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TMI Blog2009 (7) TMI 1338X X X X Extracts X X X X X X X X Extracts X X X X ..... Judge has dismissed this application vide impugned orders dated 14.5.2009. Reason given is that as per the Agreement, the disputes are to be resolved through arbitration under Singapore International Arbitration Rules (SIAC Rules) and it is the courts in Singapore which have jurisdiction to settle any disputes that may arise out of or in connection with the said Agreement. Therefore, this Court lacks jurisdiction to entertain the application under Section 9 of the Act. Validity of this order is challenged in this appeal. Therefore, the only question which needs to be determined is as to whether application under Section 9 of the Act was maintainable in this Court or not. The Facts 2. Having regard to the aforesaid scope of the present appeal though it is not necessary to spell out the details of the nature of disputes, a brief resume thereof would serve the purpose. The appellant, which is engaged in the business of manufacture, sale and marketing of variety of thermal lamination films, polypropylene films including bi-axially oriented polypropylene (BOPP) films, had entered into two agreements both dated 25.8.2008 with the respondent. The respondent is a company registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, i.e., Acco USA, has entered into an agreement with Cosmo Films under which the holding company of the respondent, namely, Acco USA has agreed to sell its GBC Commercial Print Finishing business. 4. According to the appellant, entry into such an agreement by the respondent through its holding company with Cosmo Films violated the terms of Article 21.11 of the Agreement by agreeing to transfer its entire business to Cosmo Films, an entity which is situated in India and competes with the appellant in the business of manufacture and/or sale of products such as bi-axially oriented polypropylene films and thermal lamination films being manufactured and sold by the appellant. This is what has given rise to disputes between the parties and for seeking an interim protection to restrain the respondent from implementing the agreement entered into with Cosmo Films, the appellant filed application under Section 9 of the Act. In this application, ex parte ad interim injunction was granted on 20.3.2009 against the respondent restraining it from entering into any agreement either directly or indirectly with Cosmo Films till further orders. The appellant has invoked the arbitration at Singapo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty whereas the respondent is a foreign company incorporated as per the laws of Delaware, USA. b) though place of signing of the agreement is not specifically stipulated in the said Instrument, according to the appellant this agreement was signed in Delhi. c) the agreement is to be governed and construed in accordance with the laws of Singapore. d) disputes between the parties arising out of or in connection with this agreement are supposed to be resolved by arbitration under the SIAC Rules and the venue of arbitration is fixed at Singapore, as per Article 19.2. e) subject to Article 19.2, the courts of Singapore shall have the jurisdiction to settle any disputes that may arise out of or in connection with this agreement . 8. It, thus, follows that it is not a domestic arbitration between the two Indian companies, parties to the agreement belong to two different countries and they have chosen a neutral venue, viz., Singapore for settlement of their disputes. For this purpose not only the dispute is to be resolved by SIAC as per SIAC Rules, the arbitration hearings are also to take place in Singapore and further, even the arbitral tribunal while resolving th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, courts in India will have jurisdiction to entertain petition under Section 34 of the Act, challenging such an award. His submission that unless there is specific exclusion of jurisdiction of a particular court is not spelled out in the agreement, jurisdiction of Indian court could not be held to be ousted was based on another judgment of the Supreme Court in Laxman Prasad v. Prodigy (2008) 1 SCC 618. Expanding the aforesaid submissions Dr. Singhvi pointed out that in para 2 of Bhatia International (supra) it is clearly reflected that there was a contract between the parties which contained an arbitration clause according to which the arbitration was to be as per ICC Rules and venue of arbitration was agreed to be in Paris. According to him, the facts in the instant case are similar to those in the aforesaid judgment in the case of Bhatia International. The respondent in Bhatia International (supra) had filed an application under Section 9 before the Addl. District Judge, Indore seeking interim injunctions against the appellant restraining them from selling/transferring their business, assets and properties. The appellant filed an application challenging the jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or impliedly excluded. In the entire agreement, there is no provision which either expressly states that all or any of the provisions of Part I shall not apply or impliedly excludes their applicability in the instant case. Merely because the parties have under Clause 19 agreed to be governed by the SIAC Rules for the purpose of Arbitration and have agreed on the venue of arbitration to be at Singapore, does not exclude either expressly or impliedly, the applicability of Section 9 of Part I of the Act, which provides for the remedy of seeking interim protection from the court. 