TMI Blog2012 (9) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... e it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996. With utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International [2002 (3) TMI 824 - SUPREME COURT OF INDIA] and Venture Global Engineering [2008 (1) TMI 829 - SUPREME COURT OF INDIA]. In our opinion, the provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with any of the provisions either in Part I or in Part II of the Arbitration Act, 1996. In a foreign seated international commercial arbitration, no application for interim relief would be maintainable under Section 9 or any other provision, as applicability of Part I of the Arbitration Act, 1996 is limited to all arbitrations which take place in India. Similarly, no suit for interim injunction simplicitor would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India. Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India. The judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement contained an arbitration clause for resolution of disputes arising out of the contract. The arbitration clause contained in Articles 17 and 22 was as under : Article 17.1 - Any dispute or claim arising out of or relating to this Agreement shall be in the first instance, endeavour to be settled amicably by negotiation between the parties hereto and failing which the same will be settled by arbitration pursuant to the English Arbitration Law and subsequent amendments thereto. Article 17.2 - The arbitration proceedings shall be carried out by two Arbitrators one appointed by BALCO and one by KATSI chosen freely and without any bias. The court of Arbitration shall be held wholly in London, England and shall use English language in the proceeding. The findings and award of the Court of Arbitration shall be final and binding upon the parties. Article 22 - Governing Law - This agreement will be governed by the prevailing law of India and in case of Arbitration, the English law shall apply. 4. The aforesaid clause itself indicates that by reason of the agreement between the parties, the governing law of the agreement was the prevailing law of India. However, the settle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals and special leave petitions as well as transferred case were listed alongwith this appeal. It is not necessary to take note of the facts in all matters. 8. We may, however, briefly notice the facts in Bharati Shipyard Ltd. Vs. Ferrostaal AG Anr. in SLP (C) No.27824 of 2011 as it pertains to the applicability of Section 9 of the Arbitration Act, 1996. In this case, the appellant, an Indian Company, entered into two Shipbuilding Contracts with respondent No.1 on 16th February, 2007. The appellant was to construct vessels having Builders Hull No.379 which was to be completed and delivered by the appellant to the respondent No.1 within the time prescribed under the two Shipbuilding Contracts. The agreement contained an arbitration clause. The parties initially agreed to get their disputes settled through arbitral process under the Rules of Arbitration of the International Chamber of Commerce (ICC) at Paris, subsequently, mutually agreed on 29th November, 2010 to arbitration under the Rules of London Maritime Arbitrators Association (LMAA) in London. This agreement is said to have been reached between the parties in the interest of saving costs and time. Prior to agreement dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, it is open for it to seek interim order of injunction for the purpose of preserving the assets as per Section 44 of the Arbitration Act, 1996 in Courts at London. Since the parties have agreed that substantive law governing the contract is English Law and as the law governing arbitration agreement is English Law, it is open for respondent No.1 to approach the Courts at England to seek the interim relief. 12. This special leave petition was filed against the aforesaid judgment of the High Court. 13. We have heard very lengthy submissions on all aspects of the matter. All the learned counsel on both sides have made elaborate references to the commentaries of various experts in the field of International Commercial Arbitration. Reference has also been made to numerous decisions of this Court as well as the Courts in other jurisdictions. 14. Mr. C.A. Sundaram, appearing for the appellants in C.A. No. 7019 of 2005 submits that primarily the following five questions would arise in these cases:- (a) What is meant by the place of arbitration as found in Sections 2(2) and 20 of the Arbitration Act, 1996?; (b) What is the meaning of the words under the law of which the award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, the missing word only can not be supplied by judicial interpretation. In support of the submission, reliance is placed on Nalinakhya Bysack Vs. Shyam Sunder Haldar Ors.[ 1953 SCR 533], Magor St. Mellons RDC Vs. Newport Corporation[1951 (2) All ER 839], Punjab Land Devl. Reclamation Corporation Ltd. Vs. Presiding Officer, Labour Court[(1990) 3 SCC 682] and Duport Steels Ltd. Vs. Sirs[(1980) 1 All ER 529]. It is pointed out by Mr. Sorabjee that the doctrine of ironing out the creases does not justify the substitution of a new jacket in place of the old, whose creases were to be ironed out. 17. All the learned counsel for the appellants have emphasised that the Arbitration Act, 1996 has not adopted the territorial criterion/principle completely, party autonomy has been duly recognized. This, according to the learned counsel, is evident from the provisions in Sections 2(1)(e), 2(5), 2(7), 20 and 28. It is submitted that restricting the operation of Part I only to arbitration which takes place in India would lead to reading words into or adding words to various provisions contained in the Arbitration Act, 1996. It is emphasised that restricting the applicability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther submitted that Section 2(7) clearly shows that part I would apply even to arbitrations which take place outside India. If Section 2(7) was to be restricted only to arbitrations which take place in India, there would be no need for such a provision. It is emphasised that the provision clearly states that it applies to an award made under this part . The aforesaid term is a clear indication to an arbitration which takes place outside India, where the parties have chosen the Arbitration Act, 1996 as the governing law of the arbitration. Mr. Sorabjee relied on National Thermal Power Corporation Vs. Singer Company Ors.[ (1992) 3 SCC 551], and submitted that Section 2(7) is a positive re-enactment of Section 9(b) of the Foreign Awards (Recognition and Enforcement) Act, 1961 (hereinafter referred to as the 1961 Act ). It is emphasised that Section 2(7) has been placed in Part I only to bring it in conformity with Article V(1)(e) of the New York Convention, which has been incorporated and enacted as Section 48(1)(e). The aforesaid section even though it is dealing with enforcement of awards, necessarily recognizes the jurisdiction of courts in two countries to set aside the awar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on , the siege ort , the arbitral situs the locus arbitri or the arbitral forum ). The arbitral seat is the nation where an international arbitration has its legal domicile, the laws of which generally govern the arbitration proceedings in significant respects, with regard to both internal and external procedural matters. As discussed elsewhere, the arbitral seat is the location selected by the parties (or, sometimes, by the arbitrators, an arbitral institution, or a court) as the legal or juridical home or place of the arbitration. In one commentator s words, the seat is in the vast majority of cases the country chosen as the place of the arbitration. The choice of the arbitral seat can be (and usually is) made by the parties in their arbitration agreement or selected on the parties behalf by either the arbitral tribunal or an arbitral institution. 21. He submits that whist interpreting the word place in Section 2(2), the provisions contained in Section 20 would have relevance as Section 20 stipulates that the parties are free to agree on the place of arbitration. The interpretation on the word place in Section 2(2) would also have to be in conformity with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dominance of the seat, particularly with reference to the setting aside of the award. The two jurisdictions were inserted in the New York Convention to dilute the predominance of the seat over the party autonomy. He further submitted that the apprehension that the two courts of competent jurisdiction could give conflicting verdicts on the same award is unfounded. Even if there were parallel proceedings, it would merely be a question of case management by the relevant courts in deciding which proceedings should be continued and which stayed. 23. Learned counsel have submitted that the findings in the case of Bhatia International Vs. Bulk Trading S.A. Anr.[ (2004) 2 SCC 105] (hereinafter referred to as Bhatia International ) that if Part I was not made applicable to arbitrations conducted outside India would render party remediless is wholly correct. It is not open to a party to file a suit touching on the merits of the arbitration, since such suit would necessarily have to be stayed in view of Section 8 or Section 45 of the Arbitration Act, 1996. He submits that the only way a suit can be framed is a suit to inter alia restrict the defendant from parting with properties . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat by an interim order, the Court would not grant final relief. The nature of such a suit would be to grant a final order that would in fact be in the nature of an interim order. Here the learned counsel refers to U.P. Junior Doctors Action Committee Vs. Dr. B. Sheetal Nandwani[1997 Suppl (1) SCC 680], State of Uttar Pradesh Vs. Ram Sukhi Devi[(2005) (9) SCC 733], Deoraj Vs. State of Maharashtra Ors.[ (2004) 4 SCC 697] and Raja Khan Vs. Uttar Pradesh Sunni Central Wakf Board Ors.[ (2011) 2 SCC 741] He submits that the intention of the Indian Parliament in enacting the Arbitration Act, 1996 was not to leave a party remediless. 24. Mr. Gopal Subramanium submits that the issue in the present case is that in addition to the challenge to the validity of an award being made in courts where the seat is located, are domestic courts excluded from exercising supervisory control by way of entertaining a challenge to an award? He submits that the issue arises when it is not possible, in a given case, to draw an assumption that the validity of the award is to be judged according to the law of the place of arbitration. The Arbitration Act, 1996 has removed such vagueness. The Arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid Act to arbitrations outside India, the same proposition need not subsequently be stated as a qualifier in Section 28. 25. Mr. Gopal Subramanium emphasised that Part II cannot be a complete code as it necessarily makes use of provisions in Part I. He points out that Part I and Part II of the Arbitration Act, 1996 would have been distinct codes in themselves if they had provisions of conducting arbitration in each part. However, Part I of the Arbitration Act, 1996 prescribed the entire procedure for the conduct of an arbitration, whereas Part II is only for recognition and enforcement of certain foreign awards. Therefore, he submits that Part I and Part II cannot be read separately but have to be read harmoniously in order to make Arbitration Act, 1996 a complete code. He points out that even though certain provisions of Part I are mirrored in Part II, at the same time, certain provisions of Part I which are necessary for arbitration are not covered by Part II. He points out that although Section 45, which is in part II, enables a court to make a reference to arbitration; there is no other provision like Section 11 to resolve a situation when an arbitrator is not being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtensive with the rights under the chapter on the New York Convention. Therefore, the fact that certain provisions in Part II of the Arbitration Act, 1996 appear to function in the same field as provisions in Part I, does not mean that the provisions of Part I cease to have effect, or that the provisions of Part I are no longer available to a party. This, according to Mr. Subramanium, is in consonance with the history of New York Convention and the Model Law, which shows that the Model Law was intended to fill the gaps left by the New York Convention as well as function as a complete code. He, therefore, urges that the sections which have come to be considered essential for the success of arbitration, such as Sections 9, 11 and 34, must be considered also available to the parties seeking recognition and enforcement of foreign awards 26. Finally, he submits that the decision in Bhatia International (supra) is a harmonious construction of Part I and Part II of the Arbitration Act, 1996. He further submits that the case of Venture Global Engineering Vs. Satyam Computer Services Ltd. Anr.[ [2008 (4) SCC 190]] (hereinafter referred to as Venture Global Engineering ) has been corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic dispute from choosing a place of arbitration outside India. Mr. Kumar goes even further to submit that when both the parties are Indian, the substantive law governing the dispute must necessarily be Indian irrespective of the situs of the arbitration and irrespective of any provision in the contract between the parties to the contrary. He submits that the same principle applies with equal force to the arbitration law too, that is to say, that if it is not open to two Indian parties with regard to an entirely domestic dispute to derogate from the Indian laws of contract, evidence etc., it is equally not open to them derogate from the Indian arbitrational law either. He relies on judgment of this Court in the case of TDM Infrastructure Pvt. Ltd. Vs. U.E. Development India Pvt. Ltd.,[ 2008 (14) SCC 271] Paragraphs 19, 20 and 23. He, however, very fairly points out that this was a case under Section 11 and the point in issue here did not specifically arise for consideration in the said case. History of Arbitration in India - 31. Before we embark upon the task of interpreting the provisions of the Arbitration Act, 1996, it would be apposite to narrate briefly the history of Arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerned. Under this Act, Arbitration may be without the intervention of a Court or with the intervention of a Court where there is no suit pending or in a pending suit. This Act empowered the Courts to modify the Award (Section 15), remit the Award to the Arbitrators for reconsideration (Section 16) and to set aside the Award on specific grounds (Section 30). The 1940 Act was based on the English Arbitration Act, 1934. The 1934 Act was replaced by the English Arbitration Act, 1950 which was subsequently replaced by the Arbitration Act, 1975. Thereafter the 1975 Act was also replaced by the Arbitration Act, 1979. There were, however, no corresponding changes in the 1940 Act. The law of arbitration in India remained static. 35. The disastrous results which ensued from the abuse of the 1940 Act are noticed by this Court in the case of Guru Nanak Foundation Vs. M/s. Rattan Singh Sons.[ 1981 (4) SCC 634] Justice D.A. Desai speaking for the court expressed the concern and anguish of the court about the way in which the proceedings under the 1940 Act, are conducted and without an exception challenged in courts. His Lordship observed : Interminable, time consuming, complex and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, 1937. It was to give effect to both the 1923 Protocol and 1927 Convention that the Arbitration (Protocol and Convention) Act, 1937 was enacted in India. Again a number of problems were encountered in the operation of the 1923 Protocol and the 1927 Geneva Convention. It was felt that there were limitations in relation to their fields of application. Under the 1927 Geneva Convention a party in order to enforce the Award in the Country of an origin was obliged to seek a declaration in the country where the arbitration took place to the effect that the Award was enforceable. Only then could the successful party go ahead and enforce the Award in the country of origin. This led to the problem of double exequatur , making the enforcement of arbitral awards much more complicated. In 1953 the International Chamber of Commerce promoted a new treaty to govern International Commercial Arbitration. The proposals of ICC were taken up by the United Nations Economic Social Council. This in turn led to the adoption of the convention on the Recognition and Enforcement of Foreign Arbitral Awards at New York in 1958 (popularly known as the New York Convention ). The New York Convention is an impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration; (iii) to provide that the arbitral tribunal gives reasons for its arbitral award; (iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction: (v) to minimise the supervisory role of Courts in the arbitral process; (vi) to permit an arbitral tribunal to use mediation, conciliation, or other procedures during the arbitral proceedings to encourage settlement of disputes; (vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court; (viii) to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal; and (ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two International Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award. The Act is one to consolidate and amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, often, particularly inappropriate for resolving international commercial arbitration disputes. The explanatory note by the UNCITRAL Secretariat refers to the recurring inadequacies to be found in outdated National Laws, which included provisions that equate the arbitral process with Court litigation and fragmentary provisions that failed to address all relevant substantive law issues. It was also noticed that even most of those laws that appear to be up-to-date and comprehensive were drafted with domestic arbitration primarily, if not exclusively, in mind . It further mentions that while this approach is understandable in view of the fact that even today the bulk of cases governed by arbitration law would be of purely domestic nature, the unfortunate consequence is that traditional local concepts are imposed on international cases and the needs of modern practice are often not met. There was also unexpected and undesired restrictions found in National Laws, which would prevent the parties, for example, from submitting future disputes to arbitration. The Model Law was intended to reduce the risk of such possible frustration, difficulties or surprise. Problems also stemmed from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 rights, disposing of, dealing with and/or selling their business assets and properties. The appellant raised the plea of maintainability of such an application. The appellant contended that Part I of the Arbitration Act, 1996 would not apply to arbitrations where the place of arbitration is not in India. This application was dismissed by the IIIrd Additional District Judge on 1st February, 2000. It was held that the Court at Indore had jurisdiction and the application was maintainable. The appellant filed a writ petition before the High Court of Madhya Pradesh, Indore Bench. The said writ petition was dismissed by the judgment dated 10th October, 2000, which was impugned in the appeal before this Court. On behalf of the appellants, it was submitted that Part I of the Arbitration Act, 1996 only applies to arbitrations where the place of arbitration is in India. It was also submitted that if the place of arbitration is not in India then Part II of the Arbitration Act, 1996 would apply. Reliance was also placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hmir 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. 