Rule. Shri Keyur Gandhi, learned advocate for the respondent, waives service of rule for respondents. 2. At the joint request of learned senior counsels for the parties, this petition is taken up for final hearing, today itself.
3. This petition under Article 227 of the Constitution of India is filed by the petitioners with the following prayers:
“[a] That the Hon'ble Court be pleased to issue a Writ of Certiorari or a Writ in the nature certiorari or any other appropriate writ, order or direction calling for records of the case and after going into the legality and validity thereof and set aside the impugned Order dated 16 July 2012 passed by the Additional Senior Civil Judge at Khambhalia, District Jamnagar, Gujarat;
[b] that pending hearing and final disposal of the present Application, this Hon'ble Court may be pleased to stay the operation of the impugned Order dated 16 July 2012 passed by the Additional Senior Civil Judge at Khambhalia, District Jamnagar, Gujarat;
[c] interim and ad-interim reliefs as terms of prayers Clause [b];
[d] for such further and other reliefs as the Hon'ble Court may deem fit and proper in the nature and circumstances of the case”
4. All the three petitioners viz. INEOS Commercial Services UK Limited [for short, `ICSUL-1'], INEOS Europe Limited [for short, `IEL-2'] both incorporated under the laws of United Kingdom and INEOS USA LLC [for short, `IUL-3'] incorporated under the laws of Delaware, USA, are the companies incorporated outside India and are claimants in arbitration proceedings pending before the Arbitral Tribunal in Singapore, under the Singapore International Arbitration Act and are original defendant Nos.1 to 3 respectively. The respondent No.1-Essar Oil Limited [for short, `EOL’] is a company incorporated under the Companies Act, 1956 and the plaintiff in Regular Civil Suit No.16/2012 [for short, `the said suit’] filed in the court of learned Additional Senior Civil Judge, Khambhalia, District Jamnagar. The respondent No.2-Essar Gujarat Petrochemicals Ltd. [for short, `the EGPL’] is the original defendant No.4.
5. On 03.04.2008, 27.05.2008 and 30.06.2008, three different licence agreements were signed by the petitioners- defendant Nos.1 to 3 and respondent No.2 / defendant No.4 to exploit certain proprietary technology of the petitioners for the production of propylene polymers and catalysts for use in such process. That above three agreements have genesis in the negotiations between the petitioners and respondent No.1. On 19.08.2011 notices were issued to respondents upon failure of respondent No.2-EOL to make payments required under the licence and to agree for consolidated arbitration to be governed by UNCITRAL Arbitration Rules. In reply to the above notice, on 19.09.2011 respondent No.1-plaintiff did not admit its liability as it was not party to any of the three agreements and it was not liable to pay claim amount as mentioned in the notice of arbitration. However, as per para 6 of the above notices, respondent No.1 agreed for consolidation of arbitrations under the licence agreements into one arbitration proceedings as proposed in para 1.3 of the notice of arbitration and further agreed for applicability of UNCITRAL Arbitration Rules for adjudicating dispute and appointed a Former Judge of Supreme Court of India as its Arbitrator. On 08.12.2011 the petitioners and respondents jointly submitted an agreed time table to the Arbitral Tribunal for the conduct of the arbitration proceedings. On 10.02.2012 the petitioners submitted the claim and in the backdrop of facts respondent No.1 moved an application on 26.03.2012 before the Arbitral Tribunal seeking its discharge from array of parties. The Arbitral Tribunal passed Procedural Order 1 on 11.04.2012, which reads as under:
“Having regard to the circumstances of this arbitration and the submissions by the Parties listed above, the Tribunal hereby defers any decision on its jurisdiction over Respondent No.2 until a Final Award is rendered based on the following:
a. The Parties submitted a joint draft Procedural Timetable without reference to the need for a Preliminary Challenge on Jurisdiction over Respondent No.2. Said draft Procedural Timetable was provided on 8 December 2011, almost four [4] months prior to the filing of the EOL Application.
b. Having regard to the Parties' agreed-upon Procedural Timetable of 8 December 2011, it is clear that the most efficient course of action is to hear the evidence on Respondent No.2's Application Under Article 23 of the UNCITRAL Rules 2010 together with the merits at the Substantive Hearing”
[emphasis supplied]
6. However, further order was also passed on 13.04.2012 being Procedural Order-2 with the consent of all the parties by which details of various aspects, including programme of the arbitration was laid down to which respondent No.1 herein has not raised any objection.
7. In the above factual backdrop, Regular Civil Suit No.16/2012 was filed in the Civil Court being the Court of Principal Senior Civil Judge, Khambhalia for a declaration and for permanent injunction by respondent No.1 herein wherein initially ex-parte injunction was granted on 19.04.2012. The said order came to be challenged by petitioners herein by filing Appeal from Order No.161/2012 and Civil Application for stay No.5709/2012 which came to be disposed of on 04.05.2012 with a direction to the trial Court for expeditious disposal of the application at Exh.5 as agreed by the parties and thereafter order impugned came to be passed.
8. The basic challenge in this petition under Article 227 of the Constitution of India is to the order dated 16.07.2012 passed below Exh.5 of granting injunction against the arbitration proceedings being held in Singapore by the Arbitral Tribunal under the Singapore International Arbitration Act. This petition is against grave jurisdictional error committed by the learned Civil Judge in failing to appreciate that the arbitration proceedings are distinct, different and governed by special law and in view of provisions of section 5 of the Arbitration and Conciliation Act, 1996 [for short, `Arbitration Act, 1996’], as per the legislative mandate, no judicial authority shall intervene except where so provided in Part-I of the said Act so far as matters governed by this part not withstanding anything contained in the law for the time being in force. Barring what is provided in Part-I for limited intervention like Section 9 of the Arbitration Act, 1996, interference with domestic arbitration is circumscribed, more so, the civil court cannot interfere with international arbitration held outside India. Thus, learned Civil Judge failed to take into consideration the principles of comity of nations before grant of any anti suit/anti arbitration injunction and committed grave jurisdictional error. Inter alia, it is stated that the said suit filed by respondent No.1 is not maintainable since none of the contesting defendants Nos.1 to 3-petitioners herein reside or carry on business within the jurisdiction of the civil court at Khambhalia and no cause of action has arisen within the jurisdiction of the civil Court at Khambhalia, and therefore, when the petitioners-defendant Nos.1 to 3 are not amenable to the personal jurisdiction of the civil court, such injunction could not have been granted in the subject matter of arbitration proceedings, which is outside the territorial jurisdiction of the civil court. That when the respondent No.1-plaintiff has submitted an application before the Arbitral Tribunal challenging the jurisdiction thereof, which is pending and now deferred till final award, grant of injunction against the arbitration is wholly illegal. Thus, the respondent No.1-plaintiff has submitted to the jurisdiction of Arbitral Tribunal albeit with the challenge to such jurisdiction, and therefore, granting injunction by applying parameters of prima facie case, undue hardship, irreparable loss, which could not be compensated in terms of money are irrelevant and even on merit also prima facie observations made by the civil court on the above three aspects are not based on record. Without considering the evidence and material on record about nature of agreement, prima facie findings about non-existence of privity of contract between the petitioners-defendant Nos.1 to 3 and respondent-plaintiff made by the civil court amounts to irrelevant consideration, and therefore, the order impugned deserves to be quashed and set aside.
9. As against above, at the outset, the petition is opposed by respondent No.1-EOL on the ground that the petition under Article 227 of the Constitution of India may be maintainable, but no case is made out to entertain this petition in view of availability of remedy of appeal under Order 43 Rule 1 of the CPC against order impugned passed by the Civil Judge. In addition to above, when the issue of jurisdiction is raised in this petition again a remedy is available for filing an application under Order 7 Rules 10 and 11 of the CPC before the same civil court where the suit is pending and thereafter also further remedy is available in case if such application is not accepted. In view of the above, entertaining the petition in exercise of powers under Article 227 of the Constitution of India is not warranted. As against the case of the petitioners about lack of jurisdiction under section 9 of the CPC vis-à-vis Section 5 of the Arbitration Act, 1996 and about no territorial jurisdiction of the civil court since no cause of action has arisen, the respondent No.1-EOL has exclusively referred to matrix contracts between licensor and the licencee dated 03.04.2008, 27.05.2008 and 30.06.2008 between the petitioners and respondent No.2 where respondent No.1 was not privy to the contract, and therefore, initiation of proceedings before Arbitral Tribunal itself is illegal and all the above three agreements are entered into with regard to subject matter of the agreement of parting with technical information and intellectual property rights relating to innovene process in the production of propylene polymers and catalysts for use in such process was described in detail. In the above agreement for establishment of plant to be build by licencee at Vadinar, Gujarat, India within the territorial jurisdiction of the Civil Court, Khambhalia and respondent No.1 was wrongly arraigned as a party in the arbitral proceedings filed against respondent No.1 by the petitioners. In the above circumstances the cause of action to initiate such proceedings and to claim relief for which jurisdiction under section 9 of the CPC is available only with civil Court, Khambhalia. That even in reply to the notice of arbitration, the respondent No.1 denied any liability towards the claim raised therein. Merely because of agreeing to time table before the Arbitral Tribunal does not amount to acceding to or acquiescence of jurisdiction of the Arbitral Tribunal and though the very issue was raised before the Arbitral Tribunal, no decision was rendered, and therefore, valid, proper and legal remedy was only to file suit in the Civil Court, Khambhalia.
10. That the amendment to the plaint is granted by the civil court and is placed on record of this petition by way of affidavit in reply. It would establish that the cause of action for filing the suit has arisen within the territorial jurisdiction of the civil court, Khambhalia, Gujarat, as the defendant Nos.1 to 3 are seeking to make the plaintiff as party to the arbitration proceedings on the basis of alleged breaches of licence agreements by defendant No.4 / respondent No.2. That clause 1.17 of each of the licence agreements provides that the plant to be built by defendant No.4 at Vadinar, Gujarat, India. Clause No.7 is with regard to preparation for operation, start up date and test runs. Clause No.8 provides for performance guarantees and it is crystal clear that the contract is to be implemented within the territorial jurisdiction of the civil court in view of clause 18 about applicable law and arbitration in toto. That sub-clauses 18.1, 18.2 and 18.3, 18.4 and 18.5 provide for applicable law and arbitration and either party may apply to any court of jurisdiction for their respective rights under the agreements to request injunctions or other measures of specific performance. Clause 23 is about entire agreement which replaces and supersedes any understanding, representation, warranty or promise, exchanged or made during the negotiations of this agreement. Therefore, any communication, correspondence, representation and/or understanding that officers or representatives of respondent No.1 have no bearing on the agreement nor respondent No.1 is in any manner liable for consequences, if any, arising out of such communications/representations etc. and the liability, if any, arising out of the breach of any terms or conditions of the agreements is strictly to be restricted between the signatories of the contract and in no manner respondent No.1 is responsible and liable for the claim amount. Therefore, entertaining the suit and grant of injunction by the civil court is within the parameters of section 9, Order 39 and rules 1 and 2 of the CPC. That against say of the petitioners to refer to various correspondences and communications between the petitioners and respondent No.1 prior to execution of agreements and for piercing the corporate veil i.e to remove the cloak so as to hold respondent No.1 liable for the claim amount, is uncalled for.
