Calcutta High Court
R. Piyarelall Import & Export Ltd vs Glencore Grain B.V on 20 March, 2015
Author: Soumen Sen
Bench: Soumen Sen
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
Original Side
Present:
The Hon'ble Justice Soumen Sen
GA No. 2480 of 2013
CS No. 173 of 2009
R. PIYARELALL IMPORT & EXPORT LTD.
Versus
GLENCORE GRAIN B.V.
For the Petitioner : Mr. S.K. Kapur, Sr. Adv.,
Ms. Mausumi Bhattacharya,
Mr. Sounak Mitra,
Mr. Tarun Aich
For the Respondent : Mr. Ratnanko Banerjee, Sr.Adv.,
Mr. Kuldeep Mallick, Mr. Kausik Chatterjee, Mr. Asoke Bhoumik Heard On : 04.08.2014, 18.08.2014, 29.10.2014, 10.11.2014, 31.11.2014, 02.02.2015, 04.02.2015, 16.02.2015, 18.02.2015, 02.03.2015, 04.03.2015 Judgment On : 20th March, 2015 Soumen Sen, J.:- Glencore, the sole defendant in the suit, has filed this application essentially for dismissal of the suit.
The application has been made under Order 7 Rule 11 read with Section 151 of the CPC.
The plaintiff has filed a suit against the defendant praying, inter alia, for declarations that there was no contract either dated June 10, 2008 or June 17, 2008 between R. Piyarelall Import & Export Ltd. (hereinafter referred to as "RPI") and Glencore and further declarations that no arbitration agreement exists between the parties and for perpetual injunction to restrain Glencore from proceeding further with arbitration before GAFTA and certain incidental reliefs.
The plaintiff is a dealer in peas and pulses. The defendant is an exporter of French yellow peas.
The summaries of the facts made out in the plaint are: -
i) A contract dated 17th April, 2008 was entered between Glencore and State Trading Corporation of India Ltd. (hereinafter referred to as "STC") for sale by Glencore of a quantity of 21,500 metric tonnes of French yellow peas on agreed terms and conditions;
ii) Subsequently, the plaintiff (hereinafter referred to as "RPI") entered into an agreement dated 19th May, 2008 with STC for purchase of 21,500 metric tonnes of French yellow peas on high sea sale basis and any quality or quantity claim was to be lodged and pursued by STC at the cost of RPI but the claim proceeds would be reimbursed to RPI; and no claim would lie against STC by reason of any quality or quantity claim;
iii) In performance of their contract STC opened a Letter of Credit through Vijaya Bank in favour of Glencore.
iv) In terms of the contract dated April 17, 2008, Glencore shipped 18,106.698 MT of goods in seven consignments from Rouen, France, to the Port of Navasheva, Mumbai;
v) Glencore obtained payment for the entire quantity of goods shipped by invoking the letter of credit upon presentation of the required documents.
vi) Upon inspection at Navasheva, Mumbai, of all the seven consignments shipped by Glencore only one consignment covered by Bill of Lading No.MSCUFU510761 conformed to the specifications and the other contractual specifications.
vii) The quality of the goods were found to be substandard. The plaintiff could only sell 19.920 metric tonnes and that too at a lower price of Rs.18,410 MT.
viii) The goods under the aforesaid six consignments were of un-merchantable quality and by reason thereof, the plaintiff had suffered loss and damages being the price paid for the entire balance quantity of 16084.982 M.Ts French Yellow Peas. The expenses incurred by the plaintiff for the said goods was US$1156460.65 which is equivalent to Indian Rs.47,41,53,190/- at the prevailing exchange rate.
ix) By reason of the breach of the terms of the contract by the defendant, the plaintiff had suffered loss and damages for the sum of Rs.47,41,53,190/-.
x) The plaintiff on 16th June, 2009 received a notice from the defendant at its office at 12, Government Place (East), Kolkata to a claim for arbitration and in the said notice, there is reference to an alleged contract dated 10th June, 2008 allegedly replacing another alleged contract dated 17th April, 2008.
