TMI Blog2002 (3) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... ram, Farishty D. Sethena, V. Krishnan, Tripurari Ray, Vishwajit Singh and S. Aiyar for the Respondent. JUDGMENT Variava, J. This appeal is against a judgment dated 10-10-2000 passed by the Madhya Pradesh High Court. 2. Briefly stated the facts are as follows : The appellant entered into a contract with the 1st respondent on 9-5-1997. This contract contained an arbitration clause which provided that arbitration was to be as per the rules of the International Chamber of Commerce (ICC). On 23-10-1997 the 1st respondent filed a request for arbitration with ICC. Parties agreed that the arbitration be held in Paris, France. ICC has appointed a sole arbitrator. 3. 1st respondent filed an application under section 9 of the Arbitration and Conciliation Act, 1996 ( the Act ) before the IIIrd Addl. District Judge, Indore, M.P. against the appellant and the 2nd respondent. One of the interim reliefs sought was an order of injunction restraining these parties from alienating, transferring and/or creating third party right, disposing of, dealing with and/or selling their business assets and properties. The appellant raised the plea of maintainability of such an application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration. (4) This part except sub-section (1) of section 40, sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except in so far as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder. (5) Subject to the provisions of sub-section (4), and save in so far as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country or countries, this Part shall apply to all arbitrations and to all proceedings relating thereto." Mr. Sen submits that sub-sections (3), (4) and (5) of section 2 would necessarily only apply to arbitration which take place in India. He submits that, therefore, even though the sub-section (4) of section 2 uses the words every arbitration and sub-section (5) of section 2 uses the words "all arbitrations and to all proceedings relating thereto", they must necessarily refer only to arbitrations which take place in India. He submits that otherwise there would be a conflict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided in the Act. He submits that the rational behind this is that there should be minimum interference by Courts. 11. Mr. Sen submits that the Court in Indore could not have entertained the application under section 9 as Part I did not apply to arbitrations which take place outside India. He submits that the Court in Indore and the High Court were wrong in rejecting the application of the appellant and in holding that the Court had jurisdiction. 12. Mr. Sen states that on this aspect there is no authority of this Court. He points out that a number of High Courts including the High Courts at Orissa, Bombay, Madras, Delhi and Calcutta have held that Part I would not apply to arbitrations which take place outside India. He points out that earlier, two single Judges of the Delhi High Court had held that Part I applies to arbitrations which take place outside India. He points out that now a Division Bench of the Delhi High Court has held that Part I does not apply to arbitrations which take place outside India. He submits that, therefore, now the only High Court which has held, that Part I applies to arbitrations which take place outside India, is the Madhya Pradesh High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y). It would mean that there is no law, in India, governing such arbitrations. ( b )lead to an anomalous situation, inasmuch Part I would apply to Jammu and Kashmir in all international commercial arbitrations but Part I would not apply to the rest of India if the arbitration takes place out of India. ( c )lead to a conflict between sub-section (2) of section 2 on one hand and sub-sections (4) and (5) of section 2 on the other. Further sub-section (2) of section 2 would also be in conflict with section 1 which provides that the Act extends to the whole of India. ( d )leave a party remediless inasmuch as in international commercial arbitrations which take place out of India the party would not be able to apply for interim relief in India even though the properties and assets are in India. Thus, a party may not be able to get any interim relief at all. 15. It is, thus, necessary to see whether the language of the Act is so plain and unambiguous as to admit of only the interpretation suggested by Mr. Sen. It must be borne in mind that the very object of the Act, was to establish a uniform legal framework for the fair and efficient settlement of disputes arising in internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. ER 37 and Stock v. Frank Jones (Tipton) Ltd. [1978] 1 All. ER 948). In selecting out of different interpretations the Court will adopt that which is just reasonable and sensible rather than that which is none of those things, as it may be presumed that the Legislature should have used the word in that interpretation which least offends our sense of justice. In Shanon Realites Ltd. v. Sant Michael 924 A.C. 185 at pages 192-193 Lord Shaw stated, "where words of a statute are clear, they must, of course, be followed, but in their Lordships opinion where alternative constructions are equally open that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to be regulating and that alternative is to be rejected which will introduce uncertainty, friction or confusion into the working of the system." This principle was accepted by Subba Rao, J. while construing section 193 of the Sea Customs Act, 1878 and in coming to the conclusion that the Chief of Customs Authority was not an officer of custom - Collector of Customs v. Digvijaysinhji Spg. Wvg. Mills Ltd. AIR 1961 SC 1549. 16. A reading of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere would also be an anomaly inasmuch as even if an international commercial arbitration takes place outside India, Part I would continue to apply in Jammu and Kashmir, but it would not apply to the rest of India. The Legislature could not have so intended. 