TaxTMI 
TaxTMI 
2017 (12) TMI 94
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.... 2015 (for short 'the 2015 amendment Act'). The focus of the arguments as advanced on behalf of the parties, thus are the provisions of the Act, as amended by the 2015 amendment Act. By virtue of the amended provisions, the definition of "Court" under Section 2(1)(e) of the Act stands amended interalia in relation to an international commercial arbitration. Further a ''proviso'' has been inserted to subsection (2) of Section 2, making the provisions of Sections 9, 27 and clause (a) of subsection (1) and subsection (3) of section 37 of the Act applicable to international commercial arbitrations, even if the place of arbitration is outside India and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of the Act. The definition of "Court" as contained in the 'Explanation' to Section 47 of the Act also stands amended by conferring jurisdiction exclusively on the High Court to decide the questions forming the subject matter of the award. FACTS 2. The controversy envelopes under the following factual matrix: (i) The petitioner in this petition has invoked Section 9 of the Act read with Section 151 of the Co....
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.... assets as well as particulars and details of its bank accounts. The Court also directed the respondent not to create any further encumbrances on its immovable assets. The respondent had failed to comply with the said order dated 11 April 2017, the petitioner filed a contempt petition, against the respondent. The respondent thereafter on 4 July 2017 made a disclosure. It was revealed in the disclosure, that the respondent had created a charge on both the fixed and the current assets, in favour of its lenders, as well as for the purpose of securing 10.25% NCDs issued by the respondents. It was also revealed that the respondents' account in State Bank of India, New Delhi was closed prior to filing of the petition. Resultantly as the respondent did not have any assets within the territorial jurisdiction of the Delhi High Court, in these circumstances by an order dated 4 July 2017, the Delhi High Court permitted the petitioner to withdraw the said proceedings, with a liberty to take appropriate steps for enforcement of arbitral award before the appropriate Court. (iv) The case of the petitioner is that as per the respondents' disclosure of immovable assets and the bank account....
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....ter of the arbitral award" if the same had been the subject matter of a suit on its ordinary original civil jurisdiction. Thus,the objection is that no part of the cause of action as regards the subject matter of the arbitration has arisen within Maharashtra. It is contended that the respondent also does not have any place of business within the territorial jurisdiction of this Court, as also the principal office/registered office of the respondent is at Hyderabad, as could be seen from the cause title and paragraph 8 of the reply affidavit of the respondent, which is outside Maharashtra. It is contended that none of the requisites so as to confer the jurisdiction on this Court, as laid down under clause 12 of the Letters Patent or Section 20 of the Code of Civil Procedure are satisfied for the petitioner to invoke the jurisdiction of this court under Section 9 of the Act. Submissions on behalf of the Respondent Objecting to the Jurisdiction 3. Briefly the contentions of the respondent are as under: (i) The "Court" under Section 9 of the Act is the "Court" defined under Section 2(1)(e) of the Act. Section 9 is contained in Part I of the Act. In the case of sections u....
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....t the "Court" as defined under Section 47 is a Court distinct from a Court as defined under Section 2(1)(e) of the Act. This is clear from the plain language of the two sections. The Court as defined under Section 2(1)(e) is the "Court having jurisdiction to decide the questions forming the subject matter of the arbitration". Whereas under Section 47 the "Court" is a court having jurisdiction to decide questions forming the subject matter of the arbitral award." The subject matter of arbitration is, therefore, distinct from the subject matter of the award and the jurisdictions are therefore different and/or distinct. (e) The proviso to Section 2(2) of the Act merely makes Sections 9, 27, 37(1)(a) and 37(3) applicable to international commercial arbitrations taking place outside India and does not change the wording/language of the said sections or the reference to the term 'Court' used in those sections which fall under Part I read with the definitions provided therein. That the proviso to section 2(2) merely confers jurisdiction upon Courts in India to pass orders under Sections 9, 27, 37(1)(a) and 37(3) in respect of foreign seated arbitrations. An order passed by a juri....
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....re interim/adinterim reliefs have been sought, is still pending in this Court and would not be affected by any judgment on the issue of jurisdiction of the present petition. (vi) To support the above contentions, the respondent has placed reliance on the decision of the Supreme Court in the case "Bharat Aluminium Company Vs. Kaiser Aluminium Technical" (2012)9 SCC 552, the decision of the learned Single Judge of this Court in "Tata International Ltd. Vs. Trisuns Chemical Industry Limited (2012)2 Mh.L.J. 242, and in the case of "Wireless Developers Inc. Vs. Indiagames Limited" 2012(3) Mh.L.J. 449 (vii) It is submitted that even assuming that the respondent does have offices in Pune, even then the said contention of the petitioner is incorrect. This for the reason that Section 2(1)(e)(ii) of the Act provides that the relevant High Court which has jurisdiction is one which has jurisdiction to decide the subject matter of the arbitration. The jurisdiction under Section 2(1)(e)(ii) of the Act is concerned, this Court can exercise such jurisdiction only if the appropriate courts in Pune had jurisdiction to hear a suit on the subject matter of the arbitration and consequ....
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....tral award but before it is enforced in accordance with Section 36), are applicable to a foreign award (a Part II award) which has been made even before it is enforced under Section 47 of the Act. (iv) Relying on the decision of the learned Single Judge of this Court in Tata International Ltd. Vs. Trisuns Chemical Industry Limited (supra) it is submitted that the Court in the said decision has set out the reasons as to why "cause of action" test of the "Court having jurisdiction over the subjectmatter of the arbitration" would be inapplicable in the matter of enforcing foreign awards. (v) Relying on the decision of Division Bench of this Court in "Wireless Developers Inc. Vs. Indiagames Limited" (supra) in the context of the distinction between jurisdiction qua 'subject matter of the arbitration' and 'subject matter of the award', it is submitted that identical reason and logic would apply to a proceeding under Section 9 of the Act seeking interim measures, after the foreign award is made and pending its enforcement under Section 47 of the Act. (vi) The respondent's objection that Section 9 petition should have been filed at Hyderabad where its registered....
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....). (xi) Applying the definition of "Court" in Section 2(1)(e)(ii) for the purposes of Section 9 application relating to enforcement proceedings of a foreign award in the manner suggested by the respondent will render ineffective the legislative intent and the purpose of the proviso to Section 2(2) of the Act, in making Section 9 applicable to Part II awards and proceedings. Section 2(1)(e)(ii) definition of "Court" will not apply to such Section 9 proceedings covered under the proviso to Section 2(2). (xii) To uphold the respondents' contention would result in a legal anomaly namely that this Court (under the Explanation to Section 47) has jurisdiction to enforce the foreign awards under Sections 47 and 49, but lacks jurisdiction to consider and grant appropriate interim measures to ensure that the award is not rendered a mere paper award and that the successful party is properly secured in aid of effective enforcement of such an award in proceedings under Section 47 of the Act. (xiii) An award passed under Part I of the Act can be enforced in the same manner as if it were a decree (unless an application for setting aside such award is preferred under sec....
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....f the proviso to that section, extending the applicability of Section 9 to enforceability of Part II awards. (xvii) In the case of an award for money, the subject matter of the award would be money referring to paragraph 16 of the decision in the case "Brace Transports" (supra). The location of the money would confer jurisdiction on a court for enforcing such award, whether under Part II or by way of a suit. Petitioner submits that in the present case the respondent admittedly has money within the jurisdiction of this Court and therefore, this Court also has jurisdiction to grant interim reliefs under Section 9 of the Act pending enforcement of the awards. (xviii) Even if the provisions Section 2(1)(e) were to be applied in the same manner, it is applied to arbitration under Part I, this Court has jurisdiction to decide the Section 9 application as the respondent admittedly has offices and carries on business through its distribution offices in Pune, which is within the jurisdiction of this Court. Issue arising for consideration 5. Thus, the issue which arises for consideration is 'whether the 'court' as referred to in Section 9 of the Act in the case of int....
