Calcutta High Court
Lmj International Ltd vs Sleepwell Industries Co. Ltd. & Anr on 29 August, 2017
Author: Soumen Sen
Bench: Soumen Sen
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
BEFORE:
THE HON'BLE JUSTICE SOUMEN SEN
G.A. No.370 of 2013
C.S. No.185 of 2011
LMJ INTERNATIONAL LTD.
Vs.
SLEEPWELL INDUSTRIES CO. LTD. & ANR.
For the Petitioner/Plaintiff : Mr. Surojit Nath Mitra, Sr. Adv.,
Mr. D.N. Sharma, Adv.,
Mr. S. Sarkar, Adv.,
Mrs. S. Mukhopadhyay, Adv.,
Mr. T. Aich, Adv.
For the Defendants/Respondents : Mr. Tilak Kumar Bose, Sr. Adv.,
Mr. Sailendra Jain, Adv., Mr. Asit Dey, Adv.
Hearing Concluded On :21.08.2017. Judgment On :29.08.2017.
Soumen Sen, J.:- The defendant No.1 has filed this application essentially for deletion of the name of the defendant No.1 from the suit. The prayers made in the petition are:-
(a)(i) The plaint filed in the instant suit being C.S. No.185 of 2011 be dismissed;
(ii) Alternatively, the defendant No.1 be deleted from the cause title of the plaint filed in the instant suit;
(b)(i) Stay of all further proceedings in the instant suit;
(ii) Alternatively, stay of all further proceedings in the instant suit as against the defendant No.1;
(c) In the event, prayers (a) and (b) cannot be granted, the disputes in the instant suit be referred to arbitration in accordance with the arbitration agreement contained in the contract dated 25th October, 2010 contained in Annexure "B" hereof;
(d) Injunction restraining the plaintiff from taking any steps and/or further steps in the instant suit until disposal of this application;
(e) Ad interim order in terms of prayers above;
(f) Costs of an incidental to this application be paid by the plaintiff;
(g) Such further order or orders be made and/or direction or
directions be given as to this Hon'ble Court may deem fit and proper;
The foreign award was passed on April 10, 2013 in favour of the respondent No.1 as per GAFTA Rules, 125 in relation to a contract bearing No.#LMJ/SIC/Oct/01 dated 25th October, 2010.
The plaintiff filed a suit on 9th August, 2011 praying, inter alia, for a declaration that there is no agreement between the plaintiff and the defendant No.1 to refer any dispute arising out of the said contract dated 25th October, 2010 to arbitration either as per GAFTA 125 in London or otherwise. In the suit, an interlocutory application was filed in which initially an ex parte ad interim order was passed on 10th August, 2011 restraining the parties to proceed with the arbitration. However, the interim order was vacated by Justice Dipankar Datta on 9th September, 2011.
In an appeal preferred against the said order, the Division Bench by an order dated 28th September, 2012 affirmed the order passed by the learned Single Judge. The applicant/respondent No.1 herein also preferred a cross-objection as it on the limited point that while dismissing the injunction application, the learned Single Judge has observed that the arbitration award shall abide by the results of the suit. The cross-objection was also dismissed.
The instant application, however, was filed prior to the passing of the award. The award is not under challenge. However, during the enforcement of the foreign award, the plaintiff has filed an application under Section 48 of the Arbitration and Conciliation Act, 1996 objecting to the enforceability of the said foreign award.
The applicant/defendant No.1 contends that since a suit challenging an award is not maintainable in this Court, the suit filed has now become infructuous as award has already been passed in the meantime.
Mr. Tilak Kumar Bose, the learned Senior Counsel appearing on behalf of the applicant/defendant has relied upon the decisions of this Court in R. Piyarelall Import & Export Ltd. Vs. Glencore Grain B.V. reported at (2016) 1 WBLR (Cal) 227 and Gujarat NRE Coke Limited & Anr. VS. Jindal Steel & Power Limited & Ors. (G.A. No.3946 of 2014, C.S. No.227 of 2014) dated 3rd December, 2015 for the proposition that in view of the award being passed during the pendency of the suit, the continuation of the suit would be an abuse of the process of Court. It is further submitted on the strength of the said decisions that the defendant was impleaded with an ulterior motive and purpose although the real cause of action is against the defendant No.1.
Mr. Bose has referred to the arbitration clause which records that in case the parties have failed to settle their disputes amicably through negotiation, the dispute shall be submitted to GAFTA, London for arbitration as per GAFTA Clause and Arbitration Rules, 125. The GAFTA Arbitration Rules, 125 lays down that the juridical seat of the arbitration shall be, and is hereby designated pursuant to Section 4 of the Arbitration Act, 1996 as England and the provisions of Arbitration Act, 1996 shall apply to such proceedings. Clause 1.1 and Clause 1.2 are relevant for the present purpose which read:-
"1.1. The provisions of the Arbitration Act, 1996, and of any statutory amendment, modification or re-enactment thereof for the time being in force, shall apply to every arbitration and/or appeal under these Rules save insofar as such provisions are expressly modified by, or are inconsistent with, these Rules. 1.2 The judicial seat of the arbitration shall be, and is hereby designated pursuant to section 4 of the Arbitration Act 1996 as, England."
