Satish Jha vs Headstrong Consulting Worldwide Ltd.

Gita Mittal, J.—This petition have been filed by Shri Satish Jha, one of the partners to a joint venture agreement dated November, 1992 between M/s. James Martin Holdings Ltd. On the one hand, and Shri Satish Jha and Shri Anil Nagar, on the other. The petitioner places reliance on clause 8.1 of the agreement between the parties whereby under clause 8.1, James Martin Holdings Ltd. was prohibited from competing directly or indirectly with the joint venture in any shape or form within India. It had hereby covenanted not to enter into any other joint venture, collaboration or business/commercial/economic co-operation of any kind with any other party within India, without the express written approval of Shri Satish Jha and Anil Nagar (described as ''founders'' under the agreement) which approval would not be unreasonably withheld. It was stipulated that this clause would apply to any or all of subsidiaries, associates or any other company which James Martin Holdings Ltd. may form in future. This Company is now known as Headstrong Consulting Worldwide Ltd. and has been so used before this Court. It is an undisputed fact that pursuant to this agreement, the parties had set up a joint venture company under the name and style of M/s. James Martin & Co. (India) Pvt. Ltd. The present petition was filed by the petitioner on the assertion that the respondent has attempted to conclude their merger/ acquisition with M/s. Techspan Inc, a private corporation headquartered in Sunnyville, California, USA which is an I.T. Consulting firm. It has been contended that this Company has a presence in India and also has a centre of excellence in India at Noida and offers world class development for maintenance, migration and integration facility to its clients.

The petitioner submits that inasmuch as the respondent was overreaching and infringing its obligation under clause 8.1 and without taking written approval of the petitioner, was attempting to effect such a merger, the petitioner had sent a legal notice dated the 16th of June, 2003 to the respondent, Techspan as well as M/s. Merrill Lynch, the alleged financiers for the proposed deal between the respondent-Techspan. The submission is that in the reply the respondent did not specifically deny the fact that the respondent was in fact close to precipitating its deal with the respondent. According to the petitioner, the cause of action for filing the present petition arose on account of a publication in a premier consulting magazine "The Consulting Magazine" July-August, 2003 edition, on the "Passage to India". The petitioner points out that there is a mention in this publication that "nothing has more significance than the Indian acquisition" and that "the acquisition of an Indian firm may not be far off "

Based thereon, the petitioner submits that the respondent deserves to be prohibited from closing its reported deal with Techspan and it plans to acquire and collaborate with an Indian entity without approval of the petitioner and in disregard of its contractual obligations under the afore-noticed joint venture agreement of November, 1992.

On the plea that the petitioner was taking steps to invoke arbitration to resolve the disputes under Arbitration Clause 13.2 of the Joint venture agreement, the petitioner has prayed that before commencement of the arbitral proceedings, this court may protect and secure the petitioner''s rights under the Joint Venture Agreement and prohibit the respondent from competing directly or indirectly with the joint venture in any shape or form within India and from entering into any other joint venture/collaborations or business/commercial/economic cooperation of any kind with any other party without the express written approval of the petitioner.

The respondent put in appearance and has contested the present petition. Mr. Gopal Jain, learned counsel appearing for the respondent has vehemently urged that the present petition deserves to be dismissed on the ground that there is abject failure on the part of the petitioner to seek invocation of arbitration despite the lapse of more than two years, since the filing of the petition u/s 9 of the Arbitration & Conciliation Act. Consequently, the petition merits dismissal for the reason that the petitioner has failed to show manifest intention to invoke arbitration.

The respondent has also vehemently urged that the petition is liable to be dismissed on account of suppression of material facts inasmuch as the petitioner has deliberately with malafide intent withheld the arbitral award dated 14th July, 2003 passed by Justice Sat Pal (retired) who was appointed as a sole arbitrator and who had held that the petitioner had sold his 50% shareholdings in the joint Venture company to one M/s. BILT Investment Ltd. for valuable monetary consideration of Rupees Fifty Five lakhs. The respondent points out that the arbitral Tribunal had held that the petitioner was not connected or associated with James Martin & Co. (India) Pvt. Ltd. in any manner.

The third objection of the respondent is that there was no cause of action in favour of the petitioner and against the respondent. It is urged that entire petition is premised on a website extract and a newspaper report that the respondent is entering into a merger transaction with another party. It is contended that the website extract and the newspaper report relied upon by the petitioner do not indicate so and that the respondent in any case has stated on affidavit that it has not entered into any merger transaction with any party and is not carrying on any competing activities in India.

