TaxTMI 
TaxTMI 
1994 (1) TMI 282
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....voking Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 (hereinafter referred to as 'the Foreign Awards Act'). 3.Before we deal with the applications, it would be useful to state a few facts relevant for purposes of the decisions of these appeals. 4.The suit out of which the present appeals arise was filed by the plaintiff (hereinafter referred to as the 'borrower') before the Subordinate Judge, Cuttack for various reliefs against defendants 1 to 3 (hereinafter referred to as the 'suppliers'); defendants 4 to 11 (hereinafter referred to as the 'lenders'); and defendant 12, Industrial Development Bank of India, (hereinafter referred to as the 'guarantor'). Defendant 13 in the suit is M/s Indian Metals & Ferro Alloys Ltd., (in short 'IMFA'). 5.IMFA issued a global tender for setting up a captive power plant, viz., a coal-fired power plant in Choudwar, Orissa. The tender indicated that credit by the suppliers will be preferred. The suppliers submitted their tenders in this regard. Since the tender indicated that suppliers' credit for the entire project would be preferred, the suppliers approached defen....
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....ating with the exporters. " The credit agreements also provided: "All disputes arising from the provisions of this agreement or its performance shall be finally settled by arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with these rules. Arbitration shall take place in Stockholm and be conducted in the English language. The award of the arbitral tribunal is final and obligatory for the parties without any right for a further appeal or contestation of its fulfillment. The borrower hereby expressly submits to the jurisdiction of the above mentioned arbitration tribunal." 8.The credit agreements also provided that the borrower shall furnish guarantees in favour of the lenders as security for the loans covering 100% of each of the loans plus interest, costs and fees payable under the credit agreements. As quoted above, the agreements also contained an arbitration clause which contemplates disputes arising from the agreements to be finally settled by arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three arbitrators appointe....
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.... April 25, 1991 whereby the Subordinate Judge, Cuttack had injuncted defendant 12 from making payments to defendant 4. The letter dated May 31, 1991 reads thus: "SVENSKA HANDELSBANKEN Stockholm, Sweden May 31, 1991 BY COURIER Mr Rajen Mahapatra Advocate, 7-A/3, Girdhar Apartments, Feroz Shah Road, New Delhi 110 001, India. Dear Sir, Re: Order of injunction' dated April 25, 1991 the learned Subordinate Judge, 1st Court, Cuttack, Orissa in Misc. Case No. 143 of 1991 arising out of T.S. No. 208 of 1991. We have received two letters from you, both dated April 27, 199 1, in respect of the above matter. The first was a short covering letter and the second was enclosed with it. The second quotes the terms of an injunction apparently granted in the above matter. Enclosed with it was a copy of what appears to be the notes of the Honorable Judge. We have never received anything further, either from you or from the Court. This is puzzling. What is even more puzzling is how your clients could have made such an application, and how it could have been granted, when the Honorable Court quite clearly has no jurisdiction over us as a Swedish Co....
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....; Svenska Handelsbanken sd/- sd/- Lena Bertllsen Gudrun Lundin Hollinder" 12. The subst....
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....e on merits, it is not entitled to file the present application. Reference was made to the applications dated June 28, 1991 and August 24, 1991. Reference was also made to the application dated August 24, 1991 on behalf of defendants 5 to 11 as well apart from taking other pleas to oppose the applications for stay. 18.During the pendency of the applications under Section 3 of the Foreign Awards Act, in reply to the objections filed by the plaintiff to the application, an affidavit was filed on behalf of defendant 4 Ms Barbro Margareta Lundberg which denied having taken any steps in the proceedings so as to disentitle defendant 4 from making the application under Section 3 of the Foreign Awards Act. It was deposed thus: "(a) It is denied that D-4 has taken any step in the proceedings so as to disentitle it from moving this application under Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961 ('the 1961 Act') for the following reasons: (i) D-4 engaged the services of Shri D.A. Misra, ('Mr Misra') Advocate of Orissa High Court, in or about June 19, 1991. Extensive discussions were held with Mr Misra at the offices....
