PASL WIND SOLUTIONS PRIVATE LIMITED v. GE POWER CONVERSION INDIA PRIVATE LIMITED

A and guiding spirit of arbitration. Thus, in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2016) 4 SCC 126, this Court held: “5. Party autonomy being the brooding and guiding spirit in arbitration, the parties are free to agree on application of three B different laws governing their entire contract — (1) proper law of contract, (2) proper law of arbitration agreement, and (3) proper law of the conduct of arbitration, which is popularly and in legal parlance known as “curial law”. The interplay and application of these different laws to an arbitration has been succinctly explained by this Court in Sumitomo Heavy Industries Ltd. v. ONGC C Ltd. [Sumitomo Heavy Industries Ltd. v. ONGC Ltd., (1998) 1 SCC 305], which is one of the earliest decisions in that direction and which has been consistently followed in all the subsequent decisions including the recent Reliance Industries Ltd. v. Union of India [Reliance Industries Ltd. v. Union of India, (2014) 7 D SCC 603 : (2014) 3 SCC (Civ) 737] .” *** “10. In the matter of interpretation, the court has to make different approaches depending upon the instrument falling for interpretation. Legislative drafting is made by experts and is subjected to scrutiny at different stages before it takes final shape of an Act, Rule or Regulation. There is another category of drafting by lawmen or document writers who are professionally qualified and experienced in the field like drafting deeds, treaties, settlements in court, etc. And then there is the third category of documents made by laymen who have no knowledge of law or expertise in the field. The legal quality or perfection of the document is comparatively low in the third category, high in second and higher in first. No doubt, in the process of interpretation in the first category, the courts do make an attempt to gather the purpose of the legislation, its context and text. In the second category also, the text as well as the purpose is certainly important, and in the third category of documents like wills, it is simply intention alone of the executor that is relevant. In the case before us, being a contract executed between the two parties, the court cannot adopt an approach for interpreting a statute. The terms of the contract will have to be understood in the way the parties wanted and intended them to be. In that context, H

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particularly in agreements of arbitration, where party autonomy is A the grund norm, how the parties worked out the agreement, is one of the indicators to decipher the intention, apart from the plain or grammatical meaning of the expressions and the use of the expressions at the proper places in the agreement.”

61Copy pinpoint61. Likewise, in Centrotrade Minerals & Metal Inc. v. B Hindustan Copper Ltd., (2017) 2 SCC 228, this Court held that a two- tier arbitration, namely, an arbitration at an original forum followed by an appeal at an appellate forum, would not be interdicted by the Arbitration Act, given the free party autonomy for parties to enter into an agreement as to choice of fora and procedure at such fora. Thereafter, this Court, under the head “party autonomy”, put it thus: C “Party autonomy

38. Party autonomy is virtually the backbone of arbitrations. This Court has expressed this view in quite a few decisions. In two significant passages in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. [Bharat Aluminium Co. v. D Kaiser Aluminium Technical Services Inc., (2016) 4 SCC 126 : (2016) 2 SCC (Civ) 580, Hon’ble Judges/Coram: Anil R. Dave, Kurian Joseph and Amitava Roy, JJ.] this Court dealt with party autonomy from the point of view of the contracting parties and its importance in commercial contracts. In para 5 of the Report, it was observed: (SCC p. 130) “5. Party autonomy being the brooding and guiding spirit in arbitration, the parties are free to agree on application of three different laws governing their entire contract— (1) proper law of contract, (2) proper law of arbitration agreement, and (3) proper law of the conduct of arbitration, which is popularly and in legal parlance known as “curial law”. The interplay and application of these different laws to an arbitration has been succinctly explained by this Court in Sumitomo Heavy Industries Ltd. v. ONGC Ltd., [Sumitomo Heavy Industries Ltd. v. ONGC Ltd., (1998) 1 SCC 305] which is one of the earliest decisions in that direction and which has been consistently followed in all the subsequent decisions including the recent Reliance Industries Ltd. v. Union of India [Reliance Industries Ltd. v. Union of India, (2014) 7 SCC 603 : (2014) 3 SCC (Civ) 737] .” (emphasis in original) H

