Karnataka High Court
L And T Infra Investment Partners ... vs Bhoruka Power Investments India Pvt ... on 26 September, 2025
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COMAP No. 261 of 2025
C/W COMAP No.279 of 2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 26TH DAY OF SEPTEMBER 2025
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE C M JOSHI
COMMERCIAL APPEAL NO. 261 OF 2025
C/W
COMMERCIAL APPEAL NO. 279 OF 2025
IN COMAP NO. 261 OF 2025
BETWEEN:
1. L AND T INFRA INVESTMENT
PARTNERS ADVISORY PRIVATE LIMITED
(ACTING ON BEHALF OF L&T INFRA
INVESTMENT PARTNERS AS ITS
INVESTMENT MANAGER)
A COMPANY REGISTERED UNDER
THE COMPANIES ACT, 1956 AND HAVING ITS
REGISTERED OFFICE AT PLOT NO. 177
CTS NO. 6970, 6971
VIDYANAGARI MARG, CST ROAD
KALINA, SANTACRUZ (EAST)
MUMBAI CITY, MUMBAI, MAHARASHTRA - 40098.
REPRESENT BY ITS
AUTHORIZED REPRESENTATIVE
MR. ASHWINI SHARMA
...APPELLANT
(BY SRI DHYAN CHINNAPPA, SENIOR ADVOCATE A/W
SRI MOHAMMED SHAMEER, ADVOCATE,
MS. LAVANYA B. ANANTH, MS. NIDHI &
MR. SUDHEESH KESARKAR, ADVOCATES)
AND:
1. BHORUKA POWER CORPORATION LIMITED
A COMPANY INCORPORATED UNDER
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COMAP No. 261 of 2025
C/W COMAP No.279 of 2025
THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT NO. 48
HITANANDA - II, LAVELLE ROAD
BANGALORE - 560 001
REPRESENTED BY ITS
AUTHORIZED REPRESENTATIVE.
...RESPONDENT
(BY SRI UDAYA HOLLA, SENIOR ADVOCATE A/W
MR. PRADEEP DARA K., MR. YAJIT SARNA &
MR. SUDEV JUNEJA, ADVOCATES FOR C/R No.1)
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13
OF THE COMMERCIAL COURTS ACT, 2015 PRAYING TO SET ASIDE
THE IMPUGNED ORDER DATED 28.04.2025 PASSED IN I.A.NO. 2 IN
COM. OS NO. 384 OF 2025 BY THE LD. LXXXII ADDITIONAL CITY
CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT, (CCH-83)
BENGALURU & ETC.
IN COMAP NO. 279 OF 2025
BETWEEN:
1. L & T INFRA INVESTMENT PARTNERS
ADVISORY PRIVATE LIMITED
(ACTING ON BEHALF OF L&T INFRA INVESTMENT
PARTNERS AS ITS INVESTMENT MANAGER)
A COMPANY REGISTERED UNDER
THE COMPANIES ACT, 1956 AND HAVING ITS
REGISTERED OFFICE AT PLOT NO. 177
CTS NO. 6970, 6971, VIDYANAGARI MARG
CST ROAD, KALINA, SANTACRUZ (EAST)
MUMBAI CITY, MUMBAI, MAHARASHTRA - 40098
REPRESENT BY ITS AUTHORIZED REPRESENTATIVE
MR. ASHWINI SHARMA
...APPELLANT
(BY SRI DHYAN CHINNAPPA, SENIOR ADVOCATE A/W
SRI MOHAMMED SHAMEER, ADVOCATE,
MS. LAVANYA B. ANANTH, MS. NIDHI &
MR. SUDHEESH KESARKAR, ADVOCATES)
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COMAP No. 261 of 2025
C/W COMAP No.279 of 2025
AND:
1. BHORUKA POWER INVESTMENTS
INDIA PVT. LIMITED
A COMPANY REGISTERED UNDER
THE COMPANIES ACT, 1956 AND
HAVING ITS REGISTERED OFFICE
AT TULSIANI CHAMBERS NARIMAN POINT
MUMBAI - 400 021
REPRESENTED BY ITS
AUTHORIZED REPRESENTATIVE
MR. MAHADHANAPURAM
SUBRAMANYAN SREENIVAS.
2. MR. SATYANARAYANA AGARWAL
AGED MAJOR, RESIDING AT NO. 11/3
NANDIDURGA ROAD
BANGALORE - 560 046.
3. MS. UMAH AGARWAL
AGED MAJOR
WIFE OF MR. SATYANARAYANA AGARWAL
RESIDING AT NO. 11/3, NANDIDURGA ROAD
BANGALORE - 560 046.
4. MR. SIDDHARTHA AGARWAL
AGED MAJOR
SON OF MR. SATYANARAYANA AGARWAL
RESIDING AT NO. 11/3, NANDIDURGA ROAD
BANGALORE - 560 046.
5. MR. VIVEK AGARWAL
AGED MAJOR
SON OF MR. SATYANARAYANA AGARWAL
RESIDING AT NO. 11/3
NANDIDURGA ROAD, BANGALORE - 560 046
REP. BY GPA HOLDER
MR. M.S. SREENIVAS.
...RESPONDENTS
(BY SRI C.K. NANDAKUMAR, SENIOR ADVOCATE A/W
MR. HARIKRISHNA PRAMOD, ADVOCATE
MS. AISHWARYA V. RAVINDRANATH, ADVOCATES)
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COMAP No. 261 of 2025
C/W COMAP No.279 of 2025
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION 13
OF THE COMMERCIAL COURTS ACT, 2015 PRAYING TO SET ASIDE
THE IMPUGNED ORDER DATED 28.04.2025 PASSED IN I.A. NO. 2 IN
COM. OS NO. 385/2025 BY THE LD. LXXXII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE COMMERCIAL COURT, (CCH 83)
BENGALURU & ETC.
THESE COMMERCIAL APPEALS HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT
THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:
CORAM: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON'BLE MR. JUSTICE C M JOSHI
CAV JUDGMENT
(PER: HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)
INTRODUCTION
1. The appellant has filed the present appeals under Section
13(1A) of the Commercial Courts Act, impugning orders dated
28.04.2025 [impugned orders] passed by the learned LXXXII
Addl. City Civil & Sessions Judge, Bengaluru [hereafter 'the
commercial court'] in interim applications filed under Order XXXIX
Rules 1 & 2 CPC in Com.O.S.No.384/2025 and Com.O.S No.
385/2025. The impugned orders are identically worded.
2. Bhoruka Power Corporation Limited [hereafter referred to as
'BPCL'] has filed Com.O.S. 384/2025 and Bhoruka Power
Investments India Pvt. Limited [BPIIPL], along with Mr.
Satyanarayana Agarwal, Ms. Umah Agarwal, Mr. Siddhartha
Agarwal, and Mr. Vivek Agarwal [hereafter 'the promoter
shareholders'] have filed Com.O.S.385/2025 for identical reliefs.
The said parties - BPCL and the promoter shareholders - are
hereafter collectively referred to as 'the Plaintiffs'.
3. In terms of the impugned orders, the learned Commercial
Court had restrained the appellant from continuing with the
arbitration request dated 10.01.2025 lodged by the appellant with
the London Court of International Arbitration [hereafter the LCIA]
and instituting or continuing any arbitration proceedings against the
Plaintiffs under the LCIA Rules in respect of disputes arising from
or in connection with the CCD subscription and Securities Holders
Agreement dated 21.06.2013 [hereafter referred to as 'the CCD
Agreement'].
4. According to the Plaintiffs, the arbitration clause under the
CCD Agreement, does not contemplate resolution of disputes by
arbitration administered by the LCIA or in accordance with the LCIA
Arbitration Rules, 2020 [hereafter 'the LCIA Rules 2020']. The
appellant disputes the aforesaid contention. The appellant also
challenges the maintainability of the suits on the ground that no
action for restraining a domestic arbitration, is maintainable outside
the framework of the Arbitration & Conciliation Act, 1996 [A&C
Act], by virtue of Section 5 of the A&C Act.
PREFATORY FACTS
5. L&T Infrastructure Finance Company Limited [LTIFL], Mr.
S.N. Agarwal and BPCL, entered into a share purchase agreement
[the SPA] dated 30.07.2010, whereby Mr. S.N. Agarwal, described
as a promoter of BPCL, agreed to sell 5,87,850 equity shares of
BPCL held by him, to LTIFL, which was referred to as the Investor,
for consideration of ₹49,99,99,787/- on the terms and conditions as
set out in the SPA.
6. Subsequently, on 21.06.2013, LTIFL and L&T Fincorp and,
BPCL, Bhoruka Power Holding Private Limited [BPHPL] and the
individual Promoter Shareholders (listed in Schedule-I to the CCD
Agreement), entered into the CCD Agreement. Under the CCD
Agreement, LTIFL and L&T Fincorp Limited, were referred to as
Investors and BPHPL and other persons listed in Schedule-I to
CCD Agreement were referred to as promoter shareholders.
BPHPL merged with BPIIPL. Thus, essentially the CCD Agreement
was between the L&T on one part and the Plaintiffs on the other
part.
7. The recital of the CCD Agreement records that the BPCL had
requested each of the investors to collectively invest an amount
upto ₹3,250,000,000/- (Three billion two hundred and fifty million
only), by subscribing to 32,500 zero coupon compulsorily
convertible debentures of ₹1,00,000/- (Rupees One Hundred
Thousand) each in one or more tranches.
8. In terms of the CCD Agreement, LTIFL and L&T Fincorp,
jointly subscribed to 32,500 zero coupon compulsorily convertible
debentures [CCDs] of BPCL at a total value of ₹325,00,00,000/-
(Rupees three hundred and twenty five crores). In terms of the
CCD Agreement, the maturity date of the CCDs is 28.06.2033. On
the same date on which the CCD Agreement was executed, that is
on 21.06.2013, BPCL, BPIIPL, LTIFL and L&T Fincorp entered into
a share pledge agreement [the Pledge Agreement]. It is stated
that in terms of the Pledge Agreement, BPIIPL pledged 27,13,517
equity shares of BPCL held by it, in favour of LTIFL and L&T
Fincorp. On 25.07.2019, the said parties also entered into a
supplemental share pledge agreement [Supplemental Pledge
Agreement], in terms of which 29,62,763 shares of BPCL were
pledged in favour of LTIFL and L&T Fincorp.
9. BPCL states that subsequently, the pledge of 11,70,998
number of its shares were released by LTIFL. Resultantly,
45,05,282 number of shares of BPCL [Pledged shares] held by
BPIIPL remained pledged with LTIFL and L&T Fincorp.
10. The appellant acts as an Investment Manager on behalf of
L&T Infra Investment Partners [the FUND], which is an irrevocable
trust set up under the Indian Trusts Act, 1882 and is registered as a
Category-I Alternate Investment Infrastructure Fund, under the
Securities and Exchange Board of India (Alternative Investment
Fund) Regulations, 2012.
11. On 12.09.2013, the appellant acting on behalf of the Fund,
entered into a Deed of Adherence with LTIFL and L&T Fincorp,
BPCL and the promoter shareholders under the CCD Agreement.
In terms of the said Deed of Adherence, the Fund acquired 6,729
zero coupon CCDs out of 32,500 CCDs which was subscribed by
LTIFL and L&T Fincorp. It also purchased 5,87,750 equity shares
of BPCL held by LTIFL. The appellant states that in terms of the
Deed of Adherence, the Fund is entitled to all rights available to
LTIFL and L&T Fincorp under the CCD Agreement and it is entitled
to exercise its rights, independently.
12. The appellant claims that in terms of clause 9.5(a) of the
CCD Agreement dated 21.06.2013, BPCL along with the Plaintiffs
are obliged to provide an exit to LTIFL & L&T Fincorp [also referred
to L&T parties or L&T] prior to the Exit Date, that is, within 60 (sixty)
months from the completion date of the subscription to the first
tranche of the CCDs, which was completed on 28.06.2018.
