M Class: LLB.

(TYC) 6th Semester

Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

a M.M.T.C. LIMITED
v.
STERLITE INDUSTRIES (INDIA) LTD.
AIR 1997 SC 605
Petitioner

Respondents

r
INTRODUCTION: The judgement deals with the effect of The Arbitration and Conciliation
Act, 1996 in the present case on the Arbitration agreement made prior to the commencement of
the New Act.

FACTS OF THE CASE: The appellant and respondents vide an agreement dated 14.12.1993

k agreed that in the event of any dispute arising out of the agreement, the matter in dispute shall
be referred to Arbitration. It was also mentioned in the agreement that both the parties shall
nominate an Arbitrator each and Arbitrators shall appoint an Umpire. The decision of the

e
Umpire shall be binding on the parties. Besides this Arbitrator shall be empowered to extend the
time for making award and while making such award the reason, in support must be given.
Thereafter a dispute arose between the parties and Sterlite Industries (India) Ltd., - respondent,
claimed that it had not received certain dues under the contract from the appellant- MMTC Ltd.

t
and, therefore, it invoked the above arbitration clause in the agreement between them by a letter
dated 19.01.1996 which was received by the MMTC Ltd. on 31.01.1996. On 07.02.1996 the
respondent appointed Shri M.N. Chandurkar, a former Chief Justice of Madras High Court, as
its arbitrator. The MMTC Ltd. claimed that arbitration could not be resorted to and, therefore, it

i
did not name its arbitrator. The Sterlite Industries (India) Ltd. filed an application in the
Bombay High Court for appointing an arbitrator in accordance with the New Act.

DECISION OF BOMBAY HIGH COURT: The High Court gave time to the MMTC Ltd. till

n
05.07.1996 to appoint an arbitrator. It further held that in the event of the MMTC Ltd. failing to
name its arbitrator, the arbitrator appointed by Sterlite Industries (India) Ltd. would be the sole
arbitrator under the New Act. The MMTC Ltd. appointed Shri S.N. Sapra- a former Judge of
the Delhi High Court as its arbitrator. Hence this appeal by special leave.

g LEGAL ISSUED INVOLVED:

1)
2)
Whether there is anything in the New Act to make such an agreement unenforceable?
Whether the provision of section 10 (2) of New Act, 1996 is applicable or not?
3) Whether the Arbitration agreement is invalid under the New Act, 1996?
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

CONTENTIONS BY THE APPELLANT :The appellant contended that an arbitration

agreement providing for the appointment of an even number of arbitrators is not a valid
agreement because of Section 10(1) of the New Act; and, therefore the only remedy in such a
case is by a suit and not by arbitration.

CONTENTIONS BY THE RESPONDENT: The respondent contended that there is no such

inconsistency between Section 10 of the New Act and the corresponding provision in the 1940
Act, both being substantially the same. Each of the parties having nominated its arbitrator, the
third arbitrator was required to be appointed according to Section 11(3) and the failure to do so
attracts the consequential results under the New Act. It is further contended that the provision
for number of arbitrators is a machinery provision and does not affect the validity of the
arbitration agreement which is to be determined according to Section 7 of the New Act.

DECISION OF THE HON’BLE SUPREME COURT: The Court held that the agreement is
unenforceable. There is no dispute that the arbitral proceeding in the present case commenced
after the New Act came into force and, therefore, the New Act applies. In view of the term in
the arbitration agreement that the two arbitrators would appoint the umpire or the third
arbitrator before proceeding with the reference, the requirement of Sub-section (1) of Section
10 is satisfied and sub-section (2) thereof has no application. The agreement satisfies the
requirement of Section 7 of the Act and therefore, is a valid arbitration agreement. The
appointment of arbitrators must, therefore, be governed by Section 11 of the New Act. The
Court directed the Chief Justice of the High Court to appoint the third arbitrator under Section
11(4)(b) of the New Act in view of the failure of the two appointed arbitrators to appoint the
third arbitrator within thirty days from the date of their appointments.

The appeal is disposed of accordingly.

Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

Haresh Dayaram Thakur …Appellant

Vs
State Of Maharashtra And Ors. …Respondent.
AIR 2000 (6) SCC 2281

INTRODUCTION: This Judgment deals with the provisions of Sections 73 and 74 of The
Arbitration and Conciliation Act, 1996. It puts a light upon the difference between the
proceedings of Arbitration & Conciliation. The Supreme Court in this judgment observed that
the settlement reaches finality only when the Settlement Agreement is signed by both/all the
parties in the dispute.

FACTS OF THE CASE:

1. Haresh Dayaram Thakur (Appellant) and Pitambar Dayaram Thakur are brothers.
Pitambar and his wife Raj Kumari are the respondents in the present case. Maharashtra
Housing & Area Development Authority, Mumbai (MHADA) has granted lease of the
disputed flat (Flat No. 16/199) to N.H. Krishnan, who transferred his rights, title and
interests to Manmeet Singh under an agreement of transfer.
2. The rights, title and interest of the flat was purchased by Haresh Dayaram (Appellant)
for a consideration of ₹ 3,45,000 and he applied to MHADA for the allotment of the flat
in his name. On a routine inspection of the premises by the estate manager of MHADA
reported that property was in the occupation of the appellant (Haresh) and respondents
(Pitamber & Raj Kumari) though it stood in the name of N.H. Krishnan and therefore
they were unauthorized occupants of the flat.
3. MHADA evicted all the unauthorized occupants from the flat and sealed the same. But
the permission was given to the present appellant (Haresh) to establish his claim in
respect of the property. MHADA regularized the allotment of the flat of the appellant by
an order under the Maharashtra Housing and Development Act.
4. Pitamber (Respondent) filed a Writ Petition before the Bombay High Court challenging
the order of eviction. It was contended that he also made the contribution of ₹ 1,25,000
for the purchase of the flat along with his brother.

DECISIONS BY DIFFERENT AUTHORITIES:

Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

 Decision of Bombay High Court: A Division Bench of the High Court disposed of the
Writ Petition directing, inter alia that the competent authority of MHADA would re-
examine the claims of the respondent (Pitamber) as well as the appellant (Haresh) and
pass a speaking order in the accordance with the law.
 Decision of MHADA: In compliance with the decision of the High Court the competent
authority rejecting the claim of the respondent and confirming the allotment of the flat
in the name of the appellant.

The respondents challenged the order of the MHADA by filing a Writ Petition under Article
226 and 227 of the Constitution asserting their title to the property.

DECISION OF THE HIGH COURT: In the above said Writ Petition the High Court
appointed a Conciliator with the regard to the dispute between the parties with the consent of
the petitioner and respondent.

DECISION OF THE CONCILIATOR: After hearing both the parties, the Conciliator
suggested that the matter could be settled on the Pitamber paying an amount of ₹4,00,000 to
Haresh and the petitioner would then be entitled to the flat and put in his possession.

LEGAL ISSUES INVOLVED

1. Whether the settlement by the Conciliator is to be signed by both the parties or not?
2. Whether the report made by the Conciliator is to be disclosed to both the partied or not?
3. Whether mere consent, given by the parties, to appoint the Conciliator means that the
order given by the Conciliator would be final or not?

FINDINGS OF THE COURT

1. The Arbitration and Conciliation Act, 1996 deals with two types of proceedings i.e.
Arbitration (Sec. 1 to 60) and Conciliation (Sec. 61 to 81). Therefore the arbitration and
conciliation are different from each other.
2. According to Sec. 73 (2) & (3) of then Arbitration and Conciliation Act,1996 the
Settlement Agreement must be signed by the parties, only then the Settlement
Agreement would be final and binding. According to Sec. 73(4) of the Act, the
Conciliator shall furnish a copy of settlement to each of the parties.
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

3. Conciliator is a person who is to assist the parties to settle the dispute between them
amicably. Conciliator is to proceed according to the procedure laid down in Sec. 73 of
the said Act.
4. According to Section 73 sub section (3) a Settlement Agreement becomes final and
binding on the parties and persons claiming under them only when it is signed by the
parties. A settlement has the status and effect of legal sanctity of an Arbitral Award u/s
73 only when it is signed by the parties.
5. The Conciliator failed to take note on the provisions of the Act and a clear distinction
between the Arbitration proceedings and Conciliation proceedings. In the present case,
the settlement agreement drawn up by the Conciliator does not bear the signature of the
parties. Therefore the settlement made cannot be final and binding.

