Calcutta High Court
Government Of West Bengal & Anr vs Chatterjee Petrochem (Mauritius) Co. & ... on 10 January, 2020
Equivalent citations: AIR 2020 CALCUTTA 294, AIRONLINE 2020 CAL 413
Author: Harish Tandon
Bench: Harish Tandon
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
A.P.O. 531 OF 2017
G.A. 1765 OF 2019
WITH
AP 1046 OF 2016
GOVERNMENT OF WEST BENGAL & ANR.
-Vs-
CHATTERJEE PETROCHEM (MAURITIUS) CO. & ANR.
Appearance:
Mr. Kishore Dutta, Adv. General.
Sanjay Ginodia, Adv.
Mr. Jishnu Saha, Adv.
Mr. Manoj Kumar Tiwari, Adv.
Mr. Mayank Mishra, Adv.
For the Appellants...
Mr. Sidhhartha Mitra, Sr. Adv.
Mr. Domingo Games, Adv.
Mr. Soumitra Dutta, Adv.
Ms. Arti Bhattacharya, Adv.,
.....for the respondent No.1.
Mr. Anindyo Mitra, Adv.,
Mr. Saumabho Ghose, Adv.,
Mr. Deepan Kumar Sarkar, Adv.,
Mr. P. Basu, Adv.,
......for the respondent No.2.
Judgment On: 10/01/2020
Harish Tandon, J.:
The judgment and order dated September 20, 2019 passed by the Single Bench in G.A No. 211 of 2017 filed in connection with A.P No. 1046 of 2016 is the subject matter of dispute in the instant appeal. The aforesaid application was filed challenging the Partial Final Award dated September 09, 2016 passed by the International 1 Chambers of Commerce (ICC) in Paris, France u/s 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "said Act").
An agreement was entered into on January 12, 2002 for transfer of majority shareholding and control of Haldia Petrochemicals Limited (respondent no.2 ) in favour of Chatterjee Petrochem (Mauritius) Co. (respondent no. 1) by the Government of West Bengal (appellant no. 1) and the West Bengal Industrial Development Corporation Limited (appellant no. 2).
The said agreement contains an arbitration clause which is adumbrated hereinafter:
"In respect of all disputes, differences, claims and questions between the parties hereto arising out of this JVA or in any way relating to this document or any term, condition or provision herein mentioned or construction or interpretation thereof as to the working of HPL or in any way relating to the business of the affairs of HPL, the parties shall first endeavour to settle such disputes, differences, claims or questions by friendly consultation and failing such settlement, disputes or differences will be settled in accordance with the Rules of Arbitration of the International Chamber of Commerce (ICC) Court of Arbitration. The venue of Arbitration will be Paris and the law applicable to the contract will be Indian Law."
The dispute arose between the parties with regard to financial and managerial restructuring of the respondent no. 2 company and a proceeding was initiated in the Court concerning the oppression and mismanagement in relation to the conduct and affairs of the respondent no.2. The matter ultimately reached to the Supreme 2 Court and by a judgment dated September 30, 2019, the Supreme Court did not find the charges of oppression and mismanagement to be sustainable. It was further held in the said judgment that the parties have consciously entered into an agreement and are bound by it and the allegation as to the oppression and mismanagement has not been proved [Chatterjee Petrochem Company vs. Haldia Petrochemicals Ltd. & ors. (2011) 10 SCC 466].
The respondent no.1 thereafter contemplated to initiate an arbitration proceeding which constrained the respondent no.2 to file a civil suit seeking permanent injunction against the respondent no. 1 from initiating arbitration proceedings. Several orders were passed in the said suit and ultimately, the matter reached to the Supreme Court. It was contended before the Supreme Court that the civil suit is not maintainable in view of an arbitration clause contained in the agreement and the parties must be referred to arbitration.
A plea relating to the provision contained in section 5 of the said Act was also taken in support of the contention that the judicial authority is denuded of the power to entertain the civil suit concerning a dispute agreed to be resolved by an arbitrator under the said clause. The Apex Court in its judgment dated December 10, 2013 accepted the contention of ouster of the Civil Court`s jurisdiction and referred the parties to arbitration [Chatterjee Petrochem Company & anr. vs. Haldia Petrochemicals Ltd. & ors. (2014) 14 SCC 574].
In terms of the arbitration clause, the Arbitral Tribunal was constituted which entered into a reference and invited the parties to 3 submit the statement of claim as well as the counter claim, if there be any.
The statement of claim filed by the respondent no.1, relates to the specific performance of an agreement for transfer of 15,50,99,998 shares of the respondent no.2 from the appellant no. 2 in favour of the claimant. It was further contended that the beneficial interest in the said shares stood transferred from the appellant no.2 to its nominee, the respondent no.2 and a further allegation as to the breach of the covenants of the agreement was also taken as one of the inbuilt factors pertaining to the breach of the terms of the agreement.
