9911796707
TMI Blog2011 (5) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... tural Gas Corporation Limited, Videocon Petroleum Limited, Command Petroleum (India) Private Limited and Ravva Oil (Singapore) Private Limited (hereinafter referred to as "the Contractor") in terms of which the latter was granted an exploration licence and mining lease to explore and produce the hydro carbon resources owned by Respondent No. 1. Subsequently, Cairn Energy U.K. was substituted in place of Command Petroleum (India) Private Limited and the name of the Videocon Petroleum Limited was changed to Petrocon India Limited, which merged the Appellant - Videocon Industries Limited. For the sake of convenience, the relevant clauses of Articles 33, 34 and 35 of the PSC are extracted below: 33.1 Indian Law to Govern Subject to the provisions of Article 34.12, this Contract shall be governed and interpreted in accordance with the laws of India. 33.2 Laws of India Not to be Contravened Subject to Article 17.1 nothing in this Contract shall entitle the Contractor to exercise the rights, privileges and powers conferred upon it by this Contract in a manner which will contravene the laws of India. 34.3 Unresolved Disputes Subject to the provisions of this Contract, the Parties agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003, on which date, the following order was passed in Arbitration Case No. 3 of 2003: By consent of parties, seat of the Arbitration is shifted to London. Parties will deposit Rs. 25,000 each as administrative cost with the Presiding Arbitrator. 5. Thereafter, the following proceedings were held by the arbitral tribunal at London: (i) 6.2.2004 - Interim Award pronounced in Case No. 1 of 2003 pronounced. (ii) 7.2.2004 - proceedings held in Arbitration Case No. 2 of 2003. (iii) 17.3.2004 - Case No. 2 of 2003 fixed for 13-19.5.2004 for final arguments. (iv) 17.3.2004 - Case No. 3 of 2003 fixed for recording of evidence from 3.6.2004 to 9.6.2004. (v) 17.3.2004 - Case No. 3 of 2003 fixed for arguments from 20-26.7.2004. (vi) 27.3.2004 - final arguments rescheduled to 16-20.5.2004 in Case No. 2 of 2003. (vii) 25.11.2004 - Arbitral Tribunal declared that it will pass award in Case No. 2 of 2003 and further partial award in Case No. 1 of 2003. (viii) 3.2.2005 - Case No. 2 of 2003 fixed for 25-26.2.2005 for hearing on the application for clarification filed on behalf of the Government of India. (ix) 12.3.2005 - The Tribunal declared that it will finalise the award in Case No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the parties herein, by adopting the English Law as the proper law governing the arbitration agreement, have expressly excluded the applicability of the Indian Arbitration Act, and consequently, this Court has no jurisdiction to entertain the present petition. This contention of the Respondent has been resisted by learned senior counsel for the Petitioner on the ground that English law governs the substantive aspects of the arbitration agreement, whilst the procedural aspect thereof is governed by the curial law, that is, the procedural law of the country where the seat of arbitration is. It is thus contended by learned senior counsel for the Petitioner that the juridical seat of arbitration being in Kuala Lumpur, it is the Malaysian laws that would govern the conduct of the arbitral proceedings. Learned senior counsel for the Respondent has countervailed the said averment of the Petitioner by submitting that London, and not, Kuala Lumpur is the 'designated seat' of arbitration in view of the order dated 15.11.2003 passed by the Arbitral Tribunal whereby the Arbitral Tribunal recorded the consent of the parties and shifted the seat of arbitration to London. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al matters. There is no gainsay that the Courts observe extreme circumspection whilst affording relief under Section 9 of the Indian Arbitration Act, lest the annals of party autonomy and sanctity of the arbitral tribunal - the hallmarks of any arbitration - are jeopardized. It is to be appreciated that the object underlying the grant of interim measures under Section 9 of the Indian Arbitration Act is to facilitate and sub serve any ongoing arbitral proceedings. It is much apparent that the disparate stands taken by both parties qua the seat of arbitration has resulted in a veritable impasse in the arbitral proceedings in the present case. The Petitioner has brought to our notice that the proceedings initiated by it at the High Court Kuala Lumpur challenging the Partial award have been virtually brought to a standstill owing the objections raised by the Respondent on grounds of jurisdiction. The Petitioner has already expressed its dissidence about the English Court deciding the question of seat of arbitration for the reason that for the English Court to assume jurisdiction, it is the place of arbitration which is the relevant factor. In such a situation, of the Indian Court doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nglish Arbitration Act, 1996. 