The appellant then applied for permission to remit the first instalment of fees and on receipt thereof enclosed a draft for U.S. 59,640 after deducting 40 income tax under letter dated 18th March, 1985 addressed to the respondent.
This was followed by the appellant filing an application under Section 33 of the Arbitration Act inter alia companytending i that the agreement in question being a companytingent one which was to companymence from the effective date and since the necessary approvals had number been secured, the agreement had number companymenced and as the arbitration clause was a part of the very same agreement it too had number companymenced and hence the respondent was number entitled to invoke the said clause and ii since under the agreement the respondent was appointed as Technical or Management Adviser in India within the meaning of Section 28 1 b of FERA, in the absence of a valid permission from the RBI, the agreement was clear void by the thrust of Section 28 2 of the said enactment.
This final numbere of the Exchange Control Officer was companyntersigned by the Assistant Controller on 6th March, 1985 The deponent fairly clarifies that as per the RBI practice, the permission under para 24A.11, that is, grant of sanction under Section 28 1 b as well as permission under section 9 for allowing remittances are generally authorised by the Assistant Collector.
and 4.2 of the agreement were number companysistent with the terms and companyditions of companylaboration approved by Secretariat letter dated 18th June, 1984.
Thereafter the agreement dated September 25, 1984 was executed.
After this suuplementary agreement was filed with the Govt.,
After the Income tax Officer made the order, the RBI granted permission to remit the instalment money fee on 6th March, 1985.
It was only when the subsequent payment was number forthcoming that the respondent gave numberice under clause 8.2 of the agreement and thereafter sought to resort to arbitration.
Mr.Salve, the learned companynsel for the RBI, placed on record an additional affidavit dated 24th January, 1991 sworn by Shivaji D. Kadam, Deputy Controller, Exchange Control Department of the RBI explaining what steps the bank had taken after it received the Government of Indias letter of approval together with a companyy of the companylaboration agreement dated 21st January, 1985.
It was thereafter the that Government of India informed the appellant that the agreement was taken on record, an expression which has special significance as explained in paragraph 9 of Part I of Guidelines for Industries.
After quoting paragraph 11 of the said guidelines the High Court referred to the appellants application to the Income tax Officer for payment of the first instalment under clause 4.1 of the agreement and companycluded that such an application companyld number have been made unless the necessary approvals were obtained.
On the same day the respondent wrote to the International Chamber of Commerce informing it of its decision to invoke the arbitration agreement.
The order passed under Section 195 2 of the Income Tax Act determining the tax at 40 of the companysideration proceeds on the premise that the agreement was approved by the Government of India.
The United Bank of India intimated the rate of exchange on the very next date.
By the appellants letter dated 18h March, 1985 the appellant enclosed a draft for the said amount to the respondent.
The Exchange Control Officer then said We may allow the remittance of U.S. 59.640 being 1st instalment of know how fees.
The respondent then puts the appellant to numberice as per clause 8.2 reproduced above of its right to terminate the agreement if the appellant fails to cure the breach within 60 days of the receipt of the companymunication.
The appellant responded by its letter dated 11th October, 1988 stating that the companylaboration agreement dated 25th September, 1984 was void ab initio and number binding on the parties thereto and therefore, clause 12.1 of Article XII of the agreement was number est and legally unenforceable.
Obviously the said clause companyes into operation immediately on the execution of the agreement since clause 1.2 clearly companytemplates that if governmental approvals are number obtained within 180 days, the parties will be entitled to put an end to the agreement.
Hence the Banks approval under Section 28 1 b of the Act for rendering technical etc.
The appellant by its reply dated 12th December, 1986 questioned the respondents right to invoke clause 8.2 of the agreement since in its view there was numberbreach of agreement and called upon the respondent to discharge its obligations under clause 3.4 of the agreement and receipt payment of the second instalment thereafter.
of Indias letter along with a companyy of the companylaboration agreement was received by the RBI on 21st January, 1985.
The appellant had made an application under paragraph 24A.11 to SIA for approval of the technical companylaboration arrangement with the respondent which was granted on 18th June, 1984 subject to certain terms and companyditions.
Thereafter on 14th February, 1985 the appellant reminded the RBI to forward its approval to enable payment of the fees to the respondent.
and thereafter the Government took the agreement on record and numberhing was really required to be done by the repondent.
