Krishna vs Notgiven on 29 January, 2013

[Cites 23, Cited by 0]

Madras High Court

Krishna vs Notgiven on 29 January, 2013

This application under Order XIV Rule 8 of the Original Side Rules read with Section 8 of the Arbitration and Conciliation Act has been moved to refer the dispute raised in the suit for arbitration, in terms of the Dispute Resolution clause in the Work Order dated 15.02.2011.

2. The plaintiff/non applicant has filed a suit under Order XLII Rule 1 and 2 of the Original Side Rules read with Order VII Rule 1 of CPC, for recovery of a sum of Rs.32,09,760/- (Rupees thirty two lakhs nine thousand seven hundred and sixty only), i.e. Rs.29,72,000/- (Rupees twenty nine lakhs seventy two thousand only) towards principal and Rs.2,37,760/- (Rupees two lakhs thirty seven thousand seven hundred and sixty only) with future interest at the rate of 24% per annum. The prayer is also for arrest and sale of the defendant vessel SHB DHARTI IV/CHERRY 1005-S in "as is where is" condition, which is said to be presently in the Indian waters at the port of Tuticorin. The prayer is for the sale of the vessel to recover the amount.

3. It is pleaded case of the plaintiff/non applicant that the amount is due as the plaintiff / non applicant on the request of the owners of the defendant vessel executed a work order dated 15.02.2011, which was extended by work orders dated 25.05.2011 and 13.09.2011 for repairing the defendant vessel. The work was carried out. It is the case of the plaintiff that the bill amount has not been paid.

4. This Court, while issuing notice, has ordered arrest of the vessel.

5. This application has been filed on the plea that there is an arbitration clause in the Work Order dated 15.02.2011, which covers the dispute raised in this suit.

6. The arbitration clause in the Work Order reads as under:

"In the event of any dispute or difference arising out in connection with this work order, the same shall be settled by as per Indian Arbitration and Conciliation Act. The arbitrator's award shall be final and not subject to appeal by any court and may only be entered in the court of competent jurisdiction for the execution forthwith. The venue for the arbitration shall be Hyderabad."

7. It is the case of the applicant/defendant that as the parties to the dispute entered into an arbitration agreement, and that this application under Section 8 of the Arbitration and Conciliation Act has been moved prior to the submission to the jurisdiction of this Court, therefore, proceedings in the suit are liable to be stayed, and parties referred to the arbitration.

8. The application is opposed by the plaintiff/non applicant on the ground that the suit filed by the plaintiff/non applicant is under the admiralty jurisdiction of this Court, which cannot be adjudicated by the arbitrator, as the admiralty jurisdiction vests exclusively with this Court which cannot be delegated to any third party, therefore, the arbitrator will have no jurisdiction to entertain and try the admiralty claim, inspite of the existence of arbitration agreement between the parties.

9. In support of this contention, the learned counsel for the plaintiff/non applicant has placed reliance on the Hon'ble Full Bench judgment of the Bombay High Court in J.S.Ocean Liner LLC v. M.V.Golden Progress and another - 2007(2) Arb.LR 104 (Bombay) (FB).

10. The contention of the learned counsel for the defendant/applicant that the respondent being not a vessel is not covered under the admiralty jurisdiction cannot be accepted, as it is well settled law that to be a vessel it is not necessary that she should be able to navigate under her own power.

11. Though there is no force in the contention of the learned counsel for the applicant/defendant, that the suit under admiralty jurisdiction is not maintainable, on the plea that the respondent is not a Vessel, but at the same time, there is force in the contention of the learned counsel for the applicant, that the suit deserves to be stayed, in view of the arbitration agreement between the parties.

12. Section 8 of the Arbitration and Conciliation Act, 1996, makes it mandatory for the judicial authority to refer the parties to arbitration, when the substance of the dispute is covered by arbitration clause, and application is made before submitting first statement of substance of the dispute, accompanied by arbitration agreement.

13. Section 45 of the Arbitration and Conciliation Act, 1996 again makes it obligatory to refer the parties to arbitration, unless the agreement is held to be null and void, inoperative and incapable of being performed. Admittedly, it is not the case here.

