Delhi High Court
Klg Systel Ltd vs Operation Technology Inc on 8 February, 2012
Author: G. S. Sistani
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) 162/2011
% Judgment date 08.02.2012
KLG SYSTEL LTD ..... Plaintiff
Through: Mr.G.D. Goel, Sr. Advocate with Mr.Sanjiv
Goel and Mr.Prasoon Kumar, Advocates
versus
OPERATION TECHNOLOGY INC ..... Defendant
Through: Mr.R.P. Kapilan, Sr. Advocate with
Mr.B. Ravi, Advocate
CORAM:
HON'BLE MR. JUSTICE G.S.SISTANI
G.S.SISTANI, J (ORAL)
IA.No.1023/2011
1. This an application filed by the plaintiff under Order 39 Rules 1 & 2 of
the Code of Civil Procedure, by which plaintiff has prayed that defendants
be restrained from initiating or prosecuting or pursing any proceedings
against the plaintiff outside India with regard to the subject matter of the
suit. Summons were issued in the suit on 25.01.2011. After service
defendant entered appearance on 09.02.2011 when learned senior counsel
for the defendant informed the Court that the defendant had already filed a
suit in the Court at California on 26.01.2011. Leaned senior counsel for
the defendant on instructions had also made a statement that defendant
shall not take any further action in that suit till the next date of hearing
before this court. The statement made by the counsel continues till date.
2. While counsel for the plaintiff submits that the application be allowed and
CS(OS)162/2011 Page 1 of 26
the interim order dated 09.02.2011 be confirmed, the present application
is opposed by counsel for the defendant.
3. The facts of this case as set out in the plaint are that the plaintiff is a
company duly incorporated under the Companies Act, 1956. The
defendant company was incorporated under the laws of California, USA.
The plaintiff company is stated to be a „knowledge company‟ right from
its inception. It provides solutions for IT enablement to organizations in
the areas of Oil and Gas, Manufacturing, Retail Infrastructure, Power,
Process and new economy industries such as information Technology,
Telecommunications and the service sector. It is further submitted that
the plaintiff has served more than 2000 customers including public sector
companies, Indian Corporates. The parties entered into an ETAP Rep/
Reseller Agreement on 25.04.2009 w.e.f. 01.01.2009 for a period of one
year whereby the plaintiff was to market and sell the defendant‟s products
and services as detailed in annexure B to the agreement in the territories
of Bangladesh, India, Nepal and Srilanka. Under the agreement, the
defendant granted the plaintiff the right to represent, promote the product
of the defendant and the services during the term of the agreement. The
agreement was to be perpetually renewed on an annual basis. It is also
submitted that such agreement between the parties has continued for the
past 12 years. As per the plaintiff, this agreement was not renewed either
in writing or orally after 31.12.2009. It is the case of the plaintiff that
during the continuance of this agreement plaintiff had made huge
investment in terms of money, efforts and human resources to ensure that
the products and services are properly and widely sold in the aforesaid
territories without any complaint or dispute. On account of the promotion
and marketing of the product and services by the plaintiff has resulted in
excellent results and substantial increase in the sales. During the
CS(OS)162/2011 Page 2 of 26
continuance of this agreement the plaintiff conducted three seminars at
five star hotels in New Delhi, Chennai and Mumbai during the period
September - October, 2009. Mr.Farookh Shokooh, President, CEO of the
defendant company was invited to be part of the seminars.
4. Mr.Goel, learned senior counsel for the plaintiff submits that the plaintiff
was shocked to learn that the defendant has incorporated a hundred per
cent subsidiary company in India by the name of ETAP Automation Pvt.
Ltd. on 23.12.2009 with a view to by-pass the plaintiff and with a view to
ride on the efforts and achievements of the plaintiff. Mr.Goel, also
submits that in the year 2008 due to global recession the attitude of the
defendant took a sharp turn and the defendant started hinting that the
commission as agreed between the parties be reduced. This was opposed
by the plaintiff.
5. According to the plaintiff when the agreement expired on 31.12.2009 the
same was not renewed by the defendant company and from 01.01.2010
there was no written agreement between the parties. It is the case of the
plaintiff that on 09.06.2010 the defendant company sent an e-mail to the
plaintiff proposing certain terms and conditions for the fresh agreement to
be effective from 01.01.2010 itself, which was not agreeable to the
plaintiff, as informed to the defendant vide e-mail dated 21.06.2010.
Despite negotiations, no fresh agreement has been entered into between
the parties.
6. It is also the case of the plaintiff that despite absence of an agreement, the
plaintiff in right earnest and expecting an agreement eventually informed
the defendant of the ongoing deals of the new customers and the expected
turnover in the year 2010. The plaintiff even provided details of the
prospective customers and informed the defendant of the advance stage of
which negotiations were being carried out with such prospective
CS(OS)162/2011 Page 3 of 26
customers. The exercise was done in complete confidentiality with
utmost good faith on the part of the plaintiff.
