TaxTMI 
TaxTMI 
2014 (2) TMI 1170
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....rators ("WTGs") in India. One Dr. Alloys Wobben is the Chairman of the Respondent No.1. Respondent No.2, a company incorporated under the laws of Germany, has the patent of technology in connection with the aforesaid WTGs. In furtherance of their business venture, the parties entered into various agreements, which can be briefly noticed: Share Holding Agreement: 4. On 12th January, 1994, the Appellant Nos. 2 and 3 entered into a Share Holding Agreement ("SHA") with the Respondent No.1. In terms of the SHA, the Respondent No. 1 was to hold 51% shares of the Appellant No. 1-Company, and the Appellant Nos. 2 and 3, collectively, were to hold 49% shares. Technical Know How Agreement: 5. On the same day, i.e. 12th January, 1994, the Appellant No. 1 and the Respondent No. 1 entered into a Technical Know-How Agreement ("TKHA") by which the Respondent No. 1 agreed to transfer to the Appellant No. 1 the right and the technical know-how for the manufacture of WTGs specified therein and their components. Under the terms of the TKHA, the Respondent No. 1 has to supply special components to the Appellant No. 1. Under the TKHA, the Respondent No. 1 is the licensor and the Appellants ....
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....to be brought in line with the Agreed Principles. Thus, the case of the Appellant is that the draft IPLA was not a concluded contract. On the other hand, Respondent No.1 has taken the stand that IPLA is a concluded contract and hence, binding on the parties. Both the parties refer to various e-mails/letters addressed to each other for substantiating their respective stands. It would be useful to notice here some of the emails and other communication exchanged between the parties: E-mails, letters & Text message: i. 30.09.2006: A handwritten letter was addressed by Appellant No.2 to Dr. Wobben, Chairman of Respondent No. 2. In this letter, Appellant No.2 admits signing the IPLA. The fact that IPLA does not provide for E-82 model is also referred to in this letter. ii. 02.10.2006: Dr. Wobben, Chairman of Respondent No.2, addressed a letter to Appellant No.2, stating therein his offer to acquire 6% of Equity shares of the Appellant No.1 Company which were being held by the Mehra Family, for 40 million Euros. iii. 04.10.2006: Email by one Ms. Nicole Fritsch, on behalf of Respondent no.1, wherein it was inter alia stated as follows: "...we will do our utmost to prepare/ad....
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....n of the following legal proceedings: LITIGATION: 12. We may notice only those proceedings between the parties that have a bearing on the issues arising before us. Derivative Suit: 13. Appellants No.2 and 3 filed a derivative suit (in Civil Suit No.2667 of 2007) on 11th September, 2007 before the Bombay High Court ("Bombay Suit"), seeking resumption of supplies, parts and components. In this suit, Respondent No.1 has taken out an Application under Section 45 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Indian Arbitration Act, 1996'). The Bombay Suit and the Application under Section 45 of the Indian Arbitration Act, 1996 are pending disposal. On 31st October, 2007, the Bombay High Court, by an interim order without prejudice to the individual contentions of the parties, directed the Respondent No.1 to resume the supplies to Appellant No.1 until further orders. It appears that initially the supplies were resumed in compliance of the aforesaid order. However, the Appellants claim that the Respondent no.1 after sometime stopped the supplies again. Thereafter, a Contempt Petition was filed before the Bombay High Court at the instance of ....
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....008. Daman Suit: 18. On 8th April, 2008, the Appellants filed Regular Suit No. 9 of 2008 (Daman Suit) before the Court of Civil Judge, Sr. Division, "Daman Trial Court" seeking, inter alia, a declaration to the effect that the draft IPLA was not a concluded contract and correspondingly there was no arbitration agreement between the parties to the draft IPLA. On the same day, i.e. 8th April, 2008, the Daman Trial Court passed an order in the favour of the Appellants, wherein the Respondents were directed to maintain status quo with regard to the proceedings initiated by them before the English High Court. 19. Meanwhile on 11th April, 2008, Appellant No.1, without prejudice, nominated Mr. Justice B.P. Jeevan Reddy, a former Judge of this court as arbitrator. On 24th May, 2008, Mr. Justice B.P. Jeevan Reddy intimated to the Solicitors of the Appellants that the arbitrators felt that there were inherent defects in the arbitration clause contained in the draft IPLA and therefore, the same was unworkable. The letter also expressed the inability of the arbitrators to appoint the third arbitrator. On 5th August, 2008, a joint letter was addressed by both the nominated arbitrators,....
