Case: Larsen and Toubro Limited Scomi Engineering BHD Vs. Mumbai Metropolitan Region Development Authority

1. The present petition, Under Section 11 of the Arbitration & Conciliation Act, 1996, (in short the Act), that has been filed before this Court, arises out of a contract entered into on 09.01.2009 for the work of planning, design, development, construction, manufacture, supply, testing and commissioning of a Monorail system in two particular earmarked Sections in Wadala, Mumbai including operation and maintenance for a period of three years from the date of start of commercial operations. This agreement contains an arbitration clause, which is set out hereunder:Claims, Disputes and ArbitrationSince disputes arose between the parties to the agreement, various interim claims had been made by the Consortium of M/s. Larsen and Toubro, an Indian company, together with Scomi Engineering Bhd, a Company incorporated in Malaysia, for which the Consortium has filed this petition Under Section 11 of the Act to this Court, since according to them, one of the parties to the Arbitration agreement, being a body corporate, incorporated in Malaysia, would be a body corporate, which is incorporated in a country other than India, which would attract Section 2(1)(f)(ii) of the Act.

Reasoning: When we come to the consortium agreement that is entered into between the Indian company and the Malaysian company as aforestated, we find in the definition Clause that "Consortium" shall mean L&T and Scomi Engineering Bhd, acting in collaboration, for the purpose of this agreement and shall be called "the L&T-SEB" Consortium "un-incorporated." The contract is defined in sub-Clause 6 as meaning, "the contract to be entered by the Consortium with the employer for the execution of the Project". Under sub-Clause 7, "the lead Member of the Consortium" or "Consortium Leader" shall mean L&T, that is, the Indian Company. Under sub-Clause 8, the "Supervisory Board" (hereinafter referred to as the SB) shall mean a Board constituted under Clause 11 of the GCC. When we come to Clause 11.2, it is clear that the Members of this Supervisory Board will consist of four members, two appointed by each Member. One of the Members nominated by the Consortium Leader and agreed to by all members shall then act as the Chairman of the Supervisory Board, which is, by Clause 11.5, to decide on various matters relating to the execution of the contract. Clause 21.1(g) provides that the Consortium leader shall lead all arbitration proceedings6. As correctly pointed out by Shri Jain, separate claims were made by the Indian company and the Malaysian company which were rejected by the Respondent. Nonetheless, by a letter dated 22.04.2016, the Respondent referred to these various rejection letters, and stated that documents in support of the list of "delayed events" had not yet been given, and therefore, necessary information and clarification, in response to certain observations, together with all documents in support of the claim, was requested to be furnished8. Shri Gopal Jain did not dispute the fact that this judgment was final inter-parties as no appeal has been preferred. Therefore, to stress the fact that it pertains only to "this claim" and would therefore, not apply to a different set of claims under the arbitration Clause is not an argument that appeals to us9. It is clear, as has been held by the judgment of the High Court of Bombay, and which is binding inter-parties, that it is not open for the Petitioner to rely upon their status as independent entities while dealing with the Respondent and they will have to deal with the Respondent as a Consortium only10. This being the case, it is clear that the un-incorporated "association" referred to in Section 2(1)(f)(iii) would be attracted on the facts of this case and not Section 2(1)(f)(ii) as the Malaysian body cannot be referred to as an independent entity following the judgment of the High Court of BombayIt would become clear that prior to the deletion of the expression "a company or", there were three sets of persons referred to in Section 2(1)(f)(iii) as separate and distinct persons who would fall within the said sub-clause. This does not change due to the deletion of the phrase "a company or" for the reason given by the Law Commission. This is another reason as to why "an association" cannot be read with "body of individuals" which follows it but is a separate and distinct category by itself, as is understood from the definition of "person" as defined in the Income Tax Act referred to above13. This being the case, coupled with the fact, as correctly argued by Shri Diwan, that the Indian company is the lead partner, and that the Supervisory Board constituted under the Consortium Agreement makes it clear that the lead partner really has the determining voice in that it appoints the Chairman of the said Board (undoubtedly, with the consent of other members); and the fact that the Consortiums office is in Wadala, Mumbai as also that the lead member shall lead the arbitration proceedings, would all point to the fact that the central management and control of this Consortium appears to be exercised in India and not in any foreign nation.