A.M.Shikar vs Kohinoor International General ... on 30 April, 2012

[Cites 23, Cited by 0]

Kerala High Court

A.M.Shikar vs Kohinoor International General ... on 30 April, 2012

This appeal arises from the order passed by the Court of the Subordinate Judge of Kochi on 31.5.2016 on I.A.No.676 of 2015 in O.S.No.12 of 2015. By that order, the court below dismissed the application filed by the appellant under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act" for short) to pass an order referring the parties to arbitration and dismissing the suit. The brief facts of the case are as follows:

2. The respondent herein is a company registered at Dubai, United Arab Emirates. It is engaged in the business of trading in cashew nuts. It instituted O.S.No.12 of 2015 in the Court of the Subordinate Judge of Kochi through its power of attorney, joining the appellant as the defendant and prayed for a decree allowing it to realise from the defendant the sum of Rs. 1,59,99,733.20 together Arb.Appeal No.39/2016 2 with interest at 12% per annum from the date of suit till realisation.

The respondent has in the plaint averred that it had supplied cashew nuts to the defendant on various occasions pursuant to a contract entered into between them on 30.4.2012 and yet another contract entered into on 17.5.2012. It is contended that though it has performed its obligations under the contract, the defendant who has taken delivery of the cashew nuts has committed breach of contract by not paying the amounts stipulated in the purchase contracts. The plaintiff has a further contention that the defendant is also liable to pay to it 10% of the contract value as penalty. Going by the averments in the plaint, the plaint claim of Rs. 1,59,99,733.20 consists of the sum of Rs.60,65,155.20 being the amount due for the cashew nuts supplied as per the agreement dated 30.4.2012, the sum of Rs.52,87,719.70 being the value of the cashew nuts supplied as per the agreement dated 17.5.2012 and Rs.11,35,287.30 being the amount payable as penalty. O.S.No.12 of 2015 was instituted in the Court of the Subordinate Judge of Kochi on 18.2.2015. Along with the plaint, the respondent had produced copies of the agreements dated 30.4.2012 and 17.5.2012, besides various other documents.

3. Upon receipt of summons, the appellant/defendant entered Arb.Appeal No.39/2016 3 appearance and filed I.A.No.676 of 2015 on 3.6.2015 under Section 8 of the Act with a prayer that an order may be passed referring the parties to arbitration and dismissing the suit. On the very same day, the appellant/defendant also filed his written statement which bears the date 27.5.2015. The appellant has in paragraph 3 of the affidavit filed by him in support of I.A.No.676 of 2015 contended that plaint item 2 and 12 contracts (meaning thereby the contracts entered into on 30.4.2012 and 17.5.2012, copies of which were produced along with the plaint and are mentioned at serial Nos.2 and 12 of the list of documents accompanying the plaint), contain identically worded arbitration agreements and therefore, the Sub Court does not have jurisdiction to proceed with the suit. The appellant contended that he is prepared and willing to have the dispute resolved by recourse to arbitration as provided in the contracts between the parties. The relevant averments in that regard contained in paragraphs 3, 4, 5 and 6 of the affidavit filed by the defendant in support of I.A.No.676 of 2015 are extracted below:

"3. It is submitted that plaint item 2 & 12 contracts contain arbitration agreement in writing. Clause 15 of both the contracts are similarly phrased. It reads as follows.

Cl. 15 Rules of Governance This contract is governed by the rules of Arbitration of Arb.Appeal No.39/2016 4 UAE (United Arab Emirates) and the same shall be applicable in the unlikely event that the sellers and the buyers are unable to resolve their disputes through amicable mutual discussions.

4. It is submitted that despite several discussions, earnest attempts for negotiations etc, the dispute between the parties remain unresolved. I am always prepared and ready and willing for the course of arbitration as provided.

5. It is submitted that I have filed detailed written statement today and the various statements therein may be treated as forming part of this affidavit also to avoid repetitions.

