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Lmj International Limited Vs. Swiss Singapore Overseas Enterprises Pte Limited - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Judge
AppellantLmj International Limited
RespondentSwiss Singapore Overseas Enterprises Pte Limited
Excerpt:
in the high court at calcutta ordinary original civil jurisdiction original side present: the hon’ble justice soumen sen g.a.no.2095 of 2014 c.s.no.262 of 2013 lmj international limited versus swiss singapore overseas enterprises pte limited for the petitioner/defendant : mr.abhrajit mitra, sr.adv., for the respondent/plaintiff : mr.surojit nath mitra, sr.adv., mr.ratnanko banerjee, sr.adv., mr.d.n.sharma heard on : 24.02.2015, 03.03.2015, 12.03.2015, 17.03.2015, 19.03.2015, judgment on : 27th march, 2015 soumen sen, j.:- the instant application has been filed by the defendant for rejection of plaint and for dismissal of suit. the plaintiff has filed this suit praying, inter alia, for setting aside of a foreign award made in pursuance of an arbitration clause contained in a contract.....
Judgment:

IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE Present: The Hon’ble Justice Soumen Sen G.A.No.2095 of 2014 C.S.No.262 of 2013 LMJ INTERNATIONAL LIMITED versus SWISS SINGAPORE OVERSEAS ENTERPRISES PTE LIMITED For the Petitioner/Defendant : Mr.Abhrajit Mitra, Sr.Adv., For the Respondent/Plaintiff : Mr.Surojit Nath Mitra, Sr.Adv., Mr.Ratnanko Banerjee, Sr.Adv., Mr.D.N.Sharma Heard On : 24.02.2015, 03.03.2015, 12.03.2015, 17.03.2015, 19.03.2015, Judgment On : 27th March, 2015 Soumen Sen, J.:- The instant application has been filed by the defendant for rejection of plaint and for dismissal of suit.

The plaintiff has filed this suit praying, inter alia, for setting aside of a foreign award made in pursuance of an arbitration clause contained in a contract dated 22nd October, 2009.

The arbitration clause reads:“Clause 15 Arbitration All disputes in connection with this contract or the execution thereof shall be settled amicably by friendly negotiations between the two parties.

If no settlement can be reached, the case in dispute shall then be submitted for arbitration in Singapore.

Arbitration result should be final and binding on both parties.” The basis of the instant application is that a suit challenging an award is not maintainable in law.

Mr.Abhrajit Mitra, the learned Senior Counsel appearing on behalf of the applicant submits that the Arbitration and Conciliation Act, 1996 is a complete code as has been held in FueRs.Day Lawson versus Jindal Exports Limited (AIR2011SC2649Paragraph 72: 2011(8) SCC333 and, accordingly, the plaintiff can only challenge the award in the manner and circumstances as provided in the statute.

It is submitted that an Act is to be held as a complete code when, inter alia, the Act itself provides for an adjudicatory mechanism and exclusion of the application of other statutes (expressly or by necessary implication).The applicant has relied upon Paragraph 79 of the judgment in Girnar Traders versus State of Maharashtra reported at (2011) 3 SCC1 In support of his submission that no suit lies for setting aside of a foreign award, reliance has been placed on the following decisions:i) Spentex Industries Limited versus Dunvant SA reported at MANU/DE/2736/2009 (Division Bench of the Delhi High Court dated 29/10/2009) Paragraphs 4,8,9 and 10; ii) Coal India Limited versus Canadian Commercial Corporation reported at 2013 (2) CHN494Paragraphs 22,24 to 29.

It is submitted that so far as domestic award is concerned, the law is the same both under the 1940 Act as well as 1996 Act.

No suit lies for setting aside of a domestic award.

In this regard, the applicant has referred to the following decisions:i) Deokinandan versus Basantalal reported at AIR1941Cal 527; ii) Ashok Kalra versus Akash Towers reported at MANU/DE/3028/2013 Paragraphs 18 and 19.

It is submitted that Section 5 of the Arbitration & Conciliation Act, 1996 is of general principle which would be applicable to all arbitration proceedings irrespective of whether it is domestic or international arbitration.

In Board of Trustees for the Port of Calcutta versus Louis Dreyfus G.A.No.1997 of 2014, C.S.No.220 of 2014 dated 29th September, 2014, the judgment of the Hon’ble Supreme Court in Chatterjee Petrochem Co.& Anr.

versus Haldia Petrochemicals LTD.reported at 2014 (1) Cal LT83SC) on this proposition was expressly followed.

