Enercon (India) Ltd. & Ors. Vs. Enercon GMBH & ANR.
[Civil Appeal No.2086 of 2014 arising out of SLP (C) No. 10924 of 2013]
[Civil Appeal No.2087 of 2014 arising out of SLP (C) No. 10906 of 2013]
SURINDER SINGH NIJJAR, J.
1. Leave granted.
2. These civil appeals have been filed against the order and judgment dated 5th October, 2012, passed by the Bombay High Court in CWP Nos.7804 of 2009 and 7636 of 2009. The Bombay High Court by the impugned order dismissed both the aforesaid Civil Writ Petitions.
3. Appellants No.2 and 3 (members of the Mehra family) and the Respondent No.1 (a company incorporated under the laws of Germany, having its registered office at Aurich, Germany) entered into a joint venture business by setting up the Appellant No. 1-Company - Enercon (India) Ltd. (hereinafter referred to as "EIL"), in 1994. EIL, having its registered office at Daman, was to manufacture and sell Wind Turbine Generators ("WTGs") in India. One Dr. Alloys Wobben is the Chairman of the Respondent No.1. Respondent No.2, a company incorporated under the laws of Germany, has the patent of technology in connection with the aforesaid WTGs. In furtherance of their business venture, the parties entered into various agreements, which can be briefly noticed: Share Holding Agreement:
4. On 12th January, 1994, the Appellant Nos. 2 and 3 entered into a Share Holding Agreement ("SHA") with the Respondent No.1. In terms of the SHA, the Respondent No. 1 was to hold 51% shares of the Appellant No. 1-Company, and the Appellant Nos. 2 and 3, collectively, were to hold 49% shares. Technical Know How Agreement:
5. On the same day, i.e. 12th January, 1994, the Appellant No. 1 and the Respondent No. 1 entered into a Technical Know-How Agreement ("TKHA") by which the Respondent No. 1 agreed to transfer to the Appellant No. 1 the right and the technical know-how for the manufacture of WTGs specified therein and their components. Under the terms of the TKHA, the Respondent No. 1 has to supply special components to the Appellant No. 1. Under the TKHA, the Respondent No. 1 is the licensor and the Appellants are the licensees. Supplementary Shareholding Agreements:
6. The SHA was subsequently amended by two Supplementary Share Holding Agreements ("SSHAs") dated 19th May, 1998 and 19th May, 2000. Pursuant to the said SSHAs, the shareholding of Respondent No. 1 in the Appellant No. 1-Company increased to 56% whilst the shareholding of the Appellant Nos. 2 and 3 was reduced to 44%. Supplementary Technical Know-How Agreement:
7. A Supplementary Technical Know-How Agreement ("STKHA") amending the TKHA was executed on 19th May, 2000, by which a further license to manufacture the E-30 and E-40 WTGs was granted by the Respondent No. 1 to the Appellants. Heads of Agreement:
8. In April 2004, the period of the TKHA expired; however, the Respondent No. 1 continued to supply the WTGs and components to the Appellant No.1. At this stage, there were discussions between the parties about the possibility of a further agreement which would cover future technologies developed by Respondents. On 23rd May, 2006, these negotiations were recorded in a document titled "Heads of Agreement". Agreed Principles:
9. On 29th September, 2006, the Appellants and the Respondent No. 1 entered into what is known as the "Agreed Principles" for the use and supply of the windmill technology. The second page of the Agreed Principles, inter alia, provides as follows: "The Agreed Principles as mentioned above, in their form and substance, would be the basis of all the final agreements which shall be finally executed. The agreed principles shall be finally incorporated into the
A. IPLA "Draft enclosed"
B. Successive Technology Transfer Agreement
C. Name Use Licence Agreement
D. Amendment to Existing Share Holding Agreement. The above agreements will be made to the satisfaction of all parties. And then shall be legally executed." IPLA (dated 29th September, 2006):
10. On the same day, i.e. 29th September, 2006, Intellectual Property License Agreement ("IPLA") was executed between the parties. It appears that Appellant No.2 has signed the IPLA on behalf of the Appellants No. 2 and 3. However, the Appellants have contended that this IPLA is not a concluded contract. According to the Appellants, the draft IPLA was initialled by Appellant No.2 only for the purpose of identification, with the clear understanding that the said draft still contained certain discrepancies which had to be brought in line with the Agreed Principles. Thus, the case of the Appellant is that the draft IPLA was not a concluded contract. On the other hand, Respondent No.1 has taken the stand that IPLA is a concluded contract and hence, binding on the parties. Both the parties refer to various e-mails/letters addressed to each other for substantiating their respective stands. It would be useful to notice here some of the emails and other communication exchanged between the parties:
E-mails, letters & Text message:
i. 30.09.2006: A handwritten letter was addressed by Appellant No.2 to Dr. Wobben, Chairman of Respondent No. 2. In this letter, Appellant No.2 admits signing the IPLA. The fact that IPLA does not provide for E-82 model is also referred to in this letter.
ii. 02.10.2006: Dr. Wobben, Chairman of Respondent No.2, addressed a letter to Appellant No.2, stating therein his offer to acquire 6% of Equity shares of the Appellant No.1 Company which were being held by the Mehra Family, for 40 million Euros.
iii. 04.10.2006: Email by one Ms. Nicole Fritsch, on behalf of Respondent no.1, wherein it was inter alia stated as follows:"...we will do our utmost to prepare/adapt the agreements according to theagreed principles until 19, October and will send the drafts to you."
iv. 18.10.2006: Ms. Fritsch wrote a letter to the Appellant No.2, stating therein that IPLA has been signed on 29th September, 2006 and also that the drafts of the remaining agreements have been prepared in the light of the Agreed Principles.
v. 01.11.2006: SMS/text message sent by Dr. Wobben to the Appellant No.2, wherein it was stated that he wishes to buy 12% of shares held by Appellant No.2 for 40 million Euros.
vi. 03.11.2006: E-mail written by the Appellant No.2 to Dr. Wobben, wherein the aforesaid offer of acquisition of shares of the Appellant No.1 company was rejected. Further, Appellant No.2 wrote that it would be a prudent exercise to put together the IPLA and the relevant amendments to the SHA in good shape, so that Agreed Principles get reflected in the documents at the time of their signing. Appellant No.2 also highlighted certain discrepancies between IPLA and the Agreed Principles.
vii. 24.11.2006: E-mail sent by Ms. Fritsch to Appellant No.2, wherein she apologised for the delay in sending outstanding drafts of the "Final IPLA, Shareholding Agreement, and other Successive Agreements". It was also mentioned that there are some discrepancies in the contracts and the Agreed Principles for which the Respondent has to discuss the matter internally.
viii. 01.01.2007: Ms. Fritsch wrote an email to the Appellant No.2, wherein it was stated that the Respondent No.2 would be sending the revised drafts of the outstanding contracts to the Appellants, so as to let Appellant No.2 and their lawyers verify those drafts.
ix. 29.01.2007: Ms. Fritsch forwarded the amended SHA of 1994, Corporate Name User Agreement, and Successive Technology Licence Agreement to Appellant No.2. x. 31.01.2007: An email was sent to Respondent No.1 by the Appellant No.1, wherein it was categorically stated that the IPLA is not a "done deal," the same being not in conformity with the Agreed Principles.