13. On 04.09.2018, L&T issued a buy back notice under clause
9.5 (i) and 9.5(j) of the CCD Agreement calling upon the BPCL to
buy back these investor securities and further to the Promoter
Shareholders to cause BPCL to buy back the investor securities or
to purchase the same at a price resulting in returns as agreed
under the CCD Agreement. The appellant claims that since the buy
back notice was not complied with, within a period of 60 (sixty)
days after the issuance of the said notice - that is by 03.11.2018 -
an event to default occurred on the said date, in terms of clause
9(5)(i) and 9(5)(j) of the CCD Agreement. Thereafter, L&T issued
separate notices dated 13.12.2018 to BPCL and Promoters
Shareholders declaring the occurrence of an event of default under
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the CCD Agreement and calling upon BPCL and the Promoter
Shareholders to discharge the obligations within a period of 30
days from the said notice, that is, on or before 12.01.2019 and to
take necessary action to buy back/redeem/purchase investors
securities at prices that provides the agreed returns. The appellant
states that since the BPCL and Promoter Shareholders were
unable to meet their obligations under the CCD Agreement and
were in continuous default, certain correspondences were
exchanged between the parties regarding the resolution and
payment of the outstanding amounts. It is stated that BPCL and the
Promoter Shareholders commenced negotiations with third parties
for acquisition of shares of BPCL and providing exit to the L&T
parties. However, the parties were unable to conclude the
negotiations.
14. The L&T parties entered into an agreement dated
28.09.2023 with Phoenix ARC Private Ltd. [Phoenix], whereby it
assigned its rights in respect of 25,771 number of CCDs along with
the underlying securities, out of 32,500 CCDs of BPCL.
Consequentially, 6,729 CCDs continued to be held by the Fund.
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15. The appellant states that thereafter various mails were
exchanged proposing the restructuring of financial assets and
waiver of the CCDs. However, the appellant/Fund declined the
proposal to waive the CCDs and called upon the Plaintiffs to buy
back 6729 (six thousand seven hundred and twenty-nine) number
of CCDs and equity shares of BPCL in accordance with the CCD
Agreement.
16. The Plaintiffs admitted their inability to service the debts in
various correspondences that were exchanged in the years 2023
and 2024. According to the appellant, the same amounts to a
Material Adverse Effect (MAE) under the CCD Agreement.
17. In the circumstances, the Fund exercised its rights under
Clause 18.4(A)(a) of the CCD Agreement and on 03.04.2004,
addressed a letter to the Promoter Shareholders as well as to
BPCL, calling upon them to jointly and severally purchase the
equity shares in question and 6729 CCDs for an aggregate value of
₹13,24,77,22,608/- within 60 days from the issuance of the said
notice (sale notice). The appellant claims that the Plaintiffs were
required to purchase the investor securities at a price, which would
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provide an IRR (Internal Rate of Return) of 22% p.a. from the date
of investment till the date of completion of the sale.
18. BPIIPL responded to the said notice by a letter dated
16.09.2024 contending that the sale notice was barred by
limitation.
19. On 11.12.2024, the appellant issued a notice under Section
21 of the A&C Act invoking the Arbitration Agreement under the
CCD Agreement and nominating Justice (retired) R.V. Raveendran,
a former Judge of the Supreme Court of India, as an Arbitrator.
The appellant also called upon Plaintiffs (BPCL and Promoter
Shareholders) to jointly nominate an Arbitrator within a period of
ten days of receiving the said notice.
20. BPCL responded to the said notice inter alia stating that the
claims of the appellant LTIIPAL under the CCD Agreement were
barred by limitation and the BPCL and the Promoter Shareholders
stand discharged of their obligation under the CCD Agreement.
BPCL did not respond to the notice to appoint an arbitrator by
stating that the same did not merit a response.
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21. On 15.10.2024, the appellant filed an application under
Section 9 of the A&C Act, being Com.A.No.355/2024, inter alia
seeking interim measures of protection. Pursuant to this
application, the learned Commercial Court passed an ad-interim
ex-parte order inter alia restraining the Promoter Shareholders from
dealing with the shares of BPCL.
22. Thereafter, on 10.01.2025, the appellant filed a request for
arbitration with the LCIA against the Plaintiffs (BPCL, BPIIPL, Mr.
Satyanarayan Agarwal, Ms. Umah Agarwal, Mr. Siddhartha
Agarwal and Mr. Vivek Agarwal).
23. The LCIA registered the said request for arbitration and
called upon the Plaintiffs to respond to the said request. It also
called upon the parties to make an advance against payment of
costs.
24. On 15.01.2025, the learned Commercial Court passed an
order under Section 9 of the A&C Act, granting the following interim
measures of protection in favour of the appellant.
"(a) BPCL and the Promoter Shareholders or anybody
claiming through them are restrained from alienating or
encumbering 45,05,282 shares which have been
pledged to Appellant to secure their obligations under
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the CCD Subscription and Securities Holders
Agreement dated 21 June 2013 (CCD Agreement).
(b) BPCL and the Promoter Shareholders are directed
to disclose their assets and properties. to the extent of
INR 1462.59 crores (the claim amount in the Section 9
Application) by filing an affidavit within a period of four
weeks from the date of pronouncement of the Section 9
Order.
(c) While BPCL is restrained from alienating or
encumbering the properties as specified in Schedule
A(I) and A(III) to the Section 9 Application, Appellant
No. 1 is restrained from alienating or encumbering the
properties described in Schedule B(II) to the Section 9
Application, and Appellant Nos. 2 to 5 are restrained
from alienating or encumbering the properties described
in Schedules C to F to the Section 9 Application.
(d) BPCL and the Promoter Shareholders are further
directed to furnish security to the extent of INR 1,462.59
crores, upon the deposit of which, the above-mentioned
interim reliefs shall stand vacated.
(e) Further, liberty is granted to Appellant to seek reliefs
in respect of any other properties of BPCL and the
Promoter Shareholders which can be traced by
Appellant or any other property which may be disclosed
by BPCL and Promoter Shareholders, by way of
application under Section 9 of the Arbitration Act".
25. The Promoter Shareholders appealed against the order
dated 15.01.2025 by filing an appeal being Com.A.No.70/2025, in
this Court. The said appeal is pending.
26. Thereafter, on 07.02.2025, the Plaintiffs sent a letter to the
LCIA stating that they did not agree to arbitration under the aegis of
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the LCIA and had never consented for such an arbitration. They
also claimed that there was no underlying cause of action as the
dispute was barred by limitation and they were discharged of the
obligations under the CCD Agreement.
27. The appellant issued a letter dated 20.02.2025 disputing the
contentions raised by the Plaintiffs in their response dated
07.02.2025 to the LCIA. Thereafter, BPCL issued a letter dated
26.02.2025 seeking deferment of the arbitration proceedings. This
request was also contested by the appellant. On 05.03.2025, LCIA
referred the matter to the LCIA Court for its decision on constitution
of the Arbitral Tribunal.
28. Following the same, on 11.03.2025, the plaintiffs filed
separate commercial suits, being Com.OS.No.384/2025 and
Com.OS.No.385/2025, inter alia seeking a declaration that the
arbitration clause under the CCD Agreement (Article 16) was null
and void and further seeking an order restraining the appellant from
proceeding with the arbitration under the aegis of the LCIA.
29. On 18.03.2025, the LCIA decided to proceed with the
appointment of the arbitrator for constitution of the Arbitral Tribunal.
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30. The Plaintiffs failed to make any payment to the LCIA
towards their share of advance payment of costs. Therefore, on
21.03.2025, the appellant proceeded to make payments of the
plaintiffs' share of the advance cost.
31. On 27.03.2025, the LCIA appointed Justice (retired) R.V.
Raveendran and Dr. Justice (retired) D.Y. Chandrachood as co-
arbitrators and on 02.04.2025 called upon them to appoint a third
arbitrator. Thereafter the said arbitrators sought an extension of
time for selecting the third arbitrator. The said request was
conveyed to the parties on 14.04.2025 by LCIA and the time was
extended till 30.04.2025.
32. In the meantime, the appellant filed an application under
Order VII Rule 11 CPC before the learned Commercial Court,
challenging the maintainability of the commercial suits, inter alia, on
the ground that the same was not maintainable under Section 5 of
the A&C Act. The Plaintiffs also filed applications seeking interim
orders restraining the appellant from proceeding with the
arbitration.
33. The learned Commercial Court passed the impugned orders
restraining the appellant or any other person acting on its behalf, in
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any manner pursuant to the request for arbitration lodged with the
LCIA and/or instituting a proceeding or continuing with any
arbitration proceeding against BPCL and Promoter Shareholders
as per the LCIA Rules (LCIA Arbitration Rules, 2020) under Article
16 of the CCD Agreement.
34. The appellant appealed the said decision before this Court.
On 29.07.2025 this Court passed an ad interim order staying the
impugned order. And, also issued directions for completion of the
pleadings and listed the appeals on 18.08.2025. On the said date,
the learned counsel appearing for BPCL sought an adjournment on
account of his personal difficulty and accordingly the appeals were
listed on 02.09.2025. In the meantime, BPCL preferred a Special
Leave Petition before the Supreme Court [Special Leave to Appeal
(C) No.21709/2025] impugning the ad-interim order dated
29.07.2025. The said petition was disposed of on 25.08.2025 with
direction to dispose of the appeals.
THE DISPUTE
35. The dispute between the parties is centered around the
arbitration agreement embodied in Article 16 of the CCD
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Agreement. Articles 16 and 26 of the CCD Agreement are set out
below.
"16. ARBITRATION
16.1. If there is any dispute, claim or controversy arising
from, related to or in connection with this Agreement, or
the breach, termination or invalidity hereof, the Parties
shall first attempt to resolve such dispute, controversy
or claim through good faith consultations. If the dispute,
claim or controversy is not resolved through good faith
consultations within thirty (30) days after a Party has
delivered a written notice to another Party requesting
the commencement of consultation, then the dispute,
claim or controversy shall be finally settled under the
London Court of International Arbitration India Rules
then in effect and as may be amended by the rest of this
Clause 16.1 (the "Rules"). There shall be three
arbitrators of whom the Investor shall nominate one (1)
and the Promoter Shareholders and the Company shall
jointly nominate one (1) in accordance with the Rules.
The two named arbitrators shall nominate the third
arbitrator within thirty (30) days of the nomination of the
second arbitrator. If any arbitrator has not been named
(or, in respect of the third arbitrators, the two named
arbitrators have been unable to agree a nomination)
within the time limits specified in the Rules, such
appointment shall be made in accordance with the
Rules upon the written request of either Party within
thirty (30) days of such request.
16.2. The arbitration shall be held and the award shall
be rendered in Mumbai or Bengaluru as may be
decided by the Investor in its sole discretion. The
arbitration proceeding shall be conducted and the award
shall be rendered in the English language. Each Party
shall cooperate in good faith to expedite (to the
maximum extent practicable) the conduct of any arbitral
proceedings commenced under this Agreement.
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16.3. The arbitral tribunal appointed under Clause 16.1
shall in its award determine the costs of the arbitration
(including the fees and expenses of the arbitrators, the
administrative expenses, the fees and expenses of any
experts appointed by the arbitration panel, and the
reasonable legal and other costs incurred by the parties
for the arbitration) and decide which of the parties shall
bear them or in what proportion they shall be borne by
the parties on the general principle that costs should
reflect the parties' relative success and failure in the
award or arbitration.
16.4. The award shall be final and binding upon the
Parties, and shall be the exclusive remedy between the
Parties regarding any claims, counterclaims, issues, or
accountings presented to the arbitral tribunal, Judgment
upon the award may be entered in any court having
jurisdiction thereof, and for purposes of enforcing any
arbitral award made hereunder, each Party irrevocably
submits to the jurisdiction of any court sitting where any
of such Party's material assets may be found.
16.5. Subject to the award of the arbitration tribunal,
neither the existence of any dispute or claim nor the fact
that any arbitration is pending hereunder shall relieve
any of the Parties of their respective obligations under
this Agreement. Subject to any award of the arbitration
tribunal, the pendency of a dispute or claim in any
arbitration proceeding shall not affect the performance
of the obligations under this Agreement.
** ** ** **
26 GOVERNING LAW AND JURISDICTION
26.1. This agreement is governed in all respects by the
laws of India.
26.2. Subject to Clause 16.1, each Party submits to the
non exclusive jurisdiction of the courts of Bengaluru."
