ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH & ANR.
Tools
- Court
- Supreme Court of India
- Decided
- (year only)
- Bench
- SURINDER SINGH NIJJAR and FAKKIR MOHAMED IBRAHIM KALIFULLA
- Citation
- [2014] 2 S.C.R. 855
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Headnote — Supreme Court Reports (editorial summary, not part of the judgment)
Catchwords
ARBITRATION AND CONCILIATION ACT, 1996: c s.45 rlw s. 16 - International Commercil Arbitration - Suit for declaration that Intellectual Property Licence Agreement (IPLA) was not concluded contract and coffespondingly there was no arbitration agreement therein - Application by respondent uls 45 -
Held
parties have iffevocably agreed to resolve all the disputes through arbitration - Parties can not be permitted to avoid arbitration, without satisfying the court that it would be just and in the interest of all the parties not to proceed with arbitration - Findings recorded by appellate court that the parties can proceed to arbitration are affirmed - Findings recorded by trial court dismissing the application ul E s 45 are set aside -- Application filed by respondents for reference of the dispute to arbitration u/s 45 has been correctly allowed by appellate court as well as by High Court - Issue as to whether there is a concluded contract between the parties can be left to arbitral tribunal - All the disputes arising between the parties in relation to the following agreements viz. SHA, TKHA, SSHAs and STKHA, Agreed Principles and IPLA, including the controversy as to whether IPLA is a concluded contract are referred to arbitral tribunal for adjudication -Third arbitrator who shall act as Chairman of Arbitral Tribunal, is appointed -- Arbitration clause (agreement) is independent of the underlying contract, i.e. the IPLA containing the arbitration clause -- s.16 provides that arbitration clause forming part of a contract shall be treated 855 H
Catchwords
s. 16 - Separability of arbitration clause from underlying contract -
Held
Concept of separability of the arbitration 8 clause/agreement from the underlying contract is a necessity to ensure that the intention of parties to resolve disputes by arbitration does not get frustrated with every challenge to legality, validity, finality or breach of the underlying contract - The Act, u/s 16 accepts the concept that the main contract and the arbitration agreement form two independent contracts C - Therefore, it cannot be accepted that Arbitration Agreement will perish as the IPLA has not been finalised - Rule of necessity.
Catchwords
Arbitration clause - Seemingly unworkable arbitration clause -
Held
It would be the duty of court to make the same workable within the permissible limits of law - A common sense approach has to be adopted to give effect to the intention of parties to arbitrate - Arbitration clause cannot be construed with a purely legalistic mindset, as if one is construing a provision in a statute - In the instant case, the arbitration clause as it stands cannot be frustrated on the ground that it is unworkable - Unworkability in the case is attributed only to the machinery provision - Arbitration agreement, otherwise, fulfils the criteria laid down u/s 44 of the F Act - Given that two arbitrators have been appointed, the missing line that "the two arbitrators appointed by the parties shall appoint the third arbitrator" can be read into the arbitration clause - Omission is so obvious that the court can legitimately supply the missing line - In the circumstances, the Court would apply the officious bystander principle - Parties can be permitted to proced to arbitration.
'Seat' of arbitration and 'venue' -- International Commercial Arbitration -
Held
In an International Commercial Arbitration, venue can often be different from the. H
Catchwords
Concurrent jurisdiction - International Commercial Arbitration -
Held
High Court having fixed the seat in India, committed an error in concluding that Courts in England would have concurrent jurisdiction - It runs counter to the settled position of law in India as well as in England and would lead to unnecessary complications and inconvenience - Once the seat of arbitration has been fixed in India, it would be in the nature of exclusive jurisdiction to exercise the supervisory powers over the arbitration - In view of s. 2, CPC, Daman trial court (India) has jurisdiction over the matter.
Catchwords
Anti suit injunction - International Commercial Arbitration - Suit in Daman court (India) for declaration that substantial contract was not a concluded contract and correspondingly there was no arbitration agreement therein - Anti suit injunction granted by Daman Court against proceedings initiated in the English High Court -
Held
Conclusion of the Bombay High Court that the anti-suit injunction granted by the G Daman trial court has been correctly vacated by Daman appellate court is overruled and set aside -- Consequential directions given in the judgment.
reliefs in the form of anti-arbitration injunction. The A respondents filed four appeals, which were allowed by the District Cpurt of Daman ("Daman Appellate Court). The anti-arbitration injunction was vacated, and the application u/s 45 of the Act was allowed. The appellants filed two writ petitions before the High Court of Bombay, which ultimately
Held
(a) "Prima facie, there is an arbitration agreement; (b) The curial law of the arbitration agreement is India; (c) London, designated as the venue in Clause 18.3 of the draft IPLA, is only a convenient geographical location; (d) London is not the seat; and (e) c English Courts have concurrent jurisciiction since the venue of arbitration is London."
