# ~- SVENSKA HANDELSBM'KEN AND OTHERS ETC v. INDIAN CHARGE CHROME LTD. AND OTHERS

- **Citation:** [1994] 1 S.C.R. 261
- **Court:** Supreme Court of India
- **Decided:** 1994-01-24
- **Case number:** Civil Appeal No. 266 of 1994
- **Bench:** J.S. Verma, Yogeshwar Dayal, B.P. Jeev An Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/svenska-handelsbm-ken-and-others-etc-v-indian-charge-chrome-ltd-and-others-12093
- **Pages:** 28

## Headnote

B
Foreign Awards (Recognition and Enforcement) Act, 1961-Sec. 3-Application of-Effect of counsel filing application and seeking time contrary to
express instructions in the suit without power of attorney-Whether amounts C
to taking steps in the legal proceedings.
Parties agreeing to an Arbitration clause--Eff ect of filing a
suit-Whether filing a suit would make the arbitration clause invalid or
inoperative.
Constitution of India, 1950-Art. 136-New Plea-Question raised for
the first time not to be allowed.
Global tenders were called for setting up a coal fired power plant. It
indicated preference for credii by suppliers. Tenders. were submitted by
the suppliers. A'i a result of the efforts made by the suppliers, consortium
of banks was formed for financing the project. The lenders entered into
agreement with the borrower. The credit agreements inter alia purported
to provide payments by the lenders to the suppliers on various documents,
as provided ii! the credit agreements, being presented to the lenders and
D
E
also against a potice of drawdown by the borrower.
F
A suit was filed by the plaintiff (borrower) seeking various reliefs
against the defendents 1 to 3 (suppliers), defendants 4 to 11 who are
lenders (appellants) and defendant No. 12 (guarantor). An ad interim
injunction was granted by the Civil Court injuncting the defendant No. 12 G
from making payments to defendant No. 4 Through his power of attorney
defendant No. 4 entered appearance in the Mis. Case No. 143 (where in
interim injunction was granted) without reference to the main suit and
also wrote a letter to the plaintiH's counsel objecting to the juri'idiction of
the court. An application for vac .ting the interim injunction was also filed.
Separate applications were also filed on behalf of defendants 4 to 11 H
261
262
SUPREME COURT REPORTS
[1994] 1 S.C.R.
A
without any power of. attorney seeking time for filing written statements
B
since they are foreign banks residing outside the country. Another application was filed by defendant No. 4 purportedly under Sec. 3 of Foreign ·
Awards Act for stay of the suit. An application through a separate power
of attorney was tiled by defendants 5 to 11 in support of the application
under section 3 of the Foreign Awards A!!t. By way of reply the plaintiff
pleaded that these applications under Sec. 3 of the Foreign Awards Act are
not maintainable as defendent No. 4 has taken steps in the proceedings to
contest the same on merits. An affidavit was filed on behalf of defendant
no. 4 wherein it was denied that steps were taken in the proceedings which
would disentitle it from applying for stay under section 3 of the Foreign
yC Awards Act. Subsequently a similar application was also filed by the
defendants 1 to 3. But these applications for stay were dismissed by the
Civil Court. All the three Civil Revision Petitions which were filed before
the High Court was dismissed. Hence these appeals by the defendants.
D
Allowing the appeals, this Court
HELD: 1.1. The correspondence reveals that the counsel was given
express instruction not to put in appearance or take any step in the
~-
pnceedings relating to the suit. The power of attorney was confined only
to the proceedings in the Miscellaneous application. Hence filing of apE
plication by the counsel seeking time for filing written statement is ultra
vires the authority and will not have any effect on the defendant: [280-F]
F
Sourendranath Mitra v. Tarubala Desai A.I.R. (1930) P.C. 158: 571 A
133; 34 C.W.N. 453 and Jamilabai Abdul Khader v. Shankarlal Gulabchand,
[1975] 2 S.C.C. 609, relied on.
1.2. Counsel was acting contrary to the express instructions of the
client. Hence client was not bound by the action taken by the counsel and
the same does not amount to taking steps in the legal proceedings. (281-F]
G
Renusagar Power Co. Ltd. v. General Electrical Co., [1984] 4 S.C.C.:
A.I.R. (1985) S.C. 1156, followed.
1.3. It' the requirements of Section 3 of the Foreign Awards Act are
sat

## Text

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-~-
SVENSKA HANDELSBM'KEN AND OTHERS ETC.
A
v.
INDIAN CHARGE CHROME LTD. AND OTHERS
JANUARY 24, 1994
[J.S. VERMA, YOGESHWAR DAYAL AND
B.P. JEEV AN REDDY, JJ.]
B
Foreign Awards (Recognition and Enforcement) Act, 1961-Sec. 3-Application of-Effect of counsel filing application and seeking time contrary to
express instructions in the suit without power of attorney-Whether amounts C
to taking steps in the legal proceedings.
Parties agreeing to an Arbitration clause--Eff ect of filing a
suit-Whether filing a suit would make the arbitration clause invalid or
inoperative.
Constitution of India, 1950-Art. 136-New Plea-Question raised for
the first time not to be allowed.
