R.F. Nariman, J.

1. Leave granted.

2. The present appeal raises an interesting question – as to whether two companies incorporated in India can choose a forum for arbitration outside India – and whether an award made at such forum outside India, to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 [“New York Convention”] applies, can be said to be a “foreign award” under Part II of the Arbitration and Conciliation Act, 1996 [“ Arbitration Act ”] and be enforceable as such. Factual Background 3.1. The appellant is a company incorporated under the Companies Act , Signature Not Verified Digitally signed by R Natarajan 1956 with its registered office at Ahmedabad, Gujarat. The respondent is a Date: 2021.04.20 16:06:51 IST Reason: company incorporated under the Companies Act, 1956 with its registered 1 office at Chennai, Tamil Nadu, and is a 99% subsidiary of General Electric Conversion International SAS, France, which in turn is a subsidiary of the General Electric Company, United States.

3.2. In 2010, the appellant issued three purchase orders to the respondent for supply of certain converters. Pursuant to these purchase orders, the respondent supplied six converters to the appellant. Disputes arose between the parties in relation to the expiry of the warranty of the said converters. In order to resolve these disputes, the parties entered into a settlement agreement dated 23.12.2014. Under clauses 5.1 and 5.2 of the settlement agreement, the respondent agreed to provide certain delta modules along with warranties on these modules for the working of the converter panel. Clause 6 of the settlement agreement contained the dispute resolution clause which reads as follows:

(A minimum of 60 days shall be used for resolving the dispute in amicable way before same can be referred to arbitration). 6.2 In case no settlement can be reached through negotiations, all disputes, controversies or differences shall be referred to and finally resolved by Arbitration in Zurich in the English language, in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce, which Rules are deemed to be incorporated by reference into this clause. The Arbitration Award shall be final and binding on both the parties.

6.3 The Agreement (together with any documents referred to herein) constitutes the whole agreement between the Parties 2 and it is hereby expressly declared that no variation and / or amendments hereof be effective unless mutually agreed upon and made in writing.” 3.3. Disputes arose between the parties pursuant to the settlement agreement whereby the appellant claimed that warranties that were supposed to be given for converters were not so given, whereas the respondent argued that the warranties covered only the delta modules and not the converters. Thus, on 03.07.2017, the appellant issued a request for arbitration to the International Chamber of Commerce [“ICC”]. On 18.08.2017, the parties agreed to resolution of disputes by the sole arbitrator appointed by the ICC. It was agreed between the parties, as was reflected in the request for arbitration and in the terms of reference to arbitration, that the substantive law applicable to the dispute would be Indian law.

3.4. The respondent filed a preliminary application challenging the jurisdiction of the arbitrator on the ground that two Indian parties could not have chosen a foreign seat of arbitration. Importantly, the appellant opposed the said application and asserted that there was no bar in law from this being done. By Procedural Order No.3 dated 20.02.2018, the learned sole arbitrator, Mr. Ian Leonard Meakin, dismissed the respondent’s preliminary application, holding as follows:

Finally, the cases of Enercon (India) Limited v. Enercon GMBH ( 2014) 5 SCC 1 and Bharat Aluminium Co. v. Kaiser Aluminium Inc. (2012) 9 SCC 552 relied on by the Respondent in relation to its submissions that the closest and most real connection test under Indian law do not assist the Respondent because that test is only relevant where the seat is unclear. Moreover, Bharat clearly held that the applicability of section 28 of the Indian Act is restricted to the substantive law of the contract and does not apply to the seat of the arbitration. Conclusion For the reasons set out above, the Tribunal therefore finds that the arbitration clause in the Settlement Agreement is valid and will proceed to apply the Swiss Act because the seat of the arbitration is Zurich, Switzerland.” 3.5. This procedural order was not challenged by either of the parties. Vide the said procedural order, the seat of the arbitration was stated to be Zurich, Switzerland. The respondent suggested Mumbai, India as a convenient venue in which to hold arbitration proceedings as costs would be reduced thereby. The appellant objected to this suggestion. At the Case Management Conference dated 28.06.2018, the learned arbitrator decided that though the seat is in Zurich, all hearings will be held in Mumbai, acceding to the application made by the respondent. Since the mountain did not come to Muhammad, Muhammad, in the form of the learned 5 arbitrator, went to the mountain and held all sittings at the convenient venue in Mumbai.

3.6 A final award dated 18.04.2019 was passed by the learned arbitrator in which the appellant’s claim was rejected. The learned arbitrator held:

The Appellant’s Case:

4.1. Mr. Tushar Himani, learned Senior Advocate appearing on behalf of the appellant, argued that two Indian parties cannot designate a seat of arbitration outside India as doing so would be contrary to section 23 of the Indian Contract Act, 1872 [“ Contract Act ”] read with section 28(1)(a) and section 34(2A) of the Arbitration Act. To buttress this submission, Mr. Himani pointed out the provisions of the Prohibition of Benami Property Transactions Act, 1988 [“ Benami Transactions Act ”] which cannot be bypassed if two Indians are to apply only the substantive law of India. However, by designating a seat outside India, it is open to two Indian parties to opt out of the substantive law of India which itself would be contrary to the public policy of India.

7 4.2. He then argued that foreign awards contemplated under Part II of the Arbitration Act arise only from international commercial arbitrations. “International commercial arbitration”, as has been defined in section 2(1)(f) of the Arbitration Act, would make it clear that there has to be a foreign element when parties arbitrate outside India, the foreign element being that at least one of the parties is, inter alia, a national of a country other than India, or habitually resident in a country other than India, or a body corporate incorporated outside India. For this reason, the award passed in the present case cannot be designated as a foreign award under Part II of the Arbitration Act . To buttress this submission, he relied heavily upon the judgment of a learned Single Judge of this Court in TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd. , (2008) 14 SCC 271 [“TDM”] and two judgments of the Bombay High Court.

4.3. He then sought to distinguish this Court’s judgment in Atlas Export Industries v. Kotak & Co. , (1999) 7 SCC 61 [“Atlas Export”], arguing that the specific argument made under section 23 of the Contract Act was not dealt with by the Court and that, in any case, ultimately, the Court did not allow the appellant in that case to take up this plea as it had not been taken up in the courts below.

4.4. Mr. Himani also argued that the judgment of the Madhya Pradesh High Court in Sasan Power Limited v. North American Coal Corporation 8 (India) Pvt. Ltd. , 2015 SCC OnLine MP 7417 [“Sasan I”], which decided that two Indian parties can choose a foreign seat outside India for the purpose of resolving their disputes, was based on an incorrect appreciation of facts, as observed in the appeal to the Supreme Court in Sasan Power Ltd. v. North American Coal Corporation (India) Pvt. Ltd. , (2016) 10 SCC 813 [“Sasan II”].

4.5. Going to the language of section 44 of the Arbitration Act, Mr. Himani stressed upon the expression “unless the context otherwise requires” and cited several judgments to show that the context of section 44 is that of an international commercial arbitration and cannot, therefore, apply to a foreign award between two Indian parties without the involvement of a foreign element. He also relied heavily upon the 246 th Report of the Law Commission of India of August 2014 which recommended amendments to the Arbitration Act , and particularly, the substitution of section 2(1)(e) and the explanation to section 47 . He stressed the fact that both these amendments were necessary to ensure that it is the High Court that exercises jurisdiction in all cases of international commercial arbitration. For this purpose, he relied upon the domestic arbitration law of the United States [“U.S.”] to show that even under the said law, it is only when an agreement or award between two U.S. citizens involves some foreign element that such arbitration can take place abroad. He buttressed these 9 submissions by referring to the proviso to section 2(2) of the Arbitration Act which, according to him, furnished a bridge that joined Part II to Part I, as a result of which it became clear that section 44 refers only to international commercial arbitrations, as is stated in the proviso to section 2(2) . 4.6. He then went on to argue that the Arbitration Act is a self-contained code, as has been held by several judgments of this Court, and that when there is no foreign element involved in an award made in Zurich between two Indian companies, such award cannot be the subject matter of challenge or enforcement either under Part I or Part II of the Arbitration Act . 4.7. Mr. Himani then relied heavily upon section 10 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 [“ Commercial Courts Act ”] which also recognises only two categories of arbitrations – international commercial arbitration and other than international commercial arbitration. He argued that there is a head-on conflict between section 10(3) of the Commercial Courts Act and section 47 of the Arbitration Act, as a result of which the former must prevail. For this purpose, he relied upon the non-obstante clause in section 21 of the Commercial Courts Act. This being the case, in any case, the impugned judgment made by the Gujarat High Court has to be set aside as it was made without jurisdiction because even as per the impugned judgment, the present is not a case of an international commercial 10 arbitration but instead falls under the second category of “other than international commercial arbitration”, as a result of which only the district court would have jurisdiction.

