Supreme Court of India
ENERCON (INDIA) LTD. & ORS.versusENERCON GMBH & ANR.
- Citation
- 2014 INSC 100
- Decided
- 14 February 2014
- Disposal
- Disposed off
- Bench
- S S NIJJAR
Holding
The arbitration agreement is separable and enforceable, the seat of arbitration is India, English courts lack concurrent jurisdiction, and the anti‑suit injunction is restored, compelling the parties to arbitrate.
Summary
The parties to a joint venture executed an Intellectual Property License Agreement (IPLA) containing an arbitration clause, but the appellants argued that the IPLA was not a concluded contract and therefore no arbitration agreement existed. The Supreme Court held that the arbitration clause is separable from the underlying contract and remains enforceable, directing the parties to proceed to arbitration. It found the arbitration clause workable, inserting the missing provision for appointment of the third arbitrator, and clarified that the seat of arbitration is India, with London only a venue for hearings. Consequently, English courts do not have concurrent jurisdiction, and the anti‑suit injunction previously granted by the Daman court was restored. The Court appointed Lord Hoffmann as the third arbitrator and stayed all parallel proceedings, ordering the parties to resolve their disputes through arbitration under Indian law.
Issues considered
- Whether the IPLA is a valid and concluded contract
- Whether the court should decide the existence of a concluded contract or leave it to the arbitral tribunal
- Whether the appellants can refuse to arbitrate on the ground that the IPLA is not concluded
- Whether the arbitration clause in Clause 18.1 is vague or unworkable
- Whether the seat of arbitration is London or India
- If the seat is India, whether English courts have concurrent jurisdiction
- Whether the appellants are entitled to an anti‑suit injunction
Legislation cited
- Arbitration and Conciliation Act, 1996s. 10, s. 11, s. 16, s. 44, s. 45, s. 48, s. 5, s. 7
- Civil Procedure Code (CPC)s. 2, s. 20
- Indian Contract Act, 1872s. 14, s. 15, s. 16, s. 17, s. 18, s. 19, s. 20
Subjects
Arbitration agreementSeparability doctrineSeat of arbitrationVenue vs seatInternational commercial arbitrationAnti‑suit injunctionConcurrent jurisdictionIndian Arbitration Act
Judgment
[2014] 2 S.C.R. 855
ENERCON (INDIA) LTD. & ORS. A
V.
ENERCON GMBH & ANR.
(Civil Appeal No. 2086 of 2014 etc.)
FEBRUARY 14, 2014
B
[SURINDER SINGH NIJJAR AND FAKKIR MOHAMED
IBRAHIM KALIFULLA, JJ.]
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 D
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 F
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 G
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
856 SUPREME COURT REPORTS [2014] 2 S ..C.R.
A as an agreement independent of such a contract --
UNCITRAL Model Law.
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.
Arbitration clause - Seemingly unworkable arbitration
D 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
E 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,
G 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
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.
Concurrent jurisdiction - International Commercial
Arbitration - Held: High Court having fixed the seat in India,
committed an error in concluding that Courts in England D
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 E
powers over the arbitration - In view of s. 2, CPC, Daman trial
court (India) has jurisdiction over the matter.
Anti suit injunction - International Commercial Arbitration
- Suit in Daman court (India) for declaration that substantial F
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.
Appellants No.2 and 3 and respondent No.1 (a
company incorporated under the laws of Germany, H
858 SUPREME COURT REPORTS (2014] 2 S.C.R.
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
F 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
G 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
H the application filed by the appellants, seeking interim
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 859
& ANR.
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, B
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."
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
860 SUPREME COURT REPORTS [2014) 2 S.C.R.
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
HELD:
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 A
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 B
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 E
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 F
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 G
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
862 SUPREME COURT REPORTS [2014] 2 S.C.R.
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
E
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
F 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
G 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,
H but this would not detract from the legitimacy or
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 863
&ANR.
independence of the collateral arbitration agreement, A
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 F
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 G
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
864 SUPREME COURT REPORTS [2014] 2 S.C.R.
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 C
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 D
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 E
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
866 SUPREME COURT REPORTS [2014] 2 S.C.R.
A IV, V and VI of the Act applicable. In the instant case,
London is mentioned only as a "venue" of arbitration,
which, in the facts of the case cannot be read as the
"seat" of arbitration. This is also because, all the three
laws applicable in arbitration proceedings are Indian laws.
B The law governing the contract, the law governing the
arbitration agreement and the law of arbitration/curial law
are all stated to be Indian. [para 90-91] [919-G-H; 920-B-
C, D-F]
'Naviera Amazonica Peruana S.A. Vs. Compania
C Internacional De Seguros Del Peru 1988 (1) Lloyd's Rep 116
- relied on.
Bharat Aluminium Company Vs. Kaiser Aluminium 2012 ·
(12) SCR 327 = 2012 (9) SCC 552 - referred to.
D James Miller & Partners Ltd. v. Whitworth Street Estates
(Manchester) Ltd. [1970] 1 Lloyd's Rep. 269; [1970]
A.C.583; Mustill, J. in Black Clawson International Ltd. v.
Papierwerke Waldhof-Aschaffenburg A.G. [1981] 2 Lloyd's
Rep. 446 at P. 453 - referred to.
E
Dicey & Morris on the Conflict of Laws (11th Edn.) -
cited.
3.2 In the instant case all the three laws: (i) the law
governing the substantive contract; (ii) the law governing
F the agreement to arbitrate and the performance of that
agreement; and (iii) the law governing the conduct of the
arbitration, are Indian. The curial law of England would
become applicable only if there was clear designation of
the seat in London. Since the parties have deliberately
G chosen London as a venue, as a neutral ptace to hold the
meetings of arbitration only, it cannot be accepted that
London is the seat of arbitration. Businessmen do not
intend absurd results. If seat is in London, then challenge
to the award would also be in London. But the parties
H having chosen Indian Arbitration Act, 1996 - Chapter Ill,
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 867
&ANR.
IV, V and VI, s.11 would be applicable for appointment of A
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 D
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 E
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.
868 SUPREME COURT REPORTS [2014] 2 S.C.R.
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
870 SUPREME COURT REPORTS [2014] 2 S.C.R.
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
E 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
F 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
G 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
872 SUPREME COURT REPORTS [2014) 2 S.C.R.
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
874 SUPREME COURT REPORTS [2014] 2 S.C.R.
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.
The Judgment of the Court was delivered by
SURINDER SINGH NIJJAR, J. 1. Leave granted.
c
2. These civil appeals have been filed against the order
and judgment dated 5th October, 2012, passed by the Bombay
High Court in CWP Nos.7804 of 2009 and 7636 of 2009. The
Bombay High Court by the impugned order dismissed both the
D aforesaid Civil Writ Petitions.
3. Appellants No.2 and 3 (members of the Mehra family)
and the Respondent No.1 (a company incorporated under the
laws of Germany, having its registered office at Aurich,
Germany) entered into a joint venture business by setting up
E 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:
4. On 12th January, 1994, the Appellant Nos. 2 and 3
entered into a Share Holding Agreement ("SHA") with the
Respondent No.1. In terms of the SHA, the Respondent No. 1
was to hold 51% shares of the Appellant No. 1-Company, and
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:
5. On the same day, i.e. 12th January, 1994, the Appellant
No. 1 and the Respondent No. 1 entered into a Technical Know-
How Agreement ("TKHA") by which the Respondent No. 1 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:
6. 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:
7. 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:
8. 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
876 SUPREME COURT REPORTS [2014] 2 S.C.R.
A recorded in a document titled "Heads of Agreement".
Agreed Principles:
9. On 29th September, 2006, the Appellants and the
Respondent No. 1. entered into what is known as the "Agreed
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):
F 10. On the same day, i.e. 29th September, 2006,
Intellectual Property License Agreement ("IPLA") was executed
between the parties. It appears that Appellant No.2 has signed
the IPLA on behalf of the Appellants No. 2 and 3. However, the
Appellants have contended that this IPLA is not a concluded
G 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
H 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 A
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
878 SUPREME COURT REPORTS [2014] 2 S.C.R.
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
D 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
E 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
11. The Appellants claim that Respondent No.1, in
February, 2007, unilaterally decided to stop all shipments of
supplies to India in order to pressurize them to sell the share
holding as desired by Dr. Wobben. However in March, 2007, 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
12. We may notice only those proceedings between the
parties that have a bearing on the issues arising before us.
Derivative Suit:
D
13. Appellants No.2 and 3 filed a derivative suit (in Civil
Suit No.2667 of 2007) on 11th September, 2007 before the
Bombay High Court ("Bombay Suit"), seeking resumption of
supplies, parts and components. In this suit, Respondent No.1
has taken out an Application under Section 45 of the Arbitration 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 F
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
880 SUPREME COURT REPORTS [2014] 2 S.C.R.
A Nomination of Arbitrator :
14. On 13th March, 2008, a letter was sent on behalf of
the Respondent No. 1 to the Appellant Nos. 2 and 3, wherein
the Respondent No. 1 invoked the arbitration agreement,
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:
D 15. On 27th March, 2008, "Arbitration Claim Form" was
issued by the Respondents seeking several declaratory reliefs
in relation to the IPLA from the High Court of Justice, Queens
Bench Division, Commercial Court, United Kingdom ("the
English High Court"). The reliefs which were claimed included.
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.
16. 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
17. In response to the aforesaid, a letter was addressed
· by the UK Solicitors of Respondent to the Appellants on 2nd
April, 2008, stating therein that in the event the Appellants do
not nominate their arbitrator within 7 days of the receipt of the
H 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 A
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:
18. On 8th April, 2008, the Appellants filed Regular Suit
No. 9 of 2008 (Daman Suit) before the Court of Civil Judge,
Sr. Division, "Daman Trial Court" seeking, inter alia, a 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.
19. 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.
'
20. 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
882 SUPREME COURT REPORTS [2014] 2 S.C.R.
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 :
22. 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:
23. 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
24. On 25th November, 2011, the English High Court
passed an order in form of an anti-suit injunction that had the
effect of restraining the Appellants from prosecuting/arguing the
writ petitions before the Bombay High Court. The Appellants
were restrained from approaching the Bombay High Court to 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
25. On 23rd March, 2012, the English High Court (Eder,
J.) delivered its judgment, wherein the freezing injunction was
discharged. It was inter-alia held in Paragraph 51 of the
judgment that anti-arbitration injunction of the Bombay High
Court was in force. On 27th March, 2012, the English High 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;
H
884 SUPREME COURT REPORTS [2014) 2 S.C.R.
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
26. The Appellants took necessary steps for an expeditious
listing and hearing of the writ petitions before the Bombay High
Court. However on 11th June, 2012, the Respondents filed an
Application before the English High Court for constituting an
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:
27. 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
F 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
G 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
28. On 5th October, 2012, the English Solicitors of
Respondent No.1 addressed a letter to the English Solicitors
of Appellant No.1, in relation to re-listing of their Application
dated 11th June, 2012 for appointment of a third arbitrator/re-
constitution of the Arbitral Tribunal. In October, 2012, the parties 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
886 SUPREME COURT REPORTS [2014] 2 S.C.R.
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.
29. 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
E 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
F 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
G 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."
30. From 3rd December to 14th December, 2012, the
learned counsel for the parties made efforts to finalize a draft
of the Form of Order and the accompanying undertaking(s) to E
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 F
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 G
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
888 SUPREME COURT REPORTS [2014] 2 S.C.R.
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.
B 31. Thereafter in February, 2013, the order/judgment
dated 5th October, 2012 passed by the Bombay High Court
was challenged in this court by way of present appeals.
Submissions:
C 32. We have heard the learned senior counsel for the
parties.
I. Re: Concluded Contract:
33. The first submission of Mr. Rohinton Nariman is that
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.
34. 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.
35. 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.
36. 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
890 SUPREME COURT REPORTS (2014] 2 S.C.R.
A Electrical vs. Patley Pressings, 2 Harvey vs. Pratt, 3 Bushwall
vs. Vortex, 4 Kol/ipara vs. Aswathanarayana5 and· Dresser Rand
vs. Bindal Agro. 6
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
38. It was submitted that Clause 18.1 of the IPLA is
E 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
F 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 A
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 B
pointed out that the Respondents, however, have not sought to
sustain the aforesaid reasoning of the High Court.
39. He further submitted that even though an arbitration
clause can be construed by the Court in such a way as to make 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
40. Mr. Nariman submitted that for the purposes of fixing
the seat of arbitration the Court would have to determine the
territory that will have the closest and most intimate connection
with the arbitration. He pointed out that in the present case
provisions of the Indian Arbitration, Act, 1996 are to apply;
substantive law of the contract is Indian law; law governing the 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
892 SUPREME COURT REPORTS [2014) 2 S.C.R.
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.
41. Mr. Nariman also submitted that there are even more
clear indicators within the arbitration clause which show that the
parties intended to be governed only by the Indian Arbitration
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.
G 42. Mr. Nariman gave another reason as to why London
can't be the seat of the Arbitration. According to him, if the
interpretation propounded by the Respondents is accepted, it
would lead to utter chaos, confusion and unnecessary
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.
43. 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
44. It was submitted on behalf of the Appellants that since
the seat of arbitration is India, the Courts of England would have
no jurisdiction. Appellants rely upon Oil & Natural Gas
Commission Vs. Western Company of North America 11 ,
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.
45. 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
894 SUPREME COURT REPORTS [2014] 2 S.C.R.
A to the Respondents since London is only a venue. Therefore,
an injunction ought to be issued restraining the Respondents
from pursuing proceedings before the English Court. Mr.
Nariman pointed out that the Respondents have given up the
contention that Indian and English Courts have concurrent
B jurisdiction.
46. Reliance is placed on the judgment of this Court in
Harshad Chiman Lal Modi Vs. DLF Universa/1 3, in support of
the submission that since Respondent No.1 has share holding
C in a company which has registered office within the territorial
limits of the Daman Court, therefore relief can be necessarily
granted t() the Appellants for restraining Respondent No.1 for
proceeding in the English Courts. It was also pointed out. that
Respondent No.1 has approached the Company Law Board
under Section 397 of the Companies Act; the Delhi High Court
D alleging infringement of its intellectual property rights; and the
Madras High Court against the orders passed by the Intellectual
Property Appellate Board, revoking patents in the name of Dr.