The appellants herein took a plea of demurrer that the aforesaid claim is in contradiction to the judgment of the Supreme Court rendered on September 30, 2019. A plea of issue estoppel as well as the law of limitation was also taken by the appellant and the parties advanced their arguments not only on the merits of the claim but also touching upon the plea of the statutory embargo.
The Arbitral Tribunal decided to segregate the arbitral proceeding in two parts which is nomenclatured as "phases" wherein the first phase pertains to the maintainability and performance of the breach of the agreement and the other phase relates to the assessment and the determination of the damages and also the cause. Thereafter, the arbitral Tribunal proceeded to decide the issues comprised in the first phase and passed an award in favour of the respondent no.1 by granting a specific performance by virtue of the transfer of the aforesaid shares on September 9, 2016.
4The respondent no.1 thereafter, filed an execution proceeding to enforce the said partial final award (phase 1) which gave rise to registration of EC no. 245 of 2019 before this Court. The appellants also challenged the said partial final award (phase 1) u/s 34 of the said Act by filing A.P. no. 1046 of 2016 and in such proceeding, an application being G.A No. 211 of 2017 was taken out raising a plea of demurrer that the Court does not have the power and jurisdiction to entertain such an application.
The plea of demurrer was founded on the assertion that the Partial Final Award (phase 1) is a foreign award and the Courts of India does not have the jurisdiction to entertain any application challenging the same under Part I of the said Act. It was further contended that the seat of the arbitration was in Paris, France and the arbitral proceeding was being conducted as per the rules of the International Chambers of Commerce ( International Court of Arbitration ) rules (hereinafter referred to as "ICC Rules").
On the other hand, it was contended by the appellants that even if the arbitration proceeding was held outside the country yet the seat was within the country because of the applicability of the Indian Law governing the said agreement. It was further contended that the Apex Court in the second proceeding i.e. Chatterjee Petrochem Company & anr. vs. Haldia Petrochemicals Ltd. & ors. (2014) 14 SCC 574, had applied the provisions contained in section 5 of the said Act which leads to an inescapable inference that the Part I of the said Act shall apply. The Single Bench allowed the said application and dismissed the arbitration application filed u/s 34 of the said Act with a categorical finding that the seat and venue are synonymous and the moment the proceeding was held at Paris, 5 France, it became a foreign seated award and Part I of the said Act has no manner of applicability thereto.
The instant appeal arises from the aforesaid order passed by the Single Bench and the pivotal issue raised therein is whether the impugned award is a foreign seated award amenable to the challenge under Part I of the said Act or shall be governed by the curial law i.e. the ICC rules.
It is contended that the appellant that the principle of law enunciated by the Supreme Court in Bhatia International vs. Bulk Trading S.A. & anr. reported in (2002) 4 SCC 105 shall be the governing principles even though the same has been declared as imperfect law in a subsequent constitution bench of the Supreme Court in Bharat Aluminum Company vs. Kaiser Aluminum Technical Services Inc. (2012) 9 SCC 552.
It is further contended that since the venue of the arbitration was in Paris, France and the arbitral proceeding was governed by the ICC rules even if the parties have agreed that the law underlying the contract would be governed by Indian law. Therefore, it would be presumed that they never intended that the seat of the arbitration shall be at Paris, France. It is further contended that the expression "venue" cannot be equated with "seat" and therefore, the validity or challenge to an award cannot be made under Part I of the said Act.
Per contra, the respondent contended that the "seat" and the "venue" of an arbitration are interchangeable terms and the Single Bench has not committed any error in giving the meaning of the aforesaid words in synonyms. It is contended that the underlying 6 contract may be governed by Indian Law but the arbitral proceeding was intended to be governed by curial law i.e. the ICC rules and therefore, the significance attached to the interchangeable words "venue" and "seat" assumes importance. It is thus, contended that the intention can be gathered from the relevant clauses of the agreement pertaining to the arbitration and it leaves no ambiguity that the parties chose to exclude the applicability of Part I of the said Act.
In support of their respective contention the parties have relied upon several judgments which would be dealt with hereinafter.
The question which arises for determination by this Court is whether in the light of the facts and circumstances of the instant case, it can be inferred that the parties to the arbitration agreement by express or necessary implication have excluded the applicability of Part I of the Arbitration and Conciliation Act, 1996?
Acceding to the appellants, since the Agreement has been executed prior to the case of Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552 ["BALCO"], the principles enumerated by the Supreme Court in the case of Bhatia International would apply. The Single Bench in the impugned judgment dated September 20, 2017 has also upheld the said argument by stating that:-
"In my opinion, all the decisions which were pronounced prior to the Balco case and not inconsistent with the Bhatia ratio would also apply."7
It is thus, necessary for us to examine the ratio laid down by the Supreme Court in BALCO which reads thus:-
".......
