TMI Blog2015 (3) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in London to apply”, arbitrators are to be the members of the “London Arbitration Association” and the contract “to be governed and construed according to English Law”. It is worth noting that there is no other stipulation relating to the applicability of any law to the agreement. There is no other clause anywhere in the contract. That apart, it is also postulated that if the dispute is for an amount less that US $ 50000 then, the arbitration should be conducted in accordance with small claims procedure of the London Maritime Arbitration Association. When the aforesaid stipulations are read and appreciated in the contextual perspective, “the presumed intention” of the parties is clear as crystal that the juridical seat of arbitration would be London. On the basis of principles lay down in case of Cargill International [1997 (11) TMI 515 - ROYAL COURTS OF JUSTICE],it is vivid that the intended effect is to have the seat of arbitration at London. The commercial background, the context of the contract and the circumstances of the parties and in the background in which the contract was entered into, irresistibly lead in that direction. We are not impressed by the submission tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst respondent herein, while dealing with an application moved under Section 9 of the Arbitration and Conciliation Act, 1996 (for brevity, the Act ), on the foundation that Section 9 of the Act is limited to the applications to arbitration that takes place in India and has no applicability to arbitration which takes place outside India in view of the pronouncement in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.1(1 (2012) 9 SCC 552) inasmuch as clause 5 of the contract which is the arbitration clause clearly spells out that the contract is to be governed and construed according to English law and if the dispute of the claim does not exceed USD 50,000, the arbitration should be conducted in accordance with small claims procedure of the London Maritime Arbitration Association. 2. Regard being had to the lis in question, suffice it to state that an agreement was entered into between the parties on 20.10.2010 in respect of 24 voyages of coal shipment belonging to the appellant, the first respondent before the High Court, from Indonesia to India. The respondent no. 1 herein, Gupta Coal India Ltd., undertook only 15 voyages and that resulted in disputes which ulti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law laid down by the Supreme Court in Bharat Aluminium Co. s case is declaratory in nature and, therefore, the first respondent cannot be heard to say that he is not bound by the same and that the said principle cannot be applied to the case on hand. In the case of a declaration, it is supposed to have been the law always and one cannot be heard to say that it has only prospective effect. It is deemed to have been the law at all times. If that be so, the petition before the court below is not maintainable and is only to be dismissed. 7. At the very outset, it is necessary to clear the maze as regards the understanding of the ratio in Bharat Aluminium Co. (supra) by the High Court. In the said case, the Constitution Bench has clearly ruled thus: 197. The judgment in Bhatia International was rendered by this Court on 13-3-2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by this Court on numerous occasions. In fact, the judgment in Venture Global Engg. has been rendered on 10-1- 2008 in terms of the ratio of the decision in Bhatia International. Thus, in order to do complete justice, we hereby order, that the law now declared by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply. [Emphasis supplied] After the said conclusion was recorded, the stand of the learned senior counsel for the appellant was put thus:- Faced with this situation Mr Sen submits that, in this case the parties had agreed that the arbitration be as per the Rules of ICC. He submits that thus by necessary implication Section 9 would not apply. In our view, in such cases the question would be whether Section 9 gets excluded by the ICC Rules of Arbitration. Article 23 of the 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 approp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll foreign awards . This exception which is carved out, based on agreement of the parties, in para 21 (placita e to f) is extracted below: (Bhatia International case SCC p. 119e to f) 21. By omitting to provide that Part I will not apply to international commercial arbitrations which take place outside India the effect 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 (sic allow) 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 nonderogable provisions of Part I can be excluded. Such an agreement may be express or implied. 33. The very fact that the judgment holds that it would be open to the parties to exclude the application of the provisions of Part I by express or implied agreement, would mean that otherwise the whole of Part I would apply. In any event, to apply Section 34 to foreign international awards would not be inconsistent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twithstanding anything to the contrary in this agreement, the shareholders shall at all times act in accordance with the Companies Act and other applicable Acts/rules being in force, in India at any time. The said clauses were interpreted by the Court not to exclude either expressly or impliedly the applicability of Part I of the Act. 11. In this context, it will be useful to refer to the decision in Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd.( 4 (2008) 10 SCC 308) wherein the designated Judge was called to decide the issue of appointment of sole arbitrator. The arbitration clause read as follows:- 13. Settlement of disputes 13.1. This agreement, its construction, validity and performance shall be governed by and constructed in accordance with the laws of England and Wales; 13.2. Subject to Clause 13.3 all disputes or differences arising out of, or in connection with, this agreement which cannot be settled amicably by the parties shall be referred to adjudication; 13.3. If any dispute or difference under this agreement touches or concerns any dispute or difference under either of the sub-contract agreements, then the parties agree that such dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no express or implied exclusion of the applicability of Part I of the Act and, therefore, the Courts in India have jurisdiction and the learned Additional District Judge had not flawed in exercise of jurisdiction. 14. Mr. Giri, learned senior counsel appearing for the respondents would submit that when the juridical seat is in London, Part I of the Act would not be applicable. To bolster the aforesaid submission, he has placed reliance on Reliance Industries Limited and Another v. Union of India(8 (2014) 7 SCC 603). It is also urged by Mr. Giri, learned senior counsel that after the principal agreement, an addendum was executed between the parties after pronouncement of the decision in Bharat Aluminium Co. case and, therefore, the principles laid down in Bhatia International (supra) would not be applicable. 15. It is seemly to exposit the controversy and to appreciate what has been laid down in the case of Reliance Industries Limited (supra). The appellant in the said case has assailed the judgment of the High Court of Delhi whereby the High Court had allowed the petition filed by the respondent under Section 34 of the Act, challenging the final partial award, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion dated 16-12-2010 shall be London, England. (b) That any hearings in this arbitration may take place in Paris, France, Singapore or any other location the Tribunal considers may be convenient. (c) That, save as set out above, the terms and conditions of the arbitration agreements in Article 33 of the PSCs shall remain in full force and effect and be applicable in this arbitration. 18. The respondent, Union of India, had invoked the jurisdiction of the Delhi High Court by stating that the terms of the PSCs entered would manifest an unmistakable intention of the parties to be governed by the laws of India and more particularly the Arbitration Act, 1996; that the contracts were signed and executed in India; that the subject-matter of the contracts, namely, the Panna Mukta and the Tapti fields are situated within India; that the obligations under the contracts had been for the past more than 15 years performed within India; that the contracts stipulate that they shall be governed and interpreted in accordance with the laws of India ; that they also provided that nothing in this contract shall entitle either of the parties to exercise the rights, privileges and powers c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hearing of the notice for arbitration may take place at Paris, France, Singapore or any other location the Tribunal considers may be convenient. The Court posed the question whether in the factual matrix, there has been express or implied exclusion of the applicability of Part I of the Act. In that context, the Court referred to paragraph 32 of Bhatia International case and, thereafter, analysed the relevant articles of the PSC to discover the real intention of the parties as to whether the provisions of the Act had been excluded. The Court referred to Articles 32.1 and 32.2 that dealt with the applicable law and language of the contract. Article 32.1 provided that the proper law of the contract would be law of India and under Article 32.2 made a declaration none of the provisions contained in the contract would entitle either the Government or the contractor to exercise the rights, privileges and powers conferred upon it by the contract in a manner which would contravene the laws of India. The Court observed that the basis of controversy involved in the case pertain to analysis of the anatomy of the Article 33.12 which provided that venue of the arbitration shall be London an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state that:- 47. .The first issue raised in Videocon Industries Ltd. was as to whether the seat of arbitration was London or Kuala Lumpur. The second issue was with regard to the courts that would have supervisory jurisdiction over the arbitration proceedings. Firstly, the plea of Videocon Industries Ltd. was that the seat could not have been changed from Kuala Lumpur to London only on agreement of the parties without there being a corresponding amendment in the PSC. This plea was accepted. It was held that seat of arbitration cannot be changed by mere agreement of parties. In para 21 of the judgment, it was observed as follows: (SCC p. 170) 21. Though, it may appear repetitive, we deem it necessary to mention that as per the terms of agreement, the seat of arbitration was Kuala Lumpur. If the parties wanted to amend Article 34.12, they could have done so only by a written instrument which was required to be signed by all