O.M.P.(I) (COMM.) 23/2015 Page 1 of 65
IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: 07.10.2016
O.M.P.(I) (COMM.) 23/2015 & CCP(O) 59/2016,
IA Nos.25949/2015 & 2179/2016
RAFFLES DESIGN INTERNATIONAL INDIA PRIVATE LIMITED & ANR. ..... Petitioners
Versus
EDUCOMP PROFESSIONAL EDUCATION LIMITED &ORS. ..... Respondents
Advocates who appeared in this case:
For the Petitioners : Mr Abhinav Vashist and Mr Arun Kathpalia,
Senior Advocates with Mr Prashant Mishra,
Mr Piyush Prasad, Mr Shalin Arthwan and
Ms Jamal Joy and Mr Samaksh Goyal.
For the Respondents : Mr Suhail Dutt, Senior Advocate with Mr M.A.
Niyazi, Mr Achint Singh Gyani and Ms Prabjot Kaur Chhabra.
Mr Sunil Mund, Mr Sanjiv Joshi and Ms
Badeshree for R-3.
CORAM
HON’BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The petitioners have filed the present petition under Section 9 of the
Arbitration and Conciliation Act, 1996 (hereinafter the 'Act'), inter alia,
praying as under:
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"(a) Direct that the Respondents through their directors
(including but not limited to Mr Shantanu Prakash),
officers, agents, representatives and employees
(including but not limited to the Respondent No.3) to
cease and desist forthwith from taking any actions that
have the effect of depriving the Petitioners and their
representatives of the exercise of their rights pursuant to
clause 3.1.2 of the Share Purchase Agreement dated 12
March 2015 viz. to have an absolute say on the hiring
and dismissal of employees of the Society;
(b) Direct that the Respondents through their directors
(including but not limited to Mr Shantanu Prakash),
officers, agents, representatives and employees
(including but not limited to the Respondent No.3) cease
and desist from interfering with any aspect of the hiring
and dismissal rights of the Petitioners pursuant to clause
3.1.2 of the Share Purchase Agreement dated 12 March
2015, including interfering in any manner whatsoever
with prompt payments to employees hired and/or
dismissed by the Society.
(c) Direct the Respondent No. 3 (or any other person
appointed in his capacity) to forthwith take steps to
effect the payment of salaries to Dr. C.S. Sharma and/or
take necessary steps to effect prompt payments of
salaries to any other employees hired by the Society.
(d) Restrain the Respondents No. 1 and 2 including
through their affiliates, related parties, directors,
officers, agents, representatives and employees
(including but not limited to the Respondent No.3) from
taking any steps whatsoever in contravention of clause
3.1.2 of the Share Purchase Agreement dated 12 March
2015;"
2. At the outset, the respondents have taken a preliminary objection as
to the maintainability of the present petition. The respondents contend that
the present petition under Section 9 of the Act is not maintainable
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principally on the ground that Part-I of the Act is inapplicable to arbitral
proceedings held outside India - in this case Singapore - and the parties
have impliedly agreed to exclude the applicability of Section 9 of the Act.
The respondents also contend that the Arbitration and Conciliation
(Amendment) Act, 2015 (hereafter ‗the Amendment Act‘) is inapplicable
to the present proceedings as the arbitral proceedings had commenced prior
to 23.10.2015. The petitioners contend otherwise.
3. At this stage, the limited controversy that arises for consideration is
whether the petition filed by the petitioners is maintainable.
4. Briefly stated, the facts necessary to address the aforesaid
controversy are as under:-
4.1 Raffles Education Corporation Limited (hereafter 'Raffles'), being
parent company of the petitioners' and Educomp Solutions Limited
(hereafter 'Educomp'), being parent company of the respondents' entered
into a Master Joint Venture Agreement(Master JVA) dated 16.05.2008.
Pursuant to the Master JVA, Educomp Raffles Higher Education
Limited(hereafter 'ERHEL') was incorporated as a joint venture company
for providing educational courses in management and designing at various
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locations in India. Shares of ERHEL were held by Raffles and Educomp in
equal proportion.
4.2 ERHEL took control over the management of a Society namely, Jai
Radha Raman Education Society (hereafter 'the Society') to establish a
college in NOIDA (hereafter the 'Noida College'). Subsequently, Raffles
increased its stake in ERHEL to 58.18%.
4.3 On 12.03.2015, the petitioners and the respondents entered into a
Share Purchase Agreement (hereafter 'the Agreement') whereby, on
fulfilling the conditions set out in the Agreement, shares of respondents in
ERHEL were to be acquired by the Petitioners. The relevant clause of the
Agreement reads as under:
"3.1.2. On deposit of the 10% of the Purchase Price by
the Purchasers to the Escrow Agent referred to in clause
3.1.1, the Sellers shall allow the Purchasers (i) to take
control of the Company and JRRES, limited to the
extent that the Purchasers shall have absolute say on the
hiring and dismissal of employees (including existing
employees); and (ii) to take charge of JRRES'
application to the Government of Uttar Pradesh, India
for becoming a deemed university. For clarification,
upon the Execution Date, funding of the operations of
the Company, JRRES, MIDL and MSB shall be the
exclusive responsibility of the Purchasers, details of
which shall be shared with the Sellers from time to time
till closing. In the event the Closing does not take place
as envisaged in this Agreement and this Agreement is
terminated, the Sellers shall within 30 (Thirty) days,
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introduce an amount equivalent to the total funding
contributed by the Purchasers in JRRES for the
operations of JRRES in this period as working capital."
4.4 Certain disputes arose between the parties in relation to the
Agreement. Clause 15 of the Agreement provides that the Agreement
would be governed and construed in accordance with the laws of
Singapore. Further the Arbitration would be held in Singapore under the
Arbitration Rules of the Singapore International Arbitration Centre
(hereafter 'SIAC Rules').
4.5 On 15.09.2015, the petitioners invoked the arbitration clause by
filing a Notice of Arbitration with the Singapore International Arbitration
Centre (hereafter 'SIAC') with a copy thereof to the respondents. Pursuant
to Rule 26.2 of the SIAC Rules, a request for appointment of an
Emergency Arbitrator was made by the petitioners to SIAC on 25.09.2015,
which was opposed by the respondents. The respondents by a notice dated
25.09.2015, terminated the Agreement alleging that Petitioners were in
repudiatory breach of the Agreement. Thereafter, on 28.09.2015, the Vice
President of the Court of Arbitration, SIAC appointed Mr Michael Lee as
the Emergency Arbitrator to consider the Emergency Application filed by
the claimants (petitioners herein).
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4.6 The Emergency Arbitrator passed an Interim Emergency Award
dated 06.10.2015 (hereafter ' the Emergency Award') wherein the Interim
relief sought by the claimants was granted and respondents were restrained
from taking any action that deprived the rights of the claimants in the
Agreement in respect of (a) hiring and dismissal of employees of the
Society; (b) functioning and management of the society. The respondents
were also restrained from instigating the terminated employees of the
Society, including Professor Mahesh Gandhi, to act contrary to their
respective termination letters and/or to indulge in any forcible entry into
the premises of the Society or the Noida College.
4.7 Thereafter, the petitioners filed an application being Case No
929/2015 before the High Court of the Republic of Singapore (hereafter
'Singapore High Court') under Section 12 of the International Arbitration
Act (hereafter 'IAA') seeking enforcement of the Emergency Award
against respondent no 2. It is stated by the respondents that petitioners have
secured an enforcement order dated 04.02.2016 against respondent no 2.
4.8 The respondents filed an application under paragraph 7 of schedule 1
of SIAC Rules praying for setting aside of the Emergency Award.
However, on 14.01.2016, a consent order was passed by the sole arbitrator,
Mr Andrew Jeffries, wherein the operative first two paragraphs of the
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Emergency Award were reiterated but the parties also agreed that the said
paragraphs of the Emergency award: (1) are negative or prohibitory in
nature and not positive or mandatory in nature; and (2) do not require any
member of the Society to act in breach of their fiduciary duty to the
Society.
5. It is stated by the petitioners that despite passing of the Emergency
Award, the respondents are acting in contravention of the rights of the
petitioners under the Agreement inasmuch as respondents have refused to
accept the appointment of Dr C.S Sharma, who was appointed by the
petitioners to replace Professor Gandhi and further, respondent no 3 has
also refused to sign the cheques for payment of salary to Dr Sharma. It is
further stated the respondents are illegally and malafidely disrupting the
functioning of the Society and the Noida College. It is under these
circumstances, the petitioners have filed the present petition under Section
9 of the Act.
Submissions
6. At the outset, Mr Suhail Dutt, learned Senior Advocate appearing for
the respondents submitted that present petition is not maintainable and is
liable to be dismissed. He contended that since the seat of arbitration was
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Singapore and the Agreement was entered into after the Supreme Court
had delivered the judgement in Bharat Aluminium Company v. Kaiser
Aluminium Technical Services Inc.: (2012) 9 SCC 552, Part I of the Act
would not apply and therefore, the present petition is not maintainable. Mr
Dutt drew the attention of this Court to Section 26 of the Amendment Act
and contented that by virtue of Section 26 of the Amendment Act, it was
not applicable in respect of arbitral proceedings that had commenced
before the Amendment Act came into force, that is, 23.10.2015.
7. Next, he referred to Clause 15 of the Agreement and without
prejudice to the contention that the Amendment Act did not apply,
contended that since it was expressly agreed between the parties that the
arbitration would be governed by the laws of Singapore and the arbitral
proceedings would be conducted in accordance with the Rules of SIAC,
the parties had impliedly excluded the applicability of Part I of the Act to
the arbitral proceedings. He further submitted that proviso to Section 2(2)
as amended by the Amendment Act provided that sections 9, 27, 37(1)(a)
and 37(3) were applicable "subject to an agreement to the contrary". Mr
Dutt earnestly contended that the seat of the arbitration was Singapore and
the arbitration agreement was governed by the laws of Singapore and
therefore, applicability of Part-I was excluded by the parties by
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implication. He submitted that in Bhatia International v. Bulk Trading
S.A and Anr: (2002) 4 SCC 105, the Supreme Court held that Part I of the
Act shall apply to the international commercial arbitrations which take
place outside India, unless parties had expressly or impliedly excluded the
applicability of the Act. He submitted that even if it is accepted that the
Amendment Act applies, the position of law would revert to what had been
held in Bhatia International (supra).
8. He further referred to the decisions of the Supreme Court in
Videocon Industries Ltd. v. Union of India and Anr: (2011) 6 SCC 161;
Reliance Industries Limited and Anr. v. Union of India: (2014) 7 SCC
603; and Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd.
and Anr.: (2015) 9 SCC 172 and contended that once the parties had
consciously agreed that the seat of arbitration would be outside India and
the arbitration agreement would be governed by a foreign law, it would not
be open for the parties to contend that Part I would also be applicable to the
arbitration agreement.
9. Next, Mr Dutt submitted that the reliefs as prayed for in the present
petition have already been granted by virtue of the Emergency Award and
recourse to Section 9 for enforcement of Emergency Award (which is an
interim order) was not available.
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10. Mr Vashist, Senior counsel appearing for the petitioners countered
the contentions advanced by Mr Dutt. He submitted that reading the
proviso to Section 2(2) of the Amendment Act in the manner as suggested
by Mr Dutt would render the said proviso absolutely redundant. He
contended that the very purpose for which Section 2(2) was amended was
to confer the jurisdiction on Indian courts in respect of Sections 9 and 27 of
the Act, even if the seat of arbitration is outside India. He earnestly
contended that in the expression "subject to an agreement to the contrary",
the word "agreement" would mean something more than the choice of law
and seat of arbitration. He further submitted that the decision in Bhatia
International (supra) was no longer good law for agreements entered into
after 06.09.2012 as it was over-ruled prospectively by the constitution
bench of the Supreme Court in Bharat Aluminium (supra). He also
submitted that mere choosing SIAC Rules for arbitration does not in any
way indicate that Part I has been impliedly excluded by the parties.
11. Mr Vashist stated that the present petition is not an enforcement
proceeding per se and has been filed to prevent the respondents from
frustrating the rights of the petitioners.
12. Mr Vashist also countered the submission on behalf of the
respondents that the Amendment Act would not be applicable to arbitral
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proceedings commenced before commencement of the Amendment Act on
the following grounds : (i) the expression " to arbitral proceedings " as
used in Section 26 of the Amendment Act would not apply to proceedings
before a court; and (ii) Petition was filed under the Ordinance and on the
day it was filed, there was no provision in the ordinance excluding the
applicability of the amendments to arbitral proceedings commenced prior
to 23.10.2015 and by virtue of Section 27(2) of the Act, all acts done under
the Ordinance were saved.
Reasoning and Conclusion
13. In the aforesaid context as to the maintainability of the present
petition, the following questions arise for consideration:-
(i)Whether the provisions of the Amendment Act are
applicable to the present proceedings? and
(ii) If the answer to the aforesaid question is in the affirmative
whether Section 9 of the Act is applicable by virtue of the
proviso introduced in Section 2(2) of the Act by Section 2 (II)
of the Amendment Act?
14. The controversy involved in the first question centres around the
interpretation of Section 26 of the Amendment Act, which is set out
below:-
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―26. Act not to apply to pending arbitral proceedings. –
Nothing contained in this Act shall apply to the arbitral
proceedings commenced, in accordance with the provisions
of section 21 of the principal Act, before the commencement
of this Act unless the parties otherwise agree but this Act
shall apply in relation to arbitral proceedings commenced on
or after the date of commencement of this Act.‖
15. As is plainly evident from the language of the aforesaid section, it is
in two parts. The first is couched in negative form; the opening words
expressly provide that the Amendment Act shall not apply to arbitral
proceedings commenced in accordance with section 21 of the Act, before
the commencement of the Act unless the parties agree otherwise. The
second limb is in the affirmative; that is, the Act would apply in relation to
arbitral proceedings commenced on or after the date of commencement of
the Amendment Act.
16. In my view the aforesaid two limbs are not exhaustive. This is so
because the first limb - which is in the negative form - only refers to
proceedings commenced in accordance with Section 21 of the Act prior to
the commencement of the Amendment Act (23.10.2015). Section 21 is in
Part I of the Act and, indisputably, applies only to arbitral proceedings in
India. There is no reference to arbitral proceedings that have commenced
other than under Part-I of the Act. Thus, clearly, the first limb of Section
26 of the Amendment Act would not cover arbitral proceedings
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commenced outside India - arbitral proceedings to which Part I of the Act
does not apply. In the context of those arbitral proceedings clearly the
provisions of Part II of the Act as amended by the Amendment Act would
be applicable and nothing in Section 26 of the Amendment Act bars the
applicability of the Amendment Act to those proceedings.
17. If the arbitral proceedings that have commenced under Section 21 of
the Act prior to 23.10.2015 and those that are commenced after 23.10.2015
do not exhaust the entire statutory space to which the Amendment Act is
applicable, then plainly the provisions of Section 26 as to the applicability
of the Act are not exhaustive. In other words, Section 26 is silent as to the
applicability of the Amendment Act to proceedings which are not
expressly indicated under Section 26 of the Act.
18. The second aspect to be kept in mind is the meaning of the
expression "arbitral proceedings". Section 21 of the Act provides for
commencement of arbitral proceedings and reads as under:
―21.Commencement of arbitral proceedings.—Unless
otherwise agreed by the parties, the arbitral proceedings
in respect of a particular dispute commence on the date
on which a request for that dispute to be referred to
arbitration is received by the respondent.‖
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19. Section 32 of the Act contains provisions regarding termination of
proceedings. The said section is set out below:-
―32. Termination of proceedings.—
(1) The arbitral proceedings shall be terminated by the
final arbitral award or by an order of the arbitral tribunal
under sub-section (2).
(2) The arbitral tribunal shall issue an order for the
termination of the arbitral proceedings where—
(a) the claimant withdraws his claim, unless the
respondent objects to the order and the arbitral tribunal
recognises a legitimate interest on his part in obtaining a
final settlement of the dispute,
(b) the parties agree on the termination of the
proceedings, or
(c) the arbitral tribunal finds that the continuation of the
proceedings has for any other reason become
unnecessary or impossible.
(3) Subject to section 33 and sub-section (4) of section
34, the mandate of the arbitral tribunal shall terminate
with the termination of the arbitral proceedings.‖
20. A conjoint reading of Section 21 and 32 of the Act also indicates the
scope of the expression "arbitral proceedings". Any proceedings initiated in
the Court outside the course of the arbitral proceedings can by no stretch
be considered to fall within the scope of arbitral proceedings. Thus, a
petition to set aside the arbitral award under Section 34 or for that matter a
petition under Section 9 to seek interim measures of protection after the
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arbitral award has been passed would clearly be proceedings, which by no
stretch can be considered as arbitral proceedings.
21. Bearing the aforesaid in mind, it would be noticed that the first limb
of Section 26 of the Act only bars its applicability to arbitral proceedings.
The use of the word ‗to‘ instead ‗in relation to‘, as is used for the second
limb of Section 26, is material. The use of the word ‗to‘ clearly restricts the
import of the first limb of Section 26.
22. The distinction between the expression ‗to‘ and ‗in relation to‘ was
highlighted by the Supreme Court in Thyssen Stahlunion Gmbh v. Steel
Authority of India Ltd: (1999) 9 SCC 334 in the context of Section 85(2)
of the Act. Section 85 of the Act is the repeal and savings clause. By virtue
of Section 85 (1) of the Act, the Arbitration (Protocol and Convention)
Act, 1937, the Arbitration Act, 1940 and the Foreign Awards (Recognition
and Enforcement) Act, 1961 were repealed. However, by virtue of Section
85 (2)(a) of the Act, the provisions of the aforesaid enactments were
expressly made applicable “in relation to” arbitral proceedings, which had
commenced before the Act coming into force. In that context the Supreme
Court, inter alia, held as under:-
―The provisions of the old Act (Arbitration Act, 1940)
shall apply in relation to arbitral proceedings which have
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commenced before the coming into force of the new Act (the
Arbitration and Conciliation Act, 1996).
The phrase ―in relation to arbitral proceedings‖ cannot be
given a narrow meaning to mean only pendency of the
arbitration proceedings before the arbitrator. It would cover
not only proceedings pending before the arbitrator but would
also cover the proceedings before the court and any
proceedings which are required to be taken under the old Act
for the award becoming a decree under Section 17 thereof
and also appeal arising thereunder.‖
* * *
The expression ―in relation to‖ is of the widest import as
held by various decisions of this Court in Doypack Systems
(P) Ltd., Mansukhlal Dhanraj Jain, Dhanrajamal Gobindram
and Navin Chemicals Mfg. This expression ―in relation to‖
has to be given full effect to, particularly when read in
conjunction with the words ―the provisions‖ of the old Act.
That would mean that the old Act will apply to the whole
gambit of arbitration culminating in the enforcement of the
award. If it was not so, only the word “to” could have
sufficed and when the legislature has used the expression
“in relation to”, a proper meaning has to be given. This
expression does not admit of restrictive meaning. The first
limb of Section 85 (2)(a) is not a limited saving clause. It
saves not only the proceedings pending at the time of
commencement of the new Act but also the provisions of the
old Act for enforcement of the award under that Act.‖
[emphasis supplied ]
23. As noticed above, while in the first limb, the word used is ―to‖
arbitral proceedings and in the second limb, the expression used is ―in
relation to‖ arbitral proceedings. Thus, if the aforesaid expressions are
interpreted in the manner as indicated by the Supreme Court in Thyssen
Stahlunion Gmbh (supra), the first limb of Section 26 of the Amendment
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Act would have to be read in a restrictive manner. In other words, the
Amendment Act would not apply to arbitral proceedings commenced under
Part-I of the Act before 23.10.2015. There is no controversy regarding the
second limb of Section 26; undisputedly, it has a much wider sweep and
covers all proceedings, which are connected with the arbitral proceedings -
whether commenced under Part-I or otherwise - including proceedings
under Sections 8, 9, 14, 34 and 37 of the Act.
24. Mr Dutt's contention that the use of the word "to" and the expression
"in relation to" is not of much significance and the intention of the
legislature was clear that the provisions of the Amendment Act should not
be applied to any proceedings in relation to arbitral proceedings
commenced before 23.10.2015, is unpersuasive. It is well settled that if the
legislature uses different words in respect of the same subject matter, it
must be understood that they were not used to convey the same meaning.
