AI Drafter 
TaxTMI 
TaxTMI 
2016 (8) TMI 1508
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....ted 1st January, 2009 for mine and development operations hereinafter referred to as "AGREEMENT-I". 3. Under AGREEMENT-I, the American company agreed to provide certain consultancy and other onsite services for a mine to be operated by the Appellant herein in India. Article XII Article XII insofar as it is relevant for our purpose reads as follows: Section 12.1 Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with the laws of the United Kingdom without regard to its conflict of laws principles. Section 12.2 Dispute Resolution; Arbitration. (a) Any and all claims, disputes, questions or controversies involving Reliance (i.e. SASAN) on the one hand and NAC on the other hand arising out of or in connection with this Agreement (collectively, "Disputes") which cannot be finally resolved by such parties within 60 (sixty) days of arising by amicable negotiation shall be resolved by final and binding arbitration to be administered by the International Chamber of Commerce (the "ICC") in accordance with its commercial arbitration Rules then in effect (the "Rules"). The place of arbitration shall be London, ....
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.... liabilities under the Agreement. (2) NACC India hereby accepts the transfer and assignment of all of NAC's rights and hereby assumes all of NAC's obligations under the Agreement, and hereby agrees to perform such obligations in accordance with the terms of the Agreement. CONSENT TO ASSIGNMENT AND ASSUMPTION (3) Reliance hereby consents to NAC's transfer and assignment of all of NAC's rights and obligations under the Agreement to NACC India, and agrees that hereafter NACC India shall have the right to enforce all of NAC's rights under the Agreement. all its rights and obligations with the consent of the Appellant to the Indian Company with effect from 1.4.2011. A fact which is significant in the context of the questions argued in this appeal is that all the three signatories to the AGREEMENT-II agree that the American company is not relieved of its obligations and liabilities. 7. Disputes arose between the Appellant and the Respondent. The Respondent by its letter dated 23.7.2014 purported to terminate the AGREEMENT-I. Thereafter, the Respondent made a request for arbitration on 08.08.2014. 8. The Appellant herein filed ....
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....ction 45 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "1996 Act") praying that the dispute be referred to arbitration and the second (I.A. No. 4/15) under Order 39 Rule 4 Code of Civil Procedure seeking vacation of the injunction order. The applications were contested by the Appellant unsuccessfully. The suit was dismissed. The operative portion of the judgment reads: On the basis of the above discussions, the application filed by the Defendant/applicant as I.A. No. 5 under Order 7 Rule 11-D Code of Civil Procedure read with Section 45 of the Arbitration and Conciliation Act, 1996 is allowed, resultantly the present plaint of the Plaintiff is rejected. I.A. No. 4 under Order 39 Rule 4 Code of Civil Procedure is also allowed on the same ground on which I.A. No. 5 has been allowed. Resultantly, the orders/directions of this Court dated 11.11.2014 and 2.12.14, 7.1.15 and 11.3.15, restraining the Defendant from proceeding further with the arbitration proceeding No. 20432/T.O. before ICC, London are set aside. Aggrieved by the same, the Appellant carried the matter to the High Court of Madhya Pradesh. The High Court dismissed the appeal and held:....
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....ed Indian law of arbitration (now contained in the Arbitration and Conciliation Act 1996) for two Indian Companies (each incorporated and registered in India) to agree to refer their commercial disputes (that might arise between them) to a binding arbitration, (ad hoc or institutional), with place of arbitration outside India, and with governing law being English law? Q.(2) Whether two Indian companies, Sasan Power Ltd. and NACC India Ltd., each of whom have been incorporated and registered in India could in law be said to have "made an agreement referred to in Section 44" of the 1996 Act, so as to confer jurisdiction and authority on the competent Court (District Court of Singrauli, Madhya Pradesh) to refer the parties to ICC arbitration in London Under Section 45 of the Arbitration and Conciliation Act 1996? Q.(3) Whether the arbitration agreement in Clause XII was invalid and void for being in breach of Clause (a) of Section 28 of the Indian Contract Act 1872 (not being saved by the Exception Clause), and also void because of the provisions of Section 23 of the Indian Contract Act, 1872, and hence not referable to arbitration Under Section 45 of the Arbitration....
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....reach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Section 10.2 of the Association Agreement is consequently liable to be declared null and void and set aside as being contrary to 5.7.3 of the Contract Act." Para 40- "It is submitted that the Section 10.2 should be construed as a Clause merely to prevent breach of contract, and is not a measure of damages accrued to the Plaintiff. The Section 10.2 since it puts a cap on the liquidated damages is unenforceable, illegal and liable to be declared as null and void." Para 41 "Upon a declaration by this Hon'ble Court that Section 10.2 of the said Agreement is null and void, the Plaintiff is entitled to the aforesaid damages. The Plaintiff reserves it remedy of seeking damages under Order II Rule 2 of Code of Civil Procedure and would file proceedings once a aforesaid declaration is made by this Hon'ble Court. According to the copies of the plaint supplie....