Global tenders were called for setting up a coal fired power plant. It
indicated preference for credii by suppliers. Tenders. were submitted by
the suppliers. A'i a result of the efforts made by the suppliers, consortium
of banks was formed for financing the project. The lenders entered into
agreement with the borrower. The credit agreements inter alia purported
to provide payments by the lenders to the suppliers on various documents,
as provided ii! the credit agreements, being presented to the lenders and
D
E
also against a potice of drawdown by the borrower.
F
A suit was filed by the plaintiff (borrower) seeking various reliefs
against the defendents 1 to 3 (suppliers), defendants 4 to 11 who are
lenders (appellants) and defendant No. 12 (guarantor). An ad interim
injunction was granted by the Civil Court injuncting the defendant No. 12 G
from making payments to defendant No. 4 Through his power of attorney
defendant No. 4 entered appearance in the Mis. Case No. 143 (where in
interim injunction was granted) without reference to the main suit and
also wrote a letter to the plaintiH's counsel objecting to the juri'idiction of
the court. An application for vac .ting the interim injunction was also filed.
Separate applications were also filed on behalf of defendants 4 to 11 H
261
262
SUPREME COURT REPORTS
[1994] 1 S.C.R.
A
without any power of. attorney seeking time for filing written statements
B
since they are foreign banks residing outside the country. Another application was filed by defendant No. 4 purportedly under Sec. 3 of Foreign ·
Awards Act for stay of the suit. An application through a separate power
of attorney was tiled by defendants 5 to 11 in support of the application
under section 3 of the Foreign Awards A!!t. By way of reply the plaintiff
pleaded that these applications under Sec. 3 of the Foreign Awards Act are
not maintainable as defendent No. 4 has taken steps in the proceedings to
contest the same on merits. An affidavit was filed on behalf of defendant
no. 4 wherein it was denied that steps were taken in the proceedings which
would disentitle it from applying for stay under section 3 of the Foreign
yC Awards Act. Subsequently a similar application was also filed by the
defendants 1 to 3. But these applications for stay were dismissed by the
Civil Court. All the three Civil Revision Petitions which were filed before
the High Court was dismissed. Hence these appeals by the defendants.
D
Allowing the appeals, this Court
HELD: 1.1. The correspondence reveals that the counsel was given
express instruction not to put in appearance or take any step in the
~-
pnceedings relating to the suit. The power of attorney was confined only
to the proceedings in the Miscellaneous application. Hence filing of apE
plication by the counsel seeking time for filing written statement is ultra
vires the authority and will not have any effect on the defendant: [280-F]
F
Sourendranath Mitra v. Tarubala Desai A.I.R. (1930) P.C. 158: 571 A
133; 34 C.W.N. 453 and Jamilabai Abdul Khader v. Shankarlal Gulabchand,
[1975] 2 S.C.C. 609, relied on.
1.2. Counsel was acting contrary to the express instructions of the
client. Hence client was not bound by the action taken by the counsel and
the same does not amount to taking steps in the legal proceedings. (281-F]
G
Renusagar Power Co. Ltd. v. General Electrical Co., [1984] 4 S.C.C.:
A.I.R. (1985) S.C. 1156, followed.
1.3. It' the requirements of Section 3 of the Foreign Awards Act are
satisfied a party against whom suit proceedings have been initiated, can
have it stayed, so as to get the disputes resolved through Foreign arbitraH tion proceedings as per their respective arguments.
S.HANDEL5BANKEN v. INDIANCHARGECHROMELTD.[DAYAL,J.)
263
1.4. Arbitration is contemplated as per Section 3 of the Foreign A 1
Awards Act. Merely because one has entered into contracts with different
parties, cannot prejudice or defeat the rights of a different party under a
different contract, particularly when right to foreign arbitration has been
provided by parliament as an indefeasible right in which the court does
not have any kind of discretion. By tiling a plr.int one cannot make the
arbitration clause invalid or inoperative. (283-H, 284-B]
1.5. When parties agree to have their dispute settled by. arbitration
it docs not mean that both have bound themselves not to go to court to
have the disputes settled. Even after entering into .an arbitration Clause
any party may institute legal proceedings. In this situation it is for the
other party to seek stay of the suit by showing the arbitration clause and
satisfying the terms of the provisions of law empowering the court to stay
the suit. (285-H]
1.6. A disputed question of fact cannot be allowed to be raised for
B
c
the first time in proceedings under Article 136 of the Constitution of India. D
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 266 of
1994 etc. etc.
From the Judgment and Order dated 17.6.1993 of the Orissa High
Court in C.R. No. 282 of 1992 etc. etc.
E
DeepanlCar Gupta, Solicitor General, Jaydeep Gupta, AK. Sil, G.
Joshi and G. Kandpal for the IDBI, K. Parasaran, V.A. Bobde, Shanti
Bhushan, R.P. Bhat, P. Chidambaram, R.F. Nariman, K.J. John, Shambhu
Prasad Singh, R. Sasiprabhu and Ashok Mathur for the Appellants.
F
K.K. Venugopal, Harish N. Salve, Ms. Anuradha Dutt and Ms. Vijay
Lakshmi Menon for the Respondents.