Held
Reporter's headnote (continued) and case details
p. 855
(Civil Appeal No. 2086 of 2014 etc.)
FEBRUARY 14, 2014 B
856 SUPREME COURT REPORTS [2014] 2 S ..C.R.
A as an agreement independent of such a contract -- UNCITRAL Model Law.
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 857 & ANR.
seat of arbitration - In the instant case all the three laws: (i) A the law governing the substantive contract; (ii) the law governing the agreement to arbitrate and the performance of that agreement; and (iii) the law governing the conduct of the arbitration, are Indian - Therefore, the parties have designated India as the seat - Parties being Indian and German, except B for London being chosen as a convenient place/venue for holding the meetings of arbitration, there is no other factor connecting the arbitration proceedings to London - In such circumstances, hearing of arbitration will be conducted at the venue fixed by the parties, but this would not bring about a c change in the seat of arbitration - Therefore, the seat would remain in India.
Appellants No.2 and 3 and respondent No.1 (a company incorporated under the laws of Germany, H
p. 858
A having its registered office in Germany), entered into a joint venture business by setting up appellant No. 1- Company - Enercon (India) Ltd., with its registered office at Daman. On12.1.1994 appellants nos. 2 and 3 entered into a Share Holding Agreement (SHA) with respondent B no. 1. On the same day appellant no. 1 and respondent no. 1 entered into a Technical Know-How Agreement ("TKHA"). On 29-9-2006, the appellants and respondent No. 1 executed an Intellectual Property License Agreement ("IPLA"). Dispute arose between the parties c and appellants No.2 and 3 filed a derivative suit before the Bombay High Court, seeking resumption of supplies, parts and components. In the said suit, respondent No.1 took out an application u/s 45 of the Arbitration and Conciliation Act, 1996 (the Act). Respondent no.1 also initiated proceedings before the High Court of Justice, 0 Queens Bench Division, Commercial Court, United Kingdom ("the English High Court"). The reliefs which were claimed included the constitution of an arbitral tribunal under the IPLA. On 8-4-2008, the appellants filed Regular Suit No. 9 of 2008 (Daman Suit) before the Court E 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. 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. The respondents filed an application u/s 45 of the Act in the Daman Suit. The appellants moved an application for interim injunction ex-parte in the same suit, seeking to restrain the respondents from pursuing the proceedings they had initiated in the English High Court (anti-arbitration injunction). The Daman Court dismissed the application u/s 45 of the Act on 5-1-2009 and allowed the application filed by the appellants, seeking interim
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 859 & ANR.
In the instant appeals, the following issues arose for consideration of the Court: D "(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? E (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 F contract; is the Arbitration Clause 18.1 vague and unworkable."
"(v) In case the arbitration clause is held to be workable, is the seat of arbitration in London or in India? G
(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 H
p. 860
A venue for the arbitration proceedings is London?
(vii) Linked to (v) and (vi) is the issue whether the Appellants are entitled for an anti-suit 8 injunction?"
Disposing of the appeals, the Court
c Issues (i), (ii) and (iii):
1.1 There is a legal relationship between the parties of a long standing. Section 44 of the Arbitration and Conciliation Act, 1996 (the Act) applies to arbitral awards of differences between persons arising out of legal D 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. E 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. Before this Court also, it is not the plea of the appellants that the F agreement is null and void, inoperative and incapable of being performed as it violates any of the provisions u/ss 14, 15, 16, 17, 18, 19, 19A and 20 of the Contract Act, 1872. The issue as to whether there is a concluded contract between the parties can be left to the arbitral tribunal. G [para 75) (907-E-G; 908-C-D; 909-B]
1.2 All the issues raised by the appellants about the non-existence of a concluded contract pale into insignificance in the face of "Heads of Agreement on the proposed IPLA dated 23.5. 2006". A bare perusal of this H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMSH 861 & ANR.