14. In the case of P.Anand Gajapathi Raju v. P. V.G. Raju (dead) AIR 2000 SC 1886=2000(2) Arb. LR 204 (SC), the Supreme Court was concerned with the question whether the Supreme Court as a court in appeal can refer the parties to arbitration under the Act of 1996 (new Act). While dealing with this aspect, the Supreme Court referred to Part I of the new Act, particularly Sections 5 and 8 thereof and in para 8, held thus "8. In the matter before us, the arbitration agreement covers all the disputes between the parties in the proceedings before us and even more than that. As already noted, the arbitration agreement satisfies the requirements of Section 7 of the new Act. The language of Section 8 is peremptory. It is, therefore, obligatory for the Court to refer the parties to arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal arising therefrom. There is no question of stay of the proceedings till the arbitration proceedings conclude and the Award becomes final in terms of the provisions of the new Act. All the rights, obligations and remedies of the parties would now be governed by the new Act including the right to challenge the Award. The Court to which the party shall have recourse to challenge the Award would be the Court as defined in clause (e) of Section 2 of the new Act and not the Court to which an application under Section 8 of the new Act is made.

An application before a Court under Section 8 merely brings to the Court's notice that the subject matter of the action before it is the subject matter of an arbitration agreement. This would not be such an application as contemplated under Section 42 of the Act as the Court trying the action may or may not have had jurisdiction to try the suit to start with or be the competent Court within the meaning of Section 2(1)(e) of the new Act."

15. The aforesaid legal position was reiterated by the Supreme Court in the case of Hindustan Petroleum Corporation Ltd. v. Pinkcity Midway Petroleums wherein the Supreme Court said:

"14. This Court in the case of P. Anand Gajapathi Raju v. P.V.G. Raju (dead), (2000) 4 SCC 539=2000(2) Arb. LR 204 (SC) has held that the language of Section 8 is peremptory in nature. Therefore, in cases where there is an arbitration clause in the agreement, it is obligatory for the court to refer the parties to arbitration in terms of their arbitration agreement and nothing remains to be decided in the original action after such an application is made except to refer the dispute to an arbitrator. Therefore, it is clear that if, as contended by a party in an agreement between the parties before the civil court, there is a clause for arbitration, it is mandatory for the civil court to refer the dispute to an arbitrator. In the instant case the existence of an arbitral clause in the Agreement is accepted by both the parties as also by the courts below but the applicability thereof is disputed by the respondent and the said dispute is accepted by the courts below. Be that as it may, at the cost of repetition, we may again state that the existence of the arbitration clause is admitted. If that be so, in view of the mandatory language of Section 8 of the Act, the courts below ought to have referred the dispute to arbitration."

16. The only objection by the plaintiff/non applicant is that this will not be applicable, as admiralty action is in rem or to retention of security. This was precisely what was the question before the Hon'ble Full Bench of Bombay High Court in J.S.Ocean Liner LLC vs. M.V.Golden Progress and another, 2007(2) Arb.LR 104 (Bombay) (FB), wherein it has been held as under:

"54. Thus, in the cases of P. Anand Gajapathi Raju and Hindustan Petroleum Corporation Ltd., the Supreme Court held that once the parties are referred to the arbitration, nothing remains to be decided in the original action. The Supreme Court emphasized that once the court refers the parties to arbitration in terms of their agreement, there is no question of stay of proceedings till the arbitration proceedings conclude and the award becomes final in terms of the provisions of the new Act. We are confronted with the question : whether the aforesaid observations made by the Supreme Court in the cases of P. Anand Gajapathi Raju and Hindustan Petroleum Corporation Ltd. can be applied to the admiralty action in rem or retention of security.

55. That there is no clear cut statutory provision dealing with such situation in India is not in dispute. In the circumstances, International conventions may be of guidance. Article VII of 1952 of Arrest Convention implies that where the parties have agreed to submit the dispute to arbitration, then, provided that the plaintiff brings proceedings before the Arbitral Tribunal within the time allowed by the court of arrest, the security will not be released but will remain in the court of arrest to satisfy any award in the arbitration proceedings.

