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High Court Of Calcutta
M. G. MUKHERJI, K. C. AGRAWAL
BOEING COMPANY - Appellant
Versus
R.M.INVESTMENT AND TRADING CO.PVT.LTD. - Respondent
Appeal 227 Of 1994
Decided On : 08/09/1994
FOREIGN AWARDS (RECOGNITION AND ENFORCEMENT) ACT, 1961 - SECTION 3 - INJUNCTION AND ATTACHMENT BEFORE JUDGMENT - STAY OF PROCEEDINGS - CONDITIONS - JURISDICTION - INHERENT POWERS OF THE COURT.
Fact of the Case:
R. M. Investment and Trading Company Private Limited (R.M.I.) entered into an agreement with Boeing Company for the promotion of Boeing Aircraft sales in India. Boeing refused to pay commission to R.M.I. for a transaction involving the sale of two aircraft to Air India. R.M.I. filed a suit against Boeing for recovery of commission and obtained an interim order from the Calcutta High Court restraining Boeing from withdrawing money from Air India until the arbitration proceedings were completed. Boeing filed an application for stay of the suit and all proceedings under Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961, which was granted by the High Court.
Finding of the Court:
The court held that the injunction and attachment before judgment granted by the trial court were void and illegal as they were passed without complying with the provisions of Order 38 Rule 5(4) of the Code of Civil Procedure, which requires notice to the defendant and a hearing before passing such orders. The court also held that the trial court did not have jurisdiction to grant the injunction and attachment as the suit was stayed under Section 3 of the Foreign Awards Act, which mandates a stay of proceedings in cases where arbitration is agreed upon.
Issues: 1. Whether the injunction and attachment before judgment granted by the trial court were valid and legal. 2. Whether the trial court had jurisdiction to grant the injunction and attachment in a suit stayed under Section 3 of the Foreign Awards Act.
Ratio Decidendi: 1. The court relied on the provisions of Order 38 Rule 5(4) of the Code of Civil Procedure and held that an order of attachment made without complying with the provisions of the rule is void. The court also referred to the decision in Padam Sen v. U.P. (AIR 1961 SC 218) and held that intention to defraud a creditor is essential for granting an injunction or attachment before judgment. 2. The court interpreted Section 3 of the Foreign Awards Act and held that it mandates a stay of proceedings in cases where arbitration is agreed upon. The court held that the trial court did not have jurisdiction to grant the injunction and attachment as the suit was stayed under Section 3 of the Act.
Final Decision: The appeal filed by Boeing was allowed. The judgment and order of the trial court granting injunction/attachment were set aside, and the application made for that purpose was rejected. The interim orders passed by the High Court from time to time were also vacated.
( 2 ) THE Consultant Services Agreement provided that subject to the limitation of paragraph 3, the Consultant shall use Consultant's best efforts to promote the Sale (as defined in paragraph 2. 2) of Aircraft to Customers.
( 3 ) CLAUSE 10. 2 of the agreement provided :"10. 2. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, which the parties have not been able with due diligence to settle amicably, shall be settled by arbitration con-ducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Any such arbitration proceedings shall be conducted in the English language in Seattle, Washington, USA by three arbitrators. Any award of the arbitrators shall be final, binding upon both parties, and enforceable in any court having competent jurisdiction".
( 4 ) R. M. I. filed an application in the aforesaid suit for attachment under Order 38 Rule 5 of the Code of Civil procedure and for injunction under Order 39 Rule 1 (b ).
( 5 ) THE Learned Judge passed the interim order which is reproduced below :-"the Court : Without prejudice to the rights and contentions of the parties, let the affidavit-in-opposition be filed by 2. 9. 92, affidavit-in-reply by 15. 9. 92 and the matter be adjourned till 17. 9. 92. In the meantime, if any payment is made by the Air India to the respondent, the respondent shall retain a sum of 17. 5 million US Dollars with Air India. Liberty is given to the respondent to make an application for vacating this interim order. The matter is heard in part and will appear in the list on 17. 9. 92. All parties concerned to act on a signed copy of the minutes of this order on the usual undertaking".
( 6 ) ON 12th August 1992, Boeing filed an application for stay of the suit and all proceedings therein [save and except the pending interlocutory application before A. K. Sengupta J. under section 3 of the Foreign Awards (Recognition and Enforcement) Act 1961].
( 7 ) THE interim application was specifically excluded as Boeing wanted to get the order of A. K. Sengupta, J. dated 17. 07. 92 vacated.
( 8 ) ON an application under section 3 for stay of the suit, S. K. Hazari, J. passed an interim order for stay of tire suit and all proceedings therein excepting pending interlocutory application. The said order was extended on time t6 time until the disposal of application under section 3 on 5. 4. 1993. '
( 9 ) ON 22. 12. 1992 A. K. Sengupta, J. passed the order in the nature of attachment before judgment which is to the following effect : "the Boeing Company will furnish a letter of credit from one of its bankers in the USA, e. g. , National West Minister Plc. Credit Lyonnais and ABN AMRO BANK NV, for a sum of US $ 31. 5 Millions in favour of R. M. Investment and Trading Company Pvt. Lt
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