TaxTMI 
TaxTMI 
2008 (7) TMI 1048
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....ng of 5 parts. It is only in the Schedule that the actual transaction between the parties is reduced into specifics. (b) The aforesaid I.S.D.A. Master Agreement was signed on behalf of the applicant by its authorised signatory and on behalf of the 1st respondent (plaintiff) by its Financial Controller and Secretary, who is impleaded as the 2nd defendant in the suit. (c) The I.S.D.A. Master Agreement is actually a transaction in derivatives. It is a "forward contract" entered into by the plaintiff with the first defendant (who is an authorised dealer in foreign exchange) to hedge an exposure to exchange risk, on account of heavy fluctuation in the rate of exchange of foreign currencies. (d) Though such transactions border on speculations to some extent, they have been recognised statutorily by the Foreign Exchange Management (Foreign exchange derivatives contracts) Regulations, 2000 issued under the Foreign Exchange Management Act, 1999 and by the Reserve Bank of India (Amendment) Act, 2006. (e) Therefore, in pursuance of a Resolution passed by the Board of Directors of the plaintiff Company on 21.07.2005 (Resolution No.2065), authorising the 2nd ....
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.... in O.A.No.1314 of 2007. The 1st defendant Bank was on caveat and hence, they took notice on 04.12.2007 when the application for injunction was moved. Immediately thereafter, the 1st defendant filed the present application under Section 8 of the Arbitration and Conciliation Act, 1996 seeking reference of the dispute to arbitration in terms of Part-5, Clause(j) of the Schedule to the Master Agreement dated 05.01.2007. 6. Before proceeding further, it is relevant to take note of one important fact pleaded by the applicant/1st defendant Bank, viz., that the Bank had already invoked the Arbitration Clause, by a notice dated 26.11.2007 (4 days prior to the filing of the present suit). The Bank had also moved the High Court of Bombay on 27.11.2007 in Arbitration Petition No.446 of 2007 for interim reliefs under Section 9 of the Arbitration and Conciliation Act. A retired Judge of the Supreme Court had already entered upon the reference by a letter dated 29.11.2007. 7. The I.S.D.A. Master Agreement which is the subject matter of dispute in the present suit is dated 5-1-2007. Section 13(a), (b), (c) of the Standard Format of the said Master Agreement, got substituted under Part-5, Cl....
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....d Gajapathi Raju vs. P.V.G.Raju {2000(4) SCC 539} that the language of Section 8 is peremptory in nature. The said decision is also quoted with approval in subsequent decisions in Hindustan Petroleum Corporation Ltd., vs. Pinkcity Midway Petroleums reported in {2003 (6) SCC 503} and Rashtriya Ispat Nigam Ltd., and Another vs. Verma Transport Co. reported in {2006 (7) SCC 275} etc. The rationale behind the said decision is that section 5 of the Arbitration and Conciliation Act,1996 limits the extent of judicial intervention. The relevant portion of the said decision is as follows:- "4. Part I of the new Act deals with domestic arbitrations. Section 5, which is contained in Part I of the new Act, defines the extent of judicial intervention in arbitration proceedings. It says that notwithstanding anything contained in any other law for the time being in force, in matters governed by Part I, no judicial authority shall intervene except where so provided in that Part. Section 5 brings out clearly the object of the new Act, namely, that of encouraging resolution of disputes expeditiously and less expensively and when there is an Arbitration Agreement, the Court's interventio....
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....reement.- (1) A judicial authority before which an action is brought in a matter which is the subject of an Arbitration Agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in sub-section(1) shall not be entertained unless it is accompanied by the original Arbitration Agreement or a duly certified copy thereof. (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made." Section 45 of the Act reads as follows:- "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 th....
