NOY VALLESINA ENGINEERING SPA, (NOW KNOWN AS NOY AMBIENTE S.P.A.) versus JINDAL DRUGS LIMITED & ORS. on 26 November 2020

1. The appellant, which was granted special leave, challenges ajudgment of the Bombay High Court[1]. It urges that the impugned judgmentis erroneous because it concludes that proceedings under Section 34 ofthe Arbitration and Conciliation Act, 1996 (hereafter “the Act”) can bemaintained to challenge a foreign award, defined as one, under thatCenactment.

The facts

2. The appellant company (hereafter “NV Engineering” or “theappellant”) was at the relevant time, incorporated under Italian law andDinvolved in the setting-up and construction of plants for production ofsynthetic fibers, polymers and ascorbic acid. The respondent (hereafter“Jindal”) is a public limited company incorporated under relevant Indianlaw. In 1994, Jindal negotiated with a company - Engineering Chur AGof Sagenstrasse 97, 7001 Chur, Switzerland (hereafter,‘Enco’) and, on30.01.1995 entered into four related agreements with Enco to set up anEascorbic acid plant in India. These were: (i) Engineering Contract forAscorbic for Acid Plant (ECAAP, or “plant contract”); (ii) Supply contractfor Ascorbic Acid plant (SCAAP or “supply contract”); (iii) Serviceagreement for Ascorbic Acid plant (SAAAP “service contract”); and(iv) License agreement for Ascorbic acid plant (LAAAP “licenseFcontract”).

3. Under the plant contract, Enco agreed to provide Jindal withtechnical information and basic engineering documentation for theconstruction, commission, operation and maintenance of the AscorbicAcid Plant (“the plant”). In consideration of Enco’s obligations, Jindalwas to pay a total fee of Swiss Francs 86,00,000/- in the manner providedGin the Agreement. ECAAP as well as the other three agreements hadan arbitration clause. In March 1995, with the consent of the respondent,Enco assigned ECAAP to NV Engineering. All the obligations of Encotowards Jindal were taken over by NV Engineering.

H1 Dated 28.4.2008 in Appeal No. 519/2002

H1 Dated 28.4.2008 in Appeal No. 519/2002

4. Disputes arose between Jindal and NV Engineering. The latterterminated the agreement and claimed damages. On 31.10.1996, Jindalfiled a request for arbitration under the ECAAP, i.e. the plant contract,before the International Court of Arbitration (ICC), Paris. The appellantfiled its reply to Jindal’s claim and also made a counter claim. Jindalappointed Mr. Desai as its nominee on the arbitral tribunal. NVEngineering nominated Prof. ACC Alberto Santa Maria as its nominee.The appointment of Mr. Desai and Prof. ACC Alberto Santa Maria asArbitrators was confirmed by the ICC. Mr. Richard Fernyhough Q.C.was appointed as Chairman of the Arbitral Tribunal.

5. After considering the claims and counter claims, the tribunalmade a partial award on 01.02.2000; by that award, Jindal’s claims wererejected. NV Engineering was awarded SFr.44,33,416 (Swiss Francs)towards its counterclaims under the ECAAP. The tribunal then calledupon the parties to present written representations on interest and costsin terms of Article 20 of the ICC Rules of Arbitration to enable it toframe the final award.

6. On 20.2.2000 Jindal filed a petition[2] before the Bombay HighCourt under Section 34 of the Act challenging the partial award. Thepetition was admitted for final hearing on 01.03.2000 and notice wasissued to the respondents (including the ICC and the tribunal). An interiminjunction restraining the said respondents “from receiving any furthersubmissions, and/or passing any further direction and/or Rulingand/or Award in the arbitration proceedings….” was issued. Thisorder was continued from time to time till the petition was decided. TheICC tribunal in the meanwhile was of the view that the interim orderpassed by the high court was not binding on it and consequently, proceededfurther. NV Engineering filed written submissions on interest and coston 14.03.2001. Jindal, however, notified the tribunal that it did not intendto make any submission on the issue of interest and cost. Mr. Desai (therespondent’s nominee) indicated that he was unable to continue on thetribunal due to the interim order passed by the court. Resultantly theICC appointed Mr. Ashok Sancheti as a replacement co-arbitrator inplace of Mr. Desai, and the tribunal made its final Award on 22.10.2001.When the final award was made, Jindal’s challenge to the partial award,and the interim application[3] were both pending in the High Court.

