2020 (9) TMI 595 - SC - Indian Laws

Appointment of sole arbitrator - Section 11(6) read with Seciton 11(12)(a) of the Arbitration and Conciliation Act, 1996 - HELD THAT - The parties having entered into a business transaction; certain disputes have arisen between them which is to be resolved through arbitration. To that extent the parties are also in agreement. The issue for consideration however, is with regard to the appropriate clause that will operate providing for arbitration and will be applicable in the factual matrix herein. Since the applicant is before this Court invoking the arbitration clause in the purchase order (37 separate purchase orders), it is necessary to take note of the arbitration clause relied upon. Since the transaction entered into between the parties and the dispute having arisen not being in dispute; further the above extracted arbitration clause being explicit; in a normal circumstance no other consideration would have been necessary in the limited scope for consideration in an application under Section 11 of the Act, 1996. However, in the case on hand the fact remains that undisputedly an Agreement dated 31.03.2018 is also entered into between the parties relating to the very same transaction which is referred to as the Umbrella Agreement by the respondent and as Pricing Agreement by the applicant. The said agreement also makes provision for resolution of disputes through arbitration in the manner as indicated therein. When both, the purchase order as also the Pricing Agreement subsists and both the said documents contain the arbitration clauses which are not similar to one another, in order to determine the nature of the arbitral proceedings the said two documents will have to be read in harmony or reconciled so as to take note of the nature of the dispute that had arisen between the parties which would require resolution through arbitration and thereafter arrive at the conclusion as to whether the instant application filed under Section 11 of the Act, 1996 would be sustainable so as to appoint an arbitrator by invoking Clause7 of the purchase order; more particularly in a situation where the Arbitral Tribunal has already been constituted in terms of Clause23 of the agreement dated 31.03.2018. When admittedly the parties had entered into the agreement dated 31.03.2018 and there was consensus adidem to the terms and conditions contained therein which is comprehensive and encompassing all terms of the transaction and such agreement also contains an arbitration clause which is different from the arbitration clause provided in the purchase order which is for the limited purpose of supply of the produce with more specific details which arises out of Agreement dated 31.03.2018; the arbitration clause contained in Clause23 in the main agreement dated 31.03.2018 would govern the parties insofar as the present nature of dispute that has been raised by them with regard to the price and the terms of payment including recovery etc. In that view, it would not be appropriate for the applicant to invoke Clause7 of the purchase orders more particularly when the arbitration clause contained in the Agreement dated 31.03.2018 has been invoked and the Arbitral Tribunal comprising of Mr. Jonathan Jacob Gass, Mr. Gourab Banerji and Ms. Lucy Greenwood has already been appointed on 22.06.2020. he petitioner claiming to be aggrieved by the constitution of the Arbitral Tribunal has filed the suit seeking a decree of declaration that the arbitration clause23 of the Pricing Agreement dated 31.03.2018 is null and void and in that context has sought for the ancillary relief in the suit. In the said suit the petitioner has moved the Notice of Motion seeking for an interlocutory order of injunction against the Arbitral Tribunal constituted by the ICC. The learned Single Judge through a detailed judgment dated 12.08.2020 has rejected the prayer for interim order and the Notice of Motion has been dismissed. The petitioner claiming to be aggrieved by the said order had preferred an appeal to the Division Bench, which on consideration has declined grant of interim order though the appeal has been admitted for consideration. Application dismissed.

Summary

Issues Involved:
1. Appointment of a sole arbitrator under Section 11(6) and Section 11(12)(a) of the Arbitration and Conciliation Act, 1996.
2. Applicability of arbitration clauses in purchase orders versus the "Umbrella Agreement."
3. Validity and enforcement of the arbitration clause in the "Umbrella Agreement."

Detailed Analysis:

1. Appointment of a Sole Arbitrator:
The applicant, Balasore Alloys Limited, sought the appointment of a sole arbitrator to adjudicate disputes arising from 37 purchase orders. Alternatively, the applicant requested the appointment of a second arbitrator due to the respondent, Medima LLC's, failure to nominate an arbitrator as per the contracts. The applicant relied on Clause 7 of the purchase orders, which provided for arbitration by a tribunal of three arbitrators.

2. Applicability of Arbitration Clauses:
The respondent did not dispute the nature of the transactions or the existence of arbitrable disputes. However, they argued that the disputes should be resolved under Clause 23 of the "Umbrella Agreement" dated 31.03.2018, which they had already invoked by filing a petition before the International Chamber of Commerce (ICC). The respondent contended that the application under Clause 7 of the purchase orders was not bona fide.

The court noted that both the purchase orders and the "Umbrella Agreement" contained arbitration clauses. Clause 7 of the purchase orders specified arbitration by a tribunal of three arbitrators, while Clause 23 of the "Umbrella Agreement" provided for arbitration under the ICC rules in London, governed by British Law.

3. Validity and Enforcement of the Arbitration Clause in the "Umbrella Agreement":
The court referenced the case of *Olympus Superstructures Pvt. Ltd. vs. Meena Vijay Khetan & Ors.* to harmonize the two arbitration clauses. The court concluded that the disputes should be resolved under the main agreement (the "Umbrella Agreement") when there are overlapping issues. The court emphasized that the "Umbrella Agreement" was comprehensive and governed all transactions, including those initiated before its execution date.

The court observed that the applicant had not initiated the arbitration process; instead, the respondent had invoked the arbitration clause under the "Umbrella Agreement" first. The applicant's reply to the respondent's notice indicated that the disputes related to pricing and payment terms under the "Umbrella Agreement."

The court determined that the nature of the disputes, including price determination and payment terms, fell under the "Umbrella Agreement." Therefore, the arbitration clause in the "Umbrella Agreement" governed the disputes, and the Arbitral Tribunal constituted under the ICC rules was appropriate.

Conclusion:
The court dismissed the application for appointing an arbitrator under Clause 7 of the purchase orders, as the disputes were to be resolved under Clause 23 of the "Umbrella Agreement." The Special Leave Petition (SLP) filed by the petitioner, challenging the constitution of the Arbitral Tribunal under the ICC rules, was also dismissed. The court upheld the lower court's decision to reject the interim order of injunction against the Arbitral Tribunal. The judgment emphasized the importance of harmonizing arbitration clauses and resolving disputes under the comprehensive agreement governing the transactions.