56. Article VII of the International Convention on Arrest of Ships, 1999 (Arrest Convention) provides as follows:

Jurisdiction on the merits of the case

1. The courts of the State in which an arrest has been effected or security provided to obtain the release of the ship shall have jurisdiction to determine the case upon its merits, unless the parties validly agree or have validly agreed to submit the dispute to a Court of another State which accepts jurisdiction, or to arbitration.

2. Notwithstanding the provisions of paragraph 1 of this article, the Courts of the State in which an arrest has been effected, or security provided to obtain the release of the ship, may refuse to exercise that jurisdiction where that refusal is permitted by the law of that State and a Court of another State accepts jurisdiction.

3. In cases where a Court of the State where an arrest has been effected or security provided to obtain the release of the ship:

a. does not have jurisdiction to determine the case upon its merits; or b. has refused to exercise jurisdiction in accordance with the provisions of paragraph 2 of this article, such Court may, and upon request shall, order a period of time within which the claimant shall bring proceedings before a competent court or arbitral tribunal.

4. If proceedings are not brought within the period of time ordered in accordance with paragraph 3 of this article then the ship arrested or the security provided shall, upon request, be ordered to be released.

5. If proceedings are brought within the period of time ordered in accordance with paragraph 3 of this article, or if proceedings before a competent Court or arbitral tribunal in another State are brought in the absence of such order, any final decision resulting therefrom shall be recognized and given effect with respect to the arrested ship or to the security provided in order to obtain its release on condition that:

a. the defendant has been given reasonable notice of such proceedings and a reasonable opportunity to present the case for the defence; and b. such recognition is not against public policy.

6. Nothing contained in the provisions of paragraph 5 of this article shall restrict any further effect given to a foreign judgment or arbitral award under the law of the State where the arrest of the ship was effected or security provided to obtain its release.

57. In different countries different law and procedure have been provided by law makers. Section 11 of the Arbitration Act, 1996 applicable in England provides that where the admiralty proceedings are stayed on the ground that the dispute must be referred to the arbitration, the court may order that the property arrested be retained as security for the satisfaction of any award given in the arbitration or order that the set of those proceedings must be conditional on the provisions of equivalent security for the satisfaction of any such award.

58. In USA, Section 8 of the Federal Arbitration Act (Title `US Code') provides that; 'If the basis of jurisdiction be a cause of action otherwise justiciable in admiralty, then, notwithstanding anything herein to the contrary, the party claiming to be aggrieved may begin his proceeding hereunder by seizure of the vessel or other property of the other party according to the usual course of admiralty proceedings, and the court shall then have jurisdiction to direct the parties to proceed with the arbitration and shall retain jurisdiction to enter its decree upon the award.' Section 3 of the enactment provides: '...the court shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement....'

59. South Africa has an Admiralty Jurisdiction Regulation. Section 5(3)(a) thereto provides: As court may in the exercise of its admiralty jurisdiction order the arrest of any property for the purpose of providing security for a claim which is or may be the subject of an arbitration or any proceedings contemplated, pending or proceeding, either in the Republic or elsewhere and whether or not it is subject to the law of the Republic, if the person seeking the arrest has a claim enforceable by an action in personam against the owner of the property concerned or an action in rem against such property or which would be so enforceable but for any such arbitration or proceedings.

60. It is, thus, seen that there are express statutory provisions now in place in UK, US and South Africa for retention of security.

61. In India, there is no such express statutory provision for retention of security. The Supreme Court in the case of m.v. Elisabeth observed that where statutes were silent and remedy has to be sought by recourse to basic principles, it was the duty of the court to device procedural rules by analogy and expediency. It was further observed that the High Courts in India are superior courts of record having original and appellate jurisdiction. They have inherent and plenary powers. Unless expressly or impliedly barred, and subject to the appellate or discretionary jurisdiction of the court, the High Courts have unlimited jurisdiction, including the jurisdiction to determine their own powers.

