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2005 (8) TMI 731

: Ravish Agrawal, Sr. Counsel and Sanjay S. Agrawal, Adv. JUDGMENT A.K. Patnaik, 1. The two miscellaneous appeals are appeals under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Indian Act"). 2. The facts briefly are that an agreement dated 22-4-1993 was executed between the appellant and the respondent under which the respondent was to supply installed equipment for modernization and upgradation of the production facilities of the appellant at Korba in the State of Chhattisgarh. The agreement provided for settlement of disputes by arbitration, Certain disputes arose between the parties and were referred to arbitration. The arbitration was held in England and the arbitral tribunal made two awards dated 10-11-2002 and 12-11-2002 in England. The appellant thereafter, filed applications under Section 34 of the Indian Act for setting aside the two awards dated 10-11-2002 and 12-11-2002 in the Court of learned District Judge, Bilaspur which were numbered as MJC Nos. 92 of 2003 and 14 of 2003, respectively. By order dated 20-7-2004, the learned District Judge, Bilaspur held that the applications filed by the appellant under Sect .....

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held that the applications for setting aside the awards could be filed under Section 34 of the Indian Act before the learned District Judge at Bilaspur. 5. Mr. Mukherjee, learned Counsel appearing for the appellant further submitted that Article 22 of the agreement between the parties provided that the agreement will be governed by the prevailing law of India and therefore parties to the agreement have chosen the prevailing law of India as the law governing the rights of the parties. He submitted that since the substantive rights of the parties to the agreement are to be governed by the law prevailing in India, even though the arbitrate on has taken place and the awards have been made in England can be challenged in a Court in India by an application under Section 34 of the Indian Act. He submitted that in the case of Bhatia International v. Bulk Trading S.A., [2002]2SCR411 (Supra) the Supreme Court has laid down the test that if a Court has jurisdiction to entertain an application under Section 9 of the Indian Act it would also have jurisdiction to entertain an application under Section 34 of the Indian Act to set aside an award made by the arbitrator. He argued that in the presen .....

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ecision of the Queens Bench Division in Sumitomo Heavy Industries Ltd. v. ONGC Ltd. reported in (1994) LLR 45. He finally submitted that in view of the aforesaid law laid down by the Courts, the appeals should be allowed and the impugned order dated 20-7-2004 of the learned District Judge should be set aside and the matter should be remanded back to the learned District Judge to decide the matter afresh in accordance with law. 7. Mr. Ravish Agrawal, Sr. Advocate, on the other hand, submitted that Article 17.1 of the agreement between the parties provided that any dispute or claim arising out of or relating to the agreement shall be in the first instance settled amicably by negotiation between the parties failing which the same will be settled by arbitration pursuant to the English Arbitration Law and subsequent amendments thereto. He pointed out that Article 17.2 of the agreement between the parties further provided that the arbitration proceedings shall be carried by two arbitrators; one appointed by the appellant and the other appointed by the respondent chosen freely and without any bias and the Court of arbitration shall be held wholly in London, England. He submitted that Arti .....

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ply to the arbitration and no interim award could be made under Section 47 of the English Act. 8. Mr. Agrawal submitted that Part: I of the Indian Act applied only to cases where the place of arbitration is India and the award made by the arbitrator is a domestic one and this will be clear from Sub-section 5 of Section 2 of the Indian Act. He further submitted that Part-II of the Indian Act provides for enforcement of certain foreign awards and Chapter-I of Part-II of the Indian Act relates to New York Convention Awards and applies to an arbitral award on differences between persons made on and after the 11th day of October, 1960 in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies as would be clear from Section 44 in Chapter-I of Part-II of the Indian Act. He further submitted that Chapter-II of Part-II of the Indian Act relates to Geneva Convention Awards and applies to arbitral awards on differences in pursuance of an agreement for arbitration to which the Protocol set forth in the Second Schedule applies. He argued that to arbitral awards referred to in Sections 44 and 53 of the Indian Act the provisions of Part .....

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foreign award. He referred to Paragraph 26 of the judgment of the Supreme Court in the said case of Bhatia International v. Bulk Trading S.A. (supra) in which the Supreme Court has clarified that special provisions for enforcement of foreign awards are made in Part-II of the Indian Act and to the extent that Part-II provides a separate definition of an arbitral award and separate provisions for enforcement of foreign awards, the provisions in Part-I dealing with these aspects will not apply to such foreign awards. He also cited Paragraph 28 of the said judgment of the Supreme Court in which the Supreme Court has clarified that foreign awards which are enforceable in India are deemed to be decrees and can be executed relying on Sections 49 and 58 of the Indian Act. Mr. Agrawal further submitted that the decisions of the Gujarat High Court in the case of Nirma Ltd. v. Lurgi Energie Und Entsorgung GMBH, Germany AIR2003Guj145 (supra), the Calcutta High Court in the case of White Industries Australia Limited v. Coal India Limited 2004 (2) Cal LJ 197 (supra), the Supreme Court in the case of NTPC v. Singer Company [1992]3SCR106 (supra) and the decision of the Supreme Court in Sumitomo He .....

