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Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • Mr. V.R Reddy, SC for Mr. N.C Ramesh
  • For Respondents in both the original side appeals: Mr. C.S Vaidyanathan, SC for Mr. T.K Bhaskar for R1:
  • Mr. T.C.A Shrinivasan for R2
Judges
  • D. Murugesan
  • M. Sathyanarayanan, JJ.
Acts
  • Section 106 of the Government of India Act, 1919, Section 223 of the Government of India Act, 1935, Clause 2(1) of India (Adaptation of Existing Laws) Order, 1949 and Section 18(3) of the Independence Act, 1947.
  • award.(d) Invoking Sections 44, 47 and 49 of The Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act)
  • sub-sections (2), (3), (4) and (5) of Section 2. Sub-section (2) of Section 2
  • SECTION 39 ARBITRATION AND CONCILIATION ACT
  • sub-section (2) or sub-section (3) of section 16; or(b)
  • SECTION 39 ARBITRATION ACT 1940
  • sub-section (2) and sub-section (3).(2)
  • clause (e) of sub-section (1)
  • section 45;(b)
  • section 9;(b)
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Advocates
  • Mr. V.R Reddy, SC for Mr. N.C Ramesh
  • For Respondents in both the original side appeals: Mr. C.S Vaidyanathan, SC for Mr. T.K Bhaskar for R1:
  • Mr. T.C.A Shrinivasan for R2
Judges
  • D. Murugesan
  • M. Sathyanarayanan, JJ.
Acts
  • Section 106 of the Government of India Act, 1919, Section 223 of the Government of India Act, 1935, Clause 2(1) of India (Adaptation of Existing Laws) Order, 1949 and Section 18(3) of the Independence Act, 1947.
  • award.(d) Invoking Sections 44, 47 and 49 of The Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act)
  • sub-sections (2), (3), (4) and (5) of Section 2. Sub-section (2) of Section 2
  • SECTION 39 ARBITRATION AND CONCILIATION ACT
  • sub-section (2) or sub-section (3) of section 16; or(b)
  • SECTION 39 ARBITRATION ACT 1940
  • sub-section (2) and sub-section (3).(2)
  • clause (e) of sub-section (1)
  • section 45;(b)
  • section 9;(b)
See more information ...
Smart Summary

Structured Summary of the Legal Opinion (D. Murugesan, J.)

Factual and Procedural Background

The Tamil Nadu Electricity Board (the Board) awarded the Stage-II implementation of the North Madras Thermal Power Project to Videocon Power Limited (VPL) pursuant to memoranda of understanding and subsequent negotiations. The Power Purchase Agreement (PPA) contained arbitration clauses (Clause 17) specifying UNCITRAL rules, Singapore as the seat for arbitration, English as the language, and that arbitration law would be governed by the laws of England; Clause 17.3(e) provided that any award could be enforced against assets wherever located, including in India.

A dispute arose between VPL and the Board after delays in financial closure and withdrawal of certain benefits by the Board. The dispute was referred to a three-member arbitral tribunal (two party‑nominated arbitrators and a chairman appointed by the Secretary General of the Permanent Court of Arbitration, The Hague). The tribunal conducted most proceedings in Singapore (one sitting in Hong Kong) and issued a final award dated 21.06.2004 allowing VPL damages and costs and rejecting the Board's counterclaim.

VPL filed an execution petition invoking Sections 44, 47 and 49 of the Arbitration and Conciliation Act, 1996 to enforce the award. The Board had earlier filed a Section 34 petition (15.07.2004) to set aside the award, admitted by this Court on 05.11.2004. The Court initially entertained VPL's execution petition by order dated 09.12.2004 and granted a prohibitory order against a garnishee bank; subsequent review and further orders were passed, and both the execution petition and the Section 34 petition were ultimately disposed of by a Common Order dated 09.06.2008, which is impugned in these appeals.

Legal Issues Presented

  1. Whether the award under challenge is a foreign award or a domestic award?
  2. Whether an Original Petition filed under Section 34 is maintainable if the award is a foreign award?
  3. Whether the petition filed under Section 48 for enforcement of a foreign award is maintainable before this Court?
  4. Whether an appeal is maintainable against the order passed under Section 48 of the Arbitration and Conciliation Act, 1996?

Arguments of the Parties

Appellant (Tamil Nadu Electricity Board) — Mr. V.R. Reddy (Senior Counsel)

  • The award is not a foreign award but a domestic award because two members of the tribunal signed the award in Chennai where it was pronounced; therefore, a petition under Section 34 is maintainable before this Court.
  • Part I of the Arbitration and Conciliation Act, 1996 should apply to permit a Section 34 challenge; the learned Judge erred in treating the award as foreign and excluding Part I.
  • The learned Judge should not have entertained an application under Section 48 treating the award as foreign; relied on provisions of the PPA and on the decision in Venture Global Engineering v. Satyam Computer Services Ltd. to argue applicability of Part I (even to foreign awards).

