1998 (10) TMI 547 - HC - Indian Laws

Indian Court Denies Jurisdiction in Arbitration Dispute, Grants Respondents Relief

The court held that the application under Section 9 of the Arbitration & Conciliation Act, 1996 was not maintainable as the arbitration was to be ... - Issues Involved:1. Applicability of Section 9 of the Arbitration & Conciliation Act, 1996.2. Jurisdiction of the Indian Courts.3. Validity of the arbitration agreement and the governing law.4. Interim relief and injunction.Issue-wise Detailed Analysis:1. Applicability of Section 9 of the Arbitration & Conciliation Act, 1996:The applicants sought relief under Section 9 of the Arbitration & Conciliation Act, 1996, claiming that their rights under the Hamburg Agreement were being violated. The court examined whether the Act, specifically Section 9, applied to this case. The Act consolidates and amends laws related to domestic arbitration, international commercial arbitration, and enforcement of foreign arbitral awards. The court noted that the case did not fall under 'domestic arbitration' or 'enforcement of foreign awards.' The term 'international commercial arbitration' was defined under Section 2(1)(f) of the Act, and the court concluded that the Act applies only when the place of arbitration is in India. Since the arbitration was to be held in Frankfurt/Main, Germany, and governed by German law, Part I of the Act, including Section 9, was not applicable.2. Jurisdiction of the Indian Courts:The respondents argued that the Indian courts lacked jurisdiction as the parties involved were foreign entities, and the agreement specified that disputes would be resolved through arbitration in Frankfurt/Main, governed by German law. The court agreed, noting that the parties had the freedom to choose the governing law and the seat of arbitration. The agreement explicitly stated that German law would apply, and Frankfurt/Main would be the venue for arbitration. Therefore, Indian courts did not have jurisdiction over the matter.3. Validity of the Arbitration Agreement and the Governing Law:The Hamburg Agreement included clauses specifying that German law would govern the agreement and any disputes arising from it. The arbitration clause detailed the procedure for appointing arbitrators and stated that the arbitration would be governed by the German Code of Civil Procedure. The court upheld the validity of these clauses, emphasizing that parties to an international contract have the autonomy to select the governing law and the arbitration venue. The court cited the case NTPC Vs. Singer Company & Others to support the principle that the law governing the contract and the arbitration agreement is presumed to be the law of the country where the arbitration is agreed to be held, unless otherwise specified.4. Interim Relief and Injunction:The applicants sought an interim injunction to prevent the respondents from breaching the Hamburg Agreement. An ex parte interim order was initially granted, restraining the respondents from finalizing any agreement contrary to the Hamburg Agreement. However, the respondents filed applications to vacate the interim injunction and argued that the petition was not maintainable. The court ultimately ruled that since Section 9 of the Act was not applicable and the Indian courts lacked jurisdiction, the interim relief sought by the applicants could not be granted. Consequently, the interim order was vacated.Conclusion:The court concluded that the application under Section 9 of the Arbitration & Conciliation Act, 1996, was not maintainable as the arbitration was to be conducted in Germany under German law. The Indian courts did not have jurisdiction over the matter, and the interim relief sought by the applicants was denied. The respondents' applications to vacate the interim injunction were allowed, and the applicants' petition was dismissed with costs assessed at Rs. 20,000.