Vikram Bakshi And Anr vs Mc Donalds India Pvt Ltd And Ors
2014 Latest Caselaw 7025 Del

*                  HIGH COURT OF DELHI AT NEW DELHI

+                IA Nos.6207/2014 in C.S.(OS) No.962/2014

                                   Decided on : DECEMBER 22, 2014

        VIKRAM BAKSHI AND ANR                                 ..... Plaintiffs

                           Through:       Mr.Mukul Rohatgi and
                                          Mr.Neeraj Kishan Kaul,
                                          Senior Advocates with
                                          Mr. Rishi Sood, Advocate
                                          for P-1 and P-2.
                                 versus

        MC DONALDS INDIA PVT LTD AND ORS                   ..... Defendants

                           Through:       Mr.Harish Salve and
                                          Mr.Rajiv Nayar,
                                          Senior Advocates with
                                          Mr.Rahul P. Dave,
                                          Mr.Varij Sharma,
                                          Ms. Shaista Arora and
                                          Mr. Sumit Chopra, Advocates for
                                          D-1.

CORAM:
HON'BLE MR. JUSTICE V.K. SHALI

V.K. SHALI, J.

1. This order shall dispose of IA No.6207/2014 (u/Order 39 Rule 1 &

2 CPC) by virtue of which the plaintiffs have prayed for an ad interim

injunction against the arbitration proceedings initiated by defendant No.1

before the London Court of International Arbitration.

2. Briefly stated, the facts are that the plaintiff No.1 is an Indian

citizen and resides & carries on business within the jurisdiction of this

court. The plaintiff No.2 is a company incorporated by the plaintiff No.1.

The plaintiff No.1 is the duly authorized signatory of plaintiff No.2 vide

Board Resolution dated 05.09.2013 to file the suit for mandatory

injunction and declaration.

3. The defendant Nos.1 & 2 are also stated to be companies carrying

on business within the jurisdiction of this court. It is alleged that the

plaintiffs are the registered holders and absolute owners of 1,45,600

equity shares of the defendant No.2/Company. Defendant No.1 also holds

the same number of equity shares. It is further alleged that the defendant

No.1 holds 17,73,021 number of preferential shares of and in the

defendant No.2/Company comprising 100% of the preferential capital of

the Company but it is under an obligation to the plaintiffs to exercise 50%

of the voting rights attached to such preferential shares as per the

directions of the plaintiff No.1 and in terms of Article 6A( vi) of the

Articles of Association of the Company. It is further alleged that

pursuant to the Joint Venture Agreement ('JVA' for short) dated

31.03.1995 between the plaintiff No.1 and the defendant No.1 with

McDonalds' corporation as confirming party, the defendant No.2 was

incorporated on 29.06.1995. It has also been alleged that McDonalds

Corporation is a Delware corporation and a company duly registered in

the State of Delaware in the United States of America which is the

holding company of defendant No.1. After the Joint Venture Company

was incorporated i.e. the defendant No.2, the JVA was entered into

between the plaintiffs and the defendant No.1. The relevant terms and

conditions of the JVA are as under:

"4. Ownership The JV parties shall own the following percentages of share in JV Company:

Partner 50% McDonald's 50%

Such shares shall be paid up in full when issued. The JV parties undertake to cause their shares to be voted at any time so as to comply with the provisions of this Agreement.

...............

7. Managing Director The JV parties shall promptly cause the nomination and election of partner as the sole Managing Director of JV Company.

...............

e) Re-election of Managing Director - The Managing Director shall be elected every two (2) years. McDonald's agrees to vote for the reelection of Partner as Managing Director for so long as:

1) he resides in the National Capital Region of Delhi and spends substantially all of his business time in the performance of his obligations under this Agreement and the Opening License Agreements executed hereunder:

2) He and the Investing Company (as defined below), in combination, own at least 50% of the equity shares of JV Company;

3) He discharges the responsibilities of management of JV Company in a competent and faithful manner;

4) He is not in breach of any term of this Agreement or any other agreement between the JV parties or their affiliates or subsidiaries.

32. McDonald's Option to Purchase Shares: Mc Donald's, any of its wholly-owned subsidiaries or affiliates as designed by the McDonald's, or any person or entity designated by McDonald's, may purchase all of the shares of JV Company owned or controlled by Partner at a purchase price determined in accordance with Paragraph 26 above if any of the following events shall occur:

a) Partner personally fails to maintain his principal residence in the National Capital Region of Delhi or fails to devote his full business time and best efforts to JV Company;

b) Partner terminates or suffers the termination of his relationship as Managing Director of JV Company, other than by reason of his death or incapacity. In the even to Partner's death or incapacity, paragraph 29(d) shall govern; or

c) upon expiration or termination of this Agreement.

35. Termination by Non defaulting party - The parties agree that any of the following events constitutes material default of this Agreement:

                        a)      Failure to make the investment required by
                                Paragraph 3;

                        b)      Failure of the other JV Party to vote shares in JV

Company for the election of Directors and/or the Managing Director in accordance with Paragraphs 6 and 7, or to otherwise vote in a shareholders meeting in accordance with paragraph 4;

c) The transfer of shares in JV company or encumbrance of shares in JV company by other JV Party in violation of Paragraphs 5, 27, 28, 29 or 30;

                        d)      ........    ........    ........    ........

                        e)      ........    ........    ........    ........

                        f)      .........     .........     ........    ..........

In the event of such material default, the non-defaulting Party shall give written notice of default to the defaulting Party, and may terminate this Agreement if the event of default remains unremedied sixty (60) days after the date of such notice; provided, however, that no such remedy period shall be required if the default involves 35(c), (f) and (g).

36. Termination by McDonald's The parties further agree that any of the following events constitutes material default of this Agreement:

(a) Partner shall fail to serve as Managing Director in accordance with Paragraph 7;

(b) Partner or JV company shall use the property in violation of Paragraph 23;

(c) Partner shall knowingly or intentionally violate the covenants respecting competition and conflicts of interest contained in paragraphs 24 and 25;

(d) Partner shall assign any interest of this Agreement in violation of Paragraph 40 (e);

(e) Partner breaches covenants contained in Paragraphs 10, 13, 45 or 46 or representations or warranties therein are found to be untrue;

(f) Repeated delays or failures to make delivery of the reports required by Paragraph 14;

(g) Any Operating License Agreement shall be terminated by reason of default by JV Company.

In the event of such material default, McDonald's shall give written notice of default to Partner, and may terminate this Agreement if the event of default remains unremedied sixty

(60) days after the date of such notice; provided, however, that no such remedy period shall be required if the default involves Paragraph 36 (d).

