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TMI Blog2013 (5) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... s "Devas" on 28th January, 2005, for the lease of Space Segment Capacity on ISRO/ Antrix S-Band Spacecraft. Article 19 of the Agreement empowered the Petitioner to terminate the Agreement in certain contingencies. It also provided that the Agreement and the rights and responsibilities of the parties thereunder would be subject to and construed in accordance with the laws of India. In other words, the domestic law would be the governing law of the Agreement. 3. Article 20 of the Agreement deals specially with arbitration and provides that in the event any dispute or difference arises between the parties as to any clause or provision of the Agreement, or as to the interpretation thereof, or as to any account or valuation, or as to rights and liabilities, acts, omissions of any party, such disputes would be referred to the senior management of both the parties to resolve the same within 3 weeks, failing which the matter would be referred to an Arbitral Tribunal comprising of three Arbitrators. It was provided that the seat of arbitration would be New Delhi in India. It was also provided that the arbitration proceedings would be held in accordance with the rules and procedures of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20(a) of the Agreement. Despite the attempt to resolve the dispute through the Senior Management Team and despite the fact that Devas had already invoked the Arbitration Agreement by making a Request for Arbitration to the ICC and had also appointed its nominee Arbitrator under the ICC Rules, the Petitioner appointed Mrs. Justice Sujata V. Manohar, as its Arbitrator and called upon Devas to appoint its nominee Arbitrator within 30 days of receipt of the notice. Consequently, while Devas had invoked the jurisdiction of the ICC on 29th June, 2011, the Petitioner subsequently invoked the Arbitration Agreement in accordance with the UNCITRAL Rules on the ground that Devas had invoked ICC Rules unilaterally, without allowing the Petitioner to exercise its choice. Having invoked the Arbitration Agreement under the UNCITRAL Rules, the Petitioner called upon the Respondent to appoint its Arbitrator within 30 days of receipt of the notice. 8. On 5th August, 2011, the Petitioner wrote to the Secretariat of the ICC Court stating that it had appointed its Arbitrator, in accordance with the Agreement between the parties, asserting that in view of Article 20 of the Agreement, the arbitral proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arbitration agreement, especi-ally, where the tribunal has been constituted by an Institution purportedly acting under the Arbitration agreement? iv) Whether the jurisdiction of an arbitral tribunal constituted by an institution purportedly acting under an arbitration agreement can be assailed only before the Tribunal and in proceedings arising from the decision or award of such Tribunal and not before the Court under Section 11 of the Act? v) Whether, once an arbitral tribunal has been constituted, the Court has jurisdiction under Section 11 of the Act to interfere and constitute another Tribunal? vi) Whether an arbitration between two Indian companies could be an international commercial arbi-tration within the meaning of Section 2(1)(f) of the Act if the management and control of one of the said companies is exercised in any country other than India? vii) Whether the petition is maintainable in light of the reliefs claimed and whether the conditions precedent for the exercise of jurisdiction under Section 11 of the Act are satisfied or not?" 12. While the matter was pending, most of the seven questions raised were resolved. However, the most important issue as to whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the contract would be the Indian law which would govern the arbitration Agreement. It was submitted that the cardinal test, as suggested by Dicey in his "Conflict of Laws", stood fully satisfied and that the governing law of the arbitration would be the law chosen by the parties, or in the absence of any agreement, the law of the country in which the arbitration is held. Learned counsel submitted that according to Dicey, the proper law of the arbitration is normally the same as the proper law of the contract. It is only in exceptional cases that it is not so, even where the proper law of the contract is expressly chosen by the parties. 16. However, as indicated hereinbefore, the question with which we are concerned is whether the Arbitration Agreement contemplates the application of Section 11 of the 1996 Act after the ICC Rules had been invoked by one of the parties which also appointed its nominee Arbitrator. Equally important is the question whether Section 11 of the 1996 Act empowers the Chief Justice to constitute a Tribunal in supersession of the Tribunal already in the stage of constitution under the ICC Rules, notwithstanding the fact that one of the parties had proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. It was further submitted that since the Arbitral Tribunal had been constituted under the ICC Rules, any objection as to whether or not the Tribunal had been properly constituted would have to be raised before the Arbitral Tribunal itself. It is only in such objection that the Arbitral Tribunal would have to decide as to whether a Tribunal was required to be constituted before application of the ICC or UNCITRAL Rules, inasmuch as, according to the Agreement, the Claimant in the arbitration has the right to choose any of the two Rules when commencing the arbitration. 