ECOM Agroindustrial Corporation Ltd. and Ors. vs. Respondent: Mosharaf Composite Textile Mills Ltd.

Jul 2, 2022

IN THE SUPREME COURT OF BANGLADESH (HIGH COURT DIVISION)

Civil Revision No. 1280 of 2014

Decided On: 28.05.2014

Appellants: ECOM Agroindustrial Corporation Ltd. and Ors.
Vs.
Respondent: Mosharaf Composite Textile Mills Ltd.

**Hon’ble Judges/Coram:**Sharif Uddin Chakladar and Abu Taher Md. Saifur Rahman, JJ.

Counsels:
For Appellant/Petitioner/Plaintiff: Asrarul Hossain, Advocate and Omar Sadat, Advocate

For Respondents/Defendant: Ahsanul Karim and Khairul Alam Chowdhury, Advocates

Subject: Contract

Catch Words

Mentioned IN

**Acts/Rules/Orders:**Code of Civil Procedure, 1908 (CPC) - Order VII Rule 11; Code of Civil Procedure, 1908 (CPC) - Order VII Rule 11(d); Code of Civil Procedure, 1908 (CPC) - Order XXXIX Rule 1; Code of Civil Procedure, 1908 (CPC) - Order XXXIX Rule 2; Code of Civil Procedure, 1908 (CPC) - Section 151; Constitution Of The People’s Republic Of Bangladesh - Article 109, Constitution Of The People’s Republic Of Bangladesh - Article 111; Contract Act, 1872 - Section 28

Citing Reference:

Discussed

 

 9

Mentioned

 

 21

Case Note:
arbitration - Rejection of Plaint - Order VII Rule 11 of Code of Civil Procedure, 1908 (CPC) and Section 10(2) of the arbitration Act - Whether rejecting application filed under Order VII, rule 11(d) of CPC for rejection of plaint is legal? - Held, there is a valid agreement between plaintiff and defendant with arbitration clause, pursuant to agreement an arbitration proceeding has already commenced before arbitration tribunal at Liverpool, suit is subsequent to arbitration proceeding, written statement has been filed by defendant can be treated as information to court pending arbitration before Liverpool, it is also seen that arbitrators have no jurisdiction over court but court has jurisdiction over arbitration - Decisions of arbitration is subject to review by court, either at time of mistake of some rules of court or on application of any of parties - This court also seen that there is arbitration proceeding which arrived in contract by parties by signing it in open eyes and there is no allegation of fraud practice upon plaintiff, this court is of view that as per section 10(2) of arbitration Act when it is found that there is arbitration proceeding, Court should keep its hands off from proceeding pending before court - This court find substance in this rule - In that view of matter ends of justice would be met if this court stay proceeding of Title Suit - Proceedings of Title Suit is stayed till disposal of arbitration proceeding - In result this rule is disposed of - Parties are directed to settle matter through arbitration expeditiously. [49],[50],[51]

JUDGMENT

Sharif Uddin Chakladar, J.

  1. This Rule was obtained by the defendants against Order No. 29 dated 22-1-2014 passed by the learned Joint District Judge, 1st Court, Dhaka in Title Suit No. 73 of 2012 rejecting the application filed under Order VII, rule 11(d) of the Code of Civil Procedure for rejection of plaint. It is stated that the petitioner No. 1, ECOM Agro Industrial Corp. Ltd. based in Switzerland and is an international supplier of raw cotton and the Petitioner No. 2, ECOM Agro industrial Asia Pte. Ltd. is the Bangladesh Liaison Office of the Petitioner No. 1.

  2. On 19-1-2012 opposite party No. 1 as plaintiff filed Title Suit No. 73 of 2012 before the Joint District Judge, 1st Court, against the petitioners and opposite party No. 2 for declaration that the Contract No. 315510058 dated 31-1-2011 entered into between the plaintiff and petitioner No. 1 is illegal, void and have no binding effect on the plaintiff, for a declaration that the reciprocal performance of the plaintiff under Contract No. 315510058 dated 31-1-2011 having become impossible and barred under the law of the land, the plaintiff is discharged from all liabilities under the said Contract No. 315510058 dated 31-1-2011 and the demand of the petitioner-defendant No. 1 of US $ 34,75,948.72 vide letter dated 23-11-2011 is also illegal and void and the same is not binding upon the plaintiff and as such the plaintiff is not liable to pay US $ 34,75,948.72, for a declaration that initiation of arbitration before International Cotton Association under reference No. A01/2011/200 by the petitioner-defendant No. 1 against the plaintiff pursuant to the said Contract No. 315510058 dated 31-1-2011 is illegal, void and does not have any binding effect upon the plaintiff, for a permanent injunction restraining the petitioner-defendant No. 1 from making demand of the said US $ 34,75,948.72 under the said demand letter dated 23-11-2011 upon the plaintiff directly or otherwise through any arbitral proceeding before International Cotton Association, and for permanent injunction restraining the petitioners-defendants Nos. 1 and 2 from pursuing any claim/proceedings whatsoever under and or in respect of the Contract No. 315510058 dated 31-1-2011 before International Cotton Association, Liverpool or elsewhere.