4.8. He finally argued that going by the closest connection test, the seat of arbitration can only be held to be Mumbai, and for this purpose, he relied upon Enercon (India) Ltd. v. Enercon GmbH , (2014) 5 SCC 1 [“Enercon”]. According to him, since every factor connected the arbitration in the present case to India, with no foreign element involved, applying this test, the seat would necessarily be Mumbai. Consequently, he argued that Zurich, at best, could be stated to be a “salutary seat”. This being so, obviously Part II of the Arbitration Act would not apply and the judgment has to be set aside on this score also. Despite the fact that in the written submissions before us, Mr. Himani argued, without prejudice, that the award would not be enforceable under section 48 of the Arbitration Act, he very fairly did not press this issue.

The Respondent’s Case:

5.1. Mr. Nakul Dewan, learned Senior Advocate appearing on behalf of the respondent, first pointed out that the appellant argued the exact opposite of what it itself sought under Procedural Order No.3 dated 20.02.2018 before the arbitrator. Having argued that two Indian companies can agree to have a seat of arbitration outside India, and that in the present 11 case, that seat was Zurich, and having opposed any hearings being held in Mumbai, it would now not be open to the appellant to argue the exact opposite before this Court only because the final award was made against it.

5.2. Mr. Dewan then argued that Part I and Part II of the Arbitration Act have been held to be mutually exclusive and pointed out the fundamental fallacy contained in the argument of Mr. Himani to try and import the definition of international commercial arbitration from Part I of the Arbitration Act into section 44 via the expression “unless the context otherwise requires” contained in section 44 , and the so-called bridge between Parts I and II contained in the proviso to section 2(2) . According to him, section 44 is modelled on the New York Convention which only requires “persons”, both of whom can be Indian, having disputes arising out of commercial legal relationships, which are to be decided in the territory of a State outside India, which State is a signatory to the New York Convention. He then argued that any attempt to breach the wall created between Part I and Part II, which have been held to be mutually exclusive in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. , (2012) 9 SCC 552 [“BALCO”], cannot be countenanced by this Court. 5.3. He further argued that unlike the definition of “international commercial arbitration” contained in section 2(1)(f) in Part I, nationality, 12 domicile or residence of parties is irrelevant for the purpose of applicability of section 44 of the Arbitration Act. As a matter of fact, according to the learned Senior Advocate, this is no longer res integra as it has been expressly decided under the pari materia provisions of the Foreign Awards (Recognition and Enforcement) Act, 1961 [“Foreign Awards Act”] in Atlas (supra) that two Indian parties can enter into an arbitration agreement with a seat outside India, which would result in an award that would then have to be enforced as a foreign award.

5.4. He also relied upon the judgment of the Madhya Pradesh High Court in Sasan I (supra) and argued that, in appeal, the Supreme Court did not dislodge any of the findings of the High Court but instead proceeded on the basis that the arbitration was not between only two Indian companies. He then argued, relying upon a commentary on International Commercial Arbitration, authored by Prof. Eric E. Bergsten and published by the United Nations Conference on Trade and Development in 2005 [“UNCTAD Commentary on International Commercial Arbitration”], that parties being from the same State can agree to have their disputes resolved in a State other than the State to which they belong, as a result of which the New York Convention will then apply to enforce the aforesaid foreign award.

13 5.5. He then went on to argue that neither section 23 nor section 28 of the Contract Act proscribe the choice of a foreign seat in arbitration. As a matter of fact, the exception to section 28 of the Contract Act expressly excepts arbitration from the clutches of section 28 , which is an express approval to party autonomy which is the very basis of the Arbitration Act . He also argued that section 23 of the Contract Act, when it speaks of “public policy”, must be confined to clear and incontestable cases of harm to the public and cited several cases to buttress this proposition. 5.6. In any case, he combated Mr. Himani’s argument by referring to paragraph 118 of BALCO (supra) to argue that section 28(1) of the Arbitration Act would apply only when the arbitration takes place in India and not when the seat is outside India. Equally, grounds available for challenge, which would no longer be available as a result of two parties going abroad to resolve their differences, are waivable, and both parties have, in this case, substituted the challenge to be made to an award under section 34 of the Arbitration Act with two bites at the cherry – first, by a challenge under Swiss law to the award in Zurich, and second, by resisting enforcement under the grounds contained in section 48 of the Arbitration Act.

5.7. He then refuted Mr. Himani’s contention that the expression “unless the context otherwise requires” can be used to defeat the very basis of 14 section 44 , arguing that section 44 only requires that the seat of arbitration be in a territory which is outside India and cited case law for this proposition.

5.8. He also refuted Mr. Himani’s argument that Mumbai should be the seat, as the closest connection test applies only absent the determination of seat. In the present case, the arbitration clause in the settlement agreement, together with the procedural orders passed by the arbitrator, designated Zurich as the seat and Mumbai only as a convenient venue, which has been accepted by both parties, and must govern the arbitral proceedings in this case.

5.9. He then proceeded to distinguish the three judgments relied upon by Mr. Himani to demonstrate that two Indian parties can choose a foreign seat. He then went on to argue that both in the proviso to section 2(2) and section 10 of the Commercial Courts Act, the phrase “international commercial arbitration” is not governed by the definition contained in section 2(1)(f) but would only refer to arbitrations in which the seat is outside India.

The Arbitration and Conciliation Act , 1996

6. Having heard learned counsel for both parties, it is first necessary to set out the relevant provisions of Part I and Part II of the Arbitration Act. 15 “2. Definitions.—(1) In this Part, unless the context otherwise requires,— ***

(e) “Court” means—

(i) in the case of an arbitration other than international commercial arbitration, the principal civil court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, but does not include any civil court of a grade inferior to such principal civil court, or any Court of Small Causes;

(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;

(f) “international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is—

(i) an individual who is a national of, or habitually resident in, any country other than India; or

(ii) a body corporate which is incorporated in any country other than India; or

(iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or

(iv) the Government of a foreign country;

*** 16 Scope (2) This Part shall apply where the place of arbitration is in India.

Provided that subject to an agreement to the contrary, the provisions of Sections 9 , 27 and clause (b) of sub-section (1) and sub-section (3) of Section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.

*** Construction of references (6) Where this Part, except Section 28 , leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue.

(7) An arbitral award made under this Part shall be considered as a domestic award.” A party may choose to waive its right to object under section 4 of the Arbitration Act, which reads as follows:

limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.” The rules applicable to the substance of dispute are set out in section 28 as follows:

clause (ii) by the parties, the arbitral tribunal shall apply the rules of law it considers to be appropriate given all the circumstances surrounding the dispute.

(2) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorised it to do so.

