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2016 (12) TMI 1676
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....ing out of SLP (C) No. 18611/2004 filed by M/s. Centrotrade Minerals and Metal Inc., is dismissed and Civil Appeal arising out of SLP (C) No. 21340 of 2005 (actually 2004) preferred by Hindustan Copper Ltd. is allowed. In the peculiar facts and circumstances of the case, the parties shall pay and bear their own costs. Hon'ble Mr. Justice Tarun Chatterjee pronounced His Lordship's judgment disposing of the appeals in terms of the signed judgment. In view of difference of opinion, the matter is referred to a larger Bench for consideration. The Registry of this Court shall place the matter before the Hon'ble the Chief Justice for constitution of a larger Bench. The decisions rendered by Justice Sinha and Justice Chatterjee are reported as Centrotrade Minerals & Metals Inc. v. Hindustan Copper Ltd. (2006) 11 SCC 245. 2. Since the facts of the case have been detailed by both the learned judges in their separate judgments, it is not necessary for us to detail them for the third time. What is necessary to state, however, is that the parties had entered into a contract and some disputes and differences arose between them. The contract contained an arbitration ....
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....trade? If so, what is the relief that Centrotrade is entitled to? For the present, we propose to address only the first question and depending upon the answer, the appeals would be set down for hearing on the remaining issue. We have adopted this somewhat unusual course since the roster of business allowed us to hear the appeals only sporadically and therefore the proceedings before us dragged on for about three months. Appreciating Clause 14 of the contract 6. At the outset, it is necessary to appreciate the parties' intention when they agreed upon the arbitration Clause in the contract. A plain reading of the arbitration Clause suggests that the contracting parties intended: (a) Firstly, a settlement of their disputes or differences by arbitration in India through an arbitration panel of the Indian Council of Arbitration and in accordance with the Rules of Arbitration of the Indian Council of Arbitration, and (b) Secondly, if either of the contracting parties was in disagreement with the 'arbitration result' in India, then the aggrieved party would have a right to appeal to a second arbitration in London in accordance with the Rules of Conciliation and Arbitr....
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....ard of the arbitration panel of the Indian Council of Arbitration and an award that could be enforced in accordance with the laws of India, that is, the Arbitration and Conciliation Act, 1996 (for short 'the A&C Act'). 9. The general principle that we have accepted is supported by two passages in Comparative International Commercial Arbitration.1 In paragraph 24-3 thereof reference is made to Article 31(1) of the United Nations Commission on International Trade Law (or UNCITRAL) Rules to suggest that while all awards are decisions of the arbitral tribunal, all decisions of the arbitral tribunal are not awards. Similarly, while a decision is generic, an award is a more specific decision that affects the rights of the parties, has important consequences and can be enforced. The distinction between an award and a decision of an arbitral tribunal is summarized in Paragraph 24-13. It is observed that an award: (i) concludes the dispute as to the specific issue determined in the award so that it has res judicata effect between the parties; if it is a final award, it terminates the tribunal's jurisdiction; (ii) disposes of parties' respective claims; (....
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....earned Counsel for Centrotrade is that in any event on being dissatisfied with the arbitration result, the second part of Clause 14 of the agreement entitles the aggrieved party to appeal to a second arbitration in London in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. However, according to learned Counsel for HCL the second part of Clause 14 of the contract is contrary to the laws of India. 14. In our opinion the plain language of Clause 14 specifically provides for a second arbitration, in the form of an 'appeal' against the award of the arbitration panel of the Indian Council of Arbitration. We do not think it necessary to labour on this issue, given the express words used in Clause 14. For the record, we may note that learned Counsel for HCL spent considerable time on explaining that the right to file an appeal can only be created by a statute and not by an agreement between the parties. This may be so in respect of litigation initiated in courts under a statute or for the enforcement of common law rights, but that does not prevent parties from entering into an agreement providing for non-statutory appeals so tha....
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....eans of recourse against an award. [Emphasis supplied by us]. This view also throws open the issue of party autonomy, which we will advert to a little later. But for the present, we may also refer to the Handbook of Arbitration Practice5 in which a reference is made to a two-tier system of arbitration particularly in commodity trade in the following words: .....Fundamental and ancient feature of commodity trade arbitration is the two tier system whereby the first arbitration is held speedily and relatively informally and results in the issuance of an award, which, subject to time limits, can be appealed by a dissatisfied party to a board of appeal of the relevant association. This gives a party two bites at the cherry and the arbitral process is not deemed to be concluded until the board of appeal has issued its final award.......In two tier systems, the awards of the tribunal, sole arbitrator or umpire are usually called awards of arbitration, to distinguish them from appeal awards issued by boards of appeal. 18. Our attention has also been drawn to several jurisdictions in which the statutory acceptance of a two-tier system of arbitration is prevalent, but it....
