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TMI Blog2013 (6) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... Imax Ltd and Ecity signed in Mumbai, a letter of intent dated 28 September 2000 (The agreement) leasing of 6 IMAX systems to be installed in India. On 22 November 2000, they executed a contract under which Imax agreed to sell to E[1]city an IMAX 37 GT Projection system. On 21 December 2000, Imax entered into an agreement with Electronic Media Ltd (EML) and agreed to sell a single Imax cinema system. As alleged, EML failed to fulfill its obligations therefore, the ICC arbitration. (EML arbitration). 3 There arose disputes between the parties. Imax requested for Arbitration against EML and Ecity separately. The petitioner filed its answer to the Request for Arbitration under Article 5(1) of the ICC Rules. The Arbitral Tribunal constituted and proceeded accordingly. 4 The Respondent filed a Statement of Claim. The Petitioner filed its Statement of defence. The Arbitral Tribunal conducted an evidential hearing on the question of Ecity's liability to pay damages to Imax Ltd. On 9 February 2006 the Arbitral Tribunal rendered a "Partial Award" ordering, amongst other things, an assessment of damages payable by Ecity to Imax Ltd. On 15 May 2006 further Statement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the operation and development of existing IMAX theatres in India/those under negotiation. 14 General : Time is of the essence and no extension of time shall constitute a waive of any provision. The parties shall be entitled to their remedies at law for any breach of this Agreement, provided, however, in no event shall Imax be liable to the other for special, consequential or punitive damages, Ecity shall pay any Indian taxes, duty, customs and similar charges levied on a respecting the System and the Classes, the license to use the Trademarks or payments to be made hereunder. The Initial rent, additional rent and any other amounts required to be paid by Ecity hereunder shall be paid without any deduction, abatement or set off except for the appropriate withholding taxes (to a maximum of 10% ) required by law to be deducted at source. All amounts referred to herein are in US currency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Imax and Ecity acknowledge that the structure of this transaction is contingent upon the approval of the Reserve Bank of India, and Imax and E[1]city agree to any reasonable restructuring requested by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be excluded and, therefore, the Petition under Section 34 is maintainable in India. There was no agreed clause for PartI, exclusion. Admittedly, the Awards have been made in London at the judicial seat of the arbitration. For the purpose of deciding the issue of jurisdiction, the decisions so given by the Tribunal with regard to the jurisdiction of the Tribunal to decide the dispute; and the procedural, as well as, the substantive laws applied to resolve the disputes are relevant. 11 The challenge to all these awards is maintainable in India is the issue which has to be considered on the basis of the law laid down by the Supreme Court of India in Bhatia International vs. Bulk Trading SA [2002 (4) SCC 105] and Venture Global vs. Satyam Computers [2008 (4) SCC 190] . These Courts decisions are always the source to resolve the conflict of laws. The relevant paragraphs from Venture Global are as under : "28 Mr. Nariman, after taking us through the relevant provisions of Chapter I, Part II submitted that Section 48(1)(e) read with Section 48(3) of the Act specifies that an action to set aside a foreign award within the meaning of Section 44 of the Act would lie to the "co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contra view taken in various decisions relied on by Mr. Nariman. Though in Bhatia International the issue relates to filing a petition under Section 9 of the Act for interim orders the ultimate conclusion that Part I would apply even for foreign awards is an answer to the main issue raised in this case" Proper Law: 12 The extract from The Law and Practice of Commercial Arbitration in England, Second Edition (Sir Michael J. Mustill and Stewart C. Boyd), is reproduced: "2 The proper law of the arbitration agreement: The proper law of the arbitration agreement is determined in accordance with the same principles as apply for the determination of the proper law of any ordinary contract. 1. The first step is to inquire whether the parties have expressly chosen the law which is to apply to the agreement. If so, this choice of law will prevail, even if the chosen law differs from : (a) the proper law of the underlying contract or (b) the curial law. When the court is faced with a problem in this field, questions of classification will have to be considered: for the court cannot identify the relevant law, without first asking whether it is looking for law 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement is also involved, I am inclined to consider the present matter based upon the principles of conflict of laws and Indian judicial decisions. [Conflict of Laws (Second Edition), Atul M. Setalvad]. 