11. Thus, broad propositions on the legal issues raised by the learned senior counsel for the petitioners supported by decisions, are as under:
11.1 Learned senior counsel appearing for the petitioners submits that the present petition under Article 227 of the Constitution of India is not only maintainable but also to be entertained against the interlocutory order of the trial Court at Khambhalia, more particularly, when the same suffers from serious jurisdictional error, and since no cause of action has arisen within its territorial jurisdiction, there is a need to exercise the supervisory powers of this Hon'ble Court under Article 227 of the Constitution of India to keep the subordinate court within the bounds of its jurisdiction. In support of the above submission, learned senior counsel relied on the following decisions:
[i] Surya Dev Rai v. Ram Chander Rai & Ors. [(2003)6 SCC 675]
[ii] Shalini Shyam Shetty & Anr v. Rajendra Shankar Patil [(2010)8 SCC 329]
[iii] Kishore Kumar Khaitan v. Praveen Kumar Singh [(2006)3 SCC 312]
11.2 It is next submitted that despite the claim of the plaintiff-respondent No.1 herein of not being a party to the arbitration agreements in question, in view of it having submitted to the jurisdiction of Arbitral Tribunal at Singapore and in view of it having agreed for the joint time table for the conduct and conclusion of the arbitration proceedings and in view of commencement of the said arbitration proceedings at Singapore between the parties, Civil Court, Khambhalia ought not to have stayed the said arbitration proceedings, despite there being a legislative mandate contained under section 5 of the Arbitration Act, 1996 for discouraging such judicial intervention. In support of the above submission, learned senior counsel placed reliance on the following decisions:
[i] CDC Financial Services [Mauritius] Ltd. v. BPL Communications Ltd. & Ors. [(2003)12 SCC 140]
[ii] Secur Industries Ltd. v. Godrej & Boyce Mfg. Co. Ltd. [(2004)3 SCC 447]
[iii] Shree Subhlaxmi Fabrics Pvt. Ltd. v. Chand Mal Baradia & Ors. [AIR 2005 SC 2161]
[iv] SBP & Co. v. Patel Engineering Ltd. [(2005)8 SCC 618]
[v] Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. [(2011)8 SCC 333]
11.3 It is next contended that the cause of action for plaintiff-respondent No.1 to raise grievance against the petitioners is alleged wrongful impleadment of the plaintiff in arbitration proceedings already commenced at Singapore, and therefore, the factum of the agreements between the petitioners and respondent-EGPL and its breaches cannot have any bearing on the said grievance to give rise to a cause of action so as to confer territorial jurisdiction on the trial court at Khambhalia. In support of the above submission, learned senior counsel relied on the decision of the Apex Court in the case of Union of India v. Adani Exports Ltd. [(2002)1 SCC 567].
11.4 It is further submitted that having submitted to the jurisdiction of the Arbitral Tribunal at Singapore and having agreed for a joint time table for the conduct and conclusion of the said arbitration proceedings, while claiming that it is not a party to the arbitration agreements in question, the plaintiff- respondent No.1 cannot turn around and seek reliance upon the very agreements for conferring territorial jurisdiction on the trial Court and cannot adopt the approach of `heads I win tails you lose'. In support of the above submission, learned senior counsel placed reliance on the following decisions:
[i] Bakshi Ram v. Brij Lal [1994 Supp [3] SCC 198]
[ii] Groupe Chemique Tunisien SA v. Southern Petrochemicals Industries Corpn. Ltd. [(2006)5 SCC 275]
[iii] Tata Industries Ltd. v. Grasim Industries Ltd. [(2008)10 SCC 187]
11.5 Learned senior counsel for the petitioners further submits that a party which is not a signatory to the arbitration agreements, can be roped in the arbitration proceedings arising therefrom on the basis of doctrines of [i] lifting of corporative veil; [ii] Group of companies; third-party beneficiaries, etc. In support of the above argument, learned senior counsel for the petitioners relied on;
[I] paras 2.39 to 2.46 of Chapter-2 of `Redfern and Hunter on International Arbitration';
[ii] paras 1153 to 1180 of VolI of `International Commercial Arbitration by Gary Born'; and
[iii] In the case of State of U.P. v. Renusagar Power Co. [(1988)4 SCC 59].
11.6 Learned senior counsel for the petitioners further submitted that the question as regards a if a party claiming to be a non-signatory to the arbitration agreements and disputes, the applicability thereof in a proceeding initiated under section 11 of the Act, will have to be decided by the learned Chief Justice or any person or institution designated by him. However, the position in the present case is different where the arbitration proceedings are not only initiated before a nominated Arbitral Tribunal, but one of the parties raises a plea that it is not a party. The Tribunal itself has to decide the said issue under Section 16 of the Act, which is the case in the present matter. In support of the above submission learned senior counsel relied on the decision in the case of Alva Aluminium Ltd., Bangkok v. Gabriel India Ltd. [(2011)1 SCC 167].
12. That submissions on the legal issues, supported by case law, by learned senior counsel for the respondent are as under:
On the question as to whether Special Civil Application filed by the petitioners under Article 227 of the Constitution of India is to be entertained or not, Shri Mihir Thakor, learned senior counsel for the respondents, made the following broad submissions:
12.1 It is submitted that the petitioner is challenging the order passed by the trial Court under Order 39, Rule 1 and 2 of the CPC and an appeal lies against such order under Order 43 Rule 1[r] of the CPC. The petitioners instead of filing appeal from order, have filed the present Special Civil Application under Article 227 of the Constitution of India, which ought not to be entertained as alternative adequate remedy is available to the petitioners.
12.2 It is next contended that the petitioner in the present petition is contending that the trial Court ought not have granted the interim injunction as it lacks territorial jurisdiction under section 20 of the CPC and inherent jurisdiction in view of section 5 of the Arbitration Act, 1996. If these were the contentions which the petitioners wanted to canvass, the petitioners ought to have preferred application under Order 7 Rule 10/11 of the CPC and upon rejection of such application, adequate remedy as may be available could have been availed of. Having not moved such application, the petitioners should be precluded from contending that writ petition is maintainable and should be entertained.
12.3 It is next contended that even otherwise, the supervisory jurisdiction conferred on the High Court under Article 227 of the Constitution of India is limited to see that the inferior court or the tribunal functions within the limits of its authority and not to correct an error apparent on the record, much less an error of law. In the instant case, it cannot be said that the trial Court's order suffers from apparent infirmity where the supervisory jurisdiction of the High Court should be exercised. Learned senior counsel placed reliance on the decision in the case of Mohd. Yunus v. Mohd. Mustaqim [AIR 1984 SC 38]. It is next contended that reliance placed by the petitioners on the decisions in the case of Surya Dev Rai v. Ram Chander Rai [supra], Shalini Shyam Shetty [supra] and Kishore Kumar Khaitan v. Praveen Kumar Singh [(2006)3 SCC 312] to contend that the petition under Article 227 of the Constitution of India was filed challenging the appellate order passed by the court of appeal under Order 43 of the CPC.
12.4 Learned senior counsel for the respondents on the aspect of the territorial jurisdiction of the Civil Court, Khambhalia to entertain and try the suit has submitted that the petitioners have sought to refer the dispute arising out of the three agreements at Annexure-B [pages 48 to 181], Annexure- C [pages 182 to 306] and Annexure-D [pages 307 to 426] entered into between the petitioners and Essar Gujarat Petrochemicals Ltd. - respondent No.2, contending that Essar Oil Limited-respondent No.1 is a party to the agreement and/or that the corporate veil of respondent No.2 should be lifted and if so lifted, the agreements are with respondent No.1. The said agreements are for establishment of a plant at Vadinar, within the jurisdiction of Court at Khambhalia. As the agreements are to be performed at Khambhalia and the arbitration has been invoked on the basis of non-performance of three agreements, the petitioners were entitled to move the suit before the Court at Khambhalia as said Court has territorial jurisdiction to entertain and try this suit. Cause of action for a suit is not merely the immediate cause of action namely the notice for reference to arbitration but the ultimate cause of action namely the agreement itself and the place of its performance, which was within the jurisdiction of this Court. Reliance is placed by the learned senior counsel on the decision in the case of Rajasthan High Court Advocates Association v. Union of India [(2001)2 SCC 294.
12.5 It is submitted that the contention of the petitioners based on section 5 of the Arbitration Act, 1996 that no judicial authority shall intervene, is completely misplaced. The said section applies to arbitrations to which part-I apply and those arbitrations are the arbitrations, where the place of arbitration is India. As the arbitration in the instant case is at Singapore, section 5 would have no application at all. On the contrary, section 45 of the Arbitration Act does envisage that a judicial authority, when ceased of an action in a manner 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 language of section 45 is distinct from section 8 which requires the judicial authority to refer the parties to arbitration. This section begins with a non-obstante clause and has an overriding effect on anything contained in Part-1 or in the CPC. Assuming without admitting that section 5 would apply even to arbitration, where the place of arbitration is Singapore, Section 3 of the Foreign Award (Recognition and Enforcement) Act, 1961, which was the precursor of section 45 of the Arbitration Act, 1996 will have to be considered. The only distinguishing feature is that under section 3, the proceedings were to be stayed, while under the present section, the proceedings are to be referred to arbitration. In both the cases, however, if there is no arbitration agreement, the question of either staying the proceeding or referring to arbitration would not arise. In the instant case, there is no arbitration agreement between respondent No.1 and the petitioners. Consequently the question of referring the dispute to arbitration would not arise and the trial Court was aptly justified in granting the interim injunction, as was granted in the case of Dresser Rand S.A. v. Bindal Agrochemicals Limited [AIR 2006 SC 871] by the Delhi High Court and confirmed by the Supreme Court.
12.6 It is next contended that admittedly there is no arbitration agreement between the parties and in such circumstances the matter cannot be referred to arbitration and injunction against proceeding with the arbitration ought to be granted. Principle of lifting of corporate veil cannot be applied. In support of the above submission, learned senior counsel relied on the following decisions:
[i] Indowind Energy Ltd. v. Wescare [India] Ltd. [(2010)5 SCC 306]
[ii] S.N.Prasad v. Monet Finance Ltd. [(2011)1 SCC 320]
[iii] Deutsche Post Bank Home Finance Ltd. v. Taduri Sridhar & Anr. [(2011)11 SCC 375.
12.7 The Apex Court in the case of Indowind Energy has clearly not accepted the doctrine of lifting of corporate veil and the question therefore of applying foreign authorities and treaties such as Redfern & Hunter on International Arbitration and International Commercial Arbitration by the Born to invoke the doctrine of lifting of corporate veil would not arise. Even these treaties clearly establish that different jurisdictions are taking different view on lifting the corporate veil. Lifting of corporate veil generally arises only in cases of evasion of taxes, fraud, or such similar situations. In the instant case, the petitioners were very well aware that they are entering with the agreement with respondent No.2 and did not insist on respondent No.1 becoming party to the aid agreement.
12.8 It is further submitted that the suit is a validly instituted under Section 9 of the CPC and no provision of the Arbitration Act would bar such a suit. Reliance is placed on the decision in the case of Ramesh Gobindram v. Sugra Humayun Mirza Wakt, [AIR 2010 SC 2897]. The allegation that respondent No.1 has participated in arbitration and therefore there is acquiescence is not tenable in view of decision in case of Dresser Rand [supra].
13. Heard learned senior counsel for the parties and perused the record of the case.
13.1 When this matter is taken up for final hearing, decision dated 06.09.2012 of the Constitution Bench of the Apex Court in the case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Service, Inc. in Civil Appeal No.7019 of 2005 and allied matters now reported in [(2012)8 SCALE 333] is available whereby the Apex Court in para 198 concluded that Part-I of the Arbitration Act, 1996 is applicable only to all the arbitrations, which take place within the territory of India. In paras 196 to 199 under the heading of `Conclusion', of the said judgment, the Constitution Bench of the Apex Court has declared as under:
“196. In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the UNCITRAL Model Law. Section 2(2) makes a declaration that Part 1 of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to International Commercial Arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of Arbitration Act, 1996. In our opinion, the provisions contained in Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996.
197. With utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International [supra] and Venture Global Engineering [supra]. In our opinion, the provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with any of the provisions either in Part I or in Part II of the Arbitration Act, 1996. In a foreign seated international commercial arbitration, no application for interim relief would be maintainable under Section 9 or any other provision, as applicability of Part I of the Arbitration Act, 1996 is limited to all arbitrations which take place in India. Similarly, no suit for interim injunction simplicitor would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India”
198. We conclude that Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India.
199. The judgment in Bhatia International [supra] was rendered by this Court on 13th March, 2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by this Court on numerous occasions. In fact, the judgment in Venture Global Engineering [supra] has been rendered on 10th January, 2008 in terms of the ratio of the decisions in Bhatia International [supra]. Thus, in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereinafter”.
[emphasis supplied]
13.2 In view of the above, in the present case, agreements are dated 03.04.2008, 27.05.2008 and 30.06.2008, and therefore, applicable case law will be pre Bharat Aluminium Co. [supra] and decisions in the cases of Bhatia International [supra], Venture Global Engineering v. Satyam Computer Ltd [(2008)4 SCC 190], etc.
