TaxTMI 
TaxTMI 
2005 (8) TMI 715
X X X X Extracts X X X X
X X X X Extracts X X X X
....and/or whether the original compact to this effect does not subsist as it had been abandoned and given up or should be deemed to have been given up. In this case I have not been presented with a clean slate on which to write the judgment inasmuch as the controversy between the parties has received jural attention already. Benefiting from the detailed and erudite legal submissions made before me, it is my understanding that if possible or plausible cases are presented on behalf of both the adversaries, then the Court should direct them to ventilate their respective cases before the arbitrators. However, if upon even a cursory consideration of the facts there is a strong preponderant possibility that one of the parties will needlessly and vexatiously be subjected to arbitration, thereby compelling it to expend avoidable time, effort and expense, the Arbitration & Conciliation Act, 1996 (hereinafter referred to as `Arb. & Con. Act') expects the Court to look into the matter, and thereby obviate a futile and facile Reference. This opinion holds irrespective of whether it is in the context of a domestic or a foreign arbitration; in fact this determination is essential in the latter ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edly, Part II only applies to arbitrations which take place in a convention country. Mr. Sen fairly admitted that Part II would not apply to an international commercial arbitration which takes place in a non-convention country. He also fairly admitted that there would be countries which are not signatories either to the New York Convention or to the Geneva Convention. It is not possible to accept the submission that the said Act makes no provisions for international commercial arbitrations which take place in a non-convention country. ... 23. That the legislature did not intend to exclude the applicability of Part I to arbitrations, which take place outside India, is further clear from certain other provisions of the said Act. Sub-section (7) of Section 2 reads as follows: 2. (7) An arbitral award made under this Part shall be considered as a domestic award. As is set out hereinabove the said Act applies to (a) arbitrations held in India between Indians, and (b) international commercial arbitrations. As set out hereinabove international commercial arbitrations may take place in India or outside India. Outside India, an international c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ards does not contain any provision similar to Section 9 or Section 17. As indicated earlier, Mr. Sen had submitted that this indicated the intention of the legislature not to apply Sections 9 and 17 to arbitrations, like the present, which are taking place in a foreign country. The said Act is one consolidated and integrated Act. General provisions applicable to all arbitrations will not be repeated in all Chapters or Parts. The general provisions will apply to all Chapters or Parts unless the statute expressly states that they are not to apply or where, in respect of a matter, there is a separate provision in a separate Chapter or Part. Part II deals with enforcement of foreign awards. Thus Section 44 (in Chapter I) and Section 53 (in Chapter II) define foreign awards, as being awards covered by arbitrations under the New York Convention and the Geneva Convention respectively. Part II then contains provisions for enforcement of 'foreign awards' which necessarily would be different. For that reason special provisions for enforcement of foreign awards are made in Part II. To the extent that Part II provides a separate definition of an arbitral award and separate provisions ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Delhi and Calcutta cannot be faulted for interpreting it in the manner indicated above. However, in our view a proper and conjoint reading of all the provisions indicates that Part I is to apply also to international commercial arbitrations which take place out of India, unless the parties by agreement, express or implied, exclude it or any of its provisions. Such an interpretation does not lead to any conflict between any of the provisions of the said Act. On this interpretation there are no lacunae in the said Act. This interpretation also does not leave a party remediless. Thus such an interpretation has to be preferred to the one adopted by the High Courts of Orissa, Bombay, Madras, Delhi and Calcutta. It will Therefore have to be held that the contrary view taken by these High Courts is not good law. THE STARE DECISIS OF BHATIA INTERNATIONL 4. It appears to me that the ratio of Bhatia International does not foreclose any further discussion on the interplay between Sections 8 and 45, or Part I and Part II of the Arb. & Con. Act. The controversy is altogether different since the Court was concerned with the grant of interim measures under Section 9 of the Arb & Con. Act. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has unequivocally declared that "a decision is not an authority for the proposition which did not fall for its consideration." In M/s A-One Granites v. State of U.P. and Ors., [2001]1SCR1085 it had been contended that the controversy was covered on all fours by a previous decision of the Court. The contention was rejected in these words- 11. This question was considered by the Court of Appeal in Lancaster Motor Co. (London) Ltd. v. Bremith Ltd. (1941) 1 KB 675, and it was laid down that when no consideration was given to the question, the decision cannot be said to be binding and precedents sub silentio and without arguments are of no moment. Following the said decision, this Court in the case of Municipal Corporation of Delhi v. Gurnam Kaur, AIR1989SC38 observed thus (at p. 43 of AIR): "In Gerard v. Worth of Paris Ltd. (K) (1936) 2 All ER 905 , the only point argued was on the question of priority of the claimant's debt, and on this argument being heard, the Court granted the order. No consideration was given to the question whether a garnishee order could properly be made on an account standing in the name of the liquidator. When, Therefore, this very point....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was whether an injunction could be granted by an Indian Court even in circumstances where the venue of arbitration was abroad. I had the occasion to ponder upon this very question in Naval Gent Maritime Ltd. v. M/s. Shivnath Rai Harnarain (I) Ltd. 85(2000)DLT355 . I had the advantage of the opinion of four of my learned Brothers in Unicor Gmbh Rahn Plastmaschinen and Anr. 1998(47)DRJ397 , Suzuki Motor Corporation v. Union of India and Anr. 1997 (2) Arb. LR 477, Dominent Offset Pvt. Ltd. v. Adamovske Strojirny A.S., 68(1997)DLT14 and Marriot International Inc. and Ors. v. Ansal Hotels Ltd. and Anr. AIR2000Delhi377 and Olex Focas Pvt. Ltd. and Anr. v. Skodaexport Company Ltd. and Anr. AIR2000Delhi161 . The learned Judges had concluded, by disparate dialectic, that the powers of the Court to grant injunctions under Section 9 of the Arb. & Con. Act would also extend to `international' arbitrations. The judgment of J.B. Goel, J. does not run counter to these views. On a holistic reading of the Arbitration and Conciliation Act, 1996, there is no justification to read it in compartments, and to subscribe to the view that the provisions of Part I apply only to domestic arbitrations. To....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nding, is obviously that Section 9 of the Arb. & Con. Act can be resorted to even in respect of international commercial arbitrations whose venue is outside India, i.e., foreign arbitrations culminating in a 'foreign award'. Where the sittings of an international commercial arbitration is in India, it may be termed a 'domestic arbitration'. However, there may be instances where one of the parties is not of Indian nationality and is also not a citizen of a country which is not a signatory either of the New York Convention or the Geneva Conventions. In actuality the drafters have overlooked the possibility of an international arbitration between an Indian party and another from a `non-convention' country. This is the legislative reality and there is no reason to deduce that Parliament wanted Part I alone to apply to such arbitrations. The relative likelihood of arbitrations between an Indian party and one from a non-convention country (or for that matter from a Geneva Convention country) is minuscule which is perhaps the reason for this void. I would hazard to assess the incidence of Chapter II of Part II of the Arb. & Con. Act being attracted or invoked is likely....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d be the law of the country where the arbitration is agreed to be held; since the parties had expressly agreed that Indian laws would govern contractual disputes, these laws would similarly regulate arbitral matters also. The parties in that case had also consented to the applicability of the ICC Rules & Regulations over all matters of procedure connected with the conduct of the arbitration. Mr. Sawhney's contention that since the agreement in hand adverts to Indian laws, Part I of the Arb. & Con. Act would apply to all disputes between the parties, is predicated on these observations. It must immediately be noted that in the NTPC case the Court had before it the repealed Arbitration Act, 1940 and Section 9(b) of the Foreign Awards (Recognition and Enforcement) Act 1961 (hereinafter referred to `FARE Act'), which excludes the application of the statute to 'any award made on an arbitration agreement governed by the law of India'. In order to establish his arguments, and to distinguish the decision of the Division Bench in General Electric Canada Inc. and Anr. v. National Hydroelectric Power Corporation Ltd. 2003 III AD (Delhi) 465, Mr. Chandhiok, learned Senior couns....