Supreme Court of India
M/S LARSEN AND TOUBRO LIMITED SCOMI ENGINEERING BHDversusMUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY
- Citation
- 2018 INSC 922
- Decided
- 3 October 2018
- Disposal
- Dismissed
- Bench
- R F NARIMAN
Holding
The petition under Section 11 is dismissed because the dispute does not constitute an international commercial arbitration; the consortium is an unincorporated association governed by s.2(1)(f)(iii) and must sue as a single entity.
Summary
The Mumbai Metropolitan Region Development Authority (MMRDA) entered into a monorail contract with a consortium comprising Larsen & Toubro (India) and Scomi Engineering Bhd (Malaysia). Disputes over interim claims led the consortium to file a petition under Section 11 of the Arbitration and Conciliation Act, 1996, asserting that the arbitration agreement was an international commercial arbitration because one party (Scomi) was a foreign corporation, invoking s.2(1)(f)(ii). The respondent relied on a prior High Court order that the claim could be made only in the name of the consortium, and argued that the consortium was an unincorporated association whose central management and control were in India, thus falling under s.2(1)(f)(iii). The Supreme Court examined the definition of "association" under the Act, the effect of the earlier High Court judgment, and the place‑of‑incorporation rule affirmed in TDM Infrastructure case. It held that the consortium must be treated as a single association, s.2(1)(f)(iii) applies, and there is no international commercial arbitration. Consequently, the petition under Section 11 was dismissed.
Issues considered
- Whether the arbitration agreement between MMRDA and the consortium qualifies as an international commercial arbitration under s.2(1)(f) of the Arbitration Act.
- Whether s.2(1)(f)(ii) (foreign body corporate) or s.2(1)(f)(iii) (unincorporated association) governs the consortium.
- Whether the consortium can sue as separate entities or only as a single consortium as per the earlier High Court order.
- Whether the petition under Section 11 of the Act is maintainable in view of the prior judgment.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 11, s. 11(6), s. 2(1)(f)(ii), s. 2(1)(f)(iii)
- Income Tax Act, 1961s. 2(31)
Subjects
International commercial arbitrationArbitration Act 1996ConsortiumUnincorporated associationSection 2(1)(f)Section 11 petitionMonorail contractMMRDALarsen & ToubroScomi EngineeringCentral management and control
Judgment
22 SUPREME [2018]
COURT14REPORTS
S.C.R. 22 [2018] 14 S.C.R.
A M/S LARSEN AND TOUBRO LIMITED SCOMI
ENGINEERING BHD
v.
MUMBAI METROPOLITAN REGION
DEVELOPMENT 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),
C 2(1)(f)(iii) and 11 – International Commercial Arbitration – Contract
for development of a Monorail system, between Mumbai
Metropolitan Regional Development Authority (MMRDA)-
respondent and a Consortium-petitioner (comprising an Indian
company and a Malaysian company) – Dispute arose between the
parties – Consortium made various interim claims and filed petition
D
u/s.11 of the Act – According to Consortium, since one of the parties
to the Arbitration Agreement, was a body corporate, incorporated
in a country other than India so it would attract s.2(1)(f)(ii) of the
Act and relied upon their status (i.e. an Indian company and a
Malaysian company) as independent entities – Propriety of – Held:
E In another proceeding between the same parties arising out of the
self-same agreement, the High Court by order dated 20.10.2016
had upheld the order of the Arbitrator that the particular claim that
was made in that case could be made only as a Consortium and not
as two entities separately and the said judgment was final inter-
parties as no appeal was preferred – Thus, it is not open for the
F petitioner to rely upon their status as independent entities – This
being the case, the un-incorporated “association” referred to in
s.2(1)(f)(iii) is attracted on facts of the case and not s.2(1)(f)(ii) as
the Malaysian body could not be referred to as an independent
entity following the judgment of the High Court – Further, the Indian
G company was the lead partner and the Supervisory Board constituted
under the Consortium agreement made it clear that the lead partner
had the determining voice in that, as it appointed the Chairman of
the said Board and the fact that the Consortium’s office was in
Wadala, Mumbai and also that the lead member led the arbitration
H
22
M/S L&T LTD. SCOMI ENGINEERING BHD v. MUMBAI 23
METROPOLITAN REGION DEV. AUTH.
proceedings – This all pointed to the fact that the central A
management and control of the Consortium appeared to be exercised
in India and not in any foreign nation – There is no “international
commercial 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) – B
discussed.
