Op EdsOP. ED.

The validity of an arbitration agreement in cases of an invalid parent agreement (void, voidable or void ab initio) is riddled with uncertainties in India. To date, the Supreme Court of India (“the Supreme Court”) has not had the opportunity to authoritatively pronounce the law, which furthers the legislative policy under the Indian Law.

It has been widely acknowledged by the courts in India that the parties tend to challenge the arbitration agreement intending to delay the arbitral proceedings or to avoid the mandate of arbitration agreed by them. Before 2015, judgments pronounced by Indian courts have presented only a murky picture relating to the validity of an arbitration agreement in case the main agreement is invalid (void, voidable or void ab initio).

The 2015 amendment has tectonically shifted the legislative policy, leaning in favour of arbitration, which has resulted in a change in the fundamental policy of Indian Law. The said change has been recognised by the Indian courts.[1] Considering the aforesaid change in fundamental policy of Indian Law, judgments rendered before 2015 which tended to hinder and obstruct arbitration in India, would need to be brushed aside, to achieve the legislative intent of the amendments to the Indian Laws.

It has been argued that the doctrine of separability does not save the arbitration clause in the above scenario where the arbitration agreement is invalid because the contract in which it is embedded or to which it relates to, is invalid under Indian law. Parties challenging the validity of the arbitration agreement tend to forget that the doctrine of separability is no more at a nascent stage and it is time to recognise the same considering the tectonic shift in the legislative policy which is pro-arbitration.

The Supreme Court had categorically held that the Arbitration and Conciliation Act, 1996 (“the Act”) should be interpreted to bring in line the principles underlying its interpretation in a manner that is consistent with the prevailing approaches in the common law world. Jurisprudence in India must evolve towards strengthening the institutional efficacy of arbitration.[2] Deference to a forum chosen by parties as a complete remedy for resolving all their claims is but a part of that evolution.[3] Minimising the intervention of courts is again a recognition of the same principle.[4] Therefore, a reference to the international authorities and the judgments pronounced by Courts in other jurisdictions such as Bermuda, USA, UK, and Australia, would be beneficial to understand the prevailing law representing an evolution in the common law world. It would be relevant to mention that the doctrine of separability was recognised with its full rigor in those jurisdiction as early as 1967 in US, 1990 in Bermudan Law, 1993 in English and Australian Law. The principles laid down therein would be attracted while interpreting the Act.

The answer to the issue at hand lies in deeper aspects:

  • Effect of the doctrine of separability on the agreement and pro-arbitration policy in India (Sections 5, 7 read with Section 16 of the Act);
  • Meaning of “in respect of a defined legal relationship, whether contractual or not”;
  • The test applied under Section 45 of the Act. 

International authorities and UNCITRAL Model Law

Redfern and Hunter on International Arbitration (Sixth Edn.), ‘Chapter 2 – Agreement to Arbitrate’ (at pp. 103 and 104, paras 2.103 and 2.104) state that there are, in fact, two separate contracts: the primary or main, contract concerns the commercial obligations of the parties; the secondary, or collateral, the contract contains the obligation to resolve any disputes arising from the commercial relationship by arbitration. The doctrine of separability means that an arbitration clause that forms part of a contract shall be treated as an agreement independent of the other terms of the contract.

Following the provisions of the UNCITRAL Rules, Article 16(1) of the Model Law provides that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

Section 7 of the Act defines an arbitration agreement as provided under the Model Law. Under the Model Law, the term “arbitration agreement” is defined along the lines of Article II(1) of the 1958 New York Convention; as more clearly expressed in that Convention, there is an implied guarantee of recognition that goes beyond a mere definition.