11. The Appellants claim that Respondent No.1, in February, 2007, unilaterally decided to stop all shipments of supplies to India in order to pressurize them to sell the share holding as desired by Dr. Wobben. However in March, 2007, after discussions between the parties, Respondent No.1 resumed supplies. Thereafter, the supplies were stopped once again in July, 2007. This was followed by institution of the following legal proceedings: LITIGATION:
12. We may notice only those proceedings between the parties that have a bearing on the issues arising before us. Derivative Suit:
13. Appellants No.2 and 3 filed a derivative suit (in Civil Suit No.2667 of 2007) on 11th September, 2007 before the Bombay High Court ("Bombay Suit"), seeking resumption of supplies, parts and components. In this suit, Respondent No.1 has taken out an Application under Section 45 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Indian Arbitration Act, 1996'). The Bombay Suit and the Application under Section 45 of the Indian Arbitration Act, 1996 are pending disposal.
On 31st October, 2007, the Bombay High Court, by an interim order without prejudice to the individual contentions of the parties, directed the Respondent No.1 to resume the supplies to Appellant No.1 until further orders. It appears that initially the supplies were resumed in compliance of the aforesaid order. However, the Appellants claim that the Respondent no.1 after sometime stopped the supplies again. Thereafter, a Contempt Petition was filed before the Bombay High Court at the instance of the Appellants for non-compliance of the aforesaid order by Respondent No.1. This contempt petition is pending adjudication. Nomination of Arbitrator :
14. On 13th March, 2008, a letter was sent on behalf of the Respondent No. 1 to the Appellant Nos. 2 and 3, wherein the Respondent No. 1 invoked the arbitration agreement, contained in Clause 18.1 of the IPLA. The letter nominates Mr. V.V. Veedor QC as the licensors' arbitrator. It inter-alia stated that "Enercon and WPG are happy to allow EIL to nominate its arbitrator and for the two party (sic) nominated arbitrators to select the third arbitrator, subject to consultation with the parties. The third arbitrator will act as the Chairman of the Tribunal." In the aforesaid letter, the Respondent No.1 also identified the issues that require determination through arbitration. Arbitration Claim Form:
15. On 27th March, 2008, "Arbitration Claim Form" was issued by the Respondents seeking several declaratory reliefs in relation to the IPLA from the High Court of Justice, Queens Bench Division, Commercial Court, United Kingdom ("the English High Court"). The reliefs which were claimed included the constitution of Arbitral Tribunal under the IPLA. Claim form was annexed to the letter dated 2nd April, 2008 sent by the UK Solicitors of Respondent No.1 to the Appellants.
16. Meanwhile on 31st March, 2008, a letter was addressed by the Appellant No.2 on behalf of himself and Appellant No.3, in response to letter of Respondent No.1 dated 13th March, 2008, wherein it was stated that since the draft IPLA was not a concluded contract, there is no question of a valid arbitration agreement between the parties and as such, there is no question of nominating any arbitrator.
17. In response to the aforesaid, a letter was addressed by the UK Solicitors of Respondent to the Appellants on 2nd April, 2008, stating therein that in the event the Appellants do not nominate their arbitrator within 7 days of the receipt of the said letter, the Respondents shall proceed under Section 17(2) of the English Arbitration Act, 1996 to appoint their nominee arbitrator Mr. V.V. Veeder, QC, as the sole arbitrator. The aforesaid letter was received by the Appellants on 3rd April, 2008 in Daman. The Arbitration Claim Form which had been filed before the English High Court was also served on the Appellant No.1 in Daman on 4th April, 2008.Daman Suit:
18. On 8th April, 2008, the Appellants filed Regular Suit No. 9 of 2008 (Daman Suit) before the Court of Civil Judge, Sr. Division, "Daman Trial Court" seeking, inter alia, a declaration to the effect that the draft IPLA was not a concluded contract and correspondingly there was no arbitration agreement between the parties to the draft IPLA. On the same day, i.e. 8th April, 2008, the Daman Trial Court passed an order in the favour of the Appellants, wherein the Respondents were directed to maintain status quo with regard to the proceedings initiated by them before the English High Court.
19. Meanwhile on 11th April, 2008, Appellant No.1, without prejudice, nominated Mr. Justice B.P. Jeevan Reddy, a former Judge of this court as arbitrator. On 24th May, 2008, Mr. Justice B.P. Jeevan Reddy intimated to the Solicitors of the Appellants that the arbitrators felt that there were inherent defects in the arbitration clause contained in the draft IPLA and therefore, the same was unworkable. The letter also expressed the inability of the arbitrators to appoint the third arbitrator. On 5th August, 2008, a joint letter was addressed by both the nominated arbitrators, wherein it was reiterated that they are unable to appoint the third and presiding arbitrator.
20. Thereafter, the Respondents filed an Application under Section 45 of the Indian Arbitration Act in the Daman Suit. On the other hand, the Appellants moved an Application for interim injunction ex-parte in the same suit, seeking to restrain Respondents from pursuing the proceedings they had initiated in the English High Court (anti-arbitration injunction). The Daman Court dismissed the Application under Section 45 of the Indian Arbitration Act, 1996 on 5th January, 2009. On the other hand, the Application filed by the Appellants, seeking interim reliefs in form of anti- arbitration injunction was allowed on 9th January, 2009. Both the aforesaid orders of the Daman Trial Court were challenged by the Respondents by filing four appeals before the District Court of Daman ("Daman Appellate Court").Daman Appellate Court :
21. The Daman Appellate Court allowed all the appeals of the Respondents by order dated 27th August, 2009 and set aside both the orders of the Daman Trial Court. The anti-arbitration injunction was vacated, and the Application under Section 45 of the Indian Arbitration Act, 1996 was allowed. The aforesaid order dated 27th August, 2009 was challenged by the Appellants herein by filing two writ petitions before the High Court of Bombay, viz. Writ Petition No. 7636 of 2009, filed in respect of the anti- arbitration injunction and Writ Petition No. 7804 of 2009, filed in respect of Section 45 of the Indian Arbitration Act. Bombay High Court :
22. On 4th September, 2009, the Bombay High Court ordered that the status quo order dated 8th April, 2008, passed by the Daman Trial Court be continued in Writ Petition No. 7636 of 2009. On 9th September, 2009, the Bombay High Court continued the stay of the reference under Section 45 of the Indian Arbitration Act until the next date of hearing. In the course of hearing of the both writ petitions, the Bombay High Court, on 25th January, 2010, directed that the interim order(s) granted earlier be continued until further orders. English Proceedings:
23. In spite of the aforesaid interim order(s), the Respondents filed Arbitration Claim Form 2011 Folio No.1399 before the English High Court, under Section 18 of the English Arbitration Act, 1996 for the constitution of an Arbitral Tribunal under the provisions of IPLA. The following two grounds were raised by the Respondents:-
A. that the anti-arbitration injunction passed by the Bombay High Court had fallen away; B. that the Appellants had not pursued the writ petitions before the Bombay High Court.
