Vikramajit Sen, J.— Should the Court decline to enter upon the controversy of whether an implementable arbitration agreement exists between the parties has yet again arisen like the mythical phoenix from the ashes of litigation. Mr. Rajiv Sawhney, learned Senior Counsel for the contesting defendant has contended that the Court must forthwith refer the parties to arbitration, leaving it to the Arbitral Tribunal to decide upon its own jurisdiction viz. whether the parties before it had agreed to resolve their disputes through arbitration and/or whether the original compact to this effect does not subsist as it had been abandoned and given up or should be deemed to have been given up. In this case I have not been presented with a clean slate on which to write the judgment inasmuch as the controversy between the parties has received jural attention already. Benefiting from the detailed and erudite legal submissions made before me, it is my understanding that if possible or plausible cases are presented on behalf of both the adversaries, then the Court should direct them to ventilate their respective cases before the arbitrators. However, if upon even a cursory consideration of the facts there is a strong preponderant possibility that one of the parties will needlessly and vexatiously be subjected to arbitration, thereby compelling it to expend avoidable time, effort and expense, the Arbitration & Conciliation Act, 1996 (hereinafter referred to as ‘Arb. & Con. Act’) expects the Court to look into the matter, and thereby obviate a futile and facile reference. This opinion holds irrespective of whether it is in the context of a domestic or a foreign arbitration; in fact this determination is essential in the latter case.
2. Mr. Rajiv Sawhney has relied very heavily on the decision of the Hon'ble Supreme Court titled Bhatia International v. Bulk Trading S.A, (2002) 4 SCC 105 for the proposition that in all instances where parties contract with each other that Indian laws would apply to the arbitration, the Award rendered thereon would invariably be pursuant to a domestic and not a foreign arbitration; accordingly, Part I and not Part II would govern any disputes that may be brought before the Court or Arbitral Tribunal. It is through this dialectic that he has argued that section 45 of the arb. & con. act could not be resorted to; that instead section 8 of the arb. & con act mandates the Court to refer the parties to arbitration, leaving it to the Arbitral Tribunal under Section 16 to settle objections even to their own jurisdiction, both of which fall in Part I of the Arb. & Con. Act. Mr. Sawhney has contended that it is the applicable law and not the venue of the arbitration which is the determinative factor in resolving this legal nodus. It is apparent from a perusal of this celebrated decision that the argument that every statute should be interpreted in a manner which would not lead to its extra-territoriality was not raised at all. Therefore, for the Arb. & Con. Act to apply it is imperative to find some connectivity with India (see C.E.B Draper & Sons Ltd. v. Edward Turner & Son, Ltd., [1964] 3 All E.R 148).
3. The opinion of the Apex Court in Bhatia International case (supra) can be gleaned from the following passages:
16. A reading of the provisions show that the said Act applies to arbitrations which are held in India between Indian nationals and to international commercial arbitrations whether held in India or out of India. Section 2(1)(f) defines an international commercial arbitration. The definition makes no distinction between international commercial arbitrations held in India or outside India. An international commercial arbitration may be held in a country which is a signatory to either the New York Convention or the Geneva Convention (hereinafter called ‘the convention country’). An international commercial arbitration may be held in a non-convention country. The said Act nowhere provides that its provisions are not to apply to international commercial arbitrations which take place in a non-convention country. Admittedly, Part II only applies to arbitrations which take place in a convention country. Mr. Sen fairly admitted that Part II would not apply to an international commercial arbitration which takes place in a non-convention country. He also fairly admitted that there would be countries which are not signatories either to the New York Convention or to the Geneva Convention. It is not possible to accept the submission that the said Act makes no provisions for international commercial arbitrations which take place in a non-convention country.
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23. That the Legislature did not intend to exclude the applicability of Part I to arbitrations, which take place outside India, is further clear from certain other provisions of the said Act. Sub-section (7) of Section 2 reads as follows—
2. (7) An arbitral award made under this Part shall be considered as a domestic award.
As is set out hereinabove the said Act applies to (a) arbitrations held in India between Indians, and (b) international commercial arbitrations. As set out hereinabove international commercial arbitrations may take place in India or outside India. Outside India, an international commercial arbitration may be held in a convention country or in a non-convention country. The said Act however only classifies awards as ‘domestic awards’ or ‘foreign awards’. Mr. Sen admits that provisions of Part II make it clear that ‘foreign awards’ are only those where the arbitration takes place in a convention country. Awards in arbitration proceedings which take place in a non-convention country are not considered to be ‘foreign awards’ under the said Act. They would thus not be covered by Part II. An award passed an an arbitration which takes place in India would be ‘domestic award’. There would thus be no need to define an award as a ‘domestic award’ unless the intention was to cover awards which would otherwise not be covered by this definition. Strictly speaking, an award passed in an arbitration which takes place in a non-convention country would not be a ‘domestic award’. Thus the necessity is to define a ‘domestic award’ as including all awards made under Part I. The definition indicates that an award made in an international commercial arbitration held in a non-convention country is also considered to be a ‘domestic award’.
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25. The beginning part of Section 28 reads as follows—
Rules applicable to substance of dispute.—(I) Where the place of arbitration is situated in India,—
Section 28 is in Part I. If Part I was not to apply to an arbitration which takes place outside India there would be no necessity to specify that the rules are to apply ‘where the place of arbitration is situated in India’. It has been held in the case of National Thermal Power Corpn. v. Singer Co. that in international commercial arbitration parties are at liberty to choose, expressly or by necessary implication, the law and the procedure to be made applicable. The procedure or the rules governing such arbitration may be of the country where the arbitration is being held or the body under whose aegis the arbitration is being held—all bodies which conduct arbitrations and all countries which have rules and laws governing arbitrations. Thus Section 28 does not provide for rules where the place of arbitration is out of India.
26. Mr. Sen had also submitted that Part II, which deals with enforcement of foreign awards does not contain any provision similar to section 9 or section 17. As indicated earlier, Mr. Sen had submitted that this indicated the intention of the Legislature not to apply Sections 9 and 17 to arbitrations, like the present, which are taking place in a foreign country. The said Act is one consolidated and integrated Act. General provisions applicable to all arbitrations will not be repeated in all Chapters or Parts. The general provisions will apply to all Chapters or Parts unless the statute expressly states that they are not to apply or where, in respect of a matter, there is a separate provision in a separate Chapter or Part. Part II deals with enforcement of foreign awards. Thus Section 44 (in Chapter I) and Section 53 (in Chapter II) define foreign awards, as being awards covered by arbitrations under the New York Convention and the Geneva Convention respectively. Part II then contains provisions for enforcement of ‘foreign awards’ which necessarily would be different. For that reason special provisions for enforcement of foreign awards are made in Part II. To the extent that Part II provides a separate definition of an arbitral award and separate provisions for enforcement of foreign awards, the provisions in Part I dealing with these aspects will not apply to such foreign awards. It must immediately be clarified that the arbitration not having taken place in India, all or some of the provisions of Part I may also get excluded by an express or implied agreement of parties. But if not so excluded the provisions of Part I will also apply to ‘foreign awards’. The opening words of Sections 45 and 54, which are in Part II, read ‘notwithstanding anything contained in Part I’. Such a non obstante clause had to be put in because the provisions of Part I apply to Part II.