The respondent has further submitted that it is the petitioner who is in breach of clause 8.1 who has incorporated a company by the name Headstrong India Pvt. Ltd. which is carrying on competing business activities with the joint venture company. The conduct of the petitioner evidenced by the manner in which the present petition has been filed disentitles the petitioner to any discretionary relief In support of this contention reliance is placed on Smt. Champa Arora and others Vs. Shri Shiv Lal Arora and Others, , Virumal Praveen Kumar Vs. Gokal Chand Hari Chand, Virumal Praveen Kumar Vs. Gokal Chand Hari Chand, and M/s. Seemax Construction (P) Ltd. Vs. State Bank of India and another, .

I have heard learned counsel for the parties and considered the rival contentions.

It is noteworthy that in the instant case, the petitioner and the respondent had entered into an agreement whereby they agreed to set up a joint venture company. The respondent has contended that such a joint venture company has come into existence which is known by the name of M/s. James Martin & Co. (India) Pvt. Ltd., which is carrying on business activity under the Memorandum and Articles of the Association.

The petitioner has placed before this court certain disputes which had arisen with regard to the sale of the petitioner''s shareholding in this joint venture to M/s. BILT Investments Ltd. The petitioner sought to assail the transfer of his shareholding to this company and it appears that the disputes between the petitioner and the said M/s. BILT went to arbitration. However, the petitioner has failed to disclose the fact that there were arbitration proceedings between the petitioner and M/s. BILT Investments Ltd. Which have culminated in an award dated 14th July, 2003 passed by Justice Sat Pal (Retired) as Sole Arbitrator wherein the arbitral tribunal has held that after sale of his entire 50% shares, the petitioner has ceased to have anything to do with the joint venture company.

In this view of the matter, it is urged that the petitioner ceased to have any obligation under the joint venture agreement and consequently it cannot be held in law that he continues to retain rights in perpetuity to restrain the respondent or the joint venture from entering into joint ventures with other parties.

Perusal of the petition would show that the petitioner has mentioned certain disputes with regard to its shareholdings and the claimed transfer thereof by M/s. BILT Investments Ltd. According to the petitioner, the same has been done fraudulently. However, it is a fact that the petitioner has failed to disclose the making and publishing of the award dated 14th July, 2003 by the learned Arbitrator. It certainly cannot be contended that the same was not a material fact or that the petitioner was justified in not placing this fact before this Court. I find that even in the pleadings which have been filed, the petitioner fails to render any satisfactory explanation for the deliberate nondisclosure of this material fact. It has been pleaded as an explanation that the respondent was not a party to those arbitration proceedings and for this reason, the award is irrelevant. Such objection was taken by the respondent even in its reply dated 16th July, 2003 to the legal notice sent. In my view, such a submission is wholly fallacious and is misconceived. The non-compete stipulation contained in clause 8.1 of the Joint Venture agreement between the parties is aimed at preventing the parties from entering into any competing.

The petitioner contends that even though it may have transferred its entire shareholding in the joint venture company and thereby ceased to have any interest or control over its affairs, it would still have a right to compliance under clause 8.1. Such submission is wholly misconceived.

There is an important circumstance which militates against exercise of discretionary jurisdiction in favour of this petitioner. The respondent had filed its reply on the first occasion and has been vehemently opposing all requests for adjournment in the matter. In the reply, an objection was taken that the petitioner has not invoked the arbitration and consequently was not entitled to maintain present petition. In this behalf reliance is placed on the pronouncement of the Apex Court in M/s. Sundaram Finance Ltd. Vs. M/s. NEPC India Ltd., ; Firm Ashok Traders and Another etc. Vs. Gurumukh Das Saluja and Others etc., ; Reena Silicate Industries Pvt. Ltd. Vs. GAIL (India) Ltd. and Another, , and S.P. Sankar and Others Vs. S.P. Subramani and Others,

It is noteworthy that the present petition was filed on 18th August, 2003. As noticed above, interim orders was passed in favour of the petitioner on 21st August, 2003. It was further directed that in case a notice is given for entering into joint venture agreement, the approval shall not unreasonably be withheld by the petitioner as envisaged in clause 8.1 of the agreement. The respondents had entered into appearance on the very first day itself.

This order continues to bind the parties till date.

When the matter was listed before/this court on 23rd January, 2007, the following orders was recorded:-

It is pointed out that after passing of the order dated 22nd August, 2003, the petitioner has taken no step in accordance with law to pursue the remedy for commencement of the arbitration proceedings in accordance with law and that in the light of the pronouncements of the Apex Court reported at M/s. Sundaram Finance Ltd. Vs. M/s. NEPC India Ltd., and Firm Ashok Traders and Another etc. Vs. Gurumukh Das Saluja and Others etc., , this petition itself cannot be maintained.

Petitioner shall answer this objection on the next date of hearing. At request, this matter is adjourned to 6th March, 2007.

