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TMI Blog2005 (8) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... ned and given up or should be deemed to have been given up. In this case I have not been presented with a clean slate on which to write the judgment inasmuch as the controversy between the parties has received jural attention already. Benefiting from the detailed and erudite legal submissions made before me, it is my understanding that if possible or plausible cases are presented on behalf of both the adversaries, then the Court should direct them to ventilate their respective cases before the arbitrators. However, if upon even a cursory consideration of the facts there is a strong preponderant possibility that one of the parties will needlessly and vexatiously be subjected to arbitration, thereby compelling it to expend avoidable time, effort and expense, the Arbitration Conciliation Act, 1996 (hereinafter referred to as `Arb. Con. Act') expects the Court to look into the matter, and thereby obviate a futile and facile Reference. This opinion holds irrespective of whether it is in the context of a domestic or a foreign arbitration; in fact this determination is essential in the latter case. 2. Mr. Rajiv Sawhney has relied very heavily on the decision of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irly admitted that Part II would not apply to an international commercial arbitration which takes place in a non-convention country. He also fairly admitted that there would be countries which are not signatories either to the New York Convention or to the Geneva Convention. It is not possible to accept the submission that the said Act makes no provisions for international commercial arbitrations which take place in a non-convention country. ... 23. That the legislature did not intend to exclude the applicability of Part I to arbitrations, which take place outside India, is further clear from certain other provisions of the said Act. Sub-section (7) of Section 2 reads as follows: 2. (7) An arbitral award made under this Part shall be considered as a domestic award. As is set out hereinabove the said Act applies to (a) arbitrations held in India between Indians, and (b) international commercial arbitrations. As set out hereinabove international commercial arbitrations may take place in India or outside India. Outside India, an international commercial arbitration may be held in a convention country or in a non-convention country. The said Act however only classifies aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Sections 9 and 17 to arbitrations, like the present, which are taking place in a foreign country. The said Act is one consolidated and integrated Act. General provisions applicable to all arbitrations will not be repeated in all Chapters or Parts. The general provisions will apply to all Chapters or Parts unless the statute expressly states that they are not to apply or where, in respect of a matter, there is a separate provision in a separate Chapter or Part. Part II deals with enforcement of foreign awards. Thus Section 44 (in Chapter I) and Section 53 (in Chapter II) define foreign awards, as being awards covered by arbitrations under the New York Convention and the Geneva Convention respectively. Part II then contains provisions for enforcement of 'foreign awards' which necessarily would be different. For that reason special provisions for enforcement of foreign awards are made in Part II. To the extent that Part II provides a separate definition of an arbitral award and separate provisions for enforcement of foreign awards, the provisions in Part I dealing with these aspects will not apply to such foreign awards. It must immediately be clarified that the arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial arbitrations which take place out of India, unless the parties by agreement, express or implied, exclude it or any of its provisions. Such an interpretation does not lead to any conflict between any of the provisions of the said Act. On this interpretation there are no lacunae in the said Act. This interpretation also does not leave a party remediless. Thus such an interpretation has to be preferred to the one adopted by the High Courts of Orissa, Bombay, Madras, Delhi and Calcutta. It will Therefore have to be held that the contrary view taken by these High Courts is not good law. THE STARE DECISIS OF BHATIA INTERNATIONL 4. It appears to me that the ratio of Bhatia International does not foreclose any further discussion on the interplay between Sections 8 and 45, or Part I and Part II of the Arb. Con. Act. The controversy is altogether different since the Court was concerned with the grant of interim measures under Section 9 of the Arb Con. Act. In Director of Settlement, A.P. and Ors. v. M.R. Apparao and Anr. [2002]2SCR661 , a Three Judge Bench has opined that Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... controversy was covered on all fours by a previous decision of the Court. The contention was rejected in these words- 11. This question was considered by the Court