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29. We see no substance in the submission that there would be unnecessary interference by Courts in arbitral proceedings. Section 5 provides that no judicial authority shall intervene except where so provided. Section 9 does not permit any or all applications. It only permits applications for interim measures mentioned in Clauses (i) and (ii) thereof. Thus there cannot be applications under Section 9 for stay of arbitral proceedings or to challenge the existence or validity of the arbitration agreements or the jurisdiction of the Arbitral Tribunal. All such challenges would have to be made before the Arbitral Tribunal under the said Act.
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.
34. Thus Article 23 of the ICC Rules permits parties to apply to a competent judicial authority for interim and conservatory measures. Therefore, in such cases an application can be made under Section 9 of the said Act.
35. Lastly, it must be stated that the said Act does not appear to be a well-drafted legislation. Therefore the High Courts of Orissa, Bombay, Madras, Delhi and Calcutta cannot be faulted for interpreting it in the manner indicated above. However, in our view a proper and conjoint reading of all the provisions indicates that Part I is to apply also to international commercial arbitrations which take place out of India, unless the parties by agreement, express or implied, exclude it or any of its provisions. Such an interpretation does not lead to any conflict between any of the provisions of the said Act. On this interpretation there are no lacunae in the said Act. This interpretation also does not leave a party remediless. Thus such an interpretation has to be preferred to the one adopted by the High Courts of Orissa, Bombay, Madras, Delhi and Calcutta. It will therefore have to be held that the contrary view taken by these High Courts is not good law.
The Stare Decisis of Bhatia International:
4. It appears to me that the ratio of Bhatia International does not foreclose any further discussion on the interplay between Sections 8 and 45, or Part I and Part II of the Arb. & Con. Act. The controversy is altogether different since the Court was concerned with the grant of interim measures under section 9 of the arb & con. act. In Director of Settlement, A.P v. M.R Apparao, (2002) 4 SCC 638, a three-Judge Bench has opined that “Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The aforesaid Article empowers the Supreme Court to declare the law. It is, therefore, an essential function of the Court to interpret a legislation. The statements of the Court on matters other than law like facts may have no binding force as the facts of two cases may not be similar. But what is binding is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the Court that forms the ratio and not any particular word or sentence. To determine whether a decision has ‘declared law’ it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An ‘obiter dictum’ as distinguished from a ratio decidendi is an observation by the Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though an obiter may not have a binding effect as a precedent, but it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of points raised and decided by the Court in a given case”. The Constitution Bench has also reiterated the view in Islamic Academy of Education v. State of Karnataka, (2003) 6 SCC 697 : 2003 (6) Scale 325, that the ratio decidendi of a judgment can be obtained only from a reading of its entirety. This is also the opinion of the Court in Punjab National Bank v. K.L Vaid, (2004) 7 SCC 698. In State of Gujarat v. Akhil Gujarat Pravasi, (2004) 5 SCC 155 : AIR 2004 SCC 3894, the Hon'ble Supreme Court has observed that ‘any observation made during the course of reasoning in a judgment should not be read divorced from the context in which they were used.’ Most recently, in Zee Tele Films v. Union of India, AIR SCW 2005 2985, the Court has unequivocally declared that ‘a decision is not an authority for the proposition which did not fall for its consideration’. In A-One Granites v. State of U.P, AIR 2001 SC 1203 : (2001) 3 SCC 537 it had been contended that the controversy was covered on all fours by a previous decision of the Court. The contention was rejected in these words:
11. This question was considered by the Court of Appeal in Lancaster Motor Co. (London) Ltd. v. Bremith Ltd., (1941) 1 KB 675, and it was laid down that when no consideration was given to the question, the decision cannot be said to be binding and precedents sub silentio and without arguments are of no moment. Following the said decision, this Court in the case of Municipal Corporation Of Delhi v. Gurnam Kaur ., (1989) 1 SCC 101 : AIR 1989 SC 38, observed thus (at p. 43 of AIR)—
“In Gerard v. Worth of Paris Ltd. (K), (1936) 2 All ER 905 (CA), the only point argued was on the question of priority of the claimant's debt, and on this argument being heard, the Court granted the order. No consideration was given to the question whether a garnishee order could properly be made on an account standing in the name of the liquidator. When, therefore, this very point was argued in a subsequent case before the Court of Appeal in Lancaster Motor Co. (London) Ltd. v. Bremith Ltd., (1941) 1 KB 675, the Court held itself not bound by its previous decisions. Sir Wilfrid Greene, M.R, said that he could not help thinking that the point now raised had been deliberately passed sub silentio by Counsel in order that the point of substance might be decided. He went on to say that the point had to be decided by the earlier Court before it could make the order which it did; nevertheless, since it was decided ‘without argument, without reference to the crucial words of the rule, and without any citation of authority’, it was not binding and would not be followed. Precedents sub silentio and without argument are of no moment. This rule has ever since been followed.”
In State of U.P v. Synthetics and Chemicals Ltd., (1991) 4 SCC 139, reiterating the same view, this Court laid down that such a decision cannot be deemed to be a law declared to have binding effect as is contemplated by Article 141 of the Constitution of India and observed thus—
“A decision which is not express and is not founded on reasons nor it proceeds on consideration of issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141.”
In the case of Arnit Das v. State Of Bihar., (2000) 5 SCC 488 : (2000 AIR SCW 2037 : AIR 2000 SC 2264 : 2000 Cri LJ 2971), while examining the binding effect of such a decision, this Court observed thus (Para 20):
“A decision not expressed, not accompanied by reasons and not proceeding on a conscious consideration of an issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141. That which has escaped in the judgment is not the ratio decidendi. This is the rule of sub silentio, in the technical sense when a particular point of law was not consciously determined.”
12. Thus we have no difficulty in holding that as the question regarding applicability of Rule 72 of the Rules having not been even referred to, much less considered by this Court in the earlier appeals, it cannot be said that the point is concluded by the same and no longer res integra and accordingly this Court is called upon to decide the same.