24. On 25th November, 2011, the English High Court passed an order in form of an anti-suit injunction that had the effect of restraining the Appellants from prosecuting/arguing the writ petitions before the Bombay High Court. The Appellants were restrained from approaching the Bombay High Court to clarify whether ad-interim stay granted by it was in place. Meanwhile, on 15th February, 2012, the English High Court passed an ex-parte freezing injunction restraining the Appellant No.1 from disposing of its assets in excess of 90 Million Euros.
25. On 23rd March, 2012, the English High Court (Eder, J.) delivered its judgment, wherein the freezing injunction was discharged. It was inter-alia held in Paragraph 51 of the judgment that anti- arbitration injunction of the Bombay High Court was in force. On 27th March, 2012, the English High Court discharged the anti-suit injunction subject to the undertakings given by Appellant No.1. It would be useful to notice here some of these undertakings:
i) to apply forthwith to the Bombay High Court to have the hearing of the Writ Petitions expedited and to take all reasonable and necessary steps within its power to have the writ petitions concluded as expeditiously as possible;
ii) until the determination of the Application filed by the Respondents in the English High Court, not to seek further directions in relation to prayer (c) of the Writ Petition No.7636 of 2009 - which is a prayer for interim relief.
26. The Appellants took necessary steps for an expeditious listing and hearing of the writ petitions before the Bombay High Court. However on 11th June, 2012, the Respondents filed an Application before the English High Court for constituting an Arbitral Tribunal. On 26th June, 2012, since the High Court had not disposed of early hearing Application of the Appellants, the Appellants approached this Court by Special Leave Petitions No.11676 and 11677 of 2012 for expeditious hearing of the writ petitions. This Court vide order /judgment dated 22nd June, 2012, requested the Bombay High Court to take up the writ petitions for hearing on 2nd July, 2012.Resumption of Writ Petitions before Bombay High Court:
27. The hearing of the writ petitions in the Bombay High Court resumed on 2nd July, 2012. On 3rd July, 2012, the English High Court passed an order by consent, adjourning the Respondents' Application dated 11th June, 2012, until after the Bombay High Court delivers judgment in the writ petitions, and also vacating the hearing listed for 3rd-4th July, 2012. On 5th October, 2012, the Bombay High Court dismissed the writ petitions by the order/judgment impugned before us, wherein it has been, inter alia, held as under:
A. The scope of the enquiry under the Writ Petition No.7804 of 2009 is restricted to the existence of the arbitration agreement and not the main underlying contract (which can be challenged before the Arbitral Tribunal);
B. Prima facie, there is an arbitration agreement;
C. The curial law of the arbitration agreement is India;
D. London, designated as the venue in Clause 18.3 of the draft IPLA, is only a convenient geographical location;
E. London is not the seat;
F. English Courts have concurrent jurisdiction since the venue of arbitration is London.English Proceedings :
28. On 5th October, 2012, the English Solicitors of Respondent No.1 addressed a letter to the English Solicitors of Appellant No.1, in relation to re-listing of their Application dated 11th June, 2012 for appointment of a third arbitrator/re-constitution of the Arbitral Tribunal. In October, 2012, the parties communicated with each other for getting Applications of both the parties listed, which, apart from the Application dated 11th June, 2012, included the following:
A. An Application notice issued by Appellant No.1 on 16th October, 2012:
i. for a declaration that the undertaking given by Appellant No.1 as set out in Appendix A to the order dated 27th March, 2012 do not prevent it from filing a Special Leave Petition before the Supreme Court of India and, if leave be granted, pursuing such appeals; or
ii. if the undertakings (contrary to Appellant No.1's contention), do prevent Appellant No.1 from filing Special Leave Petitions before the Supreme Court of India or pursuing the same, then, a variation of the Undertakings to permit such Special Leave Petitions to be filed and, if leave be granted, to permit such appeals to be pursued.
B. An Application notice issued by the Respondents on 17th October, 2012 for:
i. a declaration that Appellant No.1 would be breaching the Undertakings by filing Special Leave Petitions to the Indian Supreme Court.
ii. an anti-suit injunction to restrain Appellant No.1 from filing Special Leave Petitions; and
iii. expedition for the hearing of the Respondent's Application issued on 11th June, 2012.
29. In the aforesaid Applications, the English High Court (Cooke, J.) in its judgment dated 30th November, 2012 observed inter alia as follows: "Paragraph 32: There are two critical issues with which the Damman (sic) Court and the Bombay High Court have been concerned. First, is there a binding arbitration agreement? Secondly, is the seat of the putative arbitration in London? What has arisen out of the Bombay High Court decision in addition is the question whether there is room for a supervisory jurisdiction in the English Courts where the seat is not in England under the provisions of s.2(4) of the English Arbitration Act."
"Paragraph 60: If the Supreme Court of India were, in due course, to consider that the Bombay High Court was wrong in its conclusion as to the seat of the arbitration or that there was a prima facie valid arbitration or that the English Court had concurrent supervisory jurisdiction, it would be a recipe for confusion and injustice if, in the meantime, the English Court were to conclude that England was the seat of the putative arbitration, and to assume jurisdiction over EIL and the putative arbitration, and to conclude that there was a valid arbitration agreement, whether on the basis of a good arguable case or the balance of probabilities.
Further, for it to exercise its powers, whether under s.2(1) or 2(4) or s.18 of the Arbitration Act in appointing a third arbitrator, would create real problems, should the Supreme Court decide differently. Paragraph 61: These are the very circumstances which courts must strive to avoid in line with a multitude of decisions of high authority, from the Abidin Daver (1984) AC 398 onwards, including E.I. Dupont de Nemours v. Agnew [1987] 2 Lloyd's Rep 585. The underlying rationale of Eder J.'s judgment leads inexorably, in my view, to the conclusion that the issues to be determined in India, which could otherwise fall to be determined here in England, must be decided first by the Indian Courts and that, despite the delay and difficulties involved, the decision of the Indian Supreme Court should be awaited."
