Gujarat High Court
Suraj Agri Business Pte Ltd vs Kandla Export Corporation Through ... on 13 January, 2023
Author: Biren Vaishnav
Bench: Biren Vaishnav
C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 285 of 2010
With
R/SPECIAL CIVIL APPLICATION NO. 286 of 2010
With
R/SPECIAL CIVIL APPLICATION NO. 288 of 2010
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
==========================================================
1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?
========================================================== SURAJ AGRI BUSINESS PTE LTD Versus KANDLA EXPORT CORPORATION THROUGH PRAVIN SUKHRAJ SANGHVI ========================================================== Appearance:
MR.DHAVAL DAVE, LD. SENIOR ADVOCATE for MR PA JADEJA(3726) for the Petitioner(s) No. 1 MR.ANSHIN DESAI, LD. SENIOR ADVOCATE for MR. ZALAK B PIPALIA(6161) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV Date : 13/01/2023 COMMON CAV JUDGMENT
1. In all these petitions under Article 226 of the Constitution of India, the petitioners have prayed Page 1 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 that this Court be pleased to issue a writ of prohibition and/or any other appropriate writ, order or direction restraining the Court of Additional District Judge, Kutch, at Gandhidham from entertaining and proceeding further with the applications filed by the concerned respondents under Section 34 of the Arbitration and Conciliation Act, 1996, ('the Act' for short) by which, the respondents have challenged the arbitral awards in the respective arbitration proceedings.
2. The question that is raised in these petitions is whether the District Court is having the jurisdiction to entertain an application under Section 34 of the Act for challenging an award when the award is an outcome of an International Commercial Arbitration admittedly held in London with an express provision in the Page 2 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 Arbitration Clause embodied in the concerned agreement to the effect that the arbitration shall be governed by the English law.
3. For the purposes of this judgement, since the facts are common, facts of Special Civil Application No.285 of 2010 are considered.
3.1 The petitioner is a foreign company constituted and registered in consonance with the statute governing the field thereof in Singapore. The registered office is at Singapore.
The company deals in business of agricultural product.
3.2 The respondent is a partnership firm. On 23.05.2007, a contract came to be executed between the petitioner and the respondent, by which, the petitioner agreed to purchase Page 3 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 specified quantity of Indian Yellow Soybean Meal. The contract contained a provision under the heading 'Shipping Terms'. Clause 7 provided that all other terms and conditions were to be as per GAFTA 119, that arbitration as per GAFTA 125 was to take place in London with English law to apply.
3.3 After the execution of the contract, a dispute arose between the petitioner and the respondent on account of non-delivery of goods. Invoking Clause 7 of the shipping terms, the dispute was referred to the Arbitral Tribunal as per GAFTA 125 at London. An award was passed in the Arbitral Proceedings which proceeded in the meeting of GAFTA at London on 29.10.2008. It was declared that the petitioner was entitled to receive and recover from the respondent a sum of USD 1,26,000 along with interest.
Page 4 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 3.4 Aggrieved by the award, the respondent preferred an appeal before the Board of Appeal of Grain and Feed Trade Association, London.
After hearing the appeal, the Board of Appeal delivered an order dated 09.09.2009 upholding substantially the award of the Tribunal. The respondent aggrieved by the aforesaid appellate award, has preferred an application under Section 34 of the Act before the Additional District Court, Kutch at Gandhidham. On presentation of such application the learned In-
charge Additional District Judge, Kutch, at Gandhidham, passed an order dated 07.10.2009, admitting the application of the respondent and issuing notice to the petitioner. Aggrieved by this course of action, the petitioner has approached this Court.
4. Mr.Dhaval C. Dave learned Senior Advocate Page 5 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 appearing for the petitioners would make the following submissions:
4.1 Inviting the Court's attention to Section 2(2) of the Arbitration Act and reading the same, Mr.Dave would submit that it is clear that Part-I of the Act applies to the arbitration taking place in India. In other words therefore, when an arbitration takes place outside India, Part-I of the Act has no application. Reading the terms of the contract and the arbitration clause, Mr.Dave would submit that the arbitration was in accordance with the GAFTA Arbitration Rules, No.125 the provisions of the Arbitration Act, 1995 was applicable, the juridical seat of arbitration was England and it was to take place in London with English law to apply. Clearly therefore, since the arbitration did not take place in India, the applications are per-se not Page 6 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 maintainable. The Court in which they were filed patently lacked jurisdiction to entertain the same.
4.2 Mr.Dave would further submit that when the petitions were filed, the Supreme Court in the matters of in case of Bhatia International v.
Bulk Trading S.A. and Another reported in (2002) 4 SCC 105 and in case of Venture Global Engineering vs Satyam Computer Services Ltd & Anr reported in (2008) 4 SCC 190, the Supreme Court had taken a view that part-I of the Arbitration Act would apply to arbitration taking place outside India unless the concerned contract excludes the applicability of Part-I of the Arbitration Act expressly or implidly.
