IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : ARBITRATION AND CONCILIATION ACT, 1996 Date of Reserve: 27.1..2009 Date of Order: 05.02.2009 OMP No. 36/2009 Competent Investment Limited... Petitioner Through: Mr. Rajiv Nayyar, Sr. Advocate with Mr. Raktim Gogoi, Advocate Versus GL Asia Mauritius II Cayman Ltd. and Ors.... Respondents SHIV NARAYAN DHINGRA, J. 1. This petition under Section 9 of the Arbitration and Conciliation Act, 1996 has been filed by the petitioner stating therein that petitioner was a company incorporated under Law of Mauritius and respondents no. 1-3 are also companies not based in India and incorporated in Cayman Islands and Port Louis, Mauritius. Respondent no. 4 is a company incorporated in India having registered office at Goa. Respondent no. 5 is a company of Singapore (the legal identity of R-4 is not disclosed). Respondent no. 6 is a private limited company incorporated in India having its office at Janpath. The petitioner claims that it entered into a Call Option Agreement with respondents no. 1 and 2 on 19.9.2007 and in terms of this agreement, respondents no. 1 and 2 had to restructure their operation in Mauritius in a manner so that the respondent no. 2 transferred 30% paid up capital of respondent no. 4 to respondent no.3. It is submitted the project to be undertaken as per this agreement was development of a hospitality project comprising of a hotel, restaurant and luxury suites etc. at the land owned by respondent no.4 at village Cavelossim in Goa. On behalf of the petitioner, the agreement was executed in Delhi and on the part of respondents no. 1 and 2, the same was executed in Singapore and a scanned copy was mailed from there. The agreement was to become effective on acquisition of 100% equity shares by respondents no. 1 of respondent no. 2. These shares were acquired on 18.9.2007 but the respondents failed to perform their part of operation as per the agreement and sought extension of time upto 31.12.2008. Under the garb of this extension of time, respondents sought to sell the land in Goa where the hospitability project was to be developed. This fact came to the knowledge of M/s Pinfold Overseas
and a dispute arose with the broker, who was trying to arrange the transactions, Pinfold Overseas filed an arbitration petition/application in Court of Principal District, South Goa wherein respondents No. 1, 2 and 4 along with S.R Holding I Limited were made parties. The petitioner was not made a party in the said proceedings. Pinfold Overseas obtained an interim injunction from the Principal District, South Goa on 28.11.2008. The petitioner filed an application for impleadment but the same was objected to by Pinfold Overseas and respondents no. 1, 2 and 4 and S.R. Holding Limited I Limited on the ground that the petitioner was not a privy to the Call Option Agreement dated 19.9.2007. The petitioner claims that the agreement provides that until and unless the said agreement was terminated, the respondents could not issue equity shares or any security convertible into shares, without the consent of the petitioner and respondents were also restrained from selling any part of the land in terms of clause 6.3. While the petitioner has always been ready and willing to perform his part of the obligation under the agreement, the respondents had not performed their part of the agreement and the cause of action arose, when the petitioner was stopped by respondents from issuing Debentures Subscription Agreement by seeking extension of time upto 31.12.2008 and the respondents, under the garb of this extension of time tried to violate the terms of the agreement and attempted to sell the land at Goa. It is prayed that this Court should entertain the petition and restrain respondents and its servants, agents, assignees etc. from issuing any equity share or any security convertible into equity shares except as provided under clause 6.3 of the agreement. This Court should also issue injunction restraining respondents or their agents from selling, transferring, mortgaging or creating any third party rights directly or indirectly in the land at Goa, meant for hospitality project. The third relief sought is that the respondents and its agents/servants should be restrained from raising any loan as provided in clause 6.3 of the agreement for any amount or for sum of Rs.150 crores. 2. Relevant part of the arbitration agreement a part of the two Call Option Agreements relied upon by the petitioner, reads as under: 19. Governing Law and Arbitration 19.1 This Agreement and all questions of its interpretation shall be construed in accordance with the laws of England, without regard to its principles of conflicts of laws. 19.2 In this clause 19 the Seller and the Company shall be deemed to be one party and the Grantee shall be deemed to be the other Party. 19.3 Any dispute, controversy, claim or difference of any kind whatsoever arising out or in connection with the Agreement (the Dispute ) shall first be attempted to be resolved by discussions and consultations between the Grantee and the Seller in good faith for a period of thirty (30) days after written notice has been sent by registered mail by any Party to the other Party (the Consultation Period ). If the Dispute remains unresolved upon expiration of the Consultation Period, then any Party may submit the Dispute exclusively to arbitration conducted by the Singapore International Arbitration Centre ( SIAC ), for arbitration in Singapore which shall be conducted in accordance with International Arbitration rules of the Singapore International Arbitration Centre ( SIAC Rules ) rules in effect at the time the application for arbitration is made, as may be amended by the rest of this section. The language of the arbitration proceedings and written decisions or correspondence shall be English.
