Bombay High Court
E-City Entertainment (I) Pvt. Limited vs Imax Corporation on 10 June, 2013
Author: Anoop V. Mohta
Bench: Anoop V. Mohta
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dgm
THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION NO. 2560 OF 2008
IN
ARBITRATION PETITION (LODGING) NO. 525 OF 2008
E-City Entertainment (I) Pvt. Limited, having
their office at Plot No.844/4, Shah Industrial
Estate, Off. New Link Road, Opp. Laxmi
Industrial Estate, Andheri (W),
Mumbai 400 053 ... Petitioners
vs
IMAX Corporation
and having its registered office at 2515,
Speakman Drive, Mississauga,
Ontario, Canada LSK IBI .... Respondents
Mr. Milind Sathe, Senior Advocate with Mr. Birendra Saraf, Ms. Pooja
Tidke, Ms. Amina Usmani i/by M/s. ALMT Legal for the petitioner.
Mr. Atul Rajyadhyaksha, Senior Advocate with Mr. Vikram Negi, Mr.
Amit Surve, Mr. Rahul Mahajan i/by M/s. Fortitude Law Associates for
respondent.
CORAM: ANOOP V. MOHTA, J.
CLOSED ON : April 24, 2013
PRONOUNCED ON: June 10, 2013.
ORDER:
The Petitioner, E-City Entertainment (I) Pvt. Limited (original respondent), (E-city) a private limited company (E-(III)), ::: Downloaded on - 27/08/2013 20:34:21 ::: 2 nms-2560-08 in arbpl-525-08-jt.sxw having place of business at Mumbai, India, has invoked Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act) and prayed to set aside Partial Awards dated 9 February 2006 and 24 August 2007 and Final Award dated 27 March 2008 passed by the International Court of Arbitration under the Rules of Arbitration of the International Chamber of Commerce (ICC Rules).
Basic Events:-
2 The basic events are as under :
On 28 September 2000, Imax Ltd and E-city signed in Mumbai, a letter of intent dated 28 September 2000 (The agreement) leasing of 6 IMAX systems to be installed in India. On 22 November 2000, they executed a contract under which Imax agreed to sell to E-
city an IMAX 37 GT Projection system. On 21 December 2000, Imax entered into an agreement with Electronic Media Ltd (EML) and agreed to sell a single Imax cinema system. As alleged, EML failed to fulfill its obligations therefore, the ICC arbitration. (EML arbitration).::: Downloaded on - 27/08/2013 20:34:22 :::
3 nms-2560-08 in arbpl-525-08-jt.sxw 3 There arose disputes between the parties. Imax requested for Arbitration against EML and E-city separately. The petitioner filed its answer to the Request for Arbitration under Article 5(1) of the ICC Rules. The Arbitral Tribunal constituted and proceeded accordingly.
4 The Respondent filed a Statement of Claim. The Petitioner filed its Statement of defence. The Arbitral Tribunal conducted an evidential hearing on the question of E-city's liability to pay damages to Imax Ltd. On 9 February 2006 the Arbitral Tribunal rendered a "Partial Award" ordering, amongst other things, an assessment of damages payable by E-city to Imax Ltd. On 15 May 2006 further Statement of Damages filed by the Respondent. On 31 May 2006 a Statement of Defence in the Post-liability period filed by the Petitioner.
On 19 July 2006, disclosed for the first time that Imax Ltd amalgamated into Imax Corporation with effect from 1 January 2001.
From 26 to 28 July 2006, the Arbitral Tribunal heard evidence on the quantum of damage allegedly suffered by Imax. The hearing took place subject to E-city's reservation on Imax amalgamation.
5 On 5 September 2006, the Petitioner preferred an application that First Award made on liability was a nullity and the ::: Downloaded on - 27/08/2013 20:34:22 ::: 4 nms-2560-08 in arbpl-525-08-jt.sxw Tribunal has no jurisdiction to pass any award. The Respondent filed its response to it. On 24 August 2007, second Award on quantum of damages and jurisdiction and on 27 March 2008, third Award on costs and Interest have been passed. The Petitioner received the final award on 1 April 2008. The Petitioner filed the present Petition under Section 34 of the Arbitration Act in this Court on 22 July 2008. The Petitioner has taken out Notice of Motion for condonation of 20 days delay in filing the Petition. The Respondent by it's reply, has opposed the same and raised a preliminary objection to the maintainability of the Petition in India.
The relevant Clauses:-
6 The arbitration agreement noted the place of arbitration and the governing law in clause 14. The Petitioner is an Indian based company. The Respondent is a foreign entity. The digital cinema premises in demand in India and, therefore, the parties agreed to have develope the business by using the digital technology and the related systems in India.
7 The following are the relevant clauses to adjudicate the preliminary issues so raised about the jurisdiction :-::: Downloaded on - 27/08/2013 20:34:22 :::
5 nms-2560-08 in arbpl-525-08-jt.sxw "11 Marketing and Programming The intent of the parties is to cooperate on marketing and programming, sharing Imax's experience and E-citi's knowledge of and relationships in the local market. Accordingly, E-city and Imax hereby agree to the marketing and programming responsibilities, in respect of the Threatres as set out in Schedule "A" hereto, which is hereby incorporated by reference (the "M&P Services"). The annual fee for such M&P Services, to cover the cost of providing the M&P Services, is included in the Additional Rent.