  3. It is the plaintiff’s case that a contract being No. 315510058 dated 31-1-2011 was entered into between the petitioner No. 1 and the plaintiff for sale of 1,500 metric tons of Brazilian Raw Cotton at the price of US $ 1.895 per pound which provides a condition that all disputes will be settled amicably or will be referred to arbitration in accordance with Rules and By Laws of International Cotton Association (ICA) and shall be resolved by applying English Law. The said contract provides an arbitration clause to the effect that ICA arbitration for any technical or quality dispute. The plaintiff-opposite party further stated that the proforma Defendant-opposite party declined the plaintiff’s request to open L/C in favour of the petitioner No. 1 pursuant to the aforesaid contract as the contract price was higher than the market price and that it is allegedly against the provisions of the Import Policy Order 2009-2012. Upon non-performance of the contract, the petitioner No. 1 thereafter closed the contract and claimed a market difference of US $ 3,125,020.50 from the plaintiff-opposite party and on failure of the plaintiff-opposite party to settle the same, the petitioner No. 1 initiated arbitration proceedings against the plaintiff-opposite party before International Cotton Association, Liverpool. Hence the suit.

  4. Petitioners appeared before the trial court by filing Vakalatnama and thereafter on 19-11-2013, the petitioner filed an application under Order VII, rule 11(d) of the Code of Civil Procedure, 1908 read with section 151 of the Code of Civil Procedure, 1908 for rejecting the plaint of the instant suit.

  5. Plaintiff-opposite party on 12-1-2014 filed written objection against the said application filed by the petitioners under Order VII, rule 11(d) of the Code of Civil Procedure, 1908 read with section 151 of the Code of Civil Procedure, 1908.

  6. The trial court after hearing both the parties considering the facts, circumstances, materials on record and the relevant provision of law, rejected the said application under Order VII, rule 11(d) of the Code of Civil Procedure, 1908 read with section 151 of the Code of Civil Procedure, 1908 filed by the petitioners vide impugned Order No. 29 dated 22-1-2014.

  7. Learned Judge having not rejected the plaint defendant moved this court and obtained this Rule.

  8. By volumeness counter-affidavit annexing different papers and the decisions of the Courts of this subcontinent the rule is contested by plaintiff-opposite party.

  9. Mr. Omar Sadat, learned Advocate produced before us a copy of the contract upon which legal battle arose by supplementary-affidavit. Mr. Omar Sadat, learned Advocate, submits that, the Contract being No. 315510058 dated 31-1-2011 entered into between the Petitioner No. 1 and the Plaintiff-Opposite Party specifically stipulates that all disputes will be settled amicably or will be referred to arbitration in accordance with Rules and By Laws of International Cotton Association (ICA) and shall be resolved by application of English Law, but the plaintiff-opposite party completely disregarded this stipulation and filed Title Suit No. 73 of 2012 against the petitioners before the learned Joint District Judge, 1st Court and the learned Joint District Judge, 1st Court, Dhaka without considering this aspect most illegally rejected the application of the petitioners under Order VII, rule 11(d) of the Code of Civil Procedure, 1908 resulting an error of law in the decision occasioning failure of justice and hence the impugned order is liable to be set-aside.

  10. Learned Advocate further submits that, paragraph No. 5 of the plaint specifically mentions that Contract No. 315510058 dated 31-1-2011 stipulates that all disputes under the contract will be settled amicably or will be referred to arbitration in accordance with the Rules and By Laws of International Cotton Association and shall be resolved by application of English Law and, as such, it is very much apparent form the plaint that the learned Joint District Judge, 1st Court, Dhaka has no power or authority to hear and decide matter under the instant suit as it is beyond its jurisdiction and as the arbitration tribunal of the International Cotton Association has sole and exclusive power and jurisdiction to resolve any dispute under the contract, but the learned Joint District Judge, 1st Court, Dhaka without considering this aspect most illegally rejected the application under Order VII, rule 11(d) of the Code of Civil Procedure, 1908 filed by the petitioners resulting an error of law in the decision occasioning failure of justice and hence the impugned order is liable to be set-aside.

  11. Learned Advocate further submits that, learned Joint District Judge, 1 Court, Dhaka committed an error of law and failed to consider that the instant suit is barred by law, section 7 of the arbitration Act, 2001, which clearly restricts any judicial authority to hear any legal proceedings where any of the parties to the arbitration agreement filed a legal proceeding in a Court against the other party, and, as such, the instant suit is not at all maintainable in law in its present form and manner and accordingly the plaint is liable to be rejected, but the learned Joint District Judge, 1st Court, Dhaka without considering this aspect most illegally rejected the application under Order VII, rule 11(d) of the Code of Civil Procedure, 1908 filed by the petitioners resulting an error of law in the decision occasioning failure of justice and hence the impugned order is liable to be set-aside by this.

  12. Learned Advocate further submits that despite the clear stipulation in the said contract in respect of resolution of dispute through International Cotton Association by arbitration, the plaintiff has most outrageously, arbitrarily and in utter violation of the terms of the contract filed the instant suit before the learned Joint District Judge, 1 Court, Dhaka which has absolutely no jurisdiction whatsoever over the concerned matter, but the learned Joint District Judge, 1 Court, Dhaka without considering this aspect most illegally and arbitrarily rejected the application under Order VII, rule 11(d) of the Code of Civil Procedure, 1908 filed by the petitioners resulting an error of law in the decision occasioning failure of justice and hence the impugned order is liable to be set-aside.

