Supreme Court of India
HARMONY INNOVATION SHIPPING LTD.versusGUPTA COAL INDIA LTD. &ANR.
- Citation
- 2015 INSC 201
- Decided
- 10 March 2015
- Disposal
- Dismissed
- Bench
- DIPAK MISRA
Holding
The arbitration agreement expressly and impliedly excluded the applicability of Part I of the Arbitration and Conciliation Act, 1996, making London the seat of arbitration and rendering Indian courts without jurisdiction.
Summary
Harmony Innovation Shipping Ltd. entered into a charter agreement with Gupta Coal India Ltd. that stipulated arbitration in London, governed by English law, and specified the arbitrators as members of the London Arbitration Association. The appellant sought interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, claiming Indian courts had jurisdiction. The Supreme Court examined whether the arbitration clause expressly or impliedly excluded the applicability of Part I of the Act, including Section 9, to an arbitration seated outside India. Relying on Bhatia International and subsequent decisions, the Court held that the parties’ clear intention to make London the juridical seat and to govern the arbitration agreement by English law amounted to an implied exclusion of Part I. Consequently, Indian courts lack jurisdiction to entertain the application, and the appeal was dismissed.
Issues considered
- The applicability of Section 9 of the Arbitration and Conciliation Act, 1996 to an arbitration agreement that designates London as the seat and English law as governing law.
- Whether the arbitration clause expressly or impliedly excludes the provisions of Part I of the Act, thereby removing Indian court jurisdiction.
- The effect of the addendum executed after the Bharat Aluminium decision on the applicability of Bhatia International principles.
- The characterization of the seat of arbitration as analogous to an exclusive jurisdiction clause.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 11, s. 2(2), s. 3, s. 34, s. 47, s. 49, s. 9
- Companies Act, 1956
- Foreign Exchange Management Act, 1999
Subjects
ArbitrationSeat of arbitrationJurisdictionSection 9Implied exclusionInternational commercial arbitrationEnglish lawIndian courts
Judgment
[2015] 2 S.C.R. 697
A HARMONY INNOVATION SHIPPING LTD.
v.
GUPTA COAL INDIA LTD. &ANR.
B (Civil Appeal No. 610 of2015)
MARCH 10, 2015
[DIPAK MISRA AND P"RAFULL~ C. PANT, JJ.]
c Arbitration and Conciliation Act, 1996: s.9 - International
Commercial Arbitration - Arbitration agreement stated that
in case of dispute, arbitration in London would apply; the
contract would be governed by English law and arbitrators
D would be members of London Arbitration Association - This
showed that the juridical seat of arbitration would be London
- In view of implied exclusion, the courts in India will not have
jurisdiction.
E Dismissing the appeal, the Court
HELD: 1. There is no cavil over the principle stated
in Bhatia International that Part I of the Act is applicable
to arbitrations held outside India unless the parties have
F either expressly or impliedly excluded the provisions of
the Act. The stipulations in the present arbitration clause
prescribe that if any dispute or difference arise under
the charter, arbitration in London will apply; that the
arbitrators are to be commercial men who are members
G of London Arbitration Association; the contract is to be
construed and governed by English Law; and that the
arbitration should be conducted, if the claim is for a
lesser sum, in accordance with small claims procedure
of the London Maritime Arbitration Association. There is
H 697
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 698
COAL INDIA LTD.
no other provision in the agreement that any other law A
would govern the arbitration clause. When the
stipulations are read and appreciated in the contextual
perspective, "the presumed intention" of the parties is
clear as crystal that the juridical seat of arbitration would
be London. The c;ommercial background, the context, B
of the contract and the circumstances of the parties and
in the background in which the contract was entered
into, irresistibly lead in that direction. It is a proper clause
or substantial clause and not a curial or a procedural C
one by which the arbitration proceedings are to be
conducted and hence, the seat of arbitration will be at
London. [Paras 34, 41, 44, 46] [728-E; 736-B-C; 737-F;
739-C]
D
2. The Division Bench of the High Court had allowed
the petition on the foundation that the Bharat Aluminium
Co. case would govern the field and, therefore, the court
below had no jurisdiction. The said reason is not correct.
But even applying the principles laid doll)ln in Bhatia E
International and scanning the anatomy of the arbitration
clause, the courts in India will not have jurisdiction as
there is implied exclusion. Consequently, for different
reasons, the conclusion arrived at by the High Court is
upheld. [paras 48, 49] [739-E-F, G] F
Bhatia International v. Bulk Trading S.A (2002) 4 SCC
105i 2002 (2) SCR 411 - relied on.
Bharat Aluminium Co. v. Kaiser Aluminium Technical
G
Services Inc. (2012) 9 SCC 552: 2012 (12) SCR 327
- held inapplicable.
Venture Global Engg. v. Satyam Computer Services Ltd.
(2008) 4 SCC 190: 2008 (1) SCR 501; lndtel Technical
H
Services (P) Ltd. v. WS. Atkins Rail Ltd. (2008) 10 SCC
•
699 SUPREME COURT REPORTS [2015] 2 S.C.R.
A 308: 2008 (12) SCR 673; NTPC v. Singer Co. {1992) 3
SCC 551: 1992 (3) SCR 106; Citation lnfowares Ltd. v.
Equinox Corp. (2009) 7 SCC 220: 2009 (6) SCR 737;
Reliance Industries Limited and Another v. Union of
India (2014) 7 SCC 603; Videocon Industries Ltd. v.
B Union oflndia (2011) 6 SCC 161: 2011 (8) SCR 569;
Dozco India Private Ltd. v. Doosan lnfracore Company
Ltd. (2011) 6SCC179: 2010 (12) SCR 259; Sumitomo
Heavy Industries Ltd. v. ONGC Ltd. (1998) 1 SCC
305: 1997 (6) Suppl. SCR 186; Yograj Infrastructure
c
Ltd. v. Ssang Yong Engg. and Construction Co. Ltd.
(2011) 9 SCC 735: 2011 (14) SCR 301; Enercon (India)
Ltd. v. Enercon GmbH (2014) 5 SCC 1: 2014 (2)
SCR 855; A.B.C. Laminart Pvt. Ltd. and Anr. v. A.P.
D Agencies, Salem (1989) 2 SCC 163: 1989 (2) SCR 1;
Rajasthan SEB v. Universal Petrol Chemicals Ltd.
(2009) 3 SCC 107: 2009 (1) SCR 138; NTPC v. Singer
Co. (1992) 3 sec 551: 1992 (3) SCR 106; Hardy Oil
and Gas Ltd. v. Hindustan Oil Exploration Co. Ltd. (2006)
E 1 Guj LR 658 - referred to.
Lesotho Highlands Development Authority v. lmpregi/o
SPA (2005) 3·wLR 129; Sulamerica Cia Nacional de
Seguros SA v. Enesa Engelharia SA- Enesa (2013)
F 1 WLR 102; Mitsubishi Heavy Industries Ltd. v. Gulf
Bank (1997) 1 Lloyd's Rep. 343; Cargill International
S.A. v. Bangladesh Sugar & Food Industries Corp.
(1998) 1W.L.R.461 CA- referred to.
G Case law reference
2012 (12) SCR 327 referred to Para 1
2002 (2) SCR 411 referred to Para 5
H
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 700
COAL INDIA LTD.
2008 (1) SCR 501 referred to Para6 A
2008 (12) SCR 673 referred to Para 11
1992 (3) SCR 106 referred to Para 11
2009 (6) SCR 737 referred to Para 12 B
(2014) 1 sec 603 referred to Para 14
2011 (8 ) SCR 569 referred to Para 21
2010 (12) SCR 259 referred to Para 25
c
1997 (6) Suppl. SCR186 referred to Para 25
2011 (14) SCR 301 referred to Para 25
D
2014 (2) SCR 855 referred to Para 25
1989 (2) SCR 1 referred to Para 27
2009 (1) SCR 138 referred to Para 33
E
1992 (3) SCR 106 referred to Para 33
(2006) 1 Guj LR 658 referred to Para 40
CIVIL APPELLATE.JURISDICTION: Civil Appeal No. 610
F
of2015
From the Judgment and Order dated 27.11.2014 of the High ·
Court of Kerala at Emakulam in OP (C) No. 2612 of 2014
K. V. Vishwanathan, Ashwin Shankar, Abhishek Kaushik, G
Sameer Dawar, Abhinav Mukerji for the Appellant.