In The Member, Board of Revenue v. Arthur Paul Benthall: AIR 1956
SC 35 a Constitution Bench of the Supreme Court observed that “When
two words of different import are used in a statute in two consecutive
provisions, it would be difficult to maintain that they are used in the same
sense”. In D.L.F. Qutab Enclave Complex Educational Charitable Trust
v. State of Haryana and Ors.: (2003) 5 SCC 622, the Supreme Court held
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that “When different terminologies are used by the legislature it must be
presumed that the same had been done consciously with a view to convey
different meanings.”
25. To summarise, Section 26 of the Amendment Act is silent as to, (i)
arbitral proceedings commenced before 23.10.2015 to which Part-I of the
Act does not apply; (ii) proceedings in courts in relation to arbitral
proceedings commenced before 23.10.2015 to which part-I of the Act
applies; and (iii) proceedings in courts in relation to arbitral proceedings
commenced before 23.10.2015 to which Part-I does not apply.
26. The next aspect to be examined is whether the Amendment Act
would apply to proceedings before the court. As discussed earlier, Section
26 of the Amendment Act is silent as to the applicability of the
Amendment Act to proceedings (other than arbitral proceedings
commenced before 23.10.2015) which are commenced before or after
23.10.2015 but are in relation to or connected with arbitral proceedings
commenced before 23.10.2015.
27. The Amendment Act must be held applicable from the date it came
into force. The Act as it stands in the statute book stands amended with
effect from 23.10.2015. The applicability of the Amendment Act to arbitral
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proceedings that have commenced prior to that date has expressly been
excluded and, therefore, to that extent the Amendment Act would not be
applicable. However for proceedings other than those expressly excluded,
the Amendment Act would be applicable from the date it came into force.
28. Mr Dutt had, during the course of his arguments, also mentioned that
applying the amended provisions of the Amendment Act in relation to
pending proceedings would imply that the provisions were being applied
retrospectively. He did not pursue this line of argument, but in my view, it
must be addressed for the sake of completeness.
29. It is important to clarify that applying the Amendment Act from
23.10.2015 does not indicate that the Amendment Act is being applied
retrospectively in the true sense because the Amendment Act replaced the
Arbitration and Conciliation (Amendment) Ordinance, 2015; by virtue of
Section 27(1) of the Amendment Act, the said ordinance was repealed and
by virtue of Section 27(2), all acts done under the Act as amended by the
Ordinance were deemed to be done under the Act as amended by the
Amendment Act.
30. The issue to be considered is whether the Amendment Act should be
interpreted as not applicable to court proceedings for the reason that the
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same would make the Amendment Act a retrospective legislation? The
well accepted principle of interpretation is that all statutes affecting
substantive rights should be interpreted as being applicably prospectively
unless indicated otherwise either expressly or by necessary implication.
There is a general presumption that unless the statute expressly indicates, it
would not be applied retrospectively to impair a vested right or impose a
fresh burden based on past transaction/events. However, procedural laws
are presumed to apply retrospectively; this is so because as explained by
the Supreme Court in Anant Gopal Sheorey v. State of Bombay: AIR
1958 SC 915, “no person has any right in any course of procedure”. In
Amireddi Raja Gopala Rao v. Amireddi Sitharamamma and Ors: (1965)
3 SCR 122, the Supreme Court had observed that “It is a well-recognised
rule that a statute should be interpreted, if possible, so as to respect vested
rights.” These principles have to be kept in mind while addressing the
above issue.
31. The Act embodies the Indian Law as applicable to arbitrations. The
nature of arbitration law is essentially procedural but it also includes
provisions with regard to matters that cannot be classified as mere
procedural matters. This would include the question as to whether the
disputes are arbitrable; the question as to jurisdiction; the scope of
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challenge to the awards; and, to some extent even the supportive and
supervisory roles of Courts in relation to arbitrations. Thus, the Amending
Act does to certain extent affect the substantive rights of parties. The
question thus arises is: whether in view of the such effect, the applicability
of the Amendment Act to proceedings instituted in courts in relation to
arbitral proceedings instituted prior to 23.10.2015, should be interpreted to
be excluded?
32. It is also well settled that an amending enactment is not retrospective
merely because it also applies to persons to whom the pre-amended Act
applies. In Punjab University v. Subhash Chander and Anr.: 1984 (3)
SCC 603, the Supreme Court set aside the decision of the Full Bench of
the Punjab and Haryana High Court, whereby it was held that the
amendment to the rules to award lower grace marks would not be
applicable to students who had been admitted to the course prior to the
amendment. In Bishan Naraian Mishra vs State of U.P: 1965 (1) SCR the
Supreme Court held that the amendment in the rules reducing the age of
superannuation from 58 years to 55 years could not be considered as
retrospective and would apply to all employees altering the age of
superannuation after the amendment notwithstanding that the age of
superannuation was higher when they had joined the employment. The
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Court held that merely because a legislation applies to past acts does not
make the law retrospective. In The Queen v. The Inhabitants of St. Mary,
Whitechapel: (1848) 12 QBD 120 the court observed that a statute "is not
properly called a retrospective statute because a part of the requisites for
its action is drawn from a time antecedent to its passing". This principle
was cited with approval by the Supreme Court in Rao Shiv Bahadur Singh
and Anr. v. State of Vindhya Pradesh: AIR 1953 SC 394.
33. Most enactments would invariably affect some existing rights
however they cannot be considered as a retrospective legislation only for
that reason.
34. It is also necessary to bear in mind that the rights of the parties for
resolution of disputes were crystallised when they agreed for resolution of
the disputes by arbitration and not when the arbitration agreement was
invoked. Thus, in any view, even if it is assumed that the Amendment Act
has a retroactive effect, simply interpreting Section 26 of the Amendment
Act to exclude its applicability to proceedings in relation to arbitral
proceedings would not address the issue of interpreting the enactment in a
manner so as to avoid its retroactive effect, if any.
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35. Thus, in my view, a more appropriate approach would be to consider
the nature of arbitration law and effect of the Amendment Act as a whole.
Essentially, the provisions of an arbitration law can be classified into four
broad categories. The first being the provisions which relate to matters
which define the scope of arbitrations; this includes provisions defining the
matters that are arbitrable; the scope of arbitration agreements, etc. Such
provisions define the entire scope of arbitration and the legal policy of the
Alternate Dispute Resolution Mechanism. The second category of
provisions relate to the conduct of arbitrations. These provisions essentially
provide for the manner in which arbitration shall be conducted. The
provisions under chapter V of the Act clearly fall within this category. The
parties are free to derogate from most of such provisions and agree to a
separate set of rules for conduct of arbitrations. The parties are also free to
adopt the rules of any institutional arbitration such as International
Chambers of Commerce (ICC), London Court of International Arbitration
(LCIA), Delhi International Arbitration Centre (DIAC) etc. The third
category of provisions relate to the interface between the courts and the
arbitration process. The Act contains provisions in aid of arbitral
proceedings such as role of courts in appointment of arbitrators, assistance
in taking evidence, etc. This category would also include provisions
relating to exercise of supervisory role by courts including setting aside of
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awards. One facet of this category would also be enforcement of awards by
courts.
36. As discussed earlier, insofar as the rules pertaining to conduct of
arbitral proceedings are concerned, the legislature in its wisdom has
specifically provided that the Amendment Act would not apply to arbitral
proceedings that were commenced prior to 23.10.2015. The applicability of
the provisions of the Amendment Act that relate to the supportive and
supervisory role of courts, may be considered in the context of the reasons
that led to enactment of such provisions.
37. The Consultation Paper (hereafter 'the consultation paper') on the
proposed amendments to the Act placed in public domain in April, 2010 by
the Government of India, indicated the reasons for amending the Act as
under:
―As we know that main purpose of the 1996 Act is to
encourage an ADR method for resolving disputes speedy
and without much interference of the Courts. In fact Section
5 of the Act provides, ―Notwithstanding anything contained
in any other law for the time being in force, in matters
covered by this Part (i.e. Part I), no judicial authority shall
intervene except where so provided in this Part.‖ However,
with the passage of time, some difficulties in its
applicability of the Act have been noticed. The Supreme
Court and High Courts have interpreted many provisions of
the Act and while doing so they have also realized some
lacunas in the Act which leads to conflicting views. Further,
O.M.P.(I) (COMM.) 23/2015 Page 25 of 65
in some cases, courts have interpreted the provisions of the
Act in such a way which defeats the main object of such a
legislation. Therefore, it becomes necessary to remove the
difficulties and lacunas in the Act so that ADR method may
become more popular and object of enacting Arbitration
law may be achieved.‖
38. The amendments introduced by the Amendment Act are based on
246th Report of the Law Commission of India. A plain reading of the said
report clearly indicates that most of the amendments are occasioned by the
decisions rendered by the courts (mainly the Supreme Court of India). In
some cases, the courts had pointed out certain anomalies while in the other
cases, the courts had interpreted the law, which the Government felt was
different from India‘s legal policy relating to arbitration. Thus, several
amendments have also been introduced to overcome the decisions rendered
by the courts.
39. The amendment to Section 2(2) of the Act has been introduced
principally to strengthen the view of the Supreme Court in Bharat
Aluminium (supra) in respect of lex arbitri being the law that is applicable
at the seat of arbitration; at the same time also enable courts to pass interim
orders. The amendment is also to overcome the view in Bhatia
International (supra). The object of the said amendment is clearly to
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enable a party to take recourse to the courts to assist the arbitral process
being conducted overseas.
40. Significant amendments have been introduced to Section 11 of the
Act principally to restrict the judicial intervention at pre-arbitral stage in
conformity with Section 8 and 45 of the Act and further to promote
institutional arbitrations. Section 11A and IV
th Schedule to the Act have
been introduced in respect of the arbitral fees. The issue as to excessive
arbitral fees had been flagged by the Supreme Court in Union of India v
Singh Builders Syndicate: (2009) 4 SCC 523; and notice of this was taken
by the Law Commission. The amendments to Section 12 have been made
and Vth Schedule has been introduced to ensure the neutrality of the
arbitrators as this issue had been highlighted in several decisions rendered
by the Supreme Court. Substantial amendments have been brought in
Section 17 of the Act to enable arbitral tribunals to pass orders which can
be effectively enforced. The Supreme Court in Sundaram Finance Ltd v.
NEPC India Ltd: (1999) 2 SCC 479 had pointed out that the orders passed
by the arbitral tribunal cannot be enforced as orders of the Court and,
therefore, the parties have to resort to Section 9 of the Act. The
Commission also noted that in Sri Krishan v. Anand: 2009 3 Arb LR 447
(Del) this Court had attempted to find suitable legislative basis for
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enforcing the orders by reading Section 27(5) of the Act in a manner so as
to hold a person violating interim orders, guilty of contempt. The
Commission felt that the solution provided in Sri Krishan (supra) was not
a complete solution and, therefore, amendments were required to give teeth
to the orders of the arbitral tribunal.
41. The Act has also brought about significant changes in Section 34 of
the Act. The amendments made to Section 34 of the Act are intended to
bring the aforesaid Section in line with the decision regarding the scope of
the ‗public policy‘ as explained by the Supreme Court in Renu Sagar
Power Company Ltd v. General Electric Company: AIR 1994 SC 860.
Explanation 2 to Section 34(2)(b) (ii) was suggested by the Law
Commission after the 246th Report had been submitted. This was to
overcome the decision of the Supreme Court in Oil and Natural Gas
Corporation Ltd v. Western Geco International Ltd.: (2014) 9 SCC 263
and to curtail the interference of courts on the Wednesbury principle. In
that case the Supreme Court had inter alia held that an award which was
unreasonable on the anvil of Wednesbury principle could be set aside as
being contrary to public policy of India.
42. Section 36 of the Act has been amended in view of the observations
made by the Supreme Court in National Aluminium Co Limited v. M/s
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Press Steel & Fabrications Pvt Ltd and Anr: 2004 (1) SCC 540 wherein
the Supreme Court had criticized the provision of automatic suspension of
execution of the award on filing of a petition under Section 34 of the Act.
43. It is thus, seen that most of the amendments introduced in the Act
were either clarificatory or to address certain anomalies in the Act or to
remove difficulties.
44. The essential purpose of the Act is to provide the legal framework
for an Alternate Dispute Resolution (ADR) mechanism. And, as stated
above, the Amendment Act has been enacted for removing the difficulties
and the lacunae in the Act. The entire purpose of the Amendment Act is to
improve the efficacy of the ADR. Whilst it is understandable that the
arbitral proceedings that have already commenced, should be continued in
accordance with the procedure as adopted; it is difficult to understand the
rationale as to why the supportive and supervisory role of Courts in regard
to those proceedings be not provided as per the Amendment Act. If the
contention as advanced by the respondents is accepted, it would mean that
the courts would adopt different approach in lending their aid to
proceedings and enforcement of awards depending upon when the arbitral
proceedings commenced.
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45. As an illustration, let us consider a case where two sets of parties
enter into similar contracts prior to 23.10.2015. Disputes relating to one
agreement arises before 23.10.2015 and one of the parties invokes the
arbitration clause. In the other case, disputes arise after 23.10.2015 and the
arbitral proceedings commence thereafter. Arbitral awards in respect of
disputes between both the sets of parties are made on the same date - after
23.10.2015. By virtue of the amendment to Section 36 of the Act, the stay
of an arbitral award is no longer automatic after the period for setting aside
the award under Section 34 of the Act has expired and unless the Court
hearing an application under Section 34 of the Act grants a stay, the
arbitral award is liable to be enforced. If the contention of the respondent is
accepted then the Court would have to view the awards rendered in the
light of when the arbitral proceedings were commenced. While in the case
of former, the arbitral award would be automatically stayed on any party
filing an application under Section 34 of the Act but that would not be the
case in respect of the latter notwithstanding that the arbitral awards were
rendered on the same date. This, in my view, can clearly not be the
intention of the legislature.
46. The amendment for effective enforcement of the award would also
principally be a procedural matter. The Supreme Court in Narhari
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Shivram Shet Narvekar v. Pannalal Umediram: (1976) 3 SCC 203, held
that a decree passed by an Indian Court against a foreigner which was nonexecutable
in Goa (which was not a part of India) at the time when it was
passed, became executable once Goa became a part of India and the Code
of Civil Procedure was extended to Goa. The Supreme Court further
observed:-
―It seems to us that the right of the judgment- debtor to pay up
the decree passed against him cannot be said to be a vested
right, nor can be question of executability of the decree be
regarded as a substantive vested right of the judgment-debtor.
A fortiorari the execution proceedings being purely a matter of
procedure it is well settled that any change in law which is
made during the pendency of the cause would be deemed to be
retro-active in operation and the Appellate Court is bound to
take notice of the change in law‖
47. In Kuwait Minister of Public v. Sir Frederick Snow & Partners:
(1984) 1 All ER 733 (HL), the Court held that an arbitral award would be
executable in United Kingdom if the foreign State was a party to the New
York Convention, notwithstanding that such State was not a party to the
convention when the award was made. Therefore, lifting the stay of
enforcement on an award would essentially be an alteration in the
procedure.
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48. The amendments to Section 36 of the Act, although affects the rights
of parties, cannot be read as being retrospective law and, therefore,
interpreted as inapplicable for enforcement of awards rendered in relation
to the arbitral proceedings commenced before 23.10.2015. The
amendments introduced to Section 34 of the Act are also substantive,
however, it is seen that the same have been introduced to bring the defence
of ―public policy‖ within the scope of that defence, as explained by the
Supreme Court in Renu Sagar (supra). The suggestion that changes
introduced in Section 34 of the Act are substantial therefore affect the
vested rights of the parties, is also inconsiderable. The extent of
impairment to extant rights is an essential measure to evaluate whether the
law should be interpreted in a manner so as to exclude from its scope the
extant rights.
49. The fundamental premise of arbitration is that the parties have
agreed to accept the decision of an arbitral tribunal as final and binding.
Any amendment to restrict judicial intervention essentially enforces the
aforesaid ethos; thus, it cannot be considered to be divesting any part of its
vested right to any significant extent so as to read Section 34 of the Act to
be inapplicable in respect of the awards rendered pursuant to arbitral
proceedings initiated prior to 23.10.2015.
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50. In Secretary of State for Social Security and Another v.
Tunnicliffe: (1991) 2 All ER 712, the Court of Appeal observed as under:
―In my judgment the true principle is that Parliament is
presumed not to have intended to alter the law applicable
to past events and transactions in a manner which is
unfair to those concerned in them, unless a contrary
intention appears. It is not simply a question of
classifying an enactment as retrospective or not
retrospective. Rather it may well be a matter of degree—
the greater the unfairness, the more it is to be expected
that Parliament will make it clear if that is intended.‖
51. The aforesaid view was approved by the House of Lords in L’Office
Cherifien des Phosphates and another v. Yamashita-Shinnihon
Steamship Co Ltd: (1994) 1 All ER 20. In that case, the Court was
concerned with the applicability of Section 13A of the Arbitration Act of
1950. The said provision came into force on 01.01.1992 and enabled the
arbitrators to dismiss the claim if any of the following conditions were
satisfied: “(a) that there has been inordinate and inexcusable delay on the
part of the claimant in pursuing the claim; and (b) that the delay – (i) will
give rise to a substantial risk that it is not possible to have a fair resolution
of the issues in that claim; or (ii) has caused, or is likely to cause or to
have caused, serious prejudice to the respondent.” In that case, the
disputes between the parties were referred to arbitration in 1985 and after
filing of the claims and statement of defence, the arbitration had not
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proceeded further. After the introduction of Section 13A in the Arbitration
Act 1950, the respondents filed for dismissal of the case and the arbitrators
accepted the application and dismissed the case. In the aforesaid context,
the claimants argued that the arbitrator could not take into account the
delay that had occurred prior to insertion of Section 13A as the said
provision could not have any retrospective operation. The Court rejected
the aforesaid contention. The following passage from the concurring
opinion of Lord Mustill is instructive:-
―If there were any doubt about this the loud and prolonged
chorus of complaints about the disconformity between
practices in arbitration and in the High Court, and the
increasing impatience for something to be done about it,
show quite clearly that s 13A was intended to bite in full
from the outset. If the position were otherwise it would
follow that, although Parliament has accepted the advice
of all those who had urged that this objectionable system
should be brought to an end, and has grasped the nettle
and provided a remedy, it has reconciled itself to the
continuation of arbitral proceedings already irrevocably
stamped with a risk of injustice. I find it impossible to
accept that Parliament can have intended any such thing,
and with due respect to those who have suggested
otherwise I find the meaning of s 13A sufficiently clear to
persuade me that in the interests of reform Parliament was
willing to tolerate the very qualified kind of hardship
implied in giving the legislation a partially retrospective
effect.‖
52. The view that a statutory provision can be applied retrospectively on
the doctrine of fairness was accepted by the Supreme Court in Vijay v.
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State of Maharashtra: 2006 (6) SCC 289. In that case, the Court was
concerned with the applicability of provisions of Bombay Village
Panchayats Act, 1958 which enacted that no person, who has been elected
as Councillor of Zila Parishad or as member of the Panchayat Samiti shall
be a member of Panchyat or continue as such. The Supreme Court rejected
the contention that the said provision would not be applicable to the
existing members. The relevant observations of the court are quoted
below:-
"It is now well-settled that when a literal reading of the
provision giving retrospective effect does not produce
absurdity or anomaly, the same would not be construed
to be only prospective. The negation is not a rigid rule
and varies with the intention and purport of the
legislature, but to apply it in such a case is a doctrine of
fairness. When a law is enacted for the benefit of the
community as a whole, even in the absence of a
provision, the statute may be held to be retrospective in
nature. The appellant does not and cannot question the
competence of the legislature in this behalf."
53. Thus, even in cases where there is no provision that the new law is
to be applied retrospectively, the Courts would nonetheless apply the same
if it is fair to do so and if it furthers the intention of the legislature.
54. The question whether Section 26 of the Amendment Act should be
interpreted in a manner so as to exclude its applicability to Court
proceedings in relation to the arbitral proceedings that have commenced
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before 23.10.2015 would also have to be viewed on the basis whether it
could be fair to do so and whether it would further the object of the
legislation.
