w w w . L a w y e r S e r v i c e s . i n


Sakuma Exports Limited. v/s Louis Dreyfus Commodities & Uisse S.A.

    Appeal No. 337 of 2013 in Arbitration Petition No. 636 of 2011
    Decided On, 06 August 2013
    At, High Court of Judicature at Bombay
    By, THE HONOURABLE DR. JUSTICE D.Y. CHANDRACHUD & THE HONOURABLE MR. JUSTICE S.C. GUPTE
    For the Appellant: Aspi Chinoy, Senior Advocate with Darius Shroff, Senior Advocate, Sujai Kantawalla, Amey Nabar, Soura Ghosh, Ameya Deosthale, Ms. Sukhada Wagle i/b. M/s. Hariani & Co., Advocates. For the Respondent: Shyam Mehta, Senior Advocate with Asif Lampwala, Susheel Cyrial, Deepak Lad i/b. Advani & Co., Advocates.


Forward Referenced In:-
general :-   2012 (9) SCC 552,   Bharat Aluminium Co. Ltd. & Others Versus Kaiser Aluminium Technical Service, Inc.& Others]
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general :-   2012 (12) SCC 359,   Yograj Infras. Ltd. Versus Ssang Yong Eng. & Constrn Co. Ltd. & Another]
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general :-   2011 (10) SCC 420,   M/s. Cauvery Coffee Traders, Mangalore Versus M/s. Hornor Resources (Intern.) Co. Ltd.]
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general :-   2011 (9) SCC 735,   Yograj Infrastructure Ltd. Versus Ssang Yong Engineering And Construction Co. Ltd.]
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general :-   2011 AIR (SC) 2040,   Videocon Industries Limited Versus Union of India & Another]
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general :-   2011 (6) SCC 179,   M/s Dozco India P. Ltd. Versus M/s Doosan Infracore Co. Ltd.]
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general :-   2009 (7) SCC 220,   Citation Infowares Limited Versus Equinox Corporation ]
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general :-   2008 (10) SCC 308,   M/S. Indtel Technical Services Pvt. Ltd. Versus W.S. Atkins Rail Ltd. ]
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general :-   2008 (10) SCC 308,   M/S. Indtel Technical Services Pvt. Ltd. Versus W.S. Atkins Rail Ltd. ]
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general :-   2008 (10) SCC 308,   M/S. Indtel Technical Services Pvt. Ltd. Versus W.S. Atkins Rail Ltd. ]
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general :-   2003 (9) SCC 79,   Shreejee Traco (I) Private Limited Versus Paperline International Inc]
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general :-   2002 (4) SCC 105,   Bhatia International versus Bulk Trading S.A. & Another ]
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general :-   1998 (1) SCC 305,   Sumitomo Heavy Industries Limited Versus Ongc Limited and Others ]
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general :-   1992 (3) SCC 551,   National Thermal Power Corporation Versus Singer Company and Others ]
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Judgment Text
Oral Judgment:

Dr.D.Y.Chandrachud, J.

1. Admit. By consent of the learned counsel and at their request theAppeal is taken up for hearing and final disposal.

2. The appeal arises from a judgment of a Learned Single Judgedated 15 November 2011, holding that this Court had no jurisdiction toentertain a challenge to the award of an arbitral tribunal constituted by theRefined Sugar Association, London. The appeal relates to the period prior tothe applicability of the judgment of the Supreme Court in Bharat AlluminiumCompany Vs. Kaiser Alluminium Technical Services Inc. (BALCO).(2012) 9 SCC 552Inthe decision in BALCO, the Supreme Court held that Part-I of the Arbitrationand Conciliation Act, 1996, would have no application to internationalcommercial arbitration held outside India. In holding this, the Supreme Courtoverruled the earlier judgment in Bhatia International vs. Bulk Trading S.A.(2002) 4 SCC 105However, the Constitution Bench of the Supreme Court has held and directedthat the law now declared by the Court shall apply prospectively to allarbitration agreements executed thereafter. The arbitration agreement in thepresent case, was admittedly entered into before the judgment of theConstitution Bench. The rights and obligations of the parties, in so far as theappeal is concerned, are, therefore, governed by the regime which prevailedas long as the judgment of the Supreme Court in Bhatia International heldthe field. The decision in Bhatia International had taken the view that theprovisions of Part-I of the Arbitration and Conciliation Act, 1996, would applyto international commercial arbitration held out of India 'unless the parties byagreement, express or implied, exclude all or any of its provisions'at para 32 page 123.Theissue which falls for determination in the appeal is whether parties in this caseby their agreement, express or implied, have excluded all or any of theprovisions of Part-I of the Act of 1996.

