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2016 (1) TMI 1042 - SUPREME COURT

2016 (1) TMI 1042 - SUPREME COURT - TMI - Challenge to foreign awards - International commercial arbitrations - Scope of agreement executed outside India - Held that:- It is clear that the law applicable to arbitration agreement in the present case is English Law. Once it is found that the law governing the arbitration agreement is English Law, Part I of the Indian Arbitration Act stands impliedly excluded. - the applications filed by the appellant under Section 34 of the Indian Act are not main .....

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of the appellant, the Bench resolved the conflicting, if not, confusing views on the applicability of Part I of Arbitration and Conciliation Act, 1996 (hereinafter referred to as Arbitration Act ) and held that … Part I of the Arbitration Act is applicable only to all the arbitrations which take place within the territory of India , overruling a three-Judge Bench decision of this Court in Bhatia International v. Bulk Trading S.A. and another (2002) 4 SCC 105. Exercising its the power unde .....

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any of its provisions. To quote paragraph-32: 32. To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, ex .....

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d the respondent with relation to supply of equipment, and modernization and up-gradation of the production facilities of the appellant at Korba in the state of Chhattisgarh. Certain disputes arose between the parties and the same were referred to arbitration. The arbitration proceedings were held in England and the arbitral tribunal made two awards in favour of the respondent dated 10.11.2002 and 12.11.2002. The appellant filed applications, under Section 34 of the Arbitration Act before the Di .....

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n as curial law. The interplay and application of these different laws to an arbitration has been succinctly explained by this Court in Sumitomo Heavy Industries Limited v. ONGC Limited and others (1998) 1 SCC 305, which is one of the earliest decisions in that direction and which has been consistently followed in all the subsequent decisions including the recent Reliance Industries Limited and another v. Union of India (2014) 7 SCC 603. 6. In order to ascertain the applicable laws, we have to c .....

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s shall be carried by two arbitrators, one appointed by the Petitioner and one by Respondent chosen freely and without any bias. The Court of arbitration shall be wholly in London, England and shall use the English language in the proceedings. The finding and award of the Court of Arbitration shall be final and binding. Article 17.3: Before entering upon the arbitration, the two Arbitrators shall appoint an Umpire. If the two arbitrators are not able to reach an agreement on the selection of an .....

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en disputed, that the proper law of contract is Indian law. Therefore, crossing that gate, we shall now proceed to the door on the Arbitration Agreement. 8. Article 17 is solely on arbitration. Article 17.1 clearly stipulates that the disputes or claims arising out of or relating to the agreements, if not amicably settled by negotiation, will be settled by the arbitration pursuant to the English Arbitration Law and subsequent amendments thereto. The expression pursuant to , according to Concise .....

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olume 35A, page 337, citing Fabianich v. Hart, D. C. Mun App., 31A.2d 881, 883 In Aircraft Employees Housing Cooperative Society Limited v. Secretary, Rural Development and Panchayat Raj, Government of Karnataka, Bangalore and others (1996) 11 SCC 475, though in the context of the pre-amended Land Acquisition Act, this court has dealt with the meaning of the expression in pursuance of . It has been held - 4….. In pursuance of would mean under the authority of or by virtue of or in the cou .....

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prevailing law of India, and in the case of arbitration, English Law would apply. In other words, the agreement as a whole would be governed by Indian Law, and in case of arbitration, the English Law will apply. No doubt, one should not strain too much to interpret an agreement between two parties as in the case of a statutory interpretation. The approach in analysing the terms of agreement should be straight and plain but at the same time cohesive and logical. 10. In the matter of interpretatio .....

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ymen who have no knowledge of law or expertise in the field. The legal quality or perfection of the document is comparatively low in the third category, high in second and higher in first. No doubt, in the process of interpretation in the first category, the courts do make an attempt to gather the purpose of the legislation, its context and text. In the second category also, the text as well as the purpose is certainly important, and in the third category of documents like wills, it is simply in .....

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plain or grammatical meaning of the expressions and the use of the expressions at the proper places in the agreement. Contextually, it may be noted that in the present case, the respondent had invoked the provisions of English law for the purpose of the initiation of the unsettled disputes. It has hence, while interpreting an agreement, to be kept in mind that the parties, intended to avoid impracticable and inconvenient processes and procedures in working out the agreement. Potter J. made a si .....

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onstruction require the court to have regard to the commercial background, the context of the contract and the circumstances of the parties and to consider whether, against that background and in that context, to give the words a particular or restricted meaning would lead to an apparently unreasonable and unfair result. 11. A close perusal of the terms between the parties would clearly show that the first part of Article 22 is on the law governing the contract and in the second part the parties .....

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ear from Article 22. 12. Sumitomo (supra) is of no avail to the appellant. In Sumitomo (supra), there was no specific choice on the law of arbitration agreement and this court held that in absence of such choice, the law of arbitration agreement would be determined by the substantive law of the contract. That is not the case in this agreement. 13. It is clear that the law applicable to arbitration agreement in the present case is English Law. Once it is found that the law governing the arbitrati .....

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