SBP Co v.

Patel Engineering (2005) 8 SCC (2005)

Facts:

The case was brought to the Supreme Court on granting of a Special Leave Petition whereby several
petitions were combined.

Issues:

1. Whether the function/power of the Chief Justice or the person/ persons delegated by him under Section
11(6) is administrative or judicial in nature?
2. Whether "person/ institution" in S.11 (6) can include any judicial/quasi-judicial body or judges of the
lower courts when it comes to appointment of the tribunal?
3. Whether such a decision by the CJ is appealable?

Holding:

1. The Court in a majority of 6:1 held that the function/power is judicial and over-ruled the decision held
in the case of Konkan Railway Corpn. Ltd. and another v. Rani Construction Pvt. Ltd., (2000) 8 SCC 159
wherein this function in question was held to be administrative. But, the Court clarified the stand that the
decision in the present case would only have prospective ruling and all the cases decided before the date
of decision for the present case, i.e. 26th October 2005, will be held valid and only pending or future
cases will be dealt under the present holding.
2. The Court held that only judges of the High Court or the Supreme Court can be designated the power
by the CJ of HC and CJI, respectively, under this section to prevent the credibility of the person
appointing the tribunal/arbitrator from becoming sparse and to avoid greater intervention by Courts.
3. The decision is only appealable under Article 136 of the Constitution as a Special Leave Petition,
which is the discretionary power of the SC, and on determining the CJ's decision, if the SC holds it to be
correct, it will be final.
Rationale:

1. The Chief Justice when appointing the arbitrator/ referring it to arbitral tribunal needs to look into
various preliminary factors before deciding whether he can do so. He needs to consider the factors such
as:
a. Whether a valid arbitration agreement exists between the parties.
b. Whether the person who has approached the court is a party to the agreement.
c. Whether there exists a live claim, i.e. to make sure that the case is not time barred etc.
d. Whether the conditions to bring his jurisdiction into the picture exist.

To determine his jurisdiction, the conditions laid down under S11(6) need to be present which are if the
parties have failed to act according to the procedure laid down in the agreement, if the arbitrators have
failed to reach an agreement or if a person/ institution has failed to do what is expected under the
procedure. The Chief Justice when choosing the arbitrator also needs to keep in mind the qualification of
the arbitrator that had been laid down in the arbitration agreement and all such other qualifications that
are to be satisfied by default.
These functions, according to the Court, highlight the adjudicatory nature of the power and thus even
when the question of delegation by the Chief Justice of these functions to some person designated by
him, come into the play, the designation can only be restricted to person with high judicial credibility just
as the Chief Justice and not any other judicial person/ quasi judicial body. The finality given to the
decision of the CJ for appointment under S11(6), under S 11(7) is so, since the decision taken by the CJ
needs to be reached at after having looked at the merits of the case, thus not merely being an
administrative one. Also, the tenets of natural justice play a role in the discharging of such functions and
thus the CJ will have to send a notice to the other party intimating him of the filing of the application so
as to allow the other party to present its contentions.
The other contention that might arise in such cases is the scope of the arbitral tribunal to decide on its
own jurisdiction under S16 despite the CJ having referred the case to it through S11(6). The Court held
that if a case is brought to the CJ under S11(6), the CJ after examining the merits of the case(the
preliminary ones), if refers the case to an arbitral tribunal, the tribunal cannot then rule upon its
jurisdiction and decide whether it has such a jurisdiction or not. The Court held so since the very body
that brings the tribunal into force cannot question that body on its jurisdiction to do so because the
judicial function of the CJ would expect of him to have delved into the merits of the case and come to
such a conclusion. And since 11(7) gives the decision of the CJ a finality, this decision cannot be over-
ruled by the tribunal. Although if a case is brought to the tribunal directly under S16, it is free to rule on
its own jurisdiction.
2. The Act has been adopted from the UNCITRAL Model laws and Article 11, which corresponds to
S11(6), talks about the "Court" instead of the CJ. This has an obvious implication that being of the
legislature's intent on giving the power to a person with a high judicial credibility. But the CJ alone as an
individual was not intended to be the person who could carry out the function. He forms a part of a class
of persons who can discharge the function and those persons include judges of the same court, i.e., the
High Courts and the Supreme Court. The reason, once again, to only give such power to the judges of the
high court who are appointed by the CJ is to ensure credibility and the only way an institution comes into
picture while appointing the arbitrator/tribunal is that it can give suggestions as to who should constitute
the such a tribunal. The intention of the legislature in replacing "court" with CJ was also to not include
the jurisdiction of the Principal civil courts of original jurisdiction etc in such cases. It would also
lengthen the procedure since ordinary court proceedings would be resorted to, leaving space for
numerous appeals and basically increasing the burden of the Courts, contradicting the very purpose for
which the Act was brought into existence.