The fact that no steps were taken for invocation of the arbitration agreement from August, 2003 till March, 2007, is evidenced by the statement made by the petitioner on the next date of hearing. The petitioner had submitted before this Court on 6th March, 2007 that it has invoked the remedy of arbitration and has filed an appropriate petition in this behalf before the Indian Council of Arbitration on 5th March, 2007.

It has repeatedly been held that when an application u/s 9 is filed before commencement of the arbitration proceedings, there has to be manifest intention on the part of the applicant to take recourse to the arbitration proceedings, if at the time when the application u/s 9 is filed, the proceedings have not commenced u/s 21 of the Arbitration Act, 1996. In this behalf in M/s. Sundaram Finance Ltd. Vs. M/s. NEPC India Ltd., the Apex Court held thus:-

Mr. Subramanium is therefore right in submitting that when an application u/s 9 is filed before the commencement of the arbitration proceedings there has to be manifest intention on the part of the applicant to take recourse to the arbitration proceedings, if at the time when the application u/s 9 is filed, the proceedings have not commenced u/s 21 of the 1996 Act.

If an application is so made, the Court will have to be satisfied that there exists a valid arbitration agreement and the applicant intends to take the dispute to arbitration. Once it is so satisfied the Court will have the jurisdiction to pass orders u/s 9 giving such interim protection as the facts and circumstances warrant. While passing such an order and in order to ensure that effective steps are taken to commence the arbitral proceedings, the Court while exercising jurisdiction under Section9 can pass conditional order to put the applicant to such terms as it may deem fit with a view to see that effective steps are taken by the applicant for commencing the arbitral proceedings.

This very issue arose for consideration before the Apex Court in a later pronouncement. The following observations of the Court in the judgment reported at Firm Ashok Traders and Another etc. Vs. Gurumukh Das Saluja and Others etc., , are instructive and deserve to be considered in extenso:-

....The party having succeeded in securing an interim measure of protection before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the ''proximately contemplated'' or ''manifestly intended'' arbitral proceedings itself. If arbitration proceedings are not commenced within a reasonable time of an order u/s 9, the relationship between the order u/s 9 and the arbitral proceedings would stand snapped and the relief allowed to the party shall cease to be an order made ''before'' i.e. in contemplation of arbitral proceedings....

The respondents have placed reliance on two judgments of the High Court, of Judicature at Madras before this Court which also deserve to be noticed. These pronouncement shed light on the period considered reasonable by courts between an order u/s 9 and the commencement of arbitral proceedings. In Reena Silicate Industries Pvt. Ltd. Vs. GAIL (India) Ltd. and Another, an interim order u/s 9 was granted to the petitioner on 8th April, 2005 and since no steps were taken by the applicant for commencement of the arbitral proceedings till the matter was taken up for hearing till 14th February, 2006. The court has held that even though the applicant had expressed in Section 9 petition that he would commence the arbitration proceedings he did not do anything in this regard and there is a total inaction on the part of the applicant. In this view of the matter, the court pronounced that the petitioner by his own conduct has clearly accepted that he had no intention at all to the commencement of arbitration proceedings and that no reason was available as to why the applicant has not commenced the proceedings till now. On this short ground alone, the petition u/s 9 was liable to be dismissed by the Court.

Again in the judgment of the Madras High court reported at Apple Finance Ltd. Vs. Gayathri Sugar Complex Ltd., , the petitioner had filed an application u/s 9 of the Arbitration & Conciliation Act on 3rd April, 2003 and an advocate-commissioner was appointed on this application on 22nd December, 2003. This petition was taken up for consideration on 16th March, 2004 but the applicant had not taken any step to invoke the arbitral proceedings. This period of less than one year was held by the court as evidencing that the applicant had no intention to commence the proceedings as no reasons were available for the inordinate delay on the applicant. It was held that consequently the link between arbitration and the order passed stood snapped and the application would stand dismissed.

It is thus well settled that a party invoking the jurisdiction of the Court u/s 9 of the Arbitration & Conciliation Act 1996 might not have actually commenced the arbitration proceedings when such petition is filed, but it must satisfy the court that the arbitral proceedings were actually contemplated or manifestly intended to commence the same. In case the applicant fails to manifest such intention, he loses his right to seek the indulgence of the court and that on this ground alone, the injunction application is liable to be dismissed.

In the instant case, the order of injunction was passed in favour of the petitioner on 22nd August, 2003 and the respondents filed its reply to the petitioner as back as on 28th August, 2003. In the reply, the respondent had taken the objection in para 13 of the reply on merits that the petitioner had lot taken recourse to any provision of the joint venture agreement; that the petitioner had waived the arbitration clause and cannot rely upon the provision hereof and that the joint venture agreement in any case came to an end upon in corporation of the joint venture company. The respondents had also submitted that the petitioners had taken no steps to invoke the arbitration nor they could do so in law inasmuch as there was no joint venture agreement between the parties.