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.... any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court (i) ... ... (ii) for an interim measure of protection in respect of any of the following matters, namely: (a) ... ... (b) securing the amount in dispute in the arbitration; ......... (e) such other interim measure of protection as may appear to the Court to be just and convenient, and that the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it." The Explanation defining the 'Court' under Section 47 reads thus: "47. Evidence (1).... ... ... (2) .. ... ... (ExplanationIn this section and in the sections following in this Chapter, "Court" means the High Court having original jurisdiction to decide the questions forming the subjectmatter of the arbitral award if the same had been the subjectmatter of a suit on its original civil jurisdiction and in other cases, in the High Court having jurisdiction to hear appeals from decrees of Courts subordinate to such High Court.)" 7. The provi....
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....lief pending arbitration, appoint arbitrators and set aside arbitral awards even if the arbitration was conducted outside India. These powers existed unless Part I was expressly or impliedly excluded. Further, an implied exclusion was construed not on the basis of conflict of laws principles but in an ad hoc manner. This position now stands overruled following BALCO. 40.The Supreme Court in BALCO decided that Parts I and II of the Act are mutually exclusive of each other. The intention of Parliament that the Act is territorial in nature and sections 9 and 34 will apply only when the seat of arbitration is in India. The seat is the "centre of gravity" of arbitration, and even where two foreign parties arbitrate in India, Part I would apply and, by 24 virtue of section 2(7), the award would be a "domestic award". The Supreme Court recognized the "seat" of arbitration to be the juridical seat; however, in line with international practice, it was observed that the arbitral hearings may take place at a location other than the seat of arbitration. The distinction between "seat" and "venue" was, therefore, recognized. In such a scenario, only if the seat is determined to be India....
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....argains are not overturned overnight, it results in a situation where Courts, despite knowing that the decision in Bhatia is no longer good law, are forced to apply it whenever they are faced with a case arising from an arbitration agreement executed pre BALCO. 42.The above issues have been addressed by way of proposed Amendments to sections 2(2), 2(2A), 20, 28 and 31." Chapter III PROPOSED AMENDMENTS TO THE ARBITRATION AND CONCILIATION ACT, Amendment of Section 2 1. In section 2 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the principal Act),- (i) ........... (ii) In sub-section (1), clause (e), after the words "Court means -" add sub-section (i) beginning with the words "in the case of an arbitration other than international commercial arbitration," before the words "the principal Civil Court of original jurisdiction" In sub-section (1), clause (e) replace sub-clause (ii) by following: 38 "(ii) in the case of an international commercial arbitration, the High Court exercising jurisdiction over the principal Civil Court of original jurisdiction in a district, and includes the High Court in e....
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....ration and Conciliation (Amendment) Ordinance,2015. The relevant extract of the statement of objects and reasons reads thus:- "STATEMENT OF OBJECTS AND REASONS The general law relating to arbitration is contained in the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act). The Act, which is based on the UNCITRAL Model Law on International Commercial Arbitration, as adopted in 1985 by the United Nations Commission on International Trade Law (UNCITRAL), applies to both international as well to domestic arbitration. 2. The Act was enacted to provide for speedy disposal of cases relating to arbitration with least court intervention. With the passage of time, some difficulties in the applicability of the Act have been noticed. Interpretation of the provisions of the Act by courts in some cases have resulted in delay of disposal of arbitration proceedings and increase in interference of courts in arbitration matters, which tend to defeat the object of the Act. With a view to overcome the difficulties, the matter was referred to the Law Commission of India, which examined the issue in detail and submitted its 176th Report. On the basis of ....
