ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH & ANR.

A pleadings. There is a mention in one of the e-mails that Dr. Wobben has taken advantage of his friendship with Mr. Yogesh Mehra. But that seems to be more of a sulk than a genuine grievance. Even if one accepts the truth of such a statement, the same is not reflected in the pleadings. Therefore, no serious B note could be taken of that statement at this stage. The Daman Appellate Court upon reconsideration of the pleadings found that there is no plea to the effect that the agreement is null, void or incapable of being performed. Justice Savant has not examined the pleadings as the issue with regard to the c underlying contract has been left to be examined by the Arbitral Tribunal. Before us also, it is not. the plea of the Appellants that the arbitration agreement is without free consent, or has been procured by coercion, undue influence, fraud, misrepresentation or was signed under a mistake. In other words, it is not claimed that the agreement is null and void, inoperative and incapable of being performed as it violates any of the provisions under Sections 14, 15, 16, 17, 18, 19, 19A and 20 of the Indian Contract Act, 1872. The submission is that the matter cannot be·referred to arbitration as the IPLA, containing the arbitration clause/agreement, is not a concluded contract. This, in our opinion, would not fall within the parameters of an agreement being "null and void, inoperative or incapable of being performed", in terms of Sections 14, 15, 16, 17, 18, 19 and 20 of the Indian Contract Act, 1872. These provisions set out the impediments, infirmities or eventualities that would render F a particular provision of a contract or the whole contract void or voidable. Section 14 defines free consent; Section 15 defines coercion in causing any person to enter into a contract. Section 16 deals with undue influence. Fraud in relation to a contract is defined under Section 17; whereas misrepresentation is defined and explained under Section 18. Section 19 states that "when consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused". Section 19A gives the party who was unduly influenced to enter into a contract an option similar to the one

·· ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 909 & ANR. [SURINDER SINGH NIJJAR, J.] provided by the preceding section. Section 20 makes an agreement void where both the parties thereto are under a mistake as to a matter of fact. In our opinion, all the aforesaid eventualities refer to fundamental legal impediments. These are the defences to resist a claim for specific performance of a concluded contract; or to resist a claim for damages for breach of a concluded contract. We agree with Savant, J. that the issue as to whether there is a concluded contract between the parties can be left to the Arbitral Tribunal, though not for the same reasons.

76. In our opinion, all the issues raised by the Appellants C about the non-existence of a concluded contract pale into insignificance in the face of "Heads of Agreement on the proposed IPLA dated 23rd May, 2006". Clause 3 of the Heads of Agreement provides as under:- D "3. Governing Law and Jurisdiction

3.1 This paragraph is legally binding.

3.2 This Heads of Agreement is (and all negotiations and any legal agreements prepared in connection with the IPLA E shall be) governed by and construed in accordance with the law of Germany.

3.3 The parties irrevocably agree that Clause 18 of the proposed draft IPLA shall apply to settle any dispute or claim that arises out of or in connection with this memorandum of understanding and negotiations relating to the proposed IPLA."

77. A bare perusal of this clause makes it abundantly clear that the parties have irrevocably agreed that clause 18 of the proposed IPLA shall apply to settle any dispute or claim that arises out of or in connection with this Memorandum of Understanding and negotiations relating to IPLA. It must also be noticed here that the relationship between the parties formally commenced on 12th January, 1994 when the parties H

910 SUPREME COURT REPORTS · [2014] 2 S.C.R.

A entered into the first SHA and TKHA. Even under that SHA, Article XVI inter alia provided for resolution of disputes by arbitration. The TKHA also contained an identically worded arbitration clause, under Article XIX. This intention to arbitrate . has continued without waiver. In the face of this, the question B of the concluded contract becomes irrelevant, for the purposes of making the reference to the Arbitral Tribunal. It must be clarified that the doubt raised by the Appellant is that there is no concluded IPLA, i.e. the substantive contract. But this can have no effect on the existence of a binding Arbitration C Agreement in view of Clause 3. The parties have irrevocably agreed to resolve all the disputes through Arbitration. Parties can not be permitted to avoid arbitration, without satisfying the Court that it would be just and in the interest of all the parties not to proceed with arbitration. Furthermore in arbitration proceedings, courts are required to aid and support the arbitral 0 process, and not to bring it to a grinding halt. If we were to accept the submissions of Mr. Nariman, we would be playing havoc with the progress of the arbitral process. This would be of no benefit to any of the parties involved in these unnecessarily complicated and convoluted proceedings. E

78. In the facts of this case, we have no hesitation in concluding that the parties must proceed with the Arbitration. All the difficulties pointed out by Mr. Rohinton Nariman can be addressed by the Arbitral Tribunal. F

79. Further, the arbitration agreement contained in clause 18.1 to 18.3 of IPLA is very widely worded and would include all the disputes, controversies or differences concerning the legal relationship between the parties. It would include the G disputes arising in respect of the IPLA with regard to its validity, interpretation, construction, performance, enforcement or its alleged breach. Whilst interpreting the arbitration agreement and/or the arbitration clause, the court must be conscious of the overarching policy of least intervention by courts or judicial authorities in matters covered by the Indian Arbitration Act, H

ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 911

& ANR. [SURINDER SINGH NIJJAR, J.]

1996. In view of the aforesaid, it is not possible for us to accept the submission of Mr. Nariman that the arbitration agreement will perish as the IPLA has not been finalised. This is also because the arbitration clause (agreement) is independent of the underlying contract, i.e. the IPLA containing the arbitration clause. Section 16 provides that the Arbitration clause forming part of a contract shall be treated as an agreement independent of such a contract.

80. The concept of separability of the arbitration clause/ , agreement from the underlying contract is a necessity to ensure that the intention of the parties to resolve the disputes by arbitration does not evaporate into thin air with every challenge to the legality, validity, finality or breach of the underlying contract. The Indian Arbitration Act, 1996, as noticed above, under Section 16 accepts the concept that the main contract and the arbitration agreement form two independent contracts. D Commercial rights and obligations are contained in the underlying, substantive, or the main contract. It is followed by a second contract, which expresses the agreement and the i~tention of the parties to resolve the disputes relating to the underlying contract through arbitration. A remedy is elected by parties outside the normal civil court remedy. It is true that support of the National Courts would be required to ensure the success of arbitration, but this wouid not detract from the legitimacy or independence of the collateral arbitration agreement, even if it is contained in a contract, which is claimed to be void or voidable or unconcluded by one of the parties.

81. The scope and ambit of provision contained in Section 16 of the Indian Contract Act has been clearly explained in Reva Electric Car (supra), wherein it was inter alia observed as follows:

"54. Under Section 16(1), the legislature makes it clear that while considering any objection with respect to the existence or validity of the arbitration agreement, the H

912 SUPREME COURT REPORTS [2014) 2 S.C.R.

A arbitration clause which formed part of the ~ontract, has to be treated as an agreement independent of the other . terms of the contract. To ensure that there is no misunderstanding, Section 16(1 )(b) further provides that even if the Arbitral Tribunal concludes that the contract is B null and void, it should not result, as a matter of law, in an automatic invalidation of the arbitration clause. Section 16(1)(a) presumes the existence of a valid arbitration clause and mandates the same to be treated as an agreement independent of the other terms of the contract. c By virtue of Section 16(1)(b), it continues to be enforceable notwithstanding a declaration of the contract being null and void. In view of the provisions contained in Section 16(1) of the Arbitration and Conciliation Act, 1996, it would not be possible to accept the submission of Mr. Ahmadi that with the termination of the MoU on 31-12-2007, the arbitration clause would also cease to exist."