V. Giri, Raghenth Basant, Hardeep Singh, Aditi Mishra, Liz
Mathew for the Respondents.
H
701 SUPREME COURT REPORTS [2015] 2 S.C.R.
A The Judgment of the Court was delivered by:
DIPAK MISRA, J. 1. The issue that has emanated for
consideration in this appeal is whether in the obtaining factual
matrix, especially regard being had to the nature of the
B arbitration clause, the High Court is justified in setting aside
the order passed by the learned Additional District Judge,
Ernakulam on 25.9.2014 in I.A. No. 4345 of 2014 in O.P. (ARB)
No. 802/2014 directing the first respondenttherein to furnish
security for US$ 11,15,400 or its equivalent (approximate)
C Indian Rupees 6,60,00,000/- or to show cause on or before
01.10.2014, and as an interim measure conditionally attaching
the cargo belonging to the first respondent herein, while dealing
with an application moved under Section 9 of the Arbitration
and Conciliation Act, 1996 (for brevity, "the Act"), on the
D foundation that Section 9 of the Act is limited to the applications
to arbitration that takes place in India and has no applicability
fo arbitration which takes place outside India in view of the
pronouncement in Bharat Aluminium Co. v. Kaiser
E Aluminium Technical Services lnc. 1 inasmuch as clause 5
of the contract which is the arbitration clause clearly spells out
that the contract is to be governed and construed according to
English law and if the dispute of the claim does not exceed
USO 50,000, the arbitration should be conducted in
F accordance with small claims procedure of the London
Maritime Arbitration Association.
2. Regard being had to the lis in question, suffice it to state
that an agreement was entered into between the parties on
G 20.10.2010 in respect of 24 voyages of coal shipment
belonging to the appellant, the first respondent before the High
<;:ourt, from Indonesia to India. The respondent no. 1 herein,
Gupta Coal India Ltd., undertook only 15 voyages and that
resulted in disputes which ultimately stood referred to
H 1. c2012) 9 sec 552
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 702
COAL INDIA LTD. [DIPAKMISRA, J.)
.
arbitration. Be it noted, an addendum to contract was executed A
as regards the remaining voyages on 3.4.2013 when disputes
arose in respect of the principal/main agreement. As the facts
would undrape arbitration proceedings were initiated and
eventually an award was passed.
B
3. After the award came into existence, the present appellant
filed an application under Section 9 before the District Court,
Ernakulam for its enforcement under Sections 9/47 and 49 of
the Act. As the factual narration would further uncurtain in
respect of the addendum to contract, when disputes arose C
relating to the same, arbitration proceedings were initiated
and at that juncture, the appellant moved the learned 2nd
Additional District Court, Ernakulam under Section 9 of the
Act seeking attachment of the cargos as an interim relief and D
the learned Additional District Judge, as has been stated
earlier, issued conditional order of attachment.
4. The order passed by the learned Additional District Judge,
was assailed before the High Court in a Writ Petition, O.P.(C) E
No. 2612 of 2014 raising a singular contention that the
impugned order therein was absolutely without jurisdiction and
hence, unsustainable in law.
5. A counter affidavit was filed contending, inter alia, that the
application before the learned Additional District Judge was F
maintainable inasmuch as the contract between the parties
was entered into prior to the decision in Bharat Aluminium
Co. (supra) and, the,refore;the principle laid down in the said
decision was not attracted to the facts of the case, and in fact, G
it was governed by the principles stated in Bhatia
International v. Bulk Trading 5.A 2·
2. (~002i 4 sec 105
H·
703 SUPREME COURT REPORTS [2015] 2 S.C.R.
A 6. The High Court, after hearing the learned counsel for the
parties, referred to main agreement, Exhibit P-1, the
addendum, Exhibit P-2, and the arbitration clause in the main
agreement and considered the decisions in Bhatia
International (supra) and Venture Global Engg. v. Satyam
B Computer Services Ltd. 3• some decisions of the High Court,
reproduced a passage from Russell on Arbitration and
eventually came to hold as follows:
"The contention that since Ext.P1 was entered into
c before the judgment in Bharat Aluminium Co. 's case
and therefore the principles laid down in the said
decision is not applicable to the facts of the case cannot
be countenanced. The law laid down by the Supreme
Court in BharatAluminium Co.'s case is declaratory in
D
nature and, therefore, the first respondent cannot be
heard to say that he is not bound by the same and that
the said principle cannot be applied to the case on hand.
In the case of a declaration, it is supposed to have been .
E the law always and one cannot be heard to say that it
has only prospective effect. It is deemed to have been
the law at all times. If that be so, the petition before the
court below is not maintainable and is only to be
dismissed."
F
7. At the very outset, it is necessary to clear the maze as
regards the understanding of the ratio in BharatAluminium
Co. (supra) by the High Court In the said case, the Constitution
Bench has clearly ruled thus:
G
"197. The judgment in Bhatia International was rendered
by this Court on 13-3-2002. Since then, the aforesaid
judgment has been followed by all the High Courts as
H 3. (2ooa) 4 sec 190
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 704
COAL !NOIA LTD. [DIPAK MISRA, J.]
well as by this Courton numerous occasions. In fact, the A
judgment in Venture Global Engg. has been rendered
on 10-1-2008 in terms of the ratio of the decision in
Bhatia lntemationat Thus, in order to do complete
justice, we hereby order, that the law now declared by
this Court shall apply prospectively, to all the arbitration B
agreements executed hereafter."
The aforesaid judgment by the Constitution Bench was
decided on September 6, 2012. In the instant case, the
arbitration agreement was executed prior to that date and the C
addendum, as mentioned earlier, came into existence
afterwards. Therefore, there can be no scintilla of doubtthat
the authority in Bharat Aluminium Co. case would not be
applicable for determination of the controversy in hand. In fact,
0
the pronouncement in Bhatia International (supra) would be
applicable to the facts of the present case inasmuch as there
is nothing in the add~ndum to suggest any arbitration and, in
fact, it is controlled and governed by the conditions postulated
in the principal contract. We shall advert to this aspect slightly E
more specifically at a later stage.
8. Keeping the aforesaid in view, it is necessary to keenly
understand the decision in Bhatia International (supra). In
the said case, the agreement entered into between the parties, F
contained an arbitration clause which provided that arbitration
was to be as per Rules of International Chambers of
Commerce (for short, "the ICC). The parties had agreed that
the arbitration was to be held in Paris, France. The first
respondent filed an application under Section 9 of the Act G
before the learned Additional District Judge, Indore, M.P. with
an interim prayer. A plea was raised by the appellant that the
Indore Court had no jurisdiction and application was not
maintainable. The said stand was repelled by the learned
H
705 SUPREME COURT REPORTS [2015] 2 S.C.R.
A Additional District Judge, which found favour with the High
Court. Before this Court, it was urged on behalf of the appellant
that Part I of the Act only applies to arbitration where the place
of arbitration is in India, but if the place of arbitration is not in
India, then Part ll of the Act would apply. On behalf of the
B respondent therein, it was urged that unless the parties, by
their agreement either expressly or impliedly exclude its
provisions, Part I would also apply to all international
commercial arbitrations including those that take place in India.
C The three-Judge Bench came to hold thus:-
"To conclude, we hold that the provisions of Part I would
apply to all arbitrations and to all proceedings relating
thereto. Where such arbitration is held in India the
provisions of Part I would compulsorily apply and parties
D
are free to deviate only to the extent permitted by the
derogable provisions of Part I. In cases of international
commercial arbitrations held out of India provisions of
Part I would apply unless the parties by agreement,
E express or implied. exclude all or any of its provisions.
In that case the laws or rules chosen by the parties would
prevail. Any provision in Part I, which is contrary to or
excluded by that law or rules will not apply."
[Emphasis supplied]
F
After the said conclusion was recorded, the stand of
the learned senior counsel for the appellant was put thus:-
"Faced with this situation Mr Sen submits that, in this
G case the parties had agreed that the arbitration be as
per the Rules of ICC. He submits that thus by necessary
implication Section 9 would not apply. In our view, in such
cases the question would be whether Section 9 gets
excluded by th(;) ICC Rules of Arbitration. Article 23 ofthe
H
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 706
COAL INDIA LTD. [DIPAK MISRA, J.]
