[Progressive Construction Ltd. v. The Louis Berger Group Inc. & Ors., AIR 2012 AP 38]
The appellant, namely, M/s. Progressive Construction Ltd., is a Public Limited Company. It is engaged in the business of and carrying out construction activities throughout the world, including India. The appellant stated that the Government of Sudan received assistance from the United States Agency for International Development under Sudan Infrastructure Services Project, which was being administered by respondent No. 1, namely, M/s. Louis Berger Group Inc. For execution of the said project, the respondent No. 1 issued notification inviting applications.
The respondent No. 1 invited bid by dividing the contract into packages. Thereafter, the respondent No. 1 entered into an agreement with the appellant on 30-4-2009 for execution of contract work. According to the appellant, the respondent No. 1 to cover up its latches and to avoid payment to the appellant has resorted to issuing the impugned notice of expulsion dated 21-10-2009 expelling the appellant from the site. The appellant, pending initiation of arbitration proceedings, filed the petition u/s.9 of the Arbitration & Conciliation Act, 1996 to declare the action of the respondent No. 1, in issuing notice of expulsion dated 21-10-2009 to the appellant and the consequences following therefrom as illegal and arbitrary, and to grant injunction restraining the respondent No. 1 from issuing letter of demand to the respondent Nos. 3 and 4 (Banks) in order to invoke/encash the bank guarantee and also restrain them from demanding any amount from the appellant pursuant to invocation of bank guarantee.
The respondent Nos. 1 and 2 having received the notice in the petition, filed counter inter alia stating that as per Clause 67.3 of the agreement, the parties have agreed to settle the disputes arising out of the agreement finally under the rules of American Arbitration Association. Therefore, the Civil Courts in India, which includes the Courts at Hyderabad, have no jurisdiction to entertain petitions in respect of the disputes arising out of the agreement. It was contented by the appellant that since it is an International arbitration, and as part of cause of action has arisen at Hyderabad, the appellant was entitled to invoke the jurisdiction of the Courts at Hyderabad in India. The lower Court granted status quo to be maintained, however ultimately dismissed the petition.
On appeal the High Court observed that the arbitration proceedings u/s.9 of the Act cannot be equated with proceedings in a regular suit. The application u/s.9 is legislated to protect the interest of parties before initiation of arbitration proceedings or during the pendency of the proceedings. It is never the intention of the Legislature to by-pass the arbitration clause totally. While determining the application u/s.9 of the Act, it is required to determine the need to protect the property pending before the arbitration. Once the Court finds that it has no territorial jurisdiction to entertain the matter, the only course open to the Court is to reject the application to enable the parties to go before the competent Court, instead of making a decision on merits. In case it proceeds and records the findings on merits, it would affect the rights of the parties on merits. The law is well settled that any finding or observations made by a Court, which has no jurisdiction to entertain a suit or application, would be Coram non judice (a Court which has no jurisdiction to decide the matter). In view of the above, the findings recorded by the lower Court that the appellant has no prima facie case in his favour for grant of interim relief u/s.9 of the Act and other findings recorded on merits, cannot be sustained and accordingly was set aside.