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.... provisions of IPLA. The following two grounds were raised by the Respondents:- A. that the anti-arbitration injunction passed by the Bombay High Court had fallen away; B. that the Appellants had not pursued the writ petitions before the Bombay High Court. 24. On 25th November, 2011, the English High Court passed an order in form of an anti-suit injunction that had the effect of restraining the Appellants from prosecuting/arguing the writ petitions before the Bombay High Court. The Appellants were restrained from approaching the Bombay High Court to clarify whether ad-interim stay granted by it was in place. Meanwhile, on 15th February, 2012, the English High Court passed an ex-parte freezing injunction restraining the Appellant No.1 from disposing of its assets in excess of 90 Million Euros. 25. On 23rd March, 2012, the English High Court (Eder, J.) delivered its judgment, wherein the freezing injunction was discharged. It was inter-alia held in Paragraph 51 of the judgment that anti- arbitration injunction of the Bombay High Court was in force. On 27th March, 2012, the English High Court discharged the anti-suit injunction subject to the undertakings given by Appellant N....
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....he English Solicitors of Respondent No.1 addressed a letter to the English Solicitors of Appellant No.1, in relation to re-listing of their Application dated 11th June, 2012 for appointment of a third arbitrator/re-constitution of the Arbitral Tribunal. In October, 2012, the parties communicated with each other for getting Applications of both the parties listed, which, apart from the Application dated 11th June, 2012, included the following: A. An Application notice issued by Appellant No.1 on 16th October, 2012: i. for a declaration that the undertaking given by Appellant No.1 as set out in Appendix A to the order dated 27th March, 2012 do not prevent it from filing a Special Leave Petition before the Supreme Court of India and, if leave be granted, pursuing such appeals; or ii. if the undertakings (contrary to Appellant No.1's contention), do prevent Appellant No.1 from filing Special Leave Petitions before the Supreme Court of India or pursuing the same, then, a variation of the Undertakings to permit such Special Leave Petitions to be filed and, if leave be granted, to permit such appeals to be pursued. B. An Application notice issued by the Respondents on 17th Octobe....
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....on of the Indian Supreme Court should be awaited." 30. From 3rd December to 14th December, 2012, the learned counsel for the parties made efforts to finalize a draft of the Form of Order and the accompanying undertaking(s) to be submitted to the English High Court; and ultimately, parties agreed to a short hearing before the English High Court. After a hearing, on 19th December, 2012 the parties again made efforts to finalize the Form of Order. Ultimately on 15th February, 2013, the English High Court passed an order declaring that the undertakings given on 27th March, 2012 (dealt with earlier in Para 25 of this judgment) do not prevent the defendant (Appellant herein) from filing and pursuing the Special Leave Petitions and, if leave be granted, the Substantive Appeals. The English High Court further ordered the Appellant No.1 herein to give some fresh undertaking which will supersede and replace the undertakings given earlier on 27th March, 2012. These undertakings restrain the Appellants herein from seeking an injunction against the Respondents save if this Court determines that the seat of the arbitration is in India. It was further directed that the Appellants shall not see....
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...., therefore, necessarily refers to all the four agreements mentioned in the Agreed Principles. 35. Mr. Nariman also pointed out that the reliance upon prior contracts/agreements or correspondence is not permissible to determine whether IPLA is concluded or not. On the contrary, subsequent correspondence and contracts can be looked into for the purpose of determining whether the substantive contract containing arbitration agreement is concluded or not. He relied on Godhra Electricity Co. Ltd. And Anr. Vs. The State of Gujarat and Anr.[ (1975) 1 SCC 199] According to Mr. Nariman, subsequent correspondence in this regard clearly demonstrates the unconcluded nature of the IPLA. 36. Mr. Nariman submitted that under Clause 12 of the IPLA, the duration of the IPLA was till the expiry of the last of the patents, and since the patents portfolio was absent, the duration of IPLA could not be ascertained. He pointed out that the Respondents have wrongly contended that the IPLA has been concluded as the parties have duly signed the same. According to Mr. Nariman, mere signing of a document will not make it a concluded document, if in law, the contract is not concluded. In this context, re....
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....less, such an exercise would not permit the Court to rewrite the clause. In support of the submissions, he relied upon Shin Satellite Public Co. Ltd. Vs. Jain Studio Ltd.[ (2006) 2 SCC 628] He also submitted that the reconstruction of the arbitration clause in the present case cannot be achieved without doing violence to the language to the arbitration clause; and that this would not be permissible in law. For this proposition, reliance was placed upon Bushwall Vs. Vortex (supra). He submitted that the submissions made by the Respondents fly in the face of Section 45 of the Indian Arbitration Act, 1996 which does not permit the Court to make a reference to arbitration if the arbitration agreement relied upon is incapable of being performed. IV. Re: Seat of Arbitration. 40. Mr. Nariman submitted that for the purposes of fixing the seat of arbitration the Court would have to determine the territory that will have the closest and most intimate connection with the arbitration. He pointed out that in the present case provisions of the Indian Arbitration Act, 1996 are to apply; substantive law of the contract is Indian law; law governing the arbitration is Indian Arbitration law; c....
