Honasa Consumer Limited vs. Rsm General Trading Llc

$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 5 August 2024
Pronounced on: 20 August 2024
+ O.M.P.(I) (COMM.) 214/2024 & I.A. 32362/2024, I.A.
32363/2024, I.A. 35026/2024
HONASA CONSUMER LIMITED .....Petitioner
Through: Mr. Rajiv Nayar, Sr. Advocate
with Ms. Amita Gupta Katragadda, Mr.
Omar Ahmad, Mr. Vikram Shah, Mr.
Nayani Aggarwal, Mr. Karan Motiani, Ms.
Isha Choudhary, Ms. Aashna Gupta, Mr.
Manthan Nagpal and Ms. Kamakshi Puri,
Advs.
versus
RSM GENERAL TRADING LLC .....Respondent
Through: Mr. Mudit Sharma, Ms.
Nandini Sharma, Mr. Parvez A. Khan and
Mr. Abhishek Rathi, Advs.
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
J U D G M E N T
% 20.08.2024
A Prefatory Note
1. This is one of the worst instances of abuse of the legal process,
in commercial litigation, that this Court has had the misfortune of
encountering.
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AN HARI SHANKAR
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2. The petitioner and respondent entered into an Authorized
1
Distributorship Agreement , whereunder the respondent was to
distribute the petitioner’s products in the Middle East and Africa. The
contract specifically envisaged resolution of disputes by arbitration, to
2
be governed by the Arbitration and Conciliation Act, 1996 , with New
Delhi as the arbitral venue. The contract separately contained a clause
conferring exclusive jurisdiction, in respect of all matters relating to
the contract, on courts in New Delhi. The contract also specified that
it was to be interpreted in accordance with Indian law which was,
therefore, both the governing and the curial law.
3. The respondent, in clear and mala fide breach of all these
3
covenants, filed a suit in the Court of First Instance, Dubai , alleging
breach of the ADA by the petitioner, and is now the holder of a decree
by the Dubai Court which, applying Dubai law to the dispute, has
found the petitioner guilty of breach of the ADA and mulcted the
petitioner with damages of AED 25,071,991, equivalent to ₹
57,17,65,947 (at the conversion rate of ₹ 22.80 to 1 AED as applicable
today).
4. The respondent acknowledges, in its written submissions,
without as much as blinking an eyelid, that, by this stratagem, it has
rendered the arbitration agreement, as well as all other contractual
covenants between the parties, unworkable. To quote the exact
submission of the respondent:
1
“ADA” hereinafter
2
“the 1996 Act” hereinafter
3
“the Dubai Court” hereinafter
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“In the present case, there cannot be any arbitration as there has
been a determination by a Court of Law and an arbitrator cannot be
Court of Appeal.”
(Emphasis supplied)
Thus, there is a candid acknowledgement, by the respondent, that, by
approaching the Dubai Court in stark violation both of the arbitration
as well as the exclusive jurisdiction clauses in the ADA, the
respondent has rendered the arbitration agreement unworkable.
4
5. The petitioner has moved this Court under Section 9 of the
1996 Act, seeking an injunction against the respondent from enforcing
the decree of the Dubai Court, so that it can proceed to invoke the
contractually envisaged remedy of arbitration to resolve its disputes
with the respondent. The respondent contends, however, that no such
order can be passed under Section 9 of the 1996 Act, and that the
4
9. Interim measures, etc. by Court . –
(1) A party may, before or during arbitral proceedings or at any time after the making of the
arbitral award but before it is enforced in accordance with Section 36, apply to a Court:—
(i) for the appointment of a guardian for a minor or a person of unsound mind for
the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters,
namely:—
(a) the preservation, interim custody or sale of any goods which are the
subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing
which is the subject-matter of the dispute in arbitration, or as to which any
question may arise therein and authorising for any of the aforesaid purposes any
person to enter upon any land or building in the possession of any party, or
authorising any samples to be taken or any observation to be made, or
experiment to be tried, which may be necessary or expedient for the purpose of
obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court
to be just and convenient,
and the Court shall have the same power for making orders as it has for the purpose of,
and in relation to, any proceedings before it.
(2) Where, before the commencement of the arbitral proceedings, a court passes an order for
any interim measure of protection under sub-section (1), the arbitral proceedings shall be
commenced within a period of ninety days from the date of such order or within such further time
as the court may determine.
(3) Once the arbitral tribunal has been constituted, the court shall not entertain an application
under sub-section (1), unless the court finds that circumstances exist which may not render the
remedy provided under Section 17 efficacious.
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Court can only sit back and watch, helplessly, the brutal guillotine, by
the respondent, of the right of the petitioner to invoke the
contractually envisaged arbitral mechanism, to which the petitioner
and respondent had, ad idem , appended their signatures.
6. A pointer to the mala fides with which the respondent acted is
to be found in the wholly unnecessary impleadment, by the
respondent, of certain entities situated in the UAE, and including
allegations of collusion between the petitioner and the said entities, so
as to justify approaching the Dubai Court. This attempt has, however,
backfired, as the Dubai Court has specifically found the allegation of
collusion to be unfounded, and that none of the defendants in the suit,
except the petitioner, is liable towards the respondent, and has,
therefore, confirmed damages only against the petitioner. This further
underscores the legally abusive nature of the respondent’s acts.
7. The manner in which the respondent acted, in manifest breach
of the covenants of the ADA, and with the transparent intention of
frustrating a possible arbitration, is shocking, to say the least.
Facts
8. The contract between the parties
8.1 On 30 July 2020, the petitioner and the respondent entered into
an ADA. Clauses 2, 2.1, 2.2, 4.5, 15, 15.1, 15.2, 16, 16.3, 22, 22.1
(iii), 24.5(ii) and (iii) and 24.7 of the ADA read thus:
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“2. APPOINTMENT OF THE DISTRIBUTOR
2.1 The Company hereby grants to the Distributor the right to
market and distribute the Products in the Territory in compliance
with the brand guidelines of the Company and all Applicable Laws
including those relating to the procurement, storage, sale and
advertising of the Products. The specific commercial terms are
more fully set out in the Schedule 1 hereto.
2.2 The Distributor agrees to act in such capacity and exercise
its rights and perform its obligations in accordance with the terms
and conditions of this Agreement. The Distributor undertakes to
comply with certain conditions prescribed by the Company in
relation to the distribution of the Products, which may be
supplemented by the Company from time to time and shall sell and
market the Products only within the Territory. Any additional/
future conditions will be implemented through mutual discussion
and agreement.
*
4.5 The description, quantity and price of the Products shall be
set forth in the Purchase Orders. Upon execution, each Purchase
Order shall be governed by the terms and conditions of this
Agreement, which shall be incorporated therein by reference and
the terms and conditions set out in the relevant Purchase Order. In
the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions set out in the relevant
Purchase Order, the terms and conditions of this Agreement shall
take precedence to the extent of such inconsistency. Where a term
in a Purchase Order which is explicitly agreed by the Company and
expressly states to take precedence over a clause in the Agreement,
such a term of the Purchase Order will take precedence.
*
15. LEGAL RELATIONSHIP
15.1 During the continuance of this Agreement, the Distributor
shall be entitled to use the title “MAMAEARTH AUTHORISED
DISTRIBUTOR” but such use shall be in accordance with the
Company's policies in effect from time to time. Before using such
title (whether on Distributor's business stationery, advertising
material or elsewhere), the Distributor shall submit to the Company
proof prints and such other details as the company may require.
The Company may in its own discretion grant or withhold the
permission for such proposed use.
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15.2 This Agreement defines the legal relationship between the
Company and the Distributor and their respective responsibilities
in the purchase and sale of Products and nothing in this Agreement
shall render the Distributor a partner or agent of the Company. The
Distributor is an independent contractor buying and selling the
Products in its own name and at its own risk. The Distributor shall
not bind or purport to bind the Company to any obligation nor
expose the Company to any liability nor pledge or purport to
pledge the Company's credit. Further no Party shall have any right,
power or authority to act for or to bind or commit to assume any
obligation or responsibility on behalf of any other Party.
16. TERMINATION
16.3 Notwithstanding anything else contained herein, this
Agreement may be terminated by either Party at any time without
any cause, by the giving of notice in writing to the other at least 90
(ninety) days prior to the effective date of such termination.
*
22. REPRESENTATIONS AND WARRANTIES
22.1 Each Party represents and warrants to the other Party that:
(i) It has all legal right, power and authority to execute
this Agreement and carry out the terms, conditions and
provisions hereof;
(ii) The execution, delivery and performance of this
Agreement has been duly authorized by all requisite
corporate and other actions and will not violate or
contravene its charter documents, any material provisions
or requirements of any government instrumentality or any
Applicable Law or Approvals, or violate or contravene any
provisions of any agreement, arrangement, document or
instrument to which it is a party or by which it or its
property may be bound or affected.
(iii) this Agreement constitutes the valid and binding
obligation of such Party, enforceable in accordance with the
terms hereof, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ rights
generally;
(iv) no representation or warranty by such Party
contained herein or in any other agreement, document or
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instrument furnished by or on behalf of such Party to the
other Party contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact
necessary to make such representation or warranty not
misleading in light of the circumstances in which it was
made;
(v) there is no litigation pending or threatened to which
it is a party that, if adversely determined, would have a
material adverse effect on its financial condition or
prospects or business or its ability to perform its obligations
under this Agreement;
(vi) The representations and warranties contained in
Clause 22.1 hereof are given and made on and as of the date
hereof and shall survive the execution and delivery of this
Agreement and no Party shall take any action or permit
action to be taken which would cause any of such
representations or warranties to be no longer true or correct
in any respect during the subsistence of this Agreement.
*
24.5(ii) Dispute Resolution
(ii) In the event of any question, dispute or difference
arising under this Agreement or in connection therewith,
the same shall be referred to the sole Arbitrator, to be
appointed by the managing director of the Company . There
will be no objection to any such appointment on the ground
that the arbitrator has been appointed by the managing
director of the Company to this Agreement. The award of
the arbitrator shall be final and binding on both the Parties
of the Agreement. In the event of such an arbitrator to
whom the matter is originally referred, being transferred or
vacating his office or being unable to act for any reason
whatsoever, the managing director of the Company shall
appoint another person to act as an arbitrator in accordance
with terms of the Agreement and the person so appointed
shall be entitled to proceed from the stage at which it was
left out by his predecessors.
(iii) The arbitration shall be subject to Indian
Arbitration and Conciliation Act, 1996 or amendments
thereof. The arbitration proceedings shall be conducted in
English. The venue of Arbitration shall be New Delhi,
India.
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*
24.7 Law and Jurisdiction
This Agreement shall be governed by and construed in
accordance with the laws of India and shall be subject to
the exclusive jurisdiction of the New Delhi courts. ”
(Emphasis supplied)
8.2 The ADA was amended by addendum dated 27 May 2021.
Clauses 3.5 and 3.6 of the Addendum read thus:
“3.5. The provisions of Clauses 12 and 24 of the Agreement shall
apply mutatis mutandis to this Amendment,
3.6. The Patties agree that this Amendment shall modify the
Agreement only to the limited extent as specifically set out herein.
Except as specifically and expressly amended by this Amendment
all other provisions of the Agreement shall remain unchanged and
in full force and effect and shall continue to remain applicable and
binding on the Parties.”
8.3 Thus, under the ADA, the respondent undertook to market and
distribute the petitioner’s product in Middle East and Africa. The
ADA was executed in New Delhi on a stamp paper purchased at New
Delhi. Clause 24.5 envisages the resolution of dispute arising under
the ADA by arbitration, to be conducted as per the 1996 Act and fixes
the venue of arbitration at New Delhi. Clause 24.7 specifies that the
ADA would be governed by and would be construed in accordance
with the laws of India and also confers exclusive jurisdiction in
matters relating to the ADA, on Courts in New Delhi. Clause 3.5 of
the addendum made these covenants applicable, mutatis mutandis , to
the addendum as well.
