SASAN POWER LIMITED versus NORTH AMERICAN COAL CORPORATION INDIA PRIVATE LIMITED

Citation: [2016] 6 S.C.R. 809 · Decided: 24-08-2016 · Supreme Court of India · Bench: JASTI CHELAMESWAR · Disposal: Dismissed

Cited by 3 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

[2016] 6 S.C.R. 809 
SASAN POWER LIMITED 
v. 
NORTH AMERICAN COAL CORPORATION INDIA PRIVATE 
LIMITED 
(Civil Appeal No. 8299 of2016) 
AUGUST 24, 2016 
[J. CHELAMESWAR AND ABHAY MANOHAR SAPRE, JJ.] 
Arbitration and Conciliation Act, 1996 - s. 45 - Execution of 
Agreement-I between appellant and American Company-NAC - Two 
years later. execution of Agreement-II between the appe(lant, 
respondent-NACC-lndia and American Company NAC - By the said 
agreement, American company assigned all its rights and obligations 
under Agreement I with the consent of the appellant to-respondent-
lndian company - Dispute between appellant and respondent -
· Request for arbitration before ICC in London, by respondent - Suit 
by appellant - One of the prayer seeking declaration that 
arbitration agreemen( was null and void being contrary to Indian_ 
Law - Order passed whereby ICC stayed from proceeding with the 
arbitration - Applications by respondent seeking that dispute be 
referred to arbitration and sought vacation of injunction order -
Applications were allowed @nd suit was dismissed - Thereafter, 
appeal filed by the appellant - Dismissal by the High Court -
O~ 
appeal, held: Per J. Clte/ameswar, J: It can be se.,en from the tenor 
. of ihe AGREEMENT-JI that it is a tripartite agteement - Consent 
given by the appellant is qualified - Appellant retained its right 
against the American company for the enforcement of obligations 
and liabilities under AGREEMENT-I owed by the American company· 
to the appellant ~ Thus, the rights and obligations flowing out of 
AGREEMENT-II b_etween the three parties are interdependent - On 
examinatiqn of the fights and obligations 6f the American company 
under AGREEMENT-I and AGREEMENT-II, it is a dispute betWee1i 
three parties of which one is an American company with a foreign 
element i.e. rights a~d obligations ofihe American company-Hence, 
the stipulation regarding the governing law cannot be said to be an 
agreement between only two Indian companies - So long as the 
obligations arising under the AGREEMENT-I subsists and the 
809 
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810 
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SUPREME COURT REPORTS 
[2016] 6 S.C.R. 
American company is not discharged of its obligations under the 
AGREEMENT-L there is a foreign element' therein and the dispute 
arising therefrom -Autonomy of the parties in such a case to choose 
the governing law is well recognised in law - Further, in the 
AGREEMENT-II there is no discharge of the original contractee-
American company s obligations - There are mutual obligations 
(arising out of AGREEMENT-I) still to be enforced - Transaction 
covered by AGREEMENT-JI is not an assignment-Also there cannot 
be any novation between American company and respondent -
Further, for deciding whether the suit filed by appellant is 
maintainable or impliedly barred by s.45, the Court is required to 
examine only the validity of the arbitration agreement within the 
parameters set out in s.45, but not the substantive-contract of which 
the arbitration agreement is a part - Per Ahlwy Mwrolutr Sapre, J 
(Supplementing): NAC is an American company and being a party 
to Agreement-I as also to Agreement-II along with two Indian 
companies (appellant and respondent), a fortiori. Agreement-I and 
Agreement-II become an "'international commercial arbitration" 
within the meaning of s. 2(j) - Execution of Agreement-II did not 
result in substituting or rescinding or extinguishing Agreement-I -
It recognized the existence of Agreement-I and resulted in its 
amendment by adding some nel;I' clauses and one party - It cannot 
be said that as a result of execution of Agreement-JI, novation of 
contract has come
4 in to be inter se parties - Further. s. 45 shows 
that once it is found that the agreement is a legal and valid 
agreement, which is capable of being performed by the parties to 
the suit, the court has to pass an order by referring the parties to 
t!J.e arbitration in terms of the agreement - Trial court though allowed 
the application holding that the agreement was legal and proper 
and capable of being performed but did not pass any consequential 
order as required u/s. 45 by referring the parties to the arbitration 
and instead simply dismissed the suit - Thus, the order is modified 
to this extent. 
Dismissing the appea~ the Court 
Per Chelameswar, J. 
HELD: 1.1 It can be seen from the tenor of the 
AGREEMENT-II that it is a tripartite agreement. The consent 
H 
given by the appell

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