Delhi High Court
All Nippon Airways Company ... vs Japan Travel Service & Anr on 8 November, 2019
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment pronounced on: 08.11.2019
+ FAO 411/2016
ALL NIPPON AIRWAYS COMPANY LIMITED ..... Appellant
Through: Mr. Alok Mahajan, Mr. Neeraj Atri, Mr.
Rajesh Arya and Mr. Abhay M., Advocates.
versus
JAPAN TRAVEL SERVICE & ANR. ..... Respondents
Through: Mr. Salman Khurshid, Mr. Anil Kher
and Mr. D.R. Bhatia, Senior Advocates with Mr.
Kunal Kher, Ms. Namita Sharma, Ms. Subiya
Akbar Warsi, Mr. Kapil Kher, Mr. Zulnoor
Ahmed, Mr. Saurav Roy, Mr. Zafar Khurshid and
Mr. Rishi Manchanda, Advocates.
CORAM:
HON'BLE MR. JUSTICE NAJMI WAZIRI
NAJMI WAZIRI, J
FAO 411/2016 & CM APPL. 30975/2016
1. This appeal impugns the order dated 08.06.2016 passed by the learned
ADJ in Suit No. 145/2016, dismissing the applicant's application under
section 45 of the Arbitration and Conciliation Act, 1996 (hereinafter referred
to as "Act"). It also allowed the respondents'/ plaintiffs' application under
Section 42 of the Act. It held that it had jurisdiction to adjudicate the suit
and that the "Jurisdiction Clause" in the agreement between the parties did
not confer exclusive jurisdiction upon the Courts in Japan. It noted that
since the appellant had already invoked the jurisdiction of the Delhi Courts,
therefore, under section 42 of the Act, the suit would be maintainable.
FACTS:
FAO-411/2016 Page 1 of 10
2. The appellant is an airline company incorporated under the laws of
Japan. By an agreement signed in 1996, it appointed respondent no. 1 as its
General Sales Agent in India for (i) sale of passenger seats, and (ii) sale of
cargo space. The agreement was renewed from time to time. The last
renewal was on 01.01.2003. The respondents did not remit to the petitioner
an amount of about Rs. 9,37,17,690/-, so a dispute arose.
3. The lis was referred to Arbitration. An Arbitral Award was made in
Tokyo. It was sought to be enforced by the appellant before this Court. The
request was declined. By the order dated 10.11.2009, liberty was granted to
the redressal of its grievances by involving Disputes Resolution Mechanism
in accordance with the agreement between the parties.
4. The appellant sought protection of the amount in dispute in OMP Nos.
300/2008 and 301/2008, wherein the statement of the counsel for the
respondents was recorded on 18.11.2008 to the effect that: "he states that in
the meanwhile the respondent nos. 1 to 3 have no intention of selling, or
alienating, immovable property No. C-14, Westend, New Delhi, without the
permission of this Court ." Another statement was made by the learned
counsel for the respondents to the effect that: "the statement made on
18.11.2008 in OMP Nos. 300/2008 and 301/2008 shall bind the respondents
for a further period of six months from today." The said protection was
directed to be continued to operate till further orders. On 13.04.2012 in
OMP No. 270/2010, it was held that "interim order passed in the present
petition on 14.05.2010 will continue till such time it is modified in the
arbitration proceedings, if any, or any of the other proceedings in the Court."
5. Pursuant to the liberty granted to the appellants by the aforesaid
orders, the appellants, in accordance with the agreements and the laws,
FAO-411/2016 Page 2 of 10
issued a notice on 21.01.2010 to respondent nos. 1 and 2, seeking reference
to Arbitration. The latter declined the reference by a letter dated
18.02.2010. The letter was filed before the Tokyo District Court, Japan on
12.04.2010 under Article 17 of the Arbitration Act of Japan seeking the
appointment of an Arbitrator, on the ground that there was no agreement
between the appellant and respondent nos. 1 and 2 on procedure for
appointment of an Arbitrator, to resolve disputes between them. A reply
was filed by respondent nos. 1 and 2 before the Tokyo District Court, Japan.
The said Court appointed a Sole Arbitrator on 14.11.2011.
