REPORTABLE

IN THE SUPREME COURT OF INDIA  

CIVIL ORIGINAL JURISDICTION  

ARBITRATION PETITION NO. 16 OF 2007

VISA International Ltd. …Applicant  

Versus

Continental Resources (USA) Ltd.  …Respondent

J U D G M E N T  

B.SUDERSHAN REDDY,J.

This application under sub-section (5) and (9) of Section 11 of

the Arbitration  and Conciliation Act, 1996 (for short “the Act”) has

been filed with a prayer to appoint an Arbitrator in terms of Clause VI

of the agreement dated 15.2.2005 entered into by and between the

applicant and the respondent.   

2. The facts leading to filing of this application may briefly be

noticed:  

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3. The applicant is, inter alia, engaged in the business of providing

services  in  international  trading  of  Minerals,  Metals  and  Ship

Chartering.   The  respondent  with  an  intention  to  make  substantial

investments to set up an integrated aluminium complex in Orissa with

an  Alumina  refinery  to  be  catered  by  the  bauxite  deposits  of

Gandhamardan Mines entered into a Memorandum of Understanding

(for  short  “MOU”)  with  Orissa  Mining  Corporation  Ltd.  (for  short

“OMC”) for mining of bauxite deposits from the Gandhamardan Mines

situated  in  the  State  of  Orissa.  In  order  to  help  set  up integrated

aluminium complex in Orissa, OMC had decided and agreed to enter

into a Joint Venture Agreement with the respondent on certain terms

and conditions.  

4. In  terms  of  the  proposed  joint  venture  agreement,  the

respondent    was required to set up an integrated alumina complex in

the  vicinity  of  the  Gandhamardan area  and  was  further  obliged  to

utilize the bauxite lifted from the said mines as raw material in the

proposed  aluminum  complex.  The  respondent  proposed  to  the

applicant  to  set  up  the  said  integrated  aluminum complex  in  joint

venture  with  the  applicant  by duly  incorporating  a  Special  Purpose

Vehicle (SPV) for the purpose.  

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5.  The applicant relying  upon  representations  and assurances

had accepted the proposal for setting up of the said aluminum complex

in joint venture with the respondent.  The parties mutually agreed to

execute a MOU and an agreement to clearly define their  respective

rights and obligations thereto.  Accordingly,  a MOU dated 14.2.2005

was  executed   by  and  between  the  applicant  and  the  respondent

whereby  and whereunder it was agreed that the applicant and the

respondent would incorporate a company in the name and the style of

“VISA Aluminum Ltd”  for   the  purpose  of  setting  up an integrated

Aluminum Complex.  The  said MOU  was followed by an agreement

dated 15.2.2005 executed between the parties.  In terms of the said

agreement  it was agreed that the  respondent would enter into the

joint  venture  agreement  with  OMC  while  the  applicant  and  the

respondent  would incorporate  a company in the name and style  of

“VISA  Aluminum  Limited”  for  setting  up  an  integrated  Aluminum

Complex. In terms of the said agreement  26% of the  issued and paid

up  equity  shares  of  the  proposed  company  to  be  retained  by  the

respondent and  the remaining 74%  of the shareholding  to be held by

the applicant.  The applicant agreed to bear a sum of US$ 7,40,000

being 74% of US$ 10,00,000 to have been incurred by the respondent

on the pre-project activities. Day to day control was agreed to be that

of the applicant exclusively. The applicant also undertook to pay a sum

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of US$ 22,50,000 to the respondent for the future overseas costs in

terms  of  the  said  agreement.   Article  IV  of  the  said  agreement

stipulated that the agreement to be effective upon signing by both the

parties with immediate effect.  The whole controversy centers around

the interpretation of Article VI in the said agreement which according

to the applicant contains the Arbitration Clause.    