The aforesaid reasoning has also been approved by a two . Judge bench of this Court in Today Homes and Infrastructure Pvt. Ltd. vs. Ludhiana Improvement Trust and Anr., 30 wherein it was inter alia held as under:

"14. The same reasoning was adopted by a member of this Bench (S.S. Niliar, J.), while deciding the case of Reva Electric Car Company Private Limited Vs. Green Mobil [(2012) 2 SCC 93), wherein the provisions of Section 16(1) F in the backdrop of the doctrine of kompetehz kompetenz were considered and it was inter alia held that under Section 16(1), the legislature makes it clear that while considering any objection with regard to the existence or validity of the arbitration agreement, the arbitration clause, G which formed part of the contract, had to be treated as an agreement independent of the other terms of the contract. Reference was made in the said judgment to the provisions of Section 16(1)(b) of the 1996 Act, which

H 30. 2013 (7) SCALE 327.

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& ANR. [SURINDER SINGH NIJJAR, J.]

provides that even if the arbitral tribunal concludes that the contract is null and void, it should not result, as a matter of law, in an automatic invalidation of the arbitration clause. It was also held that Section 16(1)(a) of the 1996 Act presumes the existence of a valid arbitration clause and mandates the same to be treated as an agreement independent of the other terms of the contract. By virtue of Section 16(1)(b) of the 1996 Act, the arbitration clause continues to be enforceable, notwithstanding a declaration that the contract was null and void."

In view of the aforesaid, we are not inclined to accept the submission of Mr. Nariman that Arbitration Agreement will perish as the IPLA has not been finalised.

Issue (iv) D

82. We now come to the next issue that even if there is a valid arbitration agreement/clause, can the parties be denied the benefit of the same on the ground that it is unworkable? Both the Arbitrators, as noticed above, are of the opinion that the parties cannot proceed to arbitration as the arbitration clause is unworkable. The Bombay High Court has taken the view that the arbitration clause is workable as two Arbitrators are to be appointed by the licensors and one by the licensee. We are not inclined to agree with the aforesaid finding/conclusion recorded by the High Court. Respondent No.1 is the licensor and Respondent No.2 is undoubtedly 100% shareholder of Respondent No.1, but that is not the same as being an independent licensor. It would also be relevant to point out here that before this Court the Respondent has not even tried to support the aforesaid conclusion of the High Court. G

83. In our opinion, the Courts have to adopt a pragmatic approach and not a pedantic or technical approach while interpreting or construing an arbitration agreement or arbitration clause. Therefore, when faced with a seemingly unworkable arbitration clause, it would be the duty of the Court to make the H

914 SUPREME COURT REPORTS [2014] 2 S.C.R.

A same workable within the permissible limits of the law, without stretching it beyond the boundaries of recognition. In other words, a common sense approach has to be adopted to give effect to the intention of the parties to arbitrate. In such a case, the court ought to adopt the attitude of a reasonable business s person, having business common sense as well as being equipped with the knowledge that may be peculiar to the business venture. The arbitration clause cannot be construed with a purely legalistic mindset, as if one is construing a provision in a statute. We may just add here the words of Lord c Diplock in The Antaios Compania Neviera SA v Salen Rederiema AB, 31 which are as follows:

"If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense."

We entirely agree with the aforesaid observation.

This view of ours is also supported by the following judgments which were relied upon by Dr. Singhvi:

In Visa lntemational Limited (supra), it was inter alia held that:

"25 .... No party can be allowed to take advantage of inartistic drafting of arbitration clause in any agreement as long as clear intention of parties to go for arbitration in case of any future disputes is evident from the agreement and material on record including surrounding circumstances.

G 26. What is required to be gathered is the intention of the parties from the surrounding circumstances including the conduct of the parties and the evidence such as exchange of correspondence between the parties .... "

H 31. [1985]1AC191.

ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 915

& ANR. [SURINDER SINGH NIJJAR, J.] Similar position of law was reiterated in Nandan Biomatrix A Ltd. (supra), wherein this court observed inter alia as under:

28. This Court in Rukmanibai Gupta v. Collector, Jabalpur has held (at sec p. 560, para 6) that what is required to be ascertained while construing a clause is "whether the 8 parties have agreed that if disputes arise between them in respect of the subject-matter of contract such dispute shall be referred to arbitration, then such an arrangement would spell out an arbitration agreement".

29. In M. Dayanand Reddy v. A.P. Industrial Infrastructure C Corpn. Ltd., this Court has held that: (SCC p. 142, para 8)

"8 .... an arbitration clause is not required to be stated in any particular form. If the intention of the parties to refer D the dispute to arbitration can be clearly ascertained from the terms of the agreement, it is immaterial whether or not the expression arbitration or 'arbitrator' or 'arbitrators' has been used in the agreement."

(original emphasis supplied) E

30. The Court is required, therefore, to decide whether the existence of an agreement to refer the dispute to arbitration can be clearly ascertained in the facts and circumstances of the case. This, in turn, may depend upon the intention F of the parties to be gathered from the correspondence exchanged between the parties, the agreement in question and the surrounding circumstances. What is required is to gather the intention of the parties as to whether they have agreed for resolution of the disputes through arbitration. G What is required to be decided in an application under Section 11 of the 1996 Act is: whether there is an arbitration agreement as defined in the said Act."

84. It is a well recognized principle of arbitration jurisprudence in almost all the jurisdictions, especially those H

91 S SUPREME COURT REPORTS [2014] 2 S.C.R.

A following the UNCITRAL Model Law, that the Courts play a supportive role in encouraging the arbitration to proceed rather than letting it come to a grinding halt. Another equally important principle recognized in almost all jurisdictions is the least intervention by the Courts. Under the Indian Arbitration Act, B 1996, Section 5 specifically lays down that : "Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part". Keeping in view the aforesaid, we find force in the submission of Dr. c Singhvi that the arbitration clause as it stands cannot be frustrated on the ground that it is unworkable.

85. Dr. Singhvi has rightly submitted that the un-workability in this case is attributed only to the machinery provision. And the arbitration agreement, otherwise, fulfils the criteria laid down under Section 44 of the Indian Arbitration Act, 1996. Given that two Arbitrators have been appointed, the missing line that "the two Arbitrators appointed by the parties shall appoint the third Arbitrator'' can be read into the arbitration clause. The omission is so obvious that the court can legitimately supply the missing line. In these circumstances, the Court would apply the officious bystander principle, as explained by MacKinnonn, LJ in Shirlaw v. Southern Foundries, 32 to interpret the clause. In Shirlaw, it was held that:

F "prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common 'Oh, of G course!"

In construing an arbitration clause, it is not necessary to employ the strict rules of interpretation which may be necessary to construe a statutory provision. The court would be well within

ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 917

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its rights to set right an obvious omission without necessarily A leaving itself open to the criticism of having reconstructed the clause.

Further, we find support in this context from the following extract of Halsbury's Laws of England (Vol. 13, Fourth Edition, 8 2007 Reissue): ·

"The words of a written instrument must in general be taken in their ordinary or natural sense notwithstanding the fact that such a construction may appear not to carry out the purpose which it might otherwise be supposed the parties C intended to carry out; but if the provisions and expressions are contradictory, and there are grounds, appearing on the face of the instrument, affording proof of the real intention of the parties, that intention will prevail against the obvious and ordinary meaning of the words; and where the literal D {in the sense of ordinary, natural or primary) construction would lead to an absurd result, and the words used are capable of being interpreted so as to avoid this result, the literal construction will be abandoned." E

86. Mr. Rohinton Nariman had very fairly submitted that it is permissible for the Court to construe the arbitration clause in a particular manner to make the same workable when there is a defect or an omission in it. His only caveat was that such an exercise would not permit the Court to re-write the contract. In our opinion, in the present case, the crucial line which seems to be an omission or an error can be inserted by the Court. In this context, we find support from judgment of this court in Shin Satellite Public Co. Ltd. (supra), wherein the 'offending part' in the arbitration clause made determination by the arbitrator ,, final and binding between the parties and declared that the parties have waived the rights to appeal or an objection against ,. i

such award in any jurisdiction. The Court, inter-alia, held that such an objectionable part is clearly severable being independent of the dispute that has to be referred to be resolved through arbitration. By giving effect to the arbitration clause, the H

918 SUPREME COURT REPORTS . [2014] 2 S.C.R.

A court specifically noted that the "it cannot be said that the Court is doing something which is not contemplated by the parties or by 'interpretative process', the Court is rewriting the contract which is in the nature of 'novatio' (sic). The intention ·of the parties is explicit and clear; they have agreed that the dispute, if any, would be referred to an arbitrator. To that extent, therefore, the agreement is legal, lawful and the offending part as to the finality and restraint in approaching a Court of law can be separated and severed by using a 'blue pencil'."