This specific objection and the judicial pronouncements which were relied upon in support thereof were recorded in the order of 23rd January, 2007 when the matter was being taken up for consideration and at request of the petitioner it was adjourned to 6th March, 2007. The petitioner has claimed to have filed an arbitration petition on the eve of the next hearing. It is evident, therefore, that the petitioner had no intention whatsoever to invoke the arbitration at the time when the petition u/s 9 was filed or at any time thereafter. It was only because that the respondent firmly objected to the continuation of the injunction and the maintainability of this petition that the petitioner was compelled to invoke the arbitration to overcome this objection.

Mr. Jayant Bushan, learned senior counsel for the petitioner has sought to draw the distinction that the judicial pronouncements relied upon by the respondent do not assist its case inasmuch as in all the cases relied upon, the arbitration proceedings had not been commenced when the matter was taken up for hearing and judgment.

This may be the position so far as those cases are concerned. However, it has to be borne in mind that even delay of one year in invoking the arbitral proceedings have been considered fatal to the case of the applicants u/s 9 of the Arbitration and Conciliation Act. In the instant case, the delay which this Court has been asked to overlook runs to the extent of three and a half years. This is despite the binding judicial pronouncements of the Apex Court which have been noticed hereinabove and the objection of the respondent having taken at the first available opportunity.

It is also to be borne in mind that in the instant case, the petitioner has invoked the jurisdiction of this court by way of a present petition before commencement of the arbitration proceedings. The respondent has assailed even the validity and bindingness of the arbitration agreement. Apart from the same, the applicant was legally required to take effective steps commencing from the arbitration proceeding shortly after filing of the petition in this Court.

In Firm Ashok Traders (supra), the Apex Court has held that section 9 permits the filing of an application before the commencement of the arbitral proceedings. The word "before" means, inter alia "ahead of; in presence or sight of; under the consideration or cognizance of. The two events sought to be interconnected by use of the term "before" must have proximity of relationship by reference to occurrence; the later event proximately following the preceding event as a foreseeable or "within sight" certainly. The party invoking section 9 may not have actually commenced the arbitral or manifestly intended and were positively going to commence within a reasonable time. What is a reasonable time will depend on the facts and circumstances of each case and the nature of interim relief sought for would itself given an indication thereof. The distance of time must not be such as would destroy of relationship of the two events between which it exists and elapses.

The court, approached by a party with an application u/s 9, is justified in asking the party and being told how and when that party proposes to commence the arbitral proceedings. Rather, the scheme in which section 9 is placed obligates the court to do so. The Apex Court held that the party having succeeded in securing the interim measures of protection, before arbitral proceedings cannot afford to sit and sleep over the relief, conveniently forgetting the "proximately contemplated" or "manifestly intended" arbitration proceeding itself. It was further authoritatively laid down that if arbitration proceedings were not commenced within reasonable time u/s 9 of the Act, the link between the arbitration proceedings and the order passed would stand snapped and the application would stand dismissed. Such order allowed to ''the party, shall cease to be an order made ''before'' i.e. in contemplation of arbitral proceedings.

Thus delay on the part of the petitioner to commence the arbitration proceedings and its conduct by itself disentitles the petitioner to continuation of the injunction order or grant of equitable discretionary relief in the instant proceedings. Merely because the petition has remained pending for over four years and the petitioner has taken over almost three and half years to commence the arbitral proceedings would be a sufficient ground for denying the continuation of the injunction to it. In the instant case, the petitioner is disentitled to relief for the other grounds as well which have been noticed hereinabove.

The respondents have sought to extensively rely on other litigation between the parties which is pending. The respondents have also urged that there is no binding arbitration agreement between them. So far as these issues are concerned, the same would be determined in the pending litigation or in the substantive arbitration proceedings commenced by the petitioner and the respondent would seek adjudication of this issue in accordance with Section 16 of the Arbitration & Conciliation Act, 1996. In view of the aforenoticed discussion, it is wholly unnecessary for this Court to go into these aspects of the matter.

It is noteworthy that there is not a single reason or explanation rendered for not having taken expeditious steps for commencement of the arbitral proceedings. On the contrary, the petitioner''s conduct reeks of arrogance inasmuch as it has sought to defeat the objection and prohibition on the sole ground urging that it has commenced arbitration proceedings, albeit belatedly. Such conduct clearly disentitles the petitioner to any interim protection by this court in these proceedings.

