Rajasthan High Court - Jodhpur
R.K. Industries vs Maximus International General Trading ... on 16 March, 2018
Equivalent citations: AIRONLINE 2018 RAJ 1240
Author: Arun Bhansali
Bench: Arun Bhansali
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JODHPUR
S.B. Arbitration Application No. 25 / 2017
R.K. Industries, N-11, Krishi Upaj Mandi, Mandore Road, Jodhpur.
Rajasthan
----Petitioner
Versus
Maximus International General Trading LLC, 602-603, Tower A,
Centurion Star, Port Saeed, Deria, P.O. Box 47021, Dubai, United
Arab Emirates.
....Respondent No.1
The Refined Sugar Association, Represented by its Secretary, 154
Bishopsgate, London EC2M 4LN.
....Arbitrator/ Performa Respondent No.2.
_____________________________________________________
For Petitioner(s) : Mr. Vikas Balia.
Mr. Gopal Bose.
Mr. Rishi Soni.
For Respondent(s) : Mr. Manoj Bhandari.
Mr. Rajvendra Sarswat.
_____________________________________________________
HON'BLE MR. JUSTICE ARUN BHANSALI
Order 16/03/2018 This application under Section 34 of the Arbitration and Conciliation Act, 1996 ('the Act') has been filed by the applicant against the interim final arbitration award on jurisdiction dated 23.3.2017 passed by the Panel of Arbitrators of the Refined Sugar Association.
The office has reported that the application is barred by limitation by 80 days.
(2 of 14) [ARBAP-25/2017] An application under Section 34(3) of the Act has been filed seeking condonation of delay in filing the arbitration application.
The respondent No.1 has appeared on caveat. Copies of the applications under Section 34 and under Section 34(3) of the Act were supplied to learned counsel appearing for the respondents.
Though, no reply to the application under Section 34(3) of the Act seeking condonation of delay has been filed, learned counsel appearing for the caveator raised preliminary objection about the maintainability of the application under Section 34 itself, on which objection, parties were heard.
It is submitted by learned counsel for the respondent that the impugned award dated 23.3.2017 is a foreign award in terms of Section 44 of the Act and arises out of an International Commercial Arbitration, wherein, the impugned award has been delivered in London by the Panel of Arbitrators of the Refined Sugar Association in terms of the Arbitration agreement between the parties. It is submitted that as application under Section 34 is maintainable only, where the place of arbitration is in India and as admittedly the place of arbitration in the present case is London and the parties have agreed to be governed by / in accordance with English Laws, the application under Section 34 is ex-facie not maintainable and deserves to be dismissed.
It was also submitted that the final award in the matter has already been passed by the Panel of Arbitrators and, therefore, as the impugned interim award has merged in the final award, the (3 of 14) [ARBAP-25/2017] application even otherwise, is not maintainable and, therefore, on that count also, the application deserves dismissal.
Reliance was placed on Roger Shashoua and Ors. V. Mukesh Sharma & Ors.: AIR 2017 SC 3166, Sakuma Exports Ltd. V. Louis Dreyfus Commodities Suissee S.A.: (2015) 5 SCC 656 and International Nut Alliance LLC v. Binu John, Proprietor, Johns Cashwe Company: 2017 LawSuit (Kerala) 933.
Learned counsel for the applicant vehemently opposed the submissions. It was submitted that it is well settled by various judgments that venue of arbitration and seat of arbitration are two different concepts and, therefore, merely because the interim award in question has been passed at London by itself cannot bar the jurisdiction under Section 34 of the Act and, therefore, the objection raised in this regard has no substance.
It was further submitted that by the impugned interim award, the issue of jurisdiction regarding which, the applicant had raised objection, has been determined. It is submitted that the determination has been made based on the language of the arbitration agreement between the parties, which determination is ex-facie incorrect. It was submitted with reference to the arbitration clause that the intention of parties while entering into the agreement has to be seen and based on the said intention, the seat of arbitration is to be determined and if it is found that the seat is indeterminate, which is the situation in the present case, the arbitration agreement would fail and the entire proceedings would be a nullity.
(4 of 14) [ARBAP-25/2017] It was emphasized that a bare look at the impugned award itself indicates that Arbitrators have rejected the interpretation sought to be put by the respondent and then have gone on to discuss various alternative submissions / interpretations, which can be put to the arbitration agreement and have reached to a conclusion adopting the 'most likely one' which itself is enough to come to a conclusion that the agreement in question is ambiguous and that the parties were not ad idem, which is enough to ignore the said arbitration clause and, therefore, the application under Section 34 of the Act is maintainable.