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....n in incorporating the proviso to Section 2(2) and amending the definition of "court" as falling under section 2(1)(e) was to enable the Indian Courts to exercise jurisdiction inter alia under Section 9 of the Act, even where seat of the international commercial arbitration was outside India, even when such High Court does not exercise ordinary original civil jurisdiction. Thus the principal object being when the assets of the party are located in India and there is likelihood that a party will dissipate its assets in the near future, an efficacious remedy be provided to a party to seek an appropriate interim reliefs, to avoid a distinct possibility, that the foreign party would obtain an arbitral award only to realise that the entity against which it has to enforce the award renders the award only to be a paper award. 10. It is in the above conspectus and by applying the principle of harmonious construction to ascertain the object and the intention of the legislation and the mischief the legislation seeks to obviate, the amending provisions qua the jurisdiction of this Court are required to be considered. 11. The opening words of the definition clause are of some significanc....
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....e the arbitration takes place, which otherwise would not exist. On the other hand, Section 47 which is in Part II of the Arbitration Act, 1996 dealing with enforcement of certain foreign awards has defined the term "court" as a court having jurisdiction over the subject-matter of the award. This has a clear reference to a court within whose jurisdiction the asset/person is located, against which/whom the enforcement of the international arbitral award is sought. The provisions contained in Section 2(1)(e) being purely jurisdictional in nature can have no relevance to the question whether Part I applies to arbitrations which take place outside India." (emphasis supplied) 13. Brace Transport Corporation of Monrovia (supra), was a case where the appellant foreign company was holding a foreign award and had approached the Civil Court at Bhavnagar in a civil suit for recovery of the part of the amount awarded against the first and the second respondents. The suit came to be filed before the said court as the vessel which belonged to the applicant and sold to the first and the second respondent was berthed at the Alang port which was in the jurisdiction of Bhavnagar Civil Court. The C....
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....ied out. In the Law and Practice of International Commercial Arbitration by Redfern and Hunter (1986 Edn.) it is said (at pages 337 and 338): A party seeking to enforce an award in an international commercial arbitration may have a choice of country in which to do so; as it is sometimes expressed, the party may be able to go forum shopping. This depends upon the location of the assets of the losing party. Since the purpose of enforcement proceedings is to try to ensure compliance with an award by the legal attachment or seizure of the defaulting party's assets, legal proceedings of some kind are necessary to obtain title to the assets seized or their proceeds of sale. These legal proceedings must be taken in the State or States in which the property or other assets of the losing party are located. ** ** ** In other words, the place of arbitration will have been chosen as a neutral forum. It will be rare for the parties to have assets situated within this neutral country; and the award if it has to be enforc....
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....chase price of the said vessel. It can, therefore, be said that the third respondent was holding monies in the amount of Rs. 6,40,000 of the 1st and 2nd respondents." (emphasis supplied) 14. In Wireless Developers Inc.(supra) decided by the Division Bench of this Court, the appellant had invoked the jurisdiction under Section 47 of the Act as the bank accounts of the respondents as in the said case were within the jurisdiction of the Bombay High Court. The Court held that money being in Mumbai, was sufficient to confer jurisdiction on the High Court, following the decision of the Supreme Court in Brace Transport Corporation of Monrovia (supra). The court having examined the provisions of Section 2(1)(e) of the Act as also the "Court" as defined in the explanation to Section 47 held as under:- "19. It is clear from a reading of the aforesaid provisions defining the Court and the aforesaid two judgments and considering the reason and logic behind the distinction as also the analogous provisions with regard to enforcement of decrees that since the appellant claims that it can execute the award within the territorial jurisdiction of this Court that itself bestows this Co....
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....s the subject matter of the money decree may be said to be money." 7. It is therefore, clear that in respect of an award for money, subject matter can be said to be money. In other words, therefore, petition for enforcement of the foreign award can be filed in the Court where the party may have money. This is important consideration considering a party need not be tied down as in the case of Part I where the subject matter is the subject matter of the arbitration. In other words, if the party has a foreign award in its favour, it can seek to enforce the award in any part of the country where it is sought to be enforced as long as money is available or suit for recovery of money can be filed. In my opinion, therefore, expression subject matter of the award to the explanation under Section 47 is different from the expression subject matter of the arbitration under Section 2(e) of Part I of the Act. 8. A foreign award if allowed to be enforced is a deemed decree. It can be enforced anywhere that the respondents may have money. In other words it is in the nature of forum hunting. The expression subject matter of the award and the subject matter of the arbitratio....
