The National Thermal Power Corporation Ltd. v. The Singer Co. Ors. S

B.N Kirpal, J.:— The question which arises for consideration in this appeal is whether the provisions of the Indian Arbitration Act, 1940 (hereinafter referred to as ‘the Arbitration Act) are applicable to an interim award made at London by an Arbitral Tribunal constituted by I.C.C Court of Arbitration of the International Chamber of Commerce, Paris.

2. Briefly stated, the facts are that vide two letters dated 14th February, 1981 the appellant had accepted the proposal of and had awarded contracts to the respondent. This was followed by the parties executing two formal agreements, in writing, on 17 August, 1982. The first agreement was, inter alia, to design, manufacture, test and effect supplies of equipment and materials for a computer-based training simulator while by the second agreement the respondent was to do the work of clearance and handling at Indian Port, transportation and handling at project site, storage, erection, testing and commissioning and fine tuning of the said training simulator at the appellant's super thermal power station at Korba.

3. The terms of the contract between the parties were to be governed not only by the formal agreements dated 17 August, 1982 but also by the other contract documents which had preceded the aforesaid letters dated 14 February, 1981 whereby the contracts were awarded. One of the contract documents, inter alia. Containing the terms of the contract was the “General Conditions of Contract” which were applicable to both the agreements.

4. The two formal agreements dated 17 August, 1982 entered into between the parties are identically worded. Article 4.1 of the said agreements dealt with the question of settlement of disputes and is as follows:

“It is specifically agreed by and between the parties that all the differences or disputes arising out of the Contract or touching the subject matter of the Contract, shall be decided by process of settlement & Arbitration as specified in Clause 26.0 and 27.0, excluing 27.6.1 and 27.6.2, of the General Conditions of the Contract.”

The caluses of the General Conditions of the Contract, to which reference has been made by the learned counsel for the parties during the course of arguments, are as follows:

“7.2 The laws applicable to this Contract shall be the laws in force in India. The Courts of Delhi shall have exclusive jurisdiction in all matters arising under this Contract.

27.0 ARBITRATION

27.1 If any dispute or difference of any kind whatsoever shall arise between the Owner and the Contractor, arising out of the Contract for the performance of the Works whether during the progress of the works or after its completion or whether before or after the termination, abandonment or breach of the Contract, it shall, in the first place, be referred to and settled by the Engineer, who, within a period of thirty (30 days) after being requested by either party to do so, shall give written notice of his decision to the Owner and the Contractor.

27.2 Save as hereinafter provided, such decision in respect of every matter so referred shall be final and binding upon the parties until the completion of the Works and shall forthwith be given effect to by the Contractor who shall proceed with the Works with all due diligence, whether he or the Owner requires arbitration as hereinafter provided or not.

27.3 If after the Engineer has given written notice of his decision to the parties, no claim to arbitration has been communicated to him by either party within thirty (30) days from the receipt of such notice, the said decision shall become final and binding on the parties.

27.4 In the event of the Engineer failing to notify his decision as aforesaid within thirty (30) days after being requested as aforesaid, or in the event of either the Owner or the Contractor being dissatisfied with any such decision, or within thirty (30) days after the expiry of the first mentioned period of thirty (30) days, as the case may be, either party may require that the matters in dispute be referred to arbitration as hereinafter provided.

27.5 All disputes or differences in respect of which the decision, if any, of the Engineer has not become final or binding as aforesaid, shall be settled by arbitration in the manner hereinafter provided.

27.6.1 In the event of the Contractor being an Indian party, that is to say a citizen and/or a permanent resident of India, a firm or a company duly registered or incorporated in India, the arbitration shall be conducted by three arbitrators, one each to be nominated by the Contractor and the Owner and the third to be named by the President of Institution of Engineers, India. If either of the parties fails to appoint its arbitrator within sixty (60) days after receipt of a notice from the other party invoking the Arbitration clause, the President of the Institution of Engineers, India, shall have the power at the request of either of the parties to appoint the arbitrator. A certified copy of the said President making such an appointment shall be furnished to both the parties.

27.6.2 The arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory modification thereof. The venue of arbitration shall be New Delhi, India.

27.7 In the event of foreign Contractor, the arbitration shall be conducted by three arbitrators, one each to be nominated by the Owner and the Contractor and the third to be named by the President of the International Chamber of Commerce, Paris, save as above all Rules of Conciliation and Arbitration of the International Chamber of Commerce shall apply to such arbitrations. The arbitration shall be conducted at such places as the arbitrators may determine.

27.8 The decision of the majority of the arbitrators shall be final and binding upon the parties. The expenses of the arbitration shall be paid as may be determined by the arbitrators. The arbitrators may, from time to time, with the consent of all the parties enlarge the time for making the award. In the event of any of the aforesaid arbitrators dying, neglecting, resigning or being unable to act for any reason, it will be lawful for the party concerned to nominate another arbitrator in place of the outgoing arbitrator.

27.9 The arbitrator shall have full powers to review and/or revise any decision, opinion, directions, certification or valuation of the Engineer in consonance with the Contract, and neither party shall be limited in the proceedings before such arbitrators to the evidence of or arguments put before the Engineer for the purpose of obtaining the said decision.

27.10 No decision given by the Engineer in accordance with the foregoing provisions shall disqualify him as being called as a witness or giving evidence before the arbitrators or any matter whatsoever relevant to the dispute or difference referred to the arbitrators as aforesaid.

32.0 CONSTRUCTION OF THE CONTRACT

32.1 Notwithstanding anything stated elsewhere in the bid documents, the Contract to be entered into in the case of domestic bids will be treated as a divisible supply and erection Contract. The supply portion of the Contract will relate to the supply of equipment and materials and the erection portion will relate to the handling at the Site, storage, erection, construction, testing, commissioning etc. as defined in the bid documents. The Owner will pay the sales tax for the supply of equipment and raw materials in accordance with law. The sales tax should not be included in the bid price in the proposal but indicated separately.