Subsequently, a five judge bench of the Supreme Court in the case of Bharat Aluminium Company v. Kaiser Aluminium Technical Page 7 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 Services Inc. reported in (2012) 9 SCC 552, (hereinafter to be referred to as 'BALCO' for short) considered the application of Part-1 of the Arbitration Act in reference to Section 34 in context of arbitration conducted outside India and conclusively ruled that part-I of the Act has no application to the arbitration taking place outside India. Accordingly, an award passed in an arbitration taking place outside India, cannot be challenged in India under Section 34 of the Arbitration Act. He would invite the Court's attention to paras 194 to 197 of the BALCO's judgement and submit that the Supreme Court clarified that this proposition of law would apply to contracts executed subsequent to 06.09.2012 being the date on which the judgement was delivered.
4.3 Mr.Dave would therefore submit that in the Page 8 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 present cases the contract in question was prior to 06.09.2012 and in light of the law laid down in Bhatia International (supra) and Venture Global Engineering (supra) Part-I of the Arbitration Act will have no application to the arbitrations taking place outside India provided to applicability of Part-I of the Arbitration Act is not excluded either expressly or impliedly in the concerned contract.
4.4 He would submit that the contracts in question were prior to BALCO with the clause excluding the applicability of the Part-I of the Act. Therefore, when the award was a foreign seated award, application under Section 34 was not maintainable.
4.5 In support of his submissions, he would rely on the following decisions:
Page 9 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 (I) Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc. reported in (2012) 9 SCC 552 (II) Bhatia International v. Bulk Trading S.A and Another reported in (2002) 4 SCC 105 (III) Venture Global Engineering vs Satyam Computer Services Ltd & Anr reported in (2008) 4 SCC 190 (IV) IMAX Corporation v. E-City Entertainment (India) v. E-City Entertainment (India) Private Limited reported in (2017) 5 SCC 331 (V) Eitzen Bulk A/S v. Ashapura Minechem Limited and Another reported in (2016) 11 SCC 508 Page 10 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 (VI) Navalmar UK Ltd. v. Ashapura Minechem Ltd. reported in (2015) 1 GLR 630
5. Mr.Anshin Desai learned Senior Advocate would make the following submissions:
5.1 A writ of prohibition cannot be granted when the issue pending before the Trial Court is with regard to 'fraud'. Inviting the Court's attention to the grounds of challenge to the award, Mr.Desai would submit that it was the specific case of the respondent that the petitioners have fabricated, created and concocted business confirmation. He would take the Court through the first business confirmation, in which, certain terms were mentioned. He would therefore submit that when a specific case of fraud is made out and it is conclusively decided that the confirmations are Page 11 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 fabricated, the Court by issuing a writ of prohibition cannot short-circuit the proceedings.
5.2 Inviting the Court's attention to the Explanation to Section 34 of the Act, Mr.Desai would submit that when the award is challenged on the ground of it being in conflict with public policy, in contravention with fundamental policy or in conflict with most basic notions of morality or justice, unless an adjudication takes place, the proceedings cannot be stalled by issuing a writ of prohibition.
5.3 Mr.Desai would further submit that in case of BALCO (supra) it was very clear that the Constitution Bench had held the law declared by the Court shall apply prospectively to all agreements executed after 06.09.2012. In the present case, the date of the agreement was Page 12 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 23.05.2007 and therefore, it cannot be said that the judgement applies.
5.4 Mr.Desai would submit that in the decision of IMAX Corporation (supra), BALCO was not cited. It was by a bench strength of two judges.
It cannot therefore interpret the BALCO.
5.5 Mr.Desai would further submit that the decision in the case of Eitzen Bulk (supra) and that in the case of Navalmar UK Ltd. (supra) would be of no help against the judgement of the learned Single Judge in Navalmar UK Ltd.
(supra) when LPA was pending.
5.6 Mr.Desai would rely on a decision in case of Harmony Innovation Shipping Limited v.
Gupta Coal India Limited and Another reported in 2015 (9) SCC 172 and submit that Page 13 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 to apply the principle of implied exclusion, the Court has to test the 'presumed intention'. He would also rely on the decision in the case of M/S Alcon Electronics Pvt. Ltd vs Celem S.A. Of Fos 34320 Roujan reported in 2017 (2) SCC 253.
6. In rejoinder, Mr.Dhaval Dave would submit that the case of Harmony Innovation Shipping Limited (supra) in fact, supports the petitioner.
What is to be seen is that it is true that the judgement of BALCO has to be read with two limitations, both from para 32 of Bhatia International (supra) itself.
7. Having considered the submissions made by the learned counsel for the respective parties, what is apparent from reading the contents of the Arbitration Act is that the Act is divided into two Page 14 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 parts. Part-I deals with general provisions with regard to the agreement, the jurisdiction etc. whereas, part-II deals with enforcement of certain foreign awards. Section 2(2) of the Arbitration Act which falls in Part-I of the Act reads as under:
(2) This Part shall apply where the place of arbitration is in India.
[Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (b) of sub-section (1) and sub- section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.] It specifically therefore provides that this part shall apply where the place of Arbitration is in India.