13. Referring to the case of ST-CMS Electric (supra) decided by the Madras High Court it is argued that the court has very categorically held that if the parties merely agree to be governed by a Foreign law, it cannot be taken to exclude, expressly or impliedly the applicability of Section 9 of the Act to prohibit a party from obtaining interim measures before a Court of Law. Dr. Singhvi further submitted that in the absence of use of the words like alone., exclusive., only. or such like words in the Agreement in the governing law clause in the instant case, it cannot be inferred that the agreement by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. Faced with this situation Mr. Sen submits that, in this case the parties had agreed that the arbitration be as per the rules of ICC. He submits that thus by necessary implication Section 9 would not apply. In our view in such cases the question would be whether Section 9 gets excluded by the ICC Rules of Arbitration. Article 23 of the ICC Rules reads as follows: 1... 2... 34. Thus, Article 23 of the ICC Rules permits parties to apply to a competent judicial Authority for interim and conservatory measures. Therefore, in such cases an application can be made under Section 9 of the Act. 16. He further referred to Article 9 of the UNCITRAL Model Law on International Commercial Arbitration, the provisions of which have been incorporated in the Singapore International Arbitration under Article 3, provides for interim measures by Court which reads as under: Article 9 Arbitration agreement and interim measures by court: It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure 17. He also drew our attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e execution of an agreement forms a part of cause of action. In the aforesaid case, the Supreme Court in its concluding para 31 held: 31. .....Clause 18 provides for applicability of law and it specifically declares that the terms and conditions of agreement shall be interpreted in accordance with 'the laws of Hong Kong Special Administrative Region.. That in our judgment does not mean that a suit can be instituted only in Hong Kong and not in any other country. Territorial jurisdiction of a court, when the plaintiff intends to invoke jurisdiction of any court in India, has to be ascertained on the basis of the principles laid down in the Code of Civil Procedure....' Applicability of Hong Kong law., entering into an agreement in Hong Kong. or defendant residing in Ghaziabad (Uttar Pradesh). or any of them does not take away the jurisdiction of Delhi High Court since a cause of action. at least in part can be said to have arisen in Delhi.... 21. On the basis of the aforesaid submissions Dr. Singhvi made a fervent plea that judgment of the learned Single Judge be set aside holding that application of the appellant under Section 9 of the Act was competent and the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other Single Bench judgment of this Court in Nariman Films v. Dilip R. Mehta and Anr. 124 (2005) DLT 506 for the proposition that even when more than one court had jurisdiction in the matter, parties could confer exclusive jurisdiction on any one court. He also sought to draw sustenance from the following judgments: i) Hardly Oil and Gas Limited v. Hindustan Oil Exploration Company Limited and Ors .(2006) 1 GLR 658. ii) Tamil Nadu Electricity Board v. Videocon Power Limited Original Side Appeal No. 270/2008 decided on 27.01.2009 iii) National Thermal Power Corporation v. Singer Company and Ors . (1992) 3 SCC 551. Our Analysis: The Legal Position 23. We have to keep in mind the aforesaid factual position which emerges in the present case and in the light of these admitted facts, legal position as contained in various judgments of the Supreme Court and the High Courts, on the basis of which arguments were advanced by the learned Counsel for the parties, is to be considered. We deed it proper to initiate our discussion on first principle. 24. All civil societies demand a proper, effective and independent judicial system to resolve the disputes that may ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal disputes in national courts is often distinctly unappealing. Despite the frustrating procedural complexities and other uncertainties, arbitration often offers the least ineffective way to finally settle the contentious disputes that inevitably arise when international transactions go awry. [Gary B. Born, International Commercial Arbitration in the United States: Commentry and Materials, NY: Transnational Publishers (2001)]. 26. International Commercial Arbitration is a hybrid. It begins as a private agreement between the parties. It continues by way of private proceedings, in which the wishes of the parties are of great importance. Yet it ends with an award that has binding legal force and effect and which, on appropriate conditions, the courts of most countries of the world will recognize and enforce. The private process has a public effect, implemented with the support of the public authorities of each state and expressed through its national law. It usually involves five different legal systems and they are as under: 1) The law governing the parties. capacity to enter into an arbitration agreement; 2) The law governing the arbitration agreement and the perfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dant or place where cause of action has arisen. Where