2020 (9) TMI 595 - SC - Indian Laws

Court dismisses application for arbitrator, upholds 'Umbrella Agreement' for dispute resolution. Special Leave Petition denied.

The court dismissed the application for appointing an arbitrator under the purchase orders, ruling that disputes were to be resolved under the 'Umbrella ... Harmonisation of competing arbitration clauses - arbitration clause in a main or umbrella agreement prevailing where disputes relate to the main agreement and connected matters - appointment under Section 11 of the Arbitration and Conciliation Act, 1996 - first invocation principle in arbitration - competence of an already constituted arbitral tribunal where clause providing for ICC arbitration has been invokedHarmonisation of competing arbitration clauses - arbitration clause in a main or umbrella agreement prevailing where disputes relate to the main agreement and connected matters - Whether the arbitration clause contained in the Agreement dated 31.03.2018 (Clause 23) governs the disputes between the parties or the arbitration clause in the individual purchase orders (Clause 7) governs. - HELD THAT: - The Court held that where two documents between the same parties relate to the same overall transaction and one is a comprehensive agreement governing pricing, payment and related mechanisms, the arbitration clause in the main/umbrella agreement governs disputes that pertain to the main agreement and matters connected therewith. The applicant's own invocation and pleadings show that the price, payment terms, deductions and reconciliation issues arise under the Pricing Agreement dated 31.03.2018 and its internal mechanisms. The purchase orders contain more limited supply terms and do not set out the overall pricing and accounting mechanism. The Agreement expressly contemplated coverage of transactions commencing earlier and was comprehensive in scope. Applying the principle of reconciling overlapping clauses (as explained in Olympus Superstructures), the Court concluded that Clause 23 of the main agreement governs the present disputes which predominantly concern pricing and payment adjustments arising under the Pricing Agreement. [Paras 11, 12, 13, 14]The arbitration clause in the Agreement dated 31.03.2018 (Clause 23) governs the disputes between the parties; Clause 7 of the purchase orders does not govern the present dispute.Appointment under Section 11 of the Arbitration and Conciliation Act, 1996 - first invocation principle in arbitration - competence of an already constituted arbitral tribunal where clause providing for ICC arbitration has been invoked - Whether the petitioner's Section 11 application invoking Clause 7 of the purchase orders for appointment of an arbitrator is maintainable when the respondent had earlier invoked Clause 23 and an ICC tribunal has been constituted. - HELD THAT: - The Court noted that the respondent was the first to invoke the arbitration procedure under Clause 23 of the Pricing Agreement by issuing the pre-arbitration notice and initiating ICC proceedings. The Arbitral Tribunal under Clause 23 had been constituted (names and appointment communicated). Given the Tribunal already constituted under the main agreement and the Court's conclusion that Clause 23 governs the disputes, an application under Section 11 seeking appointment under the purchase order clause was not sustainable. The Court also observed that the subject matter advanced by the petitioner in its reply demonstrates that the disputes fall to be determined under the Pricing Agreement and may be dealt with by the ICC tribunal, including issues that overlap with individual purchase orders. [Paras 9, 14, 15, 16, 17]The Section 11 petition seeking appointment of an arbitrator under Clause 7 of the purchase orders is not maintainable and is dismissed; the ICC tribunal constituted under Clause 23 remains the appropriate forum.Final Conclusion: The petitions are dismissed: the arbitration clause in the Agreement dated 31.03.2018 governs the disputes between the parties and, since the respondent had validly invoked that clause and an ICC arbitral tribunal has been constituted, the Section 11 application for appointment under the purchase orders is not sustainable; Arbitration Application No.15/2020 and SLP No.10264/2020 are dismissed with no order as to costs. Issues Involved:1. Appointment of a sole arbitrator under Section 11(6) and Section 11(12)(a) of the Arbitration and Conciliation Act, 1996.2. Applicability of arbitration clauses in purchase orders versus the 'Umbrella Agreement.'3. Validity and enforcement of the arbitration clause in the 'Umbrella Agreement.'Detailed Analysis:1. Appointment of a Sole Arbitrator:The applicant, Balasore Alloys Limited, sought the appointment of a sole arbitrator to adjudicate disputes arising from 37 purchase orders. Alternatively, the applicant requested the appointment of a second arbitrator due to the respondent, Medima LLC's, failure to nominate an arbitrator as per the contracts. The applicant relied on Clause 7 of the purchase orders, which provided for arbitration by a tribunal of three arbitrators.2. Applicability of Arbitration Clauses:The respondent did not dispute the nature of the transactions or the existence of arbitrable disputes. However, they argued that the disputes should be resolved under Clause 23 of the 'Umbrella Agreement' dated 31.03.2018, which they had already invoked by filing a petition before the International Chamber of Commerce (ICC). The respondent contended that the application under Clause 7 of the purchase orders was not bona fide.The court noted that both the purchase orders and the 'Umbrella Agreement' contained arbitration clauses. Clause 7 of the purchase orders specified arbitration by a tribunal of three arbitrators, while Clause 23 of the 'Umbrella Agreement' provided for arbitration under the ICC rules in London, governed by British Law.3. Validity and Enforcement of the Arbitration Clause in the 'Umbrella Agreement':The court referenced the case of *Olympus Superstructures Pvt. Ltd. vs. Meena Vijay Khetan & Ors.* to harmonize the two arbitration clauses. The court concluded that the disputes should be resolved under the main agreement (the 'Umbrella Agreement') when there are overlapping issues. The court emphasized that the 'Umbrella Agreement' was comprehensive and governed all transactions, including those initiated before its execution date.The court observed that the applicant had not initiated the arbitration process; instead, the respondent had invoked the arbitration clause under the 'Umbrella Agreement' first. The applicant's reply to the respondent's notice indicated that the disputes related to pricing and payment terms under the 'Umbrella Agreement.'The court determined that the nature of the disputes, including price determination and payment terms, fell under the 'Umbrella Agreement.' Therefore, the arbitration clause in the 'Umbrella Agreement' governed the disputes, and the Arbitral Tribunal constituted under the ICC rules was appropriate.Conclusion:The court dismissed the application for appointing an arbitrator under Clause 7 of the purchase orders, as the disputes were to be resolved under Clause 23 of the 'Umbrella Agreement.' The Special Leave Petition (SLP) filed by the petitioner, challenging the constitution of the Arbitral Tribunal under the ICC rules, was also dismissed. The court upheld the lower court's decision to reject the interim order of injunction against the Arbitral Tribunal. The judgment emphasized the importance of harmonizing arbitration clauses and resolving disputes under the comprehensive agreement governing the transactions.