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INTERNATIONAL TRADE LAW

Project 2.0

NATIONAL LAW INSTITUTE UNIVERSITY,


BHOPAL

In the partial fulfilment for the requirement of the project on the subject of International Trade Law of
B.A., L.L.B (Hons.), Fifth Semester.

Submitted on 25th November 2020

TOPIC- CASE ANALYSIS OF


Ssangyong Engineering & Construction Co. Ltd. … Appellant
Versus
National Highways Authority of India (NHAI) … Respondent
Submitted to:

Prof Monica Raje {Faculty for International Trade Law}

Submitted by :

Hrishikesh Jaiswal

(2018BALLB126)
INTERNATIONAL TRADE LAW
Project 2.0
Hon'ble Judges/Coram:

Rohinton Fali Nariman and Vineet Saran, JJ.

Counsels:

For Appellant/Petitioner/Plaintiff: Mukul Rohatgi, Sr. Adv., Naveen Kumar, Rashmeet Kaur,
Arpana Majumdar and Ashwani Kumar, Advs.

For Respondents/Defendant: S. Nandakumar, Deepika Nandakumar, P. Palanivelu, M.S. Saran


Kumar and Naresh Kumar, Advs.

Subject: Arbitration

Acts/Rules/Orders:

Arbitration and Conciliation Act, 1996 - Section 9, Arbitration and Conciliation Act, 1996 -
Section 18, Arbitration and Conciliation Act, 1996 - Section 24, Arbitration and Conciliation
Act, 1996 - Section 24(3), Arbitration and Conciliation Act, 1996 - Section 26, Arbitration and
Conciliation Act, 1996 - Section 26(1), Arbitration and Conciliation Act, 1996 - Section 26(2),
Arbitration and Conciliation Act, 1996 - Section 26(3), Arbitration and Conciliation Act, 1996 -
Section 28, Arbitration and Conciliation Act, 1996 - Section 28(1), Arbitration and Conciliation
Act, 1996 - Section 28(3), Arbitration and Conciliation Act, 1996 - Section 31(3), Arbitration
and Conciliation Act, 1996 - Section 34, Arbitration and Conciliation Act, 1996 - Section 34(1),
Arbitration and Conciliation Act, 1996 - Section 34(2), Arbitration and Conciliation Act, 1996 -
Section 34(2A), Arbitration and Conciliation Act, 1996 - Section 37, Arbitration and
Conciliation Act, 1996 - Section 43(3), Arbitration and Conciliation Act, 1996 - Section 48,
Arbitration and Conciliation Act, 1996 - Section 48(2), Arbitration and Conciliation Act, 1996 -
Section 75, Arbitration and Conciliation Act, 1996 - Section 81, Arbitration and Conciliation
Act, 1996 - Section 87; Arbitration and Conciliation (Amendment) Act, 2015 - Section 26,
Arbitration and Conciliation (Amendment) Act, 2015 - Section 36; Foreign Awards (Recognition
and Enforcement) Act, 1961 - Section 7, Foreign Awards (Recognition and Enforcement) Act,
1961 - Section 7(1); Arbitration (Protocol and Convention Act), 1937 - Section 7(1); Arbitration
and Conciliation (Amendment) Ordinance, 2015.

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TABLE OF CONTENTS

Table of Contents.............................................................................................................................3
Certificate........................................................................................................................................4
Acknowledgement...........................................................................................................................5
Table OF Cases................................................................................................................................6
Research Methodology....................................................................................................................7
RESEARCH PROBLEM.............................................................................................................7
RESEARCH QUESTIONS..........................................................................................................7
CHAPTERIZATION...................................................................................................................7
RESEARCH METHODOLOGY.................................................................................................8
Material Facts..................................................................................................................................9
Issues Raised..................................................................................................................................12
Arguments Advanced....................................................................................................................13
Decision and Rationale..................................................................................................................14
Ratio...............................................................................................................................................15
Critical Analysis of the Case.........................................................................................................16
Conclusion.....................................................................................................................................18
Bibliography..................................................................................................................................20

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CERTIFICATE

This is to certify that the research paper titled “Case Analysis of Ssangyong Engineering v.
National Highway Authority of India”, has been prepared and submitted by Hrishikesh
Jaiswal, who is currently pursuing his B.A. LL.B. (Hons.) at National Law Institute
University, Bhopal, in fulfillment of International Trade Law. It is also certified that this is
his original research report and this paper has not been submitted to any other University,
nor published in any journal.