An arbitration agreement needs to be in writing though it need not be signed. The fact that the arbitration agreement shall be in writing is continued in Section 7(3) of the Act. Section 7(4) only further adds that an arbitration agreement would be found in the circumstances mentioned in the three sub-clauses that make up Section 7(4). This does not mean that in all cases an arbitration agreement needs to be signed. The only prerequisite is that it be in writing, as has been pointed out in Section 7(3).[5]

Collaborative reading of principles stated by Redfern and Hunter, Article 16 of the Model Law and Section 7 of the Act prima facie establish that the arbitration agreement, whether incorporated as a clause in the main agreement or executed between the parties as a separate agreement, survives and remains valid irrespective of the fact whether the main agreement is void, void ab initio or voidable. The doctrine of separability acts as a veil between the arbitration agreement and the main agreement. All legal systems admit some degree of separability of the arbitration clause from the main contract and the real question to be canvassed is to what extent is the doctrine of separability permitted.

Judgments pronounced in other jurisdictions – Bermuda, USA, UK and Australia on the meaning of ‘defined legal relationship whether contractual or not’, ‘extent of the doctrine of separability’ and ‘true meaning of transaction or contract’

Extent of doctrine of separability

Bermuda/Swiss/German Law:

In Sojuznefteexport (SNE) v. Joc Oil Ltd.,[6] the Court of Appeal of Bermuda dealt with the issue of whether the invalidity of the main agreement taints the arbitration clause. The contention raised by JOC was that the purchase agreement had not been executed by two authorised representatives of SNE and accordingly was void/void ab initio under the Soviet Law. It was submitted that when the contract did not exist ab initio, there could be no dispute between the parties which could come within the terms of the arbitration clause. JOC alleged that, as a consequence, the arbitral tribunal lacked the competence to adjudicate the dispute because the arbitration clause was void. Though the arbitral tribunal held that the main agreement was void ab initio, it upheld the validity of the arbitration agreement and delivered award in favour of SNE based on the doctrine of restitution and unjust enrichment.

The Court of Appeal was of the view that there is pro-arbitration/pro-enforcement bias, both under US Law and English Law, which shall be followed[7] and accordingly, upheld the award. Most systems recognise that an arbitration clause is a separate contract, procedural and ancillary to the main contract and it does not create substantive rights between the parties but provides how the disputes which may arise should be resolved.[8] An arbitration agreement gives rise to collateral primary and secondary obligations of its own.[9]

The Court of Appeal referred to the development of the doctrine of separability in the USA, Swiss Law, German Law, and UK Law. The doctrine of separability of the arbitral clause is referred to as ‘severability‘ in the United States and ‘autonomy‘ in France and the Federal Republic of Germany, each connoting that the invalidity of the main contract does not, in principle, entail the invalidity of the arbitral clause.[10]

Swiss Law makes no material distinction between different kinds of invalidity of the main contract, or between an arbitration clause embodied in the main contract and an arbitration agreement that is contained in a physically separate document.[11]

The German doctrine of autonomy allows arbitrators to decide upon disputes consequent upon the invalidity of the main contract without any material distinction between different kinds of invalidity or between an arbitration clause in the main contract and an arbitration agreement in a physically separate document.[12]

The invalidity of the main agreement for any reason be it non-fulfillment of legal requirements or being contrary to public policy, does not raise any issue as to whether or not the parties agreed to the terms of the contract.[13] It concedes that the parties did, but asserts that their agreement gave rise to no enforceable contractual rights or duties. It raises no issue about the consensus ad idem of the parties.[14]

English Law:

In  Fiona Trust and Holding Corpn v Privalov,[15] the House of Lords authoritatively rejected the orthodox view regarding the doctrine of separability. Concerning the construction of the arbitration agreement and doctrine of separability, it was held that arbitration is consensual. It depends upon the intention of the parties as expressed in their agreement. The meaning which the parties intended to express by the words which the parties used will be affected by the commercial background and the reader’s understanding of the purpose for which the agreement was made.[16] It was further held that in approaching the question of construction, it is necessary to inquire into the purpose of the arbitration clause. The parties have entered into a relationship, an agreement or what is alleged to be an agreement or what appears on its face to be an agreement, which may give rise to disputes.[17] The parties want those disputes decided by a tribunal which they have chosen, commonly on the grounds of such matters as its neutrality, expertise, and privacy, the availability of legal services at the seat of the arbitration and the unobtrusive efficiency of its supervisory law.[18]