32.2 Further, notwithstanding anything stated elsewhere in the bid documents, in the case of successful foreign bidder there will be two separate contracts, one for the supply of the equipment CIF basis, and other for all the field services such as clearance and handling at ports, inland transportation, insurance, storage, erection, construction, testing and commissioning of the plant and other services as defined in the scope of the bid.

32.3 The Contract shall in all respects be construed and governed according to Indian laws.

32.4 It is clearly understood that the total consideration for the Contracts(s) has been broken up into various components only for the convenience of payment of advance under the Contract(s) and for the measurement of deviations or modifications under the Contract(s).”

5. It appears that some disputes arose between the parties and on 30 July, 1987 respondent No. 1 made a request before the Court of Arbitration of the International Chamber of Commerce, Paris for arbitration between the parties under the Rules of Conciliation and Arbitration of I.C.C The said request contained the statement of claim of respondent No. 1. It was also stated therein that respondent No. 1 had appointed Mr. Yves Derains as its arbitrator. According to the respondent the venue of the arbitration was to be at the discretion of the arbitrators.

6. The appellant-herein filed with the said Court of Arbitration its answer to the request for arbitration made by respondent No. 1 Preliminary objections and legal grounds were taken by the appellant and it was, inter alia, contended that no proper request had been made for arbitration and that the claims of respondent No. 1 were barred by time. It was also the case of the appellant that as per aforesaid clause 7.2 of the General Conditions of Contract the disputes, claims and counter claims, arising out of or in connection with the contracts, were to be regulated and decided in terms of the Indian laws only. The appellant also raised counter claims and it informed the said Court of Arbitration that it had nominated Mr. B. Datta, who at that time was the Additional Solicitor General of India, as its arbitrator in terms of Article 2.4 of the I.C.C Rules. According to the I.C.C Rules, the international Chamber of Commerce nominated Sir Edward Singleton as the Chairman of the Arbitral Tribunal. According to Article 12 of the Rules of International Chamber of Commerce the Court of arbitration fixed London as the place of arbitration. It was further decided that the Arbitral Tribunal may, at its discretion, and with the agreement of the parties, hold meetings or hearings at any other location. Terms of reference were drawn up and signed by the representatives of the parties. The terms of reference specified 11 issues which were to be decided by the arbitrators and it was ordered that 7 of these issues should be heard and determined as preliminary issues. These preliminary issues which were required to be decided by the arbitrators were as follows:

Issue No. 1 Whether the laws of India govern procedural matters in the Arbitration. If not, what is the applicable procedural law.

Issue No. 2 Whether the entire reference to arbitration is valid because the Request for Arbitration was not signed by an authorised signatory of the Claimant; and, if not,

Issue No. 3 Whether the reference is bad and incompetent because it purports to join claims under two separate contracts; and if not,

Issue No. 5—Whether the reference to Arbitration is bad by reason of not being made within the time allegedly prescribed by the Contract, and, if not,

Issue No. 6—Whether the whole, or part, of the Claimant's claims are barred by time limitation pursuant to the (Indian) Arbitration Act, 1940, and the (Indian) Limitation Act 1908; and, if not,

Issue No. 9—Whether each of the seven counter claims of the Respondent amounting in total to Rs. 41,155,303 plus US $ 744,592 set out on pages 4 and 5 of the Terms of Reference is barred by time limitation and, if not, whether each such counterclaim is valid and, to what amount the Respondent is entitled in respect of each such individual valid claim.

Issue No. 10—Whether the Claimant's claim for interest, referred to, and objected to by the Respondent, in paragraphs 10(1) and 11(h) above, can be considered in the absence of pleadings as of this date, as an issue in these arbitration proceedings, and, if so, how claims for interest should be pleaded in the Arbitration by the parties.

7. The arbitrators on 9 August, 1989 made the following awards as an interim partial Award:

“1. The laws of England govern procedural matters in the arbitration.

2. The entire reference to arbitration is not invalid because the Request for Arbitration was allegedly not signed by an authorised signatory of the Claimant.

3. The reference is not bad and incompetent because it purports to join claims under two separate contracts.

4. The reference to Arbitration is not bad by reason of not being made within the time allegedly prescribed by the Contract.

5. Neither the whole, nor any part, of the Claimant's claims are barred by time limitation under the laws of India.

6. None of the seven counterclaims of the Respondent amounting in total to Rs. 41,155,303 plus US $ 744,592 set out on pages 4 and 5 of the Terms of Reference is barred by time limitation.

7. The Claimant's claim for interest, referred to, and objected to by the Respondent, in paragraphs C. 2(1) and C.3(h) of the Terms of Reference, can be considered in the absence of pleadings as of the date of the Terms of Reference, as an issue in these arbitration proceedings.

8. Because this is a Partial Award no decision is made with regard to the costs of the arbitration or the proportion in which they shall be borne by the parties.”

8. The appellant thereafter filed in this Court an application under sections 14, 30 and 33 of the 1940 Act for the setting aside of the aforesaid interim award dated 9 August, 1989. In the reply filed by the respondent No. 1 it was inter alia contended that the said application was not maintainable as the interim award was a foreign award within the meaning of the Foreign Awards (Recognition & Enforcement) Act, 1961 (hereinafter referred to as ‘the Foreign Awards Act’) and as such was outside the purview of the Arbitration Act.

