TaxTMI 
TaxTMI 
2018 (9) TMI 1705
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the objection related to the maintainability of the application under Section 34 of the Act. It was contended before the High Court that the courts in India do not have the jurisdiction to entertain an application under Section 34 of the Act to challenge the legality of the award in question. The learned Single Judge, vide order dated 9th July, 2015, accepted the preliminary objection and came to hold that in view of the terms of the agreement and the precedents holding the field, the Indian courts have no jurisdiction to entertain the application. Being of this view, the learned Single Judge did not advert to the other grounds urged in the petition. 2. Being grieved by the aforesaid order, the Union of India preferred an appeal under Section 37(2) of the Act before the Division Bench which concurred with the opinion expressed by the learned Single Judge. 3. In appeal by special leave, the two-Judge Bench in Union of India v. Hardy Exploration and Production (India) INC (2018) 7 SCC 374 referred to certain decisions from foreign jurisdictions, namely, Naviera Amazonica Peruana S.A. v. Compania Internacional De Seguros Del Peru (1988) (1) Lloyd's Law Reports 116, Hiscox v. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Judge Bench in the case of Sumitomo Heavy Industries Ltd. vs. ONGC Ltd. & Others (supra) on which great reliance was placed by Mr. Tushar Mehta, learned ASG has lost its efficacy, though approved by another recent decision of Three Judge Bench in Bharat Aluminum Company vs. Kaiser Aluminum Technical Services INC (supra), for the reason that it was rendered under the Arbitration Act, 1940, which now stands repealed by Arbitration Act, 1996 and secondly, it was rendered in relation to Section 9 of the Foreign Awards (Recognition and Enforcement) Act, 1961, which also now stands repealed by 1996 Act. 21. It was his submission that while approving the ratio of Sumitomo Heavy Industries Ltd. (supra) these two factors which have some relevance on its efficacy do not seem to have been examined in the case of Bharat Aluminum Company (supra) . 22. Dr. Singhvi also urged that what is the effect of UNCITRAL Model Law, when they are made part of the arbitration agreement for deciding the question of "seat" has also not been so far decided in any of the earlier decisions." 5. Appreciating the same, the learned Judges opined thus:- "23. In our opinion, though, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation" which read thus:- "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 substantive agreement in which it si usually embedded, capable of surviving the termination of the substantive agreement and susceptible of premature termination by express or implied consent, or by repudiation or frustration, in much the same manner as in more ordinary forms of contract. Since this agreement has a distinct life of its own, it may in principle be governed by a proper law of its own, which need not be the same as the law governing the substantive contact. The second group of obligations, consisting of what is generally referred to as the `curial law' of the arbitration, concerns the manner in which the parties and the arbitrator are required to conduct the reference of a particular dispute. According to the Engli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idual dispute. xxx xxx xxx In the absence of express agreement, there is a strong prima facie presumption tha 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 necessary to determine the seat of the arbitration, by construing the agreement to arbitrate" After reproducing the same, the Court opined:- "We think that our conclusion that the curial law does not apply to the filing of an award in court must, accordingly, hold good. We find support for the conclusion in the extracts from Mustill and Boyd which we have quoted earlier. Where the law governing the conduct of the reference is different from the law governing the underlying arbitration agreement, the court looks to the arbitration agreement to see if the dispute is arbitrable, then to the curial law to see how the reference should be conducted, "and then returns to the first law in order to give effect to the resulting aw....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the said decision. 9. In Bhatia International (supra), a Bench of this Court was dealing with the applicability of Section 9 of the Act and the jurisdiction of the courts in India. Referring to various aspects, the Court held:- "To conclude we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsory apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply." 10. A contention was raised before the Court that when the parties had agreed that the arbitration shall be as per the ICC Rules, by necessary implication, Section 9 would not apply. The learned Judges referred to Article 23 of the ICC Rules and, thereafter, came to hold that:- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h are to be governed by the laws of another country, the parties would be entitled to invoke the provisions of Part I of the aforesaid Act and consequently the application made under Section 11 thereof would be maintainable." 12. In Reliance Industries Ltd. (I), (supra), the appellant had challenged the decision of the High Court of Delhi whereby it had entertained the petition preferred under Section 34 of the Act. The Court scanned the clause relating to "Sole expert, conciliation and arbitration" and the clause that pertained to "applicable law and arbitration" and further other clauses and came to hold that once the parties had consciously agreed that the juridical seat of the arbitration would be at London and that the agreement would be governed by the laws of London, the provisions of Part I of the Act would not be applicable. 13. In Videocon Industries Limited (supra), the Court referred to Section 3 of the English Arbitration Act, 1996 which deals with the seat of arbitration and Section 53 that stipulates the place where the award is treated as made. It referred to the authority in Dozco India P. Ltd. (supra) and, eventually, came to hold that:- "In the pre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....law governing that arbitration is well established in the international instruments, namely, the New York Convention of 1958 and the UNCITRAL Model Law of 1985. It is true that the terms "seat" and "place" are often used interchangeably. In Redfern and Hunter on International Arbitration (Para 3.51), the seat theory is defined thus: "The concept that an arbitration is governed by the law of the place in which it is held, which is the "seat" (or "forum" or locus arbitri) of the arbitration, is well established in both the theory and practice of international arbitration. In fact, the Geneva Protocol, 1923 states: "2. The arbitral procedure, including the constitution of the Arbitral Tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place." The New York Convention maintains the reference to "the law of the country where the arbitration took place" [Article V(1)(d)] and, synonymously to "the law of the country where the award is made" [Articles V(1)(a) and (e)]. The aforesaid observations clearly show that the New York Convention continues the clear territorial link between the place of