2018 (12) TMI 178 - SC - Companies Law

Arbitration proceedings - parties to the Arbitration agreement, being a body corporate, incorporated in Malaysia - why an association cannot be read with body of individuals - no international commercial arbitration as defined under Section 2(1)(f) of the Act for the petitioner to come to this Court - Held that - Prior to the deletion of the expression a company or , there were three sets of persons referred to in Section 2(1)(f)(iii) as separate and distinct persons who would fall within the said sub-clause. This does not change due to the deletion of the phrase a company or for the reason given by the Law Commission. This is another reason as to why an association cannot be read with body of individuals which follows it but is a separate and distinct category by itself, as is understood from the definition of person as defined in the Income Tax Act referred to above. Indian company is the lead partner, and that the Supervisory Board constituted under the Consortium Agreement makes it clear that the lead partner really has the determining voice in that it appoints the Chairman of the said Board (undoubtedly, with the consent of other members); and the fact that the Consortium s office is in Wadala, Mumbai as also that the lead member shall lead the arbitration proceedings, would all point to the fact that the central management and control of this Consortium appears to be exercised in India and not in any foreign nation. This being the case, we dismiss the petition filed under Section 11 of the Act, as there is no international commercial arbitration as defined under Section 2(1)(f) of the Act for the petitioner to come to this Court. We also do not deem it necessary to go into whether the appropriate stage for invoking Arbitration has yet been reached.

Summary

Issues Involved:
1. Applicability of Section 2(1)(f)(ii) and Section 2(1)(f)(iii) of the Arbitration & Conciliation Act, 1996.
2. Whether the Consortium is an un-incorporated association or a body corporate.
3. Whether the arbitration clause under Section 20.4 of the General Conditions of Contract (GCC) can be invoked.
4. Whether the central management and control of the Consortium is exercised in India or outside India.
5. Whether the appropriate stage for invoking arbitration has been reached.

Issue-wise Detailed Analysis:

1. Applicability of Section 2(1)(f)(ii) and Section 2(1)(f)(iii) of the Arbitration & Conciliation Act, 1996:
The petitioners argued that the presence of a Malaysian company in the Consortium should attract Section 2(1)(f)(ii) of the Act, making it an international commercial arbitration. However, the respondents contended that the Consortium is an un-incorporated association, falling under Section 2(1)(f)(iii). The Court held that the un-incorporated "association" referred to in Section 2(1)(f)(iii) is applicable, not Section 2(1)(f)(ii), as the Malaysian body cannot be considered an independent entity.

2. Whether the Consortium is an un-incorporated association or a body corporate:
The Court examined the agreement and the Consortium Agreement, determining that the Consortium is defined as an un-incorporated association. The High Court of Bombay's earlier judgment, which was binding, held that the Consortium must deal with the respondent as a single entity, not as separate companies. This reinforced the view that the Consortium is an un-incorporated association.

3. Whether the arbitration clause under Section 20.4 of the General Conditions of Contract (GCC) can be invoked:
The petitioners claimed that the procedure outlined by Clauses 20.1 to 20.3 had been exhausted, allowing them to invoke Clause 20.4. However, the respondents argued that the necessary steps under Clauses 20.1 to 20.3 had not been completed. The Court noted that the respondents had requested further information and material, which was not provided before the petitioners invoked arbitration. Therefore, the Court did not find it necessary to determine whether the appropriate stage for invoking arbitration had been reached.

4. Whether the central management and control of the Consortium is exercised in India or outside India:
The Court found that the lead partner of the Consortium is the Indian company, with the Consortium's office located in Mumbai. The Supervisory Board, which includes the lead partner's appointee as Chairman, indicated that the central management and control are exercised in India. This supported the respondents' argument that the Consortium is managed and controlled in India.

5. Whether the appropriate stage for invoking arbitration has been reached:
The Court observed that the respondents had requested additional information and clarification, which was not provided before the petitioners invoked arbitration. This indicated that the procedure under Clauses 20.1 to 20.3 had not been fully exhausted. Consequently, the Court did not find it necessary to delve into whether the appropriate stage for invoking arbitration had been reached.

Conclusion:
The Court dismissed the petition under Section 11 of the Act, concluding that there is no "international commercial arbitration" as defined under Section 2(1)(f) of the Act. The petitioners were advised to approach the relevant court on the basis that this is not a case of international commercial arbitration. The Arbitration Petition was dismissed, and the Court did not address whether the appropriate stage for invoking arbitration had been reached.