In the matter of M/s Larsen and Toubro Limited Scomi Engineering Bhd. v. Mumbai Metropolitan Region Development Authority hon’ble Supreme Court of India held that the term “association” used in section 2(1)(f)(iii) includes a consortium of companies one of which is a foreign company.

The factual matrix which lead to this question for interpretation are as follows-

A consortium made of M/s Larsen and Toubro, an Indian company, and Scomi Engineering Bhd., a company incorporated in Malaysia entered into a contract with Mumbai Metropolitan Region Development Authority for planning, designing, development, construction, manufacture, supply, testing and commissioning of a monorail system in two particular earmarked sections in Wadala, Mumbai inclusive of operation and maintenance for a period of three years. A dispute arose from said contract which contains a dispute resolution clause providing for arbitration. In pursuance of said clause a petition was filed before Hon’ble Supreme Court under section 11 of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator. While adjudicating the matter, a bench comprising of Hon’ble Justice R. F. Nariman and Justice Navin Sinha heard arguments from advocated representing both the parties respectively. In a nutshell it was argued that since the consortium has one company as foreign company therefore it will fall under the purview of section 2(1)(f)(iii) of the Arbitration and Conciliation Act, 1996 whereas the advocate for opponent asserted that this consortium per se will not fall under the ambit of section 2(1)(f)(iii), as in accordance with said section as well as the contract in question the Indian company is the lead company and that the Supervisory Board constituted under the Consortium Agreement makes it clear that that the lead partner has the determining voice in appointing the Chairman of the said Board and the fact that the Consortium office is located in Wadala, Mumbai would point to the fact that the central management and control of this Consortium is exercised in India, hence section 2(1)(f)(iii) is not attracted. The fact that whether this consortium will fall within ambit of the term “association” also came for consideration, for which Hon’ble Supreme Court took into consideration definition of ‘person’ under Income Tax Act, 1961 as well as the Law Commission Report No. 246 of August 2014 whereby amendments to Arbitration and Conciliation Act, 1996 were suggested. The court concluded that before the term “a company or” was deleted there were three sets of persons referred under section 2(1)(f)(iii) as separate and distinct persons, hence deletion of the term “a company or” will not affect the exiting persons included under the said section i.e. association and body of individuals. And further in pursuance of a judgment given by Hon’ble Mumbai High Court, in the present matter itself that the case can be made only as a consortium and not as separate entity.

Depending upon all the abovementioned arguments raised Hon’ble Supreme Court firstly held that the term “association” under section 2(1)(f)(iii) will include consortium of companies with at least one company which is a foreign company; but dismissed the petition as there is no “international commercial arbitration” as defined in section 2(1)(f) of the Act.

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Judgment: Larsen and Toubro Limited Scomi Engineering Bhd. v. Mumbai Metropolitan Region Development Authority