By the said notice, the defendant has informed the plaintiff that they were claiming arbitration in accordance with the Rule of Grain & Feed Association in respect of the alleged contract dated 10th June, 2008 for the same of 21,000 M.Ts, 5% more or less, of French Yellow Peas and one Mr. Libre has been appointed as Arbitrator by the defendant.
xi) There is no contract dated 10th June, 2008 between the plaintiff and the defendant and there is a contract dated 17th April, 2008 between STC and the defendant for the sale of 21,500 M.Ts, 5% more or less, of French Yellow Peas pursuant to which 18106.698 M.Ts of French Yellow Peas have been shipped and payment has been obtained under the said letter of credit for such quantities.
xii) There is no agreement dated 10th June, 2008 between the parties as alleged and no goods have been shipped into India pursuant to any contract between the plaintiff and the defendant and claim for arbitration in the notice dated 16th June, 2009 is illegal, null and void.
xiii) On the basis of the aforesaid notice dated 16th June, 2009, on 18th June, 2009 and 19th June, 2009, the defendant by various e-mails of the above mentioned dates sought to serve on the plaintiff a copy of an application for obtaining order of injunction along with other documents in connection with the arbitration proceedings. Subsequent to serving such documents, an order of injunction has been obtained on 19th June, 2009 to restrain the plaintiff from proceeding with C.S. No.151 of 2009 except for the purpose of obtaining security for any claim.
xiv) The proceeding initiated by the defendant is an afterthought and has been filed with mala fide intention and is a counter-blast to the suit of the plaintiff. The defendant has no cause to go to arbitration as there is no contract or contract of arbitration between the plaintiff and defendant in which any French Yellow Peas have been shipped to India. The only subsisting contract is the contract dated 17th April, 2008 between the defendant and STC. The defendant is threatening the plaintiff with malicious proceeding by way of arbitration.
Under such facts and circumstances the plaintiff has filed the above suit. The undisputed facts emerging from the pleadings of the parties are that Glencore and RPI had entered into a contract on 17th April, 2008 being Contract No. 624330 for sale on settled terms and conditions of an agreed quantity of peas to be dispatched to India.
The existing contract was replaced between the same parties on 10th June 2008 with certain fresh terms and conditions being incorporated but the contract continued to be numbered as Contract No. 624330.
The original contract as well as the substituted contract contained an arbitration clause by virtue whereof all disputes are to be referred to arbitration at London in accordance with GAFTA Rules.
Glencore alleged to have performed its obligation and exported the goods to India and realized payment from the bankers in accordance with the Letters of Credit.
On 23rd December 2008, STC claiming to be the buyer in Contract No. 624330 filed a suit being CS No. 266 of 2008 praying, inter alia, for injunction restraining payments being made by the bankers under the L/Cs. Initially, STC obtained an ex parte order of injunction but since payments had been released by Glencore prior thereto, the said suit has now become infructuous.
Subsequently, STC and RPI as joint plaintiffs filed an instant suit being C.S. No.173 of 2009 alleging, inter alia, that the goods exported were defective in quality and claimed a decree for Rs.48 crore and other incidental reliefs.
On 16th June 2009, Glencore filed arbitration proceedings against STC before GAFTA in London seeking declaration that STC was not the buyer under Contract No. 624330 and that the disputes under that contract were covered by arbitration agreement. The said proceeding was numbered as Arbitration Case No. 13-944 in the records of GAFTA.
On the same day, Glencore also filed a separate proceeding before GAFTA against RPI in relation to the disputes arising out of Contract No. 624330 at London and claimed various declaratory reliefs. This second reference was numbered as Case No. 14-207.
On 18th June 2009, Glencore instituted proceedings in the English High Court seeking orders inter alia restraining STC and RPI from taking any steps in respect of C.S. No. 151 of 2009 in this Hon'ble Court since Glencore had already invoked arbitration and orders were made thereon.
Subsequent thereto, on 23rd June 2009, RPI filed the instant suit being Suit No. 173 of 2009 for a declaration that there was no contract between Glencore and RPI and for injunction restraining Glencore from proceeding with arbitration in London and other reliefs.
