TaxTMI 
TaxTMI 
2021 (4) TMI 1322
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....the Federation of Oil Seeds & Fats Association(FOSFA), which was arrayed as the second Defendant, are void and/or against public policy as also for a declaration that specific contracts between the respective Plaintiff (i.e. Sunraja or Gem, as the case may be) and ADM are null and void. A consequential permanent injunction to restrain ADM from initiating, proceeding with, or continuing with arbitration proceedings is also claimed apart from damages of Rs. 1,00,01,000/-. 2. In each suit, the respective Plaintiff filed an application for an interim injunction to restrain ADM and FOSFA from proceeding with the arbitration proceedings. By separate orders dated 05.07.2019 in the interim Application filed in each suit, an order of injunction was granted restraining FOSFA, the second Respondent, from proceeding with the respective arbitration case until 29.07.2019. The said interim order was subsequently extended on various dates in July to October 2019 and, eventually, extended until further orders by order dated 14.11.2019. 3. In these circumstances, ADM filed similar applications, in each suit, for the following relief: to vacate the interim injunction; to revoke the leave grante....
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....f. The contracts are unconscionable because they are totally discriminatory against the buyer. While the seller is entitled to terminate the contract, a corresponding right is not extended to the buyer. Consequently, even though there were major quality issues and repeated breaches of the exclusivity condition, the Plaintiff was constrained to continue procurement from ADM. 7. With regard to the arbitration clause, the contention of Sunraja and Gem is as under. Although there is an arbitration clause in each contract, the arbitral institution is FOSFA. FOSFA is an organisation which is fully controlled by the prominent sellers of oil seeds such as ADM; and the rules of FOSFA do not permit the party to be represented by an advocate. Therefore, the arbitration agreement is void and cannot be enforced. The suits and the applications for interim anti-arbitration injunction were filed in the above mentioned facts and circumstances. 8. I heard Mr. Nakul Dewan, learned senior counsel, assisted by Mr. Anirudh Krishnan, learned counsel, on behalf of the first Respondent/first Defendant; and Mr. P.H. Arvindh Pandian, learned senior counsel, assisted by Mr. S. Santosh and K. Magalingam,....
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....vacated because the contract clearly provides for dispute resolution through arbitration under the auspices of FOSFA. He also pointed out that FOSFA is a globally recognised arbitral body and that the allegations of Sunraja and Gem, as regards FOSFA, are unsubstantiated and liable to be rejected out of hand. Given the fact that there is an arbitration clause and the contract is governed by English law, he submitted that this Court should decline to exercise jurisdiction and vacate the interim order which is currently continuing to operate. For this proposition, he relied on a judgment of the Delhi High Court in Dholi Spintex Pvt. Ltd. v. Louis Dreyfus Company India Pvt. Ltd., CS (Comm.)286/2020, Judgment dated 24.11.2020. 12. On the other hand, Mr. Arvindh Pandian, learned senior counsel for the Respondent/Plaintiff, submitted that the contracts are contrary to public policy and, consequently, void. With specific reference to the termination clause, which enables termination by ADM but not by the Indian counter-party, he contended that such clause is unconscionable. Indeed, he contended that Sunraja and Gem could not terminate the contracts in spite of the repeated breaches of t....
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....arbitration. 15. The conduct of both ADM and FOSFA leave much to be desired according to Mr. Arvindh Pandian. In spite of the grant of an interim injunction by this Court, he pointed out that the arbitration proceedings resumed and, in fact, culminated in an ex parte arbitral award against the respective Plaintiff. Thus, FOSFA-the second Defendant did not participate in proceedings before this Court and in flagrant disregard of the order of injunction proceeded with the arbitration proceedings and granted an arbitration award in favour of the first Defendant. This underscores the lack of neutrality and the blatant disregard for the Indian judiciary. Hence, he submitted that the order of interim injunction should be made absolute and the applications filed by the first Defendant should be rejected. 16. By way of rejoinder, Mr. Nakul Dewan pointed out that it is false that the Plaintiff did not receive FOSFA Form 54. Such contention was not raised while the transactions were effected. The contention that the arbitral panel of FOSFA is not neutral was also strongly refuted. According to Mr. Dewan, the respective Plaintiff should not be permitted to resile from the contractual re....
