Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2020 Supreme(Cal) 680

IN THE HIGH COURT OF CALCUTTA
Rajasekhar Mantha, J.
Lindsay International Private Limited and Ors. - Appellants
Vs.
Laxmi Niwas Mittal and Ors. - Respondent
GA 820 of 2020 and CS 2 of 2017
Decided On : 15-09-2020

Advocates Appeared:
For the Appellant : S.N. Mukherjee, Sr. Adv., Shib Ratan Kakrania, Rudraman Bhattachariyay, Shaunak Mitra, Tanuj Kakrania, Aviroop Mitra and Sanjeeb Seni, Advs.
For the Respondents: Harish N. Salve, Siddhartha Mitra, Sr. Advs., Pallavi Shroff, Siddhartha Datta, Smarika Singh, Sakabda Roy, Surabhi Binani, Deepanjan Dutta Roy and Domingo Gomes, Advs.

A party waives its right to arbitration by engaging in litigation without promptly invoking the arbitration clause; courts can determine the existence and validity of arbitration agreements.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 5, 8, and 16 - Stay of Arbitration Reference - Examination of waiver of arbitration agreement - Court examines whether the defendant has waived the arbitration agreement. It was established that once the defendants entered a comprehensive defense, they lost the right to seek arbitration. The issues in the suit and RFA were ruled substantially similar, and the consequential ruling emphasized the binding nature of agreements in arbitration. (Paras 31-37, 39-41, 60)

(B) Waiver of Arbitration Agreement - Conduct of Defendant - The defendant's actions, including filing a written statement and engaging in civil proceedings while having the opportunity to invoke arbitration, amounted to a waiver of the right to refer disputes to arbitration. The notion of 'without prejudice' in legal proceedings does not evade the binding nature of procedural statutes. (Paras 44-47)

Facts of the case:
The plaintiffs initiated a suit for specific performance concerning shareholders' agreements involving multiple defendants. After filing their defense, the defendant sought to invoke an arbitration clause three years later, leading to questions on the validity of this arbitration request and the jurisdiction of the civil court.

Findings of Court:
The defendant was restrained from pursuing the arbitration reference; they had waived their right to arbitration by their conduct in civil proceedings. The court also noted that subject matter issues were similar between the suit and reference.

Issues: The court addressed whether the defendant waived the arbitration agreement and the jurisdiction of civil courts over such disputes.

Ratio Decidendi: The court held that a party engaged in litigation without immediately invoking the arbitration clause cannot later claim arbitration as a remedy. The existence and validity of arbitration agreements remain under the purview of the civil court when contested.

Result: Defendant restrained from pursuing arbitration and the suit allowed to proceed.

Table of Content
1. arbitration stay prayers before litigation. (Para 1)
2. factual background of agreements and disputes. (Para 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10)
3. defendant's conduct towards arbitration agreement. (Para 11 , 12 , 13)
4. arguments on arbitration referal and waiver. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23)
5. judicial intervention scope on arbitration. (Para 24 , 25 , 26)
6. discussion on waiving arbitration right. (Para 27 , 28 , 29)
7. jurisdictional interplay between courts and arbitration. (Para 30 , 32)
8. criteria for judicial authority's consideration. (Para 33 , 34 , 35)
9. nature of conduct determining waiver. (Para 36 , 37 , 38)
10. written statement implications on arbitration rights. (Para 39 , 40 , 41)
11. impact of 'without prejudice' claims. (Para 42 , 43 , 44)
12. judicial view on arbitration clause invocation. (Para 45 , 46 , 47)
13. final decision on cases related to arbitration. (Para 48 , 49 , 50)
14. court's role in arbitration disputes. (Para 51 , 52 , 53 , 54)
15. final rulings on arbitration stay. (Para 55 , 56)
16. implications of pandemic on legal proceedings. (Para 57 , 58)
17. final judgment outcome. (Para 59 , 60)

JUDGMENT :

Rajasekhar Mantha, J.

1. An interesting question arises for consideration in this matter. Whether a prayer for stay of a Reference for Arbitration (RFA) can be maintained by a plaintiff in the suit, when the Defendant seeks the RFA 3 years after having entered his principal defense. It is also necessary to consider the law to be applied in this situation and as to whether the issues in the RFA are substantially similar to that of the Suit.

2. G.A. No. 820 of 2020 has been filed by the Plaintiff on 19th May 2020 seeking to restrain the Defendant from proceeding with the RFA made by communication dated 2nd March, 2020.

3. The brief facts as pleaded in the plaint are that the plaintiff No. 1 was engaged in the trade and supply of raw materials within and outside India since 1996, inter alia to the Mittal Group of Companies which are owned and controlled by the Defendant No. 1. The Defendant No. 1 is married to the oldest sister of the Plaintiff No. 2.

4. Sometime in the year 2010, the plaintiffs and the Defendant No. 3 agreed that the latter would be admitted and allotted 25% of issued, subscribed and paid up share capital of the Plaintiff No. 1. The balance 75% shares would be held by the Plaintiff No. 2 and 3. The Board of directors of the Plaintiff No. 1 would consist of 3 directors, 2 of whom would be nominated by the Plaintiffs Nos. 2 and 3 and one by the Defendant No. 3.

5. It was also agreed that the plaintiff No. 1 was to be the sole procurer/supplier for the Arcelor Mittal Group of Companies i.e. Defendants Nos. 2 to 38, worldwide. The Defendants Nos. 39 to 42 were eventually the actual suppliers under agreements between the plaintiffs and the Defendants Nos. 2 to 38.

6. The agreements provided for the terms and conditions of management of the Plaintiff No. 1, an exit option to the Defendant No. 3 and an Arbitration Clause. Disputes and differences arose between the plaintiffs and the Defendant No. 3 in connection with supply and payment of goods, hence the suit. The plaintiff sought specific performance of the said agreements, whereas the Defendant No. 3 contended that the agreements stood terminated.

7. On 5th of January 2017, the Plaintiffs filed the instant suit against 42 Defendants, inter alia praying for the specific performance of a Shareholders' Agreement dated 21st January 2010, 29th February 2016 and other agreements express, implied, written and unwritten. The Plaintiffs also prayed for permanent injunction against the Defendant No. 39 to 42 from acting in breach of the parts of the aforesaid agreements. The prayers in the plaint are as follows:-

(b) A decree in f

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2020 Supreme(Cal) 680

IN THE HIGH COURT OF CALCUTTARajasekhar Mantha, J.Lindsay International Private Limited and Ors. - AppellantsVs.Laxmi Niwas Mittal and Ors. - RespondentGA 820 of 2020 and CS 2 of 2017Decided On : 15-09-2020

A party waives its right to arbitration by engaging in litigation without promptly invoking the arbitration clause; courts can determine the existence and validity of arbitration agreements.

Cases Referred (17)

IN THE HIGH COURT OF CALCUTTA
Rajasekhar Mantha, J.
Lindsay International Private Limited and Ors. - Appellants
Vs.
Laxmi Niwas Mittal and Ors. - Respondent
GA 820 of 2020 and CS 2 of 2017
Decided On : 15-09-2020