SHAH - (1.) , J. The question which falls to be determined in this appeal with certificate granted by the High Court of Bombay against an order refusing a motion for stay of a suit, is : "Whether an agreement to refer a future dispute to arbitration according to the rules of the International Chamber of Commerce between a Company registered under the Indian companies Act and a foreigner is binding upon the former."
(2.) THE facts which give rise to this question are these : Socite De Traction Et D Electricite Societe Anonyme - hereinafter called, for the sake of brevity, 'Traction' - is a Corporation incorporated under the laws of Belgium and carries on business as consulting and construction engineers at Brussels. THE respondent Kamani Engineering Corporation Ltd. - herein-after called 'Kamani' - is a company registered under the Indian Companies Act, 1913. Kamani carries on business, amongst others, as an engineering concern. On 22/04/1959 Kamani entered into a 'Collaboration agreement' with Traction whereby the latter undertook to provide to Kamani technical assistance for the construction of overhead railway electrification, tramway systems and trolley buses in India, Burma, Ceylon and /or Nepal. THE agreement contained an arbitration clause in Article X, which provided : "All disputes arising in connection with this agreement during the period of the agreement or thereafter shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the Rules of the said International Chamber of Commerce". On 1/09/1961 Kamani instituted suit No. 296 of 1961 in the High Court of Judicature at Bombay on its original side, inter alia for- (1) a decree declaring that Traction had committed diverse breaches of the 'Collaboration agreement' and the agreement was on that account terminated by Traction, and Kamani stood discharged from all its obligations thereunder (2) a decree for accounts of the items contained in the invoice referred to in paragraph 24 and 25 of the plaint and for ascertainment of the amount in the light of the contentions and submissions set out. (3) for decree directing Traction to pay Rs. 9,00,000.00 together with interest thereon at the rate of six per cent per annum from the date of the suit; and (4) for the aforesaid purposes for an order that all enquiries be made, directions given, orders passed and Traction be directed to hand over to Kamani all documents, files, reports, correspondence etc., removed by the representatives of the Traction. On 22/01/1962 Traction took out a notice of motion for an "order staying the proceedings in the suit pursuant to S. 3 of the Arbitration (Protocol and Convention) Act, 1937, and /or S. 34 of the Arbitration Act, 1940 and /or S. 151 of the Code of Civil Procedure, 1908 and /or the inherent powers of the High Court"; in the alternative for an order that Kamani, its servants and agents be restrained by an order and injunction from in any manner proceeding further with or from taking any further steps in the suit. Kantawalla, J., refused the motion and the order passed by him was confirmed in appeal by the High Court. The High Court held that the arbitration clause of the collaboration agreement was invalid, for it obliged Kamani, 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 relevant rules of the International Chamber of Commerce may be summarised. Article 7 provides by cl. (1) that the Court of Arbitration does not itself settle disputes except when otherwise stipulated : it appoints or confirms the nomination of arbitrators in accordance with the provisions following. If the parties have agreed to the settlement of a dispute by a sole arbitrator they may nominate him by common agreement for confirmation by the Court of Arbitration; failing agreement between the parties the arbitrator shall be appointed by the Court of Arbitration. If reference be to three arbitrators each party shall nominate an arbitrator for confirmation of the Court of Arbitration which shall appoint the third arbitrator. If the parties fail to agree on the number of arbitrators the Court of Arbitration shall appoint a sole arbitrator who shall choose the National Committee or Committees from which it shall request nominations. The sole arbitrators and third arbitrators must be nationals of countries other than those of the parties. If any challenge be made by one of the parties to the appointment of an arbitrator, the decision of the Court of Arbitration which is the sole Judge of the grounds of challenge, shall be final. On the death or refusal of an arbitrator to carry out his duties, or on resignation, the Court of Arbitration if it appointed him, shall nominate another arbitrator in his place. Article 8 deals with inisiation of arbitration proceedings. By Art. 13 it is provided that when the parties agree to submit their disputes to arbitration by the International Chamber of Commerce, they shall be deemed to submit to arbitration in accordance with the Rules and if a party raises a plea as to the existence