201. 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."
In the instant case, the Agreement has been executed on January 12, 2002. Hence, in light of the aforesaid decision rendered by the Supreme Court in BALCO, we are in agreement with the view of the Single Bench that the factual and legal issues arising out of or in connection with the arbitration conducted between the parties, shall be governed and determined as per the principles laid down by the Supreme Court in the case of Bhatia International.
Therefore, there is a need to highlight the principles enumerated by the Supreme Court in the case of Bhatia International (supra):
"16. A reading of the provisions shows that the said Act applies to arbitrations which are held in India between 8 Indian nationals and to international commercial arbitrations whether held in India or out of India. Section 2(f) defines an international commercial arbitration. The definition makes no distinction between international commercial arbitrations held in India or outside India. An international commercial arbitration may be held in a country which is a signatory to either the New York Convention or the Geneva Convention (hereinafter called the convention country). An international commercial arbitration may be held in a non-convention country. The said Act nowhere provides that its provisions are not to apply to international commercial arbitrations which take place in a non-convention country. Admittedly Part II only applies to arbitrations which take place in a convention country. Mr. Sen fairly admitted that Part II would not apply to an international commercial arbitration which takes place in a non-convention country. He also fairly admitted that there would be countries which are not signatories either to the New York Convention or to the Geneva Convention. It is not possible to accept submission that the said Act makes no provision for international commercial arbitrations which take place in a non-convention country.
....
As stated above the definition of "international commercial arbitration" makes no distinction between international commercial arbitrations which take place in India or internal commercial arbitrations which take place outside India.
......9
A Court is one which would otherwise have jurisdiction in respect of the subject matter. The definition does not provide that the Courts in India, will not have jurisdiction if an international commercial arbitration takes place outside India. Courts in India would have jurisdiction even in respect of an international commercial arbitration. As stated above an ouster of jurisdiction cannot be implied. An ouster of jurisdiction has to be express.
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 10 affect would be that Part I would also apply to 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.
23. That the Legislature did not intend to exclude the applicability of Part I to arbitrations, which take place outside India, is further clear from certain other provisions of the said Act. Sub-section (7) of Section 2 reads as follows:
"(7) An arbitral award made under this Part shall be considered as a domestic award."
As is set out hereinabove the said Act applies to (a) arbitrations held in India between Indians (b) international commercial arbitrations. As set out hereinabove international commercial arbitrations may take place in India or outside India. Outside India an international commercial arbitration may be held in a convention country or in a non-convention country. The said Act however only classifies awards as "domestic awards" or "foreign awards". Mr. Sen admits that provisions of Part II makes it clear that "foreign awards" are only those where the arbitration takes 11 place in a convention country. Awards in arbitration proceedings which take place in a non- convention country are not considered to be "foreign awards" under the said Act. They would thus not be covered by Part II. An award passed in an arbitration which takes place in India would be a "domestic award". There would thus be no need to define an award as a "domestic award" unless the intention was to cover awards which would otherwise not be covered by this definition. Strictly speaking an award passed in an arbitration which takes place in a non-convention country would not be a "domestic awards". Thus the necessity is to define a "domestic award" as including all awards made under Part I. The definition indicates that an award made in an international commercial arbitration held in a non- convention country is also considered to be a "domestic award".
24. Section 5 provides that a judicial authority shall not intervene except where so provided in Part I. Section 8 of the said Act permits a judicial authority before whom an action is brought in a matter to refer parties to arbitration. If the matters were to be taken before a judicial authority in India it would be a Court as defined in Section 2(e). Thus if Part I was to only apply to arbitrations which take place in India the term "Court" would have been used in Sections 5 and 8 of the said Act. The Legislature was aware that, in international commercial arbitrations, a matter may be taken before a judicial authority outside India. As Part I was also to apply to international commercial arbitrations held 12 outside India the term "judicial authority" has been used in Sections 5 and 8.
25. The beginning part of Section 28 reads as follows:
"28. Rules applicable to substance of dispute.- (1) where the place of arbitration is situated in India,-
............"
Section 28 is in Part I. If Part I was not to apply to an arbitration which takes place outside India there would be no necessity to specify that the rules are to apply "where the place of arbitration is situate in India". It has been held in the case of National Thermal Power Corporation vs. Singer Company and others reported in (1992) 3 SCC 551 that in international commercial arbitrations parties are at liberty to choose, expressly or by necessary implication, the law and the procedure to be made applicable. The procedure or the rules governing such arbitration may be of the country where the arbitration is being held or the body under whose aegis the arbitration is being held. All bodies which conduct arbitrations and all countries have rules and laws governing arbitrations. Thus Section 28 does not provide for rules where the place of arbitration is out of India.`
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 13 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 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."
