TaxTMI 
TaxTMI 
2012 (9) TMI 1123
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.... advert to any other facts, we record that there is no dispute that the contract containing arbitration clause has been duly executed by the parties. 3. We shall only refer to some of the relevant facts that are necessary for deciding the propriety and legality of the order passed on September 9, 2011. 4. In or about October 25, 2010, the appellant had entered into three several contracts including a contract bearing No. LMJ/SIC/Oct/01 (hereinafter referred to as the 'said contract') whereby the appellant had agreed to purchase from the defendant No. 1 and defendant No. 1 had agreed to sell to the appellant 15000 MT (+ - 5 %) of non basmati parboiled rice (15% maximum broken) of 2009-10 origin or latest crop of Thailand origin at the rate of USD 450 per MT). The appellant under the contract of sale was required to open an irrevocable confirmed unrestricted letter of credit in US Dollars in favour of the defendant No. 1 within five working days from the date of signing of the contract through Standard Chartered Bank (India) for the value of the goods to be shipped under the contract. 5. Thereafter some of the terms of the contract was amended on 7th December, 2010. ....
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.... appellant to the defendant. The appellant contended that in good faith and relying on such agreement which was duly recorded in the letter dated 14th February, 2011 instructed its banker, namely, the Bank of Baroda to remit 90% of the invoice value to the defendant no. 1 and the defendant No. 1 on the basis of such agreement had received the said amount. The defendant no. 1, however, after receiving the said amount sought to repudiate the said agreement by refusing to send any of its representatives for joint inspection and demanding forthwith payment of the balance 10% of the invoice value without holding any such joint inspection. 7. This act of repudiation resulted in a dispute as to the entitlement of the respondent No. 1 to claim and demand balance 10% of the invoice value without first having a joint inspection as mutually agreed upon between the parties. It is contended that the Government of Bangladesh, namely, the consignee to whom the said rice was ultimately delivered and raised a claim for damages to the extent of USD 430,748.42 for the inferior quality of rice. Thereafter, some discussions held between the parties in order to resolve the issue in which it was alleg....
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....0 on respect of 5000 MTS of Non Basmoti Parboiled Rice 15% (maximum) broken 2009-10 or latest Corp. Thailand origin. Sub: Notice for arbitration With reference to the above we may inform that we intend to refer the dispute as arising out of the above contract to arbitration in accordance with GAFTA Arbitration Rules, 125. This letter may be treated as notice showing our intention to refer the dispute to arbitration. Thanking you, Sd/- Illegible Yours trully, For Sleepwell Industries Co. Ltd. (Authorised Signatory) 9. This notice and the demand made by the defendant No. 1 from the defendant No. 2 to make payment of the 10% of the invoice value as resulted in filing the aforesaid suit being C.S. No. 185 of 2011 in which the plaintiff/appellant has, inter alia, prayed for the following reliefs:- a) A decree for a declaration that there is no agreement between the plaintiff and the defendant no. 1 to refer any dispute arising out of the said ....
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....Arbitration Rules of GAFTA is time barred having regard to the provisions contained in Clause 2.2(d) thereof for a limited period upto 9th September, 2011. The defendant no. 1 served with such ex parte order filed an application being G.A. No. 2625 of 2011 for vacating the ad interim order of injunction dated August 10, 2011. Such vacating application was allowed and the injunction application was dismissed with the observation was that "any action taken by the parties to the suit during its pendency shall be subject to and abide by the result of the suit. 12. This observation has resulted in filing a cross appeal by the defendant no. 1 on the ground that such observation is contrary to the provision relating to enforcement of foreign awards (in this case if an award is passed, it would be an English award) as contained in part II of Chapter 1 of the Arbitration and Conciliation Act and against the spirit of the said Act. 13. Mr. Surojit Nath Mitra, learned Counsel appearing on behalf of the petitioner submits that normally Civil Court has jurisdiction to entertain a dispute arising out of a contract. Only when there is an arbitration clause in such contract or when the parti....
