Вы находитесь на странице: 1из 124

wps­7804.09 & 7636.09

IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION

WRIT PETITION NO.7804 OF 2009 WITH WRIT PETITION NO.7636 OF 2009

1 Enercon (India) Ltd.

]

a

company incorporated and

]

existing under the laws of

]

India and having its

]

registered office at Plot No.

]

33, Daman­ Patalia,

]

Bhimpore, Daman­396 210

]

India

]

]

2 Yogesh J. Mehra

]

being Indian Inhabitant

]

residing at 101, Hare

]

Krishna, Residency Society,

]

J.V.P.D. Scheme, North

]

South Road No.8, Vile Parle (W)

]

Mumbai 400 049

]

]

3 Ajay J. Mehra

]

being Indian Inhabitant

]

residing at 101, Hare

]

Krishna, Residency Society,

]

J.V.P.D. Scheme, North

]

South Road No.8, Vile Parle (W)

]

Mumbai 400 049

]

Petitioners.

 

Versus

1 Enercon GmbH

]

a

company duly

]

incorporated and existing

]

under the law of Germany

]

and having its registered

]

office at Dreekamp 5,

]

D26605, Aurich, Germany.

]

]

wps­7804.09 & 7636.09

2

Wobben Properties GmbH

]

a company duly

]

incorporated and existing

]

under the laws of Germany

]

and having its office at

]

Dreekamp­5 D26605,

]

Aurich, Germany.

]

Respondents.

Dr.Veerendra Tulzapurkar, Senior Advocate, with Mr.Virag Tulzapurkar, Senior Advocate, with Mr.Nikhil Sakhardande, Ms.Sonali Mathur & Ms. Swagata Naik i/by M/s. AZB & Partners for the Petitioners in both the Petitions.

Mr. S.U.Kamdar, Senior Advocate with Mr. Zubin Behramkamdin, Ms.Naira Variava­Jejeebhoy, Mr.Rohan Cama, Mr. Vivek Vashi, Ms.Anusha Jegadeesh, Ms.Devika Deshmukh, and Ms.Kanika Sharma i/by Bharucha & Partners for the Respondents in Writ Petition No.7804 of 2009.

Mr. Navroze Seervai, Senior Advocate with Mr. Zubin Behramkamdin, Ms.Naira Variava­Jejeebhoy, Mr.Rohan Cama, Mr. Vivek Vashi, Ms.Anusha Jegadeesh, Ms.Devika Deshmukh, and Ms.Kanika Sharma i/by Bharucha & Partners for the Respondents in Writ Petition No.7636 of 2009.

CORAM :

R. M. SAVANT, J.

Judgment Reserved on :­ 6 th August 2012. Judgment Pronounced on :­ 5 th October 2012.

JUDGMENT

1 The above Writ Petitions have been filed invoking the Writ

Jurisdiction of this Court

under Article 227 of the Constitution of India

challenging the order dated 27 th August 2009 passed by the learned District

Judge,

Daman

by

which

order

the

Appeals

being

Misc.

Civil

Appeal

Nos.1/2009, 2/2009, 3/2009 and 4/2009 came to be allowed and resultantly

the order passed by the Trial Court dated 9 th January 2009 came to be set

aside, resulting in the Application filed under Section 45 of the Arbitration and

wps­7804.09 & 7636.09

Conciliation Act, 1996 being allowed in terms of prayer clause 28(a) thereof,

and the Injunction Application of the Petitioners above­named, who are the

original Plaintiffs, came to be rejected.

2 The issue that arises in the above Petitions is therefore in two parts

viz. Whether the parties are to be referred to arbitration, and Whether the

Petitioners are entitled to an anti­suit injunction in the facts and circumstances

of the present case. The impugned order is therefore also in two parts; first

part deals with the aspect of whether

the

parties are to

be referred to

arbitration, and second part is, whether the Petitioners are entitled to an anti­

suit injunction.

Since both the Petitions involve common facts and are

interconnected, the same are, therefore, heard together.

For the sake of brevity the Arbitration and Conciliation Act, 1996

of India and, the Arbitration and Conciliation Act, 1996 of England would be

referred to as the “Indian Arbitration Act” and “English Arbitration Act”.

FACTUAL MATRIX

3 The Petitioner No.1 herein carries on business of manufacturing

and marketing of the Wind Turbine Generators (WTG's) and components in

India, and is also in the business of setting up wind power projects on turnkey

basis.

wps­7804.09 & 7636.09

The Petitioner Nos.2 and 3 herein are the Directors of the Petitioner

No.1 and are arrayed as the Plaintiff Nos.1 to 3 in the Suit in question.

The

Respondent No.1­Enercon GmbH is a Company incorporated under the laws of

Germany and is having its registered office at Aurich, Germany. One Dr.Alloys

Wobben is a Director of the Respondent No.1. The Respondent No.2 – Wobben

Properties GmbH is a Company incorporated under the laws of Germany and is

also having its registered office at Aurich, Germany.

The Respondent No.1 is

engaged in mechanical engineering and possesses technical knowledge and

equipment for manufacturing and marketing the Wind Turbine Generators and

components.

The Respondent No.1 carries on the said business all over the

world. The Respondent Nos.1 and 2 are arrayed as the Defendant Nos.1 and 2

to the Suit in question.

The Petitioners and the Respondents are running the

joint venture business through the Petitioner No.1­Company at Daman in India.

Accordingly the parties have entered into various Agreements in furtherance of

the said business.

The Petitioner Nos.2 and 3, on 12/01/1994 entered into a

Shareholding Agreement. In terms of the said Agreement the Respondent No.1

was holding 51% shares of the Petitioner No.1­Company, and the Petitioner

Nos.2 and 3 were holding 49% shares. The said Shareholding Agreement was

subsequently amended by two Supplementary Shareholding Agreements dated

19/05/1998

and

19/05/2000.

Pursuant

to

the

said

Supplementary

Shareholding Agreements, the Respondent No.1 became a 56% shareholder in

the Petitioner No.1­Company whilst the shareholding of the Petitioner Nos.2

and 3 was reduced to 44%.

wps­7804.09 & 7636.09

On the same day i.e. on 12/01/1994, the

Petitioner No.1 and the Respondent No.1 entered into a Technical Know­How

Agreement by which the Respondent No.1 had agreed to transfer to the

Petitioner No.1 the right and the technology to use the technical know­how for

the manufacture of E­26 Wind Turbine Generators specified therein and their

components. A Supplementary Technical Know­How Agreement amending the

earlier Technical Know­How Agreement was executed on 19/05/2000 by

which a further licence to manufacture the E­30 and E­40 Wind Turbine

Generators was conferred by the Respondent No.1 to the Petitioners. Under the

terms of the Technical Know­How Agreement, the Respondent No.1 has to

continuously supply special components to the Petitioner No.1. In April 2004

the period of the Technical Know­How Agreement expired, however, the

Respondent No.1 continued to supply the Wind Turbine Generators and

components.

The Respondent No.2 has the patent of the said windmill

technology; whereas the Respondent No.1 is a licensor to supply the said

windmill technology, and the Petitioners are the licensees to use the said

windmill technology. It appears that from the year 2000 onwards and till date

the Petitioners are manufacturing the said Wind Turbine Generators and

continue to use the patents that were licensed by these agreements. On

29/09/2006 the Petitioners and the Respondent No.1 entered into what is

known as the “Agreed Principles” for the use and supply of the windmill

technology.

Under

the

said

Agreed

Principles

the

Petitioners

and

the

wps­7804.09 & 7636.09

Respondents agreed to enter into what is known as the Intellectual Property

License Agreement (“IPLA” for short), which is the subject matter of the Suit in

question.

It is the case of the Petitioners that the Agreed Principles are the

binding

principles

agreed

between

the

parties,

and

which

records

an

agreement that all definitive agreements between the parties that were to be

prepared and finally executed would be on the basis of the binding principles

agreed therein.

One of the agreements contemplated by the said Agreed

Principles was the IPLA. The Petitioner Nos.2 and 3 are the parties to the IPLA.

It seems that the Petitioner No.2 has signed the IPLA on behalf of the Mehra

family.

At the time of the signing of the IPLA the Petitioners were already

aware of the five models of the WTG's being E­26, E­30, E­40, E­48 and E­53.

It is the case of the Petitioners that the IPLA was merely a draft of the oral

terms and not a concluded contract between the parties. It was their case that

the said document was an unincorporated and inchoate document and was not

a concluded contract. It appears that one Mr.Ketwigg , the Managing Director

of Respondent No.1 in a letter dated 02/10/2006, addressed to Petitioner No.2

stated therein that all the necessary contracts between the parties should be

completed by 19/10/2006. Further in the e­mail dated 04/10/2006 Ms.Nicole

Fritsch

of the Respondent No.1 stated that she

would try her

best to

prepare/adapt

19/10/2006.

the

agreements

according

to

the

Agreed

Principles

by

It is the case of the Petitioners that to their utter shock and

surprise, on 18/10/2006 Ms. Nicole Fritsch of the Respondent No.1 totally

wps­7804.09 & 7636.09

turned around and addressed a letter to the Petitioner No.2 falsely alleging that

the draft IPLA which was signed on 29/09/2006 was a final document.

Thereafter correspondence ensued between the parties and a contentious issue

arose as to whether the IPLA can be called final or not.

Thereafter spate of

litigation ensued between the parties. This was as a result of the Respondent

No.1 stopping supplies which resulted in the Petitioner Nos.2 and 3 filing a

derivative Suit on the Original Side of this Court being Short Cause Suit

No.2667 of 2007 seeking resumption of supplies. This Court has, by an interim

order dated 31/10/2007 without prejudice to the individual contentions of the

parties, directed resumption of supplies by the Respondent No.1 to the

Petitioner No.1 until further orders of this Court.

In view of the fact that the

said order was not complied with by the Respondent No.1, there is a Contempt

Petition which has been filed by the Petitioners, which is pending.

4 The Respondent No.1 has also filed a Company Petition being

No.121 of 2007 against the Petitioners before the Company Law Board,

Principal Bench, New Delhi some time in August 2007.

The said Petition has

been filed under Sections 397 and 398 of the Companies Act.

The reliefs

sought in the said Company Petition inter alia included removal of the

Petitioner Nos.2 and 3 as Directors of Petitioner No.1, transfer of the Mehras

shareholding in the Petitioner No.1 as well as associate and subsidiary

companies

of

Petitioner

No.1

to

Respondent

No.1,

and

investigation

to

wps­7804.09 & 7636.09

ascertain the conduct of Mehras in dealing with properties, monies and

management of the Petitioner No.1.

In view of the non­compliance of the

order passed by the Company Law Board, contempt proceedings have been

initiated by the Petitioners against Dr.Wobben and Mr.Ketwigg. The Mehras i.e.

the Petitioner Nos.2 and 3 filed Company Petition No.74 of 2008 against the

Respondent No.1, Dr.Wobben and Mr. H D Ketwigg alleging oppression and

mismanagement by the Respondents.

The said Petition was also filed under

Sections 397 and 398 of the Companies Act.