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9. By letter dated 17 October 2022, addressed to the respondent,
5
the petitioner, invoking Clause 16.3, terminated the ADA w.e.f. 17
January 2023. Following this, the petitioner addressed e-mails to the
respondent on 18 October, 2022, 9 November 2022, 14 November
2022 and 24 November 2022, seeking full and final reconciliation of
the dispute between them. These e-mails did not elicit any response
form the respondent.
10. The Dubai suit
10.1 On 25 November 2022, the respondent filed Case 446/2022
before the Dubai Court, in which the order forming subject matter of
dispute in the present petition has come to be passed on 16 May 2024.
10.2 The respondent included, as the second defendant in the Dubai
6
Suit, Honasa Consumer General Trading LLC , a subsidiary company
of the petitioner based in Dubai.
10.3 The following paragraphs, from the Dubai Suit, merit
reproduction in extenso :
“ Subject Matter and Merits of the Subject Case:
First: Under an Exclusive Authorized Distributor Agreement dated
30/07/2020, entered into between the Plaintiff and the First
Defendant, registered with the government competent departments
in India. Under this agreement, Plaintiff was entrusted with
marketing, distributing, and selling cosmetics and children's
products and many goods and services belonging to the First
Defendant Company as its sole and exclusive distributor in the
5
with effect from
6
“Honasa Trading” hereinafter
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United Arab Emirates, the Middle East and Africa. This is done
through the private distribution and …
Second: It was agreed between the two parties that the contract
term is (36) months -three years - starting from 30/07/2020, it may
be terminated by both parties when the reasons stipulated in Article
(16) thereof are available, provided that this termination is
preceded by a notification to the party whosoever desires to do so,
a term of (60) days is given to eliminate this reason and settle it, so
that if that period expires and this reason remains, the termination
should be made.
Third: On 27/05/2021, the previously executed approved
Distribution Agreement was amended by increasing the
preliminary Agreement period from three years to five years,
commencing from 01/05/2021. Subsequently, in Clause (2/4) was
added to it the commitment of the First…
Fourth: In the middle of 2022, the First Defendant company
breached the concluded contract with unreasonable grounds . This
is also contrary to the contract clauses and amendments thereto
with non-competition, and making the matter exclusive to the
Plaintiff, when it has established a company that operates under the
same name and trademark as the First Defendant, which is the
Second Defendant Company.
Fifth: On 17/10/2022, the Second Defendant sent a letter of
termination to the Plaintiff without reasonable justification,
pretending and relying on the third paragraph of Article No. (16) of
the agreement
Sixth: Whereas the act of the First Defendant involved breach of
the duration of the contract and breaching as well all the
obligations assigned to it, such as respecting the commercial
nature of the contracts, and as its execution requires incurring the
Plaintiff high costs . Where the Defendant's contractual breaches
came as follows:
Seventh: As a result of the breach of the First and Second
Defendant, and after the Plaintiff submitted a huge investment
amount, as well as, prepared and installed all the supplies of
operation, marketing, selling, advertising, and concluding contracts
with third parties in considering that it is an authorized distributor
of the first defendant, the Plaintiff suffered huge damages. It is
impossible to address such damages due to the Defendants' breach
of the contract period and breaching of the contractual obligations
as a result of their complicity to cause damages to the Plaintiff
Company as indicated above.”
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10.4 The respondent raised only one final claim in the suit, which
was described thus:
Final Claims
Claim
No .
Claim Description
1 In view of the above:
We kindly request the honorable court as follows:
To admit the registration of the subject case, pay
its prescribed fee, and setting the nearest hearing
for its examination, and notify the two Defendants
to appear to hear the following judgment:
First : Before adjudication of the case: To assign
an expert specialized in the field of commercial
agencies and distribution contracts to discuss the
elements of the case, the breaches and deficiencies
of the Defendants to implement the contract
examine the serious damages incurred against the
Plaintiff.
Second : Regarding the subject matter of the case:
To bind the two Defendants to pay the Plaintiff an
amount of AED 45,000,000 (Forty Five Million
Dirhams ) in compensation for the financial and
moral damages incurred as a result of the breach
of the contract by the two Defendants , in addition
to the legal interest at the rate of 5% from the date
of the final judgment until the full payment.
Third: To bind the Defendants to pay fees,
expenses, attorney's fees
(Emphasis supplied).
11. Mr. Rajiv Nayar, learned Senior Counsel for the petitioner,
points out that the Dubai Suit was entirely predicated on the allegation
that the petitioner had breached the ADA, resulting in the respondent
being entitled to damages. This position was, in fact, conceded by Mr.
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Sameer Jain, who had appeared on behalf of the respondent before this
Court on 5 July 2024. Thereafter, however, the respondent has been
represented by Mr. Mudit Sharma, learned Counsel, who seeks to
distance himself from the concession made by Mr. Sameer Jain.
According to Mr. Sharma, Mr. Jain is not correct, and there are
allegations, in the Dubai suit, other than the allegation of breach of the
ADA by the petitioner. This submission would be addressed
presently.
12. Reply filed by the petitioner in the Dubai suit
12.1 The petitioner, on receiving notice from the Dubai Court, filed
its reply to the Dubai Suit on 8 February 2023. Specific objections to
the maintainability of the Dubai Suit were raised by the petitioner,
inter alia on the ground that the ADA contained clauses envisaging
resolution of disputes thereunder by arbitration, to be conducted as per
the 1996 Act with the venue of arbitration fixed at New Delhi;
requiring the agreement to be governed by and construed in
accordance with Indian law; and conferring, on Courts in New Delhi,
exclusive jurisdiction to deal with all disputes arising under the ADA.
It was further contended that the inclusion of Honasa Trading as the
second defendant in the Dubai Suit was a mischievous attempt at
invoking, perforce, the jurisdiction of the Dubai Court, whereas, in
actual fact, Honasa Trading had nothing to do with the dispute.
12.2 The petitioner, therefore, prayed before the Dubai Court, that
the Dubai Suit be dismissed with costs.
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13. Subsequently, on 16 March 2023, the respondent impleaded, in
the Dubai Suit, two additional defendants; Mr. Tarun Aggarwal,
Manager of Honasa Trading, stating that he was the person
responsible for sending the termination notice dated 17 October 2022
and; M H Projects LLC, with whom the petitioner had contracted
consequent on termination of the ADA with the respondent.
14. The judgment of the Dubai Court
14.1 By judgment dated 16 May 2024, the Dubai Court decreed the
Dubai Suit in favour of the respondent and against the petitioner. It is
unnecessary to reproduce the entire judgment. Suffice it to state that it
is not disputed, even by learned Counsel for respondent, that the
Dubai Court applied Dubai law to the dispute and held that, as per
Dubai law, the petitioner was guilty of breach of the ADA, entitling
the respondent to damages.
14.2 At the very outset of the judgment, the Dubai Court has noted
the request of the respondent “to appoint an expert specialized in the
field of commercial agencies and distribution contracts to investigate
the elements of the case, to ascertain the Defendants’ breach of
contract and to examine the severe damages incurred by the Plaintiff”.
On merits, the Dubai Court has ruled as under:
“On 17/10/2022, the Second Defendant issued a termination notice
to the Plaintiff without justification, citing Clause three of article
(16) of the agreement, despite the illegality of this action, which
explicitly states: "Notwithstanding anything else contained herein,
either party may terminate this agreement at any time without
cause by providing written notice to the other party at least 10 days
prior to such termination." The true understanding of this Clause
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relates to the parties' right to terminate the agreement upon the
specific conditions listed in article (16). Furthermore, this notice
conflicts with the agreement's amendment, which requires a pre-
termination notice and a 12-month remediation period for any
breaches or violations, making the termination notice invalid and
non-compliant with the agreed timelines.
Additionally, none of the conditions justifying termination were
met . The First Defendant's actions constituted a breach of the
contract's duration , violating all contractual obligations, which
involved incurring substantial financial costs by the Plaintiff to
honor the agreement. The contractual breaches by the First
Defendant include: (1) colluding with the Second Defendant to
undertake the same tasks and activities as the Plaintiff, violating
the exclusivity Clause in Clause (4/2) of the agreement's
addendum, which entails the First Defendant's commitment not to
engage commercially or communicate with any person involved in
similar activities as the Plaintiff; (2) appointing other distributors
in various Gulf countries during the contract period, contrary to
Clause 1/2 of the agreement and 3/4 of its addendum, as evidenced
by the attached correspondences, and appointing another
distributor in Qatar ; (3) violating the contract duration as specified
in the addendum, where the initial term is five years starting from
1/5/2021, without justification or grounds for termination, contrary
to the agreed termination mechanism and the 12-month
remediation period for any errors; (4) the First Defendant
personally relocating stock from the Plaintiff’s warehouses to a
new partner and distributor, despite the purchase and full payment
of those goods; (5) supplying products that did not meet the
required quality standards and were expired, based on consumption
standards recognized by relevant authorities.”
(Emphasis supplied)
14.3 In holding that the petitioner was guilty of breach of contract
entitling the respondent to damages, the Dubai Court relied on the
opinion of the experts appointed by it. This reliance is reflected in the
following passages from the judgment of the Dubai Court:
“In execution of the previous preliminary judgment, the appointed
expert carried out their assigned task and submitted a report
concluding that it was evident the First Defendant appointed the
Plaintiff (the distributor) to market, distribute, and sell products
using the First Defendant's trademarks according to the distribution
agreement dated 20/07/2020. Subsequently, both parties agreed to
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amend some commercial terms of the agreement, leading to the
execution of an amendment to the authorized distributor agreement
on 27/5/2021. The expert could not clearly and accurately
determine whether the Plaintiff breached their obligations under
the exclusive distribution agreement and its amendment mentioned
above. The expert clarified that the First Defendant property
terminated the agreement based on a termination notice dated
17/10/2022, in accordance with the Clause allowing for termination
(16.3), confirming the validity and enforcement of the termination
by the First Defendant. After reviewing the submitted documents,
the expert found them unclear, making it difficult to provide a
precise and clear technical opinion on the extent of the damage
suffered by the Plaintiff. Based on the available documents and
evidence, the expert could not provide a definitive and accurate
opinion on the breaches by either party. It was not clear to the
expert if either party had breached their obligations under the
exclusive distribution agreement dated 20/07/2020, as amended on
27/05/2021.
On 16/10/2023, the Plaintiff's representative submitted a
defense memorandum requesting the court to: first, disregard the
expert's conclusions, treating them as null and void, particularly as
the assigned tasks did not provide any clear information for the
court to rely on the report as evidence in the case. Second, to
appoint a different expert specialized in the field of commercial
agencies and trademarks or appoint a specialized dual committee
from the relevant authorities in the commercial agencies section of
the Ministry of Economy in Dubai, with a new retainer, to re-
examine the elements of the lawsuit in light of the submitted
objections and all the documents previously submitted by the
plaintiff in their explanatory and rebuttal memoranda. The aims
were to establish: 1. The legality of terminating the distribution
contract with the Plaintiff by the Defendants. 2.Whether the First
Defendant adhered to the contract terms regarding termination and
notified the Plaintiff of any breach and allowed a remediation
period of twelve months without rectifying this breach. 3. Whether
the First Defendant appointed a new distributor without adhering to
the contract terms and the termination mechanism, and whether the
new distributor colluded in this knowing fully of the Plaintiff's role
as the distributor of those products, continuing to market,
distribute, and sell the First Defendant's products labeled with the
Plaintiff's name, which constitutes a blatant infringement. 4. The
Plaintiff’s entitlement to the claimed compensation amount for the
material and moral damages suffered due to the breach of contract
terms. Additionally, the Plaintiff requested, according to Article
1/121 of Law of Evidence No. 35 of 2022, to summon the expert to
discuss their report's conclusions, particularly regarding the
termination's validity, and to confront them with the contractual
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obligation in the contract amendment and the necessity of
notification by the First Defendant of the Plaintiff's breaches and
adherence to the remediation period. This was necessary since the
Defendants had not presented any document proving that the First
Defendant notified and adhered to the twelve-month remediation
period stipulated in the contract amendment, especially since the
expert explicitly stated in section 3/5 of their conclusions: "The
expert clarified that based on the submitted documents and
available evidence ... ". The expert cannot provide a final opinion
on whether any breaches occurred by either party in the lawsuit. It
was not clear to the expert if either party had breached their
obligations within the scope and boundaries of the exclusive
distribution agreement dated 20/07/2020 and amended on
27/05/2021. Thirdly, on the subject of the lawsuit: ruling in favor
of the Plaintiffs requests as stated in their original lawsuit and their
incidental requests, and ordering the Defendants to pay the fees,
expenses, and attorney's fees.
