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Arbitration & conciliation Act – Main agreement contains Arbitration clause between main parties – Internal agreements between the parties to main agreement among them respectively with third parties though not contained arbitration clause and when those are subject to main agreement – No civil court hold jurisdiction to resolve the dispute between the parties in respect of main subject – only remedy is through the arbitration only High court and DB wrongly hold as novation of contract and wrongly nullified the arbitration clause – When arbitration clause is valid one – the parties have no remedy in civil court only before arbitration = CHATTERJEE PETROCHEM CO. & ANR ………APPELLANTS Vs. HALDIA PETROCHEMICALS LTD.& ORS. ……… RESPONDENTS =Published in / cited in / Reported in judis.nic.in/supremecourt/filename=41063

Arbitration & conciliation Act – Main agreement contains Arbitration clause between main parties – Internal agreements between the parties to main agreement among them respectively with third parties though not contained arbitration clause and when those are subject to main agreement – No civil court hold jurisdiction to resolve the dispute between the parties in respect of main subject – only remedy is through the arbitration only   High court and DB wrongly hold as novation of contract  and wrongly nullified the arbitration clause – When arbitration clause is valid one – the parties have no remedy in civil court only before arbitration  = 

 

On 21st March, 2012, the appellant  Chatterjee  Petrochem  (Mauritius)

Company (hereinafter referred to as ‘CPMC’) filed a request for  arbitration

in International  Chamber  of  Commerce  (ICC),  Paris  in  relation  to  an

agreement of restructuring which was entered into between  CPMC,  Government

of West Bengal, West Bengal Industrial  Development  Corporation  (in  short

‘WBIDC’) and Haldia Petrochemical Limited (in short ‘HPL’) on 12th  January,

2002. 

As per the Agreement, the Government  of  West  Bengal  was  to  cause

WBIDC to transfer existing shareholding to CPMC to ensure  that  CPMC  holds

51% of the total paid  up  capital  of  HPL.  

Clause  15  of  the  Agreement

provides for reference of all disputes, in any  way  relating  to  the  said

Agreement or to the business of or affair of HPL to the Rules  of  the  ICC,

Paris.=

 1. Can the Arbitration  clause  under  clause  15  of  the  letter  of

        Agreement dated 12th January, 2002 be invoked by the appellants and

        whether Clause 7.5 of the subsequent  Agreement  dated  8th  March,

        2002 invoking the exclusive jurisdiction of the courts of  Calcutta

        nullify the scope of  arbitration  as  mentioned  in  the  previous

        agreement dated 12th January, 2002? = No

 

Clause 1 of the supplementary agreement dated 30th  July,  2004  reads

as under:

“Pursuant to the said Principal Agreement GoWB  has  caused  WBIDC  to

      transfer to Chatterjee Petrochem (India) Private  Limited  (CPIL),  an

      affiliate of CPMC Rs. 155 crores of shares from  the  shareholding  of

      WBIDC existing on the date of principal agreement…”

(emphasis laid by this Court)

 

The abovementioned clause goes to show that CPIL is an  affiliate  of  CPMC.

This is to say, that by means  of  the  letter  dated  8th  March,2002  CPMC

becomes a guarantor whereas CPIL becomes the borrower. Therefore,  the  same

does not change the rights and responsibilities of  the  parties  under  the

agreement dated 12th January, 2002.

 

27. Further, the letter written by CPMC to WBIDC along  with  the  agreement

dated 8th March, 2002 reads as follows:

“…It is clarified that the aforesaid shall not prejudice  any  of  our

      rights under the said Agreement dt. January 12, 2002 and all terms and

      conditions  thereof  shall  continue  to  remain  valid,  binding  and

      subsisting between the parties to be acted upon sequentially”.

(emphasis laid by this Court)

 

The content of this letter goes  to  show  that  the  agreement  dated  12th

January, 2002 remains the principal  agreement  while  agreement  dated  8th

March  2002  remains  a  supplementary  agreement  which   was   meant   for

restructuring of HPL on urgency.

 

28.   Further, and most importantly, the agreement entered into between  the

parties dated 30th July, 2004 states as follows:

“WHEREAS the Parties  hereto  had  entered  into  an  agreement  dated

      January  12,  2002  (hereinafter  referred   to   as   the   principal

      agreement….”

 

 

Also, the Agreement dated 30th July, 2004 which  is  based  on  shareholding

issues, also notes through clause 6 that:

  “6. The Parties hereby agree, record and confirm that all other  terms

      and conditions as contained in  the  said  Principal  Agreement  shall

      remain  binding,  subsisting,  effective,  enforceable  and  in  force

      between the parties.”

