8/3/2019 IBDR (1)

1/17

Renusagar Power Company Limited v General Electric Company

Supreme Court of India

07 October 1993

Keywords: Breach Of Contract, Natural Justice, Arbitral Award, Arbitral Tribunal, ForeignJudgment, Code of Civil Procedure, Jurisdiction, Companies Act, 1956, Code Of CivilProcedure, 1908, Bank Guarantee, Constitution Of India, 1950, Indian Contract Act, 1872,Arbitration Act, 1940, Indian Limitation Act, 1908, Income-Tax Act, 1961, Functus Officio,Settlement, Foreign Exchange Regulation Act, 1973, Arbitration Clause, Award Interest, ForeignAwards (Recognition And Enforcement) Act, 1961, Arbitration (Protocol And Convention) Act,1937, Oil and Natural Gas Commission, Absence, Foreign State, Foreign Exchange RegulationAct, 1947, Interest Act, 1978, Private International, Part B States (Laws) Act, 1951, Doctrine OfPublic Policy

Summary: Foreign Awards (Recognition and Enforcement) Act, 1961, s.7 - Foreign award -Enforcement - Enquiry - Scope - Arbitral Tribunal - Presentation of case before - Counselintimating Tribunal its intention not to participate and as to its becoming functus officio -Tribunal rejecting plea and passing award on merits - Held, award cannot be impeached onmerits - Award not barred under s.7(1)(a)(ii) merely because party not presented before ArbitralTribunal - Not necessary for Tribunal to give further notice - 'public policy' refers to the publicpolicy of India.

Sumitomo Heavy Industries Limited v Oil and Natural Gas Commission of India

Supreme Court of India

28 July 2010

Case Digest

Subject: Arbitration & ADR

Keywords: Jurisdiction, Indian Contract Act, 1872, Arbitration Act, 1940, Income-Tax Act,1961, Finance Act, 1987, Territorial Waters, Continental Shelf, Exclusive Economic Zone andOther Maritime Zones Act, 1976

Summary: Arbitration & ADR - Arbitration Act, 1940 - Arbitral award - Legality - Appellantentered into a contract with first respondent - Appellant appointed a Sub-Contractor in executionof this work by a back to back contract with full knowledge of the respondent - Appellant soughtfrom respondent reimbursement of Income-tax amount which the Sub-Contractor was required to

8/3/2019 IBDR (1)

2/17

pay to UOI under newly added cl. 44BB of Income Tax Act, 1961 and which amount was paidby appellant to Sub-Contractor - Respondent declined to reimburse tax amount - Appellant,therefore, invoked Arbitration clause in agreement - Appellant contended that their liability hadarisen due to change of law and that under cl. 17.3 of General Conditions of Contract formingpart of contract between parties, respondent was required to reimburse this amount since it was

in nature of necessary and reasonable extra cost arising out of change of law - Umpire acceptedappellant's claim and directed respondent to pay appellant - Arbitration petition filed - SingleJudge held that said reimbursement by appellant to sub-contractor was a voluntary act on part ofappellant and terms of contract did not require respondent to reimburse said income-tax amountto appellant - Single Judge allowed arbitration petition and set aside award - On appeal, DB heldthat only possible view of all clauses of contract was that respondent could not be held to beliable to appellant for income-tax liability of sub-contractor and that umpire exceeded hisjurisdiction in allowing appellant's claim under cl. 17.3 of General Conditions - Hence, presentappeal - Whether as held by DB, umpire failed to apply his mind to material on record andclauses of contract between parties thereby rendering a perverse award? - Held, a finding wouldbe called perverse if it is not only against weight of evidence but altogether against evidence -

Umpire is legitimately entitled to take view which he holds to be correct one after consideringmaterial before him and after interpreting provisions of agreement - If he does so, decision ofumpire has to be accepted as final and binding - In present case, findings and award of umpireare rendered after considering material on record and giving due weightage to all terms ofcontract - Umpire has considered the fact situation and placed a construction on clauses ofagreement which according to him was correct - Further, it is an obligation of parties to acontract that they must perform their respective promises, and if a party does not so perform,arbitrator or umpire has to give necessary direction if sought - In that process, they have to give ameaningful interpretation to all relevant clauses of contract to make them effective and notredundant - This is what umpire has done and has given direction to respondent to compensateappellant for amount of necessary and reasonable extra cost caused by change in law - Award ofumpire is a well reasoned award and one within his jurisdiction, and which gives a meaningfulinterpretation to all clauses of contract including cl. 17.3 - HC erred in interfering with awardrendered by umpire - Award upheld - Appeal allowed.

Scherk v. Alberto-Culver Co.

No. 73-781

Argued April 29, 1974

Decided June 17, 1974

417 U.S. 506

8/3/2019 IBDR (1)

3/17

Syllabus

Respondent, an American manufacturer based in Illinois, in order to expand its overseasoperations, purchased from petitioner a German citizen, three enterprises owned by him andorganized under the laws of Germany and Liechtenstein, together with all trademark rights of

these enterprises. The sales contract, which was negotiated in the United States, England, andGermany, signed in Austria, and closed in Switzerland, contained express warranties bypetitioner that the trademarks were unencumbered and a clause providing that "any controversyor claim [that] shall arise out of this agreement or the breach thereof" would be referred toarbitration before the International Chamber of Commerce in Paris, France, and that Illinois lawswould govern the agreement and its interpretation and performance. Subsequently, afterallegedly discovering that the trademarks were subject to substantial encumbrances, respondentoffered to rescind the contract, but when petitioner refused, respondent brought suit in DistrictCourt for damages and other relief, contending that petitioner's fraudulent representationsconcerning the trademark rights violated 10(b) of the Securities Exchange Act of 1934 andRule 10b-5 promulgated thereunder. Petitioner moved to dismiss the action or alternatively to

stay the action pending arbitration, but the District Court denied the motion to dismiss and, assought by respondent, preliminarily enjoined petitioner from proceeding with arbitration,holding, in reliance on Wilko v. Swan,346 U. S. 427, that the arbitration clause wasunenforceable. The Court of Appeals affirmed.

