BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL SERVICE, INC.

The Judgment of the Court was delivered by

E SURINDER SINGH NIJJAR, J. 1. Whilst hearing C.A. No. 7019 of 2005, a two Judge Bench of this Court, on 16th January, 2008, passed the following order:-

"In the midst of hearing of these appeals, learned counsel for the appellant has referred to the three-Judges Bench F decision of this Court in Bhatia International Vs. Bulk Trading S.A. & Anr., (2002) 4 SCC 105. The said decision was followed in a recent decision of two Judges Bench in Venture Global Engineering Vs. Satyam Computer Services Ltd. & Anr. 2008 (1) Scale 214. My learned G brother Hon'ble Mr. Justice Markandey Katju has reservation on the correctness of the said decisions in view of the interpretation of Clause (2) of Section 2 of the Arbitration and Conciliation Act, 1996. My view is otherwise. H

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.)

Place these appeals before Hon'ble CJI for listing them before any other Bench."

2Copy pinpoint2. Pursuant to the aforesaid order, the appeal was placed for hearing before a three Judge Bench, which by its order dated 1st November, 2011 directed the matters to be placed before the Constitution Bench on 10th January, 2012.

3Copy pinpoint3. Since the issue raised in the reference is pristinely legal, it is not necessary to make any detailed reference to the facts of the appeal. We may, however, notice the very essential facts leading to the filing of the appeal. An agreement dated 22nd C April, 1993 was executed between the appellant and the respondent, under which the respondent was to supply and install a computer based system for Shelter Modernization at Balco's Korba Shelter. The agreement contained an arbitration clause for resolution of disputes arising out of the contract. The D arbitration clause contained in Articles 17 and 22 was as under: "Article 17.1 - Any dispute or claim arising out of or relating to this Agreement shall be in the first instance, endeavour to be settled amicably by negotiation between the parties hereto and failing which the same will be settled by arbitration pursuant to the English Arbitration Law and subsequent amendments thereto.

Article 17 .2 - The arbitration proceedings shall be carried out by two Arbitrators one appointed by BALCO and one by KATSI chosen freely and without any bias. The court of Arbitration shall be held wholly in London, England and shall use English language in the proceeding. The findings and award of the Court of Arbitration shall be final and binding upon the parties. G Article 22 - Governing Law - This agreement will be governed by the prevailing law of India and in case of Arbitration, the English law shall apply." H

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4Copy pinpoint4. The aforesaid clause itself indicates that by reason of the agreement between the parties, the governing law of the agreement was the prevailing law of India. However, the settlement procedure for adjudication of rights or obligations under the agreement was by way of arbitration in London and the English Arbitration Law was made applicable to such proceedings. Therefore, the lex tori for the arbitration is English Law but the substantive law will be Indian Law.

5Copy pinpoint5. Disputes arose between the parties with regard to the performance of the agreement. Claim was made by the appellant for return of its investment in the modernization programme, loss, profits and other sums. The respondent made a claim for unclaimed instalments plus interest and damages for breach of intellectual property rights. Negotiations to reach a· settlement of the disputes between the parties were unsuccessful and a written notice of request for arbitration was issued by the respondent to the appellant by a notice dated 13th November, 1997. The disputes were duly referred to arbitration which was held in England. The arbitral tribunal made two awards dated 10th November, 2002 and 12th November, 2002 E in England. The appellant thereafter filed applications under Section 34 of the Arbitration Act, 1996 for setting aside the aforesaid two awards in the Court of the learned District Judge, Bilaspur which were numbered as MJC Nos. 92 of 2003 and 14 of 2003, respectively. By an order dated 20th July, 2004, F the learned District Judge, Bilaspur held that the applications filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Arbitration Act, 1996'} for setting aside the foreign awards are not tenable and accordingly dismissed the same.

6Copy pinpoint6. Aggrieved by the aforesaid judgment, the appellant filed two miscellaneous appeals being Misc. Appeal Nos. 889 of 2004 and Misc. Appeal No.890 of 2004 in the High Court of Judicature at Chattisgarh, Bilaspur. By an order dated 10th August, 2005, a Division Bench of the High Court dismissed the appeal. It was held as follows:

BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 34 7 SERVICE, INC. [SURINDER SINGH NIJJAR, J.] "For the aforesaid reasons, we hold that the applications filed by the appellant under Section 34 of the Indian Act are not maintainable against the two foreign awards dated 10.11.2002 and 12.11.2002 and accordingly dismiss Misc. Appeal No.889 of 2004 and Misc. Appeal No.890 of 2004, but order that the parties shall bear their own costs."

The aforesaid decision has been challenged in this appeal.

7Copy pinpoint7. We may also notice that number of other appeals and special leave petitions as well as transferred case were listed alongwith this appeal. It is not necessary to take note of the facts in all matters.

8Copy pinpoint8. We may, however, briefly notice the facts in Bharati 0 Shipyard Ltd. Vs. Ferrostaal AG & Anr. in SLP (C) No.27824 of 2011 as it pertains to the applicability of Section 9 of the Arbitration Act, 1996. In this case, the appellant, an Indian Company, entered into two Shipbuilding Contracts with respondent No.1 on 16th February, 2007. The appellant was to construct vessels having Builders Hull No.379 which was to be completed and delivered by the appellant to the respondent No.1 within the time prescribed under the two Shipbuilding Contracts. The agreement contained an arbitration clause. The parties initially agreed to get their disputes settled through arbitral process under the Rules of Arbitration of the International Chamber of Commerce (ICC) at Paris, subsequently, mutually agreed on 29th November, 2010 to arbitration under the Rules of London Maritime Arbitrators Association (LMAA) in London. This agreement is said to have been reached between the parties in the interest of !laving costs and time. Prior to agreement dated 29th November, 2010 relating to arbitration under LMAA Rules, respondent No.1 had filed two requests for arbitration in relation to both the contracts under Article 4 of ICC Rules on 12th November, 2010 H

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A recognizing that the seat of arbitration is in Paris and the substantive law applicable is English Law. In its requests for arbitration, respondent No.1 had pleaded in paragraphs 25 and 26 as under:

"Applicable Law: B

25. The Contract Clause "Governing Law, Dispute and Arbitration Miscellaneous" provides that the Contract shall be governed by the Laws of England." The rights and obligations of the parties are therefore to be interpreted c in light of English Law (the applicable law).

26. In summary:

a) disputes arising out of the Contract between the parties are to be resolved by arbitration under the ICC Rules; D b) the seat of arbitration is Paris; and

c) the substantive law to be applied in the arbitration shall be English Law."

9Copy pinpoint9. Subsequently, in view of the agreement dated 29th November, 2010, the first respondent submitted two requests for arbitration under LMAA Rules in London on 4th February,

2011. During the pendency of the aforesaid two requests, on 10th November, 2010, the first respondent filed two F applications under Section 9 of the Arbitration Act, 1996 which are numbered as AA.No.6/2010 and AA.No.7/2010 seeking orders of injunction against the encashment of refund bank guarantees issued under the contracts.

