TaxTMI 
TaxTMI 
2017 (7) TMI 1446
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....referred Under Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity, 'the Act') together and it was required to advert to the "seat of arbitration and venue of arbitration" to determine the maintainability of the petition in the Courts of India. That apart, the High Court was obliged to dwell upon the territorial jurisdiction of a petition Under Section 34 of the Act at Gautam Budh Nagar, Uttar Pradesh or High Court of Delhi, in case the Courts in India have the jurisdiction to deal with the objections as postulated under Part I of the Act. Be it noted, a petition Under Section 34 of the Act was filed before the learned District Judge, Gautam Budh Nagar, Uttar Pradesh who vide order dated 06.07.2011 had not entertained the application on the ground of lack of territorial jurisdiction and returned it to be filed before the appropriate Court and the appeal arising therefrom, that is, FAO (D) 1304 of 2011, filed before the High Court of Allahabad was dismissed on the ground of maintainability. Thereafter, Writ Petition No. 20945 of 2014 was filed challenging the order dated 06.07.2011 of the District Judge, Gautam Budh Nagar. In the meantime, a petition Under ....
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....Court the Appellant took the stand that the application Under Section 34 was not maintainable since Part I of the Act is not applicable regard being had to the arbitration Clause in the agreement from which it is discernible that the courts in London have jurisdiction. Learned single Judge by the impugned order came to hold that application filed Under Section 34 of the Act is maintainable and the Delhi High Court has the territorial jurisdiction to deal with the same and accordingly directed the objection to be filed Under Section 34 before the Court. 4. We may immediately state here that Special Leave Petition (Civil) Nos. 22318-22321 of 2010 had been de-tagged vide order dated 15.02.2017 passed by the Court. 5. Regard being had to what we have stated hereinbefore, as required at present, we shall only dwell upon the applicability of Part I or Part II of the Act to the controversy in question. If Part I is applicable, then we will be obliged to advert to the issue of territorial jurisdiction of Delhi or that of Gautam Budh Nagar, Uttar Pradesh. If Part II would be applicable, then the said issue will not warrant any deliberation. 6. Criticising the impugned order, Mr. Ra....
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....jurisdiction. 8. To appreciate the controversy, it is necessary to take note of the fact that the agreement has been executed before delivery of the judgment, that is, 12.9.2012, by the Constitution Bench in BALCO and, therefore, the principle stated in Bhatia International v. Bulk Trading S.A. and Anr. (2002) 4 SCC 105 is applicable and for the said purpose what has been stated in Bhatia International (supra) has to be appositely appreciated and understood. In Bhatia International (supra), an application was preferred Under Section 9 of the Act before the learned IIIrd Additional District Judge, Indore, Madhya Pradesh and the Appellant therein had raised the plea of maintainability of such an application on the ground that Part I of the Act would not apply where the place of arbitration is not in India. The Court referred to various provisions of the Act and came to hold thus: 32. 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 compulsorily apply and parties are free to deviate only to the extent permitted by the derogable p....
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....rim and conservatory measures and, therefore, in such cases an application could be made Under Section 9 of the Act. Eventual conclusion that was recorded by the three-Judge Bench is as under: 35. ...in our view a proper and conjoint reading of all the provisions indicates that Part I is to apply also to international commercial arbitrations which take place out of India, unless the parties by agreement, express or implied, exclude it or any of its provisions. Such an interpretation does not lead to any conflict between any of the provisions of the said Act. On this interpretation there are no lacunae in the said Act. This interpretation also does not leave a party remediless.... 11. In Venture Global Engineering v. Satyam Computer Services Ltd. (2008) 4 SCC 190 the Court followed the principle stated in Bhatia International (supra). Elucidating the principle of Bhatia International (supra), the Court stated: 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....
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....ence 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 it were a decision under this agreement. 14. The Court referred to the authority in Bhatia International (supra) and Lesotho Highlands Development Authority v. Impregilo SpA (2005) 3 ALL ER 789, and came to hold that it is fairly well settled that when an arbitration agreement is silent as to the law and procedure to be followed in implementing the arbitration agreement, the law governing the said agreement would ordinarily be the same as the law governing the contract itself. The Court referred to Singer Co. (supra) and held that the proposition stated therein lent support to the view it had expressed. Thereafter, it noted that in Bhatia International (supra) this Court had laid down the proposition that notwithstanding the provisions of Section 2(2) of the Act, indicating that Part I ....
