Delhi High Court
Sea Transport Contractors Ltd. vs Indian Farmers Fertiliser Cooperative ... on 4 September, 2006
Author: Vikramajit Sen
Bench: Vikramajit Sen
JUDGMENT Vikramajit Sen, J.
1. By these Orders I shall dispose of an application bearing No. 6425/2006 under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 filed by the Plaintiff, namely, Sea Transport Contractors Ltd. (`STC' for short) seeking an ex parte ad interim injunction restraining Defendant No. 1, namely, Indian Farmers Fertiliser Cooperative Ltd. (`IFFCO' for brevity) from transmitting an alleged debt of Rs. 180,60,00,000 (Rupees one hundred eighty crores and sixty lacs only) being the equivalent of approximately U.S. dollars 40 million to Defendant No. 2, namely, Industries Chimiques du Senegal (`ICS' for short). ICS has filed I.A. No. 7132/2006 under Order XXXIX Rule 4 C.P.C. praying for the vacation of the ex parte ad interim injunction granted by me on the first date of hearing viz. 29.5.2006; I had restrained IFFCO from making payment to ICS unless a sum of 40 million dollars was first set aside by IFFCO and deposited by it in Escrow Account. IFFCO has filed I.A. 7133/2006 also under Order XXXIX Rule 4 for recalling these very Orders.
2. The following prayers have been made in the plaint:
(a) pass a Decree of permanent injunction restraining Defendant No. 1 its servants, agents and assigns from transmitting the debt of Rs. 180,60,00000/- (Rupees one hundred eighty crores and sixty lacs only) being the equivalent of approx US $ 4,00,000,00 to Defendant No. 2 or to any agent of Defendant No. 2 and/or to any other party.
(b) pass a Decree of permanent injunction restraining Defendant No. 1 its servants, agents and assigns from transmitting to Defendant No. 2 or to any agent of Defendant No. 2 and/or to any other party, any future payments for further purchases of Phosphoric Acid from Defendant No. 2.
(c) pass a Decree of mandatory injunction directing Defendant No. 1 its servants, agents and assigns to render accounts of all its purchases after the date of the present suit as well as the amounts owed to Defendant No. 2 on such purchases.
(d) pass any other or further orders as this Hon'ble Court may deem fit and proper in the circumstances of the case.
3. Pleadings have been completed in the suit as well as in all the applications.
4. The fulcrum of the Plaintiff's case is that IFFCO and ICS are colluding with each other with a view to defeat the Plaintiff's efforts to collect its dues from ICS. It has not been controverter that IFFCO holds 20 per cent of the equity of ICS; and that the CEO of IFFCO is the President of ICS. In the course of arguments it has been strenuously submitted that ICS supplies all its phosphorus production to IFFCO and that if this supply is diminished or impeded it would adversely impact the production of fertiliser in India by IFFCO. It has also been contended that IFFCO was neither a party nor was granted a hearing by the Senegal Court which had ordered a moratorium on the recovery of the debts of ICS and that the said Court had not suspended payments from IFFCO to ICS. Nevertheless, the alacrity with which IFFCO is cooperating with the said Orders manifests the complete alignment of the Defendants' interests. Prima facie, therefore, I find that it would be reasonable to assume at this stage of the proceedings that, because of the commonality of interests between IFFCO and ICS, they would indeed cooperate with each other even to the detriment of STC.
5. Learned Counsel for the Plaintiff/STC had relied on the provision of Order xxxviii Rule 5 of the CPC to contend that the Court should order the attachment of monies due and payable by IFFCO to ICS till such time as all the claims/dues of STC from ICS are not liquidated. In the course of arguments learned Counsel for STC has once again relied on the decision in Mareva Compania Naviera v. International Bulkcarriers 1980 (1) All England Law Reports 213, as well as on Section 151 of the CPC. The contention of Mr. V.P. Singh, learned Senior Counsel, appearing on behalf of Plaintiff, is that the wording employed in Section 151 of the CPC is analogous to the legal principles enunciated in Mareva and hence even if Order xxxviii Rule 5 CPC could not be invoked by STC, the injunctory relief already granted should be continued.
