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1994 DIGILAW 863 (DEL)

DORSTENER MASCHINENFABRIK AG. v. SAND PLAST INDIA LIMITED

1994-12-20

R.C.LAHOTI

body1994
Mr. R. C. Lahoti, J. ( 1 ) THE petitioner a German-company has filed the mainpetition registered as OMP under Sections 31, 32 and 33 of the Arbitration Act,1940, seeking a declaration of invalidity of the award dated 18/02/1994,a declaration that the said award shall not be enforcable unless and until it wasmade a rule of the Court in accordance with the provisions of the Arbitration Act,1940, and a restraint order against the respondent-Indian Company from execut-ing the award or giving effect to it before a Court in Germany. The main petitionis accompanied by an application under Section 41 (b) of the Act seeking an ad-interim injunction in identical terms. ( 2 ). The parties had entered into an agreement dated 6/02/1990 for thetransfer of the technical know-how and licencing arrangement for MDP 600dorstener Presses. Disputes and differences having arisen between the parties,they were REFERRED TO to Indo-German Chamber of Commerce for arbitration. Thetwo Arbitrators, who were nominees of the two parties made an award on 18/02/1994 whereby the claims of the respondent has been allowed and counterclaim of the petitioner who have rejected. On 1/03/1994 the petitioner wasserved with a notice from the Arbitrators informing of the making of the award. On April 11, 1994 the petitioner. was served with a copy of the award. ( 3 ). The respondent has intiated proceedings for enforcement of the award in Germany. The grievance of the petitioner is that the award is invalid and in any case so long as it has not been made rule of the Court. under the Arbitration Act, 1940, it cannot be enforced. ( 4 ). The petition alongwith application for interim relief have been filed on 5/12/1994. ( 5 ). The learned Counsel for the petitioner has placed implicit reliance on a decision of the Supreme Court in Oil and Natural Gass Commission v. Western Company of North America, AIR 1987 SC 674 submiting that this Court ought to issue the ad-interim injunction prayed for by the petitioner failing which the petitioner is sure to suffer an irreparable injury. The learned Counsel for the petitioner has placed implicit reliance on a decision of the Supreme Court in Oil and Natural Gass Commission v. Western Company of North America, AIR 1987 SC 674 submiting that this Court ought to issue the ad-interim injunction prayed for by the petitioner failing which the petitioner is sure to suffer an irreparable injury. It has been held :- "while as per the contract, parties are governed by the Indian Arbitrationact and the Indian Courts have the exclusive jurisdiction to affirm or set asidethe award under the said Act, the Western Company is seeking to violate thevery arbitration clause on the basis of which the award has been obtained byseeking confirmation of the award in the New York Court under the Americantaw. It will amount to an improper use of the forum in America in violation ofthe stipulation to be governed by the Indian law which by necessary implicationmeans a stipulation to exclude the USA Court to seek an affirmation and to seekit only under the Indian Arbitration Act from an Indian Court. If the restraintorder is not granted, serious prejudice would be occasioned and a party violating the very arbitration clause on the basis of which the award has come intoexistence will have secured an order enforcing the order from a foreign Court inviolation of that very clause. Till an award is transformed into a judgment anddecree under Sec. 17 of the Arbitration Act, it is altogether lifeless from the pointof view of its enforceability. Life is infused into the award in the sense of its becoming enforceable only after it is made a rule of the Court upon the judgmentand a rule of the Court upon the judgment and decree in terms of the awardbeing passed. The American Court would have therefore enforced an awardwhich is a lifeless award in the country of its origin, and under the law of thecountry of its origin which law governs the award by choice and consent. " ( 6 ). The learned Counsel for the respondent has distinguished the decision ofthe Supreme Court in O. N. G. C. case (supra) by submitting that the law laiddown by the Supreme Court has to be read in the light of the New York convention, that the award in ONGC case was a domestic award which is not the casein the case at hand. In addition it is submitted that the petitioner is guilty ofdelay and lapses which would disentitle the petitioner to the discretionary reliefof interim injunction. It is also submitted that the ONGC case was an unusualcase of not ordinary circumstances and the law laid down therein has to be readin the peculiar facts of the case discernible from the judgment of their Lordships. To my mind there is a substance