5 The Respondent No.1 had filed a Petition against the Petitioner

No.1 and others alleging that Petitioner No.1 had been supplying Wind Turbine

Generators to third parties in Germany thereby infringing the trademarks

belonging to Respondent No.1. The same was filed in the Hamburg District

Court which Court had initially granted an ex­parte ad­interim order dated

17/09/2007 restraining the Petitioner No.1 from effecting supplies to such

third parties in Germany. The Hamburg District Court thereafter dismissed the

claim of the Respondent No.1 on the ground that there was no evidence to

suggest Petitioner No.1's involvement in the matter.

The aforesaid facts

therefore disclose the diverse litigation in which the parties are involved.

6 The Respondent No.1 addressed a letter dated 13/03/2008 stating

therein that it was desirous of having all disputes relating to the IPLA settled,

wps­7804.09 & 7636.09

including whether there is a binding agreement between Petitioner No.1 and

Respondent Nos.1 and 2 in respect of the IPLA.

The Respondents also

informed the Petitioners that it had appointed Mr. V. V. Veeder QC as its

nominee arbitrator and called upon the Petitioners including Petitioner Nos.2

and 3 to nominate their arbitrator in accordance with the IPLA, which

according to the Respondent Nos.1 and 2 was a concluded contract.

The

Petitioner No.2, on behalf of the Petitioners, replied to the said letter by his

letter dated 31/03/2008 stating therein that since the IPLA was not a

concluded contract, there was no question of a valid Arbitration Agreement

between the parties and as such, there was no question of appointing any

arbitrator in the matter.

It was further stated that in any event, the past

conduct and attitude of the Respondent No.1 established that it had waived the

Arbitration Agreement.

The UK Solicitors of the Respondent Nos.1 and 2

addressed a letter to the Petitioners dated 02/04/2008 stating therein that in

the event the Petitioners did not nominate their arbitrator within seven days of

the receipt of the said letter, the Respondent Nos.1 and 2 shall proceed under

the English Arbitration Act, 1996 to appoint their nominee arbitrator Mr. V. V.

Veeder QC, as the sole arbitrator. The said letter was received by the Petitioner

No.1 in Daman on 03/04/2008, along with the said letter was annexed

`Arbitration Claim Form' dated 27/03/2008 issued by the Respondent Nos.1

and 2 seeking several declaratory reliefs from the English Court in relation to

the IPLA which according to the Respondent Nos.1 and 2 is a concluded

contract.

wps­7804.09 & 7636.09

The said declaratory reliefs inter­alia include injunctive relief from

the English Court to restrain the Petitioner Nos.2 and 3 from continuing with

independent proceedings before this Court, i.e. the Suit which was already

filed by the Petitioner Nos.2 and 3 in a derivative capacity as shareholders of

the Petitioner No.1.

The said 'Arbitration Claim Form', which had been filed

before the English Court, was also served upon the Petitioner No.1 in Daman

04/04/2008 and seems to have triggered off the filing of the Regular Civil Suit

No.9 of 2008 before the learned Civil Judge, Senior Division, Daman on

08/04/2008 inter­alia for the following reliefs viz. for a declaration that the

IPLA was not a concluded contract and correspondingly that there was no

Arbitration Agreement between the parties; for a declaration that the initiation

of proceedings before the English Court by the Respondents was void and

illegal; and for a permanent injunction restraining the Respondents from

continuing with the proceedings before the English Court. In the said Suit the

Petitioners moved an Application for temporary injunction and for other

interim reliefs.

The Trial Court, it seems, passed a status quo order on

08/04/2008 directing the Respondents to maintain status quo as regards the

proceedings initiated before the English Court till their appearance in the Suit

and to show cause why an interim order should not be passed against them.

The Respondents appeared in the Suit and filed an Application under Section

45 of the Indian Arbitration Act contending therein that the Suit before the

Trial Court ought to be referred to arbitration pursuant to the arbitration clause

contained in the IPLA.

wps­7804.09 & 7636.09

The Respondents also sought a vacation of the status

quo order.

It appears that in the interregnum on 11/04/2008, the Petitioner

No.1 had appointed Mr. Justice B. P. Jeevan Reddy (Retd.) as its arbitrator.

This, according to it, was necessitated in view of the threats of the Respondents

that the arbitrator appointed by them could be nominated as a sole arbitrator

under the English Law, in the event the Petitioner No.1 failed to nominate its

arbitrator. It seems that the arbitrator appointed by the Petitioners by his letter

dated 24/04/2008 stated that there were inherent defects in the arbitration

clause contained in the IPLA and therefore the same was unworkable and

expressed

the

inability

of

the

arbitrators

to

appoint

a

third

arbitrator.

Thereafter a joint letter was addressed which is dated 05/08/2008 by both the

arbitrators i.e. Mr. V. V. Veeder QC and Mr. Justice B. P. Jeevan Reddy (Retd.)

asking the parties to take necessary steps as may be advised.

7 The Plaintiffs i.e. the Petitioners herein had moved an application

for temporary injunction ex­parte in the said suit, wherein the Trial Court

directed the parties to maintain status quo. The Trial Court had granted an

exparte injunction restraining the Defendants i.e. the Respondents herein from

proceeding with the proceedings they had filed in the English Court.

The

Application for interim reliefs and the Application filed by the Respondents

under Section 45 of the said Act was heard by the Trial Court, and by the order

dated 09/01/2009, the learned Civil Judge, Senior Division, Daman, allowed

wps­7804.09 & 7636.09

the said Application for interim reliefs filed by the Petitioners, and rejected the

Application for referring the parties to arbitration filed under Section 45 of the

said Act by the Respondents, i.e. the Trial Court confirmed the ex­parte ad

interim order of status quo granted by it on 8/4/2008 till decision of the suit.

The Defendants i.e. the Respondents herein were restrained not to constrain

the Plaintiffs i.e. the Petitioners herein to go for arbitration till the final

decision of the suit by invoking the IPLA.

8 The gist of the reasoning of the Trial Court was to the effect that

the document in question i.e. the IPLA was not on a stamp paper and it does

not bear the signature and seal of the Public Office in authentication that the

document is enforceable in law; that the Plaintiff No.2 had signed the

document under the influence of Dr.Alloys Wobben. The Trial Court, on the

basis of the material on record, recorded a finding that the IPLA was not a

concluded contract for want of free consent, and was executed due to undue

influence, fraud, mis­representation and mistake, that the Plaintiffs would

suffer heavy economic loss if the arbitration is held at London. In so far as the

jurisdictional aspect is concerned, the Trial Court recorded a finding that the

Court at Daman

would have jurisdiction as the Plaintiff No.1 was a joint

venture between the Plaintiff No.1 and the Defendants which had its factory at

Daman.

wps­7804.09 & 7636.09

9 Aggrieved by the order dated 09/01/2009 passed by the Trial

Court, the Defendants i.e. the Respondents herein filed four Appeals which

were Civil Misc. Appeal Nos.1/2009, 2/2009, 3/2009 and 4/2009.

The said

Appeals were filed by the Respondents covering two aspects as to the grant of

the anti Suit injunction, and as to the rejection of the Application filed by them

under Section 45 of the said Act. The said Appeals were heard by the learned

Principal District Judge, Daman, who by the order dated 27/08/2009 allowed

the said four Appeals, and consequently set aside the orders passed by the Trial

Court granting the anti Suit injunction, and referred the parties to arbitration

by allowing the Application filed under Section 45 of the said Act.

However,

the Lower Appellate Court has directed the Trial Court to first decide the

jurisdiction point before proceeding with the Suit. The Lower Appellate Court

has inter alia considered the enforceability of the Arbitration Agreement,

the

case of the Plaintiffs that the IPLA was not a concluded contract, which the

Plaintiffs had sought to support by both intrinsic as well as extrinsic material,

and also the case of the Plaintiffs that the said Clause­18.3 was unworkable in

view of the methodology mentioned therein for the appointment of the

arbitrators.

The Lower Appellate Court as can be seen from its order has on

the basis of the fact that the IPLA was signed by the Plaintiff No.2, reached a

conclusion that there was an agreement between the parties to refer the

disputes to arbitration which intention of the parties, according to the Lower

wps­7804.09 & 7636.09

Appellate Court, was required to be given effect to. The Lower Appellate Court

held that assuming that there was some defect in the methodology for

appointment of the arbitrators, that would not come in the way of enforcement

of the Arbitration Agreement.

The Lower Appellate Court held that since the

parties had agreed to London being the seat of arbitration, the Plaintiffs could

not make a grievance as regards the jurisdiction of the English Courts.

The

Lower Appellate Court has by its order dated 27/08/2009, as indicated above,

has allowed the said four Appeals.

10 It is the order passed by the Lower Appellate Court in the said four

Appeals which is the subject matter of the above two Petitions.

In so far as

Writ Petition No.7804 of 2009 is concerned, the same challenges the order to

the extent of referring the parties to arbitration; whereas Writ Petition No.7636

of 2009 concerns the challenge to the setting aside of the anti Suit injunction.

11 SUBMISSIONS ON BEHALF OF THE PETITIONERS BY THE

LEARNED SENIOR COUNSEL DR. VEERENDRA TULZAPURKAR IN WRIT PETITION NO.7804 OF 2009:­

i] That the Lower Appellate Court failed to decide the important

issue, as to whether the IPLA was a concluded contract and that

there is a valid subsisting Arbitration Agreement.

wps­7804.09 & 7636.09

ii] Since the Lower Appellate Court has failed to decide the very

important jurisdictional fact, namely the existence of a concluded

contract before referring the parties to arbitration, the exercise of

the Writ Jurisdiction of this Court under Article 227 of the

Constitution of India is warranted.

The learned Senior Counsel

relied upon the Judgments of the Apex Court reported in (2006)

3 SCC 312 in the matter of Kishore Kumar Khaitan and Anr.

V/s. Praveen Kumar Singh and; (2008) 14 SCC 58 in the matter

of Ramesh Chandra Sankala V/s. Vikram Cement.

iii] That the IPLA is not a concluded contract and is only a draft. The

learned Senior Counsel sought to buttress the said submission by

referring to the clauses mentioned in the IPLA, regarding the grant

of licences, finance, tenure of the IPLA;

iv] That the patents in respect of which the licences were to be given

to the Petitioners were not finalized, the tenure of the IPLA was

also indefinite, and since the royalty is to be paid on the patents,

and since the fixation of the royalty was also not finalized; the

IPLA could not be said to be a concluded contract.

wps­7804.09 & 7636.09

v] That assuming the IPLA is a concluded contract, the arbitration

clause 18.1 is vague and is unimplementable in view of the fact

that the arbitrator of the licensor is to don two hats, two roles, one

being the arbitrator of the licensor and second being the presiding

arbitrator;

vi] That the arbitration clause is unworkable is borne out by the fact

that both the arbitrators i.e. Mr V V Veeder, QC and Mr.Justice B P

Jeevan Reddy (Retd.) have expressed that the arbitration clause as

it stands is unworkable and would require clarification.

vii] That no steps were taken for registration of the patents as required

by Section 69 of the Patents Act, as both the parties treated it as

not a concluded contract.

viii] That the IPLA cannot be said to be a concluded contract in view of

the fact that as per the Agreed Principles all the four agreements

mentioned therein were to be executed at one time and the IPLA

therefore could be said to be finalized only after the said four

documents which were inclusive of the IPLA were executed.

ix] The

extrinsic

evidence

which

is

in

the

nature

of

the

wps­7804.09 & 7636.09

correspondence exchanged between the parties shows that the

IPLA was not a concluded contract.

