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Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.        610     2015   [Arising out of SLP(C) NO. 36643 OF 2014]

Harmony Innovation Shipping Ltd. ... Appellant

                               Versus

Gupta Coal India Ltd. & Anr. ...Respondents

J U D G M E N T

Dipak Misra, J.

The issue that has emanated for consideration in this  

appeal is whether in the obtaining factual matrix, especially  

regard being had to the nature of the arbitration clause, the  

High Court is justified in setting aside the order passed by  

the  learned  Additional  District  Judge,  Ernakulam  on  

25.9.2014  in  I.A.  No.  4345  of  2014  in  O.P.  (ARB)  No.  

802/2014  directing  the  first  respondent  therein  to  furnish  

security for US$ 11,15,400 or its equivalent (approximate)  

Indian Rupees 6,60,00,000/- or to show cause on or before

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01.10.2014,  and  as  an  interim  measure  conditionally  

attaching the cargo belonging to the first respondent herein,  

while dealing with an application moved under Section 9 of  

the Arbitration and Conciliation Act, 1996 (for brevity, “the  

Act”), on the foundation that Section 9 of the Act is limited  

to the applications to arbitration that takes place in India  

and  has  no  applicability  to  arbitration  which  takes  place  

outside  India  in  view  of  the  pronouncement  in  Bharat  

Aluminium Co. v. Kaiser Aluminium Technical Services   

Inc.1 inasmuch  as  clause  5  of  the  contract  which  is  the  

arbitration clause clearly spells out that the contract is to be  

governed and construed according to English law and if the  

dispute  of  the  claim  does  not  exceed  USD  50,000,  the  

arbitration  should  be  conducted in  accordance with  small  

claims  procedure  of  the  London  Maritime  Arbitration  

Association.  

2. Regard being had to  the lis  in  question,  suffice  it  to  

state  that  an  agreement  was  entered  into  between  the  

parties  on  20.10.2010  in  respect  of  24  voyages  of  coal  

shipment  belonging  to  the  appellant,  the first  respondent  

before  the  High  Court,  from  Indonesia  to  India.   The  

1  (2012) 9 SCC 552

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respondent no. 1 herein,  Gupta Coal India Ltd.,  undertook  

only  15  voyages  and  that  resulted  in  disputes  which  

ultimately  stood  referred  to  arbitration.   Be  it  noted,  an  

addendum  to  contract  was  executed  as  regards  the  

remaining  voyages  on  3.4.2013  when  disputes  arose  in  

respect of the principal/main agreement.  As the facts would  

undrape  arbitration  proceedings  were  initiated  and  

eventually an award was passed.   

3. After  the  award  came  into  existence,  the  present  

appellant  filed  an  application  under  Section  9  before  the  

District Court, Ernakulam for its enforcement under Sections  

9/47  and  49  of  the  Act.   As  the  factual  narration  would  

further uncurtain in respect of the addendum to contract,  

when  disputes  arose  relating  to  the  same,  arbitration  

proceedings  were  initiated  and  at  that  juncture,  the  

appellant  moved the learned 2nd Additional  District  Court,  

Ernakulam under Section 9 of the Act seeking attachment of  

the cargos as an interim relief  and the learned Additional  

District Judge, as has been stated earlier, issued conditional  

order of attachment.   

4. The  order  passed  by  the  learned  Additional  District

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Judge,  was assailed before the High Court in a Writ Petition,  

O.P.(C) No. 2612 of 2014 raising a singular contention that  

the  impugned  order  therein  was  absolutely  without  

jurisdiction and hence, unsustainable in law.  

5. A counter affidavit was filed contending, inter alia, that  

the application before the learned Additional District Judge  

was  maintainable  inasmuch  as  the  contract  between  the  

parties  was  entered  into  prior  to  the  decision  in  Bharat  

Aluminium Co. (supra)  and,  therefore,  the  principle  laid  

down in the said decision was not attracted to the facts of  

the  case,  and  in  fact,  it  was  governed  by  the  principles  

stated in Bhatia International v. Bulk Trading S.A2.

6. The High Court, after hearing the learned counsel for  

the  parties,  referred  to  main  agreement,  Exhibit  P-1,  the  

addendum,  Exhibit  P-2,  and  the  arbitration  clause  in  the  

main  agreement  and  considered  the  decisions  in  Bhatia  

International (supra)  and  Venture  Global  Engg.  v.  

Satyam Computer Services Ltd.3, some decisions of the  

High  Court,  reproduced  a  passage  from  Russell  on  

Arbitration and eventually came to hold as follows:

“The contention that since Ext.P1 was entered into  2  (2002) 4 SCC 105 3  (2008) 4 SCC 190

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before  the  judgment  in  Bharat  Aluminium  Co.’s  case and therefore the principles laid down in the  said decision is not applicable to the facts of the  case cannot be countenanced.  The law laid down  by the Supreme Court in Bharat Aluminium Co.’s  case is  declaratory  in  nature and,  therefore,  the  first respondent cannot be heard to say that he is  not bound by the same and that the said principle  cannot be applied to the case on hand.  In the case  of a declaration, it is supposed to have been the  law always and one cannot be heard to say that it  has only prospective effect.  It is deemed to have  been  the  law  at  all  times.   If  that  be  so,  the  petition before the court below is not maintainable  and is only to be dismissed.”  

7. At the very outset, it is necessary to clear the maze as  

regards  the  understanding  of  the  ratio  in  Bharat  

Aluminium Co. (supra) by the High Court.  In the said case,  

the Constitution Bench has clearly ruled thus:  

“197. The  judgment  in  Bhatia  International was  rendered by this Court on 13-3-2002. Since then,  the aforesaid judgment has been followed by all  the  High  Courts  as  well  as  by  this  Court  on  numerous  occasions.  In  fact,  the  judgment  in  Venture Global Engg. has been rendered on 10-1- 2008 in terms of the ratio of the decision in Bhatia  International. Thus, in order to do complete justice,  we hereby order, that the law now declared by this  Court  shall  apply  prospectively,  to  all  the  arbitration agreements executed hereafter.”

The aforesaid judgment by the Constitution Bench was  

decided on September  6,  2012.   In  the  instant  case,  the  

arbitration agreement was executed prior to that date and

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the addendum, as mentioned earlier,  came into existence  

afterwards.  Therefore, there can be no scintilla of doubt that  

the authority in Bharat Aluminium Co. case would not be  

applicable for determination of the controversy in hand.  In  

fact,  the pronouncement in  Bhatia International (supra)  

would  be  applicable  to  the  facts  of  the  present  case  

inasmuch as there is nothing in the addendum to suggest  

any arbitration and, in fact, it is controlled and governed by  

the conditions postulated in the principal contract.  We shall  

advert  to  this  aspect  slightly  more  specifically  at  a  later  

stage.   

8. Keeping the aforesaid in view, it is necessary to keenly  

understand the decision in  Bhatia International (supra).  

In the said case, the agreement entered into between the  

parties, contained an arbitration clause which provided that  

arbitration was to be as per Rules of International Chambers  

of Commerce (for short, “the ICC).  The parties had agreed  

that the arbitration was to be held in Paris, France.  The first  

respondent filed an application under Section 9 of the Act  

before the learned Additional District Judge, Indore, M.P. with  

an interim prayer.  A plea was raised by the appellant that

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the Indore Court had no jurisdiction and application was not  

maintainable.  The said stand was repelled by the learned  

Additional District Judge, which found favour with the High  

Court.   Before  this  Court,  it  was  urged  on  behalf  of  the  

appellant that Part  I  of  the Act only applies to arbitration  

where the place of arbitration is in India, but if the place of  

arbitration is not in India, then Part II of the Act would apply.  

