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TMI Blog2008 (11) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... r. C.N. Ramchand (respondent herein) on September 4, 2003 for the development of products in the field of bio-industries and manufacturing and marketing of such products. After various meetings and negotiations, terms and conditions were finalized between the parties and the respondent was appointed as Director (Technical) by the applicant Company. A copy of the agreement has been annexed to the Application. MoU also provided that the respondent will work full time with the Company at least for next eight years from the date of signing of the agreement. According to the Company, it invested large amount in the new adventure and paid substantial sum as remuneration to the respondent for the work. 3. It is the allegation of the Company that the respondent did not take interest in work and failed to attend Board Meetings held in May and June, 2004 in spite of prior notice and information in advance about such meetings. A notice was issued by the Company to the respondent on July 14, 2004 asking him to remain present at the Board Meeting scheduled to be held on July 30, 2004. The respondent, however, sent a Letter of Resignation on July 17, 2004. The Company has alleged that not onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quisite material which went to show that he is British national. In view of the above contention, the Company sought permission from the High Court to withdraw the petition so as to enable the Company to make appropriate application to the Hon'ble Chief Justice of India. The permission sought for was granted and the application was disposed of as withdrawn. 6. The Company then approached this Court by filing the present application on May 22, 2007. Hon'ble the Chief Justice of India designated me as his nominee to deal with and decide the application preferred by the Company. Notice was issued to the respondent pursuant to which he appeared and filed a counter-affidavit on February 12, 2008. The Registry was directed to place the matter for hearing. 7. I have heard the learned counsel for the parties. 8. Learned counsel for the applicant- Company submitted that the application deserves to be allowed by appointing a third arbitrator as Umpire or sole arbitrator in view of difference between the applicant and the respondent and failure to come to an agreement to appoint an arbitrator acceptable to both the parties. It was stated that the applicant appointed Ramesh H. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country. 11. Chapter II of the Act deals with Arbitration Agreement and declares that all disputes arising between the parties would be governed by the provisions of the Act. Chapter III provides for Composition of Arbitral Tribunal . Section 10 enacts that the parties are free to determine number of arbitrators, but such number shall not be an even number. In case of failure to determine number of arbitrators, the Arbitral Tribunal shall consist of a sole arbitrator. Section 11 relates to appointment of arbitrators. It states that in case of failure on the part of the parties in arriving at an agreement to appoint an arbitrator, an application may be made to the Chief Justice of India in case of International Commercial Arbitration so that an appropriate order may be passed for appointment of arbitrator. It is on the basis of the above p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign Awards (Recognition and Enforcement) Act, 1961. The question before the Court was whether there was commercial relationship between the parties as defined in Section 2 of the Act and whether the Act would apply. In that case, an Indian Company entered into an agreement with a Company registered in USA. The Indian Company agreed to provide Boeing with consultancy services for sale of Boeing Aircraft in India. Agreement for purchase of two Boeing Aircrafts was executed. A dispute arose and the appellant claimed compensation and remuneration for consultancy services. In view of arbitration clause, the matter was referred to arbitrator. It was contended by the foreign Company that there was no `commercial element' and hence the application was liable to be dismissed. 17. This Court, however, rejected the contention. It was held that the agreement to render consultancy service by the appellant to the respondent was `commercial' in nature and there was commercial relationship between the parties. 18.Referring to earlier cases, this Court stated; It is not disputed that the sale of aircraft by Boeing to customers in India was to be a commercial transaction. The quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gers by air, sea, rail or road. [Foot-note to Article 1 (1)] (emphasis supplied) 21. Before more than three decades, in Union of India v. D.N. Revri Co., (1976) 4 SCC 147, this Court stated; It must be remembered that a contract is a commercial document between the parties and it must be interpreted in such a manner as to give efficacy to the contract rather than to invalidate it. It would not be right while interpreting a contract, entered into between two lay parties, to apply strict rules of construction which are ordinarily applicable to a conveyance and other formal documents. The meaning of such a contract must be gathered by adopting a common sense approach and it must not be allowed to be thwarted by a narrow, pedantic and legalistic interpretation . 22. Very recently, in Citibank N.A. v. TLC Marketing PLC Anr., (2008) 1 SCC 481, this Court held that commercial contract must be broadly construed with a view to give efficacy to such contract rather than to invalidate it. Clauses of the contract must be liberally interpreted. Narrow and technical approach should be avoided. [see also Russel on Arbitration (1997); p.60] 23. The other issue which has been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to get the benefit of such research and expertise, an agreement had been entered into by the parties and respondent had been appointed Director of the subsidiary Company. 28. Now, it is well settled that a Director is not a mere employee or servant of the Company. In Lee v. Lee's Air Framing Ltd., 1961 AC 12, it was held that a Director is a controller of the company's affairs and is not a mere servant of the Company. Such Director may have to work also as an employee in a different capacity. Gower and Davies' Principles of Modern Company Law, (17th Edn. pp. 370-76) also deals with duties of Director viz-a-viz as an employee of the Company and makes it clear that a Director per se cannot be said to be an employee or servant of the Company. 29. In Ram Pershad v. Commissioner of Income Tax, New Delhi (1972) 2 SCC 696, this Court held that a Managing Director may have a dual capacity. He may be both, a Director as well as an Employee. 30. The Court stated; 7. Though an agent as such is not a servant, a servant is generally for some purposes his master's implied agent, the extent of the agency depending upon the duties or position of the servant. It is ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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