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TMI Blog1992 (5) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... the jurisdiction of the competent Indian courts and the operation of Indian laws in all matters concerning arbitration in so far as the main contract as well as that which is contained in the arbitration clause are governed by the laws of India. The Delhi High Court was wrong in treating the award in question as a foreign award. The Foreign Awards Act, has no application to the award by reason of the specific exclusion contained in Section 9 of that Act. The award is governed by the laws in force in India, including the Arbitration Act, 1940. Accordingly, we set aside the impugned judgment of the Delhi High Court and direct that Court to consider the appellant's application on the merits in regard to which we express no views whatsoever. The appeal is allowed in the above terms. - Civil Appeal No. 1978 of 1992 - - - Dated:- 7-5-1992 - THOMMEN, T.K. AND AGRAWAL, S.C., JJ. JUDGMENT For the Appellant: Shanti Bhushan, Dr. A.M. Singhvi, C.Mukhopadhaya, J.C. Seth, O.P. Mittal, Sudarsh Menon and G.G. Malhotra For the Respondent: S.K. Dholakia, O.P. Sharma, D.C. Singhania, Ms. Nanita Sharma, Hari Menon, P. Piwany and R.K. Gupta THOMMEN, J. Leave granted. The N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and Arbitration of the International Chamber of Commerce shall apply to such arbitrations. The arbitration shall be conducted at such places as the arbitrators may determine." In respect of an Indian Contractor, sub-clause 6.2 clause 27 says that the arbitration shall be conducted at of New Delhi in accordance with the provisions of the Arbitration Act, 1940. It reads : "27.6.2. The arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory modification thereof. The venue of arbitration shall be New Delhi, India." The General Terms further provide : "the Contract shall in all respects be construed and governed according to Indian laws." (32.3). The formal agreements which the parties executed on 17.8.82 contain a specific provision for settlement of disputes. Article 4.1 provides : "4.1. Settlement of Disputes : It is specifically agreed by and between the parties that all the differences or disputes arising out of the contract or touching the subject matter of the contract, shall be decided by process of settlement and arbitration as specified in clause 26.0 and 27.0 excluding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural matters, the competent courts in England will also be, concurrently with the Indian courts, entitled to exercise jurisdiction over the conduct of arbitration. But occasions for interference by the courts in England would indeed be rare and probably unnecessary in view of the elaborate provisions contained in the ICC Rules by which the parties have agreed to abide. The substantive law governing arbitration, which concerns questions like capacity, validity, effect and interpretation of the contract etc., is Indian law and the competent courts in such matters are the Indian courts. Even in respect of procedural matters, the concurrent jurisdiction of the courts of the place of arbitration does not exclude the jurisdiction of the Indian courts. Mr. S. K. Dholakia appearing for the Singer, on the other hand, submits that the arbitration agreement is a separate and distinct contract, and collateral to the main contract. Although the main contract is governed by the laws in force in India, as stated in the General Terms, there is no express statement as regards the law governing the arbitration agreement. In the circumstances, the law governing the arbitration agreement is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, the system of law with which the transaction has its closest and most real connection." (pages 1161-62) The expression 'proper law of a contract' refers to the legal system by which the parties to the contract intended their contract to be governed. If their intention is expressly stated or if it can be clearly inferred from the contract itself or its surrounding circumstances, such intention determines the proper law of the contract. In the words of Lord Herchell, L.C. : "...In this case, as in all such cases, the whole of the contract must be looked at, and the contract must be regulated by the intention of the parties as appearing from the contract. It is perfectly competent to those who, under such circumstances as I have indicated, are entering into a contract, to indicate by the terms which they employ which system of law they intend to be applied to the construction of the contract, and to the determination of the rights arising out of the contract". Hamlyn Co. v. Talisker Distillery, (1891-4) All E.R. 849 at 852. Where, however, the intention of the parties is not expressly stated and no inference about it can be drawn, their intention as suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, without regard to any relevant or significant link with the place. This is particularly true when the place of arbitration is not chosen by the parties themselves, but by the arbitrators or by an outside body, and that too for reasons unconnected with the contract. Choice of place for submission to jurisdiction of courts or for arbitration may thus prove to have little relevance for drawing an inference as to the governing law of the