7. Mr.Goel, leaned senior counsel for the plaintiff submits that the defendant
took undue advantage of the plaintiff‟s gesture and utilized the
information and directly contacted such prospective customers through its
newly formed company. It is also submitted by counsel for the plaintiff
that plaintiff learnt that the defendant started directly contacting all
customers of the plaintiff since December, 2009 with a view to by-pass
the plaintiff. Counsel also contends that the plaintiff was in advanced
stage of negotiations with one Kolkata Infra Solutions, however, the
director of the newly formed company contacted the said company
directly by e-mail dated 14.06.2010 and advised them to place the order
directly with the defendant. Counsel also submits that the defendant also
allured four out of six persons who were on the team of the plaintiff on
account of its malicious attitude. It is also the case of the plaintiff that
after destroying the market of the plaintiff, the defendant sent an e-mail
dated 10.07.2010 annexing letter of 09.07.2010 terminating the contract
with the plaintiff. The defendant also raised demands regarding payments
which according to the plaintiff are baseless, as there was no subsisting
agreement between the parties. It is also contended that although no
payments are due by the plaintiff to the defendant, but payments are due
from the defendant arising out of transactions prior to 01.01.2010, which
the defendant is attempting to avoid. Under these circumstances it is
submitted that the defendant maliciously and with mala fide intention
raised disputes, and the plaintiff is apprehending that the defendant may
commence arbitration proceedings at County of Orange, State of
California, USA under the lapsed written agreement which has not been
renewed, hence the present suit was filed.
CS(OS)162/2011 Page 4 of 26
8. Mr. Goel, learned senior counsel for the plaintiff, submits that plaintiff
has been able to make out a prima facie case for grant of anti suit
injunction as there is no agreement in existence between the parties after
31.12.2009 and the agreement between the parties was only for the period
from 1.1.2009 upto 31.12.209. Relying on Clause 2.1 of the Agreement,
learned senior counsel for the plaintiff submits that the agreement was to
be perpetually renewed on an annual basis. Interpreting Clause 2.1 of the
Agreement, Mr.Goel further submits that reading of this Clause would
show that the agreement would not be automatically renewed on expiry of
the period of the agreement, but the clause suggests that the agreement is
renewable on an annual basis. Senior counsel next submits that on
9.6.2010 vide an email the defendant had desired to enter into an
agreement with the plaintiff with retrospective effect that is from
1.1.2010. Senior counsel also submits that defendant is amenable to the
personal jurisdiction of this Court as the defendant has a running office in
New Delhi; defendant is working through its 100% subsidiary company,
ETAP Automation Private Limited; and, thus, the anti suit injunction
against defendant through its 100% subsidiary company is maintainable,
especially, when the subsidiary is acting completely under the instructions
of the holding company and projecting itself as its agent for all practical
purposes. It is also contended by learned senior counsel for the plaintiff
that this subsidiary has been formed by the defendant to sell the product
which was being sold by the plaintiff. Besides the Principal Electrical
Engineer of the of the plaintiff company is now a Director of ETAP
Automation. Besides this, the summons in the present suit were accepted
by the subsidiary company and the owner and CEO of the defendant has
wrongly pleaded that defendant cannot be made subject to jurisdiction of
this Court through the subsidiary, although, Directors of both the
CS(OS)162/2011 Page 5 of 26
company are the same.
9. Learned senior counsel for the plaintiff has placed reliance on a passage
of European Court of Justice in ICI v E.C. Commission, (1972) 11
CMLR 557, quoted in Ramaiya‟s Company Law, 2010 Ed., which read as
under:
"The fact that the subsidiary has a distinct legal personality does
not suffice to dispose of the possibility that its behavior might be
imputed to the parent company. Such may be the case in particular
when the subsidiary, although being a distinct legal personality,
does not determine its behavior on the market in an autonomous
manner but essentially carries out the instructions given to it by the
parent company."
10. Learned senior counsel for the plaintiff further relies on Section 20(c) of
the Code of Civil Procedure in support of his argument that part of the
cause of action has arisen in India as the contract has been executed and
implemented in India; defendant signed the agreement in India; plaintiff
was to act as the representative of the defendant in India; all the products
were sold in India; and the alleged termination of the contract was
received in India. Therefore, this Court would have personal jurisdiction
over the defendant in the subject matter of the dispute. Senior counsel for
the plaintiff has also relied upon on A.B.C. Laminart Pvt. Ltd. v A.P.
Agencies, Saleem, reported at (1989) 2 Supreme Court Cases 163, more
particularly para 15, which reads as under:
"In the matter of a contract there may arise causes of action of
various kinds. In a suit for damages for breach of contract the cause
of action consists of the making of the contract, and of its breach,
so that the suit may be filed either at the place where the contract
was made or at the place where it should have been performed and
the breach occurred. The making of the contract is part of the cause
of action. A suit on a contract, therefore, can be filed at the place
where it was made. The determination of the place where the
contract was made is part of the Law of Contract. But making of an
offer on a particular place does not form cause of action in a suit for
CS(OS)162/2011 Page 6 of 26
damages for breach of contract. Ordinarily, acceptance of an offer
and its intimation result in a contract and hence a suit can be filed
in a court within whose jurisdiction the acceptance was
communicated. The performance of a contract is part of cause of
action and a suit in respect of the breach can always be filed at the
place where the contract should have performed or its performance
completed. If the contract is to be performed at the place where it is
made, the suit on the contract is to be filed there and nowhere else.