2 Arbitration petition No. 49/2000.

3 No. 98/2000, under Section 9 of the Act.

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A7. The petition (under Section 34) challenging the partial awardwas decided by the High Court by an order of a Single Judge dated6.2.2002[4], which held that the since the partial award was a foreignaward, a challenge through a petition was not maintainable under Section34 of the Act. Jindal preferred an appeal against that order before theDivision Bench[5] (hereafter “Jindal’s challenge appeal”). During theBpendency of the appeal, NV Engineering had applied for enforcementof the two awards, i.e. the partial and final awards, under Sections 47and 48 of the Act, in the chapter relating to foreign awards. This petitionwas allowed and Jindal’s objections against the two awards’ enforceabilitywere overruled. The single judge who decided the petition held, in aCjudgment (hereafter referred to as “the enforcement order”)[6] that thetwo awards “at Exh. A & B are enforceable, save and except thatpart of the award at Exh. A which directs payment of SwissFr.1,453,316” by Jindal to NV Engineering. Jindal preferred an appeal(hereafter “Jindal’s enforcement appeal”) and NV Engineering filed across appeal[7].D

8. By the impugned judgment, even as the later two appeals, whichdirectly dealt with the same subject matter (enforcement of a foreignaward were pending), the Division Bench decided Jindal’s challengeappeal preferred in 2002, and set aside the single judge’s order (whichhad ruled that a petition under Section 34 was not maintainable). TheEDivision Bench relied on the judgments of this court, i.e. BhatiaInternational v. Bulk Trading S. A. & Anr[8 ]and Venture GlobalEngineering v. Satyam Computer Services Ltd. & Anr[9]to hold thatproceedings under Section 34 of the Act could be validly maintained tochallenge a foreign award.FThe parties’ contentions

9. Appearing for the appellant, NV Engineering, Mr. JoydeepGupta, learned senior counsel, urged that the impugned judgment is 4 Dated 06.02.2002, which is now reported as Jindal Drugs Ltd v Noy Vallesina 2002(2) Mah. LJ 820.G5 Appeal No. 519/2002.6 Noy Vallesina v Jindal Drugs Ltd 2006 (3) Arb.LR 510 (Bom). The enforcementproceeding, under Sections 47/48 were registered as Arb. Petition No. 156/2005. Thedecision was rendered on 05.06.2006.

7 Jindal’s appeal was Appeal No. 492/2006; NV Engineering’s appeal was Appeal. No.740/2006

8 (2002) 4 SCC 105H9 2008 (4) SCC 190

unsupportable in law because a foreign award cannot be challengedunder Section 34 of the Act. It was urged that the three-judge decisionin Bhatia International[10 ]and the subsequent holding in Venture Global[11]were both held to be incorrect in the larger, five judges ruling in BharatAluminium Company vs Kaiser Aluminium Technical Services Inc[12](“BALCO” hereafter). Learned counsel submitted that even the caveatin BALCO that a class of foreign awards made prior to its pronouncementcannot aid Jindal’s essential argument with respect to maintainability ofa challenge under Section 34 and that such challenge under Part I isuntenable.

10. Mr. Gupta relied on BALCO extensively in support of hisargument that the foreign awards in this case, having been renderedoutside India under the aegis of the ICC cannot be challenged merelybecause a condition in the underlying contract says that the law governingthe agreement, would be Indian law. The following discussion in BALCOwas pressed into service:

“117. It would, therefore, follow that if the arbitrationagreement is found or held to provide for a seat/place ofarbitration outside India, then the provision that theArbitration Act, 1996 would govern the arbitrationproceedings, would not make Part I of the Arbitration Act,1996 applicable or enable the Indian courts to exercisesupervisory jurisdiction over the arbitration or the award. Itwould only mean that the parties have contractually importedfrom the Arbitration Act, 1996, those provisions which areconcerned with the internal conduct of their arbitration andwhich are not inconsistent with the mandatory provisions ofthe English procedural law/curial law. This necessarily followsfrom the fact that Part I applies only to arbitrations havingtheir seat/place in India.

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123. Thus, it is clear that the regulation of conduct ofarbitration and challenge to an award would have to be doneby the courts of the country in which the arbitration is being 10 Supra n. 8

11 Supra n. 912 2012 (9) SCC 552

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Aconducted. Such a court is then the supervisory courtpossessed of the power to annul the award. This is in keepingwith the scheme of the international instruments, such as theGeneva Convention and the New York Convention as well asthe UNCITRAL Model Law. It also recognises the territorialprinciple which gives effect to the sovereign right of a countryBto regulate, through its national courts, an adjudicatory dutybeing performed in its own country. By way of a comparativeexample, we may reiterate the observations made by the Courtof Appeal, England in C v. D [2008 Bus LR 843 : 2007 EWCACiv 1282 (CA)] wherein it is observed that:

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“It follows from this that a choice of seat for the arbitrationmust be a choice of forum for remedies seeking to attack theaward.”