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....ectively to all the arbitration agreements executed from the date of the delivery of the judgment. 18. After the said judgment was delivered, the issue arose before this Court whether the parties to the agreement have expressly or impliedly excluded Part I of the Act. Reference to the said authorities is seemly to appreciate the perspective of this Court pertaining to exclusion of Part I of the Act. 19. In Reliance Industries Limited and Anr. v. Union of India (2014) 7 SCC 603, the order of the High Court allowing the objections preferred by the Union of India pertaining to arbitrability of the claims made by the Petitioner therein in respect of royalties, cess, service tax and CAG audit was rejected and for the said purpose, the Court referred to various agreements entered into between the parties. The issue that arose before this Court is whether Part I of the Act was excluded or not. The Court reproduced the relevant part of Article 33 and the Clause that dealt with final partial award as to "seat". It took note of the fact that jurisdiction of the High Court of Delhi was invoked by the Union of India contending, inter alia, that the terms of the PSCs entered would manifes....
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....ation for the purpose initiated under the claimants' notice of arbitration would be London. The Court posed the question whether such stipulations excluded the applicability of the Part I of the Act or not. In its ultimate analysis, it repelled the contention that there had neither been any express nor implied exclusion of Part I of the Act and ruled: 43. ...In our opinion, the expression 'laws of India' as used in Articles 32.1 and 32.2 has a reference only to the contractual obligations to be performed by the parties under the substantive contract i.e. PSC. In other words, the provisions contained in Article 33.12 are not governed by the provisions contained in Article 32.1. It must be emphasised that Article 32.1 has been made subject to the provision of Article 33.12. Article 33.12 specifically provides that the arbitration agreement shall be governed by the laws of England. The two articles are particular in laying down that the contractual obligations with regard to the exploration of oil and gas under the PSC shall be governed and interpreted in accordance with the laws of India. In contradistinction, Article 33.12 specifically provides that the arbitrat....
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....f arbitration from Kuala Lumpur to London. 48. The other issue considered by this Court in Videocon Industries Ltd. was as to whether a petition Under Section 9 of the Arbitration Act, 1996 would be maintainable in the Delhi High Court, the parties having specifically agreed that the arbitration agreement would be governed by the English law. This issue was decided against the Union of India and it was held that the Delhi High Court did not have the jurisdiction to entertain the petition filed by the Union of India Under Section 9 of the Arbitration Act. 22. It is condign to note here that while discussing about the ratio in Videocon Industries Limited (supra), the Court studiedly scrutinized the agreement, mainly the relevant parts of Articles 33, 34 and 35 and opined: 50. ...The arbitration agreement in this appeal is identical to the arbitration agreement in Videocon Industries. In fact, the factual situation in the present appeal is on a stronger footing than in Videocon Industries Ltd. As noticed earlier, in Videocon Industries, this Court concluded that the parties could not have altered the seat of arbitration without making the necessary amendment to th....
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....esaid decision is that stipulations in the agreement are required to be studiedly analysed and appropriately appreciated for the purpose of arriving at whether there is express or implied exclusion and further meaning of the term "seat of arbitration". The Court has also ruled that it is necessary to avoid inconsistency between the provisions in the agreement and Part I of the Act. 26. At this juncture, we may state that there are other subsequent authorities that have dealt with express or implied exclusion. There are also authorities which have declined to accept the stance of implied exclusion. We shall refer to the same at the subsequent stage when we shall refer to the Share Holders Agreement (SHA) and appreciate what interpretation needs to be placed on the Clause relating to arbitration. Prior to that we are disposed to think to address the issue as regards the approval of Shashoua principle in BALCO and the legal acceptability of the observations made by the two-Judge Bench in Enercon (India) Ltd. (supra) or it is per incuriam as is proponed by the learned senior Counsel for the Respondents. 27. The Constitution Bench in BALCO has referred to the observations in Braes....
