Anti Suit Injunction against International Arbitration
Anti Suit Injunction in International Arbitration
SESA International Limited Vs. STEMCOR U.K. Limited & Ors.
relief by way of order of anti–arbitration injunction against respondent no. 1. In the second mentioned application, apart from praying anti–arbitration injunction, restrain order is sought for against the defendant no. 1 to proceed with thearbitration arising out of the contract Nos. RMS 0098, RMS 0099, RMS 0105, RMS 0110 and RMS 0125. The above suit has been filed by the plaintiff/petitioner claiming relief as against the respondent.
Here is the Judgment.
Sesa International Limited vs Stemcor U.K. Limited & Ors on 5 May, 2011
G.A. 696 of 2009
G.A. 1324 of 2009
C.S. 54 of 2009
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
THE HON’BLE JUSTICE KALYAN JYOTI SENGUPTA
SESA International Limited
STEMCOR U.K. Limited & Ors.
Judgment On: 5.5.2011.
K. J. Sengupta, J. :
Both the aforesaid applications have been made by the plaintiff above- named in connection with the aforesaid suit. In the first mentioned application the plaintiff/petitioner has prayed for interlocutory relief by way of order of anti- arbitration injunction against respondent no. 1. In the second mentioned application, apart from praying anti-arbitration injunction, restrain order is sought for against the defendant no. 1 to proceed with the arbitration arising out of the contract Nos. RMS 0098, RMS 0099, RMS 0105, RMS 0110 and RMS 0125. The above suit has been filed by the plaintiff/petitioner claiming relief as against the respondent No. 1, for a decree for Rs.81,67,096/-; perpetual injunction restraining the first respondent from making any demand or receiving any money under letters of credit as pleaded in paragraph ‘ 6’ of the plaint; decree for anti-arbitration injunction has been prayed for against the respondent No. 1 in relation to the said dispute mentioned in the plaint; decree for Rs.3,86,00,000/- has been claimed as against the respondent no. 2, while perpetual injunction as against respondent No. 3 has been asked for restraining it and/or its servants, agents or assigns from remitting any money under or pursuant to the letters of credit pleaded in paragraph ‘6’ of the plaint; perpetual injunction has been sought for against the respondent no. 3 from accepting or negotiating or acting upon the shipping documents presented for negotiation by and/or on behalf of the respondent No. 1 to the respondent no. 3. The facts and circumstances for which the suit was filed is summarized as follows :
Under five several contracts the plaintiff/petitioner agreed to purchase a large quantity of non-alloy steel melting scrap and the defendant no. 1 agreed to sell and deliver the same at an agreed price. The said first defendant has Indian group of company viz. Stemcor India Private Limited whose office is at amongst others in the city of Mumbaias well as in Kolkata. The defendant no. 2 agreed to act as Import Facilitator of the petitioner on payment of agreed amount of service charges and on consideration and upon deposit of agreed amount of security in cash. The plaintiff/petitioner had and still has to keep with the defendant no. 2, MSTC, a sum of Rs. 3,86,00,000/- as by way of security and/or the margin money and the said sum of money is still lying with MSTC.