In suits for agency actions the cause of action arises at the place
where the contract of agency was made or the place where actions
are to be rendered and payment is to be made by the agent. Part of
cause of action arises where money is expressly or impliedly
payable under a contract. In cases of repudiation of a contract, the
place where repudiation is received is the place where the suit
would lie. If a contract is pleaded as part of the cause of action
giving jurisdiction to the Court where the suit is filed and that
contract is found to be invalid, such part of cause of the action
disappears. The above are some of the connecting factors. So long
as the parties to a contract do not oust the jurisdiction of all the
Courts which would otherwise have jurisdiction to decide the cause
of action under the law it cannot be said that the parties have by
their contract ousted the jurisdiction of the Courts. If under the law
several Courts would have jurisdiction and the parties have agreed
to submit to one of these jurisdictions and not to other or others of
them it cannot be said that there is total ouster of jurisdiction. In
other words, where the parties to a contract agreed to submit the
disputes arising from it to a particular jurisdiction which would
otherwise also be a proper jurisdiction under the law their
agreement to the extent they agreed not to submit to other
jurisdictions cannot be said to be void as against public policy. If on
the other hand the jurisdiction they agreed to submit to would not
otherwise be proper jurisdiction to decide disputes arising out of the
contract it must be declared void being against public policy.
Would this be the position in the instant case"
11. Learned senior counsel for the plaintiff submits that in the absence of any
agreement after 31.12.2009 there is no question of any exclusive or non-
exclusive jurisdictional clause by governing law between the parties and
having regard to the fact that the cause of action, with respect to the
CS(OS)162/2011 Page 7 of 26
disputes between the parties, having arisen in India, the Courts in India
would have the jurisdiction to entertain the dispute. Senior counsel further
submits that the convenient forum to settle all disputes between the parties
would be courts in India, as the entire contract has been executed and
implemented in India; the contract was to market, sell the products and
services of the defendant in India; plaintiff is established in India; since
December, 2009, defendant has opened its office in India; the customers
are based in India and all the relevant papers, documents, witnesses, etc.,
are based in India, and, thus, the Courts in India would be in a better
position to decide the lis between the parties. On the other hand plaintiff
has no establishment in the United States; the defendant has been actively
pursuing the present suit on merits through its subsidiary and, thus, the
Courts in India are the convenient forums. In support of this contention,
learned senior counsel for the plaintiff has relied upon Magotteaux
Industries Pvt. Ltd. v. AIA Engineering Ltd., reported at 155 (2008) DLT
73 (DB), more particularly paras 52 and 64, which read as under:
"52. In the present case, in the absence of any contractual dispute or
clause wherein the parties have agreed to submit to the jurisdiction
of a particular Court, the discussion, pertaining to submission to the
exclusive jurisdiction of Court, does not arise and the mere ground
of forum inconvenience/forum convenience raised by the parties
may be adjudicated on the basis of inconvenience or hardship of the
respective parties to the present proceedings."
64. This takes us to the discussion as to how it is inconvenience
to the parties to go to the US Court to contest the proceedings. It is
a matter of fact that in the present case, the appellant No.2 is from
Belgium and has its subsidiary offices throughout the word
including USA, who has also instituted the proceedings in USA.
The respondent herein is from India and has its two companies in
USA and Italy including, Vega Industries Inc. Ltd. a subsidiary of
respondent and it is possible for them to contest the proceedings at
US Court, therefore, the inconvenience and hardship to the parties
while contesting the present suit as well as to contest the
proceedings in USA is not too much, which makes it impossible to
continue with both the proceedings simultaneously."
12. To butters his argument further that proceedings before the Court in
California are oppressive and vexatious, Mr. Goel submits that the Courts
in the United States of America are forum non-conveniens. Besides, the
plaintiff has suffered tremendous financial losses in the half year ended
30.9.2010 and it would be unusually burdensome for the plaintiff to
defend itself against the wrongful and baseless claim raised by the
defendant. On the other hand defendant has a subsidiary company in India
and would be able to contest the matter conveniently.
13. Reliance is placed on Oil and Natural Gas Commission vs. Western
Company of North America (1987) 1 SCC 496 and more particular
paragraph 18 thereof, which is reproduced below:
18. In the result we are of the opinion that the facts of this
case are eminently suitable for granting a restraint order as
prayed by ONGC. It is no doubt true that this Court sparingly
exercises the jurisdiction to restrain a party from proceeding
further with an action in a foreign court. We have the utmost
respect for the American Court. The question however is
whether on the facts and circumstances of this case it would
not be unjust and unreasonable not to restrain the Western
Company from proceeding further with the action in the
American Court in the facts and circumstances outlined
earlier. We would be extremely slow to grant such a restraint
order but in the facts and circumstances of this matter we are
convinced that this is one of those rare cases where we would
be failing in our duty if we hesitate in granting the restraint
order, for, to oblige the ONGC to face the aforesaid
proceedings in the American Court would be oppressive in
the facts and circumstances discussed earlier. But before we
pass an appropriate order in this behalf, we must deal with
the plea that the High Court does not have the jurisdiction to
grant such a restraint order even if the proceeding in the
foreign court is considered to be oppressive. Counsel for
the-Respondent has placed reliance on Cotton Corporation of
India vs. United Industrial Bank in support of this plea. In
Cotton Corporation's case, the question before the Court was
whether in the context of Section 41(b) of the Specific Relief
Act, the Court was justified in granting the injunction. The
said provision runs thus:
"41. An injunction cannot be granted:-
(b) to restrain any person from instituting or
prosecuting any proceeding in a court not subordinate
to that from which the injunction is sought:
(Emphasis added)
This provision, in our opinion, will be attracted only in a
fact-situation where an injunction is sought to restrain a party
from instituting or prosecuting any action in a Court in India
which is either of ordinate jurisdiction or is higher to the
Court from which the injunction is sought in the hierarchy of
Courts in India. There is nothing in Cotton Corporation's case
which supports the proposition that the High Court has no
jurisdiction to grant an injunction or a restraint order in
exercise of its inherent powers in a situation like the one in
the present case. In fact this Court had granted such a
restraint order in V/O Tractoroexport, Moscow v.