On 16/11/2023, the court ruled in a public hearing, before deciding
on the inclusion request, defenses, and the main issue, to reassign
the task to the previously appointed expert or another expert if
necessary. The expert was to examine the Plaintiffs objections
detailed in their rebuttal memorandum against the final expert
report, submitted to this court on 16110/2023. Accordingly, the
appointed expert carried out the assigned task and submitted a
report concluding that there were commercial transactions between
the First Defendant and “Abu Issa Holding" (before the termination
notice date), constituting a breach of the distribution agreement
dated 20/07/2020 and the amended authorized distributor
agreement dated 27/05/2021, which granted the Plaintiff the right
to distribute and market the First Defendant's products within the
agreed geographical area (Middle East and Africa). The expert
clarified that the First Defendant terminated the agreement
correctly and in accordance with the termination notice dated
17 I 10/2022, following the Clause allowing for termination (16.3),
confirming the validity and enforcement of the termination by the
First Defendant. The expert opined that the objections/violations
concerning the sale of the First Defendant's product (Mama Earth)
without removing the Plaintiff's label, which remains on the
products to date, fall outside the scope of the agreement between
the parties. The termination period expired under the notice dated
17/10/2022, making any post-termination violation an independent
act requiring separate investigation and handling outside the scope
of this lawsuit. Additionally, there were attached correspondences
from the Plaintiff regarding administrative and organizational
aspects of the relationship between the parties, which the expert did
not consider to be violations or breaches of the agreement. Upon
examining the documents, the expert found a letter of no objection
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dated 11/04/2022 from the First Defendant appointing M H
Projects LLC (the newly included party) as the authorized
distributor of the Mama Earth brand in the UAE, effective
19/01/2023, after the legal termination notice period ending on
17/01/2023. The expert left the matter of these facts for the Court’s
discretion. Additionally, the expert noted an email sent on
28/09/2022 by (Vijith – Plaintiff’s representative), showing the
email address (Plaintiff’s domain rsmtrades), indicating the
communication and offer originated from the Plaintiff, not the First
Defendant. The company name was not "Rabha"; rather, the
recipient was named "Rabha." Furthermore, there were
correspondences from the First Defendant to a company in Oman
(Enhance Group) and a company in Yemen (Al Jabal Group)
regarding offering the First Defendant's products, and
communications/understandings between the First Defendant and
"Saria" regarding distribution within Saudi Arabia. According to
Clause (2.4) of the amendment to the authorized distributor
agreement dated 27/05/2021, “provided that the distributor fulfills
its obligations under paragraph 4 of Schedule 1, the company
agrees that it will not commercially engage or negotiate with any
person engaging in similar activities to benefit from the services as
stipulated under this agreement, and the distributor must act as the
exclusive distributor of the products in the territory." The expert
left the determination of the breach to the court's discretion.”
Indian law, by which the ADA was contractually governed, needless
to say, can never leave the determination of the existence of breach to
any “expert”, and any such decision would invalidate the judgment in
its entirety, as suffering from serious abdication, by the Court, of its
judicial function.
14.4 Significantly, the Dubai Court, in the following passage from its
judgment, exonerated, completely, all defendants in the suit, except
the present petitioner:
“Similarly, there is no proof that the Plaintiffs replacement was a
result of collusion between the First Defendant (the principal) and
the new distribution agent/second joined party (MH Projects LLC),
pursuant to Article 10 of the Commercial Transactions Law.
Consequently, the effects of terminating and amending the
exclusive distribution agreement do not extend to the second and
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third Defendants and the joined parties, but only to the first
Defendant company , which is the other party to the contractual
relationship with the Plaintiff Therefore, the second and third
Defendants and the joined parties are not liable for the claimed
compensation, making the objection raised by them valid.
Consequently, the court rules the dismissal of the case against
them for lack of proper standing, without the need to explicitly
state this in the ruling .”
(Emphasis supplied)
14.5 The judgment concludes thus:
“The court ruled as follows:
1. Acceptance of the inclusion of both Tarun Agarwal Jaipur
Shankar Agarwal and M H Projects LLC as parties to the lawsuit,
procedurally.
2. Regarding the substance of the case and the ruling: The First
Defendant is hereby obligated to pay the Plaintiff an amount
totaling AED 25,071.991 as compensation for the damages
incurred, along with legal interest at a rate of 5%, starting from the
date of issuance of the final judgment until full payment. The First
Defendant is also ordered to cover the fees, expenses, and an
additional one thousand dirhams for attorney's fees, while rejecting
any other requests.”
14.6 Thus, even as per the Dubai Court, the inclusion of defendants
other than the present petitioner in the suit was unnecessary, and none
of the said defendants was liable in any manner towards the
respondent -plaintiff. The petitioner alone has been found complicit in
the alleged breach of the ADA, and it is the petitioner alone who has
been directed to pay damages.
15. The petitioner has filed statutory Appeal 984/2024, challenging
the judgment of the Dubai Court, before the Dubai Court of Appeal.
The appeal is presently pending.
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16. In the meanwhile, the respondent has moved the Dubai Court
for executing the judgment in the Dubai Suit.
17. It is in these circumstances that the petitioner has filed the
present petition before this Court under Section 9 of the 1996 Act,
seeking the following reliefs:
“It is, therefore, most respectfully prayed that, for the reasons
stated hereinabove and pending the arbitration proceedings
between the parties, this Hon'ble Court may be pleased to: -
(a) Pass an order of injunction prohibiting the
Respondent from initiating and/or continuing any and all
proceedings in relation to and arising out of the Authorized
Distributor Agreement before the Courts / other statutory
authorities of Dubai/ United Arab Emirates;
(b) Pass an order of injunction prohibiting the
Respondent from initiating and/or continuing any actions or
applications in connection with the enforcement or
interpretation of the judgement passed by the Courts of
First Instance, Dubai on May 16, 2024 (i.e., the Dubai
Judgment) in India and elsewhere;
(c) Pass an order of injunction prohibiting the
Respondent from initiating any actions or applications in
connection with the enforcement or interpretation or
performance of the terms of the Authorized Distributor
Agreement or any provision thereof including the
termination or invalidity of the same, in violation of the
Arbitration Agreement and/ or the exclusive jurisdiction
clause of the Authorized Distributor Agreement;
(d) Pass an order that in the event the Petitioner is
directed by the Dubai Court or any other Court to deposit
an amount or provide security pursuant to the Dubai
Judgment, the Respondent shall, within one week of
passing of the said order/ direction, secure such amount by
depositing an equivalent amount with the Registrar General
of this Hon'ble Court, and the Petitioner be allowed to
withdraw the said amount; and
(e) Pass such other order and/or direction as this
Hon'ble Court may deem fit and proper in the facts and
circumstances of the case and in the interest of justice.”
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18. Vide order dated 5 July 2024, this Court granted ad interim
protection to the petitioner, by restraining the respondent from
proceeding to execute the decree of the Dubai Court against the
petitioner, within the territorial jurisdiction of this Court or elsewhere.
That interim protection continues till date.
19. However, given the importance of the issue, the matter was
finally heard with the consent of the learned counsel for the parties,
after permitting the learned counsel to place on record written
submissions.
20. I have heard Mr. Rajiv Nayar, learned Senior Counsel for the
petitioner, and Mr. Mudit Sharma, learned counsel for the respondent,
at length. I have also perused the written submissions filed by learned
counsel.
Rival Contentions
21. Submissions of Mr. Rajiv Nayar for the petitioner
21.1 Mr. Nayar submits that the respondent’s act of instituting the
Dubai suit against the petitioner was clearly oppressive and vexatious.
The suit was instituted in rank violation of Clauses 24.5(ii) and (iii)
and 24.7 of the ADA, which had also been made applicable to the
Addendum dated 27 May 2021. The allegation of the respondent
against the petitioner, in the Dubai suit, was a breach of the ADA, and
nothing else. The lis , therefore, fell entirely within the four corners of
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the ADA, which was contractually required to be construed in
accordance with Indian law. The ADA also conferred exclusive
jurisdiction in matters relating to the ADA on courts in New Delhi,
and envisaged resolution of disputes by arbitration, seated in New
Delhi. The very institution of the suit in Dubai was, therefore, in mala
fide breach of the ADA, and was an obvious attempt to frustrate the
petitioner from seeking relief against the respondent in arbitration by
presenting the petitioner with a fait accompli . Where the proceedings
in the foreign court are ex facie oppressive and vexatious, an anti-suit
injunction must follow, submits Mr. Nayar, relying on para 24(2) of
7
Modi Entertainment Network v WSG Cricket PTE and para 30 of
8
Essel Sports Pvt Ltd v BCCI .
21.2 In an oblique attempt to justify approaching the Dubai Court,
the respondent submits Mr. Nayar, had mischievously impleaded, as
defendants in the Dubai Suit, entities who had nothing to do with the
dispute, as has been found by the Dubai Court itself. This is apparent
from the fact that the decree that has ultimately come to be passed is
only against the petitioner, and the Dubai Court has returned a specific
finding that none of the other defendants before it were liable in any
way towards the respondent. In support of his contention that the
respondent could not, by thus impleading irrelevant parties, frustrate
the arbitration agreement, Mr. Nayar relies on para 50 of the judgment
of the Supreme Court in Booz Allen & Hamilton Inc v SBI Home
9
Finance Ltd , paras 103 and 107 of Rakesh Malhotra v Rajendra
7
(2003) 4 SCC 341
8
2011 SCC OnLine Del 1629
9
(2011) 5 SCC 532
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10
Kumar Malhotra and paras 12 to 14 of Damco India Pvt Ltd v
11
.
Samtel Glass Ltd
21.3 Mr. Nayar further submits that, even if the defendants
impleaded in the Dubai Suit were to be presumed to be necessary or
relevant parties, that would still not justify the respondent instituting
the suit in Dubai, ignoring the arbitration clause in the ADA, as the
impleading of non-signatories in arbitral proceedings is permissible,
and the Arbitral Tribunal is well within its authority to allow such
impleadment in an appropriate case. These decisions were required,
as per the provisions of the ADA, to be taken by the Arbitral Tribunal
in accordance with the 1996 Act. Mr. Nayar relies, in this context, on
12
paras 10 and 15 of Sumitomo Heavy Industries Ltd v ONGC Ltd ,
13
and paras 71 to 73 of Reliance Industries Ltd v UOI . For the
proposition that the Arbitral Tribunal was possessed of the jurisdiction
to decide on the issue of inclusion or exclusion of non-signatories, Mr.
Nayar cites paras 169 and 170.12 of Cox & Kings Ltd v SAP India
14
Pvt Ltd , para 14 of Vistrat Real Estates Private Limited v Asian
15
Hotels North Ltd , and paras 15 and 18 of Moneywise Financial
16
Services Pvt Ltd v Dilip Jain . Even if, for any reason, the dispute
raised by the respondent in the Dubai suit were to be regarded as not
amenable to arbitration because of the necessity to include non-
signatories, the respondent would, nonetheless, have, in view of the
exclusive jurisdiction Clause 24.7 in the ADA, to pursue its remedy
10
2014 SCC OnLine Bom 1146
11
2013 SCC OnLine Del 446
12
(1998) 1 SCC 305
13
(2014) 7 SCC 603
14
(2024) 4 SCC 1
15
2022 SCC OnLine Del 1139
16
2024 SCC OnLine Del 1896
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before the civil court in New Delhi by way of original proceedings,
and not in Dubai.