5. Therefore, the annals of the Bhatia International case (supra) would be of relevance a consideration of which would disclose that the question before the Apex Court was whether an injunction could be granted by an Indian Court even in circumstances where the venue of arbitration was abroad. I had the occasion to ponder upon this very question in Naval Gent Maritime Ltd v. Shivnath Rai Harnarain (I) Ltd., 2000 (3) AD (Delhi) 857. I had the advantage of the opinion of four of my learned Brothers in Unicor Gmbh Rahn Plastmaschinen, 1998 (47) DRJ 397, Suzuki Motor Corporation v. Union Of India., 1997 (2) Arb. LR 477, Dominent Offset Pvt. Ltd. v. Adamovske Strojirny+ A.S, 1997 (42) DRJ 313; and Marriot International Inc. v. Ansal Hotels Ltd., 1999 VI AD (Delhi) 340 and Olex Focas Pvt. Ltd. v. Skodaexport Company Ltd., 20001 AD (DELHI) 527. The learned Judges had concluded, by disparate dialectic, that the powers of the Court to grant injunctions under section 9 of the arb. & con. act would also extend to ‘international’ arbitrations. The judgment of J.B Goel, J. does not run counter to these views. On a holistic reading of the Arbitration and Conciliation Act, 1996, there is no justification to read it in compartments, and to subscribe to the view that the provisions of Part I apply only to domestic arbitrations. To hold so would tantamount to defeating a uniform and universal string of precedents which underscore the pivotal role of Courts in the administration of arbitration. So long as the territorial jurisdiction of the Court is present, relief should not be declined on technicalities which are not representative of any equities in favour of the respondents. Where the properties of the respondent are within the jurisdiction of this Court, the umbilical cord of territoriality is clearly visible. It would be worthwhile to keep in perspective the decision in The Channel Tunnel Group v. Balfour Beatty Construction Limited, (1993) 1 All ER 664, where it was held that English Courts possessed inherent powers to grant injunctive relief despite the fact that the seat of Arbitration was not in England, a view that has now obtained statutory sanction in terms of the English Arbitration Act. This is the ubiquitous view internationally. I see no reason to adopt a pedantic approach and thereby render the legal regime in India dissimilar to that prevailing in other parts of the world. The globe is now becoming a village, and persons will increasing have to choose between several available forums which may not have been available earlier due to constraints of communication. Merited relief should not be denied so long as the choice of Court is not capricious. The opinion of my three learned Brothers was reversed by the Hon'ble Division Bench in Marriott International Inc. v. Ansal Hotels Limited, 86 (2000) DLT 873 (DB) : AIR 2000 Delhi 377, holding that the Court had no power to issue interim orders under section 9 of the arb. & con. act. in respect of arbitration proceedings which were being held before the Kuala Lampur Regional Centre for Arbitration, which should have been approached for this relief. It is this question of law that the Hon'ble Supreme Court was called upon to definitively settle in the Bhatia International case (supra). The Apex Court has thus preferred the opinion of the several Single Benches of this Court. The widest legal principle or the ratio decidendi extractable from Bhatia International case (supra) is that provisions of Part I of the Act apply to all arbitrations that possess statutory connectivity with India, except where Part I has been explicitly excluded (such as in Section 45). The ratio of Bhatia International case (supra), in my understanding, is obviously that section 9 of the arb. & con. act can be resorted to even in respect of international commercial arbitrations whose venue is outside India, i.e, foreign arbitrations culminating in a ‘foreign award’. Where the sittings of an international commercial arbitration is in India, it may be termed a ‘domestic arbitration’. However, there may be instances where one of the parties is not of Indian nationality and is also not a citizen of a country which is not a signatory either of the New York Convention or the Geneva Conventions. In actuality the drafters have overlooked the possibility of an international arbitration between an Indian party and another from a ‘non-convention’ country. This is the legislative reality and there is no reason to deduce that Parliament wanted Part I alone to apply to such arbitrations. The relative likelihood of arbitrations between an Indian party and one from a non-convention country (or for that matter from a Geneva Convention country) is miniscule which is perhaps the reason for this void. I would hazard to assess the incidence of Chapter II of Part II of the Arb. & Con. Act being attracted or invoked is likely to be less than ten percent. The existence of this void or lacuna leads to two possibilities where the arbitration is in respect of a non-convention party viz. (a) either to apply Part I or (b) to decide on a priori principles. It should also be kept in view that there may not be any justification to equate a situation obtaining from the failure to cater to a contract in which one party comes from a non-convention country to every arbitration including Geneva or New York Convention parties. It may be logically impermissible to apply/or ‘extrapolate’ this legal regime either to a domestic arbitration or to a New York/Geneva Convention arbitration, which are explicitly covered by Part I and Part II of the Arb. & Con. Act. If the arbitral sessions are located outside India then the proceedings can be called ‘non-convention arbitrations’ and would not be governed by the Arb. & Con. Act until such time as any part of an Award passed in those proceedings is sought to be executed in India, in which event Order XXI of the Code of Civil Procedure, 1908 would have to be resorted to. The careless drafting which pervades most of the statute is poignantly present in Section 2(f) which, whilst defining the term ‘international commercial arbitration’, fails altogether to mention that the ‘other’ party must be Indian. This has perforce to be read into the definition which regretfully adumbrates only ‘one’ and not the ‘other’.
6. Mr. Sawhney's argument is that if the contract stipulates that the laws of India shall govern the arbitral proceedings, as does Article 21 of the Joint Venture Agreement between the parties (except in the case of BHARTI), then regardless of the venue, they shall have the character of a domestic arbitration, as in section 2(7) of the arb. & con. act, and its Part I and not Part II would govern their dealings. Apart from Bhatia International (supra) he relied very heavily on the pronouncements contained in National Thermal Power Corporation v. The Singer Company, (1992) 3 SCC 551 : AIR 1993 SC 998 and on the judgment of a Division Bench of the Gujarat High Court in Nirma Ltd. v. Lurgi Energie Und Entsorgung GMBH, Germany, AIR 2003 Gujarat 145. In the NTPC case, the Apex Court held that the law of the arbitration agreement is normally the same as the law of the contract; where no express choice is made it would be the law of the country where the arbitration is agreed to be held; since the parties had expressly agreed that Indian laws would govern contractual disputes, these laws would similarly regulate arbitral matters also. The parties in that case had also consented to the applicability of the ICC Rules and Regulations over all matters of procedure connected with the conduct of the arbitration. Mr. Sawhney's contention that since the agreement in hand adverts to Indian laws, Part I of the Arb. & Con. Act would apply to all disputes between the parties, is predicated on these observations. It must immediately be noted that in the NTPC case the Court had before it the repealed Arbitration Act, 1940 and Section 9(b) of the Foreign Awards (Recognition and Enforcement) Act 1961 (hereinafter referred to ‘FARE Act’), which excludes the application of the statute to ‘any award made on an arbitration agreement governed by the law of India’. In order to establish his arguments, and to distinguish the decision of the Division Bench in General Electric Canada Inc. v. National Hydroelectric Power Corporation Ltd.) 465, Mr. Chandhiok, learned Senior Counsel appearing on behalf of Plaintiff, has relied on the following paragraphs of the NTPC case (supra):
42. The Foreign Awards Act contains a specific provision to exclude its operation to what may be regarded as a ‘domestic award’ in the sense of the award having been made on an arbitration agreement governed by the law of India, although the dispute was with a foreigner and the arbitration was held and the award was made in a foreign State.
Section 9 of this Act says—
“Nothing in this Act shall—
(a) …..
(b) apply to any award made on an arbitration agreement governed by the law of India.”
Such an award necessarily falls under the Arbitration Act, 1940, and is amenable to the jurisdiction of the Indian Courts and controlled by the Indian system of law just as in the case of any other domestic award, except that the proceedings held abroad and leading to the award were in certain respects amenable to be controlled by the public policy and the mandatory requirements of the law of the place of arbitration and the competent Courts of that place.
43. It is important to recall that in the instant case the parties have expressly stated that the laws applicable to the contract would be the laws in force in India and that the Courts of Delhi would have exclusive jurisdiction ‘in all matters arising under this contract’. They have further stated that the ‘Contract shall in all respects be construed and governed according to Indian laws’. These words are wide enough to engulf every question arising under the contract including the disputes between the parties and the mode of settlement. It was in Delhi that the agreement was executed. The form of the agreement is closely related to the system of law in India. Various Indian enactments are specially mentioned in the agreement as applicable to it in many respects. The contract is to be performed in India with the aid of Indian workmen whose conditions of service are regulated by Indian laws. One of the parties to the contract is a public sector undertaking. The contract has in every respect the closest and most real connection with the Indian system of law and it is by that law that the parties have expressly evinced their intention to be bound in all respects. The arbitration agreement is contained in one of the clauses of the contract, and not in a separate agreement. In the absence of any indication to the contrary, the governing law of the contract (i.e in the words of Dicey, the proper law of the contract) being Indian law, it is that system of law which must necessarily govern matters concerning arbitration, although in certain respects the law of the place of arbitration may have its relevance in regard to procedural matters.