DECISION OF THE SUPREME COURT : The appeal was allowed by the Supreme Court.
The order passed by the Bombay High Court was set aside by the Supreme Court. The
Settlement Agreement filed by the Conciliator before the High Court is also set aside. The High
Court is directed to dispose of the Writ Petition afresh on merit in accordance with law. Both
the parties have to bear their own costs.

APPEAL ALLOWED

Grid Corporation of Orissa Ltd. Appellant

v.
M/s Indian Charge Chrome Ltd. and Others Respondents
AIR 1998 SC 1761

INTRODUCTION: The appeals are directed against a common Judgment and Order dated 10-
2-98 passed by the Learned Chief Justice of Orissa High Court, Cuttak. All these appeals are
disposed of by this Judgment.

FACTS OF THE CASE:

1. The brief facts of the matter are that The GRID Corporation of Orissa Ltd., ‘GRIDCO'
is the appellant in all these appeals whereas M/s Indian Charge Chrome Ltd., ‘ICCL' is
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

the respondent. The GRIDCO became the successor of the Orissa State Electricity
Board ‘OSEB’ and was engaged in the business of transmission, distribution and supply
of electricity to various consumers in the State of Orissa. Indian Metals and Ferro Alloys
Company ‘IMFA’ is a sister concern of ICCL. An agreement was entered into between
OSEB and ICCL and under the said agreement the power generated by the ICCL at
Choudwar was fed to the GRID of OSEB for further transmission to the Charge Chrome
manufacturing plant of IMFA.
2. Although, the agreement was valid for 6 months, however the exchange of power on
both sides continued even thereafter. The OSEB used to raise the monthly bills as per
the readings recorded on TOD meters with 30 minutes’ recording time. GRIDCO, who
became the successor of OSEB, w.e.f. 1st April 1996, called upon ICCL to pay the
outstanding dues for the period of December, 1994 to December 1996, amounting to Rs.
24,8281 Crores. The ICCL failed to make the payment. During this period, the OSEB
and thereafter GRIDCO had been supplying electricity to ICCL (in terms of MOU).
3. The ICCL filed an application before the Regulatory Commission ‘RC’ constituted
under the Orissa Electricity Reforms Act, 1955 raising a dispute as regards to bill
amounts and its liability to pay to GRIDCO. On 08.04.1997, ICCL filed another petition
before the RC alleging that the claim of GRIDCO is untenable. A notice by GRIDCO
was given to ICCL for making payments and in default power supply will be
disconnected. The ICCL did not make any payment but on 30.04.1997 filed a petition
under section 9 of the Arbitration and Conciliation Act, 1996 in the Court of the District
Judge for the relief of Injunction.

DECISION OF THE DISTRICT JUDGE: The District Judge granted the Injunction,
restraining GRIDCO from dis-connecting back-up power supply to the ICCL, IMFA and PPL.
GRIDCO aggrieved by this order filed an appeal to the High Court of Orissa.

DECISION OF HIGH COURT: The High Court stayed the operation of the order of the
District Judge. But, later on the High Court recalled its order, on the prayer of ICCL and
directed to restore the electricity supply which was dis-connected, subject to deposit of Rs. 5
crore by ICCL as against the arrears of Rs. 24,8281 Crores. Now, aggrieved by this Order, ICCL
filed S.L.P. in the Hon’ble Supreme Court.
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

LEGAL ISSUES INVOLVED: Whether entertaining an application under section 11 of the

Arbitration and Conciliation Act, 1996 by the High Court on assumption that Regulatory
Commission had failed to arbitrate, when such matter is pending before the Regulatory
Commission, is legal or not?

