2005 (8) TMI 715 - HC - Companies Law

Summary

Issues Involved:
1. Whether the Court should decline to enter upon the controversy of whether an implementable arbitration agreement exists between the parties.
2. Applicability of Part I and Part II of the Arbitration & Conciliation Act, 1996.
3. Jurisdiction of Civil Courts in arbitration matters.
4. Waiver of arbitration clause.
5. Relevant facts and circumstances of the case.

Issue-Wise Detailed Analysis:

1. Whether the Court should decline to enter upon the controversy of whether an implementable arbitration agreement exists between the parties:
The Court analyzed whether it should refer the parties to arbitration, leaving the Arbitral Tribunal to decide its jurisdiction. It was noted that if there is a strong likelihood that one party would be needlessly subjected to arbitration, the Court should intervene to prevent a futile reference. The Court was guided by previous legal submissions and the Arbitration & Conciliation Act, 1996, which expects the Court to obviate unnecessary arbitration references.

2. Applicability of Part I and Part II of the Arbitration & Conciliation Act, 1996:
The Court examined the decision in Bhatia International v. Bulk Trading S.A. and Anr., which held that Part I of the Act applies to all arbitrations with statutory connectivity to India unless explicitly excluded. The Court noted that the ratio of Bhatia International does not foreclose further discussion on the interplay between Sections 8 and 45 or Part I and Part II. The Court concluded that Part I applies to all arbitrations unless excluded by agreement, while Part II applies specifically to New York Convention arbitrations.

3. Jurisdiction of Civil Courts in arbitration matters:
The Court emphasized that Section 5 of the Arbitration & Conciliation Act does not explicitly oust the jurisdiction of Civil Courts. It referred to several Supreme Court judgments, including Dhulabhai v. State of Madhya Pradesh, which held that Civil Courts' jurisdiction is all-encompassing unless expressly excluded by statute. The Court also highlighted that Section 8 of the Act preserves Civil Courts' jurisdiction unless an application for arbitration is filed.

4. Waiver of arbitration clause:
The Court discussed the doctrine of election of remedies, noting that a party may waive its right to arbitration by choosing to litigate in Civil Courts. The Court referred to previous judgments, including Food Corporation of India v. Sreekanath Transport, where the Supreme Court held that filing a civil suit despite an arbitration clause constitutes a waiver of the arbitration clause. The Court found that the defendants had waived their right to arbitration by actively participating in civil litigation.

5. Relevant facts and circumstances of the case:
The Court detailed the factual background, noting the incorporation of SKYCELL Communication Pvt. Limited and the subsequent disputes among its shareholders. The Court highlighted various legal actions taken by the parties, including suits and applications under Section 45 of the Arbitration & Conciliation Act. The Court observed that the defendants had previously argued that there was no arbitration agreement with the plaintiff and had engaged in extensive litigation, thereby waiving the arbitration clause. The Court concluded that the arbitration clause had become inoperative and declined to refer the parties to arbitration.

Conclusion:
The Court confirmed the interim order staying the arbitration proceedings requested by Defendant No. 1 and extended the stay to other defendants. The applications were disposed of accordingly, and the Court emphasized that the defendants must pursue their claims in Civil Courts rather than through arbitration.