The learned Senior Counsel

would rely upon the letters dated 11/3/2006, 10/4/2006, as also

the letters date 30/09/2006, 2/10/2006 and 24/11/2006 which

are post the signing of the IPLA on 29/09/2006 which according

to the learned Senior Counsel ex­facie point out that the IPLA was

not a concluded contract, and that it was only a draft;

x] That since the main contract cannot be said to have come into

existence,

therefore, the clause providing for arbitration has also

necessary to be held as not having come in existence. The learned

Senior Counsel would rely upon the judgment of the Apex Court

reported in (1960) 1 SCR 493 in the matter of Union of India

v/s. Kishorilal Gupta and Brothers and, two Division Bench

Judgments of this Court reported in 2010 (2) Company Law

Reporter 393 in the matter of Nasir Husain Films (P) Ltd. v/s

Saregama India Ltd and anr.; and 2008 (4) Arbitration Law

Reporter 179 in the matter of Oberoi Construction P. Ltd v/s

Worli Shivshahi Co­op Hsg. Society Ltd. ;

xi] That since the underlying contract has not come into existence, in

view thereof the arbitration clause in the contract is inoperative.

wps­7804.09 & 7636.09

The learned Senior Counsel would rely upon the judgment of the

Apex Court reported in (1996) 2 SCC 667 in the matter of U.P.

Rajkiya Nirman Nigam Ltd Vs. Indure Pvt. Ltd. & ors.

xii] That the IPLA is not a concluded contract, since the subject matter

being absent as the portfolio regarding the patents was not

finalized.

The

parties

were

also

not

ad­idem

as

regards

commencement of the IPLA and its duration. The IPLA is therefore

vague, ambiguous and uncertain, and is therefore, void under

Section 29 of the Indian Contract Act. The learned Senior Counsel

would place reliance on the judgment of a Division Bench of the

Karnataka High Court reported in AIR 1966 Mysore 118 in the

matter

of

Coffee

Board,

Bangalore

v/s.

Janab

Dada

Haji

Ibrahim Halari, the judgment of the Apex Court reported in

(1990) 3 SCC 1 in the matter of Mayawanti v/s. Kaushalya

Devi; reported in (2004) 1 SCC 252 in the matter of United Bank

of India v/s Ramdas Mahadeo Prashad & others; reported in

AIR 1949 Nagpur 286 in the matter of The Central Bank,

Yeotmal Ltd. V/s Vyankatesh Bapuji; and reported in (1976) 1

WLR 591 in the matter of Bushwall Properties Ltd v/s Vortex

Properties Ltd.

wps­7804.09 & 7636.09

Since there was uncertainty about the duration of the IPLA, the

said agreement was void on account of uncertainty.

Since the

portfolio of the patents was not finalized, there was uncertainty as

regards the patents and their duration, and since the duration of

the IPLA was contingent upon, the expiry of the last patents the

duration of the IPLA was not certain. The learned Senior Counsel

in support of the said contention relied upon the judgment of the

Apex Court reported in (2008) 5 SCC 58 in the matter of Vimlesh

Kumari Kulshrestha v/s. Sambhajirao and anr.

xiii] That the extrinsic evidence which has been referred to in the

Application for temporary injunction proves that the said IPLA was

not a concluded contract.

The reply filed by the Respondents to

the said Application for temporary injunction was contradictory to

their letter dated 24/11/2006 wherein they had agreed that there

was some uncertainty and that they would try to resolve it by

having a in­house meeting.

xiv] That there can be no arbitration if there is no concluded contract.

Since in the instant case the IPLA is not a concluded contract, the

parties therefore cannot be referred to arbitration.

The learned

Senior Counsel, in support of the said submission,

sought to rely

wps­7804.09 & 7636.09

upon the following judgments of the Apex Court reported in (1)

(2006) 1 SCC 751, Dresser Rand S.A. v/s. Bindal Agro Chem

Ltd and K. G. Khosla Compressors Ltd.; (2) (2010) 5 SCC 425,

Andhra Pradesh Tourism Development Corporation Ltd & Anr.

V/s. Pampa Hotels Ltd.;

(3) AIR 1962 SC 378, Jawahar Lal

Burman Vs. Union of India

and (4)

(1999)

1

SCC

9

M/s.

Rickmers Verwaltung GmbH v/s. The Indian Oil Corporation

Ltd.

xv] That the judgment in Shin­Etsu Chemical Co. Ltd. v/s. Aksh

Optifibre Ltd and anr cannot be placed reliance upon as the

proposition laid down by Justice B.N.Srikrishna that the Court

under Section 45 of the Indian Arbitration Act has only to take a

prima facie view, cannot be said to be a majority view, in view of

the discordant note sounded by Justice D.M.Dharmadhikari in Para

112 of the said judgment.

xvi] That in the facts and circumstances of the case the exercise of writ

jurisdiction under Article 227 of the Constitution of India is

warranted.

12

wps­7804.09 & 7636.09

SUBMISSIONS ON BEHALF OF THE RESPONDENTS BY THE

LEARNED SENIOR COUNSEL SHRI S U KAMDAR IN WRIT

PETITION NO.7804 OF 2009 :­

[a]

That exercise of the Writ Jurisdiction under Article 227 of the

Constitution of India is not warranted in the facts of the present

case; as the view taken by the Lower Appellate Court on the aspect

of the parties being referred to arbitration, cannot be said to be a

view which could not be taken in the facts and circumstances of

 

the case.

[b]

That the Petitioners have not pointed out as to how there has been

a

failure to exercise the jurisdiction or the Lower Appellate court

has exceeded its jurisdiction in passing the impugned order which

is

a pre­requisite to warrant the exercise of the writ jurisdiction;

[c]

That the Lower Appellate court has passed the impugned order

considering the relevant material on record, which the Trial Court

had failed to do, and therefore it cannot be said that the order

passed by the Lower Appellate Court directing the parties to

arbitration is perverse. In support of the said submission, the

learned Senior Counsel relied upon the judgments of the Apex

Court reported in (1) (2001) 8 SCC 97, Estralla Rubber v/s Dass

Estate (P) Ltd.

(2)

(2003) 6 SCC 641, State Through Special

wps­7804.09 & 7636.09

Cell, New Delhi v/s. Navjot Sandhu alias Afshan Guru and ors.

and (3) (2010) 9 SCC 385, Jai Singh and ors v/s. Municipal

Corporation of Delhi and ors.

In so far as aspect of perversity is concerned, the learned Senior

Counsel relied upon the judgment of the Apex Court reported in

(2009) 10 SCC 206 in the matter of Arulvelu and anr v/s. State

Represented by the Public Prosecutor and anr.

The said judgments inter alia lay down the scope of interference

under Article 227 of the Constitution of India. The said judgments

inter alia lay down that the power under Article 227 of the

Constitution of India is to be exercised to keep the inferior Courts

within their bounds. It is not in the nature of an appellate power

and cannot be exercised for correcting a mere error. The said

judgments

lay

down

that

if

there

is

a

failure

to

exercise

jurisdiction or jurisdiction is exercised in excess of the powers or

the findings recorded are so perverse that no reasonable man

could have arrived at such a finding that the exercise of the writ

jurisdiction under Article 227 of the Constitution of India is

warranted.

wps­7804.09 & 7636.09

[d]

That the Court whilst considering the application under section 45

has only to arrive at a prima facie view as regards the existence of

the Arbitration Agreement and the arbitrability of the dispute and

is not concerned with any dispute as regards the underlying

contract. The learned Senior Counsel for the said purpose relied

upon the judgment of the Apex Court reported in (2005) 7 SCC

234 in the matter of Shin­Etsu Chemical Co. Ltd. v/s. Aksh

Optifibre Ltd and anr.

[e]

For the proposition that the Court has to only arrive at a prima

facie view as regards Arbitration Agreement and the arbitrability of

the dispute.

The learned Senior Counsel for the Respondents,

apart from the judgment of the Apex Court in Shin­Etsu's case

(supra) relied upon another judgment of the Apex Court reported

in (2009) 2 SCC 134 in the matter of Shakti Bhog Foods Limited

V/s Kola Shipping Limited and the Division Bench Judgment of

this Court reported in 2007(5) Bom.C.R. 227 in the matter of

Caribjet Inc v/s Air India Limited and the judgment of a learned

Single Judge of this Court reported in 2012(3) Bom. C.R. 36 in

the matter of Olive Healthcare v/s. Lannett Company Inc. & anr.

wps­7804.09 & 7636.09

[f]

That the documents in question unmistakably lead to a conclusion

that the IPLA was a concluded contract. The learned Senior

Counsel sought to rely upon the correspondence between the

parties prior to the agreement being executed on 26/9/2006.

The

said correspondence starts

with the e­mail dated 25/6/2006 and

the e­mail and letters exchanged thereafter;

[g]

That the fact that IPLA is a concluded contract is borne out by the

fact that the parties have signed the same, and therefore, in terms

of the requirements as mentioned in Section 44 of the said Act, the

Lower Appellate Court was right

in referring the parties to

arbitration.

[h]

That all along it has been the stand of the Respondents that the

Petitioners have executed the IPLA which was not disputed by the

Petitioners herein. The dispute started on account of the payment

in respect of the equity shares which were to be purchased by the

Respondents. The said fact is borne out by the letter dated 3 rd

November 2006 of the Petitioners and it is only thereafter that the

Petitioners started raising a dispute as regards certain aspects of

the IPLA;

wps­7804.09 & 7636.09

[i]

That

the

aspect

of

the

main/underlying

contract

and

the

Arbitration Agreement are separable. In a given case, even if the

main contract can be said to be suffering from some infirmity but

that would not have any effect on the Arbitration Agreement. The

Court has

only to

prima facie

see whether

there is

a valid

Arbitration Agreement.

 

[j]

That the conclusivity that is required to be seen is only as regards

the Arbitration Agreement. The requirement for which finds a

place in Section 44 of the Indian Arbitration Act. The requirement

being that the Arbitration Agreement has to be in writing and

signed by the parties.

In the instant case both the conditions are

satisfied.

The learned Senior Counsel for the Respondents in

support of the said submission relied upon the judgment of the

Apex Court reported in (2012) 2 SCC 93 in the matter of Reva

Electric Car Company Private Limited v/s. Green Mobil and

(2008) 14 SCC 240 in the matter of Great Offshore Limited v/s.

Iranian Offshore Engineering and Construction Company.