9. By order dated 27 May, 1990, the learned Single Judge dismissed the appellant's petition on the ground that the same was not maintainable. In coming to this conclusion the learned Judge held that the provisions of arbitration act were not applicable in the present case. While coming to this conclusion, it was observed by him that clauses 27-6-2, relating to the applicability of the Arbitration Act, had been specifically excluded with the result that the arbitration was not to be conducted in accordance with the provisions of the arbitration act. Furthermore, respondent No. 1 was a foreign party, the arbitration was to be conducted as per rules of Conciliation and Arbitration of the I.C.C and the venue was to be selected by the arbitrators and that the venue for arbitration had been agreed to by the arbitrators to be London. It was also held that the parties had expressly agreed that their rights under the contract would be determined by the Indian Laws but this, however, did not imply that they had also agreed that the law governing the arbitration procedure would also be the indian arbitration act. In fact applicability of the Arbitration Act was specifically excluded. It was also observed that in the absence of any contractual provisions to the contrary the procedural law governing the arbitration will be the place for conducting arbitration proceedings, for example, the English law in the present case and that is what the Arbitral Tribunal had held.

10. It was vehemently contended before us that on a holistic interpretation and construction of the contract, the only conclusion which can be arrived at is that the Arbitration Act had been made specifically applicable. In this connection it was submitted that clauses 7.2 and 32.3 clearly provide that the Indian laws were to be applicable and that the reference to the laws of India must necessarily include the indian arbitration act. The position was further reinforced, it was submitted, by conferring exclusive jurisdiction to the Courts at Delhi. It was submitted by the learned counsel for the appellant that the contract between the parties was in fact executed not on 17 August, 1982 but on 14 February, 1981. It is further contended that both 1981 and 1982 documents specifically adopt the General Conditions of Contract and at no time were clauses 7.2 and 32.3 sought to be excluded or diluted.

11. As we read the formal agreements dated 17 August 1982 and the other contract documents including the General Conditions of Contract, we are unable to agree with the submission of the learned counsel for the appellant that the provisions of the arbitration act have been made specifically applicable to the arbitration between the #paries.

12. The aforesaid documents dated 14-2-81 are letters where by the respondent was informed by the appellant that their tenders had been accepted. Nevertheless in paragraph 18 it was stated that the respondent was to “enter into a formal contract agreement within sixty (60) days from the date of this award letter”. Paragraph 19 of the said letters stated that formal clearance from the Department of Electronics, Government of India, for the award of the contract was still awaited. It is thereafter, and pursuant to paragraph 18 of the aforesaid letters, that formal agreements were entered into. In our opinion it is the formal contracts dated 17 August, 1982 which are of paramount importance. The letters of 14 February, 1981 postulated the execution of formal contract agreements. It was stated that the agreement was to be prepared and finalised in consultation with each other and in line with the bid documents. Even if it were to be assumed that when the letters dated 14 February, 1981 were issued the parties may have thought that all the clauses of General Conditions of Contract were to apply to the arbitration proceedings, nevertheless when the agreements dated 17 August, 1982 were signed by the parties the earlier pre-existing clause of the contract, if any, stood amended. A provision like Article 4.1 is not incorporated in any of the earlier documents. A formal agreement was clearly envisaged between the parties and by incorporating all the earlier bid documents into these agreements of 17 August, 1982 the necessary implication would be that it is these agreements of 17 August 1982 which should be regarded as containing all the terms of contract between the parties. To the extent the agreements of 17 August, 1982 vary any clause contained in the General Conditions of Contract such variation has to be regarded as a novation of contract. The parties of their own free will, and presumably after discussion with each other, have entered into the agreements dated 17 August, 1982 and the execution on these two agreements cannot be regarded as a mere formality.

13. It was submitted, in this context, that the General Conditions of Contract have to be read harmoniously with the agreements dated 17 August, 1982. Furthermore, it was contended, that there is no specific exclusion of clause 7.2 and 32.3 anywhere in the agreements of 17 August, 1982. There can be no dispute that, as far as possible, the different clauses of the General Conditions of the Contract and the agreements of 17 August, 1982 have to be harmoniously construed. Reading all of them together, it is clear that to the contract as such, and not merely to the arbitration proceedings, clauses 7.2 and 32.3 would be applicable. As far as arbitration proceedings are concerned, Article 4.1 confines the applicability of the General Conditions of Contract to only clauses 26.0 and 27.0 It is true that Article 4.1 does not state that clauses 7.2 and 32.3 of the General Conditions of Contract will not apply but the said Article 4.1 is so worded that, by necessary implication, all the provisions of the General Conditions of Contract except clauses 26.0 and 27.0 are excluded. If the intention was not this and clauses 7.2 and 32.3 were also to apply to the arbitration proceedings then in Article 4.1 there would have been no need to refer to any clause in particular. The Article would then have provided for differences and disputes being decided by process of settlement and arbitration as specified by the General Conditions of Contract. If Article 4.1 had been so worded it may have been possible to contend that clauses 7.2 and 32.3 would also apply to the arbitration proceedings, but this is not so in the present case. Not only are the other General Conditions of Contract excluded but, while applying clauses 26.0 and 27.0 to the arbitration proceedings there is, still, specific exclusion of clauses 27.6.1 and 27.6.2 of the General Conditions of Contract. Clause 27.6.2 specifically deals with the applicability of the provisions of the arbitration act and the venue of arbitration being at New Delhi. The parties have consciously excluded the applicability of clause 27.6.2 in the present case. The maxim “Expressio Unius est exclusio alterious” meaning that Expression of one thing is the exclusion of another is clearly applicable in the instant case.

14. It was submitted by the learned counsel for the appellant that clause 27.6.2 was related to clause 27.6.1 and, therefore, when clause 27.6.1 became inapplicable, as the contractor was not an Indian party, the provision of clause 27.6.2 had to be excluded. As clause 27.6.2 stands it, possibly, has reference to the arbitration contemplated between the appellant and an Indian contractor under 27.6.2 nevertheless if the parties had desired that the indian arbitration act, along with the I.C.C Rules, was to be applicable in the present case or that the venue of arbitration was to be at Delhi then a clause similar to 27.6.2 could have been inserted in clause 27.7 It is this clause 27.7 which talks of arbitration between a foreign contractor, like the respondent, and the appellant. According to the agreement of parties, the arbitration was to be conducted by 3 arbitrators according to the I.C.C Rules and the arbitration was to be conducted at such places as the arbitrators may determine. It is clear therefrom that the venue of arbitration was not specifically provided in the agreements and it was left to the arbitrators to determine where the proceedings should take place. Furthermore, there is no mention in 27.7 of the law which will be applicable to the conduct of the arbitration proceedings. By excluding the applicability of 27.6.2 the intention of the parties clearly was that there was no provision in the contract making the Indian Arbitration Act. 1940 specifically applicable. What will be the effect of this will be considered presently.

