TMI Blog1996 (10) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... and Flare Bridges, one SGN system and some interconnecting sub-marine pipelines (for short, 'the Work'). The installation and commissioning of the said work was to include and cover detailed design, and engineering, procurement, fabrication, inspection, testing pre-commissioning, load-out, sea fastening, tow-out, installation at Offshore Site and Commissioning and any other work necessary for the final completion of the work. Clauses 17.1 and 17.2 of the contract provided as follows : 17.1 Applicable laws : All questions disputes or differences arising under, out of or in connection with this contract shall be subject to the law of India. 17.2 Arbitration : If any dispute, difference or question shall at any time hereafter arise between the parties hereto or their respective representatives of assign in respect of the contraction of these presents or concerning anything herein contained or arising out of these presents or as to the rights, liabilities or duties of the said parties hereunder which cannot be mutually resolved by the parties, the same shall be referred to arbitration, the proceedings of which shall be held at London, U.K. Within 30 days of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to proceed under the auspices of ICC. 5. On or about 20th October, 1992, a preliminary hearing took place in London before the arbitrators at which ONGC and Sumitomo were represented by their legal advisers. While admitting that the disputes had arisen within the terms of Clause 17.2 of the contract, it was submitted on behalf of ONGC that the arbitrators were not duly appointed and the arbitration could not proceed. The arbitrators rejected the submission made on behalf of ONGC and gave directions to Sumitomo and ONGC to file pleadings before them. On or about 16th December, 1992, ONGC petitioned to this court for an injunction to restrain Sumitomo from taking any further steps in the arbitration. No interim relief was granted in favour of ONGC to restrain Sumitomo. On or about 24th December, 1992, Ince Company on behalf of Sumitomo applied to the Queen's Bench Division (Commercial Court), London, for leave to issue and serve ONGC in India an originating summons seeking an order under Section 5 of the English Arbitration Act, to confirm powers on the arbitrators to proceed with the arbitration in default of service of a defence by ONGC. On or about 29th December, 1992 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he would have wished to make an award in favour of Sumitomo. On the following day, the arbitrators issued a joint notice of disagreement. Thereupon, the 1st respondent entered upon the reference as umpire. 8. On 3rd October, 1994, a hearing of the reference before the 1st respondent took place in London where at ONGC and Sumitomo were represented by their legal advisers. On 4th Oct., 1994, the 1st respondent issued an order for directions, the contents of which were in substance agreed by and between ONGC and Sumitomo during the hearing. Further dates of hearings of the reference were fixed and at the hearings of the reference, both ONGC and Sumitomo were represented by their representatives and legal advisers. Submissions on the merits of the claim of Sumitomo were made by the legal advisers of the parties. Written submissions were filed before the 1st respondent on behalf of ONGC as well as Sumitomo. The 1st respondent has made the award on 27th June, 1995. ONGC received a copy of the award from the 1st respondent, on 10th July, 1995. By their letter dated 14th July, 1995 addressed to the 1st respondent. M/s. Desai Diwanji requested the 1st respondent to file the award or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain the award. In the submission of Mr. Zaiwala, it is the substantive right of ONGC to have the award filed in this court since the validity and effect of the award are governed by the proper law of arbitration in India. 10. Mr. Salve, learned counsel appearing for Sumitomo, submitted that in the matter of choice of applicable law there are three separate heads which have to be considered, viz. : (a) the proper law of the contract, i.e., the law governing the contract between the parties which created the substantive rights of the parties, in respect of which the disputes had arisen; (b) the proper law of arbitration agreement, i.e., the law governing the obligation of the parties to submit the disputes to arbitration, and to honour an awar; (c) the curial law i.e., the law governing the conduct of the individual reference. Mr. Salve further submitted that the tests by which the applicable law to an arbitration agreement is determined are : (a) express choice of law; (b) implied choice of law; (c) law with which the agreement has the closest connection. Mr. Salve has further submitted that the principle underlying these three tests is that in the field ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made in London, U.K. in an arbitration between Sumitomo and ONGC on the contract governed by the proper law of a contract in force in India. The contract was executed outside India, Sumitomo having executed it last at Japan. There was no express stipulation in the contract as regards applicability of proper law of arbitration agreement incorporated therein. The question which arises for consideration is as to whether the arbitration agreement incorporated in the contract was governed by the proper law of arbitration in force in India so as to save the award from the ambit of the Foreign Awards (Recognition and Enforcement) Act, 1961 and attract the provisions of the Act. In other words, in the absence of any stipulation to the contrary, whether the contract was required to be seen as a whole and the parties thereto were deemed to have intended that the law applicable to the arbitration agreement was also the law of the country which governed the contract, although, in respect of procedural matters, the competent courts in England were also agreed to exercise jurisdiction over the conduct of arbitration. 