87. There is another reason which permits us to take the aforesaid view and accept the submission made by Dr. Singhvi that while construing the arbitration agreement/clause the same can be construed to make it workable, as such an approach is statutorily provided for. For this submission, Dr. Singhvi has rightly relied upon the provision contained in Sections 10 and D 11 of the Indian Arbitration Act, 1996. The object of these two provisions is to avoid failure of the arbitration agreement or the arbitration clause if contained in contract. Under Section 10(1), there is freedom given to the parties to determine the number of Arbitrators, provided that such number shall not be an even number. The arbitration clause in this case provides that the arbitral tribunal shall consist of three arbitrators. Further, it must also be noticed that the Respondents have been trying to seek adjudication of disputes by arbitration. As noted earlier, the Respondent No.2 in its email dated 13th March, 2008 clearly offered that the third and the presiding arbitrator be appointed by the respective arbitrators of the Appellants and the Respondents. On the other hand, the attitude of the Appellants is to avoid arbitration at any cost.

· 88. In this context, reliance placed by Dr. Singhvi upon G MMTC Limited .(supra) is justified. In MMTC, the provisions contained in Sections 10(1) and (2) of the Indian Arbitration Act, 1996 have been held to be machinery provisions by this Court. It was further held that the validity of an arbitration agreement does not depend on the number of arbitrators specified therein. H

ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 919

& ANR. [SURINDER SINGH NIJJAR, J.]

The Court declined to render the arbitration agreement invalid on the ground that it provided an even number of arbitrators. In the present case, Mr. Rohinton Nariman. had rightly not even emphasised that the arbitration agreement itself is illegal. The learned sr. counsel only emphasised that the arbitrators having expressed the view that the arbitration clause is unworkable, the parties ought not to be sent to the arbitration.

Similarly, other provisions contained in Sections 8, 11 and 45 of the Indian Arbitration Act, 1996 are machinery provisions to ensure that parties can proceed to arbitration provided they have expressed the intention to Arbitrate. This intention can be expressed by the parties, as specifically provided under Section 7 of the Indian Arbitration Act, 1996 by an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement. Such intention can even be expressed in the pleadings of the parties such as 0 statements of claim and defence, in which the existence of the agreement is alleged by one party and not denied by the other. In view of the above, we are of the opinion that the parties can be permitted to proceed to arbitration. E Issue No. V/Re: Seat

89. This now clears the decks for the crucial question, i.e., is the 'seat' of arbitration in London or in India. This is necessarily so as the location of the seat will determine the F Courts that will have exclusive jurisdiction to oversee the arbitration proceedings. Therefore, understandably, much debate has been generated before us on the question whether the use of the phrase "venue shall be in London" actually refers to designation of the seat of arbitration in London. G

90. We find much substance in the submissions of Mr. Nariman that there are very strong indicators to suggest that the parties always understood that the seat of arbitration would be in India and London would only be the "venue" to hold the proceedings of arbitration. We find force in the submission H

920 SUPREME COURT REPORTS [2014] 2 S.C.R.

A made by learned senior counsel for the Appellants that the facts of the present case would make the ratio of law laid down in Naviera Amazonica Peruana S.A. (supra) applicable in the present case. Applying the closest and the intimate connection to arbitration, it would be seen that the parties had agreed that B the provisions of Indian Arbitration Act, 1996 would apply to the arbitration proceedings. By making such a choice, the parties have made the curial law provisions contained in Chapters Ill, IV, V and VI of the Indian Arbitration Act, 1996 applicable. Even Dr. Singhvi had submitted that Chapters 111, IV, V and VI would c apply if the seat of arbitration is in India. By choosing that .Part I of the Indian Arbitration Act, 1996 would apply, the parties have made a choice that the seat of arbitration would be in India. Section 2 of the Indian Arbitration Act, 1996 provides that Part I "shall apply where the place of arbitration is in India". In Balco, it has been categorically held that Part I of the Indian 0 Arbitration Act, 1996, will have no application, if the seat of arbitration is not in India. In the present case, London is mentioned only as a "venue" of arbitration which, in our opinion, in the facts of this case can not be read as the "seat" of arbitration. E

91. We are fortified in taking the aforesaid view since all the three laws applicable in arbitration proceedings are Indian laws. The law governing the Contract, the law governing the arbitration agreement and the law of arbitration/Curial law are all stated to be Indian. In such circumstances, the·observation in Naviera Amazonica Peruana S.A. (supra) would become fully applicable. In this case, the Court of Appeal in England considered the agreement which contained a clause providing for the jurisdiction of the courts in Lima, Peru in the event of judicial dispute; and at the same time contained a clause providing that the arbitration would be governed by the English law and the procedural law of arbitration shall be the English law. The Court of Appeal summarised the state of the jurisprudence on this topic. Thereafter, the conclusions which arose from the material were summarised as follows:

ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 921

& ANR. [SURINDER SINGH NIJJAR, J.]

"All contracts which provide for arbitration and contain a 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 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)."

It was observed that the problem about all these formulations, including the third, is that they elide the distinction between the legal localisation of arbitration on the one hand and the appropriate or convenient geographical locality for 'iearings of the arbitration on the other hand.

92. On the facts of the case, it was observed in Naviera D Amazonica case (supra) that since 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 E & Morris on the Conflict of Laws (11th Edn.): "English Law does not recognise the concept of a delocalised 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." H

922 SUPREME COURT REPORTS (2014] 2 S.C.R.

A The aforesaid classic statement of the conflict of law rules as quoted in Dicey & Morris on the Conflict of Laws (1'1th Edn.), Vol. 1, was approved by the House of Lords in James Miller & Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd. 33 Mustill, J. in Black Clawson International B Ltd. v.' Papierwerke Waldhof-Aschaffenburg A.G. 34, a little later characterised the same proposition as "the law of the place where the reference is conducted, the lex fori". The position of law in India is the same.

93. The Court in Naviera Amazonica, also, recognised the proposition that "there 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 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 co.rnplexities. Finally it is pointed out that it is necessary not to confuse the legal seat of arbitration with the geographically convenient place or places for holding hearings. In the present case, Dr.Singhvi, it seems to us, is confusing the geographically convenient place, which is London, with the legal seat which, in our opinion, is undoubtedly India.

94. Further, on examination of the facts in Naviera Amazonica 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 it would always be open to the Arbitral Tribunal to hold hearings in Lima if this was thought to be convenient, even though the seat or forum of the arbitration would remain in London. In· the present case, with_ the utmost ease, "London" can be replaced by India, and "Lima" with London. G

95. Having chosen all the three applicable laws to be Indian laws, in our considered opinion, the parties wc:iuld not have intended to have created an exceptionally difficult

33. [1970] 1 Lloyd's Rep. 269; [1970] A.C. 583.

H 34. [1981] 2 Lloyd's Rep. 446 at P. 453.

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situation, of extreme complexities, by fixing the seat of A arbitration in London.

In view of the above, we are unable to.accept the submissions made by Dr. Singhvi that in this case, the term "venue" ought to be read as seat. 8

96. We are also unable to accept the submission made by Dr. Singhvi that in this case the venue should be understood as reference to place in the manner it finds mention in Section 20(1 ), as opposed to the manner it appears in Section 20(3), of the Indian Arbitration Act, 1996. Such a submission cannot be accepted since the parties have agreed that Curial law would be the Indian Arbitration Act, 1996.