clause makes it abundantly clear that the parties have irrevocably agreed that clause 18 of the proposed IPLA shall apply to settle any dispute or claim that arises out of or in connection with this Memorandum of Understanding and negotiations relating to IPLA. It must also be noticed that the relationship between the parties formally commenced on 12.1.1994 when the parties entered into the first SHA and TKHA. Even under that SHA, Art. 16 inter alia provided for resolution of disputes by arbitration. The TKHA also contained an identically worded arbitration clause, under Article XIX. This c intention to arbitrate has continued without waiver. In the face of this, the question of the concluded contract becomes irrelevant, for the purposes of making the reference to arbitral tribunal. [para 76-77] [909-C-D, G-H; 910-A-B] D 1.3 It must be clarified that the doubt raised by the appellant i·s that there is no concluded IPLA, i.e. the substantive contract. But this can have no effect on the existence of a binding arbitration agreement in view of Clause 3. The parties have irrevocably agreed to resolve all the disputes through arbitration. Parties can not be permitted to avoid arbitration; without satisfying the court that it would be just and in the interest of all the parties not to proceed with arbitration. Besides; in arbitration proceedings, courts are required to aid and support the arbitral pr~cess, and not to bring it to a grinding halt. This would be of no benefit to any of the parties. [para 77] [910-B-E]
1.4 Further, the arbitration agreement contained in clause 18.1 to 18.3 of IPLA is very widely worded and would include all the disputes, controversies or differences concerning the legal relationship between the parties. It would include the. disputes arising in respect of the IPLA with regard to its validity, interpretation, H
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A construction, performance, enforcement or its alleged breach. [para 79) [910-F-G]
1.5 Whilst interpreting the arbitration agreement and/ or the arbitration clause, the court must be conscious of the overarching policy of least intervention by courts or 8 judicial authorities in matters covered by the Act. In this view of the matter, it is not possible to accept that the arbitration agreement will perish as the IPLA has not been finalised. This is also because the arbitration clause (agreement) is independent of the underlying contract, i.e. C the IPLA containing the arbitration clause. Section 16 provides that the arbitration clause forming part of a contract shall be treated as an agreement independent of such a contract. [para 79] [910-G-H; 911-A-B] D 1.6 In the facts of the case, this Court holds that the parties must proceed with the arbitration. All the difficulties pointed out on behalf of appellants can be addressed by the arbitral tribunal. [para 78] [910-E-F] 1.7 The concept of separability of the arbitration clause/agreement from the underlying contract is a necessity to ensure that the intention of the parties to resolve the disputes by arbitration does not get frustrated with every challenge to the legality, validity, finality or breach of the underlying contract. The Act, u/s 16 accepts the concept that the main contract and the arbitration agreement form two independent contracts. Commercial rights and obligations are contained in the underlying, substantive, or the main contract. It is followed by a second contract, which expresses the agreement and the intention of the parties to resolve the disputes relating to the underlying contract through arbitration. A remedy is elected by parties outside the normal civil court remedy. It is true that support of the National Courts would be required to ensure the success of arbitration, but this would not detract from the legitimacy or
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 863 &ANR. independence of the collateral arbitration agreement, even if it is contained in a contract, which is claimed to be void or voidable or unconcluded by one of the parties. Therefore, it cannot be accepted that Arbitration Agreement will perish as the IPLA has not been finalised. [para 80-81] [911-C-F; 913-C] B
Reva Electric Car Company P. Ltd. v. Green Mobil. 2011
(13) SCR 359 = 2012(2) sec 93; Today Homes and Infrastructure Pvt. Ltd. vs. Ludhiana Improvement Trust and Anr., 2013 (7) SCALE 327 - relied on. c Issue (iv) 2.1 Respondent No.1 is the licensor and respondent No.2 is 100% shareholder of respondent No.1, but that is not the same as being an independent licensor. [para 82] [913-F] D 2.2 The courts have to adopt a pragmatic approach and not a pedantic or technical approach while interpreting or construing an arbitration agreement or arbitration clause. Therefore, when faced with a E seemingly unworkable arbitration clause, it would be the duty of the court to make the same workable within the permissible limits of the law, without stretching it beyond the boundaries of recognition. A common sense approach has to be adopted to give effect to the intention of the parties to arbitrate. In such a case, the court ought to adopt the attitude of a reasonable business person, having business common sense as well as being equipped with the knowledge that may be peculiar to the business venture. The arbitration clause cannot be construed with a purely legalistic mindset, as if one is construing a provision in a statute. [para 83] [913-G-H; 914-A-C] Visa International Ltd. v. Continental Resources (USA) Ltd. 2008 (16) SCR 1043 = 2009 (2) SCC 55 Nandan H
p. 864
