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AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Disposition
Attorney(S)
Judges
Acts
  • Section 11 of the Arbitration and Conciliation Act, 1996
  • Article 6 of the Agency Agreement dated 14-4-2000
  • Section 11(6) of the Arbitration and Conciliation Act, 1996
  • Section 11(6) of the Act
  • Section 37 of the Act
  • Section 11(8) of the Act
  • Article 136 of the Constitution
  • Section 16 of the Act
  • Section 9 of the Arbitration and Conciliation Act, 1996
  • Section 11(6) of the Arbitration Act, 1996
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Disposition
Attorney(S)
Judges
Acts
  • Section 11 of the Arbitration and Conciliation Act, 1996
  • Article 6 of the Agency Agreement dated 14-4-2000
  • Section 11(6) of the Arbitration and Conciliation Act, 1996
  • Section 11(6) of the Act
  • Section 37 of the Act
  • Section 11(8) of the Act
  • Article 136 of the Constitution
  • Section 16 of the Act
  • Section 9 of the Arbitration and Conciliation Act, 1996
  • Section 11(6) of the Arbitration Act, 1996
Smart Summary

Factual and Procedural Background

The petitioner, a company incorporated in Singapore, acted as an agent for Federal State Unitary Enterprise “Russian Technologies” (later merged into the respondent, Rosoboronexport) to procure a contract with the Border Security Force (BSF), Ministry of Home Affairs, Government of India, for the supply of six helicopters. Under a written Agency Agreement dated 14-4-2000, the petitioner was promised a 16% commission on payments received by the Russian enterprise from the Government of India.

After the helicopters were to be supplied and payment anticipated, the respondent denied liability to pay the agreed commission. The petitioner invoked Article 6 of the Agency Agreement, sought an injunction before the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, 1996, and later moved a petition under Section 11(6) before the Supreme Court for appointment of an arbitrator in India. In parallel, the Section 9 petition was dismissed by a Single Judge of the Delhi High Court; an appeal therefrom remains pending before a Division Bench.

The Chief Justice of India designated A.K. Mathur, J. to decide the Section 11(6) request. During the pendency of the matter, a seven-Judge Bench judgment in S.B.P. & Co. v. Patel Engineering Ltd. clarified that orders under Section 11(6) are judicial, not administrative.

Legal Issues Presented

  1. Whether the Supreme Court of India has jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 to appoint an arbitrator when the Agency Agreement’s Clause 6.2 expressly requires disputes to be submitted to the Arbitration Court under the Chamber of Commerce and Trade of the Russian Federation.
  2. Consequent to the judgment in S.B.P. & Co. v. Patel Engineering Ltd., what is the nature of the order to be passed by the designated Judge under Section 11(6).

Arguments of the Parties

Petitioner's Arguments

  • The petitioner rendered substantial services leading to the helicopter supply contract and is entitled to a 16% commission.
  • An Indian forum should appoint an arbitrator because the petitioner apprehends it will not receive justice in Russia.
  • Invocation of the arbitration clause has been made and, owing to the respondent’s inaction, an appointment by the court is necessary.

Respondent's Arguments

  • Clause 6.2 of the Agency Agreement mandates that all disputes be resolved by the Arbitration Court under the Chamber of Commerce and Trade of the Russian Federation; therefore Indian courts lack jurisdiction.
  • The petition under Section 11(6) is misconceived because the agreed arbitral forum is in Russia.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
S.B.P. & Co. v. Patel Engineering Ltd. (2005) 8 SCC 618 Held that the power exercised by the Chief Justice or his designate under Section 11 is judicial, not administrative, and orders are not appealable except under Article 136. Relied upon to state that the present order, made by the designated Judge, is a judicial order determining jurisdiction under Section 11(6).
Konkan Railway Corporation Ltd. v. Rani Construction (P) Ltd. (2002) 2 SCC 388 Earlier view that Section 11 orders were administrative; this view was overruled by S.B.P. & Co. Referenced to explain that the earlier position is no longer good law; the court proceeds on the basis of the new legal position.

Court's Reasoning and Analysis

The Court focused on Clause 6 of the Agency Agreement. Clause 6.2 unequivocally provides that unresolved disputes “will be submitted to the Arbitration Court under the Chamber of Commerce and Trade of the Russian Federation” and its decision “will be final and obligatory for both the parties.”

A.K. Mathur, J. held that where parties choose a specific arbitral forum, that choice ousts the jurisdiction of any other court to appoint an arbitrator. The presence of the Russian forum selection therefore deprives the Supreme Court of India of authority under Section 11(6). The Court further observed that, consistent with the newly declared judicial nature of Section 11 proceedings (S.B.P. & Co.), it must decide preliminary issues of jurisdiction itself; upon doing so, it found no jurisdiction to act.

