ALTERNATE DISPUTE

Submitted by:

RESOLUTION – CASE B.A.LL.B 2012 Sec C

BRIEFS
Compilation © - Amit Jyoti S. Gomber 2015
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W
Bhatia International v. Bulk Trading S.A.
2004 (2) SCC 105
Facts:
1. Bhatia International (A) entered into contract with Bulk Trading (R) on 9 th May, 1997. The
contract contained an arbitration clause which provided that arbitration was to as per the rules of
the International Chamber of Commerce.
2. The Bulk Trading filed a request for arbitration with ICC. Parties agreed that the arbitration be
held in Paris, France.
3. During which the R filed an application under Section 9 of the Arbitration and Conciliation Act,
1996 before the III Additional District Judge, Indore, Madhya Pradesh against the A and 2 nd
respondent. The interim relief sought was an injunction restraining these parties from selling their
business assets and properties.
4. The A in response contended that Part I of the said Act would not apply to arbitrations where the
place of arbitration is not in India.
Procedural History
1. The application of A was dismissed by the III Additional District Judge on 1 st February, 2000. It
was held that the court at Indore had jurisdiction and the interim relief was maintainable.
2. The A filed a Writ Petition before the High Court of Madhya Pradesh, Indore Be nch, the Writ
Petition was dismissed by the impugned judgment dated 10 th October, 2000.
Issue
 Whether Indian Courts have jurisdiction to grant interim relief u/s 9 of the Arbitration and
Conciliation Act 1996 when the seat of arbitration is outside India?
Holding:
 The court held that the Arbitration and Conciliation Act, 1996 applies to arbitrations which are
held in India between Indian nationals and to International commercial arbitrations whether held
in India or out of India. Sub-section (2) of section 2 provides that Part I would apply where the
place of arbitration is in India. The legislature had not provided that Part I will not apply to
arbitrations which take place in India, but not providing that the provisions of Part I will not apply
to arbitrations which take place out of India. The court held that the wording of the sub-section
which suggests that the intention of the legislature was to make provisions of Part I compulsorily
applicable to an arbitration, including an ICA, which takes place in India.
 Article 1 (2) of UNCITRAL Model Laws uses the word ‘only’ to emphasize that the laws are to apply
if the place of arbitration is in the territory of that State. In comparison Section 2 (2) Arbitration
and Conciliation the word ‘only’ has been omitted, which indicates that this sub-section is only an
inclusive and clarificatory provision, providing that Part I does apply to arbitration which takes
place outside India and therefore there was no necessity of separately providing that Section 9
would apply.
 The court concluded stating that provision of Part I would apply to all arbitrations and to all
proceedings relating thereto. Where such arbitrations is held in India the provisions of Part I
would compulsory apply and parties are free to deviate only to extent permitted by the
uninfringeable provision of Part I. In cases of International commercial arbitration held out of
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India provisions of Part I would apply unless parties by agreement, express or implied, exclude all
or any of its provisions.
Rationale
 The Court came to this decision because of the argument raised by the respondent’s counsel,
whereby the Court observed that accepting the arguments of the appellant would result in a
lacunae as neither Part I nor II would apply to arbitrations held in a co untry which is not a
signatory to the Geneva Convention or New York Convention. Further, it would lead to a
situation where Part I would apply to Jammu and Kashmir due to special status it enjoys under
Article 370 but Part I would not apply to the rest of India if the arbitration takes place out of
India.
 The result would be the party would be left remediless as any International Commercial
Arbitration (ICA) arbitration which takes place out of India the party would not be able to
apply for interim relief in India even though the assets are in India. Thus the apex court
preferred to adopt the interpretation given by the Indore High Court and held contrary view
taken by the other High Courts.
Rule: The Court stated provision of Part I would also apply to International Arbitration held outside India
unless the parties by agreement expressly or impliedly exclude all or any of its provisions.
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Citation Infowares Ltd. v. Equinox Corp
(2009) 7 SCC 220
Facts
Equinox Corporation (Defendant), a company incorporated under Californian laws, entered into an
outsourcing agreement with Citation Infowares Limited (Plaintiff), a company incorporated under the
Indian Companies Act, 1956. The arbitration clause in the agreement stated that this agreement will be
governed by Californian laws and in case of any dispute it shall be referred for arbitration to a mutually
agreed arbitrator. Disputes arose between the parties which led to D terminating the agreement and
because of that P incurred huge loss. Hence, P decided to take the matter to arbitration.
Procedural History
D did not agree upon an arbitrator and therefore, P moved to the Supreme Court of India for the
appointment of an arbitrator under section 11(5) of the Ar bitration and Conciliation Act, 1996 (‘Act’). P
had the power to move to Supreme Court of India for appointment of an arbitrator as none of the parties
disputed that it is an international commercial arbitration case where only Chief Justice of India or his
designate have the power to appoint an arbitrator.
Issues
1. Whether the Supreme Court of India would have the jurisdiction in this case even when the parties
had mutually agreed that the contract will be governed by Californian laws?
2. Whether Part I of the Act is applicable to International Commercial Arbitrations seated outside
India?
Holding
The Supreme Court of India would have jurisdiction in the given matter.
1. The Court held that Part I of the Act would be applicable to International Commercial Arbitrations
held outside India.
Thus, the Supreme Court found P’s application under section 11 of the act maintainable and
appointed former Chief Justice of India, RC Lahoti, as the sole arbitrator.
Rationale
The Court stated that there is a difference between the law governing the arbitration and the law
governing the agreement. The court further added that the procedural law is not incorporated within the
governing law of the agreement and held that even where the governing law of the contract is a foreign
country, if the seat of arbitration is not specified, Part I, including section 11, of the Act will be applicable.
The court further held that implied exclusion of Part I of the Act would occur only when the seat of
arbitration is mutually agreed upon and is not India and selecting a foreign law to govern the contract
would not lead to implied exclusion of Part I. Part I of the Act cannot be excluded implicitly and if the
contracting parties want to exclude Part I of the Act, they should do it expressly.
The court relied on two judgements to opine on this case – first one being Bhatia International1 Case
where the court held that Part I of the act would be applicable even where the governing law of the
contract is foreign law and secondly they relied upon Venture Global Engineering v. Satyam Computer

1
2002 (4) SCC 105
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Services Limited2 where the court held that Part I of the Act would be applicable to international
commercial arbitrations as well until and unless expressly or impliedly excluded. The court also added
that one of the contracting parties is Indian and hence the contractual obligations were to be completed
in India.
Rule: Part I of the Arbitration and Conciliation Act, 1996 would be applicable to international commercial
arbitrations as well until and unless explicitly excluded by mentioning it in the agreement, even where
the contract is governed by foreign law.

2
2008 (4) SCC 190
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Videocon Industries Limited vs Union of India & others
(2011) 6 SCC 161
Facts
A Production Sharing Contract (PSC) was entered into by the Union of India as one party and a
consortium of several domestic and foreign corporations including the appellant (hereafter referred to as
A). The PSC stated that the proper law of contract was Indian Contract Law. The seat of arbitration was
decided to be Kuala Lampur, and the law governing the arbitration agreement was decided to be English.
The seat of arbitration was shifted from Kuala Lumpur to Amsterdam at first, and then London, owing to
the SARS epidemic in Kuala Lumpur at the time.
UOI filed an application under Section 9 of the Arbitration and Conciliation Act (1996), seeking a
declaration that Kuala Lampur was the contractual and juridical seat of arbitration and that the
remaining part of the arbitration should be continued there. The appellant contended the sustainability
of the application, saying that Indian courts do not have jurisdiction over the matter.
Procedural History
High Court held that it did have jurisdiction over the matter under Section 9, after which the appellant
filed the present appeal.
Issue
1. Where is the lex loci arbitri situated?
2. Whether the Indian court has the jurisdiction to grant interim measures under section 9?
Holding
 With regard to the issue of lex arbitri , the Court assumed jurisdiction on the grounds of a close
and real connection to the Indian system of law, and held in favour of the respondent , and decided
the seat of arbitration was Kuala Lampur.
 The Court decided that by stating in the PSC that the arbitration agreement is to be governed by
English law, it was necessarily implied that Part I of the Act would be excluded.
Rationale
The Indian Supreme Court with regard to the issue of lex arbitri, assumed jurisdiction on the basis of a
real and close connection of the PSC to the Indian system of law. The court saw as to how the conflicting
stances of the parties had led to a virtual deadlock in proceedings. If in this situation the Indian court
would not decide upon the matter of seat of arbitration, the arbitration proceedings would end up in a
stale mate. This would be detrimental to the interests of all parties involved and the object of section 9 of
the Act. The court stated “under the English law the seat of arbitration means juridical seat of arbitration,
which can be designated by the parties to the arbitration agreement or by any arbitral or other institution
or person empowered by the parties to do so or by the arbitral tribunal, if so authorised by the parties. In
contrast, there is no provision in the Act under which the arbitral tribunal could change the juridical seat
of arbitration which, as per the agreement of the parties, was Kuala Lumpur. Therefore, mere change in
the physical venue of the hearing from Kuala Lumpur to Amsterdam and Londo n did not amount to
change in the juridical seat of arbitration.”
As far as the jurisdiction of the Court under Section 9 of the act is considered, the Court was of the
opinion that part I of the act was implied to be excluded and gave the following reaso ning for the same
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“In the present case, the parties had agreed that notwithstanding Article 33.1, the arbitration agreement
contained in Article 34 shall be governed by laws of England. This necessarily implies that the parties had
agreed to exclude the provisions of Part I of the Act. As a corollary to the above conclusion, we hold that
the Delhi High Court did not have the jurisdiction to entertain the petition filed by the respondents under
Section 9 of the Act and the mere fact that the appellant had earlier filed similar petitions was not
sufficient to clothe that High Court with the jurisdiction to entertain the petition filed by the respondents.
In the result, the appeal is allowed. The impugned order is set aside and the petition filed by the
respondents under Section 9 of the Act is dismissed.”
Rule: If the parties explicitly or impliedly exclude the provisions of part I of the Act in the agreement,
then Indian courts should have no jurisdiction to grant any awards.
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M/S Dozco India P. Ltd. v. M/S Doosan Infracore Co.
(2011) 6 S.C.C. 179
Facts:
In this case, M/s Dozco India P. Ltd. (the petitioner) entered into a distributorship agreement with M/s
Doosan Infracore Co. Ltd. (the respondent) under which the petitioner was appointed as the respondent’s
exclusive distributor in India and Bhutan. The distribution agreement contained an arbitration
agreement providing for arbitration under the ICC Arbitration Rules. The seat of arbitration was to be
“Seoul, Korea (or such other place as the parties may agree in writing)”, and the governing law was the
law of the Republic of Korea.
Subsequently, disputes arose between the parties. The petitioner sent a notice to the respondent calling
on it to appoint an arbitrator in accordance with the arbitration agreement contained in the distribution
agreement but the respondent failed in appointing any arbitrator.
Procedural History:
On the respondent’s failure to appoint an arbitrator, the petitioner filed an application in the Supreme
Court of India for the appointment of an arbitrator under section 11(6) of the Act.
Issue:
Whether the arbitration agreement specifically ousted the jurisdiction of the court by “expressly”
excluding Part I of the Act.
Holding:
The Indian Supreme Court held that the language of the arbitration agreement was clearly indicative of
an “express” exclusion of Part I of the Act. In reaching this conclusion, the Court distinguished its
decisions in Citation Infoware and Intdel. The Court held that Part I was not excluded in those cases, as
the impugned arbitration agreements in both cases, even though providing for the governing law to be a
foreign law, did not provide for the place of arbitration to be outside India. Court drew a distinction
between the legal “seat” of arbitration and a geographically convenient “place” of arbitration and held
that it was never the intention of the parties to have the legal seat of arbitration as any place other than
Seoul, Korea. Having concluded that Part I and therefore section 11(6) were “expressly” excluded, the
Court rejected the application for the appointment of arbitrators.
Rationale: Court gave 5 steps analysis which were -
Step 1- An exclusion of Part I is permissible only when the arbitration is not held in India (pursuant to
Bhatia).
Step 2- Therefore if there is an exclusion of Part 1(as in Dozco), the arbitration is necessarily not “held in
India”.
Step 3- Pursuant to Dozco, Part I stands excluded even when a few hearings may be conducted in India
and the seat of arbitration is located abroad.
Step 4- Where the seat of arbitration is abroad and arbitral hearings are conducted in India, the
arbitration is not “held in India”.
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Step 5- “Held in India” is therefore dependent on the location of the seat and not where individual
hearings are conducted.
Rule: “In the absence of express agreement, there is a strong prima facie presumption that the parties
intend the curial law to be the law of the ‘seat’ of the arbitration, i.e. the place at which the arbitration is
to be conducted, on the ground that that is the country most closely connected with the proceedings.”
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INDTEL Technical Services v. W S Atkins Pvt Ltd
(2008) 10 SCC 308
Facts:
1. P and D entered into an MOU for jointly submitting a tender in response to a bid invitation by
RITES Limited for carrying out various activities.
2. Without any valid reason the D terminated the Memorandum unilaterally and withdrew the joint
bid submitted to RITES. A request was also made to the D to enter into a negotiation to work out
the fair level of compensation for the losses suffered by the P because of the breach.
3. P sent a lot of letters and notices and also tried to solve the issue through ADR’s but nothing was
effective.
4. The P ultimately filed the present application for the appointment of a sole Arbitrator
under Section11(9) of the Arbitration Act, 1996 as the clause for settlement of disputes was
mentioned in the MOU and it reads as follows
"CLAUSE 13 - SETTLEMENT OF DISPUTES
1. 13.1. This Agreement, its construction, validity and performance shall be governed by
and constructed in accordance with the laws of England and Wales;
2. 13.2 Subject to Clause 13.3 all disputes or differences arising out of, or in connection
with, this Agreement which cannot be settled amicably by the Parties shall be referred to
adjudication”

Procedural History: P filed an application the Supreme Court of India under the provisions of S. 11 for
appointment of an arbitrator.

Issue: Whether the Supreme Court would have jurisdiction to appoint an Arbitrator under Section 11 of
the Arbitration Act, 1996 (PART I) when according to clause 13.1 of the MoU which mentions that the
construction, validity and performance of the agreement would be governed by and constructed in
accordance with laws of England and Wales?

Holding
 The court held that provisions of part I would apply to all international commercial arbitrations,
whether held inside India or outside India.
 If the arbitrations is held in India the provisions of part I would compulsorily apply and parties are
free to deviate only to the extent allowed by the derogable provisions of part I.
 In case of international commercial arbitrations held out of India part I would apply unless the
parties have explicitly or implicitly excluded all or any of the provisions.
 Therefore the court appointed a sole arbitrator.

Rationale
 The court reasoned that even though the parties had decided the law relating to the working of the
contract was to be the law of England and Wales, there was nothing in the MoU which suggests
that the arbitration seat has to be in the courts of England and Wales and neither of the parties
had ousted the jurisdiction of part I of the Act.
 There was no express intention to oust the jurisdiction of the Indian courts.
 The court heavily relied on the ruling of the Bhatia case which held that provisions of Part-I of the
Arbitration and Conciliation Act, 1996, would be equally applicable to International Commercial
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arbitrations held outside India, unless any of the said provisions are excluded by agreement
between the parties expressly or by implication, which is not so in the instant case .