49. It is held that the definition of international commercial arbitration under Section 2(1)(f) makes no distinction between international commercial arbitrations held in India or outside India. Further it is also held that the Arbitration Act, 1996 no where provides that its provisions are not to apply to international commercial arbitrations which take place in a non-convention country. Hence, the conclusion at Paragraph 14(a). On the basis of the discussion in Paragraph 17, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the appellants have supported the ratio of law laid down in Bhatia International (supra) and Venture Global Engineering (supra). They have also supported the decisions in ONGC Vs. Western Company of North America (supra) and National Thermal Power Corporation Vs. Singer Company Ors. (supra). 52. In order to consider the issues raised and to construe the provisions of the Arbitration Act, 1996 in its proper perspective, it would be necessary to analyse the text of the Arbitration Act, 1996 with reference to its legislative history and international conventions. We shall take due notice of the stated objects and reasons for the enactment of the Arbitration Act, 1996. 53. Further, for a comprehensive and clear understanding of the connotations of the terms used in the Arbitration Act, 1996, a brief background of various laws applicable to an International Commercial Arbitration and distinct approaches followed by countries across the world will also be useful. 54. With utmost respect, upon consideration of the entire matter, we are unable to support the conclusions recorded by this Court in both the judgments i.e. Bhatia International (supra) and Venture Global ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion contained in Section 2(2) is not affected by the proviso which is restricted to Section 1(2). By the process of interpretation, it can not be read as a proviso to Section 2(2) also. It can further be seen that the provisions relating to Enforcement of Certain Foreign Awards in Part II would apply without any restriction, as Part II has no relation to the enforcement of any purely domestic awards or domestically rendered international commercial awards. These would be covered by the Jammu Kashmir Act, 1997. 58. In view of the above, we are unable to discern any anomaly as held in Bhatia International (supra). We also do not discern any inconsistency between Section 1 and Section 2(2) of the Arbitration Act, 1996. Does Section 2(2) bar the Application of Part I to Arbitrations which take place outside India? 59. The crucial difference between the views expressed by the appellants on the one hand and the respondents on the other hand is as to whether the absence of the word only in Section 2(2) clearly signifies that Part I of the Arbitration Act, 1996 would compulsorily apply in the case of arbitrations held in India, or would it signify that the Arbitration Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id. Even if there is some defect in the phraseology used by the legislature the Court cannot, as pointed out in Crawford Vs. Spooner[6 Moo PC 1 : 4 MIA 179], aid the legislature s defective phrasing of an Act or add and amend or, by construction, make up deficiencies which are left in the Act. Even where there is a casus omissus, it is, as said by Lord Russell of Killowen in Hansraj Gupta Vs. Official Liquidator of Dehra Dun-Mussoorie Electric Tramway Co., Ltd.[ (1933) LR 60 IA 13; AIR (1933) PC 63], for others than the Courts to remedy the defect. 61. Mr. Sorabjee has also rightly pointed out the observations made by Lord Diplock in the case of Duport Steels Ltd. (supra). In the aforesaid judgment, the House of Lords disapproved the approach adopted by the Court of Appeal in discerning the intention of the legislature, it is observed that:- the role of the judiciary is confined to ascertaining from the words that Parliament has approved as expressing its intention what that intention was, and to giving effect to it. Where the meaning of the statutory words is plain and unambiguous it is not for the judges to invent fancied ambiguities as an excuse for failing to give effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1940; The Arbitration (Protocol and Convention) Act, 1937 and The Foreign Awards (Recognition and Enforcement) Act, 1961. It is specifically observed that it is widely felt that the Arbitration Act, 1940, which contains the general law of arbitration, has become outdated. It also mentions that the Law Commission of India, several representative bodies of trade and industry and experts in the fields of arbitration have proposed amendments to the Arbitration Act, 1940, to make it more responsive to contemporary requirements. It was also recognized that the economic reforms initiated by India at that time may not become fully effective, if the law dealing with settlement of both domestic and international commercial dispute remained out of tune with such reforms. The objects and reasons further make it clear that the general assembly has recommended that all countries give due consideration to the Model Law adopted in 1985, by the UNCITRAL, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice. Paragraph 3 of the statement of objects and reasons makes it clear that although the UNCITRAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e three Acts. Earlier the 1937 Act catered to the arbitrations under the Geneva Convention. After the 1958 New York Convention was ratified by India, the 1961 Act was passed. The domestic law of arbitration had remained static since 1940. Therefore, the Arbitration Act, 1996 consolidates the law on domestic arbitrations by incorporating the provisions to expressly deal with the domestic as well as international commercial arbitration; by taking into account the 1985 UNCITRAL Model Laws. It is not confined to the New York Convention, which is concerned only with enforcement of certain foreign awards. It is also necessary to appreciate that the Arbitration Act, 1996 seeks to remove the anomalies that existed in the Arbitration Act, 1940 by introducing provisions based on the UNCITRAL Model Laws, which deals with international commercial arbitrations and also extends it to commercial domestic arbitrations. UNCITRAL Model Law has unequivocally accepted the territorial principle. Similarly, the Arbitration Act, 1996 has also adopted the territorial principle, thereby limiting the applicability of Part I to arbitrations, which take place in India. 67. In our opinion, the interpretatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: 72. Divergent views were expressed as to whether the Model Law should expressly state its territorial scope of application and, if so, which connecting factor should be the determining criterion .. 73, As regards the connecting factor which should determine the applicability of the (Model) Law in a given State, there was wide support for the so-called strict territorial criterion, according to which the Law would apply where the place of arbitration was in that State . 74. Another view was that the place of arbitration should not be exclusive in the sense that parties would be precluded from choosing the law of another State as the law applicable to the arbitration procedure .. 