I.P Mukerji, J.:— This court heard an application (G.A No. 211 of 2017), taken out by the respondent No. 1, Chatterjee Petrochem (Mauritius) Co. in an application (A.P No. 1046 of 2016) to set aside a partial final award made by an arbitral tribunal, signed and delivered in Paris on 9 September, 2016. The application asked for dismissal of the setting aside application on the ground that this court and as a matter fact the courts in India had no jurisdiction to entertain try and determine it. The grounds were that the award dated 9 September, 2016 was a foreign award. It was made in a foreign seated arbitration. The seat was in Paris. The rules of the International Chamber of Commerce (ICC), International Court of Arbitration applied.
2. All sittings of the arbitration were held in Paris. The arbitration was conducted according to the rules of arbitration of this Chamber.
3. The arbitral tribunal consisted of three learned arbitrators, Professor David A.R Williams QC, (President), Mr. Peter Lever QC and Mr. Justice (Retd.) Bellur N. Srikrishna.
4. This arbitral proceeding arose out of an agreement dated 12 January, 2002 between the parties which provided that the majority shareholding and control of Haldia Petrochemicals Limited would be transferred to Chatterjee Petrochem (Mauritius) Co. by the Government of West Bengal and West Bengal Industrial Development Corporation Limited.
5. The said agreement contained an arbitration clause which is as follows:
“In respect of all disputes, differences, claims and questions between the parties hereto arising out of this JVA or in any way relating to this document or any term, condition or provision herein mentioned or construction or interpretation thereof as to the working of HPL or in any way relating to the business of the affairs of HPL, the parties shall first endeavour to settle such disputes, differences, claims or questions by friendly consultation and failing such settlement, disputes or differences will be settled in accordance with the Rules of Arbitration of the International Chamber of Commerce (ICC) Court of Arbitration. The venue of Arbitration will be in Paris and the law applicable to the contract will be Indian Law.”
6. Three clauses in this arbitration agreement are most important:
i. The disputes between the parties would be settled by arbitration in accordance with the rules of arbitration of the International Chamber of Commerce (ICC) the court of arbitration.
ii. The venue of the arbitration would be Paris.
iii. The law applicable to the contract would be Indian Law.
7. In determining this application the hands of this court are tied by the judgement of the Supreme Court in the case of Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc. . reported in (2012) 9 SCC 552. The Supreme Court said that the law declared in that case would apply to all arbitration agreements executed thereafter. Therefore, the law that is to be the backbone of this decision is the judgement of the Supreme Court in Bhatia International v. Bulk Trading S.A reported in (2002) 4 SCC 105 which was reversed by the court in the BALCO case, with the above rider.
THE RATIO IN THE CASE OF BHATIA:
8. It said that Section 2(2) of the Arbitration and Conciliation Act, 1996 provided that it would apply where the place of arbitration was in India. It did not say that it would not apply where the place of arbitration was not in India. Neither did it say that part-I would apply only where the place of arbitration was in India. Hence, it could not be said that part-I was not to apply to arbitration which took place outside India. Therefore, on construction of sub-Section 2 of Section 2 part-I compulsorily applied to arbitration including International Commercial Arbitration held in India. Part-I would also apply to International Commercial Arbitration held outside of India, unless the parties expressly or impliedly excluded its operation. An award made in an International Commercial Arbitration held in a non-convention country is also considered to be a domestic award.
9. I read paragraph-32 of the Bhatia judgement.
“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.”
10. In my opinion, all the decisions which were pronounced prior to the Balco case and not inconsistent with the Bhatia ratio would also apply.