62. In m.v. Al Quamar, (2000)8 SCC 278, in para 43, the Supreme Court said that the court has to approach the modern problems with some amount of flexibility as are now being faced in the modern business trend. Flexibility is the virtue of the law courts. The pedantic approach of the law courts is no longer existing by reason of the global change of outlook in trade and commerce.

63. In Liverpool & London S.P. & I Association Ltd. v. M.V. Sea Success I , the Supreme Court observed that where no statutory law operates in the field, interpretive changes must be made having regard to everchanging global scenario. If the 1952 Convention had been applied though India was not signatory to it, there is no reason why 1999 Arrest Convention should not be applied.

64. The counsel for the plaintiffs submitted that prior to the enactment of Section 26 of the Civil Jurisdiction and Judgments Act, 1982, there was no specific legal provision in England which permitted the English Court to order that a vessel arrested be retained as a security for the satisfaction of the arbitral award. Keeping in view the factual need, in Rena K, it was held that even if the suit was liable to be stayed in view of the arbitration clause between the parties, the arrested vessel or security furnished in lieu thereof shall not be liable to be released unconditionally. It was held that the cause of action in rem, being of a different character from a cause of action in personam, does not merge in a judgment in personam, but remains available to the person who has it so long as, and to the extent that, such judgment remains unsatisfied. The submission of the counsel for the plaintiffs was that the principle evolved in Rena K did not accord with the scheme of the Indian Arbitration and Conciliation Act, 1996 and in any event, the application of that principle in India is unnecessary in view of the fact that the Arrest Convention, 1952 and the Arrest Convention, 1999 are as much part of statute as held in m.v. Elisabeth and m.v. Sea Success-I. He would submit that Article VII of the Arrest Convention, 1999 would permit the institution of a in rem action only for security in aid of the pending arbitral proceedings in which the merits of the dispute would be finally adjudicated. He submitted that this position is fortified by Article 2(3) of the Arrest Convention, 1999 which reads:

"A ship may be arrested for the purpose of obtaining security notwithstanding that, by virtue of a jurisdiction clause or arbitration clause in any relevant contract, or otherwise, the maritime claim in respect of which the arrest is effected is to be adjudicated in a State other than the State where the arrest is effected, or is to be arbitrated, or is to be adjudicated subject to the law of another State."

65. The counsel for the defendants, on the other hand, submitted that the suit itself filed by the plaintiffs was not maintainable before this Court for want of jurisdiction in view of the arbitration clause in the charter party. He submitted that the suit simplicitor for security pending arbitration in foreign country is also not maintainable. Reference in this connection was made to Section 45 of the Act of 1996 and also to the Division Bench judgment in the case of m.v. Indurva Valley wherein m.v. Mehrab was considered. The counsel for the defendants also relied upon the judgment of the Supreme Court in the case of P. Anand Gajapati Raju wherein it was held that once, the dispute is referred to arbitration, nothing remains to be decided in the original action and such proceeding are required to be terminated by passing orders of disposal of such action/suit. The reliance was also placed on the decision of the Supreme Court in Bhatia International.