In order to make good his submission Mr. Chandhiok has drawn attention to section 51 of the arb. & con. act which only incorporates section 9(a) of the fare act. Therefore, the NTPC case (supra) may not have any direct application to the facts of the present case. There is obvious substance in his argument that because of the deliberate omission of Section 9(b) of the FARE Act the Legislature has consciously altered the position away from the choice of law and towards the venue of arbitration. Once this conclusion is arrived at since the venue of the Arbitration is outside India and is governed by the New York Convention, Part II Chapter I alone can be invoked by the present parties. section 9 of the fare act and section 51 of the arb. & con. act are reproduced in juxtaposition for facility of comparison—
Section 9 of the FARE Act
section 51 of the arb. & con. act
Saving.—Nothing in this act shall—
(a) prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Act had not been passed; or
(b) apply to any award made on an arbitration agreement governed by the law of India.
Saving.—Nothing in this Chapter shall prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award if this Chapter had not been enacted.
7. The question before the Apex Court in Sumitomo Heavy Industries Ltd. v. ONGC Ltd., (1998) 1 SCC 305, was whether consequent upon the Award having been published by the Arbitral Tribunal whose proceedings had been conducted in London and were governed by the Rules and Procedure of the International Chambers of Commerce, a petition under Section 14 of the Arbitration Act, 1940 to file the Award in the Bombay High Court was maintainable. The Hon'ble Supreme Court clarified that in the duration of the arbitral proceedings the curial law in London would hold sway, but once the Award had been published, since its enforcement was sought in India the Petition would be maintainable. It opined that ‘the Courts administering the curial laws have the authority to entertain applications by parties to arbitrations being conducted within their jurisdiction…’. It had also been observed that Section 9(b) of the FARE Act did not apply to the parties. The general principle that is extractable from this decision is that there has been a shift towards the venue determining the curial law which has to be applied.
8. Mr. Sawhney has also relied heavily on the decision of the Division Bench in Nirma Ltd. v. Lurgi Energie Und Entsorgung GMBH, Germany (supra), in which the Trial Court had rejected the prayer to set aside the ‘first partial award’ of the International Court of Arbitration for the reason that it ‘could not be said to be an interim or partial award for the purpose of Section 34 of the Act.’ The Division Bench had noted that the parties had contractually consented that their Agreement shall be governed according to laws of India. It repelled the argument that since the Award was a product of an international commercial arbitration the challenge to it stood waived. The Division Bench held inter alia that, “The decisive factor for an award to be considered a ‘domestic award’ is not the place where it is made but rather the fact of it being made under Part I of the Act. The parties in the instant case having agreed that the agreement (including the arbitration thereunder) shall be governed according to the laws of India, the arbitral award has to be held to have been made under Part I and has to be considered as a domestic award, though made on foreign soil according to the ICC Rules and Procedure—which can only displace the derogable provisions of Part I. Therefore, the recourse to a Court under Section 34, it not being a derogable provision, cannot be said to have been waived by subscribing to the ICC Rules of Arbitration’. With utmost respect I am unable to concur with this interpretation of the law; possibly, the Bench was influenced by the opinion of Lord Denning in International Tank and Pipe SAK v. Kuwait Aviation Fuelling Co. KSC, [1975] 1 ALL ER 242 (CA), which indubitably would have been relevant had Section 9(b) of the FARE Act been ‘saved’ by section 51 of the arb. & con. act. In paragraph 9 of this detailed judgment, the Division Bench has commented that the UNCITRAL Model Law does not state to which international commercial arbitrations it would apply. Most significantly it also noted that the Working Group was in favour of strict territorial criterion, but that it was not expressly dealt with. Again, with great trepidation and in all humility, it is my understanding that Article I of the New York Convention, which is referred to in section 44 of the arb. & con. act, without adverting conjointly to Section 9(b) of FARE Act and Section 51 of the Act, leaves no manner of doubt that the territorial/venue nexus has now come to be accepted—
ARTICLE 1
This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.
2. The term ‘arbitral awards’ shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted.
3. When signing, ratifying or acceding to this Convention, or notifying extension under article X hereof, any State may on the basis of reciprocity declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State. It may also declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration.”
9. As in the Singer case (supra) the decision of the Hon'ble Supreme Court in Dresser Rand S.A v. K.G Khosla Compressors Ltd., (1994) 1 Arbitration Law Reporter 506, would not apply to the Arb. & Con. Act. In this analysis the conclusion appears to be that there are no precedents which are directly applicable to the legal conundrum before me.
Extent of the jurisdiction of Civil Courts:
10. section 5 of the arb. & con. act prescribes that notwithstanding anything contained in any other law no judicial authority shall intervene in any matter governed by Part I except where so provided therein. Section 5 does not state that civil Courts shall have no role to play in arbitration matters, as it could easily have done. In Dhulabhai, etc. v. State of Madhya Pradesh, AIR 1969 SC 78, it has been opined by the Constitution Bench that ‘the jurisdiction of Civil Courts is all embracing except to the extent it is excluded by an express provision of the law or by clear intendment arising from such law.’ After discussing all the ramifications of the statute law and its previous pronouncements the following legal propositions were enunciated:
“The result of this inquiry into the diverse views expressed in this Court may be stated as follows—
(1) Where the statute gives a finality to the orders of the special Tribunals the Civil Court's jurisdiction must be held to be excluded if there is adequate remedy to do what the Civil Courts would normally do in a suit. Such provision, however, does not exclude those cases where the provisions of the particular Act have not been complied with or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.
(2) Where there is an express bar of the jurisdiction of the Court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the Civil Court.
Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the Tribunals so constituted, and whether remedies normally associated with actions in civil Courts are prescribed by the said statute or not.
(3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals.
(4) When a provision is already declared unconstitutional or the constitutionality of any provision is to be challenged, a suit is open. A writ of certiorari may include a direction for refund if the claim is clearly within the time prescribed by the Limitation Act but it is not a compulsory remedy to replace a suit.
(5) Where the particular Act contains no machinery for refund of tax collected in excess of constitutional limits or illegally collected a suit lies.
(6) Questions of the correctness of the assessment apart from its constitutionality are for the decision of the authorities and a civil suit does not lie if the orders of the authorities are declared to be final or there is an express prohibition in the particular Act. In either case the scheme of the particular Act must be examined because it is a relevant inquiry.
(7) An exclusion of the jurisdiction of the Civil Court is not readily to be inferred unless the conditions above set down apply.”
11. In paragraph 15 of Bhatia International case (supra) Hon'ble Justice S.N Variava has remarked with reference to Civil Courts that ‘the principle of universal application is that ordinarily the jurisdiction may not be ousted unless the very statutory provision explicitly indicates or even by inferential conclusion the Court arrives at the same when such a conclusion is the only conclusion’. In I.T.I Limited v. Siemens Public Communications Network Limited, (2002) 5 SCC 510 : AIR 2000 SC 2308, Hon'ble Mr. Justice Santosh Hegde has similarly observed that it is well settled that the jurisdiction of the Civil Court can only be taken away by a statute in specific terms; that such exclusion cannot be easily inferred because there is always a strong presumption that civil Courts have jurisdiction to decide all questions of a civil nature. The Court found that the High Court possessed revisory powers under section 115 of the cpc even in respect of an Appeal under Section 37 of the Act. These very same views have also been articulated in the judgment of Hon'ble Justice R.C Lahoti (as the learned Chief Justice of India then was) in Ramesh Chand Ardawatiya v. Anil Panjwani, (2003) 7 SCC 350. Finally, the following pronouncements in Sukanya Holdings (P) Limited v. Jayesh H. Pandya, (2003) 5 SCC 531 are also of equal relevance:
“For interpretation of Section 8, Section 5 would have no bearing because it only contemplates that in the matters governed by Part I of the Act, the judicial authority shall not intervene except where so provided in the Act. Except Section 8, there is no other provision in the Act that in a pending suit, the dispute is required to be referred to the Arbitrator. Further, the matter is not required to be referred to the Arbitral Tribunal, if (1) the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or (3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof. This would, therefore, mean that the Arbitration Act does not oust the jurisdiction of the Civil Court to decide the dispute in a case where parties to the arbitration agreement do not take appropriate steps as contemplated under Sub-sections (1) and (2) of Section 8 of the Act.”