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....ubmitting the first statement on the substance of the dispute) is not found in Sections 45 and 54. (c) The word, 'party' appearing in Section 8(1) has a restrictive meaning in view of the definition of the said word under Section 2(1)(h), that it would mean only a party to an Arbitration Clause. On the contrary, Section 45 does not contain such a restriction. Section 45 enables any of the parties to the Arbitration Agreement or even any person claiming through or under him to seek a reference. Section 54 also enables the parties as well as any person claiming through or under them to seek a reference. (d) More importantly, the mandate under Section 45 to refer the parties to arbitration, indicated by the word, "shall" appearing in the section, is watered down by the last part of Section 45, whereby a leverage is given to the Judicial Authority not to refer the parties to arbitration if it finds that the agreement is null and void, inoperative or incapable of being performed. Such a discretion conferred upon the Judicial Authority in the later part of Section 45 is conspicuously absent in Section 8. Section 54 goes a step further in stipulating that if the ....
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....rovided in Section 45. Both provisions are differently structured albeit the purpose of both is to refer parties to arbitration but in one case domestic arbitration and in the other case international arbitration. Unlike Section 8 which provides that the application shall be moved not later than when submitting the first statement of the substance of the dispute, under Section 45 there is no such limitation. The apparent reason is that insofar as domestic arbitration is concerned, the legislature intended to achieve speedy reference of disputes to the Arbitral Tribunal and left most of the matters to be raised before the arbitrators or post-award. In case of foreign arbitration, however, in its wisdom the legislature left the question relating to the validity of the Arbitration Agreement being examined by the court. One of the main reasons for the departure being the heavy expense involved in such arbitrations which may be unnecessary if the Arbitration Agreement is to be invalidated in the manner prescribed in Section 45." Though the above view formed part of the minority decision of Justice Y.K.Sabharwal, as he then was, the majority view of the other 2 learned Judges (Justice....
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....ection must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the legislature. "An intention to produce an unreasonable result" said Danckwerts, L.J., in Artemiou V. Procopiou (All ER p.544-I) "is not to be imputed to a statute if there is some other construction available." Where to apply words literally would "defeat the obvious intention of the legislation and produce a wholly unreasonable result", we must "do some violence to the words" and so achieve that obvious intention and produce a rational construction. Per Lord Reid in Luke v. IRC where at AC p.577 he also observed:(AllER p.664 I) "This is not a new problem, though our standard of drafting is such that it rarely emerges." It follows from the above decision of the Supreme Court that casus omissus should not be readily inferred. It cannot be supplied by the court except in the cas....
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....is extracted here under:- "......... In Smith, Coney and Barrett vs. Becker, Grey & Co. the principle is clearly acknowledged that if the contract is challenged as being void on the ground of illegality, the arbitration clause contained in the contract is also avoided .............I consider that the same result follows from an analysis of the Contract Act. By S.2 (g) of the Act, an agreement, which is not enforceable by law, is void. By S.2(h), it is only an agreement enforceable by law that is a "a contract". By S.30, an agreement by way of wager is a void agreement. It is no more a contract than an agreement affected by Ss.20, 23 or S.25. I, therefore, agree with the view expressed tentatively by Panckridge,J., in Chong Wong's case (1), to the effect that such a suit lies.... 21. In Abdul Kadir Shamsuddin Bubere -vs- Madhav Prabhakar (AIR 1962 Supreme Court 406), the Supreme court held as follows:- "17. There is no doubt that where serious allegations of fraud are made against a party and the party who is charged with fraud desires that the matter should be tried in open court, that would be a sufficient cause for the court not to order an Arbitration Ag....
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....or consideration or issues which require serious consideration of evidence relating to fraud and misrepresentation etc. are involved, such cases are best left to the civil Court and that the Arbitrator will not be competent to go into the said issues". 29........... I agree that the solemn agreement between the parties to resolve the disputes by an alternative forum before the Arbitrator should be strictly complied with. But when the dispute involves consideration of substantial questions of law and contested allegations of mala fides, fraud, misrepresentation etc., which depend on adducing of and scrutiny of detailed oral and documentary evidence, then the parties as well as the Civil Court would be justified in ignoring the arbitration clause. Section 27 of the 1996 Act provides for the Arbitrator to seek the assistance of the Court in taking evidence is an example of the admitted deficiencies of a proceeding before the arbitrator. Even after obtaining such assistance from the Civil Court, the Arbitrator would still be unable to appreciate the demeanor of the witnesses which is an essential feature of appreciation of oral evidence. Assuming that the grounds of challenge ....
