~Prudentia Conscientia Ingenium Occursus, 2016~
BCWCLC-005R
IN T THE H HON’BLE S SUPR EME C COUR T O OF Z ZELCOVA (Special Appellate Jurisdiction) SLP No ***** of 2016
I N THE MATTER OF _____________________ ________________________________ ______________________ ______________________ _______________________ _______________ ___ Coatland Coal Corporation Zelcova Private Limited (“CCZPL”) …Petitioner v. Thermopowergen Thermopowergen Private Limited (“TPL”)
…Respondent
…………………………………………………………………………… MEMOR A NDUM FOR THE R ESPO NDE NT …………………………………………………………………………
COUNSEL FOR RESPONDENT
~Memorandum for the Respondent~
TABLE OF CONTENTS
TABLE OF CONTENTS ............................. ................................................... ............................................. ............................................. .................................. ............ i LIST OF ABBREVIATIONS ............................. ................................................... ............................................. .............................................. .......................... ... ii INDEX OF AUTHORITIES............. AUTHORITIES................................... ............................................ ............................................. ........................................... .................... iii ii i STATEMENT OF JURISDICTION................... JURISDICTION......................................... ............................................ ............................................. ........................... .... v STATEMENT OF FACTS ............................................ ................................................................... ............................................. .................................... ..............vi ISSUES RAISED ............................................ ................................................................... ............................................. ............................................. ............................ .....vii SUMMARY OF ARGUMENTS ........................................... .................................................................. ............................................. ......................... ... viii ARGUMENTS ADVANCED ........................................... .................................................................. ............................................. ................................. ........... 1 1.
2.
This SLP is not maintainable before the Hon’ble Court: Court: . ............................................... ............................................... 1 1.1
Special Leave Petition Petit ion is a discretionary disc retionary remedy: r emedy: ............................................ ................................................... ....... 1
1.2
There must exist exi st exceptional circumstances ci rcumstances to exercise the power: ....................... ....................... 2
1.3
No exceptional circumstances in the present case: ........................................... .................................................. ....... 3
The arbitration agreement is opposed to public policy and hence invalid: ..................... 3 2.1.
Defining Public Policy of Zelcova: ............................................... ..................................................................... .......................... .... 3
2.2.
There is no valid arbitration agreement in the present case: ................................... ................................... 4
2.3.
Determination of Seat of Arbitration to be Malaylaka: Mala ylaka: ........................................... ........................................... 8
3. There exist no ground for interference under Section 8 of the Arbitration and Conciliation Act, 1996: ......................................................... ................................................................................ ............................................. ........................ .. 10 3.1.
Requisite conditions to t o invoke Section 8 are not satisfied s atisfied in the present case: ..... 11
3.2.
The High Court erred in vacating the stay sta y of bank guarantee: .............................. .............................. 15
PRAYER ........................................... ................................................................. ............................................ ............................................. ........................................... .................... 18
i
~Memorandum for the Respondent~
LIST OF ABBR EVIATIONS
AIR
All India Reporter
¶
Paragraph
Anr
Another
ArBLR
Arbitration Law Reporter
Art.
Article
Ed.
Edition
EWHC
England and Wales High Court
HC
High Court
Hon’ble Hon’ble
Honourable
Ltd.
Limited
Ors.
Others
SC
Supreme Court
SCC
Supreme Court Cases
SCR
Supreme Court Reports
Sec.
Section
SLP
Special Leave Petition
UOI
Union of India
Vol.
Volume
ii
~Memorandum for the Respondent~
INDEX OF AUTHOR ITIES Statutes
Indian Companies Act, 1956....................................... 1956............................................................. ............................................. ......................................... .................. 7 Indian Companies Act, 2013....................................... 2013............................................................. ............................................. ......................................... .................. 7 Indian Contract Act, 1872 ........................................... .................................................................. ............................................. .................................... .............. 6, 7 The Arbitration and Conciliation Act, 1996 ............................................ .............................................. 3, 4, 6, 7, 8, 9, 10, 11 The Constitution of India, 1950 .............................. .................................................... ............................................. ............................................. ...................... 1 Supreme Court Cases
Associate Builders v. Delhi Development Authority, 2014 (4) ARBLR 307 ........................... 4 Bharat Aluminium Company v. Kaisar Aluminium Technical Services INC., (2012) 9 SCC 552 ............................................. ................................................................... ............................................ ............................................. ............................................. ......................8, 9 Bihar State Mineral Development Corporation and Anr. v. Encon Builders (I) ( P) Ltd., (2003) 7 SCC 418 ............................................ .................................................................. ............................................ ............................................. ...................................... ............... 6 Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. & Ors., AIR A IR 2011 SC 2507 ......... 14 Branch Manager, Magma Leasing & Finance Limited & Anr. v. Potluri Madhavilata & Anr., (2009) 10 SCC 103.......................................... ................................................................ ............................................ ............................................. ......................... .. 11 Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co., (2007) 8 SCC 110 ..................16 Jagdish Chander v. Ramesh Chander, 2007 (6) SCALE 325 ......................................... .................................................... ........... 6 Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai, AIR 2004 SC 1815 ............ ............ 