12. The controversy before the Hon'ble Supreme Court in Konkan Railway Corporation Limited v. Rani Construction Private Limited, (2002) 2 SCC 388, revolved around section 11 of the arb. & con. act. Therefore, Mr. Sawhney is not justified in relying on the observations made in paragraph 21 therein that there would be no impediment in the Arbitral Tribunal holding that it had been wrongly constituted by the Court since thirty days had not expired, in order to support his contention that the jurisdiction of the Civil Court is completely ousted. The decision does not hold that a Civil Court is barred from setting aside an administrative order of the Hon'ble Chief Justice on this short ground. section 5 of the arb. & con. act could have explicitly ousted the jurisdiction of Civil Courts, but fails to do so. On the contrary, section 8 of the arb. & con. act preserves it, since a suit can/must continue unless the application envisaged in this provision has been preferred. Sections 8, 45 and Article 11(3) of New York Convention are put in juxtaposition below:
Section 8
Section 45
ARTICLE II(3)
Power to refer parties to arbitration where there is an arbitration agreement.—
(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.
(3) Notwithstanding that an application has been made under Sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.
Power of judicial authority to refer parties to arbitration.—Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
The Court of a Contracting State when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative and incapable of being performed.
From a plain reading of the provisions it is clear that Section 8 comes into operation wherever a contract contains an arbitration clause whereas Section 45 is attracted when the matter is the subject of a New York Convention arbitration agreement. Their language is different. Section 8 envisages the filing of an application by the party seeking Reference whereas section 45 of the arb. & con. act expects only a ‘request’ for this purpose. However the most important facet of difference is that no adjudication is envisaged in Section 8 whereas Section 45 contemplates the returning of a judicial finding that the agreement to arbitrate has not become inoperative or non-performable in the interregnum. The wording of Article II (3) of the New York Convention has also been departed from, in that Section 45 commences with a non-obstante and thereafter adopts the same language. Mr. Sawhney's argument to the effect that Section 45 has no application to the present dispute flies in the face of these exclusionary words, which have the effect of creating a further fascicule in the statute precluding the operation of all its other provisions. Therefore, there is no room for applying Part I of the Arb.’ & Con. Act where the New York Convention is specifically attracted, as per Section 45. The Supreme Court considered the effect of such words in Hari Singh v. State of U.P, (1984) 2 SCC 624 : AIR 1984 SC 1020. Its opinion leaves no doubt that Part I of the Arb. & Con. Act should be ignored wherever the New York Convention is applicable.
Section 70, so far as is relevant, says ‘the provisions of the factories act shall, notwithstanding anything contained in that Act, apply to all persons employed in and in connection with a factory’. It is well-known that a non obstante clause is a legislative device which is usually employed to give overriding effect to certain provisions over some contrary provisions that may be found either in the same enactment or some other enactment, that is to say, to avoid the operation and effect of all contrary provisions. Thus the non obstante clause in Section 70, namely, ‘notwithstanding anything in that Act’ must mean notwithstanding anything to the contrary contained in that Act and as such it must refer to the exempting provisions which would be contrary to the general applicability of the Act. In other words, as all the relevant provisions of the Act are made applicable to a factory notwithstanding anything to the contrary contained in it, it must have the effect of excluding the operation of the exemption provisions. Just as because of the non obstante clause the Act is applicable even to employees in the factory who might not be ‘workers’ under Section 2(1), the same non obstante clause will keep away the applicability of exemption provisions qua all those working in the factory. The Labour Court, in our view, was, therefore, right in taking the view that because of the non obstante clause Section 64 read with Rule 100 itself would not apply to the respondents and they would be entitled to claim overtime wages under Section 59 of that Act read with Section 70 of the Bombay Shops and Establishments Act, 1948.
13. The syntax and components of Parts I and II make them wholly dissimilar and entirely incomparable, leaving no room for doubt that domestic arbitration and New York Convention arbitrations are governed by distinct legal regimes. section 8 read in conjunction with sections 5 and 16 of the arb. & con. act prohibits interference by a Civil Court. The non obstante in Section 45, as also its language which should be interpreted with the assistance of the New York Convention, expects a Court to be satisfied that the agreement has not become null and void, inoperative or incapable of being performed, before the Court can accede to the request of any person to make a Reference. sections 34 and 48 of arb. & con. act and article v of new york convention are reproduced in juxtaposition:
Section 34
Section 48
ARTICLE V
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
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
1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that—
(a) the parties to the agreement referred to in Article II 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 Tribunal;
(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;
(b) the party against whom the award is invoked was not
(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 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 recognised and 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
(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.
Explanation.—Without prejudice to the generality of Sub-clause (ii), it is hereby declared, for the avoidable 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 or was in violation of Section 75 or Section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the Arbitral Tribunal:
Provided that if the Court is satisfied that the applicant Was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter 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.
(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. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that—
(a) the subject-matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) the recognition or enforcement of the award would be contrary to the public policy of that country
4. On receipt of an application under Sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of Arbitral Tribunal will eliminate the grounds for setting aside the arbitral award.
(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.
14. Arbitration, as a recognized and acceptable method of dispute resolution, is less than a century in age. At the commencement of the repealed Arbitration Act, 1940 there must have been considerable uncertainty as to how arbitration would be received; its development could not be precisely predicted but empirical data shows that it has it has surpassed all expectations. Arbitration was then at the embryonic stage that ‘conciliation’ is presently at. The reality is that today almost every commercial contract prescribes that if disputes arise they must be resolved through arbitration. Several national and international organisations are now in existence through whose aegis arbitration can be conducted. The Indian Council of Arbitration (ICA) as also various trade, chambers of Commerce and/or business organisations at the Central and State level have a panel of accomplished arbitrators as also the requisite infrastructure for conducting arbitration. The International Court of Arbitration is one of many bodies which is specifically named by contracting parties for completing arbitration. These bodies have attained specialisation to such an extent that they have promulgated their own rules of procedure much like curial law. No contact with Courts of law is necessary, until one of the parties recalcitrantly refuses to honour an Award thereby necessitating steps for its execution. There is therefore scant need to prescribe the powers and procedure pertaining to arbitration in the commercial world. This eventuality usually arises where the parties are individuals and arbitration is through the intervention of a Court. Chapters III to VI of Part I of the Arb. & Con. Act could well be otiose even for domestic commercial arbitration. These provisions would guide the parties and the arbitrators who have a first time involvement with arbitration. In this analysis it will become plain that Chapters I and II of Part II of the Arb. & Con. Act are complete codes in themselves, akin to Section 25B of the Delhi Rent Control Act in respect of both curial and substantive law pertaining to the arbitration. If this understanding is correct it would no longer be necessary to locate the power for issuing interim orders within the Arb. & Con. Act; Section 9 dealing with domestic arbitrations would become clarificatory in character.
