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2020 DIGILAW 571 (CAL)

Visa Rerssources Pte Ltd. v. Super Smelters Ltd.

2020-07-27

JOYMALYA BAGCHI, KAUSIK CHANDA

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JUDGMENT : 1. The appellant has assailed an order restraining a foreign seated arbitration before the Singapore International Arbitration Centre (SIAC for short). 2. Such judicial intervention was granted by the Learned Single Judge merely because the respondent/plaintiff had challenged the existence of the matrix contract between the parties and, under such circumstances, it would be financially burdensome to the latter to approach the tribunal at Singapore. In the impugned order, the Judge had not recorded this prima facie satisfaction with regard to the non-existence of the parent contract, far less the arbitration agreement. Challenge to the institution of an international arbitration under Part II of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act of 1996) is maintainable on very limited grounds as envisaged in Section 45 thereof. Section 45 reads as follows : “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 prima facie finds] that the said agreement is null and void, inoperative or incapable of being performed.” 3. A bare reading of the aforesaid provision makes it amply clear that the international arbitration proceeding under Part II of the Act shall not be interdicted by a judicial authority “unless it prima facie finds that the arbitration agreement is null and void, inoperative or incapable of being performed.” No such finding has been recorded by the learned Single Judge while granting the order of injunction. Hence the aforesaid reason is sufficient for us to set aside the order impugned. 4. Although it has been strenuously argued that this Court may go into the facts of the case itself to sustain the order of injunction as observed in NEPC Micon Ltd. vs. Magma Leasing Ltd. & Anr. [1999 SCC OnLine Cal 133] and (GPT Health Care Pvt. Ltd. vs. Soorajmull Nagarmull and Ors. [MANU/WB/0859/2017]. 4. Although it has been strenuously argued that this Court may go into the facts of the case itself to sustain the order of injunction as observed in NEPC Micon Ltd. vs. Magma Leasing Ltd. & Anr. [1999 SCC OnLine Cal 133] and (GPT Health Care Pvt. Ltd. vs. Soorajmull Nagarmull and Ors. [MANU/WB/0859/2017]. Hence we have taken the effort to wade through the facts of the case so as to examine whether a prima facie case for judicial intervention has been made out or not. 5. Mr. Abhrajit Mitra, learned senior counsel appearing for the respondent/plaintiff has taken us through the electronic mails exchanged by and between the parties after 26th February, 2020, that is, the date of execution of the matrix contract which includes the arbitration clause. Relying on the aforesaid communications, it was vehemently argued there was no concluded contract by and between the parties. In the absence of such contract reference to arbitration was wholly impermissible in law. 6. In reply, Mr. S.N. Mookherjee, learned senior counsel for the appellant argued that negotiations referred to in the electronic mails do not impact the arbitration agreement at all. Arbitration agreement incorporated in the matrix contract is a separate and severable contract in itself. Mere negotiations of incidental terms of the matrix contract would not affect the arbitrability of the dispute including the validity of the principal agreement before the arbitral tribunal. 7. To examine the rival submissions it may be apposite to set out the arbitration clause engrafted in the agreement dated 26th February, 2020:- “Any dispute arising between the parties in connection with this Contract including any question regarding its existence, validity or termination, shall be referred to and finally resolved by Arbitration in Singapore in accordance with the arbitration rules of the Singapore International Arbitration Centre (“SIAC Rules”), for the time being in force, which rules are deemed to be incorporated by reference in this Clause. The tribunal shall consist of one (sole) arbitrator to be appointed by the chairman of the SIAC. The place of arbitration shall be Singapore.” 8. Hence, question relating to existence or validity of the matrix contract is arbitrable before the tribunal in terms of the arbitration clause, as aforesaid. 9. The tribunal shall consist of one (sole) arbitrator to be appointed by the chairman of the SIAC. The place of arbitration shall be Singapore.” 