Imax agrees that it will use reasonable efforts to explore potential opportunities for E-city to participate in the operation and development of existing IMAX theatres in India/those under negotiation.
14 General : Time is of the essence and no extension of time shall constitute a waive of any provision.
::: Downloaded on - 27/08/2013 20:34:23 :::6 nms-2560-08 in arbpl-525-08-jt.sxw The parties shall be entitled to their remedies at law for any breach of this Agreement, provided, however, in no event shall Imax be liable to the other for special, consequential or punitive damages, E-city shall pay any Indian taxes, duty, customs and similar charges levied on a respecting the System and the Classes, the license to use the Trademarks or payments to be made hereunder. The Initial rent, additional rent and any other amounts required to be paid by E-city hereunder shall be paid without any deduction, abatement or set off except for the appropriate withholding taxes (to a maximum of 10% ) required by law to be deducted at source. All amounts referred to herein are in US currency.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Imax and E-city acknowledge that the structure of this transaction is contingent upon the approval of the Reserve Bank of India, and Imax and E-
city agree to any reasonable restructuring requested by the Reserve Bank of India, so long as such restructuring does not negatively impact E-city or Imax ::: Downloaded on - 27/08/2013 20:34:23 ::: 7 nms-2560-08 in arbpl-525-08-jt.sxw in a material fashion.
This Agreement shall be governed by and construed according to the laws of Singapore and the parties attorn to the jurisdiction of the Courts of Singapore.
Any dispute arising out of this Master Agreement or concerning the rights, duties or liabilities of E-CITI or Imax hereunder shall be finally settled by arbitration pursuant to the ICC Rules of Arbitration.
This Agreement may be executed in any number of counterparts each of which when executed and delivered is an original and all of which taken together constitute one and the same instrument.
If the foregoing terms and conditions are acceptable to you, please so indicate by signing the enclosed copy of this letter and returning it to us."
(emphasis added) London-Seat of Arbitration:-
8 The Respondent in the claim petition requested for consolidation both arbitration as stem from the agreement in view of Article 4(c)(6) of the ICC Rules. As noted, the place of arbitration was not specifically agreed. The Court of ICC on 8 October 2004 ::: Downloaded on - 27/08/2013 20:34:23 ::: 8 nms-2560-08 in arbpl-525-08-jt.sxw fixed London as the judicial seat of the arbitration in view of Article 14 (1) of the ICC Rules and, therefore, proceeded on the basis of Part I of the English Arbitration Act, 1996 (The English Law). The Petitioner raised various objections with regard to the jurisdiction of the Tribunal itself by contending that Imax had no legal status or power to make the reference to arbitration. By reasoned order, the Tribunal rejected the same.
9At this stage, as submitted by the senior counsel appearing for the parties, the main issue is with regard to the maintainability of Section 34 Petition in India apart from condonation of delay prayer.
Therefore, the counsel made the restrictive and respective submissions, so also this Judgment accordingly.
10 The Respondent contended in reply to the Notice of Motion that all these three Awards are foreign awards and not domestic awards and, therefore, the present challenge is not maintainable apart from no case to condone the delay specially in respect of first two partial awards. The submission made by the other side that the proper law applicable to the terms of the agreement must be Indian, though the agreed was Singapore law; there is conflict of laws, hence Part-I of Arbitration Act cannot be excluded and, ::: Downloaded on - 27/08/2013 20:34:23 ::: 9 nms-2560-08 in arbpl-525-08-jt.sxw therefore, the Petition under Section 34 is maintainable in India.
There was no agreed clause for Part-I, exclusion. Admittedly, the Awards have been made in London at the judicial seat of the arbitration. For the purpose of deciding the issue of jurisdiction, the decisions so given by the Tribunal with regard to the jurisdiction of the Tribunal to decide the dispute; and the procedural, as well as, the substantive laws applied to resolve the disputes are relevant.
11 The challenge to all these awards is maintainable in India is the issue which has to be considered on the basis of the law laid down by the Supreme Court of India in Bhatia International vs. Bulk Trading SA1 and Venture Global vs. Satyam Computers 2. These Courts decisions are always the source to resolve the conflict of laws. The relevant paragraphs from Venture Global are as under :
"28 Mr. Nariman, after taking us through the relevant provisions of Chapter I, Part II submitted that Section 48(1)(e) read with Section 48(3) of the Act specifies that an action to set aside a foreign award within the meaning of Section 44 of the Act would lie to the "competent authority of the country in which, or under the law of which, that award was made".
According to him, the phrase "the country...under the law of which, that award was made" refers to the country of the curial law of arbitration, in the extremely rare 1 2002 (4) SCC 105 2 2008 (4) SCC 190 ::: Downloaded on - 27/08/2013 20:34:24 ::: 10 nms-2560-08 in arbpl-525-08-jt.sxw situation where the parties choose a curial law other than the law of the country of the seat of arbitration. He further pointed out that therefore such a challenge would lie only to the competent court of the country in which the foreign award was made.