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....nder S.11 of the Common Law Procedure Act, 1854, should, in the exercise of that discretion refuse to allow matters which had been expressly agreed to be referred to arbitration, to be referred in view of fraud having been alleged against the defendant. Jessell M.R., who decided that case observed: "First of all, is it true that the parties to a contract can hardly be supposed to have endeavoured to refer to an arbitration an attempt by one of them to cheat the other? I can find no reason for assuming it. A fraudulent man would not desire publicity, but would wish that question to be inquired into before a private tribunal. Nor does it follow that the man who has been defrauded wants publicity. It is an injury to the credit of the firm. .... why should it be necessarily beyond the purview of this contract to refer to an arbitrator questions of account, even when those questions do involve misconduct amounting to dishonesty,on the part of the same partner? I do not see it. I do not say that in many cases which I will come to in the second branch of the case before the Court, Court may not in exercise of its discretion, refuse to interfere; but it does not appear to me to follow of n....
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....h the respondents/plaintiffs have challenged the validity of the agreement on the ground that a fraud was played on them, the same also can be gone into by the arbitrator in view of powers given under Sec.16 of the Act. This aspect was not considered by the learned Judge while rejecting the Application filed under Sec.8 of the Act by the appellant/defendant. Hence, we are inclined to interfere with the order passed by the learned Judge". Thus the view taken by the Division Bench supports the view taken by R.Jayasimha Babu,J., though the same has not specifically been referred to. Even a Division Bench of the Karnataka High Court took a similar view in Lexicon Finance Limited -vs- Union of India and others {2002(3) Arb.LR 60 (Karnataka) (DB). It is as follows:- "A perusal of the aforesaid provision makes it clear that an arbitration clause in an agreement shall be treated an agreement independent of other terms of the contract and even if the Arbitral Tribunal were to hold that the contract is null and void it shall not entail ipso jure the invalidity of the arbitration clause. In other words even if the contract is held to be void the clause regarding arbitration found ....
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....ator to determine his own jurisdiction is on the basis of that arbitration clause which may be treated as an agreement independent of the other terms of the contract and his decision that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. But, the question would be different where the entire contract containing the Arbitration Agreement stands vitiated by reason of fraud of this magnitude. 13. It may be noticed that Part II of the 1996 Act contains a provision for approaching the court. Section 45 of the 1996 Act contains a non-obstante clause. A judicial authority, therefore, may entertain an application at the instance of a party which alleges that there exists an Arbitration Agreement whereupon judicial authority may refer the parties to arbitration, save and except in a case where it finds that the said agreement is null and void, inoperative and incapable of being performed. Section 8 of the 1996 Act, however, is differently worded. 14. Thus, as and when a question in regard to the validity or otherwise of the Arbitration Agreement arises, a judicial authority would have the jurisdiction under certain circumstances to go in....
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....o our destination on a well laid highway and hence we have to find a way out by ourselves. But before I do so, let me examine the other contention of the learned Senior counsel for the plaintiff. Argument based upon complimentary nature of sections 8 and 11 27. The other limb of the argument of Mr.Arvind P.Datar, learned Senior counsel for the plaintiff is based upon the decision of the Supreme Court in SBP & CO. vs. PATEL ENGINEERING LTD. AND ANOTHER ((2005) 8 Supreme Court Cases 618), wherein the Supreme court noted the complimentary nature of sections 8 and 11 and held in para 16 of its judgement that "the judicial authority is entitled to, has to and bound to decide the jurisdictional issue raised before it, before making or declining a reference." The Supreme court further pointed out that "if it is held that the Chief Justice has no right or duty to decide the question or cannot decide the question, it will lead to an anomalous situation in that the judicial authority under section 8 can decide but not a Chief Justice under section 11". After so explaining the complimentary nature of sections 8 and 11, the Apex court held in para 19 as follows:- "19. It is also....