37. Effect of Termination. Upon termination of this Agreement:

(a) McDonald's or a designee may elect either to purchase all shares owned and controlled by Partner in JV company at a purchase price determined as of the date of notice of termination in accordance with Paragraph 26 above or,

(b) McDonald's may elect not to purchase all shares owned by Partner in JV Company, and in that event, the JV Parties agree that:

(i) the Operating License Agreements shall be terminated or assigned as directed by McDonald's;

(ii) the JV Parties agree to vote promptly in a General Meeting of Shareholders for dissolution and liquidation of JV Company;

(iii) the JV Parties shall cause JV Company to discontinue use of and return all property, information and materials to McDonald's;

(iv) the JV Parties agree that in liquidating JV Company and in turn in disposing of existing leaseholds, freeholds and other assets, McDonald's or a company designated by it shall have a right of first refusal to acquire any such leasehold, freehold or other asset.

(v) the JV Parties shall cause JV Company to cease the production of McDonald's food products and the operation of McDonald's restaurants.

38. Termination for failure to receive or maintain Government approval. If, at any time during the term of this Agreement, the parties are unable to obtain and maintain in force from the appropriate governmental agencies:

(a) ........ .......... ......... ..........

(b) ........ .......... ......... ..........

39. Right to reject Governmental changes. McDonald's may terminate this Agreement if:

(a) Any governmental agency grants approval for this Agreement, the Operating License Agreements and/or any related documents, but such approval is granted subject to conditions not acceptable to McDonald's; or

(b) If the terms and conditions of this Agreement, the Operating License Agreements and/or any related document are required to be in any way altered or modified to such an extent as not to be acceptable to McDonald's.

The JV Parties agree to cooperate in good faith to obtain any such government approvals, if required, and to negotiate any amendments hereof that may be required in order to obtain such approval, provided that in no event shall McDonald's be obligated to accept any amendment which it may deem unacceptable.

40. Miscellaneous

a. Governing Law. This Agreement shall be construed in accordance with an governed by this laws of India and will be subject to the jurisdiction of the courts in New Delhi, India, except for any Indian choice of law or conflicts of law rules which might direct the application of the laws of any other jurisdiction.

b. Arbitration. On demand of either JV Party, any unresolved dispute which may arise in connection with paragraphs 35, 36, 37, 38 or 39 of this Agreement shall be submitted for arbitration to be administered by the London Court of International Arbitration (the "LCIA"). Such arbitration proceedings shall be conducted in London, England and shall be conducted before a panel of three (3) arbitrators and shall be conducted in accordance with the then current commercial arbitration rules of the LCIA for international arbitrations. Partners and McDonald's shall each appoint one arbitrator

and the two arbitrators so appointed shall appoint a third arbitrator to act as Chairman of the tribunal. If a JV Party fails to nominate an arbitrator within thirty (30) days from the date when the claimant's request for arbitration has been communicated to the other JV Party, such appointment shall be made by the LCIA. The two arbitrators thus appointed shall attempt to agree upon the third arbitrator to act as Chairman. If the two arbitrators fail to nominate the Chairman within thirty (30) days from the date of appointment of the second arbitrator to be appointed, the Chairman shall be appointed by the LCIA. The JV Parties shall have the right to the broadest investigation of the facts surrounding the dispute, provided that any dispute between the parties relating to such investigation shall be submitted to the arbitral tribunal for resolution. The arbitrators shall have the right to award or include in their award any relief which they deem proper in the circumstances, including without limitation, money damages (with interest on unpaid amounts from date due), specific performance, injunctive relief, legal fees and costs. The award and decision of the arbitrators shall be conclusive and binding upon the JV Parties and judgment upon the award may be entered in any court of competent jurisdiction. Partners and McDonald's waive and right to contest the validity or enforceability of such award. The JV Parties further agree to be bound by the provisions of any applicable limitation on the period of time in which claims must be brought.

c. Force Majeure. No party shall be treated as being in default under this Agreement by reason of its failure or delay due to strikes, lockouts, casualties, acts of God, war, governmental regulation or control, or other causes beyond the reasonable control of the parties.

d. No Agency relationship. Nothing in this Agreement shall be construed to imply the existence of a partnership between the JV parties other than as shareholders in JV company, or to make any JV party the representative or agent of any other JV party. No JV party shall so hold itself out, nor shall any JV party be liable for or bound by any act or omission of any other JV party.

e. Non-assignability. Neither this Agreement nor any rights hereunder may be assigned or sublicensed, directly, indirectly, voluntarily or by operation of law by any party without first receiving the prior written consent of the other.

f. Further assurances. The parties agree to entre into and execute any and all such further agreements or documents as may be necessary or desirable to carry out the purpose of this Agreement.

g. Required approvals. The parties agree to cooperate in good faith to secure all governmental approvals required to permit the performance of the JV parties under this Agreement to conduct the business contemplated hereunder.

h. Approval by Board of Directors of McDonald's This agreement is subject to the approval of the Board of Directors of the Confirming Party. The Confirming Party shall promptly notify partner of any action taken by the Board of Directors of the Confirming Party concerning this Agreement.

i. Notices All notices required hereunder shall be in writing and may be given:

(1) by personal service or,

(2) by certified or registered mail, postage prepaid, return receipt requested,

(3) by commercial courier for express delivery, return receipt requested or,

(4) by telecopy (evidenced by a machine generated receipt) if immediately confirmed in writing by mailing a copy thereof by certified or registered air mail, prepaid postage, return receipt requested. All notices shall be deemed given when received."

4. It has been alleged in the plaint that plaintiff No.2 is not a party to

the Joint Venture Agreement or the arbitration agreement. It has also

been stated that on 11.12.1998 a supplemental agreement was executed

and on 06.08.2013, the defendant No.1 circulated a note on the same date

and voted against the re-election of the plaintiff No.1 as the Managing

Director of the defendant No.2. It is stated that the plaintiff No.1 after the

execution of the 'JVA' till the time the note dated 06.08.2013 was

circulated acted as the Managing Director of the JV company and he was

looking after its business in India. It is also alleged that the defendant

No.1 issued a 'Call Option' notice dated 16.08.2013 purporting to offer

to buy out all the shares owned and controlled by the plaintiff No.1. On

account of the Call Option notice, the plaintiff on 09.09.2013 filed CP

No.110/ND of 2013 before the Company Law Board (hereinafter referred

to as "the Board"). Vide its order dated 16.09.2013, the Board directed

defendant No.1 to maintain status quo over the shareholding pattern of

the company and the right of call option.