30. From 3rd December to 14th December, 2012, the learned counsel for the parties made efforts to finalize a draft of the Form of Order and the accompanying undertaking(s) to be submitted to the English High Court; and ultimately, parties agreed to a short hearing before the English High Court. After a hearing, on 19th December, 2012 the parties again made efforts to finalize the Form of Order. Ultimately on 15th February, 2013, the English High Court passed an order declaring that the undertakings given on 27th March, 2012 (dealt with earlier in Para 25 of this judgment) do not prevent the defendant (Appellant herein) from filing and pursuing the Special Leave Petitions and, if leave be granted, the Substantive Appeals.
The English High Court further ordered the Appellant No.1 herein to give some fresh undertaking which will supersede and replace the undertakings given earlier on 27th March, 2012. These undertakings restrain the Appellants herein from seeking an injunction against the Respondents save if this Court determines that the seat of the arbitration is in India. It was further directed that the Appellants shall not seek an injunction restraining the Respondents from pursuing proceedings instituted in the English High Court against the Appellant on various grounds enumerated in the said undertakings.
31. Thereafter in February, 2013, the order/judgment dated 5th October, 2012 passed by the Bombay High Court was challenged in this court by way of present appeals. Submissions:
32. We have heard the learned senior counsel for the parties. I. Re: Concluded Contract:
33. The first submission of Mr. Rohinton Nariman is that there can be no arbitration agreement in the absence of a concluded contract. It was submitted that IPLA is not a concluded contract since it is not in consonance with the Agreed Principles. It was submitted that the parties merely entered into the 'Agreed Principles' on 29th September, 2006, to which a draft IPLA was annexed. Mr. Nariman submitted that the Agreed Principles formed the fundamental basis on which the final IPLA "was to be made to the satisfaction of all parties and then to be legally finally executed".
Mr. Nariman reiterated that there are certain discrepancies between the Agreed Principles and the IPLA. By its letter dated 3rd November, 2006, Appellant pointed out material discrepancies between the IPLA and the Agreed Principles. These discrepancies have been accepted to be present by the Respondents in the letter dated 24th November, 2006. In fact, the Respondents have never contended that IPLA is in accordance with the Agreed Principles. The Respondents have by their letters dated 29th October, 2006 and 24th November, 2006 accepted the primacy of the Agreed Principles.
34. Further, the Appellants have relied upon the correspondence prior and subsequent to the signing of the IPLA to demonstrate that there is no concluded contract. According to the learned senior counsel, the Respondents have deliberately not dealt with the correspondence subsequent to the IPLA except to submit that the same refers to agreements other than the IPLA. This, according to the learned senior counsel, is incorrect in view of the fact that email dated 24th November, 2006 refers to "final IPLA". According to Mr. Nariman, the outstanding contracts had to be in consonance with the Agreed Principles; therefore, there is no plausible explanation as to why only the IPLA should not be in consonance with the Agreed Principles. The subsequent correspondence, therefore, necessarily refers to all the four agreements mentioned in the Agreed Principles.
35. Mr. Nariman also pointed out that the reliance upon prior contracts/agreements or correspondence is not permissible to determine whether IPLA is concluded or not. On the contrary, subsequent correspondence and contracts can be looked into for the purpose of determining whether the substantive contract containing arbitration agreement is concluded or not. He relied on Godhra Electricity Co. Ltd. And Anr. Vs. The State of Gujarat and Anr.[1] According to Mr. Nariman, subsequent correspondence in this regard clearly demonstrates the unconcluded nature of the IPLA.
36. Mr. Nariman submitted that under Clause 12 of the IPLA, the duration of the IPLA was till the expiry of the last of the patents, and since the patents portfolio was absent, the duration of IPLA could not be ascertained. He pointed out that the Respondents have wrongly contended that the IPLA has been concluded as the parties have duly signed the same. According to Mr. Nariman, mere signing of a document will not make it a concluded document, if in law, the contract is not concluded. In this context, reliance was placed upon British Electrical vs. Patley Pressings,[2] Harvey vs. Pratt,[3] Bushwall vs. Vortex,[4] Kollipara vs. Aswathanarayana[5] and Dresser Rand vs. Bindal Agro.[6] II. Re: Existence of Arbitration Agreement
37. As noticed above, the primary submission of the Appellants, is that IPLA is not a concluded contract. It was then submitted that since there is no concluded contract, there is no question of an arbitration agreement coming into existence. In any event, the challenge to the existence of the substantive agreement is a matter required to be determined by the Court seized of the matter in the exercise of jurisdiction under Section 45 of the Indian Arbitration Act, 1996. Reliance was placed upon Chloro Controls (I) Pvt. Ltd. Vs. Severn Trent Water Purification Inc. & Ors.[7] According to Mr. Nariman, it is no longer open to contend that the question whether the contract is concluded or not can be gone into by the Arbitral Tribunal.III. Re: Un-workability of Arbitration Agreement
38. It was submitted that Clause 18.1 of the IPLA is incapable of being performed and therefore, there can be no reference to arbitration under Section 45 of the Indian Arbitration Act, 1996. It was submitted that the High Court has held that "each of the licensors (Respondents) has to appoint an arbitrator and the licensee (Appellant No.1) is to appoint one arbitrator .................................. making it in all three arbitrators". As such, the High Court has misread Clause 18.3 of the IPLA to mean that each of the licensors (Respondent No.1 and Respondent No.2) has a right to appoint an arbitrator and that the Appellant No.1 also has the right to appoint an arbitrator. The construction of Clause 18.1 of the IPLA in the aforesaid manner, according to learned senior counsel, is contrary to the expressed terms of Clause 18.1 in the light of the definition of licensor and licensors contained therein as well as certain other provisions of the IPLA. Mr. Nariman also pointed out that the Respondents, however, have not sought to sustain the aforesaid reasoning of the High Court.
39. He further submitted that even though an arbitration clause can be construed by the Court in such a way as to make it workable when there is a defect or an omission, nonetheless, such an exercise would not permit the Court to rewrite the clause. In support of the submissions, he relied upon Shin Satellite Public Co. Ltd. Vs. Jain Studio Ltd.[8] He also submitted that the reconstruction of the arbitration clause in the present case cannot be achieved without doing violence to the language to the arbitration clause; and that this would not be permissible in law. For this proposition, reliance was placed upon Bushwall Vs. Vortex (supra). He submitted that the submissions made by the Respondents fly in the face of Section 45 of the Indian Arbitration Act, 1996 which does not permit the Court to make a reference to arbitration if the arbitration agreement relied upon is incapable of being performed.IV. Re: Seat of Arbitration.
