Calcutta High Court
State Trading Corporation Of India ... vs Glencore Grain B.V on 24 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. 2481 of 2013
CS No. 151 of 2009
STATE TRADING CORPORATION OF INDIA LIMITED & ANR.
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, 05.09.2014, 17.09.2014, 10.11.2014, 31.11.2014, 21.01.2015, 02.02.2015, 16.02.2015, 23.02.2015, 25.02.2015, 02.03.2015, 04.03.2015 Judgment On : 24th 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 plaintiffs have filed a suit for recovery of damages aggregating to Rs.48 crores approximately for defective supply of French yellow peas in breach of contract and incidental reliefs.
The short facts of the case made out in the plaint are:-
i) A contract dated 17th April, 2008 was made 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, by a contract dated 19th May, 2008 made between the plaintiffs themselves, it was agreed that the goods would be sold on High Sea sale basis by STC to Ratanlal Piyarelall Import & Exports Ltd.
(hereinafter referred to as "RPI"); and the agreement between them was that 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 No.2 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 No.2 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 No.2 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 plaintiffs had suffered loss and damages for the sum of Rs.47,41,53,190/-. The applicant-defendant, however, contended 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.
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 LCs. 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 the instant suit 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 step in respect of CS No. 151 of 2009 in this Court since Glencore had already invoked arbitration and orders were made thereon.
Subsequent thereto, on 23rd June 2009, RPI filed a 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. An ex parte order was passed 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.
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 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, learned senior counsel appearing in support of the application 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. The width and ambit of power given to the court under Order 7 Rule 11 read of 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. It is submitted that if the findings of the GAFTA Tribunal with regard to the contract are read into the plaint, it would be clear that the plaintiffs have filed a vexatious proceeding. The learned senior counsel would argue that in order to do justice, the court would be required to take into consideration material facts which may not appear on the face of the plaint and which may have been deliberately omitted or misrepresented. Merely because the true facts are mischievously excluded or suppressed in the plaint and dishonestly kept from the court, it is not inevitable that a protracted and delayed trial would likely to take place which would cause unnecessary harassment to the defendant. Mr. Kapoor has referred to the decision of the Hon'ble Supreme Court in Mayar (H.K.) Ltd. & Ors. Vs. M. V. Fortune Express & Ors. reported at 2006 (3) SCC 100 for the proposition that in such a situation the court is not powerless, rather it possesses inherent jurisdiction to reject or stay the plaint by treating it complete and by notionally removing the suppression for that purpose. The suppression, according to the learned senior counsel, in this case is that the plaintiffs have knowingly and deliberately made a statement that no contract has been concluded between Glencore and RPI.
It is submitted that in Mayar's case Justice Naolekar put the principle succinctly in the following terms:
"............ After treating the plaint complete in that manner, if the court finds that the cause of action is lacking it can reject the plaint just as it could reject a plaint had it been properly presented along with all relevant and necessary materials. It can also similarly stay a suit permanently (Para 9e and f).
It is submitted that the Learned Judge went on to say that in such a case:
"......rejection of the plaint in exercise of the powers under Order 7 Rule 11 of the Code would be on consideration of the principle laid down by this court. In T.Arivandandam v. T.V.Satyapal this Court has held that if on a meaningful, not formal reading of the plaint it is manifestly vexatious, and meritless,in the sense of not disclosing a clear right to sue, the court should exercise its power under Order 7 Rule 11 of the Code taking care to see that the grounds mentioned therein is fulfilled."
In other words, the true principle is that if a plaintiff is guilty to suppression of material facts, then a court has inherent jurisdiction to reject his plaint by taking into consideration the facts suppressed and where the material facts if inserted would result in the plaint losing its cause of action.
In Mayar's case the Supreme Court also considered and approved the principle that courts have inherent discretionary jurisdiction to stay proceedings in appropriate matters where they think it fit to do so. Such a jurisdiction is not limited to cases falling under Section 10 of the Code. The Code is not exhaustive and the courts have in many cases where the circumstances warrant, and necessities of the case require, to act upon the assumption of the possession of an inherent power to act ex debito justitiae and to do real and substantial justice.
In order to stay a suit on the ground of abuse of process, the court can and has the power:-
".........to keep in mind that a positive case has been made out by the defendant whereby the court can reach to the conclusion that proceedings, however, indicate an abuse of the process of the court."
In other words, when the application for dismissal of a plaint or stay of a suit permanently is based upon a charge of fraudulent suppression of material facts or abuse of process, then the court is not debarred from considering the suppressed facts outside the plaint, and in fact is entitled to see the positive case made out by the defendant indicating the suppression and/or abuse of process alleged against the plaintiff.
In Mayar (supra), the Supreme Court also followed a Madras decision and opined that:
"In the Krishnan case the Court laid down that if the ends of justice require it or it is necessary to prevent the abuse of process of the court, the court has jurisdiction to stay the trial of a suit pending before it but the exercise of such power will depend on the facts and circumstances of the case."
