‘Association’ referred under Section 2(1)(f)(iii) of The Arbitration and Conciliation Act would include a Consortium of Companies, one of which being a Foreign Company

The Supreme Court while holding that an ‘association’ referred to in the definition of International Commercial Arbitration under Section 2(1)(f)(iii) of the Arbitration and Conciliation Act, 1996, would include a consortium consisting of two or more bodies corporate, at least one of whom is a body corporate incorporated in a country other than India, however, rejected the request to appoint an arbitrator by holding that in the facts of the case it was a domestic arbitration thus, the appropriate forum would be the High Court.

The said ruling was passed in the matter of M/s Larsen and Toubro Scomi Vs. Mumbai Metropolitan Region Development Authority (Arbitration Petition (C) No. 28 of 2017), decided on 14.10.2018.

Challenge

The question which arose before the Supreme Court was whether a petition under Section 11 of the Act for appointing an arbitrator by a consortium of an Indian company together with a foreign company would be maintainable since according to the consortium one of the parties to the Arbitration agreement, being a body corporate incorporated in a country other than India would attract Section 2(1)(f)(ii) of the Act, it being an International Commercial Arbitration.

Held

The Apex Court in the present matter observed that Section 2(1)(f)(iii) of the Act refers to two different sets of persons: an “association” as distinct and separate from a “body of individuals”.

It further held that notwithstanding that an association within the meaning of Section 2(1)(f)(iii) of the Act, an association of an Indian company and a foreign company may not qualify to be an International Commercial Arbitration.

It further observed that in such an association where the Indian company is the lead partner, has a determining voice in appointing the Chairman of the Supervisory Board and the fact that the consortium’s office is situated in India, the Arbitration would be considered to be a domestic arbitration amenable to the jurisdiction of the High Courts. The gist of this reasoning was that the central management and control of this Consortium appears to be exercised in India and not in any foreign nation.