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PETITIONER: NATIONAL AGRICULTURAL COOPERATIVE MARKETINGFEDERATlON OF IND

       Vs.

RESPONDENT: ALIMENTA S.A.

DATE OF JUDGMENT26/10/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) RANGNATHAN, S.

CITATION:  1989 AIR  818            1988 SCR  Supl. (3) 548  1989 SCC  Supl.  (1) 308 JT 1988 (4)   721  1988 SCALE  (2)1612

ACT:     Arbitration  Act  1940, Section  35--Two  contracts  for supply  of goods--One of  the parties  invoking  arbitration clause--  Arbitrator appointed--In the meanwhile one of  the parties obtaining  permission of Supreme Court to file money suit since claims getting barred  by limitation--Money suits filed--Whether  other party entitled  to approach Court  and obtain stay of arbitration proceedings.

HEADNOTE:     The  petitioner  signed two contracts, one on  the  12th January.  1980  and the other on 18th August, 1980  for  the supply of Indian  H.P.S. Groundnut Kernels Javas to a  Swiss Company. On 20th  December, 1980 the petitioner informed the respondent not to nominate  any vessels to load goods as  it were unable to get necessary clearance  from the Government, and  by a telex message on 27th January. 1981  informed  the respondent that the goods could not be exported on   account of executive/legislative ban.     The respondent invoked the arbitration proceedings  with the  Federation  of  Oil  Seeds  and  Fats  Association  who informed  the  petitioner on 6th March, 1981 by a letter  of the appointment of an arbitrator. The petitioner  challenged the  arbitration  proceedings in the  Delhi High  Court.  On March  23rd. 1981 a stay order was passed   restraining  the arbitration proceedings, and on 11th December. 1981 the High Court held that no arbitration agreement existed with regard to   the second contract and as such nobody was entitled  to seek reference  to arbitration.     The  petitioner filed a special leave petition  to  this Court.  This Court passed an interim order granting  special permission  to  the respondent to file a money suit  in  any court  since  the  claims  were   getting  barred  by  time. Pursuant  to  this order the r respondent  filed  a  regular money  suit in a foreign court, and two identical  suits  in the Bombay High Court for recovering damages, for which  the written  statements were filed.                                                   PG NO 548                                                   PG NO 549     The petitioner moved an application in one of the  suits in  the High Court stating that in the interests of  justice

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pending  disposal of the three suits an injunction should be granted  restraining the  parties from proceeding  with  the arbitration,  and that the arbitration be stayed  under  the principles of section 35 of the Arbitration Act, 1940.   The High  Court  granted  interim  injunction  restraining   the parties   from  proceeding with arbitration. On  8th  March, 1985,  the  High Court  dismissed the notice of  motion  and held  that this Court’s order dated 2nd  December, 1983  was clear, there was no abandonment of the pending   arbitration proceedings  by the respondent and therefore stay could  not be  granted. This order was confirmed by the Division  Bench in appeal.     In  the S.L.P. to this Court the question  was:  whether the  High Court was right in declining to grant stay of  the arbitration proceedings.     Dismissing the application,     HELD:  1.  The High Court rightly held that  Section  35 does not apply. [556A]     Sujant  Singh v. Seth Mohinder Paul, AIR1964   Punj  395 ref. to.     2.  In  particular facts and circumstances  if  a  party filed  a suit to save limitation the same would not  vitiate the  award  or  make   the award bad  under  s.  35  of  the Arbitration Act.[555F]     3. Foreign awards automatically are not ‘lifeless award’ They  can  be  enforced in this  Court  in  accordance  with law.[556G]     Oil  & Natural Gas Common. v.Western Co. of N.  America, AIR 1987 SC 574 ref to.     4.  Whether  in a particular case it would be  just  and equitable to the parties to direct them to proceed with  the arbitration,   must depend upon the facts and  circumstances of a particular case having  regard to the legal  provisions applicable to a particular  Situation.[556A-D]     In  the  instant  case, there  is  a  valid  arbitration agreement  between the parties. In view of the direction  of this Court. the  continuation of the arbitration proceedings in respect of the filing of the   suit would not be bad.  In these  circumstances if the court declined to  exercise  its jurisdiction   under  section  151  of  the  Code  of  Civil Procedure to grant stay of the proceedings of arbitration in                                                   PG NO 550 London,  the court  has not acted in excess of  jurisdiction or has not exercised its  jurisdiction improperly. In such a situation   the   Appellate  Court   should   not   normally interfere.  In the premises, it would have been improper  to exercise any  jurisdiction to interfere. [557B-C]     V/C Tractoroexport, Moscow v. M/s Tarapore & Co. & Anr., [1970] 3 SCR 53; Serajuddin & Co. v. Michael Goldetz & Ors., AIR 1960 Cal. 47; In re All India Groundnut Syndicate  Ltd., [1945]  47 Bom. L.R. 420 and Ramji Dayawala & Sons (P)  Ltd. v. Invest  Import, [1981] 1 SCR 899. referred to.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Special Leave Petition  (Civil)No.6536 of 1988.     From  the  Judgment  and Order dated  26.4.1988  of  the Bombay High Court in Appeal No. 431 of 1988.     G.  Ramaswami,  Additional Solicitor General  and  Mukul Mudgal for the Petitioner.     Anil  B.  Diwan,  D.N. Misra,  M.P.  Bharucha  and  S.J. Vajifdar for the Respondent.     The Judgment of the Court was delivered by

