Gujarat High Court
Gupta Global Exim Pvt. Ltd. vs M.V. Asean Express on 26 August, 2004
Author: K.A. Puj
Bench: K.A. Puj
JUDGMENT J.K.A. Puj, J.
1. This application is filed by the applicants original plaintiffs seeking direction from this Court to refer parties to this application and the Admiralty Suit No. 23 of 2001 to arbitration to be held in Singapore subject to English Laws for adjudication of all the disputes arising between the parties in the said suit or otherwise in relation to or out of or in connection with the chartered party agreement annexed at Annexure-II to this application and seeking further direction to the respondents to furnish security for an amount equivalent to the amount for which Letter of Undertaking has been furnished and is subsisting in this proceedings, to enure during the Arbitral proceedings to satisfy in full or in part any Arbitral Award that may be made in favour of the applicants.
2. The brief facts giving rise to the present application are that the applicants have filed the Admiralty Suit No. 23 of 2001 in this Court, inter alia, praying for a declaration that the action of the defendants of continuing lien over 2030.252 CBM of goods lying at Kandla Port and of not delivering the said goods to the plaintiff purportedly for non-payment of freight is bad, illegal, null and void, and for a direction to the defendants to deliver the said goods free of any lien or freight or otherwise and, for issuance of appropriate orders condemning the defendant-vessel in favour of the plaintiff in the sum of Rs. 77,50,000/- along with interest thereon at the rate of 18% p.a. In the said suit, Summons was issued by this Court and in response to the service of the summons, the respondents have entered their appearance. However, the written statement has not been filed by the respondents. By an order dated 08.10.2001, this Court ordered arrest of the defendant-Vessel. The respondents after entering their appearance and furnishing a Letter of Undertaking dated 18.10.2001 as security to the applicants for release of the Vessel, the Court has vacated the order of arrest. The present applicants thereafter filed O.J.C.A. No. 242 of 2001 in this Court, inter alia, for a direction restraining the respondents from selling, alienating, transferring ownership or possession of or in any manner dealing with 2030.252 CBM lying at Kandla Port and for unconditional release of the same goods in favour of the applicants. The present respondents have filed M.C.A. No. 69 of 2001 before this Court on 04.12.2001, inter alia, praying for discharge of Letter of Undertaking dated 18.10.2001 furnished by them as security for release of the respondent Vessel. O.J.C.A. No. 242 of 2001 filed by the present applicants was withdrawn by them after the same having been opposed by the respondents by way of filing affidavit-in-reply. O.J.M.C.A. No. 69 of 2001 filed by the respondents was heard and decided by this Court by an order dated 17.06.2002, partly allowing the application and discharging the Letter of Undertaking in part. The present applicants have not challenged the said order dated 17.06.2002. However, the respondents have filed O.J. Appeal which was admitted and pending for final disposal before the Division Bench of this Court.
3. In the aforesaid background, the present O.J.C.A. is filed by the applicants.
4. Mr. M.J. Thakore, learned Senior Counsel with Mr. R.S. Sanjanwala, learned advocate appearing for the applicants have submitted that the Admiralty Suit No. 23 of 2001 is filed by the applicants for a declaration regarding the continuation of lien over 2030.252 CBM of cargo and for a decree in the sum of Rs.77,50,000/- along with interest thereon. He has further submitted that the claim of Rs.77,50,000/- is for dumping, reloading and demurrage; loss on account of deterioration in quality; loss on account of cancellation of contracts with the buyers; expenses on account of legal fees and related expenses and incidental expenses. Over and above the said claim, the applicants are also entitled to make further claims on account of developments subsequent to the filing of the suit or otherwise, including, but not limited to claim for value of the goods arising on account of claim of lien by the respondents and refusal to deliver the goods to the applicants or otherwise. Mr. Thakore has further submitted that the disputes between the parties and the resultant claims of the applicants arose out of and/or were in connection with and/or were in respect of Charter Party and involved interpretation of various clauses of Charter Party. He has further submitted that the disputes between the parties arose, as, the defendants unlawfully and illegally claimed freight at a rate higher than the rate agreed upon and prescribed by the Charter Party. The applicants-plaintiffs have refused to pay freight as demanded by the defendants. However, the applicants have paid freight at the rate agreed upon by and between the parties and prescribed by the Charter Party. The dispute ultimately led to filing of the suit by the applicants as an action in rem against the defendants Vessel and subsequent consequential proceedings for discharge of Letter of Undertaking and for release of Cargo.
