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TMI Blog2004 (7) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... ever arising between the parties out of, or relating to, the construction, meaning and operation or effect of the contract or the breach thereof shall be settled by arbitration in India through the arbitration panel of the Indian Council of Arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration. If either party is in disagreement with the arbitration result in India, either party will have the right to appeal to a second arbitration in London, UK in accordance with the rules of conciliation and arbitration of the international chamber of commerce in effect on the date hereof. The results of this second arbitration will be binding on the both parties, judgment upon the award may be entered in any Court in jurisdiction. 4. The contract between the parties was for supply of dry copper by the respondent, an American company to the appellant, which is a Government company. The first part of the arbitration agreement was also resorted to by the parties. By an award dated 15th June, 1999, the claim of the respondent was dismissed by the Indian Arbitrator and a nil award was passed. 5. The first argument made by the respondent Centrotrade is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt also, like the second award. 11. This is the point of the two awards destroying each other in case the second award is not truly and properly an appellate award. Although the point is new before us, the parties were again and again told by us during arguments that we would deal with this important point. 12. For the purpose of resolving this issue, one has to look at the arbitration clause and construe it according to the well-settled principles which govern the construction of contracts of agreeing parties. The principle is that words have to be given their plain meaning; if possible each word has to be ascribed some meaning. The intention of the parties is to be gathered from the expression given by them to their intentions by way of the words which form the contract. 13. There are other principles of construing contracts also, but in construing a hard-core business or commercial contract, the above principles reign supreme. 14. The first point to note about the said Clause 14 is that the word appeal does occur in the clause. Apart from the occurrence of this word, however, there is not a single other indication which shows that the second award would wipe out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is made expressly binding by the following phrase: The results of this second arbitration will be binding on the both parties . The correct way would be to say, both the parties. Results is again non technical, award would be the correct term of art. The respondent argued that this expression of binding nature mentioned in regard to the second award only necessarily means that the first award is not similarly binding. We are, with respect, wholly unable to agree. It does not need any contractual expression by parties to say that the award to be passed upon their arbitration will be binding upon them. The law of arbitration starts with the premise that an award is binding on the parties who have gone to arbitration. Were it not so, arbitration would have no meaning. 24. We, therefore, have before us an independent and antecedent award which is binding by the Indian Law of Arbitration. It is also a domestic award to which Part I of the Arbitration and Conciliation Act, 1996 applies. 25. Since we are of the opinion that the arbitration clause is a valid one, it also follows that the second award passed by Mr. Cooke is equally binding upon the parties. Whether that award is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in resistance in execution. There the second award, although not an appellate award, would have nonetheless the effect of an appellate award square and proper. 31. In the present situation before us, however, and we can say this at least in hindsight, it was senseless for the parties, and more so Centrotrade to go in for a second arbitration when they should have realised that whatever the award that might result in their favour in such a second reference, its execution could never be had, because a conflicting nil award which had already been passed, would be put up in resistance by the appellant, Hindustan Copper. In a situation of this nature it is the first award which exhibits the characteristic of an appellate award although it has come before the second. In short, where the parties specify that two awards might be made and both are on the same plane as here, the lesser award takes precedence over the higher, and only that part of the claim which has been awarded in both the arbitrations can be executed and money obtained on that basis. 32. To our mind, the above points are points of the greatest importance in this case and we have had to deal with these at length afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime when such application is pending adjudication there. But there is no indication anywhere in the Act that the above phrase is limited to this contingency alone. 37. In a case of the present nature, where the London award has not become binding yet, because the Indian nil award still goes on existing or co-existing with the London award, we have no doubt in our mind that the party i.e. the appellant here, can set up the defence, and show to the Executing Court that the London award has not yet become binding. It would be wrong to attach any special or extra aura to an award, even if it is a foreign award properly so-called. Foreign awards deserve all the respect, but not any more than Indian awards do. If an Indian award is not binding because there is another contrary Indian award making it of no effect, then and in that event a foreign award can be equally not binding because a contrary Indian award makes it emasculated. 