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....at the date of this contract and of which both parties hereto shall be deemed to be cognizant. Neither party hereto, nor any persons claiming under either of them, shall bring any action or other legal proceedings against the other of them in respect of any such dispute until such dispute shall first have been heard and determined by the arbitrators, umpire or Board of Appeal (as the case may be), in accordance with the Rules of Arbitration and Appeal of the Federation, and it is hereby expressly agreed and declared that the obtaining of an Award from the arbitrators, umpire of Board of Appeal (as the case maybe), shall be a condition precedent to the right of either party hereto or of any person claiming under either of them to bring any action or other legal proceedings against the other of them in respect of any such dispute." 18. Likewise, the contracts that were executed between the respective Plaintiff and the first Defendant also contain an arbitration clause, which is as under: "Arbitration: All disputes or differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of this Contract or the b....
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....above clauses are examined cumulatively, the undisputed position that emerges is that all disputes are required to be referred to arbitration in accordance with the Rules of Arbitration and Appeal of FOSFA. As stated earlier, such arbitration would be governed by the English Arbitration Act and the juridical seat of arbitration is England. It is also evident that the contracts are required to be construed in accordance with English law. Thus, there is little doubt that the contract discloses the parties' intention that the governing and curial law is English law, and that the arbitration would be governed by the FOSFA Rules of Arbitration and Appeal. Consequently, the arbitral tribunal constituted as per the contracts and not Indian courts should exercise jurisdiction, in the first instance, and, thereafter, challenges, if any, would lie before the English courts. The only exception that the contracts carve out, in this regard, is as regards interim measures to secure the claim or counter claim, as the case may be, which may be requested for before an appropriate court; but it is certainly not the case of the respective Plaintiff that these suits would qualify as actions for su....
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....l recourse to the termination clause contained therein. Although it was urged on behalf of the respective Plaintiff, by placing reliance on Interfoto and AEG, that mere reference to contract Form 54 is insufficient, upon examining the relevant clause, I find that the text prima facie discloses the intention to incorporate Form 54, albeit subject to agreed variations, and it is not a case of mere reference thereto as per principles formulated in that regard in cases such as M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd. (2009) 7 SCC 696. Even otherwise, such contention could be raised before the arbitral tribunal and before the appropriate courts in the UK, if the awards are challenged, given the fact that the governing law under the contract is English law. The above conclusion would apply equally to the contention that the respective Plaintiff did not have a choice in the matter of procuring CSFO and could only procure the same from ADM. The distinction between an arbitration clause and the other provisions of the contract becomes material in this context, and both severance and the Kompetenz-kompetenz principle are firmly entrenched in Indian jurispruden....
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....ed to nominate its arbitrator upon receiving a notice of arbitration from ADM. The decision to abandon the arbitral process and institute proceedings before this Court was taken subsequently. In any event, any grievance on this score should be canvassed before the arbitral tribunal and/or the courts in the UK in accordance with applicable law. 27. A contention was raised that the arbitral institution does not permit a party to be represented by an advocate or practising lawyer, but that ADM was permitted to avail such assistance. On perusal of the English Arbitration Act, I find that there are mandatory provisions that ensure equal opportunity (Section 33). Indeed, there are provisions to challenge an arbitrator (Section 23 and 24) and provisions that enable: jurisdictional challenges (Section 67); challenges on the ground of serious irregularity (Section 68); and on a point of law (Section 69). Although such provisions are hedged with conditions, it is clear that the grounds of challenge raised here by the respective Plaintiff could have been and may still be raised before the arbitral tribunal or the English courts. 28. Thus, the respective Plaintiff has failed to demonstra....