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....his inasmuch as the petitioner would be prevented to seek interim measures in enforcing the money award, when the money is lying within the territorial jurisdiction of the Courts only for the reason that it is not the subject matter of arbitration. This is opposed to the plain and clear intention of the legislature as incorporated by the 2015 Amendment Act as noted above. It cannot be conceived that on the one hand the legislature permits a party holding a foreign award to invoke Section 9 of the Act and further permit invoking of the provisions of Sections 47 to 49 of the Act to enforce the foreign awards, and for that matter to approach the appropriate court having jurisdiction to decide the question forming the subject matter of arbitral award, as if the same had been the subject matter of the suit as the explanation to Section 47 would provide. However, on the other hand at the same time, when it comes to adopting proceedings under Section 9 to secure the sums awarded being the money to secure the award is available within the jurisdiction of the Court, it would render the Court lacking such jurisdiction by application of Section 2(1)(e)(ii). This is surely not the intention of....
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....enerally begin with the qualifying words, similar to the words used in the present case, namely 'unless there is anything repugnant in the subject or context'. Thus there may be sections in the Act where the meaning may have to be departed from on account of the subject or context in which the word had been used and that will be giving effect to the opening sentence in the definition section, namely 'unless there is anything repugnant in the subject or context'. In view of this qualification, the Court has not only to look at the words but also to look at the context, the collocation and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words under those circumstance. (See : Vanguard Fire and General Insurance Co. Ltd. Madras v. Fraser & Ross, AIR 1960 SC 971)." 19. Again in TATA Power Co. Ltd. v. Reliance Energy Ltd. [2009] 16 SCC 659 the Supreme Court considered the principles of contextual interpretation in interpreting Section 23 of the Electricity Act,2003. The Court observed thus:- "Supply - Contextual Meaning 96. It was submitted by the respondents that in any event the word 'supply' as u....
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....ose of construction of a statute and in particular for ascertaining the purpose thereof, the entire Act has to be read as a whole and then chapter by chapter, section by section and word by word. (See Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd, (1987) 1 SCC 424 ]; Peerless General Finance and Investment Co. Ltd. v. Reserve Bank of India, [ (1992) 2 SCC 343 ] and National Insurance Co. Ltd. v. Swaran Singh, [ (2004) 3 SCC 297 ]. 100. Thus, in a case where interpretation of a Section vis-a-vis the scheme of the Act, the purport and object of the legislation, particularly having regard o the mischief it seeks to remedy; the chapter heading as also the marginal note, in our opinion, are relevant." (emphasis supplied) 20. In view of the above discussion, the contentions as urged on behalf of the respondent cannot be accepted. If the interpretation of the provisions of Section2(1)(e)(ii) of the Act as sought to be placed on behalf of the respondent is accepted, it would bring about an anomalous situation defeating the intent of the legislative provisions, as derived from a cumulative reading of the amending provisions as noted above. The purpo....
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....enter of gravity and the cause of action is the foreign award and its enforcement. The legislature in this situation could not have contemplated to confer jurisdiction for an application under Section 9 on a 'Court' as defined under section 2(1)(e)(ii) of the Act. Thus section 2(1)(e) (ii) with its ingredients and facets such as 'the relevancy of the cause of action', 'carrying on business', 'having an office', being the determinative factors to decide the jurisdiction of a Court fade into insignificance. 22. Another significant aspect which cannot be overlooked is that Section 2(1)(e)(ii) is not made applicable to foreign awards falling in Part II of the Act. It is thus clear that when neither the arbitration nor the award in question would fall under Section 2(1)(e)(ii) of the Act there cannot be any applicability of the said provision. Thus necessarily recourse would be required to be taken to the definition of "Court" as contained in the "Explanation" to Section 47 falling in Part II of the Act, so as to hold that it is this provision which becomes relevant to confer jurisdiction on this court to entertain the Section 9 petition, pending the enforceability of the foreign awa....