INDIAN ORGANIC CHEMICALS LTD Vs. CHEMTEX FIBRES INC

JUDGEMENT

(1.) SHRI M. H. Shah the learned Counsel for the defendants, contends that the agreements between the plaintiffs and the defendants are the agreements which come within the purview of the 1961 Act and that the claims of the plaintiffs in the suit are matters which have been agreed to be referred to arbitration by virtue of and under the arbitration clauses contained in the said agreements. Consequently, the learned Counsel claims that under Section 3 of the 1961 Act the suit is liable to be stayed. The learned Counsel emphasises the peremptory character of the legislative injunction in Section 3 and submits that the Court has no option but to grant stay of the proceedings. Shri. A. K. Sen, the learned Counsel for the plaintiffs, argues that the provisions of Section 3 of the 1961 Act are not attracted in the present case. The conflict will have to be resolved with reference to the relevant provisions of law seen in the context of the facts of the present case.

(2.) THE 1961 Act gives effect to the Convention on recognition and enforcement of arbitral awards adopted at New York on 10th June 1958. The said Convention was verified by India and deposited with the Secretary General of the United Nations on 13th July 1960. The 1961 Act is intended inter alia to provide for speedy settlement of disputes through arbitration by removing the constraints to which such settlements were subjected to by the provisions of the Indian Law. Section 2 of the 1961 Act by its material provision defines a foreign award as " an award on differences between persons arising out of legal relationship considered commercial under the law in force in India" provided it is made on and after 11th Oct. 1960 and provided further that it is in pursuance of an agreement in writing to which convention set forth in the Schedule to the said 1961 Act applies and is made in one of territories notified by the Central Government to be the territories to which the said convention applies. There is no dispute between the parties that under the said Section 2 United States of America has been notified by the Central Government as one of the territories to which the said Convention applies. It is also not disputed that although not on the day when these proceedings were adopted but on the day when the matter was heard by me, the United Kingdom was declared to be such a territory under a notification issued by the Government of India in that behalf. The Convention annexed to the said 1961 Act comprises of several Articles. Articles 1 and 2 are material. Clause (i) of Article 1 contemplates applicability of the Convention to the recognition and enforcement of arbitral awards made in the territory of a State other than the States where the recognition or enforcement of such awards is sought: the awards ' arising out of differences between persons whether contractual or not' . The said clause further provides that it shall apply to all awards as are not considered domestic awards under the Municipal law of the land. Clauses (ii) and (iii) of the said Article are not material and may be omitted. Clause (i) of Article 2 is of significance and provides that each contracting State shall recognise the agreement in writing under which parties undertake to submit to arbitration all or any disputes which have arisen or which might arise between them in respect of defined legal relationship, whether contractual or not concerning a subjectmatter capable of settlement by arbitration. Clause (iii) of Article 2 ordains that a Court of contracting State, when seized of an action in the matter in respect of which parties have made an agreement within the meaning of the said Article 2, shall at the request of the parties refer parties to arbitration, unless the Court finds that the said agreement is null and void, inoperative and incapable of being performed.

(3.) THE amended Section 3 of the 1961 Act read as under :