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Thursday, December 12, 2013

Arbitration & conciliation Act - Main agreement contains Arbitration clause between main parties - Internal agreements between the parties to main agreement among them respectively with third parties though not contained arbitration clause and when those are subject to main agreement - No civil court hold jurisdiction to resolve the dispute between the parties in respect of main subject - only remedy is through the arbitration only High court and DB wrongly hold as novation of contract and wrongly nullified the arbitration clause - When arbitration clause is valid one - the parties have no remedy in civil court only before arbitration = CHATTERJEE PETROCHEM CO. & ANR ………APPELLANTS Vs. HALDIA PETROCHEMICALS LTD.& ORS. ……… RESPONDENTS =Published in / cited in / Reported in judis.nic.in/supremecourt/filename=41063

 Arbitration & conciliation Act - Main agreement contains Arbitration clause between main parties - Internal agreements between the parties to main agreement among them respectively with third parties though not contained arbitration clause and when those are subject to main agreement - No civil court hold jurisdiction to resolve the dispute between the parties in respect of main subject - only remedy is through the arbitration only   High court and DB wrongly hold as novation of contract  and wrongly nullified the arbitration clause - When arbitration clause is valid one - the parties have no remedy in civil court only before arbitration  = 

On 21st March, 2012, the appellant  Chatterjee  Petrochem  (Mauritius)
Company (hereinafter referred to as ‘CPMC’) filed a request for  arbitration
in International  Chamber  of  Commerce  (ICC),  Paris  in  relation  to  an
agreement of restructuring which was entered into between  CPMC,  Government
of West Bengal, West Bengal Industrial  Development  Corporation  (in  short
‘WBIDC’) and Haldia Petrochemical Limited (in short ‘HPL’) on 12th  January,
2002. 
As per the Agreement, the Government  of  West  Bengal  was  to  cause
WBIDC to transfer existing shareholding to CPMC to ensure  that  CPMC  holds
51% of the total paid  up  capital  of  HPL.  
Clause  15  of  the  Agreement
provides for reference of all disputes, in any  way  relating  to  the  said
Agreement or to the business of or affair of HPL to the Rules  of  the  ICC,
Paris.=
 1. Can the Arbitration  clause  under  clause  15  of  the  letter  of
        Agreement dated 12th January, 2002 be invoked by the appellants and
        whether Clause 7.5 of the subsequent  Agreement  dated  8th  March,
        2002 invoking the exclusive jurisdiction of the courts of  Calcutta
        nullify the scope of  arbitration  as  mentioned  in  the  previous
        agreement dated 12th January, 2002? = No

Clause 1 of the supplementary agreement dated 30th  July,  2004  reads
as under:
      “Pursuant to the said Principal Agreement GoWB  has  caused  WBIDC  to
      transfer to Chatterjee Petrochem (India) Private  Limited  (CPIL),  an
      affiliate of CPMC Rs. 155 crores of shares from  the  shareholding  of
      WBIDC existing on the date of principal agreement…”
                            (emphasis laid by this Court)

The abovementioned clause goes to show that CPIL is an  affiliate  of  CPMC.
This is to say, that by means  of  the  letter  dated  8th  March,2002  CPMC
becomes a guarantor whereas CPIL becomes the borrower. Therefore,  the  same
does not change the rights and responsibilities of  the  parties  under  the
agreement dated 12th January, 2002.

27. Further, the letter written by CPMC to WBIDC along  with  the  agreement
dated 8th March, 2002 reads as follows:
      “…It is clarified that the aforesaid shall not prejudice  any  of  our
      rights under the said Agreement dt. January 12, 2002 and all terms and
      conditions  thereof  shall  continue  to  remain  valid,  binding  and
      subsisting between the parties to be acted upon sequentially”.
                                               (emphasis laid by this Court)

The content of this letter goes  to  show  that  the  agreement  dated  12th
January, 2002 remains the principal  agreement  while  agreement  dated  8th
March  2002  remains  a  supplementary  agreement  which   was   meant   for
restructuring of HPL on urgency.

28.   Further, and most importantly, the agreement entered into between  the
parties dated 30th July, 2004 states as follows:
      “WHEREAS the Parties  hereto  had  entered  into  an  agreement  dated
      January  12,  2002  (hereinafter  referred   to   as   the   principal
      agreement….”


Also, the Agreement dated 30th July, 2004 which  is  based  on  shareholding
issues, also notes through clause 6 that:
      “6. The Parties hereby agree, record and confirm that all other  terms
      and conditions as contained in  the  said  Principal  Agreement  shall
      remain  binding,  subsisting,  effective,  enforceable  and  in  force
      between the parties.”
                                               (emphasis laid by this Court)


The abovementioned clauses of the subsequent  Agreements  dated  8th  March,
2002 and 30th July, 2004 go to show that there has  been  no  alteration  in
the nature of rights and responsibilities of the  parties  involved  in  the
contract. Consequently, there has been no novation of the contract.