First Respondent (VPL) — Mr. C.S. Vaidyanathan (Senior Counsel)

  • Under Clause 17(a) and (b) of the PPA, disputes are to be resolved under UNCITRAL rules in Singapore in English; Clause 17.3(c) makes arbitration law governed by the laws of England and recognizes the New York Convention; majority of proceedings were in Singapore — therefore the award is a foreign award and Part I does not apply.
  • The parties expressly agreed to exclude Part I as to arbitration law matters by the PPA terms; the Venture Global Engineering judgment is inapplicable because parties here excluded Part I by clause 17.3.
  • Clause 17.3(e) of the PPA expressly permits enforcement of any award against assets wherever located and submission to the jurisdiction of Courts or Tribunals of competent jurisdiction in India; accordingly VPL can seek enforcement under Part II (Section 48) before this Court.
  • An order under Section 48, if refusing enforcement, is appealable under Section 50(1)(b), but no second appeal lies under Section 50(2); therefore Letters Patent second appeals are not maintainable (relying on Union of India v. Mohindra Supply Co. and P.S. Sathappan).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Venture Global Engineering v. Satyam Computer Services Ltd. (2008) 4 SCC 190 Holds that even a foreign award could be challenged under Part I of the Act (quoted the Bhatia International position with approval). Cited by the appellant; the Court noted the decision but relied on the contractual exclusion of Part I in the PPA and subsequent analysis to hold the Section 34 challenge was not maintainable on the facts.
Bhatia International Limited (2002) 4 SCC 105 Holds that provisions of Part I can apply to international commercial arbitrations; parties can exclude non-derogable provisions of Part I in arbitrations held outside India by express or implied agreement; Part I applies compulsorily where place of arbitration is in India. Used as the foundational precedent for the principle that Part I may be excluded by agreement; the Court applied the Bhatia distinction to conclude that the parties had excluded Part I by the PPA clauses and that the award was a foreign award.
Union of India v. Mohindra Supply Co., AIR 1962 SC 256 Addresses restriction on appeals: where a special statute provides for certain appeals and excludes others, Letters Patent appeals cannot be entertained to circumvent statutory limits. The Court relied on this principle to hold that Letters Patent second appeals are excluded where Section 50(2) of the Act bars second appeals and provides recourse only to the Supreme Court.
P.S. Sathappan (Dead) by LRs v. Andhra Bank Limited and others (reported) Confirms that appeals under Letters Patent cannot prevail over specific legislative provisions restricting or prescribing appeals; Letters Patent are subordinate to statute where inconsistent. Cited by the Court in support of the conclusion that Letters Patent appeals are not maintainable against orders under Section 48/50 of the Act.
State of West Bengal v. M/s Gourangalal Chatterjee (1993) 3 SCC 1 Holds that no appeal lies against certain orders of a single Judge (example given: revoking authority to appoint arbitrator) where statute provides specific appellate route. Referred to by the Court to illustrate the statutory restriction of appeals and as an analogue to the position under the 1996 Act.
Orma Impex (P) Ltd. v. NISSAIASB PTE. Ltd. (1999) 2 SCC 541 Referred to in the context of conflicting earlier decisions on appealability under Letters Patent; part of the jurisprudential history. Noted by the Court in summarising appellate jurisprudence relevant to arbitration statutes; used as background but not as the decisive authority for the present appealability issue.
Shyama Charan Agarwala & Sons v. Union of India (2002) 6 SCC 201 Holds that special statute provisions limit entertainable appeals; where statute prescribes appeal routes, general Letters Patent appeals are restricted. Relied upon to support the conclusion that Section 50(2) excludes Letters Patent second appeals and limits higher appellate recourse to the Supreme Court.
Vinta M. Khanolkar v. Branga M. Pai (referred) Earlier decision taking a contrary view on appealability; part of the historical debate leading to reference to a larger Bench. Cited in the Court's discussion of appellate jurisprudence; the Court referenced the conflict but relied on later authority restricting Letters Patent appeals.

Court's Reasoning and Analysis

The Court proceeded in a stepwise manner focusing on the contractual terms, statutory definitions, and controlling precedents:

  1. Contractual analysis: The Court examined Clause 17 of the PPA (17.3(a)–(e)) and Clause 18.8. Clause 17 required arbitration under UNCITRAL rules, held in Singapore in English; Clause 17.3(c) provided that arbitration law (validity, interpretation, conduct, enforcement, and other arbitration law questions) shall be governed by the laws of England and expressly subjected awards to the New York Convention. Clause 17.3(e) permitted enforcement of awards against assets wherever located, including in India. Clause 18.8 preserved Indian substantive law only "except as provided in Article 17.3." The Court read these clauses together to conclude that the parties intended the arbitral proceedings and their governing arbitration law to be outside India.
  2. Statutory test for "foreign award": The Court referred to Section 44 and identified the relevant features: (i) commercial relationship between the parties; (ii) award made pursuant to a written agreement; and (iii) award made in a Convention country. Factually the contract was commercial, the award was made pursuant to the written PPA and arbitrators were appointed under the PPA; the proceedings were held in Convention countries (Singapore primarily, one sitting in Hong Kong). Applying these tests, the Court concluded the award was a foreign award.
  3. Applicability of Part I and Section 34: The Court analysed Bhatia International and Venture Global authorities. Bhatia established that Part I can apply to international arbitrations but parties may, by agreement (express or implied), exclude Part I (including even some non-derogable provisions in arbitrations outside India). Venture Global had quoted Bhatia with approval to the effect that even foreign awards can be challenged under Part I. However, the Court emphasised that the real test is the terms of the agreement. On the facts here, Clause 17.3 expressly governed arbitration law by English law and provided for foreign seat/conduct; accordingly the parties had excluded Part I in relation to the arbitral proceedings. Clause 18.8 further corroborated that Indian substantive law applies only except as provided in Clause 17.3. Thus Section 34 (Part I) challenge was not maintainable on the facts.
  4. Enforcement under Part II (Sections 48–49): The Court observed that Clause 17.3(e) submitted parties to enforcement in Indian Courts and that under Section 48 enforcement of a foreign award can be refused only if the party resisting enforcement proves one of the enumerated grounds (Section 48(1)(a)–(e)) or the court finds under Section 48(2) that the subject matter is not arbitrable under Indian law or enforcement is contrary to public policy. The Board had not established any of the Section 48 grounds before the Court; the Court therefore held VPL entitled to enforce the award before this Court under Part II.
  5. Appealability (Section 50 and Letters Patent): The Court analysed Section 50(1)(b) and (2) which provide an appeal from orders refusing to enforce foreign awards but bar second appeals (with right to appeal to the Supreme Court). Drawing on Union of India v. Mohindra Supply Co., State of West Bengal v. Gourangalal Chatterjee, Shyama Charan Agarwala and P.S. Sathappan, the Court concluded that statutory appeal provisions prevail and Letters Patent second appeals are excluded where Section 50(2) bars second appeals. Thus an appellant cannot circumvent the statutory limitation on appeals by invoking Letters Patent.