Rule: In respect to International Commercial agreements, which are to be governed by laws of another
country, the parties would be entitled to invoke the provisions of Part-I of the Act unless they have
explicitly or implicitly ousted the Indian Jurisdiction.
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Bharat Aluminum Company and Ors. V. Kaiser Aluminum Technical Service Inc and Ors
(2012) 9 SCC 552
Facts
1. There existed an agreement between BALCO(P) and Kaiser(D) dated 22 April 1993.
2. The arbitration clause was contained in Articles 17 and 22 of the said Agreement, which is
reproduced for reference purposes (emphasis supplied):
"Article 17.1 - Any dispute or claim arising out of or relating to this Agreement shall be in the first
instance, endeavor to be settled amicably by negotiation between the parties hereto and failing
which the same will be settled by arbitration pursuant to the English Arbitration Law and
subsequent amendments thereto.
Article 17.2 - The arbitration proceedings shall be carried out by two Arbitrators one appointed by
BALCO and one KATSI chosen freely and without any bias. The court of Arbitration shall be held
wholly in London, England and shall use English language in the proceeding. The findings and award
of the Court of arbitration shall be final and binding upon the parties.
Article 22 - Governing Law - This agreement will be governed by the prevailing law of India and in
case of Arbitration, the English law shall apply."
The arbitration clause of the agreement stated:
 Proper Law of Contract: Indian Law
 Proper Law of Arbitration agreement: English Arbitration Law
 Lex Arbitri/ Governing/ Procedural law of Arbitration: English Arbitration Law
 Seat of Arbitration: London, England

3. Disputes arose between BALCO and Kaiser with regard to the performance of the said Agreement. The
disputes were referred to arbitration held in England. 2 awards were given in England by the
arbitrators
4. BALCO challenged the above mentioned Awards under Section 34 (Part I) of the Arbitration and
Conciliation Act, 1996 before the Court of Learned District Judge, Bilaspur, India.
5. This case was clubbed with various other appeals as they too were appealing on a similar point of law
6. During the pendency of the above proceedings, an application was made before a district court under
Sec 9 of the Arbitration and Conciliation Act
Procedural History
1. The P (BALCO) had challenged the awards of the British Arbitrators in the district court which
dismissed the applications on the ground that Section 34 of Part I of the said Act is not applicable for
setting aside the aforementioned foreign awards.
2. BALCO filed an appeal before the Hon'ble High Court of Chattisgarh, Bilaspur which was dismissed.
3. Now the matter is in the Supreme court before the Constitutional bench.
Issues
1. Whether the sections contained in Part I of the Arbitration and Conciliation Act would apply to
arbitration proceedings seated outside India.
2. Whether an application can be made under Part I of the Act when the proceedings are being
conducted outside of India.
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Holding
1. On the issue of applicability of the Act, the court ruled that Part I and Part II do not overlap with each
other and that the title of the Parts make it clear as to where they apply. The courts held that Part I
will apply to domestic Arbitration proceedings and Part 2 applies to international commercial
arbitration
2. Taking the holding on the first issue, the courts went on to say that civil suits under part 1 cannot be
instituted if the arbitration proceedings are being conducted outside of india. No interim relief under
Section 9 and setting aside under Section 34 can be upheld if the arbitration seat is outside India
Rationale
1. The courts analyzed Section 2 and its various subsections [2(2), 2(4) and 2(5)] which speak on the
applicability of the Act. Analyzing these sections, the courts came to the conclusion that these sections
do not extend the jurisdiction of the Act to those arbitration proceedings held outside of India. The
scheme of the Act to the court was abundantly clear and they held that it was to have territorial effect
only. Therefore, Part I of the said Act is applicable only to all arbitrations which take place within the
territory of India.
2. The Court considered that whether absence of the word "only" in Section 2(2) [conscious deviation
from Article 1(2) of UNCITRAL Model Law] makes Part I of the Act applicable to all arbitrations,
including arbitrations seated outside India. The previous judgments including Bhatia International
and Venture Global clearly held that Part I would apply to all arbitrations including those held out of
India, unless the parties by agreement, express or implied, exclude all or any of its provisions. The
Court following the principles of literal interpretation & territoriality held that in regard of the
legislative intention applicability of Part I of the Act is limited only to arbitrations held in India and
omission of the word "only" from Section 2(2) has no relevance in construction of content/intention
of the legislation.
3. In sub- section (4) "enactment" would mean only an Act made by the Indian Parliament. Section 2(5)
is merely an extension to Section 2(4) to deal with all proceedings in relation to arbitration with the
exception of statutory or compulsory arbitrations in case of inconsistency and "all arbitrations"
includes only those to which Part I is applicable.
4. The object of Section 2(7) is to differentiate between domestic and foreign awards as covered under
Part II of the Act.
5. The Act permits the parties to decide the place of arbitration. In the absence of parties failing to
specify law governing arbitration proceedings, the same would be governed as per the law of the
country in which arbitration is held, having the closest connection with the proceedings.
6. Distinguishing the concept of ‘seat’ and ’venue’, the Court that this distinction holds significance when
foreign seat is assigned, with the Act as the curial law governing the arbitration proceedings. In such
scenario, Part I would be inapplicable to the extent inconsistent with arbitration law of the seat.
7. Elaborating on the issue of choice of substantive law, the Court interpreting Section 28 of the Act held
that arbitrations under Part I of the Act not being international commercial arbitration would be
compulsorily governed by the Indian substantive law, to prevent domestic parties from resorting to
arbitration with foreign governing law, whereas no such compulsion prevails in case of international
commercial arbitration as defined under Section 2(1) (f) of the Act.
8. In relation to interim injunctions and applications under Part 1 of the Act (Section 9), the court
keeping a similar mindset on territoriality held that such applications are not tenable. It held that
when arbitration proceedings take place abroad, those rules have procedures and remedies similar to
the ones granted under the Act which are a viable remedy in the eyes of the court.
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9. The Court also observed that there is no overlapping between the provisions contained in Part I and
Part II of the said Act.
10. Approaching judicial authority under the non-obstante clause in Section 45 of the Act, does not make
Part I applicable to foreign arbitrations held outside India.
11. Section 48 of the Act recognizes that Courts of two nations are competent to annul or suspend an
award including the country in "which the award was made" and "under the law of which the award
was made". Enforcement of foreign award in India would be refused only if the said award is set aside
by Courts of either of the countries as specified above.
12. In order to do justice and maintain equity, it is clarified by the Hon'ble Supreme Court that this
judgment shall be applied prospectively to all arbitration agreements executed on or after 6
September 2012. Therefore, The judgments delivered by the Hon'ble Supreme Court in Bhatia
International case and Venture Global Engineering case (mentioned hereinabove) are set aside with
reference to arbitration agreements executed pursuant to the date of this judgment i.e. 6 September
2012. However, the judgment passed in Bhatia International case will still hold good where the
arbitration agreements are executed prior to 6 September 2012.

Rule: The supervisory jurisdiction of Indian Courts exists where the seat of Arbitration is in India.
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I.T.I. LTD. vs. Siemens Public Communications Network Ltd.
(2002) 5 SCC 510
Facts:
 The Arbitral Tribunal passed interim orders under Section 17 3 of the Arbitration and Conciliation
Act, 1996, in favor of the Respondent (hereinafter, referred to as ‘R’).
 The Appellant (hereinafter, referred to as ‘A’) filed an appeal under Section 37(2)(b)4 to the City
Civil Judge against the passing of the said interim orders. The appeal was dismissed.
Procedural History: ‘A’ sought remedy against the dismissal of first appeal by the City Civil Judge, and
with that motive, filed directly for appeal to the Supreme Court.
Issue: Whether a revision petition under section 115 of the Code of Civil Procedure lies to the High Court
as against an order made by a Civil Court in an appeal preferred under Section 37 of the Arbitration and
Conciliation Act, 1996?
Holding:
 While stating that in certain cases, the Supreme Court could entertain an appeal directly against the
judgment from a Court in first appeal, Justice Hegde held that A had the alternate remedy to approach
the High Court through its revisional jurisdiction.
 The appeal was dismissed and the Supreme Court directed ‘A’ to approach the High Court through its
revisional jurisdiction, with the caveat that the revision would not be subject to the question of
limitation.

Ratio:
 When a special act confers jurisdiction of matters that are governed by it to a Civil Court, the
procedure followed by that Court would be available to the parties, thereby inclusive of the right
of appeal or revision. In the absence of an express bar, as is under Sectio n 37(3)5; the application
of the Code of Civil Procedure cannot be ousted.
 If there exists an alternate remedy from a lower court, parties should not “hop, skip and jump” 6
the latter. The aggrieved party was directed to attract the revisional jurisdiction of the High Court
under Section 115 of the Civil Procedure Code before approaching the Supreme Court.
 Revision is not equivalent to a second appeal. Justice Dharmadhikari supported the view that the
power of revision was a power conferred on the High Cour t to keep subordinate Courts within
their jurisdiction, with the purpose of preventing any irregularity as to failure or exercise of
jurisdiction.

3
Interim measures ordered by arbitral tribunal. —

(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection
as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute.

(2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).
4
An appeal shall also lie to a Court from an order granting of the arbitral tribunal granting or refusing to grant an interim measure under section 17.
5
No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal
to the Supreme Court.
6
Paragraph 14 of Justice Santosh Hegde’s judgment.
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Rule: Drawing from the jurisprudence of the Bhatia Case7, the general principal the Court relied on was
that only specific provisions in a statute could disable the application of the Code of Civil Procedure.
Inference ought to be in favor of Civil Courts having the jurisdiction to try the case.

7
Bhatia International v. Bulk Trading S.A. & Anr., AIR 2002 SC 1432
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Dresser Rand SA v Bindal Agro Chem Ltd

(2006) 1 SCC 751

Facts
1. BINDAL wanted to invite global tenders for supply of various equipment and materials for its
Shahjahanpur Fertilizer Project. For that purpose, it prepared its standard 'Invitation to Bid'
comprising "Conditions of Purchase for Supply of Equipment and Material. The invitation was
divided into sections, namely: (i) Attachment I - Instructions to bidders (ii) Attachment II - General
conditions of purchase and, (iii) Attachment III to XVI - Special conditions of purchase.
2. BINDAL sent a telex dated 12th Jan 1990 to DR informing of it project. DR replied to the telex
on18th May 1990 offering to supply Syn-Gas Compressor, indicating the price and other
formalities.
3. DR on 16th May 1991, proposed to call for a meeting to discuss the responsib ility share, and
certain technicalities, while quoting its price for Syn. Gas compressor. DR on 10th June 1991
suggested a change in the terms and conditions of BINDAL termed as “Revis ion 4(Attachment IV)
where the General Conditions of Purchase were given. By this change DR suggested to change the
seat of arbitration to Paris, and the arbitration procedure be governed by ICC.
4. On 12th June 1991 BINDAL issued “Letters of Intent” on the letterhead of K.G.Khosla Compressors
Ltd. (KGK) stating its intention to contract with DR in relation to the Syn. Gas compressor. With
the ‘Letters of Intent’ there were other documents attached like the purchase order, terms and
conditions, government approvals, etc. the Letters of Intent were being issued in the name of KGK
and assured that the responsibility for performance wo uld, however, be that of BINDAL
5. Further, on 9th Dec 1991 BINDAL informed DR that it was not possible to accept the Syn. Gas
Compressor turbine manufactured by DR as it found after a visit to DR's works at France that DR
did not have any experience in manufacturing large mechanical turbines.
6. According to the counsel of DR the Letters of Intent and the Clause 27.4.2 of the General conditions
of Purchase, formed an “agreement”.
7. DR intended to refer the disputes relating to the "agreement" to the International Chamber of
Commerce, Paris, ('ICC' for short) for resolution by arbitration.
Procedural History
 DR lodged a request for arbitration with ICC (received by ICC on 8.3.1993) in respect of its claim
against BINDAL and KGK.
 At this stage, BINDAL filed a suit in the Delhi High Court, for a declaration that there was no
arbitration agreement between BINDAL and DR and for an injunction restraining DR from
proceeding with the arbitration under Order 39 Rule 1 and Rule 2 of the CPC.
 The learned Single Judge of the HC granted injunction to BINDAL AND KGK, restraining DR from
proceeding with the arbitration.
 DR then appealed against the order, and the Division Bench of the Court also said that there
existed no arbitration agreement between the Appellant and Respondent.
 DR filled an appeal against the order of the Division Bench of HC in the Supreme Court.
Issues
1. Whether there was an arbitration agreement between BINDAL and DR, and KGK and DR?
2. Whether KGK and BINDAL were barred by estoppel?
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Judgment: The SC upheld the decision of the Division Bench and held that there existed no arbitration
agreement between the parties. Therefore, the appeal was dismissed.

Rationale
 In order to answer the question raised in the case, the court looked at the nature of the “Letters of
Intent” and “General Clauses of Purchase”.
 The court said that the Letters Of Intent is merely an indication that the parties might get into an
agreement upon certain negotiations. The Letters of Intent are exchanged only to set out the terms
of the contract that ‘may be’ entered into by the parties.
 While deciding over the issues that whether Clause 27.4.2 of the ‘Gener al Conditions of Purchase’
is arbitration agreement or not the court said that a ‘tender document’ is by itself is not a contract
or agreement. The GCP were a part of invitation to bid, so as to enable the perspective suppliers to
be sure of their obligation and formulate their offers accordingly. Also, modifications were
possible, so at first instance this cannot be treated as a binding agreement or contract.
 The court when deciding over the issue of estoppel said that BINDAL and KGK were in the process
of appointment to a common arbitrator, but had always denied the existence of any arbitration
agreement.
Rule: of Intent merely indicates a party's intention to enter into a contract with the other party in future.
A Letter of Intent is not intended to bind either party ultimately to enter into any contract; Acquiescence
does not confer jurisdiction.
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Bihar State Mineral Development Corporation & Anr vs. Encon Builders Ltd.
(2003) 7 SCC 418
Facts:
Appellant 1 (A1) invited tender for removal of soil, sandstone, shale, conglomerates/coal etc. and
stacking it up to a certain distance. Thereafter the Respondent (R), in furtherance to the notice inviting
tender, submitted its tender that was later accepted by A1. R failed to produce the specified amount of
coal per month and stacking the same in the dump yard. This led to a heavy loss to A1, and A1 was
compelled to have the balance job by another agency, but the agreement between A1 and R was not
expressly cancelled by A1. R also made claims against the A1. The disputes were referred to the Appellant
2 (A2), the managing director, which was purported to be in terms of clause 60 of the agreement. Clause
60 is the arbitration clause whereby parties decided that MD, BSMC would be the sole arbitrator.
Procedural History:
R filed an application under Section 33 of the Arbitration Act, 1940 in the Court of the Subordinate Judge
VI, Ranchi questioning the validity of Clause 60 of the agreement. The Court held that A2 must be
restrained from acting as an arbitrator and Clause 60 of the agreement cannot be construed to be an
arbitration agreement.
This was upheld by the Ranchi Bench of the Patna High Court. The High Court held that in the facts of this
case, the arbitration agreement could not be given effect to.

Issue: Whether Clause 60 of the Agreement can be considered a valid arbitration agreement?
Holding: The court held that the arbitration agreement mentioned in Clause 60 of the Agreement was
not valid as the test of bias was fully satisfied. The A2 being a Managing Director of the party directly
involved in the dispute, bias on the part of the second appellant goes to the root of his jurisdiction to act
as an arbitrator, thus cannot assume such a role.
Rationale:
The court decided whether the Agreement could be considered a valid arbitration agreement by looking
at the essential elements that constitute an arbitration agreement, which are:
a. There must be a present or a future difference in connection with some contemplated
affair;
b. there must be the intention of the parties to settle such differences by a private tribunal;
c. the parties must agree in writing to be bound by the decision of such tribunal, enumeration
in Section 7 of the Act. Clause 60 covered the essential features
The Court held that the tests of bias that can nullify an arbitration agreement. According to Cla use 60 in
case of any disputes which arise out of the agreement, the matter shall be referred to the Managing
Director of Bihar State Mineral Development Corporation Limited, who was directly involved with the
dispute against the R.
The court cited Russel on Arbitration, 22nd Edn., in which ‘actual and apparent bias’, ‘pecuniary interest’
and ‘impartial’ principles were looked at. In actual and apparent bias, actual bias is rarely established but
is a clear ground of removal. Apparent bias deals with if there is a suspicion of bias where it has been
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variously described as apparent or unconscious or imputed bias. Also it includes some form of objective
apprehension of bias existing. Pecuniary interest is an automatic disqualification in which the arbitrator
has a direct pecuniary interest. Impartial principle deals with if there are justifiable doubts as to his
impartiality this will provide a ground for his removal by the court or mean an award can be challenged.
The court also referred to Judicial Review of Administrative Action, by de Smith in which a spectrum was
described with various bias tests. In this spectrum, bias may be proven to be present before a decision is
given, probability or possibility of bias must be present or a reasonable person may be a ble to see
reasonable suspicion for bias once the decision has been given.
In conclusion, it is clear that one cannot be a judge of his own cause, bias was clearly proven on the role of
the arbitrator and thus he cannot assume such a role as a right to fa ir trial is a fundamental rule of law,
and a domestic tribunal must be an impartial one. Clause 60 of the arbitration agreement therefore is not
valid.
Rule: Bias of the decision maker deprives the litigant of the fundamental right to a fair trial by an
impartial tribe, and therefore nullifies the arbitral award.
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Smita Conductors Ltd. V. Euro Alloys Ltd.
AIR 2001 SC 3730
Facts
1. The Respondent (Referred to as R) proposed a contract to the appellant (Referred to as A) and
was signed by the parties. This contract (referred to as Contract 1) was for supply of aluminium by
R to A and had an arbitration clause. R sent a letter along with the contract directing A to send
back a copy of the signed contract but this was not done by A, in spite of repeated reminders. R
further suggested certain amendments to Contract 1 and sent letters to A, in regard to the same, to
which A never replied.
2. R and A entered into another similar contract (Referred to as Contract 2) but it had no arbitration
agreement. R sent a second copy of the contract to A with some changes, including the insertion of
an arbitration clause. This second copy was not signed by A.
3. A issued irrevocable letters of credit in favour of credit in favour of R after the first shipment was
dispatched by R.
4. The RBI issued certain circulars at this time which put restrictions on the amount of imports and
exports. Due to this the application for the letters of credit was not cleared.
5. A sent a letter to R stating that he wanted to apply force majeure and cancel the shipment. In the
letter A referred to the two contracts between the parties.
6. R sent a letter to A that he wanted to go for arbitration to get compensation for the losses faced by
him. A did not reply to this letter.
7. An arbitration proceeding was filed in London Metal Exchange and it gave damages to R along
with pre-award interest.
8. R filed a petition in the Bombay High Court for enforcement of the award under part II. This was
accepted and petition was disposed by the court by awarding damages at an interest rate of 15%
p.a.
9. This order given by the Bombay High Court has been challenged by A in the present proceeding in
the Supreme Court of India.
Procedural History:
 After R filed the arbitration in London Metal Exchange, A filed a petition (Petition 1) in Bombay
High Court pleading that there was no valid agreement between R and A, and that the arbitration
proceedings shouldn’t take place based on those agreements. This was quashed and the court said
that the arbitration agreement binds them.
 After the decision of the arbitration in London Metal Exchange, R filed a petition in Bombay High
Court (Petition 2) to enforce the award given by the arbitrator. This award was enforced and the
petition was disposed. This order given in Petition 2 has been challenged in the present case.
Issue: Whether the arbitration agreement is valid even when not signed by both parties?
Holding: The arbitration agreement was valid here. The appeal was dismissed.
Rationale:
 The court accepted the arguments put forward by R whereby it held that arbitration agreement is
valid and so has been decided by the Bombay HC in Petition 1. They also acknowledged that A’s
conduct and correspondence clearly prove that the agreement was valid. A sent letters to R stating
that he wanted to apply force majeure to the agreements. Here he meant the present two
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agreements and thus acknowledged his acceptance of the agreements. Therefore, an acceptance of
the trade means an acceptance of the whole contract.