Initially an ex parte order was passed on July 7, 2009 in the interlocutory application filed by RPI in Suit No. 173 of 2009 restraining Glencore from proceeding with arbitration in London against RPI.
On 5th May 2010, an award was passed in Arbitration Case No. 13-944 holding, inter alia, that no contract existed between STC and Glencore and that there was no arbitration agreement between them. However, no further reliefs were granted in that arbitration to Glencore.
The ex parte interim order passed in Suit No. 173 of 2009 was recalled by an order dated October 6, 2010, inter alia, holding that Contract No. 624330 appeared prima facie to have been entered into between Glencore and RPI. The said order of the Learned Single Judge was affirmed upto the Hon'ble Supreme Court.
Although the orders were passed at the ad interim stage but the findings of the learned Single Judge and the Hon'ble Division Bench has a bearing in view of the findings arrived at by the GAFTA Tribunal in relation to the said contract. The learned single Judge, inter alia, held:-
"As rightly argued by Mr. Kapur both under English law, the Indian Law as also the GAFTA Rules, the Arbitral Tribunal is competent to rule out its own jurisdiction. The question of jurisdiction of the Arbitral Tribunal can be raised before the Arbitral Tribunal itself. Moreover, as per the GAFTA Rules, the issue of whether the disputes referred are arbitrable or not is also to be decided by the Arbitral Tribunal itself.
A fraud is an act of deliberate deception and/or misrepresentation, to induce another to do an act which he would not have done, but for such deception and/or misrepresentation and get an unfair advantage. Particulars of fraud must be pleaded.
As rightly argued by Mr. Mitra, serious allegations of fraud might more conveniently be adjudicated in a Civil Court. However, an arbitration agreement cannot be set at naught and the forum agreed upon by the parties avoided by recourse to mere allegations of fraud, vague and devoid of material particulars. The onus is on the party alleging fraud to make out a strong prima facie case of fraud in its pleadings.
In the petition the allegation of fraud is vague and devoid of any particulars whatsoever. The plaintiff-petitioner has failed to make out any prima facie case of fraud. The factual issue of whether the agreement sought to be relied upon, has at all been executed by and/or on behalf of the plaintiff-petitioner, might be decided on evidence, in arbitration. In any case under the scheme of 1996 Act, there is no question of stay of arbitration proceedings even though a civil suit might have been instituted to agitate issues of fraud.
This Court passed the interim order having regard to the assertion of the plaintiff-petitioner that there was no contract at all executed on 10th June, 2008. The aforesaid submission is apparently incorrect. Prima facie there is an agreement executed on 10th June, 2008 between Glencore and the plaintiff-petitioner, which has duly been signed, stamped and dated by and/or on behalf of the plaintiff-petitioner. Whether the agreement was, in fact, signed, stamped and dated by the plaintiff-petitioner is a factual dispute which the Arbitral Tribunal is competent to adjudicate.
As observed above, there is apparently a contract between the plaintiff-petitioner and Glencore. The contract is apparently signed, stamped and dated by and/or on behalf of the plaintiff-petitioner. The fact that letters of credit might have been furnished by STC or bills of lading might have been issued in the name of STC is of no consequence. A bill of lading is intended to provide for the rights and liabilities of the parties arising out of the contract of affreightment and is not evidence of contract of sale of goods.
The plaintiff-petitioner obtained the interim order of this Court by suppression of facts. The petition is thus dismissed and the interim order earlier passed by this Court is vacated."
The Hon'ble Division Bench affirmed the order by reiterating that:
"the plaintiff has failed to prove any prima facie case that there was no agreement between the parties or consequently, there was no arbitration clause for resolving the disputes by way of arbitration. In the absence of any prima facie case, the other two factors for grant of injunction become redundant. In this case, the plaintiff has also nominated its arbitrator pursuant to the agreement and at the same time, is trying to avoid arbitration agreed to by the parties.
We, therefore, find that the learned Single Judge, in the facts of the present case, rightly refused the prayer for injunction restraining the defendant from proceeding with the arbitration and we find no reason to interfere with the discretion exercised by her.