ARGUMENTS IN SHORT:
11. Mr. Pratap Chatterjee, learned senior counsel for the award debtor submits that this case falls squarely within the principle laid down in the Bhatia case. The arbitration agreement provided that the law governing the underlying contract was the law of India. The venue of the arbitration would be Paris. The ICC rules, International Court of Arbitration governed the arbitration proceedings. The position was identical in the Bhatia case. Therefore, on facts this court is to come to the conclusion that there was an express or implied agreement between the parties excluding part-I. Learned counsel also submitted that once the parties agreed that the law governing the underlying contract was the law of India, the intendment of the parties to be bound by the Indian legal system was clearly expressed. It could never be said that part-I of the 1996 Act was excluded by the parties. He also submitted that “venue” was not to be equated with the seat of arbitration. Considering the arbitration agreement the seat of the arbitration could not be said to have moved out of India. For the sake of convenience of the arbitral tribunal the parties had chosen Paris as the venue. The ICC rules governed the procedural part of the arbitration. It could never govern the substantive challenge to the award which could be made only under Section 34 of the Arbitration and Conciliation Act, 1996. It was never the intention of the parties that the courts of Paris, France would interpret and apply Indian substantive Law. The submissions of Mr. Chatterjee were endorsed by the learned Advocate General appearing for the State.
12. Mr. Pratap Chatterjee also submitted that in a proceeding before the Supreme Court Chatterjee Petrochem (Mauritius) Co. had pleaded that the court should not interfere in arbitration matters, under Section 5 of the Arbitration and Conciliation Act, 1996. Therefore, they were wanting reference under part-I of the Act. Now they could not approbate and reprobate and say that the arbitration was foreign.
13. Mr. Siddhartha Mitra, learned senior Advocate for Chatterjee Petrochem (Mauritius) Co., supplemented by Mr. Anindya Kumar Mitra, learned Senior Advocate, for Haldia Petrochemicals Ltd. made very short and pointed submissions. He said that the seat of arbitration was equivalent to venue. The seat of the arbitration was in Paris. The curial law governing the arbitration were the ICC rules. The agreement said nothing about the law governing the arbitration. In the absence of this provision the law of the place where the arbitration took place governed the arbitration. The law relating to enforcement or challenge of the award fell within the law of arbitration. Therefore, it could be said that the parties had specifically excluded part-I of the Arbitration and Conciliation Act, 1996.
DISCUSSION:
14. The Arbitration and Conciliation Act, 1996 has four parts out of which Part One is the most contentious. It has been involved in various cases concerning International Commercial Arbitration in the Supreme Court and in the High Courts.
15. In Section 2(1)(f) International Commercial Arbitration is defined thus:—
“(f) “international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is—
(i) An individual who is a national of, or habitually resident in, any country other than India; or
(ii) A body corporate which is incorporated in any country other than India; or
(iii) A company or an association or a body of individuals whose central management and control is exercised in any court other than India; or
(iv) The Government of a foreign country.”
16. In Section 2(2) it is stated that:
“2(2) This Part shall apply where the place of arbitration is in India.”
17. In Section 2(7) it is enacted:
“2(7) An arbitral award made under this Part shall be considered as a domestic award.”
18. Section 34 is in Part One.
19. Admittedly, the subject arbitration is an International Commercial Arbitration for the reason that one of the parties Chatterjee Petrochem (Mauritius) Co. is a body corporate incorporated outside India. The place of arbitration is not in India but in Paris. If the subject arbitral award is considered as a domestic award under part-I Section-34 applies. Chatterjee Petrochem (Mauritius) Co. always claims the award to be a foreign one. Does Part-I of the Arbitration and Conciliation Act, 1996 including, that is to say Section 34 thereof apply to this arbitration?
20. According to Bhatia, Part-I of the said Act would compulsorily apply to arbitration held in India and to international commercial arbitration held outside India also unless its application was excluded expressly or impliedly by the parties.
21. The point necessarily arises for consideration is whether from the facts the court can infer that there is an express or implied agreement between the parties to exclude Part-I of the Act.
22. The concept of a seat of arbitration is english but is of paramount importance in international commercial arbitration. There is no difference at all between seat, venue and place of arbitration unless there is an express agreement between the parties that the seat would be in one place and hearings would take place in other venues or places [see Shashoua v. Sharma reported in (2009) 2 Lloyd's Report 376]. An international commercial arbitration must have a designated seat. This choice is very important because it is an accepted principle that unless the parties otherwise agree, the law of the place where the arbitration is seated will apply to the arbitration and the conduct of the arbitral proceedings. Mr. Justice Nijjar in Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc. . with allied matters reported in (2012) 9 SCC 552, termed this as the “territorial link between the place of arbitration and the law governing the arbitration”. His lordship also remarked that “it is accepted by most of the experts that in most of the national laws arbitrations are anchored to the seat/place/situs of arbitration.” (see also Enercon (India) Limited v. Enercon GMBH (2014) 5 SCC 1).
