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NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Petition for Special Leave to Appeal (Civil) No.27404 of 2013

Sakuma Exports Ltd.     …..Petitioner

Versus

Louis Dreyfus Commodities Suisse S.A. …..Respondent

J U D G M E N T

SHIVA KIRTI SINGH, J.

1. After  hearing  the  parties  at  length  and  upon  going  through  the  impugned  

judgment and order dated 6.8.2013 passed by Division Bench of High Court of  

Judicature at Bombay in Appeal No. 337 of 2013, filed under Section 37 of the  

Arbitration and Conciliation Act,  1996 (hereinafter referred to as the ‘Act’),  

we are of the considered view that the impugned order is based upon proper  

appreciation  of  relevant  facts  and follows  the  law laid  down by  this  Court  

correctly in arriving at the finding that in the facts of the case the courts in India  

have  no  jurisdiction  to  entertain  the  petition  under  Section  34  of  the  Act,  

challenging  the  international  commercial  award  of  an  arbitral  tribunal  

constituted by the Refined Sugar Association, London.

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S.L.P.(C)No.27404 of 2013 …. (contd.)

2. There is no dispute between the parties that the Constitution Bench judgment of  

this  Court  in  the  case  of  Bharat  Aluminium  Company  etc. vs.  Kaiser  

Aluminium  Technical  Services  Inc.  etc.  (BALCO)1 overruled  the  earlier  

judgment in Bhatia International Vs. Bulk Trading S.A. and Anr.2 in coming  

to  the  conclusion  that  Part  I  of  the  Act  would  have  no  application  to  

international  Commercial  Arbitration  held  outside  India,  but  on  account  of  

further direction that the law so declared shall apply only prospectively to all  

arbitration  agreements  executed  thereafter,  the  arbitration  agreement  in  the  

present  case  is  to  be  governed  by  the  law  decided  in  the  case  of  Bhatia  

International  (supra).   According  to  the  judgment  in  the  case  of  Bhatia  

International (supra)  the  provisions  of  Part  I  of  the  Act  would  apply  to  

International Commercial  Arbitration held out of India unless the parties  by  

agreement, express or implied, exclude all or any of its provisions.

3. Since we are in agreement with the views of learned High Court of Bombay, it  

is  not  necessary  to  go  to  the  factual  details  but  on  account  of  lengthy  

submissions advanced on behalf of the petitioner, we feel it proper to extract  

paragraph 3 of the impugned judgment which reflects not only the relevant facts  

but also the relevant terms and conditions of the agreement between the parties.  

It reads thus:

“3. The Appellant is an Indian Company which carries on the business of  import and export of sugar among other commodities.  The Respondent  is a Swiss Company with whom the Appellant entered into  an agreement  on 12th January 2010 for  the purchase  

1  2012 (9) SCC 552 2  2002 (4) SCC 105

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S.L.P.(C)No.27404 of 2013 …. (contd.)

of 2700 metric tons of Brazilian white sugar of a stipulated description.  The  sugar was to be shipped between 15 January 2010 and 15 February  2010 at the option of the seller, the Respondent.  The port of  destination  was  to  be  Nhava  Sheva  or  Kolkata  at  the  option  of  the  Appellant.  Disputes arose between the parties.  The agreement between the parties  contained inter alia the following terms and conditions:

‘Terms and conditions:

This  Contract  is  subject  to  the  Rules  of  the  Refined  Sugar  Association, London as fully as if the same had been expressly  inserted  herein,  whether  or  not  either  or  both  parties  to  it  are  Members of the Association.

If any provision of this Contract is inconsistent with the Rules,  such provision shall prevail.’

Parties envisaged that all disputes would be submitted to arbitration.  The  arbitration agreement was thus:

‘Arbitration: All disputes arising out of or in conjunction with this  Contract  shall  be  referred  to  the  Refined  Sugar  Association,  London for settlement in accordance with the Rules relating to  Arbitration.  This Contract shall be governed by and construed in  accordance with English Law.’

A final award was passed by the arbitral tribunal on 31 December, 2010  which  was  sought  to  be  challenged  by  the  Appellant  in  proceedings  under Section 34 of the Act of 1996 before the learned Single Judge of  this Court.  An objection was taken to the jurisdiction of this Court to  entertain the petition on the ground that the applicability of Part-I of the  Act  was  excluded  by  the  agreement  between  the  parties  and  consequently  even  under  the  law  as  it  then  prevailed  in  Bhatia  International,  a  Petition under Section 34 was not maintainable.   The  learned  Single  Judge  has  upheld  the  objection  and  has  come  to  the  conclusion that this Court has no jurisdiction to entertain a challenge to  the  award  under  Section  34.   The  judgment  is  called  in  question  in  appeal.”

