Gujarat High Court
Scan-Shipping Pte. Ltd vs Anupam Port Cranes Corporation Limited on 30 August, 2019
Author: Sonia Gokani
Bench: Sonia Gokani
C/IAAP/16/2019 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/PETN. UNDER ARBITRATION ACT NO. 16 of 2019
==========================================================
SCAN-SHIPPING PTE. LTD
Versus
ANUPAM PORT CRANES CORPORATION LIMITED
==========================================================
Appearance:
MR HARSH N PAREKH(6951) for the Petitioner(s) No. 1
MR KAMLESH P VAIDANKAR(10135) for the Respondent(s) No. 1
NILOPHER K VAIDANKAR(8382) for the Respondent(s) No. 1
NOTICE SERVED BY DS(5) for the Respondent(s) No. 2
==========================================================
CORAM: HONOURABLE MS JUSTICE SONIA GOKANI
Date : 30/08/2019
ORAL ORDER
1.The petitioner is a company incorporated under the laws of Singapore having its registered office in the address indicated in the cause title of the petition. It is in the business of shipping and logistics services to parties all over the world.
2.Respondent No.1 is a company incorporated under the companies Act, 1956 having its registered office in India at Plot No.138, GIDC Industrial Estate, Vitahal Udyognagar, Anand, it is in the business of manufacturing of cranes and exporting the same to foreign Page 1 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER destination.
3.Respondent No.2 is the Managing Director of respondent No.1. Additionally, he is also the Director of Anupam Industries Limited, Anupam Cranes and Equipments Private Limited and Anupam Renewable Energy Private Limited. Respondent No.2 along with the family members controls the totality of share capital of respondent No.1 and exercise absolute dominion over respondent No.1 to the exclusion of any other party.
4.The genesis of this dispute is in relation to contract entered on 26.11.2013 being contract agreement relating to the transportation of STC Cranes from Pipavav Port, India to Asyaport, Turkey. Later, further contract documents were also entered into by and between the parties, which were the charterparty agreement dated 08.08.2014 and an amendment agreement dated 04.10.2014. The Page 2 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER central dispute for solution now is whether the terms of charterparty or terms of an amendment agreement would apply to the claims advanced by each side.
4.1 On 21.06.2016 the petitioner ScanShipping Pvt. Ltd. initiated arbitration proceedings on issuance of the notice of arbitration. On 04.08.2016 the Arbitral Tribunal was constituted with the appointment of the Chairman of the Tribunal and other two members. On 30.09.2016, the respondent responded to the notice of arbitration raising jurisdictional challenge. The Arbitral Tribunal on 05.01.2017 on taking into account the submissions of both the sides gave a decision on the jurisdictional issue. It decided that the issue relating to the jurisdictional challenge is so closely intertwined with the issues relating to the substantive merits of the Claimant's claim that it is desirable and expedient for both the sets of issues to be determined together on the consolidated oral Page 3 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER hearing. Eventually, after following the procedure of permitting the parties to complete the pleadings and recordance of evidence and also the written submissions, the award came to be passed. The petitioner is before this Court against respondent No.1 for USD 5,608,898 approximately Rs.39.77 Crore stemming out of a foreign award dated 19.11.2018 passed by the Arbitral Tribunal seated in Singapore.
5.It is the say of the petitioner that underlying cause of action against respondent No.1 stems out of a BIMCO "HEAVYCON"
Charterparty dated 08.08.2014, which provides Singapore Law and arbitration to apply. Respondent No.1 also entered its appearance before the Singapore Tribunal contending that the parties' rights and obligations relating to the instant dispute is not governed by the Charterparty, but, should instead be governed by a contract agreement relating to the transportation of STC Cranes from Pipavav Page 4 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER Port, India to Asyaport, Turkey dated 26.11.2013. This, of course, has been rejected by the Singapore Tribunal with the detailed reasoning.
6. The petitioner is invoking the jurisdiction of this Court under Section 9 r/w section 47 of the Arbitration and Conciliation Act, 1996 ('the Act' hereinafter) for the interim measures after the making of the arbitral award, but, before it is enforced in aid of orders of attachment, which would be levied under the Code of Civil Procedure, 1908. According to the petitioner, the foreign award since is stamped as a decree as per the decision of of the Apex Court rendered in case of Fuerst Day Lawson Ltd. vs. Jindal Exports Ltd, reported in (2001) 6 SCC 356 as envisaged under Section 49 of the Act, that the foreign award is enforceable under Chapter 1, Part II of the Act. The petitioner would have a deemed decree against respondent Page 5 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER No.1 for a sum in excess of USD 5,608,898, for the amount of Rs.39.77 Crore when received in Indian Rupees with interest.
7.It is further the say of the petitioner that the petitioner's lawyers M/s.Rajah & Tann on 28.11.2018 had issued the notice to the respondent demanding the payment of their dues under the foreign award. Respondent No.1 since failed to make the payment of its outstanding dues under the letter of demand, it has also applied to the High Court of the Republic of Singapore and sought an order of setting aside the foreign award within a period of three months. According to the petitioner, nothing would prevent the petitioner to seek the enforcement and the execution of the Arbitral award.
8.The petitioner has a reasonable and justifiable apprehension, since according to it, respondent No.2 is alleged to have Page 6 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER siphoned off or dissipated the assets of the respondent No.1 company with an intention to ensure that the USD 5.6 Million stamped as a decree remains infructuous.
9.It is pointed out to this Court that respondent No.1 in the last publically made available statutory audit report for the financial year 201617 had opined that there exists material uncertainty which would cast significant doubt about the company's ability to continue as a going concern. The Secretarial Auditors of respondent No.1 had also issued the certificate on 29.06.2018 in the context of reviewing the actual accounts for the financial year 201617 in relation to the contracts/arrangement with related parties as specified in Section 188 of the Companies Act, 2018 that respondent No.1 has not taken prior approval in respect of certain transactions entered with related to the party during the year under review. Page 7 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER
10. It is averred by the petitioner that during this period respondent No.1 has sustained loss amounting to a staggering Rs.266.21 Crore.
11. It is further the say of the petitioner that the certificate dated 06.02.2017 from Secretarial Auditors of respondent No.1 states that the company had not taken approval for related party transactions entered during the year under review, neither in the Board Meeting nor in General Meeting as per Section 188 of the Companies Act, 2013.
12. In context of reviewing respondent No.1's annual accounts for the financial year 201516 and the loss sustained of Rs.266.21 Crore, the respondent No.1's balance sheet dated 31.03.2016 indicates that it has incurred legal expenses for a staggering sum of Rs.154 Crore. Thus, in the matter of two Page 8 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER consecutive financial years 201415 and 2015 16, there has been a massive erosion in the net worth of respondent No.1 by Rs.87.6 Crore, from Rs.127.68 Crore to 40.98 Crore.