It was further submitted that merely because a final award has been passed during the pendency of the present proceedings, the interim award will not merge in the final award and, therefore, the plea raised in this regard also has no substance.
Reliance was placed on Union of India & Ors. v. Best Cast Construction Pvt. Ltd.: Civil Revision Petition No.248/2014, decided on 2.9.2014 by Karnataka High Court, Satwant Singh Sodhi v. State of Punjab & Ors.: (1993) 3 SCC 487, Union of India v. Reliance Industries Limited and Ors.: (2015) 10 SCC 213, Swiss Singapore Overseas Enterprises Pvt. Ltd. v. M.V. "African Trader": Civil Application No.23/2005, decided on 7.2.2005 by Guajarat High Court and LMJ International Ltd. v. Sleepwell Industries Co. Ltd. & Anr.: G.A. No.370/2013, decided on 29.8.2017 by Calcutta High Court.
I have considered the submissions made by learned counsel for the parties and have perused the material available on record.
(5 of 14) [ARBAP-25/2017] Insofar as, the plea raised by learned counsel for the respondent about the application having been rendered infructuous on account of passing of the final award is concerned, it may be noticed that the impugned interim award only deals with the jurisdiction and has not dealt with the merits of the claim raised by the respondent before the Panel of Arbitrators and the final award though exparte, has dealt with and delivered the award pertaining to the claim raised by the respondent on merit.
Hon'ble Supreme Court in the case of Satwant Singh Sodhi (supra), while dealing with a similar issue, inter alia, laid down as under:-
"If the interim award is intended to have effect only so long as the final award is not delivered it will have the force of the interim award and it will cease to have effect after the final award is made. If, on the other hand, the interim award is intended to finally determine the rights of the parties it will have the force of a complete award and will have effect even after the final award is delivered."
As noticed hereinbefore, the award impugned deals with the jurisdiction of the arbitral panel and, therefore, merely because the final award pertaining to the claim on merits has been delivered, it cannot be said that the present application under Section 34 of the Act, on said count, would be rendered infructuous.
It may be noticed before hand at this stage that several submissions, which have been made by counsel for the applicant, essentially touch upon the merits of the issue, which may have (6 of 14) [ARBAP-25/2017] implication on the various objections, which have raised by the applicant in response to the application filed by the respondent for enforcement of the award under Section 48 of the Act and, therefore, learned counsel for the applicant, while concluding the submissions also made a prayer that the submissions as made may be considered and confined to the maintainability of the application under Section 34 and not on the merits of the dispute.
In view of the above submissions and the obvious implications on the merit of the dispute raised in this regard, this Court is confining itself to the bare legal submissions made in this regard though the submissions as made with regard to the merit also have been noticed hereinbefore.
The parties entered into a sale-purchase contract dated 9.6.2016 for Non-White Sugar to the tune of 2600 metric tons, the arbitration agreement between the parties reads as under:-
"ARBITRATION ALL DISPUTES ARISING OUT OR IN CONJUNCTION WITH THIS CONTRACT SHALL BE REFERRED TO THE REFINED SUGAR ASSOCIATION, LONDON FOR SETTLEMENT IN ACCORDANCE WITH THE RULES RELATING TO ARBITRATION. THIS CONTRACT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH ENGLISH LAW WITH THE SAID RULES IN INDIA."
A bare look at the said agreement indicates that the parties agreed that in case of dispute arising out of the contract, the same shall be referred to the Refined Sugar Association, London for settlement in accordance with the Rules relating to arbitration. It was further agreed that the contract shall be governed by and (7 of 14) [ARBAP-25/2017] construed in accordance with English Law, however, a suffix to the said clause pertaining to the contract being governed in accordance with English Law finds place in the agreement, which indicates 'with the said Rules in India'.
On dispute arising between the parties, the respondent referred the dispute for arbitration to the Refined Sugar Association, London and the Association appointed Panel of Arbitrators in terms of Association's Arbitration Rules. On submissions being exchanged questioning the interpretation of arbitration agreement, the Arbitrators by the impugned arbitration award dated 23.3.2017 came to the following conclusion:-
"21. We therefore find that the parties agreed, in the first sentence of the arbitration clause, that all disputes arising out of or in conjunction with the Contract were to be referred to The Refined Sugar Association in London for settlement in accordance with The Association's Arbitration Rules and, in the second sentence of the arbitration clause, that the Contract was to be governed by English law except to the extent that it conflicted with India law, in which case Indian law was to apply.