Signature of the Student : …… ………………….


Signature of the Research Supervisor : …………………………

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ACKNOWLEDGEMENT

This paper has been made possible by the unconditional support of many people. I would
like to acknowledge and extend my heartfelt gratitude to Prof. (Dr.) Monica Raje for
guiding me throughout the development of this paper into a coherent whole by providing
helpful insights and sharing her brilliant expertise. I would also like to thank the officials of
Gyan Mandir, NLIU, for providing material for this study. I am deeply indebted to my
parents, seniors and friends for all the moral support and encouragement.
Hrishikesh Jaiswal 2018BALLB126

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TABLE OF CASES

1. Board of Control for Cricket in India v. Kochi Cricket (P.) Ltd. and Ors.
MANU/SC/0256/2018 : (2018) 6 SCC 287
2. R. Rajagopal Reddy v. Padmini Chandrasekharan MANU/SC/0061/1996 : (1995) 2 SCC
630
3. Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. MANU/SC/0329/2001 : (2001) 6 SCC
356
4. Bank of Baroda v. Anita Nandrajog MANU/SC/1587/2009 : (2009) 9 SCC 462 : (2009)
2 SCC (L&S) 689
5. ONGC Ltd. v. Saw Pipes Ltd. MANU/SC/0314/2003 : (2003) 5 SCC 705
6. ONGC Ltd. v. Western Geco International Ltd. MANU/SC/0772/2014 : (2014) 9 SCC
263 : (2014) 5 SCC (Civ) 12
7. HRD Corpn. v. GAIL (India) Ltd. MANU/SC/1066/2017 : (2018) 12 SCC 471
8. Associate Builders v. Delhi Development Authority MANU/SC/1076/2014 : (2015) 3
SCC 49 : (2015) 2 SCC (Civ) 204
9. Sedco Forex International Drill, Inc. and Ors. v. Commissioner of Income Tax,
Dehradun and Anr. MANU/SC/2079/2005 : (2005) 12 SCC 717
10. Goslino Mario Case MANU/SC/1227/1999 : (2000) 10 SCC 165: (2000) 241 ITR 312;
Reliance Jute and Industries Ltd. v. CIT MANU/SC/0338/1979 : (1980) 1 SCC 139 :
1980 SCC (Tax) 67
11. Sonia Bhatia v. State of U.P. MANU/SC/0363/1981
12.

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RESEARCH METHODOLOGY

RESEARCH PROBLEM

In this paper, the researcher has attempted to analyse the case Case Analysis of Ssangyong
Engineering v. National Highway Authority of India 1. Initially, the researcher tries to
understand the context of the case by delving into the circumstances which led to the
appellant filing an appeal in the Supreme Court. In light of this backdrop, the judgement
delivered by the SC is discussed and the key takeaways stated.

RESEARCH QUESTIONS

1. What were the facts of the Ssangyong Engineering v. National Highway Authority
of India ?

2. How did the Supreme Court view the concerns raised in the case?

3. What were the issues raised in this case?


4. What is the relevance of the case today and has there been sufficient
adherence of the guidelines framed by the Court?

5. What were the pronouncements made by the Court and the


directives issued for implementation of the same?

CHAPTERIZATION

The first chapter of the paper primarily deals with the background of the case. In the subsequent
chapter, Ssangyong Engineering v. National Highway Authority of India case is discussed in
detail and the wider and literal interpretation by the Supreme Court has been mentioned. Lastly,
the researcher has looked into the critical analysis of the case.

