Enercon (India) LTD Vs 2 Wobben Properties GMBH On 5 October, 2012

Bombay High Court
Bombay High Court

Enercon (India) Ltd vs 2 Wobben Properties Gmbh on 5 October, 2012
Bench: R. M. Savant
wps-7804.09 & 7636.09
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.7804 OF 2009
WITH
1 Enercon (India) Ltd. ]
a company incorporated and ]
existing under the laws of ]
India and having its ]
registered office at Plot No. ]
33, Daman- Patalia, ]
Bhimpore, Daman-396 210 ]
India ]
]
2 Yogesh J. Mehra ]
being Indian Inhabitant ]
residing at 101, Hare ]
Krishna, Residency Society, ]
J.V .D. Scheme, North
.P ]
South Road No.8, Vile Parle (W) ]
Mumbai 400 049 ]
]
Indian Kanoon - http://indiankanoon.org/doc/9004705/ 1
3 Ajay J. Mehra ]
being Indian Inhabitant ]
residing at 101, Hare ]
Krishna, Residency Society, ]
J.V .D. Scheme, North
.P ]
South Road No.8, Vile Parle (W) ]
Mumbai 400 049 ]..... Petitioners. Versus
1 Enercon GmbH ]
a company duly ]
incorporated and existing ]
under the law of Germany ]
and having its registered ]
office at Dreekamp 5, ]
D26605, Aurich, Germany. ]
]
lgc 1 of 124 wps-7804.09 & 7636.09
2 Wobben Properties GmbH ] a company duly ]
incorporated and existing ]
under the laws of Germany ]
and having its office at ]
Dreekamp-5 D26605, ]
Aurich, Germany. ]..... Respondents. Dr.Veerendra Tulzapurkar, Senior Advocate, with Mr.Virag
Tulzapurkar, Senior Advocate, with Mr.Nikhil Sakhardande, Ms.Sonali Mathur & Ms. Swagata Naik i/by
M/s. AZB & Partners for the Petitioners in both the Petitions.
Mr. S.U.Kamdar, Senior Advocate with Mr. Zubin Behramkamdin, Ms.Naira Variava-Jejeebhoy, Mr.Rohan
Cama, Mr. Vivek Vashi, Ms.Anusha Jegadeesh, Ms.Devika Deshmukh, and Ms.Kanika Sharma i/by Bharucha
& Partners for the Respondents in Writ Petition No.7804 of 2009. Mr. Navroze Seervai, Senior Advocate with
Mr. Zubin Behramkamdin, Ms.Naira Variava-Jejeebhoy, Mr.Rohan Cama, Mr. Vivek Vashi, Ms.Anusha
Jegadeesh, Ms.Devika Deshmukh, and Ms.Kanika Sharma i/by Bharucha & Partners for the Respondents in
Writ Petition No.7636 of 2009. CORAM : R. M. SAVANT, J.
Judgment Reserved on :- 6th August 2012.
Judgment Pronounced on :- 5th October 2012.
JUDGMENT :-
1 The above Writ Petitions have been filed invoking the Writ Jurisdiction of this Court under Article 227 of
the Constitution of India challenging the order dated 27th August 2009 passed by the learned District Judge,
Daman by which order the Appeals being Misc. Civil Appeal Nos.1/2009, 2/2009, 3/2009 and 4/2009 came to
be allowed and resultantly the order passed by the Trial Court dated 9 th January 2009 came to be set aside,
resulting in the Application filed under Section 45 of the Arbitration and lgc 2 of 124 wps-7804.09 & 7636.09
Conciliation Act, 1996 being allowed in terms of prayer clause 28(a) thereof, and the Injunction Application
of the Petitioners above-named, who are the original Plaintiffs, came to be rejected.
2 The issue that arises in the above Petitions is therefore in two parts viz. Whether the parties are to be
referred to arbitration, and Whether the Petitioners are entitled to an anti-suit injunction in the facts and
circumstances of the present case. The impugned order is therefore also in two parts; first part deals with the
aspect of whether the parties are to be referred to arbitration, and second part is, whether the Petitioners are
entitled to an anti- suit injunction. Since both the Petitions involve common facts and are interconnected, the
same are, therefore, heard together. For the sake of brevity the Arbitration and Conciliation Act, 1996 of India
and, the Arbitration and Conciliation Act, 1996 of England would be referred to as the "Indian Arbitration
Act" and "English Arbitration Act". FACTUAL MATRIX :-
3 The Petitioner No.1 herein carries on business of manufacturing and marketing of the Wind Turbine
Generators (WTG's) and components in India, and is also in the business of setting up wind power projects on
turnkey lgc 3 of 124 wps-7804.09 & 7636.09
basis. The Petitioner Nos.2 and 3 herein are the Directors of the Petitioner No.1 and are arrayed as the
Plaintiff Nos.1 to 3 in the Suit in question. The Respondent No.1-Enercon GmbH is a Company incorporated
under the laws of Germany and is having its registered office at Aurich, Germany. One Dr.Alloys Wobben is
a Director of the Respondent No.1. The Respondent No.2 - Wobben Properties GmbH is a Company
incorporated under the laws of Germany and is also having its registered office at Aurich, Germany. The
Respondent No.1 is engaged in mechanical engineering and possesses technical knowledge and equipment for
manufacturing and marketing the Wind Turbine Generators and components. The Respondent No.1 carries on
the said business all over the world. The Respondent Nos.1 and 2 are arrayed as the Defendant Nos.1 and 2 to
the Suit in question. The Petitioners and the Respondents are running the joint venture business through the
Petitioner No.1-Company at Daman in India. Accordingly the parties have entered into various Agreements in
furtherance of the said business. The Petitioner Nos.2 and 3, on 12/01/1994 entered into a Shareholding
Agreement. In terms of the said Agreement the Respondent No.1 was holding 51% shares of the Petitioner
No.1-Company, and the Petitioner Nos.2 and 3 were holding 49% shares. The said Shareholding Agreement
was subsequently amended by two Supplementary Shareholding Agreements dated 19/05/1998 and
19/05/2000. Pursuant to the said Supplementary Shareholding Agreements, the Respondent No.1 became a
56% shareholder in the Petitioner No.1-Company whilst the shareholding of the Petitioner Nos.2 lgc 4 of 124
wps-7804.09 & 7636.09
and 3 was reduced to 44%. On the same day i.e. on 12/01/1994, the Petitioner No.1 and the Respondent No.1
entered into a Technical Know-How Agreement by which the Respondent No.1 had agreed to transfer to the
Petitioner No.1 the right and the technology to use the technical know-how for the manufacture of E-26 Wind
Turbine Generators specified therein and their components. A Supplementary Technical Know-How
Agreement amending the earlier Technical Know-How Agreement was executed on 19/05/2000 by which a
further licence to manufacture the E-30 and E-40 Wind Turbine Generators was conferred by the Respondent
No.1 to the Petitioners. Under the terms of the Technical Know-How Agreement, the Respondent No.1 has to
continuously supply special components to the Petitioner No.1. In April 2004 the period of the Technical
Know-How Agreement expired, however, the Respondent No.1 continued to supply the Wind Turbine
Generators and components. The Respondent No.2 has the patent of the said windmill technology; whereas
the Respondent No.1 is a licensor to supply the said windmill technology, and the Petitioners are the licensees
to use the said windmill technology. It appears that from the year 2000 onwards and till date the Petitioners
are manufacturing the said Wind Turbine Generators and continue to use the patents that were licensed by
these agreements. On 29/09/2006 the Petitioners and the Respondent No.1 entered into what is known as the
"Agreed Principles" for the use and supply of the windmill technology. Under the said Agreed Principles the
Petitioners and the lgc 5 of 124 wps-7804.09 & 7636.09
Respondents agreed to enter into what is known as the Intellectual Property License Agreement ("IPLA" for
short), which is the subject matter of the Suit in question. It is the case of the Petitioners that the Agreed
Principles are the binding principles agreed between the parties, and which records an agreement that all
definitive agreements between the parties that were to be prepared and finally executed would be on the basis
of the binding principles agreed therein. One of the agreements contemplated by the said Agreed Principles
was the IPLA. The Petitioner Nos.2 and 3 are the parties to the IPLA. It seems that the Petitioner No.2 has
signed the IPLA on behalf of the Mehra family. At the time of the signing of the IPLA the Petitioners were
already aware of the five models of the WTG's being E-26, E-30, E-40, E-48 and E-53. It is the case of the
Petitioners that the IPLA was merely a draft of the oral terms and not a concluded contract between the
parties. It was their case that the said document was an unincorporated and inchoate document and was not a
concluded contract. It appears that one Mr.Ketwigg , the Managing Director of Respondent No.1 in a letter
dated 02/10/2006, addressed to Petitioner No.2 stated therein that all the necessary contracts between the
parties should be completed by 19/10/2006. Further in the e-mail dated 04/10/2006 Ms.Nicole Fritsch of the
Respondent No.1 stated that she would try her best to prepare/adapt the agreements according to the Agreed
Principles by 19/10/2006. It is the case of the Petitioners that to their utter shock and surprise, on 18/10/2006
Ms. Nicole Fritsch of the Respondent No.1 totally lgc 6 of 124 wps-7804.09 & 7636.09
turned around and addressed a letter to the Petitioner No.2 falsely alleging that the draft IPLA which was
signed on 29/09/2006 was a final document. Thereafter correspondence ensued between the parties and a
contentious issue arose as to whether the IPLA can be called final or not. Thereafter spate of litigation ensued
between the parties. This was as a result of the Respondent No.1 stopping supplies which resulted in the
Petitioner Nos.2 and 3 filing a derivative Suit on the Original Side of this Court being Short Cause Suit
No.2667 of 2007 seeking resumption of supplies. This Court has, by an interim order dated 31/10/2007
without prejudice to the individual contentions of the parties, directed resumption of supplies by the
Respondent No.1 to the Petitioner No.1 until further orders of this Court. In view of the fact that the said order
was not complied with by the Respondent No.1, there is a Contempt Petition which has been filed by the
Petitioners, which is pending. 4 The Respondent No.1 has also filed a Company Petition being No.121 of
2007 against the Petitioners before the Company Law Board, Principal Bench, New Delhi some time in
August 2007. The said Petition has been filed under Sections 397 and 398 of the Companies Act. The reliefs
sought in the said Company Petition inter alia included removal of the Petitioner Nos.2 and 3 as Directors of
Petitioner No.1, transfer of the Mehras shareholding in the Petitioner No.1 as well as associate and subsidiary
companies of Petitioner No.1 to Respondent No.1, and investigation to lgc 7 of 124 wps-7804.09 & 7636.09
ascertain the conduct of Mehras in dealing with properties, monies and management of the Petitioner No.1. In
view of the non-compliance of the order passed by the Company Law Board, contempt proceedings have been
initiated by the Petitioners against Dr.Wobben and Mr.Ketwigg. The Mehras i.e. the Petitioner Nos.2 and 3
filed Company Petition No.74 of 2008 against the Respondent No.1, Dr.Wobben and Mr. H D Ketwigg
alleging oppression and mismanagement by the Respondents. The said Petition was also filed under Sections
397 and 398 of the Companies Act.
5 The Respondent No.1 had filed a Petition against the Petitioner No.1 and others alleging that Petitioner No.1
had been supplying Wind Turbine Generators to third parties in Germany thereby infringing the trademarks
belonging to Respondent No.1. The same was filed in the Hamburg District Court which Court had initially
granted an ex-parte ad-interim order dated 17/09/2007 restraining the Petitioner No.1 from effecting supplies
to such third parties in Germany. The Hamburg District Court thereafter dismissed the claim of the
Respondent No.1 on the ground that there was no evidence to suggest Petitioner No.1's involvement in the
matter. The aforesaid facts therefore disclose the diverse litigation in which the parties are involved. 6 The
Respondent No.1 addressed a letter dated 13/03/2008 stating therein that it was desirous of having all disputes
relating to the IPLA settled, lgc 8 of 124 wps-7804.09 & 7636.09
including whether there is a binding agreement between Petitioner No.1 and Respondent Nos.1 and 2 in
respect of the IPLA. The Respondents also informed the Petitioners that it had appointed Mr. V V Veeder QC
as its . .
nominee arbitrator and called upon the Petitioners including Petitioner Nos.2 and 3 to nominate their
arbitrator in accordance with the IPLA, which according to the Respondent Nos.1 and 2 was a concluded
contract. The Petitioner No.2, on behalf of the Petitioners, replied to the said letter by his letter dated
31/03/2008 stating therein that since the IPLA was not a concluded contract, there was no question of a valid
Arbitration Agreement between the parties and as such, there was no question of appointing any arbitrator in
the matter. It was further stated that in any event, the past conduct and attitude of the Respondent No.1
established that it had waived the Arbitration Agreement. The UK Solicitors of the Respondent Nos.1 and 2
addressed a letter to the Petitioners dated 02/04/2008 stating therein that in the event the Petitioners did not
nominate their arbitrator within seven days of the receipt of the said letter, the Respondent Nos.1 and 2 shall
proceed under the English Arbitration Act, 1996 to appoint their nominee arbitrator Mr. V . . V
Veeder QC, as the sole arbitrator. The said letter was received by the Petitioner No.1 in Daman on
03/04/2008, along with the said letter was annexed `Arbitration Claim Form' dated 27/03/2008 issued by the
Respondent Nos.1 and 2 seeking several declaratory reliefs from the English Court in relation to the IPLA
which according to the Respondent Nos.1 and 2 is a concluded lgc 9 of 124 wps-7804.09 & 7636.09
contract. The said declaratory reliefs inter-alia include injunctive relief from the English Court to restrain the
Petitioner Nos.2 and 3 from continuing with independent proceedings before this Court, i.e. the Suit which
was already filed by the Petitioner Nos.2 and 3 in a derivative capacity as shareholders of the Petitioner No.1.
The said 'Arbitration Claim Form', which had been filed before the English Court, was also served upon the
Petitioner No.1 in Daman 04/04/2008 and seems to have triggered off the filing of the Regular Civil Suit No.9
of 2008 before the learned Civil Judge, Senior Division, Daman on 08/04/2008 inter-alia for the following
reliefs viz. for a declaration that the IPLA was not a concluded contract and correspondingly that there was no
Arbitration Agreement between the parties; for a declaration that the initiation of proceedings before the
English Court by the Respondents was void and illegal; and for a permanent injunction restraining the
Respondents from continuing with the proceedings before the English Court. In the said Suit the Petitioners
moved an Application for temporary injunction and for other interim reliefs. The Trial Court, it seems, passed
a status quo order on 08/04/2008 directing the Respondents to maintain status quo as regards the proceedings
initiated before the English Court till their appearance in the Suit and to show cause why an interim order
should not be passed against them. The Respondents appeared in the Suit and filed an Application under
Section 45 of the Indian Arbitration Act contending therein that the Suit before the Trial Court ought to be
referred to arbitration pursuant to the arbitration clause lgc 10 of 124 wps-7804.09 & 7636.09
contained in the IPLA. The Respondents also sought a vacation of the status quo order. It appears that in the
interregnum on 11/04/2008, the Petitioner No.1 had appointed Mr. Justice B. P. Jeevan Reddy (Retd.) as its
arbitrator. This, according to it, was necessitated in view of the threats of the Respondents that the arbitrator
appointed by them could be nominated as a sole arbitrator under the English Law, in the event the Petitioner
No.1 failed to nominate its arbitrator. It seems that the arbitrator appointed by the Petitioners by his letter
dated 24/04/2008 stated that there were inherent defects in the arbitration clause contained in the IPLA and
therefore the same was unworkable and expressed the inability of the arbitrators to appoint a third arbitrator.
Thereafter a joint letter was addressed which is dated 05/08/2008 by both the arbitrators i.e. Mr. V . Veeder
QC and Mr. Justice B. P . V . Jeevan Reddy (Retd.) asking the parties to take necessary steps as may be
advised. 7 The Plaintiffs i.e. the Petitioners herein had moved an application for temporary injunction ex-parte
in the said suit, wherein the Trial Court directed the parties to maintain status quo. The Trial Court had
granted an exparte injunction restraining the Defendants i.e. the Respondents herein from proceeding with the
proceedings they had filed in the English Court. The Application for interim reliefs and the Application filed
by the Respondents under Section 45 of the said Act was heard by the Trial Court, and by the order dated
09/01/2009, the learned Civil Judge, Senior Division, Daman, allowed lgc 11 of 124 wps-7804.09 & 7636.09
the said Application for interim reliefs filed by the Petitioners, and rejected the Application for referring the
parties to arbitration filed under Section 45 of the said Act by the Respondents, i.e. the Trial Court confirmed
the ex-parte ad interim order of status quo granted by it on 8/4/2008 till decision of the suit. The Defendants
i.e. the Respondents herein were restrained not to constrain the Plaintiffs i.e. the Petitioners herein to go for
arbitration till the final decision of the suit by invoking the IPLA.
8 The gist of the reasoning of the Trial Court was to the effect that the document in question i.e. the IPLA was
not on a stamp paper and it does not bear the signature and seal of the Public Office in authentication that the
document is enforceable in law; that the Plaintiff No.2 had signed the document under the influence of
Dr.Alloys Wobben. The Trial Court, on the basis of the material on record, recorded a finding that the IPLA
was not a concluded contract for want of free consent, and was executed due to undue influence, fraud,
mis-representation and mistake, that the Plaintiffs would suffer heavy economic loss if the arbitration is held
at London. In so far as the jurisdictional aspect is concerned, the Trial Court recorded a finding that the Court
at Daman would have jurisdiction as the Plaintiff No.1 was a joint venture between the Plaintiff No.1 and the
Defendants which had its factory at Daman.
lgc 12 of 124 wps-7804.09 & 7636.09
9 Aggrieved by the order dated 09/01/2009 passed by the Trial Court, the Defendants i.e. the Respondents
herein filed four Appeals which were Civil Misc. Appeal Nos.1/2009, 2/2009, 3/2009 and 4/2009. The said
Appeals were filed by the Respondents covering two aspects as to the grant of the anti Suit injunction, and as
to the rejection of the Application filed by them under Section 45 of the said Act. The said Appeals were
heard by the learned Principal District Judge, Daman, who by the order dated 27/08/2009 allowed the said
four Appeals, and consequently set aside the orders passed by the Trial Court granting the anti Suit injunction,
and referred the parties to arbitration by allowing the Application filed under Section 45 of the said Act.
However, the Lower Appellate Court has directed the Trial Court to first decide the jurisdiction point before
proceeding with the Suit. The Lower Appellate Court has inter alia considered the enforceability of the
Arbitration Agreement, the case of the Plaintiffs that the IPLA was not a concluded contract, which the
Plaintiffs had sought to support by both intrinsic as well as extrinsic material, and also the case of the
Plaintiffs that the said Clause-18.3 was unworkable in view of the methodology mentioned therein for the
appointment of the arbitrators. The Lower Appellate Court as can be seen from its order has on the basis of
the fact that the IPLA was signed by the Plaintiff No.2, reached a conclusion that there was an agreement
between the parties to refer the disputes to arbitration which intention of the parties, according to the Lower
lgc 13 of 124 wps-7804.09 & 7636.09
Appellate Court, was required to be given effect to. The Lower Appellate Court held that assuming that there
was some defect in the methodology for appointment of the arbitrators, that would not come in the way of
enforcement of the Arbitration Agreement. The Lower Appellate Court held that since the parties had agreed
to London being the seat of arbitration, the Plaintiffs could not make a grievance as regards the jurisdiction of
the English Courts. The Lower Appellate Court has by its order dated 27/08/2009, as indicated above, has
allowed the said four Appeals.
10 It is the order passed by the Lower Appellate Court in the said four Appeals which is the subject matter of
the above two Petitions. In so far as Writ Petition No.7804 of 2009 is concerned, the same challenges the
order to the extent of referring the parties to arbitration; whereas Writ Petition No.7636 of 2009 concerns the
challenge to the setting aside of the anti Suit injunction. 11
SUBMISSIONS ON BEHALF OF THE PETITIONERS BY THE LEARNED SENIOR COUNSEL DR.