10Copy pinpoint10. Learned District Judge, Dakshina Kannada, Mangalore granted an ex parte ad interim injunction in both the applications restraining the appellant from encashing the bank guarantee on 16th November, 2010. The appellant appeared and filed its statement of objections. After hearing, the learned H District Judge passed the judgments and orders on 14th

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SERVICE, INC. (SURINDER SINGH NIJJAR, J.]

January, 2011 allowing the applications filed by respondent A No.1 under Section 9 of the Arbitration Act, 1996.

11Copy pinpoint11. Both the orders were challenged in the appeals by the appellant before the High Court of Karnataka at Bangalore. By judgment and order dated 9th September, 2011, the High Court B allowed the appeal and set aside the orders passed by the District Judge dated 14th January, 2011. In allowing the appeal, the High Court held as follows:

"From the above, it is clear that respondent No.1 is not remedyless (sic). It is already before the Arbitral Tribunal C at London. Thus, it is open for it to seek interim order of injunction for the purpose of preserving the assets as per Section 44 of the Arbitration Act, 1996 in Courts at London. D Since the parties have agreed that substantive law governing the contract is English Law and as the law governing arbitration agreement is English Law, it is open for respondent No.1 to approach the Courts at England to seek the interim relief." E

12Copy pinpoint12. This special leave petition was filed against the aforesaid judgment of the High Court.

13Copy pinpoint13. We have heard very lengthy submissions on all aspects of the matter. All the learned counsel on both sides F have made elaborate references to the commentaries of various experts in the field of International Commercial Arbitration. Reference has also been made to numerous decisions of this Court as well as the Courts in other jurisdictions. G

14Copy pinpoint14. Mr. C.A. Sundaram, appearing for the appellants in C.A. No. 7019 of 2005 submits that primarily the following five questions would arise in these cases:- (a) What is meant by the place of arbitration as found in Sections 2(2) and 20 of the H Arbitration Act, 1996?; (b) What is the meaning of the words

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A "under the law of which the award is passed" under Section 48 of the Arbitration Act, 1996 and Article V(1 )(e) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter referred to as "the New York Convention")?; (c) Does Section 2(2) bar the application of Part I of the B Arbitration Act, 1996 (Part I for brevity) to arbitrations where the place is outside India?; (d) Does Part I apply at all stages of an arbitration, i.e., pre, during and post stages of the arbitral proceedings, in respect of all arbitrations, except for the areas specifically falling under Parts II and 111 of the Arbitration Act, c 1996 (Part II and Part Ill hereinafter)?; and (e) Whether a suit for preservation of assets pending an arbitration proceeding is maintainable?

15Copy pinpoint15. Mr. Soli Sorabjee, Mr. Sundaram, Mr. Gopal Subramanium and Dr. AM. Singhvi, learned Senior Advocates D for the appellants have in unison emphasised that Part I and Part II are not mutually exclusive. They have submitted that the Arbitration Act, 1996 has not "adopted or incorporated the provisions of Model Law". It has merely "taken into account" the Model Law. They have made a reference to the judgments of this Court in the case of Konkan Railway Corporation Ltd. & Anr. Vs. Rani Construction Pvt. Ltd. 1 and SBP & Co. Vs. Patel Engineering Ltd. & Anr. 2 It is emphasised that in fact the Arbitration Act, 1996 differs from the UNCITRAL Model Law on certain vital aspects. It is pointed out that one of the strongest examples is the omission of the word "only" in Section 2(2), which occurs in corresponding Article 1(2) of the Model Law. The absence of the word "only" in Section 2(2) clearly signifies that Part I shall compulsorily apply if the place of arbitration is in India. It does not mean that Part I will not apply if place of arbitration is not in India.

16Copy pinpoint16. Mr. Sorabjee has emphasised that the omission of word "only" in Section 2(2) is not an instance of "CASUS

1. (2002) 2 sec 388.

H 2. (2005) 8 sec 618.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] OMISSUS". The omission of the word clearly indicates that A Model Law has not been bodily adopted by the Arbitration Act,

1996. All the learned senior counsel seem to be agreed that the Arbitration Act, 1996 has to be construed by discerning the intention of the Parliament from the words and language used, i.e., the provisions of the said Act have to be construed literally B without the addition of any word to any provision. Therefore, the missing word "only" can not be supplied by judicial interpretation. In support of the submission, reliance is placed 1

on Nalinakhya Bysack 'Vs. Shyam Sunder Haldar & Ors. 3 , Magor & St. Me/Ions RDC Vs. Newport Corporation4 , Punjab c Land Devi. & Reclamation Corporation Ltd. Vs. Presiding Officer, Labour Court6 and Duport Steels Ltd. Vs. Sirs6. It is pointed out by Mr. Sorabjee that the doctrine of ironing out the creases does not justify the substitution of a new jacket in place of the old, whose creases were to be ironed out. D

17Copy pinpoint17. All the learned counsel for the appellants have emphasised that the Arbitration Act, 1996 has not adopted the territorial criterion/principle completely, party autonomy has been duly recognized. This, according to the learned counsel, is evident from the provisions in Sections 2(1)(e), 2(5), 2(7), E 20 and 28. It is submitted that restricting the operation of Part I only to arbitration which takes place in India would lead to reading words into or adding words to various provisions contained in the Arbitration Act, 1996. It is emphasised that restricting the applicability of Part I to arbitrations which take F place only in India would render the provisions in Sections 2(5), 2(7) and 20 redundant. Mr. Sundaram has reiterated that expression "place" in Sections 2(2) and Section 20 has to be given the same meaning. Section 20 of the Arbitration Act, 1996 stipulates that parties are free to agree on the place of G

. 3. 1953 SCR 533.

4. 1951 (2) All ER 839.

5. (1990) 3 sec 682.

6. (1980) 1 All ER 529. H

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A arbitrati.on outside India. Therefore, arbitrations conducted under Part I, may h,ave geographical location outside India. Similarly, if Part I was to apply only where the place of arbitration is in India then the words "Where the place of arbitration is situated in India" in Section 28(1) were wholly unnecessary. B Further, the above words qualify only Sub-section (1) of Section 28 and do not qualify Sub-section (3). The necessary implication is that Sub-section (3) was intended to apply even to foreign-seated arbitration so long as parties have chosen Arbitration Act, 1996 as law of the arbitration, which could only C p~ if Part I is to apply to such arbitration. Therefore, it is submitted by the learned counsel that the 'seat' is not the "centre of gravity" as far as the Arbitration Act, 1996 is concerned. The Arbitration Act, 1996 is "subject matter centric" and not "seat-centric". In support of this, the learned counsel placed strong reliance on the provision contained in S'ection D 2(1) (e), which provides that "jurisdiction to decide the questions forming trni subject-matter of the arbitration if the same had been the subject matter of a suit". This, according to the learned counsel, is an essential precondition for a Court to assume jurisdiction under Part I. The definition of Court in Section 2(1 )(e) E would necessarily mean that two for!:!ign parties, in order ta resolve a dispute arising outside India and governed by foreign law cannot invoke jurisdiction of an Indian Court by simply choosing India as the seat of arbitration. It is further submitted that in the absence of Section 9 of the Arbitration Act, 1996, F no interim relief can be granted unless it is in aid of final/ substantive relief that must be claimed in the suit. On the other hand, a suit claiming any permarlent relief on the substance of the dispute would tantamount to a waiver of the arbitration clause by the plaintiff. It is, the~efore, submitted by the learned G counsel that supplying word "or'IJy" in Section 2(2) will in many cases leave a party remediles~" It is further submitted, that Section 2(7) clearly shows that part I would apply eve~ to arbitrations which take place outside India. If Section 2(7) was to be restricted only to arbitrations which take place in India, H there would be no need for such a provision. It is emphasised