On behalf of the respondent therein, it was urged that unless  

the parties, by their agreement either expressly or impliedly  

exclude  its  provisions,  Part  I  would  also  apply  to  all  

international  commercial  arbitrations  including  those  that  

take place in India.   The three-Judge Bench came to hold  

thus:-  

“To conclude, we hold that the provisions of Part I  would  apply  to  all  arbitrations  and  to  all  proceedings  relating  thereto.  Where  such  arbitration is held in India the provisions of Part I  would compulsorily apply and parties are free to  deviate  only  to  the  extent  permitted  by  the  derogable  provisions  of  Part  I.  In  cases  of  international  commercial  arbitrations  held  out  of  India provisions of Part  I  would apply unless the  parties by agreement, express or implied, exclude  all or any of its provisions. In that case the laws or  rules  chosen  by  the  parties  would  prevail. Any  provision, in Part I, which is contrary to or excluded  by that law or rules will not apply.”   [Emphasis supplied]

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After the said conclusion was recorded, the stand of the  

learned senior counsel for the appellant was put thus:-  

“Faced with this situation Mr Sen submits that, in  this  case  the  parties  had  agreed  that  the  arbitration be as per the Rules of ICC. He submits  that thus by necessary implication Section 9 would  not apply. In our view, in such cases the question  would be whether Section 9 gets excluded by the  ICC Rules of Arbitration. Article 23 of the ICC Rules  reads as follows:-

Conservatory and interim measures 1. Unless  the  parties  have  otherwise  

agreed, as soon as the file has been transmitted  to it, the Arbitral Tribunal may, at the request of  a  party,  order  any  interim or  conservatory  measure  it  deems  appropriate.  The  Arbitral  Tribunal  may  make  the  granting  of  any  such  measure subject  to  appropriate security  being  furnished  by  the  requesting  party.  Any  such  measure shall take the form of an order, giving  reasons, or of an award, as the Arbitral Tribunal  considers appropriate.

2. Before the file is transmitted to the Arbitral  Tribunal, and in appropriate circumstances even  thereafter,  the  parties  may  apply  to  any  competent  judicial  authority  for  interim  or  conservatory  measures.  The  application  of  a  party to a judicial authority for such measures  or for the implementation of any such measures  ordered  by  an  Arbitral  Tribunal  shall  not  be  deemed to be an infringement or a waiver  of  the arbitration agreement and shall  not affect  the  relevant  powers  reserved  to  the  Arbitral  Tribunal.  Any  such  application  and  any  measures taken by the judicial  authority must  be notified without delay to the Secretariat. The  Secretariat  shall  inform  the  Arbitral  Tribunal  thereof.”

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After so stating, the Court referred to Article 23 of the  

ICC Rules and interpreted thus:-

“Thus Article 23 of the ICC Rules permits parties to  apply to a competent judicial authority for interim  and  conservatory  measures.  Therefore,  in  such  cases an application can be made under Section 9  of the said Act.”

9. The  decision  in  Bhatia  International (supra)  was  

followed  in  Venture  Global  Engg. (supra).   The  Court  

scanned  the  ultimate  conclusion  recorded  in  Bhatia  

International (supra)  and  in  that  context,  referred  to  

various paragraphs and came to hold as follows:-

“32. The  learned  Senior  Counsel  for  the  respondent based on para 26 submitted that in the  case of foreign award which was passed outside  India is  not  enforceable in  India by invoking the  provisions of the Act or CPC. However, after critical  analysis of para 26, we are unable to accept the  argument  of  the  learned  Senior  Counsel  for  the  respondent. Paras 26 and 27 start by dealing with  the arguments of Mr Sen who argued that Part I is  not applicable to foreign awards. It is only in the  sentence starting at the bottom of para 26 that the  phrase “it must immediately be clarified” that the  finding of the Court is rendered. That finding is to  the effect that an express or implied agreement of  parties can exclude the applicability of Part I. The  finding specifically states: “But if not so excluded,  the provisions of Part I will also apply to all ‘foreign  awards’.”  This  exception  which  is  carved  out,  based  on  agreement  of  the  parties,  in  para  21  (placita  e to  f)  is  extracted  below:  (Bhatia  International case SCC p. 119e to f)

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“21. … By omitting to provide that Part I will  not  apply  to  international  commercial  arbitrations which take place outside India the  effect would be that Part I would also apply to  international commercial arbitrations held out  of India. But by not specifically providing that  the provisions of Part I apply to international  commercial arbitrations held out of India, the  intention of the legislature appears to be to  ally  (sic  allow)  parties  to  provide  by  agreement that Part I or any provision therein  will not apply. Thus in respect of arbitrations  which take place outside India even the non- derogable  provisions  of  Part  I  can  be  excluded. Such an agreement may be express  or implied.”

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

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bypassed by taking the award to a foreign country  for enforcement.”

After so holding the Court dealt with the contentions of  

the learned senior counsel who highlighted the concept of  

‘transfer’  of  shares  and  the  procedure  involved  therein  

under the Indian Companies Act,  1956 and the impact of  

Foreign Exchange Management Act, 1999 and adverted to  

the impact and effect of the legal and regulatory scrutiny  

under both the Act and accepted the submission.  The Court,  

thereafter,  scanned  the  shareholders  agreement  and  

eventually  came to  hold  that  in  terms  of  the  decision  in  

Bhatia International (supra) , Part I of the Act is applicable  

to the award that was called in question in the said case,  

even though it was a foreign award.  

10. The aforesaid decision clearly lays down that it would  

be  open  to  the  parties  to  exclude  the  application  of  the  

provision of Part I by express or implied agreement.  Unless  

there is  express  or  implied exclusion,  the whole of  Part  I  

would apply.  The Court, as stated earlier, was dealing with  

shareholders  agreement  between  the  parties.   Sections  

11.05 (b) and (c) of the shareholders agreement between  

the parties read as follows:-

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“(b)  This  agreement  shall  be  construed  in  accordance with and governed by the laws of the  State of Michigan, United States, without regard to  the  conflicts  of  law  rules  of  such  jurisdiction.  Disputes  between  the  parties  that  cannot  be  resolved  via  negotiations  shall  be  submitted  for  final,  binding  arbitration  to  the  London  Court  of  Arbitration.

(c)  Notwithstanding  anything  to  the  contrary  in  this agreement, the shareholders shall at all times  act  in  accordance  with  the  Companies  Act  and  other applicable Acts/rules being in force, in India  at any time.”

The said clauses were interpreted by the Court not to  

exclude either expressly or impliedly the applicability of Part  

I of the Act.  

11. In this context, it will be useful to refer to the decision  

in Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail   

Ltd.4 wherein the designated Judge was called to decide the  

issue  of  appointment  of  sole  arbitrator.   The  arbitration  

clause read as follows:-

“13. Settlement of disputes 13.1. This agreement, its construction, validity  

and  performance  shall  be  governed  by  and  constructed  in  accordance  with  the  laws  of  England and Wales;

13.2.  Subject  to  Clause  13.3  all  disputes  or  differences arising out  of,  or  in  connection with,  this agreement which cannot be settled amicably  by the parties shall be referred to adjudication;

4  (2008) 10 SCC 308

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13.3.  If  any  dispute  or  difference  under  this  agreement  touches  or  concerns  any  dispute  or  difference  under  either  of  the  sub-contract  agreements,  then  the  parties  agree  that  such  dispute or difference hereunder will be referred to  the adjudicator or the courts as the case may be  appointed  to  decide  the  dispute  or  difference  under  the  relevant  sub-contract  agreement  and  the parties hereto agree to abide by such decision  as if it were a decision under this agreement.”

