Case: M/S. Centrotrade Minerals Vs. Hindustan Copper Ltd

New York Convention award should not be enforced because such enforcement would do substantial injustice and, therefore, was contrary to public policy in respect whereof the following had, normally, to be included amongst the relevant considerations: 114. The nature of the procedural injustice; Whether the party resisting enforcement had invoked the supervisory jurisdiction of the seat of the arbitration; Whether a remedy was available under that jurisdiction; Whether the courts of that jurisdiction had conclusively determined the complaint in favour of upholding the award; If the party resisting enforcement had failed to invoke that remedial jurisdiction, for what reason and, in particular, whether it was acting unreasonably in failing to do so. ANALYSIS: 115. It is not in dispute that the contention of HCL from the beginning was that the provision contained in the second part of the arbitration is void ab initio and of no effect. As noticed hereinbefore, it even filed a suit prior to entering into the reference by the Arbitrator. Even after the award was passed, proceedings before appropriate courts had been initiated. In its written statement filed before the arbitral tribunal, the question as regards the jurisdiction of the arbitrator was questioned by it. The learned arbitrator had, relying on or on the basis of the decisions, referred to hereinbefore, and also an opinion rendered by a former judge of this Court held that such an arbitration agreement is valid in law. In terms of Section 16 of the 1996 Act, the arbitrator, keeping in view the fact that the question as regard his jurisdiction had been raised was bound to decide the same before entering into the merit of the matter. Only in the event, it came to the conclusion that the arbitral tribunal had the requisite jurisdiction, it could have proceeded to determine the merit of the matter. We say so in view of the fact that in the event an arbitrator was of the opinion that he had no jurisdiction in the matter, the arbitration clause being invalid in law, Centrotrade could have preferred an appeal in terms of sub-section (2) of Section 37 of the 1996 Act. The question as regard lack of inherent jurisdiction on the part of the arbitrator in view of the second part of the arbitration clause being opposed to the public policy could have been raised by HCL in terms of Section 34 of the 1996 Act. 116. Even if it is held that two tier arbitration is permissible, under the 1996 Act it might lead to an incongruity. A two tier arbitration is invalid in law in the context of the 1996 Act having regard to Section 23 of the Contract Act as statutory jurisdiction cannot be waived by contract. It is, thus, amply clear that the very scheme of the 1996 Act does not contemplate a two tier arbitration agreement of this nature. 117. Conditions as regard non-existence or invalidity of an arbitration agreement can, in our opinion, be raised while resisting enforcement of a foreign award. Section 4 of the 1996 Act contemplates existence of an arbitration agreement which would mean a valid arbitration agreement. If the arbitration agreement is void and of no effect, it is non est in the eye of law and, thus, cannot be enforced. An arbitrator derives its jurisdiction from a reference which would mean a dispute and difference to be adjudicated upon in pursuance of or in furtherance of a valid arbitration agreement. It is not in dispute that the parties agreed that the Indian law shall apply. The validity or legality of a contract, thus, must be judged on the touch-stone of Section 23 of the Indian Contract Act. If a contract is opposed to a public policy, the same is void and of no effect. CONCLUSION: 118. It is doubtful whether the decisions of the Calcutta, Bombay and Madras High Court could have been held to be valid if a situation of the present nature had arisen therein, namely, both the 1940 and 1961 Acts are applicable in relation to two different awards made at two different point of time. The said decisions, therefore, might have been held to be good only in terms of the provisions of the 1940 Act or the 1961 Act but the ratio thereof cannot be extended to the cases falling under both the parts of the 1996 Act. 119. To bring clarity in the matter, we may notice the dichotomy arising herein. If the first award was to be enforced (although no occasion arose therefor), it could have been done only in terms of Part I of the Act. Despite invocation of second part of the arbitration agreement, it would not cease to be a decree in terms of Section 36 of the Act unless the operation thereof was directed to be stayed. In other words, the first award of the arbitral tribunal, on the expiry of the period specified for challenging the award, became a decree despite invocation of the second part thereof. It is difficult to comprehend that despite a part of the award becoming a decree of the court, the same would not be binding upon the arbitral tribunal. Section 34 of the 1996 Act provides for setting aside a domestic Indian award. It unlike the English Arbitration Act does not permit the parties to limit or avoid the operation of the statutory provisions. 120. Furthermore, the grounds for questioning a domestic award and a foreign award are different. In the context of the 1996 Act, an arbitration agreement which would otherwise be contrary to the provisions of the laws governing the contract between the parties would be void being opposed to public policy. 121. The High Courts judgment, therefore, in my considered view, cannot be sustained. 122. It is, thus, not necessary for us to advert to other questions raised at the Bar. Although we do not agree with the reasons assigned by the High Court, but we uphold the conclusion thereof on different grounds.

