IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 27.01.2009 CORAM THE HONOURABLE MR. JUSTICE D.MURUGESAN and THE HONOURABLE MR. JUSTICE M.SATHYANARAYANAN Original Side Appeal Nos.270 and 271 of 2008 Tamil Nadu Electricity Board rep. By its Secretary, No.800, Anna Salai, Chennai 600 002. .... Appellant in O.S.A.No. 270 of 2008 Vs. 1.M/s.Videocon Power Limited, No.1601, Maker Chamber – V, Nariman Point, Mumbai-400 021. rep. By its Authorised Signatory, Mr.Kuldeep Drabhu 2.Canara Bank, No.787, Anna Salai, Chennai 600 002. .... Respondents in O.S.A.No.270 of 2008 1.Tamil Nadu Electricity Board rep. By its Secretary, No.800, Anna Salai, Chennai 600 002. ... Appellant in O.S.A.No.2712008 Vs. 1.M/s.Videocon Power Limited, No.1601, Maker Chamber-V, Nariman Point, Mumbai 400 021. https://hcservices.ecourts.gov.in/hcservices/ 2.Canara Bank, No.787, Anna Salai, Chennai 600 002. 3.Mr.Justice M.L.Pendse (Retd.,) Bhagyodya Building 2nd Floor, No.79, Nagindas Master Road, Mumbai 400 023. 4.Mr.Justice S.Mohan (Retd.,) No.41, Venkatakrishna Iyer Road, R.A.Puram, Chennai 600 028. 5.Mr.V.V.Veeder, Queen's Counsel, Essex Chambers, No.24, Lincoln's Fields, London WC 2A 3ED, England. ... Respondents in O.S.A.No.271 of 2008 Original Side Appeal No.270 of 2008 filed under 15 of letters Patent r/w Order 36, Rule 1 of The Original Side Rules, praying to set aside the Common Order dated 09.06.2008 made in Review Application No.5040 of 2004. Original Side Appeal No.271 of 2008 filed under 15 of letters Patent r/w Order 36, Rule 1 of The Original Side Rules, praying to set aside the Common Order order dated 09.06.2008 made in O.P.No.624 of 2004. For Appellant in both the original side appeals : Mr.V.R.Reddy, SC for Mr.N.C.Ramesh For Respondents in both the original side appeals : Mr.C.S.Vaidyanathan, SC for Mr.T.K.Bhaskar for R1 : Mr.T.C.A.Shrinivasan for R2 https://hcservices.ecourts.gov.in/hcservices/ COMMON JUDGMENT D.MURUGESAN,J. The unsuccessful petitioner in both the Review Application and Original Petition before the learned single Judge viz., the Tamil Nadu Electricity Board is the Appellant in these appeals. 2. The following points arise for consideration in these appeals (1) Whether the award under challenge is a foreign award or domestic award? (2) Whether the Original Petition filed under Section 34 is maintainable if the award is a foreign award? (3) Whether the petition filed under section 48 for enforcement of a foreign award is maintainable before this Court? (4) Whether an appeal is maintainable against the award passed under Section 48 of The Arbitration and Conciliation Act, 1996? 3. The following few facts are necessary for consideration of the above questions: (a) The Tamil Nadu Electricity Board (herein after referred to as "the Board") initiated North Madras Thermal Power Project (NMTPP). The said project was to be implemented in three stages. The Board itself completed the Stage-I. Initially, the Board decided to undertake Stage-II as well and leaving the execution of Stage-III for private promoters. Later on, it was decided by the Government of Tamil Nadu that the execution of stage-II could also be contracted out to private promoters and accordingly offers were invited from the independent power producers. On 04.10.1994, the Government of Tamil Nadu decided to entrust the Stage-II project to the appellant M/s.Videocon Power Limited (in short, "VPL"). A Memorandum of Understanding was also signed on 25.10.1994 and the project to be set up was 1 X 500 MW After the memorandum of understanding was entered into, VPL requested the Board to consider the increase in the capacity of the project from 1 X 500 MW to 2 x 500 MW. The said request was accepted and a revised memorandum of understanding dated 18.02.1995 was entered into. After the said memorandum of understanding, VPL had again submitted first of their Draft Power Purchase Agreement (in short "PPA") only on 17.07.1995. The Board appointed a committee on 19.01.1996 to finalise the working arrangement for sharing of common facilities which was an obligation under the memorandum of understanding. The Government of Tamil Nadu recommended to the Central Electricity Authority for issue of Techno Economic Clearance of the project on 19.03.1996 after emphasising three important conditions viz., (1) the project cost should not exceed Rs.4.007 Crores/MW; (2) VPL has to absorb more than Rs.10 Crores towards sharing of common https://hcservices.ecourts.gov.in/hcservices/ facilities as the tentative cost worked out to Rs.206 Crores; and (3) VPL has to erect a 400 KV gas insulated sub-station, in view of space constraint. (b) VPL took possession of the project site land on 28.03.1996 and the Central Electricity Authority cleared the Techno Economic Clearance of the project on 03.04.1996 subject to some conditions. When VPL requested the Board on 24.10.1996 to initial the Draft Power Purchase Agreement to enable the Company to kick off the initial tie-up, the Board did not initial the Power Purchase Agreement (PPA) since VPL in its letter dated 24.06.1996 had stated that it is expected to have a few changes in the