Having dealt with the questions of law, I turn to the facts of
the present case. The Representation Agreements in force are signed
by the DirectorTerry L. Peteete for and on behalf of the
applicantIntegrated Sales Services Limited, and by Rattan Ram
Pathak, the nonapplicant No.3(i), in his capacity as the Managing
Director of the nonapplicant No.1DMC Management Consultants
Ltd., containing the clause of arbitration, making it subject to the laws
of State of Missouri, U.S.A. Neither the nonapplicant No.2Arun Dev
s/o Govindvishnu Upadhyaya, nor the applicant No.3Gemini Bay
Transcription Pvt. Ltd., through its Directors(i) Rattan Ram Pathak,
and (ii) Naresh Kumar Kopisetti, have signed the Representation
Agreements in force in their individual capacity. Except the
nonapplicant No.2Arun Dev s/o Govindvishnu Upadhyaya, none of
the other individual nonapplicants in this application were joined as
the partyrespondents in the dispute before the International
Arbitration Tribunal. The respondents before the said Tribunal were
DMC Management Consultants Ltd., Arun Dev s/o Govindvishnu
Upadhyaya, Gemini Bay Consultants Ltd., and Gemini Bay
Transcription Pvt. Ltd.
35. The nonapplicant Nos.2 and 3 have neither submitted
themselves to the arbitration nor to the composition of the
International Arbitration Tribunal. There did not exist or subsist any
arbitration agreement between the applicant and the nonapplicant
Nos.2 and 3. There is nothing in the Representation Agreements in
force, which permit the said Tribunal to exercise jurisdiction over the
nonsignatories to it. The invocation of the principle of lifting of
corporate veil and holding the nonapplicant Nos.2 and 3 as
“alter ego” of the nonapplicant No.1Company and on the basis of it,
to hold them jointly and severally liable to pay the amount under the
award, is totally without jurisdiction and cannot be sustained. Merely
because the nonapplicant Nos.2 and 3 have participated in the
proceedings before the International Arbitration Tribunal, they cannot
be estopped from raising the question of jurisdiction of the said
Tribunal in response to the application under Section 49 of the said
Act. The question of operating estoppel, acquiescence, surrender, etc.,
to the jurisdiction of the said Tribunal, does not at all arise. The
award passed by the International Arbitration Tribunal, in the present
case, is, therefore, hit by the conditions in clauses (c), (d) and (e) of
subsection (1) of Section 48 of the said Act. The said award cannot,
therefore, be enforced in India against the nonapplicant Nos.2 and 3
by making a decree of the Court.
36. Though the International Arbitration Tribunal had no
jurisdiction to invoke the principle of lifting of corporate veil and
holding the nonapplicant Nos.2 and 3 as “alter ego” of the
nonapplicant No.1Company, this Court is competent under
Section 49 of the said Act to go into all these aspects of the matter and
hold that the nonapplicant Nos.1, 2 and 3 are jointly liable to pay the
amount covered by the award passed by the said Tribunal. However,
the applicant has to make out such a case in the proceedings under
Section 49 of the said Act. After going through the contents of the
application, I do not find that any such case is made out by the
applicant. In spite of repeated queries, Shri Deven Chauhan, the
learned Advocate for the applicant, makes a statement that this is not
the case with which the applicant has come forward before this Court
while invoking the jurisdiction under Section 49 of the said Act. Had
such a case been made out, then the extent of liability of the
nonapplicant No.2, being the Director of the nonapplicant
No.1Company, was required to be judged on the basis of the
provisions of the Companies Act, 1956. In view of this, the
nonapplicant Nos.2 and 3 cannot be held in this proceeding jointly
liable to pay the amount covered by the arbitration award, along with
the nonapplicant No.1Company.
37. Shri Deven Chauhan for the applicant submits that the
nonapplicant Nos.2 and 3 were made parties in the proceedings
before the International Arbitration Tribunal in their individual
capacity and they are also made parties in the same capacity before
this Court. The award passed against them is required to be executed
against them individually by attaching their properties if such occasion
arises. In order to make the nonapplicant Nos.2 and 3(i) and (ii)
individually or severally liable to pay the sum covered by the arbitral
award in question, it must be shown that they have signed the
arbitration agreement as guarantors or sureties for the debts due or
recoverable arising out of or in connection with the contract in
question against the nonapplicant No.1, of which they are the
Directors. In such an event, the liability of the guarantor or surety will
be coextensive with that of the principal debtor, and consequently
their personal assets may be attached in execution of the decree. This
is not the case with which the applicant has approached this Court
under Section 49 of the said Act. Hence, the award passed in question
cannot be enforced against them by passing a decree.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR
Misc. Civil Application No.1319 of 2015
Integrated Sales Services Limited,
V
DMC Management Consultants Ltd.,
Coram : R.K. Deshpande, J.
Dated: 18th April, 2016
Citation: 2016(6) MHLJ195
2. The International Arbitration Tribunal has passed an award
on 2832010 in favour of the applicantIntegrated Sales Services Ltd.,
a Company based in Hong Kong, holding the nonapplicant No.1DMC
Management Consultants Ltd., the applicant No.2Arun Dev s/o
Govindvishnu Uppadhyaya, and the nonapplicant No.3Gemini Bay
Transcription Private Ltd. jointly and severally liable to pay the
applicantCompany the sum of 6,948,100 dollars within a period of
thirty days from the date of the award, failing which the
applicantCompany would become entitled to recovery of interest
computed from the date of termination of the Representation
Agreement (2272008) on the total sum of the award at the highest
legal rate allowable under the Delaware law. The nonapplicants are
also held jointly and severally liable to reimburse the administrative
fees and expenses of the Tribunal totaling 14,000 dollars, the
compensation and expenses of the Arbitrator totaling 49,903 dollars,
and the fees and expenses incurred in the matter totaling
63,903 dollars.
3. This application is filed under Section 49 of the Arbitration
and Conciliation Act, 1996 read with Order XXI, Rule 1 of the Code of
Civil Procedure for execution of the arbitral award dated 2832010.
Initially, such application was filed before the Principal District Judge
at Nagpur, who heard the matter and closed it for judgment on
5102015. By virtue of subsequent amendment introduced to
Section 47 of the Arbitration and Conciliation Act, 1996 with effect
from 23102015, the jurisdiction to entertain, try and decide such
application is conferred upon the High Court and the learned Principal
District Judge ceased to have any jurisdiction. However, the learned
Principal District Judge, by his final judgment dated 5112015, has
rejected all the objections raised to the executability of the award and
made the said award as a decree of the Court to be executed.
4. The learned Advocates appearing for the parties agree that
the judgment delivered by the learned Principal District Judge in this
matter on 5112015 is without jurisdiction and, therefore, this
application is moved before this Court for making the arbitral award
as a decree of the Court. The nonapplicants have raised several
objections, including those under Section 48 of the said Act, claiming
refusal to enforce the award passed by the International Arbitration
Tribunal, which are required to be decided now afresh. The parties
have agreed that the question of leading oral evidence in support of
their rival contentions does not at all arise and the pure questions of
law are raised, which can be decided on the basis of the documents
which are admitted and placed on record.
5. The facts in detail are as under :
On 2892000, the first Representation Agreement between
the Hong Kong based applicantIntegrated Sales Services Ltd.
(described therein as “the representative”) signed by the
DirectorTerry L. Peteete, and the nonapplicant No.1India based
DMC Management Consultants Ltd. at Nagpur, registered under the
Companies Act, 1956 (described therein as “the Company”) by one
Rattan Pathak as the Managing Director, was entered into for
providing assistance to the nonapplicant No.1Company to sell its
goods and services to prospective customers and to identify potential
services of investment and investors, upon the terms and conditions
agreed therein. The said agreement was brought into force with effect
from 3102000.
6. The first amendment to the said Representation Agreement
was signed on behalf of the applicantCompany by Terry L. Peteete;
and on behalf of the nonapplicant No.1Company, by Arun Dev
Upadhyaya, the nonapplicant No.2. By the second amendment signed
by Terry L. Peteete on behalf of the applicantCompany, and by one
Rattan Pathak on behalf of the nonapplicant No.1Company, the first
amendment was declared as null and void. Thus, the relationship
between the parties to the Representation Agreement was governed by
the agreement which came into force on 3102000 and the second
amendment to it.
7. Clause 8(d) of the Representation Agreement brought into
force on 3102000 deals with the interpretation, amendment, law,
arbitration and assignments. It makes the agreement subject to the
laws of State of Missouri, U.S.A., and provides that in the event that a
dispute arises in connection with this agreement, such dispute shall be
referred to a single arbitrator in Kansas City, Missouri, U.S.A. The
applicantCompany invoked the aforesaid clause of the arbitration and
lodged its monetary claim before the International Arbitration
Tribunal, which was registered as ICDR Case No.50181T0032709,
making DMC Management Consultants Ltd, DMC Global Inc., Arun
Dev Upadhyaya, Gemini Bay Consultants Ltd., and Gemini Bay
Transcription Pvt. Ltd. as the respondents. The parties appeared
before the International Arbitration Tribunal and filed their replies and
objections. Although, the Arbitral Tribunal looked at the objections
raised to its jurisdiction to entertain, try and decide the dispute raised
before it, the Tribunal deferred the decision on it, stating that it shall
be decided along with the dispute on merits.
8. The Arbitral Tribunal framed the following issues :
“1. Does the “alter ego” doctrine warrant piercing the
corporate veil?
2. Was there a breach of the Representation Agreement and
by whom?
3. Should damages be awarded, and if the answer is yes,
how much?
On the first issue, the Tribunal has held that DMC Global Inc.
is a wholly owned subsidiary of DMC Management Consultants Ltd.,
and both are jointly referred to as “DMC”. Shri Arun Dev Upadhyaya
is an individual entrepreneur, shareholder and former Director of
DMC. Gemini Bay Consultants Ltd. and its wholly owned subsidiary
Gemini Bay Transcription Pvt. Ltd. (jointly referred to as “Gemini
Bay”) are unrelated Corporations. The Tribunal holds that Shri
Upadhyaya and Gemini Bay have challenged the jurisdiction of the
Tribunal on the ground that, as non signatory parties to the
Representation Agreement, they are not subject to the arbitration
clause it contains, but neither did participate directly in the arbitration
process. The Tribunal finds that the law applicable was Delaware law
and hence the precedents of the Delaware Court of Chancery must be
followed. It holds that the control of DMC by Shri Upadhyaya and the
collusion with Shri Pathak and the use of the corporate forms of DMC
and Gemini Bay were simply a “facade” used to shield or coverup the
unjust result of eliminating ISS. It further holds that “alter ego”
doctrine is, therefore, an appropriate justification for lifting the
corporate veil. On the second issue, the Tribunal has observed that
there was a breach of Representation Agreement by Shri Upadhyaya,
DMC, and Gemini Bay colluded together and, therefore, held them
jointly and severally liable to breaching the Representation Agreement
by terminating it abruptly in violation of the indefinite term of that
contract and by refusing to pay commissions as obligated under the
Representation Agreement.
9. The operative portion of the final award passed by the
Arbitral Tribunal on 2832010 is reproduced below :
“1. Within thirty (30) days from the date of transmittal of
this Award to the Parties, DMC Management Consultants, Ltd,
DMC Global, Inc., Arun Dev Upadhyaya, Gemini Bay
Consulting Limited and Gemini Bay Transcription Private
limited, hereinfter referred to as Respondents, shall jointly and
severally pay to Integrated Sales Services Ltd, hereinafter
referred to as Claimant, the sum of six Million, nine hundred
and fortyeight thousand, one hundred dollars
($6,948,100.00).
2. In the event that the award is not fully paid within thirty
days from the date of this Award, Claimant shall be entitled to
also seek recovery of interest computed from the date of
termination of the Representation Agreement (July 22, 2008)
on the total sum of the Award at the highest legal rate
allowable under Delaware law.
3. The administrative fees and expenses of the International
Centre for Dispute Resolution (“ICDR”) totaling fourteen
thousand dollars ($14,000.00), and the compensation and
expenses of the arbitrator totaling fortynine thousand, nine
hundred and three dollars ($49,903.00), shall be borne
entirely, jointly and severally by Respondents. Therefore,
Respondents shall jointly and severally reimburse Claimant the
sum of sixtythree thousand, nine hundred and three dollars
($63,903.00), representing that portion of said fees and
expenses (including the Arbitrator's fees and expenses)
previously incurred by Claimant.
4. Since the arbitration clause did not provide for the award
of the attorneys' fees, Claimant and Respondents shall be
responsible for their own attorneys' fees, costs and expenses.
5. As ordered by this tribunal, all the costs and expenses of
the video conference call held on Friday, March 5, 2010 shall
be borne exclusively by Respondents but Claimant shall be
responsible for the costs and expenses of its attorneys present
during that call.
