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2016 (5) TMI 770 - SUPREME COURT

2016 (5) TMI 770 - SUPREME COURT - TMI - Arbitration enforcing the Foreign Award - whether Part I of the Arbitration Act is excluded from its operation in case of a Foreign Award where the Arbitration is not held in India and is governed by foreign law? - Held that:- Clause 28 in the present case must be intended to have a similar effect that is to exclude the applicability of Part I of the Indian Arbitration and Conciliation Act since the parties have chosen London as the seat of Arbitration an .....

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itration should be governed by the law of a foreign country.

We are thus of the view that by Clause 28, the parties chose to exclude the application of Part I to the Arbitration proceedings between them by choosing London as the venue for Arbitration and by making English law applicable to Arbitration, as observed earlier. It is too well settled by now that where the parties choose a juridical seat of Arbitration outside India and provide that the law which governs Arbitration will be .....

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refore, allowed. The judgment of the Bombay High Court enforcing the Foreign Award under Part II of the Arbitration Act is correct and liable to be upheld. - Civil Appeal Nos. 5131-5133 of 2016 (Arising out of SLP (CIVIL) Nos. 2210-2212/2011) - Dated:- 13-5-2016 - Fakkir Mohamed Ibrahim Kalifulla And S. A. Bobde, JJ. JUDGMENT S. A. Bobde, J. Leave granted in SLP (C) Nos.2210-2212/2011, SLP (C) Nos.3959/2012 and SLP (C) No.7562-7563/2016. 2. The dispute in these appeals, arises out of the Contrac .....

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oyed by the Charterers and one by the Owners and in case they shall not agree then shall appoint an Umpire whose decision shall be final and binding, the Arbitrators and Umpire to be Commercial Shipping Men. English Law to apply. Notwithstanding anything to the contrary agreed in the C.O.A., all disputes where the amount involved is less then USD 50,000/- (fifty thousand) the Arbitration shall be conducted in accordance with the Small Claims Procedure of the L.M.A.A. ( emphasis supplied ) 3. Dis .....

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2.5% per annum vide Award of the Sole Arbitrator dated 26.5.2009. Proceedings in Gujarat 4. Before Arbitration had commenced, Ashapura filed a suit alongwith an application for injunction before the Civil Judge at Jam-khambalia, Gujarat praying inter-alia that the Contract and the Arbitration Clause contained therein was illegal, null and void, ab-initio. Though initially an interim injunction was granted, the learned Civil Judge dismissed the suit for want of jurisdiction vide order dated 12.1 .....

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Award passed in London. These proceedings were filed before the District Judge, Jamnagar for setting aside the Foreign Award made in London. A Misc. Civil Application No. 101/2009 for injunction restricting Eitzen Bulk from enforcing the Award in foreign jurisdictions outside India was also moved. The District Judge, Jamnagar on 24.8.2009 dismissed the application for injunction seeking restraint on enforcement of the Award. 7. From 14.7.2009 to 3.8.2009 Eitzen applied for enforcement of the Awa .....

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Court on 17th March, 2010. 9. On 24th July, 2009, the United States District Court for Southern State of New York declared the award dated 26th May, 2009 enforceable as a judgment of that court. The proceedings filed by the appellant were contested by the respondent. 10. On 27th July, 2009, the appellant filed present proceedings under Sections 47 to 49 of Part II of the Arbitration Act for enforcing the award dated 26th May, 2009 on the ground that the respondent was carrying on business withi .....

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nction Ashapura filed a petition under Articles 226 and 227 of the Constitution of India before the High Court of Gujarat at Ahmadabad for a Writ of Certiorari to quash and set aside the Order dated 24.8.2009 rendered by the District Judge, Jam-Khambalia and for a direction not to enforce the execution of the judgment dated 24.7.2009. Ashapura inter-alia contended that the Award cannot be enforced or executed since their objections under Section 34 were pending. A learned Single Judge who heard .....

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Judge to consider all contentions by its Order dated 29.10.2009. 13. Eitzen however questioned the very jurisdiction of a Court in India to decide objections under Section 34 of the Arbitration Act in respect of a Foreign Award by way of a Writ Petition. They prayed for issue of a Writ of Prohibition and an Order restraining the learned District Judge at Jam-Khambhalia from adjudicating Ashapura s application under Section 34 of the Arbitration and Conciliation Act, 1996 against the Foreign Awar .....