5. Mr. Thakore has further submitted that the Box 25 of the Charter Party provides for law and arbitration and provides for arbitration of disputes in Singapore and English Law as applicable law. Clause 19 (c) of part II ["Gencon Charter (as revised 1992, 1976 and 1994)] provides that any dispute arising out of the Charter Party shall be referred to arbitration at the place indicated in Box 25 subject to the procedures applicable there and law of the place indicated in Box 25 will govern the Charter party. Box 25 of the Charter party prescribes place of arbitration as Singapore and the law applicable as English Law. The Charter Party, thus, contemplates, resolution of disputes through arbitration to be held in Singapore subject to English Laws.
6. Mr. Thakore has further submitted that the disputes have arisen between the parties in relation to the Charter Party and/or arising out of the Charter Party. The Charter Party contemplates resolution of such disputes through arbitration. Section 45 of the Arbitration and Conciliation Act, 1996 provides that notwithstanding anything contained in part I or under the Code of Civil Procedure, a judicial authority, when seized of an action in a matter, in respect of which the parties have made an agreement referred to in Section 44, shall, at the request of one of the parties, or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. The agreement between the parties in the present proceedings is an agreement contemplated by Section 44 being an agreement in writing for arbitration to which the convention set out in the First Schedule applies and being an agreement in one of such territories in respect of which the Central Government being satisfied with reciprocal provisions have been made, has by a notification in the Official Gazette, declared such territory to be the territory to which the convention applies. Mr. Thakore has, therefore, submitted that the applicants are the party to the agreement falling within Section 44 of the Arbitration and Conciliation Act, 1996 and as such, have filed this application under Section 45 for referring the parties to this proceeding to arbitration for resolution of disputes and adjudication of all their claims in the suit or otherwise.
7. Mr. Thakore has relied on the decision of the Bombay High Court in the case of ISLAMIC REPUBLIC OF IRAN V/s. M.V. MEHRAB AND OTHERS, A.I.R. 2002 BOMBAY 517 for the proposition that "The High Court in its admiralty jurisdiction has power to arrest a ship to secure a claim in future or pending arbitration. The Court has observed that without specific adoption by the municipal law, applicable rules of international law, could be legitimately adopted by the Court to further the remedy and cause of justice. Although India has not adopted convention relating to the arrest of Seagoing Ship, Brussels 1952 and the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, Brussels, 1968, the principles incorporated in these conventions are themselves derived from the common law of nations and are as such part of the common law of India and applicable for the enforcement of maritime claims against foreign ships. The development of maritime law has shown that it was not created as a definite all inclusive body of law. It has been developed over a period of many centuries and is still in continuous process of development. The necessities of international trade and commerce have dictated that the development should be along uniform lines in the several maritime nations and the expression admiralty or maritime should be construed in contemporary context. There is nothing in the statutes in India to exclude use of admiralty jurisdiction for the purpose of arresting a ship by way of security in future or pending arbitrations."
8. Mr. Thakore has, therefore, submitted that as per the Provisions contained in Section 45 of the Arbitration and Conciliation Act, 1996, this Court should refer the matter to the arbitration for resolving the disputes between the parties to this proceeding.