ICC Rules reads as follows:- A
Conservatory and interim measures
1. Unless the parties have otherwise agreed, as soon
as the file has been transmitted to it, theArbitral Tribunal
B
may, at the request of a party, order any interim. or
conservatory mea"sure it deems appropriate. The Arbitral
Tribunal may make the granting of any such measure
subject to appropriate security being furnished by the
requesting party. Any such measure shall take the form c
of an order, giving reasons, or of an award, as theArbitral
Tribunal considers appropriate.
2. Before the.file is transmitted to the Arbitral Tribunal,
and in appropriate circumstances even thereafter, the D
parties may apply to any competent judicial authority for
interim or conservatory measures. The application of a
party to a judicial authority for such measures or for the
implementation of any such measures ordered by an
Arbitral Tribunal shall not be deemed to be an E
infringement or a 11Yaiver of the arbitration agreement and
shall not affect the relevant powers reserved to the
Arbitral Tribunal. Any such application and any measures
taken by the judicial authority must be notified without
delay to the Secretariat. The Secretariat shall inform the F
Arbitral Tribunal thereof." •
After so stating, the Court referred to Article 23 of the
ICC Rules and interpreted thus:-
G
"ThusArticle 23 of the ICC Rules permits parties to apply
to a competent judici~I authority for interim and
conservatory measures. Therefore, in such cases an
application can be made under Section 9 of the said
H
707 SUPREME COURT REPORTS [2015] 2 S.C.R.
A Act."
9. The decision in Bhatia International (supra) was followed
in Venture Global Engg. (supra). The Court scanned the
ultimate conclusion recorded in Bhatia International (supra)
B and in that context, referred to various paragraphs and came
to hold as follows:-
"32. The learn.ed Senior Counsel for the respondent
based on para 26 submitted that in the case offoreign
c award which was passed outside India is not enforceable
in India by invoking the provisions of the Act or CPC.
However, after critical analysis of para 26, we are unable
to accept the argument of the learned Senior Counsel
for the respondent. Paras 26 and 27 start by dealing
D with the arguments of Mr Sen who argued that Part I is
not applicable to foreign awards. It is only in the sentence
starting at the bottom of para 26 that the phrase "it must
immediately be clarified" that the finding of the Court is
rendered. That finding is to the effect that an express or
E implied agreement of parties can exclude the
applicability of Part I. The finding specifically states: "But
if not so excluded, the provisions of Part I will also apply
to all 'foreign awards'." This exception which is carved
out, based on agreement of the parties, in para 21
F
(placita e to f) is extracted below: (Bhatia lntemational
case sec p. 119e to f)
"21 . ... By omitting to provide that Part I will not apply
to international commercial arbitrations which take
G
place outside India the effect would be that Part I would
also apply to international commercial arbitrations
held out of India. But by not specifically providing that
the provisions of Part I apply to international
H commercial arbitrations held out of India, the intention
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 708
COAL INDIPC-tc""IB. [DlPAK MISRA, J.]
of the legislature appears to be to ally (sic allow) A
parties to provide by agreerr.ent that Part I or any
provision therein will not apply. Thus in respect of
arbitrations which take place outside India even the
non-derogable provisions of Part I can be excluded.
Such an agreement may be express or implied." B
33. The very fact that the judgment holds that it would be
open to the parties to exclude the application of the
provisions of Part I by express or implied agreement,
would mean that otherwise the whole of Part I would apply. c
In any event, to apply Section 34 to foreign international
awards would not be inconsistent with Section 48 of the
Act, or any other provision of Part II as a situation may
arise, where, even in respect of properties situate in India
D
and where an award would be invalid if opposed to the
public policy of India, merely because the judgment-
debtor resides abroad, the award can be enforced
against properties in India through personal compliance
of the judgment-debtor and by holding out the threat of E
contempt as is being sought to be done in the present
case. In such an event, the judgment-debtor cannot be
deprived of his right under Section 34 to invoke the public
policy of India, to set aside the award. As observed
earlier, the public policy of India includes - (a) the F
fundamental policy of India; or (b) the interests of India;
or (c) justice or morality; or (d).in addition, if it is patently
illegal. This extended definition of public policy can be
bypassed by taking the award to a foreign country for
enforcement." G
After so holding the Court dealt with the contentions of
the learned senior counsel who highlighted the concept of
'transfer' of shares and the procedure involved therein under
H
709 SUPREME COURT REPORTS [2015] 2 S.C.R.
A the Indian Companies Act, 1956 and the impact of Foreign
Exchange Management Act, 1999 and adverted to the impact .
and effect of the legal and regulatory scrutiny under both the
Act and accepted the submission. The Court, thereafter,
scanned the shareholders agreement and eventually came to
B hold that in terms of the decision in Bhatia International
(supra) , Part I of the Act is applicable to the award that was
called in question in the said case, even though it was a foreign
award.
C 10. The aforesaid decision clearly lays down that it would be
open to the parties to exclude the application of the provision
of Part I by express or implied agreement. Unless there is
express or implied exclusion, the whole of Part I would apply.
The Court, as stated earlier, was dealing with shareholders
0 agreement between the parties. Sections 11.05 (b) and (c) of
the shareholders agreement between the parties read as
follows:-
"(b) This agreement shall be construed in accordance
E with and governed by the laws of the State of Michigan,
United States, without regard to the conflicts of law rules
of such jurisdiction. Disputes between the parties that
cannot be resolved via negotiations shall be submitted
for final, binding arbitration to the London Court of
F
Arbitration.
(c) Notwithst<mding anything to the contrary in this
agreement, the shareholders shall at all times act in
accordance with the Companies Act and other applicable
G
Acts/rules being in force, in India at any time."
The said clauses were interpreted by the Court not to
exclude either expressly or impliedly the applicability of Part I
H oftheAct.
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 710
COAL INDIA LTD. [DIPAKMISRA, J.]
11. In this context, it will be useful to refer to the decision in A
lndtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd. 4
wherein the designated Judge was called to decide the issue
of appointment of sole arbitrator. The arbitration clause read
as follows:-
B
"13. Settlement of disputes
13.1. This agreement, its construction, validity and
performance shall be governed by and constructed in
accordance with the laws of England and Wales; c
13.2. Subject to Clause 13.3 all disputes or differences
arising out of, or in connection with, this agreement which
cannot be settled amicably by the p~rties shall be
referred to adjudication; D
13.3. If any dispute or difference under this agreement
touches or concerns any dispute or difference under
eitherof the sub-contract agreements, then the parties
agree that such dispute or difference hereunder will be E
referred to the adjudicator or the courts as the case may
be appointed to decide the dispute or difference under
the relevant sub-contract agreement and the parties
hereto agree to abide by such decision as if it were a
decision under this agreement." F
The Court referred to the decision in Bhatia
International (supra) and Lesotho Highlands Development
Authorityv. lmpregilo SpA 5 and came to hold as follows:-
G
"lt is no doubt true that it is fairly well settled that when
an arbitration agreement is silent as to the law and
procedure to be followed in implementing the arbitration
4. (2008) 10 sec 308
5. (2005) 3 WLR 129 H
711 SUPREME COURT REPORTS [2015) 2 S.C.R.
A agreement, the law governing the said agreement would
ordinarily be the same as the law governing the contract
itself. The decisions cited by Mr Tripathi and the views
of the jurists referred to in NTPC v. Singer Co. 6 case
support such a proposition. What, however,
B distinguishes the various decisions and views of the
authorities in this case is the fact that in Bhatia
lntemationalthis Court laid down the proposition that
notwithstanding the provisions of Section 2(2) of the
Arbitration and Conciliation Act, 1996, indicating that
c
Part I of the said Act would apply where the place of
arbitration is in India, even in respect of international
commercial agreements, which are to be governed by
the laws of another country, the parties would be entitled
D to invoke the provisions of Part I of the aforesaid Act
and consequently the application made under Section
11 thereof would be maintainable."
12. Mr. Vishwanathan, learned senior counsel, apart from citing
E aforesaid authorities, have also drawn inspiration from
Citation lnfowares Ltd. v. Equinox Corp. 7 wherein the
designated Judge held that unless the provisions of Part I of
the Act are excluded by agreement between the parties either
expressly or by implication, Part I of the Act including Section
F 11 would be applicable even where the international
commercial agreements are governed by the laws of another
country. It may be that the arbitrator might be required to take
into account the applicable laws which may be the foreign laws
but that does not affect the jurisdiction under Section 11 which
G falls in Part I which has been specifically held applicable in
Bhatia International case.
sec 551
6. (1992) 3
H 7. (2009) 7 sec 220
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 712
COAL INDIA LTD. [DIPAKMISRA, J.]
