FAO (OS) No. 193/2009. Case: Max India Limited Vs General Binding Corporation. High Court of Delhi (India)
| Case Number | FAO (OS) No. 193/2009 |
| Counsel | For the Appellant: A.M. Singhvi, Sr. Adv., Ruchin Midha, Amit Bhandari and Jaiveer Shergil, Advs. and For the Respondents: A.S. Chandhiok, Sr. Adv., Tejas Karia, Neha Bhasin, Nitesh Kumar and Sandeep Bajaj, Advs. |
| Judges | A.K. Sikri and V.K. Jain, JJ. |
| Issue | Arbitration and Conciliation Act, 1996 - Sections 1, 2, 2(1), 2(2), 2(4), 2(5), 9, 20 and 34; Foreign Awards Act, 1961; Civil Procedure Code (CPC) - Sections 16 to 24 - Order 7, Rule 11; Constitution of India - Schedule - Section 141; International Cricket Counsel Rules - Schdule - Article 23; UNCITRAL Arbitration Rules, 1976; UNCITRAL Model ... |
| Judgement Date | July 16, 2009 |
| Court | High Court of Delhi (India) |
Judgment:
A.K. Sikri, J.
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Certain disputes have emerged between the appellant and the respondent herein, which arise from the Agreement dated 25.8.2008 entered between the parties, known as "Manufacture and Sale Agreement.. As this covenant contains an arbitration clause, the appellant herein proposes to invoke the arbitration in accordance with the said Agreement. Pending this action the appellant moved an application under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act.) for interim measures, inter alia, praying that the respondent be restrained from implementing the terms of Agreement entered into by it directly or through its holding company, viz., Cosmo Films regarding sale of its commercial print finishing business. Learned Single Judge has dismissed this application vide impugned orders dated 14.5.2009. Reason given is that as per the Agreement, the disputes are to be resolved though arbitration under Singapore International Arbitration Rules (SIAC Rules) and it is the courts in Singapore which have jurisdiction to settle any disputes that may arise out of or in connection with the said Agreement. Therefore, this Court lacks jurisdiction to entertain the application under Section 9 of the Act. Validity of this order is challenged in this appeal. Therefore, the only question which needs to be determined is as to whether application under Section 9 of the Act was maintainable in this Court or not.
The Facts
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Having regard to the aforesaid scope of the present appeal though it is not necessary to spell out the details of the nature of disputes, a brief resume thereof would serve the purpose. The appellant, which is engaged in the business of manufacture, sale and marketing of variety of thermal lamination films, polypropylene films including bi-axially oriented polypropylene (BOPP) films, had entered into two agreements both dated 25.8.2008 with the respondent. The respondent is a company registered under the laws of Delaware, USA. It is the subsidiary of Acco Brands Corporation and is engaged in the business of production, distribution of lamination, binding and office stationery and is a part of Acco Brands Group which deals in the manufacture of various office products, including films and lamination. On 25.8.2008 two agreements, namely, Coating Lines Sale Agreement between the appellant, GBC and two of its subsidiaries namely, Acco Brands Benelux B.V. and Hwa Seung GBC Co. Ltd., and another agreement, namely, Manufacture and Sale Agreement between the appellant and GBC were executed. Under the agreement, Max India agreed, inter alia, to manufacture products from Max India in quantities agreed therein, for a period of 10 years from the date of execution of the aforesaid agreement.
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According to the appellant, the Agreement was executed between the appellant and the respondent on "principal to principal basis.. This is evident from Clause 12 of the Agreement whereby the parties have agreed that during the non-complete period, neither party nor any of its affiliates shall market, sell or distribute the products in each other's territories marked as A and B in the Agreement. Thus, under Clause 12.2 of the Agreement, GBC categorically agreed that during the non-compete period, neither GBC nor its affiliates shall market, sell or distribute the products, whether directly or indirectly, either by itself or for or through a third party, in the Class B Territories listed in Schedule 6 of the Agreement. Such "Class B Territories" includes India. It is also stated under Clause 21.11 of the Agreement that the Agreement is personal to the parties and shall not be capable of assignment without prior approval of the other party. It is stated that under the said clause, the respondent is not permitted to assign the rights and obligations under the Agreement without providing a reasonable notice to the appellant and to an entity which is situated in India and competes with the appellant in the business of manufacture and/or sale of the products being manufactured and sold by the appellant, breach of which would lead to material breach under the agreement. It is further stated that, however, the appellant in February 2009 came to know from a press release dated 30.1.2009 available at the website of Cosmo Films, that the respondent through its holding company, i.e., Acco USA, has entered into an agreement with Cosmo Films under which the holding company of the respondent, namely, Acco USA has agreed to sell its GBC Commercial Print Finishing business.
