1. The petitioner has invoked Sections 16, 31(4), 34 and 48 of the Arbitration and Conciliation Act, 1996 (for short, the Act) for setting aside the impugned Orders/Award dated 15.11.2007, 25.04.2008 and 31.07.2008 in an international Arbitration matter as both the parties are foreigners, on the following circumstances:
On 13.04.2006, a Charter Party contract entered into between petitioners and respondents on 13.04.2006 A Dispute arose between the parties, the petitioners invoked the Arbitration clause.
2. On 31.10.2006, the petitioners filed a Statement of Claim before the Arbitral Tribunal. On 29.08.2007 the respondents filed their defence. On 28.09.2007 the petitioners filed their reply in Arbitration. On 15.11.2007, an interim Arbitration Award passed by the Tribunal.
3. On 25.04.2008 the Tribunal passed an order directing the petitioners to secure the respondents costs and the Tribunal costs for L 6000 each.
4. On 24.06.2008, the petitioners protested the lack of transparency and the absence of reasons & the conduct of the Arbitration proceedings.
5. On 31.07.2008, the Tribunal proceeded to pass the Arbitration Award. The award is received by the petitioners on 2.9.2008 The impugned Arbitration Award dismisses the petitioners claim for US $ 27,772.75, grants the respondents costs of L 6223.50 and holds that the petitioners liable for the costs of the award at L 7700. On 1.09.2008 the respondents demand payment from the petitioners of total sum of L 17,761.35.
6. On 28.01.2009, the petitioners have filed the present petition in this Court at Mumbai. The respondents by an affidavit dated 30th September, 2009 resisted the admission of the petition basically on the sole ground of jurisdiction. Therefore, heard finally by consent of the parties and the parties have made their respective submissions restricting to the issue of jurisdiction only.
7. The agreed arbitration clause is as under:
“64 Any disputes arising under this Charter to be referred to arbitration in London with English Law to apply, one arbitrator to be nominated by Owners and the other by Charterers and in case the arbitrators shall not agree, then to the decision of an uinphe to be appointed by them, the award of the arbitrators, or the umpire to be final and binding upon both parties. If either of the appointed arbitrators refuses to act or is incapable of acting or dies, the party who appointed him may appoint a new arbitrator in his place. If one party fails to appoint an arbitrator either originally or by way of substitution as aforesaid for fourteen clear clays after the other party having appointed his arbitrator has served the party making default with notice to make the appointment, the party who has appointed an arbitrator may appoint that arbitrator to act as sole arbitrator in the reference and his award shall be binding on both parties as if lie had been appointed by consent. Arbitrators to be commercial shipping men.”
8. Admittedly, the respondents are a company incorporated under the Laws of Singapore, having its place of business at Singapore. The respondents do not have any office or anywhere in India or do not carry on business either directly or through any Agent within the jurisdiction of this Court at Mumbai. The respondents are not assessed to tax in India. The respondents do not have any Agent acting exclusively for and/or authorised to incur any debts on its behalf within the jurisdiction of this Court. It is also stated that the respondents vessels/ships do not conduct business in Mumbai Port or on freight in Mumbai. However, the respondents vessels visited the Mumbai two or three times in the past.
9. Admittedly, both the parties are foreigners. The agreement was executed in U.S.A The agreed venue/seat of arbitration was London (England). The parties agreed for English law to apply to the dispute arising out of the agreement. The parties, in view of the agreement, proceeded under the English law at the place of arbitration at London. There was no dispute about the applicability of English law to the dispute as well as to the proceedings. By this agreement/arbitration clause the parties have expressly and with necessary implication agreed to exclude the application of Part I of the Arbitration Act. In view of this itself, I am of the view that this Court at Mumbai in India does not have the jurisdiction to receive, entertain, try and dispose of the present petition as filed under the Arbitration Act in India.
10. The award in question is governed by the English Arbitration Act, 1996 (for short, The English Arbitration Act). There are provisions covering a petition/application to challenge such awards final as well as interim award, within the prescribed time before an appropriate Court/Tribunal. The respondents have not moved any application and/or taken any steps to enforce the impugned foreign award in India.
11. The relevant sections of english arbitration act are as under:
“46 Rules applicable to substance of dispute
(1) The arbitral tribunal shall decide the dispute—
(a) in accordance with the law chosen by the parties as applicable to the substance of the dispute, or
(b) if the parties so agree, in accordance with such other considerations as are agreed by them or determined by the tribunal.
(2) For this purpose the choice of the laws of a country shall be understood to refer to the substantive laws of that country and not its conflict of laws rules.
(3) If or to the extent that there is no such choice or agreement, the tribunal shall apply the law determined by the conflict of laws rules which it considers applicable.
53 Place where award treated as made
Unless otherwise agreed by the parties, where the seat of the arbitration is in England and Wales or Northern Ireland, any award in the proceedings shall be treated as made there, regardless of where it was signed, dispatched or delivered to any of the parties.