6. This award is in full settlement of all claims and
counterclaims submitted to this Arbitration. Any claim or
counterclaim not specifically awarded is hereby denied.”
10. Heard Shri Deven Chauhan, the learned Advocate for the
applicantCompany; Shri Willson Mathew, the learned Advocate for
NonApplicant No.1Company; Shri Sunil Manohar, the learned Senior
Advocate, assisted by Advocates Shri A.G. Gharote and Ms Rohini
Jaiswal, for the nonapplicant No.2; and Shri Anand Jaiswal, the
learned Senior Advocate, assisted by Advocate Shri Shyam Dewani,
for the nonapplicant No.3.
11. Shri Sunil Manohar and Shri Anand Jaiswal, the learned
Senior Advocates, have urged that the Arbitral Tribunal has no power
to lift the corporate veil and it is only a Court which can lift the
corporate veil, and hence the finding by the Arbitral Tribunal on this
aspect was without jurisdiction. The reliance is placed upon the
judgment rendered by the Division Bench of this Court
on 592006 in Appeal No.658 of 2006 in Arbitration Petition No.295
of 2006 (Hemant D. Shah and others v. Chittaranjan D. Shah and
others) and the common judgment delivered by the learned Single
Judge of this Court (Shri R.D. Dhanuka, J.) on 2842015 in
Arbitration Petition No.587 of 2014 and other connected matters in
Oil and Natural Gas Corporation Ltd. v. M/s. Jindal Drilling and
Industries Limited. Inviting my attention to Section 44 of the
Arbitration and Conciliation Act, 1996, it is urged that so far as the
nonapplicant Nos.2 and 3 are concerned, the arbitral award cannot be
treated as “foreign award” for the two reasons, viz. (i) that the nonapplicant
Nos.2 and 3 are not signatories to the Representation
Agreement for arbitration to which the Convention setforth in the
First Schedule under the said Act applies; and (ii) that there exists no
legal relationship between them and the applicant, out of which, the
differences or the disputes before the Arbitral Tribunal arose. Further
inviting my attention to Sections 46 and 48 of the said Act, it is urged
that even if the arbitral award is described as “foreign award” covered
by Section 44 of the said Act, the enforcement of such award needs to
be refused on the grounds mentioned in clauses (b), (c) and (d) of
subsection (1) of Section 48 of the said Act, and, therefore, the award
does not bind the parties and cannot be made a decree of this Court.
Shri Mathew, the learned Advocate for the nonapplicant
No.1/Company, has invited my attention to clause (b) of subsection
(2) of Section 48 of the said Act to urge that the enforcement of the
award against the nonapplicant No.1 would be contrary to the public
policy of India.
12. Shri Deven Chauhan, the learned Advocate for the
applicantCompany, has invited my attention to paras 99, 102, 103,
103.1, 103.2, 104 and 105 of the decision of the Apex Court in the
case of Chloro Controls India Private Limited v. Severn Trent Water
Purification Inc. and another, reported in (2013) 1 SCC 614, to urge
that joinder of a nonsignatory party to arbitration is not unknown to
the arbitration jurisprudence and various legal bases may be applied to
bind a nonsignatory to an arbitration agreement. The doctrines of
agentprincipal relations, apparent authority, piercing of veil (also
called “alter ego”), joint venture relations, succession and estoppel are
the issues, which can be dealt with by the Arbitral Tribunal. Relying
upon the decision of the learned Single Judge of this Court
(Shri R.D. Dhanuka, J.) delivered on 842015 in Arbitration Petition
No.75 of 2012 (POL India Projects Limited v. Aurelia Reederei Eugn
Friederich GmbH Schiffahrtsgesellschaft & Company KG), it is urged that
once the issues are raised by the nonapplicants in the objections filed
before the Arbitral Tribunal, which have been negatived, resulting in
passing an arbitral award, it could only be challenged by adopting
remedy provided under the law applicable. He has relied upon paras
81, 82, 87, 88, 91, 97, 101, 102, 104, 105, 106, 111, 119 and 120 of
the aforesaid decision of this Court. It is further urged that the
nonapplicants were parties to the proceedings before the Arbitral
Tribunal and the only remedy was to challenge the arbitral award
before the Court of competent jurisdiction in terms of the law agreed
to be applicable under clause 8(d) of the Representation Agreement,
which was in the present case, the United States District Court,
Missouri. He has invited my attention to the certificate produced from
the United States District Court at Missouri, stating that no appeal has
been filed against the arbitral award in question, which is on page 114
of this application.
13. From the rival submissions, the questions, which fall for
determination by this Court, are as under :
Sr.No. Questions Answers
1. Whether the arbitral award dated 2832010
passed by the International Arbitration Tribunal
can be considered as the “foreign award” within
the meaning of Section 44 of the Arbitration and
Conciliation Act, 1996?
Yes
2. Whether the International Arbitration Tribunal
has jurisdiction to pass an award against the
nonapplicant Nos.2 and 3, who are nonsignatories
to the arbitration agreement,
recording a finding that they are the “alter ego”
of the nonapplicant No.1Company?
No
3. Once the International Arbitration Tribunal
decides the question of its own jurisdiction,
which can be challenged in the forum provided
in the law applicable (in the present case, the law
of the State of Missouri, U.S.A.) whether this
Court, acting under Section 49 of the said Act,
can go behind such award to record the findings
contrary to the contents of such award and
thereby refuse to make it a decree of a Court?
Yes
Chapter I in Part II of the said Act containing
Sections 44 to 52 is a complete code in respect of the enforcement of
certain foreign awards. In order to answer the aforesaid questions, the
scheme for enforcement of award and the extent and manner of
judicial interference in setting aside the award permissible under the
said Act, need to be seen.
As to Question No.1 :
14. Section 44 under the said Act contains the definition of
“foreign award”, and it runs as under :
“44. Definition.In this Chapter, unless the context otherwise
requires, “foreign award” means an arbitral award on
differences between persons arising out of legal relationships,
whether contractual or not, considered as commercial under
the law in force in India, made on or after the 11th day of
October, 1960
(a) in pursuance of an agreement in writing for
arbitration to which the Convention set forth in the First
Schedule applies, and
(b) in one of such territories as the Central Government,
being satisfied that reciprocal provisions have been made
may, by notification in the Official Gazette, declare to be
territories to which the said Convention applies.”
The aforesaid provision states that unless the context
otherwise requires, “foreign award” means an arbitral award on
differences between persons arising out of legal relationships, whether
contractual or not, considered as commercial under the law in force in
India, made on or after the 11th day of October, 1960, in pursuance of
an agreement in writing for arbitration to which the Convention set
forth in the First Schedule applies. The foreign award, therefore,
contains an adjudication over the differences between the persons
arising out of the legal relationships, considered as commercial under
the law in force in India. The “legal relationships” contemplated must
contain in the agreement in writing for arbitration in accordance with
the Convention set forth in the First Schedule.
15. Clause 1 under Article II of the First Schedule states that each
Contracting State shall recognise an agreement in writing under which
the parties undertake to submit to arbitration all or any differences
which have arisen or which may arise between them in respect of
defined legal relationship, whether contractual or not, concerning a
subjectmatter capable of settlement by arbitration. Clause 2 therein
states that the term “agreement in writing” shall include an arbitral
clause in a contract or an arbitration agreement, signed by the parties
or contained in an exchange of letters or telegrams. Thus, the
existence of the defined legal relationship in writing, undertaking to
submit to arbitration all or any differences concerning a subjectmatter
capable of settlement by arbitration, is the sine qua non to constitute a
“foreign award”, as defined under Section 44 of the said Act, as has
been rightly urged by the learned Senior Advocate
Shri Sunil Manohar.
16. It is not in dispute that the Representation Agreements in
force containing clause 8(d) of arbitration brought into force from
3102000 undertaking to submit to arbitration all or any differences
concerning the subjectmatter capable of settlement by arbitration, are
signed by the Director Terry L. Peteete of the applicantCompany, and
by the nonapplicant No.3(i)Rattan Ram Pathak in his capacity as the
Managing Director of the nonapplicant No.1Company. There exists a
defined legal relationship in writing in the form of the Representation
Agreements. The arbitral award passed on 2832010 by the
International Arbitration Tribunal is on the differences between the
parties to the arbitration agreement. The said award, therefore,
satisfies the test of “foreign award”, as defined under Section 44 of the
said Act. The question No.(1) is answered accordingly.
As to Question No.2 :
17. Section 45 of the said Act confers a power upon a judicial
authority to refer the parties to arbitration, and it is reproduced
below :
“45. Power of judicial authority to refer parties to
arbitration. Notwithstanding anything contained in Part I or
in the Code of Civil Procedure, 1908 (V of 1908), a judicial
authority, when seized of an action in a matter in respect of
which the parties have made an agreement referred to in
Section 44, shall, at the request of one of the parties or any
person claiming through or under him, refer the parties to
arbitration, unless it finds that the said agreement is null and
void, inoperative or incapable of being performed.”
Perusal of the aforesaid provision shows that the jurisdiction
of a judicial authority under the aforesaid provision is twofold
(i) to refer the parties to arbitration, if it finds that the matter pending
before it is such that in respect of it the parties have made an
agreement referred to in Section 44 of the said Act, and (ii) to decide
the question as to whether the arbitration agreement produced before
it is null and void, inoperative or incapable of being performed.
18. In the decision of the Apex Court in the case of Chloro
Controls India Private Limited, cited supra, relied upon by
Shri Deven Chauhan, the learned Advocate for the applicant, the Apex
Court was considering the question of invocation of jurisdiction of the
Court under Section 45 of the said Act, and in para 59, it holds that
the applicant should satisfy the prerequisites stated in Section 44 of
the said Act. In para 63, the Apex Court holds that for proper
interpretation and application of Chapter I of Part II, it is necessary
that those provisions are read in conjunction with Schedule I of the
Act. To examine the provisions of Section 45 without the aid of
Schedule I would not be appropriate as that is the very foundation of
Section 45 of the said Act. Para 83 of the said decision being relevant,
is reproduced below :
“83. Where the court which, on its judicial side, is seized of
an action in a matter in respect of which the parties have made
an arbitration agreement, once the required ingredients are
satisfied, it would refer the parties to arbitration but for the
situation where it comes to the conclusion that the agreement is
null and void, inoperative or incapable of being performed.
These expressions have to be construed somewhat strictly so as
to ensure that the court returns a finding with certainty and on
the correct premise of law and fact as it has the effect of
depriving the party of its right of reference to arbitration. But
once the court finds that the agreement is valid then it must
make the reference, without any further exercise of discretion
(refer General Electric Co. v. Renusagar Power Co. (1987) 4
SCC 137). These are the issues which go to the root of the
matter and their determination at the threshold would prevent
multiplicity of litigation and would even prevent futile exercise
of proceedings before the Arbitral Tribunal.”
It is thus a mandate of Section 45 of the said Act to refer the
parties to arbitration if the judicial authority finds that the matter
pending before it is in respect of the subject covered by an agreement
referred to in Section 44 of the said Act. However, the right to
reference cannot be construed strictly as an indefeasible right. One
can claim the reference only upon satisfaction of the prerequisites
stated under Sections 44 and 45 read with Schedule I of the said Act.
Thus, it is a legal right, which has its own contours and is not an
absolute right, free of any obligations/limitations, as has been held in
para 69 of the said decision. If the judicial authority decides that the
arbitration agreement produced before it is null and void, or
inoperative, or incapable of being performed, it has to refuse to refer
the parties to arbitration. This provision covers or deals with the stage
before the parties are referred to arbitration.
19. In a situation where the parties go before the Arbitral
Tribunal without involvement of the judicial authority, as
contemplated by Section 45 of the said Act, a dispute may be raised
before the Arbitral Tribunal that the arbitration agreement in question
is nonexistent, or is null and void, inoperative, or incapable of being
performed. A dispute may also be raised about the jurisdiction of the
Arbitral Tribunal to pass an award against the persons or parties, who
are not signatories to the arbitration agreement. The Arbitral Tribunal
may record its finding either one way or the other. If the objections
raised are rejected, then the Arbitral Tribunal may proceed further to
arbitrate the disputes or the differences referred to it on merits and
pass an award against the parties, or nonparties, or signatories, or
nonsignatories to the arbitration agreement. In case of the foreign
award passed by the International Arbitration Tribunal, unless it is
made a decree of Court in India, as contemplated by Section 49 of the
said Act, it does not become enforceable. Section 49 of the said Act
deals with the enforcement of the foreign awards, and it states that
where the Court is satisfied that the foreign award is enforceable
under Chapter I of Part II under the said Act, the foreign award shall
be made as a decree of the Court, which becomes binding upon the
parties and enforceable.