55. The stated object of Arbitration Act has always been to provide for a
speedy resolution of disputes and provide an efficacious ADR mechanism.
The Act was enacted in 1996 to consolidate laws relating to Domestic
Arbitrations, International Commercial Arbitrations and enforcement of
Foreign Awards. After its enactment, it was felt that the Act had certain
lacunae which needed to be addressed. In the year 2001, the Law
Commission of India undertook a comprehensive review and
recommended several Amendments in its 176th Report to the Government
of India. The Government of India decided to accept most of the
recommendations and accordingly, the Arbitration and Conciliation
(Amendment) Bill, 2003 was introduced in the Rajya Sabha on 22.12.2003.
Thereafter, in July, 2004, the Government constituted a Committee under
the Chairmanship of Justice Dr B.P. Saraf to undertake the study of
implications of the recommendations of the Law Commission relating to
Arbitration and Conciliation (Amendment) Bill, 2003. The Bill was
thereafter referred to the Departmental Standing Committee on Personnel,
Public Grievances, Law and Justice. The said Committee after taking
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evidence of eminent advocates, representatives of Trade and Industry and
other stake holders submitted a report on 04.08.2005. The Committee also
recommended that the Bill of 2003 may be withdrawn to bring a fresh
legislation. The said Bill of 2003 was thereafter withdrawn for further
examination. In 2010, the Government of India issued the Consultation
Paper inviting suggestions from public and other stakeholders.
56. Thereafter, the Ministry of Law and Justice asked the Law
Commission of India to undertake a study of the proposed amendments.
The Law Commission of India submitted its report on 05.08.2014 and
proposed several amendments to the Act. The Amended Act is essentially
based on the said proposals. Most of the amendments also address the
issues that were sought to be addressed by the 2003 Bill. Thus, it is clear
that there has been a long standing demand for amending the Act to make
it more effective. The amendments for restricting Judicial Review and for
removing the provision for an automatic stay of execution of the awards
have been on the anvil since several years. The Government of India
caused the President to promulgate the Arbitration and Conciliation
(Amendment) Ordinance, 2015 [No.9 of 2015], which was published in the
Gazette of India on 23.10.2015 and it came into effect immediately. The
fact that Government caused the Ordinance to be issued under Article 123
O.M.P.(I) (COMM.) 23/2015 Page 37 of 65
(1) of the Constitution of India - which is issued where the President is
satisfied that circumstances exist which make it necessary for him to take
immediate action - without waiting for the Parliament Session to
commence clearly indicates that the Government was of the view that it
was necessary to immediately implement the proposed amendments. In the
circumstances, it is difficult to accept that the intention of the Legislature
was not to apply the said provisions in respect of proceedings instituted
before the courts after 23.10.2015 either under Section 34 or under Section
36 of the Act.
57. It is also relevant to note that it is not the respondents‘ contention
that the applicability of the Amendment Act depends on the date when the
parties entered into the Arbitration Agreement; thus, no vested right can be
claimed by the parties in respect to the pre-amended Act.
58. It is also relevant to mention that as far as enforceability of foreign
awards is concerned, any proceedings for enforcement of a foreign award
after 23.10.2015 would, undisputedly, be in terms of the Act as amended. It
is not disputed that in the facts of the present case, any award that is passed
by the Arbitral Tribunal in Singapore would be enforceable as a foreign
award in accordance with the provisions of Part-II of the Act as amended
by virtue of the Amendment Act. In this view, it is also difficult to
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reconcile the position that for the purposes of section 9 of the Act, the
provisions of the Amendment Act be ignored but the arbitral award that
may follow would be enforced according to the Amended Act.
59. As mentioned hereinbefore, there is no indication in Section 26 of
the Amendment Act that it would not be applicable to the proceedings
instituted in courts after the Amendment Act came into force. As stated
earlier, the Amendment Act is based on the amendments as provided by the
Law Commission in its 246th Report. In the said report, the Law
Commission had proposed that a new section-Section 85A-be inserted in
the Act, which reads as under:-
―Transitory provisions .—(1) Unless otherwise
provided in the Arbitration and Conciliation (Amending)
Act, 2014, the provisions of the instant Act (as amended)
shall be prospective in operation and shall apply only to
fresh arbitrations and fresh applications, except in the
following situations -
(a) the provisions of section 6-A shall apply to all
pending proceedings and Arbitrations.
Explanation: It is clarified that where the issue of costs
has already been decided by the court/tribunal, the
same shall not be opened to that extent.
(b) the provisions of section 16 sub-section (7) shall
apply to all pending proceedings and arbitrations,
except where the issue has been decided by the
court/tribunal.
O.M.P.(I) (COMM.) 23/2015 Page 39 of 65
(c) the provisions of second proviso to section 24 shall
apply to all pending arbitrations.
(2) For the purposes of the instant section,—
(a) "fresh arbitrations" mean arbitrations where there
has been no request for appointment of arbitral tribunal;
or application for appointment of arbitral tribunal; or
appointment of the arbitral tribunal, prior to the date of
enforcement of the Arbitration and Conciliation
(Amending) Act, 2014.
(b) "fresh applications" mean applications to a court or
arbitral tribunal made subsequent to the date of
enforcement of the Arbitration and Conciliation
(Amending) Act, 2014.
[NOTE: This amendment is to clarify the scope of operation
of each of the proposed amendments with respect to pending
arbitrations/proceedings.]‖
It is clear from the above that the proposal was to apply the Amendment
Act, not only to all applications filed before a court/ arbitral tribunal after
the Amendment Act came into force, but it was also proposed that certain
provisions be applied retrospectively to proceedings before the arbitral
tribunal. The proposal with regard to retrospective application to pending
proceedings was not accepted, therefore, Section 26 expressly provides that
nothing in the Amendment Act would apply to pending arbitral
proceedings. The proposal that the Amendment Act shall apply only to
fresh arbitrations was accepted as is plainly evident from the language of
the latter part of Section 26 of the Amendment Act. No specific provision
O.M.P.(I) (COMM.) 23/2015 Page 40 of 65
was enacted with regard to the applicability of the amendment to ―fresh
applications‖. However, it was enacted that the Amendment Act would
come into force from 23.10.2015 and therefore would be plainly applicable
to the proceedings instituted after the said date. The Parliament had
specified the date on which the Amendment Act came into force and unless
enacted otherwise, it would be applicable to all proceedings instituted after
the specified date. There is no reason to hold that the Amendment Act
would not apply to the applications filed in Courts. For the reasons stated
herein before the Amendment Act would also apply to pending
proceedings before courts.
60. The view that Section 26 of the Amendment Act does not apply to
proceedings before courts is also supported by the decision of a Division
Bench of the Calcutta High Court in Sri. Tufan Chatterjee v. Sri Rangan
Dhar: 2016 SCC online Cal 483. Although, I have some reservation as to
the manner in which the esteemed Court has interpreted Section 9(3) of the
Act, I respectfully concur with the following conclusion:-
―A careful reading of the provisions of the 1996 Act, and in
particular Sections 21 and 32 thereof, makes it amply clear
that the expression ‗arbitral proceedings‘ in Section 26 of the
Amendment Act of 2015 cannot be construed to include
proceedings in a Court under the provisions of the 1996 Act,
and definitely not any proceedings under Section 9 of the
O.M.P.(I) (COMM.) 23/2015 Page 41 of 65
1996 Act, instituted in a Court before a request for reference
of disputes to arbitration is made.
Arbitral proceedings can be said to commence, when a
request for reference to arbitration is received by the
respondent and/or the authority competent under the
arbitration agreement, upon notice to the respondent. The
arbitral proceedings, which so commence, terminate with a
final award as provided in Section 32(1) of the 1996 Act or
with an order under Section 32(2) of the 1996 Act
Proceedings in Court under the 1996 Act whether initiated
before, during or after the termination of the arbitral
proceedings, would not attract Section 26 of the Amendment
Act of 2015.‖
61. In New Tirupur Area Development Corporation v. Hindustan
Construction Company Limited (A.No. 7674 of 2016 in O.P. No.931 of
2015), the Madras High Court has held that the Amendment Act shall
apply to petitions pending under Section 34 of the Act. The Bombay High
Court in a recent decision in M/s Rendezvous Sports World v. The Board
of Control for Cricket in India [Chamber Summons No.1530 of 2015 in
Execution Application (L) No.2481 of 2015 decided on 14.06.2016] has
also accepted the view that Section 36 of the Act as amended shall apply to
proceedings pending before Courts.
62. In view of the aforesaid, Section 2(2) of the Act as amended would
be clearly applicable in the facts of the present case. The said Sub-section
as amended reads as under:-
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―(2) This Part shall apply where the place of arbitration is in
India:
Provided that subject to an agreement to the contrary, the
provisions of sections 9, 27 and clause (a) of sub-section (1)
and sub-section (3) of section 37 shall also apply to
international commercial arbitration, even if the place of
arbitration is outside India, and an arbitral award made or to
be made in such place is enforceable and recognised under
the provisions of Part II of this Act.‖
63. The principal question to be addressed is whether by virtue of the
proviso introduced in Section 2(2) of the Act, recourse to Section 9 of the
Act is available in relation to the arbitral proceedings in question.
64. At this stage, it is necessary to refer to the Dispute Resolution
Clause, which reads as under:-
"15 Governing Law and Dispute Resolution
15.1 This Agreement shall be governed by and construed in
accordance with the laws of Singapore.
15.2 Any dispute, controversy, claims or disagreement of
any kind whatsoever between or among the Parties in
connection with or arising out of this Agreement or the
breach, termination or invalidity thereof shall be referred to
and finally resolved by arbitration in Singapore in
accordance with the Arbitration Rules of the Singapore
International Arbitration Centre (SIAC Rules) for the time
being in force, which rules are deemed to be incorporated by
reference in this clause. This Agreement and the rights and
obligations of the Parties shall remain in full force and effect
pending the award in such arbitration proceedings which
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award, if appropriate, shall determine whether and when any
termination shall become effective.
15.3 The Arbitral Tribunal shall consist of one arbitrator to
be appointed by the Chairman of SIAC.
15.4 Language of Arbitration. The language of the
arbitration shall be in English.
15.5 Survival: The provisions contained in this Clause 15
shall survive the termination of this Agreement."
65. Clause 15.1 of the agreement expressly indicates that the agreement
would be governed by and construed in accordance with the law of
Singapore. Thus, clearly, the substantive law as applicable to the contract
between the parties is the law as applicable in Singapore. The seat of
arbitration is also Singapore and therefore the law as applicable to the
arbitral proceedings, lex arbitri, is also the law as applicable in Singapore.
The legal principle that the law as applicable to arbitral proceedings would
be the law as applicable where the seat of arbitration is situated has been
authoritatively settled by a Constitution Bench of the Supreme Court in
Bharat Aluminium (supra).
66. The Supreme Court in Bhatia International (supra) had considered
the question whether Part I of the Act would be applicable to International
arbitrations and had held as under:-
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―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 parties
would prevail. Any provision, in Part I, which is contrary to
or excluded by that law or rules will not apply.‖
67. Thus, prior to decision in Bharat Aluminium (supra) the position of
law was that unless the parties had agreed to the contrary, the provisions of
Part I of the Act would be applicable. The decision in Bhatia International
(supra) was overruled by the Constitution Bench in Bharat Aluminium
(supra) and the law declared was that Part I of the Act would have no
application in cases where the seat of arbitration is outside India.
However, the Constitution Bench of the Supreme Court had expressly held
that the said decision would be applied prospectively and only in respect of
agreements that were entered into and after the date of that decision. The
Supreme Court held as under:-
―With utmost respect, we are unable to agree with the
conclusions recorded in the judgments of this Court in
Bhatia International (supra) and Venture Global Engineering
(supra). In our opinion, the provision contained in Section
2(2) of the Arbitration Act, 1996 is not in conflict with any
of the provisions either in Part I or in Part II of the
Arbitration Act, 1996. In a foreign seated international
commercial arbitration, no application for interim relief
would be maintainable under Section 9 or any other
provision, as applicability of Part I of the Arbitration Act,
1996 is limited to all arbitrations which take place in India.
Similarly, no suit for interim injunction simplicitor would be
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maintainable in India, on the basis of an international
commercial arbitration with a seat outside India.
xxxx xxxx xxxx xxxx
The judgment in Bhatia International (supra) was rendered
by this Court on 13-3-2002. Since then, the aforesaid
judgment has been followed by all the High Courts as well
as by this Court on numerous occasions. In fact, the
judgment in Venture Global Engineering (supra) has been
rendered on 10-01-2008 in terms of the ratio of the decision
in Bhatia International (supra). Thus, in order to do
complete justice, we hereby order, that the law now declared
by this Court shall apply prospectively, to all the arbitration
agreements executed hereafter.‖
68. Plainly, this position stands amended by enactment of Section 2(II)
of the Amendment Act by virtue of which Section 2(2) of the Act stands
amended by introduction of a proviso that expressly provides that
provisions of Section 9, 27 & 37(1)(a) and 37 (3) of the Act would also
apply to international commercial arbitrations even if the place of
arbitration is outside India and the arbitral award is enforceable under the
provisions of Part II of Act.
69. As is apparent from the plain language of the proviso, it is subject to
an agreement to the contrary. In other words the proviso is applicable only
if there is no agreement to the contrary; that is, there is no agreement,
which excludes the applicability of sections 9, 27, 37(1)(a) and 37(3) of the
Act.
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70. It is relevant to note that the Law Commission in its 246th report had
proposed the following amendments to Section 2(2) of the Act:
"(vi) In sub-section (2), add the word "only" after the words
"shall apply" and delete the word "place" and insert the
word "seat" in its place.
[NOTE: This amendment ensures that an Indian Court can
only exercise jurisdiction under Part I where the seat of the
arbitration is in India. To this extent, it over-rules Bhatia
International v. Bulk Trading S.A. and Anr (2002) 4 SCC
105 Anr., (2002) 4 SCC 105, and re-enforces the "seat
centricity" principle of Bharat Aluminium Company and
Ors. etc. v. Kaiser Aluminium Technical Service, Inc and
Ors. etc., (2012) 9 SCC 552]
Also insert the following proviso "Provided that, subject to
an express agreement to the contrary, the provisions of
sections 9, 27, 37 (1)(a) and 37(3) shall also apply to
international commercial arbitration even if the seat of
arbitration is outside India, if an award made, or that which
might be made, in such place would be enforceable and
recognized under Part II of this Act.
[NOTE: This proviso ensures that an Indian Court can
exercise jurisdiction with respect to these provisions even
where the seat of the arbitration is outside India.]"
71. The aforesaid proposal was not accepted in toto; the word "only" in
the opening sentence of sub section (2) and the word ―express" in the first
line of the proviso as proposed by the Law commission were omitted.
Thus, it is not necessary that the parties exclude the applicability of Section
9 of the Act by an express agreement and so long as an agreement to
exclude Section 9 and 27 of the Act can be inferred by implication, the
O.M.P.(I) (COMM.) 23/2015 Page 47 of 65
provisions of Sections 9, 27, 37(1)(a) and 37(3) would stand excluded.
This in effect reverts the position of law as it was prior to the decision in
case of Bharat Aluminium (supra) in so far as the applicability of sections
9, 27, 37(1)(a) and 37(3) of the Act is concerned. In other words, although
provisions of Part -I - except Sections 9, 27, 37(1)(a) and 37(3) of the Act
- would not apply to arbitrations held outside India, Sections 9, 27, 37(1)(a)
and 37(3) of the Act would apply unless the parties have contracted to the
contrary.
72. The controversy as to whether parties have contracted out of Part I
of the Act has been considered in several decisions. In Venture Global
Engineering v. Satyam Computer Services Ltd. and Another: (2008) 4
SCC 190, the Supreme Court considered the question whether a petition
under Section 34 of the Act was maintainable in respect of a foreign award.
Following its earlier decisions in Bhatia International (supra), the
Supreme Court had reiterated that provisions of Part I of the Act would be
applicable unless the same was expressly or impliedly excluded by the
parties. In that case, the Shareholder's Agreement between the parties
therein included the following clauses:-
"11.05 (a) xxxx xxxx xxxx xxxx
(b) This Agreement shall be construed in accordance with and
governed by the laws of the State of Michigan, United States,
O.M.P.(I) (COMM.) 23/2015 Page 48 of 65
without regard to the conflicts of law rules of such jurisdiction.
Disputes between the parties that cannot be resolved via
negotiations shall be submitted for final, binding arbitration to
the London Court of Arbitration.
(c) Notwithstanding anything to the contrary in this agreement,
the Shareholders shall at all times act in accordance with the
Companies Act and other applicable Acts/Rules being in force,
in India at any time."
73. In the aforesaid context, the Court, inter alia, held that the non
obstante clause - clause (c) as quoted above - would override the entirety of
the contract including clause (b) which deals with the settlement of
disputes by arbitration. The Court rejected the contention that the aforequoted
clause (c) could not be construed to mean that Indian law was the
substantive law of contract or the Indian law would not govern the
Disputes Resolution clause - clause (b) quoted above. The Court
concluded the Part-I of the Act could not be held to be excluded by the
parties.
74. In M/s. Indtel Technical Services Pvt. Ltd. v. W.S. Atkins Rail Ltd.:
(2008) 10 SCC 308, the Supreme Court considered the application under
Section 11 of the Act and was concerned with an agreement which
included the clause that read as under:-
"CLAUSE 13 - SETTLEMENT OF DISPUTES
O.M.P.(I) (COMM.) 23/2015 Page 49 of 65
13.1. This Agreement, its construction, validity and
performance shall be governed by and constructed in
accordance with the laws of England and Wales."
And, in context of the aforesaid clause, the Court held that:
"it is no doubt true that it is fairly well-settled that when an
arbitration agreement is silent as to the law and procedure
to be followed in implementing the arbitration agreement,
the law governing the said agreement would ordinarily be
the same as the law governing the contract itself. The
decisions cited by Mr. Tripathi and the views of the jurists
referred to in the NTPC case support such a proposition.
What, however, distinguishes the various decisions and
views of the authorities in this case is the fact that in the
Bhatia International case this Court laid down the
proposition that notwithstanding the provisions of Section
2(2) of the Arbitration and Conciliation Act, 1996,
indicating that Part-I of the said Act would apply where the
place of arbitration is in India, even in respect of
International Commercial agreements, which are to be
governed by laws of another country, the parties would be
entitled to invoke the provisions of Part-I of the aforesaid
Act and consequently the application made under Section
11 thereof would be maintainable."
75. The decisions in Bhatia International (supra) and M/S. Indtel
Technical Services Pvt. Ltd. (supra) were followed by the Supreme Court
in a later decision in Citation Infowares Limited v. Equinox Corporation:
(2009) 7 SCC 220.
76. In Dozco India (P) Ltd. v. Doosan Infracore Co. Ltd.: (2011) 6
SCC 179, the Supreme Court rejected a petition under Section 11(6) of the
Act as the Court interpreted the agreement between the parties to exclude
O.M.P.(I) (COMM.) 23/2015 Page 50 of 65
Part-I of the Act. In that case, the relevant clauses of the agreement
between the parties read as under:-
"Article 22. Governing Laws - 22.1 : This agreement shall be
governed by and construed in accordance with the laws of
The Republic of Korea.
Article 23. Arbitration - 23.1 : All disputes arising in
connection with this Agreement shall be finally settled by
arbitration in Seoul, Korea (or such other place as the parties
may agree in writing), pursuant to the rules of agreement then
in force of the International Chamber of Commerce."
In the aforesaid context, the Supreme Court held as under:-
"In the backdrop of these conflicting claims, the question
boils down to as to what is the true interpretation of Article
23. This Article 23 will have to be read in the backdrop of
Article 22 and more particularly, Article 22.1. It is clear from
the language of Article 22.1 that the whole Agreement would
be governed by and construed in accordance with the laws of
The Republic of Korea.
xxxx xxxx xxxx xxxx
If we see the language of Article 23.1 in the light of the
Article 22.1, it is clear that the parties had agreed that the
disputes arising out of the Agreement between them would be
finally settled by the arbitration in Seoul, Korea. Not only
that, but the rules of arbitration to be made applicable were
the Rules of International Chamber of Commerce. This gives
the prima facie impression that the seat of arbitration was only
in Seoul, South Korea."