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....her hand, Section 9 insists that once approached in that behalf, "the court shall have the same power for making orders as it has for the purpose of and in relation to any proceeding before it". Surely, when a matter is entrusted to a civil court in the ordinary hierarchy of courts without anything more, the procedure of that court would govern the adjudication (see R.M.A.R.A. Adaikappa Chettiar vs. R.Chandrasekhara Thevar)". In short, the ratio laid down by the Constitution Bench of the Supreme court in the above case (SBP & Co case) is (i) that sections 8 and 11 are complimentary in nature and (ii) that there is no exclusive conferment of jurisdiction on the Arbitral Tribunal under section 16 to decide the existence or validity of the Arbitration Agreement. 28. But the ratio laid down in the above decision to the effect that sections 8 and 11 are complimentary in nature, has to be reconciled with the other decisions of the Supreme court, where the dividing line between sections 8 and 45 are clearly spelt out and a Line of Control (LOC) or Lakshman rekha is pointed out. If so done, one can appreciate that the difference deliberately maintained by the law ma....
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....for resolution of disputes avoiding procedural claptrap and this led them to Arbitration Act, 1940 (Act for Short). However, the way in which the proceedings under the Act are conducted and without an exception challenged in Courts, has made lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample testimony that the proceedings under the Act have become highly technical accompanied by unending prolixity, at every stage providing a legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the Courts been clothed with 'legalese' of unforeseeable complexity." The above passage was quoted with approval in Trustees of The Port of Madras -vs- Engineering Constructions Corporations Ltd, {1995 (5) SCC 531}. 32. Again, in Panchu Gopal Bose -vs- Board of Trustees For Port of Calcutta {1993(4) SCC 338}, the Supreme Court quoted from Robertson's history that "honest men dread arbitration more than they dread law suits." A more scathing but frank observation was made in Executive Engineer, Minor Irrigation Division Orissa -vs- N.C.Budharaj (Dead) by Lrs., 2001 (1) CTC 375 as f....
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....eads as follows:- "An important feature of the said UNCITRAL Model Law and Rules is that they have harmonised concepts of Arbitration and Conciliation of different legal systems of the world and thus contain provisions which are designed for universal application." 36. The Statement of Objects and Reasons also recognised the fact that the UNICITRAL Model Law and Rules are intended to deal only with International Commercial Arbitration and Conciliation. However, it is stated that the same model could be applied even to domestic arbitration with certain modifications. Paragraph No.3 of the Statement of Objects and Reasons, reads as follows:- "Though the UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could, with appropriate modifications, serve as a model for legislation on domestic arbitration and conciliation. The present Bill seeks to consolidate and amend law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules." 37. Thus it is m....
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.... refer parties to arbitration, where there is an Arbitration Agreement, unless it finds that the agreement is null and void, inoperative or incapable of being performed. Section 8 reproduces the contents of Article 8 with 2 significant modifications, viz., (a) the rider contained in the last part of Article 8(1), viz., "unless it finds that the agreement is null and void, inoperative or incapable of being performed" is omitted in Section 8(1) and (b) that Section 8(2) enables the Court not to entertain an application under Section 8(1) unless it is accompanied by the original Arbitration Agreement or a duly certified copy thereof. However, Section 45 of the Act incorporates the aforesaid rider, in the case of International Commercial Arbitration governed by Newyork Convention Awards. Article 9 enables a party to seek interim measures of protection from a Court before or during arbitral proceedings. Section 9 not only contains such a provision, but also deals in extenso, the nature of the interim measures that could be granted by a Court. While Article 9 of the Model Law restricts the right to grant interim reliefs only before or during the arbitral ....
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....e a statement of claim or to file a statement of defence or to appear and produce evidence. Section 25 reproduces the same. Article 26 enables the Arbitral Tribunal to appoint experts to report on specific issues. Section 26 reproduces the same, but with a modification. While Article 26 enables an Arbitral Tribunal to seek the assistance of a competent Court of the State, in taking evidence, Section 26 does not enable the tribunal to seek such assistance. But a similar provision is incorporated in Section 27, more elaborately. Article 27 enables Court assistance in taking evidence. Section 27 enables an Arbitral Tribunal or even a party, with the approval of the Arbitral Tribunal to seek assistance of a Court in taking evidence. Article 28 deals with the rules applicable to the substance of dispute. Section 28 substantially reproduces the same and adopts the principles of ex aequo et bono and amiable compositeur, only if the parties have expressly authorised the tribunal to adopt them. Article 29 enables decision making by the Arbitral Tribunal, by a majority. It also enables the presiding arbitrator to decide the questions of procedure, by himself, if so au....