Wobben in India. Therefore, it has already submitted to the
jurisdiction of Courts in India. Mr. Nariman, however, points out
E that in view of the orders of the English Court dated 15th
February, 2013, restraining the Appellants from seeking an
injunction against the Respondents save if this Court
determines the seat of the arbitration is India, the Appellants
shall not seek any injunction from this Court, unless this Court
F determines that the sea1 of arbitration is in India.
Respondents' Submissions:
47. Dr. Abhishek Manu Singhvi, learned senior counsel,
appeared for Respondents No.1 and 2. Dr. Singhvi submitted
G that the over-riding principle for the Courts in Arbitration is to
see whether there is an intention to arbitrate. According to Dr.
Singhvi, the Appellants attack the existence of the main
contract, but it is only the arbitration clause that the court has
H 13. (2005) 7 sec 791.
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 895
& ANR. [SURINDER SINGH NIJJAR, J.]
to concern itself with. The court in this case, according to Dr. A
Singhvi, is not required to determine whether there is a
concluded contract, under the Indian Contract Act, 1872. The
court has to see whether there is a valid Arbitration Agreement.
Dr. Singhvi emphasised that it is for the arbitrator to decide the
question with regard to theformation of the underlying contract B
(IPLA). Further, learned senior counsel submitted that the status
of IPLA will not nullify the arbitration clause.
48. The Respondent, according to the learned senior
counsel, has to establish the existence of arbitration agreement.
Dr. Singhvi, in this context, relied upon Section 7 of the Indian C
Arbitration Act, 1996 which has three constituents, viz. (i)
Intention to arbitrate; (ii) Existence of a dispute; (iii) Existence
of some legal relationship. Further, it was submitted that an
agreement under Section 7 of the Indian Arbitration Act, 1996
does not require any offer and acceptance. D
49. It was further submitted that Section 16 of the Indian
Arbitration Act, 1996 is a drastic departure since the Arbitral
Tribunal can rule on its own jurisdiction. Further, it was submitted
under Section 16(a) of the Indian Arbitration Act, 1996 the E
existence of the arbitration clause in the contract would be
treated as an agreement independent of the contract. Learned
senior counsel also brought to our attention Section 45 of the
Indian Arbitraiion Act, 1996 and its interpretation by this court
in Chiaro Controls India Pvt. Ltd. v. Severn Trent Water F
Purification Inc (supra). rn the aforesaid case, this Court, in
Para 120, relied upon the earlier judgment of National
Insurance Company Ltd. V. Bhogara Polyfab Pvt. Ltd. 14, and
categorised the issues that have to be decided under Section.
45 as follows:
G
A. The issues which the Chief Justice/his designate will
have to decide: the question as to whether there is
an arbitration agreement.
14. c2009) 1 sec 267. H
896 St.;?REME COURT REPORTS [2014] 2 S.C.R.
A B. The issues which the Chief Justice/his designate
may choose to decide or leave them to be decided
by the Arbitral Tribunal: the question as to whether
the claim is a dead claim (long-barred) or a live
claim.
B
C. The issues which the Chief Justice/his designate
should leave exclusively to the Arbitral Tribunal. The
question concerning the merits or any claim involved
in the arbitration.
C 50. Dr. Singhvi then submitted that leavillg aside the
question of un-workability of the arbitration clause for the
moment, the intention of the parties in the instant case may be
determined from the following clauses of IPLA:
D "17 GOVERNING LAW
17.1 This Agreement and any dispute of claims arising out
of or in connection with its subject matter are governed by
and construed in accordance with the Law of.India.
E 18. DISPUTES AND ARBITRATION
18.1 All disputes, controversies or differences which may
arise between the Parties in respect of this Agreement
including without limitation to the validity, interpretation,
construction performance and enforcement or alleged
F
breach of this Agreement, the Parties shall, in the first
instance, attempt to resolve such dispute, controversy or
difference through mutual consultation. If the dispute,
controversy or difference is not resolved through mutual
consultation within 30 days after commencement of
G discussions or such longer period as the Parties may
agree in writing, any Party may refer dispute(s),
controversy(ies) or difference(s) for resolution to an arbitral
tribunal to consist of three (3) arbitrators, of who one will
be appointed by each of the Licensor and the Licensee
H
ENE~CON (INDIA) LTD. & ORS. v. ENERCON GMBH 897
& ANR. [SURINDER SINGH NIJJAR, J.]
and the arbitrator appointed by Licensor shall also act as A
the presiding arbitrator.
18.2 * * *
18.3 A proceedings in such arbitration shall be conducted
in English. The venue of the arbitration proceedings shall B
be in London. The arbitrators may (but shall not be obliged
to) award costs and reasonable expenses (including
reasonable-fees of counsel) to the Party (ies) that
substantially prevail on merit. The provisions of Indian
Arbitration and Conciliation Act, 1996 shall apply. c
The reference of any matter, dispute or claim or arbitration
pursuant to this Section 18 or the continuance of any
arbitration proceedings consequent thereto or both will in
no way operate as a waiver of the obligations of the parties D
to perform their respective obligations under this
Agreement."
51. Dr. Singhvi also drew our attention to the fact that the
Heads of the Agreement have been accepted to be final and
binding and that the parties have irrevocably accepted the .E
Arbitration Agreement contained in Clause 18. It was also
brought to our notice that ttie said document has been signed
by the Appellant No.1 and Respondent No.1.
52. Learned Senior Counsel also submitted that an F
arbitration agreement would include the following:
a. Intention to arbitrate;
b. Intention to settle by Arbitration after failure of ADR
i.e. negotiations/conciliation/mediation. G
C. Some law (i.e. proper law) to settle the Disputes
(which in this case is Indian Law)
D. Does the arbitration clause cover all disputes or is
H
898 SUPREME COURT REPORTS [2014] 2 S.C.R.
A there a carve out? In this case the clause covers
all disputes.
E. Substantive Law to Arbitrate. Here it is the Indian
Arbitration Act, 1996.
B It was further submitted that since all the essential elements
of the arbitration are present, clumsy drafting will not make any
difference in interpretation of the Arbitration clause.
53. The next submission of Dr. Singhvi, broadly put, is that
c the arbitration clause is not un-workable. The crucial question
in this context is not whether the Arbitration Clause could be
differently drafted, but the clause has to be seen in the manner
it has been drafted. Dr. Singhvi submitted that in fact there is
no mismatch between different parts of the clause. The clause,
D according to Dr. Singhvi, talks of three arbitrators: one by the
licensee, one by the licensor. The implication is that the third
one is to be appointed by the two arbitrators. Dr. Singhvi
submits that the sentence "the third arbitrator shall be
appointed by the two arbitrators" seems to have been missed
E out by the draftsman. This can be supplied by the Court to make
the arbitration clause workable.
54. It was further submitted that the missing sentence in
the arbitration clause can be supplied with the aid of some of
the provisions of the Indian Arbitration Act, 1996. In this context,
F learned senior counsel brought to our attention Sections 10 (1)
and (2) read with section 11 of the Indian Arbitration Act, 1996.
Section 10 (1) and 2 read as:
"10. Number of arbitrators.
G (1) The parties are free to determine the number of
arbitrators, provided that such number shall not be an even
number.
(2) Failing the determination referred to in sub- section (1).
H the arbitral tribunal shall consist of a sole arbitrator."
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 899
& ANR. [SURINDER SINGH NIJJAR, J.]
Section 11 ( 1) & (2) reads as: A
Appointment of arbitrators.
(1) A person of any nationality may be an arbitrator, unless
otherwise agreed by the parties.
B
(2) Subject to sub- section (6), the parties are free to agree
on a procedure for appointing the arbitrator or arbitrators.
55. Learned senior counsel also pointed out that the object
underlying Sections 10 and 11 is to avoid failure in appointment C
of arbitrators. In fact, the Respondents tried to avoid the failure
by making a concession to let the third arbitrator to be the
Presiding Arbitrator. The Letter/email dated 13th March, 2008
clearly demonstrates this intention of Respondents. It was also
submitted that the Appellant is determined to avoid the
arbitration. Dr. Singhvi submitted that there exists a manifest D
intention to refer disputes to arbitration and even if there is
lacuna it can be cured. Furthermore, according to Dr. Singhvi,
the number of arbitrators is only machinery and, therefore, its
failure cannot affect the Arbitration Clause. Learned senior
counsel relied upon the law laid down in MMTC v. Sterlite E
Industries (India) Ltd., 15 Shin Satellite Public Co. Ltd. v. Jain
Studios Ltd., (supra) Visa International Ltd. v. Continental
Resources (USA) Ltd., 16 Jagdish Chander v. Ramesh
Chander & Ors., 17 Smt. Rukmanibai Gupta v. Collector,
Jabalpur & Ors., 18 and Nandan Biometrix Ltd. v. D.I. Oils. 19 F
After taking us through the afore cited cases, Dr. Singhvi
submitted that the parties in the instant case had expressed
an intention to arbitrate and that there i!S no contrary intention.
G
15. AIR 1997 SC 605 Para 8-13.
16. (2009) 2 sec 55, Paras 24-25.
17. (2007) 5 sec 719, pp. 7-8.
18. (1980) 4 sec 556, pp. 6-7.
19. (2009) 4 sec 495, pp. 26-30 & 40. H
900 SUPREME COURT REPORTS [2014] 2 S.C.R.
A 56. The next submission of Dr. Singhvi is that the IPLA is
final. It was submitted that IPLA was to succeed the Know How
Agreement that contained an Arbitration Clause. Learned
Senior counsel brought to our attention following provisions of
the Heads of Agreement on a Proposed IPLA dated
B 23.05.2006:
"1.6 The Parties have discussed intensively the most
appropriate structure and arrangements reflected in the
draft IPLA dated 22, May 2006 attached as ANNEX 1
("Draft IPLA"). This draft IPLA expresses the final views
c of the parties and provides for detailed terms whereunder
Enercon will make available to Ell the benefit of all its
technology including patents, design rights, copyrights,
trademarks and know how relating to the Products,
including but not limited to:
D
II
"3. GOVERNING LAW AND JURISDICTION
3.1 This paragraph is legally binding.
E
3.2 This Heads of Agreement is (and all negotiations and
any legal agreement prepared in connection with IPLA
shall be governed by and construed in accordance with the
law of Germany.
F
3.3 The parties irrevocably agree that Clause 18 of the
proposed draft IPLA shall apply to settle any dispute or
claim that arises out or in connection with this
memorandum of understanding and negotiations relating
to the proposed IPLA."
G
"4.1 This Heads of Agreement represents the good faith
intentions of the parties to proceed with the proposed IPLA
on the basis of the Draft IPLA but is not legally binding and
creates no legal obligations on either party. Its sole
H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 901
& ANR. [SURINDER SINGH NIJJAR, J.]
purpose is to set out the principles on which the parties A
intend in good faith to negotiate legally definitive
agreements."
57. Learned Senior Counsel also pointed out the email sent
on 27.06.2006 by Nicole Fritsch on behalf of Respondents to
B
the Appellant No.2 and also the email sent by Appellant No.2
on 16.09.2006 to Nicole Fritsch in context of the submission
that IPLA is final. These emails have already been noticed in
the earlier part of this judgment.
58. It was also pointed out that the Appellant by his letter C
dated 30th September, 2006 expressly admitted to having
signed the IPLA. Thus, it was submitted that the Appellant
. cannot get out of the contract unless there is coercion and/or
fraud. To argue that there is now a presumption of validity in
favour of IPLA being a concluded contract, reliance was sought D
to be placed upon Grasim Industries Ltd. & Anr. v. Agarwal
Stee/2° and J.K. Jain v. Delhi Development Authority. 21
59. Dr. Singhvi also brought to our notice that the execution
and finality of the IPLA is also demonstrated by the fact that E
first page of Heads of Agreement dated 23rd May, 2006 reads
as "A PROPOSED INTELLECTUAL PROPERTY LICENSE .
AGREEMENT." Whereas, the word proposed or draft is
conspicuously absent in the IPLA dated 29th Se'ptember, 2006.
This, according to the learned senior counsel, shows that the
IPLA was a concluded contract. Dr. Singhvi further submitted F
that on 29th September, 2006 three drafts, viz. Successive
Technical Transfer Agreement, Name Use License Agreement
and amendments to the existing Shareholders Agreement were
ready and available to the parties, but at that point of time these
agreements were under discussion and being negotiated. G
Admittedly, none of these agreements were initialled, let alone
signed by the parties. This, according to Dr. Singhvi, is a clear
indication that the parties were aware of the documents that
20. c2010) 1 sec 83, p6.
21. (1995) 6 sec 571. H
902 SUPREME COURT REPORTS [2014] 2 S.C.R.
A were to be finalised between them and also of the documents
that were required to be executed. This fact was also relied
upon to support the contention that IPLA is a final and
concluded agreement that was knowingly and willingly executed
by Appellant No.2. To add credibility to this submission, learned
B senior counsel pointed out that 'E-82 Model' is expressly
excluded from the product description in the IPLA. This
according to Dr. Singhvi, is a deviation from the earlier
agreement, and it has been acknowledged by the Appellant.
Dr. Singhvi also pointed out the difference as to the provision
C of royalty between the IPLA and earlier draft to support his
contention.
60. The next set of submissions made by Dr. Singhvi relate
to the seat of arbitration. Learned senior counsel submitted that
the court has to determine where the centre of gravity for
D arbitration is situated. The terms that are normally used to
denote seat are "venue", "place" or "seat". According to the
learned senior counsel, the court cannot adopt a semantic
approach. It was also submitted that under sub sections (1), (2)
and (3) of Section 20 of Arbitration Act, 1996 the term 'place'
E connotes different meanings. Under Section 20(1), place means
seat of arbitration, whereas under section 20(3), place would
mean venue. Therefore, the expression "the venue of arbitration
proceedings" will have reference only to the seat of arbitration.
