Case: V/O Tractor Export, Moscow Vs. M/S. Tarapore &amp; Company &amp; Anr

Wood & Son Ltd., supra)21. The language in the relevant article of the Convention of 1958 had also undergone a change. According to Article II, the term "agreement in writing" was to include an arbitral clause in a contract or an arbitration agreement and that term was stated to mean something by which the parties undertook to submit to arbitration all or any differences which had arisen or which might arise between them in respect of any defined legal relationship whether contractual or not concerning a subject-matter capable of settlement by arbitration. Thus, the term "agreement in writing" embraced an arbitral clause or an agreement simpliciter to refer to arbitration as also an actual submission of the disputes to the arbitrator. It was equivalent to Arbitration Agreement as defined in the Act. By not using that term and by employing the expression submission in Section 3 the Parliament appears to have indicated an intention to restrict the meaning of that expression to an actual submission or a complete reference22. Whatever way Section 3 of the Act is looked at, it is difficult to reach the conclusion that submission means an agreement to refer or an arbitral clause and does not mean an actual submission or completed reference, and that the word "agreement" means a commercial contract and not an agreement to refer or an arbitral clause23. The next question is whether the High Court was justified in granting an interim injunction restraining the Russian Firm from proceeding with arbitration at Moscow. The position of the Russian Firm is that neither it nor the Foreign Trade Arbitration Commission of the U. S. S. R. Chamber of Commerce which is seized of the arbitration proceedings is amenable to the jurisdiction of the courts is India. The presence in India of the party sought to be injuncted is a condition pre-requisite for the grant of an injunction. Alternatively, the Indian Firm has been guilty of breach of the agreement to refer the matter to arbitration at Moscow and therefore it has disentitled itself to the exercise of the Courts discretion in its favour in the matter of granting an injunction24. Now, it is common ground that the point about the Russian Firm having no representative in India was not agitated before the High Court. The position taken up in the plaint was that the Russian Firm was carrying on business in the U. S. S. R. and at Madras. The controversy before the High Court appears to have been confined only to what is stated in Para 5 of the counter-affidavit of the Russian Firm, namely, that in the presence of the Arbitration agreement in the contract entered into between the parties, the only proper remedy for the Indian Firm was to submit the disputes to the arbitration tribunal at Moscow25. The rule as stated in Halsburys Laws of England, Vol. 21, at page 407, is that with regard to foreign proceedings, the court will restrain a person within its jurisdiction from instituting or prosecuting suits in a foreign court whenever the circumstances of the case make such an interposition necessary or proper. This jurisdiction will be exercised whenever there is vexation or oppression. In England, courts, have been very cautions and have largely refrained from granting stay of proceedings in foreign courts (Cheshires Private Industrial Law, 7th Ed., pages 108-110). The injunction is, however, issued against a party and not a foreign court26. Although it is a moot point whether Section 35 of the Arbitration Act, 1940, will be applicable to the present case, in Shiva Jute Baling Limited v. Hindley & Company Limited, it was assumed that Section 35 applied to protocol arbitration and the principle embodied in that section cannot be completely ignored while considering the question of injunction. According to the section no reference nor award can be rendered invalid by reason only of the commencement of legal proceedings upon the subjects of the reference, but when legal proceedings upon the whole of the subject-matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the arbitrators or umpire, all further proceedings in a pending reference shall, unless a stay of proceedings is granted under Section 34, be invalid27. If the venue of the arbitration proceedings had been in India and if the provisions of the Arbitration Act of 1940, had been applicable, the suit and the arbitration proceedings could not have been allowed to go on simultaneously and either the suit would have been stayed under Section 34 or if it was not stayed, and the arbitrators were notified about the pendency of the suit, they would have had to stay the arbitration proceedings because under Section 35 such proceedings would become invalid if there was identity between the subject-matter of the reference and the suit. In the present case, when the suit is not being stayed under Section 3 not to grant an injunction restraining the Russian Firm from proceeding with the arbitration at Moscow. The principle essentially is that the arbitrators should not proceed with the arbitration side by side in rivalry or in competition as if it were a Civil Court28. Ordinarily, a party which has entered into a contract of which an arbitral clause forms an integral party should not receive the assistance of the court when it seeks to resile from it. But in the present case a suit is being tried in the courts of this country which, for the reasons already stated, cannot be stayed under Section 3 of the Act in the absence of an actual submission of the disputes to the arbitral tribunal at Moscow prior to the institution of the suit. The only proper course to follow is to restrain the Russian Firm which has gone to the Moscow Tribunal for adjudication of the disputes from getting the matter decided by the tribunal so long as the suit here is pending and has not been disposed of

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]18. It is true by taking the above view the purpose and object behind the Protocol and the conventions may not be fully carried out. The intention underlying Article 4 of the Protocol of 1923 and Article 2 of the Convention of 1958 undoubtedly appears to be that whenever the parties have agreed that their differences arising out of a commercial contract be referred to an arbitration, the court of a contracting State when seized of an action in the matter, shall refer the parties to an arbitrations unless it finds that the agreement is null and void or is inoperative or incapable of being performed. We apprehend it would hardly be conducive to international commercial arbitration not to have legislation giving full and complete effect to what is provided by the Protocol and the Conventions. We also share in full measure the anxiety and the effort of those who desire to respect the terms of international Protocols and Conventions in letters and spirit. But we arethe Indian Firm has been guilty of breach of the agreement to refer the matter to arbitration at Moscow and therefore it has disentitled itself to the exercise of the Courts discretion in its favour in the matter of granting anIf the venue of the arbitration proceedings had been in India and if the provisions of the Arbitration Act of 1940, had been applicable, the suit and the arbitration proceedings could not have been allowed to go on simultaneously and either the suit would have been stayed under Section 34 or if it was not stayed, and the arbitrators were notified