1
Ssangyong Engineering and Construction Co. Ltd. vs. National Highways Authority of India (NHAI) (08.05.2019 -
SC) : MANU/SC/0705/2019

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RESEARCH METHODOLOGY

A combination of analytical and descriptive approach has been adopted by the researcher.
Case laws, precedents, etc. have been consulted wherever necessary. It must be noted that
only the criminal law domain in India has been considered for this case.

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MATERIAL FACTS

The following facts were relied upon by the court to reach the conclusion in the present case:
1. National Highway Authority of India (Respondent) awarded the project for construction of
bypass on a highway in the State of Madhya Pradesh (Project) to Ssangyong Engineering &
Construction Co. Ltd. (Appellant), a Korean company.
2. Pursuant to the Contract between the parties, the Respondent was obligated to make
payments to the Appellant for the components used for executions of works under the Project.
The parties agreed that the price adjustment for four of the components used in the Project
would be calculated as per the formula in the Contract. As per the Contract, the base date for
calculation of price adjustment was 29 September 2005. Under the formula in the Contract it
was agreed that the Wholesale Price Index (WPI) which is published by the Ministry of
Industrial Development (Ministry) would be applicable. Until 2010, the said WPI was based on
the years “1993-94” (Old Series). On 14 September 2010, the Ministry ceased publication of
WPI for the Old Series and commenced publication of WPI for the New Series “2004-05” (New
Series).
3. The Appellant applied the New Series to compute price adjustment and began raising bills
as per the New Series. From September 2010 to February 2013, the Respondent made 90%
payments of the monthly invoices on this basis.
4. Thereafter, the Respondent issued a Policy Circular2 dated 15 February 2013 (Policy
Circular) whereunder a new formula for determining the indices was used by applying a
“linking factor” which would connect the Old Series to the New Series. This naturally reduced
the price adjustment available to the Appellant under the Contract.
Appellant challenges Policy Circular before Madhya Pradesh HC
5. The Appellant did not accept the Policy Circular and filed a writ petition (Writ Petition)
before the High Court of Madhya Pradesh (MP HC) to challenge the validity of the Policy
Circular. The MP HC observed that the Contract between the parties provided for a dispute
resolution mechanism and accordingly the Writ Petition was disposed under an order dated 3
April 2013.
6. Thereafter, while the Respondent sought the consent of the Appellant to receive payment

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under the Policy Circular, the Appellant issued a conditional undertaking3 dated 17 May 2013
accepting payments under the Policy Circular while reserving its right to challenge the Policy
Circular before the appropriate forum.
Appellant refers disputes to arbitration
7. The disputes were referred to the Dispute Adjudicating Board (DAB) in terms of the
Contract. The majority members of the DAB held in favor of the Respondent and concluded
that a certain “linking factor” shall be applied while computing the price adjustment.
8. Aggrieved by the suggestions of the DAB, the Appellant referred the disputes to arbitration.
The Appellant submitted that application of the Policy Circular was dehors the Contract and
claimed amounts towards the unpaid price adjustment along with interest.
9. The majority award dated 2 May 2016 (Award) held in favor of the Respondent and
concluded that the Policy Circular was within the contractual stipulations and could be applied.
The tribunal applied certain government guidelines of the Ministry (Guidelines) which stated
that establishment of a linking factor to connect the Old Series with the New Series was
imperative. A dissenting award (Dissenting Award) was also made wherein the Ld. Arbitrator
stated that neither the Policy Circular nor the Guidelines could be applied as they were dehors
the Contract.
Challenge to the Award
10. Aggrieved by the Award, on 30 July 2016, the Appellant filed an application under section
34 of the Act (Section 34 Application) before the Ld. Single Judge of the Delhi High Court
(Delhi HC). The Delhi HC held in favor of the Respondent and upheld the Award through an
order dated 9 August 2016. Aggrieved by the order of the Ld. Single Judge, the Appellant filed
an appeal under section 37 of the Act before the division bench of the Delhi HC. By an order
dated 3 April 2017 (Order), the division bench of the Delhi HC also held in favor of the
Respondent. Thereafter, the Appellant filed an appeal before the Supreme Court.
11. The Appellant contended that since the award heavily relied upon Guidelines issued by the
Ministry and which Guidelines were never tendered in evidence, the Appellant was deprived of
its right to rebut the same and hence unable to present its case. The Appellant contended that
the Award was thus liable to be set aside under section 34(2) (a) (iii). The Appellant further
assailed the Award on the ground that by applying the new formula under the Policy Circular,
which Policy Circular was not consented to by the Appellant, the arbitral tribunal had created a

