India: Case Analysis Revisiting Balco Judgment And Application Of Doctrine Of Comity Of Courts

CASE TITLE

ANTRIX CORPORATION LTD. ('Antrix') Vs. DEVAS MULTIMEDIA PVT. LTD. ('Devas')1

FACTS

An agreement was entered into between Antrix (a Union Government of India undertaking having its registered office at Bangalore) and Devas (an incorporated company having registered office at Bangalore) at Bangalore on January 28, 2005, for the Lease of Space Segment Capacity on ISRO/Antrix S-Band Spacecraft.

On February 17, 2011, the Union Cabinet Committee on Security ("CCS") resolved to decline orbital slot in S-band to Antrix for any commercial activity and to direct annulment of the agreement. Antrix consequently terminated the agreement on February 25, 2011. Subsequently, Devas approached the International Chamber of Commerce, Paris (hereafter "ICC"), by invoking arbitration clause under the agreement and requested for arbitration. ICC responded to Antrix on July 05, 2011, stating that a portion of the arbitration clause in the agreement substantially departed from the ICC Rules, and that should the parties wish the ICC Court to administer the case, then the arbitration will be conducted in accordance with Article 31 of ICC Rules and unless the parties objected within 5 days of this communication, it would be deemed that they have accepted to conduct the proceedings in accordance with the ICC Rules.

Antrix however, did not accept the above and wrote to ICC on July 11, 2011, objecting to ICC proceeding with the arbitration. On July 30, 2011, Antrix nominated a former Judge of the Supreme Court of India as its Arbitrator under the terms of Article 21(a) of the agreement. It also filed a petition (AA No. 20/2011) under Section 11 of the Arbitration and Conciliation Act, 1996 (hereafter "1996 Act"), before the Hon'ble Chief Justice of India, seeking a direction to constitute an arbitral tribunal.

ICC informed Antrix, through a letter dated October 13, 2011, that it had appointed a former Chief Justice of India as Co-Arbitrator on its behalf (i.e. Antrix) under Article 9(6) of the ICC Rules and also confirmed the appointment of the co-Arbitrator nominated by Devas under Rule 9 (1) of the ICC Rules. The two nominee Arbitrators were given 20 days to finalize the name of the third Arbitrator. The arbitrators, however, sought more time in view of the pendency of AA No. 20/2011 before the Hon'ble Chief Justice of India. Subsequently, on November 10, 2011, the ICC itself appointed the Chairman of the arbitral tribunal.

On December 05, 2011, Antrix filed a Petition under Section 9 of the 1996 Act, being AA No. 483/2011, before the Bangalore City Civil Court (hereafter "Bangalore Court") seeking reliefs including restraint order against Devas from proceeding with the ICC arbitration contrary to the agreement between the parties, restraining Devas from getting the agreement between the parties modified or substituted by the ICC and restraining the arbitral tribunal constituted by the ICC from proceeding with the arbitration. On May 10, 2013, the Chief Justice of India dismissed AA No. 20/2011, by which time the arbitral tribunal under the ICC Rules had already been constituted. While dismissing Antrix's application under Section 11, it was clarified that Antrix would nonetheless have the right to raise its objections in appropriate proceedings.

On September 14, 2015, ICC rendered its Award in favour of Devas with a sum of USD 562.5 million with interest quotient. On September 28, 2015, Devas filed a petition under Section 9 of the Arbitration Act, before the Hon'ble High Court of Delhi, being OMP (I) No. 558/2015 for interim reliefs. On November 19, 2015, Antrix applied to the Bangalore City Civil Court under Section 34 of the Act challenging the Award dated September 14, 2015.

On February 28,2017, the Single Bench of Delhi High Court, by the judgment in challenge, ruled that Antrix's petition under Section 9 before the Bangalore court (AA No. 483/2011) was not maintainable and Devas: petition under Section 9, being OMP (I) 558/2015, before Delhi High Court was maintainable and the bar under Section 42 of the 1996 Act was inapplicable to the present case to exclude the jurisdiction of this court. It was also held that consequently, Antrix's petition under Section 34 before the Bangalore City Civil Court would not be maintainable, because Devas: petition under Section 9 before the Delhi High Court was filed earlier. The Single Bench further directed Antrix to file an affidavit of an authorized officer, enclosing therewith its audited balance sheets and profit and loss accounts for the past three years and listed the matter for decision on merits.