By signing the contract which contains an arbitration clause, the plaintiff has agreed that all disputes under the contract are to be resolved in London in accordance with the GAFTA Rules, 125 and the Arbitration and Conciliation Act, 1996 (United Kingdom) and in view thereof, the jurisdiction of this Court as a civil court is expressly or impliedly barred. It is submitted that the disputes between the plaintiff and the defendant No.1 arose pursuant to an agreement in writing for the arbitration to which the New York Convention set forth in the First Schedule to the Arbitration and Conciliation Act, 1996 applies. The arbitral tribunal constituted under the GAFTA Rules, 125 is the competent authority to adjudicate the disputes.
Mr. Bose contends that the parties in the instant case have chosen the place of arbitration to be London and that choice brings with it submission to the laws of that country including any mandatory provisions of its law on arbitration.
Mr. Bose contends that this principle laid down by the celebrated Authors Redfern and Hunter on International Arbitration has been accepted by the Hon'ble Supreme Court in two recent decisions in Union of India Vs. Reliance Industries Limited & Ors. reported at (2015) 10 SCC 213 and Eitzen Bulk A/S. V. Ashapura Minechem Ltd. & Anr. reported at AIR 2016 SC 2438.
It is submitted that Union of India (supra) there is a categorical statement that when under the agreement the parties have chosen London as the Venue for arbitration and making English Law to Arbitration Part - I of the Arbitration and Conciliation Act, 1996 would not have any application. This is by necessary implication means that the parties have consciously agreed to resolve their disputes in a foreign forum thereby excluding the application of Part - I to the arbitration proceedings. The award passed in the said proceeding would not be challenged under Section 34 before an Indian Court.
It is submitted that it has been recognized by a long catena of decisions including a recent decision of the Hon'ble Supreme Court in Imax Corporation Vs. M/s. E-City Entertainment (I) Pvt. Ltd. reported at AIR 2017 SCALE 260 that if in pursuance of the arbitration agreement the arbitration took place outside India, there is a clear exclusion of Part-I of the Arbitration Act. It is argued that in the instant case the parties have agreed to have their disputes resolved in terms of the GAFTA Rules, 125 and have taken steps for resolution of disputes by arbitration.
The plaintiff contends that the cause of action of the plaintiff against the defendant/petitioner as pleaded in the plaint is based on a binding contract dated 25th October, 2010 bearing Reference No. LMJ/SIC/OPT/01 was amended on 7th December, 2010. By the said amendment, certain terms and conditions of the contract were amended without affecting all other terms of the contract including the arbitration clause contained in the contract dated 25th October, 2010.
In the suit the plaintiff has sought for cancellation of two letters both dated 28th July, 2011 written by the defendant no.1. The said two letters are letters invoking the arbitration clause by which the disputes were referred to the GAFTA Arbitration in London. The contract between the plaintiff and the petitioner is not in dispute. The said contract contains the arbitration clause which reads:-
"All disputes in connection with the contract of the execution thereof shall be settled amicably by friendly negotiation between the two parties. If no settlement can be reached the case in dispute shall then be submitted GAFTA, London for arbitration as per GAFTA clause for and amendment if any arbitration Rule 125."
It is submitted that by agreeing to arbitration in London and that too, in accordance with the Arbitration Act, 1996 (United Kingdom), the plaintiff and the petitioner have chosen a Forum whereat disputes between the plaintiff and the defendant no.1 arising out of the contract are to be adjudicated. This choice of Forum is in the nature of a jurisdiction clause and in view of such express choice of jurisdiction clause, this Court does not have the jurisdiction to try and adjudicate the dispute between the plaintiff and the defendant no.1.
Mr. Bose has referred to Section 9 of the Code of Civil Procedure and submits that the said Section does not give the petitioner an undefined and indivisible right to a civil suit against the defendant No.1 in respect of the contract dated 25th October, 2010. Section 9 of the Code of Civil Procedure does not permit filing of a suit which is either expressly or impliedly barred.
The plaintiff by signing the contract has agreed that all disputes under the contract are to be resolved in London in accordance with law GAFTA Rules 125 and the Arbitration Act, 1996 (United Kingdom). In view thereof the jurisdiction of this Court is expressly or impliedly barred.
In so far as the defendant no. 2 is concerned the said defendant no.2 neither a necessary nor a property party and has been impleaded as a party with malafide intent and to circumvent the valid and binding arbitration agreement between the plaintiff and the petitioner.
The said defendant is the banker of the plaintiff. The learned Senior Counsel has referred to the aforesaid two decisions by me on similar issues in which it was, inter alia, held that the impleadment of unnecessary party in order to circumvent the arbitration proceedings should not be encouraged and the parties should be referred to arbitration. It is submitted that the petitioner has an independent cause of action against the defendant No.2 for non-payment of the amount under the Bill of Exchange for which a summary suit has been filed under the Order 37 of the Code of Civil Procedure being C.S. No.196 of 2011. The said suit is pending. It is submitted that the plaintiff does not have any cause of action against the defendant No.2 and the said defendant No.2 is neither a necessary nor a proper party.
