Bombay High Court
Sah Petroleums Ltd vs Sah Petroleums Ltd on 6 July, 2012
Author: B. R. Gavai
Bench: B. R. Gavai
nmsl2003-12 in suit(l)1725-12-918
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION (Lodging) NO.2003 OF 2012
IN
SUIT (Lodging) NO.1725 OF 2012
SAH Petroleums Ltd. .. Applicant/Orig. Defendant
In the matter between
Seven Islands Shipping Limited .. Plaintiff
Vs.
SAH Petroleums Ltd.
ig .. Defendant
Mr.P.Madan, Sr.Counsel a/w. Mr. Rahul Narichania, Mr. Amitava
Majumdar, Mr. Vishal Mugikar and Mr. Siddharth Ranka i/b. Bose &
Mitra and Co., Advocates for Plaintiff.
Mr. Prashant Pratap a/w. M.R. Khatri, Advocates for the Defendant.
CORAM :- B. R. GAVAI, J.
DATE :- 6th July, 2012.
P. C.:
1. Mr. Madan has strongly objected for entertaining motion on the ground that it is not lodged and that a copy thereof has been served at 11.23 a.m. He however submits that he is willing to go ahead with the preliminary objection of the defendant on the basis of denial of the averment made in the application.
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2. Though I find some substance in the submissions made by Mr. Madan, I am inclined to entertain the notice of motion as taken out by defendants in the interest of justice.
3. The Notice of motion has been taken out by the defendant raising an objection that in view of the Section 45 of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as the "Said Act") the present dispute between the parties needs to be referred to the arbitration as provided in Clause 24 of the Contract between the parties.
4. Heard Mr. Pratap, learned counsel appearing on behalf of the defendants in support of the objection. Mr. Pratap submitted that Section 45 of the said Act provides that when the Court is 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 and incapable of being performed. Learned counsel relying on the provisions of Section 7 of the said Act r/w. Article II (2) of Schedule I of the said Act, submitted that Arbitration Agreement will have to be inferred from the exchange of emails between the parties.
2/10 ::: Downloaded on - 09/06/2013 18:44:45 :::nmsl2003-12 in suit(l)1725-12-918 Learned counsel has taken me to various emails that have been exchanged between the broker i.e. Seven Islands Shipping Ltd. and the defendant. He submits that perusal of the said emails would reveal that the parties were to be governed by the Asbatankvoy Charterparty and additional clause with the logical amendments. Learned counsel submits that additional clause provides that the arbitration would be held in London according to the English Law. He further submits that perusal of the final fixtures would reveal that though the parties have agreed to abide by Asbatankvoy Charterparty by advertisement, the additional clause with logical amendments is not written by inadvertence. Learned counsel therefore submits that it is necessary that the dispute be referred to arbitration under Section 45 of the said Act and during the pendency of the proceedings the said notice of motion be stayed. Learned counsel further submits that when the plaintiff himself is relying on some clauses in the said agreement i.e. 'Asbatankvoy Charterparty', it cannot say that it is not bound by the arbitration clause.
5. Mr. Madan, learned Senior Counsel appearing for the plaintiff, on the contrary, submits that the plaintiff as well as the defendants both are Companies incorporated in India. He therefore submits that in view of the view taken by the Apex Court in the case of TDM Infrastructure Pvt.
3/10 ::: Downloaded on - 09/06/2013 18:44:45 :::nmsl2003-12 in suit(l)1725-12-918 Ltd. vs. UE Development India Private Limited 2008(2) UJ SC 0721, there cannot be an "International Arbitration Agreement" between two companies incorporated in India and as such assuming without admitting that there is clause which provides for arbitration, in view of clause (ii) of Section 2(1)(f) the same would not be valid. Learned counsel further submits that arbitration clause is a clause which can be severed from the contract and as such the submissions made by the defendant in that regard are without substance.
6. For appreciating rival submission, it will be relevant to refer to certain provisions of the said Act. Clause 2(1)(f) of the said Act reads thus :-
"2(1)(f) "international commercial arbitration" means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is -
i. an individual who is a national of, or habitually resident in, any country other than India; or ii. a body corporate which is incorporated in any country other than India; or iii. a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or iv. the Government of a foreign country;"4/10 ::: Downloaded on - 09/06/2013 18:44:45 :::
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7. It is not the case of either of the parties that there is an agreement between them signed by both the parties. Though it is the case of the defendant that it is concluded contract in view of the exchange of emails between the broker and the defendant, however, the email communications dated 23rd May, 2012, 24th May, 2012 would reveal that the terms which are agreed are only regarding Asbatankvoy Charterparty. It is to be noted that there is no mention regarding the additional clause with logical amendments, in final fixture. In that view of the matter, it appears that there was no agreement between the parties in as much as Clause 24 specifically provides that the place of arbitration shall be mentioned as in part I. Clause A requires that between London and New York, one has to struck off. Though reliance is placed on communication dated 23 rd May, 2012 which is fixtures recap which mentions additional terms, final fixture which according to the defendants is concluded contract, does not refer to additional terms and conditions. It is thus clear that there is nothing on record to show that the parties had agreed to an arbitration to be held at London in accordance with the English Laws.