13.3 In SBP & Co. [supra], the Apex Court has noticed broad features of the Arbitration Act, which was intended to manifestly cover international and commercial arbitrations and conciliations. In para 4 of the said judgment, the Apex Court held as under:
“4. The Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') was intended to comprehensively cover international and commercial arbitrations and conciliations as also domestic arbitrations and conciliations. It envisages the making of an arbitral procedure which is fair, efficient and capable of meeting the needs of the concerned arbitration and for other matters set out in the objects and reasons for the Bill. The Act was intended to be one to consolidate and amend the law relating to domestic arbitrations, international commercial arbitrations and enforcement of foreign arbitral awards, as also to define the law relating to conciliation and for matters connected therewith or incidental thereto. The preamble indicates that since the United Nations Commission on International Trade Law (UNCITRAL) has adopted a Model Law for International Commercial Arbitration and the General Assembly of the United Nations has recommended that all countries give due consideration to the Model Law and whereas the Model Law and the Rules make significant contribution to the establishment of a unified legal framework for a fair and efficient settlement of disputes arising in international commercial relations and since it was expedient to make a law respecting arbitration and conciliation taking into account the Model Law and the Rules, the enactment was being brought forward. The Act replaces the procedure laid down in Sections 8 and 20 of the Arbitration Act, 1940. Part I of the Act deals with arbitration”.
13.4 In the case of Fuerst Day Lawson Ltd. [supra], the Apex Court considered various laws on arbitration and conciliation and other conventions, which were pre-cursor of Arbitration Act, 1996. The Apex Court in paras 53 to 60, summarized scheme of the Arbitration Act, 1996 as under:
“53. Before the coming into force of the Arbitration and Conciliation Act, 1996 with effect from August 16, 1996, the law relating to domestic arbitration was contained in the Arbitration Act, 1940, which in turn was brought in place of the Arbitration Act, 1899. Apart from the Arbitration Act 1940, there were two other enactments of the same genre. One called the Arbitration (Protocol and Convention) Act, 1937 (for execution of the Geneva Convention Awards) and the other called the Foreign Awards (Recognition and Enforcement) Act, 1961 (for enforcement of the New York Convention awards). The aforesaid three Acts were replaced by the Arbitration and Conciliation Act, 1996, which is based on the United Nations Commission on International Trade Law (UNCITRAL) Model and is broadly compatible with the “Rules of Arbitration of the International Chamber of Commerce”.
54. The Arbitration and Conciliation Act, 1996 that has repealed the Arbitration Act, 1940 and also the Acts of 1937 and 1961, consolidates and amends the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and defines the law relating to conciliation and provides for matters connected therewith and incidental thereto taking into account the UNCITRAL MODEL law and Rules. The Statement of Objects and Reasons of the Arbitration and Conciliation Act, 1996 reads as under:
“Statement of Objects and Reasons
1. The law of arbitration in India is at present substantially contained in three enactments, namely, The Arbitration Act, 1940, The Arbitration (Protocol and Convention) Act, 1937 and The Foreign Awards (Recognition and Enforcement) Act, 1961. It is widely felt that the 1940 Act, which contains the general law of arbitration, has become outdated. The Law Commission of India, several representative bodies of trade and industry and experts in the field of arbitration have proposed amendments to this Act to make it more responsive to contemporary requirements. It is also recognized that our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune with such reforms. Like arbitration, conciliation is also getting increasing worldwide recognition as an instrument for settlement of disputes. There is, however, no general law on the subject in India.
2. The United Nations Commission on International Trade Law (UNCITRAL) adopted in 1985 the Model Law on International Commercial Arbitration. The General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice. The UNCITRAL also adopted in 1980 a set of Conciliation Rules. The General Assembly of the United Nations has recommended the use of these Rules in cases where the disputes arise in the context of international commercial relations and the parties seek amicable settlement of their disputes by recourse to conciliation. An important feature of the said UNCITRAL Model Law and Rules is that they have harmonised concepts on arbitration and conciliation of different legal systems of the world and thus contain provisions which are designed for universal application.
3. Though the UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could, with appropriate modifications, serve as a model for legislation on domestic arbitration and conciliation. The present Bill seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules.
4. The main objectives of the Bill are as under:-
(i) to comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation;
(ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration;
(iii) to provide that the arbitral tribunal gives reasons for its arbitral award;
(iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction;
(v) to minimise the supervisory role of courts in the arbitral process;
(vi) to permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes;
(vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court; (viii) to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal; and (ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two international Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award.
5. The Bill seeks to achieve the above objects. (emphasis supplied).
55. The Preamble of the Arbitration and Conciliation Act, 1996 is as follows:
“PREAMBLE WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985;
AND WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice; AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980;
AND WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conciliation; AND WHEREAS the said Model Law and Rules make significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations;
AND WHEREAS it is expedient to make law respecting arbitration and conciliation, taking into account the aforesaid Model Law and Rules”
[emphasis supplied]
56. The new Act is a loosely integrated version of the Arbitration Act, 1940, Arbitration (Protocol and Convention) Act, 1937 and Foreign Awards (Recognition and Enforcement) Act, 1961. It actually consolidates amends and puts together three different enactments. But having regard to the difference in the object and purpose and the nature of these three enactments, the provisions relating thereto are kept separately. A mere glance at the 1996 Act is sufficient to show that under its scheme the provisions relating to the three enactments are kept separately from each other.
57. The 1996 Act is divided into four parts and it has three schedules at its end. Part I has ten chapters that contain provisions governing domestic arbitration and international commercial arbitration. Part II has two chapters; Chapter I contains provisions relating to the New York Convention Awards and Chapter II contains provisions relating to the Geneva Convention Awards. Part III of the Act has provisions concerning conciliation. Part IV has the supplementary provisions such as the power of the High Court to make rules (section 82), provision for removal of difficulties (section 83), and the power to make rules (section 84). At the end there are two repeal and saving sections. Section 85 repeals the three enactments referred to above, subject to the appropriate saving clause and section 86 repeals Ordinance 27 of 1996, the precursor of the Act, subject to the appropriate saving clause. Of the three schedules, the first is related to Part II, Chapter I, i.e., the New York Convention Awards and the second and the third to Chapter II, i.e., the Geneva Convention Awards.
58. There is a certain similarity between the provisions of Chapters I and II of Part II but Part I of the Act is vastly different from Chapters I and II of Part II of the Act. This is quite understandable too since Part II deals only with enforcement of foreign awards (Chapter I, of New York Convention Awards and Chapter II, of Geneva Convention Awards) while Part I of the Act deals with the whole gamut of law concerning domestic arbitration and international commercial arbitration. It has, therefore, a very different and much larger framework than the two chapters in Part II of the Act.
59. Part I has ten chapters. Chapter I begins with definition clauses in section 2 that defines, amongst other terms and expressions, “arbitration”, “arbitration agreement”, “arbitral award”, etc. Chapter I also contains some “General Provisions” (sections 3-6). Chapter II contains provisions relating to “Arbitration Agreement” (sections 7-9). Chapter III contains provisions relating to “Composition of Arbitral Tribunal” (sections 10-15). Chapter IV deals with the “Jurisdiction of Arbitral Tribunals” (sections 16-17). Chapter V lays down provisions concerning “;Conduct of Arbitral Proceedings” (sections 18-27). Chapter VI deals with “Making of Arbitral Award and Termination of Proceedings” (sections 28-33). Chapter VII has only one section, i.e., section 34 that provides “Recourse against Arbitral Award”. Chapter VIII deals with “Finality and Enforcement of Arbitral Awards”
(sections 35-36). Chapter IX provides for “Appeals” (section 37 which is akin to section 39 of the 1940 Act). Chapter X contains the “Miscellaneous” provisions (sections 38-43).
60. It is also evident that Part I and Part II of the Act are quite separate and contain provisions that act independently in their respective fields. The opening words of section 2, i.e. the definition clause in Part I, make it clear that meanings assigned to the terms and expressions defined in that section are for the purpose of that part alone. Section 4 which deals with waiver of right to object is also specific to Part I of the Act. Section 5 dealing with extent of judicial intervention is also specific to Part I of the Act. Section 7 that defines “arbitration agreement” in considerable detail also confines the meaning of the term to Part I of the Act alone. Section 8 deals with the power of a judicial authority to refer parties to arbitration where there is an arbitration agreement and this provision too is relatable to Part I alone (corresponding provisions are independently made in sections 45 and 54 of Chapter I and II, respectively of Part II). The other provisions in Part I by their very nature shall have no application insofar as the two chapters of Part II are concerned”.
The Apex Court in para 64 of the above judgment by comparing and analysing respective provisions relevant for the subject matter, in para 89, held as under:
89. It is, thus, to be seen that Arbitration Act 1940, from its inception and right through 2004 (in P.S. Sathappan) was held to be a self-contained code. Now, if Arbitration Act, 1940 was held to be a self-contained code, on matters pertaining to arbitration the Arbitration and Conciliation Act, 1996, which consolidates, amends and designs the law relating to arbitration to bring it, as much as possible, in harmony with the UNCITRAL Model must be held only to be more so. Once it is held that the Arbitration Act is a self- contained code and exhaustive, then it must also be held, using the lucid expression of Tulzapurkar, J., that it carries with it “a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done”. In other words, a Letters Patent Appeal would be excluded by application of one of the general principles that where the special Act sets out a self-contained code the applicability of the general law procedure would be impliedly excluded”.
13.5 Fuerst Day Lawson Limited [supra] was basically in the context of two sections 34 and 48 of the 1996 Act and with regard to a question whether an order which was not appealable under section 50 of the Arbitration Act, 1996 could however be carried in appeal under the appellate proceedings of letters patent and after considering the provisions of Arbitration Act, 1996, (UNCITRAL) Model law with ICC Rules of Arbitration, erstwhile Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and acceptance and execution of Geneva Convention award and Foreign Awards (Recognition and Enforcement) Act, 1961 pertaining to recognition and enforcement of New York Convention awards in this country and the object of the Act, 1996 about consolidation and amendment of the law relating to domestic arbitration, international commercial arbitration, enforcement of Arbitral Tribunal awards and other such aspects based on various conventions held that appeal under Letters Patent was not available.
Thus, subject matter of this petition is to be considered by keeping in mind nature of Arbitration Act, 1996 as a special act which sets out self- contained code overriding applicability of the general law and procedure.
13.6 That decisions in the case of Bhatia International [supra] and Venture Global Engineering [supra] as the law, which was in force when the subject agreements of this petition were entered into in the year 2008, it was held by the Apex Court that provisions of Part-I of Arbitration Act, 1996 would apply to all arbitrations and to all proceedings relating thereto and if such arbitration is held in India, provisions of Part-I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part-I. In cases of international commercial arbitrations, held outside India, provisions of Part-I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions, and therefore, the law so held in Bhatia International [supra] and followed in Venture Global Engineering [supra] would apply in the facts of this case also. The respondent EOL has agreed for consolidated arbitration, submitted and nominated a Former Judge of the Apex Court as one of the arbitrators and agreed for common time table and schedule. The question about liability of EOL towards the claim in arbitration being non-signatory to agreement is to be considered by appreciating the evidence on merit by the Arbitral Tribunal in seisin of the subject matter, including that of nature, character and legal status of EOL and EGPL vis-a-vis agreements.
13.7 In the case of Yograj Infrastructure Limited v. Ssang Yong Engineering & Construction Company Limited [(2011)9 SCC 735] in the context of sections 9, 17, 20, 37 and 42 of Part-I of Arbitration Act, 1996 and agreement between the Indian Company and foreign company stipulating the seat of arbitration at Singapore and Singapore International Arbitration Centre [SIAC] Rules, 2010 were applicable for arbitral proceedings, application for interim relief filed before the District Court in India referred to arbitrator appointed by SIAC and appeal against the order of interim measures of protection by arbitrator filed before District Court under section 37(2)(b) of Arbitration Act, 1996 came to be dismissed as not maintainable before it on the ground that said proceedings were governed by laws of Singapore as arbitral proceedings were held at Singapore. The above view was upheld by the High Court and upon challenge before the Apex Court, it was not interferred with and appeal came to be dismissed. In paras 51 to 58, the Apex Court held as under:
“51. In our view, Clause 28 of the Agreement provides the answer. As indicated herein above, Clause 28 indicates that the governing law of the agreement would be the law of India, i.e., the Arbitration and Conciliation Act, 1996. The learned counsel for the parties have quite correctly spelt out the distinction between the “proper law” of the contract and the “curial law” to determine the law which is to govern the arbitration itself. While the proper law is the law which governs the agreement itself, in the absence of any other stipulation in the arbitration clause as to which law would apply in respect of the arbitral proceedings, it is now well-settled that it is the law governing the contract which would also be the law applicable to the Arbitral Tribunal itself. Clause 27.1 makes it quite clear that the curial law which regulates the procedure to be adopted in conducting the arbitration would be the SIAC Rules. There is, therefore, no ambiguity that the SIAC Rules would be the curial law of the arbitration proceedings. It also happens that the parties had agreed to make Singapore the seat of arbitration. Clause 27.1 indicates that the arbitration proceedings are to be conducted in accordance with the SIAC Rules.