It was held:“The judgment cited at the bar would show that Section 5 of the Arbitration & Conciliation Act is a general principle which would be applicable to all arbitration proceedings irrespective of fact whether it is a domestic arbitration or an international arbitration.” The same proposition was also followed in EnerCo.(India) LTD.& ORS.versus EnerCo.GMBH & Anr.

reported at 2014 (5) SCC1in Paragraph 90 in which the Hon’ble Supreme Court emphasized the need for least intervention by Courts in arbitration matter in view of Section 5 of the Act.

The policy behind Part II of the Arbitration & Conciliation Act, 1996 and especially Sections 46 to 49 is that enforceability of a foreign award is to be decided only when execution application is filed by the award holder.

The said provisions do not even contemplate two several applications, one deciding enforceability of foreign award and the other for execution of foreign award.

In this regard the defendant has referred to the following decisions of the Hon’ble Supreme Court:i) FueRs.Day Lawson versus Jindal Exports Limited reported at AIR2001SC2293Paragraph 29 at Page 2303: 2001(6) SCC356 ii) Shri Lal Mahal versus Progetto Prano SPA reported at 2014 (2) SCC433Paragraphs 45 and 46.

The seat of arbitration determines the curial law that is to apply.

In the instant case, the seat of arbitration is Singapore and the proceeding for setting aside of the award could have been filed only before the appropriate court in Singapore.

In this regard the defendant has referred to a decision of Bharat Aluminium Company versus Kaiser Aluminium reported at 2012(9) SCC552Paragraphs 123, 151 to 153.

Aue-contraire, Mr.Surajit Nath Mitra, the learned Senior Counsel appearing on behalf of the plaintiff submitted that the ouster of jurisdiction of a Civil Court has to be strictly construed.

There has to be some specific provision to that effect for the same.

The learned counsel has placed reliance on Ramesh Gobindram versus Sugra Humayun Mirza Wakf reported at AIR2010SC2897Paragraph 5 : 2010(8) SCC726(Paragraphs 12 & 13).It is submitted that there is no such provision in Part-II of the 1996 Act.

It is submitted that there is also no provision in the 1996 Act which says that no suit shall lie challenging a foreign Award.

The submission made by the defendant that principles of Section 5 of PartI of the 1996 Act also applies to Part-II of the 1996 Act is unacceptable.

A bare reading of the 1996 Act would make it clear that Section 5 limits itself to Part-I only.

Further Section 45 provides “Notwithstanding anything contained in PartI……..”.

Therefore, such submission are contrary to the scheme of the 1996 Act.

A perusal of the said 1996 Act would show that while Part-I of the said Act deals with domestic arbitrations, Part-II deals with ‘enforcement of certain foreign awards’.

The legislature while framing the said 1996 Act has included the provisions as contained in Section 5 thereof in Part-I only.

Section 5 of the Act clearly envisages that the said section is applicable only to Part-I.

A perusal of Section 5 would show that the phraseology ‘this part’ has been used twice in Section 5.

It is well-settled that when the legislature does something or incorporate some words in legislation, the same is done with an intention.

The fact that the legislature while legislating the 1996 Act and particularly, Part-II thereof, did not intend to put any restriction on judicial intervention would be evident from a perusal of the 1996 Act.

The absence in Part-II of the 1996 Act of a provision similar to Section 5 contained in Part-I clearly shows that greater judicial intervention was contemplated in respect of matters contained in Part-II of the said Act.

The Hon’ble Supreme Court in Shin-Etsu Chemical Co.LTD.versus Aksh Optifibre LTD.& Anr.

reported at 2005 (7) SCC234has held that greater judicial intervention is contemplated in Part-II of the 1996 Act (Paragraph

73) and while deciding enforceability of a foreign award, the same has to be tried out by a full trial by invoking all kinds of evidence including oral evidence (Paragraphs 87,100,101,104 and 105).This decision has not been considered in the subsequent Supreme Court decisions.

The legislature in enacting Part-II of the 1996 Act contemplated greater judicial intervention.

Prior to enactment of the 1996 Act, there were two statutes one dealing with domestic arbitration namely Arbitration Act, 1940 and the other dealing with foreign awards, i.e., the Foreign Awards (Recognition and Enforcement) Act, 1961 (in short ‘1961 Act’).Section 3 of 1961 Act states:“3.