13. Referring to the arbitration clause, submits learned senior A
counsel that there is no express or implied exclusion of the
applicability of Part I of the Act and, therefore, the Courts in
India have jurisdiction and the learned Additional District Judge
had not flawed in exercise of jurisdiction.
B
14. Mr. Giri, learned senior counsel appearing for the
respondents would submit that when the juridical seat is in
London, Part I of the Act would not be applicable. To bolster
the aforesaid submission, he has placed reliance on Reliance
Industries Limited and Another v. Union of lndia8 It is C
also urged by Mr. Giri, learned senior counsel that after the
principal agreement, an addendum was executed between the
parties after pronouncement of the decision in Bharat
Aluminium Co. case and, therefore, the principles laid down D
in Bhatia International (supra) would not be applicable.
15. It is seemly to exposit the controversy and to appreciate
what has been laid down in the case of Reliance Industries
Limited (supra). The appellant in the said case has assailed
the judgment of the High Court of Delhi whereby the High Court E
had allowed the petition filed by the respondent under Section
34 of the Act, challenging the final partial award, whereby the
objections raised by the Union of India relating to the arbitrability
of the claims made by the petitioner therein in respect of F
royalties, cess, service tax and CAG audit were rejected. The
Court referred to various agreements entered into between
the parties. It reproduced Articles 32 and 33 which was entered
into between the parties. The relevant clause for the present
purpose is 33.12. We think it appropriate to reproduce the G
relevant part of the said clause.
"33. Sole expert, conciliation and arbitration:
s. (2014) 1 sec so3
H
713 SUPREME COURT REPORTS (2015] 2 S.C.R.
A 33.12. The venue of conciliation or arbitration
proceedings pursuant to this article, unless the parties
otherwise agree, shall be London, England and shall be
conducted in .the English language. The arbitration
agreement contained in this Article 33 shall be governed
B by the laws of England. Insofar as practicable, the parties
shall continue to implement the terms of this contract
notwithstanding the initiation of arbitral proceedings and
any pending claim or dispute."
C 16. As per Article 33.12, the arbitral proceedings were to be
held in London as the neutral venue. The venue of the arbitral
proceeding w~s shifted to Paris and again re-shifted to
London. Consequently, the parties agreed for amendment of
the agreement, which is relevant for the purpose of
0
understanding the principle, ultimately stated in the said
authority:-
"4. Applicable. law and arbitration - Except the change
of venue/seat of arbitration from London to Paris, Articles
E
32 and 33 of the contract shall be deemed to be set out
in full n this agreement mutatis mutandis and so that
references therein to the contract shall be references to
this agreement."
F 17. As issues arose, theArbitral Tribunal was constituted under
Article 33.12, the venue of arbitration was in London. A
substantial hearing was held in Singapore. Thereafter, by
agreement of the parties, the Arbitral Tribunal made a final
G partial consent award which was as follows:-
"3. Final partial award as to seat
3.1. Upon the agreement of the parties, each represented
by duly authorised representatives and through counsel,
H •
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 714
COAL INDIA LTD. [DIPAK MISRA, J.]
the Tribunal hereby finds, orders and awards: A
(a) That without prejudice to the right of the parties to
subsequently agree otherwise in writing, the juridical
seat (or legal place) of arbitration for the purposes of
the arbitration initiated under the claimants' notice of B
arbitration dated 16-12-2010 shall be London, England.
(b) That any hearings in this arbitration may take place
in Paris, France, Singapore or any other location the
Tribunal considers may be convenient. c
(c) That, save as set out above, the terms and conditions
of the arbitration agreements in Article 33 of the PSCs
shall remain in full force and effect and be applicable in
this arbitration." D
18. The respondent, Union of India, had invoked the jurisdiction
of the Delhi High Court by stating that the terms of the PSCs
entered would manifest an unmistakable intention of the parties
to be governed by the laws of India and more particularly the E
Arbitration Act, 1996; that the contracts were signed and
executed in India; that the subject-matter of the contracts,
namely, the Panna Mukta and the Tapti fields are situated within
India; that the obligations under the contracts had been for the
past more than 15 years performed within India; that the F
contracts stipulate that they "shall be governed and interpreted
in accordance with the laws of India"; that they also provided
that "nothing in this contract" shall entitle either of the parties to
exercise the rights, privileges and powers conferred upon them
by the contract "in a manner which will contravene the laws of G
India" (Article 32.2); and that the contracts further stipulate that
"the companies and the operations under this contract shall
be subject to all fiscal legislation of India" (Article 15.1 )".
H
715 SUPREME COURT REPORTS (2015] 2 S.C.R.
A 19. On behalf of the appellant, the issue of maintainability was
raised. The High Court answered the issue in the following
manner:
"Upon consideration of the entire matter, the High Court
B has held that undoubtedly the governing law of the contract
i.e. proper law of the contract is the law of India.
Therefore, th~ parties never intended to altogether
exclude the laws of India, so far as contractual rights are
concerned. The. laws of England are limited in their
c applicability in relation to arbitration agreement
contained in Article 33. This would mean that the English
law would be applicable only with regard to the curial
law matters i.e. conduct of the arbitral proceedings. For
all other matters, proper law of the contract would be
D
applicable. Relying on Article 15(1 ), it has been held that
the fiscal laws of India cannot be derogated from.
Therefore, the exclusion of Indian public policy was not
envisaged by the parties at the time when they entered
E into the contract. The High Court further held that to hold
that the agreement contained in Article 33 would
envisage the matters other than procedure of arbitration
proceedings would be to rewrite the contract. The High
Court also held that the question of arbitrability of the
F claim or dispute cannot be examined solely on the
touchstone of the applicability of the law relating to
arbitration of any country but applying the public policy
under the laws of the country to which the parties have
subjected the contract to be governed. Therefore,
G according to the High Court, the question of arbitrability
of the dispute is not a pure question of applicable law of
arbitration or lex arbitri but a larger one governing the
public policy."
H
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 716
COAL INDIA LTD. [01PAK MISRA, J.]
20. Addressing the issue of maintainability, this Court referred A
to the decision in.Bhatia International (supra) and took note
of the fact that parties have agreed and as is also perceivable
from the final partial consent award that the juridical seat or
local place of arbitration for the purpose of arbitration initiated
under the claimants' notice shall be London, England. The B
parties have also agreed that the hearing of the notice for
arbitration may take place at Paris, France, Singapore or any
other location the Tribunal considers may be convenient. The
Court posed the question whether in the factual matrix, there C
has been express or i.mplied exclusion of the applicability of
Part I of the Act. In that context, the Court referred to paragraph
32 of Bhatia International case and, thereafter, analysed the
relevant articles of the PSC to discover the real intention of
the .parties as to whether the provisions of the Act had been o
excluded. The Court referred to Articles 32.1and32.2 that
dealt with the applicable law and language of the contract.
Article 32.1 provided that the proper law of the contract would
be law of India and under Article 32.2 made a declaration none
of the provisions contained in the contract would entitle either E
the Government or the contractor to exercise the rights,
privileges and powers conferred upon it by the contract in a
manner which would contravene the laws of India. The Court
observed that the basis of controversy involved in the case
pertain to analysis of the anatomy of tht;! Article 33.12 which F
provided that venue ofthe arbitration shall be London and that
the arbitration agreement shall be governed by the laws of
England. That apart, the parties had agreed that juridical seat
or legal place of arbitration for the purpose initiated under the G
claimants' notice of arbitration would be at London. The Court
posed the question whether such stipulations excluded the
applicability of the Act or not. The Court repelling the contention ,
that clauses do not exclude the applicability of the 1996 Act,
observed thus:- H
717 SUPREME COURT REPORTS [2015] 2 S.C.R.
A "In our opinion, the expression "laws of India" as used in
Articles 32.1 and 32.2 has a reference only to the
contractual obligations to be performed by the parties
under the substantive contract i.e. PSC. In other words,
the provisions contained in Article 33.12 are not
B governed by the provisions contained in Article 32.1. It
must be emphasised that Article 32.1 has been made
subject to the provision of Article 33.12. Article 33.12
specifically provides that the arbitration agreement shall
be governed by the laws of England. The two articles
c are particular in laying down that the contractual
obligations with regard to the exploration of oil and gas
under the PSC shall be governed and interpreted in
accordance with the laws of India. In contradistinction,
D Article 33.12 specifically provides that the arbitration
agreement contained in Article 33.12 shall be governed
by the laws of England. Therefore, in our opinion, the
conclusion is inescapable that applicability of the
Arbitration Act, 1996 has been ruled out by a conscious
E decision and agreement of the parties. Applying the ratio
of law as laid down in Bhatia lntemational it would lead
to the conclusion that the Delhi High Court had no
jurisdiction to entertain the petition under Section 34 of
the Arbitration Act, 1996."