This drastic reduction is the cause of concern of the petitioner.
13. There is a considerable amount of uncertainty according to the petitioner, whether respondent No.1 has written off sum of Rs.1,163,064,354/ which it was entitled to receive from Mitsubishi Heavy Industries Asia Pacific Pvt., Ltd ("Mitsubishi Singapore"
hereinater) for its financial year 201516.
This amount had been reflected in its annual returns however, the same is absent in its annual returns for the financial years 2016
17. The outstanding dues appear to be relating to a contract between respondent No.1 and Mitsubishi Singapore wherein respondent No.1 was to receive Rs.337,40,27,285/ from Mitsubishi Singapore.Page 9 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER
It is apprehended by the petitioner that there is a possible writing off of sum of Rs.116.3 Crore which was to be received from Mitsubishi Singapore as a part of larger arrangement between the Mitsubishi Group and respondent No.2 wherein Mitsubishi Heavy Industries Ltd. of Japan exercised an auction by selling its 88.23% equity shares held in respondent No.1 (earlier it was named as Anupam MHI Industries Limited) to Anupam Industries.
The cause of concerns also shows by stating that the respondent No.1 at all material time had actively participated in the arbitral proceedings, however, it chose not to turn up for the final hearing on 18.09.2018. The stand of respondent No.1 before the Tribunal was that he did not enter into the Charterparty and the parties' rights and obligations are provided by 2013 Contract. The arbitration clause also as contained in 2013 contract, shall be applicable and not the arbitration clause in the Charterparty since in 2013 Contract seat Page 10 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER of arbitration was in India.
14. Following reliefs are sought by the petitioner pending the final determination by this Court of recognition and enforcement of the foreign award.
"21...
(a) That this Hon'ble Court be pleased to pass an order for interim measures of protection in respect to the subject matter of the foreign award dated 19th November, 2018 under Section 9 (ii) (c) &
(e) of the Arbitration and Conciliation Act, 1996 on lines similar to an order under Order XXI, Rule 41 of the Code of Civil Procedure, 1908 directing the Respondent No.1/ Anupam Port Cranes corporation Limited to place on record the schedules to its Balance Sheet and Bank statements for the past 5 years;
(b) That this Hon'ble Court be pleased to pass an order for interim measures of protection in respect to the subject matter of the foreign award dated 19th November, 2018 under Section (ii) (c) & (e) of the Aribtration and Conciliation Act, 1996 on lines similar to an order under Order XXI, Rule 41 of the Code of Civil Procedure, 1908 directing the Respondent No.2/ Mr.Mehul Jagdishchandra Patel to disclose on oath within 7 days henceforth material particulars of transactions entered into between Respondent No.1/ Anupam Port Cranes Corporation with the below entities:
i. Anupam Industries Limited;
ii. Anupam Cranes and Equipment's Private Limited;
III. Anupam Renewable Energy Private Limited.
iv. Mitsubishi Heavy Industries Asia Pasific Pvt. Ltd of
Singapore;
v. Mitsubishi Heavy Industries, Ltd of Japan;
(c) That this Hon'ble Court be pleased to pass an order for
interim measures of protection in respect to the subject matter of the foreign award dated 19th November, 2018 under Section 9(ii) (c) &
(e) of the Arbitration and Conciliation Act, 1996 on lines similar to an order under Order XXI, Rule 41 of the Code of Civil Procedure, Page 11 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER 1908 directing the Respondent No.2/ Mr.Mehul Jagdishchandra Patel to disclose on oath within 7 days henceforth whether Respondent No.1/ Anupam Port Cranes Corporation has received a sum of Rs.116,30,64,354 from Mitsubishi Heavy Industries Asia Pacific Pvt. Ltd, Singapore or whether the same has been written off?
(d) That this Hon'ble Court be pleased to pass an order for interim measures of protection in respect to the subject matter of the foreign award dated 19th November, 2018 under Section 9 (ii) (c) &
(e) of the Arbitration and Conciliation Act, 1996 on lines similar to an order under Order XXI, Rule 41 of the Code of Civil Procedure, 1908 directing the Respondent No.2/ Mr.Mehul Jagdishchandra Patel to disclose on oath within 7 days henceforth whether the identity of parties which has received a sum of Rs.154 Crores from the Respondent No.1/ Anupam Port Cranes Corporation as legal costs;
(e) That this Hon'ble Court be pleased to pass an order for interm measures of protection in respect to the subject matter of the foreign award dated 19th November, 2018 under Section 9 (ii) (c) &
(e) of the Arbitration and Conciliation Act, 1996 on lines similar to an order under Order XXI, Rule 41 of the Code of Civil Procedure, 1908 directing the Respondent No.2/ Mr.Mehul Jagdishchandra Patel to disclose on oath within 7 days henceforth remittance made by Respondent No.1/ Anupam Port Cranes Corporation to him or his immediate family member during the last 5 years whether in the nature of salary, dividend, commission, agency fee, emoluments or otherwise?
(f) That this Hon'ble Court be pleased to pass an order for interim measures of protection in respect to the subject matter of the foreign award dated 19th November, 2018 under Section 9(ii)(c) &
(e) of the Arbitration and Conciliation Act, 1996 on lines similar to an order under Order XXI, Rule 41 of the Code of Civil Procedure, 1908 directing the Respondent No.2/ Mr.Mehul Jagdishchandra Patel to disclose on oath within 7 days henceforth remittances made by Respondent No.1/ Anupam Port Cranes Corporation to a third party for and or his behalf of his immediate family member or an entity over which he exercises de jure or de facto control;
(g) That this Hon'ble Court be pleased to pass an order for interim measures of protection in respect to the subject matter of the foreign award dated 19th November, 2018 under Section 9 (ii) (d) of the Arbitration and Conciliation Act, 1996 by passing an order of injunction against the Respondent No.1 its servants, agents and assigns from selling, alienating, encumbering, creating third party Page 12 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER rights, title and interest over its fixed assets, trade receivables and long term loans and advances;
(h) That this Hon'ble Court be pleased to pass an order for interim measures of protection in respect to the subject matter of the foreign award dated 19th November, 2018 under Section 9 (ii) (b) of the Arbitration and Conciliation Act, 1996 by passing an order directing the Respondent No.1 within such time as may be fixed by this Hon'ble Court to furnish security in the sum of USD 5,608,898 by depositing or furnishing an unconditional irrevocable bank guarantee of a nationalized bank to secure the Petitioners claims of USD 5,608,898;
(i) that this Hon'ble Court be pleased to order and direct the Respondents jointly and/or severally appear and show cause within such time as may be fixed by this Hon'ble Court as to why security as prayed in prayer (h) above be not furnished by Respondent No.1;
(k) For the costs of the present petition; and For such further and other reliefs as this Hon'ble Court may deem fit and proper having regard to the facts and circumstances of the present case.