Holding and Implications

Core Holding: The arbitral award dated 21.06.2004 is a foreign award; the Section 34 petition under Part I of the Arbitration and Conciliation Act, 1996 is not maintainable on the facts; VPL is entitled to seek enforcement of the foreign award under Part II (Section 48); and second appeals under Letters Patent against an order on enforcement under Section 48 are not maintainable.

Implications and Direct Effects

  • The Board's Section 34 challenge under Part I was rejected as not maintainable because the parties had, by contract (Clause 17.3 and Clause 18.8), excluded the application of Part I to the arbitration proceedings.
  • VPL is entitled to enforce the arbitral award before this Court under Section 48/49 (Part II), subject to the limited defenses expressly enumerated in Section 48 which the Board did not successfully invoke.
  • Appeals from orders under Section 48 are governed by Section 50; while an appeal lies to the appropriate court under Section 50(1), Section 50(2) bars any second appeal (except to the Supreme Court). Consequently, Letters Patent second appeals are not maintainable in respect of orders under Section 48/50.
  • The appeals before the Court were dismissed and no costs were awarded; connected miscellaneous petitions were closed.
  • No new legal principle was announced beyond application of existing authorities (Bhatia, Venture Global, and appellate‑limitation authorities) to the contractual facts — the decision applies those precedents to hold that contractual exclusion of Part I and a foreign seat result in Part II enforcement and bar a Section 34 challenge in the forum below.

End of summary based solely on the information contained in the provided opinion.

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    Tamil Nadu Electricity Board v. Videocon Power Limited

    Common Judgment — D. Murugesan, J.

    The unsuccessful petitioner in both the Review Application and Original Petition before the learned single Judge viz., the Tamil Nadu Electricity Board is the Appellant in these appeals.

    2. The following points arise for consideration in these appeals (1) Whether the award under challenge is a foreign award or domestic award?

    (2) Whether the Original Petition filed under Section 34 is maintainable if the award is a foreign award?

    (3) Whether the petition filed under section 48 for enforcement of a foreign award is maintainable before this Court?

    (4) Whether an appeal is maintainable against the award passed under Section 48 of The Arbitration and Conciliation Act, 1996?

    3. The following few facts are necessary for consideration of the above questions:

    (a) The Tamil Nadu Electricity Board (herein after referred to as “the Board”) initiated North Madras Thermal Power Project (NMTPP). The said project was to be implemented in three stages. The Board itself completed the Stage-I. Initially, the Board decided to undertake Stage-II as well and leaving the execution of Stage-III for private promoters. Later on, it was decided by the Government of Tamil Nadu that the execution of stage-II could also be contracted out to private promoters and accordingly offers were invited from the independent power producers. On 04.10.1994, the Government of Tamil Nadu decided to entrust the Stage-II project to the appellant Videocon Power Limited (in short, “VPL”). A Memorandum of Understanding was also signed on 25.10.1994 and the project to be set up was 1 × 500 MW After the memorandum of understanding was entered into, VPL requested the Board to consider the increase in the capacity of the project from 1 × 500 MW to 2 × 500 MW. The said request was accepted and a revised memorandum of understanding dated 18.02.1995 was entered into. After the said memorandum of understanding, VPL had again submitted first of their Draft Power Purchase Agreement (in short “PPA”) only on 17.07.1995 The Board appointed a committee on 19.01.1996 to finalise the working arrangement for sharing of common facilities which was an obligation under the memorandum of understanding. The Government of Tamil Nadu recommended to the Central Electricity Authority for issue of Techno Economic Clearance of the project on 19.03.1996 after emphasising three important conditions viz., (1) the project cost should not exceed Rs. 4.007 Crores/MW; (2) VPL has to absorb more than Rs. 10 Crores towards sharing of common facilities as the tentative cost worked out to Rs. 206 Crores; and (3) VPL has to erect a 400 KV gas insulated sub-station, in view of space constraint.

    (b) VPL took possession of the project site land on 28.03.1996 and the Central Electricity Authority cleared the Techno Economic Clearance of the project on 03.04.1996 subject to some conditions. When VPL requested the Board on 24.10.1996 to initial the Draft Power Purchase Agreement to enable the Company to kick off the initial tie-up, the Board did not initial the Power Purchase Agreement (PPA) since VPL in its letter dated 24.06.1996 had stated that it is expected to have a few changes in the PPA after its preliminary discussion with the Indian Financial Institution and Foreign Banks. Subsequently, there were some correspondences, which ultimately resulted in a dispute between VPL and the Board. In the Board meeting held on 08.08.2000 it was found that VPL had not attained financial closure and the time had expired for such financial closure and hence the Board decided to withdraw escrow cover from VPL and to allot two covers to another named Independent Power Producers under different projects. Hence, a dispute arose between VPL and the Board. In terms of arbitral agreement, the dispute was referred for arbitration consisting of three Arbitrators. VPL appointed Mr. Justice M.L Pendse (Retd.,) and Board appointed Mr. Justice S. Mohan (Retd.,). Mr. V.V Veeder, Queen's Counsel, Essex Chambers, London, England was appointed as third Arbitrator as the Chairman, the Secretary General of Permanent Court of Arbitration, Hague. The arbitral proceedings were conducted in Singapore followed by one sitting in Hong Kong on 08.12.2001 There was a claim at the instance of VPL and a counter claim at the instance of the Board. A partial interim award was passed by the arbitral Tribunal on 08.08.2001 at the time when the Tribunal sat in Singapore.

