TMI Blog2004 (10) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... availability of facts which are prima facie established by overwhelming evidence and material available on record justifying the grant thereof and occasioned failure of justice and thereby the appellant sustained irreparable injury, but at the same time the appellate Court cannot reassess the material and reach a conclusion different from one reached by the CLB solely on the ground that if it had considered in a particular manner, it would have come to contrary conclusion. While reversing the order of the CLB, this Court must come into close quarters with the reasonings assigned by the CLB and then this Court has to assign its own reasonings in arriving at a different conclusion. In the present case, it cannot be said that there is a multiplicity of proceedings both before the CLB and ICC Arbitral Tribunal as the scope of the proceedings before them are different and each proceeding was taken with the respective forum which is having exclusive jurisdiction on the subject raised before it. Moreover, the appellant-Company has not come forward with necessary pleadings to grant anti-suit injunction by the CLB, which are required to establish the necessary facts to grant such order. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 2 to take derivative action to safeguard their interest as minority shareholders. Even in the request for arbitration filed before the ICC Arbitral Tribunal, the copy of which is produced before us, it is stated that such a proceeding has been taken to protect the interest of the Company by the minority shareholders. Even in the petition filed in C.A. No. 62/2004, in para 8, it is admitted that such action by the appellant-company was by way of derivative action. Learned Senior Counsel appearing for the appellant tried to impress upon this Court that a party who was not able to get permission from the CLB cannot be permitted to proceed with the same proceedings ignoring the orders passed by the CLB. If such a party, in this case, respondents 1 and 2, is given right to invoke such arbitration proceedings on different capacity and exercising different right, it cannot be said that the proceedings before the CLB seeking relief differently, cannot be put against respondents 1 and 2 as if they have ignored the orders of the CLB and proceeded with the proceedings before the ICC Arbitral Tribunal invoking arbitration clause under the PPA. The respondents 1 and 2 have not sought for any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strain such a party to institute proceedings in foreign jurisdiction; (3) Such a derivative action cannot be taken when the decision of the Board of Directors was not to initiate proceedings against the TNEB; (4) Since the proceeding initiated in the foreign jurisdiction are wholly illegal and cause serious prejudice to the interest of the Company, the injunction should be granted. The above said basis on which the application is filed is only relying on the facts which has been done subsequent to the filing of the Company Petition. The cause of action to file the above C.A. No. 62/2004 arises after the filing of C.P. No. 8/2004 and orders passed in the Company Petition and Company Application. Even on this ground, the appellant-company cannot sustain their petition. The appeal was dismissed, and the court affirmed that respondents 1 and 2, as minority shareholders, have the right to initiate arbitration proceedings by way of derivative action. The principle of res judicata was not applicable, and the anti-suit injunction sought by the appellant-company was not warranted. - K. GOVINDARAJAN AND N. KANNADASAN, JJ. Udaya Holla, Aravind Dattar, Chitra Narayanan and Rishi Kumar Dugar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TNEB, regarding letter of credit and escrow accounts but no response had been received. In spite of that, the management of the appellant-Company did not take any legal action against the TNEB. Since the Company s right to recover the money would become time-barred at the end of 3 years from 26th March, 2001, an issue was raised by the nominee director of the 2nd respondent at the 50th Board meeting held on 30th December, 2003. 5. Stating that there are some acts of omission and commission and mismanagement of the Company, Company Petition in C.P. No. 8/2004 was filed claiming several reliefs as sought for in the petition. Suffice to mention the following relief alone for the purpose of the present case : " a(ii) initiating and continuing proceedings qua TNEB and Government of Tamil Nadu for and on behalf of the Company with respect to the Company s right under the PPA and GOTN guarantee." The interim relief also is sought for which is as follows : " a(i) Invoke the alternate dispute resolution remedy clause, PPA dated 3-1-1997 for and on behalf of the Company and forthwith initiate the proceedings as contemplated therein". Such a prayer is sought for to enforce clauses 16.1 and 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterim relief in terms of prayers ( a ) to ( c ) above, and confirm the same on return of notice; e. Award costs of this Application to the petitioners; and f. Pass such further orders as this Hon ble Tribunal may deem fit." The CLB in the order dated 25th March, 2004, refused to grant interim relief as sought for. Such a refusal was on the basis that the CLB cannot interfere with the business, judgment and decision of the Directors, unless there is evidence that they acted in bad faith or no sensible Board of Directors would reasonably have come to the decision which the Company Directors reached. The decision of the majority of Directors not to bring proceedings to enforce obligation of TNEB in favour of the Company is not attributed to the Directors inaction on account of mala fide reasons