SUPREME COURT

TDM Infrastructure (P) Ltd (Petitioner)

Vs.
UE Development India (P) Ltd (Respondent)
Arbitration Application No. 2 of 2008

Synopsis
Facts

 Respondent subcontracted a portion of rehabilitation and upgrading

contract to the Petitioner.
 The Petitioner Company is registered in India however the Directors of the
Petitioner were said to be Malaysian resident and even the Board of
Director of the Indian Petitioner Company was said to sit at Malaysia.
 The Petitioner invoked the Arbitration clause in the contract for resolving
the disputes as per the contract entered between them and both the
parties proposed their respective nominees as Arbitrators.
 The Respondents proposed to change the terms of Arbitration from
Arbitration Act, 1940 to Malaysian Arbitration Act 2005 and change of
venue from Delhi to Kuala Lumpur.
 This proposal was rejected by the Petitioner as a result of which the parties
could not mutually decide on the nominees.
 Vide this Arbitration application filed in the Supreme Court the Petitioners
have sough to appoint a sole arbitrator under Section 11(5) and 11 (6).

Issue

 Whether Supreme Court has the jurisdiction to pass an order for appointing
an arbitrator

Petitioner’s submissions

 Central management and control of the Petitioner Company is exercised in

Malaysia and ‘central management’ would mean that its day to day
management does not take place in India.

 Income tax act also contains a similar provision and the test which should
be applied is the real business test

 The terms ‘nationality’, ‘domicile’ or ‘residents’ must be interpreted having

regard to the text and context in which they were used.

Respondent’s submission

 Interpretative tools for provisions of Arbitration Act 1996 and taxing statute
are different

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  Jurisdiction of the court must be determined having regard to the
provisions contained in the provisions of Section 2 (6) (, 11(9) and 28 of the
1996 Act.

 The word “or” being disjunctive clause iii of Section 2 (1) of the 1996 Act
shall apply in case where clause ii does not apply

Decision

 The 1996 Act excludes domestic arbitration from the purview of

international commercial arbitration and the company which is
incorporated in a country other than India is excluded from the said
definition.

 The same cannot be included again in the premises that its central
management and control is exercised in any country other than India.

 Power of this Court to appoint arbitrator would arise in view of 11 (12) of

the 1996 Act only if the dispute arisen in relation to international
commercial arbitration.

 Section 2 (1) speaks of legal relationship whether commercial or

otherwise under the law in force in India and the relationship has to
between an individual who is a national of or habitually resident in
respect f a body corporate in any other country other than India should
receive similar treatment.

 It cannot be said that company incorporated in India does not have a

Indian nationality.

 Clause iii of Section 2 (1) of the 1996 Act shall come into play only when
clause (ii) otherwise does not apply in its entirety and not by reason of
exclusions.

 Once it is held that both the companies are incorporated in India, they
have been both domiciled in India and the arbitration agreement
between them would not be international commercial arbitration
agreement

 Only in cases such as association or body of individuals, the exercise of

central management and control in any country other than India may
have to be taken into consideration.

 The intention of the legislature appears to be clear that Indian nationals

should not be permitted to derogate from the Indian law and is a part of
the public policy of the country.

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  Domicile of a country being an artificial person would depend upon the
nature and purport of the statute.

 Nationality of a company is determined by the law of the country in

which it is incorporated and from which it derives its personality.
Distinction also exists between nationality and residence.

Thus Supreme Court has no jurisdiction to nominate an Arbitrator in the present

case

Decided On: 14.05.2008

S.B.Sinha J.