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot in a separate agreement. In the absence of any indication to the contrary, the governing law of the contract (i.e. in the words of Dicey, the proper law of the contract) being Indian law, it is that system of law which must necessarily govern matters concerning arbitration, although in certain respects the law of the place of arbitration may have its relevance in regard to procedural matters. In order to make good his submission Mr. Chandhiok has drawn attention to Section 51 of the Arb. & Con. Act which only incorporates Section 9(a) of the FARE Act. Therefore, the NTPC case (supra) may not have any direct application to the facts of the present case. There is obvious substance in his argument that because of the deliberate omission of Section 9(b) of the FARE Act the legislature has consciously altered the position away from the choice of law and towards the venue of arbitration. Once this conclusion is arrived at since the venue of the Arbitration is outside India and is governed by the New York Convention, Part II Chapter I alone can be invoked by the present parties. Section 9 of the FARE Act and Section 51 of the Arb. & Con. Act are reproduced in juxtaposition for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal commercial arbitration the challenge to it stood waived. The Division Bench held inter alias that - "The decisive factor for an award to be considered a "domestic award" is not the place where it is made but rather the fact of it being made under Part I of the Act. The parties in the instant case having agreed that the agreement (including the arbitration there under) shall be governed according to the laws of India, the arbitral award has to be held to have been made under Part I and has to be considered as a domestic award, though made on foreign soil according to the ICC Rules and Procedure - which can only displace the derogable provisions of Part I. Therefore, the recourse to a Court under Section 34, it not being a derogable provision, cannot be said to have been waived by subscribing to the ICC Rules of Arbitration". With utmost respect I am unable to concur with this interpretation of the law; possibly, the Bench was influenced by the opinion of Lord Denning in International Tank and Pipe SAK v. Kuwait Aviation Fuelling Co KSC [1975] 1 ALL ER 242 , which indubitably would have been relevant had Section 9(b) of the FARE Act been `saved' by Section 51 of the Arb. & Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n any matter governed by Part I except where so provided therein. Section 5 does not state that civil courts shall have no role to play in arbitration matters, as it could easily have done. In Dhulabhai etc. v. State of Madhya Pradesh and Anr., [1968]3SCR662 , it has been opined by the Constitution Bench that 'the jurisdiction of civil courts is all embracing except to the extent it is excluded by an express provision of the law or by clear intendment arising from such law.' After discussing all the ramifications of the statute law and its previous pronouncements the following legal propositions were enunciated- "The result of this inquiry into the diverse views expressed in this Court may be stated as follows: (1) Where the statute gives a finality to the orders of the special tribunals the civil court's jurisdiction must be held to be excluded if there is adequate remedy to do what the civil courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial proc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tatutory provision explicitly indicates or even by inferential conclusion the court arrives at the same when such a conclusion is the only conclusion'. In I.T.I. Limited v. Messrs Siemens Public Communications Network Limited AIR 2000 SC 2308, Hon'ble Mr. Justice Santosh Hegde has similarly observed that it is well settled that the jurisdiction of the Civil Court can only be taken away by a statute in specific terms; that such exclusion cannot be easily inferred because there is always a strong presumption that civil courts have jurisdiction to decide all questions of a civil nature. The Court found that the High Court possessed revisory powers under Section 115 of the CPC even in respect of an Appeal under Section 37 of the Act. These very same views have also been articulated in the judgment of Hon'ble Justice R.C. Lahoti (as the Learned Chief Justice of India then was) in Ramesh Chand Ardawatiya v. Anil Panjwani, [2003]3SCR1149 . Finally, the following pronouncements in Sukanya Holdings (P) Limited v. Jayesh H. Pandya and Anr., [2003]3SCR558 are also of equal relevance: "For interpretation of Section 8, Section 5 would have no bearing because it only contemp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hen submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. Power of judicial authority to refer parties to arbitration.- Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. The Court of a contracting State when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in that Act and as such it must refer to the exempting provisions which would be contrary to the general applicability of the Act. In other words, as all the relevant provisions of the Act are made applicable to a factory notwithstanding anything to the contrary contained in it, it must have the effect of excluding the operation of the exemption provisions. Just as because of the non obstinate clause the Act is applicable even to employees in the factory who might not be 'workers' under Section 2(1), the same non obstinate clause will keep away the applicability of exemption provisions qua all those working in the factory. The Labour Court, in our view, was, Therefore, right in taking the view that because of the non obstinate clause Section 64 read with Rule 100 itself would not apply to the respondents and they would be entitled to claim overtime wages under Section 59 of that Act read with Section 70 of the Bombay Shops and Establishments Act, 1948. 12. The syntax and components of Parts I and II make them wholly dissimilar and entirely incomparable, leaving no room for doubt that domestic arbitration and New York Convention arbitrations are governed by distinct leg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) the parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal. Provided that if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. of the country in which, or under the law of which, that award was made. (2) Enforcement of an arbitral award may also be refused if the court finds that- (a) the subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (b) the enforcement of the award would be contrary to the public policy of India. Explanation.--Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. (e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned specialisation to such an extent that they have promulgated their own rules of procedure much like curial law. No contact with courts of law is necessary, until one of the parties recalcitrantly refuses to honour an Award thereby necessitating steps for its execution. There is Therefore scant need to prescribe the powers and procedure pertaining to arbitration in the commercial world. This eventuality usually arises where the parties are individuals and arbitration is through the intervention of a Court. Chapters III to VI of Part I of the Arb. & Con. Act could well be otiose even for domestic commercial arbitration. These provisions would guide the parties and the arbitrators who have a first time involvement with arbitration. In this analysis it will become plain that Chapters I and II of Part II of the Arb. & Con. Act are complete codes in themselves, akin to Section 25B of the Delhi Rent Control Act in respect of both curial and substantive law pertaining to the arbitration. If this understanding is correct it would no longer be necessary to locate the power for issuing interim orders within the Arb. & Con. Act; Section 9 dealing with domestic arbitrations would become clar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has been infused with local applicability upon the passing of the Carriage by Air Act. Unlike in the Arb. & Con. Act, the language of those Conventions has not been tampered with or altered whilst enacting the Carriage by Air Act. It is certainly arguable that the language employed in any Treaty should similarly be employed verbatim in the municipal statute, since every nation is obliged to give complete effect to its international obligations. It is not expected of any sovereign country to lead the international community to believe that it has agreed to fall within a particular legal regime, whilst chartering a different path in reality. If the same language as is found in a ratified treaty is employed in a stature, inconsistency is obviated. WAIVER OF ARBITRATION CLAUSE IN PART I 16. Section 8 of the Arb. & Con. Act introduces into the statute the doctrine of election of remedies, i.e., the resolution of disputes either through arbitration or through civil action. In Food Corporation of India v. Sreekanath Transport, [1999]3SCR699 , the FCI had filed a civil suit despite the existence of an exclusion clause in the Agreement. The Apex Court took the view that FCI had relinq....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt would continue to have jurisdiction until it decided that issue. Reliance on Food Corporation of India and Anr. v. Yadav Engineer and Contractor AIR 1982 SC 1302, may have become anachronistic since the wordings of this Section are dissimilar to those employed in Section 34 of the Arbitration Act, 1940; the former speaks of a "first statement on the substance of the dispute" whilst the latter had referred to the "written statement" and sub-section (2) of the former explicitly contemplates an "application". It is obvious that the Court was not satisfied that a case for its interference had been made out in Brawn Laboratories Limited v. Fittydent International GMBH and Anr. 85(2000)DLT204 , which conversely implies that where a case is disclosed the court can interfere in the arbitration proceedings. In Akshay Kapur and Ors. v. Rishav Kapur and Ors. 105(2003)DLT467 , I have expressed the opinion that on the filing of a Section 8 application this Section would apply only if the suit is directly covered by the arbitration clause. I had entertained