  13. Mr. Omar Sadat, learned Advocate in support of his submissions relied on a number of decisions. Learned Advocate referred By Law 319 regarding Commencing arbitration and also text book of Russel on arbitration and also scope of the arbitration Act, 1996. Learned Advocate referred text book of Russel on arbitration, Part 1 of 1996 Act. On the question of after filing of written statement application for rejection of plaint can be filed or not, learned Advocate relied on the decision of Sitalakhaya Ice & Cold Storage Pvt. Ltd. vs. Artha Rin Adalat No. 1, LEX/BDHC/0033/2012 : 64 DLR 487, Abdul Quayum vs. International Finance Investment and Commerce Bank Ltd., 63 DLR 359, Rasheda vs. Nurussafa 24 BLD (AD) 223, 9 BLC (AD) 223. Learned Advocate referred to section 7 of the arbitration Act, 2001 also referred to Words and Phrase as interpreted by the Supreme Court of India, 1960-2002 and relied on the case of Union of India vs. GM Kokil, 1984 (Supp) SCC 196. Learned Advocate also referred NS Bindra’s Interpretation of Statutes, eight editions of Non-obstante Clause and also on this subject, Black’s Law Dictionary, 7 edition. Regulation of UN General Assembly dated 11-12-1985 on the Model Law on International Commercial arbitration.

  14. Mr. Ahsanul Karim, learned Advocate, appearing for the plaintiff-opposite party, on the other hand, submits that, in the case of arbitration instituted outside of Bangladesh, section 7 of the arbitration Act is not applicable. Learned Advocate further submits that section 3 of the arbitration Act provided sections 45, 46 and 47 of 2001 shall be applicable. In view of section 3 of the said Act of 2001, section 7 does not apply in the instant case since the place of arbitration is outside Bangladesh. Learned Advocate further submits that, until a foreign award is submitted before the Court of law of Bangladesh under section 45 of the said Act, 2001 the provision of sections 45, 46 and 47 of the said Act, 2001 cannot be invoked. Therefore, a foreign arbitration and foreign award cannot be taken into cognizance by any Court of law in Bangladesh under the said Act of 2001, as foreign award is not submitted under section 45. Learned Advocate further submits that therefore, in the instant case the existence of the said foreign arbitration in Liverpool, UK is outside Bangladesh. Learned Advocate further submits that, section 7 of the said Act of 2001 does not bar initiation of any suit. Section 7 of the said Act of 2001 restricts hearing of the proceeding of the suit if the subject matter of the suit is same as of subject matter of arbitration. Learned Advocate further submits that in this respect section 7 having read in conjunction with section 10 of the said Act of 2001, if section 7 applies restricting hearing of the proceeding of the suit then the trial court in the appropriate case may refer the matter to the arbitration and stay the proceeding of the suit under section 10 of the said Act of 2001. Learned Advocate further submits that since the initiation of the suit is not barred by section 7 of the said Act of 2001 the plaint of the suit cannot be rejected under Order VII, rule 11 of the Code of Civil Procedure. Learned Advocate further submits that the Civil Courts of Bangladesh is governed by the Civil Courts Act, 1887 and the Constitution of Bangladesh, Article 109 of the Constitution of the People’s Republic of Bangladesh provides that “the High Court Division shall held superintendence and control over all Courts and Tribunal subordinate to it” and Article 111 provided that, “the law declared by the Appellate Division shall be binding on the High Court Division and the law declared by the either Division of the Supreme Court shall be binding on all Courts subordinate to it,” Queen’s Bench has no authority to stop the proceeding of the Courts of Bangladesh. Learned Advocate further submits that as per law the suit filed by plaintiff-opposite party can proceed.