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.... choice of the parties to apply Chapter V to the Part I of the Indian Arbitration Act, 1996); challenge to the award would be under English Arbitration Act, 1996 and not under the Part I of the Indian Arbitration Act, 1996; Indian Arbitration Act, 1996 (Section 48) would apply to the enforcement of the award. 43. Lastly, it was submitted by Mr. Nariman that provisions of Section 18 of the English Arbitration Act, 1996 are derogable and in any event the parties have chosen the Indian Court for constitution of Arbitral Tribunal. V. Re: Anti Suit Injunction 44. It was submitted on behalf of the Appellants that since the seat of arbitration is India, the Courts of England would have no jurisdiction. Appellants rely upon Oil & Natural Gas Commission Vs. Western Company of North America[1987 SCR (1) 1024]. Reliance was also placed upon Modi Entertainment Network & Anr. Vs. W.S.G. Cricket Pte. Ltd.[(2003) 4 SCC 341], in support of the submission that in exercising discretion to grant an anti-suit injunction, the Court must be satisfied that the defendant is amenable to the personal jurisdiction of the Court and that if the injunction is declined the ends of justice will be defeat....
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....as to concern itself with. The court in this case, according to Dr. Singhvi, is not required to determine whether there is a concluded contract, under the Indian Contract Act, 1872. The court has to see whether there is a valid Arbitration Agreement. Dr. Singhvi emphasised that it is for the arbitrator to decide the question with regard to the formation of the underlying contract (IPLA). Further, learned senior counsel submitted that the status of IPLA will not nullify the arbitration clause. 48. The Respondent, according to the learned senior counsel, has to establish the existence of arbitration agreement. Dr. Singhvi, in this context, relied upon Section 7 of the Indian Arbitration Act, 1996 which has three constituents, viz. (i) Intention to arbitrate; (ii) Existence of a dispute; (iii) Existence of some legal relationship. Further, it was submitted that an agreement under Section 7 of the Indian Arbitration Act, 1996 does not require any offer and acceptance. 49. It was further submitted that Section 16 of the Indian Arbitration Act, 1996 is a drastic departure since the Arbitral Tribunal can rule on its own jurisdiction. Further, it was submitted under Section ....
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....nsee and the arbitrator appointed by Licensor shall also act as the presiding arbitrator. 18.2 * * * 18.3 A proceedings in such arbitration shall be conducted in English. The venue of the arbitration proceedings shall be in 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 Indian Arbitration and Conciliation Act, 1996 shall apply. The reference of any matter, dispute or claim or arbitration pursuant to this Section 18 or the continuance of any arbitration proceedings consequent thereto or both will in no way operate as a waiver of the obligations of the parties to perform their respective obligations under this Agreement." 51. Dr. Singhvi also drew our attention to the fact that the Heads of the Agreement have been accepted to be final and binding and that the parties have irrevocably accepted the Arbitration Agreement contained in Clause 18. It was also brought to our notice that the said document has been signed by the Appellant No.1 and Respondent No.1. 52. Learned Senior Counsel also submitted that an arbitratio....
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....ut that the object underlying Sections 10 and 11 is to avoid failure in appointment of arbitrators. In fact, the Respondents tried to avoid the failure by making a concession to let the third arbitrator to be the Presiding Arbitrator. The Letter/email dated 13th March, 2008 clearly demonstrates this intention of Respondents. It was also submitted that the Appellant is determined to avoid the arbitration. Dr. Singhvi submitted that there exists a manifest intention to refer disputes to arbitration and even if there is lacuna it can be cured. Furthermore, according to Dr. Singhvi, the number of arbitrators is only machinery and, therefore, its failure cannot affect the Arbitration Clause. Learned senior counsel relied upon the law laid down in MMTC v. Sterlite Industries (India) Ltd.,[ AIR 1997 SC 605 Para 8-13] Shin Satellite Public Co. Ltd. v. Jain Studios Ltd., (supra) Visa International Ltd. v. Continental Resources (USA) Ltd.,[ (2009) 2 SCC 55, Paras 24-25] Jagdish Chander v. Ramesh Chander & Ors.,[ (2007) 5 SCC 719, pp. 7-8] Smt. Rukmanibai Gupta v. Collector, Jabalpur & Ors.,[ (1980) 4 SCC 556, pp. 6-7] and Nandan Biometrix Ltd. v. D.I. Oils.[ (2009) 4 SCC 495 , pp. 26-30 & 40....
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....submitted that the Appellant cannot get out of the contract unless there is coercion and/or fraud. To argue that there is now a presumption of validity in favour of IPLA being a concluded contract, reliance was sought to be placed upon Grasim Industries Ltd. & Anr. v. Agarwal Steel[(2010) 1 SCC 83, p6] and J.K. Jain v. Delhi Development Authority.[ (1995) 6 SCC 571] 59. Dr. Singhvi also brought to our notice that the execution and finality of the IPLA is also demonstrated by the fact that first page of Heads of Agreement dated 23rd May, 2006 reads as "A PROPOSED INTELLECTUAL PROPERTY LICENSE AGREEMENT." Whereas, the word proposed or draft is conspicuously absent in the IPLA dated 29th September, 2006. This, according to the learned senior counsel, shows that the IPLA was a concluded contract. Dr. Singhvi further submitted that on 29th September, 2006 three drafts, viz. Successive Technical Transfer Agreement, Name Use License Agreement and amendments to the existing Shareholders Agreement were ready and available to the parties, but at that point of time these agreements were under discussion and being negotiated. Admittedly, none of these agreements were initialled, let alone s....
