Perma Container (Uk) Line Ltd vs Perma Container Line (India) Pvt. Ltd on 9 September, 2009

[Cites 42, Cited by 6]

Bombay High Court

Perma Container (Uk) Line Ltd vs Perma Container Line (India) Pvt. Ltd on 9 September, 2009

1 The Petitioner has invoked, Section 9 of the Arbitration and Conciliation Act, 1996 (for short, the Act), based upon an arbitration clause in agency agreement, dated 1st August, 2005, (the agreement) between the Petitioner and Respondent No.1, as there arose dispute.

2 The Petitioner is a body corporate company registered under the laws of England, United Kindgom and carries on business inter alia of transporting cargo in containers as carriers and Multimodal Transport Operators, Forwarders world wide.

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3 Respondent No.1, an Indian registered Company, is managed and controlled by Respondent No.2, as a Director also. Respondent Nos. 3 to 5 are Indian companies set up by Respondent No.2 and are also subsidiaries of Respondent No.1, managed and controlled by Respondent No.2. He has experienced in the Shipping agency.

4 They entered into the agreement as agents for the purpose of handling the Petitioner's cargo services in Mumbai, Nhava Sheva, Kandla, Mundra, ICD Delhi & ICD Ludhiana, Pune, Ahmedabad and Nagpur.

Respondent Nos. 1 and 2 supposed to perform duties of marketing, accounting and finance, freight collections and to prepare and send/ disbursement account for all these voyages within 5 days from sailing/ arrival of the vessel. The Respondents delayed everything, did not remit the entire amount, that affected the Petitioner's business adversely.

5 In June, 2007, the Petitioner took over the Mumbai agency from Respondent No.1, but allowed to continue for other locations. Ultimately, terminated the agency agreement 5/11/2008.

6 There are various correspondences, e-mails dated 28/12/2007, 29/12/2007, 21/04/2008, 21/05/2008, 01/01/2008 and 31/12/2008 wherein the respondents admitted liabilities, but requested for time to remit the same. Though promised and assured, the Respondent never made the payment. Lastly, on 13th November, 2008, reiterated his intention to pay the amount on certain condition but not paid even thereafter. The Respondents changed the stand by letter ::: Downloaded on - 09/06/2013 14:59:34 ::: 4 dated 26th November, 2008 and denied the amount and counter claimed compensation from the Petitioner. There arose the dispute between the parties.

7 The Petitioner is a Foreign Company contemplated under Section 2(f) of the International Commercial Arbitration.

8 The Arbitration clause 39 of the Agreement, is as under:-

"39. This agreement shall be governed by and construed in accordance with English law and any dispute arising out this agreement shall be referred to arbitration in London, one arbitrator being appointed by each party, in accordance with the arbitration acts 1950 and 1979 or any statutory modification or reenactment thereof for the time being in force.

On receipt by one party of the nomination in writing of the other part's arbitrator that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final."

9 This agency agreement was terminated by the Petitioner on 5th November, 2008. The collected freight/amount due, based upon this agreement, as per the Petitioner is aggregating to USD2,013,030.00 i.e. approximately Rs.10,26,64,530.00. The alleged claims so made, are for different periods ranging from February, 2008 upto August, 2008.

10 After the termination notice, Respondents 1 and 2 ceased to be the agent w.e.f. 05/11/2008 at the ports of Kandla and mundra and the ICD's at Ahmedabad, Baroda, Nagpur, Hyderabad, Pithampur, Vapi, Surat, ::: Downloaded on - 09/06/2013 14:59:34 ::: 5 Sachin, Bhusaval, Aurangabad, Miraj, Indore and Ratlam and thereby were also directed to stop all collection of freight and other charges and to hand over the containers also.

11 This Court on 5th May, 2009, considering the averments made, passed the interim order, which has been modified on 8th May, 2009, and is in force since then.

12 Respondent Nos. 1, 2 and 3 filed their reply and resisted the Petition on all counts. The Petitioner has filed Affidavit in rejoinder dated 15th July, 2009 and Respondent Nos. 2 and 3 filed their respective sur-rejoinders dated 23rd July, 2009.

13 The Respondents basically contended that; this Court has no jurisdiction to pass any order under Section 9 of the Act, based upon the agreement of the year 2005; this Court, in India, has no jurisdiction to pass any such injunction/ order; the Agreement of 2005 is not in existence, in view of the last agreement dated 1st June, 2007 signed by the Manager of the Petitioner and Respondent's Managing Director; and therefore claims so raised are also impermissible.

14 The agreement of 2007 also provides an arbitration clause. There is no dispute that both these agreements provide identical arbitration clause which is already reproduced above.

15 The learned counsel appearing for the Petitioner has relied on ::: Downloaded on - 09/06/2013 14:59:34 ::: 6 Bhatia International Vs. Bulk Trading S.A. And Another (2002) 4 S.C.C.

105. The relevant points are:-

"29. We see no substance in the submission that there would be unnecessary interference by courts in arbitral proceedings. Section 5 provides that no judicial authority shall intervene except where so provided. Section 9 does not permit any or all applications. It only permits applications for interim measures mentioned in clauses (i) and (ii) thereof. Thus, there cannot be applications under Section 9 for stay of arbitral proceedings or to challenge the existence or validity of the arbitration agreements or the jurisdiction of the Arbitral Tribunal. All such challenges would have to be made before the Arbitral Tribunal under the said Act."