2 K. K. Modi v. K. N. Modi, (1998) 3 SCC 573 ............................................. ................................................................... ............................. ....... 5 M.R. Engineers and Contracts Pvt. Ltd. v. Som Datt Builders Ltd., 2009(7) SCC 696 .......... 17 M/s. Dozco India Pvt. Ltd. v. M/s. Doosan Infracore Co. Ltd., JT J T 2010 (12) SC 198 .............. 9 M/s. System for International Agencies v. M/s. Rahul Coach Builders Pvt. Ltd., Arbitration Petition No.6 Of 2014 ........................................................... ................................................................................. ............................................. ........................... .... 6 Mathai @ Joby J oby v. George & Anr., (2010) 4 SCC 358 ............................................. ............................................................... .................. 2 N. Suriyakala v. A. Mohandoss Mohandoss and Ors., Ors ., (2007) 9 SCC 196 ................................................... ................................................... 1 ONGC v Saw Pipes, Pipes , (2003) ( 2003) 5 SCC 705 ........................................... .................................................................. ......................................... .................. 4 Pritam Singh v. The State, AIR 1950 SC 169...................................... 169............................................................ ...................................... ................ 2 S.B.P. & Co. v. Patel Engineering Ltd. & Anr., (2005) 8 SCC 618 ........................................ ........................................ 11 Sadhanathan P.S.R v. Arunachalam, AIR 1980 SC S C 856............................................. ............................................................ ............... 1 State Of Uttar Pradesh & Anr. v. Janki Saran Kailash Chandra & Anr., 1973 AIR 2071 ....... 14 Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531 .......................... .......................... 10, 12, 14 TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd., (2008) ( 2008) 14 SCC 271 ........... 7
iii
~Memorandum for the Respondent~
Tirupati Balaji Developers Pvt. Ltd. v. State of Bihar, AIR 2004 SC 2351 .............................. .............................. 2 High Court Cases
Arthi Jethani v. Daehsasn Trading (India) Pvt. Ltd., 2011 (4) AD DEL 5 .............................. .............................. 14 ITC Classic Finance Ltd. v. Grapco Mining and Co. Ltd., AIR 1997 Cal 397 ......................... 6 Jaiprakash Hyundai Consortium v. Satluj Satl uj Jal Vidyut Nigam Ltd., OMP No. 251/2003 ......... 15 M/s. Johnson Rubber Ind Ltd. v. M/s. Shree Conveyor System Pvt. Ltd., C.M(M) No.960/2013 & C.M.No.14494/2013 C.M.No.14494/2013 ....................................... ............................................................. ........................................... ..................... 14 M/s. R.R Enterprises v. C.M.D Of M/s. Garware-Wall Garware-W all Ropes, (2013) ILR I Delhi 248 ........ ........ 13 M/s. Addhar Mercantile Private Limited v. Shree Jagdamba Agrico Exports Pvt. Ltd., Arbitration Application No. 197 of 2014 ....................... ............................................. ............................................. .................................. ........... 7 Punjab Dairy Development Corporation v. Suresh Kumar, AIR 1999 P&H 235 ................... ................... 14 Sah Petroleums Ltd. v. Sah Petroleums Ltd., Suit (Lodging) No.1725 of 2012........................ 7 Suresh Arjundas Bakhtiani v. UOI & Anr., 1991 (1) BomCR 26 ..................................... ..................................... 13, 15 Teamco Private Ltd. v. T.M.S. Mani, AIR 1967 Cal 168........................................... .......................................................... ............... 6 Foreign Decisions
A v. B, (2007) 1 All E.R. (Comm) 591........................................................ 591............................................................................... .............................. ....... 9 Bolivinter Oil S.A. v. Chase Manhattan Bank N.A., [1984] 1 LLR 392 ................................. ................................. 16 Czarnikow v. Roth Schmidt, [1922] 2 K.B. 478 ........................................... ................................................................. ............................. ....... 3 Enercon GmbH & Wobben Properties GmbH v. Enercon (India) Ltd., [2012] EWHC 689 .... 8 Nav. Amazonica v. Cle.Internat. de de Seguros, (1998) 1 Lloyd‟s Rep ........................................ ........................................9 Richardson v. Mellish, (1824) 2 Bing 229........................................... .................................................................. ...................................... ............... 3 Shashoua & Ors. v. Sharma, [2009] EWHC 957. ............................................ ................................................................... .......................... ... 8 Whitworth Street Estates v. James Miller, Mil ler, (1970) AC 583......................................... 583........................................................ ............... 9 Books and Commentaries Commentaries
Ansons Law Of Contract , (J Beatson, 28th Edition Oxford University Press, Oxford, 2002) ... 3 Halsbury’s Laws of England , Vol. 2 (5th edn., 2005) ............................. .................................................... .................................. ........... 9 RS Bachawat, LAW OF ARBITRATION AND CONCILIATION, Vol. 1 (Anirudh Wadhwa, Anirudh Krishnan, eds. 5th Edn., 2010, LexisNexis Butterworths). ............................................. .................................................. ..... 10 Other Authorities
M.V. Sundararaman, Scope of Enquiry of Civil Courts Under Section 8 of the Arbitration and Conciliation Act, 1996 , (2004) JUNE PL (Jour) ....................... .............................................. ........................................... .................... 10
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~Memorandum for the Respondent~
STATEMENT OF JUR ISDICTION The Petitioner has a pproached this Hon’ble Court under Article 136 of the Constitution of India, 1950. The Respondent accepts the jurisdiction j urisdiction while contesting its maintainability.
v
~Memorandum for the Respondent~
STATEMENT OF FACTS Zelcova is common law country similar to India. Malaylaka is a country similar to that of USA. Forslyeth is the financial capital of Zelcova. Thermopowergen Private Limited (“TPL”) is a subsidiary of Zelcova Powergen Limited (“ZPL”), registered under the Companies Act, 2013 of Zelcova. Coatland Coal Corporation C orporation Zelcova Private Limited (“CCZPL”) (“CCZPL” ) also registered under the same Act, is a subsidiary of Malaylaka Power Solutions Private Limited (“MPPL”) situated at Malaylaka. TPL and CCZPL entered into a Coal Supply Agreement (“Agreement”) for a period of t hree (3) years with CCZPL starting from 1st May, 2014 pursuant to TPL’s obtaining a government contract for electricity supply. As per the agreement due to delay in payment beyond 100 days, CCZPL requested advance payment for further shipments. TPL cited failure in quality control test as per Clause 18.1 of the Agreement as the reason for withholding payments. CCZPL contested the said clause due to non-intimation of the quality test failure within 7 days. It also contended that payments were due for the old shipments and refused further supply until payment including an advance payment. Due to disputes relating to payment, CCZPL invoked Arbitration clause as per 33.1 of the Agreement which stated that “both Parti es agree agree to arbi tr ate i n M alaylaka, and the l aw of M alaylaka wil l apply to thi s Agr eement ment ”.