It was submitted that all the surrounding circumstances would
F also show that parties intended to designate England as the
seat of arbitration.
61. It was also submitted that all the proceedings between
the parties would indicate that there is nothing to indicate India
as the choice of the seat of arbitration. Learned senior counsel
G relied upon Shashoua v. Sharma, 22 Dozco India Pvt. Ltd. V.
Doosan lnfracore Company Ltd. 23 Videocon Industries v.
Union of India, 24 Yograj Infrastructure Ltd. V. Ssang Yong
22. (2009) 2 LLR 376.
23. (2011) 6 SCC 179 (Paras 4, 15 and 18).
H 24. (2011) 6 sec 161 (Paras and Paras 20 to 23).
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 903
& ANR. [SURINDER SINGH NIJJAR, J.]
Engineering and Construction Ltd. 25 National Agricultural A
Coop. Marketing Federation India (supra).
62. It was further submitted that three potential laws that
govern an arbitration agreement are as follows :
1. The proper law of the contract ; B
2. The law governing the arbitration agreement ;
3. The law governing the conduct of the arbitration
also known as curial law or lex arbitri.
c
63. Reliance was placed upon the following except of
Naviera Amazonica Peruana SA (supra):
.,.
" ........ in the majority of cases all three will be same but
(1) will often be different from (2) and (3). And occasionally, D
but rarely, (2) may also differ from (3)."
64. The next submission of Dr. Singhvi is that law of the
seat dictates the curial law, and that the proper law of the
arbitration agreement does not overwhelm law of the seat.
Laying particular emphasis on Naviera,·Dr. Singhvi submitted E
that intention of the parties is important to determine the seat.
If place is designated then curial law will be that of such place.
Dr. Singhvi relied on the ratio of Naviera and submitted that
the proper law, law of arbitration and the curial law have all been
expressly mentioned in the present case. It was also submitted F
that in the present case London as venue has to be interpreted
having conferred London the status of seat, unless some
contrary intention has been expressed.
65. According to Dr. Singhvi, closest connection test is G
completely irrelevant when the parties have specified all the
three laws applicable in a contract. Further, close connection
test is to be applied only when nothing has been mentioned in
the agreement. The effort of the court is always to find the
25. (2011) 9 SCC 735 (Paras 46-52). H
904 SUPREME COURT REPORTS [2014] 2 S.C.R.
A essential venue. He relied upon Dicey, Morris & Collins 26 to
submit that in most cases, seat is sufficiently indicated by the
country chosen as the place of the arbitration. Dr. Singhvi
submitted that the proper law and law of arbitration cannot
override curial law.
B
66. Dr. Singhvi relied heavily on the ratio of the law laid
down in Naviera (supra). Reliance was also placed upon the
cases of C vs. D. 27 and Union of India vis McDonnel. 28 He also
relied upon the ratio of Balco in support of the submission that
C London is the seat of arbitration. Particular reference was made
to Paras 75, 76, 96, 100, 104, 113, 116 and 117 of BALCO's
judgment to submit that since the seat is outside India, only those
provisions of Part I of the Indian Arbitration Act, 1996 will be
applicable, which are not inconsistent with the English Law, i.e.,
D English Arbitration Act, 1996.
Anti-Suit injunction:
67. Dr. Singhvi submitted that the prayer of Appellants for
an anti suit injunction is subject to determination by this court
E that the seat is India. Dr. Singhvi, however, argued that such
an injunction be denied even if this court holds that the seat of
arbitration is India since there is no occasion that warrants the
grant of such an injunction. The Respondents relied upon the
judgment of this court in Modi Entertainment Network v. W S. G.
F Cricket Pte. Ltd. (supra) to submit that the present case does
not fall within any, let alone all, of the parameters set out in the
aforesaid case that determine the grant of an anti-suit injunction.
68. Mr. C.U. Singh, learned senior advocate, appeared for
Respondent no.2. Mr. Singh adopts the submissions made
G before this court by Dr. Singhvi. Besides, Mr. Singh submitted
that after the enactment of the Indian Arbitration Act, 1996 the
distinction between the seat and the venue has blurred. The
26. Dicey, Morris & Collins Fifteenth Edition at 16-035.
27. (2007) 2 Lloyd's Law Reports 367.
H 28. (1993) 3 Lloyd's Rep 48.
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 905
& ANR. [SURINDER SINGH NIJJAR, J.]
term that has been used by the Parliament is 'place' which A
denotes the place of physical sitting of the Arbitral Tribunal. This
is the place which governs the curial law. However, Arbitrators
have been given the flexibility to hold meetings anywhere. He
also relied upon the judgment of this court in Chiaro (supra)
(Paras 80-83) to submit that the approach of the court is to B
make the arbitration clause workable. Reliance was also
placed upon Reva Electric Car Company P. Ltd. v. Green
Mobil. 29
Issues :
c
69. We have anxiously considered the submissions of the
learned counsel for the parties. We have also considered the
written submissions.
The issues that arise for consideration of this Court are : 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 contract; is
the Arbitration Clause 18.1 vague and unworkable, F
as observed by both the Arbitrators i.e. Mr. V.V.
Veeder QC and Mr. Justice B.P. Jeevan Reddy?
(v) In case the arbitFation 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
. 29. c2012) 2 sec 93. H
906 SUPREME COURT REPORTS [2014) 2 S.C.R.
A the arbitration as the venue for the arbitration
proceedings is London?
(vii) Linked to (v) & (vi) is the issue whether the
Appellants are entitled for an anti-suit injunction?
B These, of course, are only broad based issues; many other
supplementary questions will have to be examined in order to
give a definitive determination.
Our Conclusions :
c Issues (i), (ii) and (iii)
70. Is the IPLA a valid and a concluded contract? Is it for
the Court to decide this issue or have the par:ties intended to
let the arbitral tribunal decide it?
D
71. The Bombay High Court upon consideration of the
factual as well as the legal issues has concluded that "there can
be no escape for the Appellants from the consequences flowing
from the signing of the IPLA; and the signing of the IPLA by
E the parties is therefore a strong circumstance in arriving at a
prima facie conclusion as enunciated in Shin-Etsu Chemicals
Co. Ltd. 's case for referring the parties to arbitration."
72. The Daman Trial Court on the basis of the material on
record came to the conclusion that IPLA was not a concluded
F contract for the want of free consent, and was executed due to
undue influence, fraud, misrepresentation and mistake. It further
held that the plaintiffs (the Appellants herein) would suffer heavy
economic loss if the arbitration is held at London. These
findings were reversed by the Daman Appellate Court. It was
G held that since IPLA has been signed by the parties, there was
a valid arbitration agreement for reference of the disputes to
arbitration. It was also held that assuming that there was some
defect in the methodology for appointment of the arbitrators that
would not come in the way of enforcement of the arbitration
H agreement. The Daman Appellate Court has further held that
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 907
& ANR. [SURINDER SINGH NIJJAR, J.]
since the parties had agreed to London being the seat of A
arbitration, the Appellants (plai·ntiffs) could not raise a grievance
as regards the jurisdiction of the English Courts.
73. Mr. R.F. Nariman, learned senior counsel, appearing
for the Appellants has vehemently argued that there is neither 8
a concluded IPLA between the parties nor is there a legally
enforceable arbitration agreement. In any event, the arbitration
can not proceed as the arbitration clause itself is unworkable.
As noticed earlier, learned senior counsel has submitted that
in the absence of a concluded contract, there can be no
arbitration agreement. In short, the submission is that there can C
be no severability of the arbitration clause from the IPLA. Since
the IPLA is not a concluded contract there can be no arbitration
agreement.
74. On the other hand, Dr. Singhvi has submitted, as D
noticed earlier, that the intention pf the parties to arbitrate is
clear. Even if the existence of the mfiin contract is under dispute,
the court is concerned only with the arbitration agreement i.e.
the arbitration clause. The submission of Dr. Singhvi is that the
absence of IPLA will not nullify the l;lrbitration clause. E
75. We find considerable merit in the submissions made
by Dr. Singhvi. It cannot be disputed that there is a legal
relationship between the parties of a long standing. Section 44
of the Indian Arbitration Act, 1996 applies to arbitral awards of F
differences between persons arising out of legal proceedings. .
Such a relationship may be contractual or not, so long it is
considered as commercial under the laws in force in India.
Further, that legal relationship must be in pursuance of an
agreement, in writing, for arbitration, to which the New York
Convention applies. The court can decline to make a reference G
to arbitration in ·case it finds that the arbitration agreement is
null and void, inoperative or incapable of being performed.
There are no pleadings to that effect in the plaint. The Daman
Trial Court findings that the contract is null and void and not
based on free consent were rendered in the absence of relevant H
908 SUPREME COURT REPORTS [2014] 2 S.C.R.
A pleadings. There is a mention in one of the e-mails that Dr.
Wobben has taken advantage of his friendship with Mr. Yogesh
Mehra. But that seems to be more of a sulk than a genuine
grievance. Even if one accepts the truth of such a statement,
the same is not reflected in the pleadings. Therefore, no serious
B note could be taken of that statement at this stage. The Daman
Appellate Court upon reconsideration of the pleadings found
that there is no plea to the effect that the agreement is null, void
or incapable of being performed. Justice Savant has not
examined the pleadings as the issue with regard to the
c underlying contract has been left to be examined by the Arbitral
Tribunal. Before us also, it is not. the plea of the Appellants that
the arbitration agreement is without free consent, or has been
procured by coercion, undue influence, fraud, misrepresentation
or was signed under a mistake. In other words, it is not claimed
D that the agreement is null and void, inoperative and incapable
of being performed as it violates any of the provisions under
Sections 14, 15, 16, 17, 18, 19, 19A and 20 of the Indian
Contract Act, 1872. The submission is that the matter cannot
be·referred to arbitration as the IPLA, containing the arbitration
clause/agreement, is not a concluded contract. This, in our
E opinion, would not fall within the parameters of an agreement
being "null and void, inoperative or incapable of being
performed", in terms of Sections 14, 15, 16, 17, 18, 19 and
20 of the Indian Contract Act, 1872. These provisions set out
the impediments, infirmities or eventualities that would render
F a particular provision of a contract or the whole contract void
or voidable. Section 14 defines free consent; Section 15
defines coercion in causing any person to enter into a contract.
Section 16 deals with undue influence. Fraud in relation to a
contract is defined under Section 17; whereas
G misrepresentation is defined and explained under Section 18.
Section 19 states that "when consent to an agreement is
caused by coercion, fraud or misrepresentation, the agreement
is a contract voidable at the option of the party whose consent
was so caused". Section 19A gives the party who was unduly
H influenced to enter into a contract an option similar to the one
·· ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 909
& ANR. [SURINDER SINGH NIJJAR, J.]
provided by the preceding section. Section 20 makes an A
agreement void where both the parties thereto are under a
mistake as to a matter of fact. In our opinion, all the aforesaid
eventualities refer to fundamental legal impediments. These are
the defences to resist a claim for specific performance of a
concluded contract; or to resist a claim for damages for breach B
of a concluded contract. We agree with Savant, J. that the issue
as to whether there is a concluded contract between the parties
can be left to the Arbitral Tribunal, though not for the same
reasons.
76. In our opinion, all the issues raised by the Appellants C
about the non-existence of a concluded contract pale into
insignificance in the face of "Heads of Agreement on the
proposed IPLA dated 23rd May, 2006". Clause 3 of the Heads
of Agreement provides as under:-
D
"3. Governing Law and Jurisdiction
3.1 This paragraph is legally binding.
3.2 This Heads of Agreement is (and all negotiations and
any legal agreements prepared in connection with the IPLA E
shall be) governed by and construed in accordance with
the law of Germany.
3.3 The parties irrevocably agree that Clause 18 of the
proposed draft IPLA shall apply to settle any dispute or F
claim that arises out of or in connection with this
memorandum of understanding and negotiations relating
to the proposed IPLA."
77. A bare perusal of this clause makes it abundantly clear
that the parties have irrevocably agreed that clause 18 of the G
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 here that the relationship between the parties
formally commenced on 12th January, 1994 when the parties H
910 SUPREME COURT REPORTS · [2014] 2 S.C.R.
A entered into the first SHA and TKHA. Even under that SHA,
Article XVI inter alia provided for resolution of disputes by
arbitration. The TKHA also contained an identically worded
arbitration clause, under Article XIX. This intention to arbitrate
. has continued without waiver. In the face of this, the question
B of the concluded contract becomes irrelevant, for the purposes
of making the reference to the Arbitral Tribunal. It must be
clarified that the doubt raised by the Appellant is that there is
no concluded IPLA, i.e. the substantive contract. But this can
have no effect on the existence of a binding Arbitration
C 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. Furthermore in arbitration
proceedings, courts are required to aid and support the arbitral
0
process, and not to bring it to a grinding halt. If we were to
accept the submissions of Mr. Nariman, we would be playing
havoc with the progress of the arbitral process. This would be
of no benefit to any of the parties involved in these unnecessarily
complicated and convoluted proceedings.
E
78. In the facts of this case, we have no hesitation in
concluding that the parties must proceed with the Arbitration.
All the difficulties pointed out by Mr. Rohinton Nariman can be
addressed by the Arbitral Tribunal.
F
79. 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
G disputes arising in respect of the IPLA with regard to its validity,
interpretation, construction, performance, enforcement or its
alleged breach. 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 judicial
authorities in matters covered by the Indian Arbitration Act,
H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 911
& ANR. [SURINDER SINGH NIJJAR, J.]
1996. In view of the aforesaid, it is not possible for us to accept A
the submission of Mr. Nariman 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. the IPLA containing the arbitration
clause. Section 16 provides that the Arbitration clause forming B
part of a contract shall be treated as an agreement independent
of such a contract.