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....any money from the defendant no. 2. 20. The relief claimed against the defendant no. 1 in restraining the said defendant no. 1 from realizing any amount from the defendant no. 2 cannot be referred to arbitration. Such claim of the appellant/plaintiff is independent of such arbitration clause and not a dispute arising out of the contract dated 25th October, 2010 even if it is assumed that the said contract has been duly executed and enforceable. 21. Such claim of the appellant/plaintiff, since not covered by the arbitration clause/agreement, is required to be and has to be adjudicated by this Hon'ble Court being the natural forum. 22. The appellant/plaintiff has also claimed relief against the defendant no. 2 as the defendant no. 2 alleged to have wrongfully and illegally threatened to make payment to the defendant no. 1 though the defendant no. 2 has admitted that they are not liable to make any payment to the defendant no. 1. 23. Since the defendant no. 2 is not a party to the arbitration agreement, the appellant/plaintiff cannot claim such relief against the defendant no. 2 in the arbitration proceeding. The entire disputes between the parties being the subject ma....
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....tipulated under the GAFTA Rules, 125. 29. The reliance on Clause 21 of GAFTA Arbitration Rules No. 125 by the defendant no. 1 is totally misplaced. The Arbitral Tribunal can exercise its discretion to extend the time and admit a claim provided the respondent before the Arbitral Tribunal raises such point of limitation before the Tribunal as a defence to the arbitration claim. In the instant case no Arbitral Tribunal in terms of Rule 3 of the said rules was constituted at the time when the instant suit was filed. The defendant No. 1 had merely sought to appoint its arbitrator. There was no appointment of the arbitrator by the appellant/plaintiff nor a third arbitrator was or could be appointed. In any event, the question of the appellant/plaintiff raising such question of limitation as a defence to the arbitration claimed before any Arbitral Tribunal did not and could not arise. 30. Further if the GAFTA arbitration proceedings are conducted in London and if the appellant is compelled to participate in such proceedings, the same will lead to prohibitive costs to be incurred by the appellant and as such it will not be possible for the appellant/plaintiff to contest the arbitrati....
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....s Account. Partial shipment ALLOWED. All export duties and/or taxes and/or levies present are for seller's account. -all import duties and/or taxes and/or levies present and/or in future are for buyer's account. -all other terms /conditions not in contradiction with the above as per GAFTA 48, Arbitration as per GAFTA 125 in London. 37. The GAFTA Arbitration Rules 125 lays down that the juridical seat of the arbitration shall be, and is hereby designated pursuant to Section 4 of the Arbitration Act, 1996 as England and the provisions of Arbitration Act, 1996 shall apply to such proceedings. Some of the relevant clauses of GAFTA, 125 are reproduced here in below:- 1. PRELIMINARY 1.1 The provisions of the Arbitration Act, 1996, and of any statutory amendment, modification or re-enactment thereof for the time being in force, shall apply to every arbitration and/or appeal under these Rul....
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....e case may be, shall be deemed to be waived and absolutely barred, except:- (a) where the tribunal may in its discretion admit a claim if satisfied that the circumstances were outside the reasonable contemplation of the parties when they entered into the contract and that it would be just to extend the time, or when the conduct of one party makes it unjust to hold the other party to the strict terms of the time limit in question. Otherwise the tribunal may determine that the claim is waived and barred and refuse to admit it. There shall be no appeal to the board of appeal against the decision of the tribunal to exercise its discretion to admit a claim. If a tribunal decides not to admit the claim, then the claimant shall have the right to appeal pursuant to Rule 10, and the board of appeal shall have the power in its absolute discretion to overturn that decision and to admit the claim; (b) upon appeal if any of the provisions of Rules 10 to 20 have not been complied with, then the board of appeal may, in its absolute discretion, extend the time for compliance (notwithstanding that the time may already have expired) or dispense with the necessity for compliance and....
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....yer's duty is to nominate the ship, and the seller's to put the goods on board for account of the buyer and procure a bill of lading in terms usual in the trade. In such a case the seller is directly a party to the contract of carriage at least until he takes out the bill of lading in the buyer's name. Probably the classic type is based on the assumption that the ship nominated will be willing to load any goods brought down to the berth or at least those of which she is notified. Under present conditions, when space often has to be booked well in advance, the contract of carriage comes into existence at an earlier point of time. Sometimes the seller is asked to make the necessary arrangements; and the contract may then provide for his taking the bill of lading in his own name and obtaining payment against the transfer, as in a c.i.f. contract. Sometimes the buyer engages his own forwarding agent at the port of loading to book space and to procure the bill of lading; if freight has to be paid in advance this method may be the most convenient. In such a case the seller discharges his duty by putting the goods on board, getting the mate's receipt and handing it to the ....