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36. It is the case of the Plaintiffs that in terms of Article 16 of the
CCD Agreement (the arbitration clause), arbitration is required to
be conducted under the London Court of International Arbitration
India Rules which were in effect at the time when the parties had
entered into the CCD Agreement. They contend that the arbitration
was required to be conducted under aegis of London Court of
International Arbitration - India [LCIA India], which was set up as a
domestic Arbitral Institution. LCIA India began its operations in New
Delhi in the year 2009 and the Plaintiffs claim that it was
operationally independent of the LCIA as its operations were
managed under an Indian company namely, London Court of
International Arbitration (India) Private Company. The Plaintiffs
state that in February 2016, LCIA London decided to end its India
operations through the LCIA India. Thus LCIA India ceased to exist
as an arbitral institution. They claim that there is no agreement
between the parties for the arbitration to be administered by an
institution outside India.
37. The Plaintiffs also contend that there is a serious likelihood of
conflict of laws as to which law governing the administration of
arbitration would apply.
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38. In addition to claiming that Article 16 of the CCD Agreement
stands frustrated and no arbitration agreement exists between the
parties to the CCD Agreement, the Plaintiffs also claim that the
arbitration proceedings conducted by the LCIA are vexatious and
oppressive.
IMPUGNED ORDERS
39. Based on the rival contentions, the learned Commercial
Court had framed the following points for consideration in Para 5:
"5. Based on the contentions of the respective parties,
submissions made by the learned Advocates for both
parties, I formulate the following Points for my
consideration:-
(1) Whether the plaintiff proves the prima facie case?
(2) Whether plaintiff proves that the balance of
convenience lies in favour of the plaintiff company?
(3) Whether plaintiff proves that if the TI is not granted
the plaintiff company would suffer from irreparable loss?
(4) Whether the Plaintiff entitled for relief of temporary
injunction as prayed for?"
40. The learned Commercial Court referred to Article 16.1 of the
CCD Agreement as well as decisions of the Supreme Court in
S.B.P. and Co. v. Patel Engineering Limited and Others: (2005)
8 SCC 618; Balasore Alloys Ltd., v. Medima LLC: 2020 SCC
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Online Cal 1699; World Sport Group (Mauritius) Ltd. v. MSM
Satellite (Singapore) Pte. Ltd.: (2014) 11 SCC 639; Modi
Entertainment Network and anr. v. W.S.G Cricket Pte Ltd. :
(2003) 4 SCC 341; McDonald's India Private Limited v. Vikram
Bakshi and others : 2016 SCC Online Del 3949; Dr. Bina Modi
v. Lalit Kumar Modi and Ors : 2020 SCC Online Del 1678 and
Devi Resources Limited v. Ambo Exports Limited : 2019 SCC
Online Cal 774. The learned Commercial Court held that an anti
suit injunction would be granted if the court is satisfied that
a) defendant against whom injunction is sought, is amenable to
personal jurisdiction; and b) if the injunction is declined that the
ends of justice would be defeated and injustice would be
perpetuated. The Court observed that the principle of Comity of
Courts is required to be borne in mind, while considering whether
to grant an anti-suit injunction.
41. The learned Commercial Court accepted the contention that
the parties never intended that disputes arising from the CCD
Agreement would be subject to arbitration administered by the
LCIA London and held as under:
"36. Since, the parties never agreed for arbitration
under the AEGIS of the LCIA, London and defendant
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have given effect by unilateral amendment to eh LCIA
India rules. So the defendant is estopped from
institution of arbitration proceedings administered by
the LCIA London. Hence, the plaintiff is proved a
prima-facie case and balance of convenience also lies
in favour of the plaintiff. If the injunction order is not
granted the plaintiff will put into irreparable losses and
hardship. However, the defendant has a right to
approach the Hon'ble High Court of Karnataka under
Section 11 of Arbitration and Conciliation Act, for
seeking appointment of arbitrators. Hence, the plaintiff
is entitle the relief of temporary injunction as prayed in
this application. Hence, I answer these issues are
Affirmative."
SUBMISSIONS
42. Mr. Dhyan Chinnappa, learned Senior Counsel appearing for
the appellant advanced submissions on three fronts. First, he
submitted that the suits are not maintainable by virtue of Section 5
of the A&C Act. He submitted that although the appellant had also
filed an application under Order VII Rule 11 of the CPC on the
aforesaid grounds, the said application has not been decided. But
some of the submissions made in support of the said application
are noted in the interim order.
43. Second, he submitted that anti arbitration injunction could be
granted only in rare cases of certain foreign seated arbitrations if
the court is satisfied that the proceedings are vexatious and
oppressive. He contended that in the present case, apart from
- 24 -
stating that the arbitration costs are higher, the plaintiffs had not
established any case of the arbitration being administered by the
LCIA as being vexatious or oppressive. He referred to the schedule
of fees and submitted that the Arbitrator's fee was in the range of
approximately ₹71,000/- to ₹71,526/- per hour, which would
translate to fees within the range of ₹1,00,000/- to ₹3,00,000/- for a
three hour sitting. Given the stature of the arbitrators, the said fee
could not be considered as oppressive. Third, he submitted that
plain reading of the arbitration clause indicates the arbitration
would be conducted under the Rules of LCIA India which are effect
at the time of reference. He submitted that the expression "then in
effect" would necessarily be the Rules as were in force at the time
of invocation.
44. Mr. Nandakumar, learned Senior Counsel appearing for the
respondents countered the said submissions. He also referred to
Article 16 of the CCD Agreement and earnestly contended that
parties have never agreed to the arbitration being administered by
LCIA, London. He contended that since the parties were Indian and
the Registered office of BPCL, which had issued the securities, is
in Bangalore; the parties had chosen LCIA India as an Indian
arbitral institution. He contended that LCIA London and LCIA India
- 25 -
were distinct entities and were operationally independent. He
contended that the LCIA published LCIA India Rules, 2016 (London
Amendment) amending the Rules of LCIA by providing that if
arbitration agreement between the parties had referred to
arbitration under the Rules of LCIA India, the same would be
deemed to be LCIA Arbitration Rules 2020. He submitted that the
parties could have never foreseen the substitution of one set of
arbitral rules by another. He also pointed out that the learned
Commercial Court had accepted the said contention.
45. He also referred to the decision of the United States District
Court for Eastern District, Louisiana, whereby the court held that
parties could not be compelled to arbitrate at Dubai International
Arbitration Center (DIAC) without their consent (Baker Hughes
Saudi Arabia Company Limited v. Dynamic Industries Inc and
others : Civil Action No.2: 23-cv-1396).
46. He referred to the decision in the case of Newton
Engineering and Chemicals Ltd. v. Indian Oil Corporation Ltd.,
& others: (2013) SCC 44 and on the strength of the said decision
submitted that since the parties had not agreed to arbitration to be
administered by LCIA London, the arbitration agreement stood
- 26 -
frustrated. He also mentioned various decisions as were noted in
the impugned order and submitted that, a) Civil Courts are
empowered to issue injunctions to restrain the parties from
participating in or proceeding with arbitration proceedings in cases
where an arbitration agreement is entered into by fraud; b) the
arbitration agreement is null and void, inoperative and incapable of
being performed; or c) the continuation of such arbitration
proceedings would be a vexations or oppressive or where the
subject matter of disputes referred was incapable of being
arbitrated.
47. He submitted that the appellant is estopped from pursuing
the arbitration proceedings as the appellant had not mentioned
LCIA London in its notice invoking arbitration. He pointed out that
notice under Section 21 of the A&C Act was issued for arbitration
under the A&C Act and therefore the same could not be
commenced under the aegis of LCIA London. He also submitted
that LCIA Rules 2020 also provide for emergency arbitration.
However, the appellant has chosen to file an application under
Section 9 of the A&C Act. This also indicated that the appellant did
not propose that the arbitration be conducted under the aegis of
- 27 -
LCIA London. And, for this reason as well, the appellant is
estopped from commencing the arbitration proceedings.
48. This court also pointedly asked Mr. Nandakumar whether
there were any grounds, apart from the issue as to costs, for
contending that arbitration under the aegis of LCIA London would
be vexatious or oppressive. Mr. Nandakumar responded by
submitting that the arbitration would be vexatious, as the Rules
under which arbitration is to be conducted would be subject to laws
in UK. He contended that the parties had not agreed to the
arbitration being conducted under any other law. However, he was
unable to dispute the lex arbitri is the A&C Act as the seat of
arbitration is in India. Thus, the arbitration is required to be
conducted under the A&C Act.
49. He however referred to clause 16.5 of the LCIA Rules 2020
and contended that the said Rules are subject to laws of UK.
REASONS AND CONCLUSION
50. As noted, at the outset, the appellant's challenge to the
impugned order is essentially on three fronts. First, that
interference with the arbitral proceedings are not permissible and
- 28 -
barred by Section 5 of the A&C Act. Second that LCIA Rules 2020
are applicable by virtue of the Rules incorporated by reference in
the arbitration agreement (Article 16 of the CCD Agreement) being
amended. And, third that the arbitration proceedings are neither
vexatious nor oppressive. Thus, the grounds on which the
impugned interim order has been passed are unsustainable.
Re-maintainability of the suit
51. It is specifically averred in the plaints that the arbitration
under the aegis of LCIA London is not maintainable as the parties
had not agreed to refer their disputes to arbitration administered by
the said arbitral institution. The plaintiffs claim that Article 16 of the
CCD Agreement is rendered void and the arbitration agreement
stood frustrated on LCIA India ceasing to operate. Extracts of the
relevant averments made in plaint are reproduced below:
"32. By way of the 2016 London Amendment, the LCIA,
London has suo moto, without seeking the consent of
any of the parties, substituted a domestic arbitration
procedure with a foreign arbitration procedure which is:
(a) orders of magnitude more cost ineffective (b) lacking
in necessary physical infrastructural support; (c) not
contemplated by the parties to the CCD Agreement and
the Deed of Adherence.
33. The arbitral institution initially contemplated by the
parties was an Indian company called LCIA India
Private Limited. The LCIA in London is an entirely
different not-for-profit company. There is no process
- 29 -
known to law by which one arbitral institution may be
substituted for another without the clear consent of the
parties to the arbitration clause.
*** *** *** ***
Clause 16 of the CCD Agreement stands prima facie
frustrated - no arbitration agreement exists
42. It is humbly submitted that as Clause 16 of the CCD
Agreement is prima facie frustrated, Clause 16 of the
CCD Agreement has become void, and as such no
arbitration agreement exists between the parties to the
CCD Agreement. When LCIA India Private Limited
ceased to operate, the arbitration agreement stood
frustrated."
52. It is relevant to note that the contention that the arbitration
agreement stands frustrated - which is one of the main grounds on
which the commercial suit is founded - has not been accepted by
the learned Commercial Court. Whilst the impugned order
restrains the appellant from continuing with the arbitration
proceedings under the LCIA Rules; it does not proscribe the parties
from taking recourse to arbitration for resolution of the disputes.
53. Mr. Nandakumar, learned counsel appearing for the plaintiffs
had clarified during the course of hearing that the Plaintiffs do not
dispute that there is no arbitration agreement. However, they
dispute that there is any agreement for the arbitration to be
administered by LCIA London. He also submitted that it is open for
- 30 -
the appellant to approach the court under Section 11 of the A&C
Act for appointment of the arbitral tribunal.
54. According to the Plaintiffs the arbitral tribunal constituted by
appointment of an arbitrator (on failure of the plaintiffs to do so) will
not have the jurisdiction to enter upon the reference.
55. The Plaintiffs refute that the commercial suits instituted by
them are not maintainable. They rely on Section 9 of the Code of
Civil Procedure, 1908 [the CPC], which expressly provides that:
"the courts shall (subject to the provisions herein
contained) have jurisdiction to try all suits of a civil nature
excepting suits of which their cognizance is either
expressly or impliedly barred".
56. There is no cavil that the civil courts have jurisdiction to try all
suits of a civil nature and the exclusion of such jurisdiction cannot
be readily inferred. Thus, unless the jurisdiction in respect of
certain actions is expressly or impliedly barred, the courts would
have the jurisdiction to try those suits as well. However, the A&C
Act does contain a specific provision, which proscribes a judicial
authority from intervening in arbitral proceedings under Part-I of the
A&C Act, except to the extent as provided under Part-I of the Act.