6. The respondents filed Suit No. CS (OS) No. 229/2010 before this
Court seeking declaration and injunction against the said appointment of the
Arbitrator. The appellant filed an application under section 45 of the
Arbitration and Conciliation Act, 1996 seeking that the parties be referred to
arbitration in view of the arbitration clause contained in the agreement
entered into between the parties, whereas, the respondents/plaintiffs filed an
application under section 42 of the said Act seeking to restrain the appellant
from initiating or continuing the proceedings against them with respect to
the Arbitration Agreement dated 01.01.2003, before any other Court than the
Delhi High Court.
7. The plaintiff had in the alternative, sought interim orders to the effect
that even if the defendant continues with any arbitration proceedings before
any other court, such proceedings and subsequent action thereto by the
appellant, shall be subject to final disposal of the suit pending before this
Court.
8. The appellant had sought dismissal of the suit on the ground that it
was identical to the two suits filed earlier, being CS(OS) Nos. 1403/2007
FAO-411/2016 Page 3 of 10
and 1569/2007. The aforementioned suits were disposed off on 13.03.2009
by this Court with the direction that the plaintiff cannot be permitted to
continue with two separate set of proceedings for the same relief, one by
way of a suit and the other by way of filing of objections against the Arbitral
Award. All objections of the plaintiff arising out of the Agreement dated
05.02.2008 were considered while deciding the objection petitions of the
plaintiff being OMP Nos. 383/2008 and 384/2008. The said objections were
disposed-off by order dated 10.11.2009. It disposed off four OMPs,
declining to enforce and execute the earlier arbitral award in favour of the
appellant, however, it granted liberty to the parties to seek redressal of their
grievances, by invoking the Disputes Resolution Mechanism in accordance
with the agreement executed between the parties, as well as in accordance
with law. Subsequent to change in pecuniary jurisdiction of courts in Delhi,
the said Suit No. C.S. (OS) No. 229/2010 was transferred to the District
Court where it was renumbered as Suit No. 145/2016.
9. The learned Sole Arbitrator commenced arbitral proceedings on
06.03.2012; the parties filed their representations and written submissions
from time to time; the respondents raised various issues and contentions in
their written submissions. The arbitral award was passed on 29.05.2014
against respondent no. 1 determining inter alia that: (i) the Arbitrator had
jurisdiction to determine the appellant's claim against respondent no. 1, (ii)
that respondent no. 1 breached the Agreement dated 01.01.2003 by failing to
make payment to the claimant of sums due thereunder, (iii) that respondent
no. 1 shall pay the claimants the sum of Rs. 62,598,215.11/- together with
simple interest on Rs. 54,128,317.59 at the rate of 18.25% per annum from
01.02.2007 till the date all such amounts are paid in full, and (iv) the
FAO-411/2016 Page 4 of 10
Agreement for appointment of a General Sales Agent in India stood
terminated w.e.f 13.07.2007.
ARGUMENTS:
10. It is the appellant's contention that the impugned order has erred in
holding that since the earlier round of section 9 proceedings had invoked
jurisdiction of Delhi courts, section 42 of the Act would be applicable and
the suit would, therefore, be maintainable in Delhi. He contends that Part-I
of the Arbitration & Conciliation Act, 1996 is applicable only to domestic
arbitration. He relies upon the dicta of the Supreme Court in Bharat
Aluminium Company vs Kaiser Aluminium Technical Services Inc. (2012)
9 SCC 552 as well as Eitzen Bulk a/S vs Ashapura Minechem Ltd. & Anr.
JT 2016 (5) SC 186 to the effect that Part -I of the Act, which also includes
section 42 of the Act, would not be applicable to foreign awards like the one
made in the present proceedings. It held as under:
Bharat Aluminium Company (supra)
24. Finally, he submits that the decision in Bhatia
International [(2002) 4 SCC 105] is a harmonious
construction of Part I and Part II of the Arbitration Act,
1996. He further submits that Venture Global
Engg. v. Satyam Computer Services Ltd. [(2008) 4 SCC
190] (hereinafter referred to as "Venture Global
Engg. [(2008) 4 SCC 190] ") has been correctly decided
by this Court. Mr Subramanium further pointed out that
the judgments of this Court in Oil and Natural Gas
Commission v. Western Co. of North America [(1987) 1
SCC 496] and NTPC v. Singer Co. [(1992) 3 SCC 551]
have appropriately set aside the awards challenged
therein even though the same were not made in India.