20. In the application filed under Section 49 of the said Act to
make the foreign award as a decree of the Court in India, Section 48
of the said Act provides an opportunity to the party against whom
such an award is made to raise objections touching the jurisdiction of
the International Arbitration Tribunal to pass such an award and upon
production of the proof, to claim the order of refusal to enforce the
award. Section 48 of the said Act deals with the conditions for the
enforcement of the foreign awards, and it reads as under :
“48. Conditions for enforcement of foreign awards.
(1) Enforcement of a foreign award may be refused, at the
request of the party against whom it is invoked, only if that
party furnishes to the Court proof that
(a) the parties to the agreement referred to in section 44
were, under the law applicable to them, under some incapacity,
or the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon,
under the law of the country where the award was made, or
(b) the party against whom the award is invoked was not
given proper notice of the appointment of the arbitrator or of
the arbitral proceedings or was otherwise unable to present his
case; or
(c) the award deals with a difference not contemplated by or
not falling within the terms of the submission to arbitration, or
it contains decisions on matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on merits submitted to
arbitration can be separated from those not so submitted, that
part of the award which contains decisions on matters
submitted to arbitration may be enforced; or
(d) the composition of the arbitral authority or the arbitral
procedure was not in accordance with the agreement of the
parties, or, failing such agreement, was not in accordance with
the law of the country where the arbitration took place; or
(e) the award has not yet become binding on the parties, or
has been set aside or suspended by a competent authority of
the country in which, or under the law of which, that award
was made.
(2) Enforcement of an arbitral award may also be refused if
the Court finds that
(a) the subjectmatter of the difference is not capable of
settlement by arbitration under the law of India; or
(b) the enforcement of the award would be contrary to the
public policy of India.
[Explanation 1.For the avoidance of any doubt, it is
clarified that an award is in conflict with the public policy of
India, only if,
(i) the making of the award was induced or affected by
fraud or corruption or was in violation of section 75 or
section 81; or
(ii) it is in contravention with the fundamental policy of
Indian law; or
(iii) it is in conflict with the most basic notions of morality or
justice.
Explanation 2.For the avoidance of doubt, the test as to
whether there is a contravention with the fundamental policy
of Indian law shall not entail a review on the merits of the
dispute.
(3) If an application for the setting aside or suspension of
the award has been made to a competent authority referred to
in clause (e) of subsection (1) the Court may, if it considers it
proper, adjourn the decision on the enforcement of the award
and may also, on the application of the party claiming
enforcement of the award, order the other party to give
suitable security.”
If the objections, as contemplated by the aforesaid provisions,
are raised before the Court in India, those are required to be
adjudicated on their own merits. If the Court is satisfied about the
proof in support of such objections, then it may hold that the foreign
award is not binding upon such objectors and refuse to make such
award enforceable by making it a decree of the Court. It is thus
apparent that before enforcing the foreign award, the Court has to
record its satisfaction under Section 49 of the said Act that such
foreign award is binding upon the parties before it and is, therefore,
enforceable in India.
21. In the decision of the Apex Court in the case of Renusagar
Power Co. Ltd. v. General Electric Company, reported in
1984(4) SCC 679, the question considered was whether on merits, the
claims referred to the Court of arbitration were beyond the
scope/purview of the arbitration clause contained in the commercial
contract. The Court holds that amongst other factors, the answer
would depend upon the question as to whether it embraces even
questions of the existence, validity and effect of the arbitration
agreement, as stated in para 15 of the said decision. After considering
various judgments, four propositions are laid down by the Apex Court
in para 25 of the said decision, which is reproduced below :
“1. Whether a given dispute inclusive of the arbitrators
jurisdiction comes within the scope of purview of an arbitration
clause or not primarily depends upon the terms of the clause
itself; it is a question of what the parties intend to provide and
what language they employ.
2. Expressions such as “arising out of” or “in respect of”
or “in connection with” or “in relation to” or “in consequence
of” or “concerning” or “relating to” the contract are of the
widest amplitude and content and include even questions as to
the existence, validity and effect (scope) of the arbitration
agreement.
3. Ordinarily as a rule an arbitrator cannot clothe
himself with power to decide the questions of his own
jurisdiction (and it will be for the Court to decide those
questions) but there is nothing to prevent the parties from
investing him with power to decide those questions, as for
instance, by a collateral or separate agreement which will be
effective and operative.
4. If, however, the arbitration clause, so widely worded as
to include within its scope questions of its existence, validity
and effect (scope), is contained in the underlying commercial
contract then decided cases have made a distinction between
questions as to the existence and/or validity of the agreement
on the one hand and its effect (scope) on the other and have
held that in the case of former those questions cannot be
decided by the arbitrator, as by sheer logic the arbitration
clause must fall along with underlying, commercial contract
which is either nonexistent or illegal while in the case of the
latter it will ordinarily be for the arbitrator to decide the effect
or scope of the arbitration agreement, i.e. to decide the issue of
arbitrability of the claims preferred before him.”
The Apex Court holds as a general principle of law that
ordinarily as a rule, an arbitrator cannot clothe himself with power to
decide the questions of his own jurisdiction (and it will be for the
Court to decide those questions), but there is nothing to prevent the
parties from investing him with power to decide those questions, as
for instance, by a collateral or separate agreement which will be
effective and operative. It is further held that a distinction has to be
made in respect of commercial contract between the questions as to
the existence and/or validity of the agreement on the one hand and
its effect (scope) on the other and have held that in the case of
former, those questions cannot be decided by the arbitrator, as the
arbitration clause must fall along with the underlying commercial
contract, which is either nonexistent or illegal, while in the latter
case, it will ordinarily be for the arbitrator to decide the effect of
scope of the arbitration agreement, i.e. to decide the issue of
arbitrability of the claim preferred before him.
22. Thus, the scheme of the Act clearly postulates the filtration
of the disputes or the differences on the touchstone of various
expressions used under the arbitration agreements, like “arising out
of” or “in respect of” or “in connection with” or “in relation to” or
“in consequence of” or “concerning” or “relating to the contract
between the parties” containing the clause of arbitration at two stages,
viz. (i) at the initial stage under Section 45 of the said Act before the
matter is referred to the International Arbitration Tribunal, and (ii) at
the stage of enforceability of the foreign award under Section 49 of
the said Act by the Court in India. The questions of existence and
validity of commercial contract cannot be decided by the Arbitration
Tribunal, as the arbitration clause must fall along with the underlying
commercial contract, which becomes nonexistent and invalid.
However, it will be the exclusive jurisdiction of the Arbitral Tribunal
to decide the effect and scope of the arbitration agreement, including
that of arbitrability of the dispute. This case is not concerned with the
filtration of the arbitration agreement under Section 45 of the said
Act, but it is essentially concerned with the enforceability of the
foreign award under Section 49 of the said Act.
23. In the decision of the Apex Court in the case of Khardah
Company Ltd. v. Raymon & Co. (India) Private Ltd., delivered by the
Constitution Bench of the Apex Court, and reported in
AIR 1962 SC 1810, it is held in para 4 as under :
“(4) It cannot be disputed that the expression “arising out
of” or “concerning” or “in connection with” or “in consequence
of” or “relating to this contract” occurring in Cl. 14 are of
sufficient amplitude to take in a dispute as to the validity of
the agreement dated September 7, 1955. Vide Ruby General
Insurance Co. Ltd. v. Pearey Lal Kumar, 19523 SCR 501 :
(AIR 1952 SC 119). But the question is not whether Cl. 14 is
all comprehensive but whether it could be enforced when the
agreement of which it forms an integral part is held to be
illegal. Logically speaking, it is difficult to conceive how when
an agreement is found to be bad, any portion of it can be held
to be good. When the whole perishes, its parts also must
perish. 'Ex nihilo nil fit'. On principle therefore it must be held
that when an agreement is invalid every part of it including
the clause as to arbitration contained therein must also be
invalid.”
The Apex Court considered all sorts of expressions normally
used under the agreement containing the clause of arbitration. The
Court has held that the question is not whether such clause is
comprehensive, but whether it could be enforced when the agreement
of which it forms an integral part is held to be illegal. The Court
holds that logically speaking, it is difficult to conceive how when an
agreement is found to be bad, any portion of it can be held to be
good. When the whole perishes, it parts also must perish. It,
therefore, holds that when an agreement is invalid, every part of it,
including the clause of arbitration therein must also be invalid.
24. In respect of domestic arbitration, Section 16 contained in
Chapter IV of the said Act deals with the competence of the Arbitral
Tribunal to rule on its jurisdiction, and subsections (1), (2) and (3)
of Section 16 of the said Act being relevant, are reproduced below :
“16. Competence of arbitral tribunal to rule on its
jurisdiction.(1) the arbitral tribunal may rule on its own
jurisdiction, including ruling on any objections with respect to
the existence or validity of the arbitration agreement, and for
that purpose,
(a) an arbitration clause which forms part of a contract
shall be treated as an agreement independent of the other
terms of the contract; and
(b) a decision by the arbitral tribunal that the contract
is null and void shall not entail ipso jure the invalidity of
the arbitration clause.
(2) A plea that the arbitral tribunal does not have
jurisdiction shall be raised not later than the submission of the
statement of defence; however, a party shall not be precluded
from raising such a plea merely because that he has appointed,
or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of
its authority shall be raised as soon as the matter alleged to be
beyond the scope of its authority is raised during the arbitral
proceedings.”
In view of the aforesaid statutory provisions, the domestic
Arbitral Tribunal is made competent to rule on its own jurisdiction,
including ruling on any objections with respect to the existence or
validity of the arbitration agreement. Such a plea has to be raised not
later than the submission of the statement of defence. However, a
party is not precluded from raising such a plea merely because he has
appointed or participated in the appointment of an Arbitrator. There
is no provision in Chapter I of Part II under the said Act making the
International Arbitration Tribunal competent to rule on its own
jurisdiction, as is contained in subsection (1) of Section 16 in respect
of the domestic arbitration. The presumption would be that the
Legislature has consciously excluded the jurisdiction of the
International Arbitration Tribunal to decide the question of its own
jurisdiction, including the question of existence and validity of an
arbitration agreement.
25. It is now wellsettled that the exclusion of the ordinary
jurisdiction of the Civil Courts in India to adjudicate all the civil
disputes cannot be readily inferred unless it is barred by the express
provision of law or by necessary implication. The Arbitral Tribunals,
whether domestic or international, are the forums of limited
jurisdiction. It exercises the jurisdiction only to the extent it is
conferred and only over the persons or the parties, who have agreed
to surrender themselves to such jurisdiction. The source of jurisdiction
of the Arbitral Tribunals to adjudicate the disputes or the differences
between the parties to the arbitration agreement flows from the
consent of parties – implied or express, the agreement to that effect in
writing, or waiver or surrender to the jurisdiction of such Tribunal by
conduct of parties. In the absence of these things, it is not possible for
the Arbitral Tribunals, whether domestic or international, to assume
the jurisdiction in respect of the subjectmatter, which is to be
arbitrated and/or to pass an award against the person/s or party/ies,
who are nonsignatories to the arbitration agreement.
26. Even if the Arbitral Tribunal decides the disputes or
differences under the arbitration agreement which is nonexistent or
illegal or decides the disputes or differences not covered by the
arbitration agreement or exercises jurisdiction over nonsignatories to
it and passes an award against them or against the persons or parties
who are not joined in such proceedings, the jurisdiction of the Civil
Courts in India under Section 34 in respect of domestic awards and
under Section 49 of the said Act in respect of an award by the
International Arbitration Tribunal, to review such decision is saved.
Not only that, but such decision of the Court in India is made
appealable under Sections 37 and 50 of the said Act, as the case may
be. Though the second appeal thereafter is barred under the said
provisions, the jurisdiction of the Supreme Court of India is kept
unaffected with an addition under Sections 37(3) and 50(2) that it
shall not take away right of appeal to the Supreme Court. In view of
this, the jurisdiction of the Arbitral Tribunal to decide the questions
and pass an award, as contemplated earlier, stands excluded by
necessary implication.
27. There is a decision of the learned Single Judge of this Court
(Shri R.D. Dhanuka, J.) delivered on 2842015 in Arbitration Petition
No.587 of 2015 and other connected matters in Oil and Natural Gas
Corporation Ltd. v. M/s. Jindal Drilling and Industries Limited, holding
in para 37 of the said decision that the Arbitral Tribunal has no power
to lift the corporate veil and such power can be exercised only by a
Court if the strongest case is made out. The Court rejected the
argument advanced by the petitioner therein that the Arbitral
Tribunal should have lifted the corporate veil to find out that the
other respondents in the said petition were forming part of the
respondent No.1 and were one and the same entity – bound to
discharge the liabilities of the respondent No.1. The Court found that
the decision of the Arbitral Tribunal refusing to lift the corporate veil
cannot, therefore, be interfered with under Section 34 of the said Act.