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A Later in para 10 of the Report, it was held: (SCC pp. 131-32) “10. In the matter of interpretation, the court has to make different approaches depending upon the instrument falling for interpretation. Legislative drafting is made by experts and is subjected to scrutiny at different stages before it takes final shape of an Act, Rule or B Regulation. There is another category of drafting by lawmen or document writers who are professionally qualified and experienced in the field like drafting deeds, treaties, settlements in court, etc. And then there is the third category of documents made by laymen who have no knowledge of law or expertise in the field. The legal quality or perfection of the document is comparatively low in the third category, high in second and higher in first. No doubt, in the process of interpretation in the first category, the courts do make an attempt to gather the purpose of the legislation, its context and text. In the second category also, the text as well as the purpose is certainly important, and in the third category of documents like wills, it is simply intention alone of the executor that is relevant. In the case before us, being a contract executed between the two parties, the court cannot adopt an approach for interpreting a statute. The terms of the contract will have to be understood in the way the parties wanted and intended them to be. In that context, particularly in agreements of arbitration, where party autonomy is the grund norm, how the parties worked out the agreement, is one of the indicators to decipher the intention, apart from the plain or grammatical meaning of the expressions and the use of the expressions at the proper places in the agreement.” F (emphasis in original)

39. In Union of India v. U.P. State Bridge Corpn. Ltd. [Union of India v. U.P. State Bridge Corpn. Ltd., (2015) 2 SCC 52 : (2015) 1 SCC (Civ) 732] this Court accepted the view [ O.P. Malhotra on the Law and Practice of Arbitration and Conciliation G (3rd Edn. revised by Ms Indu Malhotra, Senior Advocate)] that the A&C Act has four foundational pillars and then observed in para 16 of the Report that: (SCC p. 64) “16. First and paramount principle of the first pillar is ‘fair, speedy and inexpensive trial by an Arbitral Tribunal’. H Unnecessary delay or expense would frustrate the very purpose

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of arbitration. Interestingly, the second principle which is A recognised in the Act is the party autonomy in the choice of procedure. This means that if a particular procedure is prescribed in the arbitration agreement which the parties have agreed to, that has to be generally resorted to.” (emphasis in original) B

40. This is also the view taken in Law and Practice of International Commercial Arbitration [Chapter 6. Conduct of the Proceedings in Nigel Blackaby, Constantine Partasides, et al., Redfern and Hunter on International Arbitration [Sixth Edn., © Kluwer Law International, Oxford University Press 2015] C pp. 353-414, Para 6.07] wherein it is said: “Party autonomy is the guiding principle in determining the procedure to be followed in an international arbitration. It is a principle that is endorsed not only in national laws, but also by international arbitral institutions worldwide, as well as by D international instruments such as the New York Convention and the Model Law.”

41. However, the authors in Comparative International Commercial Arbitration [Chapter 17: Determination of Applicable Law in Julian D.M. Lew, Loukas A. Mistelis, et al., Comparative E International Commercial Arbitration (Kluwer Law International 2003) pp. 411-437, Para 17-8] go a step further in that, apart from procedure, they say that party autonomy permits parties to have their choice of substantive law as well. It is said: “All modern arbitration laws recognise party autonomy, that is, parties are free to determine the substantive law or rules applicable to the merits of the dispute to be resolved by arbitration. Party autonomy provides contracting parties with a mechanism of avoiding the application of an unfavourable or inappropriate law to an international dispute. This choice is and should be binding on the Arbitration Tribunal. This is also confirmed in most arbitration rules.” (emphasis in original)

42. Be that as it may, the legal position as we understand it is that the parties to an arbitration agreement have the autonomy to decide H

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A not only on the procedural law to be followed but also the substantive law. The choice of jurisdiction is left to the contracting parties. In the present case, the parties have agreed on a two-tier arbitration system through Clause 14 of the agreement and Clause 16 of the agreement provides for the construction of the contract as a contract made in accordance with the laws of India. We see nothing B wrong in either of the two clauses mutually agreed upon by the parties.” In a very important passage, where it was sought to be argued that a two-tier arbitration would be contrary to the public policy of India, this Court held: C “Public policy and two-tier arbitrations

43. The question that now arises is the interplay between public policy and party autonomy and therefore whether embracing the two-tier arbitration system is contrary to public policy.