31 On close scrutiny of the materials and the dictum laid down in the three-Judge Bench decision in Bhatia International, we agree with the contention of Mr. K.K. Venugopal and hold that paras 32 and 35 of Bhatia International make it clear that the provisions of Part I of the Act would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto. We further hold that where such arbitration is held in India, the provisions of Part I would compulsorily apply and parties are free to deviate to the extent permitted by the provisions of Part I. It is also clear that even in the case 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. We are also of the view that such an interpretation does not lead to any conflict between any of the provisions of the Act and there is no lacuna as such. The matter, therefore, is concluded by the three-Judge Bench decision in Bhatia International.
35 ........................................ In view of the legal position derived from Bhatia International we are unable to accept Mr. Nariman's argument. It is relevant to point out that in this proceeding, we are not deciding the merits of the claim of both parties, particularly, the stand taken in the suit filed by the appellant herein for setting aside the award. It is for the court concerned to decide the issue on merits and we are not expressing anything on the same. The present conclusion is only with regard to the main issue whether the aggrieved party is entitled to challenge the foreign award which was passed outside India in terms of Sections 9/34 of the Act. Inasmuch as the three- Judge Bench decision is an answer to the main issue ::: Downloaded on - 27/08/2013 20:34:24 ::: 11 nms-2560-08 in arbpl-525-08-jt.sxw raised, we are unable to accept the contra view taken in various decisions relied on by Mr. Nariman. Though in Bhatia International the issue relates to filing a petition under Section 9 of the Act for interim orders the ultimate conclusion that Part I would apply even for foreign awards is an answer to the main issue raised in this case"
Proper Law:-
12 The extract from The Law and Practice of Commercial Arbitration in England, Second Edition (Sir Michael J. Mustill and Stewart C. Boyd), is reproduced:-
"2 The proper law of the arbitration agreement:-
The proper law of the arbitration agreement is determined in accordance with the same principles as apply for the determination of the proper law of any ordinary contract.
1. The first step is to inquire whether the parties have expressly chosen the law which is to apply to the agreement. If so, this choice of law will prevail, even if the chosen law differs from : (a) the proper law of the underlying contract or (b) the curial law.
When the court is faced with a problem in this field, questions of classification will have to be considered:
for the court cannot identify the relevant law, without first asking whether it is looking for law 2, 3 or 4, it is ::: Downloaded on - 27/08/2013 20:34:24 ::: 12 nms-2560-08 in arbpl-525-08-jt.sxw unnecessary to take up space with a full discussion of this problem, but a classification on the following lines would seem to be indicated -
1 The proper law of the arbitration agreement governs the validity of the arbitration agreement, the question whether a dispute lies within the scope of the arbitration agreement; the validity of the notice of arbitration; the constitution of the tribunal; the question whether an award lies within the jurisdiction of the arbitrator; the formal validity of the award; the question whether the parties have been discharged from any obligation to arbitrate future disputes.
2. The curial law governs: the manner in which the reference is to be conducted; the procedural powers and duties of the arbitrator; questions of evidence; the determination of the proper law of the contract.
3. The proper law of the reference governs: the question whether the parties have been discharged from their obligation to continue with the reference of the individual dispute."::: Downloaded on - 27/08/2013 20:34:24 :::
13 nms-2560-08 in arbpl-525-08-jt.sxw 13 The International arbitration practice has been elaborated with reference to the arbitration and foreign awards in famous commentary on the Conflict of Laws (Dicey & Morris), Thirteenth Edition. The relevant principles are as under:
Rule 57-(1) The validity, effect and interpretation of an arbitration agreement are governed by its applicable law.
Rule 57-(2) In general, and subject to the mandatory rules of the law of the seat of the arbitration, the law chosen by the parties governs arbitral proceedings; in the absence of agreement, arbitral proceedings are governed by the law of the seat of the arbitration.
14 In J.S. Ocean Liners Inc. Vs. S.K. Shipping (Singapore) Pte Ltd.3 and Perma Container (UK) Line Ltd. Vs. Perma Container Line (India) Pvt. Ltd.. & Ors.4 considering the provisions of Arbitration Act and specifically the phrase "unless any or all such provisions have been excluded by agreement between the parties, expressly or by implication", in view of specific clause/agreement between the parties, I have held that such Petition in India is not maintainable.
3 2010(2) Bom. C.R. 52 4 2010(2) Bom. C.R. 419 ::: Downloaded on - 27/08/2013 20:34:25 ::: 14 nms-2560-08 in arbpl-525-08-jt.sxw 15 The specific exclusion is not there in the present matter.
The expressed clause/agreement in the present matter itself has created conflicts in every aspect. Therefore, in view of this conflict of laws and as the Foreign element is also involved, I am inclined to consider the present matter based upon the principles of conflict of laws and Indian judicial decisions. [Conflict of Laws (Second Edition), Atul M. Setalvad].
16 The Supreme Court in National Thermal Power Corporation vs. Singer Company and ors.,5 has observed that;
"(a) a proper law governing the arbitration is distinct and different from the law procedural law governing the conduct of the arbitration;
(b) the proper law of arbitration is the same as the proper law of the underlying contract if such a law has agreed to by the parties;
(c ) if no procedural law of arbitration is agreed to by the parties, then the law of the place or seat of arbitration would determine the procedural law of arbitration;
(d) the issue as regards validity of the arbitration agreement, jurisdiction of the arbitrator etc are issues which are to be governed by the proper law of arbitration and not by the procedural law of the 5 (1992) 3 SCC 551/AIR 1993 SC 998.