10. Shri Gopal Subramaniam, learned Solicitor General submitted that as per the arbitration agreement which is binding on all the parties to the contract, a conscious decision was taken by them that Kuala Lumpur will be the seat of any intended arbitration, Indian law as the law of contract and English law as the law of arbitration and the mere fact that the arbitration was held outside Kuala Lumpur due to the outbreak of epidemic SARS, the venue of arbitration cannot be said to have been changed from Kuala Lumpur to London. Learned Solicitor General emphasised that once Kuala Lumpur was decided as the venue of arbitration by written agreement, the same could not have been changed except by amending the written agreement as provided in Clause 35.2 of the PSC. He then argued that the arbitral tribunal was not entitled to determine the seat of arbitration and the record of proceedings held on 15.11.2003 at London cannot be construed as an agreement between the parties for change in the juridical seat of arbitration. He further argued that the PSC was between the Government of India and ONGC Ltd., Videocon Petroleum Ltd., Command Petroleum (India) Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion that as per the terms of agreement, the seat of arbitration was Kuala Lumpur. If the parties wanted to amend Clause 34.12, they could have done so only by written instrument which was required to be signed by all of them. Admittedly, neither there was any agreement between the parties to the PSC to shift the juridical seat of arbitration from Kuala Lumpur to London nor any written instrument was signed by them for amending Clause 34.12. Therefore, the mere fact that the parties to the particular arbitration had agreed for shifting of the seat of arbitration to London cannot be interpreted as anything except physical change of the venue of arbitration from Kuala Lumpur to London. In this connection, reference can usefully be made to Section 3 of the English Arbitration Act, 1996, which reads as follows: 3. The seat of the arbitration. In this Part "the seat of the arbitration" means the juridical seat of the arbitration designated- (a) by the parties to the arbitration agreement, or (b) by any arbitral or other institution or person vested by the parties with powers in that regard, or (c) by the arbitral tribunal if so authorised by the parties, or determined, in the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untry - for instance, for the purpose of taking evidence.... In such circumstances, each move of the arbitral tribunal does not of itself mean that the seat of the arbitration changes. The seat of the arbitration remains the place initially agreed by or on behalf of the parties. 15. The next issue, which merits consideration is whether the Delhi High Court could entertain the petition filed by the Respondents under Section 9 of the Act. In Bhatia International v. Bulk Trading S.A. (supra), the three- Judge Bench considered the important question whether Part I of the Act is applicable to the international arbitration taking place outside India. After noticing the scheme of the Act and argument of the Appellant that Part I of the Act would apply only to the cases in which the venue of arbitration is in India, the Court observed: A reading of the provisions shows that the said Act applies to arbitrations which are held in India between Indian nationals and to international commercial arbitrations whether held in India or out of India. Section 2(1)(f) defines an international commercial arbitration. The definition makes no distinction between international commercial arbitrations h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. But by not specifically providing that the provisions of Part I apply to international commercial arbitrations held out of India, the intention of the legislature appears to be to ally (sic allow) parties to provide by agreement that Part I or any provision therein will not apply. Thus in respect of arbitrations which take place outside India even the non-derogable provisions of Part I can be excluded. Such an agreement may be express or implied. If read in this manner there would be no conflict between Section 1 and Section 2(2). The words "every arbitration" in Sub-section (4) of Section 2 and the words "all arbitrations and to all proceedings relating thereto" in Sub-section (5) of Section 2 are wide. Sub-sections (4) and (5) of Section 2 are not made subject to Sub-section (2) of Section 2. It is significant that Sub-section (5) is made subject to Sub-section (4) but not to Sub-section (2). To accept Mr. Sen's submission would necessitate adding words in Sub-sections (4) and (5) of Section 2, which the