     2. Is the suit, filed by the respondents, seeking  injunction  against
        arbitration of disputes between  the  parties  sought  for  by  the
        appellants as per Clause 15 of the principal agreement referred  to
        supra maintainable in law? = No
Further, it is pertinent to read Clause 7.5 of the Agreement  dated  8th
March, 2002 carefully. Clause 7.5 reads thus:
      “Jurisdiction: Courts at Calcutta alone shall have jurisdiction in all
      matters relating to this Agreement.”
The phrase ‘this agreement’ means the Agreement dated 8th March, 2002  which
is essentially a supplementary Agreement and does not,  by  any  mean,  make
the  Principal  Agreement  dated  12th  January,   2002   subject   to   the
jurisdiction of the Court.

 3. What Order? =
Normally,  the   parties   to   the arbitration
             agreement calling for arbitral reference should be the same  as
             those to the an action. 
But this general concept is subject  to
             exceptions which  are  that  when  a  third  party,  i.e.  non-
             signatory party,  is  claiming  or  issued  as  being  directly
             affected through a party to the arbitration agreement and there
             are principal and subsidiary agreements, and such  third  party
             is signatory to a subsidiary agreement and not to the mother or
             principal agreement which contains the arbitration clause, then
             depending upon the facts and circumstances of the  given  case,
             it may be possible to say that even such  third  party  can  be
             referred to arbitration.”
                       


37. The respondent no.1 has filed a suit seeking two  remedies  against  the
appellants: 
firstly, 
that the Arbitration Agreement contained in  Clause  15
of the Agreement dated January 12, 2002 is void and/or unenforceable  and/or
has become inoperative and/or incapable of being  performed,  and  
secondly,
the respondent no.1 sought permanent injunction  restraining  the  appellant
herein from initiating and/ or  continuing  with  the  impugned  Arbitration
proceedings bearing case no. 18582/ARP pursuant to the Impugned  Arbitration
Agreement contained in clause 15 of the Agreement  dated  January  12,  2002
and the Request for Arbitration dated March 21, 2012 and  the  communication
dated  April  02,  2012  issued  by  defendant  no.  8  in  the  Arbitration
proceedings connected therewith and incidental thereto.

      Since, we have already held that the arbitration clause is valid, suit
filed by the respondent no.1 for declaration  and  permanent  injunction  is
unsustainable in law and the suit is liable to be dismissed.
  In view of the above, we direct the parties to  resolve  their  disputes
through arbitration as mentioned in clause 15 of  the  letter  of  Agreement
dated 12th January, 2002 in accordance with the Rules of ICC. 
We  have  also
seen from  the  written  submission  of  the  appellants  counsel  that  the
appellants have already initiated an arbitration proceeding. 
In  such  case,
the parties shall continue with the arbitration proceeding  since  the  suit
filed  for  permanent  injunction  against  the  arbitration  proceeding  is
dismissed by setting aside the impugned judgment and final order  in  A.P.O.
No. 13 of 2013 passed by  the  High  Court  of  judicature  at  Calcutta  on
04.06.2013. Accordingly, the appeal is allowed, but no costs.
                           

   REPORTABLE


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION




                        CIVIL APPEAL NO.10932 OF 2013
                (Arising out of S.L.P.(C) No. 19951 OF 2013)






CHATTERJEE PETROCHEM CO. & ANR           ………APPELLANTS

                                     Vs.

HALDIA PETROCHEMICALS LTD.& ORS.        ……… RESPONDENTS











                               J U D G M E N T






V. Gopala Gowda J.




      On 21st March, 2012, the appellant  Chatterjee  Petrochem  (Mauritius)
Company (hereinafter referred to as ‘CPMC’) filed a request for  arbitration
in International  Chamber  of  Commerce  (ICC),  Paris  in  relation  to  an
agreement of restructuring which was entered into between  CPMC,  Government
of West Bengal, West Bengal Industrial  Development  Corporation  (in  short
‘WBIDC’) and Haldia Petrochemical Limited (in short ‘HPL’) on 12th  January,
2002. 
As per the Agreement, the Government  of  West  Bengal  was  to  cause
WBIDC to transfer existing shareholding to CPMC to ensure  that  CPMC  holds
51% of the total paid  up  capital  of  HPL.  
Clause  15  of  the  Agreement
provides for reference of all disputes, in any  way  relating  to  the  said
Agreement or to the business of or affair of HPL to the Rules  of  the  ICC,
Paris.


2.    The respondent HPL on the other  hand,  claims  that  the  Arbitration
Agreement contained in clause 15 of the Agreement dated 12th  January,  2002
is  void  and/  or  unenforceable  and/or  has  become  inoperative   and/or
incapable of being performed.

3.    A dispute arose between the parties regarding the allotment of  shares
and the appellant filed Company Petition No. 58 of 2009 before  the  Company
Law Board (in short ‘CLB’)on the grounds of  oppression  and  mismanagement.