Held: The arbitration clause is to be respected and enforced by federal courts in accord with theexplicit provisions of the United States Arbitration Act that an arbitration agreement, such as ishere involved, "shall be valid, irrevocable, and enforceable, save upon such grounds as exist atlaw or in equity for the revocation of any contract." 9 U.S.C. 1, 2. Wilko v. Swan, supra,distinguished. Pp.417 U. S. 510-520.

(a) Since uncertainty will almost inevitably exist with respect to any contract, such as the one inquestion here, with substantial

Page 417 U. S. 507

contacts in two or more countries, each with its own substantive laws and conflict of laws rules,a contractual provision specifying in advance the forum for litigating disputes and the law to beapplied is an almost indispensable precondition to achieving the orderliness and predictabilityessential to any international business transaction. Such a provision obviates the danger that acontract dispute might be submitted to a forum hostile to the interests of one of the parties orunfamiliar with the problem area involved. Pp.417 U. S. 515-517.

(b) In the context of an international contract, the advantages that a security buyer might possessin having a wide choice of American courts and venue in which to litigate his claims ofviolations of the securities laws, become chimerical, since an opposing party may by speedyresort to foreign court block or hinder access to the American court of the buyer's choice. Pp.417U. S. 517-518.

http://supreme.justia.com/us/346/427/case.htmlhttp://supreme.justia.com/us/346/427/case.htmlhttp://supreme.justia.com/us/346/427/case.htmlhttp://supreme.justia.com/us/417/506/case.html#510http://supreme.justia.com/us/417/506/case.html#510http://supreme.justia.com/us/417/506/case.html#510http://supreme.justia.com/us/417/506/case.html#515http://supreme.justia.com/us/417/506/case.html#515http://supreme.justia.com/us/417/506/case.html#515http://supreme.justia.com/us/417/506/case.html#517http://supreme.justia.com/us/417/506/case.html#517http://supreme.justia.com/us/417/506/case.html#517http://supreme.justia.com/us/417/506/case.html#517http://supreme.justia.com/us/417/506/case.html#517http://supreme.justia.com/us/417/506/case.html#517http://supreme.justia.com/us/417/506/case.html#515http://supreme.justia.com/us/417/506/case.html#510http://supreme.justia.com/us/346/427/case.html

8/3/2019 IBDR (1)

4/17

(c) An agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of forumselection clause that posits not only the situs of suit, but also the procedure to be used inresolving the dispute, and the invalidation of the arbitration clause in this case would not onlyallow respondent to repudiate its solemn promise but would, as well, reflect a "parochial conceptthat all disputes must be resolved under our laws and in our courts." The Bremen v. Zapata Off-

Shore Co.,407 U. S. 1,407 U. S. 9. P.417 U. S. 519.

J. S. Ocean Liners Inc., U.S.A. v S. K. Shipping (Singapore) Private Limited,

Singapore

Bombay High Court

04 January 2010

Case Digest

Subject: Arbitration & ADR

Keywords: Arbitral Tribunal, Jurisdiction, Arbitration And Conciliation Act, 1996, EnglishArbitration Act, 1996, Singapore International Arbitration Centre (Siac) Arbitration Rules, TheEnglish Arbitration Act

Summary: Arbitration & ADR - English Arbitration Act, 1996 - Arbitration and Conciliation

Act, 1996, ss. 16, 31(4), 34 and 48 - International arbitration - Maintainability of petitionchallenging foreign award - Petition filed u/s. 34 of Act challenging arbitral award passed in aninternational arbitration - Both parties are foreigners - Agreement was executed in USA - Agreedvenue of arbitration was London (England) - Parties agreed for English law to apply to disputearising out of agreement - Parties, in view of agreement, proceeded under English law at place ofarbitration at London - Award in question is governed by English Arbitration Act - Held, asparties consented and agreed that Court at London had jurisdiction and further that EnglishArbitration would govern arbitration proceedings and in fact parties have acted accordinglythroughout, this amounts to permitted commercial agreement whereby parties have agreed to begoverned by English law - Parties have also agreed and consented to exclusion of provisions ofPart I of the Arbitration Act which is permissible under law - Present petition challenging foreign

award is not maintainable in India - Remedy is under English Arbitration Act - Agreedarbitration clauses should prevail - Petition dismissed.

Part I is more comprehensive and contains extensive provisions based on the Model Law. It provides,

inter alia, for arbitrability of disputes, nonintervention by courts, composition of the arbitral tribunal,

jurisdiction of the arbitral tribunal, conduct of the arbitration proceedings, recourse against arbitral

awards and enforcement.

http://supreme.justia.com/us/407/1/case.htmlhttp://supreme.justia.com/us/407/1/case.htmlhttp://supreme.justia.com/us/407/1/case.htmlhttp://supreme.justia.com/us/407/1/case.html#9http://supreme.justia.com/us/407/1/case.html#9http://supreme.justia.com/us/407/1/case.html#9http://supreme.justia.com/us/417/506/case.html#519http://supreme.justia.com/us/417/506/case.html#519http://supreme.justia.com/us/417/506/case.html#519http://supreme.justia.com/us/417/506/case.html#519http://supreme.justia.com/us/407/1/case.html#9http://supreme.justia.com/us/407/1/case.html

8/3/2019 IBDR (1)

5/17

MITSUBISHI MOTORS CORP. V. SOLER CHRYSLER-PLYMOUTH, INC.

