SOCIETE DE TRACTION ET D'ELECTRICITE SOCIETE ANONYME versus KAMANI ENGINEERING COMPANY LTD.

Citation: [1964] 3 S.C.R. 116 · Decided: 18-04-1963 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Appeal(s) allowed

Judgment (excerpt)

1963 -- . 
.dpril 18 
116 
SUPREME COURT REPORTS [1964] VOL. 
SOCIETE DE TRACTION ET D'ELECTRICITE 
SOCIETE ANONYME 
v. 
KAMAN! ENGINEERING COMPANY LTD. 
(P. B. GAJENDRAOADE:AR, K. N. WANCHOO, 
K. C. DAS GUPTA, J. C. SHAH and 
N. RAJAGOPALA AYYANGAR JJ.) 
Arbitration-Agreement between company regi.otered undtr 
Indian CompanieB Act and a Fo•eign Company lo refer dispute to 
arl>itr'liion in accordance with the rules of International Chamber 
of Commerce-Indian Company fileB civil suit dioregarding 1h-, 
arbitration clau•e-Foreign Company applies 
for slfly of 
proceedings-Whether the agreement to refer In arbitration though 
a mnehinery 
~utside 
Indian Act 
valid 
and enforceable--
Companie• Act, 1.0~1 (Io/ 1956), ss. 389, 494 (bl-Arbitration 
Act 1940 (2' of 1940) ss. 34, 46, 47-Arbitration (Protocol 
and Convention) Act, 1937 (VI of 1937), s. 3. 
The appellant is a corporation incorporated under the 
laws of Belguim and carries on bnsiness in Brussels, The 
respondent is a company re~istered under Indian Companies 
Act, 1913. On April 22, 1959, the respondent entered into 
an agreement with the appellant whereby the latter undertook 
to provide to the former technical assistance for construction 
works. The agreement contained an arbitration clause by 
which the parties agreed to refer "all disputes arising fo 
connection with this agreement" "under the 
Rules of 
Conciliation and Arbitration of the International Chamber of 
Commerce." In 1961 the respondent instituted a suit on 
the'Original Side of the High Court of Bombay praying for 
various reliefs against the appellant. Thereupon the appellant 
took out a notice of motion for an order staying the proceedings 
in the suit persuant to s. 3 of the Arbitration (Protocol and 
Convention) Act, 1937, and/or under s. 34 of the Arbitration 
Act, 1940, and/or under s. 151 of the Code of Civil Procedure, 
1908: The High Court refused the motion on the ground that 
the arbitration clause of the agreement was invalid, for it 
obliged the appellant, contrary to s. 389 of the Indian 
Companies Act, 1956, to go to arbitration otherwise than in 
accordance with the Arbitration Act X of 1940. The present 
appeal is by way of a certificate granted by the High Court. 
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a s.c.R. 
SUPREME COURT REPORTS 117 
In the appeal it was urged that s. 389 of the Companies 
Act was an enabling provision and did not compel an Indian 
Company to agree to refer differences to arbitration only in 
accordance with the provisions of the Indian Arbitration Act. 
If the company desired to refer a dispute to arbitration under 
the Arbitration Act it might do so but the power to submit to 
arbitration being an incident to the power to enter into a 
contract for the purpose of carrying on its business, was 
unrestricted and that sub-s. (3) of s. 389 applied not to 
consensual arbitration but only to statutory 
arbitration in 
pursuance of the companies Act, i, e. 
arbitration under 
s. 494 (b) of the Companies Act, 1956, 
Held that s. 389 of the Indian Companies Act, 1956, 
is intended to provide that all arbitration to which a company 
is a party shall be conducted in accordance with the provisions 
of the Indian Arbitration Act X of 1940. Section 3o9 (1) 
of the Companies Act, 1956, regulates the power of the Indian 
Company to agree to submit disputes to arbitration and by 
subs. (3) of s. 389 the Arbitration Act applies to all arbi· 
trations to which an Indian Company is a party, 
But s. 47 of the Arbitration Act, 1940, is as much a 
part of the Indian Arbitration Act as any other provision and 
that section makes the provisions of the Arbitration Act 
applicable to all arbitrations and to all proceedings thereunder 
but subject to the provisions of s. 46 and in so far as is other· 
wise provided by any law for the time being in force. By the 
use of the words "save in so far as is otherwise provided by any 
law for the time being in force the Legislature has clearly made 
the provisions of the Arbitration (Prutocol and Convenllon) 
Act, 1937 applicable to consensual arbitration under the Arbi-
tration Act, 1940 when the conditions prescribed for applicatiJn 
of that Aot are attracted, even if the scheme of arbitration 
recognized thereby is inconsistent with ss. 3 to 38 of the Arbi· 
!ration Act, 1940. Aruitration according to the provisions of 
the Arbitration (Protocol and Convention) Act, 1937 being 
recognized by the Arbitration Act, J 940, an agreement to refer 
disputes in ac

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