Case: Yograj Infras.Ltd Vs. Ssang Yong Engineering &amp; Constrn.Co.Ltd

On 12th April, 2006, the National Highways Authority of India, New Delhi (NHAI) awarded a contract to the Respondent, SSang Yong Engineering and Construction Co. Ltd., hereinafter referred to asfor the National Highways, Sector II Project, Package: ABD-II/C-8, for upgradation to Four Laning of Jhansi-Lakhnadon Section, KM 297 to KM 351 of NH 26 in the State of Madhya Pradesh. The total contract amount was 2,19,01,16,805/-. On 13th August, 2006, SSY entered into a Sub- Contract with the Appellant Company for carrying out the work in question. The Work Order of the entire project was granted to the Appellant by the Respondent on back-to-back basis. Clause 13 of the Agreement entered into between the Respondent and the Appellant provided that 92% of all payments for the work done received by the Respondent from NHAI, would be passed on to the Appellant. Clauses 27 and 28 provided for arbitration and the governing law agreed to was the Arbitration and Conciliation Act, 1996. On 31st October, 2006, the Appellant furnished a Performance Bank Guarantee for 6,05,00,000/- to the Respondent and it also invested about 88.15 crores in the project. Three more Bank Guarantees, totaling 5,00,00,000/-, for release of mobilization advance were also furnished by the Appellant on 29th May, 2009. On 22nd September, 2009, the Respondent Company issued a notice of termination of the Agreement, inter alia, on the ground of delay in performing the work under the Agreement.4. On account of the above, the Appellant filed an application before the District and Sessions Judge, Narsinghpur, Madhya Pradesh, under Section 9 of the Arbitration and Conciliation Act, 1996, praying for interim reliefs. A similar application under Section 9 of the above Act was filed by the Appellant before the same Court on 30th December, 2009, also for interim reliefs. Ultimately, on 20th May, 2010, the dispute between the parties was referred to arbitration in terms of the Agreement and a Sole Arbitrator, Mr. G.R. Easton, was appointed by the Singapore International Arbitration Centre on 20th May, 2010. On 4th June, 2010, the Appellant filed an application before the Sole Arbitrator under Section 17 of the aforesaid Act being SIAC Arbitration No.37 of 2010, inter alia, for the following reliefsrestrain the SSY from encashing Performance Bank Guarantee No.101BGPGO63040001 dated 31.10.06 of Syndicate Bank, Nehru Place, Delhi of 6.05 crores;b. restrain the SSY from enchashing three Bank Guarantees furnished towards the mobilization advance bearing numbers 101 BGFG 091490001 of 1 Crore, 101 BGFG 091490002 of 1 Crore and 101 BGFG 091490003 of 3 Crores, totaling to 5 Crores;c. direct SSY to release a sum of 144,42,25,884/- along with the interest @ 36% till realization of nationalized bank of India for the aforesaid amount and keep it alive till passing of the final Award.d. restrain SSY from removing, shifting, alienating or transferring in any manner either itself or through any of its agents/employees, the plant, machineries, equipments, vehicles and materials, in other words maintain status-quo, till the passing of the final arbitral award;e. grant any other appropriate interim measures of protection in favour of the Cross-Claimant/applicant, which in the esteemed opinion of this Honble Tribunal are just and proper in the facts and circumstance of theThe Respondent also filed an application under Section 17 of the above Act before the Sole Arbitrator on 5th June, 2010, for interim reliefs. After considering both the applications, the Arbitrator passed an interim order on 29th June, 2010, in the following mannerThe respondent is to immediately release, for use by the Claimant, the items of plant, machinery and equipment (PME) numbered 1,5,7,8,10,19,20,21,22,23 and 32, as listed in Annexure A (Machinery Details) of the Claimants Application dated 5 June 2010.2. The respondent is restrained from creating any third party interest in, or otherwise selling, leasing or charging, the PME or other assets presently located at the work site and/or the camp site and which are owned by the respondent, without the permission of this Tribunal.3(i). The claimant is permitted to use the aggregates, which have been identified in Annexure D (engineers Statement of Materials at Site for September 2009) of the Claimants Application dated 5 June 2010 as a total quantity of 274,580 cubic metres, for the carrying out of the works in accordance with the terms and conditions of the Main Agreement and the Agreement dated 13 August, 2006 between the parties.3(ii) The respondent is to give the Claimant access to the aggregate stockpiles where the abovementioned quantity of material is currently held.The above interim orders are made with the objective of enabling the construction work on the project to continue while the disputes between the parties are resolved in these arbitration proceedings (ref. Terms or Reference dated 23 June 2010).The parties have liberty at short notice, if any of the above directions require clarification or amendment in order to ensure proper implementation.The respondent has leave (until 6 July 2010) to make a further application for the provision of security by the claimant in relation to the PME and aggregates.Aggrieved by the aforesaid interim order passed by the learned Arbitrator, the Appellant herein, which was the respondent before the learned Arbitrator, filed Appeal No.2 of 2010 on 2nd July, 2010 before the learned District Judge, Narsinghpur, under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996, for setting aside the same. On behalf of the respondent it was contended in the said appeal that the same was not maintainable before the learned District Judge, Narsinghpur, since the seat of the arbitration proceedings was in Singapore and the said proceedings were governed by the laws of Singapore. Accepting the submissions advanced on behalf of the respondent, the learned District Judge dismissed the appeal as not maintainable on 23rd July, 2010, without deciding the matter on merits.7. The appellant then moved Civil Revision No.304 of 2010, before the High Court on 26th July, 2010. The same was dismissed by the High Court on 31st August, 2010, against which the Special Leave Petition (now appeal) has been filed.