52. The immediate question which, therefore, arises is whether in such a case the provisions of Section 2(2), which indicates that Part I of the above Act would apply, where the place of arbitration is in India, would be a bar to the invocation of the provisions of Sections 34 and 37 of the Act, as far as the present arbitral proceedings, which are being conducted in Singapore, are concerned.
53. In Bhatia International (supra), wherein while considering the applicability of Part I of the 1996 Act to arbitral proceedings where the seat of arbitration was in India, this Court was of the view that Part I of the Act did not automatically exclude all foreign arbitral proceedings or awards, unless the parties specifically agreed to exclude the same.
54. As has been pointed out by the learned Single Judge in the order impugned, the decision in the aforesaid case would not have any application to the facts of this case, inasmuch as, the parties have categorically agreed that the arbitration proceedings, if any, would be governed by the SIAC Rules as the curial law, which included Rule 32, which categorically provides as follows :
“Where the seat of arbitration is Singapore, the law of the arbitration under these Rules shall be the International Arbitration Act (Cap. 143A, 2002 Ed, Statutes of the Republic of Singapore) or its modification or re- enactment thereof”.
55. Having agreed to the above, it was no longer available to the appellant to contend that the “proper law” of the agreement would apply to the arbitration proceedings. The decision in Bhatia International Vs. Bulk Trading S.A. [(2002) 4 SCC 105], which was applied subsequently in the case of Venture Global Engg. Vs. Satyam Computer Services Ltd. [(2008) 4 SCC 190] and Citation Infowares Ltd. Vs. Equinox Corporation [(2009) 7 SCC 220], would have no application once the parties agreed by virtue of Clause 27.1 of the Agreement that the arbitration proceedings would be conducted in Singapore, i.e., the seat of arbitration would be in Singapore, in accordance with the Singapore International Arbitration Centre Rules as in force at the time of signing of the Agreement.
56. As noticed herein above, Rule 32 of the SIAC Rules provides that the law of arbitration would be the International Arbitration Act, 2002, where the seat of arbitration is in Singapore. Although, it was pointed out on behalf of the appellant that in Rule 1.1 it had been stated that if any of the SIAC Rules was in conflict with the mandatory provision of the applicable law of the arbitration, from which the parties could not derogate, the said mandatory provision would prevail, such is not the case as far as the present proceedings are concerned.
57. In the instant case, Section 2(2) of the 1996 Act, in fact, indicates that Part I would apply only in cases where the seat of arbitration is in India. This Court in Bhatia International (supra), while considering the said provision, held that in certain situations the provision of Part I of the aforesaid Act would apply even when the seat of arbitration was not in India.
58. In the instant case, once the parties had specifically agreed that the arbitration proceedings would be conducted in accordance with the SIAC Rules, which includes Rule 32, the decision in Bhatia International and the subsequent decisions on the same lines, would no longer apply in the instant case where the parties had willingly agreed to be governed by the SIAC Rules”.
13.8 In the case of Videocon Industries Ltd. v. Union of India [(2011)6 SCC 161] when the High Court of Delhi exercised powers under Section 9 of the Arbitration Act, 1996 for a declaration that Kaula Lumpur was the contractual and juridical seat of arbitration and direction be issued to the Arbitral Tribunal to conduct the proceedings at such venue. Considering the facts and circumstances of the case where a clause in the matrix agreement provided that the agreement would be governed and interpreted in accordance with laws of India, but such clause was subject to another clause which stipulated venue of the arbitration and the law of the arbitration agreement was to be Kaula Lumpur, Malaysia, unless the parties agreed otherwise, arbitration agreement was to be governed by laws of England. However, due to certain unforeseen circumstances in Malaysia, the Arbitral Tribunal shifted its seat to Amsterdam and then to London and partial award was passed which was challenged by the first respondent before the Supreme Court, in the court of Malaysia. The appellant in the above case before the Supreme court resisted the petition by relying upon a clause in the agreement that provided that the arbitration agreement would be governed by the laws of England and respondent therein requested the Arbitral Tribunal to conduct further proceedings in Kaula Lumpur. It was rejected and this was the stage that the respondent filed a petition under Section 9 of the Arbitration Act, 1996 before the Delhi High Court for a direction to be issued to the Arbitral Tribunal to conduct further proceedings at Kaula Lumpur. Learned single Judge of the Delhi High Court held that it has the authority to entertain the petition filed under section 9 of the Arbitration Act, 1996 on the basis of decision of Bhatia International [supra]. That upon challenge to the above decision, the Apex Court considered both, Bhatia International [supra] and Venture Global Engineering [supra], but concluded by relying on clause that the parties had agreed that the arbitration agreement was to be governed by law of England and it implies that the parties had agreed to exclude provisions of Part-I of the Act.
13.9 In the case of Coal India Ltd. v. Canadian Commercial Corporation [AIR 2012 Calcutta 92], learned Single Judge of the Calcutta High Court while dealing with a challenge to the award under section 48 of the Arbitration Act, 1996 where simultaneously provisions of section 34 of the Arbitration Act, 1996 was invoked and the petitioner prayed to quash and set aside award in which the place of arbitration was outside India and despite that the respondent not having attempted to implement it, the learned Single Judge considered the relevant provisions of the Arbitration Act, 1996 and case law in the context of `foreign award' within the meaning of section 44 of the Arbitration Act, 1996 and distinguishable feature under section 8 and Section 45 of the Arbitration Act, 1996, in paras 98, 99, 114 to 118, held as under:
“98. Thus, an award rendered in a foreign country and which may even be a "foreign award" within the meaning of Section 44 of the 1996 Act, can still be a domestic award and amenable to annulment proceedings under Indian law in this country if such award has been made, pursuant to an agreement between the parties, under the law of India. If such an award is not subjected to any annulment proceedings in India, there might be a question as to whether its enforcement in India would be under Chapter I of Part II of the 1996 Act. If such award is sought to be annulled - with Section 34 being the only applicable provision - and the attempt fails, no question would arise of the award being subjected to Chapter I of Part II of the 1996 Act since the issue as to the enforceability of such award would already have been decided and the award- holder can proceed to have it executed in this country as a deemed decree that is recognized by Section 36 of the 1996 Act. Even if such an award is not subjected to any annulment proceedings in India, upon the time for making an application to set aside such award under Section 34 of the Act expiring, the award would ripen to be executed under the Code of Civil Procedure in the same manner as if it were a decree of the court under Section 36 of the Act. At the post- award stage, therefore, and in keeping with several judicial pronouncements noticed above, Part I and Part II of the 1996 Act will not overlap nor be seen to be alternative routes available in respect of the same award.
99. It is next to be considered as to when a New York Convention award will be regarded as a domestic award. Since the emphasis of the New York Convention is on the recognition and enforcement of certain awards in international commercial arbitration, as to whether an arbitration, or any matter relating thereto, would be governed by Chapter I of Part II of the 1996 Act is seen from the perspective of whether the award that may be rendered in the arbitration can be regarded as a New York Convention award. The matter can be appreciated with reference to Section 45 of the 1996 Act. Such section, which echoes the sentiment in Section 8 of the Act and can be loosely said to be a provision available to a party to an arbitration agreement to specifically enforce the arbitration agreement against another party thereto before a judicial authority in seisin of an action covered by the arbitration agreement, will necessarily come into play prior to any award being made and, more often than not, prior to a reference to arbitration. The juridical authority under Section 45 of the Act has first to consider whether it is "seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44" of the Act. Section 44 of the Act does not define any agreement, it defines a foreign award; and, in such context, says that, subject to certain other conditions which are irrelevant to be noticed at the moment, an award within such definition would be a foreign award if it is made "in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies ..." The international charter that is christened as the New York Convention, in its full form, is the "Convention on the recognition and enforcement of foreign arbitral awards." Article I of the convention which specifies when the convention would apply, refers only to arbitral awards and the expression, 'arbitral award' is not defined in the convention save for the indication in Article I(2) that arbitral awards shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted. The "agreement in writing" that Section 44 of the 1996 Act refers to, appears not only to be a pointer to Article II of the convention but also to such an agreement in writing that may result in the rendition of an award that would be governed by the New York Convention. The judicial authority under Section 45 of the Act has, therefore, to calculate backwards after gazing into the future as to whether an award in the arbitration covering the disputes that form the subject-matter of the action before the judicial authority will be an award governed by the New York Convention. It is the very wording of the New York Convention, that was inspired to make it acceptable to a larger number of countries with disparate legal systems, that makes the exercise of the jurisdiction by a judicial authority under Section 45 of the Act to be qualitatively different from the jurisdiction exercised by a judicial authority under Section 8 of the 1996 Act which has only to see if there is an arbitration agreement and whether such agreement covers the action that is before such judicial authority.
114. In common law countries, the annulment of an award is generally granted for want of jurisdiction and serious irregularity. But the approach to annulment proceedings may vary from one country to another and in the New York Convention permitting a choice, there could be a serious risk of the parties to an award rushing to the competent authority in the more preferred jurisdiction to file - sometimes, even contrived - annulment proceedings and hope for the universal principle of comity of courts to guide the competent authority of the alternative jurisdiction to exercise self-restraint. It is in such context that commentators and courts in some countries have reasoned that an action to set aside an award can only be brought in the country of origin of the award.
115. Finally, a decision though rendered on facts and on the appreciation of the law applicable to the facts, ought to be rooted to a principle. Almost every judicial, or judicious, principle that is relevant in this country has to be traceable to the Constitution of India since it is ultimately under that charter that courts function. The Constitution instructs - nay, commands - that a judicial decision treads lightly on matters of policy save to help realise the aspirations of the people by nudging those responsible for policy-making in fulfilling the constitutional goals. The case at hand, after all, is a commercial matter; and in such arena the judiciary has to yield, under the constitutional scheme, to the wisdom of the executive and the sagacity of the legislature. If the executive has thought it fit that the New York Convention should be embraced and the legislature has fashioned a statute that upholds India's adoption of the New York Convention, it would be a misplaced sense of justice to discover some obscure principle to found a judgment that would be opposed to the stated policy; even if it is to shield or aid an arm of the State that is the petitioner in the present proceedings. The New York Convention is based on reciprocity which demands that adopting States and the authorities therein are guided by certain rudimentary norms that would meet universal acceptability. If courts in other jurisdictions have veered around to accepting that there is a distinction between the law of the arbitration agreement and the law of the arbitration, and there is nothing in Indian law that militates against such view, such distinction is eminently qualified to be endorsed in this country as it is only a logical extension of conferring full meaning to the juridical seat of arbitration when the concept of the juridical seat of arbitration has been accepted by the Supreme Court. Indeed, the distinction and its implication resonate through the judgment in Yograj Infrastructure Limited, though there are sundry other internal supports therefor linked to the facts of that case; and the concept appears to be the plinth on which the opinion in National Agricultural Coop. Marketing Federation was constructed.
116. A note of caution is called for. A slavish acceptance of Western views and judgments should be guarded against, for false paradigms abound in economics models when Western approaches are aped without reference to the geography of another place or the history of its environs. That the judgments in NTPC and Sumitomo have met with Western academic criticism and have been bracketed with so-called "parochial" opinions of Pakistani and Indonesian courts, would count for very little - and none at all to any judge or any bench of judges of any High Court - if such judgments continue to hold the field, for they would be binding on all courts in the country. But the judgments in NTPC and Sumitomo were rendered in an another age and under a different dispensation when the legislative policy was otherwise than is evident now upon Section 9(b) of the 1961 Act, and the effect of it when read in conjunction with Section 47 of the 1940 Act, not being retained in the 1996 Act.
117. There must also be a degree of fairness in respecting a foreign party's understanding of the legal position that should be upon India having embraced the New York Convention. If the shoe were to be on the other foot it would begin to pinch as Indian companies in increasing numbers venture out to do business elsewhere.
118. Notwithstanding the law of the matrix contract in this case being governed by the laws of India and despite the arbitration agreement appearing to be governed, in the absence of any contrary indication, by the governing law clause in the matrix contract, the arbitration does not appear to have been governed thereby. The law of the arbitration, as distinct from the law of the arbitration agreement, would then have been the law of the country where the arbitration was agreed to take place. The award that was rendered in the arbitration was then not subject to Indian law and any annulment proceedings in respect thereof could only have been made in the country that was the juridical seat of the arbitration”.
13.10 The relevant provisions of the Arbitration and Conciliation Act, 1996 for the sake of convenience are reproduced herein below:
“PART-I
2. Definitions.- (1) In this Part, unless the context
otherwise requires,-
(a) “arbitration” means any arbitration whether or not administered by permanent arbitral institution;
(b) “arbitration agreement” means an agreement referred to in section 7;
(c) “arbitral award” includes an interim award;
(d) “arbitral tribunal” means a sole arbitrator or a panel of arbitrators;
(e) “Court” means 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 civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes;
(f) “international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is-
(i) an individual who is a national of, or habitually resident in, any country other than India; or
(ii) a body corporate which is incorporated in any country other than India; or
(iii) a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or
(iv) the Government of a foreign country;
5. Extent of judicial intervention.- Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.
7. Arbitration agreement.-
(1) In this Part, arbitration agreement means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in-
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.
8. Power to refer parties to arbitration where there is an arbitration agreement.-
(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when 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.
9. Interim measures etc. by Court.- A party may, before, or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court-
(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure or protection in respect of any of the following matters, namely:-
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party or authorizing any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to be just and convenient, and 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.
16. Competence of arbitral tribunal to rule on its jurisdiction.- (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,-
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed , or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall he raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3), admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34.
28. Rules applicable to substance of dispute.- (1) Where the place of arbitration is situate in India,-
(a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;
(b) in international commercial arbitration,-
(i) the arbitral tribunal shall decided the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute;
(ii) any designation by the parties of the law or legal system of a given country shall be construed, unless otherwise expressed, as directly referring to the substantive law of that country and not to its conflict of laws rules;
(iii) failing any designation of the law under clause (a) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute.
(2) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it to do so.
(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.
PART-II
44. Definition.- In this Chapter, unless the context otherwise requires, foreign award means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960-
(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and
(b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.
45. 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”.
13.11 Clause 18 of the Innovene Polypropylene Process Licence Agreement, reads as under:
“18. APPLICABLE LAW AND ARBITRATION
18.1 This AGREEMENT is construed and shall be governed in accordance with the laws of India without giving effect to any principle of conflict of law.
18.2 Any dispute, controversy or claim which may arise out of or in connection with this AGREEMENT, or the negotiation, interpretation, validity, breach or termination of this AGREEMENT, and that the Parties fail to settle amicably within ninety (90) days after delivery by a Party of a notice to the other confirming the existence of such dispute, controversy or claim, shall be finally and exclusively settled by arbitration. The Parties hereby exclude and waive any jurisdiction or venue defence otherwise available to them.
18.3 The arbitration proceedings shall be conducted by three (3) arbitrators in accordance with the UNCITRAL Arbitration Rules as in force at the start of the arbitration proceedings. The appointed authority shall be the International Chamber of Commerce in Singapore (“ICC”) acting in accordance with the procedures set forth by ICC for that purpose and in force at that time. The place of the arbitration shall be Singapore. The language of arbitration shall be English. The cost and expenses of the arbitration shall be borne equally by the Parties to the Dispute and each Party shall pay its own fees, disbursements and other charges of its counsel and arbitrators nominated by it, except as may be otherwise determined by the tribunal. The tribunal would have the power to award interest on any sum awarded pursuant to the arbitration proceedings and such sum would carry interest, if awarded, until the actual payment of such amounts.
18.4 Nothing shall preclude either Party from seeking interim and permanent equitable or injunctive relief, or both, from any court having jurisdiction to grant the same. The pursuit of equitable or injunctive relief shall not be a waiver of the right of the Parties to pursue any remedy for monetary damages through the arbitration described in this Clause 18.
18.5 Notwithstanding and without prejudice to the provisions of Article 18.2 and 18.3 either Party may apply to any court of competent jurisdiction to enforce their respective rights under this AGREEMENT to request injunctions or other measures of specific performance;”
13.12 Thus, submissions made by learned senior counsels for the parties based on decisions of the case law of the Apex Court relied in support of their submissions in the factual matrix of the case are exclusively dealt with and reproduced in earlier paragraphs of this judgment. However, as regards one of the basic contentions raised by learned counsel for the respondent about entertaining this petition under Article 227 of the Constitution of India, it is necessary to scan facts of the case; basic pleadings available with amended plaint submitted along with affidavit filed by respondent No.1; three agreements containing various clauses, including law governing arbitration; notice of arbitration and reply submitted thereto; consent of EOL for consolidated arbitration; suggesting name of the a Former Judge of the Supreme Court of India; denying the liability towards the claim in arbitration with objections raised; procedural orders passed by the Arbitral Tribunal; nature of agreements; legal character and status of three petitioners, which are the companies incorporated outside the territory of India; jurisdiction of Civil Court, Khambhalia under section 9 of the CPC and restrictions imposed about extent of jurisdiction of judicial authority in the matter of arbitration and very limited intervention to the extent manner in which it is provided in Part-I of the Arbitration Act, notwithstanding anything contained in any law time being in force, which includes CPC and further case laws governing subject of intervention of civil court in the matter of arbitration governed under Arbitration Act, 1996; more importantly the signatories of agreements including arbitration are not residing within the territory of India and issue is about international commercial arbitration where a seat/place of arbitration is outside India and the manner in which jurisdiction of civil court is invoked and jurisdiction exercised thereto can be gone into in peculiar facts and circumstances of the case in exercise of powers under Article 227 of the Constitution of India. In view of the above, the decisions of the Apex Court in the case of Surya Dev Rai [supra] and Shalini Shyam Shetty [supra] are guiding force.
13.13 The Apex Court in the above two cases considered nature of proceedings and powers of High Court under Article 226/227 of the Constitution of India and distinguished relevant nature, scope, ambit, application and evaluation between two articles and operation of area. In the decision of Shalini Shyam Shetty [supra], decision of Surya Dev Rai [supra] was relied on. It was held by the Apex Court that a writ of Certiorari is maintainable against the order of a civil Court, subordinate to the High Court (para 19, page 668 of the report) and the correctness of that ratio was doubted by another Division Bench of the Apex Court in Radhey Shyam and another vs. Chhabi Nath and others [(2009) 5 SCC 616] and a request made to the Hon'ble Chief Justice for a reference to a larger Bench is pending. But in so far as the formation of the principles on the scope of interference by the High Court under Article 227 is concerned, there is no divergence of views and in paras 44 and 45 of the above decision, the principles laid down by the Apex Court in paras 38.4 and 38.5 referring to sub-paras [5], [7] and [8] of para 38 in the case of Surya Dev Rai [supra] are reproduced. Further reference was made to other decisions of the Apex Court of Umaji Keshao Meshram v. Radhikabai [1986 Supp. SCC 401] and State of U.P. v. Dr. Vijay Anand Maharaj [AIR 1963 SC 946] and further reference was made to the decision in the case of Hari Vishnu Kamath v. Ahmad Ishaque [AIR 1955 SC 233]. Thereafter, in paras 48 and 49, the Apex Court held as under:
“48. The jurisdiction under Article 226 normally is exercised where a party is affected but power under Article 227 can be exercised by the High Court suo motu as a custodian of justice. In fact, the power under Article
226 is exercised in favour of persons or citizens for vindication of their fundamental rights or other statutory rights. Jurisdiction under Article 227 is exercised by the High Court for vindication of its position as the highest judicial authority in the State. In certain cases where there is infringement of fundamental right, the relief under Article 226 of the Constitution can be claimed ex-debito justicia or as a matter of right. But in cases where the High Court exercises its jurisdiction under Article 227, such exercise is entirely discretionary and no person can claim it as a matter of right. From an order of a Single Judge passed under Article 226, a Letters Patent Appeal or an intra Court Appeal is maintainable. But no such appeal is maintainable from an order passed by a Single Judge of a High Court in exercise of power under Article 227. In almost all High Courts, rules have been framed for regulating the exercise of jurisdiction under Article 226. No such rule appears to have been framed for exercise of High Court's power under Article 227 possibly to keep such exercise entirely in the domain of the discretion of High Court.
49. On an analysis of the aforesaid decisions of this Court, the following principles on the exercise of High Court's jurisdiction under Article 227 of the Constitution may be formulated:
(a) A petition under Article 226 of the Constitution is different from a petition under Article 227. The mode of exercise of power by High Court under these two Articles is also different.
(b) In any event, a petition under Article 227 cannot be called a writ petition. The history of the conferment of writ jurisdiction on High Courts is substantially different from the history of conferment of the power of Superintendence on the High Courts under Article 227 and have been discussed above.
(c) High Courts cannot, on the drop of a hat, in exercise of its power of superintendence under Article 227 of the Constitution, interfere with the orders of tribunals or Courts inferior to it. Nor can it, in exercise of this power, act as a Court of appeal over the orders of Court or tribunal subordinate to it. In cases where an alternative statutory mode of redressal has been provided, that would also operate as a restrain on the exercise of this power by the High Court.
(d) The parameters of interference by High Courts in exercise of its power of superintendence have been repeatedly laid down by this Court. In this regard the High Court must be guided by the principles laid down by the Constitution Bench of this Court in Waryam Singh (supra) and the principles in Waryam Singh (supra) have been repeatedly followed by subsequent Constitution Benches and various other decisions of this Court.
(e) According to the ratio in Waryam Singh (supra), followed in subsequent cases, the High Court in exercise of its jurisdiction of superintendence can interfere in order only to keep the tribunals and Courts subordinate to it, `within the bounds of their authority'.
(f) In order to ensure that law is followed by such tribunals and Courts by exercising jurisdiction which is vested in them and by not declining to exercise the jurisdiction which is vested in them.
(g) Apart from the situations pointed in (e) and (f), High Court can interfere in exercise of its power of superintendence when there has been a patent perversity in the orders of tribunals and Courts subordinate to it or where there has been a gross and manifest failure of justice or the basic principles of natural justice have been flouted.
(h) In exercise of its power of superintendence High Court cannot interfere to correct mere errors of law or fact or just because another view than the one taken by the tribunals or Courts subordinate to it, is a possible view. In other words the jurisdiction has to be very sparingly exercised.
(i) High Court's power of superintendence under Article
227 cannot be curtailed by any statute. It has been declared a part of the basic structure of the Constitution by the Constitution Bench of this Court in the case of L. Chandra Kumar v. Union of India [(1997)3 SCC 261] and therefore abridgement by a Constitutional amendment is also very doubtful.
(j) It may be true that a statutory amendment of a rather cognate provision, like Section 115 of the Civil Procedure Code by the Civil Procedure Code (Amendment) Act, 1999 does not and cannot cut down the ambit of High Court's power under Article 227. At the same time, it must be remembered that such statutory amendment does not correspondingly expand the High Court's jurisdiction of superintendence under Article 227.
(k) The power is discretionary and has to be exercised on equitable principle. In an appropriate case, the power can be exercised suo motu.
(l) On a proper appreciation of the wide and unfettered power of the High Court under Article 227, it transpires that the main object of this Article is to keep strict administrative and judicial control by the High Court on the administration of justice within its territory.
(m) The object of superintendence, both administrative and judicial, is to maintain efficiency, smooth and orderly functioning of the entire machinery of justice in such a way as it does not bring it into any disrepute. The power of interference under this Article is to be kept to the minimum to ensure that the wheel of justice does not come to a halt and the fountain of justice remains pure and unpolluted in order to maintain public confidence in the functioning of the tribunals and Courts subordinate to High Court.
(n) This reserve and exceptional power of judicial intervention is not to be exercised just for grant of relief in individual cases but should be directed for promotion of public confidence in the administration of justice in the larger public interest whereas Article 226 is meant for protection of individual grievance. Therefore, the power under Article 227 may be unfettered but its exercise is subject to high degree of judicial discipline pointed out above. (o) An improper and a frequent exercise of this power will be counter-productive and will divest this extraordinary power of its strength and vitality.”
13.14 Thus, it is true that powers under Article 227 of the Constitution are to be exercised sparingly with due care, caution and circumspection and to be refused when alternative remedy is available. But, at the same time, it is the bounden duty of the High Court, exercising powers under Article 227 of the Constitution of India, to keep subordinate courts within bounds of jurisdiction so that rule of law is maintained. When a civil court has assumed such jurisdiction even though no jurisdiction is available with it vis-à-vis cause of action, such jurisdiction is assumed which it does not have or even in a case when subordinate court has over-stepped the jurisdiction, to prevent a grave injustice to the party, powers have to be exercised under Article 227 of the Constitution of India. The following glaring facts in a matter of international commercial arbitration, though no territorial and/or inherent jurisdiction was available to Civil Court, Khambhalia, the powers are exercised by it and even stay is granted staying further proceedings before Arbitral Tribunal seized under the Singapore International Arbitration Act in Singapore qua EOL on the ground that EOL was not signatory to the agreements and is not to be subjected to arbitral proceedings.
13.15 For invoking jurisdiction of Civil Court, Khambhalia the plaintiff has basically invoked clauses of the agreement signed by parties out of the State of Gujarat about applicable law and arbitration and other clauses, including the basis of alleged breaches of three licence agreements by respondent No.2-EGPL in the arbitration proceedings though respondent No.1-EOL is not a party to such agreements. The following paragraph Nos. 12 and 13 pertaining to jurisdiction and cause of action are reproduced herein in a suit for declaration and consequential relief of permanent injunction instituted by the plaintiff / respondent No.1-EOL:
“12. JURISDICTION:
The registered office of the Plaintiff is situated within the territorial jurisdiction of this Hon'ble Court. The Defendant No.1 to 3 are seeking to compel the Plaintiff into an arbitration to which it is not a party at all by causing its Statement of Claim against the Plaintiff and the effect of which is causing injury to the Plaintiff at its registered office and is likely to cause further injury to the Plaintiff. Hence, this Hon'ble Court has the territorial jurisdiction to try this suit. This Hon'ble Court also has the pecuniary jurisdiction to try the suit as the subject matter of the suit is valued at Rs.300/-.
The Plaintiff submits that the cause of action for filing the present suit has arisen within the territorial jurisdiction of this Hon'ble Court as the Defendant Nos.1 to 3 are seeking to make the plaintiff a party to the arbitration proceedings on the basis of alleged breaches of the PP, PE S and PE G License Agreements by Defendant No.4 Clause 1.17 of each of the License Agreements defines “Plant” to mean the plant to be built by Defendant No.4 at Vadinar, Gujarat. Even the draft agreements exchanged between the Defendant No.3 and Essar Chemicals Ltd reveals that the Plant was to be constructed within the territorial jurisdiction of this Court at Vadinar, Gujarat. The Defendant Nos.1 to 3 in the Statement of plaint was to come up in Vadinar. Thus the contract was to be substantially performed within the jurisdiction of this Hon'ble Court. The Defendant Nos.1 to 3 are seeking to wrongfully make the Plaintiff a party to the disputes which have arisen substantially within the territorial jurisdiction of this Hon'ble Court between Defendant Nos.1 to 3 and Defendant No.4 which would impact the functioning of the Plaintiff.
(Made this amendment as per order pass below Ex.23)
13. CAUSE OF ACTION:
The cause of action for filing the suit originally arose when the Defendant Nos.1, 2 and 3 wrongfully, illegally and tortuously purported to include the Plaintiff in its notice invoking arbitration. The Plaintiff believed that once the Plaintiff had objected to bring included as it was not a party to any of the arbitration agreements, which it did by reply dated 19 September 2011, the said Defendants should have reconsidered the position at the time of filing their Statement of Claim and not pursued any claim against the Plaintiff herein. If the said Defendants had rightfully followed the said course of action, the Plaintiff would have not been required to file any application for its discharge from the proceedings or to file the present suit. However, the Defendant Nos.1, 2 and 3 continued with their wrongful and tortuous the Plaintiff to be put to unnecessary harassment in facing the arbitration proceedings in a foreign land without the Plaintiff being a party to any arbitration agreement and thereby causing irreparable loss and injury by maintaining its purported arbitration proceedings against the Plaintiff instead of dropping the Plaintiff from the array of parties. The cause of action further arose on 30 March 2012 when the Defendant Nos.1, 2 & 3 wrongfully objected to the determination of the Plaintiff's application for discharge being decided on a preliminary basis and thereby causing the Arbitral Tribunal to pass procedural order No.1 dated 11 April 2012”.
13.16 Thus, it Is clear that to invoke territorial jurisdiction of the Civil Court, Khambhalia, the plaintiff respondent No.1-EOL has placed reliance on the clauses of the agreement along with registered companies of the plaintiff situated within the territorial jurisdiction of the civil court and as per the agreements plant was to be constructed within the territorial jurisdiction of the civil court at Vadinar, Gujarat and for cause of action, it is pleaded that the defendant Nos.1, 2 and 3 – petitioners wrongly, illegally and tortuously purported to include plaintiff / respondent No.1 in its notice involving arbitration and in spite of objections having been raised by the plaintiff it was subjected to the arbitral proceedings and further it was pleaded that cause of action further arose when the defendant Nos.1, 2 and 3 / petitioners wrongly objected to the determination of the plaintiff’s application for discharge being decided and causing Arbitral Tribunal to pass procedural order No.I on 11.04.2012.
13.17 The above pleadings qua jurisdiction and cause of action are considered in light of section 9 of CPC, wherein it is provided that the courts are empowered to try all civil suits unless barred. Section 5 of Arbitration Act, 1996 provides extent of judicial intervention by any judicial authority and thus notwithstanding anything contained in any law for the time being in force, no judicial authority shall intervene in matters governed by Part-I of the Act except so provided in part-I. Therefore, limited intervention of judicial authority which includes civil court is available in matters governed by part-I and so provided therein. Barring the above, no intervention of civil court in matters of Arbitration Act, 1996 is permissible. The plaintiff has invoked jurisdiction of civil court at Khambhalia on the basis of agreements to which it is not a party and that no arbitration proceedings could have been initiated in absence of arbitration agreement as defined in section 7 of the Act. Thus, agreements form basis for opposing arbitral proceedings before Arbitral Tribunal and also for invoking inherent jurisdiction of the civil court. The plaintiff having agreed for consolidation of arbitration as per reply to the notice on 19.09.2011 nominated Former Judge of Supreme Court of India and further submitted and agreed to time table for arbitral proceedings, submitted an application dated 26.03.2012 before the Arbitral Tribunal seeking its discharge from array of parties. The said application was considered by the Arbitral Tribunal on which procedural order-I was passed on 11.04.2012 by which decision on the jurisdiction of the Arbitral Tribunal over EOL was deferred till actual final award is rendered on two reasons viz. that the parties submitted a joint draft procedural time table without any reference to the need for a preliminary challenge of jurisdiction for EOL which was provided four months prior to the filing of application and that it was advisable to consider the evidence on the application of EOL under Article 23 of the UNCITRAL Rules, 2010 together with merits at the substantive hearing. Even later on another procedural order was passed on 13.04.2012 with consent of all the parties and at this stage a suit was instituted at Civil Court, Khambhalia on the ground that registered office of EOL is within the jurisdiction of Civil Court, Khambhalia and that three agreements of licences referred to installation of plant etc. at Vadinar in the state of Gujarat within the territorial jurisdiction of Civil Court, Khambhalia could not form any cause of action in the context of subject matter of arbitration, which was pending before the Arbitral Tribunal having seat at Singapore governed by Singapore International Arbitration Act. Besides, defendant Nos.1 to 3 / petitioners herein are companies incorporated outside India and barred by section 20 of CPC as none of the contesting defendants actually and voluntarily reside and carry on business or personally works for gain or that the cause of action wholly or in part arises within the local limits of jurisdiction of Civil Court, Khambhalia where the suit would be instituted. That likelihood of installation of plant and machinery at Vadinar, Gujarat as per the agreements to which, admittedly, the plaintiff was not a party could not have attracted any jurisdiction of Civil Court, Khambhalia and further when the plaintiff is not a signatory nor in any manner concerned as per say of the plaintiff to such agreements enforcement of the agreement qua the claim, which is subject matter of arbitral proceedings would not have attracted the jurisdiction of civil court. That no cause of action has arisen for which jurisdiction of the Civil Court, Khambhalia could have been invoked as entire pleadings reveal absence of cause of action attracting jurisdiction of civil court.
13.18 The above view is supported by law laid down by the Apex Court in the case of Adani Exports [supra], wherein in paras 17 and 18, it is held as under:
“17. It is seen from the above that in order to confer jurisdiction on a High Court to entertain a writ petition or a special civil application as in this case, the High Court must be satisfied from the entire facts pleaded in support of the cause of action that those facts do constitute a cause so as to empower the court to decide a dispute which has, at least in-part, arisen within its jurisdiction. It is clear from the above judgment that each and every fact pleaded by the respondents in their application does not ipso facto lead to the conclusion that those facts give rise to a cause of action within the courts territorial jurisdiction unless those facts pleaded are such which have a nexus or relevance with the lis that is involved in the case. Facts which have no bearing with the lis or the dispute involved in the case, do not give rise to a cause of action so as to confer territorial jurisdiction on the court concerned. If we apply this principle then we see that none of the facts pleaded in Paragraph 16 of the petition, in our opinion, fall into the category of bundle of facts which would constitute a cause of action giving rise to a dispute which could confer territorial jurisdiction on the courts at Ahmedabad.
[emphasis supplied] 18. As we have noticed earlier, the fact that the respondents are carrying on the business of export and import or that they are receiving the export and import orders at Ahmedabad or that their documents and payments for exports and imports are sent/made at Ahmedabad, has no connection whatsoever with the dispute that is involved in the applications. Similarly, the fact that the credit of duty claimed in respect of exports that were made from Chennai were handled by the respondents from Ahmedabad have also no connection whatsoever with the actions of the appellants impugned in the application. The non-granting and denial of credit in the pass-book having an ultimate effect, if any, on the business of the respondents at Ahmedabad would not also, in our opinion, give rise to any such cause of action to a court at Ahmedabad to adjudicate on the actions complained against the appellants”.
13.19 Thus, in spite of respondents having business of export and import from Ahmedabad, orders of export import were placed from and executed at Ahmedabad, documents and payments for export and import were made at Ahmedabad and even the credit of duty claimed in respect of exports were handled from Ahmedabad, and contention about non-granting of denial of utilization of the credit in the pass-book issued by authority at Chennai will affect the business of the respondents at Ahmedabad and that bank guarantee was executed through the bankers at Ahmedabad, the Apex Court found no cause of action has arisen within the jurisdiction of High Court of Gujarat and judgment of High Court of Gujarat to entertain the civil application filed by the respondent and granting relief was quashed and set aside.
13.20 In the case of Rajasthan High Court Advocates’ Association [supra] relied by the learned counsel for the respondents with regard to cause of action, the Apex Court has reiterated the law in the case of U.P. Rashtriya Chini Mill Adhikari Parishad v. State of U.P. [(1995)4 SCC 738] that in a restricted sense `cause of action’ means the circumstances forming the infraction of the right or the immediate occasion for the action and in a wider sense, it means the necessary conditions for the maintenance of the suit, including not only infraction of the right, but the infraction coupled with the right itself. Compendiously the expression means every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court. Every fact which is necessary to be proved, as distinguished from every piece of evidence which is necessary to prove each fact, comprises in `cause of action’. It has to be left to be determined in each individual case as to where the cause of action arises. Thus, law laid down as above has to be considered in facts of the present case. As discussed in earlier paragraphs and the plaintiff according to its own assertion that it was neither a party to the contract and/or arbitration agreement and likelihood of installation of plant and machinery pursuant to licence agreements at Vadinar and that plaintiff had registered office within the jurisdiction of Civil Court neither form any cause of action nor any right was infringed of the plaintiff so as to attract the jurisdiction of Civil Court.
13.21 In the case of Alchemist Ltd. [supra] in the context of cause of action, Apex Court reiterated by emphasizing that one has to consider whether facts averred by the plaintiff would constitute a material, essential, or integral part of the cause of action, and therefore, fact or even part of the fact, which is neither material nor essential nor integral part of the cause action would not constitute part of the cause of action within meaning of clause 2, of Article 226 of the Constitution of India. If the above law is applied in which the Apex Court has also considered Adani Export Ltd. [supra] and the pleadings, including amended plaint as discussed earlier, viz. registered office of EOL, plaint to be installed at Vadinar etc., the plaintiff has no cause of action much less material, integral or essential arising within the jurisdiction of Civil Court, Khambhalia.