Mr. Bose has referred to a Division Bench judgment of our Court in P.B. Shah and Co. & Ors. Vs. Chief Executive Officer and Others, reported at AIR 1962 Cal 283 to submit that, in the event, the Court is of the opinion that the entire plaint cannot be rejected, the proper remedy is to strike out the name of the defendant against whom the plaint either does not disclose any cause of action or by reason of any statutory bar or subsequent event the suit cannot be continued against the said defendant. It is submitted that in view of the fact that there is an arbitration clause which mentions seat of arbitration at London and the fact that the entire law would apply. This Court does not have any jurisdiction to try and determine the suit as against the defendant No.1.
Per contra, Mr. Surojit Nath Mitra, learned Senior Counsel appearing on behalf of the plaintiff submits that this application is not maintainable in view of the dismissal of cross-objection filed by the applicant/defendant against the observation made by Justice Dipankar Datta in His Lordship's order dated 9th September, 2011 "any action taken by the parties to the suit during its pendency shall be subject to and abide by the result of the suit". It is submitted that by reason of the said observation, the plaintiff possibly was advised not to participate in the arbitration proceeding as both the trial court and the Division Bench has preserved the right of the plaintiff and in this jurisdiction any order allowing the application would be a modification and/or sitting in appeal over the order passed by the Division Bench. It is submitted that the law applicable to the arbitration agreement in the present case is English Law and, accordingly, Part-I of the Indian Arbitration Act stands impliedly excluded as expressly held by the Hon'ble Supreme Court in Bharat Aluminium Company Vs. Kaiser Aluminium Technical Services Inc. reported at 2014 (4) SCC 126, accordingly, Section 5 of the Arbitration and Conciliation Act, 1996 cannot have any manner of application in the instant case. Moreover, the right of the plaintiff to institute the suit under Section 9 of the Code of Civil Procedure is an inherent right which cannot be defeated and in fact is not curtailed by the 1996 Act which does not create a bar in filing a suit. The plaintiff has the choice to file a suit in this jurisdiction and as it is the most suitable forum the suit is filed in this Court. Irrespective of the merits of the claim the suit can neither be stayed nor dismissed.
Mr. Mitra has referred to the decision of Hon'ble Supreme Court in Dhannalal Vs. Kalawatibai & Ors. reported at (2002) 6 SCC 16 to submit that in case of conflict of jurisdiction the choice ought to lie with the plaintiff to choose the most suitable forum unless expressly excluded by a statute. Mr. Mitra has relied upon the decision of the Hon'ble Supreme Court in Abdul Gafur & Anr. Vs. State of Uttarakhand & Ors. reported at (2008) 10 SCC 97 Paragraph 16 to show the circumstances in which a plaint can be rejected. It is submitted that the plaint has to be read as a whole for the purpose of ascertaining whether it discloses cause of action and a plea of bar to jurisdiction of a Civil Court has to be considered having regard to the contentions raised in the plaint. Mr. Mitra strenuously argued that since the plaintiff has made out an arguable case of law and fact it cannot be contended on a meaningful reading of the plaint that the claim is manifestly vexatious and meritless in the sense of not disclosing a clear right to sue, this provision cannot be resorted to and the issues must stand to trial.
Mr. Mitra referred to a decision of the Hon'ble Supreme Court in Kamala & Ors. Vs. K.T. Eshwara SA & Ors. reported at (2008) 12 SCC 661 for the proposition that in deciding an application under Order 7 Rule 11(d), no amount of evidence can be looked into and at that stage the issues on merit of the matter would not be within the realm of the Court. This argument is made on an anticipation that the Court may eventually hold the suit against the defendant No.1 to be not maintainable in view of the award being passed in the meantime. Mr. Mitra submits that the question of res judicata is always a mixed question of law and fact and at this stage the Court cannot embark upon an enquiry as to whether the issues in the suit as well as the arbitration were same and the decision by the arbitral tribunal would operate as a res judicata in this proceeding. Mr. Mitra submits that this submission finds support in V. Rajeshwari Vs. T.C. Saravanabava reported at (2004) 1 SCC 551.
In the instant case, the seat of the arbitration is specified in the Arbitration clause, however, there is no express choice of the law governing the contract. There is an express agreement that any arbitration would be governed by the GAFTA Arbitration Rules, 125. The contract contains an arbitration clause which says that if no settlement can be reached the case in dispute shall then be submitted to GAFTA, London for arbitration as per GAFTA clause for rice and amendment if any and arbitration rule 125. In a situation where the parties have not expressly chosen the law governing the contract as a whole or the arbitration agreement in particular the law of the country where the arbitration is agreed to be held has primacy. In the instant case, an express choice has been made by the parties regarding the conduct of the arbitration that is GAFTA London.