97. In Ba/co, it has been clearly held that concurrent jurisdiction is vested in the Courts of seat and venue, only when the seat of arbitrations is in India (Para 96). Reason for the aforesaid conclusion is that there is no risk of conflict of judgments of different jurisdictions, as all courts in India would follow the Indian Law. Thus, the reliance placed by D. Singhvi on Balco in this context is misplaced. E

98. It is correct that, in virtually all jurisdictions, it is an accepted proposition of law that the seat normally carries with it the choice of that country's arbitration/Curial law. But this would arise only if the Curial law is not specifically chosen by . the parties. Reference can be made to Ba/co (supra), wherein this Court considered a number of judgments having a bearing on the issue of whether the venue is to be treated as seat. However, the court was not required to decide any controversy akin to the one this court is considering in the present case. The cases were examined only to demonstrate the difficulties that the court will face in a situation similar to the one which was considered in Na11iera Amazonica (supra).

99. We also do not agree with Dr. Singhvi that parties have not indicated they had chosen India to be the seat of arbitration. H

924 SUPREME COURT REPORTS [2014) 2 S.C.R.

A The judgments relied upon by Dr. Singhvi do not support the proposition canvassed: In fact, the judgment in the case Braes of Doune Wind Farm (Scotland) Limited Vs. Alfred McAlpine Business Services Limited35, has considered a situation very similar to the factual situation in the present case. B

100. In Braes of Doune, the English & Wales High Court considered two Applications relating to the first award of an arbitrator. The award related to an EPC (engineering, procurement and construction) contract dated 4th November, C 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 WTGs at a site some 18 km from Stirling in Scotland. This award dealt with enforceability of the clauses of the EPC contract which provided for liquidated damages for delay. The D claimant applied for leave to appeal against this award upon a question of law whilst the defendant sought, in effect, a declaration that 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:

"2. Scope of application of provisions.-(1) The provisions of this Part apply where the seat of the arbitration is in England and Wales or Northern Ireland."

101. The Court notices the singular importance of · determining the location of juridical seat in terms of Section 3, for the purposes of Section 2, in the following words of Akenhead, J.: G "15. I must determine what the parties agreed was the 'seat' of the arbitration for the purposes of Section 2 of the Arbitration Act, 1996. This means by Section 3 what the parties agreed was the 'juridical' seat. The word 'juridical'

H 35. [2008) EWHC 426 (TCC).

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is not an irrelevant word or a word to be ignored in A 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." B

(emphasis supplied}

102. Thus, it would be evident that if the "juridical seat" of the arbitration was in Scotland, the English courts would have no jurisdiction to entertain an Application for leave to appeal. C 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.

The material clauses of the EPC contract were: D "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 E 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. F

(b) Any reference to arbitration shall be to a single arbitrator ... and conducted in accordance with the Construction Industry Model Arbitration Rules, February 1998 Edn., subject to this clause {Arbitration Procedure) .... G {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 deemed to be a reference to arbitration within the meaning of the Arbitration Act, 1996 or any statutory re-enactment." H

926 SUPREME COURT REPORTS [2014] 2 S.C.R.

103. The arbitration was to be conducted under the arbitration rules known colloquially as the "GIMAR Rules". Rule 1 of the aforesaid Rules provided that:

"1.1. These Rules are to be read consistently with the Arbitration Act, 1996 (the Act), with common expressions B having the same meaning."

"1.6. (a) a single arbitrator is to be appointed, and

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

The Court was informed by the parties in arguments that the Scottish Court's powers of control or intervention would be, at the very least, seriously circumscribed by the parties' agreement in terms as set out in para 6 of the judgment. It was D 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. In construing the EPC, the Court relied upon the principles stated by the Court of Appeal in Naviera Amazonica E Peruana S.A.

104. Upon consideration of the entire material, the Court formed the view that it does have jurisdiction to entertain an Application by either party to the contract in question under F 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 control the arbitration. G (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 H mean something other than being mere verbiage. lfis a

ENERCON (INDIA) LTD. & ORS. v. ENERCON GMBH 927

& ANR. [SURINDER SINGH NIJJAR, J.] jurisdiction over disputes and not simply a court in which A 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 1.4.1 is meaningless in practice. The use of the word 'jurisdiction' suggests some form of control. B

(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. E (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 to be a reference to arbitration within the me~ning 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 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 reference without qualification.

(e) Looked at in this light, the parties' express agreement H

928 SUPREME COURT REPORTS [2014] 2 S.C.R.

A 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 B 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 c a given arbitration, the place where the arbitration is to be heard will not dictate what the governing or controlling law will be.

(f) In the context of this particular case, the fact that, as both parties seemed to accept in front of me, the Scottish courts D 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 'delocalised' arbitration or in a 'transnational firmament', to borrow Kerr, E L.J.'s words in Naviera Amazonica.

(g) The CIMAR Rules are not inconsistent with my view. Their constant references to the Arbitration Act, 1996 suggest that the parties at least envisaged the possibility F that the courts of England and Wales might play some part in policing any arbitration. For instance, 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." G

105. In our opinion, Mr. Nariman has rightly relied upon the ratio in Braes of Doune case (supra). Learned senior counsel has rightly pointed out that unlike the situation in Naviera . Amazonica (supra), in the present case all the three laws: (i) H the law governing the substantive contract; (ii) the law governing

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the agreement to arbitrate and the performance of that agreement (iii) the law governing the conduct of the arbitration are Indian. '!!..earned senior counsel has rightly submitted that the curial law of England would become applicable only if there was clear designation of the seat in London. Since the parties have deliberately chosen London as a venue, as a neutral place to hold the meetings of arbitratioo only, it cannot be accepted that London is the seat of arbitration. We find merit in the submission of Mr. Nariman that businessmen do not intend absurd results. If seat is in London, then challenge to the award would also be in London. But the parties having chosen Indian c Arbitration Act, 1996 - Chapter Ill, IV, V and VI; Section 11 would be applicable for appointment of arbitrator in case the machinery for appointment of arbitrators agreed between the parties breaks down. This would be so since the ratio laid down in Bhatia will apply, i.e., Part I of the Indian Arbitration Act, 1996 0 would apply even though seat of arbitration is not in India. This position has been reversed in Ba/co, but only prospectively. Ba/co would apply to the agreements on or after 6th September, 2012. Therefore, to interpret that London has been designated as the seat would lead to absurd results. E

106. Learned senior counsel has rightly submitted that in fixing the seat in India, the court would not be faced with the complications which were faced by the English High Court in the Braes of Doune (supra). In that case, the court understood the designation of the seat to be in Glasgow as venue, on the F strength of the other factors intimately connecting the arbitration to England. If one has regard to the factors connecting the dispute to India and the absence of any factors connecting it to England, the only reasonable conclusion is that the parties have chosen London, only as the venue of the arbitration. All G the other connectJn_g factors would place the seat firmly in India.

107. The submission made by Dr. Singhvi would only be worthy of acceptance on the assumption that London is the seat. That would be to put the cart before the horse. Surely, H

930 SUPREME COURT REPORTS . (2014] 2 S.C.R.

A jurisdiction of the courts can not be rested upon unsure or insecure foundations. If so, it will flounder with every gust of the wind from different directions. Given the connection to India of the entire dispute between the parties, it is difficult to accept that parties have agreed that the seat would be London and B that venue is only a misnomer. The parties having chosen the Indian Arbitration Act, 1996 as the law governing the substantive contract, the agreement to arbitrate and the performance of the agreement and the law governing the conduct of the arbitration; it would, therefore, in our opinion, be vexatious and oppressive c if Enercon GMBH is permitted to compel Ell to litigate in England. This would unnecessarily give rise to the undesirable consequences so pithily pointed by Lord Brandon and Lord Dip lock in Abidin Vs. Daver. 36 It was to avoid such a situation that the High Court of England & Wales, in Braes of Doune, construed a provision designating Glasgow in Scotland as the 0 seat of the arbitration as providing only for the venue of the arbitration.