Stay of proceedings in respect of matters to be referred to arbitration.Notwithstanding anything contained in the Arbitration Act, 1940, or in the Code of Civil Procedure, 1908 (5 of 1908).if any party to an agreement to which Article II of the Convention set forth in the Schedule applies, or any person claiming through or under him commences any legal proceedings in any court against any other party to the arbitration agreement or any person claiming through or under him in respect of any matter agreed to be referred to arbitration in such agreement, any party to such legal proceedings may, at any time after appearance and before filing a written statement or taking any other step in the proceedings, apply to the court to stay the proceedings and the court, unless satisfied that the agreement is null and void, inoperative or incapable of being performed or that there is not, in fact, any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings.” The 1961 Act was repealed by Section 85 of the 1996 Act.

However, the 1996 Act does not contain any provision similar to Section 3 of the 1961 Act.

The provisions as contained in the 1996 Act which is or can be said to be somewhat close or similar to Section 3 of the 1961 Act is Section 45 of the 1996 Act.

Section 45 of the 1996 Act states:“45.

Power of judicial authority to refer parties to arbitration – Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 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.” From a comparison of Section 3 of the 1961 Act and Section 45 of the 1996 Act, it would appear that though Section 3 of the 1961 Act made provision for stay of any legal proceedings in any Court, Section 45 of the 1996 Act only provides for reference to arbitration of an action initiated by a party to an arbitration agreement.

In other words, though Section 3 of the 1961 Act was applicable to all proceedings initiated at any stage, be it pre-award or post-award, the scope of Section 45 of the 1996 Act has been restricted only to action initiated at the pre-award stage where the action can be referred to arbitration.

Section 45 of the 1996 Act does include any provision for dealing with any action or proceeding initiated after the award is made.

It is well-settled that when in a subsequent legislation some provision of the earlier legislation is omitted, such omission is with some intention and/or motive.

In this connection, reliance is placed on the following decisions:i) In R.V.Price reported at (1871) LR6QB411it was held by Cockburn CJ that – “I think that when the legislature, in legislating in pari materia and substituting certain provision in that Act for those which existed in the earlier statute, has entirely changed the language of the enactment, it must be taken to have done so with some intention and motive.” ii) In D.R.Fraser & Co.Ltd.v.Minister of National Revenue reported at AIR1949PC120 it was held that“When an amending Act alters the language of the principal statute, the alteration must be taken to have been made deliberately.” iii) In (1967) 2 WLR136 (1966) 3 All ER863(Jeffs v.

New Zealand Dairy Production).the Privy Council while considering repeal of New Zealand Dairy Board Act, 1953 by New Zealand Dairy Production and Marketing Board Act, 1961 and the interaction between Section 11 of the old Act and Section 13 of the new Act held that the change in language was no accidental and gave rise to the inference that the Parliament deliberately refrained from giving the Board power to delegate any of its powers and functions to a committee with the consent of the Minister.

iv) In Lalu Prasad Yadav & Anr.

versus State of Bihar & Anr.

(2010 (5) SCC1 Paragraph 39).the Hon’ble Supreme Court approved D.R.Fraser & Co.LTD.versus The Minister of National Revenue (AIR1949PC120 and the following passage from the Principles of Statutory Interpretation by G.P.Singh was quoted – “Just as use of same language in a later statute as was used in an earlier one in pari materia is suggestive of the intention of the legislature that the language so used in the later statute is used in the same as in the earlier one, change of language in a later statute in pari materia is suggestive that change of interpretation is intended.” v) In Serish Maji v.

Nisith Kumar Dolui reported at 1999 (1) CHN365while considering amendment to Section 8 of the West Bengal Land Reforms Act, 1955, it was held as follows:“18.

The fact that Section 5 or its principles have been specifically incorporated in these various sections and their omission from Section 8 appears to be deliberate evidencing the intention of the legislature not to grant an applicant under Section 8 similar benefit.

By this omission in Section 8 it would appear that the sections of the Limitation Act have been expressly excluded within the meaning of Section 29(2) of the Limitation Act.” Therefore, by narrowing down the scope of Section 45 of the 1996 Act in contrast to Section 3 of the 1961 Act and by restricting the applicability of Section 5 of the 1996 Act to Part-I thereof, the legislature intended to allow more judicial intervention relating to matters in Part-II of the 1996 Act, i.e.relating to foreign arbitration.

