$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI + O.M.P.(I) 558/2015 Reserved on: 14th December 2016 Date of Decision: 28th February 2017 DEVAS MULTIMEDIA PRIVATE LIMITED Petitioner Through: Mr. [ENTITY], Senior Advocate with Mr. [ENTITY], Advocate. versus ANTRIX CORPORATION LIMITED Respondent Through: Mr. [ENTITY], Senior Advocate with Mr. [ENTITY] and Mr. [ENTITY], Advocates. CORAM: JUSTICE [ENTITY] JUDGMENT
% 28.02.2017 Introduction
1. [ENTITY] ([ENTITY]') has filed this petition against [ENTITY] Corporation Ltd. ([ENTITY]') under [SECTION] of the [ACT]) for directions to [ENTITY] to secure the amount awarded in favour of [ENTITY] by an Award of the Arbitral Tribunal (AT') dated 14th September, 2015 together with interest @ 18% per annum from the date of the Award till the date of full payment, by furnishing a Bank Guarantee (BG'), or attaching the bank accounts, receivables, other movable or immovable assets of [ENTITY].
2. On 9th October, 2015, [ENTITY] appeared on advance notice and raised a preliminary objection to the maintainability of the present petition. It was urged that this Court lacked territorial jurisdiction to entertain the present petition and that, in any event, no case for invocation of [SECTION] of the Act was made out.
3. On 19th January, 2016, notice was formally issued to the Respondent. The order passed on that day records that Mr. [ENTITY], learned Senior counsel for [ENTITY] besides other submissions, raised an objection about the maintainability of the petition. The order also noted that a petition had been filed by [ENTITY] under [SECTION] of the Act in the City Civil Court at Bangalore challenging the Award dated 14th September, 2015 of the AT.
4. At the hearing on 30th March, 2016, Mr. [ENTITY], learned Senior counsel appearing for [ENTITY] submitted that if the petition under [SECTION] of the Act and the petition under [SECTION] of the Act filed by [ENTITY] in the City Civil Court at Bangalore, which were pending prior to filing of the present petition, were transferred here along with the present petition, [ENTITY] would have no objection as to the issue of territorial jurisdiction or limitation. At the request of Mr. [ENTITY], who sought time to take instructions, the case was adjourned to 18th April, 2016. On the adjourned date, Mr. [ENTITY] informed the Court that the suggestion made by [ENTITY] was not acceptable to [ENTITY] and that it would like the hearing of the petition to proceed.
5. Before proceeding to deal with the preliminary objection raised by [ENTITY] as to the maintainability of the present petition, it is necessary to advert to certain relevant facts.
Relevant facts
6. On 28th January, 2005, an Agreement was entered into at Bangalore for the Lease of Space Segment Capacity on ISRO/[ENTITY] S-Band Spacecraft between [ENTITY], a company incorporated on 17 th December, 2004 having its registered office at Bangalore and [ENTITY], a Government of India undertaking also having its registered office at Bangalore. [SECTION] of the Agreement deals with arbitration and reads as under:
[SECTION]. Arbitration
(a) In the event of there being any dispute or difference between the Parties hereto as to any clause or provision of this Agreement or as to the interpretation thereof or as to any account or valuation or as to the rights, liabilities, acts, omissions of any Party hereto arising under or by virtue of these presents or otherwise in any way relating to this Agreement such dispute or difference shall be referred to the senior management of both Parties to resolve within three (3) weeks failing which it will be referred to an Arbitral Tribunal comprising of three arbitrators, one to be appointed by each party (i.e. [ENTITY] and [ENTITY]) and the arbitrators so appointed will appoint the third arbitrator.
(b) The seat of Arbitration shall be at New Delhi in India.
(c) The Arbitration proceedings shall be held in accordance with the rules and procedures of the [ACT] (International Chamber of Commerce) or UNCITRAL.
(d) The Arbitration Tribunal shall reach and render a decision or award in writing (concurred in by a majority of the members of the Arbitral Tribunal with respect to the appropriate award to be rendered or remedy to be granted pursuant to the dispute, (including the amount that any indemnifying Party is required to pay to the indemnified Party in respect of a claim filed by the indemnified Party).
(e) To the extent practicable all decisions of the board of Arbitration shall be rendered no more than 30 (thirty) days following commencement of proceedings with respect thereto. The Arbitral Tribunal shall realize its decision on award into writing and cause the same to be delivered to the Parties.
(g) Each Party to any Arbitration shall bear its own costs or expenses in relation thereto, including but not limited to such Party's attorneys' fees, if any, and the expenses and fees of the member of the Arbitral Tribunal appointed by such party, provided, however, that the expenses and fees of the third member of the Arbitral Tribunal and any other expenses of the Arbitral Tribunal not capable of being attributed to any one member shall be borne in equal parts by the Parties.
7. Thus, the above arbitration clause made it clear that the seat of arbitration would be at New Delhi in India. Significantly, there is no 'jurisdiction' clause in the Agreement. [SECTION] stated that the Agreement was subject to and had to be construed in accordance with the laws of India.
8. On 17th February, 2011, a decision was taken by the Cabinet Committee on Security (CCS') to deny orbital slot in S-band to [ENTITY] for any commercial activities and to direct annulment of the Agreement dated 28 th January, 2005, which was communicated to [ENTITY] vide letter dated 23 rd February, 2011. Consequently, a letter of termination was issued by [ENTITY] to [ENTITY] on 25th February, 2011. On 29th June, 2011, [ENTITY] approached the International Chambers of Commerce ([ACT]), Paris with a Request for Arbitration'. [ENTITY] was notified by the [ACT] of the said request on 5th July, 2011. In the said letter, the [ACT] stated that a portion of the above arbitration clause ([SECTION] "constitutes a substantial departure from the [ACT]"
and that [ACT] was not in a position to accept such a modification of its arbitration rules. It was stated that "[s]hould the parties wish the [ACT] Court to administer the case, the costs of arbitration will be fixed pursuant to [SECTION] of the Rules. Unless the parties object within 5 days, we understand that the parties accept to have the proceedings conducted pursuant to the Rules, including [SECTION]."