66. Mr. V.C. Kotwal, the senior counsel who intervened in the matter submitted that the very purpose of New York Convention is to facilitate on an international level the enforcement of arbitral awards. It would, therefore, be ironic that in seeking to uphold the convention and interpreting the state statute, the decision of the court should in fact achieve the opposite effect if it is held that the court's jurisdiction to in rem action is barred or that court must unconditionally dismiss the action already initiated or that the court cannot grant a stay pending arbitration. The very enforcement of the award would be hindered or rendered useless if assets are dissipated because of a court's inability to grant a maritime arrest or attachment or the action is required to be dismissed rather than stayed. He would submit that Section 45 should be so interpreted which enables the court to exercise jurisdiction in accord with the Convention. He would submit that Section 45 is silent as to whether in rem action should be stayed or dismissed and the non-obstante clause occurring in Section 45 cannot be read to override the provisions of Letters Patent (Clause 32) and the Colonial Courts of Admiralty Act and Admiralty Jurisdiction Act, 1861; it only overrides the provisions of Part I and the Civil Procedure code. Mr. Kotwal submitted that the court can exercise its jurisdiction in such matter on general principles or on the basis of Article VII of the Arrest Convention; the Arrest Convention being part of our common law. The senior counsel submitted that the power to release the arrested vessel is a distinct matter governed by Admiralty Law and the Arbitration Act cannot curtail that power. He submitted that m.v. Mehrab has considered all the relevant aspects and rightly held that the court in its admiralty jurisdiction has power to arrest the ship to secure a claim in future or pending arbitration. Relying on the judgment of the Supreme Court in the case of Sukanya Holdings Pvt.Ltd. v. Jayesh H. Pandya and Anr. , the senior counsel drew the analogy that the Act of 1996 does not oust the jurisdiction of the Admiralty Court altogether. He referred to UK and US statutes and practices and by relying upon m.v. Elisabeth, he submitted that the court is entitled to take into consideration the practice of other signatory State and the decisions of the courts in these countries to decide which is the proper course to be adopted. His submission was that the very basis of exercising the maritime claim would be wholly frustrated if the statute is so interpreted as to deprive a maritime claimant, the rights which he hitherto enjoyed and enjoys in other countries although there is an arbitration agreement which he admits is not void and has not become inoperative.

67. Mr. Prashant Pratap also intervened in the matter. He submitted that merely because the dispute between the parties falls within the scope of an arbitration agreement entered into between them does not ipso facto preclude one of them from bringing the action in the High Court and procure the arrest of the ship or otherwise proceed with the action. He would submit that the Civil Court jurisdiction is not ousted even in a case where there is an arbitration agreement. He exhaustively referred to Rena K principle and Article VII of the Arrest Convention, 1999 and submitted that by process of interpretative changes a procedure needs to be devised by which the security obtained by the arrest of a ship in an action in rem is retained to satisfy the judgment or award of another court or arbitral tribunal. This, according to him, is necessary not only to do substantive justice to the claimant but also to ensure that the in rem remedy available to a claimant is not defeated by the fact that the claimant may have agreed to refer the disputes to the arbitration. He gave the following suggestions:

(a) Apply the Rena K principle as applied by the English courts which were faced with a situation similar to what is prevalent in India today and retain security in the action notwithstanding the fact that the parties are referred to arbitration, if the plaintiff is able to show to the court prima facie that the defendant is unlikely to be able to satisfy the award or have the discretion to retain security in the action without further investigating whether the defendant is in a position to satisfy the award or not. In such an event, the security will be retained in the action and the plaintiff, after obtaining the award, can proceed with the action in rem and use the unsatisfied arbitration award for the purpose of an issue estoppel and obtain a judgment in his favour for which the security would then be available; or

(b) The court can straightaway apply the principles set out in the Arrest Convention, 1999 and use the retention method described therein by retaining the security provided and recognizing any final decision that may be given in the arbitration, subject to the provisions of Part II of the Arbitration and Conciliation Act, 1996. This necessarily means that if the award is held to be enforceable under Part II of the said Act as a decree of the Court, then the security retained by the court in the action in rem would be available in satisfaction of the decree.

68. The English courts initially did not accept the action in rem for the sole purpose of obtaining security for arbitration proceedings. As a matter of fact, the Court of Appeal in the Vasso ruled that even though a writ in rem had been issued and the warrant for the arrest of the vessel was available, the continued arrest of the vessel would be an abuse of process to pursue both arbitration and an action in rem. However, Rena K principle was evolved by Brandon, J. that even if a suit is liable to be stayed in view of the arbitration clause between the parties, the arrested vessel or security furnished in lieu thereof was not liable to be released unconditionally. In UK, however, in the year 1982, Civil Jurisdiction on Judgments Act, 1982 was enacted and Section 26 thereof substantially altered the aforenoticed legal position in as much as it gave the court the power to retain or order alternative security when court proceedings were stayed because of an arbitration agreement. Thus, the statutory sanction has been given to the court in England now to retain or alter the alternative security when court proceedings were stayed because of an arbitration agreement. Section 26 gives the court power to retain or order security for arbitration proceedings if the vessel had already been arrested or some other form of security has been put up before the court ordered a stay of proceedings.