Apart from the celebrated 1977 decision of Krishna Iyer, J. there are other cases also recognizing the full amplitude of the court's powers to deal with harassing and vexatious litigation, for example, in SJS Business Enterprises Pvt. Ltd. v. State of Bihar reported at 2004 (7) SCC 166 it is stated:
".... As a general rule, suppression of a material fact by a litigant disqualifies such litigant from obtaining any relief. This rule has been evolved out of need of the courts to deter a litigant from abusing the process of court by deceiving it. But the suppressed fact must be a material one in the sense that had it not been suppressed it would have an effect on the merits of the case. It must be a matter which was material for the consideration of the court, whatever view the court may have taken."
Where the argument of the defendant is that there has been an abuse of process by the plaintiff and the allegations in the plaint are pretence and total fabrication, in such a case the court is not debarred from looking at the full facts and circumstances of the case presented to it. In such a case the court has to assess whether or not the frame of the suit and its language and the terms are such and to see if the plaint is orchestrated dishonestly in a way that is a clear attempt to overreach the process of the court or not. If the court finds that the plaintiff is guilty of concealment of material facts, in that event there is no bar for the court from taking into consideration such materials as may have been presented by the aggrieved defendant and moulding the relief in such circumstances to do full justice in the case.
It is the 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, Sopan Sukhdeo Sable & Ors. Vs. Assistant Charity Commissioner & Ors. reported in 2004(3)SCC 137 and Church of Christ Charitable Trust and Educational Charitable Society Vs. Ponniamman Educational Trust reported at 2012 (8) SCC 706 Paragraph 11 in support of the said submission. It is argued that the Court should take into consideration the evidentiary and legal impact of the three awards which categorically held that no contract exists between STC and Glencore and further that there was no arbitration agreement between them. In all the GAFTA proceedings arbitrators were mutually nominated by STC/RPI and both of them were throughout represented by counsels and fully participated in the arbitral proceedings. The effect of these three awards could not be ignored. It is submitted that these awards are foreign awards which take effect as decrees of Court. The learned Senior Counsel has referred to the decision of the Hon'ble Supreme Court in Brace Transport Corporation of Monrovia, Bermuda Vs. Orient Middle East Lines Ltd., Saudi Arabia & Ors. reported at 1995 Supp (2) SCC 280 for the proposition that the awards and decrees are binding on the parties. Recognition alone may be asked for as a shield against re-agitation of issues with which the award deals. Shri Lal Mahal Limited Vs. Progetto Grano Spa reported at 2014(2) SCC 433 is referred to in order to show that at the stage of enforcement of a foreign award, the power of the Court is extremely limited and it does not give an opportunity to have a second look at the foreign award in the award enforcement stage.
Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd. reported at 2011(8) SCC 333 is cited to show that Section 49 which deals with enforcement of the foreign award makes a radical change and under the present law the award itself would be deemed to be a decree of the Court. It is emphatically submitted that given the indisputable fact that the claims and contention of both STC as well as RPI have all been adjudicated before the GAFTA Tribunal it is impossible for the plaintiffs even to argue that it has any surviving cause of action at all. This is unquestionable and not open to debate. The learned senior Counsel has referred to the observations of Hon'ble Justice K. Subba Rao in Gulabchand Chhotalal Parikh v. State of Gujarat reported at AIR 1965 SC 1153 Paragraph 35 which reads:-
"...and it would be useless and vexatious to subject the defendant to another suit for the purpose of obtaining the same result. Hence, the legal maxim, 'transit in rem judicatam', - the cause of action is changed into matter of record ..."
It is, thus, argued that the suit now is not maintainable and it would be just and proper in the fitness of things to dismiss the suit and/or permanently stayed.
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 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. It is argued that in Paragraphs 46 and 47 of the application, the defendant alleged that the plaintiff does not have a right to sue, and on that basis, has made a "demurer application" for dismissal of the suit. Therefore, if the plaint discloses a cause of action, and it appears from the statements of the plaint that the plaint is not barred by any law, there cannot be any rejection under Order 7 Rule 11(a) or Rule 11(d) of the Code of Civil Procedure.
The instant suit is a suit claiming damages in respect of French Yellow Peas supplied by the defendant. Both STC and RPI are parties in the suit. There is no denial that French Yellow Peas was sold by the defendant. It is a question of evidence in the suit as to whether the Peas were damaged or not and who would be entitled to damages. The defendant in order to avoid its liability relied upon an award dated 5th April, 2012 to allege that the issues are barred by res judicata. However, STC is not a party to this particular arbitration proceeding and, therefore, any finding, vis-à-vis, RPI cannot be at all relevant in so far as STC is concerned. It is a question of evidence in the suit as to whether the said foreign award would at all be relevant in deciding the claim of the plaintiff. Moreover, a claim for unliquidated damages has to be ascertained and assessed.