78. The Commission requested the secretariat to prepare, on the basis of the above discussion, draft provisions on the territorial scope of application of the Model Law in general, including suggestions as to possible exceptions of the general scope 80. In discussing the above proposal, the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Law State would then presumably have provided any court assistance needed by this arbitration, including setting aside, even though the place of arbitration was elsewhere. Such a system of party autonomy is envisioned by the New York Convention, which recognizes that a State may consider as domestic an award made outside the State, and vice versa. The Commission decided not to adopt the autonomy criterion. It was noted that the territorial criterion was widely accepted by existing national laws, and that where the autonomy criterion was available it was rarely used. 72. We are also unable to accept the submission of the learned counsel for the appellants that the Arbitration Act, 1996 does not make seat of the arbitration as the centre of gravity of the arbitration. On the contrary, it is accepted by most of the experts that in most of the National Laws, arbitrations are anchored to the seat/place/situs of arbitration. Redfern in Paragraph 3.54 concludes states that the seat of the arbitration is thus intended to be its centre of gravity. This, however, does not mean that all the proceedings of the arbitration have to take place at the seat of the arbitration. The arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration is governed by the law of the place in which it is held, which is the seat (or forum or locus arbitri) of the arbitration, is well established in both the theory and practice of international arbitration. In fact, the 1923 Geneva Protocol states: The arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place. The New York Convention maintains the reference to the law of the country where the arbitration took place (Article V(1)(d)) and, synonymously to the law of the country where the award is made [Article V(1)(a) and (e)]. The aforesaid observations clearly show that New York Convention continues the clear territorial link between the place of arbitration and the law governing that arbitration. The author further points out that this territorial link is again maintained in the Model Law which provides in Article 1(2) that the provision of this law, except Articles 8, 9, 35 and 36 apply only if the place of arbitration is in the territory of the State . Just as the Arbitration Act, 1996 maintains the territorial link between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the appellants that there would be no need for the provision contained in Section 2(2) as it would merely be stating the obvious, i.e., the Arbitration Act, 1996 applies to arbitrations having their place/seat in India. In our opinion, the provisions have to be read as limiting the applicability of Part I to arbitrations which take place in India. If Section 2(2) is construed as merely providing that Part I of the Arbitration Act, 1996 applies to India, it would be ex facie superfluous/redundant. No statutory provision is necessary to state/clarify that a law made by Parliament shall apply in India/to arbitrations in India. As submitted by Mr. Sorabjee, another fundamental principle of statutory construction is that courts will never impute redundancy or tautology to Parliament. See observations of Bhagwati, J. in Umed Vs. Raj Singh,[ 1975 (1) SCC 76 Para 37 at P.103] wherein it is observed as follows: It is well settled rule of interpretation that the courts should, as far as possible, construe a statute so as to avoid tautology or superfluity. The same principle was expressed by Viscount Simon in Hill Vs. William Hill (Park Lane) Ltd.[ 1949 AC 530 at P 546] in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e up the submission of the learned counsel that Sections 2(4) and 2(5) specifically make Part I applicable to all arbitrations irrespective of where they are held. This submission is again a reiteration of the conclusions recorded in Bhatia International at Paragraph 14C and reiterated in Paragraphs 21 and 22. We have earlier held that Section 2(2) would not be applicable to arbitrations held outside India. We are unable to accept that there is any conflict at all between Section 2(2) on the one hand and Sections 2(4) and 2(5) on the other hand. Section 2(4) provides as under : 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. 82. It is urged by the appellants that Section 2(4) makes Part I applicable to every arbitration under any other enactment, thereby makes it applicable to arbitrations wherever held, whether in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs relating thereto, where the seat is in India [a corollary of Section 2(2)] and if it is not a statutory arbitration or subject of an agreement between India and any other country. The exception of statutory enactments was necessary in terms of the last part of sub-clause (4), which provides for non application of this Part to statutory arbitrations in case of inconsistency. Thus, barring the statutory enactments as provided for under Section 2(4) of the Arbitration Act, 1996 and arbitrations pursuant to international agreement, all other arbitration proceedings held in India shall be subject to Part I of the said Act. Accordingly, the phrase all arbitrations in Section 2(5) means that Part I applies to all where Part I is otherwise applicable. Thus, the provision has to be read as a part of the whole chapter for its correct interpretation and not as a stand alone provision. There is no indication in Section 2(5) that it would apply to arbitrations which are not held in India. 85. In view of the aforesaid observations, we have no doubt that the provisions of Section 2(4) and Section 2(5) would not be applicable to arbitrations which are covered by Part II of the Arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Section 1(2); Sections 2(1)(f); 11(9), 11(12); 28(1)(a) and 28(1)(b). All the aforesaid provisions, which incorporate the term international , deal with pre-award situation. The term international award does not occur in Part I at all. Therefore, it would appear that the term domestic award means an award made in India whether in a purely domestic context, i.e., domestically rendered award in a domestic arbitration or in the international context, i.e., domestically rendered award in an international arbitration. Both the types of awards are liable to be challenged under Section 34 and are enforceable under Section 36 of the Arbitration Act, 1996. Therefore, it seems clear that the object of Section 2(7) is to distinguish the domestic award covered under Part I of the Arbitration Act, 1996 from the foreign award covered under Part II of the aforesaid Act; and not to distinguish the domestic award from an international award rendered in India. In other words, the provision highlights, if any thing, a clear distinction between Part I and Part II as being applicable in completely different fields and with no overlapping provisions. 89. That Part I and Part II are exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d provision that the judgments in Singer Company Ors. (supra) and ONGC v. Western Company of North America (supra) were rendered. In both the cases the foreign awards made outside India were set aside, under the 1940 Act. By deletion of Section 9-B of the 1961 Act, the judgments have been rendered irrelevant under the Arbitration Act, 1996. Having removed the mischief created by the aforesaid provision, it cannot be the intention of the Parliament to reintroduce it, in a positive form as Section 2(7) of the Arbitration Act, 1996. We, therefore, see no substance in the additional submission of Mr. Sorabjee. 92. We agree with Mr. Salve that Part I only applies when the seat of arbitration is in India, irrespective of the kind of arbitration. Section 2(7) does not indicate that Part I is applicable to arbitrations held outside India. 93. We are, therefore, of the opinion that Section 2(7) does not alter the proposition that Part I applies only where the seat or place of the arbitration is in India. 94. It appears to us that provision in Section 2(7) was also necessary to foreclose a rare but possible scenario (as canvassed by Mr. Gopal Subramanium) where two foreigners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions relied upon by the learned counsel for the appellants would make any section of Part I applicable to arbitration seated outside India. It will be apposite now to consider each of the aforesaid provisions in turn. Section 2(1)(e) of the Arbitration Act, 1996 reads as under: 2. Definitions (1) In this Part, unless the context otherwise requires - . (e) Court means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes. 96. We are of the opinion, the term subject matter of the arbitration cannot be confused with subject matter of the suit . The term subject matter in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions contained in Section 2(1)(e) being purely jurisdictional in nature can have no relevance to the question whether Part I applies to arbitrations which take place outside India. 98. We now come to Section 20, which is as under:- 20. Place of arbitration - (1) The parties are free to agree on the place of arbitration. (2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. (3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, good or other property. A plain reading of Section 20 leaves no room for doubt that where the place of arbitration is in India, the parties are free to agree to any place or seat within India, be it Delhi, Mumbai etc. In the absence of the parties agreement thereto, Section 20(2) authorizes the tribunal to determine the place/seat of such arbitration. Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the place initially agreed by or on behalf of the parties. This, in our view, is the correct depiction of the practical considerations and the distinction between seat (Section 20(1) and 20(2)) and venue (Section 20(3)). We may point out here that the distinction between seat and venue would be quite crucial in the event, the arbitration agreement designates a foreign country as the seat / place of the arbitration and also select the Arbitration Act, 1996 as the curial law/law governing the arbitration proceedings. It would be a matter of construction of the individual agreement to decide whether: The designated foreign seat would be read as in fact only providing for a venue / place where the hearings would be held, in view of the choice of Arbitration Act, 1996 as being the curial law - OR ii) Whether the specific designation of a foreign seat, necessarily carrying with it the choice of that country s Arbitration / curial law, would prevail over and subsume the conflicting selection choice by the parties of the Arbitration Act, 1996. ONLY if the agreement of the parties is construed to provide for the seat / place of Arbitration being in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al procedures floating in the transnational firmament, unconnected with any municipal system of law . It is further held that accordingly every arbitration must have a seat or locus arbitri or forum which subjects its procedural rules to the municipal law which is there in force . The Court thereafter culls out the following principle Where the parties have failed to choose the law governing the arbitration proceedings, those proceedings must be considered, at any rate prima facie, as being governed by the law of the country in which the arbitration is held, on the ground that it is the country most closely connected with the proceedings . The aforesaid classic statement of the Conflict of Law Rules as quoted in Dicey Morris on the Conflict of Laws (11th Edition) Volume 1, was approved by the House of Lords in James Miller Partners Vs. Whitworth Street Estates (Manchester) Ltd.[ [1970] 1 Lloyd s Rep. 269; [1970] A.C.583]. Mr. Justice Mustill in the case of Black Clawson International Ltd. Vs. PapierIrke Waldhof- Aschaf-fenburg A.G.[ [1981] 2 Lloyd s Rep. 446 at P. 453], a little later characterized the same proposition as the law of the place where the reference is con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 3, for the purposes of Section 2, in the following words:- I must determine what the parties agreed was the seat of the arbitration for the purposes of Section 2 of the Arbitration Act 1996. This means by Section 3 what the parties agreed was the juridical seat. The word juridical is not an irrelevant word or a word to be ignored in ascertaining what the seat is. It means and connotes the administration of justice so far as the arbitration is concerned. It implies that there must be a country whose job it is to administer, control or decide what control there is to be over an arbitration. 108. Thus, it would be evident that if the juridical seat of the arbitration was in Scotland, the English Courts would have no jurisdiction to entertain an application for leave to appeal. The Contractor argued that the seat of the arbitration was Scotland whilst the Employer argued that it was England. There were to be two contractors involved with the project. 109. The material Clauses of the EPC Contract were: 1.4.1. The Contract shall be governed by and construed in accordance with the laws of England and Wales and, subject to Clause 20.2 (Dispute Resolution) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exclusive jurisdiction to settle disputes. Although this is subject to arbitration, it must and does mean something other than being mere verbiage. It is a jurisdiction over disputes and not simply a court in which a foreign award may be enforced. If it is in arbitration alone that disputes are to be settled and the English Courts have no residual involvement in that process, this part of Clause 1.4.1 is meaningless in practice. The use of the word jurisdiction suggests some form of control. (c) The second part of Clause 1.4.1 has some real meaning if the parties were agreeing by it that, although the agreed disputes resolution process is arbitration, the parties agree that the English Court retains such jurisdiction to address those disputes as the law of England and Wales permits. The Arbitration Act, 1996 permits and requires the Court to entertain applications under Section 69 for leave to appeal against awards which address disputes which have been referred to arbitration. By allowing such applications and then addressing the relevant questions of law, the Court will settle such disputes; even if the application is refused, the court will be applying its jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 11.5 envisages something called the Court becoming involved in securing compliance with a peremptory order of the arbitrator. That would have to be the English Court, in practice. 114. These observations clearly demonstrate the detailed examination which is required to be undertaken by the court to discern from the agreement and the surrounding circumstances the intention of the parties as to whether a particular place mentioned refers to the venue or seat of the arbitration. In that case, the Court, upon consideration of the entire material, concluded that Glasgow was a reference to the venue and the seat of the arbitration was held to be in England. Therefore, there was no supplanting of the Scottish Law by the English Law, as both the seat under Section 2 and the juridical seat under Section 3, were held to be in England. Glasgow being only the venue for holding the hearings of the arbitration proceedings. The Court rather reiterated the principle that the selection of a place or seat for an arbitration will determine what the curial law or lex fori or lex arbitri will be. It was further concluded that where in substance the parties agreed that the laws ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was analogous to an exclusive jurisdiction clause. Not only was there agreement to the curial law of the seat, but also to the Courts of the seat having supervisory jurisdiction over the arbitration, so that, by agreeing to the seat, the parties agreed that any challenge to an interim or final award was to be made only in the courts of the place designated as the seat of the arbitration. Although, venue was not synonymous with seat , in an arbitration clause which provided for arbitration to be conducted in accordance with the Rules of the ICC in Paris (a supranational body of rules), a provision that the venue of arbitration shall be London, United Kingdom did amount to the designation of a juridical seat . In Paragraph 54, it is further observed as follows:- There was a little debate about the possibility of the issues relating to the alleged submission by the claimants to the jurisdiction of the High Court of Delhi being heard by that court, because it was best fitted to determine such issues under Indian Law. Whilst I found this idea attractive initially, we are persuaded that it would be wrong in principle to allow this and that it would create undue practical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... njunction. The Court of Appeal noticed the submission on behalf of the defendant as follows:- 14. The main submission of Mr Hirst QC for the defendant insurer was that the judge had been wrong to hold that the arbitration agreement itself was governed by English law merely because the seat of the arbitration was London. He argued that the arbitration agreement itself was silent as to its proper law but that its proper law should follow the proper law of the contract as a whole, namely New York law, rather than follow from the law of the seat of the arbitration namely England. The fact that the arbitration itself was governed by English procedural law did not mean that it followed that the arbitration agreement itself had to be governed by English law. The proper law of the arbitration agreement was that law with which the agreement had the most close and real connection; if the insurance policy was governed by New York law, the law with which the arbitration agreement had its closest and most real connection was the law of New York. It would then follow that, if New York law permitted a challenge for manifest disregard of the law, the court in England should not enjoin such a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian Arbitration Act of 1940 or any reenactment or modification thereof. The arbitration shall be conducted in the English language. The award of the Arbitrators shall be made by majority decision and shall be final and binding on the Parties hereto. The seat of the arbitration proceedings shall be London, United Kingdom. 118. Construing the aforesaid clause, the Court held as follows:- On the contrary, for the reasons given, it seems to me that by their agreement the parties have chosen English law as the law to govern their arbitration proceedings, while contractually importing from the Indian Act those provisions of that Act which are concerned with the internal conduct of their arbitration and which are not inconsistent with the choice of English arbitral procedural law. 119. The same question was again considered by the High Court of Justice, Queen s Bench Division, Commercial Court (England) in Sulamerica CIA Nacional de Seguros SA v. Enesa Engenharia SA - Enesa.[ [2012 WL 14764].] The Court noticed that the issue in this case depends upon the weight to be given to the provision in Condition 12 of the Insurance policy that the seat of the arbitration shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration agreement to be different from the law of the seat of the arbitration. The reason was that an agreement to arbitrate will normally have a closer and more real connection with the place where the parties have chose to arbitrate, than with the place of the law of the underlying contract, in cases where the parties have deliberately chosen to arbitrate, in one place, disputes which have arisen under a contract governed by the law of another place . 