6. It may not be necessary for the purpose of disposal of this

application to note further details as to what transpired between the

applicant and the respondent after entering into the agreement till 31st

August,  2006.   Suffice  it  to  note  that  on  31st August,  2006  the

respondent addressed a letter to the applicant, inter alia, alleging the

agreement  entered  into  between  them  is  not  ‘appropriate  and  is

obsolete’  as  it  does  not  address  the  changes  in  the  OMC  draft

agreement  itself.  The respondent proposed a new agreement  to be

prepared  on  the  lines  suggested  therein.  This  is  the  starting  point

leading  to  unending  and  acrimonious  correspondence  between  the

applicant and the respondent accusing each other of overreach. The

applicant asserted that the agreement dated 15.2.2005 entered into

by and between the parties continued to be valid and subsisting and

whereas  the  respondent  contended  that  the  agreement  became

unworkable.  On 25.9.2006 the respondent informed the applicant that

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MOU  dated  14.2.2005  and  agreement  dated  15.2.2005  “stand

discharged and CRL stands discharge” of its obligations under the said

agreement.  MOU dated 14.2.2005 and agreement dated 15.2.2005

was  treated  as  cancelled.  The  applicant  vide  letter  dated  6.3.2007

informed the respondent that its action of unilaterally terminating  the

said  MOU  and  also  the  agreement  was  not  acceptable  to  it.  The

applicant accordingly invoked the arbitration clause duly informing the

respondent that disputes thus have arisen out of the said MOU and the

agreement which are required to be resolved by the Arbitrator. The

respondent in its turn vide letter dated 3.4.2007 rejected the names

suggested  by  the  applicant  to  be  appointed  as  Arbitrator  for  the

reasons that (a) the arbitration will not be cost effective; and (b) the

arbitration is pre-mature.  

7. Be  it  noted  that  the  respondent  never  disputed  the

existence of the arbitration clause. Nor was the case of the respondent

that dispute if any between the parties may have to be resolved by

way  of  conciliation  and  not  by  arbitration.   It  is  under  those

circumstances the present application has been filed by the applicant

under Section 11(5) & (9) of the Arbitration and Conciliation Act, 1996.

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8. The respondent admits the execution of the said MOU as

well  as  the  agreement  dated  15.2.2005  but  contends  that  the

agreement is an inchoate document, a contingent matter, not capable

of  being  enforced  as  an  arbitration  agreement.   The  exchange  of

letters by and between the parties is not in dispute.  It is also the case

of the respondent that the applicant failed to identify the dispute that

could not be resolved amicably and as such there is no question of

referring the matter to arbitration by appointing an arbitrator.  

9. Having regard  to  the  pleadings  and  contentions  the  following

questions arise for consideration:  

1. Whether  there  exists  a  valid  arbitration  agreement

between the parties?

2. Whether there exists a live claim between the parties?

10. It  is  now well  settled  that  the  power  exercised  by  the  Chief

Justice of India or the Designated Judge  under Section 11 (6) of the

Arbitration and Conciliation Act, 1996 is not an administrative power.

It is a judicial power. In  SBP & Co. Vs. Patel Engineering Ltd. &

Anr.  [  (2005)  8  SCC  618]  this  Court  in  its  authoritative

pronouncement held that while exercising the power or performing the

duty  under  Section  11  (6)  of  the  Act,  the  Chief  Justice  or  the

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designated Judge has to consider whether the conditions laid down by

the Section for the exercise of that power or the performance of that

duty, exist. The Chief Justice or the designated Judge as the case may

be, is  bound to decide whether  he has jurisdiction to entertain the

request, in the sense, whether there is a valid arbitration agreement in

terms of Section 7 of the Act and whether the person before him with

a request is a party to the arbitration agreement or whether there was

no  dispute  subsisting  which  was  capable  of  being  arbitrated  upon.

These  principles  ought  to  be  borne  in  mind  while  deciding  the

application under Section 11 (6) of the Act.   

Whether  there  exists  a  valid  arbitration

agreement between the parties?  

11. The  disputed  arbitration  clause  in  the  present  case  reads  as

under:  

“Any dispute  arising  out  of  this  agreement  and which cannot be settled amicably shall be finally settled  in  accordance  with  the  Arbitration  and Conciliation Act, 1996.”