Where the proper law of contract is expressly chosen by the parties, such law must, in the absence of any contrary intention govern the arbitration agreement though collateral or ancillary to the main contract is nevertheless part of such contract. In cases of international commercial arbitrations held outside India provisions of Part-II would apply unless the parties by agreement express or implied exclude all or any of its provisions. It is now well-settled that the law of the country where arbitration is held that will govern the arbitration and matters relating thereto such as a challenge to the award. The relationship between seat of the arbitration and the law governing arbitration is an integral one. This matter has been recently discussed in Imax Corporation (supra) in which the earlier decisions of the Hon'ble Supreme Court was considered and reliance was placed on passages from Redfern and Hunter on International Arbitration, 5th Edition. The relevant Paragraphs read:-
"50. The view that it is the law of the country where arbitration is held that will govern the arbitration and matters related thereto such as a challenge to the award is well entrenched. In Dozco India (P) Ltd. (supra), this Court observed:-
"In the absence of express agreement, there is a strong prima facie presumption that the parties intend the curial law to be the law of the 'seat' of the arbitration i.e. the place at which the arbitration is to be conducted, on the ground that that is the country most closely connected with the proceedings. So in order to determine the curial law in the absence of an express choice by the parties it is first necessary to determine the seat of the arbitration, by construing the agreement to arbitrate."
51. The relationship between the seat of arbitration and the law governing arbitration is an integral one. The seat of arbitration is defined as the juridical seat of arbitration designated by the parties, or by the arbitral institution or by the arbitrators themselves as the case may be. It is pertinent to refer to the following passage from Redfern and Hunter (supra):-
"This introduction tries to make clear, the place or seat of the arbitration is not merely a matter of geography. It is the territorial link between the arbitration itself and the law of the place in which that arbitration is legally situated:
When one says that London, Paris or Geneva is the place of arbitration, one does not refer solely to a geographical location. One means that the arbitration is conducted within the framework of the law of arbitration of England, France or Switzerland or, to use an English expression, under the curial law of the relevant country. The geographical place of arbitration is the factual connecting factor between that arbitration law and the arbitration proper, considered as a nexus of contractual and procedural rights and obligations between the parties and the arbitrators.
The seat of arbitration is thus intended to be its centre of gravity."
52. Further, in the same work on International Arbitration by Redfern and Hunter (supra), the following passage emphasizes the connection between the lex arbitri and lex fori:-
"Parties may well choose a particular place of arbitration precisely because its lex arbitri is one which they find attractive. Nevertheless, once a place of arbitration has been chosen, it brings with it its own law. If that law contains provisions that are mandatory so far as arbitration are concerned, those provisions must be obeyed. It is not a matter of choice any more than the notional motorist is free to choose which local traffic laws to obey and which to disregard."
53. Thus, it is clear that the place of arbitration determines the law that will apply to the arbitration and related matters like challenges to the award etc, see Eitzen Bulk A/S (supra).
54. The significant determinant in each case is the agreement of the parties as to the place of arbitration and where in fact the arbitration took place.
55. If in pursuance of the arbitration agreement, the arbitration took place outside India, there is a clear exclusion of Part-I of the Arbitration Act. In the present case, the parties expressly agreed that the arbitration will be conducted according to the ICC Rules of Arbitration and left the place of arbitration to be chosen by the ICC. The ICC in fact, chose London as the seat of arbitration after consulting the parties. The arbitration was held in London without demur from any of the parties. All the awards i.e. the two partial final awards, and the third final award, were made in London and communicated to the parties. We find that this is a clear case of the exclusion of Part-I vide Eitzen Bulk A/S (supra), and the decisions referred to and followed therein."
In Imax Corporation (supra) the seat of arbitration was London and, therefore, Part-I was held to be not applicable. The reasons are in Paragraph 58 of the report which reads:-
"58. Therefore, the two reasons for Part-I not being applicable are as follows:-
(i) Parties agreed that the seat maybe outside India as may be fixed by the ICC; and
(ii) It was admitted that the seat of arbitration was London and the award was made there."
Another decision of the Hon'ble Supreme Court in Indus Mobile Distribution Pvt. Ltd. Vs. Datawind Inovations Private Limited & Ors. reported at 2017 SCC OnLine SC 442 may be mentioned at this stage although the said decision was rendered in relation to a domestic award but the law relating to International Commercial Arbitration having a seat outside India was considered also in the said decision. In the said decision, it was held that an agreement as to the seat of arbitration is analogous to an exclusive jurisdiction clause and in arriving at the said conclusion the Hon'ble Supreme Court has referred to few English decisions on this point. The relevant observations of the Hon'ble Supreme Court in this regard are:-
"True, that in an international commercial arbitration, having a seat in India, hearings may be necessitated outside India. In such circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but it would not have the effect of changing the seat of arbitration which would remain in India. The legal position in this regard is summed up by Redfern and Hunter, The Law and Practice of International Commercial Arbitration (1986) at p. 69 in the following passage under the heading "The Place of Arbitration":
"The preceding discussion has been on the basis that there is only one 'place' of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of the reference or the minutes of proceedings or in some other way as the place or 'seat' of the arbitration. This does not mean, however, that the Arbitral Tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is by no means unusual for an Arbitral Tribunal to hold meetings--or even hearings--in a place other than the designated place of arbitration, either for its own convenience or for the convenience of the parties or their witnesses.... It may be more convenient for an Arbitral Tribunal sitting in one country to conduct a hearing in another country-- for instance, for the purpose of taking evidence.... In such circumstances, each move of the Arbitral Tribunal does not of itself mean that the seat of arbitration changes. The seat of the arbitration remains the place initially agreed by or on behalf of the parties."
