Gujarat State Petronet Limited v. Tehran Jonood Jaihind Consortium
2019-04-22
A.J.DESAI
body2019
DigiLaw.ai
ORDER : [1.0] By way of present application – Gujarat State Petronet Limited, which has filed proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Arbitration Act”), has prayed that the above IAAP No.151/2018 filed by the applicant shall be returned to the applicant so that the same can be presented to the Court of competent jurisdiction. [2.0] Though the same was filed initially on the ground that the award passed can be treated as an international award, however under the changed circumstances i.e. the pronouncement by the Hon’ble Supreme Court in the case of M/s. Larsen and Toubro Limited SCOMI Engineering BHD vs. Mumbai Metropolitan Region Development Authority rendered in Arbitration Petition (C) No.28 of 2017, the applicant has sought to withdraw the IAAP No.151/2018 to present the same before appropriate Forum. [3.0] The opponent – original respondent i.e. Tehran Jonood – Jaihind Consortium has filed an affidavit in reply and has opposed the grant of this application, though initially it was opposed in the application under Section 34 of the Arbitration Act by the opponent saying that the award can be treated as a domestic award and the same is required to be transferred to the competent Court. [4.0] The short facts arising from the record are as under: [4.1] That the applicant executed a Consortium Agreement dated 15.11.2007 with the opponent Company, who is having an associate Company viz. Jaihind Projects Limited, a company having its office at Ahmedabad (India), for installation of pipeline. [4.2] The dispute with regard to contract arose between the parties and as per the terms and conditions of the Consortium Agreement, an Arbitrators were appointed who declared their final award on 03.05.2018. [4.3] The said award came to be challenged by way of filing IAAP No.151/2018 under Section 34 of the Arbitration Act on several grounds. During the pendency of the said petition, the Hon’ble Apex Court pronounced its decision in the case of M/s. Larsen and Toubro Limited SCOMI Engineering BHD (Supra) dealing with certain provisions of Arbitration Act and particularly section 2(1) (e)(ii) as well as section 2(1)(f) of the Arbitration Act and hence, the present application. [5.0] Mr. Mihir Thakore, learned Senior Advocate assisted by Mr.
[5.0] Mr. Mihir Thakore, learned Senior Advocate assisted by Mr. Aspi Kapadia, learned advocate appearing on behalf of the applicant would submit that the applicant executed a Consortium Agreement with the opponent Company having its office at Tehran along with one M/s. Jaihind Projects Limited having its office at Ahmedabad being party of the 2nd Part of the Consortium Agreement for several purposes viz. making a deed or entering into contract with other persons. By taking me through provision of Section 2(f)(iii), he would submit that since the applicant has entered into Consortium Agreement with association of two Companies and one company is having its office at Ahmedabad i.e. in India, as per the provision of Section 2(e)(ii) of the Arbitration Act, the subordinate Court shall have the jurisdiction to deal with any application filed under the Arbitration Act. Accordingly, IAAP No.151/2018 is required to be referred to be presented before the appropriate Court having jurisdiction. [5.1] By taking me through the decision of the Hon’ble Supreme Court in the case of M/s. Larsen and Toubro Limited SCOMI Engineering BHD (Supra), he would submit that the Hon’ble Supreme Court has held that if one of the associate is controlled by a Company having its office in India and even if one of such Companies is having its office in India, only subordinate Court shall have the jurisdiction to deal with the same. He, therefore, would submit that the application be allowed. [5.2] He has fairly conceded that the applicant has no objection if the IAAP No.151/2018 is decided by this Court, however in future other side may raise a contention about the jurisdiction of this Court about proceeding initiated under Section 34 of the Arbitration Act and therefore, he requests to pass a reasoned order. [6.0] On the other hand, learned advocate Mr. Rajesh Sharma assisted by learned advocates Mr. Y.K. Kapoor and Mr. Ravish Bhatt appearing for the opponent, under the instructions, would submit at the outset that the opponent is not going to raise any objection even in future with regard to jurisdiction of this Court in dealing with IAAP No.151/2018. However, relying upon the decision of the Hon’ble Supreme Court in the case of M/s. Larsen and Toubro Limited SCOMI Engineering BHD (Supra), he would submit that only this Court would have jurisdiction to deal with IAAP No.151/2018.