13.22 That entertaining the suit and granting relief on application for injunction the Civil Court, Khambhalia has overlooked the provisions of section 16 of the Arbitration Act, which provide for competence of Arbitral Tribunal to rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement. The contentions about EOL, whether signatory to agreements and/or liable to claim amount of arbitration to which Arbitral Tribunal at Singapore is seized with and two procedural orders are already passed that very objection is to be considered at the time of hearing of evidence on merit and the whole procedure is governed by UNCITRAL Rules, 2010 and Singapore International Arbitration Act, as the present case is governed by the law as laid down in the decisions of Bhatia International [supra] and Venture Global Engineering [supra] i.e. the case law applicable prior to Bharat Aluminium [supra]. The agreements of year 2008 entered into between the petitioners and EGPL admittedly signatories and party and privy to the contract, including the arbitration agreement and objection of EOL about no claim liability is to be examined by the Arbitral Tribunal in the context of contentions raised by the petitioners based on negotiations, understanding, representations by officers / directors of EOL prior to agreement and EOL being third party beneficiary and lifting corporate veil that EOL and EGPL are the same corporate entities. As the above issue of lifting corporate veil writ large before the Arbitral Tribunal it is not necessary by this Court to consider it while exercising powers under Article 227 of the Constitution of India.
13.23 That contention based on sections 44 and 45 of Part-II of the Arbitration Act and that of section 3 of erstwhile Foreign Awards [Recognition and Enforcement] Act, 1961 are of no help to the respondents after replacement of earlier Acts and coming into force of Act, 1996, staying of proceedings is not available in the new Act.
Section 45 in Part-II of the Arbitration Act, 1996 basically deals with proceedings of enforcement of award in India and does not deal with challenge to legality and validity of the arbitration award rendered outside India.
13.24 That as the Arbitration Act, 1996 is a special Act which sets out as self-contained code and the applicability of the general law procedure would be impliedely excluded is held in Fuerst Day Lawson Ltd. [supra]. Sections 44 and 45 are in Chapter-I of New York Convention Awards in Part-II pertaining to enforcement of certain foreign awards. Section 44 of the Arbitration Act, 1996 does not define any agreement. It defines a foreign award as per para 99 of the Coal India Ltd. [supra]. As per section 44, foreign award means, an arbitral award. Any difference between persons arising out of legal relation, whether contractual or not considered as commercial under the law in force in India, and in pursuance of an agreement in writing for arbitration to which convention set forth in the first schedule applies and the first schedule under section 44 is about convention on the recognition and enforcement of foreign arbitral awards Article-II clause-2 define `agreement in writing' which includes an arbitral clause in a contract or an an arbitration agreement signed by the parties or contained in exchange of letters or telegrams, which is pari-materia to section 7(4)(b) of Chapter-II pertaining to arbitration agreement in Part-I of the Arbitration Act, 1996. Thus, section 44 envisaged legal relationship between the persons whether contractual or not but considered as commercial under the law in force in India. Therefore, it may not be necessary to have the contractual relationship between the persons. It can be a legal relationship arising out of an agreement in writing for arbitration which may be by an exchange of letters, telegrams, telex messages or other such means of communication, which may provide record of the agreement. In the facts of this case, the arbitral tribunal is seized with the above aspect in arbitral proceedings at Singapore. Section 45 deals with the power of judicial authority to refer parties to arbitration irrespective anything contained in Part-I or in the CPC. When such judicial authority is seized of an action pertaining to a matter in respect of which the parties have made agreement, referred to in section 44, shall, upon a request of one of the parties, refer the parties to arbitration unless the judicial authority finds that the said agreement is null and void inoperative or incapable of being performed. That referral by judicial authority is mandatory provided conditions specified therein are fulfilled. Therefore, if the contention of learned counsel for the respondents is accepted to the extent that Part-I does not apply to international commercial arbitration held outside India, then also civil court will have no jurisdiction and if it applies to international commercial arbitration held outside India unless so excluded by parties by consent as held in Bhatia International [supra] Venture Global Engineering [supra] rigour of section 5 will apply including that of least and minimal interference provided in the section. If clause 18, and particularly, clauses 18.1 to 18.3 and 18.4 and 18.5 of the case on hand are read together, arbitration proceedings are governed by Singapore International Arbitration Act and rules based on UNCITRAL Model Law, which is akin to Yograj Infrastructure Limited [supra]. In the above context, following issues are pending before the Arbitral Tribunal at Singapore viz. whether any arbitration agreement does exist between EOL and petitioners; whether legal relationship between EOL and petitioners is contractual or not but commercial as recognized of law in India; whether negotiations, correspondence, representations, etc. by EOL with petitioners are forming the record pertaining to arbitration agreement; whether that EOL being third party beneficiary and having same corporate identity that of EGPL, the issue of lifting corporate veil to considered by arbitral Tribunal, Singapore. Thus, contention that no arbitration agreement in writing exist between EOL and petitioners has no merit and is hereby rejected.
13.25 That decision in the case of Dresser Rand S.A. [supra] relied by the learned senior counsel for the respondent will have no applicability on the facts of this case inasmuch as in the above case suit No.1363/93 was filed in Delhi High Court by Bindal Agro Chem Ltd. [respondent No.1 in appeal] and even interim application was filed under Order 39 Rules 1 & 2 of CPC seeking a temporary injunction to restrain Dresser Rand from proceedings with the arbitration. Dresser Rand has also filed interim applications under Section 3 of the Foreign Awards [Recognition and Enforcement] Act, 1961 for staying further proceedings in the said suit. Thus, the above proceedings were initiated prior to Arbitration Act, 1996. The Apex Court, however, relying on Section 7 of Arbitration Act, 1996 in the context of factual aspects therein including letters of Intent [LOI] issued by respondent to appellant consequent to respondents having agreed to modifications made to respondent general conditions of purchase as suggested by the appellant and said general conditions contained an arbitration clause, while construing LOI, the Apex Court noticed that general conditions containing arbitration clause were not made part of LOI nor LOI was made part of general conditions.
In view of the above, learned Single Judge and Division Bench of the High Court found that there was no arbitration agreement. In para 46, the Apex Court noted factual aspect as under:
“Thus, neither the General Conditions of Purchase forming part of Invitation of Bid nor Revision No.4 dated 10.6.1991, nor the Letters of Intent dated 12.6.1991 contain any arbitration agreement. There is also no other document or correspondence which can be read as containing a provision that can be interpreted as an agreement to resolve disputes by arbitration. We are, therefore, of the view, though for slightly different reasons, that the decision of the learned Single Judge and the Division Bench of the High Court holding that there is no arbitration agreement, does not suffer from any infirmity”.
13.26 In the facts of the present case, contentions are raised by the petitioners about existence of arbitration agreement based on communication in the form of email and other correspondence forming arbitration agreement and EOL agreed for consolidated arbitration and further participated by submitting agreed schedule, the decision rendered in Dresser Rand [supra] in the context and reference to section 33 of the Arbitration Act, there to apply with equal force in regard to section 3 of the Foreign Awards Act, therefore will have no application.
13.27 That decisions in the case of Deutsche Post Bank Home Finance Ltd. [supra] was a case where there were two different agreements viz. clause 7 of the agreement dated 21.02.2008 pertaining to agreement between the borrower and development to which appellant bank was not a party and clause 11 of the lease agreement dated 21.12.2006 between the borrower – first respondent and the appellant as a creditor arbitration agreement did exist, but the developer was not a party and in absence of any tripartite agreement, objection of appellant bank which was not considered in exercise of powers under Section 11 of the Arbitration Act, was over-ruled by the Apex Court. In the above decision, case of S.N.Prasad, Hitek Industries [Bihar] Ltd. v. Monnet Finance Limited [(2011)1 SCC 320] was relied on about guarantor is not liable for claim against borrower if he is not a party to the agreement.
13.28 That other decisions of Indowind Energy Limited [supra] again about proceedings under section 11 of the Arbitration Act, reveal that a contract can be entered into even orally and a contract can be spelt out from correspondence or conduct, but an arbitration agreement can come into existence only in the manner contemplated under section 7 of the Act. In the above case, the Apex Court found that it is fundamental that a provisions for arbitration to constitute and agreement for the purpose of section 7 should satisfy two conditions viz. it should be between the parties to the dispute and it should relate to or be applicable to the dispute. The Apex Court specifically noted that there was no exchange of statement of claim and defence in which it had alleged the existence of an arbitration agreement and the same had been accepted and not denied by Indowind in the defence statement and further it was also not the case of Wescare-respondent that any exchange of letters, telex, telegrams or other means of telecommunication referred to and provided a record of any arbitration agreement between the parties. In paras , 13 and 14 the Apex held as under:
“13. It is fundamental that a provision for arbitration to constitute an arbitration agreement for the purpose of section 7 should satisfy two conditions : (i) it should be between the parties to the dispute; and (ii) it should relate to or be applicable to the dispute. [See Yogi Agarwal v. Inspiration Clothes [(2009)1 SCC 372].
14. Wescare has not entered into any agreement with Indowind, referring to the agreement dated 24.2.2006 containing the arbitration agreement, with the intention of making such arbitration agreement, a part of their agreement. Nor is it the case of Wescare that there has been any exchange of statements of claim and defence in which it had alleged the existence of an arbitration agreement and the same had been accepted and not denied by Indowind in the defence statement. It is also not the case of Wescare that any exchange of letters, telex, telegrams or other means of telecommunication referred to and provided a record of any arbitration agreement between the parties. It therefore follows that neither sub-section (5) nor clauses (b) and (c) of sub-section (4) of section 7 applies. Therefore, what remains to be seen is whether there is any `document signed by parties', as provided in clause (a) of sub-section (4) of section 7.
[emphasis supplied]
13.29 In the facts of this case, it is specifically contended by the petitioners about voluminous record available prior to agreement entered in the form of letters, emails, etc. with EOL, and therefore, EOL is party to agreement that is the subject matter of proceedings before the Arbitral Tribunal and no further finding on the issue is necessary, at this stage in exercise of powers under Article 227 of the Constitution of India.
13.30 In the case of CDC Financial Services [Mauritius] Ltd. [supra] when High Court passed interim orders in writ petition filed by respondent BPL Communications Ltd. and thereby interfering with arbitration, the Apex Court in para 14 held that whatever may be the merits of writ application the High Court should have had regard to section 5 of the Arbitration Act, 1996 before granting reliefs it did. Under section 5 of the Arbitration Act, 1996, courts are restrained from interfering with arbitration except in the manner provided in the Arbitration Act, 1996.
13.31 In the case of Secur Industries Ltd. [supra] which arose from an interim order granted by the Division Bench of the High Court of Bombay staying arbitration proceedings, in view of section 16, 21 of the Arbitration Act,1996 and provisions of section 9 and order 30 rule 1 of the CPC in paras 10, 11, 12 and 14, the Apex Court held as under:
“10. Incorporation of the provisions of the 1996 Act into Section 6(2) of the Act has also been effected by sub- sections (4) and (5) of Section 2 of the 1996 Act which say:
2(4) This Part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder.
(5) Subject to the provisions of sub-section (4), and save in so far as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country or countries, this Part shall apply to all arbitrations and to all proceedings relating thereto".
(emphasis added)
11. The "Part" referred to in this sub-section is Part I of the 1996 Act which deals with domestic arbitrations. The proceedings before the Council, therefore, are proceedings under the 1996 Act, pursuant to a deemed agreement between the parties to the dispute. With the applicability of Part I of the 1996 Act in all its force, the extent of judicial intervention in arbitrations is limited by the non-obstante provisions of Section 5 of the 1996 Act, which stipulate:
“5. Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part". The City Civil Court was right in its approach when it said that the Court could only intervene in respect of matters expressly provided for in the 1996 Act. The validity of the proceedings before the Arbitral Tribunal is an issue which the Council, and not the Court, could decide under Section 16 of the 1996 Act. Sub- section (1) of Section 16 opens with the words " The Arbitral Tribunal may rule on its jurisdiction...". It has been held by this Court that the Arbitral Tribunal's authority under Section 16 is not confined to the width of its jurisdiction but goes to the very root of its jurisdiction. (Konkan Railways Corporation Ltd. V. Rani Construction Pvt. Ltd. 2002 (2) SCC 388). Therefore, the Council can go into the question whether its authority had been wrongly invoked by the appellant and it is open to it to hold that it had no jurisdiction to proceed with the matter.