 The court further said that an agreement in writing will include a contract of the kind in the
present case. Additionally there was no correspondence between the two parties disagreeing with
any of the terms of the contract.
Rule: An ‘agreement in writing’ includes contracts, letters and telegrams even if not signed. Signature is
not a necessity to the agreement. The conduct of the parties can signify their conse nt to the agreement.
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Sukanya Holdings Pvt. Ltd vs Jayesh H. Pandya & Anr
(2003) 5 SCC 531
Facts:
Sukanya Holdings and Jayesh entered into a partnership agreement to construct a land which belongs to
Ms. Jaykriti Mehta. After the retirement of Ms. Jaykriti Mehta, other partners agreed to continue with a
partnership firm and entered into an agreement with M/s Laxman Commercial and Finance Ltd. after
which the construction was started. It is contended that from 1996 to 1998, Jayesh H. Pandya took away
some amount from the partnership without contribution to capital construction. On 7.4.1998, five flats
were sold to the creditors of the partnership firm in order to repay the loans and excess amount was paid
to the firm. On 23.6.1999, the partnership firm executed a Deed of Conveyance subject to rights of other
parties in favour of M/s West End Gymkhana Ltd. in respect of disposed of flats. On 1.1.1999, Jayesh
wrote to the Income Tax Officer to complete the assessment of the partnership firm. Accordingly,
assessment order was passed on 30.3.2000. Thereafter, respondent no.1 filed suit No.1991 of 2000 in the
High Court of Bombay for dissolution of partnership firm and also challenged the conveyance deed. On
the same day, appellant filed an application under Section 8 of the Arbitration & Conciliation Act, 1996.
That application was opposed by Jayesh by contending that the subject matter of the suit is not between
the contracting parties and the reliefs are claimed not only against respondent 1 and 2 who are
contracting parties but are claimed against remaining 23 parties, who are purchasers/so -called tenants
of the disputed flats.
Procedural History:
The High Court rejected application under Section 8 of the Act as all the defendants to the suit are not
parties or partners in the partnership firm and the terms of the partnership deed including the
arbitration clause are not binding to them. Only part of the subject matter could at the most be referred
to the arbitration. The object and purpose of the Act is to avoid multiplicity of the proceedings and not to
allow two forums simultaneously to proceed with the matter.
Issue: Whether the bifurcation (severability) of cause of action is permissible?
Holding:
The court held that the word “matter” used in the section 8(1) refers to the entire subject matter of the
suit which relates to arbitration agreement. In others words, Section 8 does not permit bifurcation of the
cause of action, that is, the subject matter of the arbitration agreement. It also does not permit bifurcation
of suit between parties who are parties to the arbitration agreement and others who are not parties to it.
Also bifurcation of subject matter of arbitration agreement in two parts, one to be decided by civil court is
not allowed for the reason that it would inevitably delay the proceedings and would also increase the cost
of litigation causing inconvenience and harassment to the parties which is against the objective of the Act.
Rationale:
The court held that it would be difficult to give an interpretation to Section 8 under which bifurcation of
the cause of action that is to say the subject matter of the suit or in some cases bifurcation of the suit
between parties who are parties to the arbitration agreement and others is possible. This would be laying
down a totally new procedure not contemplated under the Act. If bifurcation of the subject matter of a
suit was contemplated, the legislature would have used appropriate language to permit such a course.
Since there is no such indication in the language, it follows that bifurcation of the subject matter of an
action brought before a judicial authority is not allowed.
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On interpretation of Section 8, Section 5 would have no bearing because it only contemplates tha t in the
matters governed by Part-I of the Act, Judicial authority shall not intervene except where so provided in
the Act. Except Section 8, there is no other provision in the Act that in a pending suit, the dispute is
required to be referred to the arbitrator. Where a suit is commenced ‘as to a matter’ which lies outside
the arbitration agreement and is also between some of the parties who are not parties to the arbitration
agreement, then there is no question of application of Section 8.
Rule: Bifurcation of cause of action, between the parties to arbitration agreement and third parties who
are not party to the arbitration agreement but have interest in the subject matter, is not contemplated
under S.8.
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S. B. P and Co. v. Patel Engineering Ltd.
(2005) 8 SCC 618

Facts: The case was brought to the Supreme Court on granting of a Special Leave Petition whereby
several petitions were combined.

Issues:
1. Whether the function/power of the Chief Justice or the person/ persons delegated by him
under Section 11(6) is administrative or judicial in nature?
2. Whether "person/ institution" in S.11 (6) can include any judicial/quasi-judicial body or
judges of the lower courts when it comes to appointment of the tribunal?
3. Whether such a decision by the CJ is appealable?

Holding:

1. The Court in a majority of 6:1 held that the function/power is judicial and over -ruled the decision
held in the case of Konkan Railway Corpn. Ltd. and another v. Rani Construction Pvt. Ltd., (2000) 8
SCC 159 wherein this function in question was held to be administrative. But, the Court clarified
the stand that the decision in the present case would only have prospective ruling and all the cases
decided before the date of decision for the present case, i.e. 26th October 2005, will be held valid
and only pending or future cases will be dealt under the present holding.
2. The Court held that only judges of the High Court or the Supreme Court can be designated the
power by the CJ of HC and CJI, respectively, under this section to prevent the credibility of the
person appointing the tribunal/arbitrator from becoming sparse and to avoid greater intervention
by Courts.
3. The decision is only appealable under Article 136 of the Constitution as a Special Leave Petition,
which is the discretionary power of the SC, and on determining the CJ's decision, if the SC holds it
to be correct, it will be final.

Rationale:
1. The Chief Justice when appointing the arbitrator/ referring it to arbitral tribunal needs to look
into various preliminary factors before deciding whether he can do so. He needs to consider
the factors such as:
a. Whether a valid arbitration agreement exists between the parties.
b. Whether the person who has approached the court is a party to the agreement.
c. Whether there exists a live claim, i.e. to make sure that the case is not time barred etc.
d. Whether the conditions to bring his jurisdiction into the picture exist.

To determine his jurisdiction, the conditions laid down under S11(6) need to be present
which are if the parties have failed to act according to the procedure laid down in the
agreement, if the arbitrators have failed to reach an agreement or if a person/ institution has
failed to do what is expected under the procedure. The Chief Justice when choosing the
arbitrator also needs to keep in mind the qualification of the arbitrator that had been laid
down in the arbitration agreement and all such other qualifications that are to be satisfied by
default.
These functions, according to the Court, highlight the adjudicatory nature of the power and
thus even when the question of delegation by the Chief Justice of these functions to some
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person designated by him, come into the play, the designation can only be restricted to person
with high judicial credibility just as the Chief Justice and not any other judicial person/ quasi
judicial body. The finality given to the decision of the CJ for appointment under S11(6), under
S 11(7) is so, since the decision taken by the CJ needs to be reached at after having looked at
the merits of the case, thus not merely being an administrative one. Also, the tenets of natural
justice play a role in the discharging of such functions and thus the CJ will have to send a
notice to the other party intimating him of the filing of the application so as to allow the other
party to present its contentions.
The other contention that might arise in such cases is the scope of the arbitral tribunal to
decide on its own jurisdiction under S16 despite the CJ having referred the case to it through
S11(6). The Court held that if a case is brought to the CJ under S11(6), the CJ after examining
the merits of the case(the preliminary ones), if refers the case to an arbitral tribunal, the
tribunal cannot then rule upon its jurisdiction and decide whether it has such a jurisdiction or
not. The Court held so since the very body that brings the tribunal into force cannot question
that body on its jurisdiction to do so because the judicial function of the CJ would expect of
him to have delved into the merits of the case and come to such a conclusion. And since 11(7)
gives the decision of the CJ a finality, this decision cannot be over -ruled by the tribunal.
Although if a case is brought to the tribunal directly under S16, it is free to rule on its own
jurisdiction.

2. The Act has been adopted from the UNCITRAL Model laws and Article 11, which corresponds
to S11(6), talks about the "Court" instead of the CJ. This has an obvious implication that being
of the legislature's intent on giving the power to a person with a high judicial credibility. But
the CJ alone as an individual was not intended to be the person who could carry out the
function. He forms a part of a class of persons who can discharge the function and those
persons include judges of the same court, i.e., the High Courts and the Supreme Court. The
reason, once again, to only give such power to the judges of the high court who are appointed
by the CJ is to ensure credibility and the only way an institution comes into picture while
appointing the arbitrator/tribunal is that it can give suggestions as to who should constitute
the such a tribunal. The intention of the legislature in replacing "court" with CJ was also to not
include the jurisdiction of the Principal civil courts of original jurisdiction etc in such cases. It
would also lengthen the procedure since ordinary court proceedings would be resorted to,
leaving space for numerous appeals and basically increasing the burden of the Courts,
contradicting the very purpose for which the Act was brought into existence.

3. The Court held that construing the section as an administrative one would lead to vague
conclusions. It recognised the issues that would arise out of such a conclusion since then the
decision of the CJ would be open to appeals under Article 226 of the Constitution and that way,
the case would be in the hands of the judges of High Courts to decide upon, over -ruling the
decision of the Chief Justice at times. Also, in the case of internatio nal arbitration, the decision
of the Supreme Court of India would be subject to appeal under the High Courts which in
essence would be incongruous. The CJ under S11(6) anyways deals into the details of the
preliminary facts to decide whether it is fit for appointment of an arbitrator or not and since a
high amount of judicial activity goes into it, the only recourse left to take against the CJ's
decision can be under Art 136. If after appeal under Art 136, the Supreme Court decides that
the CJ's reasons for coming to the conclusion do not show any discrepancy, it will be final and
unappeallable. This again somewhat cemented by the presence of S11(7) which makes the
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decision of the CJ final. The only way for the party to appeal then will be to wait for the or der of
the Tribunal and then appeal it under S34 of the Arbitration and Conciliation Act.

Rule: The CJ's function to appoint an arbitrator or arbitral tribunal is a judicial function and not an
administrative one and the power to designate this duty only extends to designating it to other judges
of the High Court/ Supreme Court. The decision of the CJ can also only be appealable under Article
136 after which the decision will be final and binding.
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Indowind Energy Ltd. v. Wescare (I) Ltd.
AIR 2010 SC 1793
Facts:
1. Indowind Energy which is the appellant is the nominee company of Subhuti Finance
(respondent no.2) and they share common shareholders and Directors.
2. Wescare India, respondent, enters into an agreement with Subhuti Finance for the transfer of
assets worth 981.1 Cr from Wescare India to Subhuti Finance. In this case Subhuti Finance
names Indowind Energy as its nominee and as a 3rd party to the agreement.
3. The agreement has two important clauses which states –

Clause 10- That incase of any dispute, difference, claim or questions, it would be resolved with
a mutual agreement of arbitration before a sole arbitrator and states the arbitration clause.
Clause 11- The agreement comes into validity after approval of the board of directors and
shareholders of the seller (Wescare India), the buyer (Subhuti Finance) and the third party
Indowind Energy. It also specifically states that incase the approval is not obtained by either of
the parties, the agreement shall be null and void and of no effect whatsoever.

Procedural History:

Wescare filed a petition under Section 11(6) of the Arbitration and Conciliation Act before the Madras
High Court against Subuthi and Indowind for appointment of a sole arbitrator to arbitrate upon the
disputes between them that arose in respect of agreement. Subuthi resisted the said petition alleging
that as the agreement dated 24.2.2006 did not contemplate any transaction between Wescare and
itself (Subuthi) and as no transaction took place between Wescare and Subuthi under the agreement
dated 24.2.2006, there was no cause of action nor any arbitrable dispute between them. Indowind
resisted the petition on the ground that it was not a party to the agreement dated 24.2.2006 entered
into between Wescare and Subuthi; that it had not ratified the agreement dated 24.2.2006 or acted
upon it; that there was no arbitration agreement between Wescare and Indowind. The learned Chief
Justice of the Madras High Court allowed the said application under Section 11 of the Act, by the
impugned order dated 1.8.2008 and appointed a sole arbitrator. The learned Chief Justice held that
Indowind was prima facie a party to the arbitration agreement and was bound by it, even though it
was not a signatory to the agreement dated 24.2.2006.

The said judgment is challenged in this appeal by SLP before the Supreme Court of India.

Issue:
1. Whether an arbitration clause found in a document (agreement) between two parties, could be
considered as a binding arbitration agreement on a person who is not a signatory to the
agreement?
2. Whether a company could be said to be a party to a contract containing an arbitration
agreement, even though it did not sign the agreement containing an a rbitration clause, with
reference to its subsequent conduct?

Holding:

1. The court stated that according to Section 7 of the Act, the parties should directly be involved
in the dispute in question. Thus, Indowind Energy was not a party to the main agreement and
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showed no intention into entering the arbitration agreement. A third party is not liable or the
agreement is not binding upon them even if there exists some sort of a nexus between the
main parties and the third party pertaining to the issue in question. Here, Indowind Energy
never expressed its desire in any form of letters, telegrams or other means of
telecommunication that provided any record of an arbitration agreement between the parties
or their intention to enter into one as per the requirements of Section 7 of the Arbitration and
Conciliation Act. Therefore, in the absence of an arbitration agreement between Wescare India
and Indowind Energy, no claim can be put forth by Wescare against Indowind in o rder to have
arbitration.

2. That the parties who do not sign in the main agreement cannot be binding upon the arbitration
agreement. Thus a mere third party who never showed its intention in any form cannot be
considered to be a part of this agreement as it did not sign in the main agreement between
Wescare India and Subhuti Finance. Merely because Indowind Energy and Subhuti finance
share common directors and shareholders, the act done by Subhuti Finance does not express
the same intention on behalf of it nominee Indowind Energy. These companies are two
separate legal entities and having common shareholders and directors which doesn’t make it a
single legal entity.

Rationale:
1. That a third party who is not a signatory to an arbitration agreement would not b e bound by
such an agreement even if some sort of nexus exists between the third party and the
transaction in question.
2. The signing by each and every party in the agreement was essential and that the party who
does not do so will not be bound by the clauses in the main arbitration agreement.
3. If Section 7 contemplates that an arbitration agreement should be in writing, it will not be
sufficient for the petitioner in an application under Section 11 to show that there existed an
oral contract between the parties, or that parties transacted with one another, or one of them
had performed certain acts with reference to the other, as proof of arbitration agreement.