A Biometrix Ltd. v. D./. Oils. 2009 (3) SCR 115 = 2009 (4) SCC 495 - relied on. The Antaios Compania Neviera SA v Salen Rederiema AB [1985] 1 AC 191 - referred to. B 2.3 It is a well recognized principle of arbitration jurisprudence in almost all the jurisdictions, especially those following the UNCITRAL Model Law, that the courts play a supportive role in encouraging the arbitration to proceed rather than letting it come to a grinding halt. C Another equally important principle recognized in almost all jurisdictions is the least intervention by the courts. Under the Act, s.5 specifically lays down, "Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, o no judicial authority shall intervene except where so provided in this Part". [para 84] [915-H; 916-A-B] 2.4 Therefore, in the instant case, the arbitration clause as it stands cannot be frustrated on the ground that it is unworkable. The un-workability in the case is E attributed only to the machinery provision. And the arbitration agreement, otherwise, fulfils the criteria laid down u/s 44 of the Act. Given that two arbitrators have been appointed, the missing line that "the two arbitrators appointed by the parties shall appoint the third arbitrator" F can be read into the arbitration clause. The omission is so obvious that the court can legitimately supply the missing line. In these circumstances, the Court would apply the officious bystander principle. It is permissible for the court to construe the arbitration clause in a G particular manner to make the same workable when there is a defect or an omission in it, albeit such an exercise would not permit the court to re-write the contract. In the instant case, the crucial line which seems to be an omission or an error can be inserted by the court. [para H 84-86] [916-C-E; 917-E-F]
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 865 &ANR. Shin Satellite Public Co. Ltd. Vs. Jain Studio Ltd. 2006 A (1) SCR 933 = 2006 (2) SCC 628 - referred to. Shir/aw v. Southern Foundries [1937 S. 1835] referred to Halsbury's Laws of England Vol. 13, Fourth Edition, B 2007 Reissue - referred to. 2.5 The object of ss. 10 and 11 of the Act is to avoid failure of the arbitration agreement or the arbitration clause if contained in contract. Under s. 10(1 ), there is freedom given to the parties to determine the number of arbitrators, provided that such number shall not be an ~ even number. The arbitration clause in the instant case provides that the arbitral tribunal shall consist of three arbitrators. Further, it must also be noticed that the respondents have been trying to seek adjudication of disputes by arbitration. Respondent No.2 in its email dated 13.3. 2008 clearly offered that the third and the presiding arbitrator be appointed by the respective arbitrators of the appellants and the respondents. On the other hand, the attitude of the appellants is to avoid arbitration at ·any cost. The parties can be permitted to proceed to arbitration. [para 87-88] [918-D-F; 919-E] MMTC v. Sterlite Industries (India) Ltd. 1996 (8) Suppl. SCR 676 = 1996 (6) SCC 716 - referred to. F Issue No. v/Re: Seat 3.1 There are very strong indicators to suggest that the parties always understood that the seat of arbitration would be in India, and London would only be the "venue" to hold the proceedings of arbitration. Applying the G closest and the intimate connection to arbitration, it would be seen that the parties had agreed that the provisions of the Act would apply to the arbitration proceedings. By making such a choice, the parties have made the curial law provisions contained in Chapters Ill, H
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Footnotes
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 867 &ANR.
IV, V and VI, s.11 would be applicable for appointment of arbitrator in case the machinery for appointment of arbitrators agreed between the parties breaks down. Therefore, to interpret that London has been designated as the seat would lead to absurd results, and it would, therefore, be vexatious and oppressive if respondent no. 8 1 is permitted to compel. appellant n_o. 1 to litigate in England.' This would unnecessarily give. rise to the undesirable consequences. [para 105 and 107] [928-H; 929-A-E; 930-C] Braes of Doune Wind Farm (Scotland) Limited Vs. Alfred C McA/pine Business Services Limited [2008] EWHC 426 (TCC) • relied on. Abidin Vs. Daver. [1984] AC 398 • referred to. 3.3 In the instant case, the parties have only designated London as a venue. Therefore, the parties have designated India as the seat. This is even more so as the parties have not agreed that the courts in London will have exclusive jurisdiction to resolve any dispute arising out of or in connection with the contract. In the instant case, except for London being chosen as a convenient place/venue for holding the meetings of the arbitration, there is no other factor connecting the arbitration proceedings to London. [para 109] [930-H; 931- A·C] F C v. D [2007] EWCA Civ 1282 • referred to. Shashoua v. Sharma, (2009) 2 LLR 376 - distinguished. 3.4 In an International Commercial Arbitration, venue can often be different from the seat of arbitration. In such G circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but this would not bring about a change in the seat of the arbitration. Therefore, in the instant case, the seat would remain in India. [para 125] [941-C-D] H.
p. 868
A Braes of Doune Wind Farm (Scotland) Limited Vs. Alfred McAlpine Business Services Limited [2008] EWHC 426 (TCC); 'Naviera Amazonica Peruana S.A. Vs. Compania Internacional De Seguros Del Peru 1988 (1) Lloyd's Rep 116 - referred to. B Redfern and Hunter on International Arbitration (5th Edn., Oxford University Press, Oxford/New York 2009), referred to.
