Summary of Judgment Enercon (India) Ltd. and Ors. Vs. Respondent: Enercon GMBH and Anr. dated;14.02.2014

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 2086 of 2014 (Arising out of SLP (C) No. 10924 of 2013) and Civil Appeal No. 2087 of 2014 (Arising out of SLP (C) No. 10906 of 2013)

Decided On: 14.02.2014

Appellants: Enercon (India) Ltd. and Ors.
Vs.
Respondent: Enercon GMBH and Anr.

Hon'ble Judges/Coram:Surinder Singh Nijjar and Fakkir Mohamed Ibrahim Kalifulla, JJ.

Citation: 2014(4)ABR713, 2014III AD (S.C.) 161, AIR2014SC3152, 2014(1)ARBLR257(SC), [2014]119CLA104(SC), (2014)2CompLJ1(SC), JT2014(3)SC49, 2014(2)SCALE452, (2014)5SCC1

Contract - Conclusiveness of contract - Is the IPLA a valid and a concluded contract? Is it for the Court to decide this issue or have the parties intended to let the arbitral tribunal decide it? - It was contended on behalf of Appellant that mere signing of a document will not make it a concluded document, if in law, the contract is not concluded - Held, it was not disputed that there was a legal relationship between the parties of a long standing - Section 44 of the Indian Arbitration Act, 1996 applies to arbitral awards of differences between persons arising out of legal proceedings - Such a relationship may be contractual or not, so long it is considered as commercial under the laws in force in India - Further, that legal relationship must be in pursuance of an agreement, in writing, for arbitration, to which the New York Convention applies - Court can decline to make a reference to arbitration in case it finds that the arbitration agreement is null and void, inoperative or incapable of being performed - There were no pleadings to that effect in the plaint

- Daman Trial Court findings that the contract was null and void and not based on free consent were rendered in the absence of relevant pleadings - Before the present Court it was not pleaded that the arbitration agreement was without free consent, or had been procured by coercion, undue influence, fraud, misrepresentation or was signed under a mistake - In other words, it was not claimed that the agreement was null and void, inoperative and incapable of being performed as it violated any of the provisions under Sections 14, 15, 16, 17, 18, 19, 19A and 20 of the Indian Contract Act, 1872 - Submission was that the matter cannot be referred to arbitration as the IPLA, containing the arbitration clause/agreement, was not a concluded contract - This would not fall within the parameters of an agreement being "null and void, inoperative or incapable of being performed", in terms of Sections 14, 15, 16, 17, 18, 19 and 20 of the Indian Contract Act, 1872 - These provisions set out the impediments, infirmities or eventualities that would render a particular provision of a contract or the whole contract void or voidable - These are the defences to resist a claim for specific performance of a concluded contract; or to resist a claim for damages for breach of a concluded contract - Issue as to whether there was a concluded contract between the parties can be left to the Arbitral Tribunal, though not for the same reasons - Further, the arbitration agreement contained in relevant clauses of IPLA was very widely worded and included all the disputes, controversies or differences concerning the legal relationship between the parties - It would include the disputes arising in respect of the IPLA with regard to its validity, interpretation, construction, performance, enforcement or its alleged breach - Submission that the arbitration agreement would perish as the IPLA has not been finalized was accordingly rejected also because the arbitration clause (agreement) was independent of the underlying contract, i.e. the IPLA containing the arbitration clause - Concept of separability of the arbitration clause/agreement from the underlying contract is a necessity to ensure that the intention of the parties to resolve the disputes by arbitration does not evaporate into thin air with every challenge to the legality, validity, finality or breach of the underlying contract

Contract - Benefits of arbitration contract - Even if there is a valid arbitration agreement/clause, can the parties be denied the benefit of the same on the ground that it is unworkable? - Held, the Courts have to adopt a pragmatic approach and not a pedantic or technical approach while interpreting or construing an arbitration agreement or arbitration clause - It would be the duty of the Court to make the same workable within the permissible limits of the law, without stretching it beyond the boundaries of recognition - In other words, a common sense approach has to be adopted to give effect to the intention of the parties to arbitrate - In such a case, the court ought to adopt the attitude of a reasonable business person, having business common sense as well as being equipped with the knowledge that may be peculiar to the business venture - Arbitration clause cannot be construed with a purely legalistic mindset, as if one is construing a provision in a statute - It is a well recognized principle of arbitration jurisprudence in almost all the jurisdictions, especially those following the UNCITRAL Model Law, that the Courts play a supportive role in encouraging the arbitration to proceed rather than letting it come to a grinding halt - Another equally important principle recognized in almost all jurisdictions is the least intervention by the Courts - In construing an arbitration clause, it is not necessary to employ the strict rules of interpretation which may be necessary to construe a statutory provision - Court would be well within its rights to set right an obvious omission without necessarily leaving itself open to the criticism of having reconstructed the clause - provisions contained in Sections 8, 11 and 45 of the Indian Arbitration Act, 1996 are machinery provisions to ensure that parties can proceed to arbitration provided they have expressed the intention to Arbitrate - This intention can be expressed by the parties, as specifically provided under Section 7 of the Indian Arbitration Act, 1996 by an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement - Such intention can even be expressed in the pleadings of the parties such as statements of claim and defence, in which the existence of the agreement is alleged by one party and not denied by the other - In view of the above the parties can be permitted to proceed to arbitration

Arbitraion - 'Seat' of arbitration - Determination thereof - Held, there were very strong indicators to suggest that the parties always understood that the seat of arbitration would be in India and London would only be the "venue" to hold the proceedings of arbitration - Law governing the Contract, the law governing the arbitration agreement and the law of arbitration/Curial law were all stated to be Indian - In the present case, even though the venue of arbitration proceedings has been fixed in London, it cannot be presumed that the parties have intended the seat to be also in London - In an -International Commercial Arbitration, venue can often be different from the seat of arbitration - In such circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but this would not bring about a change in the seat of the arbitration

Arbitration - Concurrent jurisdiction - Whether by having held that the seat of arbitration is in India, the Bombay High Court committed an error in concluding that the Courts in England would have concurrent jurisdiction - Held, yes - This would be contrary to underlying principle of the policy of dispute resolution through arbitration - Whole aim and objective of arbitration is to enable the parties to resolve the disputes speedily, economically and finally

Contract - Anti-suit injunction - Held, conclusion of the Bombay High Court that the anti-suit injunction granted by the Daman Trial Court has been correctly vacated by Daman Appellate Court wass overruled and hence set aside