arbit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....provision in the agreement that any other law would govern the arbitration clause. xxx xxx xxx 48. In the present case, the agreement stipulates that the contract is to be governed and construed according to the English law. This occurs in the arbitration clause. Mr Viswanathan, learned Senior Counsel, would submit that this part has to be interpreted as a part of "curial law" and not as a "proper law" or "substantive law". It is his submission that it cannot be equated with the seat of arbitration. As we perceive, it forms as a part of the arbitration clause. There is ample indication through various phrases like "arbitration in London to apply", arbitrators are to be the members of the "London Arbitration Association" and the contract "to be governed and construed according to the English law". It is worth noting that there is no other stipulation relating to the applicability of any law to the agreement. There is no other clause anywhere in the contract. That apart, it is also postulated that if the dispute is for an amount less than US $50,000 then, the arbitration should be conducted in accordance with small claims procedure of the London Maritime Arbitration....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ries Limited (II), the Court, after referring to various decisions, came to hold that the applicability of Part I of the Act can be excluded by necessary implication if it is found that on the facts of the case, either the juridical seat of the arbitration is outside India or the law governing the arbitration agreement is a law other than Indian law. Referring to the decision in Harmony Innovation Shipping Limited (supra), the Court said:- "20. It is interesting to note that even though the law governing the arbitration agreement was not specified, yet this Court held, having regard to various circumstances, that the seat of arbitration would be London and therefore, by necessary implication, the ratio of Bhatia International would not apply." 19. In Eitzen Bulk A/S (supra), the Court analysed the arbitration clause that stipulated that the disputes under the COA were to be settled and referred to arbitration in London and the English Law would apply. Interpreting the said clause, the Court held:- "33. We are thus of the view that by Clause 28, the parties chose to exclude the application of Part I to the arbitration proceedings between them by choosing London ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that law contains provisions that are mandatory so far as arbitration are concerned, those provisions must be obeyed. It is not a matter of choice any more than the notional motorist is free to choose which local traffic laws to obey and which to disregard"." 20. In IMAX Corporation (supra), interpreting the arbitration clause and the ICC Rules and referring to earlier precedents, the Court ruled:- "39. If in pursuance of the arbitration agreement, the arbitration took place outside India, there is a clear exclusion of Part I of the Arbitration Act. In the present case, the parties expressly agreed that the arbitration will be conducted according to the ICC Rules of Arbitration and left the place of arbitration to be chosen by ICC. ICC in fact, chose London as the seat of arbitration after consulting the parties. The arbitration was held in London without demur from any of the parties. All the awards i.e. the two partial final awards, and the third final award, were made in London and communicated to the parties. We find that this is a clear case of the exclusion of Part I vide Eitzen Bulk A/S, and the decisions referred to and followed therein." 21. In Roger Shashou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Thus, we answer the reference accordingly. 25. Having addressed the reference, we shall advert to the arbitration clause to delineate on whether it ousts the jurisdiction of the courts in India. Article 32 of the arbitration agreement reads as follows:- "32.1 This Contract shall be governed and interpreted in accordance with the laws of India. 32.2 Nothing in this Contract shall entitle the Contractor to exercise the rights, privileges and powers conferred upon it by this Contract in a manner which will contravene the laws of India." 26. Article 33 deals with "Sole expert, conciliation and arbitrator". Article 33.9 and 33.12 read thus:- "33.9 Arbitration proceedings shall be conducted in accordance with the UNICITRAL Model Law on International Commercial Arbitration of 1985 except that in the event of any conflict between the rules and the provisions of this Article 33, the provisions of this Article 33 shall govern. xxx xxx xxx 33.12 The venue of conciliation or arbitration proceedings pursuant to this Article unless the parties otherwise agree, shall be Kuala Lumpur and shall be conducted in English language. Insofar as practi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll state the date and the place of arbitration as determined in accordance with Article 20(1). 30. In IMAX Corporation (supra), there is reference to the ICC Rules and the Rules provide that the place of arbitration shall be fixed by the Court unless agreed upon by the parties. In the said case, the appellant had proposed the venue of Arbitration as Paris in France. The International Court of Arbitration decided that London, United Kingdom would be the juridical seat of arbitration in view of Article 14(1) of the ICC Rules and, therefore, provided on the basis of Part I of the English Arbitration Act, 1996. The three-Judge Bench ruled:- "24. In the present case, the arbitration clause contemplates an award made in pursuance of the ICC Rules without specifying the applicable law for the arbitration agreement. It would therefore be appropriate to hold that the question of validity of the award should be determined in accordance with the law of the State in which the arbitration proceedings have taken place i.e. the English Law. Though for the purposes of this decision we would only hold that the conduct of the parties exclude the applicability of Part I. In other words, w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e at hand, the only aspect that has been highlighted by Mr. C.U. Singh, learned senior counsel, is that the arbitrator held the meeting at Kuala Lumpur and signed the award. That, in our considered opinion, does not amount to determination. The clause is categorical. The sittings at various places are relatable to venue. It cannot be equated with the seat of arbitration or place of arbitration which has a different connotation as has been held in Reliance Industries Ltd. (I), (II) (supra), Harmony Innovation Shipping Limited (supra) and in Roger Shashoua (supra). 33. The word "determination" has to be contextually determined. When a "place" is agreed upon, it gets the status of seat which means the juridical seat. We have already noted that the terms "place" and "seat" are used interchangeably. When only the term "place" is stated or mentioned and no other condition is postulated, it is equivalent to "seat" and that finalises the facet of jurisdiction. But if a condition precedent is attached to the term "place", the said condition has to be satisfied so that the place can become equivalent to seat. In the instant case, as there are two distinct and disjunct riders, either of th....