Issue No. vi/ Re: Concurrent Jurisdicion:
C 4.1 The High Court having fixed the seat in India, committed an error in concluding that the Courts in England would have concurrent jurisdiction. It runs counter to the settled position of law in India as well as in England and would lead to unnecessary complications o and inconvenience. This, in turn, would be contrary to underlying principle of the policy of dispute resolution through arbitration. The whole aim and objective of arbitration is to enable the parties to resolve the disputes speedily, economically and finally. Once the seat of E arbitration has been fixed in India, it would be in the nature of exclusive jurisdiction to exercise the supervisory powers over the arbitration. [para 127 and 128] [941-F-H; 942-F-G]
(1) Enercon GMBH (2) Wobben Properties GMBH Vs. F Enercon (India) Ltd., (2012) EWHC 3711(Comm) - referred to.
4.2 The Courts in England have time and again reiterated that an agreement as to the seat is analogous G to an exclusive jurisdiction clause. This agreement of the parties would include the determination by the court as to the intention of the parties. The natural forum for all remedies, in the facts of the instant case, is only India. [para 135] [948-C-D] H ,
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 869 & ANR. Shashoua v. Sharma, (2009) 2 LLR 376 Bharat A Aluminium Company Vs. Kaiser Aluminium 2012 (12) SCR 327 = 2012 (9) SCC 552; A Vs. B [2007] 1 Lloyds Report 237 - referred to.
Issue (vii)IRe: Anti-Suit Injunction: B 5.1 It must be noticed that respondent No. 1 was initially having 51 per cent shareholding of appellant No.1 company, which was subsequently increased to 56 per cent. This would be an indicator that respondent No. 1 is actively carrying on business at Daman. This Court C considered the expression "carries on business" as it occurs in s.20 of the Code of Civil Procedure. Therefore, Daman Trial Court has jurisdiction over the matter. [para 141 and 142] [951-A-B, F] D Oil & Natural Gas Commission Vs .. Western Company of Norlh America 1987 SCR (1) 1024; Modi Entertainment Network & Anr. Vs. W S. G. Cricket Pte. Ltd. 2003 (1) SCR 480 = 2003 (4) SCC 341; Dhodha House Vs. S.K. Maingi 2005 (5) Suppl. SCR 751 = 2006 (9) SCC 41- referred to. E
Harshad Chiman Lal Modi Vs. DLF Universal 2005 (3) Suppl. SCR 495 = 2005 (7) SCC 791 - relied on.
5.2 Besides, the main contract, the IPLA is to be performed in India. The governing law of the contract is F the law of India. Neither party is English. One party is Indian, the other is German. The enforcement of the award will be in India. Any interim measures which are to be sought against the assets of appellant No. 1 ought to be in India as the assets are situated in India. G Respondent No.1 has not only participated in the proceedings in the Daman courts and the Bombay High Court, but also filed iridependent proceedings under the Companies Act at Madras and Delhi. All these factors would indicate that respondent No.1 does not even H
p. 870
A consider the Indian courts as forum-non-conveniens. In this view of the matter, this Court is of the considered opinion that the objection raised by the appellants to the continuance of the parallel proceedings in England is not wholly without justification. The only single factor which B prompted respondent No.1 to pursue. the action in England was that the venue of the arbitration has been fixed in London. The considerations for designating a convenient venue for arbitration can not be understood as conferring concurrent jurisdiction on the English C Courts over the arbitration proceedings or disputes in general. Therefore, this Court is inclined to restore the anti-suit injunction granted by the Daman trial court. [para 143] [952-B-F]
6.1 In the result, the findings recorded by the D Appellate Court that the parties can proceed to arbitration are affirmed. The findings recorded by the Trial Court dismissing the application u/s 45 of the Act are set aside. The application filed by respondents for reference of the dispute to arbitration u/s 45 has been correctly allowed by the Appellate Court as well as by the High Court. The findings of the High Court are affirmed to that extent. All the disputes arising between the parties in relation to the agreements, viz. SHA, TKHA, SSHAs and STKHA, Agreed Principles and IPLA, including the controversy as to whether IPLA is a concluded contract are referred to the arbitral tribunal for adjudication. The third arbitrator who shall act as the Chairman of the Arbitral Tribunal is appointed. [para 144-145] [952-G-H; 953-A-B, E]