(emphasis laid by this Court)

 

 

The abovementioned clauses of the subsequent  Agreements  dated  8th  March,

2002 and 30th July, 2004 go to show that there has  been  no  alteration  in

the nature of rights and responsibilities of the  parties  involved  in  the

contract. Consequently, there has been no novation of the contract.

 

 

     2. Is the suit, filed by the respondents, seeking  injunction  against

        arbitration of disputes between  the  parties  sought  for  by  the

        appellants as per Clause 15 of the principal agreement referred  to

        supra maintainable in law? = No

Further, it is pertinent to read Clause 7.5 of the Agreement  dated  8th

March, 2002 carefully. Clause 7.5 reads thus:

 “Jurisdiction: Courts at Calcutta alone shall have jurisdiction in all

      matters relating to this Agreement.”

The phrase ‘this agreement’ means the Agreement dated 8th March, 2002  which

is essentially a supplementary Agreement and does not,  by  any  mean,  make

the  Principal  Agreement  dated  12th  January,   2002   subject   to   the

jurisdiction of the Court.

 
 3. What Order? =

Normally,  the   parties   to   the arbitration

             agreement calling for arbitral reference should be the same  as

             those to the an action. 

But this general concept is subject  to

             exceptions which  are  that  when  a  third  party,  i.e.  non-

             signatory party,  is  claiming  or  issued  as  being  directly

             affected through a party to the arbitration agreement and there

             are principal and subsidiary agreements, and such  third  party

             is signatory to a subsidiary agreement and not to the mother or

             principal agreement which contains the arbitration clause, then

             depending upon the facts and circumstances of the  given  case,

             it may be possible to say that even such  third  party  can  be

             referred to arbitration.”

                       

 

 

37. The respondent no.1 has filed a suit seeking two  remedies  against  the

appellants: 

firstly, 

that the Arbitration Agreement contained in  Clause  15

of the Agreement dated January 12, 2002 is void and/or unenforceable  and/or

has become inoperative and/or incapable of being  performed,  and  

secondly,

the respondent no.1 sought permanent injunction  restraining  the  appellant

herein from initiating and/ or  continuing  with  the  impugned  Arbitration

proceedings bearing case no. 18582/ARP pursuant to the Impugned  Arbitration

Agreement contained in clause 15 of the Agreement  dated  January  12,  2002

and the Request for Arbitration dated March 21, 2012 and  the  communication

dated  April  02,  2012  issued  by  defendant  no.  8  in  the  Arbitration

proceedings connected therewith and incidental thereto.

 

      Since, we have already held that the arbitration clause is valid, suit

filed by the respondent no.1 for declaration  and  permanent  injunction  is

unsustainable in law and the suit is liable to be dismissed.

  In view of the above, we direct the parties to  resolve  their  disputes

through arbitration as mentioned in clause 15 of  the  letter  of  Agreement

dated 12th January, 2002 in accordance with the Rules of ICC. 

We  have  also

seen from  the  written  submission  of  the  appellants  counsel  that  the

appellants have already initiated an arbitration proceeding. 

In  such  case,

the parties shall continue with the arbitration proceeding  since  the  suit

filed  for  permanent  injunction  against  the  arbitration  proceeding  is

dismissed by setting aside the impugned judgment and final order  in  A.P.O.

No. 13 of 2013 passed by  the  High  Court  of  judicature  at  Calcutta  on

04.06.2013. Accordingly, the appeal is allowed, but no costs.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

 
CIVIL APPEAL NO.10932 OF 2013
(Arising out of S.L.P.(C) No. 19951 OF 2013)

 

 
CHATTERJEE PETROCHEM CO. & ANR ………APPELLANTS

Vs.

HALDIA PETROCHEMICALS LTD.& ORS. ……… RESPONDENTS

 

 

 

 

 

J U D G M E N T

 

 
V. Gopala Gowda J.

 
On 21st March, 2012, the appellant Chatterjee Petrochem (Mauritius)
Company (hereinafter referred to as ‘CPMC’) filed a request for arbitration
in International Chamber of Commerce (ICC), Paris in relation to an
agreement of restructuring which was entered into between CPMC, Government
of West Bengal, West Bengal Industrial Development Corporation (in short
‘WBIDC’) and Haldia Petrochemical Limited (in short ‘HPL’) on 12th January,
2002. As per the Agreement, the Government of West Bengal was to cause
WBIDC to transfer existing shareholding to CPMC to ensure that CPMC holds
51% of the total paid up capital of HPL. Clause 15 of the Agreement
provides for reference of all disputes, in any way relating to the said
Agreement or to the business of or affair of HPL to the Rules of the ICC,
Paris.
2. The respondent HPL on the other hand, claims that the Arbitration
Agreement contained in clause 15 of the Agreement dated 12th January, 2002
is void and/ or unenforceable and/or has become inoperative and/or
incapable of being performed.