6. In view of the clear arbitrations agreement, this Hon'ble Court ceases to exercise jurisdiction to proceed further with the suit and has to refer the parties to contractual arbitration and dismiss the suit. Hence it is most humbly prayed that this Hon'ble Court may be pleased to pass an order referring the parties to arbitration and dismiss the suit."

A similar contention was raised in paragraph 5 of the written statement as well.

4. The respondent/plaintiff opposed I.A.No.676 of 2015 by filing a written objection dated 31.8.2015. The plaintiff contended that the application is belated and cannot therefore be entertained. It also contended that the defendant has already filed his written statement in the suit and submitted to the jurisdiction of the court and therefore, the application under Section 8 of the Act, filed after the submission of Arb.Appeal No.39/2016 5 the written statement, is liable to be dismissed on that short ground. The plaintiff further contended that though clause 15 of the contract stipulates that the contract is governed by the rules of arbitration of United Arab Emirates and the same shall apply in the unlikely event that the sellers and buyers are unable to resolve their disputes through amicable mutual discussions, the said clause does not contemplate reference of the parties to arbitration. It was contended that in order to to oust the jurisdiction of civil court, there must be a specific contract between the parties to that effect. The respondent/plaintiff further contended that the Act is applicable only within the territory of India, that clause 15 of the contract stipulates that contract is governed by rules of arbitration of United Arab Emirates and therefore, the Sub Court, Kochi does not have jurisdiction to refer the parties to arbitration invoking Section 8 of the Act. It also contended that there is no agreement between the plaintiff and the defendant to refer the parties to arbitration. The relevant averments in that regard contained in paragraph 3 to 6 of the objections dated 31.8.2015 filed by the respondent/plaintiff to I.A.No.676 of 2015 are extracted below:

"3. At the outset it is submitted that the above petition is highly belated and cannot be entertained at this juncture. It is submitted that the defendant has already filed his written statement in the above case and submitted to the Arb.Appeal No.39/2016 6 jurisdiction of this Honourable Court. The present petition is filed after the submission of his written statement and on that ground itself the above petition is liable to be dismissed.

4. It is true that in clause 15 in the contract states that this contract is governed by The Rules of Arbitration of UAE (United Arab Emirates) and the same shall be applicable in the unlikely event that the sellers and the buyers are unable to resolve their disputes through amicable mutual discussions. It is submitted that the aforesaid clause does not contemplate the reference of parties to the arbitration. In order to oust the jurisdiction of civil court, there must be specific contract between the parties to that effect. Unless there is specific contract between the parties to refer the parties for arbitration in case of dispute, the civil court cannot refer the parties for arbitration. Since the clause 15 of the contract does not stipulate referring of the parties to the arbitration, the aforesaid petition is liable to be dismissed.

5. The Arbitration and Conciliation Act, 1996 is applicable only within the territory of India. The clause 15 states that this contract is governed by the Rules of Arbitration of UAE (United Arab Emirates). Hence this honourable court lacks jurisdiction to refer the parties for arbitration under section 8 of the Arbitration and Conciliation Act 1996.

6. It is submitted that there is no agreement between the plaintiff and defendant for referring the disputes to the arbitration. The defendant did not come forward for any negotiation to resolve the dispute. There is no requirement for referring the parties to arbitration. There is no bonafides in the petition and the attempt of the defendant is to delay the proceedings."

5. The Court of the Subordinate Judge of Kochi considered the rival contentions and dismissed I.A.No.676 of 2015 by order passed on 31.5.2016. The court below held that as the application to refer the parties to arbitration was filed only on 3.6.2015 and along with the said application, the written statement was also filed, it cannot be said Arb.Appeal No.39/2016 7 that the party has applied not later than the date of submitting his first statement on the substance of the dispute. The court below also held that the original of the arbitration agreement or a duly certified copy thereof has also not been produced. The court below did not however consider the question whether Section 8 of the Act would apply to the case on hand. The defendant has, aggrieved thereby, filed this appeal.