7.1 In the case of Bhatia International (supra) Page 15 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 before the Supreme Court briefly stated the facts were that the appellant had entered into a contract with the first respondent on 09.05.1997.
The contract contained an arbitration clause which provided that the arbitration was to be as per the Rules of International Chamber of Commerce and the arbitration was to be held in Paris. The first respondent filed an application under Section 9 of the Act before the 3 rd Additional District Judge, Indore, M.P., against the appellant. The appellant raised a plea contending that Part-I of the Act could not apply to arbitration where the place of Arbitration is not in India. The application was dismissed holding that the Indore Court had jurisdiction. A challenge in the writ petition also failed against which the present appeal was filed. It was the contention of the appellant that part-I of the Act only applies to Arbitration where the place of Page 16 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 Arbitration is in India. The Supreme Court interpreting the language of Section 2(2) of the Act in para 21 held as under:
"21. Now let us look at sub-sections (2), (3), (4) and (5) of Section 2. Sub-section (2) of Section (2) provides that Part I would apply where the place of arbitration is in India. To be immediately noted that it is not providing that Part I shall not apply where the place of arbitration is not in India. It is also not providing that Part I will "only" apply where the place of arbitration is in India (emphasis supplied). Thus the Legislature has not provided that Part I is not to apply to arbitrations which take place outside India.
The use of the language is significant and important. The Legislature is emphasising that the provisions of Part I would apply to arbitrations which take place in India, but not providing that the provisions of Part I will not apply to arbitrations which take place out of India. The wording of sub- section (2) of Section 2 suggests that the intention of the Legislature was to make provisions of Part I compulsorily applicable to an arbitration, including an international commercial arbitration, which takes place in India. Parties cannot, by agreement, override or exclude the non-derogable provisions of Part I in such arbitrations. By omitting to provide that Part I will not apply to international commercial arbitrations which take place outside India the affect would be that Part I would also apply to Page 17 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 international commercial arbitrations held out of India. But by not specifically providing that the provisions of Part I apply to international commercial arbitrations held out of India, the intention of the Legislature appears to be to ally parties to provide by agreement that Part I or any provision therein will not apply. Thus in respect of arbitrations which take place outside India even the non-derogable provisions of Part I can be excluded. Such an agreement may be express or implied."
In para 32 of the decision concluded that the provisions of Part-I would apply to all arbitrations and it will be open to the parties to exclude all or any of the provisions of Part-I by virtue of an agreement. Para 32 of the judgement reads as under:
"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 compulsory 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 Page 18 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 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."
7.2 That view also was taken by the Supreme Court in case of Venture Global Engineering (supra).
7.3 In BALCO (supra), a Five Judge Bench of the Supreme Court was constituted as it was observed that the Three Judge Bench decision in the case of Bhatia International (supra) followed in Venture Global Engineering (supra) needs a relook. Essential facts before the Supreme Court in that case that an agreement dated 22.04.1993 was executed between the appellant and the respondent. The arbitration clause in the said agreement provided that the arbitration law will be that of England and the Page 19 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 seat will be London. Disputes arose between parties with regard to the performance of the agreement. Awards were made in England. The appellant filed applications under Section 34 of the Act before the learned District Judge, Bilaspur, who held that such applications were not tenable as the awards were foreign awards.
Challenge to these orders before the High Court failed which was challenged before the Supreme Court in the appeal. The Supreme Court referred to the decision in case of Bhatia International (supra) and opined that they were not in agreement with the conclusions recorded by the judgements. In other words, the conclusion of Bhatia International (supra) that part-I of the Act would apply to international arbitrations unless the parties by agreement, express or implied exclude all or any of the provisions was not accepted. However, the Page 20 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 Supreme Court held thus:
"115. Upon consideration of the entire matter, it was observed that - "In these circumstances it is clear to me that the law with which the agreement to arbitrate has its closest and most real connection is the law of the seat of arbitration, namely, the law of England". (Para 14). It was thereafter concluded by the High Court that English Law is the proper law of the agreement to arbitrate. (Para 15)
116. The legal position that emerges from a conspectus of all the decisions, seems to be, that the choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings.
117. It would, therefore, follow that if the arbitration agreement is found or held to provide for a seat / place of arbitration outside India, then the provision that the Arbitration Act, 1996 would govern the arbitration proceedings, would not make Part I of the Arbitration Act, 1996 applicable or enable Indian Courts to exercise supervisory jurisdiction over the arbitration or the award. It would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory Page 21 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 provisions of the English Procedural Law/Curial Law. This necessarily follows from the fact that Part I applies only to arbitrations having their seat / place in India.
...
...
197. The judgment in Bhatia International (supra) was rendered by this Court on 13th March, 2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by this Court on numerous occasions. In fact, the judgment in Venture Global Engineering (supra) has been rendered on 10th January, 2008 in terms of the ratio of the decision in Bhatia International (supra). Thus, in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter."