VEERENDRA TULZAPURKAR
IN WRIT PETITION NO.7804 OF 2009:-
i] That the Lower Appellate Court failed to decide the important issue, as to whether the IPLA was a
concluded contract and that there is a valid subsisting Arbitration Agreement.
lgc 14 of 124 wps-7804.09 & 7636.09
ii] Since the Lower Appellate Court has failed to decide the very important jurisdictional fact, namely the
existence of a concluded contract before referring the parties to arbitration, the exercise of the Writ
Jurisdiction of this Court under Article 227 of the Constitution of India is warranted. The learned Senior
Counsel relied upon the Judgments of the Apex Court reported in (2006) 3 SCC 312 in the matter of Kishore
Kumar Khaitan and Anr. V/s. Praveen Kumar Singh and; (2008) 14 SCC 58 in the matter of Ramesh Chandra
Sankala V/s. Vikram Cement.
iii] That the IPLA is not a concluded contract and is only a draft. The learned Senior Counsel sought to
buttress the said submission by referring to the clauses mentioned in the IPLA, regarding the grant of licences,
finance, tenure of the IPLA;
iv] That the patents in respect of which the licences were to be given to the Petitioners were not finalized, the
tenure of the IPLA was also indefinite, and since the royalty is to be paid on the patents, and since the fixation
of the royalty was also not finalized; the IPLA could not be said to be a concluded contract.
lgc 15 of 124 wps-7804.09 & 7636.09
v] That assuming the IPLA is a concluded contract, the arbitration clause 18.1 is vague and is
unimplementable in view of the fact that the arbitrator of the licensor is to don two hats, two roles, one being
the arbitrator of the licensor and second being the presiding arbitrator;
vi] That the arbitration clause is unworkable is borne out by the fact that both the arbitrators i.e. Mr V V
Veeder, QC and Mr.Justice B P Jeevan Reddy (Retd.) have expressed that the arbitration clause as it stands is
unworkable and would require clarification. vii] That no steps were taken for registration of the patents as
required by Section 69 of the Patents Act, as both the parties treated it as not a concluded contract.
viii] That the IPLA cannot be said to be a concluded contract in view of the fact that as per the Agreed
Principles all the four agreements mentioned therein were to be executed at one time and the IPLA therefore
could be said to be finalized only after the said four documents which were inclusive of the IPLA were
executed. ix] The extrinsic evidence which is in the nature of the lgc 16 of 124 wps-7804.09 & 7636.09
correspondence exchanged between the parties shows that the IPLA was not a concluded contract. The
learned Senior Counsel would rely upon the letters dated 11/3/2006, 10/4/2006, as also the letters date
30/09/2006, 2/10/2006 and 24/11/2006 which are post the signing of the IPLA on 29/09/2006 which
according to the learned Senior Counsel ex-facie point out that the IPLA was not a concluded contract, and
that it was only a draft; x] That since the main contract cannot be said to have come into existence, therefore,
the clause providing for arbitration has also necessary to be held as not having come in existence. The learned
Senior Counsel would rely upon the judgment of the Apex Court reported in (1960) 1 SCR 493 in the matter
of Union of India v/s. Kishorilal Gupta and Brothers and, two Division Bench Judgments of this Court
reported in 2010 (2) Company Law Reporter 393 in the matter of Nasir Husain Films (P) Ltd. v/s Saregama
India Ltd and anr.; and 2008 (4) Arbitration Law Reporter 179 in the matter of Oberoi Construction P Ltd v/s .
Worli Shivshahi Co-op Hsg. Society Ltd. ;
xi] That since the underlying contract has not come into existence, in view thereof the arbitration clause in the
contract is inoperative. lgc 17 of 124 wps-7804.09 & 7636.09
The learned Senior Counsel would rely upon the judgment of the Apex Court reported in (1996) 2 SCC 667 in
the matter of U.P .
Rajkiya Nirman Nigam Ltd Vs. Indure Pvt. Ltd. & ors. xii] That the IPLA is not a concluded contract, since
the subject matter being absent as the portfolio regarding the patents was not finalized. The parties were also
not ad-idem as regards commencement of the IPLA and its duration. The IPLA is therefore vague, ambiguous
and uncertain, and is therefore, void under Section 29 of the Indian Contract Act. The learned Senior Counsel
would place reliance on the judgment of a Division Bench of the Karnataka High Court reported in AIR 1966
Mysore 118 in the matter of Coffee Board, Bangalore v/s. Janab Dada Haji Ibrahim Halari, the judgment of
the Apex Court reported in (1990) 3 SCC 1 in the matter of Mayawanti v/s. Kaushalya Devi; reported in
(2004) 1 SCC 252 in the matter of United Bank of India v/s Ramdas Mahadeo Prashad & others; reported in
AIR 1949 Nagpur 286 in the matter of The Central Bank, Yeotmal Ltd. V/s Vyankatesh Bapuji; and reported
in (1976) 1 WLR 591 in the matter of Bushwall Properties Ltd v/s Vortex Properties Ltd.
lgc 18 of 124 wps-7804.09 & 7636.09
Since there was uncertainty about the duration of the IPLA, the said agreement was void on account of
uncertainty. Since the portfolio of the patents was not finalized, there was uncertainty as regards the patents
and their duration, and since the duration of the IPLA was contingent upon, the expiry of the last patents the
duration of the IPLA was not certain. The learned Senior Counsel in support of the said contention relied upon
the judgment of the Apex Court reported in (2008) 5 SCC 58 in the matter of Vimlesh Kumari Kulshrestha
v/s. Sambhajirao and anr.
xiii] That the extrinsic evidence which has been referred to in the Application for temporary injunction proves
that the said IPLA was not a concluded contract. The reply filed by the Respondents to the said Application
for temporary injunction was contradictory to their letter dated 24/11/2006 wherein they had agreed that there
was some uncertainty and that they would try to resolve it by having a in-house meeting.
xiv] That there can be no arbitration if there is no concluded contract. Since in the instant case the IPLA is not
a concluded contract, the parties therefore cannot be referred to arbitration. The learned Senior Counsel, in
support of the said submission, sought to rely lgc 19 of 124 wps-7804.09 & 7636.09
upon the following judgments of the Apex Court reported in (1) (2006) 1 SCC 751, Dresser Rand S.A. v/s.
Bindal Agro Chem Ltd and K. G. Khosla Compressors Ltd.; (2) (2010) 5 SCC 425, Andhra Pradesh Tourism
Development Corporation Ltd & Anr. V/s. Pampa Hotels Ltd.; (3) AIR 1962 SC 378, Jawahar Lal Burman
Vs. Union of India and (4) (1999) 1 SCC 9 M/s. Rickmers Verwaltung GmbH v/s. The Indian Oil Corporation
Ltd.
xv] That the judgment in Shin-Etsu Chemical Co. Ltd. v/s. Aksh Optifibre Ltd and anr cannot be placed
reliance upon as the proposition laid down by Justice B.N.Srikrishna that the Court under Section 45 of the
Indian Arbitration Act has only to take a prima facie view, cannot be said to be a majority view, in view of the
discordant note sounded by Justice D.M.Dharmadhikari in Para 112 of the said judgment.
xvi] That in the facts and circumstances of the case the exercise of writ jurisdiction under Article 227 of the
Constitution of India is warranted.
lgc 20 of 124 wps-7804.09 & 7636.09
12 SUBMISSIONS ON BEHALF OF THE RESPONDENTS BY THE LEARNED SENIOR COUNSEL
SHRI S U KAMDAR IN WRIT PETITION NO.7804 OF 2009 :-
[a] That exercise of the Writ Jurisdiction under Article 227 of the Constitution of India is not warranted in the
facts of the present case; as the view taken by the Lower Appellate Court on the aspect of the parties being
referred to arbitration, cannot be said to be a view which could not be taken in the facts and circumstances of
the case.
[b] That the Petitioners have not pointed out as to how there has been a failure to exercise the jurisdiction or
the Lower Appellate court has exceeded its jurisdiction in passing the impugned order which is a pre-requisite
to warrant the exercise of the writ jurisdiction; [c] That the Lower Appellate court has passed the impugned
order considering the relevant material on record, which the Trial Court had failed to do, and therefore it
cannot be said that the order passed by the Lower Appellate Court directing the parties to arbitration is
perverse. In support of the said submission, the learned Senior Counsel relied upon the judgments of the Apex
Court reported in (1) (2001) 8 SCC 97, Estralla Rubber v/s Dass Estate (P) Ltd. (2) (2003) 6 SCC 641, State
Through Special lgc 21 of 124 wps-7804.09 & 7636.09
Cell, New Delhi v/s. Navjot Sandhu alias Afshan Guru and ors. and (3) (2010) 9 SCC 385, Jai Singh and
ors v/s. Municipal
Corporation of Delhi and ors.
In so far as aspect of perversity is concerned, the learned Senior Counsel relied upon the judgment of the
Apex Court reported in (2009) 10 SCC 206 in the matter of Arulvelu and anr v/s. State Represented by the
Public Prosecutor and anr.
The said judgments inter alia lay down the scope of interference under Article 227 of the Constitution of
India. The said judgments inter alia lay down that the power under Article 227 of the Constitution of India is
to be exercised to keep the inferior Courts within their bounds. It is not in the nature of an appellate power and
cannot be exercised for correcting a mere error. The said judgments lay down that if there is a failure to
exercise jurisdiction or jurisdiction is exercised in excess of the powers or the findings recorded are so
perverse that no reasonable man could have arrived at such a finding that the exercise of the writ jurisdiction
under Article 227 of the Constitution of India is warranted.
lgc 22 of 124 wps-7804.09 & 7636.09
[d] That the Court whilst considering the application under section 45 has only to arrive at a prima facie view
as regards the existence of the Arbitration Agreement and the arbitrability of the dispute and is not concerned
with any dispute as regards the underlying contract. The learned Senior Counsel for the said purpose relied
upon the judgment of the Apex Court reported in (2005) 7 SCC 234 in the matter of Shin-Etsu Chemical Co.
Ltd. v/s. Aksh Optifibre Ltd and anr.
[e] For the proposition that the Court has to only arrive at a prima facie view as regards Arbitration
Agreement and the arbitrability of the dispute. The learned Senior Counsel for the Respondents, apart from
the judgment of the Apex Court in Shin-Etsu' case s
(supra) relied upon another judgment of the Apex Court reported in (2009) 2 SCC 134 in the matter of Shakti
Bhog Foods Limited V/s Kola Shipping Limited and the Division Bench Judgment of this Court reported in
2007(5) Bom.C.R. 227 in the matter of Caribjet Inc v/s Air India Limited and the judgment of a learned
Single Judge of this Court reported in 2012(3) Bom. C.R. 36 in the matter of Olive Healthcare v/s. Lannett
Company Inc. & anr. lgc 23 of 124 wps-7804.09 & 7636.09
[f] That the documents in question unmistakably lead to a conclusion that the IPLA was a concluded contract.
The learned Senior Counsel sought to rely upon the correspondence between the parties prior to the agreement
being executed on 26/9/2006. The said correspondence starts with the e-mail dated 25/6/2006 and the e-mail
and letters exchanged thereafter;
[g] That the fact that IPLA is a concluded contract is borne out by the fact that the parties have signed the
same, and therefore, in terms of the requirements as mentioned in Section 44 of the said Act, the Lower
Appellate Court was right in referring the parties to arbitration.
[h] That all along it has been the stand of the Respondents that the Petitioners have executed the IPLA which
was not disputed by the Petitioners herein. The dispute started on account of the payment in respect of the
equity shares which were to be purchased by the Respondents. The said fact is borne out by the letter dated 3
rd November 2006 of the Petitioners and it is only thereafter that the Petitioners started raising a dispute as
regards certain aspects of the IPLA;
lgc 24 of 124 wps-7804.09 & 7636.09
[i] That the aspect of the main/underlying contract and the Arbitration Agreement are separable. In a given
case, even if the main contract can be said to be suffering from some infirmity but that would not have any
effect on the Arbitration Agreement. The Court has only to prima facie see whether there is a valid Arbitration
Agreement.
[j] That the conclusivity that is required to be seen is only as regards the Arbitration Agreement. The
requirement for which finds a place in Section 44 of the Indian Arbitration Act. The requirement being that
the Arbitration Agreement has to be in writing and signed by the parties. In the instant case both the
conditions are satisfied. The learned Senior Counsel for the Respondents in support of the said submission
relied upon the judgment of the Apex Court reported in (2012) 2 SCC 93 in the matter of Reva Electric Car
Company Private Limited v/s. Green Mobil and (2008) 14 SCC 240 in the matter of Great Offshore Limited
v/s. Iranian Offshore Engineering and Construction Company. [k] That the facts in Kishorilal Gupta's case are
clearly distinguishable from the facts of the present case, as in Kishorilal Gupta's case the contract itself was
superseded and therefore in the said fact lgc 25 of 124 wps-7804.09 & 7636.09
situation the Court held that no reliance could be placed on the arbitration clause in the superseded contract.
For the said purpose, the learned Senior Counsel relied upon the judgment of the Apex Court reported in
(2009) 10 SCC 103 in the matter of Branch Manager, Magma Leasing and Finance Limited and Anr. v/s.
Potluri Madhavilata and anr. wherein the judgment in Kishorilal Gupta has been distinguished by the Apex
Court. [l] That whilst considering the application under Section 45 of the said Act there can only be a prima
facie examination of the material on record so as to arrive at a conclusion whether there is an Arbitration
Agreement between the parties. In so far as other aspects are concerned, the issue can be raised before the
Arbitral Tribunal. In support of the said submission, the learned Senior Counsel for the Respondents relied
upon the judgment of the Apex Court reported in (2007) 7 SCC 120 in the matter of Aurohill Global
Commodities Ltd. v/s. Maharashtra STC Ltd. and (2009) 2 SCC 134 in the matter of Shakti Bhog Foods
Limited v/s. Kola Shipping Limited.
[m] That the infirmity if any in the main contract would not impinge upon the Arbitration Agreement
encompassed in the said contract. lgc 26 of 124 wps-7804.09 & 7636.09
The position in law in that respect in India as well as in England is the same. Hence the contention of the
learned Senior Counsel for the Petitioners that in view of the fact that the annexure to the IPLA or other
grounds on which the Petitioners contend that the IPLA was not a concluded contract would have no bearing
on the Arbitration Agreement as it is well settled that the Arbitration Agreement stands apart from the main
contract. In support of the said submission the learned Senior Counsel relied upon the English judgment
reported in (2007) UKHL 40 in the matter of th
Premium Nafta Products Limited (20 Defendant) and others th
v/s. Fili Shipping Company Limited (14 Claimant) and others and also relied upon the judgment of a learned
Single Judge of this Court reported in 2003 CLC 601 in the matter of GTC Limited v/s Royal Consulting RV
and anr.
[n] That merely because there is a challenge to the main underlying contract, the said fact would not impinge
upon the validity of the Arbitration Agreement. The learned Senior Counsel for the Respondents relied upon
the judgment of the US Federal Court reported in 546 US 440 in the matter of Buckeye Check Cashing Inc. v.
Cardegna. The said view of the US Federal Court has been affirmed by the Apex Court in the judgment
reported in (2009) 2 lgc 27 of 124 wps-7804.09 & 7636.09
SCC 494 in the matter of P Manohar Reddy & Bros. v/s. .
Maharashtra Krishna Valley Development Corporation and others and para 28 thereof.
[o] That it is only when the main underlying contract is vitiated on account of fraud, coercion, etc, that the
Arbitration Agreement can be said to be affected, such is not the case in the instant matter. (p) That it is well
settled even if there is any uncertainty or ambiguity in the underlying contract, it can be looked into and if
necessary corrected by relying on extrinsic evidence. The learned Senior Counsel in support of the said
contention sought to place reliance on Paras 11-123, 12-117, 12-118 and 13-008 from the learned Author
Chitty on Contract.
[q] That there is no uncertainty as regards the terms of the underlying contract. The date of execution of the
IPLA is certain and is referable to page 46. The date 17/09/2006 appearing on IPLA is referable to the letter
dated 17/09/2006 of Yogesh Mehra by which he has communicated his inability to remain present in
Aurich-Germany on the said day;
lgc 28 of 124 wps-7804.09 & 7636.09
[r] That the contention of the learned Senior Counsel for the Petitioners that the agreement is not a concluded
contract as it does not contain the annexure in respect of the patents which have been granted to the
Petitioners is only a bogey raised on behalf of the Petitioners, as the Petitioners are using the patents from
1994 to 2004 and two more patents were used since 2004, the Technical Know-How Agreement and
Supplemental Technical Know-How Agreement spelt out which patents have been given to the Petitioners.
[s] That all questions relating to the agreement in any event have to be decided by the Arbitral Tribunal. That
since the agreement has been signed, the requirement under Section 7 of the Indian Arbitration Act is
satisfied. For the said purpose the learned Senior Counsel relied upon the judgment of a learned Single Judge
of this Court reported in AIR 2000 Bombay 108 in the matter of Keval Krishna Balakram Hitkari v/s Anil
Keval Hitkari and others and the judgment of the Apex court reported in (1995) 6 SCC 571 in the matter of
J.K.Jain and others v/s. Delhi Development Authority and others.
That in so far as the issue as to whether the contract is concluded lgc 29 of 124 wps-7804.09 & 7636.09
or not, the signing of the contract is one of the defining aspects which test is laid down by the Apex Court in
the judgment reported in (2010) 1 SCC 83 in the matter of Grasim Industries Limited and Anr v/s. Agarwal
Steel
[t] That the contention of the learned Senior Counsel for the Petitioners that the judgment of the Lower
Appellate Court is bereft of any findings is not correct. Findings have been recorded on the basis that the
parties have signed the IPLA as also on the basis of the correspondence entered into between the parties which
can be seen from the impugned order.
[u] That even if a part of the arbitration clause is unworkable, the same is severable as in the instant case the
grievance of the Petitioners is only as regards the number of arbitrators who are to be appointed. The said
dispute can therefore be said to be a dispute only as regards the machinery provision but not as regards the
agreement between the parties to go for arbitration. [v] That even if part of the agreement is bad, the part
which can be sustained will have to be enforced. The learned Senior Counsel relied upon the judgment of the
Apex Court reported in AIR 1997 lgc 30 of 124 wps-7804.09 & 7636.09
SC 605 in the matter of M.M.T.C. Limited v/s. Sterlite Industries (India) Ltd. which is followed in (2002) 3
SCC 572 in the matter of Narayan Prasad Lohia v/s. Nikunj Kumar Lohia and others. [w] That the letter of the
arbitrator appointed by the Petitioners cannot be conclusive of the fact that the Arbitration Agreement is not
workable. The correspondence preceding the said letter does not indicate that the said Arbitration Agreement
is unworkable. [x] That the defining aspect as it were, is the intention of the parties to go for arbitration which
is clearly manifest. For the said purpose the learned counsel relied upon the judgment of the Allahabad High
Court reported in AIR 1954 Allahabad 750 in the matter of A H Bhiwindiwala and Co. v/s. R B Lakshman
Dass Mohan Lal and Sons Ltd and anr. , and the judgment of the Apex Court reported in (2009) 4 SCC 495 in
the matter of Nandan Biomatrix Limited v/s. D 1 Oils limited.
(y) That there is no merit in the contention of the learned counsel for the Petitioners that the second relief
sought in the suit of injunction cannot go to arbitration. That the said relief can only said to be referable to the
IPLA as it is the contention of the lgc 31 of 124 wps-7804.09 & 7636.09
learned Senior Counsel that since the IPLA is not a concluded contract, the Arbitration Agreement is not
enforceable. The test would therefore be whether the Arbitration Agreement as contained in IPLA can be
enforced. For the said purpose the learned Senior Counsel relied upon the judgment of the Apex Court
reported in (2006) 7 SCC 275 in the matter of Rashtriya Ispat Nigam Ltd v/s. Verma Transport Co as also the
judgment reported in (2008) 16 SCC 774 in the matter of Everest Holding Limited v/s. Syam Kumar
Shrivastava and others.
[z] The learned Senior Counsel sought to distinguish the judgments cited by the learned Senior Counsel for
the Petitioners in the context of the facts of the present case. The learned Senior Counsel for the Respondents
would contend that in the context of the facts of the cases in the judgments cited by the learned Senior
Counsel for the Petitioners that the Apex Court has held that the parties were not ad-idem, and therefore, the
contract was not concluded, but the same is not the case in the instant matter. CONSIDERATION - WRIT
PETITION NO.7804 of 2009
13 Heard the learned counsel for the parties and also perused the Written Submissions filed on behalf of the
parties. lgc 32 of 124 wps-7804.09 & 7636.09
14 Since clause (18) of the IPLA is at the fulcrum of the controversy involved in both the Petitions, it would
be apposite to reproduce sub-clauses 18.1 to 18.3 of clause 18 of the IPLA.