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....ugust 1, 1991, M/s Clifford Chance instructed Mr Misra not to take any steps whatever in either the misc. case application for an injunction brought by the plaintiff or in the main suit, without instructions. They repeated their previous express instructions that under no circumstances should steps be taken in the action. Copies of the said letters dated July 17, and August 1, 1991 is annexed as Annexure 'B'. (iv)It appears that on or about July 3 1, 1991 a purported ,application' was filed before this Hon'ble Court seeking time to file a written statement on behalf of D-4. It is submitted that this purported 'application' was filed contrary to the express prior instructions of D-4 and in glaring breach of duty. He further purported to apply on behalf of Respondents 5 to 11. As is plain from the annexures and in particular the Vakalatnama, M r Misra was only instructed by and on behalf of D-4, and no one else. (v) It further appears that a second 'application' was filed on August 24, 1991, seeking additional time to file a written statement. Again, neither D-4 nor their English Solicitors were informed in advance as to t....
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....ved that the Vakalatnama is in favour of only the following persons 'Shri A. Misra, H.P. Rath, P. Panda, G. Rath, B. Das Advocates'. There is no right to delegate. The person who signed the two ,applications' dated July 3 1, and August 24, 1991 respectively was not authorized by D-4 in its Vakalatnama to act on its behalf. Those documents are accordingly unauthorised, a nullity and void. It is submitted that neither was an 'application' and accordingly neither constitutes a step in the action. (c) It will be observed, further, that the Vakalatnama is specifically given only in respect of Misc. Case No. 143 of 199 1, and no other court proceedings. This was also deliberate, because D-4 was at all times anxious to ensure that it preserved its right to have any disputes settled by arbitration as agreed, as can be seen from the correspondence annexed hereto and referred to above, and the further letters dated August 7, August 19, and October 4, 1991 annexed hereto and marked Annexure 'F'. The two impugned ,applications' are brought in Title Suit No. 208 of 1991. D- 4 did not authorize Mr Misra to act in Title Suit No. 208....
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.... Co.' and noticed the conditions required for stayof suit under Section 3 of the Foreign Awards Act as held by this Court inthe said case, which read as under: (SCC p. 725, para 51) "(i) there must be an agreement to which Article II of the Convention set forth in the Schedule applies; (ii)a party to that agreement must commence legal proceedings against another party thereto; (iii)the legal proceedings must be 'in respect of any matter agreed to be referred to arbitration' in such agreement; (iv)the application for stay must be made before filing the written statement or taking any other step in the legal proceedings; (v) the Court has to be satisfied that the agreement is valid, operative and capable of being performed; this relates to the satisfaction about the 'existence and validity' of the arbitration agreement; (vi)the Court has to be satisfied that there are disputes between the parties with regard to the matters agreed to be referred; this relates to effect (scope) of the arbitration agreement touching the issue of arbitrability of the claims." 24.After noticing the analysis o....
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....mences any legal proceedings in any court against any other party to the agreement or any person claiming through or under him in respect of any matter agreed to be referred to arbitration in such agreement, any party to such legal proceedings may, at any time after appearance and before filing a written statement or taking, any other step in the proceedings, apply to the Court to stay the proceedings and the Court, unless satisfied, that the agreement is null and void, inoperative or incapable of being performed or that there is not, in fact, any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings." 27.Condition (iv) as culled out from the decision in the case of Renusagar1 is really not complete. The condition really is that where one of the parties to the arbitration agreement, in spite of it, commences any legal proceedings in any court against the other party, any party to such legal proceedings may, at any time after appearance and before filing a written statement or taking any other step in the proceedings, apply to the court to stay the proceedings. One of the conditions for applicability of condition ....
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.... Handelsbanken (in the person of Mrs Lundberg or Mrs Malin) or from my firm." 28.The relevant part of second communication dated July 17, 1991 which was sent by Fax reads as follows: "May I please remind you that your present instructions are only to bring the pending application relating to jurisdiction in the Court of the Subordinate Judge in Cuttack, and not to take any other steps either in that application or in the main action. Should we lose and you wish to advise an appeal, please do so and seek written instructions from us." 29.The express instructions were again given to the counsel on August 1, 1991by Fax, relevant part whereof reads as under: "As I understand the position we are awaiting a decision of the lower court on Monday, 5th August. Whatever that decision may be your express instructions remain to take no other step whatever in either the application or the action without the written instructions of this firm or the clients. Under no circumstances should any step be taken in the action which would submit either Svenska or any of the other members of the banking consortium to the jurisdiction of the Indian Courts." 30.We may ....
