Global Marketing Direct Limited v. Gtl Limited And Another

The petitioner herein is the original defendant No. 2 in Special Civil Suit No. 50 of 2002 filed by the respondent No. 1. The respondent No. 2 is the original defendant No. 1. The suit by the respondent No. 1, principally seeks reliefs, that the agreements dated 9th November, 2000 and 18th January, 2001 and Arbitration Agreements contained therein are illegal, null and void ab initio or inoperative and/or incapable of being performed and other consequential reliefs. The Agreements are between the respondent No. 1 and petitioner on the one hand and respondent No. 1 and respondent No. 2 on the other hand. An application for interim relief was moved by the respondent No. 1 to restrain the petitioner, and respondent No. 2 from in any manner commencing and/or in proceeding with and/or participating in any proceeding in a Court of law and/or any arbitration under the agreements dated 9th November, 2000 and 18th January, 2001 and also restraining them from acting upon or in furtherance of the above mentioned agreements. The application for injunction was rejected by the trial Court by its order dated 13th August, 2002. Against that an Appeal came to be filed being Appeal From Order No. 799 of 2002. That Appeal came to be dismissed by order dated 30th November, 2002. At the time of hearing of the Appeal the position was that Arbitral proceedings between the petitioner and respondent No. 1 had commenced and an Arbitrator had been appointed and in between respondent No. 1 and respondent No. 2 arbitral clause had been invoked. In the present matter we really are not concerned with the arbitral process between the respondent No. 1 and respondent No. 2. The Appeal preferred came to be dismissed by order dated 30th November, 2002. This Court held that as the arbitral process had commenced, it will not be appropriate to stay the arbitral proceedings but allow the parties to agitate their disputes before the chosen forum. The order in Appeal was challenged by way of Special Leave Petition in the Apex Court where a statement was recorded before the Apex Court that the Arbitrator had passed an Award and that respondent No. 1 would be advised to raise all such objections, as may be available to it to be raised, under section 48 of the Arbitration and Conciliation Act, 1996. Consequently, the Special Leave Petition was dismissed as withdrawn.

2. The petitioner and respondent No. 2 herein thereafter moved an application dated 30th August, 2003 before the learned Civil Judge, (Senior Division, Thane), where the suit was pending. In the said application it is set out as under:—

“It is submitted by the defendant that disputes between the parties having been referred to Arbitration, this Hon'ble Court has no jurisdiction to proceed with the suit and entertain any application for interim relief. Arbitration between plaintiff and defendant No. 2 has culminated in an Award dated 1st April, 2003 and remedy of the plaintiff is to oppose enforcement of the Award as and when it is sought to be enforced under section 48 of the Arbitration Act, 1996. In respect of Disputes between plaintiff and defendant No. 1, arbitration has been invoked. The High Court has already held by Judgment dated 30th November, 2002 that parties have agreed to arbitration and arbitration must be allowed to proceed. Thus remedy of the plaintiff is before the arbitrator and not this Hon. Court.

In the circumstances, this Hon'ble Court be pleased to hear this preliminary objection of the defendants regarding the jurisdiction of the Court to proceed with the suit or hear any interim application for injunction, restraining enforcement of the Arbitration Award or attachment before Judgment.”

3. The respondent No. 1 filed a reply opposing the grant of the relief as sought for by the petitioner herein and prayed that the application be rejected.

4. By the impugned order dated 15th September, 2003 the learned Civil Judge rejected the application. The principal contention raised before the learned Civil Judge was that the Civil Court would cease to have jurisdiction to proceed with the suit after the matter had been referred to arbitration and that had culminated into an award dated 1st April, 2003. The learned Civil Judge after considering the matter and arguments held that the petitioner and respondent No. 2 had not moved by an application under section 45 for referring the dispute to arbitration and unless request is made by either of the parties, the parties could not be referred to arbitration and as such it would be difficult to hold that the jurisdiction of the Civil Court is ousted and in that light of the matter dismissed the application while clarifying that the petitioner and respondent No. 2 are at liberty to invoke the provisions of section 45 of the Arbitration and Conciliation Act, 1996. It is this order which is the subject matter of the present Revision Application.