Rule: An arbitration agreement can come into existence only in the manner contemplated under
Section 7. An arbitration agreement under Section 7 should satisfy two conditions:
a. it should be between the parties to the dispute; and
b. it should relate to or be applicable to the dispute.
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Enercon India Ltd and Ors v. Enercon GMBH and Anr.
AIR 2014 SC 3152
Facts:
1. The plaintiffs were –
a) Enercon (India) ltd. – P1 incorporated in Daman, for manufacture of wind turbine
generator (WTG)
b) P2 and P3 – 44% Equity shareholders in P1
2. The defendants were –
a) Enercon GMBH – D1, Joint Venture with P1, is having 56% of Equity shares in R1,
incorporated in Germany
b) R2 – company incorporated in Germany having patent in manufacturing WTG.
3. In 1994, R1, entered into a Joint Venture with P1, and signed shareholders agreement with P2 and
P3, which had the ancillary document as to the Technical Know How Agreement (TKHA), where
R1 promised to provide P2 all the technical details and necessary licenses and other materials
required for manufacturing WTG.
4. The contract was modified in 1998, where the shareholding percentage of R1 in P1 from 51% to
56%.
5. With the expiration of the TKHA, RI and P2 and P3, entered into Heads of Agreement for
continuation of the supply of raw materials and negotiation on further contracts on 2006.
6. Based on the same, the company entered into Agreed Principles, where they drafted four
agreements – IPLA (Intellectual Property License Agreement), Succession Technology transfer
Agreement, Name use License and Amendment to the existing SHA.
7. The following agreement contained the Arbitration clause which stated that in case of any dispute,
each party will get to appoint an arbitrator, there will be in total three arbitrators and the venue of
arbitration will be London and the Indian Arbitration and Conciliation Act 1996 will be applicable.
8. Following the same, in 2007, R1 wanted to buy more shares from P2 and P3, which when they
refused, R1 stopped the supply.
9. Three suits were filed in three different jurisdictions, in Bombay High court; suit was filed by P2
and P3 for enforcing the contract and forcing R1 to continue the supply and for invalidating the
contract and the arbitration clause. In English Court by R1 for enforcing the arbitration clause and
claiming English courts having concurrent jurisdictions. Also an Anti suit injunction in the Bombay
High Court by P2 and P3 against suit filed in England, stating that English courts does not
jurisdiction in regard to the matter.
Procedural History: The Bombay High court stated in the judgment that the –
1. The Arbitration agreement is valid and enforceable
2. The governing law is the Indian A&C Act, 1996.
3. London is a venue and not a seat, so the Arbitration laws of England shall not be applicable.
4. On virtue of London being the Venue, the civil courts of London shall have concurrent jurisdiction.
5. The case is appealed before the Supreme Court.
Issues:
1. Is the IPLA a valid and concluded contract and if not can the arbitration clause be still held legally
binding on the parties?
2. Is the Arbitration clause workable?
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3. Is venue synonymous to seat?
4. Does English Courts get concurrent jurisdiction based on the fact that London is the venue of
Arbitration?
Rules: The court based the judgment on various provisions of the A& C Act, 1996 for instance –
 Section 10 – it essentially requires that there has to be an odd number of arbitrators for an
arbitration proceeding.
 Section 11 – deals with appointment procedure of arbitrators. 11(3) mentions that if there are
three arbitrators and the parties fail to come up with an agreement regarding their appointment,
then each party will appoint one arbitrator each and then the two arbitrator will appoint the third
one.
 Section 16 – the section essentially states that irrespective of the validity or enforceability of the
contract, the arbitration clause will be valid unless it is in itself void or null.
 Section 45 – it deals with powers of Judicial authority to refer parties or any person claiming
through or under him to arbitration unless the arbitration agreement is void or cannot be
performed.
Holding:
1. Parties have to settle dispute through arbitration including the question of enforceability of the
contract.
2. The arbitration clause is workable and discrepancies on the number of arbitrators will not make
the clause void.
3. London is a neutral venue and not a seat.
4. Only Indian courts will have jurisdiction and English courts will not have concurrent jurisdiction.
Rationale:
1. The court held that as long as there is a legal relationship between the parties whether or not the
same is contractual in nature, the arbitration clause remains valid, expect if the clause is not
nullified because of any other reason. In the concerned case, the fact that the Agreed Principles
were signed by both the parties goes to establish the legal relationship between the parties and in
the lack of reasons that would nullify the clause the arbitration clause will stand valid and
enforceable. Further with regard to section 16, even if there is a contention as to legality of the
contract, the same will not affect the arbitration clause, and the validity of the contract shall be
determined by the Arbitrator himself.
2. The second issue, was based on the fact that that the arbitration clause makes provision for
appointment of two arbitrators only and according section 10, an odd number is required. The
court stated that it is expected to adopt a reasonable business mind, and if there is enough
evidence to support that the parties intended to go for arbitration, court will in consonance with
the UNCITRAL Model, read the clause in a way to make it workable. Further validity of the
arbitration agreement based on judicial precedents does not depend on the number of arbitrators.
3. On question of whether London can be treated as a seat, the court held that if the applicable laws
are specifically mentioned then it will determine the Jurisdiction and the seat. In this case London
will be treated as a neutral venue and not seat, and in the case of Naveira Amazonica, the court
stated that Arbitration can be held at ‘X’ subject to the procedural laws of ‘Y’. The court further
stated three pointers that will help to identify whether the seat of Arbitration –
a) Substantial laws governing the contract
b) Laws (substantial) governing the arbitration agreement
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c) Laws governing the conduct of arbitration.
4. Since Indian laws are governing the above mentioned agreements, India will be treated as the seat
of arbitration in the case.
5. Finally on the question of concurrent jurisdiction of English courts on virtue of London being the
venue, the court stated that the main purpose of arbitration is to reduce complexities, time
consumption. Giving India and England concurrent jurisdiction will essentially increase the
complexities, as there will be probability where the courts might give dissenting judgments and
would be difficult to choose one over the other. Hence London shall not have concurrent
jurisdiction.
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World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pvt. Ltd.
(2014) 11 SCC 639
Facts
World Sport Group (Appellant) and MSM Satellite (Respondent) executed a facilitation deed whereunder
the respondent was to pay a sum of Rs. 425 crores to the appellant in lieu of the appellant’s services in
facilitating the obtaining of a Media Rights License from the BCCI. {paras 3, 4}
The arbitration clause of the said agreement provided that all disputes in relation to the deed will be
resolved through arbitration. Further, that (a) the seat of arbitration will be Singapore, (b) the governing
law of the contract will be English Law, (c) the arbitration will be submitted to the International Chamber
of Commerce and (d) the parties explicitly waived the right to jury trial respect of any claim under the
contract. {para 3}
Subsequently, the Respondent wrote to the appellant rescinding the Facilitation Deed on the ground that
it was voidable on the ground of fraud and misrepresentation. {para 5}
Procedural History
The Respondent filed a suit in the Bombay High Court seeking a declaration that the facilitation deed was
void and for recovery of money already paid under the terms of the deed. The Appellant, in turn, sent a
request for arbitration to the Int’l Chamber of Commerce in Singapore, purporting to act under Clause 9
of the Facilitation Deed. Subsequently, the Respondent filed a second suit in the Bombay High Court,
among other things, seeking a temporary injunction against the arbitration proceedings commenced by
the Appellant. {paras 5, 6}
The Single Judge of the Bombay Court dismissed the application for temporary injunction, declining to
interfere, holding that it would be for the Arbitrator to consider if the facilitation deed was void on
account of fraud and misrepresentation. The Respondent challenged this order before a Division Bench of
the Bombay High Court. {para 7}
The Division Bench of the Bombay High Court reversed the decision of the Single Judge and passed an
order of temporary injunction restraining the arbitratio n by the ICC. This decision of the division bench
of the Bombay High Court is under appeal in the Apex Court. {para 7}
Issues:
a. Whether the Bombay High Court was barred from entertaining the said proceedings based
on the principle of comity of courts?
b. Whether the ground taken by the Respondent that the Facilitation Deed was void due to
fraud and misrepresentation affect the arbitration agreement contained in Clause 9 of the
same deed?
c. Whether the Division Bench correctly held that where there are serious a llegations of
fraud, an otherwise competent judicial authority may decline to refer the matter to
arbitration?
d. Whether the Division Bench correctly held that the Arbitration clause, in so far as it
restricted the right of the parties to move the court for appropriate relief and also barred
the right of trial by jury, was void for being opposed to public policy?
Held:
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a. The contention that as Clause 9 of the Facilitation Deed provides that any party may seek
equitable relief in a court of competent jurisdiction in Singapore and that therefore the Bombay
High Court had no jurisdiction to entertain the suit and the application based on the principle of
comity of courts is incorrect.

Principle of judicial comity, i.e. a respect for decisions from other jurisdictions on the same
dispute, is inapplicable in the instant case. No decision of a foreign court or foreign law was cited
or challenged.
In fact, Sec. 9 of the Code of Civil Procedure provides that courts in India have the jurisdiction to
try all suits of a civil nature except cognizance of which is expressly or impliedly barred. In fact,
Sec. 45 of the Arbitration Act itself requires a judicial authority to make a determination o n if the
original agreement is “null and void, inoperative or incapable of being performed”. {paras 22 -25}

b. The arbitration agreement contained in Clause 9 of the Facilitation Deed is independent of and
separate from the main Facilitation Deed and does no t get rescinded as void by default. The
principle of severability of the arbitration agreement and the main agreement applied. The
Division Bench of the Bombay High Court, therefore, could not have refused to refer the parties to
arbitration on the ground that the arbitration agreement was also void along with the main
agreement. {para 32}
c. The Court will have to independently examine in each case whether an arbitration agreement, on
its own, is void, inoperative or incapable of being performed. Section 45 of the Act does not
support the contention that the arbitration agreement was inoperative or incapable of being
performed as allegations of fraud can be enquired into by the court and not the arbitrator.

Inoperative means where the arbitration agreement ceases to have effect due to explicit or
implicit revocation of the arbitration clause by the parties, or perhaps, non-adherence to a time-
limit etc. Incapable of performance means existence of reasons which make it impossible to
establish an arbitral tribunal. None of these conditions are applicable in the instant case.

N. Radhakrishnan v. Maestro Engineers (2010) 1 SCC 72 and Abdul Kadir v. Madhav Oak (AIR
1962 406) were decisions rendered in the context of domestic arbitrations and inapplicable to the
instant case.

Even where there are allegations of fraud in the procurement or performance of a contract, the
arbitration tribunal itself may enquire into the question. {paras 26, 27 and 33 to 36 and 39}

d. The approach of the Division Bench of the High Court that the arbitration clause was opposed to
public policy or void for being in restraint of legal proceedings under Section 23 and 28 of the
Indian Contract Act is wholly flawed. The right to jury trials is not available in India and in any
case, the arbitration clause only sought to limit the jurisdiction of Courts so far as legally
permissible. {para 38}
Conclusion
The overall reasoning of the Division Bench of the Bombay High Court is erroneous and alien to Section
45 of the Act. The decision of the Division Bench is reversed and the Single Judge’s order restored. So long
as the arbitration clause itself is not void, inoperative or incapable of being performed, a judicial
authority must refer the matter to arbitration. Thus, allegations of fraud (or even serious fraud) in
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respect of the main agreement requiring enquiry are not a ground to reject plea for reference of disputes
to arbitration under Section 45.
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Percept D'Mark (India) Pvt. Ltd. Vs. Zaheer Khan and Anr.
AIR 2006 SC 3426
Facts
The Appellant (‘A’), Percept D’Mark, entered into a Promotion Agreement with the Respondent (‘R),
Zaheer Khan. The agreement commenced on 1st Nov 2000 and was terminated by R on 28th Nov 2003.
According to this agreement A was supposed to endorse and market R. As per clause 31(b) of the
agreement, after the termination of the agreement R was required to give A an opportunity to match any
agreement that R would be offered by any third party. In the event that A matched the offer then R wou ld
be required to accept it, and in case A did not, then R was free to contract as he deemed fit. However, R
appointed a third party without offering A. A subsequently prayed for an interim order to obtain an
injunction order against R from contracting with a third party.
Procedural History
The Arbitration Petition was first filed before a Single Judge Bench of the Bombay High Court, which
ruled in favour of A, granting the injunction order against R. However on appeal before the Division
Bench of the Bombay High Court the order was over turned. Consequently A appealed in the Supreme
Court, challenging the overturn.
Issues
1. Whether the granting of the injunction would be in contravention of Sec 14, 41 and 42 of the
Specific Relief Act.
2. Whether the granting of the injunction would be rendered inequitable as the balance of
convenience was in favour of R.
3. Whether an injunction can be granted in the case where there has been an unreasonable delay in
filing for the arbitration proceedings.
4. Whether an injunction could be granted to a party, not party to the agreement.
Holding
The Court ruled in favour of the R, disallowing the injunction. Primarily, the Court ascertain ed whether A
had the intention of filling for the Arbitration Proceedings. Accordingly the Court felt that an injunction
could not be granted for such an Arbitration Proceeding.
Rationale
R had entered into the agreement with the third party in 2003, which was nearing its termination and
since no injunction subsisted at the time, it would be inequitable and inappropriate to grant an injunction
in 2006. The Arbitration Petition was filed on 4th Dec 2003 and even after 3 years elapsed, A did not
show any intention of starting the Arbitration Proceeding. This strengthened the courts belief that A was
merely taking advantage of sec 9 of the Arbitration and Conciliation Act, 1996.
The balance of convenience test was applied, and it was deemed that A could be compensated monetarily
even after the Proceedings ended, however R would suffer irreparable loss. The Court stated that in
earlier judgments in contract based on trust and talent injunctions of such a nature should not be
imposed. Adding to this the Court was of the opinion that if the injunction was passed, then it would be as
good as deciding the entire Arbitration Proceedings.
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The Court was of the opinion that in cases such as this, where the rights of the third party were being
affected directly, it would be inequitable to give the injunction against such third party.

This was an opportunity for the Courts to define the law for granting relief or injunction in situations
where the Arbitration Proceedings didn’t begin. Nonetheless, the court only took into account the non-
filing of the Arbitration Proceedings to establish the balance of convenience, without considering its
relevance with Sec 9 of the Arbitration and Conciliation Act, 1996. A conditional order for interim relief
should be granted with explicit terms laying down a reasonable period within which the Arbitration
Proceedings need to begin.
Rule
Section 9 of the Arbitration and Conciliation Act, 1996 grants interim relief ‘before, during or after
arbitral proceedings, or at any time after the making of the arbitral award, but before it is enforced’, Sub-
section (ii) enumerates some of the specific forms of interim relief that can be granted to parties who
have entered into a contract containing an arbitration clause. Section 9(ii)(d) deals with interim
injunction granted by the court.
The intention of the section is to give speedy assistance in the form of interim relief in cases where no
arbitral tribunal has been constituted in order to avoid prejudice to parties on grounds of inordinate
delay. It can be argued that this power is analogous to the arbitral tribunal, however it is ancillary to it.
Further the objective was to make the scope of the section more progressive.
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Note: This case has been over-ruled by Swiss Timing Limited vs. Organizing Committee.
N. Radhakrishnan vs. Maestro Engineers
(2010) 1 SCC 72
Facts:
In this case the two parties i.e. N Radhakrishnan and Maestro Engineers had entered into a partnership
agreement for which a partnership deed was executed between them, which contained the clause of
arbitration. Dispute arose between the parties and the appellant alleged fraud, collusion and other
serious financial malpractices on the other partners and offered to resign from the partnership firm on
the condition that his share of profits and his salary is paid to him. After this offer the other partners filed
a suit for injunction in the district court seeking declaration that the appellant was no longer a partner in
the firm and restraining the appellant from interfering in the matters of the firm.
Procedural History:
The appellant filed an application under section 8(1) of the Arbitration and conciliation act, 1996 and
requested the court to refer the matter to arbitration as the partnership deed contained the clause for
arbitration. This application of the appellant was firstly rejected in the District Court and then by the
Madras High Court on the basis that the applicant has mentioned the kind of allegations that requires
detailed appreciation of the evidence.
Issues:
1. Whether the dispute fell within the jurisdiction of arbitrator?
2. Whether the arbitrator competent enough to deal with the kind of dispute arose by the parties?
Holding:
The Supreme Court of India on first found that the matter fell in the jurisdiction of the
arbitration/arbitrator but later upheld the High Court’s decision that the “matter should be tried by the
court” as the case involved the allegations of fraud, collusion, serious malpractices by the other partners
and the court said that this kind of cases required detailed appreciation of the evidence which can only be
done in a court of law as the court is guided by the provisions of the Civil codes, Indian Evidence Act and
also criminal codes.
The court said that an arbitrator couldn’t try the matter in hand as his jurisdiction is just between the
four walls of the contract and not anything beyond it. The rules and provisions of civil codes, Indian
Evidence Act and Criminal Procedure codes are not applicable/binding to the arbitrator.
Rule: The cases, which fell within the jurisdiction of the arbitration can be tried by the court if it involves
the serious allegations of fraud, collusion, and financial malpractices.
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Datar Switchgears Ltd Vs Tata Finance

