Full Judgment Text
2019:BHC-OS:18433-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COM. APPEAL NO. 317 OF 2019
IN
COM. ARBITRATION PETITION NO. 76 OF 2018
WITH
NOTICE OF MOTION NO. 550 OF 2019
IN
COM. APPEAL NO. 317 OF 2019
IN
COM. ARBITRATION PETITION NO. 76 OF 2018
WITH
APPEAL NO. 333 OF 2019
IN
ARBITRATION PETITION NO. 548 OF 2014
WITH
NOTICE OF MOTION NO. 580 OF 2019
IN
APPEAL NO. 333 OF 2019
WITH
COM. APPEAL NO. 348 OF 2019
IN
COM. ARB. PETITION NO. 1101 OF 2018
1. Hindustan Petroleum Corporation Ltd.,
an Indian Company incorporated under the
provisions of the Companies Act, 1956 having
its registered office at Petroleum House,
17, Jamshedji Tata Road, Churchgate,
Mumbai – 400 020.
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2. Prize Petroleum Company Ltd.,
A Company under the provisions of the
Companies Act, 1956 having its registered
office at UCO Bank Building, Sansad Marg,
New Delhi – 110001. .. Appellants
Vs.
M3nergy Sdn. Bhd. (Formerly known as
M3nergy Berhad) a Malaysian Company
incorporated under the laws of Malaysia,
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having its registered office at 25 Floor,
Wisma UOA II, 21, Jalan Pinang, 50450,
Kuala Lumpur, Malaysia. .. Respondent
….
Mr. Aspi Chinoy, Senior Advocate a/w Mr. Hiroo Advani, Mr.
Rishabh Shah, Mr. Sheikh Yusuf Ali & Mr. Chirag Bhatia i/b
Advani & Co. for the Appellants.
Mr. Soli Cooper, Senior Advocate a/w Mr. Rishabh Jogani &
Ms. Shruti Shah i/b Shardul Amarchand Mangaldas & Co. for
the Respondent
….
CORAM : PRADEEP NANDRAJOG, C.J. &
SMT. BHARATI DANGRE, J.
RESERVED ON : OCTOBER 14, 2019
PRONOUNCED
ON: : OCTOBER 16, 2019
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JUDGMENT [PER PRADEEP NANDRAJOG, C.J.]:
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1. By a common partial Award dated 9 January 2014
the learned Arbitral Tribunal decided two issues. The first was
to the jurisdiction of the Arbitral Tribunal. The second was
whether the respondent was in breach of Article 22.5 of the
JEA and therefore liable for damages to the appellants. The
Award holds that it had jurisdiction to decide the dispute
between the parties and that the respondent was in breach and
hence liable to pay damages. The said Award was challenged
before the learned Single Judge vide Arbitration Petition No.
548/2014. The Arbitral Tribunal proceeded with the merits of
the claim laid by the appellants and by a majority Award dated
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27 September 2017 awarded the amounts referred to in the
majority Award in favour of the appellants. The same was
challenged under Commercial Arbitration Petition No.
76/2018.
2. The two Arbitration Petitions have been disposed of
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by a common judgment dated 10 January 2019. Allowing
Arbitration Petition No. 548/2014 and holding that there was
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no concluded contract between the parties the Award dated 9
January 2014 under which the Arbitrators held that the
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Tribunal had jurisdiction has been set aside and needless to
state the consequence thereof is setting aside of the majority
Award by allowing Commercial Arbitration Petition No.
76/2018.
3. After the majority and the minority Awards were
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published on 27 September 2017, the Arbitral Tribunal
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passed an Award relating to costs which is dated 15 June
2018. This award was challenged vide Commercial Arbitration
Petition No. 1101/2018. In view of the judgment and order
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dated 10 January 2019 allowing Arbitration Petition No.
548/2014 and Commercial Arbitration Petition No. 76/2018
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vide decision dated 11 March 2019 Commercial Arbitration
Petition No. 1101/2018 has been allowed.
4. Challenge in Appeal No. 333/2019 is to the decision
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dated 10 January 2019 allowing Arbitration Petition No.
548/2014. Challenge in Commercial Appeal No. 317/2019 is
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to the same decision dated 10 January 2019 in so far as it has
allowed Commercial Arbitration Petition No. 76/2018.