28. The Indian law has consciously and correctly
departed from the same and chosen only the nationality
test for defining an arbitration as "international" as is
apparent from Section 2(1)(f) of the Arbitration Act,
FAO-411/2016 Page 5 of 10
1996. Relying on the provision of Sections 2(2), 20 and
28, he further submits that the Arbitration Act, 1996
precludes Indian parties to a purely domestic dispute
from choosing a place of arbitration outside India. Mr
Kumar goes even further to submit that when both the
parties are Indian, the substantive law governing the
dispute must necessarily be Indian irrespective of the
situs of the arbitration and irrespective of any provision
in the contract between the parties to the contrary. He
submits that the same principle applies with equal force
to the arbitration law too, that is to say, that if it is not
open to two Indian parties with regard to an entirely
domestic dispute to derogate from the Indian laws of
contract, evidence, etc. it is equally not open to them to
derogate from the Indian arbitration law either. He relies
on the judgment of this Court in TDM Infrastructure (P)
Ltd. v. UE Development India (P) Ltd. [(2008) 14 SCC
271] paras 19, 20 and 23. He, however, very fairly points
out that this was a case under Section 11 and the point in
issue here did not specifically arise for consideration in
the said case.
11. The learned counsel for the appellant also relies upon the dicta of the
Supreme Court in IMAX Corpn. v. E-City Entertainment (India) (P) Ltd.,
(2017) 5 SCC 331, which held as under:
".... 26. The arbitration clause appears consistent with
Section 2(7) of the Arbitration Act, 1996 which recognises
the freedom to authorise any person including an
institution to determine an issue such as the choice of the
place of arbitration.
27. Dr Singhvi rightly submitted that the decisions of the
Court in Sakuma Exports Ltd. v. Louis Dreyfus
Commodities Suisse Sa [Sakuma Exports Ltd. v. Louis
Dreyfus Commodities Suisse Sa, (2015) 5 SCC 656 :
(2015) 3 SCC (Civ) 225] , Harmony Innovation Shipping
Ltd. v. Gupta Coal India Ltd. [Harmony Innovation
Shipping Ltd. v. Gupta Coal India Ltd., (2015) 9 SCC 172
: (2015) 4 SCC (Civ) 341] , and Reliance Industries
FAO-411/2016 Page 6 of 10
Ltd. v. Union of India [Reliance Industries Ltd. v. Union
of India, (2014) 7 SCC 603 : (2014) 3 SCC (Civ) 737] do
not help the appellant in view of the main difference
between the abovementioned cases and the present one
i.e. in all these cases, the parties had specifically agreed
that the seat of arbitration will be London. The
arbitration clause in these cases itself specified the seat to
be at London. In Reliance Industries Ltd. [Reliance
Industries Ltd. v. Union of India, (2014) 7 SCC 603 :
(2014) 3 SCC (Civ) 737] , the agreement that the seat of
arbitration would be London was incorporated in the
final partial award.
.....
29. We find that in the present case, the seat of arbitration
has not been specified at all in the arbitration clause.
There is however an agreement to have the arbitration
conducted according to the ICC Rules and thus a
willingness that the seat of arbitration may be outside
India. In any case, the parties having agreed to have the
seat decided by ICC and ICC having chosen London after
consulting the parties and the parties having abided by
the decision, it must be held that upon the decision of ICC
to hold the arbitration in London, the parties agreed that
the seat shall be in London for all practical purposes.
Therefore, there is an agreement that the arbitration shall
be held in London and thus Part I of the Act should be
excluded.
30. The construction that the parties agreed to exclude
the applicability of Part I of the Act and generally to have
the entire agreement governed not according to Indian
law is also apparent from the express provision that:
"This agreement shall be governed by and construed
according to laws of Singapore and parties attorn to
jurisdiction of the courts of Singapore."
31. In para 25 of NTPC v. Singer
Company [NTPC v. Singer Company, (1992) 3 SCC 551]
, this Court held: (SCC p. 564)
"25. ... On the other hand, where the proper law of the
contract is expressly chosen by the parties, as in the
present case, such law must, in the absence of an
unmistakable intention to the contrary, govern the
arbitration agreement which, though collateral or
ancillary to the main contract, is nevertheless a part of
such contract."