The defendant by way of this application cannot bypass the conditions required to be satisfied under Sections 46, 47, 48 and 49 of the Arbitration and Conciliation Act, 1996. This application is not for enforcement of an award. This application is made on the basis that, by virtue of the award, the plaintiff cannot succeed in the suit and the suit must fail. The defendant is abusing the process of law by not only obtaining a foreign award to prejudice the right of the plaintiff in a properly instituted suit before a competent court of jurisdiction, but it has also obtained an order of restraint dated 18th June, 2009 from the English High Court against the plaintiffs from further proceeding with the suit.
There is no provision in law which permits rejection of plaint or dismissal of the suit on the basis of subsequent events. The case of the defendant in support of dismissal is really their defence in the suit and, therefore, the same cannot be considered for the purpose of rejection of the plaint. This proposition is well-settled even from the decisions cited by the plaintiffs, namely, Sopan Sukhdeo (supra) Paragraph 10 and Church of Christ Charitable Trust (supra) Paragraph 11.
The issue of res judicata raised by the defendant on the basis of issues purportedly decided on a foreign award 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 this Court in Mahamaya Paul Vs. Dipak Kumar Mukherjee & Ors. reported at 2013 (1) ICC 610 and 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.
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 has 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. Shri Lal Mahal Limited (supra) and Brace Transport Corporation (supra) were distinguished by submitting that the enforcement of an award can only be in the manner provided for in the Arbitration and Conciliation Act, 1996 and a foreign award may act as shield as recognition of the said award. The defendant is attempting to use the said award as a sword instead of a shield for dismissal of the plaint. Fuerst Day Lawson Ltd. (supra) was distinguished by arguing that in the said decision, the Hon'ble Supreme Court held that the Arbitration and Conciliation Act is a complete Code. Therefore, the defendant if wants to rely on a foreign award, can only do so by enforcing the provisions of the Arbitration and Conciliation Act and, this application cannot be used to bypass the provisions of Sections 47 to 49 of the Act and obtain enforcement of an award without filing an application for enforcement. It is argued that there cannot be any quarrel with the proposition of law laid down in Gulabchand Chhotalal (supra) that a decision in an early writ petition also operate as res judicata in a subsequent regular suit.
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 Judge and the Hon'ble 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 has now been finally decided and adjudicated by the Arbitral Tribunal in favour of the defendant.
The award is declaratory in nature.
The plea for rejection of the plaint is based on plea of res judicata and abuse of the process of the Court. The applicant has solely rest its case on the award as the basis for dismissal of the suit. The applicant has also argued that since the Arbitration & Conciliation Act is a consolidated statute, the suit is not maintainable.
When the suit was filed, the arbitration proceeding has not commenced. It is during the pendency of the suit that the arbitration proceedings were concluded and two several awards were passed. Mr. Kapur, the learned senior Counsel would like me to read the findings of the Tribunal with regard to the merits of the dispute in the said proceeding, namely, binding nature of the agreement between the plaintiff No.2 and the defendant into the plaint to arrive at a finding that there is a suppression of material facts and if not, it is an abuse of the process of the Court. In other words, the submission is that the plaintiffs from the inception knew about the binding nature of the contract between the parties and, knowing fully well that the contract contains an arbitration clause and Glencore has fulfilled its contractual obligation with a malafide motive instituted this vexatious proceeding. The Tribunal on the basis of the pleadings, evidence and submission made on behalf of the parties have passed an award. The Tribunal has decided the matter on merits. The award is staring at the face of the plaintiffs. Would it have made any difference had it been a situation that the plaintiffs have instituted the suit suppressing that an award has been passed in favour of the defendant and the subject matter of the suit and arbitration are same. The answer would in the affirmative. In that event it becomes suppression of material facts. Subsequent event, in certain situations, can, make a suit infructuous.
The defendant No.2 filed an independent suit being Suit No.173 of 2009 to stall the arbitration proceeding. An 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.
The Court has the power at the stage of admitting the plaint to reject if it does not disclose any cause of action or barred by law. The Court is not required to wait for an application to be filed for rejection of plaint. In respect of self- contained statutes, there are provisions, which oust the jurisdiction of Civil Court to deal with matters that are covered under such statutes, for example, the RDB Act and SARFAESI Act. The Arbitration & Conciliation Act is an amalgam of the Arbitration 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 matters covered by arbitration. The provisions of Section 5 of the Act limit interference of judicial authorities in matters governed by Part-I of the Act and no judicial authority in terms of the said provisions can interfere except where so provided in Part-I of the said Act. By virtue of the said provision, all other statutes have been excluded from operation insofar as they relate to intervention by any judicial authority in matters covered by Sections 1 to 43 of the Act. In Fuerst Day Lawson (supra) 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....."