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law. This will be clear from the following observations of the Supreme Court in Paragraph 6 of the said judgment as reported in [1969]3SCR976 :- "It is unfortunate that the learned Trial Judge has recorded no reasons in support of his conclusion, and the High Court in appeal merely recorded that they thought that the plaintiff had sufficiently proved the case in the plaint." 13. Similarly, in State of Punjab v. Bhag Singh 2004 AIR SCW 102 (supra) cited by the learned Counsel for the appellant, the Supreme Court found that neither the trial Court nor the High Court had appreciated the entire evidence for coming to the conclusion on the guilt or otherwise of the accused and accordingly set aside the judgment of the High Court and directed the High Court to hear and dispose of the appeal in accordance with law. The relevant portion of the judgment of the Supreme Court in State of Punjab v. Bhag Singh 2004 AIR SCW 102 (supra) is quoted hereinbelow (Para 5) : "The trial Court was required to carefully appraise the entire evidence and then come to a conclusion. If the trial Court was at lapse in this regard the High Court was obliged to undertake such an exercise by enter .....

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dated and integrated Act. General provisions applicable to all arbitrations will not be repeated in all Chapters or Parts. The general provisions will apply to all Chapters or Parts unless the statute expressly states that they are not to apply or where, in respect of a matter, there is separate provision in a separate Chapter or Part II deals with enforcement of foreign awards. Thus Section 44 (in Chapter I) and Section 53 (in Chapter II) define foreign awards, as being awards covered by arbitrations under the New York Convention and the Geneva Convention respectively Part II then contains provisions for enforcement of "foreign awards" which necessarily would be different. For that reason special provisions for enforcement of foreign awards are made in Part II. To the extent that Part II provides a separate definition of an arbitral award and separate provisions for enforcement of foreign awards, the provisions in Part I dealing with these aspects will not apply to such foreign awards. It must immediately be clarified that the arbitration not having taken place in India, all or some of the provisions of Part I may also get excluded by an express or implied agreement of p .....

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uot;Convention on the recognition and enforcement of foreign arbitral awards" and Article 1 therein states as follows : "THE FIRST SCHEDULE CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS ARTICLE 1 1. This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought. It will be clear from the language used in Article 1 in the First Schedule quoted above that the convention applies to the recognition and enforcement of foreign arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought. In the present case the two awards have been made in England and the recognition and enforcement of the awards dated 10-11-2002 and 12-11-2003 are sought in India. Hence two awards dated 10-11-2002 and 12-11-2003 are "foreign awards" within th .....

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ing aside or suspension 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. 49. Enforcement of foreign awards-Whether the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court." It will be clear from Section 48(1)(e) of the Indian Act that enforcement of a foreign award may be refused at the request of the party against whom it is invoked, if that party furnishes to the Court proof that the award 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. To the extent Section 48(e) makes provision regarding the competent authority which can set aside a foreign award, the provision in Section 34 of Part-I of the Indian Act is excluded as per the decision of the Supreme Court in the case of Bhatia International v. Bulk Trading S.A. [2002]2SCR411 (supra). 17. While the .....

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) of the English Act provides for appointment of an Umpire. Article 22 of the agreement provides that the agreement will be governed by prevailing law of India and in case of arbitration the English Law shall apply. It will thus be clear from the various provisions of the agreement between the parties that the arbitration was to be conducted in accordance with the English Law. 18. Moreover, the arbitration has in fact been conducted and the award has been made in accordance with the English Law and this will be clear from paragraphs 32, 37, 42 and 45 of the award dated 12-11-2002 which are quoted hereinbelow : "32. Negotiations to reach a settlement of these disputes were unsuccessful. Pursuant to the provisions of Article 17 of the Modernization Agreement and Section 14 of the English Arbitration Act the Claimant submitted a written Notice and Request for Arbitration to the Respondent on November 13th, 1997. The Notice was accompanied by a letter dated November 13th 1997 from Mr. David Kjos, Vice-President of the Claimant. 37. Under Article 173 of the Modernization Agreement and Section 16(6)(b) of the English Arbitration Act, the arbitrators are required to appoint an Umpire .....

