Case: Harmony Innovation Shipping Ltd Vs. Gupta Coal India Ltd.

the clause which is a comprehensive one, it is London, which is the seat of arbitration. In Videocon Industries Ltd. (supra), as we have analysed earlier, Article 33.1 of the agreement which stipulated that subject to the provisions of Article 34.12, the contract would be governed and interpreted in accordance with the laws of India. Clause 34.12 of the agreement read as follows: "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." 43. In that context, the Court referred to Section 3 of the English Arbitration Act, 1996 and as has been stated earlier, opined that as per the English law, the seat of arbitration as per the said provision would mean "juridical seat of arbitration" and accordingly opined that principles stated in Bhatia International (supra) would not be applicable.44. In the present case, the agreement stipulates that the contract is to be governed and construed according to the English law. This occurs in the arbitration clause. Mr. Vishwanathan, learned senior counsel, would submit that this part has to be interpreted as a part of "curial law" and not as a "proper law" or "substantive law". It is his submission that it cannot be equated with the seat of arbitration. As we perceive, it forms as a part of the arbitration clause. There is ample indication through various phrases like "arbitration in London to apply", arbitrators are to be the members of the "London Arbitration Association" and the contract "to be governed and construed according to English Law". It is worth noting that there is no other stipulation relating to the applicability of any law to the agreement. There is no other clause anywhere in the contract. That apart, it is also postulated that if the dispute is for an amount less that US $ 50000 then, the arbitration should be conducted in accordance with small claims procedure of the London Maritime Arbitration Association. When the aforesaid stipulations are read and appreciated in the contextual perspective, "the presumed intention" of the parties is clear as crystal that the juridical seat of arbitration would be London. In this context, a passage from Mitsubishi Heavy Industries Ltd. v. Gulf Bank [[1997] 1 Lloyds Rep. 343] is worth reproducing: "It is of course both useful and frequently necessary when construing a clause in a contract to have regard to the overall commercial purpose of the contract in the broad sense of the type and general content, the relationship of the parties and such common commercial purpose as may clearly emerge from such an exercise. However, it does not seem to me to be a proper approach to the construction of a default clause in a commercial contract to seek or purport to elicit some self-contained commercial purpose underlying the clause which is or may be wider than the ordinary or usual construction of the words of each sub-clause will yield." 45. In Cargill International S.A. v. Bangladesh Sugar & Food Industries Corp. [[1998] 1 W.L.R. 461 CA], Potter L.J. balanced the two approaches and said: "In this connection [counsel] has rightly made the point that, when construing the effect of particular words in a commercial contract, it is wrong to put a label on the contract in advance and this to approach the question of construction on the basis of a pre-conception as to the contacts intended effect, with the result that a strained construction is placed on words, clear in themselves, in order to fit them within such pre-conception...On the other hand, modern principles of construction require the court to have regard to the commercial background, the context of the contract ad the circumstances of the parties, and to consider whether, against that background and I that context, to give the words a particular or restricted meaning would lead to an apparently unreasonable and unfair result." 46. 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.47. Having said that the implied exclusion principle stated in Bhatia International (supra) would be applicable, regard being had to the clause in the agreement, there is no need to dwell upon the contention raised pertaining to the addendum, for any interpretation placed on the said document would not make any difference to the ultimate conclusion that we have already arrived at.48. Before parting with the case, it is obligatory on our part to state that the Division Bench of the High Court has allowed the petition on the foundation that the Bharat Aluminium Co. case would govern the field and, therefore, the court below had no jurisdiction is not correct. But as has been analysed and discussed by us, even applying the principles laid down in Bhatia International (supra) and scanning the anatomy of the arbitration clause, we have arrived at the conclusion that the courts in India will not have jurisdiction as there is implied exclusion.

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

Explanation:
0[ds]20. Addressing the issue of maintainability, this Court referred to the decision in Bhatia International (supra) and took note of the fact that parties have agreed and as is also perceivable from the final partial consent award that the juridical seat or local place of arbitration for the purpose of arbitration initiated under the claimants notice shall be London, England. The parties have also agreed that the hearing of the notice for arbitration may take place at Paris, France, Singapore or any other location the Tribunal considers may be convenient. The Court posed the question whether in the factual matrix, there has been express or implied exclusion of the applicability of Part I of the Act. In that context, the Court referred to paragraph 32 of Bhatia International case and, thereafter, analysed the relevant articles of the PSC to discover the real intention of the parties as to whether the provisions of the Act had been excluded. The Court referred to Articles 32.1 and 32.2 that dealt with the applicable law and language of the contract. Article 32.1 provided that the proper law of the contract would be law of India and under Article 32.2 made a declaration none of the provisions contained in the contract would entitle either the Government or the contractor to exercise the rights, privileges and powers conferred upon it by the contract in a manner which would contravene the laws of India. The Court observed that the basis of controversy involved in the case pertain to analysis of the anatomy of the Article 33.12 which provided that venue of the arbitration shall be London and that the arbitration agreement shall be governed by the laws of England. That apart, the parties had agreed that juridical seat or legal place of arbitration for the purpose initiated under the claimants notice of arbitration would be at London.Elaborating the said facet, the Court discussed the principle that has been stated in Bhatia International (supra) laying that 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. Coming to the stipulations in the present arbitration clause, it is clear as day that if any dispute or difference would arise under the charter, arbitration in London to apply; that the arbitrators are to be commercial men who are members of London Arbitration Association; the contract is to be construed and governed by English Law; and that the arbitration should be conducted, if the claim is for a lesser sum, in accordance with small claims procedure of the London Maritime Arbitration Association. There is no other provision in the agreement that any other law would govern the arbitration clause.In that context, the Court referred to Section 3 of the English Arbitration Act, 1996 and as has been stated earlier, opined that as per the English law, the seat of arbitration as per the said provision would mean "juridical seat of arbitration" and accordingly opined that principles stated in Bhatia International (supra) would not be applicable.44. In the present case, the agreement stipulates that the contract is to be governed and construed according to the English law. This occurs in the arbitration clause. Mr. Vishwanathan, learned senior counsel, would submit that this part has to be interpreted as a part of "curial law" and not as a "proper law" or "substantive law". It is his submission that it cannot be equated with the seat of arbitration. As we perceive, it forms as a part of the arbitration clause. There is ample indication through various phrases like "arbitration in London to apply", arbitrators are to be the members of the "London Arbitration Association" and the contract "to be governed and construed according to English Law". It is worth noting that there is no other stipulation relating to the applicability of any law to the agreement. There is no other clause anywhere in the contract. That apart, it is also postulated that if the dispute is for an amount less that US $ 50000 then, the arbitration should be conducted in accordance with small claims procedure of the London Maritime Arbitration Association. When the aforesaid stipulations are read and appreciated in the contextual perspective, "the presumed intention" of the parties is clear as crystal that the juridical seat of arbitration would be London.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.47. Having said that the implied exclusion principle stated in Bhatia International (supra) would be applicable, regard being had to the clause in the agreement, there is no need to dwell upon the contention raised pertaining to the addendum, for any interpretation placed on the said document would not make any difference to the ultimate conclusion that we have already arrived at.48. Before parting with the case, it is obligatory on our part to state that the Division Bench of the High Court has allowed the petition on the foundation that the Bharat Aluminium Co. case would govern the field and, therefore, the court below had no jurisdiction is not correct. But as has been analysed and discussed by us, even applying the principles laid down in Bhatia International (supra) and scanning the anatomy of the arbitration clause, we have arrived at the conclusion that the courts in India will not have jurisdiction as there is implied exclusion.