12. Arbitration agreement is defined under Section 7 of the Act.  It

does not prescribe any particular form as such. In terms of the said

provision arbitration agreement means:  

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(1) An agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them  in  respect  of  a  defined  legal  relationship,  whether contractual or not.  

(2) An  arbitration  agreement  may  be  in  the  form  of  an arbitration  clause  in  a  contract  or  in  the  form of  a  separate agreement.  

(3) An arbitration agreement shall be in writing.  

(4) An arbitration agreement is in writing if it is contained in –  

a) a document signed by the parties;  b) …………………. c) ………………….

(5) ……………….

13. This Court in  Rukmani Bai Gupta Vs. Collector of Jabalpur

[ (1980) 4 SCC 556] had an occasion to construe a clause in the lease

deed which provided:  

“Whenever  any  doubt,  difference  or  dispute  shall hereafter  arise  touching  construction  of  these presents or anything herein contained or any matter or  things  connected  with  the  said  lands:  or  the amount or payment of any rent or royalty reserved or  made  payable  hereunder  in  the  matter  in difference  shall  be  decided   by  the  lessor  whose decision shall be final.”

14. In that  case the lessor  was the Governor  of  the State.   This

Court took the view that the said clause read as a whole provided for

referring future disputes to the arbitration of the Governor.  

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15. Be  it  noted  the  said  clause  does  not  use  any  expression  of

“arbitration,  a  settlement  of  dispute by the arbitrator”.   This  Court

observed  that  arbitration  agreement  is  not  required  to  be  in  any

particular  form.  It  was held  what  is  required to  be  ascertained is

whether the parties have agreed that if  disputes arise between them

in  respect  of  the  subject  matter  of  contract  such  dispute  shall  be

referred to arbitration, then such an arrangement would spell out an

arbitration agreement.  

16. In  M. Dayanand Reddy Vs. A.P. Industrial  Infrastructure

Corp. Ltd.  & Ors.  [ (1993) (3) SCC 137] the legal position has been

further clarified when this Court in clear and categorical terms held:  

“An arbitration clause is not required to be stated in any particular form. If the intention of the parties to  refer  the  dispute  to  arbitration  can  be  clearly ascertained from the terms of the agreement, it is immaterial  whether  or  not  the  expression ‘arbitration’ or ‘arbitrator’ or arbitrators’ has been used in the agreement.”

17. The  Court  is  required  to  decide  whether  the  existence  of  an

agreement to refer the dispute to arbitration can be clearly ascertained

in the facts and circumstances of the case.  This, in turn, may depend

upon  the  intention  of  the  parties  to  be  gathered  from  the

correspondence exchanged between the parties and the surrounding

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circumstances.  In the instant case, the respondent while rejecting the

names suggested by the applicant for resolution of the disputes by the

arbitrator never disputed the existence of the arbitration clause.  The

applicant vide letter dated 20.9.2006 in response to the respondent’s

letters  dated  7,8,13  and  15.9.2006  and  duly  placing reliance  upon

MOU dated 14.2.2005 and agreement dated 15.2.2005 asserted that

agreement entered into between the parties provided for resolution of

all  disputes  by arbitration.   The  applicant  accordingly  expressed  its

willingness to refer the matter to arbitration.  The respondent in its

reply dated 25.9.2006 stated that referring the matter for arbitration

“is irrelevant and inappropriate” in absence of any valid agreement, in

as much as the MOU dated 14.2.2005 was itself conditional and  not

effective.   The respondent  did  not  dispute  the existence  of  a  valid

arbitration  clause  in  the  agreement.  The  plea  was  that  agreement

entered into between the parties on 15.2.2005 itself was not a valid

one.  

18. That  an  arbitration  agreement  is  not  required  to  be  in  any

particular form has been reiterated in more than one decision. [see:

Bihar  State  Mineral  Development  Corporation  Vs.  Encon

Building  (2003)  7  SCC  418].   What  is  required  is  to  gather  the

intention of the parties as to whether they have agreed for resolution

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of the disputes through arbitration. What is required to be decided in

an application under Section 11 of the Act  is whether there is any

arbitration agreement as defined in the Act? It needs no reiteration

that Section 7 of the Act does not prescribe any particular form and it

is immaterial whether or not expression ‘arbitration’ or ‘arbitrator’ or

‘arbitrators’ has been used in the agreement.  