The  Court  referred  to  the  decision  in  Bhatia  

International (supra)  and  Lesotho  Highlands  

Development Authority v. Impregilo SpA5 and came to  

hold as follows:-

“It is no doubt true that it is fairly well settled that  when an arbitration agreement is silent as to the  law and procedure to be followed in implementing  the arbitration agreement, the law governing the  said agreement would ordinarily be the same as  the law governing the contract itself. The decisions  cited by Mr Tripathi  and the views of  the jurists  referred  to  in  NTPC  v.  Singer  Co.6 case support  such a proposition. What,  however,  distinguishes  the various decisions and views of the authorities  in this case is the fact that in Bhatia International  this  Court  laid  down  the  proposition  that  notwithstanding the provisions of Section 2(2) of  the  Arbitration  and  Conciliation  Act,  1996,  indicating that Part I of the said Act would apply  where the place of arbitration is in India, even in  respect  of  international  commercial  agreements,  which are to be governed by the laws of another  country,  the  parties  would  be entitled to  invoke  the provisions of  Part  I  of  the aforesaid Act  and  

5  (2005) 3 WLR 129 6  (1992) 3 SCC 551

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consequently the application made under Section  11 thereof would be maintainable.”

12. Mr.  Vishwanathan,  learned senior counsel,  apart from  

citing aforesaid authorities, have also drawn inspiration from  

Citation Infowares Ltd. v. Equinox Corp.7 wherein the  

designated Judge held that unless the provisions of Part I of  

the  Act  are  excluded  by  agreement  between  the  parties  

either expressly or by implication, Part I of the Act including  

Section 11 would be applicable even where the international  

commercial  agreements  are  governed  by  the  laws  of  

another  country.   It  may  be  that  the  arbitrator  might  be  

required to take into account the applicable laws which may  

be the foreign laws but that does not affect the jurisdiction  

under  Section  11  which  falls  in  Part  I  which  has  been  

specifically held applicable in Bhatia International case.  

13. Referring  to  the  arbitration  clause,  submits  learned  

senior counsel that there is no express or implied exclusion  

of the applicability of Part I  of the Act and, therefore, the  

Courts in India have jurisdiction and the learned Additional  

District Judge had not flawed in exercise of jurisdiction.  

14. Mr.  Giri,  learned  senior  counsel  appearing  for  the  

7  (2009) 7 SCC 220

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respondents would submit that when the juridical seat is in  

London, Part I of the Act would not be applicable.  To bolster  

the  aforesaid  submission,  he  has  placed  reliance  on  

Reliance Industries Limited and Another v. Union of   

India8.  It is also urged by Mr. Giri, learned senior counsel  

that  after  the  principal  agreement,  an  addendum  was  

executed between the parties after pronouncement of the  

decision in Bharat Aluminium Co. case and, therefore, the  

principles laid down in Bhatia International (supra) would  

not be applicable.  

15. It  is  seemly  to  exposit  the  controversy  and  to  

appreciate what has been laid down in the case of Reliance  

Industries Limited (supra).  The appellant in the said case  

has  assailed  the  judgment  of  the  High  Court  of  Delhi  

whereby the High Court had allowed the petition filed by the  

respondent under Section 34 of the Act, challenging the final  

partial award, whereby the objections raised by the Union of  

India relating to the arbitrability of the claims made by the  

petitioner therein in respect of royalties,  cess,  service tax  

and CAG audit were rejected.  The Court referred to various  

agreements entered into between the parties.  It reproduced  

8  (2014) 7 SCC 603

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Articles  32  and  33  which  was  entered  into  between  the  

parties.   The  relevant  clause  for  the  present  purpose  is  

33.12.   We think it  appropriate to  reproduce the relevant  

part of the said clause.  

“33. Sole expert, conciliation and arbitration:

33.12.  The  venue  of  conciliation  or  arbitration  proceedings  pursuant  to  this  article,  unless  the  parties otherwise agree, shall be London, England  and shall  be conducted in the English language.  The arbitration agreement contained in this Article  33  shall  be  governed  by  the  laws  of  England.  Insofar as practicable, the parties shall continue to  implement  the  terms  of  this  contract  notwithstanding  the  initiation  of  arbitral  proceedings and any pending claim or dispute.”

16. As per Article 33.12, the arbitral proceedings were to  

be held in London as the neutral venue.  The venue of the  

arbitral proceeding was shifted to Paris and again re-shifted  

to  London.   Consequently,  the  parties  agreed  for  

amendment  of  the  agreement,  which  is  relevant   for  the  

purpose of  understanding the principle, ultimately stated  in  

the said authority:-

“4.   Applicable  law and arbitration –  Except  the  change of venue/seat of arbitration from London to  Paris, Articles 32 and 33 of the contract shall be  deemed  to  be  set  out  in  full  n  this  agreement  mutatis mutandis and so that references therein to  the  contract  shall  be  references  to  this  agreement.”

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17. As issues arose,  the Arbitral  Tribunal  was constituted  

under Article 33.12, the venue of arbitration was in London.  

A substantial hearing was held in Singapore.  Thereafter, by  

agreement of the parties, the Arbitral Tribunal made a final  

partial consent award which was as follows:-

“3. Final partial award as to seat 3.1.  Upon  the  agreement  of  the  parties,  each  represented  by  duly  authorised  representatives  and  through  counsel,  the  Tribunal  hereby  finds,  orders and awards:

(a)  That  without  prejudice  to  the  right  of  the  parties  to  subsequently  agree  otherwise  in  writing,  the  juridical  seat  (or  legal  place)  of  arbitration  for  the  purposes  of  the  arbitration  initiated  under  the  claimants’  notice  of  arbitration dated 16-12-2010 shall  be London,  England. (b)  That  any  hearings  in  this  arbitration  may  take  place  in  Paris,  France,  Singapore  or  any  other  location  the  Tribunal  considers  may  be  convenient. (c) That, save as set out above, the terms and  conditions  of  the  arbitration  agreements  in  Article 33 of the PSCs shall remain in full force  and effect and be applicable in this arbitration.”

18. The  respondent,  Union  of  India,  had  invoked  the  

jurisdiction of the Delhi High Court by stating that the terms  

of  the  PSCs  entered  would  manifest  an  unmistakable  

intention of the parties to be governed by the laws of India  

and  more  particularly  the  Arbitration  Act,  1996;  that  the

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contracts  were  signed  and  executed  in  India;  that  the  

subject-matter  of the contracts,  namely,  the Panna Mukta  

and  the  Tapti  fields  are  situated  within  India;  that  the  

obligations under the contracts had been for the past more  

than  15  years  performed  within  India;  that  the  contracts  

stipulate  that  they  “shall  be  governed and  interpreted  in  

accordance with the laws of India”; that they also provided  

that  “nothing  in  this  contract”  shall  entitle  either  of  the  

parties  to  exercise  the  rights,  privileges  and  powers  

conferred upon them by the contract “in a manner which will  

contravene the laws of  India” (Article 32.2);  and that  the  

contracts  further  stipulate  that  “the  companies  and  the  

operations under this contract shall be subject to all fiscal  

legislation of India” (Article 15.1)”.

19. On behalf of the appellant, the issue of maintainability  

was  raised.   The  High  Court  answered  the  issue  in  the  

following manner:

“Upon consideration of the entire matter, the High  Court has held that undoubtedly the governing law  of the contract i.e. proper law of the contract is the  law of India. Therefore, the parties never intended  to altogether exclude the laws of India, so far as  contractual  rights  are  concerned.  The  laws  of  England are limited in their applicability in relation  to arbitration agreement contained in  Article  33.

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This  would  mean that  the  English  law would  be  applicable  only  with  regard  to  the  curial  law  matters  i.e.  conduct  of  the  arbitral  proceedings.  For all  other matters,  proper law of the contract  would  be  applicable.  Relying  on  Article  15(1),  it  has been held that the fiscal laws of India cannot  be  derogated  from.  Therefore,  the  exclusion  of  Indian  public  policy  was  not  envisaged  by  the  parties  at  the  time  when  they  entered  into  the  contract. The High Court further held that to hold  that the agreement contained in Article 33 would  envisage  the  matters  other  than  procedure  of  arbitration  proceedings  would  be  to  rewrite  the  contract.  The  High  Court  also  held  that  the  question  of  arbitrability  of  the  claim  or  dispute  cannot be examined solely on the touchstone of  the applicability of the law relating to arbitration of  any country but applying the public policy under  the laws of the country to which the parties have  subjected the contract to be governed. Therefore,  according  to  the  High  Court,  the  question  of  arbitrability of the dispute is not a pure question of  applicable  law  of  arbitration  or  lex  arbitri but  a  larger one governing the public policy.”

