Case: NOY VALLESINA ENGINEERING SpA, (now known as Noy Ambiente S.p.a) Vs. JINDAL DRUGS LIMITED &amp; ORS

2. The appellant company (hereafter NV Engineering or the appellant) was at the relevant time, incorporated under Italian law and involved in the setting-up and construction of plants for production of synthetic fibers, polymers and ascorbic acid. The respondent (hereafter Jindal) is a public limited company incorporated under relevant Indian law. In1994, Jindal negotiated with a company - Engineering Chur AG of Sagenstrasse 97, 7001 Chur, Switzerland (hereafter,Enco) and, on 30.01.1995 entered into four related agreements with Enco to set up an ascorbic acid plant in India. These were: (i) Engineering Contract for Ascorbic for Acid Plant (ECAAP, or plant contract); (ii) Supply contract for Ascorbic Acid plant (SCAAP or supply contract); (iii) Service agreement for Ascorbic Acid plant (SAAAP service contract); and (iv) License agreement for Ascorbic acid plant (LAAAP license contract).3. Under the plant contract, Enco agreed to provide Jindal with technical information and basic engineering documentation for the construction, commission, operation and maintenance of the Ascorbic Acid Plant (the plant). In consideration of Encos obligations, Jindal was to pay a total fee of Swiss Francs 86,00,000/- in the manner provided in the Agreement. ECAAP as well as the other three agreements had an arbitration clause. In March 1995, with the consent of the respondent, Enco assigned ECAAP to NV Engineering. All the obligations of Enco towards Jindal were taken over by NV Engineering.4. Disputes arose between Jindal and NV Engineering. The latter terminated the agreement and claimed damages. On 31.10.1996, Jindal filed a request for arbitration under the ECAAP, i.e. the plant contract, before the International Court of Arbitration (ICC), Paris. The appellant filed its reply to Jindals claim and also made a counter claim. Jindal appointed Mr. Desai as its nominee on the arbitral tribunal. NV Engineering nominated Prof. ACC Alberto Santa Maria as its nominee. The appointment of Mr. Desai and Prof. ACC Alberto Santa Maria as Arbitrators was confirmed by the ICC. Mr. Richard Fernyhough Q.C. was appointed as Chairman of the Arbitral Tribunal.5. After considering the claims and counter claims, the tribunal made a partial award on 01.02.2000; by that award, Jindals claims were rejected. NV Engineering was awarded SFr.44,33,416 (Swiss Francs) towards its counterclaims under the ECAAP. The tribunal then called upon the parties to present written representations on interest and costs in terms of Article 20 of the ICC Rules of Arbitration to enable it to frame the final award.6. On 20.2.2000 Jindal filed a petition (Arbitration petition No. 49/2000) before the Bombay High Court under Section 34 of the Act challenging the partial award. The petition was admitted for final hearing on 01.03.2000 and notice was issued to the respondents (including the ICC and the tribunal). An interim injunction restraining the said respondents from receiving any further submissions, and/or passing any further direction and/or Ruling and/or Award in the arbitration proceedings…. was issued. This order was continued from time to time till the petition was decided. The ICC tribunal in the meanwhile was of the view that the interim order passed by the high court was not binding on it and consequently, proceeded further. NV Engineering filed written submissions on interest and cost on 14.03.2001. Jindal, however, notified the tribunal that it did not intend to make any submission on the issue of interest and cost. Mr. Desai (the respondents nominee) indicated that he was unable to continue on the tribunal due to the interim order passed by the court. Resultantly the ICC appointed Mr. Ashok Sancheti as a replacement co-arbitrator in place of Mr. Desai, and the tribunal made its final Award on 22.10.2001. When the final award was made, Jindals challenge to the partial award, and the interim application (No. 98/2000, under Section 9 of the Act) were both pending in the High Court.7. The petition (under Section 34) challenging the partial award was decided by the High Court by an order of a Single Judge dated 6.2.2002(Dated 06.02.2002, which is now reported as Jindal Drugs Ltd v Noy Vallesina 2002 (2) Mah. LJ 820.), which held that the since the partial award was a foreign award, a challenge through a petition was not maintainable under Section 34 of the Act. Jindal preferred an appeal against that order before the Division Bench (Appeal No. 519/2002) (hereafter Jindals challenge appeal). During the pendency of the appeal, NV Engineering had applied for enforcement of the two