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

2. Regard being had to the lis in question, suffice it to state that an agreement was entered into between the parties on 20.10.2010 in respect of 24 voyages of coal shipment belonging to the appellant, the first respondent before the High Court, from Indonesia to India. The respondent no. 1 herein, Gupta Coal India Ltd., undertook only 15 voyages and that resulted in disputes which ultimately stood referred to arbitration. Be it noted, an addendum to contract was executed as regards the remaining voyages on 3.4.2013 when disputes arose in respect of the principal/main agreement. As the facts would undrape arbitration proceedings were initiated and eventually an award was passed.3. After the award came into existence, the present appellant filed an application under Section 9 before the District Court, Ernakulam for its enforcement under Sections 9/47 and 49 of the Act. As the factual narration would further uncurtain in respect of the addendum to contract, when disputes arose relating to the same, arbitration proceedings were initiated and at that juncture, the appellant moved the learned 2nd Additional District Court, Ernakulam under Section 9 of the Act seeking attachment of the cargos as an interim relief and the learned Additional District Judge, as has been stated earlier, issued conditional order of attachment.4. The order passed by the learned Additional District Judge, was assailed before the High Court in a Writ Petition, O.P.(C) No. 2612 of 2014 raising a singular contention that the impugned order therein was absolutely without jurisdiction and hence, unsustainable in law.5. A counter affidavit was filed contending, inter alia, that the application before the learned Additional District Judge was maintainable inasmuch as the contract between the parties was entered into prior to the decision in Bharat Aluminium Co. (supra) and, therefore, the principle laid down in the said decision was not attracted to the facts of the case, and in fact, it was governed by the principles stated in Bhatia International v. Bulk Trading S.A [(2002) 4 SCC 105] .6. The High Court, after hearing the learned counsel for the parties, referred to main agreement, Exhibit P-1, the addendum, Exhibit P-2, and the arbitration clause in the main agreement and considered the decisions in Bhatia International (supra) and Venture Global Engg. v. Satyam Computer Services Ltd. [(2008) 4 SCC 190] , some decisions of the High Court, reproduced a passage from Russell on Arbitration and eventually came to hold ascontention that since Ext.P1 was entered into before the judgment in Bharat Aluminium Co.s case and therefore the principles laid down in the said decision is not applicable to the facts of the case cannot be countenanced. The law laid down by the Supreme Court in Bharat Aluminium Co.s case is declaratory in nature and, therefore, the first respondent cannot be heard to say that he is not bound by the same and that the said principle cannot be applied to the case on hand. In the case of a declaration, it is supposed to have been the law always and one cannot be heard to say that it has only prospective effect. It is deemed to have been the law at all times. If that be so, the petition before the court below is not maintainable and is only to be dismissed.At the very outset, it is necessary to clear the maze as regards the understanding of the ratio in Bharat Aluminium Co. (supra) by the High Court. In the said case, the Constitution Bench has clearly ruledThe judgment in Bhatia International 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 Engg. has been rendered on 10-1-2008 in terms of the ratio of the decision in Bhatia International. 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 executedaforesaid judgment by the Constitution Bench was decided on September 6, 2012. In the instant case, the arbitration agreement was executed prior to that date and the addendum, as mentioned earlier, came into existence afterwards. Therefore, there can be no scintilla of doubt that the authority in Bharat Aluminium Co. case would not be applicable for determination of the controversy in hand. In fact, the pronouncement in Bhatia International (supra) would be applicable to the facts of the present case inasmuch as there is nothing in the addendum to suggest any arbitration and, in fact, it is controlled and governed by the conditions postulated in the principal contract. We shall advert to this aspect slightly more specifically at a later stage.8. Keeping the aforesaid in view, it is necessary to keenly understand the decision in Bhatia International (supra). In the said case, the agreement entered into between the parties, contained an arbitration clause which provided that arbitration was to be as per Rules of International Chambers of Commerce (for short, "the ICC). The parties had agreed that the arbitration was to be held in Paris, France. The first respondent filed an application under Section 9 of the Act before the learned Additional District Judge, Indore, M.P. with an interim prayer. A plea was raised by the appellant that the Indore Court had no jurisdiction and application was not maintainable. The said stand was repelled by the learned Additional District Judge, which found favour with the High Court. Before this Court, it was urged on behalf of the appellant that Part I of the Act only applies to arbitration where the place of arbitration is in India, but if the place of arbitration is not in India, then Part II of the Act would apply. On behalf of the respondent therein, it was urged that unless the parties, by their agreement either expressly or impliedly exclude its provisions, Part I would also apply to all international commercial arbitrations including those that take place in India. The three-Judge Bench came to holdconclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. 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 the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will notsupplied]After the said conclusion was recorded, the stand of the learned senior counsel for the appellant was putwith this situation Mr Sen submits that, in this case the parties had agreed that the arbitration be as per the Rules of ICC. He submits that thus by necessary implication Section 9 would not apply. In our view, in such cases the question would be whether Section 9 gets excluded by the ICC Rules of Arbitration. Article 23 of the ICC Rules reads as follows:-Conservatory and interim measures1. Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim[pic] or conservatory measure it deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an award, as the Arbitral Tribunal considers appropriate.2. Before the file is transmitted to the Arbitral Tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the Arbitral Tribunal. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat. The Secretariat shall inform the Arbitral Tribunalso stating, the Court referred to Article 23 of the ICC Rules and interpretedArticle 23 of the ICC Rules permits parties to apply to a competent judicial authority for interim and conservatory measures. Therefore, in such cases an application can be made under Section 9 of the said Act.The decision in Bhatia International (supra) was followed in Venture Global Engg. (supra). The Court scanned the ultimate conclusion recorded in Bhatia International (supra) and in that context, referred to various paragraphs and came to hold asThe learned Senior Counsel for the respondent based on para 26 submitted that in the case of foreign award which was passed outside India is not enforceable in India by invoking the provisions of the Act or CPC. However, after critical analysis of para 26, we are unable to accept the argument of the learned Senior Counsel for the respondent. Paras 26 and 27 start by dealing with the arguments of Mr Sen who argued that Part I is not applicable to foreign awards. It is only in the sentence starting at the bottom of para 26 that the phrase "it must immediately be clarified" that the finding of the Court is rendered. That finding is to the effect that an express or implied agreement of parties can exclude the applicability of Part I. The finding specifically states: "But if not so excluded, the provisions of Part I will also apply to all foreign awards." This exception which is carved out, based on agreement of the parties, in para 21 (placita e to f) is extracted below: (Bhatia International case SCC p. 119e to f)"21. ... By omitting to provide that Part I will not apply to international commercial arbitrations which take place outside India the effect would be that Part I would also apply to international commercial arbitrations held out of India. But by not specifically providing that the provisions of Part I apply to international commercial arbitrations held out of India, the intention of the legislature appears to be to ally (sic allow) parties to provide by agreement that Part I or any provision therein will not apply. Thus in respect of arbitrations which take place outside India even the non-derogable provisions of Part I can be excluded. Such an agreement may be express or implied."33. The very fact that the judgment holds that it would be open to the parties to exclude the application of the provisions of Part I by express or implied agreement, would mean that otherwise the whole of Part I would apply. In any event, to apply Section 34 to foreign international awards would not be inconsistent with Section 48 of the Act, or any other provision of Part II as a situation may arise, where, even in respect of properties situate in India and where an award would be invalid if opposed to the public policy of India, merely because the judgment-debtor resides abroad, the award can be enforced against properties in India through personal compliance of the judgment-debtor and by holding out the threat of contempt as is being sought to be done in the present case. In such an event, the judgment-debtor cannot [pic]be deprived of his right under Section 34 to invoke the public policy of India, to set aside the award. As observed earlier, the public policy of India includes - (a) the fundamental policy of India; or (b) the interests of India; or (c) justice or morality; or (d) in addition, if it is patently illegal. This extended definition of public policy can be bypassed by taking the award to a foreign country forso holding the Court dealt with the contentions of the learned senior counsel who highlighted the concept of transfer of shares and the procedure involved therein under the Indian Companies Act, 1956 and the impact of Foreign Exchange Management Act, 1999 and adverted to the impact and effect of the legal and regulatory scrutiny under both the Act and accepted the submission. The Court, thereafter, scanned the shareholders agreement and eventually came to hold that in terms of the decision in Bhatia International (supra) , Part I of the Act is applicable to the award that was called in question in the said case, even though it was a foreign award.10. The aforesaid decision clearly lays down that it would be open to the parties to exclude the application of the provision of Part I by express or implied agreement. Unless there is express or implied exclusion, the whole of Part I would apply. The Court, as stated earlier, was dealing with shareholders agreement between the parties. Sections 11.05 (b) and (c) of the shareholders agreement between the parties read asThis agreement shall be construed in accordance with and governed by the laws of the State of Michigan, United States, 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 anysaid clauses were interpreted by the Court not to exclude either expressly or impliedly the applicability of Part I of the Act.11. In this context, it will be useful to refer to the decision in Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd. [(2008) 10 SCC 308] wherein the designated Judge was called to decide the issue of appointment of sole arbitrator. The arbitration clause read asSettlement of disputes13.1. This agreement, its construction, validity and performance shall be governed by and constructed in accordance with the laws of England and Wales;13.2. Subject to Clause 13.3 all disputes or differences arising out of, or in connection with, this agreement which cannot be settled amicably by the parties shall be referred to adjudication;13.3. If any dispute or difference under this agreement touches or concerns any dispute or difference under either of the sub-contract agreements, then the parties agree that such dispute or difference hereunder will be referred to the adjudicator or the courts as the case may be appointed to decide the dispute or difference under the relevant sub-contract agreement and the parties hereto agree to abide by such decision as if it were a decision under thisCourt referred to the decision in Bhatia International (supra) and Lesotho Highlands Development Authority v. Impregilo SpA [(2005) 3 WLR 129] and came to hold asis 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 NTPC v. Singer Co. [(1992) 3 SCC 551] case support such a proposition. What, however, distinguishes the various decisions and views of the authorities in this case is the fact that in Bhatia International 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 the 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."

Court's reasoning:
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.