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INTERNAL MOOT SELECTIONS

2015
017

IN THE SUPREME COURT OF INDIA

M/S SCOOBY DOO

ARESENE VAN MOURINHO

INDIA PRIVATE LTD.

V.

(through its Director, Dr. Do-Little)


APPELLANT

RESPONDEDNT

CIVIL APPEAL NO. 3572 OF 2015


(Arising out of SLP (Civil) No. 2743 Of 2015

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Index
LIST OF ABBREVIATIONS........................................................................................................III
INDEX OF AUTHORITIES.........................................................................................................IV
STATEMENT OF JURISDICTION.............................................................................................VII
STATEMENT OF FACTS..........................................................................................................VIII
ISSUES RAISED............................................................................................................................X
SUMMARY OF ARGUMENTS...................................................................................................XI
ARGUMENTS ADVANCED..........................................................................................................1
1. THE DESIGNATION OF A SEAT OUTSIDE INDIA BY THE PARTIES IS CONTRARY TO THE
PUBLIC POLICY OF INDIA, AS WELL AS THE PRINCIPLES OF CONTRACT LAW..........................1
A. Designation of Foreign Seat outside India Not Permissible in Domestic Arbitration.......1
B. The Arbitration Agreement is in Derogation of Indian Law........................................3
2. THE ERROR REGARDING THE DESIGNATION OF FOREIGN SEAT BY THE INDIAN PARTIES IS
NOT SEVERABLE AND HENCE IT INVALIDATES THE ENTIRE ARBITRATION AGREEMENT............5
A. The Court Cannot Sever the Unenforceable Parts Unless Such Parts Are Clearly
Severable From the Substance of the Agreement...........................................................6
B. Court Cannot Re-Write the Arbitration Agreement....................................................7
3. THE DISPUTES ARISING DUE TO THE ALLEGATION OF OPPRESSION AND MISMANAGEMENT
ARE NOT ARBITRABLE.................................................................................................................8
A. The Issues of Oppression and Mismanagement May Ultimately Result In Criminal
Proceedings and an Arbitrator Is Not Qualified To Adjudicate Over Issues Involving
Criminal Charges..................................................................................................... 8
B. The Relief Sought By The Respondents Is In Rem And Not In Personam As Has Been
Argued By The Appellants...................................................................................... 10

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C. The Companies Act Is a Special Legislation While the Arbitration and Conciliation Act Is
a General Legislation............................................................................................. 11
D. There Exists No Obligation on Part of Courts to Refer the Matter To Arbitration.........12
4. THE JUDGMENT IN SUKANYA HOLDINGS PVT LIMITED V JAYESH H PANDYA LAYS DOWN THE
CORRECT EXPOSITION OF LAW REGARDING THE BIFURCATION OF CAUSE OF ACTION AND/OR
PARTIES......................................................................................................................................12
A. Clear Statutory Intention to Not Permit Bifurcation under Section 8 of the Arbitration &
Conciliation Act.................................................................................................... 13
B. Bifurcation of Cause of Action Not Recognized under Indian Law............................14
C. Arbitration and Conciliation Act Provides For Minimal Interference of Courts............15
D. Doctrine of Election Does Not Subscribe To Bifurcation.........................................17
PRAYERS...................................................................................................................................XIV