 

[k]

That the facts in Kishorilal Gupta's case are clearly distinguishable

from the facts of the present case, as in Kishorilal Gupta's case the

contract itself was superseded and therefore in the said fact

wps­7804.09 & 7636.09

situation the Court held that no reliance could be placed on the

arbitration clause in the superseded contract.

For the said

purpose, the learned Senior Counsel relied upon the judgment of

the Apex Court reported in (2009) 10 SCC 103 in the matter of

Branch Manager, Magma Leasing and Finance Limited and Anr.

v/s. Potluri Madhavilata and anr. wherein the judgment in

Kishorilal Gupta has been distinguished by the Apex Court.

[l]

That whilst considering the application under Section 45 of the

said Act there can only be a prima facie examination of the

material on record so as to arrive at a conclusion whether there is

an Arbitration Agreement between the parties.

In so far as other

aspects are concerned, the issue can be raised before the Arbitral

Tribunal.

In support of the said submission, the learned Senior

Counsel for the Respondents relied upon the judgment of the Apex

Court reported in (2007) 7 SCC 120 in the matter of Aurohill

Global Commodities Ltd. v/s. Maharashtra STC Ltd. and (2009)

2 SCC 134 in the matter of Shakti Bhog Foods Limited v/s. Kola

Shipping Limited.

[m]

That the infirmity if any in the main contract would not impinge

upon the Arbitration Agreement encompassed in the said contract.

wps­7804.09 & 7636.09

The position in law in that respect in India as well as in England is

the same. Hence the contention of the learned Senior Counsel for

the Petitioners that in view of the fact that the annexure to the

IPLA or other grounds on which the Petitioners contend that the

IPLA was not a concluded contract would have no bearing on the

Arbitration Agreement as it is well settled that the Arbitration

Agreement stands apart from the main contract. In support of the

said submission the learned Senior Counsel relied upon the

English judgment reported in (2007) UKHL 40 in the matter of

Premium Nafta Products Limited (20 th Defendant) and others

v/s. Fili Shipping Company Limited (14 th Claimant) and others

and also relied upon the judgment of a learned Single Judge of

this Court reported in

2003

CLC 601

in the matter

of

GTC

Limited v/s Royal Consulting RV and anr.

[n] That merely because there is a challenge to the main underlying

contract, the said fact would not impinge upon the validity of the

Arbitration Agreement.

The learned Senior Counsel for the

Respondents relied upon the judgment of the US Federal Court

reported in 546 US 440 in the matter of Buckeye Check Cashing

Inc. v. Cardegna. The said view of the US Federal Court has been

affirmed by the Apex Court in the judgment reported in (2009) 2

SCC 494

wps­7804.09 & 7636.09

in the matter of P. Manohar Reddy & Bros. v/s.

Maharashtra Krishna Valley Development Corporation and

others and para 28 thereof.

[o]

That it is only when the main underlying contract is vitiated on

account of fraud, coercion, etc, that the Arbitration Agreement can

be said to be affected, such is not the case in the instant matter.

(p)

That it is well settled even if there is any uncertainty or ambiguity

in the underlying contract, it can be looked into and if necessary

corrected by relying on extrinsic evidence.

The learned Senior

Counsel in support of the said contention sought to place reliance

on Paras 11­123, 12­117, 12­118 and 13­008 from the learned

Author Chitty on Contract.

[q]

That there is no uncertainty as regards the terms of the underlying

contract.

The date of execution of the IPLA is certain and is

referable to page 46. The date 17/09/2006 appearing on IPLA is

referable to the letter dated 17/09/2006 of Yogesh Mehra by

which he has communicated his inability to remain present in

Aurich­Germany on the said day;

wps­7804.09 & 7636.09

[r]

That

the

contention

of

the

learned

Senior

Counsel

for

the

Petitioners that the agreement is not a concluded contract as it

does not contain the annexure in respect of the patents which have

been granted to the Petitioners is only a bogey raised on behalf of

the Petitioners, as the Petitioners are using the patents from 1994

to 2004 and two more patents were used since 2004, the Technical

Know­How Agreement and Supplemental Technical Know­How

Agreement

spelt out which patents have been given to the

Petitioners.

[s]

That all questions relating to the agreement in any event have to

be decided by the Arbitral Tribunal. That since the agreement has

been signed, the requirement under Section 7 of the Indian

Arbitration Act is satisfied.

For the said purpose the learned

Senior Counsel relied upon the judgment of a learned Single Judge

of this Court reported in AIR 2000 Bombay 108 in the matter of

Keval Krishna Balakram Hitkari v/s Anil Keval Hitkari and

others and the judgment of the Apex court reported in (1995) 6

SCC

571

in

the

matter

of

J.K.Jain and others v/s. Delhi

Development Authority and others.

That in so far as the issue as to whether the contract is concluded

wps­7804.09 & 7636.09

or not, the signing of the contract is one of the defining aspects

which test is laid down by the Apex Court in the judgment

reported in (2010) 1 SCC 83 in the matter of Grasim Industries

Limited and Anr v/s. Agarwal Steel

[t]

That

the

contention

of

the

learned

Senior

Counsel

for

the

Petitioners that the judgment of the Lower Appellate Court is

bereft of any findings is not correct. Findings have been recorded

on the basis that the parties have signed the IPLA as also on the

basis of the correspondence entered into between the parties

which can be seen from the impugned order.

 

[u]

That even if a part of the arbitration clause is unworkable, the

same is severable as in the instant case the grievance of the

Petitioners is only as regards the number of arbitrators who are to

be appointed. The said dispute can therefore be said to be a

dispute only as regards the machinery provision but not as regards

the agreement between the parties to go for arbitration.

 

[v]

That even if part of the agreement is bad, the part which can be

sustained will

have to be enforced. The learned Senior Counsel

relied upon the judgment of the Apex Court reported in AIR 1997

wps­7804.09 & 7636.09

SC 605 in the matter of M.M.T.C. Limited v/s. Sterlite Industries

(India) Ltd. which is followed in (2002) 3 SCC 572 in the matter

of Narayan Prasad Lohia v/s. Nikunj Kumar Lohia and others.

[w]

That the letter of the arbitrator appointed by the Petitioners

cannot be conclusive of the fact that the Arbitration Agreement is

not workable. The correspondence preceding the said letter does

not indicate that the said Arbitration Agreement is unworkable.

[x]

That the defining aspect as it were, is the intention of the parties

to go for arbitration which is clearly manifest. For the said purpose

the learned counsel relied upon the judgment of the Allahabad

High Court reported in AIR 1954 Allahabad 750 in the matter of

A H Bhiwindiwala and Co. v/s. R B Lakshman Dass Mohan Lal

and Sons Ltd and anr. , and the judgment of the Apex Court

reported

in

(2009)

4

SCC

495

in

the

matter

of

Nandan

Biomatrix Limited v/s. D 1 Oils limited.

 

(y)

That there is no merit in the contention of the learned counsel for

the

Petitioners

that

the

second

relief

sought

in

the

suit

of

injunction cannot go to arbitration. That the said relief can only

said to be referable to the

IPLA as it is the contention of

the

wps­7804.09 & 7636.09

learned Senior Counsel that since the IPLA is not a concluded

contract, the Arbitration Agreement is not enforceable. The test

would

therefore

be

whether

the

Arbitration

Agreement

as

contained in IPLA can be enforced. For the said purpose the

learned Senior Counsel relied upon the judgment of the Apex

Court reported in (2006) 7 SCC 275 in the matter of Rashtriya

Ispat Nigam Ltd v/s. Verma Transport Co as also the judgment

reported in (2008) 16 SCC 774 in the matter of Everest Holding

Limited v/s. Syam Kumar Shrivastava and others.

[z]

The learned Senior Counsel sought to distinguish the judgments

cited by the learned Senior Counsel for the Petitioners in the

context of the facts of the present case. The learned Senior

Counsel for the Respondents would contend that in the context of

the facts of the cases in the judgments cited by the learned Senior

Counsel for the Petitioners that the Apex Court has held that the

parties were not ad­idem, and therefore, the contract was not

concluded, but the same is not the case in the instant matter.

CONSIDERATION ­ WRIT PETITION NO.7804 of 2009

13

Heard the learned counsel for the parties and also perused the

Written Submissions filed on behalf of the parties.

wps­7804.09 & 7636.09

14 Since clause (18) of the IPLA is at the fulcrum of the controversy

involved in both the Petitions, it would be apposite to reproduce sub­clauses

18.1 to 18.3 of clause 18 of the IPLA.

(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 of alleged breach of this Agreement, the parties shall, in the first instance attempt to resolve such dispute, controversy or difference through mutual consultation. If the dispute, controversy or difference is not resolved through mutual consultation within 30 days after commencement of discussions or such longer period as the parties may agree in writing, any party may refer dispute(s) controversy(ies) or difference(s) for resolution to an arbitral tribunal to consist of three (3) arbitrators of whom one will be appointed by each of the Licensor and the licensee and the arbitrator appointed by Licensor shall also act aas the presiding arbitrator.

18.2) The arbitrators shall have powers to award and/or enforce specific performance. The award of the arbitrators shall be final and binding on the parties. In order to preserve its rights and remedies, either party may seek preliminary injunctive relief or other temporary relief from any court of competent jurisdiction or from the arbitration tribunal pending the final decision or award of the arbitrator(s). Any such application to a court of competent jurisdiction for the purposes of seeking injunctive relief shall not be deemed incompatible with this agreement to arbitrate or as a waiver of this Agreement to arbitrate.

18.3) All proceedings in such arbitration shall be conducted in English. The venue of the arbitration proceedings shall be London. The arbitrators may

wps­7804.09 & 7636.09

(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 the Indian Arbitration and Conciliation Act, 1996 shall apply.

15 It would also be apposite to reproduce the relevant provisions of

the Indian Arbitration and Conciliation Act, 1996 namely Sections 7, 44 and 45

(7) Arbitration agreement – (1) in this part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2)An arbitration agreement may be in the form of

an arbitration clause in a contract or in the form of a separate agreement

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in ­

(a)

a document signed by the parties;

(b)

an exchange of letters, telex, telegrams or

other means of telecommunication which provide a record of the agreement; or

(c) an exchange of statements of claim and defence

in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document

containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

(44) Definition – In this Chapter, unless the context otherwise requires, “foreign award” means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11 th day of October, 1960 ­

wps­7804.09 & 7636.09

(a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and (b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.

(45) Power of Judicial authority to refer parties to arbitration – Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908) a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

16 As can be seen, Section 45 provides that an application may be

made to a judicial authority to refer any proceeding before it to Arbitration,

where the parties have entered into an Arbitration Agreement as contemplated

under Section 44 of the said Act. It further provides that such reference must

be made by the Court unless it finds that the Agreement is null and void,

inoperative or incapable of being performed. The reference therefore in

Sections

44

and

45

is

to

an

Arbitration

Agreement.