Any reasonable individual having regard to Section 3 of the Evidence Act would in the facts of the present case arrive at the same conclusion that the plaintiff has failed to prove prima facie case. We have pointed out that even no particular of any fraud has been alleged for avoiding the agreement dated June 10, 2008 which substituted the earlier agreement of April, 2008."
On 5th April 2012, GAFTA made and published an award in Arbitration Case No. 14-207 holding inter alia that Contract No. 624330 was concluded between Glencore and RPI which contained the arbitration clause and Glencore had duly performed its obligation by supplying the goods under the contract. It was further held that the purported quality claims were baseless and there was no breach of contract by Glencore at all.
On 19th July 2012, RPI filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside of the award. The said application was summarily rejected by an order dated 5th April 2012.
No proceedings subsequent thereto have been taken or initiated by RPI vis- à-vis the award dated 5th April 2010. The said award, accordingly, has attained finality.
On 8th May 2014, appeal preferred by Glencore against the award dated 5th May 2010 was upheld by the GAFTA Court of Appeal and further reliefs regarding costs were granted to Glencore.
Mr. S. K. Kapoor, the learned senior Counsel appearing on behalf of the petitioner submits that by reason of the award passed by the Tribunal, the continuation of the suit by the plaintiffs against the defendant would be tortuous and vexatious. In view of the GAFTA award, all issues which could have been raised at trial of the suit have been settled once and for all by the Arbitral Tribunal and the said award would operate as res judicata in the suit.
It is submitted that the above suit does not disclose any cause of action and is barred on several grounds by law.
It is argued that the principal reliefs claimed in the suit are decrees to restrain arbitration proceeding in the United Kingdom. In other words, RPI wants anti-suit perpetual injunctions to be granted in its favour in the above suit permanently restraining Glencore from proceeding with the admittedly pending arbitration proceedings in the United Kingdom.
The learned Senior Counsel submitted that the law on this point is well- settled that anti-suit injunctions which have the effect of interfering with the jurisdiction of another Court in a foreign country, particularly having regard to the principles of comity of courts, is a jurisdiction which the Court would hardly invoke.
Mr. Kapoor has referred to a Division Bench decision of this Court in LMJ International Ltd. Vs. Sleepwell Industries Co. Ltd. & Anr. reported at 2013 (1) CAL LT 301 (HC) and the decision of the Hon'ble Supreme Court in Chatterjee Petrochem Co. & Anr. Vs. Haldia Petrochemicals Ltd. reported at 2014 (184) Company Cases 1 (SC).
It is submitted that in Chatterjee Petrochem (supra) it was expressly held that suits filed for declarations and injunctive reliefs in the face of arbitration clauses providing for foreign arbitral proceedings were not sustainable in law and liable to be dismissed in limine.
The next contention is that since arbitration proceedings have been finally held and concluded the present suit has now become infructuous. The suit, in fact, has spent its life and the continuation of the suit would be an abuse of the process of law.
The learned senior Counsel has submitted that it is pertinent to take note of the fact that the plaintiff participated in the matter of appointment of arbitrator and also participated in the hearings of the arbitral proceedings which took place in the United Kingdom. The plaintiff is aware of the awards.
The only relief which the plaintiff could now seek with regard to the awards would be those envisaged by statute, that is, English Law in the United Kingdom or alternatively under Part-II of the 1996 Act. There is no scope for granting any of the reliefs claimed in the suit.
Since the subject-matter of the suit has been finally and conclusively adjudicated and decided by the arbitral tribunal, the plaintiff as on date cannot have any cause of action and, in fact, no cause of action is surviving as on date to proceed with the suit. The cause of action, if any, with regard to the filing of the suit has now merged with the award passed by the arbitral tribunal and by reason of such merger, the supposed cause of action of the plaintiff has evaporated with regard to the remainder of the suit, that is to say, the declaration that there is no agreement dated 17th April, 2008 or 10th June, 2008 between the plaintiff and the defendant. It is submitted that the basis of such claim has now been falsified by the findings in the arbitration proceedings and no longer survives for adjudication having regard to the award made by GAFTA.