80. The concept of separability of the arbitration clause/
, agreement from the underlying contract is a necessity to ensure C
that the intention of the parties to resolve the disputes by
arbitration does not evaporate into thin air with every challenge
to the legality, validity, finality or breach of the underlying
contract. The Indian Arbitration Act, 1996, as noticed above,
under Section 16 accepts the concept that the main contract
and the arbitration agreement form two independent contracts. D
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
i~tention of the parties to resolve the disputes relating to the
underlying contract through arbitration. A remedy is elected by E
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 wouid not detract from the
legitimacy or independence of the collateral arbitration
agreement, even if it is contained in a contract, which is claimed F
to be void or voidable or unconcluded by one of the parties.
81. The scope and ambit of provision contained in Section
16 of the Indian Contract Act has been clearly explained in Reva
Electric Car (supra), wherein it was inter alia observed as G
follows:
"54. Under Section 16(1), the legislature makes it clear that
while considering any objection with respect to the
existence or validity of the arbitration agreement, the
H
912 SUPREME COURT REPORTS [2014) 2 S.C.R.
A arbitration clause which formed part of the ~ontract, has
to be treated as an agreement independent of the other
. terms of the contract. To ensure that there is no
misunderstanding, Section 16(1 )(b) further provides that
even if the Arbitral Tribunal concludes that the contract is
B null and void, it should not result, as a matter of law, in an
automatic invalidation of the arbitration clause. Section
16(1)(a) presumes the existence of a valid arbitration
clause and mandates the same to be treated as an
agreement independent of the other terms of the contract.
c By virtue of Section 16(1)(b), it continues to be enforceable
notwithstanding a declaration of the contract being null and
void. In view of the provisions contained in Section 16(1)
of the Arbitration and Conciliation Act, 1996, it would not
be possible to accept the submission of Mr. Ahmadi that
with the termination of the MoU on 31-12-2007, the
D
arbitration clause would also cease to exist."
The aforesaid reasoning has also been approved by a two .
Judge bench of this Court in Today Homes and Infrastructure
Pvt. Ltd. vs. Ludhiana Improvement Trust and Anr., 30 wherein
E it was inter alia held as under:
"14. The same reasoning was adopted by a member of
this Bench (S.S. Niliar, J.), while deciding the case of Reva
Electric Car Company Private Limited Vs. Green Mobil
[(2012) 2 SCC 93), wherein the provisions of Section 16(1)
F
in the backdrop of the doctrine of kompetehz kompetenz
were considered and it was inter alia held that under
Section 16(1), the legislature makes it clear that while
considering any objection with regard to the existence or
validity of the arbitration agreement, the arbitration clause,
G
which formed part of the contract, had to be treated as an
agreement independent of the other terms of the contract.
Reference was made in the said judgment to the
provisions of Section 16(1)(b) of the 1996 Act, which
H 30. 2013 (7) SCALE 327.
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 913
& ANR. [SURINDER SINGH NIJJAR, J.]
provides that even if the arbitral tribunal concludes that the A
contract is null and void, it should not result, as a matter of
law, in an automatic invalidation of the arbitration clause.
It was also held that Section 16(1)(a) of the 1996 Act
presumes the existence of a valid arbitration clause and
mandates the same to be treated as an agreement B
independent of the other terms of the contract. By virtue
of Section 16(1)(b) of the 1996 Act, the arbitration clause
continues to be enforceable, notwithstanding a declaration
that the contract was null and void."
In view of the aforesaid, we are not inclined to accept the C
submission of Mr. Nariman that Arbitration Agreement will
perish as the IPLA has not been finalised.
Issue (iv)
D
82. We now come to the next issue that even if there is a
valid arbitration agreement/clause, can the parties be denied
the benefit of the same on the ground that it is unworkable? Both
the Arbitrators, as noticed above, are of the opinion that the
parties cannot proceed to arbitration as the arbitration clause E
is unworkable. The Bombay High Court has taken the view that
the arbitration clause is workable as two Arbitrators are to be
appointed by the licensors and one by the licensee. We are
not inclined to agree with the aforesaid finding/conclusion
recorded by the High Court. Respondent No.1 is the licensor F
and Respondent No.2 is undoubtedly 100% shareholder of
Respondent No.1, but that is not the same as being an
independent licensor. It would also be relevant to point out here
that before this Court the Respondent has not even tried to
support the aforesaid conclusion of the High Court.
G
83. In our opinion, 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 seemingly unworkable
arbitration clause, it would be the duty of the Court to make the H
914 SUPREME COURT REPORTS [2014] 2 S.C.R.
A same workable within the permissible limits of the law, without
stretching it beyond the boundaries of recognition. In other
words, 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
s 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. We may just add here the words of Lord
c Diplock in The Antaios Compania Neviera SA v Salen
Rederiema AB, 31 which are as follows:
"If detailed semantic and syntactical analysis of words in
a commercial contract is going to lead to a conclusion that
flouts business common sense, it must be made to yield
D to business common sense."
We entirely agree with the aforesaid observation.
This view of ours is also supported by the following
E judgments which were relied upon by Dr. Singhvi:
In Visa lntemational Limited (supra), it was inter alia held
that:
"25 .... No party can be allowed to take advantage of
F inartistic drafting of arbitration clause in any agreement as
long as clear intention of parties to go for arbitration in
case of any future disputes is evident from the agreement
and material on record including surrounding
circumstances.
G 26. What is required to be gathered is the intention of the
parties from the surrounding circumstances including the
conduct of the parties and the evidence such as exchange
of correspondence between the parties .... "
H 31. [1985]1AC191.
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 915
& ANR. [SURINDER SINGH NIJJAR, J.]
Similar position of law was reiterated in Nandan Biomatrix A
Ltd. (supra), wherein this court observed inter alia as under:
28. This Court in Rukmanibai Gupta v. Collector, Jabalpur
has held (at sec p. 560, para 6) that what is required to
be ascertained while construing a clause is "whether the 8
parties have agreed that if disputes arise between them
in respect of the subject-matter of contract such dispute
shall be referred to arbitration, then such an arrangement
would spell out an arbitration agreement".
29. In M. Dayanand Reddy v. A.P. Industrial Infrastructure C
Corpn. Ltd., this Court has held that: (SCC p. 142, para
8)
"8 .... an arbitration clause is not required to be stated in
any particular form. If the intention of the parties to refer D
the dispute to arbitration can be clearly ascertained from
the terms of the agreement, it is immaterial whether or not
the expression arbitration or 'arbitrator' or 'arbitrators' has
been used in the agreement."
(original emphasis supplied) E
30. The Court is required, therefore, to decide whether the
existence of an agreement to refer the dispute to arbitration
can be clearly ascertained in the facts and circumstances
of the case. This, in turn, may depend upon the intention F
of the parties to be gathered from the correspondence
exchanged between the parties, the agreement in question
and the surrounding circumstances. What is required is to
gather the intention of the parties as to whether they have
agreed for resolution of the disputes through arbitration. G
What is required to be decided in an application under
Section 11 of the 1996 Act is: whether there is an
arbitration agreement as defined in the said Act."
84. It is a well recognized principle of arbitration
jurisprudence in almost all the jurisdictions, especially those H
91 S SUPREME COURT REPORTS [2014] 2 S.C.R.
A 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. Another equally important
principle recognized in almost all jurisdictions is the least
intervention by the Courts. Under the Indian Arbitration Act,
B 1996, Section 5 specifically lays down that : "Notwithstanding
anything contained in any other law for the time being in force,
in matters governed by this Part, no judicial authority shall
intervene except where so provided in this Part". Keeping in
view the aforesaid, we find force in the submission of Dr.
c Singhvi that the arbitration clause as it stands cannot be
frustrated on the ground that it is unworkable.
85. Dr. Singhvi has rightly submitted that the un-workability
in this case is attributed only to the machinery provision. And
the arbitration agreement, otherwise, fulfils the criteria laid down
D under Section 44 of the Indian Arbitration Act, 1996. 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. The omission
is so obvious that the court can legitimately supply the missing
E line. In these circumstances, the Court would apply the officious
bystander principle, as explained by MacKinnonn, LJ in Shirlaw
v. Southern Foundries, 32 to interpret the clause. In Shirlaw, it
was held that:
F "prima facie that which in any contract is left to be implied
and need not be expressed is something so obvious that
it goes without saying; so that, if, while the parties were
making their bargain, an officious bystander were to
suggest some express provision for it in their agreement,
they would testily suppress him with a common 'Oh, of
G
course!"
In construing an arbitration clause, it is not necessary to
employ the strict rules of interpretation which may be necessary
to construe a statutory provision. The court would be well within
H 32. [1937 s. 1835].
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 917
& ANR. [SURINDER SINGH NIJJAR, J.]
its rights to set right an obvious omission without necessarily A
leaving itself open to the criticism of having reconstructed the
clause.
Further, we find support in this context from the following
extract of Halsbury's Laws of England (Vol. 13, Fourth Edition, 8
2007 Reissue): ·
"The words of a written instrument must in general be taken
in their ordinary or natural sense notwithstanding the fact
that such a construction may appear not to carry out the
purpose which it might otherwise be supposed the parties C
intended to carry out; but if the provisions and expressions
are contradictory, and there are grounds, appearing on the
face of the instrument, affording proof of the real intention
of the parties, that intention will prevail against the obvious
and ordinary meaning of the words; and where the literal D
{in the sense of ordinary, natural or primary) construction
would lead to an absurd result, and the words used are
capable of being interpreted so as to avoid this result, the
literal construction will be abandoned."
E
86. Mr. Rohinton Nariman had very fairly submitted that it
is permissible for the Court to construe the arbitration clause
in a particular manner to make the same workable when there
is a defect or an omission in it. His only caveat was that such
an exercise would not permit the Court to re-write the contract.
In our opinion, in the present case, the crucial line which seems F
to be an omission or an error can be inserted by the Court. In
this context, we find support from judgment of this court in Shin
Satellite Public Co. Ltd. (supra), wherein the 'offending part'
in the arbitration clause made determination by the arbitrator ,,
final and binding between the parties and declared that the G
parties have waived the rights to appeal or an objection against
,.
i
such award in any jurisdiction. The Court, inter-alia, held that
such an objectionable part is clearly severable being
independent of the dispute that has to be referred to be resolved
through arbitration. By giving effect to the arbitration clause, the H
918 SUPREME COURT REPORTS . [2014] 2 S.C.R.
A court specifically noted that the "it cannot be said that the Court
is doing something which is not contemplated by the parties
or by 'interpretative process', the Court is rewriting the contract
which is in the nature of 'novatio' (sic). The intention ·of the
parties is explicit and clear; they have agreed that the dispute,
B if any, would be referred to an arbitrator. To that extent,
therefore, the agreement is legal, lawful and the offending part
as to the finality and restraint in approaching a Court of law can
be separated and severed by using a 'blue pencil'."
87. There is another reason which permits us to take the
C aforesaid view and accept the submission made by Dr. Singhvi
that while construing the arbitration agreement/clause the same
can be construed to make it workable, as such an approach is
statutorily provided for. For this submission, Dr. Singhvi has
rightly relied upon the provision contained in Sections 10 and
D 11 of the Indian Arbitration Act, 1996. The object of these two
provisions is to avoid failure of the arbitration agreement or the
arbitration clause if contained in contract. Under Section 10(1),
there is freedom given to the parties to determine the number
of Arbitrators, provided that such number shall not be an even
E number. The arbitration clause in this 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. As noted earlier, the
Respondent No.2 in its email dated 13th March, 2008 clearly
F 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.
· 88. In this context, reliance placed by Dr. Singhvi upon
G MMTC Limited .(supra) is justified. In MMTC, the provisions
contained in Sections 10(1) and (2) of the Indian Arbitration Act,
1996 have been held to be machinery provisions by this Court.
It was further held that the validity of an arbitration agreement
does not depend on the number of arbitrators specified therein.
H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 919
& ANR. [SURINDER SINGH NIJJAR, J.]
The Court declined to render the arbitration agreement invalid A
on the ground that it provided an even number of arbitrators. In
the present case, Mr. Rohinton Nariman. had rightly not even
emphasised that the arbitration agreement itself is illegal. The
learned sr. counsel only emphasised that the arbitrators having
expressed the view that the arbitration clause is unworkable, B
the parties ought not to be sent to the arbitration.
Similarly, other provisions contained in Sections 8, 11 and
45 of the Indian Arbitration Act, 1996 are machinery provisions
to ensure that parties can proceed to arbitration provided they C
have expressed the intention to Arbitrate. This intention can be
expressed by the parties, as specifically provided under
Section 7 of the Indian Arbitration Act, 1996 by an exchange
of letters, telex, telegrams or other means of telecommunication
which provide a record of the agreement. Such intention can
even be expressed in the pleadings of the parties such as 0
statements of claim and defence, in which the existence of the
agreement is alleged by one party and not denied by the other.
In view of the above, we are of the opinion that the parties can
be permitted to proceed to arbitration.
E
Issue No. V/Re: Seat
89. This now clears the decks for the crucial question, i.e.,
is the 'seat' of arbitration in London or in India. This is
necessarily so as the location of the seat will determine the F
Courts that will have exclusive jurisdiction to oversee the
arbitration proceedings. Therefore, understandably, much
debate has been generated before us on the question whether
the use of the phrase "venue shall be in London" actually refers
to designation of the seat of arbitration in London.
G
90. We find much substance in the submissions of Mr.
Nariman that 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. We find force in the submission H
920 SUPREME COURT REPORTS [2014] 2 S.C.R.
A made by learned senior counsel for the Appellants that the facts
of the present case would make the ratio of law laid down in
Naviera Amazonica Peruana S.A. (supra) applicable in the
present case. Applying the closest and the intimate connection
to arbitration, it would be seen that the parties had agreed that
B the provisions of Indian Arbitration Act, 1996 would apply to the
arbitration proceedings. By making such a choice, the parties
have made the curial law provisions contained in Chapters Ill,
IV, V and VI of the Indian Arbitration Act, 1996 applicable. Even
Dr. Singhvi had submitted that Chapters 111, IV, V and VI would
c apply if the seat of arbitration is in India. By choosing that .Part
I of the Indian Arbitration Act, 1996 would apply, the parties
have made a choice that the seat of arbitration would be in
India. Section 2 of the Indian Arbitration Act, 1996 provides that
Part I "shall apply where the place of arbitration is in India". In
Balco, it has been categorically held that Part I of the Indian
0
Arbitration Act, 1996, will have no application, if the seat of
arbitration is not in India. In the present case, London is
mentioned only as a "venue" of arbitration which, in our opinion,
in the facts of this case can not be read as the "seat" of
arbitration.