The appellant also sought transfer  of  155  million  shares  in  favour  of
Chatterjee Petrochem (India) Pvt. Ltd. (in short  “the  CPIL”),  the  Indian
counterpart of CPMC as was decided in the Agreement.

4.    The Company Petition was disposed of  by  the  CLB  by  upholding  the
decision  of  the  Company  to  allot  155  million  shares  by  Indian  Oil
Corporation (in short ‘IOC’). 
The transfer of 155 million shares to CPIL  by
WBIDC was also confirmed. The CLB further directed the  Government  of  West
Bengal and WBIDC to transfer 520 million shares  held  by  them  in  HPL  to
Chatterjee Groups.

5. The Government of West Bengal preferred an appeal against the said  Order
before the High Court of Judicature at  Calcutta  under  the  provisions  of
Section 10F of the Company’s Act, 1956. The High Court set aside  the  Order
of the CLB on the ground that CPIL was not a  member  of  HPL  and  the  CLB
could not have enforced  its  right  under  private  contract  entered  into
between CPIL and WBIDC for transfer of shares as the same could not  be  the
subject matter of a petition under Section 397 of the Companies Act.

6.    Aggrieved by the same, the appellant preferred appeal Nos.  5416-5419,
5420, 5437 and  5440  of  2008  before  this  Court.   Vide  judgment  dated
30.09.2011, this Court held that the claim  of  the  appellant  transferring
shares to IOC has changed the private character of the Company and  was  not
an act of oppression on the part of the Company. According  to  this  Court,
the transfer of shares to IOC was a result of failure on  the  part  of  the
appellant to infuse adequate funds into the Company  by  way  of  equity  as
promised  and  to  participate  in  its  rights  issues.  The  Company   was
therefore, constraint to induct IOC as a member and the 155  million  shares
which was to be transferred to the appellant was instead transferred to  the
IOC. The relevant paragraph of the judgment reads as under:
      “103. The failure of WBIDC and GoWB to register the 155 million shares
      transferred to CP(I)PL could not, strictly speaking, be  taken  to  be
      failure on the part of the Company, but it was the failure of  one  of
      the parties to a private arrangement to abide by its commitments.  The
      remedy in such a case was not under Section 397 of the Companies  Act.
      It has been submitted by both Mr. Nariman and Mr. Sarkar that even  if
      no acts of oppression had been made out against the Company, it  would
      still be open to the learned Company Judge to  grant  suitable  relief
      under Section 402 of the Act to iron out the  differences  that  might
      appear from time to time in the running of the affairs of the Company.
      No doubt, in the Needle Industries case, this Court had observed  that
      the behaviour and conduct complained of must be held to be  harsh  and
      wrongful and in arriving at such a finding, the  Court  ought  not  to
      confine itself to a narrow legalistic view and allow  technical  pleas
      to defeat the beneficial  provisions  of  the  Section,  and  that  in
      certain situations the  Court  is  not  powerless  to  do  substantial
      justice between the parties, the facts of this case do not merit  such
      a course of action to be taken. Such an argument is not  available  to
      the Chatterjee Group, since  the  alleged  breach  of  the  agreements
      referred to hereinabove, was really in the nature of a breach  between
      two members of the Company and not the Company itself. It  is  not  on
      account of any act  on  the  part  of  the  Company  that  the  shares
      transferred to  CP(I)PL  were  not  registered  in  the  name  of  the
      Chatterjee  Group. There was, therefore, no occasion for  the  CLB  to
      make any order either under Section 397 or 402 of the  aforesaid  Act.
      If, as was observed in M.S.D.C. Radharamanan's case (supra),  the  CLB
      had given  a  finding  that  the  acts  of  oppression  had  not  been
      established, it would still be  in  a  position  to  pass  appropriate
      orders under Section 402 of the Act. That, however, is not the case in
      the instant appeals.”
                                               (emphasis laid by this Court)




7.    On this decision given by this Court, the appellant sought  to  invoke
the arbitration clause contained in the agreement dated 12th  January,  2002
and made a request for arbitration. 
The respondent no.1 on the  other  hand,
filed a suit before the High Court of judicature at  Calcutta  praying  that
the arbitration clause in the agreement be declared as void.