F
21. After so stating, the Court opined that it is too late in the
day to contend that the seat of arbitration is not analogous to
an exclusive jurisdiction clause. Once the parties had
consciously agreed that juridical seat of the arbitration would
G be London and that the agreement would be governed by the
laws of London, it was no longer open to contend that
provisions of Part I of the Act would also be applicable to the
arbitration agreement. The Court referred to the decision in
H
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 718
COAL INDIA LTD. [DIPAKMISRA, J.]
Videocon Industries Ltd. v. Union oflndia9 • Referring to A
clause in the Videocon Industries Ltd. (supra), the Court
proceeded to state that:-
47 .....The first issue raised in Videocon Industries Ltd.
was as to whether the seat of arbitration was London or B
Kuala Lumpur. The second issue was with regard to
the courts that would have supervisory jurisdiction over
the arbitration proceedings. Firstly, the plea of Videocon
Industries Ltd. was that the seat could not have been
changed from Kuala Lumpur to London only on c
agreement of t_he parties without th.ere being a
corresponding amendment in the PSC. This plea was
accepted. It was held that seat of arbitration cannot be
changed by mere agreement of parties. In para 21 of
D
the judgment, it was observed as follows: (SCC p. 170)
"21. Though, it may appear repetitive, we deem it
necessary to mention that as per the terms of
agreement, the seat of arbitration was Kuala Lumpur.
E
If the parties wanted to amend Article 34.12, they could
have done so only by a written instrument which was
required to be signed by all of them. Admittedly, neither
was there any agreement between the parties to the
PSC to shift the juridical seat of arbitration from Kuala F
Lumpur to London nor was any written instrument
signed bythem.foramendingArticle 34.12. Therefore,
the mere fact that the parties to the particular arbitration
had agreed for shifting of the seat of arbitration to
London cannot be interpreted as anything except G
physical change of the venue of arbitration from Kuala
Lumpur to London."
9. (2011) a sec 1a1
H
719 SUPREME COURT REPORTS [2015] 2 S.C.R.
A 48. The other issue considered by this Court in Videocon
Industries Ltd. was as to whether a petition under Section 9 of
the Arbitration Act, 1996 would be maintainable in the Delhi
High Court, the parties having specifically agreed that the
arbitration agreement would be governed by the English law.
B This issue was decided against the Union of India and it was
held that the Delhi High Court did not have the jurisdiction to
entertain the petition filed by the Union of India under Section
9 of the Arbitration Act.
C · 22. While discussing about the ratio laid down in Videocon
Industries Ltd. (supra), the Court analysed the agreement of
the earlier case, and mainly the relevant parts of Articles 33,
34 and 35. Article 34.12 in Videocon Industries Ltd. case
read as follows:
D
"34.12. Venue and law of arbitration agreement.-The
venue of sole expert, conciliation or arbitration
proceedings pursuant to this article, unless the parties
otherwise agree, shall be Kuala Lumpur, Malaysia, and
E shall be conducted in the English language. Insofar as
practicable, the parties shall continue to implement the
terms of this contract notwithstanding the initiation of
arbitral proceedings and any pending claim or dispute.
Notwithstanding the provisions of Article 33.1, the
F
arbitration agreement contained in this Article 34 shall
be governed by the laws of England."
Clause 35.2 of the agreement pertaining to amendment
G stipulated that the said contract shall not be amended modified,
varied or supplemer:ited in any respect except by an instrument
in writing signed by all the parties, which shall state the date
upon which the amendment or modification shall be effective.
Thereafter, the Court had proceeded to state what we have
H reproduced hereinbefore.
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 720
COAL INDIA LTD. [DIPAKMISRA, J.]
23. In Reliance Industries Ltd. (supra), the Court took note A
of the fact that parties had made necessary amendment in the
PSCs to provide that the juridical seat of arbitration shall be
London and the arbitration agreement will be governed by the
laws of England and in that context observed that the ratio laid
down in Videocon Industries Ltd. (supra) would be relevant B
and binding. Proceeding further, the Court stated thus:
"The arbitration agreement in this appeal is identical to
the arbitration agreement in Videocon Industries. In fact,
the factual situation in the present appeal is on a stronger c
footing than in Videocon Industries Ltd. As noticed
earlier, in Videocon Industries, this Court concluded that
the parties could not have altered the seat of arbitration
without making the necessary amendment to the PSC.
D
In the present appeal, necessary amendment has been
made in the PSC. Based on the aforesaid amendment,
the Arbitral Tribunal has rendered the final partial consent
award of 14-9-2011 recording thatthe juridical seat (or
legal place) of the arbitration for the purposes of E
arbitration initiated under the claimants' notice of
arbitration dated 16-12-2010 shall be London, England.
Furthermore, the judgment in Videocon Industries is
subsequent to Venture Global. We are, therefore, bound
by the ratio laid down in Videocon Industries Ltd." F
24. The Court also referred to Bharat Aluminium Co. (supra),
especially para 123, which is as follows:
"123 . ... ' ... an agreement as to the seat of an arbitration
G
is analogous to an exclusive jurisdiction clause. Any
claim for a remedy ... as to the validity of an existing
interim or final award is agreed to be made only in the
courts of the place designated as the seat of
arbitration'." H
721 SUPREME COURT REPORTS (2015) 2 S.C.R.
A [emphasis in original]
25. The two-Judge Bench referred to Dozco India Private
Ltd. v. Doosan lnfracore Company Ltd. 10• Sumitomo
Heavy Industries Ltd. v. ONGC Ltd.11 , Yograj Infrastructure
B Ltd. v. Ssang Yong Engg. and Construction Co. Ltd. 12 and
quoted a paragraph from C v. D 13, which was approved in
Bharat Aluminium Co. (supra) and reiterated in Enercon
(India) Ltd. v. Enercon GmbH14 and further quoted a
paragraph from the said authority which we think condign to
C be reproduced:-
"this follows from the express terms of the Arbitration
Act, 1996 and, in particular, the provisions of Section 2
which provide that Part I of the Arbitration Act, 1996
D applies where the seat of the arbitration is in England
and Wales or Northern Ireland. This immediately
establishes a strong connection between the arbitration
agreement itself and the law of England. It is for this
reason that recent authorities have laid stress upon the
E locations of the seat of the arbitration as an important
factor in determining the proper law of the arbitration
agreement."
Thereafter, the two-Judge Bench held thus:-
F
"ln our opinion, these observations in Sulamerica Gia
Nacional de Seguros SA v. Enesa Enge/haria SA -
Enesa 15 are fully applicable to the facts and
G 10. (2011) 6 sec 119
11. (1998) 1 sec 305
12. (2011) 9 sec 735
13. 2008 Bus LR 843
14. (2014) 5 sec 1
H 15. (2013) 1 WLR 102 ·
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 722
COAL INDIA LTD. [DIPAK MISRA, J.)
circumstances of this case. The conclusion reached by A
the High Court would lead to the chaotic situation where
the parties would be left rushing between India and
England for redressal of their grievances. The provisions
of Part I of the" Arbitration Act, 1996 (Indian) are
necessarily excluded; being wholly inconsistent with the B
arbitration agreement which provides "that arbitration
agreement shall be governed by English law". Thus the
remedy for the respondent to challenge any award
rendered in the arbitration proceedings would lie under
the relevant provisions contained in the Arbitration Act,
c
1996 of England and Wales. Whether or not such an
application would now be entertained by the courts in
England is not for us to examine, it would have to be
examined by the court of competent jurisdiction in D
England."
26. Elaborating the said facet, the Court discussed the principle
that has been stated in Bhatia International (supra) laying
that in cases of international commercial arbitrations held out E
of India, provisions of Part I would apply unless the parties by
agreement, express or implied, exclude all or any of its
provisions. In that case, the laws or rules chosen by the parties
would prevail. Any provision, in Part I, which is contrary to or
· excluded by that law or rules will not apply. Elaborating further, F
it proceeded to lay down thus:
"In this case, the parties have by agreement provided
that the juridical seat of arbitration will be in London.