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LIST OF ABBREVIATIONS

&
AIR
A&C
Co

And
All India Reporter
Arbitration and Conciliation
Corporation

CPC

Civil Procedure Code

CLB

Company Law Board

edn

Edition

HC

High Court

Hon'ble

Honourable

ICA
Ltd

Indian Contract Act


Limited

M/S

Masseurs

Ors

Others

Section

SC
SCC

MEMORANDUM FOR RESPONDENTS

Supreme Court
Supreme Court Cases

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INDEX OF AUTHORITIES
Cases
ABC Laminart Pvt Ltd v AP Agencies Salem AIR 1989 SC 12394
Altek Lammertz Needles Limited v Lammertz Industrienadel GMBH [2004] 56 SCL 156 (CLB)
.12
Anil Gupta v JK Gupta (2002) 47 CLA 5012
Bansi Lal v Parkash AIR 1952 P&H 3815
Benjamin Scarf v Alfred George Jardine (1881) 7 AC 345...17
Bharat Aluminium Company v Kaiser Aluminium Technical Service Inc (2012) 9 SCC 552...4
Bhatia International v Bulk Trading [2002] 4 SCC 10517
Booz Allen and Hamilton Inc v SBI Home Finance Ltd AIR 2011 SC 2507.10, 11
Canara Bank v Nuclear Power Corporation of India [1995] 2 SCR 482...11
Centrotrade Minerals and Metal Inc v Hindustan Copper Limited (2006) 11 SCC 245.2
Chandra Deo Singh v Prokash Chandra Bose AIR 1963 SC 1430..9
Clough v London and North Western Rail Co (1861) All ER 64617
Coal India Limited v Canadian Commercial Corporation AIR 2012 Cal 92..3
Company Law Board v Saz Special Civil Application No 2179 of 2014.11
Corrocraft Ltd v Pan American Airways (1968) 3 WLR 714...17
D Ramachandran v RV Janakiraman AIR 1999 SC 1128.15
Dwijendra Narain Roy v Joges Chandra De AIR 1924 Cal 60017
Enercon (India) Ltd v Enercon GMBH AIR 2014 SC 31525
Executive Engineer Dhenkanal Minor Irrigation Division v NC Budharaj 2001 (1) SCR 26412
Fuerst Day Lawson Ltd v Jindal Exports Ltd AIR 2011 SC 264914
Ganga Prasad Verma v State of Bihar 1995 (1) BLJR 395...12
Hakam Singh v Gammon (India) Ltd AIR 1971 SC 740..4
HDFC Bank v Satpal Singh Bakshi (2013) ILR 1Delhi 583.11
Hindustan Petroleum Corpn Ltd v Pinkcity Midway Petroleums 2003 (6) SCC 503...16
In Re PC Venkataramanayya (1931) AIR 1931 Mad 441.10
Jagdish Chander v Ramesh Chander (2007) 5 SCC 719.6
Kensoft Infotech Limited v Sundaram BNP Paribas Home Finance Ltd MIPR 2010 (1) 301.16
Keshavji Ravji v Commissioner of Income Tax AIR 1991 SC 180614
Kok Hoong v Leong Cheong Kweng Mines Ltd (1964) AC 993.17
Kunjan Nair v Narayanan Nair AIR 2004 SC 1761..16
Life Insurance Corporation of India v DJ Bahadur (1981) ILLJ 1 SC..10
M Vaidyanathan v The Sub-Divisional Magistrate Erode AIR 1957 Mad 658
M Venkatachalapathy v United India Insurance Company Ltd 2007 ACJ 94
Major General Shanta Shamsher v Kamani Brothers Private Ltd AIR 1959 Bom 20110
Mumbai International Airport Pvt Ltd v Golden Chariot Airport 2011 (86) ALR 47..18
N Radhakrishnan v Maestro Engineers (2010) 1 SCC 72.....................................................8, 16
Narsingh Das v Gogan Ram Lachmi Narain AIR 1955 Punj 31...14
National Thermal Power Corporation v The Singer Company (1992) 3 SCC 551.3
Nibro Limited v National Insurance (1991) ILR 2 Delhi 172.7
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Nirmaljit Singh Hoon v State of West Bengal (1973) 3 SCC 753..9
Oomor Sait v Asiam Sait 2001 (3) CTC 269.16
Pakala Narayana Swami v Emperor AIR 1939 PC 47...14
PC Rajput v State of Madhya Pradesh 1997 (1) MPLJ 102..16
Punjab National Bank v Balikram Kissenchand AIR 1940 Cal 225.10
Radha v Deepa Restaurant ILR 2014 (1) Kerala 56816
Raja Narayan Bansilal v Maneck Phiroz Mistry AIR 1961 SC 29.8
Rakesh Malhotra v Rajendar Malhotra Company Appeal 10 of 2013...12
Roop Lal Sathi v Nachhattar Singh AIR 1982 SC 155915
Shin Satellite v Jain Studios AIR 2006 SC 963...6, 7
Sopan Sukhdeo Sable v Assistant Charity Commissioner AIR 2004 SC 1801.15
Sudershan Chopra v CLB (2004) 52 SCL 429 (P&H)..12
Sukanya Holdings Pvt Ltd v Jayesh H Pandya AIR 2003 SC 225216, 17
TDM Infrastructure Private Limited v UE Development India Private Limited (2008) 14 SCC
271...2, 3, 4, 5.
Venture Global Engineering v Satyam Computer Services Ltd (2008) 4 SCC 1903
WPIL Ltd v NTPC Ltd 2009 (1) Arb LR 378...15
Yograj Infrastructure Ltd v Ssang Yong Engineering and Construction AIR 2011 SC 35171
Gautam Kapur v Limrose Engineering Order of CLB in CP No 18 of 200012
Statutes
Arbitration Act 1940..14
Arbitration and Conciliation Act 1996....................................................................1, 4, 8, 14, 16
Companies Act 1956.7, 8, 10, 11, 12
Indian Contract Act 1872.1, 4, 5
Indian Penal Code 1860..9
Books/ Commentaries/Encyclopedias
David St John Sutton, Judith Gill and Matthew Gearing, Russell on Arbitration, (23rd edn Sweet
& Maxwell 2009).3
Dinshah Fardunji Mulla, Mulla The Code of Civil Procedure, vol 1 (18th edn Lexis Nexis
Butterworths Wadhwa 2011).15
GP Singh, Principles of Statutory Interpretation (9th edn Lexis Nexis 2004)..10
Halsbury's Laws of England (4th edn 1974) vol 9..7
P Ramanatha Aiyar, Advanced Law Lexicon, vol 1 (3rd edn Lexis Nexis 2005)..7
PC Markanda, Naresh Markanda and Rajesh Markanda, Arbitration Step by Step (LexisNexis
2012)6
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Sir John Comyns & Stewart Kyd, A Digest of the Laws of England, vol 4 (4th edn Luke White
1793)..17

STATEMENT OF JURISDICTION

This matter has been referred to the present bench by the order of the division bench of this
Honble High Court under Order IV, Rule 2 of the Supreme Court Rules, 2013. The bench has
the jurisdiction to try this matter.
The respondents humbly submit to the jurisdiction of the Honble Supreme Court under the
aforementioned provisions. The respondents shall accept any judgment of the Honble bench as
final and binding upon them and shall execute it in its entirety and in good faith.

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STATEMENT OF FACTS

The Appellant, M/s Scooby Doo India Private Ltd is a company incorporated in India. It was
incorporated by Scooby Doo Intl Corp which holds 55% shares of the appellant-company. It
entered into a tri-partite agreement with the respondent and one Mr Louis CK. The respondent is
an individual who held 18% shares in the appellant-company when he entered the TPA.
The tri-partite agreement provided for transfer of 5% out of the 18% of the respondents shares in
the appellant company to Mr Louis CK. INR 50,000,000 was to be paid by the Appellant
Company to the respondent, along with him being appointed him as a Director of the appellant
company. Under the TPA, the shares have been transferred but the money has not been
transferred to the respondents bank account.
Dr. Do-Little, who represents the appellant-company, received a letter from the respondent
requesting the payment of the money as well taking the required steps towards his appointment
as a Director, as no steps had been taken by the appellate company to that effect. It was clarified
that the decision regarding his appointment as a director has not been made. The payment was
said to be made after a reaching a final decision regarding his appointment as a director.
The respondent then filed a Company Petition before the Company Law Board (CLB) alleging
oppression, mismanagement, and conduct of affairs prejudicial to public interest. He prayed
before the CLB to direct the appellant-company to transfer INR 50,000,000 and appoint the
respondent as a director of the appellant company and grant any other relief that the CLB may
deem fit.

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The appellants then filed an application under Section 45 of Arbitration Act seeking reference of
the dispute to arbitration for which they relied on Clause 15 of the TPA. Clause 15 stated that any
dispute arising out of or in connection with the TPA was to be resolved under agreed upon rules
and a mutually appointed arbitrator. The seat of the said arbitration was agreed to be Vindobona,
Danubia. The appellant-company argued for obligation of CLB to refer the dispute to arbitration
as per the TPA. It was contended by the respondent that the arbitration clause of the TPA was
invalid. CLB dismissed the application filed by the appellant-company after the arguments from
both sides.
The Honble High Court upheld the Order of the CLB on an appeal under Section 10-f of the
Companies Act. It held that an arbitration agreement between two Indian parties, designating the
seat of arbitration to be outside India, was contrary to the public policy of India and in violation
to the provisions of Indian Contract Act. It was also concluded that disputes regarding oppression
and mismanagement disputes were incapable of being referred for arbitration since the CLB was
conferred with exclusive jurisdiction to grant the various statutory reliefs under Section 402 of
the Companies Act, whereas the arbitrator was incompetent to grant the same.
The Ld. Counsel appearing for the Appellant-Company had argued that even if the Honble
Court held that oppression and mismanagement disputes were incapable of being referred to
arbitration due to the limited powers of an arbitrator, it was still possible to refer the matter to the
arbitrator in order to decide whether the dispute raised could be decided within the terms of the
TPA. The Honble High Court noted that adopting such an approach was to amount to a
bifurcation of cause of action, which was impermissible under Indian law as per a decision of a
two-judge Bench of this Court in Sukanya Holdings Pvt. Limited v. Jayesh H. Pandya, (2003) 5
SCC 531.
This Judgment and Order dated 23.11.2014 of Honble High Court was challenged by the
appellants before the Honble Supreme Court of India. The Honble Supreme Court framed the
questions of law in the present case. The Honble court also directed that the records of the case
be placed before the Honble Chief Justice of India for necessary action. The case was then
referred to a larger bench comprising of three judges of Honble Supreme Court.