MONROE LEIGH

Federal Arbitration Act -- Convention on the Recognition and Enforcement of Foreign

Arbitral Awards -- arbitrability of antitrust claims arising from an international

transaction

105 S.Ct.3346.

U.S. Supreme Court, July 2, 1985.

Petitioner, Mitsubishi Motors Corp., a Japanese automobile manufacturer,brought suit against respondent, Soler Chrysler-Plymouth, Inc., a PuertoRican automobile dealer, seeking an order compelling arbitration of certaindisputes arising out of a sales agreement between the companies. Respondentanswered, asserting various counterclaims against petitioner, including an-titrust claims under the Sherman Act (15 U.S.C. 1-7 (1982)). The U.S.District Court for the District of Puerto Rico ordered arbitration of mostof the issues between the parties pursuant to an arbitration clause containedin the sales agreement. The clause provided:

All disputes, controversies or differences which may arise between

[ Mitsubishi] and [ Soler] out of or in relation to Articles I-B through Vof this Agreement or for the breach thereof, shall be finally settled byarbitration in Japan in accordance with the rules and regulations ofthe Japan Commercial Arbitration Association.1

The district court, relying on Scherk v. Alberto-Culver Co.,2held that theinternational character of the transaction required enforcement of the ar-bitration agreement even as to the antitrust claims. On appeal, the U.S.Court of Appeals for the First Circuit affirmed in part, but found that re-spondent's antitrust claims were not appropriate for arbitration.3The courtof appeals embraced the doctrine enunciated inAmerican Safety Equipment

Corp. v. J. P. McGuire & Co.,4

precluding "domestic" arbitration of antitrustclaims, and found that neither the Scherkdecision nor the New York Con-vention on the Recognition and Enforcement of Foreign Arbitral Awards5(the Convention) altered the operation of that doctrine in connection withinternational transactions. The Supreme Court granted certiorari on theissue of whether a U.S. court should enforce an arbitration agreement withrespect to antitrust claims arising from an international commercial trans-action, and held(per Blackmun, J.): that "concerns of international comity,

http://www.questia.com/googleScholar.qst?docId=95193073#1http://www.questia.com/googleScholar.qst?docId=95193073#1http://www.questia.com/googleScholar.qst?docId=95193073#1http://www.questia.com/googleScholar.qst?docId=95193073#2http://www.questia.com/googleScholar.qst?docId=95193073#2http://www.questia.com/googleScholar.qst?docId=95193073#2http://www.questia.com/googleScholar.qst?docId=95193073#2http://www.questia.com/googleScholar.qst?docId=95193073#3http://www.questia.com/googleScholar.qst?docId=95193073#3http://www.questia.com/googleScholar.qst?docId=95193073#3http://www.questia.com/googleScholar.qst?docId=95193073#4http://www.questia.com/googleScholar.qst?docId=95193073#4http://www.questia.com/googleScholar.qst?docId=95193073#4http://www.questia.com/googleScholar.qst?docId=95193073#5http://www.questia.com/googleScholar.qst?docId=95193073#5http://www.questia.com/googleScholar.qst?docId=95193073#5http://www.questia.com/googleScholar.qst?docId=95193073#5http://www.questia.com/googleScholar.qst?docId=95193073#4http://www.questia.com/googleScholar.qst?docId=95193073#3http://www.questia.com/googleScholar.qst?docId=95193073#2http://www.questia.com/googleScholar.qst?docId=95193073#1

8/3/2019 IBDR (1)

6/17

respect for the capacities of foreign and transnational tribunals, and sensitivityto the need of the international commercial system for predictability in the

resolution of disputes require [enforcement of] the parties' agreement,even assuming that a contrary result would be forthcoming in a domesticcontext."6

The Court then considered whether the arbitration agreement itself orany other legal constraints precluded arbitration of the antitrust claims. Withlittle discussion, the Court agreed with the lower courts' conclusions thatthe arbitration provision was valid and encompassed respondent's antitrustclaims. The Court noted, however, an apparent diversity of opinion withregard to the general policy regarding arbitration of antitrust claims. Onthe one hand, cases such as The Bremen v. Zapata Off-Shore Co.7and Scherksuggested that the need for orderliness and predictability in internationaltransactions requires enforcement of an international arbitration agreement,even if the issues covered by the agreement would not be arbitrable in a

purely domestic transaction. According to the Court, Bremen and Scherk"establish[ed] a strong presumption in favor of enforcement of freely negotiatedcontractual choice-of-forum provisions."8

Samuel GLAZER, Plaintiff-Appellee, v. LEHMAN BROTHERS, INC., Defendant,

OPINION

The Defendants-Appellants appeal the District Court's The District Court held denial of theirmotion to compel arbitration. that the arbitration provisions contained in five agreementsbetween the Plaintiff-Appellee and the Defendants-Appellants were not enforceable because fourof those provisions were fraudulently induced, based on oral representations made by a brokerwho worked for Appellants, and because a fifth agreement was superseded by subsequentcriminal conduct We AFFIRM, in part, REVERSE, in part, and the other four agreements. andREMAND for further proceedings consistent with this opinion.