9. Mr. Prashant S. Pratap, learned Counsel with Mr. A.S. Vakil, learned advocate appearing for the respondents have strongly opposed this application. Mr. Pratap has raised certain preliminary objections against the maintainability of the present application. He has further submitted that the applicants themselves have, in breach of the arbitration Provisions contained in the contract between the parties, namely, the Charter Party dated 25.07.2001, commenced the present proceedings by instituting the admiralty suit in this Court on or about 08.10.2001. He has, therefore, submitted that the applicants are deemed to have waived the contractual remedy of arbitration having unconditionally submitted to the jurisdiction of this Court by filing the above suit in respect of disputes between the parties. He has, therefore, submitted that the applicants having filed the above suit, are not entitled to apply now for the purpose to be referred to arbitration.
10. Mr. Pratap has further submitted that after filing the above suit, the applicants have also sought interim relief of security in respect of its suit claim and obtained an ex-parte order of arrest of the vessel, on 08.10.2001. The vessel was released on respondent No.2 furnishing security in the amount of US $ 2,22,400, which comes to approximately Rs. 1.675 Crores. The respondent No.2 thereafter filed M.C.A. No. 69 of 2001 seeking a discharge of the security furnished and also seeking compensation and damages for wrongful arrest of their ship on the ground that the applicants have no cause of action and the claim was false and bogus and the applicants had suffered no loss or damage. He has, therefore, submitted that the application filed by the respondent No.2 was on the merits of the claim made by the applicants. This Court, by its order dated 17.06.2002, partly allowed the application by reducing the security from US $ 2,22,400/- (Rs. 1.675 Crores) to Rs. 25 Lacs only. The Responndents have preferred an appeal against the said order seeking a complete discharge of the security furnished and the said appeal is still pending. The applicants having invoked the jurisdiction of this Court and this Court having found prima facie that the full amount of the applicants' claim as pleaded being without merit thereby reducing security to only Rs. 25 Lacs as against the original claim of Rs. 1,06,75,000/-, the applicants are now seeking to pursue the claim in another jurisdiction and before another tribunal having got a finding adverse to them in the above suit. He has, therefore, submitted that the applicants cannot be permitted to do and having commenced the above suit in this Court, ignoring the contractual remedy of arbitration, which was available to them in the first place and from the very beginning, and having invoked the jurisdiction of this Court and having been a party in the proceedings where the Court made a prima facie finding on merits against it, the applicants have consented expressly and/or by necessary implication to the jurisdiction of this Court to finally decide the disputes between the parties and have waived the legitimate right to have the disputes decided in another forum and in another Country. He has, therefore, submitted that the application is not bona fide and it is moved only to avoid a determination of the disputes between the parties in view of the fact that this Court prima facie found the case of the applicants without any merit.
11. Mr. Pratap has further submitted that the respondents are entitled to damages or compensation from the applicants for wrongful arrest of their Vessel in the sum of US $ 45,000.00 and which question has by an order dated 17.06.2002, been left open by this Court to be decided at the hearing of the suit. This relief can only be granted by the Court which made the order of arrest in the first place. The applicants, too, have given an undertaking to this Court to compensate the respondents in case the order of arrest is found to be wrongful. He has, therefore, submitted that the respondents would be greatly prejudiced and deprived of their remedy and the benefit of the undertaking in the event the disputes are now referred to arbitration.
12. Mr. Pratap has further submitted that the present application should be rejected on the ground of delay and laches as, even assuming that the applicants, having filed a suit and invoked the jurisdiction of this Court to adjudicate on the disputes between the parties on merits, are entitled to proceed to arbitration, the applicants should have done this at the first available opportunity if at all and not at this belated stage. Even assuming without admitting that the applicants who filed a suit, are entitled to apply under Section 45 of the Act to have the parties referred to arbitration, such an application should be made at the earliest possible stage immediately upon filing of the suit and not after the applicants have sought and obtained interlocutory relief which has thereafter been substantially diluted on merits.