and it is not for the CLB to interpret the validity period of the PPA with reference to law of limitation, as TNEB is not bound for any such interpretation. It is represented that aggrieved by that order, an appeal was filed, but it has to see the light of the day. 8. On the same day, namely, 25-3-2004, respondents 1 and 2 initiated proceedings invoking arbitration clause in the PPA by filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant-Company with the TNEB. Learned Senior Counsel further submitted that if the TNEB discontinued the purchase of power from the appellant-Company, it would neither be possible to get third party purchaser for 300 Mega Watts of power generated by the Company. According to the learned Senior Counsel, such a decision by the Board taken not to proceed against the TNEB, was a commercial decision considering the divergent opinions available before them. Though there is a delay in settlement of the outstanding by the TNEB, according to the learned Senior Counsel, there is no allegation of misappropriation of the Company s fund. It is his further submission that the Courts cannot interfere with the business, judgment and decisions of the Directors unless it is established that the Board of Directors acted in bad faith or such a decision was not taken reasonably. It cannot be said that the Directors of the Company have committed breach of their duties in taking such decision. Respondents 1 and 2 have also not questioned the bona fides of the Directors in deciding so. Referring to the 50th and 51st Board meeting, learned Senior Counsel further submitted that the Board of Directors ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in the main Company Petition. If ultimately, the Tribunal comes to the conclusion that no such proceeding need be taken against the TNEB, then the proceedings taken before the ICC Arbitral Tribunal cannot have any legal sanction. Learned Senior Counsel further submitted that the Tribunal is not correct in holding that there is no prima facie case or the balance of convenience in favour of the appellant and they had not established any irreversible prejudice that may be suffered by the applicant in the event of not granting any such injunction. With respect to the jurisdiction of the CLB, learned Senior Counsel referred to Regulation 44 of the CLB Regulation 1991 and powers vested under section 403 of the Companies Act to grant an order of anti-suit injunction. He further submitted that anti-suit injunction is only against the party and it cannot be construed as injunction granted against the ICC Arbitral Tribunal. Learned Senior Counsel has cited a number of decisions which would be dealt with hereunder in support of his submission regarding the scope of anti-suit injunction and the powers of the CLB to grant such relief. 11. The learned Senior Counsel further submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the respondents proceeded with the arbitration proceedings on the same day as if the respondents waited for that order. According to the learned Senior Counsel, if such action is not taken immediately, the proceedings would become time- barred. Learned Senior Counsel also submitted that in view of the exception to the principles laid down in Foss s case (supra) , the minority shareholders are entitled to sue the arbitration proceedings in the name of the Company as the majority shareholders are not willing to take such proceedings. It is also submitted that such proceedings were taken only in the interest of the Company to recover the arrears of Rs. 468.88 crores especially when the TNEB has not complied with the payment security mechanism contemplated under the PPA. He further submitted that in spite of the order passed by the CLB, respondents 1 and 2 can go for arbitration, as such proceedings have been taken only in the capacity as minority shareholders and also on the basis of the exception to the principles laid down in Foss s case ( supra ). He also pointed out that parties in the arbitration proceedings are different from the parties before the CLB and the CLB cannot adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower can be used only with respect to unoccupied field. But, in the present case, the right to proceed with the arbitration proceedings is on the basis of Clause 16.2 of the PPA and so it is occupied by contract and thereby the CLB cannot exercise its discretion. Even if direction as sought for by respondents 1 and 2 to take arbitration proceedings by the CLB was given, such proceedings would be only regular action in appointing arbitrator under the agreement by the appellant-Company and it cannot be construed as a derivative action by minority shareholders. Since the present action taken by respondents 1 and 2 is nothing but derivative action on the basis of the exception to the principles of the case in Foss ( supra ), for which the permission of the CLB need not be obtained. He further submitted that in the Company Petition filed by the respondents 1 and 2, the appellant cannot sustain their Application to get orders against the respondents 1 and 2. If the prayer is granted by the CLB as sought for by the appellant, it is of permanent nature and thereby the remedy for the minority shareholders are prevented in perpetuity to pursue their remedy to safeguard their interest. He als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) Whether the CLB is having any inherent powers to grant anti-suit injunction and if it is so whether such power was not properly exercised in the present case on the basis of established principles? (2) Whether the respondents 1 and 2 are prohibited under Clause 14.3 of the shareholders agreement dated 24-11-1998 or barred by the principles of res judicata to invoke the arbitration proceedings before the ICC Arbitral Tribunal under clause 16.2 of