::: Downloaded on - 27/08/2013 20:34:25 :::15 nms-2560-08 in arbpl-525-08-jt.sxw arbitration."
17 It is necessary to consider Sections 20, 28, 31(4) of the Arbitration Act while deciding the issue so raised in the present matter.
"20 Place of arbitration. - (1) The parties are free to agree on the place of arbitration (2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.
28 Rules applicable to substance of dispute.- (1) Where the place of arbitration is situate in India, -
(a) in an arbitration other than an international ::: Downloaded on - 27/08/2013 20:34:25 ::: 16 nms-2560-08 in arbpl-525-08-jt.sxw commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;
(b) in international commercial arbitration, -
(i) the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute;
(ii) any designation by the parties of the law or legal system of a given country shall be construed, unless otherwise expressed, as directly referring to the substantive law of that country and not to its conflict of laws rules;
(iii) failing any designation of the law under clause (a) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute.
(2) The arbitral tribunal shall decide exaequo et bono or as amiable compositeur only if the parties have expressly authorised it to do so.
(3) In all cases, the arbitral tribunal shall decide in ::: Downloaded on - 27/08/2013 20:34:25 ::: 17 nms-2560-08 in arbpl-525-08-jt.sxw accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.
31 Form and contents of arbitral award. - (1) ......
(2) ..............
(3) .......................
(4) The arbitral award shall state its date and the place of arbitration as determined in accordance with section 20 and the award shall be deemed to have been made at that place.
(5) ........................
(6) ........................
(7) ........................"
18 Art. 21 of the ICC Rules provides similar clauses like
Section 28 for applying the Rules of law. The question of procedural law in the present case is also debated. The Awards were not challenged in English Court and not even in Singapore Court. The Respondents have not even taken steps to enforce the said Award in India or in any other country. The important aspects for deciding such jurisdictional issues are the law applicable to "the substance".
::: Downloaded on - 27/08/2013 20:34:26 :::18 nms-2560-08 in arbpl-525-08-jt.sxw Indian proper law/governing law:-
19 The different terms "proper law", "the substantive law", "the governing law" have similar and same purpose and understanding in the National and/or International arbitration. The interpretation and/or meaning of the terms and/or its challenge and/or breaches of the contract and/or the flowing rights and obligations apart from related facts and circumstances are always the basic elements of any reasoned arbitral award. The Indian laws, therefore, in view of the clear terms and conditions shall be the governing law or the proper law of the contract. The agreed Singapore law, even if any, or the English law as contended by the Respondent to be the governing law, just cannot be accepted to overlook the binding effect of the clauses of the terms and the Indian laws. The Arbitration Act, even otherwise, as not specifically excluded, therefore, there is no question of accepting the case of exclusion by implication in the present matter. All the parties are bound by the terms and conditions and the Indian laws. The compliances and/or obligations flowing from it goes to the root of the contract between the parties.
20 Another aspect is, in the arbitration proceedings, the ::: Downloaded on - 27/08/2013 20:34:26 ::: 19 nms-2560-08 in arbpl-525-08-jt.sxw freedom to select procedural law as seat/place of arbitration, in no way, prevail over and/or takes away the rights and obligations of the parties flowing from the Indian laws.
Foreign Procedural Law:-
21 It is clear that the place or seat of arbitration determines only the procedural law. Therefore, the jurisdiction of the Court to challenge an Award need to be governed not by the procedural law, but also by the proper law, in case of such conflict of laws in view of the inconsistent agreed clauses of the agreement. In the present case, as noted, the proper law governing the underlying the contract is Singapore Law. The Arbitral Tribunal conducted the arbitration as per the Canadian law, the Singapore law and the English law. The agreement, as recorded above, shows that the parties required to comply with the provisions of Indian Laws in most of the important aspects, in India.
22 Admittedly, agreement dated 28 September 2000 signed in Mumbai by one Mr. Brian Hall and another agreement was executed on 22 November 2000 where obligation to get approval/permission from the Reserve Bank of India was mentioned. Admittedly, the ::: Downloaded on - 27/08/2013 20:34:26 :::
20 nms-2560-08 in arbpl-525-08-jt.sxw venture was to have six theatres where Imax agreed to give exclusive rights. The parties, therefore, proceeded for necessary permission/sanctions from the Reserve Bank of India and the State Bank of India. Ultimately, the Tribunal held and proceeded on the foundation existence of valid agreement between the parties. After considering the Canadian Law, the Tribunal has given status of Imax Limited to Imax Corporation and proceeded to pass the order on all issues from time to time. The Tribunal further proceeded that Singapore Law is the applicable law of the contract in view of paragraph 14 of the Master Agreement. The Singapore law, therefore, was treated as the foundation for construction and the interpretation of the agreement between the parties. The clause itself provides that Court at Singapore shall have jurisdiction. The Tribunal, therefore, by holding that there is a binding contract and by applying the principles of Singaporean law, passed the Award in favour of the claimant (Respondent) on the issue of liability and by the final Award declared that the Petitioner (original Respondent) is in breach of Master Agreement and that it has not taken delivery of systems and made only an initial payment in respect of the second system and no payments in respect of four remaining systems and, therefore, awarded the damages.