only one Court has jurisdiction it is said to have exclusive jurisdiction; where more courts than one have jurisdiction over a subject-matter, they are called courts of available or natural jurisdiction. The growing global commercial activities gave rise to the practice of the parties to a contract agreeing beforehand to approach for resolution of their disputes there under, to either any of the available courts of natural jurisdiction and thereby create an exclusive or non-exclusive jurisdiction in one of the available forums or to have the disputes resolved by a foreign court of their choice as a neutral forum according to the law applicable to that court. It is a well-settled principle that by agreement the parties cannot confer jurisdiction, where non exists, on a court to which CPC applies, but this principle does not apply when the parties agree to submit to the exclusive or non-exclusive jurisdiction of a foreign court; indeed in such cases the English Courts do permit invoking their jurisdiction. Thus, it is clear that the parties to a contract may agree to have their disputes resolved by a Foreign Court termed as a ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y reasons of its most closest and intimate connection to the contract. e) Proper law of arbitration agreement is normally the same as the proper law of contract. It is only in exceptional cases that it is not so even where the proper law of contract is expressly chosen by the parties. Normal presumption is that the law of a country where the arbitration is agreed to be held is the proper law of arbitration agreement, though it is rebuttable presumption. f) Importantly, the validity, effect and interpretation of the arbitration agreement are governed by its proper law. g) The parties have the freedom to choose the law governing an international commercial arbitration agreement they may choose the substantive law governing arbitration as well as the procedure law governing the conduct of the arbitration. h) Where the proper law of contract is expressly chosen by the parties such law must, in the absence of an unmistakable intention to the contrary, govern the arbitration agreement which, though collateral and ancillary to the main contract, is nevertheless part of such contract. i) The arbitration proceedings are to be conducted in accordance with the law of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proper law of arbitration and the competent courts are both exclusively India, while matters of procedure connected with the conduct of arbitration are left to be regulated by the contractually chosen rules of the ICC to the extent that such rules are not in conflict with the public policy and the mandatory requirements of the proper law and of the law of the place of arbitration. The Foreign Awards Act, 1961 has no application to the award in question which has been made on an arbitration agreement governed by the law of India. 31. In the present case we do not have even to labour to find out the intention of the parties inasmuch as express and specific provisions are made in the arbitration clause manifesting the intention which is loud and clear. The two parties herein, one Indian and other American, have chosen neutral arbitral tribunal, namely, SIAC. It is also made clear that the arbitration proceedings would be conducted as per the rules of SIAC. Not only this, even contract is to be governed by the laws of Singapore. To remove any shadow of doubt the Agreement between the parties specifically vests jurisdiction on Singapore Courts. Thus, not only the proper law of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a case dealing with jurisdiction of two municipal courts, i.e., Gujarat and Tamil Nadu and in that context observations were made that the jurisdiction of a particular court is to be treated as ousted in exceptional circumstances when both courts will have jurisdiction. However, even in that case the court was of the opinion that in appropriate cases maxim expressio unius est exclusio alterius may be applied. Present case would be a case of this nature. In so far as judgment of Supreme Court in Laxman Prasad (supra) is concerned, in that case, no doubt, contract between the company of Hong Kong and its Indian ex- employee, executed in Hong Kong was to be interpreted in accordance with the Hong Kong law, the Supreme Court opined that even if applicable law is Hong Kong law, that would not oust the territorial jurisdiction of Indian courts, if cause of action arise in Delhi. In this context the Supreme Court distinguished between cause of action and applicability of law . That was a case where ex-employee had contravened the agreement by using the goodwill and passing on the trade name of the said company in a Trade Fare in Delhi. Thus, the grievance was against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Singapore and courts of Singapore are conferred with jurisdiction to decide. It is this sting in Article 19 of the Agreement which is clinching. When the parties have consciously chosen the applicability of Singapore laws, procedural as well as substantive, including the law governing arbitration proceedings, by necessary implication Indian law, i.e., Arbitration and Conciliation Act, 1996 is excluded. In that case, how application under Section 9 of that Act is maintainable? Obviously not. As a fortiorari, this Court lacks jurisdiction to deal with such an application. Therefore, present case is more akin to what was held in Singer Company (supra) and British India Steam Navigation Co. Ltd. (supra). 