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TMI Blog2017 (7) TMI 1093X X X X Extracts X X X X X X X X Extracts X X X X ..... petition Under Section 34 of the Act at Gautam Budh Nagar, Uttar Pradesh or High Court of Delhi, in case the Courts in India have the jurisdiction to deal with the objections as postulated under Part I of the Act. Be it noted, a petition Under Section 34 of the Act was filed before the learned District Judge, Gautam Budh Nagar, Uttar Pradesh who vide order dated 06.07.2011 had not entertained the application on the ground of lack of territorial jurisdiction and returned it to be filed before the appropriate Court and the appeal arising therefrom, that is, FAO (D) 1304 of 2011, filed before the High Court of Allahabad was dismissed on the ground of maintainability. Thereafter, Writ Petition No. 20945 of 2014 was filed challenging the order dated 06.07.2011 of the District Judge, Gautam Budh Nagar. In the meantime, a petition Under Section 34 of the Act came to be filed before the High Court of Delhi. 2. When the matter stood thus, ITE India Pvt. Limited approached this Court by filing Special Leave Petition (Civil) Nos. 22318-22321 of 2010. On 15.09.2015, the Court passed the following order: In course of hearing, we have been apprised that on behalf of ITE India Private Limited, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Delhi High Court has the territorial jurisdiction to deal with the same and accordingly directed the objection to be filed Under Section 34 before the Court. 4. We may immediately state here that Special Leave Petition (Civil) Nos. 22318-22321 of 2010 had been de-tagged vide order dated 15.02.2017 passed by the Court. 5. Regard being had to what we have stated hereinbefore, as required at present, we shall only dwell upon the applicability of Part I or Part II of the Act to the controversy in question. If Part I is applicable, then we will be obliged to advert to the issue of territorial jurisdiction of Delhi or that of Gautam Budh Nagar, Uttar Pradesh. If Part II would be applicable, then the said issue will not warrant any deliberation. 6. Criticising the impugned order, Mr. Rakesh Dwivedi, learned senior Counsel for the Appellants contends that the High Court has fallen into an error in its appreciation of the arbitration Clause and what has been postulated therein and come to hold that the Courts in India have jurisdiction. It is also canvassed by him that in the decision delivered between the parties, the commercial court in London, interpreting the clauses in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional (supra) has to be appositely appreciated and understood. In Bhatia International (supra), an application was preferred Under Section 9 of the Act before the learned IIIrd Additional District Judge, Indore, Madhya Pradesh and the Appellant therein had raised the plea of maintainability of such an application on the ground that Part I of the Act would not apply where the place of arbitration is not in India. The Court referred to various provisions of the Act and came to hold thus: 32. To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or Rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or Rules will not apply. 9. After recording the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its provisions. Such an interpretation does not lead to any conflict between any of the provisions of the said Act. On this interpretation there are no lacunae in the said Act. This interpretation also does not leave a party remediless.... 11. In Venture Global Engineering v. Satyam Computer Services Ltd. (2008) 4 SCC 190 the Court followed the principle stated in Bhatia International (supra). Elucidating the principle of Bhatia International (supra), the Court stated: 33. The very fact that the judgment holds that it would be open to the parties to exclude the application of the provisions of Part I by express or implied agreement, would mean that otherwise the whole of Part I would apply. In any event, to apply Section 34 to foreign international awards would not be inconsistent with Section 48 of the Act, or any other provision of Part II as a situation may arise, where, even in respect of properties situate in India and where an award would be invalid if opposed to the public policy of India, merely because the judgment-debtor resides abroad, the award can be enforced against properties in India through personal compliance with the judgment-debtor and by holding out the th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal (supra) and Lesotho Highlands Development Authority v. Impregilo SpA (2005) 3 ALL ER 789, and came to hold that it is fairly well settled that when an arbitration agreement is silent as to the law and procedure to be followed in implementing the arbitration agreement, the law governing the said agreement would ordinarily be the same as the law governing the contract itself. The Court referred to Singer Co. (supra) and held that the proposition stated therein lent support to the view it had expressed. Thereafter, it noted that in Bhatia International (supra) this Court had laid down the proposition that notwithstanding the provisions of Section 2(2) of the Act, indicating that Part I of the Act would apply where the place of arbitration is in India, even in respect of international commercial agreements, which are to be governed by the laws of another country, the parties would be entitled to invoke the provisions of Part I of the Act and consequently the application made Under Section 11 thereof would be maintainable. 