ORDER : One is an application by the plaintiff asking for interim orders. There is another application under Section 45 of the Arbitration & Conciliation Act, 1996, by the first defendant to refer the parties to arbitration. 2. An unreported judgment of a Division Bench of the Hon’ble Gujarat High Court in Sadbhav Engineering Limited v. Montecarlo Limited delivered on 22nd August, 2013, cited by Mr. S. N. Mookherjee, learned senior advocate for the first defendant, opines that it is obligatory for the judicial authority to decide or ' prima facie find out as to whether the conditions mentioned in Section 8 of the above Act were fulfilled or not. The dictum of this High Court with regard to Section 8, in my opinion, should be extended in its application, to Section 45 as well. 3. This, in my opinion, is a very important judgment because neither Section 8 nor Section 45 states what would happen to a proceeding filed in Court, pending consideration of an application under Section 8 or Section 45. Sub-section (3) of Section 8 provides that during pendency of a proceeding before a judicial authority an arbitration may be commenced or continued and an arbitral award made. Nothing is said as to how the Court should deal with the action before it. 4. This judgment provides a valuable guidance. The Court in which an application under Section 8 or Section 45 is filed is required, at the threshold, to prima facie decide whether there is an operative arbitration clause binding the parties and covering the subject-matter of the dispute or a substantial part of it in the judicial action and then pass necessary orders with regard to the suit. 5. When this Division Bench judgment was cited before the Company Law Board in another case in General Atlantic Singapore F. Pte Ltd. v. Fourcee Infrastructure Equipment Pvt. Ltd. decided on 29th October, 2013 the member deciding the case, quite improperly in breach of judicial discipline, added his own authority to the law by saying that in his opinion an interim application should be decided during the pendency of the Section 8 application, without even prima facie deciding whether an arbitration clause operated or not. 6. This order was challenged in appeal before the Hon’ble Bombay High Court which admitted the appeal.
6. This order was challenged in appeal before the Hon’ble Bombay High Court which admitted the appeal. This in turn was carried to the Hon’ble Supreme Court which passed an order on 29th November, 2013 by consent of the parties inter alia stating that the Section 45 application should be heard after the application for interim relief was decided by the Company Law Board. 7. These orders of the Company Law Board, the Bombay High Court and the Hon’ble Supreme Court were cited by Mr. Sarkar. He argued that on this basis I should not follow the Gujarat decision. In my opinion the expression of opinion by the member of the Company Law Board Mumbai Bench is not even of persuasive value to this High Court. The Hon’ble Bombay High Court and the Hon’ble Supreme Court have not pronounced any ratio to bind this Court. 8. The judgment in Tayabbhai M. Bagasarwalla v. Hind Rubber Industries Pvt. Ltd., reported in (1997) 3 SCC 443 (paras 15 & 16) : ( AIR 1997 SC 1240 ) relating to interim orders in a suit, where jurisdictional questions are raised was erroneously attempted to be applied by Mr. Sarkar to Section 8 or Section 45 cases, where the legislative intent is completely different. 9. Hence, the judgment of the Gujarat High Court, which is of great value, in my opinion, is relevant in this case. 10. On these authorities I hold that the prima facie case in Section 45 application has to be considered first and a ruling made by this Court before the interim application could be considered. 11. After consideration of the above prima facie, one of the cardinal tests to be applied as laid down in paragraph 10 of the judgment in Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., reported in (2013) 1 SCC 641 : (AIR 2013 SCC (Civ) 457) is : if a subject-matter of the suit is sent to arbitration would the other subject-matter survive? The Court is given an option either to stay the suit completely or to direct that the arbitration and the suit should proceed simultaneously. 12. The plaintiff, first defendant and the fourth defendant on 5th February, 2008 entered into a shareholders agreement. 13. Undisputedly, the second defendant is a 100% subsidiary of the first defendant. Certain terms of this agreement are quite relevant.
