1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 490 OF 2009 Perma Container (UK) Line Ltd., a company having its office at 122, Amberley Road, Bush Hill Park, Enfield, Middlesex, EN1 2RB, ...Petitioner. Vs. 1 Perma Container Line (India) Pvt. Ltd. Having its Registered Office at 601, Sabari Samridhi, Opp. Union Park, Sion- Trombay Road, Chembur (West), Mumbai – 400 071. 2 Mr. Ajith Menon, residing at 1602, Kritika Towers, Sion- Trombay Road, Chembur, Mumbai – 400 071. 3 Opal Asia Logistics India Pvt. Ltd. Having its Registered office at 601, Sabari Samridhi, Opp. Union Park, Sion- Trombay Road, Chembur (West), Mumbai – 400 071. 4 Opal Asia Surveyors & Adjusters Pvt. Ltd. Having its Registered office at 603, Sabari Samridhi, Opp. Union Park, Sion- Trombay Road, Chembur (West), 2 Mumbai – 400 071. 5 Opal Hindustan Warehousing & Multimodel Pvt. Ltd. Having its Registered office at 603, Sabari Samridhi, Opp. Union Park, Sion- Trombay Road, Chembur (West), Mumbai – 400 071. ...Respondents. Mr. Prashant S. Pratap, i/by Mr. H.G. Pratap for the Petitioner. Mr. Janak Dwarkadas, Sr. Counsel with Mr. V.R. Rambhadran with Ms. Shikha Goenka for the Respondents. CORAM :- ANOOP V. MOHTA, J. DATED :- 9TH SEPTEMBER, 2009. JUDGMENT- 1 The Petitioner has invoked, Section 9 of the Arbitration and Conciliation Act, 1996 (for short, the Act), based upon an arbitration clause in agency agreement, dated 1st August, 2005, (the agreement) between the Petitioner and Respondent No.1, as there arose dispute. 2 The Petitioner is a body corporate company registered under the laws of England, United Kindgom and carries on business inter alia of transporting cargo in containers as carriers and Multimodal Transport Operators, Forwarders world wide. 3 3 Respondent No.1, an Indian registered Company, is managed and controlled by Respondent No.2, as a Director also. Respondent Nos. 3 to 5 are Indian companies set up by Respondent No.2 and are also subsidiaries of Respondent No.1, managed and controlled by Respondent No.2. He has experienced in the Shipping agency. 4 They entered into the agreement as agents for the purpose of handling the Petitioner’s cargo services in Mumbai, Nhava Sheva, Kandla, Mundra, ICD Delhi & ICD Ludhiana, Pune, Ahmedabad and Nagpur. Respondent Nos. 1 and 2 supposed to perform duties of marketing, accounting and finance, freight collections and to prepare and send/ disbursement account for all these voyages within 5 days from sailing/ arrival of the vessel. The Respondents delayed everything, did not remit the entire amount, that affected the Petitioner’s business adversely. 5 In June, 2007, the Petitioner took over the Mumbai agency from Respondent No.1, but allowed to continue for other locations. Ultimately, terminated the agency agreement 5/11/2008. 6 There are various correspondences, e-mails dated 28/12/2007, 29/12/2007, 21/04/2008, 21/05/2008, 01/01/2008 and 31/12/2008 wherein the respondents admitted liabilities, but requested for time to remit the same. Though promised and assured, the Respondent never made the payment. Lastly, on 13th November, 2008, reiterated his intention to pay the amount on certain condition but not paid even thereafter. The Respondents changed the stand by letter 4 dated 26th November, 2008 and denied the amount and counter claimed compensation from the Petitioner. There arose the dispute between the parties. 7 The Petitioner is a Foreign Company contemplated under Section 2(f) of the International Commercial Arbitration. 8 The Arbitration clause 39 of the Agreement, is as under:- “39. This agreement shall be governed by and construed in accordance with English law and any dispute arising out this agreement shall be referred to arbitration in London, one arbitrator being appointed by each party, in accordance with the arbitration acts 1950 and 1979 or any statutory modification or reenactment thereof for the time being in force. On receipt by one party of the nomination in writing of the other part’s arbitrator that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall apply. If two arbitrators properly appointed shall not agree they shall appoint an umpire whose decision shall be final.” 9 This agency agreement was terminated by the Petitioner on 5th November, 2008. The collected freight/amount due, based upon this agreement, as per the Petitioner is aggregating to USD2,013,030.00 i.e. approximately Rs.10,26,64,530.00. The alleged claims so made, are for different periods ranging from February, 2008 upto August, 2008. 10 After the termination notice, Respondents 1 and 2 ceased to be the agent w.e.f. 05/11/2008 at the ports of Kandla and mundra and the ICD’s at Ahmedabad, Baroda, Nagpur, Hyderabad, Pithampur, Vapi, Surat, 5 Sachin, Bhusaval, Aurangabad, Miraj, Indore and Ratlam and thereby were also directed to stop all collection of freight and other charges and to hand over the containers also. 11 This Court on 5th May, 2009, considering the averments made, passed the interim order, which has been modified on 8th May, 2009, and is in force since then. 12 Respondent Nos. 1, 2 and 3 filed their reply and resisted the Petition on all counts. The Petitioner has filed Affidavit in rejoinder dated 15th July, 2009 and Respondent Nos. 2 and 3 filed their respective sur-rejoinders dated 23rd July, 2009. 