15. This Court issued notice on 01.02.2019 and also granted ad interim relief in terms of paragraph 21 (g).
16. On 13.03.2019 learned senior advocate, Mr.Navin Pahwa assisted by the learned advocate, Mr.N.M.Vaidankar appeared for and on behalf of the respondent and stated that the appropriate detailed affidavit shall be filed by the respondent disclosing market price of the properties and schedules to balancesheet and Page 13 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER Bank statements for the last 5 years before the Court. He continued to seek time for the said purpose and eventually on 01.07.2019, this Court noticed the urgency on account of allegations of siphoning of the company's assets. However, it was given to understand that the market price of the property, schedule to balancesheet and Bank statements have been disclosed before this Court and copies of which have been given to the petitioner.
17. Affidavit of disclosure of the assets of the company has been filed by the director giving the following details:
"4. That in compliance of the Order passed by this Hon'ble Court on 13.03.2019 and in view of the subsequent hearing held on 27.03.2019, I hereby produce the following documents along with the present affidavit:
(i) The company of the Valuation Report dated 26.03.2019 issued by Rudra Associates in respect of the immovable property standing in the name of Respondent No.1 company as on date is produced herewith as AnnexureA.
(ii) The copies of the Annual Reports/ Balance Sheets for last 5 years i.e. from 201112 to 201819 are annexed herewith marked as AnnexureB.
(iii) The copy of the Bank Statements of IDBI Bank pertaining to Account No.0375655100000675 in the name of Respondent No.1 Page 14 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER company for the period from 2012 to 2018 is annexed herewith AnnexureC.
(iv) The copy of the Bank Statement of ICICI Bank pertaining to Account No.008505002897 in the name of Respondent No.1 Company for the period from 2014 to 2019 is annexed herewith as AnnexureD.
(v) The copy of the Bank Statement of Axis Bank pertaining to Account No.911020050243267 in the name of Respondent No.1 Company for the period from 2013 to 2019 is annexed herewith as AnnexureE.
(vi) The copy of the Bank Statement of Corporation Bank pertaining to Account NO.048900401120002 in the name of Respondent No.1 Company for the period from 2013 to 2018 is annexed herewith as AnnexureF.
5. I further submit that the Respondent No.1 Company is having its account with Bank of Baroda and the Bank of Tokyo Mitsubishi UFJ Ltd. The Respondent No.1 company, in pursuance of the order dated 13.03.2019 passed by this Hon'ble Court, has already applied for obtaining, the Bank Statements for last 5 years from Bank of Baroda on and the Bank of TokyoMitsubishi UFJ Ltd. However, the same are still awaited. The Respondent Company undertakes to submit the same as soon as they are received. The Copy of the applications done to the aforementioned two banks are annexed herewith as AnnexureG."
18. This Court has heard the learned senior advocate, Mr.Mihir Joshi appearing with learned advocate, Mr.Harsh Parekh and learned senior advocate, Mr.Navin Pahwa with learned advocate, Mr.N.K.Vaidankar. The parties have also tendered their written submissions.
18.1 According to the petitioner, in the post judgment period of Bharat Aluminium Co. vs. Page 15 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER Kaiser Aluminium Technical Services Inc., reported in 2012 (9) SCC 552 ('BALCO') the provisions of Part I of the Arbitration Act were not to apply to the arbitration taking place out side India or when the seat of the arbitration is out side this country. This since caused extreme hardship and difficulty for the parties as the courts in India would have no power to pass any order by way of an interim measure, the law commission had recommended the amendment of the Act. Accordingly, Section 2(2) of the Arbitration Act was added with the proviso, which came into effect from 23.10.2015 and the amended act provided that Section 9, 27 (1)(a) and 37(3) would have applicability to international commercial arbitration, even where the seat of the arbitration is outside India. It is the say of the petitioner that there has to be a specific agreement to exclude Section 9 of the Arbitration Act, rather than an agreement to exclude Part I of the Act. In these circumstances, it urged that the earlier dictum of the Apex Court that the Page 16 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER parties by choosing foreign law to be the law governing the arbitration have chosen their course of action would be of no relevance. Therefore, what would be relevant is to decide whether there is an agreement to exclude the applicability of Section 9 of the Act and not an agreement to exclude the applicability of Part of the Act.
18.2 For maintaining that Section 9 would have an applicability pending the determination of enforceability of the arbitral award. Following authorities are sought to be relied upon to substantiate the oral version:
"i. Aircon Feibars FZE vs. Heligo Charters Private Limited, Commercial Arbitration Petition (L) No.208 of 2017, ii. Heligo Charters Private Limited vs. Aircon Feibars FZE, Commercial Appeal No.136 of 2017, iii. Raffles Design International India Private Ltd vs. Educomp Professional Education Limited, iv. Trammo DMCC vs.Nagarjuna Fertilizers and Page 17 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER Chemicals Ltd, reported in 2018 (1) ABR 1."
18.3 It is, urged further that it will be fallacious to argue that Section 9 would have no applicability after the foreign award is passed during the pendency of the determination of the enforceability of the foreign award. It is, therefore, the say of the learned senior counsel that as there was a considerable amount of uncertainty prevailing as to whether Section 9 would have an applicability to the arbitration proceedings seated out of India, the proviso to Section 2(2) of the Act is inserted ensuring the relief under Section 9 to the parties even when the arbitral award is made outside India. It is further the say of the petitioner that there is no coherent explanation offered by the respondent No.2Mr.Mehul Patel on serious allegation of siphoning of assets of respondent No.1company. It also does not explain as to why respondent No.1 does not have a Chief Financial Officer, Audit Committee, Independent Director as mandated Page 18 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER under companies Act and no explanation is provided as to why there has been erosion of assets of 537.19 Crore in a period of two years after the performance of the contract came to an end. It is also not explained as to why the auditor of respondent No.1 has stated as to in what manner the company is in the process of disposing the movable and immovable assets pending the agreement between the joint venture partners. About the company's future, the auditors of the company have also stated that this condition along with the other matters as set forth in the financial statement indicates existence of the material uncertainty, which may cast significant doubt about the ability of the company to continue as a going concern. It is, therefore, urged that for securing the amount in dispute in arbitration, this should be used as a material for drawing adverse inference in the context of the respondent and the Court should order furnishing of security and other protective measures under Section 9(2)(b) of the said Act in Page 19 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER addition to directing the disclosure of information/details.