The jurisdiction of this Court in exercise of powers conferred u/s 9 of the Arbitration & Conciliation Act, 1996 has fallen for consideration in several cases prior hitherto. In a decision rendered on 28th March, 2007 in the matter of M/s. Modi Rubber Ltd. v. Guardian International Corporation (in OMP 477/2006), this Court had occasion to consider the ambit and manner in which powers u/s 9 have to be exercised and on a consideration of several judicial pronouncements on the subject applicable, the principles were culled out. The relevant extract thereof is reproduced hereunder:-

It is also necessary to examine the parameters within which the court shall exercise such power. The manner and limits of exercise of such discretion have fallen for consideration in several judicial pronouncements and the principles laid down can be usefully called out thus:-

(i) Even though Section 9 does not embody the ingredients of Order 38 Rule 5 of the Code of Civil Procedure, 1908 nor the conditions of the Order 38 Rule 5 can be read into it, however for the exercise of discretion thereunder, the court can take guidance from the provisions of Order 39 as well as Order 38 of the Code of Civil Procedure, 1908. (Ref: Rite Approach Group Ltd. Vs. Rosoboronexport, ).

(ii) The scope of Section 9 of the Arbitration & Conciliation Act, 1996 is in pari meteria with the provisions of Order 39 of the Code of Civil Procedure, 1908. The power vested in the court by virtue of Section 9 must be exercised in consonance with equity which tempers the grant of discretionary relief as the relief of interim injunction is wholly equitable in nature. (Ref: M/s. Gujarat Bottling Co. Ltd. and others Vs. Coca Cola Company and others, ; Reliance Infocomm Limited Vs. Bharat Sanchar Nigam Limited, ))

(iii) The intention of the defendant is a sine qua non for invoking Section 9 where the claim is to secure the amount in dispute in arbitration. The court can take guidance from Order 38 Rule 5 of the CPC and Sections 18 and 41 of the Arbitration Act, 1940 for considering whether such a relief as has been prayed for in the petition u/s 9 deserves to be granted. (Ref: Global Company Vs. National Fertilizers Ltd., ; Mala Kumar Engineers Pvt. Ltd. (MKE) Vs. B. Seenaiah and Co. (Projects) Ltd. (BSCPL), )

(iv) Protection u/s 9 can be granted only when a prima facie case is made out and balance of convenience and possibility of irreparable loss and injury to the petitioner is made out. Section 23 of the Specific Relief Act, 1963 provides that the provision of liquidated damages is not a bar to the specific performance of the contract. The general rule of equity is also that if a thing is agreed to be done, though there is a penalty attached thereto to secure its performance, yet the court in its discretion enforces specific performance thereof. The jurisdiction of the court is discretionary and must be exercised on such judicial principles when balance of convenience and possibility of irreparable loss and injury is shown to the plaintiff (Ref: Geep Batteries (India) Pvt. Ltd. Vs. Gillette India Ltd., ; Techno Construction and Another Vs. Kunj Vihar Co-operative Group Housing Society Ltd., )

(v) The discretionary power of the court u/s 9 has to be exercised by the court sparingly and cautiously, bearing in mind that the objective of the court is to create an alternative dispute redressal mechanism and consequently, the interference by the court is not required at every stage. (Ref: 2006 (128) DLT 694 DB Sanrachna (India) Inc. v. AB Hotels Ltd.)

Whenever the powers of the courts are invoked u/s 9 with the objective of supporting the arbitration, the court must act with alacrity. However, this would not justify grant of interim orders and relief on the mere asking. (Ref: CREF Finance Ltd. Vs. Puri Construction Ltd. and Others, ; Sea Transport Contractors Ltd. Vs. Indian Farmers Fertiliser Cooperative Ltd., )

(vi) The scope and object of Section 9 of the statute is to grant such relief by way of interlocutory injunction so as to mitigate the risk or injustice to the petitioner during the period before that uncertainty can be resolved. Its object is to protect the plaintiff against injury by violation of his right for which he could not be adequately compensated in damages which would be recoverable in the action if the uncertainty were resolved in his favour at the trial. (Ref: M/s. Gujarat Bottling Co. Ltd. and others Vs. Coca Cola Company and others, ; 2006 (4) AD (Del) 38 Country Development & Management Services Pvt. Ltd. v. Brookeside Resorts Pvt. Ltd.) In Shaw Wallace Breweries Ltd. Vs. Him Neel Breweries Ltd., , Learned Single Judge of this court held that the interim orders are calculated to ensure that the assets of the party are not dissipated or frittered away and that such orders do not fall within the moratorium of Section 22.

