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TMI Blog2016 (1) TMI 1042X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Act, 1996 (hereinafter referred to as 'Arbitration Act') and held that "... Part I of the Arbitration Act is applicable only to all the arbitrations which take place within the territory of India", overruling a three-Judge Bench decision of this Court in Bhatia International v. Bulk Trading S.A. and another (2002) 4 SCC 105. Exercising its the power under Article 142 of the Constitution of India, the Constitution Bench however, held that the law declared by it would only operate prospectively. In other words, all agreements executed prior to 06.09.2012 were to be governed by the decision in Bhatia International (supra). 2. In Bhatia International (supra), it was held that even in cases of international commercial arbitrations held out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 10.11.2002 and 12.11.2002. The appellant filed applications, under Section 34 of the Arbitration Act before the District Judge, Bilaspur, which were dismissed. Aggrieved, the appellant filed appeals before the High Court of Chhattisgarh. The High Court dismissed the appeals. 5. Party autonomy being the brooding and guiding spirit in arbitration, the parties are free to agree on application of three different laws governing their entire contract - (1) proper law of contract, (2) proper law of arbitration agreement and (3) proper law of the conduct of arbitration, which is popularly and in legal parlance known as curial law. The interplay and application of these different laws to an arbitration has been succinctly explained by this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will be governed by the prevailing law of India and in case of Arbitration, the English Law shall apply." 7. In order to coherently analyse the situation, we shall first see the proper law of contract, the law governing the arbitration agreement and finally the law governing the procedure. Article 22 of the Arbitration Agreement leaves no room for any doubt, and it has also not been disputed, that the proper law of contract is Indian law. Therefore, crossing that gate, we shall now proceed to the door on the Arbitration Agreement. 8. Article 17 is solely on arbitration. Article 17.1 clearly stipulates that the disputes or claims arising out of or relating to the agreements, if not amicably settled by negotiation, will be settled by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in fact two parts. In the first part of that Article, it is agreed between the parties that the proper law of the contract will be governed by the prevailing law of India, and in the case of arbitration, English Law would apply. In other words, the agreement as a whole would be governed by Indian Law, and in case of arbitration, the English Law will apply. No doubt, one should not strain too much to interpret an agreement between two parties as in the case of a statutory interpretation. The approach in analysing the terms of agreement should be straight and plain but at the same time cohesive and logical. 10. In the matter of interpretation, the court has to make different approaches depending upon the instrument falling for interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the agreement. Contextually, it may be noted that in the present case, the respondent had invoked the provisions of English law for the purpose of the initiation of the unsettled disputes. It has hence, while interpreting an agreement, to be kept in mind that the parties, intended to avoid impracticable and inconvenient processes and procedures in working out the agreement. Potter J. made a similar observation in Cargill International S.A. v. Bangladesh Sugar and Food Industries Corporation [1998] 1 W.L.R. 461 CA: "As Lord Goff observed in another context in Palm Shipping v. Kuwait Petroleum [1988] 1 Lloyds Rep 500 at 502: "It is not a permissible method of construction to propound a general or generally accepted principal ... (and) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. 13. It is clear that the law applicable to arbitration agreement in the present case is English Law. Once it is found that the law governing the arbitration agreement is English Law, Part I of the Indian Arbitration Act stands impliedly excluded. This has been a long settled position and the latest judgment in Union of India v. Reliance Industries Limited and others 2015 (10) SCALE 149 reaffirms the same. In the words of R.F. Nariman J., "20. The last paragraph of Bharat Aluminium's judgment has now to be read with two caveats, both emanating from paragraph 32 of Bhatia International itself-that where the Court comes to a determination that the juridical seat is outside India or where law other than Indian law governs the arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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