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

Explanation:
0[ds]115. It is not in dispute that the contention of HCL from the beginning was that the provision contained in the second part of the arbitration is void ab initio and of no effect. As noticed hereinbefore, it even filed a suit prior to entering into the reference by the Arbitrator. Even after the award was passed, proceedings before appropriate courts had been initiated. In its written statement filed before the arbitral tribunal, the question as regards the jurisdiction of the arbitrator was questioned by it. The learned arbitrator had, relying on or on the basis of the decisions, referred to hereinbefore, and also an opinion rendered by a former judge of this Court held that such an arbitration agreement is valid in law. In terms of Section 16 of the 1996 Act, the arbitrator, keeping in view the fact that the question as regard his jurisdiction had been raised was bound to decide the same before entering into the merit of the matter. Only in the event, it came to the conclusion that the arbitral tribunal had the requisite jurisdiction, it could have proceeded to determine the merit of the matter. We say so in view of the fact that in the event an arbitrator was of the opinion that he had no jurisdiction in the matter, the arbitration clause being invalid in law, Centrotrade could have preferred an appeal in terms of sub-section (2) of Section 37 of the 1996 Act. The question as regard lack of inherent jurisdiction on the part of the arbitrator in view of the second part of the arbitration clause being opposed to the public policy could have been raised by HCL in terms of Section 34 of the 1996 Act116. Even if it is held that two tier arbitration is permissible, under the 1996 Act it might lead to an incongruity. A two tier arbitration is invalid in law in the context of the 1996 Act having regard to Section 23 of the Contract Act as statutory jurisdiction cannot be waived by contract. It is, thus, amply clear that the very scheme of the 1996 Act does not contemplate a two tier arbitration agreement of this nature118. It is doubtful whether the decisions of the Calcutta, Bombay and Madras High Court could have been held to be valid if a situation of the present nature had arisen therein, namely, both the 1940 and 1961 Acts are applicable in relation to two different awards made at two different point of time. The said decisions, therefore, might have been held to be good only in terms of the provisions of the 1940 Act or the 1961 Act but the ratio thereof cannot be extended to the cases falling under both the parts of the 1996 Act119. To bring clarity in the matter, we may notice the dichotomy arising herein. If the first award was to be enforced (although no occasion arose therefor), it could have been done only in terms of Part I of the Act. Despite invocation of second part of the arbitration agreement, it would not cease to be a decree in terms of Section 36 of the Act unless the operation thereof was directed to be stayed. In other words, the first award of the arbitral tribunal, on the expiry of the period specified for challenging the award, became a decree despite invocation of the second part thereof. It is difficult to comprehend that despite a part of the award becoming a decree of the court, the same would not be binding upon the arbitral tribunal. Section 34 of the 1996 Act provides for setting aside a domestic Indian award. It unlike the English Arbitration Act does not permit the parties to limit or avoid the operation of the statutory provisions120. Furthermore, the grounds for questioning a domestic award and a foreign award are different. In the context of the 1996 Act, an arbitration agreement which would otherwise be contrary to the provisions of the laws governing the contract between the parties would be void being opposed to public policy121. The High Courts judgment, therefore, in my considered view, cannot be sustained122. It is, thus, not necessary for us to advert to other questions raised at the Bar. Although we do not agree with the reasons assigned by the High Court, but we uphold the conclusion thereof on different grounds