LexENERCON (INDIA) LTD. & ORS. versus ENERCON GMBH & ANR.
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[2014] 2 S.C.R. 855 ENERCON (INDIA) LTD. & ORS. V. ENERCON GMBH & ANR. (Civil Appeal No. 2086 of 2014 etc.) FEBRUARY 14, 2014 [SURINDER SINGH NIJJAR AND FAKKIR MOHAMED IBRAHIM KALIFULLA, JJ.] ARBITRATION AND CONCILIATION ACT, 1996: s.45 rlw s. 16 - International Commercil Arbitration - Suit for declaration that Intellectual Property Licence Agreement (IPLA) was not concluded contract and coffespondingly there was no arbitration agreement therein - Application by respondent uls 45 - Held: parties have iffevocably agreed to resolve all the disputes through arbitration - Parties can not A B c D be permitted to avoid arbitration, without satisfying the court that it would be just and in the interest of all the parties not to proceed with arbitration - Findings recorded by appellate court that the parties can proceed to arbitration are affirmed - Findings recorded by trial court dismissing the application ul E s 45 are set aside -- Application filed by respondents for reference of the dispute to arbitration u/s 45 has been correctly allowed by appellate court as well as by High Court - Issue as to whether there is a concluded contract between the parties can be left to arbitral tribunal - All the disputes arising between the parties in relation to the following agreements viz. SHA, TKHA, SSHAs and STKHA, Agreed Principles and IPLA, including the controversy as to whether IPLA is a concluded contract are referred to arbitral tribunal for adjudication -Third arbitrator who shall act as Chairman of Arbitral Tribunal, is appointed -- Arbitration clause (agreement) is independent of the underlying contract, i.e. the IPLA containing the arbitration clause -- s.16 provides that arbitration clause forming part of a contract shall be treated 855 F G H 856 SUPREME COURT REPORTS [2014] 2 S .. C.R. A as an agreement independent of such a contract -- UNCITRAL Model Law. s. 16 - Separability of arbitration clause from underlying contract - Held: Concept of separability of the arbitration 8 clause/agreement from the underlying contract is a necessity to ensure that the intention of parties to resolve disputes by arbitration does not get frustrated with every challenge to legality, validity, finality or breach of the underlying contract - The Act, u/s 16 accepts the concept that the main contract and the arbitration agreement form two independent contracts C - Therefore, it cannot be accepted that Arbitration Agreement will perish as the IPLA has not been finalised - Rule of necessity. Arbitration clause - Seemingly unworkable arbitration D clause - Held: It would be the duty of court to make the same workable within the permissible limits of law - A common sense approach has to be adopted to give effect to the intention of parties to arbitrate - Arbitration clause cannot be construed with a purely legalistic mindset, as if one is E construing a provision in a statute - In the instant case, the arbitration clause as it stands cannot be frustrated on the ground that it is unworkable - Unworkability in the case is attributed only to the machinery provision - Arbitration agreement, otherwise, fulfils the criteria laid down u/s 44 of the F Act - Given that two arbitrators have been appointed, the missing line that "the two arbitrators appointed by the parties shall appoint the third arbitrator" can be read into the arbitration clause - Omission is so obvious that the court can legitimately supply the missing line - In the circumstances, G the Court would apply the officious bystander principle - Parties can be permitted to proced to arbitration. H 'Seat' of arbitration and 'venue' -- International Commercial Arbitration - Held: In an International Commercial Arbitration, venue can often be different from the. ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 857 & ANR. seat of arbitration - In the instant case all the three laws: (i) A the law governing the substantive contract; (ii) the law governing the agreement to arbitrate and the performance of that agreement; and (iii) the law governing the conduct of the arbitration, are Indian - Therefore, the parties have designated India as the seat - Parties being Indian and German, except B for London being chosen as a convenient place/venue for holding the meetings of arbitration, there is no other factor connecting the arbitration proceedings to London - In such circumstances, hearing of arbitration will be condu
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