(3) While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.” Recourse to a court against an arbitral award may be made by an application for setting aside such award, inter alia, under section 34(2A) of the Arbitration Act, which is set out as follows:

Explanation.—In this section and in the sections following in this Chapter, “Court” means the High Court having original jurisdiction to decide the questions forming the subject matter of the arbitral award if the same had been the subject matter of a suit on its original civil jurisdiction and in other cases, in the High Court having jurisdiction to hear appeals from decrees of courts subordinate to such High Court.” “49. Enforcement of foreign awards.—Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court.” Seat of the arbitral proceedings in the present case

7. Clause 6 of the settlement agreement extracted above would show that arbitration is to be resolved “in Zurich” in accordance with the Rules of Conciliation and Arbitration of the ICC. In similar circumstances, in Mankastu Impex (P) Ltd. v. Airvisual Ltd. , (2020) 5 SCC 399, where disputes were to be resolved by arbitration “administered in Hong Kong”, the Court concluded:

8. At the Case Management Conference held on 28.06.2018, the learned arbitrator specifically decided:

9. The closest connection test strongly relied upon by Mr. Himani would only apply if it is unclear that a seat has been designated either by the parties or by the tribunal. In this case, the seat has clearly been designated both by the parties and by the tribunal, and has been accepted by both the parties. The judgment in Enercon (supra), relied upon by Mr. Himani, applied the aforesaid test only because the arbitration clause therein provided that London was the “venue” and not the seat. It was, therefore, pointed out by this Court that given the various factors connecting the dispute to India and the absence of any factors connecting it to England, on the facts of that case, there was no necessity to regard London as the seat when it was, in fact, only the venue (see paragraphs 98-103, 114-116, and

10. For this reason, it is not possible to accept Mr. Himani’s contention that the seat of arbitration ought to be held to be Mumbai in the facts of the present case.

Part I and Part II of the Arbitration Act are mutually exclusive

11. The Arbitration Act is in four parts. Part I deals with arbitrations where the seat is in India and has no application to a foreign-seated arbitration. It is, therefore, a complete code in dealing with appointment of arbitrators, commencement of arbitration, making of an award and challenges to the aforesaid award as well as execution of such awards. On the other hand, Part II is not concerned with the arbitral proceedings at all. It is concerned only with the enforcement of a foreign award, as defined, in India. Section 45 alone deals with referring the parties to arbitration in the circumstances mentioned therein. Barring this exception, in any case, Part II does not apply to arbitral proceedings once commenced in a country outside India.

12. Even before the Arbitration Act of 1996, India, being one of the earliest signatories to the New York Convention, legislated in accordance therewith and enacted the Foreign Awards Act in 1961. Under this Act, section 2 , which is pari materia to section 44 of the Arbitration Act, laid down:

Similarly, Section 44 gives the definition of a foreign award for the purposes of Part II (Enforcement of Certain Foreign Awards); Chapter I (New York Convention Awards). Further, Section 53 gives the interpretation of a foreign award for the purposes of Part II (Enforcement of Certain Foreign Awards); Chapter II (Geneva Convention Awards). From the aforesaid, the intention of Parliament is clear that there shall be no overlapping between Part I and Part II of the Arbitration Act, 1996. The two parts are mutually exclusive of each other. To accept the submissions made by the learned counsel for the appellants would be to convert the “foreign award” which falls within Section 44 , into a domestic award by virtue of the provisions contained under Section 2(7) even if the arbitration takes place outside India or is a foreign seated arbitration, if the law governing the arbitration agreement is by choice of the parties stated to be the Arbitration Act, 1996 . This, in our opinion, was not the intention of Parliament. The territoriality 26 principle of the Arbitration Act, 1996 , precludes Part I from being applicable to a foreign seated arbitration, even if the agreement purports to provide that the arbitration proceedings will be governed by the Arbitration Act, 1996 .” *** “120. We are unable to agree with the submission of the learned Senior Counsel that there is any overlapping of the provisions in Part I and Part II; nor are the provisions in Part II supplementary to Part I. Rather there is complete segregation between the two parts.

121. Generally speaking, regulation of arbitration consists of four steps:

In our opinion, the aforesaid delineation is self-evident in Part I and Part II of the Arbitration Act, 1996. Part I of the Arbitration Act, 1996 regulates arbitrations at all the four stages. Part II, however, regulates arbitration only in respect of commencement and recognition or enforcement of the award.” *** “124. Having accepted the principle of territoriality, it is evident that the intention of Parliament was to segregate Part I and Part II. Therefore, any of the provisions contained in Part I cannot be made applicable to foreign awards, as defined under Sections 44 and 53 i.e. the New York Convention and the Geneva awards. This would be a distortion of the scheme of the Act. It is, therefore, not possible to accept the submission of Mr Subramanium that provisions contained in Part II are supplementary to the provision contained in Part I. Parliament has clearly segregated the two parts.”

13. This being the case, it is a little difficult to accede to any argument that would breach the wall between Parts I and II. Mr. Himani’s argument that the proviso to section 2(2) of the Arbitration Act is a bridge which connects the two parts must, thus, be rejected. As a matter of fact, section 27 2(2) specifically states that Part I applies only where the place of arbitration is in India. It is settled law that a proviso cannot travel beyond the main enacting provision – see Union of India v. Dileep Kumar Singh , (2015) 4 SCC 421 (at paragraph 20), DMRC v. Tarun Pal Singh, ( 2018) 14 SCC 161 (at paragraph 21), Kandla Export Corpn. v. OCI Corpn. , ( 2018) 14 SCC 715 (at paragraph 13), and Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, Calicut , 2021 SCC OnLine SC 16 (at paragraph 41).

14. As a matter of fact, the reason for the insertion of the proviso to section 2(2) by the Arbitration and Conciliation (Amendment) Act, 2015 was because the judgment in Bhatia International v. Bulk Trading S.A. , (2002) 4 SCC 105 [“Bhatia”] had muddied the waters by holding that section 9 would apply to arbitrations which take place outside India without any express provision to that effect. The judgment in Bhatia (supra) has been expressly overruled a five-Judge Bench in BALCO (supra). Pursuant thereto, a proviso has now been inserted to section 2(2) which only makes it clear that where, in an arbitration which takes place outside India, assets of one of the parties are situated in India and interim orders are required qua such assets, including preservation thereof, the courts in India may pass such orders. It is important to note that the expression “international commercial arbitration” is specifically spoken of in the context of a place of arbitration being outside India, the consequence of which is an arbitral 28 award to be made in such place, but which is enforced and recognised under the provisions of Part II of the Arbitration Act . The context of this expression is, therefore, different from the context of the definition of “international commercial arbitration” contained in Section 2(1)(f) , which is in the context of such arbitration taking place in India, which only applies “unless the context otherwise requires”. The four sub-clauses contained in section 2(1)(f) would make it clear that the definition of the expression “international commercial arbitration” contained therein is party-centric in the sense that at least one of the parties to the arbitration agreement should, inter alia, be a person who is a national of or habitually resident in any country other than India. On the other hand, when “international commercial arbitration” is spoken of in the context of taking place outside India, it is place-centric as is provided by section 44 of the Arbitration Act. This expression, therefore, only means that it is an arbitration which takes place between two parties in a territory outside India, the New York Convention applying to such territory, thus making it an “international” commercial arbitration.

Ingredients of a Foreign Award sought to be enforced under Part II

15. Section 44 of the Arbitration Act is modelled on Articles I and II of the New York Convention. The relevant provisions of the New York Convention read as under:

16. By way of contrast, section 53 of the Arbitration Act, which deals with awards under the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927 [“Geneva Convention”], states:

17. As a matter of fact, before the New York Convention was made final, several countries wanted to insert the provisions of section 53(b), which reflected Article I of the Geneva Convention, in the New York Convention as well. Thus, China objected to the phrasing of Article I of the New York Convention, stating:

18. Professor Pieter Sanders, in an article “New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards” (Netherlands International Law Review, Volume 6, Issue 1, March 1959), outlined what he referred to as the strides made by the New York Convention when compared with the Geneva Convention, thus:

19. Likewise, Gary B. Born, in his book “International Commercial Arbitration” (Wolters Kluwer, 3rd Edn., 2021), has this to say:

20. Finally, the New York Convention, in Article I(3), referred to only two conditions that can be made by a State when it signs, ratifies, or accedes to the New York Convention, as follows:

21. Under section 44 of the Arbitration Act, a foreign award is defined as meaning an arbitral award on differences between persons arising out of legal relationships considered as commercial under the law in force in India, in pursuance of an agreement in writing for arbitration to which the New York Convention applies, and in one of such territories as the Central Government, by notification, declares to be territories to which the said Convention applies. Thus, what is necessary for an award to be designated as a foreign award under section 44 are four ingredients:

Ingredient (i) is undoubtedly satisfied on the facts of this case. Ingredient

(ii) is satisfied given clause 6 of the settlement agreement. Ingredients (iii) and (iv) are also satisfied on the facts of this case as the disputes are between two persons, i.e. two Indian companies, and the arbitration is conducted at the seat designated by the parties, i.e. Zurich, being in Switzerland, a signatory to the New York Convention.