the suit for declaration and injunction pertaining to a Valuation Report as it was distinct from the disputes that were to be decided thr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or Section 45 or Section 54, the jurisdiction of the Civil Court will not be ousted. A distinction was then drawn between the provisions of Part I and Part II with the observation that that a Civil Court will direct the parties to an International arbitration only if it concludes that a valid agreement is in existence. This decision militates against the contesting Defendant and supports the interpretation taken by the Delhi High Court. The second decision is of a Division Bench of the Calcutta High Court titled Hindustan Copper Limited v. Centro trade Minerals and Metals Inc., AIR2005Cal133 . Hindustan Copper Ltd. had been directed by the Learned Single Judge to make payments against a foreign Award failing which execution proceedings would be initiated. The Division Bench noted that there was no Decree passed by any Court of law; however, an Award had been passed by an Arbitrator sitting in England in which he had not made any observations or alterations to the Indian Award. The issue was whether the Award, being a foreign Award, left the court with Lesser powers of enforcement. It was clarified that a foreign Award "is no more binding and no more sacrosanct than a domestic Awar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r, in the latter case the Court must adjudicate whether the arbitration clause is not null and void but is operational and capable of being performed, and only after it arrives at this conclusion, can it refer the parties to arbitration. The deliberate decision not to incorporate Section 9(b) of FARE assumes great significances, and leads inexorably to the conclusion that the factum of Indian laws in the 1996 Arbitration regime, especially Part II thereof, venue/territoriality is all important. RELEVANT FACTS OF THE CASE 20. I shall now venture onto the factual matrix of the case. SKYCELL Communication Pvt. Limited was incorporated on 3.3.1992, with the following holding:- Crompton Greaves Ltd. (CGL) 40.5%, MILLICOM and BELLSOUTH 24.5.% each and the Defendant 10.5%. The Joint Venture Agreement (JVA) stipulated that new shareholders would be invited only with the express written consent of these partners, each of whom would have a preemptive right to purchase the shares of any of the partners desirous of selling their shareholding. Furthermore, in order to ensure that each of the partners had a meaningful say in the Joint Venture, the prescribed quorum mandated the representat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....;s sale to BHARTI." Meanwhile on April 6, 2000 the Madras High Court had passed Orders on the Section 9 petition inter alias maintaining status quo for four months and in the event that the parties failed to arrive at an amicable settlement, permitted the parties/partners to initiate arbitration proceedings. On August 5, 2000 the plaintiff filed Suit No. 1727/2000 in this Court praying for an injunction against BELLSOUTH from selling its shares to any person except the plaintiff. Suit No. 957/2000 of similar nature was filed by the plaintiff in this Court on 5.9.2000 praying that Defendant No. 1 be restrained from selling its shares except to the plaintiff. On 27.9.2000 the plaintiff filed a third suit in this Court, Suit No. 2202/2000, claiming that it had stepped into the shoes of CGL and accordingly praying for an injunction restraining the other partners from acting in breach of the Joint Venture Agreement. 21. The affected partners, namely, the Defendants unsuccessfully filed an applications under Section 45 of the Arb. & Con. Act seeking a reference of the disputes to arbitration, but these applications were dismissed vide Orders dated 15.5.2001. In those proceedings Defen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocuments. (c) Restrain Defendant No. 3 (Bharti) by way of an Injunction Order or otherwise from committing any breach of the May 2001 Agreements and/or from obstructing, whether directly or indirectly, the completion of the formalities with Defendant Nos. 5 and 6. (d) Restrain Defendant Nos. 1 to 4 from acting upon or in any way, directly or indirectly, giving effect to the Resolutions circulated to the Directors of Defendant No. 4 under cover of letter dated 31st August 2001, till such time as the registration of transfer of shares of the plaintiff against payment of full consideration. (e) Issue a Mandatory Injunction or otherwise direct the Defendant Nos. 1, 2 and 3 to disclose: (i) the Agreements signed between them from the Sale and Purchase of the shares of SKYCELL (ii) the 'No Objection' clearances and approvals obtained by them in connection with the sale/purchase of the shares of SKYCELL. (f) Issue a decree of declaration declaring the Annual General Meeting of SKYCELL purportedly held on 28th September, 2001 to be illegal and void. (g) Issue a permanent Injunction against Defendant Nos. 3 and 4 restraining them from eff....