FAO (OS) No.193/2009 Page 1 Reportable IN THE HIGH COURT OF DELHI AT NEW DELHI FAO (OS) No.193/2009 Date of Hearing: 26.05.2009 Date of Decision: 16.07.2009 MAX INDIA LIMITED …..Appellant Through Dr. A.M. Singhvi, Senior Advocate with Mr.Ruchin Midha, Mr.Amit Bhandari and Mr.Jaiveer Shergil Versus GENERAL BINDING CORPORATION …..Respondent Through Mr. A.S. Chandhiok, Senior Advocate with Mr.Tejas Karia, Ms.Neha Bhasin, Mr. Nitesh Kumar and Mr.Sandeep Bajaj CORAM :- *THE HON'BLE MR.JUSTICE A.K.SIKRI THE HON'BLE MR. JUSTICE V.K. JAIN 1.Whether Reporters of Local papers may be allowed to see the Judgment? 2.To be referred to the Reporter or not? 3.Whether the judgment should be reported in the Digest? A.K. SIKRI, J. 1. Certain disputes have emerged between the appellant and the respondent herein, which arise from the Agreement dated 25.8.2008 entered between the parties, known as „Manufacture and Sale Agreement‟. As this covenant contains an arbitration clause, the appellant herein FAO (OS) No.193/2009 Page 2 proposes to invoke the arbitration in accordance with the said Agreement. Pending this action the appellant moved an application under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as „the Act‟) for interim measures, inter alia, praying that the respondent be restrained from implementing the terms of Agreement entered into by it directly or through its holding company, viz., Cosmo Films regarding sale of its commercial print finishing business. Learned Single Judge has dismissed this application vide impugned orders dated 14.5.2009. Reason given is that as per the Agreement, the disputes are to be resolved though arbitration under Singapore International Arbitration Rules (SIAC Rules) and it is the courts in Singapore which have jurisdiction to settle any disputes that may arise out of or in connection with the said Agreement. Therefore, this Court lacks jurisdiction to entertain the application under Section 9 of the Act. Validity of this order is challenged in this appeal. Therefore, the only question which needs to be determined is as to whether application under Section 9 of the Act was maintainable in this Court or not. The Facts 2. Having regard to the aforesaid scope of the present appeal though it is not necessary to spell out the details of the nature of disputes, a brief resume thereof would serve the purpose. The appellant, which is engaged in the business of manufacture, sale and marketing of variety of thermal lamination films, polypropylene films including bi-axially oriented FAO (OS) No.193/2009 Page 3 polypropylene (BOPP) films, had entered into two agreements both dated 25.8.2008 with the respondent. The respondent is a company registered under the laws of Delaware, USA. It is the subsidiary of Acco Brands Corporation and is engaged in the business of production, distribution of lamination, binding and office stationery and is a part of Acco Brands Group which deals in the manufacture of various office products, including films and lamination. On 25.8.2008 two agreements, namely, Coating Lines Sale Agreement between the appellant, GBC and two of its subsidiaries namely, Acco Brands Benelux B.V. and Hwa Seung GBC Co. Ltd., and another agreement, namely, Manufacture and Sale Agreement between the appellant and GBC were executed. Under the agreement, Max India agreed, inter alia, to manufacture products from Max India in quantities agreed therein, for a period of 10 years from the date of execution of the aforesaid agreement. 3. According to the appellant, the Agreement was executed between the appellant and the respondent on „principal to principal basis.‟ This is evident from Clause 12 of the Agreement whereby the parties have agreed that during the non-complete period, neither party nor any of its affiliates shall market, sell or distribute the products in each other‟s territories marked as A and B in the Agreement. Thus, under clause 12.2 of the Agreement, GBC categorically agreed that during the non-compete period, neither GBC nor its affiliates shall market, sell or distribute the products, whether directly or indirectly, either by itself or for or through a FAO (OS) No.193/2009 Page 4 third party, in the Class B Territories listed in Schedule 6 of the Agreement. Such “Class B Territories” includes India. It is also stated under Clause 21.11 of the Agreement that the Agreement is personal to the parties and shall not be capable of assignment without prior approval of the other party. It is stated that under the said clause, the respondent is not permitted to assign the rights and obligations under the Agreement without providing a reasonable notice to the appellant and to an entity which is situated in India and competes with the appellant in the business of manufacture and/or sale of the products being manufactured and sold by the appellant, breach of which would lead to material breach under the agreement. It is further stated that, however, the appellant in February 2009 came to know from a press release dated 30.1.2009 available at the website of Cosmo Films, that the respondent through its holding company, i.e., Acco USA, has entered into an agreement with Cosmo Films under which the holding company of the respondent, namely, Acco USA has agreed to sell its GBC Commercial Print Finishing business. 