- 31 -
It is relevant to refer to Section 5 of the A&C Act, which reads as
under:
"5. Extent of judicial intervention.--
Notwithstanding anything contained in any other
law for the time being in force, in matters
governed by this Part, no judicial authority shall
intervene except where so provided in this Part.
57. Section 16 of the A&C Act expressly empowers the Arbitral
Tribunal to rule on its own jurisdiction. It recognizes the rule of
kompetenz kompetenz. All pleas that an Arbitral Tribunal does not
have the jurisdiction are required to be raised before the Arbitral
Tribunal. Thus, even in cases where the issue of existence or
validity of an arbitration agreement is sought to be raised by a
party, the same is required to be raised before the Arbitral Tribunal
in the first instance.
58. In the present case, as noted above, the plaintiffs do no
pursue their challenge to the existence or validity of the arbitration
agreement. Thus, clearly any challenge as to jurisdiction of the
Arbitral Tribunal either in regard to the merits or the procedure is
required to be raised before the Arbitral Tribunal.
59. In terms of Section 5 of the A&C Act, interference by any
judicial authority - which includes a court - in arbitral proceedings
- 32 -
governed by Part-I of the A&C Act is barred except to the extent as
provided under Part I of the A&C Act.
60. It is open for the plaintiff to raise a challenge to the
jurisdiction of the Tribunal under Section 16 of the A&C Act if it
desires to pursue the said challenge. If the said challenge is made
and is upheld, the appellant would have a right of an appeal under
Section 37 of the A&C Act [IFFCO vs Bhadra Products: (2018) 2
SCC 534]. In certain circumstances, the decision regarding
jurisdiction would amount to an award as defined under Section
2(1)(c) of the A&C Act. In such circumstances, an application to set
aside the arbitral award would lie under Section 34 of the A&C Act.
61. In cases where the challenge is raised on the ground that
there are justifiable doubts as to independence or impartiality of the
arbitrators, the same is also required to be raised in the first
instance before the Arbitral Tribunal in terms of Section 13 of the
A&C Act. If such a challenge is rejected, the parties raising such
challenge have to await the delivery of the arbitral award and
pursue a challenge under Section 34 of the A&C Act. However, if
an arbitrator is ineligible to act under Section 12(5) of the A&C Act
or is de jure or de facto unable to perform his functions, a party has
- 33 -
recourse under Section 14 of the A&C of the Act for termination of
the mandate of the Arbitrator without following the procedure under
Section 13 of the A&C Act. [ see HRD Corporation (Marcus Oil
and Chemical Division) v. GAIL (India) Ltd.: (2018) 12 SCC 471.
62. Except as stated above, it would be impermissible for the
courts to interfere with the arbitral proceedings. Thus a suit to
restrain arbitral proceedings under the A&C Act would not lie. This
is because by virtue of Section 5 of the A&C Act, interference in
arbitral proceedings governed by Part-I of the A&C Act, is
expressly barred.
63. It is relevant to refer to the decision of the three Judges
Bench of the Supreme Court in Kvaerner Cementation India
Limited v. Bajranglal Agarwal and Another, (2012) 5 SCC 214.
In that case, a suit was filed before the Civil Court, Bombay
seeking a declaration that there exists an arbitration clause. The
learned civil court had vacated the interim order of injunction
granted earlier restraining the parties from proceeding with the
arbitration proceedings. The learned Single Judge of the Bombay
High Court had declined to interfere with the order of the civil court
vacating the injunction order. A special leave petition was
- 34 -
preferred against the said order and in those proceedings, the
Supreme Court held as under:
"2. Mr Dave, the learned Senior Counsel
appearing for the petitioner contends that the
jurisdiction of the civil court need not be inferentially
held to be ousted unless any statute on the face of it
excludes the same and judged from that angle when
a party assails the existence of an arbitration
agreement, which would confer jurisdiction on an
Arbitral Tribunal, the court committed error in not
granting an order of injunction.
3. There cannot be any dispute that in the
absence of any arbitration clause in the agreement,
no dispute could be referred for arbitration to an
Arbitral Tribunal. But, bearing in mind the very object
with which the Arbitration and Conciliation Act, 1996
has been enacted and the provisions thereof
contained in Section 16 conferring the power on the
Arbitral Tribunal to rule on its own jurisdiction,
including ruling on any objection with respect to
existence or validity of the arbitration agreement, we
have no doubt in our mind that the civil court cannot
have jurisdiction to go into that question.
4. A bare reading of Section 16 makes it explicitly
clear that the Arbitral Tribunal has the power to rule
on its own jurisdiction even when any objection with
respect to existence or validity of the arbitration
agreement is raised, and a conjoint reading of sub-
sections (2), (4) and (6) of Section 16 would make it
clear that such a decision would be amenable to be
assailed within the ambit of Section 34 of the Act.
5. In this view of the matter, we see no infirmity in
the impugned order so as to be interfered with by this
Court. The petitioner, who is a party to the arbitral
proceedings may raise the question of jurisdiction of
the arbitrator as well as the objection on the ground
- 35 -
of non-existence of any arbitration agreement in the
so-called dispute in question, and on such an
objection being raised, the arbitrator would do well in
disposing of the same as a preliminary issue so that it
may not be necessary to go into the entire gamut of
arbitration proceedings."
(emphasis added)
64. In a subsequent decision in National Aluminium Company
Limited v. Subhash Infra Engineers Private Limited and
Another: (2020) 15 SCC 557, the appellant had invoked the
arbitration clause and had called upon the respondent to select an
Arbitrator from a panel of three names sent by it. The respondent
had raised a challenge as to the existence of arbitration agreement.
It claimed that no binding contract had come into existence
between the parties and thus, the disputes could not be referred to
arbitration. The appellant, proceeded to appoint the Sole Arbitrator.
The respondent filed a suit before the civil court (Senior Civil
Judge, Gurgaon), inter alia, praying for a decree of declaration that
the appointment of a sole arbitrator was null and void. It also
sought an injunction restraining the Arbitrator, arrayed as
defendant No.2 from proceeding with the arbitration. The trial court
declined to grant an interim injunction. However, the Appellate
Court (Additional District Judge, Gurgaon) allowed the appeal and
- 36 -
had passed an order restraining the Arbitrator from proceeding
further. The appellant impugned the appellate order before the
High Court of Punjab and Haryana by filing a Civil Revision
Petition, which was dismissed by an order dated 22.10.2016. The
said order was carried in appeal before the Supreme Court. In the
aforesaid context, the Supreme Court held as under:
"12. It is a case of the appellant Company that
even if the first respondent disputes the jurisdiction
of the arbitrator, it is open for the first respondent to
move an application before the arbitrator under
Section 16 of the Act, but at the same time, the suit
filed by the first respondent, for declaration and
injunction is not maintainable.
13. In the judgment of this Court, in Kvaerner
Cementation (India) Ltd. v. Bajranglal Agarwal
[Kvaerner Cementation (India) Ltd. v. Bajranglal
Agarwal, (2012) 5 SCC 214] , this Court has
examined the similar issue and held that any
objection with respect to existence or validity of the
arbitration agreement, can be raised only by way of
an application under Section 16 of the Act and the
civil court cannot have jurisdiction to go into such
question.
14. Having regard to aforesaid judgment of this
Court and various communications between the
parties, we are in agreement with the submission
made by the learned Senior Counsel for the
appellant that, if the first respondent wants to raise
an objection with regard to existence or validity of
the arbitration agreement, it is open for the first
respondent to move an application before the
arbitrator, but with such plea, he cannot maintain a
suit for declaration and injunction. Though the trial
- 37 -
court rightly rejected the interim injunction sought for
by the first respondent, the same is erroneously
reversed by the learned Additional District Judge and
such order is confirmed by the High Court, by the
impugned order [NALCO Ltd. v. Subhash
Infraengineers (P) Ltd., 2016 SCC OnLine P&H
19317] .
15. As we are of the view that the order passed by
the Additional District Judge and the High Court are
not in conformity with the law on the subject and are
contrary to judgment of this Court as referred above,
the impugned order is liable to be set aside by
vacating the injunction orders."
65. Mr. Nandakumar contended that the decisions are no longer
good law. He contended that the decision in the case of Kvaerner
Cementation (supra) was implicitly overruled and the decision in
National Aluminium Company Limited (supra) had followed the
decision in Kvaerner Cementation. He supported the said
contention by relying the decision of the learned Single Judge of
the Calcutta High Court in Balasore Alloys Limited v. Medima
LLC: 2020 SCC OnLine Cal 1699 and drew attention of this Court
to the following observations:
"In light of the majority opinion rendered in
SBP & Co. (supra), it may therefore be interpreted
that the dictum in Kvaerner Cementation (supra),
relied on by Mr. Mookherjee, learned senior
advocate, stands implicitly overruled for two
reasons: firstly, the case was reportedly decided
on March 21, 2001, i.e. prior to the ruling in SBP &
- 38 -
Co. (supra) and secondly, it was decided by a
three Judges Bench of the Supreme Court. I hold
as such."
66. As is apparent from the above, the observations have been
made on the strength of the decision of the Constitution Bench of
the Supreme Court in SBP and Co. v. Patel Engineering: (2005)
8 SCC 618. Mr. Nandakumar neither citer nor referred to the said
decision. He rested his contention that the decision of the three
Judges Bench of the Supreme Court in Kvaerner Cementation
(supra) stood implicitly overruled solely on the observations of the
learned Single Judge of the Calcutta High Court.
67. We are, respectfully, unable to concur with the said view for
more than one reason. A plain reading of the decision of the
Supreme Court in SBP Co. (supra) indicates that it does not
support the proposition that the courts can interdict arbitral
proceedings. On the contrary, the said decision supports the view
that no interference with the arbitration proceedings is permissible
once an arbitration has commenced without reference to the court.
In the said case, the principal question that fell for consideration of
the court was regarding the nature and function of the Chief Justice
or his designate under Section 11 of the A&C Act. The Constitution
- 39 -
Bench of the Supreme Court in Konkan Railway Corporation Ltd.
& Anr v. Rani Construction Pvt. Ltd.: (2002) 2 SCC 388 had
taken a view that function of the Chief Justice or his designate
under Section 11 of the A&C Act was a pure administrative
function, which is neither judicial nor quasi judicial. Thus, the Chief
Justice or his nominee could not decide any contentious issue
between the parties. The said view was a subject matter of
contestation before the Supreme Court. In the aforesaid context,
the Supreme Court explained as under:
"12. Section 16 of the Act only makes explicit
what is even otherwise implicit, namely, that the
arbitral tribunal constituted under the Act has the
jurisdiction to rule on its own jurisdiction, including
ruling on objections with respect to the existence or
validity of the arbitration agreement. Sub-section (1)
also directs that an arbitration clause which forms
part of a contract shall be treated as an agreement
independent of the other terms of the contract. It
also clarifies that a decision by the arbitral tribunal
that the contract is null and void shall not entail ipso
jure the invalidity of the arbitration clause. Sub-
section (2) of Section 16 enjoins that a party
wanting to raise a plea that the arbitral tribunal does
not have jurisdiction, has to raise that objection not
later than the submission of the statement of
defence, and that the party shall not be precluded
from raising the plea of jurisdiction merely because
he has appointed or participated in the appointment
of an arbitrator. Sub-section (3) lays down that a
plea that the arbitral tribunal is exceeding the scope
of its authority, shall be raised as soon as the matter
alleged to be beyond the scope of its authority is
- 40 -
raised during the arbitral proceedings. When the
Tribunal decides these two questions, namely, the
question of jurisdiction and the question of
exceeding the scope of Page 1804 authority or
either of them, the same is open to immediate
challenge in an appeal, when the objection is upheld
and only in an appeal against the final award, when
the objection is overruled. Sub-section (5) enjoins
that if the arbitral tribunal overrules the objections
under sub-section (2) or sub-section (3), it should
continue with the arbitral proceedings and make an
arbitral award. Sub-section (6) provides that a party
aggrieved by such an arbitral award overruling the
plea on lack of jurisdiction and the exceeding of the
scope of authority, may make an application on
these grounds for setting aside the award in
accordance with Section 34 of the Act. The
question, in the context of Sub-Section (7) of
Section 11 is, what is the scope of the right
conferred on the arbitral tribunal to rule upon its own
jurisdiction and the existence of the arbitration
clause, envisaged by Section 16(1), once the Chief
Justice or the person designated by him had
appointed an arbitrator after satisfying himself that
the conditions for the exercise of power to appoint
an arbitrator are present in the case. Prima facie, it
would be difficult to say that in spite of the finality
conferred by sub-Section (7) of Section 11 of the
Act, to such a decision of the Chief Justice, the
arbitral tribunal can still go behind that decision and
rule on its own jurisdiction or on the existence of an
arbitration clause. It also appears to us to be
incongruous to say that after the Chief Justice had
appointed an arbitral tribunal, the arbitral tribunal
can turn round and say that the Chief Justice had no
jurisdiction or authority to appoint the tribunal, the
very creature brought into existence by the exercise
of power by its creator, the Chief Justice. The
argument of learned Senior Counsel, Mr. K.K.