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

that the provision clearly states that it applies to an award made A "under this part". The aforesaid term is a clear indication to an arbitration which takes place outside India, where the parties. have chosen the Arbitration Act, 1996 as the governing law of the arbitration. Mr. Sorabjee relied on National Thermal Power Corporation Vs. Singer Company & Ors. 7 , and submitted that B Section 2(7) is a positive re-enactment of Section 9(b) of the Foreign Awards (Recognition and Enforcement) Act, 1961 (hereinafter referred to as the '1961 Act'). It is emphasised that Section 2(7) has been placed in Part I only to bring it in conformity with Article V(1)(e) of the New York Convention, c which has been incorporated and enacted as Section 48(1)(e). The aforesaid section even though it is dealing with enforcement of awards, necessarily recognizes the jurisdiction of courts in two countries to set aside the award, namely, the courts of the country in which arbitration takes place and the country under 0 . the law of which the award was made. It is submitted that both the expressions must necessarily be given effect to and no part of the actor the section can be disregarded by describing them as fossil. '

18Copy pinpoint18. Mr. Sorabjee has emphasised that not giving effect to E the words "under the law of which the award was made", will allow many awards to go untested in Court. He has relied upon certain observations made by the U.K. Court in the case of Reliance Industries Ltd. Vs. Enron Oil & Gas India Ltd. 8 F

19Copy pinpoint19. Mr. Sundaram points out that the Arbitration Act, 1996 departs from the strict territorial criterion/principle as not only it retains the features of New York Convention but significantly departs from Model Law. The Model Law has sought to bring in an era of localized/territorial arbitration (Article 1(2)). On the G other hand, the Arbitration Act, 1996 recognizes and provides for de-localized arbitration. He emphasised that under Model

1. (1992) 3 sec 551.

8. 2002 (1) Lloyd Law Reports 645. H

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A Law, all provisions referred to localized arbitration except the exceptions in Article 1(2). Under the Arbitration Act, 1996, all provisions are de-localized, except where "place" qualification has been provided for.

20Copy pinpoint20. He further submitted that in all commentaries of 8 International Commercial Arbitration, the expression "place" is used interchangeably with "seaf'. In many cases, the terms used are "place of arbitration"; "the arbitral situs~ the "locus arbitri" or "the arbitral forum". Relying on the judgment in Braes of Daune Wind Farm (Scotland) Limited Vs. Alfred McA/pine C Business Services Limited9 which has been affirmed in Shashoua & Ors. Vs. Sharma 10 , he submitted that internationally "seat" is interpreted as being the "juridical seat". Therefore, when the parties opt for a given law to govern the arbitration, it is considered to supplant the law of the geographical location of the arbitration. Therefore, the mere geographical location is not the deciding factor of the seat. He relies on the observations made by Gary B. Born in his book 'International Commercial Arbitration', which are as follows : •A concept of central importance to the international arbitral process is that of the arbitral seat (alternatively referred to as the "place of arbitration·, the "siege• "ort", the arbitral "situs· the "locus arbitri" or the arbitral "forum"). The arbitral seat is the nation where an international arbitration has its legal domicile, the laws of which generally govern the arbitration proceedings in significant respects, with regard to both "internal" and "external" procedural matters.· As discussed elsewhere, the arbitral seat is the location selected by the parties (or, sometimes, by the arbitrators, an arbitral institution, or a court) as the legal or juridical home or place of the arbitration. In one commentator's words, the "seat" is in the vast majority of cases the country

9. [2008]EWHC 426 (TCC).

H 10. [2009] EWHC 957 (Comm.).

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) chosen as the place of the arbitration. The choice of the A arbitral seat can be (and usually is) made by the parties in their arbitration agreement or selected on the parties' behalf by either the arbitral tribunal or an arbitral institution.'

21Copy pinpoint21. He submits that whist interpreting the word "place" in B Section 2(2), the provisions contained in Section 20 would have relevance as Section 20 stipulates that the parties are free to agree on the place of arbitration. The interpretation on the word "place" in Section 2(2) would also have to be in conformity with the provisions contained in Section 2(1) (e). Further more, C Section 2(2) has to be construed by keeping in view the provisions contained in Section 2(7) which would clearly indicate that the provisions of Part I of the Arbitration Act, 1996 are not confined to arbitrations which take place within India. Whilst arbitration which takes place in India by virtue of Section 2(2) would give rise to a "domestic award"; the arbitration which is D held abroad by virtue of Section 2(7) would give rise to a "deemed domestic award"; provided the parties to arbitration have chosen the Arbitration Act, 1996 as the governing law of arbitration. E

22Copy pinpoint22. Mr. Sundaram emphasised that if Section 2(2) had not been on the Statute book there would be no doubt that if an arbitration was governed by the Arbitration Act, 1996, Part I would ipso facto become applicable to such arbitration, and under Section 2(7), irrespective of where the arbitral proceedings took place, it would become a deemed domestic award, giving rise to the incidence arising therefrom. By the inclusion of Section 2(2), the legislature has also made the Arbitration Act, 1996 and Part I applicable when the seat or place of arbitration is in India even if not conducted in accordance with Indian Arbitral laws thereby domestic what would otherwise have been a non-domestic award having been conducted in accordance with a Foreign Arbitration Act. By making such provisions, the Indian Parliament has honoured the commitment under the New York Convention. He submits that H

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A New York Convention in Articles V(1)(a) and V(1)(e) has recognized that the courts in both the countries i.e. country in which the arbitration is held and the country "under the law of which the award is made" as a court of competent jurisdiction to question the validity of the arbitral proceedings/award. He, B however, points out that the jurisdiction of the domestic court is neither conferred by the New York Convention nor under Part II of the Arbitration Act, 1996, since Dart II merely deals with circumstances under which an award may be enforced/may be refused to be enforced. These circumstances include annulment C proceedings in one of the two competent courts, whether or not any of the two courts have jurisdiction to annul the proceedings/ award, would depend on the domestic law of the ~ountry concerned. The Geneva Convention had brought with it the predominance of the seat, particularly with reference to the setting aside of the award. The two jurisdictions were inserted 0 in the New York Convention to dilute the predominance of the ."seat" over the party autonomy. He further submitted that the apprehension that the two courts of competent jurisdiction could give conflicting verdicts on the same award is unfounded. Even if there were parallel proceedings, it would merely be a question E of case management by the relevant courts in deciding which proceedings should be continued and which stayed.