PPA after its preliminary discussion with the Indian Financial Institution and Foreign Banks. Subsequently, there were some correspondences, which ultimately resulted in a dispute between VPL and the Board. In the Board meeting held on 08.08.2000 it was found that VPL had not attained financial closure and the time had expired for such financial closure and hence the Board decided to withdraw escrow cover from VPL and to allot two covers to another named Independent Power Producers under different projects. Hence, a dispute arose between VPL and the Board. In terms of arbitral agreement, the dispute was referred for arbitration consisting of three Arbitrators. VPL appointed Mr.Justice M.L.Pendse (Retd.,) and Board appointed Mr.Justice S.Mohan (Retd.,). Mr.V.V.Veeder, Queen's Counsel, Essex Chambers, London, England was appointed as third Arbitrator as the Chairman, the Secretary General of Permanent Court of Arbitration, Hague. The arbitral proceedings were conducted in Singapore followed by one sitting in Hong Kong on 08.12.2001. There was a claim at the instance of VPL and a counter claim at the instance of the Board. A partial interim award was passed by the arbitral Tribunal on 08.08.2001 at the time when the Tribunal sat in Singapore. (c) The arbitral Tribunal passed its final award on 21.06.2004 and while rejecting the VPL's claim for declaratory relief, allowed the claim for damages with legal and arbitration costs and at the same time rejected the counter claim of the Board in the very same arbitral award. (d) Invoking Sections 44, 47 and 49 of The Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") VPL filed an execution petition for enforcement of the award dated 21.06.2004. Though the said petition was not initially entertained by the Registry on certain objections as to the maintainability, by order of this Court dated 09.12.2004, such petition was entertained as it was maintainable and a prohibitory order against the Garnishee Bank was also issued. A review application filed at the instance of the Board to review the Order dated 09.12.2004 on the ground that even before the Execution Petition was filed, the Board had filed a petition on 15.07.2004 under Section 34 of the Act to set aside the award dated 21.06.2004 and the petition was admitted by this Court on 05.11.2004. https://hcservices.ecourts.gov.in/hcservices/ (e) By a subsequent order dated 30.12.2004, this Court ordered that a portion of the prohibitory order with regard to the Garnishee will be suspended for one month and the Board was directed to furnish security for the entire award amount and the review application was adjourned. Thereafter, the Execution Petition was also numbered and both the Execution Petition filed by VPL as well the Petition filed by the Board to set aside the award were taken up together and were disposed of by Common Order dated 09.06.2008 which is impugned in these appeals. 4. We have heard Mr.V.R.Reddy,learned senior counsel for Mr.N.C.Ramesh learned counsel for the appellant Board, Mr.C.S.Vaidyanathan, learned senior counsel for Mr.T.K.Bhaskar for VPL, the first respondent and Mr.T.C.A.Shrinivasan, learned counsel for the Bank, the second respondent in both the appeals. 5.1) MR.V.R.Reddy, learned senior counsel for the appellant Board would submit that the award in question is not a foreign award and it is a domestic award inasmuch as the two members have signed the award in Chennai where it was pronounced and in such event, petition under Section 34 of the Act to set aside the award is maintainable before this Court. He would further submit that the arbitral award is not a foreign award as envisaged under Section 44 of the Act and inasmuch as the award is domestic award, Part I of the Act would apply and in such case, petition under Section 34 of the Act to set aside the award is maintainable. He would further submit that the learned Judge has erred in not only coming to the conclusion that the award in question is a foreign award, but also Part I of the Act is not applicable and consequently, petition under Section 34 of the Act is not maintainable. The learned senior counsel would heavily rely upon the judgement reported in Venture Global Engineering v. Satyam Computer Services Ltd., and another (2008) 4 SCC 190 and contend that even in case of a foreign award, Part I of the Act is applicable. 5.2) He would also submit that the learned Judge ought not to have entertained the application under Section 48 of the Act filed at the instance of the Company for enforcement of the Award by treating the award as a foreign award. The learned senior counsel would extensively take us to Clause 17 of the Power Purchase Agreement and the various provisions of the Act in support of his submissions. 