3. A dispute arose between the parties regarding the allotment of shares
and the appellant filed Company Petition No. 58 of 2009 before the Company
Law Board (in short ‘CLB’)on the grounds of oppression and mismanagement.
The appellant also sought transfer of 155 million shares in favour of
Chatterjee Petrochem (India) Pvt. Ltd. (in short “the CPIL”), the Indian
counterpart of CPMC as was decided in the Agreement.

4. The Company Petition was disposed of by the CLB by upholding the
decision of the Company to allot 155 million shares by Indian Oil
Corporation (in short ‘IOC’). The transfer of 155 million shares to CPIL by
WBIDC was also confirmed. The CLB further directed the Government of West
Bengal and WBIDC to transfer 520 million shares held by them in HPL to
Chatterjee Groups.

5. The Government of West Bengal preferred an appeal against the said Order
before the High Court of Judicature at Calcutta under the provisions of
Section 10F of the Company’s Act, 1956. The High Court set aside the Order
of the CLB on the ground that CPIL was not a member of HPL and the CLB
could not have enforced its right under private contract entered into
between CPIL and WBIDC for transfer of shares as the same could not be the
subject matter of a petition under Section 397 of the Companies Act.

6. Aggrieved by the same, the appellant preferred appeal Nos. 5416-5419,
5420, 5437 and 5440 of 2008 before this Court. Vide judgment dated
30.09.2011, this Court held that the claim of the appellant transferring
shares to IOC has changed the private character of the Company and was not
an act of oppression on the part of the Company. According to this Court,
the transfer of shares to IOC was a result of failure on the part of the
appellant to infuse adequate funds into the Company by way of equity as
promised and to participate in its rights issues. The Company was
therefore, constraint to induct IOC as a member and the 155 million shares
which was to be transferred to the appellant was instead transferred to the
IOC. The relevant paragraph of the judgment reads as under:
“103. The failure of WBIDC and GoWB to register the 155 million shares
transferred to CP(I)PL could not, strictly speaking, be taken to be
failure on the part of the Company, but it was the failure of one of
the parties to a private arrangement to abide by its commitments. The
remedy in such a case was not under Section 397 of the Companies Act.
It has been submitted by both Mr. Nariman and Mr. Sarkar that even if
no acts of oppression had been made out against the Company, it would
still be open to the learned Company Judge to grant suitable relief
under Section 402 of the Act to iron out the differences that might
appear from time to time in the running of the affairs of the Company.
No doubt, in the Needle Industries case, this Court had observed that
the behaviour and conduct complained of must be held to be harsh and
wrongful and in arriving at such a finding, the Court ought not to
confine itself to a narrow legalistic view and allow technical pleas
to defeat the beneficial provisions of the Section, and that in
certain situations the Court is not powerless to do substantial
justice between the parties, the facts of this case do not merit such
a course of action to be taken. Such an argument is not available to
the Chatterjee Group, since the alleged breach of the agreements
referred to hereinabove, was really in the nature of a breach between
two members of the Company and not the Company itself. It is not on
account of any act on the part of the Company that the shares
transferred to CP(I)PL were not registered in the name of the
Chatterjee  Group. There was, therefore, no occasion for the CLB to
make any order either under Section 397 or 402 of the aforesaid Act.
If, as was observed in M.S.D.C. Radharamanan’s case (supra), the CLB
had given a finding that the acts of oppression had not been
established, it would still be in a position to pass appropriate
orders under Section 402 of the Act. That, however, is not the case in
the instant appeals.”
(emphasis laid by this Court)

 
7. On this decision given by this Court, the appellant sought to invoke
the arbitration clause contained in the agreement dated 12th January, 2002
and made a request for arbitration. The respondent no.1 on the other hand,
filed a suit before the High Court of judicature at Calcutta praying that
the arbitration clause in the agreement be declared as void.