7.4 In the case of Eitzen Bulk (supra), the dispute was with regard to a contract dated 18.01.2008. The arbitration clause provided that the dispute shall be settled to arbitration in London and the English law will apply. There was certain proceedings in Gujarat. A Division Bench of Gujarat High Court held that the Page 22 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 question whether a foreign award could be a subject matter of challenge under Section 34 was a mixed question of law and facts to be decided by the Trial Court. This judgement was under
consideration. The Supreme Court considering the main question held as under:
"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. Shri Prashant S. Pratap, learned senior counsel appearing for Eitzen submitted that the main issue is covered by a decision of this Court in Bhatia International v. Bulk Trading S.A. and another[2] and two recent decisions of this Court in Union of India v. Reliance Industries Limited and others[3] and Harmony Innovation Shipping Limited v. Gupta Coal India Limited and another[4]. We have not considered the decision in the Balco v. Kaiser Aluminium Technical Services Inc.[5] since the decision in that case does not govern Arbitration Page 23 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 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 Arbitration will be conducted in accordance with English Law and the seat of the Arbitration will be at London.
27. The question is whether the above stipulations show the intention of the parties to expressly or impliedly exclude the provisions of Part I to the Arbitration, which was to be held outside India, i.e., in London. We think that the clause evinces such an intention by providing that the English Law will apply to the Arbitration. The clause expressly provides that Indian Law or any other law 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 Page 24 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 applicability of Part I to the instant Arbitration by Clause 28. In fact, Clause 28 deals with not only the seat of Arbitration but also provides that there shall be two Arbitrators, one appointed by the charterers and one by the owners and they shall appoint an Umpire, in case there is no agreement. In this context, it may be noted that the Indian Arbitration and Conciliation Act, 1996 makes no provision for Umpires and the intention is clearly to refer to an Umpire contemplated by Section 21 of the 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 Arbitration Act. Firstly, the seat of Arbitration which is in London and secondly the clause that English Law will apply. In fact, such a situation has been held to exclude the applicability of Part I in a case where a similar clause governed the Arbitration. In Reliance Industries Limited and another v. Union of India[6], this Court referred to judgments of some other jurisdictions and observed in paragraphs 55 to 57 as follows:-Page 25 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023
C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 "55. The effect of choice of seat of arbitration was considered by the Court of Appeal in C v. D. Thisjudgment 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 the award should be only those permitted by English law. In my view they must be taken to have so agreed for the reasons given by the Judge. The whole purpose of the balance achieved by the Bermuda form (English arbitration but applying New York law to issues arising under the policy) is that judicial remedies in respect of the award should be those permitted by English law and only those so permitted. Mr Hirst could not say (and did not say) that English judicial remedies for lack of jurisdiction 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 Page 26 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 supposed that a party aggrieved by one part of an award could proceed in one jurisdiction and a party aggrieved by another part of an award could proceed in another jurisdiction. Similarly, in the case of a single complaint about an award, it could not be supposed that the aggrieved party could complain in one jurisdiction and the satisfied party be entitled to ask the other jurisdiction to declare its satisfaction with the award. There would be a serious risk of parties rushing to get the first judgment or of conflicting decisions which the parties cannot have contemplated."
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 necessarily carried with it the English Court's supervisory jurisdiction over the arbitration process. It was observed that:
"this follows from the express terms of the Arbitration Act, 1996 and, in particular, the provisions of Section 2 which provide that Part I of the Arbitration Act, 1996 applies where the seat of the arbitration is in Page 27 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 England and Wales or Northern Ireland. This immediately establishes a strong connection between the arbitration agreement itself and the law of England. It is for this 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 of Part I of the Arbitration Act, 1996 (Indian) are necessarily excluded; being wholly inconsistent with the arbitration agreement which provides "that arbitration agreement shall be governed by English law". Thus the remedy for the respondent to challenge any award rendered in the arbitration proceedings would lie under the relevant provisions contained in the Arbitration Act, 1996 of England and Wales. Whether or not such an application would now be entertained by the courts in England is not 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 Page 28 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 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 relentlessly resorted to apparent remedies for stalling the execution of the Award and in fact even attempted to prevent Arbitration. This case has become typical of cases where even the fruits of Arbitration are interminably delayed. Even though it has been settled law for quite some time that Part I is excluded where parties choose that the seat of Arbitration is outside India and the Arbitration should be governed by the law of a foreign country.
30. Mr. Divan attempted to persuade us to accept 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"[7].
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 India v. Reliance Industries Limited and others in para 18 as follows:-
Page 29 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 "18. It is important to note that in para 32 of Bhatia International itself this Court has held that Part I of the Arbitration Act, 1996 will not apply if it has been excluded either expressly or by necessary implication.