28. Shri Deven Chauhan, the learned Advocate for the
applicantCompany, has invited my attention to clause 8(d) contained
in the Representation Agreement in force, which is reproduced
below :
“8(d) Interpretation, Amendment, Law, Arbitration and
Assignments.
(i) This Agreement is subject to the laws of the State of
Missouri, U.S.A.
(ii) In the event that a dispute arises in connection with
this Agreement such dispute shall be referred to a single
arbitrator in Kanas City, Missouri, U.S.A. to be appointed
by agreement between the parties hereto, or failing
agreement to be appointed according to the rules of the
American Arbitration Association, the same rules under
which any dispute shall be decided.
(iii) In the event a dispute is committed to arbitration, the
party deemed at fault shall reimburse the full cost of the
arbitration and legal process to the aggrieved party.
(iv) This Agreement shall not be amended in any way
other than by agreement in writing, signed by both
parties.”
It is urged by him, relying upon the observations made in
paras 97, 99, 100, 102, 103, 103.1, 103.2 and 143 of the decision of
the Apex Court in the case of Chloro Controls India Private Limited,
cited supra, that the expression “a dispute arises in connection with
this Agreement” is of the widest amplitude and confers a jurisdiction
upon the International Arbitration Tribunal not only to decide the
questions of existence, validity and effect (scope) of the arbitration
agreement, but also the rights and liabilities of the persons, who are
nonsignatories to the agreement, if it finds that the cause of action is
directly relatable to the contract and that the nonsignatories are the
“alter ego” of the nonapplicant No.1Company liable to pay the
compensation/damages for breach of contract or payment of amount
arising out of the contract.
29. The Apex Court in the case of Chloro Controls India Private
Limited, cited supra, was dealing with a case under Section 45 of the
said Act, which concerns the power of the judicial authority to refer
the parties to arbitration, as has been rightly pointed out by
Shri Sunil Manohar, the learned Senior Advocate for the nonapplicant
No.2. The decision can be used as an authority for the proposition
advanced by Shri Manohar that it is the jurisdiction of the Court in
India to decide the question of existence, validity, binding nature and
enforceability of the agreement against nonsignatories by invoking
the doctrine of “lifting of corporate veil” or “alter ego”. The factual
background in which the principles are laid down and the object and
purpose of laying down such principles will have to be kept in mind.
A decision is an authority for what it actually decides and not for what
logically follows from it, is a wellsettled principle of judicial
precedents. It was not the question raised and decided in the said
decision as to whether the jurisdiction to decide all such issues lies
with the Arbitral Tribunal. The decision in Chloro Controls India
Private Limited is not an authority for the proposition that the Arbitral
Tribunal is competent or empowered either to rule on its own
jurisdiction or to make nonsignatories to the arbitration agreement
bound by the award passed by it. The decision is, therefore, no avail
to the applicant.
30. In view of above, the argument that the International
Arbitration Tribunal has jurisdiction to pass an award against the
nonsignatories to the arbitration agreement on the basis of finding
that they are the “alter ego” of the party to the agreement, is rejected
and it is held that such jurisdiction does not vest in the International
Arbitration Tribunal. The question No.2 is answered accordingly.
As to Question No.3 :
31. Now coming to the question as to whether the
nonapplicants, who had appeared in the proceedings before the
International Arbitration Tribunal and filed their reply raising all such
objections, are estopped from raising such objections in the
proceedings under Section 49 of the said Act, asking the Court to go
behind the findings recorded by the International Arbitration Tribunal.
No doubt, that in terms of clause 8(d)(i) of the Representation
Agreement in question, there may be a forum available under the
laws of the State of Missouri, U.S.A., which is the agreed law, to
challenge the award passed in question. In the decision of the Apex
Court, delivered by the Constitution Bench in the case of Khardah
Company Ltd., cited supra, such objection was raised and considered in
para 14 of the said decision. The Court has held that when the
agreement itself is void, then there was no submission which was alive
on which the Arbitrators could act and the proceedings before them
would be wholly without jurisdiction. It holds that what confers the
jurisdiction on the Arbitrators to hear and decide a dispute is an
arbitration agreement, as defined in Section 2(a) of the Arbitration
Act, and where there is no such agreement, there is an initial want of
jurisdiction which cannot be cured by acquiescence. The Court
rejected the contention that the respondents therein were estopped by
their conduct from questioning the validity of the award.
32. In the decision of the Apex Court in the case of Renusagar
Power Co. Ltd., cited supra, it is held in para 57 as under :
“57. In view of the position which arises from the
aforesaid discussion it is really unnecessary for us to go into
and decide the question whether, in cases where the arbitration
clause contained in the underlying Commercial Contract is so
widely worded as to include within its scope the question of its
existence, validity or effect (scope). The decided cases have
made a distinction between questions as to the existence or
validity of the agreement on the one hand and its effect (scope)
on the other and have held that in the case of the former those
questions cannot be decided by the arbitrators, as by sheer logic
the arbitration clause must fall along with the underlying
Commercial Contract which is either nonexistent or illegal,
while the case of the latter it will ordinarily be for the
arbitrators to decide the effect (scope) of the arbitration
agreement as is contended for by Counsel for G.E.C. because
both under the scheme of the Foreign Awards Act as well as
under the general law of arbitration obtaining in England and
in India, the decision of the arbitrator on the question of his
own jurisdiction will have to be regarded as provisional or
tentative, subject to final determination of that question by the
Court. ...”
As a general law, the Court has made a distinction between
the questions as to the existence of validity of the agreement on one
hand and its effect (scope) on the other, and has held that in the case
of the former, those questions cannot be decided by the Arbitrators, as,
by sheer logic, the arbitration clause must fall along with the
underlying commercial contract, which is either nonexistent or illegal,
while the case of the latter, it will ordinarily be for the Arbitrators to
decide the effect (scope) of the arbitration agreement. It is held under
the scheme of the Foreign Awards Act as well as under the general law
of arbitration obtaining in England and in India, the decision of the
Arbitrator on the question of his own jurisdiction will be regarded as
provisional or tentative, subject to final determination of that question
by the Court.
33. In view of above, the argument that once the International
Arbitration Tribunal rightly or wrongly decides the question of its own
jurisdiction, it can be challenged only in the forum provided in the law
applicable under the arbitration agreement and the Court in India,
acting under Section 49 of the said Act, cannot go behind such award
to record the findings contrary to the contents of such award and
refuse to make a decree of the Court, is rejected. It is held that the
decision of the International Arbitration Tribunal on such question will
be treated as tentative, subject to the decision of Court in India under
Section 49 of the said Act and there would be no question of estoppel,
waiver, surrender or acquiescence, merely because there is
participation in the proceedings of arbitration. The question No.3 is
answered accordingly.
34. Having dealt with the questions of law, I turn to the facts of
the present case. The Representation Agreements in force are signed
by the DirectorTerry L. Peteete for and on behalf of the
applicantIntegrated Sales Services Limited, and by Rattan Ram
Pathak, the nonapplicant No.3(i), in his capacity as the Managing
Director of the nonapplicant No.1DMC Management Consultants
Ltd., containing the clause of arbitration, making it subject to the laws
of State of Missouri, U.S.A. Neither the nonapplicant No.2Arun Dev
s/o Govindvishnu Upadhyaya, nor the applicant No.3Gemini Bay
Transcription Pvt. Ltd., through its Directors(i) Rattan Ram Pathak,
and (ii) Naresh Kumar Kopisetti, have signed the Representation
Agreements in force in their individual capacity. Except the
nonapplicant No.2Arun Dev s/o Govindvishnu Upadhyaya, none of
the other individual nonapplicants in this application were joined as
the partyrespondents in the dispute before the International
Arbitration Tribunal. The respondents before the said Tribunal were
DMC Management Consultants Ltd., Arun Dev s/o Govindvishnu
Upadhyaya, Gemini Bay Consultants Ltd., and Gemini Bay
Transcription Pvt. Ltd.
35. The nonapplicant Nos.2 and 3 have neither submitted
themselves to the arbitration nor to the composition of the
International Arbitration Tribunal. There did not exist or subsist any
arbitration agreement between the applicant and the nonapplicant
Nos.2 and 3. There is nothing in the Representation Agreements in
force, which permit the said Tribunal to exercise jurisdiction over the
nonsignatories to it. The invocation of the principle of lifting of
corporate veil and holding the nonapplicant Nos.2 and 3 as
“alter ego” of the nonapplicant No.1Company and on the basis of it,
to hold them jointly and severally liable to pay the amount under the
award, is totally without jurisdiction and cannot be sustained. Merely
because the nonapplicant Nos.2 and 3 have participated in the
proceedings before the International Arbitration Tribunal, they cannot
be estopped from raising the question of jurisdiction of the said
Tribunal in response to the application under Section 49 of the said
Act. The question of operating estoppel, acquiescence, surrender, etc.,
to the jurisdiction of the said Tribunal, does not at all arise. The
award passed by the International Arbitration Tribunal, in the present
case, is, therefore, hit by the conditions in clauses (c), (d) and (e) of
subsection (1) of Section 48 of the said Act. The said award cannot,
therefore, be enforced in India against the nonapplicant Nos.2 and 3
by making a decree of the Court.
36. Though the International Arbitration Tribunal had no
jurisdiction to invoke the principle of lifting of corporate veil and
holding the nonapplicant Nos.2 and 3 as “alter ego” of the
nonapplicant No.1Company, this Court is competent under
Section 49 of the said Act to go into all these aspects of the matter and
hold that the nonapplicant Nos.1, 2 and 3 are jointly liable to pay the
amount covered by the award passed by the said Tribunal. However,
the applicant has to make out such a case in the proceedings under
Section 49 of the said Act. After going through the contents of the
application, I do not find that any such case is made out by the
applicant. In spite of repeated queries, Shri Deven Chauhan, the
learned Advocate for the applicant, makes a statement that this is not
the case with which the applicant has come forward before this Court
while invoking the jurisdiction under Section 49 of the said Act. Had
such a case been made out, then the extent of liability of the
nonapplicant No.2, being the Director of the nonapplicant
No.1Company, was required to be judged on the basis of the
provisions of the Companies Act, 1956. In view of this, the
nonapplicant Nos.2 and 3 cannot be held in this proceeding jointly
liable to pay the amount covered by the arbitration award, along with
the nonapplicant No.1Company.
37. Shri Deven Chauhan for the applicant submits that the
nonapplicant Nos.2 and 3 were made parties in the proceedings
before the International Arbitration Tribunal in their individual
capacity and they are also made parties in the same capacity before
this Court. The award passed against them is required to be executed
against them individually by attaching their properties if such occasion
arises. In order to make the nonapplicant Nos.2 and 3(i) and (ii)
individually or severally liable to pay the sum covered by the arbitral
award in question, it must be shown that they have signed the
arbitration agreement as guarantors or sureties for the debts due or
recoverable arising out of or in connection with the contract in
question against the nonapplicant No.1, of which they are the
Directors. In such an event, the liability of the guarantor or surety will
be coextensive with that of the principal debtor, and consequently
their personal assets may be attached in execution of the decree. This
is not the case with which the applicant has approached this Court
under Section 49 of the said Act. Hence, the award passed in question
cannot be enforced against them by passing a decree.
38. Shri Mathews, the learned Advocate for the nonapplicant
No.1Company, the judgmentdebtor, has urged that the confirmation
of award has to be by the Court of Chancery at Delaware and the
confirmation of award by the District Court at Missouri is without
jurisdiction, and hence it is liable to be set aside. The
nonapplicant No.1 is party to the Representation Agreements
containing the arbitration clause, and such question at their instance
cannot be entertained under Section 49 of the said Act, particularly
when there is a remedy available to challenge it in the forum provided
in the laws of State of Missouri, U.S.A. It cannot be a question of the
said award being contrary to the public policy of India, as has been
urged by Shri Mathews. The award passed by the International
Arbitration Tribunal against the nonapplicant No.1 will have to be
enforced by making it as a decree of this Court.
39. In view of above, the following order is passed :
(1) The award dated 2832010 passed by the
International Arbitration Tribunal in ICDR Case
No.50181T0032709 becomes unenforceable in India to
the extent it operates against the nonapplicant No.2Arun
Dev s/o Govindvishnu Upadhyaya and No.3Gemini Bay
Transcription Pvt. Ltd., and the claim for passing a decree
against them in terms of the said award is refused.
(2) The award passed by the International Arbitration
Tribunal in ICDR Case No.50181T0032709 to the extent it
operates against the nonapplicant No.1DMC Management
Consultants Ltd. is made enforceable in India and the decree
is passed in terms of the said award against the
nonapplicant No.1.
(3) Decree be drawn accordingly.
(4) The matter shall remain pending.
JUDGE.