15. The matter may be looked at from another angle. Clause 27 of the General conditions of Contract deals with Arbitrations. If clauses 7.2 and 32.3 of the said General Conditions of Contract were to apply to all the arbitration proceedings and if one of the laws by virtue of the said clauses 7.2 and 32.3 was to include the Indian Arbitration Act, 1940 then it would not have been necessary to incorporate a clause like 27.6.2 If the indian arbitration act was to be applicable to the arbitration proceedings, by virtue of clauses 7.2 and 32.3, then where was the need to make a specific provision with regard to the applicability of the Indian Arbitration Act, 1940 in clause 27.6.2 The answer, sought to be given by the learned counsel for the appellant, was that clause 27.6.2 was incorporated so as to provide that the venue for arbitration was to be at Delhi, but we find that clause 27.6.2 refers not only to the venue of arbitration but it also specifically states that the Indian Arbitration Act, 1940 will apply to the arbitration proceedings. The reference to Indian Arbitration Act, 1940 in the first part of clause 27.6.2 seems to indicate that, without such insertion, the provisions of the Indian Arbitration Act would not have been applicable to any arbitration proceedings. In other words, the said clause 27 was to be regarded as being a comprehensive provision pertaining to arbitration contained in the correct and that, with regard to the arbitration proceedings, no other provision of the contract was to apply. This self-contained and comprehensive clause dealt with various contingencies which could arise and suitable provision was made in respect thereto. For example, if the contractor was to be an Indian party then the arbitration was to be conducted according to the provisions of clauses 27.6.1 and 27.6.2 If the contractor was to be a foreign party then the arbitration proceedings were to be conducted in a different manner. According to clause 27.7 the arbitration proceedings were to be conducted according to the rules of the International Chamber of Commerce. This clause was supplemented by clause 27.8 which, inter alia, states that the decision shall be by a majority of the arbitrators and also refers to other aspects of the arbitration including the enlargement of time for making of the award and nomination of an arbitrator in place of the outgoing arbitrator.

16. It was then contended that even if clauses 7.2 and 32.3 did not specifically apply, nevertheless the arbitration agreement contained in clause 27 of the General Conditions of Contracts is part of a contract made in India and it is the law of the land, namely, laws of India, which would apply. The learned counsel submitted that merely because the venue of the arbitration was at London would not mean that it is the English law which will be applicable. In this connection, it was urged the parties had not agreed to the venue of arbitration to be at London and the decision to hold the proceedings at London was thrust upon the appellant. Reference was also made by the learned counsel to the Foreign Awards Act and the New York Convention and it was sought to be contended that neither the said Act nor the New York Conversion excluded the applicability of the indian arbitration act which alone was the proper law applicable to these proceedings.

17. At this stage, it will be appropriate to refer to some of the relevant provisions of the Foreign Awards Act.

The Foreign Awards Act was enacted with a view to enable effect to be given to what is commonly known as, “The New York Convention”. Section 2 of the said Act defines foreign award, inter alia, as being an award which is made in pursuance of an agreement in writing for arbitration to which the New York convention applies and award being made in one of such countries as the Central Government may declare by notification to be a territory to which the said New York Convenion applies. In other words, the arbitration award, in order to be regarded as a foreign award, should be made outside India and in pursuance of an arbitration agreement in writing. Section 4 makes the foreign awards enforceable in India. In order to enforce the same section 5 provides for filing of the foreign awards in a Court in India having jurisdiction over the subject matter of the award, if the court is satisfied that the said award is enforceable, then under section 6 the Court orders the award to be filed and it then proceeds to pronounce judgement according to the award. Thereafter decree follows under section 6(2) of the said Act. Unlike the provisions of section 30 of the indian arbitration act, a foreign award is not ordered to be enforced if the party against whom it is sought to be enforced brings its case under section 7 of the said Act. One of the conditions for not enforcing the foreign award, which is relevant for the present purpose, is contained in section 7(1) (a) (v) which reads as follows:

“7. Conditions for enforcement of foreign awards.—(1) A foreign award may not be enforced under this Act—

(a) if the party against whom it is sought to enforce the award proves to the Court dealing with the case that—

……………………………….

……………………………….

(v) 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;

Section 9, inter alia provides that nothing in the Foreign Awards Act shall “apply to any award made on an arbitration agreement governed by the law of India”.

18. Reading the aforesaid Act as a whole, it is clear that if an award is made outside India in one of the recognised countries which is signatory to the New York Convention and in respect of which country the Central Government has issued the appropriate notification, then that award is, by virtue of section 2, regarded as a foreign award. The Act itself does not provide for the setting aside of the award. It, however prescribes the conditions in section 7 which, if satisfied, will enable the Court not to enforce the award. Sub-clause (v) of section 7(i) clearly provides that an award will not be enforced if it has been set aside or suspended by a competent court of the country in which or under the law of which that award has been made. This obviously means that the setting aside action has to take place under a law other than the Foreign Award Act. Furthermore, the said provision would take cognizance of such setting aside which has been effected in the country in which the award has been made or under the law of which the award has been made. Thus provision, therefore, limits the action for setting aside being taken either in the country in which the award is made or in the country under the law of which the award is made. It is in this context that section 9(b) of the Act becomes relevant because this provides that the Act would not apply to an award made on an arbitration agreement governed by the law of India. section 9(b) was inserted only to exclude those awards which would otherwise be regarded as being foreign awards but were in fact made under an arbitration agreement which is governed by the indian arbitration act. If an award is made in India then, because of the definition of the word “foreign award” the same would be regarded as a domestic award and not a foreign award. There would, therefore, be no occasion or need to exclude such a domestic award from the operation of the said Act. Reference to the award in section 9(b) can only be to that award which, but for section 9(b), would be covered by the definition of the expression “foreign award”. This world mean that if, to an arbitration proceeding, the provisions of the Indian Arbitration Act were made applicable then, in that case, even if the award was made outside India the Foreign Awards Act would not apply. In such a case, by virtue of the provisions of section 7(1)(a)(v), India would be a country under the law of which such an award would be regarded as having been made, ever though the award may actually have been made outside India.

