2008 Supreme(SC) 1773

2009(1) Supreme 8
SUPREME COURT OF INDIA
B. Sudershan Reddy, J.
VISA International Ltd. — Applicant
versus
Continental Resources (USA) Ltd. — Respondent
Arbitration Petition. 16 of 2007
Decided on : 02-12-2008

IMPORTANT POINTS
Power exercised by the Chief Justice of India or the Designated Judge under Section 11 (6) is a judicial power.

Headnote:(a)Arbitration and Conciliation Act, 1996 – Section 11 (6) – Power exercised by the Chief Justice of India or the Designated Judge under Section 11 (6) is not an administrative power – It is a judicial power. (Para 10)

       (2005)8 SCC 618 – Relied upon.

       (b)Arbitration and Conciliation Act, 1996 – Section 7 – Arbitration agreement is not required to be in any particular form – An arrangement that if disputes arise between the parties in respect of the subject matter of contract such dispute shall be referred to arbitration, then such an arrangement would spell out an arbitration agreement. (Para 15)

       (1980) 4 SCC 556; (1993) (3) SCC 137; (2003) 7 SCC 418 – Relied upon.

       (2007) 5 SCC 703 – Distinguished.

       (c)Interpretation – Contract – One cannot take into consideration terms of other contracts especially when the contract is not between the same parties. (Para 24)

       (d)Arbitration and Conciliation Act, 1996 – Section 11 – No party can be allowed to take advantage of inartistic drafting of arbitration clause in any agreement as long as clear intention of parties to go for arbitration in case of any future disputes is evident from the agreement and material on record including surrounding circumstances. (Para 26)

       (e)Arbitration and Conciliation Act, 1996 – Section 11 – Clear intention to refer the disputes to arbitration in accordance with the provisions of the Act is clearly evident from Article VI incorporated in the agreement. (Para 33)

       [1968] Vol.1 Lloyd’s Law Reports 163; [2001] Vol.2 LLR 268 – Distinguished.

       (f)Arbitration and Conciliation Act, 1996 – Section 11 – All scope of settlement having been closed and the issue being live, provisions of the Act can validly be invoked – A clear case is made out for appointment of an arbitrator to decide the disputes between the parties. (Paras 38 and 41)

       (2005)8 SCC 618 – Relied upon.

       Facts of the case :

       1. The applicant is engaged in the business of providing services in international trading of Minerals, Metals and Ship Chartering. The respondent with an intention to make substantial investments to set up an integrated aluminium complex in Orissa with an Alumina refinery to be catered by the bauxite deposits of Gandhamardan Mines entered into a Memorandum of Understanding with Orissa Mining Corporation Ltd. for mining of bauxite deposits from the Gandhamardan Mines situated in the State of Orissa. In order to help set up integrated aluminium complex in Orissa, OMC had decided and agreed to enter into a Joint Venture Agreement with the respondent on certain terms and conditions.

       2. The applicant relying upon representations and assurances had accepted the proposal for setting up of the said aluminum complex in joint venture with the respondent. A MOU dated 14.2.2005 was executed by and between the applicant and the respondent whereby and whereunder it was agreed that the applicant and the respondent would incorporate a company in the name and the style of “VISA Aluminum Ltd” for the purpose of setting up an integrated Aluminum Complex. The said MOU was followed by an agreement dated 15.2.2005 executed between the parties. In terms of the said agreement 26% of the issued and paid up equity shares of the proposed company to be retained by the respondent and the remaining 74% of the shareholding to be held by the applicant. The applicant agreed to bear a sum of US$ 7,40,000 being 74% of US$ 10,00,000 to have been incurred by the respondent on the pre-project activities. Day to day control was agreed to be that of the applicant exclusively. The applicant also undertook to pay a sum of US$ 22,50,000 to the respondent for the future overseas costs in terms of the said agreement.

       3.Article IV of the said agreement stipulated that the agreement to be effective upon signing by both the parties with immediate effect. The whole controversy centers around the interpretation of Article VI in the said agreement which according to the applicant contains the Arbitration Clause.

       4.On 31st August, 2006 the respondent addressed a letter to the applicant, inter alia, alleging the agreement entered into between them is not ‘appropriate and is obsolete’ as it does not address the changes in the OMC draft agreement itself. The respondent proposed a new agreement to be prepared on the lines suggested therein.

       5.The applicant asserted that the agreement dated 15.2.2005 entered into by and between the parties continued to be valid and subsisting and whereas the respondent contended that the agreement became unworkable.

       6.On 25.9.2006 the respondent informed the applicant that MOU dated 14.2.2005 and agreement dated 15.2.2005 “stand discharged and CRL stands discharge” of its obligations under the said agreement. MOU dated 14.2.2005 and agreement dated 15.2.2005 was treated as cancelled. The applicant vide letter dated 6.3.2007 informed the respondent that its action of unilaterally terminating the said MOU and also the agreement was not acceptable to it.

       7.The applicant accordingly invoked the arbitration clause duly informing the respondent that disputes thus have arisen out of the said MOU and the agreement which are required to be resolved by the Arbitrator. The respondent in its turn vide letter dated 3.4.2007 rejected the names suggested by the applicant to be appointed as Arbitrator for the reasons that (a) the arbitration will not be cost effective; and (b) the arbitration is pre-mature.

       8.In the circumstances the present application has been filed by the applicant under Section 11(5) & (9) of the Arbitration and Conciliation Act, 1996.

       Finding of the Court :

       A clear case is made out for appointment of an arbitrator to decide the disputes between the parties.

       Result : Arbitrator appointed.