5. It is stated that on 22.09.2013, the defendant No.1 filed an

application under Section 45 of the Arbitration and Conciliation Act,

1996 being CA No.94/2013 before the Board praying that the

proceedings of the company petition be stopped and the parties be

referred to have the disputes adjudicated through arbitration as there was

a clause in the JVA to have the disputes/differences between the parties

i.e. the plaintiff No.1 and the defendant No.1 resolved through the

London Court of International Arbitration (LCIA). It is stated that vide

order dated 30.12.2013 the Board refused to stay the arbitral proceedings

at the request of the plaintiff at the ad interim stage notwithstanding the

pendency of the application under Section 45 of the Act. It is stated that

the plaintiffs preferred an appeal against the order dated 30.12.2003 but

he did not pursue the said appeal because in the meantime the defendants

had withdrawn their application under Section 45 of the Arbitration and

Conciliation Act, 1996.

6. It has been alleged that the defendant No.1 terminated the JVA

vide letter dated 28.11.2013 and made a request for arbitration to

defendant No.3 who sent a communication to the plaintiffs on 29.11.2013

and thereafter filed the petition under Section 9 of the Act being OMP

No.1196/2013. This petition was also dismissed as withdrawn. It is now

alleged, since the Company Law Board is already seized of the Company

Petition filed by the plaintiffs, dealing with the question of

mismanagement of the JV Company as well as oppression of

management, therefore, the present suit for injunction to refrain the

defendants from proceeding with the arbitration proceedings had been

filed.

7. The defendant No.1 in order to make the company petition

infructuous, is alleged to have chosen to initiate arbitration proceedings

before the London Council of International Arbitration giving rise to a

situation whereby there will be a conflict of judgment and also by putting

the plaintiff to a forum non convenience. It has accordingly been

contended that the plaintiff was constrained to file the present suit for

declaration and mandatory injunction whereby the plaintiff has sought a

declaration that there is no arbitration agreement between the plaintiffs

and the defendant No.1 and also for declaring that the defendant No.3 is

not entitled to payment of any charges and mandatorily stop the

continuation of the arbitration proceedings.

8. The learned counsel for the defendants has neither filed the written

statement nor any reply to the application seeking ad interim stay. On the

contrary, arguments were advanced on the basis of the documents

purported to have been filed by the plaintiffs and the averments made by

them in the plaint.

9. I have heard Mr.Mukul Rohatgi and Mr.Neeraj Kishan Kaul, the

learned senior counsel for the plaintiffs and Mr.Harish Salve and

Mr.Rajiv Nayar, the learned senior counsel for the defendant No.1

respectively.

10. The first contention of the Mr.Mukul Rohatgi, the learned senior

counsel for the plaintiffs has been that the present suit is maintainable

under Section 9 of CPC and the same is not barred under Section 5 of the

Limitation Act, 1963. The learned senior counsel in support of his

contention has relied upon the judgment of the apex court in World Sport

Group (Mauritius)Ltd. V. MSM Satellite (Singapore) Pte.Ltd.,1 as well as

Devinder Kumar Gupta (Dr.) v. Realogy Corporation & Anr2.

11. Per contra, Mr.Salve contended that the present suit is not

maintainable as the suit challenging the validity of an arbitration

agreement is barred under Section 5 of the Arbitration and Conciliation

Act, 1996. It was contended that one of the main objectives of the Act is

2014 (1) Arb.Law Reporter 197 (SC)

2011 (125) DRJ 129 (DB)

to minimize the supervisory roles of courts in the arbitral proceedings and

since Section 5 of the Arbitration and Conciliation Act, 1996 is applicable

to Part II of the Act also, therefore, the civil court's jurisdiction is barred.

Reliance in this regard was placed on Chatterjee Petrochem (Mauritius)

Co.and Anr.vs.Haldia Petrochemicals Ltd3. So far as the judgments

relied upon by the learned counsel for the plaintiffs are concerned, they

were sought to be distinguished.

12. It was contended by Mr.Salve, the learned senior counsel for

defendant No.1, that the validity of an arbitration agreement to which Part

II of the Act applies can be decided only at two stages. Firstly, by the

arbitral tribunal when the arbitration proceedings have been initiated

without the intervention of the court, as is the present case or by the court

acting pursuant to Section 45 of the Act or under Section 48 of the Act

when the award is brought for enforcement.

13. It was contended that the only remedy available to the plaintiffs is

before the arbitral tribunal and not before the civil court to challenge the

validity of the arbitration agreement. Reliance in this regard was placed

on Devinder Kumar Gupta's case (supra) on which the learned senior

2013 (4) Arb.L.R. 456 (SC)

counsel for the plaintiffs had also relied. It was contended that as in the

instant case, arbitration proceedings are initiated without the intervention

of the court it is the arbitrators only who can decide the question of

validity of an arbitration agreement. Reliance in this regard was placed

on National Insurance Co. Ltd.vs.Boghara Polyfabs Pvt. Ltd4.

14. It was also urged that the Kompetenz Kompetenz rule implies a

positive and negative effect which is equally important. The positive

effect being that the arbitrators must be the first judges to rule on their

own jurisdiction and the negative effect which prevents the courts from

adjudicating such questions in the first instance. The reference in this

regard was made to Chloro Controls India Pvt. Ltd v. Severn Trent Water

Purification Inc. and Ors.5.

14A. It was also contended that the plaintiff had not disputed the

arbitration agreement. When a petition under Section 9 of the Act was

filed with regard to grant of interim relief by the respondent/defendant,

the same was not opposed by the plaintiff.

2009 (1) SCC 267

(2013) 1 SCC 641

15. It was also contended by Mr. Salve that assuming that the present

suit is maintainable, still there are facts which would show that the

present suit is an abuse of the process of law and the plaintiffs do not

deserve to be granted any relief at this ad interim stage.

16. In this regard, the fact of Joint Venture Agreement and the factum

of plaintiffs and the defendant No.1 each owning 50% equity in the

defendant No.2 has not been denied, but it has been stated that the

plaintiffs pursuant to their 50% share of the equity have invested only a

sum of Rs.14.56 crores while as the defendant No.2 has invested about

Rs.200 crores and hence owns 92.95% of the total share capital. Thus,

the filing of the present suit by the plaintiff is only an abuse of the

processes of law.

16A. It was also contended that the clause 29B of the joint venture

agreement permitted the plaintiff No.1 to invest the majority of their

investment in the defendant No.2 through plaintiff No.2, which is

controlled by plaintiff No.1. Pursuant to a supplemental agreement dated

11.12.1998, the defendant No.2 and the plaintiff No.2 became party to the

JVA as if original parties thereto which made the arbitration clause

applicable to plaintiff No.2 as well as between the parties.

17. The plaintiffs though have taken a stand that there is no arbitration

agreement between the plaintiff No.2 and the defendant No.2, which is

factually incorrect, however the said submission was not pressed during

the course of arguments.