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.... persuaded that it would be wrong in principle to allow this and that it would create undue practical problems in any event. On the basis of what I have already decided, England is the seat of the arbitration and since this carries with it something akin to an exclusive jurisdiction clause, as a matter of principle the foreign court should not decide matters which are for this Court to decide in the context of an anti-suit injunction. In making the aforesaid observations in (Shashoua case), the Court relied on judgments of the Court of Appeal in C v. D 2008 Bus LR 843 : 2007 EWCA Civ 1282 (CA). 28. The Constitution Bench analyzed the facts of C v. D (supra) which related to an order passed under the insurance policy which provided "any dispute arising under this policy shall be finally and fully determined in London, England under the provisions of the English Arbitration Act, 1950 as amended" and that "this policy shall be governed by and construed in accordance with the internal laws of the State of New York...." (Bus LR p. 847, para 2). In the said case, a partial award was made in favour of the claimant. It was agreed that the partial award is, in England law terms,....
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.... deal with Mr. Hirst's arguments in due course but, in my judgment, they fail to grapple with the central point at issue which is whether or not, by choosing London as the seat of the arbitration, the parties must be taken to have agreed that proceedings on the award should be only those permitted by English law. In my view they must be taken to have so agreed for the reasons given by the Judge. The whole purpose of the balance achieved by the Bermuda Form (English arbitration but applying New York law to issues arising under the policy) is that judicial remedies in respect of the award should be those permitted by English law and only those so permitted. Mr. Hirst could not say (and did not say) that English judicial remedies for lack of jurisdiction on procedural irregularities Under Sections 67 and 68 of the Arbitration Act, 1996 were not permitted; he was reduced to saying that New York judicial remedies were also permitted. That, however, would be a recipe for litigation and (what is worse) confusion which cannot have been intended by the parties. No doubt New York law has its own judicial remedies for want of jurisdiction and serious irregularity but it could scarcely be ....
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....gdom" whilst providing that the arbitration proceedings should be conducted in English in accordance with ICC Rules and that the governing law of the Shareholders Agreement itself would be the laws of India. It is accepted by both parties that the concept of the seat is one which is fundamental to the operation of the Arbitration Act and that the seat can be different from the venue in which arbitration hearings take place. It is certainly not unknown for hearings to take place in an arbitration in more than one jurisdiction for reasons of convenience of the parties or witnesses. The claimants submitted that in the ordinary way, however, if the arbitration agreement provided for a venue, that would constitute the seat. If a venue was named but there was to be a different juridical seat, it would be expected that the seat would also be specifically named. Notwithstanding the authorities cited by the Defendant, I consider that there is great force in this. The Defendant submits however that as "venue" is not synonymous with "seat", there is no designation of the seat of the arbitration by Clause 14.4 and, in the absence of any designation, when regard is had to the parties' agree....
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.... the courts here which many parties are keen to adopt. When therefore there is an express designation of the arbitration venue as London and no designation of any alternative place as the seat, combined with a supranational body of Rules governing the arbitration and no other significant contrary indicia, the inexorable conclusion is, to my mind, that London is the juridical seat and English law the curial law. In my judgment it is clear that either London has been designated by the parties to the arbitration agreement as the seat of the arbitration or, having regard to the parties' agreement and all the relevant circumstances, it is the seat to be determined in accordance with the final fall back provision of Section 3 of the Arbitration Act. And again: 37. None of this has any application to the position as between England and India. The body of law which establishes that an agreement to the seat of an arbitration is akin to an exclusive jurisdiction Clause remains good law. If the Defendant is right, C v. D would now have to be decided differently. Both the USA (with which C v. D was concerned) and India are parties to the New York Convention, but the basis of th....
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.... London and no designation of any alternative place as the seat, combined with a supernational body of Rules governing the arbitration and no other significant contrary indicia, the inexorable conclusion is, to my mind, that London is the juridical seat and English law the curial law" is contrary to the principles stated in Bhatia International (supra). He has also pointed out that the view that "... in an arbitration Clause which provides for arbitration to be conducted in accordance with the Rules of the ICC in Paris (a supernational body of rules), a provision that the venue of the arbitration shall be London, United Kingdom does amount to the designation of a juridical seat" is contrary to the Indian law. He further urged that the lis had arisen from an anti-suit injunction and the Court itself had observed that a mini trial would be required, and hence, the said ruling cannot be binding on the parties. Learned senior Counsel would submit that the view expressed in Enercon (India) Ltd. (supra) that the opinion of Justice Cooke, who had simply followed the principles laid down in C v. D (supra), another anti-suit injunction matter, approvingly quoted by the Constitution Bench in....