9. [ENTITY] did not accept the above stipulation. It wrote to the [ACT] on 11th July 2011 raising objections to the [ACT] proceeding with the arbitration. On 30th July 2011, [ENTITY] nominated a former judge of the Supreme Court of India as its Arbitrator in terms of [SECTION] of the Agreement. It nevertheless maintained its objection to the jurisdiction of the [ACT] to administer the arbitration proceedings.
10. On 5th August, 2011, [ENTITY] filed a petition under [SECTION] of the Act [[CASE NUMBER]] before the Chief Justice of India in the Supreme Court seeking a direction to constitute an AT. This petition was filed along with an application seeking interim reliefs. On the same date i.e., 5th August, 2011, [ENTITY] also wrote to the [ACT] reiterating that the invocation of the [ACT] was premature, unilateral and contrary to the express terms of the Contract.
11. By its letter dated 13th October, 2011, [ACT] informed [ENTITY] that it had appointed a former Chief Justice of India as Co-Arbitrator on behalf of [ENTITY] under [SECTION] of the [ACT]. By the same letter, it also confirmed the appointment of the co-Arbitrator nominated by [ENTITY] under
[SECTION] of the [ACT]. The two nominee Arbitrators were given 20 days to finalise the name of the third Arbitrator. They, however, sought more time in view of the pendency of [CASE NUMBER] before the Chief Justice of India. In the circumstances, on 10th November 2011, the [ACT] appointed Dr. [ENTITY] as Chairman of the AT.
12. On 5th December, 2011, [ENTITY] filed [CASE NUMBER] in the City Civil Court at Bangalore under [SECTION] of the Act seeking the following reliefs:
(i) restrain the Respondent from proceeding in any manner, with the [ACT] arbitration contrary to the Agreement dated 28.01.2005;
(ii) restrain the Respondent from getting the Agreement dated 28.01.2005 modified/substituted from [ACT];
(iii) restrain the Arbitral Tribunal constituted by [ACT] under [ACT] from proceeding with the arbitration;
(iv) Pass such other and further order(s) as may be deemed just and proper in facts and circumstances of this case."
13. On the same day i.e., 5th December 2011, [ENTITY] also filed a suit being [CASE NUMBER] before the Bangalore City Civil Court in which also a stay of the arbitration proceedings was sought by it. According to [ENTITY], the prayers in this petition were more or less similar to the prayers in the interim application filed by [ENTITY] along with the petition before the CJI under [SECTION] of the Act i.e., [CASE NUMBER].
14. [ENTITY] entered appearance in [CASE NUMBER] before the Bangalore City Civil Court on 7th December, 2011 and sought time to file objections. No interim ex parte order was passed at that stage. Meanwhile, in [CASE NUMBER], the designate of the CJI in the Supreme Court by an order dated 9th April, 2012 stayed the [ACT] arbitration.
15. According to [ENTITY], between 11th November, 2012 and 27th April, 2013 [ENTITY] sought time for arguments in [CASE NUMBER] in the City Civil Court at Bangalore on at least ten occasions. It is also pointed out that at no stage prior to August 2016 did [ENTITY] raise an objection as to the territorial jurisdiction of that Court to entertain [CASE NUMBER].
16. On 10th May, 2013, the Supreme Court dismissed [CASE NUMBER] being the petition under [SECTION] of the Act filed by [ENTITY]. By then, the AT under the [ACT] had already been constituted. While upholding the invocation of the [ACT] by [ENTITY], the Supreme Court clarified that this would, of course, be subject to challenge in appropriate proceedings. In other words, the dismissal of the [SECTION] petition as not maintainable did not prevent the right of [ENTITY] from taking recourse to other provisions under the aforesaid Act for appropriate relief.
17. The case of [ENTITY] is that thereafter [ENTITY] delayed proceedings in [CASE NUMBER] by seeking adjournments on five consecutive occasions. Even at that stage, no objection was raised by [ENTITY] that the proceedings in the City Civil Court at Bangalore were without jurisdiction or had become infructuous.
18. On 14th September, 2015, the [ACT] gave its Award in favour of [ENTITY] in the sum of $ 562.5 million with simple interest at 18% from the date of Award to the date of payment. Further, pre-award interest was payable in the sum of USD LIBOR plus 4% simple interest from the date of the Agreement i.e., 25th February, 2011 to the date of the Award. Thereafter on 28th September, 2015, the present petition was filed by [ENTITY] under [SECTION] of the Act.
19. On 19th November, 2015, [ENTITY] filed an application in the Bangalore City Civil Court under [SECTION] of the Act challenging the Award dated 14th September, 2015. In the said petition, [ENTITY] filed an application being [CASE NUMBER] contending that the City Civil Court at Bangalore had no jurisdiction to entertain that application. The said application is stated to be pending in that Court along with the earlier petition i.e., [CASE NUMBER] filed by [ENTITY] under [SECTION] of the Act.
20. The developments since then are that on 8th February, 2016, [ENTITY] received intimation of an order of a Court in Paris, France for enforcement of the aforementioned Award. The second development was that on 11 th August, 2016, based on an investigation commenced in 2015, the Central Bureau of Investigation (CBI') filed a charge-sheet before the Special Court for CBI Cases, New Delhi in which it concluded that the Agreement dated 28th January, 2005 between [ENTITY] and [ENTITY] was a result of criminal conspiracy between [ENTITY] and certain officials with a view to cause loss to [ENTITY]. It is stated that proceedings have already been launched against [ENTITY] for violation of the [ACT]. The third development is that [ENTITY] filed IA No. 2 in the pending [CASE NUMBER] in the City Civil Court at Bangalore objecting to the jurisdiction of that Court. It is stated that the arguments in the said application have been heard piecemeal between 24th September, 2016 and 26th November, 2016. The fourth event is that on 29th November, 2016, an application was filed by [ENTITY] in the City Civil Court at Bangalore for bringing on record the subsequent developments including the filing of the charge-sheet by the CBI and the enforcement proceedings filed by [ENTITY] in Paris.