18. It has been stated by Mr.Rohatgi, the learned senior counsel that on

09.09.2013, the plaintiffs had filed a Company Petition before the

Company Law Board on account of oppression and mismanagement

principally seeking reinstatement of plaintiff No.1 as the Managing

Director of the defendant No.2 in view of his non (re)-election as the

Managing Director on 06.08.2013 by seeking restoration of the status quo

as on 16.07.2013 as well as other ancillary reliefs which were not granted

in their favour. In addition to this, it was also the grievance of the

plaintiffs that the defendants should challenge the pattern of shareholding

of the defendant No.2 and the Company Law Board on 16.09.2013 was

pleased to pass an ad interim order which is still in force directing inter

alia the defendant No.1 to maintain status quo as regards to the

shareholding, board pattern and the 'Call Option' despite the fact that the

obligations between the parties are contractual in nature.

19. It is the case of the defendants that pursuant to the material

defaults and repudiation of the JVA by the plaintiffs which was causing

prejudice to the defendant No.1, on 28.11.2013, it terminated the JVA.

Pursuant to clause 37(a) upon the termination of the JVA, the defendant

No.1 was elected to purchase all the shares held and controlled by the

plaintiffs (directly and indirectly through the plaintiff No.2) in the

defendant No.2 which election is distinct from call option under clause

32. The plaintiffs' prayer to restrain the defendants from challenging the

shareholding pattern in the company petition to which the interim order

relates is not applicable to the termination of an agreement.

Arbitral proceedings are vexatious and oppressive as well as waiver of arbitration because of withdrawal of application under Section 45 of the Arbitration and Conciliation Act, 1996.

20. The second submission made by Mr.Rohatgi, the learned senior

counsel is that the plaintiffs have already filed a company petition before

the Company Law Board challenging the action of the defendants being

oppressive and they are indulging in mis-management and also removing

the plaintiff No.1 from the post of Managing Director. During the

process of the said proceedings, the defendants have been directed to

maintain status quo with regard to the exercise of any 'Call Option' and

not to change the holding of share pattern. It is contended that while the

said order of status quo was pending, the defendants have terminated the

agreement and invoked the arbitration clause and initiated the arbitration

proceedings in London. Therefore, the arbitral proceedings are not only

vexatious, but also oppressive inasmuch as the petition before the

Company Law Board continues to be pending adjudication and

defendants have started the arbitration proceedings which would make

the proceedings initiated by the plaintiff as infructuous.

21. It is also contended that the defendants had earlier filed a petition

under Section 45 of the Act before the Company Law Board which was

subsequently withdrawn and, therefore, withdrawal of that petition itself

was a tacit acquiescence on the part of the defendants to concede to the

jurisdiction of the Company Law Board. It was also contended that it

amounted to abandonment of its right to have the matter adjudicated

through arbitration. The learned counsel for the plaintiffs in support of

his contention has placed reliance on Essel Sports Pvt.Ltd v.BCCI (DB)6;

2011 (178) DLT 465

V.O.Tractoroexport v.Tarapore &Co.7; and CG Holdings Private Limited

v.Ramasamy Athapppan8. It was also contended that the defendants had

filed an application under Section 9 of the Act which was also dismissed

without grant of any effective relief to the petitioners.

22. The learned senior counsel for the defendants has vehemently

contested the submission. It was contended that merely because the

application under Section 45 of the Act which was filed by the defendants

was withdrawn, does not tantamount to waiver or abandonment of its

rights to go for arbitration. It is contended on behalf of the defendants

that the company petition as a matter of fact has become infructuous and

nothing survived in the company petition because the JVA itself was

terminated. Therefore, the only remedy which was open to the defendants

was to go back to arbitration.

23. It is further contended that it is the case of the plaintiffs themselves

that no part of the company petition can be said to be the subject matter

of arbitration as both the arbitral tribunal and the Company Law Board

are operating in different fields and, therefore, neither the withdrawal of

(1969) 3 SCC 562

(2012) 170 Comp.Case 93

the application under Section 45 of the Act nor the continuance of the

arbitration proceedings before the arbitral tribunal can be said to be

oppressive and vexatious. It could also not be treated as a waiver of its

right to have the dispute regarding the agreement adjudicated by the

Arbitral Tribunal.

FORUM NON CONVENIENS

24. The next argument of Mr.Rohatgi, the learned senior counsel was

that the forum of LCIA is a forum non convenience. It is on account of

the fact that the plaintiff No.1 is an Indian and plaintiff No.2 is a

company incorporated in India. Similarly, the defendant Nos.1 & 2 are

incorporated in India. They are working and operating within the

territorial limits of India. They are governed by the Indian law and the

cause of action has arisen in India, the company law petition between the

parties is pending in India, the governing laws are Indian laws, therefore,

the holding of arbitral proceedings in London is essentially a forum non

convenience so far as the plaintiffs are concerned. It was contended that

there is no concept of comity of courts involved in the matter because

arbitral proceedings are yet to be started and, therefore, it will be just and

proper in case the proceedings before the LCIA, which is nothing but

duplication of the proceedings initiated by the plaintiffs in India should

not be permitted to continue and the same deserve to be stayed. It was

also stated that the arbitration proceedings initiated are oppressive and

vexatious.

25. Mr.Salve and Mr.Nayar, the learned senior counsel for the

defendants, have contested this submission of the forum non convenience

as being not applicable to the present case. It is contended that the

plaintiffs have expressly agreed to the seat of arbitration as London. It

was contended that once the parties entered into an agreement with their

eyes open, they are presumed to have incurred on themselves

inconvenience inherent in the deal and the said inconvenience cannot be

avoided or abandoned on the pretext of forum non convenience. It was

also contended by the respondent that area of adjudication in the two

proceedings is totally different and does not overlap. Reliance in this

regard was placed on M/s AEG Aktiengesellschaft v.Insotex (India) Ltd

quoted with approval in Devinder Kumar Gupta's case.9

2011 (125) DRJ 129 (DB).

ARBITRATION AGREEMENT BEING VOID AND IN OPERATIVE & INCAPABLE OF PERFORMANCE

26. The last but not the least contention of Mr.Rohatgi, the learned

counsel for the plaintiffs, has been that Section 45 of the Act, which reads

as under:

"45.Power of judicial authority to refer parties to arbitration.- Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), 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."

27. It is a non obstante clause of Section 45 which lays down that a

party must not be referred to international arbitration unless and until the

judicial forum finds that the arbitration agreement is null and void,

inoperative or incapable of being performed. It is contended that the

reference of the dispute to the LCIA is not absolute in itself on the basis

of the so called agreement having been entered into between the plaintiffs

and the defendant No.2 for the simple reasons that the plaintiffs in the

instant case have sought a declaration that the arbitral clause in question

is null and void and this is the relief by way of a declaration which is

sought by the plaintiffs in the present suit.