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   SABYASACHI  MUKHARJI,J.  This application for  leave  to appeal  is  from the decision of the Division Bench  of  the High  Court of Bombay, dated 26th April, 1988. By  the  said decision the  Division Bench summarily dismissed the  appeal thereby affirming the  order of the learned Single Judge  of the High Court. On 12th January,  1980 the petitioner herein signed what has been treated as the first  contract with the respondent  for  the supply of 5000 Mts.  of  Indian  H.P.S. Groundnut Kernels Javas (hereinafter referred to as the said goods)  for the year 1979-8O. The second contract in respect of the same was  signed for 4000 Mts. on 3rd April, 1980.     On  18th August, 1980 since 3100 Mts. of  the  remaining first contract and total of 4000 Mts. of the second contract had   not been supplied, the contract was extended  for  the balance quantity  for the next crop season 1980-81. On  20th December.  1980 the  petitioner informed the respondent  not to  nominate any vessels to load  goods as they were  unable to get necessary clearance from the  Government.                                                   PG NO 551      The  petitioner  on  27th January, 1981  sent  a  telex informing  the  respondent  that  the  goods  could  not  be exported  on  account of executive/legislative ban  on  such exports.      On 6th March, 1981 the Federation of Oil Seeds and Fats Association (FOSFA) informed the petitioner by its letter of the appointment of an arbitrator because of non-shipment due to  Government’s  refusal. Thus the respondent  invoked  the arbitration proceedings with FOSFA. On 19th March, 1981  the petitioner  filed  a  petition  in  the  Delhi  High   Court challenging the arbitration proceedings by FOSFA. The  Delhi High  Court  on  23rd March, 1981 passed a  stay  order  and restrained  the  arbitration proceedings by FOSFA.  On  11th December,   1981,  the  Delhi  High  Court  held   that   no arbitration  agreement  existed with regard  to  the  second contract dated 3rd April, 1980 and as such none was entitled to  seek reference to arbitration. It was further held  that vis-a-vis the first contract dated 12th January, 1980  there was   an   arbitration   clause   existing.   The   National Agricultural Cooperative Marketing Federation of India Ltd., filed  a special leave petition in this Court on 1st  April, 1982 challenging the decision of the Delhi High Court on the ground  that  there was no valid  FOSFA  arbitration  clause incorporated in the first contract dated 12th January, 1980. On  2nd  December, 1983 this Court passed an  interim  order granting  special  permission to the respondent  to  file  a money  suit  in any court against the petitioner  since  the claims were getting barred by time. The said order stated as follows:      "The order of this court dated 30.4.1982 is modified to the  extent  that Alimenta S.A. is at liberty to  file  suit against  N.A.F.E.D. in respect of its claims/disputes  under the  two  contracts  dated  121.1980  and  3.4.1980.  It  is directed that such suit shall not constitute abandonment  of the  pending arbitrations instituted/commenced  by  Alimenta S.A. against N.A.F.E.D. or in any manner prejudice the  said arbitrations  or any awards made therein or the  enforcement thereof and shall not prejudice Alimenta’s contention in any of the cases."      On  17th December, 1983 the respondent filed a  regular money suit No. 488 of 1984 for an amount of US  $1,70,39,544 (equivalent to Rs. 17,93,93,440) and interest On the sum  of US  $  11,23,500 (equivalent  to  Rs.11,23,35,000).  Written statement  was  filed  by  the  respondent  raising  several objections, inter alia, limitation, maintainability etc.  On or  about  24th  July, 1984, the  respondent  filed  another

