1994 (1) TMI 282 - SC - Indian Laws

Supreme Court Upholds Validity of Arbitration Agreements in Foreign Awards Case

The Supreme Court allowed the appeals of defendant 4 and defendants 5 to 11, setting aside the High Court and trial court orders. The suit was directed to ... - Issues Involved:1. Application of Section 3 of the Foreign Awards (Recognition and Enforcement) Act, 1961.2. Validity and operativeness of arbitration agreements.3. Jurisdiction of Indian courts.4. Steps taken in legal proceedings and their implications.Summary:1. Application of Section 3 of the Foreign Awards Act:The appeals were against the order of the High Court of Orissa, which dismissed the civil revision petitions filed by the defendants seeking a stay of the suit u/s 3 of the Foreign Awards Act. The trial court had dismissed the applications for stay filed by defendants 4 and 5 to 11, stating they did not satisfy the conditions laid out in Renusagar Power Co. Ltd. v. General Electric Co. The High Court also affirmed this decision, concluding that the arbitration agreements were inoperative due to multiple arbitration clauses involving different arbitrators.2. Validity and Operativeness of Arbitration Agreements:The High Court held that while each arbitration agreement was valid and operative individually, collectively they became inoperative due to the involvement of different arbitrators for different parties. The Supreme Court found this reasoning erroneous, stating that the plaintiff's multiple contracts with different parties could not invalidate the arbitration agreements. The agreements were valid, operative, and capable of being performed.3. Jurisdiction of Indian Courts:Defendant 4 had objected to the jurisdiction of the Indian courts, emphasizing the arbitration clause that disputes should be settled by arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce in Stockholm. The Supreme Court agreed, stating that the plaintiff could not circumvent the agreed arbitration process by filing a suit in India.4. Steps Taken in Legal Proceedings:The trial court and High Court had found that defendant 4 had taken steps in the proceedings by filing applications for time to submit a written statement, which disqualified them from seeking a stay u/s 3 of the Foreign Awards Act. However, the Supreme Court reversed this finding, noting that the applications were filed without proper authority and contrary to express instructions. Therefore, defendant 4 had not taken any steps in the proceedings, fulfilling the condition for seeking a stay.Conclusion:The Supreme Court allowed the appeals of defendant 4 and defendants 5 to 11, setting aside the orders of the High Court and the trial court. The suit was directed to be stayed u/s 3 of the Foreign Awards Act. The applications for stay filed by defendants 1 to 3 were also set aside, but no separate orders were passed due to the stay granted on the lenders' applications. Parties were directed to bear their own costs.