the PPA? (3) Whether the petition in C.A. No. 62/2004 filed by the appellant is sustainable in law? (4) Whether the order of the CLB rejecting the request for anti-suit injunction is sustainable in law? 16. Before dealing with the above questions, we are inclined to extract the findings given by the CLB Additional Principal Bench, Chennai, to reject C.A. No. 62/2004 in the order impugned dated 5-7-2004, for anti-suit injunction as sought for by the appellant on the following grounds : ( i )The orders dated 9-3-2004 and 25-4-2004 passed by the CLB in interim application and in Company Application No. 38/2004 are not a bar to initiate a derivative action by the minority shareholders in the name of the Company before the ICC Arbitral Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the principles of the Companies Act; ( ix )While the reliefs under sections 397 and 398 of the Act as sought for in the Company Petition are statutory reliefs, the reliefs which may be granted by the ICC Arbitral Tribunal are pursuant to the contractual obligations between the parties; (x)The nature of the proceedings and the reliefs claimed at the CLB are separate and distinct from those proceedings made before the ICC Arbitral Tribunal; (xi)The appellant-Company herein have not established that there is any prima facie case or the balance of convenience in favour of the applicant before the CLB nor established any irreparable prejudice that may be suffered by the appellant-Company in the event of non-grant of anti-suit injunction. 17. Again, before dealing with the issues raised in the present case, the scope, the power and jurisdiction of this Court to deal with the appeal has to be gone into. 18. The above appeal is preferred under section 10F of the Companies Act, 1956. Under the said provision, any person aggrieved by the decision or order of the CLB is given liberty to prefer an appeal to the High Court on any question of law arising out of that order. So, now we have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established by overwhelming evidence and material available on record justifying the grant thereof, occasion a failure of justice and such injury to the plaintiff as would not be capable of being undone at a later stage. The discretion exercised by the trial Court and the High Court against the plaintiff is neither reasonable nor judicious. The grant of interlocutory injunction to the plaintiff could not have been refused, therefore, it becomes obligatory on the part of this Court to interfere." (p. 281) 20. In the abovesaid decision, the earlier decision of the Apex Court in Wander Ltd. v. Antox India (P.) Ltd. 1990 (Supp.) SCC 727, has been referred to. While dealing with the scope and nature of appeals and the powers of the Appellate Court in the said decision, it is held as follows : "13. On a consideration of the matter, we are afraid, the appellate Bench fell into error on two important propositions. The first is a misdirection in regard to the very scope and nature of the appeals before it and the limitations on the powers of the appellate Court to substitute its own discretion in an appeal preferred against a discretionary order. The second pertains to the infirmities in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsing the decision of the lower Court. In that aspect, we are inclined to extract the relevant portion of the said decision, which is as follows : "13. In Deputy Commr. Hardoi, In-Charge Court of Wards, Bharawan Estate v. Rama Krishna Narain, AIR 1953 SC 521, also it was held that a question of law of importance to the parties was a substantial question of law entitling the appellant to certificate under (the then) section 110 of the Code. 14. A point of law which admits of no two opinions may be a proposition of law but cannot be a substantial question of law. To be substantial a question of law must be debatable, not previously settled by law of the land or a binding precedent, and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law involving in the case there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by Court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o principles. Firstly, the findings of fact based on conflicting evidence arrived at by the trial Court must weigh with the appellate Court, more so when the findings are based on oral evidence recorded by the same presiding Judge who authors the judgment. This certainly does not mean that when an appeal lies on facts, the appellate Court is not competent to reverse a finding of fact arrived at by the trial Judge. As a matter of law if the appraisal of the evidence by the trial Court suffers from a material irregularity or is based on inadmissible evidence or on conjectures and surmises, the appellate Court is entitled to interfere with the finding of fact ( See Madhusudan Das v. Smt. Narayani Bai AIR 1983 SC 114). The rule is - and it is nothing more than a rule of practice - that when there is conflict of oral evidence of the parties on any matter in issue and the decision hinges upon the credibility of witnesses, then unless there is some special feature about the evidence of a particular witness which has escaped the trial Judge s notice or there is a sufficient balance of improbability to displace his opinion as to where the credibility lies, the appellate Court should not int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for respondents 1 and 2, in his own style, while explaining the power of the Appellate Court to interfere with the discretionary order of the CLB, relied on the "Carpet Theory", as he mentioned. According to him, if the lower forums have walked through carpet without stepping down from the same, the appellate Court cannot interfere with the order of the said forum. It is not the matter, such a walking is straight or zig-zag. It is only for the appellate Court to see whether the said forum had walked on the carpet or stepped down from the carpet. He refers the carpet to its power or jurisdiction of the forum for disposing of the application for injunction. We have to find out hereinafter whether the CLB had walked through the carpet or stepped out. 24. Now on the basis of the above settled principles of law regarding the power of this Court to deal with the appeal, we are inclined to deal with the case on the basis of the pleadings and argument advanced by the respective learned Senior Counsel. 