3. The Appellant is an Indian Company which carries on thebusiness of import and export of sugar among other commodities. TheRespondent is a Swiss Company with whom the Appellant entered into anagreement on 12 January 2010 for the purchase of 2700 metric tons ofBrazilian white sugar of a stipulated description. The sugar was to be shippedbetween 15 January 2010 and 15 February 2010 at the option of the seller,the Respondent. The port of destination was to be Nhava Sheva or Kolkata atthe option of the Appellant. Disputes arose between the parties. Theagreement between the parties contained inter alia the following terms andconditions:

'Terms and conditions:

This Contract is subject to the Rules of The Refined SugarAssociation, London as fully as if the same had been expresslyinserted herein, whether or not either or both parties to it areMembers of the Association.

If any provision of this Contract is inconsistent with the Rules,such provision shall prevail.'

Parties envisaged that all disputes would be submitted to arbitration. Thearbitration agreement was thus:

'Arbitration: All disputes arising out of or in conjunction with thisContract shall be referred to The Refined Sugar Association,London for settlement in accordance with the Rules relating toArbitration. This Contract shall be governed by and construed inaccordance with English Law.'

A final award was passed by the arbitral tribunal on 31 December 2010 whichwas sought to be challenged by the Appellant in proceedings under Section34 of the Act of 1996 before the Learned Single Judge of this Court. Anobjection was taken to the jurisdiction of this Court to entertain the petition onthe ground that the applicability of Part-I of the Act was excluded by theagreement between the parties and consequently even under the law as itthen prevailed in Bhatia International, a Petition under Section 34 was notmaintainable. The Learned Single Judge has upheld the objection and hascome to the conclusion that this Court has no jurisdiction to entertain achallenge to the award under Section 34. The judgment is called in questionin appeal.

4. Learned Senior Counsel appearing on behalf of the Appellantsubmits that:

(i) During the interregnum when the law as laid down in BhatiaInternational held the field, the Act of 1996 will apply to aninternational commercial arbitration with a seat outside India unlessthere is an express selection by the parties of a foreign law relatingeither to the arbitration agreement or to the conduct of arbitralproceedings. Absent such an express selection of a foreign law, theAct of 1996 would apply;

(ii) In the present case, parties when they entered into an arbitrationagreement while executing the contract for the sale and purchase ofsugar, specifically did not incorporate the clause recommended by theRefined Sugar Association, London more specifically, the provision thatthe arbitration shall be conducted in accordance with English law.There was a specific deletion by the parties of the reference to thecurial law being the law of England;

(iii) There is no specific selection by the parties in the present case, of aforeign curial law or a foreign law governing the agreement to arbitrateand in the absence of an express selection to that effect, Part-I of theAct of 1996 would apply in view of the principles laid down in BhatiaInternational;

(iv) After the decision in Bhatia International, the situs of an internationalcommercial arbitration with a seat outside India would not constitute aground for excluding the applicability of Part-I;

(v) Once the decision in Bhatia International came to be pronounced bya Bench of three Learned Judges, the earlier decisions in NationalThermal Power Corporation vs. Singer company,(1992) 3 SCC 551and inSumitomo Heavy Industries Ltd. vs. ONGC Ltd.,(1998) 1 SCC 305would cease togovern and it has been so held in the judgment of the designate of theHon'ble Chief Justice of India in Indtel Technical Services Pvt. Ltd.vs. W.S. Atkins Rail Limited.(2008) 10 SCC 308.