Meanwhile TPL obtained a stay on invocation of Bank Guarantee from the City Civil Court. CCZPL filed objections along with an interim application under Section 8 of the Arbitration and Conciliation Act, 1996. No order was passed by the Court and thus CCZPL approached the High Court which passed the following two orders: a) TPL misled Forlyeth District Court by not disclosing the Arbitration clause, therefore set asides the stay granted by the said Forslyeth Court and Directs the TPL to extend the bank guarantee. b) Dismissed the plea of CCZPL for arbitration under clause 33 of agreement, as clause 33.1 is against the public policy of Zelcova. Aggrieved CCZPL has filed this appeal.
vi
~Memorandum for the Respondent~
ISSUES R AISED 1. Whether this Petition under Art. 136 of the Constitution maintainable; 2. Whether the arbitration agreement is opposed to public policy and hence invalid; 3. Whether TPL misled the Court by not disclosing the Arbitration Agreement and there exist ground for interference under Section 8 of the Arbitration and Conciliation Act, 1996.
vii
~Memorandum for the Respondent~
SUMMAR Y OF AR GUMENTS 1. THIS SLP IS NOT MAINTAINABLE BEFORE THE HON’BLE COURT
The Respondent respectfully submits that the Petitioner has erred by approaching this Hon’ble Court in this matter m atter as an SLP is a discretionary remedy and the Court in a catena of decisions has imposed restrictions on exercise of this discretion. An SLP requires exceptional circumstances; the same do not exist in the present case. 2. THE
ARBITRATION AGREEMENT IS OPPOSED TO PUBLIC POLICY AND HENCE
INVALID:
The Respondent submits that the alleged arbitration agreement is opposed to public policy as it ousts the jurisdiction of the Courts in Zelcova. Further, the conditions for a valid arbitration agreement under Section 7 of The Arbitration and Conciliation Act, 1996 (“The Act”) are not satisfied as two Zelcovan parties cannot agree to arbitration under a foreign law. The seat of arbitration being in Malaylaka renders the agreement invalid and opposed to public policy of Zelcova. 3. THERE
EXIST NO GROUND FOR INTERFERENCE UNDER
SECTION 8
OF THE
ARBITRATION AND CONCILIATION ACT, 1996:
Sec. 8 of The Act empowers a judicial authority to refer parties to arbitration when there is an arbitration agreement, if a party so applies. It is submitted that in the present case the application of the Section is not attracted since the requisite conditions are not satisfied in the present case. The subject matter of the suit is not the same as the subject matter of the agreement and the bank guarantee is not covered by the alleged arbitration clause. Moreover, the Petitioner submitted to the jurisdiction by filing a detailed statement of objections before filing an application under Sec. 8. Further, the High Court erred in vacating the stay of bank guarantee by failing to notice the fraud committed by the Petitioner and since the Respondents have no remedy under Section 9 of the Act, the bank guarantee should be stayed.
viii
~Memorandum for the Respondent~
AR GUMENTS ADVANCED 1. THIS SLP IS NOT MAINTAINABLE BEFORE THE HON’BLE COURT:
The Petitioner in the present case has approached this Hon’ble Court by virtue of its jurisdiction under Art. 136 of The Constitution Constit ution of Zelcova, 1950 which provides pr ovides for Special Leave Petition. The Respondent respectfully submits that the Petitioner has erred by approaching this Hon’ble Court C ourt in this matter as an SLP is a discretionary remedy [1.1] which requires exceptional circumstances to exercise its power [1.2] [ 1.2] which which do not exist in the present case [1.3]. [1.3]. 1.1
Special pecial L eave Peti Peti ti on i s a discretionar y remedy: remedy:
The Respondent submits that the Petitioner has invoked the special appellate power granted to this Hon’ble Court. This Hon’ble Court has the power to grant special leave to appeal from any judgment, decree, determination, sentence or order in any case or matter, passed or made by any Court or tribunal in the territory of Zelcova under Art. 1
136 of the Constitution. This Article grants wide discretion to the Supreme Court to take up any matter. But the Supreme Court itself has imposed limitations upon its power and it will use this discretionary power sparingly and in exceptional cases alone. 2 This Court in the case of N. of N. Suriyakala v. A. Mohandoss Mohandoss and Ors. 3observed as under: " Article 136 of the Constitution is not a regular forum of appeal at all. It is a residual res idual provision which enables the Supreme Court to interfere with the judgment or order of any court or tribunal in India in its discretion." (Emphasis supplied) It is submitted that under Art. 136 it is up to the Supreme Court to grant special leave. It does not confer a right on a party to appeal to the Supreme Court. It only confers a wide
1
136. Special leave to appeal by the Supreme Court
(1) Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of Zelcova (2) Nothing in clause (1) shall apply to any judgment, determination, sentence or order passed or made by any court or tribunal constituted by or under any law relating to the Armed Forces. 2
Sadhanathan P.S.R v. Arunachalam, AIR 1980 SC 856.
3
N. Suriyakala v. A. Mohandoss and Ors ., (2007) ., (2007) 9 SCC 196.
1
~Memorandum for the Respondent~
discretionary power on the Supreme Court to interfere in suitable cases. 4 The very conferment of the discretionary power defies any attempt at exhaustive definition of such power. The power is permitted to be invoked not in a routine fashion but in very exceptional circumstances as and when a question of law of general public importance arises or a decision sought to be impugned before the Supreme Court shocks its conscience. The Supreme Court would not under Art. 136 constitute itself into a tribunal or court for settling disputes and reduce its elf to a mere court of error. err or.5 Thus it is clear that the power under Art. 136 is to be exercised sparingly and only when the special circumstances warranting the exercise of the power exist, i.e. the conscience of the Court should be shocked. s hocked. 1.2 Th er e mu st exis exi st excepti exceptional onal cir cumstances cumstances to exerci exerci se the powe powerr :
It is pertinent to submit that this Hon’ble Court has held that the wide discretionary power has to be exercised sparingly and in exceptional cases only. 6 As far as possible, a uniform standard should be adopted in granting special leave in wide range of matters which come up for hearing under this Article. Generally speaking, the Court will not grant special leave, unless it is shown that special circumstances exist, that substantial and grave injustice has been done and that the case in question presents features of sufficient gravity to warrant a review of the decision appealed against. 7 The power under Art. 136 is an extraordinary power to be exercised in rare and exceptional cases and on well-known principles.8 It is most respectfully submitted that this Hon’ble Court in a catena of judgments held that the Court will grant special leave only when the High Court has misunderstood the principles that govern its exercise and when there t here is a patently erroneous interpretation of law by the High Court.
4
Tirupati Balaji Developers Pvt. Ltd. v. State of Bihar, AIR 2004 SC 2351.