23Copy pinpoint23. Learned counsel have submitted that the findings in the case ofBhatia International Vs. Bulk Trading S.A. & Anr. 11 F (hereinafter referred to as "Bhatia International") that if Part I was not made applicable to arbitrations conducted outside India would render "party remediless" is wholly correct. It is not open to a party to file a suit touching on the merits of the arbitration, since such suit would necessarily have to be stayed G in view of Section 8 or Section 45 of the Arbitration Act, 1996. He submits that the only way a suit can be framed is a suit "to inter alia restrict the defendant from parting with properties".· He submits that if the right to such property itself is subject matter . of an arbitration agreement, a suit for the declaration of such

H 11. (2004) 2 sec 105.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) right can not be filed. All .that could then be filed, therefore, would be a bare suit for injunction restraining· another party from parting with property. The interlocutory relief would also be identical till such time as the injunction is made permanent. Such· a suit would not be maintainable because :- (a) an interlocutory injunction can only be granted depending on the institutional progress of some proceeding for substantial relief, the injunction itself must be part of the substantive relief tb which the plaintiffs cause. of action entitles him. In support of this proposition, he relies ·on Siskina (~argo Owners) Vs. Distos Compania Navieria SA 12, Fourie Ys:· Le Roux 13 and Adhunik c Steels Ltd. Vs. Orissa Manganese and Minerals Pvt. Ltd. :4; (b) the cause of action for any suit must entitle a party for a substantive relief. Since the substantive relief can not be asked for as the dispute is to be decided by the arbitrator, the only relief that could be asked for would be to safeguard a property 0 which the plaintiff may or may not be entjtled to proceed against, depending entirely on the outcome of another proceeding, in another jurisdiction, or which the country has no seisin; (c) in such a suit, there would be no pre-existing right to give rise to a cause of action but the right is only contingent l E speculative and in the absence of an existing I subsisting cause of action, a suit can. not be filed; (d) the absence of an existing I subsisting cause of action would entail the plaint in such a suit to be rejected under Order VII Rule 11 a. Further, no interlocutory injunction can be granted unless it is in aid of a substantive relief and therefore a suit simply praying for an injunction would F also be liable to be rejected under Order VII Rule 11; (e) no interim relief can be granted unless it is in aid of and ancillary to the main relief that may be available to the party on final determination of rights in a suit. Learned counsel refers to State of Orissa Vs. Madan Gopal Rungta 15 in support of the G

13. 2007 (1) WLR 320; 2007 (1) All ER 1087. 14.:2001 (7) sec 12s at 136.

15. 1952(1) SCR 28 . H

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A submission; (t) such a suit would be really in the nature of a suit for interim relief pending an entirely different proceeding. It is settled law that by an interim order, the Court would not grant final relief. The nature of such a suit would be to grant a final order that would in fact be in the nature of an interim order. B Here the learned counsel refers to U.P. Junior Doctors' Action Committee Vs. Dr. B. Sheetal Nandwani16 , State of Uttar Pradesh Vs. Ram Sukhi Devi11 , Deoraj Vs. State of Maharashtra & Ors. 18 and Raja Khan Vs. Uttar Pradesh Sunni Central Wakf Board & Ors. 19 He submits that the intention of c the Indian Parliament in enacting the Arbitration Act, 1996 was not to leave a party remediless.

24Copy pinpoint24. Mr. Gopal Subramanium submits that the issue in the present case is that in addition to the challe"ge to the validity of an award being made in courts where the seat is located, D are domestic courts excluded f~om exercising supervisory control by way of entertaining a challenge to an award? He submits that the issue arises when it is not possible, in a given case, to draw an assumption that the validity of the award is to be judged according to the law of the "place· of arbitration. The E Arbitration Act, 1996 has removed such vagueness. The Arbitration Act, 1996 clearly states that in respect of all subject matters over which Courts of Judicature have jurisdiction, the National Courts will have residual jurisdiction in matters of challenge to the validity of an award or enforcement of an F award. He reiterates the submissions made by other learned senior counsel and points out that the Arbitration Act, 1996 is not seat centric. This, according to learned senior counsel, is evident from numerous provisions contained· in Part I and Part II. He points out all the sections which have been noticed earlier. G According to learned senior counsel, the definition of

suppl (1) sec 680.

11. c2oos) (9) sec 733.

18. (2004) 4 sec 697.

H 19. c2011) 2 sec 741.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) International Commercial Arbitration in Section 2(1 )(f) is party A · centric. This definition is not indexed to the seat of arbitration. Similarly, the definition in Section 2(1 )(e) is subject matter centric. According to him, there is a crucial distinction between the definition of international arbitration in the Model Law and the definition of international commercial arbitration under the ·s 1961 Act. From the above, he draws an inference that seat of arbitration being in India is not a pre-requisite to confer jurisdiction on the Indian Courts under the Arbitration Act, 1996. He points out that Section 2(1 )(e) contemplates nexus with "the subject matter of the arbitration". The use of this expression in c the definition gives a clear indication of the manner in which jurisdiction is conferred. If an international arbitration takes place, irrespective of the seat, and the subject matter of that arbitration would otherwise be within the jurisdiction of an Indian Court, such Indian Court would have supervisory 0 jurisdiction. Therefore, if "the closest connection" of the arbitration is with India, and if the Indian Courts would normally have jurisdiction over the dispute, the Indian Courts will play a supervisory role in the arbitration. Restricting the applicability of Part I of the Arbitration Act, 1996 to the arbitration where the E seat is in India cannot, according to Mr. Subramanium, provide a coherent explanation of sub-section 2(1)(e) without doing violence to its language. He also makes a reference to the opening words of Section 28 "where the place of arbitration is situate in India". He then submits that if the legislature had already made it abundantly clear that Section 2(2) of the F Arbitration Act, 1996 operated as a complete exclusion of Part I of the aforesaid Act to arbitrations outside India,· the same proposition need not subsequently be stated as a qualifier in Section 28. G

25Copy pinpoint25. Mr. Gopal Subramanium emphasised that Part II . cannot be a complete code as it necessarily makes use of provisions in Part I. He points out that Part I and Part II of the Arbitration Act, 1996 would have been distinct codes in themselves if they had provisions of conducting arbitration in H

360 · SUPREME COURT REPORTS [2012] 12 S.C.R.