8. Learned senior counsel on behalf of the appellant Dr. Abhishek Manu
Singhvi relied upon Clause 15 of the letter of agreement dated 12th
January, 2002 to contend that any dispute, difference or claims arising
between the parties relating to this letter of agreement dated 12th
January, 2002, or any construction or interpretation relating to the
working of or the business of the respondent no.1, shall first make an
endeavour to settle their disputes, differences etc. in accordance with the
Rules of Arbitration of the International Chamber of Commerce. Therefore,
the learned senior counsel contended that the validity or existence of the
arbitration agreement is to be decided by the Arbitration Tribunal in terms
of Article 6 of the ICC Rules, 1998 which is pari-materia to Section 16 of
the Arbitration and Conciliation Act, 1996 (in short ‘A & C Act’)and the
Civil Court has no jurisdiction to decide on such issues. In support of
this legal contention, the learned senior counsel relied upon the decision
of this Court in Yograj Infrastructure Ltd. v. Ssang Yong Engineering and
Construction Co. Ltd.[1] wherein it was held that the arbitration shall be
held as is mentioned in the agreement which in the present case, is at
Paris.
9. It is the further case of the appellant that the agreement dated 12th
January, 2002 between the parties was not novated by the subsequent
agreements. According to the appellant, the agreement dated 12th January,
2002 is the principal agreement, which was later followed by the
supplemental agreements dated 8th March, 2002 and 30th July, 2004. The
letter of agreement dated 8th March, 2002 did not create any independent
legal right but was a mere direction from CPMC to transfer 155 million
shares to its nominee CPIL to avoid delay. Therefore, according to the
appellant, the letter of agreement dated 8th March 2002 provided that the
terms and conditions of 12th January, 2002 agreement would continue to
remain valid and subsisting between the parties. The relevant clauses will
be mentioned in the reasoning portion of the judgment.

10. The learned senior counsel relied upon Section 45 of the A & C Act to
contend that the suit instituted by the respondent No. 1 against the
request of arbitration by the appellant is not maintainable in law. He
further argued that the suit instituted by the respondent No. 1 to
restrain a foreign arbitration for resolution of the disputes between the
parties was in violation of Section 5 of the A & C Act which limits
judicial authority’s intervention in arbitration and therefore the impugned
order of injunction passed by the High Court of Judicature at Calcutta was
contrary to law and therefore, the same is liable to be set aside. In this
regard, the learned senior counsel relied upon the three Judge Bench
decision of this Court in Bhatia International v. Bulk Trading S.A. and
Anr.[2] to contend that section 5 of the A & C Act provides that no
judicial authority shall intervene except where it is provided. The
relevant paragraph will be extracted in the reasoning portion of the
judgment.

11. Mr. Sudipto Sarkar, learned senior counsel also appearing on behalf
of the appellant further contended that the maintainability of the
arbitration of the disputes between the parties can be established by
relying on the decision of this Court in Venture Global Engineering v.
Satyam Computer Services Ltd. and Anr.[3] wherein it was held that Part I
of the A & C Act will be applicable to international arbitrations as well.
Therefore, Mr. Sarkar contended that the Arbitration clause will be a bar
for judicial intervention in the present case in spite of the fact that it
is an international arbitration as per the principal agreement which will
be continued in force as per the terms of the supplemental agreements.

12. On the other hand, it is the case of the respondent HPL that the
arbitration agreement dated 12th January, 2002 is rendered void in respect
of the claim for transfer of 155 million shares in favour of CPIL inasmuch
as the parties had contracted out of their earlier agreement and the legal
liability in respect thereof was redefined in the subsequent 8th March,
2002 Agreement which provided for an exclusive jurisdiction to courts in
Calcutta to decide dispute arising out of the said agreement. Therefore, it
was pleaded by Mr. Ashok Desai, the learned senior counsel appearing on
behalf of the respondent no. 1-HPL that once a party to an arbitration
agreement seeks to adjudicate dispute before another forum and such forum
arrives at a conclusive findings of fact in relation to the dispute then,
the subsequent effort on the part of the same party to refer dispute for
arbitration under ICC Rules would be vexatious and abuse of law and it
shall be construed that the arbitration clause in the principal agreement
has been rendered inoperative by the conduct of the party itself.

13. The learned senior counsel for the respondent no. 1 further claimed
that Section 5 of the A & C Act can come into play only when existence of a
valid arbitration agreement is established. Institution of such a suit by
the respondent no.1 would constitute an “action pending before the
judicial authority” necessitating the invocation of Section 45 of the A & C
Act, if one of the parties makes a request to refer the matter for
arbitration. In such cases, the court must see whether the arbitration
agreement is valid, operative and capable of being performed, before
referring the parties to arbitration.

