Full Judgment Text
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CASE NO.:
Arbitration Petition 3 of 2005
PETITIONER:
RITE APPROACH GROUP LTD.
RESPONDENT:
M/S ROSOBORONEXPORT
DATE OF JUDGMENT: 16/11/2005
BENCH:
A.K. Mathur
JUDGMENT:
J U D G M E N T
A.K. MATHUR, J.
This arbitration petition was filed before this Court under
Section 11(6) of the Arbitration and Conciliation Act, 1996 for
appointment of the Arbitrator. Hon’ble the Chief Justice of India has
designated me to nominate the Arbitrator for disposal of dispute.
Notice of this petition was served on the parties and they were
heard.
The petitioner is a company incorporated under the relevant
laws of the Republic of Singapore having its registered office at 1101,
Continental Tower, Tamasek Avenue, Singapore and represented in
India by Austrian Trade Commission, 80, Jor Bagh, New Delhi-
110003. The petitioner carries on business, inter alia, as an Agent of
various foreign companies for negotiating and concluding contracts
on their behalf.
Federal State Unitary Enterprise Russian Technologies,
hereinafter referred to as "Russian Technologies", was a Russian
public sector company incorporated under the name and style of
"FSUE Promexport" and the said "FSUE Promexport" subsequently
merged with the Repondent ROSOBORONEXPORT. Consequently,
all the contractual rights and liabilities of M/s Russian Technologies
vested in ROSOBORONEXPORT, the respondent herein. All the
three entities have been/are owned by the Government of Russia.
The registered office of M/s ROSOBORONEXPORT is 27/3,
Stromynika STR Moscow, 107076.
That between October 1999 and April 2000 M/s Russian
Technologies approached the petitioner for procuring orders in India
for supply of helicopters to Border Security Force, Ministry of Home
Affairs, Government of India. The petitioner agreed to act as the
Agent of the said Russian Enterprise, the predecessor-in-interest of
the respondent herein for procuring contracts in India for supply of
helicopters for the BSF, Ministry of Home Affairs, Government of
India. The Border Security Force, Ministry of Home Affairs, was
approached and the Indian Authorities were persuaded to select the
helicopters manufactured by M/s Kazan Helicopters Ltd. which was to
be supplied by M/s Russian Technologies as acceptable to the
Border Security Force. The petitioner through its representatives in
India, also intimated to the respondent of the specific requirements of
the Boarder Security Force of the Ministry of Home Affairs,
Government of India so that their specific requirements could be met
by the respondent.
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Thereafter number of meetings were held and ultimately on 1st
March, 2000 pursuant to the petitioner’s effort a Memorandum of
Understanding was arrived at between the respondent and the
Border Security Force of the Ministry of Home Affairs, Government of
India whereby the modalities for the supply of helicopters were
arrived at, after lot of correspondence and discussion.
Subsequently, in recognition of the services rendered by the
petitioner to the respondent, a written contract was entered into by
and between the parties on 14th April, 2000 whereunder M/s Russian
Technologies was described as the "Principal" and the petitioner was
described as the "Agent".
Under the said agreement, Principal authorized the Agent i.e.
petitioner to take the functions for organizing and conclusion of
contracts between the Principal and the Border Security Force of the
Ministry of Home Affairs, Government of India. Originally, the agency
was for securing order for four helicopters which was subsequently
enhanced to six helicopters. As per the agency agreement, the
Agent-petitioner was given an obligation to facilitate signing of the
contract between the Russian Technologies, the Principal and the
Border Security Force of the Ministry of Home Affairs, Government of
India, the customer. The petitioner was to render assistance to
Russian Technologies in making negotiations with the Border
Security Force of the Ministry of Home Affairs, Government of India to
facilitate solving of any problems and other concerning preparations
and conclusions of the contract and to render assistance to Russian
Technologies in making negotiations with the Border Security Force
of the Ministry of Home Affairs, Government of India on the
specifications of supply of armaments and other goods for the
helicopters.
M/s Russian Technologies, respondent was also to perform
certain obligations i.e. to supply the Agent in time with necessary
information and documentation in accordance with the Agent’s
request; to inform the Agent about all the changes concerning the
conclusion and fulfilment of the contract signed under the said
agency agreement; to pay to the Agent its commission from the
amount received from Border Security Force of the Ministry of Home
Affairs, Government of India for the goods delivered or services
rendered to it with the petitioner’s assistance. The quantum of
commission under the said agreement was fixed at 16% of the
payments which would be made by the Government of India to M/s
Russian Technologies.
The petitioner acted as an Agent on behalf of the Russian
Technologies and thereafter on behalf of the respondent and
facilitated execution of a contract for supply of six helicopters to
Border Security Force of the Ministry of Home Affairs, Government of
India against payment of a total sum of Rs.180 crores of which a
Memorandum of Understanding was signed in March 2000 and a
letter of credit was opened on June, 2003.