This, in our view, is the correct depiction of the practical considerations and the distinction between "seat" [Sections 20(1) and 20(2)] and "venue" [Section 20(3)]. We may point out here that the distinction between "seat" and "venue" would be quite crucial in the event, the arbitration agreement designates a foreign country as the "seat"/"place" of the arbitration and also selects the Arbitration Act, 1996 as the curial law/law governing the arbitration proceedings. It would be a matter of construction of the individual agreement to decide whether:
(i) the designated foreign "seat" would be read as in fact only providing for a "venue"/"place" where the hearings would be held, in view of the choice of the Arbitration Act, 1996 as being the curial law, or
(ii) the specific designation of a foreign seat, necessarily carrying with it the choice of that country's arbitration/curial law, would prevail over and subsume the conflicting selection choice by the parties of the Arbitration Act, 1996." [paras 98 - 100]
12. In an instructive passage, this Court stated that an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause as follows:
"Thus, it is clear that the regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being conducted. Such a court is then the supervisory court possessed of the power to annul the award. This is in keeping with the scheme of the international instruments, such as the Geneva Convention and the New York Convention as well as the Uncitral Model Law. It also recognises the territorial principle which gives effect to the sovereign right of a country to regulate, through its national courts, an adjudicatory duty being performed in its own country. By way of a comparative example, we may reiterate the observations made by the Court of Appeal, England in C v. D [2008 Bus LR 843 : 2007 EWCA Civ 1282 (CA)] wherein it is observed that:
"It follows from this that a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award." (emphasis supplied) In the aforesaid case, the Court of Appeal had approved the observations made in A v. B [(2007) 1 All ER (Comm) 591 : (2007) 1 Lloyd's Rep 237] wherein it is observed that:
"... an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy ... as to the validity of an existing interim or final award is agreed to be made only in the courts of the place designated as the seat of arbitration." (emphasis supplied) [para 123]
13. The Constitution Bench's statement of the law was further expanded in Enercon (India) Ltd. v. Enercon Gmbh, (2014) 5 SCC 1. After referring to various English authorities in great detail, this Court held, following the Constitution Bench, as follows:
"It is accepted by most of the experts in the law relating to international arbitration that in almost all the national laws, arbitrations are anchored to the seat/place/situs of arbitration. Redfern and Hunter on International Arbitration (5th Edn., Oxford University Press, Oxford/New York 2009), in Para 3.54 concludes that "the seat of the arbitration is thus intended to be its centre of gravity". In Balco [Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810], it is further noticed that this does not mean that all proceedings of the arbitration are to be held at the seat of arbitration. The arbitrators are at liberty to hold meetings at a place which is of convenience to all concerned. This may become necessary as arbitrators often come from different countries. Therefore, it may be convenient to hold all or some of the meetings of the arbitration in a location other than where the seat of arbitration is located. In Balco, the relevant passage from Redfern and Hunter has been quoted which is as under: (SCC p. 598, para 75) "75. ... 'The preceding discussion has been on the basis that there is only one "place" of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of reference or the minutes of proceedings or in some other way as the place or "seat" of the arbitration. This does not mean, however, that the Arbitral Tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is by no means unusual for an Arbitral Tribunal to hold meetings--or even hearings--in a place other than the designated place of arbitration, either for its own convenience or for the convenience of the parties or their witnesses.... It may be more convenient for an Arbitral Tribunal sitting in one country to conduct a hearing in another country -- for instance, for the purpose of taking evidence.... In such circumstances each move of the Arbitral Tribunal does not of itself mean that the seat of arbitration changes.
The seat of arbitration remains the place initially agreed by or on behalf of the parties.' (Naviera case [Naviera Amazonica Peruana S.A. v. Compania Internacional De Seguros Del Peru, (1988) 1 Lloyd's Rep 116 (CA)] , Lloyd's Rep p. 121)" (emphasis in original) These observations have also been noticed in Union of India v. McDonnell Douglas Corpn. [(1993) 2 Lloyd's Rep 48]" [para 134]
14. This Court reiterated that once the seat of arbitration has been fixed, it would be in the nature of an exclusive jurisdiction clause as to the courts which exercise supervisory powers over the arbitration. (See: paragraph 138).
15. In Reliance Industries Ltd. v. Union of India, (2014) 7 SCC, 603, this statement of the law was echoed in several paragraphs. This judgment makes it clear that "juridical seat" is nothing but the "legal place" of arbitration. It was held that since the juridical seat or legal place of arbitration was London, English courts alone would have jurisdiction over the arbitration thus excluding Part I of the Indian Act. (See: paragraphs 36, 41, 45 to 60 and 76.1 and 76.2). This judgment was relied upon and followed by Harmony Innovation Shipping Limited v. Gupta Coal India Limited and Another, (2015) 9 SCC 172 (See: paragraphs 45 and 48). In Union of India v. Reliance Industries Limited and Others, (2015) 10 SCC 213, this Court referred to all the earlier judgments and held that in cases where the seat of arbitration is London, by necessary implication Part I of the Arbitration and Conciliation Act, 1996 is excluded as the supervisory jurisdiction of courts over the arbitration goes along with "seat".
