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Supreme Court Of India
AUROHILL GLOBAL COMMODITIES LTD. - Appellant
Versus
MAHARASHTRA STC LTD. - Respondent
Decided On : 07/31/2007
Arbitration - International Transaction - Arbitration and Conciliation Act, 1996, Section 11 (9), Section 11 (5) - 19, 20 - The court discussed the applicability of Part I of the Arbitration and Conciliation Act, 1996 to international commercial arbitrations, the power of the court to appoint an arbitrator in accordance with the terms of the contract, and the waiver of the British Rules of Arbitration. The court held that the question of whether a concluded contract existed and the necessity of a party to the arbitration proceedings are to be decided in the arbitration proceedings. The court also ruled that there was no waiver of the British Rules of Arbitration, and the parties are bound by the terms of the Arbitration Clause 19.
Fact of the Case:
M/s Aurohill Global Commodities Ltd. filed an arbitration application under Section 11 (9) read with Section 11 (5) of the Arbitration and Conciliation Act, 1996 for the appointment of arbitrators to settle a dispute with M/s Maharashtra STC Ltd. The dispute arose from a contract for the supply of billets, payment terms, and the subsequent cancellation of the letter of credit.
Finding of the Court:
The court found that the arbitration petition was maintainable under the Arbitration and Conciliation Act, 1996, and the questions regarding the existence of a concluded contract and the necessity of a party to the arbitration proceedings are to be decided in the arbitration proceedings. The court also ruled that there was no waiver of the British Rules of Arbitration, and the parties are bound by the terms of the Arbitration Clause 19.
Issues: The issues involved the maintainability of the arbitration petition, the existence of a concluded contract, and the waiver of the British Rules of Arbitration.
Ratio Decidendi: The court held that the arbitration petition was maintainable under the Arbitration and Conciliation Act, 1996, and the questions regarding the existence of a concluded contract and the necessity of a party to the arbitration proceedings are to be decided in the arbitration proceedings. The court also ruled that there was no waiver of the British Rules of Arbitration, and the parties are bound by the terms of the Arbitration Clause 19.
Final Decision: The arbitration petition stands disposed of with no order as to costs.
Judgment
S.H. KAPADIA, J.- M/s Aurohill Global Commodities Ltd. has filed an arbitration application herein under Section 11 (9) read with Section 11 (5) of the Arbitration and Conciliation Act, 1996 (the said Act) for the appointment of arbitrators to settle the dispute between the said Company and M/s Maharashtra STC Ltd. (PSU). The facts giving rise to this petition briefly are as follows.
2. The petitioner Company is based in Cyprus having its offices in Russia and India. The petitioner has been exporting steel products for more than a decade.
3. Vide letter dated 2-3-2005, M/s Sunvijay Rolling and Engineering Ltd., Nagpur placed an order on the petitioner for supply of 5000 MT of billets. Accordingly, on 10-3-2005 the petitioner forwarded pro forma invoice to the said Sunvijay Rolling and Engineering Ltd. for the required quantity of billets for a total consideration of US $2,225,000. Payment was to be made through irrevocable confirmed letter of credit (LC) payable 100% at sight. The petitioners banker was M/s BNP. Subsequently, M/s Sunvijay Rolling and Engineering Ltd. informed the petitioner that they preferred to buy the billets through M/s Maharashtra STC Ltd. (the respondent herein).
4. On 24-3-2005, a draft purchase order dated 24-3-2005 was issued by M/s Maharashtra STC Ltd. which was accepted by the petitioner. It is the case of the petitioner that the said purchase order was issued as a result of negotiations between the petitioner and M/s Maharashtra STC Ltd. According to the petitioner, this constituted a contract between the parties at Kolkata. The date of shipment was 15-5-2005 and payment was to be made through irrevocable LC to be opened by a first class Indian bank. The LC was to be made operative only after receipt of credential report from Dan & Bradstreet. Clauses 19 and 20 of the purchase order read as under:
“19. Arbitration.-Any disputes, controversies and/or claims arising out of or relating to this agreement or any modification thereto, or any alleged breach or cancellation thereof, which cannot be settled amicably between seller and buyer, shall be settled by arbitration in London, and in accordance with rules of arbitration of Great Britain arbitration (sic) and the award in pursuance thereof shall be binding on the parties.
20. jurisdiction.- The competent court under the laws applicable in a Great Britain alone shall have exclusive jurisdiction to decide all matters, disputes and controversies relating to this contract, including arbitration proceedings instituted or to be instituted. The jurisdiction of court will be London." (Emphasis supplied)
5. On 29-3-2005 M/s Maharashtra STC Ltd. requested M/s Indian Overseas Bank, Kolkata for opening of an irrevocable LC. Accordingly, M/s b Indian Overseas Bank informed the petitioners bankers that LC has been opened on the request of M/s Maharashtra STC Ltd. and that the petitioner was the beneficiary under the LC. The date of expiry of the LC was 5-62005. The last date of shipment was 15-5-2005. The LC was to operate only after receiving confirmation from the opening bank.
6. On 20-4-2005 the petitioners banker confirmed the LC. The LC was payable against presentation of FCR (a receipt of confirmation) of goods at the port of loading.
7. On 10-5-2005 it is alleged that the petitioner received the requisite confirmation on which basis the petitioner prepared the goods for shipment.
The goods arrived at the port in Ukraine and an FCR was issued to this effect. The said receipt was presented to the Bank along with the documents. d However, on 13-5-2005 M/s Sunvijay Rolling and Engineering Ltd. addressed a letter to the petitioner to suspend all the dispatches on the LC opened by M/s Maharashtra STC Ltd. On the same day, the petitioner informed M/s Sunvijay Rolling and Engineering Ltd. that it was not possible to suspend the dispatches as the goods were already placed at the port. M/s Sunvijay Rolling and Engineering Ltd. requested the petitioner vide letter e d
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