There is no rational basis upon which businessmen would be likely to wish to have questions of the validity or enforceability of the contract decided by one tribunal and questions about its performance decided by another, one would need to find very clear language before deciding that they must have had such an intention.[19] Businessmen frequently do want the question of whether their contract was valid, or came into existence, or has become ineffective, submitted to arbitration and that the law should not place conceptual obstacles in their way.[20]

Section 7 was intended to enable the courts to give effect to the reasonable commercial expectations of the parties about the questions which they intended to be decided by arbitration. But Section 7 will not achieve its purpose if the courts adopt an approach to construction which is likely in many cases to defeat those expectations.[21] Therefore, construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal.[22]

The principle of separability enacted in Section 7 means that the invalidity or rescission of the main contract does not necessarily entail the invalidity or rescission of the arbitration agreement. The arbitration agreement must be treated as a distinct agreement and can be void or voidable only on the grounds which relate directly to the arbitration agreement.[23] There may be cases in which the ground upon which the main agreement is invalid is identical with the ground upon which the arbitration agreement is invalid.[24] For example, if the main agreement and the arbitration agreement are contained in the same document and one of the parties claims that he never agreed to anything in the document and that his signature was forged, that will be an attack on the validity of the arbitration agreement.[25] But the ground of attack is not that the main agreement was invalid. It is that the signature to the arbitration agreement, as a distinct agreement, was forged. Similarly, if a party alleges that someone who purported to sign as an agent on his behalf had no authority whatever to agree on his behalf, that is an attack on both the main agreement and the arbitration agreement.[26]

On the other hand, if the allegation is that the agent exceeded his authority by entering into the main agreement in terms which were not authorised or for improper reasons that are not necessarily an attack on the arbitration agreement.[27]

Even if the allegation is that there was no concluded agreement (for example, that the terms of the main agreement remained to be agreed) that is not necessarily an attack on the arbitration agreement. If the arbitration clause has been agreed, the parties will be presumed to have intended the question of whether there was a concluded main agreement to be decided by arbitration.[28]

Section 7 is intended to overcome the arguments that because the main agreement and the arbitration agreement were bound up with each other, the invalidity of the main agreement should result in the invalidity of the arbitration agreement. They must be treated as having been separately concluded and the arbitration agreement can be invalidated only on a ground which relates to the arbitration agreement and is not merely a consequence of the invalidity of the main agreement.[29]

Section 7 reproduces in English Law the principle that was laid down by Section 4 of the United States Arbitration Act, 1925. The validity, existence or effectiveness of the arbitration agreement is not dependent upon the effectiveness, existence or validity of the underlying substantive contract unless the parties have agreed to this.[30] The purpose of these provisions, as the  United States Supreme Court (“USSC”) observed in Prima Paint Corpn v. Flood & Conklin Manufacturing Co.,[31] is that the arbitration procedure, when selected by the parties to a contract, should be speedy and not subject to delay and obstruction in the courts.[32]

The doctrine of separability requires direct impeachment of the arbitration agreement before it can be set aside. This is an exacting test. The argument must be based on facts that are specific to the arbitration agreement. Allegations that are parasitical to a challenge to the validity to the main agreement will not do.[33]

Recently, Fiona Trust was followed by High Court of Justice Queen’s Bench Division Commercial Court[34] (“the High Court”), wherein it was held that an arbitration agreement is to be treated as a distinct and separable agreement from the contract of which it forms part. The mere unenforceability of the contract will not of itself result in the unenforceability of the arbitration agreement. However, an arbitration agreement may be rendered void or unenforceable if it is directly impeached on grounds that relate to the arbitration agreement itself and are not merely a consequence of the invalidity of the underlying contract. If the assumed facts are proved in the arbitration the illegality will be established and the guarantees will not be enforced. This would not be contrary to our obligation of international comity and would, therefore, not offend against the notions of public policy.[35] The policy and purpose of the rule which invalidates the guarantees i.e. main agreement, does not strike down the arbitration provisions.[36]