However, relying upon the decision of the Hon’ble Supreme Court in the case of M/s. Larsen and Toubro Limited SCOMI Engineering BHD (Supra), he would submit that only this Court would have jurisdiction to deal with IAAP No.151/2018. He would submit that in the case before the Hon’ble Supreme Court, the control over the association was of an Indian Company having its office in India whereas in the present case the control of the entire Consortium Agreement is with the opponent which is located at Tehran i.e. outside India. He would submit that as per Section 2(f)(iii) of the Arbitration Act, if the central management of an association is centrally managed by a company which is located out of India and is also controlled by such country, jurisdiction would be with the High Court and not the subordinate Court. [6.1] By taking me through the Consortium Agreement and particularly Clauses 2 and 9 of the Consortium Agreement, he would submit that the association is completely controlled by the opponent which is incorporated and is having its principal office at Tehran. Even the Consortium Agreement discloses that the lead partner would be the opponent and only operational activities are to be carried out by another Company i.e. M/s. Jaihind Projects Limited, whose office is at Ahmedabad. He, therefore, would submit that the application be rejected. [7.0] I have heard learned advocates appearing for respective parties. [7.1] It is an undisputed fact that the present applicant Company itself has filed IAAP under Section 34 of the Arbitration Act challenging the award passed by the Arbitrator stating that it is an international award and hence, this Court would have jurisdiction to deal with the same. However, relying upon the decision in the case of M/s. Larsen and Toubro Limited SCOMI Engineering BHD (Supra), present application is filed. [7.2] Before dealing with the facts of the case, the Court would like to refer to the relevant provisions of the Arbitration Act. Section 2(1)(e) of the Arbitration Act reads as under: “2. Definitions- (1) In this Part, unless the context otherwise requires, (a) ... (b) ... (c) ... (d) ...
[7.2] Before dealing with the facts of the case, the Court would like to refer to the relevant provisions of the Arbitration Act. Section 2(1)(e) of the Arbitration Act reads as under: “2. Definitions- (1) In this Part, unless the context otherwise requires, (a) ... (b) ... (c) ... (d) ... (e) Court” means (i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes; (ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;” As per the above definition, if an award is required to be treated as international commercial arbitration, only the High Court shall have the jurisdiction to decide the question forming the subject matter of arbitration. Now, the question, whether the award which has been challenged under Section 34 of the Arbitration Act is an international commercial arbitration or not, can be decided after examining several aspects of the case as well as the ratio laid down by the Hon’ble Supreme Court in the case of M/s. Larsen and Toubro Limited SCOMI Engineering BHD (Supra). [7.3] Section 2(f) of the Arbitration Act reads as under: “2.
[7.3] Section 2(f) of the Arbitration Act reads as under: “2. Definitions (1) In this Part, unless the context otherwise requires, (f) “international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is— (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country;” [7.4] The case put forward by both the parties are under Section 2(f)(iii) of the Arbitration Act. It is clear that if an association or a body of individuals whose central management and control is exercised in any country other than India, the same is required to be treated as international commercial arbitration. [7.5] If we see Consortium Agreement, it appears that it has been declared that the lead partner would be present applicant whose office is registered at Tehran. M/s. Jaihind Projects Limited who is an associate has been made part of the Consortium Agreement only for operational purposes. Clause 2 of the Consortium Agreement makes it clear that the control with regard to the contract is with the opponent – the lead partner. Clause 2 of the Consortium Agreement reads as under: “2. In consideration of the bid submission by us to the Employer and the award of contract by the Employer to the Consortium (if selected by the Employer), we the partners to the Consortium, hereby agree that the PartnerI (M/s. Tehran Jonood – Technical and Construction Co.) shall act as the lead partner for self and for and on behalf of Partner-II (Jaihind Projects Ltd.) and further declare and confirm that we shall jointly and severally be bound to unto the Employer execution of the contract in accordance with the contract terms and shall jointly and severally be liable to the Employer to perform all contractual obligations including technical guarantees.
Further, the Lead Partner is authorized to incur liabilities and receive instructions for and on behalf of any or both partners of the CONSORTIUM and the entire execution of the Contract including receiving/making payments, shall be done exclusively by the Lead Partner.” If Clause 9 of the Consortium Agreement is perused, 90% of the activities are controlled by the present opponent since it has been decided that the primary responsibility would be of the opponent Company. [8.0] In view of the above fact, if the judgment delivered by the Hon’ble Supreme Court in the case of M/s. Larsen and Toubro Limited SCOMI Engineering BHD (Supra) is perused, the Hon’ble Supreme Court has held that when control and management is of a Company having establishment in India and its office is also in India then it cannot be treated as foreign award, however if the definition enumerated in section 2(f)(iii) of the Arbitration Act is perused, in the present case when the control is of opponent Company, in my opinion the award is required to be treated as international award. Hence, the present application is dismissed.