1996 (4) TMI 511 - SC - Indian Laws

State of Orissa succeeds Orissa Mining Corp's Charge Chrome Division; bound by arbitration agreement. Civil Appeals dismissed, SLP rejected.

State Of Orissa Versus Klockner And Company & Ors And M/s. Klockner & Company Versus Orissa Mining Corporation Ltd & Ors. And Vice-Versa

The State of Orissa was held to be the successor in interest to Orissa Mining Corporation's Charge Chrome Division. The court found that the conditions ... - Issues Involved:1. Whether the State of Orissa is the successor in interest to Orissa Mining Corporation (OMC) with respect to the Charge Chrome Division.2. Whether the conditions for invoking Section 3 of the Foreign Awards (Recognition & Enforcement) Act, 1961 are satisfied.3. Whether the suit filed by the State of Orissa should be stayed under Section 3 of the Foreign Awards Act.4. Whether the plaint in Title Suit No. 231/92 should be rejected under Order 7 Rule 11 of the CPC.Issue-wise Detailed Analysis:1. Successor in Interest to OMC:The core argument by the appellant, State of Orissa, was that it is not the successor in interest to OMC, particularly regarding the Charge Chrome Division. This was countered by the first respondent, Klockner & Co., who argued that the State of Orissa stepped into the shoes of OMC when it took over the Charge Chrome Division. The court examined clauses from Ordinance 8 of 1991 and the agreement between the State of Orissa and Tata Iron & Steel Company. The court concluded that 'the State of Orissa is the successor in interest of OMC Charge Chrome Division taken over by the Government under Ordinance of 1991.' This finding was crucial as it established that the State of Orissa had obligations under the original agreement between Klockner & Co. and OMC.2. Conditions for Invoking Section 3 of the Foreign Awards Act:The court reviewed the requirements for invoking Section 3 of the Foreign Awards Act, as laid out in the Renusagar Power Co. Ltd vs. General Electric Co. case:- There must be an agreement to which Article II of the Convention applies.- A party to that agreement must commence legal proceedings against another party.- The legal proceedings must be in respect of any matter agreed to be referred to arbitration.- The application for stay must be made before filing the written statement or taking any other step in the legal proceedings.- The court must be satisfied that the agreement is valid, operative, and capable of being performed.- The court must be satisfied that there are disputes between the parties with regard to the matters agreed to be referred.The court found that all these conditions were met. Specifically, the agreement dated 20.4.82 was valid and operative, and the arbitration clause was broad enough to cover the disputes. The State of Orissa, being the successor to OMC, was bound by this agreement.3. Stay of Suit under Section 3 of the Foreign Awards Act:The appellant argued that the suit should not be stayed because the State of Orissa was not a party to the original agreement. However, the court found that the State of Orissa, as the successor in interest to OMC, was bound by the arbitration agreement. The court cited the mandatory nature of Section 3, which requires a stay of proceedings if the conditions are met. The court concluded that 'the High Court was, therefore, justified in confirming the stay granted by the trial court.'4. Rejection of Plaint under Order 7 Rule 11 CPC:In Special Leave Petition (C) No. 19846/95, the appellant challenged the High Court's decision to reverse the trial court's order rejecting the plaint under Order 7 Rule 11 CPC. The High Court had found that the trial court failed to distinguish between the lack of cause of action and the plaint not disclosing a cause of action. The High Court noted that the plaintiff had pleaded a cause of action, and the question of whether the plaintiff had a valid cause of action should be determined based on materials produced at an appropriate stage in the suit. The Supreme Court agreed with the High Court, stating, 'We accept the view taken by the High Court and consequently find no case for interference.'Conclusion:All the Civil Appeals were dismissed with costs, and the Special Leave Petition was dismissed without costs. The court upheld the stay of the suit under Section 3 of the Foreign Awards Act and found no error in the High Court's decision to reject the application under Order 7 Rule 11 CPC.