awards, i.e. the partial and final awards, under Sections 47 and 48 of the Act, in the chapter relating to foreign awards. This petition was allowed and Jindals objections against the two awards enforceability were overruled. The single judge who decided the petition held, in a judgment (hereafter referred to as the enforcement order) that the two awards at Exh. A & B are enforceable, save and except that part of the award at Exh. A which directs payment of Swiss Fr.1,453,316 by Jindal to NV Engineering. Jindal preferred an appeal (hereafter Jindals enforcement appeal) and NV Engineering filed a cross appeal(Jindals appeal was Appeal No. 492/2006; NV Engineerings appeal was Appeal. No. 740/2006).8. By the impugned judgment, even as the later two appeals, which directly dealt with the same subject matter (enforcement of a foreign award were pending), the Division Bench decided Jindals challenge appeal preferred in 2002, and set aside the single judges order (which had ruled that a petition under Section 34 was not maintainable). The Division Bench relied on the judgments of this court, i.e. Bhatia International v. Bulk Trading S. A. & Anr (2002) 4 SCC 105     and Venture Global Engineering v. Satyam Computer Services Ltd. & Anr 2008 (4) SCC 190     to hold that proceedings under Section 34 of the Act could be validly maintained to challenge a foreign award.

Court's reasoning:
17. The decision in Bhatia (Supra n.8), and later, in Venture Global (Supra n.9), had ruled that resort to remedies under Part I of the Act can be made in respect of foreign awards, despite the clear dichotomy in the enactment between domestic awards (covered by Part I) and foreign awards (covered by Part II). This understanding was re-visited in BALCO where this court held as follows:75. We are also unable to accept the submission of the learned counsel for the appellants that the Arbitration Act, 1996 does not make seat of the arbitration as the centre of gravity of the arbitration. On the contrary, it is accepted by most of the experts that in most of the national laws, arbitrations are anchored to the seat/place/situs of arbitration. Redfern in Para 3.54 concludes that the seat of the arbitration is thus intended to be its centre of gravity. [Blackaby, Partasides, Redfern and Hunter (Eds.), Redfern and Hunter on International Arbitration (5th Edn., Oxford University Press, Oxford/New York 2009)] This, however, does not mean that all the proceedings of the arbitration have to take place at the seat of the arbitration. The arbitrators at times hold meetings at more convenient locations. This is necessary as arbitrators often come from different countries. It may, therefore, on occasions be convenient to hold some of the meetings in a location which may be convenient to all. Such a situation was examined by the Court of Appeal in England in Naviera Amazonica Peruana SA v. Compania International de Seguros del Peru [Naviera Amazonica Peruana SA v. Compania International de Seguros del Peru, (1988) 1 Lloyds Rep 116 (CA)] wherein at p. 121 it is observed as follows:The preceding discussion has been on the basis that there is only one place of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms ofreference or the minutes of proceedings or in some other way as the place or seat of the arbitration. This does not mean, however, that the Arbitral Tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is by no means unusual for an Arbitral Tribunal to hold meetings—or even hearings —in a place other than the designated place of arbitration, either for its own convenience or for the convenience of the parties or their witnesses…. It may be more convenient for an Arbitral Tribunal sitting in one country to conduct a hearing in another country — for instance, for the purpose of taking evidence…. In such circumstances each move of the Arbitral Tribunal does not of itself mean that the seat of arbitration changes. The seat of arbitration remains the place initially agreed by or on behalf of the parties.76. It must be pointed out that the law of the seat or place where the arbitration is held, is normally the law to govern that arbitration. The territorial link between the place of arbitration and the law governing that arbitration is well established in the international instruments, namely, the New York Convention of 1958 and the UNCITRAL Model Law of 1985. It is true that the terms seat and place are often used interchangeably. In Redfern and Hunter on International Arbitration [Blackaby, Partasides, Redfern and Hunter (Eds.), Redfern and Hunter on International Arbitration (5th Edn., Oxford University Press, Oxford/New York 2009)] (Para 3.51), the seat theory is defined thus:The