w w w . L a w y e r S e r v i c e s . i n


Liberty Commodities Ltd. v/s Reliance Trade Corporation PLC & Others

    Civil Revision Petition No.1609 of 2005
    Decided On, 05 July 2005
    At, High Court of Andhra Pradesh
    By, THE HONOURABLE MR. JUSTICE D.S.R. VARMA & THE HONOURABLE MS. JUSTICE G. ROHINI
    For the Petitioner: K.V. Simhadri, Advocate. For the Respondents: R1, D. Seshadri Naidu, R3 to 4, A. Rajasekhara Reddy, (Asst. Solicitor General), Advocate.


Judgment Text
(Petition under Article 227 of Constitution of India, to against the order dated: 28-2-2005 in O.P.No.50 of 2005 on the file of the court of the IV Additional District Judge, Kakinada)


Rohini, J.


This is a Revision filed under Article 227 of the Constitution of India by the 1st respondent in O.P.No.50 of 2005 on the file of the Court of the III-Addl. District Judge, Kakinada, aggrieved by the order dated 28-2-2005 in having entertained O.P.No.50 of 2005 and also granting ad interim injunction restraining the Revision Petitioner from alienating, transferring, encumbering or creating their party rights in the Cargo which is on board the M.V. ORMOS and further directing not to move the cargo until and unless the Revision petitioner furnishes Bank Guarantee to a sum of US $ 2,171411.39.


The facts in brief may be noted as under:


The Revision petitioner (Liberty Commodities Limited) and the first respondent herein (Reliance Trade Corporation) are the Companies incorporated under the Laws of England, carrying on trading activities having their registered offices at London. By Voyage Charter-party dated 17-09-2004, the owners of M.V. SEA ORCHID viz Bayfield Shipping agreed with the first respondent Company to carry a cargo of rice from Bangkok in Thailand to Warri in Nizeria. The first respondent Company in turn entered into Sub-charter party dated 20-09-2004 with the Revision petitioner for the carriage of the said cargo of rice from Bangkok to Warri in Nizeria. It is not in dispute that in terms of the arbitration clause contained in the respective Charter Parties, all the disputes between the first respondent Company and the owners of M.V. SEA ORCHID on the one hand and the first respondent Company and the Revision petitioner on the other are liable to be resolved by arbitration in London and all disputes shall be subject to English law.


It appears that as agreed M.V. SEA ORCHID sailed from Bangkok for Warri on 2-10-2004, however certain disputes arose between the first respondent and the Revision petitioner with regard to carriage of cargo of rice on board the M.V. SEA ORCHID and consequently as per the arbitration clauses provided under the agreements, an Arbitrator has been appointed and the arbitration proceedings are in progress in England.


While so, the first respondent Company has invoked the jurisdiction of the Court of the III-Addl. District Judge, Kakinada under Section 9 of the Arbitration and Conciliation Act, 1996 (for short, ‘the Act’) seeking certain reliefs against the Revision Petitioner and the owners of a Motor Vessel – ORMOS, anchored in Kakinada Port, who were arrayed as respondents 1 and 2 respectively to the said petition. The prayer in the said petition runs as under:


a) That this Hon’ble Court be pleased to restrain, by an order of permanent and mandatory injunction, the respondents, their servants and/or agents and/or any other party or person acting and/or interested in relation to cargo on board the motor vessel ORMOS from alienating, transferring, encumbering, creating third party rights, disposing of, dealing with and or selling the cargo on board the M.V. ORMOS and/or removing the said cargo from the jurisdiction of this Hon’ble Court;


b) For a permanent order and injunction of this Honb’le Court restraining the respondents, their servants and/or agents from sailing or causing to sail the motor vessel “ORMOS” at presently lying at the port and harbour of Kakinada with the cargo belonging to the 1st respondent on board, unless and until a sum of US $ 2,171,411.39 (United States Dollars Two Million One Hundred Seventy One Thousand Four Hundred Eleven and Cents Thirty Nine) is duly secured to the petitioners, either by way of deposit of the sum thereof into this Hon’ble Court may deem appropriate, in the facts and circumstances of the case;