3. The Court held that construing the section as an administrative one would lead to vague conclusions. It
recognised the issues that would arise out of such a conclusion since then the decision of the CJ would be
open to appeals under Article 226 of the Constitution and that way, the case would be in the hands of the
judges of High Courts to decide upon, over-ruling the decision of the Chief Justice at times. Also, in the
case of international arbitration, the decision of the Supreme Court of India would be subject to appeal
under the High Courts which in essence would be incongruous. The CJ under S11(6) anyways deals into
the details of the preliminary facts to decide whether it is fit for appointment of an arbitrator or not and
since a high amount of judicial activity goes into it, the only recourse left to take against the CJ's decision
can be under Art 136. If after appeal under Art 136, the Supreme Court decides that the CJ's reasons for
coming to the conclusion do not show any discrepancy, it will be final and unappeallable. This again
somewhat cemented by the presence of S11(7) which makes the
decision of the CJ final. The only way for the party to appeal then will be to wait for the order of the
Tribunal and then appeal it under S34 of the Arbitration and Conciliation Act.
Rule:

The CJ's function to appoint an arbitrator or arbitral tribunal is a judicial function and not an
administrative one and the power to designate this duty only extends to designating it to other judges of
the High Court/ Supreme Court. The decision of the CJ can also only be appealable under Article 136
after which the decision will be final and binding.

Konkan Railway v Rani Construction

BACKGROUND AND ISSUES

In Ador Samia Private Limited Vs. Peekay Holdings Limited & Ors. [1999], the court had held that the
order of the Chief Justice or his designate in exercise of the power under Section 11 of the Arbitration
Act was an administrative order and that such order was not amenable to the jurisdiction of Supreme
Court under Article 136.

The decision of the Bench of the three learned Judges affirmed this view in Konkan Railway Corporation
Ltd. & Ors. Vs. Mehul Construction Co., [2000]. Thereafter, in the present case, a Bench of two learned
Judges referred to a larger Bench the decision of the three learned Judges for re-consideration. This is
how the matter came to before a Constitution Bench. Two issues which were to be decided in this case
was-

Whether such an order was a judicial order or an administrative order, and

Does the Chief Justice or his nominee, acting under Section 11, have the authority to decide any
contentious issues between the parties to the alleged arbitration agreement?
A related question was-
Even if the said order is held to be administrative in nature what is the remedy open to the person
concerned if his request for appointment of an arbitrator is turned down by the learned Chief Justice or
his nominee, for some reason or other?
HELD

The Court observed-

The three Judge Bench noted that the Act was based upon the UNCITRAL Model framed by the
Commission on International Trade Law established by the United Nations. It said that if a comparison
was made between the language of Section 11 of the Act and Article 11 of the Model Law it was
apparent that the Act had designated the Chief Justice of a High Court in cases of domestic arbitration
and the Chief Justice of India in cases of international commercial arbitration to be the authority to
perform the function of appointment of an arbitrator whereas under the Model Law that power had been
vested in the court.

When the matter is placed before the Chief Justice or his designate under Section 11 it was not
appropriate for the Chief Justice or his designate to entertain any contentious issues between the parties
and decide the same. The only function of the Chief Justice or his designate under section 11 is, to fill the
gap left by a party to the arbitration agreement or by the two arbitrators appointed by the parties and
nominate an arbitrator. This is to enable the Arbitral Tribunal to be expeditiously constituted and
arbitration proceedings to commence.

A bare reading of Sections 13 and 16 made it clear that questions with regard to the qualifications,
independence and impartiality of the arbitrator and in respect of the jurisdiction of the arbitrator could be
raised before the arbitrator, who would decide the same. If a contingency arose where the Chief Justice or
his designate refused to make an appointment of the arbitrator, the party seeking the appointment had the
remedy of ‘mandamus.’ An intervention was possible by a court in the same way as an intervention was
possible against an administrative order of the executive.

