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2013 (11) TMI 542 - HC - Companies LawInjunction for Restraining Arbitration Proceedings - Plea of Limitation - Whether the learned Single Judge was justified in passing an order of injunction restraining an arbitration proceeding pending before ICC between the parties - Held that - The learned Single Judge was justified in rejecting the plea of limitation as a valid ground for injunction, as prayed for, so far as it relates to the transfer of 155 million shares to CPIL - Both on the factual and legal matrix the letter of termination had been disputed as the starting point of limitation - it cannot be said that the claim of the appellant was patently barred by limitation in the facts of this case so as to justify an order of injunction on such premise - The power of the judicial authority to decide the issue as to existence/ validity of the arbitration agreement was provided under the statute itself and was not whittled down by operation of section 5 of the Act - A bare reading of Section 45 of the Act would show that in the event a judicial authority was in seisin of an action relating to a matter covered by an arbitration agreement referred to in Section 44 of the Act the judicial authority shall refer the dispute in question to arbitration provided (a) a party or anyone claiming through or under him makes such request and (b) a judicial authority was satisfied that the agreement is not null and void or inoperative or incapable of being performed. Section 45 therefore empowers the judicial authority when seized of to a matter relating to an arbitration agreement to decide as to whether such agreement is null and void or inoperative or incapable of being performed prior to referring the parties to arbitration. Such power prevails over the provisions contained in Part I of the Act (which includes Section 5 of the Act) or the Civil Procedure Code due to the operation of the non-obstante clause contained in such provision. Whether an action as can be said to be covered u/s 45 of the Act Power to entertain an action or cause by a Civil Court was inherent in itself - the nature of action which may be entertained by the Court was not regulated by Section 45 of the Act - The provision merely lays down the procedure to be followed if the action so entertained by a Court related to a matter covered by an arbitration agreement providing for foreign seated arbitration - Similar was the scope of section 8 of the Act in respect of domestic arbitration - neither Section 8 nor section 45 of the Act restricted the inherent power of a Court to entertain any action in a mater relating to arbitration agreements including an action challenging the validity, existence or scope. In SBP & Co. vs. Patel Engineering Ltd. & Anr. 2005 (10) TMI 495 - SUPREME COURT - It was evident from the decision of the Constitution Bench that the power of the Court to decide as to the validity or existence of the arbitration agreement (when called upon to do so by one of the parties) was not eclipsed by the existence of such power in the arbitral tribunal. Whether the respondent had made out a case to restrain the foreign seated arbitration - None of the ancillary agreements were running counter to the terms or modified or altered the principal shareholder agreement - The Court held that in exceptional cases where it can be inferred that the real intention of the parties was to subject non signatory affiliates to arbitration, such non signatory affiliates could be referred to arbitration - It further held that real intention of the parties was to be decided in the facts of the case - The subsequent agreement was therefore not in terms of the earlier agreement but in abrogation of the liabilities arising therein and created new rights and liabilities by and between the parties - The subsequent arrangement arrived at by and between the parties on substituted the terms of the earlier agreement with regard to the reliefs pertaining to the transfer of 155 million shares to CPIL - The subsequent arrangement also provided for a different forum for adjudication and rendered the arbitration clause null and void, inoperative and incapable of being performed in relation to such dispute in the aforesaid case - no reason to differ from the finding of the learned Single Judge in this regard. The claim of transfer of shares beyond 155 million shares to CPIL stood extinguished by clause 1 and 2 of the supplementary agreement dated 30th July, 2004. Such claim, therefore, is not a live claim and referring to the parties to arbitration would be wholly vexatious and unwarranted - When a party to an arbitration agreement pursues the self-same relief before a court and invites the Court to adjudicate the same on merits and such court adjudicates the same on merits and arrives at a decision, the said party shall be deemed to have abandoned his right to seek arbitration in respect of such claim. In the instant case, the right of the Chatterjee Group to seek managerial control and majority status under the aforesaid agreement or otherwise had been finally decided by the Apex Court. It would be patently vexatious and the abuse of process of law to permit the appellant to reagitate the self-same issue before the arbitral tribunal. Remedy of arbitration and that before the CLB cannot be said to be complementary remedies constituting one remedy as a whole and one invoking arbitration on the issue of majority status and managerial control in HPL, after the Apex Court had returned a verdict on merits against the appellant on the self-same issue in the Company proceeding at the latter s behest undoubtedly amounts to abandonment of its right to arbitration by choosing to agitate such issue before the other tribunal.