The Judgment of the Court was delivered by
G
YOGESHWAR DAYAL, J. 1. Special leave granted in all these three
matters. Heard. As the matters have been heard at length, the appeals are
being disposed of.
2. All the three appeals arising out of the above said special leave
petitions are directed against the 11rder passed by the Single Judge of the H
264
SUPREME COURT REPORTS
[1994] 1 S.C.R.
A
High Court of Orissa at Cuttack dated 17th June, 1993 whereby the Single
Judge of the High Court dismissed three Civil Revision Petition Nos. 282,
283 and -284 of 1992 filed by defendant No. 4, defendants 5 to 11 and
defendants 1 to 3 respectively in Title Suit No. 208 of 1991. All the three
civil revision petitions arose out of the common order passed by the
B Subordinate Judge, Athagarh in proceedings arising out of three applications filed by the aforesaid set of defendants for stay of the suit filed by
the plaintiff invoking Section 3 of the Foreign Awards (Recognition and
Enforcement) Act, 1961 (hereinafter referred to as 'the Foreign Awards
Act').
C
3. Before we deal with the applications, it would be useful to state a
few facts relevant for purposes of the decisions of these appeals.
4. The suit out of which the present appeals arise was filed by the
plaintiff (hereinafter referred to as the 'borrower') before the Subordinate
Judge, Cuttack for various reliefs against defendants 1 to 3 (hereinafter !
D referrep to as the 'suppliers'); defendants 4 to 11 (hereinafter referred to
as the 'lenders'); and defendant No. 12, Industrial Development Bank of
India, (hereinafter referred to as the 'guarantor'). Defendant No. 13 in the
sujt is M/s. Indian Metals & Ferro Alloys Ltd., (in short 'IMF A')
E
5. IMF A issued a global tender for setting up a captive power plant,
viz., a coal-~ed power plant in Choudwar, Orissa., The tender indicated
that credit by the suppliers will be preferred. The suppliers submitted their
tenders in this regard. Since the tender indicated that suppliers' credit. for
the entire project would be preferred, the suppliers approached defendant
No. 4 (one of the lenders) to finance the project and enquiries were made
F
to find out the possibilities for financial assistance by the Swedish Government in the form of interest at subsidised rates. As a result of negotiations
the three suppliers entered into three contracts with the plaintiff.
6. Defendant No. 4 (one of the lenders) formed a consortium of
banks with defendants 5 to 11 and an American Bank for financing the
G project. The American Bank subsequently assigned its interest in favour of
one of the defendar.t Banks (lenders). The lenders entered into two credit
agreements dated 30th October, 1984 with the borrower. The credit agreements were also entered into by defendant No. 4 for itself and on behalf
of defendants 5to11. A third credit agreement dated 15th November, 1984
H was also entered into between the borrower and defendant No. 4 (lender)
S.HANDELSBANKEN v. INDIANCHARGECHROMELTD.[DAYAL,J.)
265
in its individual capacity. It is not necessary, for the purposes of present· A
proceedings, to mention the quantum of credit agreements except to state
that two additional credit agreements were also entered into between the
borrower and the lenders supplemental to the first and second credit
agreements providing for additional loans. All the credit agreements inter
alia purported to provide payments by the lenders to the suppli~rs on B
various documents, as provided in the credit agreements, being presented
to the lenders and also against a notice of drawdown by the borrower. In
relation to the third credit agreement the disbursements were to be made
directly to the lenders in respect of the financial cost payable by the
borrower upon notice of drawdown by the borrower.
7. The loans were required to be re-paid by twenty (subsequently
amended to eighteen) equal semi-annual (six monthly) consecutive instalments. The repayments were required to be made by the borrower without
demand or notice. It was specifically provided in the credit agreements
that:-
"Any amounts payable by the Borrower shall be paid without
set-off or counter claim. The liability of the Borrower to effect any
payment under this agreement is thus unconditional and shall not
in any way be dependent upon the-performance of the Contracts
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i.e. the agreements between the Borrower and the Suppliers-ExE
porters or be affected by any other claim which the Borrower may
have against the Exporters or against any other party (natural or
legal) collaborating with the Exporters."
The credit agreements also provided: -
"All disputes arising form the provisions of this Agreement or its
performance shall be finally settled by arbitration under the Rules
F
of Conciliation and Arbitration of the International Chamber of
Commerce by three arbitrators appointed in accordance with these G
rules. Arbitration shall take place in Stockholm and be conducted
in the English language. The award of the arbitral tribunal is final
and obligatory for the parties without any right for-a further appeal
or contestation of its fulfilment. The Borrower hereby expressly
submits to the jurisdiction of the above mentioned arbitration
tribunal."
H
A
B
c
266
SUPREME COURT REPORTS
[1994] 1 S.C.R.
8. The credit agreements ·also provided that the borrower shall
furnish guarantees in favour of the lenders as security for the loans covering
100% of each of the loans plus interest, costs and fees payable under the
credit agreements. As quoted above, the agreements also contained an
arbitration clause whi<:h contemplates disputes arising from the agreements
to be finally settled by arbitration under the rules of Conciliation and
Arbitration of the International Chamber of Commerce by three arbitrators
appointed in accordance with these rules. The arbitration is provided to
take place at Stockholm.