5. On the other hand, it has been urged on behalf of the Respondentby the Learned Senior Counsel that:

(i) In the present case, the rules of the Refined Sugar Association havebeen incorporated into the contract. The proper law of contract isEnglish law while the procedural law of arbitration would be governedby the RSA Rules which in turn are consistent with English law. TheRSA Rules provide for the applicability of English curial law;

(ii) Rule 8 of the RSA Rules stipulates that for the purpose of allproceedings in arbitration, the contract shall be deemed to have beenmade in England and England shall be regarded as the place ofperformance. Besides, Rule 8 stipulates that disputes shall be settledaccording to the law of England wherever the domicile, residence orplace of business of the parties to the contract may be or become. Thesettlement of disputes would cover the manner in which the disputeswould be resolved, apart from the substantive law and hence wouldinclude a challenge to the arbitral award;

(iii) In the circumstances, the curial law is provided for in the contractbetween the parties and since the parties have chosen to abide by theprovisions of English law, that would necessarily exclude theapplication of Part-I of the Indian Act of 1996;

(iv) Alternatively, even if the curial law was not provided for by the parties,the judgment in Bhatia International does not rule out the possibility ofthe provisions of Part-I being excluded in their application by the properlaw governing the contract being a foreign law;

(v) The judgment of the Supreme Court in Sumitomo holds that the curiallaw will apply until the award is made and thereafter the law that wouldapply would be the governing law of arbitration. The decision of theSupreme Court in NTPC held that the proper law of arbitration wouldnormally be the same as the proper law of contract in the absence of acontrary indication. Both these decisions have held the field and havenot been overruled in Bhatia International or, for that matter, by thesubsequent decision of the designate of the Chief Justice of India inIndtel (supra). The decision in Indtel involved an application underSection 11 of the Act of 1996 and since the case did not pertain to achallenge to an award under Section 34, the decision in Sumitomo didnot fall for consideration. Hence, it has been urged that while theproper law is the law which governs the agreement between theparties, in the absence of any other stipulation in the arbitration clauseas regards the law which would apply to the arbitration proceedings, itis the law governing the contract which is also the law applicable to thearbitral tribunal.

6. These submissions fall for consideration.

7. The Constitution Bench of the Supreme Court has in the decisionin BALCO (supra) held that the earlier decision of three learned Judges inBhatia International does not reflect the correct position in law. Consequently, after the decision in BALCO, the position in Indian law is nowauthoritatively settled: Part-I of the Act of 1996 has no application to aninternational commercial arbitration held outside India. Consequently, in aforeign seated international commercial arbitration, no application for interimrelief under Section 9 can be maintained, nor can a petition lie under Section34 for challenging the validity of the award. The continued relevance of thedecision in Bhatia International, in so far as this Court is concerned, arisesby reason of the fact that the Constitution Bench, while overruling the earlierdecision, directed that the law declared in BALCO shall apply prospectively toall arbitration agreements executed thereafter. Consequently, and though theprinciple of law laid down in Bhatia International has now been overruled inBALCO, for the purposes of this case which relates to an arbitrationagreement executed prior to the decision in BALCO, the issue raised in theappeal would turn upon an interpretation of the decision in BhatiaInternational and the law which was laid down there. The appeal raises anissue of a considerable degree of significance since Courts in India would berequired to construe the observations in Bhatia International for thepurposes of deducing the consequence of international commercialagreements that were entered into prior to the decision of the ConstitutionBench in BALCO. It is from this perspective that we must necessarily turn tothe decision in Bhatia International and construe whether in terms of the lawthat was laid down in that decision, a petition under Section 34 of the Act of1996 would be maintainable before this Court to challenge the validity of anarbitral award in a foreign seated international commercial arbitration.

8. Bhatia International held that: (i) Part-I of the Act of 1996 wouldapply to arbitration held in India and parties would be free to derogate only tothe extent to which this was permissible under the relevant provisions of Part-I; and (ii) In cases of international commercial arbitration held out of India,Part-I would apply unless parties by agreement, express or implied, excludeany of its provisions. The observation in Bhatia International is to thefollowing effect :

'To conclude, we hold that the provisions of Part I would apply toall arbitrations and to all proceedings relating thereto. Wheresuch arbitration is held in India the provisions of Part I wouldcompulsorily apply and parties are free to deviate only to theextent permitted by the derogable provisions of Part I. In cases ofinternational commercial arbitrations held out of India provisions ofPart I would apply unless the parties by agreement, express orimplied, exclude all or any of its provisions. In that case, the lawsor rules chosen by the parties would prevail. Any provision, in PartI, which is contrary to or excluded by that law or rules will notapply.'