::: Downloaded on - 27/08/2013 20:34:26 :::21 nms-2560-08 in arbpl-525-08-jt.sxw 23 As noted, the Petitioner's application under Article 6.2 of the ICC Rules with regard to the question of jurisdiction and the final Award is a nullity was also rejected again by relying on Singapore Laws. The Respondent's case was that the governing law is the English law. The contract, as referred above, shows that the agreed clauses was Singapore law so also the jurisdiction of the Singapore Court. The learned Tribunal, on the issue of amalgamation of the Respondent, rejected the Petitioner's objection by relying upon the Canadian law.
Partial awards and the final award:-
24 All these partial awards are interlinked and inter-
connected. The liability award dated 9 February 2006 and the partial and final award on the jurisdiction and quantum of damages on 24 August 2007 just cannot be read in isolation by overlooking the issue of interest and costs as awarded in the final award and the time /extension sought from the ICC Court for rendering the final award pursuance to Article 22 of the ICC Rules. All issues are required to be read together only after the receipt of the final award passed by the Tribunal. These aspects are necessary to consider in the present facts ::: Downloaded on - 27/08/2013 20:34:27 ::: 22 nms-2560-08 in arbpl-525-08-jt.sxw and circumstances of the case as there was uncertainly with regard to the nature of the agreement between the parties including the transactions where the laws of India are need to be involved at all the stages before entering into the final agreement between the parties.
The approval/sanction so required including the compliances of the provisions of Indian laws like Reserve Bank of India, Foreign Exchange Rules and Regulations (FEMA) and many other, including the principle of public policies in India.
No Specific Exclusion of Part-I:-
25 The venue itself is not decisive factor to exclude Part I of the Arbitration Act. The ICC Rules itself nowhere debar the parties or exclude Part-I of the Arbitration Act. The exclusion, even if any of Part-I need to be read and considered, in the given facts and circumstances of each case. In the present case, as noted, agreement took place in Mumbai, the projects/machinery/services were required to be provided in India subject to approval/sanction of Indian laws.
26 The English Arbitration Act of Sections 30 and 32 contemplates to have issue of jurisdiction decided by the English Court, at interim stage itself. There was no such stage/steps taken by ::: Downloaded on - 27/08/2013 20:34:27 :::
23 nms-2560-08 in arbpl-525-08-jt.sxw the parties. The learned Arbitral Tribunal proceeded on the basis of submissions/objection so raised by the Petitioner with regard to the jurisdiction. There is no specific exclusion of Part-I of the Arbitration Act and as there is no specific evidence led to support such procedure and/or laws of Singapore and/or even the English laws.
27 I have already in Lu. Qin (Hong Kong) Copmpany Ltd. vs. Conros Steels Pvt.Ltd. [ Chamber Summons No.12/2013 in Execution Application No..492/2012 in Award dated 30/08/2012 along with Chamber Summons (L) No.1588/2012 in Execution Application No.492/2012 in Award dated 30/08/2012-Conros Steels Pvt.ltd. vs. Lu. Qin (Hong Kong) Company Ltd.], on 9/10 May 2013, observed as under :
"33 In the present case, as noted above, there is no specific exclusive and/or agreement between the parties except the procedural rule as noted above, agreed to decide their disputes. The parties are always free to decide the rules to be followed and/or procedure to be adopted to adjudicate their disputes before the nominated Arbitral Tribunal. Both parties are bound by the same, so also the Arbitral Tribunal.::: Downloaded on - 27/08/2013 20:34:27 :::
24 nms-2560-08 in arbpl-525-08-jt.sxw The adoption of China Commission/ procedure/rules itself cannot be read and/or means that the parties have agreed to exclude the provisions of Part "I" of Arbitration Act as arbitration held outside India.
Therefore, in view of specific agreement between the parties, I am inclined to observe that there is no such agreement even by implication to exclude the provisions of Part "I" of the Arbitration Act of India and the governing laws of the contract.
35 The constitution Bench of Supreme Court on 6 September 2012, in Bharat Aluminium Company Vs. Kaiser Aluminium Technical Services Inc. 6 while dealing with the correctness of the Judgments of Bhatia International (supra), Videocon(Supra) and Venture Global engineering (supra) declared that, as those Judgments have been in the field since long, will govern the agreements between the parties as made prior to the date of this judgment. The judgment so declared will be applicable 6 (2012) 9 SCC 552 ::: Downloaded on - 27/08/2013 20:34:27 ::: 25 nms-2560-08 in arbpl-525-08-jt.sxw prospectively. Therefore, all earlier transactions/ litigations will be governed by the laws and regulation, which have been in existence prior to the date of the judgment. In the present case, in view of clear notification, the disputes arising out of agreements and awards so passed, based upon the same situation. The agreement, prior to 19th March, 2012, would be governed by the then prevailing law by treating Republic of China as non reciprocal territory/country.