Several judgments of this Court have held that Part I is excluded by necessary implication if it is found that on the facts of a case either the juridical seat of the arbitration is outside India or the law governing 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 a different view. In Bhatia International's case, this Court concluded as follows:
"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, express or implied, exclude all or any of its provisions. In that case the laws Page 30 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 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, 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 a law other than Indian law, part I of the Act would not have any application and, therefore, the award debtor would not be entitled to challenge the award by raising objections under Section 34 before a Court in India. A Court in India could not have jurisdiction to entertain such objections under Section 34 in 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 Page 31 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 the procedural law that will govern their arbitration, by providing for arbitration in a particular country. This is too elliptical and, as an English court itself held more recently in Breas of Doune Wind Farm it does not always hold true. What the parties have done is to choose a place of arbitration in a particular country. That choice brings with it submission to the laws of that country, including any mandatory provisions of its law on arbitration. To say that the parties have 'chosen' that particular law 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 French law then follows automatically. It is not a matter of choice.
Parties may well choose a particular place of arbitration precisely because its lex arbitri is one which they find attractive. Nevertheless, once a place of arbitration has been chosen, it brings with it its own law. If that law contains provisions that are mandatory so far as arbitration are concerned, those provisions must be obeyed. It is not a matter of choice any more than the notional motorist is free to choose Page 32 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 which local traffic laws to obey and which to disregard."
34. In this view of the matter, the judgment of the Gujarat High Court holding that Ashapura's objections under Section 34 of the Arbitration Act are tenable before a Court in India that is the Court at Jam- Khambalia, Gujarat is contrary to law. The proceedings under Section 34, which occurs in Part I, are liable to be dismissed as untenable. The Civil Appeals of Eitzen are liable to succeed and are, therefore, allowed. The judgment of the Bombay High Court dated 03.12.2015 enforcing the Foreign Award under Part II of the Arbitration Act is correct and liable to be upheld."
7.5 What is evident on reading this decision is that the decision in the case of BALCO (supra) was referred and relied upon. It was the contention of the appellant that the main issue was covered by the decision in case of Bhatia International (supra). Interpreting Clause 28 of the Contract, which clearly stipulated that the dispute is to be settled and referred to arbitration in London, the Court opined that this Page 33 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 was an express exclusion of the applicability of Part-I of the Act and therefore in light of the observations made in the decision of the Supreme Court in the case of Union of India v.
Reliance Industries Limited reported in 2015 10 SCC 213, a Court in India would not have jurisdiction to entertain such objection under Section 34 in such a case. At this stage, it will be relevant to reproduce para 18 of the decision in the case of Reliance Industries Limited (supra) which reads as under:
"18. It is important to note that in paragraph 32 of Bhatia International itself this Court has held that Part-I of the Arbitration Act, 1996 will not apply if it has been excluded either expressly or by necessary implication. Several judgments of this Court have held that Part-I is excluded by necessary implication if it is found that on the facts of a case either the juridical seat of the arbitration is outside India or the law governing 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 & Anr., (2011) 6 SCC 161, Dozco India Page 34 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 Private Limited v. Doosan Infracore Company Limited, (2011) 6 SCC 179, Yograj Infrastructure Limited v. Ssang Yong Engineering and Construction Company Limited, (2011) 9 SCC 735), the very judgment in this case reported in Reliance Industries Limited v. Union of India, (2014) 7 SCC 603, and a recent judgment in Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. & Anr., (decided on 10th March, 2015 in Civil Appeal No. 610 of 2015)]."
8. Even in the decision cited by the learned counsel for the respondent in case of Harmony Innovation Shipping Limited (supra), where, the issue for consideration was with regard to the nature of the arbitration clause in light of the pronouncement in BALCO (supra) if the facts are perused, it was a case where an agreement was entered into between the parties on 20.10.2010.
An application was filed under Section 9 before the District Court, Ernaculam. The District Judge issued an attachment order. That order was challenged by a writ petition before the High Page 35 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 Court. Considering the decisions in case of Bhatia International (supra) and Venture Global Engineering (supra), the petition was dismissed. Paras 8, 9, 27, 28, 38 to 40 and 48 read as under:
"8. The aforesaid judgment by the Constitution Bench was decided on September 6, 2012. In the instant case, the arbitration agreement was executed prior to that date and the addendum, as mentioned earlier, came into existence afterwards. Therefore, there can be no scintilla of doubt that the authority in Bharat Aluminium Co.
case would not be applicable for determination of the controversy in hand. In fact, the pronouncement in Bhatia International (supra) would be applicable to the facts of the present case inasmuch as there is nothing in the addendum to suggest any arbitration and, in fact, it is controlled and governed by the conditions postulated in the principal contract. We shall advert to this aspect slightly more specifically at a later stage.
9. Keeping the aforesaid in view, it is necessary to keenly understand the decision in Bhatia International (supra). In the said case, the agreement entered into between the parties, contained an arbitration clause which provided that arbitration was to be as per Rules of International Chambers of Page 36 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 Commerce (for short, "the ICC). The parties had agreed that the arbitration was to be held in Paris, France. The first respondent filed an application under Section 9 of the Act before the learned Additional District Judge, Indore, M.P. with an interim prayer. A plea was raised by the appellant that the Indore Court had no jurisdiction and application was not maintainable. The said stand was repelled by the learned Additional District Judge, which found favour with the High Court. Before this Court, it was urged on behalf of the appellant that Part I of the Act only applies to arbitration where the place of arbitration is in India, but if the place of arbitration is not in India, then Part II of the Act would apply. On behalf of the respondent therein, it was urged that unless the parties, by their agreement either expressly or impliedly exclude its provisions, Part I would also apply to all international commercial arbitrations including those that take place in India. The three-Judge Bench came to hold thus:-
"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, express or implied, Page 37 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 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."
