TaxTMI 
TaxTMI 
2015 (3) TMI 460
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.... limited to the applications to arbitration that takes place in India and has no applicability to arbitration which takes place outside India in view of the pronouncement in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.1(1 (2012) 9 SCC 552) inasmuch as clause 5 of the contract which is the arbitration clause clearly spells out that the contract is to be governed and construed according to English law and if the dispute of the claim does not exceed USD 50,000, the arbitration should be conducted in accordance with small claims procedure of the London Maritime Arbitration Association. 2. Regard being had to the lis in question, suffice it to state that an agreement was entered into between the parties on 20.10.2010 in respect of 24 voyages of coal shipment belonging to the appellant, the first respondent before the High Court, from Indonesia to India. The respondent no. 1 herein, Gupta Coal India Ltd., undertook only 15 voyages and that resulted in disputes which ultimately stood referred to arbitration. Be it noted, an addendum to contract was executed as regards the remaining voyages on 3.4.2013 when disputes arose in respect of the principal/main agreement. As ....
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....ciple cannot be applied to the case on hand. In the case of a declaration, it is supposed to have been the law always and one cannot be heard to say that it has only prospective effect. It is deemed to have been the law at all times. If that be so, the petition before the court below is not maintainable and is only to be dismissed." 7. At the very outset, it is necessary to clear the maze as regards the understanding of the ratio in Bharat Aluminium Co. (supra) by the High Court. In the said case, the Constitution Bench has clearly ruled thus: "197. The judgment in Bhatia International was rendered by this Court on 13-3-2002. 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 Engg. has been rendered on 10-1- 2008 in terms of the ratio of the decision in Bhatia International. 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." The aforesaid judgment by the Constitution Bench was decided on September 6, 2012. In the instant case, the arbitration ag....
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....y 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." [Emphasis supplied] After the said conclusion was recorded, the stand of the learned senior counsel for the appellant was put thus:- "Faced with this situation Mr Sen submits that, in this case the parties had agreed that the arbitration be as per the Rules of ICC. He submits that thus by necessary implication Section 9 would not apply. In our view, in such cases the question would be whether Section 9 gets excluded by the ICC Rules of Arbitration. Article 23 of the ICC Rules reads as follows:- Conservatory and interim measures 1. Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an awa....
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....rt I will not apply to international commercial arbitrations which take place outside India the effect 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 (sic allow) 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 nonderogable provisions of Part I can be excluded. Such an agreement may be express or implied." 33. The very fact that the judgment holds that it would be open to the parties to exclude the application of the provisions of Part I by express or implied agreement, would mean that otherwise the whole of Part I would apply. In any event, to apply Section 34 to foreign international awards would not be inconsistent with Section 48 of the Act, or any other provision of Part II as a situation may arise, where, even in respect of properties situate in India and where an award would be invalid if opposed to the public policy of India, merely be....
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....erpreted by the Court not to exclude either expressly or impliedly the applicability of Part I of the Act. 11. In this context, it will be useful to refer to the decision in Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd.( 4 (2008) 10 SCC 308) wherein the designated Judge was called to decide the issue of appointment of sole arbitrator. The arbitration clause read as follows:- "13. Settlement of disputes 13.1. This agreement, its construction, validity and performance shall be governed by and constructed in accordance with the laws of England and Wales; 13.2. Subject to Clause 13.3 all disputes or differences arising out of, or in connection with, this agreement which cannot be settled amicably by the parties shall be referred to adjudication; 13.3. If any dispute or difference under this agreement touches or concerns any dispute or difference under either of the sub-contract agreements, then the parties agree that such dispute or difference hereunder will be referred to the adjudicator or the courts as the case may be appointed to decide the dispute or difference under the relevant sub-contract agreement and the parties hereto agree to abide by such decision as if....
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....nior counsel appearing for the respondents would submit that when the juridical seat is in London, Part I of the Act would not be applicable. To bolster the aforesaid submission, he has placed reliance on Reliance Industries Limited and Another v. Union of India(8 (2014) 7 SCC 603). It is also urged by Mr. Giri, learned senior counsel that after the principal agreement, an addendum was executed between the parties after pronouncement of the decision in Bharat Aluminium Co. case and, therefore, the principles laid down in Bhatia International (supra) would not be applicable. 15. It is seemly to exposit the controversy and to appreciate what has been laid down in the case of Reliance Industries Limited (supra). The appellant in the said case has assailed the judgment of the High Court of Delhi whereby the High Court had allowed the petition filed by the respondent under Section 34 of the Act, challenging the final partial award, whereby the objections raised by the Union of India relating to the arbitrability of the claims made by the petitioner therein in respect of royalties, cess, service tax and CAG audit were rejected. The Court referred to various agreements entered into betwe....