40. Mr. Nariman submitted that for the purposes of fixing the seat of arbitration the Court would have to determine the territory that will have the closest and most intimate connection with the arbitration. He pointed out that in the present case provisions of the Indian Arbitration Act, 1996 are to apply; substantive law of the contract is Indian law; law governing the arbitration is Indian Arbitration law; curial law is that of India; Patents law is that of India; IPLA is to be acted upon in India; enforcement of the award is to be done under the Indian law; Joint Venture Agreement between the parties is to be acted upon in India; relevant assets are in India.
Therefore, applying the ratio of law in 'Naviera Amazonica Peruana S.A. Vs. Compania Internacional De Seguros Del Peru[9]', the seat of arbitration would be India. The submission is also sought to be supported by the Constitution Bench decision of this Court in "Bharat Aluminium Company Vs. Kaiser Aluminium[10] ("BALCO"). Mr. Nariman submitted that the interpretation proposed by the Respondents that the venue London must be construed as seat is absurd. Neither party is British, one being German and the other being Indian.
He submits that the Respondents have accepted that the choice of law of the underlying agreement is Indian. But, if 'venue of arbitration' is to be interpreted as making London the seat of arbitration it would:
(a) make the English Act applicable when it is not chosen by the parties;
(b) would render the parties' choice of the Indian Arbitration Act, 1996 completely nugatory and otiose.
It would exclude the application of Chapter V of the Indian Arbitration Act, 1996 i.e. the curial law provisions and Section 34 of the Indian Arbitration Act, 1996. On the other hand, interpretation propounded by the Appellants would give full and complete effect to the entire clause as it stands.
41. Mr. Nariman also submitted that there are even more clear indicators within the arbitration clause which show that the parties intended to be governed only by the Indian Arbitration Act, 1996. The clause uses the word Presiding Arbitrator and not Chairman; this language is expressly used in Sections 11 and 29 of the Indian Arbitration Act, 1996 as distinct from Section 30 of the English Arbitration Act, 1996.
42. Mr. Nariman gave another reason as to why London can't be the seat of the Arbitration. According to him, if the interpretation propounded by the Respondents is accepted, it would lead to utter chaos, confusion and unnecessary complications. This would result in absurdity because the Indian Arbitration Act, 1996 would apply to the process of appointment under Section 11; English Arbitration Act, 1996 would apply to the arbitration proceedings (despite the choice of the parties to apply Chapter V to the Part I of the Indian Arbitration Act, 1996); challenge to the award would be under English Arbitration Act, 1996 and not under the Part I of the Indian Arbitration Act, 1996; Indian Arbitration Act, 1996 (Section 48) would apply to the enforcement of the award.
43. Lastly, it was submitted by Mr. Nariman that provisions of Section 18 of the English Arbitration Act, 1996 are derogable and in any event the parties have chosen the Indian Court for constitution of Arbitral Tribunal.V. Re: Anti Suit Injunction
44. It was submitted on behalf of the Appellants that since the seat of arbitration is India, the Courts of England would have no jurisdiction. Appellants rely upon Oil & Natural Gas Commission Vs. Western Company of North America[11]. Reliance was also placed upon Modi Entertainment Network & Anr. Vs. W.S.G. Cricket Pte. Ltd.[12], in support of the submission that in exercising discretion to grant an anti-suit injunction, the Court must be satisfied that the defendant is amenable to the personal jurisdiction of the Court and that if the injunction is declined the ends of justice will be defeated. The Court is also required to take due notice of the principle of comity of Courts, therefore, where more than one forum is available, the Court would have to examine as to which is forum conveniens.
45. According to Mr. Nariman, all the tests which authorise the Indian Courts to exercise jurisdiction to grant the necessary relief, as laid down are being satisfied by the Appellants. According to Mr. Nariman, the English Courts are not available to the Respondents since London is only a venue. Therefore, an injunction ought to be issued restraining the Respondents from pursuing proceedings before the English Court. Mr. Nariman pointed out that the Respondents have given up the contention that Indian and English Courts have concurrent jurisdiction.
46. Reliance is placed on the judgment of this Court in Harshad Chiman Lal Modi Vs. DLF Universal[13], in support of the submission that since Respondent No.1 has share holding in a company which has registered office within the territorial limits of the Daman Court, therefore relief can be necessarily granted to the Appellants for restraining Respondent No.1 for proceeding in the English Courts.
It was also pointed out that Respondent No.1 has approached the Company Law Board under Section 397 of the Companies Act; the Delhi High Court alleging infringement of its intellectual property rights; and the Madras High Court against the orders passed by the Intellectual Property Appellate Board, revoking patents in the name of Dr. Wobben in India. Therefore, it has already submitted to the jurisdiction of Courts in India. Mr. Nariman, however, points out that in view of the orders of the English Court dated 15th February, 2013, restraining the Appellants from seeking an injunction against the Respondents save if this Court determines the seat of the arbitration is India, the Appellants shall not seek any injunction from this Court, unless this Court determines that the seat of arbitration is in India. Respondents' Submissions:
47. Dr. Abhishek Manu Singhvi, learned senior counsel, appeared for Respondents No.1 and 2. Dr. Singhvi submitted that the over- riding principle for the Courts in Arbitration is to see whether there is an intention to arbitrate. According to Dr. Singhvi, the Appellants attack the existence of the main contract, but it is only the arbitration clause that the court has to concern itself with. The court in this case, according to Dr. Singhvi, is not required to determine whether there is a concluded contract, under the Indian Contract Act, 1872. The court has to see whether there is a valid Arbitration Agreement. Dr. Singhvi emphasised that it is for the arbitrator to decide the question with regard to the formation of the underlying contract (IPLA). Further, learned senior counsel submitted that the status of IPLA will not nullify the arbitration clause.
48. The Respondent, according to the learned senior counsel, has to establish the existence of arbitration agreement. Dr. Singhvi, in this context, relied upon Section 7 of the Indian Arbitration Act, 1996 which has three constituents, viz.
(i) Intention to arbitrate;
(ii) Existence of a dispute;
(iii) Existence of some legal relationship.
Further, it was submitted that an agreement under Section 7 of the Indian Arbitration Act, 1996 does not require any offer and acceptance.