This principle is again reiterated in Sakuma Exports
Ltd. [Sakuma Exports Ltd. v. Louis Dreyfus Commodities
Suisse Sa, (2015) 5 SCC 656 : (2015) 3 SCC (Civ) 225]
This stipulation expressly excludes Part I of the Act
because it governs both the principal agreement as well
as the accompanying arbitration agreement.."
12. The learned counsel for the respondents refutes the appellant's
contentions on the ground that: i) since the application under section 9 of the
Act was moved and dealt with by order dated 14.05.2010, therefore, the
jurisdiction of this Court had already been secured, and ii) all-the-more
because there is no exclusive jurisdiction of the Court's of Japan under
Clause-13 of the Agreement between the parties.
ANALYSIS:
13. In the present case, the terms of the contract would be relevant. The
agreement governing the relation between the two parties was signed in the
year 1996; the last renewal being on 01.01.2003. In it, the relevant
provision of the agreement concerning arbitration and the law governing
jurisdiction are as under:
".. Clause 13 - Arbitration
"A) the Principal and the Agent hereby agrees that any
dispute arising out of or in connection with this Agreement,
including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by
arbitration in Tokyo, Japan in accordance with the
Arbitration Rules of the Arbitration Institute, Ministry of
Justice (Japan) for the time being in force, which Rules are
deemed to be incorporation by reference into this Clause.
There shall be a sole arbitrator to be appointed by the
Director of the Arbitration Office. The language of the
arbitration shall be the English Language.
Clause 12 - Governing Law and Jurisdiction
A) Governing Law: This agreement shall be governed by and
construed in accordance with the laws of Japan."
14. The agreement for the appointment for a general sales agent cargo and
mail dated 01.01.2003 between All Nippon Airways Co. Ltd. and Stic
Travels Pvt. Ltd. governing law and jurisdiction reads as under:
"...Governing Law: This Agreement shall be governed
by and construed in accordance with the laws of Japan.
Xxxx
Jurisdiction: In relation to any legal action or proceedings
arising out of or in connection with this Agreement
(Proceedings"), each party irrevocably submits to the non-
exclusive jurisdiction ofthe „courts of Japan, and waives any
objection to Proceedings in any such court on the grounds of
venue or on the grounds that the Proceedings have been
brought in an inappropriate or inconvenient forum.."
15. The two separate agreements between the appellant and respondent
no.1 show from the abovequoted stipulations that the parties had clearly
agreed that the dispute shall be resolved by arbitration in Tokyo, Japan in
accordance with the Arbitration Rules of the Arbitration Institute, Ministry
of Justice (Japan) and that those rules were deemed to be incorporated in the
aforesaid agreement dated 01.01.2003. The sole arbitrator was to be
appointed by the Director of the Arbitration Office, Japan. Quite
unequivocally, the seat of the arbitration, the manner of arbitration and the
applicable law was clearly agreed between the parties. This leaves no scope
for any doubt or interpretation. All that clause 12A seeks to ensure for the
parties is, that the applicable law of arbitration, is not in conflict with the
laws of either of the contracting parties. In the present case, the Japanese
law should not be in conflict with the Indian law. While the parties had
submitted to the non-exclusive jurisdiction of the Courts of Japan, they had
simultaneously and equally unequivocally agreed in clause 13A to the
resolution of disputes in terms of the rules of arbitration instituted and its
seat being Tokyo, Japan, and that Japanese law would be applicable. By
agreeing to the seat of arbitration in Tokyo, Japan, the parties had clearly
excluded the applicability of Part-I of the Act. That being the position,
relying upon the dicta of the Supreme Court in IMAX Corpn. (supra), where
the parties had "agreed to exclude the applicability of Part-I of the Act and
generally to have the entire agreement governed not according to Indian
Law", this Court is of the view that an application under section 42 of the
Act would not be maintainable and the same ought to have been dismissed.
CONCLUSION:
16. The impugned order dated 08.06.2016 has erred in this regard.
Accordingly, it is set aside. The respondent's application under section 42
of the Act should have been dismissed. The appellant's application i.e. IA
No. 15367/2015 in CS(OS) 229/2010 under s. 151 Code of Civil Procedure,
1908, seeking dismissal of the suit ought to have been allowed.
Accordingly, the Suit No. 145/2016 stands dismissed.
17. The appeal is allowed and disposed off accordingly.
NAJMI WAZIRI, J
NOVEMBER 08, 2019/rw/kk
