STATE TRADE CORPORATION OF INDIA LIMITED v. VISHWA OIL CORPORATION LIMITED
1991-08-21
J.K.MEHRA
body1991
DigiLaw.ai
J. K. Mehra, J. ( 1 ) BY this order I am disposing of the application ofthe petitioner for stay of the arbitration proceedings before the arbitratorswho have been appointed by the Indian Chambers of Commerce purportingto be acting under the arbitration agreement between the parties. ( 2 ) THE Madhya Pradesh Exports Corporation Limited (hereinafterreferred to as mpec ) and the respondents had entered into two agreementsdated 18. 12. 85 and 30. 9. 86 with the Petitioner-Corporation for the supplyof Indian Toasted Soyabean Extraction Meal (pure yellow) for furtherexport to Onab, Algeria in terms of the contract which the petitioner-Cor-poration had entered into with the said M/s. Onab, Algeria. Under boththe said agreements, parties to the agreement had agreed to settle all disputes and differences amicably and failing that by arbitration between Petitioner on the one hand and MPEC and the Respondent on the other. Therelevant clause for the purpose of the present case is one relating to thearbitration which is identical in both agreements reads as under :-Arbitration:should there be any difference or dispute between the STCand the foreign buyer in respect or arising out of the export contract due to any default on the part of MPEC and the supplier,the STC shall keep the MPEC and the supplier informed and shalltry to resolve the dispute amicably in consultation with MPEC andthe supplier. If, however, such dispute is not resolved amicably,the same shall be settled as per the provisions contained in theexport contract. Any award, decree or order passed or settlementof any dispute reached by the STC with the foreign buyer, shallbe fully binding on the MPEC and the supplier in all respects whoshall, at their own cost, jointly and severally, discharge all obligations of the SI C under or by virtue of any such award, decree,or settlement. In the event of any arbitration and/or litigationbetween the SIC and the foreign buyer, if so desired by STC, thempec and the supplier shall, without demur, become parties tosuch arbitration/litigation at their own cost and expense and shallfully cooperate with and assist the STC in connection therewith.
In the event of any arbitration and/or litigationbetween the SIC and the foreign buyer, if so desired by STC, thempec and the supplier shall, without demur, become parties tosuch arbitration/litigation at their own cost and expense and shallfully cooperate with and assist the STC in connection therewith. Any dispute between the STC on the one hand and the MPECand the supplier on the other, in respect of any matter, other thanthe matter forming subject-matter of the dispute between the STCand the foreign buyer, shall be endeavour to be settled amicablyand in case the same is not resolved amicably, it shall be referred tothe arbitration of the Indian Council of Arbitration at New Delhiwhose award shall be final and binding on both sides. The partiesshall jointly submit to the jurisdiction of the Indian Council ofarbitration and shall also require the Arbitrators to make a reasoned award. Notwithstanding anything contained in this agreement, anyposition or stand that may, at any time, be taken by the STC inrelation to inc foreign buyer in respect of any matter under orconcerning the export contract, shall not be construed to bein derogation of STC s rights against the MPEC and/or thesupplier, nor shall the same in any manner prejudice,curtail, diminish or impair STC s rights against MPEC and thesupplier or the obligations and responsibilities of the MPEC andthe supplier to STC. Neither MPEC nor the supplier shall haveany right whatsoever to plead any inconsistency or conflict in thestand of the STC vis-a-vis the foreign buyer on the one hand andthe MPEC and the supplier on the other as in any mannerextinguishing, diminishing or impairing any of the obligations andresponsibilities of the MPEC and the supplier to the STC. Norshall the supplier have any right to raise any claim, counter claim,plea or defence whatsoever against the STC on the ground if anyconflict or inconsistency between the laws of India and the lawswith reference to or based on which any arbitral award or Courtdecision may have been made or any settlement reached in anydispute between the STC and the foreign buyer. " ( 3 ) WE in the present case are concerned with the second para of thesaid arbitration Clause in the said agreements. Certain disputes are allegedto have arisen between the parties, i. e. , the present petitioner and therespondent. The respondent by itself invoked the arbitration agreement andcommenced arbitration proceedings vide its letter of 9. 8.