It is submitted that in view of the GAFTA award, all issues which could have been raised at the trial of the suit have been settled once and for all by the arbitral tribunal. The learned Senior Counsel has submitted that the width and ambit of power given to the court under Order 7 Rule 11 read with Section 151 of the Code of Civil Procedure permits the court to read into the plaint, the real and correct facts which have been purposely distorted and manipulated with a view to create an illusion of a cause of action. The learned Senior Counsel has referred to the decisions of the Hon'ble Supreme Court in Mayar (H.K.) Ltd. & Ors. vs. M. V. Fortune Express & Ors. reported at 2006 (3) SCC 100, SJS Business Enterprises Pvt. Ltd. v. State of Bihar reported at 2004 (7) SCC
166. It is submitted that having regard to the scheme of the Code and the inherent power that the Court possesses to do substantive justice, it is a duty of the Court in such a situation, on full consideration of the materials on record to form an opinion if the suit is vexatious or an abuse of process of the Court in the sense that it is bogus and irresponsible litigation, and in the event the answer is in the affirmative, the Court should dismiss the suit in limine. The learned senior Counsel has referred to the decisions in Municipal Corporation of Delhi Vs. Kamla Devi & Anr. reported at 1996(8)SCC 285 and Sopan Sukhdeo Sable & Ors. Vs. Assistant Charity Commissioner & Ors. reported in 2004(3)SCC 137 in support of the said submission.
Aue-contraire, Mr. Ratnanko Banerjee, learned senior Counsel appearing on behalf of the respondent submits that the application filed by the defendant- applicant is misconceived and proceeded on a complete misreading of the provisions of Order 7 Rule 11 or Section 151 of the Code of Civil Procedure. In an application for rejection of plaint under Order 7 Rule 11, the Court is required to find out if on the date of presentation of the plaint it discloses a cause of action. Any subsequent event cannot be taken into consideration in deciding the said application. The law with regard to the dismissal of a suit is based on the principle that the reasons for dismissal must exist as on the date of filing of the suit, that is, either the plaint itself has failed to disclose any cause of action or there is some material suppression which exists as on the date of the filing of the suit. The averments made in the plaint are only required to be looked into for the purpose of considering an application for rejection of the plaint. In the application, the defendant has alleged that the allegations in the plaint are false and that the entire case made out by the plaintiff is based on fraudulent misrepresentation and distortion of dealings. The defendant thereafter sets out the facts, which according to them, are correct facts in Paragraph 5 of the said application.
The defendant has relied on subsequent events after filing of the plaint, namely, findings in interim orders passed in connection with the suit and a foreign award dated 5th April, 2012 passed in England by GAFTA, being a private forum, in support of its prayers for dismissal/rejection. Such facts do not appear from the statements of the plaint and, therefore, cannot be looked into.
There is no provision in law for rejection of plaint or dismissal of suit on such grounds. The defendant's case in the dismissal application is really their defence in the written statement and, therefore, the same cannot be considered for the purpose of rejection of a plaint. The cases relied upon by the defendant in this regard are:-
i) Sopan Sukhdeo Sable & Ors. Vs. Assistant Charity Commissioner & Ors. reported at 2004 (3) SCC 137 Paragraph 10 and
ii) Church of Christ Charitable Trust and Educational Charitable Society Vs. Ponniamman Educational Trust reported at 2012 (8) SCC 706 Paragraph 11.
The issue of res judicata raised by the defendant on the basis of issues purportedly decided in the foreign awards cannot be a ground for dismissal of the suit or rejection of the plaint as such issue has to be factually determined on the basis of the evidence, and in any event, the same is a subsequent event. This proposition is well-settled in view of the decisions of the Division Bench of our Hon'ble High Court in Mahamaya Paul Vs. Dipak Kumar Mukherjee & Ors. reported at 2013 (1) ICC 610 and of the Hon'ble Supreme Court in Alka Gupta Vs. Narender Kumar Gupta reported at 2010 (10) SCC 141 (Paragraphs 28 to 34). The conduct of the plaintiff cannot also be a ground for dismissal of the suit as would be clear from the law laid down by the Hon'ble Supreme Court in Alka Gupta (supra).