    (c) The arbitral Tribunal passed its final award on 21.06.2004 and while rejecting the VPL's claim for declaratory relief, allowed the claim for damages with legal and arbitration costs and at the same time rejected the counter claim of the Board in the very same arbitral award.

    (d) Invoking Sections 44, 47 and 49 of The Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) VPL filed an execution petition for enforcement of the award dated 21.06.2004 Though the said petition was not initially entertained by the Registry on certain objections as to the maintainability, by order of this Court dated 09.12.2004, such petition was entertained as it was maintainable and a prohibitory order against the Garnishee Bank was also issued. A review application filed at the instance of the Board to review the Order dated 09.12.2004 on the ground that even before the Execution Petition was filed, the Board had filed a petition on 15.07.2004 under Section 34 of the Act to set aside the award dated 21.06.2004 and the petition was admitted by this Court on 05.11.2004

    (e) By a subsequent order dated 30.12.2004, this Court ordered that a portion of the prohibitory order with regard to the Garnishee will be suspended for one month and the Board was directed to furnish security for the entire award amount and the review application was adjourned, Thereafter, the Execution Petition was also numbered and both the Execution Petition filed by VPL as well the Petition filed by the Board to set aside the award were taken up together and were disposed of by Common Order dated 09.06.2008 which is impugned in these appeals.

    4. We have heard Mr. V.R Reddy, learned senior counsel for Mr. N.C Ramesh learned counsel for the appellant Board, Mr. C.S Vaidyanathan, learned senior counsel for Mr. T.K Bhaskar for VPL, the first respondent and Mr. T.C.A Shrinivasan, learned counsel for the Bank, the second respondent in both the appeals.

    5.1) MR. V.R Reddy, learned senior counsel for the appellant Board would submit that the award in question is not a foreign award and it is a domestic award inasmuch as the two members have signed the award in Chennai where it was pronounced and in such event, petition under Section 34 of the Act to set aside the award is maintainable before this Court. He would further submit that the arbitral award is not a foreign award as envisaged under Section 44 of the Act and inasmuch as the award is domestic award, Part I of the Act would apply and in such case, petition under Section 34 of the Act to set aside the award is maintainable. He would further submit that the learned Judge has erred in not only coming to the conclusion that the award in question is a foreign award, but also Part I of the Act is not applicable and consequently, petition under Section 34 of the Act is not maintainable. The learned senior counsel would heavily rely upon the judgement reported in Venture Global Engineering v. Satyam Computer Services Ltd., and another (2008) 4 SCC 190 = 2008-4-L.W. 433 and contend that even in case of a foreign award, Part I of the Act is applicable.

    5.2) He would also submit that the learned Judge ought not to have entertained the application under Section 48 of the Act filed at the instance of the Company for enforcement of the Award by treating the award as a foreign award. The learned senior counsel would extensively take us to Clause 17 of the Power Purchase Agreement and the various provisions of the Act in support of his submissions.

    6.1) Mr. C.S Vaidyanathan, learned senior counsel for the first respondent (VPL) would submit diametrically opposite to the arguments made by the learned senior counsel for the appellant. He would submit that in terms of Clause 17(a) and (b) of the PPA, the dispute shall be settled by arbitration conducted in accordance with United Nation Commission on International Trade Law (UNCITRAL) and the arbitration shall be held in Singapore and the arbitral proceedings shall be conducted and the award shall be rendered in English language.

    6.2) He would also submit that the Clause 17.3 (c) of the PPA contemplates that the validity, interpretation, construction, performance and enforcement of the arbitration agreement and any other question of arbitration law shall be governed by the laws of England. In fact, the entire arbitration proceedings were conducted only in Singapore except only one sitting in Hong Kong and the award was passed only in Singapore, a convention country and therefore, the award in question is a foreign award and in such case, Part I of the Act has no application and consequently petition under Section 34 of the Act is not maintainable. He would submit that as the parties have expressly agreed to exclude part I of the Act, the judgement of the Apex Court rendered in Venture Global Engineering case is not applicable to the facts of the present case.

    6.3) He would further submit that in terms of clause 17.3 (e) of the Agreement, it was agreed that the award could be enforced by the party against the assets of other party, wherever those assets are located and such award could be enforced into any Court or Tribunal of competent jurisdiction. As the parties had submitted to jurisdiction of this Court, insofar as the enforcement of the award including a foreign award, petition under Part II of Section 48 of the Act seeking for enforcement of the arbitral award is maintainable.

    6.4) He would further submit that in any case, as against the order of the learned Judge holding that such a petition seeking to enforce the award is maintainable second appeal is specifically excluded under Section 50(2) of the Act. Hence, the provisions of appeal under Letters Patent is not available to the appellant, in view of the judgement in The Union Of India v. Mohindra Supply Co. , AIR 1962 SC 256 and P.S Sathappan (Dead) by LRs v. Andhra Bank Limited and others AIR 2004 SCC 5152 = 2005-1-L.W. 218.

    7. For a decision on the above submissions, the relevant clauses of the Power Purchase Agreement and the relevant provisions of the Act are referable.