23. The Supreme Court has clarified that designation of a seat did not mean that all the sittings of the arbitration had to be held at that place. Meetings could be held at convenient locations e. g. for the purpose of examination of witnesses (see also Naviera Amazonica Peruana S.A v. Compania International D.A Seguros del Peru reported in (1988) 1 Lloyd's Report (CA).
24. At this point of time it is essential to know the laws applicable to International Commercial Arbitration. There is an underlying contract or the main contract regulating the substantive rights and obligations of the parties. The law applicable to this contract is called the proper law. By proper law we mean the law of the country which has the closest connection with the transactions between the parties. The proper law of the underlying contract may be agreed upon by the parties. The arbitration agreement is subsidiary to the main contract. It is usually a part of it. It is seen as a separate contract. If the law governing the agreement to arbitrate is not provided in the agreement, the law of the place where the arbitration has its seat, will govern the arbitration. The parties are however free to choose the law applicable to the arbitration agreement.
25. The third law is the curial law, that is, the law governing the arbitral procedure like examination of witnesses, translation, commission, mode of examination of witnesses, the procedure for presenting evidence and so on. This law unless otherwise agreed by the parties follows the law applicable to the arbitration agreement.
26. The fourth law is the law applicable to the parties post award. This means the law applicable to the enforcement or challenge to the award. Unless the parties agree otherwise the law applicable after the award is passed is the law governing the arbitration (National Thermal Power Corporation v. Singer Company reported in (1992) 3 SCC 551, Sumitomo Heavy Industries Ltd. v. ONGC Ltd. reported in (1998) 1 SCC 305), referring to a passage from the judgement of Potter, J in (1994) 1 Lloyd's Law Reports 45.
27. In the Law and Practice of Commercial Practice in England, second edition of Mustill and Boyd, referred to by the Supreme Court in the above case of Sumitomo it is stated that the arbitration agreement has “a distinct life of its own, it may in principle be governed by a proper law of its own which need not be the same as the law governing the substantive contract.”
28. The above basic principles of law governing International Commercial Arbitration in a foreign seat were reiterated in Venture Global Engineering v. Satyam Computer Services Ltd. reported in (2008) 4 SCC 190, Dozco India Private Limited v. Doosan Infracore Co. Ltd. reported in (2011) 6 SCC 179 Yograj Infrastructure Limited v. Ssang Yong Engineering and Construction Co. Ltd. reported in (2011) 9 SCC 735 and Reliance Industries Ltd. v. Union of India reported in (2014) 7 SCC 603.
29. In Yograj Infrastructure Limited v. Ssang Yong Engineering and Construction Co. Ltd. reported in (2011) 9 SCC 735 the law of arbitration and the curial law were of the seat of the arbitration at Singapore. Although, the proper law of the underlying contract, was the law of India, part one would not apply to the arbitration proceedings, as held by the Supreme Court. Mr. Mitra submitted that this case was closest, in facts, to our case inasmuch as the underlying contract was governed by the laws of India the arbitration agreement and the curial law governed by the Singapore law and the Rules of the Singapore Arbitral Tribunal and Singapore was the seat of the arbitration.
30. Location of the seat of arbitration in London and the agreement that the arbitration agreement was governed by the laws of England determined the proper law of the arbitration agreement to be that of England, as held in Reliance Industries Limited v. Union of India reported in (2014) 7 SCC 603. A similar case came up for consideration before the Supreme Court in Union of India v. Reliance Industries Limited reported in (2015) 10 SCC 213 where the arbitration agreement was governed by english Law and the juridical seat of the arbitration was at London. The Court expressly held that the parties had agreed that Part-I would not apply.