M/s.Tarapore & Company and had restrained a party from
proceeding with an arbitration proceedings in a foreign
country (in Moscow). As we have pointed out earlier, it
would be unfair to refuse the restraint order in a case like the
present one for the action in the foreign Court would be
oppressive in the facts and circumstances of the case. And in
such a situation the Courts have undoubted jurisdiction to
grant such a restraint order whenever the circumstances of
the case make it necessary or expedient to do so or the ends
of justice so require. The following passage extracted from
paragraph 1039 of Halsbury's Laws of England Vol. 24 at,
page 579 supports this point of view:-
With regard to foreign proceedings the court will
restrain a person within its jurisdiction from instituting
or prosecuting proceedings in a foreign court
whenever the circumstances of the case make such an
inter-position necessary or expedient. In a proper case
the court in this country may restrain person who has
actually recovered judgment in a foreign court from
proceeding to enforce that judgment. The jurisdiction
is discretionary and the court will give credit to foreign
courts for doing justice in their own jurisdiction."
It was because this position was fully realized that it was
argued on behalf of the Respondent that the action in the
U.S.A. Court could not be considered as being oppressive to
the ONGC. We have already dealt with this aspect and
reached a conclusion adverse to Western Company. There is
thus no merit in the submission that the High Court of
Bombay has no jurisdiction in this behalf."
14. Mr. Goel, submits that the stand taken by the defendant regarding
existence of an agreement and the „governing law‟ clause is untenable.
Clause 12.3. of the Agreement reads as under:
"Governing Law. This agreement will be governed by and
interpreted in accordance with the laws of the State of California,
in the United States of America. Any controversy or claim arising
out of or relating to this Agreement, or the breach thereof, shall be
settled by binding arbitration and judgment on the award rendered
by the arbitration(s) may be entered in any court having
jurisdiction thereof. The place of arbitration shall be in the County
of Orange, The State of California."
15. Analysing Clause 12.3 of the Agreement, Mr. Goel submits that upon
reading of this Clause it is crystal clear that the proper law of the contract
would be the Laws of California and any dispute between the parties
would be resolved by Arbitration in California, however, the above clause
does not provide for an exclusive jurisdiction of Courts of State of
California for the purpose of resolving any dispute.
16. Learned senior counsel for the plaintiff submits that assuming that there
exists an agreement dated 10.7.2010 between the parties yet the stand of
the defendant cannot be accepted as the defendant has opted to file a case
before the U.S. Courts thereby waiving the Arbitration Clause. Senior
counsel further submits that a perusal of Clause 12.3 shows that there is
no exclusive/non-exclusive jurisdiction clause with respect to U.S. Courts
and the only restriction is applicability of Laws of California and
requirement of Arbitration. The defendant, having itself waived the
requirement of arbitration, is now estopped from enforcing Clause 12.3
and, thus, the issue between the parties can be decided by applying the
foreign law that is the Laws of State of California. Senior counsel next
submits that it has been held by the Supreme Court of India that cause of
action and applicability of laws are distinct, different and independent and
one cannot be confused with other. Thus, the jurisdiction of Courts in
India to apply foreign laws is unquestioned and merely the parties have
agreed to be governed by the law of a particularly country would not
mean that a suit can be filed only in such country.
17. Learned senior counsel for the plaintiff has relied upon Laxman Prasad v
Prodigy Electronics Ltd., reported at (2008) 1 SCC 618, more particularly
paras 28 to 30 and 37, which read as under:
"28. Clause 18 is material for the purpose of controversy and may
be reproduced:
18. The terms and conditions as stipulated above shall be
interpreted in accordance to the laws of the Hong Kong
Special Administrative Region.
(emphasis supplied)
It is this Clause (Clause 18), which requires interpretation.
29. According to the appellant, since the terms and conditions in
the agreement have to be interpreted in accordance with the laws of
Hong Kong, no Court in any country other than a Court in Hong
Kong shall have jurisdiction to entertain a suit, petition, application
or any other proceeding. The submission of the respondent-
Company, on the other hand, is that what is agreed upon is not
territorial jurisdiction of a Court but applicability of laws. Clause
18 deals with the second eventuality and declares that terms and
conditions of the agreement would be interpreted in accordance
with the laws of Hong Kong.