(18.1) All disputes, controversies or differences which may arise between the parties in respect of
this Agreement including without limitation to the
validity, interpretation, construction, performance and enforcement of alleged breach of this Agreement, the
parties shall, in the first instance attempt to resolve such dispute, controversy or difference through mutual
consultation. If the dispute, controversy or difference is not resolved through mutual consultation within 30
days after
commencement of discussions or such longer period as the parties may agree in writing, any party may refer
dispute(s) controversy(ies) or difference(s) for resolution to an arbitral tribunal to consist of three (3)
arbitrators of whom one will be appointed by each of the Licensor and the licensee and the arbitrator
appointed by Licensor shall also act aas the presiding arbitrator.
18.2) The arbitrators shall have powers to award
and/or enforce specific performance. The award of
the arbitrators shall be final and binding on the parties. In order to preserve its rights and remedies, either
party may seek preliminary injunctive relief or other temporary relief from any court of competent jurisdiction
or from the arbitration tribunal pending the final decision or award of the arbitrator(s). Any such application to
a court of competent jurisdiction for the purposes of seeking
injunctive relief shall not be deemed incompatible
with this agreement to arbitrate or as a waiver of
this Agreement to arbitrate.
18.3) All proceedings in such arbitration shall be conducted in English. The venue of the arbitration
proceedings shall be London. The arbitrators may
lgc 33 of 124 wps-7804.09 & 7636.09
(but shall not be obliged to ) award costs and reasonable expenses (including reasonable fees of
counsel) to the party(ies) that substantially prevail on merit. The provisions of the Indian Arbitration
and Conciliation Act, 1996 shall apply.
15 It would also be apposite to reproduce the relevant provisions of the Indian Arbitration and Conciliation
Act, 1996 namely Sections 7, 44 and 45 (7) Arbitration agreement - (1) in this part, "arbitration agreement"
means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which
may arise between them in respect of a defined legal relationship, whether contractual or not.
(2)An arbitration agreement may be in the form of
an arbitration clause in a contract or in the form of a separate agreement
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in -
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a
record of the agreement; or
(c) an exchange of statements of claim and defence
in which the existence of the agreement is alleged
by one party and not denied by the other.
(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration
agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the
contract.
(44) Definition - In this Chapter, unless the context otherwise requires, "foreign award" means
an arbitral award on differences between persons
arising out of legal relationships, whether contractual or not, considered as commercial under the law in force
in India, made on or after
the 11th day of October, 1960 -
lgc 34 of 124 wps-7804.09 & 7636.09
(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First
Schedule applies, and
(b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been
made may, by notification in
the Official Gazette, declare to be territories to which the said Convention applies.
(45) Power of Judicial authority to refer parties
to arbitration - Notwithstanding anything
contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908) a judicial authority,
when seized of an action in a matter in respect of
which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties
or any person claiming through
or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void,
inoperative or incapable of being performed.
16 As can be seen, Section 45 provides that an application may be made to a judicial authority to refer any
proceeding before it to Arbitration, where the parties have entered into an Arbitration Agreement as
contemplated under Section 44 of the said Act. It further provides that such reference must be made by the
Court unless it finds that the Agreement is null and void, inoperative or incapable of being performed. The
reference therefore in Sections 44 and 45 is to an Arbitration Agreement. If the Arbitration Agreement is in
the form of a clause in the main contract, then reference in Sections 44 and 45 would be to that clause which
is an Arbitration Agreement contained as and by way of a clause in the main contract. lgc 35 of 124
wps-7804.09 & 7636.09
17 In so far as the scope of the inquiry under Section 45 of the Indian Arbitration Act is concerned, the same
is well settled by the authoritative pronouncement of the Apex Court in the Judgment reported in 2005(7)
SCC 234 in the matter of Shin-Etsu Chemical Co. Ltd. & Ors. vs Aksh Optifibre Ltd. Paragraph 72 to 75 of
the said Judgment are material and are reproduced herein under:
"72. True, that there is nothing in Section 45 which suggests that the finding as to the nature of the arbitral
agreement has to be ex facie or prima
facie. In my view, however, this is an inescapable
inference from an ex visceribus interpretation of
the statute. Sub-section (3) of Section 8 in Part I of the Act envisages that even in a situation where an
application to the court has been made
under sub-section (1), the arbitration may commence, continue and even an arbitral award
be made. This was obviously meant to cut down
delay in the conclusion of the arbitral proceedings. There is conspicuous absence of a corresponding provision
either in Section 45 or in
the rest of the provisions in Part II. This legitimately gives rise to an inference that once the arbitral agreement
has been subjected to scrutiny before the court under Section 45 of the
Act, conceivably, the arbitral proceedings could be stayed till the decision of the court on the nature of the
arbitral agreement. If it were to be held that the finding of the court under Section 45 should be a final,
determinative conclusion, then
it is obvious that, until such a pronouncement is
made, the arbitral proceedings would have to be
in limbo. This evidently defeats the credo and ethos of the Act, which is to enable expeditious
arbitration without avoidable intervention by judicial authorities.
73. The absence in Part II of the Act of a provision corresponding to Section 5 in Part I has
lgc 36 of 124 wps-7804.09 & 7636.09
been highlighted as supportive of the view that greater judicial intervention is contemplated in Part II of the
Act. The question that has arisen before the Court is not the presence or absence of
judicial intervention; it is one with regard to the manner in which the said judicial intervention should proceed
whether on a final view or prima
facie view of the factors enumerated in Section 45
of the Act.
74. There are distinct advantages in veering to
the view that Section 45 does not require a final
determinative finding by the Court. First, under
the Rules of Arbitration of the International Chamber of Commerce (as in force with effect from 1.1.1998), as
in the present case, invariably
the arbitral tribunal is vested with the power to
rule upon its own jurisdiction. Even if the court
takes the view that the arbitral agreement is not
vitiated or that it is not invalid, inoperative or unenforceable, based upon purely a prima facie view, nothing
prevents the arbitrator from trying
the issue fully and rendering a final decision thereupon. If the arbitrator finds the agreement
valid, there is no problem as the arbitration will
proceed and the award will be made. However, if
the arbitrator finds the agreement invalid, inoperative or void, this means that the party who
wanted to proceed for arbitration was given an opportunity of proceeding to arbitration, and the
arbitrator after fully trying the issue has found that there no scope for arbitration. Since the arbitrator's finding
would not be an enforceable
award, there is no need to take recourse to the
judicial intercession available under Section 48(1)(a) of the Act.
75. The finding of the court that the arbitration
agreement is valid, operative and enforceable, if
in favour of the party setting up the arbitration
agreement, is not appealable under Section 50 as
a matter of legislative policy. Refusing to refer parties to arbitration under Section 45, is however, made
appealable under Section 50(1) lgc 37 of 124 wps-7804.09 & 7636.09
(a) of the Act. Even after the court takes a prima
facie view that the arbitration agreement is not vitiated on account of factors enumerated in Section 45, and
the arbitrator upon a full trial holds that there is no vitiating factor in the arbitration agreement and makes an
award, such
an award can be challenged under Section 48(1)
(a). The award will be set aside if the party against whom it is invoked satisfies the court inter alia that the
agreement was not valid under the
law to which the parties had subjected it or under
the law of the country where the award was made. The two basic requirements, namely, expedition at the pre-
reference stage, and a fair
opportunity to contest the award after full trial,
would be fully satisfied by interpreting Section 45 as enabling the court to act on a prima facie view."
18 A useful reference could also be made to the judgment of a Division Bench of this Court in Caribjet Inc v/s
Air India Limited (supra). Para 6 of the said judgment is material and is reproduced herein under :-
6. As rightly submitted by the learned Counsel
for the appellant, the issue which is sought to
be raised is no more res integra and has been
well-settled by the decision of the Apex Court
in Shin-Etsu Chemical Company's case (supra).
By a majority decision in the said case, the Apex Court has held that:
if on a prima facie examination of the
documents and material on record including the arbitration agreement on which request for
reference is made by one of the parties, the judicial authority or the court decides to make
a reference, it may merely mention the
submissions and contentions of the parties and
summarily decide the objection if any raised on
the alleged nullity, voidness, inoperativeness or
incapability of the arbitration agreement. In case, however, on a prima facie view of the matter, which is
required to be objectively lgc 38 of 124 wps-7804.09 & 7636.09
taken on the basis of material and evidence produced by the parties on the record of the
case, the judicial authority including a regular
civil court, is inclined to reject the request for
reference on the ground that the agreement is
"null and void" or "inoperative" or "incapable of
being performed" within the meaning of
Section 45 of the Act, the judicial authority or
the court must afford full opportunities to the
parties to lead whatever documentary or oral
evidence they want to lead and then decide the
question like trial of a preliminary issue on jurisdiction or limitation in a regular civil suit
and pass an elaborate reasoned order. Where a
judicial authority or the court refuses to make a
reference on the grounds available under
Section 45 of the Act, it is necessary for the judicial authority or the court which is seized
of the matter to pass a reasoned order as the
same is subject to appeal to the appellate court
under Section 50(1)(a) of the Act and further
appeal to this Court under Sub-section (2) of
the said section."
19 The inquiry contemplated under Section 45 is therefore of a prima facie nature of the existence of an
Arbitration Agreement. If the Court comes to a prima facie conclusion that there is an Arbitration Agreement
and the same is legal and valid the matter must be referred to the Arbitral Tribunal for further consideration
which can thereafter conclusively decide either way. If the Court comes to the prima facie conclusion that
there is either no Arbitration Agreement or that the same is not valid in law, the Court must then proceed to
determine the same finally and conclusively.
lgc 39 of 124 wps-7804.09 & 7636.09
20 The issue which requires to be addressed at the threshold is whether the view expressed by Justice
B.N.Shrikrishna in Shin-Etsu Chemical Co. Ltd (supra) is the majority view. The said issue arises in view of
the submission of the Learned Senior Counsel for the Petitioners relying upon paragraph 112 of the said
Judgment of Shin Estu Chemical Co. Ltd. (Supra) that Justice D.M.Dharmadhikari has not concurred with the
view of Justice B.N.Shrikrishna. In paragraph 111 of the said Judgment Justice D.M.Dharmadhikari expressly
concurs with the view of Justice Shrikrishna and therefore there can be no dispute that the proposition laid
down by Justice Shrikrishna has been accepted by Justice D.M.Dharmadhikari, and is the majority view in the
said judgment. The said paragraph 111 is reproduced herein under :-
"With utmost respect to both of them, I am inclined to agree with the view expressed by learned Brother
Srikrishna J. but only with a rider and a partly different reason which may I state below:-
The main issue is regarding the scope of power of any judicial authority including a regular civil court under
section 45 of the Act in making or refusing a reference of dispute arising from an international arbitration
agreement governed by the provisions contained in Part III Chapter-I of the Act of 1996. I respectfully Agree
with learned Brother Srikrishna J only to the extent that if on prima facie examination of the documents and
material on record, including the arbitration agreement on which request for reference is made by one of the
parties, the judicial authority or the court decides to make a reference, it may merely mention the submissions
and contentions of the parties and summarily decide the objection if any raised on the alleged nullity,
voidness, inoperativeness or incapability of the arbitration agreement. In case, however, on a lgc 40 of 124
wps-7804.09 & 7636.09
prima facie view of the matter, which is required to be objectively taken on the basis of material and evidence
produced by the parties on the record of the case, the judicial authority including a regular civil court, is
inclined to reject the request for reference on the ground that the agreement is 'null and void' or 'inoperative' or
'incapable of being performed' within the meaning of section 45 of the Act, the judicial authority or the court
must afford full opportunities to the parties to lead whatever documentary or oral evidence they want to lead
and then decide the question like trial of a preliminary issue on jurisdiction or limitation in regular civil suit
and pass an elaborate reasoned order. Where a judicial authority or the court refuses to make a reference on
the grounds available under section 45 of the Act, it is necessary for the judicial authority or the court which is
seized of the matter, to pass a reasoned order as the same is subject to appeal to the appellate court under
section 50(1)(a) of the Act and further appeal to this Court under sub- section (2) of the said section."
(emphasis supplied)
In so far as paragraph 112 which has been relied upon by the Learned Senior Counsel, the same deals with a
situation where the Award is passed in spite of/ and/or prior to the decision holding that such an Arbitration
Agreement does not exist. The Apex Court in the said case of Shin Estu Chemical Co. Ltd. (supra) was not
concerned with such a case, neither is this Court, in the present Petition.
21 The Judgment in Shin Estu Chemical Co. Ltd (supra) has been followed by the Apex Court in Shakti Bhog
Foods Ltd, (supra) as also by a Division Bench of this Court in Caribjet Inc. Vs. Air India Ltd. (supra), as also
lgc 41 of 124 wps-7804.09 & 7636.09
by a Learned Single Judge of this Court in Olive Healthcare Vs. Lannet Company Inc. (supra). Hence, in the
light of the aforesaid Judgments, the Court for the purpose of determination of the existence or validity of an
agreement under Section 45 of the Indian Arbitration Act, has to restrict its enquiry to the Arbitration
Agreement and not the underlying contract. It is required to be noted that there is a substantial change in law
from the one that existed under the Indian Arbitration Act 1940. In the 1940 Act under Section 33 thereof, the
Court had the power and jurisdiction to determine the existence or validity of Arbitration Agreement.
However, under the provisions of the Indian Arbitration Act, the said power of the Court has been taken away
and is now expressly vested with the Arbitral Tribunal under Section 16 of the Indian Arbitration Act. Under
Section 16, the Arbitral Tribunal can rule on its own jurisdiction including ruling on any objection with
respect to the existence or validity of the Arbitration Agreement. Thus the power to determine finally and
conclusively the existence and validity of an Arbitration Agreement has been conferred on the Arbitral
Tribunal under Section 16 of the 1996 Act. It is the Arbitral Tribunal therefore which will determine whether
there is an Arbitration Agreement or not for that purpose the Arbitration Agreement will be a totally
independent agreement dehors the other terms of the contract and such an agreement would not ipso-jure
become null and void or invalid even if it has been held that the under lying contract is void. Another aspect
which is to be noted is that the severability and separability of the Arbitration lgc 42 of 124 wps-7804.09 &
7636.09
Agreement though being a clause in the same contract, has now a recognition not only under Section 16 of the
1996 Act but by a catena of the Judgments of the Apex Court. A useful reference could be made to the
Judgment reported in 2009(2)SCC 494 in the matter of P Manohar Reddy & Bros. Vs. .
Maharashtra Krishna Valley Dev. Corp. & ors., The Apex Court has recognized that the Arbitration
Agreement is separate and independent from the main Agreement. It has been held that the Arbitration clause
though being a part of the contract is a collateral term which need not in all situations perish with coming to
an end of the underlying contract and it may survive the same. Paragraphs 27 and 28 of the said Judgment are
material and are reproduced herein under :
"27. An arbitration clause, as is well known, is a part of the contract. It being a collateral term need not, in all
situations, perish with coming to an end of the contract. It may survive. This concept of separability of the
arbitration clause is now widely accepted. In line with this thinking, the UNCITRAL
Model Law on International Commercial
Arbitration incorporates the doctrine of separability in Article 16(1). The Indian law - The Arbitration
and Conciliation Act, 1996, which is based on the
UNCITRAL Model Law, also explicitly adopts this approach in Article 16 (1)(b), which reads as under:-
"16. Competence of arbitral tribunal to rule
on its jurisdictional. - (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any
objections with respect to the existence or validity of the arbitration agreement, and for that purpose, (a) An
arbitration clause which forms part of a contract shall be treated as an agreement lgc 43 of 124 wps-7804.09 &
7636.09
independent of the other terms of the contract; and (b) A decision by the arbitral tribunal that the contract is
null and void shall not entail ipso jure the invalidity of the arbitration clause.
(Emphasis supplied)
Modern laws on arbitration confirm the concept.
28. The United States Supreme Court in the recent judgment in Buckeye Check Cashing, Inc. v.
Cardegna 546 US 460 acknowledged that the separability rule permits a court "to enforce an arbitration
agreement in a contract that the arbitrator later finds to be void." The Court, referring to its earlier judgments
in Prima Paint Corporation v. Flood & Conklin Mfg. Co. 388 U. S.
395, and Southland Corporation v. Keating 465 U.
S. 1, inter alia, held:
Prima Paint and Southland answer the
question presented here by establishing three propositions. First, as a matter of substantive federal arbitration
law, an arbitration provision is severable from the remainder of the contract.
But this must be distinguished from the situation where the claim itself was to be raised during the subsistence
of a contract so as to invoke the arbitration agreement would not apply."
The said Judgment as can be seen approves the Judgments of United States Supreme Court reported in 546 US
460 in the matter of Buckeye Check Cashing Inc. Vs. Cardegana and, reported in 388 US 395 in the matter of
Prima Paint Corporation Vs. Floor and Conkling Manufacturing Company
lgc 44 of 124 wps-7804.09 & 7636.09
22 A reference could also be made to the Judgment of the Apex Court reported in 2009(10) SCC 103 in the
matter of Branch Manager Magma Leasing and Finance Ltd. & Anr. Vs. Potluri Madhavilata & Anr. The
Apex Court in the said Judgment has approved the proposition laid down in P. Manohar Reddy's case (supra)
and once again referred with approval the judgment of the United States Supreme Court in Buckeye Check
Cashing Inc. The aforesaid Judgments of the Apex Court as well as the United States Supreme Court, make it
clear that the Arbitration Agreement would survive even in case of invalidity of the main agreement or the
underlying contract. It is only in cases where the underlying contract is vitiated by fraud, coercion or
misrepresentation that the same would impact the Arbitration Agreement. 23 The principles of severability
and separability of the Arbitration Agreement is common both under the English Arbitration Act, 1996 and
the Indian Arbitration Act 1996, as evidenced by the following Judgments of the Apex Court and the House of
Lords reported in :-
1] 2003 CLC 601, GTC Ltd. Vs. Royal Consult R.V. & Anr. 2] 2009(2) SCC 134, Shakti Bhog Foods Ltd.
Vs. Kola Shipping Ltd.
3] Judgment of the House of Lords reported in 2007 UKHL 40, Premium Nafta Products Ltd. & Ors. Vs. Fili
Shipping Co. Ltd. & Ors.
lgc 45 of 124 wps-7804.09 & 7636.09
24 It is in the context of the settled law as afore stated that the facts of the present case would have to be seen.
The Learned Senior Counsel for the Petitioners laid much store on the correspondence post 29-9-2006 i.e. the
date when the IPLA was signed, to contend that the IPLA was not a concluded contract. However, the
correspondence prior thereto between the parties indicates otherwise. If the said correspondence is seen, to
which my attention is drawn by the Learned Senior Counsel appearing for the Respondents, the same
discloses that it was on 27-6-2006 i.e. a good three months prior to its execution, that the draft IPLA was sent
to the Petitioners. The said IPLA had already undergone changes on the basis of the suggestions of both the
parties and the final document was kept ready on 29-9-2006 as the Petitioner No.2 had shown his inability to
come to Aurich on 17-9-2006 when it was to be executed. The other three agreements namely the Successive
Technological Transfer Agreement, Name Use Licence Agreement and the Shareholders Agreement were not
executed on 29-9-2006 because they were not finalised as certain issues were still required to be finalised. The
most important letter if it can be said so, is the letter dated 30-9-2006 which is addressed by the Petitioner
No.2 Yogesh Mehra in his own handwriting stating therein that he has executed not one but more than one
agreement on 29-9-2006. Pertinently in paragraph 2 of the said letter, the Petitioner No.2 has in fact referred
to the patent of E-82 being the subject matter of the IPLA and not the Agreed lgc 46 of 124 wps-7804.09 &
7636.09
Principles. The fact that the letter dated 30-9-2006 refers to the execution of two agreements on 29-9-2006
and also refers to the E-82 patent, further indicates that by the said letter dated 30-9-2006 the Petitioner No.2
admitted to the execution of the IPLA. In so far as the email dated 4-10-2006 is concerned, the said email
refers to the preparation and adoption of the agreements according to the "Agreed Principles". The said email
refers to the other three agreements. It seems that only after the claim for royalty was made by the
Respondents, that on 3-11-2006 the Petitioners purportedly incorporated an indirect denial of the execution of
the IPLA. In so far as the email dated 24-11-2009 is concerned, the said email as can be seen from its subject
refers to the final IPLA the Shareholders Agreement and other Successive Agreements. The email which dealt
with the outstanding drafts of the Agreements obviously did not refer to the final IPLA but refers to the other
Successive Agreements because as far as the IPLA was concerned, the same itself stated that it was already a
finalised agreement. The email therefore, did not refer to any draft of the IPLA or the Shareholders
Agreement and therefore the said email does not in any manner aid the case of the Petitioners that the IPLA
was not a concluded contract. Further the email dated 15-12-2006 from the Petitioners to the Respondents
wherein also the Petitioners dealt with the draft agreements but the subject of the said email as can be seen
was the same as that of the email dated 24-11-2006. Thereafter the email dated 10-1-2007 dealt with a further
visit to Germany and revised "Drafts of Outstanding lgc 47 of 124 wps-7804.09 & 7636.09
Contracts". Thereafter, the email dated 29-1-2007 sent by the Petitioners, in fact mentions the amended
version of the Shareholders Agreement which is outstanding and not executed, Name Use Licence Agreement,
and the Successive Technological Transfer Agreement. The aforesaid material therefore leaves no manner of
doubt that the draft agreements referred to therein were only the other three agreements and not the IPLA.