The requirement that the enforceability of the arbitration agreement is separable from that of the principal contract was explained and illustrated in Harbour Assurance v. Kansa General International Insurance,[37] wherein the Court of Appeal held that the doctrine of separability could apply to preserve the arbitration agreement, even where the principal contract was alleged to be not merely voidable but void ab initio.[38]

US Law:

In Buckeye Check Cashing v. John Cardegna et al.,[39]  USSC relying upon Prima Paint Corp.v. Flood & Conklin Mfg. Co.,[40] and Southland Corp. v. Keating,[41] reiterated three propositions of law. First, as a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract. Second, unless the challenge is to the arbitration clause itself, the issue of the contract’s validity is considered by the arbitrator in the first instance. Third, this arbitration law applies in State as well as Federal Courts. It was further held that the rule of severability establishes how this equal footing guarantee for ‘‘a written arbitration provision’’ is to be implemented.

Buckeye and Prima Paint was recently followed by USSC,[42] wherein it was reiterated that a party’s challenge to another provision of the contract, or the contract as a whole, does not prevent a court from enforcing a specific agreement to arbitrate. As a matter of substantive federal arbitration law, an arbitration provision is severable from the remainder of the contract.[43]

Australian Law:

The Federal Court of Australia held that there is no rule of law which prohibits the empowering of an arbitrator to decide the initial validity of the contract containing the arbitration clause.[44] For those who hold a different view, there is no “received doctrine” to this effect.[45] The arbitration clause is regarded as severable from the main contract with the result that, logically, an arbitrator, if otherwise empowered to do so, can declare the main contract void ab initio without at the same time destroying the basis of his power to do so.[46]

True meaning of “contract/transaction – ‘whether contractual or not’, ‘defined legal relationship’[47]

There is no doubt that at the time of entering into an agreement, the parties believe that they are entering into a valid and binding agreement. It is not that the parties never met or never agreed -upon the terms or no consequences flowed from their invalid contract.[48] In the classic terminology of contract, there is undoubtedly consensus ad idem as to the terms of the contract.

It is a well-settled law (India, Soviet, US, and English Law) that the words must be construed as far as possible in their popular meanings. As a matter of everyday usage amongst commercial men, the word ‘contract‘ is used to mean an agreement, document, or bargain, whether legally enforceable or not. As a matter of usage in commercial transactions, the meaning of the word ‘contract‘ is not confined to a legally enforceable contract. Its meaning includes an agreement entered into between the parties, even if the agreement turns out to be invalid.

In reality, a transaction is a legal fact, is not always confined only to the expression of the will of the parties, directed to the achievement of a legal result, but gives rise, in the event of the breach of the requirements of the law, concerning the content and form of the transaction, to other consequences envisaged by the law.

It is necessary that there is a strict delineation of the factual elements lying at the basis of the legal relationships, to the establishment of which the will of the parties is directed, and the legal consequences, which the parties were not able to or did not wish to contemplate but which independently of their will are established by law. Such a delineation very distinctly manifests itself in an invalid transaction, the consequences of which are established by law. Therefore, the assertion is incorrect that an invalid (null and void) transaction does not result in any consequences.[49]

The USSC rejected the contention that the only arbitration agreements to which the provision applies are those involving a ‘‘contract,’’ and since an agreement void ab initio under State law is not a ‘‘contract,’’ there is no ‘‘written provision’’ in or ‘‘controversy arising out of’’ a ‘‘contract,’’ to the provision can apply. The USSC held that it does not read ‘‘contract’’ so narrowly.[50]