28. It was further contended that in any case as on date, the arbitral

agreement between the parties is incapable of being made operational for

the reason that the dispute with regard to the holding of the parties is

pending before the Company Law Board which has admittedly passed an

order of status quo to be maintained by the defendants with regard to the

share holding pattern and thus if the share holding pattern itself cannot be

changed by the defendants, during the pendency of the company law

petition, they ought not to have terminated the 'JVA' so as to invoke the

arbitral proceedings at London. Therefore the case of the plaintiffs falls

in one of the exceptions contemplated in Section 45 of the Act and

thereby the plaintiffs are entitled to ex parte ad interim injunction during

the examination of the merits of their suit.

29. This contention of the plaintiffs was contested by the learned

counsel for the defendants that the arbitration agreement was null and

void or incapable of operation. On the contrary, it is stated that the

question of arbitration agreement being null and void can be decided only

by the tribunal itself where the present plaintiffs can raise a plea and

there is certainly no incapacity attached to the operational aspect of the

arbitration agreement because it is the case of the plaintiffs themselves

that the arbitration agreement as well as the petition before the Company

Law Board are the proceedings which operate in different fields.

30. I have carefully considered the submissions made by the respective

sides, gone through the judgments cited by the learned counsel for the

parties and also gone through the record.

JURISDICITON OF CIVL COURT

31. The first question which arises for consideration is with regard to

the jurisdiction of the civil court. Sections 9 & 20 of the CPC read as

under:

"Section 9 - Courts to try all civil suits unless barred

The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred.

[Explanation I].-A suit in which the right to property or to an office is contested is a suit of a civil nature, notwithstanding that such right may depend entirely on the decision of questions as to religious rites or ceremonies.

[Explanation II .-For the purposes of this section, it is immaterial whether or not any fees are attached to the office referred to in Explanation I or whether or not such office is attached to a particular place.]

.......

Section 20 - Other suits to be instituted where defendants reside or cause of action arises

Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction --

(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry or business, or personally work for gain, as aforesaid, acquiesce in such institution ; or

(c) the cause of action, wholly or in part, arises.

[Explanation] .--A corporation shall be deemed to carry on business at its sole or principal office in [India] or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place."

32. The contention of the learned senior counsel for the plaintiffs is

that the civil court has the jurisdiction and for this purpose they have

made an averment in para No.35 of the plaint to state as under:

"35. The cause of action for this suit arose on 29th November, 2013, when the defendant No.1 filed the RFA with the defendant No.3. the cause of action also arose on various dates between 30 December, 2013 and 10 March 2014, when despite protests and despite the non-existence of the arbitration agreement the plaintiffs were forced to engage in correspondence with the defendant No.3 and the defendant No.1. The cause of action arose again on the appointment of the third arbitrator by the defendant No.3 on 10 March 2014. The cause of action further arose on 14 March 2014, when the defendant No.3 called upon the plaintiffs to make a payment of GBP 30,000 and cause of action also arose on 24 March 2014 when the plaintiffs have been called to participate in the arbitral proceedings."

33. Accordingly, it has been prayed by them that the Delhi High Court

has the jurisdiction. The learned senior counsel for the plaintiffs in order

to support his contention that the present suit is maintainable in a civil

court has relied upon the judgment of World Sport Group (Mauritius)

Ltd. V. MSM Satellite (Singapore) Pte.Ltd.10 and Devinder Kumar Gupta

(Dr.) v. Realogy Corporation & Anr.11

34. The contention of Mr.Salve, learned senior counsel for the

defendants, has been that this being a matter involving adjudication of

dispute between the parties by an international arbitration, therefore,

2014 (1) Arb.Law Reporter 197 (SC)

2011 (125) DRJ 129 (DB).

Section 5 read with Section 45 of the Arbitration and Conciliation Act,

1996 exclude the jurisdiction of the civil court. Section 5 reads as under:

"Section 5 - Extent of judicial intervention

Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part."

35. Section 45 which forms Part II of Chapter I of the enforcement of

certain foreign awards lays down the powers of a judicial authority to

refer the parties to arbitration. Section 45 reads as under:

"Section 45 - Power of judicial authority to refer parties to arbitration

Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), 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."

36. Mr.Salve, the learned senior counsel for the defendants, in order to

support his contention that the jurisdiction of the civil court in matters of

this nature is essentially minimal and in a way excluded relied upon the

judgment in Chatterjee Petrochem Co. vs.Haldia Petrochemicals Ltd.12.

37. In Chatterjee Petrochem's case (supra) was pronounced on

10.12.2013. The facts of the case were that on 21.03.2012, the

appellant/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 Chatterjee Petrochem (Mauritius)

Company {CPMC}, Government of West Bengal, West Bengal Industrial

Development Corporation {WBIDC} and Haldia Petrochemcials Limited

{HPL} on 12.01.2002. As per the agreement, Govt. of West Bengal was

to cause WBIDC to transfer the existing shareholding of CPMC to ensure

that CPMC holds 51% of the total paid up capital of HPL. Clause 15 of

the agreement provided for reference of all the disputes in anyway

relating to the said agreement or to the business of or affairs of HPL as

per the Rules of the ICC, Paris. The respondent HPL on the other hand

claimed that the arbitration agreement contained in clause 15 of the

agreement dated 12.01.2002 was void and /or unenforceable and/ or has

become inoperative and/or incapable of being performed.

2013 (4) Arb.L.R. 456 (SC).

38. A dispute arose between the parties regarding allotment of shares

and the appellant filed Company Petition No.58 of 2009 before the

Company Law Board (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 {CPIL}, the Indian

counter part of CPMC as was decided in the agreement. The Company

Petition was disposed of by CLB upholding the decision of the company

to allot 155 million shares to the 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 Group. The Government of West

Bengal preferred an appeal against the said order before the Calcutta

High Court which 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.

39. Aggrieved by the same, the appellant preferred an appeal before

the Supreme Court in which vide judgment dated 30.09.2011, the court

held that the act 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. Subsequent thereto, the appellant sought to

invoke the arbitration clause contained in the arbitration agreement dated

12.01.2002 and made a request for arbitration. The respondent No.1/HPL

filed a suit before the High Court of Calcutta praying that the arbitration

clause in the agreement be declared as void.

40. It was brought in evidence before the civil court that apart from the

basic agreement dated 12.01.2002 which contained the arbitration clause,

it was followed by two supplemental agreements dated 08.03.2002 and

30.07.2004 and, therefore, the arbitration clause had become null and

void, inoperative or incapable of being performed and permanent

injunction was sought against the appellant restraining initiation or

continuation of the arbitration proceedings.