DIn the aforesaid case, the Court of Appeal had approved theobservations made in A v. B [(2007) 1 All ER (Comm) 591:(2007) 1 Lloyd’s Rep 237] wherein it is observed that:

“… an agreement as to the seat of an arbitration isanalogous to an exclusive jurisdiction clause. Any claimEfor a remedy … as to the validity of an existing interim orfinal award is agreed to be made only in the courts of theplace designated as the seat of arbitration.”

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133. The party which seeks to resist the enforcement of theaward has to prove one or more of the grounds set out inSections 48(1) and (2) and/or the Explanation of sub-section(2). In these proceedings, we are, however, concerned onlywith the interpretation of the terms “country where the awardGwas made” and “under the law of which the award was made”.The provisions correspond to Article V(1)(e) of the New YorkConvention, which reads as under:

“V(1) Recognition and enforcement of the award may berefused, at the request of the party against whom it isinvoked, only if that party furnishes to the competent H

authority where the recognition and enforcement is sought,proof that—

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(e) the award has not yet become binding on the parties,or has been set aside or suspended by a competentauthority of the country in which, or under the law ofwhich, that award was made.

(2) Recognition and enforcement of an arbitral award mayalso be refused if the competent authority in the countrywhere recognition and enforcement is sought finds that—

(a) the subject-matter of the difference is not capable ofsettlement by arbitration under the law of that country; or (b) the recognition or enforcement of the award would becontrary to the public policy of that country.”

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135. Thus, the intention of the legislature is clear that thecourt may refuse to enforce the foreign award on satisfactoryproof of any of the grounds mentioned in Section 48(1), bythe party resisting the enforcement of the award. The provisionsets out the defences open to the party to resist enforcementof a foreign award. The words “set aside or suspended”, inclause (e) of Section 48(1) cannot be interpreted to meanthat, by necessary implication, the foreign award sought tobe enforced in India can also be challenged on merits in Indiancourts. The provision merely recognises that courts of the twonations which are competent to annul or suspend an award.It does not ipso facto confer jurisdiction on such courts forannulment of an award made outside the country. Suchjurisdiction has to be specifically provided in the relevantnational legislation of the country in which the courtconcerned is located. So far as India is concerned, theArbitration Act, 1996 does not confer any such jurisdictionon the Indian courts to annul an international commercialaward made outside India. Such provision exists in Section34, which is placed in Part I. Therefore, the applicability ofthat provision is limited to the awards made in India. If the A

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arguments of the learned counsel for the appellants areaccepted, it would entail incorporating the provision containedin Section 34 of the Arbitration Act, 1996, which is placed inPart I of the Arbitration Act, 1996 into Part II of the said Act.This is not permissible as the intention of Parliament wasclearly to confine the powers of the Indian courts to set asidean award relating to international commercial arbitrations,which take place in India.

134. The aforesaid Article of the New York Convention hasbeen bodily lifted and incorporated in the Arbitration Act,1996 as Section 48.

151. Redfern and Hunter [ Blackaby, Partasides, Redfern andHunter (Eds.), Redfern and Hunter on InternationalArbitration (5th Edn., Oxford University Press, Oxford/NewYork 2009).] at Para 11.96 state that the court which iscompetent to sustain or set aside an award is the court of thecountry in “alternative one” or “alternative two”. The authors,however, further state that “this court will almost invariablybe the national court at the seat of the arbitration”. Theypoint out that the prospect of an award being set aside underthe procedural law of a State other than that at the seat ofarbitration is unlikely. They point out that an ingenious (butunsuccessful) attempt was made to persuade the US DistrictCourt to set aside an award made in Mexico, on the basisthat the reference to the law under which that award was madewas a reference to the law governing the dispute and not tothe procedural law (para 11.96). The learned authors hadmade a reference to International Standard Electric Corpn.(US) v. Bridas Sociedad Anonima Petrolera (Argentina)[(1992) 7 Ybk Comm Arb 639]. The Court rejected theaforesaid argument with the following observations:

“Decisions of foreign courts under the Conventionuniformly support the view that the clause in questionmeans procedural and not substantive (that is, in mostcases, contract law)….

Accordingly, we hold that the contested language in ArticleV(1)(e) of the Convention … refers exclusively toprocedural and not substantive law, and more precisely tothe regimen or scheme of arbitral procedural law underwhich the arbitration was conducted.”

152. The correct position under the New York Convention isdescribed very clearly and concisely by Gary B. Born in hisbook International Commercial Arbitration (Kluwer LawInternational, Vol. 1), Ch. X, p. 1260 as follows:

“This provision is vitally important for the internationalarbitral process, because it significantly restricts the extentof national court review of international arbitral awardsin annulment actions, limiting such review only to thecourts of the arbitral seat (that is, the State where the awardis made or the State whose procedural law is selected bythe parties to govern the arbitration). In so doing, theConvention ensures that courts outside the arbitral seatmay not purport to annul an international award, therebymaterially limiting the role of such courts in supervisingor overseeing the procedures utilized in internationalarbitrations.

