THE HON’BLE SRI JUSTICE N.V. RAMANA AND THE HON’BLE SRI JUSTICE K.S. APPA RAO C.M.A. Nos. 117 and 118 of 2011 Common Judgment: (Per N.V. Ramana, J) These two C.M.As. are directed against the order dated 14.02.2011, passed by the II Additional Chief Judge, City Civil Court, Hyderabad, dismissing the O.P. Ns. 2312 and 2313 of 2009 holding that the Court has no jurisdiction to entertain them. Facts of the case, which are necessary for disposal of these two appeals, may briefly be noted, and they run thus: The appellant, namely M/s. Progressive Constructions Ltd., is a Public Limited Company. It is engaged in the business of and carrying out construction activities throughout the world, including India. The appellant registers an annual turnover of INR 10,000 Million. It undertakes all types of civil engineering contracts, such as irrigation, power, water, rail, transport, health, housing, industrial and commercial establishments, of any magnitude all over the world. The appellant states that the Government of Sudan received assistance from the United States Agency for International Development under Sudan Infrastructure Services Project, which is being administered by respondent No.1, namely M/s. Louis Berger Group Inc. For execution of the said project, respondent No.1 issued notification inviting applications for pre-qualification design/build construction of Juba at Nimule Road in Southern Sudan. As per the notification, respondent No.1 intended to pre-qualify interested civil work contractors for the said work. The length of the project is about 192 KMs of newly rehabilitated and all-weather surfacing, over 200 new pipe culverts and in excess of 0.4 cubic meters of earth work, including 40,000 Cu. Mtr. of rock excavation with controlled blasting techniques. Responding to the said invitation, the appellant applied for pre-qualification. On 18.10.2008, respondent No.1 gave confirmation/approval to bid for the construction of Nimule to Juba Road, Southern Sudan. Thereafter, respondent No.1 invited bid by dividing the contract into packages. Accordingly, the appellant submitted its bid. On 16.04.2009, respondent No.1 issued letter of acceptance to the appellant and further intended to enter into contract agreement with the appellant for execution of the work as mentioned in the tender document. Thereafter, on respondent No.1 entered into an agreement with the appellant on 30.04.2009 for execution of contract work worth US $ 3,40,10,704.34. It was agreed thereunder that the work shall commence from 01.05.2009 and completed by 30.10.2010. After entering into the agreement, the appellant states that they mobilized men and machinery and applied for visas for the staff. They could not get the visas in time. They brought this fact to the notice of respondent Nos. 1 and 2 through series of correspondence. Immediately after getting visas, they deployed their men at the project site. They have also shifted their machinery from Northern Sudan, where they executed contract, to the present project site, but there was delay as the Government of Southern Sudan, did not grant permission for shifting. They have also brought this fact to the notice of respondent Nos. 1 and 2. The appellant states that as required by Clause 10.1 of the agreement, they have furnished Performance Security, even though furnishing of the same is condition precedent to the initial interim payment that has to be paid by respondent Nos. 1 and 2. They also submitted performance bank guarantee under pressure from respondent Nos. 1 and 2 to their satisfaction. The appellant states that even though they arranged men and material at the work site and incurred expenditure, respondent No.1 did not pay the same. That even though they brought to the notice of respondent Nos. 1 and 2 about the delays, and also furnished performance security, respondent No.1 without considering the same, addressed letter dated 01.06.2009 to the appellant alleging that there are laches on their part in complying with the terms and conditions of the agreement and called upon the appellant to comply the same. The appellant states that they submitted detailed reply explaining the reasons for the delay in deployment of men and machinery at the project. However, the appellant states that respondent No.1, without considering their reply, addressed another letter 12.08.2009, indicating as if there was delay on the part of the appellant in fulfilling the contractual obligations, and further calling upon the appellant to explain why they should not recommend to the USAID, to terminate the contract by invoking Clause 63.1 of the Federation Internationale Des Ingenieurs Conseils (FIDIC). The appellant by their letter dated 17.08.2009 expressed their concern over the threatening attitude of respondent No.1, and submitted their reply explaining the delay in getting visas, non-cooperation of Sudan Government in according permission for shifting of machinery etc. and also about the things