of them. Admittedly, neither was there any agreement between the parties to the PSC to shift the juridical seat of arbitration from Kuala Lumpur to London nor was any written instrument signed by them for amending Article 34.12. Therefore, the mere fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated thus: The arbitration agreement in this appeal is identical to the arbitration agreement in Videocon Industries. In fact, the factual situation in the present appeal is on a stronger footing than in Videocon Industries Ltd. As noticed earlier, in Videocon Industries, this Court concluded that the parties could not have altered the seat of arbitration without making the necessary amendment to the PSC. In the present appeal, necessary amendment has been made in the PSC. Based on the aforesaid amendment, the Arbitral Tribunal has rendered the final partial consent award of 14-9-2011 recording that the juridical seat (or legal place) of the arbitration for the purposes of arbitration initiated under the claimants notice of arbitration dated 16-12-2010 shall be London, England. Furthermore, the judgment in Videocon Industries is subsequent to Venture Global. We are, therefore, bound by the ratio laid down in Videocon Industries Ltd. 24. The Court also referred to Bharat Aluminium Co. (supra), especially para 123, which is as follows: 123. an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principle that has been stated in Bhatia International (supra) laying that in cases of international commercial arbitrations held out of India, provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case, the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply. Elaborating further, it proceeded to lay down thus: In this case, the parties have by agreement provided that the juridical seat of arbitration will be in London. On the basis of the aforesaid agreement, necessary amendment has been made in the PSCs. On the basis of the agreement and the consent of the parties, the Arbitral Tribunal has made the final partial consent award on 14-9- 2011 fixing the juridical seat (or legal place) of arbitration for the purposes of arbitration initiated under the claimants notice of arbitration dated 16-12-2010 in London, England. To make it even further clear that the award also records that any hearing in the arbitration may take place in Paris, France, Singapore or any other location the Tribunal considers conveni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was open to the parties to agree that the law governing the substantive contract (PSC) would be different from the law governing the arbitration agreement. This is precisely the situation in the present case. Article 32.1 specifically provides that the performance of the contractual obligations under the PSC would be governed and interpreted under the laws of India. So far as the alternative dispute redressal agreement i.e. the arbitration agreement is concerned, it would be governed by the laws of England. There is no basis on which the respondents can be heard to say that the applicability of laws of England related only to the conduct of arbitration reference. The law governing the conduct of the arbitration is interchangeably referred to as the curial law or procedural law or the lex fori. The delineation of the three operative laws as given in Naviera Amazonica has been specifically followed by this Court in Sumitomo. The Court also, upon a survey, of a number of decisions rendered by the English courts and after referring to the views expressed by learned commentators on international commercial arbitration concluded that: 16. The law which would apply to the filing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India can be resisted on the ground of public policy. 76.4. The conclusion of the High Court that in the event, the award is sought to be enforced outside India, it would leave the Indian party remediless is without any basis as the parties have consensually provided that the arbitration agreement will be governed by the English law. Therefore, the remedy against the award will have to be sought in England, where the juridical seat is located. However, we accept the submission of the appellant that since the substantive law governing the contract is Indian law, even the courts in England, in case the arbitrability is challenged, will have to decide the issue by applying Indian law viz. the principle of public policy, etc. as it prevails in Indian law. 30. We have dealt with the said decision as it has taken note of all the pronouncements in the field and further, Mr. Giri, learned senior counsel appearing for the respondents would heavily rely on it and Mr. Viwanathan, learned senior counsel would leave no stone unturned to distinguish the same on the factual foundation especially in reference to the arbitration clause. 31. At this juncture, it is profitable to note tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso urged by him that the stipulation in the agreement does not even remotely impliedly exclude the jurisdiction of the Indian courts. He would submit that to apply the principle of implied exclusion, the Court has to test the presumed intention and in such a situation, it is the duty of the Court to adopt an objective approach, that is to say, what would have been the intention of reasonable parties in the position of the actual parties to the contract. Learned senior counsel would also contend that the concept of fair result has to be kept in view while construing a contract. To buttress the aforesaid submissions, he has drawn inspiration from Kim Lewison s The Interpretation of Contracts, pages 26, 41, 110 and 217 wherein various judgments have been referred. 