of Appeal in Lancaster Motor Co. (London) Ltd. v. Bremith Ltd. (1941) 1 KB 675, and it was laid down that when no consideration was given to the question, the decision cannot be said to be binding and precedents sub silentio and without arguments are of no moment. Following the said decision, this Court in the case of Municipal Corporation of Delhi v. Gurnam Kaur, AIR1989SC38 observed thus (at p. 43 of AIR): In Gerard v. Worth of Paris Ltd. (K) (1936) 2 All ER 905 , the only point argued was on the question of priority of the claimant's debt, and on this argument being heard, the Court granted the order. No consideration was given to the question whether a garnishee order could properly be made on an account standing in the name of the liquidator. When, Therefore, this very point was argued in a subsequent case before the Court of Appeal in Lancester Motor Co. (London) Ltd. v. Bremith Ltd. (1941) 1 KB 675, the Court held itself not bound by its previous decisions. Sir Wilfrid Greene, M.R., said that he could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I had the advantage of the opinion of four of my learned Brothers in Unicor Gmbh Rahn Plastmaschinen and Anr. 1998(47)DRJ397 , Suzuki Motor Corporation v. Union of India and Anr. 1997 (2) Arb. LR 477, Dominent Offset Pvt. Ltd. v. Adamovske Strojirny A.S., 68(1997)DLT14 and Marriot International Inc. and Ors. v. Ansal Hotels Ltd. and Anr. AIR2000Delhi377 and Olex Focas Pvt. Ltd. and Anr. v. Skodaexport Company Ltd. and Anr. AIR2000Delhi161 . The learned Judges had concluded, by disparate dialectic, that the powers of the Court to grant injunctions under Section 9 of the Arb. Con. Act would also extend to `international' arbitrations. The judgment of J.B. Goel, J. does not run counter to these views. On a holistic reading of the Arbitration and Conciliation Act, 1996, there is no justification to read it in compartments, and to subscribe to the view that the provisions of Part I apply only to domestic arbitrations. To hold so would tantamount to defeating a uniform and universal string of precedents which underscore the pivotal role of Courts in the administration of arbitration. So long as the territorial jurisdiction of the Court is present, relief should not be declined on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational commercial arbitration is in India, it may be termed a 'domestic arbitration'. However, there may be instances where one of the parties is not of Indian nationality and is also not a citizen of a country which is not a signatory either of the New York Convention or the Geneva Conventions. In actuality the drafters have overlooked the possibility of an international arbitration between an Indian party and another from a `non-convention' country. This is the legislative reality and there is no reason to deduce that Parliament wanted Part I alone to apply to such arbitrations. The relative likelihood of arbitrations between an Indian party and one from a non-convention country (or for that matter from a Geneva Convention country) is minuscule which is perhaps the reason for this void. I would hazard to assess the incidence of Chapter II of Part II of the Arb. Con. Act being attracted or invoked is likely to be less than ten percent. The existence of this void or lacuna leads to two possibilities where the arbitration is in respect of a non-convention party viz. (a) either to apply Part I or (b) to decide on a priori principles. It should also be kept in view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the applicability of the ICC Rules Regulations over all matters of procedure connected with the conduct of the arbitration. Mr. Sawhney's contention that since the agreement in hand adverts to Indian laws, Part I of the Arb. Con. Act would apply to all disputes between the parties, is predicated on these observations. It must immediately be noted that in the NTPC case the Court had before it the repealed Arbitration Act, 1940 and Section 9(b) of the Foreign Awards (Recognition and Enforcement) Act 1961 (hereinafter referred to `FARE Act'), which excludes the application of the statute to 'any award made on an arbitration agreement governed by the law of India'. In order to establish his arguments, and to distinguish the decision of the Division Bench in General Electric Canada Inc. and Anr. v. National Hydroelectric Power Corporation Ltd. 2003 III AD (Delhi) 465, Mr. Chandhiok, learned Senior counsel appearing on behalf of plaintiff, has relied on the following paragraphs of the NTPC case (supra). 