13. In support of his submissions, Mr. Pratap has relied on the decision of the Bombay High Court in the case of GTC LIMITED V/S. ROYAL CONSULTING RV AND ANOTHER, 2003 (2) ALL MR 608 wherein the Court has taken the view that "the Civil Court retains jurisdiction to decide the dispute before it. There is no ouster of jurisdiction of a civil court even in a case where there is an arbitral clause in an agreement or there is an arbitral agreement. The position is similar as in England. When a dispute arises, however, one of the parties may nevertheless commence court proceedings, either because it challenges the validity of the arbitration agreement or because he means to breach it. Where the Court action is commenced in breach of an arbitration agreement, the other party may apply to stay the court action, unless he is content to forgo his right to refer the dispute to arbitration and to defend the action before the Court. The Court has further observed that there is nothing in Section 45 like Section 8 setting out at what stage the application should be made. Section 8 requires an application to be made to the judicial authority not later than submitting first statement on the substance of dispute. There is no such limitation under Section 45. However, this exercise is to be done at the instance of the defendant. If the defendant chooses not to invoke the provision of Section 45, nothing will prevent the Court from proceeding with the suit. Again what will be the effect of Award and decree on the same cause, need not be decided here, as it is not in issue and can be decided in appropriate proceedings where the issue may arise."
14. Mr. Pratap has further relied on the decision of the Hon'ble Supreme Court in the case of P. ANAND GAJAPATHI RAJU AND OTHERS V/S. P.V.G. RAJU (DEAD) AND OTHERS, (2000) 4 SUPREME COURT CASES 539 wherein while dealing with the powers conferred on the Court under Section 8 of the Act to refer the parties to arbitration where there is an arbitration agreement, the Court has observed that the conditions which are required to be satisfied under Sections 8(1) and 8(2) of the Arbitration and Conciliation Act, 1996 before the Court can exercise its powers, are :
(1) there is an arbitration agreement;
(2) a party to the agreement brings an action in the court against the other party; (3) subject-matter of the action is the same as the subject-matter of the arbitration agreement; (4) the other party moves the court for referring the parties to arbitration before it submits his first statement on the substance of the dispute.
The Court has further observed that this last provision creates a right in the person bringing the action to have the dispute adjudicated by the Court, once the other party has submitted his first statement of defence. But if the party, who wants the matter to be referred to arbitration applies to the Court after submission of his statement and the party who has brought the action does not object, as is the case before us, there is no bar on the Court referring the parties to arbitration."
15. Mr. Pratap has, therefore, submitted that since the present applicants have waived their rights to invoke the jurisdiction of the arbitration and obtained security and since the application is moved at the belated stage, this Court should reject the said application with compensatory cost.
16. After having heard learned advocates appearing for the respective parties and after having gone through their respective contentions as are incorporated in their pleadings as well as raised at the time of hearing of this application and after having considered the orders passed by this Court earlier in this proceeding, and also considering the relevant statutory Provisions contained in Arbitration & Conciliation Act, 1996 and the authorities cited before the Court, this Court is of the view that the present application making prayer for referring the parties to arbitration deserves to be rejected. The applicants having filed the Admiralty Suit before this Court and having obtained an interim injunction seeking arrest of the Vessel in question and thereby having invoked the jurisdiction of this Court, cannot be permitted now to take recourse to the Provisions contained in Section 45 of the Arbitration & Conciliation Act, 1996. No sooner the applicants have filed the suit before this Court, they have waived their right to invoke the jurisdiction of the Arbitral Tribunal. It is true that Section 45 empowers any one of the parties or any person claiming through or under him to make the request to the Court to refer the parties to arbitration. It is, however, to be interpreted in the context in which the said phraseology is used by the legislature. A party who has already invoked the jurisdiction of the Court in breach or violation of the arbitration agreement cannot make a prayer subsequently to refer the matter to the arbitral tribunal. Even the defendant who filed the written statement in the suit and submitted to the jurisdiction of the Court cannot subsequently request the Court to refer the matter to arbitration. The Court is, therefore, of the view that there is no material difference with regard to the Provisions contained in Section 8 as well as Section 45 of the Arbitration Act. The Court is also of the view that Section 45 itself carves out certain exceptions when it states that even after invoking the jurisdiction of the Court, the parties can make the request to the Court to refer the matter to the Arbitral Tribunal if the agreement in question is null and void, inoperative or incapable of being performed. Despite the Arbitration Agreement, if the plaintiffs approach to the Court instead of invoking the jurisdiction of the Arbitral Tribunal, the Arbitration Agreement becomes inoperative qua the plaintiffs and, therefore, the Court can certainly reject the prayer made by the plaintiffs for referring the matter to the Arbitral Tribunal.