6. We heard Sri.N.D.Premachandran, learned counsel appearing for the appellant and Sri.V.M.Kurian, learned counsel appearing for the respondent. Sri.N.D.Premachandran, learned counsel for the appellant submitted that the court below erred in holding that the defendant's application under Section 8 of the Act was filed after the written statement was submitted and in further holding that the application under Section 8 is not accompanied by the original arbitration agreement or a duly certified copy thereof. Learned counsel contended that in the instant case, I.A.No.676 of 2015 was filed on 3.6.2005, that on the same daily the defendant had also filed his written statement and therefore, merely for the reason that the written statement was also filed on the same day, it cannot be said that the application under Section 8 of the Act was filed later than the date of submission of the written statement on the substance of the Arb.Appeal No.39/2016 8 dispute. Relying on the decision of a learned single Judge of the Jammu & Kashmir High Court in Ajit Singh and Ors. v. Shri Mata Vaishno Devi Shrine Board, Katra [AIR 2002 J and K 108] and the decision of a learned single Judge of the Karnataka High Court in Ramakrishna Theatre Limited, rep. by Chairman v. General Investments and Commercial Corporation Limited, rep. by its Director [AIR 2003 Kant 502] learned counsel contended that if an application under Section 8 of the Act is filed simultaneously with the written statement, it cannot be said that the application is one made after the point of time when the first statement on the substance of the dispute was submitted. Inviting our attention to the decisions of this court in N.I.I.T Ltd. v. Manoharan [2005 (3) KLT 1025], Natarajan v. General Manager, Southern Railway [2006 (2) KLT 390] and Radha N. v. Deepa Restaurant and Bar Attached & Ors. [2014 (1) KLT S.N.19 = 2014 KHC 2502] learned counsel contended that the original or a certified copy of the agreement containing the arbitration clause is required to be produced only to enable the court to find out whether the agreement in question contains an arbitration clause and in cases where the plaintiff himself has produced a copy of the agreement, that would satisfy the requirement of sub section (2) Arb.Appeal No.39/2016 9 of Section 8 of the Act. Learned counsel contended that the order passed by the court below dismissing I.A.No.676 of 2015 is therefore liable to be set aside and the application allowed.

7. Per contra, Sri.V.M.Kurian, learned counsel appearing for the respondent/plaintiff contended that Section 8 of the Act has no application to international commercial arbitration and therefore, the very application was not maintainable. Learned counsel also submitted that though in the objections filed to I.A.No.676 of 2015, the plaintiff had contended that the court below lacks jurisdiction for the reason that the Act is not applicable outside the territory of India, the court below has not adverted to that aspect. Learned counsel also invited our attention to the decision of the Constitution Bench of the Apex Court in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. [2012 (9) SCC 552] and submitted that Part 1 of the Act, which takes within its fold, Section 8 of the Act as well, has no application to international commercial arbitration. Learned counsel contended that as clause 15 relied on by the defendant stipulates that the contract between the parties is governed by the rules of arbitration of United Arab Emirates, it ipso facto follows that the Act has no application to the case on hand. Learned counsel appearing for the Arb.Appeal No.39/2016 10 respondent submitted that such being the situation, even assuming for the sake of arguments (it being not conceded) that the reasons stated by the court below are not tenable, the appellant is not entitled to the relief prayed for in I.A.No.676 of 2015.