All the five Letters of credit were duly forwarded to the advising bank nominated by the defendant no. 1 and/or their agents in that regard immediately on the date of opening of the letters of credit. Subsequently, there has been amendment to the letters of credit and the same was also intimated to the defendant no. 1 through its nominated Bank by appropriate communication. The plaintiff has discharged his obligation of payment under the said five several contracts by causing five several letters of credit to be opened covering the price of goods and all the letters of credit as amended have been accepted by the defendant no. 1 and its nominated Banker as due discharge of payment of the said five several contracts. Each of the five several letters of credit specified the documents to be presented for the due operation thereof and receiving payment thereunder. The first defendant and its advising bank have all along been aware that unless the documents, as specified in the letters of credit are presented to the issuing bank in strict compliance of the terms of the letters of credit, it would become non-compliant and invalid presentation of shipping documents. The original negotiable shipping documents were to be presented by the defendant no. 1 and its advising bank to IOB, the issuing bank. IOB, upon being satisfied that the documents were in conformity with the letters of credit, was to release payments and forward all documents including the shipping documents to the petitioner and/or its agent, MSTC. The property in the goods would have passed to the petitioner and/or its agent, MSTC and the petitioner would have been in a position to receive delivery of the goods and clear the same at the port for landing in India upon receipt of negotiable set of shipping documents. The petitioner and/or its agent, MSTC did not receive any of the original negotiable shipping documents from IOB or from Stemcor, first defendant. Later on, the petitioner came to learn that IOB had found all the documents presented by the defendant No.1, Stemcor and its advising bank in respect of 24 consignments were not in conformity with the terms of letters of credit and, IOB had duly rejected the documents as non-complaint as and when received between October, 2008 and December, 2008. Accordingly, IOB did not make over and/or even present any of the shipping documents to the petitioner or MSTC and title to the said 24 consignments did not pass on to the petitioner and/or were not transferred to the petitioner and/or its agent, MSTC. IOB has not furnished to the petitioner details of the discrepancies of the documents as purportedly presented under the letters of credit as found by the IOB. However, from the copies of the non-negotiable documents furnished to the petitioner by defendant no. 1 and its advising bank, as mentioned before, the petitioner had found out that, in fact, the documents in respect of each of the 24 consignments were discrepant and were not in conformity with the terms of the letters of credit.
The defendant No.1 and/or its agents with full knowledge of rejection of the documents submitted the same to the issuing bank under the letters of credit. It was also within the knowledge of the first defendant of the fact that the petitioner and/or its agent, MSTC had not received any of the shipping documents in respect of the 24 consignments, claimed to have been despatched by Stemcore and further that the property in the said goods have not at all been passed to the petitioner or its agent, MSTC, purported to issue letters of demand upon the petitioner for price of the goods and for return of the original bills of lading knowing fully well that the original bills of lading have never been received by the petitioner. Hence, the petitioner has neither received the said goods nor has any obligation to make any payment under the said letters of credit. Therefore, the security deposit of Rs.3.86 crore with the MSTC is required to be refunded to the plaintiff as the purpose of keeping the same has been wholly failed and/or frustrated by reason of the non-supply of the goods.
Accordingly, the plaintiff is entitled to claim refund of all the said amount of 3.86 crore from the MSTC. Over and above, the petitioner has suffered loss and damages by way of interest at the rate of 15 % p.a. on the said amount. Apart from the aforesaid monetary loss, the petitioner has suffered loss and damages on various ways because of non-supply of the goods and such claim has been quantified by the plaintiff of Rs.81,67,096/- and the said damages have been claimed as against the first defendant.
After committing breach first defendant is now indulging in multiplicity of proceedings and in multifariousness in abuse of process of law by taking the action as stated hereinafter.
The petitioner has been informed by letter dated 30th January, 2009 of the solicitors of the first defendant that the first defendant and its advising and confirming bank have jointly filed a suit before the High Court at London against IOB, claiming inter alia, a sum of US $ 3,033,037.20 and US $ 5,024,041.80 respectively for the amounts covered by the aforesaid five letters of credit. Surprisingly, in the said London suit the petitioner is not a party. At the same time, another letter dated 3rd February, 2009 has been received by the petitioner sent by the advocate of the defendant no. 1 wherefrom the petitioner came to know that the defendant no. 1 has appointed an Arbitrator to commence arbitration under auspices of London Maritime Arbitrators Association London (LMAA). By the said letter the petitioner has been asked to appoint its Arbitrator within 14 days. In the said letter it has been stated that there has been dispute having been arisen between the plaintiff/petitioner and defendant no. 1 in respect of all five contracts as the IOB declined to honour its undertaking to make payment of the contract price to the defendant no. 1 on the premise that the shipping documents presented by defendant no. 1 were non-compliant with the letters of credit. It appears thereafter on or about 20th March, 2009 the petitioner got information that judicial action has been taken by the defendant no. 1 before the District Court, Southern District of New York, USA for maritime attachment against the petitioner. It appears that the said action covers in respect of the shipment of 372 containers shipment of scrap steel including aforesaid five contracts.