The nature and function performed by the Chief Justice or his designate being essentially to aid the
constitution of the arbitral tribunal, it could not be held to be a judicial function. It was, therefore, held
 that an order under Section 11 refusing to appoint an arbitrator was not amenable to the jurisdiction of
this Court under Article 136 of the Constitution. Section 11 does not contemplate a decision on any
controversy, the party other than the requesting party may raise. Facts that nomination is to be made after
expiry of 30 days and qualifications of arbitrators along with considerations likely to secure nomination
of independent and impartial arbitrator are to be taken into account, do not mean that an adjudicatory
function is to be carried out.

To put it concisely, for an order properly to be the subject of a petition for special leave to appeal under
Article 136 it must be an adjudicatory order, an order that adjudicates upon the rival contentions of
parties, and it must be passed by an authority constituted by the State by law for the purpose in discharge
of the State’s obligation to secure justice to its people.

Hence, the bench dismissed the appeal.

National Insurance Company v Boghra Polyfab (2009) 1 SCC 267

Facts:
Boghara Polyflab (respondent) obtained a standard Fire and Special Perils Policy from the National Insurance
Co. (appellant) to cover its goods in its godowns situated at Surat for the period 4.8.2003 to 3.8.2004. The sum
insured was Rs 3 crores, subsequently increased to Rs 6 crores. On 27.5.2004 the respondent requested the
insurer to increase the sum insured by another Rs 6 crores for a period of two months. Accordingly, the
appellant issued an additional endorsement increasing the sum insured by another Rupees 6 crores, in all
Rupees twelve crores. The respondent alleges that the additional endorsement cover issued by the appellant was
for 69 days i.e. from 27.5.2004 to 3.8.2004. The appellant alleges that the additional endorsement cover was for
a period of 60 days from 27.5.2004 to 26.7.2004.

On 5.8.2004, the respondent reported damage to their stocks on account of heavy rains and flooding which took
place on 2 and 3.8.2004 and made a claim in that behalf. The surveyor submitted a preliminary report dated
14.8.2004 followed by a final survey report dated 6.12.2004 according to which the net assessed loss was
Rs.3,18,26,025/-. The said sum was arrived at on the basis that the sum insured was Rs.12 crores, the actual
value of stocks in the godowns at risk was Rs.8,15,99,149/-, value of damaged goods was Rs.5,22,81,001/-, and
the recoverable salvage value was Rs.1,87,79,922/-. The appellant informed the surveyor by letter dated
1.3.2005 that there was an error in the net assessed loss arrived at by the surveyor as it assumed the sum
insured as Rs.12 crores up to 3.8.2004 whereas the sum insured was only Rs.6 crores after 26.7.2004 till
3.8.2004, and therefore instructed the surveyor to prepare the final report regarding net assessed loss by taking
the sum insured as only Rupees six crores. The surveyor therefore gave an addendum to the final survey report
on 22.3.2005 reassessing the net loss by taking the sum insured as only Rupees six crores. The value of goods
at risk, the value of damaged goods and the value of recoverable salvage remained unaltered. By modifying the
percentage of insurance at 75.53%, the `Net Assessed Loss' was re-worked as Rs.2,34,01,740/-. The respondent
protested against the loss being assessed by taking the sum insured as only Rupees six crores. The claim and
the dispute were pending consideration for a considerable time.

The respondent alleged that the appellant forced the respondent to accept a lower settlement; that the appellant
informed the respondent that unless and until the respondent issued an undated `Discharge voucher-in-advance'
acknowledging receipt of Rs.2,33,94,964/- in full and final settlement, no amount would be released towards
the claim; that in that behalf, the appellant sent the format of the discharge voucher to be signed by respondent
on 21.3.2006; that on account of the non- release of the claim, it was in a dire financial condition and it had no
alternative but to yield to the coercion and pressure applied by the appellant; that therefore the respondent
signed and gave the said discharge voucher, undated, as required by the insurer during the last week of March,
2006. The payment was released by the appellant only after receiving the said discharge-voucher.

Boghara also sent a notice regarding a move for arbitration within 15 days if the Insurance company didn’t
agree to pay the remaining amount with 12% interest. The insurance company rejected the demand.