In Shin-Etsu (supra) the Scheme of Part-II of the 1996 Act has been explained as follows:“73.

The absence in Part-II of the Act of a provision corresponding to Section 5 in Part-I has been highlighted as supportive of the view that greater judicial intervention is contemplated in Part-II of the Act.” It is submitted that in Venture Global Engineering v.

Satyam Computer Services LTD.reported at 2008 (4) SCC190 a suit was filed challenging a foreign award.

The trial Court rejected the plaint under Order 7 Rule 11 of the CPC.

An appeal taken to High Court was dismissed.

The Hon’ble Supreme Court in Paragraph 37 held that an aggrieved party is entitled to challenge a foreign award passed outside India following Bhatia International versus Bulk Trading S.A.& Anr.

reported at 2002 (4) SCC105 The case was remanded to Trial Court and the parties were directed to maintain status quo till disposal of the suit.

The said Bhatia International and Venture Global were considered by the Hon’ble Supreme Court in Bharat Aluminium Co.versus Kaiser Aluminium Technical Services Inc.

reported at 2012 (9) SCC552 In Bharat Aluminium (supra).the Hon’ble Supreme Court though held that the said Bhatia International and Venture Global were not good law but such finding was not only on a different point, i.e., applicability of some provisions of Part-I including Section 5 in Part-II, but also has been made applicable prospectively to all arbitration agreements executed after the judgment, i.e., after 6th September, 2012.

Bharat Aluminium (supra) also nowhere holds that a suit challenging a foreign award is not maintainable.

In view of the above and as the purported arbitration agreement in the instant case is dated 22nd October, 2009, the said Bharat Aluminium (supra) or the findings therein has no applicability in the instant case and the instant case is covered by the Venture Global (supra).M/S.FueRs.Day Lawson (supra) is distinguished by submitting that the conclusion reached in the said decision that the Arbitration Act, 1996 is a selfcontained Code has to be read and understood in the context of maintainability of a Letters Patent appeal.

The Hon’ble Supreme Court has held that since the 1996 Act and particularly, Section 37 thereof provides for the appealable ordeRs.no appeal from any order not mentioned in Section 37 of the said Act ca be preferred by invoking the provisions of the Letters Patent.

Girnar Traders (supra) has been distinguished by submitting that in Paragraph 77 of the said judgment, it has been held that if complete machinery or mechanism is not provided under an Act to ensure effective execution of the functions assigned therein with due protection of the rights of the interested persons within the framework of law, it may not be possible for the Court to hold that such a statute is a self-contained Code.

It is submitted that Deokinandan Dalmia (supra) is a decision under the 1940 Act.

In view of Section 32 of 1940 Act, no suit could lie for a decision upon the existence, effect or validity of an award.

Similarly, Shri Lal Mahal LTD.(supra) has no application in the facts and circumstances of the case.

It would be apparent from paragraph 1 of the said judgment that the only question involved in the said judgment was enforceability of an award under Section 45 of the 1996 Act.

It is submitted that in Coal India LTD.(supra) an application was made for setting aside a foreign award by invoking Section 48 read with Section 34 of the 1996 Act and also Sections 47 and 151 of the Code of Civil Procedure, 1908.

The said application was dismissed.

Appeal arose out of the said judgment dismissing the application.

It is submitted that the said decision does not say that no suit challenging an award can be filed.

It only dealt with an application for setting aside of an award and nothing else.

Moreover, the Hon’ble Division Bench did not consider the judgment of the Hon’ble Supreme Court in Shin-Etsu (supra).The judgment in Coal India (supra) is contrary to the said judgment of the Hon’ble Supreme Court in Shin-Etsu (supra) and in view thereof the judgment of the Division Bench cannot be said to be a good law.

In EnerCo.(India) LTD.(supra) the paragraph relied upon by the applicant is on section 5 of the 1996 Act and as such, has no application in the instant case.

The unreported judgment in Spentex Industries (supra) is contrary to the law laid down by the Hon’ble Supreme Court.

The said judgment proceeds on the basis that Section 5 of the 1996 Act is also applicable to Part-II.

As it is now well-settled that Section 5 of the 1996 Act is specific to Part-I of the said Act, the said judgment cannot be said to be a good law.

The unreported judgment of Delhi High Court in Ashok Kalra (supra) is in relation to a domestic award.

The question was whether a suit challenging the award made in such arbitration proceeding was maintainable.

The said decision has no application in the instant case.

In view of the aforesaid it is submitted that the application for rejection of plaint is misconceived and is liable to be dismissed.

The merits of the instant application are required to be decided within the four corners of the Code of Civil Procedure.

The Court has power to reject a plaint under Order 7 Rule 11 and also under Section 151 of the Code of Civil Procedure.

Even if the application does not bear the nomenclature of Order 7 Rule 11 and Section 151 of the Code of Civil Procedure, the Court on a meaningful reading of the plaint is required to find out if the grounds stated in the plaint calls for dismissal of the suit.

Apart from the aforesaid provision, the Court can also exercise its power in striking out pleadings if it appears to the Court that any part of the pleading is unnecessary, frivolous, vexatious or which is otherwise an abuse of the process of the Court.

The instance of an abuse of the process of Court would cover matters where there is a suppression of material fact as on the date of institution of the proceeding or in a case where a party is relitigating the same issue which has been tried and decided earlier against him.

The suit can also be dismissed if it is barred by law.

The Court has the power at the stage of admitting the plaint to reject if it does not disclose any cause of action or barred by law.

The Court is not required to wait for an application to be filed for rejection of plaint.

In respect of selfcontained statutes, there are provisions, which oust the jurisdiction of Civil Court to deal with matters that are covered under such statutes, for example, the RDB act and SARFAESI Act.

The Arbitration & Conciliation Act is an amalgam of the Arbitration Act, 1940, the Arbitration (ProtoCo.& Convention) Act, 1937 and the Foreign Awards (Recognition & Enforcement) Act, 1961.

statute.

It is a consolidating and amending The object of the Act is to minimize the supervisory role of Court in relation to matters covered by arbitration.

The provisions of Section 5 of the Act limit interference of judicial authorities in matters governed by Part-I of the Act and no judicial authority in terms of the said provisions can interfere except where so provided in Part-I of the said Act.

By virtue of the said provision, all other statutes have been excluded from operation insofar as they relate to intervention by any judicial authority in matters covered by Sections 1 to 43 of the Act.

This Act of 1996 has been held to be a self-contained code.

In FueRs.Day Lawson (supra) it was held:“……It is, thus, to be seen that Arbitration Act, 1940 from its inception and right, through to 2004 (in P.S.Sathappan) was held to be a selfcontained code.

Now, if the Arbitration Act, 1940 was held to be a self- contained code, on matters pertaining to arbitration, the Arbitration and Conciliation Act, 1996, which consolidates, amend and designs the law relating to arbitration to bring it, as much as possible, in harmony with the UNCITRAL Model must be held only to be more so.

Once it is held that the Arbitration Act is a self-contained code and exhaustive, then it must also be held, using the lucid expression of Tulzapurkar, J., that it carries with it “a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done”.

In other words, a letters patent appeal would be excluded by the application of one of the general principles that where the special Act sets out a self-contained code the applicability of the general law procedure would be impliedly excluded…..” (emphasis added) In Girnar Traders versus State of Maharashtra reported at (2011) 3 SCC1it was held:79.

The Expression ‘complete code in itself’ has not been defined precisely.

However, it will be of some help to understand what the word ‘code’ means.

It has been explained in P.

Ramanatha Aiyar’s ‘The Law Lexicon’ (2nd Edn.

1997) as under: ‘A general collection or compilation of laws by public authority; a system of law; a systematic and complete body of law, on any subject such as Civil Procedure Code, Code of Criminal Procedure, Penal code.

etc.…The code is broader in comprehensive in its purposes.

its scope, and more Its general object is to embody, as near as practicable, all the law of the State, on any particular subject.

It is more than evidentiary of the law; it is the law itself.’ 80.

‘Complete’ further adds a degree of certainty to the code.

It has to be a compilation of provisions which would comprehensively deal with various aspects of the purpose sought to be achieved by that law and its dependence on other legislations is either absent or at best is minimal.

The provisions of the enactment in question should provide for a complete machinery to deal with various problems that may arise during its execution.

Sufficient powers should be vested in the authority/forum created under the Act to ensure effectual and complete implementation of the Act.