5
Mathai @ Joby v. George & Anr., (2010) 4 SCC 358.
6
Pritam Singh v. The State, AIR 1950 SC 169 ,171.
7
Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai, AIR 2004 SC 1815 (¶ 33). [“Jamshed Hormusji Wadia”] 8
Jamshed Hormusji Wadia, Wadia, AIR 2004 SC 1815.
2
~Memorandum for the Respondent~
1.3 No excepti xcepti onal cir cumstances cumstances in the pre pr esent case case:
It is submitted that in the instant case, even if there was an error committed by the High Court, it was open to the Petitioner to challenge the same before a Division Bench in appeal, or under Art. 133 of the Constitution which provides for appeal in civil cases. To invoke the power of this Court under Art. 136 which is to be invoked only in cases of grave injustice, is wholly misconceived and an abuse of the law. The Respondent pleads that there are no circumstances that warrant the interference of the Hon’ble Court and that the petition of the herein is liable lia ble to be dismissed. 2. THE
ARBITRATION AGREEMENT IS OPPOSED TO PUBLIC POLICY AND HENCE
INVALID:
The Respondent submits that the alleged arbitration agreement is opposed to public policy as it ousts the jurisdiction of the Courts in Zelcova [2.1]. [2.1]. Further, the conditions for a valid arbitration agreement under Section 7 of The Act are not satisfied [2.2] [2.2] as two Zelcovan parties cannot agree to arbitration under a foreign law [2.2.1]. [2.2.1]. The seat of arbitration being in Malaylaka [2.3] renders [2.3] renders the agreement invalid and opposed to public policy of Zelcova. 2.1. 2.1. Defi Defi ni ng Publi c Poli Poli cy of Zelcova: Zelcova:
Public policy imposes certain limitations upon the freedom of persons to contract. An ostensibly valid contract may be tainted by illegality. The origins of the policy of the law, or public policy are ancient and obscure. It has been described as an unruly horse. 9 Certain aspects of public policy are more susceptible to change than others, though the policy of the law has on some subjects been worked into a set of tolerably definite rules.10 At common law an agreement which purports to oust the jurisdiction of the Court is contrary to public policy and void. 11 It is the policy of the common law that citizens have the right to have their legal position determined by the ordinary tribunals. The Appellant submits that the term “public policy” has not been defined in Zelcovan law. Thus it relies on the interpretation of the term by the Supreme Court. The Court has
9
Richardson v. Mellish, (1824) 2 Bing 229, Per Burrough Burrough J. at p. 252.
10
Ansons Law Of Contract , (J Beatson, 28 th Edition Oxford University Press, Oxford, 2002).
11
Czarnikow v. Roth Schmidt, [1922] 2 K.B. 478.
3
~Memorandum for the Respondent~
held that in determining whether an act is opposed to public policy the following are relevant:
Contrary to the fundamental policy of Indian law;
Contrary to the interests of India;
Contrary to justice and morality; or
Patently illegal.12
Although the decision was rendered in terms of Sec. 34 of The Act, it is still useful for the determination of the meaning of public policy in the Indian context. The Respondent submits that in the present case, the arbitration agreement is not valid and is opposed to public policy. 2.2.Th 2.2.Th er e i s no vali d arbi tr ation agreement agreement in the pr pr esent case case:
Section 2 (1) (b) of The Act defines an arbitration agreement 13 in terms of Section 7 of The Act, which spells out the requirement of a valid arbitration agreement. 14 Section 7 of The The Act has been subjected to judicial interpretation by this Hon’ble Court in several cases. In the case of K. of K. K. Modi v. K. N. Modi 15, the Supreme Court has laid down the following requisites for a valid arbitration agreement:
12
Associate Builders v. Delhi Development Authority, 2014 (4) ARBLR 307(SC); ONGC v. Saw Pipes, (2003) 5 SCC 705. 13
Definitions. — Definitions. — (1) In this Part, unless the context otherwise requires, — requires, — (b) “arbitration agreement” means an agreement referred to in section 7. 14
7. Arbitration agreement. — agreement. — (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in — in — (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or (c)an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. other. (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. 15
K. K. Modi v. K. N. Modi, (1998) 3 SCC 573 . [“K.K. Modi”]
4
~Memorandum for the Respondent~
i.
must contemplate that the decision of the tribunal will be binding on the parties to the agreement;
ii. must contemplate that substantive rights of parties will be determined by the agreed tribunal; iii. must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal; iv. jurisdiction of the tribunal to decide the rights of parties must be derived either from the consent of the parties or from an order of the Court or from a statute, the terms of which make it clear that the process is to be an arbitration; v. the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides; and vi. agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law. 16 It is submitted that, in the present case, the Petitioner contends that the dispute is a subject matter of an arbitration agreement as follows: Both Parties agree to arbitrate in Malaylaka, and the law of Malaylaka will
“
apply to this Agreement” 17 However, Respondent submits that the contention of the Petitioner is wholly misconceived. There exists no valid arbitration agreement as per the law set out above. The clause does not contemplate the existence of a dispute, it does not specify that the parties intend to settle the particular disputes by arbitration nor does it elucidate the binding nature of any decision arrived at by an arbitral proceeding. In the case of Bihar of Bihar State Mineral Development Corporation and Anr v. Encon Builders (I) (P) Ltd.18, the Hon'ble Supreme Court has held that the essential elements of arbitration agreement are as follows: 1. There must be a present or a future difference in connection with some contemplated affairs.
16
K. K. Modi (1998) 3 SCC 573.
17
Moot Problem pg. 2.
18
Bihar State Mineral Development Corporation and Anr. v. Encon Builders (I) (P) Ltd., (2003) 7 SCC 418.