E
91. We are fortified in taking the aforesaid view since all
the three laws applicable in arbitration proceedings are Indian
laws. The law governing the Contract, the law governing the
arbitration agreement and the law of arbitration/Curial law are
F all stated to be Indian. In such circumstances, the·observation
in Naviera Amazonica Peruana S.A. (supra) would become
fully applicable. In this case, the Court of Appeal in England
considered the agreement which contained a clause providing
for the jurisdiction of the courts in Lima, Peru in the event of
G judicial dispute; and at the same time contained a clause
providing that the arbitration would be governed by the English
law and the procedural law of arbitration shall be the English
law. The Court of Appeal summarised the state of the
jurisprudence on this topic. Thereafter, the conclusions which
H arose from the material were summarised as follows:
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 921
& ANR. [SURINDER SINGH NIJJAR, J.]
"All contracts which provide for arbitration and contain a A
foreign element may involve three potentially relevant
systems of law: (1) the law governing the substantive
contract; (2) the law governing the agreement to arbitrate
and the performance of that agreement; (3) the law
governing the conduct of the arbitration. In the majority of B
cases all three will be the same. But (1) will often be
different from (2) and (3). And occasionally, but rarely, (2)
may also differ from (3)."
It was observed that the problem about all these
formulations, including the third, is that they elide the distinction C
between the legal localisation of arbitration on the one hand
and the appropriate or convenient geographical locality for
'iearings of the arbitration on the other hand.
92. On the facts of the case, it was observed in Naviera D
Amazonica case (supra) that since there was no contest on
Law 1 and Law 2, the entire issue turned on Law 3, "the law
governing the conduct of the arbitration". This is usually referred
to as the curial or procedural law, or the lex fori. Thereafter, the
Court approvingly quoted the following observation from Dicey E
& Morris on the Conflict of Laws (11th Edn.): "English Law does
not recognise the concept of a delocalised arbitration or of
arbitral procedures floating in the transnational firmament,
unconnected with any municipal system of law". It is further held
that "accordingly every arbitration must have a 'seat' or 'locus F
arbitri' or 'forum' which subjects its procedural rules to the
municipal law which is there in force". The Court thereafter culls.
out the following principle: ·
'Where the parties have failed to choose the law governing
the arbitration proceedings, those proceedings must be G
considered, at any rate prima facie, as being governed by
the law of the country in which the arbitration is held, on
the ground that it is the country most closely connected with
the proceedings."
H
922 SUPREME COURT REPORTS (2014] 2 S.C.R.
A The aforesaid classic statement of the conflict of law rules
as quoted in Dicey & Morris on the Conflict of Laws (1'1th
Edn.), Vol. 1, was approved by the House of Lords in James
Miller & Partners Ltd. v. Whitworth Street Estates
(Manchester) Ltd. 33 Mustill, J. in Black Clawson International
B Ltd. v.' Papierwerke Waldhof-Aschaffenburg A.G. 34, a little later
characterised the same proposition as "the law of the place
where the reference is conducted, the lex fori". The position of
law in India is the same.
93. The Court in Naviera Amazonica, also, recognised the
C proposition that "there is equally no reason in theory which
precludes parties to agree that an arbitration shall be held at a
place or in country X but subject to the procedural laws of Y''
But it points out that in reality parties would hardly make such
a decision as it would create enormous unnecessary
D co.rnplexities. Finally it is pointed out that it is necessary not to
confuse the legal seat of arbitration with the geographically
convenient place or places for holding hearings. In the present
case, Dr.Singhvi, it seems to us, is confusing the geographically
convenient place, which is London, with the legal seat which,
E in our opinion, is undoubtedly India.
94. Further, on examination of the facts in Naviera
Amazonica case, the Court of Appeal observed that there is
nothing surprising in concluding that these parties intended that
F any dispute under this policy should be arbitrated in London.
But it would always be open to the Arbitral Tribunal to hold
hearings in Lima if this was thought to be convenient, even
though the seat or forum of the arbitration would remain in
London. In· the present case, with_ the utmost ease, "London"
can be replaced by India, and "Lima" with London.
G
95. Having chosen all the three applicable laws to be
Indian laws, in our considered opinion, the parties wc:iuld not
have intended to have created an exceptionally difficult
33. [1970] 1 Lloyd's Rep. 269; [1970] A.C. 583.
H 34. [1981] 2 Lloyd's Rep. 446 at P. 453.
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 923
& ANR. [SURINDER SINGH NIJJAR, J.]
situation, of extreme complexities, by fixing the seat of A
arbitration in London.
In view of the above, we are unable to.accept the
submissions made by Dr. Singhvi that in this case, the term
"venue" ought to be read as seat. 8
96. We are also unable to accept the submission made
by Dr. Singhvi that in this case the venue should be understood
as reference to place in the manner it finds mention in Section
20(1 ), as opposed to the manner it appears in Section 20(3),
of the Indian Arbitration Act, 1996. Such a submission cannot C
be accepted since the parties have agreed that Curial law
would be the Indian Arbitration Act, 1996.
97. In Ba/co, it has been clearly held that concurrent
jurisdiction is vested in the Courts of seat and venue, only when D
the seat of arbitrations is in India (Para 96). Reason for the
aforesaid conclusion is that there is no risk of conflict of
judgments of different jurisdictions, as all courts in India would
follow the Indian Law. Thus, the reliance placed by D. Singhvi
on Balco in this context is misplaced.
E
98. It is correct that, in virtually all jurisdictions, it is an
accepted proposition of law that the seat normally carries with
it the choice of that country's arbitration/Curial law. But this
would arise only if the Curial law is not specifically chosen by .
the parties. Reference can be made to Ba/co (supra), wherein F
this Court considered a number of judgments having a bearing
on the issue of whether the venue is to be treated as seat.
However, the court was not required to decide any controversy
akin to the one this court is considering in the present case.
The cases were examined only to demonstrate the difficulties G
that the court will face in a situation similar to the one which
was considered in Na11iera Amazonica (supra).
99. We also do not agree with Dr. Singhvi that parties have
not indicated they had chosen India to be the seat of arbitration. H
924 SUPREME COURT REPORTS [2014) 2 S.C.R.
A The judgments relied upon by Dr. Singhvi do not support the
proposition canvassed: In fact, the judgment in the case Braes
of Doune Wind Farm (Scotland) Limited Vs. Alfred McAlpine
Business Services Limited35, has considered a situation very
similar to the factual situation in the present case.
B
100. In Braes of Doune, the English & Wales High Court
considered two Applications relating to the first award of an
arbitrator. The award related to an EPC (engineering,
procurement and construction) contract dated 4th November,
C 2005 (the EPC contract) between the claimant (the employer)
and the defendant (the contractor), whereby the contractor
undertook to carry out works in connection with the provision
of 36 WTGs at a site some 18 km from Stirling in Scotland.
This award dealt with enforceability of the clauses of the EPC
contract which provided for liquidated damages for delay. The
D claimant applied for leave to appeal against this award upon
a question of law whilst the defendant sought, in effect, a
declaration that the court had no jurisdiction to entertain such
an Application and for leave to enforce the award. The Court
considered the issue of jurisdiction which arose out of
E application of Section 2 of the English Arbitration Act, 1996
which provides that:
"2. Scope of application of provisions.-(1) The
provisions of this Part apply where the seat of the
F arbitration is in England and Wales or Northern Ireland."
101. The Court notices the singular importance of ·
determining the location of juridical seat in terms of Section 3,
for the purposes of Section 2, in the following words of
Akenhead, J.:
G
"15. I must determine what the parties agreed was the
'seat' of the arbitration for the purposes of Section 2 of the
Arbitration Act, 1996. This means by Section 3 what the
parties agreed was the 'juridical' seat. The word 'juridical'
H 35. [2008) EWHC 426 (TCC).
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 925
& ANR. [SURINDER SINGH NIJJAR, J.]
is not an irrelevant word or a word to be ignored in A
ascertaining what the 'seat' is. It means and connotes the
administration of justice so far as the arbitration is
concerned. It implies that there must be a country whose
job it is to administer, control or decide what control there
is to be over an arbitration." B
(emphasis supplied}
102. Thus, it would be evident that if the "juridical seat" of
the arbitration was in Scotland, the English courts would have
no jurisdiction to entertain an Application for leave to appeal. C
The contractor argued that the seat of the arbitration was
Scotland whilst the employer argued that it was England. There
were to be.two contractors involved with the project.
The material clauses of the EPC contract were: D
"1.4.1. The contract shall be governed by and construed
in accordance with the laws of England and Wales and,
subject to Clause 20.2 (Dispute Resolution), the parties
agree that the courts of England and Wales have exclusive
jurisdiction to settle any dispute arising out of or in E
connection with the contract.
(a) ... any dispute or difference between the parties to this
agreement arising out of or in connection with this
agreement shall be referred to arbitration. F
(b) Any reference to arbitration shall be to a single
arbitrator ... and conducted in accordance with the
Construction Industry Model Arbitration Rules, February
1998 Edn., subject to this clause {Arbitration Procedure) ....
G
{c) This arbitration agreement is subject to English law and
the seat of the arbitration shall be Glasgow, Scotland. Any
such reference to arbitration shall be deemed to be a
reference to arbitration within the meaning of the
Arbitration Act, 1996 or any statutory re-enactment." H
926 SUPREME COURT REPORTS [2014] 2 S.C.R.
A 103. The arbitration was to be conducted under the
arbitration rules known colloquially as the "GIMAR Rules". Rule
1 of the aforesaid Rules provided that:
"1.1. These Rules are to be read consistently with the
Arbitration Act, 1996 (the Act), with common expressions
B
having the same meaning."
"1.6. (a) a single arbitrator is to be appointed, and
(b) the seat of the arbitration is in England and Wales or
c Northern Ireland."
The Court was informed by the parties in arguments that
the Scottish Court's powers of control or intervention would be,
at the very least, seriously circumscribed by the parties'
agreement in terms as set out in para 6 of the judgment. It was
D further indicated by the counsel that the Scottish Court's powers
of intervention might well be limited to cases involving such
extreme circumstances as the dishonest procurement of an
award. In construing the EPC, the Court relied upon the
principles stated by the Court of Appeal in Naviera Amazonica
E Peruana S.A.
104. Upon consideration of the entire material, the Court
formed the view that it does have jurisdiction to entertain an
Application by either party to the contract in question under
F Section 69 of the English Arbitration Act. 1996. The Court gave
the following reasons for the decision:
"(a) One needs to consider what, in substance, the parties
agreed was the law of the country which would juridically
control the arbitration.
G
(b) I attach particular importance to Clause 1.4.1. The
parties agreed that essentially the English (and Welsh)
courts have 'exclusive jurisdiction' to settle disputes.
Although this is 'subject to' arbitration, it must and does
H mean something other than being mere verbiage. lfis a
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 927
& ANR. [SURINDER SINGH NIJJAR, J.]
jurisdiction over disputes and not simply a court in which A
a foreign award may be enforced. If it is in arbitration alone
that disputes are to be settled and the English courts have
no residual involvement in that process, this part of Clause
1.4.1 is meaningless in practice. The use of the word
'jurisdiction' suggests some form of control. B
(c) The second part of Clause 1.4.1 has some real
meaning if the parties were agreeing by it that, although
the agreed'disputes resolution process is arbitration, the
parties agree that the English court retains such jurisdiction C
to address those disputes as the law of England and
Wales permits. The Arbitration Act, 1996 permits and
requires the court to entertain applications under Section
69 for leave to appeal against awards which address
disputes which have been referred to arbitration. By
allowing such applications and then addressing the relevant D
questions of law, the court will settle such disputes; even
if the application is refused, the court will be applying its
jurisdiction under the Arbitration Act, 1996 and providing
resolution in relation to such disputes.
E
(d) This reading of Clause 1.4.1 is consistent with Clause
20.2.2(c) which confirms that the arbitration agreement is
subject to English law and that the 'reference; is 'deemed
to be a reference to arbitration within the me~ning of the
Arbitration Act, 1996'. This latter expression is extremely F
odd unless the parties were agreeing that any reference
to arbitration was to be treated as a reference to which
the Arbitration Act, 1996 was to apply. There is no
definition in the Arbitration Act, 1996 of a 'reference to
arbitration', which is not a statutory term of art. The parties G
presumably meant something in using the expression and
the most obvious meaning is that the parties were
agreeing that the Arbitration Act, 1996 should apply to the
reference without qualification.
(e) Looked at in this light, the parties' express agreement H
928 SUPREME COURT REPORTS [2014] 2 S.C.R.
A that the 'seat' of arbitration _was to be Glasgow, Scotland
must relate to the place in which the parties agreed that
the hearings should take place. However, by all the other
references the parties were agreeing that the curial law or
law which governed the arbitral proceedings ... establish
B that, prima facie and in the absence of agreement
otherwise, the selection of a place or seat for an arbitration
will determine what the curial law or 'lex fori' or 'lex arbitri'
will be, [we] consider that, where in substance the parties
agree that the laws of one country will govern and control
c a given arbitration, the place where the arbitration is to be
heard will not dictate what the governing or controlling law
will be.
(f) In the context of this particular case, the fact that, as both
parties seemed to accept in front of me, the Scottish courts
D would have no real control or interest in the arbitral
proceedings other than in a criminal context, suggests that
they can not have intended that the arbitral proceedings
were to be conducted as an effectively 'delocalised'
arbitration or in a 'transnational firmament', to borrow Kerr,
E L.J.'s words in Naviera Amazonica.
(g) The CIMAR Rules are not inconsistent with my view.