15. In the course of hearing we have also been commended to the authority in Citation Infowares Limited v. Equinox Corporation (2009) 7 SCC 220 wherein the Desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objections preferred by the Union of India pertaining to arbitrability of the claims made by the Petitioner therein in respect of royalties, cess, service tax and CAG audit was rejected and for the said purpose, the Court referred to various agreements entered into between the parties. The issue that arose before this Court is whether Part I of the Act was excluded or not. The Court reproduced the relevant part of Article 33 and the Clause that dealt with final partial award as to "seat". It took note of the fact that jurisdiction of the High Court of Delhi was invoked by the Union of India contending, inter alia, that the terms of the PSCs entered would manifest an unmistakable intention of the parties to be governed by the laws of India and more particularly the Arbitration and Conciliation Act, 1996; that the contracts were signed and executed in India; that the subject matter of the contracts were performed within India; and that the contract stipulated that they will be governed and interpreted in accordance with the laws of India. Various other clauses were pressed into service to stress upon the availability of jurisdiction in courts of India. The Court analyzing the postul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the substantive contract i.e. PSC. In other words, the provisions contained in Article 33.12 are not governed by the provisions contained in Article 32.1. It must be emphasised that Article 32.1 has been made subject to the provision of Article 33.12. Article 33.12 specifically provides that the arbitration agreement shall be governed by the laws of England. The two articles are particular in laying down that the contractual obligations with regard to the exploration of oil and gas under the PSC shall be governed and interpreted in accordance with the laws of India. In contradistinction, Article 33.12 specifically provides that the arbitration agreement contained in Article 33.12 shall be governed by the laws of England. Therefore, in our opinion, the conclusion is inescapable that applicability of the Arbitration Act, 1996 has been ruled out by a conscious decision and agreement of the parties. Applying the ratio of law as laid down in Bhatia International it would lead to the conclusion that the Delhi High Court had no jurisdiction to entertain the petition Under Section 34 of the Arbitration Act, 1996. 21. Be it noted, the Court opined that it was unacceptable that seat of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is condign to note here that while discussing about the ratio in Videocon Industries Limited (supra), the Court studiedly scrutinized the agreement, mainly the relevant parts of Articles 33, 34 and 35 and opined: 50. ...The arbitration agreement in this appeal is identical to the arbitration agreement in Videocon Industries. In fact, the factual situation in the present appeal is on a stronger footing than in Videocon Industries Ltd. As noticed earlier, in Videocon Industries, this Court concluded that the parties could not have altered the seat of arbitration without making the necessary amendment to the PSC. In the present appeal, necessary amendment has been made in the PSC. Based on the aforesaid amendment, the Arbitral Tribunal has rendered the final partial consent award of 14-9-2011 recording that the juridical seat (or legal place) of the arbitration for the purposes of arbitration initiated under the claimants' notice of arbitration dated 16-12-2010 shall be London, England. Furthermore, the judgment in Videocon Industries is subsequent to Venture Global. We are, therefore, bound by the ratio laid down in Videocon Industries Ltd. 23. Explicating the concept of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We shall refer to the same at the subsequent stage when we shall refer to the Share Holders Agreement (SHA) and appreciate what interpretation needs to be placed on the Clause relating to arbitration. Prior to that we are disposed to think to address the issue as regards the approval of Shashoua principle in BALCO and the legal acceptability of the observations made by the two-Judge Bench in Enercon (India) Ltd. (supra) or it is per incuriam as is proponed by the learned senior Counsel for the Respondents. 27. The Constitution Bench in BALCO has referred to the observations in Braes of Doune Wind Farm (Scotland) Ltd. v. Alfred McAlpine Business Services Ltd. 2008 Bus LR D 137 (QBD) : 2008 EWHC 426 (TCC) to lay down the principle that the observations made in the said case clearly demonstrate that the detailed examination which is required to be undertaken by the court is to discern from the agreement and surrounding circumstances the intention of the parties as to whether a particular place mentioned refers to the "venue" or "seat" of the arbitration. After dealing with the principles stated therein, it took note of the fact that the ratio laid down in Alfred McAlpine (supra) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of C v. D (supra) which related to an order passed under the insurance policy which provided "any dispute arising under this policy shall be finally and fully determined in London, England under the provisions of the English Arbitration Act, 1950 as amended" and that "this policy shall be governed by and construed in accordance with the internal laws of the State of New York...." (Bus LR p. 847, para 2). In the said case, a partial