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identical  suit  in  the Bombay High Court  being  Suit  No.                                                   PG NO 552 2657/84  for   recovering  damages  for  which  the  written statement was filed on 20th March, 1984. The respondent also filed  another identical suit No. 1241 of 1981 in  the  High Court  on  21st  March,  1985 for  which  also  the  written statement was filed. The Supreme Court on 9th January,  1987 held that there was a valid arbitration clause in the  first contract  dated 12.1.1980. In January, 1987 the  respondents started arbitration proceedings in respect of FOSFA contract dated  12.1.1980.  In 1987, the  petitioner’s  Solicitor  in London  issued summons to restrain the  London  arbitration. The  arbitrator  thereafter  affirmed that  they  would  not proceed   with  the  arbitration  until   the   petitioner’s application for stay was finally disposed of. The petitioner moved an application in suit No. 1241 of 1985 in the  Bombay High Court stating that in the interests of justice  pending disposal  of the above three suits an injunction  should  be granted  restraining  the parties from proceeding  with  the arbitration   and  the  arbitration  be  stayed  under   the principles  of  Section 35 of the  Indian  Arbitration  Act, 1940. On 2nd January, 1988 the Bombay High Court granted  an interim  injunction restraining the parties from  proceeding with the arbitration. The learned Single Judge on 8th March, 1988  dismissed  the notice of motion holding,  inter  alia, that  this  Court’s order dated 2nd December, 1983  set  out hereinbefore  was  clear and, therefore, stay could  not  be granted. There was an appeal to the Division Bench.      On  28th  March,  1988 there was an  interim  order  in appeal  No.  431 of 1988 permitting the respondent  to  seek clarification from this Court regarding its order dated  2nd December, 1983. This Court disposed of the said  application by  stating  that the Bombay High Court might make  its  own order.  As mentioned hereinbefore the Division Bench of  the High  Court  dismissed  on  26th  April,  1988  the   appeal preferred  from the decision of the learned Single Judge  of that High Court. Hence, the petitioner seeks have to  appeal to this Court.      The question concerned here is, whether the High  Court was     right. The High Court noted that it was an  admitted position that under the first contract the defendant therein being  the  petitioner herein, has supplied 1900  Mts  while under  the  second contract the defendant has  not  supplied anything.  The  High  Court noted that  the  petitioner  has pleaded that the Government had not permitted supply of  any further  materials  to the plaintiff  being  the  respondent herein.  The  respondent  is a Swiss  Company.  As  per  the contract   the   respondent   had   initiated    arbitration proceedings  against the petitioner with the  Federation  of Oil Seeds and Fat Association (for brief called FOSFA London                                                   PG NO 553 in  1981  and had informed the petitioner  by  their  letter dated 10th March, 1981 for the appointment of an  arbitrator on  their  behalf. The defendant had  contended  that  there could not be any such arbitration and, therefore, it filed a petition  in  the  High Court  challenging  the  arbitration proceedings. The Delhi High Court on the 11th December, 1981 came  to the conclusion that as regards the  first  contract there  was a valid arbitration agreement and as regards  the second contract, there was no such arbitration agreement. In other  words, as regards the first contract  the  respondent herein could have proceeded with the arbitration while  with regard  to  the  second contract there was  no  question  of referring  the dispute to the arbitrator as such.  Both  the parties  had  filed special leave petitions to  this  Court,