41. The learned single Judge of the Calcutta High Court held that the

parties have altered their obligations by a new agreement dated

08.03.2002 with the term that Calcutta Courts will only have the

jurisdiction. This was affirmed on 30.07.2004 and once the arbitration

agreement dated 12.01.2002 was substituted by agreements dated

08.03.2002 & 30.07.2004, the said subsequent agreements completely

extinguished the rights of the parties existing under the agreement dated

12.01.2002 and also destroyed the arbitration clause.

42. It was in this background that the Supreme Court was called upon

to decide the question with regard to the validity and applicability of

clause 15 of the principal agreement dated 12.01.2002 and it was held

that the agreements dated 08.03.2002 and 30.07.2004 show that there has

been no alteration in the nature of rights and responsibilities of the parties

involved in the contract and the principal clause under the agreement

dated 12.01.2002 was still valid and therefore, the appeal was allowed

and the court observed that the civil court's jurisdiction is barred. It was

specifically observed in para 29 of the judgment that Section 5 of the

Arbitration and Conciliation Act, 1996 will be applicable to international

agreements also and accordingly it was held that the learned single Judge

and the Division Bench had committed an error in arriving at a

conclusion that the civil suit was maintainable. On the contrary it was

held that the civil suit is not maintainable and the appellant is entitled to

invoke the international arbitration clause for settling the disputes in their

favour.

43. In World Sport Group's case (supra), which was decided much

latter in point of time than the Chatterjee Petrochem's case (supra), the

question had arisen again as to whether the civil court's jurisdiction is

barred in that given situation or not. The appeal had been filed against

the order dated 17.09.2010 of the Division Bench of the Bombay High

Court.

44. The facts of the case were that on 30.11.2007 the Board of Control

for Cricket in India (BCCI) invited tenders for IPC media rights for a

period of ten years from 2008 to 2017 on a worldwide basis. Amongst the

tenders submitted, the bid of World Sport Group India (WSG) was

accepted by the BCCI. By a pre-bid arrangement, however, the

respondent was to get the media rights for the sub continent for the period

from 2008 to 2010. On 21.01.2008, BCCI and the respondent entered

into a media rights licence agreement for the period from 2008 to 2012

for a sum of USD 274.50 million. After the first IPL season, the BCCI

terminated the agreement dated 21.01.2008 between BCCI and the

respondent for the Indian sub continent and commenced negotiations with

the WSG India. On 14.03.2009, the respondent filed a petition under

Section 9 of the Arbitration and Conciliation Act, 1996 against the BCCI

before the Bombay High Court praying for injunction against the BCCI

from granting the rights under the agreement dated 21.01.2008 to any

third party. Pursuant to the negotiations between the BCCI and WSG

India, BCCI entered into an agreement with the appellant whereunder the

media rights for the Indian sub-continent for the period 2009 to 2017

were awarded to the appellant for a value of Rs.4,791.08 crores. On

25.03.2009, a new media rights licence agreement between the BCCI and

the respondent for the Indian sub-continent for the same contract value of

Rs.4,791.08 crores. BCCI and WSG, however, were to continue with the

rest of the world media rights.

45. On 25.03.2009, the appellant and the respondent also executed the

deed for provision for facilitation services whereunder the respondent

was to pay a sum of Rs.425 crores to the appellant as the facilitation fees.

Clause 9 of the facilitation deed dated 25.03.2009 provided that the

governing law between the parties shall be the laws of England and

Wales with regard to choice of law principles.

46. Subsequent thereto, a dispute had arisen between the parties and on

09.08.2010, the learned single Judge of Bombay High Court dismissed

the application for temporary injunction of the respondent stating that it

would be for the arbitrator to consider whether the facilitation deed was

void on account of fraud and misrepresentation and that the arbitration

must, therefore, proceed and the court could not intervene in matters

governed by the arbitration clause.

47. The respondent challenged the order of the learned single Judge

before a Division Bench of Bombay High Court and by the impugned

order, the Division Bench allowed the appeal and passed an order of

temporary injunction restraining the arbitration by ICC.

48. Aggrieved by the said order, the appellant filed the appeal. It was

in this background that the apex court came to the conclusion that Section

45 of the Arbitration and Conciliation Act, 1996 does not empower the

court to decline a reference to arbitration on the ground that another suit

on the same issue is pending. The court is obliged to refer the parties to

arbitration as the language of Section 45 makes it clear that anything

contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), 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. Thus, in case

it finds the agreement is falling in any of the three categories, it shall

refuse to refer the parties to the international arbitral tribunal. These

words have been noticed by the Apex Court in number of judgments to be

significantly different than the domestic arbitration. Unlike in the

domestic arbitration (Section 8 & 11), no application is required to be

filed under Section 45 of the International Arbitration. Further, in case of

domestic arbitration, no such power is available to withhold the

arbitration on any reason whatsoever.

49. Though the Chatterjee Petrochem's case (supra) clearly lays down

that the civil court does not have the jurisdiction to entertain a suit in

which injunction stood against a party to an arbitration agreement and

necessarily a party has to be referred to arbitration, but, at the same time,

the court in a latter case of World Sport Group's case (supra) also lays

down that the reference of the dispute to an arbitrator is not an absolute

proposition because Section 45 of the Arbitration and Conciliation Act,

1996 is carrying three provisos namely that the agreement should not be

null and void, inoperative or incapable of being enforced etc.

50. Thus, both the Chatterjee Petrochem's case (supra) and World

Sport Group (Mauritius) Ltd.'s case (supra) are taking a diametrically

opposite view. The former stating that the civil court will not have the

jurisdiction in case of an international arbitration agreement while as the

latter view holds to the contrary.

51. If such is the situation where there are two contrary views

expressed by the apex court, it will be open to the court to follow either of

the two depending upon the facts of the case in hand, but, there must be

some rationale to follow a particular judgment.

52. This view that the civil court has to prima facie satisfy that in the

case of international arbitration the agreement is not null and void or

invalid or incapable of performance gets further reinforced by World

Sport Group's case (supra) where the court has been held to be having

jurisdiction. This being the latest judgment and the facts of the said case

being at pari materia with the facts of the present case makes the court

take a view that it can be said that the civil court does not have the

jurisdiction.

53. The Apex Court in Shin-Etsu Chemical Co. Ltd. vs. Aksh Optifibre

Ltd.13 also by a majority held that in case of international arbitration if a

party invokes the jurisdiction of a civil court, it is obligated by the statute

by way of a preliminary hearing and prima facie decide whether the

agreement between the parties to decide the dispute by an arbitral

tribunal, is null and void or is incapable of performance or inoperative.

The only point of difference between the majority and minority judgment

was as to whether it is to be done by taking a prima facie view of the

matter or it is to be done by the court after permitting the parties to

adduce evidence on merits. The former holding that it is only prima facie

view while as the latter taking the view that it has to be on merits.