O.M.P.(I) (COMM.) 23/2015 Page 51 of 65
77. In Videocon Industries (supra), the Supreme Court considered the
controversy as to the applicability of the Part-I of the Act in the context of
the following clauses of the agreement:-
"33.1 Indian Law to Govern Subject to the provisions of
Article 34.12, this Contract shall be governed and interpreted
in accordance with the laws of India.
33.2 Laws of India Not to be Contravened - Subject to Article
17.1 nothing in this Contract shall entitle the Contractor to
exercise the rights, privileges and powers conferred upon it by
this Contract in a manner which will contravene the laws of
India.
xxxx xxxx xxxx xxxx
34.12. Venue and Law of Arbitration Agreement The venue
of sole expert, conciliation or arbitration proceedings pursuant
to this Article, unless the Parties otherwise agree, shall be
Kuala Lumpur, Malaysia, and shall be conducted in the
English language. Insofar as practicable, the Parties shall
continue to implement the terms of this Contract
notwithstanding the initiation of arbitral proceedings and any
pending claim or dispute. Notwithstanding the provisions of
Article 33.1, the arbitration agreement contained in this
Article 34 shall be governed by the laws of England."
And, the Supreme Court held as under:-
"In the present case also, the parties had agreed that
notwithstanding Article 33.1, the arbitration agreement
contained in Article 34 shall be governed by laws of England.
This necessarily implies that the parties had agreed to exclude
the provisions of Part I of the Act. As a corollary to the above
conclusion, we hold that the Delhi High Court did not have
the jurisdiction to entertain the petition filed by the
respondents under Section 9 of the Act and the mere fact that
the appellant had earlier filed similar petitions was not
O.M.P.(I) (COMM.) 23/2015 Page 52 of 65
sufficient to clothe that High Court with the jurisdiction to
entertain the petition filed by the respondents."
78. A similar view was also expressed by the Supreme Court in
Reliance Industries Limited and Anr v. Union of India: (2014) 7 SCC
603 and Union of India v. Reliance Industries Limited and Others:
(2015) 10 SCC 213. In those cases the parties had, inter alia, agreed as
under:-
"33.12 The venue of conciliation or arbitration proceedings
pursuant to this Article, unless the Parties otherwise agree,
shall be London, England and shall be conducted in the
English Language. The arbitration agreement contained in this
Article 33 shall be governed by the laws of England. Insofar
as practicable, the Parties shall continue to implement the
terms of this Contract notwithstanding the initiation of arbitral
proceedings and any pending claim or dispute."
79. In Harmony Innovation Shipping Ltd. (supra), the Supreme Court
was concerned with interpretation of a clause that read as under:
―5. If any dispute or difference should arise under this charter,
general average/arbitration in London to apply, one to be
appointed by each of the parties hereto, the third by the two so
chosen, and their decision or that of any two of them, shall be
final and binding, and this agreement may, for enforcing the
same, be made a rule of Court. Said three parties to be
commercial men who are the members of the London
Arbitrators Association. This contract is to be governed and
construed according to English Law. For disputes where total
amount claim by either party does not exceed USD $ 50,000
the arbitration should be conducted in accordance with small
claims procedure of the London Maritime Arbitration
Association.‖
O.M.P.(I) (COMM.) 23/2015 Page 53 of 65
80. The Supreme Court after noticing various earlier decisions held as
under:
―50. Thus, interpreting the clause in question on the bedrock
of the aforesaid principles it is vivid that the intended effect is
to have the seat of arbitration at London. The commercial
background, the context of the contract and the circumstances
of the parties and in the background in which the contract was
entered into, irresistibly lead in that direction. We are not
impressed by the submission that by such interpretation it will
put the Respondent in an advantageous position. Therefore,
we think it would be appropriate to interpret the clause that it
is a proper clause or substantial clause and not a curial or a
procedural one by which the arbitration proceedings are to be
conducted and hence, we are disposed to think that the seat of
arbitration will be at London.‖
81. Mr Dutt, learned counsel had earnestly contended that in view of the
decisions of the Supreme Court in Videocon Industries (supra) Harmony
Innovation Shipping Ltd. (supra) and Reliance Industries (supra) it was
clear that the parties had implicitly agreed to exclude Section 9 of the Act
to the arbitral proceedings , because they had agreed that the agreement
would be construed and considered in accordance with law in Singapore.
82. I am unable to accept the aforesaid contention mainly for the reason
that the controversy considered by the Supreme Court in Dozco Industries
Pvt Ltd, Videocon Industries, Reliance Industries v. Union of India,
Union of India v. Reliance Industries and Harmony Innovation Shipping
Ltd. (supra) was materially different from the question involved in the
O.M.P.(I) (COMM.) 23/2015 Page 54 of 65
present case. In those cases, the question before the Supreme Court was as
to which law was applicable to the arbitral proceedings – which was the
lex arbitri. An agreement that the proper law of arbitration (lex arbitri) of
a country other than India would govern the arbitration agreement would
necessarily exclude the Act as lex arbitri and consequently Part I of the
Act.
83. In Reliance Industries cases (supra), the parties had expressly
agreed that the arbitration agreement shall be governed by the laws of
England. So was the case in Videocon Industries (supra). Undisputedly, if
the parties had agreed that the proper law applicable to the arbitration
would be that of a foreign country it would necessarily mean that the Act
would not be the proper law governing the arbitration. The two are
mutually exclusive.
84. In the present case, there is no dispute as to the law governing the
arbitration. Clause 15.1 of the Agreement expressly provides that the laws
as applicable in Singapore will apply to the entire contract. Further the
seat of the arbitration is also in Singapore. The petitioners had also applied
under Section 12 (6) of the International Arbitration Act, (IAA) - the law
as applicable to the International Arbitration in Singapore - for the
judgment in terms of the order passed by the Arbitral tribunal. In
O.M.P.(I) (COMM.) 23/2015 Page 55 of 65
paragraph 41 of the petition filed before the Singapore High Court, the
petitioner has stated as under:-
―41. It is undisputed that the IAA applies to SIAC 179 as
Singapore is the seat of the arbitration (as confirmed by the
Emergency Arbitrator in paragraph 10 of the Emergency
Award [TAB 1]). The Plaintiffs understand that this
Honourable Court has supervisory and/or curial jurisdiction
over SIAC 179 and Section 12(6) of the IAA specifically
provides that ―all orders or directions made or given by an
arbitral tribunal in the course of an arbitration shall, by leave
of the High Court or a Judge thereof, be enforceable in the
same manner as if they were orders made by a court.‖
Accordingly, I believe that Singapore is an appropriate forum
for the filing of this action for enforcement of the Emergency
Award.‖
85. Thus, the question that needs to be addressed is: whether an
agreement between the parties that a foreign law would be applicable to the
arbitration, implicitly excludes the applicability of Section 9 of the Act?
86. As noted earlier, the very purpose of amending Section 2 (2) of the
Act was to enable a party to approach the courts in India for interim relief
in respect of the arbitral proceedings held or to be held outside India. The
need for this amendment was highlighted by the Law Commission of India,
in its 176th Report in the following words:-
―Section 2(2) states that Part - I of the Act applies to
arbitration in India. That would mean that in the case of
arbitration between Indian nationals and also where one party
is not an Indian national, and where the place of the
arbitration is in India, Part I of the Act will apply. While the
O.M.P.(I) (COMM.) 23/2015 Page 56 of 65
UNCITRAL Model Law permits certain Articles like 8, 9, 35
and 36 to apply to arbitrations outside the Country, there is an
omission in this behalf in the 1996 Act. Consequently, for
example in the absence of availability of Section 9 in the case
of an arbitration outside India, the Indian party is unable to
obtain interim measures from Indian Courts, before arbitration
starts outside India. The absence of an express provision as
stated above has led to conflicting judgments in the Delhi and
Calcutta High Courts. It is proposed to allow Section 9 to the
invoked whenever arbitration is outside India. Similarly, the
provisions of Section 8, 27, 35 and 36 are proposed to be
made available whenever arbitration is outside India. Almost
all countries which have adopted the Model Law allow views
of these provisions to arbitrations outside the country. The
proposed clause (a) of Section 2(2) states that Part – I of the
Act applies to domestic arbitration in India and the proposed
clause (b) states that Sections 8, 9, 27, 35 and 36 will be
available for international arbitrations outside India.‖
In its 176th report the Law Commission had proposed that Section 2 (2)
of the Act be amended to read as under:-
―(2) (a) Save as otherwise provided in clause (b), this Part
shall apply where the place of arbitration is in India.
(b) Sections 8, 9 and 27 of this Part shall apply to
international arbitration (whether commercial or not)
where the place of arbitration is outside India or where
such place is not specified in the arbitration agreement.‖.
87. The Consultation Paper placed by the Government of India in public
domain also highlighted the need for amending Section 2 of the Act to
enable the parties to approach the Courts in India for interim relief under
Section 9 of the Act in the following words:-
O.M.P.(I) (COMM.) 23/2015 Page 57 of 65
―(xvii) It may be stated that it is the broad principle in
International Commercial arbitration that a law of the country
where it is held, namely, the Seat or forum or laws arbitri of
the arbitration, governs the arbitration. However, if all the
provisions of Part I are not made applicable to International
Commercial arbitration where the seat of arbitration is not in
India, some practical problems are arising. There may be
cases where the properties and assets of a party to arbitration
may be in India. Section 9 of the Act which falls in Part I
provide for interim measures by the Court. As per Section 9, a
party may, apply to a court for certain interim measures of
protection including for preservation, interim custody or sale
of goods, securing the amount in disputes, detention,
preservation or inspection of any property, interim injunction
etc. If provision of Section 9 is not made applicable to
International Commercial arbitration where seat of arbitration
is not in India, a party may be out of remedy if the assets and
property are in India. In cases of international arbitration
where the seat of arbitration is outside India, a serious
controversy has arisen in the Indian Courts. These are cases
where interim measures could not be granted by Indian courts
under Section 9 to an Indian national before commencement
of arbitration (or after the award) against property of a foreign
party. By the time the Indian party takes steps to move the
courts in the country in which the seat of arbitration is
located, the property may have been removed or transferred.‖
88. The Law Commission of India in its 246th Report also proposed
amendments to Section 2 (2) of the Act (as quoted herein before) as it felt
that the same were necessary. The reasons for such amendments were
explained, as under:-
―(i) Where the assets of a party are located in India, and there
is a likelihood that that party will dissipate its assets in the
near future, the other party will lack an efficacious remedy if
the seat of the arbitration is abroad. The latter party will have
two possible remedies, but neither will be efficacious. First,
O.M.P.(I) (COMM.) 23/2015 Page 58 of 65
the latter party can obtain an interim order from a foreign
Court or the arbitral tribunal itself and file a civil suit to
enforce the right created by the interim order. The interim
order would not be enforceable directly by filing an execution
petition as it would not qualify as a "judgment" or "decree"
for the purposes of sections 13 and 44A of the Code of Civil
Procedure (which provide a mechanism for enforcing foreign
judgments). Secondly, in the event that the former party does
not adhere to the terms of the foreign Order, the latter party
can initiate proceedings for contempt in the foreign Court and
enforce the judgment of the foreign Court under sections 13
and 44A of the Code of Civil Procedure. Neither of these
remedies is likely to provide a practical remedy to the party
seeking to enforce the interim relief obtained by it.
That being the case, it is a distinct possibility that a foreign
party would obtain an arbitral award in its favour only to
realize that the entity against which it has to enforce the
award has been stripped of its assets and has been converted
into a shell company.
(ii) While the decision in BALCO was made prospective to
ensure that hotly negotiated bargains are not overturned
overnight, it results in a situation where Courts, despite
knowing that the decision in Bhatia is no longer good law, are
forced to apply it whenever they are faced with a case arising
from an arbitration agreement executed pre- BALCO.‖
89. It is also necessary to reiterate that amendment to Section 2 (2) of
the Act was made on the basis of the United Nations Commission on
International Trade Law (UNCITRAL) Model Law as adopted on
21.06.1985 and as amended on 07.07.2006. Article 1.2 of UNCITRAL
Model Law reads as under:-
“Article 1. Scope of Application
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(1) xxxx xxxx xxxx xxxx
(2) The provisions of this Law, except articles 8, 9, 17 H, 17 I,
17 J, 35 and 36, apply only if the place of arbitration is in the
territory of this State. (Article 1(2) has been amended by the
Commission at its thirty-ninth session, in 2006)‖
90. The Article 9, 17H, 17I and 17J, of the Model Law are relevant and
are set out below:-
“Article 9. Arbitration agreement and interim measures by
court
It is not incompatible with an arbitration agreement for a party
to request, before or during arbitral proceedings, from a court
an interim measure of protection and for a court to grant such
measure.
xxxx xxxx xxxx xxxx
Article 17 H. Recognition and enforcement
(1) An interim measure issued by an arbitral tribunal shall be
recognized as binding and, unless otherwise provided by
the arbitral tribunal, enforced upon application to the
competent court, irrespective of the country in which it was
issued, subject to the provisions of article 17 I.
(2) The party who is seeking or has obtained recognition or
enforcement of an interim measure shall promptly inform
the court of any termination, suspension or modification of
that interim measure.
(3) The court of the State where recognition or enforcement is
sought may, if it considers it proper, order the requesting
party to provide appropriate security if the arbitral tribunal
has not already made a determination with respect to
security or where such a decision is necessary to protect the
rights of third parties.
O.M.P.(I) (COMM.) 23/2015 Page 60 of 65
Article 17 I. Grounds for refusing recognition or enforcement
(1) Recognition or enforcement of an interim measure may be
refused only:
(a) At the request of the party against whom it is invoked
if the court is satisfied that:
(i) Such refusal is warranted on the grounds set forth
in article 36(1)(a)(i), (ii), (iii) or (iv); or
(ii)The arbitral tribunal‘s decision with respect to the
provision of security in connection with the
interim measure issued by the arbitral tribunal has
not been complied with; or
(iii)The interim measure has been terminated or
suspended by the arbitral tribunal or, where so
empowered, by the court of the State in which the
arbitration takes place or under the law of which
that interim measure was granted; or
(b) If the court finds that:
(i)The interim measure is incompatible with the
powers conferred upon the court unless the court
decides to reformulate the interim measure to the
extent necessary to adapt it to its own powers and
procedures for the purposes of enforcing that
interim measure and without modifying its
substance; or
(ii) Any of the grounds set forth in article 36(1)(b)(i) or
(ii), apply to the recognition and enforcement of
the interim measure.
(iii)Any determination made by the court on any
ground in paragraph (1) of this article shall be
effective only for the purposes of the application to
recognize and enforce the interim measure. The
court where recognition or enforcement is sought
shall not, in making that determination, undertake
a review of the substance of the interim measure.
O.M.P.(I) (COMM.) 23/2015 Page 61 of 65
Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim
measure in relation to arbitration proceedings, irrespective
of whether their place is in the territory of this State, as it
has in relation to proceedings in courts. The court shall
exercise such power in accordance with its own
procedures in consideration of the specific features of
international arbitration.‖
91. The Article 17-J of the Model Law specifically provides that the
Court shall have the same powers for issuing interim measures in relation
to the arbitral proceedings irrespective of the seat of such arbitral
proceedings. In terms of the UNCITRAL Model Law, arbitral proceedings
are governed by the law as applicable at the seat of the arbitration;
nonetheless, it would be open for the Courts to issue interim orders even in
respect of the arbitral proceedings that are held outside the State. The
object of amending Section 2(2) of the Act is inter alia to incorporate such
provision in the Act.
92. The contention that the parties have impliedly agreed to exclude
Section 9 of the Act, has to be considered in the above backdrop.
93. It is seen that the parties had expressly agreed that the arbitration
shall be governed by the SIAC Rules. It is relevant to note that Rule 26.3
of the SIAC Rules, expressly provides that:-
O.M.P.(I) (COMM.) 23/2015 Page 62 of 65
"26.3 A request for interim relief made by a party to a
judicial authority prior to the constitution of the Tribunal,
or in exceptional circumstances thereafter, is not
incompatible with these Rules.‖
[Rule 30.3 of SIAC Rules, 2016 is similarly worded to Rule 26.3 quoted
above.]
94. This is pari materia to Article 9 of the Model Rules. The SIAC
Rules must be read as a part of the agreement between the parties and the
only conclusion that can be drawn is that the parties had expressly agreed
that seeking an interim order from the Courts would not be incompatible
with the arbitral proceedings .
95. The SIAC Rules are clearly in conformity with the UNCITRAL
Model Law and permit the parties to approach the Court for interim relief.
As pointed out earlier, UNCITRAL Model Law expressly provides for
courts to grant interim orders in aid to proceedings held outside the State.
And, the proviso to Section 2 (2) of the Act also enables a party to have
recourse to Section 9 of the Act notwithstanding that the seat of arbitration
is outside India. Thus, the inescapable conclusion is that since the parties
had agreed that the arbitration be conducted as per SIAC Rules, they had
impliedly agreed that it would not be incompatible for them to approach
the Courts for interim relief. This would also include the Courts other than
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Singapore. It is relevant to mention that IAA is based on UNCITRAL
Model Law and SIAC Rules are also complimentary to IAA/UNCITRAL
Model law.
96. In the circumstances, the contention that the parties by agreeing that
the proper law applicable to arbitration would be the law in Singapore have
excluded the applicability of Section 9 of the Act.
97. The only question that now remains to be considered is whether the
petitioner can approach this Court for an interim relief considering that it
has already approached the Arbitral Tribunal in Singapore and thereafter,
also obtained a judgment in terms of the interim order from the Singapore
High Court.
98. It is relevant to mention that Article 17H of the UNCITRAL Model
Law contains express provisions for enforcement of interim measures.
However the Act does not contain any provision pari materia to Article
17H for enforcement of interim orders granted by an Arbitral Tribunal
outside the India. Section 17 of the Act is clearly not applicable in respect
of arbitral proceedings held outside India.
99. In the circumstances, the emergency award passed by the Arbitral
Tribunal cannot be enforced under the Act and the only method for
enforcing the same would be for the petitioner to file a suit.
O.M.P.(I) (COMM.) 23/2015 Page 64 of 65
100. However, in my view, a party seeking interim measures cannot be
precluded from doing so only for the reason that it had obtained a similar
order from an arbitral tribunal. Needless to state that the question whether
the interim orders should be granted under section 9 of the Act or not
would have to be considered by the Courts independent of the orders
passed by the arbitral tribunal. Recourse to Section 9 of the Act is not
available for the purpose of enforcing the orders of the arbitral tribunal;
but that does not mean that the Court cannot independently apply its mind
and grant interim relief in cases where it is warranted.
101. It is relevant to note that the provisions under Article 17 I (2) of the
Model Law, the court enforcing an interim order passed by an Arbitral
Tribunal in prescribed form undertakes a review of the substance of interim
measure the Model Law. To that extent, a Court while examining a similar
relief under Section 9 of the Act would be unfettered by the findings or the
view of the Arbitral Tribunal.
102. The decisions of this Court in Sri Krishan (supra) and Indiabulls
Financial Services Ltd. & Ors. v. Jubilee Plots and Housing Private Ltd.:
2009 SCC OnLine Del 2458 referred to by Mr Dutt have no applicability
in the facts of this case. In those cases, it was held that a person disobeying
the orders passed under Section 17 of the Act would be guilty of contempt
O.M.P.(I) (COMM.) 23/2015 Page 65 of 65
as provided under Section 27 (5) of the Act. Clearly, a person guilty of not
following the interim orders of the arbitral tribunal in Singapore cannot be
proceeded for the contempt under Section 27 of the Act, as contended by
Mr Dutt.
103. In the circumstances, I am of the view that the present petition is
maintainable and accordingly, it is to be considered on its merits.