Challenge in Commercial Appeal No. 348/2019 is to the order
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dated 11 March 2019 allowing Commercial Arbitration
Petition No. 1101/2018.
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5. The factual backdrop leading to the dispute between
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the parties requires the journey to be tracked from 27
December 2004 when Oil and Natural Gas Corporation
(“ONGC”) invited tenders for development of ‘Offshore
Marginal Field Cluster-7’ (“OMFC-7”). Hindustan Petroleum
Corporation Ltd. (“HPCL”) a company incorporated under the
Companies Act, 1956 and Prize Petroleum Company Ltd.
(“PPCL”) also a Company incorporated under the Companies
Act, 1956 of whose 50% shares are held by HPCL as also
M3nergy which is a Company incorporated under the Laws of
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Malaysia executed a Memorandum of Understanding on 29
June 2005 with the object of forming a bidder group for
OMFC-7. PPCL submitted a bid on behalf of the Consortium
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on 29 June 2005. Bid was accepted. ONGC awarded the
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contract to the Consortium on 31 March 2006. Required by
the tender documents, a Service Contract for development of
OMFC-7 was executed by PPCL on behalf of the Consortium
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with ONGC on 27 September 2006. Article 7.4 of the said
Service Agreement required the consortium Companies to
execute Joint Executing Agreement (“JEA”) with ONGC
within 15 days of the effective date. Article 7.4.1 required to
Executing Contractor/Consortium to provide ONGC with a
copy of a duly executed JEA within 30 days of the effective
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date. This JEA had to be executed by the three Consortium
partners.
6. Required to be finalized and thereafter the JEA to be
executed, three Consortium partners commenced discussions
by having before them a written Memorial of the JEA. The
representatives of the parties drew up the Minutes of the
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meeting held from 16 April 2007 till 18 April 2007 and in
paragraph 4 of the Minutes recorded as under:-
“4. The Joint Executing Agreement (JEA) was
discussed among the members. The final draft as
agreed to among the members was initialed and
taken on record. As regards Article 7.3 of the JEA
concerning the charging of costs of EC Meetings to
the JV Account, the matter could not be concluded
and the members decided and agreed to refer the
matter to the Management Committee for a
decision. Executing Contractor advised that in the
meantime, members may have the initialed
document approved at the appropriate level with
their organization so as to formally execute the JEA
ASAP upon decision of the Management
Committee on Article 7.3”
7. This was mirrored in the written Memorial of the
JEA by inserting a sheet in the Memorial containing a note
recording as under:-
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“Clause 7.3. has two variants, Needs to be
deliberated and one variant has to be approved by
the MC.”
Relevant would it be to highlight that the acronym
MC means the Managing Committee of the
members of Consortium.
8. A reservation was also expressed regarding
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accounting procedure in the Minutes drawn up. On 23 April
2007 the Managing Committee of the Consortium Members
met. The Agreement arrived at by the Managing Committee
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was minuted on 23 April 2007 itself and the Minutes drawn
up read as under:-
“Minutes of the Management Committee Meeting held
during 23 April 2007 at Prize Petroleum Company Ltd.,
Tower B (504-505), Millennium Plaza, Sector 27,
Gurgaon-122 002
----------------------------------------------------------------------
PRESENT:
1. Dr. M N Prasad Prize Petroleum Company Ltd.
(PPCL)
2. Mr. S V Sahni Hindustan Petroleum Corporation Ltd.
(HPCL)
3. Mr. Nazir Kassim M3nergy BERHAD. (M3NERGY)
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4. Datuk Shahrazi bin
Sha’ari M3nergy BERHAD. (M3NERGY)
IN ATTENDENCE:
1. Mr. Rajan Kapoor Hindustan Petroleum
Corporation Ltd.
(HPCL)
2. Mr. V P Sharma Hindustan Petroleum
Corporation Ltd.(HPCL)
3. Dr. Prabhakar Thakur Hindustan Petroleum
Corporation Ltd.