[Emphasis supplied] After the said conclusion was recorded, the stand of the learned senior counsel for the appellant was put thus:-
"Faced with this situation Mr Sen submits that, in this case the parties had agreed that the arbitration be as per the Rules of ICC. He submits that thus by necessary implication Section 9 would not apply. In our view, in such cases the question would be whether Section 9 gets excluded by the ICC Rules of Arbitration. Article 23 of the ICC Rules reads as follows:-
Conservatory and interim measures
1. Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim[pic] or conservatory measure it deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party.
Any such measure shall take the form of an order, giving reasons, or of an award, as the Arbitral Tribunal considers appropriate.
Page 38 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023
2. Before the file is transmitted to the Arbitral Tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the Arbitral Tribunal. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat. The Secretariat shall inform the Arbitral Tribunal thereof."
After so stating, the Court referred to Article 23 of the ICC Rules and interpreted thus:-
"Thus Article 23 of the ICC Rules permits parties to apply to a competent judicial authority for interim and conservatory measures. Therefore, in such cases an application can be made under Section 9 of the said Act."
...
...
27. In Reliance Industries Ltd. (supra), the Court took note of the fact that parties had made necessary amendment in the PSCs to provide that the juridical seat of arbitration shall be London and the arbitration agreement will be governed by the laws of Page 39 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 England and in that context observed that the ratio laid down in Videocon Industries Ltd. (supra) would be relevant and binding. Proceeding further, the Court stated thus:
"The arbitration agreement in this appeal is identical to the arbitration agreement in Videocon Industries. In fact, the factual situation in the present appeal is on a stronger footing than in Videocon Industries Ltd. As noticed earlier, in Videocon Industries, this Court concluded that the parties could not have altered the seat of arbitration without making the necessary amendment to the PSC. In the present appeal, necessary amendment has been made in the PSC. Based on the aforesaid amendment, the Arbitral Tribunal has rendered the final partial consent award of 14-9-2011 recording that the juridical seat (or legal place) of the arbitration for the purposes of arbitration initiated under the claimants' notice of arbitration dated 16-12-2010 shall be London, England. Furthermore, the judgment in Videocon Industries is subsequent to Venture Global. We are, therefore, bound by the ratio laid down in Videocon Industries Ltd."
28. The Court also referred to Bharat Aluminium Co. (supra), especially para 123, which is as follows:
"123. ... '... an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy ... as to the validity of an Page 40 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 existing interim or final award is agreed to be made only in the courts of the place designated as the seat of arbitration'."
[emphasis in original] ...
...
38. First, we shall advert to the first proposition. There is no cavil over the principle stated in Bhatia International (supra) that Part I of the Act is applicable to arbitrations held outside India unless the parties have either expressly or impliedly excluded the provisions of the Act. Mr. Vishwanathan, learned senior counsel has submitted in the case at hand there is no express exclusion, for clause remotely does not suggest so. For the said purpose, he has commended us to the decisions in A.B.C. Laminart Pvt. Ltd. and Anr. v. A.P. Agencies, Salem[17] and Rajasthan SEB v. Universal Petrol Chemicals Ltd.[18] It is also urged by him that the stipulation in the agreement does not even remotely impliedly exclude the jurisdiction of the Indian courts. He would submit that to apply the principle of implied exclusion, the Court has to test the "presumed intention" and in such a situation, it is the duty of the Court to adopt an objective approach, that is to say, what would have been the intention of reasonable parties in the position of the actual parties to the contract. Learned senior counsel would also contend that the concept of fair Page 41 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 result has to be kept in view while construing a contract. To buttress the aforesaid submissions, he has drawn inspiration from Kim Lewison's The Interpretation of Contracts, pages 26, 41, 110 and 217 wherein various judgments have been referred.
39. The issue has to be tested, as we perceive, on the parameters of law laid down in the cases of Videocon Industries Ltd. (supra), Dozco (supra) and Reliance Industries Ltd. (supra).