There should be complete and coherent scheme of the statutory provisions for attainment of the object and purpose of the Act.

It essentially should also provide for adjudicatory scheme to deal with grievances/claims of the persons affected by enforcement of the provisions of the Act, preferably, including an appellate forum within the framework of the Act.

In other words, the Act in itself should be a panacea to all facets arising from the implementation of the Act itself.

In Chloro Controls India PVT.LTD.versus Severn Trent Water Purification Inc.

& ORS.reported at 2013 (1) SCC641 while considering the scope of Section 45 of the Act, the Hon’ble Supreme Court reiterated that the 1996 Act is a complete code and provisions of the Act shall prevail over the Code of Civil Procedure.

The relevant observations of the Hon’ble Supreme Court are stated below:155.

………….There cannot be any doubt that in terms of Section 9 CPC, the courts in India shall have jurisdiction to try all suits of civil nature.

Further, this section gives a right to a person to institute a suit before the court of competent jurisdiction.

However, the language of Section 9 CPC itself makes it clear that the civil courts have jurisdiction to try all suits of civil nature except the suits of which taking cognizance is either expressly or impliedly barred.

In other words, the jurisdiction of the court and the right to a party emerging from Section 9 CPC is not an absolute right, but contains inbuilt restrictions.

It is an accepted principle that jurisdiction of the court can be excluded.”

156. The provisions of Section 45 of the 1996 Act are to prevail over the provisions of CPC and when the court is satisfied that an agreement is enforceable, operative and is not null and void, it is obligatory upon the court to make a reference to arbitration and pass appropriate orders in relation to the legal proceedings before the court, in exercise of its inherent poweRs.165.1.

Section 45 is a provision falling under Chapter I of Part II of the 1996 Act which is a self-contained code……” The Full Bench of the Delhi High Court in National Highway Authority of India versus Oriental Structure Engineer LTD.– Gammon India LTD.(JV) reported at AIR2013Delhi 67 held that 1996 Act in effect displaces all such aspects of substantive and procedural law in respect of which there is an explicit or implied reference in the 1996 Act.

In EnerCo.(India) LTD.& ORS.versus EnerCo.GMBH & Anr.

reported at 2014 (5) SCC1in Paragraph 90 the Hon’ble Supreme Court emphasized the need for least intervention by Courts in arbitration matter in view of Section 5 of the Act.

The said Paragraph reads:“90.

It is a well-recognized principle of arbitration jurisprudence in almost all the jurisdictions, especially those following the UNCITRAL Model Law, that the courts play a supportive role in encouraging the arbitration to proceed rather than letting it come to a grinding halt.

Another equally important principle recognized in almost all jurisdictions is the least intervention by the courts.

Under the Indian Arbitration Act, 1996, Section 5 specifically lays down that: “5.

Extent of judicial intervention.

– Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.” The logical conclusion is that if a party is desirous of challenging an award, whether domestic or international, it should file objections and/or applications as contemplated by the Act.

The intention of the legislature is quite clear that Civil Court should stay its hand in matters covered under the Act and can exercise only a very limited jurisdiction as permitted by the Act.

The observation made by me in Board of Trustees with regard to Section 5 of the Act has to be read in that context.

It is now being settled that Section 5 of the Act would not apply to arbitration agreements entered after the judgment in Balco (supra).A suit before the commencement of Arbitration proceeding may lie if it challenges the agreement as null and void, inoperative or incapable of being performed.

However once an award is passed, the remedy is Section 48 and not by way of a suit.

In Chloro Controls (supra) the Hon’ble Supreme Court noticed the following three characteristics of arbitrations, namely:1.

Arbitration is consensual.

It is based on the parties’ agreement; 2.

Arbitration leads to a final and binding resolution of the dispute; and 3.

Arbitration is regarded as substitute for the court litigation and results in the passing of a binding award.

Arbitration is not a common law right.

It is right created by statute.

The rights and remedies are created by the statute.

Arbitration is consensual.

When the parties have voluntarily agreed to have their disputes resolved by Arbitration, it necessarily implies that they have consciously waived their right to have their disputes adjudicated by any other authority or by any other machinery.

Where the issues have been conclusively decided in favour of the plaintiff by the Arbitral Tribunal on the principle of comity and avoidance of inconsistent judgments require that this suit cannot proceed.

The plaintiff is not remediless.

The plaintiff had the opportunity to challenge the award before the foreign Court.