Their constant references to the Arbitration Act, 1996
suggest that the parties at least envisaged the possibility
F that the courts of England and Wales might play some part
in policing any arbitration. For instance, Rule 11.5
envisages something called 'the court' becoming involved
in securing compliance with a peremptory order of the
arbitrator. That would have to be the English court, in
practice."
G
105. In our opinion, Mr. Nariman has rightly relied upon the
ratio in Braes of Doune case (supra). Learned senior counsel
has rightly pointed out that unlike the situation in Naviera .
Amazonica (supra), in the present case all the three laws: (i)
H the law governing the substantive contract; (ii) the law governing
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 929
& ANR. [SURINDER SINGH NIJJAR, J.]
the agreement to arbitrate and the performance of that A
agreement (iii) the law governing the conduct of the arbitration
are Indian. '!!..earned senior counsel has rightly submitted that
the curial law of England would become applicable only if there
was clear designation of the seat in London. Since the parties
have deliberately chosen London as a venue, as a neutral place B
to hold the meetings of arbitratioo only, it cannot be accepted
that London is the seat of arbitration. We find merit in the
submission of Mr. Nariman that businessmen do not intend
absurd results. If seat is in London, then challenge to the award
would also be in London. But the parties having chosen Indian c
Arbitration Act, 1996 - Chapter Ill, IV, V and VI; Section 11
would be applicable for appointment of arbitrator in case the
machinery for appointment of arbitrators agreed between the
parties breaks down. This would be so since the ratio laid down
in Bhatia will apply, i.e., Part I of the Indian Arbitration Act, 1996
0
would apply even though seat of arbitration is not in India. This
position has been reversed in Ba/co, but only prospectively.
Ba/co would apply to the agreements on or after 6th
September, 2012. Therefore, to interpret that London has been
designated as the seat would lead to absurd results.
E
106. Learned senior counsel has rightly submitted that in
fixing the seat in India, the court would not be faced with the
complications which were faced by the English High Court in
the Braes of Doune (supra). In that case, the court understood
the designation of the seat to be in Glasgow as venue, on the F
strength of the other factors intimately connecting the arbitration
to England. If one has regard to the factors connecting the
dispute to India and the absence of any factors connecting it
to England, the only reasonable conclusion is that the parties
have chosen London, only as the venue of the arbitration. All G
the other connectJn_g factors would place the seat firmly in India.
107. The submission made by Dr. Singhvi would only be
worthy of acceptance on the assumption that London is the seat.
That would be to put the cart before the horse. Surely,
H
930 SUPREME COURT REPORTS . (2014] 2 S.C.R.
A jurisdiction of the courts can not be rested upon unsure or
insecure foundations. If so, it will flounder with every gust of the
wind from different directions. Given the connection to India of
the entire dispute between the parties, it is difficult to accept
that parties have agreed that the seat would be London and
B that venue is only a misnomer. The parties having chosen the
Indian Arbitration Act, 1996 as the law governing the substantive
contract, the agreement to arbitrate and the performance of the
agreement and the law governing the conduct of the arbitration;
it would, therefore, in our opinion, be vexatious and oppressive
c if Enercon GMBH is permitted to compel Ell to litigate in
England. This would unnecessarily give rise to the undesirable
consequences so pithily pointed by Lord Brandon and Lord
Dip lock in Abidin Vs. Daver. 36 It was to avoid such a situation
that the High Court of England & Wales, in Braes of Doune,
construed a provision designating Glasgow in Scotland as the
0
seat of the arbitration as providing only for the venue of the
arbitration.
108. At this stage, it would be appropriate to analyse the
reasoning of the Court in Braes of Doune in support of
E construing the designated seat by the parties as making a
reference only to the venue of arbitration. In that case, the Court
held that t~ere was no supplanting of the Scottish law by the
English law, as both the seat under Section 2 and the "juridical
seat" under Section 3, were held to be in England. It was further
F concluded, as observed earlier, that where in substance the
parties agreed that the laws of one country will govern and
control a given arbitration, the place where the arbitration is to
be heard will not dictate what the governing law will be.
109. In Braes of Doune, detailed examination was
G undertaken by the court to discern the intention of the parties
as to whether the place mentioned refers to venue or the seat
of the arbitration. The factual situation in the present case is
not as difficult or complex as the parties herein have only
H 36." (1984] AC 398.
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 931
& ANR. [SURINDER SINGH NIJJAR, J.]
designated London as a venue. Therefore, if one has to apply A
the reasoning and logic of Akenhead, J., the conclusion would
be irresistible that 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, B
which was specifically provided in Clause 1.4.1 of the EPC
Contract examined by Akenhead, J. in Braes of Doune. In the
present 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 c
London.
110. We also do not find much substance in the
submission of Dr. Singhvi that the agreement of the parties that
the arbitration proceedings will be governed by the Indian
Arbitration Act, 1996 would not be indicative of the intention of D
the parties that the seat of arbitration is India. An argument
similar to the argument put forward before us by Dr. Singhvi
was rejected in C vs. D by the Court of Appeal in England as
well as by Akenhead, J. in Braes of Doune. Underlying reason
-- for the conclusion in both the cases was that it would be rare E
for the law of the arbitration agreement to be different from the
law of the seat of arbitration.
111. C v. 0 37 the Court of Appeal in England was
examining an appeal by the defendant insurer from the F
judgment of Cooke, J. granting an anti-suit injunction preventing
it from challenging an arbitration award in the US courts. The
insurance policy provided that "any dispute arising under this
policy shall be finally and fully determined in London, England
under the provisions of the English Arbitration Act, 1950 as G
amended". However, it was further provided that "this policy
shall be governed by and construed in accordance with the
internal laws of the State of New York .... " A partial award was
rmi.de in favour of the claimants. It was agreed that this partial
37. [2007] EWCA Civ 1282. H
932 SUPREME COURT REPORTS [2014) 2 S.C.R.
A award is, in English law terms, final as to what it decides. The
defendant sought the tribunal's withdrawal of its findings. The
defendant also intimated its intention to apply to a Federal
Court applying the US Federal Arbitration Law governing the
enforcement of arbitral award, which was said to permit vacatur
B of an award where arbitrators have manifestly disregarded the
law. It was in consequence of such an intimation that the
claimant sought and obtained an interim anti-suit injunction. The
Judge held that parties had agreed that any proceedings
seeking to attack or set aside the partial award would only be
c tho$e· permitted by the English law. It was not, therefore,
permissible for the defendant to bring any proceedings in New
York or elsewhere to attack the partial award. The Judge
rejected the arguments to the effect that the choice of the law
of New York as the proper law of the contract amounted to an
agreement that the law of England should not apply to
0
proceedings post award. The Judge also rejected a further
argument that the separate agreement to arbitrate contained
in Condition V(o) of the policy was itself governed by New York
Law so that proceedings could be instituted in New York. The
E Judge granted the claimant a final injunction.
112. The Court of Appeal noticed the submission on
behalf of the defendant as follows:
"14. The main submission of Mr Hirst for the defendant
F insurer was that the Judge had been wrong to hold that the
arbitration agreement itself was governed by English law
merely because the seat of the arbitration was London. He
argued that the arbitration agreement itself was silent as
to its proper law but that its proper law should follow the
proper law of the contract as a whole, namely, New York
G
law, rather than follow from the law of the seat of the
arbitration, namely, England. The fact that the arbitration
itself was governed by English procedural law did not
mean that it followed that the arbitration agreement itself
had to be governed by English law. The proper law of the
H
ENERCON (!NOIA) LTD. & ORS. v. ENERCON GMBH 933
& ANR. [SURINDER SINGH NIJJAR, J.]
arbitration agreement was that law with which the A
agreement had the most close and real connection; if the
insurance policy was governed by New York law, the law
with which the arbitration agreement had its closest and
most real connection was the law of New York. It would then
follow that, if New York law permitted a challenge for B
manifest disregard of the law, the court in England should
not enjoin such a challenge."
113. Justice Longmore of Court of Appeal observed:
"16. I shall deal with Mr Hirst's arguments in due course C
but, in my judgment, they fail to grapple with the central
point at issue which is whether or not, by choosing London
as the seat of the arbitration, the parties must be taken to
have agreed that proceedings on the award should be only
those permitted by English law. In my view they must be D
taken to have so agreed for the reasons given by the
Judge. The whole purpose of the balance achieved by the
Bermuda Form (English arbitration but applying New York
law to issues arising under the policy) is that judicial
remedies in respect of the award should be those E
permitted by English law and only those so permitted. Mr
Hirst could not say (and did not say) that English judicial
remedies for lack of jurisdiction on procedural irregularities
under Sections 67 and 68 of the Arbitration Act, 1996 were
not permitted; he was reduced to saying that New York F
judicial remedies were also permitted. That, however,
would be a recipe for litigation and (whatis worse)
confusion which cannot have been intended by the parties.
No doubt New York law has its own judicial remedies for
want of jurisdiction and serious irregularity but it could G
scarcely be supposed that a party aggrieved by one part
of an award could proceed in one jurisdiction and a party
aggrieved by another part of an award could proceed in
another jurisdiction. Similarly, in the case of a single
complaint about an award, it could not be supposed that H
934 SUPREME COURT REPORTS [2014] 2 S.C.R.
A the aggrieved party could complain in one jurisdiction and
the satisfied party be entitled to ask the other jurisdiction
to declare its satisfaction with the award. There would be
a serious risk of parties rushing to get the first judgment
or of conflicting decisions which the parties cannot have
B contemplated.
17. It follows from this that a choice of seat for the
arbitration must be a choice of forum for remedies seeking
to attack the award."
c (emphasis supplied)
On the facts of the case, the Court held that the seat of
the arbitration was in England and accordingly entertained the
challenge to the award. ·
D 114. The cases relied upon by Dr. Singhvi relate to the
phrase "arbitration in London" or expressions similar thereto.
The same cannot be equated with the term "venue of arbitration
proceEtdings shall be in London." Arbitration in London can be
understood to include venue as well as seat; but it would be
E rather stretching the imagination if "venue of arbitration shall be
in London" could be understood as "seat of arbitratioo shall be
London," in the absence of any other factor connecting the
arbitration to London. In spite of Dr. Singhvi's seemingly
attractive submission to convince us, we decline to entertain
F the notion that India would not be the natural forum for all
remedies in relation to the disputes, having such a close and
intimate connection with India. In contrast, London is described
only as a venue which Dr. Singhvi says would be the natural
forum.
G
115. In Shashoua, such an expression was understood as
seat instead of venue, as the parties had agreed that the ICC
Rules would apply to the arbitration proceedings. In Shashoua,
the ratio in Naviera and Braes Daune has been followed. In
H this case, the Court was concerned with the construction of the
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 935
& ANR. [SURINDER SINGH NIJJAR, J.]
shareholders' agreement between the parties, which provided A
that "the venue of the arbitration shall be London, United
Kingdom". It provided that the arbitration proceedings should
be conducted in English in accordance with the ICC Rules and
that the governing law of the shareholders' agreement itself
would be the law of India. The claimants made an Application B
to the High Court in New Delhi seeking interim measures of
protection under Section 9 of the Indian Arbitration Act, 1996,
prior to the institution of arbitration proceedings. Following the
commencement of the arbitration, the defendant and the joint
venture company raised a challenge to the jurisdiction of the c
Arbitral Tribunal, which the panel heard as a preliminary issue.
The Tribunal rejected the jurisdictional objection.
116. The Tribunal then made a costs award ordering the
defendant to pay $140,000 and £172,373.47. The English
Court gave leave to the claimant .to enforce the costs award D
as a judgment. The defendant applied to the High Court of Delhi
under Section 34(2)(a)(iv) of the Arbitration Act, 1996 to set
aside the costs award. The claimant had obtained a charging
order, which had been made final, over the defendant's property
in UK. The defendant applied to the Delhi High Court for an E
order .directing the claimants not to take any action to execute
the charging order, pending the final disposal of the Section
34 petition in Delhi. seeking to set aside the costs award. The
defendant had sought unsuccessfully to challenge the costs
award in the Commercial Court under Section 68 and Section F
69 of the English Arbitration Act, 1996 and to set aside the
order giving leave to enforce the award.
117. Examining the fact situation in the case, the Court
observed as follows:
G
"The basis for the court's grant of an anti-suit injunction of
the kind sought depended upon the seat of the arbitration.
An agreement as to the seat of an arbitration brought in
the law of that country as the curial law and was
analogous to an exclusive jurisdiction clause. Not only H
936 SUPREME COURT REPORTS [2014] 2 S.C.R.
A was there agreement to the curial law of the seat, but also
to the courts of the seat having supervisory jurisdiction over
the arbitration, so that, by agreeing to the seat, the parties
agreed that any challenge to an interim or final award was
to be made only in the courts of the place designated as
B the seat of the arbitration.
Although, 'venue' was not synonymous with 'seat', in an
arbitration clause which provided for arbitration to be
conducted in accordance with the Rules of the ICC in Paris
(a supranational body of rules), a provision that 'the venue
c of arbitration shall be London, United.Kingdom' did amount
to the designation of a juridical seat .... "
In para 54, it is further observed as follows:
D "There was a ,little debate about the possibility of the
issues relating to the alleged submission by the claimants
to the jurisdiction of the High Court of Delhi being heard
by that Court, because it was best fitted to determine such
issues under the Indian law. Whilst I found this idea
attractive initially, we are persuaded that it would be wrong
E
in principle to allow this and that it would create undue
practical problems in any event. On the basis of what I have
already decided, England is the seat of the arbitration and
since this carries with it something akin to an exclusive
jurisdiction clause, as a matter of principle the foreign court
F should not decide matters which are for this Court to
decide in the context of an anti-suit injunction."
(emphasis supplied)
G If the aforesaid observations are applied to the facts of the
present case, it would be apparent that the Indian Courts would
have jurisdiction in the nature of exclusive jurisdiction over the
disputes between the parties.
118. In Shashoua case (supra), Cooke, J. concluded that
H London is the seat, since the phrase "venue of arbitration shall
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 937
& ANR. [SURINDER SINGH NIJJAR, J.]
be London, U.K." was accompanied by the provision in the A
arbitration clause for arbitration to be conducted in accordance
with the Rules of ICC in Paris (a supranational body of rules).