Dismissing the Arbitration Petition, the Court
HELD: 1. Mumbai Metropolitan Region Development
Authority (MMRDA), the respondent, has relied upon an order
was passed by the High Court of Bombay, dated 20.10.2016 C
between the same parties, in which an interim Award dated
18.08.2016 was challenged, which was between the same parties
arising out of the self-same agreement. This order upheld the
interim Award of the Arbitrators in stating that the particular claim
that was made in that case could be made only as a Consortium D
and not as two entities separately. That order has become final
as 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 the
High Court of Bombay, and which is binding inter-parties, that it E
is not open for the petitioner to rely upon their status
as independent entities while dealing with the respondent and
they 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 F
“association” referred to in Section 2(1)(f)(iii) would be
attracted on the facts of this case and not Section 2(1)(f)(ii) as the
Malaysian body cannot be referred to as an independent
entity following the judgment of the High Court of Bombay.
[Para 10][35-H; 36-A]
G
4. Section 2(1)(f)(iii) of the Act refers to two different sets
of persons: an “association” as distinct and separate from a “body
of individuals”. For example, under Section 2(31) of the Income
Tax Act, 1961, “person” is defined as including, under sub-clause
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24 SUPREME COURT REPORTS [2018] 14 S.C.R.
A (v), an association of persons, or body of individuals, whether
incorporated or not. It is in this sense, that an association is
referred to in Section 2(1)(f)(iii) which would therefore include a
consortium consisting of two or more bodies corporate, at least
one of whom is a body corporate incorporated in a country other
than India. [Para 11][36-B-C]
B
5. It would become clear that prior to the deletion of the
expression “a company or”, there were three sets of persons
referred to in Section 2(1)(f)(iii) as separate and distinct persons
who would fall within the said sub-clause. This does not change
due to the deletion of the phrase “a company or” for the reason
C given by the Law Commission. This is another reason as to why
“an association” cannot be read with “body of individuals” which
follows it but is a separate and distinct category by itself, as is
understood from the definition of “person” as defined in the
Income Tax Act referred to above. [Para 12][37-D-E]
D 6. This being the case, coupled with the fact that the Indian
company is the lead partner, and that the Supervisory Board
constituted under the Consortium Agreement makes it clear that
the lead partner really has the determining voice in that it
appoints the Chairman of the said Board (undoubtedly, with the
E consent of other members); and the fact that the Consortium’s
office is in Wadala, Mumbai as also that the lead member shall
lead the arbitration proceedings, would all point to the fact that
the central management and control of this Consortium
appears to be exercised in India and not in any foreign nation.
[Para 13][37-E-G]
F
7. This being the case, the petition filed under Section 11
of the Act is dismissed, as there is no “international commercial
arbitration” as defined under Section 2(1)(f) of the Act for the
petitioner to come to this Court. [Para 14][37-G-H]
G TDM Infrastructure Private Ltd. v. UE Development
India Private Ltd., (2008) 14 SCC 271 : [2008]
8 SCR 775 – referred to.
Case Law Reference
[2008] 8 SCR 775 referred to Para 12
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M/S L&T LTD. SCOMI ENGINEERING BHD v. MUMBAI 25
METROPOLITAN REGION DEV. AUTH. [R. F. NARIMAN, J.]
CIVIL ORIGINAL JURISDICTION : Arbitration Petition (C) A
No. 28 of 2017.
Under Section 11(6) of the Arbitration and Conciliation Act, 1996
for appointment of an Arbitrator.