(vii) The application seeking interim measures of protection u/s 9 of the Arbitration & Conciliation Act, 1996 pertaining to the preservation, interim custody or sale of equipment which is the subject matter of the agreement would be covered u/s 9 (ii) (a) as also u/s 9(ii)(c),(d) and (e) of the Act. (Ref: National Highways Authority of India (NHAI) Vs. China Coal Construction Group Corpn., )

(viii) The court has the power to pass an order u/s 9 during the pendency of the arbitration or even after the arbitral award but before the award is enforced in accordance with Section 36. Such order can be passed for preservation, interim custody or sale of any goods which are the subject matter of the arbitration agreement or securing the amount in the dispute and the like. (Ref: 2006 (128) DLT 694 Sanrachna (India) Inc. v. AB Hotels Ltd.; CREF Finance Ltd. Vs. Puri Construction Ltd. and Others, )

(ix) The power u/s 9 to grant interim relief is available to the court while u/s 17, such powers to make interim measures are made available to the Arbitral Tribunal. Even though there may be some degree of overlap between the two provisions, however, the powers u/s 9 are much wider inasmuch as they extend to the pre and post award period as well as with regard to the subject matter and the nature of the orders which the court is empowered to pass. Therefore, pendency of an application u/s 17 before the Arbitral Tribunal does not denude the court of its power to make an order for interim measures u/s 9 of the statute. (Ref: National Highways Authority of India (NHAI) Vs. China Coal Construction Group Corpn., )

(x) It has been held that though Section 9 enables a party, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced u/s 36 of the Act, may apply to the court for an interim order u/s 9, however, without a substantive move for reference or declaration on the petitioner''s stand on the substantive relief by an appropriate forum, Section 9 cannot be invoked for grant of interim relief. (Ref: Firm Ashok Traders and Another etc. Vs. Gurumukh Das Saluja and Others etc., ; M/s. Sundaram Finance Ltd. Vs. M/s. NEPC India Ltd., ; National Building Construction Corpn. Ltd. (NBCC) Vs. IRCON International Ltd., )

(xi) So far as the questions which can be considered in a petition u/s 9 of the Arbitration & Conciliation Act, 1996 are concerned, certainly issues which are to be decided in the substantive arbitration proceedings cannot be gone into in a petition u/s 9 of the statute. Thus, a question as to whether the agreement between the parties was validly entered into or whether it was validly terminated has to be determined only in the arbitration proceedings and cannot be determined in a petition u/s 9 of the statute. (Ref: S. Raminder Singh Vs. NCT of Delhi and Others, ).

A similar question had arisen before this court in D.R. Sondhi and Others Vs. Hella KG Hueck and Co. and Others In para 14 of the judgment, it was held by this court that the question as to whether the material breach has been committed or not or if there is any breach at all was agitated but it was not gone into for the reason that it is not the question for determination at present.

From the above, it is apparent that fairness and probity in the conduct of the petitioner is thus the essence and foundation for grant of discretionary relief u/s 9 of the Arbitration & Conciliation Act. The principles which apply to consideration of an application under Order 39 would guide consideration of a petition u/s 9 as well.

It is trite that deliberate suppression and concealment of material fact would disentitle any petitioner seeking discretionary relief. In S.P. Chengalvaraya Naidu (dead) by L.Rs. Vs. Jagannath (dead) by L.Rs. and others, , the Apex Court had held that the court would non-suit such a party who had concealed material facts from the Court.

In Rajabhai Abdul Rehman Munshi Vs. Vasudev Dhanjibhai Mody, , the court held that a party invoking the exercise of the overriding discussion of the Court, must approach the court with clean hands. It was held that if there appears to be any attempt to over-reach or mislead the court, by false or untrue statement or withholding true information which would have a bearing on the question of exercise of the discretion, the court would be justified in refusing to exercise the discretion or if the discretion had been exercised, in revoking the leave to appeal granted even at the time of hearing of the appeal.

In M/s. Seemax Construction (P) Ltd. Vs. State Bank of India and another, , this Court held that suppression of material fact by itself is a sufficient ground to decline the discretionary relief of injunction. A party seeking discretionary relief has to approach the Court with clean hands and is required to disclose all material facts which may, one way or the other, affect the decision. A person deliberately concealing material facts from Court is not entitled to any discretionary relief. The Court can refuse to hear such a person on merits.

The observations of the Punjab & Haryana High Court in the decision rendered in Charanji Lal and Others Vs. Financial Commissioner Haryana, Chandigarh and Others, , also have a bearing in the instant case. The court held thus:-

We cannot but hold that there has been a malafide and calculated suppression of material facts which, if disclosed would have disentitled the petitioners to the extraordinary remedy under the writ jurisdiction or in any case would have materially affected the merits on both the interim and ultimate relief claimed. We categorically reject the plea of the writ petitioners that the failure to mention all these material facts clearly within their knowledge was either inadvertent or was occasioned by any bona fide omission.