" ( 3 ) WE in the present case are concerned with the second para of thesaid arbitration Clause in the said agreements. Certain disputes are allegedto have arisen between the parties, i. e. , the present petitioner and therespondent. The respondent by itself invoked the arbitration agreement andcommenced arbitration proceedings vide its letter of 9. 8. 89 to the Indianconucil of Arbitration against the petitioner. Such an invocation by therespondent alone was objected to by the petitioner before the Indian Councilof Arbitration by means of an application. The petitioner wrote to theindian Council of Arbitration without prejudice to its rights to consider itsposition ill the case before- filing any formal reply to the claim in its application before the Indian Council of Arbitration raised various objections,mainly based on non-joinder of MPEC. Indian Council of Arbitration haswithout dealing with the said application proceeded to appoint the arbitrators. It is to be noted that each party including the petitioner before thecourt had nominated an arbitrator of its choice, but on each occasion, thepetitioner was submitting letters with the expression that "those are withoutprejudice to their rights and contentions". The respondent has till datenot impleaded or joined MPEC in the said arbitration. Their main groundfor non-joinder is that MPEC is only concerned with its overriding commission. Aggrieved by the action of Indian Council of Arbitration in notstaying the arbitration nor directing the respondent to join MPEC thepetitioner has filed the present petition challenging the jurisdiction of thearbitrators on various pleas. According to the petitioner, the followingquestions arise for determination in the present case, i. e. , : 1. Whether a reference can be made by the respondent unilater-ally without calling upon the parties to back-to-back agreement,viz, the petitioner herein and the MPEC to join in themaking of the reference ?2. Whether the reference can at all be brought by the respondentwithout joining MPEC as a co-claimant or in the event of therefusal of MPEC to join in the reference, by joining MPEC asa respondent ?3. Whether a reference can be brought under the said arbitrationclause in respect of a dispute not involving the petitioner onthe one hand and the respondent and the MPEC on theotherhand ?4. Whether a reference can be brought in respect of a disputewhich forms the subject-matter of a dispute between thepetitioner and the foreign buyer ? ( 4 ) HOWEVER, at the time of hearing, Mr.
Whether a reference can be brought in respect of a disputewhich forms the subject-matter of a dispute between thepetitioner and the foreign buyer ? ( 4 ) HOWEVER, at the time of hearing, Mr. Watal confined his arguments to point that the unilateral reference by the respondent alone withoutjoining MPEC is invalid and ultra vires the agreement. It is contendedthat the expressions "any dispute between the STC on the one hand and thempec and the supplier on the other" and the other that there is no validsubmission to arbitration as "the parties shall jointly submit to the jurisdiction of the Indian Council of Arbitration. . . . . . . . . . . . . . . . . . . . . . . " The contentionof the petitioner is that the expression "mpec and the supplier on theother" means that the dispute has to be between the STC on the one handand MPEC and the respondent jointly on the other hand. The argument ofcounsel for the petitioner is that in case it was intended that the disputebetween the STC on the one hand and MPEC and/or the supplier on theother was intended, then the expression "and/or" would have been used inplace of expression "and". It is further pointed out that wherever theparties intended the use of the expression "and/or", they have done soas is the case in the last paragraph of the said arbitration Clause where inlines 7 and 8, it is mentioned ". . . . . . . . . . . . . . . . . . . . . shall notbe construed to bein derogation of STC s rights against the MPEC and/or the supplier. . . . . . . . . . . . . . . . . . . . . "no such expression has been used in the relevant para 2 of thearbitration Clause quoted above and it is for this reason that the petitionercontends that the present unilateral reference by the respondent alone isultra vires the arbitration agreement. In the light of further expressionquoted above from sub-para 2 of the arbitration Clause, it requires theparties to "jointly submit to jurisdiction of the Indian Council of Arbitration".
In the light of further expressionquoted above from sub-para 2 of the arbitration Clause, it requires theparties to "jointly submit to jurisdiction of the Indian Council of Arbitration". It is further contended that the arbitrators entering upon suchunilateral reference lack inherent jurisdiction to entertain the reference asthere is no joint submission to arbitration as is the requirement of agreementbetween the parties. The Counsel for the petitioner has relied upon thecase of Waverly Jute Mills Co. Ltd. v. Raymon and Co. (India) Lid : AIR1963 SC 90. The contention and submissions of the petitioner have beenrepelled by Council for the respondent who has stated that the letters writtento the Indian Council of Arbitration and the appointment of its Arbitratoramounted to acquisecing into jurisdiction of the arbitrators and that thepetitioner is now estopped from challenging the same before this Court. Ithas however not been disputed that the parties are entitled to refer thedispute for adjudication by the arbitrators only in accordance with the aforesaid sub. para 2 of the arbitration Clause. He had relied upon the case ofbanwari Lal Kotiya v. P. C. Aggarwal: reported as AIR 1985 S. C. 1003 andp. C. Aggarwal v. K. N. Khosla and Others : reported as AIR 1975 Delhi 54. None of the said cases deals with a situation prevailing in the present caseas would appear from the following discussion. ( 5 ) THE Counsel has relied upon the two rulings under the Englisharbitration Law, namely. Adcock v. Wood and Rees. v. Waters reported as6 Ex 814 and 16 M. and W. 253 respectively. In the former case two parties ofthe one part and one of the other part bad submitted all matters to arbitration and the question for decision was as to whether one of the parties shallpay money to a stranger for the benefit of the other party is good and wasanswered in the positive. I am afraid that that case is clearly distinguishablewhere all the parties had submitted to the arbitration which is not the casehere. Similarly the case of Rees v. Waters has also no application to thefacts of the present case.
