TaxTMI 
TaxTMI 
2017 (12) TMI 94
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....'). 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 Code of Civil Procedure,1908 (for short 'the CPC') seekin....
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....e 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 accounts, as filed before the Delhi High Court, there are monies lying in four b....
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....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 under Part I, the applicable definitions are contained in Section 2(1) of the Act which begins with the word "In this Part, unless t....
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....ions. 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 jurisdictional Court in India would have effect throughout the territories of India. (iv) It is then submitted that there would be incongruity if the definition of "Court" under Sect....
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....spondent 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 consequently an appeal would lie to this Court. The courts in Pune, however, would have no jurisdiction as no part of the cause of action has arisen therein nor is the principal office of the respondent located therein, as required under Sect....
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....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 office and all its main properties are located, is not an answer to the question whether this Court has jurisdiction to decide the present Section 9 application. The fact that Andhra Pradesh High Court may also have jurisdiction does not mean that this Court has no jurisdiction. (....
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....ing 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 section 34 of the Act in a court as defined under S.2(1)(e) of the Act). On the other hand, an Award to which Part II of the Act applies, constitutes a cause of action in favour of the Claimant and is not deemed to be a decree, until the court is satisfied that the foreign award is enforceable. (Section 49 of the Act). (xiv) A foreign awar....
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....her 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 international commercial arbitrations which take place outside India, is a 'court' as defined under Section 2(1)(e) or as defined in the Explanation to Section 47 of the Act. Discussion and Conclusion 6. The controversy thus arises revolving around the provisions of Section 2(1)(e) of the Act which defines 'Court', Proviso to Section 2(2) which interalia makes applicable the provisions of ....
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.... 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 proviso to Section 2(2) as inserted by the 2015 amendment Act, interalia makes applicable the provisions of Section 9 to international commercial arbitration even if the place of arbitration is outside India, and the arbitral award made or to be made in such place is enforceable and recognized under the provisions of Part II of the Act. The genesis for the legislature to bring about the said amendment is the recommendations of the Law Commission in its 246th Report . To appreciate the background surrounding the legislative consider....
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....ections 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, Part I would be applicable. If the seat was foreign, Part I would be inapplicable. Even if Part I was expressly included "it would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the [foreign] Procedural Law/Curial Law." The same cannot be used to confer jurisdiction on an Indian Court. However, the decision in BALCO was expressly given prospective effect and applie....
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....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 exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Court of a grade inferior to such High Court, or in cases involving grant of interim measures in respect of arbitrations outside India, the High Court exercising jurisdiction over the court having jurisdiction to grant such measures as per the laws of India, and includes the High Court in exercise of its ordinary original civil jurisdiction." [NOTE: This is to solve the problem of conflict ....
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....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 the said report, the Arbitration and Conciliation (Amendment) Bill, 2003 was introduced in the Rajya Sabha on 22nd December, 2003. The said Bill was referred to the Department-related Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice for examination and Report. The said Committee, submitted its Report to the Parliament on 4th August, 2005, wherein the Committee recommended that since many provisions of the said Bill were contentious, the Bill may be withdrawn and a fresh legislation may be brought after considering its recommendations. Accordingly, the said Bill was withdrawn from the Rajya Sabha. 3. On a reference made again....
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....ise 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 significance. Section 2(1) "the definition clause" begins with the expression "In this part unless the context otherwise requires". Thus the contextual meaning of the definition of "Court" would be required to be considered. Clause (ii) of sub-section 2(1)(e) in defining 'Court' in case of international commercial arbitration provides the "Court" to mean "High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming subject matter of arbitration, if the same had been the subject matter of a suit ......". This definition applied in the context of the proviso to sub-section (2) of Section 2, which inter alia makes applicable the provisions of Section 9 to international commer....
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.... 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 Civil Court had granted an injunction restraining the third and the fourth respondent from disposing of, breaking or removing the vessel. The respondents had objected to the jurisdiction of the Court to try and entertain the suit. A revision application filed before the High Court against the said order came to be allowed holding that the Civil Court lacked territorial jurisdiction. The Supreme Court considering the provisions of Section 5(1) of the Foreign Awards (Recognition and Enforcement) Act,1961 which provided that "any person interested in a foreign award may apply to any court having jurisdiction over the subject-matter of the award that the award be filed in court." and section 6 which provided that "where the court is sa....