FINDINGS OF THE HON’BLE SUPREME COURT: The Supreme Court held that the High
Court had exceeded the jurisdiction, while entertaining the application under section 11 of the
Act, 1996 of ICCL. The Supreme Court confirmed the orders of the High Court and made
facility to pay the amount of Rs. 5 crore in two instalments. The three appeals were allowed by
the Supreme Court, setting aside the order of the High court and quashed the appointment of
retired Chief Justice as Arbitrator and directed the ICCL to pay arrears and the RC to arbitrate
in the matter.

Appeals allowed.
BOMBAY GAS CO.. LTD. Petitioner
V.
PARMESHWAR MITTAL
AIR 1998 BOMBAY 118 Respondents

INTRODUCTION: The petition under Arbitration Act, 1940 filed and pending before the
Court and in the meantime Arbitration and Conciliation Ordinance, 1996 came into force.

FACTS OF THE CASE: The petitioner Bombay Gas Company Limited and respondent
Parmeshwar Mittal and others agreed to carry on on the business in partnership in the firm by
the name and style of M/s Gas Property Developer upon the terms and conditions mentioned in
the agreement dated 23.1.1986. The agreement contained Arbitration Clause as well. Some
dispute arose between the parties and in the year 1994, the respondents filed suit in the Civil
Court claiming various declarations and injunctions. The petitioner filed Notice of Motion No.
852 in the year 1995 for stay of the suit under section 34 of Indian Arbitration Act, 1940.
During the pendency of the proceedings, the Arbitration and Conciliation Ordinance, 1996 was
brought into force on 25.01.1996. Under section 8 of the Ordinance, 1996, where there is an
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

existing arbitration agreement, the Court is required to refer the parties to Arbitration. In
pursuance of these provisions, the petitioner has filed the present petition for reference to
Arbitration. It is worth to note that subsequently, the said Arbitration and Conciliation
Ordinance, 1996 become an Act i.e. Arbitration & Conciliation Act, 1996.

LEGAL ISSUES INVOLVED:

1) Whether the matter is covered under the provisions of Arbitration and Conciliation Act,
1996 or Indian Arbitration Act, 1940 in view of section 85 of the Ordinance/Act, 1996?
2) Whether the allegations of fabrication of false record is a sufficient ground for not
referring the dispute to Arbitration?

CONTENTIONS BY THE PETITIONER: The petitioner contended that in view of the

provision of section 85 of the Arbitration and Conciliation Ordinance, 1996 which subsequently
became Arbitration and Conciliation Act, 1996, the Court in required to refer the parties to
Arbitration and the Court proceedings relating thereto must be stopped.

CONTENTIONS BY THE RESPONDENTS: The respondents opposed the petition on the

following two grounds:
1) Firstly, since the petitioner have invoked the provisions of the Indian Arbitration Act,
1940 before the Ordinance of 1996 came into force, so he is not entitled to invoke the
provisions of the said Ordinance, 1996. It is further contended that the proceedings under the
Indian Arbitration Act, 1940 had commenced, therefore any proceedings relating to the dispute
which have been raised by the petitioner can be adopted under the Arbitration Act, 1940 only. In
that behalf, reliance is placed on section 85 of the Ordinance.
2) Secondly, it is contended that the petitioner has filed an affidavit of one V.M. Kamath,
Personal Assistant to the Chairman of petitioner, wherein it is alleged that on 02.04.1994 on the
instructions of Chairman of the petitioner he delivered a letter dated 31.03.1994 addressed to
the respondent No. 1 in his office in Mittal Towers, Nariman Point, Mumbai. It is further
contended that no such letter was received by the respondent No. 1 and the said letter as well as
the alleged acknowledgement at the root of the said letter were fabricated and the petitioner was
trying to rely upon the fabricated documents in support of the alleged claim that the firm was
agreed to be dissolved. Thus, it is contended that such an issue about fabrication of a document
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

can be decided in accordance with law and not by Arbitration. The action amounts to a criminal
offence and such an issue cannot be referred to Arbitrator.