21.4 The decree of the Dubai Court, submits Mr. Nayar, effectively
frustrates the arbitration clause in the ADA and renders it impossible
for the petitioner to seek resolution of the dispute in accordance
therewith. It is, therefore, oppressive and vexatious to the petitioner,
justifying grant of an anti-execution injunction by this Court. Reliance
has been placed, in this context, on para 96 of the judgment of this
Court in Interdigital Technology Corporation v Xiaomi
17
Corporation .
21.5 Mr. Nayar points out that the petitioner has, at all times,
opposed the assumption of jurisdiction by the Dubai Court, over the
dispute raised by the respondent in the Dubai Suit. It was pointed out,
before the Dubai Court, that the ADA required disputes arising within
its confines to be resolved by arbitration, seated in New Delhi, and
that there was a separate exclusive jurisdiction clause in the ADA,
conferring exclusive jurisdiction, in respect of all matters relating to
the ADA, on courts in New Delhi. It could not, therefore, be said that
the petitioner had in any way acquiesced to the proceedings before the
Dubai Court.
21.6 Nor, submits Mr. Nayar, could the petitioner be said to have
approached this Court after undue delay as, had the petitioner
approached this Court while the Dubai suit was pending, there was
every likelihood of the petitioner being told to convince the Dubai
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Court that it had no jurisdiction, in the first instance. That attempt
having failed, the petitioner has no option but to approach this Court.
21.7 Mr. Nayar submits that the Dubai Court judgment is inherently
unsustainable in law. The Dubai Court has admittedly applied Dubai
law to the dispute, in the teeth of Clause 24.7 of the ADA. There is, in
fact, no reference, in the entire judgment of the Dubai Court, to Clause
24.7, which confers exclusive jurisdiction in matters relating to the
ADA on courts in New Delhi. Rather, without adverting to the said
clause, the judgment of the Dubai court holds that it has territorial
jurisdiction, as the ADA was executed within the Dubai Emirate.
21.8 Mr. Nayar further submits that the petitioner is entitled to seek,
in proceedings under Section 9 of the 1996 Act, enforcement of the
arbitration clause in the ADA. Mr. Nayar has placed reliance, in this
context, on the judgment of the Supreme Court in Bhatia
18
International v Bulk Trading SA and submits that, applying the
law declared in that case, the petitioner can invoke Section 9 for all
reliefs except stay of the arbitration clause itself. He specifically
refers, in this context, to the stipulation, following Section 9(1)(e),
conferring, on the Section 9 Court, “the same power for making orders
as it has for the purpose of, and in relation to, any proceedings before
it”. Mr. Nayar further places reliance, in support of his submissions,
19
on the decisions in OT Africa Line Ltd v Magic Sportswear Corp ,
20
Gray v Hurley , Deutsche Bank AG v Highland Crusader Offshore
17
2021 SCC OnLine Del 2424
18
(2002) 4 SCC 105
19
[2005] EWCA Civ 710
20
[2019] EWHA 1972 (QB)
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21
Partners LP , Specialised Vessel Services Ltd v MOP Marine
22
Nigeria Ltd , Times Trading Corporation v National Bank of
23
Fujairah and the judgment dated 1 November 2021 of the High
24
Court of Bombay in Majmudar & Partners v Michael Marshall .
Relying on paras 42 to 50 of Essar House Pvt Ltd v Arcellor Mittal
25
Nippon Steel India Ltd and paras 15 to 17 of Supertrack Hotels Pvt
26
Ltd v Friends Motels Pvt Ltd , Mr. Nayar submits that any such
interim measure of protection, as may be “just and convenient”, may
be granted under Section 9, if the circumstances so warrant.
21.9 The principle of comity of courts, submits Mr. Nayar, cannot
inhibit grant of relief in a case such as this, where the foreign court is
clearly exercising jurisdiction in violation of the terms of the
agreement between the parties. Besides, where parties, by agreement,
confer exclusive jurisdiction on one court, the principle of comity of
courts advices effectuating the agreement and conferring jurisdiction
on the court on which jurisdiction has been conferred ad idem by the
parties. Mr. Nayar cites, in this context, para 8 of the judgment of the
27
Court of Appeal in AIG Europe SA v John Wood Group PLC . He
further relies on paras 96, 98 and 127 of the judgment of this Court in
Interdigital Technology Corporation to submit that the principle of
comity would play little part where injunction is sought against action
which is oppressive to the applicant.
21
[2009] EWCA Civ 725
22
[2021] EWHC 333 (Comm)
23
[2020] EWHC 1078 (Comm)
24
10-CARBPL-24347-2021
25
2022 SCC OnLine SC 1219
26
2017 SCC OnLine Del 11662
27
[2022] EWCA Civ 781
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22. Submissions of Mr. Mudit Sharma for the respondent
22.1 Responding to the submissions of Mr. Nayar, Mr. Mudit
Sharma, learned Counsel for the respondent, advances a preliminary
objection to the maintainability of the present petition. He submits
that, as the Court exercising jurisdiction under Section 9 does not
enjoy the power of a civil court, it cannot grant an anti-enforcement
injunction, injuncting the enforcement of a decree passed by a foreign
court. He relies, for this purpose, on Fuerst Day Lawson Ltd v Jindal
28
Exports Ltd , which declares the 1996 Act to be a self-contained
29
code. He also relies on Section 5 of the 1996 Act, which specifically
proscribes intervention, by any judicial authority, save and except as
provided in Part I thereof. The court exercising jurisdiction under
Section 9 cannot, therefore, act ex debito justitiae , beyond the confines
of the jurisdiction that Section 9 confers.
22.2 Orders passed under Section 9 have, moreover, he submits, to
be in aid of the final claim in the arbitral proceedings. The anti-
enforcement injunction that the petitioner seeks is not in aid of any
final claim in any proposed arbitral proceedings. Para 10 of the notice
dated 25 July 2024, issued by the petitioner to the respondent under
Section 21 of the 1996 Act reads thus:
“10. In view of the aforesaid facts and circumstances, it is clear
that, RSM, is in breach of the following terms of the Agreement:
a. Clause 16.3 whereby either party to the Agreement had
28
(2011) 8 SCC 333
29
5. Extent of judicial intervention . – Notwithstanding anything contained in any other law for the
time being in force, in matters governed by this Part, no judicial authority shall intervene except where so
provided in this Part.
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the right to terminate the Agreement at any time without
cause, by giving due notice;
b. Clause 24.5(i) whereby the parties had a good faith
obligation to resolve the dispute by way of mutual
discussion;
c. Clause 24.5(ii) and Clause 24.5(iii) whereby the
parties agreed that in the event the disputes are not resolved
through mutual discussion, the disputes were to be settled
through arbitration which is subject to the Arbitration Act
and the venue of the arbitration is New Delhi; and
d. Clause 24.7 whereby the parties expressly agreed
that the Agreement will be governed by Indian laws and
shall be subject to the exclusive jurisdiction of the New
Delhi courts.”
The reliefs that the petitioner seeks, submits Mr. Sharma, are
enumerated in para 10 of the above notice, and the anti-enforcement
injunction that the petitioner was seeking cannot be said to be in aid of
any of the said reliefs.
22.3 In any case, submits Mr. Sharma, there can be no question of
any arbitration at this stage, as the lis between the parties stands
adjudicated by the Dubai Court, competently acting within its
jurisdiction, and an appeal, against the said decision, at the instance of
the petitioner, is pending. Any re-agitation of the issue already
decided by the Dubai Court would be barred by constructive res
judicata .
22.4 Pointing out, further, that Section 17 of the 1996 Act confers,
on the arbitral tribunal, the same powers as may be exercised by the
court under Section 9, Mr. Sharma submits that, if Section 9 were to
be regarded as empowering the court to stay the enforcement of the
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decree passed by the Dubai Court, the same power would be available
with an arbitrator under Section 17 which, obviously, would be a
legally unacceptable consequence.
22.5 In support of these submissions, Mr. Mudit Sharma places
reliance on paras 43, 46, 48, 56, 60 and 61 of the judgment of the UK
Supreme Court in Ust-Kamenogorsk Hydropower Plant JSC v AES
30
Ust-Kamenogorsk Hydropower Plant LLP .
22.6 Mr. Sharma further submits that Article 8 of Federal Law (6) of
31
2018, governing arbitration in the UAE , which is conceptually
32
similar to Section 8 of the 1996 Act, has been taken into
consideration by the Dubai Court in its judgment, as an application
under the said Article had been filed by the petitioner before it.
Article 8(2) of the UAE Arbitration Act does not preclude a party
from commencing arbitration during the pendency of the suit or the
Article 8 application. There was, therefore, submits Mr. Sharma, no
embargo on the petitioner commencing arbitral proceedings even
30
[2011] EWCA Civ 647
31
For the sake of convenience referred to as “the UAE Arbitration Act”
32
8. Power to refer parties to arbitration where there is an arbitration agreement . –
(1) A judicial authority, before which an action is brought in a matter which is the subject of
an arbitration agreement shall, if a party to the arbitration agreement or any person claiming
through or under him, so applies not later than the date of submitting his first statement on the
substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court
or any court, refer the parties to arbitration unless it finds that prima facie no valid arbitration
agreement exists.
(2) The application referred to in sub-section (1) shall not be entertained unless it is
accompanied by the original arbitration agreement or a duly certified copy thereof.
Provided that where the original arbitration agreement or a certified copy thereof is not
available with the party applying for reference to arbitration under sub-section (1), and the said
agreement or certified copy is retained by the other party to that agreement, then, the party so
applying shall file such application along with a copy of the arbitration agreement and a petition
praying the court to call upon the other party to produce the original arbitration agreement or its
duly certified copy before that court.
(3) Notwithstanding that an application has been made under sub-section (1) and that the
issue is pending before the judicial authority, an arbitration may be commenced or continued and an
arbitral award made.
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while the Dubai suit was pending, if it was being subjected to such
great prejudice. Having not chosen to do so, the petitioner cannot now
seek to interdict enforcement of the Dubai decree.
22.7 The circumstances in which a foreign judgment can be regarded
as not conclusive, submits Mr. Sharma, are exhaustively enumerated
33 34 35
in Section 13 of the Code of Civil Procedure, 1908 . Section 44A
of the CPC deals with execution of a decree passed by a superior court
in a reciprocating territory. Dubai, he submits, is a reciprocating
territory, and the Dubai Court is a “superior court” within the meaning
of Section 44A of the CPC. Grant of the relief sought by petitioner in
this petition would, therefore, result in this Court, in exercise of the
jurisdiction vested in it by Section 9 of the 1996 Act, usurping the
33
13. When foreign judgment not conclusive . – A foreign judgment shall be conclusive as to any matter
thereby directly adjudicated upon between the same parties or between parties under whom they or any of
them claim litigating under the same title except –
(a) where it has not been pronounced by a Court of competent jurisdiction;
(b) where it has not been given on the merits of the case;
(c) where it appears on the face of the proceedings to be founded on an incorrect view of
international law or a refusal to recognise the law of India in cases in which such law is applicable;
(d) where the proceedings in which the judgment was obtained are opposed to natural justice;
(e) where it has been obtained by fraud;
(f) where it sustains a claim founded on a breach of any law in force in India.
34
“the CPC”
35
44-A. Execution of decrees passed by Courts in reciprocating territory . –
(1) Where a certified copy of a decree of any of the superior courts of any reciprocating
80
territory has been filed in a District Court, the decree may be executed in [India] as if it had been
passed by the District Court.
(2) Together with the certified copy of the decree shall be filed a certificate from such
superior court stating the extent, if any, to which the decree has been satisfied or adjusted and such
certificate shall, for the purposes of proceedings under this section, be conclusive proof of the
extent of such satisfaction or adjustment.
(3) The provisions of Section 47 shall as from the filing of the certified copy of the decree
apply to the proceedings of a District Court executing a decree under this section, and the District
Court shall refuse execution of any such decree, if it is shown to the satisfaction of the court that the
decree falls within any of the exceptions specified in clauses (a) to (f) of Section 13.
Explanation 1 .—“Reciprocating territory” means any country or territory outside India which the
Central Government may, by notification in the Official Gazette, declare to be a reciprocating territory for the
purposes of this section; and “superior courts”, with reference to any such territory, means such Courts as
may be specified in the said notification.
