M/S LARSEN AND TOUBRO LIMITED SCOMI ENGINEERING BHD versus MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY on 3 October 2018

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SUPREME COURT REPORTS [2018] 14 S.C.R.[2018] 14 S.C.R. 22

AM/S LARSEN AND TOUBRO LIMITED SCOMIENGINEERING BHD

v.

MUMBAI METROPOLITAN REGIONDEVELOPMENT AUTHORITY

B(Arbitration Petition (C) No. 28 of 2017)

OCTOBER 03, 2018

[R. F. NARIMAN AND NAVIN SINHA, JJ.]

Arbitration and Conciliation Act, 1996 – ss. 2(1)(f)(ii),C2(1)(f)(iii) and 11 – International Commercial Arbitration – Contractfor development of a Monorail system, between MumbaiMetropolitan Regional Development Authority (MMRDA)-respondent and a Consortium-petitioner (comprising an Indiancompany and a Malaysian company) – Dispute arose between theparties – Consortium made various interim claims and filed petitionDu/s.11 of the Act – According to Consortium, since one of the partiesto the Arbitration Agreement, was a body corporate, incorporatedin a country other than India so it would attract s.2(1)(f)(ii) of theAct and relied upon their status (i.e. an Indian company and aMalaysian company) as independent entities – Propriety of – Held:EIn another proceeding between the same parties arising out of theself-same agreement, the High Court by order dated 20.10.2016had upheld the order of the Arbitrator that the particular claim thatwas made in that case could be made only as a Consortium and notas two entities separately and the said judgment was final inter-parties as no appeal was preferred – Thus, it is not open for theFpetitioner to rely upon their status as independent entities – Thisbeing the case, the un-incorporated “association” referred to ins.2(1)(f)(iii) is attracted on facts of the case and not s.2(1)(f)(ii) asthe Malaysian body could not be referred to as an independententity following the judgment of the High Court – Further, the IndianGcompany was the lead partner and the Supervisory Board constitutedunder the Consortium agreement made it clear that the lead partnerhad the determining voice in that, as it appointed the Chairman ofthe said Board and the fact that the Consortium’s office was inWadala, Mumbai and also that the lead member led the arbitration proceedings – This all pointed to the fact that the centralmanagement and control of the Consortium appeared to be exercisedin India and not in any foreign nation – There is no “internationalcommercial arbitration” as defined u/s.2(1)(f) of the Act – Thus,petition filed u/s.11 of the Act dismissed.

Arbitration and Conciliation Act, 1996 – s.2(1)(f)(iii) –discussed.

Dismissing the Arbitration Petition, the Court HELD: 1. Mumbai Metropolitan Region DevelopmentAuthority (MMRDA), the respondent, has relied upon an orderwas passed by the High Court of Bombay, dated 20.10.2016between the same parties, in which an interim Award dated18.08.2016 was challenged, which was between the same partiesarising out of the self-same agreement. This order upheld theinterim Award of the Arbitrators in stating that the particular claimthat was made in that case could be made only as a Consortiumand not as two entities separately. That order has become finalas it has not been challenged by the petitioner before this Court.[Para 3][33-C-D]

2. It is clear, as has been held by the judgment of theHigh Court of Bombay, and which is binding inter-parties, that itis not open for the petitioner to rely upon their statusas independent entities while dealing with the respondentandthey will have to deal with the respondent as a Consortium only.[Para 9][35-G]

3. This being the case, it is clear that the un-incorporated“association” referred to in Section 2(1)(f)(iii) would beattracted on the facts of this case and not Section 2(1)(f)(ii) as theMalaysian body cannot be referred to as an independententity following the judgment of the High Court of Bombay.[Para 10][35-H; 36-A]

4. Section 2(1)(f)(iii) of the Act refers to two different setsof persons: an “association” as distinct and separate from a “bodyof individuals”. For example, under Section 2(31) of the IncomeTax Act, 1961, “person” is defined as including, under sub-clause A

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A(v), an association of persons, or body of individuals, whetherincorporated or not. It is in this sense, that an association isreferred to in Section 2(1)(f)(iii) which would therefore include aconsortium consisting of two or more bodies corporate, at leastone of whom is a body corporate incorporated in a country otherthan India. [Para 11][36-B-C]B

5. It would become clear that prior to the deletion of theexpression “a company or”, there were three sets of personsreferred to in Section 2(1)(f)(iii) as separate and distinct personswho would fall within the said sub-clause. This does not changedue to the deletion of the phrase “a company or” for the reasonCgiven by the Law Commission. This is another reason as to why“an association” cannot be read with “body of individuals” whichfollows it but is a separate and distinct category by itself, as isunderstood from the definition of “person” as defined in theIncome Tax Act referred to above. [Para 12][37-D-E]

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6. This being the case, coupled with the fact that the Indiancompany is the lead partner, and that the Supervisory Boardconstituted under the Consortium Agreement makes it clear thatthe lead partner really has the determining voice in that itappoints the Chairman of the said Board (undoubtedly, with theEconsent of other members); and the fact that the Consortium’soffice is in Wadala, Mumbai as also that the lead member shalllead the arbitration proceedings, would all point to the fact thatthe central management and control of this Consortiumappears to be exercised in India and not in any foreign nation.[Para 13][37-E-G]

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7. This being the case, the petition filed under Section 11of the Act is dismissed, as there is no “international commercialarbitration” as defined under Section 2(1)(f) of the Act for thepetitioner to come to this Court. [Para 14][37-G-H]

GTDM Infrastructure Private Ltd. v. UE DevelopmentIndia Private Ltd., (2008) 14 SCC 271 : [2008]8 SCR 775 – referred to.

Case Law Reference

[2008] 8 SCR 775

referred toPara 12

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CIVIL ORIGINAL JURISDICTION : Arbitration Petition (C)No. 28 of 2017.

Under Section 11(6) of the Arbitration and Conciliation Act, 1996for appointment of an Arbitrator.

Gopal Jain, Sr. Adv., Atul Sharma, Lakshay Khanna, Ms. ParshantiRao, Gautam Talukdar, Advs. for the Petitioner.

Shyam Divan, Sr. Adv., Pratap Venugopal, A. Sarna, Ms. Niharika,Ms. Remya Raj, M/s. K. J. John And Co., Advs. for the Respondent.

The Judgment of the Court was delivered by

R. F. NARIMAN, J.

1. The present petition, under Section 11 of the Arbitration &Conciliation Act, 1996, (in short ‘the Act’), that has been filed beforethis Court, arises out of a contract entered into on 09.01.2009 for thework of planning, design, development, construction, manufacture, supply,testing and commissioning of a Monorail system in two particularearmarked sections in Wadala, Mumbai including operation andmaintenance for a period of three years from the date of start ofcommercial operations. This agreement contains an arbitration clause,which is set out hereunder:-

“Claims, Disputes and Arbitration20.1If the Contractor considers himself to be entitled toContractor’sany extension of the Time for Completion and/or anyClaimadditional payment, under any Clause of theseConditions for otherwise in connection with theContract, the Contractor shall give notice to theEmployer/Employer’s Representative, describing theevent or circumstance giving rise to the claim. Thenotice shall be given as soon as practicable, and notlater than 30 days after the Contractor became aware,or should have become aware, of the event orcircumstance.If the Contractor fails to give notice of a claim withinsuch period of 30 days, the Time for Completion shallnot be extended, the Contractor shall not be entitledto additional payment, and the Employer/Employer’sRepresentative shall be discharged from all liabilityin connection with the claim. Otherwise, thefollowing provisions of this Sub-Clause shall apply.

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AThe Contractor shall also submit any other noticeswhich are required by the Contract, and supportingparticulars for the claim, all as relevant to such eventor circumstance.The Contractor shall keep such contemporaryBrecords as may be necessary to substantiate anyclaim, either on the Site or at another locationacceptable to the Employer/Employer’sRepresentative. Without admitting liability, theEmployer/Employer’s Representative may, afterCreceiving any notice under this Sub-Clause, monitorthe record-keeping and/or instruct the Contractor tokeep further contemporary records. The Contractorshall permit the Employer/Employer’sRepresentative to inspect all these records, and shall(if instructed) submit copies to the Employer/DEmployer’s Representative.Within 45 days after the Contractor became aware(or should have become aware) of the event orcircumstances giving rise to the claim, or within suchother period as may be proposed by the ContractorEand approved by the Employer/Employer’sRepresentative, the contractor shall send to theEmployer/Employer’s Representative a fully detailedclaim which includes full supporting particulars ofthe basis of the claim and of the extension of timeFand/or additional payment claimed. If the event orcircumstance giving rise to the claim has a continuingeffect:(a) this fully detailed claim shall be considered asinterim;G(b) the Contractor shall send further interim claimsat monthly intervals, giving the accumulated delayand/or amount claimed, and such further particularsas the Employer may reasonably require; andH