108. At this stage, it would be appropriate to analyse the reasoning of the Court in Braes of Doune in support of construing the designated seat by the parties as making a reference only to the venue of arbitration. In that case, the Court held that t~ere was no supplanting of the Scottish law by the English law, as both the seat under Section 2 and the "juridical seat" under Section 3, were held to be in England. It was further concluded, as observed earlier, 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 will be.

109. In Braes of Doune, detailed examination was undertaken by the court to discern the intention of the parties as to whether the place mentioned refers to venue or the seat of the arbitration. The factual situation in the present case is not as difficult or complex as the parties herein have only H 36." (1984] AC 398.

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designated London as a venue. Therefore, if one has to apply the reasoning and logic of Akenhead, J., the conclusion would be irresistible that the parties have designated India as the seat. This is even more so as the parties have not,agreed that the courts in London will have exclusive jurisdiction to resolve any dispute arising out of or in connection with the contract, which was specifically provided in Clause 1.4.1 of the EPC Contract examined by Akenhead, J. in Braes of Doune. In the present case, except for London being chosen as a convenient place/venue for holding the meetings of the arbitration, there is no other factor connecting the arbitration proceedings to c London.

110. We also do not find much substance in the submission of Dr. Singhvi that the agreement of the parties that the arbitration proceedings will be governed by the Indian Arbitration Act, 1996 would not be indicative of the intention of D the parties that the seat of arbitration is India. An argument similar to the argument put forward before us by Dr. Singhvi was rejected in C vs. D by the Court of Appeal in England as well as by Akenhead, J. in Braes of Doune. Underlying reason -- for the conclusion in both the cases was that it would be rare for the law of the arbitration agreement to be different from the law of the seat of arbitration.

111. C v. 0 37 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 US courts. The insurance policy provided that "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 rmi.de in favour of the claimants. It was agreed that this partial

37. [2007] EWCA Civ 1282. H

932 SUPREME COURT REPORTS [2014) 2 S.C.R.

A award is, in English 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 the US Federal Arbitration Law governing the enforcement of arbitral award, which was said to permit vacatur B of an award where arbitrators have manifestly disregarded the law. It was in consequence of such an 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 c tho$e· permitted by the 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 0 proceedings post award. The Judge also rejected a further argument that the separate agreement to arbitrate contained in Condition V(o) of the policy was itself governed by New York Law so that proceedings could be instituted in New York. The E Judge granted the claimant a final injunction.

112. The Court of Appeal noticed the submission on behalf of the defendant as follows:

"14. The main submission of Mr Hirst for the defendant F 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 G 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 H

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arbitration agreement was that law with which the agreement had the most close and real connection; if the insurance policy was governed by New York law, the law 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."

113. Justice Longmore of Court of Appeal observed:

"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 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 F judicial remedies were also permitted. That, however, would be a recipe for litigation and (whatis worse) confusion which cannot have been intended by the parties. No doubt New York law has its own judicial remedies for want of jurisdiction and serious irregularity but it could G scarcely be supposed that a party aggrieved by one part of an award could proceed in one jurisdiction and a party 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 H

934 SUPREME COURT REPORTS [2014] 2 S.C.R.

A 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. There would be a serious risk of parties rushing to get the first judgment or of conflicting decisions which the parties cannot have B 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."

c (emphasis supplied)

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. ·

114. The cases relied upon by Dr. Singhvi relate to the phrase "arbitration in London" or expressions similar thereto. The same cannot be equated with the term "venue of arbitration proceEtdings shall be in London." Arbitration in London can be understood to include venue as well as seat; but it would be rather stretching the imagination if "venue of arbitration shall be in London" could be understood as "seat of arbitratioo shall be London," in the absence of any other factor connecting the arbitration to London. In spite of Dr. Singhvi's seemingly attractive submission to convince us, we decline to entertain the notion that India would not be the natural forum for all remedies in relation to the disputes, having such a close and intimate connection with India. In contrast, London is described only as a venue which Dr. Singhvi says would be the natural forum. G

115. In Shashoua, such an expression was understood as seat instead of venue, as the parties had agreed that the ICC Rules would apply to the arbitration proceedings. In Shashoua, the ratio in Naviera and Braes Daune has been followed. In H this case, the Court was concerned with the construction of the

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shareholders' agreement between the parties, which provided A that "the venue of the arbitration shall be London, United Kingdom". It provided that the arbitration proceedings should be conducted in English in accordance with the ICC Rules and that the governing law of the shareholders' agreement itself would be the law of India. The claimants made an Application B to the High Court in New Delhi seeking interim measures of protection under Section 9 of the Indian 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 to the jurisdiction of the c Arbitral Tribunal, which the panel heard as a preliminary issue. The Tribunal rejected the jurisdictional objection.

116. The Tribunal then made a costs 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 as a judgment. The defendant applied to the High Court of Delhi under Section 34(2)(a)(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 UK. The defendant applied to the Delhi High Court for an order .directing the claimants not to take any action to execute the charging order, 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 F 69 of the English Arbitration Act, 1996 and to set aside the order giving leave to enforce the award.

117. Examining the fact situation in the case, the Court observed as follows: G "The basis for the court's grant of an anti-suit injunction of the kind sought depended upon the seat of the arbitration. 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 H

936 SUPREME COURT REPORTS [2014] 2 S.C.R.

A was there agreement to the curial law of the seat, but also to the courts of the seat having supervisory jurisdiction 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 B the seat of the arbitration.

Although, 'venue' was not synonymous with 'seat', in an arbitration clause which provided for arbitration to be conducted in accordance with the Rules of the ICC in Paris (a supranational body of rules), a provision that 'the venue c of arbitration shall be London, United.Kingdom' did amount to the designation of a juridical seat .... "

In para 54, it is further observed as follows:

D "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 the 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)

G If the aforesaid observations are applied to the facts of the present case, it would be apparent that the Indian Courts would have jurisdiction in the nature of exclusive jurisdiction over the disputes between the parties.

118. In Shashoua case (supra), Cooke, J. concluded that H London is the seat, since the phrase "venue of arbitration shall

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be London, U.K." was accompanied by the provision in the arbitration clause for arbitration to be conducted in accordance with the Rules of ICC in Paris (a supranational body of rules). It was also noted by Cooke, J. that "the parties have not simply provided for the location of hearings to be in London ...... " In the present case, parties have not chosen a supranational body of rules to govern the arbitration; Indian Arbitration Act, 1996 is the law applicable to the arbitration proceedings.

119. Also, in Union of India v. McDonnell Douglas Corpn., the proposition laid down in Naviera Amazonica Peruana S.A. C was reiterated. In this case, the agreement provided that:

"The arbitration shall be conducted in accordance with the procedure provided in the Indian Arbitration Act of 1940 or any re-enactment or modification thereof. The arbitration shall be conducted in the English language. The award of the arbitrators shall be made by majoi ity decision and shall be final and binding on the parties hereto. The seat of the arbitration proceedings shall be London, United Kingdom."

120. Construing the aforesaid clause, the Court held as follows:

"On the contrary, for the reasons given, it seems to me that by their agreement the parties have chosen English law as the law to govern their arbitration proceedings, while contractually importing from the Indian Act those provisions of that Act which are concerned with the internal conduct of their arbitration and which are not inconsistent with the choice of English arbitral procedural law."