35. The issue has to be tested, as we perceive, on the parameters of law laid down in the cases of Videocon Industries Ltd. (supra), Dozco (supra) and Reliance Industries Ltd. (supra). 36. In Videocon Industries Ltd. (supra), the Court has referred to Section 3 of the English Arbitration Act, 1996, which reads as follows: 3. The seat of the arbitration.-In this Part the seat of the arbitration means the jurid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in writing, pursuant to the rules of agreement then in force of the I.C.C. The Court referred to the decisions in Bhatia International (supra), Indtel Technical Services (supra), Citation Infowares Ltd. (supra), NTPC v. Singer Co. (19 (1992) 3 SCC 551) and while analysing the import of Clause 23.1, the Court placed heavy reliance on Naviera Amazonica Peruana SA (supra) and held thus: 19. In respect of the bracketed portion in Article 23.1, however, it is to be seen that it was observed in Naviera case: It seems clear that the submissions advanced below confused the legal seat , etc. of an arbitration with the geographically convenient place or places for holding hearings. This distinction is nowadays a common feature of international arbitrations and is helpfully explained in Redfern and Hunter in the following passage under the heading The Place of Arbitration : The preceding discussion has been on the basis that there is only one place of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of reference or the minutes of proceedings or in some other way as the place or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28. In that context the Court opined that: ..... As indicated hereinabove, Clause 28 indicates that the governing law of the agreement would be the law of India i.e. the Arbitration and Conciliation Act, 1996. The learned counsel for the parties have quite correctly spelt out the distinction between the proper law of the contract and the curial law to determine the law which is to govern the arbitration itself. While the proper law is the law which governs the agreement itself, in the absence of any other stipulation in the arbitration clause as to which law would apply in respect of the arbitral proceedings, it is now well settled that it is the law governing the contract which would also be the law applicable to the Arbitral Tribunal itself. Clause 27.1 makes it quite clear that the curial law which regulates the procedure to be adopted in conducting the arbitration would be the SIAC Rules. There is, therefore, no ambiguity that the SIAC Rules would be the curial law of the arbitration proceedings. It also happens that the parties had agreed to make Singapore the seat of arbitration. Clause 27.1 indicates that the arbitration proceedings are to be conducted in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it thus: Again this Court in Yograj Infrastructure (two- Judge Bench) considered a similar arbitration agreement. It was provided that the arbitration proceedings shall be conducted in English in Singapore in accordance with the Singapore International Arbitration Centre (SIAC) Rules (Clause 27.1). Clause 27.2 provided that the arbitration shall take place in Singapore and be conducted in English language. This Court held that having agreed that the seat of arbitration would be Singapore and that the curial law of the arbitration proceedings would be the SIAC Rules, it was no longer open to the appellant to contend that an application under Section 11(6) of the Arbitration Act, 1996 would be maintainable. This judgment has specifically taken into consideration the law laid down in Bhatia International and Venture Global. The same view has been taken by the Delhi High Court, the Bombay High Court and the Gujarat High Court, in fact this Court in Videocon has specifically approved the observations made by the Gujarat High Court in Hardy Oil and Gas Ltd. v. Hindustan Oil Exploration Co. Ltd. (20 (2006) 1 Guj LR 658) 41. Coming to the stipulations in the present arbitration c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itration clause. There is ample indication through various phrases like arbitration in London to apply , arbitrators are to be the members of the London Arbitration Association and the contract to be governed and construed according to English Law . It is worth noting that there is no other stipulation relating to the applicability of any law to the agreement. There is no other clause anywhere in the contract. That apart, it is also postulated that if the dispute is for an amount less that US $ 50000 then, the arbitration should be conducted in accordance with small claims procedure of the London Maritime Arbitration Association. When the aforesaid stipulations are read and appreciated in the contextual perspective, the presumed intention of the parties is clear as crystal that the juridical seat of arbitration would be London. In this context, a passage from Mitsubishi Heavy Industries Ltd. v. Gulf Bank (21 [1997] 1 Lloyd s Rep. 343) is worth reproducing: It is of course both useful and frequently necessary when construing a clause in a contract to have regard to the overall commercial purpose of the contract in the broad sense of the type and general content, the relati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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