(HPCL)
4. Mr. Jakob Sedic M3nergy BERHAD.
(M3NERGY)
5. Mr. G R Saini Prize Petroleum Company
Ltd. (PPCL)
6. Mr. A. N. Singh Prize Petroleum
Company Ltd. (PPCL)
Agenda items for Management Committee Meeting -
Cluster 7 project
During the meeting, following matters were proposed
to be discussed and approved:
a) Nomination of the Chairman of MC for first year.
b) Appraise Management Committee on the
development on Reservoir Modeling front.
c) Formally take on record the nomination of
Executing committee & Management Committee
members by the JV partners.
d) Formally take on record decision of Executing
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Committee for implementing the project on
EPIC basis.
e) Executing Committee proposes that the matter of
“charging of costs related to attending the
Executing Committee meetings to the Joint Account”
under the JEA be discussed and resolved at MC level.
f) Adoption of Level of Authorization (AOL) as
approved & adopted by the Executing Committee.
g) Adoption of “Procurement & Contracting
requirement – Policy & Administration” document as
approved & adopted by the Executing Committee.
h) Adoption of work program & budget for FY 2007-
08 as approved by the Executing Committee
Discussions/Resolutions/Adoption by the Executing
Committee
1) By unanimity, members agreed that with effect
from today HPCL’s representative would be the
Chairman of the Management Committee for a period
of one year upto & including 22 April 2008. In terms
of rotation sequence, it would be followed by M3nergy
& PPCL respectively for one year each.
2) The Executing Contractor on behalf of the
Executing Committee informed the members about the
development on Reservoir modeling being currently
taken up by CMG. Members were informed that upon
receipt of report by CMG, same would be circulated to
the JV partners for information. Members agreed that
the representative from CMG be present & make
presentation to IRS / ONGC. It was agreed that
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tentatively, the presentation be scheduled in 1 week of
May ‘07 depending on the receipt of the report and
confirmation of dates by ONGC. Members would be
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informed about the fixed dates for the IRS/ONGC
meeting as well as the MMC meeting with ONGC.
Members noted the same.
The Petral model used earlier by SLB, had created
block boundary around the physical boundary of the
block thereby restricting the reservoir extent.
3) MC discussed the need and approach to select a
reputed consultant to complete required works to
certify reserves of Cluster 7 fields. In regard to this, the
following has been agreed by the members:
a. Executing Contractor to prepare detailed scope of
work with listed inputs & deliverables
b. Based on the agreed scope of services, obtain bids
for the certification from the following consultants
i. Gaffney, Cline & Associates
ii. Rider Scott
iii. DeGolyer and MacNaughton
4) The members took on record the nomination of
Executing & Management Committee members as
following. Members were informed that same has been
recorded & adopted by the Executing Committee.
EC Members MC Members
Member Alt. Member Member Alt. Member
HPCL Mr. Rajan
Kapoor
Dr. P Thakur Mr. M. A.
Tankiwala
Mr. S V Sahni
M3NERGY Mr. Jakob Sedic Mr. Mohd
Hanif
Mr. Nazir
Kassim
Datuk Shahrazi
bin Sha’ari
PPCL Mr. G R Saini Mr. A N
Singh
Dr. M N
Prasad
TBA
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TBA – To be advised
5) The members took note of the decision of the
Executing Committee to implement the cluster 7
project on EPIC basis and resolved to agree to approve
the decision of the Executing Committee.
6) The matter of “charging of costs related to attending
the Executing Committee meetings to the Joint
Account” under the JEA was discussed among the
members. Upon discussion, it was decided & agreed by
members that such costs not be charged to the Joint
account.
7) The members took on record the adoption of
“Review & Approval Matrix” & “Level of
Authorization” (AOL) by the Executing Committee &
gave their in-principal approval for the same. Since
these documents are integral part of the JEA, the MC
members agreed that these documents will
automatically get adopted upon signing of the JEA by
the MC members.
8) Members took on record the adoption of
“Procurement & Contracting requirement – Policy &
Administration” by the Executing Committee members
and approved & adopted the same. Copy of same is
attached.
9) The proposed work program & budget for FY
2007-08 as adopted by Executing Committee was
presented to members. The members approved the
said work program & budget and adopted the same.
The work program & budget as approved is attached.
10) The proposal to issue the Expression of
Interest (EOI) for FEED was also discussed by the
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members. In conclusion, the members advised the
Executing Contractor to have an EOI for both FEED
as well as EPIC. Executing Contractor noted the same
& confirmed that the EOI shall be accordingly
modified before being put to press.
