arbplod1375-10.doc 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION LOD.1375 OF 2010 Max Buck Gmbh & Co. KG .. Petitioners Versus Anik Industries Ltd., Mumbai .. Respondents Mr.V.R.Dhond with Ashwin Shankar and Bimal Rajshekar for petitioner Mr.G.L.Rawal, Senior Advocate with Ramesh Saboo and Mr.H.R.Shetty for respondents CORAM: S.C.DHARMADHIKARI, J. DATE : 23rd FEBRUARY 2011 P.C. 1] This is a petition under section 9 of the Arbitration and Conciliation Act, 1996 seeking principally a relief to secure the claim of petitioner in the arbitration and for an injunction restraining the respondents not to sell, alienate, create any third party interest of the coal cargo located at Plot sachin at Magdala [see prayer clause (b)]. Prayer clauses (c) and (d) of the petition need not be referred to in great details for the simple reason that this petition was moved before a learned Single Judge of this Court and learned Single Judge arbplod1375-10.doc 2 on 20th December 2010 granted an ad-interim injunction. The ad- interim injunction was in terms of prayer clause (b) and liberty was given to the respondents to apply for vacating and/or modifying the order after giving petitioners a reasonable notice. 2] Thereafter, the parties have filed their affidavits in reply and rejoinder and the petition is taken up for admission. 3] When the petition was placed for admission, Mr.Rawal, learned Senior Counsel appearing for respondents raised a preliminary objection to the jurisdiction of this Court. He invited my attention to the compilation of the documents tendered by the petitioner at which at Serial No.1 is the contract between parties. He submits that in the sale contract dated 11th August 2010 Article 70 speaks of law and arbitration. In his submission, English law is the governing law in the contract. Any dispute arising during the execution of the contract, firstly has to be settled amicably by mutual agreement between the contracting parties and should no agreement be reached, then, the dispute shall be submitted for arbplod1375-10.doc 3 settlement to the laws of Singapore (Singapore International Arbitration Court). In his further submission, this clause clearly means that parties have expressly and in any event impliedly excluded applicability of Part I of the Arbitration & Conciliation Act, 1996. The moment part I is excluded in this manner, then section 9 which falls in the said part cannot be taken recourse to and, therefore, the petition cannot be filed in this Court. Thus, this Court would have no jurisdiction to entertain and try this petition. He places reliance upon the judgement of the Supreme Court in the case of Bhatia International Vs. Bulk Trading SA, reported in (2002) 4 SCC 105 and particularly the observations made in para 32 thereof. 4] On the other hand, Mr.Dhond learned Counsel appearing for petitioners would submit that neither the judgement in the case of Bhatia International nor the phraseology of the contract and the subsequent decision in Venture Global Engineering Vs. Satyam Computer Services Ltd. & Anr., reported in A.I.R. 2008 S.C. 1061 is of any assistance to the respondents. He submits that the arbplod1375-10.doc 4 Supreme Court has held in clearest terms that in case of International Commercial Arbitration held out of India, the provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. For the law laid down in the Bhatia International's case to apply, there must be express or implied exclusion of Part I of the Act or any of its provisions. Article 70 read as a whole does not exclude the applicability of Part I or any of the provisions falling thereunder and in such circumstances, this petition has been rightly instituted in this Court. This Court, therefore, does not lack jurisdiction as contended by the learned Senior Counsel. 5] Before proceeding further, it would be proper if the Court deals with the issue of jurisdiction. In Bhatia International Vs. Bulk Trading SA the Supreme Court had an occasion to consider as to whether Part I would apply to International Commercial Arbitration held outside India. The appellant before the Supreme Court contended that Part I does not apply if the arbitration takes place outside India. However, repelling that contention and on an arbplod1375-10.doc 5 analysis of the entire Act and the scheme underlying thereunder, the Supreme Court concluded that the Act is one consolidated and integrated Act and general provisions applicable to all arbitrations will not be repeated in all Chapters or parts. The general provisions will apply to all Chapters or Parts unless the Statute expressly states they are not to apply and there is separate provision or separate chapter or part. Thereafter, the Supreme Court has by applying the principles of statutory interpretation concluded that 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 case 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, laws or rules chosen by the parties would prevail. Any provision which is contrary to or excluded by that law or rules will not apply. Reading para 32 of this judgement, I am of the opinion that in the present case, there is nothing in Article 70 which would enable me arbplod1375-10.doc 6 to hold that parties have expressly or impliedly excluded the applicability of Part I of the Act or any of its provisions. In such circumstances by stating the governing law and by stating the manner in which the dispute would be settled and the resolution thereof by the laws of Singapore, which could be said to be a forum chosen, it cannot be held that parties have excluded expressly or even impliedly part I of the Act. The learned Senior Counsel has invited my attention to the observations of the Supreme Court in Bhatia Internation's case (supra) and in the subsequent judgement (M/s.Ventue Global) to contend that the Supreme Court has emphasised that the interpretation that is placed by the High Courts of Orissa, Bombay, Madras, Delhi and Calcutta has not been preferred but at the same time, the Supreme Court holds that the Act does not appear to be a well drafted legislation. These High Courts cannot be faulted for interpreting the statute in the manner indicated in the Supreme Court Judgement. The Supreme Court however on proper and conjoint reading of the Act itself, concluded as above. 