beyond their control. Thereafter, respondent No.1 addressed another letter dated 22.08.2009 to the appellant reiterating the very same issues and called upon the appellant to explain the same. Again on 01.09.2009, respondent No.1 addressed letter to the appellant referring to Clause 63.1 of FIDIC of the contract, wherein it is stated that after 14 days from the issue of the said notice, respondent No.1 can enter upon the site and expel the appellant by releasing them from their obligations and liabilities under the contract. Responding to the same, the appellant vide letter dated 16.09.2009 elaborated the reasons for the delay that has occurred and the things beyond their control, and assured respondent No.1 that they would complete the project within the time period stipulated in the agreement. In spite of giving assurance, the appellant states that respondent No.1 addressed another letter dated 22.09.2009 raising concerns over the delay in the execution of the project and called upon the appellant to send a recovery plan with appropriate actions demonstrating serious commitment to the project. As desired by respondent No.1, the appellant states that they submitted recovery plan and assured completion of the project within the time stipulated in the agreement. That their Managing Director and Chief General Manager also met the officials of respondent No.1 at Washington and explained the reasons for the delay and assured completion of the project in time. But it is the case of the appellant, that respondent No.1, without considering the same, issued the impugned notice of expulsion dated 21.10.2009 expelling the appellant from the site. According to the appellant, respondent No.1 to cover up its laches and to avoid payment to the appellant has resorted to issuing the impugned notice of expulsion dated 21.10.2009 expelling the appellant from the site. To demonstrate the same, the appellant contended that the funds of respondent No.1 are lying in Nile Commercial Bank, which collapsed. Due to collapse of Nile Commercial Bank, the funds of respondent No.1 which are kept in the said Bank, are unavailable, and even if the appellants completes the project, respondent No.1 will not be in a position to pay the money. Respondent No.1, knowing fully well about the laches on its part, and also knowing fully well that it will not be able to pay the money to the appellant even if it completed the work, as the Nile Commercial Bank in which they kept their funds collapse, played fraud upon the appellant by asking them to give recovery plan and at the same time forced them to furnish performance bank guarantees, and even before the appellant could act on the recovery plan, immediately after the appellant furnished the bank guarantees, sought to encash the same. This conduct of respondent No.1 shows their intention to defraud the appellant and unlawfully enrich themselves of the monies of the appellant. The appellant further contends that as per Clause 63.1 of FIDIC, 28 days notice period has to be given to the contractor to show progress and in case of continued default, then they can expel the contractor, but in the instant case, respondent No.1 without following the said procedure, immediately after the appellant furnished the bank guarantee, sought to encash them and issued the impugned notice of expulsion, expelling the appellant from the site, which is illegal and arbitrary and violative of principles of natural justice. Thus contending, the appellant, pending initiation of arbitration proceedings, filed the present O.Ps. under Section 9 of the Arbitration & Conciliation Act, 1996 hereinafter referred to as ‘the Act’) to declare the action of respondent No.1, in issuing notice of expulsion dated 21.10.2009 to the appellant and the consequences following therefrom as illegal and arbitrary, and to grant injunction restraining respondent No.1 from issuing letter of demand to respondent Nos. 3 and 4 in order to invoke/encash the bank guarantee and also restrain them from demanding any amount from the appellant pursuant to invocation of bank guarantee, and further restrain respondent Nos. 3 and 4 from making any payment to respondent Nos. 1 and 2 pursuant to the invocation/encashment of performance bank guarantees The Court below by order dated 20.11.2009 while ordering notice to the respondents, ordered status quo to be maintained by respondent Nos. 3 and 4 till 20.11.2007, which later was extended pending the O.P. Respondent Nos. 1 and 2 having received the notice in the petition, filed counter inter alia stating that as per Clause 67.3, the parties have agreed to settle the disputes arising out of the agreement finally under the rules of American Arbitration Association. The Arbitration proceedings shall be in English and be held in Morris Town, New Jersey, U.S.A., or such other place as is mutually acceptable to both the parties. Therefore, the civil Courts in India, which includes the Courts at Hyderabad, have no