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....substantial deviation from the provisions of Article 36, in the sense that the Act does not provide for the refusal to recognise or enforce an arbitral award. UNCITRAL MODEL Law contains only 36 Articles. 1996 Act contains additional provisions relating to i)appealable orders ii)deposits to be made before the tribunal iii)lien on arbitral award and deposits as to costs iv) the effect of the death of a party about the Arbitration Agreement and its enforceability v) the effect of insolvency of a party vi)jurisdiction vii) limitation viii)enforcement of New York Convention Awards ix) enforcement of Geneva Convention Award x) Conciliation and the procedure to be adopted in relation thereto. xi)Supplemental provisions such as the power to make rules and to remove difficulties xii)repeal and savings of the Arbitration (Protocol and Convention) Act, 1937, the Arbitration Act, 1940 and the Foreign Awards (Recognition and Enforcement) Act, 1961 and xiii) the First, Second and Third Schedules, containing the Convention on the recognition and enforcement of Foreign Arbitr....
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....Verma Transport Co. {(2006) 7 Supreme Court Cases 275} as follows:- 15. Article 8 of the Model Rules is as under: "(1) A court before which an action is brought in a matter which is the subject of an Arbitration Agreement, shall, if a party requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. (2) Where, in such case, arbitral proceedings have already commenced, the Arbitral Tribunal may continue the proceedings while the issue of its jurisdiction is pending with the court". 17. Section 8 of the 1996 Act, however, although lifted the first part of the said Article 8 did not contain the expression contained in the second part therein. The Indian Parliament has gone beyond the recommendations made by the UNCITRAL Model Rules in enacting Sections 8 and 16 of the 1996 Act. 18. The provisions of Sections 8 and 16 of the 1996 Act may be compared with Sections 45 and 54 thereof. Section 45 deals with the New York Convention, whereas Section 54 deals with the Geneva Convention Awards. The d....
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....ation shall be accompanied by the original Arbitration Agreement or a certified copy thereof. The deletion is of the rider "unless it finds that the agreement is null and void, inoperative or incapable of being performed". 2) In respect of international commercial arbitration, to which the New York Convention Awards apply, the judicial authority is conferred with the power, under Section 45, to reject a reference, if it finds that the agreement is null and void, inoperative or incapable of being performed. At the same time, in respect of international commercial arbitration to which Geneva Convention Awards apply, no such power is conferred under Section 54. 46. The omission of the rider in Sections 8 and 54 and the inclusion of the rider in Section 45 are not without significance. The omission and commission have not happened unintentionally. Till the advent of 1996 Act, the severability or separability of the arbitration clause, from the main agreement, of which it formed a part, posed great challenges. The Arbitration Act, 1940, did not specifically provide for treating the arbitration clause contained in the main contract, as a separate agreement by itself. Therefor....
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....lly speaking, it is difficult to conceive how when an agreement is found to be bad, any portion of it can be held to be good. When the whole perishes, its parts also must perish. 'Ex nihilo nil fit'. On principle therefore it must be held that when an agreement is invalid every part of it including the clause as to arbitration contained therein must also be invalid. 5. That indeed is what has been laid down in the decisions which have been cited before us. The leading case on the subject is the decision of the House of Lords in Heyman v. Darwins Ltd., 1942 AC 356. There the question was whether repudiation of a contract by a party thereto had the effect of annulling the arbitration clause contained therein. It was held that it had not. It was in this context that the law as to the circumstances under which an arbitration clause in an agreement would become unenforceable came in for elaborate discussion. Summing up the law on the subject Viscount Simon, L.C. Observed: "If the dispute is whether the contract which contains the clause has ever been entered into at all, that issue cannot go to Arbitration under the clause, for the party who denies that he has ever ente....