Gopal Jain, Sr. Adv., Atul Sharma, Lakshay Khanna, Ms. Parshanti
Rao, Gautam Talukdar, Advs. for the Petitioner. B
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 & C
Conciliation Act, 1996, (in short ‘the Act’), that has been filed before
this Court, arises out of a contract entered into on 09.01.2009 for the
work of planning, design, development, construction, manufacture, supply,
testing and commissioning of a Monorail system in two particular
earmarked sections in Wadala, Mumbai including operation and D
maintenance for a period of three years from the date of start of
commercial operations. This agreement contains an arbitration clause,
which is set out hereunder:-
“Claims, Disputes and Arbitration
20.1 If the Contractor considers himself to be entitled to
E
Contractor’s any extension of the Time for Completion and/or any
Claim additional payment, under any Clause of these
Conditions for otherwise in connection with the
Contract, the Contractor shall give notice to the
Employer/Employer’s Representative, describing the
event or circumstance giving rise to the claim. The F
notice shall be given as soon as practicable, and not
later than 30 days after the Contractor became aware,
or should have become aware, of the event or
circumstance.
If the Contractor fails to give notice of a claim within G
such period of 30 days, the Time for Completion shall
not be extended, the Contractor shall not be entitled
to additional payment, and the Employer/Employer’s
Representative shall be discharged from all liability
in connection with the claim. Otherwise, the
following provisions of this Sub-Clause shall apply. H
26 SUPREME COURT REPORTS [2018] 14 S.C.R.
A The Contractor shall also submit any other notices
which are required by the Contract, and supporting
particulars for the claim, all as relevant to such event
or circumstance.
The Contractor shall keep such contemporary
B records as may be necessary to substantiate any
claim, either on the Site or at another location
acceptable to the Employer/Employer ’s
Representative. Without admitting liability, the
Employer/Employer’s Representative may, after
C receiving any notice under this Sub-Clause, monitor
the record-keeping and/or instruct the Contractor to
keep further contemporary records. The Contractor
shall permit the Employer/Employer ’s
Representative to inspect all these records, and shall
(if instructed) submit copies to the Employer/
D Employer’s Representative.
Within 45 days after the Contractor became aware
(or should have become aware) of the event or
circumstances giving rise to the claim, or within such
other period as may be proposed by the Contractor
E and approved by the Employer/Employer ’s
Representative, the contractor shall send to the
Employer/Employer’s Representative a fully detailed
claim which includes full supporting particulars of
the basis of the claim and of the extension of time
F and/or additional payment claimed. If the event or
circumstance giving rise to the claim has a continuing
effect:
(a) this fully detailed claim shall be considered as
interim;
G (b) the Contractor shall send further interim claims
at monthly intervals, giving the accumulated delay
and/or amount claimed, and such further particulars
as the Employer may reasonably require; and
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M/S L&T LTD. SCOMI ENGINEERING BHD v. MUMBAI 27
METROPOLITAN REGION DEV. AUTH. [R. F. NARIMAN, J.]
(c) the Contractor shall send a final claim within 30 A
days after the end of the effects resulting from the
event or circumstance, or within such other period as
may be proposed by the Contractor and approved by
the Employer/Employer’s Representative.
Within 45 days after receiving a claim or any further B
particulars supporting a previous claim, or within such
other period as may be proposed by the Employer/
Employer’s Representative and approved by the
Contractor, the employer shall respond with approval,
or with disapproval and detailed comments. He may C
also request any necessary further particulars, but
shall nevertheless give his response on the principles
of the claim within such time.
Each interim payment shall include such amounts for
any claim as have been reasonable substantiated as D
due under the relevant provision of the Contract, unless
and until the particulars supplied are sufficient to
substantiate the whole of the claim, the Contractor
shall only be entitled to payment for such part of the
claim as he has been able to substantiate.
