India / 10 February 1994 / India, Supreme Court / R.M. Investments Trading Co. Pvt. Ltd. v. Boeing Co.
|Court||India, Supreme Court|
|Date||10 February 1994|
|Parties||R.M. Investments Trading Co. Pvt. Ltd. v. Boeing Co.|
1994 AIR 1136 | http://www.judis.nic.in (website of the decisions of the Supreme Court as well as several High Courts)
|Summary||In 1986, RMI (an Indian company) entered into an agreement with Boeing (a U.S. company) to provide consultancy services for promoting the sale of Boeing aircrafts in India, and agreed to arbitrate any disputes under AAA rules. A dispute arose, and RMI brought suit in the Calcutta High Court. Boeing moved for stay of the suit on the ground that its subject matter was covered by the arbitration clause in the contract. The High Court dismissed Boeing’s application to stay the suit in April 1993, holding that the agreement in question was not a “commercial” agreement under India’s 1961 Foreign Awards (Recognition and Enforcement) Act ("1961 Act"), which implemented the NYC, and that therefore the 1961 Act did not apply. The Division Bench of the High Court, however, dismissed this decision in October 1993. RMI appealed to the Supreme Court of India, arguing that the consultancy agreement was not a commercial agreement under Section 2 the 1961 Act. The Supreme Court held that the agreement fell within the definition of “commercial” under Section 2 of the 1961 Act (which incorporated Articles I(1) and II(1) NYC but expressly required a "commercial" relationship), and therefore that the stay could be granted under the Act. The Court emphasized that the purpose of the 1961 Act was to facilitate international trade by providing for dispute settlement through arbitration. It accordingly read the term “commercial” broadly, finding that it encompassed the promotion of commercial activity, in order to further the goals of the 1961 Act. RMI played an active role in promoting the sale of Boeing’s aircraft and provided managerial assistance in the process; therefore, the transaction was commercial in nature.|
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