16 The Supreme Court in National Thermal Power Corporation vs. Singer Company and ors., [(1992) 3 SCC 551/AIR 1993 SC 998.] has observed that; "(a) a proper law governing the arbitration is distinct and different from the law procedural law governing the conduct of the arbitration; (b) the proper law of arbitration is the same as the proper law of the underlying contract if such a law has agreed to by the parties; (c) if no procedural law of arbitration is agreed to by the parties, then the law of the place or seat of arbitration would determine the procedural law of arbitration; (d) the issue as regards validity of the arbitration agreement, jurisdiction of the arbitrator etc are issues which are to be governed by the proper law of arbitration and not by the procedural law of the arbitration." 17 It is necessary to consider Sections 20, 28, 31(4) of the Arbitration Act while deciding the issue so raised in the present matter. "20 Place of arbitration. (1) The parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying the Rules of law. The question of procedural law in the present case is also debated. The Awards were not challenged in English Court and not even in Singapore Court. The Respondents have not even taken steps to enforce the said Award in India or in any other country. The important aspects for deciding such jurisdictional issues are the law applicable to "the substance". Indian proper law/governing law: 19 The different terms "proper law", "the substantive law", "the governing law" have similar and same purpose and understanding in the National and/or International arbitration. The interpretation and/or meaning of the terms and/or its challenge and/or breaches of the contract and/or the flowing rights and obligations apart from related facts and circumstances are always the basic elements of any reasoned arbitral award. The Indian laws, therefore, in view of the clear terms and conditions shall be the governing law or the proper law of the contract. The agreed Singapore law, even if any, or the English law as contended by the Respondent to be the governing law, just cannot be accepted to overlook the binding effect of the clauses of the terms and the Indian laws. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal, therefore, by holding that there is a binding contract and by applying the principles of Singaporean law, passed the Award in favour of the claimant (Respondent) on the issue of liability and by the final Award declared that the Petitioner (original Respondent) is in breach of Master Agreement and that it has not taken delivery of systems and made only an initial payment in respect of the second system and no payments in respect of four remaining systems and, therefore, awarded the damages. 23 As noted, the Petitioner's application under Article 6.2 of the ICC Rules with regard to the question of jurisdiction and the final Award is a nullity was also rejected again by relying on Singapore Laws. The Respondent's case was that the governing law is the English law. The contract, as referred above, shows that the agreed clauses was Singapore law so also the jurisdiction of the Singapore Court. The learned Tribunal, on the issue of amalgamation of the Respondent, rejected the Petitioner's objection by relying upon the Canadian law. Partial awards and the final award: 24 All these partial awards are interlinked and inter[1]connected. The liability award dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Qin (Hong Kong) Company Ltd.], on 9/10 May 2013, observed as under : "33 In the present case, as noted above, there is no specific exclusive and/or agreement between the parties except the procedural rule as noted above, agreed to decide their disputes. The parties are always free to decide the rules to be followed and/or procedure to be adopted to adjudicate their disputes before the nominated Arbitral Tribunal. Both parties are bound by the same, so also the Arbitral Tribunal. The adoption of China Commission/ procedure/rules itself cannot be read and/or means that the parties have agreed to exclude the provisions of Part "I" of Arbitration Act as arbitration held outside India. Therefore, in view of specific agreement between the parties, I am inclined to observe that there is no such agreement even by implication to exclude the provisions of Part "I" of the Arbitration Act of India and the governing laws of the contract. 35 The constitution Bench of Supreme Court on 6 September 2012, in Bharat Aluminium Company Vs. Kaiser Aluminium Technical Services Inc. [(2012) 9 SCC 552] while dealing with the correctness of the Judgments of Bhatia International (supra), Videocon(Supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n laws for the purposes of considering the breaches of its terms and conditions and consequential damages and/or compensation, if any. 29 Part I of Indian Arbitration Act will also apply to foreign awards and international arbitration as recorded in Venture and Bhatia (Supra), as seat was in London. The Tribunal has also proceeded to pass Award by overlooking the Indian laws and the contents of the agreement referring to the Indian law obligations and the fact that the contract was to be performed in India. Admittedly, Singapore law is a foreign law which needs to be pleaded and proved. [ Hari Shanker Jain v. Sonia Gandhi (2001) 8 SCC 233. ], read with Section 57 of Indian Evidence Act. There is nothing on record to show that there is any inconsistency in Singapore law so as to oust Part I of the Arbitration Act. 30 It is