On the basis of the aforesaid agreement, necessary G
amendment has been made in the PSCs. On the basis
of the agreement and the consent of the parties, the
Arbitral Tribunal has made the "final partial consent
award" on 14-9-?011 fixing the juridical seat(or legal
H
723 SUPREME COURT REPORTS [2015] 2 S.C.R.
A place) of arbitration for the purposes of arbitration
initiated under the claimants' notice of arbitration dated
16-12-2010 in London, England. To make it even further
clear that the award also records that any hearing in the
arbitration may take place in Paris, France, Singapore
B or any other location the Tribunal considers convenient.
Article 33.12 stipulates that arbitration proceedings shall
be conducted in English language. The arbitration
agreement contained in Article 33 shall be governed by
the laws of England. A combined effect of all these
c
factors would clearly show that the parties have by
express agreement excluded the applicability of Part I
of the Arbitration Act, 1996 (Indian) to the arbitration
proceedings."
D 27. On a further analysis of the said decision, we notice that
the Court repelled the submission that irrespective of the
provisions contained in Article 33.12, the Act would be
applicable to arbitration proceeding and the English law would
E be applicable only in relation to the conduct of the arbitration
up to the passing of the partial final award, as in the said case,
it was the partial final award was in question. In justification in
repelling such a submission, the Court opined thus:
"69. . ..... As noticed earlier, Article 32.1 itself
F
provides that it shall be subject to the provision of Article
33.12. Article 33.12 provides that the arbitration
agreement contained in this article shall be governed
by the laws of England. The term "laws of England"
G cannot be given a restricted meaning confined to only
curial law. It is permissible under law for the parties to
provide for different laws of the contract and the
arbitration agreement and the curial law. In Naviera
Amazonica Peruana SA v. Compania lntemacional De
H
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 724
COAL INDIA LTD. [DIPAKMISRA, J.]
Seguros Del Peru 16, the Court of Appeal in England A
considered an agreement which contained a clause
providing for the jurisdiction of the courts in Lima, Peru
in the event of judicial dispute and at the same time
contained a clause providing that the arbitration would
be governed by the English law and the procedural law B
of arbitration shall be the English law. The Court of
Appeal observed as follows:
All contracts which provide for arbitration and contain
a foreign element may involve three potentially relevant c
systems of law: ( 1) the law governing the substantive
contract; (2) the law governing the agreement to
arbitrate and the performance of that agreement; (3)
the law governing the conduct of the arbitration. In the
D
majority of cases all three will be the same. But ( 1) will
often be diffe.>rent from (2) and (3). And occasionally,
but rarely (2) may also differ from (3).
70. From the above, it is evident that it was open to the
parties to agree that the law governing the substantive E
contract (PSC) would be different from the law governing
the arbitration agreement. This is precisely the situation
in the present case. Article 32.1 specifically provides
that the perfonnance of the contractual obligations under F
the PSC would be governed and interpreted under the
laws of India. So far as the alternative dispute redressal
agreement i.e. the arbitration agreement is concerned,
it would be governed by the laws of England. There is
no basis on which the respondents can be heard to say G
that the applicability of laws of England related only to
the conduct of arbitration reference. The law governing
the conduct of the arbitration is interchangeably referred
16. (1988) 1 Lloyd's Rep 116 (CA)
H
725 SUPREME COURT REPORTS [2015] 2 S.C.R.
A to as the curial law or procedural law or the lex tori. The
delineation of the three operative laws as given in
Naviera Amazonica has been specifically followed by
this Court in Sumitomo. The Court also, upon a survey,
of a number of decisions rendered by the English courts
B and after referring to the views expressed by learned
commentators on international commercial arbitration
concluded that:
16. The law which would apply to the filing of the
c award, to its enforcement and to its setting aside
would be the law governing the agreement to arbitrate
and the performance of that agreement."
28. After so holding, the Court referred to the legal position
D stated in Dozco's case wherein it has been ruled thus:
"In the backdrop of these conflicting claims, the question
boils down to as to what is the true interpretation of Article
23. This Article 23 will have to be read in the backdrop
E of Article 22 and more particularly, Article 22.1. It is clear
from the language of Article 22.1 that the whole
agreement would be governed by and construed in
accordance with the laws of The Republic of Korea. It is
for this reason. that the respondent heavily relied on the
F law laid down in Sumitomo Heavy Industries Ltd. v.
ONGC Ltd. Thisjudgment is a complete authority on the
proposition that the arbitrability of the dispute is to be
determined in terms of the law governing arbitration
agreement and the arbitration proceedings have to be
G
conducted in accordance with the curial law. This Court,
in that judgment, relying on Mustill and Boyd: The Law
and Practice of Commercial Arbitration in England, 2nd
Edn., observed in para 15 that where the law governing
H the conduct of the reference is different from the law
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 726
COAL INDIA LTD. [DIPAK MISRA, J.]
governing the underlying arbitration agreement, the court A
looks to the arbitration agreement to see if the dispute
is arbitrable, then to the curial law to see how the
referenee should be conducted, "and then returns to the
first law in order to give effect to the resulting award". In
para 16, this Court, in no uncertain terms, declared that B
the law which would apply to the filing of the award, to its
enforcement and to its setting aside would be the law
governing the agreement to arbitrate and the
performance of that agreement."
c
The said view was accepted by the two-Judge Bench.
29. Eventually, the Court dislodged the decision of the High
Court of Delhi stating that:
D
"76.2. We further overrule and set aside the conclusion
of the High Court that, even though the arbitration
agreement would be governed by the laws of England
and that the juridical seat of arbitration would be in
London, Part I of the Arbitration Act would still be E
applicable as the laws governing the substantive contract
are Indian laws.
76.3. In the event a final award is made against the
respondent, the enforceability of the same in India can F
be resisted on the ground of public policy.
76.4. The conclusion of the High Court that in the event,
the award is sought to be enforced outside India, it would
leave the Indian party remediless is without any basis G
as the parties have consensually provided that the
arbitration agreement will be governed by the English
law. Therefore, the remedy against the award will have
to be sought in England, where the juridical seat is
H
727 SUPREME COURT REPORTS (2015] 2 S.C.R.
A located. However, we accept the submission of the
appellant that since the substantive law governing the
contract is Indian law, even the courts in England, in case
the arbitrability is challenged, will have to decide the
issue by applying Indian law viz. the principle of public
B policy, etc. as it prevails in Indian law."
30. We have dealt with the said decision as it has taken note
of all the pronouncements in the field and further, Mr. Giri,
learned senior counsel appearing for the respondents would
C heavily rely on it and Mr. Viwanathan, learned senior counsel
would leave no stone unturned to distinguish the same on the
factual foundation especially in reference to the arbitration
clause. ·
D 31. At this juncture, it is profitable to note that in Reliance
Industries Ltd. (supra), the authority in Venture Global Engg.
(supra) has been distinguished by taking note of the various
clauses in the agreement and opined that as there was a non
obstante clause in the agreement hence, the claim of the
E appellant therein can be enforced in India.
32. In view of the aforesaid propositions laid down by this Court,
we are required to scan the tenor of the clauses in the
agreement specifica;:y, the arbitration clause in appropriate
F perspective. The said clause read as follows:
"5. If any dispute or difference should arise under this
charter, general average/arbitration in London to apply,
one to be appointed by each of the parties hereto, the
G third by the two so chosen, and their decision or that of
any two of them, shall be final and binding, and this
agreement may, for enforcing the same, be made a rule
of Court. Said three parties to be commercial men who
are the members of the London Arbitrators Association.
H
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 728
COAL INDIA LTD. [DIPAK MISRA, J.]
This contract is to be governed and construed according A
to English Law. For disputes where total amount claim
by either party does not exceed USO 50,000 the
arbitration should be conducted in accordance with small
claims procedure of the London Maritime Arbitration
Association." B
33. Two aspects emerge for consideration: (i) Whether on the
basis of construction placed on the said clause in the
agreement it can be stated that the ratio laid down in Bhatia
lntemational(supra) would not be attracted, but what has been C
laid down in Reliance Industries Ltd. (supra) would be
applicable and (ii) whether the execution of the addendum
would attract the principles laid down in Bharat Aluminium
Co. case and oust the jurisdiction of the Indian courts.