17. Even otherwise in the present case, the applicants have filed the Admiralty Suit and obtained an ex-parte injunction in their favour in the form of seeking arrest of the Vessel in question. The arrest warrant was cancelled on furnishing the security and the amount of security was also subsequently reduced against which the respondents have filed an appeal before the Division Bench of this Court which is still pending. The applicants have accepted the order of the learned Single Judge of this Court. The respondents' prayer for damages is also pending for adjudication before this Court. In such a situation, if the prayer made in the present application is granted, it would adversely affect to the interest of the respondents. The applicants have also filed this application belatedly and if at this stage, the parties are put to arbitration in fresh round of denovo proceedings after having spent considerable time and incurred substantial expenses in this proceeding and after having obtained interim orders in their favour, serious prejudice would be caused to the respondents. It has also been found from the record that the goods are presently lying at Kandla Port within the jurisdiction of this Court and the respondents would be greatly prejudiced if they are unable to obtain satisfaction of their claim from the sell of the goods by the Kandla Port Trust pursuant to the order passed by this Court and if the proceedings are abatted at the request of the applicants and matters are to be taken up again in arbitration, there would be far long drawn litigation and multiplicity of proceedings. The Court is, therefore, of the view that the application does not seem to be bona fide and is filed only with a view to defeat the orders passed by this Court.
18. The decision of the Bombay High Court in the case of ISLAMIC REPUBLIC OF IRAN V/s. M.V. MEHRAB AND OTHERS, A.I.R. 2002 BOMBAY 517 relied on by the applicants do not render much assistance to the applicants as in that case, the Charter Party contains arbitration clause and the plaintiffs invoked the arbitration clause on 01.03.2001 and the arbitration proceedings were pending in London. The Plaintiffs have thereafter filed Admiralty Suit for arrest of Vessel to secure the enforcement of the award that may be passed in the arbitration proceedings. It is in that context, the Court has held that there is nothing in the statute in India to exclude use of admiralty jurisdiction for the purpose of arrest a ship by way of security in future or pending arbitrations. The facts are quite different. In the present case, after filing of the Admiralty Suit and after obtaining an interim order of arresting the Vessel and after having substantially lost in the interim application, the applicants have moved the present application seeking reference to the Arbitral Tribunal. The view taken by this Court in the present case, finds support from the observations made by the Bombay High Court in the case of GTC LIMITED V/S. ROYAL CONSULTING RV AND ANOTHER, 2003 (2) ALL MR 608 wherein it is held that When a dispute arises, however, one of the parties may nevertheless commence court proceedings, either because it challenges the validity of the arbitration agreement or because he means to breach it. Where the Court action is commenced in breach of an arbitration agreement, the other party may apply to stay the court action, unless he is content to forgo his right to refer the dispute to arbitration and to defend the action before the Court. Here by filing the Admiralty Suit before this Court, the applicants have commenced the Court action in breach of arbitration agreement and the respondents have not applied to stay the Court action and are content to forgo their right to refer the dispute to arbitration. In such a situation, neither the applicants nor the respondents can invoke the provisions contained in Section 45 of the Act.
19. In the above view of the matter, the Court does not find any substance in the present application as it is devoid of any merits either on facts or in law. The application is, therefore, rejected, without any order as to costs.