16. In a recent judgment in Eitzen Bulk A/S v. Ashapura Minechem Limited and Another, (2016) 11 SCC 508, all the aforesaid authorities were referred to and followed. Paragraph 34 of the said judgment reads as follows:
"As a matter of fact the mere choosing of the juridical seat of arbitration attracts the law applicable to such location. In other words, it would not be necessary to specify which law would apply to the arbitration proceedings, since the law of the particular country would apply ipso jure. The following passage from Redfern and Hunter on International Arbitration contains the following explication of the issue:
"It is also sometimes said that parties have selected the procedural law that will govern their arbitration, by providing for arbitration in a particular country. This is too elliptical and, as an English court itself held more recently in Breas of Doune Wind Farm it does not always hold true. What the parties have done is to choose a place of arbitration in a particular country. That choice brings with it submission to the laws of that country, including any mandatory provisions of its law on arbitration. To say that the parties have "chosen" that particular law to govern the arbitration is rather like saying that an English woman who takes her car to France has "chosen" French traffic law, which will oblige her to drive on the right-hand side of the road, to give priority to vehicles approaching from the right, and generally to obey traffic laws to which she may not be accustomed. But it would be an odd use of language to say this notional motorist had opted for "French traffic law". What she has done is to choose to go to France. The applicability of French law then follows automatically. It is not a matter of choice. Parties may well choose a particular place of arbitration precisely because its lex arbitri is one which they find attractive. Nevertheless, once a place of arbitration has been chosen, it brings with it its own law. If that law contains provisions that are mandatory so far as arbitration are concerned, those provisions must be obeyed. It is not a matter of choice any more than the notional motorist is free to choose which local traffic laws to obey and which to disregard." [para 34] (emphasis supplied) The conflict between the substantive law and the procedural law in a situation where there is no express choice of law has been succinctly stated in the authoritative book on the subject by Dicey, Morris and Collins in the "Conflict of Laws", 15th Edition. It is stated thus:
"If there is an express choice of law to govern the arbitration agreement, that choice will be effective, irrespective of the law applicable to the contract as a whole. (See. Naviera Amazonica Peruana SA v. Cia International de Seguros del Peru [1988] 1 Lloyd's Rep. 116, 119) If there is an express choice of law to govern the contract as a whole, the arbitration agreement may also be governed by that law. (See. International Tank & Pipe SAK v Kuwait Aviation Fuelling Co. KSG [1975] Q.B. 224 (CA)."
"If there is no express choice of the law to govern either the contract as a whole or the arbitration agreement, but the parties have chosen the seal of the arbitration, the contract will frequently (but not necessary) be governed by the law of that country on the basis that the choice of the seat is to be regarded as an implied choice of the law governing the contract. (See. Egon Oldendorff v. Libera Corp [1995] 2 Lloyd's Rep. 64). In each of these cases, the main contract and the arbitration agreement will be governed by the same law."
"If there is no choice of law to govern the contract as a whole, and the selection of the seat of the arbitration is not treated as an implied choice of the law of that place to govern the contract, (See.
Atlantic Underwriting Agencies Ltd. v Compagnie di Assicurazione di Milano [1979] 2 Lloyd's Rep. 240) the question arises whether the arbitration agreement is governed by the law applicable to the contract or by the law of the seat of the arbitration. It has been held that to determine the governing law, it is not permissible to look at the arbitration agreement in isolation; regard should be had to the surrounding circumstances, including the law governing the substantive contract. Nevertheless, the law of the seat of the arbitration will apply if the circumstances point to an implied intention to choose the law of that place to govern the arbitration agreement. (See. C v. D [2007] EWCA Civ 1282, [2008] Lloyd's Rep 239). In such cases the law governing the arbitration agreement will be different from the law governing the substantive contract. In Deutsche Schachtbau v. Shell International Petroleum Co. Ltd. [1990] 1 A.C. 295 it was held that an arbitration agreement providing for arbitration in Geneva under the auspices of the ICC was governed by Swiss law, notwithstanding that the contract, which was to be performed in R'As Al Khaimah, had been held by the arbitral tribunal to the governed by general principles of law." (emphasis supplied) "Even if the choice of the seat does not point to an implied intention to choose the law governing the arbitration agreement, there is an argument for saying that the arbitration agreement should nonetheless be governed by the law of the seat; an arbitration agreement is severable form the contract of which it forms a part and is normally more closely connected with the country of the seat than with any other country."
"Party autonomy in the choice of the law to govern arbitral procedure is expressed in the choice of a seat for the arbitration. This "seat" is in most cases sufficiently indicated by the country chosen as the place of the arbitration. For such a choice of place not to be given effect as a choice of seat, there will need to be clear evidence that the parties agreed to choose another seat for the arbitration; and that such a choice will be effective to endow the courts of that country with jurisdiction to supervise and support the arbitration. The concept of the "seat" of the arbitration is a juridical concept. The legal "seat" must not be confused with the geographically convenient place chosen to conduct particular hearings. (See. Shashoua v Sharma [2009] EWHC 957)."