The present case, therefore, also will govern by the decisions of Supreme Court in Bhatia International (supra), Videocon(Supra) and Venture Global engineering (supra).
I am inclined to accept the case after reading the agreement between the parties that it has close and proximate nexus with India and Indian laws".
Conflict of Laws:-
28 In case there is a uncertainty and/or vagueness in the clauses and/or agreement, like in the present case, the Court need to consider the surrounding circumstances, pre and post events, ::: Downloaded on - 27/08/2013 20:34:28 ::: 26 nms-2560-08 in arbpl-525-08-jt.sxw correspondences and agreements between the parties including the legal obligations and liabilities arising out of the contract terms and conditions. The Singapore law and/or English Law are no way helpful and/or relevant to decide the legal obligations and/or mandate of Indian laws, even for such services and/or to the launch of such projects in India by foreign entity like the Respondent. There is no material on record to show that the agreement Singapore law, even if any, itself debar the Indian party like the Petitioner to invoke Sections of Part I (2 to 36) of the Arbitration Act. Those are essential to take note of the terms and conditions of the contract including the grant of damages and the compensation. The Court under section 34 therefore, required to consider the "Doctrine of Close nexus". Merely because the parties have vaguely agreed that Singapore will be the governing law and/or the Court of Singapore will be the Court, but considering the contents of the agreement itself and in the present facts and circumstances, I am inclined to hold that the present agreement/contract need to be construed and/or governed by the Indian laws for the purposes of considering the breaches of its terms and conditions and consequential damages and/or compensation, if any.
::: Downloaded on - 27/08/2013 20:34:28 :::27 nms-2560-08 in arbpl-525-08-jt.sxw 29 Part I of Indian Arbitration Act will also apply to foreign awards and international arbitration as recorded in Venture and Bhatia (Supra), as seat was in London. The Tribunal has also proceeded to pass Award by overlooking the Indian laws and the contents of the agreement referring to the Indian law obligations and the fact that the contract was to be performed in India. Admittedly, Singapore law is a foreign law which needs to be pleaded and proved. [ Hari Shanker Jain v. Sonia Gandhi (2001) 8 SCC 233. ], read with Section 57 of Indian Evidence Act. There is nothing on record to show that there is any inconsistency in Singapore law so as to oust Part I of the Arbitration Act.
30 It is also necessary to note that there is no serious denial to the contents of the agreements by the respective parties and so also their respective legal obligations and liabilities to be performed in India in view of the e governing laws of India. I am inclined to observe that the Indian laws are applicable to the transactions in every aspect and definitely not the English or Singapore laws. I am inclined to observe that there is no case to extend the other provisions of international Treaties and conventions and/or the foreign judgments so cited and relied to overlook the clear clauses between the parties to ::: Downloaded on - 27/08/2013 20:34:28 ::: 28 nms-2560-08 in arbpl-525-08-jt.sxw be governed by the Indian laws.
31 The Law of Singapore and/or English law, in no way, takes away the rights of the petitioner to challenge the Awards in India as agreement clause itself, entitled the parties to invoke their remedies at law for any breach. There is no specific agreement whereby the parties have agreed to exclude Part-I of the Arbitration Act. The Supreme Court in Satyam Computers (supra), even in such situation, held that Section 34 Petition is maintainable in India. The submission of the Respondent, therefore, that the present Petition is not maintainable in India, in the present facts and circumstances, is unacceptable. Under the Arbitration Act, the parties are free to agree on the place of arbitration and so also the arbitration proceedings to be governed by any and/or the foreign procedural law. The parties are also empowered to fix the proper law of the contract which would govern the validity, interpretation and effect of all clauses including the arbitration clause in the contract as well as the scope of the Arbitrator's jurisdiction. It is settled that the arbitration clauses need to be considered together with the other clauses of the contract and the surrounding circumstances. The dispute between the parties, therefore, alway have the closed connection with the ::: Downloaded on - 27/08/2013 20:34:28 ::: 29 nms-2560-08 in arbpl-525-08-jt.sxw governing/proper laws or rules or regulations. Therefore, the agreement, even if any, which exclude the jurisdiction of the competent Court and the governing laws of India, it is totally inconsistent with the other clauses of the agreement between the parties. There cannot be any dispute that the Arbitral Tribunal should decide the disputes in accordance with the substantive law as per the agreed terms and conditions.
Subject matter and cause of action in India:-
32 The subject matter of the arbitration is in India and specifically within the jurisdiction of Courts of Mumbai. The supervision of the English court pending the arbitration cannot be compared with the Indian Court's jurisdiction and its enforcement after the final award in India. The agreed venue in no way takes away the right of the aggrieved parties to challenge the final award in the available forum out of two or more. The law which governs the respective statutory obligations, as in the present case is Indian law, should prevail over the procedural law of ICC Rules. The Singapore law, in no way, can control or be applicable and/or extendable to the contract clauses and the subject matters. Such governing law should prevail over the procedural law. The Court need to consider the clear ::: Downloaded on - 27/08/2013 20:34:29 :::
30 nms-2560-08 in arbpl-525-08-jt.sxw clauses and in case of conflicts of clauses and the vagueness. There is nothing to prevent the Court from construing the agreement in such situation. In the present matter, therefore, I am inclined to observe/hold that the challenge to such international award in India is maintainable. There is no total bar. The Arbitral Tribunal's power to control the arbitration proceedings goes away once the final award is passed and approved/confirmed by the Arbitral Court as per the ICC Rules. There is nothing thereafter requires the supervision of Arbitral Tribunal except permissible correction of the award for the specific reasons and circumstances.