If

the

Arbitration

Agreement is in the form of a clause in the main contract, then reference in

Sections 44 and 45 would be to that clause which is an Arbitration Agreement

contained as and by way of a clause in the main contract.

wps­7804.09 & 7636.09

17 In so far as the scope of the inquiry under Section 45 of the Indian

Arbitration Act is concerned, the same is well settled by the authoritative

pronouncement of the Apex Court in the Judgment reported in 2005(7) SCC

234 in the matter of

Shin­Etsu Chemical Co. Ltd. & Ors. vs Aksh Optifibre

Ltd. Paragraph 72 to 75 of the said Judgment are material and are reproduced

herein under:

“72. True, that there is nothing in Section 45 which suggests that the finding as to the nature of the arbitral agreement has to be ex facie or prima facie. In my view, however, this is an inescapable inference from an ex visceribus interpretation of the statute. Sub­section (3) of Section 8 in Part I of the Act envisages that even in a situation where an application to the court has been made under sub­section (1), the arbitration may commence, continue and even an arbitral award be made. This was obviously meant to cut down delay in the conclusion of the arbitral proceedings. There is conspicuous absence of a corresponding provision either in Section 45 or in the rest of the provisions in Part II. This legitimately gives rise to an inference that once the arbitral agreement has been subjected to scrutiny before the court under Section 45 of the Act, conceivably, the arbitral proceedings could be stayed till the decision of the court on the nature of the arbitral agreement. If it were to be held that the finding of the court under Section 45 should be a final, determinative conclusion, then it is obvious that, until such a pronouncement is made, the arbitral proceedings would have to be in limbo. This evidently defeats the credo and ethos of the Act, which is to enable expeditious arbitration without avoidable intervention by judicial authorities.

a

provision corresponding to Section 5 in Part I has

73. The absence in

Part II

of

the

Act of

wps­7804.09 & 7636.09

been highlighted as supportive of the view that greater judicial intervention is contemplated in Part II of the Act. The question that has arisen before the Court is not the presence or absence of judicial intervention; it is one with regard to the manner in which the said judicial intervention should proceed whether on a final view or prima facie view of the factors enumerated in Section 45

of the Act.

74. There are distinct advantages in veering to

the view that Section 45 does not require a final determinative finding by the Court. First, under the Rules of Arbitration of the International Chamber of Commerce (as in force with effect from 1.1.1998), as in the present case, invariably the arbitral tribunal is vested with the power to rule upon its own jurisdiction. Even if the court takes the view that the arbitral agreement is not vitiated or that it is not invalid, inoperative or

unenforceable, based upon purely a prima facie view, nothing prevents the arbitrator from trying the issue fully and rendering a final decision thereupon. If the arbitrator finds the agreement valid, there is no problem as the arbitration will proceed and the award will be made. However, if the arbitrator finds the agreement invalid, inoperative or void, this means that the party who wanted to proceed for arbitration was given an opportunity of proceeding to arbitration, and the arbitrator after fully trying the issue has found that there no scope for arbitration. Since the arbitrator's finding would not be an enforceable award, there is no need to take recourse to the judicial intercession available under Section 48(1)(a) of the Act.

75. The finding of the court that the arbitration

agreement is valid, operative and enforceable, if

in favour of the party setting up the arbitration agreement, is not appealable under Section 50 as

a matter of legislative policy. Refusing to refer parties to arbitration under Section 45, is however, made appealable under Section 50(1)

wps­7804.09 & 7636.09

(a) of the Act. Even after the court takes a prima facie view that the arbitration agreement is not vitiated on account of factors enumerated in Section 45, and the arbitrator upon a full trial holds that there is no vitiating factor in the arbitration agreement and makes an award, such an award can be challenged under Section 48(1) (a). The award will be set aside if the party against whom it is invoked satisfies the court inter alia that the agreement was not valid under the law to which the parties had subjected it or under the law of the country where the award was made. The two basic requirements, namely, expedition at the pre­ reference stage, and a fair opportunity to contest the award after full trial, would be fully satisfied by interpreting Section 45 as enabling the court to act on a prima facie view.”

18 A useful reference could also be made to the judgment of a

Division Bench of this Court in Caribjet Inc v/s Air India Limited (supra).

Para 6 of the said judgment is material and is reproduced herein under :­

6. As rightly submitted by the learned Counsel

for the appellant, the issue which is sought to

be raised is no more res integra and has been

well­settled by the decision of the Apex Court in Shin­Etsu Chemical Company's case (supra). By a majority decision in the said case, the Apex Court has held that:

if on a prima facie examination of the

documents and material on record including the arbitration agreement on which request for

reference is made by one of the parties, the judicial authority or the court decides to make

a reference, it may merely mention the

submissions and contentions of the parties and summarily decide the objection if any raised on the alleged nullity, voidness, inoperativeness or incapability of the arbitration agreement. In

case, however, on a prima facie view of the matter, which is required to be objectively

wps­7804.09 & 7636.09

taken on the basis of material and evidence produced by the parties on the record of the case, the judicial authority including a regular civil court, is inclined to reject the request for reference on the ground that the agreement is "null and void" or "inoperative" or "incapable of being performed" within the meaning of Section 45 of the Act, the judicial authority or the court must afford full opportunities to the parties to lead whatever documentary or oral evidence they want to lead and then decide the question like trial of a preliminary issue on jurisdiction or limitation in a regular civil suit and pass an elaborate reasoned order. Where a judicial authority or the court refuses to make a reference on the grounds available under Section 45 of the Act, it is necessary for the judicial authority or the court which is seized of the matter to pass a reasoned order as the same is subject to appeal to the appellate court under Section 50(1)(a) of the Act and further appeal to this Court under Sub­section (2) of the said section.”

19 The inquiry contemplated under Section 45 is therefore of a prima

facie nature of the existence of an Arbitration Agreement. If the Court comes to

a prima facie conclusion that there is an Arbitration Agreement and the same is

legal and valid the matter must be referred to the Arbitral Tribunal for further

consideration which can thereafter conclusively decide either way. If the Court

comes to the prima facie conclusion that there is either no Arbitration

Agreement or that the same is not valid in law, the Court must then proceed to

determine the same finally and conclusively.

wps­7804.09 & 7636.09

20 The issue which requires to be addressed at the threshold is

whether the view expressed by Justice B.N.Shrikrishna in Shin­Etsu Chemical

Co. Ltd (supra) is the majority view.

The said issue arises in view of the

submission of the Learned Senior Counsel for the Petitioners relying upon

paragraph 112 of the said Judgment of Shin Estu Chemical Co. Ltd. (Supra)

that Justice D.M.Dharmadhikari

B.N.Shrikrishna.

In

paragraph

has not concurred with the view of Justice

111

of

the

said

Judgment

Justice

D.M.Dharmadhikari expressly concurs with the view of Justice Shrikrishna and

therefore there can be no dispute that the proposition laid down by Justice

Shrikrishna has been accepted by Justice D.M.Dharmadhikari, and is the

majority view in the said judgment. The said paragraph 111 is reproduced

herein under :­

“With utmost respect to both of them, I am inclined to

view expressed by

Srikrishna J. but only with a rider and a partly different reason which may I state below

The main issue is regarding the scope of power of any judicial authority including a regular civil court under section 45 of the Act in making or refusing a reference

of dispute arising from an international arbitration

agreement governed by the provisions contained in Part

III Chapter­I of the Act of 1996. I respectfully Agree

with learned Brother Srikrishna J only to the extent that if on prima facie examination of the documents and material on record, including the arbitration agreement

on which request for reference is made by one of the

parties, the judicial authority or the court decides to

make a reference, it may merely mention the submissions and contentions of the parties and summarily decide the objection if any raised on the

alleged nullity, voidness, inoperativeness or incapability

of the arbitration agreement. In case, however, on a

learned Brother

agree with

the

wps­7804.09 & 7636.09

prima facie view of the matter, which is required to be objectively taken on the basis of material and evidence produced by the parties on the record of the case, the judicial authority including a regular civil court, is inclined to reject the request for reference on the ground that the agreement is 'null and void' or 'inoperative' or 'incapable of being performed' within the meaning of section 45 of the Act, the judicial authority or the court must afford full opportunities to the parties to lead whatever documentary or oral evidence they want to lead and then decide the question like trial of a preliminary issue on jurisdiction or limitation in regular civil suit and pass an elaborate reasoned order. Where a judicial authority or the court refuses to make a reference on the grounds available under section 45 of the Act, it is necessary for the judicial authority or the court which is seized of the matter, to pass a reasoned order as the same is subject to appeal to the appellate court under section 50(1)(a) of the Act and further appeal to this Court under sub­ section (2) of the said section.”

(emphasis supplied)

In so far as paragraph 112 which has been relied upon by the Learned Senior

Counsel, the same deals with a situation where the Award is passed in spite of/

and/or prior to the decision holding that such an Arbitration Agreement does

not exist. The Apex Court in the said case of Shin Estu Chemical Co. Ltd.

(supra) was not concerned with such a case, neither is this Court, in the

present Petition.

21 The Judgment in Shin Estu Chemical Co. Ltd (supra) has been

followed by the

Apex Court in Shakti Bhog Foods Ltd, (supra) as also by a

Division Bench of this Court in Caribjet Inc. Vs. Air India Ltd. (supra), as also

wps­7804.09 & 7636.09

by a Learned Single Judge of this Court in Olive Healthcare Vs. Lannet

Company Inc. (supra). Hence, in the light of the aforesaid Judgments, the

Court for the purpose of determination of the existence or validity of an

agreement under Section 45 of the Indian Arbitration Act, has to restrict its

enquiry to the Arbitration Agreement and not the underlying contract. It is

required to be noted that there is a substantial change in law from the one that

existed under the Indian Arbitration Act 1940. In the 1940 Act under Section

33 thereof, the Court had the power and jurisdiction to determine the existence

or validity of Arbitration Agreement. However, under the provisions of the

Indian Arbitration Act, the said power of the Court has been taken away and is

now expressly vested with the Arbitral Tribunal under Section 16 of the Indian

Arbitration Act. Under Section 16, the Arbitral Tribunal can rule on its own

jurisdiction including ruling on any objection with respect to the existence or

validity of the Arbitration Agreement. Thus the power to determine finally and

conclusively the existence and validity of an Arbitration Agreement has been

conferred on the Arbitral Tribunal under Section 16 of the 1996 Act. It is the

Arbitral

Tribunal

therefore

which

will

determine

whether

there

is

an

Arbitration Agreement or not for that purpose the Arbitration Agreement will

be a totally independent agreement dehors the other terms of the contract and

such an agreement would not ipso­jure become null and void or invalid even if

it has been held that the under lying contract is void. Another aspect which is

to

be noted

is

that

the severability and

separability of the

Arbitration

wps­7804.09 & 7636.09

Agreement though being a clause in the same contract, has now a recognition

not only under Section 16 of the 1996 Act but by a catena of the Judgments of

the Apex Court. A useful reference could be made to the Judgment reported in

2009(2)SCC

494

in

the

matter

of

P.

Manohar

Reddy

&

Bros.

Vs.

Maharashtra

Krishna

Valley

Dev.

Corp.