c) For a permanent order and injunction of this Hon’ble Court restraining the 1st respondents, their servants and / or agents from paying and / or remitting and / or crediting to the 2nd respondents and / or their nominees, and restraining the 2nd respondent from receiving any amounts either by way of freight, demurrage, charter hire, detention charges or otherwise, unless and until the outstanding sum liable to be secured to the petitioners from the 1st respondent, viz, the sum of US $ 2,171,411.39 (United States Dollars Two Million One Hundred Seventy One Thousand Four Hundred Eleven and Cents Thirty Nine) is so duly secured to the petitioners, either by way of deposit of the sum thereof into this Hon’ble Court, or by virtue of a bank guarantee in such sum duly executed in favour of the petitioners and / or the Registry of this Hon’ble Court, or by way of such security as this Hon’ble Court may deem appropriate, in the facts and circumstances of the case;


d) That a Receiver or Commissioner or such other person as this Hon’ble Court may deem appropriate be appointed by this Hon’ble Court in respect of the cargo on board the motor vessel ORMOS, with full powers, including to bring such cargo to sale, and to pay there out the monies adjudicated as due and payable by the 1st respondent to the petitioners under an Award as may be made in arbitral proceedings between the petitioners and the 1st respondent, towards and in satisfaction of the sum due to the petitioners from and against the 1st respondent;


e) Wholly in the alternative to the prayer clauses hereinabove, for an order of attachment before judgment under Order XXXVIII Rule 5 of the Civil Procedure Code, 1908, in respect of the cargo on board the said motor vessel “ORMOS” at present lying in the Port/Harbour of Kakinada and / or on the money remittable to the 2nd respondent towards freight, demurrage, charter hire, detention charges or otherwise:


f) For ad interim / interim reliefs in terms of prayers (a) through (e) above be granted;


g) That this Hon’ble Court be pleased to order and direct the 1st respondent to pay to the petitioners the costs incurred by the petitioners;


h) That this Hon’ble Court pass such other and further order (s) as it may deem fit and proper in the facts and circumstances of the case.


The case of the first respondent Company was that due to breach of Charter-party dated 28-09-2004 the Revision petitioner is liable to pay by way of demurrage and detention charges to the tune of US $ 2,171,411.39. It was alleged that the Revision petitioner is on the verge of bankruptcy and it has been encumbering all its assets to defraud its creditors and that the very last shipment the Revision petitioner will be affecting is the cargo of rice on board the motor vessel – ORMOS anchored in the high seas sailing from Kakinada port. It was claimed that the Revision Petitioner is the title-holder in respect of the cargo of rice onboard the M.V. ORMOS having purchased the same from I.T.C. Limited which is worth roughly US $ 2,960,000. Except the said cargo on board the M.V. ORMOS, there are no other identifiable assets of the Revision petitioner for satisfaction of any award in favour of the first respondent in the arbitration proceedings. It was alleged that the conduct of the Revision petitioner establishes that they are attempting to delay and defeat the realization of the amounts which are due and outstanding to the first respondent Company and in the event the Revision petitioner removes cargo on board the M.V. ORMOS, there is an imminent likelihood that the first respondent company will be left with no security for their claim against the Revision petitioner. Hence, it was prayed that permanent and mandatory injunction may be granted restraining the respondents from alienating, transferring, encumbering, creating third party rights with the cargo on board the M.V. ORMOS and for other reliefs as specified above. Along with the said petition filed under Section 9 of the Act, the first respondent Company also moved an Interlocutory Application under Order 39 Rules 1 and 2 of C.P.C. seeking temporary injunction restraining the respondents from alienating, encumbering, creating third party rights or dealing with and or selling cargo on board the M.V. ORMOS and / or removing the said cargo from the jurisdiction of the Court unless and until a sum of US $ 2,171,411.39 is duly secured either by way of deposit into the Court or by way of Bank guarantee.


However, the office of the Court below raised an objection as to the maintainability of the said petition being filed under Section 9 of the Act and consequently the matter was placed before the Court for consideration. In pursuance thereof, the learned Addl. District Judge made an order dated 28-2-2005 as under:


“Heard, Perused the decisions referred vide AIR 2002 SC 1432 and 2004 (1) Arbitration Law Report 560 of the Hon’ble High Court of A.P. In view of the referred decisions number the petition if otherwise in order.”