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.... 1. The proper law of the contract ; 2. The law governing the arbitration agreement ; 3. The law governing the conduct of the arbitration also known as curial law or lex arbitri. 63. Reliance was placed upon the following except of Naviera Amazonica Peruana SA (supra): "........in the majority of cases all three will be same but (1) will often be different from (2) and (3). And occasionally, but rarely, (2) may also differ from (3)." 64. The next submission of Dr. Singhvi is that law of the seat dictates the curial law, and that the proper law of the arbitration agreement does not overwhelm law of the seat. Laying particular emphasis on Naviera, Dr. Singhvi submitted that intention of the parties is important to determine the seat. If place is designated then curial law will be that of such place. Dr. Singhvi relied on the ratio of Naviera and submitted that the proper law, law of arbitration and the curial law have all been expressly mentioned in the present case. It was also submitted that in the present case London as venue has to be interpreted having conferred London the status of seat, unless some contrary intention has been expressed. 65. According to Dr....
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....he curial law. However, Arbitrators have been given the flexibility to hold meetings anywhere. He also relied upon the judgment of this court in Chloro (supra) (Paras 80-83) to submit that the approach of the court is to make the arbitration clause workable. Reliance was also placed upon Reva Electric Car Company P. Ltd. v. Green Mobil.[ (2012) 2 SCC 93 ] Issues : 69. We have anxiously considered the submissions of the learned counsel for the parties. We have also considered the written submissions. The issues that arise for consideration of this Court are : i) Is the IPLA a valid and concluded contract? ii) Is it for the Court to decide issue No. (i) or should it be left to be considered by the Arbitral Tribunal? iii) Linked to (i) and (ii) is the issue whether the Appellants can refuse to join arbitration on the plea that there is no concluded IPLA? iv) Assuming that the IPLA is a concluded contract; is the Arbitration Clause 18.1 vague and unworkable, as observed by both the Arbitrators i.e. Mr. V.V. Veeder QC and Mr. Justice B.P. Jeevan Reddy? v) In case the arbitration clause is held to be workable, is the seat of arbitration in London or in India? vi) ....
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....tion clause itself is unworkable. As noticed earlier, learned senior counsel has submitted that in the absence of a concluded contract, there can be no arbitration agreement. In short, the submission is that there can be no severability of the arbitration clause from the IPLA. Since the IPLA is not a concluded contract there can be no arbitration agreement. 74. On the other hand, Dr. Singhvi has submitted, as noticed earlier, that the intention of the parties to arbitrate is clear. Even if the existence of the main contract is under dispute, the court is concerned only with the arbitration agreement i.e. the arbitration clause. The submission of Dr. Singhvi is that the absence of IPLA will not nullify the arbitration clause. 75. We find considerable merit in the submissions made by Dr. Singhvi. It cannot be disputed that there is a legal relationship between the parties of a long standing. Section 44 of the Indian Arbitration Act, 1996 applies to arbitral awards of differences between persons arising out of legal proceedings. Such a relationship may be contractual or not, so long it is considered as commercial under the laws in force in India. Further, that legal relationship....
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....d and explained under Section 18. Section 19 states that "when consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused". Section 19A gives the party who was unduly influenced to enter into a contract an option similar to the one provided by the preceding section. Section 20 makes an agreement void where both the parties thereto are under a mistake as to a matter of fact. In our opinion, all the aforesaid eventualities refer to fundamental legal impediments. These are the defences to resist a claim for specific performance of a concluded contract; or to resist a claim for damages for breach of a concluded contract. We agree with Savant, J. that the issue as to whether there is a concluded contract between the parties can be left to the Arbitral Tribunal, though not for the same reasons. 76. In our opinion, all the issues raised by the Appellants about the non-existence of a concluded contract pale into insignificance in the face of "Heads of Agreement on the proposed IPLA dated 23rd May, 2006". Clause 3 of the Heads of Agreement provides as under:- "3. Governing Law and ....
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....d by the Arbitral Tribunal. 79. Further, the arbitration agreement contained in clause 18.1 to 18.3 of IPLA is very widely worded and would include all the disputes, controversies or differences concerning the legal relationship between the parties. It would include the disputes arising in respect of the IPLA with regard to its validity, interpretation, construction, performance, enforcement or its alleged breach. Whilst interpreting the arbitration agreement and/or the arbitration clause, the court must be conscious of the overarching policy of least intervention by courts or judicial authorities in matters covered by the Indian Arbitration Act, 1996. In view of the aforesaid, it is not possible for us to accept the submission of Mr. Nariman that the arbitration agreement will perish as the IPLA has not been finalised. This is also because the arbitration clause (agreement) is independent of the underlying contract, i.e. the IPLA containing the arbitration clause. Section 16 provides that the Arbitration clause forming part of a contract shall be treated as an agreement independent of such a contract. 80. The concept of separability of the arbitration clause/agreement from t....