12. The plaintiff, first defendant and the fourth defendant on 5th February, 2008 entered into a shareholders agreement. 13. Undisputedly, the second defendant is a 100% subsidiary of the first defendant. Certain terms of this agreement are quite relevant. Parent is defined as follows : Parent means PSA International Pte. Ltd., where the shareholder is PSA or a subsidiary of PSA International Pte. Ltd. and ABG where the shareholder is itself or a subsidiary of ABG, or in respect of any other shareholder, such party identified by the shareholders as that shareholder s parent. Related Company is defined as follows : Related Company means, in relation to a party, its parent, its subsidiary or a subsidiary of its parent. 14. Clause 2.4 deals with the right of first refusal for expansion. The clause is inserted below : Right of first refusal for expansion : (a) If either of PSA or ABG, itself or through a related company, participates in further port projects sharing the same port trust jurisdiction as the Port, each party will give a right of first refusal to the other to participate in these new projects on arms length terms to be separately negotiated at that time. The right of first refusal will lapse if the parties are unable to conclude a term sheet or memorandum of understanding within 3 months of the joint collaboration of the project first being formally broached in writing by one party to another, referring to this right of first refusal in this Agreement. If a term sheet or memorandum of understanding is subsequently entered into specifically for that project, it will govern any further terms of exclusively or right of first refusal to participate in the project agreed between the parties. (b) If ABG, itself or through a related company, obtains the necessary approvals and signs up the concession for the proposed offshore container terminal at Kolkata Diamond Harbour anchorage, ABG will give PSA a right of first refusal to acquire, directly or indirectly, a 49% attributable equity stake in such proposed offshore terminals, on arms length terms to be separately negotiated at that time. The right of first refusal will lapse if the parties are unable to conclude a term sheet or memorandum of understanding within 6 months of the signing up of the concession.
The right of first refusal will lapse if the parties are unable to conclude a term sheet or memorandum of understanding within 6 months of the signing up of the concession. If a term sheet or memorandum of understanding is subsequently entered into, it will govern any further terms of exclusivity or right of first refusal. 15. Clause 16.1 stipulates that the agreement would be governed and construed in accordance with the laws of India. 16. Clause 16.2 is also inserted below : Dispute resolution : (a) All disputes between the parties in connection with this Agreement, the Articles or the Company which cannot be resolved amicably between the parties will be finally settled by arbitration in London and will be governed by the rules of the London Court of International Arbitration (LCIA). (b) The arbitration tribunal will consist of a single arbitrator appointed by agreement between the parties. Failing agreement between the parties within 28 days the matter will be referred to and settled by the arbitration of one arbitrator designated by the President (or presiding officer) of LCIA, such arbitrator not being a resident or national of India or Singapore. The language of arbitration will be English. (c) The award rendered therein will be final and binding upon the parties to such arbitration proceedings. 17. The case in the plaint is based on the right of first refusal clause. Violation of that clause by the first and second defendants is alleged. The second defendant is not a signatory to the arbitration agreement. 18. The first and second defendants are represented by a common set of counsel in Court today. It was submitted on their behalf by Mr. Mookerjee, learned senior advocate that they were ready and willing to participate in the arbitration according to the arbitration clause. 19. The Board of Trustees for the Port of Kolkata has been impleaded as the third defendant. The Board of Trustees is not a party to the arbitration agreement. The cause of action against the Kolkata Port Trust (in short KoPt) as made out in the plaint is that they caused interference in the performace of the contract between the plaintiff and the first defendant.
The Board of Trustees is not a party to the arbitration agreement. The cause of action against the Kolkata Port Trust (in short KoPt) as made out in the plaint is that they caused interference in the performace of the contract between the plaintiff and the first defendant. The reliefs claimed in the plaint are as follows : The plaintiff prays for leave under Clause 12 of the Letters Patent and under Order 2, Rule II of the Code of Civil Procedure, 1908 and claims (a) Perpetual injunction restraining the defendant No. 1 and its related party i.e. defendant No. 2 from acting contrary to or inconsistent with or continuing to act contrary to or inconsistent with the SHA dated 5th February, 2008 in any manner whatsoever; (b) Perpetual injunction restraining the defendant No. 3 from procuring breach of contract between the plaintiff and the defendant No. 1 and its related party i.e. the defendant No. 2 by award of tender invited through notice bearing No. KoPT/KDS/Mech/CT/244/2013 and dated 25th October, 2013 to any of them or accepting performance thereof from them in any manner whatsoever; (c) Perpetual injunction restraining the defendant No. 2 from participating in any contract or tender with the defendant No. 3 in breach of clause 2.4 of the SHA or from obtaining or performing any contract with the defendant No. 3 without giving first right of refusal to the plaintiff or from obtaining or performing any contract emanating out of Notice Inviting Tender dated bearing No. KoPT/KDS/Mech/CT/244/2013 and dated 25th October, 2013; (d) Receiver; (e) Injunction; (f) Attachment; (g) Costs; (h) Such further and/or other relief or reliefs. 20. First of all, I would observe that in claim (a) of the plaint the plaintiff acknowledges the second defendant to be a related party in terms of the said agreement. 21. I would also note that although interference in the performance of the contract between the plaintiff and the first defendant by the KoPT is alleged, no damages are claimed against them in the plaint. Not even an inquiry into damages is claimed against KoPT. There is no averment in the plaint imputing knowledge of the KoPT with regard to the contract between the plaintiff and the first defendant or the relationship of the plaintiff with the first and second defendants. 22. The following paragraph contains the material allegation against the KoPT : 28.
