Khanji Exports Pvt. Ltd. vs Shiptrade Inc.
2000 Latest Caselaw 367 Del

JUDGMENT

Vikramajit Sen, J.

1. In a petition filed under Sections 30, 31(3), 32 and 33 of the Arbitration Act, 1940, following relief have been prayed for :

(a) declare that the award/orders dated 21-5-1999, 29-12-1999 and 3-2-2000 are not valid in law and that the same are not enforceable.

(b) Direct the arbitral tribunal to hear both the claim and the counter claim together.

(c) Restrain the tribunal from proceedings with the hearing on 28-2-2000 or any other date only of the Claim filed by the respondent till the disposal of the present application.

(d) Pass ad interim orders in terms of prayer.

(c) above.

(e) Award costs of the application.

(f) Pass such further orders as the court may deem fit and necessary in the facts and circumstances of the case.

2. The petition is accompanied by an application under Section 41(b) and Schedule II of the Arbitration Act, 1940, read with Section 151 of the Code of Civil Procedure. It contains the following prayers:

(a) Restrain the tribunal from proceeding with the hearing on 28-2-2000 or any other date only of the Claim filed by the respondent till the disposal of the present application.

(b) Pass ex parte ad interim orders in terms of prayer (a) above.

(c) Pass such further orders as the court may deem fit and necessary in the facts and circumstances of the case.

3. The following orders were passed on the first hearing;

"21.2.2000

Present: Mr. P. Chadambram, Sr. Advocate with Mr. Saurabh Kirpal for the Petitioner.

"OMP No. 45/2000 & LA 1656/2000

"This is a petition under Arbitration Act, 1940. I have perused the petition as well as the documents filed along with it. Mr. Chidambram, learned Sr. Advocate who appears for petitioner submits that it is unjust and incorrect for the Arbitrator to insist that the petitioner should furnish security for cost without the same condition being imposed on the respondent. He further submits that there has not been any agreement between the parties on the applicable rules. Had the condition of providing security for costs been imposed on both the parties, the petitioner would not have remonstrated against it. The petitioner had not made grievance of its Counter claim being stayed, but, has submitted there was no justification for not imposing the same condition on the respondent.

Issue notice to the respondent returnable 6n 19th May, 2000.

I am satisfied that till the next date of hearing the ex-parte ad interim injunction prayed for should be granted. This is all the more imperative since, as stated in the petition the share capital of the respondent is only a meagre $ 250.1 see no justification for the arbitrator to impose different standards on the parties before him. I, therefore, restrain the Tribunal from proceedings with the hearing on 28th February, 2000 or on any other date unless so permitted by the Court.

Renotify on 19th May, 2000.

Dasti.

4. Thereafter the Plaintiff has filed a fresh interim application, LA. 2395/2000, bringing to the notice of this Court that the Arbitrators had made the following statement in terms of the letter dated 25.2,2000.

"On behalf of the Tribunal I refer to Ince's fax of 23rd February enclosing a copy of the Order made by the High Court in Delhi and the subsequent exchanges. We have also now received from Incase the documents which were filed with the New Delhi Court.

We understand that proceedings are taking place in the High Court in London today. But for delay resulting in the fact that the members of the Tribunal were unable to discuss the matter promptly, we would have sent a message on receipt of Ince's fax of 23rd February sending us the Order in which we would have commented that we could see no basis on which the Indian Courts were entitled to involve themselves in this matter.

Since the High Court in London retains a supervisory jurisdiction over London arbitrations, we would have thought that the appropriate forum for any application to restrain the arbitrators from proceeding further would be the High Court in London.

Without intending any disrespect to the Indian Court it seems to us that our obligation to ensure that progress is maintained in this arbitration means that we must proceed as planned with the hearing on Monday unless and until we are restrained from doing by the Order of a body which appears to have at least Prima facie jurisdiction over us."

5. LA. No. 2395/2000 further narrates that the respondent had, on 25.2.2000, initiated proceedings before the Commercial Court, High Court of Justice, Queen's Bench Division, in which the following orders were passed;

It is ordered that :

(1) The Defendants be restrained from continuing with the action brought by them against the Claimants in the High Court of Delhi at New Delhi under reference OMP.No.45/2000 and entitled "Khanij Exports Pvt. Ltd. v Shiptrade Inc".

(2) The Defendants do forthwith take such steps as are necessary to discontinue the said proceedings and to discharge the injunction therein granted on 21st February, 2000 restraining certain named persons (hereinafter "the Arbitrators") from proceeding with an arbitration hearing on 28th February, 2000.

(3) The Defendants be restrained, whether in England or India or else where, from seeking either :

(a) to commit the Arbitrators for contempt of court; or

(b) to claim damages, compensation or any other relief from the Arbitrators;

in the event that the Arbitrators do proceed with the hearing on 28th February 2000.

(4) The Defendants be restrained from commencing any further or other proceedings in India against the Claimants directed to the conduct of the arbitration between them in England.

