Readers would be aware of the two-Judge Bench of the Supreme Court in Centrotrade (2006) 11 SCC 245:2006(3) Arb LR 201 (SC).) where SB Sinha, J. held a two-tiered tribunal invalid when the first tier was Indian and the second tier was foreign while Tarun Chatterjee, J. disagreed with him. Due to the difference of opinion between the judges, the matter was referred to a larger Bench. .
Readers may note that while SB Sinha, J. tried to distinguish two tier tribunals of arbitral institutions from the two-tiers in the case, there are observations in his judgement to the effect that two tiered tribunals of the nature discussed in the case (one Indian and the other foreign) is not contemplated in the 1996 Act. A three judge-Bench heard the matter and held such a clause to be valid.
Two questions were before the three-Judge Bench:
"(1) Whether a settlement of disputes or differences through a two-tier arbitration procedure as provided for in Clause 14 of the contract between the parties is permissible under the laws of India?
(2) Assuming a two-tier arbitration procedure is permissible under the laws of India, whether the award rendered in the appellate arbitration being a ‘foreign award’ is liable to be enforced under the provisions of Section 48 of the Arbitration and Conciliation Act, 1996 at the instance of Centrotrade? If so, what is the relief that Centrotrade is entitled to?"
The judgement of the three judge-Bench primarily rests on party autonomy and non-applicability of public policy to set aside the award. Holding that such a clause was valid, the Supreme Court, the Supreme Court held that the appeal should be listed again for consideration of the second question quoted above.
The decision of the three-judge Bench can be accessed from here.