The crucial words upon which the submissions in the appeal turn, are 'unlessthe parties by agreement, express or implied, exclude all or any of itsprovisions'. These observations of the Supreme Court would indicate that forPart-I not to apply to an international commercial arbitration held out of India,the parties must exclude by their agreement, which may be either express orimplied, all or any of its provisions. An express agreement excluding theapplicability of the provisions of Part-I is where the parties in their agreementspecifically and categorically provide that some or all of the provisions of Part-I shall have no application. But parties, in addition, may by impliedagreement exclude all or any of its provisions as well. Something which isimplied is obviously something that is not expressly provided to govern incertain events, and it is for the Court to determine whether the parties in theterms of the contract that they have adopted intended to exclude theapplicability of Part-I. The submission of the Appellant is that before the Courtcan draw an inference of an implied exclusion, there must, by the agreementof the parties, be a specific incorporation of a foreign law either in theagreement to arbitrate or in the curial law governing the conduct of thearbitration. It is to this aspect that we now turn.

9. Where parties to an international commercial agreement enterinto contractual dealings, the foreign element involved in the contract may beregulated by three systems of law. This is indicated in the locus classicus onthe subject which is the judgment of the Court of Appeal in the U.K. inNaviera Amazonica Peruana SA vs. Compania International De SegurosDel Peru.(1988) 1 Lloyd's Rep 116 CAThe Court of Appeal adverted to three potentially relevantsystems of law thus:

'A. All contracts which provide for arbitration and contain a foreignelement may involve three potentially relevant systems of law. (1)The law governing the substantive contract. (2) The law governingthe agreement to arbitrate and the performance of thatagreement. (3) The law governing the conduct of the arbitration. In the majority of cases all three will be the same. But (1) willoften be different from (2) and (3). And occasionally, but rarely,(2) may also differ from (3).'

Mustill and Boyd in their Law and Practice of Commercial Arbitration inEngland8 adverted to (i) The proper law of the contract; (ii) The proper law ofthe arbitration agreement; and (iii) The curial law :

'It may be therefore be seen that problems arising out of anarbitration may, at least in theory, call for the application of anyone or more of the following laws-

-1. The proper law of the contract, i.e. the law governing thecontract which creates the substantive rights of the parties, inrespect of which the dispute has arisen.

-2. The proper law of the arbitration agreement, i.e., the lawgoverning the obligation of the parties to submit the disputes toarbitration, and to honour an award.

-3. The curial law, i.e., the law governing the conduct of theindividual reference.'

10. The principle of party autonomy in an international commercialagreement may lead to the contract incorporating provisions on all thesethree aspects. The first is the governing law of the contract which defines thesubstantive rights and obligations of the parties. The second is the law whichgoverns the arbitration agreement. This includes questions as to whether thedispute is arbitrable; the jurisdiction of the arbitral tribunal to make an awardand the validity of the award itself. The third aspect is the curial law ofarbitration which governs the manner in which the arbitrator would conductthe arbitral proceedings and would extend to procedural matters and theregulation of the conduct of the arbitration. Questions of evidence would fallwithin that description. The curial law governs the conduct of the arbitralSecond Editionproceedings until an award is finally made by the arbitral tribunal. Parties toa transnational commercial contract may in the course of negotiation decideupon the applicability of a system of law on all three aspects. It is notnecessary that parties must abide by the same system of law on all the threeaspects. The governing law of the contract may be the law of a particularjurisdiction. On the other hand, the law governing the arbitration agreementand the curial law governing the conduct of arbitral proceedings may notnecessarily be the same as the law governing the substantive obligations ofthe parties under the contract. Moreover, as between the law governing thearbitration agreement (the proper law governing the arbitration) and the curiallaw, parties may not necessarily choose the same system of law to apply.

11. Now, it is in this background that it would be necessary for theCourt to have due regard to two leading judgments of the Supreme Courtwhich were delivered prior to the decision in Bhatia International. BhatiaInternational, as we shall shortly explain, does not affect the validity of theessential principle laid down in these decisions. The first decision in NationalThermal Power Corporation vs. Singer Company,(1992) 3 SCC 551involved a case wherethe High Court had held that it had no jurisdiction to consider the validity of anaward in a foreign seated international commercial arbitration and theArbitration Act of 1940 would have no application. The governing law of thecontract in that case was of India; the arbitration was to be governed by theRules of the International Chamber of Commerce, Paris while the seat of thearbitration was to be London. The judgment of the Supreme Court held thatnormally the proper law of the arbitration agreement is the same as the properlaw of the contract and it is only in exceptional cases that this would not be sodespite the fact that the proper law of contract was expressly chosen by theparties.At para 23 page 563The judgment of the Supreme Court holds as follows:

'The parties have the freedom to choose the law governing aninternational commercial arbitration agreement. They may choosethe substantive law governing the arbitration agreement as well asthe procedural law governing the conduct of the arbitration. Suchchoice is exercised either expressly or by implication. Wherethere is no express choice of the law governing the contract as awhole, or the arbitration agreement in particular, there is, in theabsence of any contrary indication, a presumption that the partieshave intended that the proper law of the contract as well as thelaw governing the arbitration agreement are the same as the lawof the country in which the arbitration is agreed to be held. On theother hand, where the proper law of the contract is expresslychosen by the parties, as in the present case, such law must, inthe absence of an unmistakable intention to the contrary, governthe arbitration agreement which, though collateral or ancillary tothe main contract, in nevertheless a part of such contract.'

In that case, the Supreme Court held that the proper law of thecontract wasexpressly stipulated to be the law of India and exclusive jurisdiction had beenconferred on the court in Delhi in all matters arising under the contract.Hence, parties not having chosen expressly or by implication a law differentfrom the Indian law in regard to the agreement contained in the arbitrationclause, the proper law governing the arbitration agreement was held to be thelaw in force in India.

12. The judgment in NTPC was of two Learned Judges. The secondjudgment in Sumitomo Heavy Industries Ltd. Vs. ONGC Ltd.,1998 1 SCC 305was of aBench of three Learned Judges. In that case, the proper law of contract wasIndian law; the seat of the arbitration was London and the ICC Rules were togovern the procedure for arbitration. The arbitral tribunal rendered an award.ONGC sought a direction to the umpire to file the award in Court and such adirection was granted by a learned Single Judge of this Court. The SupremeCourt in Sumitomo noted the principles of law laid down in the judgment ofthe Court of Appeal in Naviera Amazonica (supra) and the position as statedin Mustill and Boyd and held that the curial law operates during thecontinuance of the proceedings before the arbitrator to govern the procedureand conduct of the arbitration. The Supreme Court further observed asfollows:

'Where the law governing the conduct of the reference is differentfrom the law governing the underlying arbitration agreement, thecourt looks to the arbitration agreement to see if the dispute isarbitrable, then to the curial law to see how the reference shouldbe conducted, 'and then returns to the first law in order to giveeffect to the resulting award'.

The law which would apply to the filing of the award, to itsenforcement and to its setting aside would be the law governingthe agreement to arbitrate and the performance of thatagreement.'

13. Sumitomo is, therefore, authority for the principle that the lawwhich would apply to the enforcement of the award and for an actionquestioning the validity of the award would be the law governing theagreement to arbitrate and the performance of that agreement. NTPC, asnoted above, affirms the principle that choice of a proper law of contractimplies, in the absence of an unmistakable intention to the contrary, thechoice of the same law as the proper or governing law of the arbitrationagreement. The decision in Bhatia International does not affect the validityof these principles which have been enunciated in the judgment in NTPCand in Sumitomo. In fact, the Supreme Court in Bhatia International was not dealing with either of the two issues, namely, (i) whether the choice of thegoverning law of the arbitration agreement, would follow from the choice ofthe proper law of contract. or (ii) which law would apply to the challenge of anarbitral award, whether the law governing the arbitration agreement or thecurial law relating to the conduct of the arbitration. The issue before theSupreme Court in Bhatia International was whether or not Part-I wouldapply to a foreign seated international commercial arbitration. BhatiaInternational hence, did not affect or overrule the fundamental premise of thetwo decisions in NTPC and Sumitomo referred to above. These principlespostulate that parties to an international commercial arbitration in making achoice as regards the substantive law governing the arbitration agreementand the curial law governing the conduct of the arbitration, may do so eitherexpressly or by implication. If an express choice is made by the parties, thatis a matter which is self evident. But even in the absence of an expresschoice by the parties in regard to the substantive law governing thearbitration agreement or curial law, when the proper law of contract has beenspecifically chosen that law would, in the absence of an unmistakableintention to the contrary govern the arbitration agreement. The law whichgoverns an action for setting aside or questioning the validity of an award inan international commercial arbitration would be the law governing theagreement to arbitrate and the performance of that agreement. BhatiaInternational has not overturned these principles.