13 The Respondents basically contended that; this Court has no jurisdiction to pass any order under Section 9 of the Act, based upon the agreement of the year 2005; this Court, in India, has no jurisdiction to pass any such injunction/ order; the Agreement of 2005 is not in existence, in view of the last agreement dated 1st June, 2007 signed by the Manager of the Petitioner and Respondent’s Managing Director; and therefore claims so raised are also impermissible. 14 The agreement of 2007 also provides an arbitration clause. There is no dispute that both these agreements provide identical arbitration clause which is already reproduced above. 15 The learned counsel appearing for the Petitioner has relied on 6 Bhatia International Vs. Bulk Trading S.A. And Another (2002) 4 S.C.C. 105. The relevant points are:- “29. We see no substance in the submission that there would be unnecessary interference by courts in arbitral proceedings. Section 5 provides that no judicial authority shall intervene except where so provided. Section 9 does 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 9 for stay of arbitral proceedings or to challenge the existence or validity of the arbitration agreements or the jurisdiction of the Arbitral Tribunal. All such challenges would have to be made before the Arbitral Tribunal under the said Act.” “31. If as party cannot secure, before or during the pendency of the arbitral proceedings, an interim order in respect of items provided in Sections 9(i) and (ii), the result may be that the arbitration proceedings may themselves get frustrated e.g. By non-appointment of a guardian for a minor or person of unsound mind or the subject matter of the arbitration agreement not being preserved. This could never have been the intention of the legislature.” 32. To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the 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 out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply.” The same principle has been further followed and reiterated in Venture Global Engineering Vs. Satyam Computer Services Ltd. & Anr. 7 (2008) 4, S.C.C. 190, (Indtel Technical Services Private Ltd. Vs. W.S.Atkins Rail Ltd.), (2008) 10 S.C.C. 308 . In view of above, it is clear that this Court has jurisdiction to pass interim order and or such order to protect and secure the amount of the claim. 16 The learned Senior Counsel appearing for the Respondents, contended by relying on Oberai Construction Pvt. Ltd. Vs. Worli Shivshahi Co-op. Hsg. Society Ltd., 2008(5) Bom C.R. 855, Nasir Husain Films Pvt. Ltd. Vs. Saregama India Pvt. Ltd., Appeal No. 457 of 2007 in Arbitration Petition No. 81 of 2007 dated 7 th April, 2008, referring to SBP & Company Vs. Patel Engineering Limited & Anr. 2005(8) S.C.C. 618 = 2006(1) Bom.C.R. 585 (D.B.) (C.B.), that this Court under Section 9 of the Act, must decide the existence of the agreement finally and the claims under it though an Arbitrator has been appointed in pursuance to the above arbitration clause and intimated to the Respondent, about his authority and jurisdiction to decide these issues under Section 30 and 31 of the English Arbitration Act, 1996 (for short, the English Act). 17 In Oberai Construction Pvt. Ltd. (Supra), the Division Bench of this Court based upon ( SBP & Company) (Supra) in para 11 observed as under:- “11. The contention that the learned Judge had permitted the parties to proceed under section 11 may now be dealt with. Under Section 11 on an application made for constituting 8 Arbitral Tribunal and further whether the subject-matter is convered by the arbitral clause can be gone into by the Court. See Patel Engineering (supra). It is submitted that once the Court under Section 9 decides the issue as to the existence of a contract containing an arbitral clause or an arbitration agreement in writing or subject-matter being covered by the arbitral clause there is no question of the issue being once again being considered by the arbitral clause, under Section 11. If the argument advanced on behalf of the appellants is accepted namely that the decision as to the existence of arbitration agreement in a proceeding under Section 9 is final then that must conclude the issue. Once a issue is decided by a Court in a competent proceeding, the finding on that issue cannot be gone into by another Court or judicial forum unless its finding was set aside by a Superior Court. The principle of issue estoppel will arise and bar the party who was party to the earlier proceedings from once again raising the issue which was concluded. The learned Judge however, has left it open to the appellants to submit more material and documents while submitting their case under section 11. Under section 11 as noted earlier the issue will be open for consideration if the issue has not been decided by a Competent Court or Judicial forum. Though section 9 of the Act confers a power to grant only interim relief, the grant of relief is subject to the Judicial forum or Court having jurisdiction to grant interim relief. As noted in Patel Engineering (supra) the Court while deciding an application under Section 9 can decide the issue as to the existence of an arbitral clause or the subject-matter being covered by the arbitral clause. Such a decision a finding as to jurisdiction cannot be prima facie, if the obiter dicta in Patel Engineering (supra) is to be accepted. The issue would stand finally concluded. If the issue is sought to be raised before another Court or Judicial forum, considering the principles of issue of estoppel, that Court or Judicial forum would be estopped from deciding that issue. The finding of the learned Judge in that case will have to be set aside. In our opinion, the decision rendered as to the existence of an arbitral agreement is final and not prima facie on the facts of the case.” The Division Bench has on merit confirmed the findings of the Single Judge. 