VIBHU BAKHRU, J
OCTOBER 07, 2016
IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: 07.10.2016
O.M.P.(I) (COMM.) 23/2015 & CCP(O) 59/2016,
IA Nos.25949/2015 & 2179/2016
RAFFLES DESIGN INTERNATIONAL INDIA PRIVATE LIMITED & ANR. ..... Petitioners
Versus
EDUCOMP PROFESSIONAL EDUCATION LIMITED &ORS. ..... Respondents
Advocates who appeared in this case:
For the Petitioners : Mr Abhinav Vashist and Mr Arun Kathpalia,
Senior Advocates with Mr Prashant Mishra,
Mr Piyush Prasad, Mr Shalin Arthwan and
Ms Jamal Joy and Mr Samaksh Goyal.
For the Respondents : Mr Suhail Dutt, Senior Advocate with Mr M.A.
Niyazi, Mr Achint Singh Gyani and Ms Prabjot Kaur Chhabra.
Mr Sunil Mund, Mr Sanjiv Joshi and Ms
Badeshree for R-3.
CORAM
HON’BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The petitioners have filed the present petition under Section 9 of the
Arbitration and Conciliation Act, 1996 (hereinafter the 'Act'), inter alia,
praying as under:
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"(a) Direct that the Respondents through their directors
(including but not limited to Mr Shantanu Prakash),
officers, agents, representatives and employees
(including but not limited to the Respondent No.3) to
cease and desist forthwith from taking any actions that
have the effect of depriving the Petitioners and their
representatives of the exercise of their rights pursuant to
clause 3.1.2 of the Share Purchase Agreement dated 12
March 2015 viz. to have an absolute say on the hiring
and dismissal of employees of the Society;
(b) Direct that the Respondents through their directors
(including but not limited to Mr Shantanu Prakash),
officers, agents, representatives and employees
(including but not limited to the Respondent No.3) cease
and desist from interfering with any aspect of the hiring
and dismissal rights of the Petitioners pursuant to clause
3.1.2 of the Share Purchase Agreement dated 12 March
2015, including interfering in any manner whatsoever
with prompt payments to employees hired and/or
dismissed by the Society.
(c) Direct the Respondent No. 3 (or any other person
appointed in his capacity) to forthwith take steps to
effect the payment of salaries to Dr. C.S. Sharma and/or
take necessary steps to effect prompt payments of
salaries to any other employees hired by the Society.
(d) Restrain the Respondents No. 1 and 2 including
through their affiliates, related parties, directors,
officers, agents, representatives and employees
(including but not limited to the Respondent No.3) from
taking any steps whatsoever in contravention of clause
3.1.2 of the Share Purchase Agreement dated 12 March
2015;"
2. At the outset, the respondents have taken a preliminary objection as
to the maintainability of the present petition. The respondents contend that
the present petition under Section 9 of the Act is not maintainable
O.M.P.(I) (COMM.) 23/2015 Page 3 of 65
principally on the ground that Part-I of the Act is inapplicable to arbitral
proceedings held outside India - in this case Singapore - and the parties
have impliedly agreed to exclude the applicability of Section 9 of the Act.
The respondents also contend that the Arbitration and Conciliation
(Amendment) Act, 2015 (hereafter ‗the Amendment Act‘) is inapplicable
to the present proceedings as the arbitral proceedings had commenced prior
to 23.10.2015. The petitioners contend otherwise.
3. At this stage, the limited controversy that arises for consideration is
whether the petition filed by the petitioners is maintainable.
4. Briefly stated, the facts necessary to address the aforesaid
controversy are as under:-
4.1 Raffles Education Corporation Limited (hereafter 'Raffles'), being
parent company of the petitioners' and Educomp Solutions Limited
(hereafter 'Educomp'), being parent company of the respondents' entered
into a Master Joint Venture Agreement(Master JVA) dated 16.05.2008.
Pursuant to the Master JVA, Educomp Raffles Higher Education
Limited(hereafter 'ERHEL') was incorporated as a joint venture company
for providing educational courses in management and designing at various
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locations in India. Shares of ERHEL were held by Raffles and Educomp in
equal proportion.
4.2 ERHEL took control over the management of a Society namely, Jai
Radha Raman Education Society (hereafter 'the Society') to establish a
college in NOIDA (hereafter the 'Noida College'). Subsequently, Raffles
increased its stake in ERHEL to 58.18%.
4.3 On 12.03.2015, the petitioners and the respondents entered into a
Share Purchase Agreement (hereafter 'the Agreement') whereby, on
fulfilling the conditions set out in the Agreement, shares of respondents in
ERHEL were to be acquired by the Petitioners. The relevant clause of the
Agreement reads as under:
"3.1.2. On deposit of the 10% of the Purchase Price by
the Purchasers to the Escrow Agent referred to in clause
3.1.1, the Sellers shall allow the Purchasers (i) to take
control of the Company and JRRES, limited to the
extent that the Purchasers shall have absolute say on the
hiring and dismissal of employees (including existing
employees); and (ii) to take charge of JRRES'
application to the Government of Uttar Pradesh, India
for becoming a deemed university. For clarification,
upon the Execution Date, funding of the operations of
the Company, JRRES, MIDL and MSB shall be the
exclusive responsibility of the Purchasers, details of
which shall be shared with the Sellers from time to time
till closing. In the event the Closing does not take place
as envisaged in this Agreement and this Agreement is
terminated, the Sellers shall within 30 (Thirty) days,
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introduce an amount equivalent to the total funding
contributed by the Purchasers in JRRES for the
operations of JRRES in this period as working capital."
4.4 Certain disputes arose between the parties in relation to the
Agreement. Clause 15 of the Agreement provides that the Agreement
would be governed and construed in accordance with the laws of
Singapore. Further the Arbitration would be held in Singapore under the
Arbitration Rules of the Singapore International Arbitration Centre
(hereafter 'SIAC Rules').
4.5 On 15.09.2015, the petitioners invoked the arbitration clause by
filing a Notice of Arbitration with the Singapore International Arbitration
Centre (hereafter 'SIAC') with a copy thereof to the respondents. Pursuant
to Rule 26.2 of the SIAC Rules, a request for appointment of an
Emergency Arbitrator was made by the petitioners to SIAC on 25.09.2015,
which was opposed by the respondents. The respondents by a notice dated
25.09.2015, terminated the Agreement alleging that Petitioners were in
repudiatory breach of the Agreement. Thereafter, on 28.09.2015, the Vice
President of the Court of Arbitration, SIAC appointed Mr Michael Lee as
the Emergency Arbitrator to consider the Emergency Application filed by
the claimants (petitioners herein).
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4.6 The Emergency Arbitrator passed an Interim Emergency Award
dated 06.10.2015 (hereafter ' the Emergency Award') wherein the Interim
relief sought by the claimants was granted and respondents were restrained
from taking any action that deprived the rights of the claimants in the
Agreement in respect of (a) hiring and dismissal of employees of the
Society; (b) functioning and management of the society. The respondents
were also restrained from instigating the terminated employees of the
Society, including Professor Mahesh Gandhi, to act contrary to their
respective termination letters and/or to indulge in any forcible entry into
the premises of the Society or the Noida College.
4.7 Thereafter, the petitioners filed an application being Case No
929/2015 before the High Court of the Republic of Singapore (hereafter
'Singapore High Court') under Section 12 of the International Arbitration
Act (hereafter 'IAA') seeking enforcement of the Emergency Award
against respondent no 2. It is stated by the respondents that petitioners have
secured an enforcement order dated 04.02.2016 against respondent no 2.
4.8 The respondents filed an application under paragraph 7 of schedule 1
of SIAC Rules praying for setting aside of the Emergency Award.
However, on 14.01.2016, a consent order was passed by the sole arbitrator,
Mr Andrew Jeffries, wherein the operative first two paragraphs of the
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Emergency Award were reiterated but the parties also agreed that the said
paragraphs of the Emergency award: (1) are negative or prohibitory in
nature and not positive or mandatory in nature; and (2) do not require any
member of the Society to act in breach of their fiduciary duty to the
Society.
5. It is stated by the petitioners that despite passing of the Emergency
Award, the respondents are acting in contravention of the rights of the
petitioners under the Agreement inasmuch as respondents have refused to
accept the appointment of Dr C.S Sharma, who was appointed by the
petitioners to replace Professor Gandhi and further, respondent no 3 has
also refused to sign the cheques for payment of salary to Dr Sharma. It is
further stated the respondents are illegally and malafidely disrupting the
functioning of the Society and the Noida College. It is under these
circumstances, the petitioners have filed the present petition under Section
9 of the Act.
Submissions
6. At the outset, Mr Suhail Dutt, learned Senior Advocate appearing for
the respondents submitted that present petition is not maintainable and is
liable to be dismissed. He contended that since the seat of arbitration was
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Singapore and the Agreement was entered into after the Supreme Court
had delivered the judgement in Bharat Aluminium Company v. Kaiser
Aluminium Technical Services Inc.: (2012) 9 SCC 552, Part I of the Act
would not apply and therefore, the present petition is not maintainable. Mr
Dutt drew the attention of this Court to Section 26 of the Amendment Act
and contented that by virtue of Section 26 of the Amendment Act, it was
not applicable in respect of arbitral proceedings that had commenced
before the Amendment Act came into force, that is, 23.10.2015.
7. Next, he referred to Clause 15 of the Agreement and without
prejudice to the contention that the Amendment Act did not apply,
contended that since it was expressly agreed between the parties that the
arbitration would be governed by the laws of Singapore and the arbitral
proceedings would be conducted in accordance with the Rules of SIAC,
the parties had impliedly excluded the applicability of Part I of the Act to
the arbitral proceedings. He further submitted that proviso to Section 2(2)
as amended by the Amendment Act provided that sections 9, 27, 37(1)(a)
and 37(3) were applicable "subject to an agreement to the contrary". Mr
Dutt earnestly contended that the seat of the arbitration was Singapore and
the arbitration agreement was governed by the laws of Singapore and
therefore, applicability of Part-I was excluded by the parties by
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implication. He submitted that in Bhatia International v. Bulk Trading
S.A and Anr: (2002) 4 SCC 105, the Supreme Court held that Part I of the
Act shall apply to the international commercial arbitrations which take
place outside India, unless parties had expressly or impliedly excluded the
applicability of the Act. He submitted that even if it is accepted that the
Amendment Act applies, the position of law would revert to what had been
held in Bhatia International (supra).
8. He further referred to the decisions of the Supreme Court in
Videocon Industries Ltd. v. Union of India and Anr: (2011) 6 SCC 161;
Reliance Industries Limited and Anr. v. Union of India: (2014) 7 SCC
603; and Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd.
and Anr.: (2015) 9 SCC 172 and contended that once the parties had
consciously agreed that the seat of arbitration would be outside India and
the arbitration agreement would be governed by a foreign law, it would not
be open for the parties to contend that Part I would also be applicable to the
arbitration agreement.
9. Next, Mr Dutt submitted that the reliefs as prayed for in the present
petition have already been granted by virtue of the Emergency Award and
recourse to Section 9 for enforcement of Emergency Award (which is an
interim order) was not available.
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10. Mr Vashist, Senior counsel appearing for the petitioners countered
the contentions advanced by Mr Dutt. He submitted that reading the
proviso to Section 2(2) of the Amendment Act in the manner as suggested
by Mr Dutt would render the said proviso absolutely redundant. He
contended that the very purpose for which Section 2(2) was amended was
to confer the jurisdiction on Indian courts in respect of Sections 9 and 27 of
the Act, even if the seat of arbitration is outside India. He earnestly
contended that in the expression "subject to an agreement to the contrary",
the word "agreement" would mean something more than the choice of law
and seat of arbitration. He further submitted that the decision in Bhatia
International (supra) was no longer good law for agreements entered into
after 06.09.2012 as it was over-ruled prospectively by the constitution
bench of the Supreme Court in Bharat Aluminium (supra). He also
submitted that mere choosing SIAC Rules for arbitration does not in any
way indicate that Part I has been impliedly excluded by the parties.
11. Mr Vashist stated that the present petition is not an enforcement
proceeding per se and has been filed to prevent the respondents from
frustrating the rights of the petitioners.
12. Mr Vashist also countered the submission on behalf of the
respondents that the Amendment Act would not be applicable to arbitral
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proceedings commenced before commencement of the Amendment Act on
the following grounds : (i) the expression " to arbitral proceedings " as
used in Section 26 of the Amendment Act would not apply to proceedings
before a court; and (ii) Petition was filed under the Ordinance and on the
day it was filed, there was no provision in the ordinance excluding the
applicability of the amendments to arbitral proceedings commenced prior
to 23.10.2015 and by virtue of Section 27(2) of the Act, all acts done under
the Ordinance were saved.
Reasoning and Conclusion
13. In the aforesaid context as to the maintainability of the present
petition, the following questions arise for consideration:-
(i)Whether the provisions of the Amendment Act are
applicable to the present proceedings? and
(ii) If the answer to the aforesaid question is in the affirmative
whether Section 9 of the Act is applicable by virtue of the
proviso introduced in Section 2(2) of the Act by Section 2 (II)
of the Amendment Act?
14. The controversy involved in the first question centres around the
interpretation of Section 26 of the Amendment Act, which is set out
below:-
O.M.P.(I) (COMM.) 23/2015 Page 12 of 65
―26. Act not to apply to pending arbitral proceedings. –
Nothing contained in this Act shall apply to the arbitral
proceedings commenced, in accordance with the provisions
of section 21 of the principal Act, before the commencement
of this Act unless the parties otherwise agree but this Act
shall apply in relation to arbitral proceedings commenced on
or after the date of commencement of this Act.‖
15. As is plainly evident from the language of the aforesaid section, it is
in two parts. The first is couched in negative form; the opening words
expressly provide that the Amendment Act shall not apply to arbitral
proceedings commenced in accordance with section 21 of the Act, before
the commencement of the Act unless the parties agree otherwise. The
second limb is in the affirmative; that is, the Act would apply in relation to
arbitral proceedings commenced on or after the date of commencement of
the Amendment Act.
16. In my view the aforesaid two limbs are not exhaustive. This is so
because the first limb - which is in the negative form - only refers to
proceedings commenced in accordance with Section 21 of the Act prior to
the commencement of the Amendment Act (23.10.2015). Section 21 is in
Part I of the Act and, indisputably, applies only to arbitral proceedings in
India. There is no reference to arbitral proceedings that have commenced
other than under Part-I of the Act. Thus, clearly, the first limb of Section
26 of the Amendment Act would not cover arbitral proceedings
O.M.P.(I) (COMM.) 23/2015 Page 13 of 65
commenced outside India - arbitral proceedings to which Part I of the Act
does not apply. In the context of those arbitral proceedings clearly the
provisions of Part II of the Act as amended by the Amendment Act would
be applicable and nothing in Section 26 of the Amendment Act bars the
applicability of the Amendment Act to those proceedings.
17. If the arbitral proceedings that have commenced under Section 21 of
the Act prior to 23.10.2015 and those that are commenced after 23.10.2015
do not exhaust the entire statutory space to which the Amendment Act is
applicable, then plainly the provisions of Section 26 as to the applicability
of the Act are not exhaustive. In other words, Section 26 is silent as to the
applicability of the Amendment Act to proceedings which are not
expressly indicated under Section 26 of the Act.
18. The second aspect to be kept in mind is the meaning of the
expression "arbitral proceedings". Section 21 of the Act provides for
commencement of arbitral proceedings and reads as under:
―21.Commencement of arbitral proceedings.—Unless
otherwise agreed by the parties, the arbitral proceedings
in respect of a particular dispute commence on the date
on which a request for that dispute to be referred to
arbitration is received by the respondent.‖
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19. Section 32 of the Act contains provisions regarding termination of
proceedings. The said section is set out below:-
―32. Termination of proceedings.—
(1) The arbitral proceedings shall be terminated by the
final arbitral award or by an order of the arbitral tribunal
under sub-section (2).
(2) The arbitral tribunal shall issue an order for the
termination of the arbitral proceedings where—
(a) the claimant withdraws his claim, unless the
respondent objects to the order and the arbitral tribunal
recognises a legitimate interest on his part in obtaining a
final settlement of the dispute,
(b) the parties agree on the termination of the
proceedings, or
(c) the arbitral tribunal finds that the continuation of the
proceedings has for any other reason become
unnecessary or impossible.
(3) Subject to section 33 and sub-section (4) of section
34, the mandate of the arbitral tribunal shall terminate
with the termination of the arbitral proceedings.‖
20. A conjoint reading of Section 21 and 32 of the Act also indicates the
scope of the expression "arbitral proceedings". Any proceedings initiated in
the Court outside the course of the arbitral proceedings can by no stretch
be considered to fall within the scope of arbitral proceedings. Thus, a
petition to set aside the arbitral award under Section 34 or for that matter a
petition under Section 9 to seek interim measures of protection after the
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arbitral award has been passed would clearly be proceedings, which by no
stretch can be considered as arbitral proceedings.
21. Bearing the aforesaid in mind, it would be noticed that the first limb
of Section 26 of the Act only bars its applicability to arbitral proceedings.
The use of the word ‗to‘ instead ‗in relation to‘, as is used for the second
limb of Section 26, is material. The use of the word ‗to‘ clearly restricts the
import of the first limb of Section 26.
22. The distinction between the expression ‗to‘ and ‗in relation to‘ was
highlighted by the Supreme Court in Thyssen Stahlunion Gmbh v. Steel
Authority of India Ltd: (1999) 9 SCC 334 in the context of Section 85(2)
of the Act. Section 85 of the Act is the repeal and savings clause. By virtue
of Section 85 (1) of the Act, the Arbitration (Protocol and Convention)
Act, 1937, the Arbitration Act, 1940 and the Foreign Awards (Recognition
and Enforcement) Act, 1961 were repealed. However, by virtue of Section
85 (2)(a) of the Act, the provisions of the aforesaid enactments were
expressly made applicable “in relation to” arbitral proceedings, which had
commenced before the Act coming into force. In that context the Supreme
Court, inter alia, held as under:-
―The provisions of the old Act (Arbitration Act, 1940)
shall apply in relation to arbitral proceedings which have
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commenced before the coming into force of the new Act (the
Arbitration and Conciliation Act, 1996).
The phrase ―in relation to arbitral proceedings‖ cannot be
given a narrow meaning to mean only pendency of the
arbitration proceedings before the arbitrator. It would cover
not only proceedings pending before the arbitrator but would
also cover the proceedings before the court and any
proceedings which are required to be taken under the old Act
for the award becoming a decree under Section 17 thereof
and also appeal arising thereunder.‖
* * *
The expression ―in relation to‖ is of the widest import as
held by various decisions of this Court in Doypack Systems
(P) Ltd., Mansukhlal Dhanraj Jain, Dhanrajamal Gobindram
and Navin Chemicals Mfg. This expression ―in relation to‖
has to be given full effect to, particularly when read in
conjunction with the words ―the provisions‖ of the old Act.
That would mean that the old Act will apply to the whole
gambit of arbitration culminating in the enforcement of the
award. If it was not so, only the word “to” could have
sufficed and when the legislature has used the expression
“in relation to”, a proper meaning has to be given. This
expression does not admit of restrictive meaning. The first
limb of Section 85 (2)(a) is not a limited saving clause. It
saves not only the proceedings pending at the time of
commencement of the new Act but also the provisions of the
old Act for enforcement of the award under that Act.‖
[emphasis supplied ]
23. As noticed above, while in the first limb, the word used is ―to‖
arbitral proceedings and in the second limb, the expression used is ―in
relation to‖ arbitral proceedings. Thus, if the aforesaid expressions are
interpreted in the manner as indicated by the Supreme Court in Thyssen
Stahlunion Gmbh (supra), the first limb of Section 26 of the Amendment
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Act would have to be read in a restrictive manner. In other words, the
Amendment Act would not apply to arbitral proceedings commenced under
Part-I of the Act before 23.10.2015. There is no controversy regarding the
second limb of Section 26; undisputedly, it has a much wider sweep and
covers all proceedings, which are connected with the arbitral proceedings -
whether commenced under Part-I or otherwise - including proceedings
under Sections 8, 9, 14, 34 and 37 of the Act.
24. Mr Dutt's contention that the use of the word "to" and the expression
"in relation to" is not of much significance and the intention of the
legislature was clear that the provisions of the Amendment Act should not
be applied to any proceedings in relation to arbitral proceedings
commenced before 23.10.2015, is unpersuasive. It is well settled that if the
legislature uses different words in respect of the same subject matter, it
must be understood that they were not used to convey the same meaning.
