to have followed the contractual procedure and attempted amicable resolution before initiating arbitration. The plaintiff sought a decree for permanent injunction against the arbitration proceedings.

Issue 3: Compliance with arbitration clause and procedural matters
The defendant argued that the suit is barred by Section 5 of the Arbitration & Conciliation Act and should be decided by the Arbitral Tribunal under Section 16 of the Act. The plaintiff contended that the defendant did not comply with the specific procedure outlined in the arbitration clause before invoking arbitration, making the arbitration invalid.

Issue 4: Jurisdiction of the court to decide on non-compliance with arbitration procedure
The court deliberated on whether it can entertain the plaintiff's contention of non-compliance with the arbitration procedure outlined in the Shareholders Agreement. The plaintiff relied on specific clauses of the agreement and previous judgments to support their argument. However, the court held that such issues fall under the jurisdiction of the Arbitral Tribunal, as per Section 5 of the Arbitration & Conciliation Act.

In conclusion, the High Court dismissed the suit, ruling that it is barred under Section 5 of the Arbitration & Conciliation Act and Sections 34 and 41(h) of the Specific Relief Act. The court held that issues related to non-compliance with the arbitration procedure should be decided by the Arbitral Tribunal, as per the statutory provisions. The judgment emphasized the importance of upholding arbitration agreements and the limited role of the court in such matters.