D
34. First, we shall adv~rt to the first proposition. There is no
cavil over1the principle stated in Bhatia International (supra)
that Part I of the Act is applicable to arbitrations held outside
India unless the parties have either expressly or impliedly
excluded the provisions of the Act. Mr. Vishwanathan, learned E
senior counsel has submitted in ~he case at hand there is no
express exclusion, for clause remotely does not suggest so.
For the said purpose, he has commended us to the decisions
in A.B.C. Laminart Pvt. Ltd. and Ant: v. A.P. Agencies, F
Salem17 and Rajasthan SES v. Universal Petrol Chemicals
Ltd. 18 • It is also urged by hirn that the stipulation in the
agreement does not even remotely impliedly exclude the
jurisdiction of the Indian courts. He would submitthatto apply
the principle of implied exclusion, the Court has to test the G
"presumed intention" and in such a situation, it is the duty of
the Court to adopt an objective approach, that is to say, what
would have been the intention of reasonable parties in
11 (1989) 2 sec 1sa
H
18 (2009) 3 sec 101
729 SUPREME COURT REPORTS [2015] 2 S.C.R.
A the position of the actual parties to the contract. Learned
senior counsel would also contend that the concept of fair result
has to be kept in view while construing a contract. To buttress
the aforesaid submissions, he has drawn inspiration from Kim
Lewison's The Interpretation _of Contracts, pages 26, 41,
B 110 and 217 wherein various judgments have been referred.
35. The issue has to be tested, as we perceive, on the
parameters of law laid down in the cases of Videocon
Industries Ltd. (supra), Dozco (supra) and Reliance
C Industries Ltd. (supra).
36. In Videocon Industries Ltd. (supra), the Court has referred
to Section 3 of the English Arbitration Act, 1996, which reads
as follows:
D
"3. The seat of the arbitration.- In this Part 'the seat
of the arbitration' means the juridical seat of the
arbitration designated-
E (a) by the parties to the arbitration agreement, or
(b) by any arbitral or other institution or person vested
by the parties with powers in that regard, or
(c) by the Arbitral Tribunal if so authorised by the parties,
F or determined, in the absence of any such designation,
having regard to the parties' agreement and all the
relevant circumstances."
Analysing the said provision, the Court proceeded to
G state as follows:
"A reading of the above reproduced provision shows that
under the English law the seat of arbitration means
juridical seat of arbitration, which can be designated by
H
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 730
COAL INDIA LTD. [DIPAKMISRA, J.]
the parties to the arbitration agreement or by any arbitral A
or other institution or person empowered by the parties
to do so or by the Arbitral Tribunal, if so authorised by
the parties. In contrast, there is no provision in the Act
under which the Arbitral Tribunal could change the
juridical seat of arbitration which, as per the agreement B
of the parties, was Kuala Lumpur. Therefore, mere
change in the physical venue of the hearing from Kuala
Lumpur to Amsterdam and London did not amount to
change in the juridical seat of arbitration."
c
Eventually, the Court in the said case has ruled thus:
"In the present case also, the parties had agreed that
notwithstanding Article 33.1, the arbitration agreement
contained in Article 34 shall be governed by laws of D
England. This necessarily implies that the parties had
agreed to exclude the provisions of Part I of the Act. As
a corollary to the above conclusion, we hold that the Delhi
High Court did not have the jurisdiction to entertain the
petition filed by the respondents under Section 9 of the E
Act and the mere fact that the appellant had earlier filed
similar petitions was not sufficient to clothe that High
Court with the jurisdiction to entertain the petition filed
by the respondents."
F
37. In Dozco (supra), the Court referred to Article 22 and Article
23 of the agreement, which dealt with the governing laws and
arbitration. Article 22.1 in the said case provided that the
agreement shall be governed by and construed in accordance G
with the laws of the Republic of Korea. Article 23.1, which
dealt with arbitration, stipulated that all disputes arising in
connection with the: agreement, shall be finally settled by
arbitration in Seoul, Korea or such other place as the parties
may agree in writing, pursuant to the rules of agreement then H
731 SUPREME COURT REPORTS [2015] 2 S.C.R.
A in force of the l.C.C. The Court referred to the decisions in
Bhatia International (supra), lndtel Technical Services
(supra), Citation lnfowares Ltd. (supra), NTPC v. Singer
Co. 19 and while analysing the import of Clause 23.1, the Court
placed heavy reli!"nce on Naviera Amazonica Peruana SA
B (supra) and held thus:
"19. In respect of the bracketed portion in Article 23.1,
however, it is to be seen that it was observed in Naviera
case:
c
"... It seems clear that the submissions advanced below
confused the legal 'seat', etc. of an arbitration with the
geographically convenient place or places for holding
hearings. This distinction is nowadays a common feature
D of international arbitrations and is helpfully explained in
Redfern and Hunter in the following passage under the
heading 'The Pl 'Ce of Arbitration':
'The preceding discussion has been on the basis that
E there is only-one "place" of arbitration. This will be the
place chosen by or on behalf of the parties; and it will
be designated in the arbitration agreement or the
terms of reference or the minutes of proceedings or
in some other way as the place or "seat" of the
F arbitration. This does not mean, however, that the
Arbitral Tribunal must hold all its meetings or hearings
at the place of arbitration. International commercial
arbitration often involves people of many different
nationalities, from many different countries. In these
G
circumstances, it is by no means unusual for an
Arbitral Tribunal to hold meetings- or even hearings
- in a place other than the designated place of
19. (1992) 3 sec 551
H
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 732
COAL INDIA LTD. [DIPAKMISRA, J.]
arbitration, either for its own convenience or for the A
convenience of the parties or their witnesses ....
It may be more convenient for an Arbitral Tribunal
sitting in one country to conduct a hearing in another
country - for instance, for the purpose of taking 8
evidence .... In ~uch circumstances, each move of the
Arbitral Tribunal does not of itself mean that the seat
of the arbitration changes. The seat of the arbitration
remains the place initially agreed by or on behalf of
the parties.' C
These aspects need to be borne in mind when one comes
to the Judge's construction of this policy."
It would be clear from this that the bracketed portion in the D
article was not for deciding upon the seat of the arbitration,
but for the convenience of the parties in case they find to hold
the arbitration proceedings somewhere else than Seoul,
Korea. The part which has been quoted above from Naviera
Amazonica Peruana S.A. v. Compania International de E
Seguros de/ Peru supports this inference.
20. In that vie"'!f, my inferences are that:
(1) The clear language of Articles 22 and 23 of the
F
distributorship agreement between the parties in this
case spells out a clear agreement between the parties
excluding Part I of the Act.
(i1) The law laid down in Bhatia International v. Bulk
G
Trading S.A. and lndtel Technical Services (P) Ltd. v.
W S. Atkins Rail Ltd., as also in Citation lnfowares Ltd.
v. Equinox Corpn. is not applicable to the present case.
(iii) Since the interpretation of Article 23.1 suggests that
H
733 SUPREME COURT REPORTS [2015] 2 S.C.R.
A the law governing the arbitration will be Korean Law and
the seat of arbitration will be Seoul in Korea, there will
be no question of applicability of Section 11 (6) of the
Act and the appointment of arbitrator in terms of that
provision."
B
38. In Yograj Infrastructure Ltd. (supra), two-Judge Bench
dealt with the concept of "procedural law" and "curial law". In
that context, it referred to the agreement in the contract, namely,
Clauses 27 and 28. In that context the Court opined that:
c
"..... 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
D out the distinction between the "proper law" of the contract
and the "curial law" to 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
E 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 thatthe curial law which
F 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
G arbitration. Clause 27.1 indicates that the arbitration
proceedings are to be conducted in accordance with the
SIAC Rules."
[Emphasis supplied]
H
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 734
COAL INDIA LTD. [DIPAK MISRA, J.]
39. After so stating, the Court posed the question whether in A
such a case, the provisions of Section 2(2), which indicates
that Part I of the Act would apply, where the place of arbitration
is India, would. be a bar to the invocation of provisions of
Sections 34 and 27 of the Act, which have been conducted in
Singapore. The Court referred to the decision in Bhatia B
International (supra) wherein it was held that there cannot be
any automatic exclusion, but on express or implied exclusion
and opined regard being had to the Rule 32 of the SIAC Rules,
the law laid down in.Bhatia International (supra) would not C
be applicable. The said Rule, being pertinent to the issue in
question, is reproduced below:-
"32. Where the seat of arbitration is Singapore, the law
of the arbitration under these Rules shall be the
D
International Arbitration Act (Cap. 143-A, 2002 Edn.,
Statutes of the Republic of Singapore) or its modification
or re-enactment thereof."