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....n for grant of an injunction, the relevant considerations would be whether the plaintiff has been able to make out prima facie case. In Thomas Walker Vs. Auber George Jones reported in (1865-69) 1-2 L.R.P.C. 50, it was held that in considering a prayer for injunction, the Court should have due regard as to whether the nature and difficulties of question is such that it would be proper that the injunction should be granted until the time for deciding the same should arrive. 47. These are the additional considerations for not interfering with the order under challenge. 48. On the wholesome principles that the parties should be held to the terms which they have agreed, in absence of any coercion, fraud and misrepresentation and having arrived at a finding that such proceeding is not oppressive and unconscionable simply because it might entail some costs to be incurred by the plaintiff/appellant would not be a valid consideration to allow either of the parties to resile from the agreed procedure for settlement of their disputes. 49. Mr. Tilak Kumar Bose referred to Paragraph 179 of a Constitution Bench Judgment in Bharat Aluminium in order to justify that since the interim inj....
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....is regard, Mr. Bose has referred to Section 2 and Section 4 of the Arbitration & Conciliation Act, 1996. Sections 2 and Schedule I is referred to in Section 4 of the said Act are reproduced here in below:- 2. Scope of application of provisions. - (1) The provisions of this Part apply where the seat of the arbitration is in England and Wales or Northern Ireland. (2) The following sections apply even if the seat of the arbitration is outside England and Wales or Northern Ireland or no seat has been designated or determined- (a) sections 9 to 11 (stay of legal proceedings, & c.), and (b) section 66 (enforcement of arbitral awards). (3) The powers conferred by the following sections apply even if the seat of the arbitration is outside England and Wales or Northern Ireland or no seat has been designated or determined- (a) section 43 ....
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....ose an applicable law determined in accordance with the parties' agreement, or which is objectively determined in the absence of any express or implied choice, shall be treated as chosen by the parties. 53. The GAFTA Rules, 125 specify that apart from judicial seat of arbitration being in London, the law of arbitration would be the English Arbitration Act, 1996. The resulting award would, therefore, surely be an English award and a Foreign New York Convention award within the meaning of Section 44 of the Arbitration and Conciliation Act, 1996. In the case of such Foreign Awards falling under Part II of Arbitration and Conciliation Act, 1996, Section 48(e) contemplates that challenge mechanism can only be at the country where award was passed, namely, United Kingdom. There is, therefore, no possibility of the English award being made subject to a pending Indian Suit. If and only if, such foreign award is sought to be enforced in India, would the Indian Courts have jurisdiction and not otherwise. 54. The parties by agreeing to GAFTA Rules and the English Arbitration Act agreed to be bound by all provisions of the English Arbitration Act, 1996. The disputes in the instant su....
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....he view expressed by the learned single Judge of the Gujarat High Court in Hardy's case in which the learned single Judge of the Gujarat High Court referred to paragraph 32 of the judgement in Bhatia International v. Bulk Trading S.A. reported in 2002 (4) SCC 105 which is reproduced hereunder:- 31. The learned Single Judge of the Gujarat High Court in Hardy Case (2006 (1) Guj LR 658) referred to para 32 of the judgment in Bhatia international v. Bulk Trading S.A. 2002 (4) SCC 105) and observed that once the parties had agreed to be governed by any law other than Indian law in cases of international commercial arbitration, then that law would prevail and the provisions of the Act cannot be invoked questioning the arbitration proceedings or the award. This is evident from para 11.3 of the judgment, which is extracted below: (Hardy Case, Guj LR p.663) 11.3. However, Their Lordships observed in para 32 that in cases of international commercial arbitration held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case laws or unless chosen by the parties would prevail. Any p....
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....y dispute or claim arising out of or relating to this Agreement shall be in the first instance, endeavour to be settled amicably by negotiation between the parties hereto and failing which the same will be settled by arbitration pursuant to the English Arbitration Law and subsequent amendments thereto. Article 17.2 - The arbitration proceedings shall be carried out by two Arbitrators one appointed by BALCO and one by KATSI chosen freely and without any bias. The Court of Arbitration shall be held wholly in London, England and shall use English language in the proceeding. The findings and award of the Court of Arbitration shall be final and binding upon the parties. Article 22 - Governing Law - This agreement will be governed by the prevailing law of India and in case of Arbitration, the English law shall apply. 60. The Hon'ble Supreme Court in Paragraph 37 considered the international scenario and the reasons and object of the Arbitration Act and Conciliation Act, 1996. After dealing with the object of the Arbitration Act, 1996, the Hon'ble Supreme Court made the following observations:- 92. We agree with Mr. Salve that Part I only applies when....