22. At this juncture, it is important to cite the UNCTAD Commentary on International Commercial Arbitration, which states:

23. The ICCA’s Guide to the Interpretation of the 1958 New York Convention: A Handbook for Judges, compiled by the International Council for Commercial Arbitration with the assistance of the Permanent Court of Arbitration, in its comment on Article I(1) of the New York Convention, and particularly, the expression “awards made in the territory of a State other than the State where the recognition and enforcement … are sought”, states as follows:

24. However, Mr. Himani strongly relied upon the following judgments to buttress his submission that the expression “unless the context otherwise requires” used in section 44 would necessarily import the definition of “international commercial arbitration” contained in Part I when the context requires this to be done, namely, when two Indian parties are resolving their disputes against each other in a territory outside India:

Therefore in finding out the meaning of the word “insurer” in various sections of the Act, the meaning to be ordinarily given to it is that given in the definition clause. But this is not inflexible and there may be sections in the Act where the meaning may have to be departed from on account of the subject or context in which the word has been used and that will be giving effect to the opening sentence in the definition section, namely, unless there is anything repugnant in the subject or context. In view of this qualification, the court has not only to look at the words but also to look at the context, the collocation and the object of such words relating to such matter and interpret the meaning intended to be conveyed by the use of the words under the circumstances. Therefore, though ordinarily the word “insurer” as used in the Act would mean a person or body corporate actually carrying on the business of insurance it may be that in certain sections the word may have a somewhat different meaning.” (at pages 863-864)

( ii) Bennett Coleman & Co. (P) Ltd. v. Punya Priya Das Gupta , (1969) 2 SCC 1 “6. … But assuming that there is such a conflict as contended, we do not have to resolve that conflict for the purposes of the problem before us. The definition of Section 2 of the present Act commences with the words “In this Act unless the context otherwise requires” and provides that the definitions of the various expressions will be those that are given there. Similar qualifying expressions are also to be found in the Industrial Disputes Act, 1947 , the Minimum Wages Act, 1948 , the C.P. and Berar Industrial Disputes Settlement Act, 1947 and certain other statutes dealing with industrial questions. It is, therefore, clear that the definitions of ‘a newspaper employee’ and ‘a working journalist’ have to be construed in the light of and subject to the context requiring otherwise. Section 5 of the Act, which confers the right to gratuity itself contemplates in clause

(d) of sub-section (1) a case of payment of gratuity to the nominee or the family of a working journalist who dies while he is in the service of a newspaper establishment. Section 17(1) provides that where any amount is due under the Act to a newspaper employee from an employer, such an employee 39 himself or a person authorised by him or, in case of his death, any member of his family can apply to the State Government or other specified authority for the recovery thereof. Similar provisions are also to be found in Section 33-C(1) of the Industrial Disputes Act. Claims under that section include those for compensation in cases of retrenchment, transfer of an undertaking and closure under Chapter V-A of that Act, all of which would necessarily be claims arising after termination of service and the claimant would obviously be one in all those cases who would not be presently employed in the establishment of the employer against whom such claims are made. Likewise, the claim for gratuity under Section 17 , read with Section 5 of the Act, would itself be one which accrues after the termination of employment. These provisions, therefore, clearly indicate that it is not only a newspaper employee presently employed in a particular newspaper establishment who can maintain an application for gratuity. The scheme of all these acts dealing with industrial questions is to permit an ex-employee to avail of the benefits of their provisions, the only requirement being that the claim in dispute must be one which has arisen or accrued whilst the claimant was in the employment of the person against whom it is made. There can, therefore, be no doubt that the definitions of a “newspaper employee” and “working journalist” being subject to a context to the contrary, the benefit of Sections 5 and 17 is available to an ex-employee though he has ceased to be in the employment of that particular newspaper establishment at the time of his application for gratuity. The contention that the respondent was not entitled to maintain his application as he was not in the service of the appellant company on the date of his claim before the Labour Court cannot be sustained.”

( iii) Allied Motors (P) Ltd. v. CIT , (1997) 3 SCC 472 “12. In the case of Goodyear India Ltd. v. State of Haryana [(1990) 2 SCC 71 : 1990 SCC (Tax) 223 : (1991) 188 ITR 402] this Court said that the rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act.

13. Therefore, in the well-known words of Judge Learned Hand, one cannot make a fortress out of the dictionary; and should 40 remember that statutes have some purpose and object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning. In the case of R.B. Jodha Mal Kuthiala v. CIT [(1971) 3 SCC 369 : (1971) 82 ITR 570] , this Court said that one should apply the rule of reasonable interpretation. A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole.”

25. We have already seen that the context of section 44 is party-neutral, having reference to the place at which the award is made. For this reason, it is not possible to accede to the argument that the very basis of section 44 should be altered when two Indian nationals have their disputes resolved in a country outside India. On the other hand, the judgment in S.K. Gupta v. K.P. Jain , (1979) 3 SCC 54 is apposite, and states as follows:

26. For this reason, it is not possible to accede to the argument that the expression “unless the context otherwise requires” can be held to undo the very basis of section 44 by converting it from a seat-oriented provision in countries that are signatories to the New York Convention to a person- oriented provision in which one of the parties to the arbitration agreement has to be a foreign national or habitually resident outside India. In any case, the context of section 44 is very far removed from the context of an international commercial arbitration in Part I which is defined for the purposes of section 11 , section 28 , section 29A(1), section 34(2A) , and section 43I, all of which occur in Part I and deal with arbitrations which take place in India. Also, the argument of Mr. Himani would involve bodily importing the expression “international commercial arbitration” into section 42 44 , which cannot be done because of the opening words of section 44 , “In this Chapter” which is Chapter I of Part II, and then applying the definition contained in section 2(1)(f) of the Arbitration Act which, being restricted to Part I, must now be applied to Part II. No canon of interpretation would permit acceptance of such an argument.

27. At this point, it is important to refer to the judgment of this Court in Atlas (supra). In this case, even though the appellant, an Indian company, had entered into a contract dated 03.06.1980 with a company incorporated in Hong Kong, the goods were to be supplied through an Indian company, namely, Kotak & Co., in Mumbai. Disputes arose between the two Indian companies – Atlas Exports Pvt. Ltd. and Kotak & Co. The contract dated 03.06.1980 incorporated an arbitration clause as follows:

The Court also held that since this plea had never been taken in any of the courts below, it was not available to the appellant to raise the said plea before this Court for the first time.

29. It is clear that there can be more than one ratio decidendi to a judgment. Thus, In Jacobs v. London County Council, (1950) 1 All ER 737, the House of Lords, after referring to some earlier decisions, held, as follows:

we must take both as forming the ground of the judgment.” So, also, in Cheater v. Cater, (1918) 1 KB 247 (CA) Pickford, L.J., after citing a passage from the judgment of Mellish, L.J., in Erskine v. Adeane, (1873) LR 8 Ch App 756, said: (Cheater case, KB p. 252) “… That is a distinct statement of the law and not a dictum. It is the second ground given by the Lord Justice for his judgment. If a Judge states two grounds for his judgment and bases his decision upon both, neither of those grounds is a dictum.” (at page 741) The said judgment has been followed in State of Gujarat v. Manoharsinhji Pradyumansinhji Jadeja , (2013) 2 SCC 300 (at paragraphs 78 and 79) and in Shayara Bano v. Union of India , (2017) 9 SCC 1 (at footnote 65).