49. It was further submitted that Section 16 of the Indian Arbitration Act, 1996 is a drastic departure since the Arbitral Tribunal can rule on its own jurisdiction. Further, it was submitted under Section 16(a) of the Indian Arbitration Act, 1996 the existence of the arbitration clause in the contract would be treated as an agreement independent of the contract. Learned senior counsel also brought to our attention Section 45 of the Indian Arbitration Act, 1996 and its interpretation by this court in Chloro Controls India Pvt. Ltd. v. Severn Trent Water Purification Inc (supra). In the aforesaid case, this Court, in Para 120, relied upon the earlier judgment of National Insurance Company Ltd. V. Bhogara Polyfab Pvt. Ltd.[14], and categorised the issues that have to be decided under Section 45 as follows:
A. The issues which the Chief Justice/his designate will have to decide: the question as to whether there is an arbitration agreement.
B. The issues which the Chief Justice/his designate may choose to decide or leave them to be decided by the Arbitral Tribunal: the question as to whether the claim is a dead claim (long- barred) or a live claim.
C. The issues which the Chief Justice/his designate should leave exclusively to the Arbitral Tribunal. The question concerning the merits or any claim involved in the arbitration.
50. Dr. Singhvi then submitted that leaving aside the question of un- workability of the arbitration clause for the moment, the intention of the parties in the instant case may be determined from the following clauses of IPLA:
"17 GOVERNING LAW
17.1 This Agreement and any dispute of claims arising out of or in connection with its subject matter are governed by and construed in accordance with the Law of India.
18. DISPUTES AND ARBITRATION
18.1 All disputes, controversies or differences which may arise between the Parties in respect of this Agreement including without limitation to the validity, interpretation, construction performance and enforcement or alleged breach of this Agreement, the Parties shall, in the first instance, attempt to resolve such dispute, controversy or difference through mutual consultation. If the dispute, controversy or difference is not resolved through mutual consultation within 30 days after commencement of discussions or such longer period as the Parties may agree in writing, any Party may refer dispute(s), controversy(ies) or difference(s) for resolution to an arbitral tribunal to consist of three (3) arbitrators, of who one will be appointed by each of the Licensor and the Licensee and the arbitrator appointed by Licensor shall also act as the presiding arbitrator.
18.2 * * *
18.3 A proceedings in such arbitration shall be conducted in English. The venue of the arbitration proceedings shall be in London. The arbitrators may (but shall not be obliged to) award costs and reasonable expenses (including reasonable-fees of counsel) to the Party (ies) that substantially prevail on merit. The provisions of Indian Arbitration and Conciliation Act, 1996 shall apply. The reference of any matter, dispute or claim or arbitration pursuant to this Section 18 or the continuance of any arbitration proceedings consequent thereto or both will in no way operate as a waiver of the obligations of the parties to perform their respective obligations under this Agreement."
51. Dr. Singhvi also drew our attention to the fact that the Heads of the Agreement have been accepted to be final and binding and that the parties have irrevocably accepted the Arbitration Agreement contained in Clause 18. It was also brought to our notice that the said document has been signed by the Appellant No.1 and Respondent No.1.
52. Learned Senior Counsel also submitted that an arbitration agreement would include the following:
a. Intention to arbitrate;
b. Intention to settle by Arbitration after failure of ADR i.e. negotiations/conciliation/mediation.
C. Some law (i.e. proper law) to settle the Disputes (which in this case is Indian Law)
D. Does the arbitration clause cover all disputes or is there a carve out? In this case the clause covers all disputes.
E. Substantive Law to Arbitrate. Here it is the Indian Arbitration Act, 1996. It was further submitted that since all the essential elements of the arbitration are present, clumsy drafting will not make any difference in interpretation of the Arbitration clause.
53. The next submission of Dr. Singhvi, broadly put, is that the arbitration clause is not un-workable. The crucial question in this context is not whether the Arbitration Clause could be differently drafted, but the clause has to be seen in the manner it has been drafted. Dr. Singhvi submitted that in fact there is no mismatch between different parts of the clause. The clause, according to Dr. Singhvi, talks of three arbitrators: one by the licensee, one by the licensor. The implication is that the third one is to be appointed by the two arbitrators. Dr. Singhvi submits that the sentence "the third arbitrator shall be appointed by the two arbitrators" seems to have been missed out by the draftsman. This can be supplied by the Court to make the arbitration clause workable.
54. It was further submitted that the missing sentence in the arbitration clause can be supplied with the aid of some of the provisions of the Indian Arbitration Act, 1996. In this context, learned senior counsel brought to our attention Sections 10 (1) and (2) read with section 11 of the Indian Arbitration Act, 1996. Section 10 (1) and 2 read as: "10. Number of arbitrators. (1) The parties are free to determine the number of arbitrators, provided that such number shall not be an even number. (2) Failing the determination referred to in sub- section (1), the arbitral tribunal shall consist of a sole arbitrator." Section 11(1) & (2) reads as: Appointment of arbitrators. (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to sub- section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
55. Learned senior counsel also pointed out that the object underlying Sections 10 and 11 is to avoid failure in appointment of arbitrators. In fact, the Respondents tried to avoid the failure by making a concession to let the third arbitrator to be the Presiding Arbitrator. The Letter/email dated 13th March, 2008 clearly demonstrates this intention of Respondents. It was also submitted that the Appellant is determined to avoid the arbitration.
Dr. Singhvi submitted that there exists a manifest intention to refer disputes to arbitration and even if there is lacuna it can be cured. Furthermore, according to Dr. Singhvi, the number of arbitrators is only machinery and, therefore, its failure cannot affect the Arbitration Clause. Learned senior counsel relied upon the law laid down in MMTC v. Sterlite Industries (India) Ltd.,[15] Shin Satellite Public Co. Ltd. v. Jain Studios Ltd., (supra) Visa International Ltd. v. Continental Resources (USA) Ltd.,[16] Jagdish Chander v. Ramesh Chander & Ors.,[17] Smt. Rukmanibai Gupta v. Collector, Jabalpur & Ors.,[18] and Nandan Biometrix Ltd. v. D.I. Oils.[19] After taking us through the afore cited cases, Dr. Singhvi submitted that the parties in the instant case had expressed an intention to arbitrate and that there is no contrary intention.
56. The next submission of Dr. Singhvi is that the IPLA is final. It was submitted that IPLA was to succeed the Know How Agreement that contained an Arbitration Clause. Learned Senior counsel brought to our attention following provisions of the Heads of Agreement on a Proposed IPLA dated 23.05.2006:
"1.6 The Parties have discussed intensively the most appropriate structure and arrangements reflected in the draft IPLA dated 22, May 2006 attached as ANNEX 1 ("Draft IPLA"). This draft IPLA expresses the final views of the parties and provides for detailed terms where under Enercon will make available to EIL the benefit of all its technology including patents, design rights, copyrights, trademarks and know how relating to the Products, including but not limited to: ......................................................................"
