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TMI Blog2006 (1) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... the prayer of the respondent cannot be accepted. Finally, it was submitted that if this Court is not upholding the objection of the respondent and inclined to grant the prayer of the petitioner, some time may be granted to make an appointment of an arbitrator which was not done earlier because according to the respondent, there was no provision in the agreement for arbitration and clause 23 was not enforceable. The learned counsel for the petitioner has objected to such a prayer, according to him, a letter/notice was issued and in spite of a request has been made, the respondent had failed to exercise his right to appoint an arbitrator and at this belated stage, no such prayer deserves to be granted. In my opinion, since there is failure on the part of the respondent in making of appointment in accordance with the agreement, the prayer cannot be granted. Thus the arbitration petition stands allowed - Arbitration Petition 1 of 2005 - - - Dated:- 31-1-2006 - C.K. THAKKER, J. JUDGMENT This Arbitration Petition is filed by the petitioner, Shin Satellite Public Co. Ltd. against the respondent, M/s Jain Studios Ltd. under sub-section (6) of Section 11 of the Arbitration an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l appeared on behalf of the respondent and waived service of notice. Time was sought to file counter-affidavit, which was granted. A reply-affidavit was then filed by the respondent urging therein that the Arbitration Agreement was not legal and valid. It was contended that Clause 23 contained a condition that the arbitrator's determination would be treated as 'final and binding between the parties' and the parties had waived 'all rights of appeal or objection in any jurisdiction'. It was also submitted that the disputes were to be resolved by arbitration under the rules of United Nations Commission on International Trade Law (UNCITRAL). Whereas Agreement in question dated August 10, 1999 provided that the arbitration would be held in Delhi in accordance with Indian Law, under other two Agreements, the place of arbitration was fixed at Singapore and London respectively, and the governing law was English Law. It was, therefore, stated that in the present case also, arbitration may be held in London or in Singapore, where arbitration proceedings were going on between the parties. The matter could not be heard finally as the question as to the nature of function to be performed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to hold arbitration out of India. The question for consideration before me is whether the arbitration agreement is legal, valid and enforceable. Before considering respective contentions of learned counsel on the point, it would be appropriate if the relevant clauses of the agreement are considered. As already stated, the agreement had been entered into on 10th August, 1999. It was duly signed by the parties. It provides for resolution of disputes, if any, arising between the parties to the agreement. Clause 19 relates to "Governing Law" and declares that the rights and responsibilities of the parties would be governed by Indian Law. Clause 23 deals with arbitration and is, therefore, material and may be quoted in extenso: "23. ARBITRATION Any dispute arising from the interpretation or from any matter relating to the performance of this Agreement or relating to any right or obligation herein contained which cannot be resolved by the parties shall be referred to and finally resolved by arbitration under the rules of the United Nations Commission on International Trade Law (UNCITRAL). The arbitration shall be held in New Delhi and shall be in the English language. The arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arises whether the illegal or void parts may be separated or "severed" from the contract and the rest of the contract enforced without them. Nearly all the cases arise in the context of restraint of trade, but the following principles are applicable to contracts in general. First, as a general rule, severance is probably not possible where the objectionable parts of the contract involve illegality and not mere void promises. In one type of case, however, the courts have adopted what amounts almost to a principle of severance by holding that if a statute allows works to be done up to a financial limit without a licence but requires a licence above that limit, then, where works are done under a contract which does not specify an amount but which in the event exceeds the financial limit permitted without licence, the cost of the works up to that limit is recoverable. Secondly, where severance is allowed, it must be possible simply to strike out the offending parts but the court will not rewrite or rearrange the contract. Thirdly, even if the promises can be struck out as afore-mentioned, the court will not do this if to do so would alter entirely the scope and intention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plies to a lump sum contract "for a single and indivisible work." Even in this situation if the cost element can be divided into its legal and illegal components, the courts will enforce the former but not the latter. (emphasis supplied) It is no doubt true that a court of law will read the agreement as it is and cannot rewrite nor create a new one. It is also true that the contract must be read as a whole and it is not open to dissect it by taking out a part treating it to be contrary to law and by ordering enforcement of the rest if otherwise it is not permissible. But it is well-settled that if the contract is in several parts, some of which are legal and enforceable and some are unenforceable, lawful parts can be enforced provided they are severable. The learned counsel for the petitioner, in my opinion, rightly submitted that the court must consider the question keeping in view settled legal position and record a finding whether or not the agreement is severable. If the court holds the agreement severable, it should implement and enforce that part which is legal, valid and in consonance of law. In several cases, courts have held that partial invalidity in contract will n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Courts would sever in a proper case, where the severance can be made by using a 'blue pencil'. But it could be done only in those cases where the part so enforceable is clearly severable and not where it could not be severed. By such process, main purport and substance of the clause cannot be ignored or overlooked. Thus, a covenant "not to carry on business in Birmingham or within 100 miles" may be severed so as to reduce the area to Birmingham, but a covenant "not to carry on business within 100 miles of Birmingham" will not be severed so as to read "will not carry on business in