award was made in favour of the claimant. It was agreed that the partial award is, in England law terms, final as to what it decides and the Defendant sought the tribunal's withdrawal of its findings. The Defendant also intimated its intention to apply to a Federal Court applying the US Federal Arbitration Law governing the enforcement of arbitral award, which was said to permit "vacatur" of an award where arbitrators have manifestly disregarded the law. It was in consequence of such intimation that the claimant sought and obtained an interim anti-suit injunction. The learned Judge rejected the arguments to the effect that the choice of the law of New York as the proper law of the contract amounted to an agreement that the law of England shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hirst could not say (and did not say) that English judicial remedies for lack of jurisdiction on procedural irregularities Under Sections 67 and 68 of the Arbitration Act, 1996 were not permitted; he was reduced to saying that New York judicial remedies were also permitted. That, however, would be a recipe for litigation and (what is worse) confusion which cannot have been intended by the parties. No doubt New York law has its own judicial remedies for want of jurisdiction and serious irregularity but it could scarcely be supposed that a party aggrieved by one part of an award could proceed in one jurisdiction and a party aggrieved by another part of an award could proceed in another jurisdiction. Similarly, in the case of a single complaint about an award, it could not be supposed that the aggrieved party could complain in one jurisdiction and the satisfied party be entitled to ask the other jurisdiction to declare its satisfaction with the award. There would be a serious risk of parties rushing to get the first judgment or of conflicting decisions which the parties cannot have contemplated. 17. It follows from this that a choice of seat for the arbitration must be a choice of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould constitute the seat. If a venue was named but there was to be a different juridical seat, it would be expected that the seat would also be specifically named. Notwithstanding the authorities cited by the Defendant, I consider that there is great force in this. The Defendant submits however that as "venue" is not synonymous with "seat", there is no designation of the seat of the arbitration by Clause 14.4 and, in the absence of any designation, when regard is had to the parties' agreement and all the relevant circumstances, the juridical seat must be in India and the curial law must be Indian law. 27. In my judgment, in an arbitration Clause which provides for arbitration to be conducted in accordance with the Rules of the ICC in Paris (a supranational body of rules), a provision that the venue of the arbitration shall be London, United Kingdom does amount to the designation of a juridical seat. The parties have not simply provided for the location of hearings to be in London for the sake of convenience and there is indeed no suggestion that London would be convenient in itself, in the light of the governing law of the Shareholders Agreement, the nature and terms of that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 3 of the Arbitration Act. And again: 37. None of this has any application to the position as between England and India. The body of law which establishes that an agreement to the seat of an arbitration is akin to an exclusive jurisdiction Clause remains good law. If the Defendant is right, C v. D would now have to be decided differently. Both the USA (with which C v. D was concerned) and India are parties to the New York Convention, but the basis of the Convention, as explained in C v. D, as applied in England in accordance with its own principles on the conflict of laws, is that the courts of the seat of arbitration are the only courts where the award can be challenged whilst, of course, Under Article V of the Convention there are limited grounds upon which other contracting states can refuse to recognise or enforce the award once made. xxxxx 39. In my judgment therefore there is nothing in the European Court decision in the Front Comor which impacts upon the law as developed in this country in relation to anti suit injunctions which prevent parties from pursuing proceedings in the courts of a country which is not a Member State of the European Community, whether on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nti-suit injunction and the Court itself had observed that a mini trial would be required, and hence, the said ruling cannot be binding on the parties. Learned senior Counsel would submit that the view expressed in Enercon (India) Ltd. (supra) that the opinion of Justice Cooke, who had simply followed the principles laid down in C v. D (supra), another anti-suit injunction matter, approvingly quoted by the Constitution Bench in BALCO is not correct and, therefore, conclusion of Enercon (India) Ltd. (supra) to that extent is per incuriam. For the aforesaid purpose, he has commended us to Sundeep Kumar Bafna v. State of Maharashtra and Anr. (2014) 16 SCC 623 and Fibre Boards Private Limited, Bangalore v. Commissioner of Income Tax, Bangalore (2015) 10 SCC 333. 