A>. each part. However, Part I of the Arbitration Act, 1996 . ,prescribed the entire procedure for the conduct of an arbitration,· whe~s Part 11 is only for recognition and enforcement of certain fo113igh awards. Therefore, he submits that Part I and Part II caiinpt be read separately but have to be read harmoniously B · in order to make Arbitration Act, 1996 a complete code. He points-'b.ut that even though certain provisions of Part I are mirrored in Part II, at the same time, certain provisions of Part I which are necessary for arbitration are not covered by Part II. He points out that although Section 45, which is in part II, C enables a court to make a reference to arbitration; there is no other provision like Section 11 to resolve a situation when an arbitrator is not being appointed as per the agreed arbitral . procedure. Therefore, Section 11 (9) specially provides for reference in an international commercial arbitration. He further points out that the use of phrase "notwithstanding anything D contained in Part I" clearly indicates that Section 45 is to apply, irrespective of any simultaneous application of similar provision in Part I. This section clearly contemplates that provisions of Part I would apply to matters covered by Part II. Mr. Subramanium then points out that there is no provision in Part E II for taking the assistance of the court for interim relief pending arbitration, like Section 9 in Part I. Section 27, according to Mr. Subramanium, is another indication where the assistance of the Indian Court would be taken in aid of arbitration both wiihin and outside India. He reiterates that Sections 34 and 48 of the F Arbitration Act,, 1996 are to be read harmoniously. He submits various provisions of Part I are facilitative in character, excepting Section 34 which involves a challenge to an award. He points out that Section 2(4) and Section 2(5) also indicate that the Arbitration Act, 1996 applies to all arbitration G · agreements irrespective of the seat of arbitration. He submits that the harmonious way to read Section 34 as well as Section 48 of the Arbitration Act, 1996 is that where a challenge lies to an award, the legislature must have intended only one challenge. Thus, if an attempt is made to execute an award as H a decree of the court under Section 36 of Part I, there can be

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] no doubt that if there is no adjudication under Section 34, there can still be a resistance which can be offered under Section

48. Similarly, by virtue of Section 48(3) if an award is challenged under Section 34 before a competent court, the enforcement proceeding would be adjourned and the court may order suitable security. There will be only one challenge to an award, either under Section 34 or Section 48. Referring to Section 51, Mr. Gopal Subramanium submits that the rights available under Part II are in addition to rights under Part I. This section firstly postulates a hypothesis that the Chapter on New York Convention awards had not been enacted. It further makes c mention, in such a scenario, of certain rights already occupying the field that is intended to be covered by the chapter on New York conventions. It also mentions that such rights are coextensive with the rights under the chapter on the New York Convention. Therefore, the fact that certain provisions in Part II 0 of the Arbitration Act, 1996 appear to function in the same field as provisions in Part I, does not mean that the provisions of Part I cease to have effect, or that the provisions of Part I are no longer available to a party. This, according to Mr. Subramanium, is in consonance with the history of New York E Convention and the Model Law, which shows that the Model Law was intended to fill the gaps left by the New York Convention as well as function as a complete code. He, therefore, urges that the sections which have come to be considered essential for the success of arbitration, such as Sections 9, 11 and 34, must be considered also available to F the parties seeking recognition and enforcement of foreign awards.

26Copy pinpoint26. Finally, he submits that the decision in Bhatia International (supra) is a harmonious construction of Part I and G Part II of the Arbitration Act, 1996. He further submits that the case of Venture Global Engineering Vs. Satyam Computer Services Ltd. & Anr. 20 (hereinafter referred to as "Venture Global Engineering") has been correctly decided by this Court.

20. 1200s (4) sec 1soi. H

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A Mr. Subramanium further pointed out that the judgments of this Court in the case of ONGC Vs. Western Company of North America21 and National Thermal Power Corporation Vs. Singer Company & Ors. (supra) have appropriately set aside the awards challenged therein even though the same were not B made in India.

27Copy pinpoint27. Mr. E.R. Kumar appearing in SLP (C) No. 31526- 31528 of 2009 has adopted the submissions made by Mr. Subramanium. In addition, he submits that the National Arbitral C Law, i.e., Part I of the Arbitration Act, 1996 necessarily applies to all arbitrations arising between domestic parties and pertaining to a domestic dispute. Thus, even if the parties in such a case agree with the situs to be abroad, the same will not ipso facto take such arbitrations outside the applicability of Part I and operate to exclude the jurisdiction of Indian Courts · D therein. In other words, two Indian parties involved in a purely domestic dispute can not contractually agree to denude the Courts of this country of their jurisdictions with respect to a legal dispute arising between them in India. He submits that such a contract would be void under Section 23 and Section 28 of the E Indian Contract Act.

28Copy pinpoint28. He placed reliance on a judgment of this Court in the case of ABC Laminart Pvt. Ltd. Vs. A.P. Agencies, Salem22. He relies on Para 10 and 16 of the above judgment. He also relied on the case of lnterglobe Aviation Ltd. Vs. N. Satchidanancf2 3 , wherein this Court has followed the decision in ABC Laminart Pvt. Ltd. (supra).

29Copy pinpoint29. He submits that the UNCITRAL Model Law has defined the term "international" in a broad and expansive manner allowing full sway to "party autonomy". Under the Model Law, it is open to the parties to give international flavour to an

21. 1987 (1) sec 496.

22. 1989 (2) sec 163.

H 23. 2011 (7) sec 463.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] otherwise purely domestic relationship, merely by choosing a A situs of arbitration abroad [Article 1(3)(b)(i)] or even merely by. labelling the arbitration an international one. [Article 1(3)(c)].

30Copy pinpoint30. The Indian law has consciously and correctly departed from the same and chosen only the nationality test for defining an arbitration as "international" as is apparent from Section 2(1 )(f) of the Arbitration Act, 1996. Relying on the provision of Sections 2(2), 20 and 28, he further submits that Arbitration Act, 1996 precludes Indian parties to a purely domestic dispute from choosing a place of arbitration outside India. Mr. Kumar goes even further to submit that when both the parties are Indian, the substantive law governing the dispute must necessarily be Indian irrespective of the situs of the arbitration and irrespective of any provision in the contract between the parties to the contrary. He submits that the same principle applies with equal force to the arbitration law too, that is to say, that if it is not open to two Indian parties with regard to an entirely domestic dispute to derogate from the Indian laws of contract, evidence etc., it is equally not open to them derogate from the Indian arbitrational law either. He relies on judgment of this Court in the case of TDM Infrastructure Pvt. Ltd. Vs. U.E. Development E India Pvt. Ltd., 24 Paragraphs 19, 20 and 23. He, however, very fairly points out that this was a case under Section 11 and the point in issue here did not specifically arise for consideration in the said case. F History of Arbitration in India -

31Copy pinpoint31. Before we embark upon the task of interpreting the provisions of the Arbitration Act, 1996, it would be apposite to narrate briefly the history of Arbitration Law in India upto the passing of Arbitration Act, 1996. This exercise is undertaken G purely to consider: (i) what was the law before the Arbitration Act, 1996 was passed; (ii) what was the mischief or defect for ' which the law had not provided; (iii) what remedy Parliament

24. 2oos (14) sec 211. H

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A has appointed; (iv) the reasons of the remedy.