The fact that the main agreement is invalid (void, voidable or void ab initio) does not mean that there were no specific legal relationships to which the arbitration agreement could relate to. Both Section 7 of the Act and Article II of the New York Convention expressly refers to defined legal relationships ‘whether contractual or not‘. A relationship which gives rise to a claim for restitution and unjust enrichment is a defined legal relationship.[51] In any event, the reference to ‘defined legal relationship‘ is not limited to a contractual relationship since Section 7 of the Act as well as Article II(1) adds the words ‘whether contractual or not‘. Therefore, the claims framed in tort can be submitted to arbitration since they come within the purview of the arbitration agreement.[52] A claim in restitution is a claim which does arise out of a specific legal relationship.[53]

Effect of the doctrine of separability on the agreement and pro-arbitration policy in India (Section 7 read with Sections 5 and 16 of the Act)

A fresh line must be drawn to ensure the fulfillment of the intent of Parliament in enacting the Act and the 2015 Amendment Act and towards supporting commercial understandings grounded in the faith in arbitration.[54] It appears that a golden triangle i.e. Section 7 read with Sections 5 and 16 of the Act, has been enacted by Parliament which not only recognises the doctrine of separability but also restricts the court from interfering with the arbitrator’s power/ arbitral process.

English and Indian Law acknowledge that the basic principle which must guide judicial decision-making is that arbitration is essentially a voluntary assumption of an obligation by the contracting parties to resolve their disputes through a private tribunal.[55] Where commercial entities and persons of business enter into a transaction, they do so with a knowledge of the efficacy of the arbitral process.[56] The commercial understanding is reflected in the terms of the agreement between the parties.[57] The court has to impart to that commercial understanding a sense of business efficacy.[58]

In Ayyasamy v. A. Paramasivam,[59] the Supreme Court, quoting Russell on Arbitration concerning the doctrine of separability, held that doctrine of separability and Section 7 of the Arbitration Act, 1996 provides a statutory codification of the previous case law on this subject. The relevant extract of the judgment is as under:

54. …In Russell on Arbitration [24th Edn., 2015, para 2-007], the doctrine of separability has been summarised in the following extract:

The doctrine of separability.—An arbitration agreement specifies the means whereby some or all disputes under the contract in which it is contained are to be resolved. It is however separate from the underlying contract:

“An arbitration clause in a commercial contract … is an agreement inside an agreement. The parties make their commercial bargain … but in addition, agree on a private tribunal to resolve any issues that may arise between them.”

This is known as the doctrine of separability and Section 7 of the Arbitration Act, 1996 provides a statutory codification of the previous case law on this subject. …”

(emphasis supplied)

 

Given the statutory codification of the doctrine of separability in the Act (and even otherwise) and the interpretative approach adopted by the Indian Court as narrated above, the aforesaid foreign judgments which deal with ‘doctrine of separability and its effect’, ‘defined relationship whether contractual or not’, ‘meaning of transaction/contract’, ‘construction of arbitration agreement’ and ‘vice/public policy attached to the main agreement not affects the arbitration agreement’ would be squarely applicable for strengthening the institutional efficacy of arbitration in India.

To eliminate the vices of unnecessary litigation, Section 5 by a non-obstante clause, provides a clear message that there should not be any judicial intervention for scuttling the arbitration proceedings.[60]

Section 16 empowers the arbitral tribunal to rule upon its jurisdiction, including ruling on any objection for the existence or validity of an arbitration agreement. Section 16(1)(b) stipulates that a decision by the Arbitral Tribunal that a contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. Hence, the invalidity of the contract between the parties does not render the arbitration agreement invalid as a consequence of the law.[61] This recognises as inhering in the arbitrator the jurisdiction to consider whether the main contract (other than the arbitration clause) is null and void.[62] The arbitration agreement survives for determining whether the contract in which the arbitration clause is embodied is null and void.[63]

It would be relevant to mention that even under Part II of the Act (Section 45), the legislature has embedded the doctrine of separability and its implication. In Part II as well, the Court is not to be influenced by the validity of the main agreement, even if the parties contend that the main agreement is not valid for any reason including ab initio invalidity. As long as the arbitration agreement is neither null and void nor inoperative and nor incapable of being performed, the Court would refer the matter to arbitration even though the main agreement is not valid.[64]

Non-applicability of Article 299 of the Constitution of India with the arbitration agreement

One may argue that the aforesaid position of law may be considered to be valid as it relates to the contract between private parties. However, when it comes to the agreement entered into by the State in the exercise of its executive power, non-fulfilment of the requirement of Article 299 of the Constitution of India would render the main agreement as null and void being contrary to public policy and with it, the arbitration agreement must collapse. It may also be argued that such public policy also attaches to the arbitration agreement rendering it null and void.