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....ld also cease to exist." The aforesaid reasoning has also been approved by a two Judge bench of this Court in Today Homes and Infrastructure Pvt. Ltd. vs. Ludhiana Improvement Trust and Anr.,[ 2013 (7) SCALE 327] wherein it was inter alia held as under: "14. The same reasoning was adopted by a member of this Bench (S.S. Nijjar, J.), while deciding the case of Reva Electric Car Company Private Limited Vs. Green Mobil [(2012) 2 SCC 93], wherein the provisions of Section 16(1) in the backdrop of the doctrine of kompetenz kompetenz were considered and it was inter alia held that under Section 16(1), the legislature makes it clear that while considering any objection with regard to the existence or validity of the arbitration agreement, the arbitration clause, which formed part of the contract, had to be treated as an agreement independent of the other terms of the contract. Reference was made in the said judgment to the provisions of Section 16(1)(b) of the 1996 Act, which provides that even if the arbitral tribunal concludes that the contract is null and void, it should not result, as a matter of law, in an automatic invalidation of the arbitration clause. It was also held that Sec....
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....len Rederierna AB,[ [1985] 1 AC 191] which are as follows: "If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense." We entirely agree with the aforesaid observation. This view of ours is also supported by the following judgments which were relied upon by Dr. Singhvi: In Visa International Limited (supra), it was inter alia held that: "25....No party can be allowed to take advantage of inartistic drafting of arbitration clause in any agreement as long as clear intention of parties to go for arbitration in case of any future disputes is evident from the agreement and material on record including surrounding circumstances. 26. What is required to be gathered is the intention of the parties from the surrounding circumstances including the conduct of the parties and the evidence such as exchange of correspondence between the parties...." Similar position of law was reiterated in Nandan Biomatrix Ltd. (supra), wherein this court observed inter alia as under: 28. This Court in Rukmanibai Gupta v. Collector, Jabalpur has held (....
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....kability in this case is attributed only to the machinery provision. And the arbitration agreement, otherwise, fulfils the criteria laid down under Section 44 of the Indian Arbitration Act, 1996. Given that two Arbitrators have been appointed, the missing line that "the two Arbitrators appointed by the parties shall appoint the third Arbitrator" can be read into the arbitration clause. The omission is so obvious that the court can legitimately supply the missing line. In these circumstances, the Court would apply the officious bystander principle, as explained by MacKinnonn, LJ in Shirlaw v. Southern Foundries,[ [1937 S. 1835]] to interpret the clause. In Shirlaw, it was held that: "prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common 'Oh, of course!" In construing an arbitration clause, it is not necessary to employ the strict rules of interpretation which may be necessary to construe a statutory pr....
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....that the dispute, if any, would be referred to an arbitrator. To that extent, therefore, the agreement is legal, lawful and the offending part as to the finality and restraint in approaching a Court of law can be separated and severed by using a 'blue pencil'." 87. There is another reason which permits us to take the aforesaid view and accept the submission made by Dr. Singhvi that while construing the arbitration agreement/clause the same can be construed to make it workable, as such an approach is statutorily provided for. For this submission, Dr. Singhvi has rightly relied upon the provision contained in Sections 10 and 11 of the Indian Arbitration Act, 1996. The object of these two provisions is to avoid failure of the arbitration agreement or the arbitration clause if contained in contract. Under Section 10(1), there is freedom given to the parties to determine the number of Arbitrators, provided that such number shall not be an even number. The arbitration clause in this case provides that the arbitral tribunal shall consist of three arbitrators. Further, it must also be noticed that the Respondents have been trying to seek adjudication of disputes by arbitration. ....
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....ondon. 90. We find much substance in the submissions of Mr. Nariman that there are very strong indicators to suggest that the parties always understood that the seat of arbitration would be in India and London would only be the "venue" to hold the proceedings of arbitration. We find force in the submission made by learned senior counsel for the Appellants that the facts of the present case would make the ratio of law laid down in Naviera Amazonica Peruana S.A. (supra) applicable in the present case. Applying the closest and the intimate connection to arbitration, it would be seen that the parties had agreed that the provisions of Indian Arbitration Act, 1996 would apply to the arbitration proceedings. By making such a choice, the parties have made the curial law provisions contained in Chapters III, IV, V and VI of the Indian Arbitration Act, 1996 applicable. Even Dr. Singhvi had submitted that Chapters III, IV, V and VI would apply if the seat of arbitration is in India. By choosing that Part I of the Indian Arbitration Act, 1996 would apply, the parties have made a choice that the seat of arbitration would be in India. Section 2 of the Indian Arbitration Act, 1996 provides tha....