30. Obviously, there were two reasons for discarding the appellant’s argument in Atlas (supra) – the first reason was clearly on merits. The 47 second reason undoubtedly refused to entertain this plea as it had not been raised earlier. However, this was coupled with the fact that the parties participated in the arbitral proceedings and suffered an award, after which such plea was then taken. We are, therefore, unable to accede to the contention of Mr. Himani that this case cannot be regarded as an authority for the proposition that sections 23 and 28 of the Contract Act are out of harm’s way when it comes to enforcing a foreign award under the Foreign Awards Act, 1961, where both parties are Indian companies.

31. It is interesting to note that under U.S. law, an arbitration agreement or award made between two U.S. citizens shall not fall under the New York Convention unless such relationship involves properties located abroad, envisages performance of a contract, entered in the U.S., to take place abroad, or has some reasonable connection with one or more foreign states. Thus, section 202 of the Federal Arbitration Act [Title 9, U.S. Code] states as follows:

32. It is important to note that no such caveat is entered when India acceded to the New York Convention and enacted the Foreign Awards Act and the Arbitration Act, 1996. On the contrary, we have seen as to how “persons” mentioned in section 44 has no reference to nationality, residence or domicile. This is another important pointer to the fact that, unlike the U.S. Code, section 44 of the Arbitration Act does not enter any such caveat.

33. In Sasan I (supra), the dispute resolution clause contained in the contract between two Indian companies was set out in paragraph 33 of the judgment as follows:

The place of arbitration shall be London, England. Each party shall appoint one (1) arbitrator and the two (2) arbitrators so appointed shall together select and appoint a third arbitrator. If either Reliance, on the one hand, or NAC, on the other hand, fail to appoint their respective arbitrator within 30(thirty) days after receipt by respondent(s) of the demand for arbitration or if the two (2) party-appointed arbitrators are unable to appoint the chairperson of the arbitral tribunal within thirty (30) days of the appointment of the second arbitrator, then the ICC shall appoint such arbitrator or the chairperson, as the case may be, in accordance with the listing, ranking and striking provisions of the Rules. Save and except the provision under Section 9 , the provisions of the Part 1 of (Indian) Arbitration and Conciliation Act, 1996 , as amended (the ‘ Arbitration Act ’) shall not apply to the arbitration. The arbitrators shall not award punitive, exemplary, multiple or consequential damages. In connection with the arbitration proceedings, the parties hereby agree to cooperate in good faith with each other and the arbitral tribunal and to use their respective best efforts to respond promptly to any reasonable discovery demand made by such party and the arbitral tribunal.’ Sub-clause (d) of this Article deals with payments to be made by the parties for the purpose of Arbitration.

‘(d) Each party shall bear its own arbitration expenses, and Reliance on the one hand, and NAC, on the other hand, shall pay one-half of the ICC's and the chairperson's fees and expenses, unless the arbitrators determine that it would be equitable if all or a portion of the prevailing party's expenses should be borne by the other party. Unless the Award provides for non-monetary remedies, any such Award shall be made and shall be promptly payable in (i) US Dollars if payable to NAC or (ii) Rupees if paid to Reliance net of any tax or other deduction. The Award shall include interest from the date of any breach or other violation of this Agreement and the rate of interest shall be specified by the arbitral tribunal and shall be calculated 50 from the date of any such breach or other violation to the date when the Award is paid in full.’” The Court then referred to BALCO (supra) and held:

We need not go into the questions any further now, as we find that the judgment in the case of Atlas Exports (supra) is a binding precedent.

56. Various other contentions were also advanced by Shri. Anirudh Krishnan, learned counsel, to say that the judgment in the case of TDM Infrastructure (supra) is not by a Court and, therefore, the provision of Article 141 of the Constitution will not apply. Once we have held that the principle of law laid down by the Supreme Court in the case of Atlas Exports (supra) is binding on us and is applicable to the present dispute, we need not go into all these questions.

57. On going through the scheme of the Arbitration and Conciliation Act, 1996 , we find that based on the seat of arbitration so also the nationality of parties, an arbitration is classified to be an ‘International Arbitration’, and the governing law is also determined on the basis of the seat of arbitration. Therefore, it is clear that based on the seat of arbitration, the question of permitting two Indian companies/parties to arbitrate out of India is permissible. In the case of Atlas Exports (supra) itself, the principle has been settled that two Indians can agree to have a seat of arbitration outside India. Now, if two Indian Companies agree to have their seat of arbitration in a foreign country, the question would be as to whether the provisions of Part I or Part II would apply. Section 44 , of the Act of 1996, contemplates a foreign award to be one pertaining to difference between persons arising out of legal relationship, whether 56 contractual or not, which is in pursuance to an agreement in writing for arbitration, to which the convention set forth in the first schedule applies.

58. In the First Schedule to the Act of 1996, convention on the recognition and enforcement of foreign award popularly known as New York Convention has been laid down and admittedly in this case the parties have agreed to have an arbitration with its seat outside India i.e.. London. If that be the position then the provisions of section 45 would be attracted until and unless it is established that the agreement is null and void, inoperative or incapable of being performed. If we analyse the scheme of the Arbitration and Conciliation Act, 1996 , we find that there is a distinction between ‘International Commercial Arbitration’ and a ‘Foreign Award’. It is the case of the appellant that in a dispute between two Indian Parties, which is a domestic arbitration, Part II and Section 45 of the Act of 1996 will not apply. However, when we consider the distinction between ‘International Commercial Arbitration’ and ‘Foreign Award’, we find that there is a difference between an International Commercial Arbitration and an Arbitration which is not an International Commercial Arbitration. The same is based on the nationality of the parties and this distinction is only relevant for the purpose of following the appointment procedure as contemplated under section 11 . As far as nationality of the parties are concerned, the same has no applicability for considering the applicability of Part II, of the Act of 1996. Applicability of Part II is determined solely based on what is the seat of arbitration, whether it is in a country which is signatory to the New York Convention. If this requirement is fulfilled, Part II will apply and in the present case as this requirement is fulfilled, we have no hesitation in holding that the dispute in question is covered by Part II of the Act of 1996.” *** “72. Finally, we may observe that once it is found by us that parties by mutual agreement have decided to resolve their dispute by arbitration and when they, on their own, chose to have the seat of arbitration in a foreign country, then in view of the provisions of Section 2(2) of the Act of 1996, Part I of the Act , will not apply in a case where the place of arbitration is not India and if Part I does not apply and if the agreement in question fulfils the requirement of Section 44 then Part II will apply and when Part II applies and it is found that agreement is 57 not null or void or inoperative, the bar created under Section 45 would come into play and if bar created under Section 45 comes into play then it is a case where the Court below had no option but to refer the parties for arbitration as the bar under Section 45 would also apply and the suit itself was not maintainable.” This statement of the law has our approval. It may only be mentioned that the judgment in Fuerst Day Lawson Ltd. v. Jindal Exports Ltd. , (2011) 8 SCC 333 [“Fuerst Day Lawson”], referred to the provisions of the Foreign Awards Act, 1961 and Part II of the Arbitration Act of 1996 and not the Arbitration Act, 1940 , as has been incorrectly held in paragraphs 53 and 54 of the aforesaid judgment. In addition, it may only be mentioned that the judgment of this Court by a learned Single Judge, under section 11 of the Arbitration Act, in TDM (supra) cannot, in any case, be regarded as a binding precedent, having been delivered by a Single Judge appointing an arbitrator under section 11 – see State of West Bengal v. Associated Contractors , (2015) 1 SCC 32 (at paragraph 17).