At first, the aforesaid argument appears to be attractive, but does not stand in law and deserves to be rejected for various reasons. As already explained, the public policy or reason for invalidity attached to the main agreement does not relate to the arbitration agreement. Further, Article 299 corresponds substantially to Article 175(3) of the Government of India Act, 1935. It is not in dispute that the underlying objective behind Article 299 is to ensure that no rights and obligations are created against the State without the blessing of the Governor or the President, as the case may be. There is a substantial and crucial difference between the main agreement and an arbitration agreement:

  • The main agreement provides for rights and obligations of the parties, whereas the arbitration agreement does not provide for any rights and obligations pertaining to the dispute in question. The main agreement deals with the substantive rights of the parties and the consequence thereof. In contrast, the arbitration agreement does not deal with substantive rights and is rather a procedural agreement between the parties;
  • In case of breach of the main agreement, the court may grant various remedies including specific performance thereof. However, in the case of an arbitration agreement, the only remedy available is the specific enforcement of the arbitration agreement.
  • When a contract contains an arbitration agreement, it is a collateral term relating to the resolution of disputes, unrelated to the performance of the contract. It is as if two contracts – one regarding the substantive terms of the main contract and the other relating to resolution of disputes – had been rolled into one, for purposes of convenience. An arbitration clause is, therefore, an agreement independent of the other terms of the contract or the instrument.

The contract not conforming to Article 299(1) is not void in the technical sense that it cannot be ratified. The Supreme Court of India held that there should be nothing to prevent the ratification of the contract by the Government especially if that was for the benefit of the Government.[65] Since the arbitration agreement incorporated in the main agreement neither prescribes any right/obligation nor relates to the performance of the substantive right under the main agreement, it would remain valid even if the rigor of Article 299 may not have been complied with.

Conclusion

 It is evident from above that both in common law as well as in the civil law jurisdictions, the courts have recognised the ambit and extent of principle of separability, which makes it imperative for the Indian Courts to make a fresh start given the adoption of the principle of separability by  Parliament in Section 7 of the Act. This gets further strengthened from the very fact that the aforesaid change in legislative policy requires that any doubts concerning the scope of arbitral issues should be resolved in favor of arbitration and that arbitration clauses should be construed as broadly as possible.[66] The evolution of these foreign jurisdictions as arbitration hubs lies within the pro-arbitration approach adopted therein as early as 1990s. In order to develop India as an arbitration hub, it is imperative for the Indian Courts to adopt such an approach and instil the confidence between the parties.

There is every reason to presume that the parties being consensus ad idem intend to have the defined legal relationships decided by the same tribunal[67] whether contractual or not, and the claims arising therefrom, irrespective of whether their contract is effective or not, since arbitration is intended to be a one-stop method of adjudication for the determination of all disputes.[68]

Therefore, the practice of unnecessary challenges to the arbitration agreement by the parties should be nipped at the bud and the parties must be directed to abide by the arbitration agreement for the same having been consensus ad idem, irrespective of the nature of invalidity attached to the main agreement between them.


*Alumni, National Law University Odisha (Batch of 2009-14), presently working as In-house Counsel at an Indian Conglomerate. Anurag may be reached at anuragnluo@gmail.com. The views expressed herein are personal and do not represent views of any organisation. 

[1]Vijay Karia v. Prysmian Cavi E Sistemi SRL, 2020 SCC OnLine SC 177 (3 Judges-Bench).

[2]Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386, para 53.

[3]Id.

[4]Id.