In the instant case, as noticed above the petitioner has deliberately concealed that by an arbitral award it has been held that the petitioner has transferred its shareholding in the company. Such conduct would disentitle the petitioner to any relief or exercise of discretion in its favour in the face of deliberate concealment of material facts from the court.

The respondent has also placed the fact that the petitioner has set up competing business in violation of clause 8.1 under the name and style of M/s. Headstrong India Pvt. Ltd. In its rejoinder, the petitioner has admitted that he has set up such a company and explained in the rejoinder that he had incorporated this company with the intention of converting it into a similar joint venture company to be in consonance with the newly rechristened Headstrong Global Group. The petitioner has urged before this Court that inasmuch as the respondent had sought redressal against the petitioner for its actions, these facts would have no bearing in adjudication in the present proceedings.

As noticed above, the discretionary relief of injunction is premised on a petitioner being able to establish that he has a prima facie case in his favour; that grave and irreparable loss and injury would ensure to the petitioner in case interim protection is not granted; and, that the balance of convenience, interest of justice and equity were in favour of the petitioner.

On a consideration of the facts, which have been laid before this court, there can be no manner of doubt that the petitioner has willfully concealed material facts which facts would disentitle it to grant of injunction. By virtue of statutory operation, the arbitral award is in the nature of decree. Therefore, at present, by virtue of the arbitral award dated 14th July, 2003 it has been found that the petitioner has no interest left in the Joint Venture Company. It consequently would have to be held that no irreparable loss and damage could possibly enure to the petitioner in case interim protection was not granted to it. Further the petitioner would, therefore, not have a prima facie case in its favour.

The petitioner is also disentitled to exercise of discretionary relief in its favour on account of principles laid down by this Court in Smt. Champa Arora and others Vs. Shri Shiv Lal Arora and Others, Virumal Praveen Kumar Vs. Gokal Chand Hari Chand, , M/s. Seemax Construction (P) Ltd. Vs. State Bank of India and another, . In these pronouncements, the Court was of the view that malafide and dishonest suppression of material facts would disentitle the plaintiff to exercise a discretionary relief in his favour.

As noticed above the petitioner has also failed to show a prima facie case in its favour. The respondent has raised strong disputes of fact. Balance of convenience, interest of justice and equity are against the petitioner in the foregoing facts.

For all these reasons, I find no merit in this petition which is hereby dismissed with costs.

I.A.2624/2007 (O.39 R.2-A)

This application has been filed by the petitioner u/s 39 Rule 2A CPC read with Section 2(b) and 12 of the Contempt of Court Act, 1971.

I have recorded a detailed discussion on the factual matrix and have found that the petitioner is guilty of suppression material facts. The petitioner has concealed the fact that there is an arbitration award against him holding that the petitioner has transferred the entire shareholding and has no subsisting right or interest left in the Joint Venture Company.

The petitioner has not only suppressed the same from this Court in the petition but even in the reply has sought to assert that inasmuch as the respondent was not a party to the arbitration proceedings, the same were of no relevance. This is a circumstance which needs to be noticed for the reason that such a material fact if brought to the notice of the Court when the matter came up for consideration on 22nd August, 2003, the result may have been otherwise. The petitioner has complained in the present application that the respondents have wilfully violated the order dated 22nd August, 2003 passed by this Court in the petition. In support of its assertions, the petitioner places reliance on the newspaper report published in the Economic Times of 4th November, 2003 to urge that the petitioner has merged with the Indian company M/s. Techspan and reliance is also placed on what has been termed as a print out of the extracts of the website of the respondent towards that the respondent had clearly undertaken a merger process with M/s. Techspan.

The respondent has vehemently disputed the contentions of the petitioner and urged that the petitioner is placing reliance on the single newspaper article to substantiate serious allegations against the respondents. It has been pointed out that the newspaper article mentions that two companies in the United States had entered into an American transaction in the United States of America and their terms. The articles do not make reference to the respondent herein. The respondent has also denied that the pages which are claimed to have been reproduced by the petitioner from a website do not belong to the respondents website.

After filing of the aforesaid application, the petitioner filed IA No. 357/2004 being an application under Order 39 Rules 2A CPC read with section 2(b) and Section 12 of the Contempt of Courts Act, seeking issuance of summons to 10 further persons arraying them as directors of the respondent no. 1. This application came up for hearing on 21st January, 2004 when the court directed notice to issue to the respondent.

The respondent thereafter filed IA No. 744/2004 pointing out that the persons who had been arrayed as respondents in IA No. 357/2004 were not a party to the main petition and that the application was only to harass the persons named therein, who were foreigners and to cause serious prejudice to them. This review petition came up for hearing on 6th February, 2004 when the court directed that notices may not be issued to the persons stated in IA No. 357/2004 inasmuch, in case the prayer of the applicants is denied, counsel would put in appearance on their behalf on the next date.