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....elf-contained code and exhaustive, then it must also be held, using the lucid expression of Tulzapurkar, J., that it carries with it "a negative import that only such acts as are mentioned in the Act are permissible to be done and acts or things not mentioned therein are not permissible to be done". In other words, a letters patent appeal would be excluded by the application of one of the general principles that where the special Act sets out a self-contained code the applicability of the general law procedure would be impliedly excluded. 22. On the other hand, in ITI Ltd. v. Siemens Public Communications Network Ltd. (2002) 5 SCC 510 the question before this Court was whether the provisions of the Code of Civil Procedure were applicable to the A&C Act or not. In response, this Court observed10 that since there was no express provision excluding the provisions of the Code in the A&C Act, it cannot be held by inference that the provisions of the Code were inapplicable. 23. In any event, we are afraid the passage referred to by the learned Counsel from Fuerst Day Lawson has been misunderstood and is even otherwise inapposite since we are not concerned with a statutory appeal bu....
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....ions of Sub-section (1) of Section 34 and then to Sections 35 and 36 of the A&C Act. These read as follows: 34. Application for setting aside arbitral award.--(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3). 35. Finality of arbitral awards.--Subject to this Part an arbitral award shall be final and binding on the parties and persons claiming under them respectively. 36. Enforcement. (1) Where the time for making an application to set aside the arbitral award Under Section 34 has expired, then, subject to the provisions of Sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the court. (2) Where an application to set aside the arbitral award has been filed in the Court Under Section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of Sub-section....
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....n arbitral award to mutually agree to a procedure whereby the arbitral award might be reconsidered by another arbitrator or panel of arbitrators by way of an appeal and the result of that appeal is accepted by the parties to be final and binding subject to a challenge provided for by the A&C Act. This is precisely what the parties have in fact agreed upon and we see no difficulty in honouring their mutual decision and accepting the validity of their agreement. 28. The fact that recourse to a court is available to a party for challenging an award does not ipso facto prohibit the parties from mutually agreeing to a second look at an award with the intention of an early settlement of disputes and differences. The intention of Section 34 of the A&C Act and of the international arbitration community is to avoid subjecting a party to an arbitration agreement to challenges to an award in multiple forums, say by way of proceedings in a civil court as well under the arbitration statute. The intention is not to throttle the autonomy of the parties or preclude them from adopting any other acceptable method of redressal such as an appellate arbitration. In this context, the view expressed i....
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....low only one type of recourse, to the exclusion of any other recourse regulated in any procedural law of the State in question. Article 34(1) provides that the sole recourse against an arbitral award is by application for setting aside, which must be made within three months of receipt of the award (Article 34(3)). In regulating "recourse" (i.e., the means through which a party may actively "attack" the award), Article 34 does not preclude a party from seeking court control by way of defence in enforcement proceedings (Articles 35 and 36). Article 34 is limited to action before a court (i.e., an organ of the judicial system of a State). However, a party is not precluded from appealing to an arbitral tribunal of second instance if the parties have agreed on such a possibility (as is common in certain commodity trades). [Emphasis supplied by us]. 30. Learned Counsel for HCL contended that since an award of the first instance is final and binding on the parties Under Section 35 of the A&C Act there cannot be an 'appeal' provision in the agreement between the contracting parties. The "final and binding" nature of an arbitral award (postulated by Section 35 of the A&C A....
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....r." This conclusion, according to the learned Judge, is based upon the elementary principle that, as between the parties and their privies, an award is entitled to that respect which is due to the judgment of a court of last resort. Therefore, if the award which has been pronounced between the parties has, in fact, or can, in law, be deemed to have dealt with the present dispute, the second reference would be incompetent. This position also has not been and cannot be seriously disputed. [Emphasis supplied by us]. 32. This Court held that the above decision stated the correct position in law and was binding. This Court further adverted to paragraph 7 of Schedule I to the Arbitration Act, 1940 to state: ....We may mention that no comment was made in these cases on the provisions of para 7 of Schedule 1 to the Act. This para provides: 7. The award shall be final and binding on the parties and persons claiming under them respectively. If the award is final and binding on the parties it can hardly be said that it is a waste paper unless it is made a Rule of the Court. 33. In a separate opinion Justice Hedge held as follows: ....