(c) the Contractor shall send a final claim within 30days after the end of the effects resulting from theevent or circumstance, or within such other period asmay be proposed by the Contractor and approved bythe Employer/Employer’s Representative.Within 45 days after receiving a claim or any furtherparticulars supporting a previous claim, or within suchother period as may be proposed by the Employer/Employer’s Representative and approved by theContractor, the employer shall respond with approval,or with disapproval and detailed comments. He mayalso request any necessary further particulars, butshall nevertheless give his response on the principlesof the claim within such time.Each interim payment shall include such amounts forany claim as have been reasonable substantiated asdue under the relevant provision of the Contract, unlessand until the particulars supplied are sufficient tosubstantiate the whole of the claim, the Contractorshall only be entitled to payment for such part of theclaim as he has been able to substantiate.The Employer/Employer’s Representative shallproceed in accordance with Sub-Clause 3.5(Determination) to agree or determine (i) the extension(if any) of the Time for completion (before or after itsexpiry) in accordance with Sub-Clause 8.4 [Extensionof Time for Completion], and/or(ii) the additional payment (if any) to which theContractor is entitled under the Contract. Therequirements of this Sub-Clause are in addition tothose of any other Sub-Clause, which may apply to aclaim. If the Contractor fails to comply with this oranother Sub-Clause in relation to any claim, anyextension of time and/or additional payment shall takeaccount of the extent (if any) to which the failure hasprevented or prejudiced proper investigation of the ABC

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Aclaim, unless the claim is excluded under the secondparagraph of this Sub-Clause.20.2Should any dispute or difference of any kindDispute to bewhatsoever arise between the Employer and theBreferred toContractor, in connection with, or arising out of theand settled byContract, or subject matter thereof, or the executionEmployer’sof Works/commissioning of the System/Operation &RepresentativeMaintenance of the System, whether, during theat Siteprogress of Works/during Operation and MaintenanceCof the System or after their completion and whetherbefore or after termination, abandonment or breachof Contract, it should, in the first place, subject to theprovision under Sub-clause 14.4 above, be referredto and settled by the Employer’s Representative atSite, who shall, within a period of 60 days after beingDrequested in writing by either party to do so, givewritten notice of his decision to the Employer and theContractor. The Employer’s Representative at Sitewhile considering the matters of dispute referred tohim, shall be competent to call for any records,Evouchers, information and enforce the attendance ofthe parties either in person or through authorisedrepresentatives, to sort out or clarify any issue, resolvethe differences and to assist him to decide the mattersreferred to him. Subject to arbitration, as hereinafterprovided, such decision in respect of every matter soFreferred shall be final and binding upon the Employerand the Contractor, who shall proceed with theexecution of Works/ commissioning of the System/Operation & Maintenance of the System (as the casemay be) with all due diligence irrespective of whetherGany of the parties goes in or desires to go in forarbitration. If the Employer’s Representative at Sitehas given written notice of his decision to the Employerand the Contractor and no intimation of reference ofany claim to arbitration has been sent to him by eitherH