It was also noted by Cooke, J. that "the parties have not simply
provided for the location of hearings to be in London ...... " In
the present case, parties have not chosen a supranational body B
of rules to govern the arbitration; Indian Arbitration Act, 1996
is the law applicable to the arbitration proceedings.
119. Also, in Union of India v. McDonnell Douglas Corpn.,
the proposition laid down in Naviera Amazonica Peruana S.A. C
was reiterated. In this case, the agreement provided that:
"The arbitration shall be conducted in accordance with the
procedure provided in the Indian Arbitration Act of 1940
or any re-enactment or modification thereof. The arbitration
shall be conducted in the English language. The award of D
the arbitrators shall be made by majoi ity decision and shall
be final and binding on the parties hereto. The seat of the
arbitration proceedings shall be London, United Kingdom."
120. Construing the aforesaid clause, the Court held as
E
follows:
"On the contrary, for the reasons given, it seems to me that
by their agreement the parties have chosen English law
as the law to govern their arbitration proceedings, while
contractually importing from the Indian Act those provisions F
of that Act which are concerned with the internal conduct
of their arbitration and which are not inconsistent with the
choice of English arbitral procedural law."
121. The same question was again considered by the High G
Court of Justice, Queen's Bench Division, Commercial Court
(England) in SulameRica CIA Nacional De Seguros SA v.
Enesa Engenharia SA - Enesa. The Court noticed that the
issue in this case depends upon the weight to be given to the
·provision in Condition 12 of the insurance policy that "the seat H
938 SUPREME COURT REPORTS [2014] 2 S.C.R.
A of the arbitration shall be London, England." It was observed
that this necessarily carried with it the English Court's
supervisory jurisdiction over the arbitration process. It was
observed that "this follows from the express terms of the
Arbitration Act, 1996 and, in particular, the provisions of Section
B 2 which provide that Part I of the Arbitration Act, 1996 applies
where the seat of the arbitration is in England and Wales or
Northern Ireland. This immediately establishes a strong
connection between the arbitration agreement itself and the law
of England. It is for this reason that recent authorities have laid
c stress upon the locations of the seat of the arbitration as an
important factor in determining the proper law of the arbitration
agreement." The Court thereafter makes a reference to the
observations made in C v. D by the High Court as well as the
Court of Appeal. The observations made in paragraph 12 have
particular relevance which are as under:
0
"In the Court of Appeal, Longmore, L.J., with whom the
other two Lord Justices agreed, decided (again obiter)
that, where there was no express choice of law for the
arbitration agreement, the law with which that agreement
E had its closest and most real connection was more likely
to be the law of the seat of arbitration than the law of the
underlying contract. He referred to Mustill, J. (as he then
was) in Black Clawson International Ltd. v. Papierwerke
Waldhof-Aschaffenburg A.G. as saying that it would be a
F rare case in which the law of the arbitration agreement was
not the same as the law of the place or seat of the
arbitration. Longmore, L.J. also referred to the speech of
Lord Mustilf (as he had then become) in Channel Tunnel
Group ltd. v. Balfour Beatty Construction ltd. and
G concluded that the Law Lord was saying that, although it
was exceptional for the proper law of the underlying
contract to be different from the proper law of the arbitration
agreement, it was less exceptional (or more common) for
the proper law of that underlying contract to be different
H from the curial law, the law of the seat of the arbitration.
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 939
& ANR. [SURINDER SINGH NIJJAR, J.]
He was not expressing any view on the frequency or A
otherwise of the law ofthe arbitration agreement differing
from the law of the seat of the arbitration. Longmore, L.J.
agreed with Mustill, J.'s earlier dictum that it would be rare
for the law of the separable arbitration agreement to be
different from the law of the seat of the arbitration. The B
reason was
'that an agreement to arbitrate will normally have a
closer and more real connection with the place
where the parties have chosen to arbitrate, than C
with the place of the law of the underlying contract,
in cases where the parties have deliberately chosen
to arbitrate, in one place, disputes which have
arisen under a contract governed by the law of
another place'. (C case, Bus LR p. 854, para 26)" D
122. Upon consideration of the entire matter, it was
observed in SulameRica supra that "In these circumstances it
is clear to me that the law with which the agreement to arbitrate
has its closest and most real connection is the law of the seat
of arbitration, namely, the law of England". It was thereafter E
concluded by the High Court that the English law is the proper
law of the agreement to arbitrate.
The aforesaid observations make it abundantly clear that
the submissions made by Dr. Singhvi cannot be supported F
either in law or in facts. In the present case, all the chosen laws
are of India, therefore, it cannot be said the laws of England
would have any application.
123. We also do not find any merit in the submission of
Dr. Singhvi that the close and the most intimate connection test G
is wholly irrelevant in this case. It is true that the parties have
specified all the three laws. But the Court in these proceedings
is required to determine the seat of the arbitration, as the
Respondents have taken the plea that the term "venue" in the
arbitration clause actually makes a reference to the "seat" of H ·
940 SUPREME COURT REPORTS [2014] 2 S.C.R.
A the arbitration.
124. It is accepted by most of the experts in the law
relating to international arbitration that in almost all the national
laws, arbitrations are anchored to the seaUplace/situs of
arbitration. Redfern and Hunter on International Arbitration (5th
8
Edn., Oxford University Press, Oxford/New York 2009), in para
3.54 concludes that "the seat of the arbitration is thus intended
to be its centre of gravity." In Balco, it is further noticed that this
does not mean that all proceedings of the arbitration are to be
held at the seat of arbitration. The Arbitrators are at liberty to
C hold meetings at a place which is of convenience to all
concerned. This may become necessary as Arbitrators often
come from different countries. Therefore, it may be convenient
to hold all or some of the meetings of the arbitration in a
location other than where the seat of arbitration is located. In
D Balco, the relevant passage from Redfern and Hunter, has
been quoted which is as under:
"The preceding discussion has been on the basis that
there is only one 'place' of arbitration. This will be the
E place chosen by or on behalf of the parties; and it will be
designated in the arbitration agreement or the terms of
reference or the minutes of proceedings or in some other
way as the place or 'seat' of the arbitration. This does not
mean, however, that the Arbitral Tribunal must hold all
F its meetings or hearings at the place of arbitration.
International commercial arbitration often involves
people of many different nationalities, from many different
countries. In these circumstances, it is by no means
unusual for an Arbitral Tribunal to hold meetings-or even
hearings-in a place other than the designated place of
G
arbitration, either for its own convenience or for the
convenience of the parties or their witnesses ... It may be
more convenient for an Arbitral Tribunal sitting in one
country to conduct a hearing in another country - for
instance, for the purpose of taking evidence.... In such
H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 941
& ANR. [SURINDER SINGH NIJJAR, J.]
circumstances each move of the Arbitral Tribunal does A
not of itself mean that the seat of arbitration changes. The
seat of arbitration remains the place initially agreed by
or on behalf of the parties. "
These observations have also been noticed in Union of B
India Vs. McDonald Dug/as Corporation (supra).
125. In the present case, even though the venue of
arbitration proceedings has been fixed in London, it cannot be
presumed that the parties have intended the seat to be also in
London. In an International Commercial Arbitration, venue can C
often be different from the seat of arbitration. In such
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. This is precisely the ratio
in Braes of Dounne. Therefore, in the present case, the seat D
would remain in India.
126. In Naviera Amazonica Peruana S.A. (supra), the
Court of Appeal observed that it would always be open to the
Arbitral Tribunal to hold the hearings in Lima if this were thought E
to be convenient, even though the seat or forum of the
arbitration would remain in London.
Issue No. VI/ Re: Concurrent Jurisdicion:
127. Having held that the seat of arbitration is in India, in F
our opinion, the Bombay High Court committed an error in
concluding that the Courts in England would have concurrent
jurisdiction. Holding that the Courts in England and India will
have concurrent jurisdiction, as observed on different occasions
by Courts in different jurisdictions, would lead to unnecessary G
complications 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. The kind of difficulties that can be H
942 SUPREME COURT REPORTS (2014] 2 S.C.R.
A caused by Courts. in two countries exercising concurrent
jurisdiction over the same subject matter have been very
succinctly set down by Lord Brandon in Abdin Vs. Daveu
(su'pra)- as follows:-
"ln this connection it is right to point out that, if concurrent
B
actions in respect of the same subject matter proceed
together in two different countries, as seems likely if a stay
is refused in the present case, one or other of the two
undesirable consequences may follow: first, there may be
two conflicting judgments of the two courts concerned; or
c secondly, there may be an ugly rush to get one action
decided ahead of the other in order to create a situation
of res judicata or issue estoppel in the latter."
Lord Diplock said in the same case:
D
"comity demands that such ~ituation should not be
permitted to occur as between courts of two civilised and
friendly states"; it would be, he said, "a recipe for confusion
and injustice". As Bingham LJ said in Dupont No 1 the
policy of the law must be to favour the litigation of issues ·
E
only once in the most appropriate forum. The interests of
justice require that one should take into account as a factor
the risks of injustice and oppression that arise from
concurrent proceedings in different jurisdictions in relation
to the same subject matter."
F
128. 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. This view of ours will
find support from the judgment of the Court of Appeal in
G England in recognizing the difficulties that the parties will face
in case the Courts in India and England have concurrent
jurisdiction. Cooke J. in his judgment in (1) Enercon GMBH (2)
Wobben Properties GMBH Vs. Enercon (India) Ltd., dated
30th November, 2012, (2012) EWHC 3711(Comm), observed
H as under:
'
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 943
. & ANR: [SURINDER SINGH NIJJAR, J.]
"14. A lifting of the stay in this country and an appoint of A
a third arbitrator under s. 18 of the English Act would, if
the Indian proceedings continue and the Supreme Court
decides the matter differently from the Bombay High
Court and this court, give rise to the possibility of
conflicting judgments with all the chaos that might entail. B
In practice, therefore, the question of lifting the stay here
and the grant of the anti-suit injunction against EIL are
closely interconnected.
15. It cannot, in my judgment, be right that both English C
and Indian courts should be free to reach inconsistent
judgments on the same subject matter, whether or not the
current ultimate result in India, which allows for an English
court to appoint an arbitrator by virtue of s.2(4) of the
English Act, will or will not involve any inconsistent
judgment, and whether there is or is not a current issue D
estoppels which would debar Enercon from contending
that London is the seat of the arbitration, which is its
primary case, giving rise, as it says, to the court's power
to appoint an arbitrator under s. 18 of the English Act by
virtue of s.2(1) of that Act and by reference to s.3 of that E
Act.
xx xxx xx xxx xx
56. Comity and the avoidance of inconsistent judgments
F
require that I should refrain from deciding matters which
· are possibly going to be decided further in India. It would
be a recipe for confusion and injustice if I were not to do
so. Issue estoppels is already said to arise on the
question of the seat of arbitration and curial law, and that
raises very difficult questions for the court to decide. If the G
stay was lifted, then I could decide the matter differently
from Savant J. or from a later final decision on appeal in
the Supreme Court of India, if that matter went ahead.
The Indian courts are seised and should reach, in my
H
944 SUPREME COURT REPORTS [2014] 2 S.C.R.
A judgment, a concluded decision, albeit on an expedited
basis.
xx xxx xx xxx xx
60. If the Supreme Court in India were, in due course, to
B 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
c English court were to conclude that England was the seat
of the putative arbitration, and to assume jurisdiction over
EIL and the putative arbitration, and to conclude that
there was a valid arbitration agreement, whether on the
basis of a good arguable case or the balance of
D 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.
61. These are the very circumstances which courts must
E
strive to avoid in line with a multitude of decisions of high
authority, from the Abidin Daver [1984} AC 398 onwards,
including E. I. Dupont de Nemours v. Agnew [1987]2
Lloyd's Rep 585. The underlying rationale of Eder J. 's
judgment leads inexorably, in my view, to the conclusion
F that the issues to be determined in India, which could
otherwise fall to be determined here in England, must be
decided first by the Indian courts and that, despite the
delay and difficulties involved, the decision of the Indian
Supreme Court should be awaited.
G
62. It is also fair to point out in this context that, even if I
were to decide the seat issue here on the basis of full
argument (which I have not heard) whether in the way that
Eder J. did or otherwise, the possibility or likelihood of
H one side or another wishing to appeal with subsequent
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 945
& ANR. [SURINDER SINGH NIJJAR, J.]
delay might then arise in the context of the English A
proceedings. But, if I did make such a decision, in line
with Eder J., I would be making a determination which is
directly contrary to that of Savant J. and it seems to me
that that is inappropriate as a matter of comity, whether
or not there is any issue estoppels. B
63. Moreover, it would be a recipe for confusion and
injustice, and to back it up with an anti-suit injunction
would merely fan the flames for a continued battle, which
is contrary to the principles of comity when the position C
is unclear and the agreement itself is governed by Indian
law."
129. In our opinion, these observations of Justice Cooke
foresee the kind of intricate complexities that may arise in case
the Courts of India and England were to exercise the concurrent D
jurisdiction in these matters.
130. We are unable to agree with the conclusion reached
by Justice Savant that the Courts in England would exercise
.concurrent jurisdiction in the matter. Having concluded that the E
seat of arbitration is in India, the conclusions reached by the
Bombay High Court seem to be contrary in nature. In Paragraph
45, it is concluded that the law relating to arbitration agreement
is the Indian Arbitration Act. Interpreting Clause 18.3, it is
observed as follows:-
F
"45 .................... The said clause provides that the
provisions of the Indian Arbitration and Conciliation Act,
1996 shall apply. If the said clause is read in the ordinary
and natural sense, the placement of the words that "the
Indian Arbitration and Conciliation Act shall apply" .in the G
last clause 18.3 indicates the specific intention of the
parties to the application of the Indian Arbitration Act, not
only to the Arbitration Agreement but also that the curial
law or the Lex Arbitri would be the Indian Arbitration Act.