5. At the time of hearing of this petition on behalf of the petitioner their learned Counsel drew my attention to the judgment of this Court in GTC Ltd. v. Royal Consulting RV, 2003 (2) All MR 608. It is contended by the learned Counsel for the petitioner, after referring to various paragraphs in the judgment, that there is nothing further left in the suit and consequently the trial Court ought to have allowed the application and consequently the order will have to be set aside and the suit dismissed. It was also pointed out by the learned Counsel for the petitioner that in fact the petitioner herein when they filed their reply to the application for temporary injunction in the suit filed by respondent No. 1, had apart from seeking dismissal of the application for interim relief, had also sought a direction to direct the parties to arbitration in respect of the disputes raised by the plaintiff regarding the performance of the agreement dated 18th January, 2001 in accordance with clause 13 thereof.

6. On the other hand on behalf of respondent No. 1 their learned Counsel contends that the Civil Court continues to have jurisdiction as the matter was not referred to arbitration by the Court and in spite of the award of the learned Arbitrator the Court would continue to have jurisdiction. It, therefore, cannot be said that merely because an award is passed, that the Civil Court would cease to have jurisdiction and that the Court ought not to proceed with the suit or hearing any of the interim application in the proceedings. Learned Counsel also relies on the very same judgment adverted to on behalf of the petitioner to contend that the Civil Court would have jurisdiction continue to proceed with the suit.

7. At the outset it may be noted that the petitioners have relied on the judgment of the Apex Court in the case of P. Anand Gajapathi Raju v. P.V.G Raju (dead), (2000) 4 SCC 539 to contend that when the parties proceed to arbitration in terms of the arbitration agreement nothing remains to be decided in the original action or appeal arising thereon. Similarly the reliance is placed on the judgment in the case of Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums., (2003) 6 SCC 503 to contend that when there is an arbitration clause and a party applies under section 8 of the Act of 1996 a mandatory duty is cast on the Court to refer the parties to arbitration and the Civil Court if the party complies with the mandate of section 8 is bound to refer the parties to arbitration and in that event has no jurisdiction to proceed with the suit. On the other hand on behalf of the respondent No. 1 their learned Counsel relied on the judgment of Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531 to contend that in the instant case the suit filed was maintainable and considering the parties and the reliefs sought it will be clear that the Civil Court would continue to have jurisdiction and that jurisdiction is not ousted even if there be an arbitral award in the arbitral proceeding between the petitioner and the respondent No. 1. At any rate it is contended that considering sections 44 and 45, the Court will continue to have jurisdiction.

8. With the above we may now proceed to dispose of the issues that arise in the present proceedings. Insofar as the issue of jurisdiction is concerned, the petitioner would have to show on the facts of the case that on account of subsequent acts namely passing of the award the Civil Court would cease to have jurisdiction in respect of the subject matter in the pending suit, though initially it had jurisdiction. The Civil Procedure Code has been amended in the State of Maharashtra by introduction of section 9A to the Code of Civil Procedure. By virtue of this amendment it is open to a defendant to raise a plea of want of jurisdiction even at the stage of interim relief and if is so raised the Civil Court is bound to frame the issue of jurisdiction at a preliminary stage and dispose of the same. As noted earlier the application moved by the petitioner is on the basis that the award has been passed on 1st April, 2003 and the remedy if and at all of the respondent No. 1 is to oppose the enforcement of the award. There is really no application for interim relief in terms of the provisions of the Code of Civil Procedure. The petitioner also did not apply to the Court for framing of issue as to jurisdiction and to get the same decided as that can be done on pleading being completed and issues being framed. In the instant case based on the pleadings in the application the trial Court was called upon not to proceed with the suit or hear any interim application restraining enforcement of the arbitration award and attachment before judgment considering that an award has been passed and hence it ceased to have jurisdiction.