If the plaintiff choose not to challenge the award before the foreign court still it has the option to raise objection under Section 48 of the present Act at the time of enforcement of the award.

The plaintiff, however, cannot file a suit challenging the award.

A cause of action based on contract which has been conclusively decided against the plaintiff totally non-suit the plaintiff.

Once a finding is arrived at by the Tribunal against the plaintiff in relation to the contract, it logically follows that apart from the remedies available under the Act, the plaintiff has no other right.

In Bharat Aluminium Company versus Kaiser Aluminium Technical Services Inc.

reported at 2012 (9) SCC552in Paragraph 176 it was held that as a matter of law, an inter-parte suit simply for interim relief pending arbitrations, even if it be limited for the purpose of restraining dissipation of assets would not be maintainable.

It was further held that pendency of the arbitration proceedings outside India would not provide a cause of action for a suit where the main prayer is for injunction.

If the suit is filed during the pendency of arbitration proceedings in a foreign country and the cause of action in the suit is founded on initiation of a arbitration proceeding in a foreign country, it is not open for a party to file a suit touching on the merits of the arbitration.

As observed in BALCO (supra) if such a suit was to file it would in all probabilities be stayed in view of Sections 8 and 45 of the Arbitration Act, 1996.

In Chatterjee Petrochem (supra) it was held that Section 5 of the Arbitration and Conciliation Act, 1996 would even apply to Part-II of the Arbitration Act and there would be a complete bar to proceed with the suit.

In Chatterjee Petrochem (supra).the Hon’ble Supreme Court reiterated the view expressed in Venture Global Engineering v.

Satyam Computer Services LTD.reported at 2008 (4) SCC190in which it is held that Section 5 of the Act which falls in Part-I specifies that no judicial authority shall intervene except where so provided.

The Scheme of the Act is such that the general provisions of Part –I including Section 5, would apply to all Chapters or Parts of the Act.

This view was, however, diluted in a larger Bench decision of the Hon’ble Supreme Court in BALCO (supra).However, there is an observation in Paragraph 100 of the judgment that if the agreement is held to provide for a “seat”/“place” outside India, Part I would be inapplicable to the extent inconsistent with the arbitration law of the seat, even if the agreement purports to provide that the Arbitration Act, 1996 shall govern the arbitration proceedings.

It is significant to mention that the seat of arbitration in the instant case is Singapore.

Article 5 of the Statutes of the Republic of Singapore International Arbitration Act is in pari materia to Section 5 of the present Act.

Article 5 of the Singapore Act reads:“5.

Extent of Court Intervention In matters governed by this Law, no court shall intervene except where so provided in this Law.” The arbitration clause in the agreement specifies that the dispute shall be submitted for arbitration in Singapore.

In Reliance Industries LTD.& Anr.

versus Union of India reported at 2014 (7) SCC603the Hon’ble Supreme Court held:“38.

We are also of the opinion that since the ratio of law laid down in Balco has been made prospective in operation by the Constitution Bench itself, we are bound by the decision rendered in Bhatia international.

Therefore, at the outset, it would be appropriate to reproduce the relevant ratio of Bhatia International in para 32 which is as under: “32.

To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto.

Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I.

In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions.

In that case the laws or rules chosen by the parties would prevail.

Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply.” All the arbitration agreements entered on or prior to the date 6th September, 2012, i.e., the date of the decision of Balco (supra) would be covered by Bhatia International (supra) and Venture Global Engg.

(supra) as they are the applicable law till the date 6th September, 2012.

In paragraph 197 of the judgment in Balco (supra).the Hon’ble Supreme Court observed that the law laid down in the said judgment would apply prospectively to all arbitration agreements executed hereafter.

In the instant case, the arbitration agreement is dated 22nd October, 2009.

In such circumstances, the ratio of Venture Global (supra) would be applicable in the instant case and the suit must be held to be barred on the date of filing of the suit.

In view of the aforesaid the application succeeds.

C.S.No.262 of 2013 is dismissed.

It is made clear that I have not gone into the merits of the claim and this order of dismissal shall not prevent the plaintiff to exercise its right under Section 48 of the Arbitration and Conciliation Act, 1996 if the grounds mentioned therein are available to the plaintiff.

Urgent xerox certified copy of this judgment, if applied for, be given to the parties on usual undertaking.

(Soumen Sen, J.)


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