SVENSKA HANDELSBM'KEN AND OTHERS ETC. versus INDIAN CHARGE CHROME LTD. AND OTHERS

Citation: [1994] 1 S.C.R. 261 · Decided: 24-01-1994 · Supreme Court of India · Bench: J.S. VERMA, YOGESHWAR DAYAL, B.P. JEEVAN REDDY
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Judgment (excerpt)

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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-Ap-
plication 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 applica-
tion 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 
y-
C 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 
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pnceedings relating to the suit. The power of attorney was confined only 
to the proceedings in the Miscellaneous application. Hence filing of ap-
E 
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 arbitra-
H tion proceedings as per their respective arguments. 
S.HANDEL5BANKEN v. INDIANCHARGECHROMELTD.[DAYAL,J.) 
263
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