25. Before dealing with Point No. 1, it is beneficial to deal with the scope of "anti-suit injunction" in general which are culled out from various decisions. The same is not defined or deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the process of the Bench." The CLB is vested with inherent power to exercise even under section 402( g ) of the Companies Act, which reads as follows : "402. Powers of. Without prejudice to the generality of the powers of the Tribunal under section 397 or 398, any order under either section may provide for ( a )****** ( b )****** ( c )to ( f )****** ( g )any other matter for which in the opinion of the (Tribunal) it is just and equitable that provision should be made." 27. Regulation No. 44 is in pari materia to section 151 of the Code of Civil Procedure. Section 151 of the Code reads as follows : "151. Saving of inherent powers of Court . Nothing in this Code shall be deemed to limit or otherwise affect the inherent power of the Court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court." From the abovesaid Regulation No. 44 and the section 402(g) of the Companies Act, it is clear that the inherent power can be exercised by the CLB to meet the ends of justice and to prevent abuse of the process of the CLB. 28. Courts have held that such inherent power can be exercised in the absence of any express prohibition. In the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that grant of injunction is a discretionary one. While holding so, the Apex Court has given guidelines as to the circumstances under which such discretionary relief of injunction should be granted, which is as follows : "4. (1) there is a serious disputed question to be tried in the suit and that an act, on the facts before the Court, there is probability of his being entitled to the relief asked for by the plaintiff/defendant; (2) the Court s interference is necessary to protect the party from the species of injury. In other words, irreparable injury or damage would ensue before the legal right would be established in trial; and (3) that the comparative hardship or mischief or inconvenience which is likely to occur from withholding the injunction will be greater than that would be likely to arise from granting it." It is also held that the burden is on the plaintiff to prove that there is " prima facie " case in his favour and also has to satisfy that not granting such an order of injunction by the Court would result in "irreparable injury". 32. The learned Senior Counsel appearing for the appellant relied on the decision of the Calcutta High Court (Division Bench) in Debi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the assigned field of jurisdiction is efficaciously and meaningfully exercised. The powers of the Tribunal are no doubt limited. Its area of jurisdiction is clearly defined, but within the bounds of its jurisdiction, it has all the powers expressly and impliedly granted. The implied grant is, of course, limited by the express grant and, therefore, it can only be such powers as are truly incidental and ancillary for doing all such acts or employing all such means as are reasonably necessary to make the grant effective. As stated in Maxwell on Interpretation of Statutes (11th Edn.) "where an Act confers a jurisdiction, it impliedly also grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution." (p. 457) 35. In the decision of the Apex Court in J.K. Synthetics Ltd. v. C.C.E. 1996 (6) SCC 92 also, similar view is taken, which is extracted hereunder : "3. Our attention was invited to the judgment of this Court in ITO v. M.K. Mohammed Kunhi 1969 (71) ITR 815 : AIR 1969 SC 430, where the question related to the powers of the Income Tax Appellate Tribunal under section 254 of the Income Tax Act, 1961. Reliance was placed upon Sut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Senior Counsel appearing for the appellant relied on the decision in V.O. Tractoro Export v. Tarapore Co. 1969 (3) SCC 562. In the said case, the appellant before the Supreme Court initiated arbitration proceedings before Foreign Trade Arbitration Commission of the U.S.S.R. Chamber of Commerce, Moscow. Before initiation of such proceeding, the respondents before the Apex Court filed a suit on the Original Side of the Madras High Court. After initiating the arbitration proceedings, the appellant entered appearance and contested the suit and filed an application for stay of the suit. Respondents also filed another application for injunction restraining the appellant from taking any part in the arbitration proceedings in Moscow. Learned Single Judge dismissed the application for stay of the suit and granted injunction restraining the appellant from taking part in the proceedings in Moscow. The Division Bench also confirmed the decision of the learned Single Judge. On appeal, the Apex Court found that no case for injunction has been made out and set aside the orders of the High Court and allowed the appeal filed before them. While dealing with the question whether the High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) SCR 569, it was assumed that section 35 applied to protocol arbitration and the principle embodied in that section cannot be completely ignored while considering the question of injunction. According to that section no reference nor award can be rendered invalid by reason only of the commencement of legal proceedings upon the subject of the reference, but when legal proceedings upon the whole of the subject-matter of the reference have been commenced between all the parties to the reference and a notice thereof has been given to the arbitrators or umpire, all further proceedings in a pending reference shall, unless a stay of proceedings is granted under section 34, be invalid. 