M/S. WILTECH SOFTWARE SOLUTIONS PVT.LTD v ABBF BAU SOFT AG; MR. ANDRE BULA

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE V.CHITAMBARESH WEDNESDAY, THE 30TH DAY OF JULY 2014/8TH SRAVANA, 1936 AR.No. 12 of 2014 () --------------------- PETITIONER(S): ---------------- M/S. WILTECH SOFTWARE SOLUTIONS PVT.LTD IT PARK 1, PLOT # 16, CSEZ KAKKANAD, COCHIN. REPRESENTED BY MR.ASHOK MAMMEN GENERAL MANAGER. BY ADVS.SRI.K.JAJU BABU (SR.) SMT.M.U.VIJAYALAKSHMI SRI.JIKKU SEBAN GEORGE RESPONDENT(S): ------------------- 1. ABBF BAU SOFT AG, ROUTE ANDRE PILLER 29, CH 1762, GIVISIEZ/FR SWITZERLAND-CH 1762. 2. MR.ANDRE BULA CHIEF EXECUTIVE OFFICER, ABBF BAU SOFT AG ROUTE ANDRE PILLER 29, CH 1762, GIVISIEZ/FR SWITZERLAND-CH 1762. R1 & 2 BY ADV. SRI.PARITOSH JAISWAL R1 & 2 BY ADV. SRI.P.JAYABAL MENON R1 & 2 BY ADV. SRI.JAGAN GEORGE THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 30-07-2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: “C.R.” V.CHITAMBARESH, J. --------------------Arbitration Request No.12 of 2014 --------------------Dated this the 30[th] day of July, 2014 **==> picture [126 x 14] intentionally omitted <==** This Arbitration Request has been placed before me as the person designated by the Chief Justice of this Court to act under Section 11(6) of the Arbitration and Conciliation Act, 1996 ('the Act' for short). The applicant is a software company engaged in the business of developing, selling and exporting computer software and providing computer consultancy services. The respondents are a company engaged in developing software for construction business and other standard software and its Chief Executive Officer. Annexure-B Foreign Collaboration Agreement was entered into by the applicant and the respondents whereunder they agreed to work together in developing computer software. Later disputes arose between the applicant and the respondents as regards the settlement of bills as evident by Annexure-E and Annexure-F e-mails exchanged. The respondents by Annexure-G letter purported to cancel the collaboration agreement unilaterally which was however not accepted by the applicant in Annexure-H letter. The applicant finally AR.No.12 of 2014 2 issued Annexure-I letter demanding resolution of the dispute by arbitration which was not acceded to by the respondents in Annexure-J e-mail. It is under these circumstances has the Arbitration Request been filed to appoint a sole Arbitrator to resolve the dispute in terms of Section 11(6) of the Act. 2. The applicant relies on Clause 25 of Annexure-B Foreign Collaboration Agreement which is extracted hereunder: “All disputes, questions or differences etc., arising in connection with this agreement shall be referred to a single arbitrator in India in case parties agree up on one, otherwise two arbitrators in India, one to be appointed by each party in accordance with and subject to the provisions of the Arbitration Act, 1940 or any other enactment or statutory modification thereof for the time being in force.” The respondents on receipt of notice in the Arbitration Request have filed a counter affidavit raising a preliminary objection on its maintainability in addition to the defence on merits. The respondents contend that the dispute in the instant case is AR.No.12 of 2014 3 between companies incorporated in India and abroad to be resolved by international commercial arbitration. The respondents maintain that only the Chief Justice of India or the person or institution designated by him can appoint an Arbitrator in an international commercial arbitration. The plea in essence is that I lack jurisdiction to appoint an Arbitrator to resolve the dispute between the parties and that the Arbitration Request is liable to be dismissed. 3. I heard Mr.K.Jaju Babu, Senior Advocate on behalf of the applicant and Mr.Paritosh Jaiswal, Advocate on behalf of the respondents. 4. 'International commercial arbitration' has been defined under Section 2(1)(f) of the Act as follows:- (f) “international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is - (i) an individual who is a national of, or habitually resident in, any country other than India; or AR.No.12 of 2014 4 - (ii) a body corporate which is incorporated in any country other than India; or (iii) a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country; The applicant is a company incorporated under the provisions of the Companies Act, 1956 having its registered office at Thiruvananthapuram in the State of Kerala in India. The first respondent is a company incorporated under the Law of Switzerland having its registered office at Bosingen in Switzerland and the second respondent is a Swiss national. Thus the dispute arise out of legal relationship where one of the parties is a body corporate incorporated in any country other than India. The second respondent who is also arrayed as one of the contracting parties is an individual who is a national of or habitually resident in a country other than India. The legal relationship between the parties is contractual