concept that an arbitration is governed by the law of the place in which it is held, which is the seat (or forum or locus arbitri) of the arbitration, is well established in both the theory and practice of international arbitration. In fact, the Geneva Protocol, 1923 states***** ******** *****95. The learned counsel for the appellants have submitted that Section 2(1)(e), Section 20 and Section 28 read with Section 45 and Section 48(1)(e) make it clear that Part I is not limited only to arbitrations which take place in India. These provisions indicate that the Arbitration Act, 1996 is subject-matter centric and not exclusively seat-centric. Therefore, seat is not the centre of gravity so far as the Arbitration Act, 1996 is concerned. We are of the considered opinion that the aforesaid provisions have to be interpreted by keeping the principle of territoriality at the forefront. We have earlier observed that Section 2(2) does not make Part I applicable to arbitrations seated or held outside India. In view of the expression used in Section 2(2), the maxim expressumfacitcessaretacitum, would not permit by interpretation to hold that Part I would also apply to arbitrations held outside the territory of India. The expression this Part shall apply where the place of arbitration is in India necessarily excludes application of Part I to arbitration seated or held outside India. It appears to us that neither of the provisions relied upon by the learned counsel for the appellants would make any section of Part I applicable to arbitration seated outside India. It will be apposite now to consider each of the aforesaid provisions in turn.96. Section 2(1)(e) of the Arbitration Act, 1996 reads as under:****** ****** ******We are of the opinion, the term subject-matter of the arbitration cannot be confused with subject-matter of the suit. The term subject-matter in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. For example, if the arbitration is held in Delhi, where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal sitting in Delhi passes an interim order Under Section 17 of the Arbitration Act, 1996, the appeal against such an interim order under Section 37 must lie to the courts of Delhi being the courts having supervisory jurisdiction over the arbitration proceedings and the tribunal. This would be irrespective of the fact that the obligations to be performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi. In such circumstances, both the courts would have jurisdiction i.e. the court within whose jurisdiction the subject-matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution i.e. arbitration is located.98. We now come to Section 20, which is as under:****** ****** ******A plain reading of Section 20 leaves no room for doubt that where the place of arbitration is in India, the parties are free to agree to any place or seat within India, be it Delhi, Mumbai, etc. In the absence of the parties agreement thereto, Section 20(2) authorises the tribunal to determine the place/seat of such arbitration. Section 20(3) enables the tribunal to meet at any place for conducting hearings at a place of convenience in matters such as consultations among its members for hearing witnesses, experts or the parties.99. The fixation of the most convenient venue is taken care of by Section 20(3). Section 20, has to be read in the context of Section 2(2), which places a threshold limitation on the applicability of Part I, where the place of arbitration is in India. Therefore, Section 20 would also not support the submission of the extra-territorial applicability of Part I, as canvassed by the learned counsel for the appellants, so far as purely domestic arbitration is concerned.Only if the agreement of the parties is construed to provide for the seat/place of arbitration being in India — would Part I of the Arbitration Act, 1996 be applicable. If the agreement is held to provide for a seat/place outside India, Part I would be inapplicable to the extent inconsistent with the arbitration law of the seat, even if the agreement purports to provide that the Arbitration Act, 1996 shall govern the arbitration proceedings.