Athe Employer or the Contractor within a period of 60days from receipt of such notice, the said decision ofthe Employer’s Representative shall remain final andbinding upon the Employer and the Contractor andthe same shall be deemed to have been accepted bythem. The Employer or the Contractor shall not seekBany arbitration thereafter.20.3If the Employer’s Representative at Site fails to giveReferring ofnotice of his decision, as aforesaid, within a period ofDisputes for60 days after being requested as aforesaid or if eitherArbitrationthe Employer or the Contractor be dissatisfied withCany such decision of the Employer’s Representativeat Site, only then shall the matter in dispute be referredto arbitration as herein provided20.4Disputes or differences shall be due for arbitrationDisputes Dueonly if the conditions in Sub-Clause 20.2 and 20.3Dfor Arbitrationabove fulfilled.and SettlementExcept where otherwise provided in the Contract, allof Disputesdisputes or differences, whatsoever arising betweenthe parties, arising out of or relating to construction,measuring operation or effect of the Contract or theEbreach thereof, shall be settled by arbitration asdetailed in Sub Clause 20.5.20.5Matters to be arbitrated upon shall be referred to aNomination ofSole Arbitrator where the individual claim does notArbitrators/exceed Rs. 5 million or the total value of claims doesFSole Arbitratornot exceed Rs. 15 millions. Beyond the above limit(s),there shall be three arbitrators. For this purpose theemployer will make out a panel of Arbitrators withthe requisite qualifications and professional experiencerelevant to the field to which the Contract relates andGwill be residents of India only. In case of a singlearbitrator, the Panel will be of three Arbitrators, outof which the Contractor will choose one. In case threearbitrators are to be appointed, the Employer will makeout a panel of five. The Contractor and the EmployerH

Awill choose one arbitrator each from the above andthe two so chosen will choose the third arbitrator fromthe above panel only who will act as the “PresidingArbitration” of the arbitration panel.If in a dispute, the contractor fails to choose theBArbitrator within thirty (30) days after the Employerhas nominated the Panel, the Employer may nominatean Arbitrator from the same panel of Arbitrators givenby the Employer for the matter in dispute.If, in a dispute, the two chosen Arbitrators fail toCappoint third Arbitrator- Presiding Arbitrator(Arbitration Panel’s case) within thirty (30) days afterthey have been appointed, the Employer may applyto the Indian Council of Arbitration, New Delhi, tonominate the third Arbitrator from the same panel ofDArbitrators given by the Employer for the matter indispute.Neither party shall be limited in the proceedings beforesuch arbitrator/s to the evidence or arguments putbefore the Employer’s Representative at Site for thepurpose of obtaining his decision. No decision givenEby the Employer’s Representative in accordance withthe foregoing provisions shall disqualify him from beingcalled as a witness and giving evidence before thearbitrator/s on any matter, whatsoever, relevant todispute or difference referred to arbitrator/s.FSubstitute Arbitrators- If for any reason on arbitratoris unable to perform his function, a substitute shall beappointed in the same manner as the original arbitrator.20.6 ArbitrationIn any Arbitration proceedings hereunder:GVenue,(a) Proceedings shall be held in Mumbai, India only.Language andAward(b) English language shall be the official language forall purposes. (Note: English language may be changedto any other language, with the agreement of both theparties)H

M/S L&T LTD. SCOMI ENGINEERING BHD v. MUMBAI31METROPOLITAN REGION DEV. AUTH. [R. F. NARIMAN, J.]A(c) The Arbitration Award shall be final and bindingon all parties and shall be enforceable in any Court ofcompetent jurisdiction, and the parties hereby waiveany objection to or claims of immunity in respect ofsuch enforcements.B(d) In Arbitral proceedings with more than onearbitrator, any decision of the arbitral tribunal shall bemade by a majority of all its members.(e) The Arbitrator(s) shall always give item-wise andreasoned awards irrespective of the value of claim(s)in the dispute in all cases.C(f) Where the arbitral award is for payment of money,no interest shall be payable on the whole or any partof the money for any period till the date on which theaward is made.D(g) The cost of arbitration shall be borne by therespective parties. The cost inter-alia includes thefees of the Arbitrator(s) as per the rate fixed by theEmployer from time to time.20.7The arbitration proceedings shall be governed by IndiaERulesArbitration and Conciliation Act, 1996, as amended,Governing thefrom time to time including provisions in force at theArbitrationtime the reference is made.Proceedings20.8The reference to arbitration shall proceedFNo Supervisionnotwithstanding that Works/System shall not then beof Workor be alleged to be complete, provided always thatthe obligations of the Employer/Employer’sRepresentative and the Contractor shall not be alteredby reasons of arbitration being conducted during theGprogress of Works. Neither party shall be entitled tosuspend the work to which the dispute relates onaccount of arbitration and payments to the Contractorshall continue to be made in terms of the Contract.H

A20.9No dispute or difference shall be referred toLimitation ofArbitration after expiry of 60 days from the date ofTimedecision by the Employer’s Representative at Site, ifnotified, or from the date when the Employer’sRepresentative at Site ought to have given hisBdecision in terms of provisions under Sub-Clause 20.2in case of failure on the part of the Employer’sRepresentative at Site to give notice of decision.