"31. If as party cannot secure, before or during the pendency of the arbitral proceedings, an interim order in respect of items provided in Sections 9(i) and (ii), the result may be that the arbitration proceedings may themselves get frustrated e.g. By non-appointment of a guardian for a minor or person of unsound mind or the subject matter of the arbitration agreement not being preserved. This could never have been the intention of the legislature."

32. To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto.

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 derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply."

The same principle has been further followed and reiterated in Venture Global Engineering Vs. Satyam Computer Services Ltd. & Anr.

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(2008) 4, S.C.C. 190, (Indtel Technical Services Private Ltd. Vs. W.S.Atkins Rail Ltd.), (2008) 10 S.C.C. 308 .

In view of above, it is clear that this Court has jurisdiction to pass interim order and or such order to protect and secure the amount of the claim.

16 The learned Senior Counsel appearing for the Respondents, contended by relying on Oberai Construction Pvt. Ltd. Vs. Worli Shivshahi Co-op. Hsg. Society Ltd., 2008(5) Bom C.R. 855, Nasir Husain Films Pvt. Ltd. Vs. Saregama India Pvt. Ltd., Appeal No. 457 of ig th 2007 in Arbitration Petition No. 81 of 2007 dated 7 April, 2008, referring to SBP & Company Vs. Patel Engineering Limited & Anr.

2005(8) S.C.C. 618 = 2006(1) Bom.C.R. 585 (D.B.) (C.B.), that this Court under Section 9 of the Act, must decide the existence of the agreement finally and the claims under it though an Arbitrator has been appointed in pursuance to the above arbitration clause and intimated to the Respondent, about his authority and jurisdiction to decide these issues under Section 30 and 31 of the English Arbitration Act, 1996 (for short, the English Act).

17 In Oberai Construction Pvt. Ltd. (Supra), the Division Bench of this Court based upon ( SBP & Company) (Supra) in para 11 observed as under:-

"11. The contention that the learned Judge had permitted the parties to proceed under section 11 may now be dealt with. Under Section 11 on an application made for constituting ::: Downloaded on - 09/06/2013 14:59:34 ::: 8 Arbitral Tribunal and further whether the subject-matter is convered by the arbitral clause can be gone into by the Court. See Patel Engineering (supra). It is submitted that once the Court under Section 9 decides the issue as to the existence of a contract containing an arbitral clause or an arbitration agreement in writing or subject-matter being covered by the arbitral clause there is no question of the issue being once again being considered by the arbitral clause, under Section 11. If the argument advanced on behalf of the appellants is accepted namely that the decision as to the existence of arbitration agreement in a proceeding under Section 9 is final then that must conclude the issue. Once a issue is decided by a Court in a competent proceeding, the finding on that issue cannot be gone into by another Court or judicial forum unless its finding was set aside by a Superior Court. The principle of issue estoppel will arise and bar the party who was party to the earlier proceedings from once again raising the issue which was concluded. The learned Judge however, has left it open to the appellants to submit more material and documents while submitting their case under section 11. Under section 11 as noted earlier the issue will be open for consideration if the issue has not been decided by a Competent Court or Judicial forum. Though section 9 of the Act confers a power to grant only interim relief, the grant of relief is subject to the Judicial forum or Court having jurisdiction to grant interim relief. As noted in Patel Engineering (supra) the Court while deciding an application under Section 9 can decide the issue as to the existence of an arbitral clause or the subject-matter being covered by the arbitral clause. Such a decision a finding as to jurisdiction cannot be prima facie, if the obiter dicta in Patel Engineering (supra) is to be accepted. The issue would stand finally concluded. If the issue is sought to be raised before another Court or Judicial forum, considering the principles of issue of estoppel, that Court or Judicial forum would be estopped from deciding that issue. The finding of the learned Judge in that case will have to be set aside. In our opinion, the decision rendered as to the existence of an arbitral agreement is final and not prima facie on the facts of the case."

The Division Bench has on merit confirmed the findings of the Single Judge.

18 In Nasir Husain (supra), the same Division Bench has observed as under:-

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"5. The Supreme Court in SBP & Co. Vs. Patel Engineering Ltd., and another reported in (2005) 8 S.C.C. 618, has held that when a party approaches the court under Section 9 for grant of interim relief, asserting that there was a dispute liable to be arbitrated upon in terms of the agreement and the opposite party disputes the existence of the arbitration agreement as defined in the Act or raises a plea that the dispute involved was not covered by the arbitration clause, considering the terminology of Section 9 of the Act, that court has necessarily has jurisdiction to decide whether there is an arbitration agreement which is valid in law and whether the dispute sought to be raised is covered by the agreement. There is no indication in the Act, that the powers of the court are curtailed on these aspects. On the other hand, Section 9 insists, that once approached in that behalf, "the court shall have the same power for making orders as it has for the purpose of and in relation to any proceeding before it". The Court then observed, "Surely, when a matter is entrusted to a civil Court in the ordinary hierarchy of courts without anything more, the procedure of that court would govern the adjudication." A Petition under Section-9 is not a suit but a civil proceeding. Considering Section 141 of the Code of Civil Procedure, the procedure governing suits will be applicable, as far as it can be made applicable, in all civil proceedings. It will therefore, be open to the court to frame issues on these aspects and decide the same. On such issue being decided, the findings on the issues would conclude the issue between the parties on those issues and the said finding cannot be reopened in any proceeding between the parties either on application under Section-11 of before an arbitral Tribunal. The only remedy would be in an appeal filed under Section 37 of the Act.