14. But the submission which has been urged on behalf of theAppellant is that a decision which was rendered by the designate of the ChiefJustice of India in a proceeding under Section 11 of the Act of 1996, in IndtelTechnical Services Pvt. Ltd. vs. W.S.Atkins Rail Limited,(2008) 10 SCC 308casts a doubton the applicability of the NTPC principle in the post Bhatia regime. NowIndtel was a case where parties to an international commercial agreementhad agreed that the substantive law governing the agreement would be theEnglish law. Parties had neither made a choice in regard to the curial lawgoverning the procedure of the arbitration nor the seat of the arbitration. TheLearned designate of the Chief Justice of India held as follows:

'It is no doubt true that it is fairly well settled that when anarbitration agreement is silent as to the law and procedure to befollowed in implementing the arbitration agreement, the lawgoverning the said agreement would ordinarily be the same as thelaw governing the contract itself. The decisions cited byMr.Tripathi and the views of the jurists referred to in NTPC case(1992) 3 SCC 551support such a proposition. What, however, distinguishes thevarious decisions and views of the authorities in this case is thefact that in Bhatia International this court laid down the propositionthat notwithstanding the provisions of Section 2(2) of theArbitration and Conciliation Act, 1996, indicating that Part I of thesaid Act would apply where the place or arbitration is in India,even in respect of international commercial agreements, whichare to be governed by the laws of another country, the partieswould be entitled to invoke the provisions of Part I of the aforesaidAct and consequently the application made under Section 11thereof would be maintainable.'

The judgment in Indtel thus recognised as a fairly well settled principle thatwhen an arbitration agreement is silent on the law and procedure to befollowed in implementing the arbitration agreement, the law governing thearbitration agreement would ordinarily be the same as the law governing thecontract. This was, however, distinguished on the facts of that case followingBhatia International. Indtel was a case where there was a proceedingunder Section 11 before the designate of the Chief Justice of India and in asituation where parties had neither agreed to the seat of the arbitration or thecurial law. An arbitration with a seat in India was permissible under thecontract between the parties. Hence, the designate of the Chief Justice ofIndia held that whatever be the applicable law of arbitration, Part-I wouldapply under the Bhatia principle.

15. Prior to the decision in Indtel, another decision of the designate ofthe Chief Justice of India in a proceeding under Section 11 was rendered inShreejee Traco (I) Pvt. Ltd. vs. Paperline International Inc.(2003) 9 SCC 79This was acase where the seat of the arbitration was in New York. Parties had notindicated a choice of law. It was held there that though there was no expresschoice of law governing the contract as a whole or the arbitration agreementin particular a presumption would arise in the absence of a contrary indicationthat parties intended that the proper law of the contract as well as the lawgoverning the arbitration agreement would the same as the law of the countryin which the arbitration is agreed to be held. A later decision again of thedesignate of the Chief Justice of India in a proceeding under Section 11 wasin Dozco India Pvt. Ltd. vs. Doosan Infracore Co. Ltd.(2011) 6 SCC 179That was a casewhere the substantive law governing the contract was Korean law (underArticle 22 of the agreement); the seat of the arbitration was to be Seoul, Koreaand the Rules of the International Chamber of Commerce were to be appliedto the conduct of the arbitration. The decision relied on the judgment inSumitomo and on the observations in Mustill and Boyd. Indtel wasdistinguished on the ground that parties had not chosen the law governingarbitration procedure, including the seat of the arbitration and it was,therefore, that the Court exercised the jurisdiction under Section 11(6). In thecase at hand, it was held that both having regard to Articles 22.1 and 23.1, itwas clear that parties had agreed that the disputes arising out of theagreement would be finally settled in Seoul, Korea; that the rules of arbitrationof ICC would apply which was held to be indicative of the implied exclusion ofPart-I. The conclusions in that case were as follows:

'In that view, my inferences are that:

(i) The clear language of Articles 22 and 23 of the distributorshipagreement between the parties in this case spells out a clearagreement between the parties excluding Part I of the Act.

(ii) The law laid down in Bhatia International v. Bulk Trading S.A.(2002) 4 SCC 105and Indtel Technical Services (P) Ltd. v. W.S.Atkins Rail Ltd.,(2008) 10 SCC 308asalso in Citation Inforwares Ltd. v. Equinox Corpn.(2009) 7 SCC 220is notapplicable to the present case.