·
9. On 24th June, 1989 the plaintiff (borrower) took over the plant
and on 25th June, 1989 issue a taking over certificate. On 28th July, 1989
the plaintiff authorised defendant No. 4 to disburse the balance 5% of the
payment to defendant No. 3 as well.
10. It was on or about April 28, 1991 that the present suit was filed
D by the plaintiff for: (a) a declaration that the taking over certificate dated
25th June, 1989 is void/voidable instrument and the same may be delivered
and cancelled; (b) it be further declared that the plaintiff is entitled to
dimunition/extinction of price towards the power plant as mentioned in
Annexure 'A' to the plaint, in the alternative, if the court fmds, that any
amount is payable to defendants 1 to 11 jointly or severally, the same be
E
directed to be paid as per reschedule of payment to be calculated on the
basis of a cash flow basis on actual generation as determined on equiry;
( c) a decree of declaration that the guarantees obtained from defendants
12 and 13 by defendants 1 to 11 are void/voidable instruments and ought
~o be delivered and cancelled; ( d) a decree of perpetual injunction restrainF
ing defendants 12 and 13 from making payments dated 30th April, 1991
and payments falling due on subsequent dates under any guarantee to
defendant No. 4 and/or defendant Nos. 4 to 11; and (e) a decree of
perpetual injunction restraining defendants 4 to 11 from recalling the loan
and/or taking any steps from recovering the said loan either in full or in
part, etc. etc.
G
11. On receipt of summons in the suit and notice on the application
for interim injunction filed by the plaintiff (borrower); defendant Nos. 1 to
3 (suppliers) did not enter appearance. Defendant No. 4 (lender) entered
appearance by power of attorney dated 28th June, 1991 specifically in
H Miscellaneous Case No. 143 of 1991 i.e. in relation to the application for
S.HANDELSBANKEN v. INDIAN CHARGE CHROME LTD. [DAYAL,J.)
267
interim injunction without any reference to the main suit. By this power of A
attorney defendant No. 4 appointed S/Shri A. Misra, H.P. Rath and P.N.
Misra, Advocates on their behalf in Miscellaneous Case No. 143 of 1991.
Before filing of the power of attorney, defendant No. 4 also wrote to the
plaintiffs counsel objecting to the jurisdiction of the court itself by letter
dated 31st May, 1991 and also sent a copy of this letter to the Court
opposing the order of ad interim injunction dated 25th April, 1991 whereby B ·
the Subordinate Judge, Cuttack had injuncted defendant No. 12 from
making payments to defendant No. 4. The letter dated 31st May, 1991 reads
thus:
"SVENSKA HANDELSBANKEN
Stockholm, Sweden
May 31, 1991
Dear Sir,
BY COURIER
Mr. Rajen Mahapatra
Advocate,
7-A/3, Girdhar
Apartments,
Feroz Shah Road,
New Delhi-110 001.
India.
Re: Order of injunction dated 25.4.1991 by the learned Sub-ordinate Judge, 1st Court, Cuttack, Orissa in Misc. Case No.
143 of 1991 arising out of T.S. No. 208 of 1991.
We have received two letters from you, both dated 27th April,
1991, in respect of the above matter.
The first was a short covering letter and the second was enclosed
with it. The second quotes the terms of an injunction apparently
granted in the above matter. Enclosed with it was a copy of what
appears to be the notes of the Honourable Judge.
c
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G
We have never received anything further, either from you or from H
268
A
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SUPREME COURT REPORTS
(1994) 1 S.C.R.
the Court. This is puzzling.
What is even more puzzling is how your clients could have made
such an application, and how it could have been granted, when the
Honourable Court quite clearly has no jurisdiction over us as a
Swedish corporation with no presence in India, or over any dispute
between us and your client.
Your clients and we signed three main credit agreements under
which your clients' borrowings have taken place. Each of those
agreements contained the following clauses:
(A) "All amounts payable by the Borrower under the Agreement
shall be paid without set-off or counterclaim. The liability of
the Borrower to -effect any payment under this Agreement is
thus unconditional and shall not in any way be dependant
μpon performance of the Contracts or be affected by any
other claim which the Borrower may have against the Exporters or against any other party (natural or legal) collaborating with the Exporters."
(B) "This Agreement shall be deemed to be made under and shall
be construed in accordance with and governed in all respects
by Swedish law."
(C) "All disputes arising from the provisions of this Agreement or
its performance shall be finally settled by arbitration under
the Rules of Concilliation and Arbitration of the International
Chamber of Commerce by three arbitrators appointed in
accordance with these rules. Arbitration shall take place in
Stockholm and be conducted in the English language. The
award of the arbitral tribunal is final and obligatory for the
parties without any right for a further appeal or contestation
of its fulfilment. The Borrower hereby expressly submits to
the jurisdiction of the above mentioned arbitration tribunal."
In the light of the above we find it incomprehensible how your
client can seek to drag us into whatever dispute which he may have
with the builders of the power plant. Nor do we understand how
you can wrongly seek the circumvent the clearly provided sole
S.HANDELSBANKEN v. INDIANCHARGECHROMELTD.(DAY.Ai,J.)