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....ed, an Indian company ("NACC India") that is 99% owned by NAC and 1% owned by TRU Global Energy Services, L.L.C., a wholly-owned subsidiary of NAC. of the AGREEMENT-II that it is a tripartite agreement. The assignment to be effective between the American company and the Respondent requires the consent of the Appellant in view of Section 15.6 of AGREEMENT-I. NAC hereby acknowledges that, as provided in Section 15.6 of the Agreement, NAC's transfer and assignment of all of NAC's rights and obligations under the Agreement to NACC India does not release NAC, as assignor, from its obligations or liabilities under the Agreement. The consent given by the Appellant herein is qualified. The Appellant retained its right against the American company for the enforcement of obligations and liabilities under AGREEMENT-I owed by the American company to the Appellant. Therefore, the rights and obligations flowing out of AGREEMENT-II between the three parties are interdependent. What exactly are such rights and obligations and their legal implications require an elaborate enquiry and no argument in this behalf has been advanced before us. The Appellant's case ....
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....and where it is impossible to say that the whole consideration has been executed. Contracts of this class cannot be assigned at all in the sense of discharging the original contractee and creating privity or quasi privity with a substituted person. The decision of the Court of Appeal was affirmed by the House of Lords. Tolhurst v. The Associated Portland Cement Manufacturers Limited (1903) AC 414 20. In the facts and circumstances of the case on hand as indicated by the record, the AGREEMENT-II appears to be falling under the 2nd of the above mentioned two classes of the contracts. There is no discharge of the original contractee i.e., the American company's obligations. There are mutual obligations (arising out of AGREEMENT-I) still to be enforced. The American company legally cannot claim to have been discharged from the obligations arising under AGREEMENT-I and infact has not been discharged. On the other hand, the Appellant by an express covenant under AGREEMENT-II retained its rights to enforce obligations (arising under AGREEMENT-I) against the American company (See Footnote 3). AGREEMENT-II perhaps only creates an agency The Indian Contract Act th....
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....said to have stepped into the shoes of the American company because the obligations under AGREEMENT-I owed by the American company to the Appellant were not discharged by the AGREEMENT-II. It is on the basis of such a flawed understanding of law regarding the nature of the AGREEMENT-II the Appellant raises the esoteric proposition whether two Indian Companies could have stipulated that their agreement be governed by the laws of the United Kingdom. 24. Adjudication of the dispute raised by the Respondent in the arbitration would necessarily involve examination of the rights and obligations of the American company under AGREEMENT-I and AGREEMENT-II. Therefore, it is a dispute between three parties (of which one is an American company) with a foreign element i.e. rights and obligations of the American company. Hence, the stipulation regarding the governing law cannot be said to be an agreement between only two Indian companies. 25. At this stage, we must deal with the submission made on behalf of the Appellant that there was a concession by the Respondent before the High Court that AGREEMENT-II is not a tripartite agreement but a bipartite agreement. 20. That apart, ....
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....ocument. Provided that such secondary evidence is otherwise admissible under the Evidence Act. Though oral evidence can be secondary evidence Under Section 63(5), Section 64 mandates that documents must be proved by primary evidence except in exceptional circumstances specified under the other provisions of Evidence Act. Logically, a concession at the bar regarding the content of a written agreement including the fact as to who are the parties to the document, in our opinion, does not stand on any different footing than the oral evidence of the parties. The concession made by the counsel for the Respondent is not secondary evidence admissible under any of the clauses of Section 65 of the Evidence Act. Therefore, in our opinion, the concession made at the bar by the learned Counsel (for the Respondent herein) before the High Court does not preclude the Respondent from asserting that AGREEMENT-II is a tripartite agreement. The tenor and content and the fact that representatives of the three companies signed the document cannot be ignored simply on the basis of an uninformed concession made at the bar. 26. Therefore, the question whether two Indian companies could enter into an agr....
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.... 28. The history and development of the law of arbitration in this country was very succinctly captured by this Court in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. etc. (2012) 9 SCC 552 See para 32 to 38 of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. etc. (2012) 9 SCC 552 (for short "BALCO"). It traced out the origin and development of not only the domestic law of arbitration in India but also the international arrangements regarding arbitration agreements and awards made in one country but sought recognition or enforcement in another country-the Geneva Protocol on Arbitration Clauses, 1923 and the Geneva Convention on Execution of Foreign Arbitral Awards, 1927 and the New York Convention, 1958. It also indicated how two consequential enactments known as the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961 came to be made by the Parliament to give effect to the above international arrangements. 29. All the three international legal instruments dealt with the various aspects of problems which could arise out of an international commercial arbitration, such as the recognition o....