30. We find considerable force in the submission of the learned
counsel for the respondent Company. In our view, 'cause of action'
and 'applicability of law' are two distinct, different and independent
things and one cannot be confused with the other. The expression
'cause of action' has not been defined in the Code. It is however
settled law that every suit presupposes the existence of a cause of
action. If there is no cause of action, the plaint has to be rejected
[Rule 11(a) of Order VII). Stated simply, 'cause of action' means a
right to sue. It consists of material facts which are imperative for
the plaintiff to allege and prove to succeed in the suit. The classic
definition of the expression ('cause of action') is found in the
observations of Lord Brett in Cooke v. Gill, (1873) 8 CP 107: 42 LJ
CP 98. His Lordship stated:
"Cause of action means every fact which it would be
necessary for the plaintiff to prove, if traversed, in order to
support his right to the judgment of the court".
37. The argument of the defendant that the agreement was executed
in Hong Kong and hence suit could have been instituted only in that
country is, in our opinion, not well founded. It is no doubt true that
the suit could have been instituted in Hong Kong as well. That,
however, does not take
away the jurisdiction of Delhi Court where a part of cause of action
has arisen. In the plaint, it was specifically alleged by the plaintiff
Company that the defendant committed breach of terms and
conditions of agreement during the Trade Fair in February, 2005
held in Pragati Maidan, Delhi. It was, therefore, open to the
plaintiff Company to institute a suit in a competent Court within the
jurisdiction of Delhi and that is how the suit is filed in the High
Court on its Original Side."
18. Mr. Goel contends that the balance of convenience is in favour of the
plaintiff as compared to defendant‟s rights as the matter can be decided in
India, the Courts applying the laws of California and in case of any claim
defendant must file a suit within the territorial jurisdiction of this Court. It
is further contended that in case an anti suit injunction is not granted to
the plaintiff, the plaintiff will suffer an irreparable injury as the plaintiff
has no office or establishment or working or business in the States of
California and the case has only been filed to harass and intimidate the
plaintiff.
19. Present application is opposed by learned senior counsel for the defendant
on the ground that the suit is vexatious and speculative, the same lacks
merits and bona fides and, thus, the present application merits dismissal.
Senior counsel further submits that present suit has become infructuous as
the defendant has already instituted a suit against the plaintiff for the
following reliefs:
(i) economic damages according to proof,
(ii) disgorgement of all gains, profits derived by plaintiff herein
from their acts of unfair competitive.
(iii) punitive damages,
(iv) pre-judgment interest and interest on the some of damages
awarded to maximum extent permitted by law and according
to proof.
(v) that KLG be enjoined from further misappropriation of
defendant herein‟s trade secrets.
(vi) attorney‟s fees and punitive damages,
(vii) cost of suit herein incurred before the United State District
Court Central District of California in Case No.SACVII-
00147 JVS (cwx).
20. Learned senior counsel for the defendant submits that defendant was
served with an Advocate‟s notice on 31.1.2011 and summons were
received from the Court on 1.2.2011, by which time, the defendant had
already filed a suit in California on 26.1.2011 for recovery of damages in
respect of the transaction covered under the Agreement dated 25.9.2009.
Senior counsel further submits that the present suit also arises out of the
same very Agreement dated 25.9.2009.
21. Strong reliance has been placed by learned senior counsel for the
defendant on the case of Modi Entertainment Network & Anr. v. W.S.G.
Cricket Pte. Ltd., reported at AIR 2003 SC 1177 = (2003) 4 SCC 341 in
support of his argument that ordinarily no anti suit injunction will be
granted. Relevant portion of Para 22 (5) and (6) of the judgment reads as
under:
(5) ... ordinarily no anti-suit injunction will be granted in regard to
proceedings in such a forum conveniens and favoured forum as it
shall be presumed that the parties have thought over their
convenience and all other relevant factors before submitting to non-
exclusive jurisdiction of the court of their choice which cannot be
treated just an alternative forum;
(6) a party to the contract containing jurisdiction clause cannot
normally be prevented from approaching the court of choice of the
parties as it would amount to aiding breach of the contract; yet
when one of the parties to the jurisdiction clause approaches the
court of choice in which exclusive or nonexclusive jurisdiction is
created, the proceedings in that court cannot per se be treated as
vexatious or oppressive nor can the court be said to be forum non-
conveniens;
22. It is submitted by Mr.Kabilan that the suit filed by defendant in the U.S.
Courts cannot be termed as vexatious or oppressive since it has been filed
in accordance with terms and conditions of the agreement between the
parties. It is further submitted that it cannot be said that in case the suit is
filed by defendant in India would be proper and the suit filed in the State
of California would be oppressive and vexatious, even otherwise the
plaintiff cannot pray for an injunction from this Court as it would amount
to adding the plaintiff to commit breach of the contract. It is next
submitted that to maintain a suit for anti suit injunction the fundamental
requirement is that this Court should have jurisdiction and as the
defendant against whom anti suit injunction is prayed for is not at all
amenable to the personal jurisdiction of this Court, thus, no suit would lie.