In the light of the above, it is manifestly important to recapitulate Section 2(1)(f) of the Arbitration Act which defines 'International Commercial Arbitration' as:-
"2(f) "international commercial arbitration" means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is -
(i) an individual who is a national of, or habitually resident in, any country other than India; or
(ii) a body corporate which is incorporated in any country other than India; or
(iii) a company or an association or a body of individuals whose central management and control is exercised in any country other than India; or
(iv) the Government of a foreign country."
It is beyond cavil that the arbitration proceedings conducted between the parties is in the nature of an 'international commercial arbitration' since it is ex-facie evident from a bare perusal of 14 Section 2(1)(f) of the Arbitration Act that the respondent no.1 is a body corporate incorporated outside India. We, also find that the Single Bench in his judgment dated September 20, 2017, also noted that:-
"....
Admittedly, the subject arbitration is an International Commercial Arbitration for the reason that one of the parties Chatterjee Petrochem (Mauritius) Co., is a body corporate incorporated outside India. The place of arbitration is not in India but in Paris. If the subject arbitral award is considered as a domestic award under part-I, Section 34 applies. Chatterjee Petrochem (Mauritius) Co. always claims the award to be a foreign one. ...."
The position of law enumerated in paragraph no. 32 of Bhatia International propels us to examine whether by necessary implication, the parties to the arbitration agreement had sought to exclude the application of Part I of the Arbitration Act.
In this regard, it is essential to highlight clause 4 of the Terms of Reference ("T.O.R") between the parties, which enumerated: -
"4. THE PLACE OF ARBITRATION AND THE APPLICABLE LAW 4.1 This arbitration shall be governed by the ICC Rules as agreed by the Parties in Clause 15 of the Agreement 4.2 The substantive law of the contract is Indian Law, as agreed by the Parties in Clause 15 of the Agreement.15
4.3 The place i.e. juridical seat of arbitration is Paris, France, as agreed by the Parties in Clause 15 of the Agreement. This does not preclude the Tribunal, after consultation with the Parties, from meeting with the Parties and witnesses at any other place or communicating with the Parties by conference call or videoconference.
4.4 The Award or Awards of the Tribunal (interim, partial or final) will be deemed conclusively to be made at the place of arbitration but may be signed by the Tribunal elsewhere than Paris, France. No Party shall seek to rely upon any argument to the effect that:
(a) any Award or Awards and/or procedural decisions shall be of limited validity; or
(b) any Award or Awards are not made at Paris, France, by reason of their having, in fact, been signed elsewhere than Paris, France."
It is now a settled position of law that an international commercial arbitration proceeding calls for the application of any one or more of the following laws:-
a) The proper law of the contract i.e. the law that governs the contract, which creates the substantive rights of the parties.
b) The law applicable to the arbitration agreement i.e. the law governing the obligation of the parties to submit the disputes to arbitration and to honour an award.
c) The curial law i.e. the law governing the conduct of the individual reference.16
It is imperative to note that Article 23 of the ICC Rules which states:-
" Terms of Reference
1. As soon as it has received the file from the Secretariat, the arbitral tribunal shall draw up, on the basis of documents or in the presence of the parties and in the light of their most recent submissions, a document defining its Terms of Reference. This document shall include the following particulars:
.....
(f) the place of the arbitration; and ...
4. After the Terms of Reference have been signed or approved by the Court, no party shall make new claims which fall outside the limits of the Terms of Reference unless it has been authorized to do so by the arbitral tribunal, which shall consider the nature of such new claims, the stage of the arbitration and other relevant circumstances."
Article 18 of the ICC Rules, defines the "Place of Arbitration" to be:-
"1. The place of the arbitration shall be fixed by the Court, unless agreed upon by the parties.
2. The arbitral tribunal may, after consultation with the parties, conduct hearings and meetings at any location it 17 considers appropriate, unless otherwise agreed by the parties.
3. The arbitral tribunal may deliberate at any location it considers appropriate."
In the instant case, the T.O.R. were signed by both the appellants and the respondent no.1 except the respondent no.2, who had informed the Arbitral Tribunal of not actively participating in the arbitral proceedings but had agreed to abide by any agreements reached between the other parties as to the conduct of the arbitration as well as all procedural rulings of the Arbitral Tribunal.
It is thus evident from clause 4.2. of the T.O.R that the parties have agreed to have the law governing the underlying contract i.e. the proper law of the contract to be Indian law, while in clause 4.3 of the T.O.R., the parties have agreed to have Paris, France as the juridical seat of the arbitration. The perusal of Article 23 ICC Rules also makes it ex-facie evident that the T.O.R. is a document which is binding upon the parties to the arbitration agreement i.e. the appellants and the respondents in the instant appeal. Further, as per Article 18 of the ICC Rules, both the parties and the Arbitral Tribunal has the power to decide upon the 'Place' of arbitration. In the instant case, as mentioned in clause 4 of the T.O.R., the parties have themselves agreed to have the juridical seat of arbitration in Paris, France and hence, there is not an iota of doubt that the seat of the arbitration is in Paris, France.