38. The novice's argument or the argument of the beginner, that the existence of the nil Indian Award will never allow the London award to become binding, and therefore the phrase has not yet becoming binding occurring in Section 41(l)(e) does not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself has no force in India ex proprio vigore. The preamble of the 1996 Act will show that the Model Law was adopted only by a Commission of the United Nations, the General Assembly of which merely recommended its adoption by the different signatory nations. What the Indian adoption is, what form it has taken, is to be seen from the 1996 Act. The preamble in this regard is quoted below : Preamble WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model Law on International Commercial Arbitration in 1985; AND WHEREAS the General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law or arbitral procedures and the specific needs of international commercial arbitration practice; AND WHEREAS the UNCITRAL has adopted the UNCITRAL Conciliation Rules in 1980; AND WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of international commercial relations and the parties seek an amicable settlement of that dispute by recourse to conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of foreign award being itself different according to the Laws of the two countries. In our opinion, the true and core criterion to determine whether the award is a foreign award or not is to ask the question, whether an Indian Court would be competent to entertain a challenge to the award under Section 34 of the 1996 Act. This proposition we shall try to establish and confirm on the basis of various authorities dealt with below but it is our firm opinion that this is the key to the riddle which is the riddle of the determination of an award as a foreign award or otherwise. A running common theme of Arbitration Law in the few countries of which we are aware is this, that some Competent Court somewhere retains supervisory jurisdiction over the award. It is not lawful for the parties to say that they will go to arbitration and the award never be challengeable in any Court of Law. The Nationality of the Court which is competent to set aside the award. 48. Unless the two conditions (a) and (b) of Section 44 of the 1996 Act are satisfied an award cannot be considered to be a foreign award in India but even if those conditions are satisfied there remains a category of awards which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There are several Supreme Court cases which lend a lot of support to this point of view. The first case in this regard cited by Mr. Kapoor appearing for the appellant is the case of NTPC, reported at [1992]3SCR106 . In that case the Delhi High Court had refused to entertain an application for setting aside of an award since the seat of Arbitration was London. The Delhi High Court had opined that the English Courts alone had jurisdiction to set aside the award. This opinion was held by the High Court although it was expressly incorporated in the agreement that the laws applicable to the contract shall be the laws in force in India. The Supreme Court opined in paragraph 8 that the fundamental question is what the law which governs the agreement, and if that law is Indian Law, the award would not be a foreign award. In paragraph 26 Their Lordships said that the proper law of the arbitration agreement is normally the same as the proper law of the contract. In paragraph 26 it was opined that in respect of procedural matters concerning the conduct of arbitration, the English Courts would have jurisdiction, but the overriding principle is that the Courts of the country whose substantive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian Law from producing foreign awards. 59. Mr. Mitter's argument was that so notable an omission cannot but point to the legislative intent that even if Indian law is the governing law of an arbitration contract today, nonetheless the award under the contract will be a foreign contract if it is made on a foreign convention territory, as defined in Section 44. 60. With all due respect, we are unable to agree. Neither Part II of the 1996 Act, nor Section 51 states anywhere either expressly or by necessary implication that the definition of Section 44 will apply notwithstanding the proper law of the contract being Indian law. All that has happened by reason of the dropping of Section 9(b) is that the Court is now compelled to see on its own, even if the proper law of the contract is Indian Law, whether the Indian Courts would have jurisdiction to set aside the award made on foreign soil. We are of the opinion that in the very small handful of cases where parties might choose and agree to apply Indian Law to their contract and nonetheless confer jurisdiction on a foreign Court, say the English Courts, for retaining supervisory jurisdiction over the award in matters like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat implicit reference. 64. If we take a different view, the result would be in supportable according to common sense also. The New York convention is not of modern origin or something which happened in the 1990's. It had taken place in or about the year 1958. As a result of that convention the Foreign Awards Act, 1961 was enacted. It provided that if the proper law of the contract is Indian Law, the award will not be a foreign award. That same New York convention is the basic subject-matter of Part II of the 1996 Act. The provisions regarding enforcement of foreign award have remained practically the same. The New York convention has not altered. All that has happened is that the UNCITRAL Model Law has been recommended for adoption by the United Nations in 1985. On the basis of such adoption such a big change cannot take place without express words, the big change being that the proper law of the contract will have not bearing at all on the nature of the award being foreign or otherwise, but that only the situs of the arbitration will be the important and the sole factor. 65. Our legislature has not adopted the UNCITRAL model in that fashion. Had it done so, it would als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This paramount and all pervading importance given to the venue of the arbitration is an Anglo-American feature which has not yet found place in Indian Law. According to our law the proper law of the contract is a much more important and determinative factor than the venue of arbitration. 69. We are accordingly of opinion that the award of Mr. Cooke is not a foreign award and is not enforceable under Part II but is enforceable under Section 36 of Part I of the 1996 Act. 70. A point of appealability was argued on the basis of Section 50 of the 1996 Act. That point would not arise if the award is not a foreign award. Even if the point arose, the order being an order in execution, we would have no hesitation in holding that a Letters Patent appeal under Clause 15 would lie to the Division Bench, the first Judge being one of the High Court itself. Authorities were cited in this regard but the matter being clear we do not need to traverse the old ground once again. We make it clear that the application for execution was transferred to the High Court by itself from Alipore; but once that is done, the Original Side order, even if passed in its extraordinary civil jurisdiction is stil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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