32Copy pinpoint32. Resolution of disputes "through arbitration wai; not unknown in India everr in ancient times. Simply stated, settlement of disputes through arbitration is the alternate system B of resolution of disputes whereby the parties to a dispute get the same settled through the intervention of a third party. The role of the court is limited to the extent of regulating the process. During the ancient era of Hindu Law in India, there were several machineries for settlement of disputes between the parties. These were known as Kulani (village council), Sreni C (corporation) and Puga (assembly). 25 Likewise, commercial matters were decided by Mahajans and Chambers. The resolution of disputes through the panchayat was a different system of arbitration subordinate to the courts of law. The arbitration tribunal in ancient period would have the status of D panchayat in modern lndia. 26 The ancient system of panchayat has been given due statutory recognition through the various Panchayat Acts subsequently followed by Panchayati Raj Act,

1994. It has now been constitutionally recognized in Article 243 of the Constitution of India. E

33Copy pinpoint33. However, we are concerned here with modern arbitration law, therefore, let us proceed to see the legislative history leading to the enactment of Arbitration Act, 1996.

The Indian Scenario - F

34Copy pinpoint34. The first Indian Act on Arbitration law came to be passed in 1899 known as Arbitration Act, 1899. It was based on the English Arbitration Act, 1899. Then'oame the Code of Civil Procedure, 1908. Schedule II of the .Code contained the G provisions relating to the law of Arbitration whicl\were extended to the other parts of British India. Thereafter the Arbitration Act, 1940 (Act No.10 of 1940) (hereinafter referred to as the "1940

25. See P.V Kane History of Dharmasastra, Vol.Ill P.242.

H 26. See Justice S.Varadachariar Hindu Judicial System P.98.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) · Act") was enacted to consolidate and amend the law relating A to arbitration. This Actcame into force on 1st July, 1940. It is an exhaustive Code in so far as law relating to the domestic arbitration is concerned. Under this Act, Arbitration may be without the inter:vention of a Court or with the intervention of a Court where there is no suit pending or in a pending suit. This B Act empowered the Courts to modify the Award (Section 15), remit the Award to the Arbitrators for reconsideration (Section 16) and to set aside the Award on specific grounds (Section 30). The 1940 Act was based on the English Arbitration Act,

1934. The 1934 Act was replaced by the English Arbitration c . Act, 1950 which was subsequently replaced by the Arbitration Act, 1975. Thereafter the 1975 Act was also replaced by the Arbitration Act, 1979. There were, however, no corresponding changes in the 1940 Act. The law of arbitration in India remained static. D

35Copy pinpoint35. The disastrous results which ensued from the abuse of the 1940 Act are noticed by this Court in the case of Guru Nanak Foundation Vs. Mis. Rattan Singh & Sons. 27 Justice D.A. Desai speaking for the court expressed the concern and anguish of the court about the way in which the proceedings under the 1940 Act, are conducted and without an exception challenged in courts. His Lordship observed : .

"Interminable, time consuming, complex and expensive court procedures impelled jurists to search for an alternative forum, less formal, more effective and speedy for resolution of disputes,avoiding procedural claptrap and this led them to Arbitration Act, 1940 ("Act" for short). However, the way in which the proceedings under the Act are conducted and without an exception challenged in G Courts, has made lawyers laugh and legal philosophers weep. (Emphasis supplied). Experience shows and law reports bear ample testimony that the proceedings under the Act have become highly technical accompanied by

21. 19a1 (4) sec 634. H

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A unending prolixity, at every stage providing a legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the Courts been clothed with 'legalese' of unforeseeable complexity. This case amply demonstrates the same." B

36Copy pinpoint36. This was the arena of domestic arbitration and domestic award.

International Scenario -

c 37. Difficulties were also being faced in the International sphere of Trade and Commerce. With the growth of International Trade and Commerce, there was an increase in disputes arising out of such transactions being adjudicated through Arbitration. One of the problems faced in such Arbitration, 0 related to recognition and enforcement of an Arbitral Award made in one country by the Courts of other countries. This difficulty was sought to be removed through various International Conventions. The first such International Convention was the Geneva Protocol on Arbitration Clauses, 1923, popularly referred to as "the 1923 Protocol". It was implemented w.e.f. 28th July, 1924. This Protocol was the product of the initiative taken by the International Chamber of Commerce (ICC) under the auspices of the League of Nations. The 1923 Protocol sought to make arbitration agreements and arbitration clauses in particular enforceable internationally. It was also sought to ensure that Awards made pursuant to such arbitration agreements would be enforced in the territory other than the state in which they were made. The 1923 Protocol proved to be inadequate. It was followed by the Geneva Convention on the execution of Foreign Arbitrated Awards, 1927 and is popularly known as the "Geneva Convention of 1927". This convention was made effective on 25th July, 1929. India became a signatory to both the 1923 Protocol and the 1927 Convention on 23rd October, 1937. It was to give effect to both the 1923 Protocol and 1927 Convention that the Arbitration H (Protocol and Convention) Act, 1937 was enacted in India.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] Again a number of problems were encountered in the operation of the 1923 Protocol and the 1927 Geneva Convention. It was felt that there were limitations in relation to their fields of application. Under the 1927 Geneva Convention a party in order to enforce the Award in the Country of an origin was obliged to seek a declaration in the country where the arbitration took place to the effect that the Award was enforceable. Only then could the successful party go ahead and enforce the Award in the country of origin. This led to the problem of "double exequatur", making the enforcement of arbitral awards much more complicated. Jn 1953 the c International Chamber of Commerce promoted a new treaty to govern International Commercial Arbitration. The proposals of ICC were taken up by the United Nations Economic Social Council. This in turn led to the adoption of the convention on the Recognition and Enforcement of Foreign Arbitral Awards D . at New York in 1958 (popularly known as "the New York Convention"}. The New York Convention is an improvement on the Geneva Convention of 1927. It provides for a much more simple and effective method of recognition and enforcement of foreign arbitral awards. It gives much wider effect to the validity of arbitration agreement. This convention came into force on 7th June, 1959. India became a State Signatory to this convention on 13th July, 1960. The Foreign Awards (Recognition and Enforcement) Act, 1961 was enacted to give effect to the New York Convention. Thus prior to the enactment of the Arbitration Act, 1996, the law of Arbitration in India was contained in the Protocol and Convention Act, 1937, the Arbitration Act, 1940 and the Foreign Awards (Recognition and Enforcement} Act, 1961. There were no further amendments in the aforesaid three acts. Therefore, it was generally felt that the arbitration laws in India had failed to keep pace with the developments at the international level.