&

ors.,

The

Apex

Court

has

recognized that the Arbitration Agreement is separate and independent from

the main Agreement. It has been held that the Arbitration clause though being

a part of the contract is a collateral term which need not in all situations perish

with coming to an end of the underlying contract and it may survive the same.

Paragraphs 27 and 28 of the said Judgment are material and are reproduced

herein under :

“27. An arbitration clause, as is well known, is a part of the contract. It being a collateral term need not, in all situations, perish with coming to an end of the contract. It may survive. This concept of separability of the arbitration clause is now widely accepted. In line with this thinking, the UNCITRAL Model Law on International Commercial Arbitration incorporates the doctrine of separability in Article 16(1). The Indian law ­ The Arbitration and Conciliation Act, 1996, which is based on the UNCITRAL Model Law, also explicitly adopts this approach in Article 16 (1)(b), which reads as under:­

“16. Competence of arbitral tribunal to rule on its jurisdictional. ­ (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,

(a) An arbitration clause which forms part of a

contract shall

treated as an agreement

be

wps­7804.09 & 7636.09

independent of the other terms of the contract; and

(b) A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (Emphasis supplied)

Modern laws on arbitration confirm the concept.

28. The United States Supreme Court in the

recent judgment in Buckeye Check Cashing, Inc. v.

Cardegna 546 US 460 acknowledged that the separability rule permits a court "to enforce an arbitration agreement in a contract that the arbitrator later finds to be void." The Court, referring to its earlier judgments in Prima Paint Corporation v. Flood & Conklin Mfg. Co. 388 U. S. 395, and Southland Corporation v. Keating 465 U. S. 1, inter alia, held:

Prima Paint and Southland answer the question presented here by establishing three propositions. First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract.

But this must be distinguished from the situation where the claim itself was to be raised during the subsistence of a contract so as to invoke the arbitration agreement would not apply.”

The said Judgment as can be seen approves the Judgments of

United States Supreme Court reported in 546 US 460 in the matter of

Buckeye Check Cashing Inc. Vs. Cardegana and, reported in 388 US 395 in

the

matter

of

Prima

Paint

Corporation

Vs.

Floor

and

Conkling

Manufacturing Company

wps­7804.09 & 7636.09

22 A reference could also be made to the Judgment of the Apex Court

reported in 2009(10) SCC 103 in the matter of

Branch Manager Magma

Leasing and Finance Ltd. & Anr. Vs. Potluri Madhavilata & Anr. The Apex

Court in the said Judgment has approved the proposition laid down in P.

Manohar Reddy’s case (supra) and once again referred with approval the

judgment of the United States Supreme Court in Buckeye Check Cashing Inc.

The aforesaid Judgments of the Apex Court as well as the United States

Supreme Court, make it clear that the Arbitration Agreement would survive

even in case of invalidity of the main agreement or the underlying contract. It

is only in cases where the underlying contract is vitiated by fraud, coercion or

misrepresentation that the same would impact the Arbitration Agreement.

23 The principles of severability and separability of the Arbitration

Agreement is common both under the English Arbitration Act, 1996 and the

Indian Arbitration Act 1996, as evidenced by the following Judgments of the

Apex Court and the House of Lords reported in :­

1] 2003 CLC 601, GTC Ltd. Vs. Royal Consult R.V. & Anr.

2] 2009(2) SCC 134, Shakti Bhog Foods Ltd. Vs. Kola Shipping

Ltd.

3] Judgment of the House of Lords reported in 2007 UKHL 40,

Premium Nafta Products Ltd. & Ors. Vs. Fili Shipping Co. Ltd. &

Ors.

wps­7804.09 & 7636.09

24 It is in the context of the settled law as afore stated that the facts

of the present case would have to be seen. The Learned Senior Counsel for the

Petitioners laid much store on the correspondence post 29­9­2006 i.e. the date

when the IPLA was signed, to contend that the IPLA was not a concluded

contract. However, the correspondence prior thereto between the parties

indicates otherwise. If the said correspondence is seen, to which my attention

is drawn by the Learned Senior Counsel appearing for the Respondents, the

same discloses that it was on 27­6­2006 i.e.

a good three months prior to its

execution, that the draft IPLA was sent to the Petitioners. The said IPLA had

already undergone changes on the basis of the suggestions of both the parties

and the final document was kept ready on 29­9­2006 as the Petitioner No.2

had shown his inability to come to Aurich on 17­9­2006 when it was to be

executed. The other three agreements namely the Successive Technological

Transfer Agreement, Name Use Licence Agreement and the Shareholders

Agreement were not executed on 29­9­2006 because they were not finalised as

certain issues were still required to be finalised. The most important letter if it

can be said so, is the letter dated 30­9­2006 which is addressed by the

Petitioner No.2 Yogesh Mehra in his own handwriting stating therein that he

has executed not one but more than one agreement on 29­9­2006. Pertinently

in paragraph 2 of the said letter, the Petitioner No.2 has in fact referred to the

patent of E­82 being the subject matter of the IPLA and not the Agreed

wps­7804.09 & 7636.09

Principles. The fact that the letter dated 30­9­2006 refers to the execution of

two agreements on 29­9­2006 and also refers to the E­82 patent, further

indicates that by the said letter dated 30­9­2006 the Petitioner No.2 admitted

to the execution of the IPLA.

In so far as the email dated 4­10­2006 is

concerned, the said email refers to the preparation and adoption of the

agreements according to the “Agreed Principles”. The said email refers to the

other three agreements. It seems that only after the claim for royalty was made

by

the

Respondents,

that

incorporated an indirect denial

on

3­11­2006

the

Petitioners

purportedly

of the execution of the IPLA. In so far as the

email dated 24­11­2009 is concerned, the said email as can be seen from its

subject

refers to

the

final

IPLA

the

Shareholders

Agreement

and

other

Successive Agreements. The email which dealt with the outstanding drafts of

the Agreements obviously did not refer to the final IPLA but refers to the other

Successive Agreements because as far as the IPLA was concerned, the same

itself stated that it was already a finalised agreement. The email therefore, did

not refer to any draft of the IPLA or the Shareholders Agreement and therefore

the said email does not in any manner aid the case of the Petitioners that the

IPLA was not a concluded contract. Further the email dated 15­12­2006 from

the Petitioners to the Respondents wherein also the Petitioners dealt with the

draft agreements but the subject of the said email as can be seen was the same

as that of the email dated 24­11­2006. Thereafter the email dated 10­1­2007

dealt with a further visit to Germany and revised “Drafts of Outstanding

wps­7804.09 & 7636.09

Contracts”. Thereafter, the email dated 29­1­2007 sent by the Petitioners, in

fact mentions the amended version of the Shareholders Agreement which is

outstanding

and

not

executed,

Name

Use

Licence

Agreement,

and

the

Successive Technological Transfer Agreement. The aforesaid material therefore

leaves no manner of doubt that the draft agreements referred to therein were

only the other three agreements and not the IPLA. Therefore, a perusal of the

documents on record discloses that not only is the Arbitration Agreement

contained in clause 18.1to the IPLA legally and validly executed, but it is in

writing and signed by the parties.

25 The contentions of the Learned Senior Counsel for the Petitioners

as regards the unenforceability of the Arbitration Agreement all revolve around

the alleged uncertainty and ambiguity in the underlying or the matrix contract.

It was contended that since the IPLA is

vague, ambiguous and uncertain, the

same is void under Section 29 of the Indian Contract Act, 1872. Consequently

the Arbitration Agreement as contained in clause 18 of IPLA, is also void. The

contention therefore of ambiguity and uncertainty is as regards the underlying

contract and not in respect of the Arbitration Agreement. Assuming it to be so,

applying the principle of separability and severability of the Arbitration

Agreement from the main agreement, the submission of the learned Senior

Counsel for the Petitioners does not have merit and cannot impede the Court

from referring the parties to arbitration.

wps­7804.09 & 7636.09

26

Now coming to the contention of the Learned Senior Counsel for

the

Petitioners

that

since

on

the

IPLA

three

dates

are

appearing,

the

commencement date and the duration of the IPLA is therefore uncertain and

therefore the

IPLA is not a concluded contract on account of

the said

uncertainty and ambiguity. In so far as the said three dates are concerned, the

first date i.e. 27­6­2006 is referable to the first email dated 27­6­2006 under

which the draft IPLA was forwarded to the Petitioner No.2. The Petitioner No.2

can therefore be said to be aware that 27­6­2006 is referable to the date on

which the draft

was forwarded and therefore it could never be the date of

execution. The date 17­9­2006 appearing on the third page of the IPLA is the

date on which the IPLA was proposed to be executed. Since the Petitioner No.2

cancelled his visit to Aurich­Germany by its email dated 16­9­2006, the said

date 17­9­2006 remained to be cancelled /altered. The third date is 29­9­2006

which also appears on the first page of the IPLA. There is no dispute that the

signatures on the IPLA have been affixed by the parties on 29­9­2006. In the

light of the aforesaid and since it is not disputed by the Petitioners i.e. the IPLA

has been executed on 29­9­2006, the question of taking into consideration any

other date would not arise. In any event, the said dispute can only be relatable

to the underlying contract and can be raised before the Tribunal and if raised,

it is for the Arbitral Tribunal to adjudicate upon the same.

wps­7804.09 & 7636.09

27 Now coming to the judgments cited by the learned Senior Counsel

for the Petitioners in support of his contention that since the underlying

contract cannot be said to have come into existence,

therefore, the clause

providing for arbitration has also necessary to be held as not having come into

existence. In so far as Kishorilal Gupta's case (supra) is concerned, in the said

case, the contention was that even after supersession of an earlier contract, the

Arbitration Agreement contained in the superseded contract continues in spite

of the admitted position that under the new contract, there was no arbitration

clause.

It is in the said fact situation that the Apex Court held that with the

supersession of the whole contract, the Arbitration Agreement also stood

superseded and does not survive. The said judgment has been distinguished by

the Apex Court in the case of Branch Manager, Magma Leasing and Finance

Ltd, by holding that the new contract entered

into was a novation under

Section 62 of the Indian Contract Act and thus no reliance can be placed on the

Arbitration Agreement contained in such a superseded contract.

In the case of U.P. Rajkiya Nirman Nigam Ltd., (supra) the facts

were that the counter proposal was not signed at all and thus, no concluded

contract was arrived at between the parties. It was in the said context that the

Apex Court held that there was no concluded contract. Para 19 of the said

judgment is material and is reproduced herein under :­

“In view of the fact that Section 2

envisages a

the Act

agreement for arbitration and

[a]

of

written

wps­7804.09 & 7636.09

that written agreement to submit the existing or future differences to arbitration is a pre­condition and further in view of the fact that the original contract itself was not a concluded contract, there existed no arbitration agreement for reference to the arbitrators. The High Court, therefore, committed a gross error of law in concluding that an agreement had emerged between the parties, from the correspondence and from submission of the tenders to the Board. Accordingly it is declared that there existed no arbitration agreement and that the reference to the arbitration, therefore, is clearly illegal. Consequently arbitrators cannot proceed further to arbiter the dispute, if any. The conclusion of the High Court is set aside.”