69. Section 45 of the Act of 1996 requires the Judicial Authority to refer parties to the arbitration when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44 unless the Judicial Authority finds that the said agreement is null and void, inoperative or incapable of being performed.

70. In the case of Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. And Anr. , the Supreme Court while dealing with Section 45 by majority took the view that while Section 8 leaves no discretion in the court in the matter of referring parties to arbitration, Section 45 empowers the court to refuse the reference to arbitration if it finds that the arbitration agreement is null and void, inoperative or incapable of being performed though such finding shall be prima facie and does not require final determinative finding by the court.

71. Obviously, if on prima facie view, the Judicial Authority finds that the arbitration agreement is valid, operative and capable of being performed, such authority shall have no discretion but to refer the parties to arbitration agreement. Section 45, though starts with non- obstante clause by overriding Part I and the provisions of Civil Procedure Code, cannot be read to exclude the admiralty jurisdiction in rem exercised by the High Court by virtue of Letters Patent Clause 32, the Colonial Courts of Admiralty Act, 1890 and Admiralty Court Jurisdiction Act, 1861.

72. We find considerable force in the argument of the counsel for the plaintiffs that it is unnecessary to apply Rena K principle in view of the Arrest Convention, 1999 which is as much part of our law and the statute in view of the decisions of the Supreme Court in m.v. Elisabeth and m.v. Sea Success. As a matter of fact, Mr. Prashant Pratap also suggested and, in our view, rightly that the court can straightaway apply the principle set out in the Arrest Convention, 1999. The view of senior counsel Mr. V.C. Kotwal is also in line with the view of the counsel for the plaintiffs and Mr. Prashant Pratap in this regard.

73. The application of Article VII of 1999 Arrest Convention, in admiralty jurisdiction in our view, would be purposive and preferable. The applicability of Arrest Convention, 1999 in the absence of any domestic law or inconsistency with the domestic law would be more in regard to the international general principles and interaction between the arbitration agreement and in rem action. Such purposive interpretation would be in consonance with broadly accepted international procedure by which the security obtained by the arrest of the ship in the action in rem is retained to satisfy the judgment and award of arbitral tribunal. Such construction shall neither be in conflict with Section 45 of the Act of 1996 nor the judgment of the Supreme Court in P. Anand Gajapati Raju and Hindustan Petroleum Corporation Ltd. In the cases of P. Anand Gajapati Raju and Hindustan Petroleum Corporation Ltd., the subject matter did not relate to an action in rem nor the Supreme court was concerned with the question of retention method, as provided in 1999 Arrest Convention. The observation made by the Supreme Court in P. Anand Gajapati Raju that once the dispute has been referred to arbitration, nothing remains to be decided by the court has to be read to have been made in the context of Section 8 of the Act of 1996 and cannot be construed as wide as to cover action in rem or the retention method as provided in 1999 Arrest Convention. Rather, the application of Arrest Convention, particularly Article VII is in accord and in conformity with the observations made by the Supreme court in m.v. Elisabeth and m.v. See Success I.

74. The course suggested by us is also in accord and consonance with the legal position that was highlighted by the Supreme Court in the case of Sukanya Holdings Pvt. Ltd. wherein with reference to the interpretation of Section 5 and Section 8 of the Act of 1996, the Supreme Court observed thus (para 12 of Arb.LR):

"For interpretation of Section 8, Section 5 would have no bearing because it only contemplates that in the matters governed by Part I of the Act, Judicial authority shall not intervene except where so provided in the Act. Except Section 8 there is no other provision in the Act that in a pending suit, the dispute is required to be referred to the arbitrator. Further, the matter is not required to be referred to the arbitral Tribunal, if-(1) the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or (3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof. This would, therefore, mean that Arbitration Act does not oust the jurisdiction of the Civil Court to decide the dispute in a case where parties to the Arbitration Agreement do not take appropriate steps as contemplated under Sub-sections (1) and (2) of Section 8 of the Act."