120. Upon consideration of the entire matter, it was observed that - In these circumstances it is clear to me that the law with which the agreement to arbitrate has its closest and most real connection is the law of the seat of arbitration, namely, the law of England . (Para 14). It was thereafter concluded by the High Court that English Law is the proper law of the agreement to arbitrate. (Para 15) 121. The legal position that emerges from a conspectus of all the decisions, seems to be, that the choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings. 122. It would, therefore, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration is in India. This will not apply where the seat is outside India. In that event, the conflict of laws rules of the country in which the arbitration takes place would have to be applied. Therefore, in our opinion, the emphasis placed on the expression where the place of arbitration is situated in India , by the learned senior counsel for the appellants, is not indicative of the fact that the intention of Parliament was to give an extra-territorial operation to Part I of the Arbitration Act, 1996. Part II 124. It was next submitted by the counsel for the appellants that even some of the provisions contained in Part II would indicate that Part I of the Arbitration Act, 1996 would not be limited to the arbitrations which take place in India. It was pointed out that even though Part II deals specifically with recognition and enforcement of certain foreign awards yet provision is made for annulment of the award by two Courts, i.e., Courts of the country in which the award was made or the Courts of the country under the law of which the award was made. This, according to the learned counsel, recognizes the concurrent jurisdictions of Courts in two countries to set aside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire procedure for the conduct of an arbitration and Part II is only to give recognition to certain foreign awards, the two parts have to be read harmoniously in order to make the Indian Arbitration Law a complete code. He submits that Part I can not be read separately from Part II as certain provisions of Part I, which are necessary for arbitrations are not covered by Part II. He gives an example of the provision contained in Section 45, which empowers the term judicial authority to refer parties to arbitration when seized of an action in a matter, in respect of which parties have made an agreement as referred to in Section 44. The aforesaid provision contains a non- obstante clause. This clearly indicates that it is contemplated by the legislature that provisions of Part I would apply to matters covered by Part II. He, therefore, points out that if Part I were to apply only to arbitrations that take place in India, then Indian Courts would not be able to grant any interim relief under Section 9 to arbitrations which take place outside India. He also points out that there are a number of other provisions where Indian Courts would render assistance in arbitrations taking place o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as well as the UNCITRAL Model Law. It also recognizes the territorial principle which gives effect to the sovereign right of a country to regulate, through its national courts, an adjudicatory duty being performed in its own country. By way of a comparative example, we may reiterate the observations made by the Court of Appeal, England in C Vs. D (supra) wherein it is observed that it follows from this that a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award. In the aforesaid case, the Court of Appeal had approved the observations made in A Vs. B,[ [2007] 1 Lloyds Report 237] wherein it is observed that:- ..an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy as to the validity of an existing interim or final award is agreed to be made only in the courts of the place designated as the seat of arbitration. 129. Having accepted the principle of territoriality, it is evident that the intention of the parliament was to segregate Part I and Part II. Therefore, any of the provisions contained in Part I can not be made applicable to Foreign Awards, as defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters. Section 5 would be equally applicable to such bodies. The use of the term judicial authority in no manner has any reference to arbitrations not held in India It is in conformity with Clause (V) of the objects and reasons for the Arbitration Act, 1996, which has been given statutory recognition in Section 5. 131. The learned senior counsel had also pointed out that since Section 19 of the Arbitration Act, 1996 clearly provides that the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908, there was no need for the non-obstante clause. But the reason, in our view, is discernable from Section 3 of the 1961 Act, which also contains a non-obstante clause with reference to the Arbitration Act, 1940. Section 45 in the Arbitration Act, 1996 is a repetition of the non-obstante clause in Section 3 in the 1961 Act. It is not unusual for a consolidating act to retain the expressions used in the previous Acts, which have been consolidated into a form of Principal Act. A consolidating Act is described in Halsbury s law of England, Fourth Edition Reissue, Para 1225 as under:- A consolidation Act is a form of principal Act which presents the whole body of the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n existed in the English Arbitration Act, 1950 and the English Arbitration Act, 1975. Section 4(1) of the English Arbitration Act, 1950 was similar to Section 34 of the Arbitration Act, 1940 in India. Section 1(2) of the English Arbitration Act, 1975 was similar to Section 3 of the Foreign Awards Act, 1961. 134. In view of the above, it would not be possible to accept the submission of the learned counsel for the appellants that the aforesaid non-obstante clause in Section 45 would indicate that provisions of Part I would also be applicable to arbitrations that take place outside India. Does Section 48(1)(e) recognize the jurisdiction of Indian Courts to annul a foreign award, falling within Part II? 135. Much emphasis has been laid by the learned counsel for the appellants on the expression that enforcement of a foreign award may be refused when the award has been set aside or suspended .. under the law of which that award was made. The aforesaid words and expressions appear in Section 48, which is contained in Part II of the Arbitration Act, 1996 under the title enforcement of certain foreign awards . The Courts in India under Chapter I of Part II of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also , on the application of the party claiming enforcement of the award, order the other party to give suitable security. 136. The party which seeks to resist the enforcement of the award has to prove one or more of the grounds set out in Section 48(1) and (2) and/or the explanation of sub-section (2). In these proceedings, we are, however, concerned only with the interpretation of the terms country where the award was made and under the law of which the award was made . The provisions correspond to Article V(1)(e) of the New York Convention, which reads as under:- 1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: . (e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reading of the Article V(1)(e) [Section 48(1)(e)] makes it clear that only the courts in the country in which the award was made and the courts under the law of which the award was made (hereinafter referred to as the first alternative and the second alternative respectively) would be competent to suspend/annul the New York Convention awards. It is clarified that Section 48(1)(e) is only one of the defences on the basis of which recognition and enforcement of the award may be refused. It has no relevance to the determination of the issue as to whether the national law of a country confers upon its courts, the jurisdiction to annul the awards made outside the country. Therefore, the word suspended/set aside in Section 48(1)(e) cannot be interpreted to mean that, by necessary implication, the foreign awards sought to be enforced in India can also be challenged on merits in Indian Courts. The provision only means that Indian Courts would recognize as a valid defence in the enforcement proceedings relating to a foreign award, if the Court is satisfied that the award has been set aside in one of the two countries, i.e., the first alternative or the second alternative . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned author, as noticed above, make it clear that the second alternative is an exception to the general rule. It was only introduced to make it possible for the award to be challenged in the court of the second alternative , if the court of the first alternative had no power to annul the award, under its national legislation. In our opinion, the disjunction would also tend to show that the second alternative would be available only if the first is not. Accepting the submission made by Mr.Sundaram, would lead to unnecessary confusion. There can be only one Court with jurisdiction to set aside the award. There is a public policy consideration apparent, favouring the interpretation that, only one Court would have jurisdiction to set aside the arbitral award. This public policy aspect was considered by the Court of Appeal in England in the case of C Vs. D (supra). The observation of the Court of Appeal in Paragraph 16 of the judgment has already been reproduced earlier in this judgment. 