(iii) Since the interpretation of Article 23.1 suggests that the lawgoverning the arbitration will be Korean Law and the seat ofarbitration will be Seoul in Korea, there will be no question ofapplicability of Section 11(6) of the Act and the appointment ofarbitrator in terms of that provision.'

16. The subsequent decision of the designate of the Chief Justice ofIndia in a proceeding under Section 11 in Cauvery Coffee Traders,Mangalore vs. Hornor Resources (International) Company Limited,(2011) 10 SCC 420involved a situation where the situs of the arbitration was to be in a foreigncountryAt para 7 page 425.The Learned designate held that the view which was taken inShreejee Traco would not have binding effect on the ground that it wascontrary to the law laid down in Bhatia International.

17. At this stage, it would be necessary to again clarify that ShreejeeTraco was a case where only the situs of the arbitration was outside India andparties had not made a decision on the choice of law either governing thecontract as a whole or in regard to the arbitration agreement. That by itself, inthe Bhatia regime would not result in the exclusion of Part-I of the Act of1996. So long as the judgment in Bhatia International held the field, Part-I ofthe Act of 1996 would not be excluded merely by the choice of the seat ofarbitration being outside India. The situation in Shreejee Traco and inCauvery Coffee Traders thus involved contracts where only the seat of thearbitration was in a foreign country. This in the Bhatia regime would not byitself result in the exclusion of Part-I. On the other hand, where apart from theforeign seat of the international commercial arbitration, there are otherindicative circumstances emanating from the agreement between the partiesby which the choice of law in regard to the governing law of the contract is aforeign law as in Dozco and the rules of a foreign arbitral institution such asthe ICC have been adopted by the parties that has been held to be indicativeof an implied agreement excluding the application of Part-I.

18. In Videocon Industries Ltd. vs. Union of India,AIR 2011 SC 2040the issuerelated to the applicability of the provisions of Section 9 of the Act of 1996 to acase involving an international commercial agreement where (i) The properlaw of the contract was Indian law; (ii) The seat of the arbitration was KualaLumpur, Malaysia; and (iii) The arbitration agreement was to be governed byEnglish law. The Supreme Court held that a change of the venue would not result in a change of the seat of arbitration and referred to the decision inDozco (supra). The Supreme Court affirmed the view in a judgment of aLearned Single Judge of the Gujarat High Court in Hardly Oil and GasLimited vs. Hindustan Oil Exploration Company Limited(2006) 1 GLR 658.Hardly Oilinvolved a case where the substantive law governing the contract was Indianlaw; the law governing the arbitration agreement was to be English law andthe seat of the arbitration was London with the rules of the London Court ofInternational Arbitration governing the arbitration. The Gujarat High Courtheld in those facts that there was a specific provision that the law governingthe arbitration would be English law and hence, Part-I would stand excluded.The Bench of two learned Judges of the Supreme Court affirmed thecorrectness of the view of the learned Single Judge of the Gujarat High Court.In the case at hand, it was held that parties had agreed that the arbitrationagreement shall be governed by the law of England which necessarily impliedthat they had agreed to exclude the provisions of Part-I.

19. Finally, we may refer to a decision of two learned Judges of theSupreme Court in Yograj Infrastructure Limited vs. Ssang YongEngineering and Construction Company Limited,(2011) 9 SCC 735where the substantivelaw governing the arbitration agreement was Indian law while the seat of thearbitration was Singapore, with the arbitration being governed by the Law ofSingapore (the reference to SIAC rules in the original order was latercorrected in a clarificatory order of the Supreme Court in YograjInfrastructure Limited vs. Ssang Yong Engineeing and ConstructionCompany Limited.).(2012) 12 SCC 359The Supreme Court held as follows:

'As indicated hereinabove, Clause 28 indicates that the governinglaw of the agreement would be the law of India i.e. the Arbitrationand Conciliation Act, 1996. The learned counsel for the partieshave quite correctly spelt out the distinction between the 'properlaw' of the contract and the 'curial law' to determine the law whichis to govern the arbitration itself. While the proper law is the lawwhich governs the agreement itself, in the absence of any otherstipulation in the arbitration clause as to which law would apply inrespect of the arbitral proceedings, it is now well settled that it isthe law governing the contract which would also be the lawapplicable to the arbitral tribunal itself. Clause 27.1 makes it quiteclear that the curial law which regulates the procedure to beadopted in conducting the arbitration would be the SIAC Rules.There is, therefore, no ambiguity that the SIAC Rules would bethe curial law of the arbitration proceedings. It also happens thatthe parties had agreed to make Singapore the seat of arbitration.Clause 27.1 indicates that the arbitration proceedings are to beconducted in accordance with the SIAC Rules.'

