2008 (5) TMI 412 - SC - Companies Law

Nomination of arbitrator Held that - As it is noticed that the nationality of a company is determined by the law of the country in which it is incorporated and from which it derives its personality. However for the purpose of taxation test of residence may not be registration but where the company does its real business and where the central management and control exists. A distinction thus exists in law between a nationality and the residence. Furthermore there exists a dispute that all the Board meetings take place only in Malaysia. In a matter involving determination of jurisdiction of a court certainty must prevail which cannot be determined by entering into a dispute question of fact. Thus this Court has no jurisdiction to nominate an arbitrator

Issues Involved:
1. Jurisdiction of the Supreme Court of India to appoint an arbitrator.
2. Definition and applicability of "International Commercial Arbitration" under the Arbitration and Conciliation Act, 1996.
3. Interpretation of the terms "nationality," "domicile," and "residence" in the context of arbitration.
4. Applicability of the Indian Income-tax Act, 1961 in determining the central management and control of a company.

Detailed Analysis:

1. Jurisdiction of the Supreme Court of India to Appoint an Arbitrator:
The primary issue was whether the Supreme Court of India had jurisdiction to appoint an arbitrator under Section 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996 (the 1996 Act). The petitioner argued that the central management and control of the company were exercised in Malaysia, thus qualifying it as an international commercial arbitration under Section 2(1)(f) of the 1996 Act. The respondent contended that since the petitioner was incorporated in India, it should be considered an Indian company, and the arbitration should be treated as domestic.

2. Definition and Applicability of "International Commercial Arbitration":
The court examined the definition of "international commercial arbitration" under Section 2(1)(f) of the 1996 Act, which includes:
- An individual who is a national of, or habitually resident in, any country other than India.
- A body corporate incorporated in any country other than India.
- A company or an association or a body of individuals whose central management and control is exercised in any country other than India.
- The Government of a foreign country.

The court emphasized that "international commercial arbitration" and "domestic arbitration" are distinct concepts. For a company incorporated in India, the arbitration would be considered domestic, even if its central management and control are exercised outside India.

3. Interpretation of "Nationality," "Domicile," and "Residence":
The court discussed the interpretation of "nationality," "domicile," and "residence" in the context of arbitration. It was noted that a company incorporated in India has Indian nationality for the purposes of the Act. The court rejected the argument that the central management and control being in Malaysia would make it an international commercial arbitration. The court referenced the English Arbitration Act and the UNCITRAL Model Law, noting that the term "international commercial arbitration" is not included in the UNCITRAL Model Law.

4. Applicability of the Indian Income-tax Act, 1961:
The petitioner referred to the Indian Income-tax Act, 1961, arguing that the test for determining the central management and control should be similar to that in taxation cases. The court, however, found that the provisions of the 1996 Act are not in pari materia with the Income-tax Act. Taxing statutes serve a different purpose and involve compulsory exaction, whereas the 1996 Act deals with arbitration agreements and the appointment of arbitrators.

Conclusion:
The court concluded that since both companies were incorporated in India, the arbitration agreement between them could not be considered an international commercial arbitration. Consequently, the Supreme Court of India did not have jurisdiction to appoint an arbitrator under Section 11 of the 1996 Act. The application was dismissed with costs, and counsel's fee was assessed at Rs. 50,000.

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