The Chairman thanked the members for their active &
positive participation. The meeting ended with vote of
thanks by the Chairman.
Adoption of the minutes & signature of the Members;
Members/Alt. Member
HPCL
Sd/-
Member/Alt. Member
M3NERGY
Sd/-
Member/Alt. Member
PPCL”
9. Relevant would it be to highlight that vide paragraph
6 of the Minutes, the decision concerning charging of costs was
finalized by recording that such costs need not be charged to
the joint Account.
10. During the year 2007-2008 the Consortium
Members discussed whether M3nergy could be appointed as
the Joint Executing Contractor and if not what should be the
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voting share of M3nergy. At a meeting held between 4 to 6
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December 2007 it was recorded that all pending issues need to
be resolved so that the JEA could be executed and handed over
to ONGC. In this meeting the accounting procedure to be
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followed was finalized. On 1 August 2008 the Members of
the Managing Committee of the three Companies met and
pertaining to Item No.1 of the Agenda concerning the JEA to
be executed and submitted to ONGC, recorded an agreement
as under:-
“After deliberations, it was agreed that the JEA
initialed in April 2007 will be the final document
to be executed and submitted to ONGC.
M3Energy has agreed to sign the document on
5.08.2008 after discussions with their
Management. The original was handed over to
M3Energy for signature from their end.”
11. The JEA could not be executed because M3nergy
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refused to do so. On 4 September 2008, exercising power
under Article 31.3.(i) of the Service Contract, ONGC gave
notice period of 90 days calling upon the Consortium Members
to execute and submit it to the JEA. None being submitted,
ONGC terminated the contract. Neither party challenged
termination.
12. HPCL and PPCL gave notice invoking the
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arbitration clause contained in the written Memorial of the JEA
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initialed by the parties when they met from 16 to 18 April
2007. Arbitral Tribunal was constituted. The Statement of
Claim was filed by HPCL and PPCL against M3nergy. A
jurisdictional challenge was laid by M3nergy before the Arbitral
Tribunal on the plea that the initialed JEA was not the final
Agreement between the parties. Vide first partial Award dated
th
9 January 2014 the learned Arbitrators held that there was a
concluded Agreement between the parties which contained an
arbitration clause and thus the Tribunal had jurisdiction to
entertain the claim. The learned Arbitrators also held M3nergy
responsible for the breach and declared so.
13. On the issue of jurisdiction, suffice it to highlight,
case of the claimants was that the written Memorial of the JEA
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which set the discussions at the meetings held from 16 April
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2007 till 18 April 2007 became the final document to be
executed evidenced from the Minutes of the meeting of the
Members of the Managing Committee of the three companies
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held on 1 August 2008. The contra case pleaded by the
Respondent was that unless the formal JEA was drawn up, the
written Memorial could not be treated as the written
Agreement and therefore the arbitration clause contained
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therein would not bind the parties. The discussion in the
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award dated 9 January 2014 is in paragraphs 21 to 49 of the
award. The learned Arbitrators have noted the initialed JEA
written Memorial which was discussed by the Consortium
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partners in the meeting held from 16 April 2007 till 18 April
2007. The Arbitral Tribunal has thereafter noted the minutes
drawn up in the Managing Committee meeting of the
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Consortium members which was held on 23 April 2007. The
Arbitral Tribunal has noted that vide para 6 of the minutes
drawn up the issue concerning charging of costs was finalized
by recording that such costs need not be charged to the Joint
Account. The learned Arbitral Tribunal has thereafter noted
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the minutes of the meeting held between 4 to 6 December
2007 in which the accounting procedure was finalized and
initialed by the parties. The Arbitral Tribunal has also noted the
st
minutes of the meeting held on 1 August 2008.