Submissions on behalf of [ENTITY]
21. Mr. [ENTITY], learned Senior counsel appearing for [ENTITY] made the following submissions:
(i) [CASE NUMBER] was filed by [ENTITY] in the City Civil Court at Bangalore as far back as on 5th December 2011 much before the filing of the present petition by [ENTITY] and much prior to the AT passing the Award on 14th September, 2015. Therefore, the bar under [SECTION] of the Act would apply to the present petition. Any further application could be instituted by [ENTITY] only before the City Civil Court at Bangalore.
(ii) [ENTITY] not having objected to the territorial jurisdiction of the City Civil Court at Bangalore must be taken to have waived such objection. [ENTITY]' objection to the jurisdiction of the Bangalore City Civil Court was on the basis that the seat of arbitration was at New Delhi. It is submitted that after the judgment of the Constitutional Bench of the Supreme Court in Bharat Aluminium Co. v Kaiser Aluminium Technical Service Inc. (2012) 9 SCC 552 ([ENTITY]'), the designation of the seat' or place' of arbitration does not confer exclusive jurisdiction on the Court of that location. Reliance is also placed on the decisions of this Court in Priya Hiranandani Vandrevala v.
Niranjan Hiranandani 2016 (3) Arb LR 128 affirmed by the Division Bench (DB) in 2016 (4) Arb LR 18 (Del) (DB) and [PRECEDENT];
(iii) By placing reliance on paragraph 265 of the petition filed under [SECTION] of the Act before the Bangalore City Civil Court, [ENTITY] had sought to explain why it is only that Court which has exclusive jurisdiction to deal with the petition. The subject matter of the dispute viz. the termination of the agreement having been conveyed in Bangalore, it was plain that the substantial part of the cause of action arose in Bangalore. Further, the agreement was signed at Bangalore. Both the parties have their registered office in Bangalore. Therefore, the Court in Bangalore continued to have subject matter jurisdiction apart from territorial jurisdiction and pecuniary jurisdiction. In terms of the decision of the Supreme Court in [PRECEDENT], it is the Bangalore Court which would have jurisdiction and the present petition would be barred under [SECTION] of the Act.
(iv) The Court at Delhi will not have exclusive jurisdiction only because the seat of arbitration is in Delhi. The decision in [ENTITY] (supra) states that the Court at the seat and the Court where suit would have been instituted (treating arbitration to be a suit) would have concurrent jurisdiction. Even [SECTION] of the Agreement dated 28th January, 2005 indicates that the intention of the parties was not to confer exclusive jurisdiction on any one Court. It states that the Award may be enforced by any Court of competent jurisdiction.
(v) The reliance placed by [ENTITY] on the decisions in [PRECEDENT]; [PRECEDENT]), [PRECEDENT] and [PRECEDENT] in support of the plea that the seat is akin to exclusive jurisdiction is misplaced. Those decisions were concerned with the issue whether [SECTION] of the Act would apply to international arbitration. The said principle would be inapplicable when two Courts are within India, both being governed by the same legal regime. In such cases, unless it is held that the Court within whose jurisdiction the cause of action arises alone would have jurisdiction, [SECTION] would be rendered otiose.
(vi) Likewise, the other decisions relied upon by [ENTITY] i.e., [PRECEDENT] and [PRECEDENT] were rendered earlier to the decision of the Constitution Bench of the Supreme Court in [ENTITY] (supra). On the other hand, the decision of the learned Single Judge in [PRECEDENT] (supra) which was confirmed by the DB in appeal squarely applied in the facts of the present case. The decisions in [PRECEDENT] and [PRECEDENT] were in cases where the relevant clause specified the Court that would have exclusive jurisdiction whereas there is no such exclusive jurisdiction clause in the present case. Likewise, the decision dated 4th October, 2016 in [PRECEDENT], the decision dated 8th March, 2016 in [PRECEDENT] and the decision of the Madras High Court in [PRECEDENT] were in cases where there was an exclusive jurisdiction clause.
(vii) The question that requires to be addressed by this Court is whether the present petition is barred by [SECTION] of the Act and for that limited purpose, whether the Bangalore Court is the Court of competent jurisdiction. The Court will have to examine whether the Bangalore Court has territorial, pecuniary or subject matter jurisdiction. However, this Court is not required to examine whether the reliefs prayed for in the petition pending in City Civil Court at Bangalore are capable of being granted. That issue would be decided by the City Civil Court in Bangalore before which [CASE NUMBER] is pending.
(viii) As explained by the Calcutta High Court in [PRECEDENT], there is a fundamental distinction between lack of jurisdiction and erroneous exercise of jurisdiction. In the present case, it could not be said that the Bangalore Court lacks jurisdiction in view of [SECTION] of the Act as explained by the Constitution Bench in [ENTITY] (supra). Irrespective of whether the order passed by the Bangalore Court in the petition under [SECTION] was erroneous, that would not oust the jurisdiction of that Court. In other words, it would not be an order passed by a Court without jurisdiction. At the highest, it could be said to be an erroneous order passed by a Court of competent jurisdiction. As long as the Bangalore Court is of the view that it does not lack territorial, pecuniary or subject matter jurisdiction, the bar under [SECTION] would apply. Reliance is placed on the decisions in [PRECEDENT] and [PRECEDENT].