3. The agreement also contains a definition clause and the definition of Applicable Law as given in the agreement is as under: Applicable Law shall mean any law, rule, regulation, ordinance, order, treaty, judgment, decree bye-law, terms of any governmental approval, administrative instruction, directive, guideline or any other norm prescribed by any state organ or any decision of, or determination by any court tribunal, governmental department or agency or any state authority, having the force of law, if any country having jurisdiction over any of the Parties or over their assets or over the Company and shall include, along with any of the foregoing, any injunction, permit or decision of any central state, local or municipal government, authority, agency, tribunal, court or other body in Mauritius the Cayman Island and the United States of America, as such Applicable Law may exist from time to time. 4. In view of the arbitration agreement and looking at the memo of parties, this Court asked the petitioner to address the arguments on maintainability of this petition/application. It is submitted by the counsel for the petitioner that the agreement was executed partly at Delhi and partly in Singapore and therefore cause of action exists in Delhi. Reliance was also placed on Section 8 of the agreement, wherein it is provided that parties were also at liberty to take resort to specific performance of the agreement without prejudice to the right of the parties to pursue other remedies in case of a breach of any obligation. It is was submitted that since the agreement provided to settle all disputes and controversies through arbitration, since a dispute had arisen, it gave a right to the petitioner to invoke arbitration clause at Singapore International Arbitration Centre. In the meantime, the land is to be protected and the respondents are to be restrained from taking steps contrary to the agreement (para 21 of the application). In para 17 of the application, it is stated by the petitioner that in case the respondents are successful in selling the land, the agreement will become unenforceable as the sole objective of the said agreement was to develop hotel and hospitality business on the said land. However, during arguments, the Counsel for the petitioner stated that petitioner gives up the relief regarding injunction on selling and transferring the land in Goa and the Court should consider restraining respondents and their servants/agents from issuing equity shares or any security or from raising loan. 5. In order to exercise jurisdiction under Section 9, the Court has to see if the matter was covered under Section 2(e) of the Arbitration and Conciliation Act, which defines the Court as the Court which could entertain application under Section 9. The first and foremost requirement for exercising jurisdiction under Section 9 is, if on the cause of action mentioned in Section 9 of the petition, a suit had been filed, whether the Court would have been able to entertain the suit. Although, the petitioner during arguments has given up the relief in respect of injunction regarding land in Goa but the entire application shows that the main grievance of the petitioner was that the respondents were trying to sell the land in Goa and petitioner was apprehensive that it would frustrate the entire project. It is to be noted that the other affected party has taken up the matter in appropriate Court ie. the Court of Principal District at Goa and filed an application there for necessary relief, whereas, the petitioner has chosen to file this petition/application under Section 9 of the Arbitration and Conciliation Act invoking jurisdiction of Delhi Court without a cause of action being there within Delhi Court. It is nowhere mentioned
in the petition/application as to when cause of action arose in respect of reliefs a) and c) or the respondents made any effort to issue equity share or any security convertible into equity shares or the respondent had made effort to raise loan. The entire application is silent on the cause of action for these two reliefs. Para 25 of the application about cause of action reads as under: 25) The cause of action has arisen on the day when the Members of the Project Management Committee of respondent no. 4 along with respondent no. 5 and 6 entered into a Negotiation in Delhi for development of hotel project on the said land. The cause of action further arose when the Members of the Project Management Committee and respondent no. 5 s Delhi Office Respondent no. 6 agreed upon to creation of the petitioner, M/s Pinfold Overseas Pvt. Ltd. S.R.Holding I Limited and S.R.Holding II Limited in different countries to give effect to the Understanding which was entered between the parties. The cause of action further arose when the petitioner executed the said Agreement in Delhi. The cause of action further arose when the Deed of Adherence was executed and sent to Delhi. The cause of action further arose when the respondent failed to fulfill the obligations in terms of the said Agreement. The cause of action further arose when the respondents illegally tried to sell the said land. The cause of action further arose when the petitioner was stopped by the respondents from issuing the Debentures Subscription Agreement by seeking extension of time upto 31.12.2008. The cause of action further arose when the respondents under the garb of said extension of time tried to violate the terms of the said Agreement and attempted to sell the said land. The cause of action continues to arise in favour of the petitioner and against the respondents. 6. This para itself shows that only action which the petitioner feared was an attempt to sell the land at Goa by the respondents; no other para describes of any effort made by the respondents in terms of prayers a) and c). 7. There is another reason for dismissing this application; respondent no. 6 against whom relief has been sought is not a party to the Call Option Agreement dated 19.9.2007. The parties to the said Agreement are GL Asia Mauritius II Cayman Ltd., Rollway Partners Limited and Competent Investments Limited i.e. petitioner, respondent no. 1 and respondent no.2. SR Holding II Limited is party to the Deed of Adherence which provides that SR Holding II Limited became party to the agreement on execution of deed of adherence on 5th November, 2008 i.e. the date of its execution. However, neither Sunset Resort Limited (respondent no.4) nor respondent no.5 nor respondent no.6 are the parties to the arbitration agreement and they have been made parties in the petition/application under Section 9. Section 9 application can be filed only against those entities who are party to the arbitration clause. No relief can be obtained under Section 9 against those entities, who are not party to the arbitration clause, since arbitration clause is not binding on those who are not parties to it. I, therefore, consider that this petition/application is ought to be dismissed on this ground as well. 8. I, therefore, dismiss this application on the ground of non- maintainability because of the application having made against parties, who are not parties to the arbitration agreement and because of this Court lacking territorial jurisdiction. The petition is hereby dismissed.
Sd./- February 05, 2009 SHIV NARAYAN DHINGRA, J.