"The courts of the seat will have the sole supervisory and primary supportive function in relation to the conduct of the arbitration, save where there has been an express and effective choice of a different lex arbitri, in which event the role of the courts of the seat will be limited to those matters specified by their own law as internationally mandatory, i.e, non-degorable, even where an express choice of a different lex arbitri has been made by the parties. Where the parties have expressly chosen the seat of their arbitration, it is the courts at the seat which have exclusively supervisory jurisdiction to determine claims for a remedy going to the existence or scope of the arbitrator's jurisdiction, or to allegations of bias".
In deciding the present application, it has to be seen whether the continuation of the suit would be an abuse of the process of the Court, having regard to the fact that an award was passed during the pendency of the suit.
In the interlocutory proceeding, there is a clear finding by Justice Dipankar Datta that the parties have signed the contract which contains the arbitration agreement. The Division Bench while affirming the order has observed that "the impact of the arbitration on the suit or vice-versa at this stage is also not required to be gone into would all depend upon the progress of both the matters". Admittedly, the award was passed after the order of the Division Bench.
The plaintiff having failed to obtain any stay of arbitration proceeding cannot seek a fresh adjudication of the issues decided by the arbitral tribunal on the basis of the claim lodged by the defendant No.1. The plaintiff could not have maintained the suit in view of the arbitration agreement. Although, a prayer is made in the petition in the alternative to refer the dispute to arbitration but the said prayer is now become redundant in view of the fact that an award has already been passed. In any event, referring the dispute to arbitration would have been automatic by reason of the existence of the arbitration clause as the plaintiff could not have contended that the said agreement is either null and void or inoperative or incapable of being performed. The dispute arose with regard to the performance of the contract. On a reading of the order of the Division Bench, it does not appear to me that any special right was either created or preserved for the plaintiff. Once the plaintiff accepts the contract which contains the arbitration clause and a foreign award has been passed, the only way the plaintiff can resist enforcement of the award by making an application under Section 48 of the Arbitration and Conciliation Act, 1996. In fact, the plaintiff made several attempts to resist enforcement of the said award and ultimately on 22nd August, 2017, the said application filed under Section 48 of the Arbitration and Conciliation Act, 1996 by the plaintiff was rejected. The award has attained its finality. In this context, it has to be seen whether any cause of action survives against the defendant No.1.
In Mayar (H.K) Ltd. & Ors. Vs. Owners & Parties, Vessel M.V. Fortune Express & Ors. reported at (2006) 3 SCC 100, the Hon'ble Supreme Court approved the principle that the Courts have inherent discretionary jurisdiction to stay proceedings in appropriate matters where it appears to the Court that it is fit to do so and such jurisdiction is not limited to cases falling under Section 10 of the Code of Civil Procedure. The plea for deletion of the name of the defendant No.1 is based on the arbitration clause which refers to GAFTA, London as a seat of arbitration and the GAFTA Rules, 125 states that UK Arbitration Act, 1996 shall apply such arbitration.
The arbitration clause and the relevant GAFTA Rules, 125 clearly evince an intention that English Law will apply to arbitration. The plaintiff does not dispute that for setting aside of the foreign award, an application is required to be filed before the English Court. When a contract is to be governed by the law of particular country even in absence of any jurisdictional clause, the Court of such country is considered to be a more convenient forum for adjudication of the disputes in accordance with the laws of the Country. The cause of action of the plaintiff in the suit as against defendant No.1 as on date does not survive in view of the award. The order refusing to stay the arbitration proceeding and directing the plaintiff to raise all objections including the jurisdiction of the arbitral tribunal in a way recognized that the disputes are required to be resolved by the arbitral tribunal and for which no further order under Section 45 of the Arbitration and Conciliation Act, 1996 would be necessary. Moreover, the venue of the arbitration and the law applicable to such proceeding, namely, English Law makes it clear that the parties intended to have their disputes resolved in England even if it is contended that the said clause is limited to matters relating to arbitration. It is plain from the reading of the plaint that the dispute is arising out of the contract which contains an arbitration clause. The plaintiff perhaps would argue that the order allowing enforcement of the foreign award in India may be ultimately set aside and in that event, the plaintiff could pursue the suit is also not acceptable in view of the fact that two parallel proceedings arising out of the same set of facts and dispute could not continue simultaneously in different fora.
Once the parties have chosen a place of arbitration in a particular country and have decided to resolve their dispute by arbitration a suit covering the subject matter of the arbitration in my view should not be entertained unless it is shown that continuation of the said proceeding is demonstrably oppressive and vexatious. The parties in the instant case has agreed the venue and seat of arbitration should be in London and English Law shall apply. This agreement between the parties in my view completely oust the jurisdiction of this Court to try a suit arising out of the contract in respect of an award has already been passed.
The plaintiff being unsuccessful in the anti-suit injunction to obtain an order of injunction cannot disregard the award and invite this Court to decide the same issues that were before the arbitral tribunal. The Court in an application under Section 48 of the Arbitration and Conciliation Act, 1996 is only seized with the limited issue as to whether the said award could be enforced in India and not so much on the merits of the award.
