M/S AUROHILL GLOBAL COMMODITIES LTD. versus M/S M.S.T.C.LTD.

Citation: [2007] 8 S.C.R. 689 · Decided: 31-07-2007 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Disposed off

Judgment (excerpt)

MIS AUROHILL GLOBAL COMMODITIES LTD. 
A 
v. 
MIS M.S.T.C.LTD. 
JULY 31, 2007 
[S.H. KAPADIA, J.] 
B 
Arbitration and Conciliation Act, I 996: 
Applicability of the Act-To international commercial arbitration--
Held: The Act is applicable to internatiOnal commercial arbitration held C 
outside India, unless any or all the provisions of the Act have been excluded 
by an agreement between the parties expressly or by implication. 
s. I I (9) rlw s. I I (5)-Appointment of arbitrator-International 
commercial transaction-One of the contesting Companies purchasing goods D 
on behalf of a third Company from the other contesting Company-Issuance 
of Draft Purchase Order by the purchasing Company-Arbitration clause 
specifying applicability of British law of arbitration-Dispute regarding 
·transaction-Legal notice by selling Co,;,pany-Proposing therein ·to be 
governed by the Act-Acceptance thereof by the purchasing Company-
Petition for appointment of arbitrator-Maintainability questioned-On the E 
ground that it· was based on non est contract-Held: The petition is 
maintainable as the Act is applicable also to international commercial 
arbitration-The questions regarding validity of the contract and non-joinder 
of the third company to be decided by the arbitrator-However, British law 
of arbitration would be applicable to the arbitral proceedings as per the F 
terms of the arbitration clause. 
In an international transaction, respondent-Company was to purchase 
goods on behalf of a third company from the petitioner-company. After 
negotiations between both the companies, respondent-Company issued a Draft 
Purchase Order and the same was accepted by the petitioner-company. In the G 
Arbitration clause of the Draft Purchase Order specified settlement of 
disputes in accordance with rules of arbitration of Great Britain and the 
jurisdiction of the Court was spetified to be o(London. 
After a dispute regarding the transaction arose, petitioner sent a legal 
689 
II 
690 
SUPREME COURT REPORTS 
[2007) 8 S.C.R. 
A notice to the respondent for settlement of the dispute through arbitration 
proposing to be governed by Arbitration and Conciliation Act, 1996 for the 
purpose of procedural law and Indian Contract Act as substantive iaw. The 
respondent by his reply to the notice agreed in principle to be guided by the 
Arbitration Act. 
B 
Petitioner filed an application for appointment of Arbitrator under the 
Act. Respondent-Company objected to the maintainability of the petition on 
the grounds that the petition was based on the contract which was non est as 
the Dntft Purchase Order did not constitute a valid and binding contract 
between the parties; and that this Court could not appoint an arbitrator of its 
C own choice, as the arbitration clause specified applicability of British law of 
arbitration. 
D 
Petitioner -:ontended that respondent would be deemed to have waived 
his right to be governed by the British Law in view of its reply to the legal 
notice agreeing to be guided by the Indian Law. 
Disposing of the petition, the Court 
HELD: 1. Provisions of Part I of the Arbitration and Conciliation Act, 
1996 are equally applicable to international commercial arbitration ("ICC") 
held outside India, unless any or all the provisions have been excluded by an 
E agreement between the parties, expressly or by implication, therefore, where 
arbitratfon is to be carried out as per rules of lCC, parties can deviate only to 
the extent permissible. (Para 12( (695-A) 
F 
G 
H 
Bhatia International v. Bulk Trading S.A. and Anr., (2002) 4 SCC 105, 
relied on. 
. 2. In the present case, the petitioner-company has filed this petition 
un:ler Section 11(9) read with Section 11(5) of Arbitration and Conciliation 
Act, 1996. Section 11 falls in Part I. The alleged contract is an international 
transaction, therefore, this Court has the power to appoint an arbitrator in 
accordance with the terms of the contract. Under the Act, the arbitnil tribunal 
has very wide powers. The powers of the courts have been curtailed'. The 
arbitral tribunal's authority under Section 16 of the Act is not confined to 
the width of its jurisd.iction but goes .to the very root of its jurisdiction. 
Therefore, it cannot be said that the arbitration petition was misconceived 
·and not maintainable in law. (Para 13) (695-B, C, DJ 
• 
AUROHILLGLOBALCOMMODITIES LTD. v. M.S.T.C. LTD. 
691 
r . 
Secur Industries Ltd v. Godrej and Boyce Mfg. Co. Ltd and Anr., (2004) A 

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