Instead of proceeding with adjudication of its claims on merit and failing to commence the arbitration proceedings, the petitioners have delayed adjudication even in the petition u/s 9 of the Arbitration & Conciliation Act. The petitioners thereafter filed yet another application under Order 39 Rule 2A of the CPC which was registered as IA 2624/2007 on allegations similar to those made in the earlier applications.

It is thus evident that having been granted interim relief, this petitioner has only been interested in delaying adjudication in the main petition and for this reason has filed one application after another. I have found that the petitioner has concealed material facts in the main petition, which cast substantial doubt in the very basis of his claim and entitlement.

The respondent has pointed out that the order dated 22nd August, 2003 only prohibited the respondent-company and did not injunct any other Company. The newspaper report relied upon by the petitioner refers to two United State Companies and contains no reference to the respondent. The respondent has filed a reply and on affidavit have stated that they have not violated the interim orders in any manner.

The respondents vehemently objected that the facts stated in newspapers may not be taken notice of by this Court. Reliance has been placed on the pronouncement in Laxmi Raj Shetty and Another Vs. State of Tamil Nadu, wherein it was held that the judicial notice cannot be taken of the fact stated in a news item being in the nature of hearsay secondary evidence, unless proved by evidence aliunde. It was further held that a report in a newspaper is only in the nature of hearsay evidence and is not one of the documents referred to in Section 78(2) of the Evidence Act by which an allegation of fact can be proved. The presumption of genuineness attached u/s 81 of the Evidence Act to a newspaper report cannot be treated as proof of the facts reported therein. A statement of fact contained in a newspaper is merely hearsay and therefore inadmissible in evidence in the absence of the maker of the statement appearing in Court and deposing to have perceived the fact as reported.

The respondents have disputed not only the newspaper report but also have disputed any connection with the extract of the website placed on record by the petitioners. In this background, without anything more, it cannot be held that the respondents have violated the orders passed by this Court.

So far as consideration of an application under Order 39 Rule 2A of the CPC is concerned, the principles in respect thereof have been succinctly laid down by this Court in 1994 (IV) AD (Delhi) 55 M/s. Jai Durga Industries v. Shri Surjeet Singh. It was held by the Court that:-

The proceedings under Order 39 Rule 2A CPC, though civil in nature, involve penal consequences. The burden of proof lies on the petitioner to allege and prove facts and circumstances enabling fixing of liability of breach on the person proceeded against. The underlying concept behind proceedings contemplated by Order 39 Rule 2A CPC is to maintain and uphold the dignity of the court and sanctity of the orders passed by it. It also aims at securing compliance with the orders of the court. Undoubtedly, the orders of the court are too sacrosanct. The court would not bear or connive at their violation. But at the same time, it would not blink its eyes at the realities and punish a person for non-compliance with an order which could not have been complied with.

In the above case, the court was faced with conflicting assertions and a case of oath against oath. The court found the version of the respondents more probable in view of the facts found by the Local Commissioner during the local investigation. It was also found that petitioner had failed to establish the facts claimed to have ever existed and for this reason, the petitioner was disbelieved.

In the instant case, the petitioners have placed no material before this Court which have enabled the Court to arrive at a conclusion that the respondents had violated the order dated 22nd August, 2003, though it is well settled that the nature of the proceedings and the quality of evidence required to be proved and established may not require satisfaction of the tender of criminal proceedings. However, certainly the proceedings being punitive require stricter proof than civil actions.

It has been held in AIR 1980 Gua 1 Sudhir Namasudhra & Ors. v. Purnendu Kumar Das that persons not injuncted by orders of the Court, cannot be punished for violating the restrictive injunction. In the instant case, there is not an iota of material before the Court to arrive at a conclusion that any of the persons named arrayed as respondents 2 to 12 of IA 357/2004 have violated the orders of this Court. The petitioners have also not asserted a single fact to show that these persons had even knowledge of the orders passed by this Court or the manner in which they have violated the same.

From the above, it is apparent that the petitioners have filed one application after another not only to detract the proceedings in OMP no. 333/2003 but also have utilised the process of this Court to oppress the other side, the respondents. In my view, this action of the petitioners is a gross abuse of this Court. In this view of the matter, I find no merit in this application which is also dismissed. Accordingly, this application is dismissed with costs.

The costs for dismissal of OMP No. 333/2003 & IA No. 2624/2007 are quantified at Rs. 50,000/-. Costs shall be paid to the respondent within two weeks from the passing of this order and a proof thereof shall be placed before this Court.