Venugopal that Section 16 has full play only when
an arbitral tribunal is constituted without intervention
under Section 11(6) of the Act, is one way of
- 41 -
reconciling that provision with Section 16 of the Act,
especially in the context of sub- section (7) thereof.
We are inclined to the view that the decision of the
Chief Justice on the issue of jurisdiction and the
existence of a valid arbitration agreement would be
binding on the parties when the matter goes to the
arbitral tribunal and at subsequent stages of the
proceeding except in an appeal in the Supreme
Court in the case of the decision being by the Chief
Justice of the High Court or by a Judge of the High
Court designated by him.
18. It is true that the power under Section 11(6)
of the Act is not conferred on the Supreme Court or
on the High Court, but it is conferred on the Chief
Justice of India or the Chief Justice of the High
Court. One possible reason for specifying the
authority as the Chief Justice, could be that if it were
merely the conferment of the power on the High
Court, or the Supreme Court, the matter would be
governed by the normal procedure of that Court,
including the right of appeal and the Parliament
obviously wanted to avoid that situation, since one
of the objects was to restrict the interference by
Courts in the arbitral process. Therefore, the power
was conferred on the highest judicial authority in the
country and in the State in their capacities as Chief
Justices. They have been conferred the power or
the right to pass an order contemplated by Section
11 of the Act. We have already seen that it is not
possible to envisage that the power is conferred on
the Chief Justice as persona designata. Therefore,
the fact that the power is conferred on the Chief
Justice, and not on the court presided over by him is
not sufficient to hold that the power thus conferred is
merely an administrative power and is not a judicial
power.
19. It is also not possible to accept the argument
that there is an exclusive conferment of jurisdiction
on the arbitral tribunal, to decide on the existence or
validity of the arbitration agreement. Section 8 of the
- 42 -
Act contemplates a judicial authority before which
an action is brought in a matter which is the subject
of an arbitration agreement, on the terms specified
therein, to refer the dispute to arbitration. A judicial
authority as such is not defined in the Act. It would
certainly include the court as defined in Section 2(e)
of the Act and would also, in our opinion, include
other courts and may even include a special tribunal
like the Consumer Forum (See Fair Air Engineers
(P) Ltd. and Anr. v. N.K. Modi.) When the
defendant to an action before a judicial authority
raises the plea that there is an arbitration agreement
and the subject matter of the claim is covered by the
agreement and the plaintiff or the person who has
approached the judicial authority for relief, Page
1809 disputes the same, the judicial authority, in the
absence of any restriction in the Act, has
necessarily to decide whether, in fact, there is in
existence a valid arbitration agreement and whether
the dispute that is sought to be raised before it, is
covered by the arbitration clause. It is difficult to
contemplate that the judicial authority has also to
act mechanically or has merely to see the original
arbitration agreement produced before it, and
mechanically refer the parties to an arbitration.
Similarly, Section 9 enables a Court, obviously, as
defined in the Act, when approached by a party
before the commencement of an arbitral
proceeding, to grant interim relief as contemplated
by the Section. When a party seeks an interim relief
asserting that there was a dispute liable to be
arbitrated upon in terms of the Act, and the opposite
party disputes the existence of an arbitration
agreement as defined in the Act or raises a plea that
the dispute involved was not covered by the
arbitration clause, or that the Court which was
approached had no jurisdiction to pass any order in
terms of Section 9 of the Act, that Court has
necessarily to decide whether it has jurisdiction,
whether there is an arbitration agreement which is
valid in law and whether the dispute sought to be
raised is covered by that agreement. There is no
- 43 -
indication in the Act that the powers of the Court are
curtailed on these aspects. On the other hand,
Section 9 insists that once approached in that
behalf, "the Court shall have the same power for
making orders as it has for the purpose of and in
relation to any proceeding before it". Surely, when a
matter is entrusted to a Civil Court in the ordinary
hierarchy of Courts without anything more, the
procedure of that Court would govern the
adjudication [See R.M.A.R.A. Adaikappa Chettiar
and Anr. v. R. Chandrasekhara Thevar (AIR 1948
P.C. 12)]
20. Section 16 is said to be the recognition of the
principle of Kompetenz - Kompetenz. The fact that
the arbitral tribunal has the competence to rule on
its own jurisdiction and to define the contours of its
jurisdiction, only means that when such issues arise
before it, the Tribunal can and possibly, ought to
decide them. This can happen when the parties
have gone to the arbitral tribunal without recourse to
Section 8 or 11 of the Act. But where the
jurisdictional issues are decided under these
Sections, before a reference is made, Section 16
cannot be held to empower the arbitral tribunal to
ignore the decision given by the judicial authority or
the Chief Justice before the reference to it was
made. The competence to decide does not enable
the arbitral tribunal to get over the finality conferred
on an order passed prior to its entering upon the
reference by the very statute that creates it. That is
the position arising out of Section 11(7) of the Act
read with Section 16 thereof. The finality given to
the order of the Chief Justice on the matters within
his competence under Section 11 of the Act, are
incapable of being reopened before the arbitral
tribunal. In Konkan Railway (Supra) what is
considered is only the fact that under Section 16,
the arbitral tribunal has the right to rule on its own
jurisdiction and any objection, with respect to the
existence or validity of the arbitration agreement.
What is the impact of Section 11(7) of the Act on the
- 44 -
arbitral tribunal constituted by an order under
Section 11(6) of the Act, was not considered.
Obviously, this was because of the view taken in
that decision that the Chief Justice is not expected
to decide anything while entertaining a request
under Section 11(6) of the Act and is only
performing an administrative function in appointing
an arbitral tribunal. Once it is held that there is an
adjudicatory function entrusted to the Chief Justice
by the Act, obviously, the right of the arbitral tribunal
to go behind the order passed by the Chief Justice
would take another hue and would be controlled by
Section 11(7) of the Act." [Emphasis added]
68. As is apparent from the above, the Supreme Court was
considering the question as to the nature and the function of the
Chief Justice or his designate under Section 11 of the A&C Act.
One of the contentions advanced was that the nature of the power
exercised was clearly administrative and non-judicial and therefore,
the Arbitral Tribunal could exercise powers under Section 16 of the
A&C Act to arrive at a conclusion contrary to the findings of the
Chief Justice of the High Court or the Supreme Court, as the case
may be, in exercise of its powers under Section 11 of the A&C Act.
The Supreme Court was of the view that the powers conferred
under Section 11, may not be administrative powers and thus, any
finding was not an administrative decision. It is in this context, the
Court held that the jurisdiction conferred on the Arbitral Tribunal,
- 45 -
was not exclusive. And, the Courts would also have the jurisdiction
to address the question as to the existence of arbitration
agreement and whether the disputes are arbitrable while
considering an application under Sections 8 and 9 of the A&C Act.
However, the Supreme Court also underscored the object of the
scheme of the A&C Act is that interference by Courts in the arbitral
proceedings, is restricted. It is material to note that Sections 11, 8
and 9 of the Act fall within Part-I of the A&C Act and thus within the
express exception under Section 5 of the A&C Act. Section 5 does
not bar the jurisdiction of the Courts, in entirety. It only confines the
jurisdiction of the Courts to examine matters to the extent as
provided under Part-I of the A&C Act. Thus, the decision of the
Supreme Court in SPB &Co. is not an authority for the proposition
that the courts can entertain actions challenging the jurisdiction of
the Arbitral Tribunals in the first instance and intervene in arbitral
proceedings governed by Part-I of the A&C Act other than as
specifically provided under that part.
69. It is also important to note that by virtue of the Arbitration and
Conciliation (Amendment) Act, 2015, the scope of examination of
court is confined to the existence of the arbitration agreement by
introduction of Sub-section (6A) to Section 11 of the A&C Act.
- 46 -
70. It is also material to note that the decision in National
Aluminium Company Limited v. Subhash Infra Engineers
Private Limited and Another (supra), affirming the view in
Kvaerner Cementation (supra) was rendered after the decision in
SBP & Co.(supra). Thus the contention that the decision in SBP &
Co implicitly overruled the view in Kvaerner Cementation (supra),
cannot be accepted on that ground as well.
71. It is also instructive to refer to the decision of the
Constitution Bench of the Supreme Court in Interplay Between
Arbitration Agreements under Arbitration and Conciliation Act,
1996 and Stamp Act, 1899 In Re.: (2024) 6 SCC 1. The Supreme
Court had observed that Section 5 of the A&C Act is based on
Article 5 of the Model Law. However, there is material difference
between Article 5 of the Model Law and Section 5 of the A&C Act.
The difference being that Section 5 also incorporates a non
obstante provision, which curtails the scope of judicial intervention.
Thus, the interference by the courts is confined to the extent
expressly provided in Part I of the A&C Act. It would be relevant to
refer to the following extract of the said decision:
"79. This indicates that Article 5 of the Model
Law emphasises on Arbitral Tribunal being the
- 47 -
first instance to determine all issues relating to
matters of law or construction as well as issues of
jurisdiction and scope of authority. It exclusively
determines the manner and form of judicial
intervention in the arbitration process. National
courts can intervene with respect to matters not
expressly governed by the Model Law."
72. It is material to note that the issue that fell for consideration
before the Constitution Bench in Interplay Between Arbitration
Agreements under Arbitration and Conciliation Act, 1996 &
Stamp Act, 1899 (supra), was whether Sections 33 and 35 of the
Stamp Act, 1899 [the Stamp Act] would be applicable at the
reference stage. In N.N. Global Mercantile (P) Ltd. v. Indo
Unique Flame Ltd.: (2023) 7 SCC 1, the Supreme Court had by
majority held that the arbitration agreement which is unstamped,
could not be considered as in existence and the provisions of
Sections 33 and 35 of the Stamp Act, 1899 were applicable at the
referral stage. Hrishikesh Roy, J., has penned one of the
dissenting opinions. The following observations from his opinion,
are of some significance:
"344. A collective reading of the Statement of Objects
and Reasons of the Arbitration Act, 1996 read with
Section 5 of the Act, and Article 5 of the Model Law,
would make it abundantly clear that the legislative intent
behind the enactment was to inter alia, minimise the
intervention of the courts and provide for timely
- 48 -
resolution of disputes. By adding a non obstante clause,
Parliament through Section 5 made a significant
departure from Article 5 and gave an overriding effect
over the provisions of any other law for the time being in
force. It circumscribed the role of the judicial authority,
especially in context of the courts exercising any
residual power that may accrue to them through any
provision in any law.
*** *** *** ***
407. At the cost of repetition, let us now refer to Section
5 of the Arbitration Act, 1996 to understand the special
nature of the Act. As noted above, the Arbitration Act,
1996 is a special legislation and Section 5 begins with a
non obstante clause which overrides powers of judicial
authorities acting under any other law other than the
Arbitration Act, 1996. As argued by the learned counsel
for the intervener, Debesh Panda, the special nature of
the Act is also established from the non obstante clause
in Section 5 of the Arbitration Act, 1996. On the
Arbitration Act being a self-contained code, Indu
Malhotra, J. comments as under:
"The Arbitration and Conciliation Act, 1996 is a
self-contained code governing the law relating to
arbitration, including Section 5 which gives it an
overriding effect over statutes. Once it is held that
the 1996 Act is a self-contained code and is
exhaustive, it carries with it the negative import
that only such acts which are permissible in the
statute may be done, and none others."
