BURN STANDARD COMPANY LIMITED v. MCDERMOTT INTERNATIONAL INC. AND ANOTHER

Citation: [1991] 2 S.C.R. 67

Court: Supreme Court of India

Bench: A.M. AHMADI, V. RAMASWAMI, M. FATHIMA BEEVI

Case summary

Section 28 of The Foreign Exchange Regulation Act, 1973 (FERA).

Judgment text

The Judgment of the Court was delivered by AHMADI, J. Special leave granted. The principal question which this Court is called upon to answer in this appeal by special leave is whether the arbitration clause contained in Article 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 fqr want of general or special permission of the Reserve Bank of India (RBI) under Section 28 of The Foreign Exchange Regulation Act, 1973 (FERA).

The rele~ant part of the said provision reads as under: "28(1)--Without prejudice to the provisions of Section 47 and notwithstanding anything contained in any other provision of this Act or the Companies Act, 1956, a person resident outside India (whether a citizen of India or not) or a person who is not a citizen of India but is resident in India, or a company (other than a banking company) which is not incorporated under any law in force in India or in which the non-resident interest is more than forty per cent, or any branch of such company, shall not, except with the general or special permission of the Reserve Bank,- I (a) act, or accept appointment, as agent in India or any person or company, in the trading or commercial transactions of such person or company; or (b) act, or accept appointment, as technical or management adviser in India or any person or company; or (c) permit any trade mark, which he or it is entitled to use, to be used by any person or company for any direct or indirect consideration.

(2) Where any such person or company (including its branch) as it referred to in sub-section (1) acts or accepts appointment as such agent, or technical management adviser, or permits the use of any such trade mark, without the permission of the Reserve Bank, such acting, appointment or permission, as the case may be. shall be void. The petitioner is a Government company incorporated under the Companies Act, 1956, having its registered office at IOC. Hungerford Street, Calcutta, whereas the respondent is a Corporation organised and existing under the laws of the Republic of Panama with its executive office at P. O. Box 61961, 1010 Common Street, New Orleans, Louisiana 70161, U. S. A. , with a branch office at P. O. Box 3098, Dubai, UAE.

On 25th September, 1984 the said parties entered into an agreement, styled "Technical Collaboration Agreement", for the fabrication of off-shore platform structure, including but not limiied fo Jackets, Piles, Decks, Modules, Platform & pipeline components, including their sub-components, for the oil and gas industry which