15. So far as Civil Courts are concerned it is not necessary for them to trace their powers to issue injunctions to a statute; in common law systems the reverse is oftentimes observed. To mention only a few examples, the principles laid down in Ryland v. Fletcher, Donoghue v. Stevenson, Central London Property Trust Ltd. v. High Trees House Ltd., 1947 K.B 130 : [1956] I All ER 256 (now known simply as High Trees in which the principle of promissory estoppal was established) and Mareva v. International Bulk Carriers, (1980) 1 All ER 213 (thenceforward ‘Mareva injunction’ has become a term of art) have in fact acted as catalysts for statutory activity. Civil Courts in common-law countries have a duty, which cannot be deferred, postponed or procrastinated, to decide every dispute brought before it. If no legislation is in existence the lis must be decided on first principles. The Channel Tunnel case (supra) is significant for several reasons including the reiteration by the House of Lords that the Court had power pursuant to its inherent jurisdiction to grant a stay of an action brought before it in breach of an agreed method of resolving disputes.
16. The ‘United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June, 1958)’, the New York Convention in common legal parlance, has been ratified by India of 13th July, 1960. By virtue of its Article VII the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the execution of Foreign Arbitral Awards of 1927 ceases to have effect between the contracting States. Considering that the New York Convention has been ratified by 108 nations and less than five sovereign contracting states of the Geneva Convention have not become signatories to the New York Convention, Chapter II of Part II of the Arb. & Con. Act already has minimal applicability and may soon have none at all, reducing that Chapter to a surplasage. Article 51 of the Constitution of India, which is a Directive Principles of State Policy, expects the promotion of international peace and security and once a Treaty is ratified by India it becomes its duty to ensure that appropriate legislation is passed so that the Treaty has municipal/domestic applicability and efficacy. For example the Warsaw and Hague Conventions regulating International Carriage by Air has been infused with local applicability upon the passing of the Carriage by Air Act. Unlike in the Arb. & Con. Act, the language of those Conventions has not been tampered with or altered whilst enacting the Carriage by Air Act. It is certainly arguable that the language employed in any Treaty should similarly be employed verbatim in the municipal statute, since every nation is obliged to give complete effect to its international obligations. It is not expected of any sovereign country to lead the international community to believe that it has agreed to fall within a particular legal regime, whilst chartering a different path in reality. If the same language as is found in a ratified treaty is employed in a stature, inconsistency is obviated.
Waiver of Arbitration Clause in Part I:
17. section 8 of the arb. & con. act introduces into the statute the doctrine of election of remedies, i.e, the resolution of disputes either through arbitration or through civil action. In Food Corporation Of India v. Sreekanth Transport, (1999) 4 SCC 491 : AIR 1999 SC 2184 : 1999 (2) Arb. L.R 531, the FCI had filed a civil suit despite the existence of an exclusion clause in the Agreement. The Apex Court took the view that FCI had relinquished or abandoned its right of proceedings pursuant to the said clause. The decision in Magna Leasing Limited v. NEPC Micon Limited, AIR 1998 Calcutta 94, has already been relied upon by me in Raj & Associates…Plaintiff v. Videsh Sanchar Nigam Limited & Ors.…Defendants, 2004 (2) Arb. L.R 614 (VSNL case). The situation turned out to be the reverse of that which is normally encountered; the plaintiff had filed a suit which it subsequently attempted to withdraw with the intention of pursuing its remedy through arbitration. The second defendant, RITES, had invoked Section 8, whilst simultaneously objecting to its impleadment on the strength of Section 230 of the Contract Act, and its contention had been upheld. VSNL had filed a Counter Claim, and the Plaintiff was refused leave to conditionally withdraw the suit, observing that it had elected not to take recourse to arbitration for adjudication of its claims. My attention had not been drawn to the fortifying opinion of the Division Bench in Pran Nath Panjan v. State of Jammu & Kashmir, AIR 1972 J & K 11, found in these words, ‘But where the party himself chooses to invoke the jurisdiction of the Civil Court, submits to it, does not avail of the arbitration clause …. he cannot afterwards claim the benefit of the arbitration clause and ask the Court to enforce the said clause against the second party’.
18. section 8 of the arb. & con. act came up for consideration in P. Anand Gajapathi Raju v. P.V.G Raju (Dead), (2000) 4 SCC 539 : 2000 (2) Arb. L.R 204 (SC) and it was laid down that the party seeking to enforce the arbitration clause must file/move an application for this purpose. This is also the expressed view of the Apex Court in Sukanya Holdings (supra). In Sudarshan Chopra v. Company Law Board, 2004 (2) Arb. L.R 241 (P&H) (DB) the Division Bench of the Punjab & Haryana High Court rejected the argument that the Arbitrator alone was competent under section 16 of the arb. & con. act to opine on the existence of an arbitration agreement. It also appears that the Court thought it necessary to file a formal application under section 8 of the arb. & con. act. In Global Marketing Direct Limited v. GTL Limited, 2004 (3) Arb. L.R 56 (Bombay) the learned Judge had noted the need to file an application under Section 8 where Part I of the Arb. & Con. Act applied whilst recording that there was no such formality in Section 45. It was also observed that the Civil Court would continue to have jurisdiction until it decided that issue. Reliance on Food Corporation of India v. Yadav Engineer and Contractor, (1982) 2 SCC 499 : AIR 1982 SC 1302, may have become anachronistic since the wordings of this section are dissimilar to those employed in Section 34 of the Arbitration Act, 1940; the former speaks of a ‘first statement on the substance of the dispute’ whilst the latter had referred to the ‘written statement’ and Sub-section (2) of the former explicitly contemplates an ‘application’. It is obvious that the Court was not satisfied that a case for its interference had been made out in Brawn Laboratories Limited v. Fittydent International GMBH, 85 (2000) DLT 204, which conversely implies that where a case is disclosed the Court can interfere in the arbitration proceedings. In Akshay Kapur & Ors…Plaintiffs v. Rishav Kapur & Ors…Defendants, 105 (2003) DLT 467, I have expressed the opinion that on the filing of a Section 8 application this section would apply only if the suit is directly covered by the arbitration clause. I had entertained the suit for declaration and injunction pertaining to a Valuation Report as it was distinct from the disputes that were to be decided through the aegis of arbitration. In Vijay Vishwanath Talwar v. Mashreq Bank, PSC, 109 (2004) DLT 838, my learned Brother R.C Chopra, J. has similarly declined to dismiss a civil suit in respect of an arbitration clause which allegedly had been agreed to under duress and coercion. In Jagson International Ltd.…Plaintiff v. Frontier Drilling…Defendant, 113 (2004) DLT 189 Chopra, J. similarly dismissed an application under Order 39 of the CPC, allowed the defendant's application under section 45 of the arb. & con. act, after observing that the difference in the language of that section and section 8 was conspicuous and was of significance. My learned Brother was of the opinion that a party should not be blindly sent to a foreign land until the Arbitration Agreement was found not to be null and void, inoperative or incapable of being performed. On facts it was found that the plaintiff was attempting to wriggle out of the Arbitration commitment on frivolous grounds. This conclusion was arrived at after consideration of the decision of the Apex Court in Ganpati Raju (supra), Pinkcity (supra), Sukanya (supra); and Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd.., (1999) 5 SCC 688, in which it has been opined that section 8 of the arb. & con. act envisages the reference to the Arbitrator of only those disputes which the Arbitrator is competent or empowered to decide. In Shivnath Rai Har Narain.Plaintiff; v. Italgrani Spadefendant., 93 (2001) DLT 222, it has held that where the factum of existence of the agreement is in dispute this question should be decided by the Court as a preliminary issue whenever Part II of the Arb. & Con. Act is attracted. If inquiries of this nature are envisaged in Section 8, a fortiori it is mandatory under section 45 of the arb. & con. act. Whereas in the former the Court's scrutiny should be calculated to return a prima facie finding, in the latter it should be in greater detail, short of deciding contentious issues of fact going to the root of the disputes.
