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An analysis on TDM Infrastructure Private Limited Versus UE Development India Private Limited, 2008 14 scc 271
The case of Tdm Infrastructure Private vs U e Development India[1] benched by Justice S.B. Sinha is a landmark decision made by the Supreme Court on May 14, 2008, about the international commercial arbitration and its applicability when the companies are incorporated in India. Here the parties raised objections as to the arbitrator appointment and the petition was lied before the Supreme Court for appointment of a sole arbitrator by the court for adjudication. When it came before the court, the Supreme Court considered,
- Whether the arbitration is an international commercial arbitration within the meaning of section 2(1)(f)? and
- Whether the Supreme Court have the power to appoint arbitrators?
According to Section 2(1)(f)[2], where at least one of the parties falls within the clauses (i)-(iv), then it becomes an international commercial arbitration. According to clause (iii) when the central management of the company is outside India, then arbitration with such party becomes international. Effecting such a provision along with section 11(6)[3], petitioners contented it to be international commercial arbitration and that arbitrators can be appointed by the Supreme Court. Countering it, by showing that the petitioner company is registered in India[4], respondents contented Supreme Court did not have jurisdiction over the matter and also, that the Court has no jurisdiction to pass an order for appointing an arbitrator.
The court after analysing the contentions of the parties, concluded that clause 2(1)(f)(iii) would only come into play where clause 2(1)(f)(ii) otherwise do not apply. The court further looked into the inception of both companies and found that they both were incorporated under the Companies Act and have been domiciled in India. Thus, concluded that the arbitration is not international commercial arbitration and that clause (ii) of Section 2(1)(f) will apply and not clause (iii) thereof. It not being an international commercial arbitration, it was held that the court cannot nominate an arbitrator.
The case is an important one as far as the interpretation of the word, international commercial arbitration is concerned. It also clarified on determination of nationality, domicile and Control and management by referring to judgement by English and Indian courts[5].
However, it should be noted that this judgement restricted the scope of international commercial arbitration by interpreting the word ‘or’ in section 2 (1)(f). Without giving a solid reason, the court merely looked into the incorporation of the company and held it as a domestic arbitration. Fearing that arbitration might be domestic, MNCs and other companies having control outside India though incorporated here, might refrain from the Indian market due to this view taken by the court. The concept of party autonomy is another drawback and it will be seriously affected especially in cases where the parties might be Indians but the subject matter is situated beyond India. Under such circumstances, parties won’t be able to make their own decisions. This judgement will have serious impacts on international trade and business as most firms resolve disputes through ADR and see party autonomy as an attractive factor. If they are seen as domestic and curtail party autonomy, why would they even opt for arbitration? Ease of doing business gets seriously affected and international players may refrain from conducting business in the Indian market fearing litigation. The fact that these litigations take years and years to settle further adds to the problem. Thus, there is an urgent need to frame the regulations in such a way that commercial interest is preserved.
[1] (2008) 14 SCC 271
[2] Section 2(1)f (f) of Arbitration and Conciliation Act 1996;
“international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is— (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or (iii) 2*** an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country;
[3] Section 11(6) Where, under an appointment procedure agreed upon by the parties, — (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court]to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment
[4] Section 2(1)f(ii) says that when a body corporate which is incorporated in any country other than India is a party to arbitration, then it is international commercial arbitration. As here it was incorporated in India, it is domestic arbitration.
[5] In Subbayya Chettiar v. IT Commissioner, Madras, AIR 1951 SC 101; Central Bank of India Ltd. v. Ram Narain, AIR 1955 SC 36.
- The case relates to international commercial arbitration and its applicability when the companies are incorporated in India.
- The case is an important one as far as interpretation of the word, international commercial arbitration is concerned.
- It also clarified on determination of nationality, domicile and on Control and management by referring to judgement by English and Indian courts