(2000) 8 SCC 151
Facts:
The Appellant (Datar Switch Gears) and the Respondent (Tata Finance) were in a lease agreement
dealing with certain machinery. Soon after, a dispute arose and the respondent (hereafter referred to as
“R”) sent a notice to the Appellant( hereafter referred to as “A”) for a payment of a substantial amount
within the next 14 days. A failed to pay the amount during the stipulated time, therefore, as earlier
mentioned by R it had to be treated as a notice for arbitration under the arbitration clause (20.9) o f the
agreement entered by the two parties. R did not however immediately appoint an Arbitrator but filed an
Arbitration petition under Section 9 of the Arbitration and Conciliation Act,1996.
On 25th November, 1999 the R being the lessor went ahead and nominated an Arbitrator, after the lapse
of 30 days from the payment notice sent. A, thereon, questioned the authority of the R appointing an
Arbitrator after the long lapse of notice period of thirty days and contended that the power of appoint an
arbitrator should have been exercised within a reasonable period of time and with concurrence to the
consent of A.
Procedural History:
A filed an arbitration application before the Chief Justice of the Bombay High Court asking them to
appoint another Arbitrator due to the expiry of thirty days since the notice was sent and also challenged
the unilateral appointment of the arbitrator. R challenged this application stating that an arbitrator was
already appointed by them according to the provisions given in the arbitration clause agreed to in the
lease agreement. The Chief Justice of the Bombay High Court held that since an arbitrator was already
appointed as per the conditions given in the lease agreement the application to appoint an another
arbitrator failed. A now has appealed before the Supreme Court challenging the order of the Chief Justice
of the Bombay High Court that maintains the appointment of an arbitrator by R even after the expiry of
thirty days which is allegedly beyond the reasonable time.
Issues:
1. If there a failure of the mechanism provided under the lease agreement entered by th e parties?
2. If under Section 11(6) of the Act, R forfeits his right to appoint an arbitrator if he fails to appoint
one within the period of thirty days?
Holding/ Judgement:
The Court held that there was no failure of the arbitration mechanism as prescribed under the lease
agreement as Clause 20.9 of the agreement. As the agreement clearly stated that the lessor (R) will have
the authority to appoint the arbitrator and the award will be final and binding. Hence, the Court agreed
with the lower court’s decision stating that there was no failure in procedure while appointing the
arbitrator.
The Court opined that Section 11(6) does not mention the a specific period of d ays as a limit the court,
however, did mention that even though the period of thirty days is not mentioned if the opposing party
moves to the Court before the appointment of the arbitrator then that forfeits the right of a party to
appoint an arbitrator. In the present case an arbitrator was already appointed by R before the A
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approached the Court. The court thus dismissed the appeal at all costs as there was no cause of action to
sustain any kind of failure in the procedure to appoint an arbitrator on part of R.
Rationale: Section 11 of the Act discusses the procedure of appointing an Arbitrator. If there is any kind
of failure wherein two parties cannot appoint an arbitrator or two arbitrators cannot agree on the third
arbitrator, then the aggrieved party can approach the Court under Section 11( 4) (5) &(6) of the Act.
Under section 11 (4) & (5) the period of thirty days has been mentioned as a reasonable time period for
the appointment of an arbitrator. However, the present application before the Cou rt is under Section
11(6) (a) no time limit has been prescribed under this section. Provided, that an arbitrator is appointed
before A filed an application under Section 11 before Court. Thus in cases where an arbitrator has not
been appointed within thirty days but no application has been made before the court under Section 11 of
the Act calling the procedure to appoint an arbitrator the right to appoint an arbitrator does not cease. In
the present case, not only did the party provide them with a notice for the payment but also the had
already appointed an arbitrator and settled a date for resolution of the dispute .
Additionally, the arbitration clause (20.9) agreed by the two parties in the lease agreement did not
prescribe any time period neither did it provide for any consent on the part of the lessee (A) for the
appointment of the Arbitrator. The Court also stated that where two parties have willfully entered into a
contract that does not contain any kind of fraud, deceit or mala fide intention on the part of the arbitrator,
the Court will not interfere in matters relating to appointment of an arbitrator.
Rule: The Court applied the rule that since no time period was expressly mentioned under Section 11(6)
of the Act. A party does not forfeit his right to appoint an arbitrator at the expiry of the thirty days, unless,
the other party has already approached the Court under Section 11 of the Act for failure in appointing an
Arbitrator. Also, it is crucial to look at the procedure provided in the arbitration clause of the agreement
signed by the two parties.
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Indian Oil Corporation Ltd. vs. Raja Transport (P) Ltd.
(2009) 8 SCC 520
Facts:
1. The appellant appointed the respondent as its dealer for retail sale of petroleum products.
2. In the contract they had an agreement that in the case of any dispute, the matter will be solved by
arbitration.
3. In the agreement itself, they also decided that the Director, Marketing of the Corporation or of
some officer of the Corporation who may be nominated by the Director Marketing, will be the sole
arbitrator.
4. After the period of six month, the appellant terminated the dealership of the respondent on the
recommendation of its Vigilance Department.
Procedural History:
 The respondent filed Suit in the Court of Civil Judge, Junior Division, Rishikesh, Dehradun for a
declaration that the order of termination of dealership was illegal and void and for a permanent
injunction restraining the appellant from stopping supply of petroleum products to its retail
outlet.
 The appellant filed an application under Section 8 of the Arbitration and Conciliation Act, praying
that the suit be rejected and the matter be referred to arbitration according to the agreement,
which the civil judge accepted and directed the parties to refer the matter to arbitration within
two months.
 Before going for the arbitration proceedings, the respondent filed an application before the Chief
Justice of High Court praying for appointment of an independent ar bitrator to decide the dispute
relating to the validity of the termination of the dealership.
 The learned Chief Justice, after hearing the parties allowed the application, and appointed a
retired High Court Judge as sole arbitrator to decide the dispute.
Issues:
1. Whether the learned Chief Justice was justified in assuming that when an employee of one of the
parties to the dispute is appointed as an arbitrator, he will not act independently or impartially?
2. In what circumstances, the Chief Justice or his designate can ignore the appointment procedure or
the named arbitrator in the arbitration agreement, to appoint an arbitrator of his choice?
3. Whether respondent herein had taken necessary steps for appointment of arbitrator in terms of
the agreement, and the appellant had failed to act in terms of the agreed procedure, by not
referring the dispute to its Director (Marketing) for arbitration?
Analysis:
1. Once a party has entered into an agreement with eyes wide open, it cannot wriggle out of the
situation by contending that the person appointed as arbitrator, is an employee of the other party
and thus he will not be impartial or objective. However, if the appellant feels that the arbitrator
has not acted independently or impartially, or he has suffered from any bias, it will always be open
to the party to make an application under Section 34 of the Act to set aside the award on the
ground that arbitrator acted with bias or malice in law or fact. The court held that a person being
an employee of one of the parties cannot per se be a bar to his acting as an Arbitrator. Accordingly,
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the answer to the first question is that the learned Chief Justice was not justified in his assumption
of bias.
2. The legislative intent is that the parties should abide by the terms of the arbitration agreement. If
the arbitration agreement provides for arbitration by a named Arbitrator, the courts should
normally give effect to the provisions of the arbitration agreement. In other words, referring the
disputes to the named arbitrator shall be the rule. The Chief Justice or his designate will have to
merely reiterate the arbitration agreement by referring the parties to the named arbitrator or
named Arbitral Tribunal. Ignoring the named Arbitrator/Arbitral Tribunal and nominating an
independent arbitrator shall be the exception to the rule, to be resorted for valid reasons.
3. When the dispute arose, the respondent did not seek arbitration, but went to civil court. It was the
appellant who sought reference to arbitration in terms of the arbitration agreement. The
respondent ought to have referred the dispute to the Director (Marketing) of the appellant within
two months from the date of the order of the court. It failed to do so. Therefore, it was the
respondent who failed to act in terms of the agreed procedure and not the appellant.
Held: The appeal is, therefore, allowed. The order of the High Court is set aside. The Director (Marketing)
of the appellant Corporation is appointed as the sole arbitrator to decide the disputes between the
parties.
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Swiss Timing Limited (P) Versus Organising Committee, Commonwealth Games 2010, Delhi (R)
(Arbitration Petition No. 34 OF 2013)
Facts:
Swiss Timing Ltd. (P) entered into an agreement with the Organizing Committee for providing Timing,
Score, Result (TSR) systems and supporting services required to conduct the commonwealth games in
India. It was alleged by (P) that the (R) had defaulted in making payments due under the
Contract/agreement and therefore the arbitration clause, Clause 38.6 as provided under the contract, was
invoked by the (P) and hence an Arbitrator was appointed by them.
(R) Failed to nominate their arbitrator due to which the third arbitrator was also not nominated and now
(P) has made application to SC u/s 11(4) read with section 11 (6) of the Act for the constitution of the
Arbitral Tribunal.
Issue:
Whether the Arbitral tribunal has jurisdiction in the matters of fraud, Misrepresentation or in the cases
were the contract stands not valid/ void?
Organizing Committee Contended:
1. That the Contract was Void-ab-initio, as it was obtained by corrupt practices and hence the
Arbitration cannot be invoked.
2. Heavy Reliance was placed on N. Radhakrishnan case , where it was held that the allegations of
fraud and serious malpractices cannot be dealt with properly in arbitration.
3. That there were criminal Proceedings pending simultaneously in the trial court, and thus the
arbitration cannot be invoked as it will lead to unnecessary confusion.
Rationale:
1. The court held that the Judgement in N. Radhakrishnan case is per incuriam, that is bad in law and
it cannot be relied upon.
 As it failed to consider the earlier judgments of the court in Hindustan Petroleum
Corporation and Anand Gajapathi Raju case , wherein it was seen as the obligation of the
Civil court to direct the parties to the Arbitration agreement where there exists an
Arbitration Agreement.
 Also, Section 16 (2), which deals with the principle of separability, was not referred to the
court anywhere in N. Radhakrishnan case.
2. The Court Adopted the Pro arbitration policy, keeping up with the general principle u/s 5. Court
concluded on the Joint Reading of Section 5 and Section 16 that also on matters where the contract
is void/voidable, arbitration can be referred to.
 By the proper presentation of facts and evidences to the tribunal itself.
3. Void and Voidable Contracts: Court drew the distinction in the cases where the contract is void or
voidable and said that the two are in many cases used interchangeably, whereas both have its
different meaning.
 It held that the Court ought to decline reference to arbitration only where the Court can
reach the conclusion that the contract is void on a meaningful reading of the contract
document itself without the requirement of any further proof.
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Whereas, in the cases of voidable contracts, the court cannot decline the reference to the
arbitration.
4. Possibility of Conflicting Decisions
 So if the Award is made in favour of (P) by the tribunal, (R) will be at liberty to resist
enforcement on the ground of subsequent conviction if any at the criminal proceedings.
 And if the Criminal proceedings result in an Acquittal, it would leave little ground for
challenging the validity of the underlying contract. Thus denial of reference at this stage
would unnecessarily delay the arbitration.
Holding: The court while deciding in favour of the (P), appointed the other 2 arbitrators. Also, favouring
the principle of separability u/s 16 (2) decided on the jurisdiction of the tribunal even in the matters of
fraud and misrepresentation or in the cases of invalidity of the contract.
Rules:
 N. Radhakrishnan Judgement is bad in law and not to be followed.
 In the cases of fraud or misrepresentation or the invalidity of the contract, the arbitration
agreement will be valid.
 Section 11 – deals with appointment procedure of arbitrators. 11(3) mentions that if there are
three arbitrators and the parties fail to come up with an agreement regarding their appointment,
then each party will appoint one arbitrator each and then the two arbitrator will appoint the third
one.
 Section 16(2) [Principle of Separability] – the section essentially states that irrespective of the
validity or enforceability of the contract, the arbitration clause will be valid and seen separately
from the main contract.
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M.V.Baltic Confidence & anr vs. State Trading Corpn of India Ltd. & anr
(2001) 7 SCC473
Facts:
The Appellants are the owners and parties interested in the vessel M.V.Baltic Confidence (for short, “the
ship”). Respondent 2 is the charterer of the said ship under the Time Charter Party Agreement entered
between it and the Appellants. Five Bills of Lading, all dt.26/5/1997, issued by the Appellants wherein
Respondent 2 agreed and undertook to carry on board the said ship Canadian yellow peas from the port
of Vancouver in Canada to the port of Calcutta in good order and condition. Respondent 1 is the holder
and endorsee of each of the said Bills of Lading and the owner of the stock of peas. Respondent 1 filed an
Admiralty suit in the Calcutta High Court against the Appellants and Respondent 2 for failing to deliver
the goods in good order and condition and for loss and damages suffered by it.
Procedural History:
The Appellants and Respondent 2 herein, as the 1st and 2nd defendants in the aforesaid suit filed in
Calcutta High Court, filed an application under Section 45 of the Act of 1996 for stay of the proceedings in
the suit and for referring the disputes to arbitration in terms of Clause 62 of the Charter Party Agreement
which was specifically incorporated as a condition of the Bills of Lading. A Single Judge of the High Court
who held that the arbitration clause in the Charter Party Agreement was not applicable to the alleged
disputes arising from the Bills of Lading rejected the said application. On appeal by the defendants, the
Division Bench of the High Court confirmed the order passed by the Single Judge of the High Court.
Now the matter is before the SC.
Issue: A standard arbitration clause contained in a Charter Party Agreement was incorporated in a Bill of
Lading. However, the expression "“Charter Party” was not changed to “Bill of Lading” while incorporating
the arbitration clause in the Bill of Lading. Will the arbitration clause be still held valid?
Judgment: The Supreme Court observed that the principal question to be considered in this case is “what
was the intention of the parties to the Bill of Lading while incorporating therein Clause 62 of the Charter
Party Agreement”. It is to kept in mind that while incorporating the conditions of the Charter Party
Agreement in the Bill of Lading, specific reference has been made to the arbitration clause by use of the
expression “including the law and arbitration clause”. On a fair reading of clause 62 of the Charter Party
Agreement (arbitration clause) and condition 1of the Bill of Lading (incorporation clause) there is no
manifest inconsistency or insensibility. Such was not the case of the parties in the suit nor any s uch
finding recorded in the judgement of the High Court (Single Judge or the Division Bench). Respondent 1
also did not contend before the Supreme Court that if the arbitration clause in the Charter Party
Agreement was implemented in relation to disputes arising out of Bills of Lading, it would result in an
absurd/unworkable situation. It was also not urged that the condition in the Bill of Lading incorporating
the arbitration clause of the Charter Party was null and void, incapable of being performed. The main
ground on which it was contended by Respondent 1 that the clause is inoperative is that the expression
“Charter Party” in clause 62 of the Charter Party Agreement was not changed to “ Bill of Lading” while
incorporating the same in the latter. The Supreme Court rejected this contention stating that it went
against the intention of the parties as evident from the incorporation clause. The Supreme Court also
observed that while ascertaining the intention of the parties, attempt should be made to give mea ning to
the incorporation clause and to give effect to it and not to invalidate or frustrate it giving a literal,
pedantic and technical reading of the clause.
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The judgement of the Division Bench of the High Court was set aside and the appeal was allowed.
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Narayan Prasad Lohia vs. Nikunj Kumar Lohia
(2002)1 Arb LR 493(SC)
Facts:
In this case there was a family dispute which was sought to be solved by the appointment of two
arbitrators. The dispute was solved, and an award was rendered by the tribunal. The parties aggrieved by
the award, challenged the award, and asked the Court to set it aside on the ground of violation of S.10.
The party realise after an year to fight a case on the issue of number of the arbitrators. Cal HC accepted
this challenge and set it aside. Appeal also dismissed, and matter reaches SC.
Laws Applicable:
Sections 4, 5, 10, 11, 16 and 34(2)(a)(v)
Issue:
1. Whether an Arbitral Tribunal composed of an even number of members was contemplated by the
legislators can also be laid to rest by emphasizing on the general scheme of the Act?
2. Is this provision, which says ‘shall not be an even number’ directory or mandatory?
Holding:
Besides observing that Section 10 of the Act is a derogable provision, the Supreme Court had, in this case
also held that an arbitral award can be set aside by the Court under Section 34(2)(a)(v) of the Act only if
the composition of the Arbitral Tribunal or the arbitral procedure was not in accorda nce with the
agreement between the parties. Furthermore, it was held that an arbitral award could be challenged on
the ground of composition of Arbitral Tribunal only when an objection is first taken before the Tribunal
under Section 16(1) of the Act, and the Tribunal has rejected such objection.
It was held in this case that if an objection under Section 16(1) of the Act was not raised within the time
period specified in Section 16(2), there is a deemed waiver of the right to object under Section 4.
Moreover, it was held that an application to set aside the arbitral award cannot be made before the court
under Section 34(2)(a)(v), unless the objection made under Section 16(1) has been rejected by the
Arbitral Tribunal. Herein, reference is made to the well-settled principle of law that states that consent
cannot confer nor take away jurisdiction. It is submitted that a defect of jurisdiction goes to the root of
the matter and strikes at the authority of a court to pass a decree. Such a basic and fundamental d efect
cannot be cured by consent of parties and the judgment or order passed by a court, however, precisely
certain and technically correct is null and void and the validity thereof can be challenged at any stage. A
decree passed without jurisdiction is non est and its validity can be challenged whenever it is sought to
be enforced as a foundation for a right. It is submitted that when a court does not have the power to
exercise jurisdiction by consent and the same is open to challenge at any stage of the p roceeding, why
should an Arbitral Tribunal be given such exemption. It is submitted that a wrongly constituted Arbitral
Tribunal cannot, merely, on account of non-objection by the parties assume jurisdiction on itself.
Ratio: S.10 is a derogable provision. The parties must raise an objection about number before the
tribunal u/S.16. If not, it is considered as waiver u/s 4.
Conclusion:
Applying the maxim absoluta sententia expositore non indigete—a clear proposition does not need
exposition—it can be concluded that there was no requirement in law to interpret Section 10(1) of the
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Act so as to suggest that odd number of arbitrators was not mandatory. Such interpretation of the
provision goes against the legislative intent and is opposed to public policy.
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McDermott International Inc v. Burn Standard Co. Ltd.
(2006) 11 SCC 181
Facts:
BSCL and McDermott International Inc. (for short "MII") entered into Technical Collaboration Agreement
on 25thSeptember, 1984 in terms whereof the McDermott International agreed to transfer technology to
the former with regard to design, construction and operation of a fabrication yard. The said agreement
contains a separate arbitration clause between the parties. However, with regard to the fabrication and
installation of offshore platforms, BSCL decided to give a sub-contract of the work to MII on a project-by-
project basis. BSCL while retained the job of fabrication of the ED and EE decks, six helidecks and
procurement of materials for the overall project other than pipeline materials and some process
equipment, which was issued by ONGC, sub-contracted the remaining work.
In terms of a letter of intent dated 14th September, 1984 a contract was entered into by and between
BSCL and ONGC for fabrication and installation of offshore platforms
A part of the said contract work was assigned to MII in respect of fabrication, transportation and
installation of structures, modules, platforms and pipeline components on or about 1st January 1986. The
work under the said agreement was to be completed within 24 months but in all respects it was
completed in early 1989.
Procedural History:
Disputes and differences having arisen between the parties, MII invoked the arbitration clause by a legal
notice dated 10thApril, 1989. The parties before the Calcutta High Court initiated several proceedings as
regards invocation of arbitration clause. The said proceedings ultimately ended in favor of MII leading to
appointment of two arbitrators for determination of the disputes and differences between the parties.
The arbitrators who were earlier appointed were removed and Mr. Justice A.N. Sen, a retired Judge of this
Court was appointed as a sole arbitrator. It is stated that Mr. Justice A.N. Sen declined to act as an
Arbitrator and by an order dated 28thAugust, 1998, Mr. Justice R.S. Pathak was appointed by this Court
as a sole arbitrator.
BSCL filed an application under Section 34 of the Act questioning the said partial award dated 9thJune,
2003 as also the additional award dated 29thSeptember, 2003.which is in accordance of section 16 clause
6 of the arbitration act.
The learned Arbitrator thereafter took up the left over matters for his consideration, viz., points Nos. 6, 8
and 9 observing that ONGC in the meantime had expressed no interest in participating in the decision
making process at the inter-party level and, thus, arrived at an inference that the machinery set up under
the sub-contract has broken down and it would be for him to determine the same.
An application was filed by BSCL under Section 34 of the Act praying for setting aside the final award.
Issue: Can a party challenge the award to be set aside under S. 34 on the ground that the arbitrator had
no jurisdiction to make an award, when no objection was raised under S. 16?
Holding: The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral
award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in
case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of
the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is
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desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level
and this can be justified as parties to the agreement make a conscious decision to exclude the court's
jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.