The learned Additional District Judge having entertained the petition under Section 9 of the Act, which was numbered as O.P.No.50 of 2005, by a separate order dated 28-2-2005 granted ad interim injunction against the respondents 1 and 2 (the Revision petitioner and the owners of M.V. ORMOS) and their men with regard to cargo on board the M.V. ORMOS. The operative portion of the said order runs as under:


“Issue ad-interim injunction against the respondents 1 and 2 and their men from alienating, transferring encumbering or creating 3rd party rights in the Cargo (cargo which is on Board the M.V. ORMOS) and they are also directed not to move the Cargo until and unless R1 gives Bank Guarantee to a sum of US. Dollars 2,171,411.39.”


Aggrieved by the same, this Revision Petition is filed by the 1st respondent in O.P.No.50 of 2005 under Article 227 of the Constitution of India contending that the impugned orders are arbitrary, illegal and without jurisdiction.


We have heard the learned Counsel for both the Parties at length and perused the material on record.


The learned Senior Counsel Sri D. Prakash Reddy, appearing for the Revision Petitioner, submits that the Court below had no territorial jurisdiction in the matter as both the petitioner and the 1st respondent are Companies incorporated under the Laws of England and having registered office in England and carrying on trading activities from England. He submits that no cause of action has arisen to initiate action within the territorial jurisdiction of Kakinada or in India. As such, according to the learned Senior Counsel entertaining the application under Section 9 of the Act and passing an Exparte order of interim injunction is illegal and without jurisdiction.


On the other hand, Sri Nooty Ramamohana Rao, the learned Counsel appearing for the 1st respondent submits that since the cargo belonging to the Revision Petitioner is lying on board the M.V. ORMOS within the waters of Kakinada, thus within the jurisdiction of the District Court at Kakinada, the dispute is amenable to the Court at Kakinada and therefore the Court below has jurisdiction to entertain and try the proceedings under Section 9 of the Act. In support of his contention, the learned Counsel placed reliance upon the decision of the Supreme Court in Bhatia International Vs. Bulk Trading S.A. (2002) 4 SCC 105.


Having regard to the rival contentions raised, the only point that arises for considerations is whether the Court of Addl. District Judge at Kakinada has jurisdiction to entertain the petition filed by the 1st respondent under Section 9 of the Act.


For proper appreciation of the controversy involved, it would be appropriate to extract Section 9 of the Act which reads as under:


“9. Interim measures, etc. by court:- 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 authorizing for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorizing 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.”


On a plain reading of Section 9 of the Act, it is clear that a party can make an application for grant of the interim reliefs as provided therein either before commencement of the arbitral proceedings or during the arbitral proceedings or at any time after the making of arbitral award, however before it is enforced in accordance with Section 36 of the Act.


In the case on hand, it is not in dispute that the arbitral proceedings are pending at London. It is also not in dispute that as per the arbitration clause under the respective Head and Sub-Charter parties all disputes arising from the Charter party shall be subject to English Law and to arbitration in London. The relevant arbitration clause runs as under:


“Any dispute arising from this Charterparty shall be subject to English Law and to arbitration in London, which jurisdiction is recognized and accepted by both parties to this agreement.”


In the light of the above clause, the learned Senior Counsel for the Revision Petitioner points out that the parties are governed by the (English) Arbitration Act, 1996 and as such it is not open to the 1st respondent to invoke the provisions of Arbitration and Conciliation Act, 1996. However, the learned Senior Counsel submits that for the purpose of the present case, even assuming without conceding that the 1st respondent Company is entitled to invoke the jurisdiction under Section 9 of the Act. The Court of Addl. District Judge at Kakinada where the petition under Section 9 of the Act was filed does not have jurisdiction to entertain the petition.


Elaborating his argument, the learned Senior Counsel points out that under Section 9 of the Act the party has to apply to a Court as defined under Section 2 (1) (e) of the Act. He submits that to fall within the meaning of the “Court” as defined under Section 2 (1) (e) of the Act, the Court shall be such which is competent under the law to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit


Section 2 (1) (e) of the Arbitration Act which defines the Court may be extracted as under:


2 (1) (e): “Court” means the Principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes; (emphasis supplied)


As can be seen in terms of the definition of the word “Court” under Section 2 (1) (e) of the Act, the proper Court should be not only the Principal Civil Court of original jurisdiction in a district, but it shall also have jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of the suit.


The learned senior Counsel does not dispute the fact that the Court of the Addl. District Judge at Kakinada which passed the orders impugned is the Principal Civil Court of original jurisdiction in the District. He, however, contends that the said Court does not have the jurisdiction to decide the questions forming the subject matter of the arbitration pending between the parties if the same had been the subject matter of the suit. He submits that neither of the parties resides or carries on business within the local limits of the Court at Kakinada nor any part of the cause of action has arisen within the jurisdiction of the said Court and therefore under Section 20 of C.P.C. the Court at Kakinada is not competent to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit.


The learned Counsel for the 1st respondent Sri Nooty Ramamohana Rao while supporting the view expressed by the Court below, reiterates that the law laid down in Bhatia International’s case (1 supra) a complete answer with regard to the objection raised by the Revision petitioner that the Court of the Addl. District Judge at Kakinada has no jurisdiction to entertain the petition under Section 9 of the Act. While extensively referring to several paras in the said judgment, the learned Counsel submits that as held by the Apex Court, the Act applies to arbitrations which are held in India between Indian Nationals and also to International Commercial Arbitrations whether held in India or out of India. He submits that in the absence of an express clause in the agreement ousting the jurisdiction or excluding the applicability of the provisions of the Act, the Courts in India would have jurisdiction even in respect of an International Commercial Arbitration which takes place outside India.


In Bhatia International’s case (1 supra), the appellant therein entered into a contract with the 1st respondent on 9-5-1997. The said contract contained an arbitration clause which provided that the arbitration was to be as per the rules of the International Chamber of Commerce. On 23-10-1997 at the instance of the 1st respondent and with consent of both the parties to have the arbitration in Paris, the International Chamber of Commerce appointed a sole Arbitrator. While so, the 1st respondent filed an application under Section 9 of the Act before the III-Addl. District Judge, Indore, M.P. against the appellant and the 2nd respondent seeking certain interim reliefs including an order of injunction restraining the said parties from alienating, transferring and / or creating third party rights, disposing of their business assets and properties. The appellant raised an objection as to the maintainability of such an application on the ground that Part-1 of the Act would not apply to arbitrations where the place of arbitration is not in India. The said application was dismissed by the III-Addl. District Judge, Indore holding that the Court at Indore had jurisdiction and the application under Section 9 of the Act was maintainable. Questioning the same, the appellant filed a Writ Petition before the High Court of Madhya Pradesh, Indore Bench, but the same was dismissed. On appeal, the Supreme Court considered the scope and object of various provisions of the Act in detail and held as under:


“………. The provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement. Express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply.”


While explaining the definition of Section 2 (1) (f) of the Act which defines “International Commercial Arbitration”, the Supreme Court held that the said definition makes no distinction between International Commercial Arbitrations held in India or outside India.


On a careful reading of the judgment in Bhatia International’s case (1 supra), it is clear that the main question that fell for consideration in the said case was whether the provisions of Part I do not apply to arbitrations which take place outside India in view of sub-Section (2) of Section 2 of the Act. In the said case, only one of the parties was a Foreign National. The question whether the Court of the III-Addl. District Judge, Indore is a Court within the meaning of Section 2 (1) (e) of the Act was not the subject matter of the debate in Bhatia International’s case (1 supra). The only question that was raised was whether the Court at Indore was competent to entertain the application under Section 9 of the Act as Part I of the Act did not apply to arbitrations which take place outside India. In that context, the Apex Court held that the Legislature did not intend to exclude the applicability of Part I to arbitrations which takes place outside India.


As a matter of fact, the Apex Court while referring to the definition of the “Court” under Section 2(1)(e) of the Act observed that a Court is one which would otherwise have jurisdiction in respect of the subject matter. Thus, it is clear that the Court must have territorial jurisdiction with regard to the subject-matter of the arbitration proceedings under Sections 15 to 20 of C.PC. in the same way as determined in any Civil Suit.


