2012 (9) TMI 1123 - HC - Indian Laws

Court upholds arbitration clause under GAFTA Rules despite time bar, emphasizing England as seat.

LMJ International Limited Versus Sleepwell Industries Co. Ltd. & Anr.

LMJ International Limited Versus Sleepwell Industries Co. Ltd. & Anr. - TMI Issues Involved:1. Jurisdiction of Civil Court to restrain International Commercial Arbitration.2. Validity and enforceability of the arbitration clause in the contract.3. Limitation period for referring disputes to arbitration under GAFTA Rules.4. Applicability of GAFTA Rules and English Arbitration Act to the arbitration proceedings.5. Justification for granting or vacating interim injunction.Summary:Jurisdiction of Civil Court to restrain International Commercial Arbitration:The primary issue was whether a Civil Court has the power and jurisdiction to restrain a party from making reference to an International Commercial Arbitration and resolving the dispute through such arbitration. The court noted that the contract containing the arbitration clause was duly executed by the parties. The court emphasized that a Civil Court retains jurisdiction unless an application for referring the parties to arbitration is made u/s 45 of the Arbitration and Conciliation Act, 1996, which was not done in this case.Validity and enforceability of the arbitration clause in the contract:The appellant contested the enforceability of the arbitration clause, arguing that there was no agreement to refer disputes to arbitration under GAFTA Rules. The court found that the contract explicitly contained an arbitration clause, and both parties had agreed to resolve disputes through GAFTA arbitration. The court held that the arbitration clause was valid and enforceable.Limitation period for referring disputes to arbitration under GAFTA Rules:The appellant argued that the reference to arbitration was time-barred according to GAFTA Rules, specifically clause 2.2(d), which requires disputes to be referred within 60 days from the notice of a dispute. The court noted that the dispute arose on 22nd March 2011, and the notice for arbitration was issued on 28th July 2011, which was beyond the stipulated time limit. However, the court stated that the arbitral tribunal has the discretion to extend the time limit under Rule 21(a) of GAFTA Rules.Applicability of GAFTA Rules and English Arbitration Act to the arbitration proceedings:The court highlighted that the GAFTA Arbitration Rules designate England as the juridical seat of arbitration and that the provisions of the English Arbitration Act, 1996, apply. The court referred to various Supreme Court judgments, including Bharat Aluminium Co. vs. Kaiser Aluminium Technical Service, Inc., to support the view that Part I of the Arbitration and Conciliation Act, 1996, does not apply to arbitrations seated outside India unless explicitly agreed otherwise by the parties.Justification for granting or vacating interim injunction:The court examined whether the learned single Judge was justified in vacating the interim injunction that restrained the respondent from proceeding with the arbitration. The court held that the parties had agreed to resolve disputes through GAFTA arbitration, and the arbitration clause was valid. The court also noted that the arbitration proceedings were not oppressive or vexatious and that the appellant was aware of the arbitration clause at the time of executing the contract. Consequently, the court found no valid grounds to grant an interim injunction and upheld the decision to vacate it.Conclusion:The court dismissed the appeal and the cross-objection, holding that the arbitration clause was valid and enforceable, the reference to arbitration was not time-barred, and the interim injunction was rightly vacated. The court emphasized the importance of respecting the agreed arbitration process and the jurisdiction of the arbitral tribunal under GAFTA Rules and the English Arbitration Act, 1996.