DECISION OF THE HON’BLE BOMBAY HIGH COURT: The Court held that section 8 of
the Ordinance/Act, 1996 makes a complete departure from the old provisions of section 34 of
Act, 1940 which only provided for stay of the suit in the discretion of the Court. Section 8 of
Ordinance/Act, 1996 on the other hand makes it mandatory for the Court to refer the parties to
Arbitration. Further the Court held that in view of the mandatory nature of section 8 of
Ordinance/Act, 1996, the argument that a dispute cannot be referred to Arbitration due to
allegation of fabrication of record cannot be accepted. In any event, it is settled position of law
that it is the person against whom fraud is alleged has an option to have the matter decided by
the Civil Court. Merely because the respondents have made allegations of fabrication of record
against the petitioner, the dispute cannot taken out of Arbitration.

FINAL ORDER OF THE COURT: The Court finally allowed the petition, directing the
parties to refer to Arbitration, the disputes and differences which have arisen between the
parties hereto as stated above, including the respondents' claims raised in accordance with the
said arbitration agreement and the Arbitration and Conciliation Ordinance, 1996.

Petition allowed.

K.K. MODI Appellant

v.
K.N. MODI Respondent

AIR 1998 SC 1297

FACTS OF THE CASE:

1. The present litigation has arisen on account of disputes between Seth Gujjar Mal Modi's
five sons - K.K. Modi, V.K. Modi, S.K. Modi, B.K. Modi and U.K. Modi on the one
hand (Group B) and Kedar Nath Modi, the younger brother of Seth Gujjar Mal Modi
and his three sons - M.K. Modi, Y.K. Modi and D.K. Modi (Group A) the other hand.
The Modi family owns various assets and controlling interest in a number of public
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

limited companies. For the division of property, differences and disputes have arisen
between between both groups. To resolve these differences, negotiations took place with
the help of the financial institutions which had lent money to these companies.
Representatives of several banks, Reserve Bank of India and financial institutions were
also invited to participate.

2. Ultimately, on 24.01.1989, a Memorandum of Understanding (MoU) was arrived at

between Group A and Group B under which it is agreed between the parties that Group
A will manage the various companies enumerated in clause 1. One of the companies so
included is Modipon Ltd. minus Indofil (Chemical Division) and selling agency. Under
clause 2, Group B is entitled to manage, own and/or control the companies enumerated
in that clause. One of the companies so included is Modipon Ltd. minus Modipon Fibre
Division.

3. Clause 9 of MoU provides that "Implementation will be done in consultation with the
financial institutions. For all disputes, clarifications etc. in respect of implementation of
this agreement, the same shall be referred to the Chairman, IFCI or his nominees whose
decisions will be final and binding on both the groups."

4. Pursuant to the MoU, M/s. S.B. Billimoria & Co. gave reports between January and
March 1991. M/s Bansi S. Mehta & Co. The members of both the groups were
dissatisfied with these reports. On 08.12.1995, the Chairman, IFCI gave his detailed
Report, which he described as his decision on each dispute raised or clarification sought.

5. On 18.05.1996 the present appellants i.e. Group B challenged the Order dated
08.12.1995 of Chairman, IFCI and filed an arbitration petition under Section 33 of the
Arbitration Act, 1940, in Delhi High Court vide which he challenged the legality and
validity of the said decision on the basis that it was an award in arbitration proceedings
between Group A and Group B. On the same day Group B also filed a Civil Suit in
Delhi High Court to challenge the same decision dated 08.12.1995 of the Chairman and
M.D., IFCI.
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

LEGAL ISSUES INVOLVED:

1) Whether Clause 9 of the Memorandum of Understanding dated 24.01.1989 constitutes
an Arbitration agreement; and whether the decision DATED 08.12.1995 of the Chairman, IFCI
constitutes an award?
2) Whether Suit filed by Group ‘B’ in Delhi High Court is an abuse of the process of
Court?

DECISION OF DELHI HIGH COURT (Single Judge): The Delhi High Court held that the
decision of the chairman and M.D. of IFCI cannot be considered as an Award. The learned
judge also held that the entire exercise of filing suit in this court was an abuse of the process of
the Court.

DECISION OF DIVISION BENCH - DELHI HIGH COURT: The Division bench of Delhi
High Court upheld the decision of Single Judge of Delhi High Court.