jurisdiction to entertain petitions in respect of the disputes arising out of the agreement. They further contended that, even otherwise, the provisions of Indian Arbitration and Conciliation Act are not applicable, because before entertaining an application under Section 9 of the Act, and passing an order, the Court has to satisfy for itself that there exist a valid arbitration agreement and the applicant intends to take the disputes to the Arbitrator. The appellant having not satisfied the Court that they intend to take the disputes to arbitration, the present petition under Section 9 of the Act is not maintainable. They further contended that a party seeking injunction from encashing bank guarantee has to show prima facie case of established fraud and an irretrievable injury. They further contended that as the appellant failed to meet the deadlines and failed to rectify the lapses in spite of issuing several notices, respondent No.1 issued the impugned notice of expulsion, and it cannot be said to be illegal or arbitrary. At any rate, they contended that since the Courts in India, including the Courts at Hydeabad, have no jurisdiction to entertain petitions, involving disputes arising out of the agreement in question, the Court has no jurisdiction to entertain the present petition, and prayed to dismiss the petition by setting aside the order of status quo granted earlier. Respondent Nos. 3 and 4 also filed their respective counters. The Court below considering the rival contentions, framed the following two points for determination: 1. Whether the City Civil Court, Hyderabad has no territorial jurisdiction to entertain the petition in view of the agreement between the parties to hold the arbitration proceedings in Morris Town, New Jersey, United States of America? 2. Whether the appellant is entitled for injunction restraining the first respondent from invoking the performance bank guarantee? The Court below upon considering the above points in the light of the pleadings of the rival parties and considering the evidence placed, answered point No.1 in favour of respondent No.1 and against the appellant holding that as the parties have specifically decided to settle the disputes under the Rules of American Arbitration Association and arbitration proceedings shall be in English and be held in Morris Town, New Jersey, U.S.A., the principal Civil Court at Hyderabad has no territorial jurisdiction to entertain an application under Section 9 of the Arbitration and Conciliation Act and; it also answered point No.2 in favour of respondent No.1 and against the appellant that since arbitration proceedings initiated by the appellant are pending, and even assuming that the Court has jurisdiction to entertain the appellant, yet it cannot grant the relief of declaration that the impugned notice of expulsion dated 21.10.2009 as null and void or relief of injunction restraining respondent No.1 from invoking the performance bank guarantee. Accordingly, by the judgment and decree, impugned in the appeals, dismissed the petitions. The learned counsel for the appellant submitted that the agreement entered into between the parties provides an arbitration clause in Clause 6.1(b), whereunder the parties have agreed that the contract shall be construed and interpolated in accordance with the specified laws of State of New Jersey and laws of United States of America. Clause 6.1(b) provides that the contract expressly agreed to waive any right to invoke the jurisdiction of local/national courts where this contract is performed and agrees to accept the exclusive jurisdiction of State and Federal Courts at New Jersey, U.S.A., and since they are executing the work at Southern Sudan, by virtue of operation of the above clause, the jurisdiction of National Courts at Sudan itself are excluded and not the jurisdiction of Indian Courts. Therefore, according to the appellant, the Courts in India, namely the Courts at Hyderabad have got jurisdiction to entertain the present petition filed under Section 9 of the Act, unless the parties specifically agreed to bar the jurisdiction of Indian Courts. The arbitral clause in the agreement provides exclusion of jurisdiction of Courts at Sudan and not the Indian Courts. He further submitted that respondent No.1 is having its Registered Office at Hyderabad and its activities are also being regulated from its office at Hyderabad. The appellant has submitted its tender for the contract and furnished bank guarantee and complied with the other requisite formalities from Hyderabad. In the absence of any specific clause excluding the jurisdiction of Indian Courts, in particular, the interim measures being taken by the appellant before initiation of arbitration proceedings as per the arbitration clause contained in the agreement entered into by them with respondent Nos. 1 and 2, the appellant contends that the jurisdiction of the civil Courts in India is not waived. He relied on the judgments of the Apex Court in Bhatia International v. Bulk Trading S.A.