Holding and Implications

The application under Section 11(6) is rejected for want of jurisdiction.

Implications: The parties must pursue arbitration before the Arbitration Court under the Chamber of Commerce and Trade of the Russian Federation as contractually agreed. The decision enforces the primacy of party autonomy in selecting an arbitral forum and confirms that Indian courts will not override a clear foreign forum selection in an arbitration clause. No new substantive precedent is created beyond applying the principles affirmed in S.B.P. & Co.

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    Rite Approach Group Ltd. v. Rosoboronexport .

    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 an arbitrator. The Hon'ble the Chief Justice of India has designated me to nominate the arbitrator for disposal of the dispute.

    2. Notice of this petition was served on the parties and they were heard.

    3. 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 110 003. The petitioner carries on business, inter alia, as an agent of various foreign companies for negotiating and concluding contracts on their behalf.

    4. 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 respondent 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, 107 076.

    5. That between October 1999 and April 2000 M/s Russian Technologies approached the petitioner for procuring orders in India for supply of helicopters to the 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 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 were 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 the specific requirements of the Border Security Force of the Ministry of Home Affairs, Government of India so that their specific requirements could be met by the respondent.

    6. Thereafter a number of meetings were held and ultimately on 1-3-2000 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 a lot of correspondence and discussion.

    7. 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 14-4-2000 whereunder M/s Russian Technologies was described as the “principal” and the petitioner was described as the “agent”.

    8. Under the said agreement, the principal authorised the agent i.e the petitioner to take the functions for organising 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 petitioner agent 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 preparations and conclusions concerning 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.

    9. M/s Russian Technologies, the 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 the 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.

    10. The petitioner acted as an agent on behalf of Russian Technologies and thereafter on behalf of the respondent and facilitated execution of a contract for supply of six helicopters to the 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.

    11. 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, the petitioner reminded the respondent about its 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 Russian Technologies for procuring this contract, had also claimed 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 the 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, the petitioner prayed that an injunction order may be issued and the matter may be referred to an arbitrator. The petitioner has also referred to the arbitration clause in Article 6 of the Agency Agreement dated 14-4-2000 which reads as under:

    “6. Solving of disputes and differences
    6.1. If any disputes and/or differences between the principal and the agent concerning the present agreement arise, both parties will try to solve them by negotiations.
    6.2. If differences and/or disputes could not be solved by both parties through negotiations, they will be submitted to the 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 the parties.”

    Therefore in this background, the 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, the 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 an interim order and directed the 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 helicopters to the Government of India in terms of the contract entered into in June 2003.

    12. Thereafter that matter came up before the Delhi High Court on 12-1-2004 and the order dated 12-12-2003 was modified.

    13. Thereafter on 17-3-2004 the claimant invoked the 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 25-5-2004 the learned Single Judge of the Delhi High Court after hearing the parties dismissed the petition.

    14. Thereafter the 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.

    15. In this background the petitioner approached this Court by filing a 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.

    16. 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 the Arbitration Court under the Chamber of Commerce and Trade of the Russian Federation. Therefore, this Court has no jurisdiction to entertain this petition.

    17. The matter got adjourned several times for one reason or the other for filing of the reply, ultimately the arguments were heard and the order reserved.

    18. 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 and Conciliation Act, 1996 therefore the arguments were heard and the 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 S.B.P & Co. v. Patel Engg. Ltd. (2005) 8 SCC 618 and the earlier decision rendered in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) 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 a judicial order and not an administrative order as was held in Konkan Rly. case (2002) 2 SCC 388. Therefore, now the legal position has been crystallised that the order passed by the Judge on nomination of the Hon'ble Chief Justice of India under Section 11 shall be a judicial order not amenable to any appeal. The legal position has been summarised as under in the above decision in S.B.P & Co. (2005) 8 SCC 618:

    “47. 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 designated Judge would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of 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 designated Judge.
    (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 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 Rly. Corpn. Ltd. v. Rani Construction (P) 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 High Court concerned or a Judge of that Court designated by the Chief Justice.
    (xii) The decision in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. (2002) 2 SCC 388 is overruled.”

    19. 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 the 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.

    20. 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 a particular court to decide the matter then it automatically ousts the jurisdiction of the 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.

    21. 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 the Russian Federation alone has jurisdiction to act as an arbitrator and resolve the dispute. Hence, this application is rejected.

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    Comments

    Rite Approach Group Ltd. v. Rosoboronexport .
    (Nov 16, 2005)