THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLE SRI JUSTICE K.S.APPA RAO C.M.A.No.739 of 2007 Date of Judgment: 24-08-2011 Between: PS EXIM (HK) Limited, a Company incorporated in Hong Kong and having registered office at Hong Kong rep. by its General Manager and Principal Officer in India Sri Mrigendra Singh. ..Appellant and BTM EXPORTS LIMITED, a Company incorporated in India under the Companies Act and having its registered office at New Delhi. ..Respondent The Court made the following Judgment: THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLE SRI JUSTICE K.S.APPA RAO C.M.A.No.739 of 2011 Oral Order: (Per Hon’ble Sri Justice A.Gopal Reddy) This Appeal by the appellant/petitioner is filed under Section 37 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) aggrieved by the dismissal order of the II Additional District Judge, Visakhapatnam dated 12-07-2011 dismissing A.O.P.No.805 of 2011 filed under Section 9 of the Act seeking direction to the respondent to furnish security for the sum of Rs.4 crores within specified time, failing which order for attachment of the iron ore fines of a quantity of 10,000 Wet Metric Tones (WMT), which is equivalent to Rs.4 crores out of the quantity of the respondent lying at the stockyard of SVK Shipping in Port Area, Visakhapatnam and to grant injunction restraining the respondent from removing the material of a quantity of 10,000 WMT iron ore fines out of the quantity of the respondent lying at the stockyard of SVK Shipping in Port Area, Visakhapatnam. Appellant/petitioner having its registered office at Hong Kong doing business in purchase and sale of iron ore etc., entered into a contract on 12-05-2011 with the respondent by exchange of docuCents by E-mail. According to the appellant, it agreed to purchase 86,000 WMT of iron ore fines from the respondent, to which the respondent agreed to sell. As per Clause 3 of the agreement, the price for the said quantity of iron ore fines was fixed at 162 US $ (USD) per WMT Free on Board (FOB). As per Clause 2 of the agreement, the load part of cargo was specified as Visakhapatnam and the cargo is to be shipped for carriage for delivery at the port in China which is to be specified later. As per Clause 7 of the agreement, it is agreed that 2.25 million USD would be paid by the petitioner to the respondent in advance before loading and for the balance amount it is agreed to give irrevocable letter of credit within ten days from the date of signing the contract from the first class International Bank in Hong Kong through an advising bank in India. As per Clause 19, all disputes or differences arising out of the contract or relating to the same or breach thereof shall be settled by friendly negotiations between the parties, failing which the dispute shall be submitted for arbitration to third country with International Arbitration Centre for arbitration under rules with English law. As per Clause 22, any amendment of contract or modification shall be in writing subject to confirmation by contracting parties. After entering into the agreement, it is alleged that there was a sudden slump in the prices of iron ore fines in the global market and the rate has fallen from 162 USD to 157.5 USD per WMT. Hence, the petitioner decided to negotiate with the respondent regarding price of the said iron ore fines. However, the petitioner remitted a sum of Rs.1,00,00,000/- to the respondent on 21-05-2011 to show its seriousness to purchase the material. The said amount was paid pending negotiations with regard to price, which was accepted by the respondent. During the negotiations between the Directors of the petitioner and respondent on 02-06-2011 at New Delhi in the presence of one S.Chaterjee, who is mediator to both the parties, the petitioner proposed to give irrevocable letter of credit for 100% FOB towards value of iron ore fines and to pay Rs.5,00,00,000/-, out of which one crore was already deposited and two crores was offered to be paid on 07-06-2011 and balance amount of Rs.2,00,00,000/- is to be paid on 09-06-2011. On the oral consent given by the Managing Director of the respondent, the petitioner paid Rs.3,00,00,000/- on 08-06-2011. The petitioner has also chartered a ship by name M.V.Princes Kathire for carrying the cargo which was duly informed to the respondent by the agent of vessel at Visakhapatnam. While so, the respondent sent an E-mail on 14-06-2011 enquiring whether Rs.1,00,00,000/- would be paid on that day and also asked to send the draft copy of letter of credit of ICBC Bank of Hong Kong for which the petitioner agreed to pay the said sum on the date of shipment of the cargo besides opening of letter of credit and on the same day evening another E-mail was sent changing its stand demanding 100% payment of the contract amount in advance before delivery of the material within five days stating that if the said amount is not paid, the sum of Rs.4,00,00,000/- already paid by the petitioner will be forfeited without any notice. So, the petitioner got issued a legal notice dated 17-06-2011 from Hong Kong protesting against the attempt of the respondent to forfeit the amount and also making its intention that it is ready and willing to perform its part of contract as varied on 03-06-2011 and also stated that the petitioner would claim damages for breach of contract to a tune of 1,118,000 USD for which the respondent issued a reply on 19-06-2011 with all untenable contentions. Though the petitioner needs amicable settlement, the respondent is not responding; therefore, the above O.P. was filed with the reliefs as aforementioned. The respondent filed counter stating that the Court at Visakhapatnam has no jurisdiction to entertain the petition as it is not maintainable under law; that the petitioner cannot invoke the provisions