18 In Nasir Husain (supra), the same Division Bench has observed as under:- 9 “5. The Supreme Court in SBP & Co. Vs. Patel Engineering Ltd., and another reported in (2005) 8 S.C.C. 618, has held that when a party approaches the court under Section 9 for grant of interim relief, asserting that there was a dispute liable to be arbitrated upon in terms of the agreement and the opposite party disputes the existence of the arbitration agreement as defined in the Act or raises a plea that the dispute involved was not covered by the arbitration clause, considering the terminology of Section 9 of the Act, that court has necessarily has jurisdiction to decide whether there is an arbitration agreement which is valid in law and whether the dispute sought to be raised is covered by the agreement. There is no indication in the Act, that the powers of the court are curtailed on these aspects. On the other hand, Section 9 insists, that once approached in that behalf, “the court shall have the same power for making orders as it has for the purpose of and in relation to any proceeding before it”. The Court then observed, “Surely, when a matter is entrusted to a civil Court in the ordinary hierarchy of courts without anything more, the procedure of that court would govern the adjudication.” A Petition under Section-9 is not a suit but a civil proceeding. Considering Section 141 of the Code of Civil Procedure, the procedure governing suits will be applicable, as far as it can be made applicable, in all civil proceedings. It will therefore, be open to the court to frame issues on these aspects and decide the same. On such issue being decided, the findings on the issues would conclude the issue between the parties on those issues and the said finding cannot be reopened in any proceeding between the parties either on application under Section-11 of before an arbitral Tribunal. The only remedy would be in an appeal filed under Section 37 of the Act. 6. While considering Section 9 of the English Arbitration Act in Nigal Peter Albon (trading as N.A. Carriage Co.) and Naza Motor Trading SDN BHD and Ors. (2007) 2 All ER 1075, a Division Bench of the England and Wales High Court, in the context of their law referred to the judgment of the Court of Appeal in Fiona Trust Vs. Prialoy (2007) EWCA 20, that if the construction of an arbitration agreement is in issue, that issue has to be decided under Section-9 of the 1996 Act, before a stay can be granted under that section. Reference in support was made to the guide-lines laid down in Brise Vs.St. David (1999) BLR 19, which judgment though reversed in 10 appeal the guide-lines were approved by the Court of Appeal in (2000) 1 LILR 522 and again in Al Naimi Vs. Islamic Press Agency (2000) 1 LLLR 522. The directions are 1) where it is possible to do so, to decide the issue on the available evidence presently before the court that the arbitration agreement was made and grant the stay; (2) to give directions for the trial by the court of the issue; (3) to stay the proceedings on the basis that the arbitrator will decide the issue and (4) where it is possible to do so to decide the issue on the available evidence that the arbitration agreement was not made and dismiss the application for the stay. Considering these guide-lines a Court can try and subject to one qualification should decide the issue whether the arbitration agreement was concluded. The qualification is in a case where there is an issue which the court cannot resolve on the available evidence on the application as to whether the arbitration agreement was concluded, the court indeed can stay the proceedings so that the arbitrator can decide the issue. In England also, the issues of existence of arbitral clause or whether the dispute falls with the arbitration clause can in circumstances be decided under Section-9 of this Act. 7. In our opinion, under the Act of 1996 and considering the judgment in Patel Engineering (supra) and Section 141 of the Code of Civil Procedure, the issue of existence of an arbitral agreement as also the issue as to whether the subject matter is covered by the arbitral clause will have to be decided as an issue when such issue arises before a court entertaining the petition under Section-9 of the Act. A similar view has been taken by us in another unreported judgment of this court in Oberai Construction Pvt. Ltd. Vs. Worli Shivshahi Co.Op. Hsg. Society Ltd. decided on 30th January, 2008 in Appeal No.619 of 2007. To that extent the finding by the learned Judge that his finding is prima facie and leaving the issue open for consideration in the proceeding under Section 11 would in our opinion not be the correct statement of law under the Act. A Court considering an application and or petition under Section 9 of the Act, has jurisdiction to decide whether there is an arbitral clause and secondly whether the dispute raised falls within the scope of the arbitral clause.” 19 It is, therefore, relevant to refer the observations of the Supreme 11 Court decision in S.B.P. Company (Supra) as the Division Bench has relied upon the same and treated it to be “obiter dicta” has made above observations as quoted in Oberai Construction Pvt. Ltd. and Nasir Husain Films Pvt. Ltd.