OVERVIEW

This appeal asks this Court to again review the Supreme Court's decision in Prima Paint Corp. v.Flood & Conklin Mfg. Co., 388 U.S. 395, 402-04, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), and toconstrue the breadth of Specifically, this appeal the Supreme Court's holding therein. requires

the Court to examine two areas of law, the severability of arbitration provisions under PrimaPaint and the application of the Although parol evidence rule under Ohio law, as applied to theformer. the primary issue presented by the parties concerns the application of the parol evidencerule under Ohio law, the severability issue must first be addressed.

http://www.questia.com/googleScholar.qst?docId=95193073#6http://www.questia.com/googleScholar.qst?docId=95193073#6http://www.questia.com/googleScholar.qst?docId=95193073#6http://www.questia.com/googleScholar.qst?docId=95193073#7http://www.questia.com/googleScholar.qst?docId=95193073#7http://www.questia.com/googleScholar.qst?docId=95193073#7http://www.questia.com/googleScholar.qst?docId=95193073#8http://www.questia.com/googleScholar.qst?docId=95193073#8http://www.questia.com/googleScholar.qst?docId=95193073#8http://www.questia.com/googleScholar.qst?docId=95193073#8http://www.questia.com/googleScholar.qst?docId=95193073#7http://www.questia.com/googleScholar.qst?docId=95193073#6

8/3/2019 IBDR (1)

7/17

Green Tree vs Bazzle

The Bazzle respondents and the Lackey and Buggs respondents separately entered into

contracts with petitioner Green Tree Financial Corp. that were governed by South

Carolina law and included an arbitration clause governed by the Federal Arbitration Act.Each set of respondents filed a state-court action, complaining that Green Tree's failure

to provide them with a form that would have told them of their right to name their own

lawyers and insurance agents violated South Carolina law, and seeking damages. The

Bazzles moved for class certification, and Green Tree sought to stay the court

proceedings and compel arbitration. Mter the court certified a class and compelled

arbitration, Green Tree selected, with the Bazzles' consent, an arbitrator who later

awarded the class damages and attorney's fees. The trial court confirmed the award,

and Green Tree appealed, claiming, among other things, that class arbitration was

legally impermissible. Lackey and the Buggses also sought class certification and Green

Tree moved to compel arbitration. The trial court denied Green Tree's motion, finding

the agreement unenforceable, but the state appeals court reversed. The parties then

chose an arbitrator, the same arbitrator who was later chosen to arbitrate the Bazzles'

dispute. The arbitrator certified a class and awarded it damages and attorney's fees.

The trial court confirmed the award, and Green Tree appealed. The State Supreme

Court withdrew both cases from the appeals court, assumed jurisdiction, and

consolidated the proceedings. That court held that the contracts were silent in respect

to class arbitration, that they consequently authorized class arbitration, and thatarbitration had properly taken that form.

Held: The judgment is vacated, and the case is remanded. 351 S. C. 244, 569 S. E. 2d

349, vacated and remanded.

JUSTICE BREYER, joined by JUSTICE SCALIA, JUSTICE SOUTER, and JUSTICE

GINSBURG, concluded that an arbitrator must determine whether the contracts forbid

class arbitration. Pp. 450-454.

(a) Green Tree argues that the contracts are not silent-that they forbid arbitration. If

the contracts are not silent, then the state court's

445

holding is flawed on its own terms; that court neither said nor implied that it would

have authorized class arbitration had the parties' arbitration agreement forbidden it.

8/3/2019 IBDR (1)

8/17

Whether Green Tree is right about the contracts presents a disputed issue of contract

interpretation. The contracts say that disputes "shall be resolved ... by one arbitrator

selected by us [Green Tree] with consent of you [Green Tree's customer]." The class

arbitrator was "selected by" Green Tree "with consent of" Green Tree's customers, the

named plaintiffs. And insofar as the other class members agreed to proceed in class

arbitration, they consented as well. Green Tree did notindependently

select thisarbitrator to arbitrate its dispute with the otherclass members, but whether

the contracts contain such a requirement is not decided by the literal contract terms.

Whether "selected by [Green Tree]" means "selected by [Green Tree] to arbitrate this

dispute and no other (even identical) dispute with another customer" is the question at

issue: Do the contracts forbid class arbitration? Given the broad authority they

elsewhere bestow upon the arbitrator, the answer is not completely obvious. The

parties agreed to submit to the arbitrator "[allldisputes, claims, or controversies arisingfrom or relating to this contract or the relationships which result from this contract."

And the dispute about what the arbitration contracts mean is a dispute "relating to this

contract" and the resulting "relationships." Hence the parties seem to have agreed that

an arbitrator, not a judge, would answer the relevant question, and any doubt about

the "'scope of arbitrable issues'" should be resolved" 'in favor of arbitration.''' Mitsubishi

Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U. S. 614, 626. The question here

does not fall into the limited circumstances where courts assume that the parties

intended courts, not arbitrators, to decide a particular arbitration-related matter, as it

concerns neither the arbitration clause's validity nor its applicability to the underlying

dispute. The relevant question here is what kind of arbitration proceeding the parties

agreed to, which does not concern a state statute or judicial procedures, cf. Volt

Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ.,489 U.

S. 468, but rather contract interpretation and arbitration procedures. Arbitrators are

well situated to answer that question. Pp. 450-453.

(b) With respect to the question whether the contracts forbid class arbitration, the

parties have not yet obtained the arbitration decision that their contracts foresee.

Regarding Bazzle plaintiffs, the State Supreme Court wrote that the trial court issued an

order granting class certification and the arbitrator subsequently administered class

arbitration proceedings without the trial court's further involvement. As

for Lackeyplaintiffs, the arbitrator decided to certify the class after the trial court had

determined that the identical contract in the Bazzle

http://supreme.justia.com/us/489/468/case.htmlhttp://supreme.justia.com/us/489/468/case.htmlhttp://supreme.justia.com/us/489/468/case.htmlhttp://supreme.justia.com/us/489/468/case.htmlhttp://supreme.justia.com/us/489/468/case.htmlhttp://supreme.justia.com/us/489/468/case.html

8/3/2019 IBDR (1)

9/17

Stolt-Nielsen S.A., et al. v. AnimalFeeds International Corp. (08-1198)

The parties in this case are parties to an international maritime contract that contains anarbitration clause. The contracts are silent as to whether arbitration is permissible onbehalf of a class, and the parties submitted that issue to arbitration. A panel of

arbitrators decided that the arbitration clause allowed for class arbitration. The DistrictCourt vacated the award on the ground that it was made in "manifest disregard" of thelaw. The 2nd Circuit reversed.