(5) Service of the documents required to be served pursuant to the undertaking (3) above be deemed good service on the Defendants if served either

It is in these circumstances that the Applicant has made the following prayers in I.A. 2395/2000.

a) Restrain the arbitrators from making any award in relation to the arbitration disputes pending between the petitioner and the respondent.

b) Restrain the respondent from taking any step of proceeding to enforce the award that has been made or may be made provided such award is against the applicant herein, in the arbitration proceedings pending between the petitioner and the respondent.

(c) Restrain the respondent from continuing with the action brought by the respondent against the applicant in the High Court of Justice, Queen's Bench Division, Commercial Court in the matter between Shiptrade Inc. v. Khanji Exports Pvt. Ltd. and further direct the respondent to discontinue the said action/proceeding and to discharge the orders therein granted on 25.2.2000.

(d) Pass any such orders as the court may deem fit and necessary in the facts and circumstances of the case.

6. The decision of the Supreme Court in Tayabbhai M. Bagasarwalla & Anr. v. Hind Rubber Industries Pvt. Ltd. & Ors., , provides an answer to the present forensic impasse which has resulted from the passing of the subsequent orders by the Hon'ble Commercial Judge, High Court of Justice, Queen's Bench Division. What is immediately evident from a perusal of the judgment in Tayabbhai's case (supra) is that the law is the same in England and in India, on the question of obeying judicial orders still they are modified or set aside by the Court which issued them. One of the foremost factors of Indian jurisprudence, as it has evolved through judgments of the Supreme Court of India, is a healthy respect for judicial systems and views of other countries. Also significant is its constant effort to evolve and effectuate general principles of law which would be of universal application, irrespective of the legal system or regime that may exist. No doubt, in Tayabbhai's case (supra), the Supreme Court was concerned with the issue whether a party could be punished for the contempt of an order passed by a Court which was found, in Appeal, not to have jurisdiction over the disputes in which such orders were passed. The Apex Court nonetheless punished the party transgressing the orders to imprisonment for contempt of even these orders passed by a Court which had no initial jurisdiction. The reasoning can be conveniently extrapolated, since in flows along the same stream. I am reproducing passages from this judgment containing extracts from five treatise/judgments of the United Kingdom for reasons which ought to be plainly evident.

(a) In Hoffmann-La Roche v. Secy. of State for Trade and Industry, 1975 AC 295 : (1974) 2 ALL ER 1128, HL Lord Dislock observed as under :

"the order would be presumed to be valid unless the presumption was rebutted in competent legal proceedings by a party entitled to sue."

(b) In Smith v. East Elloe Rural District Council, 1956 AC 736 : (1956) 1 ALL ER 855, HL Lord Radcliffe observed as under :

An order, even if not made in good faith, is still an act capable of legal con sequences. It bear no brand of invalidity of its forehead. Unless the necessary proceedings are taken at law to establish the cause of invalidity and to get it quashed or otherwise upset, it will remain as effective for its ostensible purpose as the most impeccable of orders."

(c) Wade's Administrative Law,(6th Edn.). - 'Void' is meaningless in an absolute sense; and 'unless the necessary proceedings are taken at law to establish the cause of invalidity and to get it quashed or otherwise upset, it will remain as effective for its ostensible purpose as the most impeccable of order'.

(d) Oswald on Contempt (1910 Edn. at p.l06). - ''An order irregularly obtained cannot be treated as a nullity, but must be implicitly obeyed, until, by a proper application, it is discharged."

(e) In Hadkinson v. Hadkinson, the Court of Appeal held as under :

"It is the plain and unqualified obligation of every person against, or in respect of whom an order is made by a court of competent jurisdiction to obey it unless and until that order is discharged. The uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by an order believes it to be irregular or even void. Lord Cottenham, L.C., said in Chuck v. Cremer, (1846) 1 Coop temp Cott 247: 47 ER 820 :

"A party, who knows of an order, whether null or valid, regular or irregular, cannot be permitted to disobey it.....It would be most dangerous to hold that the suitors, or their solicitors, could themselves Judge whether it was null or valid - whether an order was regular or irregular. That they should come to the court and not take upon themselves to determine such a question. That the course of a party knowing of an order, which was null or irregular, and who might be affected by it, was plain. He should apply to the Court that it might be discharged. As long as it exited it must not be disobeyed. Such being the nature of this obligation, two consequences will, in general follow from its breach. The first is that anyone who disobeys an order of the Court (and I am not now considering disobedience of orders relating merely to matters of procedure) is in contempt and may be punished by committal or attachment or otherwise. The second is that no application to the Court by such a person will be entertained until he has purged himself of his contempt."

