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TMI Blog2002 (12) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground that the impugned arbitral award only refuses to accept the plea of jurisdiction raised by NIRMA and such decision of the arbitral tribunal could not be said to be an interim or partial award for the purpose of Section 34 of the Act. 2. The relevant facts, in brief, are that, on 1-9-1997, NIRMA entered into "Know-how and Supervision Agreement" with LURGI (Lentjes Energitechnik GmbH of Germany) which, inter alia, contained the clauses as under : "Article XV : Arbitration : 15.1 If, at any time any question/dispute or difference whatsoever shall arise between LENTJES and NIRMA out of or in connection with this agreement, the same shall be finally settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (I.C.C.). The place of arbitration shall be London and arbitration proceedings shall be carried out in English. Article XVI : General Conditions : 16.2 The Agreement shall be governed according to the laws of India," 2.1 On 12-12-1997, and thereafter, NIRMA and Lentjes Energy (India) Pvt. Ltd. (L.E.I.), a wholly owned subsidiary of LURGI, entered into other agreements for engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Terms of Reference document in this arbitration, signed on 21st September, 2001, the Arbitral Tribunal now finds, holds, determines and orders as follows :- 7.1 A "question/dispute or difference" has arisen on 17th January, 2001 out of or in connection with the Know-How Agreement, which entitle the claimants to invoke Article 15.1, and the Arbitral Tribunal has jurisdiction over the present arbitral proceedings notwithstanding the existence of the pending Indian arbitral proceedings. 7.2 Notwithstanding the existence of the Indian arbitral proceedings, the Arbitral Tribunal should proceed to deal with the Claimant's claims. 7.3 All issues of costs in connection with this Partial Award are hereby reserved." 3. As seen earlier, the challenge to the above First Partial Award under Section 34 of the Act was turned down only on the ground that award was in essence a decision on the plea that the arbitral tribunal did not have jurisdiction or was exceeding the scope of its authority and the scheme of the Act did not permit challenge to such a decision where the arbitral tribunal had not accepted the plea. Thus, the challenge to jurisdiction of the arbitral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any event, the arbitral award is only a decision rejecting a jurisdictional plea and as such it is not open to challenge under Section 34 of the Act. He submitted that the English Arbitration Act, 1996 applied in all cases where the seat of arbitration was in England, and as such the appellant's remedy was under Section 67 of the English Act which provides for challenge to any award of the arbitral tribunal including an interim award deciding upon its own jurisdiction. The impugned award could have been challenged within a period of 28 days under the English Act and the appellant has not done so. He submitted that the enforcement in India of a New York Convention award can be opposed on the grounds set out in Section 48 of the Act which are substantially similar to the grounds available to challenge a domestic award under Section 34. However, since no award has been rendered on merits, no occasion has arisen for LURGI to enforce any award in India. If and when such an occasion arises, the appellant would have an opportunity to resist enforcement of such award under Section 48 of the Act. It is repeatedly asserted in his written arguments also that a decision rejecting juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain an application for setting aside the impugned partial award? And (b) Whether an application to set aside the impugned partial award was maintainable under Section 34 of the Act? 7. Before dealing with the critical controversy created by the facts of the case and the contentions of the learned Counsel, it would be advantageous to take an overview of the relevant provisions of the Act. 7.1 The Arbitration and Conciliation Act, 1996 is, by its preface, an Act to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto. Whereas the United Nations Commission on International Trade Law (UNCITRAL) had adopted the Model Law on International Commercial Arbitration and the General Assembly of the United Nations recommended that all countries gave due consideration to the said Model Law, the Indian law was enacted after taking into account the aforesaid Model Law. According to its Statement of Objects and Reasons, the main objectives, inter alia, were: to comprehensively cover international c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (6) of Section 31 allows the making of an interim arbitral award on any matter with respect to which final award could be made. Under Section 32, the arbitral proceedings shall be terminated by final arbitral award or by an order of the arbitral tribunal under Sub-section (2) thereof. Section 34 provides for recourse to a Court against an arbitral award only by an application for setting aside such award in accordance with Sub-sections (2) and (3) thereof which provide for the grounds and the period of limitation. Subsection (4) provides for giving an opportunity to the arbitral tribunal to eliminate the grounds for setting aside the award. According to Sections 35 and 36, the award shall be, subject to the provisions of Part I, final and binding and shall be enforced as a decree of the Court. Chapter IX provides for appeals and in that no appeal is provided against a decision rejecting the plea that arbitral tribunal did not have jurisdiction or the plea that it was exceeding the scope of its authority. 