In The Member, Board of Revenue v. Arthur Paul Benthall: AIR 1956
SC 35 a Constitution Bench of the Supreme Court observed that “When
two words of different import are used in a statute in two consecutive
provisions, it would be difficult to maintain that they are used in the same
sense”. In D.L.F. Qutab Enclave Complex Educational Charitable Trust
v. State of Haryana and Ors.: (2003) 5 SCC 622, the Supreme Court held
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that “When different terminologies are used by the legislature it must be
presumed that the same had been done consciously with a view to convey
different meanings.”
25. To summarise, Section 26 of the Amendment Act is silent as to, (i)
arbitral proceedings commenced before 23.10.2015 to which Part-I of the
Act does not apply; (ii) proceedings in courts in relation to arbitral
proceedings commenced before 23.10.2015 to which part-I of the Act
applies; and (iii) proceedings in courts in relation to arbitral proceedings
commenced before 23.10.2015 to which Part-I does not apply.
26. The next aspect to be examined is whether the Amendment Act
would apply to proceedings before the court. As discussed earlier, Section
26 of the Amendment Act is silent as to the applicability of the
Amendment Act to proceedings (other than arbitral proceedings
commenced before 23.10.2015) which are commenced before or after
23.10.2015 but are in relation to or connected with arbitral proceedings
commenced before 23.10.2015.
27. The Amendment Act must be held applicable from the date it came
into force. The Act as it stands in the statute book stands amended with
effect from 23.10.2015. The applicability of the Amendment Act to arbitral
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proceedings that have commenced prior to that date has expressly been
excluded and, therefore, to that extent the Amendment Act would not be
applicable. However for proceedings other than those expressly excluded,
the Amendment Act would be applicable from the date it came into force.
28. Mr Dutt had, during the course of his arguments, also mentioned that
applying the amended provisions of the Amendment Act in relation to
pending proceedings would imply that the provisions were being applied
retrospectively. He did not pursue this line of argument, but in my view, it
must be addressed for the sake of completeness.
29. It is important to clarify that applying the Amendment Act from
23.10.2015 does not indicate that the Amendment Act is being applied
retrospectively in the true sense because the Amendment Act replaced the
Arbitration and Conciliation (Amendment) Ordinance, 2015; by virtue of
Section 27(1) of the Amendment Act, the said ordinance was repealed and
by virtue of Section 27(2), all acts done under the Act as amended by the
Ordinance were deemed to be done under the Act as amended by the
Amendment Act.
30. The issue to be considered is whether the Amendment Act should be
interpreted as not applicable to court proceedings for the reason that the
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same would make the Amendment Act a retrospective legislation? The
well accepted principle of interpretation is that all statutes affecting
substantive rights should be interpreted as being applicably prospectively
unless indicated otherwise either expressly or by necessary implication.
There is a general presumption that unless the statute expressly indicates, it
would not be applied retrospectively to impair a vested right or impose a
fresh burden based on past transaction/events. However, procedural laws
are presumed to apply retrospectively; this is so because as explained by
the Supreme Court in Anant Gopal Sheorey v. State of Bombay: AIR
1958 SC 915, “no person has any right in any course of procedure”. In
Amireddi Raja Gopala Rao v. Amireddi Sitharamamma and Ors: (1965)
3 SCR 122, the Supreme Court had observed that “It is a well-recognised
rule that a statute should be interpreted, if possible, so as to respect vested
rights.” These principles have to be kept in mind while addressing the
above issue.
31. The Act embodies the Indian Law as applicable to arbitrations. The
nature of arbitration law is essentially procedural but it also includes
provisions with regard to matters that cannot be classified as mere
procedural matters. This would include the question as to whether the
disputes are arbitrable; the question as to jurisdiction; the scope of
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challenge to the awards; and, to some extent even the supportive and
supervisory roles of Courts in relation to arbitrations. Thus, the Amending
Act does to certain extent affect the substantive rights of parties. The
question thus arises is: whether in view of the such effect, the applicability
of the Amendment Act to proceedings instituted in courts in relation to
arbitral proceedings instituted prior to 23.10.2015, should be interpreted to
be excluded?
32. It is also well settled that an amending enactment is not retrospective
merely because it also applies to persons to whom the pre-amended Act
applies. In Punjab University v. Subhash Chander and Anr.: 1984 (3)
SCC 603, the Supreme Court set aside the decision of the Full Bench of
the Punjab and Haryana High Court, whereby it was held that the
amendment to the rules to award lower grace marks would not be
applicable to students who had been admitted to the course prior to the
amendment. In Bishan Naraian Mishra vs State of U.P: 1965 (1) SCR the
Supreme Court held that the amendment in the rules reducing the age of
superannuation from 58 years to 55 years could not be considered as
retrospective and would apply to all employees altering the age of
superannuation after the amendment notwithstanding that the age of
superannuation was higher when they had joined the employment. The
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Court held that merely because a legislation applies to past acts does not
make the law retrospective. In The Queen v. The Inhabitants of St. Mary,
Whitechapel: (1848) 12 QBD 120 the court observed that a statute "is not
properly called a retrospective statute because a part of the requisites for
its action is drawn from a time antecedent to its passing". This principle
was cited with approval by the Supreme Court in Rao Shiv Bahadur Singh
and Anr. v. State of Vindhya Pradesh: AIR 1953 SC 394.
33. Most enactments would invariably affect some existing rights
however they cannot be considered as a retrospective legislation only for
that reason.
34. It is also necessary to bear in mind that the rights of the parties for
resolution of disputes were crystallised when they agreed for resolution of
the disputes by arbitration and not when the arbitration agreement was
invoked. Thus, in any view, even if it is assumed that the Amendment Act
has a retroactive effect, simply interpreting Section 26 of the Amendment
Act to exclude its applicability to proceedings in relation to arbitral
proceedings would not address the issue of interpreting the enactment in a
manner so as to avoid its retroactive effect, if any.
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35. Thus, in my view, a more appropriate approach would be to consider
the nature of arbitration law and effect of the Amendment Act as a whole.
Essentially, the provisions of an arbitration law can be classified into four
broad categories. The first being the provisions which relate to matters
which define the scope of arbitrations; this includes provisions defining the
matters that are arbitrable; the scope of arbitration agreements, etc. Such
provisions define the entire scope of arbitration and the legal policy of the
Alternate Dispute Resolution Mechanism. The second category of
provisions relate to the conduct of arbitrations. These provisions essentially
provide for the manner in which arbitration shall be conducted. The
provisions under chapter V of the Act clearly fall within this category. The
parties are free to derogate from most of such provisions and agree to a
separate set of rules for conduct of arbitrations. The parties are also free to
adopt the rules of any institutional arbitration such as International
Chambers of Commerce (ICC), London Court of International Arbitration
(LCIA), Delhi International Arbitration Centre (DIAC) etc. The third
category of provisions relate to the interface between the courts and the
arbitration process. The Act contains provisions in aid of arbitral
proceedings such as role of courts in appointment of arbitrators, assistance
in taking evidence, etc. This category would also include provisions
relating to exercise of supervisory role by courts including setting aside of
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awards. One facet of this category would also be enforcement of awards by
courts.
36. As discussed earlier, insofar as the rules pertaining to conduct of
arbitral proceedings are concerned, the legislature in its wisdom has
specifically provided that the Amendment Act would not apply to arbitral
proceedings that were commenced prior to 23.10.2015. The applicability of
the provisions of the Amendment Act that relate to the supportive and
supervisory role of courts, may be considered in the context of the reasons
that led to enactment of such provisions.
37. The Consultation Paper (hereafter 'the consultation paper') on the
proposed amendments to the Act placed in public domain in April, 2010 by
the Government of India, indicated the reasons for amending the Act as
under:
―As we know that main purpose of the 1996 Act is to
encourage an ADR method for resolving disputes speedy
and without much interference of the Courts. In fact Section
5 of the Act provides, ―Notwithstanding anything contained
in any other law for the time being in force, in matters
covered by this Part (i.e. Part I), no judicial authority shall
intervene except where so provided in this Part.‖ However,
with the passage of time, some difficulties in its
applicability of the Act have been noticed. The Supreme
Court and High Courts have interpreted many provisions of
the Act and while doing so they have also realized some
lacunas in the Act which leads to conflicting views. Further,
O.M.P.(I) (COMM.) 23/2015 Page 25 of 65
in some cases, courts have interpreted the provisions of the
Act in such a way which defeats the main object of such a
legislation. Therefore, it becomes necessary to remove the
difficulties and lacunas in the Act so that ADR method may
become more popular and object of enacting Arbitration
law may be achieved.‖
38. The amendments introduced by the Amendment Act are based on
246th Report of the Law Commission of India. A plain reading of the said
report clearly indicates that most of the amendments are occasioned by the
decisions rendered by the courts (mainly the Supreme Court of India). In
some cases, the courts had pointed out certain anomalies while in the other
cases, the courts had interpreted the law, which the Government felt was
different from India‘s legal policy relating to arbitration. Thus, several
amendments have also been introduced to overcome the decisions rendered
by the courts.
39. The amendment to Section 2(2) of the Act has been introduced
principally to strengthen the view of the Supreme Court in Bharat
Aluminium (supra) in respect of lex arbitri being the law that is applicable
at the seat of arbitration; at the same time also enable courts to pass interim
orders. The amendment is also to overcome the view in Bhatia
International (supra). The object of the said amendment is clearly to
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enable a party to take recourse to the courts to assist the arbitral process
being conducted overseas.
40. Significant amendments have been introduced to Section 11 of the
Act principally to restrict the judicial intervention at pre-arbitral stage in
conformity with Section 8 and 45 of the Act and further to promote
institutional arbitrations. Section 11A and IV
th Schedule to the Act have
been introduced in respect of the arbitral fees. The issue as to excessive
arbitral fees had been flagged by the Supreme Court in Union of India v
Singh Builders Syndicate: (2009) 4 SCC 523; and notice of this was taken
by the Law Commission. The amendments to Section 12 have been made
and Vth Schedule has been introduced to ensure the neutrality of the
arbitrators as this issue had been highlighted in several decisions rendered
by the Supreme Court. Substantial amendments have been brought in
Section 17 of the Act to enable arbitral tribunals to pass orders which can
be effectively enforced. The Supreme Court in Sundaram Finance Ltd v.
NEPC India Ltd: (1999) 2 SCC 479 had pointed out that the orders passed
by the arbitral tribunal cannot be enforced as orders of the Court and,
therefore, the parties have to resort to Section 9 of the Act. The
Commission also noted that in Sri Krishan v. Anand: 2009 3 Arb LR 447
(Del) this Court had attempted to find suitable legislative basis for
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enforcing the orders by reading Section 27(5) of the Act in a manner so as
to hold a person violating interim orders, guilty of contempt. The
Commission felt that the solution provided in Sri Krishan (supra) was not
a complete solution and, therefore, amendments were required to give teeth
to the orders of the arbitral tribunal.
41. The Act has also brought about significant changes in Section 34 of
the Act. The amendments made to Section 34 of the Act are intended to
bring the aforesaid Section in line with the decision regarding the scope of
the ‗public policy‘ as explained by the Supreme Court in Renu Sagar
Power Company Ltd v. General Electric Company: AIR 1994 SC 860.
Explanation 2 to Section 34(2)(b) (ii) was suggested by the Law
Commission after the 246th Report had been submitted. This was to
overcome the decision of the Supreme Court in Oil and Natural Gas
Corporation Ltd v. Western Geco International Ltd.: (2014) 9 SCC 263
and to curtail the interference of courts on the Wednesbury principle. In
that case the Supreme Court had inter alia held that an award which was
unreasonable on the anvil of Wednesbury principle could be set aside as
being contrary to public policy of India.
42. Section 36 of the Act has been amended in view of the observations
made by the Supreme Court in National Aluminium Co Limited v. M/s
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Press Steel & Fabrications Pvt Ltd and Anr: 2004 (1) SCC 540 wherein
the Supreme Court had criticized the provision of automatic suspension of
execution of the award on filing of a petition under Section 34 of the Act.
43. It is thus, seen that most of the amendments introduced in the Act
were either clarificatory or to address certain anomalies in the Act or to
remove difficulties.
44. The essential purpose of the Act is to provide the legal framework
for an Alternate Dispute Resolution (ADR) mechanism. And, as stated
above, the Amendment Act has been enacted for removing the difficulties
and the lacunae in the Act. The entire purpose of the Amendment Act is to
improve the efficacy of the ADR. Whilst it is understandable that the
arbitral proceedings that have already commenced, should be continued in
accordance with the procedure as adopted; it is difficult to understand the
rationale as to why the supportive and supervisory role of Courts in regard
to those proceedings be not provided as per the Amendment Act. If the
contention as advanced by the respondents is accepted, it would mean that
the courts would adopt different approach in lending their aid to
proceedings and enforcement of awards depending upon when the arbitral
proceedings commenced.
O.M.P.(I) (COMM.) 23/2015 Page 29 of 65
45. As an illustration, let us consider a case where two sets of parties
enter into similar contracts prior to 23.10.2015. Disputes relating to one
agreement arises before 23.10.2015 and one of the parties invokes the
arbitration clause. In the other case, disputes arise after 23.10.2015 and the
arbitral proceedings commence thereafter. Arbitral awards in respect of
disputes between both the sets of parties are made on the same date - after
23.10.2015. By virtue of the amendment to Section 36 of the Act, the stay
of an arbitral award is no longer automatic after the period for setting aside
the award under Section 34 of the Act has expired and unless the Court
hearing an application under Section 34 of the Act grants a stay, the
arbitral award is liable to be enforced. If the contention of the respondent is
accepted then the Court would have to view the awards rendered in the
light of when the arbitral proceedings were commenced. While in the case
of former, the arbitral award would be automatically stayed on any party
filing an application under Section 34 of the Act but that would not be the
case in respect of the latter notwithstanding that the arbitral awards were
rendered on the same date. This, in my view, can clearly not be the
intention of the legislature.
46. The amendment for effective enforcement of the award would also
principally be a procedural matter. The Supreme Court in Narhari
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Shivram Shet Narvekar v. Pannalal Umediram: (1976) 3 SCC 203, held
that a decree passed by an Indian Court against a foreigner which was nonexecutable
in Goa (which was not a part of India) at the time when it was
passed, became executable once Goa became a part of India and the Code
of Civil Procedure was extended to Goa. The Supreme Court further
observed:-
―It seems to us that the right of the judgment- debtor to pay up
the decree passed against him cannot be said to be a vested
right, nor can be question of executability of the decree be
regarded as a substantive vested right of the judgment-debtor.
A fortiorari the execution proceedings being purely a matter of
procedure it is well settled that any change in law which is
made during the pendency of the cause would be deemed to be
retro-active in operation and the Appellate Court is bound to
take notice of the change in law‖
47. In Kuwait Minister of Public v. Sir Frederick Snow & Partners:
(1984) 1 All ER 733 (HL), the Court held that an arbitral award would be
executable in United Kingdom if the foreign State was a party to the New
York Convention, notwithstanding that such State was not a party to the
convention when the award was made. Therefore, lifting the stay of
enforcement on an award would essentially be an alteration in the
procedure.
O.M.P.(I) (COMM.) 23/2015 Page 31 of 65
48. The amendments to Section 36 of the Act, although affects the rights
of parties, cannot be read as being retrospective law and, therefore,
interpreted as inapplicable for enforcement of awards rendered in relation
to the arbitral proceedings commenced before 23.10.2015. The
amendments introduced to Section 34 of the Act are also substantive,
however, it is seen that the same have been introduced to bring the defence
of ―public policy‖ within the scope of that defence, as explained by the
Supreme Court in Renu Sagar (supra). The suggestion that changes
introduced in Section 34 of the Act are substantial therefore affect the
vested rights of the parties, is also inconsiderable. The extent of
impairment to extant rights is an essential measure to evaluate whether the
law should be interpreted in a manner so as to exclude from its scope the
extant rights.
49. The fundamental premise of arbitration is that the parties have
agreed to accept the decision of an arbitral tribunal as final and binding.
Any amendment to restrict judicial intervention essentially enforces the
aforesaid ethos; thus, it cannot be considered to be divesting any part of its
vested right to any significant extent so as to read Section 34 of the Act to
be inapplicable in respect of the awards rendered pursuant to arbitral
proceedings initiated prior to 23.10.2015.
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50. In Secretary of State for Social Security and Another v.
Tunnicliffe: (1991) 2 All ER 712, the Court of Appeal observed as under:
―In my judgment the true principle is that Parliament is
presumed not to have intended to alter the law applicable
to past events and transactions in a manner which is
unfair to those concerned in them, unless a contrary
intention appears. It is not simply a question of
classifying an enactment as retrospective or not
retrospective. Rather it may well be a matter of degree—
the greater the unfairness, the more it is to be expected
that Parliament will make it clear if that is intended.‖
51. The aforesaid view was approved by the House of Lords in L’Office
Cherifien des Phosphates and another v. Yamashita-Shinnihon
Steamship Co Ltd: (1994) 1 All ER 20. In that case, the Court was
concerned with the applicability of Section 13A of the Arbitration Act of
1950. The said provision came into force on 01.01.1992 and enabled the
arbitrators to dismiss the claim if any of the following conditions were
satisfied: “(a) that there has been inordinate and inexcusable delay on the
part of the claimant in pursuing the claim; and (b) that the delay – (i) will
give rise to a substantial risk that it is not possible to have a fair resolution
of the issues in that claim; or (ii) has caused, or is likely to cause or to
have caused, serious prejudice to the respondent.” In that case, the
disputes between the parties were referred to arbitration in 1985 and after
filing of the claims and statement of defence, the arbitration had not
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proceeded further. After the introduction of Section 13A in the Arbitration
Act 1950, the respondents filed for dismissal of the case and the arbitrators
accepted the application and dismissed the case. In the aforesaid context,
the claimants argued that the arbitrator could not take into account the
delay that had occurred prior to insertion of Section 13A as the said
provision could not have any retrospective operation. The Court rejected
the aforesaid contention. The following passage from the concurring
opinion of Lord Mustill is instructive:-
―If there were any doubt about this the loud and prolonged
chorus of complaints about the disconformity between
practices in arbitration and in the High Court, and the
increasing impatience for something to be done about it,
show quite clearly that s 13A was intended to bite in full
from the outset. If the position were otherwise it would
follow that, although Parliament has accepted the advice
of all those who had urged that this objectionable system
should be brought to an end, and has grasped the nettle
and provided a remedy, it has reconciled itself to the
continuation of arbitral proceedings already irrevocably
stamped with a risk of injustice. I find it impossible to
accept that Parliament can have intended any such thing,
and with due respect to those who have suggested
otherwise I find the meaning of s 13A sufficiently clear to
persuade me that in the interests of reform Parliament was
willing to tolerate the very qualified kind of hardship
implied in giving the legislation a partially retrospective
effect.‖
52. The view that a statutory provision can be applied retrospectively on
the doctrine of fairness was accepted by the Supreme Court in Vijay v.
O.M.P.(I) (COMM.) 23/2015 Page 34 of 65
State of Maharashtra: 2006 (6) SCC 289. In that case, the Court was
concerned with the applicability of provisions of Bombay Village
Panchayats Act, 1958 which enacted that no person, who has been elected
as Councillor of Zila Parishad or as member of the Panchayat Samiti shall
be a member of Panchyat or continue as such. The Supreme Court rejected
the contention that the said provision would not be applicable to the
existing members. The relevant observations of the court are quoted
below:-
"It is now well-settled that when a literal reading of the
provision giving retrospective effect does not produce
absurdity or anomaly, the same would not be construed
to be only prospective. The negation is not a rigid rule
and varies with the intention and purport of the
legislature, but to apply it in such a case is a doctrine of
fairness. When a law is enacted for the benefit of the
community as a whole, even in the absence of a
provision, the statute may be held to be retrospective in
nature. The appellant does not and cannot question the
competence of the legislature in this behalf."
53. Thus, even in cases where there is no provision that the new law is
to be applied retrospectively, the Courts would nonetheless apply the same
if it is fair to do so and if it furthers the intention of the legislature.