legislature has purposely omitted to add viz. "subject to provision of Sub-section (2)". However read in the manner set out hereinabove there would also be no conflict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made "before" or "during the arbitral proceedings". Thus it is clear that an application for interim measure can be made to the courts in India, whether or not the arbitration takes place in India, before or during arbitral proceedings. Once an award is passed, then that award itself can be executed. Sections 49 and 58 provide that awards covered by Part II are deemed to be a decree of the court. Thus "foreign awards" which are enforceable in India are deemed to be decrees. A domestic award has to be enforced under the provisions of the Code of Civil Procedure Code. All that Section 36 provides is that an enforcement of a domestic award is to take place after the time to make an application to set aside the award has expired or such an application has been refused. Section 9 does suggest that once an award is made, an application for interim measure can only be made if the award is a "domestic award" as defined in Section 2(7) of the said Act. Thus where the legislature wanted to restrict the applicability of Section 9 it has done so specifically. We see no substance in the submission that there would be unnecessary interference by courts in arbitral proceedings. Section 5 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on behalf of the Appellant and observed: On close scrutiny of the materials and the dictum laid down in the three-Judge Bench decision in Bhatia International we agree with the contention of Mr. K.K. Venugopal and hold that paras 32 and 35 of Bhatia International make it clear that the provisions of Part I of the Act would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto. We further hold that where such arbitration is held in India, the provisions of Part I would compulsorily apply and parties are free to deviate to the extent permitted by the provisions of Part I. It is also clear that even in the case 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. We are also of the view that such an interpretation does not lead to any conflict between any of the provisions of the Act and there is no lacuna as such. The matter, therefore, is concluded by the three-Judge Bench decision in Bhatia International. The learned Senior Counsel for the Respondent based on para 26 submitted that in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. In such an event, the judgment-debtor cannot be deprived of his right under Section 34 to invoke the public policy of India, to set aside the award. As observed earlier, the public policy of India includes - (a) the fundamental policy of India; or (b) the interests of India; or (c) justice or morality; or (d) in addition, if it is patently illegal. This extended definition of public policy can be bypassed by taking the award to a foreign country for enforcement. 17. We may now advert to the judgment of the learned Single Judge of the Gujarat High Court in Hardy Oil and Gas Limited v. Hindustan Oil Exploration Company Limited and Ors. (2006) 1 GLR 658. The facts of that case were that an agreement was entered into between Unocal Bharat Limited, Hardy Oil and Gas Limited, Netherland B.V. (Hardy), Infrastructure Leasing and Financial Services Limited, Housing Development Finance Corporation Limited and Hindustan Oil Exploration Company Limited on 14.10.1998. The agreement had an arbitration clause. A dispute having arisen between the parties, the matter was referred to the arbitral tribunal. During the pendency of the arbitration proceedings, an application was filed by the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional v. Bulk Trading S.A. (supra), Shreejee Traco (I) Pvt. Ltd. v. Paperline International Inc. (2003) 9 SCC 79, National Thermal Power Corporation v. Singer Company (1992) 3 SCC 551 and upheld the order of the learned District Judge by observing that in terms of Clause 9.5.4 of the agreement, the place of arbitration was London and the law governing arbitration was the English law. The learned Single Judge referred to paragraph 32 of the judgment in Bhatia International v. Bulk Trading S.A. (supra) and observed that once the parties had agreed to be governed by any law other than Indian law in cases of international commercial arbitration, then that law would prevail and the provisions of the Act cannot be invoked questioning the arbitration proceedings or the award. This is evident from paragraph 11.3 of the judgment, which is extracted below: However, their Lordships observed in Para.32 that 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 laws or rules chosen by the parties would prevail. Any provision, in Part-I, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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