Introduction
In a landmark decision the Supreme Court of India has dealt with various facets of arbitration law including the following
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Separability of arbitration clause/agreement from the underlying contract.
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Assistance of the court in making an arbitration clause workable within the permissible limits of law.
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Determination of seat of arbitration applying the closest and intimate connection to arbitration.
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Venue versus Seat of arbitration.
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Concurrent jurisdiction in arbitration proceedings.
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Principles governing anti-suit injunction.
The Supreme Court by its decision dated February 14, 2014 in of Enercon (India) Ltd & Ors V/s Enercon GMBH & Anr has clarified the position with regards to above , removing another possible hurdle that one could face in Commercial arbitration .
There were various agreements executed between the parties including an IPLA which contained the arbitration clause. The dispute pertained to holding supplies by Enercon GMBH (respondent) to Enercon (India) (appellant). Arbitration agreement invoked by Enercon GMBH was opposed by Enercon (India) contending that the IPLA was not a concluded contract hence the arbitration agreement was not valid.
Proceedings were simultaneously initiated in Daman Court, Bombay High Court, English courts and before the arbitrators and there were disputes relating to the seat of arbitration, pertaining to workability of arbitration clause, with respect to concurrent jurisdiction of Indian and English court in arbitration proceeding & the principles governing anti-suit injunction.
Ø IPLA was not a concluded contact since it was not in consonance with the agreed principles and as such the arbitration agreement did not come into existence.
Ø Clause 18.1 of the IPLA was incapable of being performed .The construction done by the HC to make it workable was not sustainable.
Ø While determining the Seat of arbitration the courts need to see the closest and intimate connection with arbitration. In this case, seat was to be India irrespective of the venue of arbitration being London.
Ø Since the Seat of arbitration in in India, the courts of England would have no jurisdiction.
Enercon Gmbh’s Case:
Ø The court is required to see whether there is a valid arbitration agreement and not whether there is a concluded contract. The arbitrator shall decide with respect to the formation of underlying contract.
Ø Arbitration clause is not non-workable .The object underlying Section 10 and 11 are to avoid failure in appointment of arbitrator. The parties had the intention of arbitrate which is clear from the agreement and subsequent conduct of parties. The sentence that a third arbitrator shall be appointed by the two arbitrators has been missed out by the draftsman. This can be supplied by the court to make the arbitration clause workable.
Ø The seat is in London and Not India. London was mentioned as Venue and it has to be interpreted as seat unless contrary intention has been expressed.
A lot of judgments were taken into consideration while deciding on the issue. It was observed that in an international commercial arbitration that Venue of arbitration can often be different from the seat of arbitration. In such circumstances the hearing of the arbitration shall be conducted at the venue fixed by the parties but this would not bring about a change in the seat of the arbitration. The intention of the parties with regards to the seat of arbitration cannot be presumed on the basis of the venue fixed by the parties. In the present case, the (i) laws governing the substantive contract,(ii) the law governing the agreement to arbitrate & the performance of that agreement (iii) the law governing the conduct of the arbitration were Indian leading to the presumption that the seat of arbitration was to be India and London was only chosen to be a venue .
Concurrent jurisdiction in arbitration proceedings
Hence, it was held that that concurrent jurisdiction in arbitration proceedings in the present case was not sustainable.