Explanation 2 .—“Decree” with reference to a superior court means any decree or Judgment of such
Court under which a sum of money is payable, not being a sum payable in respect of taxes or other charges of
a like nature or in respect of a fine or other penalty, but shall in no case include an arbitration award, even if
such an award is enforceable as a decree or Judgment.
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jurisdiction otherwise vested in the executing Court by Sections 13
and 44A of the CPC.
22.8 The submissions of the petitioner, in fact, points out Mr.
Sharma, directly invoke clauses (c) and (f) of Section 13 of the CPC.
The pre-emptive decision on the enforceability of the decree passed by
the Dubai Court, as sought by the petitioner, would amount to a
finding by this Court under Section 13 of the CPC, while exercising
jurisdiction under Section 9 of the 1996 Act. This is impermissible.
Once a verdict stood rendered by the Dubai court, its enforceability
has to be decided on the anvil of Sections 13 and 44A of the CPC. To
that extent, the stage at which the present petition has been preferred
by the petitioner is also of relevance. The petitioner cannot use
Section 9 of the 1996 Act to stymie proceedings for execution of the
decree passed by the Dubai court.
22.9 Mr. Sharma also invokes the principle of comity of courts
which, he submits, would militate against grant of the reliefs sought
by the petitioner. Mr. Sharma places reliance, in this context, on the
judgment of the US Court of Appeal in Chevron Corporation v Hugo
36
Gerardo Camacho Naranjo, Ja .
22.10 Mr. Sharma disputes Mr. Nayar’s submission that the lis in the
Dubai suit fell entirely within the corners of the ADA, or the
arbitration clause contained therein. According to Mr. Sharma, the
dispute in the Dubai suit travelled beyond mere performance or non-
performance of the ADA. It was not, therefore, as though by
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instituting the suit in the Dubai Court, the respondent was agitating an
issue which was squarely within the four corners of the ADA.
Reliance is placed, in this context, on following passages from the
decree of the Dubai Court:
“Considering that the actions of the first defendant constituted a
breach of the contract for the entire duration of the agreement and a
violation of all its obligations, which include respecting the
commercial nature of these contracts and the financial costs
incurred by the plaintiff, it is stated that the contractual breaches
committed by the first defendant are as follows: (1) The first
defendant, in collusion with the second defendant, agreed for the
latter to perform the same tasks and functions as the plaintiff,
which constitutes a violation of the exclusivity clause in executing
the contract, as stated in clause (2/4) of the agreement appendix .
This clause includes the first defendant's undertaking not to engage
commercially or communicate with any person involved in a
similar activity to the plaintiff. (2) The first defendant, during the
contract period, appointed other distributors in multiple locations in
the Arabian Gulf region, in violation of paragraph 2/1 of the
agreement and 2/4 its appendix, as evidenced by the attached
correspondence, and appointed another distributor in the state of
Qatar. (3) Violation of the contract term as stipulated in its
appendix, which states that the initial period is 5 years starting
from 01/05/2021, without any justified reason or basis for
termination, contradicting the agreed-upon termination mechanism
and a remedial period of 12 months if an error occurs. (4) The first
defendant, on a personal basis, transferred the inventory of goods
existing in the plaintiff's warehouses to a new partner and another
distributor, despite purchasing those goods and paying their full
dues. (5) The first defendant supplied products that did not meet
the required quality standards and were expired, according to the
recognized consumption standards and requirements of the relevant
authorities in this regard. Since the plaintiff has made a significant
investment and has prepared and arranged all the necessary
operational, marketing, sales, advertising, and contractual
requirements with third parties based on its status as an authorized
distributor of the first defendant, This has led to significant damage
to the plaintiff that cannot be rectified, due to the breach
committed by the first and second defendants regarding the
contract duration and the violation of contractual obligations,
resulting from their collusive actions causing harm to the plaintiff.
The damages that warrant compensation are outlined in the
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Judgment dated 26 January 2012
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attached statement of the account number (7) and as mentioned in
the statement of the case.
The third defendant has been implicated based on their contract
with the plaintiff and the negotiations related to the concluded and
implemented contract. Subsequently, they established the second
defendant company in Dubai, which involved fraudulent and
deceptive actions that make them personally liable for paying the
compensation owed to the plaintiff.
*
And whereas, on the dates of 16/3/2023 and 24/4/2023, the
plaintiff’s attorney submitted two defence memoranda, requesting
the inclusion of Tarun Agarwal Gowry Shankar Agarwal as a new
litigant in the case, on the grounds that he is the director of the
second defendant company and actively manages it. It is stated that
he was the party responsible for sending the termination letter and
that he communicated with one of the plaintiff company's
employees, instigating him to provide the plaintiff's customer lists
and all marketing and distribution plans, which caused damage to
the plaintiff company .
*
And whereas, on the date of 21/6/2023, the plaintiff's attorney
submitted a defence memorandum, requesting the inclusion of MH
Enterprises LLC as a new litigant in the case. They also requested
an urgent division, based on the fact that the latter replaced them
and became the party agreed upon by the first and second
defendants as a new distributor responsible for marketing,
distributing, and selling the products of the first defendant after
terminating the contract with the plaintiff, without a valid reason,
making them subject to the consequences of terminating the
exclusive distribution contract and obligating them to compensate
for the damages suffered, justifying their inclusion based on the
Commercial Agency Law. In conclusion, their memorandum
requests the following;: first: accepting the inclusion request
formally, and second: urgently issuing an order for the imposition
of a precautionary attachment on all products sold by the first and
second defendants and currently in possession of the newly
included defendant, with a label bearing the name of the plaintiff,
to prevent any future legal disputes, and to obligate the intervened
to refrain from doing so, and to compel him to remove any
infringement that has occurred and remove the plaintiff's name
from the products being marketed and sold by them , and to instruct
the...
In the presence of the litigants, the court issued the following
verdict, firstly: accepting entering Tarun Agarwal Gowry Shankar
Agarwal and MH Enterprises in the case in form.
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Secondly: concerning the case subject and entering: the first
defendant shall pay the plaintiff an amount of AED 25,071,991, as
a compensation of any damage effected the latter, besides the legal
interest of 5%, as of the date of the final verdict issued come into
force, until full payment. The first defendant shall pay all fees and
expenses of a thousand Dirhams in consideration of the fess of the
attorney at law, other than that was rejected.”
(Emphasis supplied)
Thus, the respondent had, in the Dubai Suit, made out a clear case for
proceeding against the defendants, impleaded in the said suit, who
were not parties to the ADA.
22.11 Mr. Sharma submits that the petitioner is effectively seeking
enforcement of the arbitration agreement contained in the ADA, and,
therefore, specific performance of the ADA, which cannot be sought
in Section 9 proceedings. Reliance is placed, in this context, on para
17 of the judgment of the Division Bench of this Court in Bharat
Catering Corporation v Indian Railway Catering and Tourism
37
Corporation Ltd .
22.12 Finally, submits Mr. Sharma, an anti-enforcement injunction is
an extreme relief, which can be granted only in exceptional
circumstances. The petitioner has not been able to make out a case
justifying a prayer for grant of an anti-enforcement injunction of the
decree passed by the Dubai court.
23. Further written submissions by the petitioner
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2009 (113) DRJ 435 (DB)
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23.1 Post reserving of judgment in this petition, the petitioner has
filed short additional written submissions. While several of the earlier
submissions have been reiterated, the petitioner seeks to distinguish
the decisions in Ust-Kamenogorsk and Bharat Catering Corporation ,
on which Mr. Sharma has sought to place reliance. Ust-
Kamenogorsk , it is submitted, was a case in which no arbitral
proceedings were contemplated, whereas, in the present case, the
petitioner has addressed a notice under Section 21 of the 1996 Act to
the respondent, thereby initiating arbitral proceedings. Bharat
Catering Corporation is sought to be distinguished by submitting that
the petitioner is not, in the present case, seeking specific performance
of the ADA, but is merely seeking an injunction restraining the
respondent from enforcing the Dubai court decree.
23.2 The principle of comity of courts, it is submitted, is not affected
by the relief sought by the petitioner, which is directed against the
respondent, and not against the Dubai court or its decree. Rather, by
seeking that the parties uphold the bargain into which they entered by
way of the ADA, the petitioner, it is submitted, is enforcing the
principle of comity of courts.
24. Further written submissions by the respondent
24.1 The respondent, too, has filed written submissions post
reserving of judgment by this Court. They essentially deal with some
of the decisions cited by Mr. Nayar. Gray , it is submitted, is a case in
which anti-suit injunction, as sought, was refused , and the petitioner
merely seeks to place reliance on certain observations made by the
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Court while referring to the earlier decision in Deutsche Bank .
Deutsche Bank , the respondent submits, actually advocates against
grant of indiscriminate anti-suit injunctions, which are destructive of
the principle of comity of courts. It is further stated, in the said
decision, that “the stronger the connection of the foreign court with
the parties and the subject matter of the dispute, the stronger the
argument against intervention”. OT Africa was a case in which the
anti-suit injunction was sought within a month of institution of the suit
in the foreign court. Bhatia International stands overruled in Bharat
38
Aluminium Co v Kaiser Aluminium Technical Services Inc ;
nonetheless, it is submitted that para 29 of Bhatia International
supports the respondent. Majmudar & Partners was a decision
passed by the Vacation Bench of the High Court of Bombay before
any proceedings had been instituted in the foreign court.
24.2 Finally, the respondent places reliance on the decisions of the
Supreme Court in Alcon Electronics Pvt Ltd v Celem SA of FOS
39
34320 Roujan and of this Court in Transasia Private Capital Ltd v
40
Gaurav Dhawan .
Analysis
25. The law is at times likened to a well known quadriped –
unfairly both to the law and to the quadriped – but it cannot be made a
spectacle of ridicule, which requires the Court to sit back and
helplessly tolerate brutalization of the legal process by an
38
(2012) 9 SCC 552
39
(2017) 2 SCC 253
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unscrupulous litigant.
26. Not an iota of bona fides can be attributed to the respondent’s
decision to sue the petitioner before the Dubai court; nor,
consequently, can the respondent be permitted to capitalize on the
outcome of the said decision. Allowing the respondent to do so would
not only amount to condoning breach of the ADA with impunity, but
would also permit the respondent to reap a windfall from the
consequence of such breach.
27. Re. the plea of the lis in the Dubai suit not being restricted to
the ADA
27.1 Mr. Sharma’s contention that the lis , in the Dubai suit, was not
restricted to breach of the ADA, is obviously devoid of substance.
The only cause of action pleaded in the Dubai suit was breach, by the
petitioner, of Clauses 4/2, 1/2 and 3/4 of the addendum to the ADA, by
allegedly allowing others to distribute the petitioner’s products in the
UAE. The dispute, therefore, was entirely confined within the four
corners of the ADA and its covenants, and was obviously a dispute
which was arbitrable in terms of Clause 24.5(ii) thereof.
27.2 The respondent, in an obviously desperate attempt to escape the
reference of the dispute to arbitration by the petitioner, impleaded,
without any justification whatsoever, Honasa Trading and, later, Mr.
Tarun Aggarwal, manager of Honasa Trading and M H Project LLC.
It is obvious, even to a person unschooled in the niceties of the law
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2021 SCC OnLine Del 2393
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relating to necessary and proper parties to a lis , that the impleadment
of these additional defendants was without any justification
whatsoever. The termination notice dated 17 October 2022 was issued
by the petitioner, from its Gurgaon office. It makes no reference either
to Honasa Trading or to Tarun Aggarwal, and the allegation that it had
been issued at the instance of Honasa Trading, or was issued by Tarun
Aggarwal, was obviously false, with a view to justify approaching the
Dubai Court. The Dubai Court has, significantly, rejected, in no
uncertain terms, the said allegations, and has held the added
defendants to be in no manner responsible to the petitioner. Damages
have, therefore, entirely been foisted on the petitioner and, by seeking
to execute the Dubai decree, the respondent, too, acknowledges that it
had unnecessarily impleaded the additional defendants. It is a matter
of regret, therefore, that the respondent has the temerity, even before
this Court, to again seek to justify the filing of the suit in Dubai on the
ground that the additional defendants were necessary parties, merely
because of unfounded and baseless allegations of collusion by which
the respondent sought to embellish the suit, and which even the Dubai
Court has not accepted.