Print Page
the present case. The Representation Agreements in force are signed
by the DirectorTerry L. Peteete for and on behalf of the
applicantIntegrated Sales Services Limited, and by Rattan Ram
Pathak, the nonapplicant No.3(i), in his capacity as the Managing
Director of the nonapplicant No.1DMC Management Consultants
Ltd., containing the clause of arbitration, making it subject to the laws
of State of Missouri, U.S.A. Neither the nonapplicant No.2Arun Dev
s/o Govindvishnu Upadhyaya, nor the applicant No.3Gemini Bay
Transcription Pvt. Ltd., through its Directors(i) Rattan Ram Pathak,
and (ii) Naresh Kumar Kopisetti, have signed the Representation
Agreements in force in their individual capacity. Except the
nonapplicant No.2Arun Dev s/o Govindvishnu Upadhyaya, none of
the other individual nonapplicants in this application were joined as
the partyrespondents in the dispute before the International
Arbitration Tribunal. The respondents before the said Tribunal were
DMC Management Consultants Ltd., Arun Dev s/o Govindvishnu
Upadhyaya, Gemini Bay Consultants Ltd., and Gemini Bay
Transcription Pvt. Ltd.
35. The nonapplicant Nos.2 and 3 have neither submitted
themselves to the arbitration nor to the composition of the
International Arbitration Tribunal. There did not exist or subsist any
arbitration agreement between the applicant and the nonapplicant
Nos.2 and 3. There is nothing in the Representation Agreements in
force, which permit the said Tribunal to exercise jurisdiction over the
nonsignatories to it. The invocation of the principle of lifting of
corporate veil and holding the nonapplicant Nos.2 and 3 as
“alter ego” of the nonapplicant No.1Company and on the basis of it,
to hold them jointly and severally liable to pay the amount under the
award, is totally without jurisdiction and cannot be sustained. Merely
because the nonapplicant Nos.2 and 3 have participated in the
proceedings before the International Arbitration Tribunal, they cannot
be estopped from raising the question of jurisdiction of the said
Tribunal in response to the application under Section 49 of the said
Act. The question of operating estoppel, acquiescence, surrender, etc.,
to the jurisdiction of the said Tribunal, does not at all arise. The
award passed by the International Arbitration Tribunal, in the present
case, is, therefore, hit by the conditions in clauses (c), (d) and (e) of
subsection (1) of Section 48 of the said Act. The said award cannot,
therefore, be enforced in India against the nonapplicant Nos.2 and 3
by making a decree of the Court.
36. Though the International Arbitration Tribunal had no
jurisdiction to invoke the principle of lifting of corporate veil and
holding the nonapplicant Nos.2 and 3 as “alter ego” of the
nonapplicant No.1Company, this Court is competent under
Section 49 of the said Act to go into all these aspects of the matter and
hold that the nonapplicant Nos.1, 2 and 3 are jointly liable to pay the
amount covered by the award passed by the said Tribunal. However,
the applicant has to make out such a case in the proceedings under
Section 49 of the said Act. After going through the contents of the
application, I do not find that any such case is made out by the
applicant. In spite of repeated queries, Shri Deven Chauhan, the
learned Advocate for the applicant, makes a statement that this is not
the case with which the applicant has come forward before this Court
while invoking the jurisdiction under Section 49 of the said Act. Had
such a case been made out, then the extent of liability of the
nonapplicant No.2, being the Director of the nonapplicant
No.1Company, was required to be judged on the basis of the
provisions of the Companies Act, 1956. In view of this, the
nonapplicant Nos.2 and 3 cannot be held in this proceeding jointly
liable to pay the amount covered by the arbitration award, along with
the nonapplicant No.1Company.
37. Shri Deven Chauhan for the applicant submits that the
nonapplicant Nos.2 and 3 were made parties in the proceedings
before the International Arbitration Tribunal in their individual
capacity and they are also made parties in the same capacity before
this Court. The award passed against them is required to be executed
against them individually by attaching their properties if such occasion
arises. In order to make the nonapplicant Nos.2 and 3(i) and (ii)
individually or severally liable to pay the sum covered by the arbitral
award in question, it must be shown that they have signed the
arbitration agreement as guarantors or sureties for the debts due or
recoverable arising out of or in connection with the contract in
question against the nonapplicant No.1, of which they are the
Directors. In such an event, the liability of the guarantor or surety will
be coextensive with that of the principal debtor, and consequently
their personal assets may be attached in execution of the decree. This
is not the case with which the applicant has approached this Court
under Section 49 of the said Act. Hence, the award passed in question
cannot be enforced against them by passing a decree.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR
Misc. Civil Application No.1319 of 2015
Integrated Sales Services Limited,
V
DMC Management Consultants Ltd.,
Coram : R.K. Deshpande, J.
Dated: 18th April, 2016
Citation: 2016(6) MHLJ195
2. The International Arbitration Tribunal has passed an award
on 2832010 in favour of the applicantIntegrated Sales Services Ltd.,
a Company based in Hong Kong, holding the nonapplicant No.1DMC
Management Consultants Ltd., the applicant No.2Arun Dev s/o
Govindvishnu Uppadhyaya, and the nonapplicant No.3Gemini Bay
Transcription Private Ltd. jointly and severally liable to pay the
applicantCompany the sum of 6,948,100 dollars within a period of
thirty days from the date of the award, failing which the
applicantCompany would become entitled to recovery of interest
computed from the date of termination of the Representation
Agreement (2272008) on the total sum of the award at the highest
legal rate allowable under the Delaware law. The nonapplicants are
also held jointly and severally liable to reimburse the administrative
fees and expenses of the Tribunal totaling 14,000 dollars, the
compensation and expenses of the Arbitrator totaling 49,903 dollars,
and the fees and expenses incurred in the matter totaling
63,903 dollars.
3. This application is filed under Section 49 of the Arbitration
and Conciliation Act, 1996 read with Order XXI, Rule 1 of the Code of
Civil Procedure for execution of the arbitral award dated 2832010.
Initially, such application was filed before the Principal District Judge
at Nagpur, who heard the matter and closed it for judgment on
5102015. By virtue of subsequent amendment introduced to
Section 47 of the Arbitration and Conciliation Act, 1996 with effect
from 23102015, the jurisdiction to entertain, try and decide such
application is conferred upon the High Court and the learned Principal
District Judge ceased to have any jurisdiction. However, the learned
Principal District Judge, by his final judgment dated 5112015, has
rejected all the objections raised to the executability of the award and
made the said award as a decree of the Court to be executed.
4. The learned Advocates appearing for the parties agree that
the judgment delivered by the learned Principal District Judge in this
matter on 5112015 is without jurisdiction and, therefore, this
application is moved before this Court for making the arbitral award
as a decree of the Court. The nonapplicants have raised several
objections, including those under Section 48 of the said Act, claiming
refusal to enforce the award passed by the International Arbitration
Tribunal, which are required to be decided now afresh. The parties
have agreed that the question of leading oral evidence in support of
their rival contentions does not at all arise and the pure questions of
law are raised, which can be decided on the basis of the documents
which are admitted and placed on record.
5. The facts in detail are as under :
On 2892000, the first Representation Agreement between
the Hong Kong based applicantIntegrated Sales Services Ltd.
(described therein as “the representative”) signed by the
DirectorTerry L. Peteete, and the nonapplicant No.1India based
DMC Management Consultants Ltd. at Nagpur, registered under the
Companies Act, 1956 (described therein as “the Company”) by one
Rattan Pathak as the Managing Director, was entered into for
providing assistance to the nonapplicant No.1Company to sell its
goods and services to prospective customers and to identify potential
services of investment and investors, upon the terms and conditions
agreed therein. The said agreement was brought into force with effect
from 3102000.
6. The first amendment to the said Representation Agreement
was signed on behalf of the applicantCompany by Terry L. Peteete;
and on behalf of the nonapplicant No.1Company, by Arun Dev
Upadhyaya, the nonapplicant No.2. By the second amendment signed
by Terry L. Peteete on behalf of the applicantCompany, and by one
Rattan Pathak on behalf of the nonapplicant No.1Company, the first
amendment was declared as null and void. Thus, the relationship
between the parties to the Representation Agreement was governed by
the agreement which came into force on 3102000 and the second
amendment to it.
7. Clause 8(d) of the Representation Agreement brought into
force on 3102000 deals with the interpretation, amendment, law,
arbitration and assignments. It makes the agreement subject to the
laws of State of Missouri, U.S.A., and provides that in the event that a
dispute arises in connection with this agreement, such dispute shall be
referred to a single arbitrator in Kansas City, Missouri, U.S.A. The
applicantCompany invoked the aforesaid clause of the arbitration and
lodged its monetary claim before the International Arbitration
Tribunal, which was registered as ICDR Case No.50181T0032709,
making DMC Management Consultants Ltd, DMC Global Inc., Arun
Dev Upadhyaya, Gemini Bay Consultants Ltd., and Gemini Bay
Transcription Pvt. Ltd. as the respondents. The parties appeared
before the International Arbitration Tribunal and filed their replies and
objections. Although, the Arbitral Tribunal looked at the objections
raised to its jurisdiction to entertain, try and decide the dispute raised
before it, the Tribunal deferred the decision on it, stating that it shall
be decided along with the dispute on merits.
8. The Arbitral Tribunal framed the following issues :
“1. Does the “alter ego” doctrine warrant piercing the
corporate veil?
2. Was there a breach of the Representation Agreement and
by whom?
3. Should damages be awarded, and if the answer is yes,
how much?
On the first issue, the Tribunal has held that DMC Global Inc.
is a wholly owned subsidiary of DMC Management Consultants Ltd.,
and both are jointly referred to as “DMC”. Shri Arun Dev Upadhyaya
is an individual entrepreneur, shareholder and former Director of
DMC. Gemini Bay Consultants Ltd. and its wholly owned subsidiary
Gemini Bay Transcription Pvt. Ltd. (jointly referred to as “Gemini
Bay”) are unrelated Corporations. The Tribunal holds that Shri
Upadhyaya and Gemini Bay have challenged the jurisdiction of the
Tribunal on the ground that, as non signatory parties to the
Representation Agreement, they are not subject to the arbitration
clause it contains, but neither did participate directly in the arbitration
process. The Tribunal finds that the law applicable was Delaware law
and hence the precedents of the Delaware Court of Chancery must be
followed. It holds that the control of DMC by Shri Upadhyaya and the
collusion with Shri Pathak and the use of the corporate forms of DMC
and Gemini Bay were simply a “facade” used to shield or coverup the
unjust result of eliminating ISS. It further holds that “alter ego”
doctrine is, therefore, an appropriate justification for lifting the
corporate veil. On the second issue, the Tribunal has observed that
there was a breach of Representation Agreement by Shri Upadhyaya,
DMC, and Gemini Bay colluded together and, therefore, held them
jointly and severally liable to breaching the Representation Agreement
by terminating it abruptly in violation of the indefinite term of that
contract and by refusing to pay commissions as obligated under the
Representation Agreement.
9. The operative portion of the final award passed by the
Arbitral Tribunal on 2832010 is reproduced below :
“1. Within thirty (30) days from the date of transmittal of
this Award to the Parties, DMC Management Consultants, Ltd,
DMC Global, Inc., Arun Dev Upadhyaya, Gemini Bay
Consulting Limited and Gemini Bay Transcription Private
limited, hereinfter referred to as Respondents, shall jointly and
severally pay to Integrated Sales Services Ltd, hereinafter
referred to as Claimant, the sum of six Million, nine hundred
and fortyeight thousand, one hundred dollars
($6,948,100.00).
2. In the event that the award is not fully paid within thirty
days from the date of this Award, Claimant shall be entitled to
also seek recovery of interest computed from the date of
termination of the Representation Agreement (July 22, 2008)
on the total sum of the Award at the highest legal rate
allowable under Delaware law.
3. The administrative fees and expenses of the International
Centre for Dispute Resolution (“ICDR”) totaling fourteen
thousand dollars ($14,000.00), and the compensation and
expenses of the arbitrator totaling fortynine thousand, nine
hundred and three dollars ($49,903.00), shall be borne
entirely, jointly and severally by Respondents. Therefore,
Respondents shall jointly and severally reimburse Claimant the
sum of sixtythree thousand, nine hundred and three dollars
($63,903.00), representing that portion of said fees and
expenses (including the Arbitrator's fees and expenses)
previously incurred by Claimant.
4. Since the arbitration clause did not provide for the award
of the attorneys' fees, Claimant and Respondents shall be
responsible for their own attorneys' fees, costs and expenses.
5. As ordered by this tribunal, all the costs and expenses of
the video conference call held on Friday, March 5, 2010 shall
be borne exclusively by Respondents but Claimant shall be
responsible for the costs and expenses of its attorneys present
during that call.