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....rt approvingly quoted the following observation from Dicey & Morris on the Conflict of Laws (11th Edn.): "English Law does not recognise the concept of a delocalised arbitration or of arbitral procedures floating in the transnational firmament, unconnected with any municipal system of law". It is further held that "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". The Court thereafter culls out the following principle: "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." The aforesaid classic statement of the conflict of law rules as quoted in Dicey & Morris on the Conflict of Laws (11th Edn.), Vol. 1, was approved by the House of Lords in James Miller & Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd.[ [1970] 1 Lloyd's Rep. 269; [1970] A.C.583] Mustill, J. in Black Clawson International Ltd. v. Papierwe....
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.... of seat and venue, only when the seat of arbitrations is in India (Para 96). Reason for the aforesaid conclusion is that there is no risk of conflict of judgments of different jurisdictions, as all courts in India would follow the Indian Law. Thus, the reliance placed by D. Singhvi on Balco in this context is misplaced. 98. It is correct that, in virtually all jurisdictions, it is an accepted proposition of law that the seat normally carries with it the choice of that country's arbitration/Curial law. But this would arise only if the Curial law is not specifically chosen by the parties. Reference can be made to Balco (supra), wherein this Court considered a number of judgments having a bearing on the issue of whether the venue is to be treated as seat. However, the court was not required to decide any controversy akin to the one this court is considering in the present case. The cases were examined only to demonstrate the difficulties that the court will face in a situation similar to the one which was considered in Naviera Amazonica (supra). 99. We also do not agree with Dr. Singhvi that parties have not indicated they had chosen India to be the seat of arbitration. The jud....
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....o appeal. The contractor argued that the seat of the arbitration was Scotland whilst the employer argued that it was England. There were to be two contractors involved with the project. The material clauses of the EPC contract were: "1.4.1. The contract shall be governed by and construed in accordance with the laws of England and Wales and, subject to Clause 20.2 (Dispute Resolution), the parties agree that the courts of England and Wales have exclusive jurisdiction to settle any dispute arising out of or in connection with the contract. (a) ... any dispute or difference between the parties to this agreement arising out of or in connection with this agreement shall be referred to arbitration. (b) Any reference to arbitration shall be to a single arbitrator and conducted in accordance with the Construction Industry Model Arbitration Rules, February 1998 Edn., subject to this clause (Arbitration Procedure) (c) This arbitration agreement is subject to English law and the seat of the arbitration shall be Glasgow, Scotland. Any such reference to arbitration shall be deemed to be a reference to arbitration within the meaning of the Arbitration Act, 1996 or any statutory re....
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....rmits and requires the court to entertain applications under Section 69 for leave to appeal against awards which address disputes which have been referred to arbitration. By allowing such applications and then addressing the relevant questions of law, the court will settle such disputes; even if the application is refused, the court will be applying its jurisdiction under the Arbitration Act, 1996 and providing resolution in relation to such disputes. (d) This reading of Clause 1.4.1 is consistent with Clause 20.2.2(c) which confirms that the arbitration agreement is subject to English law and that the 'reference' is 'deemed to be a reference to arbitration within the meaning of the Arbitration Act, 1996'. This latter expression is extremely odd unless the parties were agreeing that any reference to arbitration was to be treated as a reference to which the Arbitration Act, 1996 was to apply. There is no definition in the Arbitration Act, 1996 of a 'reference to arbitration', which is not a statutory term of art. The parties presumably meant something in using the expression and the most obvious meaning is that the parties were agreeing that the Arbitration Act, 1996 should apply....
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....as a venue, as a neutral place to hold the meetings of arbitration only, it cannot be accepted that London is the seat of arbitration. We find merit in the submission of Mr. Nariman that businessmen do not intend absurd results. If seat is in London, then challenge to the award would also be in London. But the parties having chosen Indian Arbitration Act, 1996 - Chapter III, IV, V and VI; Section 11 would be applicable for appointment of arbitrator in case the machinery for appointment of arbitrators agreed between the parties breaks down. This would be so since the ratio laid down in Bhatia will apply, i.e., Part I of the Indian Arbitration Act, 1996 would apply even though seat of arbitration is not in India. This position has been reversed in Balco, but only prospectively. Balco would apply to the agreements on or after 6th September, 2012. Therefore, to interpret that London has been designated as the seat would lead to absurd results. 106. Learned senior counsel has rightly submitted that in fixing the seat in India, the court would not be faced with the complications which were faced by the English High Court in the Braes of Doune (supra). In that case, the court understoo....
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....9. In Braes of Doune, detailed examination was undertaken by the court to discern the intention of the parties as to whether the place mentioned refers to venue or the seat of the arbitration. The factual situation in the present case is not as difficult or complex as the parties herein have only designated London as a venue. Therefore, if one has to apply the reasoning and logic of Akenhead, J., the conclusion would be irresistible that the parties have designated India as the seat. This is even more so as the parties have not agreed that the courts in London will have exclusive jurisdiction to resolve any dispute arising out of or in connection with the contract, which was specifically provided in Clause 1.4.1 of the EPC Contract examined by Akenhead, J. in Braes of Doune. In the present case, except for London being chosen as a convenient place/venue for holding the meetings of the arbitration, there is no other factor connecting the arbitration proceedings to London. 110. We also do not find much substance in the submission of Dr. Singhvi that the agreement of the parties that the arbitration proceedings will be governed by the Indian Arbitration Act, 1996 would not be indic....
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....he Court of Appeal noticed the submission on behalf of the defendant as follows: "14. The main submission of Mr Hirst for the defendant insurer was that the Judge had been wrong to hold that the arbitration agreement itself was governed by English law merely because the seat of the arbitration was London. He argued that the arbitration agreement itself was silent as to its proper law but that its proper law should follow the proper law of the contract as a whole, namely, New York law, rather than follow from the law of the seat of the arbitration, namely, England. The fact that the arbitration itself was governed by English procedural law did not mean that it followed that the arbitration agreement itself had to be governed by English law. The proper law of the arbitration agreement was that law with which the agreement had the most close and real connection; if the insurance policy was governed by New York law, the law with which the arbitration agreement had its closest and most real connection was the law of New York. It would then follow that, if New York law permitted a challenge for manifest disregard of the law, the court in England should not enjoin such a challenge." ....
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....understood to include venue as well as seat; but it would be rather stretching the imagination if "venue of arbitration shall be in London" could be understood as "seat of arbitration shall be London," in the absence of any other factor connecting the arbitration to London. In spite of Dr. Singhvi's seemingly attractive submission to convince us, we decline to entertain the notion that India would not be the natural forum for all remedies in relation to the disputes, having such a close and intimate connection with India. In contrast, London is described only as a venue which Dr. Singhvi says would be the natural forum. 115. In Shashoua, such an expression was understood as seat instead of venue, as the parties had agreed that the ICC Rules would apply to the arbitration proceedings. In Shashoua, the ratio in Naviera and Braes Doune has been followed. In this case, the Court was concerned with the construction of the shareholders' agreement between the parties, which provided that "the venue of the arbitration shall be London, United Kingdom". It provided that the arbitration proceedings should be conducted in English in accordance with the ICC Rules and that the governing law o....
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....gdom' did amount to the designation of a juridical seat...." In para 54, it is further observed as follows: "There was a little debate about the possibility of the issues relating to the alleged submission by the claimants to the jurisdiction of the High Court of Delhi being heard by that Court, because it was best fitted to determine such issues under the Indian law. Whilst I found this idea attractive initially, we are persuaded that it would be wrong in principle to allow this and that it would create undue practical problems in any event. On the basis of what I have already decided, England is the seat of the arbitration and since this carries with it something akin to an exclusive jurisdiction clause, as a matter of principle the foreign court should not decide matters which are for this Court to decide in the context of an anti-suit injunction." (emphasis supplied) If the aforesaid observations are applied to the facts of the present case, it would be apparent that the Indian Courts would have jurisdiction in the nature of exclusive jurisdiction over the disputes between the parties. 118. In Shashoua case (supra), Cooke, J. concluded that London is the seat, since....
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....land. This immediately establishes a strong connection between the arbitration agreement itself and the law of England. It is for this reason that recent authorities have laid stress upon the locations of the seat of the arbitration as an important factor in determining the proper law of the arbitration agreement." The Court thereafter makes a reference to the observations made in C v. D by the High Court as well as the Court of Appeal. The observations made in paragraph 12 have particular relevance which are as under: "In the Court of Appeal, Longmore, L.J., with whom the other two Lord Justices agreed, decided (again obiter) that, where there was no express choice of law for the arbitration agreement, the law with which that agreement had its closest and most real connection was more likely to be the law of the seat of arbitration than the law of the underlying contract. He referred to Mustill, J. (as he then was) in Black Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg A.G. as saying that it would be a rare case in which the law of the arbitration agreement was not the same as the law of the place or seat of the arbitration. Longmore, L.J. also referred to the sp....
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.... the experts in the law relating to international arbitration that in almost all the national laws, arbitrations are anchored to the seat/place/situs of arbitration. Redfern and Hunter on International Arbitration (5th Edn., Oxford University Press, Oxford/New York 2009), in para 3.54 concludes that "the seat of the arbitration is thus intended to be its centre of gravity." In Balco, it is further noticed that this does not mean that all proceedings of the arbitration are to be held at the seat of arbitration. The Arbitrators are at liberty to hold meetings at a place which is of convenience to all concerned. This may become necessary as Arbitrators often come from different countries. Therefore, it may be convenient to hold all or some of the meetings of the arbitration in a location other than where the seat of arbitration is located. In Balco, the relevant passage from Redfern and Hunter, has been quoted which is as under: "The preceding discussion has been on the basis that there is only one 'place' of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of reference or the minutes of proc....