E
The Employer/Employer’s Representative shall
proceed 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 its
expiry) in accordance with Sub-Clause 8.4 [Extension
of Time for Completion], and/or F
(ii) the additional payment (if any) to which the
Contractor is entitled under the Contract. The
requirements of this Sub-Clause are in addition to
those of any other Sub-Clause, which may apply to a
claim. If the Contractor fails to comply with this or G
another Sub-Clause in relation to any claim, any
extension of time and/or additional payment shall take
account of the extent (if any) to which the failure has
prevented or prejudiced proper investigation of the
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28 SUPREME COURT REPORTS [2018] 14 S.C.R.
A claim, unless the claim is excluded under the second
paragraph of this Sub-Clause.
20.2 Should any dispute or difference of any kind
Dispute to be whatsoever arise between the Employer and the
B
referred to Contractor, in connection with, or arising out of the
and settled by Contract, or subject matter thereof, or the execution
E mp l oy e r ’s of Works/commissioning of the System/Operation &
Representative Maintenance of the System, whether, during the
at Site progress of Works/during Operation and Maintenance
C of the System or after their completion and whether
before or after termination, abandonment or breach
of Contract, it should, in the first place, subject to the
provision under Sub-clause 14.4 above, be referred
to and settled by the Employer’s Representative at
Site, who shall, within a period of 60 days after being
D
requested in writing by either party to do so, give
written notice of his decision to the Employer and the
Contractor. The Employer’s Representative at Site
while considering the matters of dispute referred to
him, shall be competent to call for any records,
E vouchers, information and enforce the attendance of
the parties either in person or through authorised
representatives, to sort out or clarify any issue, resolve
the differences and to assist him to decide the matters
referred to him. Subject to arbitration, as hereinafter
provided, such decision in respect of every matter so
F
referred shall be final and binding upon the Employer
and the Contractor, who shall proceed with the
execution of Works/ commissioning of the System/
Operation & Maintenance of the System (as the case
may be) with all due diligence irrespective of whether
G any of the parties goes in or desires to go in for
arbitration. If the Employer’s Representative at Site
has given written notice of his decision to the Employer
and the Contractor and no intimation of reference of
any claim to arbitration has been sent to him by either
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M/S L&T LTD. SCOMI ENGINEERING BHD v. MUMBAI 29
METROPOLITAN REGION DEV. AUTH. [R. F. NARIMAN, J.]
the Employer or the Contractor within a period of 60 A
days from receipt of such notice, the said decision of
the Employer’s Representative shall remain final and
binding upon the Employer and the Contractor and
the same shall be deemed to have been accepted by
them. The Employer or the Contractor shall not seek B
any arbitration thereafter.
20.3 If the Employer’s Representative at Site fails to give
Referring of notice of his decision, as aforesaid, within a period of
Disputes for 60 days after being requested as aforesaid or if either
Arbitration the Employer or the Contractor be dissatisfied with C
any such decision of the Employer’s Representative
at Site, only then shall the matter in dispute be referred
to arbitration as herein provided
20.4 Disputes or differences shall be due for arbitration
Disputes Due only if the conditions in Sub-Clause 20.2 and 20.3 D
for Arbitration above fulfilled.
and Settlement Except where otherwise provided in the Contract, all
of Disputes disputes or differences, whatsoever arising between
the parties, arising out of or relating to construction,
measuring operation or effect of the Contract or the E
breach thereof, shall be settled by arbitration as
detailed in Sub Clause 20.5.
20.5 Matters to be arbitrated upon shall be referred to a
Nomination of Sole Arbitrator where the individual claim does not
Arbitrators/ exceed Rs. 5 million or the total value of claims does F
Sole Arbitrator not exceed Rs. 15 millions. Beyond the above limit(s),
there shall be three arbitrators. For this purpose the
employer will make out a panel of Arbitrators with
the requisite qualifications and professional experience
relevant to the field to which the Contract relates and G
will be residents of India only. In case of a single
arbitrator, the Panel will be of three Arbitrators, out
of which the Contractor will choose one. In case three
arbitrators are to be appointed, the Employer will make
out a panel of five. The Contractor and the Employer
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30 SUPREME COURT REPORTS [2018] 14 S.C.R.