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....uress or undue influence, the clause does not apply and a stay will be refused." The same view was reiterated in Waverly Jute Mills Co.Ltd. -vs- Raymon & Co. (AIR 1963 Supreme Court 90). 49. The decisions in Khardah Company Ltd., v. Raymon & Co. (India) Pvt. Ltd. (AIR 1962 Supreme Court 1810) and Waverly Jute Mills Co. Ltd., vs. Raymon & Co. (India) Pvt.Ltd. (AIR 1963 Supreme Court 90) were also followed in Jaikishan Dass Mull vs. Luchhiminarain Kanoria and Co. {(1974) 2 Supreme Court Cases 521}. In that case, two members of the East India Jute and Hessian Exchange Limited, entered into contracts for the purchase of Hessian cloth, on the terms and conditions set forth in the contract notes which were in printed form as prescribed in Appendix IV to the bye laws of the Exchange. In the printed format, there was a clause for delivery of goods along side the export vessel in the port of Calcutta, after giving a notice of a duration agreed to between the parties. The said clause was scored out. Later, the parties entered into three cross contracts, by way of settlement of the earlier two contracts and the deliveries under the first set of contracts, were set off against each other....
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.... The relevant portion of para 18 of the said decision is as follows:- "If the arbitration clause is so wide as to have included the very validity or otherwise of the contract on the grounds of fraud, misrepresentations, mutual mistake or any valid reason, the arbitrator surely will have jurisdiction to decide even that dispute. Two extreme cases have to be avoided, namely, if simply because there is an arbitration clause all suits including one questioning the validity or existence or binding nature of the parent contract is to be referred to arbitrator irrespective of whether the arbitration clause covered it or not, then in all cases of contracts containing arbitration clause the parties will be deprived of the right of a civil suit. On the other hand if despite the arbitration clause having included or covered ex facie even a dispute as to the existence, validity or binding nature of the parent contract to allow the suit to proceed and to deprive the arbitrator of his jurisdiction to decide the question will go contrary to the policy and objects of the Arbitration Act as embodied in sections 32, 33 and 34 of the Act." 52. Thus, in the above decision, the Supreme cour....
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.... contract shall be treated as an agreement 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. (2) A plea that the Arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the Arbitral Tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The Arbitral Tribunal may, in either case, admit a later plea if it considers the delay justified. (2) A plea that the Arbitral Tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the Arbitral Tribunal is exceed....
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....tration Agreement including the question as to its nullity and voidity; and c) that even a decision declaring the contract as null and void will not make the arbitration clause invalid; appear to have been accepted and adopted in many of the neighbouring countries especially SAARC countries after the advent of the UNCITRAL Model Law. Canada, Australia and a few states in U.S.A., have also adopted the Model Law. 56. The Bangladesh Arbitration Act of 2001, while adopting Article 16 of the Model Law, enables the Arbitral Tribunal, under Section 17 to decide whether the Arbitration Agreement is against public policy or incapable of being performed. Section 17 of the said Act, reads as follows:- "17. Competence of Arbitral Tribunal to rule on its own jurisdiction:- Unless otherwise agreed by the parties, the Arbitral Tribunal may rule on its own jurisdiction on any questions including the following issues, namely - (a) whether there is existence of a valid Arbitration Agreement; (b) whether the Arbitral Tribunal is properly constituted; (c) whether the Arbitration Agreement is against public policy; (d) whether the Arbitr....
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....ken as a separate agreement, and even if the arbitrator takes a decision holding the contract as null and void, such provisions shall not be held to be legally null and void for that reason alone." 58. The Arbitration Act, 1940 of Pakistan does not appear to have been brought in tune with the Model Law. However, Section 32 of the Act bars the institution of a suit on any ground whatsoever, for a decision upon the existence, effect or validity of an Arbitration Agreement or award. It reads as follows:- "32. Bar to suit contesting Arbitration Agreement or award:- Notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever, for a decision upon the existence, effect or validity of an Arbitration Agreement or award, nor shall any Arbitration Agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act". However, Sec.34 of the said Act whittles down the effect of Se.32 to some extent. 59. The Arbitration Act, 1995 of Srilanka adopts the same principles as contained in the Model Law. Under Section 11 of the Act, the Arbitral Tribunal is conferred with jurisdiction to rule on any....
