2008 (10) TMI 697 - HC - Companies Law

Summary

Issues Involved:
1. Interim injunction restraining arbitration proceedings.
2. Stay of the arbitration clause.
3. Application under Section 45 of the Arbitration and Conciliation Act, 1996.
4. Vacating the interim injunction.

Detailed Analysis:

Interim Injunction Restraining Arbitration Proceedings:
The plaintiffs sought an interim order of injunction to restrain defendants 6 and 10 from proceeding with arbitration. The court granted an ad interim ex parte injunction on 7.3.2008, restraining the defendants from proceeding with the arbitration.

Stay of the Arbitration Clause:
The plaintiffs also filed an application for a stay of the arbitration clause, arguing that the arbitration agreement was null and void, inoperative, and incapable of being performed. The court examined the arbitration clause and the context of the Joint Venture Agreement, noting the plaintiffs' acceptance of the Joint Venture Agreement but their opposition to the arbitration clause.

Application under Section 45 of the Arbitration and Conciliation Act, 1996:
Defendants 6 and 10 filed an application under Section 45 to refer the parties to international commercial arbitration. The court analyzed the scope of the enquiry under Section 45, referencing the divergent views in Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. and another (2005) 7 SCC 234. The court concluded that the arbitration agreement was not null and void, as the plaintiffs did not plead any specific facts rendering the agreement null and void under the parameters of the Contract Act, 1872.

The court also determined that the arbitration agreement was not incapable of being performed, as the arbitration itself was not impossible to perform, even if the Joint Venture Agreement was presumed to be incapable of being performed.

Vacating the Interim Injunction:
Defendants 6 and 10 sought to vacate the interim injunction granted in O.A. No. 277 of 2008. The court examined whether the arbitration agreement had become inoperative. The court found that the defendants had engaged in multiple litigations, including civil suits, company petitions, and criminal complaints, which made the arbitration agreement inoperative. The court cited the principle that arbitration is intended to be an alternative dispute resolution mechanism, not an additional one, and that the defendants' actions had rendered the arbitration agreement a "dead letter."

The court also noted that some defendants were not parties to the Joint Venture Agreement or the arbitration agreement, making the arbitration tribunal's jurisdiction over those individuals questionable.

Conclusion:
The court dismissed the application under Section 45 (A. No. 2670 of 2008), allowed the application for injunction (O.A. No. 277 of 2008), and the application for stay of the arbitration clause (A. No. 1236 of 2008). The application to vacate the injunction (A. No. 2671 of 2008) was dismissed. The court concluded that the arbitration agreement had become inoperative due to the conduct of defendants 6 and 10, who had engaged in extensive litigation in various forums, thereby abandoning the arbitration agreement.