19. It is precisely for the aforesaid reason that the endeavour of the learned counsel for the appellant has been to contend that the arbitration agreement in the present case, is governed by the arbitration law of India. The interim award, in the present case, has been made in England. Prima facie, therefore, it has to be regarded as a foreign award under Section 2 of the Foreign Awards Act. If, to the arbitration agreement in question, the indian arbitration act was to apply then the said award would be regarded as a domestic award and would be open to challenge under section 30 of the Indian Arbitration Act, 1940. We have already observed that, on a correct interpretation of the contract documents it cannot be held that the indian arbitration act is specifically applicable. In the absence of such a stipulation in the contract the question which arises is as to which is the proper law of arbitration which would be applicable to the arbitration agreement, arbitration proceeding and the award.

20. At the outset, we would like to make it clear that merely because proceedings may have to be conducted according to the I.C.C Rules, it would not mean that the provisions of the Indian Arbitration Act, 1940, if otherwise applicable, would cease to apply. The I.C.C Rules merely set out the mode and manner in which the arbitration proceedings are to be conducted. In inter alia provides for #referring the disputes for arbitration, appointment of arbitrators by the Council and other procedural rules and regulations are also laid down for the conduct of the arbitration proceedings. The Arbitration Act itself contains provisions with regard to the conduct of the arbitration proceedings. Chapter II of the Arbitration Act contains provisions with regard to the conduct of arbitration without the intervention of the Court. Most of the said provisions are applicable unless a different intention is expressed in an arbitration agreement. Therefore, to the extent that ICC Rules may be at variance with the provisions of the arbitration act then the said Rules will apply. It is not in dispute that if the arbitration proceedings, even under the I.C.C Rules, had been held in India and the award delivered in India then the indian arbitration act will apply. The award so delivered will have to be made a rule of the court and in this connection all the provisions of the Indian Arbitration Act would be attached. This would clearly show that merely because the I.C.C Rules have been made applicable the jurisdiction of the indian arbitration act is not excluded. To put it differently, the applicability of the I.C.C Rules does not per se decide as to which is the proper law in relation to the arbitration proceedings.

21. In Russell's Arbitration, 20 Edition, at page 58, dealing with the conflict of laws, it is stated as under:

“Where a contract is made between parties resident of different countries, or is made in one country to be performed in another, the validity and effect of an arbitration clause in the contract are to be determined (unless the contract specifically provides otherwise, as is not infrequently the case) by the “proper law” of the contract as a whole: that is to says whatever system of law is was intended by the parties should govern the contract. This intention, where not expressly set out in the contract itself, must be gathered from the language of the whole contract considered in the light of the surrounding circumstances.”

It has further been stated by Russell at page 58 that “if the proper law of the contract has an effect on the arbitration clause, it is equally true that the arbitration clause may have an effect on the proper law of the contract and one has, inter alia, to determine to what extent the provision that arbitration is to be held in a particular country carries with it an implication that the law of that country is to be the proper law of the contract and/or the proper law of the arbitration”. It has also been recognised that the law of arbitration may well be a law which is different from the proper law of the contract. The judicial opinion seems to be that the arbitration being a matter of procedure is governed by lex fori.

22. In James Miller & Partners Limited v. Whithworth Street Estates (Manchester) Ltd., 1970 AC 583(1), a question, similar to the one raised in the present case, came up for consideration. On 10 May, 1965 contract was entered into between a Scottish Company (James Miller & Partners) and the English Company (Whithworth Street Estates) whereby the Scottish Company was to carry out certain conversion work at the Company's factory in Scotland. The contract was concluded in Scotland and was in the standard from published by the Royal Institute of British Architects. The agreement contained an arbitration clause which provided that in the event of a dispute arising between the parties then the President of the said Institute would appoint an arbitrator. As the disputes arose, the said President, on an application being made, appointed a Scottish architect as the arbitrator. During the course of arbitration certain points of law arose and the English Company asked the arbitrator to state his award in the form of a special case for the decision of the English High Court. The Arbitrator refused to do so holding that the arbitration was a Scottish arbitration. He subsequently issued a final order in favour of the Scottish Company. The English Company filed an application in the Court in England and obtained an order directing the arbitrator to state the award in the form of a special case. Appeal filed against the said order was allowed but, on a further appeal, the Court of appeal decided in favour of the English Company on the ground that the proper law of the contract was English and that the arbitration was governed by the English law. A further appeal was filed by the Scottish Company to the House of Lords. Reversing the Court of Appeal, the House of Lords held that where the parties had failed to choose the law governing arbitration proceedings then those proceedings must be considered, at any rate prima facie, as being governed by the law of the country in which the arbitration has held, on the ground that that is the country most closely connected with the proceedings. While coming to this conclusion it was observed in that case that the curial law of the arbitration could be different from the proper law of the contract.