(ix) The averments in the application under [SECTION] of the Act before the Supreme Court were in the context of jurisdiction of that Court and not in respect of the jurisdiction of the Court at Delhi or Bangalore. Further, as explained in [PRECEDENT] (supra), under the Act, as it stood prior to 23rd October, 2015, applications under [SECTION] of the Act were not considered to be before a 'Court' as defined under [SECTION] of the Act and, therefore, would not be included for the purposes of [SECTION] of the Act. In any event, even if the averments in the petition before the Supreme Court were to be construed as some kind of admission or concession, it would not act as an estoppel against [ENTITY] from approaching the Bangalore City Civil Court since there cannot be any estoppel against law.
(x) There was no question of issue estoppel since the issue of jurisdiction of the Court competent to hear the application within the meaning of [SECTION] [SECTION] of the Act was not at all an issue before the Supreme Court and not decided by it in [ENTITY] Corporation v. [ENTITY] Multimedia (2014) 11 SCC 560. There the Supreme Court clarified that the invocation of the [ACT] by [ENTITY] would be subject to challenge in appropriate proceedings.
(xi) [ENTITY] was guilty of suppression of material facts and documents including the factum of having delayed the adjudication of [CASE NUMBER]; having filed enforcement proceedings in the Court in Paris, having filed an IA in [CASE NUMBER] and the factum of it having been argued for several days.
Submissions on behalf of [ENTITY]
22. On behalf of [ENTITY], Mr [ENTITY], learned senior counsel, made the following submissions:
(i) The question whether [SECTION] of the Act is applicable in the present case ought to be decided by this Court alone. Reliance is placed on the decision of the Madras High Court in [PRECEDENT] (supra), the onus was on [ENTITY] to establish that that (a) the [SECTION] petition before the Bangalore Court was maintainable in law; (b) the [SECTION] petition before the Bangalore Court was one which was made under this Part; and (c) the Bangalore Court had jurisdiction to entertain the [SECTION] petition filed by [ENTITY]. That onus has not been discharged by the Respondent.
(ii) The petition filed under [SECTION] by [ENTITY] in the City Civil Court at Bangalore was not maintainable in law and was ex facie incompetent as it sought a stay of the [ACT] arbitration proceedings. It was explained by the Supreme Court in [PRECEDENT]) that [SECTION] only permits an application for interim measures mentioned in clause (i) and (ii) thereof. There could not be an application for stay of the arbitration proceedings or to challenge the existence or validity of the arbitration agreement or the jurisdiction of the AT. Reliance was placed on the decision of Bombay High Court in [PRECEDENT]. Reliance was also placed on the decision in H.K.A. Agencies v. Actia India Pvt. Ltd.
(2011) 1 ILR 378.
(iii) [SECTION] of the Act will not apply in the following situations:
(a) Where an application under [SECTION] is filed in a Court that is not competent to consider the said application; and
(b) Where an application has been made in a Court of competent jurisdiction but it is barred by law i.e., it is not an application under [SECTION] of the Act.
In the present case, since neither of the above conditions have been met, therefore, the bar of [SECTION] of the Act would not apply.
(iv) It is reiterated that the Court at Bangalore does not have the subject matter jurisdiction' since it does not have the jurisdiction to grant the reliefs sought in the application. Reliance is placed on the decision of this Court in [PRECEDENT] and the decision dated 16th September, 2016 in [CASE NUMBER] ([PRECEDENT]).
(v) [ENTITY] has been indulging in forum shopping. In its petition under [SECTION] of the Act before the Supreme Court, [ENTITY] itself conceded that the seat of arbitration was in Delhi; that the cause of action only arose at Delhi and that the competent Court for the purposes of [SECTION] was Delhi. [ENTITY] further conceded that the Award had its genesis in the policy decision of the Government taken in Delhi and that the cause of action wholly arose within the jurisdiction of this Court. Having taken the above stand in the petition under [SECTION] of the Act, [ENTITY] was now estopped from contending to the contrary. Reliance is placed on the decision in [PRECEDENT].
(vi) There was no stay of the arbitration proceedings by the Supreme Court in the application in the petition under [SECTION] of the Act which was pending before it. There was also no such stay granted in the [SECTION] petition of [ENTITY] pending before the City Civil Court, Bangalore.
(vii) Further, [ENTITY] filed a suit before the Bangalore City Civil Court seeking stay of the arbitration proceedings. The prayers made in the [SECTION] petition before the Supreme Court and the [SECTION] petition in the Bangalore City Civil Court were identical. Even the pleadings were identical. The [SECTION] petition having not been entertained, the [SECTION] petition was barred in law and ex facie incompetent. Even the suit filed by [ENTITY] was barred in law and not maintainable in view of [SECTION] of the Act as explained by the Supreme Court in [PRECEDENT].
(viii) The [SECTION] petition of [ENTITY] was dismissed by the Supreme Court on 10th May, 2013. The review petition filed against the said judgment was dismissed on 29th August, 2013. With the dismissal of the [SECTION] petition, the invocation of [ACT] arbitration by the Petitioner stood upheld and, therefore, the principles of res judicata were attracted and would give rise to an issue estoppel. Reliance is placed on the decision of the Supreme Court in [PRECEDENT] and [PRECEDENT] Ltd. (2015) 10 SCC
(ix) Pursuant to the decision of the Supreme Court, [ENTITY] fully participated in the arbitration proceedings. The principle of comity of jurisdiction had no application to the present case since the City Civil Court at Bangalore had not even assumed jurisdiction or upheld that it did. [ENTITY]' objection to the jurisdiction of that Court had been pending consideration since 2011. For the principle of comity of jurisdiction to apply, the Court where the other proceedings are pending has to be (a) a Court of competent jurisdiction; (b) a Court that can grant the relief sought for; and (c) whose jurisdiction has not been ousted by an agreement of the parties. The answer to the above conditions has to be in the negative in view of the declaration of law in [PRECEDENT] (supra). Reliance is also placed on the decision dated 31st May, 2007 of this Court in [PRECEDENT] and [PRECEDENT].