It cannot be disregarded that the award is staring at the face of the plaintiff. Moreover, the subject matter of the suit and the arbitration are same. The Arbitration and Conciliation Act, 1996 is an amalgam of the Arbitration and Conciliation Act, 1940, the Arbitration (Protocol & Convention) Act, 1937 and the Foreign Awards (Recognition & Enforcement) Act, 1961. It is a consolidating and amending statute. The object of the Act is to minimize the supervisory role of Court in relation to mattes covered by arbitration. In Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd. reported at 2011(8) SCC 333 it was held:-
"......It is, thus, to be seen that Arbitration Act, 1940 from its inception and right, through to 2004 (in P.S. Sathappan) was held to be a self- contained code. Now, if the Arbitration Act, 1940 was held to be a self- contained code, on matters pertaining to arbitration, the Arbitration and Conciliation Act, 1996, which consolidates, amend and designs the law relating to arbitration to bring it, as much as possible, in harmony with the UNCITRAL Model must be held only to be more so. Once it is held that the Arbitration Act is a self-contained code and exhaustive, then it must also be held, using the lucid expression of Tulzapurkar, J., that it carries with it "a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done". In other words, a letters patent appeal would be excluded by the application of one of the general principles that where the special Act sets out a self-contained code the applicability of the general law procedure would be impliedly excluded....."
The logical conclusion follows from a reading of various provisions of the Arbitration and Conciliation Act, 1996 and the decisions of the Hon'ble Supreme Court is that if a party is desirous of challenging an award whether domestic or forum, it should file objections and applications as contemplated by the 1996 Act. There cannot be any doubt that the cause of action in the suit is founded on initiation of an arbitration proceeding in a foreign country which has since culminated in an award. In view of the discussions made earlier, the continuation of the suit as against the defendant no.1 at this stage would be an abuse of the process of the Court.
The plaint discloses a distinct and separate cause of action against the defendant no.2.
The plaint in paragraphs 49 and 50 has disclosed a separate and independent cause of action insofar as the defendant no.2 is concerned. The said paragraphs are:
"49. By a letter dated 4th August, 2011, the defendant no.2 informed the plaintiff that one Ramendra Lal Auddy Solicitor and Advocate and Notary of Sandersons and Morgans of Royal Insurance Building, 5, Netaji Subhas Road, Kolkata - 700001 presented a Bill of Exchange bearing No. 2021E/ 2011/PB/LMJ dated 19.01.2011 for US $ 3,823,488.90 on the defendant no.2 for payment illegally demanding from the defendant no.2 in its alleged capacity as drawee and acceptor of payment of US $ 382,348.90 purporting to be the remainder 10% of the bill. The defendant no.2 in its said letter though informed the plaintiff that such presentation of the said bill was made on the defendant no.2 illegally and knowing fully well that the same was accepted by the plaintiff for payment and contemporaneous records including the forwarding schedule of Bangkok Bank dealing with several letters from the defendant no.1 and subsequent correspondence unequivocally established that the plaintiff was intended to be the drawee and the defendant no.2 had merely acted as collecting agent of Bangkok Bank plc. The defendant no.2 by its said letter however, though sought to allege that the question of the said bill being accepted by the defendant no.2 did not and could not arise since the defendant no.2 did put its signature thereon and that the aid bill was presented to it with oblique motive entitling the bank to initiate legal proceedings not only against the defendant no.1 but also against the said Notary for having made false claim on the defendant no.2 and on other grounds, yet the defendant no.2 by the said letter also purported to call upon the plaintiff to authorise the defendant no.2 to debit the account of the plaintiff with sum of US $ 382,348.90 together with interest thereon from 16th February, 2011 and remit the same to the Bangkok Bank plc. The plaintiff states that from a perusal of the said letter it would be clearly evident that it is well known to the defendant no.2 that the defendant no.2 is not liable to make any payment either to the defendant no.1 or to its banker under the said Bill of Exchange. However, the defendant no.2 by its said letter not only called upon the plaintiff to debit the account of the plaintiff with said sum of US $ 382,348,90 bug has also threatened the plaintiff to debit the account of plaintiff with the said sum of US $ 3,823,488.90 together with upto date interest from 16th February, 2011 and remit the same to the banker of the defendant no.1. By the said letter the defendant no.2 has also sought to allege that it has earmarked Rs.1,80,00,000/- (equivalent to US $ 382,348,90) in the cash credit account of the plaintiff.
50. The plaintiff states that the defendant no.2 is neither entitled to debit the account of the plaintiff maintained with the defendant no.2 nor is the defendant no.2 entitled to remit any amount either to the defendant no.1 or to its banker."
It is thus clear that the plaintiff is alleging that the defendant no.2 is threatening to release the payment notwithstanding the fact that the defendant no.2 is of the opinion that such presentation of the bill was made by the plaintiff on the defendant no.2 illegally and knowing fully well that the bill was accepted by the plaintiff for payment and contemporaneous records would show that the plaintiff was intended to be the drawee and the defendant no.2 had merely acted as collecting agent of Bangkok Bank.
Under such circumstances, the name of the defendant No.1 shall be deleted from the plaint.
The application being G.A. No.370 of 2013 is allowed.
Urgent Photostat certified copy of this judgment, if applied for, be given to the parties on usual undertaking.
(Soumen Sen, J.)