6. While considering Section 9 of the English Arbitration Act in Nigal Peter Albon (trading as N.A. Carriage Co.) and Naza Motor Trading SDN BHD and Ors. (2007) 2 All ER 1075, a Division Bench of the England and Wales High Court, in the context of their law referred to the judgment of the Court of Appeal in Fiona Trust Vs. Prialoy (2007) EWCA 20, that if the construction of an arbitration agreement is in issue, that issue has to be decided under Section-9 of the 1996 Act, before a stay can be granted under that section. Reference in support was made to the guide-lines laid down in Brise Vs.St. David (1999) BLR 19, which judgment though reversed in ::: Downloaded on - 09/06/2013 14:59:34 ::: 10 appeal the guide-lines were approved by the Court of Appeal in (2000) 1 LILR 522 and again in Al Naimi Vs. Islamic Press Agency (2000) 1 LLLR 522. The directions are 1) where it is possible to do so, to decide the issue on the available evidence presently before the court that the arbitration agreement was made and grant the stay; (2) to give directions for the trial by the court of the issue; (3) to stay the proceedings on the basis that the arbitrator will decide the issue and (4) where it is possible to do so to decide the issue on the available evidence that the arbitration agreement was not made and dismiss the application for the stay. Considering these guide-lines a Court can try and subject to one qualification should decide the issue whether the arbitration agreement was concluded. The qualification is in a case where there is an issue which the court cannot resolve on the available evidence on the application as to whether the arbitration agreement was concluded, the court indeed can stay the proceedings so that the arbitrator can decide the issue. In England also, the issues of existence of arbitral clause or whether the dispute falls with the arbitration clause can in circumstances be decided under Section-9 of this Act.

7. In our opinion, under the Act of 1996 and considering the judgment in Patel Engineering (supra) and Section 141 of the Code of Civil Procedure, the issue of existence of an arbitral agreement as also the issue as to whether the subject matter is covered by the arbitral clause will have to be decided as an issue when such issue arises before a court entertaining the petition under Section-9 of the Act. A similar view has been taken by us in another unreported judgment of this court in Oberai Construction Pvt. Ltd. Vs. Worli Shivshahi Co.Op. Hsg. Society Ltd. decided on 30th January, 2008 in Appeal No.619 of 2007.

To that extent the finding by the learned Judge that his finding is prima facie and leaving the issue open for consideration in the proceeding under Section 11 would in our opinion not be the correct statement of law under the Act. A Court considering an application and or petition under Section 9 of the Act, has jurisdiction to decide whether there is an arbitral clause and secondly whether the dispute raised falls within the scope of the arbitral clause."

19 It is, therefore, relevant to refer the observations of the Supreme ::: Downloaded on - 09/06/2013 14:59:34 ::: 11 Court decision in S.B.P. Company (Supra) as the Division Bench has relied upon the same and treated it to be "obiter dicta" has made above observations as quoted in Oberai Construction Pvt. Ltd. and Nasir Husain Films Pvt. Ltd.(supra).

20 It is important to note that the Apex Court recently in National Insurance Company Limited Vs. Boghara Polyfab Pvt. Ltd. 2009(4) Bom. C.R. 891, has reaffirmed and reiterated the scope and purpose of Section 11, 16 by elaborating the same as under:-

"The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evbidence recorded, as may be necessary.

We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the Court at various stages of the proceedings before the Arbitral tribunal."

"47(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary aspects as indicated in the earlier parts of this judgment. These will be, his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators." (emphasis supplied) This Court also examined the 'competence' of the Arbitral Tribunal to rule upon its own jurisdiction and about the existence of the arbitration clause, when the Chief Justice or his designate had appointed the Arbitral Tribunal under Section 11 of the Act, after deciding upon such jurisdictional issue. This ::: Downloaded on - 09/06/2013 14:59:34 ::: 12 Court held:

"We are inclined to the view that the decision of the Chief Justice on the issue of jurisdiction and the existence of a valid arbitration agreement would be binding on the parties when the matter goes to the Aritral Tribunal".

Section 16 is said to be the recognition of the principle of Kompetenz - Kompetenz. The fact that the Arbitral Tribunal has the competence to rule on its own jurisdiction and to define the contours of its jurisdiction, only means that when such issues arise before it, the Tribunal can and possibly, ought to decide them. This can happen when the parties have gone to the Arbitral Tribunal without recourse to section 8 or 11 of the Act.

But where the jurisdictional issues are decided under these sections, before a reference is made, section 16 cannot be held to empower the arbitral tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made. The competence to decide does not enable the arbitral tribunal to get over the finality conferred on an order passed prior to its entering upon the reference to it was made. The competence to decide does not enable the arbitral tribunal to get over the finality conferred on an order passed prior to its entering upon the reference by the very statute that creates it. That is the position arising out of section 11(7) of the Act read with section 16 thereof. The finality given to the order of the Chief Justice on the matters within his competence under section 11 of the Act, are incapable of being reopened before the Arbitral Tribunal. "

16. It is thus clear that when a contract contains an arbitration clause and any dispute in respect of the said contract is referred to arbitration without the intervention of the Court, the Arbitral Tribunal can decide the following questions affecting its jurisdiction:

     (a)     whether there is an arbitration agreement;
     (b)     whether the arbitration agreement is valid;

(c) whether the contract in which the arbitration clause is found is null and void and if so whether the invalidity extends to the Arbitr4ation clause also. It follows therefore that if the respondent before the Arbitral Tribunal contends that the contract has been discharged by reason of the claimant ::: Downloaded on - 09/06/2013 14:59:34 ::: 13 accepting payment made by the respondent in full and final settlement, and if the claimant counters it by contending that the discharge voucher was extracted from him by practicing fraud, undue influence, or coercion, the Arbitral Tribunal will have to decide whether the discharge of contract was vitiated by any circumstance which rendered the discharge voidable at the instance of the claimant. If the Arbitral Tribunal comes to the conclusion that there was a valid discharge by voluntary execution of a discharge voucher, it will refuse to examine the claim on merits, and reject the claim as not maintainable. On the other hand, if the arbitral tribunal comes to the conclusion that such discharge of contract was vitiated by any circumstances which rendered it void, it will ignore the same and proceed to decide the claim on merits.

