In what
can termed as an important development in Arbitration Law, the Supreme Court of
India (“Supreme Court”) has delivered a 129-page judgment wherein issues such
as ‘factors determining seat of
arbitration’, ‘concurrent jurisdiction of foreign court’ etc. have been
discussed. In Enercon (India) Ltd. & Ors v. Enercon GMBH & Anr. ,
the Supreme Court had to decide appeal(s) against two judgments of Bombay High
Court – one judgment which allowed the application of the respondent under
section 45 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”)
and other judgment vacating the anti-suit injunction issued against the
respondent.
Before
going to and discussing underlying issues, it would first be important to
understand the factual background.
Factual
Background: In
1994, Appellants no. 2 and 3 (“Members of Mehra Family”) entered into a Joint
Venture Agreement (“JVA”) with Respondent no. 1 (“Enercon GMBH”) to incorporate
Appellant no.1 [“Enercon (India) Ltd.”]. The objective behind incorporating Appellant
no.1 was to manufacture and sell Wind Turbine Generators (“WTG”). In
furtherance of JVA, both the parties executed certain agreements which included
Share Holding Agreement and Technical Know How Agreement (“TKHA”) (these agreements were later amended).
After
the expiry of TKHA, there were further negotiations between the parties. These
negotiations, which were recorded in a document titled ‘Heads of Agreement’, sought to explore the possibility of
agreement to transfer future technology developed by the Respondents. Following
these negotiations, parties entered into ‘Agreed Principles’, which were meant to be the basis of all the
final agreements. On the same day when ‘Agreed
Principles’ were executed, parties also executed and signed Intellectual Property License Agreement (“IPLA”). IPLA contained
an arbitration clause (Clause 18) which can be read as follows:
17
GOVERNING LAW
17.1 This
Agreement and any
dispute of claims arising out of or in connection with
its subject matter are governed by
and construed in
accordance with the Law of India.
18.
DISPUTES AND ARBITRATION
18.1 All
disputes.....................any
Party may refer dispute(s), controversy(ies) or difference(s)
for resolution to an
arbitral tribunal to consist of
three (3) arbitrators, of who one will be appointed by each of the
Licensor and the
Licensee and the arbitrator appointed by Licensor shall also
act as the presiding arbitrator.
18.2
....................
18.3 A
proceedings in such
arbitration shall be conducted
in English. The
venue of the arbitration proceedings shall be in London. The arbitrators
may (but shall not
be obliged to)
award costs and reasonable expenses
(including reasonable-fees of counsel)
to the Party
(ies) that substantially
prevail on merit. The
provisions of Indian Arbitration and Conciliation Act, 1996 shall
apply........”
As
disputes arose between the parties, Respondent(s) sought to initiate
arbitration proceedings thereby nominating an arbitrator. Respondents further
sought to file an ‘Arbitration Claim Form’ before the English High Court. This initiation
of arbitration was resisted by the Appellants on the ground that there was no ‘concluded contract (IPLA)’
and hence there was no question of
arbitration. While Appellants claimed that IPLA was not a concluded contract because of its
non-conformity with ‘Agreed Principles’,
Respondents claimed it to be a binding contract.