The dispute in terms of the bill of lading are subject to the London jurisdiction and has to be resolved by the arbitration.
In spite of the arbitration clause the said action has been taken before the US Court and thereby the defendant no. 1 has given go-bye the said arbitration agreement.
Even in the said action defendant no. 1 has obtained an ex parte order of attachment of the assets of the petitioner inNew York and pursuant thereto actually got attached an amount of 2,78,500 US Dollar, which is lying with the American Express Bank. It further appears that payment has been made pursuant to the said order of attachment, by the petitioner, through Bank of Commerce, Overseas Branch, Kolkata to another foreign seller by way of advance payment and was credited to the American Express Bank of New York. The defendant no. 1 has filed another complaint in the District Court in New York against the Indian Overseas Branch separately. In that action the plaintiff/petitioner was not a party. The said action also relates to the said cargo covered by 372 shipping containers including the aforesaid materials covered by the said five agreements.
Thus, it will appear that the said Arbitrator has no jurisdiction to adjudicate upon or override the various provisions of law in India. Keeping the aforesaid multiple proceedings pending, the first defendant at the same time is trying to proceed with the arbitration with unseemingly haste. The first defendant has written letters to their nominated Arbitrator claiming that their nominated Arbitrator has become sole Arbitrator and has urged him to proceed with the matter.
Thus, a grave urgency has arisen and further facts have come to light as such that unless interim order is issued restraining the first defendant from proceeding with the arbitration proceedings of Mr. Michael Collett, their nominated Arbitrator, the petitioner would suffer irreparable loss and prejudice. The arbitration proceeding initiated by the Stemcor (first defendant) is vexatious, harassive, oppressive and malafide. Stemcor, knowing well that there is no arbitrable dispute with the petitioner herein has commenced, the arbitration proceeding only with the object of harassing the petitioner. The arbitration agreements relied upon by Stemcor for commencing the arbitration are/is inoperative and inapplicable.
Holding arbitration at LMAA is prohibitively expensive. The fees of the arbitrators for conducting an arbitral proceeding in LMAA is exorbitantly high as will be self-evident from the table of fees under Rules of LMAA. In addition thereto, expenses for stay at London is exorbitantly high and not less than 400 pound per person per day, besides the costs of travelling. This apart, the petitioner’s legal costs i.e. legal fees of the senior counsel, junior counsel, solicitor, representative per arbitration sitting will be extremely high. Travelling expenses, boarding and lodging at London are very expensive. In such circumstances, the petitioner estimated that for each arbitration sitting the petitioner would be burdened with an expense of approximately Rs.2 lakh in addition to the arbitrator’s fees, which is $500 per Arbitrator. It is not possible or feasible for the petitioner to conduct such arbitration. Stemcor has initiated the arbitration proceeding before LMAA for specific reason and knowing that the petitioner will not be in a financial position to participate thereat. Balance of convenience warrants adjudication of disputes, if any, between the parties in India. Both the petitioner and Stemcor have their respective places of business in India(Kolkata and Mumbai). Stemcor U.K. and Stemcor India have office in Mumbai and Kolkata and have all possible infrastructure with adequate number of staffs, offices etc. Indeed Stemcor U.K. through Stemcor India has regular business dealings, negotiations, transactions in India both from Mumbai as well as from Kolkata. The Stemcor has dealings and connection with the lawyers also in India. Dealings and transactions between the parties took place partly at Kolkata at the office of the petitioner and partly at the offices of the Stemcor in Kolkata and Mumbai.