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....nstructions not to put in appearance or take any step in the proceedings relating to suit. If the applications dated July 31, 1991 and August 24, 1991 had been moved with either express or implied instructions of the lender, defendant 4, there can be no doubt that it would normally amount to taking legal steps in the proceedings relating to suit. But in view of the power of attorney being merely to the proceedings in Misc. Case No. 143 of 1991 coupled with the express instructions to the contrary, the counsel had no power or authority to file any application seeking time for filing written statement. The filing of the two applications is totally ultra vires the authority and specific instructions of defendant 4 and was thus totally unauthorised and of no effect on defendant 4. 33. As late as 1930 the Privy Council in the case of Sourendra Nath Mitra v. Tarubala Dasi2 made the following two observations at page 161 of the report: "Two observations may be added. First, the implied authority of counsel is not an appendage of office, a dignity added by the Courts to the status of barrister or advocate at law. It is implied in the interests of the client, to give the f....
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....atisfied that Article II of the convention set forth in the schedule to the Foreign Awards Act applies to each of the agreements with the three sets of applicants. Suit out of which these civil revisions arise as legal proceedings initiated by plaintiff which is a party to each of the agreements with the applicants. Such suit relates broadly to defects in the equipments supplied, erection and commission of the power plant by defendants 1 to 3 and non- satisfaction of terms for payment to defendants 1 to 3 by defendant 4. These are all in respect of matters agreed to be referred to arbitration as per the clauses to that effect in the various agreements. By alleging fraudulent misrepresentations in the plaint against the applicants, plaintiff cannot avoid the arbitration clauses in view of the broad language of the different clauses, where question of fraudulent representation can also be effectively answered in the award to be binding on the parties to the agreement. Therefore, conditions (i), (ii), (iii) and (vi) as laid down by the Supreme Court for application of Section 3 are satisfied in this case in respect of all the applicants." Again in paragraph 16 of the judgment....
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....eated as having become inoperative. It has further been observed by the High Court that if all the agreements containing arbitration clauses with different defendants had envisaged only one arbitrator for adjudicating all the disputes, the fact that there were several. agreements with the different defendants would not have affected the matter and the award given by common arbitrators could have bound all the parties in the suit. 41. It appears to us that the aforesaid reasoning of the High Court is strained and totally erroneous. It also amounts to disregarding the mandatory provision of Section 3 of the Foreign Awards Act. 42. For purposes of the present case we are, for the present, considering merely the applications for stay of the suit filed on behalf of the lenders. It is C. clear from their applications that all the conditions envisaged for the applicability of Section 3 of the Foreign Awards Act are fully complied with. 43. The plaintiff by merely entering into other contracts with different parties cannot prejudice or defeat the rights of the different party under the different contract, particularly when the right to foreign arbitration has been provided by Parl....
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....er country as the lenders may determine. It was submitted that it is only in the agreement of defendant 4 that instead of any other country, which is struck off, Sweden, the United Kingdom or the State of New York are mentioned. However, clause 18.04 makes it clear that the real purpose of rendering clause 18.02 inapplicable was to enable the lenders to sue the borrower in Sweden. It was submitted that where the arbitration clause is rendered inapplicable to a party to the dispute at his choice, the said clause is no arbitration clause at all. 47. It will be noticed that it is totally a new point urged on behalf of the plaintiff borrower that there is no arbitration clause so far as defendant 4 and defendants 5 to 11 are concerned. 48. Since it is a disputed question of fact, we ought not to allow it to be raised for the first time. However, the arbitration agreements are before us and the clause is admitted. Defendant 4 has throughout been relying upon clause 18.02 of the contract and still is ready and willing to have the dispute settled by arbitration under the said clause, should the plaintiff raise it before the ICC in accordance with clause 18.02. It is the plaintiff wh....
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.... 1 All ER 337 clause 18.03 is to reserve to defendant 4 the right to suit for money advanced. It is intended to be exercised in cases where there is no dispute whatsoever but still payments have not been made. These are standard clauses in all credit agreements. Clause 18.03 gives an additional right. To the extent this clause is exercised in cases where there are disputes, it would be the exercise of a legal right and both parties have agreed that the borrower will submit to the jurisdiction of the court. In such an eventuality defendant 4 would have elected to exercise the right under clause 18.03, which is in addition to and not in derogation of the arbitration clause in clause 18.02. As the arbitration clause remains untouched by clause 18.03, if defendant 4 was to sue the plaintiff under clause 18.03 for recovery of its loan, it may be open to the plaintiff (borrower) to apply under Section 3 and seek stay of the suit. The stay of the suit could be granted notwithstanding clause 18.03 for the simple reason that the agreement to submit to the jurisdiction to the court under clause 18.03 relates to the maintainability of the suit in a court agreed to by both parties, but does no....