19. Shri K.K. Venugopal, learned senior counsel appearing on

behalf of the respondent submitted that MOU dated 14.2.2005 does

not contain any arbitration clause and further  the agreement dated

15.2.2005  itself  is  a  contingent  agreement  incapable  of  being

enforced.   

20. Dr. Singhvi, learned senior counsel for the applicant in response

to the said contention submitted that MOU dated 14.2.2005 culminated

in the agreement dated 15.2.2005 which contained a valid arbitration

clause  and there  is  no  legal  hindrance to  appoint  an  arbitrator  for

resolving the disputes.  

21. The crucial question centers around the interpretation of Clause

VI of the agreement dated 15.2.2005. Shri Venugopal, in response to

a pointed query from the court  submitted that the intention of the

respondent  was  to  agree  for  settlement  of  the  disputes  through

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conciliation  in  accordance  with  the provisions  of  the Act  in  case  of

failure  to  settle  disputes  amicably  between  the  parties.   The

submission was in a case of arbitration, there is no settlement; the

award of an arbitrator who has to be independent and impartial from

the parties is binding by and between the parties not because both the

parties finally have settled  the matter but because of legal sanctity.

There has been no attempt whatsoever to amicably settle the matter

which is  a pre-condition  to invoke the latter  limb of  Article  VI  and

therefore,  the application under  Section 11 is  liable to be rejected.

The learned counsel in this regard placed reliance on the decision  in

Iron and Steel  Company Ltd. Vs. Tiwari Roadlines  reported in

[2007)  5 SCC 703].   In the said case the parties have agreed for

resolution of disputes by arbitration in accordance with the Rules of

Arbitration of the Indian Council of Arbitration.  No efforts were made

to have the disputes settled by arbitration in accordance with the Rules

of Arbitration of the Indian Council of Arbitration.  On the contrary, one

of the parties moved an application under Section 11 of the Act.  It is

under those circumstances this Court held:

“Since the parties here had agreed on a procedure for  appointing  an  arbitrator  for  settling   the dispute by arbitration as contemplated by Section 11 (2) and there is no allegation that any one of the contingencies enumerated in Section 11 (6) clause  (a)  or  (b)  or  (c)  had  occurred,  the application moved by the respondent was clearly not maintainable and the court had no jurisdiction

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to  entertain  such  an  application  and  pass  any order.” (emphasis supplied)

22. The case has no application to the fact situation in hand.  It was

a  case  where  one  of  the  parties  invoked Section  11(6)  of  the  Act

without there being no allegation that any one of the contingencies

enumerated in Section 11(6) Clause (a) or (b) or (c) had occurred.

23. In the present case the parties did not agree upon any particular

procedure for the appointment of  the arbitrator. Clause VI provides

that disputes arising out of the agreement which could not be settled

amicably shall be finally settled in accordance with the provisions of

the Act.  

The  question  is  whether  the  parties  have

agreed to resolve their disputes by arbitration

or through conciliation?  

24. Be it noted that at no stage the respondent took any plea that

the  dispute  was  required  to  be  settled  through  conciliation  in

accordance  with  the  Arbitration  and  Conciliation  Act,  1996.  It  is

evidently  an  afterthought.  Shri  Venugopal  submitted  that  on  a

comparison with dispute  resolution clause in the MOU entered into

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between  the  OMC  and  CRL  with  the   settlement  clause  in  the

agreement dated February 15, 2005, it is apparent that there was no

specific intention of the parties to refer the disputes to arbitration.  It

is true that the dispute resolution clause in MOU entered into between

OMC and CRL is more specific in its terms but the said clause would

not throw any light in construing clause VI in the agreement dated 15th

February,  2005.  One cannot  take into consideration terms of  other

contracts  especially  when  the  contract  is  not  between  the  same

parties.