34. The Bombay High Court has referred to and relied upon TDM (supra) to arrive at the opposite conclusion of Sasan I (supra). Thus, in Seven Islands Shipping Ltd. v. Sah Petroleums Ltd., (2012) 5 Mah LJ 822, one of us (Gavai, J.) sitting as Single Judge of the Bombay High Court, after placing reliance on TDM (supra), held:

35. Likewise, another learned Single Judge of the Bombay High Court, in M/s. Addhar Mercantile Pvt. Ltd. v. Shree Jagadamba Agrico Exports Pvt. Ltd., Arbitration Application No. 197 of 2014 (decided on 12.06.2015), after referring to TDM (supra), then held:

36. Both these decisions rely on the judgment of this Court in TDM (supra) and have not appreciated the law in its correct perspective and, therefore, stand overruled. On the other hand, a learned Single Judge of the Delhi High Court in GMR Energy Limited v. Doosan Power Systems India, CS (COMM ) 447/2017 (decided on 14.11.2017), considered the same question and followed the judgment of the Madhya Pradesh High Court in Sasan I (supra) – see paragraphs 29, 30 and 31. It distinguished the judgment in TDM (supra) correctly, as follows:

3. Stay of proceedings in 45. Power of judicial authority respect of matters to be to refer parties to arbitration. referred to arbitration.— — Notwithstanding anything Notwithstanding anything contained in Part I or in the contained in the Arbitration Code of Civil Procedure , 1908 Act, 1940 (10 of 1940), or in (5 of 1908), a judicial authority, the Code of Civil Procedure , when seized of an action in a 1908 (5 of 1908), if any party matter in respect of which the to an agreement to which parties have made an Article II of the Convention set agreement referred to in Section forth in the Schedule applies, 44, shall, at the request of one or any person claiming of the parties or any person through or under him claiming through or under him, commences any legal refer the parties to arbitration, proceedings in any court unless it finds that the said against any other party to the agreement is null and void, agreement or any person inoperative or incapable of claiming through or under him being performed. in respect of any matter agreed to be referred to arbitration in such agreement, any party to such legal proceedings may, at any time after appearance and before filing a written statement or taking any other step in the proceedings, apply to the court to stay the proceedings and the court, unless satisfied that the agreement is null and void, inoperative or incapable of being performed or that there is not, in fact, any dispute between the parties 62 with regard to the matter agreed to be referred, shall make an order staying the proceedings.

4. Effect of foreign awards. 46. When foreign award —(1) A foreign award shall, binding.—Any foreign award subject to the provisions of which would be enforceable this Act, be enforceable in under this Chapter shall be India as if it were an award treated as binding for all made on a matter referred to purposes on the persons as arbitration in India. between whom it was made, (2) Any foreign award which and may accordingly be relied would be enforceable under on by any of those persons by this Act shall be treated as way of defence, set-off or binding for all purposes on the otherwise in any legal persons as between whom it proceedings in India and any was made, and may references in this Chapter to accordingly be relied on by enforcing a foreign award shall any of those persons by way be construed as including of defence, set off or references to relying on an otherwise in any legal award.

proceedings in India and any references in this Act to enforcing a foreign award shall be construed as including references to relying on an award.

5. Filing of foreign awards in court.—(1) Any person interested in a foreign award may apply to any court having jurisdiction over the subject-

matter of the award that the award be filed in court.

(2) The application shall be in writing and shall be numbered and registered as a suit between the applicant as plaintiff and the other parties as defendants.

63 (3) The court shall direct notice to be given to the parties to the arbitration, other than the applicant, requiring them to show cause, within a time specified why the award should not be filed.

6. Enforcement of foreign 49. Enforcement of foreign award.— awards.—Where the court is (1) Where the court is satisfied satisfied that the foreign award that the foreign award is is enforceable under this enforceable under this Act, the Chapter, the award shall be court shall order the award to deemed to be a decree of that be filed and shall proceed to court.

pronounce judgment Appealable orders.—(1) An according to the award. appeal shall lie from the order (2) Upon the judgment so refusing to— pronounced a decree shall refer the parties to arbitration follow, and no appeal shall lie under Section 45 ;

(b) if the court dealing with the award was made. case is satisfied that— (2) Enforcement of an arbitral

(i) the subject-matter of the award may also be refused if difference is not capable of the court finds that— settlement by arbitration under (a) the subject-matter of the the law of India; or difference is not capable of

(ii) the enforcement of the settlement by arbitration under award will be contrary to the law of India; or public policy. (b) the enforcement of the award would be contrary to the public policy of India.

(2) If the court before which a Explanation.—Without prejudice foreign award is sought to be to the generality of clause (b) of relied upon is satisfied that an this section, it is hereby application for the setting declared, for the avoidance of aside or suspension of the any doubt, that an award is in award has been made to a conflict with the public policy of competent authority referred India if the making of the award to in sub-clause (v) of clause was induced or affected by

(a) of subsection (1), the court fraud or corruption. may, if it deems proper, (3) If an application for the adjourn the decision on the setting aside or suspension of enforcement of the award and the award has been made to a may also, on the application of competent authority referred to the party claiming in clause (e) of sub-section (1) enforcement of the award, the court may, if it considers it order the other party to furnish proper, adjourn the decision on suitable security. the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.

8. Evidence.—(1) The party 47. Evidence.—(1) The party applying for the enforcement applying for the enforcement of of a foreign award shall, at the a foreign award shall, at the time of the application, time of the application, produce produce— before the court— 66 the original award or a copy the original award or a copy thereof, duly authenticated in thereof, duly authenticated in the manner required by the the manner required by the law law of the country in which it of the country in which it was was made; made;

shall produce a translation into translation into English certified English certified as correct by as correct by a diplomatic or a diplomatic or consular agent consular agent of the country to of the country to which that which that party belongs or party belongs or certified as certified as correct in such other correct in such other manner manner as may be sufficient as may be sufficient according according to the law in force in to the law in force in India. India.

Explanation.—In this section and all the following sections of this Chapter, ‘court’ means the Principal Civil Court of Original Jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction over the subject-

matter of the award if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such Principal Civil Court, or any Court of Small Causes.

9. Saving.—Nothing in this 51. Saving.—Nothing in this Act shall— Chapter shall prejudice any 67 prejudice any rights which any rights which any person would person would have had of have had of enforcing in India of enforcing in India of any award any award or of availing himself or of availing himself in India in India of any award if this of any award if this Act had not Chapter had not been enacted. been passed; or

(b) apply to any award made on an arbitration agreement governed by the law of India.

10. Repeal.—The Arbitration 52. Chapter II not to apply.— (Protocol and Convention) Act , Chapter II of this Part shall not 1937 (6 of 1937), shall cease apply in relation to foreign to have effect in relation to awards to which this Chapter foreign awards to which this applies.

Act applies.

11. Rule-making power of the High Court.—The High Court may make rules consistent with this Act as to— the filing of foreign awards and all proceedings consequent thereon or incidental thereto;

the evidence which must be furnished by a party seeking to enforce a foreign award under this Act; and

(c) generally, all proceedings in court under this Act.

65. A comparison of the two sets of provisions would show that Section 44 , the definition clause in the 1996 Act is a verbatim reproduction of Section 2 of the previous Act (but for the words “chapter” in place of “Act”, “First Schedule” in place of “Schedule” and the addition of the word “arbitral” before the word “award” in Section 44 ). Section 45 corresponds to Section 3 of the previous Act.

66. Section 46 is a verbatim reproduction of Section 4(2) except for the substitution of the word “chapter” for “Act”. Section 47 is almost a reproduction of Section 8 except for the addition of the words “before the court” in sub-section (1) and an Explanation as to what is meant by “court” in that section. 68

67. Section 48 corresponds to Section 7 ; Section 49 to Section 6(1) and Section 50 to Section 6(2) .

68. Apart from the fact that the provisions are arranged in a far more orderly manner, it is to be noticed that the provisions of the 1996 Act are clearly aimed at facilitating and expediting the enforcement of the New York Convention Awards.