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mixed question of fact and law and is required to be decided by the Trial Court on the basis of the Plaint and Written Statement and Evidence before it. This judgment was questioned by way of SLP (C) Nos. 2210-2212 of 2011 filed by Eitzen. Proceedings in Maharashtra 15. On 27.7.2009, Eitzen filed Arbitration Petition No. 561/2009 under Sections 47 to 49 of the Arbitration Act for enforcing the Foreign Award in the Bombay High Court, within whose jurisdiction Ashapura carries on business and has .....

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Single Judge held that since the parties had agreed that the juridical seat of the Arbitration in this case would be at London and English Law would apply there was an express and in any case an implied, exclusion of Part I of the Arbitration Act. 17. Ashapura filed Notice of Motion No. 3975 of 2009 claiming that since proceedings had already been initiated under Part I before the Gujarat High Court, the Bombay High Court had no jurisdiction in the matter by virtue of Section 42 of the Arbitrati .....

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Petition No. 561 of 2009 of Eitzen for enforcing the Foreign Award dated 26.5.2009. 19. As a preliminary objection, it was contented before the Bombay High Court that this Court had passed an Order on 27.2.2012 ordering status quo on further proceedings and, therefore, the Hon ble Court ought not to proceed in the matter. That this Order was to operate upto 16.4.2012 and was thereafter extended till 22.8.2012. The High Court rejected this contention on the ground that the Order of status quo ha .....

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ver the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court. of the Arbitration Act, rightly; that since an application under Section 34 of the Arbitration Act, which is an application contemplated by Part I of the Arbitration Act, has been made before the Court in Gujarat and that Court alone has jurisdiction over the Arbitration proceedings and all subsequent applications must be made .....

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thus have, on the one hand, the decision of the Gujarat High Court holding that a Court in India has jurisdiction under Section 34 to decide objections raised in respect of a Foreign Award because Part I of the Arbitration Act is not excluded from operation in respect of a Foreign Award and on the other, a decision of the Bombay High Court holding that Part I is excluded from operation in case of a Foreign Award and thereupon directing enforcement of the Award. The decisions of the Gujarat High .....

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ly filed an application for enforcement of the foreign award in its favour under Section 42 of the Arbitration Act being Arbitration Petition Nos.1359 and 1360 of 2010 before the Bombay High Court. Ashapura has raised similar objection to the enforcement of the Foreign Award by way of Notice of Motion. By Notices of Motion Nos. 2390 and 2444 of 2012 Ashapura had contended that the Bombay High Court cannot entertain the application in view of the Section 42 of the Arbitration Act. Both these Noti .....

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of the Award, it has held that Eitzen would not be entitled to take any step in execution of the Award or seek any relief in violation of Section 22 of the SICA Act without permission from the BIFR. The main question 24. Thus, the main question on which contentions were advanced by the learned counsel for the parties is whether Part I of the Arbitration Act is excluded from its operation in case of a Foreign Award where the Arbitration is not held in India and is governed by foreign law. 25. Shr .....

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al Services Inc. (2012) 9 SCC 552 since the decision in that case does not govern Arbitration agreements entered prior to 6.9.2012 and the contract in the instant case is dated 18.1.2008. 26. According to the learned counsel, Clause 28, which is the Arbitration Clause in the Contract, clearly stipulates that any dispute under the Contract is to be settled and referred to Arbitration in London . It further stipulates that English Law to apply. The parties have thus clearly intended that the Arbit .....

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aw will not apply by positing that English Law will apply. The intention is that English Law will apply to the resolution of any dispute arising under the law. This means that English Law will apply to the conduct of the Arbitration. It must also follow that any objection to the conduct of the Arbitration or the Award will also be governed by English Law. Clearly, this implies that the challenge to the Award must be in accordance with English Law. There is thus an express exclusion of the applic .....