23. Dicey & Morris in the Conflict of Laws, 11 Edition, at page 536, while dealing with the question of the law governing arbitration proceedings, stated that ‘the proper law of the arbitration agreement is normally the same as the proper law of the contract of which it forms a part, but there may be exceptional cases where the arbitration agreement will be governed by a different law ………if there is no express choice of the law to govern the contract as a whole or the arbitration agreement in particular, there is a strong presumption that the proper law of the contract (including the arbitration clause) is the law of the country in which the arbitration is to be held. But this presumption, though strong, can be #resultted, for the House of Lords (in Compagnie Tunisienne de Navigation S.A v. Compagnie ‘d’ Armement Maritime S.A (1971 AC 572)(2) has emphasized that arbitration clause is only one of several circumstances to be considered in determining the proper law of a contract. The presumption cannot operate if no place of arbitration is left to be chosen by the arbitrators or by an outside party. In such cases the proper law of the contract (including the arbitration clause) will be determined in accordance with normal principles”.

At page 539 of Dicey & Morris, it has been observed as follows.

“It is for the parties to choose not only the law which is to govern their agreement to arbitrate, but also the law which is to govern the arbitration proceedings. Normally the parties exercise this power by determining (expressly or by implication) the country in which the arbitration is to take place #thus, where the #parties choose the place of arbitration, and do not expressly choose a different law to govern their contract, the law governing the arbitration proceedings will normally be the same as the law governing the arbitration agreement. But this is not necessarily so. Thus, if the parties to an English contract provide for arbitration in Zurich, English law would govern the validity, interpretation and effect of the arbitration clause as such (including the scope of the arbitrators jurisdiction), but the arbitration proceedings (including the extent to which they are subject to judicial control) would be governed by the law prevailing in Zurich. Where the parties have failed to choose the law governing the arbitration proceedings, those proceedings must be considered, at any rate prima facie, as being governed by the law of the country most closely connected with the proceedings.”

24. The question with regard to jurisdiction of Court also came up for consideration before the Court of Appeal in England in the case of Naviera Amazonicao Peruana S.A v. Compania International De Seguros Del Peru, 1988 (1) Lloyd's Law Reports, 116.(3) In that case, the parties had entered into an agreement whereby the respondents, who were the ship owners, had insured four vessels against the marine risks with the appellants. The insurance policies had various American and other institute clauses and contained certain printed general conditions. Article 1 of the general conditions provided that in the event of conflict between the printed and the typed stipulations the latter were to prevail. Article 31 of the printed conditions provided that the city of Lima would have jurisdiction over all disputes but the typed endorsement in Spanish, when translated to English, stated that “arbitration under the conditions and laws of London”. Disputes arose between the parties and a question arose whether the disputes under the policy were to be resolved by arbitration in London or Lima. While coming to the conclusion that the arbitration was to be held in London the Court referred not only to the decided cases but also to books by different authors including Dicey & Morris on the Conflict of Laws, Mustill & Boyd on Commercial Arbitration and Articles by D. R. Thomas of “Curial Law of Arbitration Proceedings”, Lloyd's Maritime and Commercial Law Quarterly (1984) P. 491 and Redfern and Hunter “The Law and Practice of International Commercial Arbitration” (1986) at pp. 52 to 70. The state of jurisprudence on this point was analysed and the consequences which emerged therefrom were, inter alia, summarized by Lord Justice Kerr as follows:

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

B. English law does not recognize the concept of a “de-localised” arbitration (See Dicey & Morris at pp. 541, 542) or of “arbitral procedures floating in the transnational firmament, unconnected with any municipal system of law” (Bank Mellat v. Helliniki Techniki S.A, (1984) Q.B 291 at p. 301 (Court of Appeal). Accordingly, every arbitration must have a “seat” or locus arbitri or forum which subjects its procedural rules to the municipal law which is there in force. This is what I have termed law (3).

C. Where the parties have failed to choose the law governing the arbitration proceedings, those proceedings must be considered, at any rate prima facie, as being governed by the law of the country in which the arbitration is, held, on the ground that it is the country most closely connected with the proceedings.

D. In the light of some of the matters debated before us it may be helpful to add that in my view none of these principles is different in relation to “institutional” arbitrations, such as those conducted under the rules of the International Chamber of Commerce or the London Court of International Arbitration. The relevant rules of such bodies are incorporated by reference into the contract between the parties, and their binding contractual effect will be respected and enforced by the Courts of the forum, except in so far as they may conflict with the public policy or any mandatory provisions of the lex fori.

E. There is equally no reason in theory which precludes parties to agree that an arbitration shall be held at a place or in country X but subject to the procedural laws of Y. The limits and implications of any such agreement have been much discussed in the literature, but apart from the decision in the instant case there appears to be no reported cases where this has happened.

F. Finally, as I mentioned at the outset, it seems clear that the submissions advanced below confused the legal “seal” etc. of an arbitration with the geographically convenient place or places for holding hearings. This distinction is nowadays a common feature of international arbitrations and is helpfully explained in Redfern and Hunter at p. 69 in the following passage under the heading “The place of Arbitration”:

“The preceding discussion has been on the basis that there is only one “place” of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of reference or the minutes of proceedings or in some other way as the place or “seat” of the arbitration. This does not mean, however, that the arbitral tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is, by no means unusual for an arbitral tribunal to hold meetings—or even hearings—in a place other than the designated place of arbitration, either for its own convenience or for the convenience of the parties or their witnesses……..It may be more convenient for an arbitral tribunal sitting in one country to conduct a hearing in another country—for instance, for the purpose of taking evidence…….In such circumstances each move of the arbitral tribunal does not of itself mean that the seat of the arbitration changes. The seat of the arbitration remains the place initially agreed by or on behalf of the parties”.

These aspects need to be borne in mind when one comes to the Judge's construction of this policy.”

25. From the aforesaid it would appear to us that there can be a difference of law which would govern the validity, interpretation and effect of the arbitration clause and the law which would govern the arbitration proceedings. The aforesaid passages would seem to indicate that it is conceivable that there are two types of laws which may apply for two different situations, but dealing with the same arbitration agreement. Whenever any question arises with regard to the validity or interpretation and effect of the arbitration clause then the law which would be applicable is the law applicable to the contract which contains the arbitration clause. Once arbitration proceedings commence then the law which would be applicable would be governed by the principle of lex fori, namely, the law of the country in which the arbitration proceedings are held. This would also appear from what Russell has said at page 62, namely, “It is a well recognised situation that one law may govern the contract and another arbitration procedure. But until the arbitration actually commences the only law to govern the situation is the law of the contract.”

