BURN STANDARD COMPANY LIMITED Vs. MCDERMOTT INTERNATIONAL INC

JUDGEMENT

(1.) Special leave granted.

(2.) The principal question which this Court is called upon to answer in this appeal by special leave is whether the arbitration clause contained in Art. XII (paragraph 12. 1) of the Technical Collaboration Agreement entered into at Dubai, United Arab Emirates, on September 25, 1984, between the appellant Burn Standard Company Ltd., a Government of India Undertaking, and the respondent McDermott International Inc., a foreign company, is rendered void by virtue of the agreement itself being ab initio void for want of general or special permission of the Reserve Bank of India (RBI) under S. 28 of the Foreign Exchange Regulation Act, 1973 (FERA). The relevant part of the said provision reads as under:

(3.) The aforesaid agreement was entered into after it was approved by the Secretariat for Industrial Approvals (SIA) by their letter dated 18th June, 1984. After the execution of the agreement it was filed with the Government of India on 5th October, 1984. 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 Cls. 3.2 and 4.2 of the agreement were not consistent with the terms and conditions of collaboration approved by Secretariat letter dated 18th June, 1984, in that, Cl. 3.2 should contain a clause that any additional payment made for special Technical Services would be subject to prior approval of Government of India and in Cl. 4.2 the payment expressed in U.S. dollars 298,200 should be 298,500 and the figure of the 3rd instalment should be 99,450 instead of 99,400 U.S. dollars. 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.