6] The judgement in the case of Bhatia International was arbplod1375-10.doc 7 rendered on 13th March 2002. Nearly 9 years have gone by but the Supreme Court observations have not been taken into consideration by the concerned Authorities. It is high time that a properly drafted legislation is put in place considering that Foreign Direct Investment in India is encouraged in core sectors and that there is increasing emphasis to resolve disputes by recourse to arbitration, then, a reasonable expectation would be that a law which is complete and proper is enacted. If parties have to go to Court only to seek its intervention for properly reading and interpreting an enactment, then, that creates an impression which can hardly be termed conducive in an Industrial and Trade atmosphere post globalisation, liberalisation and privatisation. If the appropriate legislature does not take corrective steps, even after the reminder of the Highest Court in the Country, then parties are left to approach Law Courts, time and again. Now, atleast it is hoped that after the Supreme Court observations, the Legislature will step in and take note of them. I say nothing more. 7] Having over-ruled the preliminary objection, what arbplod1375-10.doc 8 remains for consideration is the request of petitioner to grant interim measures. The petitioners have, in petition itself pointed out that the discharge commenced on 5th October 2010. The discharge operations were halted by the petitioners on two occasions. The details thereof are set out in the petition and particularly in para 3. It is stated that a letter dated 15th October 2010 was addressed and it was pointed out that the hatches were closed due to respondent's failure to clear the letter of credit as payment to the petitioners. They had not paid for the cargo and yet discharged 85% of the same. Therefore, the petitioner was entitled to stop discharge of the cargo as long as their dues remained unpaid. 8] After so referring, what has been stated is that a demurrage invoice came to be raised and no payment has been received. A reply dated 10th December 2010 was received on 16th December 2010 but the contents thereof are not admitted. As far as para 4 of the petition is concerned that contains the allegations with regard to the balance sale price invoice dated 23rd November 2010 for U.S.$ 163852.92 and U.S.$ 199,499.64. It is contended that the arbplod1375-10.doc 9 sale contract is dated 11th August 2010. There were three addendums. Invoices were raised. The sum representing 10% of the sale value remains unpaid by the buyers. The original payments were to be made by letter of credit but thereafter, petitioners have alleged that the respondents themselves lifted 90% of the cargo by making payment. For the balance cargo, lien of the petitioners has not been discharged. As long as the petitioners' dues were not paid in full, going by the terms of the contract, the petitioners could claim the cargo. The rights in the cargo do not pass in favour of the buyer until full payment. For all these reasons, interim injunction as prayed has been rightly granted at the ad-interim stage and it should be confirmed is the request. 9] Additionally, it is pointed out that contrary to the injunction order and in breach thereof, the cargo has been lifted, removed and disposed of by the respondents. My attention is invited to the affidavit in rejoinder and the annexures thereto in this behalf. Today an additional affidavit in reply in the form of affidavit in sur- rejoinder has been filed and it is pointed out that there is no breach arbplod1375-10.doc 10 committed of the order dated 20th December 2010. At the time of passing of the order, approximately 2500 mt of coal was lying with the respondent. 10] On the basis of the material which can be said to be sketchy and inadequate and only in the form of photographs, it will not be possible to hold that the respondents have committed any breach of order dated 20th December 2010. The breach of the order of injunction passed by this Court is an serious issue and matter, if the petitioners are alleging deliberate breach and violation of the order and, therefore, praying for initiation of contempt proceedings, then, all the more cogent, reliable and satisfactory material should have been placed before the Court. The annexures to the rejoinder hardly satisfy this test and, therefore, I am in agreement with the learned senior counsel that no case for initiation of contempt proceedings or any breach of injunction is made out. That disposes of the case of petitioner in so far as initiation of contempt proceedings. arbplod1375-10.doc 11 11] On hearing both counsel for sometime, as far as interim measures are concerned and perusing with their assistance the petition, compilation of documents and all affidavits on record, I am of the view that this Court should not express a tentative or prima facie opinion also on the pleas raised because that would prejudice the case of both sides in the arbitration. Suffice it to note that all the allegations in the petition have been denied and it is pointed out that respondents have a counter claim. Considering the fact that the cargo is of non-cooking coal and the contract is dated 11th August 2010 and the discharge had commenced on 5th October 2010 so also nearly 90% of the cargo has been removed, interest of justice would be served if the order of injunction already made is modified and the respondents are permitted to sell and dispose of the balance cargo but on certain terms. In other words, respondents can dispose of the balance cargo stated to be of 2500 mt approximately lying at the port of discharge on their filing an affidavit in this Court disclosing details of the transactions and dealings in that behalf. Such disclosure on affidavit be made the moment the contract has been executed in that behalf and in any event within two weeks from the arbplod1375-10.doc 12 date the final document in relation to the cargo is executed by the respondents with the interested buyers/third parties. Respondents will be permitted to give delivery of the said cargo only after the affidavit has been filed and they secure the claim to the extent of the sold material by giving a bank guarantee of a nationalised bank. On these conditions being complied with the balance cargo can be dealt with by the respondents or the injunction as granted by the order dated 20th December 2010 shall continue till the disposal of the arbitral reference. It is once again clarified that this Court has not rendered any opinion, on the versions which have been placed by both sides before me. Petition disposed of in the aforementioned terms. No costs. (S.C.DHARMADHIKARI, J)