  15. In support of his submissions, learned Advocate relied on the case of Unicoi Bangladesh vs. Maxwell Engineering Works Ltd., 56 DLR (AD) 166, the case is under Order XXXIX, rules 1 and 2 of the Code of Civil Procedure, The case of Uzbekistan Airways vs. Air Spain Ltd., 10 BLC 614, this case is on sections 3(2), 10 and 45 to 47 of the arbitration Act. Unreported decision of the Appellate Division arising from the decision of High Court Division i.e. Civil Petition for Leave To Appeal No. 1112 of 2005, the Case of Canada Shipping and Trading SA vs. TT Katikaayu, LEX/BDAD/0067/2001 : 54 DLR 93, this case is under sections 45-47 of the arbitration Act, the case of Maico Jute Bag Corporation vs. Bangladesh Jute Mills Corporation, 23 BLC (AD) 38, this case is under section 10 of the arbitration Act, 2001, the case of Chittagong Port Authority vs. Ananda Shipyard and Slipways Ltd., 32 BLD 120 = LEX/BDHC/0187/2005 : 63 DLR 405. Unreported decision of this Court in Civil Revision No. 2299 of 2007, Dozco India Private Ltd. vs. Doosan Infracore Company Ltd. 6 SCC 179.The case of STX Corporation Ltd. vs. Meghna Group of Industries Ltd., 64 DLR 550, this is a case under section 3(2) of the arbitration Act, the case of MV Aghia Thalassini vs. Abu Bakr Siddique, 32 DLR (AD) 106, this is a case under section 34 of the arbitration Act. Judgment of the High Court Division of aforesaid case of Abdu Bakr Siddique vs. MV Aghia Thalassini, reported in LEX/BDHC/0027/1977 : 30 DLR 94, the case of Halcyon Steamship Co., Inc. USA, represented by Hegee and Co. (Pak) Ltd. vs. Province of East Pakistan, now Government of Bangladesh, represented by Collector of Chittagong, 26 DLR (SC) 7, this is a case under 34 of the arbitration Act, the case of Bangladesh Air Service (Pvt) Ltd. vs. British Airways Plc, LEX/BDHC/0006/1997 : 49 DLR 187, this is a case under section 28 of Contract Act, the case of Civil Engineering Co. vs. Mahkota Technology Sdn Bhd, 14 BUT 103, the case of Sukanya Holdings Pvt. Ltd. vs. Jayesh H Pandya, AIR SC 2252 this is a case under sections 5, 8 of the arbitration Act.

  16. We will consider the aforesaid cited decisions by both the parties if required. We will now gradually proceed with our judgment.

  17. The agreement upon which the legal battle arose in which plaintiff and defendant themselves agreed may be looked into:–

“This contract incorporates the Rules and By-Laws of the International Cotton Association in force at the time this contract was entered into. All disputes will be settled amicably or will be referred to arbitration in accordance with the Rules and By-Laws of the International Cotton Association and shall be resolved by application of English law. ICA arbitration for any technical or quality dispute. To be covered by the buyer.

  1. In the agreement in clause 4, a condition was for ‘Force Majeure’, the contract was arrived on 31-1-2011 and Contract No. 315510058 for sale of 1500 metric tons of Brazilian Raw Cotton at the price of US $ 1.895 per pound and it was agreed that all disputes will be settled amicably or will be referred to arbitration in accordance with Rules and By Laws of International Cotton Association and shall be resolved by application of English Law. The dispute arises when the plaintiff instituted suit at Bangladesh. Defendant referred the dispute to arbitration at Liverpool. In the plaint there is no allegation of forgery or misrepresentation or misappropriation or mis-interpretation of clause of agreement in arriving the agreement. Both the parties in free way entered into agreement. It is settled principle of law that unless there is forgery, fraud or misappropriation the agreement arrived both the parties are bound by terms of the agreement. It is internationally accepted in which Bangladesh is a party. If any dispute arises between the parties over trading of cotton then it will be resolved by invoking arbitration Clause of the agreement by International Cotton Association Limited with Rules and By-laws of that association. By-laws 300 of the aforesaid association make its mandatory as:
  1. “We will conduct arbitration in one of two ways:

• Quality arbitration will deal with disputes arising from the manual examination of the quality of cotton and/or the quality characteristics which can only be determined by instrument testing. Bylaws especially applicable to quality arbitrations and appeals are set out in part 2.

• Technical arbitrations will deal with all other disputes. By-laws especially applicable to technical arbitrations and appeals are set out in part 1.

  1. The mandatory provisions of the arbitration Act 1996 the act shall apply to every arbitration and/or appeal under these By-laws. The non-mandatory provisions of the Act shall apply save insofar as such provisions are modified by, or are inconsistent with, these By-laws.

  2. The seat of our arbitrations is in England. No one can decide or agree otherwise.

  3. Disputes shall be settled according to the law of England wherever the domicile, residence or place of business of the parties to the contract may be.

  4. If parties have agreed to arbitration under our By-laws, then, subject to By-law 300.6 below, they must not use any court at all unless we have no further power to do what is required, or the act allows, in which case they must apply to the courts in England or Wales.

  5. A party can apply to a court anywhere to obtain security for its claim while arbitration or an appeal is taking place.

  6. If a party is prevented from proceeding with an arbitration as a result of the application of the provisions By-law 302.3 or By-law 318.1, it is free to apply to any court which is willing to accept jurisdiction.”

  1. In that by law also by law 301, the formation of Tribunal, by law 302 Commencement of arbitration, by law 303(a) for Appointment of Arbitrators, and by law 303(b) for Revoking the authority of an arbitrator or appeal committee member. By Law 304 for Associations, fees and deposits on account of arbitration fees. By Law 306 Conduct of the arbitration. By-law 307 for Oral hearings. By Law 308 for Technical arbitration Awards. By Law 309 for Interest on Awards. By Law 310 for Costs. By Law 316 for Notices. By Law 317 for Fees. Of them by laws 301, 302 and 306 may be referred to:

By Law 301 is as follows:–

‘Disputes which fall to be determined under these By-laws shall be heard by a tribunal of three arbitrators or, if both parties agree, by a sole arbitrator who, for the purposes of these By-laws, shall be deemed to be Chairman. Each party shall appoint one arbitrator and arbitrators shall appoint the third arbitrator who shall serve as Chairman of the tribunal. The tribunal shall ensure that the parties are treated with equality and that each party has the right to be heard and is given a fair opportunity to present its case. The tribunal shall conduct the proceedings with a view to expediting the resolution of the dispute. All communications between either party and the tribunal shall be simultaneously copied to the other party.’