42. The Foreign Awards Act contains a specific provision to exclude its operation to what may be regarded as a 'domestic award' in the sense of the awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law of the place of arbitration may have its relevance in regard to procedural matters. In order to make good his submission Mr. Chandhiok has drawn attention to Section 51 of the Arb. Con. Act which only incorporates Section 9(a) of the FARE Act. Therefore, the NTPC case (supra) may not have any direct application to the facts of the present case. There is obvious substance in his argument that because of the deliberate omission of Section 9(b) of the FARE Act the legislature has consciously altered the position away from the choice of law and towards the venue of arbitration. Once this conclusion is arrived at since the venue of the Arbitration is outside India and is governed by the New York Convention, Part II Chapter I alone can be invoked by the present parties. Section 9 of the FARE Act and Section 51 of the Arb. Con. Act are reproduced in juxtaposition for facility of comparison: Section 9 of the FARE Act Section 51 of the Arb. Con. Act Saving.--Nothing in this act shall- (a) prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Act had not been passed; or (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arbitration there under) shall be governed according to the laws of India, the arbitral award has to be held to have been made under Part I and has to be considered as a domestic award, though made on foreign soil according to the ICC Rules and Procedure - which can only displace the derogable provisions of Part I. Therefore, the recourse to a Court under Section 34, it not being a derogable provision, cannot be said to have been waived by subscribing to the ICC Rules of Arbitration . With utmost respect I am unable to concur with this interpretation of the law; possibly, the Bench was influenced by the opinion of Lord Denning in International Tank and Pipe SAK v. Kuwait Aviation Fuelling Co KSC [1975] 1 ALL ER 242 , which indubitably would have been relevant had Section 9(b) of the FARE Act been `saved' by Section 51 of the Arb. Con. Act. In paragraph 9 of this detailed judgment, the Division Bench has commented that the UNCITRAL Model Law does not state to which international commercial arbitrations it would apply. Most significantly it also noted that the Working Group was in favor of strict territorial criterion, but that it was not expressly dealt with. Again, with gre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... except to the extent it is excluded by an express provision of the law or by clear intendment arising from such law.' After discussing all the ramifications of the statute law and its previous pronouncements the following legal propositions were enunciated- The result of this inquiry into the diverse views expressed in this Court may be stated as follows: (1) Where the statute gives a finality to the orders of the special tribunals the civil court's jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure. (2) Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court. Where there is no express exclusion the examination of the remedies and the scheme of the particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c terms; that such exclusion cannot be easily inferred because there is always a strong presumption that civil courts have jurisdiction to decide all questions of a civil nature. The Court found that the High Court possessed revisory powers under Section 115 of the CPC even in respect of an Appeal under Section 37 of the Act. These very same views have also been articulated in the judgment of Hon'ble Justice R.C. Lahoti (as the Learned Chief Justice of India then was) in Ramesh Chand Ardawatiya v. Anil Panjwani, [2003]3SCR1149 . Finally, the following pronouncements in Sukanya Holdings (P) Limited v. Jayesh H. Pandya and Anr., [2003]3SCR558 are also of equal relevance: For interpretation of Section 8, Section 5 would have no bearing because it only contemplates that in the matters governed by Part I of the Act, the judicial authority shall not intervene except where so provided in the Act. Except Section 8, there is no other provision in the Act that in a pending suit, the dispute is required to be referred to the arbitrator. Further, the matter is not required to be referred to the Arbitral Tribunal, if: (1) the parties to the arbitration agreement have not filed any such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or continued and an arbitral award made. Power of judicial authority to refer parties to arbitration.- Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. The Court of a contracting State when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative and incapable of being performed. From a plain reading of the provisions it is clear that Section 8 comes into operation wherever a contract contains an arbitration clause whereas Section 45 is attracted when the matter is the subject of a New York Convention arbitration agreement. Their language is different. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho might not be 'workers' under Section 2(1), the same non obstinate clause will keep away the applicability of exemption provisions qua all those working in the factory. The Labour Court, in our view, was, Therefore, right in taking the view that because of the non obstinate clause Section 64 read with Rule 100 itself would not apply to the respondents and they would be entitled to claim overtime wages under Section 59 of that Act read with Section 70 of the Bombay Shops and Establishments Act, 1948. 