It is alleged that because of the petitioner’s efforts, the contract
for supply of six helicopters by M/s Russian Technologies, which
subsequently merged with M/s ROSOBORONEXPORT became
possible. The Petitioner came to know that the helicopters would be
supplied by M/s ROSOBORONEXPORT to the Government of India
by the end of 2003. Therefore petitioner reminded the respondent
about their obligation to pay 16% commission to the petitioner. But
unfortunately M/s ROSOBORONEXPORT denied the obligation to
pay any commission to the petitioner. The stand of the respondent
was that one of the petitioner’s representatives in India, Dr. Eric
Gutman, an Austrian citizen, who had rendered service to M/s
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Russian Technologies for procuring this contract, had also claimed
for the commission and on his behalf the Austrian Trade
Commissioner in India had approached the respondent, M/s Kazan
Helicopters. The contention of the petitioner was that once the
helicopters are supplied by respondent to the Government of India,
and the Government of India makes the payment of the price of these
helicopters to the Russian party, the petitioner would be left with no
remedy and therefore petitioner prayed that an injunction order may
be issued and the matter may be referred to Arbitrator. The petitioner
has also referred to arbitration clause in Article 6 of Agency
Agreement dated 14.4.2000 which reads as under:
"Article 6
Solving of Disputes and Differences
6.1. If any disputes and/or differences between the
PRINCIPAL and the AGENT concerning the present
agreement a rise, both PARTIES will try to solve it by
negotiations.
6.2 If differences and/or disputes could not be solved by
both PARTIES through negotiations, they will be
submitted to Arbitration Court under the Chamber of
Commerce and Trade of the Russian Federation.
The decision of the Arbitration Court will be final and
obligatory for both PARTIES."
Therefore in this background petitioner filed this petition under
Section 11(6) of the Arbitration Act, 1996 and sought prayer for
appointment of arbitrator in India under the Indian Arbitration Act as
according to the petitioner, it apprehends that it is not likely to get
justice in Russia. A notice was also given but without any result,
hence the petitioner approached this Court. Before this, petitioner
filed an application under Section 9 of the Arbitration and Conciliation
Act, 1996 before the Delhi High Court and the Delhi High Court
passed interim order and directed Border Security Force of the
Ministry of Home Affairs, Government of India to hold back 16% out
of the amount payable to the respondent company in regard to the
supply of the helicopters to Government of India in terms of the
contract entered into in June, 2003.
Thereafter that matter came up before the Delhi High Court on
12.1.2004 and order dated 12.12.2003 was modified.
Thereafter on 17.03.2004 the claimant invoked arbitration
clause in view of the differences and disputes existing between the
parties and called upon the respondent to act as per the agreement
within 30 days from the receipt of the notice failing which the claimant
would be constrained to initiate appropriate legal action against the
respondent. Thereafter on completion of pleadings of the parties on
25.05.2005 learned Single Judge of Delhi High Court after hearing
parties dismissed the petition.
Thereafter petitioner filed an appeal before the Division Bench
of the Delhi High Court and the Division Bench issued notice in the
matter on 27.5.2004 and the said appeal is pending adjudication
before the Division Bench.
In this background petitioner approached this Court by filing
petition under Section 11(6) of the Arbitration and Conciliation Act,
1996, and that is how the matter has come before me on designation
by the Hon’ble Chief Justice of India.
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The respondent opposed the petition by filing a detailed reply
and one of the principal submissions of the learned counsel for the
respondent was that Clause 6.2 of the Agency Agreement dated
14.4.2000 provides that in case of dispute between the parties, the
parties will resort to arbitration for resolution of their dispute and they
will submit to Arbitration Court under the Chamber of Commerce and
Trade of the Russian Federation. Therefore this Court has no
jurisdiction to entertain this petition.
The matter got adjourned for several times for one reason or
the other for filing of the reply, ultimately the arguments were heard
and order reserved.
It may be relevant to mention here that since the matter was
pending before the Seven Judge Bench with regard to the
interpretation of certain provisions of the Arbitration & Conciliation
Act, 1996, therefore arguments were heard and order was reserved
awaiting the decision of the Seven Judge Bench. Now recently on
26.10.2005 the Seven Judge Bench has delivered its decision in Civil
Appeal No. 4168 of 2003 (M/s S.B.P. & Co. vs M/s Patel
Engineering Ltd. & Anr.) and the earlier decision rendered in the
case of Konkan Railway Corporation Ltd. And another Vs Rani
Construction Pvt. Ltd. [(2002) 2 SCC 388] has been reversed and
now it has been held that the order passed by the Judge on
designation by the Hon’ble Chief Justice, the order shall be judicial
order and not administrative order as was held in Konkan Railway
case (supra). Therefore now legal position has been crystallized that
the order passed by the Judge on nomination of the Hon’ble Chief
Justice of India under Section 11 shall be judicial order not amenable
to any appeal. The legal position has been summarized as under in
above decision M/s S.B.P. & Co.(Supra) :-
"46. We, therefore, sum up our conclusions as
follows:
i) The power exercised by the Chief Justice of
the High Court or the Chief Justice of India
under Section 11(6) of the Act is not an
administrative power. It is a judicial power.
