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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE D. MURUGESAN & THE HONOURABLE MR. JUSTICE M. SATHYANARAYANAN
Tamil Nadu Electricity Board rep. By its Secretary
Versus
M/s. Videocon Power Limited & Others
Original Side Appeal Nos.270 and 271 of 2008
decided on 27-01-2009
(B) Arbitration and Conciliation Act, 1996 (26 of 1996)-Sec.44, 47, 49-Foreign award-When award proceedings are contemplated outside India, award is a foreign award.
A conjoint reading of both the above clauses would show that the intention of the parties to the Power Purchase Agreement is that the award proceedings shall be outside India thereby meaning that such an award would only be a foreign award. Para 9(1)
(C) Arbitration and Conciliation Act, 1996 (26 of 1996)-Sec.44-Foreign award-Criteria to decide.
The Court while deciding the question as to whether the award was a foreign award or domestic award, must keep in mind the agreement as such and in the absence of any provision in the agreement either contrary to the arbitral proceedings in India or arbitrators to sign the award in India, merely because either arbitral proceedings conducted in India or the arbitrators have signed the award in India would by themselves not make arbitral award as a domestic award. Para 11
To determine, as to whether the award is a foreign award, the relevant test would be, firstly, the relationship between the parties must be commercial; secondly, the award must be made in pursuance of the agreement in writing; and thirdly, the award must be made in convention country. Para 12
(D) The Arbitration and Conciliation Act, 1996 (26 of 1996)-Sec.48, 49-Foreign award-Challenge-Jurisdiction of Court-Terms of the agreement decides.
The real test to find out as to whether a foreign award could be challenged under Part I of the Act, depends upon the terms of the agreement. Para 17
While holding that Part I also can be made applicable in respect of foreign awards one of the test would be such international commercial arbitration may be held in non-convention country. In the event, such arbitration is held in a convention country, like the one on hand, Part-II of the Act would alone apply to the arbitration. Para 17
(E) The Arbitration and Conciliation Act, 1996 (26 of 1996)-Sec.48-Foreign award-Execution-When Court may refuse to enforce.
Under sub-section (1) of section 48 of the Act, the Court may refuse to enforce a foreign award at request of the party against whom it is invoked, only if that party furnishes to the Court the proof. Clauses (a) to (e) of the sub-section of section 48 of the Act relates to such proof. Para 25
When there is a specific enactment contemplating a provision for appeal to the Supreme Court in respect of an order passed under Section 48 of the Act, the appeal under 15 of Letters Patent is not certainly maintainable.
Para 32
(F) The Arbitration and Conciliation Act, 1996 (26 of 1996)-Sec.50-Foreign award-Letters patent appeal-Not maintainable.
As against the order in Execution Petition, second appeal is not maintainable under Clause 15 of the Letters Patent. Para 33
Common Judgment: (D. Murugesan, J.)
The unsuccessful petitioner in both the Review Application and Original Petition before the learned single Judge viz., the Tamil Nadu Electricity Board is the Appellant in these appeals.
2. The following points arise for consideration in these appeals
.(1) Whether the award under challenge is a foreign award or domestic award?
.(2) Whether the Original Petition filed under Section 34 is maintainable if the award is a foreign award?
.(3) Whether the petition filed under section 48 for enforcement of a foreign award is maintainable before this Court?
.(4) Whether an appeal is maintainable against the award passed under Section 48 of The Arbitration and Conciliation Act, 1996?
3. The following few facts are necessary for consideration of the above questions:
.(a) The Tamil Nadu Electricity Board (herein after referred to as "the Board") initiated North Madras Thermal Power Project (NMTPP). The said project was to be implemented in three stages. The Board itself completed the Stage-I. Initially, the Board decided to undertake Stage-II as well and leaving the execution of Stage-III for private promoters. Later on, it was decided by the Government of Tamil Nadu that the execution of stage-II could also be contracted out to private promoters and accordingly offers were invited from the independent power producers. On 010. 1994, the Government of Tamil Nadu decided to entrust the Stage-II project to the appellant M/s. Videocon Power Limited (in short, "VPL"). A Memorandum of Understanding was also signed on 210. 1994 and the project to be set up was 1 X 500 MW After the memorandum of understanding was entered into, VPL requested the Board to consider the increase in the capacity of the project from 1 X 500 MW to 2 x 500 MW. The said request was accepted and a revised memorandum of understanding dated 18.02.1995 was entered into. After the said memorandum of understanding, VPL had again submitted first of their Draft Power Purchase Agreement (in short "PPA") only on 17.07.1995. The Board appointed a committee on 19.01.1996 to finalize the working arrangement for sharing of common facilities, which was an obligation under the memorandum of understanding. The Government of Tamil Nadu recommended to the Central Electricity Authority for issue of Techno Economic Clearance of the project on 19.03.1996 after emphasizing three important conditions viz., (1) the project cost should not exceed Rs.4.007 Crores/MW; (2) VPL has to absorb more than Rs.10 Crores towards sharing of common facilities as the tentative cost worked out to Rs.206 Crores;
.and (3) VPL has to erect a 400 KV gas insulated sub-station, in view of space constraint.
.(b) VPL took possession of the project site land on 28.03.1996 and the Central Electricity Authority cleared the Techno Economic Clearance of the project on 03.04.1996 subject to some conditions. When VPL requested the Board on 210. 1996 to initial the Draft Power Purchase Agreement to enable the Company to kick off the initial tie-up, the Board did not initial the Power Purchase Agreement (PPA) since VPL in its letter dated 24.06.1996 had stated that it is expected to have a few changes in the PPA after its preliminary discussion with the Indian Financial Institution and Foreign Banks. Subsequently, there were some correspondences, which ultimately resulted in a dispute between VPL and the Board. In the Board meeting held on 08.08.2000 it was found that VPL had not attained financial closure and the time had expired for such financial closure and hence the Board decided to withdraw escrow cover from VPL and to allot two covers to another named Independent Power Producers under different projects. Hence, a dispute arose between VPL and the Board. In terms of arbitral agreement, the dispute was referred for arbitration consisting of three Arbitrators. VPL appointed Mr.Justice M.L. Pendse (Retd.,) and Board appointed Mr.Justice S. Mohan (Retd.,). Mr. V.V. Veeder
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