Therefore, a perusal of the documents on record discloses that not only is the Arbitration Agreement
contained in clause 18.1to the IPLA legally and validly executed, but it is in writing and signed by the parties.
25 The contentions of the Learned Senior Counsel for the Petitioners as regards the unenforceability of the
Arbitration Agreement all revolve around the alleged uncertainty and ambiguity in the underlying or the
matrix contract. It was contended that since the IPLA is vague, ambiguous and uncertain, the same is void
under Section 29 of the Indian Contract Act, 1872. Consequently the Arbitration Agreement as contained in
clause 18 of IPLA, is also void. The contention therefore of ambiguity and uncertainty is as regards the
underlying contract and not in respect of the Arbitration Agreement. Assuming it to be so, applying the
principle of separability and severability of the Arbitration Agreement from the main agreement, the
submission of the learned Senior Counsel for the Petitioners does not have merit and cannot impede the Court
from referring the parties to arbitration.
lgc 48 of 124 wps-7804.09 & 7636.09
26 Now coming to the contention of the Learned Senior Counsel for the Petitioners that since on the IPLA
three dates are appearing, the commencement date and the duration of the IPLA is therefore uncertain and
therefore the IPLA is not a concluded contract on account of the said uncertainty and ambiguity. In so far as
the said three dates are concerned, the first date i.e. 27-6-2006 is referable to the first email dated 27-6-2006
under which the draft IPLA was forwarded to the Petitioner No.2. The Petitioner No.2 can therefore be said to
be aware that 27-6-2006 is referable to the date on which the draft was forwarded and therefore it could never
be the date of execution. The date 17-9-2006 appearing on the third page of the IPLA is the date on which the
IPLA was proposed to be executed. Since the Petitioner No.2 cancelled his visit to Aurich-Germany by its
email dated 16-9-2006, the said date 17-9-2006 remained to be cancelled /altered. The third date is 29-9-2006
which also appears on the first page of the IPLA. There is no dispute that the signatures on the IPLA have
been affixed by the parties on 29-9-2006. In the light of the aforesaid and since it is not disputed by the
Petitioners i.e. the IPLA has been executed on 29-9-2006, the question of taking into consideration any other
date would not arise. In any event, the said dispute can only be relatable to the underlying contract and can be
raised before the Tribunal and if raised, it is for the Arbitral Tribunal to adjudicate upon the same. lgc 49 of
124 wps-7804.09 & 7636.09
27 Now coming to the judgments cited by the learned Senior Counsel for the Petitioners in support of his
contention that since the underlying contract cannot be said to have come into existence, therefore, the clause
providing for arbitration has also necessary to be held as not having come into existence. In so far as
Kishorilal Gupta's case (supra) is concerned, in the said case, the contention was that even after supersession
of an earlier contract, the Arbitration Agreement contained in the superseded contract continues in spite of the
admitted position that under the new contract, there was no arbitration clause. It is in the said fact situation
that the Apex Court held that with the supersession of the whole contract, the Arbitration Agreement also
stood superseded and does not survive. The said judgment has been distinguished by the Apex Court in the
case of Branch Manager, Magma Leasing and Finance Ltd, by holding that the new contract entered into was
a novation under Section 62 of the Indian Contract Act and thus no reliance can be placed on the Arbitration
Agreement contained in such a superseded contract. In the case of U.P. Rajkiya Nirman Nigam Ltd., (supra)
the facts were that the counter proposal was not signed at all and thus, no concluded contract was arrived at
between the parties. It was in the said context that the Apex Court held that there was no concluded contract.
Para 19 of the said judgment is material and is reproduced herein under :- "In view of the fact that Section 2
[a] of the Act envisages a written agreement for arbitration and lgc 50 of 124 wps-7804.09 & 7636.09
that written agreement to submit the existing or future differences to arbitration is a pre-condition and further
in view of the fact that the original contract itself was not a concluded contract, there existed no arbitration
agreement for reference to the arbitrators. The High Court, therefore, committed a gross error of law in
concluding that an agreement had emerged between the parties, from the correspondence and from submission
of the tenders to the Board. Accordingly it is declared that there existed no arbitration agreement and that the
reference to the arbitration, therefore, is clearly illegal. Consequently arbitrators cannot proceed further to
arbiter the dispute, if any. The conclusion of the High Court is set aside."
In the case of Nasir Husain Films (P) Ltd. (supra) the facts were that reliance was placed on a draft document.
The Division Bench of this Court held that the major issues on which negotiations were still in progress were
not settled. The contract could not be said to be concluded. In the case of Oberoi Const. Pvt. Ltd (supra) the
facts were that the General Body Resolution passed by the society did not accept the concluded agreement and
stated that the same will be subject to circulation of the draft and finalization thereof. It was in the said context
that the Division Bench held that since the document was not accepted or signed or executed by the society,
there was no conclusivity of the contract. However in the instant case, the IPLA has admittedly been executed
on 29/09/2006 by the parties signing on each page and also in the lgc 51 of 124 wps-7804.09 & 7636.09
execution clause, therefore, the said judgments (supra) cited by the learned Senior Counsel for the Petitioners
would have no application. In the case of United Bank of India (supra) the issue before the Apex Court was
centered around as to whether the MOU entered into between the parties on 18-5-1994 and forwarded by
letter dated 20-5-1994 has been acted upon and complied with by the parties . One of the conditions for the
MOU to come into force was withdrawal of the suit by the Respondents filed by them against the United Bank
of India. Since the suit was not withdrawn, the Apex Court held that the MOU cannot be said to have come
into existence. Para 7 of the said judgment is material and is reproduced herein under :- "Undisputedly, the
respondents did not withdraw the suit filed by them against the United Bank of India, which is the condition
precedent stipulated in clause (1) of the MOU. The respondents also did not pay the guarantee liability of Rs.
2.33 lacs. No compromise petition was filed before an appropriate court. Therefore, by no stretch of
imagination it can be said that the terms and conditions stipulated in the MOU had been complied with and
acted upon by the parties. Apart from what has been said, subsequent to the MOU there was also a lot of
correspondence between the parties by exchanging letters giving offers and counter- offers, as would be
revealed in the letters dated 16.6.94,23.12.94,12.6.95,15.6.95 and 19.6.95. All these correspondence would go
to show that the parties failed to arrive at a consensus even on what were the terms of the MOU. Thus, it is
clear that there was no concluded contract nor was there any novation."
In the case of Vimlesh Kumar Kulshrestha (supra) the agreement in question was held to be void for
uncertainty as there was no proper lgc 52 of 124 wps-7804.09 & 7636.09
description of the property given in the agreement by annexing a map, though map was referred to in the
agreement, nor the description was satisfactorily proved in a suit for specific performance. It is the said
context that the Apex Court held that the agreement if read was uncertain. Para 24 of the said report is
material and is reproduced herein under :-
"Reference to the said legal maxim, in our opinion, is not apposite in the facts and circumstances of this case.
By reference to the boundaries of the premises alone, the description of the properties agreed to be sold did
not become certain. For the purpose of finding out the correct description of the property, the entire agreement
was required to be read as a whole. So read, the agreement becomes uncertain."
In the case of Coffee Board, Bangalore (supra), the facts were that the defendant had to specify the quantity of
coffee which he intended to purchase, those quantities were omitted to be specified and those portions were
left blank in the tender form. It is in the said context that the Division Bench of the Karnataka High Court held
that the offer was vague for uncertainty and indefiniteness on the acceptance of which no contract is ever born
or comes into being. Paras 30 and 31 of the said report are material and are reproduced herein under :-
"30 Now, in this case the defendant did only one of those two things. He stated the prices, but he did not state
the quantities which he wanted. If a person is told that goods of more than one description are available for
sale and he is asked to state what prices he would be willing to offer for those goods and which of those goods
he would be willing to buy at those prices, and that person states only his prices but never indicates the lgc 53
of 124 wps-7804.09 & 7636.09
goods required by him, it is, I think, Impossible for any one to suggest that there was any acceptable offer
made by him. I do not find it possible to accede to the argument that in a case in which a tenderer who had to
submit his tender in the form Exhibit A-3 which was sent in this case, does not fill in the blanks in the last
paragraph of that tender, the necessary and inevitable inference is that he is willing to buy all the goods to
which the tender form referred."
31 The fact that paragraph 3(a) of Exhibit A-1 required the tenderer to state the quantities and the fact that
Exhibit A-3 contains separate columns for the price and the quantity, makes the position abundantly clear that
unless a tender like Ex. A-3 not only states the prices but also states the quantities, the tender is no offer which
in law can be accepted. In my opinion, the specification of the quantity required by the tenderer was an
essential term of the offer, and if that term was not to be found in the offer his offer was vague for uncertainty
and indefiniteness, on the acceptance of which no contract is ever born or comes into being." The aforesaid
judgments were relied upon by the learned Senior Counsel for the Petitioners to buttress his submission that
the IPLA was void on account of ambiguity and uncertainty.
Reading of the said judgments discloses that all the said judgments are concerning the validity of the
underlying contract and not the Arbitration Agreement. In the said judgments the underlying contract has been
held to be void or has not come into existence on account of the reasons mentioned therein. However, the
instant case arises under Section 45 of the Indian Arbitration Act, the infirmity, if any, in the underlying
contract cannot therefore lgc 54 of 124 wps-7804.09 & 7636.09
be looked into. It is well settled that even if there is any uncertainty or ambiguity, it can be looked into and if
necessary corrected by relying on extrinsic evidence, as rightly contended by the learned Senior Counsel for
the Respondents, by placing reliance on the extracts from the learned Author Chitty on Contract. Therefore
the said judgments cannot aid the Petitioners to further their case that the parties cannot be referred to
arbitration. 28 In so far as the submission of the Learned Senior Counsel for the Petitioners that all the
agreements were to be executed simultaneously, the same is not borne out by any document. The composite
arrangement referred to pertains only to the fact that the said arrangement will govern the subsequent
relationship of the parties in a composite manner and not that each of the documents must be executed
simultaneously.
The issue as to whether the IPLA is a concluded contract can also be looked at from the angle of the same
being signed by the parties. There is no dispute that the Petitioner No.2 has signed the IPLA on 29-9-2006 by
affixing his signature on every page of the IPLA including the execution clause. The presumption which
arises on the execution of the documents is enunciated by the Judgment of the Apex Court reported in 2010
(1) SCC 83 in the matter of M/S. Grasim Industries Ltd. vs M/S. Agarwal Steel. Para 6 of the said report is
material and is reproduced herein under : lgc 55 of 124 wps-7804.09 & 7636.09
"In our opinion, when a person signs a document, there is a presumption, unless there is proof of force or
fraud, that he has read the document property and understood it and only then has has affixed his signatures
thereon, otherwise no signature on a document can ever be accepted. In particular, businessmen, being careful
people (since their money is involved) would have ordinarily ready and understood a document before signing
it. Hence the presumption would be even stronger in their case. There is no allegation of force or fraud in this
case. Hence it is difficult to accept the contention of the respondent while admitting that the document, Ext.
D-8 bears his signatures that it was signed under some mistake. We cannot agree with the view of the High
Court on this question. On this ground alone, we allow this appeal, set aside the impugned judgment of the
High Court and remand the matter to the High Court for expeditious disposal in accordance with law."
In the said context the Judgment of a Learned Single Judge of this Court is also relevant, which Judgment is
reported in AIR 2000 BOM 108 in the matter of Keval Krishna Balakram Hitkari v/s Anil Keval Hitkari. Para
8 of the said Judgment is relevant and is reproduced herein under :-
8. So far as the objections raised by respondent No. 1 that the agreement of arbitration was not signed on the
day on which it is shown to have been signed and it was signed on the day on which the award was made is
concerned in my opinion even if it is assumed that the arbitration agreement was not signed in November,
1994 as claimed and that it was signed on 3rd April, 1995 the conduct of the parties of signing that agreement
and accepting the award and executing further documents pursuant to that award has to be construed as
existence of an arbitration agreement between the parties. The observations of the Supreme Court in para 6 of
its judgment in the case of Vaidya Harishankar Laxmiram Rajyaguru of Rajkot are pertinent which reads as
follows :
lgc 56 of 124 wps-7804.09 & 7636.09
"6. The main objection to the award is that there was no written agreement signed by both the parties to refer
the disputes to arbitration. It is clear from the narration of facts that the parties had agreed to refer the dispute
to arbitrator. The award signed by both the parties about which there is no factual dispute reiterated the fact
that the parties had agreed to refer the dispute to the arbitration of the said arbitrator and that he made an
award. All these are in writing and signed by all the parties. This in our opinion in the light of the facts and
circumstances of the case can certainly be construed to be a proper arbitration agreement in terms of section
2(a) of the Act. In this connection reference may be made to the observations of this Court in Prasun Roy v.
Calcutta Metropolitan Development Authority, AIR 1988 SC 205 : (1987) 4 SCC 217 where all the relevant
authorities on this point have been discussed. See also in this connection the decision of the Judicial
Committee in Chowdhri Murtaza Hossein v. Mst. Bibi Bechunnissa, (1875-76) 3 IA 209, 220. The
observations in the said decision were made in different context. But in the present context it is clear that the
conduct of the parties that there was an arbitration agreement and by signing two award it could be said that
the parties had agreed to refer the disputes in writing to the arbitration of the named arbitrator. This agreement
was done twice firstly by signing an endorsement below the award and secondly by entering into an
agreement in the form of a letter dated August 14, 1978 (Ex. 40)."
Hence there can be no escape for the Petitioners from the consequences flowing from the signing of the IPLA;
and the signing of the IPLA by the parties is therefore a strong circumstance in arriving at a prima facie
conclusion as enunciated in Shin Etsu Chemical Co. Ltd's case for referring the parties to arbitration.
lgc 57 of 124 wps-7804.09 & 7636.09
29 Now coming to the submission of the Learned Senior Counsel appearing for the Petitioners that clause
18.1 of the IPLA itself is uncertain, ambiguous and unworkable as according to the Learned Senior Counsel,
out of the two Arbitrators, one Arbitrator is also to don the hat of the Presiding Arbitrator. For the said
purpose clause 18 of the IPLA would have to be revisited. A reading of the said clause 18.1 discloses that
each of the licensors have to appoint an Arbitrator and the licensee is to appoint one Arbitrator. In terms of the
IPLA, the Respondent No.2 has licenced the patents to the Respondent No.1 who has then licenced them to
the Petitioners, hence two Arbitrators have to be appointed by each of the licensors and one has to be
appointed by the licensee making it in all three Arbitrators. Since at the time of invocation of the arbitration
clause, the Respondents in fairness agreed to appoint the third arbitrator independently, the said fact cannot
make the Arbitration Agreement invalid, ambiguous and uncertain as contended by the Learned Senior
Counsel. In any event, the provision regarding the number of arbitrators is merely a machinery provision and
does not form part of the Arbitration Agreement. Even if the machinery part is invalid, there is still an
Arbitration Agreement by and between the parties which can be enforced. A useful reference could be made
to the Judgments of the Apex Court which have been relied upon by the learned Senior Counsel for the
Respondents. The relevant paragraphs thereof are reproduced herein under :- lgc 58 of 124 wps-7804.09 &
7636.09
AIR 1997 SC 605 in the matter of M.M.T.C. Limited vs Sterlite Industries (India) Ltd. (supra) Paras 8, 9, 10
and 11 are relevant and are reproduced herein under :-
"8. Sub-section (3) of Section 7 requires an arbitration agreement to be in writing and
sub-section (4) describe the kind of that writing. There is nothings in Section 7 to
indicate the requirement of the number of arbitrators as a part of the arbitration agreement. Thus the validity
of an arbitration
agreement does not depend on the number of
arbitrators specified therein. The number of
arbitrators is dealt with separately in Section
10 which is a part of machinery provision for
the working of the arbitration agreement. It
is, therefore clear that an arbitration agreement specifying an even number of
arbitrators cannot be a ground to render the
arbitration agreement invalid under the New
Act as contended by the learned Attorney General.
9. Section 10 deals with the number of arbitrators. Sub-section (1) says that the parties are free to determine
the number of arbitrators, provided that such number shall
not be an even number. Sub-section (2) then
says that failing the determination referred
to in sub-section (1), the arbitral tribunal shall consist of a sole arbitrator. Section 11
provides for appointment of arbitrators. This is
how arbitral tribunal is constituted.
10. The arbitration clause provides that each party shall nominate one arbitrator and
the two arbitrators shall then appoint an umpire before proceeding with the reference.
The arbitration agreement is valid as it satisfies the requirement of Section 7 of the
New Act . Section 11 (3) requires the two arbitrators to appoint the third arbitrator or lgc 59 of 124
wps-7804.09 & 7636.09
the umpire. There can be no doubt that the
arbitration agreement in the present case accords with the implied condition contained
in para 2 of the First Schedule to the Arbitration Act, 1940 requiring the two arbitrators, one each appointed
by the two sides, to appoint. an umpire not later than one month from the latest date of their
respective appointments.
11. The question is: whether there is anything in the New Act to make such an agreement unenforceable? We
do not find any
such indication in the New Act. There is no dispute that the arbitral proceeding in the present case
commenced after the New Act came into force and, therefore, the New Act
applies. In view of the term in the arbitration
agreement that the two arbitrators would appoint the umpire or the third arbitrator before proceeding with the
reference, the requirement of Sub-section (1) of Section 10 is
satisfied and sub-section (2) thereof hes no
application. As earlier stated the agreement satisfies the requirement of Section 7 of the Act and therefore, is a
valid arbitration agreement. The appointment of arbitrators
must, therefore, be governed by Section 11 of
the New Act.
(2002) 3 SCC 572 in the matter of Narayan Prasad Lohia v/s. Nikunj Kumar Lohia and others . Para 17 is
material and is reproduced herein under:-
"We are also unable to accept Mr. Venugopal's
argument that, as a matter of public policy, Section 10 should be held to be non-
derogable. Even though the said Act is now an
integrated law on the subject of Arbitration, it
cannot and does not provide for all
contingencies. An arbitration being a creature
lgc 60 of 124 wps-7804.09 & 7636.09
of agreement between the parties, it would be
impossible for the Legislature to cover all aspects. Just by way of example Section 10 permits the parties to
determine the number of
arbitrators, provided that such number is not
an even number. Section 11(2) permits parties
to agree on a procedure for appointing the arbitrator or arbitrators. Section 11 then provides how arbitrators
are to be appointed if
the parties do not agree on a procedure or if
there is failure of the agreed procedure. A reading of Section 11 would show that it only
provides for appointments in cases where there
is only one arbitrator or three arbitrators. By
agreement parties may provide for
appointment of 5 or 7 arbitrators. If they do not provide for a procedure for their
appointment or there is failure of the agreed
procedure, then Section 11 does not contain any provision for such a contingency. Can this
be taken to mean that the Agreement of the parties is invalid. The answer obviously has to
be in the negative. Undoubtedly the procedure
provided in Section 11 will mutatis mutandis
apply for appointment of 5 or 7 or more arbitrators. Similarly even if parties provide for
appointment of only two arbitrators, that does
not mean that the agreement becomes invalid.
Under Section 11(3) the two arbitrators should
then appoint a third arbitrator who shall act as
the presiding arbitrator. Such an appointment
should preferably be made at the beginning. However, we see no reason, why the two arbitrators cannot
appoint a third arbitrator at
a later stage i.e. if and when they differ. This
would ensure that on a difference of opinion
the arbitration proceedings are not frustrated.