8. Learned senior counsel on behalf  of  the  appellant  Dr.  Abhishek  Manu
Singhvi relied upon  Clause  15  of  the  letter  of  agreement  dated  12th
January, 2002 to contend that any  dispute,  difference  or  claims  arising
between the  parties  relating  to  this  letter  of  agreement  dated  12th
January, 2002,  or  any  construction  or  interpretation  relating  to  the
working of or the business of the  respondent  no.1,  shall  first  make  an
endeavour to settle their disputes, differences etc. in accordance with  the
Rules of Arbitration of the International Chamber  of  Commerce.  Therefore,
the learned senior counsel contended that the validity or existence  of  the
arbitration agreement is to be decided by the Arbitration Tribunal in  terms
of Article 6 of the ICC Rules, 1998 which is pari-materia to Section  16  of
the Arbitration and Conciliation Act, 1996 (in short ‘A  &  C  Act’)and  the
Civil Court has no jurisdiction to decide on  such  issues.  In  support  of
this legal contention, the learned senior counsel relied upon  the  decision
of this Court in Yograj Infrastructure Ltd. v. Ssang  Yong  Engineering  and
Construction Co. Ltd.[1] wherein it was held that the arbitration  shall  be
held as is mentioned in the agreement which  in  the  present  case,  is  at
Paris.
9.    It is the further case of the appellant that the agreement dated  12th
January, 2002  between  the  parties  was  not  novated  by  the  subsequent
agreements.  According to the appellant, the agreement dated  12th  January,
2002  is  the  principal  agreement,  which  was  later  followed   by   the
supplemental agreements dated 8th March,  2002  and  30th  July,  2004.  The
letter of agreement dated 8th March, 2002 did  not  create  any  independent
legal right but was a mere direction  from  CPMC  to  transfer  155  million
shares to its nominee CPIL to  avoid  delay.  Therefore,  according  to  the
appellant, the letter of agreement dated 8th March 2002  provided  that  the
terms and conditions of 12th  January,  2002  agreement  would  continue  to
remain valid and subsisting between the parties. The relevant  clauses  will
be mentioned in the reasoning portion of the judgment.

10. The learned senior counsel relied upon Section 45 of the A &  C  Act  to
contend that the suit  instituted  by  the  respondent  No.  1  against  the
request of arbitration by the appellant  is  not  maintainable  in  law.  He
further argued that the suit instituted by  the  respondent       No.  1  to
restrain a foreign arbitration for resolution of the  disputes  between  the
parties was in violation of Section  5  of  the  A  &  C  Act  which  limits
judicial authority’s intervention in arbitration and therefore the  impugned
order of injunction passed by the High Court of Judicature at  Calcutta  was
contrary to law and therefore, the same is liable to be set aside.
In  this
regard, the learned  senior  counsel  relied  upon  the  three  Judge  Bench
decision of this Court in Bhatia International  v.  Bulk  Trading  S.A.  and
Anr.[2] to contend that section 5  of  the  A  &  C  Act  provides  that  no
judicial  authority  shall  intervene  except  where  it  is  provided.  The
relevant paragraph will  be  extracted  in  the  reasoning  portion  of  the
judgment.

11.   Mr. Sudipto Sarkar, learned senior counsel also  appearing  on  behalf
of  the  appellant  further  contended  that  the  maintainability  of   the
arbitration of the disputes  between  the  parties  can  be  established  by
relying on the decision of this  Court  in  Venture  Global  Engineering  v.
Satyam Computer Services Ltd. and Anr.[3] wherein it was held  that  Part  I
of the A & C Act will be applicable to international arbitrations  as  well.
Therefore, Mr. Sarkar contended that the Arbitration clause will  be  a  bar
for judicial intervention in the present case in spite of the fact  that  it
is an international arbitration as per the principal  agreement  which  will
be continued in force as per the terms of the supplemental agreements.

12. On the other hand, it is  the  case  of  the  respondent  HPL  that  the
arbitration agreement dated 12th January, 2002 is rendered void  in  respect
of the claim for transfer of 155 million shares in favour of  CPIL  inasmuch
as the parties had contracted out of their earlier agreement and  the  legal
liability in respect thereof was redefined  in  the  subsequent  8th  March,
2002 Agreement which provided for an exclusive  jurisdiction  to  courts  in
Calcutta to decide dispute arising out of the said agreement. Therefore,  it
was pleaded by    
Mr. Ashok Desai, the learned senior counsel appearing  on
behalf of the respondent no. 1-HPL that  once  a  party  to  an  arbitration
agreement seeks to adjudicate dispute before another forum  and  such  forum
arrives at a conclusive findings of fact in relation to  the  dispute  then,
the subsequent effort on the part of the same party  to  refer  dispute  for
arbitration under ICC Rules would be vexatious  and  abuse  of  law  and  it
shall be construed that the arbitration clause in  the  principal  agreement
has been rendered inoperative by the conduct of the party itself.

13. The learned senior counsel for the  respondent  no.  1  further  claimed
that Section 5 of the A & C Act can come into play only when existence of  a
valid arbitration agreement is established. Institution of such  a  suit  by
the  respondent  no.1   would  constitute  an  “action  pending  before  the
judicial authority” necessitating the invocation of Section 45 of the A &  C
Act, if one of  the  parties  makes  a  request  to  refer  the  matter  for
arbitration. In such cases, the  court  must  see  whether  the  arbitration
agreement is  valid,  operative  and  capable  of  being  performed,  before
referring the parties to arbitration.

14.   It is  the  further  case  of  respondent  no.1  that  the  subsequent
agreement through letter dated 8th March 2002, in  respect  of  transfer  of
155 million shares of HPL, new rights and liabilities were  created  by  and
between the non- parties to the arbitration  agreement.  The  new  agreement
also provided  for  a  different  dispute  resolution  mechanism  among  the
parties, that is, the courts  in  Calcutta.  The  relevant  clause  will  be
extracted in the reasoning portion of the judgment.