Procedural History:

After the appellant's refusal to agree for arbitration, the respondent filed an application under Section 11
of the Arbitration & Conciliation Act, 1996 in the Bombay High Court. The said petition was resisted by
the appellant by reiterating that the respondent had accepted the payment of Rs.233,94,964/- in full and
final settlement and therefore, the respondent could not invoke the arbitration clause.
 The Bombay High Court, applying sec 11 allowed the petition and appointed a sole arbitrator. The High
Court examined the issue and found that prima facie there was no accord and satisfaction or discharge of
the contract. It held that the appellant is still entitled to raise this issue before an arbitrator and the
arbitrator has to decide it. The Insurance company has now appealed before the SC.

Issue:

Whether if the dispute is arbitrable under Sec. 11 of the Arbitration and Conciliation Act?
Holding:

The appeal was dismissed by the Supreme Court upholding the High Court’s judgment as there was no
accord and satisfaction or discharge of the contract, and that the dispute was held arbitrable.
Reasoning:

The accord and satisfaction in such a case is not voluntary but under duress, compulsion and
coercion. The coercion is subtle, but very much real. The `accord' is not by free consent. The arbitration
agreement can thus be invoked to refer the disputes to arbitration. Being in financial difficulties, the
claimant agrees to the demand and issues an undated discharge voucher in full and final settlement. Only
a few days thereafter, the admitted amount mentioned in the voucher is paid.
Here even if the claimant might have agreed for settlement due to financial compulsions and
commercial pressure or economic duress, the decision was his free choice. There was no threat, coercion
or compulsion by the respondent. Therefore, the accord and satisfaction is binding and valid and there
cannot be any subsequent claim or reference to arbitration.
At the time of signing the voucher by the respondent and at the time of delivery of voucher by the
respondent to the appellant, the contents of the voucher that the said amount had been received, that such
amount had been received in full and final settlement of all claims, and that in consideration of such
payment, the company was absolved from any further liability, are all false and not supported by
consideration.

Datar Switchgears v. Tata Finance Ltd (2008) 8 SCC 151

Facts:
The Appellant (Datar Switch Gears) and the Respondent (Tata Finance) were in a lease agreement
dealing with certain machinery. Soon after, a dispute arose and the respondent (hereafter referred to as
“R”) sent a notice to the Appellant( hereafter referred to as “A”) for a payment of a substantial amount
within the next 14 days. A failed to pay the amount during the stipulated time, therefore, as earlier
mentioned by R it had to be treated as a notice for arbitration under the arbitration clause (20.9) of the
agreement entered by the two parties. R did not however immediately appoint an Arbitrator but filed an
Arbitration petition under Section 9 of the Arbitration and Conciliation Act,1996.
On 25th November, 1999 the R being the lessor went ahead and nominated an Arbitrator, after the lapse
of 30 days from the payment notice sent. A, thereon, questioned the authority of the R appointing an
Arbitrator after the long lapse of notice period of thirty days and contended that the power of appoint an
arbitrator should have been exercised within a reasonable period of time and with concurrence to the
consent of A.

Procedural History:

A filed an arbitration application before the Chief Justice of the Bombay High Court asking them to
appoint another Arbitrator due to the expiry of thirty days since the notice was sent and also challenged
the unilateral appointment of the arbitrator. R challenged this application stating that an arbitrator was
already appointed by them according to the provisions given in the arbitration clause agreed to in the
lease agreement. The Chief Justice of the Bombay High Court held that since an arbitrator was already
appointed as per the conditions given in the lease agreement the application to appoint an another
arbitrator failed. A now has appealed before the Supreme Court challenging the order of the Chief Justice
of the Bombay High Court that maintains the appointment of an arbitrator by R even after the expiry of
thirty days which is allegedly beyond the reasonable time.
Issues:

1. If there a failure of the mechanism provided under the lease agreement entered by the parties?
2. If under Section 11(6) of the Act, R forfeits his right to appoint an arbitrator if he fails to appoint one
within the period of thirty days?
 Holding/ Judgement:

The Court held that there was no failure of the arbitration mechanism as prescribed under the lease agreement
as Clause 20.9 of the agreement. As the agreement clearly stated that the lessor (R) will have the authority to
appoint the arbitrator and the award will be final and binding. Hence, the Court agreed with the lower court’s
decision stating that there was no failure in procedure while appointing the arbitrator.
The Court opined that Section 11(6) does not mention the a specific period of days as a limit the court,
however, did mention that even though the period of thirty days is not mentioned if the opposing party moves
to the Court before the appointment of the arbitrator then that forfeits the right of a party to appoint an
arbitrator. In the present case an arbitrator was already appointed by R before the A approached the Court. The
court thus dismissed the appeal at all costs as there was no cause of action to sustain any kind of failure in the
procedure to appoint an arbitrator on part of R.
Rationale:

Section 11 of the Act discusses the procedure of appointing an Arbitrator. If there is any kind of failure wherein
two parties cannot appoint an arbitrator or two arbitrators cannot agree on the third arbitrator, then the
aggrieved party can approach the Court under Section 11( 4) (5) &(6) of the Act. Under section 11 (4) & (5) the
period of thirty days has been mentioned as a reasonable time period for the appointment of an arbitrator.
However, the present application before the Court is under Section 11(6) (a) no time limit has been prescribed
under this section. Provided, that an arbitrator is appointed before A filed an application under Section 11
before Court. Thus in cases where an arbitrator has not been appointed within thirty days but no application has
been made before the court under Section 11 of the Act calling the procedure to appoint an arbitrator the right
to appoint an arbitrator does not cease. In the present case, not only did the party provide them with a notice for
the payment but also the had already appointed an arbitrator and settled a date for resolution of the dispute.

Additionally, the arbitration clause (20.9) agreed by the two parties in the lease agreement did not prescribe
any time period neither did it provide for any consent on the part of the lessee (A) for the appointment of the
Arbitrator. The Court also stated that where two parties have willfully entered into a contract that does not
contain any kind of fraud, deceit or mala fide intention on the part of the arbitrator, the Court will not interfere
in matters relating to appointment of an arbitrator.
Rule:

The Court applied the rule that since no time period was expressly mentioned under Section 11(6) of the Act.
A party does not forfeit his right to appoint an arbitrator at the expiry of the thirty days, unless, the other party
has already approached the Court under Section 11 of the Act for failure in appointing an Arbitrator. Also, it is
crucial to look at the procedure provided in the arbitration clause of the agreement signed by the two parties.

India Household & Healthcare Ltd. v LG Household & Healthcare Ltd., (2007) 5 SCC 510

FACTS:-

Allegedly, an agreement was entered into by and between the parties hereto on 8.05.2004. The said
agreement contained an arbitration clause being Clause 12 thereof, the relevant portion whereof reads as
follows:

"12.2 In the event of any dispute or difference arising between the parties hereto or as to the rights and
obligations under this agreement or as to any claim monetary or otherwise of one party to another, such
dispute or difference shall be referred to arbitration of a common arbitrator, if agreed upon, otherwise to
two or more arbitrators, one to be appointed by each of the parties to this agreement and such arbitration
shall be governed by the Arbitration and Conciliation Act, 1996, for the time being in force. The venue
for such arbitration shall be in India or as is mutually decided otherwise. Until a finality is achieved in the
arbitration or litigation, the Licensor shall have no right to cancel the agreement and appoint any third
party or enter into agreement with any party for the sale/ importation or manufacture of the products/
provision of services in the territory."

Respondent, however, contends that the said agreement was preceded by a Memorandum of
Understanding dated 1.11.2003. Respondent further contends that the said purported Memorandum of
Understanding and licence agreement dated 8.05.2004 are vitiated by a fraud of a very large magnitude
fructified by a criminal conspiracy hatched between M/s. K.P. Jayram Pillai and Vijay R. Singh
representing the petitioner and M/s. C.H. Kim and B.K. Jung representing the respondent. The petitioner -
company bribed the said C.H. Kim and B.K. Jung for the purpose of creation of the aforesaid documents.
They had already been convicted and sentenced to undergo imprisonment by the Korean Criminal Court.
It was contended that they misused their official position to advance private benefit. There seems to be a
substantial and reasonable nexus to promote personal advantage. There was furthermore no ostensible
authority on their part to represent the company. The said Memorandum of Understanding also
contravenes the Korean laws in terms whereof the execution thereof required the prior approval of and a
duly executed power of attorney from the Representative Director and the Chief Executive Officer of the
respondent which did not exist in the present case.

There cannot be any doubt whatsoever that there exists a sharp distinction between the provisions of
the Arbitration Act, 1940 and the 1996 Act. The philosophy of the 1996 Act is different. The 1996 Act is
required to be read keeping in view the UNCITRAL Model Rules. It is also no doubt true that where
existence of an arbitration agreement can be found, apart from the existence of the original agreement,
the Courts would construe the agreement in such a manner so as to uphold the arbitration agreement.
However, when a question of fraud is raised, the same has to be considered differently. Fraud, as is well
known, vitiates all solemn acts. 