It is submitted that the instant application is not an application for enforcement of a foreign award under Section 48 of the Arbitration and Conciliation Act. If the defendant is entitled to execute such award then it is for them to proceed with the execution under Section 48 of the Arbitration and Conciliation Act, 1996. The instant application for dismissal cannot be used indirectly for enforcing a foreign award resulting in dismissal of a validly instituted civil suit in a competent court in India. A trial procedure in a foreign private forum and an award passed on such basis may not be relevant for adjudication of a properly instituted suit before a competent court of India.
The case of the defendant is really an answer to the merits of the suit, whether the plaintiff will be able to obtain a declaration or not is the subject matter of the final outcome in the suit. The interim orders relied upon by the defendant, even if it is affirmed by the Hon'ble Supreme Court cannot be relevant in the matter of trial of the suit. The defendant has not been able to show as to how an award subsequently obtained can be used for the purpose of dismissal of the plaintiff's suit.
Further when a party prays for a declaration of an agreement to be illegal, void and inoperative, inter-alia, on ground of fraud, such relief can only be given by a civil court and not by arbitration. (Atul Singh v. Sunil Kumar Singh reported at 2008 (2) SCC 602 Paragraph 17 and G.E. Capital Transportation Financial Services Ltd. v. Amritajit Mitra reported at 2009 (2) CAL LT 321 (HC) Paragraph 21 and Ghyanshyamdas Baheti v. Jamuna Transport Corporation reported at AIR 2011 Cal 91 Paragraph 21, 22 and
24) It is submitted that the cases cited by Mr. Kapur, the learned Senior Counsel appearing on behalf of the Petitioner, are clearly distinguishable and, in fact, some of the decisions in support of the contention of the plaintiffs that on the grounds stated in the application, the suit cannot be dismissed. The decision in Mayar's case relating to dismissal of a suit on the ground of suppression is not applicable in the instant case. The suppression was with regard to a Forum Selection Clause and an applicable law of Singapore. In the instant case, there is no such suppression. It was held in the said decision that only plaint can be considered. In Mayar's case the suit was, however, not dismissed.
The other decisions on dismissal proceeded on the basis that if on a meaningful reading of the plaint, it appears to be vexatious and harassing and/or abuse of the process of the Court, the suit may be dismissed. The said decision also recognizes that suppression must exist as on the date of the filing of the suit. In dealing with the arguments that the suit is filed by the plaintiffs are abuse of the process of the Court, it is submitted that unless it is shown that the filing of a suit was improperly done in a favourable jurisdiction by creating/inventing territorial jurisdiction by deceit, falsehood or sharp practice, it cannot be said that the plaintiffs are guilty of abuse of the process of Court. In the instant case, the arbitration proceeding was instituted subsequently and an award was passed. There is no question of creating jurisdiction of the Hon'ble High Court of Calcutta.
The merits of the instant application are required to be decided within the four corners of the Code of Civil Procedure. The Court has power to reject a plaint under Order 7 Rule 11 and also under Section 151 of the Code of Civil Procedure. Even if the application does not bear the nomenclature of Order 7 Rule 11 and Section 151 of the Code of Civil Procedure, the Court on a meaningful reading of the plaint is required to find out if the grounds stated in the plaint calls for dismissal of the suit. Apart from the aforesaid provision, the Court can also exercise its power in striking out pleadings if it appears to the Court that any part of the pleading is unnecessary, frivolous, vexatious or which is otherwise an abuse of the process of the Court. The instance of an abuse of the process of Court would cover matters where there is a suppression of material fact as on the date of institution of the proceeding or in a case where a party is relitigating the same issue which has been tried and decided earlier against him. The re-agitation may or may not be barred under res judicata. But if the same issue is sought to be re-agitated, it also amounts to an abuse of the process of the Court. A proceeding being filed for a collateral purpose, or a spurious claim being made in litigation may also in a given set of facts amount to an abuse of the process of the Court. Frivolous or vexatious proceedings may also amount to an abuse of the process of the Court especially where the proceedings are absolutely groundless. The Court then has the power to stop such proceedings summarily and prevent the time of the public and the Court from being wasted. This principle has been enunciated in K.K. Modi Vs. K.N. Modi & Ors. reported at 1998 (3) SCC 573. However, the Hon'ble Supreme Court has sounded a note of caution by observing that it is a matter of Court's discretion whether such proceedings should be stopped or not and this discretion has to be exercised with circumspection. It is a jurisdiction which should be sparingly exercised, and exercised only in special cases. The Court should also be satisfied that there is no chance of the suit succeeding.