Consequently, Antrix filed appeal in March 2017 under Section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (hereafter "Commercial Courts Act") before the Division Bench of the Hon'ble Delhi High Court wherein following issues were adjudicated:

ISSUES INVOLVED

  1. Whether appeal under Section 13 is maintainable under the provisions of the Commercial Courts Act?
  2. If appeal is maintainable, does Delhi High Court have exclusive jurisdiction to adjudicate any applications arising out of the Agreement between Antrix and Devas?
  3. If the answer to question (b) is in the negative, will Section 42 of the 1996 Act preclude Devas' Section 9 petition before Delhi High Court on account of Antrix's previous Section 9 petition before the Bangalore City Civil Court?

DECISION ON

a) Issue (a)- Whether appeal under Section 13 is maintainable under the provisions of the Commercial Courts Act?

To maintain an appeal under Section 13 of the Commercial Court Act, the Appellant needed to satisfy that the order in challenge is an order passed under Section 9 of the 1996 Act, and hence, the same is challengeable under Section 37 of the 1996 Act. Even though the Single Bench of High Court did not decide the reliefs sought under Section 9, the Court concluded that the Appeal is maintainable since the order under challenge is in the nature of an Order under Section 9 of the 1996 Act. The Court held that the direction to Antrix to furnish an affidavit along with the particulars sought, is to aid its order with respect to a possible distraint, attachment or further such consequential order towards interim relief. The Court further recorded that the Single Bench's observations that the Bangalore Court cannot proceed with the matter under Section 34 of the 1996 Act, is giving finality to an order and further the declaration by a Court about the lack of jurisdiction of another court, based on the appreciation of the matter before the latter court is undeniably an adverse order.

b) Issue (b)- If appeal is maintainable, does Delhi High Court has exclusive jurisdiction to adjudicate any applications arising out of the Agreement between Antrix and Devas?

The Court relied on the infamous BALCO Judgment (Bharat Aluminium Co Ltd v Kaiser Aluminium Technical Service Inc)2 rendered by the Hon'ble Supreme Court, wherein it was held that for the purpose of Section 2(1) (e) of the 1996 Act, the courts at the seat of the arbitration do not have exclusive jurisdiction. Rather, two courts have concurrent jurisdiction – (1) the court which is amenable to the seat of the arbitration and (2) the court within whose jurisdiction the cause of action arises.

While the agreement between the parties is pre-BALCO judgment and BALCO judgment was ruled to apply prospectively to all the arbitration agreements executed post BALCO judgment rendered on September 06, 2012, this Judgment further clarified that the rule regarding prospective effect was applicable only to the finding that Part I of the Arbitration Act, 1996, is applicable only to all the arbitrations which take place within the territory of India, and not to other ratio laid down in BALCO.

In this case, since the parties chose the seat as New Delhi but did not specify an exclusive forum selection clause, it was held herein that the Delhi Court cannot be said to have exclusive competence to entertain applications under the 1996 Act. Since both the parties are from Bangalore, the agreement was signed in Bangalore, the cause of action has arisen in Bangalore and therefore, the Bangalore City Civil Court, cannot be said to have been excluded from jurisdiction to entertain applications under the 1996 Act.

c) Issue (c) - If the answer to question (b) is in the negative, will Section 42 of the 1996 Act preclude Devas' Section 9 petition before Delhi High Court on account of Antrix's previous Section 9 petition before the Bangalore City Civil Court?

The Court ruled that the principle of comity of courts would require that the Court which is seized of the dispute first shall decide on the application as to whether it is vexatious or an abuse of the process of law. Since the Bangalore City Civil Court was approached by Antrix first, the said Court should first decide on Section 9 petition filed by Antrix and whether it is maintainable, vexatious or mala-fide. In case the Petition is found to be maintainable and bona-fide, Section 42 would come into play and all subsequent applications would have to be made by the parties before that Court only.

Any other view to give jurisdiction to Delhi Court on a subsequent application under the 1996 Act would defeat the parliamentary mandate under Section 42 of the 1996 Act and would run afoul of the principle of comity of courts. If Bangalore Court upholds Devas' objections and finds Antrix's petition to be barred in law or vexatious, and declares it non-est, then the first application under the 1996 Act would be Devas' Section 9 application before the Delhi High Court, which would then not be hit by Section 42.

Footnotes

1. Judgment dated 30.05.2018 passed in FAO(OS)(COMM) 67/2017 by High Court of Delhi at New Delhi

2. (2012) 9 SCC 649

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