408. The use of the expression "so provided" in Section
5, disregards all forms of intervention except that, which
is specified in Part I. Such intention is apparent from the
language of the non obstante clause. As noted earlier,
this provision is yet another instance where Parliament
went a step beyond the language employed in the
UNCITRAL Model Law of 1985."
- 49 -
73. The said view was accepted by the Supreme Court in
Interplay Between Arbitration Agreements under Arbitration
and Conciliation Act, 1996 & Stamp Act, 1899, In Re (supra).
The Court was of the view that the scope of the non obstante
clause under Section 5 of the A&C Act, excluded the operation of
Sections 33 and 35 of the Stamp Act. We may refer to the
following extract from the said decision:
"185. In the above segments, we have dealt with the
scope of Section 5 of the Arbitration Act. It restricts
the extent of judicial intervention in various matters
governed by Part I of the Arbitration Act. The non
obstante clause in this provision is of particular
significance. It indicates that the rule in Section 5
(and consequently, the provisions of the Arbitration
Act) must take precedence over any other law for the
time being in force. Any intervention by the Courts
(including impounding an agreement in which an
arbitration clause is contained) is, therefore, permitted
only if the Arbitration Act provides for such a step,
which it does not. Sections 33 and 35 cannot be
allowed to operate in proceedings under Section 11
(or Section 8, as the case may be), in view of the non
obstante clause in Section 5. This being the case, we
are unable to agree with the decision in N.N. Global,
that the Court in a proceeding under Section 11 must
give effect to Sections 33 and 35 of the Stamp Act
despite the interdict in Section 5. The Court held :
(SCC p. 87, para 129)
"129. Section 5 no doubt provides for a non
obstante clause. It provides against judicial
interference except as provided in the Act. The
non obstante clause purports to proclaim so
despite the presence of any law which may
- 50 -
provide for interference otherwise. However,
this does not mean that the operation of the
Stamp Act, in particular, Sections 33 and 35
would not have any play. We are of the clear
view that the purport of Section 5 is not to take
away the effect of Sections 33 and 35 of the
Stamp Act. The Court under Section 11
purporting to give effect to Sections 33 and 35
cannot be accused of judicial interference
contrary to Section 5 of the Act."
186. Section 5 is effectively rendered otiose by the
interpretation given to it in N.N. Global. The Court
failed to provide a reason for holding that Section 5
of the Arbitration Act does not have the effect of
excluding the operation of Sections 33 and 35 of the
Stamp Act in proceedings under Section 11 of the
Arbitration Act. The non obstante clause in Section 5
does precisely this. In addition to the effect of the
non obstante clause, the Arbitration Act is a special
law. We must also be cognizant of the fact that one
of objectives of the Arbitration Act was to minimise
the supervisory role of Courts in the arbitral
process."
74. In view of the above, we are unable to agree with the
proposition that the Courts can entertain suits for examining the
jurisdiction of Arbitral Tribunal or determine any question including
as to arbitrability of the disputes in proceedings other than in A&C
Act. The same would fall foul of Section 5 of the A&C Act.
75. The reliance placed by the plaintiffs on the decision of the
Supreme Court in World Sport Group Mauritius Limited v. MSM
Satellite (Singapore) Pte. Limited : (2014) 11 SCC 639 (supra), is
- 51 -
misplaced. In that case, the parties had executed the Deed for
Provision of Facilitation Services dated 25.03.2009 [Facilitation
Deed]. Clause 9 of the said deed contained an arbitration
agreement, whereby the parties had agreed that the disputes
arising in connection with or touching upon the Deed, would be
submitted to the International Chamber of Commerce [ICC], for a
final and binding arbitration under its rules of arbitration. It was
agreed that the arbitration would be held in Singapore, before a
Sole Arbitrator. It is, thus clear that the arbitration, which was
called in question was an international commercial arbitration which
was seated overseas. In terms of the agreement between the
parties (Facilitation Deed), the parties had agreed that the same
would be governed by and construed in accordance with the law of
England and Wales. The respondent had instituted two suits, first
that the Facilitation Deed was void and sought recovery of a sum of
Rs.125 crores paid to the appellant. After the suit was instituted,
the appellant had sent a request for arbitration to ICC, Singapore.
ICC Singapore had issued a notice to the respondent to file its
response to the request for arbitration. In the meanwhile, the
respondent filed another suit before the Bombay High Court,
seeking a declaration that the Facilitation Deed was rescinded and
- 52 -
the appellant was not entitled to invoke the arbitration clause. The
respondent also filed an application for temporary injunction
restraining the appellant from continuing with the arbitration
proceedings. The learned Single Judge declined to grant any order
of injunction. The order of the learned Single Judge was challenged
before the Division Bench of the Bombay High Court. The Division
Bench allowed the appeal and issued an order of temporary
injunction, restraining arbitration by the ICC. The order of the
Division Bench was appealed before the Supreme Court. In the
aforesaid context, the Supreme Court considered the question
whether the Division Bench of Bombay High Court, could have
passed an order of injunction restraining arbitration in Singapore.
In the aforesaid context, the Supreme Court referred to Sections 44
and 45 in Chapter-I of Part-II of the A&C Act and observed that any
Civil Court in India, which entertains a suit, would have to follow the
mandate of the said provisions.
76. The arbitration involved in the said case, was not an
arbitration under Part-I of the A&C Act and therefore, the express
bar of Section 5 of the A&C Act, did not apply. Notwithstanding the
same, the Supreme Court had held that the Civil Courts would
have to confine the examination to the grounds as set out under
- 53 -
Section 45 of the A&C Act, which require any judicial authority,
when seized of an action in a matter in respect of which the parties
had made an agreement to which the New York Convention
(Convention as set forth in the First Schedule apply) applies would
at the request of the parties, refer them to arbitration unless the
Court found that the agreement is 'null and void, inoperative or
incapable of being performed'. The provisions of Section 45
expressly require a Judicial Authority to examine whether an
agreement, which is covered under Section 44 of the A&C Act is
null and void, inoperative or incapable of being performed. One of
the contentions advanced before the Supreme Court was that the
principles of Judicial Comity required the Bombay High Court to
refrain from entertaining the suit. The Court rejected the said
contention and observed that under Section 9 of the CPC, Courts
in India have the jurisdiction to try all suits of civil nature excepting
suits of which cognizance is either expressly or impliedly barred.
The court ruled that the Bombay High Court had jurisdiction to
entertain the suit and its jurisdiction could not be ousted. The Court
also noted that Clause 9 of the Facilitation Deed provided that the
parties could approach Courts of competent jurisdiction for
equitable relief.
- 54 -
77. Mr. Nandkumar had also relied on the decision of a learned
Single Judge of the Delhi High Court in Engineering Projects
(India) Limited vs. MSA Global LLC (Oman) : 2025 SCC Online
Del 5072. In that case, the agreement between the parties
contained an arbitration clause, which provided that the agreement
would be governed by and construed in accordance with laws and
regulations of Sultanate of Oman. The arbitration was required to
be held in accordance with the rules of arbitration of International
Chamber of Commerce and the jurisdiction of the agreement would
lie with Courts at New Delhi. In the said case as well, the seat of
arbitration was in Singapore. In the aforesaid context, the Delhi
High Court referred to the decision of the Supreme Court in
O.N.G.C vs. Western Co. of North America : 1987 (1) SCC 496,
and observed that the said decision lays down a precedent for
restraining a party from proceeding before foreign seated arbitral
tribunal provided the case is of such gravity that it warrants such
extraordinary interference. The court observed as under:
"58. Thus, the aforesaid decision categorically
lays down a precedent for restraining a party from
proceeding before a foreign-seated arbitral proceeding,
provided the case is of such gravity that it warrants such
extraordinary interference. It equally settles that such a
restraining order could be passed by the High Court as
well and Section 41(b) of the Specific Relief Act, 1963
- 55 -
would have no bearing on this power of the High Court.
No doubt, the case indicates that such a remedy is to be
provided in extraordinary and rare situations wherein the
denial of this relief would effectively result into a patently
unjust and unconscionable outcome for the plaintiff. It
be noted that at this stage, the Court is only dealing with
the preliminary question of maintainability and whether
the present case calls for this extraordinary and rare
relief shall form part of the subsequent discussion, as it
necessarily involves a factual enquiry."
78. The learned Single Judge, prima facie, found that the
arbitration proceedings were vexatious and oppressive as there
were justifiable grounds to question the independence and
impartiality of one of the arbitrators, as he had failed to disclose his
prior involvement in arbitration proceedings involving the Managing
Director and Promoter of the defendant. The plaintiff in the said
case had raised a challenge before the ICC Court under the ICC
Rules, which was rejected on merits. The ICC Court had held that
although non-disclosure was 'regrettable', the circumstances did
not establish justifiable doubts as to the learned Arbitrator's
impartiality or independence. The plaintiff had preferred an
application under Article 13(3) of the UNCITRAL read with Section
3(1) of the Singapore International Arbitration Act, 1994, seeking
determination of the validity of the learned Arbitrator's continued
participation in the arbitral proceedings but had not prevailed. The
- 56 -
defendant had filed a petition under Section 47 read with 48 of the
A&C Act, seeking enforcement of a partial award before the Court
which is pending before the Delhi High Court. We have some
reservations, whether in the given circumstances, an anti-
arbitration injunction could have been granted. However, it is not
necessary for this Court to consider the said view in any detail, as
the said decision was also rendered in respect of an arbitration to
which Part-I of the A&C Act and Section 5 of the A&C Act are
inapplicable. Thus, the reliance placed by the plaintiffs on the said
decision, is misplaced as well.
79. The decisions in Mc. Donald's India Private Ltd. vs.
Vikram Bakshi & Ors.: 2016 SCC Online Del 3949 and Union of
India vs. Dabhol Power Company : 2004 SCC Online Del 1298,
are also equally inapplicable. In Mc.Donald India Private Limited
(supra), the anti-arbitration injunction was sought in respect of
arbitration proceedings seated at London. The arbitration
agreement was one that was covered under Section 44 of the A&C
Act. In Dabhol Power Company's case as well, the arbitration
was not governed by Part-I of the A&C.
- 57 -
80. In none of the said cases, referred to by the learned senior
counsel, the express bar of Section 5 of the A&C Act was
applicable.
81. It is also relevant to note a vital difference between the
provisions of Section 45, which falls in Part-II of the A&C Act; and
Section 8 of the A&C Act. In terms of Section 45 of the A&C Act,
the Judicial Authority (Court), is required to refer the parties to
arbitration unless the Court prima facie finds the agreement to be
"null and void, inoperative or incapable of being performed". Thus,
an action in respect of the subject matter of disputes that are
covered by arbitration agreement under Section 44 of the A&C Act
may be maintainable, if the Court prima facie finds that the
arbitration agreement is null and void, inoperative and incapable of
performance. It is also important to note that there is no provision
under Section 45 of the Act, which expressly provides that
notwithstanding that an application has been made under Section
45 of the Act for referring the parties to arbitration, the arbitral
proceedings would continue. However, sub-section (3) of Section 8
of the A&C Act expressly provides notwithstanding that an
application under Section 8(1) of the A&C Act is pending, "the
arbitration may commence or continue and an arbitral award
- 58 -
made". This also clearly indicates that in so far as arbitrations,
which are governed by Part-I of the A&C Act, the Courts cannot
interfere in the arbitration proceedings notwithstanding that an
application to refer the parties to arbitration is pending before a
Judicial Authority before which an action has been instituted.
82. In view of the above, the learned Commercial Court could
not have proceeded to issue the impugned order restraining the
parties from proceeding with arbitration, notwithstanding the merits
or demerits of the respondent's contention that it had not agreed for
an arbitration to be administered by the LCIA London. The
commercial court's jurisdiction to try a suit questioning the
arbitration proceedings governed by Part-I of the A&C Act is barred
by virtue of Section 5 of the A&C Act.
83. In view of the above, it is not necessary to examine other
contentions advanced by the learned counsel for the parties
including as to the interpretation of the arbitration clause, since
indisputably, the Arbitral Tribunal would have the jurisdiction to
examine the same. However, for the sake of completeness, we
consider it apposite to examine the other contentions as well.