Mr. Kapur, the learned senior Counsel has laid much emphasis on the observations made by the learned Single Bench and the Hon'ble Justice Division Bench with regard to the conduct of the plaintiffs and the view expressed by the Hon'ble Judges with regard to the binding nature of the contract which has since been finally decided and adjudicated by the arbitral tribunal in favour of the defendants.
Mr. Kapur submits that it is a settled principle of law that a suit for declarations to the effect that a contract does not subsist, as prayed for in this case, is ex facie not maintainable under the Specific Relief Act, 1963 since it purports to seek negative declarations not contemplated under Section 34 of that Act.
The Section does not contemplate bare declarations without pecuniary liability. Thus, a suit for a bare declaration, namely, that a contract does not subsist or that the plaintiff is not liable for specific performance is not maintainable. (Mahabir Jute Mills Vs. Kedar Nath; AIR 1960 All 254) The scope of the section has been a matter of debate and there seems to be a conflict of opinion. The Calcutta view was that the section is not exhaustive of the circumstances in which a declaration may be granted. (Sachindra Vs. Mahendra; AIR 1934 Cal 155) The conflict, however, has now been settled by the decision of the Hon'ble Supreme Court in Rama Rajhava Reddy Vs. Sesha Reddy reported at AIR 1967 SC 436 and reaffirmed and reiterated in Supreme General Films Vs. H.H. Maharaja Baijnath Singhji Deo reported at AIR 1975 SC 1810. The view expressed in the said decisions is that the section is not exhaustive of the class of cases in which declaratory decree may be given, and laid down the principle that the Courts have got the power to grant such a decree independently of the requirements of Section 34.
The award is declaratory in nature.
The plea for rejection of the plaint is based on the award and abuse of the process of the Court.
The real issue required to be decided in the application is consequent upon the award if the suit is required to be dismissed.
It is an indisputable fact that the suit was filed to restrain the defendant from proceeding with the arbitration. The learned Single Judge as well as the Hon'ble Division Bench, prima facie, held that there is a valid arbitration agreement between the parties. Consequent thereupon the parties participated in the arbitration proceeding which has culminated in an award. Under the relevant rules of arbitration it was open for the defendant to question the jurisdiction of the arbitral tribunal. In fact, the arbitral tribunal has come to a finding that the contract was validly concluded between the defendant as seller and the plaintiff as buyer. This award has attained finality.
In Bharat Aluminium Company Vs. Kaiser Aluminium Technical Services Inc. reported at 2012 (9) SCC 552 in Paragraph 176 it was held that as a matter of law, an inter-parte suit simply for interim relief pending arbitrations, even if it be limited for the purpose of restraining dissipation of assets would not be maintainable. There would be number of hurdles which the plaintiff would have to cross, which may well prove to be insurmountable. It was further held that pendency of the arbitration proceedings outside India would not provide a cause of action for a suit where the main prayer is for injunction.
In the instant case, the entire suit is based on the pendency of arbitration proceedings in a foreign country. If the cause of action in the suit is founded on initiation of a arbitration proceeding in a foreign country, it is not open for a party to file a suit touching on the merits of the arbitration. As observed in BALCO (supra) if such a suit was to file it would in all probabilities be stayed in view of Sections 8 and 45 of the Arbitration Act, 1996.