If at all English Law is applicable, this Hon’ble Court is more than well efficient to decide the matter by applying English Laws. Lawyers practicing in this Hon’ble Court, are well conversant in English Laws and there are several lawyers in Kolkata who have studied and are trained in London and are proficient in English Laws. On the other hand, there are very few lawyers in London who have command over Indian Laws. Indian Law has close nexus and connection with the contracts between the parties and it is the proper law. None of the defendants, except first, has filed any affidavit either to support or to oppose the present application. In the affidavit, the first defendant has taken preliminary point of jurisdiction of this Court contending that this Court has no territorial jurisdiction as no part of the cause of action could and can be said to have arisen within the territorial limit of this Hon’ble Court. It is alleged that the first defendant, at no point of time, had and still has any place of business. It is also alleged that first defendant has no branch office at any place in India far less in Kolkata nor there has been any agent for business to negotiate with the plaintiff/petitioner. Hence, this Court cannot pass any order. It is alleged that the petitioner/respondent no. 1 freely negotiated and then entered into the five contracts mentioned in the petition and each of them agreed that any controversy or claim arising out or relating to this contract, or breach thereof shall be settled by arbitration and this contract shall be governed by the laws of England. There has not been any protest with regard to the arbitration agreement till the respondent no. 1 referred its disputes to arbitration by its letter dated February 3, 2009. It is, therefore, obvious that the prayers for passing restraint orders as against the respondent no. 1 and the grounds in support thereof are by way of an afterthought and to delay the arbitration. The action of the petitioner is, rather, oppressive and vexatious and for such reason the instant application is liable to be dismissed. By a letter dated 14th May, 2009 the petitioner has challenged the jurisdiction of the arbitrator and has thereby chose the Arbitral Tribunal as the forum for adjudication of its jurisdiction. For such reason, the petitioner is estopped from calling upon this Hon’ble Court to decide on the validity of the agreement or the jurisdiction of the Arbitral Tribunal. The Arbitration and Conciliation Act, 1996 does not provide for any injunction order being passed restraining any parties from continuing in arbitration. The respondent no. 1 is also not within the jurisdiction and has also not submitted to the jurisdiction of this Hon’ble Court. In such circumstances, the present application is liable to be dismissed.
The petitioner has not made out a case why the Calcutta High Court would be a more appropriate forum for the hearing of its application against respondent no. 1 than the arbitration in London which is agreed to be the forum in which all claims arising out of or relating to the contracts would be settled. Even if a decree is passed in terms of prayer (e), the same would not render the arbitration or any award to be passed therein bad. Any award which may be obtained by the respondent no. 1 would be enforceable in all other countries which are signatories under the New York Convention (unless the Award is found to be bad under the provisions of the New York Convention in the country where it is being sought to be enforced). In restraining the respondent no. 1 from continuing in arbitration, this Hon’ble Court would encroach upon the jurisdiction of other international courts which would have the jurisdiction to decide whether the award/agreement is bad. The Court would also make itself a party to the breach of the arbitration agreement which is being breached by the petitioner.
This Hon’ble Court does not have any jurisdiction to pass orders as prayed for in the interim application. The reliefs sought in the interim application are barred under the provisions of law and in particular, the provisions contained in the Arbitration and Conciliation Act, 1996. Since there is a valid arbitration agreement it is necessary that the arbitration be allowed to continue. I find from the pleadings and records with regard to the subject matter of the dealings and transaction it is alleged that respondent No. 1 has not delivered the goods to the petitioner in accordance with the contracts. Goods were unloaded at Haldia Port and remained there. In the affidavit in reply with regard to the factum of progress of arbitration it is alleged as follows: The petitioner had filed submission on the question of jurisdiction of the Arbitral Tribunal. The learned Arbitrator has passed its award on jurisdiction on 9th February 2009 against petitioner. There are several other claims which have been enumerated in the statement of claim before the learned Arbitrator. However, by necessary implication it is not denied that payment has been made. Learned counsel for both the parties had advanced argument both on fact and in law. I have considered all. Mr. Anindya Mitra, learned Senior Counsel for the petitioner submits that the arbitration proceedings has been initiated. It will appear from the pleadings and documents filed subsequent to filing of the present applications that there has been no subsisting dispute between the parties in real sense. The arbitration proceedings without any live dispute with the first defendant would not only be more oppressive, but absolutely punitive, vexatious and unconscionable.
