2020 (7) TMI 843 - HC - Law of Competition

Challenge to majority arbitral award - contravention of the provisions of section 3(4) and section 4 of the Competition Act by the respondent and its group companies - petitioner filed an application under section 16 of the Arbitration Act raising a plea of jurisdiction and praying for dismissal of the claims made by the respondent for want of jurisdiction. Whether present dispute was not arbitrable as alleged in the statement of defence? - HELD THAT - The tribunal rightly held that the adjudication by the tribunal shall be in the nature of the right and liability of the parties to the agreement and would relate to right in personam and not right in rem. If the arbitral tribunal would have held that it had no jurisdiction in the matter and would have dismissed the claim of the respondent the respondent would not have any remedy at all. In the proceedings before the CCI whatever may be the outcome the respondent would not be able to get any effective relief or decree or award directing the petitioner herein to pay the particular amount to the respondent. The arbitral tribunal rightly held that the respondent had certain rights under the 2015 SLA and thus it must also have remedy for enforcement of such rights. If the challenge to the jurisdiction of the tribunal by the respondent is upheld it would result in dismissal of the claim without adjudication of the merits and without granting any relief to him. The tribunal accordingly rightly held that wherever there is right there is a remedy or where there is no wrong without remedy. Does the Competition Act apply to the 2015 Sub- license Agreement? - HELD THAT - The arbitral tribunal held that it was clear that the question whether or not Competition Act 2002 applies to 2015 SLA can and is to be decided only by the CCI. It is rightly held that once the CCI is empowered to determine the said question section 61 of the Competition Act bars the arbitral tribunal from considering the said question. After adverting to section 61 of the Competition Act and after noticing the admitted facts that the CCI is still investigating the matter and no orders have yet been passed by the CCI under Section 26 or under Section 27 the arbitral tribunal rightly held that that issue will be decided by the CCI. Whether section 61 of the Competition Act would exclude the jurisdiction of the Arbitral Tribunal in entertaining monetary claim arising out of the 2015 SLA though CCI has no jurisdiction to entertain any such monetary claim made by one party against another party to the SLA under the provisions of the Competition Act or not? - HELD THAT - The petitioner did not dispute before this Court that the said 2015 SLA was executed after detailed negotiations held by the petitioner with full independent legal advice received by the petitioner of its implications. There is also no dispute that various State Government Price Notifications relied upon by the petitioner before this Court fixing maximum sale price at which the petitioner could sell the seeds were already existing before the execution of the said 2015 SLA between the parties. No objection about the rate was however raised by the petitioner at that stage. The trait value in respect of which the dispute between the parties arose was one of the components of maximum selling price of cotton seeds prescribed under those State Government Price notifications referred to and relied upon by the petitioner. A perusal of the record clearly indicates that neither the petitioner nor its associate companies had during the relevant period even made any attempt to avoid the said 2015 SLA and had availed off the benefits under the said agreement. Even before the CCI the petitioner and its associate companies had never sought avoidance of 2015 SLA but had challenged the termination of notice issued by the respondent thereby terminating the 2015 SLA and had prayed for the stay of termination of 2015 SLA - the stand taken by the petitioner is totally inconsistent with each other and is mutually destructive. Even during the course of the arguments none of the counsel appearing for the petitioner addressed this Court on the issue of quantification of the amount awarded by the arbitral tribunal or on the merit of the claim decided by the arbitral tribunal in the impugned award but addressed only on the issue of jurisdiction of the arbitral tribunal. Reliance placed on Section 17 of the Arbitration Act in support of the submission that the arbitral tribunal is empowered to suspend the arbitral proceedings is misplaced. Under Section 17 the arbitral tribunal is empowered to grant interim measures on the grounds and the circumstances set out in the said provision. Section 17 does not empower the arbitral tribunal to suspend the arbitral proceedings. It is thus clear beyond reasonable doubt that the arbitral tribunal could neither terminate nor suspend the arbitral proceedings before the CCI under the provisions of the Competition Act nor could refuse to deal with the monetary claims arising out of the 2015 SLA merely on the ground that the issue of validity