14. It is the further case of respondent no.1 that the subsequent
agreement through letter dated 8th March 2002, in respect of transfer of
155 million shares of HPL, new rights and liabilities were created by and
between the non- parties to the arbitration agreement. The new agreement
also provided for a different dispute resolution mechanism among the
parties, that is, the courts in Calcutta. The relevant clause will be
extracted in the reasoning portion of the judgment.

15. The learned senior counsel, Mr. K.K. Venugopal, appearing on behalf
of Respondent no. 2, Govt. of West Bengal, contended that the Arbitration
and Conciliation Act, 1996 does not apply to the present case. According to
the learned senior counsel, a party may purport to appoint an arbitrator
who may enter upon the arbitration even when there is serious dispute as to
whether the arbitration clause exists. In spite of the fact that no
arbitration clause exists, if a party resorts to arbitration, then neither
section 8 nor section 45 of the A & C Act in case of international
arbitration would provide for adjudication of the issue as to whether the
arbitration clause exists. It is only where a suit has first been filed, in
point of time, on the substantive agreement or the underlying agreement,
either by way of specific performance or for compensation for breach of
contract, that section 8 or section 45 of the A & C Act would come into
play. However, we are not inclined to comment on this contention since it
is not pertinent to the case.

16. The learned senior counsel for Respondent no. 2 also contended that
when no arbitration clause exists in the agreement, the matter cannot be
adjudicated either under Part I or Part II of the A & C Act rather, the
matter can be adjudicated only by an independent suit seeking injunction
against the party who had initiated arbitration, from proceeding with the
arbitration.

17. It is further the case of the learned senior counsel, Mr. K.K.
Venugopal that the facts of the present case are extraordinary and that the
matter has been extensively litigated in the previous round both, before
the Company Law Board and the appellate proceedings thereof. At no point in
time did the Chatterjee Group or any of its constituent affiliate, saved or
reserved their right to seek arbitration under the alleged Arbitration
Agreement which they now seek to enforce. This Court has already declined
the reliefs on merit as well as on the point of jurisdiction. Therefore, he
submits that at this juncture, invoking the arbitration clause from the
principal agreement by the Chatterjee Group disregarding the Agreement
dated 8th March, 2002, is clearly vexatious and abuse of the process of
law. Therefore, the suit filed by respondent no. 1 seeking injunction
relief on arbitration is maintainable in law.

18. It is further the case of the learned senior counsel on behalf of
Respondent no.2 that the matter has been elaborately argued before this
Court on complicated issues of law which arise for determination in the
case. It is therefore, submitted by him that in such an event this Court
would not render findings on questions of law while disposing an appeal
against the interlocutory order so as to give finality in such findings.
This approach of the Court is adopted in many cases arising under the
Intellectual Property law, namely Bajaj Auto Ltd. v. TVS Motor Company
Ltd.[4], Shree Vardhman Rice & General Mills v. Amar Singh Chawalwala[5],
Milmet Oftho Industries & Ors. v. Allergan Inc.[6] and Dhariwal Industries
Ltd. & Anr. v. M.S.S. Food Products[7]. We are inclined to mention at this
stage that in this appeal we are confined to deciding upon the validity of
the arbitration clause in the principal agreement dated 12th January, 2002
only. Hence, this contention does not require to be addressed in this
appeal.

19. The learned senior counsel for respondent No. 3 Mr. C.A. Sundaram
contends that jurisdictional issue in the present case, shall be decided as
the threshold issue in the present case. In relation to this, he placed
reliance upon the three Judge Bench decision of this Court in Chloro
Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc. and
Ors.[8]

20. In the light of the facts and circumstances presented before us on
the basis of admitted documents on record, and also based on the legal
contentions urged by the learned senior counsel on behalf of both the
parties, the following issues would arise for consideration of this Court
in these proceedings:

1. Can the Arbitration clause under clause 15 of the letter of
Agreement dated 12th January, 2002 be invoked by the appellants and
whether Clause 7.5 of the subsequent Agreement dated 8th March,
2002 invoking the exclusive jurisdiction of the courts of Calcutta
nullify the scope of arbitration as mentioned in the previous
agreement dated 12th January, 2002?
2. Is the suit, filed by the respondents, seeking injunction against
arbitration of disputes between the parties sought for by the
appellants as per Clause 15 of the principal agreement referred to
supra maintainable in law?
3. What Order?
Answer to Point no.1
21. We are inclined to reject the submission made by the learned senior
counsel on behalf of the respondents that the transfer of shares to CPIL
instead of CPMC substantially changes the legal rights and responsibilities
of the parties as per agreement referred to supra thereby, resulting in
novation of contract.