- 59 -
II. Whether the arbitration proceedings are vexatious and
oppressive.
84. The second question to be examined is whether in the given
facts, an order restraining the parties from proceeding with
arbitration is warranted. According to the Plaintiffs, the continuation
of arbitration proceedings is vexatious and oppressive and
therefore, they were entitled to an interim order to restrain the
arbitral proceedings. As noted above, there is no cavil that an
arbitration agreement exists between the parties and thus the
disputes are required to be resolved through arbitration. The
arbitration clause also expressly provides constitution of an Arbitral
Tribunal of three (3) members. It is agreed that the Plaintiffs will
nominate one Arbitrator and the Investor (L&T) would nominate one
Arbitrator and both the Arbitrators shall nominate the third
Arbitrator. Whilst the appellant has nominated an Arbitrator, the
plaintiffs have declined to do so.
85. We may note that before the Commercial Court, the
appellants had without prejudice indicated that they are agreeable
for the Plaintiffs to appoint an arbitrator and for the arbitration to be
conducted as an adhoc arbitration. However, the Plaintiffs had
declined the said proposal. Thus, this is clearly not a case where
- 60 -
the respondents are vexed by the Arbitral Tribunal being
constituted by appointment of Arbitrator by LCIA. We may recall
that the Plaintiffs have averred that the arbitration agreement had
ceased to exist. However, as noted hereinabove, it was conceded
that this stand is without merit and arbitration agreement exists
between the parties. The only contention advanced is that there is
no agreement between the parties that the arbitration be
administered by the LCIA (London).
86. We may now refer to the averments made in the plaint to
examine the Plaintiffs case that the arbitral proceedings are
vexatious and oppressive. The relevant extracts of the plaint are
set out below:
Arbitration proceedings conducted by LCIA London
are vexatious and oppressive
36. As highlighted above, the LCIA India Rules, by
undergoing the 2016 London Amendment, where
substituted in a wholesale manner. What at the time of
entry into the CCD Agreement was a substantive
arbitration rule set, was amended to a paragraph long
"rule", which states that where any agreement
concluded prior to June 2016 provided for an arbitration
to under the rules of LCIA India, the parties "shall be
taken to have agreed in writing that the arbitration
between them shall be administered by the LCIA,
London, and shall be conducted in accordance with the
LCIA Arbitration Rules, 2020". Such deeming fiction is
created not by any statutory law in force which binds
- 61 -
the parties, but foreign arbitral institution sitting
thousands of miles away. Agreements, especially
arbitration agreements, are creatures of consensus ad
idem and consent of the parties. Such salutary
principles are discarded entirely by way of 2016 London
Amendment.
*** *** *** ***
39. The Parties were conscious and alive to the fact that
any arbitration proceedings arising from the CCD
Agreement, administered by LCIA London, would be
prohibitively expensive and cost ineffective. A
comparison of the Schedule of Costs as provided in the
rules of LCIA India, in effect immediately prior to the
2016 London Amendment, and the Schedule of Costs
as provided in the LCIA Arbitration Rules, 2020 is
provided below:
LCIA London
LCIA India Schedule of
Schedule of Costs 2023
CATEGORY
Arbitration Costs (effective
(effective 17 1 December,
April, 2010) 2023)
ADMINISTRATIVE CHARGES
Registration Fee INR 30,000 + £1,950 (INR
(non-refundable) 12.36% Service 2,14,580)
Tax (then
prevailing rate)
Registrar/Deputy INR 5,000 per £300 per hour
Registrar hour (INR 33,012)
Counsel INR 2,500 per £285 per hour
hour (INR 31,361)
Case Ν.Α. £220 per hour
administrators (INR 24,209)
- 62 -
Casework Ν.Α. £190 per hour
accounting (INR 20,907)
functions
FEES AND EXPENSES OF THE ARBITRAL TRIBUNAL
Hourly Fees Not exceeding INR £250 to £650
range 20,000 (INR 27,510-INR
71,526)
EMERGENCY ARBITRATOR
Application Fee No provision £10,000 (INR
11,00,440)
Emergency £25,000 (INR
Arbitrator's Fee 27,51,100)
TRIBUNAL SECRETARY
Hourly rate No such Position £100-£200 per
hour
*** *** *** ***
41. As such, in view of the costs imposed by way of the
LCIA Arbitration Rules, 2020, ipso facto the arbitration
proceedings Initiated by the Defendant are oppressive
and vexatious.
87. In addition to the above averments, it was also contended
that the arbitration is vexatious as the arbitration is not governed by
Indian law. The said contention is ex facie erroneous as the CCD
Agreement as well as the arbitration is governed by Indian law. Mr
- 63 -
Nandkumar conceded that there is no dispute that the arbitration
would be governed by the A&C Act, as the seat of arbitration is in
India. Undisputedly, Part-I of the A&C Act is applicable to the
arbitration between the parties.
88. Next, it was earnestly argued on behalf of the Plaintiffs that
conduct of the arbitration under the LCIA Rules is vexatious and
oppressive as the Plaintiffs had not agreed to arbitration under the
said LCIA Rules, 2020; they had agreed to the LCIA Rules which
were in vogue at the time when the CCD Agreement was entered
into.
89. We had called upon the learned counsel appearing for the
plaintiffs to point out any material difference between the LCIA
Rules that were in force at the time when the CCD Agreement was
entered into by the parties and the LCIA Rules, 2020 under which
the arbitration is being administered.
90. In response to the said query, Mr. Nandakumar contended
that the fee structure of LCIA (London) was higher and the
arbitration would be governed by the laws of United Kingdom.
However, apart from the fee structure, he was unable to point out
any material difference in the Rules that were in vogue at the time
- 64 -
of executing the CCD Agreement and the LCIA Rules, 2020,
regarding the procedure for conducting the arbitration. He however
contended that the LCIA Rules, 2020 are required to be interpreted
according to the laws of United Kingdom. He has referred to Rule
16.5 of the LCIA Rules, 2020 and had contended that the laws of
United Kingdom would be applicable with regard to the said rules.
91. Rule 16.4 and 16.5 of the LCIA Rules, 2020 are set out
below:
"16.4 Subject to Article 16.5 below, the law
applicable to the Arbitration Agreement and the
arbitration shall be the law applicable at the seat
of the arbitration, unless and to the extent that the
parties have agreed in writing on the application of
other laws or rules of law and such agreement is
not prohibited by the law applicable at the arbitral
seat.
16.5 Notwithstanding Article 16.4, the LCIA Rules
shall be interpreted in accordance with the laws of
England."
92. A plain reading of Rule 16.5 of the LCIA Rules, 2020
indicates that the said Rules are required to be interpreted under
the laws of United Kingdom. The seat of arbitrator is in India.
Therefore in terms of Rule 16.4 (as well as the law as it stands
today) the law governing arbitration in India, that is the A&C Act, is
- 65 -
applicable to the present arbitration. There is no dispute as to the
interpretation of LCIA Rules, 2020. Moreover, Mr. Nandakumar
was also unable to point out to any law of United Kingdom
regarding interpretation, which is material difference from the
principles of statutory interpretation followed in India.
93. The apprehension that apart from the question of fees, the
LCIA Rules 2020 would work in any manner disadvantageous to
the Plaintiffs, is without any basis. The contention that an
arbitration under the LCIA Rules, 2020 is vexatious or oppressive,
is illusory and contrived.
94. The only ground on which any of the Plaintiffs may have a
grievance with the LCIA Rules, 2020, is the issue regarding the fee
structure. Although it was averred that the fee that would be
payable is thirty times the fee that was stipulated under the LCIA
Rules as worded at the material time, also appears to be without
basis.
95. We had called upon Mr. Nandakumar to point out as to how
the fee structure is thirty times higher. However, we did not receive
any satisfactory response.
- 66 -
96. There is no dispute that the fee structure under the schedule
of fees under the LCIA Rules, 2020 as is currently applicable, is
higher than the fee structure as applicable under the LCIA Rules
that were in force and were when the parties had entered into the
CCD Agreement. However, the difference does not appear to be
large as contended.
97. It was contended on behalf of the appellant that the fees for
Arbitral Tribunal was within the range of ₹30,000/- to ₹78,000/-.
The arbitral fee for three hour sitting of the Arbitral Tribunal would
be in the range of ₹90,000 to ₹2,34,000/-. If we consider that the
value of the claims made is over 1500 crores, the said fee cannot
be considered as oppressive or vexatious.
98. The Arbitral fee under the Fourth Schedule of the A&C Act
would be over ₹30 lakhs. The Fee Schedule under the rules of
Delhi International Arbitration Centre, for the given claim would be
twice as much.
99. Black's Law Dictionary defines 'vexatious' as "without
reasonable or probable cause or excuse; harassing; annoying".
Butterworths defines the expression 'vexatious' as one "which has
- 67 -
little or no basis in law and is instituted to annoy or embarrass the
opponent".
100. The word 'oppressive' is defined in Stroud's Judicial
Dictionary as "that which is burdensome, unjust or harsh to the
point of being unconscionable".
101. Considering that the Plaintiff's issue regarding arbitration
being conducted under the A&C Act is essentially confined to the
fees, we are not persuaded to accept that the arbitration under the
LCIA Rules 2020, in the given facts of this case can be considered
as vexatious or oppressive.
III. Re-interpretation of Article 16 of the CCD Agreement
102. The last question to be examined is, whether the arbitration
being conducted under the LCIA Rules is contrary to the agreement
between the parties. It is material to note that in terms of clause 16
of the CCD Agreement, the parties had agreed that "dispute claim
or controversy shall be finally settled under the London Court of
International Arbitration India Rules then in effect".
- 68 -
103. Admittedly, the London Court of International Arbitration India
Rules were amended. The LCIA India, Rules, 2016, inter alia
provide as under:
"Effective 1 October 2024, where any agreement
concluded before 1 June 2016, provides in writing and in
whatsoever manner for arbitration under the rules of or by
LCIA India, the parties shall be taken to have agreed in
writing that the arbitration between them shall be
administered by the London Court of International
Arbitration (LCIA) and shall be conducted in accordance
with the LCIA Arbitration Rules 2020 (or such amended
rules as the LCIA or the LCIA Court may hereafter adopt
to take effect before the commencement of the
arbitration) and that such LCIA Arbitration Rules 2020
form part of their agreement (collectively, the
Arbitration Agreement)."
104. Article 16.1 referred to the London Court of International
Arbitration of India Rules, which stood amended to provide that the
arbitration be conducted under the LCIA Rules, 2020. Thus, the
arbitration under the LCIA Rules is required to be conducted in
accordance with the LCIA Rules, 2020. According to the
respondent, the said amendment as to the LCIA Rules, is
inapplicable, as the same has virtual effect of substituting the rules
in entirety as to provide for direct administration by LCIA London,
which was not in contemplation of the parties.
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105. A plain reading of Article 16.1 of the CCD Agreement
indicates that the parties had agreed that the arbitration shall be
conducted in accordance with the London Court of Arbitration
International India Rules [LCIA Rules] then in effect.
106. According to the Plaintiffs, the words 'then in effect' imply that
the rules that were prevalent on the date the parties had entered
into the agreement, would be applicable. This is stoutly contested
by the appellants. They contend that the words 'then in effect' imply
that the rules which would be effective at the time of invocation,
would be applicable.
107. The relevant extract of Article 16.1 of the CCD Agreement
which falls for consideration is set out below:
"16.1. If the dispute, claim or controversy is not resolved
through good faith consultations within thirty (30) days
after a Party has delivered a written notice to another
Party requesting the commencement of consultation,
then the dispute, claim or controversy shall be finally
settled under the London Court of International
Arbitration India Rules then in effect and as may be
amended by the rest of this Clause 16.1 (the "Rules").
(emphasis added)
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108. A plain reading of clause 16.1 under the CCD Agreement
clearly indicates the words 'then in effect' have to be read in
connection with the preceding sentences which refer to delivery of
a written notice requesting for commencing of consultation and the
failure of resolution of dispute within 30 days of such written notice.