8. Sri.N.D.Premachandran, learned counsel appearing for the appellant submitted in reply to the contention raised by Sri.V.M.Kurian, learned counsel appearing for the respondent, that though the Apex Court had in Bhatia International v. Bulk Trading S.A. [(2002) 4 SCC 105] held that the provisions in Part 1 of the Act would apply to all arbitration and proceedings relating thereto, the said decision was overruled by a Constitution Bench of the Apex Court in Bharat Aluminium Co. (supra) by judgment delivered on 6.9.2014, that in the said decision it was held that the law thus declared by the Apex Court shall apply only prospectively to all arbitration agreements executed thereafter and therefore, as the agreements in the instant case were executed on 30.04.2012 and 15.5.2012 prior to the decision of the Apex Court in Bharat Aluminium Co. (supra), the rights of parties would stand governed by the decision of the Apex Court in Bhatia International (supra). Alternatively, learned counsel contended that the Act was amended by Ordinance 9 of 2015, which Arb.Appeal No.39/2016 11 was promulgated on 23.10.2015, whereby the Act underwent substantial amendments, that Ordinance 9 of 2015 was replaced by the Arbitration and Conciliation Amendment Act, 2015, Act 3 of 2016 and that the Act as amended makes it evident that even Part 1 of the Act applies to international commercial arbitration. Inviting our attention to the proviso to sub section (2) of Section 2 of the Act as amended, learned counsel contended that by virtue of the said proviso, clause (a) of sub section (1) of Section 37 of the Act is made applicable to international commercial arbitration, that Section 37(1)

(a) of the Act provides for an appeal from an order refusing to refer the parties to arbitration under Section 8 of the Act and therefore, it necessarily follows that Section 8 applies to international commercial arbitration as well. Learned counsel also invited our attention to the provisions contained in Section 11 of the Act as amended and submitted that even in respect of international commercial arbitration, the remedy provided under Section 11 of the Act is available before the Honourable the Supreme Court of India.

9. We have considered the submissions made at the Bar by learned counsel appearing on either side. We have also gone through the pleadings and the materials on record including the plaint, the Arb.Appeal No.39/2016 12 written statement, the affidavit filed in support of I.A.No.676 of 2015 and the averments in the objections filed by the plaintiff. The instant suit, instituted by a company incorporated in Dubai is one for realization of amounts due under 2 contracts, one dated 30.04.2012 and another dated 17.5.2012 as also the penalty payable in terms of the stipulations therein. The suit was instituted on 18.2.2015. Upon receipt of notice, the appellant/defendant entered appearance and filed I.A.No.676 of 2015 contending that the contract between the parties contains an arbitration agreement and therefore, the suit is not maintainable. I.A.No.676 of 2015 was filed on 3.6.2015. On the same day, the appellant/defendant had also filed his written statement, wherein also such an objection was put forward. The written statement was returned to cure defects and it was re-presented on 24.6.2015. In view of the fact that the application filed under Section 8 of the Act was presented along with the written statement, the court below took the stand that the application under Section 8 was later than the date of submitting the first statement on the substance of dispute. The court below also held that as the original arbitration agreement or a duly certified copy thereof does not accompany the application, for that reason also it cannot be entertained. We are Arb.Appeal No.39/2016 13 afraid, the court below committed an error in dismissing the application under Section 8 of the Act on those grounds.

10. As stated earlier, the written statement was filed only on 3.6.2016. It was returned as defective and it was re-presented only on 24.6.2016. The application under Section 8 of the Act on which the impugned order was passed was presented along with the written statement on 3.6.2016. A learned single Judge of the High Court of Jammu and Kashmir has in a case where the petition under Section 8 of the Act was presented along with the objections to the application for condonation of delay held that the expression "not later than the date of submitting his first statement on the substance of the dispute"

indicates that the application under Section 8 can be made simultaneously with the filing of the first statement. Vide Ajit Singh and Ors. v. Shri Mata Vaishno Devi Shrine Board, Katra (supra), it was held that had the intention of the legislature been otherwise, as was the case under Section 34 of the Arbitration Act, 1940, the wording of Section 8 would have been altogether different. The learned single Judge held that in a case where the first statement and the application in terms of Section 8 are simultaneously filed, it cannot be said that the application has not been filed at the stage envisaged by Arb.Appeal No.39/2016 14 Section 8 of the Act. The same view was taken by a learned single Judge of the Karnataka High Court in Ramakrishna Theatre Limited (Supra). In that case it was held that the expression "if the party so applies not later than the date of submitting his first statement of defence" means that such an application can be presented along with the first statement and not necessarily prior to the filing of the first statement. In that case, as the application was belatedly made, relief was however declined.