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According to the appellant, entry into such an agreement by the respondent through its holding company with Cosmo Films violated the terms of Article 21.11 of the Agreement by agreeing to transfer its entire business to Cosmo Films, an entity which is situated in India and competes with the appellant in the business of manufacture and/or sale of products such as bi-axially oriented polypropylene films and thermal lamination films being manufactured and sold by the appellant. This is what has given rise to disputes between the parties and for seeking an interim protection to restrain the respondent from implementing the agreement entered into with Cosmo Films, the appellant filed application under Section 9 of the Act. In this application, ex parte ad interim injunction was granted on 20.3.2009 against the respondent restraining it from entering into any agreement either directly or indirectly with Cosmo Films till further orders. The appellant has invoked the arbitration at Singapore as well as per Article 19.2 of the Agreement.
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The respondent when issued notice of the aforesaid application and injunction order chose to challenge the maintainability of the said application contending lack of jurisdiction in this Court. As mentioned above, this contention is accepted by the learned Single Judge which has led to dismissal of the appellant's application.
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Since the question involved is a pure question of law decision whereof depends on the interpretation of Article 19 of the Agreement in the light of the provisions of the Act, as interpreted by the judgments of the Supreme Court which are taken note of by the learned Single judge in the impugned order, we may straightaway proceed to take note of the contention of the parties inasmuch as those very contentions which were advanced before the learned Single Judge were pressed into service by the counsel on either side before us as well. However, these contentions would be appreciated more appropriately by first taking note of Article 19, interpretation whereof is the centre of controversy. This Article reads as under:
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GOVERNING LAW AND DISPUTE RESOLUTION
19.1 This agreement shall be governed and construed in accordance with the laws of Singapore and, subject to Article 19.2, the court of Singapore shall have jurisdiction to settle any disputes that may arise out of or in connection with this Agreement.
19.2 Any dispute between the Parties arising out of or in connection with this Agreement shall be referred to and finally resolved by arbitration under the Singapore International Arbitration Centre rules ("SIAC Rules") as in force at the time of the dispute, which SIAC Rules shall be deemed to be a part of this Agreement by reference. The arbitration shall be conducted before one (1) arbitrator mutually appointed by the Parties, failing which Max India shall be entitled to appoint one (1) arbitrator and GBC shall be entitled to appoint one (1) arbitrator and the two (2) arbitrators so appointed shall jointly appoint a third arbitrator who shall preside as the chairman. Such arbitration shall be conducted in the English language. The venue of arbitration shall be at Singapore.
Summary of undisputed position
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What follows from the facts taken note of above and the reading of Article 19, can be summarized as under:
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appellant is an Indian party whereas the respondent is a foreign company incorporated as per the laws of Delaware, USA.
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though place of signing of the agreement is not specifically stipulated in the said Instrument, according to the appellant this agreement was signed in Delhi.
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the agreement is to be governed and construed in accordance with the laws of Singapore.
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disputes between the parties arising out of or in connection with this agreement are supposed to be resolved by arbitration under the SIAC Rules and the venue of arbitration is fixed at Singapore, as per Article 19.2.
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subject to Article 19.2, the courts of Singapore "shall have the jurisdiction to settle any disputes that may arise out of or in connection with this agreement".
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It, thus, follows that it is not a domestic arbitration between the two Indian companies, parties to the agreement belong to two different countries and they have chosen a neutral venue, viz., Singapore for settlement of their disputes. For this purpose not only the dispute is to be resolved by SIAC as per SIAC Rules, the arbitration hearings are also to take place in Singapore and further, even the arbitral tribunal while resolving the disputes is supposed to apply laws of Singapore while construing the agreement. In case any matter is to be taken to courts, even that is to be settled by courts of Singapore which is vested with the necessary jurisdiction by the consent of the parties.
Submissions: The Appellant
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Notwithstanding the aforesaid position emerging from the reading of the Agreement, endeavour of the appellant is to establish that for the purpose of seeking an order of interim measure pending arbitration proceedings, application under Section 9 of the Act would be competent in this Court, i.e., courts in India. For making this proposition good, Dr. A.M. Singhvi, learned senior counsel for the appellant, paraphrased his submissions in the following manner:
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Even when arbitral proceedings were to be conducted by SIAC at Singapore applying laws of Singapore, jurisdiction of Indian courts was...
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