By-law 302 is:–

  1. ‘Any party wishing to commence arbitration under these By-laws (the Claimant) shall send us a written request for arbitration (the Request), and we shall copy the Request to the other party (the Respondent).

  2. When sending the request, the Claimant shall also send.

• The name, address including email address, telephone and facsimile number of the Respondent,

• A copy of the written arbitration clause together with a copy of the contractual documentation in which the arbitration clause is contained or in respect of which the arbitration arises.

• The name of their nominated arbitrator, or, if appropriate, the name of the sole arbitrator agreed by the parties.

• Such application fee as may be due under Appendix C of our Rule Book.

  1. Association may refuse arbitration facilities where one of the parties to the dispute has been suspended from the Association or expelled. arbitration will also be refused where either the name of one of the parties appeared on the Association’s List of unfulfilled Awards the time that the contract under dispute was entered into, or the penalty of denial of arbitration services has been imposed on one of the parties pursuant to Article 27 or By-law 421; and the contract under dispute was entered into after 4 September 2002.’

By-law 306 may be referred to:–

‘It shall be for the Chairman, having consulted his fellow arbitrators, to decide all procedural and evidential matters, subject to the right of the parties to agree any matter.

  1. The Chairman shall ensure the prompt progress of the arbitration, where appropriate by the making of Orders.

  2. As soon as the Chairman has determined a timetable for proceedings, it shall notify the parties.

  3. The parties have a duty to do all things necessary for the proper and expeditious conduct of the proceedings, including complying without delay with any order or direction of the tribunal as to procedural and evidential matters.

  4. If either party fails to comply with any procedural order of the tribunal, the tribunal shall have power to proceed with the arbitration and make an Award.

  5. Decisions, Orders and Awards shall be made by all or a majority of the arbitrators, including the Chairman. The view of the Chairman shall prevail in relation to a decision, order or Award in respect of which there is neither unanimity nor a majority.

  6. All statements, contracts and documentary evidence must be submitted in the English language. Whenever documentary evidence is submitted in a foreign language, unless otherwise directed by a tribunal, this must be accompanied by an officially certified English translation.”

20. arbitration is public policy as in law it can be said to alternative dispute resolution which has been accepted whole over the World. When agreement having an arbitration clause it is settle principle of law that before instituting any suit parties must or shall invoke the arbitration proceeding. Civil court has a hand to part to play as unless award may make rule of the court, award has no value.

  1. In the text book Jurisdiction and arbitration Agreements and their Enforcement, first Edition by David Joseph QC-2005, the author look into limitations on bringing of an application as:

“Section 9(3): Limitations on the bringing of an application

No application can be made prior to acknowledgment of service. This is straightforward and requires no amplification. The application must thereafter be made prior to taking any step in the proceedings to answer the substantive claim, which in most cases will mean within the time for the service of the defence, namely 28 days after the service by the claimant of the particulars of claim.

Bys. 9(3), the defendant is not entitled to bring an application under section 9(1) after he has taken a step in the proceedings to answer the substantive claim. The expression was considered by the Court of Appeal in Patel vs. Patel (2000) QB 551CA. The decision in that case was that a party who had issued an application (1) (2000 QB 554) to set-aside a default judgment (OP. Cit Para 6.13 and see to same effect Mustill & Bagd. P.472) (2) to be granted permission to bring a counterclaim, and (3) (Pitchers Ltd. vs. Plura (Queensbury) Ltd. (1940) 1AII ER 151) for consequential directions to be given, was not precluded from applying to stay proceedings under section 9 of the arbitration Act 1996. The affidavit in support indicated that the defendant intended to apply for a stay. The application to answer the substantive claim. The potential difficulty created was the inclusion in the application notice of a claim for permission to counterclaim and for consequential directions. Lord Woolf MR, however, considered that the applicant did not need permission to counterclaim and therefore had sought otiose relief, and that, further, the application for directions was entirely neutral. Lord Woolf MR considered that a party ought not be taken to have abandoned the right to apply for a stay by making a claim for otiose relief. The judgments of Lord Woolf MR and Lord Justice Otton contain important guidance to practitioners under section 9(3) of the arbitration Act. Lord Woolf Law which referred to the latest time for challenge being the submission of his “first statement on the substance of the dispute”. Lord Justice Otton approved a passage in professor Merkin’s arbitration Law equating the loss of the right to apply for a stay with the defendant taking some step amounting to an invocation of the court’s jurisdiction and an unequivocal representation that he did not intend to refer issues in dispute to arbitration. Where a party in his affidavit states that he intends to apply for a stay, this test will not be satisfied. Likewise, the test will not be satisfied where a party seeks a stay of proceedings and summary judgment conditional upon the dismissal of the stay application.”