****** ******* *******110. Examining the fact situation in the case, the Court observed as follows: (Shashoua case [2009 EWHC 957 (Comm)])The basis for the courts grant of an anti-suit injunction of the kind sought depended upon the seat of the arbitration. An agreement as to the seat of an arbitration brought in the law of that country as the curial law and was analogous to an exclusive jurisdiction clause. Not only was there agreement to the curial law of the seat, but also to the courts of the seat having supervisory jurisdiction over the arbitration, so that, by agreeing to the seat, the parties agreed that any challenge to an interim or final award was to be made only in the courts of the place designated as the seat of the arbitration.Although, venue was not synonymous with seat, in an arbitration clause which provided for arbitration to be conducted in accordance with the Rules of the ICC in Paris (a supranational body of rules), a provision that the venue of arbitration shall be London, United Kingdom did amount to the designation of a juridical seat….In para 54, it is further observed as follows: (Shashoua case [2009 EWHC 957 (Comm)])There was a little debate about the possibility of the issues relating to the alleged submission by the claimants to the jurisdiction of the High Court of Delhi being heard by that Court, because it was best fitted to determine such issues under the Indian law. Whilst I found this idea attractive initially, we are persuaded that it would be wrong in principle to allow this and that it would create undue practical problems in any event. On the basis of what I have already decided, England is the seat of the arbitration and since this carries with it something akin to an exclusive jurisdiction clause, as a matter of principle the foreign court should not decide matters which are for this Court to decide in the context of an anti-suit injunction.In making the aforesaid observations in Shashoua case [2009 EWHC 957 (Comm)] , the Court relied on the judgments of the Court of Appeal in C v. D [2008 Bus LR 843 : 2007 EWCA Civ 1282 (CA)] .111. In C v. D [2008 Bus LR 843: 2007 EWCA Civ 1282 (CA)] the Court of Appeal in England was examining an appeal by the defendant insurer from the judgment of Cooke, J. granting an anti-suit injunction preventing it from challenging an arbitration award in the US courts. The insurance policy provided any dispute arising under this policy shall be finally and fully determined in London, England under the provisions of the English Arbitration Act, 1950 as amended. However, it was further provided that this policy shall be governed by and construed in accordance with the internal laws of the State of New York…. (Bus LR p. 847, para 2). A partial award was made in favour of the claimants. It was agreed that this partial award is, in English law terms, final as to what it decides. The defendant sought the tribunals withdrawal of its findings. The defendant also intimated its intention to apply to a Federal Court applying the US Federal Arbitration Law governing the enforcement of arbitral award, which was said to permit vacatur of an award where arbitrators have manifestly disregarded the law. It was in consequence of such intimation that the claimant sought and obtained an interim anti-suit injunction. The Judge held that parties had agreed that any proceedings seeking to attack or set aside the partial award would only be those permitted by the English law. It was not, therefore, permissible for the defendant to bring any proceedings in New York or elsewhere to attack the partial award. The Judge rejected the arguments to the effect that the choice of the law of New York as the proper law of the contract amounted to an agreement that the law of England should not apply to proceedings post award. The Judge also rejected a further argument that the separate agreement to arbitrate contained in Condition V(o) of the policy was itself governed by New York Law so that proceedings could be instituted in New York. The Judge granted the claimant a final injunction.****** ****** ******116. The legal position that emerges from a conspectus of all the decisions, seems to be, that the choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings.117. It would, therefore, follow that if the arbitration agreement is found or held to provide for a seat/place of arbitration outside India, then the provision that the Arbitration Act, 1996 would govern the arbitration proceedings, would not make Part I of the Arbitration Act, 1996 applicable or enable the Indian courts to exercise supervisory jurisdiction over the arbitration or the award. It would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the English procedural law/curial law. This necessarily follows from the fact that Part I applies only to arbitrations having their seat/place in India.The final conclusions in BALCO were recorded as follows:194. In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted in the UNCITRAL Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to international commercial arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in the Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996.23. Having regard to the precedential unanimity, so