22. It is nowhere mentioned in the letter dated 8th March, 2002 that
transfer of shares to CPIL instead of CPMC extinguishes the old agreement
dated 12th January, 2002 to nullity. In fact, in the letter dated 8th
March, 2002, CPMC has been constantly mentioned as a guarantor. It is only
to this extent the nature of agreement has changed.

23. It is argued by the learned senior counsel Mr. C.A. Sundaram,
appearing on behalf of Respondent no.3 that the concurrent findings of
facts on the prima facie case by the learned single Judge and the Division
Bench of the High Court of Calcutta have held that there has been a
novation of agreement between the parties to the principal agreement dated
12th January,2002 by the subsequent agreements dated 8th March, 2002 and
30th July, 2004.

24. It has been held by the learned single Judge of the Calcutta High Court
that:
“……This is a case, where by express words the parties have altered
their obligations by a new agreement on 8th March, 2002 with a term
that the Courts in Kolkata ‘alone’ would have jurisdictions. This was
affirmed by the 30th July, 2004 agreement. This put an end to the
arbitration, once and for all. Therefore, the arbitration clause in
the 12th January, 2002 agreement was abrogated by the 8th March
agreement. Abrogation of an arbitration agreement could not be made in
clearer terms…”.
25. Further, the Division Bench of Calcutta High Court vide impugned
judgment dated 12th January 2012, made the following observations:
a. ) Agreement of 12th January 2002 was substituted by agreements of
March 8, 2002 and July 30, 2004.
b. ) Such a subsequent agreement completely extinguished the rights
existing under the January 12, 2002 agreement and also destroyed
the arbitration clause.
c. ) Remedy is under Agreement of March 8, 2002 which does not
provide for Arbitration but states that courts at Calcutta alone
shall have jurisdiction.

d. ) Agreement of March 8, 2002 is not an ancillary to agreement of
January 12, 2002 but materially alters the same. The principle laid
down in Chloro Controls Case (supra) does not apply. Real intention
of the parties in the instant case was to substitute one agreement
with another.
26. Clause 1 of the supplementary agreement dated 30th July, 2004 reads
as under:
“Pursuant to the said Principal Agreement GoWB has caused WBIDC to
transfer to Chatterjee Petrochem (India) Private Limited (CPIL), an
affiliate of CPMC Rs. 155 crores of shares from the shareholding of
WBIDC existing on the date of principal agreement…”
(emphasis laid by this Court)

 
The abovementioned clause goes to show that CPIL is an affiliate of CPMC.
This is to say, that by means of the letter dated 8th March,2002 CPMC
becomes a guarantor whereas CPIL becomes the borrower. Therefore, the same
does not change the rights and responsibilities of the parties under the
agreement dated 12th January, 2002.

27. Further, the letter written by CPMC to WBIDC along with the agreement
dated 8th March, 2002 reads as follows:
“…It is clarified that the aforesaid shall not prejudice any of our
rights under the said Agreement dt. January 12, 2002 and all terms and
conditions thereof shall continue to remain valid, binding and
subsisting between the parties to be acted upon sequentially”.
(emphasis laid by this Court)

 
The content of this letter goes to show that the agreement dated 12th
January, 2002 remains the principal agreement while agreement dated 8th
March 2002 remains a supplementary agreement which was meant for
restructuring of HPL on urgency.

28. Further, and most importantly, the agreement entered into between the
parties dated 30th July, 2004 states as follows:
“WHEREAS the Parties hereto had entered into an agreement dated
January 12, 2002 (hereinafter referred to as the principal
agreement….”
Also, the Agreement dated 30th July, 2004 which is based on shareholding
issues, also notes through clause 6 that:
“6. The Parties hereby agree, record and confirm that all other terms
and conditions as contained in the said Principal Agreement shall
remain binding, subsisting, effective, enforceable and in force
between the parties.”
(emphasis laid by this Court)
The abovementioned clauses of the subsequent Agreements dated 8th March,
2002 and 30th July, 2004 go to show that there has been no alteration in
the nature of rights and responsibilities of the parties involved in the
contract. Consequently, there has been no novation of the contract.