contract, unless supported in that respect by the rest of the contract and the surrounding circumstances. Any such clause must necessarily give way to stronger indications in regard to the intention of the parties. See The Fehmarn, (1958) 1 All E.R. 333. Dicey's sub-rule (2) of rule 180 reads :- "Sub-rule (2) - When the intention of the parties to a contract with regard to the law governing the contract is not expressed in words, their intention is to be inferred from the terms and nature of the contract, and from the general circumstances of the case, and such inferred intention determines the proper law of the contract." Where the parties have not expressly or impliedly selected the proper law, the courts impute an intention by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arified that the expression 'proper law' refers to the substantive principles of the domestic law of the chosen system and not to its conflict of laws rules. The law of contract is not affected by the doctrine of renvoi. See Dicey, Vol. II, p.1164. In a case such as the present, there is no need to draw any inference about the intention of the parties or to impute any intention to them, for they have clearly and categorically stipulated that their contract, made in India and the courts in Delhi are to 'have exclusive jurisdiction in all matters arising under this contract' (cl. 7) The cardinal test suggested by Dicey in rule 180 is thus fully satisfied. As regards the governing law of arbitration, Dicey says : "Rule 58-(1) The validity, effect and interpretation of an arbitration agreement are governed by its proper law. (2) The law governing arbitration proceedings is the law chosen by the parties, or, in the absence of agreement, the law of the country in which the arbitration is held." (Vol I, Pages 534-535). The principle in rule 58, ass formulated by Dicey, has two aspects (a) the law governing the arbitration agreement, namely, its proper law; and (b) the law g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t which, though collateral or ancillary to the main contract, is nevertheless a part of such contract. Whereas, as stated above, the proper law of arbitration (i.e., the substantive law governing arbitration) determines the validity, effect and interpretation of the arbitration agreement, the arbitration proceedings are conducted, in the absence of any agreement to the contrary, in accordance with the law of the country in which the arbitration is held. On the other hand, if the parties have specifically chosen the law governing the conduct and procedure of arbitration, the arbitration proceedings will be conducted in accordance with that law so long as it is not contrary to the public policy or the mandatory requirements of the law of the country in which the arbitration is held. If no such choice has been made by the parties, expressly or by necessary implication, the procedural aspect of the conduct of arbitration (as distinguished from the substantive agreement to arbitrate) will be determined by the law of the place or seat of arbitration. Where, however, the parties have, as in the instant case, stipulated that the arbitration between them will be conducted in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny manner supersede the overriding jurisdiction and control of the Indian law and the Indian courts. This means, questions such as the jurisdiction of the arbitrator to decide a particular issue or the continuance of an arbitration or the frustration of the arbitration agreement, its validity, effect and interpretation are determined exclusively by the proper law of the arbitration agreement, which, in the present case, is Indian Law. The procedural powers and duties of the arbitrators, as for example, whether they must hear oral evidence, whether the evidence of one party should be recorded necessarily in the presence of the other party, whether there is a right of cross-examination of witnesses, the special requirements of notice, the remedies available to a party in respect of security for costs or for discovery etc. are matters regulated in accordance with the rules chosen by the parties to the extent that those rules are applicable and sufficient and are not repugnant to the requirements of the procedural law and practice of the seat of arbitration. The concept of party autonomy in international contracts is respected by all systems of law so far as it is not incompatible wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o questions as to the choice of law and the jurisdiction of courts. Unlike in the case of persons belonging to the same legal system, contractual relationships between persons belonging to different legal systems may give rise to various private international law questions such as the identity of the applicable law and the competent forum. An award rendered in the territory of a foreign State may be regarded as a domestic award in India where it is sought to be enforced by reason of Indian law being the proper law governing the arbitration agreement in terms of which the award was made. The Foreign Awards Act, incorporating the New York Convention, leaves no room for doubt on the point. The ICC Rules provide for settlement by arbitration of business dispute of an international character. They furnish an institutionalised procedure of arbitration. These Rules being a self-contained