I am afraid that that case is clearly distinguishablewhere all the parties had submitted to the arbitration which is not the casehere. Similarly the case of Rees v. Waters has also no application to thefacts of the present case. The Counsel has also relied upon a passage from20th Edition of Russel on Arbitration and has drawn my attention to pages95, 99 and 100 where the question of submission by only one of the twoparties vis-a-vis the third had been considered and it was found that theexpression is to be taken distributively. This expression is based on the lawlaid down in Adcock v. Wood. However, a perusal of that ruling showsthat that, was a case of submission to arbitration by all, Moreover, in thepresent case there exists a specific agreement to the effect that submissionto the jurisdiction will be joint. The Hon ble Supreme Court in the case ofwaverly Jute Mills (supra) has held that : "the agreement for arbitration is the very foundation on whichthe jurisdiction of the arbitrators to act rests and where that is notin existence at the time when they enter on their duties, the proceedings must be held to be wholly without jurisdiction. And thisdefect is not cured by the appearance of the parties in those proceedings even if that is without protest, because it is well settledthat consent cannot confer jurisdiction. "their Lordship of the Privy Council in the case of Florrie Edridge v. Rustomji Danjibhoy Sethna : reported as AIR 1933 Privy Council 233 havelaid down that, "the subsequent conduct of a party is irrelevant for the purpose ofconstruing the agreement; the construction must depend on theintention of the parties when it was made, which is to be ascertained from its terms, read in the light of the facts known to bothparties when it was concluded. " ( 6 ) THUS, in fact the jurisdiction of the Arbitrators really depends onthe intention of the parties to be ascertained from the terms of the agreementin the light of the facts known to the parties at the time the agreement wasentered into/concluded. While construing an agreement the Court shouldas far as possible construe it as a whole harmoniously so as no part of it isrendered redundant. The use of the expressions "and" and "and/or"in the same Clause could not have been intended to be an interchangeableexpression.
While construing an agreement the Court shouldas far as possible construe it as a whole harmoniously so as no part of it isrendered redundant. The use of the expressions "and" and "and/or"in the same Clause could not have been intended to be an interchangeableexpression. Further a specific provision for joint submission to the jurisdiction cannot be treated to be a meaningless addition to the agreement andhas to be assigned a meaning intended by the parties to the agreement atthe time the agreement was entered into. ( 7 ) COUNSEL for the respondent cited the case of Pannalal Jagatmalv. State of M. P. reported as AIR 1963 M. P. 242; to support his argumentthat the petitioner cannot challenge the jurisdiction of the arbitrators, I amafraid that ruling does not help the respondent because in that case boththe parties had lodged their respective claim and counter claim before thearbitrator and it was in that context held that the parties had submittedto the arbitration. In the present case the petitioner has not yet filed anypleading except its application to the Indian Council of Arbitration withoutprejudice to its contentions for impleading MPEC. ( 8 ) MY attention was also drawn to pages 99 and 100 of the sameedition of Russel on Arbitration to butress the arguments that normallyinjunctions against arbitration are not granted. I find in that very commentary it has been noticed that "now it is well recognised that the Courthas jurisdiction to grant injunction on that basis restraining either party orthe arbitrator from proceeding with the reference. " However, before thegrant of injunction the Court has to consider the well recognised principles-that continuance of arbitration would be oppressive or vexatious or wouldamount to an abuse of the process of theCourt and the well known principles of irreparable injury and the petitioner having a good prima facie caseand the balance of convenience in his favour. In reply to this argumentcounsel for the petitioner has referred to AIR 1982 Delhi 44 where in para28, it has been laid that there cannot be any acquiscence in arbitrationmatters. Mr. Watal has argued that the Arbitrators in the present caselacked inherent jurisdiction and wherever inherent lack of jurisdiction isthere, the matter can be taken up at any stage and there cannot be anyestoppel against it.
Mr. Watal has argued that the Arbitrators in the present caselacked inherent jurisdiction and wherever inherent lack of jurisdiction isthere, the matter can be taken up at any stage and there cannot be anyestoppel against it. ( 9 ) TAKING into consideration the various arguments addressed, Ifind that even if it is considered that the respondent by itself could approachthe Indian Council of Arbitration for a reference of the disputes to thearbitration, there could not be any such reference unless there was jointsubmission. The said expression does require careful examination/consideration in the light of the facts of this case as to whether it was intendedto be a mandatory condition precedent in addition to the effect of the partieshaving chosen to use the expression "and" and "and/or" in differentsub-paras of the same clause regarding arbitration. ( 10 ) IN this view of the matter I am of the view that the balance ofconvenience is in favour of the petitioner who also has made out a primafacie case for interference and it would be just to grant the prayer for stayof arbitration proceedings. For the aforesaid reason, I accept this application and stay the proceedings before the Arbitrators pending the disposal of O. M. P. No. 35 of 1991. ( 11 ) I. A. stands disposed of. ( 12 ) I also direct that the hearing of the main O. M. P. No. 35/91 beexpedited.