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new contract. Thus, the Award, according to the Appellant was liable to be set aside as being in
conflict with the public policy of India under section 34(2)(b)(ii) of the Act. Furthermore, the
Appellant also challenged the award as being vitiated by patent illegality under section 34(2A)
of the Act.
12. The Respondent resisted the challenge to the Award and also raised an objection as to the
applicability of the Arbitration and Conciliation (Amendment) Act, 2015 (Amendment Act).

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ISSUES RAISED

While the Hon’ble Supreme Court of India dealt with various minor issues based on the
applicability of the Act, the major issues before the consideration of the Hon’ble Supreme Court
were as follows:
(a) Whether the decision by the arbitral tribunal on a matter that was not referred to it
by the parties can be considered as a ground to set aside the arbitral award?
(b) Whether a new contract has been made by the majority award of the arbitral tribunal,
without the consent of the Appellant, by applying a formula outside the agreement,
as per the Circular and whether this act amount to violation of public policy?

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ARGUMENTS ADVANCED

Following contentions are presented by the parties to the case before the Supreme Court:-
Ssangyong contended as under:

that Section 34(2)(a)(iv) of the Act was attracted to the facts of the present case as the majority
award contained decisions on matters beyond the scope of the submission to arbitration. It was
argued that vide majority award, a new contract was substituted by the actual contract between
the parties amounting to a novation of the old agreement and the old formula contained in the
contract, which would be a decision on a matter beyond the scope of the submission to
arbitration;
that the award was in conflict with the public policy of India, being contrary to the fundamental
policy of Indian law as well as the most basic notions of justice and thus hit by Section 34(2)(b)
(ii) of the Act. This argument was premised on the contention that rewriting of the terms of the
contract ought to shock the conscience of the Court, as a new contract was foisted on one of the
parties unilaterally;
that the principles of natural justice were violated and, therefore, Section 34(2)(a)(iii) of the Act
would also be attracted as the government guidelines were never produced before the arbitrators,
and the arbitrators applied the said guidelines behind the back of the parties.

NHAI argued that the issue of applying the new formula as per the Circular is a matter of
interpretation of the agreement in which the arbitrators’ view is final.

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DECISION AND RATIONALE

The Hon’ble Supreme Court after hearing the issues raised , arguments advanced and
authorities cited stated that the following points dealing with all the questions of law as well
of the fact.

The Supreme Court ruled on various issues that were discussed during the
proceedings of the matter. The Court held that an award would be against justice and
morality when it shocks the conscience of the court. However, the same would be
determined on a case to case basis. The apex court interpreted and discussed the principles
stipulated under the New York convention. Under Para 54 of the judgement, the apex court
has discussed the necessity of providing the party with the appropriate opportunity to review
the evidence against them and the material is taken behind the back of a party, such an
instance would lead to arising of grounds under section 34(2)(a)(iii) of the Arbitration and
Conciliation (Amendment) Act, 2015.2 In this case, the SC applied the principles under the
New York convention of due process to set aside an award on grounds that one of the parties
was not given proper chance of hearing. The court held that if the award suffers from patent
illegality, such an award has to be set aside. However, this ground may be invoked if (a) no
reasons are given for an award, (b) the view taken by an arbitrator is an impossible view
while construing a contract, (c) an arbitrator decides questions beyond a contract or his terms
of reference, and (d) if a perverse finding is arrived at based on no evidence, or overlooking
vital evidence, or based on documents taken as evidence without notice of the parties.3 The

Hon’ble Supreme Court analyzed various case laws and law commission report, to

summarize the following with respect to the public policy of India:

(a) The public policy of India now means the fundamental policy of Indian law;

(b) Violation of principles of natural justice continues to be a ground of challenge of an

award;
2
Shri Lal Mahal Ltd. v. Progetto Grano Spa MANU/SC/0655/2013
3
1 Lloyd's Rep 715; BAZ v. BBA and Ors. MANU/SGHC/0001/2018

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(c) The ground for interference in the basis that the arbitral award is in conflict

with justice or morality is to be understood as a conflict with the most basic

notions of morality or justice;

(d) Violation of public policy of India is now constricted to mean that a domestic award is

contrary to the fundamental policy of Indian law and that such award is against

the basic notion of justice or morality.