An Act is to be held a complete code when, inter-alia, the Act itself provides for an adjudicatory mechanism and exclusion of the application of other statutes (expressly or by necessary implication). In Girnar Traders Vs. State of Maharashtra reported at (2011) 3 SCC 1 it was held:-
79. The Expression 'complete code in itself' has not been defined precisely. However, it will be of some help to understand what the word 'code' means. It has been explained in P. Ramanatha Aiyar's 'The Law Lexicon' (2nd Edn. 1997) as under:
'A general collection or compilation of laws by public authority; a system of law; a systematic and complete body of law, on any subject such as Civil Procedure Code, Code of Criminal Procedure, Penal code. Etc. ...The code is broader in its scope, and more comprehensive in its purposes. Its general object is to embody, as near as practicable, all the law of the State, on any particular subject. It is more than evidentiary of the law; it is the law itself.'
80. 'Complete' further adds a degree of certainty to the code. It has to be a compilation of provisions which would comprehensively deal with various aspects of the purpose sought to be achieved by that law and its dependence on other legislations is either absent or at best is minimal. The provisions of the enactment in question should provide for a complete machinery to deal with various problems that may arise during its execution. Sufficient powers should be vested in the authority/forum created under the Act to ensure effectual and complete implementation of the Act. There should be complete and coherent scheme of the statutory provisions for attainment of the object and purpose of the Act. It essentially should also provide for adjudicatory scheme to deal with grievances/claims of the persons affected by enforcement of the provisions of the Act, preferably, including an appellate forum within the framework of the Act. In other words, the Act in itself should be a panacea to all facets arising from the implementation of the Act itself.
The Full Bench of the Delhi High Court in National Highway Authority of India Vs. Oriental Structure Engineer Ltd. - Gammon India Ltd. (JV) reported at AIR 2013 Delhi 67 held that 1996 Act in effect displaces all such aspects of substantive and procedural law in respect of which there is an explicit or implied reference in the 1996 Act.
In Enercon (India) Ltd. & Ors. Vs. Enercon GMBH & Anr. reported at 2014 (5) SCC 1 in Paragraph 90 the Hon'ble Supreme Court emphasized the need for least intervention by Courts in arbitration matter in view of Section 5 of the Act. The said Paragraph reads:-
"90. It is a well-recognized principle of arbitration jurisprudence in almost all the jurisdictions, especially those following the UNCITRAL Model Law, that the courts play a supportive role in encouraging the arbitration to proceed rather than letting it come to a grinding halt. Another equally important principle recognized in almost all jurisdictions is the least intervention by the courts. Under the Indian Arbitration Act, 1996, Section 5 specifically lays down that:
"5. Extent of judicial intervention. - Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part."
Keeping in view the aforesaid, we find force in the submission of Dr. Singhvi that the arbitration clause as it stands cannot be frustrated on the ground that it is unworkable."
The logical consequence is that if a party is desirous of challenging an award, whether domestic or international, it should file objections/applications as contemplated by the Act.
The plaintiff No.1 and the plaintiff No.2 separately suffered an award against them, which has virtually decided the issues that are now being raised in the suit. By reason of the findings arrived at by the Tribunal that the contract has been duly performed and the goods have been supplied in terms of the contract. The claim for damages in the suit fails. The said awards are not under challenge. The plaintiffs cannot by way of filing the suit indirectly challenge the award. The claim for damages in the suit would necessarily involve re-agitation of the issues that have been conclusively decided by the Tribunal and so long the awards remain in force, claim of the plaintiffs on account of damages cannot succeed.
Where the issues have been conclusively decided in favour of the plaintiffs on the principle of comity and avoidance of inconsistent judgments require that this suit be permanently stayed. The plaintiffs are not remediless. The plaintiffs had the opportunity to challenge the award before the foreign Court. If the plaintiffs choose not to challenge the award before the foreign court still it has the option to raise objection under Section 48 of the present Act at the time of enforcement of the award. The plaintiffs, however, cannot file a suit challenging the award. A cause of action based on contract which has been conclusively decided against the plaintiffs totally non-suit the plaintiffs. The claims for damages are only consequential. Once a finding is arrived at by the Tribunal against the plaintiffs in relation to the transactions, it logically follows that apart from the remedies available under the Act, the plaintiffs have no other right.
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 prior to a suit filed by R. Piyarelall against the defendant and R.Piyarelall has failed to obtain an injunctive order restraining arbitration. The plaintiffs did not take any steps under Section 45 of the Arbitration and Conciliation Act nor have 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 Co. & Anr. Vs. Haldia Petrochemicals Ltd. reported at 2014 (184) Comp Cas 1 (SC) 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.No.2481 of 2013 is allowed. The suit being C.S.No.151 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.)