Approach Group Ltd. Vs. M/S Rosoboron Export  Insc 641 (16 November 2005)
A.K. Mathur A.K. Mathur,
This arbitration petition was filed before this Court under Section 11(6) of
and Conciliation Act, 1996 for appointment of the Arbitrator. Hon'ble the
Chief Justice of India has designated me to nominate the Arbitrator for
disposal of dispute.
Notice of this petition was served on the parties and they were heard.
The petitioner is a company incorporated under the relevant laws of the Republic
of Singapore having its registered office at 1101, Continental Tower, Tamasek
Avenue, Singapore and represented in India by Austrian Trade Commission, 80,
Jor Bagh, New Delhi- 110003. The petitioner carries on business, inter alia, as
an Agent of various foreign companies for negotiating and concluding contracts
on their behalf.
Federal State Unitary Enterprise Russian Technologies, hereinafter referred
to as "Russian Technologies", was a Russian public sector company
incorporated under the name and style of "FSUE Promexport" and the
said "FSUE Promexport" subsequently merged with the Repondent
ROSOBORONEXPORT. Consequently, all the contractual rights and liabilities of M/s
Russian Technologies vested in ROSOBORONEXPORT, the respondent herein. All the
three entities have been/are owned by the Government of Russia.
The registered office of M/s ROSOBORONEXPORT is 27/3, Stromynika STR Moscow,
That between October 1999 and April 2000 M/s Russian Technologies approached
the petitioner for procuring orders in India for supply of helicopters to
Border Security Force, Ministry of Home Affairs, Government of India. The
petitioner agreed to act as the Agent of the said Russian Enterprise, the
predecessor-in-interest of the respondent herein for procuring contracts in India
for supply of helicopters for the BSF, Ministry of Home Affairs, Government of
India. The Border Security Force, Ministry of Home Affairs, was approached and
the Indian Authorities were persuaded to select the helicopters manufactured by
M/s Kazan Helicopters Ltd. which was to be supplied by M/s Russian Technologies
as acceptable to the Border Security Force. The petitioner through its
representatives in India, also intimated to the respondent of the specific
requirements of the Boarder Security Force of the Ministry of Home Affairs,
Government of India so that their specific requirements could be met by the
Thereafter number of meetings were held and ultimately on 1st March, 2000 pursuant to the petitioner's effort a Memorandum of Understanding was
arrived at between the respondent and the Border Security Force of the Ministry
of Home Affairs, Government of India whereby the modalities for the supply of
helicopters were arrived at, after lot of correspondence and discussion.
Subsequently, in recognition of the services rendered by the petitioner to
the respondent, a written contract was entered into by and between the parties
on 14th April, 2000 whereunder M/s Russian Technologies was described as the
"Principal" and the petitioner was described as the
Under the said agreement, Principal authorized the Agent i.e.
petitioner to take the functions for organizing and conclusion of contracts
between the Principal and the Border Security Force of the Ministry of Home
Affairs, Government of India. Originally, the agency was for securing order for
four helicopters which was subsequently enhanced to six helicopters. As per the
agency agreement, the Agent-petitioner was given an obligation to facilitate
signing of the contract between the Russian Technologies, the Principal and the
Border Security Force of the Ministry of Home Affairs, Government of India, the
customer. The petitioner was to render assistance to Russian Technologies in
making negotiations with the Border Security Force of the Ministry of Home
Affairs, Government of India to facilitate solving of any problems and other
concerning preparations and conclusions of the contract and to render
assistance to Russian Technologies in making negotiations with the Border
Security Force of the Ministry of Home Affairs, Government of India on the
specifications of supply of armaments and other goods for the helicopters.
M/s Russian Technologies, respondent was also to perform certain obligations
i.e. to supply the Agent in time with necessary information and documentation
in accordance with the Agent's request; to inform the Agent about all the
changes concerning the conclusion and fulfilment of the contract signed under
the said agency agreement; to pay to the Agent its commission from the amount
received from Border Security Force of the Ministry of Home Affairs, Government
of India for the goods delivered or services rendered to it with the petitioner's
assistance. The quantum of commission under the said agreement was fixed at 16%
of the payments which would be made by the Government of India to M/s Russian
The petitioner acted as an Agent on behalf of the Russian Technologies and
thereafter on behalf of the respondent and facilitated execution of a contract
for supply of six helicopters to Border Security Force of the Ministry of Home
Affairs, Government of India against payment of a total sum of Rs.180 crores of
which a Memorandum of Understanding was signed in March 2000 and a letter of
credit was opened on June, 2003.
