2004 (7) TMI 681 - HC - Indian Laws

Summary

Issues Involved:
1. Validity of the arbitration agreement.
2. Permissibility of successive arbitrations.
3. Nature and enforceability of the second award.
4. Whether the second award is a foreign award.
5. Jurisdiction and applicability of Indian law.
6. Execution and binding nature of the awards.

Detailed Analysis:

1. Validity of the Arbitration Agreement:
The appellant argued that the arbitration agreement itself was invalid on various grounds, including the claim that successive arbitrations are not permitted. The court overruled this ground, stating that successive arbitrations are permissible under Indian law, referencing authorities from the High Courts of Calcutta, Bombay, and Madras.

2. Permissibility of Successive Arbitrations:
The court acknowledged that successive arbitrations are not impermissible in India. The arbitration clause in question allowed for an appeal to a second arbitration in London if either party disagreed with the result of the first arbitration in India. The court found that such a clause is valid and does not violate any legal principles.

3. Nature and Enforceability of the Second Award:
The court examined whether the second award, made by Mr. Cooke in London, should be treated as an appellate award that wipes out the first award. It concluded that the second arbitrator did not proceed as if exercising appellate powers. The clause used the term "appeal," but the court interpreted it to mean a second arbitration rather than an appellate process. The second award was binding but did not nullify the first award.

4. Whether the Second Award is a Foreign Award:
The court analyzed whether the second award qualifies as a foreign award under Section 44 of the Arbitration and Conciliation Act, 1996. It determined that the award was not a foreign award because the arbitration agreement was governed by Indian law, and the Indian courts had jurisdiction to set aside the award. The court emphasized that the proper law of the contract being Indian law is a significant factor in determining the nature of the award.

5. Jurisdiction and Applicability of Indian Law:
The court highlighted that Indian law and jurisdiction apply to the arbitration agreement and the awards. It referenced the case of NTPC, where the Supreme Court held that if the proper law of the arbitration agreement is Indian law, the award cannot be considered foreign. The court also noted the Bhatia International case, which allowed for the application of Part I of the 1996 Act to arbitrations held outside India if the proper law of the contract is Indian law.

6. Execution and Binding Nature of the Awards:
The court concluded that the second award by Mr. Cooke, even if binding, could not be enforced due to the existence of the conflicting nil award passed under the rules of the Indian Council of Arbitration. The court referenced Section 48(e) of the 1996 Act, which allows refusal of enforcement if the award has not become binding. The court found that the London award had not become binding because of the co-existing Indian nil award.

Conclusion:
The appeal was allowed, and the impugned order was set aside. The court declared the London award inexecutable as long as the Indian nil award stands. The execution of Mr. Cooke's award was refused, and the appellants were entitled to their costs both in the appeal and in the lower court.