17. Whether the intervention of the Court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is (i) issues which the Chief Justice or his Designate is bound to decide; (ii) issues which he can also decide, that is issues which he may choose to decide;

and (iii) issues which should be left to the Arbitral Tribunal to decide.

17.1 The issues (first category) which Chief Justice/ his designate will have to decide are:-

(a) Whether the party making the application has approached the appropriate High Court.

(b) Whether there is an arbitration agreement and whether the party who has applied under section 11 of the Act, is a party to such an agreement.

17.2 The issues (second category) which the Chief Justice / his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are:

(a) Whether the claim is a dead (long barred) claim or a live claim.

(b) Whether the parties have concluded the contract/ transaction by recording satisfaction of their mutual rights and ::: Downloaded on - 09/06/2013 14:59:34 ::: 14 obligation or by receiving the final payment without objection.

17.3. The issues (third category) which the Chief Justice/ his designate should leave exclusively to the Arbitral Tribunal are:

(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration).

(ii) Merits or any claim involved in the arbitration.

It is clear from the scheme of the Act as explained by this Court in SBP & Co., that in regard to issues falling under the second category, if raised in any application under section 11 of the Act, the Chief Justice/ his designate may decide them, if necessary by taking evidence. Alternatively, he may leave those issues open with a direction to the Arbitral Tribunal to decide the same. If the Chief Justice of his Designate chooses to examine the issue and decides it, the Arbitral Tribunal cannot re-examine the same issue. The Chief Justice/ his designate will, in choosing whether he will decide such issue or leave it to the Arbitral Tribunal, be guided by the object of the Act (that is expediting the arbitration process with minimum judicial intervention). Where allegations of forgery/ fabrication are made in regard to the document recording discharge of contract by full and final settlement, it would be appropriate if the Chief Justice / his designate decides the issue."

21 Admittedly, the parties have agreed to be governed by the English laws. The place of Arbitration is at London. The Petitioner is a Foreigner/ Foreign Entity. Therefore, this is admittedly an International Commercial Arbitration Proceeding governed by the English Arbitration Act.

22 The relevant Sections of English Arbitration Act are as under:-

"Power in case of default to appoint sole arbitrator-

17.-(1) Unless the parties otherwise agree, where each of two parties to an arbitration agreement is to appoint an ::: Downloaded on - 09/06/2013 14:59:34 ::: 15 arbitrator and one party (" the party in default") refuses to do so, or fails to do so within the time specified, the other party, having duly appointed his arbitrator, may give notice in writing to the party in default that he proposes to appoint his arbitrator to act as sole arbitrator.

(2) If the party in default does not within 7 clear days of that notice being given-

            a)      make the required appointment, and




                                                          
            b)      notify the other party that he has done so,

the other party may appoint his arbitrator as sole arbitrator whose award shall be binding on both parties as if he had been so appointed by agreement.

(3) Where a sole arbitrator has been appointed under subsection (2), the party in default may (upon notice to the appointing party) apply to the court which may set aside the appointment.

(4) The leave of the court is required for any appeal from a decision of the court under this section.

.Competence of tribunal to rule on its own jursidiction-

30.-(1) Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to-

a) whether there is a valid arbitration agreement,

b) whether the tribunal is properly constituted, and

c) what matters have been submitted to arbitration in accordance with the arbitration agreement.

(2) Any such ruling may be challenged by any available arbitral process of appeal or review or in accordance with the provisions of this Part.

Objection to substantive jurisdiction of tribunal

31.-(1) An objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the proceedings must be raised by a party not later than the time he takes the first step in the proceedings to contest the merits of any matter in ::: Downloaded on - 09/06/2013 14:59:34 ::: 16 relation to which he challenges the tribunal's jurisdiction.

A party is not precluded from raising such an objection by the fact that he has appointed or participated in the appointment of an arbitrator.

(2) Any objection during the course of the arbitral proceedings that the arbitral tribunal is exceeding its substantive jurisdiction must be made as soon as possible after the matter alleged to be beyond its jurisdiction is raised.

(3) The arbitral tribunal may admit an objection later than the time specified in subsection (1) or (2) if it considers the delay justified.

(4) Where an objection is duly taken to the tribunal's substantive jurisdiction and the tribunal has power to rule on its own jurisdiction, it may-

(a) rule on the matter in an award as to jurisdiction, or

(b) deal with the objection in its award on the merits.

If the parties agree which of these courses the tribunal should take, the tribunal shall proceed accordingly.

(5) The tribunal may in any case, and shall if the parties so agree, stay proceedings whilst an application is made to the court under section 32 (determination of preliminary point of jurisdiction).

23 Section 32 empowers the Court to determine the preliminary point of jurisdiction.

24 Therefore, as per the English Act the Tribunal is empowered to determine its own jurisdiction which covers the aspect about the validity of Arbitration agreement, the constitution of the Tribunal and the subject matter of the Arbitration. In the present case, the Respondents, in spite of notices, issued by the Petitioner and the Arbitrator, failed to appoint his arbitrator.