He submits to clarify the phrases “without any live dispute”, that all claims made in the arbitration by first defendant have been satisfied and discharged. It will appear from the claims submission filed before the learned Arbitrator that first defendant at paragraphs 48 and 49 therein has recorded that no claim is made for five letters of credit. Only claim made in the arbitration is for a sum of US $ 1,594,104 which is a part of amount receivable under Letters of Credit No. 105 which also stand paid. Even the said claim in relation to said Letter of Credit has also been paid to first defendant by Indian Overseas Bank on 16th October, 2009 and 17th February, 2010 pursuant to the order of this Court. Therefore, all claims in relation to five Letters of Credit stand paid. The entire amount of the price of the goods under five letter of credits thus have been received by first defendant. Even the interest and cost have also been paid off as per order of this Court.
The remaining claims made in paragraphs 52 and 53 of the claim submission of the first defendant is on account of demurrage, storage, and other ancillary port charges and terminal handling cost, import duties or charges at discharge port. No specific amount of monetary claim has been made by first defendant, because first defendant had not paid any of those aforesaid items. In fact, first defendant made only a claim for indemnity in the last sentence of paragraph 52. The first defendant has not filed any Bill of Entry for clearance of the goods nor has owned up any liability after shipment. All the Bills of Lading were handed over to Indian Overseas Bank from whom they received payment of price of goods. Even the claim of indemnity on account of the demurrage, storage etc. have fully taken care of by the order of sale of the said goods dated 30th July, 2010 passed by this Court in G.A. No.1931 of 2010.
The first defendant has not incurred any liability on account of this demurrage, port charges etc. hence its apprehension is baseless and imaginary. It is the liability of the purchaser to make all payment for clearance of the goods not the first defendant nor of the plaintiff in terms of the said order dated 30th of July 2010.
Hence it is evident that continuation of arbitration proceeding by first defendant will be vexatious, harassing and oppressive. Therefore, strong case has been made out for granting order of injunction on the aforesaid ground. According to the learned counsel in order to continue the arbitration proceeding there must be live and subsisting dispute and this proposition of law has been settled in the decision of the Supreme Court reported in 2005 (8) SCC 618, (para 32). Moreover he submits drawing my attention to the Supreme Court decision reported in 2003 (4) SCC 341 that in case of discretion being not exercised granting injunction restraining the parties from arbitration proceeding, the ends of justice would be defeated and injustice would be perpetuated. Learned counsel for the first defendant submits placing the factual aspect in the affidavit, that this Court has no jurisdiction to entertain this suit as no part of the cause of action has arisen within the territorial limit of this Court. Admittedly, the first defendant does not have any place of business within the territorial limit of this Hon’ble Court.
It is also contended that the alleged ground made out in the petition, does not constitute any case for stalling the arbitration proceeding. Proceeding in arbitration would not amount to multiplicity of proceedings. The arbitration is concerned with the dispute arising out of the Contracts between the plaintiff on the one hand and the respondent No.1 on the other. In the suit, filed in the London High Court, the cause of action is against Indian Overseas Bank in respect of the Letters of Credit.
Learned counsel submits that the issues as to whether the claims under the Letters of Credit and the Contracts are arbitrable before the Arbitral Tribunal, is a question which shall be decided by the Arbitral Tribunal exclusively. The arbitration agreement between the parties specifically stipulates that the said Contracts should be governed by the Laws of England. The Arbitration Act of 1996 of England empowers the Arbitral Tribunal to rule on its own jurisdiction by and under Section 30 of the English Arbitration Act, and Section 31 thereof expressly authorises the respondent in the arbitration to question the lack of substantive jurisdiction of the Arbitral Tribunal at the outset of the proceeding which has been done. In fact, in this case plaintiff has already submitted the jurisdiction to the learned Arbitrator who ruled against it with regard to the jurisdiction and as such this issue cannot be raised. After having submitted to the jurisdiction of the learned Arbitrator the plaintiff-petitioner is estopped from asking any relief restraining any of the parties to the arbitration agreement from proceeding with the arbitration.