    8.1) Clause 17 of the Agreement reads as under:

    (a) The Dispute shall be settled by arbitration conducted in accordance with the United Nations Commission and Internal Trade Law (UNCITRAL) as in effect on the date of this Agreement (the “Rules). The Arbitration shall be held in Singapore. The arbitration proceedings shall be conducted, and the award shall be rendered, in the English language.

    (b) There shall be three arbitrators of whom each Party shall select one. The two arbitrators thus appointed shall select the third (3rd) arbitrator to act as Chairman (but not umpire) of the Arbitral Tribunal within thirty (30) days of the selection of the second arbitrator. If the party does not select an arbitrator where it is entitled to do so within thirty (30) days of a request for arbitration by Party or if the two party appointed arbitrators fail to agree on a third (3rd) arbitrator, the Secretary General of the Permanent Court of Arbitration at The Hague shall make such appointment.

    (c) Notwithstanding the terms of Article 18.8 hereof, the validity, interpretation, construction, performance and enforcement of the arbitration agreement contained in this Article 17.3, the conduct of the arbitration (including any resort to a Court for provisional remedy), the enforcement of any Award and any other question of arbitration law shall be governed by the laws of England. The parties expressly acknowledge and agree that any Award under this Article 17.3 shall be subject to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958.

    (d) The Award under this Article 17.3 shall be final and binding upon the parties and shall be the sole and exclusive remedy between the Parties regarding all disputes. Any rights of appeal available at law may be exercised by a Party only (i) after the Award has been fully implemented under this Article 17.3, or (ii) if such party must pay an amount under such Award, after such party has either deposited the amount of the award in the Court or tribunal of competent jurisdiction.

    (e) The Parties agree that any Award may be enforced by a Party against the assets of the other Party where ever those assets are located and such Award may be enforced into any Court or Tribunal of competent jurisdiction of any such Courts or Tribunal in India.

    (f) to (j) ……….

    8.2) Clause 18 of the Power Purchase Agreement reads as under:—

    18.8 Governing Law: Except as provided in Article 17.3 hereof, this Agreement and the rights and obligations hereunder shall be interpreted, construed and governed by the substantive laws of India, without regard to its principles of conflict of laws that might require the application of the law of any other jurisdiction.

    8.3) Sections 2(2), 34, 35, 36, 37, 44, 46, 48, 49 and 50 of the Act read thus:—

    A. 2. Definitions.-(1) In this Part, unless the context otherwise requires,-

    (a) to (h) …….

    (2) This Part shall apply where the place of arbitration is in India.

    (3) to (9) …..

    B. 34. Application for setting aside arbitral award. — (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).

    (2) An arbitral award may be set aside by the court only if-

    (a) The party making the application furnishes proof that-

    (i) A party was under some incapacity, or

    (ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

    (iii) The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

    (iv) The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

    Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

    (v) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

    (b) The court finds that-

    (i) The subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

    (ii) The arbitral award is in conflict with the public policy of India.

    C. 35. Finality of arbitral awards.-Subject to this Part an arbitral award shall be final and binding on the parties and persons, claiming under them respectively.

    D. 36. Enforcement.- Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the court.

    E. 37. Appealable orders. — (1) An appeal shall lie from the following orders (and from no others) to the court authorised by law to hear appeals from original decrees of the court passing the order, namely:—

    (a) Granting or refusing to grant any measure under section 9;

    (b) Setting aside or refusing to set aside an arbitral award under section 34.

    (2) An appeal shall also lie to a court from an order of the arbitral tribunal —

    (a) Accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or

    (b) Granting or refusing to grant an interim measure under section 17.

    (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

    F. 44. Definition.-In this Chapter, unless the context otherwise requires, “foreign award” means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960-

    (a) In pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and

    (b) In one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.

    G. 46. When foreign award binding.-Any foreign award which would be, enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on an award.

    H. 48. Conditions for enforcement of foreign awards. — (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that-

    (a) The parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

    (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

    (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

    Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or

    (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

    (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

    (2) Enforcement of an arbitral award may also be refused if the court finds that-

    (a) The subject-matter of the difference is not capable of settlement by arbitration under the law of India; or

    (b) The enforcement of the award would be contrary to the public policy of India.

    Explanation. -Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption.

    (3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.

    I. 49. Enforcement of foreign awards.-Where the court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that court.

    J. 50. Appealable orders. of foreign awards. — (1) An appeal shall lie from the order refusing to-

    (a) Refer the parties to arbitration under section 45;

    (b) Enforce a foreign award under section 48, to the court authorised by law to hear appeals from such order.

    (2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

    Point Nos. 1 & 2:—

    9.1) To determine the above questions, the clauses in the Power Purchase Agreement containing arbitration are relevant. In terms of clause 17.3 (a) of the agreement, the parties have agreed to settle the dispute by arbitration conducted in accordance with United Nation Commission on International Trade Law (UNCITRAL). The parties have also agreed that the arbitration shall be held in Singapore and the arbitration proceedings shall be conducted and the award shall be rendered in English language. In terms of Clause 17.3 (c) of the Agreement, the parties have also agreed that the validity, interpretation, construction, performance and enforcement of the agreement contained in Clause 17.3 of the agreement, the conduct of arbitration (including any resort to a Court for provisional remedy) the enforcement of any award and any other question of arbitration law shall be governed by the Laws of England. A conjoint reading of both the above clauses would show that the intention of the parties to the Power Purchase Agreement is that the award proceedings shall be outside India thereby meaning that such an award would only be a foreign award. By Clause 17.3 (a) of the PPA, the parties have agreed to settle the dispute by arbitration conducted in accordance with UNCITRAL. The parties have also agreed for the arbitration to be held in Singapore and the language is English. By clause 17.3 (b) of the PPA, the parties have also agreed to select one arbitrator each leaving the appointment of the third arbitration to the Secretary General of the Permanent Court of Arbitration, the Hague. Factually both parties have nominated their respective arbitrators and the third arbitrator namely, the Chairman was appointed by the Secretary General of the Permanent Court of Arbitration, The Hague and almost all the sittings were held in Singapore, except for once in Hong Kong.