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....h 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 enforced, must generally be enforced in a country other than that in which it was made. This is why it is so important that international awards should be recognisable and enforceable internationally and not merely in the country in which they are made; moreover, unlike the place of arbitration, the place of recognition and enforcement will not be chosen by or on behalf of the parties. It will depend upon the circumstances of each particular case. ... ... ... ... Whether it becomes necessary to enforce an international award, the position is different. The first step is to determine the country or countries in which enforcement is to be sought. In order to reach this decision the party seeking enforcement needs to locate the State or States in which the losing....
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....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 Court with the territorial jurisdiction, it having within its territorial limits the subject matter of the award which is money in the form of the bank account." (emphasis supplied) 15. In Tata International Ltd. (supra) the learned Single Judge of this Court considering the distinction between the "subject matter of arbitration" and "subject matter of award" as appearing in the definition of "court" under Section 2(1)(e) and the 'Explanation' to Section 47 respectively, held that in regard to an award for money the subject matter can be said to be money and the petition for enforcement of the foreign award can be filed in the court where the party may have money. It was held that if the party had a foreign award in its favour, it can seek to enforce the award in any part of the country where it ....
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....ression 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 arbitration agreement are two different and distinct expressions. In respect of a foreign award, if the expression subject matter of the award was to mean the same thing as the subject matter of the arbitration agreement, in most cases there would be no Court available where the award could be enforced as the entire cause of action in respect of the subject matter of the arbitration could be the foreign country. Merely because in the instant case, the contract was entered into in India cannot result in a different interpretation. The expression as the explanation itself permits forum hunting if that expression can be used. After considering all these provisions a similar view was taken in Arbitration Petition Lodg. No. 427 of 2001 in the case of Naval Gent Marline Ltd. v. Shivnath Rai Harnarain (I) Ltd. and Ors., decided on 5th July, 2001 in....
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....ovide. 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 the legislature. Any interpretation which would defeat the intention of the legislature is required to be avoided. Thus, in my opinion, considering the amended provisions and in the facts of the present case when the petitioner is holding a foreign award and when the money is available within the jurisdiction of this Court as contained in the bank accounts of the respondent at Mumbai, the principles of "contextual interpretation" of Section 2(1)(e)(ii) would be required to be adopted considering the opening words of Section 2(1) "In this Part, unless the context otherwise requires--" and adverting to this principle of interpretation it would be required to be held that the "Court" as defined under the explanation to Section 47, would be the appropriate court when the petitioner is seeking interim reliefs under Section 9 of the Act pending th....
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....r 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 used in Section 23 should be given the same meaning as is given to it in Section 2(70) of the Act i.e. the sale of electricity to a licensee or consumer. Accordingly by its very nature, supply would have a supplier and a receiver and any direction which is aimed at ensuring or regulating supply by its very nature would have to be directed to both the supplier and the receiver. 97. However, when the question arises as to the meaning of a certain provision in a statute, it is not only legitimate but proper to read that provision in its context. The legal principle is that all statutory definitions have to be read subject to the qualification variously expressed in the definition clause which created them and it may be that even where the definition is exhaustive inasmuch as the word defined is said to mean a certain thing, it is possible for the word to have some what....
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....isions 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 purpose and object of the amended provisions of the 2015 Act must certainly prevail over a narrow interpretation which would defeat the purpose and object of the 2015 Amendment Act. The petitioner who holds monetary awards against the respondent would be prevented from approaching the court for interim reliefs where the assets of the respondent are available within the jurisdiction of this Court. As clearly seen from observations in paragraph 97 of the Bharat Aluminium Co. (supra), then in Brace Transport Corpn. of Monrovia, Bermuda (supra), Wireless Developers Inc. (supra), and Tata International Ltd. (supra), the Court would have territorial jurisdiction if the monies/the bank accounts are located within the jurisdiction of the Court. The legislature would not envisage a situation that a party can invoke jurisdiction of the Court to enforce a monetary award under Section 47 and 49 of the Act, however,....