19. Written submissions of the respondents on the maintainability of this application are submitted by objecting to the application of Section 9 to the arbitral proceedings governed by foreign law with the intimates of the parties. It is much emphasized that the party cannot approach this Court after agreeing to a foreign Arbitral award. Since the provision itself provides that such remedies are available only in respect of domestic award and not in case of international award because, this has a reference of Section 36 of the Act, which contained provision of enforcement of the domestic award. Section 2 (7) of the Act stipulates that in arbitral award made under Part I shall be considered as a domestic award. It is, therefore, urged that the provisions of Section 2(7) and Section 9(1) read with Section 36 would make it amply clear that in case of international arbitral award, Section 9 Page 20 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER would have no applicability.
19.1 The judgment of Bharat Aluminum reported in 2012 (9) SCC 552 is heavily relied upon. It is further urged that the Bombay High Court in case of Katra Holdings Limited vs Corsair Investments LIC & Ors, has held that provision contained in Section 34 would have no applicability in relating to international arbitration. If the provision contained in Sections 34 and 36 do not apply to international arbitration, the later part of Section 9(1) cannot apply at all to the International commercial arbitration. Subsection (3) of Section 9 stipulates that once the Arbitral Tribunal is constituted, the Court shall not entertain an application under Section 9 (1) of the Act. The remedy is for making an application for the Arbitral Tribunal as provided under Section 17 before during and after the award.
19.2 It is reiterated by the respondents that section 9 would not be available to the Page 21 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER petitioner, which can approach the Arbitral Tribunal for interim measure even after the
award. It is further the say of the respondent that the proviso under Section 9 is subject to two qualifications, the first qualification is containing the opening part of the proviso which provides that "subject to an agreement to the contrary" which makes it clear that applicability of Section 9 to an Arbitrational Commercial Tribunal having a seat outside India is subject to agreement between the parties. Once the parties agreed to abide by the foreign law, the applicability of Section 9 would be impliedly get excluded. The parties have chosen the applicability of Singapore Law in relation to the arbitration proceedings, hence, the International Arbitration Act, 2002 is the law which would govern the arbitration held in Singapore. The Act being a complete code by itself in relation to the International Commercial Arbitration, it contains the constitution of the Arbitral Tribunal, interim measures, enforcement of the Page 22 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER award, etc. Thus, if the charteredparty bases for arbitral proceedings and the International Arbitration Act, 2002 would apply, the Arbitration and Conciliation Act, 1996 would necessarily stand excluded. Reliance is placed on the decision of Bhatia International vs. Bulk Trading S.A., reported in 2002 (4) SCC 105, to urge that in case of International Commercial Arbitration, Part I would apply unless and until the parties by agreement, express or implied, exclude all or any of its provisions. It is also the say of the respondentcompany that the language used by the parliament in this proviso "subject to an agreement to the contrary" would imply that the parliament has permitted by the expressed or implied agreement to exclude applicability of Section 9, 27 or 37 (1)(a) & 37(3) as stipulated in the proviso to Section 2(2) of the Act. This, according to the respondents, is for restoring the interpretation made in Bhatia International (supra) only to the Page 23 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER extent of the applicability of Sections 9, 27 and 37 and not the entire Part I. It is, therefore, the say of the respondent that the parties since have chosen the international Arbitration Act, they have by necessary implication excluded the applicability of the entire Arbitration and Conciliation Act, 1996 including the exclusion naturally of the provisions of Sections 9, 27 and
37. 19.3 It is further said that even later part of the proviso would disentitle the petitioner to maintain the present petition, where it begins with the words " and an arbitral award made or to be made in such place is enforceable and recognized under the provisions of Part II of this Act" would mean that without prejudice to the above referred contentions about maintainability of Section 9 application, the Court will have also to come to a positive conclusion that in case Section 9 is being invoked at the stage when the foreign arbitral Page 24 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER award is already made, such award should be enforceable and recognized under the provision of Part II of the Act. It is urged that Section 47 would require the party coming for the enforcement of a foreign award to produce the same before the Court as stipulated in the provisions itself, which has not been done in the instant case where neither original award nor authenticated copy of the award as required by the provision was produced. In such an eventuality the Court may need to refuse to enforce the award unless the party seeking enforcement submits the proof on various aspects. The petitioner since has failed to satisfy most of the requirements, the award is to be held as not enforceable. For substantiating the version and the written statements, various decisions have been pressed into service, which shall be referred to as and when necessary.
20. On thus hearing learned advocates on both the sides, at the outset, the law on the subject Page 25 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER needs discussion. In part I, Chapter I under the General Provisions Section 2 provides for the definition in the said Act of 1996.
20.1 Section 2(2) deserves reproduction at this stage.
"Section 2 (2): This Part shall apply where the place of arbitration is in India. [Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of subsection (1) and subsection (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.]"
21. It is clear that this part is to apply where the place of arbitration is in India. The proviso to this Subsection (2) of Section 2 has been inserted by the Act 3 of 2016 with effect from 23.10.2015, making it abundantly clear that Sections 9, 27, 37(1)(a) & 37(3) of the Act shall also apply to the International Commercial Arbitration. Even if the place of arbitraition is outside India and arbitral award to be made in such place is enforceable and recognised under the provision of Part II of this Act subject to Page 26 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER of course an agreement to contrary. This Act which stood before 23.10.2015 is not what is the Act after the amendment has come into being on 23.10.2015, whereby this proviso has been introduced to Subsection (2) of Section 2 of the Act. This part was applicable where the place of arbitration was in India prior to 23.10.2015 as was provided under the Act and in various decisions of the Apex Court this was one of the the debates as to whether this would have an applicability in case of foreign award.
22. In decision of the Apex Court in case of Bhatia International (supra) an agreement was entered into between the parties containing an arbitration clause which provided that the arbitration was to be conducted as per the rules of the International Chamber of Commerce (for short ICC). Such arbitration was to be held in Paris, France. An application was moved under Section 9 of the Arbitration Act before the learned 3rd Additional District Judge, Indore, Page 27 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER M.P., where one of the interim reliefs sought was the order of injunction. A plea was raised that the Indore Court has no jurisdiction and application was not maintainable on the ground that the part I of the said Act would have no applicability to arbitration where the place of arbitration is not in India. This was dismissed by the learned District Judge, Indore holding that the Court at Indore had jurisdiction and the application was maintainable.