4. According to the appellant, entry into such an agreement by the respondent through its holding company with Cosmo Films violated the terms of Article 21.11 of the Agreement by agreeing to transfer its entire business to Cosmo Films, an entity which is situated in India and competes with the appellant in the business of manufacture and/or sale of products such as bi-axially oriented polypropylene films and thermal lamination films being manufactured and sold by the appellant. This is FAO (OS) No.193/2009 Page 5 what has given rise to disputes between the parties and for seeking an interim protection to restrain the respondent from implementing the agreement entered into with Cosmo Films, the appellant filed application under Section 9 of the Act. In this application, ex parte ad interim injunction was granted on 20.3.2009 against the respondent restraining it from entering into any agreement either directly or indirectly with Cosmo Films till further orders. The appellant has invoked the arbitration at Singapore as well as per Article 19.2 of the Agreement. 5. The respondent when issued notice of the aforesaid application and injunction order chose to challenge the maintainability of the said application contending lack of jurisdiction in this Court. As mentioned above, this contention is accepted by the learned Single Judge which has led to dismissal of the appellant's application. 6. Since the question involved is a pure question of law decision whereof depends on the interpretation of Article 19 of the Agreement in the light of the provisions of the Act, as interpreted by the judgments of the Supreme Court which are taken note of by the learned Single judge in the impugned order, we may straightaway proceed to take note of the contention of the parties inasmuch as those very contentions which were advanced before the learned Single Judge were pressed into service by the counsel on either side before us as well. However, these contentions would be appreciated more appropriately by first taking note of Article 19, interpretation whereof is the centre of controversy. This Article reads as FAO (OS) No.193/2009 Page 6 under:- “19. GOVERNING LAW AND DISPUTE RESOLUTION 19.1 This agreement shall be governed and construed in accordance with the laws of Singapore and, subject to Article 19.2, the court of Singapore shall have jurisdiction to settle any disputes that may arise out of or in connection with this Agreement. 19.2 Any dispute between the Parties arising out of or in connection with this Agreement shall be referred to and finally resolved by arbitration under the Singapore International Arbitration Centre rules (“SIAC Rules”) as in force at the time of the dispute, which SIAC Rules shall be deemed to be a part of this Agreement by reference. The arbitration shall be conducted before one (1) arbitrator mutually appointed by the Parties, failing which Max India shall be entitled to appoint one (1) arbitrator and GBC shall be entitled to appoint one (1) arbitrator and the two (2) arbitrators so appointed shall jointly appoint a third arbitrator who shall preside as the chairman. Such arbitration shall be conducted in the English language. The venue of arbitration shall be at Singapore.” Summary of undisputed position 7. What follows from the facts taken note of above and the reading of Article 19, can be summarized as under:- a) appellant is an Indian party whereas the respondent is a foreign company incorporated as per the laws of Delaware, USA. b) though place of signing of the agreement is not specifically stipulated in the said Instrument, according to the appellant this agreement FAO (OS) No.193/2009 Page 7 was signed in Delhi. c) the agreement is to be governed and construed in accordance with the laws of Singapore. d) disputes between the parties arising out of or in connection with this agreement are supposed to be resolved by arbitration under the SIAC Rules and the venue of arbitration is fixed at Singapore, as per Article 19.2. e) subject to Article 19.2, the courts of Singapore "shall have the jurisdiction to settle any disputes that may arise out of or in connection with this agreement". 