54. The question whether Section 26 of the Amendment Act should be
interpreted in a manner so as to exclude its applicability to Court
proceedings in relation to the arbitral proceedings that have commenced
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before 23.10.2015 would also have to be viewed on the basis whether it
could be fair to do so and whether it would further the object of the
legislation.
55. The stated object of Arbitration Act has always been to provide for a
speedy resolution of disputes and provide an efficacious ADR mechanism.
The Act was enacted in 1996 to consolidate laws relating to Domestic
Arbitrations, International Commercial Arbitrations and enforcement of
Foreign Awards. After its enactment, it was felt that the Act had certain
lacunae which needed to be addressed. In the year 2001, the Law
Commission of India undertook a comprehensive review and
recommended several Amendments in its 176th Report to the Government
of India. The Government of India decided to accept most of the
recommendations and accordingly, the Arbitration and Conciliation
(Amendment) Bill, 2003 was introduced in the Rajya Sabha on 22.12.2003.
Thereafter, in July, 2004, the Government constituted a Committee under
the Chairmanship of Justice Dr B.P. Saraf to undertake the study of
implications of the recommendations of the Law Commission relating to
Arbitration and Conciliation (Amendment) Bill, 2003. The Bill was
thereafter referred to the Departmental Standing Committee on Personnel,
Public Grievances, Law and Justice. The said Committee after taking
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evidence of eminent advocates, representatives of Trade and Industry and
other stake holders submitted a report on 04.08.2005. The Committee also
recommended that the Bill of 2003 may be withdrawn to bring a fresh
legislation. The said Bill of 2003 was thereafter withdrawn for further
examination. In 2010, the Government of India issued the Consultation
Paper inviting suggestions from public and other stakeholders.
56. Thereafter, the Ministry of Law and Justice asked the Law
Commission of India to undertake a study of the proposed amendments.
The Law Commission of India submitted its report on 05.08.2014 and
proposed several amendments to the Act. The Amended Act is essentially
based on the said proposals. Most of the amendments also address the
issues that were sought to be addressed by the 2003 Bill. Thus, it is clear
that there has been a long standing demand for amending the Act to make
it more effective. The amendments for restricting Judicial Review and for
removing the provision for an automatic stay of execution of the awards
have been on the anvil since several years. The Government of India
caused the President to promulgate the Arbitration and Conciliation
(Amendment) Ordinance, 2015 [No.9 of 2015], which was published in the
Gazette of India on 23.10.2015 and it came into effect immediately. The
fact that Government caused the Ordinance to be issued under Article 123
O.M.P.(I) (COMM.) 23/2015 Page 37 of 65
(1) of the Constitution of India - which is issued where the President is
satisfied that circumstances exist which make it necessary for him to take
immediate action - without waiting for the Parliament Session to
commence clearly indicates that the Government was of the view that it
was necessary to immediately implement the proposed amendments. In the
circumstances, it is difficult to accept that the intention of the Legislature
was not to apply the said provisions in respect of proceedings instituted
before the courts after 23.10.2015 either under Section 34 or under Section
36 of the Act.
57. It is also relevant to note that it is not the respondents‘ contention
that the applicability of the Amendment Act depends on the date when the
parties entered into the Arbitration Agreement; thus, no vested right can be
claimed by the parties in respect to the pre-amended Act.
58. It is also relevant to mention that as far as enforceability of foreign
awards is concerned, any proceedings for enforcement of a foreign award
after 23.10.2015 would, undisputedly, be in terms of the Act as amended. It
is not disputed that in the facts of the present case, any award that is passed
by the Arbitral Tribunal in Singapore would be enforceable as a foreign
award in accordance with the provisions of Part-II of the Act as amended
by virtue of the Amendment Act. In this view, it is also difficult to
O.M.P.(I) (COMM.) 23/2015 Page 38 of 65
reconcile the position that for the purposes of section 9 of the Act, the
provisions of the Amendment Act be ignored but the arbitral award that
may follow would be enforced according to the Amended Act.
59. As mentioned hereinbefore, there is no indication in Section 26 of
the Amendment Act that it would not be applicable to the proceedings
instituted in courts after the Amendment Act came into force. As stated
earlier, the Amendment Act is based on the amendments as provided by the
Law Commission in its 246th Report. In the said report, the Law
Commission had proposed that a new section-Section 85A-be inserted in
the Act, which reads as under:-
―Transitory provisions .—(1) Unless otherwise
provided in the Arbitration and Conciliation (Amending)
Act, 2014, the provisions of the instant Act (as amended)
shall be prospective in operation and shall apply only to
fresh arbitrations and fresh applications, except in the
following situations -
(a) the provisions of section 6-A shall apply to all
pending proceedings and Arbitrations.
Explanation: It is clarified that where the issue of costs
has already been decided by the court/tribunal, the
same shall not be opened to that extent.
(b) the provisions of section 16 sub-section (7) shall
apply to all pending proceedings and arbitrations,
except where the issue has been decided by the
court/tribunal.
O.M.P.(I) (COMM.) 23/2015 Page 39 of 65
(c) the provisions of second proviso to section 24 shall
apply to all pending arbitrations.
(2) For the purposes of the instant section,—
(a) "fresh arbitrations" mean arbitrations where there
has been no request for appointment of arbitral tribunal;
or application for appointment of arbitral tribunal; or
appointment of the arbitral tribunal, prior to the date of
enforcement of the Arbitration and Conciliation
(Amending) Act, 2014.
(b) "fresh applications" mean applications to a court or
arbitral tribunal made subsequent to the date of
enforcement of the Arbitration and Conciliation
(Amending) Act, 2014.
[NOTE: This amendment is to clarify the scope of operation
of each of the proposed amendments with respect to pending
arbitrations/proceedings.]‖
It is clear from the above that the proposal was to apply the Amendment
Act, not only to all applications filed before a court/ arbitral tribunal after
the Amendment Act came into force, but it was also proposed that certain
provisions be applied retrospectively to proceedings before the arbitral
tribunal. The proposal with regard to retrospective application to pending
proceedings was not accepted, therefore, Section 26 expressly provides that
nothing in the Amendment Act would apply to pending arbitral
proceedings. The proposal that the Amendment Act shall apply only to
fresh arbitrations was accepted as is plainly evident from the language of
the latter part of Section 26 of the Amendment Act. No specific provision
O.M.P.(I) (COMM.) 23/2015 Page 40 of 65
was enacted with regard to the applicability of the amendment to ―fresh
applications‖. However, it was enacted that the Amendment Act would
come into force from 23.10.2015 and therefore would be plainly applicable
to the proceedings instituted after the said date. The Parliament had
specified the date on which the Amendment Act came into force and unless
enacted otherwise, it would be applicable to all proceedings instituted after
the specified date. There is no reason to hold that the Amendment Act
would not apply to the applications filed in Courts. For the reasons stated
herein before the Amendment Act would also apply to pending
proceedings before courts.
60. The view that Section 26 of the Amendment Act does not apply to
proceedings before courts is also supported by the decision of a Division
Bench of the Calcutta High Court in Sri. Tufan Chatterjee v. Sri Rangan
Dhar: 2016 SCC online Cal 483. Although, I have some reservation as to
the manner in which the esteemed Court has interpreted Section 9(3) of the
Act, I respectfully concur with the following conclusion:-
―A careful reading of the provisions of the 1996 Act, and in
particular Sections 21 and 32 thereof, makes it amply clear
that the expression ‗arbitral proceedings‘ in Section 26 of the
Amendment Act of 2015 cannot be construed to include
proceedings in a Court under the provisions of the 1996 Act,
and definitely not any proceedings under Section 9 of the
O.M.P.(I) (COMM.) 23/2015 Page 41 of 65
1996 Act, instituted in a Court before a request for reference
of disputes to arbitration is made.
Arbitral proceedings can be said to commence, when a
request for reference to arbitration is received by the
respondent and/or the authority competent under the
arbitration agreement, upon notice to the respondent. The
arbitral proceedings, which so commence, terminate with a
final award as provided in Section 32(1) of the 1996 Act or
with an order under Section 32(2) of the 1996 Act
Proceedings in Court under the 1996 Act whether initiated
before, during or after the termination of the arbitral
proceedings, would not attract Section 26 of the Amendment
Act of 2015.‖
61. In New Tirupur Area Development Corporation v. Hindustan
Construction Company Limited (A.No. 7674 of 2016 in O.P. No.931 of
2015), the Madras High Court has held that the Amendment Act shall
apply to petitions pending under Section 34 of the Act. The Bombay High
Court in a recent decision in M/s Rendezvous Sports World v. The Board
of Control for Cricket in India [Chamber Summons No.1530 of 2015 in
Execution Application (L) No.2481 of 2015 decided on 14.06.2016] has
also accepted the view that Section 36 of the Act as amended shall apply to
proceedings pending before Courts.
62. In view of the aforesaid, Section 2(2) of the Act as amended would
be clearly applicable in the facts of the present case. The said Sub-section
as amended reads as under:-
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―(2) This Part shall apply where the place of arbitration is in
India:
Provided that subject to an agreement to the contrary, the
provisions of sections 9, 27 and clause (a) of sub-section (1)
and sub-section (3) of section 37 shall also apply to
international commercial arbitration, even if the place of
arbitration is outside India, and an arbitral award made or to
be made in such place is enforceable and recognised under
the provisions of Part II of this Act.‖
63. The principal question to be addressed is whether by virtue of the
proviso introduced in Section 2(2) of the Act, recourse to Section 9 of the
Act is available in relation to the arbitral proceedings in question.
64. At this stage, it is necessary to refer to the Dispute Resolution
Clause, which reads as under:-
"15 Governing Law and Dispute Resolution
15.1 This Agreement shall be governed by and construed in
accordance with the laws of Singapore.
15.2 Any dispute, controversy, claims or disagreement of
any kind whatsoever between or among the Parties in
connection with or arising out of this Agreement or the
breach, termination or invalidity thereof shall be referred to
and finally resolved by arbitration in Singapore in
accordance with the Arbitration Rules of the Singapore
International Arbitration Centre (SIAC Rules) for the time
being in force, which rules are deemed to be incorporated by
reference in this clause. This Agreement and the rights and
obligations of the Parties shall remain in full force and effect
pending the award in such arbitration proceedings which
O.M.P.(I) (COMM.) 23/2015 Page 43 of 65
award, if appropriate, shall determine whether and when any
termination shall become effective.
15.3 The Arbitral Tribunal shall consist of one arbitrator to
be appointed by the Chairman of SIAC.
15.4 Language of Arbitration. The language of the
arbitration shall be in English.
15.5 Survival: The provisions contained in this Clause 15
shall survive the termination of this Agreement."
65. Clause 15.1 of the agreement expressly indicates that the agreement
would be governed by and construed in accordance with the law of
Singapore. Thus, clearly, the substantive law as applicable to the contract
between the parties is the law as applicable in Singapore. The seat of
arbitration is also Singapore and therefore the law as applicable to the
arbitral proceedings, lex arbitri, is also the law as applicable in Singapore.
The legal principle that the law as applicable to arbitral proceedings would
be the law as applicable where the seat of arbitration is situated has been
authoritatively settled by a Constitution Bench of the Supreme Court in
Bharat Aluminium (supra).
66. The Supreme Court in Bhatia International (supra) had considered
the question whether Part I of the Act would be applicable to International
arbitrations and had held as under:-
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―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 parties
would prevail. Any provision, in Part I, which is contrary to
or excluded by that law or rules will not apply.‖
67. Thus, prior to decision in Bharat Aluminium (supra) the position of
law was that unless the parties had agreed to the contrary, the provisions of
Part I of the Act would be applicable. The decision in Bhatia International
(supra) was overruled by the Constitution Bench in Bharat Aluminium
(supra) and the law declared was that Part I of the Act would have no
application in cases where the seat of arbitration is outside India.
However, the Constitution Bench of the Supreme Court had expressly held
that the said decision would be applied prospectively and only in respect of
agreements that were entered into and after the date of that decision. The
Supreme Court held as under:-
―With utmost respect, we are unable to agree with the
conclusions recorded in the judgments of this Court in
Bhatia International (supra) and Venture Global Engineering
(supra). In our opinion, the provision contained in Section
2(2) of the Arbitration Act, 1996 is not in conflict with any
of the provisions either in Part I or in Part II of the
Arbitration Act, 1996. In a foreign seated international
commercial arbitration, no application for interim relief
would be maintainable under Section 9 or any other
provision, as applicability of Part I of the Arbitration Act,
1996 is limited to all arbitrations which take place in India.
Similarly, no suit for interim injunction simplicitor would be
O.M.P.(I) (COMM.) 23/2015 Page 45 of 65
maintainable in India, on the basis of an international
commercial arbitration with a seat outside India.
xxxx xxxx xxxx xxxx
The judgment in Bhatia International (supra) was rendered
by this Court on 13-3-2002. Since then, the aforesaid
judgment has been followed by all the High Courts as well
as by this Court on numerous occasions. In fact, the
judgment in Venture Global Engineering (supra) has been
rendered on 10-01-2008 in terms of the ratio of the decision
in Bhatia International (supra). Thus, in order to do
complete justice, we hereby order, that the law now declared
by this Court shall apply prospectively, to all the arbitration
agreements executed hereafter.‖
68. Plainly, this position stands amended by enactment of Section 2(II)
of the Amendment Act by virtue of which Section 2(2) of the Act stands
amended by introduction of a proviso that expressly provides that
provisions of Section 9, 27 & 37(1)(a) and 37 (3) of the Act would also
apply to international commercial arbitrations even if the place of
arbitration is outside India and the arbitral award is enforceable under the
provisions of Part II of Act.
69. As is apparent from the plain language of the proviso, it is subject to
an agreement to the contrary. In other words the proviso is applicable only
if there is no agreement to the contrary; that is, there is no agreement,
which excludes the applicability of sections 9, 27, 37(1)(a) and 37(3) of the
Act.
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70. It is relevant to note that the Law Commission in its 246th report had
proposed the following amendments to Section 2(2) of the Act:
"(vi) In sub-section (2), add the word "only" after the words
"shall apply" and delete the word "place" and insert the
word "seat" in its place.
[NOTE: This amendment ensures that an Indian Court can
only exercise jurisdiction under Part I where the seat of the
arbitration is in India. To this extent, it over-rules Bhatia
International v. Bulk Trading S.A. and Anr (2002) 4 SCC
105 Anr., (2002) 4 SCC 105, and re-enforces the "seat
centricity" principle of Bharat Aluminium Company and
Ors. etc. v. Kaiser Aluminium Technical Service, Inc and
Ors. etc., (2012) 9 SCC 552]
Also insert the following proviso "Provided that, subject to
an express agreement to the contrary, the provisions of
sections 9, 27, 37 (1)(a) and 37(3) shall also apply to
international commercial arbitration even if the seat of
arbitration is outside India, if an award made, or that which
might be made, in such place would be enforceable and
recognized under Part II of this Act.
[NOTE: This proviso ensures that an Indian Court can
exercise jurisdiction with respect to these provisions even
where the seat of the arbitration is outside India.]"
71. The aforesaid proposal was not accepted in toto; the word "only" in
the opening sentence of sub section (2) and the word ―express" in the first
line of the proviso as proposed by the Law commission were omitted.
Thus, it is not necessary that the parties exclude the applicability of Section
9 of the Act by an express agreement and so long as an agreement to
exclude Section 9 and 27 of the Act can be inferred by implication, the
O.M.P.(I) (COMM.) 23/2015 Page 47 of 65
provisions of Sections 9, 27, 37(1)(a) and 37(3) would stand excluded.
This in effect reverts the position of law as it was prior to the decision in
case of Bharat Aluminium (supra) in so far as the applicability of sections
9, 27, 37(1)(a) and 37(3) of the Act is concerned. In other words, although
provisions of Part -I - except Sections 9, 27, 37(1)(a) and 37(3) of the Act
- would not apply to arbitrations held outside India, Sections 9, 27, 37(1)(a)
and 37(3) of the Act would apply unless the parties have contracted to the
contrary.
72. The controversy as to whether parties have contracted out of Part I
of the Act has been considered in several decisions. In Venture Global
Engineering v. Satyam Computer Services Ltd. and Another: (2008) 4
SCC 190, the Supreme Court considered the question whether a petition
under Section 34 of the Act was maintainable in respect of a foreign award.
Following its earlier decisions in Bhatia International (supra), the
Supreme Court had reiterated that provisions of Part I of the Act would be
applicable unless the same was expressly or impliedly excluded by the
parties. In that case, the Shareholder's Agreement between the parties
therein included the following clauses:-
"11.05 (a) xxxx xxxx xxxx xxxx
(b) This Agreement shall be construed in accordance with and
governed by the laws of the State of Michigan, United States,
O.M.P.(I) (COMM.) 23/2015 Page 48 of 65
without regard to the conflicts of law rules of such jurisdiction.
Disputes between the parties that cannot be resolved via
negotiations shall be submitted for final, binding arbitration to
the London Court of Arbitration.
(c) Notwithstanding anything to the contrary in this agreement,
the Shareholders shall at all times act in accordance with the
Companies Act and other applicable Acts/Rules being in force,
in India at any time."
73. In the aforesaid context, the Court, inter alia, held that the non
obstante clause - clause (c) as quoted above - would override the entirety of
the contract including clause (b) which deals with the settlement of
disputes by arbitration. The Court rejected the contention that the aforequoted
clause (c) could not be construed to mean that Indian law was the
substantive law of contract or the Indian law would not govern the
Disputes Resolution clause - clause (b) quoted above. The Court
concluded the Part-I of the Act could not be held to be excluded by the
parties.
74. In M/s. Indtel Technical Services Pvt. Ltd. v. W.S. Atkins Rail Ltd.:
(2008) 10 SCC 308, the Supreme Court considered the application under
Section 11 of the Act and was concerned with an agreement which
included the clause that read as under:-
"CLAUSE 13 - SETTLEMENT OF DISPUTES
O.M.P.(I) (COMM.) 23/2015 Page 49 of 65
13.1. This Agreement, its construction, validity and
performance shall be governed by and constructed in
accordance with the laws of England and Wales."
And, in context of the aforesaid clause, the Court held that:
"it is no doubt true that it is fairly well-settled that when an
arbitration agreement is silent as to the law and procedure
to be followed in implementing the arbitration agreement,
the law governing the said agreement would ordinarily be
the same as the law governing the contract itself. The
decisions cited by Mr. Tripathi and the views of the jurists
referred to in the NTPC case support such a proposition.
What, however, distinguishes the various decisions and
views of the authorities in this case is the fact that in the
Bhatia International case this Court laid down the
proposition that notwithstanding the provisions of Section
2(2) of the Arbitration and Conciliation Act, 1996,
indicating that Part-I of the said Act would apply where the
place of arbitration is in India, even in respect of
International Commercial agreements, which are to be
governed by laws of another country, the parties would be
entitled to invoke the provisions of Part-I of the aforesaid
Act and consequently the application made under Section
11 thereof would be maintainable."
75. The decisions in Bhatia International (supra) and M/S. Indtel
Technical Services Pvt. Ltd. (supra) were followed by the Supreme Court
in a later decision in Citation Infowares Limited v. Equinox Corporation:
(2009) 7 SCC 220.
76. In Dozco India (P) Ltd. v. Doosan Infracore Co. Ltd.: (2011) 6
SCC 179, the Supreme Court rejected a petition under Section 11(6) of the
Act as the Court interpreted the agreement between the parties to exclude
O.M.P.(I) (COMM.) 23/2015 Page 50 of 65
Part-I of the Act. In that case, the relevant clauses of the agreement
between the parties read as under:-
"Article 22. Governing Laws - 22.1 : This agreement shall be
governed by and construed in accordance with the laws of
The Republic of Korea.
Article 23. Arbitration - 23.1 : All disputes arising in
connection with this Agreement shall be finally settled by
arbitration in Seoul, Korea (or such other place as the parties
may agree in writing), pursuant to the rules of agreement then
in force of the International Chamber of Commerce."
