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

A Commercial Arbitration. The Arbitration Act, 1996 would not apply to purely domestic arbitrations which were earlier covered by the Jammu and Kashmir Act, 1945 and now by the Jammu & Kashmir Arbitration and Conciliation Act, 1997. We are also unable to agree with the conclusion that in Jammu & Kashmir, B Part I would apply even to arbitration which are held outside India as the proviso does not state that Part I would apply to Jammu & Kashmir only if the place of Arbitration is in Jammu & Kashmir. Since Section 2(2) of Part I applies to all arbitrations, the declaration of territoriality contained therein would be equally applicable in Jammu & Kashmir. The provision contained in Section 2(2) is not affected by the proviso which is restricted to Section 1(2). By the process of interpretation, it can not be read as a proviso to Section 2(2) also. It can further be seen that the provisions relating to "Enforcement of Certain Foreign Awards" in Part II would apply without any restriction, as Part II has no relation to the enforcement of any purely domestic awards or domestically rendered international commercial awards. These would be covered by the Jammu & Kashmir Act, 1997.

58Copy pinpoint58. In view of the above, we are unable to discern any anomaly as held in Bhatia International (supra). We also do not discern any inconsistency between Section 1 and Section 2(2) of the Arbitration Act, 1996.

F Does Section 2(2) bar the Application of Part I to Arbitrations which take place outside India?

59Copy pinpoint59. The crucial difference between the views expressed by the appellants on the one hand and the respondents on the other hand is as to whether the absence of the word "only" in G Section 2(2) clearly signifies that Part I of the Arbitration Act, 1996 would compulsorily apply in the case of arbitrations held in India, or would it signify that the Arbitration Act, 1996 would be applicable only in cases where the arbitration takes place in India. In Bhatia International and Venture Global Engineering H

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) (supra), this Court has concluded that Part I would also apply A to all arbitrations held out of India, unless the parties by agreement, express or implied, exclude all or any of its provisions. Here again, with utmost respect and humility, we are unable to agree with the aforesaid conclusions for the reasons stated hereafter. B

60Copy pinpoint60. It is evident from the observation made by this Court in Konkan Railway Corporation Ltd. & Anr. (supra) that the Model Law was taken into account in drafting of the Arbitration Act, 1996. In Paragraph 9, this Court observed "that the Model C Law was only taken into account in the drafting of the said Act is, therefore, patent. The Arbitration Act, 1996 and the Model Law are not identically drafted". Thereafter, this Court has given further instances of provisions of the Arbitration Act, 1996, not being in conformity with the Model Law and concluded that "The Model Law and judgments and literature thereon are, therefore, not a guide to the interpretation of the Act and, especially of Section 12 thereof. The aforesaid position, according to Mr. Sorabjee has not been disagreed with by this Court in SBP & Co. (supra). We agree with the submission of Mr. Sorabjee that the omission of the word "only" in Section 2(2) is not an instance of "CASUS OMISSUS". It clearly indicates that the Model Law has not been bodily adopted by the Arbitration Act,

1996. But that can not mean that the territorial principle has not been accepted. We would also agree with Mr. Sorabjee that it is not the function of the Court to supply the supposed omission, which can only be done by Parliament. In our opinion, legislative surgery is not a judicial option, nor a compulsion, whilst interpreting an Act or a provision in the Act. The observations made by this_ Court in the case of Nalinakhya Bysack (supra) would tend to support the aforesaid views, wherein it has been observed as follows:- "It must always be borne in mind, as said by Lord Halsbury in Commissioner for Special Purpose of Income Tax Vs. H

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A PremseP8 , that it is not competent to any Court to proceed upon the assumption that the legislature has made a mistake. The Court must procee.(:I on the footing that the legislature intended what it has said. Even if there is some defect in the phraseology used by the legislature the Court B cannot, as pointed out in Crawford Vs. Spoone~9 • aid the legislature's defective phrasing of an Act or add and amend or, by construction, make up deficiencies which are left in the Act. Even where there is a casus omissus, it is, as said by Lord Russell of Killowen in Hansraj Gupta Vs. c Official Liquidator of Dehra Dun-Mussoorie Electric Tramway Co., Ltd. 30 , for others than the Courts to remedy the defect."

61Copy pinpoint61. Mr. Sorabjee has also rightly pointed out the observations made by Lord Dip lock in the case of Duport · D Steels Ltd. (supra). In the aforesaid judgment, the House of Lords disapproved the approach adopted by the Court .of Appeal in discerning the intention of the legislature, it is observed that:-

E "... the role of the judiciary is confined to ascertaining from the words that Parliament has approved as expressing its intention what that intention was, and to giving effect to it. Where the meaning of the statutory words is plain and unambiguous it is not for the judges to invent fancied ambiguities as an excuse for failing to give effect to its plain meaning because they themselves consider that the consequences of doing so would be inexpedient, or even unjust or immoral. In controversial matters such as are involved in industrial relations there is room for differences of opinion as to what is expedient, what is just and what is morally justifiable. Under our Constitution it is

28. LR (1891) AC 531 at Page 549.

29. 6 Moo PC 1 : 4 MIA 179.

H 30. (1933) LR 60 IA 13; AIR (1933) PC 63.

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Parliament's opinion on these matters that is paramount." A (emphasis supplied)

In the same judgment, it is further observed:-

"But if this be the case it is for Parliament. not for the judiciarv. to decide whether any changes should be made to the law as stated in the Act."

62Copy pinpoint62. The above are well accepted principles for discerning the intention of the legislature. In view of the aforesaid, we shall construe the provision contained in Section 2(2) without adding the word "only" to the provision.

63Copy pinpoint63. We are unable to accept the submission of the learned counsel for the appellants that the omission of the word "only" from Section 2(2) indicates that applicability of Part I of the Arbitration Act, 1996 is not limited to the arbitrations that take place in India. We are also unable to accept that Section 2(2) would make Part I applicable even to arbitrations which take place outside India. In our opinion, a plain reading of Section 2(2) makes it clear that Part I is limited in its application to . arbitrations which take place in India. We are in agreement with the submissions made by the learned counsel for the respondents, and the interveners in support of the respondents, that Parliament by limiting the applicability of Part I to arbitrations which take place in India has expressed a legislative declaration. It has clearly given recognition to the territorial principle. Necessarily therefore, it has enacted that Part I of the Arbitration Act, 1996 applies to arbitrations having their place/seat in India. Does the missing 'only' indicate a deviation from Article G 1(2) of the Model Law?

64Copy pinpoint64. As noticed earlier the objects and reasons for the enactment of the Arbitration Act, 1996 clearly indicate that the Parliament had taken into account the UNCITRAL Model Laws. · The statement of the objects and reasons of the Arbitration Act, H

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A 1996 clearly indicates that law of arbitration in India at the time of enactment of the Arbitration Act, 1996, was substantially contained in three enactments, namely, The Arbitration Act, 1940; The Arbitration (Protocol and Convention) Act, 1937 and The Foreign Awards (Recognition and Enforcement) Act, 1961. B It is specifically observed that it is widely felt that the Arbitration Act, 1940, which contains the general law of arbitration, has become outdated. It also mentions that the Law Commission of India, several representative bodies of trade and industry and experts in the fields of arbitration have proposed C amendments to the Arbitration Act, 1940, to make it more responsive to contemporary requirements. It was also recognized that the economic reforms initiated by India at that time may not become fully effective, if the law dealing with settlement of both domestic and international commercial dispute remained out of tune with such reforms. The objects and 0 reasons further make it clear that the general assembly has recommended that all countries give due consideration to the Model Law adopted in 1985, by the UNCITRAL, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice. Paragraph 3 of the statement of objects and reasons makes it clear that although the UNCITRAL Model Laws are intended to deal with Iinternational commercial arbitration and conciliation, they could, with appropriate modifications, serve as a Model Law for legislation of domestic arbitration and conciliation. Therefore, the bill was introduced seeking to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral award and to define the law relating to conciliation, taking into account the UNCITRAL Model Law and Rules. We G have set out the main objects of the bill a little earlier, Paragraph 3(5) of which clearly states that one of the objects is "to minimize the supervisory role of Courts in arbitral process".

65Copy pinpoint65. Much of the debate before us was concentrated on the H comparison between Article 1(2) of UNCITRAL and Section

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) 2(2). Learned counsel for the appellants had canvassed that A the Parliament had deliberately deviated from Article 1(2) of UNCITRAL to express its intention that Part I shall apply to all arbitrations whether they take place in India or in a foreign country. The word "only' is conspicuously missing from Section 2(2) which is included in Article 1(2) of UNCITRAL. This B indicates that applicability of Part I would not be limited to Arbitrations which take place within India. Learned counsel for the appellants submitted that in case the applicability of Section 2(2) is limited to arbitrations which take place within India, it would give rise to conflict between Sections 2(2), 2(4), 2(5), c 2(7), 20 and 28. With equal persistence, the learned counsel for the respondents have submitted that Part I has accepted the territorial principle adopted by UNCITRAL in letter and spirit.