7.2 Part II of the Act defines in Section 44 "Foreign Award" of which the essential attributes are that : "(a) It is an arbitral award on difference bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrator are concluded. The need to challenge an award arises if it is being enforced and the enforcement process is subsequent to and independent of the proceedings before the arbitrator. It is not governed by the curial or procedural law that governed the procedure that the arbitrator followed in the conduct of the arbitration. The proper law governing the arbitration in that case being the law of India, it was held that the Courts in India were entitled to receive the awards made in United Kingdom. 8.1 In National Thermal Power Corporation (NTPC) v. Singer Company, 1992 (3) SCC 551, it is held that where the proper law of contract is expressly chosen by the parties, as in the present case, such law must in absence of an unmistakable intention to the contrary, govern the arbitration agreement which, though collateral or ancillary to the main contract, is nevertheless a part of such contract. The overriding principle is that the Courts of the country whose substantive laws govern the arbitration agreement are the competent Courts in respect of all matters arising under the arbitration agreement and the jurisdiction exercised by the Courts of the seat of arbitration is merely c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt not governed by the law of India. The Foreign Awards Act contained a specific provision to exclude its operation to what may be regarded as a "domestic award" by virtue of Section 9 which said that nothing in that Act shall apply to any award made on an arbitration agreement governed by the law of India. Such foreign awards were held to be amenable to the jurisdiction of Indian Courts and controlled by the Indian system of law just as in the case of any other domestic award, except that the proceedings held abroad and leading to the award were in certain respects amenable to be controlled by the public policy and the mandatory requirements of the law of the place of arbitration and the competent Courts of that place. It was concluded in the NTPC case (supra) that the jurisdiction exercisable by the English Courts and the applicability of the laws of that country in procedural matters must be viewed as concurrent and consistent with the jurisdiction of the competent Indian Courts and the operation of Indian laws in all matters concerning arbitration insofar as the main contract as well as that which is contained in the arbitration clause are governed by the laws of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... award" unless the intention was to cover awards which would otherwise not be covered by this definition. Strictly speaking, an award passed in an arbitration which takes place in a non-convention country would not be a "domestic award". Thus, the necessity is to define a "domestic award" as including all awards made under Part I. The definition indicates that an award made in an international commercial arbitration held in a non-convention country is also considered to be a "domestic award". "24. Section 5 provides that a judicial authority shall not intervene except where so provided in Part I. Section 8 of the said Act permits a judicial authority before whom an action is brought in a matter to refer parties to arbitration. If the matters were to be taken before a judicial authority in India it would be a Court as defined in Section 2(1)(e). Thus, if Part I was to only apply to arbitrations which take place in India, the term "Court" would have been used in Sections 5 and 8 of the said Act. The legislature was aware that in international commercial arbitrations, a matter may be taken before a judicial authority outside India. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roper law governing the arbitration is the law of India. Applying the above principles evolved in NTPC (supra) and Bhatia International (supra), not only that the provisions of the Arbitration Act apply to the arbitration, but the Court of competent jurisdiction in India has jurisdiction to entertain applications in accordance with law. In the context of Section 34 of the Act, the above view is further fortified by the fact that it provides for recourse to a Court against an "arbitral" award without deploying the words "domestic award" or "foreign award". The corresponding provision of Clause (1) of Article 34 of the UNCITRAL Model Law reads as under : "(1) Recourse to a Court against an arbitral award made in the territory of the State/ under this law may be made only by an application for setting aside in accordance with Paras (2) and (3) of this Article." Parallel provision in Section 34 of the Act omits either of the clauses, namely, "made in the territory of the State" or "under this law". The commentary of the Commission on this aspect reveals that the question of the territorial scope of application, the pending n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural law and the competent Courts of that country may have a certain measure of control. 