44. Years ago, it was said per Burroughs, J. in Amicable Society D v. Bolland [Amicable Society v. Bolland, (1830) 4 Bligh (NS) 194 : 5 ER 70 : 2 Dow & Cl 1 : 6 ER 630. [Ed.: See also per Burroughs, J. in Richardson v. Mellish, 1824 Bing 229 at 252 : 130 ER 293 at 303, wherein also he observed: “Public Policy — it is a very unruly horse, and when once you get astride it you never E know where it will carry you.”]] (Fauntleroy case): “Public policy is a restive horse and when you get astride of it, there is no knowing where it will carry you.” Perhaps to assist in getting over this uncertainty, Mustill and Boyd [The Law and Practice of Commercial Arbitration in England, F London, Butterworths 1982 pp. 245-246] identify four classes of provision regarded by the courts as contrary to public policy. They are: (i) Terms which affect the substantive content of the award; (ii) Terms which purport to exclude or restrict the supervisory jurisdiction of the Court; (iii) Terms which require the arbitrator to conduct the reference in an unacceptable manner; and (iv) G Terms which purport to empower the arbitrator to carry put procedures or exercise powers which lie exclusively within the jurisdiction of the courts. Clause 14 of the agreement between the parties does not fall under any of these situations.” *** H

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“46. For the present we are concerned only with the fundamental A or public policy of India. Even assuming the broad delineation of the fundamental policy of India as stated in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] we do not find anything fundamentally objectionable in the parties preferring and accepting the two-tier arbitration system. B The parties to the contract have not by-passed any mandatory provision of the A&C Act and were aware, or at least ought to have been aware that they could have agreed upon the finality of an award given by the arbitration panel of the Indian Council of Arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration. Yet they voluntarily and deliberately chose to agree upon a second or appellate arbitration in London, UK in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. There is nothing in the A&C Act that prohibits the contracting parties from agreeing upon a second instance or appellate arbitration — either explicitly or implicitly. No such prohibition or mandate can be read into the A&C Act except by an unreasonable and awkward misconstruction and by straining its language to a vanishing point. We are not concerned with the reason why the parties (including HCL) agreed to a second instance arbitration — the fact is that they did and are bound by the agreement entered into by them. E HCL cannot wriggle out of a solemn commitment made by it voluntarily, deliberately and with eyes wide open.” Nothing stands in the way of party autonomy in designating a seat of arbitration outside India even when both parties happen to be Indian nationals, as has been held hereinabove. F Section 10 of the Commercial Courts Act.

62Copy pinpoint62. Shri Himani relied upon section 10 read with section 21 of the Commercial Courts Act to argue that in all cases between Indian nationals which result in awards delivered in a country outside India, section 10(3) would apply, as a result of which the impugned judgment having been G made by a High Court, is made without jurisdiction. In order to appreciate this submission, sections 10 and 21 of the Commercial Courts Act are set out hereinbelow: “10. Jurisdiction in respect of arbitration matters.—Where the subject-matter of an arbitration is a commercial dispute of a specified value and— H

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A (1) If such arbitration is an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) that have been filed in a High Court, shall be heard and disposed of by the Commercial Division where such Commercial Division has been constituted in such High Court. (2) If such arbitration is other than an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) that have been filed on the original side of the High Court, shall be heard and disposed of by the Commercial Division where such Commercial Division has been constituted in such High Court. (3) If such arbitration is other than an international commercial arbitration, all applications or appeals arising out of such arbitration under the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) that would ordinarily lie before any principal civil court of original jurisdiction in a district (not being a High Court) shall be filed in, and heard and disposed of by the Commercial Court exercising territorial jurisdiction over such arbitration where such Commercial Court has been constituted.” “21. Act to have overriding effect.—Save as otherwise provided, the provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law for the time being in force other than this Act.”

63Copy pinpoint63. It must be remembered that when a foreign award is sought to be enforced under Part II of the Arbitration Act, the explanation to section 47 makes it clear that it is the High Court alone which is the court on whose doors the applicant must knock. This is sought to be answered by Shri Himani by stating that since the explanation to section 47 is in direct collision with section 10(3) of the Commercial Courts Act, vide section 21 of the Commercial Courts Act, section 10(3) would prevail over the explanation to section 47.

