LexSTATE OF ORISSA ETC. versus KLOCKNER AND COMPANY AND ORS. ETC.
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STATE OF ORISSA ETC.
v.
KLOCK.,'\IER AND COMPANY AND ORS. ETC.
APRIL 16, 1996
[J.S. VERMA AND K. VENK.ATASWAMI, JJ.j
Foreign Awards (Recognition and Enforcement) Act 1961-S.3 r/w Ar-
bitration Act 1940, s.34 and Takeover Ordinance 8 of 1991, Clauses 4(5), 5,
C 6 and 7-Agrecment between foreign company and 01issa Mining Co1poration
for exclusive 111arketing of charge chronie--State Govenunent taking over
charge chrome division and selling it to Tata Iron and Steel Com-
pany--Forcign conipany refening dispute to inte1national arbitration-State of
01issa filing suit claiming not to be mccessor in intemst of OMC and hence
not bound by agreement--{)n application by foreign company, T1ial Court
D staying suit-High ('oiat affinning stay--fleld, under takeover Ordinance,
State 1vus successor in interest to OMC and bound by agreenient; suit 1ightly
stayed.
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Forei&"' Awards (Recognition and Enforcement) Act 1961-S.3 r/w
Arbitration Act 1940, s. 34-Step in proceeding-Agreement between foreign
company and 01issa Mining C01poration for exclusive marketing of charge
chronie-State Gove111n1ent taking over charge chronie division and selling it
to Tata Iron and Steel Company-Foreign company refening dispute to
illlemational arbitration-State of 01issa filing suit claiming not to be succes-
sor in interest of OMC and hence not bound by agreement--{) MC filing suit
questioning validity of entire agreement-Applications by foreign company
under Foreign Awards Act for stay of State of 01issa's suit and under Order
7 Rule 11 CPC for rejection of OMC's plaint-Whether application for
rejection of plaint a step in proceeding by foreign co111pany baning it fron1
seeking stay of State's suit-Held, No.
Code of Civil Procedure 1908--0rder VII Rule ll(a) and (d) r/w
Arbitration Act 1940, s.32-Rejection of plaint-Agreement between foreign
company and 01issa Mining C01poration for exclusive marketing of charge
chrome--OMC filing suit questioning validity of entire agreement-Foreign
company filing application for rejection of plaint on ground of absence of
I-I cause of action for the suit-Iiial Court accepting application-High Cowt
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STATE v. KLOCKNER AND CO.
3o9
reversing pointing out plaint alone had to be considered for deciding whether A
it disclosed cause of action-Fwthe1; suit challenged validity of the entire
agreement and not 1nerely the arbitration agreenient, hence not ban·ed under
s.3Jc-Held, High Cowt's order dismissing application did not call for inte1c
ference.
Under a marketing agreemeut between Klockner and Company
(Klockner) and the Orissa Mining Corporation (OMC), the charge
chrome prodnced by OMC was to be marketed exclusively through Klock-
ner. Clause 15 provided for reference of disputes between the parties to
the International Chamber of Commerce. The place of arbitration was to
be London and the law applicable the Swiss Law or any other law mutually
agreed upon.
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Under another agreement entered into between OMC and Orissa
Mining Corporation (Alloys) Ltd., the latter replaced OMC in the earlier
agreement with Klockner. After the Government of India ordered the
merger of OMC (Alloys) with OMC, the State of Orissa promulgated D
Ordinance No. 8 of 1991 under which the charge chrome division was taken
over and transferred by way of sale to Tata Iron & Steel Company
(TISCO). The agreement between the State of Orissa of TISCO stipulated
that any claim in respect of OMC's agreement with Klockner wonld be
discharged by the State of Orissa.
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Failing to resolve its disputes with OMC, Klockner made an arbitra-
tion reference to the International Chamber of Commerce. On receiving
notice, the State of Orissa filed a suit before the Civil Judge, Bhubaneswar
for a declaration that it was not a successor of OMC and therefore, not
liable to pay jointly with OMC to Klockner. OMC filed a suit questioning F
the entire agreement. Thereupon; Klockner filed an application for stay of
the suit invoking s.3 of the Foreign Awards (Re.cognition and Enforcement)
Act, 1961. Klockner also filed an application under Order Vil Rule 11 CPC
for rejection of the plaint in the suit filed by OMC.
The Civil Judge stayed the suit and also rejected the plaint in OMC's
suit The High Court of Orissa atlirmed the order of the civil judge staying
the suit but reversed the order r~jecting the plaint.
The High Court held that for the 1mrposes of deciding the applica-
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