Validity of Appellate Arbitration Clauses

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Supreme Court in the case of M/S Centrodate Minerals and Metals Inc v Hindustan Copper Ltd upheld the validity of appellate arbitration clauses. The Appellant, a US Corporation (Centrodate Minerals and Metals Inc) had entered into a contract of sale for 15,500 DMT. That after delivering of the consignment and payment being made, there arose a dispute regarding the quantity of dry weight of copper delivered. Clause 14 of the agreement between parties provided for first tier of arbitration in India and in case of no decision, the second would be by ICC in London, which would be invoked by the Appellant.
The Apex court earlier had upheld the validity of two-tier arbitration agreements under the Arbitration and Conciliation Act, 1996. While recently considering the validity of award passed by ICC under Section 48 of the Act, the objections of the Respondent were rejected and allowance of enforcement of a foreign arbitral award dated 29.09.2001, was passed in favour of the Appellant Centrotrade, thereby ending the long saga between Centrotrade Minerals and Metals Inc v. Hindustan Copper Ltd.
The Apex Court while ruling on the validity of the arbitration clause and the enforceability of the ICC Arbitral Award (in appeal) passed the same in favour of Centrotrade Minerals, and held that two-tier arbitration agreements are valid and legally permissible under the Arbitration and Conciliation Act, 1996. Further, regarding the objection pertaining to the enforceability of the ICC Foreign Award under Section 48 of the Arbitration and Conciliation Act 1996, Apex Court had noted that as earlier established, enough opportunities were given to the Respondent for filing the Statement of Defence, but the Respondent had always sorted for extension, which would not be accepted by the Apex Court.

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