25. Shri Venugopal, relied on that clause and submitted that in the

absence of a similar clause in the present agreement the parties have

made their intention expressly clear to resolve their disputes through

conciliation in case of failure to settle the disputes amicably among

themselves.

26. The submission is unsustainable for more than one reason.  No

party  can  be  allowed  to  take  advantage  of  inartistic  drafting  of

arbitration clause in any agreement as long as clear intention of parties

to go for arbitration in case of any future disputes is evident from the

agreement  and  material  on  record  including  surrounding

circumstances.

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27.  What is required to be gathered is the intention of the parties

from  the  surrounding  circumstances  including  the  conduct  of  the

parties and the evidence such as exchange of correspondence between

the parties.   The respondent in none of its letters addressed to the

applicant suggested that the dispute between the parties is required to

be settled through conciliation and not by arbitration.  In response to

the applicant’s  letter  invoking the arbitration clause the respondent

merely  objected  to  the  names  inter-alia  contending  the  suggested

arbitration would not be cost effective and the demand for arbitration

itself was a premature one.

Is  there  any  material  available  on  record

suggesting that the parties intended to resolve

their disputes through conciliation on failure to

settle  the  disputes  amicably  among

themselves?   

28. Part III of the Act deals with conciliation. Section 61 provides:

”save as otherwise provided by any law and unless  have otherwise

agreed, Part III shall  apply to conciliation of disputes  arising out of

legal relationship, whether contractual or not and to all proceedings

relating thereto. Section 62 speaks of commencement of conciliation

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proceedings.  It says the party initiating conciliation shall send to the

other  party  a  written  invitation  to  conciliate  under  Part  III,  briefly

identifying the subject of the dispute and the conciliation proceedings

shall commence when the other party accepts in writing the invitation

of conciliation. If the other party rejects the invitation, there will be no

conciliation proceedings.  Part III of the Act does not envisage any

agreement for conciliation of future disputes.  It only provides for an

agreement to refer the disputes to conciliation after the disputes had

arisen.  Whereas  Section  7  of  the  Act  which  speaks  of  arbitration

agreement provides for an agreement  between the parties to submit

to the arbitration all or certain disputes which have arisen or which

may arise  between  them in respect  of  a defined legal  relationship,

whether contractual or not.  

29. Clause VI in the present case obviously provides for resolution of

the  disputes  between  the  parties  which  may  arise  out  of  the

agreement  after  its  execution.   There  was no dispute  between the

parties  even  as  on  the  date  of  the  agreement.   That  apart  the

conciliator  only  assists  the  parties  in  an  independent  and  impartial

manner  in  their  attempt  to  reach  an  amicable  settlement  of  their

disputes.   The  conciliator  provides  guidance  as  provided  for  under

Section 67 of the Act.  Under Section 73 of the Act the Conciliator

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formulates the terms of a possible settlement when it appears to him

that there exist elements of a settlement which is acceptable to the

parties.  Ultimately  it  is  the  parties  who  are  required  to  reach  an

agreement  on  a  settlement  of  dispute.  The  conciliator  merely

authenticates  the  settlement  agreement.  The  settlement  agreement

shall have the same effect as the arbitral award on agreed terms on

the substance of the dispute rendered by the arbitral tribunal under

Section 30.  

30. In  the  present  case  as  is  evident  from  Clause  VI  of  the

agreement the parties intended to settle the disputes amicably among

themselves and only in case of failure the disputes were required to be

settled  in  accordance  with  the  provisions  of  the  Act.   It  is  clearly

evident from the language employed in Clause VI that on failure to

settle the disputes amicably the parties intended to invite a binding

verdict in accordance with the provisions of the Act.  The parties never

intended to go through the conciliation proceedings even after their

failure to arrive at an amicable settlement among themselves.  It is

pertinent  to  observe  that  the  respondent  never  initiated  any

conciliation by sending any written invitation to conciliate under Part

III of the Act. In the circumstances, it is impossible to accede to the

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submission  that  the  parties  intended to  settle  their  future  disputes

arising out of the agreement through conciliation.  