  1. In practical terms, the right to apply under section 9(3) will be lost by reason of the filing of the defence. However, the right might be lost any other unequivocal act which invokes the jurisdiction of the court to deal with the substance of the claim without a proper reservation of rights. Care, therefore should be taken expressly to indicate the intention to apply for a stay and to reserve all rights, when seeking an extension of time for the service of a defence or in appearing in court on the return date of an injunction for interim relief.

  2. Section 9 (4): “the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed”.

“It should first be remembered that the nature of the remedy is a stay and not a compulsory reference to arbitration. This distinction is important (as was pointed out in para. 11.01 above) and this linguistic formula permits the courts to stay court proceedings which are the subject of an arbitration agreement but which are required to be submitted to an expert (or some other alternative dispute resolution forum) prior to arbitration. Although the remedy does not compel arbitration, the remedy is mandatorily imposed. The court is obliged to grant a stay if the requirements of section 9(1) are fulfilled, unless the court is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed. There is no discretion to refuse a stay on general grounds of forum non conveniens or the desire to avoid multiple proceedings. As regards this last point, this distinguishes arbitration agreements from choice of court agreements.”

  1. The burden of proof in each case rests with the party opposing a stay. This is in contrast to the position under section 9(1). The burden rests with the applicant to demonstrate the existence and scope of the arbitration agreement. The stay of proceedings refers to all any interim freezing injunction or other security process. The words in section 9(4) are themselves derived from Art. II.3 of the New York Convention. It is noted by Professor Van den Berg in his authoritative word on the New York Convention, that the summary Records of the New York Conference of 1958 do not reveal any discussion regarding these words. It is suggested that the words ought to be interpreted in the same manner as other English statutory provisions giving effect to international treaty obligations. In the present context, it is suggested that the exceptions to mandatory referral to arbitration ought to be narrowly construed in order to give effect to the overall scheme of the New York Convention.’

  2. ‘The court is only concerned here with the arbitration agreement. If therefore an issue is raised as to whether the substantive contract is illegal, null or void, the court will have to consider the nature of the allegation, whether it impeaches the arbitration agreement (as opposed to the substantive contract), and whether the dispute in question falls within the scope of the arbitration agreement. Section 7 of the arbitration Act 1996 expressly embraces the doctrine of the separability of the arbitration agreement. An arbitration agreement is not to be regarded as invalid, nonexistent or ineffective because the subtractive agreement is so held. Separability has been considered in Ch.4 above. A respondent to an application under section 9 separate the agreement to arbitration from the governing procedural rules. Likewise, neither a change of the name of the identified institution nor a change to its governing rules will ordinarily render the agreement incapable of being performed. Further, the non-existence of an appointing authority will not render the arbitration agreement incapable of being performed as the parties can approach the court for the appointment of an arbitrator. If the arbitration clause itself contains some pathological contradiction, the court might conclude that it is incapable of being performed, or might conclude that there is no agreement at all on the grounds of uncertainty.’

  3. The court has inherent jurisdiction to stay its proceedings in the interests of justice. The long-established inherent power of the court contrasts with the less developed and more questionable inherent power of a tribunal under the arbitration Act 1996 to stay its own proceedings in the interest of justice. The power of the court obviously applies to cases where the English court is not forum conveniens or where proceedings have been brought in breach of an agreement to bring proceedings in another forum. The power, however, also applies in cases where court and arbitral claims proceed in parallel. It is appropriate to have regard to the clear statement of principle from the eminent US Supreme Court judge, Mr. Justice Cardozo in Landis vs. North American Co.'

  4. ‘A potential area for the exercise of the inherent jurisdiction is where it is plain that the arbitration agreement only covers part of the claims brought in court by a claimant against the defendant. In such a case, the court taking into account all the circumstances might well conclude that the balance of the court proceedings not caught by the arbitration agreement ought to be stayed pending the determination of the arbitral tribunal. The argument in favour of such an order will be more powerful if the conclusions of the arbitral tribunal are likely to affect or even be determinative of the remaining matters to be decided in court.’

  5. In our arbitration Act of 2001 law says that:–

“Section 7 of arbitration Act of 2001 give jurisdiction to Court as “Notwithstanding anything contained in any other law for the time being in force, where any of the parties to the arbitration agreement files a legal proceedings in a Court against the other party, no judicial authority shall hear any legal proceedings except in so far as provided by his Act.”

  1. Our law says if there be any arbitration clause in any contract or agreement then whether it is invoke or not Court has a duty to see whether parties to the agreement proceed to resolve the dispute by arbitration. arbitration is alternative forum i.e. alternative dispute resolution, which at present is intends to relieve the court from deciding in lengthy legal proceeding. We have already quoted from the contract that the parties have signed the agreement thereby the terms of agreement are binding upon them. Court is not powerless to see the veracity of the award as until and unless award be made rule of the court no party can get benefit of such award.

  2. Section 10 Sub-section (2) of the arbitration Act, 200 may be looked into

“(2) Thereupon, the Court shall, if it is satisfied that an arbitration agreement exists, refer the parties to arbitration and stay the proceedings, unless the court finds that the arbitration agreement is void, inoperative or is incapable of determination by arbitration.”