40. In Videocon Industries Ltd. (supra), the Court has referred to Section 3 of the English Arbitration Act, 1996, which reads as follows:
"22. ... '3. The seat of the arbitration.-In this Part 'the seat of the arbitration' means the juridical seat of the arbitration designated-
(a) by the parties to the arbitration agreement, or
(b) by any arbitral or other institution or person vested by the parties with powers in that regard, or
(c) by the Arbitral Tribunal if so authorised by the parties, or determined, in the absence of any such designation, having regard to the parties' agreement and all the relevant circumstances."Page 42 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023
C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 Analysing the said provision, the Court proceeded to state as follows:
"A reading of the above reproduced provision shows that under the English law the seat of arbitration means juridical seat of arbitration, which can be designated by the parties to the arbitration agreement or by any arbitral or other institution or person empowered by the parties to do so or by the Arbitral Tribunal, if so authorised by the parties. In contrast, there is no provision in the Act under which the Arbitral Tribunal could change the juridical seat of arbitration which, as per the agreement of the parties, was Kuala Lumpur. Therefore, mere change in the physical venue of the hearing from Kuala Lumpur to Amsterdam and London did not amount to change in the juridical seat of arbitration."
Eventually, the Court in the said case has ruled thus:
"In the present case also, the parties had agreed that notwithstanding Article 33.1, the arbitration agreement contained in Article 34 shall be governed by laws of England. This necessarily implies that the parties had agreed to exclude the provisions of Part I of the Act. As a corollary to the above conclusion, we hold that the Delhi High Court did not have the jurisdiction to entertain the petition filed by the respondents under Section 9 of the Act and the mere fact that the appellant had earlier filed similar petitions was not sufficient to Page 43 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 clothe that High Court with the jurisdiction to entertain the petition filed by the respondents."
...
...
48. In the present case, the agreement stipulates that the contract is to be governed and construed according to the English law. This occurs in the arbitration clause. Mr. Vishwanathan, learned senior counsel, would submit that this part has to be interpreted as a part of "curial law" and not as a "proper law" or "substantive law". It is his submission that it cannot be equated with the seat of arbitration. As we perceive, it forms as a part of the arbitration clause. There is ample indication through various phrases like "arbitration in London to apply", arbitrators are to be the members of the "London Arbitration Association" and the contract "to be governed and construed according to English Law". It is worth noting that there is no other stipulation relating to the applicability of any law to the agreement. There is no other clause anywhere in the contract. That apart, it is also postulated that if the dispute is for an amount less that US $ 50000 then, the arbitration should be conducted in accordance with small claims procedure of the London Maritime Arbitration Association. When the aforesaid stipulations are read and appreciated in the contextual perspective, "the presumed intention" of the parties is clear as crystal that the juridical seat of arbitration would be London. In this Page 44 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 context, a passage from Mitsubishi Heavy Industries Ltd. v. Gulf Bank[21] is worth reproducing:
"It is of course both useful and frequently necessary when construing a clause in a contract to have regard to the overall commercial purpose of the contract in the broad sense of the type and general content, the relationship of the parties and such common commercial purpose as may clearly emerge from such an exercise. However, it does not seem to me to be a proper approach to the construction of a default clause in a commercial contract to seek or purport to elicit some self-contained 'commercial purpose' underlying the clause which is or may be wider than the ordinary or usual construction of the words of each sub-clause will yield."
9. Reading this decision indicates that since in the case the arbitration agreement was executed prior to the date of the decision in BALCO, it was held that the pronouncement in Bhatia (supra) would be applicable to the facts of the case and when the conditions in the agreement are crystal clear, the presumed intention of the parties that the juridical seat of arbitration was Page 45 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 London was proper.
10. Coming to the facts of the present case, the relevant clauses of the contract read as under:
"7. ALL OTHER TERMS AND CONDITION TO BE AS PER GAFTA 119. WHEN NOT IN CONFLICT WITH THE ABOVE ARBITRATION AS PER GAFTA 125, TO TAKE PLACE IN LONDON WITH ENGLISH LAW TO APPLY BOTH THE CONTRACTUAL PARTNERS HEREBY ACKNOWLEDGE THE FAMILIARITY WITH THE TEXT OF THE ABOVE MENTIONED GAFTA CONTRACTS AND AGREE TO BE BOUND BY ITS TERMS AND CONDITION.
...
26.ARBITRATION:
(a) Any and all disputes arising out of or under this contract or any claim regarding the interpretation or execution of this contract shall be determined by arbitration in accordance with the GAFTA Arbitration Rules, No 125, in the edition current at the date of this contract, such Rules are incorporated into and form part of this Contract and both parties hereto shall be deemed to be fully cognisant of and to have expressly agreed to the application of such Rules.
...
Page 46 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 1:2 The judicial seat of the arbitration shall be, and is hereby designated pursuant to section 4 of the Arbitration Act 1996 as, England."
11. These terms of the agreement categorically indicate that where the Court comes to determination that the juridical seat is outside India or where the law other than Indian law governs the arbitration agreement. Part-I of the Arbitration Act would be excluded by the necessary implications. Para 21 in the case of Reliance Industries Limited (supra) reads as under:
"21. 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 Page 47 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 the arbitration is in India or on whose facts a 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."
12. Summarizing therefore the law as set out in the decisions aforesaid, though as per decision in case of BALCO (supra) it was to apply prospectively and had taken a view that Part-I of the Act has no application to the Arbitration taking place outside India. Reading the decisions in the case of Reliance Industries Limited (supra) and Harmony Innovation Shipping Limited (supra), it is obvious that the dictum of law laid down in Bhatia International and Venture Global Engineering (supra) would apply. In the facts of the case, as the contracts in question expressly excluded the Page 48 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 applicability of Part-I of the Arbitration Act.