Birmingham". The distinction may appear to be artificial, but is well-settled. In Re Davstone Estates Ltd.'s Leases, Manprop, Ltd. v. O'Dell Ors., [1969] 2 All ER 849, on which reliance was placed by the learned counsel for the respondent, is clearly distinguishable. In that case, the Court held that the agreement entered into between the parties was opposed to public policy and hence was not enforceable. Similarly, Kall-Kwik Printing (U.K.) Limited v. Frank Clearence Rush, 1996 FSR 114, instead of supporting the respondent, helps the petitioner. There it was observed that if the covenant is severable, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istence of the sub-clause or the fact that the sub- clause appears to be void does not in any way affect the right of the parties to have recourse to arbitration and does not make a reference to an arbitrator any the less an alternative remedy." In the present case, clause 23 relates to arbitration. It is in various parts. The first part mandates that, if there is a dispute between the parties, it shall be referred to and finally resolved by arbitration. It clarifies that the rules of UNCITRAL would apply to such arbitration. It then directs that the arbitration shall be held in Delhi and will be in English language. It stipulates that the costs of arbitration shall be shared by the parties equally. The offending and objectionable part, no doubt, expressly makes the arbitrator's determination "final and binding between the parties" and declares that the parties have waived the rights of appeal or objection "in any jurisdiction". The said objectionable part, in my opinion, however, is clearly severable as it is independent of the dispute being referred to and resolved by an arbitrator. Hence, even in the absence of any other clause, the part as to referring the dispute to arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the respondent, it was submitted that if the matter is referred to arbitration in London or in Singapore, it had no objection. But as the Arbitration Agreement provides 'Delhi' as the venue and since that part of the agreement is enforceable, the prayer of the respondent cannot be granted. Finally, it was submitted by the respondent that if this Court is not upholding the objection of the respondent and is inclined to grant the prayer of the petitioner, some time may be granted to the respondent to make an appointment of an arbitrator. It was not done earlier because according to the respondent, clause 23 was not enforceable. The learned counsel for the petitioner objects to such a prayer. According to him, a letter/notice was issued and in spite of request by the petitioner, the respondent had failed to exercise his right to appoint an arbitrator. At this belated stage, now, the respondent cannot be permitted to take advantage of its own default. In my opinion, since there is failure on the part of the respondent in making an appointment of an arbitrator in accordance with the agreement, the prayer cannot be granted. For the foregoing reasons, the arbitration petition stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the parties otherwise agree, such reference shall not take place until after the completion, alleged completion or abandonment of the Works or the determination of the Contract. The venue of Arbitration shall be such place or places as may be fixed by the Arbitrator in his sole discretion. The award of the Arbitrator shall be final, conclusive and binding on both parties to the Contract." According to the Court, the sub-clause making the award final and conclusive was clearly seperable from the main clause which makes a reference to an arbitrator imperative. "The existence of the sub-clause or the fact that the sub-clause appears to be void does not in any way affect the right of the parties to have recourse to arbitration and does not make a reference to an arbitrator any the less an alternative remedy." Similar questions also came up for consideration while dealing with Article 13 of the Constitution. The said Article indicates that laws inconsistent with or in derogation of the Fundamental Rights contained in Part III of the Constitution would "to the extent of such inconsistency, be void". In R.M.D.Chamarbaugwalla Anr. v. Union of India Anr. (1957) SCR 930 : AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the invalid portion is expunged from the statute what remains cannot be enforced without making alterations and modifications therein, then the whole of it must be struck down as void, as otherwise it will amount to judicial legislation. Vide Sutherland on Statutory Construction, Vol. 2, p. 194. 7. In determining the legislative intent on the question of separability, it will be legitimate to take into account the history of the legislation, its object, the title and the preamble to it. Vide Sutherland on Statutory Construction, Vol. 2, pp. 177-178. It is an accepted principle of law that while interpreting statutory provisions, the Court would attempt to find out the intention of the Legislature and try to save statute to the extent it is possible. Read Dickerson has suggested: ".... the Courts are at least free from control by original legislatures. Curtis, for one, has contended that consistently with the ascertained meaning of the statute, a court should be able to shake off the dust of the past plant its feet firmly in the present. ..... The Legislature which passed the stature has adjourned and its members gone home to their constituents or to a long rest from al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entered into was not legal and valid and hence was not enforceable. Similarly, Kall-Kwik Printing (U.K.) Limited v. Frank Clearence Rush [1996] F.S.R. 114 also does not help the respondent. On the contrary, in the said case it was held that if the covenant is severable, the same can be implemented. In the present case, clause 23 relates to arbitration, mainly it is in four parts. The first part states that, if there is dispute between the parties, it shall be referred to and finally resolved by arbitration. It also says that the rules of UNCITRAL would apply to such arbitration. It then states that the arbitration shall be held in Delhi and will be in English language. It also states that the costs of arbitration shall be shared by the parties equally. The disputed part declares the arbitrator's determination as "final and binding between the parties" and also that parties have waived the rights of appeal or objection in any jurisdiction. The said objectionable part, in my opinion, is clearly severable as it is independent of matter being raised to and decided by an arbitrator. Therefore, even in the absence of any other clause, the said part can be given effect to and enforced. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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