in the contentions raised on behalf of therespondent. ( 7 ). ONGC case (supra) was a case where their Lordships had formed anopinion that there was a possibility of the award being set-aside by an Indiancourt. The Western Company was going ahead with the proceedings in theamerican Court which if permitted, would be oppressive to the ONGC andwould amount to driving the Indian Company in a tight corner and placing itin a inextricable situation. ( 8 ). The case at hand is one where an Indian Company is seeking enforcementof award against a German Company in German. It is a reverse situation. Thegerman Company has rushed to India and is seeking setting aside of the awardand restraining an Indian Company from enforcing the award in Germany. Thepetitioner has not come out with a case of oppression or gross-injustice. Theindian Company finding the German Company = (the petitioner) having no assetsin India, has chosen to go to Germany for enforcing the award. ( 9 ). In ONCG s case (supra) itself their Lordships have held: "the facts of this case are eminently suitable for granting a restraint orderas prayed by ONGC. It is no doubt true that Supreme Court sparoinglyexercises the jurisdiction to restrain a party from proceeding further with anaction in a foreign Court. This is one of those rate cases where the Courtwould be failing in its duty if it hesitates in granting the restraint order, for,to oblige the ONGC to face the aforesaid proceedings in the Americancourt would be oppressive in the facts and circumstances of the case. " ( 10 ). Several principles of law laid down in a landmark decision of this Courtin Gas Authority of India Ltd. v. Spie Copag SA. AIR 1994 Delhi 75 repel theprimary contention raised on behalf of the petitioner. I may briefly notice someof the relevant principles laid-down therein. " ( 10 ). Several principles of law laid down in a landmark decision of this Courtin Gas Authority of India Ltd. v. Spie Copag SA. AIR 1994 Delhi 75 repel theprimary contention raised on behalf of the petitioner. I may briefly notice someof the relevant principles laid-down therein. The prime object of the New Yorkconvention was to ensure the recommendation and enforcement of commercialarbitration agreement having international features and the resultant foreignawards arisen therefrom. The New York convention will apply to an arbitrationagreement if it has foreign element or flavour involving international trade andcommerce (which the case in hand does have), even though such an agreementdoes not lead to a foreign award. To quote :- "the New York Convention will apply to an arbitration agreement if it hasa foreign element or flavour involving international trade and commerceeven though such an agreement does not lead to a foreign award but theenforcement and recognition of the agreement will of course be subjected tothe limitations already spelt out. Thus the agreement in question enteredby Indian company with foreign company attracts Art. 11 (3) of the Newyork Convention and cannot be termed as a domestic arbitration agreementinasmuch as the parties constituting the foreign company and their business are located outside India. " ( 11 ). The principals governing the grant of ad-interim injunction in suchmatters are the same as in other civil matters. The plaintiff must show that it hasa prima facie case, the balance of convenience lies in its favour and in the absenceof injunction. It is likely to suffer an irreparable injury. In addition the Courtwould also look at the conduct of the parties. Delay defeats equity and inappropriate cases disentitles the party from indulgence in the discretionary jurisdiction of the Court. As already noticed the petitioner having been served withcopy of the award passed by the Arbitrators on 11th Apri, 1994 nothing hadprevented the petitioner from filing the present petition within a reasonable timethereafter. The petitioner was served with summons from LANDGERICHT ESSEN (High Court of ESSEN ). The petitioner has also filed its reply in the said proceedings on 15/11/1994. The objection which the petitioner has raised hearcan also be raised before the Court in Germany. ( 12 ). This Court is not satisfied that the petitioner has a prima facie case andthe balance of convenience lies it its favour. The petitioner has also filed its reply in the said proceedings on 15/11/1994. The objection which the petitioner has raised hearcan also be raised before the Court in Germany. ( 12 ). This Court is not satisfied that the petitioner has a prima facie case andthe balance of convenience lies it its favour. The Court is also not satisfied thatthe petitioner would suffer any irreparable injury in the absence of injunction. On the contrary, the respondent is likely to suffer irreparable injury if the enforcement of award is stayed. ( 13 ). For all the foregoing reasons, IA No-10455/94 is rejected.