6. The plaint makes mention of an Agreement titled as the Contract of Exclusive Cooperation (COEC) executed between STC and ICS. Clause 18 thereof records that the contract would be valid for an initial period of two (2) years and could be automatically renewed thereafter for further two (2) years periods on a rolling basis unless either of the Parties has acted in material breach of their obligations. Clause 19 stipulates that the contract shall be governed and considered in accordance with the English law and any dispute and/or breach and/or default arising out of or in relation to the contract shall be referred to the exclusive jurisdiction of the High Court of Justice in London. The plaint further mentions another Agreement known as the Contract of Affreightment (COA) which, inter alia, contains an arbitration clause. Since disputes have arisen between STC and ICS in respect of both contracts, legal proceedings have been initiated by STC in the Queen's Bench Division, Commercial Court of the United Kingdom for US $ 7,72,57,812.50 with regard to CEOE and arbitration proceedings before Arbitral Tribunal at London for a claim of US $ 2,18,109.38 in respect of COA. These proceedings are avowedly pending.
7. Clause 19 further stipulates the lex fori as well as lex loci to be that of the United Kingdom. (I may mention that Indian Courts have consistently held that parties cannot by agreement inter se bestow jurisdiction on a Court which would not, by its own curial law permit it to assume jurisdiction over the dispute. Indian Courts have resolutely refused to exercise jurisdiction unless the cause of action has arisen or the Defendant resides or carries on business within its territorial limits. Hence, it would have to be presumed, at least in this country, that the contracts came to be executed in the United Kingdom.)
8. The plaint further asseverates that STC had simultaneously initiated legal actions for securing the amount due to it in other jurisdictions. Against a claim of US$ 75,218,109.38 Writ of Attachment to the extent of US $ 52,18,109.38 was issued by the United States District Court on 7.12.2005. The French Court, by Orders dated 13.12.2005, also passed Attachment Orders for EURO 86,20,275 in favor of STC although the claim raised by STC before it was for US$ 76 million = Euro 63 million. Copies of both the judicial orders have been annexed to the plaint. The plaint also contains the following statements:
16. The Plaintiff submits that its claims against Defendant No. 2 arise out of the breaches committed by Defendant No. 2 pursuant to the COEC and COA dated 06.04.2005 and 04.02.2005 respectively. The amounts of these two claims is US $ 7,72,57.812.50 and US $ 218109.38 respectively. The said claims are based on the minimum quantities of cargo stipulated for in the Agreements/Contracts. Out of the total amount claimed i.e. US $ 7,72,57,812.50, the Plaintiff, by virtue of the attachment orders has been able to secure US $ 1,60,34,830.45. Thus the amount of US $ 6,12,22,982.05 still remains unsecured. The Plaintiff has not been ale to secure the said amount as Defendant Nos. 1 and 2 have been actively ensuring that the same remains outside the jurisdiction of both the United States as well as the French Courts where attachment orders are in force and thus, unattached. The Plaintiff has not been able to trace the other sums in possession of, or due to Defendant No. 2 except the sums in possession with Defendant No. 1 which have been retained by Defendant No. 1, a shareholder of Defendant No. 2, in a collusive attempt to ensure that the Plaintiff is deprived of securing its claim to that extent.
17. The Plaintiff submits that the amount withheld by Defendant No. 1 i.e. the debt owed by Defendant No. 1 to Defendant No. 2, till date, amounts to US $40,000000 approximately. This amount will keep increasing on further purchases made by Defendant No. 1 as per the commitment of Defendant No. 1 to purchase all the Phosphoric Acid produced by Defendant No. 2.
9. In Brace Transport Corporation of Monrovia, Bermuda v. Orient Middle East Lines Ltd., Saudia Arabia the Supreme Court of India gave its imprimatur to forum hunting in the context of the execution of a foreign Award and facilitated the attachment of moneys payable by an Indian Company to the Judgment Debtor under the Award. So far as Mareva injunctions are concerned, it is noteworthy that they were not available in the United Kingdom until the momentous judgment of the Court of Appeal in 1975. The controversy existed because of the view in Lister & Co. v. Stubbs (1890) 45 Ch D 1, to the effect that Courts had no jurisdiction to protect a creditor before he gets judgment. A perusal of the Queen's Bench Practice Directions Standard Forms disclose that they are in vogue for both Mareva Injunctions as well as Auton Piller Orders. In India this genre of injunctions has been available at least since 1908 in terms of Order xxxvII of the CPC as orders for attachment before judgment. These provisions enable the Court even to arrest a person who has absconded or is about to abscond or leave the local limits of the Court or has disposed of or removed his property there from. Attachment of the property of a defendant (in contradistinction to a judgment-debtor) can also be ordered. Therefore there is evidently no impediment in granting attachment orders even before a debt is adjudicated upon and a decree is passed by the Court, in ordinary civil proceedings.