A will choose one arbitrator each from the above and
the two so chosen will choose the third arbitrator from
the above panel only who will act as the “Presiding
Arbitration” of the arbitration panel.
If in a dispute, the contractor fails to choose the
B Arbitrator within thirty (30) days after the Employer
has nominated the Panel, the Employer may nominate
an Arbitrator from the same panel of Arbitrators given
by the Employer for the matter in dispute.
If, in a dispute, the two chosen Arbitrators fail to
C appoint third Arbitrator- Presiding Arbitrator
(Arbitration Panel’s case) within thirty (30) days after
they have been appointed, the Employer may apply
to the Indian Council of Arbitration, New Delhi, to
nominate the third Arbitrator from the same panel of
D Arbitrators given by the Employer for the matter in
dispute.
Neither party shall be limited in the proceedings before
such arbitrator/s to the evidence or arguments put
before the Employer’s Representative at Site for the
purpose of obtaining his decision. No decision given
E
by the Employer’s Representative in accordance with
the foregoing provisions shall disqualify him from being
called as a witness and giving evidence before the
arbitrator/s on any matter, whatsoever, relevant to
dispute or difference referred to arbitrator/s.
F
Substitute Arbitrators- If for any reason on arbitrator
is unable to perform his function, a substitute shall be
appointed in the same manner as the original arbitrator.
20.6 Arbitration In any Arbitration proceedings hereunder:
G Venue, (a) Proceedings shall be held in Mumbai, India only.
Language and
Award (b) English language shall be the official language for
all purposes. (Note: English language may be changed
to any other language, with the agreement of both the
parties)
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M/S L&T LTD. SCOMI ENGINEERING BHD v. MUMBAI 31
METROPOLITAN REGION DEV. AUTH. [R. F. NARIMAN, J.]
(c) The Arbitration Award shall be final and binding A
on all parties and shall be enforceable in any Court of
competent jurisdiction, and the parties hereby waive
any objection to or claims of immunity in respect of
such enforcements.
(d) In Arbitral proceedings with more than one B
arbitrator, any decision of the arbitral tribunal shall be
made by a majority of all its members.
(e) The Arbitrator(s) shall always give item-wise and
reasoned 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 part
of the money for any period till the date on which the
award is made.
D
(g) The cost of arbitration shall be borne by the
respective parties. The cost inter-alia includes the
fees of the Arbitrator(s) as per the rate fixed by the
Employer from time to time.
20.7 The arbitration proceedings shall be governed by India E
Rules Arbitration and Conciliation Act, 1996, as amended,
Governing the from time to time including provisions in force at the
Arbitration time the reference is made.
Proceedings
20.8 The reference to arbitration shall proceed F
No Supervision notwithstanding that Works/System shall not then be
of Work or be alleged to be complete, provided always that
the obligations of the Employer/Employer ’s
Representative and the Contractor shall not be altered
by reasons of arbitration being conducted during the
G
progress of Works. Neither party shall be entitled to
suspend the work to which the dispute relates on
account of arbitration and payments to the Contractor
shall continue to be made in terms of the Contract.
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32 SUPREME COURT REPORTS [2018] 14 S.C.R.
A
20.9 No dispute or difference shall be referred to
Limitation of Arbitration after expiry of 60 days from the date of
Time decision by the Employer’s Representative at Site, if
notified, or from the date when the Employer’s
Representative at Site ought to have given his
B decision in terms of provisions under Sub-Clause 20.2
in case of failure on the part of the Employer’s
Representative at Site to give notice of decision.
Since disputes arose between the parties to the agreement, various
interim claims had been made by the Consortium of M/s Larsen and
C Toubro, an Indian company, together with Scomi Engineering Bhd, a
Company incorporated in Malaysia, for which the Consortium has filed
this petition under Section 11 of the Act to this Court, since according to
them, one of the parties to the Arbitration agreement, being a body
corporate, incorporated in Malaysia, would be a body corporate, which
D is incorporated in a country other than India, which would attract Section
2(1)(f)(ii) of the Act.