22. WE THEREFORE AWARD AND DIRECT that RKI shall pay the costs of The Refined Sugar Association relating to this Award which we tax and settle in the sum of £6,890.00 exclusive of Value Added Tax, provided always that if Maximus shall have paid any such costs in the first instance, they shall be entitled to immediate reimbursement therefor by RKI."
A perusal of the Act reveals that scope of Part-I of the Act, which includes Section 34 also, has been confined by Section 2(2) of the Act to cases where the place of arbitration is in India.
(8 of 14) [ARBAP-25/2017] Though now by Arbitration and Conciliation (Amendment) Act, 2015, provisions of Sections 9, 27, 37(1)(a) and 37(3) have been made applicable to international commercial arbitration, which also have been made subject to an agreement to the contrary.
The foreign awards have been dealt with in Part-II of the Act. Sections 44 to section 49 give a complete procedure as to the enforcement of the foreign award in India. To facilitate contest, if any, to the person against whom the award is made, section 48 prescribes the conditions for enforcement of foreign awards and at the same time grant liberty to the person against whom the award has been published to contest the enforcement of the said award by pointing out that the conditions embodied in section 48 have not been fulfilled. Sub-section 3 of section 48 also entitles the person against whom the award is made to seek adjournment of decision on the ground that the setting aside application or application for suspension of award has been made to a competent authority. The 'competent authority' has been qualified in Section 48(1)(e) of the Act by the words "of the country in which, or under the law of which, that award was made".
However, section 49 prescribes that if the conditions of section 48 are fulfilled the award shall be deemed to be a decree of the Indian Courts.
A close reading of the above Sections reveal that they don't contemplate a situation where a foreign award could be challenged by way of application under Section 34 of the Act in Indian Courts. Rather a right is given to the award holder to (9 of 14) [ARBAP-25/2017] enforce the award coupled with only a right to the losing party to resist/contest such action on the grounds that would be available to him. The losing party does not have any right at all to challenge the award in India. The reason is not far to seek. The basic concept of law suggests that the forum available to a party would be the place where incident occurs giving rise to a right to approach the forum. When arbitration is held at a particular place, the aggrieved party has to approach the Court/Forum under the governing law, where the arbitration was held and/or award was published unless the parties mutually agreed to be guided by another law.
In the case of Reliance Industries Ltd. (supra) on which, strong reliance was placed by learned counsel for the applicant, Hon'ble Supreme Court reiterating the principles laid down by it in Reliance Industries Ltd. v. Union of India: (2014) 7 SCC 603 {'RIL (2014)'} and noticing that in the said case the arbitration agreements were entered into before 12.9.2012 i.e. the date of pronouncement of judgment in Balco v. Kaiser Aluminium Technical Services Inc.: (2012) 9 SCC 552 laid down as under:-
"20. The last paragraph of Bharat Aluminium's judgment has now to be read with two caveats, both emanating from paragraph 32 of Bhatia International itself-that where the Court comes to a determination that the juridical seat is outside India or where law other than Indian law governs the arbitration agreement, Part-I of the Arbitration Act, 1996 would be excluded by necessary implication. Therefore, even in the cases governed by the Bhatia principle, it is only those cases in which agreements stipulate that the seat of the arbitration is in India or on whose facts a (10 of 14) [ARBAP-25/2017] judgment cannot be reached on the seat of the arbitration as being outside India that would continue to be governed by the Bhatia principle. Also, it is only those agreements which stipulate or can be read to stipulate that the law governing the arbitration agreement is Indian law which would continue to be governed by the Bhatia rule."
It would be seen that the Hon'ble Supreme Court in its earlier judgment between the same parties in RIL (2014), after construing the arbitration clauses had come to the conclusion that the seat of arbitration in the said case would be London, though Clause-32.1 of the agreement had provided that the contract shall be governed and interpreted in accordance with the Laws of India, in view of Clause 33.12 therein, that the venue of arbitration shall be London and the arbitration agreement shall be governed by the laws of England.
In view thereof, irrespective of the observations made by the Hon'ble Supreme Court, strongly relied on by counsel for the applicant, the same would have no implication.