But if the two Arbitrators agree and give a common award there is no frustration of the
proceedings. In such a case their common opinion would have prevailed, even if the third
arbitrator, presuming there was one, had
differed. Thus we do not see how there would
be waste of time, money and expense if a party,
lgc 61 of 124 wps-7804.09 & 7636.09
with open eyes, agrees to go to Arbitration of
two persons and then participates in the proceedings. On the contrary there would be waste of time, money
and energy if such a party is allowed to resile because the Award is
not of his liking. Allowing such a party to resile
would not be in furtherance of any public policy and would be most inequitable."
The next contention of the learned Senior Counsel for the Petitioners that since the Annexures 1 to 4 to the
IPLA do not form part of the finally executed IPLA, there is an uncertainty and ambiguity as regards the
Patent portfolio and the Marks which are licensed under the IPLA to the Petitioners. Though in terms of the
scope of inquiry contemplated under Section 45 of the Indian Arbitration Act, the same is not necessary to be
gone into by this Court. In so far as the said contention is concerned, it is required to be noted that the
business relationship between the parties existed from the year 1994. The Petitioners were already using the
Patents right from 1994 and to which Patents there were additions. Even the Marks have been used by the
Petitioners right from the year 1994, and therefore, the parties were aware of the Patents and the marks in
respect of which they have entered into a contract. Therefore, prima facie, there doesn't seem to be any merit
in the said contention of the Petitioners. However, as indicated above, the issue as regards the alleged
infirmity in the underlying contract i.e. the IPLA is required to be urged before the Arbitral Tribunal, and it
will be for the Arbitral Tribunal to consider the same.
lgc 62 of 124 wps-7804.09 & 7636.09
The defining aspect is the intention of the parties to go for arbitration which intention is clearly manifest in the
IPLA. On the said aspect, it would be gainful to refer to the judgment of the Apex Court reported in 2009(4)
SCC 495 in the matter of Nandan Biomatrix Limited D 1 Oils Vs.
Limited,. Paras 26, 27, 30, 32, 33 and 34 are material and are reproduced herein under :-
"26 The disputed arbitration clause in the present case is clause 15.1, mentioned in the Supply Agreement,
which is reproduced as under:
"15.1 . Any dispute that arises between the parties shall be resolved by submitting the same to the institutional
arbitration in India under the provisions of arbitration and conciliation act, 1996."
"27 Arbitration agreement is defined under Section 7 of the 1996 Act. It does not prescribe any particular
form as such. In terms of the said provision, arbitration agreement means:
"Section 7 - Arbitration agreement (1) In this Part, "arbitration agreement" means an agreement by the parties
to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect
of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a
separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained 13 in- (a) a document signed by the parties" "30
The Court is required, therefore, to decide lgc 63 of 124 wps-7804.09 & 7636.09
whether the existence of an agreement to refer the dispute to arbitration can be clearly ascertained in the facts
and circumstances of the case. This, in turn, may depend upon the intention of the parties to be gathered from
the correspondence exchanged between the parties, the agreement in question and the surrounding
circumstances. What is required is to gather the intention of the parties as to whether they have agreed for
resolution of the disputes through arbitration. What is required to be decided in an application on Section 11
of the 1996 Act is : whether there is an arbitration agreement as defined in the said Act."
"32 I do not find any merit in the above contentions raised on behalf of the non-applicant. The question which
needs to be asked is : what did the parties intend at the time of execution of the Supply Agreement dated
10.8.04? What did the parties intend when clause 15.1 came to be incorporated in the said Supply Agreement?
The answer to the said questions undoubtedly is that any dispute that may arise between the parties shall be
resolved by submitting the same to the Institutional Arbitration in India under the provisions of the 1996 Act.
It may be mentioned that the name of a specific institution is not indicated in clause 15.1."
"33 The 1996 Act does not prescribe any form for an arbitration agreement. The arbitration agreement is not
required to be in any particular form.
[See : Bihar State Mineral Development Corporation & Another v. Encon Builders (I) (P) Ltd. - (2003) 7 SCC
418]. What is required is to gather the intention of the parties as to whether they have agreed for resolution of
the disputes through arbitration."
34 In my view, in the present case, the parties unequivocally agreed for resolution of the disputes through
Institutional Arbitration and not through an ad hoc arbitration. Therefore, in my view, there exists a valid
arbitration agreement between the parties vide clause 15.1 in the Supply Agreement dated 10.8.04. The lgc 64
of 124 wps-7804.09 & 7636.09
first issue is accordingly answered in favour of the applicant and against the non-applicant.
30 Now coming to the contention of the Learned Senior Counsel for the Petitioners that the prayer in the suit
pertaining to the anti suit injunction can never be referred to arbitration in support of which contention
reliance is placed by the Learned Senior Counsel on the Judgment of the Apex Court in Sukanya Holdings
Pvt. Ltd. (supra). In so far as the said contention is concerned, it is required to be noted that the Judgment in
Sukanya Holdings Pvt. Ltd (supra) has been distinguished by the Apex Court in the case of Rashtriya Ispat
Nigam Limited v/s Verma Transport Co. reported in (2006) 7 SCC 275. Paras 23, 45 and 47 of the said report
are material and reproduced herein under :-
"23 In the instant case, the existence of a valid agreement stands admitted. There cannot also be any dispute
that the matter relating to termination of the contract would be a dispute arising out of a contract and, thus, the
arbitration agreement contained in clause 44 of the contract would be squarely attracted. Once the conditions
precedent contained in the said proceedings are satisfied, the judicial authority is statutorily mandated to refer
the matter to arbitration. What is necessary to be looked into therefor, inter alia, would be as to whether the
subject-matter of the dispute is covered by the arbitration agreement or not."
"45 Reliance placed by the learned counsel on Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya and Another
[(2003) 5 SCC 531 is misplaced.Therein, not only a suit for dissolution of the firm was filed, but a different
cause of action had arisen in relation whereto apart from parties to the arbitration agreement, other parties had
also been impleaded. In the aforementioned lgc 65 of 124 wps-7804.09 & 7636.09
fact situation, this Court held :
"Secondly, there is no provision in the Act that when the subject-matter of the suit includes subject-matter of
the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is
also no provision for splitting the cause or parties and referring the subject-matter of the suit to the
arbitrators."
"47 Such a question does not arise herein as the parties herein are parties to the arbitration agreement and the
question in regard to the jurisdiction of the arbitrator, if any, can be determined by the arbitrator himself in
terms of Section 16 of the 1996 Act."
In my view, the Judgment in Sukanya Holdings Pvt. Ltd. (supra), has no application even in the present case
because the parties to the instant proceedings are parties to the Arbitration Agreement and the cause of action
which is sought to be invoked is also covered by the Arbitration Agreement between the parties and the said
relief i.e. anti suit injunction is also claimed on the basis of the dispute between the parties which are covered
by the Arbitration Agreement. It was held by the Apex Court in Everest Holding's case (supra) that the
Judgment in Sukanya Holdings Pvt.Ltd.'s case(supra) has been distinguished in the case of Rashtriya Ispat
Nigam Ltd. because in Sukanya Holdings Pvt. Ltd.'s case two distinct and different causes of action were
merged in a suit and it required independent adjudication of the rights of the flat purchasers who are not
governed by the Arbitration Agreement and the cause of action which is sought to be invoked is also covered
by the Arbitration Agreement between the parties.
lgc 66 of 124 wps-7804.09 & 7636.09
31 Now coming to the judgments relied upon by the learned Senior Counsel for the Petitioners in support of
his contention that there can be no arbitration, if there is no concluded contract. The judgment in Dresser Rand
S.A. (supra) was a case where no contract had come into existence at all as the contract was spelt out on the
basis of a tender document and ultimately the said tender document which was held to be merely an invitation
to offer was not accepted as a final contract. The terms and condition in the said case contemplated for an
agreement to come into existence only when the final purchase order was placed, as there was no such
purchase order placed, it was held that there was no concluded contract. It is is well settled that the tender or
bid document is merely an invitation to offer, and therefore, the same by itself cannot be treated as a contract
between the parties. In the case of Andhra Pradesh Tourism Development Corporation Ltd & Anr. (supra), the
facts were that even prior to the incorporation and registration of a company, a contract was executed by its
purported Managing Director in the capacity of a Managing Director of the company which was at the time
not in existence. It was held that obviously when the parties to an agreement do not exist, there could never be
valid parties to the agreement, and consequently, there can never be a valid Arbitration Agreement between
such parties.
lgc 67 of 124 wps-7804.09 & 7636.09
In the case of Jawahar Lal Burman (supra) the contention was that there was only a conditional acceptance of
the tender and therefore there was no concluded valid contract. On the basis of the facts of the said case the
Apex Court has held in Para 15 of the said report that there was a concluded contract and the condition of
security deposit was a condition subsequent and not a condition precedent.
In the case of Rickmers Verwaltung GmbH (supra) the correspondence between the parties were sought to be
relied upon to spell out a concluded contract. It is in the said context that the Apex Court examined the said
case and came to a conclusion that the correspondence in that case does not spell out a concluded contract
between the parties. In my view, the said judgments do not further the case of the Petitioners in any manner.
As indicated above, the inquiry that this Court is required to make under Section 45 of the Indian Arbitration
Act is limited to determine prima facie whether there is in existence an Arbitration Agreement and if yes, refer
the parties to arbitration unless it finds that the Arbitration Agreement is invalid, inoperative, null, void and
incapable of being performed. Invalidity of the agreement could only be on the ground if the same is
questioned on the grounds of coercion, fraud, misrepresentation or that the lgc 68 of 124 wps-7804.09 &
7636.09
said agreement has not been duly executed. It is pertinent to note that in the instant case, the parties are not
relying upon any correspondence for the purposes of establishing the existence of the contract, because in the
instant case the IPLA is duly executed in writing and signed by the parties. The correspondence that is sought
to be relied upon by the parties is in support of their respective assertions that the IPLA is not a concluded
contract or that the IPLA is a concluded contract. So far as the Respondents are concerned, the said
correspondence is relied upon to demonstrate that the parties had applied their mind to the drafts of the IPLA,
that were prepared before finally executing the same on 29/09/2006. In my view, the Lower Appellate Court
was right in interfering with the order passed by the Trial Court. The view taken by the Lower Appellate
Court on the aspect of referring the parties to arbitration on a prima facie view that there is in existence an
Arbitration Agreement cannot be faulted with in the facts and circumstances of the case. CONCLUSION -
32 In the light of the well settled position in law that the Court whilst considering an Application under
Section 45 of the Indian Arbitration Act has only to arrive at a prima facie conclusion that there exist an
Arbitration Agreement, the submission of the learned Senior Counsel for the Petitioners that since the Lower
Appellate Court has referred the parties to arbitration lgc 69 of 124 wps-7804.09 & 7636.09
without recording a finding that the IPLA is a concluded contract, is therefore without merit. The scope of the
jurisdiction under Article 227 of the Constitution of India has been succinctly elucidated in the judgments
which have been cited on either side. It is well settled that the powers under Article 227 of the Constitution of
India cannot be exercised "as a cloak of an Appeal in disguise" and that the writ court cannot substitute its
own conclusion for the conclusion reached by the courts below. Interference is called for only if the impugned
order results in a mis-carriage of justice or the findings are so perverse that no reasonable person could have
arrived at such findings. In my view, in the facts and circumstances of the present case, the conclusion arrived
at by the Lower Appellate Court whilst referring the parties to arbitration cannot be said to be a conclusion
which could not be arrived at in the facts and circumstances of the case
33 In any event, since the findings of the Lower Appellate Court can only be said to be prima facie in nature,
the Petitioners would have an opportunity to agitate the issue which they seek to agitate before the Arbitral
Tribunal. Hence in so far as the part of the impugned order, which relates to the application filed by the
Respondents under Section 45, is concerned, no interference is called for in the writ jurisdiction of this Court
under Article 227 of the Constitution of India. The Writ Petition No.7804 of 2009 is accordingly dismissed.
Rule discharged, with no order as to costs. lgc 70 of 124 wps-7804.09 & 7636.09
34 SUBMISSIONS ON BEHALF OF THE PETITIONERS BY THE LEARNED SENIOR COUNSEL
DR.VEERENDRA TULZAPURKAR IN WRIT PETITION NO.7636 OF 2009
(i) That assuming that the IPLA is a concluded contract in view of Clause 18.3 wherein it has been
specifically stated that the "Arbitration and Conciliation Act, 1996" i.e. the Indian Arbitration Act would be
applicable, the said Act would therefore govern the procedure as also a conduct of the proceedings and
therefore the English Courts would not have jurisdiction.
(ii) That since the arbitration is governed by the Indian Arbitration Act, it is only the Indian Courts which
would have jurisdiction, and the Petitioners are therefore entitled to an injunction restraining the Respondents
from proceeding further with the proceedings in the English Court;
(iii) That in view of an express choice of law i.e. the Indian Arbitration Act, having been made by the parties
as the law governing the arbitration and the curial law, there is no question of determining the seat of
arbitration. For the said purpose the learned Senior Counsel would place reliance on the following judgments
reported in :-
lgc 71 of 124 wps-7804.09 & 7636.09
(1) (2007) 5 SCC 692, National Agricultural Co-op Marketing Federation Indian Ltd v/s. Gains Trading Ltd.
(2) (2009) 7 SCC 220, Citation Infowares Ltd. v/s. Equinox Corporation ;
(3) (2008) 10 SCC 308, Indtel Technical Services Pvt. Ltd v/s. W.S. Atkins;
(4) (2002) 4 SCC 105, Bhatia International v/s. Bulk Trading S.A. And Another;
(5) (1988) 1 Lloyds L.R. 116, Naviera Amazonica v/s Compania International;
(6) 2011(3) ARBL 350, Prima Buildwell v/s. Lost City; (7) (2008) E.W.H.C. 426, Breas of Doune v/s. Alfred
Mc Alpine,
(iv) That in so far as arbitration proceedings are concerned, the concept of venue is different from the concept
of seat of arbitration. The seat of arbitration would have the consequences of fixing the jurisdiction. In the
instant case, since the London is only the "venue" and since the parties have chosen the application of the
Indian Arbitration Act, the parties would be governed by the said Indian Law.
(v) That the determination of the seat of arbitration would come into play only if the parties have not chosen
the law which would be applicable and it is only in the said context that the Court would have to find out as to
which curial law would apply to the arbitration. Moreover, the curial law comes much later which is in respect
of the conduct of the proceedings. In the instant case, there lgc 72 of 124 wps-7804.09 & 7636.09
is no need to find out the law applicable for which the seat of arbitration can be an indicia, as the parties have
by choice agreed to the application of the Indian Arbitration Act. For the said purpose the learned Senior
Counsel relied upon two English Judgments i.e. the judgment reported in (2008) EWHC 426 in the matter of
Braes of Doune Wind Farm (Scotland) Ltd. v. Alfred Mcalpine Business Services Ltd. and (1988) Vol.1
Lloyd's Law Reports 116 in the matter of Naviera Amazonica Peruana S.A. v/s. Compania Internacional DE
Seguros Del Peru.
(vi) That once the agreement contained a express term which in this case is the Indian Arbitration Act, it is not
open for the Court to read into a contract a term on the basis of the venue which in the instant case is the
application of the English Law. The learned Senior Counsel for the said purpose relied upon the judgments of
the Apex Court reported in (1968) 1 SCR 821 in the matter of Nathati Jute Mills Ltd. v/s Khyaliram
Jagannath.
(vii) That it is not permissible to interpret the said clause 18.3 in a restricted manner so as to limit/confine the
choice of law made by the parties only to some parts of the Act. When the agreement in clause 18.3 provides
that the 'provisions of the Arbitration and lgc 73 of 124 wps-7804.09 & 7636.09
Conciliation Act, 1996 shall apply', it is agreed between the parties that the entire Act applies and not the
select provisions. In support of the said contention the learned Senior Counsel would place reliance on the
judgments of the Apex Court reported in (1994) 4 SCC 104 in the matter of Assistant Excise Commissioner
v/s Isaac Peter, and 1968 (1) SCR 821 in the matter of Naihiti Jute Mills Limited v/s. Khyalynam Jagannath.
(viii) That once the parties have agreed that the Indian Arbitration Act would apply, then any action contrary
to the provisions of the Indian Arbitration Act amounts to breach of contract, and if a party commits breach of
contract after expressly agreeing to the application of the Indian Arbitration Act thereby to the exclusive
jurisdiction of the Indian Court, the Court ought to grant an interim injunction preventing continuance of such
breach. (ix) That since the substantive prayer is as regards the injunction sought by the Petitioners against the
Respondents restraining them from approaching the English Courts in view of the said Arbitration Agreement,
this Court would have to consider the grant of the said relief as the said relief cannot be the subject matter of
arbitration. The learned Senior Counsel relied upon the lgc 74 of 124 wps-7804.09 & 7636.09
judgment of the Apex Court in (2003) 5 SCC 531 in the matter of Sukanya Holdings
(P) Ltd. v/s. Jayesh H Pandya and anr.
(x) That it is well settled that where a party is put in an inextricable situation by the proceedings filed in a
foreign court, such a situation would be oppressive to such a party. The Apex Court has ruled that in such
cases the Courts in India ought to exercise jurisdiction and injunct parties from proceeding with the
proceedings in a foreign court. Reliance was placed on the judgment of the Apex Court reported in (1987) 1
SCC 496 in the matter of ONGC v/s. Western Company, North America. (xi) That the learned Senior Counsel
for the Petitioners in the alternative submitted that even assuming the English Arbitration Act, 1996 applies,
since Section 18 which provides for appointment of Arbitral Tribunal being non-mandatory, and in view of
the agreement between the parties that the Indian Arbitration Act will apply, the application of the
non-mandatory provision of the English Arbitration Act is excluded by virtue of the provisions of Section 4(2)
of the English Arbitration Act, 1996. The English Court therefore would have no jurisdiction to entertain any
application for appointment of Arbitral Tribunal. lgc 75 of 124 wps-7804.09 & 7636.09
(xii) That the issue of seat of arbitration would not arise in the present case in view of the settled position in
law as enunciated by the Apex Court in the case of Bhatia International v/s Bulk Trading SA and Another
reported in (2002) 4 SCC 105 wherein the Apex Court has held that in cases of international commercial
arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or
implied, exclude all or any of its provisions.
(xiii) That the matter of appointment of Arbitral Tribunal is covered by the law of Arbitration Agreement, and
not the curial law or lex arbitri. In support of the said submission the learned Senior Counsel would place
reliance on the judgment of the Apex Court reported in (1998) 1 SCC 305 in the matter of Sumitomo Heavy
Industries v/s. ONGC, and (2012) 1 BCR 547 in the matter of Sakuma Exports v/s Louis .
(xiv) That the curial law that would be applicable to the arbitration proceeding cannot be approached from the
choice of seat if the parties have expressly chosen the application of a particular law. The approach should
therefore be to find out what is the law lgc 76 of 124 wps-7804.09 & 7636.09
chosen by the parties rather than first finding out the seat and then determine the law; that once the parties
have made a choice of the law applicable to Arbitration Agreement and the curial law, then there is no need
for finding out what the seat is and what would be the law if a seat is in a particular country. (xv) That the
reference to the seat becomes relevant only in the absence of choice of the curial law and this is borne out
from the passages of the very text books and the judgments relied upon by the Respondents.
(xvi) That the choice of the parties as regards the proper law of arbitration or the curial law is the
determinative factor for ascertaining the seat of arbitration. Only absent such choice, the question of finding
the seat of arbitration arises. (xvii) That the judgments cited on behalf of the Respondents on the aspect of seat
being the determinative factor are not applicable in the facts of the present case when the parties have
expressly chosen the application of the Indian Arbitration Act. In the cases cited by the Respondents there was
no choice of the proper law of the Arbitration Agreement and/or the curial law and it is in the lgc 77 of 124
wps-7804.09 & 7636.09
said circumstances that the choice of the seat became a determinative factor.
(xviii) That the parties have agreed to the application of the Indian Arbitration Act, 1996 to be the proper law
of arbitration as well as curial law is also indicative from the fact that in clause 18.3 the expression "Presiding
Arbitrator" is used which appears in the Indian Arbitration Act, 1996 whereas the English Arbitration Act,
1996 the word "Umpire" appears.