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14. The impugned judgment dated 10 January 2019
sets the signature tune to discuss the evidence by setting forth
the legal principle to be followed by a Court seized of an
objection to an award pertaining to the jurisdiction of the
Arbitral Tribunal by recording in paragraph 4 as under:-
“4. At the outset, it must be made clear that
whatever may be the position with respect to other
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findings of fact or law arrived at by the arbitral
tribunal on merits of the dispute, insofar as the
objection to the tribunal's jurisdiction is concerned,
it is essentially for the court to assess its merits on
the basis of jurisdictional facts pleaded by the
parties. The principle of party autonomy contained
in the twin doctrines of independent existence of an
arbitration agreement (i.e. independent from the
underlying contract) and kompetenz-kompetenz
merely implies that the arbitral tribunal has to rule
on its jurisdiction in the first instance. The
arbitration agreement being an independent and
stand-alone contract between the parties, the
tribunal always has the initial jurisdiction and
authority to rule on its own jurisdiction. That is
the purport of Section 16 of the Act. If the arbitral
Tribunal holds itself to be possessing jurisdiction to
adjudicate upon their disputes and differences, the
parties have to undergo the entire arbitration
reference and only thereafter raise the issue in a
challenge under Section 34 of the final arbitration
award rendered in such reference. In such
challenge, it is for the court to scrutinize the
objections to the arbitral tribunal's jurisdiction. In
that scrutiny, the jurisdictional facts, on the basis of
which the tribunal claims to act, are examined by
the court for their existence. The yardstick applied
by the challenge court to other assessments of the
arbitral tribunal, namely, on matters of merit,
whether on questions of fact or of law, is not
apposite for considering this jurisdictional
challenge. It is not that the court merely considers
whether or not a finding arrived at by the arbitrator
on a jurisdictional fact is contrary to public policy of
India under Clause b(ii) of Sub-section (2) of
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Section 34 or on the ground of patent illegality
appearing on the face of the award within the
meaning of Sub-section (2-A) of Section 34. The
arbitral forum either possesses jurisdiction in the
matter or it does not. By coming to an erroneous
finding on jurisdictional facts,whether or not its
view on such matters be a possible view, it cannot
confer upon itself the jurisdiction which it did not
possess. In other words, the question of jurisdiction,
in the ultimate analysis, is only for the court to
decide, though, as part of the principle of party
autonomy, the question is, and ought to be, decided
in the first instance always by the arbitral forum.”
15. Thereafter the learned Single Judge has proceeded to
reappraise the evidence and the conclusion reached is that the
JEA remained only at the stage of negotiations and did not
fructify in to an agreement and because the arbitration clause
was part of the JEA it could not form a stand-alone contract.
The learned Single Judge has not dealt with the reasoning of the
arbitral tribunal on account of the view taken by the learned
Single Judge that law enjoined upon him to independently
appraise the evidence and not deal with the manner in which
the arbitral tribunal has dealt with the evidence.
16. Thus, in the three appeals arguments were restricted
only to the legal issue : Whether a dispute embracing the
jurisdiction of the arbitral tribunal requires the Court seized of a
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challenge to an award to ignore the reasons given by the arbitral
tribunal on appraisal of the evidence before the tribunal and
independently appraise the evidence.
17. Shri. Aspi Chinoy, learned Senior Counsel for the
appellants relied upon a decision of a Division Bench of this
Court reported as 2005(2) Mah. L.J. 386 VFC Securities Pvt.
Ltd. Vs. Rashesh N Shah Shares & Brokers Pvt.Ltd. and a
decision of the Supreme Court reported as 2012 (5) SCC 214
Kvaerner Cementation India Ltd. Vs. Bajranglal Agarwal &
Anr. to urge that even on the issue of jurisdiction of the arbitral
tribunal the same principles of law as had been laid down
concerning arbitral awards on merits apply and need to be
followed. Meaning thereby, wrong decisions of the arbitral
tribunal on issue of jurisdiction, unless shown to be perverse
cannot be corrected and that if an issue of fact arose for
consideration, the arbitral tribunal would be the final judge to
determine the said fact after appraising the evidence and unless
it could be shown that vital evidence was ignored or irrelevant
evidence was considered while reaching the conclusion,
decision by the arbitral tribunal on a question of fact was final.