27.3 The plea that the lis in the Dubai suit was not restricted to
breach of the ADA by the petitioner is, therefore, unhesitatingly
rejected.
28. Re. Sections 13 and 44A of the CPC
28.1 The reliance, by Mr. Sharma, on Sections 13 and 44A of the
CPC is fundamentally misplaced on facts as well as in law. There are
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at least four reasons why the submissions of Mr. Sharma, predicated
on these provisions, are liable to be rejected.
28.2 Firstly, Sections 13 and 44A of the CPC are not even
applicable at this point, as they pertain to the executability of foreign
decrees in India, and the respondent has not moved any Indian court
for executing the Dubai decree. In fact, having moved the Dubai court
for execution against the petitioner, it defeats comprehension as to
how the respondent is citing Sections 13 and 44A of the CPC as a
defence to the present petition. Even on facts, therefore, the reliance
is both misplaced, and mistimed.
28.3 Secondly, the submission is predicated on a principle, unknown
to the law, that, against one impugned action, there can be only one
remedy. Law knows no such doctrine. Were the respondent to seek to
execute the Dubai judgment and decree in India, the petitioner would
unquestionably have the right to oppose the execution by all means
known to law, which would include the grounds enumerated in
Section 13 of the CPC. The existence of that right, at that stage,
where occasion to so arise, does not serve, by any theory known to
law, to disentitle the petitioner to seek protective interim orders under
Section 9 of the 1996 Act.
28.4 Thirdly, Section 9 of the 1996 Act, and Sections 13 and 44A of
the CPC, cater to different circumstances, and operate in distinct
spheres. Section 9 is in the nature of a protective provision, to protect
the arbitral corpus and the arbitral process so that arbitration, when
contractually envisaged as the mode of resolution of disputes between
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the parties, is allowed to continue to its final culmination, and the
award, as and when rendered, is not defeated before rendition.
Sections 13 and 44A of the CPC deal with execution of foreign
decrees, and the circumstances to be borne in mind by a Court before
whom a foreign decree is brought for execution. They are, therefore,
as alike as chalk and cheese, and the question of the right under
Section 9 being in any way prejudiced by Sections 13 and 44A of the
CPC cannot, therefore, arise.
28.5 Fourthly, there is no legal proscription even against a plurality
of legal remedies being available against the same impugned action, at
one time and one stage. In such a case, the only restraint that the law
imposes is one of election, by requiring the challenger to elect the
41
mode of challenge which he desires to adopt. That situation does
not, however, obtain here, as, firstly, the stage for application of
Section 13 or 44A of the CPC has not arisen – and may never arise, as
the respondent has chosen to seek to enforce the Dubai decree in
Dubai itself – and, secondly, as already noted, the two remedies cater
to different situations, and are available at different stages.
28.6 Mr. Mudit Sharma sought to submit that, by the present
petition, the petitioner is seeking to pre-empt the exercise of a
competent executing Court under Section 13 of the CPC. The
submission is truly surprising, being advanced on behalf of a
respondent who has elected not to pursue execution proceedings in
India, but to proceed for execution in Dubai. There does not arise,
therefore, any occasion for any executing Court in India to exercise
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jurisdiction under Section 13, so that no question of pre-empting such
exercise can arise either.
28.7 The submission is, moreover, misguided in law as well. Once it
is understood that the right to seek pre-arbitral interim relief under
Section 9 and to assail the enforceability of the Dubai court decree are
independently available to the petitioner, the possibility of findings or
observations returned by the Court adjudicating the Section 9
application having relevance even while deciding objections to the
enforceability of the decree under Section 13 of the CPC – should
such occasion arise – is a live possibility. That possibility cannot,
however, operate as an inhibiting factor to grant of relief under
Section 9 of the 1996 Act, if the conditions for grant of such relief are
met.
28.8 Sections 13 and 44A of the CPC, therefore, do not, in any way,
affect the authority of this Court to grant relief, as sought by the
petitioner, in the present petition under Section 9 of the CPC. The
reliance, by Mr. Sharma, on Sections 13 and 44A of the CPC is,
therefore, clearly misguided.
29. Scope of Section 9
29.1 Mr. Sharma lays great stress on what he perceives to be the
somewhat limited scope of Section 9 of the 1996 Act. He submits that
Section 9 cannot be used to enforce the arbitration clause in the ADA
and, further, that the Court has no jurisdiction to pass an order of anti-
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Refer Bihar State Co-operative Marketing Union Ltd v Uma Shankar Sharan, (1992) 4 SCC 196
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enforcement injunction of a decree passed by a foreign court under
Section 9. For the submission that an anti-enforcement injunction of a
foreign decree cannot be granted under Section 9, Mr. Sharma cites
Ust-Kamenogorsk and, for the proposition that Section 9 cannot be
used for enforcing the arbitration clause or for seeking specific
performance of a contract, he relies on Bhatia International and
Bharat Catering Corporation .
29.2 Plainly read, Section 9 does not admit of any such limitations.
Its scope is wide and compendious. While it is true that the use of the
expression “any of the following matters, namely” in Section 9(1)(ii)
results in the enumeration of the “matters”, which follows, being
exhaustive rather than illustrative, clause (e) of Section 9(1)(ii) covers
“such other interim measure of protection as may appear to the court
to be just and convenient”. The words “just and convenient”, once
again, are wide and compendious in their import. The scope of
Section 9 is broadened still further by the stipulation, which follows,
that “the Court shall have the same power for making orders as it has
for the purpose of, and in relation to, any proceedings before it”. In
other words, apart from “preservation, interim custody or sale of any
goods which are the subject-matter of the arbitration agreement”
[covered by clause (a) of Section 9(1)(ii)], “securing the amount in
dispute in the arbitration” [covered by clause (b)], “detention,
preservation or inspection of any property or thing which is the
subject-matter of the dispute in arbitration… authorising, for any of
the aforesaid purposes any person to enter upon any land or building
in the possession of any party, or authorising any samples to be taken
or any observation to be made, or experiment to be tried, which may
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be necessary or expedient for the purpose of obtaining full information
or evidence” [covered by clause (c)], “interim injunction” [covered by
clause (d)] and “appointment of a receiver” [covered by clause (d)],
Section 9 further empowers the Court to order any other such interim
measure of protection as may appear to it to be just and convenient,
and also clothes it with all the powers to pass interim orders, available
to a Court in respect of matters before it. This last stipulation would
cover, within it, the entire panoply of powers to grant interim relief,
and pass interlocutory orders, available to a civil Court.
29.3 Section 9 is absolute in its application. It is not made subject to
any other provision in the 1996 Act or elsewhere. Dealing with the
scope of Section 9, the Supreme Court, in Essar House Pvt Ltd v
42
Arcellor Mittal Nippon Steel India Ltd held:
“39. In deciding a petition under Section 9 of the Arbitration
Act, the Court cannot ignore the basic principles of the CPC. At
the same time, the power Court to grant relief is not curtailed by
the rigours of every procedural provision in the CPC. In exercise of
its powers to grant interim relief under Section 9 of the Arbitration
Act, the Court is not strictly bound by the provisions of the CPC.
40. While it is true that the power under Section 9 of the
Arbitration Act should not ordinarily be exercised ignoring the
basic principles of procedural law as laid down in the CPC, the
technicalities of CPC cannot prevent the Court from securing the
ends of justice. It is well settled that procedural safeguards, meant
to advance the cause of justice cannot be interpreted in such
manner, as would defeat justice.
41. Section 9 of the Arbitration Act provides that a party may
apply to a Court for an interim measure or protection inter alia to
(i) secure the amount in dispute in the arbitration; or (ii) such other
interim measure of protection as may appear to the Court to be just
and convenient, and the Court shall have the same power for
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2022 SCC OnLine SC 1219
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making orders as it has for the purpose of, and in relation to, any
proceedings before it.
42. As argued by Mr. Kaul, besides the specific power of
securing the amount in dispute, the Courts have been empowered
to pass any interim measure of protection, keeping in view the
purpose of the proceedings before it. The said provision confers a
residuary power on the Court to pass such other interim measures
of protection as may appear to be just and convenient.
43. Many High Courts have also proceeded on the principle
that the powers of a Court under Section 9 of the Arbitration Act
are wider than the powers under the provisions of the CPC.
43
44. In Ajay Singh v Kal Airways Pvt Ltd the Delhi High
Court correctly held:
“…Section 9 grants wide powers to the courts in fashioning
an appropriate interim order, is apparent from its text.
Nevertheless, what the authorities stress is that the exercise
of such power should be principled, premised on some
known guidelines - therefore, the analogy of Orders 38 and
39. Equally, the court should not find itself unduly bound
by the text of those provisions rather it is to follow the
underlying principles…”
44
45. In Jagdish Ahuja v Cupino Ltd , the Bombay High Court
correctly summarised the law in Paragraph 6 extracted
hereinbelow:—
“6. As far as Section 9 of the Act is concerned, it cannot
be said that this court, while considering a relief
thereunder, is strictly bound by the provisions of Order 38
Rule 5. As held by our Courts, the scope of Section 9 of the
Act is very broad; the court has a discretion to grant
thereunder a wide range of interim measures of protection
“as may appear to the court to be just and convenient”,
though such discretion has to be exercised judiciously and
not arbitrarily. The court is, no doubt, guided by the
principles which civil courts ordinarily employ for
considering interim relief, particularly, Order 39 Rules 1
and 2 and Order 38 Rule 5; the court, however, is not
unduly bound by their texts. As this court held in Nimbus
45
Communications Ltd v BCCI (per D.Y. Chandrachud J,
as the learned Judge then was), the court, whilst exercising
43
2017 SCC OnLine Del 8934
44
2020 SCC OnLine Bom 849
45
2012 SCC OnLine Bom 287
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power under Section 9, “must have due regard to the
underlying purpose of the conferment of the power under
the court which is to promote the efficacy of arbitration as
a form of dispute resolution.” The learned Judge further
observed as follows:
“Just as on the one hand the exercise of the power
under Section 9 cannot be carried out in an
uncharted territory ignoring the basic principles of
procedural law contained in the Code of Civil
Procedure 1908, the rigors of every procedural
provision in the Code of Civil Procedure 1908
cannot be put into place to defeat the grant of relief
which would subserve the paramount interests of
justice. A balance has to be drawn between the two
considerations in the facts of each case.”
46
46. In Valentine Maritime Ltd v Kreuz Subsea Pte Ltd , the
High Court held:—
“88. …It is now a well settled legal position, that at least
with respect to Chartered High Courts, the power to grant
temporary injunctions are not confined to the statutory
provisions alone. The Chartered High Courts had an
inherent power under the general equity jurisdiction to
grant temporary injunctions independently of the
provisions of the Civil Procedure Code, 1908…”
*
95. Insofar as judgment of this Court delivered by the
Division Bench of this court in case of Nimbus
Communications Limited v. Board of Control for Cricket
in India (supra) relied upon by the learned senior counsel
for the VML is concerned, this Court adverted to the
judgment of Hon'ble Supreme Court in case of Adhunik
47
Steels Ltd v Orissa Manganese and Minerals (P) Ltd ,
and held that in view of the decision of the Supreme Court
in case of Adhunik Steels Ltd , (supra) the view of the
Division Bench in case of National Shipping Company of
Saudi Arabia (supra) that the exercise of power under
section 9(ii)(b) is not controlled by the provisions of the
Civil Procedure Code, 1908 cannot stand. This court in the
said judgment of Nimbus Communications Ltd (supra)
held that the exercise of the power under section 9 of the
Arbitration Act cannot be totally independent of the basic
46
2021 SCC OnLine Bom 75
47
(2007) 7 SCC 125
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principles governing grant of interim injunction by the civil
Court, at the same time, the Court when it decides the
petition under section 9, must have due regard to the
underlying purpose of the conferment of the power upon
the Court which is to promote the efficacy of arbitration as
a form of dispute resolution.