[1], Jindal Vijayanagar Steel (JSW Steel Ltd.) v. Jindal Praxair Oxygen Co. Ltd.[2] and Transmission Corpn. of A.P. Ltd. v. Lanco Kondapalli Power (P) Ltd.[3] and of this Court in INCOMM Tele Limited v. Bharat Sanchar Nigam Ltd.[4]. He further submitted that respondent No.1 to cover up its laches, and to avoid payment has resorted to issuing the impugned notice of expulsion dated 21.10.2009 expelling the appellant from the site. He submitted that Nile Commercial Bank, where respondent No.1 kept its funds collapsed. Due to collapse of Nile Commercial Bank, respondent No.1 will not be able to pay money to the appellant even if it completes the work. Respondent No.1, being well aware of this, yet played fraud upon the appellant by asking them to give recovery plan and forcing them to furnish performance bank guarantees, and immediately after the appellant furnished the bank guarantees, sought to encash the same, which shows their intention to defraud the appellant and unlawfully enrich themselves of the monies of the appellant. In support of his argument that fraud vitiates entire proceedings, irrespective of other technicalities, and as such, the Court has jurisdiction to grant injunction restraining respondent Nos. 1 and 2 from invoking the bank guarantee, placed reliance on the judgments of the Apex Court in Shrisht Dhawan v. Shaw Brothers[5], S.P. Chengalvaraya Naidu (Dead) by L.Rs. v. Jagannath (Dead) by L.Rs.[6], Delhi Development Authority v. Skipper Construction Co. (P) Ltd.[7], Commissioner of Customs v. Essar Oils Ltd.[8], Ram Chandra Singh v. Savitri Devi[9], State of A.P. v. T. Suryachandra Rao[10], Bhurao Dagdu Paralkar v. State of Maharashtra[11] and Tanna & Modi v. CIT, Mumbai XXV[12] Hence, he submitted that the Courts in India, including those at Hyderabad, have jurisdiction to entertain the present petition, and the Court below committed an error in dismissing the petitions. He relied on the judgments of the Apex Court in U.P. State Sugar Corporation v. Sumac International Ltd.[13], State of Haryana v. Continental Construction Ltd.[14] and Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co.[15] On the other hand, the counsel for the respondent Nos. 1 and 2 contended that the agreement was not entered in India. The agreement entered between the parties contains arbitration clause whereunder the parties have agreed that in case of any dispute, they would be bound by the provisions of such clause. It is also contended in view of the clause 6.1(b), the Courts in India, have no jurisdiction to entertain any dispute, including the application filed under Section 9 of the Act. He further contended that once the seat of arbitration is agreed to between the parties, in that place alone, the parties have to agitate their rights either for interim protection or to arbitrate the dispute between them. He relied on clause 6.1(b) of Section III of letter of offer in the agreement, which reads as follows: “This contract shall be construed and interpolated in accordance with substantive laws of the State of New Jersey and the applicable laws of the United States of America. By the execution of this contract, the contractor expressly agrees to waive any rights to invoke jurisdiction of local national Courts where this contract is performed and agrees to accept the exclusive jurisdiction of the State and federal courts of New Jersey, U.S.A.” According to the learned counsel, in view of the above terms agreed to between the parties, the Courts in India have no territorial jurisdiction to entertain any application either under Part I or Part II of Arbitration Act. He relied on the judgment of the Apex Court in South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises Pvt. Ltd.[16] in support of his contention that execution of performance guarantee at a particular place, will not give cause of action, to file suit at a place other than the place agreed to under the agreement. Insofar as the contention of fraud raised by the appellant is concerned, the learned counsel for respondent Nos. 1 and 2 contended that though the plea of fraud is raised by the appellant before the trial Court, the same was not proved by adducing appropriate direct evidence. He further submitted that the question of going through material with regard to fraud would arise only in cases where the court has jurisdiction to entertain the petition filed. He further supported the findings arrived by the trial Court in dismissing the O.P. and submitted that the order passed by the trial Court does not suffer from any infirmity though it gave finding on merits even after it came to the conclusion that it has no territorial jurisdiction to entertain the petitions. The counsel for the appellant, in his reply, reiterated his submission on territorial jurisdiction of the Courts in India and fraud. He also contended that the trial Court erred in coming to conclusion that plea of fraud was