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....y to underlying principle of the policy of dispute resolution through arbitration. The whole aim and objective of arbitration is to enable the parties to resolve the disputes speedily, economically and finally. The kind of difficulties that can be caused by Courts in two countries exercising concurrent jurisdiction over the same subject matter have been very succinctly set down by Lord Brandon in Abdin Vs. Daveu (supra)- as follows:- "In this connection it is right to point out that, if concurrent actions in respect of the same subject matter proceed together in two different countries, as seems likely if a stay is refused in the present case, one or other of the two undesirable consequences may follow: first, there may be two conflicting judgments of the two courts concerned; or secondly, there may be an ugly rush to get one action decided ahead of the other in order to create a situation of res judicata or issue estoppel in the latter." Lord Diplock said in the same case: "comity demands that such a situation should not be permitted to occur as between courts of two civilised and friendly states"; it would be, he said, "a recipe for confusion and injustice". As Bingham LJ s....
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....tion of the seat of arbitration and curial law, and that raises very difficult questions for the court to decide. If the stay was lifted, then I could decide the matter differently from Savant J. or from a later final decision on appeal in the Supreme Court of India, if that matter went ahead. The Indian courts are seised and should reach, in my judgment, a concluded decision, albeit on an expedited basis. xx xxx xx xxx xx 60. If the Supreme Court in India were, in due course, to consider that the Bombay High Court was wrong in its conclusion as to the seat of the arbitration or that there was a prima facie valid arbitration or that the English court had concurrent supervisory jurisdiction, it would be a recipe for confusion and injustice if, in the meantime, the English court were to conclude that England was the seat of the putative arbitration, and to assume jurisdiction over EIL and the putative arbitration, and to conclude that there was a valid arbitration agreement, whether on the basis of a good arguable case or the balance of probabilities. Further, for it to exercise its powers, whether under s.2(1) or 2(4) or s.18 of the Arbitration Act in appointing a third arbitr....
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....hall apply. If the said clause is read in the ordinary and natural sense, the placement of the words that "the Indian 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 une....
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....sion of the High Court is contrary to the observations made in Shashoua (supra) which have been approvingly quoted by this Court in Balco in (Paragraph 110). On the facts of the case, the Court held that the seat of the arbitration was in England and accordingly entertained the challenge to the award. 134. In A Vs. B[[2007] 1 Lloyds Report 237] again the Court of Appeal in England observed that:- ".....an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy......as to the validity of an existing interim or final award is agreed to be made only in the courts of the place designated as the seat of arbitration." (emphasis supplied) 135. In our opinion, the conclusion reached by Justice Savant that the Courts in England would have concurrent jurisdiction runs counter to the settled position of law in India as well as in England and is, therefore, not sustainable. The Courts in England have time and again reiterated that an agreement as to the seat is analogous to an exclusive jurisdiction clause. This agreement of the parties would include the determination by the court as to the intention of the parties. In the pr....
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....fied 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." 139. In Paragraph 24(2) of the same decision, this Court further observed that :- "24(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 injunction in regard to proceedings which are oppressive or vexatious or in a forum non- conveniens." 140. Examining these aspects, Eder, J. in fact also came to the conclusion that the anti-suit injunction granted by the English Court needed at-least to be stayed during the pendency of proceedings in India. The reasons given by Eder, J. in support of the conclusions are as under:- "48. Bearing these general pr....
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.... the ambit of a civil action within the meaning of Section 9 of the Code....." 142. The fact that Daman trial court has jurisdiction over the matter is supported by the judgment of this Court in Harshad Chiman Lal Modi (supra), which was relied upon by Mr. Nariman. The following excerpt makes it very clear:- "16...........The proviso to Section 16, no doubt, states that though the court cannot, in case of immovable property situate beyond jurisdiction, grant a relief in rem still it can entertain a suit where relief sought can be obtained through the personal obedience of the defendant...... The principle on which the maxim was based was that the courts could grant relief in suits respecting immovable property situate abroad by enforcing their judgments by process in personam i.e. by arrest of the defendant or by attachment of his property." 143. This apart, we have earlier noticed that the main contract, the IPLA is to be performed in India. The governing law of the contract is the law of India. Neither party is English. One party is Indian, the other is German. The enforcement of the award will be in India. Any interim measures which are to be sought against the assets o....
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....e deem it appropriate to take it upon ourselves to name the third arbitrator. A perusal of the judgment of Eder, J. gives an indication that a list of three names was provided from which the third arbitrator could possibly be appointed. The three names are Lord Hoffmann, Sir Simon Tuckey and Sir Gordon Langley. We hereby appoint Lord Hoffmann as the third arbitrator who shall act as the Chairman of the Arbitral Tribunal. 146. In view of the above, Regular Civil Suit No. 9 of 2008, pending before the Court of Civil Judge, Senior Division, Daman; and the Application under Section 45 of the Arbitration Act, 1996 filed in the Civil Suit No.2667 of 2007 and Contempt Petition in relation to Civil Suit No.2667 of 2007 pending before the Bombay High Court at the instance of the Appellants are stayed. Parties are at liberty to approach the Court for the appropriate orders, upon the final award being rendered by the Arbitral Tribunal. This will not preclude the parties from seeking interim measures under Section 9 of the Indian Arbitration Act, 1996. 147. Civil Appeal No.2086 of 2014 @ SLP (C) No.10924 of 2013 is partly allowed as follows: a. The conclusion of the Bombay High Court ....