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TMI Blog2021 (4) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... ived did not surface then. Therefore, the material on record does not prima facie support the contention that the respective Plaintiff did not have a copy of the contract Form 54 of FOSFA. However, in order to not prejudice the contesting parties in proceedings before the appropriate forum, I do not propose to enter conclusive findings. As regards the contention that the contract is unconscionable because it permits termination by the seller but not by the buyer; prima facie, such contention appears to be untenable in view of the incorporation of contract Form 54 in the executed contracts with the consequential recourse to the termination clause contained therein - The distinction between an arbitration clause and the other provisions of the contract becomes material in this context, and both severance and the Kompetenz-kompetenz principle are firmly entrenched in Indian jurisprudence, as is evident from Sasan and MSM. The respective Plaintiff also contended that the arbitral institution is not neutral inasmuch as it is controlled by oil seed producers. In effect, the respective Plaintiff appeared to contend that any arbitral institution which is set up by a trade organisatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h suit, and others. Each of the suits is for a declaration that the arbitration proceedings (Case Nos. 778 and 779) instituted by ADM against Sunraja and Gem, respectively, before an arbitral institution, viz the Federation of Oil Seeds Fats Association(FOSFA), which was arrayed as the second Defendant, are void and/or against public policy as also for a declaration that specific contracts between the respective Plaintiff (i.e. Sunraja or Gem, as the case may be) and ADM are null and void. A consequential permanent injunction to restrain ADM from initiating, proceeding with, or continuing with arbitration proceedings is also claimed apart from damages of Rs. 1,00,01,000/-. 2. In each suit, the respective Plaintiff filed an application for an interim injunction to restrain ADM and FOSFA from proceeding with the arbitration proceedings. By separate orders dated 05.07.2019 in the interim Application filed in each suit, an order of injunction was granted restraining FOSFA, the second Respondent, from proceeding with the respective arbitration case until 29.07.2019. The said interim order was subsequently extended on various dates in July to October 2019 and, eventually, extended u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted issues. The contract was emailed to the Plaintiff only after the cargo was loaded onto the vessel. Even at that juncture, the standard form contract, namely, FOSFA Form 54, was not provided to the Plaintiff. The contracts are unconscionable because they are totally discriminatory against the buyer. While the seller is entitled to terminate the contract, a corresponding right is not extended to the buyer. Consequently, even though there were major quality issues and repeated breaches of the exclusivity condition, the Plaintiff was constrained to continue procurement from ADM. 7. With regard to the arbitration clause, the contention of Sunraja and Gem is as under. Although there is an arbitration clause in each contract, the arbitral institution is FOSFA. FOSFA is an organisation which is fully controlled by the prominent sellers of oil seeds such as ADM; and the rules of FOSFA do not permit the party to be represented by an advocate. Therefore, the arbitration agreement is void and cannot be enforced. The suits and the applications for interim anti-arbitration injunction were filed in the above mentioned facts and circumstances. 8. I heard Mr. Nakul Dewan, learned senior c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and Conciliation Act, 1996 (the Indian Arbitration Act) are, therefore, liable to be allowed. 11. With regard to the grant of an anti-arbitration injunction, he submitted that such order is liable to be vacated because the contract clearly provides for dispute resolution through arbitration under the auspices of FOSFA. He also pointed out that FOSFA is a globally recognised arbitral body and that the allegations of Sunraja and Gem, as regards FOSFA, are unsubstantiated and liable to be rejected out of hand. Given the fact that there is an arbitration clause and the contract is governed by English law, he submitted that this Court should decline to exercise jurisdiction and vacate the interim order which is currently continuing to operate. For this proposition, he relied on a judgment of the Delhi High Court in Dholi Spintex Pvt. Ltd. v. Louis Dreyfus Company India Pvt. Ltd., CS (Comm.)286/2020, Judgment dated 24.11.2020. 12. On the other hand, Mr. Arvindh Pandian, learned senior counsel for the Respondent/Plaintiff, submitted that the contracts are contrary to public policy and, consequently, void. With specific reference to the termination clause, which enables terminatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inc v. FLS Aerospace Ltd. (1992) 2 Lloyd's Report 45(Laker Airways) was relied upon. For all these reasons, he submitted that the respective Plaintiff cannot expect an impartial adjudication through such arbitration. 15. The conduct of both ADM and FOSFA leave much to be desired according to Mr. Arvindh Pandian. In spite of the grant of an interim injunction by this Court, he pointed out that the arbitration proceedings resumed and, in fact, culminated in an ex parte arbitral award against the respective Plaintiff. Thus, FOSFA-the second Defendant did not participate in proceedings before this Court and in flagrant disregard of the order of injunction proceeded with the arbitration proceedings and granted an arbitration award in favour of the first Defendant. This underscores the lack of neutrality and the blatant disregard for the Indian judiciary. Hence, he submitted that the order of interim injunction should be made absolute and the applications filed by the first Defendant should be rejected. 