(supra). 20 It is important to note that the Apex Court recently in National Insurance Company Limited Vs. Boghara Polyfab Pvt. Ltd. 2009(4) Bom. C.R. 891, has reaffirmed and reiterated the scope and purpose of Section 11, 16 by elaborating the same as under:- “The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evbidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the Court at various stages of the proceedings before the Arbitral tribunal.” “47(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary aspects as indicated in the earlier parts of this judgment. These will be, his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators.” (emphasis supplied) This Court also examined the ‘competence’ of the Arbitral Tribunal to rule upon its own jurisdiction and about the existence of the arbitration clause, when the Chief Justice or his designate had appointed the Arbitral Tribunal under Section 11 of the Act, after deciding upon such jurisdictional issue. This 12 Court held: “We are inclined to the view that the decision of the Chief Justice on the issue of jurisdiction and the existence of a valid arbitration agreement would be binding on the parties when the matter goes to the Aritral Tribunal”. Section 16 is said to be the recognition of the principle of Kompetenz – Kompetenz. The fact that the Arbitral Tribunal has the competence to rule on its own jurisdiction and to define the contours of its jurisdiction, only means that when such issues arise before it, the Tribunal can and possibly, ought to decide them. This can happen when the parties have gone to the Arbitral Tribunal without recourse to section 8 or 11 of the Act. But where the jurisdictional issues are decided under these sections, before a reference is made, section 16 cannot be held to empower the arbitral tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made. The competence to decide does not enable the arbitral tribunal to get over the finality conferred on an order passed prior to its entering upon the reference to it was made. The competence to decide does not enable the arbitral tribunal to get over the finality conferred on an order passed prior to its entering upon the reference by the very statute that creates it. That is the position arising out of section 11(7) of the Act read with section 16 thereof. The finality given to the order of the Chief Justice on the matters within his competence under section 11 of the Act, are incapable of being reopened before the Arbitral Tribunal. “ 16. It is thus clear that when a contract contains an arbitration clause and any dispute in respect of the said contract is referred to arbitration without the intervention of the Court, the Arbitral Tribunal can decide the following questions affecting its jurisdiction: (a) whether there is an arbitration agreement; (b) whether the arbitration agreement is valid; (c) whether the contract in which the arbitration clause is found is null and void and if so whether the invalidity extends to the Arbitr4ation clause also. It follows therefore that if the respondent before the Arbitral Tribunal contends that the contract has been discharged by reason of the claimant 13 accepting payment made by the respondent in full and final settlement, and if the claimant counters it by contending that the discharge voucher was extracted from him by practicing fraud, undue influence, or coercion, the Arbitral Tribunal will have to decide whether the discharge of contract was vitiated by any circumstance which rendered the discharge voidable at the instance of the claimant. If the Arbitral Tribunal comes to the conclusion that there was a valid discharge by voluntary execution of a discharge voucher, it will refuse to examine the claim on merits, and reject the claim as not maintainable. On the other hand, if the arbitral tribunal comes to the conclusion that such discharge of contract was vitiated by any circumstances which rendered it void, it will ignore the same and proceed to decide the claim on merits. 17. Whether the intervention of the Court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is (i) issues which the Chief Justice or his Designate is bound to decide; (ii) issues which he can also decide, that is issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide. 17.1 The issues (first category) which Chief Justice/ his designate will have to decide are:- (a) Whether the party making the application has approached the appropriate High Court. (b) Whether there is an arbitration agreement and whether the party who has applied under section 11 of the Act, is a party to such an agreement. 17.2 The issues (second category) which the Chief Justice / his designate may choose to decide (or leave them to the decision of the Arbitral Tribunal) are: (a) Whether the claim is a dead (long barred) claim or a live claim. (b) Whether the parties have concluded the contract/ transaction by recording satisfaction of their mutual rights and 14 obligation or by receiving the final payment without objection. 17.3. The issues (third category) which the Chief Justice/ his designate should leave exclusively to the Arbitral Tribunal are: (i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration). (ii) Merits or any claim involved in the arbitration. It is clear from the scheme of the Act as explained by this Court in SBP & Co., that in regard to issues falling under the