121. The same question was again considered by the High G Court of Justice, Queen's Bench Division, Commercial Court (England) in SulameRica CIA Nacional De Seguros SA v. Enesa Engenharia SA - Enesa. 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 H

938 SUPREME COURT REPORTS [2014] 2 S.C.R.

A of the arbitration 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 B 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 connection between the arbitration agreement itself and the law of England. It is for this reason that recent authorities have laid c 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 observations made in C v. D by the High Court as well as the Court of Appeal. The observations made in paragraph 12 have particular relevance which are as under: 0 "In the Court of Appeal, Longmore, L.J., 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 E 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 Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg A.G. as saying that it would be a F 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, L.J. also referred to the speech of Lord Mustilf (as he had then become) in Channel Tunnel Group ltd. v. Balfour Beatty Construction ltd. and concluded 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 from the curial law, the law of the seat of the arbitration.

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He was not expressing any view on the frequency or otherwise of the law ofthe arbitration agreement differing from the law of the seat of the arbitration. Longmore, L.J. agreed with Mustill, J.'s earlier dictum that it would be rare for the law of the separable arbitration agreement to be different from the law of the seat of the arbitration. The B reason was

'that an agreement to arbitrate will normally have a closer and more real connection with the place where the parties have chosen to arbitrate, than C 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'. (C case, Bus LR p. 854, para 26)" D

122. Upon consideration of the entire matter, it was observed in SulameRica supra 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". It was thereafter concluded by the High Court that the English law is the proper law of the agreement to arbitrate.

The aforesaid observations make it abundantly clear that the submissions made by Dr. Singhvi cannot be supported either in law or in facts. In the present case, all the chosen laws are of India, therefore, it cannot be said the laws of England would have any application.

123. We also do not find any merit in the submission of Dr. Singhvi that the close and the most intimate connection test is wholly irrelevant in this case. It is true that the parties have specified all the three laws. But the Court in these proceedings is required to determine the seat of the arbitration, as the Respondents have taken the plea that the term "venue" in the arbitration clause actually makes a reference to the "seat" of H ·

940 SUPREME COURT REPORTS [2014] 2 S.C.R.

A the arbitration.

124. It is accepted by most of the experts in the law relating to international arbitration that in almost all the national laws, arbitrations are anchored to the seaUplace/situs of arbitration. Redfern and Hunter on International Arbitration (5th 8 Edn., Oxford University Press, Oxford/New York 2009), in para 3.54 concludes that "the seat of the arbitration is thus intended to be its centre of gravity." In Balco, it is further noticed that this does not mean that all proceedings of the arbitration are to be held at the seat of arbitration. The Arbitrators are at liberty to C hold meetings at a place which is of convenience to all concerned. This may become necessary as Arbitrators often come from different countries. Therefore, it may be convenient to hold all or some of the meetings of the arbitration in a location other than where the seat of arbitration is located. In D Balco, the relevant passage from Redfern and Hunter, has been quoted which is as under:

"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 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 such H

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circumstances each move of the Arbitral Tribunal does A 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. "

These observations have also been noticed in Union of B India Vs. McDonald Dug/as Corporation (supra).

125. In the present case, even though the venue of arbitration proceedings has been fixed in London, it cannot be presumed that the parties have intended the seat to be also in London. In an International Commercial Arbitration, venue can often be different from the seat of arbitration. In such circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but this would not bring about a change in the seat of the arbitration. This is precisely the ratio in Braes of Dounne. Therefore, in the present case, the seat would remain in India.

126. In Naviera Amazonica Peruana S.A. (supra), the Court of Appeal observed that it would always be open to the Arbitral Tribunal to hold the hearings in Lima if this were thought to be convenient, even though the seat or forum of the arbitration would remain in London.

Issue No. VI/ Re: Concurrent Jurisdicion:

127. Having held that the seat of arbitration is in India, in our opinion, the Bombay High Court committed an error in concluding that the Courts in England would have concurrent jurisdiction. Holding that the Courts in England and India will have concurrent jurisdiction, as observed on different occasions by Courts in different jurisdictions, would lead to unnecessary complications and inconvenience. This, in turn, would be contrary to underlying principle of the policy of dispute resolution through arbitration. The whole aim and objective of arbitration is to enable the parties to resolve the disputes speedily, economically and finally. The kind of difficulties that can be H

942 SUPREME COURT REPORTS (2014] 2 S.C.R.

A caused by Courts. in two countries exercising concurrent jurisdiction over the same subject matter have been very succinctly set down by Lord Brandon in Abdin Vs. Daveu (su'pra)- as follows:-

"ln this connection it is right to point out that, if concurrent B actions in respect of the same subject matter proceed together in two different countries, as seems likely if a stay is refused in the present case, one or other of the two undesirable consequences may follow: first, there may be two conflicting judgments of the two courts concerned; or c secondly, there may be an ugly rush to get one action decided ahead of the other in order to create a situation of res judicata or issue estoppel in the latter."

Lord Diplock said in the same case: D "comity demands that such ~ituation should not be permitted to occur as between courts of two civilised and friendly states"; it would be, he said, "a recipe for confusion and injustice". As Bingham LJ said in Dupont No 1 the policy of the law must be to favour the litigation of issues · E only once in the most appropriate forum. The interests of justice require that one should take into account as a factor the risks of injustice and oppression that arise from concurrent proceedings in different jurisdictions in relation to the same subject matter." F

128. Once the seat of arbitration has been fixed in India, it would be in the nature of exclusive jurisdiction to exercise the supervisory powers over the arbitration. This view of ours will find support from the judgment of the Court of Appeal in G England in recognizing the difficulties that the parties will face in case the Courts in India and England have concurrent jurisdiction. Cooke J. in his judgment in (1) Enercon GMBH (2) Wobben Properties GMBH Vs. Enercon (India) Ltd., dated 30th November, 2012, (2012) EWHC 3711(Comm), observed H as under:

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"14. A lifting of the stay in this country and an appoint of A a third arbitrator under s. 18 of the English Act would, if the Indian proceedings continue and the Supreme Court decides the matter differently from the Bombay High Court and this court, give rise to the possibility of conflicting judgments with all the chaos that might entail. B In practice, therefore, the question of lifting the stay here and the grant of the anti-suit injunction against EIL are closely interconnected.

15. It cannot, in my judgment, be right that both English C and Indian courts should be free to reach inconsistent judgments on the same subject matter, whether or not the current ultimate result in India, which allows for an English court to appoint an arbitrator by virtue of s.2(4) of the English Act, will or will not involve any inconsistent judgment, and whether there is or is not a current issue D estoppels which would debar Enercon from contending that London is the seat of the arbitration, which is its primary case, giving rise, as it says, to the court's power to appoint an arbitrator under s. 18 of the English Act by virtue of s.2(1) of that Act and by reference to s.3 of that E Act.

xx xxx xx xxx xx

56. Comity and the avoidance of inconsistent judgments require that I should refrain from deciding matters which · are possibly going to be decided further in India. It would be a recipe for confusion and injustice if I were not to do so. Issue estoppels is already said to arise on the question of the seat of arbitration and curial law, and that raises very difficult questions for the court to decide. If the stay was lifted, then I could decide the matter differently from Savant J. or from a later final decision on appeal in the Supreme Court of India, if that matter went ahead. The Indian courts are seised and should reach, in my H

944 SUPREME COURT REPORTS [2014] 2 S.C.R.

A judgment, a concluded decision, albeit on an expedited basis.

xx xxx xx xxx xx

60. If the Supreme Court in India were, in due course, to B consider that the Bombay High Court was wrong in its conclusion as to the seat of the arbitration or that there was a prima facie valid arbitration or that the English court had concurrent supervisory jurisdiction, it would be a recipe for confusion and injustice if, in the meantime, the c English court were to conclude that England was the seat of the putative arbitration, and to assume jurisdiction over EIL and the putative arbitration, and to conclude that there was a valid arbitration agreement, whether on the basis of a good arguable case or the balance of probabilities. Further, for it to exercise its powers, whether under s. 2(1) or 2(4) or s. 18 of the Arbitration Act in appointing a third arbitrator, would create real problems, should the Supreme Court decide differently.