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ISSUES RAISED

1. Whether an agreement between two Indian parties to resolve their disputes through
arbitration, seated outside India, is contrary to considerations of public policy, and
contract law of India?
2. If the above question is answered in the affirmative, whether the impermissibility of a
stipulation designating the arbitral seat to be outside India invalidates the entire
arbitration agreement, or can the same be severed to hold the remainder of the arbitration
agreement as being valid and enforceable?
3. Whether disputes arising out of oppression and mismanagement applications/ complaints
under Sections 397, 398 read with Section 402 of the Companies Act, are capable of being
referred to arbitration?
4. Whether the principles relating to bifurcation of cause of action and/or parties,
enunciated by a two-judge bench of this Court in Sukanya Holdings Pvt Limited v Jayesh
H Pandya (2003) 5 SCC 531, lay down the correct exposition of law?

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SUMMARY OF ARGUMENTS

1. An Agreement Between Two Indian Parties To Resolve Their Disputes Through


Arbitration, Seated Outside India, Is Contrary To Considerations Of Public Policy And
Contract Law Of India.
The respondent submits that the present arbitration agreement is null and void, being against the
public policy and contract law of India, and thus cannot be enforced. The respondent submits the
following arguments: firstly that the designation of foreign seat is impermissible in domestic
arbitration, and secondly that the present agreement is in derogation of India law.
2. The Entire Arbitration Agreement Is Invalidated Due To Designation Of The Seat Of
Arbitration Outside India By The Parties.
The respondent submits that the arbitration agreement is invalidated due to the error arising due
to the designation of the seat of arbitration. The error regarding the foreign seat cannot be
severed in order to give effect to the rest of the agreement. For this, the respondent presents the
following arguments: firstly, that the error regarding the foreign seat is not severable from the
agreement, and secondly, that the Court is not to re-write the arbitration agreement in order to
give effect to the agreement.
3. The Disputes Arising Due To the Allegation of Oppression And Mismanagement Are Not
Arbitrable
The respondents submit that the issues regarding allegations of oppression and mismanagement
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Firstly, issues of oppression and mismanagement may ultimately result in criminal proceedings
which the arbitrator is not qualified to adjudicate over; secondly, the relief sought by the
respondents before the CLB was not limited to actions in personam only but also included in
rem; thirdly, the Companies Act is a special legislation while the Arbitration And Conciliation
Act is a general legislation, therefore interpretation of Arbitration And Conciliation Act yields to
the interpretation of provisions of Companies Act; lastly, there exists no obligation on part of the
courts to refer the issues of oppression and mismanagement to arbitration.
4. The Judgment in Sukanya Holdings Pvt Limited V Jayesh H Pandya Lays Down the
Correct Exposition of Law Regarding the Bifurcation of Cause Of Action And/or Parties
The respondents submit that the judgement in Sukanya Holdings lays down te correct exposition
regarding the issue of bifurcation and the following arguments are forwarded in support of the
statement-Firstly, Clear statutory intention to not permit bifurcation under Section 8 of the
Arbitration & Conciliation Act; secondly, bifurcation of cause of action not recognized under
Indian Law as partial rejection of claims is not permissible under Indian law and a part of the
claim made by the plaintiff does not find mention in the Indian laws while the same regarding
whole of claim does in the Code Of Civil Procedure; thirdly, Arbitration and Conciliation Act
provides for minimal interference of courts. The court can either refer or refuse to refer the
matter to arbitration. However part-reference would lead to increasing interference of the court in
the functioning of the tribunal; lastly, Doctrine of election does not allow for bifurcation as has
been defined in the Sukanya judgement.

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ARGUMENTS ADVANCED
1. THE DESIGNATION OF A SEAT OUTSIDE INDIA BY THE PARTIES IS CONTRARY TO THE
PUBLIC POLICY OF INDIA, AS WELL AS THE PRINCIPLES OF CONTRACT LAW
1. The respondents humbly submit that the designation of the seat of arbitration outside India is
contrary to the public policy of India and the principles of contract law. Hence the arbitration
agreement should be declared invalid. For this the respondent submits the following arguments:
firstly that the designation of foreign seat is impermissible in domestic arbitration, and secondly
that the present agreement is in derogation of India law.
A. Designation of Foreign Seat outside India Not Permissible in Domestic Arbitration
2. The scheme of the Arbitration & Conciliation Act, 1996 consists of provisions under Part I of
the Act to be applied in domestic arbitration and those under Part II of the Act to be applied in
international commercial arbitration.1 International commercial arbitration has been defined
under sub-section (f) of section 2 of the Arbitration Act of 1996. Under the said provision an
arbitration can be said to be international commercial arbitration, if one of the parties to the
agreement is not an Indian national or the one who habitually resides outside India 2; or, if the
same is a body corporate incorporated in a country other than India 3; or if the central
management and control of the company is done in any country other than India 4; or, when
government of a foreign country is a party to the arbitration agreement5.
i. The Arbitration Agreement Is Not An International Commercial Arbitration.

1 Yograj Infrastructure Ltd v Ssang Yong Engineering and Construction AIR 2011 SC 3517.
2 Indian Contract Act 1872 (ICA 1872), s 2(f) (ii).
3 ICA 1872, s 2(f) (ii).
4 ICA 1872, s 2(f) (iii).
5 ICA 1872, s 2(f) (iv).

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3. The facts of the present case must be evaluated on each of the four standpoints. It remains an
undisputed fact that the respondent is an Indian national and the appellate company is
incorporated in India under the Companies Act of India 6. Thus the factual preposition resulting
out of the present arbitration agreement cannot be said to be an international commercial
arbitration, as far as the first two criteria are concerned. The fourth criteria can also be rejected
since it is quite evident that none of the parties to the agreement are government of foreign
countries. It is pertinent to mention here that this Honble court has held that if the two parties to
a contract have an Indian identity or if they are incorporated in India then the question of
applicability of clause (iii) of Section 2(1)(f) i.e. the third criteria, would not arise.7
4. Then, the third criteria, which relates to companies control and central management, needs to
be considered. It is an undisputed fact that the management of the appellate company is situated
in India. Another fact that remains incontestable is that the incorporator and the majority
shareholder of the appellate company, exercises no control over the day to day functioning of the
latter. Therefore there is no company outside India that looks into the central management or
controls the company from outside India. Thus, the present factual arrangement cannot be called
international commercial arbitration even under the third criteria. Hence, the agreement has to
ii. Seat of Arbitration is Outside India
5. Taking note of the fact that as per the Clause 15 of the arbitration agreement 8 entered by the
parties, the seat of arbitration has been decided to be Vindobana, Danubia 9 i.e. a place in a
country other than India or rather a place i.e. outside India. Since both the parties above are
Indian then the restriction imposed by this Honble court10 would be applicable to them and thus
6 Factsheet, 3.
7 TDM Infrastructure Private Limited v UE Development India Private Limited (2008) 14 SCC 271.
8 Factsheet, 7.
9 ibid.
10 TDM Infrastructure (n 7).