269
forum, namely arbitration before the International Chamber of A
Commerce, with the hearings to be in Stockholm.
We are sending a copy of this letter to the Honourable Court in
Cuttack.
Yours faithfully,
Svenska Handelsbanken
sd/-
sd/-
Lena Bertllsen
Gudrun Lundin Hollinder"
B
c
12. The substance of the letter is that the contracts contained att
arbitration agreement which provided that all disputes arising from the
provisions of Agreement or its performance shall be finally settled by
arbitration under the Rules of Concilliation and Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordD
ance with these rules., The arbitration agreement was agreed to be
governed by Swedish Law.
13. It appears that an application dated 28th June, 1991 was filed by
defendant No. 4 for vacating the interim injunction granted in Misc. Case
No. 143 of 1991 and it was this application with which the aforesaid power E
of attorney dated 28th June, 1991, specifically mentioning Miscellaneous
Case No. 143 of 1991, was filed in court. Written arguments '!Vere also filed
on 31st July, 1991 opposing the continuation of the interim injunction.
14. It also appears that on the same date i.e. 31st July, 1991 an
application was filed purporting to be on behalf of defendant Nos. 4 to 11
(lenders), without any power of attorney from defendants 5 to 11, stating
inter alia "that these defendants are foreign banks and are residing outside
the country, therefore six weeks time may kindly be granted enabling these
defendants to file their written statement." It is not clear from the application which Advocate had signed it.
15. It appears that another application dated 24th August, 1991,
purporting to be on behalf of defendants 4 to 11, without any power of
attornef in favour of the counsel in the suit, was filed again asking for time
of eight weeks being granted to defendants 4 to 11 to file their written
statement.
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SUPREME COUE.T REPORTS
[1994) 1 S.C.R.
16. On or about 1st November, 1991 the defendant No. 4 filed an -
application purporting to be under Section 3 of the Foreign Awards Act
for stay of the suit. Another application under Section 3 of the Foreign
Awards Act was also filed on behalf of defendants 5 to 11 supported by a
separate power of attorney in favour of the counsel in the suit in support
of the applications under Section 3 of the Foreign Awards Act.
17. In reply to the applications filed on behalf of defendant No. 4
and defendii.nt Nos. 5 to 11 it was inter aliil pleaded on behalf of the
plaintiff that the applications under Section 3 of the Foreign Awards Act
were not maintainable and that defendant No. 4 had taken steps in the
C proceedings and having participated in the proceedings with a view to
contest the same on merits, it is not entitled to file the present application.
Reference was made to the applications dated 28th June, 1991 and 24th
August, 1991. Reference was also made to the applicatio~ ·dated 24th
August, 1991 on behalf of defendants 5 to 11 as well apart from taking
D other pleas to oppose the applications for stay.
18. During the pendency of the applications under Section 3 of the
Foreign Awards Act, in reply to the objections filed by the plaintiff to the
application, an affidavit was filed on behalf of defendant No. 4 of Ms.
Barbro Margareta Lundberg which denied having taken any steps in the
E proceedings so as to disentitle defendant No. 4 from making the applicaF
G
H
tion under Section 3 of the Foreign Awards Act. It was deposed t~us:
(a) It is denied that D-4 has taken any step in the proceedings so
as to disentitle it from moving this Application under Section 3 of
the Foreign Awards (Recognition and Enforcement) Act, 1961
("the 1961 Act") for the following reasons:
(i) D-4 engaged the servi~es of Shri D.A. Misra, ("Mr . .Misra")
Advocate of Orissa High Court, in or about 19 June, 1991.
Extensive discussions were held with Mr. Misra at the offices
of Mis Clifford Chance in London (Solicitors of D-4) when:
it was made clear to Mr. Misra that under no circumstances
should he take any steps whatever which might result in D-4
being deemed to have submitted to the jurisdiction of the
Indian Courts or to have entered into the merits of the dispute
in Suit No. 208of1991 because D-4 wanted to reserve to itself
the option of compelling Plaintiff to arbitrate the dispute, as
/
S. HANDELlBANKEN v. INDIAN CHARGE CHROME LTD. (DAYAL, J.)
271
agreed. D-4 in the presence and with the help-of Mr. Misra A
prepared an Affidavit by Ms. Helene Melin, an officer of D-4
contesting the jurisdiction of the Indian Courts and relying
upon the arbitration provisions contained in the Credit
Agreements. On behalf of D-4, Mis Clifford Chance, by their
letter of instructions dated 19 June, 1991 expressly instructed B
Mr. Misra to take no steps in the action nor to do anything
else which might be construed as a submission to the jurisdiction of the Indian courts in respect of this matter. This
letter was personally handed over to Mr Misra during the
course of the meetings held in London. In the presence of
two officers of D-4 and their said English Solicitors Mr. Misra C
, read the letter and accepted these instructions. He assured
his clients D-4 that he would act in accordance with these
very clear and explicit instructions. A copy of the letter dated
19th June, 1991 is annexed as Annexure 'A'.