(x) The proceedings before the Bangalore City Civil Court are coram non judice i.e., wholly without jurisdiction. Even assuming that the Bangalore Court takes upon itself to exercise a jurisdiction that it does not have, any order passed by it would be a nullity. Reliance is placed on [PRECEDENT] and Official Trustee, [PRECEDENT].
(xi) The decisions of both the learned Single Judge and the DB in [PRECEDENT] (supra) are distinguishable on facts as there was no agreed seat of arbitration in that case. The parties there were not ad idem as to the seat of arbitration. Clause 13.4 of the agreement in that case permitted the parties to approach a Court of competent jurisdiction for enforcement of the arbitral award. A specific plea taken in that case was that the [SECTION] petition in the Bombay High Court was 'frivolous' and 'malafide'. No plea was taken that the petition was incompetent or barred by law. In [PRECEDENT] (supra), the Court was dealing with two petitions that were maintainable and which were filed in two Courts of competent jurisdiction. Moreover, the reliefs sought were in respect of immoveable properties located in Mumbai.
(xii) The seat is analogous to an exclusive jurisdiction clause. Once the parties here decided that the seat would be in Delhi, the Courts in Delhi would have exclusive jurisdiction to entertain all matters arising under the arbitration proceedings. Reliance is placed on Reliance Industries Ltd. v.
Union of India (supra) [followed in [PRECEDENT] (supra), [ENTITY] (supra) and [PRECEDENT] (supra)].
(xiii) Designation of the seat of arbitration is important for determining the Court that would have supervisory jurisdiction over the contract or the arbitration proceedings. More importantly, it will determine the Court in which the challenge to the Award can be entertained. It is inconceivable that the supervisory Court can 'shift' or 'change'. If the plea of [ENTITY] were to be accepted, it would shift the supervisory Court from Delhi to Bangalore. This would be contrary to the law laid down in [ENTITY] (supra) that only the 'Seat Court' has jurisdiction to entertain a challenge to an Award. Reliance is placed on the decisions in [PRECEDENT] (supra) [PRECEDENT] (supra) and [PRECEDENT] (supra).
(xiv) By virtue of [SECTION] of the Agreement dated 28th January, 2005 and in view of the definition of 'Court' under [SECTION] of the Act, the Courts in Delhi alone were to have the exclusive jurisdiction to entertain and decide any questions forming the subject matter of the present Agreement. Reliance was placed on the decisions in [PRECEDENT] and [PRECEDENT].
23. Since arguments have at this stage been addressed only on the issue of maintainability of the present petition, the Court is not dealing with the merits.
Which Court should decide first?
24. In the first instance, the Court would like to deal with the issue of whether in view of [SECTION] of the Act, it is this Court alone that has to decide whether the bar under [SECTION] of the Act applies. For that purpose, it will have to determine whether the ingredients of [SECTION] stand fulfilled.
25. The Court is conscious that the question as to the jurisdiction of the City Civil Court at Bangalore to entertain [ENTITY]'s [SECTION] petition has been raised by [ENTITY] before that Court in an application filed in those proceedings in 2011. However, that Court is yet to decide that question. Nevertheless, for the purposes of deciding the preliminary objection raised by [ENTITY] in the present petition under [SECTION] of the Act, this Court has to decide that question viz whether the bar under [SECTION] stands attracted. Consequently, it has to examine if the City Civil Court at Bangalore is the Court of competent jurisdiction to deal with the application already filed before it by [ENTITY] under [SECTION] of the Act and whether such application is a valid one, capable of being entertained and granted. The very nature of the objection that [SECTION] permits to be raised will require the Court before which such objection is raised to decide on the competence of another Court. Where that other Court has already decided that question, and has held that it has the jurisdiction, the subsequent Court on the principle of comity of jurisdiction will normally accept that determination. Where the other Court is yet to decide that question, as in the present case, the subsequent Court cannot shirk its duty to decide the questions that emanate from the objection under [SECTION] of the Act.
26. The Court, therefore, does not agree with the submission on behalf of [ENTITY] that the City Civil Court at Bangalore should first decide on its jurisdiction before this Court can exercise any jurisdiction in the matter. In [PRECEDENT] (supra), the other Court was a Court of equivalent jurisdiction viz. the Bombay High Court. Even in [PRECEDENT] (supra), the other Court was the Bombay High Court. Here, the other Court is the City Civil Court at Bangalore. But that again is only one distinguishing feature. The other, and more serious one, is that neither of those cases witnessed an endless wait for a decision on jurisdiction and maintainability. Those cases did not contemplate a situation where the other Court did not decide the issue for several years, as in the present case. At least since 2011, the Bangalore City Civil Court has not decided [ENTITY]' application objecting to its jurisdiction and as to the maintainability of [ENTITY]'s [SECTION] petition.
Analysis of [SECTION]
27. Before proceeding to examine the submissions of the parties, a reference requires to be made to [SECTION] of the Act, which reads thus:
"42. Jurisdiction. Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court."
28. First, therefore, the Court has to examine if there is any other application earlier made by a party to the Agreement in question in some other Court. It has to be an application under [SECTION] of the Act. The word 'Court' is not qualified by the word 'competent'. The word 'application' is not qualified by the word 'valid'. In other words, [SECTION] does not mandate that such an application should be a valid application' and the Court should be a Court of competition jurisdiction'. A plain reading of the provision, therefore, would mean that as long as the two ingredients exist viz. one, there should be an earlier application under [SECTION] of the Act; and two, it should have been made in another Court, then it is such other Court which alone would have jurisdiction over the arbitration proceedings.
29. However, the Court is not inclined to accept such a simplistic reading of [SECTION] of the Act. The very object of [SECTION] of the Act, which is to avoid multiplicity of proceedings, dictates this approach. The scheme of [SECTION] is to ensure that the first Court that is approached by either party to the agreement is the 'one stop' Court for all subsequent proceedings. If that be the legislative intent, it is trite that both elements must be satisfied:
the petition under [SECTION] must be capable of being granted and the Court in which it is filed must be competent in law to entertain and grant the reliefs prayed for in that first petition.