The US Supreme Court held (5-3) that imposing class arbitration on parties who havenot agreed to authorize class arbitration is inconsistent with the Federal Arbitration Act(FAA).

(1) The arbitrators exceeded their powers by imposing their own policy choice instead ofidentifying and applying a rule of decision derived from the FAA or from maritime orNew York law. (2) Imposing class arbitration in this case is inconsistent with the FAA.

The Court restated the principles that arbitration "is a matter of consent, not coercion,"that "private agreements to arbitrate are enforced according to their terms," and thatparties are "generally free to structure their arbitration agreements as they see fit."Based on these principles, "parties may specify WITH WHOM they chose to arbitrate."[Emphasis in original] Because the parties stipulated that there was no agreement onclass arbitration, the parties cannot be compelled to submit to class arbitration.

The DISSENT argued that the arbitrators' "partial award" was not ripe for judicial review.On the merits, the dissent would have upheld the arbitrators due to the strict limitationthe FAA places on judicial review of arbitral awards.

Buckeye Check Cashing v. Cardegna (Docket No. 04-1264)

Arbitrator, not court, must decide whether contract containing arbitrationagreement was illegal.

The US Supreme Court held it is for an arbitrator - not a state court - to decide whetheror not a contract containing an arbitration clause is illegal. This is a strong re-statement(extension?) of the rule laid down inPrima Paint Corp v. Flood & Conklin, 388 US 395(1967), in which the US Supreme Court said that it was up to the arbitrator - not thecourt - to decide whether the underlying contract was subject to a defense of fraud inthe inducement.

http://laws.findlaw.com/us/388/395.htmlhttp://laws.findlaw.com/us/388/395.htmlhttp://laws.findlaw.com/us/388/395.htmlhttp://laws.findlaw.com/us/388/395.html

8/3/2019 IBDR (1)

10/17

Buckeye Check Cashing, Inc. v. Cardegna(US Supreme Court 02/21/2006) involved aclaim that the entire contract was illegal and therefore void under Florida's usury laws.The Court concluded (7-1) that it did not matter whether the issue was stated in terms of"void" or "voidable," or whether the matter arose in federal court or state court. It's forthe arbitrator to decide.

Cardegna claimed that Buckeye made illegal usurious loans disguised as check cashingtransactions in violation of Florida law. The agreement Cardegna signed contained anarbitration clause, so Buckeye filed a motion to compel arbitration. Buckeye relied onPrima Paint Corp v. Flood & Conklin, 388 US 395 (1967).The Florida Supreme Courtdistinguished Prima Paint, saying that case dealt with whether the contract wasvoidable. In Cardegna's case the issue was whether the contract was void underFlorida law. Therefore, said the Florida court, since a void contract would mean thearbitration clause could not be enforced, the issue was to be decided by a court.

The US Supreme Court's reasoning:

Regardless of whether it is brought in federal or state court, a challenge to thevalidity of a contract as a whole, and not specifically to the arbitration clausewithin it, must go to the arbitrator, not the court.

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U. S. 395, and SouthlandCorp. v. Keating, 465 U. S. 1, answer the question presented here byestablishing three propositions.

First, as a matter of substantive federal arbitration law, an arbitration provision isseverable from the remainder of the contract. Prima Paint.

Second, unless the challenge is to the arbitration clause itself, the issue of thecontract's validity is considered by the arbitrator in the first instance. Prima Paint.

Third, this arbitration law applies in state as well as federal courts. Southland.

The crux of Cardegna's claim is that the Agreement as a whole (including itsarbitration provision) is rendered invalid by the usurious finance charge. Becausethis challenges the Agreement, and not specifically its arbitration provisions, thelatter are enforceable apart from the remainder of the contract, and the challengeshould be considered by an arbitrator, not a court. The Florida Supreme Courterred in declining to apply Prima Paint's severability rule, and Cardegna'sassertion that that rule does not apply in state court runs contrary to Prima Paintand Southland.

Justice Thomas DISSENTED, arguing that the Federal Arbitration Act does not apply instate courts.

http://www.lawmemo.com/docs/us/buckeye/opinion.pdfhttp://www.lawmemo.com/docs/us/buckeye/opinion.pdfhttp://laws.findlaw.com/us/388/395.htmlhttp://laws.findlaw.com/us/388/395.htmlhttp://laws.findlaw.com/us/388/395.htmlhttp://www.lawmemo.com/docs/us/buckeye/opinion.pdf

8/3/2019 IBDR (1)

11/17

Shin Satellite Public Co. Ltd. V. Jain Studios

In the case of Shin Satellite Public Co. Ltd. V. Jain Studios Ltd., 2006(2) SCC628 where the Supreme Court was dealing with an agreement between the

parties for availing broadcasting services in favour of the petitioner therein by therespondent. Because of the dispute between the parties, arbitration clause wasinvoked to which defence was taken by the respondent that the claim of thepetitioner was not maintainable in as much as clause 20 of the agreement wasagainst the public policy and was not enforceable. The Supreme Court in the lightof para 430 of Halsbury Law of England, 4 th Edition, Volume 9, page 297 finallyheld as under: 430. Severance of illegal and void provisions Acontract will rarely be totally illegal or void and certain parts of it may be entirelylawful in themselves. The question therefore arises whetherthe illegal or void parts may be separated or `severed from the contract and the

rest of the contract enforced without them. Nearly all the cases arise inthe context of restrain of trade, but the following principles are applicable tocontracts in general. First, as a general rule, severance is probablynot possible where the objectionable parts of the contract involve illegality andnot mere void promises. In one type of case, however, the courtshave adopted what amounts almost to a principle of severance by holding that ifa statute allows works to be done up to a financial limit without a licence butrequires a licence above that limit, then, where works are done under a contractwhich does not specify an amount but which in the event exceeds the financiallimit permitted without licence, the cost of the works up to that limit is

recoverable.Secondly, where severance is allowed, it must be possible simply to strike outthe offending parts but the court will not rewrite or rearrange the contract.Thirdly, even if the promises can be struck outas aforementioned, the court will not do this if to do so would alter entirely thescope and intention of the agreement.Fourthly, the contract, shorn of the offending parts, must retain the characteristicsof a valid contract, so that if severance will remove the whole or mainconsideration given by one party the contract becomes unenforceable.Otherwise, the offending promise simply drops out and the other parts of thecontract are enforceable.