6.2 Regular Civil Suit No. 9 of 2008, pending before the Court of Civil Judge, Senior Division, Daman, and the application u/s 45 of the Arbitration Act, 1996 filed in the Civil Suit No.2667 of 2007 and Contempt Petition in relation to Civil Suit No.2667 of 2007 pending before the Bombay High Court at the instance of the appellants are H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 871 &ANR. stayed. Parties are at liberty to approach the court for the A appropriate orders, upon the final award being rendered by the Arbitral Tribunal. This will not preclude the parties from seeking interim measures uls 9 of the Act. [para 146] [953-E-G] 8 6.3 (a) The conclusion of the Bombay High Court that the seat of the arbitration is in India is upheld; (b) The conclusion that the English Courts would have concurrent jurisdiction is overruled and consequently set aside; (c) The conclusion of the Bombay High Court' that the anti-suit injunction granted by the Daman Trial Court C has been correctly vacated by Daman Appellate Court is overruled and set aside; (d) Consequential directions given in the judgment. [para 147] [953-A-D]
Godhra Electricity Co. Ltd. And Anr. Vs. The State of D Gujarat and Anr. 1975 (2) SCR 42 = 1975 (1) SCC 199; · Kol/ipara vs." Aswathanarayana (1968) 3 SCR 387 and = Dresser Rand vs. Bindal Agro. 2006 (1) SCR 308 2006 (1) SCC 751; Chloro Controls (/) Pvt. Ltd. Vs. Severn Trent Water Purification Inc. & Ors. 2013 (1) SCC 641; National Insurance E Company Ltd. V. Bhogara Polyfab Pvt. Ltd. 2008 (13) SCR 638 = 2009 (1) SCC 267; Jagdish Chander v. Ramesh Chander & Ors. 2007 (5) SCR 720 = 2007 (5) SCC 719 Smt. Rukmanibai Gupta v. Collector, Jabalpur & Ors. 1980 (4) SCC. 556; Grasim Industries Ltd. & Anr. v. Agarwal Steel 2009 (15) F SCR 283 = 2010 (1) SCC 83; and J.K. Jain v. Delhi Development Authority 1995(4) Suppl. SCR 72 = 1995 (6) SCC 571; Dozco India Pvt. Ltd. V. Doosan lnfracore Company Ltd. 2010 (12) SCR 259 = 2011 (6) SCC 179; Videocon Industries v. Union of India 2011 (8) SCR 569 = 2011 (6) SCC 161; Yograj Infrastructure Ltd. V. Ssang Yong G Engineering and Construction Ltd. 2011 (14) SCR 301 = 2011 (9) sec 735 - cited.
British Electrical vs. Patley Pressings, [1953] 1 WLR 280 Harvey vs. Pratt, [1965] 1 W.L.R. 1025; Bushwall vs. Vortex, H
p. 872
A [1976] 1 WLR 591; C vs. D. (2007) 2 Lloyd's Law Reports 367 and Union of India vis McDonnel. (1993) 2 Lloyd's Rep 48 - cited. Case Law Reference: B 1975 (2) SCR 42 cited para 35 1975 (1)-, sec 199 cited para 35 [1953] 1 WLR 280 cited para 36 (1965] 1 W.L.R. 1025 cited para 36 c (1976] 1 WLR 591 cited para 36 (1968) 3 SCR 387 cited para 36 2006 (1) SCR 308 cited para 36 D 2013 (1) sec 641 cited para 37 2006 (1) SCR 933 referred to para 39 1988 (1) Lloyd's Rep 116 relied on Para 40 2012 (12) SCR 327 referred to Para 40 E 1987 SCR (1) 1024 referred to Para 44 2003 (1) SCR 480 referred to p~ra 44 2005 (3) Suppl. SCR 495 relied on para 46 F 2008 (13) SCR 638 cited para 49 1996 (8) Suppl. SCR 676 referred to para 55 2008 (16) SCR 1043 relied on para 55
G 2007 (5) SCR 720 cited para 55 2009 (3) SCR 115 relied on para 55 2009 (15) SCR 283 cited para 58 1995 (4) Suppl. SCR 72 cited para 58 H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 873 &ANR. (2009) 2 LLR 376 distinguished para 61 A 2010 (12) SCR 259 cited para 61 2011 (14) SCR 301 cited para 61 2011 (8) SCR 569 cited para 61 B (2007) 2 Lloyd's Law cited para 66 Reports 367 (19993) 2 Lloyd's Rep 48 cited para 66 2011 (13) SCR 359 cited Para 68 c [1985) 1 AC 191 referred to para 83 [1937 s. 1835) referred to para 85 [1970] 1 Lloyd's Rep. 269 : referred to para 92 D [1970) A.C.583 [1981) 2 Lloyd's Rep. 446 referred to para 92 [2008]EWHC 426 (TCC) relied on Para 99 E [2007) EWCA Civ 1282 referred to Para 111 (2012) EWHC 3711 (Comm) referred to Para 134 [2007) 1 Lloyds Report 237 referred to Para 134 2005 (5) Suppl. SCR 751 referred to Para 141 F
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2086 of 2014.