61. These are the very circumstances which courts must strive to avoid in line with a multitude of decisions of high authority, from the Abidin Daver [1984} AC 398 onwards, including E. I. Dupont de Nemours v. Agnew [1987]2 Lloyd's Rep 585. The underlying rationale of Eder J. 's judgment leads inexorably, in my view, to the conclusion that the issues to be determined in India, which could otherwise fall to be determined here in England, must be decided first by the Indian courts and that, despite the delay and difficulties involved, the decision of the Indian Supreme Court should be awaited. G

62. It is also fair to point out in this context that, even if I were to decide the seat issue here on the basis of full argument (which I have not heard) whether in the way that Eder J. did or otherwise, the possibility or likelihood of H one side or another wishing to appeal with subsequent

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delay might then arise in the context of the English A proceedings. But, if I did make such a decision, in line with Eder J., I would be making a determination which is directly contrary to that of Savant J. and it seems to me that that is inappropriate as a matter of comity, whether or not there is any issue estoppels. B

63. Moreover, it would be a recipe for confusion and injustice, and to back it up with an anti-suit injunction would merely fan the flames for a continued battle, which is contrary to the principles of comity when the position is unclear and the agreement itself is governed by Indian law."

129. In our opinion, these observations of Justice Cooke foresee the kind of intricate complexities that may arise in case the Courts of India and England were to exercise the concurrent jurisdiction in these matters.

130. We are unable to agree with the conclusion reached by Justice Savant that the Courts in England would exercise .concurrent jurisdiction in the matter. Having concluded that the seat of arbitration is in India, the conclusions reached by the Bombay High Court seem to be contrary in nature. In Paragraph 45, it is concluded that the law relating to arbitration agreement is the Indian Arbitration Act. Interpreting Clause 18.3, it is observed as follows:- F "45 .................... The said clause provides that the provisions of the Indian Arbitration and Conciliation Act, 1996 shall apply. If the said clause is read in the ordinary and natural sense, the placement of the words that "the Indian Arbitration and Conciliation Act shall apply" .in the G last clause 18.3 indicates the specific intention of the parties to the application of the Indian Arbitration Act, not only to the Arbitration Agreement but also that the curial law or the Lex Arbitri would be the Indian Arbitration Act. The application of the Indian Arbitration Act therefore can H

946 SUPREME COURT REPORTS [2014] 2 S.C.R.

A be said to permeate clause-18 so that in the instant case laws (2) and (3) are same if the classification as made by the learned authors is to be applied. The reference to the Indian Arbitration Act is therefore not merely a clarification . as to the proper law of the arbitration agreement as is B sought to be contended on behalf of the Respondents. It has to be borne in mind that the parties are businessmen and would therefore not. include words without any intent or object behind them. It is in the said context, probably that the parties have also used the word "venue" rather than the word "see?t" which is usually the phrase which is used c in the clauses encompassing an Arbitration Agreement. There is therefore a clear and unequivocal indication that the parties have agreed to abide by the Indian Arbitration Act at all the stages, and therefore, the logical consequence of the same would be that in choosing D London as the venue the parties have chosen it only as a place of arbitration and not the seat of arbitration which is a juristic concept." ·

131. This conclusion is reiterated in Paragraph 46 in the following words:-

"46. The proposition that when a choice of a particular law is made, the said choice cannot be restricted to only a part of the Act or the substantive provision of that Act only. The choice is in respect of all the substantive and curial law provisions of the Act. The said proposition has been settled by judicial pronouncements in the recent past. ...... "

132. Having said so, learned Judge further observes as follows:- G "49. Though in terms of interpretation of Clause 18.3, this Court has reached a conclusion that the lex arbitri would be the Indian Arbitration Act. The question would be, whether the Indian Courts would have exclusive jurisdiction. H The nexus between the "seat" or the "place" of arbitration

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& ANR. [SURINDER SINGH NIJJAR, J.] vis-a-vis the procedural law i.e. the lex arbitri is well settled A by the judicial pronouncements which have been referred to in the earlier part of this judgment. A useful reference could also be made to the learned authors Redfern and Hunter who have stated thus :- 8 "the place or seat of the arbitration is not merely a matter of geography. It is the territorial link between the arbitration itself and the law of·the place in which that arbitration is legally situated .... "

The choice of seat also has the effect of conferring C exclusive jurisdiction to the Courts wherein the seat is situated."

Here the Bombay High Court accepts that the seat carries with it, usually, the notion of exercising jurisdiction of the Courts 0 where the seat is located.

133. Having said so, the High Court examines the question whether the English Courts can exercise jurisdictions in support of arbitration between the parties, in view of London being the venue for the arbitration meetings. In answering the aforesaid question, the High Court proceeds on the basis that there is no agreement between the parties as regards the seat of the arbitration, having concluded in the earlier part of the judgment that the parties have intended the seat to be in India. This conclusion of the High Court is contrary to the observations made in Shashoua (supra) which have been approvingly quoted by this Court in Balco in (Paragraph 110). 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. G

134. In A Vs. 8 38 again the Court of Appeal in England observed that:-

38. [2007] 1 Lloyds Report 237. H

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A " ..... 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." B (emphasis suppl.ied}

135. In our opinion, the conclusion reached by Justice Savant that the Courts in England would have concurrent jurisdiction runs counter to the settled position of law in India C as well as in England and is, therefore, not sustainable. The Courts in England have time and again reiterated that an agreement as to the seat is analogous to an exclusive jurisdiction clause. This agreement of the parties would include the determination by the court as to the intention of the parties. o In the present case, Savant, J. having fixed the seat in India erred in holding that the courts in India and England would exercise concurrent jurisdiction. The natural forum for all remedies, in the facts of the present case, is only India.

Issue Cviil/Re: Anti-Suit Injunction: E -

136. Having held that the Courts in England would have concurrent jurisdiction, the Bombay High Court on the basis thereof concludes as follows:-

"ln view of the conclusion that this Court has reached, F namely that the English Courts would have concurrent jurisdiction to act in support of arbitration, the case of the Appellants for an anti suit injunction does not stand to scrutiny. However, in so far as the aspect of forum non- conveniens is concerned, in my view, since the Appellants G have agreed to London as the venue for arbitration, they cannot be heard to complain that the Courts at London are forum non-conveniens for them. The Appellants have appeared before the said Courts, and therefore, the case . of forum non- conveniens is bereft of any merit." H

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137. The aforesaid conclusion again ignores the principle A laid down by this Court in Oil & Natural Gas Commission Vs. Western Company of North America (supra), wherein it is held as follows:-

"As per the contract, while the parties are governed by the 8 Indian Arbitration Act and the Indian Courts have the exclusive jurisdiction to affirm or set aside the award under the said Act, the Respondent is seeking to violate the very arbitration clause on the basis of which the award have been obtained by seeking confirmation of the award in the C New York Court under the American Law. This amounts to an improper use of the forum in American (sic) in violation of the stipulation to be governed by the Indian law, which by necessary implication means a stipulation to exclude the USA Court to seek an affirmation and to seek it only under the Indian Arbitration Act from an Indian Court. D If the restraint order is not granted, serious prejudice would be occasioned and a party violating the very arbitration clause on the basis of which the award has come into existence will have secured an order enforcing the order from a foreign court in violation of that very clause .. " E

138. Again in the case of Modi Entertainment Network & Anr. (supra), it was held that :- "24(1 ). In exercising discretion to grant an anti-suit F injunction the court must be satisfied of the following aspects: (a) the defendant, against whom injunction is sought, is amenable to the personal jurisdiction of the court; (b) if the injunction is declined, the ends of justice will be defeated and injustice will be perpetuated; and (c) G the principle of comity - respect for the court in which the . commencement or continuance of action/proceeding is sought to be restrained - must be borne in mind."