13. As far as the contention of the learned Senior Advocate on the challenge to the award on the ground of fraud, the Bombay High Court in the case of Mitsui OSK Lines Limited, Japan v.
Orient Ship Agency Private Limited, rendered in an arbitration petition under Sections 46 to 49 of the Arbitration Act held that the comparison of provisions of Sections 48 and 44 of the Act show that the grounds on which a domestic award can be challenged as also the grounds on which a party can resist enforcement of a foreign award are identical. Therefore, when enforcement of the foreign award is sought, it is open for the respondent to plead the same ground as available under Section 34. (Mitsui judgement) The relevant paras read as under:
"A comparison of the provisions of Section Page 49 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 48 and Section 34 of the Act quoted above shows that the grounds on which a domestic award can be challenged as also the grounds on which a party can resist enforcement of a foreign award are identical. Thus, as and when enforcement of the award is sought against the petitioner, it can resist the enforcement of the award on the same grounds on which it could have challenged the award under Section 34 of the Act. Therefore, it cannot be said that the petitioner has no remedy of challenging the Award. It is a settled principle of law that in construing statutes one has to adhere to the ordinary meaning of the words used and to the grammatical construction unless that is at variance with the intention of the legislature to be collected from the scheme of the statute itself or leads to any manifest absurdity or repugnancy. It appears from the reading of the Act that insofar as the challenge and enforceability is concerned, there are different schemes for a domestic award and a foreign award. The Act provides for a direct challenge to a domestic award (section 34). A domestic award is enforceable as a decree passed by a Civil Court, after the period provided for challenging the same is over, and in case it is challenged, after the challenge fails (section 36). Whereas, insofar as a foreign award is concerned, it is not enforceable in India unless the court finds that it is enforceable. For that purpose, the party which seeks its enforcement has to make an application to the Court, and has to satisfy Page 50 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 the Court about its enforceability (section
49). It is only after the party satisfies the Court that a foreign award becomes enforceable as a decree passed by a Civil Court (section 49). The Act, provides different remedies to persons, against whom domestic award is made and person against whom foreign award is made. A person against whom a domestic award is made, has to immediately approach the Court for challenging the same by making an application under Section 34 of the Act otherwise the person in whose favour the award has been made can execute the same as a decree. On the other hand, a person against whom a foreign award has been made, is not required to challenge the same, because it cannot be executed against him in India unless the Court finds that it is enforceable. He can wait till the person in whose favour the foreign award has been made, makes an application before the Court (Section 47). Rule 803E of Rules framed by this Court, provides for a notice to be issued to the person who is likely to be adversely affected by the proceeding. After receiving the notice from the Court, he can appear before the Court, and submit his defence and resist the enforcement of the foreign award against him. He can request the Court not to enforce the award and in case he succeeds in satisfying the Court on one or more of the grounds mentioned in Section 48 of the Act, the Court has to refuse to enforce the award. As observed above, comparison of the provision of Section 34 and Section 48 of the Act shows Page 51 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023 C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023 that a person against whom a foreign award has been made can resist the enforcement of the foreign award against him on the same ground on which he could have, had it been provided, challenged the validity of the award under Section 34 of the Act. In other words, the grounds on which a domestic award can be challenged and the grounds on which the enforcement of a foreign award can be resisted are identical.
Thus, though the Scheme of the Act provides different kind of remedies to the persons aggrieved by a domestic award and a person aggrieved by a foreign award, both the remedies are equally efficacious and adequate, it cannot be said that the Act does not provide an effective remedy to a person who is aggrieved by a foreign award. Hence, there is, in my opinion, no need to construe the provisions of Section 2(2) of the Act in any other manner."
14. As far as the contention of the respondent that a writ of prohibition is premature, the contention is misconceived inasmuch as, for the reasons aforesaid, when this Court holds that the exercise of jurisdiction by the Court below was without authority of law and without jurisdiction, a writ of prohibition can certainly lie.
Page 52 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023C/SCA/285/2010 CAV JUDGMENT DATED: 13/01/2023
15. For the aforesaid reasons, order dated 07.10.2009 passed in Arbitration Application No.338 of 2009, order dated 07.10.2009 passed in Arbitration Application No.339 of 2009, and order dated 07.10.2009 passed in Arbitration Application No.340 of 2009, are set quashed and set aside.
16. Petitions are allowed.
(BIREN VAISHNAV, J) FURTHER ORDER Mr.Anshin Desai learned Senior Advocate appearing for the respondent requests that implementation and operation of this judgement be stayed for a period of six weeks.
The implementation and operation of this Common CAV judgement dated 13.01.2023 shall stand suspended till 31.01.2023.
(BIREN VAISHNAV, J) ANKIT SHAH Page 53 of 53 Downloaded on : Fri Jan 13 20:57:41 IST 2023