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The Petitioner, therefore, invoked Section 17 and 18 of the English Act and confirmed him as the sole Arbitrator. By informing to the Respondents, the Arbitrator has clearly expressed that the issue with regard to the jurisdiction will be considered firstly.

25 The summary/ prima facie findings under Section 9 of the Act, in my view, cannot be intended to decide finally, which as noted above, falls within the ambit and the jurisdiction in view of Section 30, 31 and 67 of the English Act, to be determined by the Tribunal. To grant interim protection or interim measure in any international arbitration does not mean that the Court in India under Section 9 of the Act should decide the validity of the agreement and or arbitrability and or even the constitution of the Arbitral Tribunal itself finally. The remedy of Section 32, 67 and or 72(2)(a) of the English Act even if, any, cannot be a reason to overlook the scope and purpose of arbitration and specially Section 17, 18, 30 and 31 of the English Act which empowers the tribunal to determine the above issues.

26 The purpose and object of Section 16 of the Act as referred and discussed in SBP & Co. (Supra) has been further followed in McDermott International Inc. Vs. Burn Standard Co. Ltd & Ors. (2006) 11 S.C.C. 181, National Thermal Power Corpn. Ltd. Vs. Siemens Atkeingesellschaft, (2007) 4 S.C.C. 451 and Gas Authority of India Ltd.

And Anr. Vs. Keti Construction (I) Ltd. & Ors., (2007) 5 SCC 38 and National Insurance Company Limited (Supra). It is in line with the scope ::: Downloaded on - 09/06/2013 14:59:34 ::: 18 and purpose of Section 30 and 31 of the English Act keeping in mind the UNCITRAL Model Law. It is the English Arbitral Tribunal to decide and determine finally the objections as raised by the Respondents including the validity of the agreement, the subject matter and or the existence of arbitration agreement and the claims based upon the same.

27 We have already quoted in Shri Harjinder Sinh s/o Balwant Singh Osan Vs. Paramjeet Singh s/o Balwant Singh Osan in Arbitration Appeal No. 1 of 2009 (Arbitration Appeal St. NO. 11067 of 2008), th decided on 18 September, 2008, as under:-

"14. The scheme and purpose of Act of 1996 is as under :-

"The Arbitration and Conciliation Act, 1996, is much more comprehensive than the repealed 1940 Act. It consists of 86 sections divided into four parts. Part I relates to domestic as well as international commercial arbitrations; Part II relates to enforcement of foreign awards under the New York and Geneva Conventions; Part III relates to conciliation; and Part IV contains supplementary provisions. The Act has three Schedules. The First Schedule reproduces the provisions of the New York Convention on Recognition of Enforcement of Foreign Arbitral Awards; the Second Schedule contains provisions of the Geneva Protocol of Arbitration Clauses of 1923; and the Third Schedule contains provisions of Geneva Convention on Execution of Foreign Arbitral Awards. Part II is a virtual reproduction of the provisions of the repealed 1937 Act and the 1961 Act excepting the deletion of Section 9(1)(b) of both the Acts.

The Act seeks to make the arbitration and conciliation law on the lines of the recommendations of the United Nations and the Model Law adopted by the United Nations Commission on International Trade Law (UNCITRAL). It has provided a unified formula for both international commercial arbitration and domestic arbitration and has consolidated the entire law on ::: Downloaded on - 09/06/2013 14:59:34 ::: 19 arbitration in one single Act."

28 There is no quarrel with the proposition that under Section 9 of the Act, the Court must satisfy prima facie the existence of Arbitration agreement, the jurisdiction of the Court and the subject matter of the Arbitration agreement. Section 9 can be invoked at any stage of the proceedings but subject to above. Therefore, if the case is made out, even before invoking the Arbitration clause, a party can move the court for interim protection and measure. It is all with intention and in aid to the main proceedings which the party may get decided through the agreed tribunal. The invocation under Section 9, therefore, is only for interim protection/ measure pending the main decision/ arbitral award. The Division Bench as relied by the learned Senior counsel appearing for the Respondents (Oberai Construction Pvt. Ltd. and Nasir Husain Films Pvt.

Ltd. (Supra) has in fact confirmed the order passed by the Single Judge expressing view that there exists no written agreement/ contract and therefore, no question of granting any relief under Section 9. Those Division Bench Judgments as on facts are distinguishable. We are not concerned with any invocation of Section 11 of the Act in the present case as the Petitioner has invoked the Arbitration clause as referred above and the Arbitrator has already been appointed and proceedings are pending at London which will be governed by the English Act. Therefore, the submission that this Court should decide finally under Section 9 the existence of the agreement and ::: Downloaded on - 09/06/2013 14:59:34 ::: 20 the claims, is untenable and unmaintainable.

29 The scope and purpose of Sections 8, 9, 11, 16 and 45 of the Act, are totally different in all respect. The Court under Section 11 cannot pass any order of injunction or protective measure. Under Section 9, the Court cannot appoint the Arbitrator pursuance to the agreement clause though need to consider the existence of the agreement for the purpose of granting interim relief or protection. The Chief Justice or the designated Judge under Section 11 as referred above and as decided by the Apex Court needs to consider the existence of the agreement, jurisdiction, and arbitrability of the matter/ claim including limitation under various circumstances.