18. Shri. Soli Cooper, learned Senior Counsel for the
respondent relied upon a decision of the Supreme Court of
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United Kingdom reported as 2010 UKSC 46 Dallah Real
Estate and Tourism Holding Company (Appellant) V. The
Ministry of Religious Affairs, Government of Pakistan
(Respondent) to urge that on issues of jurisdiction of an arbitral
tribunal the correct approach is for the Court to appraise the
evidence again akin to the manner in which an appellate court
does. Learned Senior Counsel urged that as per Section 7 of the
Arbitration and Conciliation Act, 1996 an arbitration
agreement had to be in writing, and if in a document, had to be
signed by the parties. As per the learned Senior Counsel in the
instant case, the appellants had relied upon the arbitration
clause in the JEA which was initialed and formed the basis of
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discussion held from 16 April 2007 to 18 April 2007 and the
fact of the matter was that no document was admittedly signed
by the parties which contained an arbitration clause.
19. Since learned Counsel for the parties had addressed
arguments restricted to the legal issue: Whether the view taken
by the learned Single Judge was premised on a correct reading
of the law, we refrain from expressing any opinion on the
conclusions to be arrived at from the evidence on record and
deal only with the legal issue which was debated at the hearing
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held on 14 October 2019.
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20. The decision of the Division Bench of this Court in
VFC Securities Case (supra) deals with the issue of the learned
Arbitrator deciding on his own jurisdiction concerning the
arbitration clause in the Rules of the National Stock Exchange.
Thus, the law laid down therein that if an arbitration clause in a
Rule binding the parties falls for interpretation, unless there was
an error of construction of a kind which would make it perverse
would not be interfered with by a Court is not attracted to the
facts of the present case. The decision of the Supreme Court in
Kvaerner case (Supra) also does not deal with a similar case at
hand.
21. As per Section 16 of the Arbitration and Conciliation
Act, 1996 the arbitral tribunal has to rule on its own
jurisdiction and if the decision is that it had the jurisdiction, the
same has to be challenged in accordance with Section 34 after
the arbitral tribunal makes an arbitral award. Sub-Section (2) of
Section 34 of the said Act empowers a Court to set aside an
award if the arbitration agreement was not valid under the law
to which the parties had subjected themselves to. Thus, it is
apparent that the principles of law laid down in the judicial
decisions limiting the power of the Court to interfere with
arbitral awards rendered on merits would apply with equal
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force to a challenge to a decision under Section 16 of the
Arbitration and Conciliation Act 1996.
22. Concerning decision of the Supreme Court of the
United Kingdom cited by learned Senior Counsel for the
Respondent, suffice it to note that dealing with an international
award pertaining to a contract governed by the French laws the
Court noted the argument concerning review of the decision of
an arbitral tribunal on a dispute to its jurisdiction, the
contention noted was that the Tribunal had power to consider
and rule on its own jurisdiction (kompetenz-kompetenze) or
(competence-competence), and that in the case before it the
Tribunal did so after full and close examination, and that its
first partial award on jurisdiction should be given strong
evidential effect. In these circumstances, the argument was, a
court should refuse to become further involved, at least when
the tribunal's conclusions could be regarded on their face as
plausible or reasonably supportable. The Bench noted the
treatise authored by Fouchard, Gaillard, Goldman's
International Commercial Arbitration wherein para 659 it was
pertinently opined:-
“Even today, the competence-competence principle
is all too often interpreted as empowering the
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arbitrators to be the sole judges of their jurisdiction.
That would be neither logical nor acceptable. In
fact, the real purpose of the rule is in no way to
leave the question of the arbitrators' jurisdiction in
the hands of the arbitrators alone. Their jurisdiction
must instead be reviewed by the courts if an action
is brought to set aside or to enforce the award”.
23. Noting that same was the position of law in France,
in paragraphs 26 & 30 of the opinion the Court held as under:-
“26. An arbitral tribunal’s decision as to
the existence of its own jurisdiction cannot
therefore bind a party who has not submitted the
question of arbitrability to the tribunal. This leaves
for consideration the nature of the exercise which a
court should undertake where there has been no
such submission and the court is asked to enforce
an award. Domestically, there is no doubt that,
whether or not a party’s challenge to the
jurisdiction has been raised, argued and decided
before the arbitrator, a party who has not submitted
to the arbitrator’s jurisdiction is entitled to a full
judicial determination on evidence of an issue of
jurisdiction before the English court, on an
application made in time for that purpose under
S.67 of the Arbitration Act 1996, just as he would
be entitled under S.72 if he had taken no part
before the arbitrator: see e.g. Azov Shipping Co. v
Baltic Shipping Co. [1999] 1 Lloyd’s Rep 68. The
English and Fresh legal positions thus coincide: see
the Pyramids case (para 20 above).