or a self-regulating code, they operate more or less independently of judicial interference in the conduct of arbitration, except in so far as they conflict with the mandatory requirements of the governing system of the proper law or the procedural law of the place of arbitration. Party-autonomy in intern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for enforcement of the Convention. These are the conditions which must be satisfied to qualify an award as a 'foreign award' (S.2 read with S.9). See ICC Rules of Arbitration, 1988; See also Craig, Park and Paulsson, International Chamber of Commerce Arbitration, 2nd ed. (1990). An award is 'foreign' not merely because it is made in the territory of a foreign State, but because it is made in such a territory on an arbitration agreement not governed by the law of India. An award made on an arbitration agreement governed by the law of India, though rendered outside India, is attracted by the saving clause in S.9 of the Foreign Awards Act and is, therefore, not treated in India as a 'foreign award'. A 'foreign award' is (subject to section 7) recognised and enforceable in India 'as if it were an award made on a matter referred to arbitration in India' (S.4). Such an award will be ordered to be filed by a competent court in India which will pronounce judgment according to the award (S.6). Section 7 of Foreign Awards Act, in consonance with Art. V of the New York Convention which is scheduled to the Act, specifies the conditions under which recognition and enforcement of a forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts of Delhi would have exclusive jurisdiction 'in all matters arising under this contract'. They have further stated that the 'Contract shall in all respects be construed and governed according to Indian laws'. These words are wide enough to engulf every question arising under the contract including the disputes between the parties and the mode of settlement. It was in Delhi that the agreement was executed. The form of the agreement is closely related to the system of law in India. Various Indian enactments are specifically mentioned in the agreement as applicable to it in many respects. The contract is to be performed in India with the aid of Indian workmen whose conditions of service are regulated by Indian laws. One of the parties to the contract is a public sector undertaking. The contract has in every respect the closest and most real connection with the Indian system of law and it is by that law that the parties have expressly evinced their intention to be bound in all respects. The arbitration agreement is contained in one of the clauses of the contract, and not in a separate agreement. In the absence of any indication to the contrary, the governing law of the contract (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... governing arbitration proceedings, those proceedings were to be considered to be governed by the law of the place in which the arbitration was held, namely, Scotland because it was that system of law which was most closely connected with the proceedings. Various links with Scotland, which was the place of performance of the contract, unmistakably showed that the arbitral proceedings were to be governed by the law of Scotland, although the majority of the learned Law Lords (Lords Reid Wilberforce dissenting on the point) held that, taking into account certain other factors, the contract was governed by English law. That case is no authority for the proposition that, even where the proper law of the contract is expressly stated by the parties, and in the absence of any contrary indication, a different law governed arbitration. The observations contained in that judgment do not support the contention urged on behalf of the Singer that merely because London was designated to be the place of arbitration, the law which governed arbitration was different from the law expressly chosen by the parties as the proper law of the contract. It is true that the procedural law of the place of ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract have no connection with anything English, and they have the closest connection with Indian laws, rules and regulations. In the circumstances, the mere fact that the venue chosen by the ICC Court for the conduct of arbitration is London does not support the case of the Singer on the point. Any attempt to exclude the jurisdiction of the competent courts and the laws in force in India is totally inconsistent with the agreement between the parties. In sum, it may be stated that the law expressly chosen by the parties in respect of all matters arising under their contract, which must necessarily include the agreement contained in the arbitration clause, being Indian law and the exclusive jurisdiction of the courts in Delhi having been expressly recognised by the parties to the contract in all matters arising under it, and the contract being most intimately associated with India, the proper law of arbitration and the competent courts are both exclusively Indian, while matters of procedure connected with the conduct of arbitration are left to be regulated by the contractually chosen rules of the ICC to the extent that such rules are not in conflict with the public policy an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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