6. This award is in full settlement of all claims and
counterclaims submitted to this Arbitration. Any claim or
counterclaim not specifically awarded is hereby denied.”
10. Heard Shri Deven Chauhan, the learned Advocate for the
applicantCompany; Shri Willson Mathew, the learned Advocate for
NonApplicant No.1Company; Shri Sunil Manohar, the learned Senior
Advocate, assisted by Advocates Shri A.G. Gharote and Ms Rohini
Jaiswal, for the nonapplicant No.2; and Shri Anand Jaiswal, the
learned Senior Advocate, assisted by Advocate Shri Shyam Dewani,
for the nonapplicant No.3.
11. Shri Sunil Manohar and Shri Anand Jaiswal, the learned
Senior Advocates, have urged that the Arbitral Tribunal has no power
to lift the corporate veil and it is only a Court which can lift the
corporate veil, and hence the finding by the Arbitral Tribunal on this
aspect was without jurisdiction. The reliance is placed upon the
judgment rendered by the Division Bench of this Court
on 592006 in Appeal No.658 of 2006 in Arbitration Petition No.295
of 2006 (Hemant D. Shah and others v. Chittaranjan D. Shah and
others) and the common judgment delivered by the learned Single
Judge of this Court (Shri R.D. Dhanuka, J.) on 2842015 in
Arbitration Petition No.587 of 2014 and other connected matters in
Oil and Natural Gas Corporation Ltd. v. M/s. Jindal Drilling and
Industries Limited. Inviting my attention to Section 44 of the
Arbitration and Conciliation Act, 1996, it is urged that so far as the
nonapplicant Nos.2 and 3 are concerned, the arbitral award cannot be
treated as “foreign award” for the two reasons, viz. (i) that the nonapplicant
Nos.2 and 3 are not signatories to the Representation
Agreement for arbitration to which the Convention setforth in the
First Schedule under the said Act applies; and (ii) that there exists no
legal relationship between them and the applicant, out of which, the
differences or the disputes before the Arbitral Tribunal arose. Further
inviting my attention to Sections 46 and 48 of the said Act, it is urged
that even if the arbitral award is described as “foreign award” covered
by Section 44 of the said Act, the enforcement of such award needs to
be refused on the grounds mentioned in clauses (b), (c) and (d) of
subsection (1) of Section 48 of the said Act, and, therefore, the award
does not bind the parties and cannot be made a decree of this Court.
Shri Mathew, the learned Advocate for the nonapplicant
No.1/Company, has invited my attention to clause (b) of subsection
(2) of Section 48 of the said Act to urge that the enforcement of the
award against the nonapplicant No.1 would be contrary to the public
policy of India.
12. Shri Deven Chauhan, the learned Advocate for the
applicantCompany, has invited my attention to paras 99, 102, 103,
103.1, 103.2, 104 and 105 of the decision of the Apex Court in the
case of Chloro Controls India Private Limited v. Severn Trent Water
Purification Inc. and another, reported in (2013) 1 SCC 614, to urge
that joinder of a nonsignatory party to arbitration is not unknown to
the arbitration jurisprudence and various legal bases may be applied to
bind a nonsignatory to an arbitration agreement. The doctrines of
agentprincipal relations, apparent authority, piercing of veil (also
called “alter ego”), joint venture relations, succession and estoppel are
the issues, which can be dealt with by the Arbitral Tribunal. Relying
upon the decision of the learned Single Judge of this Court
(Shri R.D. Dhanuka, J.) delivered on 842015 in Arbitration Petition
No.75 of 2012 (POL India Projects Limited v. Aurelia Reederei Eugn
Friederich GmbH Schiffahrtsgesellschaft & Company KG), it is urged that
once the issues are raised by the nonapplicants in the objections filed
before the Arbitral Tribunal, which have been negatived, resulting in
passing an arbitral award, it could only be challenged by adopting
remedy provided under the law applicable. He has relied upon paras
81, 82, 87, 88, 91, 97, 101, 102, 104, 105, 106, 111, 119 and 120 of
the aforesaid decision of this Court. It is further urged that the
nonapplicants were parties to the proceedings before the Arbitral
Tribunal and the only remedy was to challenge the arbitral award
before the Court of competent jurisdiction in terms of the law agreed
to be applicable under clause 8(d) of the Representation Agreement,
which was in the present case, the United States District Court,
Missouri. He has invited my attention to the certificate produced from
the United States District Court at Missouri, stating that no appeal has
been filed against the arbitral award in question, which is on page 114
of this application.
13. From the rival submissions, the questions, which fall for
determination by this Court, are as under :
Sr.No. Questions Answers
1. Whether the arbitral award dated 2832010
passed by the International Arbitration Tribunal
can be considered as the “foreign award” within
the meaning of Section 44 of the Arbitration and
Conciliation Act, 1996?
Yes
2. Whether the International Arbitration Tribunal
has jurisdiction to pass an award against the
nonapplicant Nos.2 and 3, who are nonsignatories
to the arbitration agreement,
recording a finding that they are the “alter ego”
of the nonapplicant No.1Company?
No
3. Once the International Arbitration Tribunal
decides the question of its own jurisdiction,
which can be challenged in the forum provided
in the law applicable (in the present case, the law
of the State of Missouri, U.S.A.) whether this
Court, acting under Section 49 of the said Act,
can go behind such award to record the findings
contrary to the contents of such award and
thereby refuse to make it a decree of a Court?
Yes
Chapter I in Part II of the said Act containing
Sections 44 to 52 is a complete code in respect of the enforcement of
certain foreign awards. In order to answer the aforesaid questions, the
scheme for enforcement of award and the extent and manner of
judicial interference in setting aside the award permissible under the
said Act, need to be seen.
As to Question No.1 :
14. Section 44 under the said Act contains the definition of
“foreign award”, and it runs as under :
“44. Definition.In this Chapter, unless the context otherwise
requires, “foreign award” means an arbitral award on
differences between persons arising out of legal relationships,
whether contractual or not, considered as commercial under
the law in force in India, made on or after the 11th day of
October, 1960
(a) in pursuance of an agreement in writing for
arbitration to which the Convention set forth in the First
Schedule applies, and
(b) in one of such territories as the Central Government,
being satisfied that reciprocal provisions have been made
may, by notification in the Official Gazette, declare to be
territories to which the said Convention applies.”
The aforesaid provision states that unless the context
otherwise requires, “foreign award” means an arbitral award on
differences between persons arising out of legal relationships, whether
contractual or not, considered as commercial under the law in force in
India, made on or after the 11th day of October, 1960, in pursuance of
an agreement in writing for arbitration to which the Convention set
forth in the First Schedule applies. The foreign award, therefore,
contains an adjudication over the differences between the persons
arising out of the legal relationships, considered as commercial under
the law in force in India. The “legal relationships” contemplated must
contain in the agreement in writing for arbitration in accordance with
the Convention set forth in the First Schedule.
15. Clause 1 under Article II of the First Schedule states that each
Contracting State shall recognise an agreement in writing under which
the parties undertake to submit to arbitration all or any differences
which have arisen or which may arise between them in respect of
defined legal relationship, whether contractual or not, concerning a
subjectmatter capable of settlement by arbitration. Clause 2 therein
states that the term “agreement in writing” shall include an arbitral
clause in a contract or an arbitration agreement, signed by the parties
or contained in an exchange of letters or telegrams. Thus, the
existence of the defined legal relationship in writing, undertaking to
submit to arbitration all or any differences concerning a subjectmatter
capable of settlement by arbitration, is the sine qua non to constitute a
“foreign award”, as defined under Section 44 of the said Act, as has
been rightly urged by the learned Senior Advocate
Shri Sunil Manohar.
16. It is not in dispute that the Representation Agreements in
force containing clause 8(d) of arbitration brought into force from
3102000 undertaking to submit to arbitration all or any differences
concerning the subjectmatter capable of settlement by arbitration, are
signed by the Director Terry L. Peteete of the applicantCompany, and
by the nonapplicant No.3(i)Rattan Ram Pathak in his capacity as the
Managing Director of the nonapplicant No.1Company. There exists a
defined legal relationship in writing in the form of the Representation
Agreements. The arbitral award passed on 2832010 by the
International Arbitration Tribunal is on the differences between the
parties to the arbitration agreement. The said award, therefore,
satisfies the test of “foreign award”, as defined under Section 44 of the
said Act. The question No.(1) is answered accordingly.
As to Question No.2 :
17. Section 45 of the said Act confers a power upon a judicial
authority to refer the parties to arbitration, and it is reproduced
below :
“45. Power of judicial authority to refer parties to
arbitration. Notwithstanding anything contained in Part I or
in the Code of Civil Procedure, 1908 (V of 1908), a judicial
authority, when seized of an action in a matter in respect of
which the parties have made an agreement referred to in
Section 44, shall, at the request of one of the parties or any
person claiming through or under him, refer the parties to
arbitration, unless it finds that the said agreement is null and
void, inoperative or incapable of being performed.”
Perusal of the aforesaid provision shows that the jurisdiction
of a judicial authority under the aforesaid provision is twofold
(i) to refer the parties to arbitration, if it finds that the matter pending
before it is such that in respect of it the parties have made an
agreement referred to in Section 44 of the said Act, and (ii) to decide
the question as to whether the arbitration agreement produced before
it is null and void, inoperative or incapable of being performed.
18. In the decision of the Apex Court in the case of Chloro
Controls India Private Limited, cited supra, relied upon by
Shri Deven Chauhan, the learned Advocate for the applicant, the Apex
Court was considering the question of invocation of jurisdiction of the
Court under Section 45 of the said Act, and in para 59, it holds that
the applicant should satisfy the prerequisites stated in Section 44 of
the said Act. In para 63, the Apex Court holds that for proper
interpretation and application of Chapter I of Part II, it is necessary
that those provisions are read in conjunction with Schedule I of the
Act. To examine the provisions of Section 45 without the aid of
Schedule I would not be appropriate as that is the very foundation of
Section 45 of the said Act. Para 83 of the said decision being relevant,
is reproduced below :
“83. Where the court which, on its judicial side, is seized of
an action in a matter in respect of which the parties have made
an arbitration agreement, once the required ingredients are
satisfied, it would refer the parties to arbitration but for the
situation where it comes to the conclusion that the agreement is
null and void, inoperative or incapable of being performed.
These expressions have to be construed somewhat strictly so as
to ensure that the court returns a finding with certainty and on
the correct premise of law and fact as it has the effect of
depriving the party of its right of reference to arbitration. But
once the court finds that the agreement is valid then it must
make the reference, without any further exercise of discretion
(refer General Electric Co. v. Renusagar Power Co. (1987) 4
SCC 137). These are the issues which go to the root of the
matter and their determination at the threshold would prevent
multiplicity of litigation and would even prevent futile exercise
of proceedings before the Arbitral Tribunal.”
It is thus a mandate of Section 45 of the said Act to refer the
parties to arbitration if the judicial authority finds that the matter
pending before it is in respect of the subject covered by an agreement
referred to in Section 44 of the said Act. However, the right to
reference cannot be construed strictly as an indefeasible right. One
can claim the reference only upon satisfaction of the prerequisites
stated under Sections 44 and 45 read with Schedule I of the said Act.
Thus, it is a legal right, which has its own contours and is not an
absolute right, free of any obligations/limitations, as has been held in
para 69 of the said decision. If the judicial authority decides that the
arbitration agreement produced before it is null and void, or
inoperative, or incapable of being performed, it has to refuse to refer
the parties to arbitration. This provision covers or deals with the stage
before the parties are referred to arbitration.
19. In a situation where the parties go before the Arbitral
Tribunal without involvement of the judicial authority, as
contemplated by Section 45 of the said Act, a dispute may be raised
before the Arbitral Tribunal that the arbitration agreement in question
is nonexistent, or is null and void, inoperative, or incapable of being
performed. A dispute may also be raised about the jurisdiction of the
Arbitral Tribunal to pass an award against the persons or parties, who
are not signatories to the arbitration agreement. The Arbitral Tribunal
may record its finding either one way or the other. If the objections
raised are rejected, then the Arbitral Tribunal may proceed further to
arbitrate the disputes or the differences referred to it on merits and
pass an award against the parties, or nonparties, or signatories, or
nonsignatories to the arbitration agreement. In case of the foreign
award passed by the International Arbitration Tribunal, unless it is
made a decree of Court in India, as contemplated by Section 49 of the
said Act, it does not become enforceable. Section 49 of the said Act
deals with the enforcement of the foreign awards, and it states that
where the Court is satisfied that the foreign award is enforceable
under Chapter I of Part II under the said Act, the foreign award shall
be made as a decree of the Court, which becomes binding upon the
parties and enforceable.