15.   The learned senior counsel, Mr. K.K. Venugopal,  appearing  on  behalf
of Respondent no. 2, Govt. of West Bengal, contended  that  the  Arbitration
and Conciliation Act, 1996 does not apply to the present case. According  to
the learned senior counsel, a party may purport  to  appoint  an  arbitrator
who may enter upon the arbitration even when there is serious dispute as  to
whether the arbitration  clause  exists.
 In  spite  of  the  fact  that  no
arbitration clause exists, if a party resorts to arbitration,  then  neither
section 8 nor section 45  of  the  A  &  C  Act  in  case  of  international
arbitration would provide for adjudication of the issue as  to  whether  the
arbitration clause exists. It is only where a suit has first been filed,  in
point of time, on the substantive agreement  or  the  underlying  agreement,
either by way of specific performance or  for  compensation  for  breach  of
contract, that section 8 or section 45 of the A &  C  Act  would  come  into
play. However, we are not inclined to comment on this  contention  since  it
is not pertinent to the case.

16.   The learned senior counsel for Respondent no. 2  also  contended  that
when no arbitration clause exists in the agreement,  the  matter  cannot  be
adjudicated either under Part I or Part II of the A  &  C  Act  rather,  the
matter can be adjudicated only by an  independent  suit  seeking  injunction
against the party who had initiated arbitration, from  proceeding  with  the
arbitration.

17.   It is further the  case  of  the  learned  senior  counsel,  Mr.  K.K.
Venugopal that the facts of the present case are extraordinary and that  the
matter has been extensively litigated in the  previous  round  both,  before
the Company Law Board and the appellate proceedings thereof. At no point  in
time did the Chatterjee Group or any of its constituent affiliate, saved  or
reserved their right to  seek  arbitration  under  the  alleged  Arbitration
Agreement which they now seek to enforce. This Court  has  already  declined
the reliefs on merit as well as on the point of jurisdiction. Therefore,  he
submits that at this juncture, invoking  the  arbitration  clause  from  the
principal agreement by  the  Chatterjee  Group  disregarding  the  Agreement
dated 8th March, 2002, is clearly vexatious and  abuse  of  the  process  of
law. Therefore, the suit  filed  by  respondent  no.  1  seeking  injunction
relief on arbitration is maintainable in law.

18.   It is further the case of the learned  senior  counsel  on  behalf  of
Respondent no.2 that the matter has  been  elaborately  argued  before  this
Court on complicated issues of law which  arise  for  determination  in  the
case. It is therefore, submitted by him that in such  an  event  this  Court
would not render findings on questions of  law  while  disposing  an  appeal
against the interlocutory order so as to give  finality  in  such  findings.
This approach of the Court is  adopted  in  many  cases  arising  under  the
Intellectual Property law, namely Bajaj  Auto  Ltd.  v.  TVS  Motor  Company
Ltd.[4], Shree Vardhman Rice & General Mills v.  Amar  Singh  Chawalwala[5],
Milmet Oftho Industries & Ors. v. Allergan Inc.[6] and  Dhariwal  Industries
Ltd. & Anr. v. M.S.S. Food Products[7]. We are inclined to mention  at  this
stage that in this appeal we are confined to deciding upon the  validity  of
the arbitration clause in the principal agreement dated 12th  January,  2002
only. Hence, this contention does  not  require  to  be  addressed  in  this
appeal.

19.   The learned senior counsel for respondent No.  3   Mr.  C.A.  Sundaram
contends that jurisdictional issue in the present case, shall be decided  as
the threshold issue in the present case. In  relation  to  this,  he  placed
reliance upon the three  Judge  Bench  decision  of  this  Court  in  Chloro
Controls India Pvt.  Ltd.  v.  Severn  Trent  Water  Purification  Inc.  and
Ors.[8]

20.   In the light of the facts and circumstances  presented  before  us  on
the basis of admitted documents on record,  and  also  based  on  the  legal
contentions urged by the learned  senior  counsel  on  behalf  of  both  the
parties, the following issues would arise for consideration  of  this  Court
in these proceedings:

     1. Can the Arbitration  clause  under  clause  15  of  the  letter  of
        Agreement dated 12th January, 2002 be invoked by the appellants and
        whether Clause 7.5 of the subsequent  Agreement  dated  8th  March,
        2002 invoking the exclusive jurisdiction of the courts of  Calcutta
        nullify the scope of  arbitration  as  mentioned  in  the  previous
        agreement dated 12th January, 2002?


     2. Is the suit, filed by the respondents, seeking  injunction  against
        arbitration of disputes between  the  parties  sought  for  by  the
        appellants as per Clause 15 of the principal agreement referred  to
        supra maintainable in law?