23. Learned senior counsel for the defendant has also opposed the submission
made by Mr.Goel that since the subsidiary company is functioning at New
Delhi, the present suit can be filed against the defendant, through
subsidiary, ETAP Automation Private Limited. Senior counsel contends
that the subsidiary company cannot be considered as an agent or a
representative of the defendant company and as such the present suit is
not maintainable. It is further submitted that at the time when the parties
signed the agreement the defendant did not have any office at Delhi and
even at present the defendant has not established any office at Delhi and
the defendant cannot be sued through its subsidiary, which is a distinct
entity. Mr.Kabilan further contends that it is wrong to suggest that the
agreement between the parties did not have a certain definite term. It is
next contended that the agreement was to be perpetually renewed on an
annual basis. Relying on Clause 2.1 of the Agreement, which is
reproduced below, it is contended by senior counsel for the defendant that
unless the agreement is specifically terminated it remains in full force and
effect and even otherwise the plaintiff continue to act and work as per the
agreement which is evident from its conduct and the averments made in
the plaint:
"2.1 OTI does hereby grant to Company, the right to represent,
promote and/or sell OTI‟s Products and Services, for the life of this
Agreement. The term of this Agreement shall begin on January 1,
2009, and perpetually renew on an annual basis. Company agrees
and recognizes that this agreement is limited to Company‟s
representation, promotion and/or sale of OTI‟s Products and
Services and does not relate to any other agreement and/or
relationship that may exist now and in the future by and between
the Parties hereto."
24. It is submitted that the aforesaid clause is being misread by the plaintiff as
this is a standard procedure and practice of the defendant with all its
clients. Relying on para 4 of the plaint, learned counsel for the defendant
submits that it has been averred that "the term of the agreement began on
1.1.2009 and was to be perpetually renewed on an annual basis".
Learned senior counsel contends that until the date of termination of the
agreement both the parties had operated under the understanding that
there was a contractual relationship between them, which provided that
plaintiff would sell the defendant‟s products/services to customers,
receive monies from the customers directly, thereafter reduce the money
by the applicable commission and then forward the balance to the
defendant. This arrangement is confirmed by numerous projects and
orders from the plaintiff to the defendant, invoices from the defendant to
the plaintiff and material confirming the shipment of defendant‟s products
to various customers. It is in relation to these transactions that the plaintiff
owes money in relation to the invoices and it was never the stand of the
plaintiff that the agreement had expired. Senior counsel further submits
that reading of the plaint itself would show that plaintiff continue to
maintain commercial relations with defendant even after December, 2009.
25. Learned senior counsel for the defendant has drawn the attention of the
Court to paras 13 and 14 of the plaint. It is further submitted that even
otherwise as per para 18 of the plaint, a dispute between the parties
relating to Shree Cement, pertains to a period to 31.12.2009. Senior
counsel has strongly urged before this Court that the terms and conditions
of the Agreement between the parties remain in force and effective up till
July, 2010, when it was specifically terminated by the defendant. Senior
counsel further submits that the agreement between the parties, which
contains Clause 12.3 (Governing Laws) would continue to remain in force
as far as resolution of disputes is concerned.
26. Learned senior counsel for the defendant has refuted the submissions
made by senior counsel for the plaintiff that courts in India have natural
jurisdiction and are, thus, competent to grant anti suit injunction against
them. It is strongly urged before this court by counsel for the defendant
that parties have chosen the forum and at this stage plaintiff cannot
introduce a new plea of forum non-conveniens and also raise objections
that the entire proceedings, that would be initiated by the defendant, is
vexatious and oppressive in nature and plaintiff is likely to be forced into
accepting the terms which would be totally against the interest of the
plaintiff as the parties have already agreed to submit to the jurisdiction of
the U.S. Courts and the defendant has already filed a suit in the U.S.
Court.
27. I have heard counsel for the parties and also considered their rival
contentions. The Apex Court in the case of Modi Entertainment Network
(supra) has culled out various principles to be considered in exercising the
discretion for grant of anti suit injunction. It would be useful to reproduce
para 24 of this judgment:
(1) In exercising discretion to grant an anti-suit injunction the
court must be satisfied of the following aspects : -
(a) the defendant, against whom injunction is sought, is
amenable to the personal jurisdiction of the court;
(b) if the injunction is declined the ends of justice will be
defeated and injustice will be perpetuated; and
(c) the principle of comity - respect for the court in which the
commencement or continuance of action/proceeding is sought
to be restrained - must be borne in mind;
(2) in a case where more forums than one are available, the Court in
exercise of its discretion to grant anti-suit injunction will examine
as to which is the appropriate forum (forum conveniens) having
regard to the convenience of the parties and may grant anti-suit
injunction in regard to proceedings which are oppressive or
vexatious or in a forum non-conveniens;
(3) Where jurisdiction of a court is invoked on the basis of
jurisdiction clause in a contract, the recitals therein in regard to
exclusive or non-exclusive jurisdiction of the court of choice of the
parties are not determinative but are relevant factors and when a
question arises as to the nature of jurisdiction agreed to between the
parties the court has to decide the same on a true interpretation of
the contract on the
facts and in the circumstances of each case;
(4) a court of natural jurisdiction will not normally grant anti-suit
injunction against a defendant before it where parties have agreed
to submit to the exclusive jurisdiction of a court including a foreign
court, a forum of their choice in regard to the commencement or
continuance of proceedings in the court of choice, save in an
exceptional case for good and sufficient reasons, with a view to
prevent injustice in circumstances such as which permit a
contracting party to be relieved of the burden of the contract; or
since the date of the contract the circumstances or subsequent
events have made it impossible for the party seeking injunction to
prosecute the case in the court of choice because the essence of the
jurisdiction of the court does not exist or because of a vis major or
force majeure and the like;
(5) where parties have agreed, under a nonexclusive jurisdiction
clause, to approach a neutral foreign forum and be
governed by the law applicable to it for the resolution of their
disputes arising under the contract, ordinarily no anti suit injunction
will be granted in regard to proceedings in such a forum conveniens
and favoured forum as it shall be presumed that the parties have
thought over their convenience and all other relevant factors before
submitting to non-exclusive jurisdiction of the court of their choice
which cannot be treated just an alternative forum;
(6) a party to the contract containing jurisdiction clause cannot
normally be prevented from approaching the court of choice of the
parties as it would amount to aiding breach of the contract; yet
when one of the parties to the jurisdiction clause approaches the
court of choice in which exclusive or nonexclusive jurisdiction is
created, the proceedings in that court cannot per se be treated as
vexatious or oppressive nor can the court be said to be forum non-
conveniens; and
(7) the burden of establishing that the forum of choice is a forum
nonconveniens or the proceedings therein are oppressive or
vexatious would be on the party so contending to aver and
prove the same.