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(1)(e) is different and it says that the enforcement of the foreign award may be refused at the request of the party against whom it is invoked only if that party furnishes to the Court proof that the award has been set aside or suspended by a competent authority of the country under the law of which that award was made. The Legislature by using two different expressions namely, "law to which the parties have subjected the agreement" and "the law under which the award was made" obviously has intended two different meanings and both the expressions cannot mean one and the same thing. In the present case. Since Article 22 of the agreement provides that the agreement will be governed by the prevailing law in India, it is the law of India to which parties have subjected the agreement within the meaning of the expression used in Section 48(1)(a) of the Indian Act. But since Article 22 also provides that in the case of Arbitration, the English Law will apply, it is the English Law under which the arbitration has been conducted and the award has been made. 20. In National Thermal Power Corporation v. Singer Company [1992]3SCR106 (supra) cited by Mr. Mukherjee, agreemen .....

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on to be different from the proper law of contract, the Supreme Court held that the law of contract that will be applicable will also include the law of arbitration that will be applicable because the arbitration agreement is part of the main agreement. Moreover, in the aforesaid case of National Thermal Power Corporation v. Singer Company (supra) the Supreme Court was not called upon to interpret the provisions of Section 48 of the Indian Act. As we have seen, Section 48 of the Indian Act used two different expressions, "the law to which the parties have subjected the agreement and the law under which the award was made" and these two expressions used by the legislative have 110 be interpreted to mean two different things. The law to which the parties have subjected the agreement would mean "the law governing the agreement or the proper law of contract applicable to the agreement as chosen by the parties" and "the law under which the award was made" would mean the law according to which the arbitration was conducted and the award was made. 21. In Sumitomo Heavy Industries Ltd. v. ONGC Ltd. AIR1998SC825 (supra) cited by Mr. Mukherjee, Sumitomo Heavy In .....

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be mutually agreed upon, the dispute may be submitted by either party to Arbitration for final settlement under the rules of conciliation and arbitration of the International Chamber of Commerce, Paris, France, by one or more arbitrators appointed in accordance with the Rules." "4.1 This Agreement shall be subject to and governed by the laws in force in India except that the Indian Arbitration Act of 1940 shall not apply." Disputes and differences arose between the parties and the arbitration sittings were held in London and the award was made and published in France at Paris. Coal India Limited filed an application for setting aside the award under Sections 34 and 48 of the Indian Act before Calcutta High Court. A Division Bench of the Calcutta High Court held that the cause of action admittedly arose in July, 1999 and by that time the Indian Arbitration Act, 1940 was repealed by Section 85 of the Indian Act which came into force in August, 1996 and that the parties to the contract made an express choice in Indian Law both as the proper law of contract and the proper law of arbitration and India was also the country with which the contract was most closely associat .....

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oper law governing the arbitration is the law of India and not only the provisions of the Indian Arbitration Act apply to the arbitration but the Court of competent jurisdiction in India had jurisdiction to entertain applications under Section 34 of the Indian Act. In the aforesaid case of Nirma Ltd. v. Lurgi Energie Und Entsorgung GMBH, Germany AIR2003Guj145 (supra) also the only provision in the agreement was that the agreement shall be governed according to the laws of India and there was no separate agreement that in case of arbitration the English Law would apply and that the arbitration will be conducted in accordance with the English Act and the amendments thereto as in the present case. 24. Coming now to the view of Justice Potter in Sumitomo Heavy Industries Ltd. v. ONGC Ltd. reported in (1994) Lloyd's Law Reports 45 cited on behalf of the appellants, Justice Potter after referring to the provisions of the agreement between the parties has held : "In this case, as to (1), the parties have made an express choice of Indian Law as the proper law of the contract. As to (2), it seems to me likely (although it is not necessary finally to decide) that the proper law of t .....

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nd other factors may indicate that different laws should apply." Thus, where parties to the agreement have subjected the agreement only to the Indian law and do not indicate in the agreement that the English Law will apply in case of arbitration, then the expression "the law to which the parties have subjected" the agreement in Section 48(1)(a) of the Indian Act and the expression "under the law of which the award is made". In Section 48(1)(e) of the Indian Act would be the Indian Law because the arbitration agreement would follow the proper law of the main contract. But where parties to the agreement have subjected the agreement to the Indian Law and have also indicated in the agreement that in case of arbitration, the English Law will apply, as in the present case, then the said two expressions in the said Section 48(1)(a) and Section 48(1)(e) will mean two different things and "the law to which parties have subjected" the agreement would be the Indian Law and the country "under the law of which the award is made" will be England. We have, therefore, no doubt in our mind that the applications of the appellant under Section 34 of the In .....

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