It is alleged that because of the petitioner's efforts, the contract for
supply of six helicopters by M/s Russian Technologies, which subsequently
merged with M/s ROSOBORONEXPORT became possible. The Petitioner came to know
that the helicopters would be supplied by M/s ROSOBORONEXPORT to the Government
of India by the end of 2003. Therefore petitioner reminded the respondent about
their obligation to pay 16% commission to the petitioner. But unfortunately M/s
ROSOBORONEXPORT denied the obligation to pay any commission to the petitioner.
The stand of the respondent was that one of the petitioner's representatives in
India, Dr. Eric Gutman, an Austrian citizen, who had rendered service to M/s
Russian Technologies for procuring this contract, had also claimed for the
commission and on his behalf the Austrian Trade Commissioner in India had
approached the respondent, M/s Kazan Helicopters. The contention of the petitioner
was that once the helicopters are supplied by respondent to the Government of
India, and the Government of India makes the payment of the price of these
helicopters to the Russian party, the petitioner would be left with no remedy
and therefore petitioner prayed that an injunction order may be issued and the
matter may be referred to Arbitrator. The petitioner has also referred to
arbitration clause in Article 6 of Agency Agreement dated 14.4.2000 which reads
"Article 6 Solving of Disputes and Differences 6.1. If any disputes
and/or differences between the PRINCIPAL and the AGENT concerning the present
agreement a rise, both PARTIES will try to solve it by negotiations.
6.2 If differences and/or disputes could not be solved by both PARTIES through
negotiations, they will be submitted to Arbitration Court under the Chamber of
Commerce and Trade of the Russian Federation.
The decision of the Arbitration Court will be final and obligatory for both
PARTIES." Therefore in this background petitioner filed this petition
under Section 11(6) of the Arbitration Act, 1996 and sought prayer for
appointment of arbitrator in India under the Indian Arbitration Act as
according to the petitioner, it apprehends that it is not likely to get justice
in Russia. A notice was also given but without any result, hence the petitioner
approached this Court. Before this, petitioner filed an application under
Section 9 of the Arbitration and
Conciliation Act, 1996
before the Delhi High Court and the Delhi High Court passed interim order and
directed Border Security Force of the Ministry of Home Affairs, Government of
India to hold back 16% out of the amount payable to the respondent company in
regard to the supply of the helicopters to Government of India in terms of the
contract entered into in June, 2003.
Thereafter that matter came up before the Delhi High Court on 12.1.2004 and order
dated 12.12.2003 was modified.
Thereafter on 17.03.2004 the claimant invoked arbitration clause in view of
the differences and disputes existing between the parties and called upon the
respondent to act as per the agreement within 30 days from the receipt of the
notice failing which the claimant would be constrained to initiate appropriate
legal action against the respondent. Thereafter on completion of pleadings of
the parties on 25.05.2005 learned Single Judge of Delhi High Court after
hearing parties dismissed the petition.
Thereafter petitioner filed an appeal before the Division Bench of the Delhi
High Court and the Division Bench issued notice in the matter on 27.5.2004 and
the said appeal is pending adjudication before the Division Bench.
In this background petitioner approached this Court by filing petition under
Section 11(6) of the Arbitration and
Conciliation Act, 1996, and
that is how the matter has come before me on designation by the Hon'ble Chief
Justice of India.
The respondent opposed the petition by filing a detailed reply and one of
the principal submissions of the learned counsel for the respondent was that
Clause 6.2 of the Agency Agreement dated 14.4.2000 provides that in case of
dispute between the parties, the parties will resort to arbitration for
resolution of their dispute and they will submit to Arbitration Court under the
Chamber of Commerce and Trade of the Russian Federation. Therefore this Court
has no jurisdiction to entertain this petition.
The matter got adjourned for several times for one reason or the other for
filing of the reply, ultimately the arguments were heard and order reserved.
It may be relevant to mention here that since the matter was pending before
the Seven Judge Bench with regard to the interpretation of certain provisions
of the Arbitration & Conciliation Act, 1996, therefore arguments were heard
and order was reserved awaiting the decision of the Seven Judge Bench. Now
recently on 26.10.2005 the Seven Judge Bench has delivered its decision in
Civil Appeal No. 4168 of 2003 (M/s S.B.P. & Co. vs M/s Patel Engineering
Ltd. & Anr.) and the earlier decision rendered in the Construction Pvt.