11. The expression "not later than when submitting his first statement on the substance of the dispute", occurring in Section 8(1) of the Act as it originally stood (the expression w.e.f 23.10.2015 is "not later than the date of submitting his first statement on the substance of the dispute") arose for consideration before the High Court of Gujarat in Varun Seacon Ltd. vs. Bharath Bijlee Ltd. [AIR 1998 Guj. 99]. The Gujarat High Court held that the mere filing of an application for adjournment of the suit to file a written statement, would not debar the defendant from prosecuting the application under Section 8 of the Act. After comparing the provisions contained in Section 8 of the Act with the provisions contained in Section 34 of the Arbitration Act, 1940, the Gujarat High Court held as follows: Arb.Appeal No.39/2016 15

"Now, the underlined words in sub-s.(1) of S.8 make a clear departure from the legal position as contained in S.34 of the Old Act, under which if the defendant had filed an application for adjournment for filing written statement, it was treated as taking a step in the suit proceedings and therefore, it was held that in such a case the suit was not required to be stayed at the instance of a defendant who had displayed an intention to proceed with the suit and acquiesce in the method of resolution of dispute adopted by the plaintiff, namely filing of the suit and thereby indicated that it had abandoned its right under the arbitration agreement to get the dispute resolved by arbitration. Realizing that such an interpretation was bringing about anomalous results and frustrating the laudable object of the arbitration law, the legislature has advisedly made a clear departure from the earlier position and, therefore, now a party is disentitled from getting stay of the suit only if the party has earlier submitted its statement on the substance of the dispute, that is, if earlier the defendant has filed its reply on merits."

12. In N.I.I.T Ltd. v. Manoharan (supra), a learned single Judge of this court considered the meaning of the expression 'substance of the dispute' occurring in Section 8 of the Act. In that case, the suit was one for realisation of the sum of Rs.46,03,684/- claimed under different heads. The plaintiff was a franchisee of the defendant. The plaintiff's case was that the defendant without authority appointed another franchisee and thus occasioned loss to the plaintiff. The agreement between the parties contained an arbitration clause. The plaintiff had instituted the suit along with an application for leave to file the suit as an indigent person. The defendant did not appear in that application which was filed as O.P(Indigent) No.92 of Arb.Appeal No.39/2016 16 2000 and contest it even after receipt of notice. After that application was allowed by order passed on 25.08.2003, the defendant received summons in the suit and he entered appearance and thereafter filed an application under Section 8 of the Act to refer the dispute to arbitration in terms of the stipulations in the agreement between the parties. The plaintiff contended in the objections filed to the said application that as the defendant had remained exparte in the application for leave to file the suit as an indigent person in spite of service of notice, it cannot be said that the application under Section 8 was filed at the first opportunity. The trial court dismissed the application accepting that contention and also the further contention of the plaintiff that the original or a certified copy of the arbitration agreement has not been produced along with the affidavit. Allowing the revision petition filed by the unsuccessful defendant, a learned single Judge of this court held that an application made to the court under Section 8 of the Act is mainly to bring to the court's notice that the subject matter of the dispute before it is governed by an arbitration clause, that the purpose and intent of the Act is to promote resolution of disputes by arbitration and not to take the matter out of the purview of the arbitration, that grant of the relief prayed for in the Arb.Appeal No.39/2016 17 application for leave to file the suit as an indigent person does not visit the defendant with any civil consequences and does not cast any liability on him even if he does not enter appearance in that case and therefore, the view taken by the court below that as the application for reference was not filed at the stage of filing the application for leave to file the suit as an indigent person, the defendant is precluded from filing an application at a later stage, cannot be sustained.