In the case of Nasir Husain Films (P) Ltd. (supra) the facts were

that reliance was placed on a draft document. The Division Bench of this Court

held that the major issues on which negotiations were still in progress were not

settled. The contract could not be said to be concluded.

In the case of Oberoi Const. Pvt. Ltd (supra) the facts were that

the General Body Resolution passed by the society did not accept the

concluded agreement and stated that the same will be subject to circulation of

the draft and finalization thereof.

It was in the said context that the Division

Bench held that since the document was not accepted or signed or executed by

the society, there was no conclusivity of the contract.

However in the instant case, the IPLA has admittedly been

executed on 29/09/2006 by the parties signing on each page and also in the

wps­7804.09 & 7636.09

execution clause, therefore, the said judgments (supra) cited by the learned

Senior Counsel for the Petitioners would have no application.

In the case of United Bank of India (supra) the issue before the

Apex Court was centered around as to whether the MOU entered into between

the parties on 18­5­1994 and forwarded by letter dated 20­5­1994 has been

acted upon and complied with by the parties .

One of the conditions for the

MOU to come into force was withdrawal of the suit by the Respondents filed by

them against the United Bank of India. Since the suit was not withdrawn, the

Apex Court held that the MOU cannot be said to have come into existence.

Para 7 of the said judgment is material and is reproduced herein under :­

“Undisputedly, the respondents did not withdraw the suit filed by them against the United Bank of India, which is the condition precedent stipulated in clause (1) of the MOU. The respondents also did not pay the guarantee liability of Rs. 2.33 lacs. No compromise petition was filed before an appropriate court. Therefore, by no stretch of imagination it can be said that the terms and conditions stipulated in the MOU had been complied with and acted upon by the parties. Apart from what has been said, subsequent to the MOU there was also a lot of correspondence between the parties by exchanging letters giving offers and counter­ offers, as would be revealed in the letters dated 16.6.94,23.12.94,12.6.95,15.6.95 and 19.6.95. All these correspondence would go to show that the parties failed to arrive at a consensus even on what were the terms of the MOU. Thus, it is clear that there was no concluded contract nor was there any novation.”

In the case of Vimlesh Kumar Kulshrestha (supra) the agreement

in question was held to be void for uncertainty as there was no proper

wps­7804.09 & 7636.09

description of the property given in the agreement by annexing a map, though

map was referred to in the agreement, nor the description was satisfactorily

proved in a suit for specific performance. It is the said context that the Apex

Court held that the agreement if read was uncertain. Para 24 of the said report

is material and is reproduced herein under :­

“Reference to the said legal maxim, in our opinion, is not apposite in the facts and circumstances of this case. By reference to the boundaries of the premises alone, the description of the properties agreed to be sold did not become certain. For the purpose of finding out the correct description of the property, the entire agreement was required to be read as a whole. So read, the agreement becomes uncertain.”

In the case of Coffee Board, Bangalore (supra), the facts were

that the defendant had to specify the quantity of coffee which he intended to

purchase, those quantities were omitted to be specified and those portions

were left blank in the tender form. It is in the said context that the Division

Bench of the Karnataka High Court held that the offer

was vague for

uncertainty and indefiniteness on the acceptance of which no contract is ever

born or comes into being. Paras 30 and 31 of the said report are material and

are reproduced herein under :­

“30 Now, in this case the defendant did only one of those two things. He stated the prices, but he did not state the quantities which he wanted. If a person is told that goods of more than one description are available for sale and he is asked to state what prices he would be willing to offer for those goods and which of those goods he would be willing to buy at those prices, and that person states only his prices but never indicates the

wps­7804.09 & 7636.09

goods required by him, it is, I think, Impossible for any one to suggest that there was any acceptable offer made by him. I do not find it possible to accede to the argument that in a case in which a tenderer who had to submit his tender in the form Exhibit A­3 which was sent in this case, does not fill in the blanks in the last paragraph of that tender, the necessary and inevitable inference is that he is willing to buy all the goods to which the tender form referred.”

31 The fact that paragraph 3(a) of Exhibit A­1

required the tenderer to state the quantities and the fact that Exhibit A­3 contains separate columns for the price and the quantity, makes the position abundantly clear that unless a tender like Ex. A­3 not only states the prices but also states the quantities, the tender is no offer which in law can be accepted. In my opinion, the specification of the quantity required by the tenderer was an essential term of the offer, and if that term was not to be found in the offer his offer was vague for uncertainty and indefiniteness, on the acceptance of which no contract is ever born or comes into being.”

The aforesaid judgments were relied upon by the learned Senior

Counsel for the Petitioners to buttress his submission that the IPLA was void on

account of ambiguity and uncertainty.

Reading of the said judgments discloses that all the said judgments

are concerning the validity of the underlying contract and not the Arbitration

Agreement. In the said judgments the underlying contract has been held to be

void or has not come into existence on account of the reasons mentioned

therein. However, the instant case arises under Section 45 of the Indian

Arbitration Act, the infirmity, if any, in the underlying contract cannot therefore

be looked into.

wps­7804.09 & 7636.09

It is well settled that even if there is any uncertainty or

ambiguity, it can be looked into and if necessary corrected by relying on

extrinsic evidence, as rightly contended by the learned Senior Counsel for the

Respondents, by placing reliance on the extracts from the learned Author

Chitty on Contract. Therefore the said judgments cannot aid the Petitioners to

further their case that the parties cannot be referred to arbitration.

28 In so far as the submission of the Learned Senior Counsel for the

Petitioners that all the agreements were to be executed simultaneously, the

same is not borne out by any document. The composite arrangement referred

to pertains only to

the fact that the said arrangement will govern the

subsequent relationship of the parties in a composite manner and not that each

of the documents must be executed simultaneously.

The issue as to whether the IPLA is a concluded contract can also

be looked at from the angle of the same being signed by the parties. There is

no dispute that the Petitioner No.2 has signed the IPLA on 29­9­2006 by

affixing his signature on every page of the IPLA including the execution clause.

The presumption which arises on the execution of the documents is enunciated

by the Judgment of the Apex Court reported in 2010 (1) SCC 83 in the matter

of

M/S. Grasim Industries Ltd. vs M/S. Agarwal Steel. Para 6 of the said

report is material and is reproduced herein under :

wps­7804.09 & 7636.09

“In our opinion, when a person signs a document, there is a presumption, unless there is proof of force or fraud, that he has read the document property and understood it and only then has has affixed his signatures thereon, otherwise no signature on a document can ever be accepted. In particular, businessmen, being careful people (since their money is involved) would have ordinarily ready and understood a document before signing it. Hence the presumption would be even stronger in their case. There is no allegation of force or fraud in this case. Hence it is difficult to accept the contention of the respondent while admitting that the document, Ext. D­8 bears his signatures that it was signed under some mistake. We cannot agree with the view of the High Court on this question. On this ground alone, we allow this appeal, set aside the impugned judgment of the High Court and remand the matter to the High Court for expeditious disposal in accordance with law.”

In the said context the Judgment of a Learned Single Judge of this

Court is also relevant, which Judgment is reported in AIR 2000 BOM 108 in

the matter of Keval Krishna Balakram Hitkari v/s Anil Keval Hitkari. Para 8

of the said Judgment is relevant and is reproduced herein under :­

8. So far as the objections raised by respondent No. 1 that the agreement of arbitration was not signed on the day on which it is shown to have been signed and it was signed on the day on which the award was made is concerned in my opinion even if it is assumed that the arbitration agreement was not signed in November, 1994 as claimed and that it was signed on 3rd April, 1995 the conduct of the parties of signing that agreement and accepting the award and executing further documents pursuant to that award has to be construed as existence of an arbitration agreement between the parties. The observations of the Supreme Court in para 6 of its judgment in the case of Vaidya Harishankar Laxmiram Rajyaguru of Rajkot are pertinent which reads as follows :

wps­7804.09 & 7636.09

"6. The main objection to the award is that there was no written agreement signed by both the parties to refer the disputes to arbitration. It is clear from the narration of facts that the parties had agreed to refer the dispute to arbitrator. The award signed by both the parties about which there is no factual dispute reiterated the fact that the parties had agreed to refer the dispute to the arbitration of the said arbitrator and that he made an award. All these are in writing and signed by all the parties. This in our opinion in the light of the facts and circumstances of the case can certainly be construed to be a proper arbitration agreement in terms of section 2(a) of the Act. In this connection reference may be made to the observations of this Court in Prasun Roy v. Calcutta Metropolitan Development Authority, AIR 1988 SC 205 : (1987) 4 SCC 217 where all the relevant authorities on this point have been discussed. See also in this connection the decision of the Judicial Committee in Chowdhri Murtaza Hossein v. Mst. Bibi Bechunnissa, (1875­76) 3 IA 209, 220. The observations in the said decision were made in different context. But in the present context it is clear that the conduct of the parties that there was an arbitration agreement and by signing two award it could be said that the parties had agreed to refer the disputes in writing to the arbitration of the named arbitrator. This agreement was done twice firstly by signing an endorsement below the award and secondly by entering into an agreement in the form of a letter dated August 14, 1978 (Ex. 40)."

Hence there can be no escape for the Petitioners from the consequences

flowing from the signing of the IPLA; and the signing of the IPLA by the parties

is therefore a strong circumstance in arriving at a prima facie conclusion as

enunciated in Shin Etsu Chemical Co. Ltd's case for referring the parties to

arbitration.

wps­7804.09 & 7636.09

29 Now coming to the submission of the Learned Senior Counsel

appearing for the Petitioners that clause 18.1 of the IPLA itself is uncertain,

ambiguous and unworkable as according to the Learned Senior Counsel, out of

the two Arbitrators, one Arbitrator is also to don the hat of the Presiding

Arbitrator. For the said purpose clause 18 of the IPLA would have to be

revisited. A reading of the said clause 18.1 discloses that each of the licensors

have to appoint an Arbitrator and the licensee is to appoint one Arbitrator. In

terms of the IPLA, the Respondent No.2 has licenced the patents to the

Respondent No.1 who has then licenced them to the Petitioners, hence two

Arbitrators have to be appointed by each of the licensors and one has to be

appointed by the licensee making it in all three Arbitrators. Since at the time of

invocation of the arbitration clause, the Respondents in fairness agreed to

appoint the third arbitrator independently, the said fact cannot make the

Arbitration Agreement invalid, ambiguous and uncertain as contended by the

Learned Senior Counsel. In any event, the provision regarding the number of

arbitrators is merely a machinery provision and does not form part of the

Arbitration Agreement. Even if the machinery part is invalid, there is

still an

Arbitration Agreement by and between the parties which can be enforced. A

useful reference could be made to the Judgments of the Apex Court which have

been relied upon by the learned Senior Counsel for the Respondents.