not raised in the pleadings and sought for setting aside the order of the trial Court. He strongly relied on the judgment of the Supreme Court in Bhatia International Case and prayed for allowing the appeal. Having heard the learned counsel for the appellant and the learned counsel for respondent Nos. 1 and 2 and perused the judgment and award under appeal, the following questions arise for consideration in these appeals: 1) Whether the Courts in India have territorial jurisdiction to entertain the application under Section 9 of the Act? 2) Whether the trial Court is justified in recording the findings on facts, having coming to the conclusion that Courts have no jurisdiction to entertain application under Section 9 of the Act, as the application itself is for an interim measure to protect the interest of parties pending arbitration between the parties? 3) Whether the respondent committed fraud on appellant? In re Question No.1: The appellant is a Public Limited Company having its Registered Office in Hyderabad. It entered into an agreement with respondent No.1, having its Registered Office at U.S.A. The work required to be executed by the appellant is at Southern Sudan. The material on record indicates that respondent No.1 is an International Consulting Firm, having its Headquarters at Morristown, New Jersey, U.S.A., and Branch Office at Hyderabad. It invited bids to execute work at Southern Sudan. The bid submitted by the appellant was accepted for packages. The agreement was entered between the appellant and respondent No. 1 on 30.04.2009. As per the terms of the contract, bank guarantees are required to be furnished by the appellant. The appellant obtained the bank guarantees from its bankers at Hyderabad and furnished the same to respondent No.1. Respondent No.1, during the subsistence of the contract, terminated the contract on various allegations and sought to encash the bank guarantees. The appellant filed O.Ps. under Section 9 of the Act seeking an injunction restraining respondent No.1 not to encash the bank guarantees. The injunction was granted by the Court below, pending O.P. injuncting respondent No. 1 not to encash the bank guarantees by maintaining the status quo with regard to bank guarantees, by both parties. The contention of appellant is that the Courts in India have territorial jurisdiction as its Registered Office is at Hyderabad, the bid was submitted from Hyderabad and bank guarantees were also obtained at Hyderabad and as such part of cause of action arose at Hyderabad and therefore the Courts at Hyderabad had territorial jurisdiction. We are unable to agree with this submission of the appellant. The appellant and the respondents in Clause 67.3 of the agreement, agreed to the arbitration clause, which to the extent relevant reads: Any dispute in respect of which: (a) the decision, if any, of the Engineer has not become final and binding pursuant to sub-clause 67.1, and (b) amicable settlement has not been reached within the period stated in sub- clause 67.2, shall be finally settled, unless otherwise specified in the contract, under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed under such Rules. The appellant and the respondents further in Appendix to Bid, relating to contract documents at Clause 6.1(b) agreed as follows; The contract shall be construed and interpolated in accordance with the substantive laws of the State of New Jersey and the applicable laws of the United States of America. By the execution of this contract the contractor expressly agrees to waive any rights to invoke jurisdiction of local national courts where this contract is performed and agrees to accept the exclusive jurisdiction of the State and Federal Court of New Jersey, USA. From a plain reading of the above clauses, it becomes clear that the appellant and respondent No.1 under the agreement have agreed for final settlement of the disputes under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators. They have also agreed that the contract shall be construed and interpolated in accordance with the substantive laws of the State of New Jersey and the applicable laws of the United States of America. By the execution of the contract, the appellant has agreed to waive their right to invoke the jurisdiction of the local national courts where the contract is performed (Southern Sudan) and also further agreed to accept the exclusive jurisdiction of the State and Federal Court of New Jersey, USA. They nowhere agreed to the jurisdiction of the Courts in India. It is the contention of the appellant that since it is an international arbitration, and as part of cause of action has arising at Hyderabad, the appellant is entitled to invoke the jurisdiction of the Courts at Hyderabad in India. This contention of the appellant is bereft of any merit. Section 2(f) of the Act defines “international commercial arbitration” to mean an arbitration relating to disputes arising out of legal relationships, whether