20. In the application filed under Section 49 of the said Act to
make the foreign award as a decree of the Court in India, Section 48
of the said Act provides an opportunity to the party against whom
such an award is made to raise objections touching the jurisdiction of
the International Arbitration Tribunal to pass such an award and upon
production of the proof, to claim the order of refusal to enforce the
award. Section 48 of the said Act deals with the conditions for the
enforcement of the foreign awards, and it reads as under :
“48. Conditions for enforcement of foreign awards.
(1) Enforcement of a foreign award may be refused, at the
request of the party against whom it is invoked, only if that
party furnishes to the Court proof that
(a) the parties to the agreement referred to in section 44
were, under the law applicable to them, under some incapacity,
or the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon,
under the law of the country where the award was made, or
(b) the party against whom the award is invoked was not
given proper notice of the appointment of the arbitrator or of
the arbitral proceedings or was otherwise unable to present his
case; or
(c) the award deals with a difference not contemplated by or
not falling within the terms of the submission to arbitration, or
it contains decisions on matters beyond the scope of the
submission to arbitration:
Provided that, if the decisions on merits submitted to
arbitration can be separated from those not so submitted, that
part of the award which contains decisions on matters
submitted to arbitration may be enforced; or
(d) the composition of the arbitral authority or the arbitral
procedure was not in accordance with the agreement of the
parties, or, failing such agreement, was not in accordance with
the law of the country where the arbitration took place; or
(e) the award has not yet become binding on the parties, or
has been set aside or suspended by a competent authority of
the country in which, or under the law of which, that award
was made.
(2) Enforcement of an arbitral award may also be refused if
the Court finds that
(a) the subjectmatter of the difference is not capable of
settlement by arbitration under the law of India; or
(b) the enforcement of the award would be contrary to the
public policy of India.
[Explanation 1.For the avoidance of any doubt, it is
clarified that an award is in conflict with the public policy of
India, only if,
(i) the making of the award was induced or affected by
fraud or corruption or was in violation of section 75 or
section 81; or
(ii) it is in contravention with the fundamental policy of
Indian law; or
(iii) it is in conflict with the most basic notions of morality or
justice.
Explanation 2.For the avoidance of doubt, the test as to
whether there is a contravention with the fundamental policy
of Indian law shall not entail a review on the merits of the
dispute.
(3) If an application for the setting aside or suspension of
the award has been made to a competent authority referred to
in clause (e) of subsection (1) the Court may, if it considers it
proper, adjourn the decision on the enforcement of the award
and may also, on the application of the party claiming
enforcement of the award, order the other party to give
suitable security.”
If the objections, as contemplated by the aforesaid provisions,
are raised before the Court in India, those are required to be
adjudicated on their own merits. If the Court is satisfied about the
proof in support of such objections, then it may hold that the foreign
award is not binding upon such objectors and refuse to make such
award enforceable by making it a decree of the Court. It is thus
apparent that before enforcing the foreign award, the Court has to
record its satisfaction under Section 49 of the said Act that such
foreign award is binding upon the parties before it and is, therefore,
enforceable in India.
21. In the decision of the Apex Court in the case of Renusagar
Power Co. Ltd. v. General Electric Company, reported in
1984(4) SCC 679, the question considered was whether on merits, the
claims referred to the Court of arbitration were beyond the
scope/purview of the arbitration clause contained in the commercial
contract. The Court holds that amongst other factors, the answer
would depend upon the question as to whether it embraces even
questions of the existence, validity and effect of the arbitration
agreement, as stated in para 15 of the said decision. After considering
various judgments, four propositions are laid down by the Apex Court
in para 25 of the said decision, which is reproduced below :
“1. Whether a given dispute inclusive of the arbitrators
jurisdiction comes within the scope of purview of an arbitration
clause or not primarily depends upon the terms of the clause
itself; it is a question of what the parties intend to provide and
what language they employ.
2. Expressions such as “arising out of” or “in respect of”
or “in connection with” or “in relation to” or “in consequence
of” or “concerning” or “relating to” the contract are of the
widest amplitude and content and include even questions as to
the existence, validity and effect (scope) of the arbitration
agreement.
3. Ordinarily as a rule an arbitrator cannot clothe
himself with power to decide the questions of his own
jurisdiction (and it will be for the Court to decide those
questions) but there is nothing to prevent the parties from
investing him with power to decide those questions, as for
instance, by a collateral or separate agreement which will be
effective and operative.
4. If, however, the arbitration clause, so widely worded as
to include within its scope questions of its existence, validity
and effect (scope), is contained in the underlying commercial
contract then decided cases have made a distinction between
questions as to the existence and/or validity of the agreement
on the one hand and its effect (scope) on the other and have
held that in the case of former those questions cannot be
decided by the arbitrator, as by sheer logic the arbitration
clause must fall along with underlying, commercial contract
which is either nonexistent or illegal while in the case of the
latter it will ordinarily be for the arbitrator to decide the effect
or scope of the arbitration agreement, i.e. to decide the issue of
arbitrability of the claims preferred before him.”
The Apex Court holds as a general principle of law that
ordinarily as a rule, an arbitrator cannot clothe himself with power to
decide the questions of his own jurisdiction (and it will be for the
Court to decide those questions), but there is nothing to prevent the
parties from investing him with power to decide those questions, as
for instance, by a collateral or separate agreement which will be
effective and operative. It is further held that a distinction has to be
made in respect of commercial contract between the questions as to
the existence and/or validity of the agreement on the one hand and
its effect (scope) on the other and have held that in the case of
former, those questions cannot be decided by the arbitrator, as the
arbitration clause must fall along with the underlying commercial
contract, which is either nonexistent or illegal, while in the latter
case, it will ordinarily be for the arbitrator to decide the effect of
scope of the arbitration agreement, i.e. to decide the issue of
arbitrability of the claim preferred before him.
22. Thus, the scheme of the Act clearly postulates the filtration
of the disputes or the differences on the touchstone of various
expressions used under the arbitration agreements, like “arising out
of” or “in respect of” or “in connection with” or “in relation to” or
“in consequence of” or “concerning” or “relating to the contract
between the parties” containing the clause of arbitration at two stages,
viz. (i) at the initial stage under Section 45 of the said Act before the
matter is referred to the International Arbitration Tribunal, and (ii) at
the stage of enforceability of the foreign award under Section 49 of
the said Act by the Court in India. The questions of existence and
validity of commercial contract cannot be decided by the Arbitration
Tribunal, as the arbitration clause must fall along with the underlying
commercial contract, which becomes nonexistent and invalid.
However, it will be the exclusive jurisdiction of the Arbitral Tribunal
to decide the effect and scope of the arbitration agreement, including
that of arbitrability of the dispute. This case is not concerned with the
filtration of the arbitration agreement under Section 45 of the said
Act, but it is essentially concerned with the enforceability of the
foreign award under Section 49 of the said Act.
23. In the decision of the Apex Court in the case of Khardah
Company Ltd. v. Raymon & Co. (India) Private Ltd., delivered by the
Constitution Bench of the Apex Court, and reported in
AIR 1962 SC 1810, it is held in para 4 as under :
“(4) It cannot be disputed that the expression “arising out
of” or “concerning” or “in connection with” or “in consequence
of” or “relating to this contract” occurring in Cl. 14 are of
sufficient amplitude to take in a dispute as to the validity of
the agreement dated September 7, 1955. Vide Ruby General
Insurance Co. Ltd. v. Pearey Lal Kumar, 19523 SCR 501 :
(AIR 1952 SC 119). But the question is not whether Cl. 14 is
all comprehensive but whether it could be enforced when the
agreement of which it forms an integral part is held to be
illegal. Logically speaking, it is difficult to conceive how when
an agreement is found to be bad, any portion of it can be held
to be good. When the whole perishes, its parts also must
perish. 'Ex nihilo nil fit'. On principle therefore it must be held
that when an agreement is invalid every part of it including
the clause as to arbitration contained therein must also be
invalid.”
The Apex Court considered all sorts of expressions normally
used under the agreement containing the clause of arbitration. The
Court has held that the question is not whether such clause is
comprehensive, but whether it could be enforced when the agreement
of which it forms an integral part is held to be illegal. The Court
holds that logically speaking, it is difficult to conceive how when an
agreement is found to be bad, any portion of it can be held to be
good. When the whole perishes, it parts also must perish. It,
therefore, holds that when an agreement is invalid, every part of it,
including the clause of arbitration therein must also be invalid.
24. In respect of domestic arbitration, Section 16 contained in
Chapter IV of the said Act deals with the competence of the Arbitral
Tribunal to rule on its jurisdiction, and subsections (1), (2) and (3)
of Section 16 of the said Act being relevant, are reproduced below :
“16. Competence of arbitral tribunal to rule on its
jurisdiction.(1) the arbitral tribunal may rule on its own
jurisdiction, including ruling on any objections with respect to
the existence or validity of the arbitration agreement, and for
that purpose,
(a) an arbitration clause which forms part of a contract
shall be treated as an agreement independent of the other
terms of the contract; and
(b) a decision by the arbitral tribunal that the contract
is null and void shall not entail ipso jure the invalidity of
the arbitration clause.
(2) A plea that the arbitral tribunal does not have
jurisdiction shall be raised not later than the submission of the
statement of defence; however, a party shall not be precluded
from raising such a plea merely because that he has appointed,
or participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of
its authority shall be raised as soon as the matter alleged to be
beyond the scope of its authority is raised during the arbitral
proceedings.”
In view of the aforesaid statutory provisions, the domestic
Arbitral Tribunal is made competent to rule on its own jurisdiction,
including ruling on any objections with respect to the existence or
validity of the arbitration agreement. Such a plea has to be raised not
later than the submission of the statement of defence. However, a
party is not precluded from raising such a plea merely because he has
appointed or participated in the appointment of an Arbitrator. There
is no provision in Chapter I of Part II under the said Act making the
International Arbitration Tribunal competent to rule on its own
jurisdiction, as is contained in subsection (1) of Section 16 in respect
of the domestic arbitration. The presumption would be that the
Legislature has consciously excluded the jurisdiction of the
International Arbitration Tribunal to decide the question of its own
jurisdiction, including the question of existence and validity of an
arbitration agreement.
25. It is now wellsettled that the exclusion of the ordinary
jurisdiction of the Civil Courts in India to adjudicate all the civil
disputes cannot be readily inferred unless it is barred by the express
provision of law or by necessary implication. The Arbitral Tribunals,
whether domestic or international, are the forums of limited
jurisdiction. It exercises the jurisdiction only to the extent it is
conferred and only over the persons or the parties, who have agreed
to surrender themselves to such jurisdiction. The source of jurisdiction
of the Arbitral Tribunals to adjudicate the disputes or the differences
between the parties to the arbitration agreement flows from the
consent of parties – implied or express, the agreement to that effect in
writing, or waiver or surrender to the jurisdiction of such Tribunal by
conduct of parties. In the absence of these things, it is not possible for
the Arbitral Tribunals, whether domestic or international, to assume
the jurisdiction in respect of the subjectmatter, which is to be
arbitrated and/or to pass an award against the person/s or party/ies,
who are nonsignatories to the arbitration agreement.
26. Even if the Arbitral Tribunal decides the disputes or
differences under the arbitration agreement which is nonexistent or
illegal or decides the disputes or differences not covered by the
arbitration agreement or exercises jurisdiction over nonsignatories to
it and passes an award against them or against the persons or parties
who are not joined in such proceedings, the jurisdiction of the Civil
Courts in India under Section 34 in respect of domestic awards and
under Section 49 of the said Act in respect of an award by the
International Arbitration Tribunal, to review such decision is saved.
Not only that, but such decision of the Court in India is made
appealable under Sections 37 and 50 of the said Act, as the case may
be. Though the second appeal thereafter is barred under the said
provisions, the jurisdiction of the Supreme Court of India is kept
unaffected with an addition under Sections 37(3) and 50(2) that it
shall not take away right of appeal to the Supreme Court. In view of
this, the jurisdiction of the Arbitral Tribunal to decide the questions
and pass an award, as contemplated earlier, stands excluded by
necessary implication.
27. There is a decision of the learned Single Judge of this Court
(Shri R.D. Dhanuka, J.) delivered on 2842015 in Arbitration Petition
No.587 of 2015 and other connected matters in Oil and Natural Gas
Corporation Ltd. v. M/s. Jindal Drilling and Industries Limited, holding
in para 37 of the said decision that the Arbitral Tribunal has no power
to lift the corporate veil and such power can be exercised only by a
Court if the strongest case is made out. The Court rejected the
argument advanced by the petitioner therein that the Arbitral
Tribunal should have lifted the corporate veil to find out that the
other respondents in the said petition were forming part of the
respondent No.1 and were one and the same entity – bound to
discharge the liabilities of the respondent No.1. The Court found that
the decision of the Arbitral Tribunal refusing to lift the corporate veil
cannot, therefore, be interfered with under Section 34 of the said Act.