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....edings have been brought to stay the proceedings so far as they concern that matter. (2) An application may be made notwithstanding that the matter is to be referred to arbitration only after the exhaustion of other dispute resolution procedures. (3) An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has taken any step in those proceedings to answer the substantive claim. (4) On an application under this section the court shall grant a stay unless satisfied that the Arbitration Agreement is null and void, or incapable of being performed. (5) If the court refuses to stay the legal proceedings, any provision that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings." Section 30(1)(a) of the Act which is akin to Section 16 of our Act (though not in pari materia), enables the Arbitral Tribunal to rule on the existence of a valid Arbitration Agreement. But unlike Section 16 of our Act, Section 30 of the English Act provides for an appeal or review against such a ruling of the....
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....rticle 8(1) of the Model Law, which requires the stay of a judicial proceeding in favour of an arbitration where one party wishes to enforce the Arbitration Agreement (see Automatic Systems Inc v. Bracknell Corp. [1994] 18 O.R. [3d] 257). All Canadian jurisdictions have adopted Article 16 of the Model Law by providing that the Arbitration Agreement is independent of the contract in which it is found and thereby permitting the Arbitral Tribunal to determine its own jurisdiction, including objections with respect to the existence of an Arbitration Agreement. Domestic arbitrations are governed by similar principles. For example, section 17(1) of the Ontario Arbitration Act provides that "an Arbitral Tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence or validity of the Arbitration Agreement. 62. In so far as U.S.A. is concerned, some of the states have adopted the UNCITRAL Model Law, but the federal law namely, the United States Arbitration Act, 1925, now known as Federal Arbitration Act, does not appear to have been brought in tune with the Model Law. Section 2 of the said Act provides tha....
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....ions' in the aforesaid book. It is on account this fundamental principle that the Supreme court pointed out the possibility of a 'broad arbitration clause' in ITC Ltd -vs- G.J.Fernandes AIR 1989 839. 64. Therefore, if by agreement, parties could have disputes where allegations of fraud, misrepresentation etc., are made, referred to arbitration, it is certainly possible for the legislature to bring them within the purview of arbitration. This is what the 1996 Act has done by virtue of section 16 of the Act. In so far as domestic arbitration is concerned, what a court can do at the pre reference stage, is restricted to what is prescribed under sections 8, 9 and 11. That it cannot traverse beyond what is provided therein, is also stated in section 5. Similarly what an Arbitral Tribunal can do is spelt out in section 16. If the deletion in section 8, of the rider contained in section 45 is a case of omission, the insertion of a similar rider in section 16 empowering the Arbitral Tribunal to go into the question, is a case of commission. This, therefore, is a clear signal to the fact that in so far as domestic arbitration is concerned, the question as to whether an Arb....
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....d down by the Apex court in Sukanya Holdings (P) Ltd., vs. Jayesh H.Pandya and another {(2003) 5 Supreme Court Cases 531}. The relevant portion of the said decision is as follows:- "14. Thirdly, there is no provision as to what is required to be done in a case where some parties to the suit are not parties to the Arbitration Agreement. As against this, under Section 24 of the Arbitration Act, 1940, some of the parties to a suit could apply that the matters in difference between them be referred to arbitration and the court may refer the same to arbitration provided that the same can be separated from the rest of the subject-matter of the suit. The section also provided that the suit would continue so far as it related to parties who have not joined in such application". 68. But the above decision is of no assistance to the respondent/plaintiff. The said decision, does not lay down as a proposition of law that the moment a person who is not a party to an Arbitration Agreement is roped in, the jurisdiction of the Arbitral Tribunal stands ousted. In a Civil Suit, the plaintiff is the dominus litus and he may cite any one as a party, at the time of institution. Such a privi....