29. It has been further argued by the learned senior counsel for the
respondents that Section 5 of the A & C Act, which bars intervention by
judicial authority in Arbitration Agreement will not be applicable to
International Agreements such as the present case. We are inclined to
reject this contention by placing reliance upon the legal principle laid
down by this Court in Venture Global Engineering case (supra), the relevant
paragraph of which reads as under:
“25. …… In order to find out an answer to the first and prime issue
and whether the decision in Bhatia International (supra) is an answer
to the same, let us go into the details regarding the suit filed by
the appellant as well as the relevant provisions of the Act. The
appellant -VGE filed O.S. No. 80 of 2006 on the file of the Ist
Additional District Court, Secunderabad, for a declaration that the
Award dated 3.4.2006 is invalid, unenforceable and to set aside the
same. Section 5 of the Act makes it clear that in matters governed by
Part I, no judicial authority shall intervene except where so
provided. Section 5 which falls in Part I, specifies that no judicial
authority shall intervene except where so provided. The Scheme of the
Act is such that the general provisions of Part I, including
Section 5, will apply to all Chapters or Parts of the Act.”
(emphasis laid by this Court)
30. Further, it is pertinent to read Clause 7.5 of the Agreement dated 8th
March, 2002 carefully. Clause 7.5 reads thus:
“Jurisdiction: Courts at Calcutta alone shall have jurisdiction in all
matters relating to this Agreement.”

 
The phrase ‘this agreement’ means the Agreement dated 8th March, 2002 which
is essentially a supplementary Agreement and does not, by any mean, make
the Principal Agreement dated 12th January, 2002 subject to the
jurisdiction of the Court.

31. Therefore, we are of the opinion that both the learned single Judge and
the Division Bench erred in arriving at the conclusion mentioned above and
their findings are liable to be set aside. In the light of the case
mentioned above and also on the basis of the clauses of the Principal
Agreement dated 12th January 2002 and subsequent Agreements dated 8th March
2002 and 30th July, 2004, read with section 5 of the A&C Act, we are
inclined to observe that the Arbitration clause in the Principal Agreement
continued to be valid in view of clause no. 6 of the Agreement dated 30th
July, 2004 and also by virtue of its mention in different parts of both the
supplementary agreements dated 8th March, 2002 and 30th July, 2004.
Therefore, the arbitration clause mentioned in Clause 15 of the Arbitration
agreement dated January 12, 2002 is valid and the appellant is entitled to
invoke the arbitration clause for settling their disputes. We, therefore,
answer the point no.1 in favour of the appellant.

Answer to Point nos.2 and 3
32. We answer point nos. 2 and 3 together since they are interrelated.
It is the claim of the respondent no.3 that the suit was filed by
Respondent no. 1 under section 9 of CPC and not section 45 of the A&C Act.
Respondent no.3 further placed reliance upon the decision of this Court in
Ganga Bai v. Vijay Kumar & Ors.[9] to hold that:
“15. …There is an inherent right in every person to bring suit of a
civil nature and unless the suit is barred by statute one may, at ones
peril, bring a suit of one’s choice. It is no answer to a suit,
howsoever frivolous the claim, that the law confers no such right to
sue. A suit for its maintainability requires no authority of law and
it is enough that no statute bars the suit. But the position in regard
to appeals is quite the opposite. The right of appeal inheres in no
one and therefore an appeal for its maintainability must have the
clear authority of law. That explains why the right of appeal is
described as a creature of statute.”
(emphasis supplied by this Court)

Therefore, the learned senior counsel appearing on behalf of respondent no.
3 places reliance upon this decision to contend that the Calcutta High
Court (exercising its ordinary original jurisdiction) has the jurisdiction
(territorial as well as pecuniary) to entertain the present suit under
section 9 of CPC and grant of such interim injunctive relief as it deems
fit under Order 39 Rules 1 and 2 of the CPC is permissible in law.
33. We are inclined to reject this contention raised by the learned
senior counsel appearing on behalf of Respondent no. 3. A careful reading
of the decision leaves no doubt in the mind as has been held in
Ganga Bai’s case (supra) that:
“15. …There is an inherent right in every person to bring suit
of a civil nature and unless the suit is barred by statute one
may, at ones peril, bring a suit of one’s choice……”
(emphasis laid by this Court)