Since disputes arose between the parties to the agreement, variousinterim claims had been made by the Consortium of M/s Larsen andCToubro, an Indian company, together with Scomi Engineering Bhd, aCompany incorporated in Malaysia, for which the Consortium has filedthis petition under Section 11 of the Act to this Court, since according tothem, one of the parties to the Arbitration agreement, being a bodycorporate, incorporated in Malaysia, would be a body corporate, whichDis incorporated in a country other than India, which would attract Section2(1)(f)(ii) of the Act.

2. Shri Gopal Jain, learned senior counsel appearing on behalf ofthe Consortium, has taken us through the agreement, in which he stronglyrelies upon the fact that the two entities, that is, the Indian company andEthe Malaysian company, though stated to be a Consortium, are jointlyand severally liable, to the employer. Learned senior counsel has alsorelied upon the fact that throughout the working of the contract, separateclaims have been made, which have been rejected by the MumbaiMetropolitan Region Development Authority (hereinafter referred to as‘MMRDA’). He has also further relied upon the fact that by at leastFthree letters, during the working of the agreement, the claims have infact been rejected altogether and that, therefore, there is no impedimentin invoking the Arbitration clause under Section 20.4 of the GeneralConditions of Contract (hereinafter referred to as ‘GCC’), as theprocedure outlined by Clauses 20.1 to 20.03 had already been exhausted.

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3. On the other hand, Mr. Shyam Diwan, learned senior counselappearing on behalf of MMRDA, the respondent, has relied upon boththe contract dated 09.01.2009 as well as the actual ConsortiumAgreement dated 04.06.2008 between the Indian company and theMalaysian company, which, when read together, would show that they H

are really an un-incorporated association and would, therefore, fall withinSection 2(1)(f)(iii) as being an association or a body of individuals,provided the central management and control is exercised in any countryother than India. He has also gone on to rely heavily upon the fact thatin the Consortium, the lead partner is the Indian company, and theConsortium’s office is at Wadala in Mumbai making it clear, therefore,that sub-Clause (iii) of Section 2(1)(f) of the Act would not apply as it isclear that the central management and control, that is envisaged by thesaid sub-Clause, would not be exercised in a country outside India but inIndia itself. He has also strongly relied upon an order passed by the HighCourt of Bombay, dated 20.10.2016 between the same parties, in whichan interim Award dated 18.08.2016 was challenged, which was betweenthe same parties arising out of the self-same agreement. This Orderupheld the interim Award of the Learned Arbitrators in stating that theparticular claim that was made in that case could be made only as aConsortium and not as two entities separately. He has also pointed outthat this Order has become final as it has not been challenged by thepetitioner before this Court. In answering Mr. Gopal Jain’s submissionas to Clause 20.4 of the GCC being invoked after the procedure underClauses 20.1 to 20.3 has been exhausted, he referred to and relied upona letter dated 22.04.2016 written by the respondent in which, afterreferring to the various refusals, referred to by Mr. Jain, furtherinformation and material was requested from Mr. Jain’s client. Insteadof furnishing such material straightaway, a notice invoking Arbitrationdated 01.07.2016 was sent by Mr. Jain’s client. The respondent, by areply dated 20.08.2016 reiterated its position that Clauses 20.1 to 20.3had not yet been exhausted, and therefore, on 08.09.2016, rejected therequest for arbitration.

4. The contract dated 09.01.2009 is between (1) MMRDA and(2) a Consortium, comprising, (a) L&T, an Indian Company, and; (b) M/s Scomi Engineering Bhd, a Malaysian Company. It is true that each ofthem are jointly and severally responsible to the employer, beingcollectively referred to as the “contractor.”

5. Under the General Conditions of Contract, the “contractor”, inClause 1.1.2.3 is defined as meaning an Individual, Firm, Company,Corporation, Joint Venture or Consortium, whether incorporated or not.