18. Section 2(1)( a ) defines arbitration as meaning any arbitration whether or not administered by a permanent arbitral institution. Thus, this definition recognises that the arbitration could be under a body like the Indian Chambers of Commerce or the International Chamber of Commerce. Arbitrations under International Chamber of Commerce would be held, in most cases, out of India. Section 2(1)( c ) provides that the term arbitral award would include an interim award. 19. Section 2(1)( f ) defines an international commercial arbitration. It reads as follows : "2( f ) international commercial arbitration means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is ( i )an individual who is a national of, or habitually resident in, any country other than India; or ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pulsorily applicable to an arbitration, including an international commercial arbitration, which takes place in India. Parties cannot, by agreement, override or exclude the non-derogable provisions of Part I in such arbitrations. By omitting to provide that Part I will not apply to international commercial arbitrations which take place outside India the affect would be that Part I would also apply to international commercial arbitrations held out of India. But by not specifically providing that the provisions of Part I apply to international commercial arbitrations held out of India, the intention of the Legislature appears to be to ally parties to provide by agreement that Part I or any provision therein will not apply. Thus, in respect of arbitrations which take place outside India even the non-derogable provisions of Part I can be excluded. Such an agreement may be express or implied. 22. If read in this manner there would be no conflict between section 1 and section 2(2). The words every arbitration in sub-section (4) of section 2 and the words "all arbitrations and all proceedings relating thereto" in sub-section (5) of section 2 are wide. Sub-sections (4) and (5) of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt I. Section 8 of the Act permits a judicial authority before whom an action is brought in a matter to refer parties to arbitration. If the matters were to be taken before a judicial authority in India it would be a Court as defined in section 2(1)( e ). Thus, if Part I was to only apply to arbitrations which take place in India the term Court would have been used in sections 5 and 8. The Legislature was aware that, in international commercial arbitrations, a matter may be taken before a judicial authority outside India. As Part I was also to apply to international commercial arbitrations held outside India the term judicial authority has been used in sections 5 and 8. 25. The beginning part of section 28 of the Act reads as follows : " Rules applicable to substance of dispute. (1) Where the place of arbitration is situate in India, " Section 28 is in Part I. If Part I was not to apply to an arbitration which takes place outside India there would be no necessity to specify that the rules are to apply "where the place of arbitration is situate in India". It has been held in the case of National Thermal Power Corpn. v. Singer Co. [1992] 3 SCC 551 that in internation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Part I apply to Part II. 27. Mr. Sen had also relied upon article 1(2) of the UNCITRAL Model Law and had submitted that India has purposely not adopted this article. He had submitted that the fact that India had not provided (like in the UNCITRAL Model Law) that section 9 would apply to arbitral proceedings which take place out of India indicated the intention of the Legislature not to apply section 9 to such arbitrations. We are unable to accept this submission. Article 1(2) of UNCITRAL Model Law reads as follows : "(2) The provisions of this Law, except articles 8, 9, 35 and 36, apply only if the place of arbitration is in the territory of this State." [Emphasis supplied] Thus, article 1(2) uses the word only to emphasize that the provisions of that Law are to apply if the place of arbitration is in the Territory of that State. Significantly in section 2(2) the word only has been omitted. The omission of this word changes the whole complexion of the sentence. The omission of the word only in section 2(2) indicates that this sub-section is only an inclusive and clarificatory provision. As stated above it is not providing that provisions of Part I do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are deemed to be a decree of the Court. Thus, foreign awards which are enforceable in India are deemed to be decrees. A domestic award has to be enforced under the provisions of Code of Civil Procedure, 1908. All that section 36 provides is that an enforcement of a domestic award is to take place after the time to make an application to set aside the award has expired or such an application has been refused. Section 9 does suggest that once an award is made an application for interim measure can only be made if the award is a domestic award as defined in section 2(7). Thus, where the Legislature wanted to restrict the applicability of section 9 it has done so specifically. 29. We see no substance in the submission that there would be unnecessary interference by Courts in arbitral proceedings. Section 5 provides that no judicial authority shall intervene except where so provided. Section 9 does not permit any or all applications. It only permits applications for interim measures mentioned in clauses ( i ) and ( ii ) thereof. Thus, there cannot be applications under section 9 for stay of arbitral proceedings or to challenge the existence or validity of arbitration agreements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration. Article 23 of ICC Rules reads as follows : " Conservatory and Interim Measures. 1. Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an Award, as the Arbitral Tribunal considers appropriate. 2. Before the file is transmitted to the Arbitral Tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the Arbitral Tribunal. Any such application and any measures taken by the judicial authority must be notified without delay to the Secreta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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