20. Addressing  the  issue  of  maintainability,  this  Court  

referred  to  the  decision  in  Bhatia  International (supra)  

and took note of the fact that parties have agreed and as is  

also perceivable from the final  partial  consent award that  

the juridical seat or local place of arbitration for the purpose  

of arbitration initiated under the claimants’ notice shall be  

London,  England.   The parties  have also  agreed that  the  

hearing of the notice for arbitration may take place at Paris,  

France,  Singapore  or  any  other  location  the  Tribunal

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considers may be convenient.  The Court posed the question  

whether  in  the  factual  matrix,  there has been express  or  

implied exclusion of the applicability of Part I of the Act.  In  

that context, the Court referred to paragraph 32 of  Bhatia  

International case and, thereafter,  analysed the relevant  

articles  of  the  PSC  to  discover  the  real  intention  of  the  

parties as to  whether  the provisions of  the Act  had been  

excluded.   The Court referred to Articles 32.1 and 32.2 that  

dealt with the applicable law and language of the contract.  

Article  32.1  provided that  the  proper  law of  the  contract  

would  be  law  of  India  and  under  Article  32.2  made  a  

declaration none of the provisions contained in the contract  

would  entitle  either  the  Government  or  the  contractor  to  

exercise the rights, privileges and powers conferred upon it  

by the contract  in  a manner which would contravene the  

laws  of  India.   The  Court  observed  that  the  basis  of  

controversy involved in the case pertain to analysis of the  

anatomy of the Article 33.12 which provided that venue of  

the  arbitration  shall  be  London  and  that  the  arbitration  

agreement shall be governed by the laws of England.  That  

apart,  the  parties  had  agreed  that  juridical  seat  or  legal

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place  of  arbitration  for  the  purpose  initiated  under  the  

claimants’ notice of arbitration would be at London.   The  

Court  posed  the  question  whether  such  stipulations  

excluded  the  applicability  of  the  Act  or  not.   The  Court  

repelling  the  contention  that  clauses  do  not  exclude  the  

applicability of the 1996 Act, observed thus:-

“In our opinion, the expression “laws of India” as  used in Articles 32.1 and 32.2 has a reference only  to the contractual obligations to be performed by  the parties under the substantive contract i.e. PSC.  In other words, the provisions contained in Article  33.12  are  not  governed  by  the  provisions  contained in Article 32.1. It must be emphasised  that  Article  32.1  has  been  made  subject  to  the  provision of Article 33.12. Article 33.12 specifically  provides that  the  arbitration agreement  shall  be  governed by the laws of England. The two articles  are particular in laying down that the contractual  obligations with regard to the exploration of oil and  gas  under  the  PSC  shall  be  governed  and  interpreted in accordance with the laws of India. In  contradistinction,  Article  33.12  specifically  provides that the arbitration agreement contained  in Article 33.12 shall be governed by the laws of  England. Therefore, in our opinion, the conclusion  is inescapable that applicability of the Arbitration  Act,  1996  has  been  ruled  out  by  a  conscious  decision  and agreement  of  the  parties.  Applying  the ratio of law as laid down in Bhatia International  it would lead to the conclusion that the Delhi High  Court had no jurisdiction to entertain the petition  under Section 34 of the Arbitration Act, 1996.”

21. After so stating, the Court opined that it is too late in  

the  day  to  contend  that  the  seat  of  arbitration  is  not

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analogous  to  an  exclusive  jurisdiction  clause.   Once  the  

parties  had  consciously  agreed  that  juridical  seat  of  the  

arbitration would be London and that the agreement would  

be governed by the laws of London, it was no longer open to  

contend that provisions of Part I  of the Act would also be  

applicable to the arbitration agreement.  The Court referred  

to the decision in  Videocon Industries Ltd. v. Union of  

India9.   Referring  to  clause in  the  Videocon Industries  

Ltd. (supra), the Court proceeded to state that:-

47. ….The first issue raised in Videocon Industries  Ltd. was as to whether the seat of arbitration was  London or  Kuala  Lumpur.  The second issue was  with  regard  to  the  courts  that  would  have  supervisory  jurisdiction  over  the  arbitration  proceedings.  Firstly,  the  plea  of  Videocon  Industries Ltd. was that the seat could not have  been changed from Kuala Lumpur to London only  on agreement of the parties without there being a  corresponding amendment in the PSC. This plea  was accepted. It was held that seat of arbitration  cannot be changed by mere agreement of parties.  In para 21 of the judgment,  it  was observed as  follows: (SCC p. 170)

“21.  Though,  it  may  appear  repetitive,  we  deem it necessary to mention that as per the  terms of agreement, the seat of arbitration was  Kuala Lumpur. If the parties wanted to amend  Article 34.12, they could have done so only by a  written  instrument  which  was  required  to  be  signed by all of them. Admittedly, neither was  there  any  agreement  between  the  parties  to  

9  (2011) 6 SCC 161

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the PSC to shift the juridical seat of arbitration  from  Kuala  Lumpur  to  London  nor  was  any  written  instrument  signed  by  them  for  amending  Article  34.12.  Therefore,  the  mere  fact that the parties to the particular arbitration  had agreed for shifting of the seat of arbitration  to  London  cannot  be  interpreted  as  anything  except  physical  change  of  the  venue  of  arbitration from Kuala Lumpur to London.”

48. The  other  issue  considered  by  this  Court  in  Videocon  Industries  Ltd. was  as  to  whether  a  petition  under  Section  9  of  the  Arbitration  Act,  1996  would  be  maintainable  in  the  Delhi  High  Court,  the parties having specifically agreed that  the arbitration agreement would be governed by  the English law. This issue was decided against the  Union of India and it was held that the Delhi High  Court did not have the jurisdiction to entertain the  petition filed by the Union of India under Section 9  of the Arbitration Act.

22. While discussing about the ratio laid down in Videocon  

Industries Ltd. (supra), the Court analysed the agreement  

of the earlier case, and mainly the relevant parts of Articles  

33, 34 and 35.  Article 34.12 in Videocon Industries Ltd.  

case read as follows:

“34.12. Venue and law of arbitration agreement.— The  venue  of  sole  expert,  conciliation  or  arbitration  proceedings  pursuant  to  this  article,  unless the parties otherwise agree, shall be Kuala  Lumpur, Malaysia, and shall be conducted in the  English  language.  Insofar  as  practicable,  the  parties shall  continue to implement the terms of  this  contract  notwithstanding  the  initiation  of  arbitral  proceedings  and  any  pending  claim  or

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dispute. Notwithstanding the provisions of Article  33.1, the arbitration agreement contained in this  Article  34  shall  be  governed  by  the  laws  of  England.”

Clause 35.2 of the agreement pertaining to amendment  

stipulated  that  the  said  contract  shall  not  be  amended  

modified, varied or supplemented in any respect except by  

an instrument in writing signed by all the parties, which shall  

state the date upon which the amendment or modification  

shall be effective.  Thereafter, the Court had proceeded to  

state what we have reproduced hereinbefore.  