From the Judgment and Order dated 05.10.2012 of the G High Court of Bombay in CWP No. 7636 of 2009. WITH Civil Appeal No. 2087 of 2014.
Rohinton Nariman, Nikhil Sakhardande, Ashim Sood, H
p. 874
A Manu Agarwal, Sonali Mathur, Swagata Naik, N. Ganpathy for the Appellants,
Dr. A.M. Singhvi, C.U. Singh, Akhil Sibal, Vivek A. Vashi, Naira Jejeebhoy, Jehangir Jejeebhoy, Kum Kum Sen, Shamika B Haldipurkar, Nidiram Sharma, Nikhil Chawla for the Respondents.
Judgment
The Judgment of the Court was delivered by
SURINDER SINGH NIJJAR, J. 1. Leave granted. c
22. 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.
33. 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. (hereinaft~r referred to as "Ell"), in 1994. !;IL, 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 F 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:
G Share Holding Agreement:
44. 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 H the Appellant Nos. 2 and 3, collectively, were to hold 4~%
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 875 & ANR. [SURINDER SINGH NIJJAR, J.] shares. A
Technical Know How Agreement:
55. 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 B 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 C licensor and the Appellants are the licensees.
Supplementary Shareholding Agreements:
66. The SHA was subsequently amended by two Supplementary Share Holding Agreements ("SSHAs") dated D 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%. " E Supplementary Technical Know-How Agreement:
77. A Supplementary Technical Know-How Agreeme'nt ("STKHA") amending the TKHA was executed on 19th May, 2000, by which a further license to manufacture the E-30 and F E-40 WTGs was granted by the Respondent No. 1 to the Appellants.
Heads of Agreement:
88. In April 2004, the period of the TKHA expired; however, G. 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 H
p. 876
A recorded in a document titled "Heads of Agreement".
Agreed Principles:
99. On 29th September, 2006, the Appellants and the Respondent No. 1. entered into what is known as the "Agreed 8 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 c 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" D B. Successive Technology Transfer Agreement
C. Name Use Licence Agreement
D. Amendment to Existing Share Holding Agreement. E The above agreements will be made to the satisfaction of all parties. And then shall be legally executed."
IPLA (dated 29th September, 2006):
1010. 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 lPLA was not a concluded contract. On the other hand,
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 877 & ANR. [SURINDER SINGH NIJJAR, J.]
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: B
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 c 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 D 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 E 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 the agreed principles until F 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 G 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 H
p. 878
A 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 B 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 c 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, F 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, G 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 "dor.e deal," the same H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 879 & ANR. [SURINDER SINGH NIJJAR, J.] being not in conformity with the Agreed Principles. A
1111. 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, B 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: c
1212. We may notice only those proceedings between the parties that have a bearing on the issues arising before us.
Derivative Suit: D
1313. 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 E 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. G 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. H
p. 880
A Nomination of Arbitrator :
1414. 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, 8 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 Ell to nominate its arbitrator and for the two party (sic) nominated arbitrators to select the third arbitrator, subject to consultation with the parties. C 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:
1515. 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. E 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.
1616. Meanwhile on 31st March, 2008, a letter was addressed by the Appellant No.2 on behalf of himself and F 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. G
1717. 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 und&r Section 17(2)
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 881 & ANR. [SURINDER SINGH NIJJAR, J.] 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. B
Daman Suit:
1818. 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 C 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 D directed to maintain status quo with regard to the proceedings initiated by them before the English High Court.
1919. Meanwhile on 11th April, 2008, Appellant No.1, without prejudice, nominated Mr. Justice B.P. Jeevan Reddy, a former E 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 F 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. '
2020. Thereafter, the Respondents filed an Application under G 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 H
p. 882
A 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 B Trial Court were challenged by the Respondents by filing four appeals before the District Court of Daman ("Daman Appellate Court").
Daman Appellate Court :
C 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 D 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 E Arbitration Act.