At the same time, the New York Convention also allows thecourts of the arbitral seat wide powers with regard to theannulment of arbitral awards made locally. The Conventiongenerally permits the courts of the arbitral seat to annulan arbitral award on any grounds available under locallaw, while limiting the grounds for non-recognition ofConvention awards in courts outside the arbitral seat tothose specified in Article V of the Convention. This has theeffect of permitting the courts of the arbitral seatsubstantially greater scope than courts of other States toaffect the conduct or outcome of an internationalarbitration through the vehicle of annulmentactions. Together with the other provisions of Articles IIand V, this allocation of annulment authority confirms the(continued) special importance of the arbitral seat in theinternational arbitral process under the New YorkConvention.”

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(emphasis supplied)

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153. In our opinion, the aforesaid is the correct way tointerpret the expressions “country where the award was made”and the “country under the law of which the award was made”.We are unable to accept the submission of Mr Sundaram thatthe provision confers concurrent jurisdiction in both the fora.“Second alternative” is available only on the failure of the“first alternative”. The expression under the law is thereference only to the procedural law/curial law of the countryin which the award was made and under the law of which theaward was made. It has no reference to the substantive law ofthe contract between the parties. In such view of the matter,we have no hesitation in rejecting the submission of thelearned counsel for the appellants.

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154. At this stage, we may notice that in spite of the aforesaidinternational understanding of the second limb of ArticleDV(1)(e), this Court has proceeded on a number of occasionsto annul an award on the basis that parties had chosen Indianlaw to govern the substance of their dispute. The aforesaidview has been expressed in Bhatia International [(2002) 4SCC 105] and Venture Global Engg. [(2008) 4 SCC 190] InEour opinion, accepting such an interpretation would be toignore the spirit underlying the New York Convention whichembodies a consensus evolved to encourage consensualresolution of complicated, intricate and in many cases verysensitive international commercial disputes. Therefore, theinterpretation which hinders such a process ought not to beFaccepted. This also seems to be the view of the national courtsin different jurisdictions across the world. For the reasonsstated above, we are also unable to agree with the conclusionsrecorded by this Court in Venture Global Engg. [(2008) 4 SCC190] that the foreign award could be annulled on the exclusiveGgrounds that the Indian law governed the substance of thedispute. Such an opinion is not borne out by the huge bodyof judicial precedents in different jurisdictions of the world.”

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11. It was next argued that BALCO, a five-judge decision, clearlyenunciated the principle that the seat of arbitration also indicated theHchoice of the law governing the arbitration. Learned counsel relied on the observations of the larger bench, and its emphasis on the“Shashoua principle”[13]. It was contended that according to that principle,the designation of a “seat” of the arbitration would carry with it “somethingakin to an exclusive jurisdiction clause”. Learned counsel referred toidentical conditions in each contract, in the present case, which expresslystated that arbitration would be “under the Rules of Conciliation andarbitration of the International Chamber of Commerce, Paris andArbitration proceedings shall be in the English language and shalltake place in London.” NV Engineering therefore, argued that theintention of the parties expressed unambiguously in the contract wasthat the arbitration was governed by the law of the seat, i.e. UK law.Therefore, the findings in the impugned judgment were clearly untenable.

12. The appellants also contended that Union of India v RelianceIndustries[14] Harmony Innovation Shipping Ltd v Gupta Goal IndiaLtd[15 ]and Roger Shashoua v Mukesh Sharma[16 ]have now establishedthat pre-Balco awards involving agreements which stipulate that thejuridical seat is in India, and which stipulate or can be read as stipulatingthat the law governing arbitration would be Indian law, would not beruled by BALCO. However, cases where juridical seat is not in India, orthe law governing arbitration is not Indian law, would be bound by BALCO.Therefore, the impugned judgment, which held to the contrary, cannotbe sustained.

13. The appellant lastly relied on Section 50 of the Act and arguedthat the order holding that the petition under Section 34 was notmaintainable was not appealable. Learned counsel also relied on FuerstDay Lawson Ltd. v. Jindal Exports Ltd.[17]in this context.

14. Mr. Jay Salva, learned senior counsel for Jindal, submittedthat the impugned judgment is unexceptionable and not liable to beinterfered with. He argued that Section 34 operates in a field differentfrom Section 48. The latter enables the enforcement of a foreign award,and the court may only refuse enforcement, whereas under Section 34,the legality of an award can be gone into and the court has the jurisdiction 13 The term based on the rule spelt out in Roger Shashoua v Mukesh Sharma 2009EWHC 957 (Comm)

14 2015 (10) SCC 213

15 2015 (9) SCC 172

16 2017 (14) SCC 722

17 (2011) 8 SCC 333

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Ato set it aside. This crucial difference was recognized by Indian courts,as is evident from the decisions in Bhatia International[18]and VentureGlobal[19].