The observations made by the learned single Judge and the Hon'ble Division Bench concerning the issue with regard to the concluded contract between the parties have now attained finality in the award. The Court is required to take into consideration the whole fact in order to ascertain if the continuation of the suit would be vexatious or an abuse of the process of Court. It has to be remembered that this suit was filed subsequent to a suit filed by STC and the present plaintiff against the defendant and after initiation of the arbitration proceeding before the GAFTA. The plaintiff did not take any steps under Section 45 of the Arbitration and Conciliation Act nor has filed any application for setting aside of the award before appropriate Court. Mr. Kapur would submit that in view of the observation made by the Hon'ble Supreme Court in Chatterjee Petrochem (supra) that Section 5 of the Arbitration and Conciliation Act, 1996 would even apply to Part-II of the Arbitration Act, there would be a complete bar to proceed with the suit.
In Chatterjee Petrochem (supra), the Hon'ble Supreme Court reiterated the view expressed in Venture Global Engineering v. Satyam Computer Services Ltd. reported at 2008 (4) SCC 190 in which it is held that Section 5 of the Act which falls in Part-I specifies that no judicial authority shall intervene except where so provided. The Scheme of the Act is such that the general provisions of Part -I including Section 5, would apply to all Chapters or Parts of the Act. This view was, however, diluted in a larger Bench decision of the Hon'ble Supreme Court in BALCO (supra). However, there is an observation in Paragraph 100 of the judgment that if the agreement is held to provide for a "seat"/"place" outside India, Part I would be inapplicable to the extent inconsistent with the arbitration law of the seat, even if the agreement purports to provide that the Arbitration Act, 1996 shall govern the arbitration proceedings. In paragraph 197 of the judgment, the Hon'ble Supreme Court observed that the law laid down in the said judgment would apply prospectively to all arbitration agreements executed hereafter. In the instant case, the arbitration commenced on 16th June, 2009 and the award was passed on 5th April, 2012. In such circumstances, the ratio of Venture Global (supra) would be applicable in the instant case and the suit must be held to be barred on the date of filing of the suit.
The argument made by Mr. Banerjee that fraud is alleged in the plaint and in view of the decisions relied upon by the plaintiff, such issue is required to be decided at the trial of the suit cannot be accepted. In view of the decisions of the Hon'ble Supreme Court in World Sports Group (Mauritius) Ltd. Vs. MSM Satelite (Singapore) Pte. Ltd. reported at 2014 (11) SCC 639 and Swiss Timing Ltd. Vs. Commonwealth Games 2010 Organising Committee reported at 2014 (6) SCC 677, the Tribunal has jurisdiction to decide the said issue. In any event, it was for the plaintiff before the said Tribunal to allege and prove that there was a fraud perpetrated by the defendant upon the plaintiff. The Tribunal has the jurisdiction to decide the issue relating to fraud. There is, in fact, no material difference in the language of the two provisions of Sections 8 and 45 of the Act.
The decision in World Sports (supra) insulates New York Convention arbitrations held outside India from disruptions caused by intervention of Courts on account of parties alleging fraud. It is stated in the said decision that in the case of arbitrations covered by the New York Convention, the Court can decline to make a reference of a dispute covered by the arbitration agreement only if it comes to the conclusion that the arbitration agreement is null and void, inoperative or incapable of being performed and not on the ground that allegations of fraud or misrepresentation have to be inquired into while deciding the disputes between the parties.
In England after the enactment of Section 7 of the UK Arbitration Act, 1996, Courts have held that accusations or fraud are in principle capable of falling within the scope of its agreement to arbitrate.
In any event, having regard to the fact that the award encompasses all the issues conceived or could have been agitated by the plaintiff, the continuation of the suit, in my view, would be an abuse of the process of the Court. Moreover, I am of the view that there is no chance of succeeding in the suit. Under such circumstances, the application filed by the defendant being G.A.2480 of 2013 is allowed. The suit being C.S.No.173 of 2009 is dismissed.
Urgent xerox certified copy of this judgment, if applied for, be given to the parties on usual undertaking.
(Soumen Sen, J.)