The appellants have argued that the Arbitration Agreement do not mention the seat of arbitration and the expression used is that of 'venue'. The appellants while placing reliance on the judgment of the Supreme Court in the case of Union of India vs. Hardy Exploration and Production (India) Inc. AIR 2018 SC 4871 ["Hardy Exploration"] submitted that 18 the mere use of the word 'venue' does not mean that in all cases the 'venue' should be construed as 'seat' and thus, in the instant case, the mere mention of the 'venue' of arbitration to be that of Paris, France, does not itself indicate that the 'seat' of arbitration shall also be Paris, France. Further, they have also argued before us that the recording of the juridical seat/place (instead of venue) in the T.O.R. does not satisfy the test of "determination".
Taking into consideration the Arbitration Agreement which is the subject matter of the instant appeal, there is nothing mentioned with regard to the 'seat' of arbitration, however, as afore-mentioned, the parties vide clause 4.2. of the T.O.R., have mutually agreed to have the 'seat' of arbitration as Paris, France. Insofar as the argument of the appellants is concerned, that the recording of the juridical seat/place in the T.O.R. is erroneous, we, do not find the aforesaid argument holding any water since during the course of the arbitral proceedings which was conducted in Paris, France, no objections were raised by the appellants with regard to the recording in the T.O.R. Further, in the first procedural conference held in May, 2015, there was a request on behalf of the counsels for the appellants to shift the 'venue' of arbitration to India (page 17 of the transcript), but there had been no discussion, whatsoever, with regard to shifting of the 'seat' of arbitration.
In this regard, it is important to consider the case of Reliance Industries Limited & anr. Vs. Union of India (2014) 7 SCC 603 wherein the Supreme Court while reiterating the position of law laid down in Videocon Industries Ltd. vs. Union of India (2011) 6 SCC 161, held that:-
"47. We are of the opinion that in the impugned judgment the High Court has erred in not applying the ratio of law laid down in Videocon Industries Ltd. in the present case. The first issue raised in Videocon Industries Ltd. was as to 19 whether the seat of arbitration was London or Kuala Lumpur. The second issue was with regard to the courts that would have supervisory jurisdiction over the arbitration proceedings. Firstly, the plea of Videocon Industries Ltd. was that the seat could not have been changed from Kuala Lumpur to London only on agreement of the parties without there being a corresponding amendment in the PSC. This plea is accepted. It was held that seat of arbitration cannot be changed by mere agreement of parties. In para 21 of the judgment, it was observed as follows: (SCC p. 170) "21. Though, it may appear repetitive, we deem it necessary to mention that as per the terms of agreement, the seat of arbitration was Kuala Lumpur. If the parties wanted to amend Article 34.12, they could have done so only by a written instrument which was required to be signed by all of them. Admittedly, neither was there any agreement between the parties to the PSC to shift the juridical seat of arbitration from Kuala Lumpur to London nor was any written instrument signed by them for amending Article 34.12. Therefore, the mere fact that the parties to the particular arbitration had agreed for shifting the of the seat of arbitration to London cannot be interpreted as anything except physical change of venue of arbitration from Kuala Lumpur to London."
Similarly, in the instant case, the mere request on behalf of the appellants to shift the 'venue' from Paris, France to India cannot be construed as a change in the 'seat' of arbitration since the same could 20 have only taken place by amending clause 4 of the T.O.R., which was not carried out. Hence, the arguments of the appellants in this regard are completely unfounded and unsustainable.
In arguendo, if we incline ourselves to have the claims of the appellants tested on the touchstone of the principle of law culminated from in the case of Hardy Exploration (supra), it would be necessary for us to postulate, with respect to the case in hand, when the 'venue' of the arbitration would be regarded as the 'seat' of arbitration.
The first case, addressing the situation is of Shashoua vs. Sharma, (2009) 2 Llyod`s Law Rep 376, wherein Cooke J. concluded that:-
"....
26. The shareholders agreement provided that "the venue of arbitration shall be London, United Kingdom" whilst providing that the arbitration proceedings should be conducted in English in accordance with ICC Rules and that the governing law of the shareholders agreement itself would be the laws of India. It is accepted by both parties that the concept of the seat is one which is fundamental to the operation of the Arbitration Act and that the seat can be different from the venue in which arbitration hearings take place. It is certainly not unknown for hearings to take place in an arbitration in more than one jurisdiction for reasons of convenience of the parties or witnesses. The claimants submitted that in the ordinary way, however, if the arbitration agreement provided for a venue, that would constitute the seat. If a venue was named but there was to be a differed juridical seat, it would be expected that the seat would also be specifically named. Notwithstanding the authorities cited by the defendant, I consider that there is 21 great force in this. The defendant submits however that as "venue" is not synonymous with "seat", there is no designation of the seat of the arbitration by clause 14.4 and, in the absence of any designation, when regard is had to the parties' agreement and all the relevant circumstances the juridical seat must be in India and the curial law must be Indian law.