also necessary to note that there is no serious denial to the contents of the agreements by the respective parties and so also their respective legal obligations and liabilities to be performed in India in view of the e governing laws of India. I am inclined to observe that the Indian laws are applicable to the transactions in every aspect and definitely not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to challenge the final award in the available forum out of two or more. The law which governs the respective statutory obligations, as in the present case is Indian law, should prevail over the procedural law of ICC Rules. The Singapore law, in no way, can control or be applicable and/or extendable to the contract clauses and the subject matters. Such governing law should prevail over the procedural law. The Court need to consider the clear clauses and in case of conflicts of clauses and the vagueness. There is nothing to prevent the Court from construing the agreement in such situation. In the present matter, therefore, I am inclined to observe/hold that the challenge to such international award in India is maintainable. There is no total bar. The Arbitral Tribunal's power to control the arbitration proceedings goes away once the final award is passed and approved/confirmed by the Arbitral Court as per the ICC Rules. There is nothing thereafter requires the supervision of Arbitral Tribunal except permissible correction of the award for the specific reasons and circumstances. The "Court" for Section 34 Petition: 33 I am of the opinion that the "Court" as contemplat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctus officio". The Arbitrator, who is functus officio further cannot rewrite the award. He becomes functus officio for the purposes of deciding the dispute. There are other stages also contemplate to terminate the arbitration proceedings. Therefore, the concept of supervision of Court of place of Seat of arbitration even after termination of arbitration proceedings, in my view, looses its importance. The ICC Rules nowhere provides that the award is subject to challenge only in the Court of Seat of arbitration. All the Arbitration Acts are also silent about the same. Section 34 Petition maintainable in India: 35 There is no specific bar created by any specific provision of Arbitration Act. Therefore, by such selfimposed bar the aggrieved party's rights to challenge the award in the Competent Court, where he can put the award for enforcement, as subject matter is also fall within the same court's jurisdiction just cannot be taken away. The finality of award is relevant under the arbitration law even for the execution and/or enforcement, which always subject to the competent Court's confirmation of the award. It is also subject to the cause of action and/or su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussion and debate in such arbitration proceedings as it impede the Arbitral Tribunal power to pass the enforceable award. The inclusion of Sections 34 to 37 in PartI of the Arbitration Act.: 38 The inclusion of Sections 34 to 37 in PartI of the Arbitration Act throughout, need reconsideration, at national and international level by all concerned. The confirmation of the award by the Court and Appeal thereon readwith its enforcement just cannot be stated to be governed by only the procedural law. The enforceability of Foreign Award: 39 The Arbitral Tribunal is under obligation to pass the enforceable award. The Court is under obligation to adjudicate and resolve the conflicts and so also the Arbitral Tribunal, in accordance with the national law and /or the governing law as per the terms. I am inclined to observe that Chapter II which deals with the power of competent court to decide the award and further to enforce the same by treating decree of court as contemplated under the Code of Civil Procedure (CPC) just cannot be controlled by the procedural rules and/or procedural law of arbitration and/or by the Court of seat of arbitration even though the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner, received last award dated 27 March 2008, on 1 April 2008. The petition filed on 21 July 2008. There is delay of 20 days, beyond the period of 90 days as prescribed. However, it is within the permissible outer limit of 120 days. There is no compulsion/provision that such partial award should be challenged and/or such partial awards cannot be challenged along with the final award. The Awards so passed show that the reasons are interlinked and interconnected. The aggrieved party therefore can challenge the final award along with such partial awards under Section 34 of the Arbitration Act. The final award has ultimately confirmed the partial awards. Therefore, as there is delay of 20 days in challenging the final award, the delay even if any in challenging the earlier partial awards which are inseparable and as sufficient case is made out, for the reasons recorded in above paragraphs, the delay is required to be condoned in the interest of justice. The Notice of Motion is deserved to be allowed in terms of prayer clause (a). 42 Resultantly, the following order: a) The Petition under Section 34 is maintainable in India. b) The Notice of Motion is accordingly allowed. c) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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