[5]Caravel Shipping Services Pvt. Ltd. v.  Premier Sea Foods Exim Pvt. Ltd., (2019) 11 SCC 461;

Jugal Kishore Rameshwardas v.  Goolbai Hormusji, AIR 1955 SC 812.

[6]Sojuznefteexport (SNE) v. Joc Oil Ltd., Court of Appeal of Bermuda, Yearbook Commercial Arbitration 1990, Vol. XV [recently cited by Bermuda Supreme Court in Huawei Tech Investment Co. Ltd. v. Sampoerna Strategic Holdings Limited, (2014) SC (Bda) 8 Civ (14 February, 2014)].

[7] R.F. Nairman, J.  reiterated pro-arbitration bias in Vijay Karia v. Prysmian Cavi E Sistemi SRL, 2020 SCC OnLine 177 (3 Judges-Bench).

[8]Supra Note 6.

[9]Lord Diplock, Paal Wilson & Co. v. Partenreederei (sup.), (1983) AC 8541.

[10]Supra Note 6, para 42.

[11]Supra Note 6, para 81.

[12]Supra Note 6, para 84.

[13]Mackender v. Feldia, (1967) 2 QB 590.

[14]Id., supra Note 6, para 105.

[15]Fiona Trust and Holding Corpn v. Privalov, [2007] Bus LR 686 : [2007] UKHL 40.

[16]Id., para 5.

[17]Id., para 6.

[18]Id.

[19]Id., para 7.

[20]Id., para 10.

[21]Id.

[22]Id., para 13.

[23] Id., para 17.

[24]Id.

[25]Id.

[26]Id.

[27]Id., para 18.

[28]Id.

[29]Id.

[30]Id., para 32.

[31]Prima Paint Corpn. v. Flood & Conklin Manufacturing Co., (1967) 388 US 395, 404: 87 SCt 1801.

[32]Supra Note 15, para 32. Fiona Trust and Holding Corpn v Privalov, [2007] UKHL 40.

[33]Id., para 35.

[34]Beijing Jianlong Heavy Industry Group v. Golden Ocean Group Ltd., [2013] Bus LR D 58 : [2013] EWHC 1063 (COMM).

[35]Id., para 41.

[36]Id.

[37]Harbour Assurance Co. (UK) Ltd. v. Kansa General International Insurance Ltd., [1993] 3 WLR 42 : [1993] 1 Lloyd’s Rep 455.

[38]Id.; supra Note 34, para 26.

[39]Buckeye Check Cashing v. John Cardegna et al., 2006 SCC OnLine US SC 14: 546 US 440.

[40]Prima Paint Corp.v. Flood & Conklin Mfg. Co., 1967 SCC OnLine US SC 160 : 388 US 395 : 87 SCt 1801 : 18 LEd 2d 1270.

[41]Southland Corp. v. Keating, 1984 SCC OnLine US SC 19 :  465 US 1 (1984): 104 SCt 852: 79 LEd 2d 1.

[42]Rent–A–Center, West v. Antonio Jackson, 2010 SCC OnLine US SC 78 : 561 US 63 (2010) : 177 LEd 2d 403 (2010).

[43]Id.

[44]QH Tours Ltd v. Ship Design & Management (Aust) Pty Ltd., (1991) 33 FCR 227.

[45]Id.

[46]Id.

[47]Supra Note 6, paras 122 to 124.

[48]Supra Note 6, para 114.

[49]Supra Note 6, para 113.

[50]Buckeye Check Cashing v. John Cardegna et al., 546 U.S. 440 relaying upon Prima Paint Corp.v. Flood & Conklin Mfg. Co., 388 US 395: 87 SCt 1801: 18 LEd 2d 1270 and Southland Corp. v. Keating, 1984 SCC OnLine US SC 19 : 465 US 1 (1984) : 104 SCt 852: 79 LEd 2d 1.

[51]Supra Note 6, paras 94 & 95.

[52]Supra Note 6, para 142.