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A The Arbitration Act. 1996

The Objects and Reasons of the Act

38Copy pinpoint38. The Statement of Objects and Reasons referred to the fact that the existing legal framework was outdated and that the economic reforms in India would not be fully effective as "the law dealing with settlement of both domestic and international commercial disputes remained out of tune with such reforms". It then refers to the Model Law and the recognition of the general assembly of the United Nations that all countries give due consideration to the Model Laws in view of the "desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice". Finally, the Statement of Objects and Reasons states as follows:- "3. Though the said UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could, with appropriate modifications, serve as a model for legislation on domestic arbitration and conciliation. The present bill seeks to ·consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules." The main objectives of the bill are as under:- F "(i) to comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation; (ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration; (iii) to provide that the arbitral tribunal gives reasons for its arbitral award; (iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction:

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] (v) to minimise the supervisory role of Courts in the A arbitral process;

(vi) to permit an arbitral tribunal to use mediation, conciliation, or other procedures during the arbitral ,proceedings to encourage settlement of disputes; B (vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court;

(viii) to provide that a settlement agreement reached by c the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal; and

(ix) to provide that, for purposes of enforcement of D foreign awards, every arbitral award made in a country to which one of the two International Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award." E

The Act is o.ne "to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto."

39Copy pinpoint39. The Preamble to the Arbitration Act, 1996 repeats to some extent what the Statement of Objects provide, materially:- "AND WHEREAS the said Model Law and Rules make significant contribution to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations;

AND WHEREAS it is expedient to make law respecting H

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A arbitration and conciliation, taking into account the aforesaid Model Law and Rules;" Scheme of the Arbitration Act, 1996 -

40Copy pinpoint40. The Arbitration Act, 1996 is divided into four parts. B Part I which is headed "Arbitration"; Part II which is headed "Enforcement of Certain Foreign Awards"; Part Ill which is headed "Conciliation" and Part IV being "Supplementary Provisions". We may notice here that it is only Parts I and II which have relevance in the present proceedings. c

41Copy pinpoint41. We may further notice here that the 1961 Foreign Awards Act was enacted specifically to give effect to the New York Convention. The preamble of the 1961 Act is as follows: "An Act to enable effect to be given to the Convention on D the Recognition and Enforcement of Foreign Arbitral Awards, done at New York on the 10th day of June, 1958, to which India is a party and for purposes connected therewith."

42Copy pinpoint42. In the 1961 Act, there is no provision for challenging the Foreign Award on merits similar or identical to the provisions contained in Sections 16 and 30 of the 1940 Act, which gave power to remit the award to the arbitrators or umpire for reconsideration under Section 30 which provided the F grounds for setting aside an award. In other words, the 1961 Act dealt only with the enforcement of foreign awards. The Indian Law has remained as such from 1961 onwards. There was no intermingling of matters covered under the 1940 Act, with the matters covered by the 1961 Act.

43Copy pinpoint43. Internationally, the Arbitration Law developed in different countries to cater for the felt needs of a particular country. This necessarily led to considerable disparity in the National Laws on arbitration. Therefore, a need was felt for improvement and harmonization as National Laws which were, H

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) often, particularly inappropriate for resolving international commercial arbitration disputes. The explanatory note by the UNCITRAL Secretariat refers to the recurring inadequacies to be found in outdated National Laws, which included provisions that equate the arbitral process with Court litigation and fragmentary provisions that failed to address all relevant substantive law issues. It was also noticed that "even most of those laws that appear to be up-to-date and comprehensive were drafted with domestic arbitration primarily, if not exclusively, in mind". It further mentions that "while this approach is understandable in view of the fact that even today the bulk c of cases governed by arbitration law would be of purely domestic nature, the unfortunate consequence is that traditional local concepts are imposed on international cases and the needs of modern practice are often not met." There was also unexpected and undesired restrictions found in National Laws, 0 which would prevent the parties, for example, from submitting future disputes to arbitration. The Model Law was intended to reduce the risk of such possible frustration, difficulties or surprise. Problems also stemmed from inadequate arbitration laws or from the absence of specific legislation governing arbitration which were aggravated by the fact that National E Laws differ widely. These differences were frequent source of concern in international arbitration, where at-least one of the parties is, and often both parties are, confronted with foreign and unfamiliar provisions and procedures. It was found that obtaining a full and precise account of the law applicable to the arbitration is, in such circumstances, often expensive, impractical or impossible.

44Copy pinpoint44. With these objects in view, the UNCITRAL Model Law on International Arbitration ("the Model Law") was adopted by the United Nations Commission on International Trade Law (UNCITRAL) on 21st June, 1985 at the end of the 18th Session of the Commission. The General Assembly in its Resolution 40 of 1972 on 11th December, 1985 recommended that "all States give due consideration to the Model Law on international H

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A commercial arbitration, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice".

45Copy pinpoint45. The aim and the objective of the Arbitration Act, 1996 is to give effect to the UNCITRAL Model Laws. 8

46Copy pinpoint46. Keeping in view the aforesaid historical background; the objects and reasons of the Act and the elaborate submissions made by the learned counsel for the parties, it would now be necessary to consider the true scope of the provisions of Part I and Part II of the Arbitration Act, 1996.

47Copy pinpoint47. Since the reference relates to the ratio in Bhatia International (supra) and Venture Global Engineering (supra), it would be appropriate to make a brief note about the reasons given by this Court in support of the conclusions reached therein.

48Copy pinpoint48. In Bhatia International, the appellant entered into a contract with the 1st respondent on 9th May, 1997. This contract contained an arbitration clause, which provided that arbitration was to be as per the rules of the International Chamber of Commerce (for short "ICC"). On 23rd October, 1997, the 1st respondent filed a request for arbitration with ICC. Parties agreed that the arbitration be held in Paris, France. ICC appointed a sole arbitrator. The 1st respondent filed an application under Section 9 of the Arbitration Act, 1996 before the lllrd Additional District Judge, Indore, M.P. against the appellant and the 2nd respondent. One of the interim reliefs sought was an order of injunction restraining these parties from alienating, transferring and/or creating third-party rights, disposing of, dealing with and/or selling their business assets and properties. The appellant raised the plea of maintainability of such an application. The appellant contended that Part I of the Arbitration Act, 1996 would not apply to arbitrations where the place of arbitration is not in India. This application was dismissed by the Ill rd Additional District Judge on 1st February,

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.]