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....ons which render a foreign award unenforceable are specified in Sections 48 and 57 respectively. The other provisions deal with matters incidental to the enforcement of foreign awards. It is significant to note that Part II does not deal with any matter pertaining to any step anterior to the making of an (foreign) arbitral award. 32. We now deal with the scheme of Part I of the 1996 Act. It contains provisions which defines an arbitration agreement, its form and content, the procedure for appointment of arbitrators, jurisdiction of arbitral tribunals, the procedure to be followed by the arbitral tribunals, form and content of the arbitral awards, the forum before which and the procedure by which the arbitral award can be challenged and all matters incidental and ancillary to the above-mentioned aspect of the arbitration. 33. This Court in Bhatia International v. Bulk Trading S.A. and Anr. (2002) 4 SCC 105 considered the question whether Part 1 of 1996 Act would apply to an arbitration where the place of arbitration is outside India. The parties had a contractual relationship and the contract contained an arbitration Clause which provided that in the event of any disp....
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....as follows: 194. ... We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to international commercial arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in the Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996. 196. We conclude that Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India. However, such a declaration of law was directed to operate only prospectively. Para 197 of the BALCO case reads- The judgment in Bhatia International [ (2002) 4 SCC 105] was rendered by this Court on 13-3-2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by this Court on numerous occasions. In fact, the judgment in ....
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....se choose to exclude the application of all or some of the provisions of Part I by an agreement. Parties to the AGREEMENT I agreed to exclude the application of Part I of the Arbitration Act except Section 9 thereof. The relevant part of Article XII Section 12.2(a) reads as follows: "Save and except the provision Under Section 9, the provisions of the Part I of (Indian) Arbitration and Conciliation Act, 1996, as amended (the "Arbitration Act") shall not apply to the arbitration. 38. The question, therefore, is whether the arbitration agreement in question is one falling exclusively under Part-I of the 1996 Act or falling under both parts of the 1996 Act. Bhatia International never declared that the arbitration agreement falling under the scope of Part-I of the 1996 Act would automatically cease to fall under Part-II of the 1996 Act. On the other hand there are observations to the contra.See paras 26 and 32 of Bhatia International A recent judgment of this Court Union of India v. Reliance Industries Limited and Ors. (2015) 10 SCC 213 15. However, this Court in Bhatia International v. Bulk Trading S.A. (2002) 4 SCC 105, resurrected this doctrine of concurrent jur....
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....exists an arbitration agreement are bound to refer the dispute between the parties to arbitration and are precluded Under Sections 8 and 45 from adjudicating the dispute (of course) subject to the other conditions stipulated in the two sections. 41. The instant appeal as already noticed arises out of an order in Interlocutory Application No. 5 of 2015 filed by the Respondent herein in the suit filed by the Appellant herein. In the Interlocutory Application, the Respondent made two prayers, i.. Refer the disputes between the Applicant and the Respondent to Arbitration (bearing ICC No. 20432/TO as contemplated under the Agreement; ii. Reject the Plaint in C.S. (O.S.) 4A of 2014 as being barred by law and pass any other Orders that this Court may deem fit in the interest of justice. (i) to reject the plaint in the suit filed by the Appellant being barred by law; and (ii) to refer the dispute between the Appellant and the Respondent to arbitration as contemplated under the AGREEMENT. 42. Insofar as the first of the abovementioned two prayers is concerned, the applicant's/Respondent case is to be found at para Nos. 16 and 17 of the application. In substance, the plea is that t....
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....nt would be contrary to the public policy and hit by Sections 23 of the Indian Contract Act, 1872. Therefore, the arbitration agreement initiated by the Respondent cannot be proceeded with. 45. It is settled law that an arbitration agreement is an independent or "self contained" agreement. In a given case, a written agreement for arbitration could form part of another agreement, described by Lord Diplock as the "substantive contract" Aughton Ltd. v. MF Kent Services Ltd. (1991) 57 BLR 1 (CA) "the status of a so-called 'arbitration clause' included in a contract of any nature is different from other types of clauses because it constitutes a 'self contained contract collateral or ancillary to' 'the substantive contract'. These are the words of Lord Diplock in Bremer Vulkan v. South India Shipping [1981] AC 909. It is a self-contained contract, even though it is, by common usage, described as an "arbitration clause". It can, for example, have a different proper law from the proper law of the contract to which it is collateral. This status of "self-contained contract" exists irrespective of the type of substantive contract to which it is col....