27. If the venue of the arbitration proceedings had been in India and if the provisions of the Arbitration Act of 1940, had been applicable, the suit and the arbitration proceedings could not have been allowed to go on simultaneously and either the suit would have been stayed under section 34 or if it was not stayed, and the arbitration were notified about the pendency of the suit, they would have had to stay the arbitration proceedings because under section 35 such proceedings would become invalid if there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the decision in Modi Entertainment Network s case ( supra ), the Apex Court had dealt with similar issue regarding the power of issuing anti-suit injunction to restrict the proceedings in foreign Court. In para 24 of the decision, the Apex Court has laid down the principles in exercising the discretion to grant injunction which read as follows : "24. From the above discussion the following principles emerge : (1) In exercising discretion to grant an anti-suit injunction the Court must be satisfied of the following aspects : ( a )the defendant, against whom, injunction is sought, is amenable to the personal jurisdiction of the Court; ( b )if the injunction is declined, the ends of justice will be defeated and injustice will be perpetuated; and ( c )the principle of comity - respect for the Court in which the commencement or continuance of action/proceeding is sought to be restrained - must be borne in mind. (2) In a case where more forums than one are available, the Court in exercise of its discretion to grant anti-suit injunction will examine as to which is the appropriate forum ( forum conveniens ) having regard to the convenience of the parties and may grant anti-suit injunc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Court be said to be forum non-conveniens. (7) The burden of establishing that the forum of choice is a forum non-conveniens or the proceedings therein are oppression or vexatious would be on the party so contending to aver and prove the same." (p. 360) 41. The learned Senior Counsel appearing for the appellant-Company submitted that the Apex Court in the above case has come to the conclusion that there is no valid reason to grant anti-suit injunction and such conclusion is on the basis of the facts of that case, and also no valid reason was given or merits were not made out to grant such injunction. But the principles laid down in Modi Entertainment Network s case ( supra ), have to be relied on, regarding the issuance of anti-suit injunction and the same have to be applied to test the correctness of exercise of discretion by the CLB. 42. Learned Senior Counsel appearing for the appellant relied on the decision in O.N.G.C. v. Western Co. of North America 1987 (1) SCC 496, in which the Apex Court, relying on the decision in V.O. Tractoro Export s case ( supra ) and other decisions found, on the basis of the facts of that case, that the said case was one of those rare cases where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in a foreign Court. We have the utmost respect for the American Court. The question however is whether on the facts and circumstances of this case it would not be unjust and unreasonable not to restrain the Western Company from proceeding further with the action in the American Court in the facts and circumstances outlined earlier. We would be extremely slow to grant such a restraint order but in the facts and circumstances of this matter we are convinced that this is one of those rare cases where we would be failing in our duty if we hesitate in granting the restraint order, for, to oblige the ONGC to face the aforesaid proceedings in the American Court would be oppressive in the facts and circumstances discussed earlier. But before we pass an appropriate order in this behalf, we must deal with the plea that the High Court does not have the jurisdiction to grant such a restraint order even if the proceeding in the foreign Court is considered to be oppressive. Counsel for the respondent has placed reliance on Cotton Corporation of India v. United Industrial Bank 1983 (3) SCR 962 : 1983 (4) SCC 625 : 1984 (55) Comp. Cas. 423, in support of this plea. In Cotton Corporation s cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued on behalf of the respondent that the action in the US Court could not be considered as being oppressive to the ONGC. We have already dealt with this aspect and reached a conclusion adverse to Western Company. There is no merit in the submission that the High Court of Bombay has no jurisdiction in this behalf." In the abovesaid decision, the Apex Court has come to the conclusion that the order of injunction should be granted restraining the respondent from proceeding with in US Court, on the ground that the Indian Court had exclusive jurisdiction to grant such injunction and action taken by the respondent in the foreign Court would be oppressive in the facts and circumstances of that case. The American Court had no jurisdiction in the facts and circumstances of the case. Moreover, the action by the respondent before American Court is in violation of the arbitration clause. Even in Modi Entertainment Network s case ( supra ), the Apex Court had referred to ONGC s case ( supra ) and accepted the principles laid down in ONGC s case ( supra ) and discussed the reason for the conclusion of the Apex Court in favour of granting injunction. So, the principles laid down even in ONGC s ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents is nothing but oppressive and the same issue is pending before the CLB. But the prayer sought for before the CLB is only to direct the Administrator to invoke clause 16.2 of PPA which means the Company has to initiate arbitration proceedings. But the proceeding taken by respondents 1 and 2 before the ICC Arbitral Tribunal is as a derivative action as minority shareholders. So, even if any order is passed, as suggested by the learned Senior Counsel appearing for the appellant, in the Company Petition, it does not affect the present proceedings taken by the respondents. 