2000. It was held that the Court at Indore had jurisdiction and the application was maintainable. The appellant filed a writ petition before the High Court of Madhya Pradesh, Indore Bench. The said writ petition was dismissed by the judgment dated 10th October, 2000, which was impugned in the appeal before this Court. On behalf of the appellants, it was submitted that Part I of the Arbitration Act, 1996 only applies to arbitrations where the place of arbitration is in India. It was also submitted that if the place of arbitration is not in India then Part II of the Arbitration Act, 1996 would apply. Reliance was also placed on Section 2(1 )(f). With regard to Section 2(4) and (5), it was c submitted that the aforesaid provisions would only apply to arbitrations which take place in India. It was submitted that if it is held that Part I applies to all arbitrations, i.e., even to arbitrations whose place of arbitration is not in India, then sub- section (2) of Section 2 would become redundant and/or 0 otiose. It was also pointed out that since Section 9 and Section 17 fall in Part I, the same would not have any application in cases where lhe place of arbitration is not in India. It was emphasised that the legislature had deliberately not provided any provision similar to Section 9 and Section 17 in Part II. It E was also submitted that a plain reading of Section 9 makes it clear that it would not apply to arbitrations which take place outside India. It was further submitted that Section 9 provides that an application for interim measures must be made before the award is enforced in accordance with Section 36, which deals with enforcement of domestic awards only. On the other hand, provisions for enforcement of foreign awards are contained in Part II. It was submitted that Section 9 does not talk of enforcement of the award in accordance with Part 11. It was further submitted that there should be minimum intervention by the Courts in view of the underlying principle in Section 5 of the Arbitration Act, 1996. On the other hand, the respondents · therein had made the submissions, which are reiterated before us. In Paragraph 14 of the Judgment, it is held as follows:-

"14. At first blush the arguments of Mr Sen appear very H

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A attractive. Undoubtedly sub-section (2) of Section 2 states that Part I is to apply where the place of arbitration is in India. Undoubtedly, Part II applies to foreign awards. Whilst the submissions of Mr Sen are attractive, one has to keep in mind the consequence which would follow if they are B accepted. The result would: (a) Amount to holding that the legislature has left a lacuna in the said Act. There would be a lacuna as neither Part I or II would apply to arbitrations held in a country which is not a signatory to the New York c Convention or the Geneva Convention (hereinafter called "a non-convention country"). It would mean that there is no law, in India, governing such arbitrations.

D (b) Lead to an anomalous situation, inasmuch as Part I would apply to Jammu and Kashmir in all international commercial arbitrations but Part I would not apply to the rest of India if the arbitration takes place out of India. E (c) Lead to a conflict between sub-section (2) of Section 2 on one hand and sub-sections (4) and (5) of Section 2 on the other. Further, sub-section (2) of Section 2 would also be in conflict with Section 1 which provides that the Act extends to the whole of India.

(d) · Leave a party remediless inasmuch as in international commercial arbitrations which take place out of India the party would not be able to apply for interim relief in India even though the properties and assets are in India. Thus a party may not be able to get any interim relief at all."

49Copy pinpoint49. It is held that the definition of international commercial arbitration under Section 2(1)(f) makes no distinction between

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] international commercial arbitrations held in India or outside A India. Further it is also held that the Arbitration Act, 1996 no where provides that its provisions are not to apply to international commercial arbitrations which take place in a non- convention country. Hence, the conclusion at Paragraph 14(a). On the basis of the discussion in Paragraph 17, this Court B reached the conclusion recorded at Paragraph 14(b). The conclusions at Paragraph 14(c) is recorded on the basis of the reasons stated in Paragraphs 19, 20, 21, 22 and 23. Upon consideration of the provision contained in Sections 2(7), 28, 45 and 54, it is held that Section 2(2) is only an inclusive and c clarificatory provision. The provision contained in Section 9 is considered in Paragraphs 28, 29, 30 and 31. It is concluded in Paragraph 32 as follows:-

"32. To conclude, I hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating D 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 provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part E 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." F

50Copy pinpoint50. In Venture Global Engineering (supra), this Court relied on Paragraphs 14, 17, 21, 26, 32 and 35. It is concluded in Paragraph 37 as follows:-

"37. In view of the legal position derived from Bhatia G International we are unable to accept Mr. Nariman's argument. It is relevant to point out that in this proceeding we are not deciding the merits of the claim of both parties, particularly, the stand taken in the suit filed by the appellant herein for setting aside the award. It is for the court H

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A concerned to decide the issue on merits and we are not expressing anything on the same. The present conclusion is only with regard to the main issue whether the aggrieved party is entitled to challenge the foreign award which was passed outside India in terms of Sections 9/ B 34 of the Act. Inasmuch as the three-Judge Bench decision is an answer to the main issue raised, we are unable to accept the contra view taken in various decisions relied on by Mr. Nariman. Though in Bhatia International the issue relates to filing a petition under Section 9 of the Act for c interim orders the ultimate conclusion that Part I would apply even for foreign awards is an answer to the main issue raised in this case."

51Copy pinpoint51. As noticed above, the learned senior counsel for the appellants have supported the ratio of law laid down in Bhatia D International (supra) and Venture Global Engineering (supra). They have also supported the decisions in ONGC Vs. Western Company of North America (supra) and National Thermal Power Corporation Vs. Singer Company & Ors. (supra).

52Copy pinpoint52. In order to consider the issues raised and to construe the provisions of the Arbitration Act, 1996 in its proper perspective, it would be necessary to analyse the text of the Arbitration Act, 1996 with reference to its legislative history and international conventions. We shall take due notice of the stated F objects and reasons for the enactment of the Arbitration Act, 1996.

53Copy pinpoint53. Further, for a comprehensive and clear understanding of the connotations of the terms used in the Arbitration Act, 1996, a brief background of various laws applicable to an G International Commercial Arbitration and distinct approaches followed by countries across the world will also be useful.

54Copy pinpoint54. With utmost respect, upon consideration of the entire matter, we are unable to support the conclusions recorded by H this Court in both the judgments i.e. Bhatia International (supra)

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] and Venture Global Engineering (Supra). A

55Copy pinpoint55. In our opinion, the conclusion recorded at Paragraph 14B can not be supported by either the text or context of the provisions in Section 1(2) and proviso thereto. Let us consider the provision step-by-step, to avoid any confusion. A plain B reading of Section 1 shows that the Arbitration Act, 1996 extends to whole of India, but the provisions relating to domestic arbitrations, contained in Part I, are not extended to the State of Jammu and Kashmir. This is not a new addition. Even the 1940 Act states: c "Section 1 - Short title, extend and commencement -

(2) It extends to the whole of India (except the State of Jammu and Kashmir)." D

56Copy pinpoint56. Thus, the Arbitration Act, 1996 maintains the earlier position so far as the domestic arbitrations are concerned. Thereafter, comes the new addition in the proviso to Section 1(2), which reads as under: E "Provided that Parts I, Ill and IV shall extend to the State of Jammu and Kashmir only in so far as they relate to international commercial arbitration or, as the case may be, international commercial conciliation." F

57Copy pinpoint57. The proviso is necessary firstly due to the special status of the State of Jammu & Kashmir, secondly to update the Jammu and Kashmir Act, 1945. In our opinion, the proviso does not create an anomaly. The aforesaid Act is almost a carbon copy of the 1940 Act. Both the Acts do not make any provision G relating to International Commercial Arbitration. Such a provision was made under the Arbitration Act, 1996 by repealing the existing three Acts, i.e., 1937 Protocol Act, 1940 Act and the Foreign Awards Act, 1961. Therefore, the proviso has been added to incorporate the provisions relating to International H

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