ii) The power under Section 11(6) of the Act, in
its entirety, could be delegated by the Chief
Justice of the High Court only to another judge
of that court and by the Chief Justice of India
to another judge of the Supreme Court.
iii) In case of designation of a judge of the High
Court or of the Supreme Court, the power that
is exercised by the designated judge would be
that of the Chief Justice as conferred by the
statute.
iv) The Chief Justice or the designated judge will
have the right to decide the preliminary
aspects as indicated in the earlier part of this
judgment. These will be, his own jurisdiction,
to entertain the request, the existence of a
valid arbitration agreement, the existence or
otherwise of a live claim, the existence of the
condition for the exercise of his power and on
the qualifications of the arbitrator or
arbitrators. The Chief Justice or the judge
designated would be entitled to seek the
opinion of an institution in the matter of
nominating an arbitrator qualified in terms of
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Section 11(8) of the Act if the need arises but
the order appointing the arbitrator could only
be that of the Chief Justice or the judge
designate.
v) Designation of a district judge as the authority
under Section 11(6) of the Act by the Chief
Justice of the High Court is not warranted on
the scheme of the Act.
vi) Once the matter reaches the arbitral tribunal
or the sole arbitrator, the High Court would not
interfere with orders passed by the arbitrator
or the arbitral tribunal during the course of the
arbitration proceedings and the parties could
approach the court only in terms of Section
37 of the Act or in terms of Section 34 of the
Act.
vii) Since an order passed by the Chief Justice of
the High Court or by the designated judge of
that court is a judicial order, an appeal will lie
against that order only under Article 136 of the
Constitution of India to the Supreme Court.
viii) There can be no appeal against an order of
the Chief Justice of India or a judge of the
Supreme Court designated by him while
entertaining an application under Section
11(6) of the Act.
ix) In a case where an arbitral tribunal has been
constituted by the parties without having
recourse to Section 11(6) of the Act, the
arbitral tribunal will have the jurisdiction to
decide all matters as contemplated by Section
16 of the Act.
x) Since all were guided by the decision of this
Court in Konkan Railway Corpn. Lts. & Anr.
Vs. Rani Construction Pvt. Ltd. [(2002) 2
SCC 388)] and orders under Section 11(6) of
the Act have been made based on the
position adopted in that decision, we clarify
that appointments of arbitrators or arbitral
tribunals thus far made, are to be treated as
valid, all objections being left to be decided
under Section 16 of the Act. As and from this
date, the position as adopted in this judgment
will govern even pending applications under
Section 11(6) of the Act.
xi) Where District Judges had been designated
by the Chief Justice of the High Court under
Section 11(6) of the Act, the appointment
orders thus far made by them will be treated
as valid; but applications if any pending
before them as on this date will stand
transferred, to be dealt with by the Chief
Justice of the concerned High Court or a
Judge of that court designated by the Chief
Justice.
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xii) The decision in Konkan Railway Corpn. Ltd.
& Anr. Vs. Rani Construction Pvt. Ltd.
[ (2002) 8 SCC 388] is overruled."
In the present case, as per the Agency Agreement dated
14.4.2000, Clause 6.2 categorically states that if any dispute arises
between the parties then the same shall be submitted to Arbitration
Court under the Chamber of Commerce and Trade of the Russian
Federation. Therefore there is a specific clause mentioned in the
Agency Agreement as to which court will have jurisdiction to try and
dispose of the matter.
In view of the specific provision specifying the jurisdiction of the
Court to decide the matter, this Court cannot assume the jurisdiction.
Whenever there is a specific clause conferring jurisdiction on
particular Court to decide the matter then it automatically ousts the
jurisdiction of other Court. In this agreement, the jurisdiction has been
conferred on the Chamber of Commerce and Trade of the Russian
Federation as the authority before whom the dispute shall be
resolved. In view of the specific arbitration clause conferring power
on the Chamber of Commerce and Trade of the Russian Federation,
it is that authority which alone will arbitrate the matter and the finding
of that arbitral tribunal shall be final and obligatory for both the
parties.
Thus, in this view of the matter, I am of the opinion that this
Court has no jurisdiction and the Chamber of Commerce and Trade
of Russian Federation alone has jurisdiction to act as an arbitrator
and resolve the dispute. Hence this application is rejected.