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English Arbitration Act, 1996. It is thus clear that the intention is that the Arbitration should be conducted under the English law, i.e. the English Arbitration Act, 1996. It may also be noted that Sections 67, 68 and 69 of the English Arbitration Act provide for challenge to an Award on grounds stated therein. The intention is thus clearly to exclude the applicability of Part I to the instant Arbitration proceedings. 28. This is a case where two factors exclude the operation of Part I of the .....

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considered by the Court of Appeal in C v. D. This judgment has been specifically approved by this Court in Balco and reiterated in Enercon. In C v. D, the Court of Appeal has observed: (Bus LR p. 851, para 16) Primary conclusion 16. I shall deal with Mr Hirst s arguments in due course but, in my judgment, they fail to grapple with the central point at issue which is whether or not, by choosing London as the seat of the arbitration, the parties must be taken to have agreed that proceedings on th .....

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on procedural irregularities under Sections 67 and 68 of the 1996 Act were not permitted; he was reduced to saying that New York judicial remedies were also permitted. That, however, would be a recipe for litigation and (what is worse) confusion which cannot have been intended by the parties. No doubt New York law has its own judicial remedies for want of jurisdiction and serious irregularity but it could scarcely be supposed that a party aggrieved by one part of an award could proceed in one j .....

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ed. 56. The aforesaid observations in C v. D were subsequently followed by the High Court of Justice, Queen s Bench Division, Commercial Court (England) in Sulamerica Cia Nacional de Seguros SA v. Enesa Engelharia SA - Enesa. In laying down the same proposition, the High Court noticed that the issue in that case depended upon the weight to be given to the provision in Condition 12 of the insurance policy that the seat of the arbitration shall be London, England . It was observed that this necess .....

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is reason that recent authorities have laid stress upon the locations of the seat of the arbitration as an important factor in determining the proper law of the arbitration agreement. 57. In our opinion, these observations in Sulamerica case are fully applicable to the facts and circumstances of this case. The conclusion reached by the High Court would lead to the chaotic situation where the parties would be left rushing between India and England for redressal of their grievances. The provisions .....

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for us to examine, it would have to be examined by the court of competent jurisdiction in England. 29. We are in agreement with the above observation and in this clause 28 in the present case must be intended to have a similar effect that is to exclude the applicability of Part I of the Indian Arbitration and Conciliation Act since the parties have chosen London as the seat of Arbitration and further provided that the Arbitration shall be governed by English Law. In this case the losing side has .....

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ept the possibility that Part I is not excluded and in any case not wholly excluded in such a case, but the law is too well settled and with good reasons, for us to take any other view. We do not wish to endorse a recipe for litigation and (what is worse) confusion C vs. D (2008 Bus LR 843). 31. When the judgment in Reliance was sought to be indirectly reviewed in another case under the same agreement and between the same parties, this Court reiterated its earlier view and observed in Union of I .....

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overning the arbitration agreement is a law other than Indian law. This is now well settled by a series of decisions of this Court [see Videocon Industries Ltd. v. Union of India, Dozco India (P) Ltd. v. Doosan Infracore Co. Ltd., Yograj Infrastructure Ltd. v. Ssang Yong Engg. and Construction Co. Ltd., the very judgment in this case reported in Reliance Industries Ltd. v. Union of India and a recent judgment in Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd.]. We see no reason to take .....

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nless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply. 32. We are thus of the view that by Clause 28, the parties chose to exclude the application of Part I to the Arbitration proceedings between them by choosing London as the venue for Arbitration and by making English law applicable to Arbitration, .....

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such a case. 33. As a matter of fact the mere choosing of the juridical seat of Arbitration attracts the law applicable to such location. In other words it would not be necessary to specify which law would apply to the Arbitration proceedings, since the law of the particular country would apply ipso jure. The following passage from Redfern and Hunter on International Arbitration contains the following explication of the issue:- It is also sometimes said that parties have selected the procedural .....

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to govern the arbitration is rather like saying that an English woman who takes her car to France has chosen French traffic law, which will oblige her to drive on the right-hand side of the road, to give priority to vehicles approaching from the right, and generally to obey traffic laws to which she may not be accustomed. But it would be an odd use of language to say this notional motorist had opted for French traffic law . What she has done is to choose to go to France. The applicability of Fre .....

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