  1. This section uphold the sanctity of the arbitration clause signed by the parties as if any party filed any suit, the court has duty that as soon the court find there is arbitration clause signed by the parties to resolve the dispute by arbitration then a duty cast upon the court to stay the legal proceeding pending before the Court. Before the arbitration award, the parties and Court has no jurisdiction to proceed with any suit. If any party after knowing that the arbitration going in foreign countries, as in the case in our hand, and filed the suit and pray for stay of the arbitration proceeding, as per section 10(2) of the arbitration Act, Court should not encourage the legal proceeding to proceed further, as soon as the Court has noticed to arbitration proceeding Court shall stay the proceeding of the suit till award arrive by the arbitrator. There may be a case that after having know of the arbitration proceeding the suit was filed and injunction was obtained form proceeding of the parties to the arbitration, that also discourage as we have seen from the decision of Indian Jurisdiction in the Case of Dresser SA vs. KG Khoksha Ltd. (1994) 1 Arb. LR 506 (SC), wherein it has been held that ad interim order or granting injunction should not be allowed. The suit so long an arbitration proceeding continue, can be stayed as per section 10 of the arbitration Act unless the agreement is void, inoperative or is incapable of determination by arbitration.

  2. We have read the plaint and satisfy that this requirement of law has not clearly spelt out. It is seen from the plaint that plaintiff stated there is legal bar in Bangladesh to perform under the contract and also that the contract being frustrated in the eye of law, the contract having been arrived at the office of the plaintiff, as such, the suit has been filed in Bangladesh, instead of filing of suit plaintiff can invoke the arbitration clause. A question may be arise that defendant has already filed written statement and as we see, filed application under Order VII, rule 11 of the Code of Civil Procedure. In the case of filing of the written statement we are of the view that this does not if so facto injuncted the defendant to proceeding as after the award the suit may proceed, in the case filing of the application under Order VII, rule 11 of the Code of Civil Procedure we are of the view that this application has filed misconceived, to be treated as application for stay as per section 10 of the arbitration Act.

  3. In the decision of AIR 1951 (Punj) 173 it has been held that section 34 however does not prohibit the filing of the written statement pending the decision of an application for stay of the proceeding. Hence, there is no irregularity if the Court calls upon such applicant to put in a written statement before deciding the application for stay. It is settled principle that the question is to be decided as to when the dispute in the suit and when dispute in the arbitration clause covered if suit be filed for damage of breach of contract and non delivery of goods then the suit can proceed otherwise suit cannot proceed. The Court shall keep their hands off till decisions arrive by arbitrator.

  4. The Contract No. 315510058 dated 31-1-2011 specifically stipulates that all disputes shall be referred to arbitration in accordance with the Rules and By-laws of the International Cotton Association shall be for any technical or quality dispute. By-law 300(1) of the Rules and By-laws of the International Cotton Association states as follows:

“Quality arbitrations will deal with disputes arising from the manual examination of the quality of cotton and/or the quality characteristics which can only be determined by instrument testing. By-laws especially applicable to quality arbitrations and appeals are set out in part. 2.

Technical arbitrations will deal with all other disputes. By-laws especially applicable to technical arbitrations and appeals are set out in Part 1.”

  1. Question calls for determination as to whether suit should be stayed pending disposal of arbitration proceeding. In the case of PLD 1978 Lah. 475 and ILR 1953 Hyd. 727 (DB), it is held that by commencing arbitration proceeding right to sue is not ousted. The suit can proceed as per PLD 1982 Kar. 778(DB) if the existence of an arbitration agreement or its validity is challenged and thereafter, if the court found that the agreement is valid and agreement is in existence then allowed the parties to proceed with the arbitration proceeding.

  2. In the case of 1982 CLC 1039 it is held that when the subject matter of the suit and the arbitration agreement is the same, the parties are bound to refer the matter to arbitration and the court would, therefore, stay the suit. In the case of AIR 1956 (All) 194 a Division Bench of Allahabad held if a person, who has been a party to an arbitration agreements, brings a suit ignoring that agreement, the defendant’s remedy, if he wants to rely on that agreement, is to proceed under section 34 and to ask for stay of the suit.

  3. It appears that both plaintiff and defendant to the contract in open eyes go through the clauses of the contract and put their signature as such filing of the suit instead of proceeding of arbitration by plaintiff is unthinkable. It is also seen defendant and plaintiff did not raise question of validity of the arbitration agreement or did not raise anything as regard fraud practice, the proceeding as we see can continue. The award if so facto does not give any fear upon the person against whom the award goes as the suit, ultimate decision, rest with civil court.

  4. In the case of Jagatheesan vs. Veerammal MLJ(1980) (3 Mad) 802 it was held that:

“1. It is true that the word “arbitrator” has not been used in the partnership deed, but one has to see what the parties contemplated at the time of entering into the partnership.

  1. If the obvious intention between the parties was to refer the matter in dispute between them to Panchayatdars without resort to court, then it can easily be assumed that the intention of the parties was to settle the matters in their entirety by arbitration.

  2. Therefore, so long as the parties wanted to have the dispute determined by approaching the Panchayatdars outside the court, the intention that the disputes must be referred to arbitration, can be easily inferred.”