to say, about the manner of applicability of BALCO in respect of agreements entered into and awards rendered earlier, with respect to the law of the seat of arbitration (or the curial law) excluding applicability of Part I of the Act, and the unambiguous intention of the parties in the present case (expressed in Clause 12.4.2) that the seat of arbitration was London, where the ICC arbitration proceedings were in fact held, and the awards rendered, this court is of the opinion that the impugned judgment cannot be sustained.24. The above discussion would have been sufficient to dispose of this appeal. However, it is noticeable that the decision in Feurest Day Lawson (Supra n. 17) unambiguously ruled out the maintainability of any appeal against an order granting enforcement of a foreign arbitration award. In the present case, both the partial and final awards are foreign awards. Therefore, the provisions of Sections 47/48 were correctly invoked by NV Engineering, for enforcement of the awards (through Application No 156/2005). Jindal objected to the enforcement proceedings, in accordance with grounds articulated in Part II of the Act. A single judge substantially upheld the award, and proceeded to its enforcement, by a judgment dated 05.06.2006, at the same time rejecting the challenge to enforcement laid out by Jindal. Both parties appealed to the Division Bench; Jindal, on the challenge to the order rejecting its objection to enforcement (Appeal No. 492/2006), and NV Engineering, as to that part of the order of the single judge, refusing to enforce a part of the award (Appeal. No. 740/2006).This court, in Kandla Export Corpn. v. OCI Corpn (2018) 14 SCC 715  held that a further appeal by a party aggrieved by an order of enforcement, even under the later enacted Commercial Courts Act, 2015 is not maintainable:20. Given the judgment of this Court in Fuerst Day Lawson [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 : (2011) 4 SCC (Civ) 178] , which Parliament is presumed to know when it enacted the Arbitration Amendment Act, 2015, and given the fact that no change was made in Section 50 of the Arbitration Act when the Commercial Courts Act was brought into force, it is clear that Section is a provision contained in a self-contained code on matters pertaining to arbitration, and which is exhaustive in nature. It carries the negative import mentioned in para 89 of Fuerst Day Lawson [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 : (2011) 4 SCC (Civ) 178] that appeals which are not mentioned therein, are not permissible. This being the case, it is clear that Section 13(1) of the Commercial Courts Act, being a general provision vis-à-vis arbitration relating to appeals arising out of commercial disputes, would obviously not apply to cases covered by Section 50 of the Arbitration Act.22. This, in fact, follows from the language of Section 50 itself. In all arbitration cases of enforcement of foreign awards, it is Section 50 alone that provides an appeal. Having provided for an appeal, the forum of appeal is left to the Court authorised by law to hear appeals from such orders. Section 50 properly read would, therefore, mean that if an appeal lies under the said provision, then alone would Section 13(1) of the Commercial Courts Act be attracted as laying down the forum which will hear and decide such an appeal.In view of the categorical holdings in the judgments of this court, Jindals appeal to the Division Bench, (Appeal No. 492/2006) is not maintainable. However, in view of the above decisions, and the express terms of Section 50, NV Engineerings appeal (Appeal. No. 740/2006), against the order of the single judge (to the extent it refuses enforcement) is maintainable.26. This court has not considered the merits of the substantive challenge to the enforcement order, because the parties were not heard and therefore, it would not be fair to comment on it. Further, Jindal has proceeded on the assumption that its appeal to the Division Bench on this aspect is pending. In view of the finding of this court that such an appeal (against an order of enforcement) is untenable by reason of Section 50, the merits of Jindals objections to the single judges order, are open for it to be canvassed in appropriate proceedings. Such proceedings cannot also be a resort to any remedy under the Code of Civil Procedure. In the event Jindal chooses to avail of such remedy, the question of limitation is left open, as this court is conscious of the fact that Fuerst Day Lawson (Supra n. 17) is a decision rendered over 10 years ago; it settled the law decisively and has been followed in later judgments. It cannot be said that Jindal was ignorant of the law.