     3. What Order?


Answer to Point no.1
21.   We are inclined to reject the submission made by  the  learned  senior
counsel on behalf of the respondents that the transfer  of  shares  to  CPIL
instead of CPMC substantially changes the legal rights and  responsibilities
of the parties as per agreement referred  to  supra  thereby,  resulting  in
novation of contract.

22.   It is nowhere mentioned in the  letter  dated  8th  March,  2002  that
transfer of shares to CPIL instead of CPMC extinguishes  the  old  agreement
dated 12th January, 2002 to nullity.  In  fact,  in  the  letter  dated  8th
March, 2002, CPMC has been constantly mentioned as a guarantor. It  is  only
to this extent the nature of agreement has changed.

23.   It is  argued  by  the  learned  senior  counsel  Mr.  C.A.  Sundaram,
appearing on behalf of Respondent  no.3  that  the  concurrent  findings  of
facts on the prima facie case by the learned single Judge and  the  Division
Bench of the High Court  of  Calcutta  have  held  that  there  has  been  a
novation of agreement between the parties to the principal  agreement  dated
12th January,2002 by the subsequent agreements dated  8th  March,  2002  and
30th July, 2004.

24. It has been held by the learned single Judge of the Calcutta High  Court
that:
      “……This is a case, where by express words  the  parties  have  altered
      their obligations by a new agreement on 8th March, 2002  with  a  term
      that the Courts in Kolkata ‘alone’ would have jurisdictions. This  was
      affirmed by the 30th July, 2004 agreement. This  put  an  end  to  the
      arbitration, once and for all. Therefore, the  arbitration  clause  in
      the 12th January, 2002  agreement  was  abrogated  by  the  8th  March
      agreement. Abrogation of an arbitration agreement could not be made in
      clearer terms…”.


 25.  Further, the Division Bench  of  Calcutta  High  Court  vide  impugned
 judgment dated 12th January 2012, made the following observations:
     a. ) Agreement of 12th January 2002 was substituted by  agreements  of
        March 8, 2002 and July 30, 2004.
     b. ) Such a subsequent agreement completely  extinguished  the  rights
        existing under the January 12, 2002 agreement  and  also  destroyed
        the arbitration clause.


     c. )   Remedy is under Agreement of  March  8,  2002  which  does  not
        provide for Arbitration but states that courts  at  Calcutta  alone
        shall have jurisdiction.

     d. ) Agreement of March 8, 2002 is not an ancillary  to  agreement  of
        January 12, 2002 but materially alters the same. The principle laid
        down in Chloro Controls Case (supra) does not apply. Real intention
        of the parties in the instant case was to substitute one  agreement
        with another.


26.   Clause 1 of the supplementary agreement dated 30th  July,  2004  reads
as under:
      “Pursuant to the said Principal Agreement GoWB  has  caused  WBIDC  to
      transfer to Chatterjee Petrochem (India) Private  Limited  (CPIL),  an
      affiliate of CPMC Rs. 155 crores of shares from  the  shareholding  of
      WBIDC existing on the date of principal agreement…”
                            (emphasis laid by this Court)




The abovementioned clause goes to show that CPIL is an  affiliate  of  CPMC.
This is to say, that by means  of  the  letter  dated  8th  March,2002  CPMC
becomes a guarantor whereas CPIL becomes the borrower. Therefore,  the  same
does not change the rights and responsibilities of  the  parties  under  the
agreement dated 12th January, 2002.

27. Further, the letter written by CPMC to WBIDC along  with  the  agreement
dated 8th March, 2002 reads as follows:
      “…It is clarified that the aforesaid shall not prejudice  any  of  our
      rights under the said Agreement dt. January 12, 2002 and all terms and
      conditions  thereof  shall  continue  to  remain  valid,  binding  and
      subsisting between the parties to be acted upon sequentially”.
                                               (emphasis laid by this Court)




The content of this letter goes  to  show  that  the  agreement  dated  12th
January, 2002 remains the principal  agreement  while  agreement  dated  8th
March  2002  remains  a  supplementary  agreement  which   was   meant   for
restructuring of HPL on urgency.

28.   Further, and most importantly, the agreement entered into between  the
parties dated 30th July, 2004 states as follows:
      “WHEREAS the Parties  hereto  had  entered  into  an  agreement  dated
      January  12,  2002  (hereinafter  referred   to   as   the   principal
      agreement….”


Also, the Agreement dated 30th July, 2004 which  is  based  on  shareholding
issues, also notes through clause 6 that:
      “6. The Parties hereby agree, record and confirm that all other  terms
      and conditions as contained in  the  said  Principal  Agreement  shall
      remain  binding,  subsisting,  effective,  enforceable  and  in  force
      between the parties.”
                                               (emphasis laid by this Court)


The abovementioned clauses of the subsequent  Agreements  dated  8th  March,
2002 and 30th July, 2004 go to show that there has  been  no  alteration  in
the nature of rights and responsibilities of the  parties  involved  in  the
contract. Consequently, there has been no novation of the contract.