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S.L.P.(C)No.27404 of 2013 …. (contd.)

4. After discussing appropriate case laws, the High Court summarized the relevant  

facts and its views in paragraph 20 which also conveniently extracts Rule 8 of  

the  Rules  of  Refined  Sugar  Association,  London.   Paragraph  20  reads  as  

follows:

“20. In the present case, the parties have specifically made their contract  subject to the rules of the Refined Sugar Association, London.  Leaving  no ambiguity of interpretation the contract mandates that the rules of the  Refined Sugar Association, London are incorporated ‘as fully as if the  same has been expressly inserted’ in the contract.  The governing law of  the contract is English law.  All disputes arising out or in conjunction  with the contract were to be referred to the Refined Sugar Association  for settlement in accordance with the rules relating to arbitration of the  Association.  The law in the U.K. is, therefore, the substantive law of the  contract.  The seat of the arbitration is in the U.K. Parties have made it  clear that the rules of the Refined Sugar Association would govern the  resolution of their disputes.  Rule 8 of the Rules of the Refined Sugar  Association (on which there is no dispute between the parties during the  course of the hearing of the appeal) provides as follows:

‘8.  For the purpose of all proceedings in arbitration, the contract  shall  be  deemed  to  have  been  made  in  England,  any  correspondence in reference to the offer, the acceptance, the place  of payment or otherwise, not-withstanding, and England shall be  regarded as the place of performance.  Disputes shall be settled  according to the law of England wherever the domicile, residence  or  place  of  business  of  the  parties  to  the  contract  may  be  or  become.   The  seat  of  the  Arbitration  shall  be  England and all  proceedings shall take place in England.  It shall not be necessary  for the award to state expressly the seat of the arbitration.’

The terms of the purchase contract as well as Rule 8 of the Rules of the  Refined Sugar Association would make it  clear that  disputes shall  be  settled in accordance with the law of England wherever the domicile,  residence  or  place  of  business  of  parties  to  the  contract  may  be  or  become.  Moreover, for the purposes of all proceedings in arbitration, the  contract shall be deemed to have been made in England and England  shall be regarded as the place  

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S.L.P.(C)No.27404 of 2013 …. (contd.)

of performance.   The seat  of  the arbitration shall  be  England and all  proceedings  shall  take  place  in  England.   On  the  basis  of  these  provisions, it has been submitted that parties have, by the terms of their  agreement, impliedly excluded the provisions of Part-I.  We find merit in  the submission.  It  is  clear  from the terms and conditions  which have  been accepted by the parties in the purchase contract, read with Rule 8  that  parties  have  accepted  English  law  as  the  governing  law  of  the  contract; that the seat of the arbitration would be London; that disputes  shall be settled according to the law of England which would include the  resolution  of  disputes  and  that  all  proceedings  shall  take  place  in  England.  Alternatively, even if it were to be held that parties have not  provided for  the  curial  law governing  the  arbitration,  the  decision  in  Bhatia International does not prohibit the exclusion  of the application of  Part-I on account of the proper law of the contract being a foreign law.  Where the proper law governing the contract is expressly chosen by the  parties, which they have done in the present case by selecting English  law as the proper law of the contract, that law must, in the absence of an  unmistakable intention to the contrary, govern the arbitration agreement.  The arbitration agreement, though it is collateral or ancillary to the main  contract  is  nevertheless  a  part  of  the  contract.   In  an  application  for  challenging the validity of an arbitral award under Section 34, the Court  would necessarily  have to  revert  to  the  law governing the  arbitration  agreement which, in our considered view, would be the law of England.”

5. Since one of  the  terms and conditions  of  the  agreement  makes  the  contract  

subject to the Rules of the Refined Sugar Association, London by treating the  

same to have been expressly inserted in the agreement, Rule 8 of the Refined  

Sugar Association, London leaves no manner of doubt that the parties have not  

only accepted English law as the law governing the contract but the disputes  

and the arbitration shall also be governed by the law of England. The seat of  

Arbitration is admittedly England.

6. Learned counsel for the petitioner highlighted that the arbitration clause is  not  

strictly  the  same  as  recommended  by  the Refined Sugar Association,  

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S.L.P.(C)No.27404 of 2013 …. (contd.)

London which clearly stipulated that the arbitration shall be conducted in accordance  

with the English law. But this does not take us far.  The condition that the contract is  

subject to the Rules of the Refined Sugar Association, London which stand inserted in  

the  contract  and  wordings  of  Rule  8  clinch  the  relevant  issue  in  favour  of  the  

respondent.

7. We find no merit in the petition and the same is dismissed as such. No costs.

…………………………….J. [ANIL R. DAVE]

……………………………..J. [SHIVA KIRTI SINGH]

New Delhi. March 28, 2014.

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