20. Reliance was placed on Section 16 of the 1996 Act which incorporates the Kompetenz Kompetenz principle within its scope. Since the arbitration was to be governed by Part I of the 1996 Act, the Tribunal would have complete authority over all issues, including the validity of its constitution. 21. Reference was also made to the decision of this Court in Gas Authority of India Ltd. vs. Keti Construction (I) Ltd. & Ors.[(2007) 5 SCC 38], wherein the aforesaid principle contained in Section 16 of the 1996 Act had been referred to. Learned counsel submitted that in arriving at the aforesaid decision, this Court had f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11(6) of the 1996 Act, was not entitled to question the validity of the appointment of the Arbitral Tribunal and the instant Arbitration Petition was liable to be dismissed. 24. As indicated hereinbefore, the question which we are called upon to decide is whether when one of the parties has invoked the jurisdiction of the International Chamber of Commerce and pursuant thereto an Arbitrator has already been appointed, the other party to the dispute would be entitled to proceed in terms of Section 11(6) of the 1996 Act. 25. In order to answer the said question, we will have to refer back to the provisions relating to arbitration in the agreement entered into between the Petitioner and the Respondent on 28th January, 2005. Article 19 in clear terms provides that the rights and responsibilities of the parties under the Agreement would be subject to and construed in accordance with the laws in India, which, in effect, means the Arbitration and Conciliation Act, 1996. Article 20 of the Agreement specifically deals with arbitration and provides that disputes between the parties regarding the provisions of the Agreement or the interpretation thereof, would be referred to the Senior Mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in sub- section (3) applies and- (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (6) Where, under an appointment procedure agreed upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd also indicated that it had appointed Mrs. Justice Sujata V. Manohar, as its Arbitrator in terms of Article 20(9) of the Agreement. 31. The matter is not as complex as it seems and in our view, once the Arbitration Agreement had been invoked by Devas and a nominee Arbitrator had also been appointed by it, the Arbitration Agreement could not have been invoked for a second time by the Petitioner, which was fully aware of the appointment made by the Respondent. It would lead to an anomalous state of affairs if the appointment of an Arbitrator once made, could be questioned in a subsequent proceeding initiated by the other party also for the appointment of an Arbitrator. In our view, while the Petitioner was certainly entitled to challenge the appointment of the Arbitrator at the instance of Devas, it could not do so by way of an independent proceeding under Section 11(6) of the 1996 Act. While power has been vested in the Chief Justice to appoint an Arbitrator under Section 11(6) of the 1996 Act, such appointment can be questioned under Section 13 thereof. In a proceeding under Section 11 of the 1996 Act, the Chief Justice cannot replace one Arbitrator already appointed in exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in respect of those same issues which are already pending before the Arbitral Tribunal for adjudication, would be without jurisdiction. 34. In view of the language of Article 20 of the Arbitration Agreement which provided that the arbitration proceedings would be held in accordance with the rules and procedures of the International Chamber of Commerce or UNCITRAL, Devas was entitled to invoke the Rules of Arbitration of the ICC for the conduct of the arbitration proceedings. Article 19 of the Agreement provided that the rights and responsibilities of the parties thereunder would be subject to and construed in accordance with the laws of India. There is, therefore, a clear distinction between the law which was to operate as the governing law of the Agreement and the law which was to govern the arbitration proceedings. Once the provisions of the ICC Rules of Arbitration had been invoked by Devas, the proceedings initiated thereunder could not be interfered with in a proceeding under Section 11 of the 1996 Act. The invocation of the ICC Rules would, of course, be subject to challenge in appropriate proceedings but not by way of an application under Section 11(6) of the 1996 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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