8. Hence, question relating to existence or validity of the matrix contract is arbitrable before the tribunal in terms of the arbitration clause, as aforesaid. 9. Electronic mails exchanged between the parties particularly the electronic mails dated 6th March, 2020 and one dated 18th March, 2020 deal with other terms of the matrix contract which do not affect the arbitration clause. In fact, in the electronic mail dated 18th March, 2020 the appellant recorded that a concluded contract with logical changes had already come into being between the parties. Whether such contention of the appellant is valid or not squarely falls within the expression “existence or validity of the contract” which is an arbitrable dispute in terms of the arbitration clause engrafted therein. 10. In view of the aforesaid facts, we are not persuaded by the submission of Mr. Mitra, learned senior counsel that subsequent negotiations between the parties affected the existence of the arbitration agreement. Reference in this regard may be made to (2014) 11 SCC 639 [World Sports Group (Mauritius) Ltd. vs. MSM Satellite (Singapore) Pte. Ltd.] and (2014) 5 SCC 1 (Enercon (India) Ltd. & Ors. vs. Enercon GMBH & Anr.). In World Sports Group (supra), the Apex Court, while dealing with an anti arbitration suit, emphasized the severability of the arbitration agreement from the matrix contract. Similar view was also taken in Enercon (India) Limited (Supra) where the Court unequivocally held that dispute relating to the existence/validity of the underlying contract shall not affect the arbitration clause which constitutes a separate and severable contract in itself. In Uttarakhand Purv Sainik Kalyan Nigam Limited vs. Northern Coal Field Limited [ (2020) 2 SCC 455 ], the Apex Court was dealing with a case relating to domestic arbitration where reference had been made under Section 11 of the Arbitration and Conciliation Act, 1996. Even under such circumstances, the Apex Court emphasized the doctrine of “kompetenz-kompetenz” of the arbitral tribunal. Such doctrine was subject to the limited exception of the arbitration agreement itself being procured by fraud or deception. The ratio in Uttarakhand Purv Sainik (supra) cannot be dilated to include a dispute relating to existence/validity of the matrix contract. Even under such circumstances, the Apex Court emphasized the doctrine of “kompetenz-kompetenz” of the arbitral tribunal. Such doctrine was subject to the limited exception of the arbitration agreement itself being procured by fraud or deception. The ratio in Uttarakhand Purv Sainik (supra) cannot be dilated to include a dispute relating to existence/validity of the matrix contract. The Court in the said report was concerned with the existence or validity of the arbitration agreement and not the underlying contract whose existence falls squarely within the “kompetenz-kompetenz” of the arbitral tribunal. Other authorities are also distinguishable. 11. Nicco Corporation Limited vs. Prysmian Cavie Sistemi Energia S.R.L & Ors. [MANU/SC/1781/2009] was decided in the facts of the said case and that too, prior to the amendment of Section 45 of the Act of 1996, which unequivocally holds that judicial intervention can be permitted only and only if the Court prima facie finds that the arbitration agreement is either null or void, inoperable or incapable of being performed. It is pertinent to note subsequent to the execution of the arbitration agreement on 26th February, 2020, no dispute with regard to its existence or validity was raised by either of the parties at any point of time. Similarly, in Orissa Stevedores Ltd. vs. The Orissa Minerals Development Co. Ltd. & Ors. [(2010) 2 Calcutta Law Times 293], the Court was dealing with an application for reference to arbitration under Section 11 of the Act of 1996. The issue of severability of the arbitration clause from the matrix contract as enunciated by the Apex Court in World Sports Group (supra) and Enercon (India) Ltd. (supra) did not fall for consideration in the said report. Vedanta Ltd. vs. Emirates Trading Agency LLC [ AIR 2017 SC 2035 ] and U.P. Rajkiya Nirman Nigam Ltd. vs. Indure Pvt. Ltd. & Ors. [ (1996) 2 SCC 667 ] also do not deal with the severability and binding nature of the arbitration agreement in the backdrop of challenge to the existence of the underlying contract. 12. For the aforesaid reasons, we are inclined to set aside the impugned order passed by the Learned Trial Court. The appeal is accordingly allowed. APO 70 of 2020, GA No.882 of 2020 and GA No.883 of 2020 are disposed of. There shall be no order as to costs. 13. Prayer for stay is considered and refused.