27. In my judgment, in an arbitration clause which provides for arbitration to be conducted in accordance with the Rules of the ICC in Paris (a supranational body of rules), a provision that the venue of the arbitration shall be London, United Kingdom does amount to the designation of a juridical seat. The parties have not simply provided for the location of hearings to be in London for the sake of convenience and there is indeed no suggestion that London would be convenient in itself, in the light of the governing law of the shareholders agreement, the nature and terms of that agreement and the nature o the disputes which were likely to arise and which did in fact arise ( although the first claimant is resident in the UK).
.......
34. " London arbitration" is a well known phenomenon which is often chosen by foreign nationals with a different law, such as the law of New York, governing the substantive rights of the parties. This is because of the legislative framework and supervisory powers of the courts here which many parties are keen to adopt. When therefore there is an express designation of the arbitration venue as London and 22 no designation of any alternative place as the seat, combined with a supranational body of rules governing the arbitration and no other significant contrary indicia, the inexorable conclusion is, to my mind, that London is the juridical seat and English law the curial law. In my judgment it is clear that either London has been designated by the parties to the arbitration agreement as the seat of the arbitration or, having regard to the parties' agreement and all the relevant circumstances. It is the seat to be determined in accordance with the final fallback provision of section 3 of the Arbitration Act."
(emphasis supplied) In the case of Enercon (India) Ltd & ors vs. Enercon GmbH & anr. (2014) 5 SCC 1 para 98, the Supreme Court was considering whether the use of the phrase, "venue shall be in London" actually refers to designation of the "seat" of arbitration in London. The Apex Court while applying the 'closest and the intimate connection to arbitration' held that since the parties had agreed that the provisions of the Indian Arbitration Act, 1996 would apply to the arbitration proceedings, by making such a choice, the parties have made the curial law provisions contained in Chapter III, IV, V and VI of the Act of 1996 applicable. The Supreme Court while analysing the submissions of Dr. Singhvi in relation to the phrase "arbitration in London" or expression similar thereto, also stated that the same cannot be equated with the term "venue of arbitration proceedings shall be in London" since arbitration in London can be understood to include venue as well as the seat; but it would be rather stretching the imagination if "venue of arbitration shall be in London"
23could be understood as "seat of arbitration shall be London", in the absence of any other factor connecting the arbitration to London.
The Supreme Court while setting at rest the debate between the "seat" and "venue" of arbitration in Hardy Exploration (supra) categorically held that: -
"27. In view of the aforesaid development of law, there is no confusion with regard to what the seat of arbitration and venue of arbitration mean. There is no shadow of doubt that the arbitration clause has to be read in a holistic manner so as to determine the jurisdiction of the Court. That apart, if there is mention of venue and something else is appended thereto, depending on the nature of the prescription, the Court can come to a conclusion that there is implied exclusion of Part I of the Act.... .....
39. The word 'determination' has to be contextually determined. When a 'place' is agreed upon, it gets the status of a seat, which means a juridical seat. We have already noted that the terms 'place' and 'seat' are used interchangeably. When only the term 'place' is stated or mentioned and no other condition is postulated, it is equivalent to 'seat' and that finalises the facet of jurisdiction. But if a condition precedent is attached to the term 'place', the said condition has to be satisfied so that the place can become equivalent to 'seat'. In the instant case, as there are two distinct and disjunct riders, either of them have to be satisfied 24 to become a place. As is evident, there is no agreement. As far as determination is concerned, there has been no determination.....
40. The said test clearly means that the expression of determination signifies an expressive opinion. In the instance case, there has been no adjudication and expression of an opinion. Thus, the word 'place' cannot be used as seat. To elaborate, a venue can become a seat if something else is added to it as a concomitant. But a place unlike seat, at least as is seen in the contract, can become a seat if one of the conditions precedent is satisfied. It does not ipso facto assume the status of seat. Thus understood, Kuala Lumpur is not the seat or place of arbitration and the interchangeable use will not apply in stricto sensu."
The Supreme Court has succinctly laid down that the 'venue' of arbitration would become the 'Seat' of arbitration if something else is appended thereto and in order to deduce the same, a Court is expected to adopt a holistic approach while reading the arbitration clause. In the instant case, the Arbitration Agreement clearly stipulates that the 'venue' of arbitration shall be in Paris, France and the law governing the conduct of the arbitration shall be in accordance with the ICC Rules. Therefore, from a reading of the Arbitration Agreement in the light of the rule of law mentioned above, it can be stated that since the supranational rules of ICC has been added to the 'venue' as a concomitant, the 'venue' of arbitration i.e. Paris, France shall be deemed to be the 'seat' of arbitration in the instant case.
