16 June, 2014
Legal News & Analysis – Asia Pacific – India – Dispute Resolution
Himalya International Ltd. Vs. Simplot India Foods Pvt. Ltd (Simplot India LLC) & Anr. CS (OS) 1231/2013
Facts Of The Case
Simplot India LLC is one of the world’s leading manufacturer & supplier of frozen french fries for the fast food chain. To capture the Indian market, in 2011, Simplot India LLC (Simplot) entered into a Shareholder’s Agreement (SHA) with Himalya International Ltd (HIL) and a Joint Venture entity named as Himalya Simplot Private Limited (HSPL) was incorporated. Disputes arose between the JV Partners and both the parties decided to wind up the JV. Pursuant to clause 12.3 of the SHA, Simplot invoked arbitration before Singapore International Arbitration Centre (SIAC) in Singapore. HIL filed a suit seeking a decree for permanent injunction restraining Simplot from invoking arbitration before Singapore International Arbitration Centre.
HIL filed a suit before the High Court alleging that the invocation of arbitration at Singapore was illegal due to non-compliance by Simplot of the pre-arbitral steps as contemplated in the SHA before invoking arbitration, thus rendering the invocation clauses redundant.
Submission Of The Parties
Simplot moved an application under Order VII Rule 11 of the Civil Procedure Code, 1908 seeking rejection of the suit. It was submitted that such a suit has barred under Section 5 of the Arbitration Conciliation Act, 1996 (the Act), which, vide the non-obstante clause prevented judicial intervention in arbitration unless the intervention was provided for under the Act itself. The Act did not vest any right to approach courts for such relief and rather provided under Section 16 that all issues including procedural matters must be raised before the Arbitral Tribunal itself, which had very wide powers to determine its own jurisdiction and decide all such issues. Reliance was placed on the judgment in the case of Aurohill Global Commodities Vs. MSTC Ltd. (2007) 7 SCC 120, Roshan Lal Gupta Vs. Parasram Holdings, 157 (2009) DLT 712 and Clearwater Capital Partners (Cyprus) Ltd. Vs. Gurmeher Singh Majithia & Ors. 189 (2012) DLT 362.
HIL admitted that they had not challenged the existence or the validity of the arbitration agreement. It was submitted that the judgment relied upon by Simplot pertained to suits where there was a challenge to the validity of the Shareholder Agreement. Reliance was placed on Article 21 of the Act and the judgment of the Hon’ble Supreme Court in the case of Venture Global Engineering vs. Satyam Computer services Ltd., AIR 2008 (SC) 1061 where it was held that since all the courts below had failed to take into consideration the specific clause in the Shareholders agreement and the conduct of the parties, the orders passed were set aside.
Decision
The High Court allowed the application filed by Simplot and rejected the suit seeking anti-arbitration injunction. The Hon’ble Court relying upon the aforesaid judgments held that no suit for such a relief can be entertained by the Court when HIL had prior thereto elected to refer the disputes for arbitration pursuant to the SHA. The issues raised by the HIL namely, non-compliance of Clauses 12.3 (a) and 12.3 (b) of SHA, are issues which have to be gone into by the Arbitral Tribunal. Section 5 of the said Act takes away the jurisdiction of the Civil Court and hence, the said statutory provision has to be given effect to. The remedy available to HIL is to approach the Arbitral Tribunal.
The High Court further held that the Supreme Court’s judgment in the case of Venture Global is of no help to the HIL as in that case the issue was whether the award in question which was a foreign award, Part I of the Arbitration and Conciliation Act would be applicable. There is nothing said in that judgment which would help HIL to support the maintainability of the present suit.
The Court finally rejected the plaint holding that such a relief falls foul of Section 5 of the Act and hence a suit based on such a relief was barred by law.
For further information, please contact:
Madhu Sweta, Partner, Rajani Singhania & Partners
[email protected]
Sumit Gupta, Rajani Singhania & Partners
[email protected]