20. In the present case, the parties have specifically made theircontract subject to the rules of the Refined Sugar Association, London.Leaving no ambiguity of interpretation the contract mandates that the rules ofthe Refined Sugar Association, London are incorporated 'as fully as if thesame has been expressly inserted' in the contract. The governing law of thecontract is English law. All disputes arising out or in conjunction with thecontract were to be referred to the Refined Sugar Association for settlement inaccordance with the rules relating to arbitration of the Association. The law inthe U.K. is, therefore, the substantive law of the contract. The seat of thearbitration is in the U.K. Parties have made it clear that the rules of theRefined Sugar Association would govern the resolution of their disputes. Rule8 of the Rules of the Refined Sugar Association (on which there is no disputebetween the parties during the course of the hearing of the appeal) providesas follows:

'8. For the purpose of all proceedin

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gs in arbitration, thecontract shall be deemed to have been made in England, anycorrespondence in reference to the offer, the acceptance, theplace of payment or otherwise, not-with-standing, and Englandshall be regarded as the place of performance. Disputes shall besettled according to the law of England wherever the domicile,residence or place of business of the parties to the contract maybe or become. The seat of the Arbitration shall be England and allproceedings shall take place in England. It shall not be necessaryfor the award to state expressly the seat of the arbitration.' The terms of the purchase contract as well as Rule 8 of the Rules of theRefined Sugar Association would make it clear that disputes shall be settledin accordance with the law of England wherever the domicile, residence orplace of business of parties to the contract may be or become. Moreover, forthe purposes of all proceedings in arbitration, the contract shall be deemed tohave been made in England and England shall be regarded as the place ofperformance. The seat of the arbitration shall be England and all proceedingsshall take place in England. On the basis of these provisions, it has beensubmitted that parties have, by the terms of their agreement, impliedlyexcluded the provisions of Part-I. We find merit in the submission. It is clearfrom the terms and conditions which have been accepted by the parties in thepurchase contract, read with Rule 8 that parties have accepted English law asthe governing law of the contract; that the seat of the arbitration would beLondon; that disputes shall be settled according to the law of England whichwould include the resolution of disputes and that all proceedings shall takeplace in England. Alternatively, even if it were to be held that parties have notprovided for the curial law governing the arbitration, the decision in BhatiaInternational does not prohibit the exclusion of the application of Part-I onaccount of the proper law of the contract being a foreign law. Where theproper law governing the contract is expressly chosen by the parties, whichthey have done in the present case by selecting English law as the proper lawof the contract, that law must, in the absence of an unmistakable intention tothe contrary, govern the arbitration agreement. The arbitration agreement,though it is collateral or ancillary to the main contract is nevertheless a part ofthe contract. In an application for challenging the validity of an arbitral awardunder Section 34, the Court would necessarily have to revert to the lawgoverning the arbitration agreement, which, in our considered view, would bethe law of England. 21. In this view of the matter and for the reasons that we haveindicated, we have come to the conclusion that this Court has no jurisdictionto entertain the petition under Section 34 of the Arbitration and ConciliationAct, 1996, challenging an international commercial award of an arbitraltribunal constituted by the Refined Sugar Association, London. The judgmentof the Learned Single Judge does not suffer from any error. The appeal isaccordingly dismissed. There shall be no order as to costs. 22. After the conclusion of the judgment, Counsel appearing on behalfof the Appellant seeks an extension of the ad-interim protection which wasgranted by an order of the Division Bench dated 4 September 2012 during thependency of the appeal. On 4 September 2012, the Division Bench recordedthat the statement which was made by Counsel appearing on behalf of theRespondent on 13 February 2012 that the Respondent shall not take steps forexecution of the award will continue till the next date of hearing. In order toenable the Appellant to have recourse to its remedies against this judgment,we extend the protection which was granted by the Division Bench on 4September 2012, for a period of four weeks from today.
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