143. It was pointed out by the Court of Appeal that accepting more than one jurisdiction for judicial remedies in respect of an award would be a recipe for litigation and confusion. Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt. The appeal was allowed. It was held as follows: 31. On close scrutiny of the materials and the dictum laid down in the three-Judge Bench decision in Bhatia International we agree with the contention of Mr. K.K. Venugopal and hold that paras 32 and 35 of Bhatia International make it clear that the provisions of Part I of the Act would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto. We further hold that where such arbitration is held in India, the provisions of Part I would compulsorily apply and parties are free to deviate to the extent permitted by the provisions of Part I. It is also clear that even in the case 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. We are also of the view that such an interpretation does not lead to any conflict between any of the provisions of the Act and there is no lacuna as such. The matter, therefore, is concluded by the three-Judge Bench decision in Bhatia International 33. The very fact that the judgment holds that it would be open to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement proceedings in the District Court in Michigan, USA in the teeth of the injunction granted by the courts in India which also, on the basis of the comity of courts, should have been respected by the District Courts in Michigan, USA. Elaborating the same, he further submitted that the injunction of the trial court restraining the respondents from seeking or effecting the transfer of shares either under the terms of the award or otherwise was in force between 15-6- 2006 and 27-6-2006. The injunction of the High Court in the following terms - the appellant (i.e. Respondent 1) shall not effect the transfer of shares of the respondents pending further orders was in effect from 27-6-2006 till 28-12-2006. The judgment of the US District Court was on 13-7-2006 and 31-7-2006 when the award was directed to be enforced as sought by Respondent 1, notwithstanding the injunction to the effect that the appellant (Respondent 1 herein) shall not effect the transfer of shares of the respondents pending further orders . The first respondent pursued his enforcement suit in Michigan District Courts to have a decree passed directing - VGE shall deliver to Satyam or its designee, share certi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction over the same dispute. There would be a clear risk of conflicting decisions. This would add to the problems relating to the enforcement of such decisions. Such a situation would undermine the policy underlying the New York Convention or the UNCITRAL Model Law. Therefore, we are of the opinion that appropriate manner to interpret the aforesaid provision is that alternative two will become available only if alternative one is not available. 147. The expression under the law has also generated a great deal of controversy as to whether it applies to the law governing the substantive contract or the law governing the arbitration agreement or limited only to the procedural laws of the country in which the award is made. 148. The consistent view of the international commentators seems to be that the second alternative refers to the procedural law of the arbitration rather than law governing the arbitration agreement or underlying contract . This is even otherwise evident from the phrase under the law, that award was made , which refers to the process of making the award (i.e., the arbitration proceeding), rather than to the formation or validity of the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Convention provides that a court of secondary jurisdiction may refuse to enforce an arbitral award if it has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. Courts have held that the language, the competent authority of the country under the law of which, that award was made refers exclusively to procedural and not substantive law, and more precisely, to the regimen or scheme of arbitral procedural law under which the arbitration was conducted, and not the substantive law .. applied in the case. .. Under the New York Convention, an agreement specifying the place of the arbitration creates a presumption that the procedural law of that place applies to the arbitration. Authorities on international arbitration describe an agreement providing that one country will be the site of the arbitration but the proceedings will be held under the arbitration law of another country by terms such as exceptional ; almost unknown ; a purely academic invention ; almost never use in practice ; a possibility more theoretical than real ; and a once-in-a-blue-moon set of circumstances. Commentators n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to the law governing the dispute and not to the procedural law (Paragraph 11.96). The Learned Authors had made a reference to the case International Standard Electric Corp. (US) Vs. Bridas Sociedad Anonima Petrolera (Argentina).[ (1992) VII Ybk Comm Arb 639] The Court rejected the aforesaid argument with the following observations:- Decisions of foreign courts under the Convention uniformly support the view that the clause in question means procedural and not substantive (that is, in most cases, contract law) . Accordingly, we hold that the contested language in Article V(1)(e) of the Convention refers exclusively to procedural and not substantive law, and more precisely to the regimen or scheme of arbitral procedural law under which the arbitration was conducted. 155. The Court went on to hold that since the quorum of arbitration was Mexico, only the Mexican court had jurisdiction to set aside the award. 156. The correct position under the New York Convention is described very clearly and concisely by Gary B. Born in his book International Commercial Arbitration (Kluwer Law International, Vol. I), Chapter X Page 1260 as follows : This provision is vitall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national understanding of the second limb of Article V(1)(e), this Court has proceeded on a number of occasions to annul an award on the basis that parties had chosen Indian Law to govern the substance of their dispute. The aforesaid view has been expressed in Bhatia International (supra) and Venture Global Engineering (supra). In our opinion, accepting such an interpretation would be to ignore the spirit underlying the New York Convention which embodies a consensus evolved to encourage consensual resolution of complicated, intricate and in many cases very sensitive International Commercial Disputes. Therefore, the interpretation which hinders such a process ought not to be accepted. This also seems to be the view of the national courts in different jurisdictions across the world. For the reasons stated above, we are also unable to agree with the conclusions recorded by this Court in Venture Global Engineering (supra) that the foreign award could be annulled on the exclusive grounds that the Indian law governed the substance of the dispute. Such an opinion is not borne out by the huge body of judicial precedents in different jurisdictions of the world. Interim measures etc. by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the ratio in Bhatia International on the core issue, i.e., grant of interim measures under Section 9, is correct. Although, he was not much concerned about the other issues, of annulment or enforcement of the award, he has reiterated the submissions made by the other learned counsel, on Sections 2(2), 2(1)(f) and 2(5). 160. We are unable to accept the submissions made by the learned counsel. It would be wholly undesirable for this Court to declare by process of interpretation that Section 9 is a provision which falls neither in Part I or Part II. We also do not agree that Section 9 is a sui generis provision. 