about the pendency of the suit, they would have had to stay the arbitration proceedings because under Section 35 such proceedings would become invalid if there was identity between the subject-matter of the reference and the suit. In the present case, when the suit is not being stayed under Section 3 not to grant an injunction restraining the Russian Firm from proceeding with the arbitration at Moscow. The principle essentially is that the arbitrators should not proceed with the arbitration side by side in rivalry or in competition as if it were a Civil Court28. Ordinarily, a party which has entered into a contract of which an arbitral clause forms an integral party should not receive the assistance of the court when it seeks to resile from it. But in the present case a suit is being tried in the courts of this country which, for the reasons already stated, cannot be stayed under Section 3 of the Act in the absence of an actual submission of the disputes to the arbitral tribunal at Moscow prior to the institution of the suit. The only proper course to follow is to restrain the Russian Firm which has gone to the Moscow Tribunal for adjudication of the disputes from getting the matter decided by the tribunal so long as the suit here is pending and has not been disposedthe present case if there was any such reference to arbitration it was only on November 4, 1967, that is, about three weeks after the suit has been filed in the HighSection 3 of the Act. Even at the time of the Act of 1889, the word "submission" had received a special meaning as including a mere agreement to refer to arbitration as well as an actual reference or submission to arbitration and this special manner. In the Arbitration Clauses (Protocol) Act, 1924 the phrase "submission made in pursuance of the agreement" is used and the word "submission" is employed in the statutory sense. In any the Indian Arbitration Act, 1889, Section 4(b) defines submission in exactly the same terms as Section 27 of the English Act of 1889. In the English Arbitration Act of 1934 the word "agreement" is defined in Section 21(2) as a "written agreement to submit present or future differences to arbitration whether the arbitrator is named therein or not". It is clear, therefore, that expression "arbitration agreement" and the word "submission" are synonymous and connote the same idea. In my opinion the expression "submission made in pursuance of an agreement" in Section 3 of the Act must be construed in its historical setting. The word "submission" must, therefore, be interpreted to mean that the arbitral clause itself and the word "agreement" as the commercial or the business agreement which includes or embodies that clause. In other words the word "submission" in the opening words of the section means an agreement to refer to arbitration and the words "the agreement to which the Convention set forth in the schedule applies" mean the business agreement or contract containing the arbitral clause. It follows, therefore, that if there is an arbitral clause whether this is followed by actual reference to arbitration or not, the very existence of this clause in the commercial agreement would render the stay of the suit mandatory under Section 3 of the Act39. The view that I have expressed is also consistent with the rule of construction that as far as practicable the municipal law must be interpreted by the courts in conformity with international obligations which the law may seek to effectuate. It is well settled that if the language of a section is ambiguous or is capable of more than one meaning the protocol itself becomes relevant for there is prima facie presumption that Parliament does not intend to act in breach of international law, including specific treaty obligations. In the words of Diplock, L. J., in Salomonv. Commissioners of Customs andthis principle to the present case it is manifest that Article 2 of the Convention which is contained in the Schedule to the Act imposes a duty on the court of a contracting State when seized of such an action to refer the parties to arbitration. Section 3 of the Act must, therefore, be read in consonance with this international obligation or impose a refinement not warranted by the Convention itself will not bethis principle to the present case it is manifest that Article 2 of the Convention which is contained in the Schedule to the Act imposes a duty on the court of a contracting State when seized of such an action to refer the parties to arbitration. Section 3 of the Act must, therefore, be read in consonance with this international obligation or impose a refinement not warranted by the Convention itself will not bet is, however, maintained by the respondent that the words "submission" and "agreement" must be given their natural and grammatical meaning and the words "submission made in pursuance of an agreement" can only mean and actual submission of the disputes to the arbitral tribunal. So the word "agreement" can have reference to had can be constructed only in the sense of an arbitration agreement or arbitral clause in a commercial contract. The contention is that if submission has to be taken in the sense of an arbitration agreement it would render the words "submission made in pursuance of an agreement" meaningless and unintelligible.Civil Appeal Nos. 1208 and 1833 of 1969 arise out of the application No. 106 of 1968 filed by the first respondent for injunction to restrain the first respondent for taking further part in the arbitration proceedings in Moscow. Ramamurti, J., took the view that since the application No. 2604 of 1967 for stay of the proceedings in the pending suit C. S. 118 of 1967 had been dismissed the first respondents injunction petition should be allowed on the ground that the two forums were mutually exclusive. In the connected appeals I have taken the view that the appellant would be entitled to an order of stay of the proceedings in C. S. 118 of 1967 under Section 3 of Act 45 of 1961. Even assuming that Section 3 of the Act is not applicable this is not a proper case in which the High Court should have issued an injunction restraining the appellant from proceeding with the arbitration. As a rule the Court has to exercise its discretion will great circumspection for it is imperative that the right of access to the tribunals of a country should not be lightly interfered with. It is not sufficient merely to show that two actions have started for it is not prima facie vexatious to commence two actions about the same subject-matter, one here and one abroad. (See McHenry v. Lewis. The reason of this reluctance to exercise the jurisdiction is that owing to a possible difference between the law of the two countries, the stay of one of the actions may deprive the plaintiff of some advantages which he is justified in pursuing48. Thus he may have a personal remedy in one country and a remedy only against the goods in another; or a remedy against land in one State but no such remedy in another. The rule, therefore, is that a plea of lis alibi pendens will not succeed and the court will order a stay of proceedings unless the defendant proves vexation in point of facts. He must show that the continued prosecution of both actions is oppressive or embarrassing, an onus which he will find it difficult to discharge if the plaintiff can indicate some material advantage that is likely to result from each separate action. Each case, therefore, depends upon the a setting of its own facts and circumstances.