26. To put it differently, the question as to which law is to apply, after an arbitration agreement has been entered into and disputes between the parties arisen, may be considered with regard to three distinct stages. The first stage would be where a question relating to an arbitration agreement or the proceedings may have to be decided prior to the commencement of the arbitration proceedings. The second stage would be where the proper law has to be decided after the arbitration proceedings have been commenced and the third stage would be after an award has been made.

27. We have to see as to which is the proper law which will be applicable in each of the three stages. It may be, as we will presently examine, that it is the law of one particular country alone which applies to all the three stages but, under different circumstances, it is possible that at each stage the Proper law applicable may be different. In the absence of specifications of a particular law being applicable to the arbitration proceedings, the proper law which will apply with have to be determined on the basis of either of the three principles. Firstly, the proper law may be that of the country where the contract is executed. The second possibility may be that the proper law would be of the country where the arbitration proceedings are held. Thirdly, the proper law may be of the country where the award has been made.

28. In our opinion, as regards the first stage, the proper law to be applied must necessarily be the law applicable to the execution of the contract. An arbitration agreement, like the present, is a part and parcel of a contract executed between the parties. The general principle is that, to the contract, it is the law of the land in which the contract is executed which will apply. An arbitration agreement like the present, whereby the provisions of the i.c.c rules have been made applicable, is not only silent about the applicability of the law but also makes no specific provision with regard to the venue of the arbitration proceedings. As in the present case, it was left to the I.C.C Council and thereafter to the arbitrators to decide as to where the proceedings are to be conducted. A question with regard to the validity of the arbitration agreement may, however, arise before the arbitration proceedings are actually initiated or commenced. Which is the law which would apply at that stage. If, for example, a question arises whether the arbitration agreement has been validly entered into or not, will an application under Section 33 of the Indian Arbitration Act be maintainable. This question can be raised even before the arbitrators have been appointed. At this stage it is not known what the venue of the arbitration proceedings would be and, secondly, the question of law of the country in which award has been made being applicable would also not arise. In our opinion, at this stage, the proper law would be the law of the country which is applicable to the contract or the law of the county in which the contract was executed. It is not possible that at this a party, who may have a justifiable grievance, is without any remedy. It is not necessary, and the party cannot be compelled to wait for arbitrators being appointed and the venue of arbitration being decided before aggrieved party is permitted to approach the court to decide on the validity of the arbitration agreement under which the proceedings are sought to be commenced. In such a situation The answer can only be that it is the law of the country in which the contract has been executed, or the arbitration agreement entered, which will be applicable.

29. In support of the aforesaid conclusion reference may usefully be made to the decision of the Court of Appeal in the case of International Tank and Pipe SAK v. Kuwait Aviation Fuelling Co. KSC, 1975 (1) All E.R 242.(4) A contract was entered into between the Companies which was registered in Kuwait, for constructing a new fuelling depot at the Kuwait International Airport. The contract was subject to the general conditions prepared by the International Federation of Engineers which, inter alia, provided that if any dispute arose the same was to be settled finally under the rules of conciliation and arbitration of the International Chamber of Commerce. By Article 16 of those rules the arbitration was to be governed by the law of procedure chosen by the parties or, failing such choice, by that of the country in which the arbitrator held the proceedings. Disputes having arisen, the same were not amicably resolved and a letter was written stating that if no settlement was reached then the contractors reserve the right to have the matters in dispute settled by arbitration Employers did not accept that letter constituted a sufficient communication of a claim to arbitration within 90 days of the Engineers' decision. The contractors applied to the High Court of London for extension of time of commencing arbitration proceedings. The employers, however, contended that the court had no jurisdiction to entertain such an application since it was possible that the arbitration would be conducted according to the rules of procedure of the law of some country other than England. While holding that the English law was applicable it was observed that clause 16 of the Rules had not come into force because the parties had not chosen what country was to govern the procedure; and no decision had been taken as to where the arbitration should take place. It was under these circumstances that it was held that the English law would be applicable. It was held that the proper law of a contract and the law governing the procedure in an arbitration arising from that contract may be different and that in that case the law to be applied to the problem which the court had to decide was to be according to the proper law of the contract, namely, the English law.

30. The ratio of the aforesaid decision clearly is where a question pertaining to arbitration prior to the commencement of the arbitration proceeding or, possibly, before the arbitrators enter upon the reference, it is the proper law of the contract which would be applicable and not the law of the country in which proceedings are to be held, as that country may not be known. Applying the said principles to the present case if, before the determination of venue of the arbitration, an application under section 33 or any other application under the Arbitration Act had to be filed then it is the court in India which would have the jurisdiction to entertain such an application. This is because the proper law of the contract would be the law of India. In the words of Lord Denning in International Tank's case (supra) “It may be that some other law will govern procedure in the arbitration itself. It may be Kuwait Law, or some other law. But that procedural law does not take effect until the arbitration has actually started, that is to say, not until the arbitrator has been properly appointed and is able to rule on the procedure to be adopted in the arbitration”. This is a clear exposition of the law, namely, that till the arbitration proceedings commence it is the law of the country in which the contract is executed which would be applicable.

31. The commence of the arbitration proceedings is the second stage at which it is to be decided as to which would be the proper law to be made applicable.