75. Looking at Section 45 which is part of Part II of the Act of 1996, it would be seen that it overrides part I which includes Section 5 and provides that the Judicial authority shall not intervene except where so provided in the part. Section 5, therefore, does not come in the way of Section 45. Section 45 as the language suggests, empowers the Judicial authority to refer parties to arbitration at the request of one of the parties to such agreement where it is seized of an action in a matter in respect of which the parties have made the agreement as contemplated in Section 44. There is no inherent lack of jurisdiction in the court in entertaining an action in rem in respect of which the parties have an agreement referred to in Section 44 and none of the parties has invoked arbitration agreement. There is no other provision in Chapter I in Part II which otherwise prohibits the court in entertaining in rem action in respect of which there is arbitration agreement between the parties and the arbitration tribunal has not been constituted. The position that Judicial Authority shall not refer the parties to the arbitration under Section 45 if the agreement is null and void, inoperative or incapable of being performed also suggests that validity of the agreement is open to the scrutiny by the Judicial Authority and, therefore, its jurisdiction is not ousted at threshold.

76. Take the present case where hypothetically speaking the defendants would have given up the arbitration, in which event the suit shall be proceeded with and it cannot be said that the High Court has no jurisdiction to deal with such suit.

77. We are of the view, absent explicit legislation providing that action in rem may be used to obtain and retain security even though the merits of the dispute are to be determined in the arbitration proceedings and that subject matter of the dispute falls with admiralty jurisdiction, some procedure which is not prohibited and that is also not inconsistent with the law be devised which helps in advancing the cause of justice in accord with Article VII of Arrest Convention, 1999.

78. We shall, accordingly, articulate our conclusions thus:

(i) An application under Section 9 of the Arbitration and Conciliation Act, 1996 is not maintainable for the arrest of the vessel for obtaining security of an Award that may be made in arbitration proceedings. The view to the contrary in m.v. Indurva Valley, to that extent is overruled.

(ii) An action in rem (in admiralty jurisdiction) for recovery of the claim and arrest of the vessel where the parties have agreed to submit the dispute to arbitration can be maintained and in such case if by way of an interim measure, the vessel is arrested or the security provided to obtain the release of the vessel, matter shall proceed in accord with Article VII of the International Convention on Arrest of Ships, 1999.

(iii) If the proceedings are brought within the time so ordered by the Court before the arbitral tribunal, any final decision resulting therefrom shall be recognised and given effect with respect to the arrested ship or to the security provided in order to obtain its release provided that the defendant has been given reasonable notice of such proceedings and a reasonable opportunity to present the case for defence and in accord with the provisions contained in Arbitration and Conciliation Act, 1996.

(iv) With regard to clauses (ii) and (iii), it is, however, clarified that retention of security shall remain a matter of discretion and it shall be for the court to pass appropriate order in that regard after taking into consideration all relevant circumstances. Let the notices of motion No. 2780 of 2005 and 3287 of 2005 be posted before the Admiralty Judge for disposal in the light of our answer to the reference."

17. In view of the law laid down by the Hon'ble Full Bench of Bombay High Court, on which reliance is placed by the plaintiff/non applicant, this application is allowed, with liberty to the applicant to invoke arbitration clause within two month of the receipt of certified copy of this order or take necessary steps for getting the matter adjudicated through arbitration within the stipulated time.

18. The security if any provided to obtain release of the vessel arrested by this Court would be deemed to be the security for the award VINOD K. SHARMA, J., gms/ar if any passed in the arbitration proceedings / or in alternative Vessel will remain arrested. However, in case no proceedings are initiated for getting matter adjudicated within the period stipulated by invoking arbitration clause, the security / arrest will be deemed to have been vacated. No costs.

29.01.2013 Index: Yes / No Internet: Yes / No gms/ar Pre-Delivery Order in A.No.4265 of 2012

in C.S.No.504 of 2012

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