25A provision contained in Section 20 of the Arbitration Act as relied upon by the appellant is also misplaced. The said provision contemplates the place of arbitration as aggrieved by the parties failing which it can be determined by the Arbitral Tribunal taking into account the circumstances and the convenience of the parties. Sub-section 3 of Section 20 of the Arbitration Act starts with a non-obstante clause and have an over-riding effect on sub-section 1 and 2 thereof. Under the aforesaid sub-section the Arbitral Tribunal in absence of any agreement to the 'place', can meet at any place, which it considers appropriate upon consulting the other members for the purposes of recording the evidence, examining the witnesses or for inspection of the documents, goods or other properties. In Hardy exploration (supra), the Apex Court held that the place and the seat are sometimes used interchangeably subject to an exception as to an attachment of certain conditions. In other words, if the conditions are appended and/or attached to the place of the arbitration, the conditions takes a front seat and then the place cannot be equated with the seat. It has not been laid down in absolute term that the place in all cases shall be equated with the seat and therefore, a pragmatic approach is required to determine the intention of the parties and their conduct in course of a transaction as well as the condition attached to the place to bring within the purview of the place as seat. As stated above, the Arbitration Agreement clearly provides that the rules of Arbitration of the International Chamber of Commerce shall be the curial law governing the said Arbitral proceeding in determining and adjudicating the disputes and/or differences raised therein. In our considered view, such condition attached to the place determines the seat of an arbitration and the proceedings are to be governed by such rules.
26It is the case of the respondents that an agreement as to the seat of arbitration is analogous to an exclusive jurisdiction clause. We are in consonance with the same. The argument finds legal support from the observations made in Reliance Industries (supra) wherein the Supreme Court held that:-
"...
51. We may also point out that the judgment in Videocon Industries has been followed on numerous occasions by a number of High Courts. This apart, the judgment of this Court in Videocon Industries Ltd. also reflects the view taken by the courts in England on the same issues. In A v. B. considering a similar situation, it has been held as follows:
(Balco case, SCC. p.621, para 123) "123......'....an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction.
Any claim for a remedy....as to the validity of an 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)
52. This Court in Dozco India (P) Ltd. v. Doosan Infracore Co. Ltd. (2011) 6 SCC 161 again reiterated the principle laid down in Sumitomo Heavy Industries Ltd vs. ONGC Ltd., (1998) 1 SCC 305, wherein the law was very clearly enunciated in para 16: [Dozco India (P) Ltd. case, SCC p. 185, para 12] "12....The law which would apply to filing of the award, to its enforcement and to its setting aside 27 would be the law governing the agreement to arbitrate and the performance of that agreement."
This judgment in Sumitomo Case is rendered by a three- Judge Bench."
Therefore, considering the facts of the instant case, there is no doubt that since the seat of arbitration is in Paris, France, the curial law would be that of Paris, France i.e. ICC Rules.
It is, now of prime significance for us to determine the next question concerning the instant appeal i.e. whether as per the principle of law enumerated under paragraph 32 of Bhatia International, the parties to the Arbitration Agreement, by necessary implication, has sought to exclude the application of Part-I of the Arbitration Act.
The Senior Counsel for the appellants have submitted before this Court that under the Bhatia regime, Part I would apply even if "seat" is outside India unless excluded expressly or by implication and that exclusion cannot be inferred by seat being foreign.
The Supreme Court in the case of Eitzen Bulk A/S vs. Ashapura Minechem Limited & anr. (2016) 11 SCC 508 considered that 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. The Court thus held:-
"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 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....28
....
33. 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."