of the Act; that Clause 19 of the contract provides resolution of dispute by arbitration; that the disputes are to be settled by friendly negotiations and if the dispute still persists, then the parties shall refer the dispute for arbitration; that the place of arbitration is agreed to be in third country with International Arbitration Centre for arbitration i.e. in other country other than India or Hong Kong; that the parties further agreed that the arbitral proceedings shall be governed by Rules of International Arbitration Centre with English law, as the governing law; that the parties have categorically agreed to keep the Indian law out of applicability; therefore, the petitioner cannot file the present petition under Section 9 of the Act in the Court at Visakhapatnam; that the petitioner has also opted for arbitration in Singapore which is a third country; therefore, it is clear that the parties have inter se agreed to resolve their dispute outside the India under English law. As per settled law, none of the provisions of Part I of the Act are applicable and the jurisdiction, if any, is with the Court of competent jurisdiction in Singapore and the applicable law is English law under which similar powers exist for granting any interim relief which a party may desire. The facts are elaborately disputed in counter which are not necessary for reproduction. The claim of the petitioner has been elaborately dealt with by the trial Judge which need not be repeated once again nor it is necessary for us to dwell deep into various contentions advanced by the learned counsel for the appellant/petitioner as discussed by the learned trial Judge, since the issue involved is: whether the Court at Visakhapatnam will have jurisdiction or not and the same has been found against the petitioner by the trial court. During the course of enquiry Exs.A1 to A12—documents are marked on behalf of the petitioner and no documentary evidence was adduced by the respondent. The learned trial Court after considering the arguments advanced by the counsel and the documents filed by the parties was of the view that Clause 19 of the agreement—Ex.A1 provides to resolve the dispute through arbitration, which reads as under: “All disputes or differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of this contract or by friendly negotiations between the two parties. If no settlement can be reached, the case in dispute shall be submitted for arbitration to third country which International Arbitration Centre for arbitration under their rules with English Law to apply which shall be agreed upon by both the parties.” Since the Act has no application to resolve the dispute, petitioner cannot invoke the jurisdiction of the Court at Visakhapatnam on the principle of necessity and accordingly dismissed the application. Aggrieved by the same the present appeal is filed. We have heard the counsel on both sides and gone through the agreement apart from exhibits marked in the lower court and the reasoning adopted by lower court in dismissing the petition. Learned counsel for the petitioner by relying upon the judgment of the Supreme Court in BHATIA INTERNATIONAL v. BULK TRADING S.A.[1] contended that observation made by the Supreme Court in para-35 of its judgment has to be followed by the trial court, wherein it was held Part I of the Act is also applicable to International commercial arbitrations which took place out of India, unless the parties by agreement, express or implied, exclude it or any of its provisions. We are not persuaded to accept the contention advanced by the learned counsel for the appellant, because even in BHATIA’s case the Supreme Court held when the parties have agreed that the Internal Law is to apply to resolve the dispute in the said arbitration then it amounts to implied exclusion of application of the Act and the provisions thereunder land as such the parties cannot invoke the Arbitration and Conciliation Act, 1996 and provisions thereunder in the said situation. The learned trial court after reproducing paras-32 and 35 of the judgment in Bhatia’s, rightly came to the conclusion when the Act itself has no application to resolve the dispute, the petitioner cannot invoke the jurisdiction of the Court at Visakhapatnam on the principle of necessity. In VIDEOCON INDUSTRIES LTD. v. UNION OF INDIA[2] where similar arbitration clause was invoked the Supreme Court after referring the various judgments in para-18 of its judgment approved the reasoning of the learned single Judge of Gujarat High Court holding that the learned single Judge had rightly followed the conclusion recorded by three judge Bench in the case of Bhatia (1 supra) and held that the District Court, Vadodara did not have the jurisdiction to entertain the petition filed under Section 9 of the Act because the parties had agreed that the law governing the arbitration will be English law and allowed the appeal setting aside the judgment of the Delhi High Court in entertaining petition filed under Section 9 of the Act and dismissed the petition filed by the respondents under Section 9 of the Act. Except making submissions with regard to jurisdiction under clause 19 of the agreement, no other submissions have been made by the learned counsel for the appellant. In view of the same, it is not necessary for us to go into the factual aspects as depicted in the pleadings qua impugned judgment. Suffice it to say, we do not find any infirmity in the order passed by the learned II Additional District Judge, Visakhapatnam in dismissing the petition filed under Section 9 of the Act warranting interference. The appeal is accordingly dismissed. No order as to costs. _________________ A.GOPAL REDDY, J. ______________ K.S.APPA RAO,J. 24-08-2011 Murthy [1] (2002) 4 SCC 105 [2] AIR 2011 SC 2040