7. The previously expressed views of the Supreme Court, followed in Tayabbhai's case (supra), arc to be found in Ravi S. Naik v. Union of India, 1994 Supp (2) SCC Ml, and call for reproduction:

"In the absence of an authoritative pronouncement by this Court the stay order passed by he High Court could not be ignored by the Speaker on the view that his order, could not be a subject-matter of Court proceedings and his decision was final. It is settled law that an order, even though interim in nature, is binding till it is set aside by a competent Court and it cannot be ignored on the ground that the Court which passed the order had no jurisdiction to pass the same. Moreover the stay order was passed by the High Court which is a superior Court of Record and 'in the case of a superior Court of Record, it is for the court to consider whether any matter falls within its jurisdiction or not. Unlike a court of limited jurisdiction, the superior Court is entitled to determine for itself questions about its own jurisdiction. (See; Special Reference No. 1 of 1964 (Keshav Singh, Re), 1965) 1 SCR 413; (Mulraj v. Murti Raghonathji Maharaj,

8. In this analysis it is clear that it is wrong and totally opposed to judicial comity for any Court to pass orders which have the effect of nullifying or modifying the orders passed by another, however compelling the facts of the case may be. The Court approached subsequently should instead direct the party to approach the first Court for vacating or modifying the ex pane orders. This is a 'ground norm' or general principle of law which is of universal application. Judicial systems are insulated from and impervious to pressures which exert on national politics. It would not be sanguine to expect, in this century, that Courts would transcend its national boundaries and develop unitary legal regime globally. Every ex parte order can be immediately recalled or modified in this Country by invoking Order XXXIX of the Code of Civil Procedure or powers analogous thereto. I shall say no more.

9. The statements voiced in the Tribunal's letter dated 25.2.2000, reproduced above, being anterior to the subsequent orders of the Hon'ble Commercial Judge, Queen's Bench Division dated 25.2.2000 and are not protected by them. The consequences appear to be two-fold -- (a) that the Tribunal prima facie, is in Contempt of Court -- even accounting for and accepting its continuing proceeding under the blanket of the orders dated 25.2.2000. Since that Court has already reflected upon this issue and passed protective orders viz-a-viz the arbitral proceedings, I shall desist from acting further, (b) That Orders/Award of the Tribunal, atleast in this Country would be liable to being set aside since they have manifestly misconducted themselves and the arbitral proceedings.

10. It would be improper for me to venture onto the merits of the dispute. That must await the presentation of a defense or opposition from the respondent. From an account filed before me, pertaining to the proceedings in the Court of the Hon'ble Judge, is appears that the provisions of the Arbitration and Conciliation Act, 1996 were relied upon by the respondent and not those of the Arbitration Act, 1940. I had occasion to consider questions similar to these in OMP 200/99 titled Naval Gent Maritime Ltd. v. Shivnath Raj Hamarain (I) Ltd., I had observed as follows:

"Three learned Single Judges of this Court have separately concluded, by disparate dialectic, that the powers of the Court to grant injunctions under Section 9 would also extend to international arbitrations. As I have already observed, the judgment of J.B. Goel, J. does not run counter to these views. In the present case the respondent and its assets are undoubtedly located in India. Dr. Singhvi's argument, no doubt attractive, that the proper forum to obtain interim relief in the present case would be through English Courts, is not sufficiently compelling for me to hold differently to three learned Single Judges of this Court, On a holistic reading of the Arbitration and Conciliation Act, 1996, there is no justification to read it in compartments, and to subscribe to the view that the provisions of Part I apply only to domestic arbitrations. To hold so would be tantamount to defeating a uniform and universal string of precedents which underscore the pivotal role of Courts in the administration of arbitration. So long as the territorial jurisdiction of the Court is present, relief should not be declined on technicalities which are not representative of any equities in favour of the respondents. Since the properties of the respondent are within the jurisdiction of this Court, the umbilical cord of territoriality is clearly visible. The petitioner could no doubt have initiated proceedings in England and perhaps obtained similar orders from these Courts also. Although challenges to the jurisdiction of those Courts may have been much more difficult to assert, it would be worthwhile to keep in perspective the decision in The Channel Tunnel Group v. Balfour Beauty Construction Limited and Others (1993) 1 All ER 664 where it was held that the English Courts possessed inherent powers to grant injunctive relief even where the seat of Arbitration was not in England. This view has now obtained statutory sanction in terms of the English Arbitration Act. This is the ubiquitous view internationally. I see no reason to adopt a pedantic approach and thereby render the legal regime in India dissimilar to that prevailing in other parts of the world. The globe is now becoming a village, and persons will have increasing to choose between several available Courts. Earlier these may not have been available due to constraints of communication. So long as the choice is not capricious, merited relief should not be denied. It is palpably obvious that the present court was chosen because the relief, if granted, would be most efficacious and timely".

11. Arguments were concluded on the application on 28.3.2000, having previously come upon on 14.3.2000 and 21.3.2000. Learned counsel had pressed for immediate disposal of the application apprehending that if an Award was published the entire proceedings would be rendered infructuous. I have cogitated over the matter, mindful of the danger of passing orders which would vindicate the adage that justice hurried is justice buried. I have also tried my utmost not to further exacerbate the impasse which exists because of the palpably mutually opposing orders. It would also be necessary for me to record that Mr. Chidambaram, had, fairly not pressed prayer (c), keeping the awkward and delicate situation that has resulted from the respondent's decision not to approach this Court for setting-aside or modifying the ex-parte orders. I restrain the Arbitrators from making any Award in relation to the proceedings pending between the parties. I further restrain the respondent from taking any step or proceedings to enforce the Award, if published.

12. The application stands disposed of.