23. In  Reliance Industries Ltd. (supra),  the Court  took  

note  of  the  fact  that  parties  had  made  necessary  

amendment in the PSCs to provide that the juridical seat of  

arbitration shall  be London and the arbitration agreement  

will be governed by the laws of England and in that context  

observed that the ratio laid down in  Videocon Industries  

Ltd. (supra)  would  be  relevant  and  binding.   Proceeding  

further, the Court stated thus:

“The  arbitration  agreement  in  this  appeal  is  identical to the arbitration agreement in Videocon  Industries.  In  fact,  the  factual  situation  in  the  present  appeal  is  on  a  stronger  footing  than  in  Videocon  Industries  Ltd. As  noticed  earlier,  in  Videocon Industries, this Court concluded that the  parties  could  not  have  altered  the  seat  of

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arbitration  without  making  the  necessary  amendment  to  the  PSC.  In  the  present  appeal,  necessary amendment has been made in the PSC.  Based on the aforesaid  amendment,  the Arbitral  Tribunal  has  rendered  the  final  partial  consent  award  of  14-9-2011  recording  that  the  juridical  seat  (or  legal  place)  of  the  arbitration  for  the  purposes  of  arbitration  initiated  under  the  claimants’ notice of arbitration dated 16-12-2010  shall  be  London,  England.  Furthermore,  the  judgment in  Videocon Industries is subsequent to  Venture Global.  We are,  therefore,  bound by the  ratio laid down in Videocon Industries Ltd.”

24. The  Court  also  referred  to  Bharat  Aluminium  Co.  

(supra), especially para 123, which is as follows:

“123.  … ‘…  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’.”

[emphasis in original]

25. The two-Judge Bench referred to Dozco India Private  

Ltd.  v.  Doosan Infracore  Company Ltd.10,  Sumitomo  

Heavy  Industries  Ltd.  v.  ONGC  Ltd.11,  Yograj  

Infrastructure  Ltd.  v.  Ssang  Yong  Engg.  and  

Construction Co. Ltd.12 and quoted a paragraph from C v.  

D13, which was approved in Bharat Aluminium Co. (supra)  

10  (2011) 6 SCC 179 11  (1998) 1 SCC 305 12  (2011) 9 SCC 735 13  2008 Bus LR 843

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and  reiterated  in  Enercon  (India)  Ltd.  v.  Enercon  

GmbH14 and  further  quoted  a  paragraph  from  the  said  

authority which we think condign to be reproduced:-

“this  follows  from  the  express  terms  of  the  Arbitration  Act,  1996  and,  in  particular,  the  provisions of Section 2 which provide that Part I of  the Arbitration Act, 1996 applies where the seat of  the arbitration is in England and Wales or Northern  Ireland.  This  immediately  establishes  a  strong  connection  between  the  arbitration  agreement  itself and the law of England. It is for this reason  that recent authorities have laid stress upon the  locations  of  the  seat  of  the  arbitration  as  an  important factor in determining the proper law of  the arbitration agreement.”

Thereafter, the two-Judge Bench held thus:-

“In our opinion, these observations in  Sulamerica  Cia Nacional de Seguros SA v. Enesa Engelharia SA   --  Enesa15 are  fully  applicable  to  the  facts  and  circumstances of this case. The conclusion reached  by  the  High  Court  would  lead  to  the  chaotic  situation where the parties would be left rushing  between India and England for  redressal  of  their  grievances.  The  provisions  of  Part  I  of  the  Arbitration  Act,  1996  (Indian)  are  necessarily  excluded;  being  wholly  inconsistent  with  the  arbitration  agreement  which  provides  “that  arbitration  agreement  shall  be  governed  by  English law”. Thus the remedy for the respondent  to challenge any award rendered in the arbitration  proceedings  would  lie  under  the  relevant  provisions contained in the Arbitration Act, 1996 of  England  and  Wales.  Whether  or  not  such  an  application  would  now  be  entertained  by  the  courts in England is not for us to examine, it would  

14  (2014) 5 SCC 1 15  (2013) 1 WLR 102

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have to be examined by the court of competent  jurisdiction in England.”

26. Elaborating  the  said  facet,  the  Court  discussed  the  

principle  that  has  been  stated  in  Bhatia  International  

(supra)  laying  that  in  cases  of  international  commercial  

arbitrations held out of India, provisions of Part I would apply  

unless  the  parties  by  agreement,  express  or  implied,  

exclude all or any of its provisions.  In that case, the laws or  

rules chosen by the parties would prevail.  Any provision, in  

Part I, which is contrary to or excluded by that law or rules  

will not apply.  Elaborating further, it proceeded to lay down  

thus:

“In  this  case,  the  parties  have  by  agreement  provided that the  juridical seat of arbitration will  be  in  London.  On  the  basis  of  the  aforesaid  agreement, necessary amendment has been made  in the PSCs. On the basis of the agreement and  the consent of the parties, the Arbitral Tribunal has  made the “final  partial  consent award” on 14-9- 2011  fixing  the  juridical  seat (or  legal  place)  of  arbitration for the purposes of arbitration initiated  under  the  claimants’  notice  of  arbitration  dated  16-12-2010 in London, England. To make it even  further clear that the award also records that any  hearing in the arbitration may take place in Paris,  France,  Singapore  or  any  other  location  the  Tribunal  considers  convenient.  Article  33.12  stipulates  that  arbitration  proceedings  shall  be  conducted  in  English  language.  The  arbitration  agreement  contained  in  Article  33  shall  be  governed  by  the  laws  of  England.  A  combined

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effect of all these factors would clearly show that  the parties have by express agreement excluded  the  applicability  of  Part  I  of  the  Arbitration  Act,  1996 (Indian) to the arbitration proceedings.”

27. On a further  analysis of the said decision,  we notice  

that the Court repelled the submission that irrespective of  

the provisions contained in Article 33.12, the Act would be  

applicable  to  arbitration  proceeding  and  the  English  law  

would be applicable only in relation to the conduct of the  

arbitration up to the passing of the partial final award, as in  

the said case, it was the partial final award was in question.  

In  justification  in  repelling  such  a  submission,  the  Court  

opined thus:

“69. ......  As  noticed  earlier,  Article  32.1  itself  provides that it shall be subject to the provision of  Article  33.12.  Article  33.12  provides  that  the  arbitration  agreement  contained  in  this  article  shall  be  governed  by  the  laws  of  England.  The  term  “laws  of  England”  cannot  be  given  a  restricted meaning confined to only curial law. It is  permissible under law for the parties to provide for  different laws of the contract and the arbitration  agreement  and  the  curial  law.  In  Naviera  Amazonica Peruana SA v. Compania Internacional   De  Seguros  Del  Peru16,  the  Court  of  Appeal  in  England  considered  an  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  

16  (1988) 1 Lloyd’s Rep 116 (CA)

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arbitration shall  be the English law. The Court of  Appeal observed as follows:

All contracts which provide for arbitration and  contain  a  foreign  element  may  involve  three  potentially relevant systems of law: (1) the law  governing the substantive contract; (2) the law  governing the agreement to  arbitrate 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).

70. From the above, it is evident that it was open  to the parties to agree that the law governing the  substantive contract (PSC) would be different from  the law governing the arbitration agreement. This  is  precisely  the  situation  in  the  present  case.  Article  32.1  specifically  provides  that  the  performance of the contractual obligations under  the PSC would be governed and interpreted under  the laws of India. So far as the alternative dispute  redressal agreement i.e. the arbitration agreement  is concerned, it would be governed by the laws of  England.  There  is  no  basis  on  which  the  respondents  can  be  heard  to  say  that  the  applicability of laws of England related only to the  conduct  of  arbitration  reference.  The  law  governing  the  conduct  of  the  arbitration  is  interchangeably  referred  to  as  the  curial  law or  procedural law or the  lex fori.  The delineation of  the  three  operative  laws  as  given  in  Naviera  Amazonica has been specifically followed by this  Court in Sumitomo. The Court also, upon a survey,  of a number of decisions rendered by the English  courts and after referring to the views expressed  by  learned  commentators  on  international  commercial arbitration concluded that:

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16. The law which would apply to the filing of  the award, to its enforcement and to its setting  aside  would  be  the  law  governing  the  agreement to arbitrate and the performance of  that agreement.”