58 Effect of award
(1) Unless otherwise agreed by the parties, an award made by the tribunal pursuant to an arbitration agreement is final and binding both on the parties and on any persons claiming through or under them.
(2) This does not affect the right of a person to challenge the award by any available arbitral process of appeal or review or in accordance with the provisions of this Part.
67 Challenging the award: substantive jurisdiction
(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court-
(a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or
(b) for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(2) The arbitral tribunal may continue the arbitral proceedings and make a further award while an application to the court under this section is pending in relation to an award as to jurisdiction.
(3) On an application under this section challenging an award of the arbitral tribunal as to its substantive jurisdiction, the court may by order-
(a) confirm the award,
(b) vary the award, or
(c) set aside the award in whole or in part.
(4) The leave of the court is required for any appeal from a decision of the court under this section.
68 Challenging the award: serious irregularity
(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant-
(a) failure by the tribunal to comply with section 33 (general duty of tribunal);
(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);
(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties.
(d) failure by the tribunal to deal with all the issues that were put to it;
(e) any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;
(f) uncertainty or ambiguity as to the effect of the award;
(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;
(h) failure to comply with the requirements as to the form of the award; or
(i) any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.
(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may—
(a) remit the award to the tribunal, in whole or in part, for reconsideration,
(b) set the award aside in whole or in part, or
(c) declare the award to be of no effect, in whole or in part.
The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.
(4) The leave of the court is required for any appeal from a decision of the court under this section.
12. The provision of Appeal against Order under sections 67, 68 or 69 is also available under Section 70 of the English Arbitration Act.
13. The basic judgment is Bhatia International v. Bulk Trading S.A, (2002) 4 SCC 105. Para 32 of the same, as relevant, is reproduced as under:
“32 To conclude we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsory apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. 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 the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply.”
14. The Apex Court in Venture Global Engineering v. Satyam Computer Services Ltd., (2008) 4 SCC 190, while dealing with the challengeable aspect of foreign award under Section 34 of the Act in India, has also reiterated that provisions of Part I could be applicable to International Commerce Arbitration held out of India, “unless any or all such provisions have been excluded by agreement between the parties, expressly or by implication”.
15. Therefore, in view of the present facts and circumstances, as the parties have consented and agreed that the Court at London have the jurisdiction and further that the English Act would govern the arbitration proceedings and in fact the parties have acted accordingly throughout, in my view, this amounts to permitted commercial agreement whereby the parties have agreed to be governed by the English law. It also means that the parties have agreed and consented to the exclusion of provisions of Part I of the Act which is permissible under the law. The Apex Court in Rajasthan State Electricity Board v. Universal Petrol Chemicals Limited, (2009) 3 SCC 107, specifically recognised and accepted such agreement of having exclusive jurisdiction to a particular Court and the law. The Apex Court has also recognised in Indian Oil Corporation Limited v. Raja Transport (P) Ltd., (2009) 8 SCC 520, that such arbitration agreement between the parties need to be accepted.
16. In view of the above, as such agreement/exclusion clause and adoption and/or agreement of the parties to be governed by particular law is well within the frame work of law and the record and it is not against any law. In my view, as Part I as referred above is specifically excluded, the foreign award/orders in question are also excluded from the said provision. Therefore, in view of the above Apex Court decisions i.e Bhatia International and Venture Global Engineering (supra), I hold that the present application/petition under Section 34 of the Arbitration Act challenging the foreign award is not maintainable in India. The remedy is under the English Arbitration Act. The agreed arbitration clauses should prevail.
17. In National Agricultural Co-operative Marketing Federation of India Ltd. v. Aliments S.A, an Unreported judgment dated 10.07.2009 in FAO (OS) No. 205/2000 by Delhi High Court, the basic issue was about maintainability of an Appeal before the Division Bench of Delhi High Court against the order of the learned Single Judge passed under Section 34 of the Act in respect of a foreign award.
18. In Max India Limited v. General Binding Corporation, Unreported judgment dated 16th July, 2009 in FAO (OS) No. 193/2009 of Delhi High Court, the issue was about maintainability of an application under Section 9 of the Act as the parties have agreed to resolve their disputes through arbitration under Singapore International Arbitration Rules (SIAC) and whether the Courts in Singapore have jurisdiction to settle such disputes and, therefore, the Delhi High Court lacs the jurisdiction to entertain such application. This petition is under Section 34 of the Act and not under Section 9. The power and purpose of the Court under these Sections are distinct and different. Max India Limited (supra) the Division Bench of Delhi High Court has confirmed the order of the learned Single Judge holding that the arbitration proceedings or the Courts at Singapore are appropriate forum even for the purposes of seeking interim measure after considering the similar clauses.
19. In view of above, without expressing anything on the merits of the matter, I am dismissing the present petition under Section 34 of the Act as not maintainable in India.
20. However, the liberty is granted to the petitioners to take appropriate proceedings or steps to challenge the foreign award as per the English Arbitration Act. The rival contentions are kept open on all counts.
21. Resultantly, the petition is dismissed. No costs.