IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:08.11.2011 CORAM THE HON'BLE MRS. JUSTICE R.BANUMATHI and THE HON'BLE MS. JUSTICE R.MALA O.S.A.Nos.280 to 283 of 2011 Financial Software & Systems Pvt. Ltd., rep. by its Head-Finance, Mr.G.Sivakumar, 502-A, South Block, Tidel Park, No.4, Canal Bank Road, Chennai-600 113. ... Appellant in all appeals. vs. 1.ACI Worldwide Corp. 6060, Coventry Elkhorn, NE-68022-6482 USA. 2.ACI Worldwide (Asia) Pte. Ltd., 300, Beach Road, #21-03/06 The Concourse Singapore – 199555. 3.ACI Worldwide Solutions Private Limited, 6th Floor, Housefin Building, Bandra Kurla Complex, Bandra East, Mumbai-400 051. ... Respondents 1 to 3 in O.S.A.Nos.280, 281 & 283/2011 1.ACI Worldwide Corp. 6060, Coventry, Elkhorn, NE-68022-6482 USA. 2.ACI Worldwide (Asia) Pte. Ltd., 300, Beach Road, #21-03/06 The Concourse Singapore – 199555. 3.ACI Worldwide Solutions Private Limited, 6th Floor, Housefin Building, Bandra Kurla Complex, Bandra East, Mumbai-400 051. https://hcservices.ecourts.gov.in/hcservices/ 4.Andhra Bank, Cyber Gateway, D' Block, 3rd Floor, Hitec City, Madhapur, Hyderabad-500 081 Attn: Mr.R.Athmaram, General Manager (DIT) 5.Axis Bank Limited Maker Tower "E", 3rd Floor, Cuffe Parade Colaba Mumbai-400 005 Attn: Mr.S.Satpathy Sr. Vice President – IT 6.Canara Bank, Department of Information Technology, Naveen Complex, 14, M.G.Road, Bangalore – 560 001. Attn: Mr.B.Shandilya, Deputy General Manager 7.The Federal Bank Limited, Corporate office – Federal Towers, Alwaye, Kerala – 683 101 Attn: Mr.G.Rajagopalan Nair, Additional General Manager, Systems and Technology Department. 8.HDFC Bank Limited, HDFC Bank House, Senapathi Bapat Marg Lower Parel, Mumbai – 400 013 Attn: Mr.Anil Jaggia CIO 9.HP India Sales Pvt. Ltd., (IT Outsourcing Partner of Bank of Baroda) 101-102, Enterprise Centre, Off Nehru Road, Next to Orchid Hotel, Mumbai-99 Attn: Mr.Simhan Niganara Project Director. 10.ICICI Bank, ICICI Bank Towers, Bandra-Kurla Complex, Mumbai-400 051 Attn: Mr.Mukesh Kumar Jain Sr. General Manager. 11.Indian Bank, Technology Management Department Head Office 66, Rajaji Salai, Chennai-600 001 Attn: Mr.Asif S.A. Assistant General Manager-TMD https://hcservices.ecourts.gov.in/hcservices/ 12.Induslnd Bank Limited, IBL House, CTS No.179G, MIDC Cross Road -B, Extn. Off Andheri Kurla Road, Andheri (East), Mumbai – 400 093 Attn. Mr.Sanjay Jaiswal GM – IT 13.Kotak Mahindra Bank Limited Kotak Infiniti, Building No.21, Raheja Infinity Park, Off Western Express Highway, Goregaon Mulund link Road, Malad (E) Mumbai – 400 097 Attn: Mr. Vikram Sud COO 14.Oriental Bank of Commerce, F-14, 14th Floor, Competent house, Connaught Place New Delhi – 110 001 Attn: Mr.S.K.Sharma DGM – DIT 15.Punjab National Bank, H.O:5, Parliament Street, New Delhi – 110 001 Attn: Mr.Ajay Misra, General Manager – Information Technology 16.Royal Bank of Scotland (formerly ABN Amro Bank) 414, Empire Complex, S.B. Marg, Lower Parel, Mumbai – 400 013 Attn. Mr.Sudhir Prabhu Head-Application Support-Consumable Banking 17.State Bank of India, Global IT Centre, Sector-11, CBD Belapur, Navi Mumbai – 400 614 Attn: Mr.Amitabh Kumar GM – Alternate Channels & Payments Systems Group 18.Union Bank of India 1/1A, Technology Centre, Adhi Sankaracharya Marg Opp. Powai Lake, Powai Andheri (East) Mumbai – 400 072 Attn: Mr.T.K.Srivatsava General Manager – DIT ... Respondents in OSA.282/2011 https://hcservices.ecourts.gov.in/hcservices/ Original Side Appeals are filed under Order XXXVI Rule 1 of the Original Side Rules read with Clause 15 of the Letters Patent against the common order dated 12.04.2011 in O.A.Nos.155 to 157 of 2011 and A.No.1002 of 2011 on the file of this Court. O.A.155 OF 2011: Original Appllication No.155 of 2011 praying that this Hon'ble Court be pleased to grant an order of ad-interim injunction restraining the Respondents their affiliates, associates, agents, men, servants and/or anyperson/s claiming through or under the Respondents, either directly or indirectly, from providing any support of whatsoever nature to other system integrators/Service providers/partners of the Respondents, by whatever name called in violation of clause 6 of the SRA. O.A.NO.156 OF 2011 Original Appllication No.156 of 2011 praying that this Hon'ble Court be pleased to grant an order of ad-interim injunction restraining the Respondents their affiliates, associates, agents, men, servants and/or any person/s claiming through or under the Respondents, either directly or indirectly, from customer banks (listed in Schedule 1 of this application) without bifurcation of the Applicant's intellectual properties and services and ACI's intellectual properties and Services by the Applicant and the Respondents. A.NO.1002 OF 2011 Appllication praying that this Hon'ble Court be pleased to grant an order of interim direction directing the Respondents, to provide all the required products licenses, common development environment and other support services, including