The purported arbitration agreement is an international commercial arbitration agreement. Section 16 of

the 1996 Act which is in Chapter 4 of Part I thereof may not, thus, be applicable in this case. Even if it
applies, the jurisdiction of the arbitrator to determine his own jurisdiction is on the basis of that
arbitration clause which may be treated as an agreement independent of the other terms of the contract
and his decision that the contract is null and void shall not entail ipso jure the validity of the arbitration
clause.

ISSUES:-

 the applicant herein has also prayed for inter alia the following reliefs:
 Whether the issue of use of LG logo is a valid and tenable ground for the termination of agreements
between the parties?

Whether the Petitioner is entitled under the agreements to continue with the production of the "Products"
with LG logo as agreed between the parties?"

The said prayers fall outside the arbitration agreement since LG Logo belongs to LG Corporation which
is the owner of the trade mark. It is not a party to the arbitration agreement. It is allegedly has filed a
separate suit.

Duro Felguera v. Gangavaram Port Ltd. 2017 SCC OnLine SC 1233

Factual background

This case involved three parties, namely: (1) Gangavaram Port Limited (GPL), an Indian company; (2)
Duro Felguera Plantas Industrials SA (DFPI), a Spanish company; and (3) Felguera Gruas India Private
Limited (FGI), an Indian company.

GPL had developed a greenfield, ultra-modern, all-weather sea-port and intended to expand its facilities
in the port with respect to bulk materials handling system. For this purpose, GPL invited a tender and in
response to the said tender, DFPI along with FGI submitted a Single Bid/ Tender - Original Package No 4
dated 15 November 2011.

DFPI and FGI were selected as the contractors for the works and after discussion between the parties, the
Original Package No 4 was divided into five different and separate packages, namely (i) New Package
No 4, (ii) Package No 6, (iii) Package No 7, (iv) Package No 8 and (v) Package No 9. New Package No 4
was awarded to DFPI whereas Package Nos 6 to 9 were awarded to FGI. Separate letters of award were
issued for the five different Packages.

Five different contracts were entered into on 10 May 2012 for the five separate Packages with different
parties. The contract with reference to New Package No 4 was entered into with DFPI and the contracts
in relation to Package Nos 6, 7, 8, 9 and 10 were entered into with FGI. Each one of the
contract/agreement for work under the split up Packages contained an arbitration clause namely, sub-
clause 20.6 and the proceedings were governed by the Arbitration and Conciliation Act, 1996 (Act).
DFPI also executed a corporate guarantee dated 17 March 2012 (Guarantee) in favor of GPL
guaranteeing due performance of all the works awarded to DFPI and FGI. The Guarantee had its own
separate arbitration clause (Clause 8).

On 11 August 2012, DFPI and FGI executed a Tripartite Memorandum of Understanding (MOU) with
GPL to carry out the works as per the priority of the documents listed therein. The MOU did not contain
any specific arbitration clause.

Disputes arose between the parties and DFPI issued a notice invoking arbitration on 5 April 2016 for the
New Package No 4 contract. FGI also issued four arbitration notices dated 7 April 2016 for Package Nos
6 to 9 contracts. Both DFPI and FGI nominated Justice D R Deshmukh as their nominee arbitrator in each
of the respective five contracts.

GPL issued a comprehensive arbitration notice on 13 April 2016 under sub-section 20.6 of the Original
Package No 4 – Tender Document which, as per GPL, was incorporated in the MOU by reference and all
the other five contracts namely Package No 4, Package Nos 6 to 9 and the Guarantee.