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they cannot have the seat of arbitration outside India and, as per this Honble court, if the seat is
agreed to be outside India then the same will be against the public policy of India11.
6. Thus the present arbitration agreement 12, which was part of the tripartite agreement (TPA) 13, is
against public policy of India. It has been held by this Honble court that no agreement can be
against the public policy of India14 and if any agreement is against the public policy of India then
the same would be void15. It thus follows that if there is an arbitration agreement between two
Indian parties then they cannot choose to have the seat of arbitration outside India and if they
choose to do so then the same will be against the public policy of India.
B. The Arbitration Agreement is in Derogation of Indian Law
7. It is most respectfully submitted before this Honble court, that this court through one of its
judgement has made it amply clear that though the aspect of party autonomy is respected by all
systems of law, the same is subject to public policy of a country. 16 This aspect relating to public
policy was further qualified by this Honble court. 17 It held that the Indian nationals should not
be permitted to derogate from Indian law. This is part of the public policy of the country 18. Here
we can see that the latter case has, in effect placed restriction on an Indian party to a dispute, to
oust the jurisdiction of an Indian court. The court does not restrict the application of the present

11 ibid.
12 Factsheet, 4.
13 ibid.
14 Centrotrade Minerals and Metal Inc. v Hindustan Copper Limited (2006) 11 SCC 245.
15 ibid.
16National Thermal Power Corporation v The Singer Company (1992) 3 SCC 551.
17 TDM Infrastructure (n 7).
18 ibid.

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restriction only to Indian national, but the application has been extended also to the corporations
that are incorporated in India19.
i. The Parties to the suit have Indian Identities.
8. It is pertinent to mention here that it is a matter of undisputed fact that the appellant is a
corporation incorporated in India20 and the respondent is an Indian national. Moreover Mr Louis
CK, who is not a party to the present suit but was a party to the original tripartite agreement
(TPA)21, is also an Indian national.
ii. The Governing Law will be that of the Seat of Arbitration
9. Reference to a place as the seat of arbitration implies that the proper law of that place would
be applicable to the arbitration.22 Also it has been an established principle that the law of the seat
of arbitration will govern both the matrix contract and the arbitration agreement. 23 This law will
govern the substance of the arbitration agreement in addition to the curial aspect. 24 If another
country is chosen as the seat of arbitration, it denotes an acceptance regarding the application of
the law of that country relating to the conduct and supervision of arbitrations in the
proceedings25, which implies that if the seat of arbitration is chosen by the parties then the
arbitration will be governed by the law of such seat.

19 ibid.
20 Factsheet. 3.
21 ibid.
22 Venture Global Engineering v Satyam Computer Services Ltd (2008) 4 SCC 190.
23 David St John Sutton, Judith Gill and Matthew Gearing, Russell on Arbitration, (23rd edn Sweet &
Maxwell 2009) 92. See also Coal India Limited v Canadian Commercial Corporation AIR 2012 Cal 92.
24 ibid.
25 Bharat Aluminium Company v Kaiser Aluminium Technical Service Inc (2012) 9 SCC 552.

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iii. The Arbitration Agreement Restrains Right to Legal Proceedings.
10. As per the provision of the Indian Contract Act, rights of the parties to seek legal recourse
cannot be restricted through an agreement.26 However, the said provision is not applicable if
reference has been made to arbitration.27 Also, parties to a private agreement cannot confer upon
a court jurisdiction which it does not possess, nor can they divest a court of jurisdiction which it
possesses under the ordinary law.28 It is true that the present agreement related to arbitration,
however the effect of such arbitration proceeding will be such that will restrict a parties right to
legal proceedings.
11. This will be clear if discussed in reference to the judgement of the constitutional bench of this
Honble court29. It is pertinent to mention that the constitutional bench did not interfere with the
view taken in the case of TDM Infrastructure 30 and affirmed the same. In the judgement of the
said constitutional bench in Bharat Aluminium it was also held that Part I of the Indian
Arbitration and Conciliation Act of 1996 (hereinafter referred to as the Arbitration Act) would
not be applicable to the arbitrations that takes place outside India. 31 It is important to note that the
awards of an arbitral tribunal or an arbitrator can be enforced under section 36 and challenged
under section 34 of the Arbitration Act. Both the above sections i.e. sections 34 and 36 are
enacted under Part I of the Arbitration Act.
12. Thus, if the seat of arbitration is outside India then the parties to the arbitration can neither
enforce nor challenge the award of such arbitration proceedings. Therefore by choosing the seat
26 ICA 1872, s 28.
27 ibid.
28 ABC Laminart Pvt Ltd v AP Agencies Salem AIR 1989 SC 1239. See also Hakam Singh v Gammon
(India) Ltd AIR 1971 SC 740.
29 ibid.
30 TDM Infrastructure (n 7).
31 Bharat Aluminium (n 25).

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of arbitration to be outside India, the party to the arbitration also choose to impliedly avoid the
jurisdiction of the Indian courts, and is in effect an agreement in restrain of legal proceedings.
13. It follows from the above discussion that if two Indian Parties decide on having the seat of
arbitration outside India then the same will be against public policy as it would result in ousting
of the jurisdiction of the Indian courts, as the right of the parties to legal proceedings will be
restrained.
14. Now, it can be safely inferred from the above discussion that if both the parties to an
arbitration agreement are Indian then the seat of arbitration cannot be outside India. It can be
further deduced that, the seat of arbitration can be outside India only when one or more of the
parties to the arbitration agreement are non-Indian.32 In a situation where one or more parties to
an arbitration agreement are non-Indian, then the arbitration will be an international commercial
arbitration.33 It thus follows that the seat or place of arbitration can be located outside India
only in case of international commercial arbitration.
15. Therefore, the present arbitration agreement is null and void, being against the public policy
of India, and thus cannot be enforced.34 Hence, the plea of the appellate, that the dispute shall be
referred to the decided arbitrator, is devoid of merit and is in turn liable to be rejected.
2. THE ERROR REGARDING THE DESIGNATION OF FOREIGN SEAT BY THE INDIAN PARTIES IS
NOT SEVERABLE AND HENCE IT INVALIDATES THE ENTIRE ARBITRATION AGREEMENT
16. The respondents submit that the invalidity of the delegation of a foreign seat results in the
invalidation of the entire arbitration agreement. The error regarding the foreign seat cannot be
severed to give effect to the rest of the agreement. Hence, the entire arbitration agreement should
be held invalid. For this, the respondents present the following arguments: firstly, that the error
regarding the foreign seat is not severable from the agreement, and secondly, that the Court is not
to re-write the arbitration agreement in order to give effect to the agreement.
32 TDM Infrastructure (n 7).
33 ICA 1872, s 2(f)(i).
34 Enercon (India) Ltd v Enercon GMBH AIR 2014 SC 3152.