38. In Sundeep Kumar Bafna (supra), the Court referred to the Constitution Bench decision in Union of India v. Raghubir Singh (1989) 2 SCC 754 and Chandra Prakash v. State of U.P. (2002) 4 SCC 234 and thereafter expressed its view thus: 19. It cannot be overemphasized that the discipline demanded by a precedent or the disqualification or diminution of a decision on the application of the per incuriam Rule is of great importan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the proposition canvassed by the Assessee in challenging the provision. This Court has not, and could not have, intended to say that the Price Control Orders made by the Central Government under the IDR Act imposed a fetter on the legislative power of the State under Entry 54 of List II to levy taxes on the sale or purchase of goods. The reference to sales tax in paragraph 86 of that judgment was merely accidental or per incuriam and has, therefore, no effect on the impugned levy. 41. Be it noted, in Vikas Yadav v. State of Uttar Pradesh and Ors. (2016) 9 SCC 541 the Court has taken note of the aforesaid decisions and observed that it was not inclined to enter into the doctrine of precedents and the principle of per incuriam in the said case. That observation was made in the context of the said case. As far as the present controversy is concerned, we shall proceed to deal with the aspect whether principle stated in Shashoua which was based on the principle laid down in C v. D (supra) has really been accepted by this Court. If we arrive at an affirmative conclusion, the question of per incuriam would not arise. We may hasten to add that after such a deliberation, we shall also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry relating to the conduct and supervision of arbitrations will apply to the proceedings. 117. It would, therefore, follow that if the arbitration agreement is found or held to provide for a seat/place of arbitration outside India, then the provision that the Arbitration Act, 1996 would govern the arbitration proceedings, would not make Part I of the Arbitration Act, 1996 applicable or enable Indian Courts to exercise supervisory jurisdiction over the arbitration or the award. It would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the English Procedural Law/Curial Law. This necessarily follows from the fact that Part I applies only to arbitrations having their seat/place in India. 45. In Enercon (India) Ltd. (supra), the Court addressed to the issue of "seat/place of arbitration" and "venue of arbitration" for the purpose of conferment of exclusive jurisdiction on the Court. The Court appreciated the point posing the question whether the use of the phrase "venue shall be in London" actually ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nglish arbitral procedural law. 47. Further proceeding, the two-Judge Bench referred to Sulamerica Cia Nacional de Seguros SA (supra) wherein there has been reference to C v. D (supra) and further reproduced the observations from Sulamerica Cia Nacional de Seguros SA (supra) which read thus: In these circumstances it is clear to me that the law with which the agreement to arbitrate has its closest and most real connection is the law of the seat of arbitration, namely, the law of England. 48. In the said case, the High Court had concluded that the English law is the appropriate law of the agreement to arbitrate. This Court did not accept the view of the High Court by holding thus: 141. This conclusion is reiterated in para 46 in the following words: (Enercon GmbH case, Bom LR p. 3472) 46. The proposition that when a choice of a particular law is made, the said choice cannot be restricted to only a part of the Act or the substantive provision of that Act only. The choice is in respect of all the substantive and curial law provisions of the Act. The said proposition has been settled by judicial pronouncements in the recent past. 142. Having said so, the learned Judge further obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution Bench. Therefore, we are unable to accept the submission of Mr. Chidambaram that the finding recorded in Enercon (India) Ltd. (supra) that Shashoua principle has been accepted in BALCO should be declared as per incuriam. 51. At this juncture, we think it necessary to dwell upon the issue whether Shashoua principle is the ratio decidendi of BALCO and Enercon (India) Ltd. (supra) and we intend to do so for the sake of completeness. It is well settled in law that the ratio decidendi of each case has to be correctly understood. In Regional Manager v. Pawan Kumar Dubey (1976) 3 SCC 334, a three-Judge Bench ruled: 7. ... It is the Rule deducible from the application of law to the facts and circumstances of a case which constitutes its ratio decidendi and not some conclusion based upon facts which may appear to be similar. One additional or different fact can make a world of difference between conclusions in two cases even when the same principles are applied in each case to similar facts. 52. In Director of Settlements, A.P. and Ors. v. M.R. Apparao and Anr. (2002) 4 SCC 638, another three-Judge Bench, dealing with the concept whether a decision is "declared law", observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be considered keeping in view the questions that arose for consideration in the case. One is not expected to pick up a word or a sentence from a judgment de hors from the context and understand the ratio decidendi which has the precedential value. That apart, the Court before whom an authority is cited is required to consider what has been decided therein but not what can be deduced by following a syllogistic process. 