but not limited to product upgrades, version upgrades, fixes and release upgrades etc, as per the Purchase Order dated 7th January 2011 issued by Kotak Mahindra Bank and the Respondents, to enable the Applicant to meet the requirements of the RFP released by Kotak Mahindra Bank, basis the letter of support dated 2nd December 2010 given by the 3rd Respondent to Kotak Mahindra Bank. O.A.NO.157 OF 2011 Original Appllication No.157 of 2011 praying that this Hon'ble Court be pleased to appoint a Receiver who will raise AMC Invoices for the period commencing from 1st April 2010 to 31st March 2011 on the existing customers (as listed in Schedule 1 of this application) of the Applicant herein, in the already existing format of the https://hcservices.ecourts.gov.in/hcservices/ Applicant and to receive the amounts so invoiced from the Applicant's customers and to deposit the same in a bank account to be opened for this specific and exclusive purpose, pending disposal of the proposed arbitration proceedings. For Appellant : Mr.P.S.Raman, Senior Counsel for M/s.R & P Partners For Respondents : Mr.AL.Somayaji Senior Counsel for Mr.T.K.Bhaskar; Mr.Srinath Sridevan and Mr.K.Harishankar COMMON JUDGMENT R.BANUMATHI,J Challenge in these appeals is the order of single Judge dismissing the applications [O.A.Nos.155 to 157 of 2011 and A.No.1002 of 2011] filed under Section 9 of Arbitration and Conciliation Act, 1996 holding that the substantive as well as the procedural law is outside the country [Singapore] and that the parties have impliedly excluded the jurisdiction of Part I of Arbitration and Conciliation Act, 1996. Though the appeals are of the year 2011, with the consent of both the counsel, main appeals itself were taken up for final disposal. 2. Factual background:- Appellant-Financial Software & Systems Private Limited was a distributor of ACI's Software products such as “BASE24” and “PRM” in India under an International Distribution Agreement [IDA] entered into on 29.04.1998 between the Appellant and the 2nd Respondent-ACI Worldwide (Asia) Private Limited. Subsequently during 2005, certain disputes and differences arose between the Appellant and the 2nd Respondent-ACI and Appellant filed suit in C.S.No.628 of 2008 to settle the disputes and differences. Several rounds of discussions and consultations took place between the Appellant and ACI which entering into a Settlement and Release Agreement [SRA] dated 17.02.2010. SRA provides amongst other things and set out in detail the full and final settlement and resolve, between the Appellant and ACI for valuable consideration in terms of any and all disputes and differences and further provided for the effective release and discharge of either Party from any and all claims and all obligations past, present or future under IOI, IDA and all other agreements signed between the parties. The disputes resolutions clause in Clause 14.6 of SRA stipulates that “agreement shall be construed and enforced in accordance with and governed by laws of Singapore”. Parties have also agreed that the disputes will https://hcservices.ecourts.gov.in/hcservices/ be settled exclusively by compulsory arbitration in accordance with Arbitration Rules of Singapore International Arbitration Centre (SIAC). 3. Appellant was/is always ready and willing to perform its duties and obligations under SRA. Inspite of Appellant's persevering, diligent and earnest attempts to resolve all open items in the SRA, the Respondents are not ready and willing to perform their reciprocal promises as contemplated under the SRA. Stating that Appellant had continued to perform its obligations as agreed to in the Software agreements [customer contracts] and that ACI is not performing its obligations under the SRA and that the Respondents have deeply impacted the Appellant's financials, causing loss of revenue and loss of goodwill and reputation to the Appellant, Appellant has filed applications under Section 9 of Arbitration and Conciliation Act restraining the Respondents, their men and agents from providing any support to other System Integrators/Service Providers/Partners of the Respondents in violation of Clause 6 of the SRA. 4. Respondents resisted the application denying all the allegations and interalia raising preliminary objection of maintainability. Respondents averred that application under Section 9 of the Act is not maintainable. It was further averred that jurisdiction of Indian Courts are barred under Clause 14.6 of SRA, since Clause states that agreement shall be construed and enforced in accordance with the laws of Singapore. Enforcement of terms of SRA or for any other remedy arising out of the SRA is to be settled only in accordance with the compulsory arbitration under Singapore International Arbitration Centre (SIAC). Rule 18 of SIAC Rules specifies that the parties may agree on the "Seat of Arbitration" and failing such agreement “Seat of Arbitration” shall be Singapore, unless the Arbitral Tribunal decides otherwise. Since substantive law is laws of Singapore and procedural law applicable is also SIAC Rules, Section 9 application is not maintainable. 