[53]Supra Note 6, para 143; Sections 70 and 65 of the Contract Act, 1872.

[54]Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386, para 57.

[55] Supra Note 15; Id., paras 48 and 53.

[56]Supra Note 57, paras 48 and 53.

[57]Id.

[58]Id.

[59] Id., para 54.

[60]Id., para 12.2.

[61]Id., para 34, Swatantra Properties (P) Ltd. v.  Airplaza Retail Holdings Pvt. Ltd., Arbitration and Conciliation Appl. u/S. 11(4) No. 134 of 2017, Allahabad HC (Judgment dt. 28.05.2018).

[62]Id.

[63]Supra Note 57, para 34.

[64]Sasan Power Ltd. v. North American Coal Corpn. (India) (P) Ltd., (2016) 10 SCC 813, paras 49 and 81.

[65]Chaturbhuj Vithaldas v. Moreshwar Parasharan, AIR 1954 SC 236, para 42.

[66]Vijay Karia .v. Prysmian Cavi E Sistemi SRL , 2020 SCC OnLine 177 (3 Judges-Bench); David L. Threlkeld & Co. Inc. v. Metallgesellschaft Ltd. (London), (1991) 923 F 2d 245 (2d Cir).

[67]Supra Note 15, para 14; Federal Supreme Court of the Federal Republic of Germany (Bundesgerichtshof) (1970) 6 Arbitration International 79, 85.

[68]Supra Note 15, para 27.

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Dipak Misra, CJ and AM Khanwilkar and Dr DY Chandrachud, JJ stayed the Delhi High Court judgement dated 17.02.2016 in Indian Radiological and Imaging Association (IRIA) v Union of India, Writ Petition (C) No. 6968 of 2011 for negating the directions given by the Supreme Court in Voluntary Health Association of Punjab v Union of India, (2016) 10 SCC 265.

In Voluntary Health Association of Punjab case, the Supreme Court had issued comprehensive directions for the purpose of effective implementation of the provisions of the Pre-conception and Pre-natal Diagnostic Techniques (Prohibition of Sex Selection) Act, 1994 (PCPNDT Act). In the said judgment, the Court had directed the states and the Union territories to implement the Pre-conception and Pre-natal Diagnostic Techniques (Prohibition of Sex Selection) (Six Months Training) Rules, 2014 forthwith considering that the provision for training required under the above subordinate legislation, is imperative to realise the objects and purposes of the Act.

When the validity of the said Training Rules was challenged before the Delhi High Court, it held that it was unable to find any provision in the PCPNDT Act empowering any of the bodies constituted under the law or even the Central government to prescribe qualifications for practicing medicine with the aid of an ultrasound imaging equipment or to prescribe the nature and content of the curriculum or duration of the qualification.

After going through the various provisions of the Training Rules and the PCPNDT Act, the Court said:

 “Prima facie the judgment of the Delhi High Court has trenched upon an area of legislative policy. Judicial review cannot extend to reappreciating the efficacy of a legislative policy adopted in a law which has been enacted by the competent legislature. Both the Indian Medical Council Act, 1956 and the PCPNDT Act are enacted by Parliament. Parliament has the legislative competence to do so. The Training Rules 2014 were made by the Central Government in exercise of the power conferred by Parliament. Prima facie, the rules are neither ultra vires the parent legislation nor do they suffer from manifest arbitrariness.”

It said that Parliament which has the unquestioned authority and legislative competence to frame the law considered it necessary to empower the Central government to frame rules to govern the qualifications of persons employed in genetic counselling centres, laboratories and clinics. The wisdom of the legislature in adopting the policy cannot be substituted by the court in the exercise of the power of judicial review.

For the said reasons, the Court stayed the impugned Delhi High Court judgment and directed that   the judgment of this Court in Voluntary Health Association of Punjab case shall be strictly enforced by all states and union territories untrammelled by any order of any High Court or any other court. [Union of India v. Indian Radiological and Imaging Association, 2018 SCC OnLine SC 221, order dated 14.03.2018]