Welligton vs Kirit Mehta

Recently in the case ofWellington Associates Ltdv. Kirit Mehta[29]acting as a designate of the Chief

Justice of India in an International Commercial Arbitration Jagannadha Rao J had assumed full judicial

powers. In this case he held that the jurisdiction of the CJI or his designate to decided question is not

8/3/2019 IBDR (1)

12/17

excluded by Section 16 of the Act. Further he held that arbitration clause was an enabling provision only

having no mandatory sense and thus no reference could be made to an Arbitral tribunal. He stated that

even if the Chief Justice of India or his designate is to be treated as an administrative authority, the

position is that when the said authority is approached seeking appointment of an arbitrator or an

arbitral tribunal and a question is raised that there is to start with, no arbitration clause the CJI or his

designate would have to decide the question. What must be noted here is that Jagannadha Rao J was

the same judge who had deemed it appropriate to refer the matter to a larger bench in the earlier case

of ICICI Ltd.[30]

M/s. J.G. Engineers Pvt. Ltd. Vs. Union of India & another

The Arbitration and Conciliation Act, 1996 -Section 34Setting aside arbitral award - Respondents awarded work of "extension of terminal building" at Guwahatiairport to appellant - Terminated contract on ground of non-completion even after 35 months - Arbitrator

awarded a sum of Rs.1,04,58,298/- with interest and costs in favour of appellant - Rejected counterclaims of respondents - Challenged - District court dismissed the petition filed by respondents undersection 34 - Affirmed - Award passed by Arbitrator - High Court reversed said orders - Appeal - Evidenceon record showed - Appellant was not responsible for delay - Respondents were responsible for delay -Once it is held - Contractor was not responsible for delay - Provisions which make the decision ofSuperintending Engineer or Engineer-in-Charge final and conclusive - Irrelevant - Arbitrator have

jurisdiction - Awards on items 2, 4, 6, 7, 8 and 9 - Upheld by civil court - High Court in appeal did not findany infirmity - Judgment of High Court setting aside award - Cannot be sustained - Thus set aside -Findings of arbitrator - Contractor was not responsible for delay - Termination of contract is illegal are notopen to challenge - Arbitral award upheld - Impugned order of High Court set aside - District Courtrestored - appeal allowed.

soleimany-Civil courts can question the legality of a Beth Din decision in the event of the award or thewayin which it was procured being contrary to public policy. In the case of Soleimany vs Soleimanya financial dispute between two Iranian Jewish merchants, a father and son, who were exportingPersian carpets in contravention of Iranian Revenue laws and export controlsthe London BethDin recognised that the original contract was illegal, but since this illegality was regarded asirrelevant under the applicable Jewish law an appropriate award was made. The UK Court ofAppeal, however, ruled that the underlying contract was illegal as it contravened the law of Iran

and that the award of the Beth Din was therefore contrary to public policy and could not beenforced.

Venture Global Engineering v Satyam Computer Services & Another: Excerpts

and some observations

http://www.indianlawcases.com/Act-The.Arbitration.and.Conciliation.Act,.1996http://www.indianlawcases.com/Act-The.Arbitration.and.Conciliation.Act,.1996-310http://www.indianlawcases.com/Act-The.Arbitration.and.Conciliation.Act,.1996-310http://www.indianlawcases.com/Act-The.Arbitration.and.Conciliation.Act,.1996-310http://lexarbitri.blogspot.com/2010/08/venture-global-engineering-v-satyam.htmlhttp://lexarbitri.blogspot.com/2010/08/venture-global-engineering-v-satyam.htmlhttp://lexarbitri.blogspot.com/2010/08/venture-global-engineering-v-satyam.htmlhttp://lexarbitri.blogspot.com/2010/08/venture-global-engineering-v-satyam.htmlhttp://lexarbitri.blogspot.com/2010/08/venture-global-engineering-v-satyam.htmlhttp://www.indianlawcases.com/Act-The.Arbitration.and.Conciliation.Act,.1996-310http://www.indianlawcases.com/Act-The.Arbitration.and.Conciliation.Act,.1996

8/3/2019 IBDR (1)

13/17

We had argued in one of our earlier posts, that the judgment of the AP High Court inVenture Global Engineering v. Satyam Computer Services and another was unfoundedin law. Wereportedrecently that the said judgment has been reversed by the Supreme

Court in appeal. Here we reproduce the relevant portions of the judgment of theSupreme Court and make some observations on the judgment.Facts and procedural history of the case:

The procedural history of this case up to the controversial decision inVenture Global v.Satyam Computer Services Ltd, [(2008) 4 SCC 190] is fairly well known. In short, afterfailing to get the award in favour of Satyam set aside before courts in Michigan andIllinois courts and after the enforcement of the award was granted in the United States,Venture filed a sought setting aside of the award in India. Though the civil court andAndhra Pradesh High court ruled that a foreign award could not be set aside underSection 34 of the Arbitration and Conciliation Act, 1996, Supreme Court in VentureGlobal v. Satyam Computer Services Ltd, [(2008) 4 SCC 190] held that a foreign awardcould be set aside under Section 34 and remanded the application under Section 34 tobe decided by the Civil Court.