Whether the claim of the first defendant has been paid off and/or satisfied or not can also be decided by the learned Arbitrator. Learned counsel has relied on decision of the Supreme Court rendered in case of Aurohill Global Commodities Ltd. vs. Maharashtra STC Limited reported in (2007) 7 SCC 120 to contend that the Arbitrator is having power to decide all disputes. It is submitted further the plaintiff has discharged its liability to make payment by opening letters of credit to the first defendant, is incorrect and fallacious in the eye of law. This proposition has been settled by the Court of Appeal in England in case of W J Alan & Co. Ltd. vs. EL Nasr Export & Import Company reported in (1972) 2 All E R 127 that the Letters of Credit is conditional payment of the price and not absolute. It may mean that the buyer, will have to pay twice over. Thus, opening of Letters of Credit by Indian Overseas Bank cannot be said to be payment under the said Contracts to the respondent No.1 as seller of the goods.
Learned counsel for the respondent on the question of inconvenience submits that it has been settled by the Hon’ble Supreme Court in the case ofModi Entertainment Network vs. W.S.G. Cricket Pte Ltd. reported in (2003) 4 SCC 341. In this case Supreme Court has held that a party to the contract, containing jurisdiction clause, cannot normally be prevented from approaching the Court of choice of the parties as it would amount to aiding of breach of the contract, and the proceeding in that Court cannot per se be treated as vexatious or oppressive nor can the Court be said to be a forum non convenient. Relying on another Supreme Court decision in case of Man Roland vs. Multi Colour Offset Ltd., reported in (2004) 7 SCC 447, learned counsel argues that when the parties have agreed on a particular forum, the Court will enforce such agreement. This is not because of a lack or ouster of its own jurisdiction but because the Court will not be a party to a breach of agreement.
It is submitted that the respondent No.1 has got other claim also which has arisen out of the breach of Contracts for not accepting the goods. The parties to the arbitration agreement keeping their eyes open have chosen its forum and at the time of choice all situation and possibilities have been foreseen and thought of. After having agreed to choose this forum the parties cannot be allowed to resile on the ground of so-called oppression and inconvenience. It is also contended that petitioner shall not be allowed to rely on any materials which are not forming the part of the pleadings. In any view of the matter subsequent event as sought to be submitted by producing document, can be decided by the learned Arbitrator.
After careful consideration of all the submissions made on behalf of the learned counsel for the parties now it appears to us the following are admitted position:
(i) The first defendant has filed the suit in English Court wherein decree has been passed against the Indian Overseas Bank and thereby obligation under five Letters of Credit have been enforced, and payment have been received. It is however contended that the said decision has been under appeal.
(ii) The goods which were discharged at the port of Haldia in terms of the order of this Court has been sold by public auction and the third party has taken delivery of the same. In terms of the Court’s order it is the obligation of this purchaser to clear the goods from port authority upon payment of all the duties which include demurrage and other port charges and customs duties.
(iii) The first defendant has also got an order attachment from American Court for securing the claim as against the plaintiff/petitioner. (iv) The first defendant has also approached the learned Arbitrator to raise question of jurisdiction of the learned Arbitrator having regard to the facts and circumstances of this case and objection. Objection to jurisdiction has been overruled by the learned Arbitrator by passing an award which is remaining unchallenged.
In view of the aforesaid factual aspect now it has become necessary for the Court to decide the following questions in this matter:-
(i) Whether this Court has jurisdiction to decide the matter namely whether any part of the cause of action has arisen within the jurisdiction of this Court or not?
(ii) Under the law whether this Court can pass an order of injunction restraining the parties from proceeding with the arbitration or not? (iii) Whether on the subsequent facts and development it would be prudent for this Court to allow the parties to go to arbitration or not? On the question of jurisdiction I am of the prima facie view that it is a mixed question of fact and law as in the plaint and petition it has been clearly stated part of the cause of action has arisen within the territorial limit of this Court, of course, this statement and averment has been denied in the affidavit in opposition. Hence to resolve this dispute require evidence and that can be decided at the time of the trial of the suit. At present statements and averments in the plaint is the decisive factor, until issue is decided finally in the suit. It appears that no action has been taken by the first defendant for rejection of the plaint on that ground and besides another interlocutory application was made an order was passed and this plea at the interlocutory stage could have been raised but was not raised. When the Court at interlocutory stage has passed order and same having been accepted, at least for decision of the interlocutory application it cannot be said this Court has no jurisdiction. Hence the plea of jurisdiction is overruled at this stage. However, it is kept open for final decision at the time of trial.