5. Upon consideration of rival contentions and referring to Clause 14.6 of SRA and also Clause 18 of SIAC Rules, the learned Judge held that substantive law applicable to the agreement is the laws of Singapore and the procedure for holding arbitration proceedings is also as per the arbitration Rules of SIAC and the Seat of Arbitration is also at Singapore and on correct interpretation, Seat of Arbitration is to be Singapore and therefore Madras High Court will have no jurisdiction to entertain and try the application under Section 9 of Arbitration and Conciliation Act, 1996. 6. Mr.P.S.Raman, learned Senior Counsel for Appellant has contended that the learned Judge erred in holding that Madras High Court does not have jurisdiction to decide Section 9 application and the said finding of the learned Judge is contrary to the law laid https://hcservices.ecourts.gov.in/hcservices/ down by the Supreme Court. It was contended that Appellant and the 3rd Respondent are Indian entities and the 1st Respondent is the entity incorporated in the United States of America and the parties could not have therefore impliedly excluded application of the Act. Learned Senior Counsel would further contend that when there was no agreement relating to "Seat of Arbitration" in the agreement, the learned Judge erred in holding that "Seat of Arbitration" was Singapore. Placing reliance upon (2002) 4 SCC 105 [Bhatia International v. Bulk Trading S.A. and another] and (2008) 4 SCC 190 [Venture Global Engg. v. Satyam Computer Services Ltd.], learned Senior Counsel argued that learned Judge has misinterpreted the law laid down by three Judges of Supreme Court in Bhatia International which was subsequently followed by Venture Global Engineering case. Learned Senior Counsel would further submit that the facts referred to in (2011) 6 SCC 179 [Dozco India Private Limited v. Doosan Infracore Company Limited] and 2009 93) ARBLR 162 (Delhi) [Max India Limited v. General Binding Corporation] were completely different to the facts of the instant case. 7. Countering the arguments of learned Senior Counsel for Appellant, Mr.AL.Somayaji, learned Senior Counsel for Respondents contended that as per Clause 14.6 of SRA, Singapore laws govern the contract and procedure for holding arbitration proceedings is also as per the Arbitration Rules of SIAC and parties have expressly excluded application of Part I of the Act. Learned Senior Counsel would further contend that there is nothing in the agreement for applicability of Indian laws and when there is specific exclusion of Indian laws, application under Section 9 of Arbitration Act is not maintainable. 8. The question falling for our consideration is whether this Court would have jurisdiction to entertain Section 9 application. 9. Before we advert to various decisions relied on by the learned Senior Counsel for both sides, we may usefully refer to the relevant Clauses. Clause 18 of SIAC Rules deals with “Seat of Arbitration” which reads as under:- “18. Seat of Arbitration 18.1 The parties may agree on the seat of arbitration. Failing such an agreement, the seat of arbitration shall be Singapore, unless the Tribunal determines, having regard to all the circumstances of the case, that another seat is more appropriate.” 10. Disputes resolution clause as contained in Clause 14.6 of SRA stipulates as under:- https://hcservices.ecourts.gov.in/hcservices/ “14.6 Enforcement of Agreement. This Agreement shall be construed and enforced in accordance with and governed by the laws of Singapore. The Parties hereby agree that any act to enforce the terms of this Agreement, or for any other remedy arising out of said Agreement, will be settled exclusively by compulsory arbitration in accordance with Arbitration Rules of the Singapore International Arbitration Centre (SIAC); except that either Party may pursue legal/equitable remedies in any Court of competent jurisdiction”. Clause 14.6 states that for enforcement of terms of SRA or for any other remedy arising out of the SRA is to be settled only in accordance with compulsory arbitration under SIAC Rules. Rule 18 of SIAC Rules, 2010 specifies that “Seat of Arbitration” to be governed by SIAC Rules shall be Singapore, unless the Arbitral Tribunal decides otherwise. 11. Interpreting Clause 14.6 of SRA, learned Senior Counsel for Appellant and Respondents referred to various decisions. Before we refer to those decisions, we propose to refer the decisions which elaborate upon the various laws potentially applicable to various aspects of arbitral relationship. 