35. Indisputably, main proceedings are to be held in Singapore - whether arbitration proceedings before SIAC or proceedings in the Court in connection with those arbitration proceedings. In these circumstances, the question is as to whether incidental proceedings can be held in India. Answer is that only under limited circumstances created by Bhatia International (supra). However, this case would not fall within the four corners of Bhatia International (supra). To demonstrate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trations. b) Lead to an anomalous situation, inasmuch as Part I would apply to Jammu and Kashmir in all international commercial arbitrations but Part I would not apply to the rest of India if the arbitration takes place out of India. c) Lead to a conflict between Sub-section (2) of Section 2 on the one hand and Sub-sections (4) and (5) of Section 2 on the other. Further, Sub-section (2) of Section 2 would also be in conflict with Section 1 which provides that the Act extends to the whole of India. d) Leave a party remediless inasmuch as in international commercial arbitration which take place out of India the party would not be able to apply for interim relief in India even though the properties and assets are in India. Thus, a party may not be able to get any interim relief at all. 36. The aforesaid dicta of the Apex Court binds us as law declared under Section 141 of the Constitution. However, it would be important to note that Court was dealing with a situation where the arbitration was taking place outside India. 37. The conclusion recorded by the Supreme Court in para 32 of the said judgment provides categorical answer to the issue at hand. In para 32 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easure would be needed during the pendency of arbitral proceedings, adequate remedy was provided in the SIAC Rules as well as Singapore Arbitration Act. Matter can be looked from another angle as well. What happens after the award is rendered by the Arbitral Tribunal? Such an award in the present case would normally be challenged in Singapore Court. Supreme Court judgment in Venture Global (supra) which permitted mixed foreign award challengeable under Section 34 of the Arbitration Act 1996 in an Indian Court also provides that provisions of Part I would be applicable to international commercial arbitration held out of India unless any or all such provisions have been excluded by agreement between the parties, expressly or by implication . The manner in which Singapore laws, substantive as well as curial, are made applicable and jurisdiction is also conferred upon the Singapore Court, it amounts to exclusion of those provisions by necessary implication. It would, thus, be an incongruous situation where not only arbitration proceedings but all other judicial proceedings are to take place in Singapore and at the same time parties are permitted to have recourse to Indian Arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors . WP (C) No. 8004/2007 decided on 18.2.2008, this Court referred to various judgments of the US courts as well as its own earlier judgments while accepting the doctrine of Comity of Jurisdiction. Relevant observations contained in the said judgment runs as under: 20. In Hartford Fire Ins. Co. v. Cal. 509 U.S. 764, it was observed that the comity of courts refers to a situation where judges decline to exercise jurisdiction over matters more appropriately adjudged elsewhere. 46. Similarly, on grounds of comity and pursuant to federal law, the Supreme Court has generally refused to allow federal courts to intervene in pending cases in state courts in the absence of showing of bad faith harassment. 47. Comity is a tool for co-operation. But it can also be a tool for exclusion. Forum non-convenient (Latin for inconvenient forum or inappropriate forum ) (FNC) is a discretionary power of mostly common law courts to refuse to hear a case that has been brought before it. The Courts may refuse to take jurisdiction over matters where there is a more appropriate forum available to the parties. In the present case, having regard to the scope and spirit behind Article 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be maintainable in court of law in India. To arrive at this conclusion the Court referred to and relied upon the judgment of the Supreme Court in Bhatia International (supra). With respect, we feel that the distinguishing features, because of which Bhatia International (supra) would not apply, have not been properly appreciated by the Andhra Pradesh High Court. Though the judgment in Singer Company (supra) is referred to, there is no discussion thereupon except mentioning that the said case was considered by the Supreme Court in Bhatia International (supra). A proper insight into the principle laid down in Singer Company (supra) would have brought out the distinguishing feature. In view of our reasons given above, we respectfully disagree with the view taken by Andhra Pradesh High Court. 51. In National Highways Authority of India and Anr. v. Bumihiway DDB Ltd. (JV) and Ors. (2006) 10 SCC 763, it was opined: 44...The parties have entered into a contract after fully understanding the import of the terms so agreed to from which there cannot be any deviation. The Courts have held that the parties are required to comply with the procedure of appointment as agreed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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