96. This court held that just as on the one hand the
exercise of the power under Section 9 cannot be carried out
in an uncharted territory ignoring the basic principles of
procedural law contained in the Civil Procedure Code,
1908, the rigors of every procedural provision in the Civil
Procedure Code, 1908 cannot be put into place to defeat
the grant of relief which would sub-serve the paramount
interests of justice. A balance has to be drawn between the
two considerations in the facts of each case. The principles
laid down in the Civil Procedure Code, 1908 for the grant
of interlocutory remedies must furnish a guide to the Court
when it determines an application under Section 9 of the
Arbitration and Conciliation Act, 1996. The underlying
basis of Order 38 Rule 5 therefore has to be borne in mind
while deciding an application under Section 9(ii)(b) of the
Arbitration Act.
*
104. The Division Bench of this court in case of Deccan
48
Chronicle Holdings Limited v L & T Finance Ltd , after
adverting to the judgment of Supreme Court in case
of Adhunik Steel Ltd (supra), judgment of the Division
Bench of this court in case of Nimbus Communications
Ltd (supra) held that the rigors of every procedural
provision of the Code of Civil Procedure cannot be put into
place to defeat the grant of relief which would sub-serve
the paramount interests of the justice. The object of
preserving the efficacy of arbitration as an effective form of
dispute resolution must be duly fulfilled. This would
necessarily mean that in deciding an application under
Section 9, the Court would while bearing in mind the
fundamental principles underlying the provisions of the
Code of Civil Procedure, at the same time, have the
discretion to mould the relief in appropriate cases to secure
the ends of justice and to preserve the sanctity of the
arbitral process. The Division Bench of this Court in the
said judgment did not interfere with the order passed by the
learned Single Judge directing the parties to furnish
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security so as to secure the claim of the original petitioner
in arbitration by applying principles of Order 38 Rule 5 of
the Code of Civil Procedure. …”
47. In Srei Infrastructure Finance Limited v. Ravi Udyog Pvt
49
Ltd , the Calcutta High Court, speaking through one of us (Indira
Banerjee, J.), as Judge of that Court, said:—
“An application under section 9 of the Arbitration &
Conciliation Act, 1996 for interim relief is not to be judged
as per the standards of a plaint in a suit. If the relevant facts
pleaded, read with the documents annexed to the petition,
warrant the grant of interim relief, interim relief ought not
to be refused by recourse to technicalities…”
48. Section 9 of the Arbitration Act confers wide power on the
Court to pass orders securing the amount in dispute in arbitration,
whether before the commencement of the arbitral proceedings,
during the arbitral proceedings or at any time after making of the
arbitral award, but before its enforcement in accordance with
Section 36 of the Arbitration Act. All that the Court is required to
see is, whether the applicant for interim measure has a good prima
facie case, whether the balance of convenience is in favour of
interim relief as prayed for being granted and whether the applicant
has approached the court with reasonable expedition.
49. If a strong prima facie case is made out and the balance of
convenience is in favour of interim relief being granted, the Court
exercising power under Section 9 of the Arbitration Act should not
withhold relief on the mere technicality of absence of averments,
incorporating the grounds for attachment before judgment under
Order 38 Rule 5 of the CPC.”
(Underscoring supplied; italics in original)
29.4 This Court had, in its decision in Hindustan Cleanenergy Ltd v
50
MAIF Investments India 2 Pte Ltd , attempted to analyse the scope
and ambit of Section 9, after a study of the precedents in Arcelor
51
Mittal Nippon Steel v Essar Bulk Terminal Ltd , Adhunik Steels ,
52
Arvind Constructions Co (P) Ltd v Kalinga Mining Corporation ,
49
A.P. No. 522 of 2008
50
(2022) 1 Arb LR 337
51
2021 SCC OnLine SC 718
52
(2007) 6 SCC 798
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53
Firm Ashok Traders v Gurmukh Das Saluja as well as several
decisions of Division Benches of this Court. Finally, this Court
concluded:
54
“93. In Avantha Holdings , this Court has taken a stock of
the decisions of the Supreme Court in Adhunik Steels , Arvind
Constructions and Firm Ashok Traders , though these
decisions were rendered at the time when Section 17 was in its
pre-amended form. Among other things, these decisions of the
Supreme Court hold that (i) the demonstration of irreparable or,
perhaps, substantial, harm, were interim protection not granted,
is necessary for relief to be granted under Section 9, (ii) the
interim relief granted under Section 9 may, to some extent,
overlap with the final relief sought in the arbitral
proceedings and (iii) grant of interim relief under Section 9 of
the 1996 Act would also be subject to the restrictions
governing Section 9 of the Specific Relief Act, 1963. This
Court has also relied on the following observations of the
Division Bench of the High Court of Madras in V.
55
Sekar v Akash Housing , as authored by Banumathi, J (as she
then was), expounding on the scope of Section 9(1)(ii)(e) of
Section 9, which is in the nature of a residual clause,
empowering the Court to grant such interim protection as may
be “just and convenient”:
“The purpose of Section 9 is to provide an interim measure of
protection to the parties to prevent the ends of justice from
being defeated. Section 9(2)(e) vests the Court with the power
to grant such interim measures of protection as may be just
and convenient. The jurisdiction under the “just and
convenient” clause is quite wide in amplitude, but must be
exercised with restraint. Interim measures are to be granted by
the Court so as to protect the rights in adjudication before the
arbitral tribunal from being frustrated. It does not allow the
Court the discretion to exercise unrestrained powers and
frustrate the very object of arbitration .”
56
94. In my decision in CRSC Design (which was affirmed in
57
appeal by the Division Bench ), I have attempted to delineate
the following three criteria, cumulative satisfaction of which is
necessary, before interim protection can be granted under
Section 9:
53
(2004) 3 SCC 155
54
(2020) 272 DLT 664
55
AIR 2011 Mad 110: (2011) 3 Arb LR 327 (DB)
56
(2020) 274 DLT 89
57
2020 SCC OnLine Del 1526
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(a) the existence of an arbitration clause, and manifest intent,
of the Section 9 petitioner, to invoke the said clause, and
initiate arbitral proceedings,
(b) the existence of a prima facie case, balance of
convenience and irreparable loss, justifying such grant of
interim relief to the applicant, and
(c) the existence of emergent necessity, so that, if interim
protection is not granted by the Court, even before arbitral
proceedings are initiated and the chance to approach the
arbitral tribunal under Section 17 manifests itself, there is a
possibility of the arbitral proceedings being frustrated or
rendered futile.”
29.5 In Bharat Aluminium , the Supreme Court held that “so far as
the Indian law is concerned, it is settled that the source “of a court’s
58
power to grant interim relief is traceable to Section 94 and in
59
exceptional cases to Section 151 CPC”. This enunciation is of
considerable significance, as it saves the inherent power of the Court
“to make such orders as may be necessary for the ends of justice or to
prevent abuse of process of the Court”, as envisaged by section 151.
29.6 Proceeding sequentially through the various clauses of Section
9(1)(ii), one finds the power to grant interim injunctions specifically
figuring in clause (d), even before one reaches clause (e). This power,
58
94. Supplemental proceedings . – In order to prevent the ends of justice from being defeated the Court
may, if it is so prescribed,—
(a) issue a warrant to arrest the defendant and bring him before the Court to show cause why
he should not give security for his appearance, and if he fails to comply with any order for security
commit him to the civil prison;
(b) direct the defendant to furnish security to produce any property belonging to him and to
place the same at the disposal of the Court or order the attachment of any property;
(c) grant a temporary injunction and in case of disobedience commit the person guilty thereof
to the civil prison and order that his property be attached and sold;
(d) appoint a receiver of any property and enforce the performance of his duties by attaching
and selling his property;
(e) make such other interlocutory orders as may appear to the Court to be just and
convenient.
59
151. Saving of inherent powers of Court . – Nothing in this Code shall be deemed to limit or otherwise
affect the inherent power of the Court to make such orders as may be necessary for the ends of justice or to
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juxtaposed with the clarification, which follows in Section 9(1)(ii),
that the Court, exercising Section 9 jurisdiction would have the same
powers to make orders as it would have for the purpose of, and in
relation to, proceedings before it, is by itself sufficient to include, in
the powers conferred by Section 9(1)(ii)(d), the power to grant anti-
suit or anti-enforcement injunctions. One need actually look no
further.
29.7 Though one, as noted, need actually look no further, the power
to grant an anti-suit, or anti-enforcement, injunction, would also be
encompassed in the power to grant interim measures of protection as
may be “just and convenient”, and would in any case be included in
the power to pass orders to secure the ends of justice or to prevent
abuse of the process of the Court, conferred by Section 151 of the
CPC.
29.8 Where, therefore, proceedings in a foreign Court, or any order
or decree passed by a foreign Court, threatens to prejudice or derail
the arbitral process which may competently be instituted in India, the
Section 9 Court is amply possessed of the power to injunct the party
who has instituted the foreign proceedings from further proceeding
with them, or from enforcing the potentially threatening order or
decree passed therein. If a civil Court, dealing with a civil suit, can do
so, so can a Section 9 Court seized with the task of protecting the
arbitral process from being derailed or hijacked – or, as in the present
case, guillotined.
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29.9 Ust-Kamenogorsk
29.9.1 Mr. Sharma cited Ust-Kamenogorsk , from which he relied on
the following passages:
“34 It is in these circumstances that the question now arises
whether it is consistent with the 1996 Act for the English court to
determine whether there is a valid and applicable arbitration
agreement covering the subject matter of actual or threatened
foreign proceedings and, if it holds that there is, to injunct the
commencement or continuation of the foreign proceedings. JSC
points to sections 32 and 72 of the Act as the means by which a
challenge to the jurisdiction may, under certain conditions, be
pursued during an arbitration and to section 67 as the means by
which an award may be challenged for lack of jurisdiction. It
submits, that, if AESUK convoked an arbitral tribunal, the
arbitrators could rule on their jurisdiction under section 30, their
ruling could be tested under sections 32, 67 and/or 72 and the court
could in the meantime be asked to give interim relief under section
44.
*
43 Similarly, the court’s powers listed in section 44 are
exercisable only “for the purposes of and in relation to arbitral
proceedings” and depend on such proceedings being on foot or
“proposed”: see section 44(3). That alone is sufficient in my
opinion to lead to a conclusion that section 44 has no bearing on
the question whether section 37 empowers the court to restrain the
commencement or continuation of foreign proceedings in the light
of an arbitration agreement under which neither party wishes to
commence an arbitration.
*
46 Section 44(2) is the modern successor to the First Schedule
to the Arbitration Act 1934 and section 12(6) of the Arbitration
Act 1950-section 44(2)(e) corresponds with paragraph 8 of the
First Schedule to and section 12(6)(h) of the 1950 Act. The matters
listed in section 44 are all matters which could require the court’s
intervention during actual or proposed arbitral proceedings. The
power to grant an interim injunction is expressed in general terms,
but is limited, save in cases of urgency, to circumstances in which
either the tribunal permits an application to the court or all the
other parties agree to this in writing. There is no power to grant a
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final injunction, even after an award. There is authority (not
requiring review on this appeal) that section 44(3) can include
orders urgently required pending a proposed arbitration to preserve
or enforce parties’ substantive rights—eg an order to allow
inspection of an agent’s underwriting records or to submit a
proposed transfer to a central bank: see Hiscox Underwriting Ltd v
60
Dickson Manchester & Co Ltd ; Cetelem SA v Roust Holdings
61
Ltd . Such orders can be said to be “for the purposes of and in
relation to arbitral proceedings”. But orders restraining the actual
or threatened breach of the negative aspect of an arbitration
agreement may be required both where no arbitration proceedings
are on foot or proposed, and where the case is not one of urgency
(and so not within section 44(3)). They enforce the negative right
not to be vexed by foreign proceedings. This is a right of a
different character both to the procedural rights with which section
44 is mainly, at least, concerned, and to the substantive rights to
which the Hiscox and Cetelem cases hold that it extends.