22.1 When a Writ Petition was moved before the High Court of Madhya Pradesh, Indore Bench, the same was dismissed.
22.2 This was carried to the Apex Court where the question had been raised as to whether the Part I of the said Act would apply to the arbitration where the place of arbitration is outside India. On behalf of the respondents therein it was urged that unless the party by agreement either expressly or impliedly excludes its provision, Part I would apply to all Page 28 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER International Arbitrations including the one which would take place in India. The Apex Court concluded that the provision of Part I would have an applicability to all arbitrations including international commercial arbitration and to all proceedings relating thereto. It further held that where such arbitration is held in India, the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the provisions of Part I. Even, in case of International Commercial Arbitration held outside India, the provision of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions and in such case the laws or rules chosen by the parties shall prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will have no applicability. The question before the Court was whether Section 9 also would get excluded by the ICC Rules of Arbitration. The Court referred to Article 23 of the ICC Rule and on interpreting the same has held that Page 29 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER Article 23 of the ICC Rules permits the parties to apply to any competent judicial authority for interim or conservatory measures. And therefore, the Apex Court held that an application can be made under Section 9 of the said Act.
23. This was followed in Venture Global Engineering vs. Satyam Computer Services Ltd. And another, reported in (2008) 4 SCC 190. In that decision, the appellantcompany and the respondentcompany had entered into a joint venture agreement. Their agreement had provided for the dispute resolution by referring the matter to the Arbitration after the dispute which arose between the parties was referred to the sole arbitrator. The award came to be passed and for enforcing the award a petition came to be filed before the Eastern District Court of Michigan at U.S.A. The appellant had challenged such proceedings before the US Court by filing the petition, where it objected to the enforcement of the award specifically pointing at Page 30 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER the violation of Indian laws under the Foreign Exchange Management Act, 1999 ('FEMA'). The appellant had preferred the Suit before the 1st Additional Chief Judge, City Civil Court, Secundrabad for setting aside the award and permanent injunction of transfer of shares under the award where exparte order of injunction was granted. This was challenged in an Appeal before the High Court of Andhra Pradesh at Hyderabad, and the Court directed the interim suspension of the order of District Court, but, made it clear that there would be no transfer of the shares until the further order would be permitted. A petition was preferred for rejection of the plaint under Order VII Rule 11 and the Trial Court had allowed such application rejecting the plaint which was challenged before the High Court and the High Court dismissed the appeal by holding that the the award cannot be challenged even if, it is against the public policy and made in contradiction of statutory provisions. Page 31 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER
24. The Special Leave to Appeal was preferred before the Apex Court. Here the question had arisen with regard to the enforcement of the foreign award which did not contain any provision similar to Section 9 or Section 17 of the said Act. The Apex Court held thus:
"19. Mr. Nariman heavily relied on paragraph 26 of the judgment in Bhatia International which we have extracted supra. According to him, the said paragraph contains not only the submissions of Mr. Sen, who appeared for Bhatia International therein but also the ultimate conclusion of the Bench. He reiterated that the Court concluded thus:
"26.Thus Section 44 (in Chapter I) and Section 53 (in Chapter II) define foreign Awards, as being awards covered by arbitrations under the New York Convention and the Geneva Convention respectively. Part II then contains provisions for enforcement of foreign awards which necessarily would be different. For that reason, special provisions for enforcement of foreign awards are made in Part II. To the extent that Part II provides a separate definition of an arbitral award and separate provisions for enforcement of foreign awards, the provisions in Part I dealing with these aspects will not apply to such foreign awards. It must immediately be clarified that the arbitration not having taken place in India, all or some of the provisions of Part I may also get excluded by an express or implied agreement of parties. But if not so excluded, the provisions of Part I will also apply to foreign awards. The opening words of Sections 45 and 54, which are in Part II, read notwithstanding anything contained in Part. Such a non obstante clause had to be put in because the provisions of Part I apply to Part II."
31. On close scrutiny of the materials and the dictum laid down in threeJudge Bench decision in Bhatia International (supra), we agree with the contention of Mr. K.K.Venugopal and hold that paragraphs 32 and 35 of the Bhatia International (supra) make it clear that the provisions of Part I of the Act would apply to all Page 32 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER arbitrations including international commercial arbitrations and to all proceedings relating thereto. We further hold that where such arbitration is held in India, the provisions of PartI would compulsorily apply and parties are free to deviate to the extent permitted by the provisions of PartI. It is also clear that even in the case of international commercial arbitrations held out of India provisions of PartI would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. We are also of the view that such an interpretation does not lead to any conflict between any of the provisions of the Act and there is no lacuna as such. The matter, therefore, is concluded by the threeJudge Bench decision in Bhatia International.
32. The Learned senior counsel for the respondent based on para 26 submitted that in the case of foreign award which was passed outside India is not enforceable in India by invoking the provisions of the Act or the CPC. However, after critical analysis of para 26, we are unable to accept the argument of learned senior counsel for the respondent. Paras 26 and 27 start by dealing with the arguments of Mr. Sen who argued that Part I is not applicable to foreign awards. It is only in the sentence starting at the bottom of para 26 that the phrase it must immediately be clarified that the finding of the Court is rendered. That finding is to the effect that an express or implied agreement of parties can exclude the applicability of Part I. The finding specifically states: But if not so excluded, the provisions of Part I will also apply to all foreign awards. This exception which is carved out, based on agreement of the parties, in para 21 (placitum (e) to (f) is extracted below:
"21. ....By omitting to provide that Part I will not apply to international commercial arbitrations which take place outside India the effect would be that Part I would also apply to international commercial arbitrations held out of India. But by not specifically providing that the provisions of Part I apply to international commercial arbitrations held out of India, the intention of the legislature appears to be to allow parties to provide by agreement that Part I or any provision therein will not apply. Thus in respect of arbitrations which take place outside India even the nonderogable provisions of Part I can be excluded. Such an agreement may be express or implied.
33. The very fact that the judgment holds that it would be open to the parties to exclude the application of the provisions of Part I by express or implied agreement, would mean that otherwise the whole of Part I would apply. In any event, to apply Section 34 to foreign international awards would not be inconsistent with Section 48 of the Act, or any other provision of Part II as a situation Page 33 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER may arise, where, even in respect of properties situate in India and where an award would be invalid if opposed to the public policy of India, merely because the judgmentdebtor resides abroad, the award can be enforced against properties in India through personal compliance of the judgmentdebtor and by holding out the threat of contempt as is being sought to be done in the present case. In such an event, the judgmentdebtor cannot be deprived of his right under Section 34 to invoke the public policy of India, to set aside the award. As observed earlier, the public policy of India includes (a) the fundamental policy of India; or (b) the interests of India; or (c) justice or morality; or (d) in addition, if it is patently illegal. This extended definition of public policy can be bypassed by taking the award to a foreign country for enforcement."