29. It has been further  argued  by  the  learned  senior  counsel  for  the
respondents that Section 5 of the A & C  Act,  which  bars  intervention  by
judicial authority in  Arbitration  Agreement  will  not  be  applicable  to
International Agreements such as  the  present  case.  
We  are  inclined  to
reject this contention by placing reliance upon  the  legal  principle  laid
down by this Court in Venture Global Engineering case (supra), the  relevant
paragraph of which reads as under:
      “25. …… In order to find out an answer to the first  and  prime  issue
      and whether the decision in Bhatia International (supra) is an  answer
      to the same, let us go into the details regarding the  suit  filed  by
      the appellant as well as the  relevant  provisions  of  the  Act.  The
      appellant -VGE filed O.S. No. 80 of  2006  on  the  file  of  the  Ist
      Additional District Court, Secunderabad, for a  declaration  that  the
      Award dated 3.4.2006 is invalid, unenforceable and to  set  aside  the
      same. Section 5 of the Act makes it clear that in matters governed  by
      Part  I,  no  judicial  authority  shall  intervene  except  where  so
      provided. Section 5 which falls in Part I, specifies that no  judicial
      authority shall intervene except where so provided. The Scheme of  the
      Act  is  such  that  the  general  provisions  of  Part  I,  including
      Section 5, will apply to all Chapters or Parts of the Act.”
                                               (emphasis laid by this Court)


30. Further, it is pertinent to read Clause 7.5 of the Agreement  dated  8th
March, 2002 carefully. Clause 7.5 reads thus:
      “Jurisdiction: Courts at Calcutta alone shall have jurisdiction in all
      matters relating to this Agreement.”




The phrase ‘this agreement’ means the Agreement dated 8th March, 2002  which
is essentially a supplementary Agreement and does not,  by  any  mean,  make
the  Principal  Agreement  dated  12th  January,   2002   subject   to   the
jurisdiction of the Court.

31. Therefore, we are of the opinion that both the learned single Judge  and
the Division Bench erred in arriving at the conclusion mentioned  above  and
their findings are liable to  be  set  aside.  In  the  light  of  the  case
mentioned above and also on the  basis  of  the  clauses  of  the  Principal
Agreement dated 12th January 2002 and subsequent Agreements dated 8th  March
2002 and 30th July, 2004, read with  section  5  of  the  A&C  Act,  we  are
inclined to observe that the Arbitration clause in the  Principal  Agreement
continued to be valid in view of clause no. 6 of the  Agreement  dated  30th
July, 2004 and also by virtue of its mention in different parts of both  the
supplementary agreements dated  8th  March,  2002  and  30th    July,  2004.
Therefore, the arbitration clause mentioned in Clause 15 of the  Arbitration
agreement dated January 12, 2002 is valid and the appellant is  entitled  to
invoke the arbitration clause for settling their  disputes.  We,  therefore,
answer the point no.1 in favour of the appellant.

Answer to Point nos.2 and 3
32. We answer point nos. 2 and 3 together since they are interrelated.
      It is the claim of the respondent no.3 that  the  suit  was  filed  by
Respondent no. 1 under section 9 of CPC and not section 45 of the  A&C  Act.
Respondent no.3 further placed reliance upon the decision of this  Court  in
Ganga Bai v. Vijay Kumar & Ors.[9] to hold that:
      “15. …There is an inherent right in every person to bring  suit  of  a
      civil nature and unless the suit is barred by statute one may, at ones
      peril, bring a suit of one's choice.  It  is  no  answer  to  a  suit,
      howsoever frivolous the claim, that the law confers no such  right  to
      sue. A suit for its maintainability requires no authority of  law  and
      it is enough that no statute bars the suit. But the position in regard
      to appeals is quite the opposite. The right of appeal  inheres  in  no
      one and therefore an appeal for  its  maintainability  must  have  the
      clear authority of law. That explains  why  the  right  of  appeal  is
      described as a creature of statute.”
                                           (emphasis supplied by this Court)

Therefore, the learned senior counsel appearing on behalf of respondent  no.
3 places reliance upon this decision  to  contend  that  the  Calcutta  High
Court (exercising its ordinary original jurisdiction) has  the  jurisdiction
(territorial as well as pecuniary)  to  entertain  the  present  suit  under
section 9 of CPC and grant of such interim injunctive  relief  as  it  deems
fit under Order 39 Rules 1 and 2 of the CPC is permissible in law.