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....n agreements in Article 33 of the PSCs shall remain in full force and effect and be applicable in this arbitration." 18. The respondent, Union of India, had invoked the jurisdiction of the Delhi High Court by stating that the terms of the PSCs entered would manifest an unmistakable intention of the parties to be governed by the laws of India and more particularly the Arbitration Act, 1996; that the contracts were signed and executed in India; that the subject-matter of the contracts, namely, the Panna Mukta and the Tapti fields are situated within India; that the obligations under the contracts had been for the past more than 15 years performed within India; that the contracts stipulate that they "shall be governed and interpreted in accordance with the laws of India"; that they also provided that "nothing in this contract" shall entitle either of the parties to exercise the rights, privileges and powers conferred upon them by the contract "in a manner which will contravene the laws of India" (Article 32.2); and that the contracts further stipulate that "the companies and the operations under this contract shall be subject to all fiscal legislation of India" (Article 15.1)". 19. ....
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....f the Act. In that context, the Court referred to paragraph 32 of Bhatia International case and, thereafter, analysed the relevant articles of the PSC to discover the real intention of the parties as to whether the provisions of the Act had been excluded. The Court referred to Articles 32.1 and 32.2 that dealt with the applicable law and language of the contract. Article 32.1 provided that the proper law of the contract would be law of India and under Article 32.2 made a declaration none of the provisions contained in the contract would entitle either the Government or the contractor to exercise the rights, privileges and powers conferred upon it by the contract in a manner which would contravene the laws of India. The Court observed that the basis of controversy involved in the case pertain to analysis of the anatomy of the Article 33.12 which provided that venue of the arbitration shall be London and that the arbitration agreement shall be governed by the laws of England. That apart, the parties had agreed that juridical seat or legal place of arbitration for the purpose initiated under the claimants' notice of arbitration would be at London. The Court posed the question whether ....
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....ocon 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 was 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 of the seat of arbitration to London cannot be interpreted as anything except physical change of the venue of arbitration from Kuala Lumpur to London." 48. The other issue considered by this Court in Videocon Industries Lt....
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.... the parties could not have altered the seat of arbitration without making the necessary amendment to the PSC. In the present appeal, necessary amendment has been made in the PSC. Based on the aforesaid amendment, the Arbitral Tribunal has rendered the final partial consent award of 14-9-2011 recording that the juridical seat (or legal place) of the arbitration for the purposes of arbitration initiated under the claimants' notice of arbitration dated 16-12-2010 shall be London, England. Furthermore, the judgment in Videocon Industries is subsequent to Venture Global. We are, therefore, bound by the ratio laid down in Videocon Industries Ltd." 24. The Court also referred to Bharat Aluminium Co. (supra), especially para 123, which is as follows: "123. ... '... an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy ... as to the validity of an 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] 25. The two-Judge Bench referred to Dozco India Private Ltd. v. Doosan Infracore Company Ltd. (10 (2011) 6 SCC 179), Sumitomo Heavy....
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....the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply. Elaborating further, it proceeded to lay down thus: "In this case, the parties have by agreement provided that the juridical seat of arbitration will be in London. On the basis of the aforesaid agreement, necessary amendment has been made in the PSCs. On the basis of the agreement and the consent of the parties, the Arbitral Tribunal has made the "final partial consent award" on 14-9- 2011 fixing the juridical seat (or legal place) of arbitration for the purposes of arbitration initiated under the claimants' notice of arbitration dated 16-12-2010 in London, England. To make it even further clear that the award also records that any hearing in the arbitration may take place in Paris, France, Singapore or any other location the Tribunal considers convenient. Article 33.12 stipulates that arbitration proceedings shall be conducted in English language. The arbitration agreement contained in Article 33 shall be governed by the laws of England. A combined effect of all these factors would clearly show that the parties have by express agreement excluded the applicabi....
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....governed and interpreted under the laws of India. So far as the alternative dispute redressal agreement i.e. the arbitration agreement is concerned, it would be governed by the laws of England. There is no basis on which the respondents can be heard to say that the applicability of laws of England related only to the conduct of arbitration reference. The law governing the conduct of the arbitration is interchangeably referred to as the curial law or procedural law or the lex fori. The delineation of the three operative laws as given in Naviera Amazonica has been specifically followed by this Court in Sumitomo. The Court also, upon a survey, of a number of decisions rendered by the English courts and after referring to the views expressed by learned commentators on international commercial arbitration concluded that: 16. 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." 28. After so holding, the Court referred to the legal position stated in Dozco's case wherein it has been ruled thus: "In the backdrop of these conflicting claims, the quest....