25. The Court thus made it quite clear following the decision of Bhatia International (supra) that the provisions of Part I are applicable to International Commercial Arbitration held outside India unless any or all such provisions have been excluded by agreement between the parties expressly or by implication. This very issue had arisen in case of Harmony Innovation Shipping Ltd vs Gupta Coal India Ltd and the Court referred to the decisions of the Bhatia International (supra) and Venture Global Engineering (supra). The Court reiterated the very decisions to lay down that it would be open for the parties to exclude the application of provision of Part I by express or implied agreement and unless that is done, the Page 34 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER whole of Part I would be applicable.
"44. In Reliance Industries Ltd. (supra), the twoJudge Bench, while referring to the submissions of the learned counsel for the appellant therein had also referred to the pronouncement in Yograj Infrastructure Ltd. (supra) and dealt with it thus:
"54. Again this Court in Yograj Infrastructure (twoJudge Bench) considered a similar arbitration agreement. It was provided that the arbitration proceedings shall be conducted in English in Singapore in accordance with the Singapore International Arbitration Centre (SIAC) Rules (Clause 27.1). Clause 27.2 provided that the arbitration shall take place in Singapore and be conducted in English language. This Court held that having agreed that the seat of arbitration would be Singapore and that the curial law of the arbitration proceedings would be the SIAC Rules, it was no longer open to the appellant to contend that an application under Section 11(6) of the Arbitration Act, 1996 would be maintainable. This judgment has specifically taken into consideration the law laid down in Bhatia International and Venture Global. The same view has been taken by the Delhi High Court, the Bombay High Court and the Gujarat High Court, in fact this Court in Videocon has specifically approved the observations made by the Gujarat High Court in Hardy Oil and Gas Ltd. v. Hindustan Oil Exploration Co. Ltd.[20]"
45. Coming to the stipulations in the present arbitration clause, it is clear as day that if any dispute or difference would arise under the charter, arbitration in London to apply; that the arbitrators are to be commercial men who are members of London Arbitration Association; the contract is to be construed and governed by English Law; and that the arbitration should be conducted, if the claim is for a lesser sum, in accordance with small claims procedure of the London Maritime Arbitration Association. There is no other provision in the agreement that any other law would govern the arbitration clause.
47. In that context, the Court referred to Section 3 of the English Arbitration Act, 1996 and as has been stated earlier, opined that as per the English law, the seat of arbitration as per the said provision would mean "juridical seat of arbitration" and accordingly opined that principles stated in Bhatia International (supra) would not be applicable.
48. In the present case, the agreement stipulates that the contract is to be governed and construed according to the English law. This occurs in the arbitration clause. Mr. Vishwanathan, learned senior counsel, would submit that this part has to be interpreted as a part of "curial Page 35 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER law" and not as a "proper law" or "substantive law". It is his submission that it cannot be equated with the seat of arbitration. As we perceive, it forms as a part of the arbitration clause. There is ample indication through various phrases like "arbitration in London to apply", arbitrators are to be the members of the "London Arbitration Association" and the contract "to be governed and construed according to English Law". It is worth noting that there is no other stipulation relating to the applicability of any law to the agreement. There is no other clause anywhere in the contract. That apart, it is also postulated that if the dispute is for an amount less that US $ 50000 then, the arbitration should be conducted in accordance with small claims procedure of the London Maritime Arbitration Association. When the aforesaid stipulations are read and appreciated in the contextual perspective, "the presumed intention" of the parties is clear as crystal that the juridical seat of arbitration would be London. In this context, a passage from Mitsubishi Heavy Industries Ltd. v. Gulf Bank[21] is worth reproducing:
"It is of course both useful and frequently necessary when construing a clause in a contract to have regard to the overall commercial purpose of the contract in the broad sense of the type and general content, the relationship of the parties and such common commercial purpose as may clearly emerge from such an exercise. However, it does not seem to me to be a proper approach to the construction of a default clause in a commercial contract to seek or purport to elicit some selfcontained 'commercial purpose' underlying the clause which is or may be wider than the ordinary or usual construction of the words of each subclause will yield."
26. In case of Bharat Aluminium Co. (supra) the Court after noticing the misuse of the provisions particularly under Article 34 and also on thoroughly examining all the provisions held that in foreign seated International Commercial Arbitration there shall be no application for interim relief maintainable under Section 9 or any other provisions. Similarly, there shall be Page 36 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER no suit for interim injunction maintainable in India. The Apex Court further held that Part I of the Arbitration Act, 1996 would have no application to International Commercial Arbitration. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. The Apex Court held that here can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996. Relevant paragraphs are reproduced as under:
"164. It was next submitted that if the applicability of Part I is limited to arbitrations which take place in India, it would leave many parties remediless in a number of practical situations.
165. In this connection, Mr. Sorabjee has relied upon the judgment of the English High Court in Reliance Industries Limited (supra). In the aforesaid case, the contracts were governed by the Indian law as their proper law. The disputes were to be determined by the arbitration in London. The procedural law applicable was English Law.
The distinction between the proper law of the JOA's and the procedural law was known to the parties. At the arbitration hearing, the parties agreed that the principles of construction of contracts in Indian Law were the same as in English Law. The parties further agreed that the English Law principles on the construction of contracts were those set out by Lord Hoffmann in Investors Compensation Scheme Ltd. vs. West Bromwich Building Society, as explained and expanded by Lord Hoffmann in Bank Page 37 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER of Credit & Commerce International SA vs. Ali & Ors. In their awards, the three arbitrators stated (at paragraph 73) that they would apply those principles to construe the contracts under consideration in making their Partial Arbitral Awards. The question raised at the threshold was whether the applicantReliance can apply for permission to appeal to the Commercial Court in England and Wales "on a question of law arising out of an award made in the proceedings" under Section 69 (1) of the Arbitration Act, 1996 (English). So the "threshold" issue was whether any point of construction of the contracts, assuming that would be a question of law at all, is a "question of law of England and Wales" within Section 82(1) of the Arbitration Act, 1996. It was accepted by the applicant that unless the question of law concerned "the law of England and Wales, then leave to appeal cannot be granted." The issue before the Court was as to whether the questions of construction of JOA's are questions of Indian Law because the contracts are governed by Indian Law. The parties did not, as a matter of fact, vary the proper law of the contracts for the purposes of arbitration hearing in London. As the parties agreed that the Indian Law applied to the contracts, the arbitrators had to apply Indian Law when construing the contracts. Although the parties agreed that Indian Law and English Law principles of construction were the same, ultimately the arbitrators were applying Indian Law rather than English Law to construe the contract. The Court rejected the submission of the applicant that the arbitrators had applied the English Law. The Court observed that: "27. I am unable to accept the submissions of Mr.Akenhead. The parties agreed that the contracts were to be governed by Indian Law as their proper law. The parties also agreed that disputes should be determined by arbitration in London. The parties were carful to ensure that English Law would be the procedural law applicable to arbitration proceedings that arose as a result of disputes arising out of the JOAs. The distinction between the proper law of the JOAs and the procedural law was also well in the minds of the arbitrators as they drew particular attention to it in paragraph 26 of their Partial Awards. The effect of those contractual provisions is, as the arbitrators also recognized, that all procedural matters were to be governed by English law as laid down in Part 1 of the 1996 Act. The parties must be taken to have appreciated that fact also.