Ltd. [(2002) 2 SCC 388] has been reversed and now it has been held that the
order passed by the Judge on designation by the Hon'ble Chief Justice, the
order shall be judicial order and not administrative order as was held in Konkan
Railway case (supra). Therefore now legal position has been crystallized that
the order passed by the Judge on nomination of the Hon'ble Chief Justice of
India under Section 11 shall be judicial order not amenable to any appeal. The
legal position has been summarized as under in above decision M/s S.B.P. &
Co.(Supra) :- "46. We, therefore, sum up our conclusions as follows:
i) The power exercised by the Chief Justice of the High Court or the Chief
Justice of India under Section 11(6) of the Act is not an administrative power.
It is a judicial power.
ii) The power under Section 11(6) of the Act, in its entirety, could be
delegated by the Chief Justice of the High Court only to another judge of that
court and by the Chief Justice of India to another judge of the Supreme Court.
iii) In case of designation of a judge of the High Court or of the Supreme
Court, the power that is exercised by the designated judge would be that of the
Chief Justice as conferred by the statute.
iv) The Chief Justice or the designated judge will have the right to decide
the preliminary aspects as indicated in the earlier part of this judgment.
These will be, his own jurisdiction, to entertain the request, the existence of
a valid arbitration agreement, the existence or otherwise of a live claim, the
existence of the condition for the exercise of his power and on the
qualifications of the arbitrator or arbitrators. The Chief Justice or the judge
designated would be entitled to seek the opinion of an institution in the
matter of nominating an arbitrator qualified in terms of Section 11(8) of the
Act if the need arises but the order appointing the arbitrator could only be
that of the Chief Justice or the judge designate.
v) Designation of a district judge as the authority under Section 11(6) of
the Act by the Chief Justice of the High Court is not warranted on the scheme
of the Act.
vi) Once the matter reaches the arbitral tribunal or the sole arbitrator,
the High Court would not interfere with orders passed by the arbitrator or the
arbitral tribunal during the course of the arbitration proceedings and the
parties could approach the court only in terms of Section 37 of the Act or in
terms of Section 34 of the Act.
vii) Since an order passed by the Chief Justice of the High Court or by the
designated judge of that court is a judicial order, an appeal will lie against
that order only under Article 136 of the Constitution of India to the Supreme
viii) There can be no appeal against an order of the Chief Justice of India
or a judge of the Supreme Court designated by him while entertaining an
application under Section 11(6) of the Act.
ix) In a case where an arbitral tribunal has been constituted by the parties
without having recourse to Section 11(6) of the Act, the arbitral tribunal will
have the jurisdiction to decide all matters as contemplated by Section 16 of
x) Since all were guided by the decision of this Court in Konkan Railway
Corpn. Lts. & Anr.
SCC 388)] and orders under Section 11(6) of the Act have been made based on
the position adopted in that decision, we clarify that appointments of
arbitrators or arbitral tribunals thus far made, are to be treated as valid,
all objections being left to be decided under Section 16 of the Act. As and
from this date, the position as adopted in this judgment will govern even
pending applications under Section 11(6) of the Act.
xi) Where District Judges had been designated by the Chief Justice of the
High Court under Section 11(6) of the Act, the appointment orders thus far made
by them will be treated as valid; but applications if any pending before them
as on this date will stand transferred, to be dealt with by the Chief Justice
of the concerned High Court or a Judge of that court designated by the Chief
xii) The decision in Konkan Railway Corpn. Ltd.
[ (2002) 8 SCC 388] is overruled." In the present case, as per the
Agency Agreement dated 14.4.2000, Clause 6.2 categorically states that if any
dispute arises between the parties then the same shall be submitted to Arbitration
Court under the Chamber of Commerce and Trade of the Russian Federation.
Therefore there is a specific clause mentioned in the Agency Agreement as to
which court will have jurisdiction to try and dispose of the matter.
In view of the specific provision specifying the jurisdiction of the Court
to decide the matter, this Court cannot assume the jurisdiction.
Whenever there is a specific clause conferring jurisdiction on particular
Court to decide the matter then it automatically ousts the jurisdiction of
other Court. In this agreement, the jurisdiction has been conferred on the
Chamber of Commerce and Trade of the Russian Federation as the authority before
whom the dispute shall be resolved. In view of the specific arbitration clause
conferring power on the Chamber of Commerce and Trade of the Russian Federation,
it is that authority which alone will arbitrate the matter and the finding of
that arbitral tribunal shall be final and obligatory for both the parties.
Thus, in this view of the matter, I am of the opinion that this Court has no
jurisdiction and the Chamber of Commerce and Trade of Russian Federation alone
has jurisdiction to act as an arbitrator and resolve the dispute. Hence this
application is rejected.