The

relevant paragraphs thereof are reproduced herein under :­

AIR 1997 SC 605 in the matter of

wps­7804.09 & 7636.09

M.M.T.C. Limited vs Sterlite Industries

(India) Ltd. (supra) Paras 8, 9, 10 and 11 are relevant and are reproduced

herein under :­

“8. Sub­section (3) of Section 7 requires

an arbitration agreement to be in writing and sub­section (4) describe the kind of that writing. There is nothings in Section 7 to indicate the requirement of the number of

arbitrators as a part of the

agreement. Thus the validity of an arbitration agreement does not depend on the number of arbitrators specified therein. The number of

arbitrators is dealt with separately in Section

10 which is a part of machinery provision for

the working of the arbitration agreement. It is, therefore clear that an arbitration agreement specifying an even number of arbitrators cannot be a ground to render the arbitration agreement invalid under the New Act as contended by the learned Attorney General.

arbitration

9. Section 10 deals with the number of arbitrators. Sub­section (1) says that the parties are free to determine the number of arbitrators, provided that such number shall not be an even number. Sub­section (2) then says that failing the determination referred to in sub­section (1), the arbitral tribunal shall consist of a sole arbitrator. Section 11 provides for appointment of arbitrators. This is how arbitral tribunal is constituted.

10. The arbitration clause provides that

each party shall nominate one arbitrator and the two arbitrators shall then appoint an umpire before proceeding with the reference. The arbitration agreement is valid as it satisfies the requirement of Section 7 of the New Act . Section 11 (3) requires the two arbitrators to appoint the third arbitrator or

wps­7804.09 & 7636.09

the umpire. There can be no doubt that the arbitration agreement in the present case accords with the implied condition contained in para 2 of the First Schedule to the Arbitration Act, 1940 requiring the two arbitrators, one each appointed by the two sides, to appoint. an umpire not later than one month from the latest date of their respective appointments.

11. The question is: whether there is

anything in the New Act to make such an agreement unenforceable? We do not find any such indication in the New Act. There is no dispute that the arbitral proceeding in the present case commenced after the New Act came into force and, therefore, the New Act applies. In view of the term in the arbitration agreement that the two arbitrators would appoint the umpire or the third arbitrator before proceeding with the reference, the requirement of Sub­section (1) of Section 10 is satisfied and sub­section (2) thereof hes no application. As earlier stated the agreement satisfies the requirement of Section 7 of the Act and therefore, is a valid arbitration agreement. The appointment of arbitrators must, therefore, be governed by Section 11 of the New Act.

(2002) 3 SCC 572 in the matter of

Narayan Prasad Lohia v/s. Nikunj

Kumar Lohia and others .

under:­

Para 17 is material and is reproduced herein

“We are also unable to accept Mr. Venugopal's argument that, as a matter of public policy, Section 10 should be held to be non­ derogable. Even though the said Act is now an integrated law on the subject of Arbitration, it cannot and does not provide for all contingencies. An arbitration being a creature

wps­7804.09 & 7636.09

of agreement between the parties, it would be impossible for the Legislature to cover all aspects. Just by way of example Section 10 permits the parties to determine the number of arbitrators, provided that such number is not an even number. Section 11(2) permits parties to agree on a procedure for appointing the arbitrator or arbitrators. Section 11 then provides how arbitrators are to be appointed if the parties do not agree on a procedure or if there is failure of the agreed procedure. A reading of Section 11 would show that it only provides for appointments in cases where there is only one arbitrator or three arbitrators. By agreement parties may provide for appointment of 5 or 7 arbitrators. If they do not provide for a procedure for their appointment or there is failure of the agreed procedure, then Section 11 does not contain any provision for such a contingency. Can this be taken to mean that the Agreement of the parties is invalid. The answer obviously has to be in the negative. Undoubtedly the procedure provided in Section 11 will mutatis mutandis apply for appointment of 5 or 7 or more arbitrators. Similarly even if parties provide for appointment of only two arbitrators, that does not mean that the agreement becomes invalid. Under Section 11(3) the two arbitrators should then appoint a third arbitrator who shall act as the presiding arbitrator. Such an appointment should preferably be made at the beginning. However, we see no reason, why the two arbitrators cannot appoint a third arbitrator at a later stage i.e. if and when they differ. This would ensure that on a difference of opinion the arbitration proceedings are not frustrated. But if the two Arbitrators agree and give a common award there is no frustration of the proceedings. In such a case their common opinion would have prevailed, even if the third arbitrator, presuming there was one, had differed. Thus we do not see how there would be waste of time, money and expense if a party,

wps­7804.09 & 7636.09

with open eyes, agrees to go to Arbitration of two persons and then participates in the proceedings. On the contrary there would be waste of time, money and energy if such a party is allowed to resile because the Award is not of his liking. Allowing such a party to resile would not be in furtherance of any public policy and would be most inequitable.”

The

next

contention

of

the

learned

Senior

Counsel

for

the

Petitioners that since the Annexures 1 to 4 to the IPLA do not form part of the

finally executed IPLA, there is an uncertainty and ambiguity as regards the

Patent portfolio and the Marks which are licensed under the IPLA to the

Petitioners.

Though in terms of the scope of inquiry contemplated under

Section 45 of the Indian Arbitration Act, the same is not necessary to be gone

into by this Court. In so far as the said contention is concerned, it is required to

be noted that the business relationship between the parties existed from the

year 1994. The Petitioners were already using the Patents right from 1994 and

to which Patents there were additions. Even the Marks have been used by the

Petitioners right from the year 1994, and therefore, the parties were aware of

the Patents and the marks in respect of which they have entered into a

contract. Therefore, prima facie, there doesn't seem to be any merit in the said

contention of the Petitioners. However, as indicated above, the issue as regards

the alleged infirmity in the underlying contract i.e. the IPLA is required to be

urged before the Arbitral Tribunal, and it will be for the Arbitral Tribunal to

consider the same.

The defining aspect is the intention

wps­7804.09 & 7636.09

of the parties to

go for

arbitration which intention is clearly manifest in the IPLA. On the said aspect,

it would be gainful to refer to the judgment of the Apex Court reported in

2009(4) SCC 495 in the matter of

Nandan Biomatrix Limited Vs. D 1 Oils

Limited,. Paras 26, 27, 30, 32, 33 and 34 are material and are reproduced

herein under :­

“26 The disputed arbitration clause in the present case is clause 15.1, mentioned in the Supply Agreement, which is reproduced as under:

"15.1 . Any dispute that arises between the parties shall be resolved by submitting the same to the institutional arbitration in India under the provisions of arbitration and conciliation act, 1996."

“27 Arbitration agreement is defined under Section 7 of the 1996 Act. It does not prescribe any particular form as such. In terms of the said provision, arbitration agreement means:

"Section 7 ­ Arbitration agreement (1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained 13 in­ (a) a document signed by the parties”

“30

The Court is required, therefore, to decide

wps­7804.09 & 7636.09

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 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. What is required to be decided in an application on Section 11 of the 1996 Act is : whether there is an arbitration agreement as defined in the said Act.”

“32 I do not find any merit in the above contentions raised on behalf of the non­applicant. The question which needs to be asked is : what did the parties intend at the time of execution of the Supply Agreement dated 10.8.04? What did the parties intend when clause 15.1 came to be incorporated in the said Supply Agreement? The answer to the said questions undoubtedly is that any dispute that may arise between the parties shall be resolved by submitting the same to the Institutional Arbitration in India under the provisions of the 1996 Act. It may be mentioned that the name of a specific institution is not indicated in clause

15.1.”

“33 The 1996 Act does not prescribe any form for an arbitration agreement. The arbitration agreement is not required to be in any particular form.

[See : Bihar State Mineral Development Corporation & Another v. Encon Builders (I) (P) Ltd. ­ (2003) 7 SCC 418]. What is required is to gather the intention of the parties as to whether they have agreed for resolution of the disputes through arbitration.”

34 In my view, in the present case, the parties

unequivocally agreed for resolution of the disputes through Institutional Arbitration and not through an ad hoc arbitration. Therefore, in my view, there exists a valid arbitration agreement between the parties vide clause 15.1 in the Supply Agreement dated 10.8.04. The

wps­7804.09 & 7636.09

first issue is accordingly answered in favour of the applicant and against the non­applicant.

30 Now coming to the contention of the Learned Senior Counsel for

the Petitioners that the prayer in the suit pertaining to the anti suit injunction

can never be referred to arbitration in support of which contention reliance is

placed by the Learned Senior Counsel on the Judgment of the Apex Court in

Sukanya Holdings Pvt. Ltd. (supra). In so far as the said contention is

concerned, it is required to be noted that the Judgment in Sukanya Holdings

Pvt. Ltd

(supra) has been distinguished by the Apex Court in the case of

Rashtriya Ispat Nigam Limited v/s Verma Transport Co. reported in (2006)

7 SCC 275. Paras 23, 45 and 47 of the said report are material and reproduced

herein under :­

“23 In the instant case, the existence of a valid agreement stands admitted. There cannot also be any dispute that the matter relating to termination of the contract would be a dispute arising out of a contract and, thus, the arbitration agreement contained in clause 44 of the contract would be squarely attracted. Once the conditions precedent contained in the said proceedings are satisfied, the judicial authority is statutorily mandated to refer the matter to arbitration. What is necessary to be looked into therefor, inter alia, would be as to whether the subject­matter of the dispute is covered by the arbitration agreement or not.”

“45 Reliance placed by the learned counsel on Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya and Another [(2003) 5 SCC 531 is misplaced.Therein, not only a suit for dissolution of the firm was filed, but a different cause of action had arisen in relation whereto apart from parties to the arbitration agreement, other parties had also been impleaded. In the aforementioned

fact situation, this Court held :

wps­7804.09 & 7636.09

"Secondly, there is no provision in the Act that when the subject­matter of the suit includes subject­matter of the arbitration agreement as well as other disputes, the matter is required to be referred to arbitration. There is also no provision for splitting the cause or parties and referring the subject­matter of the suit to the arbitrators.”

“47 Such a question does not arise herein as the parties herein are parties to the arbitration agreement and the question in regard to the jurisdiction of the arbitrator, if any, can be determined by the arbitrator himself in terms of Section 16 of the 1996 Act.”

In my view, the Judgment in Sukanya Holdings Pvt. Ltd. (supra),

has no application even in the present case because the parties to the instant

proceedings are parties to the Arbitration Agreement and the cause of action

which is sought to be invoked is also covered by the Arbitration Agreement

between the parties and the said relief i.e. anti suit injunction is also claimed

on the basis of the dispute between the parties which are covered by the

Arbitration Agreement. It was held by the Apex Court in Everest Holding's case

(supra) that the Judgment in Sukanya Holdings Pvt.Ltd.'s case(supra) has

been distinguished in the case of Rashtriya Ispat Nigam Ltd. because in

Sukanya Holdings Pvt. Ltd.'s case two distinct and different causes of action

were merged in a suit and it required independent adjudication of the rights of

the flat purchasers who are not governed by the Arbitration Agreement and the

cause of action which is sought to be invoked is also covered by the Arbitration

Agreement between the parties.

wps­7804.09 & 7636.09

31 Now coming to the judgments relied upon by the learned Senior

Counsel for the Petitioners in support of his contention that there can be no

arbitration, if there is no concluded contract. The judgment in

Dresser Rand