Court's reasoning:
In our view, Clause 28 of the Agreement provides the answer. As indicated hereinabove, Clause 28 indicates that the governing law of the agreement would be the law of India, i.e., the Arbitration and Conciliation Act, 1996. The learned counsel for the parties have quite correctly spelt out the distinction between theof the contract and theto determine the law which is to govern the arbitration itself. While the proper law is the law which governs the agreement itself, in the absence of any other stipulation in the arbitration clause as to which law would apply in respect of the arbitral proceedings, it is now well-settled that it is the law governing the contract which would also be the law applicable to the Arbitral Tribunal itself. Clause 27.1 makes it quite clear that the Curial law which regulates the procedure to be adopted in conducting the arbitration would be the SIAC Rules. There is, therefore, no ambiguity that the SIAC Rules would be the Curial law of the arbitration proceedings. It also happens that the parties had agreed to make Singapore the seat of arbitration. Clause 27.1 indicates that the arbitration proceedings are to be conducted in accordance with the SIAC Rules. The immediate question which, therefore, arises is whether in such a case the provisions of Section 2(2), which indicates that Part I of the above Act would apply, where the place of arbitration is in India, would be a bar to the invocation of the provisions of Sections 34 and 37 of the Act, as far as the present arbitral proceedings, which are being conducted in Singapore, are concerned.36. In Bhatia International (supra), wherein while considering the applicability of Part I of the 1996 Act to arbitral proceedings where the seat of arbitration was in India, this Court was of the view that Part I of the Act did not automatically exclude all foreign arbitral proceedings or awards, unless the parties specifically agreed to exclude the same.37. As has been pointed out by the learned Single Judge in the order impugned, the decision in the aforesaid case would not have any application to the facts of this case, inasmuch as, the parties have categorically agreed that the arbitration proceedings, if any, would be governed by the SIAC Rules as the Curial law, which included Rule 32, which categorically provides as followsthe seat of arbitration is Singapore, the law of the arbitration under these Rules shall be the International Arbitration Act (Cap. 143A, 2002 Ed, Statutes of the Republic of Singapore) or its modification or re- enactment thereof.Having agreed to the above, it was no longer available to the appellant to contend that theof the agreement would apply to the arbitration proceedings. The decision in Bhatia International Vs. Bulk Trading S.A. [(2002) 4 SCC 105] , which was applied subsequently in the case of Venture Global Engg. Vs. Satyam Computer Services Ltd. [(2008) 4 SCC 190] and Citation Infowares Ltd. Vs. Equinox Corporation [(2009) 7 SCC 220] , would have no application once the parties agreed by virtue of Clause 27.1 of the Agreement that the arbitration proceedings would be conducted in Singapore, i.e., the seat of arbitration would be in Singapore, in accordance with the Singapore International Arbitration Centre Rules as in force at the time of signing of the Agreement. As noticed hereinabove, Rule 32 of the SIAC Rules provides that the law of arbitration would be the International Arbitration Act, 2002, where the seat of arbitration is in Singapore. Although, it was pointed out on behalf of the appellant that in Rule 1.1 it had been stated that if any of the SIAC Rules was in conflict with the mandatory provision of the applicable law of the arbitration, from which the parties could not derogate, the said mandatory provision would prevail, such is not the case as far as the present proceedings are concerned. In the instant case, Section 2(2) of the 1996 Act, in fact, indicates that Part I would apply only in cases where the seat of arbitration is in India. This Court in Bhatia International (supra), while considering the said provision, held that in certain situations the provision of Part I of the aforesaid Act would apply even when the seat of arbitration was not in India. In the instant case, once the parties had specifically agreed that the arbitration proceedings would be conducted in accordance with the SIAC Rules, which includes Rule 32, the decision in Bhatia International and the subsequent decisions on the same lines, would no longer apply in the instant case where the parties had willingly agreed to be governed by the SIAC Rules.39. With regard to the effect of Section 42 of the Arbitration and Conciliation Act, 1996, the same, in our view was applicable at the pre-arbitral stage, when the Arbitrator had not also been appointed. Once the Arbitrator was appointed and the arbitral proceedings were commenced, the SIAC Rules became applicable shutting out the applicability of Section 42 and for that matter Part I of the 1996 Act, including the right of appeal under Section 37 thereof.