In the aforesaid context, the Supreme Court held as under:-
"In the backdrop of these conflicting claims, the question
boils down to as to what is the true interpretation of Article
23. This Article 23 will have to be read in the backdrop of
Article 22 and more particularly, Article 22.1. It is clear from
the language of Article 22.1 that the whole Agreement would
be governed by and construed in accordance with the laws of
The Republic of Korea.
xxxx xxxx xxxx xxxx
If we see the language of Article 23.1 in the light of the
Article 22.1, it is clear that the parties had agreed that the
disputes arising out of the Agreement between them would be
finally settled by the arbitration in Seoul, Korea. Not only
that, but the rules of arbitration to be made applicable were
the Rules of International Chamber of Commerce. This gives
the prima facie impression that the seat of arbitration was only
in Seoul, South Korea."
O.M.P.(I) (COMM.) 23/2015 Page 51 of 65
77. In Videocon Industries (supra), the Supreme Court considered the
controversy as to the applicability of the Part-I of the Act in the context of
the following clauses of the agreement:-
"33.1 Indian Law to Govern Subject to the provisions of
Article 34.12, this Contract shall be governed and interpreted
in accordance with the laws of India.
33.2 Laws of India Not to be Contravened - Subject to Article
17.1 nothing in this Contract shall entitle the Contractor to
exercise the rights, privileges and powers conferred upon it by
this Contract in a manner which will contravene the laws of
India.
xxxx xxxx xxxx xxxx
34.12. Venue and Law of Arbitration Agreement The venue
of sole expert, conciliation or arbitration proceedings pursuant
to this Article, unless the Parties otherwise agree, shall be
Kuala Lumpur, Malaysia, and shall be conducted in the
English language. Insofar as practicable, the Parties shall
continue to implement the terms of this Contract
notwithstanding the initiation of arbitral proceedings and any
pending claim or dispute. Notwithstanding the provisions of
Article 33.1, the arbitration agreement contained in this
Article 34 shall be governed by the laws of England."
And, the Supreme Court held as under:-
"In the present case also, the parties had agreed that
notwithstanding Article 33.1, the arbitration agreement
contained in Article 34 shall be governed by laws of England.
This necessarily implies that the parties had agreed to exclude
the provisions of Part I of the Act. As a corollary to the above
conclusion, we hold that the Delhi High Court did not have
the jurisdiction to entertain the petition filed by the
respondents under Section 9 of the Act and the mere fact that
the appellant had earlier filed similar petitions was not
O.M.P.(I) (COMM.) 23/2015 Page 52 of 65
sufficient to clothe that High Court with the jurisdiction to
entertain the petition filed by the respondents."
78. A similar view was also expressed by the Supreme Court in
Reliance Industries Limited and Anr v. Union of India: (2014) 7 SCC
603 and Union of India v. Reliance Industries Limited and Others:
(2015) 10 SCC 213. In those cases the parties had, inter alia, agreed as
under:-
"33.12 The venue of conciliation or arbitration proceedings
pursuant to this Article, unless the Parties otherwise agree,
shall be London, England and shall be conducted in the
English Language. The arbitration agreement contained in this
Article 33 shall be governed by the laws of England. Insofar
as practicable, the Parties shall continue to implement the
terms of this Contract notwithstanding the initiation of arbitral
proceedings and any pending claim or dispute."
79. In Harmony Innovation Shipping Ltd. (supra), the Supreme Court
was concerned with interpretation of a clause that read as under:
―5. If any dispute or difference should arise under this charter,
general average/arbitration in London to apply, one to be
appointed by each of the parties hereto, the third by the two so
chosen, and their decision or that of any two of them, shall be
final and binding, and this agreement may, for enforcing the
same, be made a rule of Court. Said three parties to be
commercial men who are the members of the London
Arbitrators Association. This contract is to be governed and
construed according to English Law. For disputes where total
amount claim by either party does not exceed USD $ 50,000
the arbitration should be conducted in accordance with small
claims procedure of the London Maritime Arbitration
Association.‖
O.M.P.(I) (COMM.) 23/2015 Page 53 of 65
80. The Supreme Court after noticing various earlier decisions held as
under:
―50. Thus, interpreting the clause in question on the bedrock
of the aforesaid principles it is vivid that the intended effect is
to have the seat of arbitration at London. The commercial
background, the context of the contract and the circumstances
of the parties and in the background in which the contract was
entered into, irresistibly lead in that direction. We are not
impressed by the submission that by such interpretation it will
put the Respondent in an advantageous position. Therefore,
we think it would be appropriate to interpret the clause that it
is a proper clause or substantial clause and not a curial or a
procedural one by which the arbitration proceedings are to be
conducted and hence, we are disposed to think that the seat of
arbitration will be at London.‖
81. Mr Dutt, learned counsel had earnestly contended that in view of the
decisions of the Supreme Court in Videocon Industries (supra) Harmony
Innovation Shipping Ltd. (supra) and Reliance Industries (supra) it was
clear that the parties had implicitly agreed to exclude Section 9 of the Act
to the arbitral proceedings , because they had agreed that the agreement
would be construed and considered in accordance with law in Singapore.
82. I am unable to accept the aforesaid contention mainly for the reason
that the controversy considered by the Supreme Court in Dozco Industries
Pvt Ltd, Videocon Industries, Reliance Industries v. Union of India,
Union of India v. Reliance Industries and Harmony Innovation Shipping
Ltd. (supra) was materially different from the question involved in the
O.M.P.(I) (COMM.) 23/2015 Page 54 of 65
present case. In those cases, the question before the Supreme Court was as
to which law was applicable to the arbitral proceedings – which was the
lex arbitri. An agreement that the proper law of arbitration (lex arbitri) of
a country other than India would govern the arbitration agreement would
necessarily exclude the Act as lex arbitri and consequently Part I of the
Act.
83. In Reliance Industries cases (supra), the parties had expressly
agreed that the arbitration agreement shall be governed by the laws of
England. So was the case in Videocon Industries (supra). Undisputedly, if
the parties had agreed that the proper law applicable to the arbitration
would be that of a foreign country it would necessarily mean that the Act
would not be the proper law governing the arbitration. The two are
mutually exclusive.
84. In the present case, there is no dispute as to the law governing the
arbitration. Clause 15.1 of the Agreement expressly provides that the laws
as applicable in Singapore will apply to the entire contract. Further the
seat of the arbitration is also in Singapore. The petitioners had also applied
under Section 12 (6) of the International Arbitration Act, (IAA) - the law
as applicable to the International Arbitration in Singapore - for the
judgment in terms of the order passed by the Arbitral tribunal. In
O.M.P.(I) (COMM.) 23/2015 Page 55 of 65
paragraph 41 of the petition filed before the Singapore High Court, the
petitioner has stated as under:-
―41. It is undisputed that the IAA applies to SIAC 179 as
Singapore is the seat of the arbitration (as confirmed by the
Emergency Arbitrator in paragraph 10 of the Emergency
Award [TAB 1]). The Plaintiffs understand that this
Honourable Court has supervisory and/or curial jurisdiction
over SIAC 179 and Section 12(6) of the IAA specifically
provides that ―all orders or directions made or given by an
arbitral tribunal in the course of an arbitration shall, by leave
of the High Court or a Judge thereof, be enforceable in the
same manner as if they were orders made by a court.‖
Accordingly, I believe that Singapore is an appropriate forum
for the filing of this action for enforcement of the Emergency
Award.‖
85. Thus, the question that needs to be addressed is: whether an
agreement between the parties that a foreign law would be applicable to the
arbitration, implicitly excludes the applicability of Section 9 of the Act?
86. As noted earlier, the very purpose of amending Section 2 (2) of the
Act was to enable a party to approach the courts in India for interim relief
in respect of the arbitral proceedings held or to be held outside India. The
need for this amendment was highlighted by the Law Commission of India,
in its 176th Report in the following words:-
―Section 2(2) states that Part - I of the Act applies to
arbitration in India. That would mean that in the case of
arbitration between Indian nationals and also where one party
is not an Indian national, and where the place of the
arbitration is in India, Part I of the Act will apply. While the
O.M.P.(I) (COMM.) 23/2015 Page 56 of 65
UNCITRAL Model Law permits certain Articles like 8, 9, 35
and 36 to apply to arbitrations outside the Country, there is an
omission in this behalf in the 1996 Act. Consequently, for
example in the absence of availability of Section 9 in the case
of an arbitration outside India, the Indian party is unable to
obtain interim measures from Indian Courts, before arbitration
starts outside India. The absence of an express provision as
stated above has led to conflicting judgments in the Delhi and
Calcutta High Courts. It is proposed to allow Section 9 to the
invoked whenever arbitration is outside India. Similarly, the
provisions of Section 8, 27, 35 and 36 are proposed to be
made available whenever arbitration is outside India. Almost
all countries which have adopted the Model Law allow views
of these provisions to arbitrations outside the country. The
proposed clause (a) of Section 2(2) states that Part – I of the
Act applies to domestic arbitration in India and the proposed
clause (b) states that Sections 8, 9, 27, 35 and 36 will be
available for international arbitrations outside India.‖
In its 176th report the Law Commission had proposed that Section 2 (2)
of the Act be amended to read as under:-
―(2) (a) Save as otherwise provided in clause (b), this Part
shall apply where the place of arbitration is in India.
(b) Sections 8, 9 and 27 of this Part shall apply to
international arbitration (whether commercial or not)
where the place of arbitration is outside India or where
such place is not specified in the arbitration agreement.‖.
87. The Consultation Paper placed by the Government of India in public
domain also highlighted the need for amending Section 2 of the Act to
enable the parties to approach the Courts in India for interim relief under
Section 9 of the Act in the following words:-
O.M.P.(I) (COMM.) 23/2015 Page 57 of 65
―(xvii) It may be stated that it is the broad principle in
International Commercial arbitration that a law of the country
where it is held, namely, the Seat or forum or laws arbitri of
the arbitration, governs the arbitration. However, if all the
provisions of Part I are not made applicable to International
Commercial arbitration where the seat of arbitration is not in
India, some practical problems are arising. There may be
cases where the properties and assets of a party to arbitration
may be in India. Section 9 of the Act which falls in Part I
provide for interim measures by the Court. As per Section 9, a
party may, apply to a court for certain interim measures of
protection including for preservation, interim custody or sale
of goods, securing the amount in disputes, detention,
preservation or inspection of any property, interim injunction
etc. If provision of Section 9 is not made applicable to
International Commercial arbitration where seat of arbitration
is not in India, a party may be out of remedy if the assets and
property are in India. In cases of international arbitration
where the seat of arbitration is outside India, a serious
controversy has arisen in the Indian Courts. These are cases
where interim measures could not be granted by Indian courts
under Section 9 to an Indian national before commencement
of arbitration (or after the award) against property of a foreign
party. By the time the Indian party takes steps to move the
courts in the country in which the seat of arbitration is
located, the property may have been removed or transferred.‖
88. The Law Commission of India in its 246th Report also proposed
amendments to Section 2 (2) of the Act (as quoted herein before) as it felt
that the same were necessary. The reasons for such amendments were
explained, as under:-
―(i) Where the assets of a party are located in India, and there
is a likelihood that that party will dissipate its assets in the
near future, the other party will lack an efficacious remedy if
the seat of the arbitration is abroad. The latter party will have
two possible remedies, but neither will be efficacious. First,
O.M.P.(I) (COMM.) 23/2015 Page 58 of 65
the latter party can obtain an interim order from a foreign
Court or the arbitral tribunal itself and file a civil suit to
enforce the right created by the interim order. The interim
order would not be enforceable directly by filing an execution
petition as it would not qualify as a "judgment" or "decree"
for the purposes of sections 13 and 44A of the Code of Civil
Procedure (which provide a mechanism for enforcing foreign
judgments). Secondly, in the event that the former party does
not adhere to the terms of the foreign Order, the latter party
can initiate proceedings for contempt in the foreign Court and
enforce the judgment of the foreign Court under sections 13
and 44A of the Code of Civil Procedure. Neither of these
remedies is likely to provide a practical remedy to the party
seeking to enforce the interim relief obtained by it.
That being the case, it is a distinct possibility that a foreign
party would obtain an arbitral award in its favour only to
realize that the entity against which it has to enforce the
award has been stripped of its assets and has been converted
into a shell company.
(ii) While the decision in BALCO was made prospective to
ensure that hotly negotiated bargains are not overturned
overnight, it results in a situation where Courts, despite
knowing that the decision in Bhatia is no longer good law, are
forced to apply it whenever they are faced with a case arising
from an arbitration agreement executed pre- BALCO.‖
89. It is also necessary to reiterate that amendment to Section 2 (2) of
the Act was made on the basis of the United Nations Commission on
International Trade Law (UNCITRAL) Model Law as adopted on
21.06.1985 and as amended on 07.07.2006. Article 1.2 of UNCITRAL
Model Law reads as under:-
“Article 1. Scope of Application
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(1) xxxx xxxx xxxx xxxx
(2) The provisions of this Law, except articles 8, 9, 17 H, 17 I,
17 J, 35 and 36, apply only if the place of arbitration is in the
territory of this State. (Article 1(2) has been amended by the
Commission at its thirty-ninth session, in 2006)‖
90. The Article 9, 17H, 17I and 17J, of the Model Law are relevant and
are set out below:-
“Article 9. Arbitration agreement and interim measures by
court
It is not incompatible with an arbitration agreement for a party
to request, before or during arbitral proceedings, from a court
an interim measure of protection and for a court to grant such
measure.
xxxx xxxx xxxx xxxx
Article 17 H. Recognition and enforcement
(1) An interim measure issued by an arbitral tribunal shall be
recognized as binding and, unless otherwise provided by
the arbitral tribunal, enforced upon application to the
competent court, irrespective of the country in which it was
issued, subject to the provisions of article 17 I.
(2) The party who is seeking or has obtained recognition or
enforcement of an interim measure shall promptly inform
the court of any termination, suspension or modification of
that interim measure.
(3) The court of the State where recognition or enforcement is
sought may, if it considers it proper, order the requesting
party to provide appropriate security if the arbitral tribunal
has not already made a determination with respect to
security or where such a decision is necessary to protect the
rights of third parties.
O.M.P.(I) (COMM.) 23/2015 Page 60 of 65
Article 17 I. Grounds for refusing recognition or enforcement
(1) Recognition or enforcement of an interim measure may be
refused only:
(a) At the request of the party against whom it is invoked
if the court is satisfied that:
(i) Such refusal is warranted on the grounds set forth
in article 36(1)(a)(i), (ii), (iii) or (iv); or
(ii)The arbitral tribunal‘s decision with respect to the
provision of security in connection with the
interim measure issued by the arbitral tribunal has
not been complied with; or
(iii)The interim measure has been terminated or
suspended by the arbitral tribunal or, where so
empowered, by the court of the State in which the
arbitration takes place or under the law of which
that interim measure was granted; or
(b) If the court finds that:
(i)The interim measure is incompatible with the
powers conferred upon the court unless the court
decides to reformulate the interim measure to the
extent necessary to adapt it to its own powers and
procedures for the purposes of enforcing that
interim measure and without modifying its
substance; or
(ii) Any of the grounds set forth in article 36(1)(b)(i) or
(ii), apply to the recognition and enforcement of
the interim measure.
(iii)Any determination made by the court on any
ground in paragraph (1) of this article shall be
effective only for the purposes of the application to
recognize and enforce the interim measure. The
court where recognition or enforcement is sought
shall not, in making that determination, undertake
a review of the substance of the interim measure.
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Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim
measure in relation to arbitration proceedings, irrespective
of whether their place is in the territory of this State, as it
has in relation to proceedings in courts. The court shall
exercise such power in accordance with its own
procedures in consideration of the specific features of
international arbitration.‖
91. The Article 17-J of the Model Law specifically provides that the
Court shall have the same powers for issuing interim measures in relation
to the arbitral proceedings irrespective of the seat of such arbitral
proceedings. In terms of the UNCITRAL Model Law, arbitral proceedings
are governed by the law as applicable at the seat of the arbitration;
nonetheless, it would be open for the Courts to issue interim orders even in
respect of the arbitral proceedings that are held outside the State. The
object of amending Section 2(2) of the Act is inter alia to incorporate such
provision in the Act.
92. The contention that the parties have impliedly agreed to exclude
Section 9 of the Act, has to be considered in the above backdrop.
93. It is seen that the parties had expressly agreed that the arbitration
shall be governed by the SIAC Rules. It is relevant to note that Rule 26.3
of the SIAC Rules, expressly provides that:-
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"26.3 A request for interim relief made by a party to a
judicial authority prior to the constitution of the Tribunal,
or in exceptional circumstances thereafter, is not
incompatible with these Rules.‖
[Rule 30.3 of SIAC Rules, 2016 is similarly worded to Rule 26.3 quoted
above.]
94. This is pari materia to Article 9 of the Model Rules. The SIAC
Rules must be read as a part of the agreement between the parties and the
only conclusion that can be drawn is that the parties had expressly agreed
that seeking an interim order from the Courts would not be incompatible
with the arbitral proceedings .
95. The SIAC Rules are clearly in conformity with the UNCITRAL
Model Law and permit the parties to approach the Court for interim relief.
As pointed out earlier, UNCITRAL Model Law expressly provides for
courts to grant interim orders in aid to proceedings held outside the State.
And, the proviso to Section 2 (2) of the Act also enables a party to have
recourse to Section 9 of the Act notwithstanding that the seat of arbitration
is outside India. Thus, the inescapable conclusion is that since the parties
had agreed that the arbitration be conducted as per SIAC Rules, they had
impliedly agreed that it would not be incompatible for them to approach
the Courts for interim relief. This would also include the Courts other than
O.M.P.(I) (COMM.) 23/2015 Page 63 of 65
Singapore. It is relevant to mention that IAA is based on UNCITRAL
Model Law and SIAC Rules are also complimentary to IAA/UNCITRAL
Model law.
96. In the circumstances, the contention that the parties by agreeing that
the proper law applicable to arbitration would be the law in Singapore have
excluded the applicability of Section 9 of the Act.
97. The only question that now remains to be considered is whether the
petitioner can approach this Court for an interim relief considering that it
has already approached the Arbitral Tribunal in Singapore and thereafter,
also obtained a judgment in terms of the interim order from the Singapore
High Court.
98. It is relevant to mention that Article 17H of the UNCITRAL Model
Law contains express provisions for enforcement of interim measures.
However the Act does not contain any provision pari materia to Article
17H for enforcement of interim orders granted by an Arbitral Tribunal
outside the India. Section 17 of the Act is clearly not applicable in respect
of arbitral proceedings held outside India.
99. In the circumstances, the emergency award passed by the Arbitral
Tribunal cannot be enforced under the Act and the only method for
enforcing the same would be for the petitioner to file a suit.
O.M.P.(I) (COMM.) 23/2015 Page 64 of 65
100. However, in my view, a party seeking interim measures cannot be
precluded from doing so only for the reason that it had obtained a similar
order from an arbitral tribunal. Needless to state that the question whether
the interim orders should be granted under section 9 of the Act or not
would have to be considered by the Courts independent of the orders
passed by the arbitral tribunal. Recourse to Section 9 of the Act is not
available for the purpose of enforcing the orders of the arbitral tribunal;
but that does not mean that the Court cannot independently apply its mind
and grant interim relief in cases where it is warranted.
101. It is relevant to note that the provisions under Article 17 I (2) of the
Model Law, the court enforcing an interim order passed by an Arbitral
Tribunal in prescribed form undertakes a review of the substance of interim
measure the Model Law. To that extent, a Court while examining a similar
relief under Section 9 of the Act would be unfettered by the findings or the
view of the Arbitral Tribunal.
102. The decisions of this Court in Sri Krishan (supra) and Indiabulls
Financial Services Ltd. & Ors. v. Jubilee Plots and Housing Private Ltd.:
2009 SCC OnLine Del 2458 referred to by Mr Dutt have no applicability
in the facts of this case. In those cases, it was held that a person disobeying
the orders passed under Section 17 of the Act would be guilty of contempt
O.M.P.(I) (COMM.) 23/2015 Page 65 of 65
as provided under Section 27 (5) of the Act. Clearly, a person guilty of not
following the interim orders of the arbitral tribunal in Singapore cannot be
proceeded for the contempt under Section 27 of the Act, as contended by
Mr Dutt.
103. In the circumstances, I am of the view that the present petition is
maintainable and accordingly, it is to be considered on its merits.
VIBHU BAKHRU, J
OCTOBER 07, 2016
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