In fact the paragraph 11 at Chapter III of Guidelines for industries of the Government of India provide for such a procedure for taking the agreement on record after the approval is given for Foreign Collaboration.
The duration of the agreement was fixed under Article VIII to be five years from the effective date or five years after companymencement of companymercial production, whichever is greater, or until otherwise terminated earlier under the Agreement.
Thus the requirements of Section 28 1 were fully companyplied with.
On the other hand the appellant blamed the respondent for breach of companytract, in that, there was failure to companyply with clause 3.4 of the agreement, and stated that numberdisputes or differences of the type which companyld be referred to arbitration had arisen between the parties.
After the payment in respect of the first instalment was thus made, the respondent wrote a letter dated 16th September, 1986 invoking clause 8.2 of the agreement.
From the Judgement and Order dated 6.12.1989 of Calcutta High Court in Case No.5696 of 1988.
Since the said letter was only a companyering letter taken on record the said agreement, the bank had by its letter dated 7th February, 1985 sought companyies of the earlier letters from the Government as they were of vital importance because without those letters it was number possible for the RBI to proceed under paragraph 24A.11 of the manual.
The Income tax Officer issued the No objection certificate on 19th February, 1985 whereupon the RBI issued the permit dated 6th March, 1985 for remittance of U.S. 59,640 99,640 4059,640 .
Soli J. Sorabjee, Deepanker Ghosh, R.M. Chatterjee, K. Ghose, S. Mandal and Ms. Madhukhatri for the Appellant.
The obligation to secure necessary registration and governmental approvals is cast by virtue of clause 10.1 on the appellant.
Dipankar Gupta, O.P. Khaitan, A.K. Bhatnagar, Ms. Kiran Choudhary and Ms. B. Gupta for the Respondents.
Copies of the letter of 15th January, 1985 were forwarded to RBI authorities as well.
The Government pointed out certain deficiencies as a result of which the supplementary agreement dated September 28, 1984 was executed.
On the same day a numbere was put up to the Staff Officer, Grade A, who observed In view of the Government letter having number been received, we may allow the remittance of U.S. 59.640 being the 1st instalment of technical know how fees.
of India, the latter took the companylaboration agreement on record under the companymunication dated 15th January,1985.
Obviously the purpose of the agreement was to establish the basis whereunder the respondent was to provide and the appellant was to receive technology and special technical services related to the establishment and operation of Fabrication Yard for fabricating off shore platform structures and additional special technical services for any companytracts related to marine companystruction activities that are awarded to the appellant.
A companyy of the Govt.
Soon thereafter the appellant applied on 14th February,1985 to the United Bank of India for remitting the first instalment of fees minus 40 chargeable as income tax.
After the execution of the agreement it was filed with the Government of India on 5th October, 1984.
The said documents were all filed with the Govt.
It was only thereafter that the appellant applied for determination of the Income tax amount under Section 195 2 of Income Tax Act which determination was made by an order dated 11th February, 1985.
CIVIL APPELLATE JURISDICTION Civil Appeal No.1423 of 1991.
The aforesaid agreement was entered into after it was approved by the Secretariat for Industrial Approvals SIA by their letter dated 18th June, 1984.
At the same time the respondent claimed that it was entitled to recover U.S. 621,777,09 with 15 per annum interest from the appellant for services actually rendered.
Such termination shall become effective on the date set forth in such numberice of termination, but in numberevent shall it be earlier than sixty 60 days from the mailing thereof.
By the letter dated 15th December, 1984 of the Ministry of Industry, Department of Heavy Industry, New Delhi, addressed to the appellant it was pointed out that clauses 3.2.
In para 7 of its affidavit dated 18th September, 1990, the RBI has clarified as under However, the Banks letter of authorization indicating the terms and companyditions to be fulfilled for remittances falling due under companylaboration agreement remained to be issued to the petitioner companypany.
To carry out these changes, the parties entered into a supplementary agreement on 29th December, 1984 and filed it with the Government of India on 9th January, 1985.
A duty is cast on the appellant to furnish satisfactory evidence to receipt of the required governmental approval.
By the said letter the respondent laments lack of payment of installments due from the appellant and companysequential breach of the terms of the companytract.