While the matter was pending before the Civil Court, Mr. Ramalinga Raju confessed toacts of fraud in relation to the books of Satyam and subsequently Satyam was taken overby Tech Mahindra and renamed Mahindra Satyam. An application was moved byVenture seeking amendment of the application to place on record matters relating to thefraud. This application was allowed by the Civil Court.

Decision of the High Court:

In a Civil Revision, the Andhra Pradesh High Court struck down this decision and held(i) that the fraud had no nexus with the foreign award, (ii) a court while deciding on anapplication to set aside an award cannot consider material that was not available to thearbitral tribunal, (iii) despite Order VI of the CPC being applicable, no application underSection 34 for setting aside an award could be amended after the time period to file suchan application has elapsed; (iv) an application under Order VIII, Rule 9 of the CPC tobring additional pleadings cannot be entertained as Order VIII stands excluded by Rule12(1) of Andhra Pradesh Arbitration Rules, 2000.

Contentions of the Parties before the Supreme Court:

The Appellant was represented by Mr. KK Venugopal and Mr. Harish Salve appeared forthe Respondent. Salve did not seek to defend the judgment on the technical ground oflimitation. Instead he argued that the requested amendment, if allowed, would not haveany bearing on the outcome of the proceedings. According to him fraud could bebrought within the ambit of "public policy" under Section 34 only if it was committedduring the course of the arbitral proceedings. In making this submission, he relied on

http://lexarbitri.blogspot.com/2010/05/satyam-venture-phase-ii-case-of.htmlhttp://lexarbitri.blogspot.com/2010/05/satyam-venture-phase-ii-case-of.htmlhttp://hc.ap.nic.in/orders/crp_5712_2009.html#_ftn15http://hc.ap.nic.in/orders/crp_5712_2009.html#_ftn15http://lexarbitri.blogspot.com/2010/08/breaking-news-sc-reverses-ap-hc.htmlhttp://lexarbitri.blogspot.com/2010/08/breaking-news-sc-reverses-ap-hc.htmlhttp://lexarbitri.blogspot.com/2010/08/breaking-news-sc-reverses-ap-hc.htmlhttp://indiankanoon.org/doc/75785/http://indiankanoon.org/doc/75785/http://indiankanoon.org/doc/75785/http://indiankanoon.org/doc/75785/http://indiankanoon.org/doc/75785/http://indiankanoon.org/doc/75785/http://indiankanoon.org/doc/75785/http://indiankanoon.org/doc/75785/http://indiankanoon.org/doc/75785/http://indiankanoon.org/doc/75785/http://indiankanoon.org/doc/75785/http://lexarbitri.blogspot.com/2010/08/breaking-news-sc-reverses-ap-hc.htmlhttp://hc.ap.nic.in/orders/crp_5712_2009.html#_ftn15http://lexarbitri.blogspot.com/2010/05/satyam-venture-phase-ii-case-of.html

8/3/2019 IBDR (1)

14/17

the phrase "the making of the award was induced of affected by fraud" appearing in thetext of the Explanation to Section 34(2)(b)(ii). Demanding a narrow construction of thisphrase, he argued that the fraud, in this case, would not fall under the definition ofpublic policy as it was committed before the commencement of arbitration.

Venugopal argued that the fraud, in the present case, falls squarely within the ambit ofpublic policy as the shareholders agreement in which the arbitration clause wascontained was entered into suppressing material facts.

Decision of the Supreme Court:

On the issue of whether there was a limitation on amending the grounds in anapplication under Section 34, the Supreme Court placed reliance onState MaharashtraVs. M/s Hindustan Construction Company Ltd. (AIR 2010 SC 1299) (a guest post byMr. Badrinath Srinivasan on this case can be found here) which recently held thatwhere application under Section 34 has been made within the prescribed time, leave toamend grounds, in such an application, if the peculiar circumstances of the case and theinterest of justice so warrant, can be granted. The Court held: We are of the opinionthat in dealing with a prayer for amendment, Courts normally prefer substance to formand techniques and the interest of justice is one of most relevant considerations.Therefore, if a party is entitled to amend its pleadings, having regard to the justice of thecase, the right of the party to amend cannot be defeated just because a wrong Section ora wrong provision has been quoted in the amendment petition. The approach of theHigh Court in this case, in rejecting the appellants prayer for amendment, inter alia, onthe ground that a wrong provision has been quoted in the amendment petition, isobviously a very hyper technical one".

On the the question of whether fraud, in this case, fell within the ambit of "public policy"

the court observed:

"[T]his Court is unable to accept the contention of the learned counsel for therespondent that the expression fraud in the making of the award has to be narrowlyconstrued. This Court cannot do so primarily because fraud being of infinite varietymay take many forms, and secondly, the expression the making of the award will haveto be read in conjunction with whether the award was induced or affected by fraud. Onsuch conjoint reading, this Court is unable to accept the contentions of the learnedcounsel for the respondents that facts which surfaced subsequent to the making of theaward, but have a nexus with the facts constituting the award, are not relevant todemonstrate that there has been fraud in the making of the award. Concealment of

relevant and material facts, which should have been disclosed before the arbitrator, is anact of fraud. If the argument advanced by the learned counsel for the respondents isaccepted, then a party, who has suffered an award against another party who hasconcealed facts and obtained an award, cannot rely on facts which have surfacedsubsequently even if those facts have a bearing on the facts constituting the award.Concealed facts in the very nature of things surface subsequently. Such a constructionwould defeat the principle of due process and would be opposed to the concept of publicpolicy incorporated in the explanation."