Bombay High Court :
2222. On 4th September, 2009, the Bombay High Court ordered that the status quo order dated 8th April, 2008, passed F 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, G on 25th January, 2010, directed that the interim order(s) granted earlier be continued until further orders.
English Proceedings:
2323. In spite of the aforesaid interim order(s), the H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 883 & ANR. [SURINDER SINGH NIJJAR, J.] A 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:- B 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. c
2424. 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 D 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. E
2525. 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 F 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 G take all reasonable and necessary steps within its power to have the writ petitions concluded as expeditiously as p·ossible;
p. 884
A (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. B
2626. 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 C 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 D petitions for hearing on 2nd July, 2012.
Resumption of Writ Petitions before Bombay High Court:
2727. The hearing of the writ petitions in the Bombay High _ E 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; H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 885 & ANR. [SURINDER SINGH NIJJAR, J.] C. The curial law of the arbitration agreement is India; A
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; B
F. English Courts have concurrent jurisdiction since the venue of arbitration is London.
English Proceedings : c
2828. 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 D 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 E 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 F 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 G 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, H
p. 886
A 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 B 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 c iii. expedition for the hearing of the Respondent's Application issued on 11th June, 2012.
2929. In the aforesaid Applications, the English High Court D (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 H Ell and the putative arbitration, and to conclude that there
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 887 & ANR. [SURINDER SINGH NIJJAR, J.] was a valid arbitration agreement, whether on the basis A 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. B
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 C 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 D Supreme Court should be awaited."
3030. 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 H
p. 888
A 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.
3131. 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:
3232. We have heard the learned senior counsel for the parties.
I. Re: Concluded Contract:
3333. The first submission of Mr. Rohinton Nariman is that D 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 Agrefld Principles. It was submitted that the parties merely entered into the 'Agreed Principles' on 29th September, 2006, E 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 F 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 G 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.
3434. Further, the Appellants have relied upon the H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 889 & ANR. [SURINDER SINGH NIJJAR, J.] correspondence prior and subsequent to the signing of the IPLA A 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 B 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 c consonance with the Agreed Principles. The subsequent correspondence, therefore, necessarily refers to all the four agreements mentioned in the Agreed Principles.
3535. Mr. Nariman also pointed out that the reliance upon prior contracts/agreements or correspondence is not D 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 E 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.
3636. Mr. Nariman submitted that under Clause 12 of the F 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. G 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
1. (1975) 1 sec 199. H
p. 890
Footnotes
II. Re: Existence of Arbitration Agreement 8 37. As noticed above, the primary submission of the Appellants, is that IPLA is not a concluded contract. It was th~n 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 C 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 (/) Pvt. Ltd. Vs. Severn Trent Water Purification Inc. & Ors. 7 According to Mr. Nariman, it is no · D longer open to contend that the question whether the contract is concluded or not can be gone into by the Arbitral Tribunal.
Ill. Re: Un-workability of Arbitration Agreement
3838. 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
G 2. [1953] 1 WLR 280.
3. [1965] 1 W.L.R. 1025.
4. [1976] 1 WLR 591.
5. (1968) 3 SCR 387.
6. (2006) 1 sec 751.
H 7. (2013) 1 sec 641.
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 891 & ANR. [SURINDER SINGH NIJJAR, J.]
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.
3939. He further submitted that even though an arbitration clause can be construed by the Court in such a way as to make c 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 D 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 Bushwa/I 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 E a reference to arbitration if the arbitration agreement relied upon is incapable of being performed.
IV. Re: Seat of Arbitration. F
4040. 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 G 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;
8. (2006) 2 sec 628. H
p. 892
A 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 B 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 c German and the other being Indian. He submits that the •kespondents 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 0 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, E interpretation propounded by the Appellants would give full and complete effect to the entire clause as it stands.
4141. 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 F 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 ArbitratiQn Act, 1996.
4242. 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
9. 1988 (1) Lloyd's Rep 116.
H 10. c2012) 9 sec 552.
ENERCON (INDIA) LTD. & 'ORS. v. ENERCON GMBH 893 & ANR. [SURINDER SINGH NIJJAR, J.]
complications. This would result in absurdity because the Indian A 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 B 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.
4343. Lastly, it was submitted by Mr. Nariman that provisions C 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 D
4444. 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 , Reltance was also placed upon Modi Entertainment Network E . & Anr. Vs. W. S. G. Cricket Pte. Ltd. 12, in support of the submission that in exercising discretion to grar:it 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. F 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.
4545. According to Mr. Nariman, all the tests which authorise G 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
11. 1987 SCR (1) 1024.
12. (2003) 4 sec 341 H
p. 894
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