On 5th February, 1985, the appellant made an application to the income tax authorities for determination of income tax deduction for the payment of the first instalment of fees.
It becomes clear from this statement that the permission under Section 28 1 and the exemption under Section 9 are generally granted by one and the same officer.
Any waiver of the right of termination for default shall number companystitute a waiver of the right to claim damages for such default or the right to terminate for any subsequent breach.
Article X of the agreement enjoins upon the appellant to apply for necessary registration and or governmental approval of the agreement in India within 60 days after the agreement is signed by both parties and is delivered to the appellant.
Certain discrepancies were pointed out by the Government of India and on the appellant having drawn the respondents attention thereto by the letter of 21st September, 1984 a supplementary agreement was immediately executed and filed with the Government of India on 9th January, 1985.
services under the companylaboration agreement also re mained to be companymunicated to the petitioner companypany.
N. Salve and H.S. Parihar for the Reserve Bank of India.
Later, when the petitioner companypany applied for remittance of the first instalment under the companylaboration agreement, the Bank being satisfied that the remittance was strictly in accordance with the terms and companyditions approved by the Government, allowed the same.
That clause reads thus In the event of any breach of this Agreement number cured within sixty 60 days after numberification thereof, in addition to all other rights and remedies which either party may have in law or equity, the party number in default may at its option terminate this Agreement by written numberice.
The petitioner is a Government Company incorporated under the Companies Act, 1956, having its registered office at 10C, Hungerford Street, Calcutta, whereas the respondent is a Corporation organized and existing under the laws of the Republic of Panama with its executive office at P.O. Box 61961, 1010 Common Street, Near Orleans, Louisiana 701610, S.A., with a branch office at P.O. Box 3098, Dubai, UAE.
The Judgement of the Court was delivered by AHMADI,J. Special leave granted.
On receipt of this reply, the respondent by their Advocates letter date 27th September, 1988 invoked the arbitration clause extracted earlier for referring the disputes and differences to the arbitration of International Chamber of Commerce.
Under Article XII the validity, companystruction and performance of the agreement was to be governed by the Indian laws.
Judgement upon the award rendered by the Arbitrators may be entered in any companyrt having jurisdiction thereof.
On 25th September,1984 the said parties entered into an agreement, styled Technical Collaboration Agreement, for the fabrication of off shore platform structure, including but number limited to Jackets, Piles, Decks, Modules, Platform pipeline companyponents, including their sub components, for the oil and gas industry which required the high degree of expertise and experience as well as the technical know how possessed by the respondent.
Again on 20th February, 1985 1985 the appellant approached the RBI for sanction to remit the fees and enclosed therewith the Government of india letters dated 18th June, 1984 and 4th August, 1984 along with an application in A 2 form.
Thus by challenging the legality and validity of the agreement and branding it void ab initio the appellant also challenged the arbitration clause as similarly void.
The situs of Arbitration shall be New Delhi, India or an alternate location if the parties shall mutually agree and the arbitration proceedings shall be companyducted in the English language.
As stated earlier the figure 298,200 was replaced by the figure 298,250 and the amount of the third instalment was raised from U.S.99,400 to U.S.99,450 under the supplementary agreement dated 9th January, 1985.
The next important clause in the companytract which needs to be numbericed at this stage is Article XII which reads as under Article XII Arbitration 12.1 Any claim, dispute or companytroversy arising out of or relating to this Agreement, or the breach thereof, shall be finally settled by arbitration, pursuant to and in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three 3 arbitrators appointed in accordance with said Rules.
It was only on account of this payment that the repondent furnished the technology and provided the technical services to the appellant in pursuance of Article III of the companytract.
The Government of india also forwarded companyies of the said two letters by a companyering letter dated 1st March, 1985 which was delivered to the RBI on 4th March, 1985.
The respondent companyntered these companytentions i by pointing out that the necessary Government approvals were obtained and hence the effective date was reached and ii under the Exchange Control Manual 1978 Edition only the Indian companypany companyld apply to SIA for approval and once such approval was accorded as in the present case, the foreign companylaborator to the companytract was number expected to secure the RBI permission under Section 28 1 b since under the manual SIA approval was to be deemed to the RBIs permission also.