http://indiankanoon.org/doc/476741/http://indiankanoon.org/doc/476741/http://indiankanoon.org/doc/476741/http://indiankanoon.org/doc/476741/http://www.blogger.com/profile/08357572960266796641http://www.blogger.com/profile/08357572960266796641http://lexarbitri.blogspot.com/2010/05/guest-post-permissibility-of-amendments.htmlhttp://lexarbitri.blogspot.com/2010/05/guest-post-permissibility-of-amendments.htmlhttp://lexarbitri.blogspot.com/2010/05/guest-post-permissibility-of-amendments.htmlhttp://www.blogger.com/profile/08357572960266796641http://indiankanoon.org/doc/476741/http://indiankanoon.org/doc/476741/

8/3/2019 IBDR (1)

15/17

Finally, the Court laid down the following position in relation to amendment ofpleadings in a proceeding under Section 34 upon the discovery of fraud:

"[]This Court also holds that the facts concealed must have a causative link. And if theconcealed facts, disclosed after the passing of the award, have a causative link with thefacts constituting or inducing the award, such facts are relevant in a setting asideproceeding and award may be set aside as affected or induced by fraud. [...] Thequestion in this case, is therefore one of relevance of the materials which the appellantwants to bring on record by way of amendment in its plea for setting aside the award."

Conclusion

By laying down justness of the plea, relevance and causative link as the the parametersto judge an application for amendment, the position taken by the Supreme Court isidentical to that advocated by us and several commentators, especially Badri, in ourpost

following the HC judgment.

vervaeke-The issue was whether a Belgian decree pronouncing void a marriage celebrated in Englandshould be recognised here. The parties had entered into the marriage with no intention of everliving together. Relying on its notion of public policy, the Belgian Court treated that as a shamand so declared it void. The opposite view was taken here. English public policy required that themarriage be held valid here and the court so declared. An attempt was then made to obtain

recognition of the Belgian nullity decree. The court considered the effect of the illegality of amarriage when seeking to enforce here a decree of divorce. Held: The rule in Sottomayor v DeBarros (No. 2) applied to determine the validity of a marriage where consent was in issue.

ONGC v Saw Pipes

This case arose out of a challenge to an arbitral award rendered with regard to a dispute relating

to supply of equipment for off shore oil exploration by the respondent. The case was heard byM.B Shah and Arun Kumar JJ. The judgment was written by Shah J.

FACTSOil and Natural Gas Commission had placed an order on Saw Pipes for supply of equipment foroff shore exploration, to be procured from approved European manufacturers. The delivery wasdelayed due to general strike of steel mill workers in Europe. Timely delivery was the essence ofthe contract. ONGC granted extension of time, but it invoked the clause for recovery of

http://lexarbitri.blogspot.com/2010/05/satyam-venture-phase-ii-case-of.htmlhttp://lexarbitri.blogspot.com/2010/05/satyam-venture-phase-ii-case-of.htmlhttp://lexarbitri.blogspot.com/2010/05/satyam-venture-phase-ii-case-of.htmlhttp://lexarbitri.blogspot.com/2010/05/satyam-venture-phase-ii-case-of.html

8/3/2019 IBDR (1)

16/17

Liquidated Damages by withholding the amount from the payment to the supplier. ONGCdeducted from the payment $3,04,970.20 and Rs 15,75,557 towards customs duty, sales tax andfreight charges. Saw pipes disputed the deduction and matter was referred to arbitration. Whilethe arbitral tribunal rejected Saw Pipes defence of force majure, it required ONGC to lead

evidence to establish the loss suffered by breach and proceed to hold, in absence of evidence of

financial losses, that the deduction of Liquidated damages was wrongful. The award waschallenged by ONGC; inter alia as being opposed to public policy ONGCs case was that thearbitral tribunal failed to decide the dispute by not applying the prevailing substantive law,ignoring the terms of the contract and customary practices of usage of trade in such transactions.ONGC challenged the award as being patently illegal. The single judge and division bench ofBombay High Court dismissed the challenge. The Supreme Court set aside an arbitration awarddirecting ONGC to refund $3,04,970.20 and Rs 15.76 Lakhs towards liquidated damagesretained by it while making payment to the company.

Issues Raised1) Whether ONGC had the right to Liquidated Damages.

2) Whether Patent illegality could be used as a ground to assail the award under section 34.

Decision Of The Supreme CourtThe Honble Court first extensively discussed the courts jurisdiction to set aside an award underSection 34 of the Arbitration and Concilliation Act 1996 and the various grounds on whichinterference was permissible.

Passing over to the question of damages, the Honble Court opined that when the words of the

contracts are clear, there is nothing that the court can do about it. If the parties had agreed upon asum as being pre- estimated genuine liquidated damages there was no reason for the tribunal toask the purchaser to prove his loss.

It further opined that when the court concludes that stipulation for damages is by way of penalty,it can grant reasonable compensation upon proof of damage. However, where an agreement hasbeen executed by experts in the field, the court should be slow to construe a clause providing forliquidated damages as penalty. At paragraph 49, citing Maula Bux v Union of India (the courtconcludes that this is especially true where the court is unable o assess compensation or suchassessment is fraught with difficulties. In such cases the burden of proof would be on party whocontends that the stipulation amount is not reasonable. There was no such contention raised inthe instant case.

As regards forfeiture, after considering its decision in Union of India v Rampur Distellery thecourt states the forfeiture clause can be construed either as liquidated damages or as a penalty,depending on the reasonableness of the amount to be forfeited.

Therefore, as regards Liquidated Damages and penalties, the primary conclusion of the courtappears to be that Liquidated Damages should be regarded as reasonable compensation, whilepenalties should not. Further, it also appears to have concluded in case of penalty damages willhave to be proved. The Honble Court reaffirms that no compensation at all be awarded if the

court concludes that no loss is likely to occur because of the breach.

8/3/2019 IBDR (1)

17/17