12. The syntax and components of Parts I and II make them wholly dissimilar and entirely incomparable, leaving no room for doubt that domestic arbitration and New York Convention arbitrations are governed by distinct legal regimes. Section 8 read in conjunction with Sections 5 and 16 of the Arb. Con. Act prohibits interference by a Civil Court. The non-obstante in Section 45, as also its language which should be interpreted with the assistance of the New York Convention, expects a Court to be satisfied that the agreement has not become null and void, inoperative or incapable of being performed, before the Court can accede to the request of any person to make a Reference. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; Or (c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or (d) the composition of the arbitral authority or the arbitral procedure was not in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India; or (b) the enforcement of the award would be contrary to the public policy of India. Explanation.--Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. (e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. 2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that- (a) the subject-matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) the recognition or enforcement of the award would be contrary to the public policy of that country 4. On receipt of an application under sub-section (1), the court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst time involvement with arbitration. In this analysis it will become plain that Chapters I and II of Part II of the Arb. Con. Act are complete codes in themselves, akin to Section 25B of the Delhi Rent Control Act in respect of both curial and substantive law pertaining to the arbitration. If this understanding is correct it would no longer be necessary to locate the power for issuing interim orders within the Arb. Con. Act; Section 9 dealing with domestic arbitrations would become clarificatory in character. 14. So far as Civil Courts are concerned it is not necessary for them to trace their powers to issue injunctions to a statute; in common law systems the reverse is oftentimes observed. To mention only a few examples, the principles laid down in Ryland v. Fletcher, Donoghue v. Stevenson, Central London Property Trust Ltd. v. High Trees House Ltd. 1947 K.B. 130 : [1956] I All ER 256 (now known simply as High Trees in which the principle of promissory estoppel was established) and Mareva v. International Bulk Carriers (1980) 1 All ER 213 (thenceforward 'Mareva injunction' has become a term of art) have in fact acted as catalysts for statutory activity. Civil Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is employed in a stature, inconsistency is obviated. WAIVER OF ARBITRATION CLAUSE IN PART I 16. Section 8 of the Arb. Con. Act introduces into the statute the doctrine of election of remedies, i.e., the resolution of disputes either through arbitration or through civil action. In Food Corporation of India v. Sreekanath Transport, [1999]3SCR699 , the FCI had filed a civil suit despite the existence of an exclusion clause in the Agreement. The Apex Court took the view that FCI had relinquished or abandoned its right of proceedings pursuant to the said clause. The decision in Magna Leasing Limited v. NEPC Micon Limited and Anr., has already been relied upon by me in Raj Associates and Anr. v. Videsh Sanchar Nigam Limited and Ors. 2004 (2) Arb. L.R. 614 . The situation turned out to be the reverse of that which is normally encountered; the plaintiff had filed a suit which it subsequently attempted to withdraw with the intention of pursuing its remedy through arbitration. The second Defendant, RITES, had invoked Section 8, whilst simultaneously objecting to its impleadment on the strength of Section 230 of the Contract Act, and its contention had been upheld. VSNL had filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onversely implies that where a case is disclosed the court can interfere in the arbitration proceedings. In Akshay Kapur and Ors. v. Rishav Kapur and Ors. 105(2003)DLT467 , I have expressed the opinion that on the filing of a Section 8 application this Section would apply only if the suit is directly covered by the arbitration clause. I had entertained the suit for declaration and injunction pertaining to a Valuation Report as it was distinct from the disputes that were to be decided through the aegis of arbitration. In Vijay Vishwanath Talwar v. Mashreq Bank, PSC and Ors. 109(2004)DLT838 , my learned Brother R.C. Chopra, J. has similarly declined to dismiss a civil suit in respect of an arbitration clause which allegedly had been agreed to under duress and coercion. In Jagson International Ltd. v. Frontier Drilling, 113(2004)DLT189 Chopra, J. similarly dismissed an application under Order XXXIX of the CPC, allowed the Defendant's application under Section 45 of the Arb. Con. Act, after observing that the difference in the language of that Section and Section 8 was conspicuous and was of significance. My learned Brother was of the