19. At the close of arguments on 22.7.2005 learned Counsel for the contesting defendant has cited two decisions in support of his contentions. In GTC Limited v. Royal Consulting’ R.V, 2003 (5) LJ SOFT 113 : 2003 (2) ALL MR 608 the learned Judge has in terms voiced the opinion that even under the Arb. & Con. Act if the parties acquiesce in the proceedings by not availing of the procedure set down in Section 8 or Section 45 or Section 54, the jurisdiction of the Civil Court will not be ousted. A distinction was then drawn between the provisions of Part I and Part II with the observation that that a Civil Court will direct the parties to an international arbitration only if it concludes that a valid agreement is in existence. This decision militates against the contesting defendant and supports the interpretation taken by the Delhi High Court. The second decision is of a Division Bench of the Calcutta High Court titled Hindustan Copper Limited v. Centrotrade Minerals and Metals Inc., AIR 2005 Calcutta 133. Hindustan Copper Ltd. had been directed by the learned Single Judge to make payments against a foreign Award failing which execution proceedings would be initiated. The Division Bench noted that there was no Decree passed by any Court of law; however, an Award had been passed by an Arbitrator sitting in England in which he had not made any observations or alterations to the Indian Award. The issue was whether the Award, being a foreign Award, left the Court with lessor powers of enforcement. It was clarified that a foreign Award ‘is no more binding and no more sacrosanct than a domestic Award which has either not been set aside or has passed the test of challenge before an Indian Court’. It was also the opinion of the Division Bench that the legal position in India and England is different. It was noted that the provisions of the English Arbitration Act, 1996 were attracted only where the seat of arbitration was in England or Wales or Northern Ireland. It should immediately be noted that the sites/or venue of the Arbitration as against the applicable law has thus been recognized. The other issue that had arisen was whether the London Award was a foreign award within the purview of section 44 of the arb. & con. act. It will at once become clear that the facts and issues necessary for the decision in that case are totally dissimilar to those that exist in the case in hand, where the enforcement of a foreign award is not the question. It was in this context that the NTPC case (supra) had been referred to. The Court did not find any significance in the dropping of Section 9(b) of the FARE Act, although Bhatia International case (supra) was cited it was found not to be relevant since Section 9(b) of FARE Act did not come into play whereas it was Section 9 and the powers to grant interlocutory relief that was under scrutiny. It was in those circumstances that the Bench came to the view, with which I respectfully differ, that the venue of arbitration determining the competency of the Court ‘has not yet found place in Indian law’. The Division Bench expressed the view that the effect of the deletion of Sub-section (b) from Section 9 of the FARE Act was that ‘the Court is now compelled to see on its own, even if the proper law of the contract is Indian law, whether the Indian Courts would have jurisdiction to set aside the Award made on foreign soil’. The decision in that case, however, is that the Award published in England was not a foreign Award and accordingly was not enforceable under Part II. This precedent also does not definitively advance the case of the respondents.”
20. In summation, in every Arbitration governed by the New York Convention, Part II Chapter I shall have to be applied, notwithstanding the provisions of Part I. In these cases it is the venue of the arbitration that is conclusive whilst an application must be filed in Part I arbitrations to halt civil proceedings, this is not necessary where Part II comes into operation. However, in the latter case the Court must adjudicate whether the arbitration clause is not null and void but is operational and capable of being performed, and only after it arrives at this conclusion, can it refer the parties to arbitration. The deliberate decision not to incorporate Section 9(b) of FARE assumes great significances, and leads inexorably to the conclusion that the factum of Indian laws in the 1996 Arbitration regime, especially Part II thereof, venue/territoriality is all important.
Relevant Facts of the Case:
21. I shall now venture onto the factual matrix of the case. SKYCELL Communication Pvt. Limited was incorporated on 3.3.1992, with the following holding—Crompton Greaves Ltd. (CGL) 40.5%, MILLICOM and BELLSOUTH 24.5% each and the defendant 10.5%. The Joint Venture Agreement (JVA) stipulated that new shareholders would be invited only with the express written consent of these partners, each of whom would have a preemptive right to purchase the shares of any of the partners desirous of selling their shareholding. Furthermore, in order to ensure that each of the partners had a meaningful say in the Joint Venture, the prescribed quorum mandated the representation and affirmative vote of each of the partners. Clause 21 of J.V.A contains the Arbitration Agreement to refer all disputes to the ICC. The Joint Venture Agreement also declares that it would be governed by the laws of India, which Mr. Sawhney has construed to indicate that Part-I to the exclusion of Part-II of the Arb. & Con. Act applies to every dispute between the parties. In October/November, SKYCELL issued notices to each of the partners seeking their consent for the sale of the shares of CGL and the defendant No. 1 to the plaintiff. On 25.11.1999 CGL appears to have entered into an Agreement for the sale of its equity in SKYCELL to the plaintiff. On 9.12.1999 BELLSOUTH declined to give its consent to the proposed sale of the equity held by CGL as well as defendant No. 1 to the plaintiff and notified all the partners to commence arbitration in terms of its letter dated 31.1.2000 The following day i.e 1.2.2000 BELLSOUTH filed an application under section 9 of the arb. & con. act in the Madras High Court praying for an order restraining CGL from transferring its shares in SKYCELL. On 29.3.2000 defendant No. 1 filed a suit before the Addl. District Judge, Delhi praying firstly for a Decree of Permanent Injunction restraining CGL from selling its shareholding in SKYCELL except in accordance with the Articles of Association, and secondly, for a decree of permanent injunction restraining SKYCELL from registering any proceedings or transaction pertaining to these shares. This Suit was eventually dismissed on 4.8.2003 on the grounds that the shares had already been transferred. In the proceedings before the Madras High Court in OMP Nos. 19515/2000 & 19516/2000, the learned Judge has made the following observations which are being reproduced in order to buttress the opinion that if a Court blindly refers parties to arbitration, ignoring their conduct, grave injustice may result. ‘Satwant Singh appears to be a seasoned litigant and not a fair litigant. He resorted to the Court of Additional District Judge at Delhi in March 2000 to aid BELLSOUTH's efforts and give it a second line to fall back on in the event this Court vacating the injunction against CGL. He did not disclose these proceedings to SKYCELL, CGL or BHARTI till 26.8.2000 when he wanted to rely on another order from the same Court obtained behind their back to stall the confirmation of CGL's sale to BHARTI.’ Meanwhile on April 6, 2000 the Madras High Court had passed Orders on the Section 9 petition inter alia maintaining status quo for four months and in the event that the parties failed to arrive at an amicable settlement, permitted the parties/partners to initiate arbitration proceedings. On August 5, 2000 the plaintiff filed Suit No. 1727/2000 in this Court praying for an injunction against BELLSOUTH from selling its shares to any person except the plaintiff. Suit No. 957/2000 of similar nature was filed by the Plaintiff in this Court on 5.9.2000 praying that defendant No. 1 be restrained from selling its shares except to the plaintiff. On 27.9.2000 the plaintiff filed a third suit in this Court, Suit No. 2202/2000, claiming that it had stepped into the shoes of CGL and accordingly praying for an injunction restraining the other partners from acting in breach of the Joint Venture Agreement.