However, as recorded in National Insurance (Supra), the Apex Court has elaborated the scope and power of the Chief Justice and or the Designated Court. Therefore, after deciding the existence of arbitration agreement, the the Chief Justice in a given case may refer the matter to the Arbitral Tribunal to decide the issue of limitation and or even the validity or nullity of the Arbitration agreement. Once the Chief Justice decides the existence of Arbitration agreement, then it is difficult for the Arbitral Tribunal to decide that issue again, unless, directed otherwise. Therefore, if party unable to appoint an arbitrator jointly and if Section 11 is invoked, the finality is given to such order and decision under Section 11 of the Act with regard to the existence of arbitration, arbitrability and related jurisdictional aspect. The summary decision given under Section 9 of the Act with regard ::: Downloaded on - 09/06/2013 14:59:34 ::: 21 to the existence of agreement and amount of the claim even if needed to be given by the Court before granting any relief that itself cannot be stated to be the final and binding under Sections 30, 31, 32 of the English Act.

30 The Apex Court in Shakti Bhog Foods Limited Vs. Kola Shipping Ltd.,(2009) 2, S.C.C. Page-134, has reiterated, after considering Section 30 and 31 of the English Arbitration Act, 1996, that the Arbitral Tribunal may Rule on its own jurisdiction and also can decide on the existence of the valid Arbitration agreement. This is similar to the provisions under Section 16 of the Act whereby the Arbitral Tribunal can decide on its jurisdiction and also on the existence or validity of the Arbitration agreement.

31 It is observed in Adhunik Steels Ltd. V/s. Orissa Manganese and Minerals (P) Ltd. In (2007) 7 S.C.C. 125), referring to the Siskina (1979) AC 210, "The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action. It is granted to preserve the status quo pending the ascertainment by the court of the rights of the parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which may or may not include a final injunction."

"16. Recently, in Fourie V. Le Roux, (2007) 1 W.L.R. 320, the house of Lords speaking through Lord Scott of Foscote stated:

"An interlocutory injunction, like any other interim order, is intended to be of temporary duration, dependent on the institution and progress of some proceedings for substantive relief."

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32 Considering the rival contentions and documents placed on recored including the conduct of the Respondents, I am of the view that all ingredients as contemplated under Order 38 Rule 5 are available in support of the Petitioner. The Respondents' contention that order 38 Rule 5 is not complied and unsecured debts and secured debts is unsustainable. Having once accepted the liability and now denying, even the existing of the agreement claims of the Petitioner, therefore, at this stage, cannot be denied merely on the basis of simple denial to the same by the Respondents. Raman Tech. & Process Engg. Co. & Anr. Vs. Solanki Traders, (2008) 2 S.C.C. 302, is of no assistance to the respondents except on law.

33 The Judgment in Arbitration Petition Lodging No. 324 of 2009, Vijay Agarwal Vs. Lehman Brothers Advisors Pvt. Ltd. decided on 02/05/2009, is also of no assistance in view of above reasoning itself. It is observed in para 12, based upon the International Commercial Arbitration in UNCITRAL Model Law jurisdiction by Dr. Peter Binder.

"In certain circumstance, especially where the Arbitral Tribunal has not yet been established, the issuance of interim measures by the court is the ony way assets can be saved for a furture arbitration. Otherwise, the claimant could end up with a worthless arbitral award due to the fact that the losing party has moved his attachable assets to a 'safe' jurisdiction where they are out of reach of the claimant's seizure. The importance of such a provision in an arbitration law is therefore evident, and a comparison of the adopting jurisdictions shows that all jurisdictions include some kind of provision on the issue, all granting the parties permission to seek court ordered interim measures."

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34 In the present case, the foreign company seeking a protection in India against the Respondents having base and the properties in India, therefore, to take prima facie view, summarily based upon the material and the documents about the existence of the agreement and the claims is well within the scope and purpose of Section 9 of the Act. This is with a view to grant urgent, appropriate relief or protection or security pending the main Arbitration proceedings before the Tribunal at London.

As noted, pursuance to the obligations under the English Arbitration Act and as Respondents through the letters raised an issue as to the existence and extent of tribunal jurisdiction, the arbitrator in view of Section 30 of the English Act intimated to the parties to send their written submissions on jurisdictional issue with further observation that he has jurisdiction to deal with the same also. He expressed his willingness to publish the award on jurisdiction, at the earliest. There is dispute between the parties whether agreement dated 1st August, 2005 is the governing agreement and or agency agreement dated 1st July/ 1st June, 2007. The Petitioner is disputing the existence of 1st July, 2007 agreement. The Respondents are not denying the execution of the agreement dated 1st August, 2005 and the similar arbitration clause. The Respondents, however, sought to contend in this proceedings that 1st August, 2005 agreement is not in existence in view of 1 st July, 2007 agreement. There is ::: Downloaded on - 09/06/2013 14:59:34 ::: 24 no reference in 1st July, 2007 agreement, about the 1st August, 2005 agreement. The agreement of 2005 nowhere provides any time period.

The Claims due from the Respondents for the period February, 2008 to August, 2008 fall under the first agreement or second, is also interlinked and interconnected. There is sufficient material to observe that there exists arbitration agreement between the parties and the claim so raised.

Respondent Nos. 1 and 2 agreed in writing, the liability/ the amount, but now disputing the same. Even otherwise as noted the majority territories of the agency cover under two agreements are also different. There is nothing to show that agreement dated 1st August, 2005 terminated automatically by virtue of agreement dated 1st June, 2007. Mere denial by the Respondents about the existence of first agreement dated 1st August, 2005 is not sufficient. The Petitioner is denying the second agreement.