*
48 The better view, in my opinion, is that the reference in
section 44(2)(e) to the granting of an interim injunction was not
intended either to exclude the court’s general power to act under
section 37 of the 1981 Act in circumstances outside the scope of
section 44 of the 1996 Act or to duplicate part of the general
power contained in section 37 of the 1981 Act. Where an
injunction is sought to restrain foreign proceedings in breach of an
arbitration agreement—whether on an interim or a final basis and
whether at a time when arbitral proceedings are or are not on foot
or proposed—the source of the power to grant such an injunction
is to be found not in section 44 of the 1996 Act, but in section 37 of
the 1981 Act. Such an injunction is not “for the purposes of and in
relation to arbitral proceedings”, but for the purposes of and in
relation to the negative promise contained in the arbitration
agreement not to bring foreign proceedings, which applies and is
enforceable regardless of whether or not arbitral proceedings are
on foot or proposed. Colman J in Sokana Industries Inc v Freyre
62
& Co Inc was correct on this point when he held that the court’s
power to make orders “for the purpose of and in relation to a
reference” in section 12(6) of the Arbitration Act 1950 did not
include the granting of relief consisting of either a final or an
interim injunction to restrain an alleged breach of a London
Chamber of Commerce arbitration agreement consisting in the
commencement of proceedings in Florida.
60
[2004] 2 Lloyd’s Rep 438;
61
[2005] 1 WLR 3555
62
[1994] 2 Lloyd’s Rep 57
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*
56 Section 37 is a general power, not specifically tailored to
situations where there is either an arbitration agreement or an
exclusive choice of court clause. To adopt words of Lord Mustill in
63
the Channel Tunnel case , with reference to the relationship
between section 37 and the previous arbitration legislation (the
Arbitration Act 1950):
“Under section 37(1) by contrast the arbitration clause is
not the source of the power to grant an injunction but is
merely a part of the facts in the light of which the court
decides whether or not to exercise a power which exists
independently of it.”
The court may as a result need to be very cautious: “in the exercise
of its general powers under section 37 so as not to conflict with
any restraint which the legislature may have imposed on the
exercise of the new and specialised powers”: (p 364B–C).
However, it is, in my opinion, entirely understandable that
Parliament should not have thought to carve out from section 37 of
the Senior Courts Act or to reproduce in the 1996 Act one aspect
of a general power conferred by section 37. It cannot be deduced
from the fact that it did not do so that it intended that the general
power should never be exercised in any context associated with
arbitration.”
(Emphasis supplied)
These passages, in my view, do not hold, in any manner of speaking,
that no order restraining a plaintiff from pursuing a manifestly
oppressive and vexatious proceeding in a foreign judicial forum,
contrary to the contract with the defendant, can be passed under
Section 9 of the 1996 Act.
29.9.2 It is interesting to note, however, one significant difference
between Section 44 of the Arbitration Act 1996 applicable in the
64
UK , with which the Supreme Court was concerned, and Section 9 of
the 1996 Act. Sub-sections (1) and (2) of Section 44 of the UK
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[1993] AC 334, 360E–F
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Arbitration Act, which para 45 of the report sets out in extenso , read
thus:
“44 Court powers exercisable in support of arbitral
proceedings
(1) Unless otherwise agreed by the parties, the court
has for the purposes of and in relation to arbitral
proceedings the same power of making orders about the
matters listed below as it has for the purposes of and in
relation to legal proceedings.
(2) Those matters are – (a) the taking of the evidence
of witnesses; (b) the preservation of evidence; (c) making
orders relating to property which is the subject of the
proceedings or as to which any question arises in the
proceedings – (i) for the inspection, photographing,
preservation, custody or detention of the property, or (ii)
ordering that samples be taken from, or any observation be
made of or experiment conducted upon, the property; and
for that purpose authorising any person to enter any
premises in the possession or control of a party to the
arbitration; (d) the sale of any goods the subject of the
proceedings; (e) the granting of an interim injunction or the
appointment of a receiver.”
Section 44 of the UK Arbitration Act did not, therefore, contain any
“just and convenient” clause equivalent to Section 9(1)(ii)(e) of the
1996 Act. As against this, Section 37 of the Senior Courts Act, 1981
did contain such a provision, which read:
“The High Court may by order (whether interlocutory or final)
grant an injunction or appoint a receiver in all cases in which it
appears to the court to be just and convenient to do so.”
29.9.3 In para 48 of the report in Ust-Kamenogorsk , the Supreme
Court holds that, where the arbitration agreement contained a negative
covenant not to proceed outside the UK, a proceeding initiated in a
foreign country in violation of the negative covenant could be
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“the UK Arbitration Act” hereinafter
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injuncted from being prosecuted , though the power to grant such an
injunction would flow, not from Section 44 of the UK Arbitration Act,
but from Section 37 of the Senior Courts Act. Section 9 of the 1996
Act applicable in India combines the features of Section 44 of the UK
Arbitration Act and Section 37 of the Senior Courts Act; ergo, Ust-
Kamenogorsk would, contrary to what Mr. Sharma submits, actually
hold that the Section 9 court does possess the power to grant an anti-
enforcement injunction where the foreign proceedings are violative of
the exclusive jurisdiction clause in the contract between the parties –
which is equivalent to the negative covenant in the agreement with
which the Supreme Court was concerned in that case – and not that it
does not.
29.10 In any event, this Court has not been called upon, by the
petitioner, to stay the Dubai court decree, or its enforcement, as,
indeed, this Court cannot. What it intends to injunct, by this order, is
the prosecution of the enforcement proceedings, by the respondent, in
Dubai . The injunction is, therefore, against the respondent; certainly
not against the Dubai court.
29.11 Indeed, it is precisely because this Court cannot restrain the
Dubai court from proceeding, and can only restrain the respondent,
that the Court is constrained to pass a protective order of deposit
against the respondent and in favour of the petitioner, in the event that
the Dubai court decides to proceed with the enforcement, despite the
respondent being injuncted by this Court from so doing.
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29.12 Mr. Sharma also seeks to contend that the petitioner is, by this
petition, seeking to enforce the arbitration clause, which cannot be
granted under Section 9. He relies on para 17 of the judgment of the
Division Bench of this Court in Bharat Catering Corporation and
para 29 of the report in Bhatia International .
29.13 Para 17 of Bharat Catering Corporation reads thus:
“17. Apart from merits, even otherwise, in our view, the scope
and ambit of Section 9 do not envisage the restoration of a contract
which has been terminated. The learned Single Judge, in our view,
rightly held that if the petitioner is aggrieved by the letter of
termination of the contract and is advised to challenge the validity
thereof, the petitioner can always invoke the arbitration clause to
claim damages, if any, suffered by the petitioner. It is not open to
this Court to restore the contract under Section 9, which is meant
only for the sole purpose of preserving and maintaining the
property in dispute and cannot be used to enforce specific
performance of a contract as such. A bare glance at the said
Section will suffice to show that pending arbitration proceedings,
the Court and the Arbitral Tribunal have been vested with the
power to ensure that the subject matter of the arbitration is not
alienated or frittered away.”
The decision in Bharat Catering Corporation , plainly, does not, in
any manner, support Mr. Sharma’s contention that Section 9 cannot be
used to seek enforcement of an arbitration clause in a contract.
Indeed, the submission strikes at the very ethos of Section 9 which, as
the decisions cited earlier clearly hold, has, as its very raison d’etre ,
the protection and preservation of the arbitral corpus and the arbitral
process , and aims at ensuring, among other things, that the arbitration
clause is not reduced to a redundancy – which the respondent, with
possibly unintended Freudian candidness, admits to have done. This
is conceptually, and jurisprudentially, entirely distinct from seeking
specific performance of a contract which stands terminated. Bharat
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AN HARI SHANKAR
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Catering Corporation does not, therefore, help Mr. Sharma in his
endeavours.
29.14 Para 19 of Bhatia International – though subsequently
overruled on another point by Bharat Aluminium – reads:
“29. We see no substance in the submission that there would be
unnecessary interference by courts in arbitral proceedings.
Section 5 provides that no judicial authority shall intervene
except where so provided. Section 9 does not permit any or all
applications. It only permits applications for interim measures
mentioned in clauses (i) and (ii) thereof. Thus there cannot be
applications under Section 9 for stay of arbitral proceedings or to
challenge the existence or validity of the arbitration agreements
or the jurisdiction of the Arbitral Tribunal. All such challenges
would have to be made before the Arbitral Tribunal under the
said Act.”
It is well settled that a judgment of a Court is an authority only for
65
what it says, and not for what may logically seem to flow from it ,
and para 29 of Bhatia International certainly does not say that an
arbitration clause cannot be enforced in a Section 9 proceeding.
Rather, it recognizes that the Section 9 Court can grant all interim
measures envisaged by clauses (i) and (ii) of Section 9 and excludes ,
specifically, stay of arbitral proceedings, a challenge to the existence
or validity of arbitration agreements, and a challenge to the
jurisdiction of the Arbitral Tribunal. There is, therefore, no known
proscription, in the law, for an order under Section 9 of the 1996 Act
enforcing the arbitration agreement executed between the parties, by
which they have bound themselves. If either party acts in derogation
of the clause, the Court is not only empowered, but also duty bound to
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Refer UOI v Chajju Ram, (2003) 5 SCC 568
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Date:20.08.2024 22:49
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AN HARI SHANKAR
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interfere and injunct continuance of the derogation, in exercise of its
Section 9 jurisdiction.
29.15 Mr. Sharma’s submission that, in exercise of the jurisdiction
vested in it by Section 9 of the 1996 Act, this Court cannot grant the
reliefs sought in the petition is, therefore, rejected.
30. Re. submission that relief sought by petitioner is not in aid of
final relief in arbitration
Mr. Sharma’s submission that the relief sought by the petitioner is not
in aid of the final relief proposed in the arbitral proceedings has
obviously merely to be urged to be rejected. The question of
obtaining any final relief in the arbitral proceedings can arise only if
the arbitral proceedings are permitted to continue, and it is the
respondent’s own contention, in its written submissions, that there can
now be no question of arbitration, in the light of the Dubai court
decree. The petitioner has manifested its intention to resort to
arbitration as envisaged in the ADA – unlike the respondent who
seems to regard the ADA and its covenants as totally dispensable and
the Dubai court decree having admittedly resulted in the petitioner
being incapacitated from doing so, the petitioner is entirely justified in
invoking Section 9 of the 1996 Act to seek a restraint against the
respondent from enforcing the decree against the petitioner.
31. Re. Section 17 of the 1996 Act
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Date:20.08.2024 22:49
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31.1 Mr. Sharma also contended that, if Section 9 were to be
interpreted as permitting the Court to grant an anti-enforcement
injunction of a decree passed by a foreign Court, that power would
also ipso facto be available to an Arbitral Tribunal under Section 17,
as the powers of the Arbitral Tribunal under Section 17 and the power
of the Court under Section 9 are co-equal. This, he submits, is
obviously impermissible, and indicates that Section 9 can never be
read as empowering a Court to grant an anti-enforcement injunction of
a foreign decree.
31.2 The logical error in the argument is apparent. It is the Arbitral
Tribunal which, under Section 17, has been invested with the
jurisdiction to pass orders which a Court can pass under Section 9, and
not vice versa. Law is not arithmetic. The principle that, if a equals b,
b must equal a, may not apply in law, with the same inflexibility with
which it applies in arithmetic. It is the jurisdiction of the Arbitral
Tribunal, when called upon to exercise powers under Section 17,
which may have to be tested vis-à-vis the jurisdiction of a Court under
Section 9, and not vice versa. That occasion does not arise in the
present instance, and this Court is not, therefore, called upon to
deliberate on the jurisdiction of an Arbitral Tribunal under Section 17.
Section 9 is not statutorily, or otherwise, subject to Section 17. What
the Court is to identify is its jurisdiction under Section 9. That
identification is required to be undertaken on the basis of Section 9
and its various sub-sections or clauses, and not by examining whether
an Arbitral Tribunal, under Section 17, would, or would not, be able
to pass a similar order. If, within the parameters of the statute, and the
words used by it, a Court can, under Section 9 of the 1996 Act, grant
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Signing
Date:20.08.2024 22:49
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AN HARI SHANKAR
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