    10. Section 44 of the Act defines a foreign award meaning thereby unless the context otherwise requires, “foreign award” means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India.

    11. The submission of Mr. V.R Reddy, the learned senior counsel for the appellant Board is that the agreement was entered into in India and that the two arbitrators have signed in India thereby the award could be considered to be one of domestic award. We find no force in the said contention as the Court while deciding the question as to whether the award was a foreign award or domestic award, must keep in mind the agreement as such and in the absence of any provision in the agreement either contrary to the arbitral proceedings in India or arbitrators to sign the award in India, merely because either arbitral proceedings conducted in India or the arbitrators have signed the award in India would by themselves not make arbitral award as a domestic award. Such a conclusion would be contrary to the intention of the parties as contained in the agreement.

    12. To determine, as to whether the award is a foreign award, the relevant test would be, firstly, the relationship between the parties must be commercial; secondly, the award must be made in pursuance of the agreement in writing; and thirdly, the award must be made in convention country. As far as the legal relationship between the parties is concerned, there is no dispute that the contract is commercial and the parties have commercial relationship. The Award was passed pursuant to the agreement in writing since after the dispute had arisen both the parties have nominated two arbitrators in terms of Clause 17.3 (b) of the PPA and the third arbitrator viz., The Chairman was appointed by the Secretary General of the Permanent Court of Arbitrator, The Hague. Therefore, the further relevant test to arrive at a conclusion in respect of a “foreign award” would be first, the intention of the parties; secondly whether the arbitral proceedings were conducted strictly in accordance with the PPA. Thirdly, as to whether the award was to be made in a convention country. Factually in this case, the arbitral proceedings were conducted in convention countries viz., in Singapore except for one sitting in Hong Kong.

    13. In Bhatia International case, while holding that even in case of a foreign award, Part I of the Act could be made applicable, the Apex Court has, in fact, held that the parties to the agreement can exclude the provisions of Part I of the Act in case of International Commercial Arbitrations including those that take place outside India. Hence, we have no hesitation to hold that the award in question is a foreign award.

    14. This takes us to the next question, as to whether a foreign award could be challenged in exercise of the powers under part I of Section 34 of the Act. Much reliance was placed by Mr. V.R Reddy, on the judgement reported in Venture Global Engineering case. Before the Apex Court, the earlier judgement in Bhatia International case was heavily relied upon. In Venture Global Engineering case, the Apex Court had quoted the case of Bhatia International Limited case, (2002) 4 Supreme Court 105 with approval. In the said judgement, it has been held that even a foreign award could be challenged under Part I of Section 34 of the Act.

    15.1) For appreciation of the submissions made by Mr. V.R Reddy, Senior Counsel, both the above judgements of the Apex Court are to be carefully considered. In Bhatia International case the Apex Court was considering the impact of exclusion of the power to challenge a foreign award in exercise of power under Part-I of the Act and had ultimately held that even a foreign award could be challenged under Part I of the Act. While holding that the parties by agreement cannot over-ride or exclude the non derogable provisions of Part I in such arbitration in para 21 the Apex Court had observed thus:

    21. Now let us look at sub-sections (2), (3), (4) and (5) of Section 2. Sub-section (2) of Section 2 provides that Part I would apply where the place of arbitration is in India. To be immediately noted, that it is not providing that Part I shall not apply where the place of arbitration is not in India. It is also not providing that Part I will ‘only’ apply where the place of arbitration is in India (emphasis supplied). Thus the legislature has not provided that Part I is not to apply to arbitrations which take place outside India. The use of the language is significant and important. The legislature is emphasizing that the provisions of Part I would apply to arbitrations which take place in India, but not providing that the provisions of Part I will not apply to arbitrations which take place out of India. The wording of sub-section (2) of Section 2 suggests that the intention of the legislature was to make provisions of Part I compulsorily applicable to an arbitration, including an international commercial arbitration, which takes place in India. Parties cannot, by agreement, override or exclude the non-derogable provisions of Part I in such arbitrations. By omitting to provide that Part I will not apply to international commercial arbitrations which take place outside India the effect would be that Part I would also apply to international commercial arbitrations held out of India. 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.”

    15.2) Further in the very same judgement, the Apex Court in para 32 had observed thus:

    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 compulsorily 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.”

    16. A careful scrutiny of the Judgement in Bhatia International Company's case would show that though a foreign award could be questioned under Part I of the Act, the parties are at liberty either expressly or impliedly to exclude all or any of its provisions and if such exclusion is made in the agreement for the applicability of part-I of the Act as regards to the foreign award, certainly, such a foreign award cannot be challenged under Part-I of the Act (i.e,) by filing petition under Section 34 of the Act.