22. The affected partners, namely, the defendants unsuccessfully filed an applications under section 45 of the arb. & con. act seeking a reference of the disputes to arbitration, but these applications were dismissed vide Orders dated 15.5.2001 In those proceedings defendant No. 1 had ‘declared in unequivocal terms that the plaintiff is not a party to the Joint Venture Agreement (JVA) and there is no agreement between the plaintiff on the one hand and defendant Nos. 1, 2, 3 and 5 on the other hand.’ It was held that since the privity of contract had not been accepted by the defendants with Bharti (the petitioner herein) the objection to the Suit not been maintainable was devoid of merit. This Suit was eventually dismissed as withdrawn on 21.11.2001 This Order has not been appealed against and, therefore, operates as res judicata. Almost five months later, on 9.10.2000, defendant No. 1 issued a notice to the other partners including the plaintiff for commencing arbitration proceedings. On 2.11.2000 CGL filed Suit No. 884/2000 pleading therein that all disputes had been settled and that the Joint Venture partners had abandoned arbitration wherein the Hon'ble Single Judge of the Madras High Court vacated the interim stay and dismissed the application seeking restraint Orders from initiating arbitration proceedings on March 16, 2001. These Orders were assailed before the Division Bench of that Court. On 15.5.2001 the application under Section 45 in Suit No. 2202/2000 which had been filed by the defendants was dismissed. It has been contended by Mr. Sawhney that in this Order there is an observation that the suits filed by defendant No. 1 do not tantamount to abandonment of the Arbitration Clause. On 3.11.2001 defendant No. 1 filed Suit No. 2089/2001 for the issuance of mandatory and permanent injunction and the prayer clause calls to be reproduced:
(a) Defendant Nos. 5 and 6 be directed by issue of a Mandatory Injunction or otherwise to forthwith exchange the documents under paragraph ‘A’ and ‘B’ of the Joint Instructions as stated in Paragraph 75 of the Plaint without awaiting further lodgement of the ‘No Objections’ from defendant Nos. 7 and 8.
(b) In the alternate and without prejudice to the relief claimed under para (a) above, this Hon'ble Court may be pleased to order by issue of a Mandatory Injunction or otherwise the defendant Nos. 3, 4, 7 and 8 to forthwith lodge with defendant Nos. 5 and 6 the ‘No Objections’ of defendant Nos. 7 and 8 to the sale of the plaintiff's shares to defendant No. 3 and direct the said defendant Nos. 5 and 6 to forthwith exchange the documents.
(c) Restrain defendant No. 3 (Bharti) by way of an Injunction Order or otherwise from committing any breach of the May 2001 Agreements and/or from obstructing, whether directly or indirectly, the completion of the formalities with defendant Nos. 5 and 6.
(d) Restrain defendant Nos. 1 to 4 from acting upon or in any way, directly or indirectly, giving effect to the Resolutions circulated to the Directors of defendant No. 4 under cover of letter dated 31st August, 2001, till such time as the registration of transfer of shares of the Plaintiff against payment of full consideration.
(e) Issue a Mandatory Injunction or otherwise direct the defendant Nos. 1, 2 and 3 to disclose: (i) the Agreements signed between them from the Sale and Purchase of the shares of SKYCELL (ii) the ‘No Objection’ clearances and approvals obtained by them in connection with the sale/purchase of the shares of SKYCELL.
(f) Issue a decree of declaration declaring the Annual General Meeting of SKYCELL purportedly held on 28th September, 2001 to be illegal and void.
(g) Issue a permanent Injunction against defendant Nos. 3 and 4 restraining them from effecting any changes: (i) in the Board of Directors of SKYCELL Communications Ltd., (ii) in the Capital of SKYCELL Communications Ltd., and (iii) In the name of SKYCELL Communications Ltd. and/or from acting in breach of the plaintiff's rights under the Joint Venture Agreement dated 12th August, 1992.
23. In paragraph 115 of the Plaint it has been stated that leave be granted to it, in terms of Order II Rule 2 of the Code of Civil Procedure to claim any other relief, which is now being construed to be tantamount to reserving its rights to proceed in arbitration. It may also be recalled that defendant No. 1 had issued a notice for commencing arbitration proceedings on October 9, 2000 but instead of doing so had filed this Suit. It is also relevant to mention that this very Suit was dismissed in default on 27.9.2004 The question is whether, assuming the existence of an arbitration clause between the parties, this clause had been waived.
24. On 22.8.2003 arbitration proceedings had been initiated by defendant No. 1 before the ICC. On 26.9.2003 this Court ordered a stay of the arbitration proceedings which were to be held pursuant to the defendants' request dated 22.8.2003 Convoluted and complicated sequence of events should normally be left to the Arbitrators to appreciate, consider and unravel. Unless it is indubitably clear that the substratum of the Arbitration Agreement has disintegrated, and if the only conclusion that can be drawn is that the foreign Arbitration is motivated to harass and thereby coerce the other parties into a settlement, Courts should not interference in the commencement, conduct and continuance of proceedings, before the Arbitrators. A greater degree of investigation is expected of the Court in the case of a foreign arbitration.
25. Having expressed this opinion, so far as the present case is concerned, it has already been narrated that the defendants contention predicated on section 45 of the arb. & con. act had been specifically rejected. Perhaps it is for this reason that the defendant had sagaciously not filed a second application under Section 45 which would have been immediately barred from consideration on the grounds of res judicata. The arbitration clause, by any consideration, has now become inoperative, and I have no hesitation in declining to refer the parties to arbitration.
26. If the contention is that this application had not been filed because the defendant had been advised that the arbitration is not a foreign but a domestic one, then Chapter II of Part I would immediately be attracted, with fatal repercussions for the contesting defendant. In the fasciculus of Chapter ii, section 8 of the arb. & con. act enjoins the filing of an application before a judicial Authority not later than when submitting the first statement on the substance of the dispute. Such an application, which is barred from being entertained unless it is accompanied by original arbitration agreement or a duly certified copy thereof, has not been filed by the contesting defendant, for reasons which have not been explained at all.
27. Keeping all these factors in mind I am unable to come to any conclusion other than confirming the interim order already passed. By way of reiteration the defendant had in earlier proceedings posited that there was no arbitration agreement between itself and the plaintiff. Assuming that such an agreement existed the defendant has taken sundry legal steps in various Civil Courts notwithstanding. The defendant is not rendered remediless. All that has happened is that it must pursue the protection of its interests in a Civil Court rather than an Arbitral Tribunal.
28. Arbitration proceedings requested for by defendant No. 1 DSS Enterprises Pvt. Ltd. vide letter dated 22.8.2003, and the operation of letter dated 28.8.2003 of the ICC, International Court of Arbitration are stayed during the pendency of the suit.
29. I.A 9735/2003 stands allowed of accordingly.
IAs No. 9923/2003 & 9925/2003
30. Since the interim Order has been made absolute I am satisfied that it should be extended to defendant No. 2, namely Crompton Greaves Ltd. and defendant No. 5, namely, Bharti Cellular Limited.
31. Applications stand disposed of accordingly.
IA 9735/2003 allowed.
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