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....ation Rules and Regulations was under consideration. Several other instances could be cited but that is not necessary. There are several decisions of several High Courts to the same effect and we see no error in the implicit acceptance of the general principle of two-tier arbitrations. Party autonomy 36. Party autonomy is virtually the backbone of arbitrations. This Court has expressed this view in quite a few decisions. In two significant passages in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.18 this Court dealt with party autonomy from the point of view of the contracting parties and its importance in commercial contracts. In paragraph 5 of the Report, it was observed: Party autonomy being the brooding and guiding spirit in arbitration, the parties are free to agree on application of three different laws governing their entire contract -- (1) proper law of contract, (2) proper law of arbitration agreement, and (3) proper law of the conduct of arbitration, which is popularly and in legal parlance known as "curial law". The interplay and application of these different laws to an arbitration has been succinctly explained by this Court in Sumitomo ....
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....r expense would frustrate the very purpose of arbitration. Interestingly, the second principle which is recognised in the Act is the party autonomy in the choice of procedure. This means that if a particular procedure is prescribed in the arbitration agreement which the parties have agreed to, that has to be generally resorted to. [Emphasis supplied by us]. 38. This is also the view taken in Law and Practice of International Commercial Arbitration20 wherein it is said: Party autonomy is the guiding principle in determining the procedure to be followed in an international arbitration. It is a principle that is endorsed not only in national laws, but also by international arbitral institutions worldwide, as well as by international instruments such as the New York Convention and the Model Law. 39. However, the authors in Comparative International Commercial Arbitration21 go a step further in that, apart from procedure, they say that party autonomy permits parties to have their choice of substantive law as well. It is said: All modern arbitration laws recognise party autonomy, that is, parties are free to determine the substantive law or Rules applicable ....
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.... fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) if it is patently illegal. 44. For the present we are concerned only with the fundamental or public policy of India. Even assuming the broad delineation of the fundamental policy of India as stated in Associate Builders we do not find anything fundamentally objectionable in the parties preferring and accepting the two-tier arbitration system. The parties to the contract have not by-passed any mandatory provision of the A&C Act and were aware, or at least ought to have been aware that they could have agreed upon the finality of an award given by the arbitration panel of the Indian Council of Arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration. Yet they voluntarily and deliberately chose to agree upon a second or appellate arbitration in London, UK in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. There is nothing in the A&C Act that prohibits the contracting parties from agreeing upon a second instance or appellate arbitration-either explicitly ....
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....2002] 104 (4) Bom L.R. 932, Amin Merchant v. Bipin M. Gandhi 2005 (Suppl.) Arb. LR 337, Dhansukh K. Sethia v. Rajendra Capital Services Ltd. 2008 (1) Arb. LR 368 (Bombay), Dowell Leasing & Finance Ltd. v. Radheshyam B. Khandelwal 2008 (1) Bom C.R. 768, ANS Pvt. Ltd. v. Jayesh R. Ajmera 2014 SCC Online Bom 1825 and Ankit Bimal Deorah v. Microsec Capital Ltd. 2015 SCC Online Bom 4538 9 Steel Authority of India Ltd. v. Engineers Project Ltd. 2014 SCC Online Del 2314 U.P. Rajya Vidyut Utpadan Nigam Ltd. v. Union of India MANU/DE/3452/2015 and Rakesh Kumar Garg v. DSE Financial Service Ltd. MANU/DE/3339/2015 10 Per Justice Santosh Hegde with Justice D.M. Dharmadhikari concurring 11 Eighteenth Session, Vienna, 3-21 June 1985, A/CN.9/264 (25th March 1985) 12 Article 34. Application for setting aside as exclusive recourse against arbitral award (i) Recourse to a court against an arbitral award made [in the territory of this State] [under this Law] may be made only by an application for setting aside in accordance with paragraphs (2) and (3) of this article. 13 A/CN. 91264, 25 March 1985 https://documents-dds-ny.un.org/doc/UNDOC/GEN/V85/267/01/PDF/V8526701.pdf?Ope....