Case: Shreejee Traco (I) Private Limited Vs. Paperline International Inc

(1) This is a petition under Section 11(4) of the Arbitration and Conciliation Act, 1996 (hereinafter, the Act for short) seeking appointment of an arbitrator for and on behalf of the respondent herein, in the backdrop of the events briefly stated hereinafter. (2) The petitioner, a company duly incorporated in India and having its principal office at Delhi placed an order for the supply of facial tissue paper to the respondent, a company incorporated in New York and having its seat thereat. The respondent issued pro forma invoice dated 22-6-2001 wherein one of the clauses provides as under: "Any disputes or claims will be submitted to arbitration in New York." (3) The abovesaid clause is treated by the petitioner as arbitration contract between the parties.(4) The petitioner opened an L/C as demanded by the respondent and agreed to by the petitioner. The shipment of the goods arrived at Nhava Sheva Port at Mumbai. The goods on inspection were found to be not conforming to the sample of goods. The petitioner held the respondent guilty of breach of contract and demanded damages and compensation along with refund of the amount of L/C with interest. Vide legal notice dated 22-11-2001 the petitioner called upon the respondent to join in constitution of an Arbitral Tribunal. The petitioner nominated one Shri Vikas Jain, Chartered Accountant, New Jersey, USA as his arbitrator and requested the respondent to nominate its arbitrator within 30 days of the date of receipt of the notice and thereafter both the nominated arbitrators proceeding to appoint a presiding arbitrator. The respondent neither appointed an arbitrator nor responded to the petitioners notice. On 12-1-2002 the present petition has been filed. (5) The respondent though noticed has chosen to remain absent. These proceedings have, therefore, proceeded ex parte against the respondent. In view of the place of arbitration being New York, as agreed upon between the parties, a doubt arose whether the Chief Justice of India or his designate within the meaning of Section 11 of the Act would be competent to appoint an arbitrator. Shri V.A. Mohta, Senior Advocate was requested to render his assistance as amicus curiae. Shri V.A. Mohta has appeared and pointed out various relevant legal .provisions. Shri Rajesh Aggarwal, the learned counsel for the petitioner has also been heard. (6) Section 11 is placed in Part I of the Act. Sub-section (2) of Section 2 provides: This Part shall apply where the place of arbitration is in India." On a plain reading of this provision it is clear that Parliament intended the provisions of Part I to be applicable when the place of arbitration is in India. Shri Rajesh Aggarwal, the learned counsel for the petitioner submitted that the provision is not couched in a negative form i.e. it does not exclude the applicability of Part I if the place of arbitration is not in India. He submitted that the contract was to be performed in India; it is here that the breach of contract has taken place. Therefore, a petition under Section 11 of the Act is maintainable before the Chief Justice of India or his designate. (7) In National Thermal Power Corpn. v. Singer Co. a question arose as to the applicability of Indian law when one of the contracting parties was a foreigner. Though the case is pre-1996, certain observations made therein are apposite. In case of conflict of laws, the Supreme Court of India has opined that for arbitration, the selection of the place of arbitration may have little significance where it is chosen, as is often the case, without regard to any relevant or significant link with the place. This is particularly true when the place of arbitration is not chosen by the parties themselves, but by the arbitrators or by the outside body, and that too for reasons unconnected with the contract. It would be different if choice of place for submission for the arbitration is supported by the rest of the contract and surrounding circumstances which may be treated as stronger indication in regard to the intention of the parties. Dicey and Morns on The Conflict of Laws (11th Edn., Vol. II) was cited with approval wherein the learned authors state inter alia that the law governing arbitration proceedings is the law chosen by the parties, or, in the absence of agreement, the law of the country in which the arbitration is held. In the absence of express choice of the law governing the contract as a whole or the arbitration agreement as such having been exercised by the parties, a presumption may arise that the law of the country where the arbitration is agreed to be held is the proper law of the arbitration agreement. The presumption is rebuttable. The parties have the freedom to choose the law governing an international commercial arbitration agreement. Where there is no express choice of the law governing the contract as a whole, or the arbitration agreement in particular, there is, in the absence of any contrary indication, a presumption that the parties have intended that the proper law of the contract as well as the law governing the arbitration agreement are the same as law of the country in which the arbitration is agreed to be held. There is nothing in the contract or correspondence between the parties to rebut the ordinary presumption and spell out an intention of the parties that they intended proper law of India to govern arbitration in spite of the place of arbitration having been agreed to be at New York.(8) So far as the language employed by Parliament in drafting sub-section (2) of Section 2 of the Act is concerned, suffice it to say that the language is clear and unambiguous. Saying that this Part would apply where the place of arbitration is in India tantamounts to saying that it will not apply where the place of arbitration is not in India.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In view of the place of arbitration being New York, as agreed upon between the parties, a doubt arose whether the Chief Justice of India or his designate within the meaning of Section 11 of the Act would be competent to appoint anthe case iscertain observations made therein are apposite. In case of conflict of laws, the Supreme Court of India has opined that for arbitration, the selection of the place of arbitration may have little significance where it is chosen, as is often the case, without regard to any relevant or significant link with the place. This is particularly true when the place of arbitration is not chosen by the parties themselves, but by the arbitrators or by the outside body, and that too for reasons unconnected with the contract. It would be different if choice of place for submission for the arbitration is supported by the rest of the contract and surrounding circumstances which may be treated as stronger indication in regard to the intention of the parties. Dicey and Morns on The Conflict of Laws (11th Edn., Vol. II) was cited with approval wherein the learned authors state inter alia that the law governing arbitration proceedings is the law chosen by the parties, or, in the absence of agreement, the law of the country in which the arbitration is held. In the absence of express choice of the law governing the contract as a whole or the arbitration agreement as such having been exercised by the parties, a presumption may arise that the law of the country where the arbitration is agreed to be held is the proper law of the arbitration agreement. The presumption is rebuttable. The parties have the freedom to choose the law governing an international commercial arbitration agreement. Where there is no express choice of the law governing the contract as a whole, or the arbitration agreement in particular, there is, in the absence of any contrary indication, a presumption that the parties have intended that the proper law of the contract as well as the law governing the arbitration agreement are the same as law of the country in which the arbitration is agreed to be held. There is nothing in the contract or correspondence between the parties to rebut the ordinary presumption and spell out an intention of the parties that they intended proper law of India to govern arbitration in spite of the place of arbitration having been agreed to be at New York.(8) So far as the language employed by Parliament in drafting(2) of Section 2 of the Act is concerned, suffice it to say that the language is clear and unambiguous. Saying that this Part would apply where the place of arbitration is in India tantamounts to saying that it will not apply where the place of arbitration is not in India.