Even if second agreement of 2007 is purported to be signed by the Petitioner's Manager, still on that ground, the claim of the Petitioner arising out of 1st August, 2005 agreement cannot be overlooked and decided.

36 The Respondents conduct of admitting the amount initially with request to grant time to make the payment and now total denial of the claims, is a factor goes against the Respondents. Though received from the arbitrator from London yet the Respondents not confirmed or appointed the Arbitrator as per the Arbitration Clause and raised only issue with regard to the jurisdiction and existence of the agreement. The Respondents ::: Downloaded on - 09/06/2013 14:59:34 ::: 25 themselves admitted that they are acting without any written agreement as an agents at Kandla, Mundra and Hydrabad from 1st June, 2007. The factual assertions and denials revolving around the agreements and the findings thereafter including denial of the claims need detail inquiry and trial. At this stage, there existence agreement between the parties and the claim so raised by the Petitioner falls within the ambit of these agreements and as the basic requirements to grant relief/ protection under Section 9 of the Act are available, I am inclined to maintain the order in favour of the Petition as already passed. However, the objection with regard to the jurisdiction and or existence of agreement and or the claim need to be adjudicated finally at London by the Tribunal so constituted as per the agreed clause and the English Laws.

37 It is averred by the Petitioner as Respondent No.3 without contesting the merit of the matter resisted the interim order/ injunction.

Respondent No.3 is wholly owned 100% subsidiary of Respondent No.1.

Respondent No.2 is a Director of Respondent No.1 and 3 and has in charge of day to day activities and takes all financial and all relevant decision pertaining to Respondent Nos. 1 and 3. Respondent No.2, therefore, controls, manage, operates Respondent Nos. 1 and 3. Respondent No.1 owes the Petitioner a sum of USD2,013,030.00 which comes to Approximately Rs.10,26,64,530.00. This liability is not in dispute except the denial at later stage the audited balance sheet of Respondent No.1 for ::: Downloaded on - 09/06/2013 14:59:34 ::: 26 the period of 2007-2008 shows that as averred, a sum of Rs.1,86,23,872 has been given as a loan by Respondent No.1 to Respondent No.3.

Respondent No.1 had no other special business. This Court, therefore, on 8th May, 2009, passed order restraining Respondent No.3 from selling/ transferring the Gandhidham property.

38 The scheme and purpose of Section 9 of the Act with regard to the international Arbitration has been enlarged and consider in Bhatia (Supra). It nowhere provides and or expressed that the order of injunction or protective measure or any such order if passed under Section 9 by the Court, with regard to the Arbitration Agreement and or subject matter is final and binding to all the courts or the tribunal.

39 The observation made by a Single Judge under Section 9 if confirmed by a Division Bench in Appeal, those observation may have persuasive value to the Chief Justice under Section 11 of the Act. The Chief Justice may accept and or adopt the same. The findings so given by the Chief Justice under Section 11 on merits of such matters is binding to the tribunal under Section 16 of the Act. However, that is also subject to the observations and or findings given by the Chief Justice. It is settled that the Chief Justice exercises a Judicial power and not an administrative power. (2009 (5) Mh.L.J. 153, Nandan Biomatrix Ltd. Vs. D 1 Oils Ltd.).

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The finding given under Section 9 is binding and final for all the purposes to all the Courts. In view of above, is not correct in the present case. The finding given by the Indian Court under Section 9 with regard to the existence of agreement and or subject matter for granting interim protection and or reliefs, in aid to the main reliefs, cannot be said to be final and binding to the Arbitration Tribunal under Section 30/ 31 of the English Act. The Principles of res-judicata or estoppel do not apply in such circumstances.

40 The doctrine of Precedent or ratio decidendi is explained, elaborated and reiterated in Shin-Etsu Chemical Co. Ltd. Vs. Aksh Optifibre Ltd.

(2005) 7 S.C.C. 234, that "if the Court thinks that an issue does not arise, then any observations made with regard to such issue would be purely obiter dicta." "A case is only an authority for what is actually decides and not for what may seem to follow logically from it."

41 We have to consider the scheme and purpose of each Section and the object of the Arbitration Act as a whole. The power and jurisdiction so provided under the particular Section to the particular Court/ authority/ tribunal cannot be frustrated by deciding everything at the prima facie stage of the Arbitration proceedings. The final decision by the Court, therefore, at this stage, if any also amounts to interference in the Arbitral ::: Downloaded on - 09/06/2013 14:59:34 ::: 28 proceedings which parties have decided to get settled through the Arbitral Tribunal at London under English Law.

42 The agreement and the arbitration Clause needs to be construe as per the English Laws. In view of this typical clause even the procedure to settle the dispute shall be governed by those English Laws. The proposition, therefore, based upon the above two Judgments Oberai and Nasir (Supra) is, therefore, untenable and unacceptable in the present facts and circumstances of the case. Such submissions, in my view, will frustrate the whole object of the international arbitration scheme. It will cause more conflict and create more extra-territorial issues than solving it.

43 Section 9 of the Act and Section 9 of the English Act are totally different and are applicable on different situations. Those are not similar in any way. The English Judgments, have only persuasive value. The ratio/ decision given by the English Court are not binding on the Indian Courts or vice versa. (Entertainment Network (India) Limited Vs. Super Cassette Industries Limited, (2008) 13 SCC 30,) We have held in Marico Ltd. Vs. Raj Oil Mills Ltd. 2008(3) Bom.C.R.659, as under:-

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"21. Even otherwise at the most the English decisions have persuasive value but cannot be relied to interpret, specially when the provisions of the Act as amended is different and clear."