10. So far as arbitral disputes are concerned, it is no longer res integra that interim injunctions of the nature in debate before me can be granted under Section 9 of the Arbitration & Conciliation Act, 1996, even in connection with a foreign arbitration. In The Channel Tunnel Group v. Balfour Beatty Construction Limited and Ors. (1993) (1) All.E.R. 664 the House of Lords held that an injunction could issue despite the fact that the seat of arbitration lay in a foreign country. I had occasion to ponder this point in Naval Gent Maritime Ltd. v. Shivnath Rai Harnarain (I) Ltd. 2000(3) AD (Delhi) 857 : 2000(87) DLT 552 and my conclusion was that such injunctions could be passed in India notwithstanding that the venue of arbitration was in England. A different view was favored by the Division Bench in Merriot International Inc. v. Ansal Hotels Ltd. 1999 VI AD (D) 340. This question, however, was settled by the Supreme Court in Bhatia International v. Bulk Trading S.A. wherein it was held that Section 9 of the Arbitration & Conciliation Act can be resorted to even in respect of international commercial arbitrations whose venue is outside India.
11. All Statutes must be viewed and interpreted with a proactive vision. This is not to say that Courts would be justified in granting interim orders and reliefs on the asking. Wherever the powers of the Court are invoked with the objective of supporting the arbitration, the Court must act with alacrity. This principle is recognised both in the United Kingdom and United States of America. The Supreme Court had approved the English decision in Channel Tunnel. In Coppee-Lavalin v. Ken-Ren Chemicals and Fertilizers Ltd. (1994) 2 All.E.R. 449 it has been observed by Lord Mustill that the Court's intervention is not only permissible but highly beneficial where otherwise justice would be denied. A similar position was successfully canvassed in the American decisions rendered in Murray Oil Products v. Mitsui & Co. 146 F.2d 381 and Albatross S.S. Co. v. Manning Bros Inc 95 F.Supp 459.
12. I would, even, venture to state that the proposition that Courts possess powers to grant injunctions and attachment orders even before the passing of a Decree or an Award has attained not only in India but in all common law' countries the exalted standing of a general principle of law.
13. This, however, does not solve the problem of the Plaintiff since other legal factors have also to be kept in view. The phrase `Forum Shopping' has come to be abhorred in every country; it has been ubiquitously viewed as a legal anathema. In the present analysis, this will prove to be the stumbling block in the Plaintiff's case. As already noted above resolution of both civil and arbitral disputes stands restricted by the volition of the parties to the United Kingdom. A civil suit is pending in the Queen's Bench Division in England and arbitral proceedings are in progress in London. On the strength of ratio in Channel Tunnel the Queen's Bench Division was possessed of sufficient powers to issue an attachment order even in respect of monies held by the Indian party IFFCO or payable by it in foreign currency either in US Dollars or Euros. A Mareva injunctions could also have been prayed for in the United Kingdom. Counsel for the Plaintiff STC are unable to clarify whether any attempt in this direction had been made; certainly this question has not been traversed in the plaint or in any of the interim applications. Courts in all common law countries insist that all claims or causes or action that have arisen on a particular date must be simultaneously raised and brought into adjudicatory stream. In India this finds written expression in Order II of the Code of Civil Procedure which mandates that every suit shall, as far as practicable, be framed so as to afford ground for final decision upon the subjects in dispute and to prevent further litigation concerning them. Therefore every suit must include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action. Where a plaintiff omits to sue in respect of any portion of his claim he shall not afterwards be permitted to sue in respect of the portion so omitted or relinquished. If a person is entitled to more than one relief in respect of the same cause of action he must sue for all of them; if he omits to do so without leave of the Court, he shall not afterwards sue for any relief so omitted. The question that immediately arises is whether courts in India would be justified in exercising jurisdiction for passing orders either in the nature of attachment before judgment or analogous to Section 9 of the Arbitration & Conciliation Act, 1996, where the same relief ought to have been asked for in the proceedings pending before the Queen's Bench Division or in connection with the arbitral proceedings. This question would be equally relevant in respect of proceedings in the American Courts as well as in the French Courts. I am informed that STC as well as ICS have filed Appeals against the Order of the District Judge, New York. I can only assume that this may well be one of the grounds agitated before the Appellate Court. The legal rigour of bringing the entire claim before the same Court also has attained characteristics of a general principle of law. I am not in any doubt that since the Plaintiff before me has already invoked jurisdiction of a Court in the United Kingdom, I ought not to entertain a relief which should have been pleaded for in that Court. If I were not to do so I would in fact be encouraging `forum shopping'.