45. In the decision in Laker Airways Ltd. v. Sabena, Belgian World Airlines 1984 U.S. App. LEXIS 24811, the United States Court of Appeals for the District of Columbia Circuit, while dealing with the limits of Federal Court s power to conserve its adjudicatory authority over a case filed with the Court, instead of actively raising all defensive claims in the Federal Court, the named defendants initiated suits in foreign Tribunals for the sole purpose of terminating the federal Court s adjudication of the litigation. It is also found that the issue raised in two different Courts represents a head-on collision be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deem international comity an important integer in the decisional calculus - and the liberal approach assigns too low a priority to that interest. In the bargain, it undermines the age-old presumption in favour of concurrent parallel proceedings - a value judgment that leaves us uneasy - and presumes that public policy always favours allowing a suit pending in an American Court to go forward without any substantial impediment. To cinch matters, this approach gives far too easy passage to international anti-suit injunctions. We understand that the judicial process is a cornerstone of the American way of life - but in an area that raises significant separation of powers concerns and implicates international relations. We believe that the law calls for a more cautious and measured approach. The conservative approach has more to commend it. First, it recognizes the rebuttable presumption against issuing international anti-suit injunctions (and, thus, honours the presumption favouring the maintenance of parallel proceedings). Second, it is more respectful of principles of international comity. Third, it compels an inquiring Court to balance competing policy considerations. Last - but f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but only in cases where the defendant s claim to relief arises out of the plaintiff s cause of action, or is incidental to it. Buckley, J., also referred to the decision of Davey, L.J., in the same case wherein it is stated thus: In my opinion, it must be relating to or arising out of the relief sought in the action which is before the Court, and that any other injunction cannot properly be granted in the action. The principles stated in the above decision have been followed by this Court and it is only in cases where the defendants claim to relief arises out of the plaintiff s cause of action or is incidental to it that he can ask for a temporary injunction against the plaintiff. 4. In the instant case, the cause of action for the plaintiff s suit, as stated earlier arose in the year 1970, whereas the cause of action for the defendants arose in the year 1973. The two causes of action are different. Therefore, the Courts below were wholly in error in granting temporary injunction prayed for by defendant 1." (p. 137) 47. Learned Senior Counsel appearing for the appellant also relied on the decision in Ramaiah v. Godappa 1989 (1) Kar. L.J. 210, to substantiate the same contention a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the specific contract between the appellant-Company and TNEB and no such proceeding can be taken in India as it has been specifically excluded. To appreciate the above reasons, it is relevant to extract clause 16.2 of the PPA which reads as follows : "16.2 Arbitration of Disputes : In the event the Parties are unable to resolve any dispute pursuant to section 16.1, then: ( a )Except as otherwise provided in this Agreement, any dispute, controversy, or claim arising out of or relating to this Agreement, or breach, termination or validity thereof, shall be finally settled by arbitration in accordance with this section 16.2. ( b )Notwithstanding section 17.8 the arbitration shall be conducted in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (the "ICC") in effect on the date of this Agreement (the "Rules"). ( c )There shall be three arbitrators of whom each Party shall select one. The two arbitrators thus appointed shall select the third arbitrator to act as chairman of the Tribunal within thirty (30) days of selection of the second arbitrator. If the two Party-appointed arbitrators fails to agree on a third arbitrator, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the fact that the ICC Arbitral Tribunal is having natural and exclusive jurisdiction and a forum of choice of the parties, no anti-suit injunction can be granted in respect of proceedings taken before the natural and exclusive jurisdiction of the forum of choice of parties by the forum, namely, the CLB, which is not having jurisdiction to decide the issue raised before the ICC Arbitral Tribunal especially when the CLB is not even having concurrent jurisdiction to decide that issue in question. If injunction as sought for is granted, it amounts to aiding breach of contract, namely, clause 16.2 of the PPA, as the proceedings have been taken before the ICC Arbitral Tribunal which is having natural and exclusive jurisdiction for which the parties have specifically