15. Learned counsel contested the appellants’ argument that thedecision in BALCO would govern the dispute in the present case. HeBrelied on the observations in BALCO that arbitration agreements enteredinto before the decision, and disputes which arose under them, wouldcontinue to be bound by the pre-BALCO rules. Since, in this case, theagreements were entered into, and awards too were rendered duringthe prevalence of Bhatia[20 ]principle, the later decision in BALCO or anysubsequent judgment could not apply.C

16. Learned counsel emphasized that though the ECAAP (theplant contract) stated that the arbitration was to be in London, under theICC. Clause 12.4.1 clearly stated that the contract would be governedby Indian law, which unambiguously pointed to the fact that the partiesintended that the law governing arbitration too was Indian law. Therefore,Dthere is no question of the applicability of the ratio in BALCO.

Analysis & Conclusions

17. The decision in Bhatia[21], and later, in Venture Global[22], hadruled that resort to remedies under Part I of the Act can be made inErespect of foreign awards, despite the clear dichotomy in the enactmentbetween domestic awards (covered by Part I) and foreign awards(covered by Part II). This understanding was re-visited in BALCO wherethis court held as follows:

“75. We are also unable to accept the submission of the learnedFcounsel for the appellants that the Arbitration Act, 1996 doesnot make seat of the arbitration as the centre of gravity ofthe arbitration. On the contrary, it is accepted by most of theexperts that in most of the national laws, arbitrations areanchored to the seat/place/situs of arbitration. Redfern in Para3.54 concludes that ‘the seat of the arbitration is thus intendedGto be its centre of gravity.’ [Blackaby, Partasides, Redfern 18 Supra n. 819 Supra n. 920 Supra n. 821 Supra n.822 Supra n.9H

and Hunter (Eds.), Redfern and Hunter on InternationalArbitration (5th Edn., Oxford University Press, Oxford/NewYork 2009)] This, however, does not mean that all theproceedings of the arbitration have to take place at the seatof the arbitration. The arbitrators at times hold meetings atmore convenient locations. This is necessary as arbitratorsoften come from different countries. It may, therefore, onoccasions be convenient to hold some of the meetings in alocation which may be convenient to all. Such a situationwas examined by the Court of Appeal in England in NavieraAmazonica Peruana SA v. Compania International de Segurosdel Peru [Naviera Amazonica Peruana SA v. CompaniaInternational de Seguros del Peru, (1988) 1 Lloyd’s Rep 116(CA)] wherein at p. 121 it is observed as follows:

‘The preceding discussion has been on the basis that thereis only one “place” of arbitration. This will be the placechosen by or on behalf of the parties; and it will bedesignated in the arbitration agreement or the terms ofreference or the minutes of proceedings or in some otherway as the place or “seat” of the arbitration. This doesnot mean, however, that the Arbitral Tribunal must hold allits meetings or hearings at the place of arbitration.International commercial arbitration often involves peopleof many different nationalities, from many differentcountries. In these circumstances, it is by no means unusualfor an Arbitral Tribunal to hold meetings—or even hearings—in a place other than the designated place of arbitration,either for its own convenience or for the convenience ofthe parties or their witnesses…. It may be more convenientfor an Arbitral Tribunal sitting in one country to conducta hearing in another country — for instance, for thepurpose of taking evidence…. In such circumstances eachmove of the Arbitral Tribunal does not of itself mean thatthe seat of arbitration changes. The seat of arbitrationremains the place initially agreed by or on behalf of theparties.’

76. It must be pointed out that the law of the seat or placewhere the arbitration is held, is normally the law to govern AB

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Athat arbitration. The territorial link between the place ofarbitration and the law governing that arbitration is wellestablished in the international instruments, namely, the NewYork Convention of 1958 and the UNCITRAL Model Law of 1985.It is true that the terms “seat” and “place” are often usedinterchangeably. In Redfern and Hunter on InternationalBArbitration [Blackaby, Partasides, Redfern and Hunter(Eds.), Redfern and Hunter on International Arbitration (5thEdn., Oxford University Press, Oxford/New York 2009)] (Para3.51), the seat theory is defined thus:‘The concept that anarbitration is governed by the law of the place in which it isCheld, which is the “seat” (or “forum” or locus arbitri) of thearbitration, is well established in both the theory and practiceof international arbitration. In fact, the Geneva Protocol,1923 states ******************