6.1) Mr.C.S.Vaidyanathan, learned senior counsel for the first respondent (VPL) would submit diametrically opposite to the arguments made by the learned senior counsel for the appellant. He would submit that in terms of Clause 17(a) and (b) of the PPA, the dispute shall be settled by arbitration conducted in accordance with United Nation Commission on International Trade Law (UNCITRAL) and the arbitration shall be held in Singapore and the arbitral proceedings shall be conducted and the award shall be rendered in English language. https://hcservices.ecourts.gov.in/hcservices/ 6.2) He would also submit that the Clause 17.3 (c) of the PPA contemplates that the validity, interpretation, construction, performance and enforcement of the arbitration agreement and any other question of arbitration law shall be governed by the laws of England. In fact, the entire arbitration proceedings were conducted only in Singapore except only one sitting in Hong Kong and the award was passed only in Singapore, a convention country and therefore, the award in question is a foreign award and in such case, Part I of the Act has no application and consequently petition under Section 34 of the Act is not maintainable. He would submit that as the parties have expressly agreed to exclude part I of the Act, the judgement of the Apex Court rendered in M/s.Venture Global Engineering case is not applicable to the facts of the present case. 6.3) He would further submit that in terms of clause 17.3 (e) of the Agreement, it was agreed that the award could be enforced by the party against the assets of other party, wherever those assets are located and such award could be enforced into any Court or Tribunal of competent jurisdiction. As the parties had submitted to jurisdiction of this Court, insofar as the enforcement of the award including a foreign award, petition under Part II of Section 48 of the Act seeking for enforcement of the arbitral award is maintainable. 6.4) He would further submit that in any case, as against the order of the learned Judge holding that such a petition seeking to enforce the award is maintainable second appeal is specifically excluded under Section 50(2) of the Act. Hence, the provisions of appeal under Letters Patent is not available to the appellant, in view of the judgement in The Union of India v. Mohindra Supply Co., AIR 1962 SC 256 and P.S.Sathappan (Dead) by LRs v. Andhra Bank Limited and others AIR 2004 SCC 5152. 7. For a decision on the above submissions, the relevant clauses of the Power Purchase Agreement and the relevant provisions of the Act are referable. 8.1) Clause 17 of the Agreement reads as under: (a) The Dispute shall be settled by arbitration conducted in accordance with the United Nations Commission and Internal Trade Law (UNCITRAL) as in effect on the date of this Agreement (the "Rules). The Arbitration shall be held in Singapore. The arbitration proceedings shall be conducted, and the award shall be rendered,in the English language. (b) There shall be three arbitrators of whom each Party shall select one. The two arbitrators thus appointed shall select the third (3rd) arbitrator to act as Chairman )but not umpire) of https://hcservices.ecourts.gov.in/hcservices/ the Arbitral Tribunal within thirty (30) days of the selection of the second arbitrator. If the party does not select an arbitrator where it is entitled to do so within thirty (3) days of a request for arbitration by Party or if the two party appointed arbitrators fail to agree on a third (3rd) arbitrator, the Secretary General of the Permanent Court of Arbitration at The Hague shall make such appointment. (c) Notwithstanding the terms of Article 18.8 hereof, the validity, interpretation, construction, performance and enforcement of the arbitration agreement contained in this Article 17.3, the conduct of the arbitration (including any resort to a Court for provisional remedy), the enforcement of any Award and any other question of arbitration law shall be governed by the laws of England. The parties expressly acknowledge and agree that any Award under this Article 17.3 shall be subject to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958. (d) The Award under this Article 17.3 shall be final and binding upon the parties and shall be the sole and exclusive remedy between the Parties regarding all disputes. Any rights of appeal available at law may be exercised by a Party only (i) after the Award has been fully implemented under this Article 17.3, or (ii) if such party must pay an amount under such Award, after such party has either deposited the amount of the award in the Court or tribunal of competent jurisdiction. (e) The Parties agree that any Award may be enforced by a Party against the assets of the other Party where ever those assets are located and such Award may be enforced into any Court or Tribunal of competent jurisdiction of any such Courts or Tribunal in India. (f) to (j) .......... 8.2) Clause 18 of the Power Purchase Agreement reads as under:- 18.8. Governing Law: Except as provided in Article 17.3 hereof, this Agreement and the rights and obligations hereunder shall be interpreted, construed and governed by the substantive laws of India, without regard to its principles of conflict of laws that might require the application of the law of any other jurisdiction. 