consented and the CLB which is not having natural jurisdiction with respect to the issue raised before the ICC Arbitral Tribunal. When the CLB is not having jurisdiction to decide the issue raised before the ICC Arbitral Tribunal, the question of protecting the CLB s own proceeding and process does not arise. On the basis of the facts set out earlier, it is clear that there is no duplication of parties and issues b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the conduct of their own business. Except as expressly provided for herein, this Agreement shall not constitute any Party as the legal representative or agent of any other party for any purpose whatsoever, and no Party shall have the right or authority to assume, create, or incur any liability or obligation of any kind, express or implied, in the name of or on behalf of any other Party. If any party provides services or supplies products or technology to the Company or to the any Party, such Party does so as an independent contractor engaged in its own business." The abovesaid clause prohibits any party to act as a legal representative or agent or any other party for any purpose whatsoever and no party shall have the right to assume, create or incur any liability or obligation of any kind express or implied in the name of or on behalf of any other party. This clause is relied upon by the appellant-company to say that respondents 1 and 2 have no authority or they are prohibited to take arbitration proceedings in the name of the appellant-company. The CLB rightly rejected the case of the appellant-company on the ground that the said clause cannot override the established c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarding non-compliance of the clauses mentioned in the PPA regarding the payment security mechanism by the TNEB and also the outstanding of a sum of Rs. 468.88 crores (approximate) as on 31-1-2004. It is relevant to mention here that before filing the said Company Petition, the 1st respondent-Company moved the Board for passing resolution to take action to recover money. Since they failed in their attempt, they approached the CLB. Apart from the abovesaid fact, various averments regarding mismanagement have been averred in the Company Petition. On that basis, they have sought for appointment of an administrator for the appellant-company and also to vest with the powers to the said administrator to initiate and continue the proceedings against the TNEB for and on behalf of the Company with respect to the Company s right under the PPA. Even while seeking for interim order, respondents 1 and 2 have prayed only to give direction to the administrator to invoke alternative dispute resolution mechanism. No doubt, in the order dated 9-3-2004, the CLB rejected such request for interim relief as sought for. Even in C.A. 38/2004, respondents 1 and 2 prayed before the CLB to authorise the Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acity to get the relief for the benefit of the Company by way of derivative action. As rightly submitted by Dr. Singhvi, learned Senior Counsel appearing for respondents 1 and 2, only if the request made by respondents 1 and 2 to the Company to proceed against the TNEB is rejected, respondents 1 and 2 can invoke their right as minority shareholders. 55. So, the orders passed by the CLB rejecting the request of respondents 1 and 2 to direct the Company to initiate proceedings against the TNEB either through administrator or through directors cannot stand in the way of respondents 1 and 2 to take derivative action to safeguard their interest as minority shareholders. Even in the request for arbitration filed before the ICC Arbitral Tribunal, the copy of which is produced before us, it is stated that such a proceeding has been taken to protect the interest of the Company by the minority shareholders. Even in the petition filed in C.A. No. 62/2004, in para 8, it is admitted that such action by the appellant-company was by way of derivative action. Learned Senior Counsel appearing for the appellant tried to impress upon this Court that a party who was not able to get permission from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e majority acts in an oppressive manner, it is not as if the minority are without a remedy. In the abovesaid Foss s case ( supra ), Sir James Wigram, Vice Chancellor who delivered the judgment, observed as follows : "If a case should arise of injury to a corpn., by some of its members, for which no adequate remedy remained, except that of a suit by individual corporators in their private characters, asking in such character the protection of those rights to which in their corporate character they were entitled, I cannot but think that the principle so forcibly laid down by Lord Cottenham In Wallworth v. Hot 1841 (4) Myl Cr. 619: (41 ER 238) other cases would apply, the claims of justice would be found superior to any difficulties arising out of technical rules respecting the mode in which corpns., are required to sue." Subsequently, various decisions have recognised exceptions to what is conveniently known as the Rule of Foss s case ( supra ). The Division Bench of this Court in the decision in Nagappa v. Madras Race Club AIR 1951 Mad. 831, held as follows : "(9) The later decisions however have recognised exceptions to what is conveniently known as the rule in Foss v. Harbottle 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be gone into, as the very question is raised before the ICC Arbitral Tribunal and pending. But the fact remains, the proceedings were taken by way of derivative action by minority shareholders, namely, respondents 1 and 2, which is permissible in law, though we are not going into the correctness of the form in which such a request for arbitration was made. 60. The learned Senior Counsel appearing for the appellant-Company relied on the principle of res judicata in support of his submission that the proceedings taken by respondents 1 and 2 before the ICC Arbitral Tribunal cannot be allowed to proceed with. The principles of res judicata is based on the need of giving a finality to the judicial decisions. What it says that once a res judicata is judicata, it shall not be adjudged again. This principle of res judicata is embodied in relation to suits under section 11 of the Code. But, even where section 11 of the Code does not apply, the principles of res judicata has been applied by Courts for the purpose of achieving finality in litigation. 