Further, the Supreme Court in the case of Imax Corporation vs. E-City Entertainment (India) Pvt. Ltd. (2017) 5 SCC 331 held that it is appropriate that the question of validity of the award should be determined in accordance with the law of the State in which the arbitration proceedings have taken place i.e. English law. However, for the purpose of decision in the instant matter, the Court held that the conduct of the parties excluded the applicability of Part I or in other words, where the parties have not expressly chosen the law governing the contract as a whole or the arbitration agreement in particular, the law of the country where the arbitration is agreed to be held has primacy. The Supreme Court while analysing Clause 14 i.e. the arbitration agreement in that 29 case, held that there is no doubt that the parties have agreed to exclude Part I by agreeing that the arbitration would be conducted as per ICC Rules. The parties were undoubtedly conscious that the ICC could choose a venue for arbitration outside India which in the view of the Supreme Court is sufficient to infer that the parties agreed to exclude Part I. Moreover, the possibility of ICC choosing India is not a counter-indication of the aforesaid inference. The Supreme Court held that it is clear that the place of arbitration determines the law that will apply to the arbitration and related matters like challenges to the award etc., and the significant determinant in each case is the agreement of the parties as to the place of arbitration and where in fact the arbitration took place. The Supreme Court additionally held that in the given case, the parties have expressly agreed that the arbitration will be conducted according to the ICC Rules of Arbitration and left the place of arbitration to be chosen by ICC. ICC in fact, chose London as the seat of arbitration after consulting the parties. The arbitration was held in London without any demur from any of the parties. All the awards i.e. the two partial final awards, and the third final award, were made in London and communicated to the parties. The Court thus ruled that it is a clear case of the exclusion of Part I (see Eitzen Bulk A/S vs. Ashapura Minechem Ltd. (2016) 11 SCC 508). The Supreme Court while reiterating the position of law enumerated in the case of Yograj Infrastructure Limited vs. Ssang Yong Engineering and Construction Company Limited (2011) 9 SCC 735 in Reliance Industries (supra) categorically noted that:-
"54. Again this Court in Yograj Infrastructure (two-Judge Bench) considered a similar arbitration agreement. It was provided that the arbitration proceedings shall be conducted 30 in English in Singapore in accordance with the Singapore International Arbitration Centre (SIAC) Rules (Clause 27.1).
Clause 27.2 provided that the arbitration shall take place in Singapore and be conducted in English language. This Court held that having agreed that the seat of arbitration would be Singapore and that the curial law of the arbitration proceedings would be the SIAC Rules, it was no longer open to the appellant to contend that that an application under Section 11(6) of the Arbitration Act, 1996 would be maintainable. This judgment has specifically taken into consideration the law laid down in Bhatia International and Venture Global. The same view has been taken by the Delhi High Court, the Bombay High Court and the Gujarat High Court, in fact this Court in Videocon has specifically approved the observations made by the Gujarat High Court in Hardy Oil."
Similarly, in the instant case, it can be garnered that the curial law is the ICC Rules and the seat of the arbitration is in Paris, France. The parties have stated the proper law of the contract i.e. the law applicable to the underlying contract to be that of India. As discussed above, an agreement as to the seat of arbitration should be regarded as conferring an exclusive jurisdiction clause and thus, the law applicable to the arbitration agreement shall be the law of the seat of arbitration i.e. Paris, France. Moreover, in the light of the decisions rendered by the Apex Court, as mentioned above, it is also evident , that the law of the country where the arbitration has been held will have primacy, which in the instant case is of Paris, France.
31Therefore, since the parties agreed to choose ICC Rules as the curial law for the arbitration proceedings and Paris, France as the 'seat' as well as the 'venue' of arbitration, it can be stated that the parties by necessary implication have sought to exclude the application of Part I of the Arbitration and Conciliation Act, 1996. The same has also been upheld by the Supreme Court in the case of Eitzen Bulk A/S (supra), wherein the Supreme Court opined:-
"......
34. As a matter of fact that mere choosing of the juridical seat of arbitration attracts the law applicable to such location. In other words, it would not be necessary to specify which law would apply to the arbitration proceedings, since the law of the particular country would apply ipso jure. The following passage from Redfern and Hunter on International Arbitration contains the following explication of the issue:
"It is also sometimes said that parties have selected the procedural 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 32 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 of 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 which local traffic laws to obey and which to disregard"."
It is manifestly discernable from the discussions as made hereinabove that though the laws of India would be the substantive law governing the contract but the curial law is the ICC Rules and therefore, Part I of the Arbitration Act does not apply. It is one thing to say that the laws of India would govern the rights of the parties, however, it is totally 33 different when the situs of the arbitration under the curial law rendering the Part I of the Arbitration Act inapplicable.
In consideration of the above-stated principles of law and considering the facts and circumstances relevant to the instant dispute, we, are therefore, of the view that the Courts in India do not have the jurisdiction to entertain an application u/s 34 of the Arbitration and Conciliation Act, 1996 to set aside the Partial Final Award dated September 9, 2016.
We, thus, uphold the judgment dated September 20, 2019 passed by the Learned Single Judge of this Court.
In view of the above, the appeal is dismissed. All connected applications are accordingly disposed of.
No order as to costs.
(Abhijit Gangopadhyay, J.) (Harish Tandon,J.) Later After the judgment is delivered in open court, the appellants pray for stay of the operation of this order for a limited period.
After giving our anxious thought over the prayer, we do not find such prayer can be acceded in view of the findings recorded in the instant judgment.
The prayer is thus refused.
Urgent certified copy of this judgment, if applied for, be supplied to the parties within three days from the date of application upon compliance of requisite formalities.
(Abhijit Gangopadhyay, J.) (Harish Tandon,J.) 34 35