31. Shri  Venugopal  submitted  that  the  agreement  dated  15th

February, 2005 is of inchoate nature and is a contingent agreement,

therefore, even if any dispute had arisen the same cannot be referred

to any Arbitral Tribunal to resolve it.  

32. The decision reported in  E.J.R. Lovelock Ltd.  Vs. Exportles

[1968] Vol.1 Lloyd’s Law Reports 163 and AIG Europe S.A. vs. QBE

International Insurance Ltd. reported in [2001] Vol.2 LLR 268 upon

which reliance was placed are not applicable to the facts of the case

and render any assistance to resolve the issue. In  E.J.R. Lovelock

Ltd.(supra) the arbitration clause was divided into two parts.  The first

part  (which  was  lifted  bodily  from  a  standard  form  and  contract)

provided for  arbitration before English arbitrators.   The second part

provided for arbitration in Russia in accordance with Russian Chamber

of Commerce Arbitration Rules.  Lord Denning having interpreted the

arbitration clause contained in the agreement in that case observed

that the clause was so uncertain that the court cannot give effect to it.

“The clause is divided into two parts which are inconsistent with one

another: and it is impossible to reconcile them. The first part of this

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arbitration clause would send “any dispute and/or claim to arbitration

in England.   The second part  of  the clause would  send “any other

dispute” to arbitration in Russia.  It is beyond the wit of man or at any

rate beyond my wit – to say which dispute comes within which part of

the clause…….the whole clause is meaningless. It  must be rejected.

The court  cannot  give  effect  to  it.   The  dispute cannot  be  sent  to

arbitration.”   In  AIG  Europe  S.A.;  Queen’s  Bench  Division  while

construing a contract of reinsurance which inter-alia  provided:

“All terms clauses and conditions as original in all respects including settlements:

The  underlying  policy  contained  among  its general conditions the following clauses:

(L) Arbitral Procedure In case of dispute between the insured and the insurers  the  parties  will  apply  to  Tribunal  de Commerce  in  Paris  who  will  appoint  an arbitrator…..  

(M) Law and Jurisdiction In  the  event  of  dispute  between  the  insured and the insurer…..the…..parties should address themselves  to  the  French  Courts  which  have sole  jurisdiction;  foreign  companies   which have accepted part of the risk are also subject to the jurisdiction of the French Courts…”       

observed that clause (L) on its face merely provided for a preliminary

procedure involving appointment of persons described as arbitrators;

but it was clear that it was at best a procedure for consideration which

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might or might not result in a compromise of a dispute; it was clearly

not an arbitration agreement in the sense in which that expression was

normally used, nor did it deprive the courts of jurisdiction; as between

the insured and insurer.

33. In the present case the parties have agreed that the disputes

arising out of the agreement which cannot be settled amicably to be

finally  settled  in  accordance  with  the  provisions  of  Arbitration  and

Conciliation Act, 1996.  The Act not only provides for the procedure

involving appointment of arbitrator but also comprehensively provides

as  to  jurisdiction  of  Arbitral  Tribunal  and  conduct  of  arbitral

proceedings  such  as  determination  of  rules  of  procedure;  place  of

arbitration  etc.  and  for  making  arbitral  award  and  termination  of

proceedings.  The  arbitral  award  shall  be  final  and  binding  on  the

parties and persons claiming under them respectively. The award is

enforceable under the Code of Civil Procedure in the same manner as

if it was a decree of the court. The parties have thus agreed for the

resolution of  the disputes making all the provisions of the Arbitration

and Conciliation Act, 1996 applicable until the final termination of their

disputes  arising  out  of  the  agreement.   The  absence  of  word

‘Reference’ may not clinch the issue inasmuch as  it is the whole clause

providing for the resolution/settlement of the disputes arising out of

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the agreement and not a word or two is required to be interpreted in

order to gather the intention of the parties.  In my considered opinion

clear intention to refer the disputes to arbitration in accordance with

the  provisions  of  Arbitration  and  Conciliation  Act,  1996  is  clearly

evident  from  Article  VI  incorporated  in  the  agreement.  It  is  also

required to notice that clause VI contains expression “shall be finally

settled…..” which is of some significance.  The award passed by the

Arbitral Tribunal is final and binding on the parties and the persons

claiming under them respectively of course subject to the provisions

contained in Chapter III of the Act.  A plane reading of the arbitration

clause  reveals  that  parties  intended  to  settle  disputes  finally  in

accordance with the provisions of the Act in case of failure to arrive at

amicable settlement.  