161. Schematically, Section 9 is placed in Part I of the Arbitration Act, 1996. Therefore, it can not be granted a special status. We have already held earlier that Part I of the Arbitration Act, 1996 does not apply to arbitrations held outside India. We may also notice that Part II of the Arbitration Act, 1996, on the other hand, does not contain a provision similar to Section 9. Thus, on a logical and schematic construction of the Arbitration Act, 1996, the Indian Courts do not have the power to grant interim measures when the seat of arbitration is out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e determined by the arbitration in London. The procedural law applicable was English Law. The distinction between the proper law of the JOA s and the procedural law was known to the parties. At the arbitration hearing, the parties agreed that the principles of construction of contracts in Indian Law were the same as in English Law. The parties further agreed that the English Law principles on the construction of contracts were those set out by Lord Hoffmann in Investors Compensation Scheme Ltd. vs. West Bromwich Building Society,[ [1998] WLR 1896 at 913] as explained and expanded by Lord Hoffmann in Bank of Credit Commerce International SA vs. Ali Ors. [[2001] 2 WLR 735 at 749] In their awards, the three arbitrators stated (at paragraph 73) that they would apply those principles to construe the contracts under consideration in making their Partial Arbitral Awards. The question raised at the threshold was whether the applicant-Reliance can apply for permission to appeal to the Commercial Court in England and Wales on a question of law arising out of an award made in the proceedings under Section 69 (1) of the Arbitration Act, 1996 (English). So the threshold issue was whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of construction of the JOAs, then they were bound to do so using principles of construction established under the proper law of the contracts, i.e. Indian law. 29. As it happens the parties agreed that the principles of construction under the proper law of the contract equated with those principles under English law, as declared by the House of Lords in two recent cases. What the arbitrators did was to take those principles of construction and apply them as principles of Indian law in order to construe the contracts according to Indian law. The arbitrators had to do that, as a matter of the procedural law of the arbitration. That is because under the English law of arbitration procedure, the arbitrators were bound to construe the contracts and determine the disputes between the parties according to the proper law of the contracts concerned. 30. Therefore, I think that it is wrong to say that the arbitrators applied English Law when construing the contracts. They applied Indian law, which happened to be the same as English law on this topic. 166. On the basis of that, it was concluded that no question of law of England and Wales arises out of the two partial awards of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid words in italics have been quoted with approval by a Constitution Bench of this Court in Punjab Land Development and Reclamation Corporation Ltd., Chandigarh Vs. Presiding Officer, Labour Court, Chandigarh Others.[ (1990) 3 SCC 682] 170. In view of the aforesaid, we are unable to agree with the submission made by Dr. Singhvi that provision contained in Section 9 can be made applicable even to arbitrations which take place outside India by giving the same a purposive interpretation. In our opinion, giving such an interpretation would be destructive of the territorial principles upon which the UNCITRAL Model Laws are premised, which have been adopted by the Arbitration Act, 1996. 171. We are further of the opinion that the approach adopted by this Court in Bhatia International to remove the perceived hardship is not permissible under law. A perusal of paragraph 15 would show that in interpreting the provisions of the Arbitration Act, 1996, the court applied the following tests: Notwithstanding the conventional principle that the duty of Judges is to expound and not to legislate, the courts have taken the view that the judicial art interpretation and appraisal is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in three different instruments, i.e. the Arbitration Act, 1940 read with 1961 Act, and the Arbitration (Protocol and Convention) Act, 1937, it cannot be construed as a lacuna when the same law is consolidated into one legislation, i.e. the Arbitration Act, 1996. 175. It must further be emphasised that the definition of foreign awards in Sections 44 and 53 of the Arbitration Act, 1996 intentionally limits it to awards made in pursuance of an agreement to which the New York Convention, 1958 or the Geneva Protocol, 1923 applies. It is obvious, therefore, that no remedy was provided for the enforcement of the non convention awards under the 1961 Act. Therefore, the non convention award cannot be incorporated into the Arbitration Act, 1996 by process of interpretation. The task of removing any perceived lacuna or curing any defect in the Arbitration Act, 1996 is with the Parliament. The submission of the learned counsel is, therefore, rejected. The intention of the legislature is primarily to be discovered from the language used, which means that the attention should be paid to what has been said and also to what has not been said. [See: Gwalior Rayon Silk Mfg. (Wvg.) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to claim an injunction the existence of a pending suit is a pre requisite. It is in this background that one has to examine as to whether an inter-parte suit for interim relief during the pendency of arbitration proceedings outside India would be maintainable. 179. In our opinion, pendency of the arbitration proceedings outside India would not provide a cause of action for a suit where the main prayer is for injunction. Mr.Sundaram has rightly pointed out that the entire suit would be based on the pendency of arbitration proceedings in a foreign country. Therefore, it would not be open to a party to file a suit touching on the merits of the arbitration. If such a suit was to be filed, it would in all probabilities be stayed in view of Sections 8 and 45 of the Arbitration Act, 1996. It must also be noticed that such a suit, if at all, can only be framed as a suit to inter alia restrain the defendant from parting with property. Now, if the right to such property could possibly arise, only if the future arbitration award could possibly be in favour of the plaintiff, no suit for a declaration could obviously be filed, based purely only on such a contingency. All that could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms as prayed for, temporary relief in the same terms can hardly if ever be granted. In State of Orissa v. Madan Gopal Rungta a Constitution Bench of this Court clearly spelt out the contours within which interim relief can be granted. The Court said that an interim relief can be granted only in aid of, and as ancillary to, the main relief which may be available to the party on final determination of his rights in a suit or proceeding . If this be the purpose to achieve which power to grant temporary relief is conferred, it is inconceivable that where the final relief cannot be granted in the terms sought for because the statute bars granting such a relief ipso facto the temporary relief of the same nature cannot be granted .. 182. The legal position is reiterated in Ashok Kumar Lingala vs. State of Karnataka.[ (2012) 1 SCC 321] 183. In matters pertaining to arbitration, the suit would also be barred under Section 14(2) of the Specific Relief Act. Although the provision exists in Section 37 of the Specific Relief Act, 1963, for grant of temporary/perpetual injunction, but the existence of cause of action would be essential under this provision also. Similar would be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al art. The sub-rule speaks of the action in which a particular kind of relief, an injunction is sought. This pre-supposes the existence of a cause of action on which to found the action . A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the Court. The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre- existing cause of action. It is granted to preserve the status quo pending the ascertainment by the Court of the rights of the parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which may or may not include a final injunction. 186. As noticed earlier, the position is no different in India. Therefore it appears that under the law, as it stands today, an inter-parte suit simply for interim relief pending arbitration outside India would not be maintainable. 187. It appears after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive relief was granted in Channel Tunnel case in view of the statutory provisions contained in Section 37(1) of the Supreme Court Act, 1981. This is made further clear by the following observations:- We are concerned here with powers which the Court already possesses under Section 37 of the Act of 1981. The only question is whether the court ought permanently and unconditionally to renounce the possibility of exercising such powers in a case like the present. I am unable to see why the fact that Parliament is contemplating the specific grant of interim powers, not limited to interlocutory injunctions, in support of arbitrations but has not yet chosen to do so should shed any light on the powers of the court under existing law. It may be that if and when section 25 is made applicable to arbitrations, the court will have to be very cautious in the exercise of its general powers under section 37 so as not to conflict with any restraint which the legislature may have imposed on the exercise of the new and specialized powers. 193. The decision in Channel Tunnel would not support the proposition that injunctive relief could be granted under Section 9 of the Arbitration Act, 1996 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the UNCITRAL Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to International Commercial Arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996. 199. With utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International (supra) and Venture Global Engineering (supra). In our opinion, the provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with any of the provisions either ..... X X X X Extracts X X X X X X X X Extracts X X X X
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