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A“Bidder” is also defined under Clause 1.1.2.10 as meaning an Individual,Firm, Company, Corporation, Joint Venture or Consortiumwhich couldsubmit a bid. What is important to notice is that the contract was signedby the employer, viz., MMRDA and by the contractor under the headsub-Clauses (A) and (B) in which L&T India signed as ‘A’ and ScomiEngineering Bhd has signed as ‘B’. When we come to the consortiumBagreement that is entered into between the Indian company and theMalaysian company as aforestated, we find in the definition clause that“Consortium” shall mean L&T and Scomi Engineering Bhd, acting incollaboration, for the purpose of this agreement and shall be called “theL&T-SEB” Consortium “un-incorporated.” The contract is defined inCsub-Clause 6 as meaning, “the contract to be entered by the Consortiumwith the employer for the execution of the Project”. Under sub-Clause7, “the lead Member of the Consortium” or “Consortium Leader” shallmean L&T, that is, the Indian Company. Under sub-Clause 8, the“Supervisory Board” (hereinafter referred to as ‘the SB’) shall mean aBoard constituted under Clause 11 of the GCC. When we come toDClause 11.2, it is clear that the Members of this Supervisory Board willconsist of four members, two appointed by each Member. One of theMembers nominated by the Consortium Leader and agreed to by allmembers shall then act as the Chairman of the Supervisory Board, whichis, by Clause 11.5, to decide on various matters relating to the executionEof the contract. Clause 21.1(g) provides that the Consortium leadershall lead all arbitration proceedings.

6. As correctly pointed out by Shri Jain, separate claims weremade by the Indian company and the Malaysian company which wererejected by the respondent. Nonetheless, by a letter dated 22.04.2016,Fthe respondent referred to these various rejection letters, and stated thatdocuments in support of the list of “delayed events” had not yet beengiven, and therefore, necessary information and clarification, in responseto certain observations, together with all documents in support of theclaim, was requested to be furnished. By a letter dated 01.07.2016, theConsortium, instead of responding to this letter, invoked arbitration, statingGthat interim claims had already been rejected, and all the necessaryinformation had already been furnished, as a result of which, the stageof Clause 20.4 had arrived. This was replied to by a letter dated20.08.2016 in which the respondent reiterated its position that the remedies provided under Clause 20.3 has not yet been exhausted, and that therefore,there is no question of appointing an Arbitrator. On 08.09.2016, thenotice invoking arbitration was replied to by the respondent, rejectingthe same.

7. It is important, at this juncture, to refer to an order made by theHigh Court of Bombay dated 20.10.2016 which, as has been stated earlier,arises between the self-same parties, under the same contract. An interimAward made by the Arbitrators qua different claims arising under thesame contract had made it clear that the claim could be filed only in thename of the Consortium and not separately, as was contended by ShriJain’s client. The preliminary issue framed on this count was “whetherthe claimants are entitled to file this claim as Claimant No. 1 and ClaimantNo. 2 or only as the Consortium of L&T and Scomi Engineering Bhd?”The High Court of Bombay, agreed with the interim Award of theArbitrators, and held as follows:-

“8. Considering the terms and conditions of the contract as wellas the decision cited by Mr. Ankhad, in my opinion, in the factsand circumstances of the present case, it is not open for thepetitioners to rely upon their independent identities while dealingwith the respondent and that they will have to deal with therespondent as a Consortium only. Therefore, there is no infirmityin the impugned order. For the same reason, the present petitionas filed would also not been maintainable. Hence, the same isdismissed.”

8. Shri Gopal Jain did not dispute the fact that this judgment wasfinal inter-parties as no appeal has been preferred. Therefore, to stressthe fact that it pertains only to “this claim” and would therefore, notapply to a different set of claims under the arbitration clause is not anargument that appeals to us.

9. It is clear, as has been held by the judgment of the High Courtof Bombay, and which is binding inter-parties, that it is not open for thepetitioner to rely upon their status as independent entities while dealingwith the respondent and they will have to deal with the respondent as aConsortium only.