DECISION OF THE SUPREME COURT: The appeal of the appellants from the judgment
of the learned judge was partly allowed. The SC held that as far as the decision of the Chairman
and M.D., IFCI is challenged, as a decision and not as an award, it is maintainable and not an
abuse of the process of the court. The court held that Clause 9 of MOU dated 24.01.1989 did
not constitute an Arbitration agreement and so the decision of the Chairman and M.D. IFCI is
not an Award. Further the Hon’ble SC held that if the situation during the pendency of the suit
in Delhi High Court or trial court, requires, then no meeting of the Modipon Board shall be
held. Also the defendant Group ‘A’ shall not sell any shares held in Godfrey Phillips India Ltd.
provided the plaintiff in the suit deposit, in the Delhi High Court, a sum of Rs. 5 crore within
four weeks from the date of this order. In the event of any changes in the circumstances, the
parties will be at liberty to apply to HC for any variation in this order.
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

Tamil Nadu Electricity Board Appellant

v.
M/s Bridge Tunnel Constructions & Others Respondent
AIR 1997 SC 1376

INTRODUCTION: These appeals, by special leave, are against the judgment of the Madras
High Court, dated 20.12.1990.

FACTS OF THE CASE:

1. M/s Bridge Tunnel Constructions (the respondents) entered into an agreement with the
Tamil Nadu Electricity Board (appellant) to construct inter-connecting tunnels. The
initial value of the tender to be awarded was Rs. 47 Lakhs and it was revised to Rs. 69
Lakhs on 16.01.1975. In the course of execution of the contract, a sum of Rs. 92 Lakhs
was paid to the respondent. The contract was to be completed within a period of 24
months from 18.01.1975; but it was completed after the expiry of the term, i.e, on
25.08.1978. Resultantly, a dispute arose as to the entitlement to further amount towards
the work done by the respondent.

2. The respondent issued a notice to appellant for appointment of an arbitrator but

appellant delayed in nomination of the arbitrator. When the respondent exercised the
power, after expiry of the time prescribed in the notice, appointing a sole arbitrator,
proceedings under Section 33 of the Arbitrator Act, 1940 were initiated by the appellant.

3. Against the claims, objections were raised by the appellant. They requested the
Arbitrators to decide on the arbitrability of the items mentioned in the claims of the
respondents. The umpire, without going into the details, in a non-speaking award as
against the claim of Rs. 2 crores 10 lakhs, has awarded a consolidated sum of Rs. 70.83
lakhs as under which The Respondent shall pay the claimant a sum of Rs. 70,83,793/-
and release the earnest money deposit and Bank Guarantees furnished by the claimant in
lieu of Security Deposit, in full settlement of all claims and counter-claims.
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

4. Calling the award in question, an application to set it aside has been filed. The
respondent filed an application to make the award the rule of the court. The civil Court
dismissed the petition of the appellant and made the award the rule of the court. On
appeal, the Division Bench of the High Court has confirmed the same. Thus these
appeals, by special leave.

LEGAL ISSUE: Whether the arbitrator, having been invested with the jurisdiction to
decide the arbitrability of certain claims, has committed an error of jurisdiction in not
considering the arbitrability of the claims?

DECISION: The court allowed the appeals, set aside the award of the arbitrator and leave the
parties to bear their own costs. If there are no outstanding dues recoverable from the
respondents, the security deposit and bank guarantee is required to be refunded to the
respondent.

Appeal Allowed

Venture Global Engineering Appellants

V.
Satyam Computer Services Ltd. Respondents
AIR 2008 SC 221
Facts of the Case:

1. Venture Global Engineering, a company incorporated in the United States of America

and Satyam Computer Services Limited entered into a Joint Venture Agreement to
constitute a company named Satyam Venture Engineering Services Ltd in which both
the appellant and respondent have 50 per cent equity shareholding.
2. Another agreement was also executed between the parties on the same day which
provides that disputes have to be resolved amicably between the parties and failing such
resolution, the disputes are to be referred to arbitration.
3. In February, 2005, disputes arose between the parties. Respondent No.1 alleged that the
appellant had committed an event of default under the Shareholders Agreement owing to
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