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95. The learned counsel for the appellants have submittedthat Section 2(1)(e), Section 20 and Section 28 read withSection 45 and Section 48(1)(e) make it clear that Part I isnot limited only to arbitrations which take place in India.These provisions indicate that the Arbitration Act, 1996Eis subject-matter centric and not exclusively seat-centric.Therefore, “seat” is not the “centre of gravity” so far as theArbitration Act, 1996 is concerned. We are of the consideredopinion that the aforesaid provisions have to be interpretedby keeping the principle of territoriality at the forefront. Wehave earlier observed that Section 2(2) does not make Part IFapplicable to arbitrations seated or held outside India. Inview of the expression used in Section 2(2), themaxim expressumfacitcessaretacitum, would not permit byinterpretation to hold that Part I would also apply toarbitrations held outside the territory of India. The expressionG“this Part shall apply where the place of arbitration is inIndia” necessarily excludes application of Part I toarbitration seated or held outside India. It appears to us thatneither of the provisions relied upon by the learned counselfor the appellants would make any section of Part I applicable E

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to arbitration seated outside India. It will be apposite now toconsider each of the aforesaid provisions in turn.

96. Section 2(1)(e) of the Arbitration Act, 1996 reads as under:****** ****** ******

We are of the opinion, the term “subject-matter of thearbitration” cannot be confused with “subject-matter of thesuit”. The term “subject-matter” in Section 2(1)(e) is confinedto Part I. It has a reference and connection with the processof dispute resolution. Its purpose is to identify the courtshaving supervisory control over the arbitration proceedings.Hence, it refers to a court which would essentially be a courtof the seat of the arbitration process. In our opinion, theprovision in Section 2(1)(e) has to be construed keeping inview the provisions in Section 20 which give recognition toparty autonomy. Accepting the narrow construction asprojected by the learned counsel for the appellants would, infact, render Section 20 nugatory. In our view, the legislaturehas intentionally given jurisdiction to two courts i.e. the courtwhich would have jurisdiction where the cause of action islocated and the courts where the arbitration takes place. Thiswas necessary as on many occasions the agreement mayprovide for a seat of arbitration at a place which would beneutral to both the parties. Therefore, the courts where thearbitration takes place would be required to exercisesupervisory control over the arbitral process. For example, ifthe arbitration is held in Delhi, where neither of the partiesare from Delhi, (Delhi having been chosen as a neutral placeas between a party from Mumbai and the other from Kolkata)and the tribunal sitting in Delhi passes an interim order UnderSection 17 of the Arbitration Act, 1996, the appeal againstsuch an interim order under Section 37 must lie to the courtsof Delhi being the courts having supervisory jurisdiction overthe arbitration proceedings and the tribunal. This would beirrespective of the fact that the obligations to be performedunder the contract were to be performed either at Mumbai orat Kolkata, and only arbitration is to take place in Delhi. Insuch circumstances, both the courts would have jurisdiction A

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i.e. the court within whose jurisdiction the subject-matter ofthe suit is situated and the courts within the jurisdiction ofwhich the dispute resolution i.e. arbitration is located.

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98. We now come to Section 20, which is as under:

A plain reading of Section 20 leaves no room for doubtthat where the place of arbitration is in India, the parties arefree to agree to any “place” or “seat” within India, be itDelhi, Mumbai, etc. In the absence of the parties’ agreementthereto, Section 20(2) authorises the tribunal to determinethe place/seat of such arbitration. Section 20(3) enables thetribunal to meet at any place for conducting hearings at aplace of convenience in matters such as consultations amongits members for hearing witnesses, experts or the parties.

99. The fixation of the most convenient “venue” is taken careof by Section 20(3). Section 20, has to be read in the contextof Section 2(2), which places a threshold limitation on theapplicability of Part I, where the place of arbitration is inIndia. Therefore, Section 20 would also not support thesubmission of the extra-territorial applicability of Part I, ascanvassed by the learned counsel for the appellants, so faras purely domestic arbitration is concerned.

Only if the agreement of the parties is construed toprovide for the “seat”/”place” of arbitration being in India— would Part I of the Arbitration Act, 1996 be applicable. Ifthe agreement is held to provide for a “seat”/”place” outsideIndia, Part I would be inapplicable to the extent inconsistentwith the arbitration law of the seat, even if the agreementpurports to provide that the Arbitration Act, 1996 shall governthe arbitration proceedings.”

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110. Examining the fact situation in the case, the Courtobserved as follows: (Shashoua case [2009 EWHC 957(Comm)])

“The basis for the court’s grant of an anti-suit injunctionof the kind sought depended upon the seat of thearbitration. An agreement as to the seat of an arbitrationbrought in the law of that country as the curial law andwas analogous to an exclusive jurisdiction clause. Not onlywas there agreement to the curial law of the seat, but alsoto the courts of the seat having supervisory jurisdictionover the arbitration, so that, by agreeing to the seat, theparties agreed that any challenge to an interim or finalaward was to be made only in the courts of the placedesignated as the seat of the arbitration.