69. Section 3 of the 1961 Act dealing with a stay of proceedings in respect of matters to be referred to arbitration was confined in its application to “legal proceedings in any court” and the court had a wider discretion not to stay the proceedings before it. The corresponding provision in Section 45 of the present Act has a wider application and it covers an action before any judicial authority. Further, under Section 45 the judicial authority has a narrower discretion to refuse to refer the parties to arbitration.” The learned Single Judge thereafter arrived at the conclusion, on the facts of that case, that the arbitral award delivered in Singapore between the two Indian parties would be enforceable under Part II, and not Part I, of the Arbitration Act.

37. Likewise, a learned Single Judge of the Delhi High Court, in Dholi Spintex v. Louis Dreyfus, CS (COMM ) 286/2020 (decided on 24.11.2020), had occasion to consider the same point of law, and after referring to Sasan I (supra), correctly held:

Exception 1.—Saving of contract to refer to arbitration dispute that may arise.—This section shall not render illegal a contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.” *** 71

39. The elusive expression “public policy” appearing in section 23 of the Contract Act is a relative concept capable of modification in tune with the strides made by mankind in science and law. An important early judgment of the Court of Appeal, namely, Maxim Nordenfelt Guns and Ammunition Company v. Nordenfelt, [1893] 1 Ch. 630 [“Nordenfelt”], puts it thus:

40. The classic judgment of this Court in Gherulal Parakh v. Mahadeodas Maiya , 1959 Supp (2) SCR 406 [“Gherulal”] states as follows:

41. This judgment has been referred to with approval in several subsequent decisions. Thus, in Murlidhar Aggarwal v. State of U.P. , (1974) 2 SCC 472, this Court held:

42. In Union of India v. Gopal Chandra Misra , (1978) 2 SCC 301, this Court held:

43. This Court’s judgment in Central Inland Water Transport Corpn. v. Brojo Nath Ganguly , (1986) 3 SCC 156, after referring to the case law on the subject, then held:

44. Likewise, in Rattan Chand Hira Chand v. Askar Nawaz Jung , (1991) 3 SCC 67, this Court took the view that:

45. In Renusagar Power Co. Ltd. v. General Electric Co. , 1994 Supp (1) SCC 644, this Court held:

46. In Zoroastrian Coop. Housing Society Ltd. v. District Registrar, Coop. Societies (Urban ), (2005) 5 SCC 632, this Court held:

47. In State of Rajasthan v. Basant Nahata , (2005) 12 SCC 77, this Court held:

48. In Vodafone International Holdings BV v. Union of India , (2012) 6 SCC 613, this Court held:

49. A reading of the aforesaid judgments leads to the conclusion that freedom of contract needs to be balanced with clear and undeniable harm to the public, even if the facts of a particular case do not fall within the crystallised principles enumerated in well-established ‘heads’ of public policy. The question that then arises is whether there is anything in the public policy of India, as so understood, which interdicts the party 81 autonomy of two Indian persons referring their disputes to arbitration at a neutral forum outside India.

50. It can be seen that exception 1 to section 28 of the Contract Act specifically saves the arbitration of disputes between two persons without reference to the nationality of persons who may resort to arbitration. It is for this reason that this Court in Atlas (supra) referred to the said exception to section 28 and found that there is nothing in either section 23 or section 28 which interdicts two Indian parties from getting their disputes arbitrated at a neutral forum outside India.

51. However, it was argued by Shri Himani, with specific reference to section 28(1)(a) and section 34(2A) of the Arbitration Act, that since two Indian parties cannot opt out of the substantive law of India and therefore, ought to be confined to arbitrations in India, Indian public policy, as reflected in these two sections, ought to prevail. We are unable to agree with this argument. It will be seen that section 28(1)(a) of the Arbitration Act, when read with section 2(2) , section 2(6) and section 4 , only makes it clear that where the place of arbitration is situated in India, in an arbitration other than an international commercial arbitration (i.e. an arbitration where none of the parties, inter alia, happens to be a national of a foreign country or habitually resident in a foreign country), the arbitral tribunal shall decide 82 the dispute in accordance with the substantive law for the time being in force in India.

52. It can be seen that section 28(1)(a) of the Arbitration Act makes no reference to an arbitration being conducted between two Indian parties in a country other than India, and cannot be held, by some tortuous process of reasoning, to interdict two Indian parties from resolving their disputes at a neutral forum in a country other than India.

53. Take the case of an Indian national who is habitually resident in a country outside India. Any dispute between such Indian national and an Indian national who is habitually resident in India would attract the provisions of section 2(1)(f)(i) and, consequently, section 28(1)(b) of the Arbitration Act, in which case two Indian nationals would be entitled to have their dispute decided in India in accordance with the rules of law designated by the parties as applicable to the substance of the dispute, which need not be Indian law. This, by itself, is a strong indicator that section 28 of the Arbitration Act cannot be read in the manner suggested by Mr. Himani.

54. Even otherwise, BALCO (supra), which has been referred to by the Madhya Pradesh High Court in Sasan I (supra), in paragraph 118 thereof specifically indicated that section 28(1)(a) of the Arbitration Act will not apply where the seat is outside India as, in that event, the conflict of law 83 rules of the country in which the arbitration takes place would have to be applied.

55. Coming to the example given by Shri Himani, namely, that the application of the Benami Transactions Act cannot be sought to be circumvented by two Indian nationals by resorting to an arbitration in a seat outside India, it is more than likely that, as in the present case, two Indian nationals will apply the substantive law of India to disputes between them which arise from a breach of contract which takes place in India. Even in the absence of any designation of which rules will apply to the substance of the dispute, which dispute pertains to transactions concluded in India and breach thereof, the substantive law of India will be applied by the arbitrator in accordance with the conflict of law rules of the country in which the arbitration takes place. Dicey, Morris and Collins on the Conflict of Laws (Sweet & Maxwell, 15th Edn.) states as follows:

56. The case of Ralli Brothers was followed in Foster v. Driscoll 1929 1 Kings Bench 470. Both these judgments were then referred to in Regazzoni v. KC Sethia [1958] A.C. 301. In this case, the House of Lords decided a case in which the respondents agreed to sell and deliver to the appellant, jute bags. Both parties contemplated that they should be shipped from India to Genoa for resale in South Africa. The parties were also aware that the export of jute from India to South Africa was prohibited by Indian law. Despite the fact that English law was the proper law of the contract, the House of Lords held that the contract was unenforceable since an English court will not enforce a contract which violates the law of a foreign and friendly state. Vicount Simonds put it thus:

57. It will thus be seen that where the law of India prohibits a certain act, the conflict of law rules as set down in Dicey’s authoritative treatise will take care of this situation in most cases as the arbitrators would then apply these rules on the ground of international comity between nations in cases which arise between two Indian nationals in an award made outside India, which would fall within the definition of “foreign award” under Section 44 of the 1996 Act.

58. Even otherwise, a ground may be made out under section 48 against enforcement of a foreign award where enforcement of such award would be contrary to the public policy of India. If, on the facts of a given case, it is found that two Indian nationals have circumvented a law which pertains to the fundamental policy of India, such foreign award may then not be enforced under section 48(2)(b) of the Arbitration Act. On the assumption that Mr. Himani’s example of the Benami Transactions Act pertains to the fundamental policy of Indian law, if the foreign award is contrary to such fundamental policy, such award will then not be enforced in India. 91

59. When it comes to the ground raised under section 34(2A) of the Arbitration Act, it is clear that in an international commercial arbitration, say, between an Indian national habitually resident outside India and an Indian national resident in India, even when the arbitration takes place in India resulting in an award being made in India, the ground available under section 34(2A) would not be available, as it would not apply to an international commercial arbitration held in India. In agreeing to a neutral forum outside India, parties agree that instead of one bite at the cherry under section 34 of the Arbitration Act, where an arbitration between two Indian nationals is conducted in India [with the grounds for setting aside the award being available under section 34(2A) ], what is instead put in place by the parties is two bites at the cherry, namely, the recourse to a court or tribunal in a country outside India for setting aside the arbitral award passed in that country on grounds available in that country (which may be wider than the grounds available under section 34 of the Arbitration Act), and then resisting enforcement under the grounds mentioned in section 48 of the Arbitration Act. The balancing act between freedom of contract and clear and undeniable harm to the public must be resolved in favour of freedom of contract as there is no clear and undeniable harm caused to the public in permitting two Indian nationals to avail of a challenge procedure of a foreign county when, after a foreign award passes muster under that procedure, its enforcement can be resisted in India on the grounds 92 contained in section 48 of the Arbitration Act, which includes the foreign award being contrary to the public policy of India. Party Autonomy