Issues Involved:
1. Validity and enforceability of the arbitration agreement dated January 12, 2002. 2. Jurisdiction of the Civil Court to entertain a suit challenging the arbitration agreement. 3. Whether the subsequent agreement dated March 8, 2002, novated the January 12, 2002 agreement. 4. Whether the arbitration clause in the January 12, 2002 agreement survived the subsequent agreements. 5. Applicability of the principle of res judicata and issue estoppel. 6. Limitation period for invoking arbitration. Detailed Analysis: 1. Validity and Enforceability of the Arbitration Agreement: The court examined whether the arbitration agreement dated January 12, 2002, was still valid and enforceable. The respondent argued that the arbitration agreement had become void and unenforceable due to the subsequent agreement dated March 8, 2002, which provided for the jurisdiction of the Calcutta courts. The court held that the subsequent agreement created independent legal rights and liabilities, substituting the earlier agreement and extinguishing the arbitration clause. 2. Jurisdiction of the Civil Court: The court affirmed its jurisdiction to entertain a suit challenging the validity of an arbitration agreement under Section 45 of the Arbitration and Conciliation Act, 1996. It emphasized that Section 5 of the Act, which limits judicial intervention, does not bar the court's inherent power to entertain such a suit. The court referred to the Supreme Court's decision in SBP & Co. vs. Patel Engineering Ltd., which held that the court has the authority to decide the existence and validity of an arbitration agreement. 3. Novation of the January 12, 2002 Agreement: The court found that the agreement dated March 8, 2002, materially altered the terms of the January 12, 2002 agreement. The subsequent agreement transferred shares to CPIL, an independent legal entity, and not merely as a nominee of CPMC. This created new rights and liabilities, thereby novating the earlier agreement and extinguishing the arbitration clause. 4. Survival of the Arbitration Clause: The court held that the arbitration clause in the January 12, 2002 agreement did not survive the subsequent agreements. The new agreement provided for a different dispute resolution forum, namely the Calcutta courts, thereby rendering the arbitration clause null and void, inoperative, and incapable of being performed. 5. Principle of Res Judicata and Issue Estoppel: The court examined whether the findings of the Supreme Court in the company petition operated as res judicata or issue estoppel. It held that the Supreme Court's decision on the issue of managerial control and majority shareholding in HPL was on merits and binding. The appellant could not revive the same claim in arbitration, as it had been finally decided by the Supreme Court. The court concluded that the appellant had abandoned its right to arbitration by pursuing the same relief before the CLB and the Supreme Court. 6. Limitation Period for Invoking Arbitration: The court addressed the issue of limitation, noting that the letter dated September 28, 2005, terminating the contract, was disputed by the appellant. The court held that the claim was not patently time-barred and that the question of limitation should be decided by the arbitrator. The court rejected the plea of limitation as a ground for injunction, allowing the issue to be determined on merits by the appropriate forum. Conclusion: The court dismissed the appeal, upholding the injunction against the arbitration proceedings before the ICC. It concluded that the subsequent agreement dated March 8, 2002, novated the January 12, 2002 agreement, extinguishing the arbitration clause. The court affirmed its jurisdiction to entertain the suit challenging the arbitration agreement and held that the appellant had abandoned its right to arbitration by pursuing the same relief before the CLB and the Supreme Court. The issue of limitation was left to be decided on merits by the appropriate forum.
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