31. In Eitzen Bulk A/S v. Ashapura Minechem Limited with allied matters reported in (2016) 11 SCC 508 Mr. Justice Bobde opined that by choosing London as the seat or venue of arbitration and by choosing English Law, as the law governing the arbitration, the parties had excluded part-I and Section 34 would have no application to the case. In Imax Corporation v. E-City Entertainment (India) Private Limited . reported in (2017) 5 SCC 331 another judgment by Mr. Justice Bobde the Court went to the extent of holding that where the arbitration was foreign seated the law of that country would apply to the arbitration whether the parties had agreed to it or not.
32. In the Bhatia case the Supreme Court laid down very general principles that part-I of the 1996 Act applied to International commercial Arbitration, seated outside India, unless expressly or impliedly excluded by the parties. The Court was concerned with the question whether Section 9 of the said Act applied.
33. On the basis of the dictum laid down by the court, it had to answer the question whether the arbitration in question which was governed by the ICC rules, expressly excluded part-I. On a consideration of Article 23 of the ICC rules it opined that they permitted a party to apply to a competent judicial authority the interim and conservatory measures. Hence 5.9 could be invoked. Therefore, the judgement itself has left enough room to a judge to come to the conclusion whether Part-I was excluded or not.
FINAL FINDINGS:-
34. In my view there is no real conflict in the application of the principles of private International Law and the conflict of laws in the Bhatia case and those in the Balco case.
35. In the Balco case if it is an International Commercial Arbitration and the seat is in a foreign country, Part-I of the Act is automatically excluded. In the Bhatia case part-I will apply unless and until specifically excluded by the parties. If one applies the Balco principle one does not have to consider any question of fact regarding jurisdiction. If the seat is foreign part-I is automatically excluded.
36. According to Bhatia, whether the parties have so excluded the jurisdiction of the Courts of this country is a question of fact to be determined by the Court itself.
37. The underlying contract is the main contract between the parties, determining their rights and obligations. Usually the arbitration agreement is a collateral agreement contained in that agreement. Proper law means the rules of the legal system which has the closest connection with the parties and the subject matter of the dispute. The proper law of contract may be that law or the law that is chosen by the parties. The principle is that this proper law of contract is absolutely static. No matter which court, forum or arbitral tribunal national or foreign adjudicates on the dispute arising out of the underlying contract or out of the arbitration agreement or out of the curial law, the proper law of the underlying contract remains the same. In this case, the proper law that determines, the rights and obligations of the parties is Indian Law, as agreed by the parties. The seat of arbitration determines, in the absence of any agreement to the contrary, the law of arbitration or the curial law which is to apply. The terms seat or venue of arbitration are synonymous.
38. In this particular case although the parties have chosen Indian Law as the law of the underlying contract, the venue or the seat of the arbitration was chosen as Paris. The curial law applicable to the arbitration were the ICC rules. The law which governs the arbitration agreement also governs challenge to the award. It is true that in the contract in question there is no reference to the law that would apply to the arbitration. When no such law is specified the law of the seat of arbitration governs such a case. Therefore in this case the law governing the agreement to arbitrate and enforcement of challenge to the award is the law of the place where the seat of the arbitration is located or in other words Paris.
39. Furthermore, there is clear authority in the above decisions that the courts of the country where the seat of arbitration is situated, can apply the law of the underlying contract, even if it is foreign law.
40. Finally, by submitting before the Supreme court that they be referred to arbitration, Chatterjee Petrochem (Mauritius) Co. did not relinquish or waive any right under the arbitration agreement in question, in my opinion.
41. In those circumstances applying the Bhatia principle it could be said that the parties had specifically agreed to exclude Part 1 of the Act.
42. This application (G.A No. 211 of 2017) succeeds. This Court or as a matter of fact no Court in India has jurisdiction to entertain an application to set aside the award in question of the ICC at Paris dated 9 September, 2016 which is the subject matter of the setting aside application AP 1046 of 2017. The application is dismissed on this technical ground of jurisdiction. This Court has not considered the merits of the case concerning challenge to the award.
43. Hence:
1. the application A.P 1046 of 2016 is dismissed on the ground of territorial jurisdiction, keeping all other points urged therein, open.
2. The application G.A 211 of 2017 is allowed.
44. Certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.
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