9.2 The Supreme Court has also observed in NTPC case (supra) that the arbitration clause must be considered together with the rest of the contract and the relevant surrounding circumstances. In that case, the choice of the place of arbitration was, as far as the parties were concerned, merely accidental. On the other hand, apart from the expressly stated intention of the parties, the contract itself, including the arbitration agreement contained in one of its clauses, was redolent of India and matters Indian. The disputes between the parties under the contract had no connection with anything English, and they had the closest connection with Indian laws, Rules and Regulations. In those circumstances, the mere fact that the venue chosen by the I.C.C. Court for the conduct of arbitration was London did not support the case of Singer on the point. Any attempt to exclude the jurisdiction of the competent Courts and the laws enforceable in India was held to be totally inconsistent with the agreement between the parties. 10. In view of the above, we have no hesitation in holding that the Indian Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehemently emphasised by the learned Counsel Mr, Dave, that the impugned partial award is an award finally putting to rest the jurisdictional controversy in the arbitration and it was regarded as such by the I.C.C. Rules, the arbitral tribunal and the English Law. It also has all the trappings of an award as are attributed to an award under Section 31 of the Act and an interim award is expressly and specifically included in the definition of "arbitral award" in Section 2(1)(c). However, the term "award" is not defined in the Act. Its dictionary meaning indicates it to be "a decision of an arbitrator on an issue submitted to him". 12. The analytical Commentary on UNCITRAL Draft Model Law is as under : "3. Article 34 provides recourse to an arbitral award without specifying which kind of decision would be subject to such recourse. The Working Group, therefore, agree that it was desirable for the Model Law to define the term "award" and noted that such definition had important implications for a number of provisions of the Model Law especially Arts. 34 and 16. After consideration of proposed definition, the Working Group decided, for lack ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat such decision under Sub-section (5) of Section 16 would become final, binding and enforceable under Sections 35 and 36 of the Act. 13.2 In applying the above legislative scheme, the Court cannot go by the form leaving alone the substance. In view of the qualified definition of arbitral award, since the context otherwise requires, the award shall not include an interim award which, in substance, is a decision of the arbitral tribunal rejecting the plea raised under Sub-section (2) or (3) of Section 16. 14. Learned Counsel Mr. Sen insisted that the impugned award was a foreign award and since it had not come for enforcement before any Court, there was no occasion to challenge the same. The fallacy of that argument should be obvious if the provisions of Section 46 were referred. According to Section 46, a foreign award which would be enforceable has to be treated as binding for all purposes on the persons as between whom it was made and may be relied on by any of those persons by way of defence, set-off or otherwise in any legal proceedings in India. By virtue of the provisions of Section 49, the award which is enforceable, which means the award which is binding under Section 46 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Union of India, 2000 (1) Arb. LR 30 (AP), observed that : "6. .....As already stated above, Central Act 26 of 1996 has aimed at consolidating the law of arbitration, both domestic and foreign and to cut short the procedural aspects for providing speedy and efficacious remedy and not providing of appeal against ruling of the Arbitrator upholding his competence to deal with the matter is one such step in aid of faster disposal of the arbitral proceedings, and by giving opportunity to the party aggrieved to question the award under Section 34 of the Act. The only thing is that the party has to wait till the award is rendered and is not given that traditional right of interrupting the proceedings at each stage of the proceeding. As such, there is a nexus tor the object to be achieved, i.e. speedy disposal of the arbitration proceedings and also the intelligible differentia as already mentioned (supra)." Accordingly, we decide the second issue against the appellant. 15. It was also observed during the course of arguments that the parties on both sides had taken contradictory stands and unloaded so much voluminous printed and typewritten material that could only create con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two Benches of this Court by referring to the voluminous record unnecessarily unloaded in the Court which would necessarily result into relegation of all other urgent and important matters, not to mention the matters awaiting final hearing since decades. This epilogue is essential and of some instructive value inasmuch as it has a bearing upon the strength and burden of judiciary, ethics of advocacy and the alacrity of the legislature in making clarificatory amendments which can go a long way in eliminating unnecessary and arduous litigations. We also note the sincere efforts made by the learned Counsel in minimising the area of difference for an overall out-of-Court and out-of-arbitration settlement which, at one stage, appeared feasible and within reach but which course could not be fully pursued in the Court for want of time. The appeal is dismissed with the above observations with no order as to costs. The Civil Applications filed in this appeal are also accordingly rejected and the interim relief stands vacated. At this stage, the learned Counsel for the appellant requested to extend the interim relief which was operating till now. In view of rejection of the appeal, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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