34. Further the respondent has placed reliance and referred to the

checklist  of  matters  to  be  considered/suggested  by  Russel  in  his

treatise, Russel on Arbitration.  The contention was that the disputed

clause  does  not  satisfy  the  checklist  of  matters  to  be  considered.

Russel  in  his  treatise  suggests  that  while  drafting  an  arbitration

agreement care needs to be taken to ensure whether they need to be

addressed in the particular circumstances of the case.   The following

is the checklist of the matters which according to Russel need to be

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considered when drafting an arbitration agreement.  But it may not be

necessary to include any provision for all of them. But thought should

be given as to whether they need to be addressed in the particular

circumstances  of  the  case.    A  close  scrutiny  of  clause  VI  of  the

agreement  which  provides  for  the  applicability  of  the  provisions  of

Arbitration and Conciliation Act reveals that essential elements stated

in the checklist have been addressed to namely:  

1. The parties have been properly identified;

2. There is a clear reference to arbitration in accordance with the provisions of Arbitration and Conciliation Act, 1996;    

3. The disputes  that had arisen between the parties  which could  not  be  amicably  settled  are  to  be  referred  to arbitration;

4. The seat of the arbitration is to be in terms of Section 20 (1) and 20(2). The arbitral tribunal in the absence of any agreement between the parties is entitled to determine the place of arbitration;

5. The  substance  of  the  dispute  is  to  be  determined  in accordance  with  the  provisions  of  Sections 19,23,24,25,26,27 and other provisions of the Arbitration and Conciliation Act, 1996.

35. The arbitration clause states that the disputes arising out of the

agreement which cannot be settled amicably to be finally settled in

accordance with the Arbitration and Conciliation Act, 1996.  Therefore,

the provisions of the said Act will govern the appointment of Arbitrator,

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the  reference  of  disputes  and  the  entire  process  and  procedure  of

arbitration from the stage of appointment of arbitration till the award is

made and executed/given effect to.   The provisions of the said Act

would meet the requirement of checklist of the matters enumerated in

the  treatise.   Once  the  parties  agree  for  resolution  of  dispute  in

accordance with the Arbitration and Conciliation Act, 1996 the said Act

will take care of the entire processes and procedure.  Be that as it may

when the specific intention of the parties is clearly evident from the

arbitration clause  the same cannot be treated as vague on the ground

that it does not satisfy the suggested checklist of all  matters to be

considered while drafting an arbitration agreement.         

Whether  invocation  of  Article  VI  providing  for

arbitration is premature?

36. It was contended that the pre-condition for amicable settlement

of  the  dispute  between  the  parties  has  not  been  exhausted  and

therefore  the  application  seeking  appointment  of  arbitrator  is

premature.  From the correspondence exchanged between the parties

at pages 54-77 of the Paper-book, it is clear that there was no scope

for amicable settlement, for both the parties have taken rigid stand

making allegations against each other.  In this regard a reference may

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be made to the letter dated 15th September, 2006 from the respondent

herein in which it is inter-alia stated “……since February, 2005 after the

execution of the agreements, various meetings/discussions have taken

place between both the parties for furtherance of the objective and

purpose  with  which  the  agreement  and  MOU  was  signed  between

parties. Several correspondences have been made by CRL to VISA to

help and support its endeavour for achieving the goal for which the

above mentioned agreements were executed.”  In the same letter it is

alleged  that  in  spite  of  repeated  requests  the  petitioner  has  not

provided any Funding Schedules for their portion of equity along with

supporting  documents  to  help  in  convincing  OMC  of  financial

capabilities of the parties and ultimately to obtain financial closure of

the project.  The exchange of letters between the parties undoubtedly

discloses  that  attempts  were  made for  an  amicable  settlement  but

without any result leaving no option but to invoke arbitration clause.  