8. It, thus, follows that it is not a domestic arbitration between the two Indian companies, parties to the agreement belong to two different countries and they have chosen a neutral venue, viz., Singapore for settlement of their disputes. For this purpose not only the dispute is to be resolved by SIAC as per SIAC Rules, the arbitration hearings are also to take place in Singapore and further, even the arbitral tribunal while resolving the disputes is supposed to apply laws of Singapore while construing the agreement. In case any matter is to be taken to courts, even that is to be settled by courts of Singapore which is vested with the necessary jurisdiction by the consent of the parties. Submissions: The Appellant 9. Notwithstanding the aforesaid position emerging from the reading FAO (OS) No.193/2009 Page 8 of the Agreement, endeavour of the appellant is to establish that for the purpose of seeking an order of interim measure pending arbitration proceedings, application under Section 9 of the Act would be competent in this Court, i.e., courts in India. For making this proposition good, Dr. A.M. Singhvi, learned senior counsel for the appellant, paraphrased his submissions in the following manner:- 10. Even when arbitral proceedings were to be conducted by SIAC at Singapore applying laws of Singapore, jurisdiction of Indian courts was not "specifically excluded" in Article 19 of the Agreement. In the absence of such specific exclusion, court in India for limited purpose of issuing direction for interim measures, to protect the property in India shall have the requisite jurisdiction. This, according to the learned counsel, was the rationale behind the judgment of the Apex Court in Bhatia International v. Bulk Trading SA and Another (2002) 4 SCC 105 wherein the Court held that for emergent interim relief a party could approach a court of competent jurisdiction in India even when location of the arbitration was outside India. His submission was that judgment of this Court in Mariotte, wherein contrary view was taken, was specifically overruled. He also referred to the judgment of Andhra Pradesh High Court in the case of National Aluminum Company Limited v. Gerald Metals, 2004 (2) Arbitration Law Reporter 382 as well as Madras High Court in ST- CMS Electric Company Limited v. Tamil Nadu Electricity Board (OAs No.419 and 420/2006) decided on 26.2.2007 wherein application under FAO (OS) No.193/2009 Page 9 Section 9 was held to be maintainable in identical circumstances, as prevailing in the instant case, following Bhatia International (supra). Referring to the recent judgment of the Supreme Court in Venture Global v. Stayam Computers Service Limited (2008) 4 SCC 190, he argued that principle laid down in Bhatia International (surpa) was expanded further by holding that even in respect of „international awards‟ finally rendered, courts in India will have jurisdiction to entertain petition under Section 34 of the Act, challenging such an award. His submission that unless there is specific exclusion of jurisdiction of a particular court is not spelled out in the agreement, jurisdiction of Indian court could not be held to be ousted was based on another judgment of the Supreme Court in Laxman Prasad v. Prodigy (2008) 1 SCC 618. Expanding the aforesaid submissions Dr. Singhvi pointed out that in para 2 of Bhatia International (supra) it is clearly reflected that there was a contract between the parties which contained an arbitration clause according to which the arbitration was to be as per ICC Rules and venue of arbitration was agreed to be in Paris. According to him, the facts in the instant case are similar to those in the aforesaid judgment in the case of Bhatia International. The respondent in Bhatia International (supra) had filed an application under Section 9 before the Addl. District Judge, Indore seeking interim injunctions against the appellant restraining them from selling/transferring their business, assets and properties. The appellant filed an application challenging the jurisdiction of the Court at Indore on the ground that Part I is not applicable to international commercial arbitrations. The Supreme Court, FAO (OS) No.193/2009 Page 10 while explaining the importance of Section 9 of the Act, held in para 31 of Bhatia International (supra) that:- “31. If a party cannot secure, before or during the pendency of the arbitral proceedings, an interim order in respect of items provided in Section 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.” 