(ii) The Vakalatnama issued by D-4 to Mr. Misra in the injunction
proceedings (Misc. Case No. 143 of 1991) is restricted compared to the normal form. This was done intentionally and
D
WllS discussed and agreed with Mr. Misra at the meetings in
London in June 1991. The usual right of substitution was
deleted because D- 4 wanted to control who was to represent E
it in the injunction proceedings. Mr. Misra indicated what
names he wanted inserted in the power of attorney, and wrotf.
them down. D-4 asked questions about these persons and Mr.
Misra gave informations about them which satisfied D-4 .
........... D-4 intended to authorise the Mr. Misra that it met in
London to defend the injunction., not any other person who
may be called Misra. Subsequently D-4 has found that "Misra"
F
is a common name in Cuttack. D-4 submits that it is not bound
by actions taken in its name by Mr. Ashok Misra, or any other
person who has not been authorized by it in the V akalatnama.
G
(iii) Again, by letters dated 17th July and 1 August, 1991, Mis
Clifford Chance instructed Mr. Misra not to take any steps
whatever in either the Misc. Case Application for an injunction brought by the Plaintiff or in the Main Suit, without
instructions. They repeated their previous express instruc- H
272
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SUPREMECOURTREPO~
(1994] 1 S.C.R.
tions that under no circumstances should steps be ~aken in
the action. Copies of the said letters dated 17th July and 1
August, 1991 is annxed as Annexure 'B'.
(iv) It appears that on or about 3i July, 1991 a purported "application" was filed before ·this Hon'ble Court seeking time to file
1
a written statement on behalf of D-4. It is submitted that this
purported "application was filed contrary to the express prior
instructions of D-4 and in glaring breach of duty. He further
purported to apply on behalf of Respondents 5 - 11. As is
plain from the Annexures and in particular the V akalatnama.
Mr. Misra was only instructed by and on behalf of D-4, and
no one else.
(v) It further appears that a second "application" was filed on 24
August, 1991, seeking additional time to file a Written Statement. Again, neither D-4 nor their English Solicitors were
informed in advance as to the filing of this application, and
the filing of the document took place contrary to the express
instructions of both. Indeed on or about 13 August, 1991 a
representative of M/s Clifford Chance travelled from Delhi
to Cuttack with Mr. Misra to attend the court hearing on 14
August, and also held meetings with Mr. Misra in Delhi and
Cuttack on 13, 14 and 15 August. During those meetings it
was repeatedly stressed to Mr. Misra how important it was
for D-4 to retain its ability to insist on arbitration as agreed
by the parties in writing, and accordingly that no step in the
action be taken on behalf ofD-4. Mr. Misra made no mention
of the impugned application.
(vi) D-4 oruy became aware of the filing of the "application" dated
31 July, 1991 at the en.d of August, 1991, and immediately by
their Solicitor's letter dated 2 September, 1991 called upon
Mr. Misra to explain.
It is noteworthy, and very surprising that no mention was
made of this "application" during the series of meetings held
in India in mid-August referred to above, or in correspondence or later telephone conversation.
-
S.HANDELSBANKEN \'. INDIANCHARGECHROMELTD.[DAYAL,J.]
273
(vii) By his letter dated 8 September 1991, Mr. Misra informed A
D-4's English Solicitors that the filing of an application for
adjournment for the purposes of filing a Written Statement
does not amount to a step in the action. A copy of that letter
is annexed as Annexure 'C'. No mention was made in this
letter of the second "application" dated 24 August, 1991.
(viii) The first time D-4 or its English Solicitors became aware of
the second 'application" of 24 August, 1991 was when it was
mentioned in Plaintiffs Objection filed herein. It came as a
complete surprise.
B
c
(ix) As a result of his Actions D-4 discharged Mr. Misra as their
Advocate by letter dated 16 October 1991. No reply was ever
received to this letter. However, Mr. Misra sent D-4 an
account for his services under cover of a letter dated 31
December 1991, (Annexure Da). D-4 has refused to pay this
account in all the circumstances, (Annexure Db.)
D
(b) The V akalatnama granted to D-4' s advocate was strictly limited
by deliberate choice. It is annexed hereto as An"'lexure E.
The full circumstances surrounding the grant of the Vakalatnama, E
were set out in sub-paragraph (a) above. It will be observed that
the V akalatnama is in favour of only the following persons "Sri A.
Misra, H.P. Rath, P. Panda, G. Rath, B. Das Advocates". There is
no right to delegate. The persons who signed the two "application"
,dated 3J.July and 24August 1991 respectively was not authorized by
D-4 in its Vakalatnama to act on its behalf.
F
Those documents are accordingly unauthorised, a nullity and void.
It is submitted that neither was an "application" and accordingly
neither constitutes a step in the action.