RATIO
Setting aside of the majority arbitral award by a court under a S.34 application does not give
effect to the minority arbitral award. Fresh arbitral proceedings need to be conducted in such
a case.

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CRITICAL ANALYSIS OF THE CASE

The Supreme Court allowed the appeal and set aside the Order. In the interest of
time, the Supreme Court upheld the Dissenting Award instead of referring the matter a fresh
arbitration. While the court set aside the majority award, the intent of the courts to further the
objective of the Act i.e. speedy resolution of disputes has certainly come through. The
Supreme Court delved into a catena of decisions, leading authorities, Law Commission
Reports and other resources to hold that the Amendment Act has modified the definition of
public policy to reflect a narrow approach akin to the Renusagar4 position.

In its decision, the Supreme Court has observed it would now be restricted to set
aside an award (i) induced or affected by fraud or corruption, (ii) contravening the basic
notions of justice or morality, (ii) contravening the fundamental policy of Indian law. The
Supreme Court has clarified that a mere contravention of the substantive law 5 would not
render the award susceptible to a challenge on the ground of being in conflict with the public
policy. Furthermore, the Supreme Court has stated that the finding that an award contravenes
public policy of India as it violates the “most basic notions of justice” can only be applied in
“exceptional circumstances which shock the conscience of the courts”.6

Further, the Supreme Court has cautioned that “under no circumstances can any court
interfere with an arbitral award on the ground that justice has not been done” as such
interference would be an intrusion into the merits of the dispute which in turn is against the
tenets of section 34 of the Act. The Supreme Court has rightly held that the Amendment Act
has limited the scope of intervention by making significant changes to section 28, which
when read with section 34 of the Act does not permit a court to review the merits of the
matter. It has also held that the Amendment Act leaves construction of the contract to the
tribunal and the court cannot sit in appeal over the same. 7 Thus, the ground of non-judicial
approach as developed in ONGC Western Geco8 has been done away with.

4
Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644
5
ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705
6
rofilati Italia SRL v. Paine Webber Inc MANU/UKCM/0001/2001
7
Karaha Bodas Co. LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara MANU/FEFT/0277/2004
8
ONGC Ltd. v. Western Geco International Ltd., (2014) 9 SCC 263

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However, perversity in awards may still cause such awards to be set aside provided
the same fall within the parameters of patent illegality. 9 The Supreme Court has clarified that
what cannot be said to be against the fundamental policy of Indian law cannot be reagitated
under the guise of patent illegality. However, an award without reasons, an award based on
no evidence, an award based on documents taken behind the back of parties, etc. could be set
aside under the ground of patent illegality. 10 While winding up its decision, the Supreme
Court has clarified that the grounds available under section 34 of the Act to set aside an
award must be applied carefully. Nonetheless, the present case is a welcome exception as it
reaffirms that PSUs cannot unilaterally alter contractual terms to the disadvantage of private
parties or parties with much lesser bargaining power.11

9
Atecs Mannesmann GmbH v. Rodrimar S/A Transportes Equipamentos Industriais e Armazes Gerais XXXV Y.B.
Comm. Arb. 330
10
Ibid
11
G.W.I. Kersten & Co. B.V. v. Societe Commerciale Raoul Duval et Co. XIX Y.B. Comm. Arb. 708;