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being 1755 of 1982 and 1756 of 1982 from the decision of the High  Court of Delhi. This Court admitted the  petition  but did not decide the matter immediately. In the meanwhile, the claim  of  the  plaintiffs  was getting  barred  by  law  of limitation  and,  therefore, they moved  this Court  for  an early  hearing. This Court instead of hearing  the  petition passed an order on 12th December, 1988 giving liberty to the respondent  to  file suit in respect of its claims.  It  was further  stated  that  filing  of  such  a  suit  would  not constitute   abandonment   of   the   pending    arbitration proceedings  instituted  or  commenced  by  the   respondent against the petitioner.      It is pursuant to this liberty that the respondent  had filed suit No. 488 of 1984. Thereafter, without  withdrawing the first suit but perhaps on the basis that there was  some technical  defect in the suit according to the  Bombay  High Court, the respondent had filed a second suit No. 2659/84 on 20th March, 1984. It had filed another suit No. 1241 of 1985 on  the very next date. All these suits were pending in  the High  Court  of Bombay. The cause of action  in  respect  of these suits is the same. It has been stated that the present suit  had  been  filed by way of  an  abundant  caution  and without  prejudice to the rights and  contentions  including the  arbitration proceedings. As a result of  this  decision the  respondent started their arbitration  proceedings  from the  stage at which it had been stayed earlier but  only  in respect of the first contract. The first notice of motion is for stay of these arbitration proceedings on the ground that the present suit as also the other two suits are pending and there  cannot  be  any multiplicity of  the  proceedings  in respect  of the same cause of action. The High  Court  noted further that in view of the decision of this Court giving it liberty  to  file  the proceedings  the  respondent  was  at liberty  to  proceed  with the  arbitration  proceedings  in respect  of  the first contract and having  regard  to  this position  it stated at the time of hearing of this  petition                                                   PG NO 554 before the High Court and also in its affidavit that it  was giving up claim in respect of the first contract.      The  learned Solicitor General who had appeared in  the Bombay High Court on behalf of the petitioner, which was the defendant, contended that it was not open to the  respondent to forego a part of its claim. The learned Solicitor General had also argued that the cause of action was one and it  was not open to the respondent to split up its cause of  action. The High Court, however, did not find any substance in  that argument. The High Court was of the view that there were two claims arising out of the two contracts and the claims could easily  be segregated or separated and that was  the  reason that  the High Court held that the respondent could give  up part of its claims which related to the first contract.      In our opinion, the High Court was right. Relying  upon the decision of this Court in V/C Tractoroexport, Moscow  v. M/s.  Tarapore  & Co. & Anr., [1970] 3 SCR 53,  the  learned Solicitor General had submitted before the Bombay High Court that though Section 35 of the Arbitration Act, 1940 does not apply,  the principles underlying the same would  apply  and those  principles were that arbitrators should  not  proceed with  arbitration  side  by  side  and  in  rivalry  or   in competition  with the Civil Court. It Was further  submitted before  the  High  Court that it  can  exercise  cognate  or similar powers possessed by it under Section 151 of the Code of  Civil  Procedure  and should avoid  the  possibility  of conflict of decisions. Reliance was placed on a decision  of the  Calcutta  High  Court in Serajuddin &  Co.  v.  Michael

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Goldetz  & Ors., AIR 1960 Cal. 47. In the said  circumstance it was submitted that the proper course was to restrain  the plaintiffs from getting the matter decided in London so long as  the  suit was pending and had not been disposed  of.  In view  of the fact that the subject matter of  the  reference was  the  same as in the plattings of the suit,  the  public tribunal  should  have precedence, it was submitted  by  the learned Solicitor General.      Reliance  was  also  placed on the  decision  of  India Groundnut  Syndicate Ltd., [1945] 47 Bom. L.R.  420.  Though there was no averment relating to inconvenience with  regard to the contract or proceedings in a foreign Contract learned Solicitor had relied on the decision of this Court in  Ramji Dayawala & Sons (P) Ltd. v. Invest Import, [1981] 1 SCR 899, and  submitted that it was more convenient for  adjudication in India then in London. In addition to this the high  costs of the arbitration and the restrictions on the  availability of  foreign-exchange were also highlighted before  the  High Court of Bombay, and in as much as the defence in action  in                                                   PG NO 555 India  as also the arbitration in London was the  same,  and the evidence was the same and the entire contract had to  be performed  by shipping the goods from India.  Therefore,  it was  submitted  that it was not necessary that  the  parties should be allowed to proceed with the arbitration in London. It  was also submitted that no prejudice would be caused  to the  respondent  if they are required to  proceed  with  the present  suit and not with the arbitration  proceedings.  On behalf  of  the petitioner, however, it had  been  contended that   the  respondent  was  interested  in   delaying   the proceedings  somehow  or the other. In support of  this  the petitioner  brought to the notice of the High Court that  in 1980  when the breach of contract took place, the  plaintiff instituted   arbitration  proceedings  and  the   respondent promptly filed petition in the Delhi High Court and got stay of  the  arbitration  proceedings.  Thereafter,  they   lost interest in the matter and the matter came to be decided  by this  Court  and  this Court by  its  order  dated  9.1.1987 expressed  and directed that the first contract was  subject to the arbitration agreement and there was no reason why the defendants  could not have proceeded with such  arbitration. It  further  appears  that sometime  in  October,  1987  the petitioner had taken out an originating summons in the  High Court  of Justice in London but the summons were not  served on the respondent. The arbitrators had given the  directions that they would proceed and not wait any further. And it was upon  this  that  the respondent  had  brought  the  present proceedings in the Bombay High Court. The High Court further felt  that  in  view of the decision of this  Court  on  2nd December,  1983  there  was no abandonment  of  the  pending arbitration proceedings by the respondent.      It  is  well-settled  that  in  particular  facts   and circumstances it a party files a suit to save limitation the same would not Vitiate the award or make the award bad under Section  35  of  the  Arbitration  Act.  Reference  in  this connection may be made to the observations of the Punjab and Haryana  High Court in Sujant Singh v. Seth  Mohinder  Paul, AIR 1964 Punj 395. The High Court felt that in the facts and circumstances of this case Section 35 of the Arbitration Act does not apply, which postulates that neither any  reference nor  any award shall be rendered invalid by reason  only  of the commencement of the legal proceedings upon the  subject- matter of the reference but when the legal proceedings  upon the   whole  subject-matter  of  the  reference  have   been commenced  between  all  the parties to  the  reference  and

