Case: Enercon (India) Ltd  Vs. Enercon Gmbh


Decision reasoning: 0[ds]75. We find considerable merit in the submissions made by Dr. Singhvi. It cannot be disputed that there is a legal relationship between the parties of a long standing. Section 44 of the Indian Arbitration Act, 1996 applies to arbitral awards of differences between persons arising out of legal proceedings. Such a relationship may be contractual or not, so long it is considered as commercial under the laws in force in India. Further, that legal relationship must be in pursuance of an agreement, in writing, for arbitration, to which the New York Convention applies. The court can decline to make a reference to arbitration in case it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. There are no pleadings to that effect in the plaint. The Daman Trial Court findings that the contract is null and void and not based on free consent were rendered in the absence of relevant pleadings. There is a mention in one of the e-mails that Dr. Wobben has taken advantage of his friendship with Mr. Yogesh Mehra. But that seems to be more of a sulk than a genuine grievance. Even if one accepts the truth of such a statement, the same is not reflected in the pleadings. Therefore, no serious note could be taken of that statement at this stage. The Daman Appellate Court upon reconsideration of the pleadings found that there is no plea to the effect that the agreement is null, void or incapable of being performed. Justice Savant has not examined the pleadings as the issue with regard to the underlying contract has been left to be examined by the Arbitral Tribunal. Before us also, it is not the plea of the Appellants that the arbitration agreement is without free consent, or has been procured by coercion, undue influence, fraud, misrepresentation or was signed under a mistake. In other words, it is not claimed that the agreement is null and void, inoperative and incapable of being performed as it violates any of the provisions under Sections 14, 15, 16, 17, 18, 19, 19A and 20 ofthe Indian Contract Act, 1872. The submission is that the matter cannot be referred to arbitration as the IPLA, containing the arbitration clause/agreement, is not a concluded contract. This, in our opinion, would not fall within the parameters of an agreement beingand void, inoperative or incapable of beingin terms of Sections 14, 15, 16, 17, 18, 19 and 20 ofthe Indian Contract Act, 1872. These provisions set out the impediments, infirmities or eventualities that would render a particular provision of a contract or the whole contract void or voidable. Section 14 defines free consent; Section 15 defines coercion in causing any person to enter into a contract. Section 16 deals with undue influence. Fraud in relation to a contract is defined under Section 17; whereas misrepresentation is defined and explained under Section 18. Section 19 states thatconsent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was soSection 19A gives the party who was unduly influenced to enter into a contract an option similar to the one provided by the preceding section. Section 20 makes an agreement void where both the parties thereto are under a mistake as to a matter of fact. In our opinion, all the aforesaid eventualities refer to fundamental legal impediments. These are the defences to resist a claim for specific performance of a concluded contract; or to resist a claim for damages for breach of a concluded contract. We agree with Savant, J. that the issue as to whether there is a concluded contract between the parties can be left to the Arbitral Tribunal, though not for the same reasons.Further, the arbitration agreement contained in clause 18.1 to 18.3 of IPLA is very widely worded and would include all the disputes, controversies or differences concerning the legal relationship between the parties. It would include the disputes arising in respect of the IPLA with regard to its validity, interpretation, construction, performance, enforcement or its alleged breach. Whilst interpreting the arbitration agreement and/or the arbitration clause, the court must be conscious of the overarching policy of least intervention by courts or judicial authorities in matters covered by the Indian Arbitration Act, 1996. In view of the aforesaid, it is not possible for us to accept the submission of Mr. Nariman that the arbitration agreement will perish as the IPLA has not been finalised. This is also because the arbitration clause (agreement) is independent of the underlying contract, i.e. the IPLA containing the arbitration clause. Section 16 provides that the Arbitration clause forming part of a contract shall be treated as an agreement independent of such a contract.In our opinion, the Courts have to adopt a pragmatic approach and not a pedantic or technical approach while interpreting or construing an arbitration agreement or arbitration clause. Therefore, when faced with a seemingly unworkable arbitration clause, it would be the duty of the Court to make the same workable within the permissible limits of the law, without stretching it beyond the boundaries of recognition. In other words, a common sense approach has to be adopted to give effect to the intention of the parties to arbitrate. In such a case, the court ought to adopt the attitude of a reasonable business person, having business common sense as well as being equipped with the knowledge that may be peculiar to the business venture. The arbitration clause cannot be construed with a purely legalistic mindset, as if one is construing a provision in a statute.It is a well recognized principle of arbitration jurisprudence in almost all the jurisdictions, especially those following the UNCITRAL Model Law, that the Courts play a supportive role in encouraging the arbitration to proceed rather than letting it come to a grinding halt. Another equally important principle recognized in almost all jurisdictions is the least intervention by the Courts. Under the Indian Arbitration Act, 1996, Section 5 specifically lays down that :anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in thisKeeping in view the aforesaid, we find force in the submission of Dr. Singhvi that the arbitration clause as it stands cannot be frustrated on the ground that it is unworkable.We find much substance in the submissions of Mr. Nariman that there are very strong indicators to suggest that the parties always understood that the seat of arbitration would be in India and London would only be theto hold the proceedings of arbitration. We find force in the submission made by learned senior counsel for the Appellants that the facts of the present case would make the ratio of law laid down in Naviera Amazonica Peruana S.A. (supra) applicable in the present case. Applying the closest and the intimate connection to arbitration, it would be seen that the parties had agreed that the provisions of Indian Arbitration Act, 1996 would apply to the arbitration proceedings. By making such a choice, the parties have made the curial law provisions contained in Chapters III, IV, V and VI of the Indian Arbitration Act, 1996 applicable. Even Dr. Singhvi had submitted that Chapters III, IV, V and VI would apply if the seat of arbitration is in India. By choosing that Part I of the Indian Arbitration Act, 1996 would apply, the parties have made a choice that the seat of arbitration would be in India. Section 2 of the Indian Arbitration Act, 1996 provides that Part Iapply where the place of arbitration is inIn Balco, it has been categorically held that Part I of the Indian Arbitration Act, 1996, will have no application, if the seat of arbitration is not in India. In the present case, London is mentioned only as aof arbitration which, in our opinion, in the facts of this case can not be read as theof arbitration.91. We are fortified in taking the aforesaid view since all the three laws applicable in arbitration proceedings are Indian laws. The law governing the Contract, the law governing the arbitration agreement and the law of arbitration/Curial law are all stated to be Indian. In such circumstances, the observation in Naviera Amazonica Peruana S.A. (supra) would become fully applicable. In this case, the Court of Appeal in England considered the agreement which contained a clause providing for the jurisdiction of the courts in Lima, Peru in the event of judicial dispute; and at the same time contained a clause providing that the arbitration would be governed by the English law and the procedural law of arbitration shall be the English law.It is correct that, in virtually all jurisdictions, it is an accepted proposition of law that the seat normally carries with it the choice of thatarbitration/Curial law. But this would arise only if the Curial law is not specifically chosen by the parties. Reference can be made to Balco (supra), wherein this Court considered a number of judgments having a bearing on the issue of whether the venue is to be treated as seat. However, the court was not required to decide any controversy akin to the one this court is considering in the present case. The cases were examined only to demonstrate the difficulties that the court will face in a situation similar to the one which was considered in Naviera Amazonica (supra).Thus, it would be evident that if theof the arbitration was in Scotland, the English courts would have no jurisdiction to entertain an Application for leave to appeal. The contractor argued that the seat of the arbitration was Scotland whilst the employer argued that it was England. There were to be two contractors involved with the project.In the present case, even though thevenue of arbitrationproceedings has been fixed in London, it cannot be presumed that the parties have intended the seat to be also in London. In an International Commercial Arbitration, venue can often be different from the seat of arbitration. In such circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but this would not bring about a change in the seat of the arbitration. This is precisely the ratio in Braes of Dounne.Therefore, in the present case, the seat would remain in India.This apart, we have earlier noticed that the main contract, the IPLA is to be performed in India. The governing law of the contract is the law of India. Neither party is English. One party is Indian, the other is German. The enforcement of the award will be in India. Any interim measures which are to be sought against the assets of Appellant No. 1 ought to be in India as the assets are situated in India. We have also earlier noticed that Respondent No.1 has not only participated in the proceedings in the Daman courts and the Bombay High Court, but also filed independent proceedings under the Companies Act at Madras and Delhi. All these factors would indicate that Respondent No.1 does not even consider the Indian Courts as forum-non-conveniens. In view of the above, we are of the considered opinion that the objection raised by the Appellants to the continuance of the parallel proceedings in England is not wholly without justification. The only single factor which prompted Respondent No.1 to pursue the action in England was that the venue of the arbitration has been fixed in London. The considerations for designating a convenient venue for arbitration can not be understood as conferring concurrent jurisdiction on the English Courts over the arbitration proceedings or disputes in general. Keeping in view the aforesaid, we are inclined to restore the anti-suit injunction granted by the Daman Trial