2. Shri Gopal Jain, learned senior counsel appearing on behalf of
the Consortium, has taken us through the agreement, in which he strongly
relies upon the fact that the two entities, that is, the Indian company and
E the Malaysian company, though stated to be a Consortium, are jointly
and severally liable, to the employer. Learned senior counsel has also
relied upon the fact that throughout the working of the contract, separate
claims have been made, which have been rejected by the Mumbai
Metropolitan Region Development Authority (hereinafter referred to as
‘MMRDA’). He has also further relied upon the fact that by at least
F three letters, during the working of the agreement, the claims have in
fact been rejected altogether and that, therefore, there is no impediment
in invoking the Arbitration clause under Section 20.4 of the General
Conditions of Contract (hereinafter referred to as ‘GCC’), as the
procedure outlined by Clauses 20.1 to 20.03 had already been exhausted.
G 3. On the other hand, Mr. Shyam Diwan, learned senior counsel
appearing on behalf of MMRDA, the respondent, has relied upon both
the contract dated 09.01.2009 as well as the actual Consortium
Agreement dated 04.06.2008 between the Indian company and the
Malaysian company, which, when read together, would show that they
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M/S L&T LTD. SCOMI ENGINEERING BHD v. MUMBAI 33
METROPOLITAN REGION DEV. AUTH. [R. F. NARIMAN, J.]
are really an un-incorporated association and would, therefore, fall within A
Section 2(1)(f)(iii) as being an association or a body of individuals,
provided the central management and control is exercised in any country
other than India. He has also gone on to rely heavily upon the fact that
in the Consortium, the lead partner is the Indian company, and the
Consortium’s office is at Wadala in Mumbai making it clear, therefore,
B
that sub-Clause (iii) of Section 2(1)(f) of the Act would not apply as it is
clear that the central management and control, that is envisaged by the
said sub-Clause, would not be exercised in a country outside India but in
India itself. He has also strongly relied upon an order passed by the High
Court of Bombay, dated 20.10.2016 between the same parties, in which
an interim Award dated 18.08.2016 was challenged, which was between C
the same parties arising out of the self-same agreement. This Order
upheld the interim Award of the Learned Arbitrators in stating that the
particular claim that was made in that case could be made only as a
Consortium and not as two entities separately. He has also pointed out
that this Order has become final as it has not been challenged by the
D
petitioner before this Court. In answering Mr. Gopal Jain’s submission
as to Clause 20.4 of the GCC being invoked after the procedure under
Clauses 20.1 to 20.3 has been exhausted, he referred to and relied upon
a letter dated 22.04.2016 written by the respondent in which, after
referring to the various refusals, referred to by Mr. Jain, further
information and material was requested from Mr. Jain’s client. Instead E
of furnishing such material straightaway, a notice invoking Arbitration
dated 01.07.2016 was sent by Mr. Jain’s client. The respondent, by a
reply dated 20.08.2016 reiterated its position that Clauses 20.1 to 20.3
had not yet been exhausted, and therefore, on 08.09.2016, rejected the
request for arbitration.
F
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 of
them are jointly and severally responsible to the employer, being
collectively referred to as the “contractor.”
G
5. Under the General Conditions of Contract, the “contractor”, in
Clause 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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34 SUPREME COURT REPORTS [2018] 14 S.C.R.