9. We may note that the Arbitration Agreement between the respondent No. 1 and the respondent No. 2 is in the matter of an International Commercial Arbitration as defined under section 2(f) of the Arbitration and Conciliation Act, 1996 which is being referred to as the Act of 1996. Insofar as the Act of 1996 is concerned if a suit is brought before the domestic forum in this country in respect of an arbitral clause in a matter of international commercial arbitration, then notwithstanding anything contained in part I or in the Code of Civil Procedure, a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. In the instant case in the suit filed by respondent No. 1 also seeks a relief that the agreements including the Arbitration clause in the agreements are null and void. We have earlier referred to the prayer clauses in the suit. The prayer is, that the Arbitration agreements contained in them are illegal, null and void ab initio or inoperative and/or incapable of being performed. Therefore, in a case of international commercial arbitration, a Civil Court before whom an action is brought, has jurisdiction to decide whether an agreement in writing for arbitration is null and void, inoperative, or incapable of being performed. The position under section 45 is clearly different from that under section 8. Under section 8 a judicial authority before whom an action is brought in a matter which is the subject matter of an arbitration shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. As observed by the Apex Court in P. Anand Gajapathi Raju (supra) and as further observed in Sukanya Holdings (P) Ltd., (supra), if the subject matter of the dispute is subject matter of arbitration and all parties to the suit are parties to the arbitration agreement and the defendant has complied with other requirements of section 8 including invoking the provisions before filing the first statement of defence, there is nothing left for the Court but to direct the parties to arbitration and all issues then will have to be decided by the learned Arbitrator, including the issue as to the validity of the arbitration agreement itself. We are, however, not concerned in the instant case with an application under section 8. We are concerned with the provisions of section 45 of the Act of 1996. It may also be noted that the application before the trial Court not to proceed with the suit was taken by both the petitioner, and respondent No. 2. However, only the petitioner the original defendant No. 2 has moved this Court against the order rejecting the said application. The respondent No. 2 has chosen not to challenge the said order. It transpires that though the arbitral clause had been invoked under the agreement between the respondent No. 1 and respondent No. 2 no steps have thereafter been taken to proceed with the arbitration as pointed out at the Bar. It is not necessary for us further examine the proceedings between the respondent No. 1 and the respondent No. 2 as that is not the subject matter of the present Revision Application.

10. An analysis, therefore, of the law would be that in a proceeding pending before a judicial authority, section 45 can be resorted to if there are disputes between the parties as to the validity of the arbitration agreement. Unlike section 8 which provides that the application shall be moved not later than when submitting the first statement of the substance of the dispute under section 45 there is no such limitation. All that section 45 says is that when a judicial authority is seized of an action in a matter in respect of which parties had made an agreement for arbitration the judicial authority at the request of one of the parties or any person claiming through them or under him refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. Prima facie, therefore, there seems to be no time limit within which such an application can be made. A further aspect of the matter is that even if section 45 is invoked, the Civil Court would continue to have jurisdiction until it decides whether the arbitration agreement is void, inoperative or unlawful. It is only after recording such a finding with the issue of jurisdiction be answered.

11. On behalf of the petitioner it was contended that there is no need to file an application and all that has to be pointed out by a party to the Court, is that there is an arbitration agreement whereupon the Court is bound to consider the issue. In the instant case it is pointed out that in the reply filed in the application for temporary injunction the petitioner had in fact, prayed apart from seeking dismissal of the application for temporary injunction to refer the parties to arbitration in terms of Clause 13 of the Agreement. These averments were not brought to the notice of the Court. This Court whilst disposing off the Appeal From Order had noted that the petitioner and respondent No. 2 for reasons which they are so advised had not applied under section 45 of the Act of 1996. At any rate, the suit itself seeks relief that the agreements including the arbitration agreement is null and void. In these circumstances even if the reply to the application for temporary injunction is considered to be an application to the Court under section 45, yet the issue would have to be decided, whether the parties could have been directed to arbitration without the Court first considering that the agreement is null and/or inoperative or incapable of being performed. Even otherwise considering the language of section 45 which uses the expression at the request of one of the parties; would mean that the attention of the Court is invited to the arbitral clause with a request to direct the parties to arbitration. This would mean that a formal application is made to the Court so that the other side and the Court knows why the request under section 45 is made.