28. After so holding, the Court referred to the legal position  

stated in Dozco’s case wherein it has been ruled thus:

“In the backdrop of these conflicting claims,  the  question  boils  down  to  as  to  what  is  the  true  interpretation  of  Article  23.  This  Article  23  will  have to be read in the backdrop of Article 22 and  more particularly, Article 22.1. It is clear from the  language of Article 22.1 that the whole agreement  would  be  governed  by  and  construed  in  accordance with the laws of The Republic of Korea.  It  is  for  this  reason that  the  respondent  heavily  relied on the law laid down in  Sumitomo Heavy  Industries  Ltd. v.  ONGC Ltd. This  judgment  is  a  complete  authority  on  the  proposition  that  the  arbitrability of the dispute is to be determined in  terms of the law governing arbitration agreement  and  the  arbitration  proceedings  have  to  be  conducted in accordance with the curial law. This  Court,  in  that  judgment,  relying  on  Mustill  and  Boyd:  The  Law  and  Practice  of  Commercial   Arbitration in England, 2nd Edn., observed in para  15 that where the law governing the conduct of  the reference is different from the law governing  the  underlying  arbitration  agreement,  the  court  looks  to  the arbitration agreement  to  see if  the  dispute is arbitrable, then to the curial law to see  how the reference should be conducted, “and then  returns to the first law in order to give effect to the  resulting  award”.  In  para  16,  this  Court,  in  no  uncertain  terms,  declared  that  the  law  which  would  apply  to  the  filing  of  the  award,  to  its  enforcement and to its setting aside would be the  law governing the agreement to arbitrate and the  performance of that agreement.”

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The said view was accepted by the two-Judge Bench.

29. Eventually, the Court dislodged the decision of the High  

Court of Delhi stating that:  

“76.2. We  further  overrule  and  set  aside  the  conclusion of the High Court that, even though the  arbitration agreement would be governed by the  laws  of  England  and  that  the  juridical  seat of  arbitration  would  be  in  London,  Part  I  of  the  Arbitration Act would still be applicable as the laws  governing  the  substantive  contract  are  Indian  laws.

76.3. In the event a final award is made against  the respondent, the enforceability of the same in  India  can  be  resisted  on  the  ground  of  public  policy.

76.4. The conclusion of the High Court that in the  event, the award is sought to be enforced outside  India, it would leave the Indian party remediless is  without any basis as the parties have consensually  provided  that  the  arbitration  agreement  will  be  governed  by  the  English  law.  Therefore,  the  remedy against the award will have to be sought  in  England,  where  the  juridical  seat  is  located.  However,  we  accept  the  submission  of  the  appellant that since the substantive law governing  the  contract  is  Indian  law,  even  the  courts  in  England, in case the arbitrability is challenged, will  have to decide the issue by applying Indian law  viz. the principle of public policy, etc. as it prevails  in Indian law.”

30. We have dealt with the said decision as it  has taken  

note of all the pronouncements in the field and further, Mr.  

Giri, learned senior counsel appearing for the respondents

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would heavily rely on it and Mr. Viwanathan, learned senior  

counsel  would leave no stone unturned to distinguish the  

same on the factual foundation especially in reference to the  

arbitration clause.  

31. At this juncture, it is profitable to note that in Reliance  

Industries Ltd. (supra), the authority in  Venture Global  

Engg. (supra) has been distinguished by taking note of the  

various clauses in the agreement and opined that as there  

was  a  non  obstante  clause  in  the  agreement  hence,  the  

claim of the appellant therein can be enforced in India.   

32. In view of the aforesaid propositions laid down by this  

Court, we are required to scan the tenor of the clauses in the  

agreement specifically, the arbitration clause in appropriate  

perspective.  The said clause read as follows:  

“5. If any dispute or difference should arise under  this charter, general average/arbitration in London  to  apply,  one  to  be  appointed  by  each  of  the  parties hereto, the third by the two so chosen, and  their decision or that of any two of them, shall be  final  and  binding,  and  this  agreement  may,  for  enforcing the same, be made a rule of Court. Said  three parties to be commercial men who are the  members  of  the  London  Arbitrators  Association.  This  contract  is  to  be  governed  and  construed  according to English Law.  For disputes where total  amount claim by either party does not exceed USD  50,000  the  arbitration  should  be  conducted  in  accordance  with  small  claims  procedure  of  the

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London Maritime Arbitration Association.”

33. Two aspects emerge for consideration: (i) Whether on  

the basis of construction placed on the said clause in the  

agreement  it  can  be  stated  that  the  ratio  laid  down  in  

Bhatia International (supra) would not be attracted, but  

what  has  been  laid  down  in  Reliance  Industries  Ltd.  

(supra) would be applicable and (ii) whether the execution of  

the  addendum  would  attract  the  principles  laid  down  in  

Bharat Aluminium Co. case and oust the jurisdiction of the  

Indian courts.

34. First, we shall advert to the first proposition.  There is  

no cavil over the principle stated in  Bhatia International  

(supra) that Part I of the Act is applicable to arbitrations held  

outside  India  unless  the  parties  have  either  expressly  or  

impliedly  excluded  the  provisions  of  the  Act.   Mr.  

Vishwanathan, learned senior counsel has submitted in the  

case  at  hand  there  is  no  express  exclusion,  for  clause  

remotely does not suggest so.  For the said purpose, he has  

commended us to the decisions in  A.B.C. Laminart Pvt.  

Ltd. and Anr. v. A.P. Agencies, Salem17 and  Rajasthan  

SEB v. Universal Petrol Chemicals Ltd.18 It is also urged  17  (1989) 2 SCC 163 18  (2009) 3 SCC 107

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by him that the stipulation in the agreement does not even  

remotely  impliedly  exclude  the  jurisdiction  of  the  Indian  

courts.   He  would  submit  that  to  apply  the  principle  of  

implied  exclusion,  the  Court  has  to  test  the  “presumed  

intention” and in such a situation, it is the duty of the Court  

to adopt an objective approach, that is to say, what would  

have been the intention of reasonable parties in the position  

of the actual parties to the contract.  Learned senior counsel  

would also contend that the concept of fair result has to be  

kept in view while construing a contract.   To buttress the  

aforesaid submissions, he has drawn inspiration from  Kim  

Lewison’s The Interpretation of Contracts,  pages 26,  

41,  110  and  217  wherein  various  judgments  have  been  

referred.  

35. The  issue  has  to  be  tested,  as  we  perceive,  on  the  

parameters  of  law  laid  down  in  the  cases  of  Videocon  

Industries  Ltd. (supra),  Dozco (supra)  and  Reliance  

Industries Ltd. (supra).  

36. In  Videocon Industries Ltd. (supra),  the Court  has  

referred to Section 3 of the English Arbitration Act,  1996,  

which reads as follows:

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“3. The seat of the arbitration.—In this Part  ‘the  seat  of  the  arbitration’  means  the  juridical  seat of the arbitration designated—

(a) by the parties to the arbitration agreement, or

(b)  by any arbitral  or  other institution or person  vested by the parties with powers in that regard,  or

(c) by the Arbitral Tribunal if so authorised by the  parties, or determined, in the absence of any such  designation,  having  regard  to  the  parties’  agreement and all the relevant circumstances.”

Analysing the  said  provision,  the Court  proceeded to  

state as follows:  

“A  reading  of  the  above  reproduced  provision  shows  that  under  the  English  law  the  seat  of  arbitration  means  juridical  seat  of  arbitration,  which  can  be  designated  by  the  parties  to  the  arbitration agreement or by any arbitral or other  institution or person empowered by the parties to  do so or by the Arbitral Tribunal, if so authorised by  the parties. In contrast, there is no provision in the  Act under which the Arbitral Tribunal could change  the juridical seat of arbitration which, as per the  agreement  of  the  parties,  was  Kuala  Lumpur.  Therefore, mere change in the physical venue of  the hearing from Kuala Lumpur to Amsterdam and  London did not amount to change in the juridical  seat of arbitration.”