Although, ‘venue’ was not synonymous with ‘seat’, in anarbitration clause which provided for arbitration to beconducted in accordance with the Rules of the ICC in Paris(a supranational body of rules), a provision that ‘the venueof arbitration shall be London, United Kingdom’ didamount to the designation of a juridical seat….”

In para 54, it is further observed as follows: (Shashouacase [2009 EWHC 957 (Comm)])

“There was a little debate about the possibility of the issuesrelating to the alleged submission by the claimants to thejurisdiction of the High Court of Delhi being heard bythat Court, because it was best fitted to determine suchissues under the Indian law. Whilst I found this ideaattractive initially, we are persuaded that it would be wrongin principle to allow this and that it would create unduepractical problems in any event. On the basis of what Ihave already decided, England is the seat of the arbitrationand since this carries with it something akin to an exclusivejurisdiction clause, as a matter of principle the foreigncourt should not decide matters which are for this Courtto decide in the context of an anti-suit injunction.”

In making the aforesaid observations in Shashouacase [2009 EWHC 957 (Comm)] , the Court relied on thejudgments of the Court of Appeal in C v. D [2008 Bus LR843 : 2007 EWCA Civ 1282 (CA)] .

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A111. In C v. D [2008 Bus LR 843: 2007 EWCA Civ 1282 (CA)]the Court of Appeal in England was examining an appeal bythe defendant insurer from the judgment of Cooke, J. grantingan anti-suit injunction preventing it from challenging anarbitration award in the US courts. The insurance policyprovided “any dispute arising under this policy shall be finallyBand fully determined in London, England under the provisionsof the English Arbitration Act, 1950 as amended”. However,it was further provided that “this policy shall be governed byand construed in accordance with the internal laws of theState of New York….” (Bus LR p. 847, para 2). A partial awardCwas made in favour of the claimants. It was agreed that thispartial award is, in English law terms, final as to what itdecides. The defendant sought the tribunal’s withdrawal ofits findings. The defendant also intimated its intention to applyto a Federal Court applying the US Federal Arbitration Lawgoverning the enforcement of arbitral award, which was saidDto permit “vacatur” of an award where arbitrators havemanifestly disregarded the law. It was in consequence of suchintimation that the claimant sought and obtained an interimanti-suit injunction. The Judge held that parties had agreedthat any proceedings seeking to attack or set aside the partialEaward would only be those permitted by the English law. Itwas not, therefore, permissible for the defendant to bring anyproceedings in New York or elsewhere to attack the partialaward. The Judge rejected the arguments to the effect thatthe choice of the law of New York as the proper law of thecontract amounted to an agreement that the law of EnglandFshould not apply to proceedings post award. The Judge alsorejected a further argument that the separate agreement toarbitrate contained in Condition V(o) of the policy was itselfgoverned by New York Law so that proceedings could beinstituted in New York. The Judge granted the claimant a finalGinjunction.

116. The legal position that emerges from a conspectus of allthe decisions, seems to be, that the choice of another countryas the seat of arbitration inevitably imports an acceptance H

that the law of that country relating to the conduct andsupervision of arbitrations will apply to the proceedings.

117. It would, therefore, follow that if the arbitration agreementis found or held to provide for a seat/place of arbitrationoutside India, then the provision that the Arbitration Act, 1996would govern the arbitration proceedings, would not makePart I of the Arbitration Act, 1996 applicable or enable theIndian courts to exercise supervisory jurisdiction over thearbitration or the award. It would only mean that the partieshave contractually imported from the Arbitration Act, 1996,those provisions which are concerned with the internalconduct of their arbitration and which are not inconsistentwith the mandatory provisions of the English procedural law/curial law. This necessarily follows from the fact that Part Iapplies only to arbitrations having their seat/place in India.”

The final conclusions in BALCO were recorded as follows:

The final conclusions in BALCO were recorded as follows:

“194. In view of the above discussion, we are of theconsidered opinion that the Arbitration Act, 1996 hasaccepted the territoriality principle which has beenadopted in the UNCITRAL Model Law. Section 2(2) makes adeclaration that Part I of the Arbitration Act, 1996 shallapply to all arbitrations which take place within India. Weare of the considered opinion that Part I of the ArbitrationAct, 1996 would have no application to internationalcommercial arbitration held outside India. Therefore, suchawards would only be subject to the jurisdiction of theIndian courts when the same are sought to be enforced inIndia in accordance with the provisions contained in PartII of the Arbitration Act, 1996. In our opinion, theprovisions contained in the Arbitration Act, 1996 make itcrystal clear that there can be no overlapping orintermingling of the provisions contained in Part I withthe provisions contained in Part II of the Arbitration Act,1996.”