    17. The above law laid down by the Apex Court has been quoted with approval by the subsequent Judgement in Venture Global Engineering case. Hence, the real test to find out as to whether a foreign award could be challenged under Part I of the Act, depends upon the terms of the agreement. As we have already held that in terms of clause 17.3 of the Power Purchase Agreement, the award in question is a foreign award and in terms of clauses 17.3 (a), (b) and (c) of the Agreement, the parties have agreed to exclude Part-I of the Act and therefore, on given facts of the present case, the petition under Part-I of Section 34 of the Act under Part-I of the Act, is not maintainable. This is fortified by clause 18.8 of the Power Purchase Agreement, which states that except as provided in Clause 17.3 of the PPA and the rights and the obligations thereof shall be interpreted, constructed and governed by the substantive laws of India. By that clause, the parties have agreed for the applicability of substantive law of India only in such of those cases not covered by clause 17.3 of the PPA. The intention of the parties are clear that the law in respect of the arbitral proceedings are governed only by clause 17.3 of the PPA relating to a foreign award. There is one more aspect that even in Bhatia International case, the Apex Court had drawn a distinction while considering the award as to whether it is a foreign award or domestic award. While holding that Part I also can be made applicable in respect of foreign awards one of the test would be such international commercial arbitration may be held in non convention country. In the event, such arbitration is held in a convention country, like the one on hand, Part-II of the Act would alone apply to the arbitration. For all the above reasons we find that on facts of this case, the award being a foreign award and the arbitral proceedings were held in convention countries and the parties have agreed for such arbitral proceedings, the challenge to such foreign award is not maintainable under Part-I of the Act. Point Nos. 1 and 2 are answered accordingly.

    Point Nos. 3 and 4:—

    18. Though both the appeals question the order rejecting the Original Petition filed under Section 34 of the Act and consequently the order in dismissing the Review Application, in view of the rival contentions we are inclined to consider the point Nos. 3 and 4 as well.

    19. Mr. V.R Reddy, learned senior counsel for the appellant Board has submitted that the Execution Petition itself is not maintainable since the Part I of the Act alone would apply.

    20. Per contra Mr. C.S Vaidyanathan, learned senior counsel for the first respondent (VPL) has submitted that inasmuch as the award in question is a foreign award, Part II of the Act alone is applicable and in any case, the order passed under Section 48 of the Act cannot be questioned by way of second appeal.

    21. In view of the rival contentions we are inclined to deal with those contentions as well while we decide both the point Nos. 3 & 4.

    Point No. 3:—

    22. In terms of Clause 17.3 (e) of the Power Purchase Agreement, the parties have agreed that any award may be enforced by a party against the assets of the other party wherever those asses are located and such award may be enforced into any Court or Tribunal of competent jurisdiction. The parties have expressly submitted themselves to the jurisdiction of any such Courts or Tribunals in India.

    23. The portion of clause 17.3 (3) of the PPA has already been extracted in the earlier part of this Order. VPL would certainly be entitled to approach this Court for enforcement of such foreign award and therefore, the petition for enforcement of such foreign award in terms of the PPA between the parties.

    24. In this context, it may also be relevant to refer the following provisions. Section 44 of the Act, defines “foreign award”. Section 46 of the Act contemplates that any foreign award which would be enforceable under Chapter I of Part II of the Act, shall be treated as binding for all purposes on the persons as between whom it was made.

    25. Under sub-section (1) of section 48 of the Act, the Court may refuse to enforce a foreign award at request of the party against whom it is invoked, only if that party furnishes to the Court the proof. Clauses (a) to (e) of the sub-section of section 48 of the Act relates to such proof. The Board has not questioned the enforcement of the award and consequently requested for refusal on any one of the grounds thereon. That apart under sub-section (2) of section 48 of the Act, the Court may also refuse to enforce an arbitral award, if the Court finds that the subject matter of the difference is not capable of settlement by arbitration under the law of India or enforcement of the award would be contrary to the public policy of India. None of the grounds are urged before us to challenge the petition filed seeking for enforcement of the arbitral award. Though the petition was questioned before the learned single Judge on the ground of public policy as well, as we have held that the petition under Section 34 of the Act is not maintainable, we are not inclined to consider the question of challenge as to the enforcement of the award on the ground that it is contrary to the public policy. Hence, for all the above reasons, VPL is entitled to seek for enforcement of the award before this Court. The Point No. 3 is answered accordingly.

    Point No. 4:—

    26. Section 49 of the Act contemplates that when once the Court is satisfied that a foreign award is enforceable under Part II of the Act, such award shall be deemed to be a decree of that Court. Any order passed under Section 48 of the Act in refusing to enforce a foreign award could be questioned by way of appeal under clause (a) of sub-section (1) of section 50 of the Act. Under Clause (b) of sub-section (1) of section 50 of the Act, an appeal is also provided in respect of any order refusing to refer the parties to arbitration under Section 45 of the Act. Sub-section 2 of section 50 of the Act contemplates that no second appeal shall lie from an order passed in appeal under this Section, except a right of appeal to the Supreme Court. It is the contention of Mr. C.S Vaidyanathan, learned senior counsel for the first respondent (VPL) that inasmuch as the provisions of appeal are available only in respect of the person who approaches this Court for enforcement of a foreign award and in case such petition is refused, he could prefer an appeal and in case, the appeal is also rejected, there is no second appeal. The said section does not contemplate any right on the appellant Board to prefer an appeal. He would also submit that in the light of the Judgement in The Union Of India v. Mohindra Supply Co. , AIR 1962 SC 256 and P.S Sathappan (Dead) by LRs v. Andhra Bank Limited and others, an appeal under Letters Patent is not maintainable.

    27. In State Of West Bengal v. M/S Gourangalal Chatterjee., (1993) 3 SCC 1, the Apex Court while dealing with the similar provisions of appeal under Section 39 of The Arbitration and Conciliation Act, 1940 has held that no appeal lies against the order of the single Judge of a High Court revoking the authority to appoint an arbitrator. The Apex Court had, in fact, relied upon the judgement in The Union Of India v. Mohindra Supply Co. , AIR 1962 SC 256. Subsequently, having noticed another judgement of the Apex Court in Vinta M. Khanolkar v. Branga M. Pai taking contrary view relying upon Clause 15 of the Letters Patent applicable to the High Court of Bombay, the issue was referred to a larger Bench in Orma Impex (P) Limited v. NISSAIASB PTE. Ltd.,, (1999) 2 SCC 541.