The 1996 Act does not use the expression "partial award". It uses interim award or final award. An award
has been defined under Section 2(c) to include an interim award. Sub -Section (6) of Section 31
contemplates an interim award. An interim award in terms of the said provision is not one in r espect of
which a final award can be made, but it may be a final award on the matters covered thereby, but made at
an interim stage.
If the partial award answers the definition of the award, as envisaged under Section 2(c) of the 1996 Act,
for all intent and purport, it would be a final award. Some arbitrators instead and in place of using the
expression "interim award" use the expression "partial award". By reason thereof the nature and
character of an award is not changed.
Both the partial award and the final award are subject matter of challenge under Section 34 of the Act.
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K.K. Modi vs K.N. Modi & Ors.
(1998) 3 SCC 573
Facts
1. Keder Nath Mothi (group A) and his three sons and Seth Gujjar Modi and his five sons (group B),
had a controlling interest in many public limited companies and owned various assets together.
2. A dispute arose between both the brothers. They entered into a negotiation to resolve this dispute,
with the help of financial institutions, which had lend money to their companies.
3. On 24th January 1989 both the parties entered into a Memorandum of Understanding.
4. According to MoU Bansi S. Mehta and company was supposed to provide sche mes for splitting of
the companies by taking into account the valuation fixed by S.B Billimori and companies.
5. Both the parties were dissatisfied with the reports submitted by companies.
6. They send various representation to the Chairman and Managing Director of Industrial Finance
Corporation of India Ltd. keeping in view Clause 9 of MoU. Clause 9 of MoU read, “Implementation
will be done in consultation with the financial institutions. For all disputes, clarifications etc, in
respect of implementation of this agreement, the same shall be referred to the Chairman,
Industrial Finance Corporation of India, (IFCI) or his nominees whose decisions will be final and
binding on both the groups.”
7. On 8th December 1995, Chairman gave his decision, on the basis of total valuation of Modi Group
assets and liabilities and allocation between the parties, an amount of 2125.55 lakh Rupees was to
be paid by group B to group A. The amount should be deposited with IFCI by 15th January 1996,
failing which an interest of 16.5% per annum would put.
Procedural History
Group B filed an arbitration petition under section 33 of Arbitration Act, 1940, in Delhi High Court
challenging the legality of Chairman’s decision on the basis that it was an award. Also filed a civil suit in
Delhi High Court challenging the same decision on almost the same prayers and averments. High court
gave the decision in favor of group A therefore group B appealed to the Supreme Court.
Issues
1. Whether Clause 9 constituted an arbitration agreement and the decision by the Chairman is an
award?
2. Whether the civil suit was an abuse of process of the court?
Holding
Court said that it was not an arbitration agreement and thus the decision not an award, as clause 9 speaks
about not the disputes in general but the disputes that would arise in understanding or comprehending
of the MoU.
The court said that filing of an arbitration suit and a civil suit together was an abuse of the power of the
court.
Rationale
Court discussed about some of the attributes, which must be present in a agreement for it to be an
arbitration agreement, which were listed by Mustill and Boyd, which are.
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1. The arbitration agreement must contemplate that the decision of the tribunal will be binding on
the parties to the agreement,
2. That the jurisdiction of the tribunal to decide the rights of parties must derive either from the
consent of the parties or from an order of the Court or from a statute, the terms of which make it
clear that the process is to be an arbitration,
3. The agreement must contemplate that the agreed tribunal will determine substantive rights of
parties;
4. That the tribunal will determine the rights of the parties in an impartial and judicial manner with
the tribunal owing an equal obligation of fairness towards both sides;
5. That the agreement of the parties to refer their disputes to the decision of the tribunal must be
intended to be enforceable in law and lastly;
6. The agreement must contemplate that the tribunal will make a decision upon a dispute, which is
already formulated at the time when a reference is made to the tribunal.
7. The court summarized section 7 in three point being:
a) existence of disputes as against intention to avoid future disputes;
b) the tribunal or forum so chosen is intended to act judicially after taking into account
relevant evidence before it and the submissions made by the parties before it; and
c) the decision is intended to bind the parties.
The court said that one must examine the true intention and purpose of the agreement.
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Chloro Controls (I) P. Ltd vs. Severn Trent Water Purification
Civil Appeal No. 7134 of 2012
Facts:
There was a joint venture agreement (“Principal Agreement”) between an American company (Capital
Controls (Delaware) Company Inc.), an Indian company (Chloro Co ntrols India Pvt. Ltd.) and the Director
of the Indian company, Mr. M.B. Kocha. The PA also provided for several ancillary agreements required to
be entered into between the Indian company, the group of companies to which the American Company
belonged (the Severn Trent Group) and the Director of the Indian company, amongst several others. 8
While the principal agreement contained an arbitration clause, a few of the ancillary agreements did not.
Further, not all the Respondents in the original suit were parties to the arbitration agreement.
The parties had essentially entered into multiple agreements and disputes had arisen between the Indian
promoter and the foreign collaborator in relation to a joint venture which had been undertaken by the
two.

Procedural History:
Chloro Controls (India) Private Ltd., the appellant, filed a suit on the original s ide of the High Court of
Bombay, for declaration that the joint venture agreements and supplementary collaboration agreements
entered into between some of the parties are valid, subsisting and binding. It also sought a direction that
the scope of business of the joint venture company, Resp. No. 5, set up under the said agreements
includes the manufacture, sale, distribution and service of the entire range of chlorin ation equipment
including the electro-chlorination equipment and claimed certain other reliefs as well, against the
defendants in that suit. The said parties took out several notices of motion.
Notice of Motion No.778 of 2004 was dismissed by another learned Single Judge of the High Court of
Bombay, declining the reference of the suit to an arbitral tribunal vide order dated 8th April, 2004. This
order was again assailed in appeal by the defendants in the suit and another Division Bench of the
Bombay High Court, vide its judgment dated 4th March, 2010, allowed the Notice of Motion No.778 of
2004 and made reference to arbitration under Section 45 of the 1996 Act.
The judgments of the Division Benches have been assailed by the respective parties before the Su preme
Court in these Special Leave Petitions, SLP(C) No.8950/2010 and SLP(C) No.26514 -15/2011,
respectively. Both these appeals are to be disposed of by this judgment of the court.
Issues:
1. What is the ambit and scope of Section 45 of the Arbitration and Conciliation Act, 1996?
2. Whether the principles enunciated in the case of Sukanya Holdings Pvt. Ltd. v. Jayesh H. Pandya , is
the correct exposition of law?
3. Whether in a case where multiple agreements are signed between different parties and where
some contain an arbitration clause and others don’t and further the parties are not identically
common in proceedings before the Court (in a suit) and the arbitratio n agreement, a reference of
disputes as a whole or in part can be made to the arbitral tribunal, more particularly, where the
parties to an action are claiming under or through a party to the arbitration agreement?