30. In [PRECEDENT] (supra), the Supreme Court elaborated on the scope of [SECTION] of the Act. It was explained that the said provision would only apply "to applications made under [SECTION] if they are made to a Court as defined." Consequently, "an application made to a Court without subject-matter jurisdiction would be outside [SECTION]."
31. Here, the decisions of some the High Courts require to be referred to as well. In [PRECEDENT] (supra) the Madras High Court observed:
7.1 The jurisdiction as referred to under [SECTION] of the [ACT], would only mean that the Court which entertain[s] the first application must have jurisdiction. In other words, [SECTION] of the Act cannot be invoked unless the party, who raises the plea of jurisdiction demonstrate[s] that the Court which entertained the first application has got the jurisdiction.
7.2 The further fact that the arbitration agreement has been entered into between the parties, is not in dispute. Mere filing of an application before a Court by itself will not oust the jurisdiction.
It other words, by merely filing an application before any Court, the bar under [SECTION] cannot be extended, when another application is filed by a party before another Court, which has got jurisdiction. Therefore, a party, who raises the plea of lack of jurisdiction, will have to establish the fact that the Court, which entertains the first application at the earliest point of time, has got jurisdiction
The object and intend enshrined in the [ACT], is to avoid multiplicity of proceedings and the Forum shopping at the instance of one of the parties to an arbitral agreement. It can only be applied when the first application filed is before a Court of competent jurisdiction and thereafter, the second application is filed by either of parties to avoid the jurisdiction of the Court, which entertain the said earlier application. (emphasis supplied)
32. In [PRECEDENT] (supra), the Bombay High Court held that for the bar under [SECTION] to apply, the first application "must be a competent application and not just any application. In H.K.A. Agencies v.
Actia India Pvt. Ltd. (supra), a DB of the Kerala High Court held that the "first application filed must be filed validly and legally. If such prior application is filed before a court which has no jurisdiction, the bar of [SECTION] cannot obviously be applied. The expression an application under this part has been made in a Court must certainly be read in the circumstances as validly made in Court
33. This Court in [PRECEDENT] held:
6. It is only when the basic ingredient for filing of the arbitration proceedings before the Court of competent jurisdiction is satisfied that the bar contemplated under [SECTION] of the Act can be enforced against the maintainability of a petition before another Court.
34. The above decisions emphasize a purposive interpretation of [SECTION] of the Act in light of its object. The petition which is under [SECTION] has to be a valid one capable of being granted. Secondly, the Court before which it is filed has to be a 'competent' Court. Talking of both a 'valid' petition and a 'competent' Court, three scenarios are possible. The Court may be the competent Court and the petition is such that the reliefs prayed for can be granted. In such an event, the requirement of [SECTION] would stand satisfied; the second scenario is that the Court that is first approached is the competent Court but the petition that is filed in incapable of being entertained and granted; and the third scenario is that the petition filed is one which can be granted but it is filed in a Court that has no jurisdiction to entertain such petition.
35. The present case, in the considered view of this Court, falls in the second category. In other words, the petition filed by [ENTITY] under [SECTION] of the Act is filed in a Court of competent jurisdiction viz. the City Civil Court at Bangalore. However, the petition itself cannot be entertained and granted by that Court. What are the reasons for this conclusion?
36. As regards the competence of the Bangalore Court, after the decision in [ENTITY] (supra), the jurisdiction of two Courts in the domestic setting stands recognised. The oft-cited paras 96 and 97 of the decision in [ENTITY] (supra) require to be set out since they have been referred to at great length by both counsel.
"96. We are of the opinion, the term "subject-matter of the arbitration" cannot be confused with "subject-matter of the suit".
The term "subject-matter" in [SECTION] is confined to [SECTION]. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the Courts having supervisory control over the arbitration proceedings. Hence, it refers to a Court which would essentially be a Court of the seat of the arbitration process. In our opinion, the provision in [SECTION] has to be construed keeping in view the provisions in [SECTION] which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render [SECTION] nugatory. In our view, the legislature has intentionally given jurisdiction to two Courts i.e. the Court which would have jurisdiction where the cause of action is located and the Courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the Courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. For example, if the arbitration is held in Delhi, where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal sitting in Delhi passes an interim order under [SECTION] of the [ACT], the appeal against such an interim order under [SECTION] must lie to the Courts of Delhi being the Courts having supervisory jurisdiction over the arbitration proceedings and the tribunal. This would be irrespective of the fact that the obligations to be performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi. In such circumstances, both the Courts would have jurisdiction i.e. the Court within whose jurisdiction the subject-matter of the suit is situated and the Courts within the jurisdiction of which the dispute resolution i.e. arbitration is located.
97. The definition of [SECTION] includes "subject matter of the arbitration" to give jurisdiction to the Courts where the arbitration takes place, which otherwise would not exist. On the other hand, [SECTION] which is in [SECTION] of the '[ACT] dealing with enforcement of certain foreign awards has defined the term "Court" as a Court having jurisdiction over the subject-matter of the award. This has a clear reference to a Court within whose jurisdiction the asset/person is located, against Which/whom the enforcement of the international arbitral award is sought. The provisions contained in [SECTION] being purely jurisdictional in nature can have no relevance to the question whether [SECTION] applies to arbitrations which take place outside India." (emphasis supplied) 'Seat' and 'exclusive' jurisdiction
37. [ENTITY] does not dispute the above legal position viz. "both the Courts would have jurisdiction i.e. the Court within whose jurisdiction the subject- matter of the suit is situated and the Courts within the jurisdiction of which the dispute resolution i.e. arbitration is located." However, it insists that once the parties have agreed on the 'seat' of arbitration, even in a domestic arbitration, then it must be implied that they intended to confer 'exclusive' jurisdiction on the seat Court to the exclusion of all other Courts. This Court is not prepared to agree with this contention for the reasons elaborated hereafter.