Next contention has been raised whether this Court in view of the arbitration agreement between the parties has any jurisdiction or not. This issue has been decided by the Division Bench of this Court in G.A. No.678 of 2009, C.S. No.69 of 2009 in case of NICCO Corporation Limited vs. Prysmian Cavi e Systemi Energia s.r.l. and another. At pages 17 and 18 of the said unreported decision the Division Bench of this Court ruled as follows:- “From minute reading of the said section it emerges that if no application is made at the stage mentioned in Section 8 judicial authority including the Court may proceed with the trial of the suit and at the same time the party concerned applying for stay should also be free by necessary implication to proceed with the arbitration at his/its risk unless interdicted by the Court by anti-arbitration injunction for which there is no prohibition in the Act, and such measure taken by the Court being an equitable one. If at early stage any action is taken by the adversary under Section 8 and also under Section 45 of 1996 Act then civil Court has limited jurisdiction to examine whether disputes in the suit are referable or not. On the other hand if no step is taken by the defendants either under Section 8 or Section 45 there is no bar in the 1996 Act to proceed with, particularly when the defendant(s) submit to jurisdiction of Civil Court giving rise to abandonment of arbitration agreement. Hence Section 5 of the 1996 is to be read and applied harmoniously with Sections 8 and 45 as the case may be. Therefore, it cannot be said that the Court has no jurisdiction as rightly argued by Mr. Mitra, however the jurisdiction will cease, the moment Court decides to refer the dispute to arbitration under the said Section. In this context three Bench decision of the Supreme Court in cases of Svenska Handels banker etc & others vs. Indian Charge Chrome Ltd & others reported in (1994) 2 SCC 155 cited by Mr. Deb is meaningfully helpful. In paragraphs 51 and 53 it is observed as follows:- “When parties agree to have their disputes settled by Arbitration it does not mean that both have bound themselves not to go to Court to have the dispute settled. At page 163 of Russel on Arbitration, twentieth End. it is stated that a party to a contract to refer disputes to arbitration has a perfect right to bring an action in respect of those disputes, and the Court has jurisdiction to try such disputes. Any provision to the contrary would be an ouster of the jurisdiction of the Courts.”
“53. It may be that even after entering into an arbitration clause any party may institute legal proceedings. It is for the other party to seek stay of the suit by showing arbitration clause and satisfying the terms of the provision of law empowering the Court to stay the suit….”
This judgment of Supreme Court was rendered when the present Act was not in existence, but in Patel Engineering Case [2005 (8) SCC 618] the Apex Court considered in this context, the implication of the present Act. In paragraphs 19 and 25 as appropriately pointed out by Mr. Mitra, above principle has substantially been approved. Consequently it follows the suit is entertainable and maintainable so long the Court does not pass order referring dispute upon examination of arbitration agreement as discussed earlier.” In this case admittedly no action has been taken under Section 45 of the Arbitration and Conciliation Act 1996 for stay of hearing of the suit or for referring the matter to the arbitration. Subsequently, one of the parties viz. the first defendant referred the matter unilaterally to the learned Arbitrator and plaintiff admittedly has gone to learned Arbitrator to contend that the learned Arbitrator has no jurisdiction to decide the matter on merit. On question of referability the learned Arbitrator has viewed against the plaintiff-petitioner. As such dispute concerning referability no longer subsists. I am of the view that though the said award with regard to the question of jurisdiction has been passed but the court does not cease its jurisdiction unless it decides not to proceed with the subject matter of the controversy to arbitration or accept the said arbitral award. As the learned Arbitrator has not decided anything on merit of the case and the Court is yet to refer the matter under Section 45 all disputes to arbitration, it has jurisdiction not only to proceed with hearing of the suit, and in appropriate case the Court pass an order of anti- arbitration injunction. It would be appropriate to set out Section 45 of the Arbitration and Conciliation Act 1996.