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64Copy pinpoint64. Before entering into a discussion as to whether there is any direct collision between the aforesaid provisions, one is first to appreciate the purport of the expression “international commercial arbitration” contained in section 10(1) of the Commercial Courts Act. We have already seen how section 2(1)(f) of the Arbitration Act which defines the expression “international commercial arbitration” is only for a limited purpose, namely, for the purpose of Part I of the Arbitration Act. Under section 2(2) of the Commercial Courts Act, words and expressions used and not defined in the Commercial Courts Act but defined in the CPC and the Indian Evidence Act, 1872 shall have the same meanings respectively assigned to them in that Code and the Act. Conspicuous by its absence are definitions contained in the Arbitration Act. C

65Copy pinpoint65. We have therefore to see what is the purport of the expression “international commercial arbitration” when used in section 10(1) of the Commercial Courts Act.

66Copy pinpoint66. We have already seen how “international commercial arbitration”, when used in the proviso to section 2(2) of the Arbitration D Act, does not refer to the definition contained in section 2(1)(f) but would have reference to arbitrations which take place outside India, awards made in such arbitrations being enforceable under Part II of the Arbitration Act. It will be noted that section 10(1) applies to international commercial arbitrations, and applications or appeals arising therefrom, under both Parts I and II of the Arbitration Act. When applications or appeals arise out of such arbitrations under Part I, where the place of arbitration is in India, undoubtedly, the definition of “international commercial arbitration” in section 2(1)(f) will govern. However, when applied to Part II, “international commercial arbitration” has reference to a place of arbitration which is international in the sense of the arbitration taking place outside India. Thus construed, there is no clash at all between section 10 of the Commercial Courts Act and the explanation to section 47 of the Arbitration Act, as an arbitration resulting in a foreign award, as defined under section 44 of the Arbitration Act, will be enforceable only in a High Court under section 10(1) of the Commercial Courts Act, G and not in a district court under section 10(2) or section 10(3).

67Copy pinpoint67. Even otherwise, this Court has made it clear in BGS SGS SOMA JV v. NHPC, (2020) 4 SCC 234 (at paragraphs 12 and 13) that the substantive law as to appeals and applications is laid down in the Arbitration Act whereas the procedure governing the same is laid down H

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A in the Commercial Courts Act. In this context, it has also been held that the Arbitration Act is a special Act vis-à-vis the Commercial Courts Act which is general, and which applies to the procedure governing appeals and applications in cases other than arbitrations as well. In Kandla Export Corpn. v. OCI Corpn., (2018) 14 SCC 715, this Court held: B “20. Given the judgment of this Court in Fuerst Day Lawson [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 : (2011) 4 SCC (Civ) 178] , which Parliament is presumed to know when it enacted the Arbitration Amendment Act, 2015, and given the fact that no change was made in Section 50 of the Arbitration Act when the Commercial Courts Act was brought C into force, it is clear that Section 50 is a provision contained in a self-contained code on matters pertaining to arbitration, and which is exhaustive in nature. It carries the negative import mentioned in para 89 of Fuerst Day Lawson [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 : (2011) 4 SCC D (Civ) 178] that appeals which are not mentioned therein, are not permissible. This being the case, it is clear that Section 13(1) of the Commercial Courts Act, being a general provision vis-à-vis arbitration relating to appeals arising out of commercial disputes, would obviously not apply to cases covered by Section 50 of the Arbitration Act.” E *** “27. The matter can be looked at from a slightly different angle. Given the objects of both the statutes, it is clear that arbitration itself is meant to be a speedy resolution of disputes between parties. Equally, enforcement of foreign awards should take place as soon as possible if India is to remain as an equal partner, commercially speaking, in the international community. In point of fact, the raison d’être for the enactment of the Commercial Courts Act is that commercial disputes involving high amounts of money should be speedily decided. Given the objects of both the enactments, if we were to provide an additional appeal, when Section 50 does away with an appeal so as to speedily enforce foreign awards, we would be turning the Arbitration Act and the Commercial Courts Act on their heads. Admittedly, if the amount contained in a foreign award to be enforced in India were less than Rs 1 crore, and a Single Judge of a High Court were to enforce such award, no appeal would lie, in keeping with the object of speedy enforcement of