54. Even in Devinder Kumar Gupta's case's (supra) also on which

both the learned senior counsel have placed reliance by interpreting the

judgment in their own way, one fact is noticeable, that it refers to the

judgment of the Supreme Court in Abdul Gafur vs.State of Uttarakhand14

and states that there is a presumption of civil court having jurisdiction,

(2005) 7 SCC 234

(2008) 10 SCC 97

though in this case the court had held that civil court does not have the

jurisdiction to entertain the suit.

55. I have purposely not placed reliance on Devinder Kumar Gupta's

case because this is a Division Bench Judgment of our own High Court

while as we already have catena of judgments from the Supreme Court

and that too covering whole spectrum and holding that the courts have or

have not the jurisdiction depending on the facts and circumstances of the

case. Therefore, the approach of the court has been governed more by the

peculiar facts of the case which was being decided at that point of time.

So far as the facts of the present case are concerned, I feel they are more

akin to the facts of the World Sport Group's case (supra) incidentally

being the last in the series, seems to be more appropriate to be applied to

the facts of the present case.

56. The contention of Mr.Salve, the learned senior counsel, that

World Sport Group's case does not take note of Section 5 of the Act is

immaterial because Section 45 itself visualizes contingencies which

confer the power to the court to decide whether agreement is null and

void, inoperative or incapable to be performed.

57. In the back drop of the above judgments and preponderance of

view by the apex court in World Sport Group's case (supra) and Shin-

Etsu Chemical Co. Ltd.'s case (supra), I do not feel that the view

expressed in Devinder Kumar Gupta's case or Chatterjee Petrochem

Co.'s case (supra) or the other judgments cited by the respondents that

the Arbitration and Conciliation Act does not provide a remedy to a

person claiming non-existence of an arbitration agreement except by

submitting to the jurisdiction of the arbitral tribunal. Similarly, I feel that

the observation of the apex court in Bharat Aluminum Co.'s case15,

National Insurance Company's case16 and Chloro Controls India Pvt.

Ltd's case17 to hold that the party be relegated to arbitral tribunal for

deciding the applicability of proviso to Section 45 cannot be seen in

isolation because the observation has to be reconciled with the

observation of the same court in Shin-Etsu Chemical Co. Ltd.'s case

(supra) and World Sport Group's case (supra) where the apex court has

held that the jurisdiction of civil court is not completely ousted.

(2012) 9 SCC 552

2009 (1) SCC 267

(2013) 1 SCC 641

58. There is another aspect which will show that the civil court's

jurisdiction cannot be said to be ousted in the instant case. The Bombay

High Court has in case titled Rakesh Malhotra vs. Rajinder Kumar

Malhotra, Company Appeal No.10/2013 decided along with a batch of

other Company Appeal of 11 to 13, 16 to 19, on 20.08.2014, held that the

disputes under Section 397 to 402 which pertain to oppression and

mismanagement, are not referable to arbitration.

59. In the present case also the petitioner has gone to the Company

Law Board for allegations of oppression and mismanagement while as the

respondents have invoked the arbitration clause after allegedly revoking

the agreement itself. I feel that the dispute between the parties falls in the

proviso to Section 45 of the Arbitration and Conciliation Act, 1945 and as

the agreement prima facie is incapable of performance or inoperative at

least till the time the question of oppression and mismanagement is

decided by the Company Law Board, hence the civil court's jurisdiction

is not barred.

FORUM NON-CONVENIENS

60. Another factor for holding that the civil court has the jurisdiction is

that the LCIA is forum non- conveniens. The learned senior counsel Mr.

Rohatgi had contended that the anti-arbitration restraint order deserves to

be granted on account of the fact that the forum where the arbitration

proceedings are to take place is a forum non-conveniens as it is stationed

in London while as most of the parties are stationed in India and carrying

on business in India except defendant No.2, which happens to be a

company incorporated in USA. It has been contended that its interest will

be sufficiently protected by other defendants. Further, governing law is

Indian law between the parties. Even after the award is passed, it has to

be executed in India under Indian laws because the business is being

carried out in India. Thus, the arbitration proceedings being conducted in

London are oppressive and vexatious.

61. Mr. Salve, the learned senior counsel for the defendants has

contended that forum non-conveniens plea cannot be relied upon by the

plaintiffs on account of the fact that when the arbitration agreement was

signed, it was done by the defendants with their eyes open and after

having signed the agreement, it does not lie in their mouth to have the

civil suit filed in India and contend that the place of arbitration

adjudication between the parties is a forum non-conveniens. He has

placed reliance on case titled M/s AEG Aktiengesellschaft v.Insotex

(India) Ltd.18

62. I have considered the submission made by the learned senior

counsel for the parties. However, I feel that there is merit in the

submission made by Mr. Rohatgi that the plaintiffs are entitled to an

injunction on account of the place of arbitration proceedings being in

London and, therefore, being a forum non- conveniens. This is on

account of the fact that all the parties are Indians except one, the area of

operation of business is in India meaning thereby, the cause of action

itself has arisen in India. The governing law between the parties is the

Indian law and that being the position, the place of arbitration being

London becomes a forum non- conveniens to the plaintiffs. The

contention of Mr.Salve, learned senior counsel, that the said agreement

with regard to the venue of arbitration was signed with the eyes open and

hence does not become forum non conveniens because the court, in such

a situation where the venue agreed has absolutely no special reason to be

selected like carrying out the business, or applicability of the laws, will

not permit one of the parties to use its dominant partner to the detriment

of the opposite side.

In CA No.7055/1996 decided by the Supreme Court on 10.04.1996

63. Consequently, the arbitration proceedings can be stayed on the

ground that they have become not only vexatious but oppressive also and

the court cannot be mute spectator to this.

CONFLICTING DECISIONS

64. As on date, the CLB and the civil court are already seized of the

matter. So far as the civil court is concerned, a declaration is sought that

the arbitration agreement is null and void, inoperative or incapable of

being performed. So far as the company law petition is concerned, the

plaintiffs have prayed that they are being subjected to mismanagement

and oppression by the respondents and, therefore, their interest be

protected. In the second suit which has been filed by the private

respondents, there is already a stay which is operating in favour of the

plaintiffs and, therefore, the continuation of the arbitration proceedings in

London can give rise to a judgment which may be in conflict with the

judgment which is either granted by the Company Law Board or by the

civil court and, therefore, the proceedings before the arbitral tribunal

deserve to be stayed.

WAIVER OF ARBITRATION CLAUSE

65. Another reason why this court holds that the civil court will have

jurisdiction of the matter is on account of the waiver or abandonment of

arbitration clauses between the parties.