(xix) If a party acts against the terms of the contract, it has the effect of causing harm and injury to the other
side. In the instant case, the Respondents have invoked jurisdiction of the English Courts and thereby
dragging the Petitioners to a Court which does not have jurisdiction in terms of the agreement. Reliance was
placed on the judgment of the Apex court in ONGC v/s. Western Company, North America.(supra)
(xx) That the Petitioners are entitled to an anti suit injunction by the reason of choice of the Indian Arbitration
Act, by the parties as the applicable law relating to the entire arbitration. It is only the Indian Courts which
would have jurisdiction, and the English lgc 78 of 124 wps-7804.09 & 7636.09
Courts would have none. The Respondents having approached the English Court thereby breaching the
agreement as they have wrongly invoked the jurisdiction of the English Court, the Petitioners are therefore
approaching the Civil Court to prevent continuance of the breach by seeking an anti suit injunction. (xxi) That
the assets of the Respondents in the form of shares of Petitioner No.1 and the dividend income arising
thereform are in Daman making the Respondents personally amenable to the jurisdiction of the Daman Court
as any order passed by the Daman Court can be enforced against the assets of the Respondents in Daman.
(xxii) That the Petitioner No.1 being a joint venture between the Respondent No.1 and Mehra family. A joint
venture is in the nature of a partnership. The Respondent No.1 as partner of the joint venture is carrying on
business in Daman, and as such are within the personal jurisdiction of the Daman Court. The learned Senior
Counsel in support of the said contention has relied upon the judgment of the Apex Court reported in 1995(1)
SCC 478 in the matter of New Horizons Limited and Anr v/s Union of India, and the judgments of this Court
reported in AIR 1932 Nag 114 in lgc 79 of 124 wps-7804.09 & 7636.09
the matter of Tarabai v/s Chogmal and in AIR 1971 Bom 362 in the matter of Ex-parte-Girdharlal Shankar
Dave which was approved in the judgment reported in 1986 MLJ 325 in the matter of Harshad V/s Ishardas.
(xxiii) That allowing the Respondents to proceed in the English Court will result in allowing them to commit
breach of and continue to commit breach of the express agreement between the parties. 35 SUBMISSIONS
ON BEHALF OF THE RESPONDENTS BY THE LEARNED SENIOR COUNSEL SHRI NAVROZE
SEERVAI IN WRIT PETITION NO.7636 OF 2009:-
[A] That the seat is a juristic concept and is not a linguistic concept, as is sought to be contended by the
learned counsel for the Petitioners. The juristic concept of a seat is to be gathered from the terms of the
agreement, as it expresses the consensual intent of the parties.
[B] That use of the expression "place", "venue" or directly referring to the "city" where the arbitration is to
take place, would mean that all such words, phrases are used to indicate the seat of arbitration and would not
mean a geographical location.
lgc 80 of 124 wps-7804.09 & 7636.09
[C] That since none of the parties to the IPLA are even located in London, it therefore clearly indicates that
London was not referred to for the sake of convenience but was designated as the seat by the parties.
(D) That the parties having chosen the seat of arbitration as London which is contained in Clause 18.3 of the
agreement, it is not proper for the Petitioners to resile from the said clause so as to contend that London was
chosen geographically as it was convenient for the parties to meet in London.
(E) That the Petitioners approaching the Civil Court in Daman i.e. the Indian Court are therefore acting in
breach of the Arbitration Agreement.
(F) The conjoint reading of Sections, 2, 4 and 5 of the English Arbitration Act makes it clear that once the
Arbitration Agreement is in writing and the venue is London, the said agreement would have to be given
effect.
(G) That in terms of the English Arbitration Act both the mandatory and non-mandatory provisions of the said
Act would apply. lgc 81 of 124 wps-7804.09 & 7636.09
(H) That in view of the fact that the seat of arbitration is London, the applicability of the Arbitration and
Conciliation Act, 1996 of India would only govern the Arbitration Agreement but not the Lex Arbitri.
(I) That the law of the country wherein the seat is situated would be applicable in so far as the Lex Arbitri is
concerned, the said position is made clear from the commentaries of the learned Authors Mustill & Boyd,
Russell and Redfern & Hunter. The learned Senior Counsel relied upon the following passages from the
commentaries of the three learned authors.
Mustill and Boyd - Chapter IV - The applicable law and the jurisdiction of the court.
Russell - Paragraphs 2-087, 2-088, 2-090, 2-093, 2-094, 2-099, 2- 100 to 2-109.
Redfern and Hunter - Chapter 3 - Paragraphs 3.09 to 3.33 & Paragraph 3.34 from the Chapter - The Law
Governing the Arbitration
[J] That the learned Authors have made it clear that in the absence of an agreement as to the procedural law,
the choice of seat determines the procedural law of the arbitration. That where lgc 82 of 124 wps-7804.09 &
7636.09
parties have failed to choose the law governing the arbitration proceedings, those proceedings must be
considered as being governed by the law of the country in which the arbitration is held on the ground that it is
the country most closely connected with the proceedings. In support of the said contention, the learned Senior
Counsel for the Respondents has relied upon the following judgments. (1970) AC 583, James Miller &
Partners Ltd. v/s Whitworth Street Estate; (1984) 1 QB 291, Bank Mellat v/s Helliniki Techniki SA; (1988) 1
Lloyd's Law Reports 116, Naviera v/s Compania; (2011) 6 SCC 179, Dozco India Pvt. Ltd. v/s Doosan
Infracore Company Ltd; (2011) 6 161, Videocon Industries Ltd v/s. Union of India; (2011) 9 SCC 735 Yograj
Infrastructure Ltd. v/s. Ssang Yong Engineering and Construction Ltd; (2010) 3 Arb. L.R. 70, Bhushan Steel
v/s Singapore International Arbitration Centre; and (2011) 3 Arb. L.R. 350, Prima Buildwell Private Ltd v/s.
Lost City Development LLC.
(K) That since the seat of arbitration being London, the English Law would be applicable can be seen from
Section 4 of the English Arbitration and Conciliation Act, 1996. The said Act postulates that unless there is
clear and unequivocal intention to the contrary lgc 83 of 124 wps-7804.09 & 7636.09
the law of the country wherein the seat of arbitration is situated would govern the law of arbitration.
(L) That the seat of arbitration has got far reaching consequences in the context of the application of the lex
arbitri or the curial law, the learned Senior Counsel in support of his contention that it would be the English
Arbitration Act that would be applicable relied upon the following English judgments :-
[I] (2008) Vol. 1 Lloyd's Law Reporter page 239 in the matter of C v D.
[II] (2007) Vol. 1 Lloyd's Law Reporter page 237 in the matter of A v B
[III] 2007 Vol. 1 Lloyd's Law Reporter page 358 in the matter of A v B (Costs) (No.2)
[IV] (2009) Vol.2 Lloyd's Law Reporter page 376 in the matter of Shashoua and others v Sharma
[V] (2006)1 AC page 221 in the matter of Lesotho Highlands Development Authority v/s Impregilo Spa and
others. [VI] 1970 AC page 583 in the matter of James Miller & Partners Ltd, and Whitworth Street Estates
(Manchester) Ltd. (Lord Hudson, J)
[VII] (1984) 1 QB page 291, in the matter of Bank Mellat v Helliniki Techniki S.A (Lord Waller, Lord Kerr
and Lord Robert Goff L. JJ)
[VIII] (1988) Vol 1 page 116, in the mater of Naviera Amazonica Peruana S.A. v. Compania Interacional De
Serguros Del Peru
[M] That the seat being London, the arbitration proceedings would be governed by the English Arbitration
Act, and therefore, there would be exclusion of the Indian Arbitration Act, in so far as the Lex Arbitri or the
curial law is concerned, the natural corollary lgc 84 of 124 wps-7804.09 & 7636.09
would be that the English Courts would have supervision over the arbitration proceedings, therefore, the
Respondents were entitled to approach the English Court. In support of the said contention, the learned Senior
Counsel relied upon the following English Judgments :-
[I] (2007) Vol.2 Lloyd's Law Reporter page 367 in the matter of C v D
[II] (2008) Vol. 1 Lloyd's Law Reporter Appeal Court page 239 in the matter of C v D.
[III] (2007) Vol. 1 Lloyd's Law Reporter page 237 in the matter of A v B
[IV] 2007 Vol. 1 Lloyd's Law Reporter page 358 in the matter of A v B (No.2)
[IV] (2009) Vol.2 Lloyd's Law Reporter page 376 in the matter of Shashoua and others v Sharma
[N] That in so far as international commercial arbitration is concerned, there are three potential systems of law
applicable to the arbitration viz, (1) The law governing the substantive contract; (2) The law governing the
agreement to arbitrate and the performance of that agreement; and (3) The law governing the conduct of the
arbitration. In majority of cases all three will be the same, but (1) will often be different from (2) and (3), and
occasionally, but rarely, (2) may also differ from (3). [O] That the enquiry of the Court to ascertain the choice
of seat in a case where a place/venue/city has been mentioned/nominated by lgc 85 of 124 wps-7804.09 &
7636.09
the parties, does not commence with a consideration of the proper law of the contract/ arbitration, whilst
ignoring the chosen place/venue, as contended by the Petitioners. If the said contention of the Petitioners is
accepted, it would mean that once the parties have chosen the law governing the Arbitration Agreement, that
law is both the law of the Arbitration Agreement and the curial law and the parties's express choice of a curial
law by reference to a seat is to be completely ignored and rendered otiose
[P] That the choice of law has to be a specific choice of curial law i.e. the agreement must state that the law of
a particular country as the curial law. In the absence of any such specific agreement as to curial law, the law
of the country in which the seat of arbitration is situate will apply.
[Q] That the non-mandatory provisions of the English Arbitration Act can be excluded if there is an express
agreement to the contrary and such agreement is the one contemplated by Section 4(2) of the English
Arbitration Act and that in the absence of any such agreement, the non mandatory provisions become
mandatory and that in view thereof, the provisions of Section 18 of the English lgc 86 of 124 wps-7804.09 &
7636.09
Arbitration Act, which provides for machinery for appointment of Arbitral Tribunal, is applicable and the
Respondents cannot be prevented from approaching the English Court for constitution of the Arbitral
Tribunal.
[R] That the curial law and the substantive law relating to Arbitration Agreement are different and separate;
whereas the substantive law of arbitration governs the existence or validity of the arbitration, the curial law
governs the reference including the appointment of Tribunal, and that the terms 'Constitution of the Tribunal'
refers to the composition or qualification of the arbitrators and not its appointment.
[S] That the Petitioners being in breach of the agreement whereby they have agreed to the exclusive
jurisdiction of the English Court having agreed to London as the seat are not entitled to any anti- suit
injunction.
[T] That the Respondents are not amenable to the jurisdiction of the Courts in Daman and the Respondents
cannot therefore be injuncted from proceeding in a Court which has exclusive jurisdiction.
lgc 87 of 124 wps-7804.09 & 7636.09
[U] That the Petitioners are not entitled to anti-suit injunction in view of the well settled principles laid down
in the judgment of the Apex Court reported in (2003) 4 SCC 341 in the case of Modi Entertainment Ltd. V/s.
W.S.G. Cricket Pvt. Ltd.
[V] The learned Senior Counsel in the alternative submitted that assuming the Indian Arbitration and
Conciliation Act 1996 applies on account of the choice of London as the venue, the English Courts, if not
having an exclusive jurisdiction, have concurrent jurisdiction on account of Section 2(4) of the English
Arbitration Act.
[W] That since the parties have not specifically provided for as to what is to happen in the event of a failure of
the procedure for appointment of the Arbitral Tribunal, and since Section 18 of the English Act has not been
excluded by the parties, the English Courts have concurrent jurisdiction.
CONSIDERATION - WRIT PETITION NO.7636 OF 2009
36 Heard the learned counsel for the parties and also perused the Written Submissions filed on behalf of the
parties. lgc 88 of 124 wps-7804.09 & 7636.09
37 This Court in Writ Petition No.7804 of 2009 has taken a prima facie view that there is in existence an
Arbitration Agreement and therefore the parties can be referred to arbitration. In so far as instant Petition i.e.
Writ Petition No.7636 of 2009 is concerned, the question is whether the Petitioners are entitled to an anti suit
injunction, and whether the English Courts have jurisdiction.
38 The adjudication of the said aspect therefore revolves around the interpretation of clause 18.3 of the IPLA.
For the sake of convenience, the said clause 18.3 is revisited herein under for the purposes of the present
Petition. "Clause 18.3---- All proceedings in such arbitration shall be conducted in English. The venue of the
arbitration proceedings shall be London. The arbitrators may (but shall not be obliged to) award costs and
reasonable expenses (including reasonable fees of counsel) to the Party(ies) that substantially prevail on merit.
The provisions of the Indian Arbitration and Conciliation Act, 1996 shall apply"
39 The defining words therefore are that "The venue of the arbitration proceedings shall be London", "The
provisions of the Indian Arbitration and Conciliation Act, 1996 shall apply". The learned Senior Counsel for
the Petitioners would contend, relying upon the said words that the parties have made a choice of Lex Arbitri
as well as curial law, and therefore, there is no question of embarking upon an exercise of determining the seat
so as to lgc 89 of 124 wps-7804.09 & 7636.09
determine the curial law that would be applicable. In the said context, it would be apposite to refer to the
judgment in Bhatia International v/s Bulk Trading S.A. & Another reported in (2002) 4 SCC 105; which
covers the issue of the application of Part-I of the Indian Arbitration Act. In the said case the arbitration clause
provided that the arbitration would as per the rule of the International Chambers of Commerce. The arbitration
was to be held in Paris. Section 9 of the Arbitration Act, 1996 was invoked. The Additional District Judge
seating at Indore held that he had jurisdiction against the said order. A writ was filed which was dismissed and
the matter reached the Apex Court. The Apex Court held that Part-I applies even when the arbitration was to
be held out of India unless parties agreed to exclude application of that part. Para-32 of the said judgment is
material and is reproduced herein under :- "32. To conclude we hold that the provisions of Part I would apply
to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions
of Part I would compulsory apply and parties are free to deviate only to the extent permitted by the derogable
provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I
would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that
case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or
excluded by that law or rules will not apply."
40 In the said context, a reference could be made to the judgment cited on behalf of the Petitioners viz. (2007)
5 SCC 692 in the matter of National Agricultural Co-op Marketing Federation India Ltd. v/s Gains lgc 90 of
124 wps-7804.09 & 7636.09
Trading Ltd. Paras 8 and 9 are material and are reproduced herein under :- "8. Let me now examine whether
the arbitration procedure and appointment of arbitrator is governed by the Act, or by the laws in Hong Kong.
This depends on the interpretation of the arbitration clause in particular the following words : "the matter in
dispute shall then be referred to and finally resolved by arbitration in Hong Kong in accordance with the
provisions of the Arbitration and Conciliation Act, 1996." The respondent wants to read this provision thus :
(i) the matter in dispute shall be referred to
arbitration at Hong Kong;
(ii) the matter in dispute shall be finally resolved by arbitration at Hong Kong; and
The respondent wants to ignore the words "in accordance with the provisions of Arbitration and Conciliation
Act, 1976 or any other statutory modification, enactment or amendment thereof for the time being in force" in
clause 17 as a meaningless addition. The use of the words 'referred to and finally resolved by arbitration in
Hong Kong', according to respondent, shows an intention that the arbitration has to take place in Hong Kong
in accordance with Hong Kong Laws.
9. The rules of interpretation require the clause to be read in the ordinary and natural sense, except where that
would lead to an absurdity. No part of a term or clause should be considered as a meaningless surplusage,
when it is in consonance with the other parts of the clause and expresses the specific intention of parties.
When read normally, the arbitration clause makes it clear that the matter in dispute shall be referred to and
finally resolved by arbitration in accordance with the provisions of the Arbitration and Conciliation Act, 1996
(or any statutory modification, enactment or amendment thereof) and the venue of arbitration shall be Hong
Kong. This interpretation does not render any part of the arbitration clause, meaningless or redundant. Merely
because the parties have agreed that the venue of arbitration shall be Hong Kong, it does not follow that Laws
in force in Hong lgc 91 of 124 wps-7804.09 & 7636.09
Kong will apply. The arbitration clause states that the Arbitration and Conciliation Act, 1996 (an Indian
Statute) will apply. Therefore, the said Act will govern the appointment of arbitrator, the reference of disputes
and the entire process and procedure of arbitration from the stage of appointment of arbitrator till the award is
made and executed/given effect to."
(2009) 7 SCC 220 in the matter of Citation Infowares Limited v/s. Equinox Corporation. Paras 9, 12, 16, 31
and 32 are material and are reproduced herein under :-
"9. What is important is the agreement dated 25.01.2007 which has already been referred to. Under the said
agreement clause 10.1 provided as under:
"10.1 Governing law- This agreement shall be governed by and interpreted in accordance with
the laws of California, USA and matters of dispute, if any, relating to this agreement or its
subject matter shall be referred for arbitration to a mutually agreed Arbitrator."
Thus, in between, first agreement dated 09.02.2004 and the subsequent agreement dated 25.01.2007 there was
an essential difference that under the last agreement the governing law was to be that of California, USA.
However, that clause did provide for arbitration in case of disputes." "12 So far so good. However, the
question that has arisen is whether this Court would have the jurisdiction in the present factual scenario and on
the backdrop of the fact that the parties vide the aforementioned clause 10.1 had agreed that the governing law
would be that of California, USA. According to the applicant, it is only this Court which would have the
jurisdiction to appoint the Arbitrator, while according to the respondent this Court does not have the
jurisdiction to appoint the Arbitrator as the provisions of the Arbitration Act would necessarily stand excluded
in view of the specific language of clause 10.1 of the agreement wherein the governing law would be the law
of California, USA."
lgc 92 of 124 wps-7804.09 & 7636.09
"16. As against this, Shri Krishnan Venugopal, Learned Senior Counsel appearing on behalf of the respondent
urged from the language of the clause 10.1 that where the governing law is agreed between the parties, say
foreign law, then essentially, the question of appointment of arbitrator also falls in the realm of the said
foreign law and not within the realm of Arbitration and Conciliation Act."
"31 It may be that the Arbitrator might be required to take into account the applicable laws which may be the
foreign laws but that does not effect the jurisdiction under Section 11 which falls in Part I which has been
specifically held applicable in Bhatia International case. The learned Judge, deciding Indtel Technical
Services' case also has taken into consideration this aspect and has expressed in Paragraph 36 as follows:
(SCC p.317)
"36...... The decisions cited by Mr. Tripathi and the views of the jurists referred to in NTPC
case support such a proposition. What, however,
distinguishes the various decisions and views of the authorities in this case is the fact that in Bhatia
International this Court laid down the proposition that notwithstanding the provisions of
Section 2(2) of the Arbitration and Conciliation Act, 1996 indicating that Part I of the said Act would apply
where the place of arbitration is in
India, even in respect of international commercial
agreements, which are to be governed by the laws
of another country, the parties would be entitled
to invoke the provisions of Part I of the aforesaid Act and consequently the application made under
Section 11 thereof would be maintainable.
The situation therefore is identical in the present matter." "32 Shri Venugopal, however, contended that if the
parties intended specifically in this case that the law governing the contract was Californian law, as expressed
lgc 93 of 124 wps-7804.09 & 7636.09
in Bhatia International as well as in Indtel Technical Services' case, an implied exclusion of Part I should be
presumed. I am afraid it is not possible to read such an implied exclusion. Seeing the striking similarity
between Clause 10.1 in the instant case and Clauses 13.1 and 13.2 in Indtel case which have been quoted
above and further the view expressed by learned Judge in Indtel Technical Services' case regarding the
exclusion, it is only possible to read even distantly such an implied exclusion of Part I. It cannot be forgotten
that one of the contracting parties is the Indian party. The obligations under the contract were to be completed
in India. Further considering the nature of the contract, it is difficult to read any such implied exclusion of Part
I in the language of Clause 10.1. That argument of learned senior counsel for the respondent therefore must be
rejected."
(2008) 10 SCC 308 in the matter of Indtel Technical Services Private Limited v/s. W.S. Atkins Rail Limited;
Para 36 is relevant and is reproduced herein under :-
"36 Although, the matter has been argued at great length and Mr. Tripathi has tried to establish that the
decision of this Court in Bhatia International case is not relevant for a decision in this case, I am unable to
accept such contention in the facts and circumstances of the present case. It is no doubt true that it is fairly
well- settled that when an arbitration agreement is silent as to the law and procedure to be followed in
implementing the arbitration agreement, the law governing the said agreement would ordinarily be the same
as the law governing the contract itself. The decisions cited by Mr. Tripathi and the views of the jurists
referred to in NTPC case support such a proposition. What, however, distinguishes the various decisions and
views of the authorities in this case is the fact that in Bhatia International this Court laid down the proposition
that notwithstanding the provisions of Section 2(2) of the Arbitration and Conciliation Act, 1996 indicating
that Part I of the said Act would apply where the place of arbitration is in India, even in respect of
international lgc 94 of 124 wps-7804.09 & 7636.09
commercial agreements, which are to be governed by the laws of another country, the parties would be
entitled to invoke the provisions of Part I of the aforesaid Act and consequently the application made under
Section 11 thereof would be maintainable."