In the case on hand, both the Revision petitioner and the 1st respondent are the companies registered under the Laws of England having their registered offices in England and carrying trading activities from England and the agreement in question governs the English Laws by express choice of both the parties. Admittedly, the subject matter of the Arbitration which is in progress in England is the dispute between the Revision petitioner and the 1st respondent pertaining to the claim for demurrages for delay in discharging the cargo which was on board M.V. SEA ORCHID at the point of delivery at Warri, Nizeria.


Even assuming that the Revision petitioner is holding title to the cargo of rice lying in the vessel M.V. ORMOS anchored at Kakinada port, the fact remains that the said cargo does not form part of the subject-matter of the arbitration which is in progress in England. The learned Counsel for the first respondent does not dispute the fact that cargo on board the M.V. ORMOS has nothing to do with the dispute between the Revision petitioner and the first respondent under the Sub-charter party dated 28-9-2004 which is the subject matter of Arbitration in England. As can be seen from the averments of the first respondent in O.P.No.50 of 2005, the Sub-charter party between the parties was for transportation of cargo from Bangkok to Warri in Nizeria. In the circumstances, if any dispute arises under the said Sub-charter party, even assuming that there is no arbitration agreement between the parties if a suit was to be brought by either of the parties to the Sub-charter party such suit could not have been brought before the Court at Kakinada since neither of the parties to the dispute is residing within the jurisdiction of the said Court nor any part of cause of action based on which the suit could have been filed, arose in the jurisdiction of the said Court.


As expressed above, we are of the view that the “Court” within the meaning of Section 2(1)(e) of the Act is only the Court which would have jurisdiction with regard to the subject-matter of the arbitration if the disputes were sought to be adjudicated by way of a suit. If the Court does not have jurisdiction to entertain such a suit equally the Court is not competent to entertain the petition under Section 9 of the Act.


Though the learned Counsel for the first respondent vehemently contended that keeping inview the object of the Act which is a special enactment, it should be held that the Court at Kakinada is competent to entertain the petition in question so as to strengthen the efficacy and effectiveness of the arbitration proceedings and submitted that in the absence of such power, the party would be

Please Login To View The Full Judgment!
left remediless, we are unable to agree. The interpretation as sought to be given by the learned Counsel would render the later part of the definition of “Court” under Section 2 (1)(e) of the Act redundant and otiose. The contention of the learned Counsel, if accepted would confer jurisdiction on all the Courts to entertain the petition under Section 9 of the Act irrespective of the fact whether such Court is one which would otherwise have jurisdiction in respect of the subject-matter of the arbitration if the same had been the subject-matter of suit. Such interpretation would run contrary to the purport and object of Section 2 (1)(e) of the Act. In our considered opinion, the Legislature did not intend to confer jurisdiction on all the Courts whether or not such Court has jurisdiction in respect of the subject-matter of arbitration. For the aforesaid reasons, we are of the view that the Court below was in error in having entertained O.P.No.50 of 2005 under Section 9 of the Act following the decision in Bhatia International’s case (1 supra) since the question with regard to the interpretation of the word ‘Court’ within the meaning of Section 2 (1)(e) of the Act was neither considered non decided in the said decision. No other decision has been placed before us by the respondents in which a contrary view has been expressed with regard to the interpretation of Section 2(1)(e) of the Act. The further contention raised by the learned Counsel for the first respondent with regard to the maintainability of the Revision Petition under Article 227 of the Constitution of India on the ground that the order impugned is not a final order and that the petitioner ought to have submitted itself to the hearing before the Court below is also without any substance. As held in Surya Dev Rai Vs. Ram Chander Rai (2003) 6 supreme Court Cases 675, it is always open to this Court to exercise its supervisory jurisdiction under Article 227 of the Constitution of India when a subordinate court assumed a jurisdiction which it does not have. As expressed above, since the Court below has no jurisdiction at all to entertain the petition under Section 9 of the Act and to grant the reliefs as prayed for with regard to the cargo on board the M.V. ORMOS, in our considered opinion the matter warrants interference under Article 227 of the Constitution of India and the impugned orders which are vitiated by lack of jurisdiction are liable to be set aside. Accordingly the Revision Petition is allowed holding that O.P.No.50 of 2005 cannot be maintained in the Court at Kakinada. Consequently, the order dated 28-2-2005 in I.A.No.464 of 2005 which is without jurisdiction is set aside. No costs.
O R