of the 2015 SLA by the Central Government by filing a reference or in view of the information filed by the petitioner before the CCI under provisions of the Competition Act is pending before the CCI - there is no substance in the submission made by the learned senior counsel for the petitioner that the arbitral tribunal ought to have awaited for the outcome of the pending proceedings before the CCI and could not have made an arbitral award though admittedly there was no dispute on the merits of the claim. There is no substance in the submission that the issues in the arbitral proceedings being related to the issues pending before the CCI and thus even if the part of the claims were arbitrable and other part was not arbitrable the entire proceedings before the arbitral tribunal became non-arbitrable. There is no merit in the submission of the learned senior counsel for the petitioner that the respondent could have applied for extension of time for indefinite period for making an arbitral award or for some period beyond the date of disposal of proceedings before CCI under Section 29A(4) of the Arbitration Act. This submission is in the teeth of Section 29A(4). Court has no power to grant such extension for indefinite period or to indirectly suspend the arbitral proceedings under Section 29A (4) of the Arbitration Act. Whether or not the Competition Act applies to the 2015 SLA? - HELD THAT - If the arbitral tribunal would have rendered a finding one way or the other on the issue nos.3(a) to 3(f) as formulated based on the pleadings filed by the respondent that would have amounted to the arbitral tribunal exceeding its jurisdiction and would have been in violation of Section 61 of the Competition Act and not otherwise. The decision of the arbitral tribunal awarding the monetary claims made by the respondent under the said 2015 SLA would not amount to the arbitral tribunal wrongly assuming the existence of jurisdictional facts. The arbitral tribunal is empowered to exercise powers in view of the existence of arbitration agreement and to find out whether the claims made before it are arbitrable or not. Such exercise would not amount to assuming the existence of the jurisdiction facts. In view of the limited judicial intervention prescribed under section 5 of the Arbitration Act the arbitral tribunal or this Court could not have either terminate or suspend the arbitral proceedings in view of there being no such power available or prescribed under the Arbitration Act for either termination of the arbitral proceedings or for suspension thereof in view of the pendency of the complaint filed by the Central Government or the information filed by the petitioner before the CCI. The judgment of Supreme Court in case of Mahavir J. Patil 2009 (4) TMI 1067 - SUPREME COURT relied upon by the learned senior counsel for the petitioner is clearly distinguishable in the facts of this case. Supreme Court in the said judgment had considered Section 12 of the Resettlement Act 1976 and held that it was the clear legislative intent as Section 12 of the Resettlement Act clearly stipulated that any transfer by way of sale partition etc after the date of notification under Section 11 would be void. It is held that where the statue itself is against a transfer it is the statue which will pre-dominate vis-a-vis the other consideration. The said judgment would not apply to the facts of this case even remotedly. A perusal of the award clearly indicates that the arbitral tribunal has rightly allowed the monetary claims made by the respondent after considering the pleadings evidence oral and written arguments advanced by the parties. In so far as the merit of the claim is concerned the petitioner did not raise any dispute on the quantification nor agitated any submission across the bar while arguing the arbitration petition at length before this Court. None of the findings rendered by the arbitral tribunal shows any perversity or any patent illegality in the impugned award - no case is thus made out by the petitioner for intervention with the impugned award in Commercial Arbitration Petition and thus the said petition deserves to be dismissed. Challenge to tribunal s award on the grounds of public policy and patent illegality - HELD THAT - The court found no evidence of such violations. The tribunal s decision was based on a plausible interpretation of the contract and the evidence and thus did not warrant interference under Section 34 of the Arbitration Act. Conclusion - A perusal of the award clearly indicates that the arbitral tribunal has rightly allowed the monetary claims made by the respondent after considering the pleadings evidence oral and written arguments advanced by the parties. In so far as the merit of the claim is concerned the petitioner did not raise any dispute on the quantification nor agitated any submission across the bar while arguing the arbitration petition at length before this Court. None of the findings rendered by the arbitral tribunal shows any perversity or any patent illegality in the impugned award. The petitions challenging the arbitral award dismissed.