13. As stated earlier, in the instant case, the application under Section 8 of the Act was filed simultaneously with the filing of the written statement. In any case, it is not the case of the plaintiff that the application was filed after the written statement was filed. The court below has also not entered such a finding. There is nothing on record to show that the application under Section 8 of the Act was filed after the defendant filed his written statement. In such circumstances, we hold that the application under Section 8 of the Act which was dismissed by the impugned order was one made at the stage contemplated in Section 8 of the Act.

14. We shall next consider whether the stipulation in sub section (2) of Section 8 of the Act that the application under sub section (1) of Section 8 shall not be entertained unless it is Arb.Appeal No.39/2016 18 accompanied by the original arbitration agreement or a duly certified copy thereof, is mandatory. The question whether the stipulation contained in sub section (2) of Section 8 of the Act that the application referred to in subsection (1) of Section 8 shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof is mandatory arose for consideration before the High Court of Calcutta in ITC Classic Finance Ltd. v. Grapco Mining and Co. Ltd. & Anr. [AIR 1997 Calcutta 397] In that case, xerox copies of the agreements were produced before court and they were relied upon by the plaintiff as well as defendants. There was also no dispute that the copies were true copies of their originals. The Calcutta High Court held that production of xerox copies of the agreement containing the arbitration clause would constitute sufficient compliance with the requirement of sub section (2) of Section 8 of the Act. A similar question arose before the High Court of Punjab and Haryana in Parampal Singh & other v. Punjab State Ware House Corpn., Chandigarh & Ors. [AIR 2000 P & H 53]. It was held that if the original of the arbitration agreement or a duly certified copy of the arbitration agreement has been already produced by the other party, the production of another certified copy or the original of the Arb.Appeal No.39/2016 19 arbitration agreement by the party invoking Section 8 of the Act cannot be insisted upon.

15. In N.I.I.T. Ltd. (supra) a learned single Judge of this court held that as the plaintiff had in that case produced the originals of the 3 agreements referred to and relied on by him along with the plaint, the court below was not justified in dismissing the application under Section 8(1) of the Act on the ground that the defendant who made the application for reference did not produce the original or a certified copy. The same view was reiterated by another learned single Judge of this court in Natarajan v. General Manager, Southern Railway [2006 (2) KLT 390]. It was held that the word `accompany' occurring in sub section (2) of Section 8 of the Act must be reasonably and realistically understood and in a case where the agreement is already before the court, non-production of the original or a copy of the agreement along with the application is not fatal. The same view was taken in yet another decision of this court in Radha N. v. Deepa Restaurant and Bar Attached and Ors [2014 (1) KLT S.N 19 = 2014 KHC 2502]. In the light of the principles laid down in the decisions referred to above, with which we concur, we hold that the court below committed an error when it held that the application under Arb.Appeal No.39/2016 20 Section 8 was not filed at the proper stage and was defective.

16. This should have necessarily resulted in the relief prayed for in I.A.No.676 of 2015 being granted. However, in view of the submission made by learned counsel for the respondent/plaintiff that Section 8 of the Act has no application to the case on hand, we will have to necessarily consider whether Section 8 applies to the case on hand before proceeding to grant the relief prayed for in I.A.No.676 of 2015. Section 2 of the Arbitration Act as it stood in force immediately prior to 23.10.2015 stipulated that this part (meaning thereby Part 1 of the Act) shall apply where the place of arbitration is in India. Interpreting the aforesaid provision and the other provisions contained in the Act, a 3 Judges Bench of the Apex Court held in Bhatia International (supra) that provisions of Part 1 of the Act would apply to all arbitrations and to all proceedings relating to arbitration. It was held that where such an arbitration is held in India, the provisions of Part 1 would compulsorily apply and the parties are free to deviate only to the extent permitted by the derogable provisions of part 1. The Apex Court held that in cases of international commercial arbitration held out of India, the provisions of Part 1 would apply unless the parties by agreement, express or implied, exclude all or any of its Arb.Appeal No.39/2016 21 provisions. It was held that in such a case, the laws or rules chosen by the parties would prevail and any provision, in Part I of the Act, which is contrary to or excluded by that law or rules, will not apply. In coming to the said conclusion, the Apex Court held that the wording of sub section (2) of Section 8 of the Act suggests that the intention of the legislature was to make the provisions of Part 1 of the Act compulsorily applicable to all arbitration including international commercial arbitration which takes place in India and that by omitting to provide that Part 1 of the Act will not apply to international commercial arbitration which takes place outside India, the effect would be that Part 1 would also apply to international commercial arbitration held out of India. The Apex Court proceeded on the basis that by not specifically providing that the provisions of Part 1 apply only to international commercial arbitration held out of India, the intention of the legislature appears to be to allow the parties to provide by agreement that Part 1 or any provision thereof will not apply.