12. The problems arising out of arbitration, call for the application of any one or more of laws viz., (i) The proper law of the contract; (ii) The proper law of the arbitration agreement; (iii) The curial law i.e. Procedural law for conduct of arbitration. Referring to Law and Practice of Commercial Arbitration in England by Mustill and Boyd, in (1998) 1 SCC 305 [SUMITOMO HEAVY INDUSTRIES LIMITED v. ONGC LIMITED AND OTHERS], the Supreme Court held as under:- “10. .... It may therefore be seen that problems arising out of an arbitration may, at least in theory, call for the application of any one or more of the following laws- 1. The proper law of the contract, i.e., the law governing the contract which creates the substantive rights of the parties, in respect of which the dispute has arisen. 2. The proper law of the arbitration agreement, i.e., the law governing the obligation of the parties to submit the disputes to arbitration, and to honour an award. 3. The curial law, i.e., the law governing the conduct of the individual reference. (underlining added) * * * https://hcservices.ecourts.gov.in/hcservices/ 1. The proper law of the arbitration agreement governs the validity of the arbitration agreement, the question whether a dispute lies within the scope of the arbitration agreement; the validity of the notice of arbitration; the constitution of the tribunal; the question whether an award lies within the jurisdiction of the arbitrator; the formal validity of the award; the question whether the parties have been discharged from any obligation to arbitrate future disputes. 2. The curial law governs the manner in which the reference is to be conducted; the procedural powers and duties of the arbitrator; questions of evidence; the determination of the proper law of the contract. 3. The proper law of the reference governs the question whether the parties have been discharged from their obligation to continue with the reference of the individual dispute. * * * In the absence of express agreement, there is a strong prima facie presumption that the parties intend the curial law to be the law of the “seat” of the arbitration, i.e., the place at which the arbitration is to be conducted, on the ground that that is the country most closely connected with the proceedings. So in order to determine the curial law in the absence of an express choice by the parties it is first necessary to determine the seat of the arbitration, by construing the agreement to arbitrate.” [underlining added] 11. The conclusion that we reach is that the curial law operates during the continuance of the proceedings before the arbitrator to govern the procedure and conduct thereof. The courts administering the curial law have the authority to entertain applications by parties to arbitrations being conducted within their jurisdiction for the purpose of ensuring that the procedure that is adopted in the proceedings before the arbitrator conforms to the requirements of the curial law and for reliefs incidental thereto. Such authority of the courts administering the curial law ceases when the proceedings before the arbitrator are concluded.” 13. Mr.P.S.Raman, learned Senior Counsel for Appellant has contended that as per the ratio of BHATIA INTERNATIONAL case [(2002) https://hcservices.ecourts.gov.in/hcservices/ 4 SCC 105], Part I of the Act is applicable to the International Commercial Arbitration whether the “Seat of Arbitration” is in India or not. Learned Senior Counsel would further contend that there is nothing in the SRA to warrant a conclusion that the “Seat of Arbitration” is to be outside India or that the parties had mutually excluded application of any of the provisions of Part I of the aforesaid Act to the agreement. It was also submitted that by virtue of SRA, the parties had not ousted the jurisdiction of this Court nor had any express intention to that effect been included. It was further argued that Clause 14.6 of SRA does not even refer to the place of arbitration and neither the governing law of contract nor by the procedural law can exclude the application of Part I of Arbitration Act. Taking us through various provisions of Arbitration and Conciliation Act, learned Senior Counsel for Appellant would further contend that “Seat of Arbitration” does not find place in the Indian Arbitration Act; but finds a place only in Section 3 of English Arbitration Act and while so, the Court cannot infer exclusion of Part I of the Act to the SRA on the assumption that "Seat of Arbitration" is Singapore. 