Summary

Issues Involved:

1. Jurisdiction of the Arbitral Tribunal under the Arbitration and Conciliation Act, 1996.
2. Applicability of the Competition Act, 2002 to the 2015 Sub-License Agreement (SLA).
3. Arbitrability of disputes involving competition law issues.
4. Validity and enforceability of the 2015 SLA under the Competition Act.
5. Impact of pending proceedings before the Competition Commission of India (CCI) on arbitration proceedings.
6. Whether the arbitral tribunal should have stayed or dismissed the proceedings pending the outcome of the CCI proceedings.
7. Whether the arbitral tribunal could decide the monetary claims under the 2015 SLA.
8. Whether the arbitral tribunal's decision was influenced by the interim orders of the CCI.
9. The impact of state government notifications on the trait value payable under the 2015 SLA.
10. Whether the arbitral tribunal's award was in violation of public policy or contained patent illegality.

Detailed Analysis:

1. Jurisdiction of the Arbitral Tribunal:

The arbitral tribunal's jurisdiction was challenged under Section 16 of the Arbitration and Conciliation Act, 1996. The tribunal applied the triple test of jurisdiction: existence of a valid arbitration agreement, proper constitution of the tribunal, and whether the matters submitted were within the scope of the arbitration agreement. The tribunal found that these criteria were met, and thus it had jurisdiction to decide the monetary claims under the 2015 SLA. The tribunal also noted that the CCI did not have jurisdiction to award monetary claims, which were within the purview of the arbitral tribunal.

2. Applicability of the Competition Act to the 2015 SLA:

The tribunal held that the question of whether the Competition Act applied to the 2015 SLA was to be decided by the CCI. The tribunal refrained from expressing any opinion on issues related to the Competition Act, such as abuse of dominance or anti-competitive agreements, as these were within the exclusive jurisdiction of the CCI.

3. Arbitrability of Competition Law Issues:

The tribunal concluded that while issues of competition law were not arbitrable, the monetary claims under the 2015 SLA were arbitrable. The tribunal differentiated between rights in personam, which are arbitrable, and rights in rem, which are not. The monetary claims were considered rights in personam.

4. Validity and Enforceability of the 2015 SLA:

The tribunal found that the 2015 SLA was not declared void by any competent authority and thus was presumed valid. The tribunal noted that any declaration of voidness under the Competition Act would have to be made by the CCI, and until such a declaration, the SLA was enforceable.

5. Impact of Pending CCI Proceedings:

The tribunal held that the pending proceedings before the CCI did not oust its jurisdiction to decide the monetary claims. The tribunal noted that the CCI's proceedings and the arbitration proceedings could proceed in parallel as they addressed different issues.

6. Stay or Dismissal of Proceedings:

The tribunal rejected the argument that it should have stayed or dismissed the arbitration proceedings pending the outcome of the CCI proceedings. The tribunal emphasized that doing so would leave the respondent without a remedy, as the CCI could not award monetary claims.

7. Decision on Monetary Claims:

The tribunal decided the monetary claims based on the contractual obligations under the 2015 SLA. It found that the petitioner had collected the trait value from farmers and was obliged to pay the respondent as per the agreement. The tribunal's decision was based on the interpretation of the contract and the evidence presented.

8. Influence of CCI Interim Orders:

The tribunal noted that the interim orders of the CCI were administrative and did not determine the rights or obligations of the parties. The tribunal held that these interim orders did not bind it or influence its decision on the monetary claims.

9. State Government Notifications:

The tribunal found that the state government notifications did not fix the trait value but only the maximum sale price. The tribunal held that the contractual trait value under the 2015 SLA was not contrary to these notifications.

10. Public Policy and Patent Illegality:

The tribunal's award was challenged on the grounds of public policy and patent illegality. The court found no evidence of such violations. The tribunal's decision was based on a plausible interpretation of the contract and the evidence, and thus did not warrant interference under Section 34 of the Arbitration Act.

In conclusion, the court dismissed the petitions challenging the arbitral award, upholding the tribunal's jurisdiction and decision on the monetary claims under the 2015 SLA. The court found no merit in the arguments related to the applicability of the Competition Act, the impact of CCI proceedings, or the alleged public policy violations.