(1988) 1 Lloyds L.R. 116 in the matter of Naviera Amazonica v/s Compania International, In the said
judgment the statement of law in Para (C) on page 119 is relevant and the same is reproduced herein under :-
"Where the parties have failed to choose the law governing the arbitration proceedings, those proceedings
must be considered, at any rate prima facie, as being governed by the law of country in which the arbitration is
held, on the ground that it is the country most closely connected with the proceeding." Similar view has been
expressed in the judgments reported in 2011(3) ARBL 350, in the matter of Prima Builders v/s. Lost City, and
(2008) E.W.H.C. 426, in the matter of Breas of Doune v/s. Alfred . The proposition which is laid down is that
once an express choice is made by the parties, the parties would be bound by the said choice.
41 It is a well settled position based on the commentaries of the learned authors as also the judicial
pronouncements, that the problems arising out of an arbitration may call for the application of any one or
more of the following laws :-
lgc 95 of 124 wps-7804.09 & 7636.09
[i] the proper law of the contract i.e. the law governing the contract which creates the substantive rights of the
parties in respect of which dispute has arisen;
[ii] the proper law of arbitration agreement i.e. the law governing the obligation of the parties to submit
disputes to arbitration and to honour any award; and [iii] the curial law i.e. the law governing the conduct of
the individual reference.
The learned authors Mustill & Boyd have classified them as follows :-
[i] The proper law of arbitration agreement governs the validity of the arbitration agreement, the question
whether a dispute lies within the scope of the arbitration agreement; the validity of the notice of arbitration;
the constitution of the tribunal; the question whether an award lies within the jurisdiction of the arbitrator; the
formal validity of the award; the question whether the parties have been discharged from any obligation to
arbitrate future dispute.
[ii] The curial law governs : the manner in which the reference is to be conducted; the procedural powers and
duties of the arbitrator; questions of evidence; the determination of the proper law of the contract.
[iii] The proper law of the reference governs: the question whether the parties have been discharged from the
obligation to continue with the reference of the individual dispute.
The learned author Russell has classified in Chapter 5(c) as follows:-
lgc 96 of 124 wps-7804.09 & 7636.09
"That with the arbitration agreement itself it is also open to the parties to specify a procedural law for the
arbitration which is different from the law governing the arbitration agreement. In Para 2-101 it is made clear
that in the absence of an agreement as to the procedural law the choice of seat prescribes the procedural law of
arbitration."
The learned authors Mustill & Boyd with reference to determination of the curial law have stated as follows :-
"The choice of curial law may be made expressly, and such a choice is effective, even though the law chosen
is neither the proper law of the arbitration agreement nor the law of the country where the arbitration is to take
place. An express choice of curial law different from that of the proper law of the arbitration agreement is not
particularly unsual and does not give rise to any particular problems. An express choice of curial law different
from the law of the country in which the arbitration is to be held is however almost unknown. This is no doubt
because of the formidable conceptual and practical problems which are likely to arise should be necessary to
invoke the powers of a court in relation to the reference.... In the absence of express agreement, there is a
strong prima facie presumption that the parties intended the curial law to be the law of the `seat' of the
arbitration, i.e. the place at which the arbitration is to be conducted, on the ground that that is the country most
closely connected with the proceedings. So in order to determine the curial law in the absence of an express
choice by the parties it is first necessary to determine the seat of the arbitration, by construing the agreement
to arbitrate."
The learned Senior Counsel appearing for the Respondents strenuously urged that in the instant case though
London is the "venue" for the arbitration meetings, it is in fact the seat of arbitration and not a convenient lgc
97 of 124 wps-7804.09 & 7636.09
geographical location and therefore the English Arbitration Act would apply and it would be the English
Courts that would have jurisdiction. The learned Senior Counsel for the Respondents in support of the said
contention relied upon a number of judgments which included well known English Judgments. It would be
apposite to consider them at this stage. 2007 2 Lloyd's Law Reports 367, C v D ; 2008 1 Lloyd's Law Reports
239, C v D; 2007 1 Lloyd's Law Reports 237, A v B; 2007 1 Lloyd's Law Reports page 358, A v B; (2009) 2
Lloyds Law Reports 376, Shashoua v Sharma; 2006 1 AC 221, Lesotho Highlands Development Authority
Vs. Impergilo SpA; (2011) 6 SCC 179, Dozco India Pvt.Ltd v Doosan Infracore Company Ltd; (2011) 6 161,
Videocon Industries Ltd v Union of India; 2011 9 SCC 735, Yograj Infrastructure Vs Ssang Yong
Engineering; 2010 (3) Arbitration Law Reports 70, Bhushan Steel Ltd Vs Singapore International Arbitration
Centre; 2011 (3) Arbitration Law Reports 350, Prima Buildwell Pvt. Ltd Vs. Lost City Development and the
judgment of Justice EDER reported in (2012) EWHC 689 (Comm) between Enercon GmbH and Anr. v/.s
Enercon (India) Ltd.
In C v. D, 2007 Lloyd's Law Reports 367 (supra) the relevant clause was as follows :-
"Any dispute arising under this policy shall be finally and fully determined in London, England under the
provisions of the English Arbitration Act of 1950 as amended"
lgc 98 of 124 wps-7804.09 & 7636.09
It is in the said context the learned Judge has observed in Para 24 of the said report as follows :-
"By agreeing to the 1996 Arbitration Act, the parties thus, prima facie, accept the framework of the mandatory
provisions and, absent other agreement, to the application of the non-mandatory provisions. Section 4(4)
provides that "it is immaterial whether or not the law applicable to the parties' agreement is the law of
England and Wales. In the context this must mean the law applicable to the parties agreement to arbitrate."
Thereafter in Para 25 the learned Judge has observed as follows :- "Thus, if the parties agree a curial law
which is not the law of England and Wales, provisions of that are effective to replace any non-mandatory
provision in the 1996 Act, insofar as they make provision for such a matter."
The said judgment can therefore be said to be a judgment on the proposition that the contract referred to in the
provision of Section 2 of the English Act is not the contract regarding proper law of the underlying contract
but the contract pertaining to the proper law of arbitration and, once such contract exists, then, it is
permissible for the parties to contract out of non-mandatory provisions.
The second judgment in C v. D 2008 1 Lloyd's Law Reports 239 (supra) reiterates the said position. Para 19
of the said report is material wherein it has been observed as follows :-
lgc 99 of 124 wps-7804.09 & 7636.09
"That is reinforced by the terms of section 4(5) of the Act which refers not to a choice of law clause generally
but to a choice of law as "the applicable law in respect of a matter provided for by a non-mandatory provision
of this part" of the Act. In other words there has to be a choice of law with regard to the specific provision of
the Act which the parties agree is not to apply."
In the case of A v. B, (2007) 1 Lloyd's Law Reports 237 (supra), the choice of law of arbitration was Swiss
law and the seat was Geneva. In the said circumstances it was held that the Swiss law was applicable and,
therefore, the English Court had no jurisdiction. In the said case also reference was made to the decision in
Naviera Amazonica and a passage was quoted from the said judgment in Para 111 thereof which is
reproduced herein under :-
"English law does not recognise the concept of a "de- localised" arbitration (see Dicey & Morris at pp 541,
542) or of "arbitral procedures floating in the transitional firmament, unconnected with any municipal system
of law" (Blank Mellat v Helliniki Techniki SA [1984] QB 291 at p 301 (Court of Appeal). Accordingly, every
arbitration must have "seat" or locus arbitri or forum which subjects its procedural rules to the municipal law
there in force... Prima facie, ie in the absence of some express and clear provision to the contrary, it must
follow that an agreement that the curial or procedural law of an arbitration is to be the law of X has the
consequence that X is also the law of the "seat" of the arbitration. The Lex fori is then the law of X and,
accordingly, X is the agreed forum of the arbitration. A further consequence is then that the courts which are
competent to control or assist the arbitration are the courts exercising jurisdiction at X."
lgc 100 of 124 wps-7804.09 & 7636.09
In the case of A v. B, 2007 1 Lloyd's Law Reports 358 (supra) in view of the choice of law of arbitration
being Swiss and the seat of arbitration being Geneva, it was held that the part "A" had committed a breach of
contract to invoke the jurisdiction of the English courts.
In the case of Shashoua v. Sharma (supra) the relevant clause was clause 14 which was the arbitration clause
which provided for arbitration to be in accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce, Paris. Clause 14.2 provided for arbitration proceedings to be conducted
in the English language and clause 14.4 provided that "the venue of arbitration shall be London, United
Kingdom". However, the matrix contract or the underlying contract was to be governed by the laws of India,
and therefore there was no choice of law of arbitration. It was in the context of the said facts that it was stated
that the English law was applicable to arbitration. The contention of the Defendants that as the proper law of
the underlying contract was Indian law, the law relating to arbitration is also Indian law, was negatived by the
court on the ground that there was no choice of the law of arbitration, and therefore, since the seat being in
England, the English law as applicable. It was held in the said judgment that the venue was equivalent to the
seat and the ICC Rules were not the law of arbitration as the ICC Rules were not connected to any court. A
reference was made to the decision in the case of Braes and Doune. In the said fact situation it was held lgc
101 of 124 wps-7804.09 & 7636.09
in the said case that English law was applicable as the seat was in England as there was no choice of the law
of arbitration.
In the case of Lesotho Highlands Development Authoritative v. Impregilo SpA (supra) it has been expressly
stated that the law of Lesotho (that is the proper law of the underlying contract) is not an agreement to the
contrary in writing of the nature referred to in Section 4(2) and 4(5) of the English Arbitration Act, 1996.
In the case of Dozco India Private Limited v. Doosan Infracore Company Limited (supra), the seat was Seoul,
Korea and it was held that the same cannot be changed without a written agreement. In para 14 a passage from
Mustill and Boyd was referred to. However, what is required to be noted is that in the said case also there was
no choice of the law of arbitration. It is in the said context, the seat assumes importance for determining the
curial law or lex arbitri. It is in the fact situation of the said case, it was held that Part-I of the Indian
Arbitration Act would not apply.
In the case of Videocon Industries Ltd. v. Union of India (Supra) the question that arose in the said case can
be found in paras 20 and 24 of the said report viz. Kuala Lumpur was the designated seat or the seat of
arbitration and the same has been shifted to London, and the next issue was, whether the lgc 102 of 124
wps-7804.09 & 7636.09
Delhi High Court could entertain a petition filed by the Respondents under Section 9 of the Arbitration and
Conciliation Act, 1996. There was no issue before the Apex Court as to whether when there is a choice of
proper law of arbitration, the law of the country in which seat is situate will prevail over such choice. In the
said case there was no dispute that Kuala Lumpur was the seat and the parties had initiated arbitration
proceedings on the said basis. The Apex Court in the said fact situation held that the Delhi High Court would
have no jurisdiction to entertain the Petition under Section 9 of the Indian Arbitration Act. Notwithstanding
the fact that the meetings of the arbitration were held in London, though the seat of arbitration was in Kuala
Lumpur. In the case of Yograj Infrastructure v. Ssang Yong Engineering (supra), as can be seen from reading
of Para 54, the proper law of arbitration was also the law of Singapore and the seat was also in Singapore. The
law of Singapore was incorporated in the rules and which rules were agreed to be applicable by the parties in
the contract.
In the case of Bhushan Steel Ltd v. Singapore International Arbitration Centre (supra), it was held that Part-I
of the Arbitration Act would apply, if there is no agreement regarding the governing law of arbitration. lgc
103 of 124 wps-7804.09 & 7636.09
In the case of Prima Buildwell Pvt. Ltd v. Lost City Development (supra) it has been held that in the absence
of any other agreement to the contrary, the law governing the Arbitration Agreement where the arbitration is
agreed to be held is the law of England and Wales.
42 Relying upon the said judgments it was the submission of the learned Senior counsel for the Respondents
that in the face of the express choice of seat i.e. the place/venue of the arbitration proceedings, the Courts have
very rarely (and for exceptional reasons) disregarded the choice of seat of the parties.
43 The next limb of the submissions of the learned Senior Counsel for the Respondents was that in the
absence of an express agreement as to the procedural law, the choice of seat prescribes the procedural law of
arbitration. In support of which submission, the learned Senior Counsel for the Respondents relied upon the
judgment of the House of Lords in James Miller & Partners Ltd. V/s Whitworth Street Estate, (supra). In the
said judgment a passage from Dicey and Morris has been quoted with approval which is reproduced herein
under :-
"Where the parties have failed to choose the law governing the arbitration proceedings, those proceedings
must be considered, at any rate prima facie, as being governed by the law of the country in which the
arbitration is held on the ground that it is the country most closely connected with the proceeding" lgc 104 of
124 wps-7804.09 & 7636.09
The learned Senior Counsel in support of the aforesaid submission also relied upon the judgment in the case
of Bank Mellat V/s Helliniki Techniki SA, (supra) wherein it is held that the curial law or the procedural law
of the forum of arbitration will apply in the absence of any contractual provision to the contrary. The
following excerpt on page 301 of the said judgment is material and is reproduced herein under :-
"The fundamental principle in this connection is that under our rules of private international law, in the
absence of any contractual provision to the contrary, the procedural (or curial) law governing arbitrations is
that of the forum of the arbitration, whether this be England, Scotland or some foreign country, since this is
the system of law with which the agreement to arbitrate in the particular forum will have its closest
connections : see Whitworth Street Estates (Manchester) Ltd. v. James Miller & Partners Ltd . [1970] A.C.
583"
In support of the aforesaid submission the learned Senior Counsel also relied upon the judgment in the case of
Naviera Amazonica V/s Compania Internacional, (supra).
"Before considering the correct construction of this particular contract on the question whether the "seat" (or
whatever term one uses) of any arbitration thereunder was agreed to be London or Lima, or---- to put it
colloquially--- whether this contract provided for arbitration in London or Lima, I must summarize the state of
the jurisprudence on this topic and deal with the general submissions which were debated on this appeal. In
that connection we were referred to Oppenheim & Co. v. Mahomed Haneef, [1922] 1 A.C.
482 at p.487; James Miller & Partners Ltd. v. Whitworth lgc 105 of 124 wps-7804.09 & 7636.09
Street Estates (Manchester) Ltd, [1970] 1 Lloyd's Rep. 269; [1970] A.C. 583, in particular per Lord
Wilberforce at pp.281 and 616, 617; Black Clawson International Ltd. v. Paperwerke Waldhof-Aschaffenburg
A.G., [1981] 2 Lloyd's Rep. 446 per Mr. Justice Mustill (as he then was) at p.453; Dicey & Morris on The
Conflict of Laws (11th ed.) vol.1, r. 58 at pp. 539 to 542; Mustill & Boyd on Commercial Arbitration, passim;
D. Rhidian Thomas "The Curial Law of Arbitration Proceedings", Lloyd's Maritime and Commercial Law
Quarterly (1984) p.491; and Redfern and Hunter "The Law and Practice of International Commercial
Arbitration" (1986) at pp. 52 to 70. In addition, among many other publications one should mention the two
important earliest and most recent discussions of this topic; first Dr. F. A. Mann's "Lex facit arbitrium" in
1967, reprinted in Arbitration International, 1986, Vol. 2 p. 241 and now "The new lex mercatoria" by Lord
Justice Mustill in Bos and Brownlies "Liber Amicorum for Lord Wilberforce" (1987) at p. 149
Without analysing any of this material in detail,
the conclusions which emerge from it can be summarized as follows :
A. All contracts which provide for arbitration and contain a foreign element may involve three potentially
relevant systems of law. (1) The law governing the substantive contract. (2) The law governing the agreement
to arbitrate and the performance of that agreement. (3) The law governing the conduct of the arbitration. In the
majority of cases all three will be the same. But (1) will often be different from (2) and (3). And occasionally,
but rarely, (2) may also differ from (3).
In the present case there was no investigation of
(1), the substantive law, because nothing turns on it, but I am content to assume that this was the law of Peru
on the ground that this was the system with which this policy was most closely connected. On this appeal
there was also ultimately no contest about law (2) which may be regarded as the substantive law of the
agreement to arbitrate. The Judge rightly held that on the wording lgc 106 of 124 wps-7804.09 & 7636.09
of the arbitration clause the parties had agreed expressly that their agreement to arbitrate should be subject to
English law and that the leave granted under O.11 to serve the insurers out of the jurisdiction had been correct
on this ground. Accordingly, the entire issued turned on law (3), the law governing the conduct of the
arbitration. This is usually referred to as the curial or procedural law, or the lex fori.
B. English law does not recognize the concept of a "de-localised" arbitration (see Dicey & Morris at pp. 541,
542) or of "arbitral procedures floating in the transnational firmament, unconnected with any municipal
system of law" (Bank Mellat v. Helliniki Techniki S.A., [1984] Q.B. 291 at p.301 (Court of Appeal)).
Accordingly, every arbitration must have a "seat" or locus arbitri or forum which subjects its procedural rules
to the municipal law which is there in force. This is what I have termed law (3).
C. ... Where the parties have failed to choose the law governing the arbitration proceedings, those proceedings
must be considered, at any rate prima facie, as being governed by the law of the country in which the
arbitration is held, on the ground that it is the country most closely connected with the proceedings... See
Dicey & Morris Vol. 1 at p.539 and the references to the approval of this classic statement by the House of
Lords in Whitworth Stree Estate v. James Miller (sup). Or, to quote the words of Mr. Justice Mustill in the
Black Clawson case (sup.) at p.453 where he characterized law (3) as "the law of the place where the
reference is conducted: the lext fori". Although Mr.Milligan contested this, I cannot see any reason for
doubting that the converse is equally true. Prima facie, i.e. in the absence of some express and clear provision
to the contrary, it must follow that an agreement that the curial or procedural law of an arbitration is to be the
law of X has the consequence that X is also to be the "seat" of the arbitration. The lex fori is then the law of
X, and accordingly X is the agreed forum of the arbitration. A further consequence is then that the lgc 107 of
124 wps-7804.09 & 7636.09
Courts which are competent to control or assist the arbitration are the Courts exercising jurisdiction at X.
Prima facie, therefore, the forum of any arbitration which might arise under this policy was London, since the
arbitration clause provided, in effect, that the law in force in London was to be the curial or procedural law of
any such arbitration.
D. In the light of some of the matters debated before us it may be helpful to add that in my view, none of these
principles is different in relation to "institutional" arbitrations, such as those conducted under the rules of the
International Chamber of Commerce or the London Court of International Arbitration. The relevant rules of
such bodies are incorporated by reference into the contract between the parties, and their binding contractual
effect will be respected and enforced by the Courts of the forum, except in so far as they may conflict with the
public policy or any mandatory provisions of the lext fori."
A reading of the said judgments relied upon by the learned Senior Counsel for the Respondents makes it clear
that it is only in the absence of an agreement as to the procedural law that the choice of seat assumes
significance as in that event the seat prescribes the procedural law.
In so far as the decision of Justice EDER rendered in the proceedings between the Petitioners and the
Respondents is concerned, it is required to be noted that the learned Judge in Para 54 has himself observed as
follows :-
"Another reason why I have reached my conclusion somewhat reluctantly is that I would have reached the
conclusion that the "seat" of the arbitration is London lgc 108 of 124 wps-7804.09 & 7636.09
which is, of course, the conclusion which the claimants say Judge Purohit reached. Given my conclusion that
these proceedings be stayed, my views on this issue are obiter. However, this issue was addressed at some
length and in the event that this matter goes further or otherwise comes back before the court, it may be
convenient to set out my brief reasons for such conclusion. It may also be of assistance to the BHC if an when
it comes to hear the Writ Petitions although, as I say, my views are strictly obiter."
Further in Para 55, after referring to the issue which arises in the contest of the question of "seat", the learned
judge has observed as follows :- "These are difficult issues. However, for present purposes I propose to
address the question of "seat" on assumption that it is to be determined on a balance of probability as a matter
of English law by the court although I recognise that those assumptions are not necessarily correct."