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....of 30 days and along with the penalty of Rs. 15,000/-. The dealer filed a civil suit seeking a declaration that the action of the HPCL was illegal and arbitrary. In the said suit, HPCL filed an application praying that the dispute be referred to arbitration in view of the arbitration agreement between the parties. The said application was dismissed by the civil court holding that the dispute between the parties was not covered by the arbitration agreement which finding came to be confirmed by the High Court in a Revision. Dealing with the question, this Court held: 16. It is clear from the language of the section, as interpreted by the Constitution Bench judgment in Konkan Rly. that if there is any objection as to the applicability of the arbitration Clause to the facts of the case, the same will have to be raised before the Arbitral Tribunal concerned. ... the courts below ought not to have proceeded to examine the applicability of the arbitration Clause to the facts of the case... If it is impermissible for a civil court to examine whether a dispute is really covered by the arbitration agreement, we see no reason to hold that a civil court exercising jurisdictio....
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....is one such. The substantive agreement is governed by the Indian law and the arbitration agreement by the law of England. See Para 2 of the said judgment. The principles of law in this regard are well settled. In all of the cases, the validity of either of the clauses/agreements does not depend upon the existence of the other. Therefore, the examination of the question of consistency of Article X Section 10.2 (part of the substantive contract) with Section 23 of the Contract Act are beyond the scope of the enquiry while adjudicating the validity of the arbitration agreement either Under Section 45 or Section 8 (amended or original) of the 1996 Act. Therefore, the submissions of the Appellant in this regard are required to be rejected. 50. We are left with only one question. Relief No. (iv) claimed in the suit of the Appellant is for decree of declaration "against the Defendant", Respondent herein, that Article XII of AGREEMENT-I is "null and void, inoperative and unenforceable". Obviously Prayer No. (iv) is also based on the assumption that the dispute is exclusively between the Appellant and the Respondent, and therefore, there could not be an agreement between them fo....
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....alco") (2012) 9 SCC 552. 56. At the outset, I may take note of the Rule of interpretation, which is applicable while construing any Deed. The learned Judge Vivian Bose, J. speaking for the Bench in his inimitable style of writing succinctly laid down the Rule in a leading decision of this Court in Pandit Chunchun Jha v. Sheikh Ebadat Ali and Anr. AIR 1954 SC 345 in following words: Deed - Construction - (T.P. Act, 1882, Section 8) Where a document has to be construed, the intention must be gathered, in the first place, from the document itself. If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out. The real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used. If, however, there is ambiguity in the language employed, then it is permissible to look to the surrounding circumstances to determine what was intended. 57. Perusal of Agreement-I indicates that it is executed between the Appellant (an Indian company) and the American Company (NAC) whereas Agreement-II indicates that it is executed between the Appe....
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....an American company (NAC); Secondly, the Agreement-II recognizes transfer of the rights of the original contractee, i.e., American Company (NAC) coupled with their obligations specified in the Agreement-I; Thirdly, the obligations specified in the Agreement-I are not fully performed much less to the satisfaction of the parties concerned but are still to be performed inter se qua each other; Fourthly, by virtue of the terms of the Agreement-II, the parties are still under obligation to perform and, if necessary, enforce their respective rights and obligations arising out of Agreement-I against each other depending upon the nature of breaches when committed by any of the parties; Fifthly, Agreement-II appears to be in the nature of amendment to the Agreement-I because while recognizing the existence of Agreement-I parties have incorporated some new clauses and added one new party to the Agreement-II, i.e., the Respondent (NACC-India) herein. 63. Keeping in view the aforementioned facts which, in my view, emerge from the reading of two agreements and applying the aforementioned principle of law, I am of the considered opinion that the Agreement-II is not a "Deed of Assignment". It ....
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....one party to the arbitration agreement is a foreign company then whether such agreement becomes an "international commercial arbitration" within the meaning of Section 2(f) of the Act. 71. In this case, I find that NAC is an American company and being a party to Agreement-I as also to Agreement-II along with two Indian companies (Appellant and the Respondent), a fortiori, Agreement-I and Agreement-II become an "international commercial arbitration" within the meaning of Section 2(f) of the Act which, in clear terms, provides that if one of the parties to the agreement is a foreign company then such agreement would be regarded as "international commercial arbitration". 72. One can not dispute the legal position arising in the light of law laid down by this Court in Balco's case (supra) (See Para 197 at page 648 of the decision) that the case at hand would be governed by the law laid down in the case of Bhatia International (supra) because the case at hand arose prior to Balco regime. The law laid down in Bhatia International is contained in para 32, which reads as under: 32. To conclude, we hold that the provisions of Part I would apply to all arbitrations and to ....