5
~Memorandum for the Respondent~
2. There must be the intention of the parties to settle such difference by a private tribunal. 3. The parties must agree in writing to be bound by the decision of such tribunal. 4. The parties must be ad idem. In the present case the above conditions are not satisfied and hence there is no valid arbitration agreement between the parties. The mere use of the words `arbitration' or `arbitrator" in a clause will not make it an arbitration agreement.19Any ambiguity and vagueness in the arbitration clause would render the same invalid and unworkable. 20 In the present case Clause 33.1 is vague on the question of reference and the finality of the decision in the adjudication proceedings. In M/s. In M/s. System for International Agencies v. M/s. Rahul Coach Builders Pvt. Ltd.21, the Supreme Court refused a petition under Section 11 of The Act holding that the Arbitration Clause was vague and uncertain. The said principle is squarely applicable to the case at hand. The clause under consideration does not contain the manner of appointment of arbitrators, it does not state that the disputes will be finally settled by the arbitral tribunal, nor does it suggest that the parties will be bound by such decisions. Thus, the failure of certain terms in the agreement makes it unenforceable and void. 2.2.1. Two Zelcovan parties cannot exclude applicability Zelcovan laws: Section 23 of the Zelcovan Contract Act, 1872 (“Contract Act”) Act”) which prohibits agreements against public policy, read with Section 28 of the Contract Act which prohibits agreements restraining legal proceedings leads to the conclusion that two Zelcovan parties cannot agree to arbitrate outside Zelcova. The Supreme Court has held that the intention of the legislature would be clear that Zelcovan nationals should
19
Jagdish Jagdish Chander v. Ramesh Chander, 2007 (6) SCALE 325.
20
ITC Classic Finance Ltd. v. Grapco Mining and Co. Ltd., AIR 1997 Cal 397; Teamco Private Ltd. v. T.M.S. Mani, AIR 1967 Cal 168.
21
M/s. System for International Agencies v. M/s. Rahul Coach Builders Pvt. Ltd., Arbitration Petition No.6 Of 2014, decided on 16 th February 2016 (Supreme Court).
6
~Memorandum for the Respondent~
not be permitted to derogate from Zelcovan law. 22 This is part of the public policy. 23 Zelcovan parties choose a foreign governing law for their contracts will be a violation of public policy and hence such contracts are void under Section 23 of the Contract Act. The decision of the Supreme Court in TDM Infrastructures Infrastructures followed by the Bombay High Court in Addhar Mercantile Mercantile is categorical on this point. The same is applicable in the present case as both the Parties are registered under the Zelcovan Companies Act and are therefore Zelcovan parties. The exclusion of Zelcovan law is thus a blatant violation of the above said dictum of the Supreme Court. The Supreme Court of India has held that, if both the companies are incorporated in India, the arbitration agreement concluded between them shall be construed to be a domestic arbitration agreement and not an International Commercial Arbitration. The Court also placed Section 2(1)(f)(ii) of The Act on a higher pedestal than Section 2(1)(f)(iii) of The Act remarking that the latter will only be applicable in cases where Section 2(1)(f)(ii) of The Act does not apply in its entirety. Thus, the Court limited the application of Section 2(1) (f) (iii) of The Act to cases where the body corporate is an association or a body of individuals unregistered or unincorporated under Zelcovan Companies Act, 1956. 24 In the present case both parties are registered under the Zelcovan Companies Act, 2013 and therefore the ratio of the above authorities will apply to them. 2.2.2. The substantive law applicable to the Agreement is the Zelcovan Contract Act, 1872: Section 28(1)(a) of the Contract Act makes it clear that in an arbitration under Part I of The Act to which section 2(1)(f) of The Act does not apply, there is no choice but for the Tribunal to decide the dispute by applying the Zelcovan substantive law applicable to the contract. This is clearly to ensure that two or more Zelcovan parties do not circumvent the substantive Zelcovan law, by resorting to arbitrations. The provision would have an overriding effect over any other contrary provision in such
22
TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd., (2008) 14 SCC 271 . [“TDM Infrastructures”]. Infrastructures”]. 23
M/s. Addhar Mercantile Private Limited v. Shree Jagdamba Agrico Exports Pvt. Ltd., Arbitration Application No. 197 of 2014 decided on 12 th June 2015 (Bom HC) [“Addhar Mercantile”]; Sah Petroleums Ltd. v. Sah Petroleums Ltd., Suit (Lodging) No.1725 of 2012 decided on 6 th July 2012 (Bom HC). 24
TDM Infrastructures, Infrastructures, (2008) 14 SCC 271.
7
~Memorandum for the Respondent~
contract. On the other hand, where an arbitration under Part I is an International Commercial Arbitration within Section 2(1)(f) of The Act, the parties would be free to agree to any other substantive law and if not so agreed, the substantive law applicable would be as determined by the Tribunal. The section merely shows that the legislature has segregated the domestic and international arbitration. Therefore, to suit India, conflict of law rules have been suitably modified, where the arbitration is in India. 25 Two or more Zelcovan parties cannot circumvent the substantive Zelcovan Law by resorting to arbitration. 2.3. 2.3. Dete Deterr mi nation of Seat of of A r bitr ation to be M alaylaka:
The Respondent humbly submits that in the present case the arbitration agreement has to be interpreted to decide whether the designation of Malaylaka is the venue or seat of arbitration. This Court has drawn a distinction between distinction between a ‘seat’ and ‘venue’ which would be quite crucial in the event, the arbitration agreement designates a foreign country as the ‘seat’/ ‘place’ of the the arbitration and also select The Act as the curial law/ law governing the arbitration proceedings. The Court further clarified that the choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings. 26 The principle to be applied while determining the seat is first and foremost the express intention of the parties. The English case of Shashoua & Ors. v. Sharma 27lays down the principle as follows: “When therefore there is an express designation of the arbitration venue as London and no designation of any alternative place as the seat, combined with a supranational body of rules governing the arbitration and no other significant contrary indicia, the inexorable conclusion is, to my mind, that London is the juridical seat and English law the curial law…” law…” In Enercon GmbH & Wobben Properties GmbH v. Enercon (India) Ltd. 28 arbitration agreement did not specify the seat of the arbitration, named the venue as London but also provided that the Zelcovan Arbitration and Conciliation Act 1996 should apply. The
25
Bharat Aluminium Company v. Kaisar Aluminium Technical Services INC., (2012) 9 SCC 552 . [“BALCO”].
26
BALCO, BALCO, (2012) 9 SCC 552.
27
Shashoua & Ors. v. Sharma, [2009] EW HC 957.
28
Enercon GmbH & Wobben Properties GmbH v. Enercon (Zelcova) Ltd., [2012] EWHC 689 (Comm), 23 March 2012.
8
~Memorandum for the Respondent~
English court found that determination of the seat was a question for the Indian courts because the issue of the arbitral ar bitral seat se at was already pending before them, t hem, the claimants had engaged fully in the Indian proceedings, and because of the comity between England and India. Nonetheless, the English court held, obiter, that the objective intention of the parties was for London to be the t he seat, s eat, and that there was no significant s ignificant contra indicia to this. The essential task was to give effect to the objective intention of the parties. Case law and commentary both signify that the seat is in most cases sufficiently indicated by the country chosen as the place of the arbitration, and that for such choice of place not to be given effect as the seat sea t there would need to be clear evidence that (i) the parties agreed to choose another seat for the arbitration; and (ii) that choice would be effective to endow the courts of that country with the jurisdiction to supervise and support the ar bitration. In the absence of some express and clear provision to the contrary, it must follow that an agreement that the curial or procedural law of arbitration is to be the law of X has the consequence consequence that X is also to be the “seat “ seat”” of the arbitration. The lex fori is fori is then the law of X, and accordingly X is the agreed forum of the arbitration. A further consequence is then that the courts which are competent to control or assist the arbitration are the Courts exercising jurisdiction at X. 29 In the absence of a clear indication to the contrary, there is a presumption that the place where the arbitration is to take place will constitute its seat of arbitration.30 In the case of an agreement as to the seat of arbitration is analogous to an exclusive jurisdiction clause.31. When the parties by express agreement have agreed that the law juridically controlling the arbitration being Malaylaka law, the seat of arbitration to be in Malaylaka impliedly one can easil y say that they have excluded Part I of The Act. As a result, the seat being outside Zelcova, the proposed arbitration will be an international commercial arbitration seated outside Zelcova, and thus Part I of the Arbitration and Conciliation Act cannot apply to the case at hand, applying the principle in BALCO. in BALCO.32 This precludes an application under Sec. 8 of The Act.
29
Halsbury’s Laws of England , Vol. 2 (5th edn., 2005) referring to the approval of the classic statement by the House of Lords in Whitworth Street Estates v. James Miller, (1970) AC 583, or to quote the words of Lord Justice Kerr in Nav. Amazonica v. Cle.Internat. de Seguros, (1998) 1 Lloyd‟s Rep. 116.
30
M/s. Dozco Zelcova Pvt. Ltd. v. M/s. Doosan Infracore Co. Ltd., JT 2010 (12) SC 198.
31
A v. B, (2007) 1 All E.R. (Comm) 591 .
32
BALCO, BALCO, (2012) 9 SCC 552.
9
~Memorandum for the Respondent~
3. THERE
EXIST NO GROUND FOR INTERFERENCE UNDER
SECTION 8
OF THE
ARBITRATION AND CONCILIATION ACT, 1996:
Sec. 8 of The Arbitration and Conciliation Act, 1996 empowers a judicial authority to refer parties to arbitration when there is an arbitration agreement, if a party so applies. It is submitted that in the present case the application of the Section is not attracted since the requisite conditions are not satisfied in the present case [3.1]. [3.1] . The subject matter of the suit is not the same as the subject matter of the agreement and the bank guarantee is not covered by the alleged arbitration clause [3.1.2]. [3.1.2]. Moreover, the Petitioner submitted to the jurisdiction by filing a detailed statement of objections before filing an application under Sec. 8 [3.1.3]. [3.1.3]. Further, the High Court erred in vacating the stay of bank guarantee [3.2] by [3.2] by failing to notice the fraud committed by the Petitioner and since the Respondents have no remedy under Sec. 9 of the Act, the bank guarantee should be stayed s tayed [3.2.1]. [3.2.1] . A judicial authority includes a court defined under Sec. 2(e) of The Act. Sec. 8 states as follows: Power to refer parties to arbitration where there is an arbitration agreement. — — (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. To attract Sec. 8, the subject of dispute in the pending suit should be the subject of the arbitration agreement.33 The party has to apply before filing his first statement in the suit. If the substance of dispute in the suit and the arbitration agreement is the same, court has no discretion. Certain exceptions have been carved out of Sec. 8 when it would be permissible for the court/judicial authority to decline to refer the parties to arbitration and the arbitration agreement notwithstanding, continue adjudication of the proceedings. 34 When the subject33
RS Bachawat, L AW OF ARBITRATION AND CONCILIATION, Vol. 1 (Anirudh Wadhwa, Anirudh Krishnan, eds. 5th Edn., 2010, LexisNexis Butterworths).
34
M.V. Sundararaman, Scope of Enquiry of Civil Courts Under Section 8 of the Arbitration and Conciliation Act, 1996 , (2004) JUNE PL (Jour) 13.
10
~Memorandum for the Respondent~
matter of the suit/legal proceedings includes subject-matter of the arbitration agreement as well as other disputes, the parties cannot be referred to arbitration. 35 In the present case, since the dispute includes not only those issues allegedly covered by the arbitration clause, but also disputes arising out of a bank guarantee, not covered under the said clause, Sec. 8 is not applicable. 3.1.Re 3.1.Requi qui si te condi condi ti ons to in voke Secti Section on 8 ar e not sati sati sf i ed in i n the pre pr esent case case:
From a plain reading of the Section, certain conditions are to be satisfied for applying Sec. 8 of The Act. Act . These conditions were listed by this Hon’ble Court in the case of Branch Manager, Magma Leasing & Finance Limited & Anr. v. Potluri Madhavilata & Anr .. ..36 The following are the requisites: a. That there exists an arbitration agreement; b. That action has been brought to the court by one party to the arbitration agreement against the other party; c. That the subject matter of the suit is same as the subject matter of the arbitration agreement; d. That the other party before he submits his first statement of the substance of the dispute, moves the court for referring the parties to arbitration; and e. That along with the application the other party tenders the original arbitration agreement or duly certified copy thereof. For a valid application under Sec. 8 of the Act, all the five conditions stated above must be satisfied. In the present case, the following are observed: 1. There is no valid arbitration agreement between the parties; 2. The matter that has been brought before the judicial authority is not the subject of the arbitration agreement; and 3.
The Petitioner has made an application u/s 8 after submitting the first statement on the substance of the dispute.
Hence, the prerequisite conditions are not satisfied.