    28. Be that as it may, in a subsequent judgement in Shyama Charan Agarwala & sons v. Union of India, (2002) 6 SCC 201, while holding that section 39 of the Arbitration Act, 1940 is restricted in its application only in respect of certain types of orders appealable, the Apex Court found that being special statute, no appeal can be entertained except under section 39 of the Arbitration Act, 1940.

    29. To the question as to whether such appeal could be entertained under the provisions of Clause 15 of the Letters Patent, the answer is the Judgement of the Apex Court in The Union Of India v. Mohindra Supply Co. , AIR 1962 SC 256. In para 5, the Apex Court held thus:—

    “5. …. Under S. 39(1), an appeal lies from the orders specified in that sub-section and from no others. The legislature has plainly expressed itself that the right of appeal against the orders passed under the arbitration Act may be exercised only in respect of certain orders. The right to appeal against other orders is expressly taken away. If by the express provision contained in S. 39(1), a right to appeal from a judgement which may otherwise be available under the Letters Patent is restricted, there is no ground for holding that cl. (2) does not similarly restrict the exercise of appellate power granted by the Letters Patent. If for reasons aforementioned the expression “second appeal” includes an appeal under the Leters Patent, it would be impossible to hold that notwithstanding the express prohibition, an appeal under the Letters Patent from an order passed in appeal under sub-s (1) is competent.”

    30. The said judgement was quoted with approval in P.S Sathappan (Dead) by LRs v. Andhra Bank Limited and others AIR 2004 SCC 5152. In that judgement the Apex Court was considering the provisions of section 104 of CPC and it was held that an appeal provided under the Letters Patent of the High Court is an appeal provided by a law for the time being in force as such an appeal is expressly saved. In P.S Sathapan's case the Apex Court in para 71 and 72 has held thus:—

    “71. The Letters Patent although is a subordinate legislation but nevertheless would be a law within the meaning of Articles 225 and 372 of the Constitution of India, but the same cannot prevail over a Legislative Act, if clause 44 of the Letters Patent is to be given a proper meaning. The provisions of Letters Patent despite attainment of independence by India are saved by Section 106 of the Government of India Act, 1919, Section 223 of the Government of India Act, 1935, Clause 2(1) of India (Adaptation of Existing Laws) Order, 1949 and Section 18(3) of the Independence Act, 1947. Letters Patent, thus, would undoubtedly come within the meaning of existing law but the status thereof cannot be higher than that of the statute made law. Not only in terms of Clause 44 of the Letters Patent, but having regard to the fact that the same is a subordinate legislation, it would be subject to laws made by a competent legislature.

    72. The Letters Patent is not a statutory enactment although it has the force of law. Clause 44 of the Letters Patent in no uncertain terms states that the provisions thereof would be subject to the legislative powers of the Governor-General in Legislative Council, and also of the Governor General-General in Council under Section 71 of the Government of India Act, 1915.”

    31. Section 37 of the Act deals with the provision of appeal when the challenge is made in respect of a domestic award. Sub-section (1) of section 37 of the Act contemplates a provision of appeal against the order granting or refusing to grant any interim measure under Section 9 of the Act, setting aside or refusing to setting aside an arbitral Award under Section 34 of the Act. Sub-section (2) of section 37 of the Act also contemplates a provision of appeal to the Court from an order of the arbitral Tribunal accepting the plea referred to in sub-section (2) or (3) of section 16 of the Act or granting or refusing to grant an interim measure under Section 17 of the Act. By that section only one provision of appeal is made to the Court. Sub-section 3 of section 37 of the Act bars a second appeal from an order in appeal and a provision of second appeal to the Supreme Court was made available. Sub-section (2) of section 50 of the Act is a similar provision relating to the second appeal as contained in sub-section (3) of section 37 of the Act. section 39 of the Arbitration Act, 1940 has a similar provision and therefore the above Judgement rendered by the Apex Court would be equally applicable to the provision of Section 50 of the Act.

    32. Inasmuch as sub section (1) of section 50 of the Act is available only against the order refusing to refer the parties to arbitration under section 45 of the Act and an order refusing to enforce a foreign award under Section 48 of the Act, no second appeal is contemplated in view of sub section 2 of section 50 of the Act. [See-Shyama Charon Agarwala & sons v. Union of India, (2002) 6 SCC 201]. However, sub section 2 of section 50 of the Act, empowers a right on the parties aggrieved to approach the Supreme Court. The said section by virtue of its specific provision provides for second appeal only to the Supreme Court in respect of an order allowing the petition for enforcement of a foreign award. It must be construed that the provisions of Clause 14 of the Letters Patent is excluded. Hence, the provisions of Letters Patent cannot prevail over a Legislative Act. When there is a specific enactment contemplating a provision for appeal to the Supreme Court in respect of an order passed under Section 48 of the Act, the appeal under 15 of Letters Patent is not certainly maintainable. Accordingly, Point NO. 4 is answered.

    29. For all our above discussions and conclusions, we hold that the award in question is a foreign award and the same cannot be questioned under Section 34 of Part-I of the Act. In terms of Clause 17.3(e) of the Power Purchase Agreement, VPL, the 1st respondent Company is entitled to approach this Court for enforcement of such foreign award. As against the order in Execution Petition, second appeal is not maintainable under Clause 15 of the Letters Patent. In view of the above findings, both the appeals are dismissed. However, considering the circumstances, there will be no costs. Consequently, connected MPs are closed.

    VCJ/VCS

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