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A. The Court Cannot Sever the Unenforceable Parts Unless Such Parts Are Clearly
Severable From the Substance of the Agreement
17. The Doctrine of severability has been recognized by the Indian law regarding an agreement
comprising of valid as well as invalid parts.35 However, the same is only permissible to the extent
that the main substance of the clause is not disregarded. 36 In an arbitration agreement, the clear
intention of the parties to refer the dispute to arbitration must exist and as such, it forms the
substance of the agreement.37 The doctrine of severability cannot be applied in a situation where
it may affect the intention of the parties to arbitrate.
18. The intention of the parties to refer a dispute for arbitration by a private tribunal as well as
the finality and the binding nature of the reward are considered to be necessary elements of an
arbitration agreement.38 Apart from such necessary elements, the arbitration agreement may
comprise of the laws governing the parties and the court having jurisdiction over the matter.39 If
the intention to arbitrate is affected by the severance of the invalid parts, such an agreement
cannot be considered to be a valid arbitration agreement.
19. The Court is also supposed to examine the agreement as whole, and is to dissect the
agreement by taking away the parts considered to be invalid and enforce the remaining parts of
the agreement.40 Thus, the Court is not to sever the unenforceable parts from the arbitration
agreement unless such unenforceable parts are clearly severable from the agreement. 41 The test
35 ibid.
36 Shin Satellite v Jain Studios AIR 2006 SC 963.
37 Jagdish Chander v Ramesh Chander (2007) 5 SCC 719.
38 PC Markanda, Naresh Markanda and Rajesh Markanda, Arbitration Step by Step (Lexis Nexis 2012)
235.
39 ibid.
40 Shin Satellite (n 35).
41 ibid.

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of severability in such a case is not based on textual severability, but rather substantive
severability.42
20. Hence, the substance of the arbitration agreement has to be maintained when severing the
invalid or offensive parts. The designation of the foreign seat for arbitration of the dispute is
provided in the Tri-Partite agreement.43 The wording of Clause 15 denotes an intention to decide
the governing law as well as the seat of the arbitration when referring a dispute connected with
the agreement.44 Thus, the governing law as well as the seat of arbitration cannot be considered
to be severable from the substance of the agreement i.e. the intention of parties to arbitrate.
B. Court Cannot Rewrite the Arbitration Agreement
21. The Doctrine of Severability only allows Court to severe the invalid or offensive parts of the
agreement, while giving effect to the rest of the contract. 45 This is done so as to ensure that the
intention of the parties is given effect by the Court, regardless of the existence of any technical or
mechanical errors.46 However, the Court cannot make additions or alternations to the agreement
for this purpose.47 It is because the intention of the parties form the substance of an agreement
and such alternation or addition would result in the Court giving effect to something that is not
intended by the parties.48
22. If the agreement is altered in any manner by the courts, it would invariably lead to the parties
being bound by the agreement, the terms of which they did not agree upon. The agreement in
42 ibid.
43 Factsheet, 7.
44 ibid.
45 Halsbury's Laws of England (4th edn 1974) vol 9 Para 430.
46 Shin (n 35).
47 P Ramanatha Aiyar, Advanced Law Lexicon, vol 1 (3rd edn Lexis Nexis 2005) 553-554.
48 Shin (n 35).

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such a situation would be as devised by the courts through the addition of any term or a clause,
and not as per the consensus ad idem between the parties. Without the existence of consensus ad
idem i.e. mutual assent, it would be invalid. 49 While the Court has a duty to minimize the judicial
intervention by referring the parties to arbitration, the Court is not allowed to re-write the
agreement in order to give effect to that.
23. The seat of arbitration as well as the procedural law applicable for arbitration has already
been decided by the parties through the arbitration clause of the Tri-partite Agreement dated
26.07.201250. If the court decides to alter the clauses regarding the seat of arbitration and the
applicable laws due to the invalidity, that would result in doing what was not considered or
agreed upon by the parties at the time of the agreement.
3. THE DISPUTES ARISING DUE TO THE ALLEGATION OF OPPRESSION AND MISMANAGEMENT
ARE NOT ARBITRABLE
24. The respondents submit that the dispute arising due to the allegation of oppression and
mismanagement by the appellant-company arising from the Sections 397 and 398 read with
Section 402 of the Companies Act, 1956 against the respondents is inarbitrable and hence cannot
be referred to the arbitrator deriving his power from Clause 15 of the Tri-Partite Agreement. The
respondents submit the following arguments supporting the same: firstly, issues of oppression
and mismanagement may ultimately result in criminal proceedings which the arbitrator is not
qualified to adjudicate over; secondly, the relief sought by the respondents before the CLB was
not limited to actions in personam only but also included in rem; thirdly, the Companies Act is a
special legislation while the Arbitration And Conciliation Act is a general legislation, therefore
interpretation of Arbitration And Conciliation Act yields to the interpretation of provisions of
Companies Act; fourthly, there exists no obligation on part of the courts to refer the issues of
oppression and mismanagement to arbitration.

49 Nibro Limited v National Insurance (1991) ILR 2 Delhi 172.


50 Factsheet, 7.

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A. The Issues of Oppression and Mismanagement May Ultimately Result In Criminal
Proceedings and an Arbitrator Is Not Qualified To Adjudicate Over Issues Involving
Criminal Charges
25. As per the Companies Act, the Central Government must start an investigation for the matters
of mismanagement and oppression if the Company Law Board opines that the business is being
conducted in a manner which is oppressive towards any of the companys members and the
information derived from such investigation may ultimately result in criminal proceedings. 51
Furthermore, there is no prohibition under the provisions of the act of prosecution of the accused
under the Indian Penal Code.52 Section 242(1) of the Companies Act states the authority the
Central Government can exercise when it finds that by virtue of the investigation conducted
under Section 239, there appears guilt of the person so as to be held criminally liable.
26. The respondents further submit that The Honble Supreme Court in N Radhakrishnan v
Maestro Engineers53 has stated that whenever there arise serious allegations of fraud, or a
possibility of criminal action for alleged commission of criminal offences, the matter, for the
furtherance of justice, should be tried in a court of law which would be more competent and have
the means to decide complicated matters involving various questions and issues raised.54
27. The case at hand points to a prima facie case of criminal cheating. 55 The respondent had been
fraudulently induced into entering into a tri-partite agreement on the pretext of being made one
of the directors of the appellant-company and the failure on part of the appellant-company in
complying with the said agreement has led to loss of property of the respondent in the form of
5% of the 18% shares that the respondent held in the appellant-company and non-appointment as
the director has led to harm of mind and reputation of the respondent, thereby fulfilling all the
51 Raja Narayan Bansilal v Maneck Phiroz Mistry AIR 1961 SC 29.
52 M Vaidyanathan v The Sub-Divisional Magistrate Erode AIR 1957 Mad 65.
53 (2010) 1 SCC 72.
54 Ibid.
55 Indian Penal Code 1860, s 415.

