TaxTMI 
TaxTMI 
1997 (12) TMI 598
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.... 1983, whereunder the appellant agreed to install and commission on trunkey basis an oil platform at Bombay High, about 100 miles north-west of Bombay. The contract stipulated the following. "17.0 Laws/Arbitration 17.1 Applicable Laws All questions disputes or difference arising under, out of or in connection with this Contract shall be subject to the laws of Indian. 17.2 Arbitration If any dispute, difference or question shall at any time hereafter arise between the parties hereto or their respective representatives or assigns in respect of the construction of these presents or concerning anything herein contained or arising out of these presents or as to the rights, liabilities or duties of the said parties hereunder which cannot be mutually resolved by the parties, the same shall be referred to arbitration, the proceeding of which shall be held at London, U.K. Within 30 days of the receipt of the notice of intention of appoint arbitrators each party shall appoint an arbitrator of its own choice and inform the other party. Before entering upon the arbitration, the two arbitrators shall appoint an umpire. In case the parties fail to app....
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....t the award was invalid, unenforceable and liable to be set aside under the provisions of the said Act. The learned Judge, as aforestated, allowed the petition. 6. The decision rendered by Potter, J. in the Commercial Court is of some importance because the jurisdiction of the English Courts was discussed. The learned Judge said: "Before stating my reasons for that conclusion and then turning to the "frustration" argument, and because questions have arisen as to whether English law or Indian law is appropriate to be applied at various stages of this application, I propose briefly to advert to the various laws potentially applicable to the various aspects of the arbitral relationship which may fall for consideration in cases of this kind. (1) The proper law of the underlying contract i.e. the law governing the contract which creates the substantive rights and obligations of the parties out of which the dispute has arisen. (2) The proper law of the arbitration agreement, i.e. the law governing rights and obligations of the parties arising from their agreement to arbitrate and, in particular, their obligation to submit their disputes to arbitration and to....
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....n agreement is part of the substance of the underlying contract and the terms of cl. 17.1 are clear in that respect. As to (3), it matters not for the purpose of this application whether the governing law in English or Indian law, because Mr. Dunning has conceded before me that there is no material difference between the two so far as applicable to the doctrine of frustration upon which he relies (see also par. 7 of the affidavit of Mr. Majumdar to that effect). As to (4), the curial law, it seems to me plain that it is the law of England. There is, it is true, no express choice of curial law. However, there is a clear requirement that the arbitration proceedings be held in London. In the absence of express agreement, there is a strong prima facie presumption that the parties intend the curial law to be the law of the "seat" of the arbitration, i.e. the place at which the arbitration is to be conducted, on the ground that is the country most closely connected with the proceedings - see Mustill and Boyd, 2nd ed., p.64." 7. Neither of the parties having filed an appeal from the judgment of Potter, J., its finding bind them. Based upon these findings, it was contended by M....
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....ce that X is also to be the "seat" of the arbitration. The lex fori is then the law of X, and accordingly X is the agreed forum of the arbitration. A further consequence is then that the Courts which are competent to control or assistant the arbitration are the Courts exercising jurisdiction at X". The learned Judge observed that there was no reason in theory which precluded "parties to agree that an arbitration shall be held at a place or in country X but subject to the procedural laws of Y". (Emphasis supplied.) 1. In the Law and Practice of Commercial Arbitration in England, Second Edition by Mustill and Boyd, there is a chapter on "The applicable law and the jurisdiction of the Court". Under the subtitle, "Law Governing The Arbitration", it is said, "An agreed reference to arbitration involves two groups of obligations. The first concerns the mutual obligations of the parties to submit future disputes, or an existing dispute to arbitration, and to abide by the award of a tribunal constituted in accordance with the agreement. It is now firmly established that the arbitration agreement which creates these obligations is a separate contract, distinct from the substanti....
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....te 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. XXX In the absence of express agreement, there is a strong prima facie presumption that the parties intend the curial law to be the law of the 'seat' of the arbitration, i.e. the place at which the arbitration is to be conducted, on the ground that that is the country most closely connected with the proceedings. So in order to determine the curial law in the absence of an express choice by the parties it is first ....
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....party's failure to appoint an arbitrator, e.g. whether an arbitrator may be appointed by a court, or whether the arbitration can proceed before the sole arbitrator appointed by the other party, and whether the authority of an arbitrator can be revoked. The law will also determine what law the arbitrators are to apply, and whether they are expected or allowed to decide ex aequo et bono or as amiables compositeurs, and, if not, whether the parties can gave them this power or impose on them this duty. That law will also determine the procedural powers and duties of the arbitrators, e.g. whether they must hear oral evidence (but not their jurisdiction to decide the dispute, which is governed by the arbitration agreement and the law applicable to it) or whether the arbitrators have been guilty of misconduct. It will also determine what judicial remedies are available to a party who wishes to apply for security for costs or for discovery or who wishes to challenge the award once it has been rendered and before it is sought to enforce it abroad, and the circumstances in which judicial remedies may be excluded." (Emphasis supplied.) 15. Mr. Sorabjee submitted, relying upon ....
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....ing award". 17. The law which would apply to the filing of the award, to its enforcement and to its setting aside would be the law governing the agreement to arbitrate and the performance of that agreement. Having regard to the clear terms of Clause 17 of the contract between the appellant and the first respondent, we are in no doubt that the law governing the contract and the law governing the rights and obligations of the parties arising from their agreement to arbitrate, and, in particular, their obligations to submit disputes to arbitration and to honour the award, are governed by the law of India; nor is there any dispute in this behalf. Section 47 of the Indian Arbitration Act, 1940, reads thus: "47. Act to apply to all arbitrations. - Subject to the provisions of Section 46, and save in so far as is otherwise provided by any law for the time being in force, the provisions of this Act shall apply to all arbitrations and to all proceedings thereunder" Provided that an arbitration award otherwise obtained may with the consent of all the parties interested be taken into consideration as a compromise or adjustment of a suit by any Court before which the suit ....