28. The consequence is that if and when disputes under the contracts were referred to arbitration, as a matter of the procedural law of the arbitrations (English Law), the tribunal had to decide those disputes in accordance with the proper law of the contracts as chosen by the parties - unless the parties agreed to vary the contracts' terms, which they did not. Therefore, if as in this case, the arbitrators had to decide issues of construction of the JOAs, then they were bound to do so using principles of Page 38 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER construction established under the proper law of the contracts, i.e. Indian law.
29. As it happens the parties agreed that the principles of construction under the proper law of the contract equated with those principles under English law, as declared by the House of Lords in two recent cases. What the arbitrators did was to take those principles of construction and apply them as principles of Indian law in order to construe the contracts according to Indian law. The arbitrators had to do that, as a matter of the procedural law of the arbitration. That is because under the English law of arbitration procedure, the arbitrators were bound to construe the contracts and determine the disputes between the parties according to the proper law of the contracts concerned.
30. Therefore, I think that it is wrong to say that the arbitrators "applied English Law" when construing the contracts. They applied Indian law, which happened to be the same as English law on this topic."
197.In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the UNCITRAL Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India.
We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to International Commercial Arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996.
198. With utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International (supra) and Venture Global Engineering (supra). In our opinion, the provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with any of the provisions either in Part I or in Part II of the Arbitration Act, 1996. In a foreign seated international commercial arbitration, no application for interim relief would be maintainable under Section 9 or any Page 39 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER other provision, as applicability of Part I of the Arbitration Act, 1996 is limited to all arbitrations which take place in India. Similarly, no suit for interim injunction simplicitor would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India.
199. We conclude that Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India.
200. The judgment in Bhatia International (supra) was rendered by this Court on 13th March, 2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by this Court on numerous occasions. In fact, the judgment in Venture Global Engineering (supra) has been rendered on 10th January, 2008 in terms of the ratio of the decision in Bhatia International (supra). Thus, in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter."
27. It is rightly pointed out by the petitioner that for bringing an end to the unscrupulous practice after the decision of Bhatia International (supra) and Venture Global Engineering (supra), the larger Bench of the Apex Court had overruled both these decisions making it very clear that Part I will have no applicability so far as the arbitration having its seats outside India. However, realising the extreme difficulties in case of those, who needed the interim relief before the award is made enforceable during/after/or before the Page 40 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER proceedings, the legislature had deemed it appropriate to introduce the proviso to Section 2 (2) of the Arbitration Act, 1996. Therefore, the parties which lost in the International Commercial Arbitration seated outside India when rushed to the India under Section 34 of the Arbitration Act, there was an apparent misuse which could be noticed by the Larger Bench in BALCO's judgment which chose not to apply Part I to the arbitration proceedings seated outside India. However, this also since has caused extreme difficulties for the genuine parties, the legislature in its wisdom has provided the proviso after the law commission recommended amendment of Act and that eventually permitted the arbitration conducted outside India to invoke the jurisdiction of the Court under Section 9 for protecting the assets located within the jurisdiction of Indian Courts. Thus, with the present scenario, unless there is an express agreement to exclude this provision contained under the proviso, Section 9 of the Arbitration Page 41 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER Act would have an applicability and the provision of Part I also would apply to arbitration taking place or seated outside India. This introduction was essentially to handle and redress the issue which had rendered the Indian Courts powerless by virtue of BALCO's judgment, so far as the interim protection in relation to the protection of assets located in India was concerned.
28. This Court, therefore, concludes that the proviso introduced on 23.10.2015 would explicitly give powers to the Courts in India unless the parties have expressly agreed to exclude this provision as its applicability writs large on the face of the statute itself. The cause of which was marred on account of the decision of the BALCO (supra), which had attempted to redress a malice of moving application under Section 34 after losing abroad. This complete exclusion of Part I in the post BALCO's judgment made it difficult for the genuine parties to the arbitration and therefore, any interpretation Page 42 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER otherwise than this, could result into the defeat of the objectives with which proviso this has been introduced.
29. This Court is also supported by the decision of the Delhi High Court in case of Raffles Design International India Private Limited vs. Educomp Professional Education Limited, the judgment delivered on 07.10.2016, wherein referring to the various decisions of the Apex Court, the Court answered the question whether the petitioner can approach the Court for interim relief considering that it had already approached the Arbitral Tribunal in Singapore and also obtained the judgment in term of interim order from the Singapore High Court, which had answered in affirmation referring to Article 17 H of the UNCITRAL Model Law which contains an express provision for enforcement of interim measure.
30. Following are the findings and observations of the Delhi High Court:
Page 43 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER
"96. In the circumstances, the contention that the parties by agreeing that the proper law applicable to arbitration would be the law in Singapore have excluded the applicability of Section 9 of the Act.
97. The only question that now remains to be considered is whether the petitioner can approach this Court for an interim relief considering that it has already approached the Arbitral Tribunal in Singapore and thereafter, also obtained a judgment in terms of the interim order from the Singapore High Court.
98. It is relevant to mention that Article 17 H of the UNCITRAL Model Law contains express provisions for enforcement of interim measures. However the Act does not contain any provision pari materia to Article 17H for enforcement of interim orders granted by an Arbitral Tribunal outside the India. Section 17 of the Act is clearly not applicable in respect of arbitral proceedings held outside India.
99. In the circumstances, the emergency award passed by the Arbitral Tribunal cannot be enforced under the Act and the only method for enforcing the same would be for the petitioner to file a suit.
100. However, in my view, a party seeking interim measures cannot be precluded from doing so only for the reason that it had obtained a similar order from an arbitral tribunal. Needless to state that the question whether the interim orders should be granted under section 9 of the Act or not would have to be considered by the Courts independent of the orders passed by the arbitral tribunal. Recourse to Section 9 of the Act is not available for the purpose of enforcing the orders of the arbitral tribunal; but that does not mean that the Court cannot independently apply its mind and grant interim relief in cases where it is warranted.