in the form of Foreign Collaboration Agreement considered as AR.No.12 of 2014 5 commercial under the law in force in India. Thus the dispute arising out of the legal relationship between the applicant and the respondents can be resolved by international commercial arbitration only. 5. Sub-sections (6), (9) and (12) of Section 11 of the Act which are germane are extracted hereunder:- - (6) Where, under an appointment procedure agreed upon by the parties,- - (a) a party fails to act as required under that procedure; or - (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. (7) x x x x x (8) x x x x x - (9) In the case of appointment of sole or AR.No.12 of 2014 6 third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. (10) x x x x x (11) x x x x x (12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to “Chief Justice” in those sub-sections shall be construed as a reference to the “Chief Justice of India”. (b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to “Chief Justice” in those subsections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) or sub-section (1) of section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court. It is evident from Section 11(9) of the Act that only the Chief Justice of India or the person or institution AR.No.12 of 2014 7 designated by him can appoint an Arbitrator in an international commercial arbitration. The reference to the 'Chief Justice' shall be construed as a reference to the 'Chief Justice of India' in international commercial arbitration. The reference to the 'Chief Justice' shall be construed as a reference to the 'Chief Justice of the High Court' in the case of any other arbitration. The above aspects are clarified by sub-sections (12) (a) and (b) of Section 11 of the Act noticing the difference between international commercial arbitration and any other arbitration. 6. National Aluminium Co. Ltd. v. Metalimpex Ltd. [(2001) 6 SCC 372] dealt with an International Commercial Arbitration involving an Indian company and a Bangladeshi company. The expression “International Commercial Arbitration” was explained in Rodemadan India Ltd. v. International Trade Expo Centre Ltd. [2006 (11) SCC 651] as follows:- The situation is one of a dispute between the petitioner, which is a foreign company and the respondent and is therefore, an “international commercial arbitration” within the meaning of Section 2(1)(f) of the AR.No.12 of 2014 8 Act. The inter-play between sub-sections (6) and (12) of Section 11 of the Act in regard to the jurisdiction to appoint an Arbitrator was discussed in M/s.HRD Corporation v. GAIL (India) Ltd. [184 (2011) DLT 390]. It was held therein as follows:- 26.A Conjoint reading of the aforementioned provisions especially the interplay between Section 2(f) read with Section 11(6) and Section 11(12) makes it abundantly clear that the legislature has intentionally carved out a fine distinction between matters relating to the “any other arbitration” and “international commercial arbitration” when it comes to the process of the appointment of the arbitrator. 27. Section 11(12) clarifies all the doubts in explicit terms by stating that when it comes to the matters referred to in sub section (4), (5) and (6) arising in an international commercial arbitration, the reference to the term Chief Justice shall be construed as reference to the Chief Justice of India. 28. This leaves no room for doubt that Section 11(6) is the enabling provision which empowers the High court, in the AR.No.12 of 2014 9 present case this court as well as the Supreme Court for appointment of the arbitrator. However, the designated court changes depending upon the nature of arbitration. In the case of international commercial arbitration, the Supreme Court will exercise powers vested under Section 11 (6) by virtue of the clear terms of Section 11(12) sub clause (a) read with Section 11 (6), on the other hand in the case of any other arbitration, the same powers vested in it shall be exercised by the High Court in view of the operation of Section 11(6) read with Section 11(12)(b) of the Act. The jurisdiction to appoint an Arbitrator in the International Commercial Arbitration on hand vests with the Chief Justice of India or the person or institution designated by him. Only the jurisdiction to appoint an Arbitrator in the case of any other arbitration can be exercised by the Chief Justice of this Court or the person or institution designated by him. It necessarily follows that the present Arbitration Request filed under Section 11(6) of the Act to appoint an Arbitrator has to fail. The applicant faced with this situation has filed a memo seeking to withdraw the AR.No.12 of 2014 10 Arbitration Request with liberty to move the Supreme Court for the same relief. The respondents do not oppose the prayer to withdraw the Arbitration Request and the same is therefore allowed without prejudice to make a motion before the appropriate forum. The Arbitration Request is dismissed as withdrawn. No costs. V.CHITAMBARESH, Judge. nj.