2009 (1) TMI 917 - HC - Indian Laws

Summary

Issues Involved:
1. Applicability of Arbitration Clause u/s 8 of the Arbitration and Conciliation Act, 1996.
2. Non-arbitrability of disputes involving non-parties to the arbitration agreement.
3. Scope of arbitration clause concerning intellectual property rights and confidentiality.
4. Waiver or abandonment of arbitration clause by initiating civil proceedings.

Summary:

1. Applicability of Arbitration Clause u/s 8 of the Arbitration and Conciliation Act, 1996:
Defendants 1 and 2 filed an application u/s 8 of the Arbitration and Conciliation Act, 1996, for dismissal of the suit on the grounds that disputes are covered by the arbitration clause. The court noted that the plaintiff is a company incorporated in Ireland, and defendants 1 and 2 are based in India, making Part II, Chapter I of the Act applicable. The court held that a wrong heading in the cause title does not warrant dismissal of the application, as the pleadings satisfy the requirements of Section 45 of the Act.

2. Non-arbitrability of disputes involving non-parties to the arbitration agreement:
The plaintiff argued that defendants 3-5 are not parties to the arbitration agreement, citing the Supreme Court decision in Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya and Anr. The court noted that the entire subject matter of the suit should be covered by the arbitration agreement for Section 8 to apply. However, the court found that the objections regarding defendants 3-5 were not sufficient to dismiss the application, as the substance of the plaint should be scrutinized carefully.

3. Scope of arbitration clause concerning intellectual property rights and confidentiality:
The plaintiff contended that Clause 29.6 of the Agreement, which is the arbitration clause, is subject to Clause 29.5(a) concerning breach of confidentiality or intellectual property rights, making the disputes non-arbitrable. The court held that Clause 29.5(a) allows seeking injunctive relief even within the 30 business days dispute resolution period but does not limit the scope of arbitration. The entire agreement, including intellectual property matters, is subject to arbitration.

4. Waiver or abandonment of arbitration clause by initiating civil proceedings:
The plaintiff argued that defendants 1 and 2 had waived their right to arbitration by filing a civil suit (CS(OS) 1223/2008). The court noted that the defendants had filed the present application for arbitration before filing the civil suit and had not abandoned their rights under the arbitration clause. The subsequent withdrawal of the civil suit indicated that the defendants had not waived or abandoned their right to arbitration.

Conclusion:
The application u/s 45 of the Act was allowed, and the parties were referred to arbitration. The interim injunction granted by the court on 18th February 2008 was extended for 60 days to enable the plaintiff to take appropriate steps under Section 9 of the Act or before the arbitrators. The court clarified that it had not adjudicated the merits of the interim order or the case inter se the parties, and any observations made would not be binding on subsequent legal proceedings. The application and the suit were disposed of with no order as to costs.