12. The real crux of the matter however, is that an Award has been passed. Is it open to this Court at this stage to dismiss the suit or not to proceed with the suit on the ground of no jurisdiction or that the subject matter is covered by an award assuming that a formal application under section 45 is not required. As pointed out earlier the suit is filed by the respondent No. 1 against the respondent No. 2 as defendant No. 1 and the petitioner as defendant No. 2. The subject matter of the suit consists of two independent agreements between the parties. Really, therefore, what the Court will have to answer is whether in view of the award in arbitral proceedings between petitioner and respondent No. 1 the suit in the circumstances can be proceeded with. The Court also will have to consider whether the suit between the petitioner and respondent No. 1 has to be dismissed either on the ground, that the cause of action no longer survives or that the subject matter of the dispute between the petitioner and respondent No. 1 having culminated into an award is now barred by the principles of res judicata, or that even the reliefs prayed for by the plaintiff can be the subject matter of an arbitration and/or the like. It is not necessary for this Court to answer that contention at this stage considering the nature of the pleadings and the reliefs sought before the trial Court. Suffice it to say that the Civil Court was not called upon to answer such issues. All that it was called upon was to decide whether the Court had jurisdiction to proceed with the suit. The trial Court on the arguments advanced proceeded on the footing that what the petitioner and respondent No. 2 were contending was that the Civil Court has no jurisdiction as disputes between the petitioner and respondent No. 1 had been decided by an Arbitrator. It is in these circumstances that the application was dismissed. As noted earlier, in the judgment in GTC Ltd., (supra) the Civil Court in spite of an arbitration agreement continues to have jurisdiction and that jurisdiction can only be ousted in a manner provided under section 8 in the case of a domestic arbitration and in the manner provided under section 45 or section 54 in case of an international commercial arbitration, depending upon whether it is bound by the New York Convention or Geneva Convention. The ultimate order of the trial Court, therefore, that it has jurisdiction cannot be faulted. The judgment of this Court dated 30th November, 2002 in GTC Limited (supra) has not answered the issue. What this Court was considering in the Appeal From Order was an application for interim relief to restrain the petitioner and respondent No. 2 from proceeding with the arbitral proceedings. This Court after considering the matter held that on the facts and in view of invocation of the arbitral clause, it would not be a fit case to grant injunction and the parties should be left to proceed before the forum that they have chosen. This Court in that matter also examined the power under sections 8 and 16, the doctrine of severability of the arbitration clause as also the power under sections 45 and 54. It is not possible, therefore, to accept the contention raised on behalf of the petitioner that this Court insofar as the subject matter of the present suit is concerned, has taken a view that the Civil Court would have no jurisdiction or that the suit cannot be proceeded with. It will be open to the petitioner, if so advised, to take out appropriate proceedings in respect of the subject matter between itself and respondent No. 1, and then to get an appropriate finding and/or order from the Court.

13. In the present Revision Application the scope is limited to the points urged before the learned trial Court. Considering the exercise of revisional power even if the contention of the petitioner was accepted the entire suit itself could not have been disposed off on the ground of no jurisdiction as respondent No. 2 has not challenged the order nor is there any award passed in any proceedings between respondent No. 1 and respondent No. 2 in respect of the present subject matter. At the highest even if the argument of the petitioner is accepted, a part of the cause of action in the suit would have to be held to no longer survive or barred and at the highest between the petitioner and respondent No. 1. In these circumstances and for the other reasons earlier stated this will not be a fit case for this Court to interfere with the impugned order in the exercise of its revisional jurisdiction.

14. Civil Revision Application rejected.

15. All parties to act on an ordinary copy of this order duly authenticated by the Personal Secretary of this Court.

16. P.C:— After the order is pronounced on behalf of the petitioners learned Counsel prays that the order be not given effect to and the interim order granted by this Court on 7th October, 2003 be continued for a period of eight weeks from today.

17. The respondents appose the grant of such relief.

18. Having considered the matter and the fact that the respondent No. 1 itself is before the Apex Court it will be proper that the interim order is continued for a further period of eight weeks. Hence the interim order dated 7th October, 2003 to continue for a period of eight weeks from today.

19. All parties to act on an ordinary copy of this order duly authenticated by the Personal Secretary of this Court.

Order accordingly.