  1. Where a dispute, though not arising under the contract, is inextricably connected with or indisputably linked up with the contract which contains an arbitration clause, it can be said that the dispute is connected with the contract. In the case of Firm Harjas Rai vs. Tek Chand 101 IC 786, AIR (Lah) 465 it has been held that section 34 cannot apply unless;

“(a) The plaintiff is a party to the agreement to refer;

(b) The defendant, desiring stay of the suit, has the right to apply to the court to stay it; and

(c) The subject-matter of the dispute is the same before the arbitrator and the court.”

  1. The guiding principle for determining whether the clause as to arbitration in the contract applies or not, is that the dispute is referable to arbitration in cases where the avoidance of the contract arises out of the terms of the contract itself. Where, however, a party seeks to avoid the contract for reasons de hors it, the arbitration clause cannot be resorted to, as it, together with the terms of the contract, is set aside. A party cannot rely on a term of the contract to repudiate it and still say that the arbitration clause should not apply. If he relies on the contract he must rely on it for all purposes. Therefore, where the plaintiff sues to recover the price under the contract, as a valid and binding contract, he cannot repudiate the terms of the contract relating to arbitration, while seeking to rely on the contract in support of his claim.

  2. In the case of Lewis W. Fernandes vs. Jivtalal, 29 IC 568; It has held that in order to give the arbitrators jurisdiction to make a valid award, the party claiming arbitration must show (i) the existence of a dispute between him and the opposite party, arising out of or in relation to a contract, entered into between them, and (ii) a clear, valid and subsisting arbitration agreement within the meaning of this section.

  3. In the case of Jai Narain vs. Narain Das, 69 1C 583; Gopi Ram vs. Pokhar Das, 154 IC 7; It has been held that a private tribunal, such as an arbitrator, cannot oust the jurisdiction of the court, but an arbitration becomes functus officio when the Court has refused to stay an action, or the defendant has abstained from asking it to do so. This rule only applies when the dispute before the two tribunals is identical.

  4. In the case of Gopi Ram vs. Pokhar Das, 154 IC 7; it has further held that when the arbitrator has become functus officio in respect of the dispute which forms the subject matter of a suit, he becomes functus officio regarding the whole dispute including that portion of it which formed the subject-matter of the second suit, if the subject-matter of the second suit was the same as the subject-matter of the first suit.

  5. Now if the court did not want to stay the proceeding what is its effect.

  6. In the case of Gul Mohammed vs. Fata Bibi, AIR 1956 J & K 122, it is held that when the court refuses to stay the proceedings, it means that the suit will be heard on merits by the Court. If the suit is to proceed, the work of the arbitrator, ipso facto, comes to an end and his authority is revoked, and there is no more a valid reference before him.

  7. In the case of Muhammad Mohideen vs. Muhammed Naina, 177 IC 440, it is held that in that case, the court should not renounce its powers and duties in disposing of the suit. It should exercise as much control as it can under the law over the proceedings before the arbitrator. The court should see that the parties do not delay the disposal of the arbitration proceedings and that, as far as possible, they prosecute those proceedings.

  8. In the case of Hukum Chand vs. TM Kaisha Ltd. 190 IC 596, it is held that the arbitration proceeding can legally continue on the stay of the suit, even though the court has decided that the award already made is a nullity.'

In the proceeding of the suit Court shall see–

“(1) An arbitration agreement between parties to the dispute.

(2) A Reference before arbitrators duly appointed by the parties under the arbitration agreement, and

(3) An award properly made by such arbitrators.”

  1. Where a suit is stayed under this section, the matter is referred to arbitration; but if, during the arbitration proceedings, some mistake is found to have been made, and an application is made to the Court to correct it, and the court orders the mistake to be corrected, the suit does not become a new suit and the jurisdiction of the arbitrators is not lost.

  2. On an overall consideration of the entire materials on record before us, on considerations of the decisions as referred to above we have already seen that there is a valid agreement between plaintiff and defendant with arbitration clause, pursuant to the agreement an arbitration proceeding has already commenced before arbitration tribunal at Liverpool, the suit is subsequent to the arbitration proceeding, written statement has been filed by the defendant can be treated as information to the court pending arbitration before Liverpool, it is also seen that arbitrators have no jurisdiction over the court but court has jurisdiction over the arbitration. The decisions of the arbitration is subject to review by the court, either at the time of mistake of some rules of the court or on the application of any of the parties. We also seen that there is arbitration proceeding which arrived in the contract by the parties by signing it in open eyes and there is no allegation of fraud practice upon the plaintiff, we are of the view that as per section 10(2) of the arbitration Act when it is found that there is arbitration proceeding, Court should keep its hands off from the proceeding pending before the court. We find substance in this rule.

  3. In that view of the matter ends of justice would be met if we stay the proceeding of Title Suit No. 73 of 2012. Proceedings of Title Suit No. 73 of 2012 is stayed till disposal of arbitration proceeding.

  4. In the result this rule is disposed of. Parties are directed to settle the matter through arbitration expeditiously.

The order of injunction granted earlier by the trial court is hereby vacated.

Bangladesh Air Service (Pvt.) Ltd. vs. Respondent: British Airways PLC
HRC Shipping Limited vs. Respondent: M.V. X- Press Manaslu and Ors.

Related Posts