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criteria required for a prima facie case of cheating, the test for which is whether there exist
sufficient ground for proceeding and not sufficient ground for conviction. 56 This, thereby, implies
that there is no need to prove intention and the fact that the other requirements of the offence are
satisfied, creates ground enough for proceeding thereby creating a prima facie case of cheating.
28. Thus, the Court can proceed with a suit despite the presence of an arbitration clause if dispute
involves serious questions of law or complicated questions of fact adjudication of which would
depend upon detailed oral and documentary evidence.57 Further, a Civil Court can refuse to refer
matter to arbitration if complicated question of fact or law is involved. 58 Thus, given the fact that
the question of law here is complicated because of the involvement of a criminal offence, the
respondents submit and solicit the intervention of the court in this matter by declaring the issue
to be not capable of being referred to arbitration.

B. The Relief Sought By The Respondents Is In Rem And Not In Personam As Has Been
Argued By The Appellants.
29. The Honble Supreme Court has decided that actions in rem refer to actions determining the
title to property the rights of parties not merely among themselves but against all persons at any
time claiming a right in that property.59
30. The relief sought by the respondent was before the Company Law Board and under sections
397 and 398 of the Companies Act and also claimed that the affairs of the appellant-company

56 Nirmaljit Singh Hoon v State of West Bengal (1973) 3 SCC 753. See also Chandra Deo Singh v
Prokash Chandra Bose AIR 1963 SC 1430.
57M Venkatachalapathy v United India Insurance Company Ltd 2007 ACJ 94; Oomor Sait HG v Asiam
Sait 2001 (3) CTC 269.
58 Ibid. See also N Radhakrishnan (n 53).
59 Booz Allen and Hamilton Inc v SBI Home Finance Ltd AIR 2011 SC 2507.

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were being conducted prejudicial to public interest60, thereby indicating that it was not just the
interest of the respondent but also those of other shareholders of the company which were being
desecrated by the company, thereby not limiting the relief being sought by the respondent to
merely in personam, rather, extend it to all those being prejudiced by such conduct of the
company.
31. Furthermore, in rem implies against the whole world and not just against an individual or a
group of individuals only and this can be equated to be having a legal character which is
something more than a legal right.61 The word character here has been equated to a status and
differentiated from a right The declaration of a person's right operates as against a particular
person or group of persons against a particular person or group of persons against whom the right
is claimed, whereas a man's status is something which defines his position not in relation to any
particular person or group of persons but in relation to the rest of the world; his status
distinguishes him from the rest of the world. 62 Furthermore, the Companies Act has declared a
director as an officer of the company63 and therefore recognises him to be occupying a position
recognised under law. Also, the Indian courts have recognised official position as a legal status
possessing a legal character64, thereby implying that the position that a director occupies in a
company, which by virtue of the Companies Act, is official in nature, and implies that it is
accompanied by a legal character which makes it in rem. This implies that the relief being sought
by the respondents is in rem.

60 Factsheet, 6.
61 In Re PC Venkataramanayya (1931) AIR 1931 Mad 441.
62 Punjab National Bank v Balikram Kissenchand AIR 1940 Cal 225.
63 Companies Act 1956 (CA 1956), s 2(30).
64 Major General Shanta Shamsher v Kamani Brothers Private Ltd AIR 1959 Bom 201.

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C. The Companies Act Is a Special Legislation While the Arbitration and Conciliation Act
Is a General Legislation
32. The respondents submit that in India Generalia specialibus non derogant. 65 The Indian
judiciary has decided that In determining whether a statute is a special or a general one, the
focus must be on the principal subject matter plus the particular perspective. For certain
purposes, an Act may be general and for certain other purposes it may be special and we cannot
blur distinctions when dealing with finer points of law.66
33. In the present case, there is an implied conflict as to whether the matter should be decided by
the company law board or the arbitral tribunal. The Indian courts have held that those disputes
for which there has been a constitution of a special tribunal would be considered to be nonarbitrable.67 This has been held to be true in various cases involving the Rent Control Tribunal
under the Rent Control Act, or Labour Court/Industrial Tribunal under the Industrial Disputes
Act, 1947, or the Debts Recovery Tribunal.68 The specific provisions (Sections 397, and 398) of
the Companies Act refer to the CLB as a special tribunal for the purpose of deciding the disputed
issues. Further, the CLB has been given the additional power, under Section 402 of the
Companies Act, to, without prejudice to the generality of the powers of the CLB under section
397 or 398, to make any order under either Section to provide for various measures stated
therein. Such powers under Sections 397, 398 read with Section 402 of the Act are conferred
only upon the CLB by the Statute and not available to the arbitrator.69
34. Lastly, there existed exclusive jurisdiction for the High Court earlier, and post the Companies
(Amendment) Act, 1988 the same had powers to deal with matters arising from sections 397-405

65 GP Singh, Principles of Statutory Interpretation (9th edn Lexis Nexis 2004) 133.
66 Life Insurance Corporation of India v DJ Bahadur (1981) ILLJ 1 SC.
67 Booz Allen (n 55).
68 HDFC Bank v Satpal Singh Bakshi (2013) ILR 1Delhi 583.
69 Company Law Board v Saz Special Civil Application No 2179 of 2014.

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of the Companies Act were conferred upon the CLB. 70 Thus, the CLB has all the judicial
authority of a court as has been declared by the Honble Supreme Court. 71 Thus, the CLB
exercises exclusive jurisdiction over the matters arising from the afore-mentioned sections.
Hence, the issue is non-arbitrable.
D. There Exists No Obligation on Part of Courts to Refer the Matter to Arbitration
35. The respondents submit that the issues before this Honble Court regarding disputes relating
to mismanagement and oppression being capable of arbitration are directly related to the rights of
shareholders in their capacity as members of the company72 and arise out of the violation of
statute or articles of association.73 And, as has been declared by the Honble CLB, as long as the
above criteria are fulfilled, there arises no question of referring the matter to arbitration. 74 Since
the issues are concerned with mismanagement and oppression and have also referred to the
interests of other shareholders, therefore, the allegations of the respondents are not limited to the
TPA only and cover the articles of association of the company as well.
36. Furthermore, the respondents have tried to enforce their statutory power which, the Honble
CLB has declared, can be adjudicated without reference made to the contractual agreement75 and
cannot be ousted through a consent arrived at by the parties, i.e., the issue is non-arbitrable. 76
Lastly, the interpretation of the sections 397, 398 and 402 have been made in such a manner that
70 ibid.
71 Canara Bank v Nuclear Power Corporation of India [1995] 2 SCR 482.
72Factsheet, 13.3.
73 CA 1956, s 397 & 398.
74 Gautam Kapur v Limrose Engineering Order of CLB in CP No 18 of 2000. See also Altek Lammertz
Needles Limited v Lammertz Industrienadel GMBH [2004] 56 SCL 156 (CLB).
75 Altek (n 74).
76 Anil Gupta v JK Gupta (2002) 47 CLA 50. See also Rakesh Malhotra v Rajendar Malhotra Company
Appeal 10-19 of 2013.