66Copy pinpoint66. Whilst interpreting the provisions of the Arbitration Act, 1996, it is necessary to remember that we are dealing with the D Act which seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards. The aforesaid Act also seeks to define the law relating to conciliation and for matters connected therewith or incidental thereto. It is thus obvious that the Arbitration Act, 1996 seeks to repeal and replace the three pre-existing Acts, i.e., The Arbitration Act, 1940; The Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. Section 85 repeals all the three Acts. Earlier the 1937 Act catered to the arbitrations under the Geneva Convention. After the 1958 New York Convention was ratified by India, the 1961 Act was passed. The domestic law of arbitration had remained static since 1940. Therefore, the Arbitration Act, 1996 consolidates the law on domestic arbitrations by incorporating the provisions to expressly deal with the domestic as well as international commercial arbitration; by taking into account the 1985 UNCITRAL Model Laws. It is not confined to the New York Convention, which is concerned only with enforcement of certain foreign awards. It is also necessary to appreciate that H

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A the Arbitration Act, 1996 seeks to remove the anomalies that existed in the Arbitration Act, 1940 by introducing provisions based on the UNCITRAL Model Laws, which deals with international commercial arbitrations and also extends it to commercial domestic arbitrations. UNCITRAL Model Law has B unequivocally accepted the territorial principle. Similarly, the Arbitration Act, 1996 has also adopted the territorial principle, thereby limiting the applicability of Part I to arbitrations, which take place in India.

67Copy pinpoint67. In our opinion, the interpretation placed on Article 1(2) by the learned counsel for the appellants, though attractive, would not be borne out by a close scrutiny of the Article. Article 1(2) reads as under:-

"Article 1(2): The provisions of this law, except Articles 8, D 9, 17(H), 17(1), 17(J), 35 and 36 apply "only" if the place of arbitration is in the territories of this State".

68Copy pinpoint68. The aforesaid article is a model and a guide to all the States, which have accepted the UNCITRAL Model Laws. The E genesis of the word "only" in Article 1(2) of the Model Law can be seen from the discussions held on the scope of application of Article 1 in the 330th meeting, Wednesday, 19 June, 1985 of UNCITRAL. This would in fact demonstrate that the word "only" was introduced in view of the exceptions referred to in Article 1(2) i.e. exceptions relating to Articles 8, 9, 35 & 36 F (Article 8 being for stay of judicial proceedings covered by an arbitration agreement; Article 9 being for interim reliefs; and Articles 35 & 36 being for enforcement of Foreign Awards). It was felt necessary to include the word "only" in order to clarify that except for Articles 8, 9, 35 & 36 which could have extra G territorial effect if so legislated by the State, the other provisions would be applicable on a strict territorial basis. Therefore, the word "only" would have been necessary in case the provisions with regard to interim relief etc. were to be retained in Section 2(2) which could have extra-territorial application. The Indian H

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

legislature, while adopting the Model Law, with some A variations, did not include the exceptions mentioned in Article 1(2) in the corresponding provision Section 2(2). Therefore, the word "only" would have been superfluous as none of the exceptions were included in Section 2(2). B

69Copy pinpoint69. We are unable to accept the submission of the learned counsel for the appellants that the omission of the word "only", would show that the Arbitration Act, 1996 has not accepted the territorial principle. The Scheme of the Act makes it abundantly clear that the territorial principle, accepted in the UNCITRAL C Model Law, has been adopted by the Arbitration Act, 1996.

70Copy pinpoint70. That the UNCITRAL Rules adopted strict territorial principle is evident from the Report of the UNCITRAL in paragraphs 72 to 80.on the work of its 18th Session in Vienna between 3rd to 21st June, 1985. The relevant extracts of these paragraphs are as under: ·

."72. Divergent views were expressed as to whether the Model Law should expressly state its territorial scope of application and, if so, which connecti119 faclor should be the determining criterion .............................. "

"73, As regards the connecting factor which should determine the applicability of the (Model) Law in a given State, there was wide support for the so-called strict territorial criterion, according to which the Law would apply where the place of arbitration was in that s~~ ....................................................... " "74. Another view was that the place of arbitration should not be exclusive in the sense that parties would be precluded from choosing the law of another State as the law applicable to the arbitration procedure .................. "

"78. The Commission requested the secretariat to prepare, on the basis of the above discussion, draft H

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A provisions on the territorial scope of application of the Model Law in general, including suggestions as to possible exceptions of the general scope ............................................................ "

"80. In discussing the above proposal, the Commission B decided that, for reasons stated in support of the strict territorial criterion (see above, para 73), the applicability of the Model Law should depend exclusively on the place of arbitration as defined in the Model Law ............................................................. " c "81. The Commission agreed that a provision implementing that decision, which had to be included in article 1, should be formulated along the following lines: "The provisions of this Law, except articles 8, 9, 35 and D 36 apply only if the place of arbitration is in the territory of this State ...... .................................................. •

71Copy pinpoint71. Similarly, the acceptance of the territorial principle in UNCITRAL has been duly recognized by most of the experts and commentators on International Commercial Arbitration. The aforesaid position has been duly noticed by Howard M. Holtzmann and Joseph E. Beuhaus in "A guide to the UNCITRAL Model Law on International Commercial Arbitration, Legislative History and Commentary". Dealing with the territorial scope of application of Article 1(2) at Pages 35 to 38, it is stated:-

"... in early discussions of this issue, Article 27, dealing with court assistance in taking evidence was included in the list of exceptions. At that time, the draft of that Article G provided for such assistance to foreign arbitrations. The provision was subsequently changed to its present format, and, by virtue of Article 1(2), it applies only to arbitrations in the enacting State. Assistance in taking evidence for use in foreign arbitrations can be provided only under any H

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] rules on the question in other laws of the State. A

"The Commission adopted the principle that the Model Law would only apply if the place of arbitration was in the enacting State - known as the "territorial criterion" for applicability - only after extensive debate. The primary 8 alternative position was to add a principle called the "autonomy criterion" which would have applied the Law also to arbitrations taking place in another country if the parties had chosen to be governed by the procedural law of the Model Law State. Thus, if the autonomy criterion had been adopted, the parties would have been free, subject to restrictions such as fundamental justice, public policy and rules of court competence, to choose the arbitration Jaw of a State other than that of the place of arbitration. The courts of the Model Law State would then presumably have provided any court assistance needed by this arbitration, including setting aside, even though the place of arbitration was elsewhere. Such a system of party autonomy is envisioned by the New York Convention, which recognizes that a State may consider as domestic an award made outside the State, and vice versa." E "The Commission decided not to adopt the autonomy criterion. It was noted that the territorial criterion was widely accepted by existing national laws, and that where the autonomy criterion was available it was rarely used." F

72Copy pinpoint72. We are also unable to accept the submission of the learned counsel for the appellants that the Arbitration Act, 1996 does not make seat of the arbitration as the centre of gravity of the arbitration. On the contrary, it is accepted by most of the experts that in most of the National Laws, arbitrations are G anchored to the seaUplace/situs of arbitration. Redfern in Paragraph 3.54 concludes states that "the seat of the arbitration is thus intended to be its centre of gravity." This, however, does not mean that all the proceedings of the arbitration have to take place at the seat of the arbitration. The H

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A arbitrators at times hold meetings at more convenient locations. This is necessary as arbitrators often come from different countries. It may, therefore, on occasions be convenient to hold some of the meetings in a location which may be convenient to all. Such a situation was examined by the court of appeal in B England in Naviera Amazonica Peruana S.A. Vs. Compania lntemacionale De Seguros Del Peru3 1 therein at p.121 it is observed as follows :

"The preceding discussion has been on the basis that there is only one "place" of arbitration. This will be the place c chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of reference or the minutes of proceedings or in some other way as the place or "seat" of the arbitration. This does not mean, however, that the arbitral tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is by no means unusual for an arbitral tribunal to hold meetings or even hearings in a place other than the designated place of arbitration, either for its own convenience or for the convenience of the parties or their witnesses ...... It may be more convenient for an arbitral tribunal sitting in one country to conduct a hearing in another country, for instance, for the purpose of taking evidence ..... In fact circumstances each move of the arbitral tribunal does not of itself mean that the seat of arbitration changes. The seat of arbitration remains the place initially agreed by or on behalf of the parties." G

73Copy pinpoint73. These observations were subsequently followed in Union of India Vs. McDonnell Douglas Corp. 32

31. 1988 (1) Lloyd's Law Reports 116.

H 32. 1993 (3) Lloyd's Law Reports 48.

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74Copy pinpoint74. It must be pointed out that the law of the seat or place where the arbitration is held, is normally the law to govern that arbitration. The territorial link between the place of arbitration and the law governing that arbitration is well established in the international instruments, namely, the New York Convention of 1958 and the UNCITRAL Model Law of 1985. It is true that the terms "seat" and "place' are often used interchangeably. In Redfern and Hunter on International Arbitration, 5th Edn. (para 3.51 ), the seat theory is defined thus: ''The concept that an arbitration is governed by the law of the place in which it is held, which is the 'seat' (or 'forum' or locus arbitri) of the arbitration, is well established in both the theory and practice of international arbitration. In fact, the 1923 Geneva Protocol states: 'The arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes o place.' The New York Convention maintains the reference to 'the law of the country where the arbitration took place "(Article V(1 )(d))" and, synonymously to 'the law of the country where the award is made' [Article V(1 )(a) and (e)]. The aforesaid observations clearly show that New Yo1·k Convention continues the clear territorial link between the place of arbitration and the law governing that arbitration. The author further points out that this territorial link is again maintained in the Model Law which provides in Article 1(2) that "the provision of this law, except Articles 8, 9, 35 and 36 apply only if the place of arbitration is in the territory of the State". Just as the Arbitration Act, 1996 maintains the territorial link between the place of arbitration and its law of arbitration, the law in Switzerland and England also maintain a clear link between the seat of arbitration and the /ex arbitri. Swiss Law states: "the provision of this chapter shall apply to any arbitration if the seat of the arbitral tribunal is in Switzerland and if, at the time when the arbitration agreement was concluded, at least one of the parties had neither its domicile nor its habitual residence in Switzerfand. 33

33. See Swiss Private International Law Act, 1987, Chapter 12 Article 176 (1). H

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75Copy pinpoint75. We are of the opinion that the omission of the word "only" in Section 2(2) of the Arbitration Act, 1996 does not detract from the territorial scope of its application as embodied in Article 1(2) of the Model Law. The article merely states that the Arbitration Law as enacted in a given state shall apply if B the arbitration is in the territory of that State. The absence of the word "only" which is found in Article 1(2) of the Model Law, from Section 2(2) of the Arbitration Act, 1996 does not change the content/import of Section 2(2) as limiting the application of Part I of the Arbitration Act, 1996 to arbitrations where the place/ c seat is in India.

76Copy pinpoint76. For the reasons stated above, we are unable to support the conclusion reached in Bhatia International and Venture Global Engineering (supra), that Part I would also apply to arbitrations that do not take place in India. D

77Copy pinpoint77. India is not the only country which has dropped the word "only" from its National Arbitration Law. The word "only" is missing from the Swiss Private International Law Act, 1987 Chapter 12, Article 176 (1 )(I). It is also missing in Section 2(1) E of the 1996Act (U.K.). The provision in Section 2(1) of the U.K. Act reads as follows:- "2(1) - The provisions of this Part apply where the seat of the arbitration is in England, Wales, or Northern Ireland." The aforesaid sections clearly do not provide for any exception which, in fact, are separately provided for in F Section 2(2) and 2(3) of the Arbitration Act, 1996. Therefore, we are in agreement with the submission made by Mr.Aspi Chenoy that Section 2(2) is an express parliamentary declaration/ recognition that Part I of the Arbitration Act, 1996 applies to arbitration having their place/seat in India and does not apply to arbitrations sealed in foreign territories.

78Copy pinpoint78. We do not agree with the learned counsel for the appellants that there would be no need for the provision contained in Section 2(2) as it would merely be stating the obvious, i.e., the Arbitration Act, 1996 applies to arbitrations having their place/seat in India. In our opinion, the provisions

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] have to be read as limiting the applicability of Part I to arbitrations which take place in India. If Section 2(2) is construed as merely providing that Part I of the Arbitration Act, 1996 applies to India, it would be ex facie superfluous/ redundant. No statutory provision is necessary to state/clarify that a law made by Parliament shall apply in India/to arbitrations in India. As submitted by Mr. Sorabjee, another fundamental principle of statutory construction is that courts will never impute redundancy or tautology to Parliament. See observations of Bhagwati, J. in Umed Vs. Raj Singh, 34 wherein it is observed as follows: "It is well settled rule of interpretation that the courts c should, as far as possible, construe a statute so as to avoid tautology or superfluity." The same principle was expressed by Viscount Simon in Hill Vs. William Hill (Park Lane) Ltd. 35 in the following words:-

"11 is to be observed that though a Parliamentary enactment D (like Parliamentary eloquence) is capable of saying the same thing twice over without adding anything to what has already been said once, this repetition in an Act of Parliament is not to be assumed. When the legislature enacts a particular phrase in a statute the presumption is E that it is saying something which has not been said immediately before. The Rule that a meaning should, if possible, be given to every word in the statute implies that, unless there is good reason to the contrary, the words add something which has not been said immediately before." F

79Copy pinpoint79. We quote the above in extenso only to demonstrate that Section 2(2) is not merely stating the obvious. It would not. be a repetition of what is already stated in Section 1(2) of the Arbitration Act, 1~96 which provides that "it extends to the G whole of India". Since the consolidated Arbitration Act, 1996 deals with domestic, commercial and international commercial arbitrators, it was necessary to remove the uncertainty that the

34. 1975 (1) SCC 76 Para 37 at P.103.

35. 1949 AC 530 at P 546. H

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A Arbitration Act, 1996 could also apply to arbitrations which do not take place in India. Therefore, Section 2(2) merely reinforces the limits of operation of the Arbitration Act, 1996 to India.

80Copy pinpoint80. Another strong reason for rejecting the submission made by the learned counsel for the appellants is that if Part I 8 were to be applicable to arbitrations seated in foreign countries, certain words would have to be added to Section 2(2). The section would have to provide that "this part shall apply where the place of arbitration is in India and to arbitrations C having its place out of India." Apart from being contrary to the contextual intent and object of Section 2(2), such an interpretation would amount to a drastic and unwarranted rewriting/alteration of the language of Section 2(2). As very strongly advocated by Mr. Sorabjee, the provisions in the Arbitration Act, 1996 must be construed by their plain language/ D terms. It is not permissible for the court while construing a provision to reconstruct the provision. In other words, the Court cannot produce a new jacket, whilst ironing out the creases of the old one. In view of the aforesaid, we are unable to support the conclusions recorded by this Court as noticed earlier. E Is Section 2(2) in conflict with Sections 2(4) and 2(5) -

81Copy pinpoint81. We may now take up the submission of the learned counsel that Sections 2(4) and 2(5) specifically make Part I applicable to all arbitrations irrespective of where they are held. F This submission is again a reiteration of the conclusions recorded in Bhatia International at Paragraph 14C and reiterated in Paragraphs 21 and 22. We have earlier held that Section 2(2) would not be applicable to arbitrations held 1

outside India. We are unable to accept that there is any conflict at all between Section 2(2) on the one hand and Sections 2(4) and 2(5) on the other hand. Section 2(4) provides as under :

''This Part except sub-section (1) of Section 40, Sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] were pursuant to an arbitration agreement and as if that A other enactment were an arbitration agreement except in so far as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder."

82Copy pinpoint82. It is urged by the appellants that Section 2(4) makes B Part I applicable to "every arbitration" under any other enactment, thereby makes it applicable to arbitrations wherever held, whether in India or outside India. In our opinion, the submission is devoid of merit. Section 2(4) makes Part I applicable to "every arbitration under any other enactment for the time being in force". Hence, there must be an enactment C "for the time being in force" under which arbitration takes place. In our opinion, "any other enactment" would in its ordinary meaning contemplate only an Act made by the Indian Parliament. By virtue of Article 245, "Parliament may make laws for the whole or any part of India". Thus it is not possible to accept that "every arbitration" would include arbitrations which take place outside India. The phrase "all arbitrations" has to be read as limited to all arbitrations that take place in India. The two sub-sections merely recognize that apart from the arbitrations which are consensual between the parties, there may be other types of arbitrations, namely, arbitrations under certain statutes like Section 7 of the Indian Telegraph Act, 1886; or bye-laws of certain Associations such as Association of Merchants, Stock Exchanges and differer~ Chamber of Commerce. Such arbitrations would have to be regarded as covered by Part I of the Arbitration Act, 1996, except in so far as the provision'3 of Part I are inconsistent with the other enactment or any rules made thereunder. There seems to be no indication at all in Section 2(4) that can make Part I applicable to statutory or compulsory arbitrations, which take place outside India.

83Copy pinpoint83. Similarly, the position under Section 2(5) would remain the same. In our opinion, the provision does not admit of an interpretation that any of the provisions of Part I would have any H

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A application to arbitration which takes place outside India. Section 2(5) reads as under:-

"Subject to the provisions of sub-section (4), and save insofar as is otherwise provided by any law for the time being in force or in any agreement in force between India B and any other country or countries, this Part shall apply to all arbitrations and to all proceedings relating thereto."

84Copy pinpoint84. This sub-clause has been made subject to sub-clause (4) and must be read in the backdrop of Section 2(2) of the C Arbitration Act, 1996. Section 2(2) of the aforesaid Act provides that this part shall apply where the place of arbitration is in India. Section 2(5) takes this a step further and holds that this Part shall apply to all arbitrations and proceedings relating thereto, where the seat is in India [a corollary of Section 2(2)] D and if it is not a statutory arbitration or subject of an agreement between India and any other country. The exception of statutory enactments was necessary in terms of the last part of sub- clause (4), which provides for non application of this Part to statutory arbitrations in case of inconsistency. Thus, barring the statutory enactments as provided for under Section 2(4) of the Arbitration Act, 1996 and arbitrations pursuant to international agreement, all other arbitration proceedings held in India shall be subject to Part I of the said Act. Accordingly, the phrase 'all arbitrations' in Section 2(5) means that Part I applies to all where Part I is otherwise applicable. Thus, the provision has to be read as a part of the whole chapter for its correct interpretation and not as a stand alone provision. There is no indication in Section 2(5) that it would apply to arbitrations which are not held in India.

85Copy pinpoint85. In view of the aforesaid observations, we have no doubt that the provisions of Section 2(4) and Section 2(5) would not be applicable to arbitrations which are covered by Part II of the Arbitration Act, 1996, i.e. the arbitrations which take place outside India. We, therefore, see no inconsistency between H

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] Sections 2(2), 2(4) and 2(5). For the aforesaid reasons, we are A unable to agree with the conclusion in Bhatia lntemational that limiting the applicability of part I to arbitrations that take place in India, would make Section 2(2) in conflict with Sections 2(4) and 2(5). B Does Section 2(7) indicate that Part I applies to arbitrations held outside India?

86Copy pinpoint86. We have earlier noticed the very elaborate submissions made by the learned senior counsel on the rationale, scope, and application of Section 2(7), to arbitrations C having a seat outside India.

87Copy pinpoint87. Having considered the aforesaid submissions, we are of the opinion that the views expressed by the learned counsel for the appellants are not supported by the provisions of the 0 Arbitration Act, 1996. Section 2(7) of the Arbitration Act, 1996 reads thus:

"An arbitral award made under this Part shall be considered as a domestic award." E

88Copy pinpoint88. In our opinion, the aforesaid provision does not, in any manner, relax the territorial principal adopted by Arbitration Act,

1996. It certainly does not introduce the concept of a delocalized arbitration into the Arbitration Act, 1996. It must be remembered that Part I of the Arbitration Act, 1996 applies not only to purely domestic arbitrations, i.e., where none of the parties are in any way "foreign" but also to "international commercial arbitrations" covered within Section 2(1)(f) held in !ndia. The term "domestic award" can be used in two senses: one to distinguish it from "international award", and the other to distinguish it from a "foreign award". It must also be remembered that "foreign award" may well be a domestic award in the country in which it is rendered. As the whole. of the Arbitration Act, 1996 is designed to give different treatments to the awards made in India and those made outside India, the H

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A distinction is necessarily to be made between the terms "domestic awards" and "foreign awards". The Scheme of the Arbitration Act, 1996 provides that Part I shall apply to both "international arbitrations" which take place in India as well as "domestic arbitrations· which would normally take place in India. B This is clear from a number of provisions contained in the Arbitration Act, 1996 viz. the Preamble of the said Act; proviso and the explanation to Section 1(2); Sections 2(1 )(f); 11 (9), 11 (12); 28(1 )(a) and 28(1 )(b). All the aforesaid provisions, which incorporate the term "international", deal with pre-award c situation. The term "international award" does not occur in Part I at all. Therefore, it would appear that the term "domestic award" means an award made in India whether in a purely domestic context, i.e., domestically rendered award in a domestic arbitration or in the international context, i.e., domestically rendered award in an international arbitration. 0 Both the types of awards are liable to be challenged under Section 34 and are enforceable under Section 36 of the Arbitration Act, 1996. Therefore, it seems clear that the object of Section 2(7) is to distinguish the domestic award covered under Part I of the Arbitration Act, 1996 from the "foreign award" E covered under Part II of the aforesaid Act; and not to distinguish the "domestic award" from an "international award" rendered in India. In other words, the provision highlights, if any thing, a clear distinction between Part I and Part II as being applicable in completely different fields and with no overlapping provisions. F

89Copy pinpoint89. That Part I and Part II are exclusive of each other is evident also from the definitions section in Part I and Part II. Definitions contained in Section 2(i)(a) to (h) are limited to Part I. The opening line which provides "In this part, unless the context otherwise requires ...... ", makes this perfectly clear. Similarly, Section 44 gives the definition of a foreign award for the purposes of Part II (Enforcement of Certain Foreign Awards); Chapter I (New York Convention Awards). Further, Section 53 gives the interpretation of a foreign award for the purposes of Part II (Enforcement of Certain Foreign Awards);

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) Chapter II (Geneva Convention Awards). From the aforesaid, the intention of the Parliament is clear that there shall be no overlapping between Part I and Part II of the Arbitration Act,

1996. The two parts are mutually exclusive of each other. To accept the submissions made by the learned counsel for the appellants would be to convert the "foreign award" which falls within Section 44, into a domestic award by virtue of the provisions contained under Section 2(7) even if the arbitration takes place outside India or is a foreign seated arbitration, if the law governing the arbitration agreement is by choice of the parties stated to be the Arbitration Act, 1996. This, in our c opinion, was not the intention of the Parliament. The territoriality principle of the Arbitration Act, 1996, precludes Part I from being applicable to a foreign seated arbitration, even if the agreement purports to provide that the Arbitration proceedings will be governed by the Arbitration Act, 1996. D

90Copy pinpoint90. The additional submission of Mr. Sorabjee is that Section 9-B of the 1961 Act, which was in negative terms, has been re-enacted as Section 2(7) of the Arbitration Act, 1996 in positive terms. Section 9-B of the 1961 Act, was as under: E "9. Saving - Nothing in this Act shall -

(b) apply to any award made on an arbitration agreement governed by the law of India." F

91Copy pinpoint91. We are of the opinion that the Section has been intentionally deleted, whereas many other provisions of the 1961 Act have been retained in the Arbitration Act, 1996. If the provision were to be retained, it would have been placed in Part G II of the Arbitration Act, 1996. In our opinion, there is no link between Section 2(7) of the Arbitration Act, 1996, with the deleted Section 9-B of the 1961 Act. It was by virtue of the aforesaid provision that the judgments in Singer Company & Ors. (supra) and ONGC v. Western Company of North H

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A America (supra) were rendered. In both the cases the foreign awards made outside India were set aside, under ihe 1940 Act. By deletion of Section 9-B of the 1961 Act, the judgments have been rendered irrelevant under the Arbitration Act, 1996. Having removed the mischief created by the aforesaid provision, it cannot be the intention of the Parliament to reintroduce it, in a positive form as Section 2(7) of the Arbitration Act, 1996. We, therefore, see no substance in the additional submission of Mr. Sorabjee.

92Copy pinpoint92. We agree with Mr. Salve that Part I only applies when the seat of arbitration is in India, irrespective of the kind of arbitration. Section 2(7) does not indicate that Part I is · applicable to arbitrations held outside India.

93Copy pinpoint93. We are, therefore, of the opinion that Section 2(7) D does not alter the proposition that Part I applies only where the "seat" or "place" of the arbitration is in India.

94Copy pinpoint94. It appears to us that provision in Section 2(7) was also necessary to foreclose a rare but possible scenario (as E canvassed by Mr. Gopal Subramanium) where two foreigners who arbitrate in India, but under a Foreign Arbitration Act, could claim that the resulting award would be a "non-domestic" award. In such a case, a claim could be made to enforce the award in India, even though the seat of arbitration is also in India. This curious result has occurred in some cases in other jurisdictions, F e.g., U.S.A. In the case of Bergesen Vs. Joseph Muller Corporation36 , the Court held an award made in the State of New York between two foreign parties is to be considered as a non-domestic award within the meaning of the New York Convention and its implementing legislation. Section 2(7), in our G opinion, is enacted to reinforce the territorial criterion by providing that, when two foreigners arbitrate in India, under a Foreign Arbitration Act, the provisions of Part I will apply. Indian Courts being the supervisory Courts, will exercise control and

H 36. 710 F.2d 928.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] regulate the arbitration proceedings, which will produce a A "domestically rendered international commercial award". It would be a "foreign award" for the purposes of enforcement in a country other than India. We, therefore, have no hesitation in · rejecting the submissions made by the learned senior counsel for the appellants, being devoid of merit. B

Party Autonomy

95Copy pinpoint95. Learned counsel for the appellants have .submitted that Section 2(1)(e), Section 20 and Section 28 read with Section 45 and Section 48(1)(e) make it clear that Part I is not limited only to arbitrations which take place in India. These provisions indicate that Arbitration Act, 1996 is subject matter centric and not exclusively seat centric. Therefore, ·seat" is not the "centre of gravity" so far as the Arbitration Act, 1996 is concerned. We are of the considered opinion that the aforesaid provisions have to be interpreted by keeping the principle of territoriality at the forefront. We have earlier observed that Section 2(2) does not make Part I applicable to arbitrations seated or held outside India. In view of the expression used in Section 2(2), the maxim expressum facit cessare taciturn, would not permit by interpretation to hold that Part I would also apply to arbitrations held outside the territory of India. The expression "this Part shall apply where the place of arbitration is in India" necessarily f excludes application of Part I to arbitration seated or held outside India. It appears to us that neither of the provisions relied upon by the learned counsel for the appellants would make any section of Part I applicable to arbitration seated outside India. It will be apposite now to consider each of the aforesaid provisions in turn. Section 2(1)(e) of the Arbitration Act, 1996 reads as under: G "2. Definitions (1) In this Part, unless the context otherwise requires -

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A (e) "Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject B matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes."

96Copy pinpoint96. We are of the opinion, the term ·subject matter of the arbitration" cannot be confused with "subject matter of the suit". C The term "subject matter" in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. For example, if the arbitration is held in Delhi, where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal sitting in Delhi passes an interim order under Section 17 of the Arbitration Act, 1996, the appeal against such an interim order under Section 37 must lie to the Courts of Delhi being the Courts having supervisory jurisdiction over the arbitration proceedings and the tribunal. This would be

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irrespective of the fact that the obligations to be performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi. In such circumstances, both the Courts would have jurisdiction, i.e., the Court within whose jurisdiction the subject matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution, i.e., arbitration is located.

97Copy pinpoint97. The definition of Section 2(1 )(e) includes "subject matter of the arbitration" to give jurisdiction to the courts where the arbitration takes place, which otherwise would not exist. On c the other hand, Section 47 which is in Part II of the Arbitration Act, 1996 dealing with enforcement of certain foreign awards has defined the term "court" as a court having jurisdiction over the subject-matter of the award. This has a clear reference to a court within whose jurisdiction the asseUperson is located, 0 against which/whom the enforcement of the international arbitral award is sought. The provisions contained in Section 2(1)(e) being purely jurisdictional in nature can have no relevance to the question whether Part I applies to arbitrations which take place outside India. E

98Copy pinpoint98. We now come to Section 20, which is as under:-

"20. Place of arbitration -

(1) The parties are free to agree on the place of arbitration.

(2) Failing any agreement referred to in sub-section (1 ), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. (3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers H

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A appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, good or other property." A plain reading of Section 20 leaves no room for doubt 8 that where the place of arbitration is in India, the parties are free to agree to any "place" or "seat" within India, be it Delhi, Mumbai etc. In the absence of the parties' agreement thereto, Section 20(2) authorizes the tribunal to determine the place/ seat of such arbitration. Section 20(3) enables the tribunal to meet at any place for conducting hearings at a place of convenience in matters such as consultations among its members for hearing witnesses, experts or the parties.

99Copy pinpoint99. The fixation of the most convenient "venue" is taken care of by Section 20(3). Section 20, has to be read in the context of Section 2(2), which places a threshold limitation on the applicability of Part I, where the place of arbitration is in India. Therefore, Section 20 would also not support the submission of the extra-territorial applicability of Part I, as canvassed by the learned counsel for the appellants, so far as purely domestic arbitration is concerned.

100Copy pinpoint100. True, that in an international commercial arbitration, having a seat in India, hearings may be necessitated outside India. In such circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but it would not have the effect of changing the seat of arbitration which would remain in India. The legal position in this regard is summed up by Redfern and Hunter, The Law and Practice of International Commercial Arbitration (1986) at Page 69 in the following passage under the heading "The Place of Arbitration":- G "The preceding discussion has been on the basis that there is only one "place" of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of the H reference or the minutes of proceedings or in some other

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] way as the place or "seat" of the arbitration. This does not mean, however, that the arbitral tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is by no means unusual for an arbitral tribunal to hold meetings - or even hearings - in a place other than the designated place of arbitration. either for its own convenience or for the convenience of the parties or their witnesses ... It may be more convenient for an arbitral tribunal sitting in one c country to conduct a hearing in another country - for instance, for the purpose of taking evidence ..... In such circumstances, each move of the arbitral tribunal does not of itself mean that the seat of arbitration changes. The seat of the arbitration remains the place initially agreed by or 0 on behalf of the parties." This, in our view, is the correct depiction of the practical considerations and the distinction between "seat" (Section 20(1) and 20(2)) and "venue· (Section 20(3)). We may point out here that the distinction between "seat" and "venue" would be quite crucial in the event, the arbitration agreement designates a foreign country as the "seat"/"place· of the arbitration and also select the Arbitration Act. 1996 as the curial law/law governing the arbitration proceedings. It would be a matter of construction of the individual agreement to decide whether: (i) The designated foreign "seat" would be read as in fact only providing for a "venue·/ "place· where the hearings would be held, in view of the choice of G Arbitration Act, 1996 as being the curial law- OR (ii) Whether the specific designation of a foreign seat, necessarily carrying with it the choice of that country's Arbitration I curial law, would prevail over H

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A and subsume the conflicting selection choice by the parties of the Arbitration Act, 1996.

ONLY if the agreement of the parties is construed to provide for the "seat" /"place" of Arbitration being in India - would Part I.of the Arbitration Act, 1996 be applicable. If the agreement is 8 held to provide for a "seat" I "place" outside India, Part I would be inapplicable to the extent inconsistent with the arbitration law of the seat, even if the agreement purports to provide that the Arbitration Act, 1996 shall govern the arbitration proceedings.

101Copy pinpoint101. How complex the situation can become can be best demonstrated by looking at some of the prominent decisions on the factors to be taken into consideration in construing the relevant provisions of the contract/arbitration clause.

0 102. In Naviera Amazonica Peruana S.A. (supra), the Court of Appeal, in England considered the agreement which contained a clause providing for the jurisdiction of Courts in Lima Peru in the event of judicial dispute and at the same time contained a clause providing that the arbitration would be E governed by English Law and the procedural law of Arbitration shall be English Law.

103Copy pinpoint103. The Court of Appeal summarized the State of the jurisprudence on this topic. Thereafter, the conclusions which arose from the material were summarized as follows:- F •All contracts which provide for arbitration and contain a foreign element may involve three potentially relevant systems of law. (1) The law governing the substantive contract. (2) The law governing the agreement to arbitrate G and the performance of that agreement. (3) The law governing the conduct of the arbitration. In the majority of cases all three will be the same. But (1) will often be different from (2) and (3). And occasionally, but rarely, (2) may also differ from (3)."

104Copy pinpoint104. It is observed that the problem about all these

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

formulations, including the third, is that they elide the distinction A between the legal localization of an arbitration on the one hand and the appropriate or convenient geographical locality for hearings of the arbitration on the other hand.

105Copy pinpoint105. On the facts of the case, it was observed that since 8 there was no contest on Law 1 and Law 2, the entire issue turned on Law 3, "The law governing the conduct of the arbitration. This is usually referred to as the curial or procedural law, or the lex fori." Thereafter, the Court approvingly quoted the following observation from Dicey & Morris on the Conflict C of Laws (11th Edition): "English Law does not recognize the concept of a de-localised" arbitration or of "arbitral procedures floating in the transnational firmament, unconnected with any municipal system of law". It is further held that "accordingly every arbitration must have a "seat" or "locus arbitri" or "forum" which subjects its procedural rules to the municipal law which is there in force". The Court thereafter culls out the following principle "Where the parties have failed to choose the law governing the arbitration proceedings, those proceedings must be considered, at any rate prima facie, as being governed by the law of the country in which the arbitration is held, on the ground that it is the country most closely connected with the proceedings". The aforesaid classic statement of the Conflict of Law Rules as quoted in Dicey & Morris on the Conflict of Laws (11th Edition) Volume 1, was approved by the House of Lords in James Miller & Partners Vs. Whitworth Street Estates F (Manchester) Ltd. 37 · Mr. Justice Mustill in the case of Black Clawson International Ltd. Vs. Papierlrke Waldhof-Aschaf- fenburg A. G- 36 , a little later characterized the same proposition as "the law of the place where the reference is conducted, the lex fori". The Court also recognized the proposition that "there G is equally no reason in theory which precludes parties to agree that an arbitration shall be held at a place or in country X but

37. 11970] 1 Lloyd's Rep. 269; [1970] A.C.583.

38. 11981] 2 Lloyd's Rep. 446 at P. 453. H

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A subject to the procedural laws of Y". But it points out that in reality parties would hardly make such a decision as it would create enormous unnecessary complexities. Finally it is pointed out that it is necessary not to confuse the legal "seat" of an arbitration with the geographically convenient place or places for holding hearings.

106Copy pinpoint106. On examination of the facts in that case, the Court of Appeal observed that there is nothing surprising in concluding that these parties intended that any dispute under this policy, should be arbitrated in London. But ii would always be open to the Arbitral Tribunal to hold hearings in Lima if this were thought to be convenient, even though the seat or forum of the arbitration would remain in London.

107Copy pinpoint107. A similar situation was considered by the High Court D of Justice Queen's Bench Division Technol0gy and Construction Court in Braes of Doune Wind Farm (Scotland) Limited v Alfred McA/pine Business Services Limited (supra). In this case the Court considered two applications relating to the First Award of an arbitrator. The award related to an EPC E (Engineering, Procurement and Construction) Contract dated 4th November, 2005 ("the EPC Contract") between the Claimant ("the Employer") and the Defendant (''the Contractor") whereby the Contractor undertook to carry out works in connection with the provision of 36 wind turbine generators (the "WTGs") at a W site some 18 kilometres from Stirling in Scotland. This award dealt with enforceability of the clauses of the EPC Contract which provided for liquidated damages for delay. The claimant applied for leave to appeal against this award upon a question of law whilst the Defendant sought, in effect, a declaration that G the Court had no jurisdiction to entertain such an application and for leave to enforce the award. The Court considered the issue of jurisdiction which arose out of application of Section 2 of the (English) Arbitration Act, 1996 which provides that - "(1) The provisions of this Part apply where the seat of the arbitration is in England and Wales or Northern Ireland." The 1H,.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] Court notices the singular importance of determining the A ,, location of "juridical seat" in terms of Section 3, for the purposes of Section 2, in the following words:-

"! must determine what the parties agreed was the "seat" of the arbitration for the purposes of Section 2 of the 8 Arbitration Act 1996. This means by Section 3 what the parties agreed was the "juridical" seat. The word "juridical" "is not an irrelevant word or a word to be ignored in ascertaining what the "seat" is. It means and connotes the administration of justice so far as the arbitration is concerned. It implies that there must be a country whose job it is to administer, control or decide what control there is to be over an arbitration."

108Copy pinpoint108. Thus, it would be evident that if the "juridical sear of the arbitration was in Scotland, the English Courts would have no jurisdiction to entertain an application for leave to appeal. The Contractor argued that the seat of the arbitration was Scotland whilst the Employer argued that it was England. There were to be two contractors involved with the project. E

109Copy pinpoint109. The material Clauses of the EPC Contract were:

1.4.1. The Contract shall be governed by and construed in accordance with the laws of England and Wales and, subject to Clause 20.2 (Dispute Resolution), the Parties agree that the courts of England and Wales have exclusive jurisdiction to settle any dispute arising out of or in connection with the contract.

(a) ... any dispute or difference between the Parties to this Agreement arising out of or in connection with this Agreement shall be referred to arbitration. (b) Any reference to arbitration shall be to a single arbitrator. .. and conducted in accordance with the Construction Industry Model Arbitration Rules H

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A February 1998 Edition, subject to this Clause (Arbitration Procedure) ...

(c) This arbitration agreement is subject to English Law and the seat of the arbitration shall be Glasgow, · Scotland. Any such reference to arbitration shall be B deemed to be a reference to arbitration within the meaning of the Arbitration Act, 1996 or any statutory re-enactment.·

110Copy pinpoint110. The Arbitration was to be conducted under the C Arbitration Rules known colloquially as the "GIMAR Rules". Rule 1.1 of the Rules provided that:

"These Rules are to be read consistently with the Arbitration Act 1996 (the Act), with common expressions 0 having the same meaning." Rule 1.6 applied:

(a) a single arbitrator is to be appointed, and

E (b) the seat of the arbitration is in England and Wales or Northern Ireland.

111Copy pinpoint111. The court was informed by the parties in arguments that Scottish Court's powers of control or intervention would be, at the very least, seriously circumscribed by the parties' F agreement in terms as set out in paragraph 6 of the judgment. It was further indicated by the counsel that the Scottish Court's powers of intervention might well be limited to cases involving such extreme circumstances as the dishonest procurement of an award. G

112Copy pinpoint112. In construing the EPC, the court relied upon the principles stated by the Court of Appeal in Naviera Amazonica Peruana SA (supra).

113Copy pinpoint113. Upon consideration of the entire material, the Court H formed the view that it does have jurisdiction to entertain an

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] application by either party to the contract in question under A Section 69 of the (English) Arbitration Act, 1996. The court gave the following reasons for the decision:-

(a) One needs to consider what, in substance, the parties agreed was the law of the country which would juridically 8 control the arbitration.

(b) I attach particular importance to Clause 1.4.1. The parties agreed that essentially the English (and Welsh) Courts have "exclusive jurisdiction" to settle disputes. Although this is "subject to" arbitration, it must and does C mean something other than being mere verbiage. It is a jurisdiction over disputes and not simply a court in which a foreign award may be enforced. If it is in arbitration alone that disputes are to be settled and the English Courts have no residual involvement in that process, this part of Clause D 1.4.1 is meaningless in practice. The use of the word "jurisdiction" suggests some form of control. (c) The second part of Clause 1.4.1 has some real meaning if the parties were agreeing by it that, although the agreed disputes resolution process is arbitration, the parties agree that the English Court retains such jurisdiction to address those disputes as the law of England and Wales permits. The Arbitration Act, 1996 permits and requires the Court to entertain applications under Section 69 for leave to appeal against awards which address disputes which have been referred to arbitration. By allowing such applications and then addressing the relevant questions of law, the Court will settle such disputes; even if the application is refused, the court will be applying its jurisdiction under the Arbitration Act, 1996 and providing resolution in relation to such disputes.

(d) This reading of Clause 1.4.1 is consistent with Clause 20.2.2 (c) which confirms that the arbitration agreement is subject to English Law and that the "reference" is "deemed H

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A to be a reference to arbitration within the meaning of the Arbitration Act, 1996." This latter expression is extremely odd unless the parties were agreeing that any reference to arbitration was to be treated as a reference to which the Arbitration Act, 1996 was to apply. There is no 8 definition in the Arbitration Act, 1996 of a "reference to arbitration", which is not a statutory term of art. The parties presumably meant something in using the expression and the most obvious meaning is that the parties were agreeing that the Arbitration Act, 1996 should apply to the c reference without qualification.

(e) Looked at in this light, the parties' express agreement that the "seat" of arbitration was to be Glasgow, Scotland must relate to the place in which the parties agreed that the hearings should take place. However, by all the other references the parties were agreeing that the curial law or law which governed the arbitral proceedings establish that, prima facie and in the absence of agreement otherwise, the selection of a place or seat for an arbitration will determine what the curial law or "lex fori" or "lex arbitri" will be, we consider that, where in substance the parties agree that the laws of one country will govern and control a given arbitration, the place where the arbitration is to be heard will not dictate what the governing or controlling law will be.

F (f) In the context of this particular case, the fact that, as both parties seemed to accept in front of me, the Scottish Courts would have no real control or interest in the arbitral proceedings other than in a criminal context, suggests that they can not have intended that the arbitral proceedings were to be conducted as an effectively "delocalized" G arbitration or in a "transnational firmament", to borrow Lord Justice Kerr's words in the Naviera Amazonica case.

(g) The CIMAR Rules are not inconsistent with my view. Their constant references to the Arbitration Act, 1996 H suggest that the parties at least envisaged the possibility

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] that the Courts of England and Wales might play some part A in policing any arbitration. For instarce, Rule 11.5 envisages something called "the Court" becoming involved in securing compliance with a peremptory order of the arbitrator. That would have to be the English Court, in practice." B

114Copy pinpoint114. These observations clearly demonstrate the detailed examination which is required to be undertaken by the court to discern from the agreement and the surrounding circumstances the intention of the parties as to whether a particular place mentioned refers to the "venue" or "seat" of the arbitration. In C that case, the Court, upon consideration of the entire material, concluded that Glasgow was a reference to the "venue" and the "seat" of the arbitration was held to be in England. Therefore, there was no supplanting of the Scottish Law by the English Law, as both the seat under Section 2 and the "juridical seat" D under Section 3, were held to be in England. Glasgow being only the venue for holding the hearings of the arbitration proceedings. The Court rather reiterated the principle that the selection of a place or seat for an arbitration will determine what the "curial law" or "lex fori" or "lex arbitri" will be. It was further concluded that where in substance the parties agreed that the laws of one country will govern and control a given arbitration, the place where the arbitration is to be heard will not dictate what the governing law or controlling law will be. In view of the above, we are of the opinion that the reliance placed upon this judgment by Mr.Sundaram is wholly misplaced.

115Copy pinpoint115. The aforesaid ratio has been followed in Shashoua & Ors. (supra). In this case, the Court was concerned with the construction of the shareholders' agreement between the parties, which provided that "the venue of the arbitration shall be London, United Kingdom". 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 law of India. The H

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A claimants made an application to the High Court in New Delhi seeking interim measures of protection under Section 9 of the Arbitration Act, 1996, prior to the institution of arbitration proceedings. Following the commencement of the arbitration, the defendant and the joint venture company raised a challenge B to the jurisdiction of the arbitral tribunal, which the panel heard as a preliminary issue. The tribunal rejected the jurisdictional objection. The tribunal then made a cost award ordering the defendant to pay $140,000 and £172,373.47. The English Court gave leave to the claimant to enforce the costs award c as a judgment. The defendant applied to the High Court of Delhi under Section 34(2)(iv) of the Arbitration Act, 1996 to set aside the costs award. The claimant had obtained a charging order, which had been made final, over the defendant's property in the UK. The defendant applied to the Delhi High Court for an order directing the claimants not to take any action to execute the charging oJder, pending the final disposal of the Section 34 petition in Delhi seeking to set aside the costs award. The defendant had sought unsuccessfully to challenge the costs award in the Commercial Court under Section 68 and Section 69 of the 1996 Act (U.K.) and to set aside the order giving leave to enforce the award. Examining the fact situation in the case, the Court obser\ted as follows:-

"The basis for the court's grant of an anti-suit injunction of the kind sought depended upon the seat of the arbitration. F An agreement as to the seat of an arbitration brought in the law of that country as the curial law and was analogous to an exclusive jurisdiction clause. Not only was there agreement to the curial law of the seat, but also to the Courts of the seat having supervisory jurisdiction G over the arbitration, so that, by agreeing to the seat, the parties agreed that any challenge to an interim or final award was to be made only in the courts of the place designated as the seat of the arbitration.

Although, 'venue' was not synonymous with 'seat', in an H

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) arbitration clause which provided for arbitration to be A conducted in accordance with the Rules of the ICC in Paris (a supranational body of rules), a provision that 'the venue of arbitration shall be London, United Kingdom' did amount to the designation of a juridical seat..: ... ." B In Paragraph 54, it is further observed as follows:-

"There was a little debate about the possibility of the issues relating to the alleged submission by the claimants to the jurisdiction of the High Court of Delhi being heard by that court, because it was best fitted to determine such issues under Indian Law. Whilst I found this idea attractive initially, we are 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. "[emphasis supplied] E

116Copy pinpoint116. In making the aforesaid observations, the Court relied on judgments of the Court of Appeal in C Vs. 03 9 • Here the Court of Appeal in England was examining an appeal by the defendant insurer from the judgment of Cooke, J. granting an anti-suit injunction preventing it from challenging an arbitration award in the U.S. Courts. The insurance policy 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". However, it was further provided that "this policy shall be governed by and construed in accordance with the internal laws of the State of New York .... ". A partial award was made in favour of the claimants. It was agreed that this partial award is, in English

39. [2007] EWCA Civ 1282 (CA). H

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A Law terms, final as to what it decides. The defendant sought the tribunal's withdrawal of its findings. The defendant also intimated its intention to apply to a Federal Court applying US Federal Arbitration Law governing the enforcement of arbitral award, which was said to permit "vacatur" of an award where B arbitrators have manifestly disregarded the Jaw. It was in consequence of such intimation that the claimant sought and obtained an interim anti-suit injunction. The Judge held that parties had agreed that any proceedings seeking to attack or set aside the partial award would only be those permitted by c English Law. It was not, therefore, permissible for the defendant to bring any proceedings in New York or elsewhere to attack the partial award. The Judge rejected the arguments to the effect that the choice of the law of New York as the proper law of the contract amounted to an agreement that the law of England should not apply to proceedings post award. The 0 Judge also rejected a further argument that the separate agreement to arbitrate contained in the Condition V(o) of the policy was itself governed by New York Law so that proceedings could be instituted in New York. The Judge granted the claimant a final injunction. The Court of Appeal E noticed the submission on behalf of the defendant as follows:-

"14. The main submission of Mr Hirst QC for the defendant insurer was that the judge had been wrong to hold that the arbitration agreement itself was governed by English law merely because the seat of the arbitration was London. He argued that the arbitration agreement itself was silent as to its proper law but that its proper law should follow the proper law of the contract as a whole, namely New York law, rather than follow from the law of the seat of the arbitration namely England. The fact that the arbitration itself was governed by English procedural law did not mean that it followed that the arbitration agreement itself had to be governed by English law. The proper law of the arbitration agreement was that law with which the agreement had the most close and real connection; if the

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] insurance policy was governed by New York law, the law A with which the arbitration agreement had its closest and most real connection was the law of New York. It would then follow that, if New York law permitted a challenge for manifest disregard of the law, the court in England should not enjoin such a challenge." B

The Court of Appeal held:-

"16. I shall 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 C 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) F 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 supposed that a party aggrieved by one part of an award could proceed in one jurisdiction and a party G aggrieved by another part of an award could proceed in another jurisdiction. Similarly, in the case of a single complaint about an award, it could not be supposed that the aggrieved party could complain in one jurisdiction and the satisfied party be entitled to ask the other jurisdiction H

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A to declare its satisfaction with the award. There would be a serious risk of parties rushing to get the first judgment or of conflicting decisions which the parties cannot have contemplated.

17. It follows from this that a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award"......... .

117Copy pinpoint117. On the facts of the case, the Court held that the seat of the arbitration was in England and accordingly entertained the challenge to the award. Again in Union of India Vs. McDonnell Douglas Corp. (supra), the proposition laid down in Naviera Amazonica Peruana S.A. (supra) was reiterated. In this case, the agreement provided that:-

D "The arbitration shall be conducted in accordance with the procedure provided iri the Indian Arbitration Act of 1940 or any reenactment or modification thereof. The arbitration shall be conducted in the English language. The award of the Arbitrators shall be made by majority decision and shall be final and binding on the Parties hereto. The seat of the E arbitration proceedings shall be London, United Kingdom."

118Copy pinpoint118. Construing the aforesaid clause, the Court held as follows:-

F "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 G of their arbitration and which are not inconsistent with the choice of English arbitral procedural law."

119Copy pinpoint119. The same question was again considered by the High Court of Justice, Queen's Bench Division, Commercial Court (England) in Sulamerica CIA Nacional de Seguros SA v. H

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] Enesa Engenharia SA - Enesa. 40 The Court noticed that the issue in this case depends upon the weight to be given to the provision in Condition 12 of the Insurance policy that "the seat of the arbitr:ation shall be London, England." It was observed that this necessarily carried with it the English Court's supervisory jurisdiction over the arbitration process. It was observed that "this follows from the express terms of the Arbitration Act, 1996 and, in particular, the provisions of Section 2 which provide that Part I of the Arbitration Act, 1996 applies where the seat of the arbitration is in England and Wales or Northern Ireland. This immediately establishes a strong c connection between the arbitration agreement itself and the law of England. It is for this reason that recent authorities have laid stress upon the locations of the seat of the arbitration as an important factor in determining the proper law of the arbitration agreement." The court thereafter makes a reference to the 0 observations made in the case of C. vs. D by the High Court as well as the Court of Appeal. In Paragraph 12, the observations made have particular relevance which are as under: "In the Court of Appeal, Longmore W, with whom the other two Lord Justices agreed, decided (again obiter)· that, where there was no express choice of law for the arbitration agreement, the law with which that agreement had its closest and most real connection was more likely to be the law of the seat of arbitration than the law of the underlying contract. He referred to Mustill J. (as he then was) in Black Clawsen International Limited v Papierwerke Waldhof-Aschaffenburg AG [1981] 2 LLR 446 as saying that it would be a rare case in which the law of the arbitration agreement was not the same as the law of the place or seat of the arbitration. Longmore LJ also referred to the speech of Lord Mustill (as he had then become) in Chanel Tunnel Group Limi.ted vs. Balfour Beatty Construction Limited [1993] 1 LLR 291 and concluded

40. [2012 WL 14764]. H

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A that the Law Lord was saying that, although it was exceptional for the proper law of the underlying contract to be different from the proper law of the arbitration agreement, it was less exceptional (or more common) for the. proper law of that underlying contract to be different B from the curial law, the law of the seat of the arbitration. He was not expressing any view on the frequency or otherwise of the law of the arbitration agreement differing from the l~aw of the seat of the arbitration. Longmore LJ agreed with Mustill J's earlier dictum that it would .be rare c for the law 01• the separable arbitration agreement to be different from the law of the seat of the arbitration. The reason was "that an agreement to arbitrate will normally have a closer and more real connection with the place where the parties have chose to arbitrate, than with the place of the law of the underlying contract, in cases where the parties have deliberately chosen to arbitrate, in one place, disputes which have arisen under a contract governed by the law of another place".

120Copy pinpoint120. Upon consideration of the entire matter, it was observed 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)

121Copy pinpoint121. 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.

122Copy pinpoint122. It would, therefore, follow that if the arbitration agreement is found or held to provide for a seat I place of arbitration outside India, then the provision that the Arbitration H Act, 1996 would govern the arbitration proceedings, would not

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] make Part I of the Arbitration Act,· 1995 applicable or enable A Indian Courts to exercise supervisory jurisdiction over the arbitration or the award. It would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory B provisions of the English Procedural Law/Curial Law. This necessarily follows from the fact that Part I applies only to arbitrations having their seat I place in India.

Section 28" •· c

123Copy pinpoint123. It was submitted by the learned counsel for the appellants that Section 28 is another indication of the intention of the Parliament that Part I of the Arbitration Act, 1996 was not confined to arbitrations which take place in India. We are unable lo accept the submissions made by the learned counsel for the parties. As the heading of the Section 28 indicates, its only purpose is to identify the rules that would be applicable to "substance of dispute". In other words, it deals with the applicable conflict of law rules. This section makes a distinction between purely domestic arbitrations and international commercial arbitrations, with a seat in India. Section 28(1)(a) makes ii clear that in an arbitration under Part I to which Section 2(1 )(f) does not apply, there is no choice but for the Tribunal to decide "the dispute" by applying the Indian "substantive law applicable to the contract". This is clearly lo ensure that two or more Indian parties do not circumvent the substantive Indian law, by resorting lo arbitrations. The provision would have an overriding effect over any other contrary provision in such contract. On the other hand, where an arbitration under Part I is an international commercial arbitration within Section 2(1)(f), G the parties would be free to agree to any other "substantive law'' and if not so agreed, the "substantive law" applicable would be as determined by the Tribunal. The section merely shows that the legislature has segregated the domestic and international arbitration. Therefore, to suit India, conflict of law rules have H

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A been suitably modified, where the arbitration is in India. This will not apply where the seat is outside India. In that eivent, the conflict of laws rules of the country in which the arbitration takes place would have to be applied. Therefore, in our opinion, the emphasis placed on the expression "where the place of B arbitration is situated in India", by the learned senior counsel for the appellants, is not indicative of the fact that the intention of Parliament was to give an extra-territorial operation to Part I of the Arbitration Act, 1996.

C Part II

124Copy pinpoint124. It was next submitted by the counsel for the appellants that even some of the provisions contained in Part II would indicate that Part I of the Arbitration Act, 1996 would not be limited to the arbitrations which take place in India. It was pointed out that even though Part II deals specifically with recognition and enforcement of certain foreign awards yet provision is made for annulment of the award by two Courts, i.e., Courts of the country in which the award was made or the Courts of the country under the law of which the award was made. This, according to the learned counsel, recognizes the concurrent jurisdictions of Courts in two countries to set aside the award. They rely on Section 48(1)(e) of the Arbitration Act, 1996, which corresponds to Article V(1)(e) of the New York Convention. Mr. Sorabjee has emphasised that both these expressions must necessarily be given effect to and no part of the Act or section can be disregarded by describing the same as a "fossil". This is in reply to the submission made by Mr. Salve on the basis of the history of the inclusion of the term "under the law of which" in Article V(1)(e). Mr. Sorabjee has emphasised that the word "under the law of which" were specifically inserted in view of the Geneva Convention, which limited the jurisdiction to only one Court to set aside the award namely "the country in which the award was made." He, therefore, submits that this specific intention must be given effect to. Not giving effect to the words "under the law of which

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] the award was made", will allow many awards to go untested. A At this stage, Mr. Sorabjee had relied on Reliance Industries Ltd. (supra). We must notice here that Mr. Sundaram in his submissions has not gone so far as Mr. Sorabjee. According to Mr. Sundaram, the jurisdiction of a domestic Court over an arbitration is neither conferred by the New York Convention, nor B under Part II, since Part II merely deals with circumstances under which the enforcing court may or may not refuse to enforce the award. That circumstance includes annulment of proceedings in a competent court, i.e., the Court in the country where the arbitration is held or the Court having jurisdiction in the country c under the laws of which the arbitral disputes have been conducted. According to Mr. Sundaram, providing two such situs for the purposes of annulment does not ipso facto amount to conferring of jurisdiction to annul, on any domestic Court. The provision only provides that if the annulment proceedings are 0 before such Courts, the award may not be enforced. Therefore, to see if an arbitral award can be annulled by the Court of the country, one has to look at the jurisdiction of such Courts under the domestic law. The relevance of New York Convention and Article V(1 )(e) ends there, with merely recognizing possibility of two Courts having jurisdiction to annul an award. Mr. Subram::mium emphasised that provisions contained in Part II can not be said to be a complete code as it necessarily makes use of the provisions of Part I. Since Part I prescribes the entire procedure for the conduct of an arbitration and Part II is only to give recognition to certain foreign awards, the two parts have to be read harmoniously in order to make the Indian Arbitration Law a complete code. He submits that Part I can not be read separately from Part II as certain provisions of Part I, which are necessary for arbitrations are not covered by Part II. He gives an example of the provision contained in Section 45, which empowers the term "judicial authority" to refer parties to arbitration when seized of an action in a matter, in respect of which parties have made an agre!!ment as referred to in Section

44. The aforesaid provision contains a non-obstante clause. This clearly indicates that it is contemplated by the legislature H

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A that provisions of Part I would apply to matters covered by Part II. He, therefore, points out that if Part I were to apply only to arbitrations that take place in India, then Indian Courts would not be able to grant any interim relief under Section 9 to arbitrations which take place outside India. He also points out B that there are a number of other provisions where Indian Courts would render assistance in arbitrations taking place outside India. Learned senior counsel has also pointed out the necessity to read Sections 34 and 48 of the Arbitration Act, 1996 harmoniously. He points out that barring Section 34, which c involves the challenge to an award, the other provisions in Part I and Part II are facilitative in character.

125Copy pinpoint125. We are unable to agree with the submission of the learned senior counsel that there is any overlapping of the provisions in Part I and Part II; nor are the provisions in Part II D supplementary to Part I. Rather there is complete segregation between the two parts.

126Copy pinpoint126. Generally speaking, regul11tion of arbitration consists of four steps (a) the commencement of arbitration; (b) the conduct of arbitration; (c) the challenge to the award; and (d) the recognition or enforcement of the award. In our opinion, the aforesaid delineation is self evident in Part I and Part II of the Arbitration Act, 1996. Part I of the Arbitration Act, 1996 regulates arbitrations at all the four stages. Part II, however, regulates arbitration only in respect of commencement and recognition or enforcement of the award.

127Copy pinpoint127. In Part I, Section 8 regulates the commencement of arbitration in India, Sections 3, 4, 5, 6, 10 to 26, 28 to 33 regulate the conduct of arbitration, Section 34 regulates the challenge to the award, Sections 35 and 36 regulate the recognition and enforcement of the award. Sections 1, 2, 7, 9, 27, 37, 38 to 43 are ancillary provisions that either support the arbitral process or are structurally necessary. Thus, it can be seen that Part I deals with all stages of the arbitrations which take place in India. In Part II, on the other hand, there are no

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] provisions regulating the conduct of arbitration nor the challenge A .. to the award. Section 45 only empowers the judicial authority to refer the parties to arbitration outside India in pending civil action. Sections 46 to 49 regulate the recognition and enforcement of the award. Sections 44, 50 to 52 are structurally necessary. B

128Copy pinpoint128. Thus, it is clear that the regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being conducted. Such a court is then the supervisory court possessed of the power to annul the award. This is in keeping with the scheme of the international instruments, such as the Geneva Convention and the New York Convention as well as the UNCITRAL Model Law. It also recognizes the territorial principle which gives effect to the sovereign right of a country to regulate, through its national courts, an adjudicatory duty being performed in its own country. By way of a comparative example, we may reiterate the observations made by the Court of Appeal, England in C Vs. D (supra) wherein it is observed that "it follows from this that a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award." In the aforesaid case, the Court of Appeal had approved the observations made in A Vs. B, 41 wherein it is observed that:-

" ..... an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy ...... as to the validity of an existing interim or final award is agreed to be made only in the courts of the place designated as the seat of arbitration." ·

• 129. Having accepted the 1Jrinciple of territoriality, it is evident that the intention of the parliament was to segregate Part I and Part II. Therefore, any of the provisions contained in ' Part I can not be made applicable to Foreign Awards, as

41. [2007) 1 Lloyds Report 237. H

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A defined under Sections 44 and 53, i.e., the New York Convention and the Geneva Awards. This would be a distortion _of the scheme of the Act. It is, therefore, not possible to accept .the submission of Mr. Subramanium that provisions contained in Part II are supplementary to the provision contained in Part B I. The Parliament has clearly segregated the two parts.

Section 45

130Copy pinpoint130. We are unable to accept the submission that the use of expression "notwithstanding anything contained in Part I, or in the Code of Civil Procedure, 1908", in Section 45 of the Arbitration Act, 1996 necessarily indicates that provisions of Part I would apply to foreign seated arbitration proceedings. Section 45 falls within Part II which deals with enforcement proceedings in India and does not deal with the challenge to the validity of the arbitral awards rendered outside India. Section 45 empowers a judicial authority to refer the parties to arbitration, on the request made by a party, when seized of an action in a matter in respect of which the parties have made an agreement referred to in Section 44. It appears that inclusion of the term "judicial authority" in Sections 5 and 8 of the Arbitration Act, 1996, has caused much confusion in the minds Of the learned counsel for the appellants. In our opinion, there is no justification for such confusion. Such use of the term "judicial authority", in Section 5 and Section 8 of the Arbitration F Act, 1996, is not a recognition by the Parliament that Part I will 'apply to international commercial arbitrations held outside India. The term "judicial authority" is a legacy from the 1940 Act. The corresponding provision of Section 34 of the 1940 Act, which covered· purely domestic arbitrations, between two or more G Indian parties, within the territory of India, also refers to "judicial authority". It is nobody's contention that by using the term· "judicial authority", the Parliament had intended the 1940 Act to apply outside India. In our opinion, the term "judicial authority" has been retained especially in view of policy of least intervemtion, which can not be limited only to the Courts. This H

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) is clearly in recognition of the phenomenon that the judicial control of commercial disputes is no longer in the exclusive jurisdiction of Courts. There are many statutory bodies, tribunals which would have adjudicatory jurisdiction in very complex commercial matters. Section 5 would be equally applicable to such bodies. The use of the term "judicial authority" in no manner has any reference to arbitrations not held in India It is in conformity with Clause M of the objects and reasons for the Arbitration Act, 1996, which has been given statutory recognition in Section 5.

131Copy pinpoint131. The learned senior counsel had also pointed out that c since Section 19 of the Arbitration Act, 1996 clearly provides that the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908, there was no need for the non-obstante clause. But the reason, in our view, is discernable from Section 3 of the 1961 Act, which also contains a non-obstante clause D with reference to the Arbitration Act, 1940. Section 45 in the Arbitration Act, 1996 is a repetition of the non-obstante clause in Section 3 in the 1961 Act. It is not unusual for a consolidating act to retain the expressions used in the previous Acts, which have been consolidated into a form of Principal Act. A E consolidating Act is described in Halsbury's law of England, Fourth Edition Reissue, Para 1225 as under:-

"A consolidation Act is a form of principal Act which presents the whole body of the statute law on a subject in complete form, repealing the former Acts. When drafting a consolidation Act the practice is not to change the existing wording, except so far as may be required for purposes of verbal 'carpentry'. and not to incorporate court rulings. This is known as 'straight' consolidation, the product being a form of declaratory enactment. The difference between a consolidating Act and a codifying Act is that the latter, unlike the former, incorporates common law rules not previously codified. It can be determined from the long title whether or not an Act is a consolidation Act." H (emphasis supplied)