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2011 Supreme(Mad) 4394
High Court of Judicature at Madras
THE HONOURABLE MRS. JUSTICE R. BANUMATHI & THE HONOURABLE MS. JUSTICE R. MALA
Financial Software & Systems Pvt. Ltd., rep. by its Head-Finance, G. Sivakumar
Versus
ACI Worldwide Corp. & Others
O.S.A.Nos.280 to 283 of 2011
Decided On :Decided on : 08-11-2011
For the Appellant:P.S. Raman, Senior Counsel for M/s. R & P Partners, Advocate.
For the Respondents - AL. Somayaji, Senior Counsel for T.K. Bhaskar, Srinath Sridevan, K. Harishankar, Advocates.
The main legal point established in the judgment is that the jurisdiction of the court to entertain Section 9 applications under the Arbitration and Conciliation Act, 1996, is determined by the substantive law applicable to the agreement, the procedure for holding arbitration proceedings, and the Seat of Arbitration.
Headnote:
Arbitration - Jurisdiction - Arbitration and Conciliation Act, 1996 - Section 9 - Clause 14.6 of Settlement and Release Agreement [SRA] - SIAC Rules - Singapore International Arbitration Centre (SIAC) - [Section 9, Arbitration and Conciliation Act, 1996, Rule 18 of SIAC Rules] - The judgment discusses the jurisdiction of the Madras High Court to entertain Section 9 application under the Arbitration and Conciliation Act, 1996, in light of Clause 14.6 of the Settlement and Release Agreement (SRA) and Rule 18 of SIAC Rules. The court held that the substantive law applicable to the agreement is the laws of Singapore, the procedure for holding arbitration proceedings is as per the arbitration Rules of SIAC, and the Seat of Arbitration is also at Singapore. The court concluded that Madras High Court had no jurisdiction to entertain the Section 9 application.
Fact of the Case:
The case involved a dispute between Financial Software & Systems Private Limited and ACI Worldwide (Asia) Private Limited. The parties had entered into a Settlement and Release Agreement (SRA) which stipulated that the agreement shall be construed and enforced in accordance with and governed by the laws of Singapore. The Appellant filed applications under Section 9 of the Arbitration and Conciliation Act, 1996, seeking to restrain the Respondents from providing support to other entities in violation of the SRA.
Finding of the Court:
The court found that the substantive law applicable to the agreement is the laws of Singapore, the procedure for holding arbitration proceedings is as per the arbitration Rules of SIAC, and the Seat of Arbitration is also at Singapore. Therefore, the Madras High Court had no jurisdiction to entertain the Section 9 application.
Issues: The main issue was whether the Madras High Court had jurisdiction to entertain the Section 9 application under the Arbitration and Conciliation Act, 1996, in light of the terms of the Settlement and Release Agreement (SRA) and the SIAC Rules.
Ratio Decidendi: The court applied the principles established in BHATIA INTERNATIONAL, DOZCO, VIDEOCON, and YOGRAJ INFRASTRUCTURE cases to determine the jurisdiction of the Madras High Court. It concluded that the law governing arbitration is the Singapore law, indicating an exclusion of Part I of the Act, and therefore, the Madras High Court had no jurisdiction to entertain the Section 9 application.
Final Decision: The appeals were dismissed, and the Madras High Court's decision to hold that it had no jurisdiction to entertain the Section 9 application was upheld.
R.BANUMATHI,J
1. Challenge in these appeals is the order of single Judge dismissing the applications [O.A.Nos.155 to 157 of 2011 and A.No.1002 of 2011] filed under Section 9 of Arbitration and Conciliation Act, 1996 holding that the substantive as well as the procedural law is outside the country [Singapore] and that the parties have impliedly excluded the jurisdiction of Part I of Arbitration and Conciliation Act, 1996. Though the appeals are of the year 2011, with the consent of both the counsel, main appeals itself were taken up for final disposal.
2. Factual background:- Appellant-Financial Software & Systems Private Limited was a distributor of ACIs Software products such as ‘BASE24’ and ‘PRM’ in India under an International Distribution Agreement [IDA] entered into on 29.04.1998 between the Appellant and the 2nd Respondent-ACI Worldwide (Asia) Private Limited. Subsequently during 2005, certain disputes and differences arose between the Appellant and the 2nd Respondent-ACI and Appellant filed suit in C.S.No.628 of 2008 to settle the disputes and differences. Several rounds of discussions and consultations took place between the Appellant and ACI which entering into a Settlement and Release Agreement [SRA] dated 17.02.2010. SRA provides amongst other things and set out in detail the full and final settlement and resolve, between the Appellant and ACI for valuable consideration in terms of any and all disputes and differences and further provided for the effective release and discharge of either Party from any and all claims and all obligations past, present or future under IOI, IDA and all other agreements signed between the parties. The disputes resolutions clause in Clause 14.6 of SRA stipulates that ‘agreement shall be construed and enforced in accordance with and governed by laws of Singapore’. Parties have also agreed that the disputes will be settled exclusively by compulsory arbitration in accordance with Arbitration Rules of Singapore International Arbitration Centre (SIAC).
3. Appellant was/is always ready and willing to perform its duties and obligations under SRA. Inspite of Appellants persevering, diligent and earnest attempts to resolve all open items in the SRA, the Respondents are not ready and willing to perform their reciprocal promises as contemplated under the SRA. Stating that Appellant had continued to perform its obligations as agreed to in the Software agreements [customer contracts] and that ACI is not performing its obligations under the SRA and that the Respondents have deeply impacted the Appellants financials, causing loss of revenue and loss of goodwill and reputation to the Appellant, Appellant has filed applications under Section 9 of Arbitration and Conciliation Act restraining the Respondents, their men and agents from providing any support to other System Integrators/Service Providers/Partners of the Respondents in violation of Clause 6 of the SRA.
4. Respondents resisted the application denying all the allegations and interalia raising preliminary objection of maintainability. Respondents averred that application under Section 9 of the Act is not maintainable. It was further averred that jurisdiction of Indian Courts are barred under Clause 14.6 of SRA, since Clause states that agreement shall be construed and enforced in accordance with the laws of Singapore. Enforcement of terms of SRA or for any other remedy arising out of the SRA is to be settled only in accordance with the compulsory arbitration under Singapore International Arbitration Centre (SIAC). Rule 18 of SIAC Rules specifies that the parties may agree on the "Seat of Arbitration" and failing such agreement ‘Seat of Arbitration’ shall be Singapore, unless the Arbitral Tribunal decides otherwise. Since substantive law is laws of Singapore and procedural law applicable is also SIAC Rules, Section 9 application is not maintainable.
5. Upon consideration of rival contentions and referring to Clause 14.6 of SRA and als