28. Shri Deven Chauhan, the learned Advocate for the
applicantCompany, has invited my attention to clause 8(d) contained
in the Representation Agreement in force, which is reproduced
below :
“8(d) Interpretation, Amendment, Law, Arbitration and
Assignments.
(i) This Agreement is subject to the laws of the State of
Missouri, U.S.A.
(ii) In the event that a dispute arises in connection with
this Agreement such dispute shall be referred to a single
arbitrator in Kanas City, Missouri, U.S.A. to be appointed
by agreement between the parties hereto, or failing
agreement to be appointed according to the rules of the
American Arbitration Association, the same rules under
which any dispute shall be decided.
(iii) In the event a dispute is committed to arbitration, the
party deemed at fault shall reimburse the full cost of the
arbitration and legal process to the aggrieved party.
(iv) This Agreement shall not be amended in any way
other than by agreement in writing, signed by both
parties.”
It is urged by him, relying upon the observations made in
paras 97, 99, 100, 102, 103, 103.1, 103.2 and 143 of the decision of
the Apex Court in the case of Chloro Controls India Private Limited,
cited supra, that the expression “a dispute arises in connection with
this Agreement” is of the widest amplitude and confers a jurisdiction
upon the International Arbitration Tribunal not only to decide the
questions of existence, validity and effect (scope) of the arbitration
agreement, but also the rights and liabilities of the persons, who are
nonsignatories to the agreement, if it finds that the cause of action is
directly relatable to the contract and that the nonsignatories are the
“alter ego” of the nonapplicant No.1Company liable to pay the
compensation/damages for breach of contract or payment of amount
arising out of the contract.
29. The Apex Court in the case of Chloro Controls India Private
Limited, cited supra, was dealing with a case under Section 45 of the
said Act, which concerns the power of the judicial authority to refer
the parties to arbitration, as has been rightly pointed out by
Shri Sunil Manohar, the learned Senior Advocate for the nonapplicant
No.2. The decision can be used as an authority for the proposition
advanced by Shri Manohar that it is the jurisdiction of the Court in
India to decide the question of existence, validity, binding nature and
enforceability of the agreement against nonsignatories by invoking
the doctrine of “lifting of corporate veil” or “alter ego”. The factual
background in which the principles are laid down and the object and
purpose of laying down such principles will have to be kept in mind.
A decision is an authority for what it actually decides and not for what
logically follows from it, is a wellsettled principle of judicial
precedents. It was not the question raised and decided in the said
decision as to whether the jurisdiction to decide all such issues lies
with the Arbitral Tribunal. The decision in Chloro Controls India
Private Limited is not an authority for the proposition that the Arbitral
Tribunal is competent or empowered either to rule on its own
jurisdiction or to make nonsignatories to the arbitration agreement
bound by the award passed by it. The decision is, therefore, no avail
to the applicant.
30. In view of above, the argument that the International
Arbitration Tribunal has jurisdiction to pass an award against the
nonsignatories to the arbitration agreement on the basis of finding
that they are the “alter ego” of the party to the agreement, is rejected
and it is held that such jurisdiction does not vest in the International
Arbitration Tribunal. The question No.2 is answered accordingly.
As to Question No.3 :
31. Now coming to the question as to whether the
nonapplicants, who had appeared in the proceedings before the
International Arbitration Tribunal and filed their reply raising all such
objections, are estopped from raising such objections in the
proceedings under Section 49 of the said Act, asking the Court to go
behind the findings recorded by the International Arbitration Tribunal.
No doubt, that in terms of clause 8(d)(i) of the Representation
Agreement in question, there may be a forum available under the
laws of the State of Missouri, U.S.A., which is the agreed law, to
challenge the award passed in question. In the decision of the Apex
Court, delivered by the Constitution Bench in the case of Khardah
Company Ltd., cited supra, such objection was raised and considered in
para 14 of the said decision. The Court has held that when the
agreement itself is void, then there was no submission which was alive
on which the Arbitrators could act and the proceedings before them
would be wholly without jurisdiction. It holds that what confers the
jurisdiction on the Arbitrators to hear and decide a dispute is an
arbitration agreement, as defined in Section 2(a) of the Arbitration
Act, and where there is no such agreement, there is an initial want of
jurisdiction which cannot be cured by acquiescence. The Court
rejected the contention that the respondents therein were estopped by
their conduct from questioning the validity of the award.
32. In the decision of the Apex Court in the case of Renusagar
Power Co. Ltd., cited supra, it is held in para 57 as under :
“57. In view of the position which arises from the
aforesaid discussion it is really unnecessary for us to go into
and decide the question whether, in cases where the arbitration
clause contained in the underlying Commercial Contract is so
widely worded as to include within its scope the question of its
existence, validity or effect (scope). The decided cases have
made a distinction between questions as to the existence or
validity of the agreement on the one hand and its effect (scope)
on the other and have held that in the case of the former those
questions cannot be decided by the arbitrators, as by sheer logic
the arbitration clause must fall along with the underlying
Commercial Contract which is either nonexistent or illegal,
while the case of the latter it will ordinarily be for the
arbitrators to decide the effect (scope) of the arbitration
agreement as is contended for by Counsel for G.E.C. because
both under the scheme of the Foreign Awards Act as well as
under the general law of arbitration obtaining in England and
in India, the decision of the arbitrator on the question of his
own jurisdiction will have to be regarded as provisional or
tentative, subject to final determination of that question by the
Court. ...”
As a general law, the Court has made a distinction between
the questions as to the existence of validity of the agreement on one
hand and its effect (scope) on the other, and has held that in the case
of the former, those questions cannot be decided by the Arbitrators, as,
by sheer logic, the arbitration clause must fall along with the
underlying commercial contract, which is either nonexistent or illegal,
while the case of the latter, it will ordinarily be for the Arbitrators to
decide the effect (scope) of the arbitration agreement. It is held under
the scheme of the Foreign Awards Act as well as under the general law
of arbitration obtaining in England and in India, the decision of the
Arbitrator on the question of his own jurisdiction will be regarded as
provisional or tentative, subject to final determination of that question
by the Court.
33. In view of above, the argument that once the International
Arbitration Tribunal rightly or wrongly decides the question of its own
jurisdiction, it can be challenged only in the forum provided in the law
applicable under the arbitration agreement and the Court in India,
acting under Section 49 of the said Act, cannot go behind such award
to record the findings contrary to the contents of such award and
refuse to make a decree of the Court, is rejected. It is held that the
decision of the International Arbitration Tribunal on such question will
be treated as tentative, subject to the decision of Court in India under
Section 49 of the said Act and there would be no question of estoppel,
waiver, surrender or acquiescence, merely because there is
participation in the proceedings of arbitration. The question No.3 is
answered accordingly.
34. Having dealt with the questions of law, I turn to the facts of
the present case. The Representation Agreements in force are signed
by the DirectorTerry L. Peteete for and on behalf of the
applicantIntegrated Sales Services Limited, and by Rattan Ram
Pathak, the nonapplicant No.3(i), in his capacity as the Managing
Director of the nonapplicant No.1DMC Management Consultants
Ltd., containing the clause of arbitration, making it subject to the laws
of State of Missouri, U.S.A. Neither the nonapplicant No.2Arun Dev
s/o Govindvishnu Upadhyaya, nor the applicant No.3Gemini Bay
Transcription Pvt. Ltd., through its Directors(i) Rattan Ram Pathak,
and (ii) Naresh Kumar Kopisetti, have signed the Representation
Agreements in force in their individual capacity. Except the
nonapplicant No.2Arun Dev s/o Govindvishnu Upadhyaya, none of
the other individual nonapplicants in this application were joined as
the partyrespondents in the dispute before the International
Arbitration Tribunal. The respondents before the said Tribunal were
DMC Management Consultants Ltd., Arun Dev s/o Govindvishnu
Upadhyaya, Gemini Bay Consultants Ltd., and Gemini Bay
Transcription Pvt. Ltd.
35. The nonapplicant Nos.2 and 3 have neither submitted
themselves to the arbitration nor to the composition of the
International Arbitration Tribunal. There did not exist or subsist any
arbitration agreement between the applicant and the nonapplicant
Nos.2 and 3. There is nothing in the Representation Agreements in
force, which permit the said Tribunal to exercise jurisdiction over the
nonsignatories to it. The invocation of the principle of lifting of
corporate veil and holding the nonapplicant Nos.2 and 3 as
“alter ego” of the nonapplicant No.1Company and on the basis of it,
to hold them jointly and severally liable to pay the amount under the
award, is totally without jurisdiction and cannot be sustained. Merely
because the nonapplicant Nos.2 and 3 have participated in the
proceedings before the International Arbitration Tribunal, they cannot
be estopped from raising the question of jurisdiction of the said
Tribunal in response to the application under Section 49 of the said
Act. The question of operating estoppel, acquiescence, surrender, etc.,
to the jurisdiction of the said Tribunal, does not at all arise. The
award passed by the International Arbitration Tribunal, in the present
case, is, therefore, hit by the conditions in clauses (c), (d) and (e) of
subsection (1) of Section 48 of the said Act. The said award cannot,
therefore, be enforced in India against the nonapplicant Nos.2 and 3
by making a decree of the Court.
36. Though the International Arbitration Tribunal had no
jurisdiction to invoke the principle of lifting of corporate veil and
holding the nonapplicant Nos.2 and 3 as “alter ego” of the
nonapplicant No.1Company, this Court is competent under
Section 49 of the said Act to go into all these aspects of the matter and
hold that the nonapplicant Nos.1, 2 and 3 are jointly liable to pay the
amount covered by the award passed by the said Tribunal. However,
the applicant has to make out such a case in the proceedings under
Section 49 of the said Act. After going through the contents of the
application, I do not find that any such case is made out by the
applicant. In spite of repeated queries, Shri Deven Chauhan, the
learned Advocate for the applicant, makes a statement that this is not
the case with which the applicant has come forward before this Court
while invoking the jurisdiction under Section 49 of the said Act. Had
such a case been made out, then the extent of liability of the
nonapplicant No.2, being the Director of the nonapplicant
No.1Company, was required to be judged on the basis of the
provisions of the Companies Act, 1956. In view of this, the
nonapplicant Nos.2 and 3 cannot be held in this proceeding jointly
liable to pay the amount covered by the arbitration award, along with
the nonapplicant No.1Company.
37. Shri Deven Chauhan for the applicant submits that the
nonapplicant Nos.2 and 3 were made parties in the proceedings
before the International Arbitration Tribunal in their individual
capacity and they are also made parties in the same capacity before
this Court. The award passed against them is required to be executed
against them individually by attaching their properties if such occasion
arises. In order to make the nonapplicant Nos.2 and 3(i) and (ii)
individually or severally liable to pay the sum covered by the arbitral
award in question, it must be shown that they have signed the
arbitration agreement as guarantors or sureties for the debts due or
recoverable arising out of or in connection with the contract in
question against the nonapplicant No.1, of which they are the
Directors. In such an event, the liability of the guarantor or surety will
be coextensive with that of the principal debtor, and consequently
their personal assets may be attached in execution of the decree. This
is not the case with which the applicant has approached this Court
under Section 49 of the said Act. Hence, the award passed in question
cannot be enforced against them by passing a decree.
38. Shri Mathews, the learned Advocate for the nonapplicant
No.1Company, the judgmentdebtor, has urged that the confirmation
of award has to be by the Court of Chancery at Delaware and the
confirmation of award by the District Court at Missouri is without
jurisdiction, and hence it is liable to be set aside. The
nonapplicant No.1 is party to the Representation Agreements
containing the arbitration clause, and such question at their instance
cannot be entertained under Section 49 of the said Act, particularly
when there is a remedy available to challenge it in the forum provided
in the laws of State of Missouri, U.S.A. It cannot be a question of the
said award being contrary to the public policy of India, as has been
urged by Shri Mathews. The award passed by the International
Arbitration Tribunal against the nonapplicant No.1 will have to be
enforced by making it as a decree of this Court.
39. In view of above, the following order is passed :
(1) The award dated 2832010 passed by the
International Arbitration Tribunal in ICDR Case
No.50181T0032709 becomes unenforceable in India to
the extent it operates against the nonapplicant No.2Arun
Dev s/o Govindvishnu Upadhyaya and No.3Gemini Bay
Transcription Pvt. Ltd., and the claim for passing a decree
against them in terms of the said award is refused.
(2) The award passed by the International Arbitration
Tribunal in ICDR Case No.50181T0032709 to the extent it
operates against the nonapplicant No.1DMC Management
Consultants Ltd. is made enforceable in India and the decree
is passed in terms of the said award against the
nonapplicant No.1.
(3) Decree be drawn accordingly.
(4) The matter shall remain pending.
JUDGE.
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