several venture companies becoming insolvent and they had exercised its option to
purchase the appellant-company’s shares in SVES at its book value.
4. On 25.07.2005, respondent No.1 filed a request for arbitration with the London Court of
International Arbitration which appointed Mr. Paul B Hannon as sole arbitrator on
10.9.2005. The sole Arbitrator on 3.4.2006 passed an award directing the appellant
company to transfer the shares to respondent No.1..
5. On 14.4.2006, respondent No.1 filed a petition to recognize and enforce the award
before the United States District Court. The appellant entered appearance to defend this
proceeding before the US Court by filing a cross petition. In the said petition, it objected
to the enforcement of the Award which ordered transfer of shares which was in violation
of Indian Laws and Regulations specifically the Foreign Exchange Management Act,
1999 and its notifications.
6. The appellant filed a suit before the I Additional Chief Judge, City Civil Court,
Secunderabad on 28.4.2006 seeking declaration to set aside the award and permanent
injunction on the transfer of shares under the Award.

Legal Issue before the Court: Jurisdiction of Indian Courts under the Arbitration and
Conciliation Act, 1996 for setting aside of a foreign arbitral award.

Decision of the District Court: On 15.6.2006, the District Court passed an ad-interim ex parte
order of injunction restraining respondent No.1 from seeking or effecting the transfer of shares
either under the terms of the Award or otherwise. Challenging the said order, respondent No.1
filed an appeal before the High Court of Andhra Pradesh.

Decision of the High Court: The High Court dismissed the appeal holding that the award
cannot be challenged even if it is against the public policy and in contravention of statutory
provisions.

Contentions by the Appellant : The appellant claim that Part I of the Arbitration and
Conciliation Act, 1996 applies to foreign awards is covered by the judgment of this Court in
Bhatia International v. Bulk Trading S.A. and Anr. Satyam Computer Services Ltd. could not
have pursued the enforcement proceedings in the District Court in Michigan, USA.
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws

Contentions by the Respondent: In view of Section 44 of the Act and the terms of the
agreement, no suit would lie in India to set aside the Award, which is a foreign Award. No
application under Section 34 of the Act would lie to set aside the Award. In view of the
provisions of the Act and the terms of the agreement, the first respondent rightly sought
enforcement of the Award in Michigan, USA, hence the civil suit filed at Secunderabad is not
maintainable. Section 11.5(c) of the Shareholders Agreement only deals with the rights and
obligations of the appellant and the first respondent while acting as shareholders of the 2nd
respondent it has nothing to do with the enforcement of foreign Award. In terms of the
agreement, having participated in the arbitration proceedings in UK, filed cross-suit/objection
in the District Court, Michigan opposing the Award, the appellant cannot agitate the very same
issue in the Indian Courts namely, District Court, Secunderabad.

Judgment of the Supreme Court:

1. The Supreme Court agreed with the decision in Bhatia International v. Bulk Trading
S.A. and stated that the provisions of Part I of the Act would apply to all arbitrations
including international commercial arbitrations and to all proceedings relating thereto.
Where such arbitration is held in India, the provisions of Part-I would compulsorily
apply.
2. To apply Section 34 to foreign international awards would not be inconsistent with
Section 48 of the Act, or any other provision of Part II.
3. The Court held that Part I of the Act is applicable to the Award in question even though
it is a foreign Award. Even a foreign award can be challenged under Section 34 of the
Act, although Section 34 deals with challenge to a domestic award.
4. On the issue of whether there was a limitation on amending the grounds in an
application under Section 34, the Supreme Court held that, if a party is entitled to amend
its pleadings, having regard to the justice of the case, the right of the party to amend
cannot be defeated just because a wrong Section or a wrong provision has been quoted
in the amendment petition.
5. In case of international commercial arbitrations held out of India provisions of Part-I
would apply unless the parties by agreement express or implied, exclude all or any of its
provisions.
Class: LLB.(TYC) 6th Semester
Subject: ADRS
Ms. Sandeep: Asst. Prof. Laws