61. To rely upon the principles of res judicata, the following conditions should exist : ( a )The matter directly and substantially in iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions. What it says is that once a res judicata, it shall not be adjudged again. Primarily it applies as between past litigation and future litigation. When a matter - whether on a question of fact or a question of law - has been decided between two parties in one suit or proceeding and the decision is final, either because no appeal was taken to a higher Court or because the appeal was dismissed, or no appeal lies, neither party will be allowed in a future suit or proceeding between the same parties to canvass the matter again. This principle of res judicata is embodied in relation to suits in section 11 of the Code of Civil Procedure; but even where section 11 does not apply, the principle of res judicata has been applied by Courts for the purpose of achieving finality in litigation. The result of this is that the original Court as well as any higher Court must in any future litigation proceed on the basis that the previous decision was correct. (8) The principle of res judicata applies also as between two stages in the same litigation to this extent that a Court, whether the trial Court or a higher Court having at an earlier stage decided a matter in one way will not allow the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned in the petition to invoke clause 16.2 of the PPA. They have not sought for, before the CLB, to appoint arbitrator, which can be done only as per clause 16.2 of the PPA. All these steps are being taken by respondents 1 and 2 only to safeguard the interest of the appellant-Company and according to respondents 1 and 2, if the proceedings are not initiated in time, it would become time-barred. Though there is dispute regarding the period of limitation, we need not decide the said issue in this appeal. From the above, it is clear that the appellants have not satisfied any one of the conditions mentioned above to sustain their claim that the respondents are estopped from taking proceedings before the ICC Arbitral Tribunal in view of the order passed by the CLB. 66. The learned Senior Counsel appearing for the appellant referred to an example more than once in support of his submission that the respondents 1 and 2 shall not be permitted to proceed with the proceedings pending before the ICC Arbitral Tribunal. According to him, if a petition is filed by a person seeking permission to go to Bombay and if it is refused, he cannot go to Bombay at all. But, we have to see on what capa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn jurisdiction when a particular issue is already pending before the Courts of India and the CLB would have the same power as the Civil Court to grant anti-suit injunction where proceedings initiated in a foreign jurisdiction are wholly illegal and cause serious prejudice to the interest of the Company. From the above pleadings in C.A. No. 62/2004, we can set out the basis on which the said application is filed: (1)The minority shareholders/respondents 1 and 2 initiated derivative action against the TNEB, in the name of the appellant-company without any appropriate authorisation as per the statutory requirement; (2)Civil Courts are having jurisdiction to restrain such a party to institute proceedings in foreign jurisdiction; (3)Such a derivative action cannot be taken when the decision of the Board of Directors was not to initiate proceedings against the TNEB; (4)Since the proceeding initiated in the foreign jurisdiction are wholly illegal and cause serious prejudice to the interest of the Company, the injunction should be granted. The above said basis on which the application is filed is only relying on the facts which has been done subsequent to the filing of the Company Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion proceedings which are detrimental to the interest of the Company. According to him, when the Company is not willing to take arbitration proceedings on the basis of commercial decisions, minority shareholders cannot be allowed to take arbitration proceedings. According to him, even other creditors of the Company are supporting the decision of the Company in this regard. He also submitted that since the TNEB is the sole purchaser of power supply generated by the appellant, if the appellant-company antagonise the TNEB, there is a possibility of refusing to purchase the power from the TNEB and thereby the appellant-company has to close down the industry. Learned Senior Counsel cited some of the example regarding such action taken by the TNEB in various States. But, as rightly submitted by Dr. Singhvi, learned Senior Counsel appearing for the respondents 1 and 2, in the Application filed in C.A. No. 62/2004, it is only stated as follows: "The Hon ble Board would have the same power as Civil Courts to grant anti-suit injunction where the proceedings in a foreign jurisdiction are wholly illegal and cause serious prejudice to the interest of the Company ." Except the said averment, no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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