11. Dr. Singhvi further pointed out that the issue of jurisdiction in Bhatia International (supra) arose since Section 2(2) of the Act provides that Part I of the Act shall apply to all arbitrations held in India. The Supreme Court interpreted the said clause and held that the intention of the legislature was to make Part I compulsorily applicable to all arbitrations held in India, domestic or international. The Court in para 21 held that Section 2(2) of the Act was only to make emphasis for applicability of Part I to all arbitrations taking place in India, but the clause nowhere states that its applicability in cases of international commercial arbitrations has been excluded. Therefore, while Part I of the Act has been compulsorily made applicable to all arbitrations, it is equally applicable in cases of international commercial arbitrations unless parties expressly or implied agree to not apply the same under the agreement. The Supreme Court, while concluding in para 32 in Bhatia International FAO (OS) No.193/2009 Page 11 (supra) held as follows:- “32. To conclude we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto….. 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 apply.” 12. It was argued that in the instant case, a bare reading of all the provisions of the Agreement shows that none of the provisions of Part I of the Act has not been expressly or impliedly excluded. In the entire agreement, there is no provision which either expressly states that all or any of the provisions of Part I shall not apply or impliedly excludes their applicability in the instant case. Merely because the parties have under Clause 19 agreed to be governed by the SIAC Rules for the purpose of Arbitration and have agreed on the venue of arbitration to be at Singapore, does not exclude either expressly or impliedly, the applicability of Section 9 of Part I of the Act, which provides for the remedy of seeking interim protection from the court. 13. Referring to the case of ST-CMS Electric (supra) decided by the Madras High Court it is argued that the court has very categorically held that if the parties merely agree to be governed by a Foreign law, it cannot be taken to exclude, expressly or impliedly the applicability of Section 9 FAO (OS) No.193/2009 Page 12 of the Act to prohibit a party from obtaining interim measures before a Court of Law. Dr. Singhvi further submitted that in the absence of use of the words like „alone‟, „exclusive‟, „only‟ or such like words in the Agreement in the governing law clause in the instant case, it cannot be inferred that the agreement by parties to submit to one jurisdiction means exclusion of all other jurisdictions. Reference is made to the judgment of the Supreme Court in the case of ABC Laminart Pvt. Ltd. And Anr. V. A.P. Agencies, Salem, (1989) 2 SCC 163 wherein the parties had agreed to be subject to the jurisdiction of Kaira jurisdiction, wherein the suit was filed by the respondent at Salem. The Supreme Court in the above case, while considering the issue of jurisdiction held in para 22 as under:- “22. …..The question then is whether it can construed to have excluded the jurisdiction of the Court at Salem. In the clause „any dispute arising out of this sale shall be subject to Kaira jurisdiction‟ ex facie we do not find exclusive words like „exclusive, „alone‟, „only‟ and the like. Can the maxim ‘expressio unius est exclusion alterius’ be applied under the facts and circumstances of the case?..... The other terms and conditions are also not indicative of exclusion of other jurisdictions. …..That being the position it could not be said that the jurisdiction of court at Salem which court otherwise had jurisdiction under law through connecting factor of delivery of goods thereat, was expressly excluded.” 14. He argued that the principle laid down in the above judgment was applied by the Supreme Court in the case of RSDV Finance Co. Pvt. Ltd. V. Shree Vallabh Glass Works Ltd., (1993) 2 SCC 130. The Supreme FAO (OS) No.193/2009 Page 13 Court in para 20 of Bhatia International (supra) further held:- “A court is one which would otherwise have jurisdiction in respect of the subject matter. Its definition does not provide that the Courts in India will not have jurisdiction in case of an international commercial arbitration…. An ouster of jurisdiction cannot be implied. An ouster of jurisdiction has to be express.” 