“Section 45. 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.” It is argued that the subsequent document which was not filed in the pleading should not be looked into by the Court. I find the documents filed before me are admitted ones and correctness of the content thereof has not been denied and disputed nor the same has been challenged. Moreover, documents are mostly orders of the Court and Court can take note of the same even without any pleading.
As I notice considering submission of Mr. A.K.Mitra that the substantial claim of the first defendant has already been paid off and/or secured, prima facie there is hardly any substantial claim left, for adjudication, for the price of the goods, has been paid off, and even interest and costs arising out of price of the goods have also been paid. Other claims namely port charges and custom duties are not required to be paid by the first defendant and the same has to be paid by the third party buyer in India. These facts are not disputed at all. In view of the undisputed fact what relief can be granted by this Court on these two application is the precise task. In my view whatever left over dispute raised by the first defendant can be resolved both by this Court and the learned Arbitrator. I think that having regard to extent and nature of this left over dispute as raised by first defendant adjudication thereof in the arbitration in London would undoubtedly be harassive and excessive for the plaintiff/petitioner as far as cost factor is concerned and on weighing balance of convenience and inconvenience. Hence order of injunction as prayed for by the plaintiff/petitioner would have been passed. But when the plaintiff has already gone to participate arbitration proceeding even on limited point I think I should not pass any order of injunction restraining the parties from participating in the arbitration proceeding for the rest of the dispute including whether the claim has been satisfied or not. As I have observed already having regard to area of left over dispute, it would be extremely hardship as far as cost factor is concerned, order allowing to participate Arbitration would not be unreserved. In case of Modi Entertainment Network -vs.- W.S.G. Cricket PTE Ltd reported in (2003) 4 SCC 341 Supreme Court in paragraph 27 stated on legal position “……….It cannot be laid down as a general principle that once the parties have agreed to submit to the jurisdiction of a foreign Court, the proceedings and the action brought either in the Court of natural jurisdiction or in the Court of choice will per se be oppressive or vexatious. It dependents on the facts of each case and the question whether proceedings in a Court are vexatious or oppressive has to be decided on the basis of the material brought before the Court…………”
While deferentially following above observation I am of the opinion when it is noticed prima facie area of dispute is much less and there is likelihood of claim of the claimant/defendant being dismissed the Court will not allow the party resisting anti arbitration injunction, to participate in arbitration proceedings without conditions even if the Court finds arbitration agreement being valid, operational mechanism between the parties, otherwise it would be oppressive or vexatious.
It appears from the statement in petition that the cost of arbitration would be around 2 lakhs per day apart from the fees of the learned Arbitrator. I direct the first defendant would be entitled to proceed with the arbitration in the event it secures before the hearing of the arbitration proceedings is started, the estimated costs @ 2 lakhs per day likely to be incurred by the plaintiff for participating in arbitration in London. Such securities shall be furnished by bank guarantee(s) in any Indian Nationalized Bank through its own banker or by itself in favour of the plaintiff/petitioner, and such bank guarantee(s) shall be kept valid upon renewal till final decision is taken by the learned Arbitrator. In the event venue of the Arbitration is shifted mutually by the parties, to any place in India, above security will not be required to be furnished. It is made clear in the event the claim of the defendant No.1 is rejected, in the Arbitration the plaintiff will be entitled to encash the said bank guarantee(s) forthwith. If award is passed allowing claim of the first defendant by the learned Arbitrator the bank guarantee(s) so to be furnished shall be returned forthwith. Until the bank guarantee is furnished or the venue of Arbitration is shifted as above, the first defendant and/or its agents or assigns is restrained from proceeding with the arbitration. All the disputes viz. whether there exists any live dispute or not can be decided by the Arbitration. Obviously decision of the Supreme Court reported in 2005 (8) SCC 618 (para 32) is of no relevance now, nor the decision of Court of Appeal in England in case of WJ Alan & Co. Ltd. -vs.- EL Nasr. Export & Import Company reported in (1972) 2 ALL ER 127 is of any help at this stage. Any observation of this Court on merit if any, must be ignored. (K. J. Sengupta, J.)