101. It is relevant to note that the provisions under Article 17 I (2) of the Model Law, the court enforcing an interim order passed by an Arbitral Tribunal in prescribed form undertakes a review of the substance of interim measure the Model Law. To that extent, a Court while examining a similar relief under Page 44 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER Section 9 of the Act would be unfettered by the findings or the view of the Arbitral Tribunal.
102. The decisions of this Court in Sri Krishan (supra) and Indiabulls Financial Services Ltd. & Ors. v. Jubilee Plots and Housing Private Ltd.: 2009 SCC OnLine Del 2458 referred to by Mr Dutt have no applicability in the facts of this case. In those cases, it was held that a person disobeying the orders passed under Section 17 of the Act would be guilty of contempt as provided under Section 27 (5) of the Act. Clearly, a person guilty of not following the interim orders of the arbitral tribunal in Singapore cannot be proceeded for the contempt under Section 27 of the Act, as contended by Mr Dutt. "
31. Bombay High Court in case of Aircon Feibars FZE vs. Heligo Charters Private Limited was also considering an application for adinterim reliefs and this very issue had arisen before the Court which interpreted it to hold that the interim measure would be available even to the parties which had chosen the foreign seat. This was challenged before the Appellant Bench and which also had an occasion to deal with the same at length.
ON MERIT:
32. In the case on the hands, the petitioner is Page 45 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER the company incorporated under the laws of Singapore. The respondentcompany is based in India. The petitioner because of action against respondent No.1 was out of BIMCO "HEAVYCON" Charterparty dated 08.08.2014 which provided Singapore Law and arbitration to apply. The Singapore Tribunal has passed a final award. The foreign award is dated 19.11.2018 and interim measure of protection is sought under Section 9 (2) (b) of the Arbitration Act, whereby the petitioner is seeking respondent No.1 to be directed to furnish the security in the sum of USD 5,608,898 by furnishing an unconditional irrevocable Bank guarantee of a nationalized Bank to secure the petitioner's claim. Thus, in this application, a request is of grant of interim foreign award which is sought to be protected by way of an application under Section 9(2)(b) of the Arbitration Act. The proviso to Subsection (2) of Section 2 of the Arbitration Act would entitle the petitioner to approach this Court. All objections raised by the respondent in Page 46 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER relation to the applicability of Part I to the Foreign Award in wake of this introduction of the proviso cannot be countenanced. This issue is accordingly held in favour of the petitioner.
33. So far as the direction of furnishing the security to the tune of the arbitral award is concerned, this Court notices from the averments made by the petitioner and the contentions raised by the other side of the chronological depletion of the funds of respondentcompany.
34. This Court had issued the notice directing the respondent to show cause as to why the security as prayed for in prayer (h) of para 21 be not furnished. The affidavit is filed by Mr.Mehul Jagdishchandra Patel in his capacity as the director of respondent No.1company stating therein that the contentions raised on behalf of the petitioner are completely misconceived and may not warrant any consideration. The affidavit of the disclosure of the assets of the company Page 47 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER has been filed by the very director on 01.04.2019 with which he has produced the copy of valuation report dated 26.03.2019 issued by the Rudra Associates. The copies of Annual Reports/ Balance Sheets for last 5 years i.e. from 201112 to 201819, the Bank statement of IDBI Bank pertaining to Account No.0375655100000675 in the name of Respondent No.1 company and other statements of ICICI Bank, Axis Bank, Corporation Bank, Bank of Baroda and Bank of TokyoMitsubishi UFJ Ltd are pressed into service and he has relied upon the same for substantiating his version.
35. The affidavitinreply on behalf of the respondent is also filed on 06.05.2019, wherein on the merit of matter, he has denied the averments set out in the petition.
36. Both the sides have extensively argued on the financial condition of the company and the gradual depletion of the shares of the Mitsubishi. An attempt is made to defend on the Page 48 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER part of the respondents by placing various documents on the record. This Court also has been taken through the audited reports, Bank statements and the chronological events which have taken place with the help of the substantive documents.
37. This Court on careful consideration of entire gamut of facts and plethora of materials pressed into service along with Annual reports, Balance sheets from 20162017 to 20182019, Bank statements of IDBI Bank, ICICI Bank and Axis Bank and Corporate Bank of respondent No.1 company of 20132018, is of the firm opinion that the amount of award shall need to be secured, lest the very exercise of passing award would be frustrated. Considering the series of events, which have taken place in the last five years as also from the substantive material, validly and officially brought on record and notable absence of any cogent and palatable material or convincing contention, this is a fit case to direct Page 49 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER furnishing of security. Gradual depletion of funds and share of Mitsubishi from the entire record sends clear bells of warning and would warrant order of protection, so as not to frustrate the very process and Arbitral award. Therefore, the prayer in terms of para 21 (h) is required to be granted by way of an interim measure of protection in respect of the subject matter of the foreign award. It is not out of place to make a specific mention of order of injunction granted by this Court injuncting the respondent from disposing of its assets. Respondent also was directed to place on record valuation of the assets and pursuant to such a direction, the respondent company has complied with the same. Attempt on the part of the respondent to distinguish the judgment of Raffles Design International India Private Limited (Supra) and of Samson Maritime Limited (Supra) on the basis of different factual matrix, cannot be countenanced as what is important is the ratio Page 50 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER laid down in each case.
38. Respondent, resultantly, is directed at this stage to furnish the security in terms of USD 5,608,898 by furnishing unconditional irrevocable Bank guarantee of Nationalized Bank, the same shall be done within a period of six weeks from the date of receipt of a copy of this order. The Bank guarantee once received shall be initially for the period of one year, which shall be renewed periodically till further order of this Court. Till the same is furnished, injunction on assets shall continue to operate.
39. Being satisfied that in absence of any agreement to contrary, section 9 of the Arbitration Act would have an applicability even though it is a case of International Commercial Arbitration as provided in proviso to section 2(2) of the Arbitration Act, although interim injunction is in operation of not to transfer the assets, there would be a need to specifically direct furnishing of security to protect the Page 51 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021 C/IAAP/16/2019 ORDER petitioner so as not to frustrate the very cause, as the execution of award is yet pending.
40. Present petition stands disposed of accordingly.
41. Considering the direction issued by this Court in terms of para 21 (hss) may not be any requirement for this Court to dwell into the request of the petitioner so far as other prayers are concerned, however, the nongrant of the same specifically and explicitly will not in any manner take away the right of the petitioner to insist for the same in the future, if any such need arises.
(MS SONIA GOKANI, J) M.M.MIRZA Page 52 of 52 Downloaded on : Sun Feb 28 06:21:39 IST 2021