60. The decks have now been cleared to give effect to party autonomy in arbitration. Party autonomy has been held to be the brooding and guiding spirit of arbitration. Thus, in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. , (2016) 4 SCC 126, this Court held:

61. Likewise, in Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. , (2017) 2 SCC 228, this Court held that a two-tier arbitration, namely, an arbitration at an original forum followed by an appeal at an appellate forum, would not be interdicted by the Arbitration Act , given the free party autonomy for parties to enter into an agreement as to choice of fora and procedure at such fora. Thereafter, this Court, under the head “party autonomy”, put it thus:

This Court has expressed this view in quite a few decisions. In two significant passages in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. [Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2016) 4 SCC 126 :

353-414, Para 6.07] wherein it is said:

tier arbitration would be contrary to the public policy of India, this Court held:

Section 10 of the Commercial Courts Act.

62. Shri Himani relied upon section 10 read with section 21 of the Commercial Courts Act to argue that in all cases between Indian nationals which result in awards delivered in a country outside India, section 10(3) would apply, as a result of which the impugned judgment having been made by a High Court, is made without jurisdiction. In order to appreciate this submission, sections 10 and 21 of the Commercial Courts Act are set out hereinbelow:

63. It must be remembered that when a foreign award is sought to be enforced under Part II of the Arbitration Act , the explanation to section 47 makes it clear that it is the High Court alone which is the court on whose doors the applicant must knock. This is sought to be answered by Shri Himani by stating that since the explanation to section 47 is in direct collision with section 10(3) of the Commercial Courts Act, vide section 21 of 100 the Commercial Courts Act , section 10(3) would prevail over the explanation to section 47 .

64. Before entering into a discussion as to whether there is any direct collision between the aforesaid provisions, one is first to appreciate the purport of the expression “international commercial arbitration” contained in section 10(1) of the Commercial Courts Act. We have already seen how section 2(1)(f) of the Arbitration Act which defines the expression “international commercial arbitration” is only for a limited purpose, namely, for the purpose of Part I of the Arbitration Act . Under section 2(2) of the Commercial Courts Act, words and expressions used and not defined in the Commercial Courts Act but defined in the CPC and the Indian Evidence Act, 1872 shall have the same meanings respectively assigned to them in that Code and the Act . Conspicuous by its absence are definitions contained in the Arbitration Act .

65. We have therefore to see what is the purport of the expression “international commercial arbitration” when used in section 10(1) of the Commercial Courts Act.

66. We have already seen how “international commercial arbitration”, when used in the proviso to section 2(2) of the Arbitration Act, does not refer to the definition contained in section 2(1)(f) but would have reference to arbitrations which take place outside India, awards made in such 101 arbitrations being enforceable under Part II of the Arbitration Act . It will be noted that section 10(1) applies to international commercial arbitrations, and applications or appeals arising therefrom, under both Parts I and II of the Arbitration Act. When applications or appeals arise out of such arbitrations under Part I, where the place of arbitration is in India, undoubtedly, the definition of “international commercial arbitration” in section 2(1)(f) will govern. However, when applied to Part II, “international commercial arbitration” has reference to a place of arbitration which is international in the sense of the arbitration taking place outside India. Thus construed, there is no clash at all between section 10 of the Commercial Courts Act and the explanation to section 47 of the Arbitration Act, as an arbitration resulting in a foreign award, as defined under section 44 of the Arbitration Act, will be enforceable only in a High Court under section 10(1) of the Commercial Courts Act, and not in a district court under section 10(2) or section 10(3) .

67. Even otherwise, this Court has made it clear in BGS SGS SOMA JV v. NHPC , (2020) 4 SCC 234 (at paragraphs 12 and 13) that the substantive law as to appeals and applications is laid down in the Arbitration Act whereas the procedure governing the same is laid down in the Commercial Courts Act . In this context, it has also been held that the Arbitration Act is a special Act vis-à-vis the Commercial Courts Act which is general, and which 102 applies to the procedure governing appeals and applications in cases other than arbitrations as well. In Kandla Export Corpn. v. OCI Corpn. , (2018) 14 SCC 715, this Court held:

Given the objects of both the statutes, it is clear that arbitration itself is meant to be a speedy resolution of disputes between parties. Equally, enforcement of foreign awards should take place as soon as possible if India is to remain as an equal partner, commercially speaking, in the international community. In point of fact, the raison d'être for the enactment of the Commercial Courts Act is that commercial disputes involving high amounts of money should be speedily decided. Given the objects of both the enactments, if we were to provide an additional appeal, when Section 50 does away with an appeal so as to speedily enforce foreign awards, we would be turning the Arbitration Act and the Commercial Courts Act on their heads. Admittedly, if the amount contained in a foreign award to be enforced in India were less than Rs 1 crore, and a Single Judge of a High Court were to enforce such award, no appeal would lie, in keeping with the object of speedy enforcement of foreign awards. However, if, in the same fact circumstance, a 103 foreign award were to be for Rs 1 crore or more, if the appellants are correct, enforcement of such award would be further delayed by providing an appeal under Section 13(1) of the Commercial Courts Act. Any such interpretation would lead to absurdity, and would be directly contrary to the object sought to be achieved by the Commercial Courts Act viz. speedy resolution of disputes of a commercial nature involving a sum of Rs 1 crore and over. For this reason also, we feel that Section 13(1) of the Commercial Courts Act must be construed in accordance with the object sought to be achieved by the Act. Any construction of Section 13 of the Commercial Courts Act, which would lead to further delay, instead of an expeditious enforcement of a foreign award must, therefore, be eschewed. Even on applying the doctrine of harmonious construction of both statutes, it is clear that they are best harmonised by giving effect to the special statute i.e. the Arbitration Act , vis-à-vis the more general statute, namely, the Commercial Courts Act , being left to operate in spheres other than arbitration.”

68. It is interesting to note that the Arbitration and Conciliation (Amendment) Act, 2015 and the Commercial Courts Act, 2015 , both came into effect from 23.10.2015. In R.S. Raghunath v. State of Karnataka , (1992) 1 SCC 335, this Court held that even a later general law which contains a non-obstante clause does not override a special law as both must be held to operate as follows:

exists particularly when no patent conflict or inconsistency can be spelt out. As already noted Rules 1(3)(a), 3(1) and 4 of the General Rules themselves provide for promotion by selection and for enforceability of the Special Rules in that regard. Therefore there is no patent conflict or inconsistency at all between the General and the Special Rules.”

69. Consequently, this argument of the appellant also fails. Whether an application under section 9 of the Arbitration Act would lie

70. Mr. Dewan, by way of cross objection, has challenged the finding of the Gujarat High Court by the impugned judgment that the section 9 application that was made by the respondent was not maintainable by reason of the expression “international commercial arbitration” appearing in the proviso to section 2(2) having the meaning to be ascribed by section 105 2(1)(f) of the Arbitration Act. We have already held in paragraph 14 above that this view of the law is incorrect. Consequently, this part of the judgment is set aside, it being held that the application made by the respondent under section 9 would be maintainable.

71. In light of the findings arrived at by us, we uphold the impugned judgment of the Gujarat High Court, except for the finding on the section 9 application of the respondent being held to be non-maintainable. The appeal is disposed of accordingly.

………………….......................J. [ ROHINTON FALI NARIMAN ] ………………….......................J. [ B.R. GAVAI ] ………………….......................J. [ HRISHIKESH ROY ] New Delhi;

April 20, 2021.