8.3) Sections 2(2), 34, 35, 36, 37, 44, 46, 48, 49 and 50 of the Act read thus:- https://hcservices.ecourts.gov.in/hcservices/ A. 2. Definitions. - (1) In this Part, unless the context otherwise requires, - (a) to (h) ....... (2) This Part shall apply where the place of arbitration is in India. (3) to (9) ..... B. 34. Application for setting aside arbitral award. – (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and subsection (3). (2) An arbitral award may be set aside by the court only if- (a) The party making the application furnishes proof that- (i) A party was under some incapacity, or (ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or https://hcservices.ecourts.gov.in/hcservices/ (b) The court finds that- (i) The subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) The arbitral award is in conflict with the public policy of India. C. 35. Finality of arbitral awards. -Subject to this Part an arbitral award shall be final and binding on the parties and persons, claiming under them respectively. D. 36. Enforcement. - Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the court. E. 37. Appealable orders. – (1) An appeal shall lie from the following orders (and from no others) to the court authorised by law to hear appeals from original decrees of the court passing the order, namely: - (a) Granting or refusing to grant any measure under section 9; (b) Setting aside or refusing to set aside an arbitral award under section 34. (2) An appeal shall also lie to a court from an order of the arbitral tribunal-- (a) Accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or (b) Granting or refusing to grant an interim measure under section 17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. F. 44. Definition. -In this Chapter, unless the context otherwise requires, “foreign award” means an arbitral award on differences between persons https://hcservices.ecourts.gov.in/hcservices/ arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960- (a) In pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and (b) In one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies. G. 46. When foreign award binding. - Any foreign award which would be, enforceable under this Chapter shall be treated as binding for all purposes on the persons as between whom it was made, and may accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as including references to relying on; an award. H. 48. Conditions for enforcement of foreign awards. – (1) Enforcement of a foreign award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the court proof that- (a) The parties to the agreement referred to in section 44 were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those https://hcservices.ecourts.gov.in/hcservices/ not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be enforced; or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. (2) Enforcement of an arbitral award may also be refused if the court finds that- (a) The subject-matter of the difference is not capable of settlement by arbitration under the law of India; or (b) The enforcement of the award would be contrary to the public policy of India. Explanation. -Without prejudice to the generality of clause (b) of this section, it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. (3) If an application for the setting aside or suspension of the award has been made to a competent authority referred to in clause (e) of sub-section (1) the court may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security. I. 49. Enforcement of foreign awards. -Where the court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that court. J. 50. Appealable orders. – (1) An appeal shall lie from the order refusing to- (a) Refer the parties to arbitration under section 45; (b) Enforce a foreign award under section 48, to the court authorised by law to hear appeals from such order. https://hcservices.ecourts.gov.in/hcservices/ (2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. Point Nos. 1 & 2:- 9.1) To determine the above questions, the clauses in the Power Purchase Agreement containing arbitration are relevant. In terms of clause 17.3 (a) of the agreement, the parties have agreed to settle the dispute by arbitration conducted in accordance with United Nation Commission on International Trade Law (UNCITRAL). The parties have also agreed that the arbitration shall be held in Singapore and the arbitration proceedings shall be conducted and the award shall be rendered in English language. In terms of Clause 17.3 (c) of the Agreement, the parties have also agreed that the validity, interpretation, construction, performance and enforcement of the agreement contained in Clause 17.3 of the agreement, the conduct of arbitration (including any resort to a Court for provisional remedy) the enforcement of any award and any other question of arbitration law shall be governed by the Laws of England. A conjoint reading of both the above clauses would show that the intention of the parties to the Power Purchase Agreement is that the award proceedings shall be outside India thereby meaning that such an award would only be a foreign award. By Clause 17.3 (a) of the PPA, the parties have agreed to settle the dispute by arbitration conducted in accordance with UNCITRAL. The parties