2016 (5) TMI 770 - SC - Indian Laws

Arbitration enforcing the Foreign Award - whether Part I of the Arbitration Act is excluded from its operation in case of a Foreign Award where the Arbitration is not held in India and is governed by foreign law? - Held that - Clause 28 in the present case must be intended to have a similar effect that is to exclude the applicability of Part I of the Indian Arbitration and Conciliation Act since the parties have chosen London as the seat of Arbitration and further provided that the Arbitration shall be governed by English Law. In this case the losing side has relentlessly resorted to apparent remedies for stalling the execution of the Award and in fact even attempted to prevent Arbitration. This case has become typical of cases where even the fruits of Arbitration are interminably delayed. Even though it has been settled law for quite some time that Part I is excluded where parties choose that the seat of Arbitration is outside India and the Arbitration should be governed by the law of a foreign country. We are thus of the view that by Clause 28, the parties chose to exclude the application of Part I to the Arbitration proceedings between them by choosing London as the venue for Arbitration and by making English law applicable to Arbitration, as observed earlier. It is too well settled by now that where the parties choose a juridical seat of Arbitration outside India and provide that the law which governs Arbitration will be a law other than Indian law, part I of the Act would not have any application and, therefore, the award debtor would not be entitled to challenge the award by raising objections under Section 34 before a Court in India. A Court in India could not have jurisdiction to entertain such objections under Section 34 in such a case. The proceedings under Section 34, which occurs in Part I, are liable to be dismissed as untenable. The Civil Appeals of Eitzen are liable to succeed and are, therefore, allowed. The judgment of the Bombay High Court enforcing the Foreign Award under Part II of the Arbitration Act is correct and liable to be upheld.

Issues Involved:
1. Jurisdiction of Indian courts under Section 34 of the Arbitration Act for a foreign award.
2. Applicability of Part I of the Arbitration and Conciliation Act, 1996 to foreign awards.
3. Enforcement of foreign arbitration awards in India.
4. Exclusion of Part I of the Arbitration Act by agreement.
5. Conflict between judgments of Gujarat High Court and Bombay High Court regarding jurisdiction and enforcement.

Detailed Analysis:

1. Jurisdiction of Indian courts under Section 34 of the Arbitration Act for a foreign award:
The core issue was whether Indian courts have jurisdiction under Section 34 of the Arbitration Act to entertain objections against a foreign award. The Gujarat High Court held that a court in India has jurisdiction under Section 34 to decide objections raised in respect of a foreign award because Part I of the Arbitration Act is not excluded from operation in respect of a foreign award. Conversely, the Bombay High Court held that Part I is excluded from operation in the case of a foreign award and directed the enforcement of the award.

2. Applicability of Part I of the Arbitration and Conciliation Act, 1996 to foreign awards:
The Supreme Court examined whether Part I of the Arbitration Act applies to foreign awards where the arbitration is held outside India and governed by foreign law. The Court referred to Clause 28 of the Contract, which stipulated that any dispute arising under the contract is to be settled by arbitration in London, with English Law to apply. The Court concluded that the parties intended to exclude the applicability of Part I of the Arbitration Act by choosing London as the seat of arbitration and English Law to govern the arbitration.

3. Enforcement of foreign arbitration awards in India:
The Supreme Court upheld the Bombay High Court’s decision to enforce the foreign award under Part II of the Arbitration Act. The Court noted that the award was enforceable as a judgment in various jurisdictions including the Netherlands, USA, Belgium, and the UK. The enforcement proceedings in Bombay were initiated under Sections 47 to 49 of the Arbitration Act, which pertain to the enforcement of foreign awards.

4. Exclusion of Part I of the Arbitration Act by agreement:
The Court emphasized that the exclusion of Part I of the Arbitration Act can be either express or implied. In this case, the arbitration clause explicitly provided that English Law would apply, indicating the parties’ intention to exclude Part I. The Court referred to previous judgments, including Bhatia International v. Bulk Trading S.A. and Union of India v. Reliance Industries Limited, to support the view that the choice of a foreign seat and foreign law implies the exclusion of Part I.

5. Conflict between judgments of Gujarat High Court and Bombay High Court regarding jurisdiction and enforcement:
The Supreme Court resolved the conflict between the Gujarat High Court and the Bombay High Court. The Gujarat High Court held that objections under Section 34 were tenable in India, while the Bombay High Court held that Part I was excluded and enforced the award. The Supreme Court sided with the Bombay High Court, stating that the choice of London as the seat and English Law as the governing law excluded the applicability of Part I, thereby negating the jurisdiction of Indian courts under Section 34.

Conclusion:
The Supreme Court allowed the appeals filed by Eitzen Bulk A/S, upheld the enforcement of the foreign award by the Bombay High Court, and dismissed the appeals filed by Ashapura Minechem Ltd. The Court clarified that where parties choose a foreign seat and foreign law, Part I of the Arbitration Act does not apply, and Indian courts do not have jurisdiction to entertain objections under Section 34 against foreign awards.

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