35
Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531 [“Sukanya Holdings”].
36
Branch Manager, Magma Leasing & Finance Limited & Anr. v. Potluri Madhavilata & Anr., (2009) 10 SCC 103.
11
~Memorandum for the Respondent~
3.1.1. There must be a valid arbitration agreement: The Respondent submits that, while deciding an application under Sec. 8, the Court must decide the validity of the arbitration agreement. 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.37 A mechanical reference to arbitration is not contemplated. As submitted above by the Respondent in 2.1, the Arbitration agreement between CCZPL and TPL is not valid and hence arbitration cannot be invoked. 3.1.2. The subject matter of the suit should be the same as the subject matter of the arbitration agreement: The Respondent humbly submits that the subject matter of the suit is not the same as the subject matter of the arbitration agreement. The subject matter of the suit is the Bank Guarantee and the Court has jurisdiction to interfere in the invocation of the bank guarantee. Encashment of a bank guarantee is always subject to the result of litigation or arbitration between the parties to the main contract. That is no ground for holding that the arbitration clause contained in the main contract becomes part and parcel of the contract of bank guarantee which is undoubtedly a separate and independent contract between different parties. The relevant language used in Sec. 8 is in a matter which is the subject matter of an arbitration agreement; Court is required to refer the parties to arbitration. Therefore, the suit should be in respect of 'a matter' which the parties have agreed to refer and which comes within the ambit of arbitration agreement. 38 3.1.2.1.
Arguendo, existence of valid arbitration agreement does not oust
jurisdiction of Civil Court In Sukanya Holdings 39 the Supreme Court held that the 1996 Act does not oust the t he jurisdiction of the civil court to decide the dispute in a case where the parties to the arbitration agreement does not take appropriate steps mentioned under sub-s
37
S.B.P. & Co. v. Patel Engineering Ltd. & Anr., (2005) 8 SCC 618.
38
Sukanya Holdings, Holdings , AIR 2003 SC 2252.
39
Sukanya Holdings, Holdings , AIR 2003 SC 2252.
12
~Memorandum for the Respondent~
(1) and (2) of the Act. Where a suit is commenced - "as to a matter" which lies outside the arbitration agreement and is also between some of the parties who are not parties to the arbitration agreement, there is no question of application of Sec. 8. The Court in Sukanya Holdings 40 held that: “The High Court by its judgment and order dated 18.9.2001 rejected application under Section 8 of the Act. The Court arrived at the conclusion that in the suit apart from the relief of dissolution and accounts, plaintiff has prayed for other reliefs. All the defendants to the suit are not parties or partners in the partnership firm and the terms of the partnership deed including the arbitration clause are not binding to them. Only part of the subject matter could at the most be referred ref erred to the arbitration. The Court also negatived the alternative prayer for referring part of the subject matter in respect of those parties who are parties to the partnership agreement which contains arbitral clause. The Court arrived at the conclusion that such procedure is not contemplated under the Act. The object and purpose of the Act is to avoid multiplicity of the proceedings and not to allow two forums simultaneously to proceed with the matter.” Hence, the Respondent humbly submit that if a suit is filed against parties, some of which are bound by the Arbitration agreement, while others are not, in such circumstances a common suit will lie against the parties. Two different remedies in respect of same cause of action are not maintainable. The claim relating to the enforcement of a bank guarantee is not covered by the arbitration clause and is not referable to arbitration.41 Hence, bank guarantee is not a matter of dispute under the arbitration and agreement and therefore the Respondents can bring the matter of invoking the bank guarantee before the Court. 3.1.3. Petitioner has waived its rights by filing a detailed Statement of of objections : Sec. 8 of the Act clearly provides that the application had to be made not later than submitting the first statement on the subject matter of the dispute. In the present case, the Petitioner has filed the application under Sec. 8 after the filing of a detailed statement of objections and is hence precluded from claiming reference to arbitration. Courts have refused to allow applications before it which had been filed after the
40
Ibid.
41
Suresh Arjundas Bakhtiani v. UOI & Anr., 1991 (1) BomCR 26.
13
~Memorandum for the Respondent~
issues were framed. The Court expressly rejected the contention that since the matter had been raised in the Written Statement that was enough. 42 CCZPL had appeared before the Court and filed a detailed statement of objection to the said stay application. CCZPL by doing so has submitted to the jurisdiction of the court and has waived its right to Arbitration. The interpretation of Sec. 8 while deciding Sukanya Holdings 43supports the view that such an application cannot be filed after the first statement on the substance of the dispute has been filed by the applicant.44 Not only filing of the written statement in a suit, but filing of any statement, application, affidavit filed by a Defendant prior to the filing of the written statement will be construed as 'submission of a statement
on
the
substance
of
the
dispute',
if
by
filing
such
statement/application/affidavit, the Defendant shows his intention to submit himself to the jurisdiction of the court and waive his right to seek reference to arbitration.45 Though Sec. 8 does not prescribe any time-limit for filing an application under that section, and only states that the application under Sec. 8 of The Act should be filed before submission of the first statement statem ent on the substance of the dispute, dis pute, the scheme of The Act and the provisions of the section clearly indicate that the application thereunder should be made at the earliest. A party who willingly participates in the proceedings in the suit and subjects himself to the jurisdiction of the court cannot subsequently turn around and say that the parties should be referred to arbitration in view of the existence of an arbitration agreement. Whether a party has waived his right to seek arbitration and subjected himself to the jurisdiction of the court, depends upon the conduct of such party in the suit. 46 In State Of Uttar Pradesh & Anr. v. Janki Saran Kailash Chandra & Anr ., .,47 an application for time to file written statement was considered to be a step in the proceedings. While comparing the scope of Section 34 of the 1940 Act vis-a-vis the vis-a-vis the scope of Sec. 8 of the 1996
42
M/s. R.R Enterprises v. C.M.D Of M/s. Garware-Wall Ropes, (2013) ILR I Delhi 248.
43
Sukanya Holdings, Holdings , AIR 2003 SC 2252.
44
Arthi Jethani v. Daehsan Trading (India) Pvt. Ltd., 2011 (4) AD DEL 5.
45
Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. & Ors., AIR 2011 SC 2507 . [“Booz Allen”].
46
Booz Allen, Allen, AIR 2011 SC 2507.