Eventually, the Court in the said case has ruled thus:

“In the present case also, the parties had agreed  that  notwithstanding  Article  33.1,  the  arbitration  agreement  contained  in  Article  34  shall  be  governed  by  laws  of  England.  This  necessarily

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implies that the parties had agreed to exclude the  provisions of Part I of the Act. As a corollary to the  above  conclusion,  we  hold  that  the  Delhi  High  Court did not have the jurisdiction to entertain the  petition filed by the respondents under Section 9  of the Act and the mere fact that the appellant had  earlier filed similar petitions was not sufficient to  clothe  that  High  Court  with  the  jurisdiction  to  entertain the petition filed by the respondents.”

37. In  Dozco (supra), the Court referred to Article 22 and  

Article 23 of the agreement, which dealt with the governing  

laws and arbitration.  Article 22.1 in the said case provided  

that the agreement shall be governed by and construed in  

accordance with the laws of the Republic of Korea.  Article  

23.1,  which  dealt  with  arbitration,  stipulated  that  all  

disputes arising in connection with the agreement, shall be  

finally settled by arbitration in Seoul,  Korea or such other  

place as the parties may agree in writing, pursuant to the  

rules of  agreement then in  force of  the I.C.C.   The Court  

referred to the decisions in  Bhatia International (supra),  

Indtel  Technical  Services (supra),  Citation  Infowares  

Ltd. (supra), NTPC v. Singer Co.19 and while analysing the  

import of Clause 23.1, the Court placed heavy reliance on  

Naviera Amazonica Peruana SA (supra) and held thus:

19  (1992) 3 SCC 551

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“19. In respect of the bracketed portion in Article  23.1,  however,  it  is  to  be  seen  that  it  was  observed in Naviera case:

“…  It  seems  clear  that  the  submissions  advanced below confused the legal ‘seat’, etc.  of  an  arbitration  with  the  geographically  convenient place or places for holding hearings.  This distinction is nowadays a common feature  of  international  arbitrations  and  is  helpfully  explained in Redfern and Hunter in the following  passage  under  the  heading  ‘The  Place  of  Arbitration’:

‘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  circumstances,  each  move  of  the  Arbitral Tribunal does not of itself mean that  the seat of the arbitration changes. The seat

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of the arbitration remains the place initially  agreed by or on behalf of the parties.’

These aspects need to be borne in mind when  one comes to the Judge’s  construction of  this  policy.”

It  would  be  clear  from  this  that  the  bracketed  portion in the article was not for deciding upon the  seat of the arbitration, but for the convenience of  the parties in case they find to hold the arbitration  proceedings  somewhere  else  than  Seoul,  Korea.  The  part  which  has  been  quoted  above  from  Naviera  Amazonica  Peruana  S.A. v.  Compania  International  de  Seguros  del  Peru supports  this  inference.

20. In that view, my inferences are that:

(i) The clear language of Articles 22 and 23 of  the distributorship agreement between the parties  in this case spells out a clear agreement between  the parties excluding Part I of the Act.

(ii) The law laid down in  Bhatia International v.  Bulk Trading S.A. and Indtel Technical Services (P)   Ltd. v.  W.S.  Atkins  Rail  Ltd.,  as  also  in  Citation  Infowares Ltd. v.  Equinox Corpn. is not applicable  to the present case.

(iii)  Since  the  interpretation  of  Article  23.1  suggests that the law governing the arbitration will  be Korean Law and the seat of arbitration will be  Seoul  in  Korea,  there  will  be  no  question  of  applicability  of  Section 11(6)  of  the Act  and the  appointment  of  arbitrator  in  terms  of  that  provision.”

38. In  Yograj  Infrastructure  Ltd. (supra),  two-Judge  

Bench dealt with the concept of “procedural law” and “curial  

law”.  In that context, it referred to the agreement in the

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contract, namely, Clauses 27 and 28.  In that context the  

Court opined that:  

“..... As indicated hereinabove, Clause 28 indicates  that the governing law of the agreement would be  the law of India i.e. the Arbitration and Conciliation  Act,  1996.  The  learned  counsel  for  the  parties  have  quite  correctly  spelt  out  the  distinction  between the “proper law” of the contract and the  “curial  law”  to  determine  the  law  which  is  to  govern the arbitration itself.  While the proper law  is the law which governs the agreement itself, in  the  absence  of  any  other  stipulation  in  the  arbitration clause as to which law would apply in  respect of the arbitral proceedings, it is now well  settled that  it  is  the law governing the contract  which  would  also  be  the  law  applicable  to  the  Arbitral Tribunal itself. Clause 27.1 makes it quite  clear  that  the  curial  law  which  regulates  the  procedure  to  be  adopted  in  conducting  the  arbitration  would  be  the  SIAC  Rules.  There  is,  therefore, no ambiguity that the SIAC Rules would  be the curial law of the arbitration proceedings. It  also happens that the parties had agreed to make  Singapore  the  seat  of  arbitration. Clause  27.1  indicates that the arbitration proceedings are to be  conducted in accordance with the SIAC Rules.”

[Emphasis supplied]

39. After so stating, the Court posed the question whether  

in  such  a  case,  the  provisions  of  Section  2(2),  which  

indicates that Part I of the Act would apply, where the place  

of arbitration is India, would be a bar to the invocation of  

provisions of Sections 34 and 27 of the Act, which have been  

conducted in Singapore.  The Court referred to the decision

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in  Bhatia International (supra) wherein it  was held that  

there cannot be any automatic exclusion, but on express or  

implied exclusion and opined regard being had to the Rule  

32  of  the  SIAC  Rules,  the  law  laid  down  in  Bhatia  

International (supra) would not be applicable.   The said  

Rule, being pertinent to the issue in question, is reproduced  

below:-  

“32. Where the seat of arbitration is Singapore,  the law of the arbitration under these Rules shall  be  the  International  Arbitration  Act  (Cap.  143-A,  2002 Edn., Statutes of the Republic of Singapore)  or its modification or re-enactment thereof.”

And in that context, the Court ruled thus:  

“Having  agreed  to  the  above,  it  was  no  longer  available  to  the  appellant  to  contend  that  the  “proper law” of the agreement would apply to the  arbitration  proceedings.  The  decision  in  Bhatia  International v.  Bulk  Trading  S.A.,  which  was  applied subsequently  in  Venture Global  Engg. v.  Satyam  Computer  Services  Ltd. and  Citation  Infowares  Ltd. v.  Equinox  Corpn. would  have no  application once the parties  agreed by virtue of  Clause 27.1 of the agreement that the arbitration  proceedings would be conducted in Singapore i.e.  the seat of arbitration would be in Singapore, in  accordance  with  the  Singapore  International  Arbitration Centre Rules as in force at the time of  signing of the agreement.

xxxxx xxxxx xxxxx

In  the  instant  case,  once  the  parties  had  specifically agreed that the arbitration proceedings

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would be conducted in accordance with the SIAC  Rules,  which  includes  Rule  32,  the  decision  in  Bhatia  International  1   and  the  subsequent    decisions on the same lines, would no longer apply  in the instant case where the parties had willingly  agreed to be governed by the SIAC Rules.”         