33.   We are inclined to  reject  this  contention  raised  by  the  learned
senior counsel appearing on behalf of Respondent no. 3.  A  careful  reading
of  the  decision  leaves  no  doubt  in  the  mind  as  has  been  held  in
Ganga Bai’s case (supra) that:
             “15. …There is an inherent right in every person to bring  suit
             of a civil nature and unless the suit is barred by statute  one
             may, at ones peril, bring a suit of one's choice……”
                                               (emphasis laid by this Court)




34. The learned senior counsel for respondent no. 3 further places  reliance
upon the Constitution Bench decision of seven Judges in SBP & Co.  v.  Patel
Engineering Ltd. & Anr.[10] wherein it was held that:
           “19…..When  the  defendant  to  an  action  before  a   judicial
           authority raises the plea that there is an arbitration agreement
           and the subject matter of the claim is covered by the  agreement
           and the plaintiff or the person who has approached the  judicial
           authority for relief, disputes the same, the judicial authority,
           in the absence of any restriction in the Act, has necessarily to
           decide  whether,  in  fact,  there  is  in  existence  a   valid
           arbitration agreement and whether the dispute that is sought  to
           be raised before it, is covered by the arbitration clause….”
                    (emphasis laid by this Court)




35.   We have already held that the Principal Agreement dated 12th  January,
2002 continues to be in force with its arbitration clause in place. We  have
also mentioned, while answering point no. 1, that section 5 of the  A&C  act
will be applicable to Part II of the Act as well. The Agreement  dated  12th
January, 2002 remains valid and the  arbitration  clause,  with  all  fours,
will  be  applicable  to  the  parties  concerned  to  get  their   disputes
arbitrated and resolved in the Arbitration as per  the  Rules  of  ICC.  The
contention raised by the learned senior counsel  for  Respondent  no.2,  Mr.
K.K. Venugopal regarding the maintainability of  the  suit  while  examining
the interlocutory order in the appeals, is therefore, untenable in law.

36. The  fact  that  CPIL,  which  initially  was  a  non-signatory  to  the
Agreement does not jeopardize the arbitration clause in any manner. In  this
connection, we are inclined to record  an  observation  made  in  the  three
Judge Bench decision of this  Court  in  Chloro  Controls  India  Pvt.  Ltd. (supra), 
wherein it was held as under:
             “107. If one analyses the above cases and the  authors'  views,
             it  becomes  abundantly  clear  that  reference  of  even  non-
             signatory parties to arbitration agreement can be made. It  may
             be the result  of  implied  or  specific  consent  or  judicial
             determination.  Normally,  the   parties   to   the arbitration
             agreement calling for arbitral reference should be the same  as
             those to the an action. But this general concept is subject  to
             exceptions which  are  that  when  a  third  party,  i.e.  non-
             signatory party,  is  claiming  or  issued  as  being  directly
             affected through a party to the arbitration agreement and there
             are principal and subsidiary agreements, and such  third  party
             is signatory to a subsidiary agreement and not to the mother or
             principal agreement which contains the arbitration clause, then
             depending upon the facts and circumstances of the  given  case,
             it may be possible to say that even such  third  party  can  be
             referred to arbitration.”
                       (Emphasis laid by this Court)



37. The respondent no.1 has filed a suit seeking two  remedies  against  the
appellants: 
firstly, 
that the Arbitration Agreement contained in  Clause  15
of the Agreement dated January 12, 2002 is void and/or unenforceable  and/or
has become inoperative and/or incapable of being  performed,  and  
secondly,
the respondent no.1 sought permanent injunction  restraining  the  appellant
herein from initiating and/ or  continuing  with  the  impugned  Arbitration
proceedings bearing case no. 18582/ARP pursuant to the Impugned  Arbitration
Agreement contained in clause 15 of the Agreement  dated  January  12,  2002
and the Request for Arbitration dated March 21, 2012 and  the  communication
dated  April  02,  2012  issued  by  defendant  no.  8  in  the  Arbitration
proceedings connected therewith and incidental thereto.

      Since, we have already held that the arbitration clause is valid, suit
filed by the respondent no.1 for declaration  and  permanent  injunction  is
unsustainable in law and the suit is liable to be dismissed.


38. In view of the above, we direct the parties to  resolve  their  disputes
through arbitration as mentioned in clause 15 of  the  letter  of  Agreement
dated 12th January, 2002 in accordance with the Rules of ICC. 
We  have  also
seen from  the  written  submission  of  the  appellants  counsel  that  the
appellants have already initiated an arbitration proceeding. 
In  such  case,
the parties shall continue with the arbitration proceeding  since  the  suit
filed  for  permanent  injunction  against  the  arbitration  proceeding  is
dismissed by setting aside the impugned judgment and final order  in  A.P.O.
No. 13 of 2013 passed by  the  High  Court  of  judicature  at  Calcutta  on
04.06.2013. Accordingly, the appeal is allowed, but no costs.



                                             …………………………………………………J.
                                             [G.S. SINGHVI]






                        ……………………………………………………J.    [V.
                                GOPALA GOWDA]






New Delhi,
December 10, 2013





                           -----------------------
[1]    (2011) 9 SCC 735
[2]    (2002) 4 SCC 105
[3]    (2008) 4 SCC 190
[4]    (2009) 9 SCC 797 (para 5)
[5]   (2009) 10 SCC 257 (para 2)
[6]    (2004) 12 SCC 624 (paras 9 to 11)
[7]    (2005) 3 SCC 63 (para 20)
[8]    (2013) 1 SCC 641
[9]    (1974) 2 SCC 393
[10]   (2005) 8 SCC 618

                           -----------------------
                                      3


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