A “Bidder” is also defined under Clause 1.1.2.10 as meaning an Individual,
Firm, Company, Corporation, Joint Venture or Consortium which could
submit a bid. What is important to notice is that the contract was signed
by the employer, viz., MMRDA and by the contractor under the head
sub-Clauses (A) and (B) in which L&T India signed as ‘A’ and Scomi
Engineering Bhd has signed as ‘B’. When we come to the consortium
B
agreement that is entered into between the Indian company and the
Malaysian company as aforestated, we find in the definition clause that
“Consortium” shall mean L&T and Scomi Engineering Bhd, acting in
collaboration, for the purpose of this agreement and shall be called “the
L&T-SEB” Consortium “un-incorporated.” The contract is defined in
C sub-Clause 6 as meaning, “the contract to be entered by the Consortium
with the employer for the execution of the Project”. Under sub-Clause
7, “the lead Member of the Consortium” or “Consortium Leader” shall
mean L&T, that is, the Indian Company. Under sub-Clause 8, the
“Supervisory Board” (hereinafter referred to as ‘the SB’) shall mean a
Board constituted under Clause 11 of the GCC. When we come to
D
Clause 11.2, it is clear that the Members of this Supervisory Board will
consist of four members, two appointed by each Member. One of the
Members nominated by the Consortium Leader and agreed to by all
members shall then act as the Chairman of the Supervisory Board, which
is, by Clause 11.5, to decide on various matters relating to the execution
E of the contract. Clause 21.1(g) provides that the Consortium leader
shall lead all arbitration proceedings.
6. As correctly pointed out by Shri Jain, separate claims were
made by the Indian company and the Malaysian company which were
rejected by the respondent. Nonetheless, by a letter dated 22.04.2016,
F the respondent referred to these various rejection letters, and stated that
documents in support of the list of “delayed events” had not yet been
given, and therefore, necessary information and clarification, in response
to certain observations, together with all documents in support of the
claim, was requested to be furnished. By a letter dated 01.07.2016, the
Consortium, instead of responding to this letter, invoked arbitration, stating
G that interim claims had already been rejected, and all the necessary
information had already been furnished, as a result of which, the stage
of Clause 20.4 had arrived. This was replied to by a letter dated
20.08.2016 in which the respondent reiterated its position that the remedies
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M/S L&T LTD. SCOMI ENGINEERING BHD v. MUMBAI 35
METROPOLITAN REGION DEV. AUTH. [R. F. NARIMAN, J.]
provided under Clause 20.3 has not yet been exhausted, and that therefore, A
there is no question of appointing an Arbitrator. On 08.09.2016, the
notice invoking arbitration was replied to by the respondent, rejecting
the same.
7. It is important, at this juncture, to refer to an order made by the
High Court of Bombay dated 20.10.2016 which, as has been stated earlier, B
arises between the self-same parties, under the same contract. An interim
Award made by the Arbitrators qua different claims arising under the
same contract had made it clear that the claim could be filed only in the
name of the Consortium and not separately, as was contended by Shri
Jain’s client. The preliminary issue framed on this count was “whether
the claimants are entitled to file this claim as Claimant No. 1 and Claimant C
No. 2 or only as the Consortium of L&T and Scomi Engineering Bhd?”
The High Court of Bombay, agreed with the interim Award of the
Arbitrators, and held as follows:-
“8. Considering the terms and conditions of the contract as well
as the decision cited by Mr. Ankhad, in my opinion, in the facts D
and circumstances of the present case, it is not open for the
petitioners to rely upon their independent identities while dealing
with the respondent and that they will have to deal with the
respondent as a Consortium only. Therefore, there is no infirmity
in the impugned order. For the same reason, the present petition E
as filed would also not been maintainable. Hence, the same is
dismissed.”
8. Shri Gopal Jain did not dispute the fact that this judgment was
final inter-parties as no appeal has been preferred. Therefore, to stress
the fact that it pertains only to “this claim” and would therefore, not F
apply to a different set of claims under the arbitration clause is not an
argument that appeals to us.
9. It is clear, as has been held by the judgment of the High Court
of Bombay, and which is binding inter-parties, that it is not open for the
petitioner to rely upon their status as independent entities while dealing G
with the respondent and they will have to deal with the respondent as a
Consortium 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
H
36 SUPREME COURT REPORTS [2018] 14 S.C.R.
A facts of this case and not Section 2(1)(f)(ii) as the Malaysian body cannot
be referred to as an independent entity following the judgment of the
High Court of Bombay.