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....(India) Ltd. to that extent deserves to be treated as per incuriam. 40. In this regard, we may usefully refer to the decision in State of U.P. v. Synthetics and Chemicals Ltd. (1991) 4 SCC 139, wherein a two-Judge Bench of this Court held that one particular conclusion of a Bench of seven-Judges in Synthetics and Chemicals Ltd. and Ors. v. State of U.P. and Ors. (1990) 1 SCC 109 as per incuriam. The two-Judge Bench in Synthetics and Chemicals Ltd. (supra) opined thus: 36. The High Court, in our view, was clearly in error in striking down the impugned provision which undoubtedly falls within the legislative competence of the State, being referable to Entry 54 of List II. We are firmly of the view that the decision of this Court in Synthetics (supra) is not an authority for the proposition canvassed by the Assessee in challenging the provision. This Court has not, and could not have, intended to say that the Price Control Orders made by the Central Government under the IDR Act imposed a fetter on the legislative power of the State under Entry 54 of List II to levy taxes on the sale or purchase of goods. The reference to sales tax in paragraph 86 of that judgment was merel....
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....993) 2 Lloyd's Rep 48 and Naviera Amazonica Peruana S.A. v. Compania International de Seguros del Peru (1988) 1 Lloyd's Rep 116 (CA) and concluded thus: 115. Upon consideration of the entire matter, it was observed in Sulame Rica case [Sulame Rica CIA Nacional De Seguros SA v. Enesa Engenharia SA - Enesa, 2012 WL 14764 : 2012 EWHC 42 (Comm)] that - "In these circumstances it is clear to me that the law with which the agreement to arbitrate has its closest and most real connection is the law of the seat of arbitration, namely, the law of England". (Para 14). It was thereafter concluded by the High Court that English Law is the proper law of the agreement to arbitrate. (Para 15) 116. The legal position that emerges from a conspectus of all the decisions, seems to be, that the choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings. 117. It would, therefore, follow that if the arbitration agreement is found or held to provide for a seat/place of arbitration outside India, then the provision that the Arbitrat....
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....ties, which provided that "the venue of the arbitration shall be London, United Kingdom". It provided that the arbitration proceedings should be conducted in English in accordance with the ICC Rules and that the governing law of the shareholders' agreement itself would be the law of India.... 46. Proceeding further the Court approved the Shashoua's principle and referred to McDonnell Douglas Corporation (supra) where in the principles stated in Naviera Amazonica Peruana S.A. (supra) were reiterated. Construing the clauses in the agreement, the said authority has held: On the contrary, for the reasons given, it seems to me that by their agreement the parties have chosen English law as the law to govern their arbitration proceedings, while contractually importing from the Indian Act those provisions of that Act which are concerned with the internal conduct of their arbitration and which are not inconsistent with the choice of English arbitral procedural law. 47. Further proceeding, the two-Judge Bench referred to Sulamerica Cia Nacional de Seguros SA (supra) wherein there has been reference to C v. D (supra) and further reproduced the observations from Sulameri....
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....ed extensively from the said judgment, as we find, the Court after adverting to various aspects, has categorically held that the High Court had not followed Shashoua principle. The various decisions referred to in Enercon (India) Ltd. (supra), the analysis made and the propositions deduced leads to an indubitable conclusion that Shashoua principle has been accepted by Enercon (India) Ltd. (supra). It is also to be noted that in BALCO, the Constitution Bench has not merely reproduced few paragraphs from Shashoua but has also referred to other decisions on which Shashoua has placed reliance upon. As we notice, there is analysis of earlier judgments, though it does not specifically state that "propositions laid down in Shashoua are accepted". On a clear reading, the ratio of the decision in BALCO, in the ultimate eventuate, reflects that the Shashoua principle has been accepted and the two-Judge Bench in Enercon (India) Ltd. (supra), after succinctly analyzing it, has stated that the said principles have been accepted by the Constitution Bench. Therefore, we are unable to accept the submission of Mr. Chidambaram that the finding recorded in Enercon (India) Ltd. (supra) that Shashoua p....
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....ertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings.... 54. In this context, we recapitulate what the Court had said in Ambica Quarry Works v. State of Gujarat and Ors. (1987) 1 SCC 213: 18. ...The ratio of any decision must be understood in the background of the facts of that case. It has been said long time ago that a case is only an authority for what it actually decides, and not what logically follows from it. (See Lord Halsbury in Quinn v. Leathem (1901) AC 495).... 55. From the aforesaid authorities, it is quite vivid that a ratio of a judgment has the precedential value and it is obligatory on the part of the Court to cogitate on the judgment regard being had to the facts exposited therein and the context in which the questions had arisen and the law has been declared. It is also necessary to read the judgment in entirety and if any principle has been laid down, it has to be considered keeping in view the questions that arose for consideration in the case. One is not expected to pick u....