28. It has been contended before this court that three multiple factors for grant
of injunction including ante suit injunction are strong prima facie case,
balance of convenience and irreparable loss. Mr.Goel, learned senior
counsel for the plaintiff has strongly urged before this court that the
plaintiff has been able to establish a strong prima facie case, and balance
of convenience is also in favour of the plaintiff and in case an ante suit
injunction is not granted, the plaintiff will suffer irreparable injury.
29. Mr.Goel, learned senior counsel for the plaintiff submits that there is no
agreement in existence between the parties after 31.12.2009. I find no
force in the submission made by counsel for the plaintiff, as complete
reading of the agreement would show that the agreement was to be
perpetually renewed on an annual basis. Even as per the plaintiff the
agreements have continued for twelve years. Although the agreement was
not specifically renewed, but it is an admitted position of fact based on the
averments made by the plaintiff in the plaint itself that the parties
continued to work together even after 31.12.2009. No doubt the parties
were contemplating on varying the terms of the agreement, but during this
period the parties continued to carry on business. In paragraph 13 of the
plaint it has been stated that "In spite of absence of an agreement, the
plaintiff, in right earnest and expecting an agreement eventually, informed
the defendant of the ongoing deals with new customers and the expected
turuover in the year 2010. The plaintiff even provided details of the
prospective customers and informed the defendant of the advance stage of
which negotiations are being carried with such prospective customers.
This exercise was done in complete confidentiality, and utmost good faith
on part of the plaintiff.............." Further as per the plaint after
establishing a subsidiary, the defendant had been directly contacting all
the customers of the plaintiff and it has also been stated that sale/ deal
with Kolkata Infra Solutions was at the final stage, however, subsidiary
vide e-mail dated 14.06.2010 contacted the said company and asked them
to place the order directly. The above averments made by the plaintiff
would clearly establish the fact that although no formal agreement was
entered for renewal of the earlier agreement but the parties continued to
work together. Even otherwise, merely because the agreement came to an
end, would not mean that the clause 12.3 would not be applicable
regarding governing law for resolution of the disputes between the parties.
30. Regarding maintainability of the present suit it has been contended by
counsel for the plaintiff that since the subsidiary of the defendant carries
on work for gain at New Delhi and summons in the suit have been
received by them on behalf of the defendant at New Delhi, this court
would have territorial jurisdiction in the matter and further on account of
the fact that the directors of the company established in India and the
defendant are common. Even otherwise, it is the contention of counsel for
the defendant that cause of action has arisen in part in India. The
agreement has been implemented in India; the agreement was for the
market and sale of products in India, the plaintiff contacted clients in
India, sold the products to customers in India, collected the price of the
product from the customers in India and after deducting its commission
sent the sale price by the plaintiff from India; besides that letter of
termination received by the plaintiff in India. In support of this plea,
learned senior counsel for the plaintiff has relied in the case A.B.C.
Laminart (Supra). There is no quarrel to the proposition laid down by the
Apex Court in the aforesaid judgment, however, has also laid down the
exception is when parties to the contract agreed to submit to one of the
jurisdictions, which would otherwise also be proper jurisdiction under the
law, such an agreement would be valid. While it is the case of the
plaintiff that the plaintiff signed the agreement at New Delhi, it is not
disputed that the defendant signed the agreement in the United States of
America. Elaborate arguments have been advanced by learned senior
counsel for the plaintiff that convenient forum would be the courts in
India, as the entire contract has been executed and implemented in India,
and even otherwise, the defendant has now established its office in India
since December, 2009. The customers are based in India; all relevant
papers and documents would be available in India, on the contrary the
plaintiff does not have any office in California and thus the proceedings
before the Courts at California would be oppressive and vexatious. It is
also submitted before this Court that the Courts in USA are forum non-
convenience and moreover the plaintiff has suffered tremendous loss and
it would be burdensome for it to defend itself against the wrongful and
baseless claims. Any action in a forum outside India would be oppressive
and vexatious and more so there is exclusive jurisdiction clause, operating
between the parties, resultantly ends of justice would be defeated and
injustice would be perpetuated, if the defendant is allowed to pursue its
remedy before a forum other than India.