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they appear to constitute a code by themselves and an order made u/s 402 cannot be made by an
arbitrator.77 Also, as per the Companies Act, a civil court does not have jurisdiction to decide
over matters which are to be decided by the CLB. 78 And given that the jurisdiction of an arbitral
tribunal coincides with that of a civil court 79, the arbitrator in the current case is thereby
prohibited from adjudicating over the matter.
4. THE JUDGMENT IN SUKANYA HOLDINGS PVT LIMITED V JAYESH H PANDYA LAYS DOWN THE
CORRECT EXPOSITION
AND/OR

OF

LAW REGARDING

THE

BIFURCATION

OF

CAUSE

OF

ACTION

PARTIES

37. The respondents submit that the principles laid down in the Sukanya Holding judgment lay
down the correct exposition of law regarding the bifurcation of cause of action and/or parties.
Such a bifurcation is not permissible under the Indian law. For this, the respondents submit the
following arguments: Firstly, Clear statutory intention to not permit bifurcation under Section 8
of the Arbitration & Conciliation Act; secondly, bifurcation of cause of action not recognized
under Indian Law as partial rejection of claims is not permissible under Indian law and a part of
the claim made by the plaintiff does not find mention in the Indian laws while the same regarding
whole of claim does in the Code Of Civil Procedure; thirdly, Arbitration and Conciliation Act
provides for minimal interference of courts. The court can either refer or refuse to refer the
matter to arbitration. However part-reference would lead to increasing interference of the court in
the functioning of the tribunal; fourthly, Doctrine of election does not allow for bifurcation as has
been defined in the Sukanya judgement.
A. Clear Statutory Intention to Not Permit Bifurcation under Section 8 of the Arbitration
& Conciliation Act
38. It is the settled position of law that when the language of the Act infers a clear and
unambiguous meaning, it must be taken by the courts to mean as it exists in the Act. 80 This is so
77 Sudershan Chopra v CLB (2004) 52 SCL 429 (P&H).
78 CA 1956, s 10GB.
79 Executive Engineer Dhenkanal Minor Irrigation Division v NC Budharaj 2001 (1) SCR 264.

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because the words used in the statute express the legislative intention. 81 It has also been held that
when the words in the statute a plain meaning, courts are not to infer the intention by
supposition.82
39. The language used in section 8 of the Arbitration & Conciliation Act, on a plain reading, does
not suggest any scope for bifurcation of cause of action or between parties. If such bifurcation
not in contemplation of the legislature while framing the provision, it would not be possible for
the courts to conclude the permissibility of bifurcation. Such an interpretation can only be made
in case the language of the statute contains any ambiguity regarding its scope.83
40. Arbitration Act 1940 provided that where only some of the parties applied for dispute to be
referred to arbitration, then the Court had the power to refer the matter to be arbitrated, but only
to the extent of those parties who joined such application for arbitration. 84 This section provided
for the separation of the dispute between plaintiff and some of the defendants from the dispute
with other defendants, provided the same is clearly capable of being separated. 85 Thus, the
bifurcation of the suit in terms of the parties was clearly permissible under the Arbitration Act,
1940.
41. However, the language in Section 8 of the Arbitration & Conciliation Act, 1996 does not
have any scope for the bifurcation of cause of action or parties. It has been held that the
Arbitration & Conciliation, 1996 has the effect of repealing the provisions of the Arbitration Act,
1940.86 Thus, it clearly follows that the bifurcation as provided for in Section 24 of the
Arbitration Act, 1940 is not permissible due to the repealing of the provision as there is no
80 Ganga Prasad Verma v State of Bihar 1995 (1) BLJR 395.
81 ibid.
82 Pakala Narayana Swami v Emperor AIR 1939 PC 47.
83 Keshavji Ravji v Commissioner of Income Tax AIR 1991 SC 1806.
84 Arbitration Act1940, s 24.
85 Narsingh Das v Gogan Ram Lachmi Narain AIR 1955 Punj 31.

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corresponding provision in the Arbitration & Conciliation Act, 1996. This shows a clear and
express intention on part of the legislature to render bifurcation of such nature impermissible
under the scope of the Act.
B. Bifurcation of Cause of Action Not Recognized under Indian Law
42. It is submitted that the bifurcation of cause of action has not been recognized in Indian law.
The provisions of Civil Procedure Code particularly indicate that splitting up of claims arising
out of a cause of action is not permissible under the Indian law. For this purpose, Order 2 Rule 2
and Order 7 Rule 11 of the CPC are relied upon to determine the impermissibility of bifurcation.
I. Partial Rejection of Claims not Permissible under the India Law
43. Order 7 Rule 11 of the CPC provides for the cases in which plaint is to be rejected by the
Court. It provides that in a situation where the plaint does not disclose a cause if action, the Court
is to reject the plaint wholly.87It has been interpreted by the judiciary to mean that Order 7 Rule
11 does not provide for any particular portion of the plaint to be rejected by the court. 88 It has
been settled that such rejection would amount to dissection of the plaint into various parts in
order to examine whether a cause of action is arises out of them. 89 Thus, a plaint has to be either
accepted or rejected wholly.90
44. The impermissibility of the partial rejection of claims under the CPC has been considered to
render the bifurcation of cause of actions impermissible. While upholding the correctness of the
Sukanya judgment, it has been held that the denial on part of the court to bifurcate the cause of
86 Fuerst Day Lawson Ltd v Jindal Exports Ltd AIR 2011 SC 2649.
87 Roop Lal Sathi v Nachhattar Singh AIR 1982 SC 1559.
88 Sopan Sukhdeo Sable v Assistant Charity Commissioner AIR 2004 SC 1801. See Also: Dinshah
Fardunji Mulla, Mulla The Code of Civil Procedure, vol 1 (18th edn Lexis Nexis Butterworths Wadhwa
2011) 612.
89 D Ramachandran v RV Janakiraman AIR 1999 SC 1128.
90 Bansi Lal v Parkash AIR 1952 P&H 38.