8. Apart from that I find that reliance placed by the plaintiff on the judgment of the Apex Court in TDM Infrastructure Pvt. Ltd. vs. UE 5/10 ::: Downloaded on - 09/06/2013 18:44:45 ::: nmsl2003-12 in suit(l)1725-12-918 Development India Private Limited 2008(2) UJ SC 0721 is well merited. In the said case, both the companies were incorporated in India, though Directors and the shareholders of the petitioner company were residents of Malaysia, had involved in the Arbitration Agreement.
The application under Section 11 sub-section (9) of the said Act was made before the Hon'ble Chief Justice of India for appointment of an Arbitrator in pursuance to the said provisions. It will be relevant to refer to the provisions of Section 11 sub-section (9) of the said Act:
"Sec.11(9) - In the case of appointment of sole or third Arbitrator in an International commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an Arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities."
9. It can, thus, be seen that powers of the Chief Justice of India or his nominee are with regard to appointment of sole or third Arbitrator in International Agreement. An objection was raised before the Apex Court by respondents that since both the parties are the companies registered in India the Court would not have jurisdiction to entertain such application, in as much as the said Arbitration Agreement cannot be construed to be an "International Commercial Arbitration" as defined under Clause 2(1)(f) of the said Act. The Hon'ble Supreme Court has 6/10 ::: Downloaded on - 09/06/2013 18:44:45 ::: nmsl2003-12 in suit(l)1725-12-918 considered the relevant provisions of the Arbitration Act viz. Section 11 and Section 28. It will be relevant to refer para 12 and 13 of the judgment of the Apex Court wherein the Apex Court considered as to what would be meant by the term "International Commercial Arbitration" :-
"12.Whereas Part I of the 1996 Act deals with domestic arbitration, Part II thereof deals with the Foreign Award.
The term "International Commercial Arbitration"
has a definite connotation. It inter alia means a body corporate which is incorporated in any country other than India. However, according to the Petitioner, it is a company whose central management and control is exercised in any country other than India and, thus, despite the fact that the company is incorporated and registered in India, its central management and control being exercised in Malaysia, it will come within the purview of Clause (iii) of Section 2(1)(f) of the 1996 Act.
13. Whenever in an interpretation clause, the word "means" is used the same must be given a restrictive meaning.
"International Commercial Arbitration" and "Domestic Arbitration" connote two different things. The 1996 Act excludes domestic arbitration from the purview of International Commercial Arbitration. The Company which is incorporated in a country other than India is excluded from the said definition. The same cannot be included again on the premise that its central management and control is exercised in any country other than India. Although Clause (iii) of Section 2(1)(f) of the 1996 7/10 ::: Downloaded on - 09/06/2013 18:44:45 ::: nmsl2003-12 in suit(l)1725-12-918 Act talks of a company which would ordinarily include a company registered and incorporated under the Companies Act but the same also includes an association or a body of individuals which may also be a foreign company. Sub-section (6) of Section 2 of the 1996 Act leaves the parties free to determine certain issues. That freedom shall include the right of the parties to authorize any person including an institution, to determine the same. Thus, in a case of this nature, the Court shall not interpret the words in such a manner which would be opposed to the intention of the parties.
A Statute which provides for an arbitration between the parties and a taxing statute must be interpreted differently. The term "International Commercial Arbitration" even does not find place in the UNICITRAL Model Law. It finds place only in the English Arbitration Act which has also not been given effect to."
10. After considering all the relevant provisions, it is observed thus in para 19 and 20 :
"19.When, thus, both the companies are incorporated in India, in my opinion, Clause (ii) of Section 2(1)
(f) will apply and not the Clause (iii) thereof.
20.Section 28 of the 1996 Act is imperative in character in view of Section 2(6) thereof, which excludes the same from those provisions which parties derogate from (if so provided by the Act).
The intention of the legislature appears to be clear that Indian nationals should not be permitted to derogate from Indian law. This is part of the public policy of the country."
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11. After considering the relevant provisions and various earlier judgments, the Apex Court upheld objections raised on behalf of the respondents and rejected the application, upholding the objection that the Court had no jurisdiction. In my considered view, the Apex Court clearly held in the said case, that when both the companies are incorporated in India, it cannot be an "International Commercial Arbitration" as defined under clause 2(1)(f).
12. No contrary judgment of the Apex Court has been pointed out by Shri Pratap. As a Judge of the High Court, I would be bound by the view taken by the Apex Court.
13. Mandate of Section 45 to refer a dispute to the Arbitrator is also on a condition that the said agreement has to be a legal agreement.
When the Apex Court, in unequivocal terms has held that when both the Companies are incorporated in India an agreement cannot be termed as an "International Arbitration Agreement", I am of the view that since both the plaintiff and the defendants are companies incorporated in India even for the sake of argument, there is an arbitration agreement, it cannot be an "International Arbitration Agreement" and as such not valid in law. However, I may clarify that I have not gone through the question 9/10 ::: Downloaded on - 09/06/2013 18:44:45 ::: nmsl2003-12 in suit(l)1725-12-918 whether in fact there is an arbitration agreement between the parties or not.
14. In that view of the matter, objection as raised, is found to be without substance and the notice of motion is therefore rejected.
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