The "Court" for Section 34 Petition:-
33 I am of the opinion that the "Court" as contemplated in Section 2(e) and 34 of the Arbitration Act is this Court in India "having jurisdiction to decide the questions forming the subject matter of the arbitration". The cause of action is situated within the jurisdiction of this Court at Mumbai, in India. The place of arbitration in no way a decisive factor to determine the jurisdiction of the Court to entertain the petition under Section 34 of the Arbitration Act. It is relevant to note that the choice of law and the law of the place of arbitration are different. In the present case, the Indian (National ::: Downloaded on - 27/08/2013 20:34:29 :::
31 nms-2560-08 in arbpl-525-08-jt.sxw law) should prevail to consider the merits of the matter and not the English or Singapore laws. The Arbitral Tribunal is under obligation to make sure that the award is enforceable at law. Considering the nature of contract and the parties involved and as the subject matter and the cause of action arises in India, the international award in question is enforceable in India in accordance with law. The English law or the Singapore law, if utilised and/or made applicable would make the award vulnerable. The principles of interpretation differ from country to country guided by the judgments of respective National courts. The Singapore law, in no way, control and govern the contract terms and conditions though it is agreed that the agreement "shall be governed and construed according to laws of Singapore and by the Court of Singapore". I am inclined to observe that with regard to the nature of terms and conditions and the governing law so agreed by the parties to govern and construe the agreement, is in conflicts with the Indian laws and the public policies. The Part-I of the Arbitration Act, as recorded above, is applicable and, therefore, the foreign award is liable to be challenged by invoking Section 34 of the Arbitration Act. All the provisions of Part-I of Arbitration Act are applicable in all respects, in the present facts and circumstances of the case.
::: Downloaded on - 27/08/2013 20:34:29 :::32 nms-2560-08 in arbpl-525-08-jt.sxw The final award-Termination of Arbitration proceedings- Functus Officio:-
34 Section 32 contemplates the "termination of arbitration proceedings" under the Arbitration Act. The arbitration proceedings terminates when the final award is passed. The "final arbitration award" [ 31 (1 & 7), 34 (4) and 36 ] is the award which is enforceable/executable, in accordance with the Arbitration Act. Once the Arbitrator makes the award, he is "functus officio". The Arbitrator, who is functus officio further cannot rewrite the award. He becomes functus officio for the purposes of deciding the dispute. There are other stages also contemplate to terminate the arbitration proceedings. Therefore, the concept of supervision of Court of place of Seat of arbitration even after termination of arbitration proceedings, in my view, looses its importance. The ICC Rules nowhere provides that the award is subject to challenge only in the Court of Seat of arbitration. All the Arbitration Acts are also silent about the same.
Section 34 Petition maintainable in India:-
35 There is no specific bar created by any specific provision of ::: Downloaded on - 27/08/2013 20:34:29 :::
33 nms-2560-08 in arbpl-525-08-jt.sxw Arbitration Act. Therefore, by such self-imposed bar the aggrieved party's rights to challenge the award in the Competent Court, where he can put the award for enforcement, as subject matter is also fall within the same court's jurisdiction just cannot be taken away. The finality of award is relevant under the arbitration law even for the execution and/or enforcement, which always subject to the competent Court's confirmation of the award. It is also subject to the cause of action and/or subject matter within the jurisdiction of the Competent Court, as per the substantive law of the agreement. The decisive factor, therefore, to decide the court's jurisdiction for challenging the award, in my view, is existence of the subject matter and cause of action within the jurisdiction of the "competent court" as contemplated under the agreement and the governing law of the contract. The Court of Seat of Arbitration, as sought to be contended, in my view, in every matter, and specifically in the present facts and circumstances, cannot be the decisive factor to decide the court where the aggrieved party should challenge the award. In the present case, the award was passed in London by the Tribunal and confirmed by the ICC Courts under the Rules. There is clear conflicts of laws and the jurisdiction. Sections 34 to 36 and 2 (e) of Arbitration Act, if read together, I am inclined to hold that in the present case, in view of the ::: Downloaded on - 27/08/2013 20:34:30 ::: 34 nms-2560-08 in arbpl-525-08-jt.sxw conflicts in every part of the agreements, the Court of India has jurisdiction to entertain to challenge to the international award.
There is no bar at least.
36 The theory and/or doctrine of direct and/or indirect exclusion of Part I and/or Part II, in every such matter, is only because of Sections 1 (2), 2(2) to (9) of the Arbitration Act. It is because of these provisions of national and/or international arbitration laws, apart from Arbitration procedural rules and regulations in the field, such discussions are on these issues, at every corner of the world.