44 Therefore, all the relevant ingredients as contemplated under Order 40 Rule 38 Rule 5 and Order 39 Rule (1) of the Civil Procedure Code (for short CPC), read with Specific Reliefs Act, are available in favour of the Petitioners covering the elements of balance of convenience, irreparable injury and the conduct of the Respondents.

45 It is observed in Kishorsinh Ratansinh Jadeja v. Maruti Corp. & ors., JT 2009 (5) SC 180 as under :

"12 In addition to the above, Mr.Ranjit Kumar also referred to the decision of this Court in Mandali Ranganna & ors v. T. Ramachandra [2008 (11) SCC 1] wherein an additional principle was sought to be enunciated relating to grant of injunction by way of an equitable relief. This Court held that in addition to the three basic principles, a Court while granting injunction must also take into consideration the conduct of the parties. ....."

46 The Apex Court in Adhunik Steels Ltd. (Supra) has observed:-

"It is true that Section 9 of the Act speaks of the Court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject-matter of the arbitration agreement and such interim measure of protection as may appear to the court to be just and convenient."

"Moreover, when a party is given a right to approach an ::: Downloaded on - 09/06/2013 14:59:34 ::: 30 ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act. On that basis also, it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under Section 9 of the Act."

47 A Division Bench of this Court in National Shipping Company of Saudi Arabia Vs. Sentrans Industries Limited, Mumbai, 2004 (2) Mh.L.J.696 has observed while considering Section 9 of the Act r/w Order 38, Rule 5 of the Code of Civil Procedure (for short, "CPC") as under:-

"We also hold without hesitation that the Court is competent to pass an appropriate protection order of interim measure as provided under section 9(ii)

(b) outside the provisions of Order 38, Rule 5 of the Code of Civil Procedure. Each case under Section 9(ii) (b) of the Act of 1996 has to be considered in its own facts and circumstances and on the principles of equity, fair play and good conscience. The power of the Court under Section 9(ii)(b) cannot be restricted to the power conferred on the Court under Civil Procedure Code though analogous principles may be kept in mind."

48 A Division Bench of this Court in Saraswat Co-operative Bank Ltd., Mumbai Vs. Chandrakant Maganlal Shah, 2002(1) Mh.L.J. 581, has observed that if a case is made out, the Court can pass an interlocutory order or appoint a Court Receiver under Order 40 of the CPC or pass order of attachment before Judgment as envisaged under Order 38 of the CPC. A prima facie opinion at the interlocutory stage is sufficient [(2008) 2, S.C.C. 724, Rajendran & Ors. Vs. Shankar Sundaram & Ors.]".

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49 In view of above, I am inclined to allow this Petition in terms of prayer clauses (c), (e) and (g) to the following extent only.

"(c) Respondent No.1 and its servants and/ or agents be restrained by an order and injunction from in any manner selling, transferring, alienating or disposing of or dealing with flat nos. 506 and 506 in Apollo, Raheja Acropolis II, off Sion-

Trombay Road, Chembur, Mumbai 400 071 and all furniture and fixtures herein or in any manner creating any third party interest in or inducting any third party into the said two flats."

"(e) (except bracketed portion)-

Respondent No.1 and Respondent No.2 be restrained by an order and injunction of this Hon'ble High Court from operating the following bank accounts of Respondent No.1 and/ or transferring and/ or withdrawing and/or using in any manner whatsoever the amounts lying in the bank accounts till the Petitioner's claim is secured to the extent of USD2,013,030.00 i.e. Approx. Rs. 10,26,64,530.00 and security is furnished to the satisfaction of the Prothonotary and Senior Master, High Court, Bombay; (i) Accounts of Perma Container Line (India) Pvt. Ltd. with Standard Chartered Bank, M.G. Road Branch, Fort, Mumbai 400 001; (ii) Accounts of Perma Container Line (India) Pvt. Ltd. with HDFC Bank, Chamber Branch, Mumbai; (iii) Accounts of Perma Container Line (India) Pvt. Ltd., with "Corporation Bank, Gandhidham, Kandla, Gujarat."

Respondent No.1 is permitted to operate Standard Chartered Bank Account for normal course of business only.

"g) Respondent No.3 and its servants and/ or agents be restrained by an order and injunction from selling, transferring, alienating or disposing off or dealing with or creating third party rights in the office premises being Office No.207, 2nd Floor, Mani Complex, Plot No. 84, Sector 8, Gandhidham Gujarat ."

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50 The order/ direction dated 8th May, 2009 against the concerned Respondent to maintain the Accounts shall continue till modified or vacated by the learned Arbitral Tribunal at London.

51 The liberty is granted to the Respondents to furnish solvent security to the extent of amount of USD2,013,030.00 i.e. Approxmately Rs.10,26,64,530.00 to the satisfaction of the Petitioner on or before 4th November, 2009. If the security is furnished, then the interim order so granted, shall stand vacated, if not furnished it shall continue till the Arbitral Tribunal at London pass such other appropriate order or direction.

52 The liberty is also granted to the parties to raise pleas or defences before the Arbitral Tribunal at London or to file an application for appropriate order or for such other measure and or the protection.

53 The Petition is allowed accordingly. No order as to costs.

(ANOOP V. MOHTA, J.) ::: Downloaded on - 09/06/2013 14:59:34 :::

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