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foreign awards. However, if, in the same fact circumstance, a A foreign award were to be for Rs 1 crore or more, if the appellants are correct, enforcement of such award would be further delayed by providing an appeal under Section 13(1) of the Commercial Courts Act. Any such interpretation would lead to absurdity, and would be directly contrary to the object sought to be achieved by the Commercial Courts Act viz. speedy resolution of disputes of a commercial nature involving a sum of Rs 1 crore and over. For this reason also, we feel that Section 13(1) of the Commercial Courts Act must be construed in accordance with the object sought to be achieved by the Act. Any construction of Section 13 of the Commercial Courts Act, which would lead to further delay, instead of an expeditious enforcement of a foreign award must, therefore, be eschewed. Even on applying the doctrine of harmonious construction of both statutes, it is clear that they are best harmonised by giving effect to the special statute i.e. the Arbitration Act, vis-à-vis the more general statute, namely, the Commercial D Courts Act, being left to operate in spheres other than arbitration.”

68Copy pinpoint68. It is interesting to note that the Arbitration and Conciliation (Amendment) Act, 2015 and the Commercial Courts Act, 2015, both came into effect from 23.10.2015. In R.S. Raghunath v. State of Karnataka, (1992) 1 SCC 335, this Court held that even a later general law which contains a non-obstante clause does not override a special law as both must be held to operate as follows: “13. As already noted, there should be a clear inconsistency between the two enactments before giving an overriding effect to the non-obstante clause but when the scope of the provisions of an earlier enactment is clear the same cannot be cut down by resort to non-obstante clause. In the instant case we have noticed that even the General Rules of which Rule 3(2) forms a part provide for promotion by selection. As a matter of fact Rules 1(3)(a) and 3(1) and 4 also provide for the enforceability of the Special Rules. The very Rule 3 of the General Rules which provides for recruitment also provides for promotion by selection and further lays down that the methods of recruitment shall be as specified in the Special Rules, if any. In this background if we examine the General Rules it becomes clear that the object of these Rules only is to provide broadly for recruitment to services of all the departments and they are framed generally to cover situations H

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A that are not covered by the Special Rules of any particular department. In such a situation both the Rules including Rules 1(3)(a), 3(1) and 4 of General Rules should be read together. If so read it becomes plain that there is no inconsistency and that amendment by inserting Rule 3(2) is only an amendment to the General Rules and it cannot be interpreted as to supersede the B Special Rules. The amendment also must be read as being subject to Rules 1(3)(a), 3(1) and 4(2) of the General Rules themselves. The amendment cannot be read as abrogating all other Special Rules in respect of all departments. In a given case where there are no Special Rules then naturally the General Rules would be C applicable. Just because there is a non-obstante clause, in Rule 3(2) it cannot be interpreted that the said amendment to the General Rules though later in point of time would abrogate the special rule the scope of which is very clear and which co-exists particularly when no patent conflict or inconsistency can be spelt out. As already noted Rules 1(3)(a), 3(1) and 4 of the General Rules D themselves provide for promotion by selection and for enforceability of the Special Rules in that regard. Therefore there is no patent conflict or inconsistency at all between the General and the Special Rules.”

69Copy pinpoint69. Consequently, this argument of the appellant also fails. E Whether an application under section 9 of the Arbitration Act would lie

70Copy pinpoint70. Mr. Dewan, by way of cross objection, has challenged the finding of the Gujarat High Court by the impugned judgment that the section 9 application that was made by the respondent was not maintainable by reason of the expression “international commercial F arbitration” appearing in the proviso to section 2(2) having the meaning to be ascribed by section 2(1)(f) of the Arbitration Act. We have already held in paragraph 14 above that this view of the law is incorrect. Consequently, this part of the judgment is set aside, it being held that the application made by the respondent under section 9 would be maintainable.

71Copy pinpoint71. In light of the findings arrived at by us, we uphold the impugned judgment of the Gujarat High Court, except for the finding on the section 9 application of the respondent being held to be non-maintainable. The appeal is disposed of accordingly.

H Nidhi Jain Appeal disposed of.