12. The arguments which have been raised before us by the learned counsel on behalf of the respondent to a large extent related to the merits of the appellant's claim before the Council. Having regard to the scope of the authority of the Arbitral Tribunal under Section 16, this is not a matter which the Court can adjudicate upon. Indeed it is incumbent on the Court to refer the parties to arbitration under Section 8(1) of the 1996 Act if a suit is filed in a matter which is the subject matter of an arbitration agreement. Furthermore, even while this question is pending decision before a Court, the Arbitral Tribunal may proceed with the arbitration under Section 8(3) and make its award. The High Court could not, therefore, have stayed the proceedings before the Council.
14. This brings us to the ground on which the High Court stayed the proceedings before the Council, namely, the alleged failure of the appellant to serve notice under Section 21 of the 1996 Act. The point was not raised before the High Court at all by the respondent No. 1. This was candidly stated by the learned counsel for the respondent No. 1. Our attention was not drawn to any other legal proceeding which requires a notice to be given prior to commencing proceedings apart from Section 21 of the 1996 Act. Whether the notice was a notice under Section 21 and whether the giving of notice under Section 21 is to be construed as a pre-condition to the exercise of jurisdiction by the Council are questions which the Council will have to decide. This debate could not be a ground for the High Court interfering with the Council's jurisdiction and staying proceedings before it”.
13.32 That in Shree Subhlaxmi Fabrics Pvt. Ltd. [supra], the Apex Court in a dispute pertaining to jurisdiction of two different courts and refusal by trial court to try the suit on the ground of lack of territorial jurisdiction the interference by the High Court was not approved and in para 14 it was held that the consistent view taken by the Supreme Court is that contentious issues should not be gone into or decided at the stage of appointment of an arbitrator and no time should be wasted in such an exercise. The remedy of the aggrieved party is to raise an objection before the Arbitral Tribunal as under section 16 of the Arbitration Act, 1996, the Tribunal is empowered to rule about its own jurisdiction.
13.33 In the case of Alva Aluminium Ltd., Bangkok [supra], the Apex Court was considering a dispute about existence of arbitration agreement in exercise of powers under Section 11 of the Arbitration Act, 1996 by learned Chief Justice or his designate, as the case may be in the context of section 16 of the Arbitration Act, 1996. In para 18 of the said judgment, the Apex Court held that once the existence of the arbitration agreement itself is questioned by any party to the proceedings initiated under section 11 of the Arbitration Act, 1996, the same will have to be decided by the learned Chief Justice or his designate as the case may be because existence of arbitration agreement is a jurisdictional fact which will have to be addressed while making the order on petition under Section 11 of the Act. But as further held in para 19 that the position may be different where arbitration proceedings are initiated before a nominated Arbitral Tribunal but the opposite party appears to dispute the existence of the arbitration agreement and in such a situation, the Arbitral Tribunal can itself decide the issue in exercise of its powers under section 16(1) of the Arbitration Act, 1996.
13.34 In the decision of Bakshi Ram [supra] and Tata Industries Limited [supra] while considering the conduct of the litigant, who makes a complete volte face and takes a stand like `heads I win tails you lose', the courts of equity and justice cannot uphold such an unfair stand permitting such a party to a probate to his advantage, will be applicable in the facts of this case in view of stand taken by respondent-EOL submitting to jurisdiction of Arbitral Tribunal at Singapore based on a consent for consolidated arbitration by nominating Former Judge of the Supreme Court of India and two procedural orders passed therein by Arbitral Tribunal even recording consent and thereafter invokes the jurisdiction of Civil Court, Khambhalia, recourse is taken to agreements on the ground that registered office of EOL plant and machinery referred to in the licence agreement to be installed at Vadinar, District Jamnagar, Gujarat are within the territorial jurisdiction of Civil Court, Khambhalia and the very agreements were opposed before Arbitral Tribunal by EOL that it was not a signatory nor a privy to the agreement and was not liable to pay the claim. In short, defense of EOL before the Arbitral Tribunal is cause of action in the suit filed.
13.35 That ordinarily civil court has inherent jurisdiction under section 9 of the CPC unless barred expressly or impliedly. In the matter of arbitration governed by Arbitration Act, 1996 so far as Part-I of the Act is concerned, section 5 imposes restriction and the jurisdiction of any judicial authority, including the civil court and intervention in the matter governed by Part-I is circumscribed to the extent so provided in part-I for example under sections, 8, 9, 13(5), 14(2), 16(6), 27, 34, 39(2) and (4), 43(3), etc. That section5 of the Arbitration Act, 1996 is based on concept of `judicial minimalism' etc. and inherited from Article 5 of the UNICITRAL Model Law, and clause [v] of Objects and reasons of Arbitration Act, 1996.
13.36 Section 16 of Chapter-IV of part-I of the Arbitration Act, 1996 is about competence of Arbitral Tribunal to rule on its jurisdiction and the party which disputes and/or opposes or do not admit the jurisdiction of the Arbitral Tribunal can approach the very Arbitral Tribunal, who can rule on its own jurisdiction.
13.37 That interference in the matter of arbitration by civil court in exercise of jurisdiction under section 9 of the CPC particularly in the case of International Commercial Arbitration governed by Arbitration Act, 1996 is again circumscribed by decisions of the Apex in the case of CDC Financial Services [Mauritius] Ltd. [supra], Alva Aluminium Ltd., Bangkok [supra], Shree Subhlaxmi Fabrics Pvt. Ltd. [supra], Secur Industries Ltd. [supra].
13.38 That parameters of grant or otherwise of injunction viz. prima facie case, balance of convenience, undue hardship, irreparable loss that cannot be compensated in terms of money are not to be applied in mechanical manner,but civil court has to exercise great care, caution and circumscription in a case where international commercial arbitration is pending before the forum constituted and authorised to deal with subject under arbitration law and injunction prayed for against the arbitral proceedings either by a party to arbitration agreement or third party is to be viewed in the context of serious repercussions on pending arbitration along with other relevant materials. That subject matter, which is common before the Arbitral Tribunal and the civil court upon exercise of jurisdiction may not get entangled in procedural cobweb and lost in labyrinth of submissions made by learned counsels for parties when they are argumentatively at their best.
13.39 Thus, concept of least or minimal interference of civil court and exercise of their powers in the matter pertaining to and arising out of arbitration agreement and proceedings will be in consonance with object and reasons of enactment of Act, 1996 and particularly clause V of para 4 of statement object and reasons, which reads as under:
“[v] to minimise the supervisory role of courts in the arbitral process”;
The above object is echoed by the Apex Court in the case of Bharat Sewa Sansthan v. Uttar Pradesh Electronics Corporation Limited [AIR 2007 SC 2961]. The Apex Court considering the facts of that case thought it fit not to exercise powers under Article 142 of the Constitution of India. In para 22 the Apex Court held as under:
“22. ........The nature and ambit of the power of this Court under Article 142 of the Constitution of India, no doubt, is meant to do complete justice between the litigating parties, but at the same time this Court has to bear in mind that the power is conceived to meet the situations which cannot be effectively and appropriately tackled by the existing provisions of law. Human and equitable approach should be balanced to do complete justice to both the parties and not be tilted in favour of either party without ignoring the statutory provisions. This Court in exercise of its jurisdiction can grant appropriate relief where there is some manifest illegality, or where there is manifest want of jurisdiction, or where some palpable injustice is shown to have resulted to the parties.
Having said so, considering the main objectives of the Arbitration Act, 1996, in para 23 the Apex Court held as under:
23. ........ The main objectives of the Arbitration Act is to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration and to minimise the supervisory role of courts in the arbitral process and to permit an arbitral Tribunal to use mediation, conciliation or other procedures during the arbitral proceedings in settlement of disputes, etc. etc. This Court ordinarily will not be obliged to bypass the provisions of the Arbitration and Conciliation Act, 1996 in exercise of its power and jurisdiction under Article 142 of the Constitution of India”.
It is to be noted that the decision of the Constitution Bench in the case of Bharat Aluminium [supra] has a prospective effect i.e. the law laid down in the said judgment will be applicable from 06.09.2012, and therefore, applicable case law will be pre Bharat Aluminium Co. [supra] and decisions in the cases of Bhatia International [supra], Venture Global Engineering v. Satyam Computer Ltd [(2008)4 SCC 190], etc.
13.40 That reference made to commentary of learned authors of `Redfern and Hunter on International Arbitration', 5th Edition and particularly about parties to arbitration agreement and further 3rd parties to the arbitration agreement and the requirement of signed agreement in writing, in a given case does not altogether exclude the possibility of arbitration agreement concluded in proper form between two or more parties also binding other parties and concept of piercing the corporate veil within group of companies etc. and another book of International Commercial Arbitration and Chapter 9 of Volume 1 by learned author Gary Born about legal basis for binding non-signatories to international arbitration agreements on the basis of consensual theories viz. Agency, assumption, assignment and non- consensual theories for example estoppel, alter ego including the `group of companies Doctrine' guarantors, succession, subrogation, ratification, joint venture relations and directions could be issued are again in the domain of reference pending before the Arbitral Tribunal in seisin of the the subject matter and/or relevant issues as above are to be considered after hearing/leading evidence on merit and at this stage in exercise of jurisdiction under Article 227 of the Constitution of India and what is held about no cause of action and lack of jurisdiction by the civil court, no further discussion is necessary.
13.41 Therefore, the remedy of Order 43 rule 1, Order 7 rule 11 of the CPC is not to be availed of by the petitioners in view of lack of jurisdiction by Civil Court, Khambhalia in this particular case. The plaint does not disclose cause of action and that from the statement in the plaint, it is to be discerned that the suit is barred. Keeping in mind the paras 48 and 49 [d], [e], [g], [k], [l], [m] and [n] of Shalini Shyam Shetty [supra] with regard to exercise under Article 227 of the Constitution of India and even grounds and reasons for granting injunction application Exh.5 vide impugned order reveal clear non-application of mind by the civil court about absence of cause of action and lack of jurisdiction of the civil court. The action of Civil Court in assuming such jurisdiction contrary law by mere reference to contentions and noticing some provisions of the Arbitration Act, 1996 and applying principles of prima facie case, balance of convenience, hardship and irreparable loss that cannot be compensated in terms of money are de-void of any merit and the fact remains that in arbitration proceedings the plaintiff can be suitably compensated and cost can also be awarded, if the Arbitral Tribunal concludes that he is wrongfully arraigned in the arbitral proceedings. Further, the whole claim in arbitration is based on failure to comply with and/or breach of conditions of the agreement and either party can be suitably compensated in terms of money, and therefore also, no injunction could have been granted by applying principles of prima facie case, balance of convenience and irreparable loss that cannot be compensated in terms of money. Thus, considering the overall appreciation of the facts, as discussed above, it would be clear that the order impugned passed by the Civil Court, Khambhalia is without jurisdiction and is passed in absence of any cause of action.
13.42 As this Court has held that the Civil Court, Khambhalia has neither territorial nor any inherent jurisdiction in absence of any cause of action, the other contentions raised by the learned counsels for the parties are not to be gone in detail.
14. In view of th above, the Civil Court has exercised the jurisdiction not vested into it and has passed the impugned order by assuming the jurisdiction, and therefore, in exercise of powers under Article 227 of the Constitution of India, the order impugned dated 16 July 2012 passed by the Additional Senior Civil Judge, at Khambhalia, District Jamnagar passed below Exh.5 in Regular Civil Suit No. 16/2012, is hereby quashed and set aside.
Accordingly, this petition is allowed.
Rule is made absolute to the aforesaid extent. However, there shall be no order as to costs.
At this stage, Shri Mihir Thakor, learned Senior Counsel for the respondents makes a request to continue stay granted by the Civil Court, Khambhalia, which is in operation till today so as to enable the respondents to approach higher court, which is opposed by learned senior counsel for the petitioners. Considering the overall facts and circumstances of the case, the request of Shri Mihir Thakor, is rejected.
*pvv [Anant S. Dave, J.]