31. As an alternate argument, Mr.Goel, learned senior counsel for the plaintiff
has submitted that even otherwise clause 12.3 of the agreement is
applicable only in case the defendant had invoked the arbitration clause.
It is submitted that upon reading of clause 12.3 it would be clear that (i)
the proper law of contract would be the law of the State of California; and
(ii) any dispute would be resolved by arbitration to be held in California.
It is thus submitted that the clause does not provide for an exclusive
jurisdiction of the court at State of California for the purpose of any
dispute. The submission of counsel for the plaintiff, is unacceptable on
account of the fact that the parties had agreed that the agreement would be
governed and interpreted in accordance with law of State of California, in
the United States of America, hence any proceedings to be filed were to
be governed by the laws of State of California and to be filed in the
United States of America. The concluding lines of this clause also read
that the place of arbitration shall be in the County of Orange, State of
California, USA, which defines the place where the proceedings are to be
conducted. The submissions of counsel for the plaintiff with regard to
forum non-convenience are to be determined in the light of the agreement
entered into between the parties. It has been repeatedly held that ante suit
injunction should be granted very rarely and with great caution. In the
case of Settlement Corporation vs. Hochschild [1965] 3 All ER 486, it
has been held:
"It is not disputed that the court has jurisdiction to restrain
the prosecution of proceedings before the foreign court,
because it is a jurisdiction which applies in personam against
a party and does not involve conflict between the tribunal of
the two countries. But it is only exercised very rarely, with
great caution, to avoid even the appearance of interfering
with the foreign court, and if the foreign action is vexatious
and useless."
32. In the case of MacShannon vs. Rockware Glass Ltd. [1978] 1 All ER
625, it has been held:
"In order to justify a stay two conditions must be satisfied,
one positive and the other negative:
(a) The defendant must satisfy the court that there is
another forum to whose jurisdiction he is amenable in
which justice can be done between the parties at
substantially less inconvenience or expenses, and
(b) The stay must not deprive the plaintiff of a legitimate
personal or judicial advantage which would be
available to him if he invoked the jurisdiction of the
English court."
33. In the case of Modi Entertainment Network (Supra) to the facts of facts
of this case, the Supreme Court has held that unless good and sufficient
reasons are shown by a party seeking ante suit injunction the intention of
the parties as evidenced by the contract has to be given effect to. In
paragraph 24 of the aforesaid judgment which has been extracted above,
as per clause 6 it has been categorically held:
"(6) a party to the contract containing jurisdiction clause cannot
normally be prevented from approaching the court of choice of the
parties as it would amount to aiding breach of the contract; yet
when one of the parties to the jurisdiction clause approaches the
court of choice in which exclusive or nonexclusive jurisdiction is
created, the proceedings in that court cannot per se be treated as
vexatious or oppressive nor can the court be said to be forum non-
convenience"
34. Another factor which this court also cannot lose track of the fact that what
is contemplated to be forum non-convenience is that the customers are in
India, all papers and documents are in India, the witnesses would be in
India and thus it would be not convenient to resolve the disputes in the
Courts at California. These are all facts, which are far from being good or
sufficient to ignore the jurisdiction clause as it cannot be said that these
facts were not foreseen or unknown to the plaintiff where the agreement
was signed between the parties. No doubt clause 12.6 does not contain
any non-exclusive jurisdiction clause, but as held in the case of Modi
Entertainment Network (Supra) „normally the court must give effect to
the intention of the parties as expressed in the agreement entered, except
when strong reasons justify disregard of the contractual obligations of the
parties.‟ In my view the plaintiff has failed to establish the ground of
forum non-convenience. A burden which is to be discharged by the
plaintiff, factors of litigation expenses, papers, documents by itself are not
enough to establish forum non-convenience, as all those facts were well
within the knowledge of the plaintiff at the time of signing of the
agreement.
35. The judgments, sought to be relied upon, by learned counsel for the
plaintiff are not applicable to the facts of the present case inasmuch that
the parties to the agreement had agreed as per Clause 12.3 of the
Agreement that the Agreement would be governed and interpreted in
accordance with the laws of the State of California in the United States of
America. It may be noticed that the defendant has already instituted a suit
against the plaintiff in the United States of America. Although according
to Clause 12.3 any controversy or claim, relating to the agreement or
breach thereof, was to be settled through arbitration, however, since this
Clause specifically mentions the governing law to the Laws of the State of
California in the United States of America and the place of arbitration was
also settled in the County of Orange in the State of California, by filing
the proceedings would not take away the intention of the parties with
regard to the governing laws and the place of adjudication. Accordingly,
present application is without any merit and the same is dismissed.
CS(OS) 162/2011
36. List the matter for further proceedings on 22.3.2012.
G.S.SISTANI, J
FEBRUARY 08, 2012
ssn/msr
