Balasore v Medima: How the Supreme Court decided which of two arbitration clauses would be invoked to settle the dispute

The Supreme Court on Wednesday dismissed a petition filed by Balasore Alloys against the decision of the Calcutta High Court in a case involving two different arbitration clauses in agreements between the parties (Balasore Alloys Limited v. Medima LLC)..A three-judge Bench comprising Chief Justice of India SA Bobde and Justices AS Bopanna and V Ramasubramanian sought to harmonise which of the two arbitration clauses would apply in the given facts of the case..Balasore Alloys Limited, a Kolkata-based High Carbon Ferro Chrome manufacturer, had approached the Supreme Court by way of a special leave petition and an arbitration petition after failing to obtain anti-arbitration injunctions in the Calcutta High Court..The company contended before the Supreme Court that in the disputes between itself and Medima, a US-based company, the arbitration was wrongfully invoked by the latter under the pricing agreement, which prescribed an ICC Arbitration comprising three arbitrators, seated in London. .It was argued by the petitioner that the proper course would have been to invoke the arbitration clause under the individual purchase orders entered into between the parties. This clause provided for arbitration in Kolkata. On this basis, it was prayed that the Supreme Court either appoint the sole arbitrator under the purchase orders or appoint the second arbitrator on behalf of Medima. Further, it was contended that the London seated-ICC Tribunal comprising Lucy Greenwood, Jonathan Jacob Gass and Senior Advocate Gourab Banerji, was improperly constituted..The Supreme Court, however, noted that when the purchase orders as well as the pricing agreement - referred to as the "umbrella agreement" by Medima - subsisted, and both contained arbitration clauses which are not similar to one another, the two documents had to be harmonized and reconciled. .The question would then be as to whether or not the application filed under Section 11 of the Arbitration and Conciliation Act, 1996 would be sustainable so as to appoint an arbitrator by invoking Clause 7 of the purchase order, when the ICC Tribunal stood constituted under Clause 23 of the umbrella agreement..Ruling in favour of Medima, the Bench declined the Section 11 application on the grounds that:Medima was the first to invoke the arbitration clause with reference to the pricing/umbrella agreement dated March 31, 2018.Balasore, in its reply dated April 13, 2020 to Medima’s arbitration notice, referred to the fact that the dispute was on repricing and the terms of payment governing individual contracts - both aspects being dealt with by terms 5, 8, 9, 10 of the Pricing Agreement which “provides for the mechanism relating purchases and sales; final price, payment of provisional price and adjustment of advance, determination of the final sale price and monthly accounting and payment.”The terms of the purchase order did not provide for such determination of pricing, except for referring to the price of the quantity ordered for and the special terms relating to provisional price etc..The judgment reads,"...when admittedly the parties had entered into the agreement dated 31.03.2018 and there was consensus ad idem to the terms and conditions contained therein which is comprehensive and encompassing all terms of the transaction and such agreement also contains an arbitration clause which is different from the arbitration clause provided in the purchase order which is for the limited purpose of supply of the produce with more specific details which arises out of Agreement dated 31.03.2018; the arbitration clause contained in Clause 23 in the main agreement dated 31.03.2018 would govern the parties insofar as the present nature of dispute that has been raised by them with regard to the price and the terms of payment including recovery etc...".Thus, the application was refused on the ground that the aspects disputed by Balasore had to be determined in terms of the provisions of the pricing/umbrella agreement dated March 31, 2018. Further, the Court also said that the Tribunal constituted under the March 31 agreement could also look into the individual purchase orders..Balasore was represented by Senior Advocate Maninder Singh. Senior Advocates SN Mookherjee and Ritin Rai appeared for Medima..Read Judgment: