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p. 426 Copy page pinpoint

132Copy pinpoint132. Similarly, a certain amount of 'carpentry' has been done in the Arbitration Act, 1996 whilst consolidating the earlier three Acts. Therefore, in section 45 of the Arbitration Act, 1996, the reference to 1940 Act has been replaced by reference to Part I, which now covers the purely domestic arbitrations, earlier B covered by the 1940 and the new additions, i.e. the international commercial arbitrations, which take place in India. It appears that the Parliament in order to avoid any confusion has used the expression "notwithstanding anything contained in Part I" out of abundant caution, i.e., "ex abundanti cautela". c A three judge bench of this Court in R.S. Raghnath Vs. State of Kamataka & Anr. 42 , considering the nature of the non- obstante clause observed that:-

D But the non-obstante clause need not necessarily and always be co-extensive with the operative part so as to have the effect of cutting down the clear terms of an enactment and if the words of the enactment are clear and are capable of a clear interpretation on a plain and E · grammatical construction of the words the non-obstante clause cannot cut down the construction and restrict the scope of its operation. In such cases the non-obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the legislature by way of abundant caution and not by way of limiting the ambit and scope of the Special Rules."

133Copy pinpoint133. We are, therefore, of the opinion that existence of the non-obstante clause does not alter the scope and ambit of the field of applicability of Part I to include international commercial arbitrations, which take place out of India. We may further point out that a similar provision existed in the English Arbitration Act, 1950 and the English Arbitration Act, 1975. Section 4(1) of the

H 42. (1992) 1 sec 335.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.) English Arbitration Act, 1950 was similar to Section 34 of the A Arbitration Act, 1940 in India. Section 1(2) of the English Arbitration Act, 1975 was similar to Section 3 of the Foreign Awards Act, 1961.

134Copy pinpoint134. In view of the above, it would not be possible to accept the submission of the learned counsel for the appellants B that the aforesaid non-obstante clause in Section 45 would indicate that provisions of Part I would also be applicable to arbitrations that take place outside India. Does Section 48(1)(el recognize the jurisdiction of Indian c Courts to annul a foreign award, falling within Part II?

135Copy pinpoint135. Much emphasis has been laid by the learned counsel for the appellants on the expression that enforcement of a foreign award may be refused when the award "has been set aside or suspended .... ." "under the law of which" that award was made. The aforesaid words and expressions appear in Section 48, which is contained in Part II of the Arbitration Act, 1996 under the title "enforcement of certain foreign awards". The Courts in India under Chapter I of Part II of the aforesaid Act have limited powers to refuse the enforcement of foreign awards given under the New York Convention. It would be apposite to notice the provisions of Section 48 at this stage, which are as under:-

"48.Conditions for enforcement of foreign awards.- F (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that--- (a) the parties to the agreement referred to in section 44 were, under the law applicable to them, G under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law ofthe country where the award was made; or H

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A (b) the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

B (c) the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration. c Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or D (d) the composition of the arbitral authority or the arbitral procedure was not in accordance with tile agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place ; or E (e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. F (2) Enforcement of an arbitral award may also be refused if the court finds that-

(a) the subject -matter of the difference is not capable of G settlement by arbitration under the law of India; or

(b) the enforcement of the award would be contrary to the public policy of India.

Explanation.----Without prejudice to the generality of H

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clause (b), it is hereby declared, for the avoidance of any A doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption.

(3) If an application for the setting aside or suspension of 8 the award has been made to a competent authority referred to in clause (e) of sub-section (1) the Court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also , on the application of the party claiming enforcement of the award, order the other party to give suitable security." .

136Copy pinpoint136. The party which seeks to resist the enforcement of the award has to prove one or more of the grounds set out in Section 48(1) and (2) and/or the explanation of sub-section (2). In these proceedings, we are, however, concerned only with the interpretation of the terms "country where the award was made" and "under the law of which the award was made". The provisions correspond to Article V(1 )(e) of the New York Convention, which reads as under:- E ·1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: F ........................ ··~ ...... . (e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under G the law of which, that award was made.

2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: H

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A (a) the subject matter of the difference is not capable of settlement by arbitration under the law of that country; or

(b) the recognition or enforcement of the award would 8 be contrary to the public policy of that country.

137Copy pinpoint137. The aforesaid Article of the New York Convention has been bodily lifted and incorporated in the Arbitration Act, 1996 as Section 48.

c 138. Thus, the intention of the legislature is clear that the Court may refuse to enforce the foreign award on satisfactory proof of any of the grounds mentioned in Section 48(1), by the party resisting the enforcement of the award. The provision sets out the defences open to the party to resist enforcement of a D foreign award. The words "suspended or set aside", in Clause (e) of Section 48(1) can not be interpreted to mean that, by necessary implication, the foreign award sought to be enforced in India can also be challenged on merits in Indian Courts. The provision merely recognizes that courts of the two nations which · E are competent to annul or suspend an award. It does not ipso facto confer jurisdiction on such Courts for annulment of an award made outside the country. Such jurisdiction has to be specifically provided, in the relevant national legislation of the country in which the Court concerned is located. So far as India is concerned, the Arbitration Act, 1996 does not confer any such jurisdiction on the Indian Courts to annul an international commercial award made outside India. Such provision exists in Section 34, which is placed in Part I. Therefore, the applicability of that provision is limited to the awards made in India. If the arguments of the learned counsel for the appellants are accepted, it would entail incorporating the provision contained in Section 34 of the Arbitration Act, 1996, which is placed in Part I of the Arbitration Act, 1996 into Part II of the said Act. This is not permissible as the intention of the Parliament was clearly to confine the powers of the Indian H Courts to set aside an award relating to international

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] commercial arbitrations, which take place in India. A

139Copy pinpoint139. As noticed above, this section corresponds to Article V(1)(e) of the New York Convention. A reading of the Article V(1)(e) [Section 48(1)(e)] makes it clear that only the courts in the country "in which the award was made" and the courts 8 "under the law of which the award was made" (hereinafter referred to as the "first alternative" and the "second alternative" respectively) would be competent to suspend/annul the New York Convention awards. It is clarified that Section 48(1)(e) is only one of the defences on the basis of which recognition and enforcement of the award may be refused. It has no relevance to the determination of the issue as to whether the national law of a country confers upon its courts, the jurisdiction to annul the awards made outside the country. Therefore, the word "suspended/set aside" in Section 48(1 )(e) cannot be interpreted to mean that, by necessary implication, the foreign awards sought to be enforced in India can also be challenged on merits in Indian Courts. The provision only means that Indian Courts would recognize as a valid defence in the enforcement proceedings relating to a foreign award, if the Court is satisfied that the award has been set aside in one of the two countries, E i.e., the "first alternative" or the "second alternative".

140Copy pinpoint140. Mr. Sundaram had submitted that the two countries identified in "alternative one" and "alternative two", would have concurrent jurisdiction to annul the award. In our opinion, F interpreting the provision in the manner suggested by Mr. Sundaram would lead to very serious practical problems.

141Copy pinpoint141. In this context, it would be relevant to take note of some of the observations made by Hans Smit, Professor of Law, Columbia University in the Article titled "Annulment and G Enforcement of International Arbitral Awards". The author points out the reasons for incorporating the second forum for annulment. He states that -

"While, therefore, there appears to be no justification, H

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A based in reason and principle, for providing for an exception to the general rule of recognition and enforcement for the forum at the place of arbitration, the drafters of the Convention compounded their error by providing for two fora for an annulment action. For Article B V(1)(e) envisages that an annulment action may be brought "in the country in which .... the award was made" or "in the country .... under the law of which the award was made." The disjunctive used in the Convention's text naturally raises the question of whether the second forum c is available only if the first is not or whether the party seeking annulment has the option of selecting either or even to try its luck in both. The legislative history of the Convention sheds illuminating light on the issue.

The text of Article V(1)(e) originally proposed acknowledge only the bringing of an annulment action in the place in which the award was made. One of the delegates at the Conference devoted to the drafting of the Convention raised the question of what would happen if the forum at the place of arbitration would refuse to entertain an annulment action. The obviously correct answer to that question would have been that, in that case, no annulment action could be brought and that the happy consequence would be that only denial of recognition and enforcement on grounds specified in the Convention would be possible. Instead, the drafters of the Convention provided for an alternative forum in the country the arbitration laws of which governed the arbitration. That choice was both most fateful and most regrettable."

142Copy pinpoint142. These observations militate against the concurrent jurisdiction submission of Mr.Sundaram. The observations made by the learned author, as noticed above, make it clear that the "secor.d alternative• is an exception to the general rule. It was only introduced to make it possible for the award to be challenged in the court of the "second alternative·, if the court of the "first alternative" had no power to annul the award, under H

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its national legislation. In our opinion, the disjunction would also tend to show that the "second alternative" would be available only if the first is not. Accepting the submission made by Mr.Sundaram, would lead to unnecessary confusion. There can be only one Court with jurisdiction to set aside the award. There is a public policy consideration apparent, favouring the interpretation that, only one Court would have jurisdiction to set aside the arbitral award. This public policy aspect was considered by the Court of Appeal in England in the case of C Vs. D (supra). The observation of the Court of Appeal in Paragraph 16 of the judgment has already been reproduced c earlier in this judgment.

143Copy pinpoint143. It was pointed out by the Court of Appeal that accepting more than one jurisdiction for judicial remedies in respect of an award would be a recipe for litigation and confusion. "Similarly, in the case of a single complaint about 'o 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 to declare its satisfaction with the award". E

144Copy pinpoint144. The creation of such a situation is apparent from the judgment of this Court in Venture Global Engineering (supra). In the aforesaid judgment, the award was made by the London Court of International Arbitration on 3rd April, 2006. Respondent No.1, on 14th April, 2006, filed a petition to recognize and enforce the award before the United States District Court, Eastern District Court of Michigan, in the United States of America (for short the 'US Court'). The appellant entered appearance to defend this proceeding before the US Court by filing a cross petition. In the said petition, it took objection to the enforcement of the award, which had directed transfer of shares. The objection was that the direction was in violation of Indian laws and regulations, specifically the Foreign Exchange Management Act (in short the 'FEMA') and its notifications. Two wesks later on 28th April, 2006, the appellant filed a suit in the H

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A City Civil Court, Secunderabad seeking declaration to set aside the award and permanent injunction on the transfer of shares. On 15th June, 2006, the District Court passed an ad interim ex parte order of injunction, inter alia, restraining respondent No.1 for seeking or effecting the transfer of shares either under B the terms of the award or otherwise. Respondent No.1 filed an appeal challenging the said order before the High Court of Andhra Pradesh. The High Court admitted the appeal and directed interim suspension of the order of the District Judge, but made it clear that "respondent No.1 would not affect the c transfer of shares till further orders".

145Copy pinpoint145. On 13th July, 2006, in response to the summons, respondent No.1 appeared in the court and filed a petition under Order VII, Rule 11 for rejection of the plaint. The trial court by its order dated 28th December, 2006, allowed the said D application and rejected the plaint of the appellant. On 27th February, 2007, the High Court dismissed the appeal holding that the award cannot be challenged even if it is against public policy and in contravention of statutory provisions. The judgment of the High Court was challenged in appeal before this Court. E The appeal was allowed. It was held as follows:

"31. On close scrutiny of the materials and the dictum laid down in the three-Judge Bench decision in Bhatia International we agree with the contention of Mr. K.K. F Venugopal and hold that paras 32 and 35 of Bhatia International make it clear that the provisions of Part I of the Act would apply to all arbitrations including international commercial arbitrations and to all proceedings relating tt·.ereto. We further hold that where such arbitration is held in India, the provisions of Part I would compulsorily apply and parties are free to deviate to the extent permitted by the provisions of Part I. It is also clear that even in the case of il}lernational commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. We are also of the view that such an

SH.A.RAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 435

SERVICE, INC. [SURINDER SINGH NIJJAR, J.] interpretation does not lead to any conflict between any of the provisions of the Act and there is no lacuna as such. The matter, therefore, is concluded by the three-Judge Bench decision in Bhatia International

33. The very fact that the judgment holds that it would be 8 open to the parties to exclude the application of the provisions of Part I by express or implied agreement, would mean that otherwise the whole of Part I would apply. In any event, to apply Section 34 to foreign international awards would not be inconsistent with Section 48 of the Act, or any other provision of Part II as a situation may arise, where, even in respect of properties situate in India and where an award would be invalid if opposed to the public policy of India, merely because the judgment-debtor resides abroad, the award can be enforced against properties in India through personal compliance of the judgment-debtor and by holding out the threat of contempt as is being sought to be done in the present case. In such an event, the judgment-debtor cannot be deprived of his right under Section 34 to invoke the public policy of India, to set aside the award. As observed earlier, the public policy of India E includes - (a) the fundamental policy of India; or (b) the interests of India; or (c) justice or morality; or (d) in addition, if it is patently illegal. This extended definition of public policy can be bypassed by taking the award to a foreign country for enforcement. F

37. In view of the legal position derived from Bhatia International we are unable to accept Mr. Nariman's argument. It is relevant to point out that in this proceeding, we are not deciding the merits of the claim of both parties, G particularly, the stand taken in the suit filed by the appellant herein for setting aside the award. It is for the court concerned to decide the issue on merits and we are not expressing anything on the same. The present conclusion is only with regard to the main issue whether the H

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A aggrieved party is entitled to challenge the foreign award which was passed outside India in terms of Sections 9/ 34 of the Act. Inasmuch as the three-Judge Bench decision is an answer to the main issue raised, we are unable to accept the contra view ta~en in various decisions relied B on by Mr. Nariman. Tho6gh in Bhatia lntemationa/1 the issue relates to filing a petition under Section 9 of the Act for interim orders the ultimate conclusion that Part I would apply even for foreign awards is an answer to the main issue raised in this case. c 42. The learned Senior Counsel for the appellant submitted that the first respondent Satyam Computer Services Ltd. could not have pursued the enforcement proceedings in the District Court in Michigan, USA in the teeth of the injunction granted by the courts in India which also, on the basis of the comity of courts, should have been respected by the District Courts in Michigan, USA. Elaborating the same, he further submitted that the injunction of the trial court restraining the respondents from seeking or effecting . the transfer of shares either under the terms of the award or otherwise was in force between 15-6-2006 and 27-6-

2006. The injunction of the High Court in the following terms-

"the appellant (i.e. Respondent 1) shall not effect the transfer of shares of the respondents pending further orders" was in effect from 27-6-2006 till 28-12-2006. The judgment of the US District Court was on 13-7-2006 and 31-7-2006 when the award was directed to be enforced as sought by Respondent 1, notwithstanding the injunction to the effect that the appellant (Respondent 1 herein) "shall not effect the transfer of shares of the respondents pending further orders". The first respondent pursued his enforcement suit in Michigan District Courts to have a decree passed directing - "... VGE shall deliver to Satyam or its designee, share certificates in a form suitable for immediate transfer to Satyam evidencing all

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of the appellant's ownership interest in Satyam Venture A Engineering Services (SVES), the party's joint venture company". Further, ''VGE (the appellant herein) shall do all that may otherwise be necessary to effect the transfer of its ownership interest in SVES to Satyam (or its designee)". It is pointed out that obtaining this order by B pursuing the case in the US District Courts, in the teeth of the prohibition contained in the order of the High Court, would not only be a contempt of the High Court but would render all proceedings before the US courts a brutum fulmen, and liable to be ignored. Though Mr. R.F. Nariman c has pointed out that the High Court only restrained the respondent from effecting transfer of the shares pending further orders by the City Civil Court, Secunderabad, after the orders of the trial court as well as limited order of the High Court, the first res·pondent ought not to have proceeded with the issue before the District Court, Michigan without getting the interim orders/directions vacated.

47. In terms of the decision in Bhatia International we hold that Part I of the Act is applicable to the award in question even though it is a foreign award. We have not expressed anything on the merits of claim of both the parties. It is further made clear that if it is found that the court in which the appellant has filed a petition challenging the award is not competent and having jurisdiction, the same· shall be transferred to the appropriate court. Since from the inception of ordering notice in the special leave petition both parties were directed to maintain status quo with regard to transfer of shares in issue, the same shall be maintained till the disposal of the suit. Considering the nature of dispute which relates to an arbitration award, we request the court concerned to dispose of the suit on merits one way or the other within a period of six months from the date of receipt of copy of this judgment. Civil appeal is allowed to this extent. No costs." H

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146Copy pinpoint146. With these observations, the matter was remanded back to the trial court to dispose of the suit on merits. The submissions made by Mr. K.K.Venugopal, as noticed in paragraph 42, epitomize the kind of chaos which would be created by two court systems, in two different countries, B exercising concurrent jurisdiction over the same dispute. There would be a clear risk of conflicting decisions. This would add to the problems relating to the enforcement of such decisions. Such a situation would undermine the policy underlying the New York Convention.or the UNCJTRAL Model Law. Therefore, we c are of the opinion that appropriate manner to interpret the aforesaid provision is that "alternative two" will become available only if "alternative one" is not available.

147Copy pinpoint147. The expression "under the law" has also generated a great deal of controversy as to whether it applies to "the Jaw D governing the substantive contract" or "the Jaw governing the arbitration agreement" or limited only to the procedural laws of the country in which the award is made.

148Copy pinpoint148. The consistent view of the international commentators E seems to be that the "second alternative" refers to the procedural J~w of the arbitration rather than "law governing the arbitration agreement" or "underlying contract". This is even otherwise evident from the phrase "under the law, that award was made", which refers to the process of making the award F (i.e., the arbitration proceeding), rather than to the formation or validity of the arbitration agreement.

· 149. Gary B. Born in his treatise titled International Commercial Arbitration takes the view in Chapter 21 that the correct interpretation of Article V(1)(e)'s "second alternative" is that it relates exclusively to procedural law of the arbitration which produced an award and not to other possible laws (such as the substantive law governing the parties underlying dispute or governing the parties' arbitration agreement). He further notices that courts have generally been extremely reluctant to conclude that the parties have agreed upon a procedural law

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other than that of the arbitral seat. Consequently, according to A Born, although it is theoretically possible for an award to be subject to annulment outside the arbitral seat, by virtue of Article V(1 )(e)'s "second alternative", in reality this is a highly unusual "once-in-a-blue-moon" occurrence. He further notices that a number of national courts have considered the meaning of B Article V(1)(e)'s "second alternative". Many, but not all, courts have concluded that the alternative refers to "the procedural law of arbitration", rather than the "substantive law applicable to the merits of the parties' dispute or to the parties' arbitration agreement." In our opinion, the views expressed by the learned c author are in consonance with the scheme and the spirit in which the New York Convention was formulated. The underlying motivation of the New York Convention was to reduce the hurdles and produce a uniform, simple and speedy system for enforcement of foreign arbitral award. Therefore, it seems to 0 be accepted by the commentators and the courts in different jurisdictions that the language of Article V(1 )(e) referring to the "second alternative" is to the country applying the procedural law of arbitration if different from the arbitral forum and not the substantive law governing the underlying contract between the parties.

Case Law -

150Copy pinpoint150. At this stage, it would be appropriate to consider the manner in which the expression "under the law" has been interpreted judicially in different jurisdictions.

151Copy pinpoint151. The aforesaid expression came up for consideration in the case of Karaha Bodas Co. LLC Vs. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 43 the Federal Court in the U.S. considered the provisions contained in Article G V(1 )(e) and observed as follows:- "Article V(1)(e) of the Convention provides that a court of

43. 335 F.3d 357. H

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A secondary jurisdiction may refuse to enforce an arbitral award if it "has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made." Courts have held that the language, "the competent authority of the country ..... . B under the law of which, that award was made" refers exclusively to procedural and not substantive law, and more precisely, to the regimen or scheme of arbitral procedural law under which the arbitration was conducted, and not the substantive law ..... applied in the case." ................ . c "Under the New York Convention, an agreement specifying the place of the arbitration creates a presumption that the procedural law of that place applies to the arbitration. Authorities on international arbitration describe an agreement providing that one country will be the site of the arbitration but the proceedings will be held under the arbitration law of another country by terms such as "exceptional"; "almost unknown"; a "purely academic invention"; "almost never use in practice"; a possibility "more theoretical than real"; and a "once-in-a-blue-moon set of circumstances." Commentators note that such an agreement would be complex, inconvenient, and inconsistent with the selection of a neutral forum as the arbitral forum ....... ."

152Copy pinpoint152. Similarly, in the case of Karaha Bodas Co. LLC F (Cayman Islands) Vs. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara - Pertamina (Indonesia), 44 the aforesaid legal proposition is reiterated. In this case, again the Hong Kong Court considered Article V(1)(e) of the Convention G at length. This was a case where the substantive law applicable to the contract was Indonesian law and the country of the arbitration i.e. seat of arbitration as per the arbitration agreement was Switzerland. It was contended relying on the second leg of Article V(1)(e) that the law under which the award

H 44. Yearbook Comm. Arb'n Vol. XXVlll )2003) Page 752.

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had been made was Indonesian law and therefore Perlamina's A challenge in Indonesia was valid. This was rejected. It was held that Article V(1 )(e) referred to the procedural or curial law and that because the seat of the arbitration was in Switzerland, the lex arbitri or the curial or procedural law applicable to the arbitration was Swiss law. Therefore, only the Swiss Courts had jurisdiction to set aside the award.

153Copy pinpoint153. In International Electric Corporation Vs. Bridas Sociedad Anonima Petroleva, Industrial Y Commercial, 45 the New York Court held that the italicised words referred to the procedural law governing the arbitration, and not to the substantive law governing the agreement between the parties, since the situs of arbitration is Mexico, the governing procedural law that of Mexico, only Mexico Courts have jurisdiction under the Convention to vacate the award. D

154Copy pinpoint154. Redfern and Hunter (supra) at paragraph 11.96 state that the court which is competent to sustain or set aside an award is the court of the country in "alternative one" or "alternative two". The authors, however, further state that "this Court will almost invariably be the national court at the seat of E the arbitration". They point out that the prospect of an award being set aside under the procedural law of a State other than that at the seat of arbitration is unlikely. They point out that an ingenious (but unsuccessful) attempt was made to persuade the US District Court to set aside an award made in Mexico, F on the basis that the reference to the law under which that award was made was a reference to the law governing the dispute and not to the procedural law (Paragraph 11.96). The Learned Authors had made a reference to the case International Standard Electric Corp. (US) Vs. Bridas G Sociedad Anonima Petro/era (Argentina). 46 The Court rejected the aforesaid argument with the following observations:-

45. 745 F Supp 172, 178 (SONY 1990).

46. (1992) VII Ybk Comm Arb 639. H

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A "Decisions of foreign courts under the Convention unifonnfy support the view that the clause in question means procedural and not substantive (that is, in most cases, contract law) .... Accordingly, we hold that the contested language in Article B V(1)(e) of the Convention ...... refers exclusively to procedural and not substantive law, and more precisely to the regimen or scheme of arbitral procedural law under which the arbitration was conducted." c 155. The Court went on to hold that since the quorum of arbitration was Mexico, only the Mexican court had jurisdiction to set aside the award.

156Copy pinpoint156. The correct position under the New York Convention D is described very clearly and concisely by Gary 8. Born in his book International Commercial Arbitration (Kluwer Law International, Vol. I), Chapter X Page 1260 as follows:

"This provision is vitally important for the international arbitral process, because it significantly restricts the extent E of national court review of international arbitral awards in annulment actions, limiting such review only to the courts of the arbitral seat (that is, the state where the award is made or the state whose procedural law is selected by the parties to govern the arbitration). In so doing, the F Convention ensures that courts outside the arbitral seat may not purport to annul an international award, thereby materially limiting the role of such courts in supervising or overseeing the procedures utilized in international arbitrations. G At the same time, the New York Convention also allows the courts of the arbitral seat wide powers with regard to the annulment of arbitral awards made locally. The Convention generally pennits the courts of the arbitral seat to annul an arbitral award on any grounds available under

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local law, while limiting the grounds for non-recognition of A Convention awards in courts outside the arbitral seat to those specified in Article V of the Convention. This has the effect of permitting the courts of the arbitral seat substantially greater scope than courts of other states to affect the conduct or outcome of an international arbitration s through the vehicle of annulment actions. Together with the other provisions of Articles II and V, this allocation of annulment authority confirms the (continued) special importance of the arbitral seat in the international arbitral process under the New York Convention." c (emphasis supplied)

157Copy pinpoint157. In our opinion, the aforesaid is the correct way to interpret the expressions "country where the award was made" and the "country under the law of which the award was made''. D We are unable to accept the submission of Mr. Sundaram that the provision confers concurrent jurisdiction in both the fora. "Second alternative" is available only on the failure of the "first alternative". The expression under the law is the reference only to the procedural law/curial law of the country in which the E award was made and under the law of which the award was made. It has no reference to the substantive law of the contract between the parties. In such view of the matter, we have no hesitation in rejecting the submission of the learned counsel for the appellants. F

158Copy pinpoint158. At this stage, we may notice that in spite of the aforesaid international understanding of the second limb of Article V(1)(e), this Court has proceeded on a number of occasions to annul an award on the basis that parties had chosen Indian Law to govern the substance of their dispute. The G aforesaid view has been expressed in Bhatia International (supra) and Venture Global Engineering (supra). In our opinion, accepting such an interpretation would be to ignore the spirit underlying the New York Convention which embodies a consensus evolved to encourage consensual resolution of H

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A complicated, intricate and in many cases very sensitive International Commercial Disputes. Therefore, the interpretation which hinders such a process ought not to be accepted. This also seems to be the view of the national courts in different jurisdictions across the world. For the reasons stated above, B we are also unable to agree with the conclusions recorded by . this Court in Venture Global Engineering (supra) that the foreign award could be annulled on the exclusive grounds that the Indian law governed the substance of the dispute. Such an opinion is not borne out by the huge body of judicial precedents c in different jurisdictions of the world. Interim measures etc. by the Indian Courts where the seat of arbitration is outside India.

159Copy pinpoint159. We have earlier noticed the submissions made by the learned counsel for the parties wherein they had emphasised that in case the applicability of Part I is limited to arbitration which take place in India, no application for interim relief would be available under Section 9 of the Arbitration Act, 1996, in an arbitration seated outside India. It was further emphasised that in such circumstances, the parties would be left remediless. Dr. Singhvi, in order to get out of such a situation, had submitted that remedy under Section 9 would still be available. According to Dr. Singhvi, Section 9 is a stand alone provision which cannot be effected by the limit contained in Section 2(2). He submits that the provisions contained in Section 9 do not impede the arbitral process. Its only purpose is to provide an efficacious, preservatory, interim, conservatory, emergent relief necessary for protecting the subject matter of arbitration, pending the conclusions of the proceedings. He also emphasised that interim orders of foreign courts are not, ipso facto or ipso jure, enforceable in India and, absent Section 9, a party will be remediless in several real life situations. He, therefore, urged that this Court could give a purposive interpretation of Section 9 to ensure that the Courts in India have the jurisdiction to take necessary measures for preservation of assets and/or to prevent dissipation of assets.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] Dr. Singhvi submitted that the decision in Bhatia International A (supra) is correct, in so far as it relates to the grant of interim injunction under Section 9 of the Arbitration Act, 1996. He did not say before us that the courts in India would have any power to annul the award under Section 34 of the Arbitration Act, 1996, in matters where arbitrations have taken place at abroad. B But at the same time, he canvassed that the provisions contained in Section 9 cannot be equated with the provisions contained in Section 34. The remedy under Section 9 is interim and subservient to the main arbitration proceedings, whereas remedy under Section 34 would interfere with the final award. c Further more, annulment of the award under Section 34 would have extra-territorial operation whereas Section 9 being entirely asset focused, would be intrinsically territory focused and intra- territorial in its operation. He submitted that the ratio in Bhatia International on the core issue, i.e., grant of interim measures 0 under Section 9, is correct. Although, he was not much concerned about the other issues, of annulment or enforcement of the award, he has reiterated the submissions made by the other learned counsel, on Sections 2(2), 2(1 )(f) and 2(5).

160Copy pinpoint160. We are unable to accept the submissions made by E the learned counsel. It would be wholly undesirable for this Court to declare by process of interpretation that Section 9 is a provision which falls neither in Part I or Part II. We also do not agree that Section 9 is a sui generis provision. F

161Copy pinpoint161. Schematically, Section 9 is placed in Part I of the Arbitration Act, 1996. Therefore, it can not be granted J special status. We have already held earlier that Part I of the Arbitration Act, 1996 does not apply to arbitrations held outside India. We may also notice that Part II of the Arbitration Act, 1996, on the other hand, does not contain a provision similar to Section 9. Thus, on a logical and schematic construction of the Arbitration Act, 1996, the Indian Courts do not have the power to grant interim measures when the seat of arbitration is outside India. A bare perusal of Section 9 would clearly show that it relates to interim measures before or during arbitral proceedings or

446 SUPREME COURT REPORTS [2012] 12 S.C.R.

A at any time after the making of the arbitral award, but before it is enforced in accordance with Section 36. Section 36 necessarily refers to enforcement of domestic awards only. Therefore, the arbitral proceedings prior to the award contemplated under Section 36 can only relate to arbitrations B which take place in India. We, therefore, do not agree with the observations made in Bhatia International (supra) in paragraph 28 that "The words in accordance with Section 36 can only go with the words after the making of the arbitral award.• It is clear that the words "in accordance with Section 36" can have no c reference to an application made "before" or "during the arbitral proceedings". The text of Section 9 does not support such an interpretation. The relevant part of the provisions is as under:

"9. Interim measures, etc. by Court -A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a court .......... ."

162Copy pinpoint162. A bare look at the aforesaid provision would indicate that there is no break up of the sentence in between the two comas at the beginning and end of the sentence. Therefore, the sentence cannot be broken into three parts as it is done in paragraph 28 of Bhatia International (supra). The arbitral proceedings mentioned in the aforesaid provision cannot relate to arbitration which takes place outside India. F

163Copy pinpoint163. Therefore, we have no hesitation in declaring that the provision contained in Section 9 is limited in its application to arbitrations which take place in India. Extending the applicability of Section 9 to arbitrations which take place outside India would be to do violence to the policy of the territoriality declared in G Section 2(2) of the Arbitration Act, 1996.

164Copy pinpoint164. It was next submitted that if the applicability of Part I is limited to arbitrations which take place in India, it would leave many parties remediless in a number of practical situations. H

BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 44 7 SERVICE, INC. [SURINDER SINGH NIJJAR, J.)

165Copy pinpoint165. In this connection, Mr. Sorabjee has relied upon the A judgment of the English High Court in Reliance Industries Limited (supra). In the aforesaid case, the contracts were governed by the Indian law as their proper law. The disputes were to be determined by the arbitration in London. The . procedural law applicable was English Law. The distinction · 8 between the proper law of the JOA's and the procedural law was known to the parties. At the arbitratron hearing, the parties agreed that the principles of construction of contracts in Indian Law were the same as in English Law. The parties further agreed that the English Law principles on the construction of contracts were those set out by Lord Hoffmann in Investors Compensation Scheme Ltd. vs. West Bromwich Building Society, 47 as explained and expanded by Lord Hoffmann in Bank of Credit & Commerce International SA vs. Ali & Ors. 48 In their awards, the three arbitrators stated (at paragraph 73) that they would apply those principles to construe the contracts under consideration in making their Partial Arbitral Awards. The question raised at the threshold was whether the applicant- Reliance can apply for permission to appeal to the Commercial Court in England and Wales "on a question of law arising out of an award made in the proceedings" under Section 69 (1) of the Arbitration Act, 1996 (English). So the "threshold" issue was whether any point of construction of the contracts, assuming that would be a question of law at all, is a "question of law of England and Wales" within Section 82(1) of the Arbitration Act,

1996. It was accepted by the applicant that unless the question of law concerned "the law of England and Wales, then leave to appeal cannot be granted." The issue before the Court was as to whether the questions of construction of JOA's are questions of Indian Law because the 9ontracts are governed by Indian Law. The parties did not, as a matter of fact, vary the proper law of the contracts for the purposes of arbitration hearing in London. As the parties agreed that the Indian Law applied to

47. (1998] WLR 1896 at 913.

48. [2001] 2 WLR 735 at 749. H

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A the contracts, the arbitrators had to apply Indian Law when construing the contracts. Although the parties agreed that Indian Law and English Law principles of construction were the same, ultimately the arbitrators were applying Indian Law rather than English Law to construe the contract. The Court rejected the 8 submission of the applicant that the arbitrators had applied the English Law. The Court observed that:-

"27. I am unable to accept the submissions of Mr.Akenhead. The parties agreed that the contracts were to be governed by Indian Law as their proper law. The c parties also agreed that disputes should be determined by arbitration in London. The parties were earful to ensure that English Law would be the procedural law applicable to arbitration proceedings that arose as a result of disputes arising out of the JOAs. The distinction between the proper law of the JOAs and the procedural law was also well in the minds of the arbitrators as they drew particular attention to it in paragraph 26 of their Partial Awards. The effect of those contractual provisions is, as the arbitrators also recognized, that all procedural matters were to be governed by English law as laid down in Part 1 of the 1996 Act. The parties must be taken to have appreciated that fact also.

28. The consequence is that if and when disputes under the contracts were referred to arbitration, as a matter of the procedural law of the arbitrations (English Law). the tribunal had to decide those disputes in accordance with the proper law of the contracts as chosen by the parties - unless the parties agreed to vary the contracts' terms, which they did not. Therefore, if as in this case, the arbitrators had to decide issues of construction of the JOAs, then they were bound to do so using principles of construction established under the proper law of the contracts, i.e. Indian law.

H 29. As it happens the parties agreed that the principles of

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construction under the proper law of the contract equated with those principles under English law, as declared by the House of Lords in two recent cases. What the arbitrators did was to take those principles of construction and apply them as principles of Indian law in order to construe the contracts according to Indian law. The arbitrators had to do that, as a matter of the procedural law of the arbitration. That is because under the English law of arbitration procedure, the arbitrators were bound to construe the contracts and determine the disputes between the parties according to the proper law of the contracts concerned. c

30. Therefore, I think that it is wrong to say that the arbitrators "applied English Law" when construing the contracts. They applied Indian law, which happened to be the same as English law on this topic." D

166Copy pinpoint166. On the basis of that, it was concluded that no question of law of England and Wales arises out of the two partial awards of the arbitrators. It was accordingly held that the English Court does not have any power to grant leave to appeal under Section 69 of the Arbitration Act, 1996. E

167Copy pinpoint167. In our opinion, the aforesaid judgment does not lead to the conclusion that the parties were left without any remedy. Rather the remedy was pursued in England to its logical conclusion. Merely, because the remedy in such circumstances may be more onerous from the view point of one party is not the same as a party being left without a remedy. Similar would be the position in cases where parties seek interim relief with regard to the protection of the assets. Once the parties have chosen voluntarily that the seat of the arbitration shall be outside India, they are impliedly also understood to have chosen the necessary incidents and consequences of such choice. We, therefore, do not find any substance in the submissions made by the learned counsel for the appellants, that if applicability of Part I is limited to arbitrations which take place in India, it would leave many parties remediless. H

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168Copy pinpoint168. If that be so, it is a matter to be redressed by the legislature. We may also usefully refer here to the observations made in Nalinakhya Bysack (supra), Duport Steels Ltd. (supra) and Magor & St. Me/Ions, RDC Vs. Newport Corporation (supra), in which the attempt made by Lord Denning to construe B legislation contrary to Parliament's intention just to avoid hardship was disapproved by the House of Lords. It was observed by Lord Simonds as follows:-

"The second part of the passage that I have cited from the judgment of the learned Lord Justice is no doubt the logical c sequel of the first. The court, having discovered the intention of Parliament and of Ministers too, must proceed to fill in the gaps. What the legislature has not written, the court must write. This proposition, which restates in a new form the view expressed by the Lord Justice in the earlier case of Seaford Court Estates Ld. V. Asher (tO which the Lord Justice himself refers), cannot be supported. It appears to me to be a naked usurpation of the legislative function under the thin disguise of interpretation and it is the less justifiable when it is guesswork with what material the legislature would, if it had discovered the gap, have filled it in. If a gap is disclosed, the remedy lies in an amending Act."

[emphasis supplied]

169Copy pinpoint169. The aforesaid words in italics have been quoted with approval by a Constitution. Bench of this Court in Punjab Land Development and Reclamation Corporation Ltd., Chandigarh Vs. Presiding Officer, Labour Court, Chandigarh & Others. 49

170Copy pinpoint170. In view of the aforesaid, we are unable to agree with the submission made by Dr. Singhvi that provision contained in Section 9 can be made applicable even to arbitrations which take place outside India by giving the same a purposive

H 49. (1990) 3 sec ea2.

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interpretation. In our opinion, giving such an interpretation would A be destructive of the territorial principles upon which the UNCITRAL Model Laws are premised, which have been adopted by the Arbitration Act, 1996.

171Copy pinpoint171. We are further of the opinion that the approach 8 adopted by this Court in Bhatia /ntemationa/ to remove the perceived hardship is not permissible under law. A perusal of paragraph 15 would show that in interpreting the provisions of the Arbitration Act, 1996, the court applied the following tests:

"Notwithstanding the conventional principle that the duty of C Judges is to expound and not to legislate, the courts have taken the view that the judicial art interpretation and appraisal is imbued with creativity and realism and since interpretation always implied a degree of discretion and choice, the courts would adopt, particularly in areas such o as, constitutional adjudication dealing with social and defuse (sic) rights. Courts are therefore, held as "finishers, refiners and polishers of legislation which comes to them in a state requiring varying degrees of further processing" (see Corocraft Ltd. v. Pan American Airways, All ER at E p. 1071 D, WLR at p. 732, State of Haryana v. Sampuran Singh, AIR at p. 1957). If a language used is capable of bearing more than one construction, in selecting the true meaning, regard must be had to the consequences, resulting from adopting t~e alternative constructions. A F construction that results in hardship, serious inconvenience, injustice, absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the system which the statute purports to regulate has to be rejected and preference should be given to that G construction which avoids such results."

172Copy pinpoint172. From the above, it is evident that the provisions of the Arbitration Act, 1996 were interpreted keeping in mind the consequences in limiting the applicability of Part I to arbitrations which take place in India. The Court also acted as "finishers", H

452 SUPREME COURT REPORTS [2012) 12 S.C.R.

A "refiners" and "polishers" of the Arbitration Act, 1996 assuming that the Arbitration Act, 1996 required varied degrees of further "processing". In our opinion, as demonstrated whilst discussing the various provisions of the Arbitration Act, 1996 in earlier part of judgment, the intention of the Parliament is available within 8 the text and the context of the provisions. As observed by Lord Simonds in Mag or & St. Me/Ions Vs. Newport Corporation (supra), if the gap or lacuna is disclosed, it would be for the Parliament to rectify the same. Such a task cannot be undertaken by the Court.

173Copy pinpoint173. It was also submitted that Non-Convention Awards would not be covered either by Part I or Part II. This would amount to holding that the legislature has left a lacuna in the Arbitration Act, 1996. This would mean that there is no law in India governing such arbitrations. D

174Copy pinpoint174. We are of the opinion that merely because the Arbitration Act, 1996 does not cover the non convention awards would not create a lacuna in the Arbitration Act, 1996. If there was no lacuna during the period in which the same law was E contained in three different instruments, i.e. the Arbitration Act, 1940 read with 1961 Act, and the Arbitration (Protocol and Convention) Act, 1937, it cannot be construed as a lacuna when the same law is consolidated into one legislation, i.e. the Arbitration Act, 1996.

175Copy pinpoint175. It must further be emphasised that the definition of "foreign awards" in Sections 44 and 53 of the Arbitration Act, 1996 intentionally limits it to awards made in pursuance of an agreement to which the New York Convention, 1958 or the Geneva Protocol, 1923 applies. It is obvious, therefore, that no G remedy was provided for the enforcement of the 'non convention awards' under the 1961 Act. Therefore, the non convention award cannot be incorporated into the Arbitration Act, 1996 by process of interpretation. The task of removing any perceived lacuna or curing any defect in the Arbitration Act, H 1996 is with the Parliament. The submission of the learned

BHARAT ALUMINIUM CO. v. KAISER ALUMINIUM TECHNICAL 453

SERVICE, INC. [SURINDER SINGH NIJJAR, J.] counsel is, therefore, rejected. The intention of the legislature is primarily to be discovered from the language used, which means that the attention should be paid to what has been said and also to what has not been said. [See: Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd. vs. Custodian of Vested Forests, [AIR 1990 SCC 1747 at page 1752]. Here the clear intention of the legislature is not to include the Non-convention Awards within the Arbitration Act, 1996.

Is An lnter-Parte Suit For Interim Relief Maintainable -

176Copy pinpoint176. It appears to us that as a matter of law, an inter-parte suit simply for interim relief pending arbitrations, even if it be limited for the purpose of restraining dissipation of assets would not be maintainable. There would be number of hurdles which the plaintiff would have to cross, which may well prove to be insurmountable. D

177Copy pinpoint177. Civil Courts in India, by virtue of Section 9 of the Code of Civil Procedure, 1908 (for short the 'CPC'), have the jurisdiction to try all suits of a civil nature, excepting suits which are either expressly or impliedly barred. Fundamental to the maintainability of a civil suit is the existence of a cause of action in favour of the plaintiff. This is evident from the various provisions contained in the CPC. However, it would be appropriate to notice that Order VII Rule 1 gives the list of the particulars which have to be mandatorily included in the plaint. Order VII Rule 1(e) mandates the plaintiff to state the facts constituting the cause of action and when it arose. Order VII Rule 11 (a) provides the plaint shall be rejected where it does not disclose a cause of action. A cause of action is the bundle of facts which are required to be proved for obtaining relief prayed for in the suit. The suit of the plaintiff has to be framed in accordance with Order II. Order II Rule 1 provides that every ----' suit shall as far as practicable be framed so as to afford ground for final decision upon the subjects in dispute and to prevent further litigation concerning them. The aforesaid rule is required to be read along with Rule 2 which provides that every suit shall H

454 SUPREME COURT REPORTS [2012) 12 S.C.R.

A include the whole of the claim which the plaintiff is entitled to make in respect of the cause of action; but a plaintiff may relinquish any portion of his claim in order to bring the suit within the jurisdiction of any court. The aforesaid provisions read together would lead to the firm conclusion that the existence of cause of action is a sine qua non for the maintainability of a civil suit.

178Copy pinpoint178. The provisions with regard to the temporary injunction and interlocutory orders are contained in Order 39 and Order

40. In order to claim an injunction the existence of a pending suit is a pre requisite. It is in this background that one has to examine as to whether an inter-parte suit for interim relief during the pendency of arbitration proceedings outside India would be maintainable.

179Copy pinpoint179. In our opinion, pendency of the arbitration proceedings outside India would not provide a cause of action for a suit where the main prayer is for injunction. Mr.Sundaram has rightly pointed out that the entire suit would be based on the pendency of arbitration proceedings in a foreign country. E Therefore, it would not be open to a party to file a suit touching on the merits of the arbitration. If such a suit was to be filed, it would in all probabilities be stayed in view of Sections 8 and 45 of the Arbitration Act, 1996. It must also be noticed that such a suit, if at all, can only be framed as a suit to "inter alia restrain F the defendant from parting with property." Now, if the right to such property could possibly arise, only if the future arbitration award could possibly be in favour of the plaintiff, no suit for a declaration could obviously be fileo, based purely only on such a contingency. All that could then be filed would, therefore, be G a bare suit for injunction restraining the other party from parting with property. The interlocutory relief would also be identical. In our view, such a suit would not be maintainable, because an interlocutory injunction can only be granted during the pendency of a civil suit claiming a relief which is likely to result in a final decision upon the subject in dispute. The suit would be , H

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maintainable only on the existence of a cause of action, which would entitle the plaintiff for the substantive relief claimed in the suit. The interim injunction itself must be a part of the substantive relief to which the plaintiffs cause of action entitled him. In our opinion, most of the aforesaid ingredients are missing in a suit claiming injunction restraining a party from dealing with the assets during the pendency of arbitration proceedings outside India. Since the dispute is to be decided by the Arbitrator, no substantive relief concerning the merits of the arbitration could be claimed in the suit. The only relief that could be asked for would be to safeguard the property which the plaintiff may or c may not be entitled to proceed against. In fact the plaintiffs only claim would depend on the outcome of the arbitration • proceeding in a foreign country over which the courts in India would have no jurisdiction. The cause of action would clearly be contingenVspeculative. There would be no existing cause 0 of action. The plaint itself would be liable to be rejected under Order VII Rule 11 (a). In any eveflt, as noticed above, no interim relief could be granted unless it is in aid of and ancillary to the main relief that may be available to a party on final determination of rights in a suit. This view will find support from a number of judgments of this Court.

180Copy pinpoint180. In the State of Orissa vs. Madan Gopal Rungta, 50 at page 35 this Court held:

"....An interim relief can be granted only in aid or, and as ancillary to, the main relief which may be available to the party on final determination of his rights in a suit or proceeding ...... •

181Copy pinpoint181. Following the above Constitution Bench, this Court in Cotton Corporation Limited vs. United Industrial Ban/<5 1 G held: "10 ...... But power to grant temporary injunction was

50. AIR 1952 SC 12.

51. (1983) 4 sec 625. H

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A conferred in aid or as auxiliary to the final relief that may be granted. If the final relief cannot be granted in terms as prayed for, temporary relief in the same terms can hardly if ever be granted. In State of Orissa v. Madan Gopal Rungta a Constitution Bench of this Court clearly spelt out B the contours within which interim relief can be granted. The Court said that 'an interim relief can be granted only in aid of, and as ancillary to, the main relief which may be available to the party on final determination of his rights in a suit or proceeding'. If this be the purpose to achieve c which power to grant temporary relief is conferred, it is inconceivable that where the final relief cannot be granted in the terms sought for because the statute bars granting such a relief ipso facto the temporary relief of the same nature cannot be granted ..... "

182Copy pinpoint182. The legal position is reiterated in Ashok Kumar Unga/a vs. State of Karnataka. 52

183Copy pinpoint183. In matters pertaining to arbitration, the suit would also be barred under Section 14(2) of the Specific Relief Act. E Although the provision exists in Section 37 of the Specific Relief Act, 1963, for grant of temporary/perpetual injunction, but the existence of cause of action would be essential under this provision also. Similar would be the position under Section 38 of the Specific Relief Act.

184Copy pinpoint184. Claim for a Mareva Injunction in somewhat similar circumstances came up for consideration in England before the House of Lords in Siskina (Cargo Owners) Vs. Distos Compania Navieria SA (supra). In this case, cargo owners had a claim against a Panamanian company. The dispute had no G connection with England. The defendant's only ship had sunk and there were insurance proceeds in England to which the defendant was entitled. The cargo owners sought leave to serve the writ on the defendant under what was then RSC Order 11,

H 52. c2012) 1 sec 321.

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Rule 1(1 )(i). Mocatta, J. gave leave and at the same time A granted an injunction in the terms asked for in Paragraph 2 of the writ petition. Subsequently, Kerr, J. set aside the notice of the writ but maintained the injunction pending in appeal. On the cargo-owners appeal, the Court of Appeal by a majority reversed the judgment of Kerr, J. and restored the Mareva B injunction as originally granted by Mocatta, J. The matter reached the House of Lords by way of an appeal against the majority judgment of the Court of Appeal. The House of Lords on appeal held that there was no jurisdiction to commence substantive proceedings in England. Therefore, the writ and all c subsequent proceedings in the action had to be set aside. Consequently there could be no Mareva injunction. It was held that a Mareva injunction was merely an interlocutory injunction and such an injunction could only be granted as " .... ancillary and incidental to the pre-existing cause of action". 0

185Copy pinpoint185. Lord Diplock observed that "it is conceded that the cargo owners' claim for damages for breach of contract does not of itself fall within any of the sub-rules of Order 11, Rule 1(1 ); nor does their claim for damages for tort." It is further observed that ''what is contended by the counsel for the cargo-owners is E that if the action is nevertheless allowed to proceed, it will support a claim for Mareva injunction restraining the ship owners from disposing of their assets within the jurisdiction until judgment and payment of the damages awarded thereby; and that this of itself is sufficient to bring the case within sub-rule (i) F which empowers the High Court to give leave for service of its process on persons outside the jurisdictions". Interpreting Order 11 Rule 1(i), it was held that the word used in sub-rule (i) are terms of legal art. The sub-rule speaks of "the action" in which a particular kind of relief, "an injunction" is sought. This pre- G supposes the existence of a cause of action on which to found "the action". A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by H

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A him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the Court. The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action. It is granted to preserve the status quo pending the ascertainment by the Court of the rights of the parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which may or may not include a final injunction.

186Copy pinpoint186. As noticed earlier, the position is no different in India. Therefore it appears that under the law, as it stands today, an inter-parte suit simply for interim relief pending arbitration outside India would not be maintainable.

187Copy pinpoint187. It appears after the aforesaid observations were made in Siskina (Cargo Owners) (supra), necessary amendments were made in the English Law viz. Section 37(1) of the Supreme Court Act, 1981. The provision was sp,ecifically made for grant of Mareva injunction by Section 25 of the Civil Jurisdiction and Judgments Act, 1982.

189Copy pinpoint189. The after effects of Siskina (Cargo Owners) (supra) were duly noticed by Steven Gee QC MA (Oxon) in his book titled Mareva Injunctions and Anton Piller Relief, Fourth Edition, as under:-

(i) The English Court would not assert a substantive jurisdiction over a defendant just because he had assets within the jurisdiction. The contrary proposition would have had the unsatisfactory consequence as observed by Lord Diplock in Siskina that the Court would find itself asserting jurisdiction over a foreigner to decide the merits of sub~lantive proceedings which had nothing to do with England.

(ii) There was no jurisdiction to grant Mareva relief unless and until the plaintiff had an accrued right of action.

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SERVICE, INC. [SURINDER SINGH NIJJAR, J.] (iii) There was no jurisdiction to preserve assets within the jurisdiction of the Court which would be needed to satisfy a claim against the defendant if it eventually succeeded regardless of where the merits of the substantive claim were to be decided. According to the other, the position in relation to the s free-standing interlocutory injunction relief has been • eroded by a succession of developments .

190Copy pinpoint190. Thereafter, in a subsequent judgment in Channel Tunnel Group Ltd. & Anr. Vs. Balfour Beatty Construction Ltd. & Ors., 53 Lord Mustill summed up the principle for grant of interim relief as follows:-

"For present purposes it is sufficient to say that the doctrine of Siskina, put at its highest, is that the right to an interlocutory injunction cannot exist in isolation, but is always incidental to and dependent on the enforcement of a substantive right, which usually although not invariably takes, the shape of a cause of action. If the underlying right itself is not subject to the jurisdiction of the English Court, then that Court should never exercise its power under E Section 37(1) by way of interim relief." ·

191Copy pinpoint191. However, on facts in the Channel Tunnel case (supra), it was found that"if this is a correct appreciation of the doctrine, it does not apply to the present case.• F

192Copy pinpoint192. From the above, it is apparent that the injunctive relief was granted in Channel Tunnel case in view of the statutory provisions contained in Section 37(1) of the Supreme Court Act, 1981. This is made further clear by the following observations:- G

"We are concerned here with powers which the Court already possesses under Section 37 of the Act of 1981.

53. (1993) AC 334. H

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A The only question is whether the court ought permanently and unconditionally to renounce the possibility of exercising such powers in a case like the present. I am unable to see why the fact that Parliament is contemplating the specific grant of interim powers, not limited to B interlocutory injunctions, in support of arbitrations but has not yet chosen to do so should shed any light on the powers of the court under existing law. It may be that if and when section 25 is made applicable to arbitrations, the court will have to be very cautious in the exercise of its general powers under section 37 so as not to conflict with c any restraint which the legislature may have imposed on the exercise of the new and specialized powers."

193Copy pinpoint193. The decision in Channel Tunnel would not support the proposition that injunctive relief could be granted under Section D 9 of the Arbitration Act, 1996, as no corresponding provision to Section 37(1) of the English Supreme Court Act, 1981 exists under the Indian legislation.

194Copy pinpoint194. Mr. Sorabjee has also referred to the principle that no suit allows for grant of interim injunction simplicitor and that an interim injunction had to be granted only in aid of a final injunction/principle relief claimed in the suit. He made a reference to the Constitution Bench decision of this Court in State of Orissa Vs. Madan Gopal Rungta (supra). He also referred to the judgment of the House of Lords in Fourie Vs. Le Roux (supra). The House of Lords after referring to the decision in Siskina and Channel Tunnel observed as follows:-

"On the other hand, if the leave had been upheld, or if the defendant had submitted to the jurisdiction, it would still have been open to the defendant to argue that the grant of a Mareva injunction in aid of the foreign proceedings in Cyprus was impermissible, not on strict jurisdictional grounds but because such injunctions should not be granted otherwise than as ancillary to substantive proceedings in England." [emphasis supplied]

BHARAT ALUMINIUM CO. v. KAISERALUMINIUMTECHNICAL 461

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

195Copy pinpoint195. However, the House of Lords pointed out in A Paragraph 31 of the judgment that the relief can now be granted under English Law by virtue of express provision contained in Section 25 of the Civil Jurisdiction and Judgment Act, 1982, as extended to the Civil Jurisdiction and Judgments Act (Interim Relief) Order, 1997. This order enables the High Court "to grant interim relief' in relation to "proceedings that have been or are about to be commenced in a foreign state".

196Copy pinpoint196. So far as the Indian Law is concerned, it is settled that the source "of a Court's power to grant interim relief is traceable to Section 94 and in exceptional cases Section 151 CPC. CPC pre-supposes the existence of a substantive suit for final relief wherein tile power to grant an interim relief may be exercised only till disposal thereof.

197Copy pinpoint197. In this view of the matter, it is patent that there is no existing provision under the CPC or under the Arbitration Act, 1996 for a Court to grant interim measures in terms of Section 9, in arbitrations which take place outside India, even though the parties by agreement may have made the Arbitration Act, 1996 as the governing law of arbitration. E CONCLUSION :-

198Copy pinpoint198. In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the F UNCITRAL Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to International Commercial Arbitration held outside India. G ·Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in Arbitration Act, 1996 make it crystal clear that H

462 SUPREME COURT REPORTS [2012) 12 S.C.R.

A there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996.

199Copy pinpoint199. With utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia 8 International (supra) and Venture Global Engineering (supra). In our opinion, the provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with any of the provisions either in Part I or in Part II of the Arbitration Act, 1996. In a foreign seated international commercial arbitration, no application for interim relief would be maintainable under Section 9 or any other provisi9n, as applicability of Part I of the Arbitration Act, 1996 is limited to all arbitrations which take place in li~dia. Similarly, no suit for interim injunction simplicitor would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India.

200Copy pinpoint200. We conclude that Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India. E

201Copy pinpoint201. The judgment in Bhatia International (supra) was rendered by this Court on 13th March, 2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by this Court on numerous occasions. In fact, the F judgment in Venture Global Engineering (supra) has been rendered on 10th January, 2008 in terms of the ratio of the decision in Bhatia International (supra). Thus, in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter. G

202Copy pinpoint202. The reference is answered accordingly.

B.B.B. Reference Answered.