14. It has already been noted that legal proceedings have been initiated by STC in the United Kingdom as well as in America and France. The Order of the Vice President Juge de I'Execution du Tribunal de Grande Instance de Nanterre dated 14.12.2005 attaches funds in the hands of Puteaux Michelet Agency payable to ICS in order to secure the amount of Euros Nine hundred thousand at which STC's claim against ICS was provisionally estimated. This was not the total claim raised by STC in the French Court. I shall assume that the French Court possessed jurisdiction to pass the aforementioned attachment orders despite the fact that the jurisdiction of the Court in United Kingdom had already been invoked. In such an event there is already a judicial determination to the effect that a sum of only Euros Nine hundred thousand was receivable by STC. Similarly the garnishee or attachment order passed by the United States District Court Southern District of New York limits freezing order to US$ 5.2 million "on the basis that the Plaintiff could not possibly be entitled to more than $ 5 million under the COEC (2 years x $2.5 million which was the amount that the Claimant was at that time claiming it ought to have earned per year)", even though the claim was for approximately US$ 75 million. The fact that STC had made an alternative prayer that the contract of which it had alleged had been breached by ICS was for a duration of two years. This decision again leaves no room for further adjudication by this Court. It must be presumed that both the Courts in different continents had concluded that a much lesser amount than what had been set up by the STC, may eventually be allowed in the latters favor. STC is barred from venturing around the globe in an attempt of obtaining more favorable Orders.
15. It has been aggressively been argued that the Plaintiff is guilty of suppression of material facts and is, therefore, automatically and completely disentitled to any discretionary relief. Mr. A.S. Chandhioke learned Senior Counsel appearing for Defendant No. 2, has cited the decision of the Division Bench in Satish Khosla v. Eli Lilly Ranbaxy Ltd. . It was in the backdrop of this contention that a reproduction of the portions of the plaint had been carried out hereinabove. In my considered opinion necessary facts have been pleaded albeit in a very sagacious manner. In the light of previous adjudications both in France as well as in New York it would be improper for me to exercise jurisdiction. I must refrain from doing so on principles of constructive res judicata. Therefore, I do not need to consider Premraj Mundra v. Md.Maneck Gazi or Raman Hosiery Factory, Delhi v. J.K. Synthetics Ltd. .
16. The prayers in the plaint have been reproduced above. In essence the Plaintiff seeks recovery of its alleged claims from dues payable by IFFCO to ICS. Prima facie ad valorem court fee has to be paid by the Plaintiff on the strength of the ration in Ratlam Straw Board Mills Private Ltd. v. Union of India . A final decision on the question of court fee, however, is deferred, as has been done by M.A. Khan, J in Sanat Products Ltd. v. Glade Drugs & Nutraceuticals Pvt. Ltd. 2003 (27) PTC 525 (Del).
17. Mr.Chandhioke also assails the very maintainability of the suit on the grounds that a suit cannot be founded only on Order xxxviii or Section 151 of the CPC. This Objection need not be decided at this stage, although it appears prima facie that the reliefs prayed for in the Plaint partake of interlocutory nature and must be asked for in a substantive suit.
18. For these manifold reasons the Plaintiff's application under Order XXXIX Rules 1 and 2 is dismissed and the Defendants applications under Order XXXIX Rule 4 are allowed. Interim Orders passed on May 29, 2006 are recalled. I refrain from imposing costs on the Plaintiff.
CS (OS) 1164/2006
19. List the Suit on 27.11.2006 for arguments on maintainability.