The combined effect of the judgments in the case of Bhatia International v. Bulk Trading S.A. & Anr.: (2002) 4 SCC 105, Balco (supra) and Reliance Industries Ltd. (supra) came to be examined by the Hon'ble Supreme Court in the case of Roger Shashoua (supra) and after referring to the arbitration clause, which provided for the venue of the arbitration at London and the governing law as 'Laws of India' laid down as under:-
"67. It is submitted by Mr. Dwivedi, learned senior Counsel appearing for the Appellants that the nature of the language employed in the aforesaid clauses clearly (11 of 14) [ARBAP-25/2017] lay the postulate that the arbitration shall be carried only in London and the seat of arbitration shall be in London. Apart from relying upon the decision in Enercon (India) Ltd. (AIR 2014 SC 3152) (supra) for the said purpose, he has copiously referred to the Rules of Conciliation and Arbitration of the International Chambers of Commerce. Per contra, Mr. Chidambaram would submit that the arbitration agreement clearly lays down with regard to the venue and as has been held by this Court, venue cannot be equated with the seat/place of arbitration. As we perceive, the Clause relating to the arbitration stipulates that the arbitral proceedings shall be in accordance with the ICC Rules. There is a Clause in the SHA that the governing law of SHA would be laws of India. The aforesaid agreement has already been interpreted by the English Courts to mean that the parties have not simply provided for the location of hearing to be in London.
68. It is worthy to note that the arbitration agreement is not silent as to what law and procedure is to be followed. On the contrary, Clause 14.1 lays down that the arbitration proceedings shall be in accordance with Rules of Conciliation and Arbitration of the ICC. In Enercon (India) Ltd. (supra), the two-judge bench referring to Shashoua case accepted the view of Cooke, J. that the phrase "venue of the arbitration shall be in London, UK" was accompanied by the provision in the arbitration Clause or arbitration to be conducted in accordance with the Rules of ICC in Paris. The two-Judge Bench accepted the Rules of ICC, Paris which is supernational body of Rules as has been noted by Cooke, J. and that is how it has accepted that the parties have not simply provided for the location of hearings to be in London. To elaborate, the distinction between the venue and the seat remains. But when a Court finds there is prescription for venue and something else, it has to be adjudged on the facts of each case to determine the juridical seat. As in the instant case, the agreement in question has been (12 of 14) [ARBAP-25/2017] interpreted and it has been held that London is not mentioned as the mere location but the courts in London will have the jurisdiction, another interpretative perception as projected by the learned senior Counsel is unacceptable.
69..........
70..........
71. We respectfully concur with the said view, for there is no reason to differ. Apart from that, we have already held that the agreement in question having been interpreted in a particular manner by the English courts and the said interpretation having gained acceptation by this Court, the inescapable conclusion is that the courts in India have no jurisdiction.
72. In view of the aforesaid analysis, we allow the appeals and set aside the judgment of the High Court of Delhi that has held that courts in India have jurisdiction, and has also determined the Gautam Budh Nagar has no jurisdiction and the petition Under Section 34 has to be filed before the Delhi High Court. Once the courts in India have no jurisdiction, the aforesaid conclusions are to be nullified and we so do. In the facts and circumstances of the case, there shall be no order as to costs."
Further in a similar challenge to maintainability of application under Section 34 of the Act pertaining to an arbitration clause, wherein, the contract was made subject to the Rules of the Refined Sugar Association, London, it was laid down by Hon'ble Supreme Court in the case of Sakuma Exports (supra) as under:-
"5. Since one of the terms and conditions of the agreement makes the contract subject to the Rules of the Refined Sugar Association, London by treating the same to have been expressly inserted in the agreement, Rule 8 of the Refined Sugar Association, London leaves no manner of doubt that the parties (13 of 14) [ARBAP-25/2017] have not only accepted English law as the law governing the contract but the disputes and the arbitration shall also be governed by the law of England. The seat of Arbitration is admittedly England.
6. Learned counsel for the Petitioner highlighted that the arbitration clause is not strictly the same as recommended by the Refined Sugar Association, London which clearly stipulated that the arbitration shall be conducted in accordance with the English law. But this does not take us far. The condition that the contract is subject to the Rules of the Refined Sugar Association, London which stand inserted in the contract and wordings of Rule 8 clinch the relevant issue in favour of the Respondent."
In view of the law consistently laid down by Hon'ble Supreme Court regarding the maintainability of the applications under Section 34 in relation to an award passed in the case of an International Commercial Arbitration, holding in similar nature case that the seat of arbitration being in London, the application under Section 34 of the Act would not be maintainable, the submissions made by counsel for the applicant cannot be accepted and the objection deserves acceptance.
It is made clear, as already observed hereinbefore, that the present observations have been made and conclusions arrived at only with a view to examine the maintainability of the present application under Section 34 of the Act and the validity as such of the arbitration agreement as questioned by learned counsel for the applicant, has not been dealt with by this Court.
In view of the above discussion, the application filed by the applicant under Section 34 against the impugned award dated (14 of 14) [ARBAP-25/2017] 23.3.2017 is not maintainable. The same is, therefore, dismissed.
No order as to costs.
(ARUN BHANSALI)J. Sumit/-