(c) It will be observed, further, that the Vakalatnama is specifically G
given only in respect of Misc. Case No. 143 of 1991, and no other
court proceedings. This was also deliberate, because D-4 was at
all times anxious to ensure that it preserved its right to have any
disputes settled by arbitration as agreed, as can be :;een from the
correspondence annexed hereto and referred to above, and the H
274
A
B
c
D
SUPREME COURT REPORTS
[1994] 1 S.C.R.
further letters dated 7 August, 19 August and 4 October, 1991
annxed hereto and marked Annexure 'F'. The two impugned
"applications" are brought in Title Suit 208 of 1991. D-4 did not
authorize Mr. Misra to act in Title Suit 208 of 1991. No Vakalatnama authorizing any person to act on behalf of D-4 in Title Suit
208 of 1991 was filed until M/s Swarup John & Co. filed their
Vakalatnama on ........... 1991. Accordingly, it is submitted that the
impugned applications are each a nullity, void and of no effect,
and therefore could not be a step in the action.
(d) It will be observed, further, that the Vakalatnama as filed is
granted by D-4 only. D-5 - 11 are not parties to that Vakalatnama.
D-5 - 11 had not been properly served in any of these proceedings
in. July and August 1991 when the impugned applications were
filed. They had not issued any Vakalatnama not were any
Vakalatnama's either given to Mr. Misra or filed on behalf of D-5
- .11, and for this reason, also, the impugned applications are void
and of no effect.
( e) In all these circumstances it is further or alternatively submitted
that the Hon'ble Court erred on both occasions in granting time
on the basis of each of the two impugned applications. It is
E
submitted that the Hon'ble Court had no power to act on application brought by persons without authority and/or in the wrong
proceedings and/or on behalf of the wrong parties and/or in
response to void applications, and accordingly the Hon'ble Court
made a serious mistake;''
F
Alongwith the affidavit all the documents mentioned in it were also
filed.
19. The trial court, however, dismissed the application for stay filed
by defendant No .. 4 and defendants 5 to 11 by its order dated 23rd June,
G 1992.
20. At this stage it would be useful to state the facts in relation to an
application filed under Section 3 of the Foreign Awards Act on behalf of
defendants 1 to 3 (suppliers).
H
21. It will be noticed that so far as the suppliers are concerned, they
>...
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-1
S.HANDEL5BANKEN v. INDIANCHARGECHROMELTD.[DAYAL,J.)
275
never pat _in any appearance to oppose the application for ad interim A
injunction that the plaintiff had filed against defendants 4 to 12. They,
however, filed the application purporting to be under Section 3 of the
Foreign Awards Act for stay of the suit in view of three separate contracts
entered into between the borrower and the suppliers containing arbitration
clauses.
B
22. The application filed on behalf of defendants 1 to 3 (suppliers)
was also dismissed by the trial court on the same date.
23. The trial court relied on the decision of this Court in Renusagar
Power Co. Ltd. v. General Electric Company and Another, A.I.R. (1985) S.C. C
1156, and noticed the conditions required for stay of Suit under Section 3
of the ·Foreign Awards Act as held by this Court in the said case, which
read as under:
(i) There must be an agreement to which Article II of the Convention set forth in the Schedule applies;
D
(ii~ a party to that agreement must commence legal proceedings
against another party thereto;
(iii) the legal proceedings must be "in respect of any matter agreed
to be referred to arbitration" in such agreement;
E
(iv) the application for stay must be made befort>. filing the written
statement or taking any other step in the legal proceedings;
(v) ·the Court has to be satisfied that the agreement is valid,
operative and capable of being performed; this relates to the F
satisfaction about the 'existence and validity' of the arbitration
agreement; and
(vi) the Court has to be satisfied that there are disputes between
the parties with regard to the matters agreed to be referred; G
this relates to effect (scope) of the arbitration agreement
touching the issue of arbitrability of the claims."
24. After noticing the analysis of Section 3 of the Foreign Awards
Act in Renusagar's case it took the view that all the defendants have failed
to satisfy condition numbers (i), (iii), (v) and (vi) and defendant No. 4 have H
276
SUPREME COURT REPORTS
[1994] 1 S.C.l?..
A
not satisfied/fulfilled condition ·No. (iv) also, by its impugned judgment
dated 23rd June, 1992.
B
25. Three sets of revision petitions were filed before the High Court
- one on behalf of defendants 1 to 3 (suppliers) second on behalf of
defendant No. 4 (one of the lenders) and third on behalf of defendants 5
to.11 (other lenders). The High Court by its impugned order dated 17th
June, 1993 dismissed all the three revision petitions. It took the view that
condition Nos. (i); (ii); (iii) and (vi) as laid down by this Court in the
aforesaid case of Renusagar were satisfied in respect of all the defendants.
It, however, took the view that so far as condition No. (v) is concerned it
C is not satisfied in respect of all the defendants. It held that the agreements
for arbitration by different arbitrators one between defendants 1 to 3 and
the borrower (plaintiff) and the other between the borrower .(plaintiff) and
lenders by other set of arbitrators make the agreements inoperative and
are not capable of being performed. The High Court, however, again
D affirmed the finding of the trial court that defendant No. 4 has not satisfied
condition No. (iv) in as must as before filing the application for stay,
defendant No. 4 had taken other steps in the legal proceedings.