47
State Of Uttar Pradesh & Anr. v. J anki Saran Kailash Chandra & Anr., 1973 AIR 2071.
14
~Memorandum for the Respondent~
Act, what is necessary is disclosure of the entire substance in the main proceeding itself and not taking part in the supplemental proceeding. 48 Punjab Dairy Development Corporation v. Sudesh Kumar 49 the court held that the defendant had taken a number of adjournments to enable him to file his written statements; this was held to be sufficient to disentitle him to seek reference to arbitration. Thus in the present case, applying the ratio in all the above said decisions, filing of detailed statement of objections by the Petitioner disentitles reference to arbitration. 3.2. Th e H igh Cour t er er r ed in vacatin vacatin g the stay of of bank guarantee: guarantee:
The invocation of bank guarantee by the Petitioner is intended to overreach the adjudicative process, provided under the terms of the agreement. This is a fraudulent attempt on the part of the Petitioner so as to justify grant of an injunction order; and the Respondents shall suffer irretrievable injustice and injury in the event the bank guarantees are permitted to be encashed. Further, the Respondent submits that in similar matters the Courts have granted interim stay. In this regard it is relevant to note the case of Jaiprakash Hyundai Consortium v. Satluj Jal Vidyut Nigam Ltd., 50 where the Court held as under:“The courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a bank guarantee. Hence if there is such a fraud of which the beneficiary seeks to take the advantage, he can be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases payment -of money under such a bank guarantee would adversely affect the bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country."
48
M/s. Johnson Rubber Ind Ltd. v. M/s. Shree Conveyor System Pvt. Ltd., C.M(M) No.960/2013 & C.M.No.14494/2013 (Stay), decided on 16 th October 2014 (Delhi High Court).
49
Punjab Dairy Development Corporation v. Suresh Kumar, AIR 1999 P&H 235.
50
Jaiprakash Hyundai Consortium v. Satluj Jal Vidyut Nigam Ltd., OMP No. 251/2003. This judgement was upheld by a Division Bench in the case of Satluj Jal Vidyut Nigam Ltd. v. Jai Prakash Hyundai Corsortium AIR 2006 Delhi 239 where in 26 it was held/; Hence, we uphold the impugned order to the extent it relates to passing of the injunction order in favor of contractor and against the department against encashment of bank guarantees in question.
15
~Memorandum for the Respondent~
The question of enforcement or non-enforcement of bank guarantee is not amenable to arbitration, without even impleading the bank as a party thereto. The arbitration clause contained in the main contract does not cover the dispute as to the enforcement of the bank guarantee by the beneficiary.51 The Courts have culled out two exceptions to the general rule of non-interference by the Courts, namely (i) fraud and (ii) the resulting of irretrievable injustice or harm. In the case of Bolivinter of Bolivinter Oil S.A. v. Chase Manhattan Bank 52 it was stated that an injunction may be granted where it is proved that the bank knows that any demand for payment already made or which may thereafter be made will clearly fraudulent. Fraud of an egregious nature which would vitiate the very foundation of such a Bank Guarantee or letter of credit and the beneficiary beneficiar y seeks to take advantage of the situation. 53 The Respondent submits that there is fraud on behalf of the Petitioner. As per the payment clause cla use under the Agreement, payments pa yments were subject to receipt of shipment at Forsyleth port and only after clearance of quality test as set forth in the Agreement. It is further submitted that two earlier shipments have failed the quality tests due to which payments have been withheld by TPL, and hence CCZPL cannot invoke the bank guarantee as they have failed to perform their duty under the contract. If under the terms of the contract the obligations have to be performed in a certain sequence, one of the parties to the contract cannot require compliance with the obligations of the other party without in the first instance performing his own part if under the contract it is to be performed by it earlier. This principle squarely applies to the present case because until and unless the shipments made by CCZPL had complied with the quality tests thereby performing their obligation under the contract, no question arises of bank guarantee being invoked and invocation of the same is fr audulent.
51
Suresh Arjundas Bakhtiani v. UOI & Anr., 1991 (1) BomCR 26 10 .
52
Bolivinter Oil S.A. v. Chase Manhattan Bank N.A., [1984] 1 LLR 392 .
53
Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co., (2007) 8 SCC 110.
16
~Memorandum for the Respondent~
3.2.1. The Respondent has no remedy under Section 9 of the Arbitration and Conciliation Act, 1996: Arguendo there exists a valid arbitration agreement and the Court exercises its power under Sec. 8 to refer the parties to arbitration, the Respondents cannot maintain an application under Sec. 9 of the Act for stay sta y of bank guarantee. The subject matter of Bank Guarantees are independent i ndependent contracts and unless a specific arbitration clause is mentioned in the bank guarantee or a clear reference to the Arbitration clause contained in other supplementary contract between the parties is made therein, Sec. 9 of the said Act cannot be invoked by the parties to the Bank Guarantees. It is their case that the subject matter of Bank Guarantees, not containing the arbitration clause, cannot be called for in question before this Court by invoking Sec. 9 of the above said Act. The subject matter Bank Guarantee also does not refer to any arbitration clause in any contract between the parties. The Apex Court reported in M.R. Engineers and Contracts Pvt. Ltd. v. Som Datt Builders Ltd. 54 the learned Judge found that the arbitration clauses cannot be incorporated with the Bank Guarantees therein since mere reference to the original contract will not make the arbitration clause be read into Bank Guarantees.
54
M.R. Engineers and Contracts Pvt. Ltd. v. Som Datt Builders Ltd., 2009(7) SCC 696.
17
~Memorandum for the Respondent~
PR AYER In light of the issues raised, arguments advanced and authorities cited, the counsel for the Appellant humbly prays that this Hon’ble court may be pleased to: 1. Stay the invocation of the bank guarantee provided by TPL to CCZPL and reverse the order of the High Court directing extension of Bank Guarantee; 2. Hold that Clause 33.1 of the Agreement between the Petitioner and Respondent is opposed to public policy; 3. Hold that there is no valid arbitration agreement between the parties and uphold the judgment of the High Court Court to that extent; 4. Pass any or other such orders that it may deem fit in the interest of justice.
rd
Dated this 3 day of April 2016.
Sd/COUNSEL FOR RESPONDENT
18