16. By way of rejoinder, Mr. Nakul Dewan pointed out that it is false that the Plaintiff did not receive FOSFA Form 54. Such contention was not raised while the transactions we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to arbitration in London (or elsewhere if so agreed) in accordance with the Rules of Arbitration and Appeal of the Federation of Oils, Seeds and Fats Associations Limited, in force at the date of this contract and of which both parties hereto shall be deemed to be cognizant. Neither party hereto, nor any persons claiming under either of them, shall bring any action or other legal proceedings against the other of them in respect of any such dispute until such dispute shall first have been heard and determined by the arbitrators, umpire or Board of Appeal (as the case may be), in accordance with the Rules of Arbitration and Appeal of the Federation, and it is hereby expressly agreed and declared that the obtaining of an Award from the arbitrators, umpire of Board of Appeal (as the case maybe), shall be a condition precedent to the right of either party hereto or of any person claiming under either of them to bring any action or other legal proceedings against the other of them in respect of any such dispute. 18. Likewise, the contracts that were executed between the respective Plaintiff and the first Defendant also contain an arbitration clause, which is as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, except so far as the same may be notified or varied above, be deemed to be incorporated in and to form part of this contract.... 21. When the above clauses are examined cumulatively, the undisputed position that emerges is that all disputes are required to be referred to arbitration in accordance with the Rules of Arbitration and Appeal of FOSFA. As stated earlier, such arbitration would be governed by the English Arbitration Act and the juridical seat of arbitration is England. It is also evident that the contracts are required to be construed in accordance with English law. Thus, there is little doubt that the contract discloses the parties' intention that the governing and curial law is English law, and that the arbitration would be governed by the FOSFA Rules of Arbitration and Appeal. Consequently, the arbitral tribunal constituted as per the contracts and not Indian courts should exercise jurisdiction, in the first instance, and, thereafter, challenges, if any, would lie before the English courts. The only exception that the contracts carve out, in this regard, is as regards interim measures to secure the claim or counter claim, as the case may be, which may be req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prima facie, such contention appears to be untenable in view of the incorporation of contract Form 54 in the executed contracts with the consequential recourse to the termination clause contained therein. Although it was urged on behalf of the respective Plaintiff, by placing reliance on Interfoto and AEG, that mere reference to contract Form 54 is insufficient, upon examining the relevant clause, I find that the text prima facie discloses the intention to incorporate Form 54, albeit subject to agreed variations, and it is not a case of mere reference thereto as per principles formulated in that regard in cases such as M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd. (2009) 7 SCC 696. Even otherwise, such contention could be raised before the arbitral tribunal and before the appropriate courts in the UK, if the awards are challenged, given the fact that the governing law under the contract is English law. The above conclusion would apply equally to the contention that the respective Plaintiff did not have a choice in the matter of procuring CSFO and could only procure the same from ADM. The distinction between an arbitration clause and the other provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OSFA or the specific arbitrators in the present case are not neutral. Indeed, the facts on record disclose that the respective Plaintiff proceeded to nominate its arbitrator upon receiving a notice of arbitration from ADM. The decision to abandon the arbitral process and institute proceedings before this Court was taken subsequently. In any event, any grievance on this score should be canvassed before the arbitral tribunal and/or the courts in the UK in accordance with applicable law. 27. A contention was raised that the arbitral institution does not permit a party to be represented by an advocate or practising lawyer, but that ADM was permitted to avail such assistance. On perusal of the English Arbitration Act, I find that there are mandatory provisions that ensure equal opportunity (Section 33). Indeed, there are provisions to challenge an arbitrator (Section 23 and 24) and provisions that enable: jurisdictional challenges (Section 67); challenges on the ground of serious irregularity (Section 68); and on a point of law (Section 69). Although such provisions are hedged with conditions, it is clear that the grounds of challenge raised here by the respective Plaintiff could hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indulged in. 30. Notwithstanding such conclusion, if so advised, it would be open to the respective Plaintiff to cite these proceedings and seek exclusion of time to appeal against the first partial award in accordance with the Rules of Arbitration and Appeal of FOSFA or to initiate appropriate proceedings in the courts in the UK in accordance with the English Arbitration Act. The question as to whether the contesting parties had a reasonable opportunity to present the case and whether a party was under some incapacity could become material if an action for enforcement is initiated subsequently in an Indian court. Although ADM has made out a case in the applications under Section 45 of the Arbitration Act, it is not necessary to refer the parties for arbitration because arbitral proceedings have already culminated in a first partial award. Accordingly, the applications to refer the parties to arbitration are disposed of subject to the observations and conclusions contained herein. In view of the orders in the applications to revoke leave and in the Section 45 applications, no orders are necessary in the applications to reject the plaint; therefore, said applications are closed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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