13. Although the contract was expressly governed by the laws in force i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arbitration agreement may be regarded as a collateral or ancillary contract in the sense that it survives to determine the claim of the parties and the mode of settlement of their disputes been after the breach or repudiation of the main contract. But it is not an independent contract, and it has no meaningful existence except in relation to the rights and liabilities of the parties under the main contract. It is a procedural machinery which is activated when the disputes arise between the parties regarding their rights and liabilities law governing such rights and liabilities. The is the proper law of the contract, and unless otherwise provided, such law governs the whole contract including the arbitration agreement, and particularly so when the later is contained not in a separate agreement, but, in one of the clauses of the main contract. 16. The proper law of arbitration agreement is normally the same is the proper law of the contract. It is only in exceptional cases that it is not so even where the proper law of the contract is expressly chosen by the parties. In the case of National Thermal Power Corporation (supra), the parties to the contract clearly and categorically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... award may be filed in any court having jurisdiction in the matter to which the reference relates. Sub-section (c) of Section 2 defines 'court' for the purposes of the Act to mean Civil Court have jurisdiction to decide the question forming the subject matter of the reference if the same had been the subject matter of a suit, but does not, except for purpose of arbitration proceedings under Section 21 of the Act, include Small Causes Court. Section 2(c) does not mean that a court has jurisdiction to receive an award only if the whole cause of action arose within the jurisdiction of the court. Under Section 2(c) any court which could have jurisdiction to decide the question arising from the subject matter of the reference, could be the proper court in which the award may be filed. To give the court jurisdiction it is not necessary that the whole cause of action should arose there. Section 20 of the Code of Civil Procedure, 1908 except the illustrations thereto, is reproduced hereunder : 20. Subject to the limitations aforesaid, every suit shall be instituted in a court within the local limits of whose jurisdiction - (a) the defendant, or each of the defendants where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehra Dun (India), ONGC is also carrying on business at Bombay (India) having its office within the territorial jurisdiction of this court. Hence, if Sumitomo was to institute a suit against ONGC in respect of claims being subject matter of arbitration reference, this court could have entertained such a suit even though the contract was lastly signed by Sumitomo at Japan and the SH Complex is situated outside the territorial jurisdiction of this court. Under sub-section (1) of Section 31 read with Section 2(c) of the Act, this court has the jurisdiction to take on file the award. Even otherwise, in view of sub-section (4) of Section 31 of the Act, this court has the jurisdiction to take the award on its file since ONGC had earlier filed Arbitration Petition No. 8 of 1993 against Sumitomo in this court for determination of scope, validity and effect of the arbitration agreement incorporated in the contract. 22. Recent years had seen a large growth in private arbitration with a foreign element, or international commercial arbitration as it is frequently called. Certain types of contracts use in international trade customarily provide for arbitration either by a trade association or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Bombay High is not a territory of India and as such, performance of a part of the contract at Bombay High court constitute as performance thereof within the territory of India. In support of his submission, Mr. Salve has put reliance of sub-clause (2) of Article 1 of the Constitution of India as also on the provisions contained in the Territorial Waters, Continental Shelf. Exclusive Economic Zone and other Maritime Zones Act, 1976, Sub-section (1) of Article 1 of the Constitution of India states India, that is, Bharat, shall be a Union of States. Sub-clause (2) records that the States and the territories thereof shall be as specified in the First Schedule to the Constitution of India. Sub-Clause (3) records that the territory of India shall comprise : (a) the territorial of the States; (b) the Union Territories specified in the First Schedule; and (c) such other territories as may be acquired. The Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 defines 'limit' in relation to territorial waters, continental shelf exclusive economic zone and other maritime zones of India and Section 3 thereof records that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of these Acts has been saved in respect of arbitration where the proceedings commenced prior to 25th January, 1996. Mr. Salve has submitted that what is saved by Section 85 of the said Ordinance (and now Section 85 of The Arbitration and Conciliation Act, 1996) is the substantive right vested in a party and not the munisterial work and since in his submission, the filing of an award in a court of law is ministerial work, it is not saved by the provisions of Section 85 and as such, the petitioners are not entitled to any relief in the petition since Section 14 of the Act stands repealed. In support of his submission that filing of an award in a court of law is ministerial work and not an exercise of substantive right vested in a party to the reference. Mr. Salve has put reliance on the judgment of Dhansukhalal C. Mehta v. Navnitlal Chunilal (AIR 1934 Bombay 398), wherein the court has taken the view that the filing of an award is nothing but a ministerial work to be done by the arbitrators. As justifiably submitted by Mr. Zaiwala, sub-section (2) of Section 85 uses the terminology 'commenced' and not 'terminated', in respect of all arbitration proceedings whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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