8
A complete list of the ancillary agreements may be found in a tabular format at
http://www.nishithdesai.co m/information/research-and-articles/nda-hotlin e/nda-hotline-single-
view/newsid/1352/html/1.html?no_cache=1
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4. Whether bifurcation or splitting of parties or causes of action would be permissible, in absence of
any specific provision for the same, in the 1996 Act?
Holding:
The court extensively relying on jurisprudence internationally available, established that there were two
distinct schools of thought existing. One adopting a pro-arbitration approach, which allowed for even
non-signatories to an Arbitration Agreement to be subject to arbitration, if the facts of the case justified
the referral to arbitration, while the other adopts a very strict approach providing that only if the subject
matter of the dispute was covered by the arbitration clause and that the parties to the dispute were
parties to the arbitration agreement could a matter be referred to arbitration. In India, there is an
emerging trend of the former.
The court observed that language of section 45 is worded in favour of making a reference to arbitration
provided the court is satisfied that a valid, enforceable and operative arbitration agreement exists. It was
held that the expression ‘person claiming through or under' provided under Section 45 of the Act
indicates that the section does not refer to parties to the agreement but persons in general and if it is
established that a person is claiming through or under the signatory to the arbitration agreement then
the matter could be referred to arbitration. The court however made a cautionary remark that such
reference could be done though only in exceptional cases where the facts principally justify a reference.
Thus, the court effectively held that even non-signatories to an arbitration agreement could be made
parties to an arbitration proceeding if the facts and circumstances of the case justified the same and not
doing so would result in a miscarriage of justice.
Rationale:
The important factors which the court provided would have to be considered while dealing with such an
issue were:
o Direct relationship of the party signatory to the arbitration agreement;
o Direct commonality of the subject matter;
o Agreement between parties being a composite transaction;
o Transaction should be of composite nature where performance of principal agreement may
not be feasible without the aid, execution and performance of the supplementary or
ancillary agreements, for achieving the common object and collectively having bearing on
the dispute; and
o Whether a composite reference of such parties would serve the ends of justice.
The court thereafter deliberating upon the various agreements executed by the parties pointed out that
they all formed a part of a composite transaction where the PA was similar to a mother agreement and
the other agreements executed were ancillary and required for effective implementation of the PA.
Rule:
Widening the scope of Section 45, the Court held that the case of Sukanya Holdings was applicable to
cases made out under Section 8 and would only apply to domestic arbitrations. Cases under Section 45
where international arbitrations were concerned, was worded in favour of having arbitration
proceedings and thus would be construed in that manner when the facts permitted the court to do so.
Hence, in these exceptional cases, even non-signatories to an arbitration agreement could be made
parties to certain arbitration proceedings where there was a commonality of subject matter and the
agreements they entered into were in the nature of a composite transaction.
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National Insurance Company Ltd. v. Boghara Polyflab
(2009) 1 SCC 267
Facts:
Boghara Polyflab (respondent) obtained a standard Fire and Special Perils Policy from the National
Insurance Co. (appellant) to cover its goods in its godowns situated at Surat for the period 4.8.2003 to
3.8.2004. The sum insured was Rs 3 crores, subsequently increased to Rs 6 crores. On 27.5.2004 the
respondent requested the insurer to increase the sum insured by another Rs 6 crores for a period of two
months. Accordingly, the appellant issued an additional endorsement increasing the s um insured by
another Rupees 6 crores, in all Rupees twelve crores. The respondent alleges that the additional
endorsement cover issued by the appellant was for 69 days i.e. from 27.5.2004 to 3.8.2004. The appellant
alleges that the additional endorsement cover was for a period of 60 days from 27.5.2004 to 26.7.2004.
On 5.8.2004, the respondent reported damage to their stocks on account of heavy rains and flooding
which took place on 2 and 3.8.2004 and made a claim in that behalf. The surveyor submitted a
preliminary report dated 14.8.2004 followed by a final survey report dated 6.12.2004 according to which
the net assessed loss was Rs.3,18,26,025/-. The said sum was arrived at on the basis that the sum
insured was Rs.12 crores, the actual value of stocks in the godowns at risk was Rs.8,15,99,149/ -, value of
damaged goods was Rs.5,22,81,001/-, and the recoverable salvage value was Rs.1,87,79,922/-. The
appellant informed the surveyor by letter dated 1.3.2005 that there was an error in the net assessed loss
arrived at by the surveyor as it assumed the sum insured as Rs.12 crores up to 3.8.2004 whereas the sum
insured was only Rs.6 crores after 26.7.2004 till 3.8.2004, and therefore instructed the surveyor to
prepare the final report regarding net assessed loss by taking the sum insured as only Rupees six crores.
The surveyor therefore gave an addendum to the final survey report on 22.3.2005 reassessing the net
loss by taking the sum insured as only Rupees six crores. The value of goods at risk, the value of damaged
goods and the value of recoverable salvage remained unaltered. By modifying the percentage of
insurance at 75.53%, the `Net Assessed Loss' was re-worked as Rs.2,34,01,740/-. The respondent
protested against the loss being assessed by taking the sum insured as only Rupees six crores. The claim
and the dispute were pending consideration for a considerable time.
The respondent alleged that the appellant forced the respondent to accept a lower settlement; that the
appellant informed the respondent that unless and until the respondent issued an undated `Discharge
voucher-in-advance' acknowledging receipt of Rs.2,33,94,964/- in full and final settlement, no amount
would be released towards the claim; that in that behalf, the appellant sent the format of the discharge
voucher to be signed by respondent on 21.3.2006; that on account of the non - release of the claim, it was
in a dire financial condition and it had no alternative but to yield to the coercion and pressure applied by
the appellant; that therefore the respondent signed and gave the said discharge voucher, undated, as
required by the insurer during the last week of March, 2006. The payment was released by the appellant
only after receiving the said discharge-voucher.
Boghara also sent a notice regarding a move for arbitration within 15 days if the Insurance company
didn’t agree to pay the remaining amount with 12% interest. The insur ance company rejected the
demand.
Procedural History:
After the appellant's refusal to agree for arbitration, the respondent filed an application under Section 11
of the Arbitration & Conciliation Act, 1996 in the Bombay High Court. The said petition was r esisted by
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the appellant by reiterating that the respondent had accepted the payment of Rs.233,94,964/ - in full and
final settlement and therefore, the respondent could not invoke the arbitration clause.
The Bombay High Court, applying sec 11 allowed the petition and appointed a sole arbitrator. The High
Court examined the issue and found that prima facie there was no accord and satisfaction or discharge of
the contract. It held that the appellant is still entitled to raise this issue before an arbitrator a nd the
arbitrator has to decide it. The Insurance company has now appealed before the SC.
Issue: Whether if the dispute is arbitrable under Sec. 11 of the Arbitration and Conciliation Act?
Holding: The appeal was dismissed by the Supreme Court upholding the High Court’s judgment as there
was no accord and satisfaction or discharge of the contract, and that the dispute was held arbitrable.
Reasoning:
 The accord and satisfaction in such a case is not voluntary but under duress, compulsion and
coercion. The coercion is subtle, but very much real. The `accord' is not by free consent. The
arbitration agreement can thus be invoked to refer the disputes to arbitration. Being in financial
difficulties, the claimant agrees to the demand and issues an undated discha rge voucher in full and
final settlement. Only a few days thereafter, the admitted amount mentioned in the voucher is
paid.
 Here even if the claimant might have agreed for settlement due to financial compulsions and
commercial pressure or economic duress, the decision was his free choice. There was no threat,
coercion or compulsion by the respondent. Therefore, the accord and satisfaction is binding and
valid and there cannot be any subsequent claim or reference to arbitration.
 At the time of signing the voucher by the respondent and at the time of delivery of voucher by the
respondent to the appellant, the contents of the voucher that the said amount had been received,
that such amount had been received in full and final settlement of all claims, and that in
consideration of such payment, the company was absolved from any further liability, are all false
and not supported by consideration.
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Publicis Communication vs. True North Communications Inc.
206 F. 3D 725
Facts:
 Two advertising companies- Publicis Communication (Paris based), the Plaintiff and True North
Communications (Chicago based), the Defendant- got into a joint venture.
 Among other things, they decided to arbitrate any dispute arising out of their corporal divorce,
before the London Court of International Arbitration following the UNCITRAL Arbitration Rules.
 Three arbitrators were appointed with one of them being the Chairman.
 One such disagreement arose when D asked P to turn over their tax records.
Procedural History:
When D asked P to turn over it’s tax records, the matter was directed to arbitration. The arbitration
tribunal “ordered” P to provide with all tax information between 1994 and 1996 to D.
However, P failed to comply with the order and D went to the Northern District of Illinois and got the
arbitration decision “confirmed”.
Later, D contended that it received all the tax records that it requested from P but P argued saying it had
not turned over all the records literally called for by tribunal’s order. As a result of this, the present US
Court of Appeals for the Seventh Circuit has decided to review the findings again and decide.
Issues:
1. Whether or not the aforesaid order by the arbitration tribunal regarding particular tax records
final?
2. Whether this particular order procedural or substantive in nature?
3. Whether the arbitration award was ambiguous and the District Court Judge should have
remanded it back to the tribunal?
Holding:
1. The particular order given by the tribunal regarding particular tax records was final.
2. The particular order is procedural in nature.
3. The arbitration was unambiguous and sending it back to the tribunal for clarification would have
defeated the swift resolution parties sought.
Therefore, court affirmed the decision given by Northern District of Illinois, upholding that P was wrong
in not complying with the order and asking it to turn over the tax records.
Rationale:
 P claimed that the tribunal called its decision an “order”, which according to arbitration rules, is
not final. As a result of this, D was wrong in getting the “order” confirmed by the court. D insists
that judicial confirmation of final rulings can be termed as awards or orders and tribunal’s
decision will be “final”.
 Court held that while “award” has been treated as “final”, it does not necessarily mean that it
cannot be replaced by synonyms such as opinion, decision, and order. The nomenclature of the
decision will not be deciding its finality but the content of that decision will. Courts have gone
beyond the heading of a document and delved into the substance of the decision to decide if it is
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final or not. Furthermore, court held that “A ruling on a discrete, time-sensitive issue may be final
even though other claims remain to be addressed by the arbitrators.”
 P argued that according to UN Arbitration Rules, if the award is final then it has to be signed by all
arbitrators. Since this particular award was only signed by the Chairman as “for and on behalf” of
the other arbitrators, it cannot be final.
 Court held that there is an exception to this ground rule under Art. 31(2) of UNCITRAL Arbitration
Rules. According to that exception, in case the tribunal is giving a procedural decision, arbitrators
can consult each other but the Chairman alone may sign the decision. The court confirmed it’s
belief that the decision must be judged based on substance and effect. Thereby holding that it is
final in this sense as well.
 P further argued that the arbitration award was ambiguous and the Judge should not have
confirmed it. Quoting the Federation Arbitration Act, P contended that in case of an unclear
arbitration awards, the court should send it back to the arbitrator for further clarification instead
of interpreting it.
 Court held that whenever possible, a court must avoid remanding the award back to arbitrator for
clarification because of the interest in prompt and final arbitration. Therefore, the Judge was
correct in finding the award unambiguous and confirming the decision thereby avoiding
meaningless waste of time.
Rule:
 The finality of a document cannot be judged based upon its heading. It is imperative to look at the
content of the decision and decide whether it is final or not. Even if the courts and commentators
have always related “awards” with “final”, it does not mean that orders, ruling or decision cannot
be final as well.
 As and when possible, the courts must avoid wasting the time of both parties by sending the
award back to arbitrators for clarifications. Parties choose to go for arbitration in order to
minimize court intervention and thereby save time. However, if courts are allowed to remand the
awards back to arbitrators in every case then that will defeat the purpose of arbitration.
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Ravindra Kumar Gupta & Co. vs. UOI
(2010)1 SCC 409
Facts:
The appellant was a contractor who was allotted certain civil works to be completed within a specified
time, which they kept extending from time to time by mutual agreement. After completion of work,
dispute arose between the parties regarding the work and its payment. The contractor invoked the
arbitration clause in the agreement and filed an application before the sole arbitrator under the Indian
Arbitration Act of 1940. Both the parties participated in the proceedings. The arbitrator passed a
reasoned award in favour of the contractor.

Procedural History:
The Union Of India filed a suit in the Civil Court to set aside the award by contending that the arbitrator
had acted beyond the scope of his authority in allowing contractors claim contrary to the prov isions in
the agreement relating to hold ups and losses suffered due to delay. The UOI contended that the delay in
execution of work was due to default of the contractor himself. He had not employed sufficient
manpower and resources to complete the work in time.
The civil court rejected these contentions and passed the reasoned award. This was challenged by the
UOI in an appeal before the High Court to set aside the award under Section 30 of the Indian Arbitration
Act of 1940 . HC set aside the findings recorded by the arbitrator and held that the arbitrator has acted
unreasonably and irrationally in ignoring the limits and the provisions of the contract. The contractor
filed the present appeal by Special Leave.
Issue: Can the court re-appreciate the evidence led by the parties before the arbitrator and interfere with
the arbitration award passed by the arbitrator?
Holding:
The HC committed a ‘serious error in re-appreciating the evidence led by the parties before the
arbitrator’. The arbitrator had recorded a firm finding under the said claim that there was default and
delay on the part of UOI. This evidence was duly examined and evaluated by the arbitrator. Subsequently
he passed the award in favour of the appellant after giving elaborate reasons for the sam e. Therefore,
finding recorded by the arbitrator cannot be said to be either perverse or based on no evidence.
The HC erroneously substituted the decision of the arbitrator with its own opinion on appreciation of
evidence. Such a course was not permissible to the High Court while examining objections to the award
under Section 30 of the Arbitration Act, 1940. Appeal was allowed.
Rationale:
The court referred to various earlier judgments of the Apex Court and based its decision on the following
considerations:

 The arbitrator is the final arbiter for the dispute between the parties and it is not open to
challenge the award on the ground that the arbitrator has drawn his own conclusion or has failed
to appreciate the facts.
 Where the arbitrator has given the reasons in making the award, the court cannot examine the
reasonableness of the reasons.
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 The power to assess evidence lies with the forum that is decided by the parties and it is not for the
court to judge the evidence before the arbitrator. Thus, the arbitrator is the sole judge of the
quality as well as the quantity of evidence.
 Interference with the arbitration award is not available within the jurisdiction of the Court unless
there exist a total perversity in the award or the judgment is based on a wrong proposition of law.
 The common phraseology "error apparent on the face of the record" does not entail a closer
scrutiny of the merits of documents and materials on record. Court cannot substitute its own
evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted
contrary to the agreement between the parties.
 When two views are possible with regard to interpretation of statutory provisions and or facts the
court would not be justified in interfering with the award of the arbitrator if the view taken by the
arbitrator is a possible view if not the only correct view.
Rule:
Test of Perversity: The court can re-appreciate the evidence led by the parties before the arbitrator and
set aside the award passed by him, if there is a total perversity i.e. a gross error in the award or the
judgment is based on a wrong proposition of law.
Relevance of the Case w.r.t Arbitration & Conciliation Act, 1996:
In this case the law with regard to the scope and ambit of jurisdiction of court to interfere with the
Arbitration award has been discussed in detail. The principles that governed the setting aside of awards
under Section 30 of the 1940 act also apply to Section 34 of the 1996 act, barring th e changes being made
to the grounds for setting aside such an award.
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Shri Lal Mahal Ltd vs Progetto Grano
Civil Appeal No. 5085 of 2013
Facts:
Shri Lal Mahal Limited (Appellant) entered into a contract with Progetto Grano Spa (Respondent) for the
supply of a specific type of wheat. The agreement provided that the wheat had to be certified by a named
authority which was certified to the effect by the appellant. The respondent relied on a certificate of
quality provided by a certifying agency at the port of loading in India to argue that the wheat supplied
was of the requisite quality. The appellant contended that the reliability of the quality certificate at the
port of loading was not consistent with the agreement that the quality of wheat was below that which
was contractually agreed.
Procedural History:
The dispute was filed and heard by an arbitral tribunal called Grain and Feed Trade Association (GAFTA)
which was seated in London. The arbitral tribunal ruled in favor of the respondent and awarded
damages. The award of the tribunal appealed by the appellant was unsuccessful before the Board of
Appeal of the GAFTA. An application before the High Court of Justice in London to set aside the award
was also rejected.
The respondent sought to enforce the award before the Delhi High Court but was opposed by the
appellant on the ground of opposing public policy as the arbitral award granted was contrary to the
express provision in the contract. The High Court did not interfere with the award on the basis that it was
not expected to re-determine questions of fact in enforcement proceedings. The seller finally appealed
against this decision to the Supreme Court of India.
Issue:
Whether the Court could look at the merits of the case if it is contrary to the ‘public policy of India’ and
whether it should interfere in foreign seated arbitration awards on the grounds of ‘patent illegality’.
Holding:
The Supreme Court upheld the decision of the High Court and held in favor of the responde nt as the
challenge raised by the appellant required reconsideration of the merits of the case and re -looking at the
facts. Such a challenge can be raised only if it is contrary to ‘public policy of India’ and is covered by one
of the three categories enumerated in Renusagar.
Rationale:
The Supreme Court in Renusagar Power Co. Limited v. General Electric Company, recognized that merely a
violation of Indian laws would not suffice to attract the bar of public policy. In the case of ONGC v. Saw
Pipes, the Supreme Court expanded the test of ‘public policy’ to mean an award that violates the statutory
provisions of Indian law or terms of the contract. The judgment in ONGC diverged from the interpretation
given to the expression “public policy” in Renusagar on the ground that Renusagar dealt with
enforcement of an award which had attained finality, whereas the issue before the court in ONGC was
concerning the validity of the arbitral award itself, which was under challenge under Section 34 of the
Act. In Phulchand Exports Limited v. O.O.O. Patriot, the Supreme Court expanded the meaning of the
expression ‘public policy’ under section 48 of the Act, and held that the scope and purport of the
expression under section 34 and 48 are the same. Thus, even in a scenario where the award attains
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finality, upon an action for enforcement of the foreign award being instituted, the parties by virtue of the
decision in Phulchand could apply the extremely broad standard of ‘public policy’ in ONGC and almost re -
open the entire matter.
This case overruled the Phulchand case and held that the expression ‘public policy’ as found under
Section 48 of the Act would not bring within its folds the ground of ‘patent illegality’and such a ground is
limited to section 34 of the Act where the issue is whether the award should be set aside or not.
The Court further held that the applicability of the doctrine of ‘public policy’ is comparatively limited in
cases involving conflict of laws and foreign seated arbitrations. It ruled that the expressio n ‘public policy
of India’ under Section 34 was required to be interpreted in the context of the jurisdiction of the court
where the validity of the award is challenged, before it becomes final and executable in contrast to
enforcement of an award after it becomes final.
Rule:
Public policy for awards in foreign seated arbitration would mean against:
a) Fundamental policy of Indian law; or
b) The interest of India; or
c) Justice or morality.
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Oil and Natural Gas Corp. vs. Saw Pipes Ltd.
AIR 2003 SC 2629
Facts:
ONGC had placed an order to Saw Pipes limited for supply of equipment for an off shore exploration, to be
bought from approved European manufacturers. The supply was delayed due to a strike of steel mill
workers in Europe. ONGC granted extension of time, but raised the causes of recovery of liquidated
damages. It withheld the amount from the payment to the supplier (saw pipes), as timely delivery was
the key principle of the contract.
Procedural History:
The case resulted after an appeal passed by a division bench of the High Court of Judicature at Bombay
with regard to a dispute relating to supply of equipment for an off shore oil exploration by the
respondent.
Issue:
Whether the court would have jurisdiction under Section 34 of the Act to set aside an award passed by
the Arbitral Tribunal which is patently illegal or in violation of the provisions of the Act or any other
substantive law governing the parties or is against the terms of the contract?
Holding:
The first question that the court dealt with was to look at whether a court can set aside an award if the
arbitral tribunal has not followed the set procedure as prescribed by the Act. The provision states that
the arbitral tribunal has to decide dispute in accordance with the substantive law according to section 28.
When section 28 is read along with Section 34 of the Act, the legislative intent is that the award could be
set aside as it would mean that tribunal has acted beyond its jurisdiction. Hence whe n an award is
contrary to the substantive provision of law or the provisions of the Act or against the terms of the
contract, it would be patently illegal, which could be restricted under Section 34. The court further
addressed the concept of ‘public policy of India’ that was added in the Renusagar case. The petitioner in
the Renusagar case challenged that the phrase ‘public policy of India’ was in the context of enforcement
of a foreign award while here it is a question of setting aside of domestic award a nd hence the term has to
be given a broader scope.
When an award is said to be patently illegal it cannot be in favour of public interest and therefore the
court ruled an extra condition to adjudicate an award unenforceable under Section 34 on the princip le of
being against the public policy that was patent illegality. The courts in this case ruled that the award here
was patently illegal as the tribunal had not based its ruling on the terms of the contract and on the
substantive law of India.
Rationale:
The Supreme Court read patent illegality as any violation of the substantive law administered in India, or
as an award conflicting the terms of contract. The judgment expanded the concept of Public policy to add
to that the award would be contrary to public policy if it is patently illegal. Public policy is a principle that
holds that no subject can do, which has a tendency to be detrimental to the public or against the public
good, which may be characterized as it sometimes has been policy of the law or pu blic policy in relation
to administration of the law. Public policy signifies same matter, which concerns public good and public
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interest. The three-judge bench decision of the Renusagar case had construed the ground for public
policy narrowly as confined to the fundamental policy of Indian law, the Interest of India, justice or
morality. This came as a clear violation of the doctrine of precedents as this case involved a foreign award
whereas the Renusagar case dealt with a domestic award.
Rule: Following are the grounds on which the court can set aside the award under S. 34 if its is against
public policy:
a) Fundamental policy of Indian law; or
b) The interest of India; or
c) Justice or morality, or
d) In addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that
award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it
shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged
void.
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Sumitomo Heavy industries ltd. v. O.N.G.C. lLtd.
(1998) 1 SCC 305
Facts:
Sumitomo, a foreign company (appellants) entered in contract with O.N.G.C (Respondent 1). The proper
law of contract was Indian contract Act and it was decided by the parties that if any dispute arise the
matter would be resolved through arbitration. It was decided that the proceedings would take place in
London and in accordance with rules of International Chamber of Commerce (ICC). Dispute arose and
both the parties decided to take the matter to arbitration. Both Appellant and respondent appointed
arbitrator and in turn the arbitrators appointed an Umpire (Respondent 2). Respondent 2 decided the
arbitration in favor of respondent 1 and made his final award. Further, respondent 1 approached Bombay
High Court seeking respondent 2 (Umpire) to file the award. Appellants approached Supreme Court
contending Bombay high Court does not have the jurisdiction to decide the matter as procedural law
governing the arbitration was of England.
Issue:
1. What procedural or curial law would be applicable to the arbitration proceedings?
2. What is the scope and area of procedural law in arbitration proceedings?
Holding:
The facts of the case clearly states that the seat of the arbitration would be London and it will be in
accordance with the rules of International chamber of commerce. The issue presented before the court
was arisen because the fact that the Respondent 1 wanted Respondent 2 (Umpire) to file the award in the
Bombay High court.
The Supreme Court cited Bank Mellat v. Helliniki Teckniki SA, that laid down the test of closest
connection test with regard to the application of procedural or curial law. The test states that the
fundamental principle of application procedural law would that with of forum with which the agreement
to arbitrate in the particular form would have its closest connection. In absence of an express agreement
by the parties there is strong presumption that the parties intended the curial law to be the ‘seat’ of the
arbitration on the grounds that that is the country which is closely connected with the proceeding s.
Since in the following case the seat of the arbitration was decided to be London, the curial law of England
would apply. The curial law would be applicable to the proceedings to the extent how proceedings has to
be conducted, procedural powers and duties of the arbitrators, question of evidence, determination of the
proper law of contract.
The second issue presented before the court deals with respect to the scope of the powers of the
arbitrators. Whether it extends to enforcement of awards or does it ends once the award is decided by
the arbitrators. Supreme Court decided that procedural or curial is applicable only to the extent of
conducting the proceedings and courts of that country would have the jurisdiction to entertain
applications made by the parties for appointment of arbitrators or to seek relief incidental to the
proceedings being conducted. The application of curial law ceases once the arbitration proceedings have
been concluded.
The court further stated that curial law is not applicable to the filling of the awards. Since proper law
governing the arbitration is different from the curial law governing proceedings, the court looks to the
arbitration agreement to see if the dispute is arbitrable, then to the curial law to see how the referen ce
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has be to be conducted and then returns to the first law in order to give effect to the resulting awards.
The power to enforce award is a substantive issue and is governed by the proper law of arbitration
agreement which is Indian law in the present case. So, the court decided that since, curial law is limited to
arbitration proceedings and it ceases when the proceedings are concluded. The Bombay high Court has
the jurisdiction in the matter to file the award as it is a matter of substantive right and not a procedural
one.
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Bhagawati Oxygen Ltd. vs. Hindustan Copper Ltd.
(2005) 6 SCC 462
Facts:
 Hindustan Copper Limited (R) invited tender for supply of oxygen for its plant at Ghatsila. The
tender contained a condition that successful bidder will set up an oxygen plant in the vicinity of
HCL. The tender of Bhagawati Oxygen (A) Limited was accepted and they entered into an
agreement. It was for a period of seven years from the date of co mmencement of supply of oxygen.
 It was agreed that R will at its own cost install, operate and maintain an oxygen plant for the
supply of high purity oxygen gas to A. Also the purity of oxygen would be 99 per cent. Clause 2.3
clarified that the minimum acceptable purity of the oxygen gas should be 85 per cent.
 Clauses 10.4 and 10.5 are relevant which are:

"Clause 10.4. In case BOL fail to supply oxygen from the captive plant it will be the responsibility
of BOL to arrange liquid oxygen from other sources at contracted rates and keep HCL requirement
feed uninterruptedly failing which HCL will have the right to procure the gas from elsewhere and
the difference of such procurement cost and the agreed price subject to a limit of 80% of the total
requirement as per NIT, will be recovered from BOL forthwith. However, HCL will give adequate
chance to BOL to meet the HCL's requirements by their own means from other sources at the
contract price.
Clause 10.5. In case, for any period the quantity of Gas supplied goes down below the guaranteed
purity or pressure, no payment will be made for that period or quantity unless specifically prior
acceptance is obtained from HCL."
 There was an arbitration clause which was in case of any dispute arising out of work or in relation
to this agreement the dispute will be referred to an arbitrator appointed jointly by the chairman of
HCL and BOL and his award will be final and binding. Also it stated that the provisions of the
Arbitration Act, 1940 will apply.
 BOL supplied the oxygen to HCL and but no payment was made as HCL said that they did not meet
the quality requirement. Also It was also alleged by BOL that bad water was supplied by HCL due
to which the plant was damaged and had to shut down on August 12,1993. On October 11, 1993, a
letter was written by HCL to BOL calling upon BOL to supply or to arrange for supply of oxygen to
HCL on or before August 26, 1993. But the gas was not supplied by BOL to HCL.
 They then referred the matter to arbitration where BOL claimed Rs. 1,80,81,402.93 on the
grounds (i) Dues on account of unpaid bills; (ii) Cost of repairing due to bad water supplied by
HCL; (iii) Loss of revenue due to shut down; and (iv) Interest. HCL filed a counter claim in the
arbitration proceedings for Rs.2,66,26,023.14 claiming (i) Recovery of excess amount paid to
BOL; (ii) Difference of price of oxygen purchased by HCL from other sources; (iii) Extra
expenditure due to consumption of excess furnace oil due to low purity of oxygen; and (iv)
Interest.
Procedural History:
HCL filed an appeal against Arbitration award to the High Court of Calcutta and it confirmed the order.
Then it was further appealed.
Issues:
1. Whether on the facts the Arbitrator was right in allowing the claim of BOL?
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2. Whether the Arbitrator had misconducted himself in passing the award and by dismissing the
counter claim of HCL and whether the learned single Judge and the Division Bench of the High
Court were right in setting aside that part of the award by directing the Arbitrator to re-consider
the matter and decide it afresh?
3. Whether the Arbitrator had power to award interest at the rate of eighteen per cent per annum for
pre-reference period, pendent-lite and post reference, also whether the learned single Judge and
the Division Bench were justified in reducing the rate of interest from 18% to 6%?
Held:
1. The arbitrator was not wrong in allowing the claim of BOL as he considered all the requirements
of the agreement. All the claims of HCL like BOL did not meet the purity requirements mentioned
in the agreement, no payment was made because of low standards of oxygen, that BOL failed to
maintain constant stock of 50,000 Litres of liquid oxygen were wrong. The arbitrator observed
that HCL never disputed on the requirement of constant stock of liquid oxygen neither it forced or
objected on non-maintenance of the constant stock.
Regarding the purity level HCL never complained of the same and always accepted the oxygen
provided by BOL. Also it was observed that there was neither excess consumption of furnace oil
nor drop in production by HCL. Further there was waiver and abandonment of the rights
conferred on HCL and in view of the waiver HCL was required to make payment to BOL. Therefore
the arbitrator was justified in allowing the claim of BOL.
2. According to section 30 of the 1940 act the court while exercising the power, cannot re-appreciate
the evidence or examine correctness of the conclusions arrived at by the Arbitrator. The
jurisdiction is not appellate in nature and an award passed by an Arbitrator cannot be set aside on
the ground that it was erroneous. Only when court is satisfied that the Arbitrator had
misconducted himself or the proceedings or the award had been improperly procured the award
can be set aside. In this case the arbitrator considered all the relevant evidences on record and if
after considering all the evidences he gave an award then it could not be said to a case of
misconduct covered by Section 30 of the Act. Therefore the learned single judge and the division
bench was wrong in setting aside the award and allowing the proceedings to start afresh
3. An Arbitrator has power and jurisdiction to grant interest for all the three stages provided the rate
of interest is reasonable. The arbitrator gave enough weightage to the reasonableness of the
interest therefore the rate of interest decide by the arbitrator was not wrong and the learned
single judge and the Division bench was wrong in reducing the rate of interest.
Rationale:
 The award passed by an arbitrator cannot be set aside by the court on any ground which is not
mentioned in section 30 (1940 Act). The award can be set aside if:
a) an arbitrator or umpire has misconducted himself or the proceedings;
b) an award has been made after the issue of an order by the Court superseding the arbitration or
after arbitration proceedings have become invalid under Sec. 35;
c) an award has been improperly procured or is otherwise invalid.
 Also while exercising the power under section 30 the court cannot re-appreciate the evidence as
then the whole purpose of enacting the act will be defeated.
 An arbitrator has the power to grant same relief which could have been granted by the court if the
matter was before the court therefore the arbitrator has the power to grant interest pendent lite.
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Shreejee Traco Pvt. Ltd vs. Paperline International INC
(2003) 9 SCC 79
Facts:
The petitioner a company incorporated in India, held the respondent, company incorporated in new York
guilty of breach of contract and claimed damages and compensation along with refund to the account L/C
interest. It appointed an arbitrator and send vide request letter to the respondent to appoint an
arbitrator within 30 days so that the both the arbitrator can appoint third arbitrator. The respondent
neither appoints an arbitrator nor responds to the legal notice. Hence, the petitioner filed a petition
under sector 11(4) arbitration an conciliation act 1996 seeking appointment of an arbitrator for and on
behalf of respondent.
Issue:
Whether petition can be filed in India when the seat is outside India?
Rationale:
The law governing arbitration is the law chosen by the parties, or in absence of the agreement, law of the
country will be applicable in which arbitration held. In absence of express choice of law the law
governing the contract as a whole or the arbitration agreement having been practiced by the parties, a
presumption arise that law of the country should be applicable in which the arbitration agreement was
held. This presumption is rebuttable. Parties have the right to choose the law. In this there is nothing
which can rebut this presumption and spell out the intention of the parties to choose Indian law as a
proper for the arbitration.
Holding:
Hence the Supreme Court dismisses the petition and held that Indian courts doesn’t have jurisdiction in
this case .so, this should be proceed in according to the New York law.
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Centrotrade Mineral & Metals Inc. vs. Hindustan Copper Ltd.
MANU/SC/8146/2006
Facts:
Centrotrade was incorporated in United States of America and it dealt with sale and purchase of non-
precious metals including copper. Whereas Hindustan Copper Ltd. is a Government of India under taking
and its business included purchase of copper concentrate. They entered into an agreement on 16 th of
January 1996 where Centrotrade was the seller and the HCL was the purchaser of copper concentrate.
Clause 14 of the agreement provides for arbitration in. case any differences or disputes arise between the
parties. Clause 14 of the agreement reads as under:
“All disputes and differences whatsoever arising between the parties out of, or relating to the construction
meaning and operation or effect of the contract or the breach thereof shall be settled by arbitration in India
through the arbitration panel of the Indian Council of Arbitration in accordance with the Rules of
arbitration of the Indian Council of Arbitration.
If either party is in disagreement with the arbitration result in India, either party will have the right to
appeal to a second arbitrator in London, U.K. in accordance with the rules of conciliation and arbitration of
the International Chamber of Commerce in effect on the date hereof and the result of this second arbitration
will be binding on both the parties. Judgment upon the award may be entered in any Court of Jurisdiction.”
Procedural History:
Disputes arose between the parties to the agreement in 1998 and pursuant to Clause 14 of the
agreement; disputes were referred to Indian Council of Arbitration where Centrotrade was the claimant.
The Indian Council of Arbitration appointed an arbitrator before whom Centrotrade claimed an award.
The arbitrator appointed by the Indian Council of Arbitration, however, made a 'NIL' award. Disagreeing
with the award passed by the arbitrator appointed by the Indian Council of Arbitration, and relying on
the second part of Clause 14 of the agreement, Centrotrade approached the International Chamber of
Commerce (in short 'ICC'). The arbitrator appointed by the ICC passed an award in favor of the
Centrotrade
After the ICC arbitrator passed the award, an application was filed by HCL seeking declaration of the
award passed by the ICC as void and not enforceable. At the same time, Centrotrade filed an application
for enforcement of the ICC Award. These applications were transferred to the original side of the Calcutta
High Court, which were heard and disposed of by the judgment and order of the learned Single Judge of
that Court. The learned. Single Judge held that, the ICC Award was enforceable in law and therefore
direction was made to HCL to make payment to Centrotrade.
An appeal was further made to the Division Bench of the High Court. The Division Bench set the judgment
of the learned Single Judge aside. Aggrieved thereby, Centrotrade has filed Special Leave Petition against
the aforesaid judgment of the Division Bench of the Calcutta High Court and at the same time HCL has
also filed another Special Leave Petition against the same judgment. In both the Special Leave Petitions
notices were issued and they were taken up for final hearing together for decision.
Issue:
1. Whether the provision for appeal to a second arbitration in Clause 14 of the Arbitration
Agreement is permissible and valid?
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2. Whether the two-tier agreements are opposed to the public policy?

Holding:
There is a difference of opinion between the 2 judges in this case, due to which this case is referred to a
larger bench.
But both the Judges answered the issues in hand and that will be looked after in the next section of the
brief.
Rationale:
Issue 1: Whether the provision for appeal to a second arbitration in Clause 14 of the Arbitration
Agreement is permissible and valid?
Justice S.B.Sinha held that the 1996 Act envisages only one award under one set of rules i.e. under Part I
and Part II of the Act. It does not contemplate multilayer awards (a mixture of domestic and foreign
awards) governed by different set of rules.

In this case, for the first part of arbitration the Indian law is applicable (ICA Rules) whereas ICC Rules
would govern the second part. Therefore, both parts cannot be carried out under the same institution.
Two different natures of the awards are not contemplated only because there is a provision for appeal. If
by fiction of law an award becomes a decree without the intervention of the Court, the nature of an
award, which can be passed by the appellate arbitrator, would lose the character of an award.

Justice Sinha further held that the Doctrine of merger will not apply here as it envisages an Appellate
authority who can pass the same type of order which could be passed by the original authority. As soon
as the award becomes enforceable, it becomes final and binding. If the first award in the present case was
to be enforced, it had to be done according to Part I. The time limit to make it final under Part I would not
cease to run if second part of the arbitration agreement is invoked. Therefore, Act does not contemplate
that the arbitrator would be entitled to sit in appeal over an executable decree. If during the proceedings
for second arbitration, the award from first arbitration becomes a decree, the appellate arbitrator cannot
set aside the decree.

Applying the same to the facts, since the parties agreed that the Indian law shall apply, the validity of the
contract may be judged as per S. 23 of Contract Act, 1872. This will make the two-tier arbitration invalid
in law in the context of the 1996 Act when read with S. 23 of the Contract Act as statutory jurisdiction
cannot be waived by contract.

Thus, the order passed by a tribunal lacking inherent jurisdiction would be a nullity.

On the other hand, Justice Tarun Chatterjee held that a two-tier arbitration entered into before or after
the 1996 Act is valid and 
permissible in India as there is no prohibition given under the Act. He held that
the Act does not prohibit the parties from entering into an agreement whereby the first arbitration
proceedings is conducted under Part I and appeal therefrom is conducted under Pa rt II.

According to him, Clause 14 clearly states that second arbitration is an appeal to be exercised by the
party aggrieved by the award of first arbitration and the award from second arbitration shall be final and
binding on the parties. Therefore the second arbitration was not an independent proceeding. By applying
the doctrine of merger, the original award merges with the appellate award making this award valid and
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capable of enforcement. Here, S. 35 cannot serve as a bar to appellate arbitration as this section only
comes into operation once the arbitration proceedings as a whole, which must include appellate
arbitrations, if any, have ended.

Therefore, the second award is a foreign award as it satisfies the conditions laid down in S. 44 .

Issue 2: Whether the two-tier agreements are opposed to the public policy?

Justice Sinha held that the Two-tier agreements are opposed to public policy if they oust/ create the
jurisdiction of the court as mentioned in Clause 14 of the Arbitration Agreement in this case. This is in
violation of S. 23 of ICA, 1857 and therefore against the public policy of India.

On the other hand, Justice Chatterjee held that the award is valid and binding and not opposed to public
policy as there is not express prohibition against two-tier agreements under the 1996 Act.

Rule:
Since this particular case did not reach to any consensus whatsoever due to a difference in the opinion of
the two Judges, there is no particular rule, which can be followed throughout. But, either of the following
interpretation can be used till the time a larger bench gives away a more concrete judgment.