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notice  has been given to the arbitrator or the umpire,  all further  proceedings in a pending reference shall  unless  a stay of proceedings is granted under Section 34, be invalid. The  High  Court  held, and in our  opinion   rightly,  that                                                   PG NO 556 Section  35 does not apply. The order of this Court set  out hereinbefore  clearly  permits  the  continuation  of  legal proceedings  in  suit  and cannot  operate  to  nullify  the arbitration   proceedings   in  London.  The   High   Court, therefore,  declined  to  grant  stay  of  the   arbitration proceedings.  Was the High Court right, is the  question  in this application.      Reliance was placed by the learned Additional Solicitor General  Mr.  G. Ramaswamy before us on a decision  of  this Court  in  Oil  & Natural Gas Commn. v. Western  Co.  of  N. America,  AIR  1987  SC 674 for the proposition  that  in  a situation  of the present type it would be improper  to  ask the petitioner to go on with the arbitration in London.  The facts  there were entirely different from the  facts  before us.  Section 151 of the Code of Civil Procedure on the  bais of  which and on the principle of which stay of  proceedings in London was sought, are well-settled and these  principles are  whether  in  a particular case it  would  be  just  and equitable to the parties to direct them to proceed with  the arbitration, must depend upon the facts and circumstances of a  particular  case having regard to  the  legal  provisions applicable  to  a  particular  situation.  In  the  decision referred to hereinbefore this Court took into  consideration the  fact that there was an application under Sections 30  & 33  of  the  Arbitration Act for setting  aside  the  awards rendered  by  the umpire in that case and that there  was  a possibility of the award rendered by the Umpire being stayed by the Indian court. This Court also took into consideration that  in that event an extremely anomalous  situation  would arise  inasmuch as the successful party the Western  Company might  well  have recovered the amount awarded  as  per  the award  from the assets of the losing party in  U.S.A.  after procuring the judgment in terms of the award from the U.S.A. court.  Such possibility of damage and danger is  absent  in the present case. In the said decision before this Court  by the  contract  therein  the  Indian  courts  had   exclusive Jurisdiction  and it would, however, be improper to  proceed on   the  basis  that  the  Indian  courts  have   exclusive jurisdiction  to affirm or set aside the award in  terms  of the  proper law of the contract, or in terms of  the  actual contrast  between the parties. Foreign awards  automatically are  not  ’lifeless awards’. They can be  enforced  in  this country  in accordance with law. See in this connection  the Foreign Awards (Recognition and Enforcement) Act, 1961.      Furthermore,  unlike  the  case of Oil  &  Natural  Gas Commission this is not a case of restraining the  respondent from  proceeding  in  a foreign court. This  is  a  case  of binding  the  parties  to their bargain  for  going  to  the arbitration.  The learned Single Judge of the High Court  in                                                   PG NO 557 the  instant  case had taken into account all  the  relevant facts.  It had considered the contract of the  parties,  the arbitration  agreement, the statement made on behalf of  the respondent and had thereafter exercised its jurisdiction not to  stay the proceedings of arbitration in relation  to  the first  contract.  There  is a  valid  arbitration  agreement Between the parties. In view of the direction of this Court, the  continuation of the arbitration proceedings in  respect of  the  filing  of  the suit would not  be  bad.  In  those circumstances   if  the  court  declined  to  exercise   its

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jurisdiction  under  Section  151  of  the  Code  of   Civil Procedure to grant stay of the proceedings of arbitration in London,  the court, in our opinion, has not acted in  excess of  jurisdiction  or  has  not  exercised  its  jurisdiction improperly.  In such a situation the Appellate Court  should not normally interfere. In the premises, it would have  been improper to exercise any jurisdiction to interfere. See  the observations of this Court in Ramji Dayawala & Sons (P) Ltd. (supra).  There  will  be  no stay  of  the  arbitration  in relation to the first contract only.      In  the  Premises,  it would not be proper  for  us  to interfere  with  the judgment of the Division Bench  of  the High  Court.  The  application,  therefore,  fails  and   is accordingly dismissed.      N.V.K.