opinion that a party should not be blindly se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd failing which execution proceedings would be initiated. The Division Bench noted that there was no Decree passed by any Court of law; however, an Award had been passed by an Arbitrator sitting in England in which he had not made any observations or alterations to the Indian Award. The issue was whether the Award, being a foreign Award, left the court with Lesser powers of enforcement. It was clarified that a foreign Award is no more binding and no more sacrosanct than a domestic Award which has either not been set aside or has passed the test of challenge before an Indian Court . It was also the opinion of the Division Bench that the legal position in India and England is different. It was noted that the provisions of the English Arbitration Act, 1996 were attracted only where the seat of arbitration was in England or Wales or Northern Ireland. It should immediately be noted that the sites/or venue of the Arbitration as against the applicable law has thus been recognized. The other issue that had arisen was whether the London Award was a foreign award within the purview of Section 44 of the Arb. Con. Act. It will at once become clear that the facts and issues necessary for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (CGL) 40.5%, MILLICOM and BELLSOUTH 24.5.% each and the Defendant 10.5%. The Joint Venture Agreement (JVA) stipulated that new shareholders would be invited only with the express written consent of these partners, each of whom would have a preemptive right to purchase the shares of any of the partners desirous of selling their shareholding. Furthermore, in order to ensure that each of the partners had a meaningful say in the Joint Venture, the prescribed quorum mandated the representation and affirmative vote of each of the partners. Clause 21 of J.V.A. contains the Arbitration Agreement to refer all disputes to the ICC. The Joint Venture Agreement also declares that it would be governed by the laws of India, which Mr. Sawhney has construed to indicate that Part-I to the exclusion of Part-II of the Arb. Con. Act applies to every dispute between the parties. In October/November, SKYCELL issued notices to each of the partners seeking their consent for the sale of the shares of CGL and the Defendant No. 1 to the plaintiff. On 25.11.1999 CGL appears to have entered into an Agreement for the sale of its equity in SKYCELL to the plaintiff. On 9.12.1999 BELLSOUTH declined to give its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uit in this Court, Suit No. 2202/2000, claiming that it had stepped into the shoes of CGL and accordingly praying for an injunction restraining the other partners from acting in breach of the Joint Venture Agreement. 21. The affected partners, namely, the Defendants unsuccessfully filed an applications under Section 45 of the Arb. Con. Act seeking a reference of the disputes to arbitration, but these applications were dismissed vide Orders dated 15.5.2001. In those proceedings Defendant No. 1 had declared in unequivocal terms that the plaintiff is not a party to the Joint Venture Agreement (JVA) and there is no agreement between the plaintiff on the one hand and Defendant Nos. 1, 2, 3 and 5 on the other hand. It was held that since the privity of contract had not been accepted by the Defendants with Bharti (the Petitioner herein) the objection to the Suit not been maintainable was devoid of merit. This Suit was eventually dismissed as withdrawn on 21.11.2001. This Order has not been appealed against and, Therefore, operates as res judicata. Almost five months later, on 9.10.2000, Defendant No. 1 issued a notice to the other partners including the plaintiff for commencing arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igned between them from the Sale and Purchase of the shares of SKYCELL (ii) the 'No Objection' clearances and approvals obtained by them in connection with the sale/purchase of the shares of SKYCELL. (f) Issue a decree of declaration declaring the Annual General Meeting of SKYCELL purportedly held on 28th September, 2001 to be illegal and void. (g) Issue a permanent Injunction against Defendant Nos. 3 and 4 restraining them from effecting any changes: (i) in the Board of Directors of SKYCELL Communications Ltd., (ii) in the Capital of SKYCELL Communications Ltd., and (iii) In the name of SKYCELL Communications Ltd. and/or from acting in breach of the plaintiff's rights under the Joint Venture Agreement dated 12th August, 1992. In paragraph 115 of the Plaint it has been stated that leave be granted to it, in terms of Order II Rule 2 of the Code of Civil Procedure to claim any other relief, which is now being construed to be tantamount to reserving its rights to proceed in arbitration. It may also be recalled that Defendant No. 1 had issued a notice for commencing arbitration proceedings on October 9, 2000 but instead of doing so had filed this Suit. It is also r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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