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CONCLUSION

Art.142 of the Constitution gives the Supreme Court the power to make such orders as
may be necessary for doing “complete justice” in a case. In Delhi Development Authority v.
Skipper Construction Co.12 this power was deliberately left undefined, so that it could be adapted
according to a given situation. However, later in Supreme Court Bar Association v. Union of
India13 ,this power was restricted to the extent that the Supreme Court could not neglect express
statutory provisions in its exercise of this plenary power. A court is not allowed to modify an
award when dealing with an application u/S.34 of the Act. To reduce judicial interference and
reinforce party autonomy, the award must be set aside and fresh arbitral proceedings should be
conducted. This position was recently reiterated by the Delhi High Court in Delhi Metro Rail
Corporation Ltd. v. Delhi Airport Metro Express (FAO (OS) (COMM) 58/2018 & CM Nos.
13434/2018, 17581/2018 & 31531/2018).

Though this was accepted by the Court in the present case, it further observed that fresh
arbitral proceedings would lead to substantial delay, defeating the objective of the Act to
promote speedy dispute resolution. Thus, drawing a balance between party autonomy and
efficiency, the Court exercised its plenary power u/Art.142 of the Constitution by declaring the
minority decision as the enforceable award between the Parties.14 However, such declaration
begs the question as to whether the upholding of minority awards in the past has been improper;
since in the past, in cases like Modi Entertainment v. Prasar Bharati15 and ONGC v. Interocean
Shipping16 , the courts have upheld the minority awards without the use of the plenary power
u/Art.142 of the Constitution.

The use of the plenary power also raises the possibilities of parties appealing disputes up
to the Supreme Court in the hope of getting favourable judgments u/Art.142 of the
Constitution.17 Thus, in the interest of certainty, suitable amendments should be made in the Act.
Despite these issues raised by this judgment, its impact may not be much since the Supreme
12
(1996 AIR 2005),
13
(1998 INSC 225),
14
Paklito Inv. Ltd. v. Klockner East Asia Ltd. XIX Y.B. Comm. Arb. 664;
15
(OMP 39 of 2008),
16
(Arbitration Petition 549/2013),
17
BAZ v. BBA and Ors. MANU/SGHC/0001/2018

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Court in State of Punjab v. Rafiq Masih18 held that orders u/Art.142 of the Constitution do not
constitute a binding legal precedent. Lastly, some commentators have found the Court’s
characterisation of the 2015 amendments as prospective as wholly misleading. In my view, these
commentators fail to make a distinction between commencement of arbitral proceedings and
commencement of court proceedings.

They thus conclude that by applying the 2015 amendments to S.34 applications for
arbitral proceedings that initiated before 23.10.2015, the Court has given a retrospective
application to the 2015 amendments. However, this is not the case. Court proceedings commence
once an application is filed u/S.34 of the Act after the termination of arbitral proceedings in front
of an arbitral tribunal. Keeping this distinction in mind, the criticism is unfounded, and the
Court’s applicability of S.34 to applications made after 23.10.2015 is a clear prospective
application of the 2015 amendments.19

18
(Special Leave Petition (C) No.11684 of 2012)
19
SGHC 275; AJU v. AJT MANU/SGCA/0084/2011

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BIBLIOGRAPHY

Cases

BAZ v. BBA and Ors.....................................................................................................................17


G.W.I. Kersten & Co. B.V. v. Societe Commerciale Raoul Duval et Co.....................................16
Karaha Bodas Co. LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara................15
Lloyd's Rep 715; BAZ v. BBA and Ors........................................................................................13
ONGC Ltd. v. Saw Pipes Ltd........................................................................................................15
ONGC Ltd. v. Western Geco International Ltd.............................................................................16
Paklito Inv. Ltd. v. Klockner East Asia Ltd..................................................................................17
Renusagar Power Co. Ltd. v. General Electric Co........................................................................15
rofilati Italia SRL v. Paine Webber Inc.........................................................................................15
Shri Lal Mahal Ltd. v. Progetto Grano Spa...................................................................................13

Online Sources:

 Google.co.in

 Wikipedia.org

 Legalservicesindia.com

 http://www.vuhelp.net/law-transfer-property/

 http://www.advocatekhoj.com/library/bareacts/transferofproperty

 www.indiakanoon.org

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