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30. The nature of the present exercise is,
in my opinion, also unaffected where an arbitral
tribunal has either assumed or, after full
deliberation, concluded that it had jurisdiction.
There is in law no distinction between these
situations. The tribunal’s own view of its
jurisdiction has no legal or evidential value, when
the issue is whether the tribunal had any legitimate
authority in relation to the Government at all. This
is so however full was the evidence before it and
however carefully deliberated was its conclusion. It
is also so whatever the composition of the tribunal
– a comment made in view of Dallah’s repeated
(but no more attractive for that) submission that
weight should be given to the tribunal’s
“eminence”, “high standing and great experience”.
The scheme of the New York Convention, reflected
in ss. 101-103 of the 1996 Act may give limited
prima facie credit to apparently valid arbitration
awards based on apparently valid and applicable
arbitration agreements, by throwing on the person
resisting enforcement the onus of proving one of
the matters set out in Article V(1) and S.103. But
that is as far as it goes in law. Dallah starts with
advantage of service, it does not also start fifteen or
thirty love up.”
24. But immediately thereafter in paragraph 31 the
Court held as under:-
“31. This is not to say that a court seised of
an issue under Article V(1)(a) and S. 103(2)(b) will
not examine, both carefully and with interest, the
reasoning and conclusion of an arbitral tribunal
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which has undertaken a similar examination.
Courts welcome useful assistance. The correct
position is well-summarised by the following
paragraph which I quote from the Government’s
written case:
“233. Under S. 103(2)(b) of the 1996
Act / Art V. 1(a) NYC, when the issue is
initial consent to arbitration, the Court must
determine for itself whether or not the
objecting party actually consented. The
objecting party has the burden of proof,
which it may seek to discharge as it sees fit.
In making its determination, the Court may
have regard to the reasoning and findings of
the alleged arbitral tribunal, if they are
helpful, but it is neither bound nor restricted
by them.”
25. Thus, the legal position is that on an issue concerning
the partial arbitral award relating to the jurisdiction of the
arbitral tribunal, while reviewing the decision of the arbitral
tribunal, the Court is bound to examine, both carefully and
with interest, the reasoning and conclusion of an arbitral
tribunal. Indeed, in the said decision, in paragraphs 33 to 39,
the Supreme Court of United Kingdom set out the approach of
the tribunal to the issue of jurisdiction and thereafter analysed
the history of the dispute. The Court found that the arbitral
tribunal had not applied the French Law to be adopted while
directing its mind to the common intention of the parties and
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had drawn wrong conclusions from the facts. In view thereof,
the Court held that the ruling by the arbitral tribunal on its
jurisdiction was correctly set aside by the Court of first
jurisdiction.
26. Far from supporting the view canvassed by learned
Senior Counsel for the respondent, the decision militates
against the view propounded and the only deviation we note
relating to the settled principles of law in India is in the use and
choice of words and expressions used. At base, the Supreme
Court of United Kingdom found a misdirected approach by the
arbitral tribunal in the law to be applied on the issue of
determining the common intention of the parties and found
wrong conclusions drawn from the evidence i.e. a non-judicious
approach justifying the setting aside the award. Same is the
position of law in India. A wrong application of a principle of
law (as against an erroneous interpretation of law) is held as a
ground to hold that the award is vitiated and drawing wrong
conclusions from the evidence is a case of non-judicious
approach as per the law in India.
27. The principle of law stated by the learned Single
Judge to guide his decision in paragraph 4 of the impugned
decision being contrary to the settled principles of law, we set
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th
aside the impugned judgment dated 10 January 2019 and
allow Appeal No. 333/2019 and Commercial Appeal No.
317/2019. We restore Arbitration Petition No. 548/2014 and
Commercial Arbitration Petition No. 76/2018 for adjudication
afresh. We allow Commercial Appeal No. 348/2019 and set
th
aside the order dated 11 March 2019 and restore Commercial
Arbitration Petition No.1101/2018 for adjudication afresh.
28. Parties shall bear their own costs in appeals.
29. Pending Notices of Motion are disposed of.
SMT. BHARATI DANGRE, J. CHIEF JUSTICE
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