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....ion. Such use of the term "judicial authority", in Section 5 and Section 8 of the Arbitration Act, 1996, is not a recognition by the Parliament that Part I will apply to international commercial arbitrations held outside India. The term "judicial authority" is a legacy from the 1940 Act. The corresponding provision of Section 34 of the 1940 Act, which covered purely domestic arbitrations, between two or more Indian parties, within the territory of India, also refers to "judicial authority". It is nobody's contention that by using the term "judicial authority", the Parliament had intended the 1940 Act to apply outside India. In our opinion, the term "judicial authority" has been retained especially in view of policy of least intervention, which cannot be limited only to the Courts. This is clearly in recognition of the phenomenon that the judicial control of commercial disputes is no longer in the exclusive jurisdiction of Courts. There are many statutory bodies, tribunals which would have adjudicatory jurisdiction in very complex commercial matters. Section 5 would be equally applicable to such bodies. The use of the term "judicial authority" in no manner has any reference to a....
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....ch a suit, if at all, can only be framed as a suit to "inter alia restrain the defendant from parting with property." Now, if the right to such property could possibly arise, only if the future arbitration award could possibly be in favour of the plaintiff, no suit for a declaration could obviously be filed, based purely only on such a contingency. All that could then be filed would, therefore, be a bare suit for injunction restraining the other party from parting with property. The interlocutory relief would also be identical. In our view, such a suit would not be maintainable, because an interlocutory injunction can only be granted during the pendency of a civil suit claiming a relief which is like to result in a final decision upon the subject in dispute. The suit would be maintainable only on the existence of a cause of action, which would entitle the plaintiff for the substantive relief claimed in the suit. The interim injunction itself must be a part of the substantive relief to which the plaintiff's cause of action entitled him. In our opinion, most of the aforesaid ingredients are missing in a suit claiming injunction restraining a party from dealing with the assets dur....
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....hich are governed by the Code of Civil Procedure in view of the specific bar created by Section 41(b) of the Specific Relief Act. However, the doctrine of anticipatory injunction which is very often now being applied in resisting a proceeding before a foreign court or tribunal on the ground that since the courts in India like the Courts in England are courts of both law and equity and thus, all equitable principle the Court in India may grant an order of injunction restraining a party from proceeding before any foreign court or forum. However, this doctrine has to be applied with care and caution as it involves the issue of respect for corresponding another international forum. Although in this case, it is a proceeding before an arbitral tribunal but the same principle is to be applied in which the tests are that the Court in the domestic forum may grant an ad interim order of injunction to avoid injustice or if the foreign proceedings are found to be oppressive or vexatious or to put it simply "in the ends of justice". 63. In Modi Entertainment Network & Anr. v. W.S.G. Cricket Pte. Ltd. reported in AIR 2003 SC 1177 it was held that where parties have agreed, under a non-exclusi....
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....ce, save in an exceptional case for good and sufficient reasons, with a view to prevent injustice in circumstances such as which permit a contracting party to be relieved of the burden of the contract; or since the date for the contract the circumstances or subsequent events have made it impossible for the party seeking injunction to prosecute the case in the court of choice because the essence of the jurisdiction of the court does not exist or because of a vis major or force majeure and the like; 5. Where parties have agreed, under a non-exclusive jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily no anti-suit injunction will be granted in regard to proceedings in such a forum conveniens and favoured forum as it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to non-exclusive jurisdiction of the court of their choice which cannot be treated just an alternative forum; 6. A party to the contract containing jurisdiction clause cannot normally be prevented from approaching....
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....nvenient unless; (a) the threatened conduct is "unconscionable" which primarily means it must be conduct which is oppressive or vexatious or which interferes with the due process of the court; (b) the jurisdiction is necessary to protect the applicant's legitimate interest in proceedings in England which must be the natural forum for the litigation. Rix LJ then said that while these are conditions for the grant of an anti-suit injunction (and in that sense may be said to go to jurisdiction), these considerations are again relevant when the court comes to exercise its discretion. I would, however, myself prefer to say that the conditions set out in (iii) above do not, strictly speaking, go to jurisdiction. They are requirements of the exercise of a jurisdiction that the court already has. This is, however, purely a matter of nomenclature and I have no doubt that, while Rix LJ confined his permission to appeal in the present case to the question of jurisdiction and refused permission to appeal against the judge's discretion, he intended there to be full argument as to the principles on which the judge exercised his jurisdiction. 67. In the ....