11. Section 2(1)(f)(iii) of the Act refers to two different sets of
persons: an “association” as distinct and separate from a “body of
B individuals”. For example, under Section 2(31) of the Income Tax Act,
1961, “person” is defined as including, under sub-clause (v), an association
of persons, or body of individuals, whether incorporated or not. It is in
this sense, that an association is referred to in Section 2(1)(f)(iii) which
would therefore include a consortium consisting of two or more bodies
corporate, at least one of whom is a body corporate incorporated in a
C country other than India.
12. Further, the expression “a company or” which was originally
at 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 TDM
Infrastructure Private Ltd. v. UE Development India Private Ltd.,
D (2008) 14 SCC 271, held that the expression “a company or” in Section
2(1)(f)(iii) of the Act cannot possibly be said to refer to a company
registered and incorporated in India which may be controlled by persons
in a country outside India. The Court held:
“20. The learned counsel contends that the word “or” being
E disjunctive, sub-clause (iii) of Section 2(1)(f) of the 1996 Act shall
apply in a case where sub-clause (ii) shall not apply. We do not
agree. The question of taking recourse to sub-clause (iii) would
come into play only in a case where sub-clause (ii) otherwise
does not apply in its entirety and not where by reason of an
F exclusion clause, consideration for construing an agreement to be
an international commercial arbitration agreement goes outside
the purview of its definition. Once it is held that both the companies
are incorporated in India, and, thus, they have been domiciled in
India, the arbitration agreement entered into by and between them
would not be an international commercial arbitration agreement
G and, thus, the question of applicability of sub-clause (iii) of Section
2(1)(f) would not arise.”
The Law Commission Report No. 246 of August 2014, which
made several amendments to the Arbitration and Conciliation Act, 1996,
gave the following reason for deleting the words “a company or”:
H
M/S L&T LTD. SCOMI ENGINEERING BHD v. MUMBAI 37
METROPOLITAN REGION DEV. AUTH. [R. F. NARIMAN, J.]
“(iii) In sub-section (1), clause (f), sub-clause (iii), delete the words A
“a company or” before the words “an association or a body of
individuals.
[NOTE: The reference to “a company” In sub-section (iii) has
been removed since the same is already covered under sub-section
(ii). The intention is to determine the residence of a company B
based on its place of incorporation and not the place of central
management/control. This further re-enforces the “place of
incorporation” principle laid down by the Supreme Court in TDM
Infrastructure Private Limited v. UE Development India Private
Limited, (2008) 14 SCC 271, and adds greater certainty in case of
companies having a different place of incorporation and place of C
exercise 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 Section
2(1)(f)(iii) as separate and distinct persons who would fall within the
said sub-clause. This does not change due to the deletion of the phrase D
“a company or” for the reason given by the Law Commission. This is
another reason as to why “an association” cannot be read with “body of
individuals” which follows it but is a separate and distinct category by
itself, as is understood from the definition of “person” as defined in the
Income Tax Act referred to above. E
13. This being the case, coupled with the fact, as correctly argued
by Shri Diwan, that the Indian company is the lead partner, and that the
Supervisory Board constituted under the Consortium Agreement makes
it clear that the lead partner really has the determining voice in that it
appoints the Chairman of the said Board (undoubtedly, with the consent F
of other members); and the fact that the Consortium’s office is in Wadala,
Mumbai as also that the lead member shall lead the arbitration
proceedings, would all point to the fact that the central management and
control of this Consortium appears to be exercised in India and not in
any foreign nation.
G
14. This being the case, we dismiss the petition filed under Section
11 of the Act, as there is no “international commercial arbitration” as
defined under Section 2(1)(f) of the Act for the petitioner to come to this
Court. We also do not deem it necessary to go into whether the
appropriate stage for invoking Arbitration has yet been reached.
H
38 SUPREME COURT REPORTS [2018] 14 S.C.R.
A 15. The Arbitration Petition is dismissed in the aforesaid terms.
16. It would be open for the petitioner to approach the relevant
court on the footing that this is not a case of an international commercial
arbitration.
B Ankit Gyan Arbitration Petition dismissed.
C
D
E
F
G
H
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