56. Tested on the aforesaid principle, we find that question that arose in BALCO and the discussion that has been made by the larger Bench relating to Shashoua and C v. D (supra) are squarely in the context of applicability of Part I or Part II of the Act. It will not be erroneous to say that the Constitution Bench has built the propositional pyramid on the basis or foundation of certain judgments and Shashoua and C v. D (supra) are two of them. It will be inappropriate to say that in Enercon (India) Ltd. (supra) the Court has cryptically observed that observations made in Shashoua have been approvingly quoted by the Court in BALCO in para 110. We are inclined to think, as we are obliged to, that Shashoua principle has been accepted in BALCO as well as Enercon ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usions. 59. Thus, the analysis made in the said case, the two-Judge Bench has opined that a precedent is a judicial decision containing a principle which forms an authoritative element termed as ratio decidendi and any reasons assigned in support of such interim order containing prima facie findings are only tentative. There cannot be any quarrel over the aforesaid proposition of law. However, the controversy involved in this case has its distinctive characteristics. The Commercial Court in London, interpreting the same agreement adverted to earlier judgments (may be in anti-suit injunction) and held that in such a situation the Courts in London will have jurisdiction. The analysis made therein, as has been stated earlier, has been appreciated in BALCO and Enercon (India) Ltd. (supra) and this Court has approved the principle set forth in the said case. Once this Court has accepted the principle, the principle governs as it holds the field and it becomes a binding precedent. To explicate, what has been stated in Shashoua as regards the determination of seat/place on one hand and venue on the other having been accepted by this Court, the conclusion in Shashoua cannot be avoided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adam v. Savitribai Sopan Gujar (1999) 3 SCC 722 and Collector of Central Excise, Kanpur v. Flock (India) Pvt. Ltd. (2000) 6 SCC 650. 63. In Zuari Cement Ltd. (supra), the Court ruled that though the Petitioner and the Corporation therein have subjected themselves to the ESI Court, the same could not confer jurisdiction upon the ESI Court to determine the question of exemption from the operation of the Act, for by consent, the parties cannot agree to vest jurisdiction in a court to try the dispute which the court does not possess. 64. In view of the aforesaid, there cannot be any trace of doubt that any filing of an application by the Appellant in the courts in India can clothe such courts with jurisdiction unless the law vests the same in them. 65. Though we have opined that Shashoua principle has been accepted in BALCO and Enercon (India) Ltd. (supra), yet we think it apt to refer to the clauses in the agreement and scrutinize whether there is any scope to hold that the courts in India could have entertained the petition. Clause 14 of the shareholders agreement (SHA) refers to arbitration. The said Clause reads thus: 14. ARBITRATION 14.1 ...Each party shall nominate one arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rules of ICC, Paris which is supernational body of Rules as has been noted by Cooke, J. and that is how it has accepted that the parties have not simply provided for the location of hearings to be in London. To elaborate, the distinction between the venue and the seat remains. But when a Court finds there is prescription for venue and something else, it has to be adjudged on the facts of each case to determine the juridical seat. As in the instant case, the agreement in question has been interpreted and it has been held that London is not mentioned as the mere location but the courts in London will have the jurisdiction, another interpretative perception as projected by the learned senior Counsel is unacceptable. 69. Another aspect that was highlighted before us and with immense force and enthusiasm requires to be adverted to. It has been submitted that the arbitration agreement has the closest and most real connection with India and hence, the Courts in India would have the jurisdiction as per the principle laid down in Singer Co. (supra). In the said case, it has been expressed thus: 16. Where the parties have not expressly or impliedly selected the proper law, the courts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contract) being Indian law, it is that system of law which must necessarily govern matters concerning arbitration, although in certain respects the law of the place of arbitration may have its relevance in regard to procedural matters. 70. It is apposite to note that the said decision has been discussed at length in Union of India v. Reliance Industries Limited. The Court, in fact, reproduced the arbitration Clause in Singer Co. (supra) and referred to the analysis made in the judgment and noted that notwithstanding the award, it was a foreign award, since the substantive law of the contract was Indian law and the arbitration law was part of the contract, the arbitration Clause would be governed by Indian law and not by the Rules of International Chambers of Commerce. On that basis the Court held in Singer Co. (supra) that the mere fact that the venue chosen by the ICC Court or conduct of the arbitration proceeding was London, does not exclude the operation of the Act which dealt with the domestic awards under the 1940 Act. The two-Judge Bench in Reliance Industries Limited. quoted para 53 of Singer Co. (supra) and thereafter opined: 13. It can be seen that this Court in Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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