The common rule to be framed by the Central Government:-
37 I am inclined to observe that the clear rules and/or regulations as contemplated in Sections 82 and 84 of the Arbitration Act by the Central Government and to be followed by High Court are necessary to give proper guidance to the people at large. The amendment to the Arbitration Act may or may not follow, but appropriate rules and regulations and guidelines on the basis of existing Arbitration Acts need to be made and implemented at the earliest. It is also for the reason that the provisions of Indian and/or national law ::: Downloaded on - 27/08/2013 20:34:30 ::: 35 nms-2560-08 in arbpl-525-08-jt.sxw always prevail over all the foreign laws and/or Treaty and/or Conventions. The agreed clause of arbitration agreements, even if are in conflicts and/or inconsistent and/or contrary to the respective clauses or the terms and the national law, such agreed clauses itself are the matter of discussion and debate in such arbitration proceedings as it impede the Arbitral Tribunal power to pass the enforceable award.
The inclusion of Sections 34 to 37 in Part-I of the Arbitration Act.:-
38 The inclusion of Sections 34 to 37 in Part-I of the Arbitration Act throughout, need re-consideration, at national and international level by all concerned. The confirmation of the award by the Court and Appeal thereon readwith its enforcement just cannot be stated to be governed by only the procedural law.
The enforceability of Foreign Award:-
39 The Arbitral Tribunal is under obligation to pass the enforceable award. The Court is under obligation to adjudicate and resolve the conflicts and so also the Arbitral Tribunal, in accordance with the national law and /or the governing law as per the terms. I ::: Downloaded on - 27/08/2013 20:34:30 :::
36 nms-2560-08 in arbpl-525-08-jt.sxw am inclined to observe that Chapter II which deals with the power of competent court to decide the award and further to enforce the same by treating decree of court as contemplated under the Code of Civil Procedure (CPC) just cannot be controlled by the procedural rules and/or procedural law of arbitration and/or by the Court of seat of arbitration even though the arbitral Tribunal have passed the final award and thereby terminated the arbitration proceedings itself. The Arbitral Tribunal thereafter becomes functus officio. Therefore, the submission that the Court where seat of arbitration was fixed/agreed should supervise such final award, in my view, creates more complication than solving it specifically in view of the agreed conflicting terms and conditions like in the present case. I am inclined to hold that there is direct relation between the court who passed the award and/or confirmed and/or modified the award with its enforcement specially under the Indian laws including Arbitration Act and the CPC.(Civil Procedure Code).
40 In view of conflict of laws and as the foreign element is also involved, the basic source of conflict of laws are the decisions of the Courts in India and also the mandatory provisions of Indian laws and considering the cause of action and as the subject matter is also in ::: Downloaded on - 27/08/2013 20:34:30 ::: 37 nms-2560-08 in arbpl-525-08-jt.sxw India, therefore, in the interest of justice and public policy, I am inclined to hold that this Court is competent court to entertain challenge of such foreign award and so also its enforcement.
The delay:-
41 Now the question still remains, whether the Court at this stage is required to look into the merits of the matter and also the reason for condonation of delay in filing the present Petition whereby all Awards are under challenge. Admittedly, the Arbitral Tribunal passed first partial award on 9 February 2006. Second partial award on 24 August 2007 by observing "The Award should be read in conjunction with the Liability Award ("the Liability Award") dated 1 st February, 2006, which is incorporated by reference into this Award.".
By the second award, the Petitioner's challenge to the jurisdiction of the Arbitral Tribunal was rejected. The Arbitral Tribunal directed that a sum of US $ 9,406,148.31 be paid along with interest. The decision on other issues including costs and interest was deferred with further direction to arrive at an agreement in that regard. The final award was passed on 27 March 2008 by observing as under :
"The Final Award on the issue of interest and costs should be read in conjunction with the Liability ::: Downloaded on - 27/08/2013 20:34:31 :::
38 nms-2560-08 in arbpl-525-08-jt.sxw Award dated 1st February, 2006 and the Partial Final Award on jurisdiction and Quantum dated 24th August, 2007, both of which are incorporated by reference to this Award.".
The Petitioner, received last award dated 27 March 2008, on 1 April 2008. The petition filed on 21 July 2008. There is delay of 20 days, beyond the period of 90 days as prescribed. However, it is within the permissible outer limit of 120 days. There is no compulsion/provision that such partial award should be challenged and/or such partial awards cannot be challenged along with the final award. The Awards so passed show that the reasons are interlinked and interconnected.
The aggrieved party therefore can challenge the final award along with such partial awards under Section 34 of the Arbitration Act. The final award has ultimately confirmed the partial awards. Therefore, as there is delay of 20 days in challenging the final award, the delay even if any in challenging the earlier partial awards which are inseparable and as sufficient case is made out, for the reasons recorded in above paragraphs, the delay is required to be condoned in the interest of justice. The Notice of Motion is deserved to be allowed in terms of prayer clause (a).
::: Downloaded on - 27/08/2013 20:34:31 :::39 nms-2560-08 in arbpl-525-08-jt.sxw 42 Resultantly, the following order:-
a) The Petition under Section 34 is maintainable in India.
b) The Notice of Motion is accordingly allowed.
c) There shall be no order as to costs.
d) Place the Arbitration Petition after eight weeks for admission.
(ANOOP V. MOHTA, J.) ::: Downloaded on - 27/08/2013 20:34:31 :::