38. First, [ENTITY] (supra) recognizes the jurisdictions of two Courts in a given case as a 'possibility'. It only illustrates a few of those possibilities. It does not explicitly state that once the parties agree on a seat then they intend implicitly to confer 'exclusive' jurisdiction on the seat Court i.e., to the exclusion of all other Courts. [ENTITY] (supra) cannot be understood to have said so for the simple reason that the said decision does not purport to contemplate all possible arbitration clauses.
39. It must be recalled that the running theme of the Act is the agreement to the contrary between parties. Where the agreement is explicit then that will have to be given effect to, of course to the extent practicable and legally permissible. Here again, several possibilities exist There are clauses where both the seat and the jurisdiction (sometimes exclusive) are mentioned. Then there are instances, as in the present case, where the 'seat' or 'place' of arbitration is mentioned, but the clause is silent as to the jurisdiction of Courts. The seat may be at a place where no part of the cause of action may have arisen. Yet, after [ENTITY] (supra), even the Court of that seat would have jurisdiction. But, in the absence of an exclusive jurisdiction clause, there is no automatic inference as to the seat Court's exclusivity as far as jurisdiction is concerned. If the seat Court is approached first by either party, it is possible it might, by virtue of [SECTION], become the 'exclusive' Court for all subsequent proceedings.
40. A third scenario is where the seat' of arbitration is not mentioned but jurisdiction' is. And then again, the word 'exclusive' might or might not qualify the word 'jurisdiction'. A third scenario is conferring jurisdiction on a Court where no part of the cause of action has arisen. There is case law for each of these scenarios and the result in each case will depend on the factual matrix. For example, in [PRECEDENT], the Court held that since the seat of arbitration was in Delhi, the Delhi Court would have jurisdiction irrespective of the fact that the cause of action arose elsewhere. The context, however, was different from the present case. There the Court was not on facts dealing with a situation where a previous petition had been filed in another Court. The decisions in [PRECEDENT]. (supra) and [PRECEDENT] (supra), relied upon by [ENTITY], are earlier to and inconsistent with the decision in [ENTITY] (supra).
41. A distinction also requires to be made between international and domestic arbitrations. The relevance of 'seat' (which incidentally is not an expression defined in the Act, which uses the expression 'place of arbitration') in domestic arbitrations is not clear even post [ENTITY] (supra). There is a point of view among some legal scholars that the concept of 'seat of arbitration' is apposite for international but not domestic arbitrations. In other words, when two Courts within India are governed by the same legal regime, the concept of a 'seat' court is inapposite. It is urged that notwithstanding [ENTITY], it must be held that consistent with the plain reading of [SECTION] of the Act, the Court within whose jurisdiction the cause of action arises alone has jurisdiction. This Court, however, does not consider it necessary to examine such questions. Being bound by [ENTITY] it would prefer deciding the issues within the given understanding of the law post [ENTITY].
42. As far as the decisions on the point that 'seat' is akin to jurisdiction' are concerned, the decisions in [PRECEDENT] (supra), [PRECEDENT] (supra), [PRECEDENT] (supra) and [PRECEDENT] (supra), were all in the context of international arbitration and cannot ipso facto be made applicable to domestic arbitrations.
43. The result is that in the absence of a jurisdiction clause in the arbitration agreement, the mere fact that a seat is mentioned would not automatically confer exclusivity on the seat Court as far as jurisdiction is concerned. In the present case, there is no exclusive jurisdiction clause. The parties specified the seat as New Delhi but by doing so, they did not intend to oust the jurisdiction of the Court at Bangalore. While some part of the cause of action, for e.g., the decision of the CCS, may have arisen within the jurisdiction of the Court at Delhi, a substantial part of the cause of action had arisen within the jurisdiction of the City Civil Court at Bangalore. In this context the submission of [ENTITY] that the termination of the agreement was conveyed in Bangalore, the agreement was signed at Bangalore, both parties have their registered offices in Bangalore and therefore the substantial parts of the cause of action arose in Bangalore is well founded. The Court, therefore, rejects the plea of [ENTITY] that Delhi has exclusive jurisdiction only because the seat of arbitration was in Delhi, without anything more.
Maintainability of [ENTITY]'s [SECTION] petition in Bangalore
44. But that is not the end of the matter. The further question is whether the petition by [ENTITY] under [SECTION] of the Act pending in the City Civil Court at Bangalore is a valid petition which can be entertained and granted? IN this context, it requires to be recalled that this Court has already rejected the plea of [ENTITY] that the question whether its [SECTION] petition was maintainable should be first decided and only by the City Civil Court at Bangalore.
45. The following three prayers were made in [CASE NUMBER] filed by [ENTITY] under [SECTION] of the Act before the City Civil Court at Bangalore:
(i) to restrain [ENTITY] from proceeding with the [ACT] arbitration;
(ii) to restrain [ENTITY] from getting the Agreement dated 28th January 2005 modified/substituted from [ACT];
(iii) to restrain the AT constituted by the [ACT] under [ACT] from proceeding with the arbitration.
46. After the passing of the Award on 14th September, 2015, none of the above prayers survives. Nothing, therefore, turns on whether [ENTITY] challenged only prayers (i) and (iii) above and not (ii). At this point in time with the AT having rendered its Award and having become functus officio, the question of entertaining prayer (ii) does not arise.
47. There is merit in the contention of [ENTITY] that even otherwise the prayers in [CASE NUMBER] by [ENTITY] under [SECTION] of the Act could not have been entertained or granted by the City Civil Court in Bangalore. In [PRECEDENT] (supra), the Supreme Court explained that [SECTION] of the Act did not permit any or all applications. It only permits applications for interim measures mentioned in clauses (i) and (ii) thereof. Thus there cannot be applications under [SECTION] for stay of arbitral proceedings or to challenge the existence or validity of the arbitration agreements or the jurisdiction of the Arbitration Tribunal.