Once proceedings have commenced at London the principle of lex fori will apply. This is evident from the ratio of the English decisions and the views of different authors which have been referred to earlier. If any question arises with regard to the conduct of the arbitration proceedings then it would only be the Courts in England, which would have the exclusive jurisdiction to decide the points which arise relating to the arbitration proceedings. Reference was made to the decision of Compagnie d' Armement Maritime SA v. Compagnie Tunisienne de Navigation SA, 1970 (3) All ER 71(5) that in case where the parties had not made an express choice as regards the proper law an agreement by them to refer the disputes to arbitration in a particular country was a strong indication that the law of that country was to be the proper law of the contract. Such an indication was not, however, conclusive or irresistible, and that the arbitration clause must be considered together with the rest of the contract and the relevant surrounding facts and any implication from it could be negatived by an overwhelming implication from the other matters. It was submitted that looking at the contract as a whole the intention of the parties clearly was that it is only the indian arbitration act which will apply and not the law of any other country.

32. We are not inclined to agree with this submission. As already noted, there is no specific provision in the contract making the Indian law specifically applicable to disputes covered by the I.C.C Rules. Secondly, Rule 27.7.2 did contain a clause with regard to the conduct of arbitration proceedings according to the principles of the Indian Arbitration Act, 1940 but the applicability of that Rule has been expressly excluded. Thirdly, in Article 4.1 of the formal contract dated 17 August, 1982 it was stated that the disputes shall be decided by process of settlement and arbitration as specified in clauses 26.0 and 27.0 excluding 27.6.2 and 27.6.1 of the General Conditions of Contract. The parties must have been aware of the general rule that the jurisdiction of the Court, in the absence of the intention to the contrary, in deciding the validity of the arbitration proceedings is governed by the principle of lex fori. Furthermore, section 9 of the 1961 Act itself stated that the said Act is not applicable if the indian arbitration act is applicable. Notwithstanding being aware of this, there was no clause incorporated in the arbitration agreement of the effect that arbitration proceedings will be governed by the Indian Arbitration Act, 1940. In ONGC v. Weston Co., AIR 1987 SC 674,(6) it was specifically provided that the arbitration proceedings would be governed by the indian arbitration act. It was in view of this that the Supreme Court applied the provisions of the Indian law. It seems to us that there was a conscious decision not to insist on the application of the Indian law to the arbitration proceedings and that is why there was no specific provision incorporated in the contract between the parties where the arbitration proceedings were to be governed by the provisions of the Indian Arbitration Act, 1940.

33. It is true that the parties had not specifically agreed to the venue where the arbitration proceedings were to be held. When arbitration was sought it was also not known as to who will be the Chairman who would be appointed and where the proceedings would be conducted. But the parties agreed to such a situation and the necessary implication of this is that they were bound to accept the venue which was fixed for the conduct of the arbitration proceedings, Once the venue is deemed to be acceptable to them it must follow that the proper law applicable to the arbitration proceedings would be the law of the country in which the proceedings are held. In the present case the proceedings were held in England and the interim award was delivered there and, therefore, it is only the Courts in England which would have the jurisdiction. Had the venue been in India or had the award been made in India, even if the proceedings might have been held in London, then it would have been the Courts in India which would have jurisdiction to adjudicate upon the validity of the interim award.

34. The third stage arises after the award is made. The 1961 Act deals with awards which have been made outside India. It gives statutory recognition to the New York Convention. The said convention does not deal with the setting aside of the awards but deals with the recognition and enforcement thereof. Nevertheless, in Article V it is stated as to under what circumstances recognition and enforcement of award would be refused. One of the grounds for refusing to enforce the award is contained in said Article 1(e) which provides that the award will not be enforced if it has, inter alia, been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. This Article is identical to section 7(1)(a)(v) of the Foreign Awards Act. Therefore, in section 7(1)(a)(v) it is clearly provided that award can be set aside either in the country in which it is made or under the law of which the award is made. This postulates that the county under the law of which the award is made may be different than the country in which the award is made. For example, if from the agreement it is clear that the award is made under the laws of India then even though the award may have been made in England then the Indian Courts would, in addition to the Courts of England, have the jurisdiction to decide with regard to the validity of the award.

35. Section 2, as already stated, inter alia, defines the foreign award as being one with is made outside India. This section and the other provisions of the Act are not to apply if, as provided by section 9, the award is made under #an arbitration agreement governed by the law of India. The #jurisdiction of the arbitrator would flow from the arbitration agreement. According to section 2(a) of the Indian Arbitration Act, 1940 an arbitration agreement has to be in writing. If an arbitration agreement has to be in writing and the jurisdiction of the arbitrator is to be derived therefrom it would appear to us to the logical that, when in section 9(b), reference is made to the arbitration agreement being governed by the laws of India, notwithstanding that an award is made outside India, then in order to oust the applicability of the Foreign Awards Act it trust be specifically stated in writing in the contract or in the arbitration agreement itself that to the arbitration proceedings the indian arbitration act will apply. In the absence of any such clear stipulation it must follow that the applicability of the 1961 Act is not excluded and that the award once made outside London is subject to the jurisdiction of the London Courts alone, for the purpose of setting aside the same, and that this Court has no jurisdiction to entertain the application or the objections filed by the appellant.

36. In the present case as section 9 of the Foreign Awards Act is not applicable, this Court has no jurisdiction to entertain the appellant's application because the interim award has been made outside India. The principle of lex fori is clearly applicable in the present case.

37. Before concluding, we may note that it had been contended on behalf of the respondents that the decision of the arbitrators which is sought to be impugned was not an award and could not be set-aside. It was also contended that the award had not been properly filed in accordance with the provisions of section 14(2) of the Indian Arbitration Act. For the view which we are taking, it is not necessary for us to consider the merits of the aforesaid submissions of the respondents.

38. From the aforesaid, it will follow that as this Court had no jurisdiction to entertain the application which had been filed by the appellant under section 14, 30 and 33 of the Indian Arbitration Act, 1940 the same was rightly dismissed. and in fact the present appeal itself cannot be regarded as being maintainable.

For the aforesaid reasons this appeal is dismissed. There will, however, be no order as to costs.

M.B.L Appeal dismissed.