And in that context, the Court ruled thus:
E
"Having agreed to the above, it was no longer available
to the appellant to contend that the "proper law" of the
agreement would apply to the arbitration proceedings.
The decision in Bhatia lntemationalv. Bulk Trading S.A.,
which was applied subsequently in Venture Global Engg. F
v. Satyam Computer Services Ltd. and Citation
lnfowares Ltd. v. ·Equinox Corpn. would have no
application once the parties agreed by virtue of Clause
27 .1 of the agreement that the arbitration proceedings
G
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.
xxxxx xxxxx xxxxx H
735 SUPREME COURT REPORTS [2015) 2 S.C.R.
A 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 lntemational1
and the subsequent decisions on the same lines. would
B no longer apply in the instant case where the parties had
willingly agreed to be governed by the SIAC Rules."
[Emphasis added)
c 40. In Reliance Industries Ltd. (supra), the two-Judge
Bench, while referring to the submissions of the learned
counsel for the appellant therein had also referred to the
pronouncement in Yograj Infrastructure Ltd. (supra) and dealt
with it thus:
D
"Again this Court in Yograj Infrastructure (two-Judge
Bench) considered a similar arbitration agreement. It
was provided that the arbitration proceedings shall be
conducted in English in Singapore in accordance with
E the Singapore International Arbitration Centre (SIAC)
Rules (Clause 27.1). Clause 27.2 provided that the
arbitration shall take place in Singapore and be
conducted in English language. This Court held that
having agreed that the seat of arbitration would be
F Singapore and that the curial law of the arbitration
proceedings would be the SIAC Rules, it was no longer
open to the a'ppellant to contend that an application
under Section 1.1 (6) of the Arbitration Act, 1996 would
be maintainable. This judgment has specifically taken
G
into consideration the law laid down in Bhatia
International and Venture Global. The same view has
been taken by the Delhi High Court, the Bombay High
Court and the Gujarat High Court, in fact this Court in
H Videocon has specifically approved the observations
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 736
COAL INDIA LTD. [DIPAKMISRA, J.]
made by the Gujarat High Court in Hardy Oil and Gas A
Ltd. v. Hindustan Oil Exploration Co. Ltd. 20 "
41. Coming to the stipulations in the present arbitration
clause, it is clear as day that if any dispute or difference would
arise under the charter, arbitration in London to apply; that the B
arbitrators are to be commercial men who are members of
London Arbitration Association; the contract is to be construed
and governed by English Law; and thatthe arbitration should
be conducted, ifthe claim is for a lesser sum, in accordance
with small claims procedure of the London Maritime Arbitration C
Association. There is no other provision in the agreement
that any other law would govern the arbitration clause.
42. Mr. Giri, learned senior counsel would submit that from
the clause which is a comprehensive one, it is London, which D
is the seat of arbitration. In Videocon Industries Ltd. (supra),
as we have analysed earlier, Article 33.1 of the agreement
which stipulated that subject to the provisions of Article 34.12,
the ·contract would be governed and interpreted in accordance
with the laws of India. Clause 34.12 of the agreement read as E
follows:
"34.12. Venue and law of arbitration agreement.-The
venue of sole expert, conciliation or arbitration
proceedings pursuant to this article, unless the parties F
otherwise agree, shall be Kuala Lumpur, Malaysia, and
shall be conducted in the English language. Insofar as
practicable, the parties shall continue to implement the
terms of this contract notwithstanding the initiation of
G
arbitral proceedings and any pending claim or dispute.
Notwithstanding the provisions of Article 33.1, the
arbitration agreement contained in this Article 34 shall
be governed by the laws of England."
20. (2006) 1 Guj LR 658 H
737 SUPREME COURT REPORTS [2015] 2 S.C.R.
A 43. In that context, the Court referred to Section 3 of the
English Arbitration Act, 1996 and as has been stated earlier,
opined that as per the English law, the seat of arbitration as
per the said provision would mean "juridical seat of arbitration"
and accordingly opined that principles stated in Bhatia
B International (supra) would not be applicable.
44. In the present case, the agreement stipulates that the
contract is to be governed and construed according to the
English law. This occurs in the arbitration clause. Mr.
C Vishwanathan, learned senior counsel, would submit that this
part has to be interpreted as a part of"curial law'' and not as a
"proper law" or "substantive law". It is his submission that it
cannot be equated with the seat of arbitration. As we perceive,
it forms as a part of the arbitration clause. There is ample
0
indication through various phrases like "arbitration in London
to apply", arbitrators are to be the members of the "London
Arbitration Association" and the contract "to be governed and
construed according to English Law". It is worth noting that
E there is no other stipulation relating to the applicability of any
law to the agreement. There is no other clause anywhere in
the contract. That apart, it is also postulated that if the dispute
is for an amount less that US $ 50000 then, the arbitration
should be conducted in accordance with small claims
F procedure of the London Maritime Arbitration Association.
When the aforesaid stipulations are read and appreciated in
the contextual perspective, "the presumed intention" of the
parties is clear as crystal that the juridical seat of arbitration
would be London. In this context, a passage from Mitsubishi
G Heavy lndustrie$ Ltd. v. Gulf Bank21 is worth reproducing:
"It is of course both useful and frequently necessary when
construing a clause in a contract to have regard to the
H 21. [1997] 1 Lloyd 's Rep. 343
HARMONY INNOVATION SHIPPING LTD. v. GUPTA 738
COAL INDIA LTD. [DIPAK MISRA, J.]
overall commercial purpose of the contract in the broad A
sense of the type and general content, the relationship of
the parties and such common commercial purpose as
may clearly emerge from such an exercise. However, it
does not seer:: to me to be a proper approach to the
construction of a default clause in a commercial contract B
to seek or purport to elicit some self-contained
'commercial purpose' underlying the clause which is or
may be wider than the ordinary or usual construction of
the words of each sub-clause will yield."
c
45. In Cargill International S.A. v. Bangladesh Sugar &
Food Industries Corp. 22· Potter L.J. balanced the two
approaches and said:
"In this connection [counsel] has rightly made the point D
that, when construing the effect of particular words in a
commercial contract, it is wrong to put a label on the
contract in advance and this to approach the question
of construction on the basis of a pre-conception as to
the contact's intended effect, with the result that a
E
strained construction is placed on words, clear in
themselves, in order to fit them within such pre-
conception ...
On the other hand, modern principles of construction F
require the court to have regard to the commercial
background, the context of the contract ad the
circumstances of the parties, and to consider whether,
against that background and I that context, to give the
G
words a particular or restricted meaning would lead to
an apparently unreasonable and unfair result."
46. Thus, interpreting the clause in question on the
22 (1998] 1W.LR.461 CA H
739 SUPREME COURT REPORTS [2015] 2 S.C.R.
A bedrock of the aforesaid principles it is vivid that the
intended effect is to have the seat of arbitration at London.
The commercial background, the context of the contract
and the circumstances of the parties and in the
background in which the contract was entered into,
B irresistibly lead in that direction. We are not impressed
by the submission that by such interpretation it will put
the respondent in an advantageous position. Therefore,
we think it would be appropriate to interpret the clause
that it is a proper clause or substantial clause and not a
curial or a procedural one by which the arbitration
c proceedings are to be conducted and hence, we are
disposed to think that the seat of arbitration will be at
London.
47. Having said that the implied exclusion principle stated in
Bhatia International (supra) would be applicable, regard
0 being had to the clause in the agreement, there is no need to
dwell upon the contention raised pertaining to the addendum,
for any interpretation placed on the said document would not
make any difference to the ultimate conclusion that we have
already arrived at·.
E 48. Before parting with the case, it is obligatory on our part to
state that the Division Bench of the High Court has allowed
the petition on the foundation that the Bharat Aluminium Co.
case would govern the field and, therefore, the court below
had no jurisdiction is not correct. But as has been analysed
F and discussed by us, even applying the principles laid down
in Bhatia International (supra) and scanning the anatomy of
the arbitration clause, we have arrived at the conclusion that
the courts in India will not have jurisdiction as there is implied
exclusion.
G 49. Consequently, for different reasons, we concur with the
conclusion arrived at by the High Court and accordingly, the
appeal, being sans merit, stands dismissed. However, in the
facts and circumstances of the case, there shall be no order
as to costs.
H Devika Gujral Appeal dismissed.
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