17. The decision in Bhatia International (supra) was overruled by a Constitution Bench of the Apex Court in Bharat Aluminium Co. (supra). After a detailed analysis of the relevant provisions contained in the Arbitration Act, 1940, the Foreign Awards Arb.Appeal No.39/2016 22 (Recognition and Enforcement) Act, 1951 and the Arbitration and Conciliation Act, 1996, the Apex Court held that Part I of the Act would have no application to international commercial arbitration held outside India and such awards would only be subject to the jurisdiction of the Indian courts when they are sought to be enforced in India in accordance with the provisions contained in Part II of the Act. The Apex Court held that the provisions of the Act make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Act. The Apex Court also held that the provision contained in Section 2(2) of the Act is not in conflict with any of the provisions either in Part I or Part II of the Act and that in a foreign seated international commercial arbitration no application for interim injunction simpliciter would be maintainable under Section 9 or any other provision as the applicability of Part 1 of the Act is limited to all arbitrations which take place in India. The Apex Court proceeded to hold that no suit for interim injunction simpliciter would be maintainable in India on the basis of an international commercial arbitration with a seat outside India and that Part 1 of the Act is not applicable to all arbitration which take place outside India. The Apex Court however held that as the judgment of Arb.Appeal No.39/2016 23 the Apex Court in Bhatia International (supra) which was rendered on 13.3.2003 was being followed by all the High Courts and by the Apex Court and the same view was reiterated in Venture Global Engg. v. Satyam Computer Services Ltd. [2008 (4) SCC 190] which was decided on 10.01.2008, to do complete justice, the law declared in Bharat Aluminium Co. (supra) shall apply only prospectively to all arbitration agreements executed thereafter.

18. In the light of the binding decision of the Apex Court in Bharat Aluminium Co. (supra) which was decided on 6.9.2014, we will have to necessarily hold that Section 8 occurring in Part 1 of the Act can have no application to international commercial arbitration. However, the Apex Court has in the very same judgment held that the law declared by the Apex Court will apply only to arbitration agreements executed on and after 6.9.2014. The agreements in the instant case were entered into on 30.04.2012 and 17.5.2012. Such being the situation, we are of the considered opinion that the application filed by the appellant under Section 8 of the Act (I.A.676 of 2015 in O.S.12 of 2015 on the file of the Court of the Subordinate Judge of Kochi) cannot be thrown out on that score.

19. There is also yet another reason why we are of the opinion Arb.Appeal No.39/2016 24 that the application filed under Section 8 of the Act is maintainable. The Act was amended by Ordinance 9 of 2015 w.e.f 23.10.2015, the date on which the Ordinance was promulgated. The Ordinance was replaced by the Act 3 of 2016. The Act, as amended by Ordinance 9 of 2015 and Act 3 of 2016 has undergone substantial changes. Section 2 (2) of the Act was amended by incorporating the following proviso.

"Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act."

The proviso stipulates that subject to an agreement to the contrary, the provisions of Sections 9, 27, clause (a) of sub section (1) of section 37 and sub section (3) of Section 37 of the Act shall also apply to international commercial arbitration even if the place of arbitration is outside India and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of the Act. Though learned counsel appearing for the respondent contended that the amendment to sub section (2) of Section 2 of the Act by Act 3 of 2016 is of no consequence and by virtue of that alone it cannot be said that Section 8 has application even to international Arb.Appeal No.39/2016 25 commercial arbitration, we find no merit or force in the said contention.