139. In Paragraph 24(2) of the same decision, this Court further observed that :- H

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A "24(2). In a case where more forums than one are available, the court in exercise of its discretion to grant anti- suit injunction will examine as to which is the appropriate forum {forum conveniens) having regard to the convenience of the parties and may grant anti-suit B injunction in regard to proceedings which are oppressive or vexatious or in a forum non-conveniens."

140. Examining these aspects, Eder, J. in fact also came to the conclusion that the anti-suit injunction granted by the C English Court needed at-least to be stayed during the pendency of proceedings in India. The reasons given by Eder, J. in support of the conclusions are as under:- "48. Bearing these general principles in mind and recognising the permissive nature of CPR Part 62.5, the important point, in my view, is that the claimants did not pursue their applications in the original proceedings that they issued in this court in _March 2008. On the contrary, they engaged fully (albeit perhaps reluctantly) in the Indian proceedings before the Daman court. When they lost at first instance before Judge Shinde, they appealed to the DCC with the result indicated above. That is the choice they made. Having made that choice and now some years down the line, it seems to me that lhe English court should at least be extremely cautious to intervene at this stage - F and, in Mr Edey QC's words, to "wrest" back the proceedings to England. To do so at this stage when those proceedings are, in effect, still pending would give rise to - the "recipe for confusion and injustice" which Lord Diplock specifically warned against in The Abidin Daver as referred to in the passage of the judgment of Hobhouse J G . which I have quoted above. For that reason alone, I have decided somewhat reluctantly that I should follow the course suggested by Mr Edey QC ie that these proceedings should be stayed at least for the time being pending resolution of the Writ Petitions currently before the H

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BHC ...... " A

141. It must be noticed that Respondent No. 1 was initially having 51 per cent shareholding of the Appellant No.1 company, which was subsequently.increased to 56 per cent. This would be an indicator that the .Respondent No: 1·is actively carrying 8 on business at Daman. This Court considered the expression "carries on. business" as·it occurs in Section 20•of the Civil Procedure Code in :the case o(Dhodha Hqtise Vs. S. K. Maingi?g and observed as. follows:-

"46. The expression "carries on business" and the C expression "personally works for gain" connote two different meanings. For the purpose of carrying on business only presence of a man at a place is not necessary. Such business may be carried on at a place through an agent or a manager or through a servant. The D owner may not even visit that place. The phrase "carries on business" at a certain place would, therefore, mean having an interest in a business at that place, a voice in what is done, a share in the gain or loss and some control thereover. The expression is much wid~r than what the . E expression in normal parlance connotes, because of the ambit of a civil action within the meaning of Section 9 of the Code ..... "

142. The fact that Daman trial court has jurisdiction over the matter is supported by the judgment of this Court in Harshad Chiman Lal Modi {supra), which was relied upon by Mr. Nariman. The following excerpt makes it very clear:-

"16 ........... The proviso to Section 16, no doubt, states that though the court cannot, in case of immovable property situate beyond jurisdiction, grant a relief in rem still it can entertain a suit where relief ·sought can be obtained through the personal obedience of the defendant. ..... The principle on which the maxim was based was that the

39. (2006) e sec 41. H

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A courts could grant relief in suits respecting immovabl~ property situate abroad by enforcing their judgm~nts ·by process in personam i.e. by arrest of the defendant or by attachment of his property."

143. This apart, we have earlier noticed that the main contract, the IPLA is to be performed in India. The governing law of the contract is the law of India. Neither party is English. One party is Indian, the other is German. The enforcement of the award will be in India. Any interim measures which are to C be sought against the assets of Appellant No. 1 ought to be in India as the assets are situated in India. We have also earlier noticed that Respondent No.1 has not only participated in the proceedings in the Daman courts and the Bombay High Court, but also filed independent proceedings under the Companies D ~t at Madras and Delhi. All these factors would indicate that Respondent No.1 does not even consider the Indian Courts as forum-non-conveniens. In view of the above, we are of the considered opinion that the objection raised by the Appellants to the continuance of the parallel proceedings in England is not wholly without justification. The only single factor which prompted E Responddnt No.1 to pursue the action in England was that the venue of the arbitration has been fixed in London: The considerations for designating a convenient venue for arbitration can not be understood as conferring concurrent jurisdiction on the English Courts over the arbitration proceedings or disputes F in general. Keeping in view the aforesaid, we are incHned to restore the anti-suit injunction granted by the Daman Trial Court.

144. For the reasons recorded above, Civil Appeal No.2087 of 2014@ SLP (C) No.10906 of 2013 is dismissed. G The fin~ings recorded by the Appellate Court that the parties can proceed to arbitration are affirmed. The findings recorded . by the Trial Court dismissing the Applica~ion under Section 45 _are set aside. In other words, the Application filed by the Respondents for reference of the dispute to arbitration under H Section 45 has been correctly allowed by the Appellate Court

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as well as by the High Court. The findings of the High c·ourt A · are affirmed to that extent. All the disputes arising between the parties in relation to the following agreements viz. SHA, TKHA, SSHAs and STKHA, Agreed Principles and IPLA, including the controversy as to whether IPLA is a concluded contract are referred to the Arbitral Tribunal for adjudication. B

145. In the normal circumstances, we would have directed the parties to approach the two learned arbitrators, namely Mr. V.V. Veeder, QC and Mr. Justice 8.P. Jeevan Reddy to appoint the third arbitrator who shall also act as the presiding arbitrator. C However, keeping in view the peculiar facts and circumstances of this case and the inordinate delay which has been caused due to the extremely convoluted and complicated proceedings indulged in by the parties, we deem it appropriate to take it upon ourselves to name the third arbitrator. A perusal of the judgment of Eder, J. gives an indication that a list of three names was D provided from which the third arbitrator could possibly be appointed. The three names are Lord Hoffmann, Sir Simon Tuckey and Sir Gordon Langley. We hereby appoint Lord · Hoffmann as the third arbitrator who shall act as the Chairman of the Arbitral Tribunal. E

146. In view of the above, Regular Civil Suit No. 9 of 2008, pending before the Court of Civil Judge, Senior Dhtision, Daman; and the Application under Section 45 of the Arbitration Act, 1996 flied in the Civil Suit No.2667 of 2007 and Contempt F Petition in relation to Civil Suit No.2667 of 2007 pending before the Bombay High Court at the instance of the Appellants are stayed. Parties are at liberty to approach the Court for the appropriate orders, upon the final award being rendered by the Arbitral Tribunal. This will not preclude the parties from seeking G interim measures under Section 9 of the Indian Arbitration Act, 1996.

147. Civil Appeal No.2086 of 2014@ SLP (C) No.10924 ·of 2013 is partly allowed as follows: H

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. A a. The conclusion of the Bombay High Court that the seat of the arbitration is in India is upheld; b. The conclusion that the English Courts would have concurrent jurisdiction is overruled and consequently set aside; B c. The conclusion of the Bombay High Court that the anti-suit injunction granted by the Daman Trial Court has been correctly vacated by Daman Appellate Court is overruled and hence set aside. c d. Consequently, the Respondents are restrained from proceeding with any of the actions the details of which have been given in the judgment of Eder, J. dated 23rd March, 2012 and the order dated 27th March, 2012 as well as the judgment of Justice D Cooke dated 30th November, 2012. These matters include: All or any of the. proceedings/ applications/ reliefs claimed by the Respondents in the Arbitration E Claim 2011 Folio 1399, including but not limited to: (1) Application under Section 18 of the English Arbitration Act, 1996; (2) Injunctions pursuant to Se.ction 44 of the English Arbitration Act, 1996 and /or Section 37 of the Senior F Courts Act, 1981 . The Respondents are also restrained from approaching the English Courts for seeking any declaration/relief/clarification and/or to institute any proceedings that may result in delaying G or otherwise affect the constitution of the arbitral tribunal and its proceedings thereafter.

148. In view of the above, the parties are directed to proceed to arbitration in accordance with law. H R.P. Appeals disposed of.