The said decision therefore can hardly be said to support the contention of the Respondents as regards London
being the "seat" of arbitration as the learned Judge has himself observed that the views expressed by him were
obiter. 44 The submission of the learned Senior Counsel for the Respondents that the law governing the
arbitration proceedings will be the English law and that the parties have conferred exclusive jurisdiction on
the English Court, and thereby have excluded the jurisdiction of the Indian Court is made on the basis that the
seat being London, the English Arbitration and Conciliation Act, 1996 lgc 109 of 124 wps-7804.09 & 7636.09
applies, and therefore, the arbitration proceedings are to be governed by the English Court, and therefore, the
jurisdiction of the Indian Courts is ousted. 45 The issue which therefore arises is, as to whether in the instant
case enquiry as to determine the seat of arbitration is necessary so that the same would result in determination
of the curial law that would be applicable. The legal position as can be seen that emerges from the judgments
cited by the learned Senior Counsel for the Petitioners is that the said enquiry is necessary if the parties have
failed to choose the curial law, as in the instant case it is not disputed by the Respondents that the law relating
to Arbitration Agreement is the Indian Arbitration Act. In the context of the said issue it would be relevant to
revert to the excerpt of clause 18.3 of the IPLA which is as follows :- "Clause 18.3---- All proceedings in such
arbitration shall be conducted in English. The venue of the arbitration proceedings shall be London. The
arbitrators may (but shall not be obliged to) award costs and reasonable expenses (including reasonable fees of
counsel) to the Party(ies) that substantially prevail on merit. The provisions of the Indian Arbitration and
Conciliation Act, 1996 shall apply"
As can be seen that after providing for award costs and reasonable expenses (including reasonable fees of
counsel) to the Party(ies) that substantially prevail on merit. The said clause provides that the provisions of
the Indian Arbitration and Conciliation Act, 1996 shall apply. If the said clause is read in the ordinary and
natural sense, the placement of the words that "the Indian lgc 110 of 124 wps-7804.09 & 7636.09
Arbitration and Conciliation Act shall apply" in the last clause 18.3 indicates the specific intention of the
parties to the application of the Indian Arbitration Act, not only to the Arbitration Agreement but also that the
curial law or the Lex Arbitri would be the Indian Arbitration Act. The application of the Indian Arbitration
Act therefore can be said to permeate clause-18 so that in the instant case laws (2) and (3) are same if the
classification as made by the learned authors is to be applied. The reference to the Indian Arbitration Act is
therefore not merely a clarification as to the proper law of the arbitration agreement as is sought to be
contended on behalf of the Respondents. It has to be borne in mind that the parties are businessmen and would
therefore not include words without any intent or object behind them. It is in the said context, probably that
the parties have also used the word "venue" rather than the word "seat" which is usually the phrase which is
used in the clauses encompassing an Arbitration Agreement. There is therefore a clear and unequivocal
indication that the parties have agreed to abide by the Indian Arbitration Act at all the stages, and therefore,
the logical consequence of the same would be that in choosing London as the venue the parties have chosen it
only as a place of arbitration and not the seat of arbitration which is a juristic concept.
46 The proposition that when a choice of a particular law is made, the said choice cannot be restricted to only
a part of the Act or the substantive lgc 111 of 124 wps-7804.09 & 7636.09
provision of that Act only. The choice is in respect of all the substantive and curial law provisions of the Act.
The said proposition has been settled by judicial pronouncements in the recent past. A useful reference could
be made to the judgment of a learned Single Judge of the Gujarat High Court reported in XLVII Gujarat Law
Reports 658 in the case of Hardy Oil and Gas Ltd. Vs Hindustan Oil Exportation Co. Ltd.. Para 11.3 of the
said judgment is relevant is reproduced herein under :-
"However, their Lordships observed in Para 32 that in cases of international commercial arbitrations held out
of India provisions of Part-I would apply unless the parties by agreement, express or implied, exclude all or
any of its provisions. In that case laws or rules chosen by the parties would prevail. Any provision, in Part-I,
which is contrary to or excluded by that law or rules would not apply. Thus, even as per the decision relied
upon by learned Advocate for the appellant, if the parties have agreed to be governed by any law other than
Indian law in cases of international commercial arbitration, same would prevail. In the case on hand, it is very
clear even on plain reading of Clause 9.5.4 that the parties' intention was to be governed by English law in
respect of arbitration. It is not possible to give a narrow meaning to this clause as suggested by the Ld. Sr.
Advocate, Mr. Thakore, that it would apply only in case of dispute of arbitration agreement. It can be
interpreted to only to mean that in case of any dispute regarding arbitration, English law would apply. When
the clause deals with the place and language of arbitration with a specific provision that the law governing
arbitration will be the English Law, such a narrow meaning cannot be given. No other view is possible in the
light of exception carved out of clause 0.5.1 relating to arbitration. Term "Arbitration", in clause 9.5.4 cannot
be taken to mean arbitration agreement. Entire arbitral proceedings have to be taken to be governed by
English law"."
lgc 112 of 124 wps-7804.09 & 7636.09
47 The argument which was advanced on behalf of the Petitioner therein who had invoked the Indian
Arbitration Act to say that whereas the choice pertained only to the existence and validity of the Arbitration
Agreement other matters were not covered by that choice and therefore an application under Section 9 the
Indian Arbitration Act was maintainable was negatived by the learned Judge. The said view in Hardy Oil and
Gas Ltd (supra) has been approved by the Apex Court in Videocon Industries Ltd (supra) and followed by a
learned Single Judge of this Court in Sakuma Export Ltd. v/s Louis Drefus Commodities reported in 2012 (1)
Bom CR 547, (Paras 35-38) are relevant and are reproduced herein under :-
35. There is yet another ground on which the aforesaid conclusion can be reached. It also arises out of the
express agreement between the parties. As noted above, the express agreement between the parties stipulates
that Rules of the Refined Sugar Association, London form part of the contract, if they are not inconsistent
with the other provisions of the contract. The first clause relied upon by the Respondent from the
Introduction/Preamble to the Rules of Refined Sugar Association relating to Arbitration reads as under :
"When the parties to a contract have incorporated a clause to the effect that any dispute arising out of it shall
be referred to The Refined Sugar Association (sometimes referred to as the RSA) such dispute may be
referred to the Association for settlement in accordance with the Rules relating to Arbitration and the
Arbitration Act, 1996."
36. From the above clause, it is clear that once the parties to the contract incorporate a clause to the effect that
any dispute arising out of the contract shall be referred to the Refined Sugar Association, such dispute must be
settled in accordance with the Rules relating to Arbitration and English Arbitration Act, 1996. Therefore even
on this analysis it is clear that this Court does not lgc 113 of 124 wps-7804.09 & 7636.09
have jurisdiction to entertain the present Petition under Section 34 of the Arbitration and Conciliation Act,
1996.
37. Again, the second clause relied upon by the Respondent from the Introduction/Preamble to the Rules of
Refined Sugar Association relating to Arbitration reads as under :
"The Association's Rules and Arbitration procedures are conducted in accordance with English Law.
However, where the parties have agreed a contract law other than English, the Association may, with the
parties' agreement, decide the dispute."
38. The above Clause clearly stipulates that the Association's Rules and Arbitration procedures are conducted
in accordance with English Law and it is only where the parties have agreed to a contract law other than
English, the association may, with the parties agreement decide the dispute. In the present case, the parties
have not agreed to any contract law other than English. In view of categorical assertion in the clause set out
hereinabove that the Association Rules and Arbitration procedures are conducted in accordance with English
law coupled with the fact that the parties have expressly agreed to be governed by the Association's Rules
relating to arbitration, there remains no doubt in concluding that the parties have expressly agreed that the
arbitration would be conducted in accordance with the English law. Again in Rule 8 it is clearly stated that
"For the purpose of all proceedings in arbitration, the contract shall be deemed to have been made in England,
........England shall be regarded as the place of performance, disputes shall be settled according to the law of
England............. The seat of the arbitration shall be England and all proceedings shall take place in
England.........." In view thereof, nothing turns on the issue raised by the Petitioner that the Respondents have
not exactly incorporated the recommended arbitration clause which include a condition that "such arbitration
shall be conducted in accordance with English Law". As set out hereinabove, the introduction to the
Association's Rules/Preambles provide that the arbitration proceedings are generally conducted in accordance
with English Law except where the parties have agreed to a contract law other than English. In lgc 114 of 124
wps-7804.09 & 7636.09
view thereof, though it is beyond any doubt from the aforestated decisions of the Hon'ble Supreme Court that
the curial law does not govern the question pertaining to the maintainability of the present Petitions u/s.34 of
the Arbitration & Conciliation Act, 1996, it is established that the parties herein have agreed to the
Association's Rules and arbitration procedures being conducted in accordance with English law and Mr.
Chinoy is not correct in his submission that the agreement contains no provision stipulating a choice of law
governing the arbitration procedure."
48 In the judgment reported in (2012) 2 BCR 168 in the matter of Eitzen vs Ashapura what fell for
consideration before a learned Single Judge of this Court was the interpretation of the clause which stated that
"English law to apply". The said law was interpreted to mean that the same governed the entire arbitration
proceedings and the use of the expression "umpire" clearly established that the parties chose the application of
the English law as the said expression "umpire" appears in the English law. The said judgment in Eitzen
(supra) has relevance to the present case as in the present case Clause 18.3 of the IPLA uses the expression
"Presiding Arbitrator" which expression finds place in the Indian Arbitration Act and not in the English
Arbitration Act. This therefore is one more circumstance or indicia which shows that the choice of law was
the Indian Arbitration Act and such choice having been made by the parties, the same governed the entire
arbitration. The findings of the Lower Appellate Court on the aspect of the law applicable which are drawn on
the basis of London being the "seat" of arbitration are therefore unsustainable. lgc 115 of 124 wps-7804.09 &
7636.09
49 Though in terms of interpretation of Clause 18.3, this Court has reached a conclusion that the lex arbitri
would be the Indian Arbitration Act. The question would be, whether the Indian Courts would have exclusive
jurisdiction. The nexus between the "seat" or the "place" of arbitration vis-a- vis the procedural law i.e. the lex
arbitri is well settled by the judicial pronouncements which have been referred to in the earlier part of this
judgment. A useful reference could also be made to the learned authors Redfern and Hunter who have stated
thus :-
"the place or seat of the arbitration is not merely a matter of geography. It is the territorial link between the
arbitration itself and the law of the place in which that arbitration is legally situated..."
The choice of seat also has the effect of conferring exclusive jurisdiction to the Courts wherein the seat is
situated. In the instant case, as can be seen, there is no agreement between the parties as regards the "seat" of
arbitration as the parties have chosen London as only the venue for the arbitration meetings. In view of
London being the venue for the arbitration meetings, the question that is posed is, whether the English Courts
can exercise jurisdiction in support of arbitration between the parties. 50 It is required to be noted that the
instant case is a uncommon case where there is no agreement between the parties as regards the seat of
arbitration, and the agreement between the parties is only as regards London lgc 116 of 124 wps-7804.09 &
7636.09
being the venue for arbitration. The Arbitration Agreement in the instant case also does not provide what is to
happen in the event of a failure of the procedure for appointment of the Arbitral Tribunal. Therefore in so far
as Section 18 of the English Act is concerned, which is a non-mandatory provision, the application of the said
provision has not been expressly excluded by the parties, and therefore, the said provision is available for
invocation by the parties. In the context of London being only the venue and not the seat of arbitration. It
would be apposite to refer to Section 2(4) of the English Arbitration Act which reads thus:-
"The Court may exercise a power conferred by any provision of this Part not mentioned in subsection (2) or
(3) for the purpose of supporting the arbitral process where
(a) no seat of the arbitration has been designated or determined, and
(b) by reason of a connection with England and Wales or Northern Ireland the court is satisfied
that it is appropriate to do so."
Therefore in so far as Section 2(4) of the English Act is concerned, the two requirements for exercising power
under any of the provisions of the English Arbitration Act, are that no seat of arbitration has been designated,
and that by reason of a connection with England and Wales or Northern Ireland the court is satisfied that it is
appropriate to do so. In the instant case, both the conditions for the exercise of power under the said Part of
the English Act are satisfied, as no place other than London is mentioned in clause 18 of the IPLA, lgc 117 of
124 wps-7804.09 & 7636.09
since London is not the seat, and therefore, no seat of arbitration has been designated by the parties. Secondly
since the meetings of the arbitration are to take place in London, there is a strong connection between the
arbitration and the country wherein the arbitration meetings have to take place. As indicated above Section
2(4) of the English Arbitration Act clamps itself in view of the peculiar fact situation where the seat of
arbitration has not been designated by the parties.
Looked at from the said angle i.e. the territorial link between the arbitration itself and the law of the place in
which the arbitration meetings are to be held, the conclusion that is is required to be drawn is that the English
Courts would have concurrent jurisdiction. The Lower Appellate Court has also held that no exclusive
jurisdiction has been given to the Indian Courts. Hence the Respondents cannot be said to have committed a
breach of the agreement by invoking the jurisdiction of the English Court for constituting the Arbitral
Tribunal. The finding of the Lower Appellate Court to the said extent is required to be sustained.
51 The contention of the learned Senior Counsel for the Respondents that splitting up of the application of
Indian Arbitration Act is permissible, inasmuch as in respect of the Arbitration Agreement the Indian
Arbitration Act would apply but in so far as curial law is concerned, the provisions of the lgc 118 of 124
wps-7804.09 & 7636.09
English Arbitration Act would have application. The said contention proceeds on the basis that London is the
seat of arbitration and therefore, the English Arbitration Act would apply. The Indian Arbitration Act contains
both the procedural and the curial provisions, and therefore, when the parties have agreed to the application of
the Indian Arbitration Act, it has to apply as a whole and not in parts. The submission of the learned Senior
Counsel for the Petitioners based on Sumitomo Heavy Industries (supra) that the appointment of the Arbitral
Tribunal precedes the reference and therefore the curial law is not applicable is well founded. However for the
reason that the parties have chosen London as the place of arbitration, and since there is no agreement
between the parties as regards the seat of arbitration, Section 2(4) of the English Act clamps itself as it were
on the agreement; and therefore notwithstanding the fact that in terms of the law laid down in Hardy Oil and
Gas Ltd (supra) and Sakuma Export Ltd (supra), the invocation of the jurisdiction of the English Courts for
taking such measures as are needed in support of arbitration cannot be prevented as the English Courts can be
said to have concurrent jurisdiction.
52 As regards the submission of the learned Senior Counsel for the Respondents based on Section 4(2) of the
English Act is concerned, the same has to be read with Section 4(5) of the English Act. The said Section
provides that if a choice of law other than the law of England and Wales or Northern lgc 119 of 124
wps-7804.09 & 7636.09
Ireland as applicable law in respect of a matter provided for by a non- mandatory provision of this part is
equivalent to an agreement making provision about that matter. Thus, as per the English Act, when a choice of
law other than law of England is made in respect of a non-mandatory matter (appointment of Arbitral Tribunal
governed by Section 18 of the Act) then such a choice will constitute the agreement contemplated by Section
4 (2) of the English Act so as to make the English Act in-applicable as regards non- mandatory provision. In
the present case, since there is no agreement between the parties as regards the seat and, since the parties have
agreed to hold the arbitration meetings at London, the parties have expressly not excluded the application of
Section 18 of the English Arbitration Act, and is therefore available for invocation by the parties. The parties
would therefore be entitled to approach the English Courts for constitution of the Arbitral Tribunal. 53 In so
far as the relief of anti suit injunction is concerned, the learned Senior Counsel for the Petitioners sought to
rely upon the judgment of the Apex Court reported in (1987) 1 SCC 496 in the matter of ONGC v/s. Western
Company, North America. The said anti suit injunction has been sought by the Petitioners on the ground of
breach of agreement by the Respondents and on the ground of London being forum non-conveniens. The
learned Senior Counsel for the Petitioners contended that the Daman Court has a personal jurisdiction over the
Respondents. In support of the said contention lgc 120 of 124 wps-7804.09 & 7636.09
he sought to rely upon the judgment of the Apex Court reported in (1995) 1 SCC 478 in the matter of New
Horizons Ltd. v/s. Union of India, and the judgments of this Court in Tarabai's case, Girdharlal Shankar
Dave's case and Ishardas's case (supra).
Per contra, in so far as the aspect of anti suit injunction is concerned, the learned Senior Counsel for the
Respondents relied upon the judgment of the Apex Court reported in (2003) 4 SCC 341 in the matter of Modi
Entertainment v/s. W.S.G. Cricket Private Ltd. The principles spelt out by the Apex Court in the said case
whilst considering the application for anti suit injunction can be seen from Para 24 of the said report which is
reproduced herein under :-
"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 lgc 121 of 124 wps-7804.09 & 7636.09
injunction in regard to proceedings which are oppressive or vexatious or in a forum non-conveniens;
(3) Where jurisdiction of a court is invoked on the basis of jurisdiction clause in a contract, the recitals therein
in regard to exclusive or non-exclusive jurisdiction of the court of choice of the parties are not determinative
but are relevant factors and when a question arises as to the nature of jurisdiction agreed to between the
parties the court has to decide the same on a true interpretation of the contract on the facts and in the
circumstances of each case;
(4) a court of natural jurisdiction will not normally grant anti-suit injunction against a defendant before it
where parties have agreed to submit to the exclusive jurisdiction of a court including a foreign court, a forum
of their choice in regard to the commencement or continuance of proceedings in the court of choice, save in an
exceptional case for good and sufficient reasons, with a view to prevent injustice in circumstances such as
which permit a contracting party to be relieved of the burden of the contract; or since the date of the contract
the circumstances or subsequent events have made it impossible for the party seeking injunction to prosecute
the case in the court of choice because the essence of the jurisdiction of the court does not exist or because of
a vis major or force majeure and the like;
(5) where parties have agreed, under a non- exclusive jurisdiction clause, to approach a neutral foreign forum
and be governed by the law applicable to it for the resolution of their disputes arising under the contract,
ordinarily no anti-suit injunction will be granted in regard to proceedings in such a forum conveniens and
favoured forum as it shall be presumed that the parties have thought over their convenience and all other
relevant factors before submitting to non-exclusive jurisdiction of the court of their choice which cannot be
treated just an alternative forum;
(6) a party to the contract containing jurisdiction clause cannot normally be prevented from approaching the
court of choice of the parties as it would amount to lgc 122 of 124 wps-7804.09 & 7636.09
aiding breach of the contract; yet when one of the parties to the jurisdiction clause approaches the court of
choice in which exclusive or non-exclusive jurisdiction is created, the proceedings in that court cannot per se
be treated as vexatious or oppressive nor can the court be said to be forum non-conveniens; and
(7) the burden of establishing that the forum of choice is a forum non-conveniens or the proceedings therein
are oppressive or vexatious would be on
the party so contending to aver and prove the same. In view of the conclusion that this Court has reached,
namely that the English Courts would have concurrent jurisdiction to act in support of arbitration, the case of
the Petitioners for an anti suit injunction does not stand to scrutiny. However, in so far as the aspect of forum
non- conveniens is concerned, in my view, since the Petitioners have agreed to London as the venue for
arbitration, they cannot be heard to complain that the Courts at London are forum non- conveniens for them.
The Petitioners have appeared before the said Courts, and therefore, the case of forum non- conveniens is
bereft of any merit. 54 For the reasons mentioned herein-above the finding (refer para 63 of the impugned
judgment) of the Lower Appellate Court that London is the seat of arbitration is required to be interfered with,
the said finding is accordingly set aside and it is held that London is only a geographically convenient location
which the parties have chosen as a venue to hold the arbitration meetings.
lgc 123 of 124 wps-7804.09 & 7636.09
CONCLUSIONS - WRIT PETITION NO.7636 OF 2009
55 On an interpretation of clause 18.3 of the IPLA this Court has reached a conclusion that the curial law or
Lex Arbitri would be the Indian Arbitration Act. Though the Indian Arbitration Act would apply, however, in
view of the fact that the parties have chosen London as the venue for the arbitration meetings, the English
Courts would have concurrent jurisdiction and therefore the jurisdiction of the English Courts can also be
invoked by the parties for taking such measures as are required in support of arbitration. The judgment and
order of the Lower Appellate Court on the aspect of anti suit injunction is, therefore, sustained but on a
different ground which is mentioned in the body of this Judgment. The above Writ Petition No.7636 of 2009
is accordingly dismissed. Rule discharged, with no order as to costs. [R.M.SAVANT, J]
lgc 124 of 124

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