The application of the Indian Arbitration Act therefore can H
946 SUPREME COURT REPORTS [2014] 2 S.C.R.
A be said to permeate clause-18 so that in the instant case
laws (2) and (3) are same if the classification as made by
the learned authors is to be applied. The reference to the
Indian Arbitration Act is therefore not merely a clarification .
as to the proper law of the arbitration agreement as is
B sought to be contended on behalf of the Respondents. It
has to be borne in mind that the parties are businessmen
and would therefore not. include words without any intent
or object behind them. It is in the said context, probably
that the parties have also used the word "venue" rather than
the word "see?t" which is usually the phrase which is used
c in the clauses encompassing an Arbitration Agreement.
There is therefore a clear and unequivocal indication that
the parties have agreed to abide by the Indian Arbitration
Act at all the stages, and therefore, the logical
consequence of the same would be that in choosing
D
London as the venue the parties have chosen it only as a
place of arbitration and not the seat of arbitration which is
a juristic concept." ·
131. This conclusion is reiterated in Paragraph 46 in the
E following words:-
"46. The proposition that when a choice of a particular law
is made, the said choice cannot be restricted to only a part
of the Act or the substantive provision of that Act only. The
choice is in respect of all the substantive and curial law
F
provisions of the Act. The said proposition has been
settled by judicial pronouncements in the recent past. ...... "
132. Having said so, learned Judge further observes as
follows:-
G
"49. Though in terms of interpretation of Clause 18.3, this
Court has reached a conclusion that the lex arbitri would
be the Indian Arbitration Act. The question would be,
whether the Indian Courts would have exclusive jurisdiction.
H The nexus between the "seat" or the "place" of arbitration
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 947
& ANR. [SURINDER SINGH NIJJAR, J.]
vis-a-vis the procedural law i.e. the lex arbitri is well settled A
by the judicial pronouncements which have been referred
to in the earlier part of this judgment. A useful reference
could also be made to the learned authors Redfern and
Hunter who have stated thus :-
8
"the place or seat of the arbitration is not merely a
matter of geography. It is the territorial link between
the arbitration itself and the law of·the place in
which that arbitration is legally situated .... "
The choice of seat also has the effect of conferring C
exclusive jurisdiction to the Courts wherein the seat is
situated."
Here the Bombay High Court accepts that the seat carries
with it, usually, the notion of exercising jurisdiction of the Courts
0
where the seat is located.
133. Having said so, the High Court examines the question
whether the English Courts can exercise jurisdictions in support
of arbitration between the parties, in view of London being the
venue for the arbitration meetings. In answering the aforesaid E
question, the High Court proceeds on the basis that there is
no agreement between the parties as regards the seat of the
arbitration, having concluded in the earlier part of the judgment
that the parties have intended the seat to be in India. This
conclusion of the High Court is contrary to the observations F
made in Shashoua (supra) which have been approvingly
quoted by this Court in Balco in (Paragraph 110). On the facts
of the case, the Court held that the seat of the arbitration was
in England and accordingly entertained the challenge to the
award. G
134. In A Vs. 8 38 again the Court of Appeal in England
observed that:-
38. [2007] 1 Lloyds Report 237. H
948 SUPREME COURT REPORTS [2014] 2 S.C.R.
A " ..... an agreement as to the seat of an arbitration is
analogous to an exclusive jurisdiction clause. Any claim
for a remedy ...... as to the validity of an existing interim
or final award is agreed to be made only in the courts of
the place designated as the seat of arbitration."
B
(emphasis suppl.ied}
135. In our opinion, the conclusion reached by Justice
Savant that the Courts in England would have concurrent
jurisdiction runs counter to the settled position of law in India
C as well as in England and is, therefore, not sustainable. The
Courts in England have time and again reiterated that an
agreement as to the seat is analogous to an exclusive
jurisdiction clause. This agreement of the parties would include
the determination by the court as to the intention of the parties.
o In the present case, Savant, J. having fixed the seat in India
erred in holding that the courts in India and England would
exercise concurrent jurisdiction. The natural forum for all
remedies, in the facts of the present case, is only India.
Issue Cviil/Re: Anti-Suit Injunction:
E -
136. Having held that the Courts in England would have
concurrent jurisdiction, the Bombay High Court on the basis
thereof concludes as follows:-
"ln view of the conclusion that this Court has reached,
F
namely that the English Courts would have concurrent
jurisdiction to act in support of arbitration, the case of the
Appellants for an anti suit injunction does not stand to
scrutiny. However, in so far as the aspect of forum non-
conveniens is concerned, in my view, since the Appellants
G have agreed to London as the venue for arbitration, they
cannot be heard to complain that the Courts at London are
forum non-conveniens for them. The Appellants have
appeared before the said Courts, and therefore, the case
. of forum non- conveniens is bereft of any merit."
H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 949
& ANR. [SURINDER SINGH NIJJAR, J.]
137. The aforesaid conclusion again ignores the principle A
laid down by this Court in Oil & Natural Gas Commission Vs.
Western Company of North America (supra), wherein it is held
as follows:-
"As per the contract, while the parties are governed by the 8
Indian Arbitration Act and the Indian Courts have the
exclusive jurisdiction to affirm or set aside the award under
the said Act, the Respondent is seeking to violate the very
arbitration clause on the basis of which the award have
been obtained by seeking confirmation of the award in the C
New York Court under the American Law. This amounts
to an improper use of the forum in American (sic) in
violation of the stipulation to be governed by the Indian law,
which by necessary implication means a stipulation to
exclude the USA Court to seek an affirmation and to seek
it only under the Indian Arbitration Act from an Indian Court. D
If the restraint order is not granted, serious prejudice would
be occasioned and a party violating the very arbitration
clause on the basis of which the award has come into
existence will have secured an order enforcing the order
from a foreign court in violation of that very clause .. " E
138. Again in the case of Modi Entertainment Network &
Anr. (supra), it was held that :-
"24(1 ). In exercising discretion to grant an anti-suit F
injunction the court must be satisfied of the following
aspects: (a) the defendant, against whom injunction is
sought, is amenable to the personal jurisdiction of the
court; (b) if the injunction is declined, the ends of justice
will be defeated and injustice will be perpetuated; and (c) G
the principle of comity - respect for the court in which the .
commencement or continuance of action/proceeding is
sought to be restrained - must be borne in mind."
139. In Paragraph 24(2) of the same decision, this Court
further observed that :- H
950 SUPREME COURT REPORTS [2014) 2 S.C.R.
A "24(2). In a case where more forums than one are
available, the court in exercise of its discretion to grant anti-
suit injunction will examine as to which is the appropriate
forum {forum conveniens) having regard to the
convenience of the parties and may grant anti-suit
B injunction in regard to proceedings which are oppressive
or vexatious or in a forum non-conveniens."
140. Examining these aspects, Eder, J. in fact also came
to the conclusion that the anti-suit injunction granted by the
C English Court needed at-least to be stayed during the pendency
of proceedings in India. The reasons given by Eder, J. in
support of the conclusions are as under:-
"48. Bearing these general principles in mind and
recognising the permissive nature of CPR Part 62.5, the
D important point, in my view, is that the claimants did not
pursue their applications in the original proceedings that
they issued in this court in _March 2008. On the contrary,
they engaged fully (albeit perhaps reluctantly) in the Indian
proceedings before the Daman court. When they lost at
E first instance before Judge Shinde, they appealed to the
DCC with the result indicated above. That is the choice
they made. Having made that choice and now some years
down the line, it seems to me that lhe English court should
at least be extremely cautious to intervene at this stage -
F and, in Mr Edey QC's words, to "wrest" back the
proceedings to England. To do so at this stage when those
proceedings are, in effect, still pending would give rise to -
the "recipe for confusion and injustice" which Lord Diplock
specifically warned against in The Abidin Daver as
referred to in the passage of the judgment of Hobhouse J
G
. which I have quoted above. For that reason alone, I have
decided somewhat reluctantly that I should follow the
course suggested by Mr Edey QC ie that these
proceedings should be stayed at least for the time being
pending resolution of the Writ Petitions currently before the
H
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 951
& ANR. [SURINDER SINGH NIJJAR, J.]
BHC ...... " A
141. It must be noticed that Respondent No. 1 was initially
having 51 per cent shareholding of the Appellant No.1 company,
which was subsequently.increased to 56 per cent. This would
be an indicator that the .Respondent No: 1·is actively carrying 8
on business at Daman. This Court considered the expression
"carries on. business" as·it occurs in Section 20•of the Civil
Procedure Code in :the case o(Dhodha Hqtise Vs. S. K.
Maingi?g and observed as. follows:-
"46. The expression "carries on business" and the C
expression "personally works for gain" connote two
different meanings. For the purpose of carrying on
business only presence of a man at a place is not
necessary. Such business may be carried on at a place
through an agent or a manager or through a servant. The D
owner may not even visit that place. The phrase "carries
on business" at a certain place would, therefore, mean
having an interest in a business at that place, a voice in
what is done, a share in the gain or loss and some control
thereover. The expression is much wid~r than what the . E
expression in normal parlance connotes, because of the
ambit of a civil action within the meaning of Section 9 of
the Code ..... "
142. The fact that Daman trial court has jurisdiction over
F
the matter is supported by the judgment of this Court in Harshad
Chiman Lal Modi {supra), which was relied upon by Mr.
Nariman. The following excerpt makes it very clear:-
"16 ........... The proviso to Section 16, no doubt, states
that though the court cannot, in case of immovable property G
situate beyond jurisdiction, grant a relief in rem still it can
entertain a suit where relief ·sought can be obtained
through the personal obedience of the defendant. ..... The
principle on which the maxim was based was that the
39. (2006) e sec 41. H
952 SUPREME COURT REPORTS [2014} 2 S.C.R.
A courts could grant relief in suits respecting immovabl~
property situate abroad by enforcing their judgm~nts ·by
process in personam i.e. by arrest of the defendant or by
attachment of his property."
B 143. This apart, we have earlier noticed that the main
contract, the IPLA is to be performed in India. The governing
law of the contract is 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
C be sought against the assets of Appellant No. 1 ought to be in
India as the assets are situated in India. We have also earlier
noticed that Respondent No.1 has not only participated in the
proceedings in the Daman courts and the Bombay High Court,
but also filed independent proceedings under the Companies
D ~t at Madras and Delhi. All these factors would indicate that
Respondent No.1 does not even consider the Indian Courts as
forum-non-conveniens. In view of the above, we are 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 prompted
E Responddnt 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 Courts over the arbitration proceedings or disputes
F in general. Keeping in view the aforesaid, we are incHned to
restore the anti-suit injunction granted by the Daman Trial Court.
144. For the reasons recorded above, Civil Appeal
No.2087 of 2014@ SLP (C) No.10906 of 2013 is dismissed.
G The fin~ings recorded by the Appellate Court that the parties
can proceed to arbitration are affirmed. The findings recorded
. by the Trial Court dismissing the Applica~ion under Section 45
_are set aside. In other words, the Application filed by the
Respondents for reference of the dispute to arbitration under
H Section 45 has been correctly allowed by the Appellate Court
ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 953
& ANR. [SURINDER SINGH NIJJAR, J.]
as well as by the High Court. The findings of the High c·ourt A ·
are affirmed to that extent. 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 the Arbitral Tribunal for adjudication. B
145. In the normal circumstances, we would have directed
the parties to approach the two learned arbitrators, namely Mr.
V.V. Veeder, QC and Mr. Justice 8.P. Jeevan Reddy to appoint
the third arbitrator who shall also act as the presiding arbitrator. C
However, keeping in view the peculiar facts and circumstances
of this case and the inordinate delay which has been caused
due to the extremely convoluted and complicated proceedings
indulged in by the parties, we deem it appropriate to take it upon
ourselves to name the third arbitrator. A perusal of the judgment
of Eder, J. gives an indication that a list of three names was D
provided from which the third arbitrator could possibly be
appointed. The three names are Lord Hoffmann, Sir Simon
Tuckey and Sir Gordon Langley. We hereby appoint Lord
· Hoffmann as the third arbitrator who shall act as the Chairman
of the Arbitral Tribunal. E
146. In view of the above, Regular Civil Suit No. 9 of 2008,
pending before the Court of Civil Judge, Senior Dhtision,
Daman; and the Application under Section 45 of the Arbitration
Act, 1996 flied in the Civil Suit No.2667 of 2007 and Contempt F
Petition in relation to Civil Suit No.2667 of 2007 pending before
the Bombay High Court at the instance of the Appellants are
stayed. Parties are at liberty to approach the Court for the
appropriate orders, upon the final award being rendered by the
Arbitral Tribunal. This will not preclude the parties from seeking G
interim measures under Section 9 of the Indian Arbitration Act,
1996.
147. Civil Appeal No.2086 of 2014@ SLP (C) No.10924
·of 2013 is partly allowed as follows:
H
954 SUPREME COURT REPORTS (2014] 2 S.C.R.
. A 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;
B
c. The conclusion of the Bombay High Court that the
anti-suit injunction granted by the Daman Trial Court
has been correctly vacated by Daman Appellate
Court is overruled and hence set aside.
c d. Consequently, the Respondents are restrained from
proceeding with any of the actions the details of
which have been given in the judgment of Eder, J.
dated 23rd March, 2012 and the order dated 27th
March, 2012 as well as the judgment of Justice
D Cooke dated 30th November, 2012. These matters
include:
All or any of the. proceedings/ applications/ reliefs
claimed by the Respondents in the Arbitration
E Claim 2011 Folio 1399, including but not limited to:
(1) Application under Section 18 of the English Arbitration
Act, 1996;
(2) Injunctions pursuant to Se.ction 44 of the English
Arbitration Act, 1996 and /or Section 37 of the Senior
F
Courts Act, 1981 .
The Respondents are also restrained from approaching
the English Courts for seeking any declaration/relief/clarification
and/or to institute any proceedings that may result in delaying
G or otherwise affect the constitution of the arbitral tribunal and
its proceedings thereafter.
148. In view of the above, the parties are directed to
proceed to arbitration in accordance with law.
H R.P. Appeals disposed of.
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