2008 (8) TMI 803 - SC - Companies Law

Whether clauses 13.2 and 13.3 of the Memorandum of Understanding can be construed to be an arbitration agreement? Whether having regard to clause 13.1 of the Memorandum of Understanding indicating that the construction, validity and performance of the agreement would be governed by and constructed in accordance with laws of England and Wales, this Court would have jurisdiction to appoint an Arbitrator under Section 11 of the Arbitration Act, 1996? Held that - As from the wording of clause 13.2 and clause 13.3 I am convinced, for the purpose of this application, that the parties to the Memorandum intended to have their disputes resolved by arbitration and in the facts of this case the petition has to be allowed. Justice B.N. Srikrishna, is appointed as sole arbitrator to arbitrate upon the disputes which have arisen betweens the parties hereto as set out in sub-paragraphs (a) to (h) of paragraph 19 of the present application. The sole Arbitrator will be entitled to decide upon the procedure to be adopted in the arbitral proceedings, the sittings of the arbitral proceedings and to also settle his fees in respect thereof.

Issues Involved:
1. Whether clauses 13.2 and 13.3 of the Memorandum of Understanding can be construed to be an arbitration agreement.
2. Whether the Supreme Court of India has jurisdiction to appoint an Arbitrator under Section 11 of the Arbitration Act, 1996, given that the Memorandum of Understanding indicates that the construction, validity, and performance of the agreement would be governed by the laws of England and Wales.

Issue-Wise Detailed Analysis:

1. Whether clauses 13.2 and 13.3 of the Memorandum of Understanding can be construed to be an arbitration agreement:

The appellant argued that clauses 13.2 and 13.3 of the Memorandum of Understanding indicate the intention of the parties to resolve disputes through arbitration, despite the use of the term "adjudication." The appellant's counsel, Mr. S.C. Gupta, referred to various legal definitions and previous judgments to support the argument that "adjudication" can be interpreted as arbitration. The respondent, represented by Mr. Parag Tripathi, contended that the terms used in the Memorandum did not meet the requirements of a valid arbitration agreement and that the expressions used were vague and ambiguous. The court, however, was convinced that the parties intended to resolve their disputes through arbitration based on the wording of clauses 13.2 and 13.3.

2. Whether the Supreme Court of India has jurisdiction to appoint an Arbitrator under Section 11 of the Arbitration Act, 1996:

The appellant argued that the jurisdiction of the domestic courts should be determined by their own laws, and since the application was made under Section 11 of the Arbitration and Conciliation Act, 1996, the Indian law should apply. The appellant cited the case of Bhatia International vs. Bulk Trading S.A., where it was held that Part-I of the Arbitration and Conciliation Act, 1996, applies to both domestic and international arbitrations, irrespective of whether the seat of arbitration is in India or not. The respondent countered that since the Memorandum specified that the law governing the agreement was the law of England and Wales, the procedural law of England and Wales should apply, and the Indian courts should not have jurisdiction. The respondent also referenced various legal principles and judgments to support this argument.

The court concluded that the decision in Bhatia International's case, which was rendered by a Bench of Three Judges, was applicable to the present case. It was held that the provisions of Part-I of the Arbitration and Conciliation Act, 1996, would apply to international commercial arbitrations held outside India unless expressly excluded by the parties, which was not the case here. Consequently, the application made under Section 11 was deemed maintainable.

Conclusion:

The court found that the parties intended to resolve their disputes through arbitration as indicated in clauses 13.2 and 13.3 of the Memorandum of Understanding. Furthermore, the court held that it had jurisdiction to appoint an Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, based on the precedent set by the Bhatia International case. Justice B.N. Srikrishna was appointed as the sole arbitrator to arbitrate the disputes between the parties, with the authority to decide the procedure, sittings, and fees for the arbitral proceedings. The arbitrator was urged to expedite the arbitration proceedings and pass the award promptly.

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