66. It is not in dispute that the plaintiffs had filed a company petition

on 09.09.2013 before the Company Law Board seeking reinstatement of

the petitioner as the MD of the defendant No.2 as he had not been

reelected as the MD for which elections were held on 06.08.2013. He has

also prayed that the petition deserves to be entertained on account of his

plea of oppression and mismanagement. The Tribunal had passed an ad

interim order during the pendency of the petition directing the parties to

maintain status quo as regards the shareholding, board pattern and call

option. The said order is continuing as on date.

67. During the pendency of the said company petition, the respondents

filed an application under Section 45 of the Arbitration and Conciliation

Act, 1996. The said Section mandates the court to refer the parties to the

alternative dispute resolution mechanism which has to be by way of

arbitration tribunal. Curiously enough, this application was withdrawn by

the respondent. After the withdrawal of the application, the respondent

terminated the agreement and invoked the arbitration clause. It is also not

out of place to mention here that the respondent had also filed separately

an application under Section 9 of the Arbitration and Conciliation Act,

1996 seeking enlarged relief against the plaintiff in order to protect its

interest. This application was also not pressed.

68. Both these facts that is the fact of filing the application under

Section 45 and its subsequent withdrawal and also the filing of an

application under Section 9 of the Arbitration and Conciliation Act, 1996

seeking ad interim relief and not bringing it to its logical conclusion

clearly shows the intention of the respondents that they were submitting

to the jurisdiction of the Company Law Board and the jurisdiction of the

Indian Courts. Whether it is treated as waiver or abandonment is a

question of fact which I feel, prima facie, the defendants were unable to

satisfy with the continuation of the proceedings in India and therefore

chose to withdraw the application.

69. The contention of the learned senior counsel Mr.Nayar is that

assuming though not admitting the jurisdiction of the civil court, it has

been urged that the filing of the suit by the plaintiff is an abuse of the

processes of law on account of the fact that though in the joint venture

respondent No.2 and the plaintiff No.1 through plaintiff No.2 have 50%

equity in respondent No.2, but the quantum of funds invested by the two

are having huge variation, the former has investment of Rs.200 crores

while as the latter has investment of Rs.14.56 crores. Thus the

respondent has more than 92% of share capital, therefore, the suit may

not be entertained. The question of holding of each of the party may not

be relevant at this stage so far as the question of abuse of the processes of

law is concerned. Merely because somebody's financial stake is less than

that of the other party does not make his action as suspect or abuse of the

processes of law if such a party seek redressal of its grievance or a legal

right.

70. The learned senior counsel for the respondents has also referred to

the judgments in Modi Entertainment Network19, Enercon (India) Ltd20

and Essel Sports Pvt. Ltd.21 to contend that in all these three judgments,

the anti-suit injunction which has been granted by the civil court is not

anti-arbitration injunction and, therefore, the injunction which has been

granted in the said three suits could not be made the basis for staying the

(2003) 4 SCC 341

AIR 2014 SC 3152

ILR (2011) V DELHI 585

arbitration proceedings which have already been commenced by the

arbitral tribunal at the LCIA.

71. No doubt, the three cases referred to hereinabove to which

reference has been made by the learned senior counsel for the

defendants, the injunction which was granted was an anti-suit injunction

to be initiated or to be continued by the civil court but merely because

that was an anti-suit injunction granted by the civil court, does not mean

that anti-arbitration injunction cannot be granted by a court on the same

principles provided not only the plaintiff satisfies the three requirements

which a party is expected to satisfy in an ordinary suit for grant of ad

interim injunction and over and above also satisfies the court that any of

the three contingencies which are envisaged in Section 45 of the Act is

available to him. Meaning thereby, that if a party is able to show that in a

given particular case any of the three contingencies of the agreement

being null and void, inoperative or incapable of being performed is

satisfied by a party in addition to the other three conditions, which are

prerequisites for grant of an ad interim injunction, an anti-arbitration

injunction can also be granted.

72. In the instant case, as has been observed hereinabove that because

of the pendency of the company law petition initiated by the present

plaintiffs, where there are allegations of mismanagement and oppression

pending before the Company Law Board for the last more than a year and

an ad interim order having been passed restraining the defendants from

proceeding ahead with the change in the share pattern of the holding of

the company that tantamounts to having made the arbitration agreement

inoperative or incapable of performance though for a limited purpose or

for a limited time, the plaintiff is in my view entitled to an anti arbitration

injunction.

CONCLUSION

73. For the reasons mentioned above, I am of the considered opinion

that the plaintiff has been able to satisfy all the three requirements for

grant of ad interim injunction namely the plaintiff has got prima facie

good case that the balance of convenience is in favour of the plaintiff, that

the plaintiff will suffer irreparable loss in case ad interim injunction

against the respondents from continuing with the arbitration proceedings,

is not granted. Further, in addition to satisfying the above three

requirements, the plaintiff has also been able to prima facie show to this

court that the arbitration agreement between the parties is inoperative or

incapable of performance on account of the fact that the plaintiff has

already filed a suit for oppression and mismanagement in Company Law

Board in India which has directed the defendants to maintain status quo

with regard to the shareholding pattern of the defendant No.1 during the

pendency of the petition. Secondly, the dispute which is pending

between the parties before the Company Law Board with regard to the

oppression and mismanagement will have certain overlapping disputes

with the disputes sought to be raised by the defendants on the assumption

that they were well within their right to terminate the joint venture

agreement and refer the dispute for adjudication before the arbitral

tribunal. This is notwithstanding the fact that according to the defendants

the plaintiffs have allegedly taken the view in the pleadings of this suit

and company petition that they operate in different circumstances.

74. According to the defendants, there is no overlapping of the disputes

sought to be raised by the parties before the two forums. But, in my

considered opinion, there is bound to be possibility of conflict in

decisions even if it is assumed that the disputes sought to be raised in two

forums are not overlapping. To top it all, the disputes sought to be raised

before the arbitral tribunal are suffering from forum non conveniens.

This is on account of the fact that the parties except one of the defendants

are carrying on business in India, cause of action has accrued in India, the

governing law between the parties is Indian, the award, if at all, will be

passed in favour of the defendants, has to be enforced in India according

to the Indian laws, therefore, simply by having the arbitral tribunal

located at a place outside India, it becomes forum non conveniens and,

therefore, it makes the very carrying on of the arbitration proceedings by

the defendants when the company law petition is pending, as oppressive

and vexatious. I, therefore, restrain the defendants from pursuing the

arbitration proceedings before the arbitral tribunal till the disposal of the

suit or alternatively till the stay is not vacated by the Company Law

Board.

75. The IA No.6207/2014 accordingly stands disposed of.

CS(OS) No.962/2014 & IA Nos.6858/2014 & 7079-7083/2014

1. List the matter before the Joint Registrar for completion of

pleadings on 08.01.2015.

V.K. SHALI, J.

DECEMBER 22, 2014