Sasan Power Ltd v. North America Coal Corporation India Pvt Ltd
CITATION– Civil Appeal No 8299 of 2016.
JUDGE – Shri Rajendra Menon.
FACTS–
Sasan Power entered into an association agreement with North American Coal Corporation-US (“NACC-US”) in 2007 (“Agreement”). The Agreement, inter alia, provided for resolution of disputes by way of arbitration to be administered by ICC in London, England, under laws of the United Kingdom.
In 2011, NACC-US assigned its rights, liabilities and obligations under the Agreement to the Respondent – North America Coal Corporation India Pvt Ltd. (“NACC-India”) by way of an Assignment Agreement.
Interestingly, whilst an assignment to NACC-India was conducted, it appears that the obligations and liabilities of NACC-US under the Agreement continued.
In 2014, NACC-India terminated the Agreement and filed a request for arbitration claiming compensation of INR 1,82,59,301. Sasan Power filed its objection to this request for arbitration. Sasan Power, thereafter, filed a suit before the District Court and sought an anti-arbitration injunction.
The injunction was granted by the District Court.
A second request for arbitration was filed by NACC-US before the ICC. Sasan Power filed a second suit challenging the request for arbitration filed by NACC-US.
NACC-India filed applications for rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 (“Code”) read with Section 45 of the Arbitration & Conciliation Act, 1996 (“Act”) and vacation of the anti-arbitration injunction granted by District Court (“Applications”), before the District Court.
The District Court allowed the Applications moved by NACC-India and dismissed the suit filed by Sasan Power. Consequently, Sasan Power filed this appeal under Section 96 of the Code
ISSUES – The Court, amongst other things, considered:
Whether the appeal filed by Sasan Power was maintainable in light of Section 50 of the Act?
Whether two Indian parties could choose to seat their arbitration in a foreign country?
JUDGEMENT – The Court saw no reason to interfere with the impugned judgment which referred the parties to arbitration under Section 45 of the Act and dismissed the appeal while providing the following reasons:
The Court observed that only orders refusing to refer parties to arbitration could be appealed as per Section 50 of the Act.
The Court, while, placing reliance on the judgment in Atlas Exports, observed that Section 28 of the Indian Contract Act, 1872 read with the Exception 1 would not be a bar to foreign seated arbitration. Further, it was observed that when two Indian parties had willingly entered into an agreement in relation to arbitration, the contention that a foreign seated arbitration would be opposed to Indian public policy was untenable.
The Court stated that the principle laid down in Atlas Exports (that was by a larger bench than TDM Infrastructure) would, in light of the decision in Fuerst Day Lawson Ltd v. Jindal Exports3, wherein it was observed by the Supreme Court that there was not much difference between provisions of the Act and 1940 Act; be binding precedent in relation to the issue at hand.
The Court noted that in TDM Infrastructure the Supreme Court had clarified by way of an Official Corrigendum that:
“It is, however, made clear that any findings/observations made hereinbefore were only to determine the jurisdiction of this Court as envisaged under Section 11 of the 1996 Act and not for any other purpose.”
The Court observed that the scheme of the Act indicated that the classification of arbitration as an international commercial arbitration depended only on the nationality of the parties, which is only relevant for the appointment arbitrators as contemplated under Section 11 of the Act.
The Court opined that the nationality of the parties would not influence the applicability of Part II of the Act, the applicability of which would flow depending on the seat of arbitration.
The Court, relying upon Enercon (India) Private Limited v. Enercon GMBH4 and Chatterjee Petroleum v. Haldia Petro Chemicals5, believed that where the parties had agreed to resolve their disputes through arbitration, the courts were to give effect to the intention of the parties and interfere only when the agreement was null or void or inoperative.
The Court observed that once parties by mutual agreement had agreed to resolve their disputes by a foreign-seated arbitration, Part I of the Act would not apply.
Further where the agreement fulfilled the requirements of Section 44, provisions of Part II of the Act would apply. It was held that a court, under Section 45, would have to refer parties to arbitration where it was found that the agreement was not null or void or inoperative.