Not even an inquiry into damages is claimed against KoPT. There is no averment in the plaint imputing knowledge of the KoPT with regard to the contract between the plaintiff and the first defendant or the relationship of the plaintiff with the first and second defendants. 22. The following paragraph contains the material allegation against the KoPT : 28. The plaintiff has also put the defendant No. 3 to notice of the aforesaid facts by letters dated 20th February, 2014 and 22nd March, 2014. The defendant No. 3 despite having notice and knowledge of the aforesaid facts is interested to take steps with undue haste to award the tender to the defendant No. 2 and have performance thereof by the defendant No. 2. The defendant No. 3 is also aware that by awarding or having performance of the tender by the defendant No. 2, it would be procuring breach of the contract and/or of the SHA between the plaintiff and the defendant No. 1. The defendant No. 4 is, however, interested to continue to act in such aforesaid wrongful manner and moreso with undue haste. 23. Mr. Mitra, learned advocate appearing for KoPT cited Merkur Island Shipping Corporation v. Laughton Shaw and Lewis (The Hoegh Apapa); reported in (1983) Vol. 2 Lloyd s Law Reports page 1, an opinion of the House of Lords which, inter alia, held that in an action for interference with contractual rights two requirements had to be met; (i) knowledge of the existence of the contract concerned; and (ii) intention to interfere with its performance. Lord Diplock based the ratio on an earlier pronouncement of the law by Lord Denning MR. 24. From a perusal of the averments in the plaint prima facie these two requirements are not met. 25. It appears that the KoPT has been joined as a party so as to enlarge the subject matter of the dispute and to enable submissions to be made that the dispute in the suit is wider than that covered by the arbitration clause. Hence, the suit should proceed. 26. It is here that the Court is cast with a duty to carefully scrutinize the case of the parties and decide whether the parties should be referred to arbitration. 27. Mr.
Hence, the suit should proceed. 26. It is here that the Court is cast with a duty to carefully scrutinize the case of the parties and decide whether the parties should be referred to arbitration. 27. Mr. Sarkar, learned senior advocate for the plaintiff argued that on a reading of Sections 44 and 45 together with the first paragraph of the first schedule, only the parties to an arbitration agreement could be referred to arbitration and no other party. He argued that any person claiming under a party could apply for reference to arbitration. In this case, the second defendant was not asking for arbitration. Hence, the matter should not be referred to arbitration. 28. The judgment of the Hon’ble Supreme Court in Chloro Controls India (P) Ltd. v. Severn Trent Watger Purification Inc., reported in (2013) 1 SCC 641 : (AIR 2013 SC (Civ) 497) is quite different. The Hon’ble Supreme Court has given a wide definition to the word party. It has not made any difference between an applicant asking for arbitration and a respondent. A three Judges Bench speaking through Swatanter Kumar, J. opined that reference to a party included agents and persons claiming through that party etc. The Hon’ble Court refused to follow an earlier two Judges Bench judgment of the same Court in Sumitomo Corporation v. CDC Financial Services (Mauritius) Ltd., reported in (2008) 4 SCC 91 : ( AIR 2008 SC 1594 ) the ratio of which was in accordance with Mr. Sarkar s submission. 29. As I have said before, according to plaintiff s pleading the second defendant is described as a related party. At the hearing of this application, the second defendant maintained this position and agreed to go to arbitration with the first defendant. In the above decision, the Hon’ble Supreme Court has gone to the extent of saying that even in multi party agreements, if it could be shown that one party was claiming under the another or was acting as another party s agent or servant etc. he could be made bound by the arbitration clause. 30. Therefore, I prima facie hold that the plaintiff, the first, second and fourth defendants are bound by the arbitration clause. 31.
he could be made bound by the arbitration clause. 30. Therefore, I prima facie hold that the plaintiff, the first, second and fourth defendants are bound by the arbitration clause. 31. The above three Judges Bench judgment of the Hon’ble Supreme Court has not departed from its earlier ratio in the case of Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya (2003) 5 SCC 531 : ( AIR 2003 SC 2252 ). It distinguished the earlier case on facts. 32. I also come to the prima facie conclusion that the subject-matter of the dispute covered by the arbitration clause would not leave much surviving in the suit. 33. Therefore, on the ratio of Chloro Control India (P) Ltd. v. Severn Trent Water Purification Inc. (AIR 2013 SC (Civ) 497) I think for the time being the suit should be stayed. 34. This would not preclude the parties to commence and proceed with arbitration. This would also not prevent any party from approaching a proper forum for interim reliefs. 35. Let affidavit in opposition to the Section 45 application be filed by 17th April, 2014. List this Section 45 application (TA No. 50 of 2013) on 30th April, 2014. Affidavit in reply, if any, may be filed in the mean- time. 36. The interim application could be considered after final disposal of the Section 45 application, if so warranted. 37. Certified photocopy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities. Order accordingly.