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action is in contravention with the Order 7 Rule 11. 91 This is so because a bifurcation of cause of
action has been considered to be of the nature of partial rejection of the plaint.
45. When a cause of action is bifurcated as considered by the Court in the Sukanya judgment, the
court will be in a position where the plaint by the party would have to rejected partially i.e. some
parts of plaint would be rejected while some would be accepted. However, such recourse not
available to the Indian courts by the interpretation of Order 7 Rule 11 of the CPC, it would
amount to contravention of the Indian law.
II. A Suit by Plaintiff to Include Whole of Claims Pertaining to the Cause of Action
46. Order 2 Rule 2 of the Civil Procedure Code sets outs a general principle for the inclusion of
whole of the claims which the plaintiff is entitled to make with regard to the cause of action, and
the relinquishment of such part of the claim so omitted. 92 It provides for all reliefs which are
arising out of the same cause of action to be claimed in one suit. 93 The principle regarding this
provision is that the defendant in a case should not be vexed by the splitting of claims.94
47. Now, if there is a bifurcation of cause of action, the purpose of Order 2 Rule 2 stands
defeated as such bifurcation would contravene the reasoning behind this provision. Bifurcation
would result in the defendant being vexed as there would be the splitting up of cause of actions
between the court and the Arbitration tribunal. Hence, in order to preserve the intention behind
Order 2 Rule 2 of CPC, bifurcation of cause of actions should not be permitted by the Court
under Indian law.
C. Arbitration and Conciliation Act Provides For Minimal Interference of Courts
48. The respondents submit that where the issues involved are complicated and the arbitrator is
not competent to decide over the issue, then allowing the suit to be tried and disposed of by the
91 WPIL Ltd v NTPC Ltd 2009 (1) Arb LR 378.
92 Kunjan Nair v Narayanan Nair AIR 2004 SC 1761.
93 ibid.
94 PC Rajput v State of Madhya Pradesh 1997 (1) MPLJ 102.

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civil court would be just, proper, and in the interest of justice. 95 Whenever complicated matters
arise, for the sake of furtherance of justice, they should be tried in the court which is more
competent to look into the matter.96 Further, it has also been held that whenever the issues
involve serious questions of law or complicated questions of fact, 97 then the civil court can
refuse to refer the matter to arbitration. 98 This principle, if used, should involve the civil court
disposing of the issues by itself and does not provide for part-reference to arbitral proceedings 99
nor does it subscribe to the principle of bifurcation.
49. The matter dealt with in the Sukanya judgement is related to part-reference of a dispute to
arbitration which would involve subject matter of the suit or parties being bifurcated which is
something that does not find mention in the Arbitration And Conciliation Act, 1996.100 Since the
object of the Act involves the intervention of the court to be kept at a minimum 101 and the court
deciding the extent of reference that ought to be made to arbitration would count as an extensive
intervention of court and resultant limitation of jurisdiction of the arbitrator to adjudicate over
only a part of the dispute would beat the object of the Act, therefore, bifurcation would go
against what was envisaged by the framers of the Arbitration And Conciliation Act. Furthermore,
the extensive interference would also cause delay of proceedings and increase the cost of court
procedures which again would beat the legislative intention of enacting the Act.102
95 Radha v Deepa Restaurant ILR 2014 (1) Kerala 568.
96 N.Radhakrishnan (n 52).
97 Oomor Sait v Asiam Sait 2001 (3) CTC 269.
98 ibid. See also Hindustan Petroleum Corpn Ltd v Pinkcity Midway Petroleums 2003 (6) SCC 503.
99 Sukanya Holdings Pvt Ltd v Jayesh H Pandya AIR 2003 SC 2252.
100 Ibid; See also Kensoft Infotech Limited v Sundaram BNP Paribas Home Finance Ltd MIPR 2010 (1)
301.
101 Arbitration and Conciliation Act 1996 (A&CA 1996), s 5.
102 ibid.

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50. Lastly, since the issue of bifurcation has arisen over the construction of Section 8 of the Act,
what needs to be understood is that whenever the language of a statute is capable of bearing
more than one interpretation, the one made by the judiciary should be based on avoiding
hardship, serious inconvenience, injustice, absurdity or anomaly which leads to inconsistency or
uncertainty and friction in the system. 103 Given that interpreting Section 8 to allow the
possibility of bifurcation would lay down a new procedure not contemplated in the Act, 104 and
would lead to the court intervening in the procedure of arbitration and might cause friction,
inconsistency, and uncertainty in between the two forums of dispute resolution. Therefore, the
interpretation of the statute should be made opposed to the process of bifurcation between
reference to arbitration and disposal of a case before the court.
D. Doctrine of Election Does Not Subscribe To Bifurcation
51. The respondents submit that in accordance with the doctrine of election, the judgement in
Sukanya Holdings lays down the correct exposition of law. The doctrine states that when a party
decides to go for one of two available remedies, and has communicated his determination such
that it leads the other party to believe that he is going for that remedy 105, it shall be the only
remedy he can pursue.106Further, when a litigant makes an election, then the court would hold
him against such election and refuse to start over again. 107 The litigant cannot take inconsistent
positions in the court and to approbate and reprobate to the detriment of his opponents.108
52. The applicability of this doctrine in relation to the Sukanya judgement arises from the fact
that whenever the dispute of bifurcation arises, it would only do so when one party has failed to
103 Corrocraft Ltd v Pan American Airways (1968) 3 WLR 714. See also Bhatia International v Bulk
Trading [2002] 4 SCC 105.
104 Sukanya (n 93).
105 Benjamin Scarf v Alfred George Jardine (1881) 7 AC 345.
106 Clough v London and North Western Rail Co (1861) All ER 646. See also Sir John Comyns &
Stewart Kyd, A Digest of the Laws of England, vol 4 (4th edn Luke White 1793) 652.
107 Kok Hoong v Leong Cheong Kweng Mines Ltd (1964) AC 993.

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convince the court in the first instance that the issue be referred to arbitrator rather than being
disposed of by the civil court. That being so, they would be changing the stance regarding the
relief they sought in the first place. That being a violation of the aforementioned doctrine 109,
bifurcation of the cause of action in such a situation cannot take be permitted to take place.

108 Dwijendra Narain Roy v Joges Chandra De AIR 1924 Cal 600.
109 Mumbai International Airport Pvt Ltd v Golden Chariot Airport 2011 (86) ALR 47.

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PRAYERS
In light of the questions raised, issues presented and authorities cited, the respondents most
humbly and respectfully pray before the Honble Supreme Court to allow the appeal and adjudge
and declare:
1. That an agreement between two Indian parties to resolve their dispute through arbitration,
seated outside India, is contrary to the considerations of public policy and the principles of
contract law.
2. That the stipulation of designating the arbitral seat to be outside India invalidates the entire
arbitration agreement and the same cannot be severed out of the arbitration agreement.
3. That the disputes arising out of oppression and mismanagement application/complaints under
section 397, 398 read with section 402 of the companies Act are not capable of being referred to
arbitration.
4. That the principles relating to bifurcation of cause of action and/or parties enunciated in the
case of Sukanya Holdings Pvt. Limited v. Jayesh H Pandya lays down the correct exposition of
law.
The Court may also be pleased to pass any such order as it may deem fit in terms of equity,
justice and good conscience.
For this act of kindness, the Appellants shall duty bound forever pray.
Sd/(Counsel for the Respondents)

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