2012 (3) TMI 660 - HC - Indian Laws

Summary

Issues Involved:

1. Whether Clause 16 of the Agreement mandates arbitration.
2. Applicability of the judgment in Sukanya Holdings (P) Ltd. v. Jayesh H Pandya.
3. Whether Respondent No. 1 waived its right to arbitration by filing a complaint in the United States District Court for the Eastern District of Pennsylvania.

Summary:

1. Mandatory Nature of Clause 16:
The court examined whether Clause 16 of the Agreement is mandatory for arbitration. Clause 16 uses the word "shall," indicating a mandatory nature. The concluding part of Clause 16, which allows parties to seek interim relief from a court, does not detract from the mandatory arbitration requirement. The word "decree" in Clause 16 should be interpreted ejusdem generis with "temporary restraining order" and "preliminary injunction," implying it refers to interim relief rather than final adjudication. The court also referenced the judgment of the United States District Court for the Eastern District of Pennsylvania in Speciality Bakeries, Inc. v. Robhal, Inc., which supports the view that such clauses do not derogate from arbitration provisions.

2. Applicability of Sukanya Holdings (P) Ltd. v. Jayesh H Pandya:
The court considered the applicability of the Sukanya Holdings judgment, which held that if a suit involves parties not bound by the arbitration clause, the parties cannot be referred to arbitration. In the present case, the Petitioner joined Respondent No. 2 (DHL) to the suit to defeat the arbitration clause. The court found that the claim against Respondent No. 2 was contingent and not bonafide, aimed at avoiding arbitration. The court distinguished the facts from Sukanya Holdings, noting that Section 45 of the Arbitration and Conciliation Act, 1996, does not include the "subject matter" concept, unlike Section 8. Thus, Sukanya Holdings does not apply to Section 45.

3. Waiver of Right to Arbitration:
The Petitioner argued that Respondent No. 1 waived its right to arbitration by filing a complaint in the United States District Court for the Eastern District of Pennsylvania. However, the court found that Respondent No. 1 withdrew the complaint at the Petitioner's counsel's request to proceed with arbitration. The court held that the Petitioner, having participated in the arbitration and filed a counterclaim, could not now claim waiver by Respondent No. 1.

Conclusions:
1. The trial court's view on the existence of the Arbitration Agreement and arbitrability of the dispute is prima facie.
2. The Arbitral Tribunal will finally adjudicate the existence and arbitrability of the dispute.
3. The parties can raise their contentions before the Arbitral Tribunal.
4. The Arbitral Tribunal will decide based on the applicable law to the Agreement.
5. The Suit filed by the Petitioner against Respondent No. 2 (DHL) is not bonafide and aims to frustrate the Arbitration Clause; hence, Sukanya Holdings does not apply.

The Writ Petition was dismissed, and the rule was discharged with no order as to costs.