Whether there is any live issue between the

parties ?

37. The next question that falls for consideration is as to whether

there  is  a  live  issue  between  the  parties?   The  application  for

arbitration  can  be  made  only  when  a  dispute  arises  between  the

parties to the arbitration agreement and such dispute gives rise to a

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live issue.  As to what is the meaning and nature of dispute has been

summed up by Mustill  and Boyd in their treatise on Arbitration law

titled Law and Practice of Commercial Arbitration, 1982……

“A dispute means that there may be a difference of opinion  as to the future performance of a contract. For  example,  one  party  may  be  denying  that  any further performance is due, on the ground that the contract  has  been  discharged  by  repudiation  or frustration; or it may be a common ground that the contract is subsisting, but the parties may be in a dispute  about  whether  a  particular  act  would constitute a valid performance, or whether one party is entitled to give a particular order, or exercise an option in a particular way.  If the parties stand their ground in such a situation, a time will come when it is too late for the right view to prevail; one party will irremediably in the wrong; and serious financial loss is likely to ensue.  All this can be prevented if the parties can mount arbitration with sufficient speed to enable  them to  know  the  true  position  under  the contract before the time for performance has finally expired.”       

38. In the present case,  in this sense there is a dispute and live

issue between both the parties.    It is not a stale claim or a claim

barred  by  any  limitation.  However,  it  is  required  to  note  that  this

finding as to the existence of dispute is confined only for the purpose

of  finding out  whether  the arbitral  procedure  has to be started for

resolving the live issue in between the parties.  

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39. In SBP & Co. vs. Patel Engineering Ltd. & Anr. [(2005)

8 SCC 618] it is observed:

“39. It is necessary to define what exactly the Chief  Justice,  approached with  an  application under Section 11 of the Act, is to decide at that stage.   Obviously,  he  has  to  decide  his  own jurisdiction  in  the  sense  whether  the  party making the  motion has approached the right High Court.  He has to decide whether there is an arbitration agreement, as defined in the Act and  whether  the  person  who  has  made  the request  before  him,  is  a  party  to  such  an agreement.  It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties  have  concluded  the  transaction  by recording satisfaction of their mutual rights and obligations or  by receiving  the  final  payment without objection.  It may not be possible at that  stage,  to  decide  whether  a  live  claim made, is one which comes within the purview of the arbitration clause.  It will be appropriate to  leave  that  question  to  be  decided  by  the Arbitral Tribunal on taking evidence, along with the  merits  of  the  claims  involved  in  the arbitration.   The  Chief  Justice  has  to  decide whether  the  applicant  has  satisfied  the conditions  for  appointing  an  arbitrator  under Section 11(6) of the Act.  For the purpose of taking a decision on these aspects, the Chief Justice  can  either  proceed  on  the  basis  of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary.  We think that adoption of  this  procedure   in  the  context  of  the  Act would  best  serve  the  purpose  sought  to  be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral Tribunal.”   

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40. It is amply clear from the facts as pleaded and as well as from

the exchange of correspondence between the parties that there has

not been any satisfaction recorded by the parties with respect to their

claims.  There has been no mutual satisfaction arrived at between the

parties as regards the dispute in hand.  The claims are obviously not

barred by any limitation.  It  is thus clear that there is a live issue

subsisting between the parties requiring its resolution.   

41. In the light of foregoing discussion I am of the clear opinion that

a clear case is made out for appointment of an arbitrator to decide the

disputes between the parties.

42. Hon’ble Shri Justice Dr. A.S. Anand, former Chief Justice of India

is appointed as the sole Arbitrator  with a request to him to decide the

disputes between the parties arising out of the agreement referred to

in this order.  The sole Arbitrator shall be at liberty to fix his fee in the

matter.  

43. The application is accordingly allowed.  

                                         ……………………………………J.

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         [B.SUDERSHAN  REDDY]

New Delhi, December 2, 2008

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