15. According to Dr. Singhvi in the instant case merely because the parties have agreed to be governed by Singapore laws and have agreed to submit to the jurisdiction of courts at Singapore, does not ipso facto oust the jurisdiction of the Courts in India to grant interim measures under Section 9 of the Act, in order to protect the subject matter of Arbitration at least till the time the Arbitral Tribunal commences the arbitration proceedings. This was considered and decided by the Supreme Court in paras 33 and 34 of Bhatia International (supra), which are reiterated hereunder:- “33. Faced with this situation Mr. Sen submits that, in this case the parties had agreed that the arbitration be as per the rules of ICC. He submits that thus by necessary implication Section 9 would not apply. In our view in such cases the question would be whether Section 9 gets excluded by the ICC Rules of Arbitration. Article 23 of the ICC Rules reads as follows:- 1. ….. 2. ….. 34. Thus, Article 23 of the ICC Rules permits FAO (OS) No.193/2009 Page 14 parties to apply to a competent judicial Authority for interim and conservatory measures. Therefore, in such cases an application can be made under Section 9 of the Act.” 16. He further referred to Article 9 of the UNCITRAL Model Law on International Commercial Arbitration, the provisions of which have been incorporated in the Singapore International Arbitration under Article 3, provides for interim measures by Court which reads as under:- “Article 9 Arbitration agreement and interim measures by court: It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure” 17. He also drew our attention to a similar provision contained in the UNCITRAL Arbitration Rules 1976 (Appendix 27) under Article 26(3) which reads as under:- “A request for interim measures addressed by any party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement.” 18. Thus, applying the principle laid down by the Supreme Court in para 34 of Bhatia International (supra) reproduced hereinabove. Contention of Dr. Sihgiv was that the Singapore International Arbitration FAO (OS) No.193/2009 Page 15 Act also permits parties to apply to a court for interim and conservatory measures. Therefore, applicability of Section 9 in Part I of the Act is not excluded under the Singapore law and this Court has the jurisdiction to grant interim measures under Section 9 of the Act to the appellant. 19. Dr. Singhvi also placed great reliance on the following passage in the case of Laxman Prasad v. Prodigy Electronics Ltd. (supra):- “30. We find considerable force in the submission of the learned counsel for the respondent Company. In our view, „cause of action‟ and „applicability of law‟ are two distinct, different and independent things and one cannot be confused with the other. The expression „cause of action‟ has not been defined in the Code. If there is no cause of action, the plaint has to be rejected [Rule 11(a) of Order VII]. Stated simply, „cause of action‟ means a right to sue. It consists of material facts which are imperative for the plaintiff to allege and prove to succeed in the suit……” 20. Based on that he submitted that in the present case the appellant received a signed copy of the contract from the respondent, which is reflected from an email dated August 28, 2008 sent by the respondent to the appellant. The execution of the said Agreement was concluded at New Delhi by signing of the Agreement by the appellant at his Corporate office at New Delhi. The appellant has categorically made an averment to this effect in para 16 of the petition before the learned Single Judge, which has not been specifically denied by the respondent in its application challenging the maintainability. Thus, with the conclusion of the execution of the Agreement at New Delhi, a part of cause of action has FAO (OS) No.193/2009 Page 16 arisen within the jurisdiction of this Court. In the case of ABC Laminart Pvt. Ltd. (supra) it was held by the Supreme Court that the conclusion of the execution of an agreement forms a part of cause of action. In the aforesaid case, the Supreme Court in its concluding para 31 held:- “31. …..Clause 18 provides for applicability of law and it specifically declares that the terms and conditions of agreement shall be interpreted in accordance with „the laws of Hong Kong Special Administrative Region.‟ That in our judgment does not mean that a suit can be instituted only in Hong Kong and not in any other country. Territorial jurisdiction of a court, when the plaintiff intends to invoke jurisdiction of any court in India, has to be ascertained on the basis of the principles laid down in the Code of Civil Procedure…………… „Applicability of Hong Kong law‟, „entering into an agreement in Hong Kong‟ or „defendant residing in Ghaziabad (Uttar Pradesh)‟ or any of them does not take away the jurisdiction of Delhi High Court since a „cause of action‟ at least in part can be said to have arisen in Delhi……” 21. On the basis