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....nterim order which does not finally and conclusively decide an issue cannot be a precedent. It further observed that any reasons assigned in support of such non-final interim order containing prima facie findings, are only tentative and any interim directions issued on the basis of such prima facie findings are temporary arrangements to preserve the status quo till the matter is finally decided, to ensure that the matter does not become either infructuous or a fait accompli before the final hearing. Dealing with the decisions in Kapila Hingorani (II) (supra), the Court opined that the observations and directions in said case were interim in nature based on tentative reasons, restricted to the peculiar facts of that case involving an extraordinary situation of human rights violation resulting in starvation deaths and suicides by reason of non-payment of salaries to the employees of a large number of public sector undertakings for several years, have no value as precedents. The Court further ruled that the interim directions were also clearly in exercise of extraordinary power Under Article 142 of the Constitution and, therefore, it was not possible to read such tentative reasons, as....
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....ion which it does not inherently have. It is his further submission that it is settled principle of law that consent cannot confer jurisdiction. He has commended us to the authorities in Videocon Industries Ltd. (supra), Kanwar Singh Saini v. High Court of Delhi (2012) 4 SCC 307, Jagmittar Sain Bhagat v. Director, Health Services, Haryana (2013) 10 SCC 136, Zuari Cement Ltd. v. Regional Director, Employees' State Insurance Corporation (2015) 7 SCC 690 and United Commercial Bank Ltd. v. Workmen AIR 1951 SC 230. We have already reproduced paragraph 33 from the Videocon Industries Ltd. (supra) in a different context. 62. In Kanwar Singh Saini (supra), this Court has laid down that conferment of jurisdiction is a legislative function and it can neither be conferred with the consent of the parties nor by a superior court, and if the court passes an order/or a decree having no jurisdiction over the matter, it would amount to a nullity as the matter goes to the root of the cause. For the said purpose the two-Judge Bench has placed reliance upon United Commercial Bank Ltd. (supra), State of Gujarat v. Rajesh Kumar Chimanlal Barot (1996) 5 SCC 477, Kesar Singh v. Sadhu (1996) 7 SCC 7....
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....Conciliation and Arbitration of the International Chambers of Commerce. Per contra, Mr. Chidambaram would submit that the arbitration agreement clearly lays down with regard to the venue and as has been held by this Court, venue cannot be equated with the seat/place of arbitration. As we perceive, the Clause relating to the arbitration stipulates that the arbitral proceedings shall be in accordance with the ICC Rules. There is a Clause in the SHA that the governing law of SHA would be laws of India. The aforesaid agreement has already been interpreted by the English Courts to mean that the parties have not simply provided for the location of hearing to be in London. 68. It is worthy to note that the arbitration agreement is not silent as to what law and procedure is to be followed. On the contrary, Clause 14.1 lays down that the arbitration proceedings shall be in accordance with the Rules of Conciliation and Arbitration of the ICC. In Enercon (India) Ltd. (supra), the two-Judge Bench referring to Shashoua case accepted the view of Cooke, J. that the phrase "venue of arbitration shall be in London, UK" was accompanied by the provision in the arbitration Clause or arbitration to ....
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....applicable to the contract would be the laws in force in India and that the courts of Delhi would have exclusive jurisdiction "in all matters arising under this contract". They have further stated that the "contract shall in all respects be construed and governed according to Indian laws". These words are wide enough to engulf every question arising under the contract including the disputes between the parties and the mode of settlement. It was in Delhi that the agreement was executed. The form of the agreement is closely related to the system of law in India. Various Indian enactments are specifically mentioned in the agreement as applicable to it in many respects. The contract is to be performed in India with the aid of Indian workmen whose conditions of service are regulated by Indian laws. One of the parties to the contract is a public sector undertaking. The contract has in every respect the closest and most real connection with the Indian system of law and it is by that law that the parties have expressly evinced their intention to be bound in all respects. The arbitration agreement is contained in one of the clauses of the contract, and not in a separate agreement. In the ab....