or validity of the arbitration clause, if the Court of Arbitration is satisfied as to the prima facie existence of such a clause, it may without prejudice to the admissibility or the merits of such plea, order that the arbitration shall proceed. Article 16 prescribes the procedure to be followed in the arbitration proceeding. The rules by which the arbitration proceeding shall be governed shall be the Rules of the Chamber and, in the event of there being no provision in those Rules, those of the law of procedure chosen by the parties or, failing such choice, those of the law of the country in which the arbitrator holds the proceedings shall govern the proceedings. By Art. 18 the proceedings before the arbitrator are to take place in the country determined by the Court of Arbitration, unless the parties have agreed in advance upon the place of arbitration. Article 19 deals with the arbitrator's terms of reference. The arbitrator is required, before hearing of the case commences, to draw up in the presence of the parties a statement defining his terms of reference including the names and addresses of the parties, brief statement of the claims of the parties, terms of reference, statement of the case, indication of the points at issue to be determined, the place of arbitration proceeding, and all other matters in order that the award when made shall be enforceable at law, or which in the opinion of the Court of Arbitration and the arbitrator, it is desirable to specify. Article 20 deals with the hearing of the case by the arbitrator and Art. 21 specifies the powers of the arbitrator. The arbitrator is competent to decide the dispute on the basis of the relevant documents, unless one of the parties requests that a hearing be given. The arbitrator may suo motu, or on the request of the parties, summon the parties to appear before him at a specified place and time and if the parties or any of them having been duly summoned, fail to appear before the arbitrator he may, after satisfying himself that the summons was duly served upon the party or parties, proceed with the arbitration ex parte. Article 23 provides that the award shall be made with sixty days from the date on which the signed statements under Art. 19 are submitted, but time may extended by the Court of Arbitration. Article 25 deals with the decision regarding the costs of arbitration, arbitrator's fee and the administrative costs. By Art. 26 the arbitrator has before completing the award to submit the same to the Court of Arbitration. The Court of Arbitration may lay down modifications as to its form and if need be draw the arbitrator's attention even to points connected with the merits of the case, and no award shall under any circumstances be issued until approved as to its form by the Court of Arbitration. Article 27 and 28 deal with the pronouncement and notification of the award. By Art. 28 the award is made final, it being undertaken by the parties that the award shall be carried out without delay, the parties having waived their right to any form of appeal, in so far as such waiver may be valid. By Article 30 the award is required to be deposited with Secretariat of the Court of Arbitration. This is followed by a general rule which states that in circumstances not specifically provided for, the Court of Arbitration and the arbitrator shall act on the basis of the rules and make their best efforts for the award to enforceable at law.
(3.) THE scheme of arbitration contemplated by these Rules is different from the scheme contemplated by Sections 3 to 38 of the Arbitration Act. Some of the striking provisions of the Rules are the power of the Court of Arbitration to appoint arbitrators or umpires, finality of the award without any provision for resort to the Civil Court to remit or to set aside the award even for misconduct of the arbitrator or an error apparent on the face of the award, and the power of the Court of Arbitration to modify the award and to give direction during the course of proceedings for arbitration, and similar provisions. Kamani is, as already stated, a company registered under the Indian Companies Act of 1913 and by S. 3(1) of the Indian Companies Act, 1956 is a 'company' for the purposes of that Act. S. 389 of the Indian Companies Act, 1956 (before it was repealed by Act. 65 of 1960) read as follows- "(1) A company may, by written agreement refer to arbitration, in accordance with the Arbitration Act, 1940 (X of 1940), an existing or future difference between itself and any other company or person. (2) A company which is a party to an arbitration may delegate to the arbitrator power to settle any terms or to determine any matter, capable of being lawfully settled or determined by the company itself, or by its Board of directors, managing director, managing agent, secretaries and treasurers, or manager. (3) The provisions of the Arbitration Act, 1940 (X of 1940), shall apply to all arbitrations in pursuance of this Act to which a company is a party". ;