48. This, therefore, knocks out prayers (i) and (iii) of [CASE NUMBER]. The City Civil Court at Bangalore could not have, at any stage, and certainly not at this stage, grant prayers (i) and (iii). As far as prayer (ii) is concerned, with the Award having been pronounced by the AT, even that relief has become infructuous. The reliance placed by [ENTITY] on the decision in [PRECEDENT] is to no avail as the stage of the present proceedings is different. None of the reliefs prayed for in [ENTITY]'s [SECTION] petition is capable of being granted. With the passage of time, the prayers in the said petition have become academic. The Court should not have to decide academic questions which will defeat the object of the Act to expedite proceedings.
49. While the Court is refraining from going into the aspect of issue estoppel' as a result of the averments by [ENTITY] in the petition under [SECTION] before the Supreme Court, the fact remains that the Supreme Court declined to grant relief to [ENTITY] in the said petition. The application filed by [ENTITY] in that petition contained prayers that were no different from those in the [SECTION] petition filed by it in the City Civil Court at Bangalore, as the following table reveals:
Prayers in [CASE NUMBER] in the City Civil Prayers in the application in the S. 11 Court at Bangalore under [SECTION] petition in the Supreme Court i. restrain [ENTITY] from proceeding in any i. restrain [ENTITY] from proceeding in any manner, with the [ACT] Arbitration contrary manner, with the [ACT] Arbitration contrary to the Agreement dated 28th January 2005; to the Agreement dated 28th January 2005;
ii. restrain [ENTITY] from getting the ii. restrain [ENTITY] from getting the AT Agreement dated 28th January 2005 constituted by the [ACT], Paris, France; modified/substituted from [ACT].
iii. restrain [ENTITY] from getting the iii. restrain the AT constituted by [ACT] Agreement dated 28th January 2005 under [ACT] from proceeding with the modified/substituted from [ACT]. arbitration.
50. Even the pleadings in both petitions were more or less similar. The rejection of the said prayers by the Supreme Court is therefore one more reason for the prayers in [ENTITY]'s [SECTION] petition not capable of being granted by the City Civil Court at Bangalore.
51. Therefore, notwithstanding that the City Civil Court in Bangalore may have the territorial and pecuniary jurisdiction, it cannot, given the prayers made in [CASE NUMBER], grant any of the reliefs prayed for in that petition. To recapitulate, in [PRECEDENT] (supra), it was explained that it is not that any relief can be sought under [SECTION] of the Act. The only order that can possibly be passed by the Bangalore City Civil Court is that none of the reliefs sought in [CASE NUMBER] can be granted. In the circumstances, waiting for that decision indefinitely would be an exercise in futility.
52. As regards the plea that failed to disclose that it delayed the adjudication of [CASE NUMBER] and that it had filed enforcement proceedings in the Court in Paris or an application in [CASE NUMBER], the Court is of the view that no real prejudice can be said to have been caused to [ENTITY] on that score. A perusal of the proceedings in [CASE NUMBER] in the City Civil Court at Bangalore reveal that the failure of those proceedings to progress cannot be attributed to [ENTITY] alone. Further the fact remains that [ENTITY]' application in those proceedings is yet to be decided. The core issue whether the bar under [SECTION] applies to the present petition would have to be answered irrespective of the enforcement proceedings instituted in the Court in Paris.
53. For the above reasons, the Court concludes that as far as the present petition by [ENTITY] under [SECTION] of the Act is concerned, the bar under [SECTION] of the Act will not apply. This is a case where the second scenario - of the Court in Bangalore being the competent Court but the petition of [ENTITY] under [SECTION] of the Act being rendered incapable of being granted - subsists.
Consequence of the above determination
54. As a sequitur, [ENTITY]'s petition under [SECTION] of the Act challenging the Award in question in the same City Civil Court at Bangalore would not be maintainable in that Court by virtue of [SECTION] of the Act. This is because the present petition having been filed on 28th September, 2015 becomes a petition earlier to the said petition under [SECTION] of the Act filed by [ENTITY] on 19th November, 2015. This Court has jurisdiction to entertain the present petition. The seat of arbitration was specified as New Delhi, which is where the arbitration took place. The prayers made in this petition have neither been rendered infructuous and are not by nature such that cannot be entertained or granted.
55. However, it is not as if [ENTITY] would be deprived of any remedy as a result. As far as the present petition is concerned, it can still defend it on merits. As far as the challenge to the Award is concerned, [ENTITY] can withdraw the petition filed by it in Bangalore and file another one in this Court. The issue of limitation will be considered by this Court in the context of [SECTION] of the [ACT]. To be fair to [ENTITY], it did offer at the time of hearing of this petition on 30th March, 2016 that it will have no objection if the petition under [SECTION] were transferred to this Court.
However, [ENTITY] opted to proceed with the present petition on merits. This aspect will be kept in view by the Court while dealing with the question of limitation under [SECTION] of the [ACT].
Conclusion
56. Therefore, the Court overrules the objections raised by [ENTITY] to the maintainability of the present petition with reference to [SECTION] of the Act. On the other hand, in view of [SECTION] of the Act, the subsequent petition by [ENTITY] under [SECTION] of the Act is required to be filed in this Court. [ENTITY] may raise its pleas as to the limitation and the applicability of [SECTION] of the [ACT] to such petition.
57. List on 21st March 2017 for hearing on merits. To facilitate the hearing, [ENTITY] will, at least one week prior to the next date, file an affidavit of an authorised officer, enclosing therewith its audited balance sheets and profit and loss accounts for the past three years.
58. Not to be treated as part-heard.
59. This is an application by [ENTITY] seeking leave to place certain additional documents on record. For the reasons stated therein, the application is allowed and the additional documents are taken on record. This is of course without prejudice to the contentions of [ENTITY] to the contents thereof.
[ENTITY], J FEBRUARY 28, 2017 rd