"3. GOVERNING LAW AND JURISDICTION
3.1 This paragraph is legally binding.
3.2 This Heads of Agreement is (and all negotiations and any legal agreement prepared in connection with IPLA shall be governed by and construed in accordance with the law of Germany.
3.3 The parties irrevocably agree that Clause 18 of the proposed draft IPLA shall apply to settle any dispute or claim that arises out or in connection with this memorandum of understanding and negotiations relating to the proposed IPLA."
"4.1 This Heads of Agreement represents the good faith intentions of the parties to proceed with the proposed IPLA on the basis of the Draft IPLA but is not legally binding and creates no legal obligations on either party. Its sole purpose is to set out the principles on which the parties intend in good faith to negotiate legally definitive agreements."
57. Learned Senior Counsel also pointed out the email sent on 27.06.2006 by Nicole Fritsch on behalf of Respondents to the Appellant No.2 and also the email sent by Appellant No.2 on 16.09.2006 to Nicole Fritsch in context of the submission that IPLA is final. These emails have already been noticed in the earlier part of this judgment.
58. It was also pointed out that the Appellant by his letter dated 30th September, 2006 expressly admitted to having signed the IPLA. Thus, it was submitted that the Appellant cannot get out of the contract unless there is coercion and/or fraud. To argue that there is now a presumption of validity in favour of IPLA being a concluded contract, reliance was sought to be placed upon Grasim Industries Ltd. & Anr. v. Agarwal Steel[20] and J.K. Jain v. Delhi Development Authority.[21]
59. Dr. Singhvi also brought to our notice that the execution and finality of the IPLA is also demonstrated by the fact that first page of Heads of Agreement dated 23rd May, 2006 reads as "A PROPOSED INTELLECTUAL PROPERTY LICENSE AGREEMENT." Whereas, the word proposed or draft is conspicuously absent in the IPLA dated 29th September, 2006. This, according to the learned senior counsel, shows that the IPLA was a concluded contract. Dr. Singhvi further submitted that on 29th September, 2006 three drafts, viz. Successive Technical Transfer Agreement, Name Use License Agreement and amendments to the existing Shareholders Agreement were ready and available to the parties, but at that point of time these agreements were under discussion and being negotiated. Admittedly, none of these agreements were initialled, let alone signed by the parties.
This, according to Dr. Singhvi, is a clear indication that the parties were aware of the documents that were to be finalised between them and also of the documents that were required to be executed. This fact was also relied upon to support the contention that IPLA is a final and concluded agreement that was knowingly and willingly executed by Appellant No.2. To add credibility to this submission, learned senior counsel pointed out that 'E-82 Model' is expressly excluded from the product description in the IPLA. This according to Dr. Singhvi, is a deviation from the earlier agreement, and it has been acknowledged by the Appellant. Dr. Singhvi also pointed out the difference as to the provision of royalty between the IPLA and earlier draft to support his contention.
60. The next set of submissions made by Dr. Singhvi relate to the seat of arbitration. Learned senior counsel submitted that the court has to determine where the centre of gravity for arbitration is situated. The terms that are normally used to denote seat are "venue", "place" or "seat". According to the learned senior counsel, the court cannot adopt a semantic approach. It was also submitted that under sub sections (1), (2) and (3) of Section 20 of Arbitration Act, 1996 the term 'place' connotes different meanings. Under Section 20(1), place means seat of arbitration, whereas under section 20(3), place would mean venue. Therefore, the expression "the venue of arbitration proceedings" will have reference only to the seat of arbitration. It was submitted that all the surrounding circumstances would also show that parties intended to designate England as the seat of arbitration.
61. It was also submitted that all the proceedings between the parties would indicate that there is nothing to indicate India as the choice of the seat of arbitration. Learned senior counsel relied upon Shashoua v. Sharma,[22] Dozco India Pvt. Ltd. V. Doosan Infracore Company Ltd.[23] Videocon Industries v. Union of India,[24] Yograj Infrastructure Ltd. V. Ssang Yong Engineering and Construction Ltd.[25] National Agricultural Coop. Marketing Federation India (supra).
62. It was further submitted that three potential laws that govern an arbitration agreement are as follows :
1. The proper law of the contract ;
2. The law governing the arbitration agreement ;
3. The law governing the conduct of the arbitration also known as curial law or lex arbitri.
63. Reliance was placed upon the following except of Naviera Amazonica Peruana SA (supra): "........in the majority of cases all three will be same but (1) will often be different from (2) and (3). And occasionally, but rarely, (2) may also differ from (3)."
64. The next submission of Dr. Singhvi is that law of the seat dictates the curial law, and that the proper law of the arbitration agreement does not overwhelm law of the seat. Laying particular emphasis on Naviera, Dr. Singhvi submitted that intention of the parties is important to determine the seat. If place is designated then curial law will be that of such place. Dr. Singhvi relied on the ratio of Naviera and submitted that the proper law, law of arbitration and the curial law have all been expressly mentioned in the present case. It was also submitted that in the present case London as venue has to be interpreted having conferred London the status of seat, unless some contrary intention has been expressed.
65. According to Dr. Singhvi, closest connection test is completely irrelevant when the parties have specified all the three laws applicable in a contract. Further, close connection test is to be applied only when nothing has been mentioned in the agreement. The effort of the court is always to find the essential venue. He relied upon Dicey, Morris & Collins[26] to submit that in most cases, seat is sufficiently indicated by the country chosen as the place of the arbitration. Dr. Singhvi submitted that the proper law and law of arbitration cannot override curial law.
66. Dr. Singhvi relied heavily on the ratio of the law laid down in Naviera (supra). Reliance was also placed upon the cases of C vs. D.[27] and Union of India v/s McDonnel.[28] He also relied upon the ratio of Balco in support of the submission that London is the seat of arbitration. Particular reference was made to Paras 75,76, 96, 100, 104, 113, 116 and 117 of BALCO's judgment to submit that since the seat is outside India, only those provisions of Part I of the Indian Arbitration Act, 1996 will be applicable, which are not inconsistent with the English Law, i.e., English Arbitration Act, 1996.Anti-Suit injunction:
67. Dr. Singhvi submitted that the prayer of Appellants for an anti suit injunction is subject to determination by this court that the seat is India. Dr. Singhvi, however, argued that such an injunction be denied even if this court holds that the seat of arbitration is India since there is no occasion that warrants the grant of such an injunction. The Respondents relied upon the judgment of this court in Modi Entertainment Network v. W.S.G. Cricket Pte. Ltd. (supra) to submit that the present case does not fall within any, let alone all, of the parameters set out in the aforesaid case that determine the grant of an anti-suit injunction.