 
34. The learned senior counsel for respondent no. 3 further places reliance
upon the Constitution Bench decision of seven Judges in SBP & Co. v. Patel
Engineering Ltd. & Anr.[10] wherein it was held that:
“19…..When the defendant to an action before a judicial
authority raises the plea that there is an arbitration agreement
and the subject matter of the claim is covered by the agreement
and the plaintiff or the person who has approached the judicial
authority for relief, disputes the same, the judicial authority,
in the absence of any restriction in the Act, has necessarily to
decide whether, in fact, there is in existence a valid
arbitration agreement and whether the dispute that is sought to
be raised before it, is covered by the arbitration clause….”
(emphasis laid by this Court)

 
35. We have already held that the Principal Agreement dated 12th January,
2002 continues to be in force with its arbitration clause in place. We have
also mentioned, while answering point no. 1, that section 5 of the A&C act
will be applicable to Part II of the Act as well. The Agreement dated 12th
January, 2002 remains valid and the arbitration clause, with all fours,
will be applicable to the parties concerned to get their disputes
arbitrated and resolved in the Arbitration as per the Rules of ICC. The
contention raised by the learned senior counsel for Respondent no.2, Mr.
K.K. Venugopal regarding the maintainability of the suit while examining
the interlocutory order in the appeals, is therefore, untenable in law.

36. The fact that CPIL, which initially was a non-signatory to the
Agreement does not jeopardize the arbitration clause in any manner. In this
connection, we are inclined to record an observation made in the three
Judge Bench decision of this Court in Chloro Controls India Pvt. Ltd.
(supra), wherein it was held as under:
“107. If one analyses the above cases and the authors’ views,
it becomes abundantly clear that reference of even non-
signatory parties to arbitration agreement can be made. It may
be the result of implied or specific consent or judicial
determination. Normally, the parties to the arbitration
agreement calling for arbitral reference should be the same as
those to the an action. But this general concept is subject to
exceptions which are that when a third party, i.e. non-
signatory party, is claiming or issued as being directly
affected through a party to the arbitration agreement and there
are principal and subsidiary agreements, and such third party
is signatory to a subsidiary agreement and not to the mother or
principal agreement which contains the arbitration clause, then
depending upon the facts and circumstances of the given case,
it may be possible to say that even such third party can be
referred to arbitration.”
(Emphasis laid by this Court)

 

37. The respondent no.1 has filed a suit seeking two remedies against the
appellants: firstly, that the Arbitration Agreement contained in Clause 15
of the Agreement dated January 12, 2002 is void and/or unenforceable and/or
has become inoperative and/or incapable of being performed, and secondly,
the respondent no.1 sought permanent injunction restraining the appellant
herein from initiating and/ or continuing with the impugned Arbitration
proceedings bearing case no. 18582/ARP pursuant to the Impugned Arbitration
Agreement contained in clause 15 of the Agreement dated January 12, 2002
and the Request for Arbitration dated March 21, 2012 and the communication
dated April 02, 2012 issued by defendant no. 8 in the Arbitration
proceedings connected therewith and incidental thereto.

Since, we have already held that the arbitration clause is valid, suit
filed by the respondent no.1 for declaration and permanent injunction is
unsustainable in law and the suit is liable to be dismissed.
38. In view of the above, we direct the parties to resolve their disputes
through arbitration as mentioned in clause 15 of the letter of Agreement
dated 12th January, 2002 in accordance with the Rules of ICC. We have also
seen from the written submission of the appellants counsel that the
appellants have already initiated an arbitration proceeding. In such case,
the parties shall continue with the arbitration proceeding since the suit
filed for permanent injunction against the arbitration proceeding is
dismissed by setting aside the impugned judgment and final order in A.P.O.
No. 13 of 2013 passed by the High Court of judicature at Calcutta on
04.06.2013. Accordingly, the appeal is allowed, but no costs.

 

…………………………………………………J.
[G.S. SINGHVI]

 

 
……………………………………………………J. [V.
GOPALA GOWDA]

 

 
New Delhi,
December 10, 2013

 

 

———————–
[1] (2011) 9 SCC 735
[2] (2002) 4 SCC 105
[3] (2008) 4 SCC 190
[4] (2009) 9 SCC 797 (para 5)
[5] (2009) 10 SCC 257 (para 2)
[6] (2004) 12 SCC 624 (paras 9 to 11)
[7] (2005) 3 SCC 63 (para 20)
[8] (2013) 1 SCC 641
[9] (1974) 2 SCC 393
[10] (2005) 8 SCC 618

———————–
3

 

 

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