[Emphasis added]

40. In  Reliance  Industries  Ltd. (supra),  the  two-Judge  

Bench,  while  referring  to  the  submissions  of  the  learned  

counsel  for  the appellant  therein had also referred to the  

pronouncement in  Yograj Infrastructure Ltd. (supra) and  

dealt with it thus:  

“Again  this  Court  in  Yograj  Infrastructure (two- Judge  Bench)  considered  a  similar  arbitration  agreement.  It  was  provided  that  the  arbitration  proceedings  shall  be  conducted  in  English  in  Singapore  in  accordance  with  the  Singapore  International  Arbitration  Centre  (SIAC)  Rules  (Clause  27.1).  Clause  27.2  provided  that  the  arbitration  shall  take  place  in  Singapore  and be  conducted  in  English  language.  This  Court  held  that  having  agreed  that  the  seat  of  arbitration  would be Singapore and that the curial law of the  arbitration proceedings would be the SIAC Rules, it  was no longer open to the appellant to contend  that  an  application  under  Section  11(6)  of  the  Arbitration Act, 1996 would be maintainable. This  judgment has specifically taken into consideration  the  law  laid  down  in  Bhatia  International and  Venture Global. The same view has been taken by  the Delhi High Court, the Bombay High Court and  the  Gujarat  High  Court,  in  fact  this  Court  in  Videocon has  specifically  approved  the  observations made by the Gujarat  High Court in

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Hardy Oil and Gas Ltd. v. Hindustan Oil Exploration   Co. Ltd.20”

41. Coming  to  the  stipulations  in  the  present  arbitration  

clause,  it  is  clear as day that if  any dispute or difference  

would  arise  under  the  charter,  arbitration  in  London  to  

apply; that the arbitrators are to be commercial men who  

are members of London Arbitration Association; the contract  

is to be construed and governed by English Law; and that  

the  arbitration should  be conducted,  if  the  claim is  for  a  

lesser sum, in accordance with small claims procedure of the  

London Maritime Arbitration Association.   There is no other  

provision in the agreement that any other law would govern  

the arbitration clause.   

42. Mr. Giri, learned senior counsel would submit that from  

the clause which is a comprehensive one, it is London, which  

is  the  seat  of  arbitration.   In  Videocon Industries  Ltd.  

(supra),  as  we  have  analysed  earlier,  Article  33.1  of  the  

agreement which stipulated that subject to the provisions of  

Article  34.12,  the  contract  would  be  governed  and  

interpreted  in  accordance with  the laws of  India.   Clause  

34.12 of the agreement read as follows:  

20  (2006) 1 Guj LR 658

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“34.12. Venue and law of arbitration agreement.— The  venue  of  sole  expert,  conciliation  or  arbitration  proceedings  pursuant  to  this  article,  unless the parties otherwise agree, shall be Kuala  Lumpur, Malaysia, and shall be conducted in the  English  language.  Insofar  as  practicable,  the  parties shall  continue to implement the terms of  this  contract  notwithstanding  the  initiation  of  arbitral  proceedings  and  any  pending  claim  or  dispute. Notwithstanding the provisions of Article  33.1, the arbitration agreement contained in this  Article  34  shall  be  governed  by  the  laws  of  England.”

43. In that context, the Court referred to Section 3 of the  

English Arbitration Act, 1996 and as has been stated earlier,  

opined that as per the English law, the seat of arbitration as  

per  the  said  provision  would  mean  “juridical  seat  of  

arbitration” and accordingly opined that principles stated in  

Bhatia International (supra) would not be applicable.  

44. In the present case, the agreement stipulates that the  

contract is to be governed and construed according to the  

English  law.   This  occurs  in  the  arbitration  clause.   Mr.  

Vishwanathan,  learned  senior  counsel,  would  submit  that  

this part has to be interpreted as a part of “curial law” and  

not  as  a  “proper  law”  or  “substantive  law”.   It  is  his  

submission  that  it  cannot  be  equated  with  the  seat  of  

arbitration.   As  we  perceive,  it  forms  as  a  part  of  the

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arbitration clause.  There is ample indication through various  

phrases like “arbitration in London to apply”, arbitrators are  

to be the members of the “London Arbitration Association”  

and the contract “to be governed and construed according  

to English Law”.  It is worth noting that there is no other  

stipulation  relating  to  the  applicability  of  any  law  to  the  

agreement.   There  is  no  other  clause  anywhere  in  the  

contract.  That apart, it is also postulated that if the dispute  

is for an amount less that US $ 50000 then, the arbitration  

should  be  conducted  in  accordance  with  small  claims  

procedure  of  the  London Maritime Arbitration  Association.  

When the aforesaid stipulations are read and appreciated in  

the contextual perspective, “the presumed intention” of the  

parties is clear as crystal that the juridical seat of arbitration  

would  be  London.   In  this  context,  a  passage  from  

Mitsubishi Heavy Industries Ltd. v. Gulf Bank21 is worth  

reproducing:

“It  is  of  course  both  useful  and  frequently  necessary when construing a clause in a contract  to have regard to the overall commercial purpose  of the contract in the broad sense of the type and  general content, the relationship of the parties and  such common commercial purpose as may clearly  emerge from such an exercise.  However, it does  

21 [1997] 1 Lloyd’s Rep. 343

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not seem to me to be a proper approach to the  construction of a default  clause in a commercial  contract  to  seek  or  purport  to  elicit  some  self- contained  ‘commercial  purpose’  underlying  the  clause which is or may be wider than the ordinary  or  usual  construction of  the  words  of  each sub- clause will yield.”  

45. In  Cargill International S.A. v. Bangladesh Sugar  

& Food Industries Corp.22,  Potter  L.J.  balanced the  two  

approaches and said:  

“In this connection [counsel] has rightly made the  point that, when construing the effect of particular  words in a commercial contract, it is wrong to put  a  label  on  the  contract  in  advance  and  this  to  approach the question of construction on the basis  of a pre-conception as to the contact’s intended  effect, with the result that a strained construction  is placed on words, clear in themselves, in order to  fit them within such pre-conception...

On  the  other  hand,  modern  principles  of  construction require the court  to  have regard to  the  commercial  background,  the  context  of  the  contract ad the circumstances of the parties, and  to consider whether, against that background and  I  that  context,  to  give the words a particular  or  restricted  meaning  would  lead  to  an  apparently  unreasonable and unfair result.”

46. Thus, interpreting the clause in question on the bedrock  

of the aforesaid principles it is vivid that the intended effect  

is to have the seat of arbitration at London.  The commercial  

background,  the  context  of  the  contract  and  the  

22  [1998] 1 W.L.R. 461 CA

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circumstances of the parties and in the background in which  

the  contract  was  entered  into,  irresistibly  lead  in  that  

direction.  We are not impressed by the submission that by  

such  interpretation  it  will  put  the  respondent  in  an  

advantageous  position.   Therefore,  we  think  it  would  be  

appropriate to interpret the clause that it is a proper clause  

or substantial clause and not a curial or a procedural one by  

which the arbitration proceedings are to be conducted and  

hence, we are disposed to think that the seat of arbitration  

will be at London.  

47. Having said that the implied exclusion principle stated  

in  Bhatia  International (supra)  would  be  applicable,  

regard being had to the clause in the agreement, there is no  

need to dwell upon the contention raised pertaining to the  

addendum,  for  any  interpretation  placed  on  the  said  

document would not  make any difference to  the ultimate  

conclusion that we have already arrived at.    

48. Before parting with the case, it is obligatory on our part  

to  state  that  the  Division  Bench  of  the  High  Court  has  

allowed  the  petition  on  the  foundation  that  the  Bharat  

Aluminium Co. case would govern the field and, therefore,

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the court below had no jurisdiction is not correct.  But as has  

been  analysed  and  discussed  by  us,  even  applying  the  

principles laid down in  Bhatia International (supra)  and  

scanning  the  anatomy of  the  arbitration  clause,  we  have  

arrived at  the conclusion that  the courts  in  India will  not  

have jurisdiction as there is implied exclusion.  

49. Consequently, for different reasons, we concur with the  

conclusion arrived at by the High Court and accordingly, the  

appeal, being sans merit, stands dismissed.  However, in the  

facts and circumstances of the case, there shall be no order  

as to costs.  

.............................J. [Dipak Misra]

..........................., J. [Prafulla C. Pant]

New Delhi March 10, 2015