68. Mr. C.U. Singh, learned senior advocate, appeared for Respondent no.2. Mr. Singh adopts the submissions made before this court by Dr. Singhvi. Besides, Mr. Singh submitted that after the enactment of the Indian Arbitration Act, 1996 the distinction between the seat and the venue has blurred. The term that has been used by the Parliament is 'place' which denotes the place of physical sitting of the Arbitral Tribunal. This is the place which governs the curial law. However, Arbitrators have been given the flexibility to hold meetings anywhere. He also relied upon the judgment of this court in Chloro (supra) (Paras 80-83) to submit that the approach of the court is to make the arbitration clause workable. Reliance was also placed upon Reva Electric Car Company P. Ltd. v. Green Mobil.[29]Issues :
69. We have anxiously considered the submissions of the learned counsel for the parties. We have also considered the written submissions. The issues that arise for consideration of this Court are :
i) Is the IPLA a valid and concluded contract?
ii) Is it for the Court to decide issue No. (i) or should it be left to be considered by the Arbitral Tribunal?
iii) Linked to (i) and (ii) is the issue whether the Appellants can refuse to join arbitration on the plea that there is no concluded IPLA?
iv) Assuming that the IPLA is a concluded contract; is the Arbitration Clause 18.1 vague and unworkable, as observed by both the Arbitrators i.e. Mr. V.V. Veeder QC and Mr. Justice B.P. Jeevan Reddy?
v) In case the arbitration clause is held to be workable, is the seat of arbitration in London or in India?
vi) In the event it is held that the seat is in India, would the English Courts have the concurrent jurisdiction for taking such measures as required in support of the arbitration as the venue for the arbitration proceedings is London?
vii) Linked to (v) & (vi) is the issue whether the Appellants are entitled for an anti-suit injunction? These, of course, are only broad based issues; many other supplementary questions will have to be examined in order to give a definitive determination. Our Conclusions : Issues (i), (ii) and (iii)
70. Is the IPLA a valid and a concluded contract? Is it for the Court to decide this issue or have the parties intended to let the arbitral tribunal decide it?
71. The Bombay High Court upon consideration of the factual as well as the legal issues has concluded that "there can be no escape for the Appellants from the consequences flowing from the signing of the IPLA; and the signing of the IPLA by the parties is therefore a strong circumstance in arriving at a prima facie conclusion as enunciated in Shin-Etsu Chemicals Co. Ltd.'s case for referring the parties to arbitration."
72. The Daman Trial Court on the basis of the material on record came to the conclusion that IPLA was not a concluded contract for the want of free consent, and was executed due to undue influence, fraud, misrepresentation and mistake. It further held that the plaintiffs (the Appellants herein) would suffer heavy economic loss if the arbitration is held at London. These findings were reversed by the Daman Appellate Court. It was held that since IPLA has been signed by the parties, there was a valid arbitration agreement for reference of the disputes to arbitration. It was also held that assuming that there was some defect in the methodology for appointment of the arbitrators that would not come in the way of enforcement of the arbitration agreement. The Daman Appellate Court has further held that since the parties had agreed to London being the seat of arbitration, the Appellants (plaintiffs) could not raise a grievance as regards the jurisdiction of the English Courts.
73. Mr. R.F. Nariman, learned senior counsel, appearing for the Appellants has vehemently argued that there is neither a concluded IPLA between the parties nor is there a legally enforceable arbitration agreement. In any event, the arbitration can not proceed as the arbitration clause itself is unworkable. As noticed earlier, learned senior counsel has submitted that in the absence of a concluded contract, there can be no arbitration agreement. In short, the submission is that there can be no severability of the arbitration clause from the IPLA. Since the IPLA is not a concluded contract there can be no arbitration agreement.
74. On the other hand, Dr. Singhvi has submitted, as noticed earlier, that the intention of the parties to arbitrate is clear. Even if the existence of the main contract is under dispute, the court is concerned only with the arbitration agreement i.e. the arbitration clause. The submission of Dr. Singhvi is that the absence of IPLA will not nullify the arbitration clause.
75. We find considerable merit in the submissions made by Dr. Singhvi. It cannot be disputed that there is a legal relationship between the parties of a long standing. Section 44 of the Indian Arbitration Act, 1996 applies to arbitral awards of differences between persons arising out of legal proceedings. Such a relationship may be contractual or not, so long it is considered as commercial under the laws in force in India. Further, that legal relationship must be in pursuance of an agreement, in writing, for arbitration, to which the New York Convention applies.
The court can decline to make a reference to arbitration in case it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. There are no pleadings to that effect in the plaint. The Daman Trial Court findings that the contract is null and void and not based on free consent were rendered in the absence of relevant pleadings. There is a mention in one of the e-mails that Dr. Wobben has taken advantage of his friendship with Mr. Yogesh Mehra. But that seems to be more of a sulk than a genuine grievance. Even if one accepts the truth of such a statement, the same is not reflected in the pleadings. Therefore, no serious note could be taken of that statement at this stage.
The Daman Appellate Court upon reconsideration of the pleadings found that there is no plea to the effect that the agreement is null, void or incapable of being performed. Justice Savant has not examined the pleadings as the issue with regard to the underlying contract has been left to be examined by the Arbitral Tribunal. Before us also, it is not the plea of the Appellants that the arbitration agreement is without free consent, or has been procured by coercion, undue influence, fraud, misrepresentation or was signed under a mistake. In other words, it is not claimed that the agreement is null and void, inoperative and incapable of being performed as it violates any of the provisions under Sections 14, 15, 16, 17, 18, 19, 19A and 20 of the Indian Contract Act, 1872.
The submission is that the matter cannot be referred to arbitration as the IPLA, containing the arbitration clause/agreement, is not a concluded contract. This, in our opinion, would not fall within the parameters of an agreement being "null and void, inoperative or incapable of being performed", in terms of Sections 14, 15, 16, 17, 18, 19 and 20 of the Indian Contract Act, 1872. These provisions set out the impediments, infirmities or eventualities that would render a particular provision of a contract or the whole contract void or voidable. Section 14 defines free consent; Section 15 defines coercion in causing any person to enter into a contract. Section 16 deals with undue influence. Fraud in relation to a contract is defined under Section 17; whereas misrepresentation is defined and explained under Section 18.
Section 19 states that "when consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused". Section 19A gives the party who was unduly influenced to enter into a contract an option similar to the one provided by the preceding section. Section 20 makes an agreement void where both the parties thereto are under a mistake as to a matter of fact. In our opinion, all the aforesaid eventualities refer to fundamental legal impediments. These are the defences to resist a claim for sp