Main contentions of GPL

i. The MOU referred to all the agreements and it had subsumed all the separate agreements and
therefore there could only be one agreement in relation to which one particular arbitral tribunal
should be appointed to resolve the disputes of international commercial arbitration.
ii. The MOU makes a reference to the Original Package No 4 – Tender Document which contains an
arbitration clause and hence the arbitration clause is incorporated into the MOU by reference.
iii. The Original Package No 4 – Tender Document was split up into five separate contracts only
based on a request made by DFPI for the convenience of the contractors and all the works are
interconnected and interlinked.
iv. The appointment of a single arbitral tribunal, under the MOU, would avoid conflicting awards
between the parties, huge wastage of time, resources and expenses and would be consistent with
law and public policy.
Main contentions of DFPI and FGI

i. The parties by a conscious decision and agreement superseded the Original Package No 4 –
Tender Document and five new package contracts with different works were entered and
executed.
ii. The MOU came into existence long after the contracts and it does not contain any arbitration
clause. The MOU only enlists the priority of the documents to be considered for carrying out the
works and cannot override the terms of the separate contracts.
iii. The Guarantee has its own separate and distinct arbitration clause and the same has no connection
with the arbitration clauses of the five different contracts.
iv. There cannot be a composite reference for five different contracts which are separate in their
contents and the subject matter. Therefore, there has to be multiple arbitral tribunals for different
contracts, however, the composition of these tribunals can be the same.

Decision of the Court

Powers of the Court under Section 11(6A) of the Act

The Court noticed that this was one of the first cases before it on the issue of interpretation of Section
11(6A) of the Act after the amendments to the Act in 2015. Therefore, the Court deemed it appropriate to
outline the scope and extent of power of the High Court and the Supreme Court under Sections 11(6) and
11(6A) of the Act.

The Court while considering the pre-amendment judgments2  held that even though the scope and power
of the High Court and Supreme Court under Section 11(6) of the Act was considerably wide but after the
amendment all that the Court needs to see is whether the arbitration agreement exists and nothing more
and nothing less. The Court also held that the amended provisions of Section 11(7) of the Act provides
that the order passed under Section 11(6) shall not be appealable and thus finality is attached to the order
passed under this Section.

Composite reference of multiple agreements

The Court held that in this case there are six arbitral agreements i.e. five package contracts for works and
one under the Guarantee. The Court also held that from the records all that had to be seen was that there
were separate letters of award, separate contracts, separate subject matters and separate and distinct
works. The Court held that considering these circumstances and the restrictive scope of interference
under Section 11 of the Act, there had to be separate arbitral tribunals for the disputes pertaining to each
agreement, for the following reasons:

i. After the Original Package No. 4 was split up into five separate agreements, the parties could not
revert to the terms of the Original Package No. 4 nor could they merge into one.
ii. Mere reference of the Original Package No. 4 – Tender Document in the MOU could not lead to
an inference of an arbitration clause being incorporated in it. The MOU, in this case, was meant to
lay down the priority of documents only to clarify the priority in execution of the work.
iii. Merely because DFPI gave a corporate guarantee undertaking to compensate GPL for both DFPI
and FGI, the same cannot supersede the five split up contracts.
iv. The Court while distinguishing the judgment of the Supreme Court in Chloro Controls India
Private Limited v Severn Trent Water Purification Inc & Ors (Chloro Controls case) held
that the said judgment and the ratio regarding the doctrine of 'composite reference' was not
applicable to the instant case. The Court considered that the arbitration clause in the Chloro
Controls case included the wordings "under and in connection with" in the principal agreement,
which was very wide. However, in this case all the contracts had separate arbitration clauses and
they did not depend upon the terms and conditions of the parent agreement (i.e. the MOU).
v. The Court also considered that if the request of GPL for having a composite international
commercial arbitration is accepted, then FGI (the Indian party) may lose the opportunity of
challenging the award under Section 34(2A) of the Act.
vi. MR Engineers and Contractors Pvt. Ltd. Vs Som Dut Builders Limited (2009) 7 SCC 696,
referred while arguing for Section 7(5) in the instant case. They said that “even though the
contract between the parties does not contain a provision for arbitration, an arbitration clause
contained in an independent document will be imported and engrafted in the contract between the
parties, by reference to such independent document in the contract, if the reference is such as to
make the arbitration clause in such document, a part of the contract. ..... A general reference to
another contract will not be sufficient to incorporate the arbitration clause from the referred
contract into the contract under consideration. There should be a special reference indicating a
mutual intention to incorporate the arbitration clause from another document into the contract.
The exception to the requirement of special reference is where the referred document is not
 another contract, but a standard form of terms and conditions of trade associations or regulatory
institutions which publish or circulate such standard terms and conditions for the benefit of the
members or others who want to adopt the same. ......”

However, since the issues arising between the parties were interrelated, the Court appointed the same
arbitral tribunal for resolving each of the disputes under two international commercial arbitrations
involving DFPI and four domestic arbitrations involving FGI.