26. There was no dispute before us so far as the lenders' applications
E were concerned that they were governed by Section 3 of the Foreign
Awards Act for the purpose of stay of the suit as the arbitration was
contemplated under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce, which was to take place in Stockholm and the parties rights were to be governed by Swedish Law . .ThereF
fore, we are dealing first with the question of compliance of Section 3 of
the Foreign Awards Act on behalf of defendant No. 4 and defendants 5 to
11. Section 3 of the Foreign Awards Act reads as under: -
G
H
'
"3. Stay of proceedings in respect of matters to be referred to
arbitration - Notwithstanding anything contained in the Arbitration
Act, 1940, or in the Code of Civil Procedure, 1908, if any party to
an agreement to which Article II of the Convention set forth in
the Schedule applies, or any person claiming through or under him
commences any legal proceedings in any court against any other
party to the agreement or any person claiming through or under
him in respect of any matter agreed to be referred to arbitration
·>--
••
S. HANDELSBANKEN v. INDIAN CHARGE CHROME LTD. [DAYAL, J.)
277
in such agreement, any party to such legal proceedings may, at any A
time after appearance and before filing a written statement or
taking any other step in the proceedings, apply to the Court to stay
the proceedings and the Court, unless satisfied, that the agreement
is null and void, inoperative or incapable of being performed or
that there is not, in fact, any dispute between the parties with
regard to the matter agreed to be referred, shall make an order
staying the proceedings."
27. Condition No. (iv) as culled out from the decision in the case of
Renusagar (supra) is really not complete. The condition really is that where
one of the parties to the arbitration agreement, inspite of it, commences
B
c
any legal proceedings in any court against the other party, any party to such
legal proceedings may, at any time after appearance and before filing a
written statement or taking any other step in the proceedings, apply to the
Court to stay the proceedings. One of the· conditions for applicability of
condition No. (iv) is that there must be appearance on its behalf before D
court in which the proceedings are pending and after filing appearance,
but before filing the written statement or taking other steps in those
proceedings, the party concerned must apply for stay. The condition of
putting in appearance is equally important. It is clear from the discussions
of the facts by the trial court as well as in view of the affidavit filed on
behalf of defendant No. 4 of Ms. Barbro Margareta Lundberg and the
express instructions conveyed to its counsel with the power of attorney
dated 28th June, 1991 which was specifically limited to the Misc. Case No.
143 of 1991, it limited the act of appearance merely to oppose the application for ad interim injunction operating against defendant No. 4. It is again
clear that the party concerned must put in appearance in the suit before
applying for stay under Section 3 of the Foreign Awards Act. At the stage
applications purporting to be on behalf of defendants 4 to 11 were filed on
31st July, 1991 and 24th August, 1991, seeking time to file written statement, no appearance had been filed on behalf of defendant Nos. 5 to 11
E
F
at all and no appearance had been filed in the suit on behalf of defendant G
No. 4. It will again be observed that the Vakalatnama dated 24th June, 1991
was specifically given in respect of Misc. Case No. 143of1991 and no other
court proceedings. No power of attorney was filed on behalf of defendant
No. 4 in the suit at all with either of the two applications seeking time for
filing written sratement. The applications for seeking time were filed con- H
I
278
SUPREME COURT REPORTS
(1994) 1 S.C.R.
A
trary t-0 the express instructions given to the Counsel appearing on behalf
of defendant No. 4 vide communication dated 19th June, 1991 as is clear
from paragraphs 1 to 3 thereof which are as under: -
B
c
D
"1. T'...te instructions at present are to contest only the jurisdiction
of the court in Cuttack over Defendants 4 to 11 in the pending
proceedings.
£.Accordingly, you are under no circumstances to take any step
in the action (in the technical sense) or to do anything else which
might be construed as a submission to the jurisdiction of any Indian
court in respect of this matter.
3. Clients and the Syndicate of banks they represent consider this
matter to be so important that you are not to diven from these
instructions without express written instructions either from
Svenska Handelsbanken (in the person of Mrs. Lundberg or Mrs.
Malin) or from my firm."
\ "
,·
28; The relevant part of second communication dated 17th July, 1991
-+--
E
F
G
H
which was sent by Fax reads as follows: -
"May I please remind you that your present instructions- are only
to bring the pending Application relating to jurisdiction in the
Court of the Subordinate Judge in Cuttack, and not to take any
other steps either in that Application or in the main action. Shonld
we lost and you wish to advise an Appeal, please do so and seek
written jnstructions from us."
29. The express instructions were a~ain given to the counsel on 1st
August, 1991 by Fax, relevant part whereof reads as under: -
"As I understand the position we are awaiting a decision of the
lower court on Monday 5 August. Whatever that decigion may be
your express instructions remaiμ. to take no qther step whatever in
either the application or the action without the written instrui;tions
of this firm or the clients. Under no circumstances should any step
be taken in the action which would submit either Svenska or any
of the other members of the Banking Consortium to the jurisdiction
of the Indian Courts."
I
A.,
S,HANDELSBANKEN v. INDIAN CHARGE CHROME LTD. [DAYAL;J.)
279
30. We may als<> at this stage qnote the actual power of attoraey A
executed 'on behalf of defendant No. 4 in Misc. Case No. 143 of 1991 which
reads:
"Svenska Handelsbanken
FORM OF V AKALATNAMA
B
IN THE COURT OF THE SUBORDINATE JUDGE, CUTIACK
Miscellaneous Case No.