10. This being the case, it is clear that the un-incorporated“association” referred to in Section 2(1)(f)(iii) would be attracted on the A

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Afacts of this case and not Section 2(1)(f)(ii) as the Malaysian body cannotbe referred to as an independent entity following the judgment of theHigh Court of Bombay.

11. Section 2(1)(f)(iii) of the Act refers to two different sets ofpersons: an “association” as distinct and separate from a “body ofBindividuals”. For example, under Section 2(31) of the Income Tax Act,1961, “person” is defined as including, under sub-clause (v), an associationof persons, or body of individuals, whether incorporated or not. It is inthis sense, that an association is referred to in Section 2(1)(f)(iii) whichwould therefore include a consortium consisting of two or more bodiescorporate, at least one of whom is a body corporate incorporated in aCcountry other than India.

12. Further, the expression “a company or” which was originallyat the beginning of Section 2(1)(f)(iii) was omitted by Act 3 of 2016.This was for the reason that the judgment of this Court, in TDMInfrastructure Private Ltd. v. UE Development India Private Ltd.,D(2008) 14 SCC 271, held that the expression “a company or” in Section2(1)(f)(iii) of the Act cannot possibly be said to refer to a companyregistered and incorporated in India which may be controlled by personsin a country outside India. The Court held:

“20. The learned counsel contends that the word “or” beingEdisjunctive, sub-clause (iii) of Section 2(1)(f) of the 1996 Act shallapply in a case where sub-clause (ii) shall not apply. We do notagree. The question of taking recourse to sub-clause (iii) wouldcome into play only in a case where sub-clause (ii) otherwisedoes not apply in its entirety and not where by reason of anFexclusion clause, consideration for construing an agreement to bean international commercial arbitration agreement goes outsidethe purview of its definition. Once it is held that both the companiesare incorporated in India, and, thus, they have been domiciled inIndia, the arbitration agreement entered into by and between themwould not be an international commercial arbitration agreementGand, thus, the question of applicability of sub-clause (iii) of Section2(1)(f) would not arise.”

The Law Commission Report No. 246 of August 2014, whichmade several amendments to the Arbitration and Conciliation Act, 1996,gave the following reason for deleting the words “a company or”:H

“(iii) In sub-section (1), clause (f), sub-clause (iii), delete the words“a company or” before the words “an association or a body ofindividuals.

[NOTE: The reference to “a company” In sub-section (iii) hasbeen removed since the same is already covered under sub-section(ii). The intention is to determine the residence of a companybased on its place of incorporation and not the place of centralmanagement/control. This further re-enforces the “place ofincorporation” principle laid down by the Supreme Court in TDMInfrastructure Private Limited v. UE Development India PrivateLimited, (2008) 14 SCC 271, and adds greater certainty in case ofcompanies having a different place of incorporation and place ofexercise of central management and control]”

It would become clear that prior to the deletion of the expression“a company or”, there were three sets of persons referred to in Section2(1)(f)(iii) as separate and distinct persons who would fall within thesaid sub-clause. This does not change due to the deletion of the phrase“a company or” for the reason given by the Law Commission. This isanother reason as to why “an association” cannot be read with “body ofindividuals” which follows it but is a separate and distinct category byitself, as is understood from the definition of “person” as defined in theIncome Tax Act referred to above.

13. This being the case, coupled with the fact, as correctly arguedby Shri Diwan, that the Indian company is the lead partner, and that theSupervisory Board constituted under the Consortium Agreement makesit clear that the lead partner really has the determining voice in that itappoints the Chairman of the said Board (undoubtedly, with the consentof other members); and the fact that the Consortium’s office is in Wadala,Mumbai as also that the lead member shall lead the arbitrationproceedings, would all point to the fact that the central management andcontrol of this Consortium appears to be exercised in India and not inany foreign nation.

14. This being the case, we dismiss the petition filed under Section11 of the Act, as there is no “international commercial arbitration” asdefined under Section 2(1)(f) of the Act for the petitioner to come to thisCourt. We also do not deem it necessary to go into whether theappropriate stage for invoking Arbitration has yet been reached.

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A15. The Arbitration Petition is dismissed in the aforesaid terms.

16. It would be open for the petitioner to approach the relevantcourt on the footing that this is not a case of an international commercialarbitration.

BAnkit Gyan

Arbitration Petition dismissed.

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