If the disputes remain unresolved, the same were required to be
settled under the London Court of International Arbitration India
Rules then in effect. Clearly, the words 'then in effect' means that
rules in effect on the date when the matters are required to be
referred to arbitration, failing the resolution by consultation.
109. We may note, clauses in several statutes use the words "for
the time being in force". The words 'then in effect' as used in
Article 16.1 of the CCD Agreement is synonymous to the
expression 'for the time being in force'.
110. The expression "law for the time being in force" has been the
subject matter of debate in various cases. The weight of the
judicial precedents is in favour of construing the said expression as
not only covering law as in force at the time of enactment, but the
law that may be enacted in future as well.
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111. In Thyssen Stahlunion Gmbh v. Steel Authority of India
Ltd.: (1999) 9 SCC 334, the Supreme Court had considered the
expression "for the time being in force" in the context of arbitration
agreement and held that the said expression would mean that the
provisions of the A&C Act which were applicable at the relevant
time, when the arbitration proceedings are held, would be
applicable. It is relevant to refer to the following passage from the
said decision:
"35. Parties can agree to the applicability of the new
Act even before the new Act comes into force and
when the old Act is still holding the field. There is
nothing in the language of Section 85(2)(a) which
bars the parties from so agreeing. There is,
however, a bar that they cannot agree to the
applicability of the old Act after the new Act has
come into force when arbitral proceedings under the
old Act have not commenced though the arbitral
agreement was under the old Act. Arbitration clause
in the contract in the case of Rani
Constructions (Civil Appeal No. 61 of 1999) uses the
expression "for the time being in force" meaning
thereby that provision of that Act would apply to the
arbitration proceedings which will be in force at the
relevant time when arbitration proceedings are held.
We have been referred to two decisions -- one of
the Bombay High Court and the other of the Madhya
Pradesh High Court on the interpretation of the
expression "for the time being in force" and we agree
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with them that the expression aforementioned not
only refers to the law in force at the time the
arbitration agreement was entered into but also to
any law that may be in force for the conduct of
arbitration proceedings, which would also include the
enforcement of the award as well. The expression
"unless otherwise agreed" as appearing in Section
85(2)(a) of the new Act would clearly apply in the
case of Rani Constructions in Civil Appeal No. 61 of
1999. Parties were clear in their minds that it would
be the old Act or any statutory modification or re-
enactment of that Act which would govern the
arbitration. We accept the submission of the
appellant Rani Constructions that parties could
anticipate that the new enactment may come into
operation at the time the disputes arise. We have
seen Section 28 of the Contract Act. It is difficult for
us to comprehend that arbitration agreement could
be said to be in restraint of legal proceedings. There
is no substance in the submission of the respondent
that parties could not have agreed to the application
of the new Act till they knew the provisions thereof
and that would mean that any such agreement as
mentioned in the arbitration clause could be entered
into only after the new Act had come into force.
When the agreement uses the expressions "unless
otherwise agreed" and "law in force" it does give an
option to the parties to agree that the new Act would
apply to the pending arbitration proceedings. That
agreement can be entered into even before the new
Act comes into force and it cannot be said that
agreement has to be entered into only after the
coming into force of the new Act."
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112. In Municipal Corpn. of Delhi v. Prem Chand Gupta, (2000)
10 SCC 115, the Supreme Court considered the merit of the words
"for the time being in force" as used in Regulation 4(1) of the
Service Regulations of 1959. The Service Regulation of 1959 was
framed by the Government of India under Section 98 of the Delhi
Municipal Corporation Act, 1957. The Supreme Court rejected the
contention that the Rules at the time when the Service Regulations
were promulgated would be applicable and not the Rules that came
into force subsequently. We consider it apposite to set out the
following extract from the said decision:
"12. But even that apart, Regulation 4(1) of the
very same Service Regulations of 1959 clearly
provides as follows:
"4. (1) Unless otherwise provided in the Act or
these regulations, the rules for the time being in
force and applicable to government servants in the
service of the Central Government shall, as far as
may be, regulate the conditions of service of
municipal officers and other municipal employees."
Excepted matters mentioned therein are not
relevant for our present purpose. It, therefore,
becomes clear that on a combined operation of
Regulation 2(b)(ii) and Regulation 4(1) of the Service
Regulations, 1959, the relevant rules which were in
force in 1966 when the respondent workman's
services were terminated were the latter Rules of
1965 and could not be the earlier Rules of 1949
which had got superseded and had ceased to exist
on the statute-book.
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13. In this connection, one submission of learned
counsel for the respondent workman may be noted.
He submitted that as laid down by Regulation 4(1),
the rules for the time being in force as mentioned
therein would refer to only those rules which were in
force when the Service Regulations of 1959 were
promulgated and not any latter rules. It is difficult to
countenance this submission. Rules for the time
being in force will have a nexus with the regulation of
condition of service of the municipal officers at the
relevant time as expressly mentioned in Regulation
4(1). Therefore, whenever the question of regulation
of conditions of service of the municipal officers
comes up for consideration, the relevant rules in
force at that time have to be looked into. This is the
clear thrust of Regulation 4(1). Its scope and ambit
cannot be circumscribed and frozen only to the point
of time in the year 1959, when the Service
Regulations were promulgated. If such was the
intention of the framers of the Regulation, Regulation
4(1) would have employed a different phraseology,
namely, "rules at present in force" instead of the
phraseology "rules for the time being in force". The
phraseology "rules for the time being in force" would
necessarily mean rules in force from time to time and
not rules in force only at a fixed point of time in 1959
as tried to be suggested by learned counsel for the
respondent workman."
113. The aforesaid view regarding interpretation of the expression
"law for the time being in force" resonated with the Supreme Court
in Forum for People's Collective Efforts (FPCE) and Anr. v. The
State of West Bengal and Anr.: (2021) 8 SCC 599.
114. Mr. Chinnappa, learned Senior counsel appearing for the
appellants had also referred to the decision of the Singapore High
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Court in Cars & Cars Pte Ltd v. Volkswagen AG and Another:
[2009] SGHC 233, which we find persuasive. In the said case, the
Court was called upon to construe the Rules that would be
applicable in the context of an arbitration clause which read as
under:
"This agreement herein shall be governed by and its
provisions interpreted in accordance with the law of
Singapore. Any disputes arising out of or in
connection with this agreement herein shall be
referred to arbitration in the Singapore International
Arbitration Centre in accordance with the Rules of the
Singapore International Arbitration Centre for the time
being in force."
The court held that the Rules as applicable at the time of invocation
would be applicable.
115. In Peter Cremer v. Granaria BV: [1981] Lloyd's Rep 583,
the Queen's Bench Division (Commercial Court) considered a
similar question whether the said Rules for the time being in force
when the contract was entered into or when the arbitration had
commenced, would be applicable. In this regard, the Court
observed as under:
"Indeed, if one looks at its as a matter of common-
sense, I do not think it can be expected that
arbitrators in any particular case should have to
look at the date of the contract, ascertain the
relevant procedure for arbitrations which were in
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force as at that date and then, regardless of the fact
that new procedures, which may or may not be
fundamental, may have been introduced and
applicable and keing [sic: being] applied at the date
when the arbitrators were appointed, go back to and
apply the old procedure in force as at the date when
the contract was made...."
116. The rules of arbitration are clearly procedural rules and do
not affect the substantive rights of the parties. The plain language
of the arbitration clause indicates that the parties had agreed that
on failure of resolution of disputes by consultation, pursuant to the
notice, the disputes would be referred to arbitration under the rules
then in effect. The same clearly means that the Rules which would
be in effect at the time of reference to arbitration will be applicable.
117. Mr. Nandakumar also referred to the decision of the United
States District Court, Eastern District of Louisiana in Baker
Hughes Saudi Arabia Co. Ltd. v. Dynamic Industries Inc.: Civil
Action No.2:23-cv-1396. In the said case, the learned Judge had
considered the motion to dismiss the case on the Forum Non
Conveniens. The contract between the parties required the
disputes to be finally resolved by arbitration under the arbitration
rules of Dubai International Financial Center London Court of
International Arbitration [DIFC LCIA]. Dubai International Financial
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Center applied international rules for arbitration based Rules as
used by LCIA. However, the Government of Dubai had issued a
decree abolishing the DIFC LCIA and replacing the same by Dubai
International Arbitration Center [DIAC] to administer the existing
cases. The learned Judge held that the parties had not agreed for
an arbitration under the DIAC, therefore, the case was dismissed
on the forum non conveniens.
118. It is settled law, arbitration rests on consent. The decision in
Baker Hughes Saudi Arabia Co. Ltd. v. Dynamic Industries Inc
(supra) proceeded on the basis that the parties had not agreed for
the arbitration to be conducted under the aegis of the Dubai
International Arbitration Centre. The transfer was effected not by
consent between the parties but by a decree of the Government of
Dubai. There was no agreement between the parties to the effect
that they would be bound by the laws of Dubai. The plaintiff in that
case thus questioned the authority and the Dubai Government to
unilaterally alter the forum of arbitration.
119. In the present case, the parties have agreed to conduct the
arbitration in accordance with the set of rules referred to in Article
16.1 of the CCD Agreement. Concededly, the said rules stand
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amended. The LCIA India Rules, 2016 expressly provides that the
arbitration "shall be administered by London Court of International
Arbitration (LCIA) and shall be conducted in accordance with the
LCIA Arbitration Rules, 2020".
120. Thus, the arbitration is being conducted under the rules as
referred in Article 16.1 of the CCD Agreement. The fact that the
Rules were amended subsequently does not, prima facie, frustrate
the agreement of the parties that the arbitration would be
conducted under the said Rules. More so, when the parties have
expressly agreed that the arbitration would be under the Rules then
in effect, that is, at the time of reference to arbitration.
121. Article 16.1 of the CCD Agreement does not specifically
provide that arbitration will be administered by LCIA India. It
merely refers to the Rules in accordance with which the arbitration
is to be conducted. Since the Rules (as amended) provide the
arbitration will be conducted by LCIA and in accordance with LCIA
Rules, 2020; the arbitration is required to be conducted
accordingly.
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122. The contention that the parties had agreed that the
arbitration would be conducted in accordance with the rules which
were in force at the time the agreement was entered into, is prima
facie flawed, for yet another reason. Once the rules are amended
by an arbitration institution, further proceedings would necessarily
have to be conducted in accordance with the rules which are in
force when the reference is made. It is difficult to accept that an
arbitration institution would administer an arbitration on the basis of
rules that had existed in the past, that is at the time when the
parties had entered into an agreement. In the present case, there
were no disputes between the parties when they entered into CCD
Agreement. The arbitration clause was included in the CCD
Agreement for resolving any disputes that may arise in future.
Thus, it stands to reason that the parties contemplated that the
arbitration would be administered in accordance with the Rules as
in force when the disputes are referred.
123. It is apparent from the pleadings and the contentions
advanced before this Court that the Plaintiffs' strategy is to avoid
arbitration commenced by the appellants and to compel the
appellants to seek recourse to Section 11 of the A&C Act.
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According to the learned Senior counsel for the appellants, the
plaintiffs' claim is barred by limitation. And the plaintiffs are of the
view that the said contention would necessarily require to be
adjudicated under Section 11 of the A&C Act.
124. However, we note that in a recent decision in SBI General
Insurance Company vs. Krish Spinning : 2024 SCC OnLine SC
1754, the Supreme Court had clarified its observations made in
M/s. Arif Azim Co. Ltd. v. M/s. Aptech Ltd. : 2024 INC 155 and
had held that, 'while determining the issue of limitation in exercise
of powers under Section 11(6) of the Act, 1996, the referral court
should limit its enquiry to examining whether Section 11(6)
application has been filed within the period of limitation of three
years or not'. It was further clarified that the referral courts, at the
stage of deciding an application for appointment of an Arbitrator,
must not conduct an intricate evidentiary enquiry into the question
whether the claims raised by the applicant are time barred and
should leave that question for determination by the Arbitrator.
125. However, it is not necessary for this Court to examine this
question in these proceedings. The only question that falls for
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consideration of this is, whether the appellants were required to be
restrained from continuing with the arbitral proceedings.
126. In view of the above, the said question is answered in the
negative. The impugned orders are accordingly, set aside.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(C M JOSHI)
JUDGE
AHB/SD/KS