20. The Apex Court has in para.195 of Bharat Aluminium Co. (supra) held that in a foreign seated international commercial arbitration no application for interim relief would be maintainable under Section 9 of the Act or any other provisions of the Act as the applicability of Part 1 of the Act is limited to all arbitrations which takes place in India. The proviso to sub section (2) of Section 2 which was inserted by Act 3 of 2016 w.e.f 23.10.2015 states in express terms that Section 9 shall also apply to international commercial arbitration even if the place of arbitration is outside India. It is also stipulated that clause (a) of sub section (1) of Section 37 of the Act shall also apply to international commercial arbitration. Section 37 (1)(a) is a provision which provides for an appeal from an order refusing to refer parties to arbitration under Section 8. If an appeal can lie from an order refusing to refer the parties to arbitration under Section 8, in an international commercial arbitration, it ipso facto follows that the remedy by way of an application under Section 8 is also available to the parties though it is not expressly stated in the proviso to sub section (2) of Section 8.

Arb.Appeal No.39/2016 26

21. By Act 3 of 2016, Section 8 of the Act was also amended. Section 8 of the Act as it originally stood is extracted below:-

"8. Power to refer parties to arbitration where there is an arbitration agreement:-

(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof;

(3) Notwithstanding that an application has been made under subsection (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."

Section 8 of the Act as it now stands after it was amended by Act 3 of 2016 w.e.f 23.10.2015 reads as follows:

"8. Power to refer parties to arbitration where there is an arbitration agreement:-- [(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.] (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:

[Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition Arb.Appeal No.39/2016 27 praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.] (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made."

22. Sub section (1) of Section 8 of the Act as amended stipulates that notwithstanding any judgment, decree or order of the Supreme Court or any court, a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person under him so applies not later than the date of submitting his first statement on the substance of the dispute, then refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. Sections 2(2) and 8 of the Act as amended by Act 3 of 2016 make the provisions in Part I of the Act applicable to international commercial arbitration as well. The amendments brought about to Section 11 of the Act by Act 3 of 2016 also point to the said fact. After the Act was amended by Act 3 of 2016 even in respect of international commercial arbitration, an application under Section 11 of the Act will lie to the Honourable the Supreme Court of India. We are therefore of the considered opinion that the application filed by the appellant under Arb.Appeal No.39/2016 28 Section 8 of the Act for an order referring the parties to arbitration is maintainable.

23. The respondent/plaintiff has no case that no valid arbitration agreement exists between the parties. The plaintiff also does not dispute the fact that the agreement between the parties contains an arbitration clause. In the objections filed by it to I.A.No.676 of 2015, more particularly paragraph 4 thereof, the plaintiff has admitted the fact that clause 15 of the contract stipulates that the contract is governed by the rules of arbitration of United Arab Emirates and that the same shall be available in the unlikely event that the sellers and buyers are unable to resolve their disputes through amicable mutual discussion. Though it was also contended that the aforesaid clause does not contemplate a reference of the parties to arbitration, we find no merit or force in the said contention. The very stand of the respondent/plaintiff discloses that it has no case that no valid arbitration agreement between the parties is in existence.

For the reasons stated above, we allow the appeal, set aside the impugned order, allow I.A.No.676 of 2015 in O.S.No.12 of 2015 and refer the parties to arbitration. Consequently we hold that O.S.No.12 of 2015 instituted by the respondents in the Court of the Subordinate Arb.Appeal No.39/2016 29 Judge of Kochi is not maintainable. It will be open to the respondents to move the court below for appropriate further orders. No costs.

Sd/-

P.N.RAVINDRAN Judge Sd/-

P.V.ASHA Judge vpv/rtr

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