14. The decision in BHATIA INTERNATIONAL lays down the propositions regarding applicability of Part I of arbitrations conducted outside India. BHATIA INTERNATIONAL case was primarily dealing with the issue whether all Indian Court could provide “interim relief” under Section 9 with regard to the arbitration held outside India. In BHATIA INTERNATIONAL case, application was made by the Respondent thereon to the III Additional District Judge, Indore, Madhya Pradesh under Section 9 of the Arbitration and Conciliation Act, 1996 for grant of certain interim reliefs to restrain the parties from alienating, transferring and creating third-party rights wherein Bhatia International raised a plea as to the maintainability of Section 9 application which was dismissed by the learned III Additional District Judge holding that the Court at Indore had jurisdiction to entertain the application under Section 9 of the Act and that the same was maintainable. Order of III Additional District Judge, Indore was challenged before the Madhya Pradesh High Court, Indore Bench by Bhatia International by way of a Writ Petition which was also dismissed by the High Court, Indore Bench and the same was challenged before the Supreme Court contending that Part I of Arbitration and Conciliation Act applies only to the arbitrations where the place of arbitration is in India as has been indicated in sub-section (2) of Section 2 of the Act. In BHATIA INTERNATIONAL case, in Paragraph (32), the Supreme Court held as under:- “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 https://hcservices.ecourts.gov.in/hcservices/ 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”. 15. To sum up, the conclusions from BHATIA INTERNATIONAL case are:- (i)Part I mandatorily applies when arbitration is held in India; (ii)Part I applies to arbitrations conducted outside India, unless applicability of Part I is impliedly or expressly excluded; and (iii)There is no express or implied exclusion of Part I, when the Seat of Arbitration was Paris and the proper law of the contract and proper law of arbitration agreement are not specified. 16. Expanding the BHATIA INTERNATIONAL case, the Supreme Court in (2008) 4 SCC 190 [VENTURE GLOBAL ENGINEERING v. SATYAM COMPUTER SERVICES LIMITED AND ANOTHER] has held that “Section 34 of Part I to be applicable to an arbitration conducted by the London Court of International Arbitration where the applicable law to the contract was the law of the State of Michigan, United States. In VENTURE GLOBAL ENGINEERING case, the Supreme Court held as under:- “31. On close scrutiny of the materials and the dictum laid down in the three-Judge Bench decision in Bhatia International [(2002) 4 SCC 105] we agree with the contention of Mr. K.K.Venugopal and hold that paras 32 and 35 of Bhatia International make it clear that the provisions of Part I of the Act would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto. We further hold that where such arbitration is held in India, the provisions of Part I would compulsorily apply and parties are free to deviate to the extent permitted by the provisions of Part I. It is also clear that even in the 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. We are also of the view that such an interpretation does not lead to any conflict between any of the provisions of the Act and there is no lacuna as such. The matter, therefore, is concluded by the three- https://hcservices.ecourts.gov.in/hcservices/ Judge Bench decision in Bhatia International. ............ 33. The very fact that the judgment holds that it would be open to the parties to exclude the application of the provisions of Part I by express or implied agreement, would mean that otherwise the whole of Part I would apply. In any event, to apply Section 34 to foreign international awards would not be inconsistent with Section 48 of the Act, or any other provision of Part II as a situation may arise, where, even in respect of properties situate in India and where an award would be invalid if opposed to the public policy of India, merely because the judgment-debtor resides abroad, the award can be enforced against properties in India through personal compliance of the judgment-debtor and by holding out the threat of contempt as is being sought to be done in the present case. In such an event, the judgment- debtor cannot be deprived of his right under Section 34 to invoke the public policy of India, to set aside the award. As observed earlier, the public policy of India includes – (a) the fundamental policy of India; or (b) the interests of India; or (c) justice or morality; or (d) in addition, if it is patently illegal. This extended definition of public policy can be bypassed by taking the award to a foreign country for enforcement.” (underlining added) 17. In VENTURE GLOBAL ENGINEERING case, the agreement contained provision which stated as “notwithstanding anything to the contrary in this agreement, the Shareholders shall at all times act in accordance with the Companies Act and other applicable Acts/Rules being in force, in India at any time”. In the said decision since the shareholders agreed to act in accordance with the Companies Act, the Supreme Court held that “implied exclusion condition was not specified on the basis of the clause and other surrounding circumstances viz., (i) the company was situated in India; (ii) the transfer of the “ownership interests” shall be made in India under the laws of India as set out; and (iii) all the steps necessary have to be taken in India before the ownership interests stood transferred. 18. In INDTEL TECHNICAL