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....law. Therefore, the remedy against the award will have to be sought in England, where the juridical seat is located. However, we accept the submission of the appellant that since the substantive law governing the contract is Indian law, even the courts in England, in case the arbitrability is challenged, will have to decide the issue by applying Indian law viz. the principle of public policy, etc. as it prevails in Indian law." 30. We have dealt with the said decision as it has taken note of all the pronouncements in the field and further, Mr. Giri, learned senior counsel appearing for the respondents would heavily rely on it and Mr. Viwanathan, learned senior counsel would leave no stone unturned to distinguish the same on the factual foundation especially in reference to the arbitration clause. 31. At this juncture, it is profitable to note that in Reliance Industries Ltd. (supra), the authority in Venture Global Engg. (supra) has been distinguished by taking note of the various clauses in the agreement and opined that as there was a non obstante clause in the agreement hence, the claim of the appellant therein can be enforced in India. 32. In view of the aforesaid proposition....
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.... what would have been the intention of reasonable parties in the position of the actual parties to the contract. Learned senior counsel would also contend that the concept of fair result has to be kept in view while construing a contract. To buttress the aforesaid submissions, he has drawn inspiration from Kim Lewison's The Interpretation of Contracts, pages 26, 41, 110 and 217 wherein various judgments have been referred. 35. The issue has to be tested, as we perceive, on the parameters of law laid down in the cases of Videocon Industries Ltd. (supra), Dozco (supra) and Reliance Industries Ltd. (supra). 36. In Videocon Industries Ltd. (supra), the Court has referred to Section 3 of the English Arbitration Act, 1996, which reads as follows: "3. The seat of the arbitration.-In this Part 'the seat of the arbitration' means the juridical seat of the arbitration designated- (a) by the parties to the arbitration agreement, or (b) by any arbitral or other institution or person vested by the parties with powers in that regard, or (c) by the Arbitral Tribunal if so authorised by the parties, or determined, in the absence of any such designation, having regard to the parties' ag....
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.... (supra) and held thus: "19. In respect of the bracketed portion in Article 23.1, however, it is to be seen that it was observed in Naviera case: "... It seems clear that the submissions advanced below confused the legal 'seat', etc. of an arbitration with the geographically convenient place or places for holding hearings. This distinction is nowadays a common feature of international arbitrations and is helpfully explained in Redfern and Hunter in the following passage under the heading 'The Place of Arbitration': 'The preceding discussion has been on the basis that there is only one "place" of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of reference or the minutes of proceedings or in some other way as the place or "seat" of the arbitration. This does not mean, however, that the Arbitral Tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is by no means unusual for an Arbitral Tribunal to hold meetings....
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....law which is to govern the arbitration itself. While the proper law is the law which governs the agreement itself, in the absence of any other stipulation in the arbitration clause as to which law would apply in respect of the arbitral proceedings, it is now well settled that it is the law governing the contract which would also be the law applicable to the Arbitral Tribunal itself. Clause 27.1 makes it quite clear that the curial law which regulates the procedure to be adopted in conducting the arbitration would be the SIAC Rules. There is, therefore, no ambiguity that the SIAC Rules would be the curial law of the arbitration proceedings. It also happens that the parties had agreed to make Singapore the seat of arbitration. Clause 27.1 indicates that the arbitration proceedings are to be conducted in accordance with the SIAC Rules." [Emphasis supplied] 39. After so stating, the Court posed the question whether in such a case, the provisions of Section 2(2), which indicates that Part I of the Act would apply, where the place of arbitration is India, would be a bar to the invocation of provisions of Sections 34 and 27 of the Act, which have been conducted in Singapore. The Court re....
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....ed 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 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 and Gas Ltd. v. Hindustan Oil Exploration Co. Ltd. (20 (2006) 1 Guj LR 658)" 41. Coming to the stipulations in the present arbitration clause, it is clear as day that if any dispute or difference would arise under the charter, arbitration in London to apply; that the arbitrators are to be commercial men who are members of London Arbitration Association; the contract is to be construed and governed by English Law; and that the arbitration should be conducted, if the claim is for a lesser sum, in accordance with small claims p....
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....where in the contract. That apart, it is also postulated that if the dispute is for an amount less that US $ 50000 then, the arbitration should be conducted in accordance with small claims procedure of the London Maritime Arbitration Association. When the aforesaid stipulations are read and appreciated in the contextual perspective, "the presumed intention" of the parties is clear as crystal that the juridical seat of arbitration would be London. In this context, a passage from Mitsubishi Heavy Industries Ltd. v. Gulf Bank (21 [1997] 1 Lloyd's Rep. 343) is worth reproducing: "It is of course both useful and frequently necessary when construing a clause in a contract to have regard to the overall commercial purpose of the contract in the broad sense of the type and general content, the relationship of the parties and such common commercial purpose as may clearly emerge from such an exercise. However, it does not seem to me to be a proper approach to the construction of a default clause in a commercial contract to seek or purport to elicit some selfcontained 'commercial purpose' underlying the clause which is or may be wider than the ordinary or usual construction of the words of ea....