18. The Shashoua principle has been followed repeatedly in aseries of decisions of this court, with respect to the law governingthe seat as the law of the “seat” where the arbitration had been AB

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Aheld.[23 ]In Reliance[24 ]this court answered the question, in thefollowing terms:

“18. It is important to note that in para 32 of BhatiaInternational [Bhatia International v. Bulk Trading S.A.,(2002) 4 SCC 105] itself this Court has held that Part I ofBthe Arbitration Act, 1996 will not apply if it has beenexcluded either expressly or by necessary implication.Several judgments of this Court have held that Part I isexcluded by necessary implication if it is found that on thefacts of a case either the juridical seat of the arbitration isoutside India or the law governing the arbitrationCagreement is a law other than Indian law. This is now wellsettled by a series of decisions of this Court [see VideoconIndustries Ltd. v. Union of India [(2011) 6 SCC 161 :(2011) 3 SCC (Civ) 257] , Dozco India (P) Ltd. v. DoosanInfracore Co. Ltd. [(2011) 6 SCC 179 : (2011) 3 SCC (Civ)D276] , Yograj Infrastructure Ltd. v. Ssang Yong Engg. andConstruction Co. Ltd. [(2011) 9 SCC 735 : (2011) 4 SCC(Civ) 864] , the very judgment in this case reportedin Reliance Industries Ltd. v. Union of India [RelianceIndustries Ltd. v. Union of India, (2014) 7 SCC 603 :(2014) 3 SCC (Civ) 737] and a recent judgment in HarmonyEInnovation Shipping Ltd. v. Gupta Coal India Ltd. [(2015)9 SCC 172 : (2015) 4 SCC (Civ) 341] ].

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19. In fact, in Harmony case [(2015) 9 SCC 172 : (2015)4 SCC (Civ) 341] , this Court, after setting out all theaforesaid judgments, set out the arbitration clause in thatFcase in para 36 as follows: (SCC p. 193)

“36. In view of the aforesaid propositions laid down bythis Court, we are required to scan the tenor of theclauses in the agreement specifically, the arbitrationclause in appropriate perspective. The said clause readsGas follows:

23 This court, in the facts of this case, is of the opinion that it is inessential to explainor notice the difference between the “venue” which is a matter of convenience, and“seat” – an expression that has definite legal connotations in regard to intention ofparties, vis-à-vis jurisdiction of the courts.H24 Supra n. 14

‘5. If any dispute or difference should arise underthis charter, general average/arbitration in Londonto apply, one to be appointed by each of the partieshereto, the third by the two so chosen, and theirdecision or that of any two of them, shall be finaland binding, and this agreement may, for enforcingthe same, be made a rule of court. Said three partiesto be commercial men who are the members of theLondon Arbitrators Association. This contract is tobe governed and construed according to English law.For disputes where total amount claimed by eitherparty does not exceed US $50,000 the arbitrationshould be conducted in accordance with small claimsprocedure of the London Maritime ArbitrationAssociation.’”

It then held: (SCC pp. 198 & 200, paras 45 & 50-51)

It then held: (SCC pp. 198 & 200, paras 45 & 50-51)

“45. Coming to the stipulations in the present arbitrationclause, it is clear as day that if any dispute or differencewould arise under the charter, arbitration in London toapply; that the arbitrators are to be commercial men whoare members of London Arbitration Association; thecontract is to be construed and governed by English law;and that the arbitration should be conducted, if the claimis for a lesser sum, in accordance with small claimsprocedure of the London Maritime Arbitration Association.There is no other provision in the agreement that any otherlaw would govern the arbitration clause.”

“50. Thus, interpreting the clause in question on thebedrock of the aforesaid principles it is vivid that theintended effect is to have the seat of arbitration atLondon. The commercial background, the context of thecontract and the circumstances of the parties and inthe background in which the contract was entered into,irresistibly lead in that direction. We are not impressedby the submission that by such interpretation it will putthe respondent in an advantageous position. Therefore, A

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we think it would be appropriate to interpret the clausethat it is a proper clause or substantial clause and nota curial or a procedural one by which the arbitrationproceedings are to be conducted and hence, we aredisposed to think that the seat of arbitration will be atLondon.

51. Having said that the implied exclusion principlestated in Bhatia International [Bhatia Internationalv. Bulk Trading S.A., (2002) 4 SCC 105] would beapplicable, regard being had to the clause in theagreement, there is no need to dwell upon the contentionraised pertaining to the addendum, for anyinterpretation placed on the said document would notmake any difference to the ultimate conclusion that wehave already arrived at.”

20. It is interesting to note that even though the law governingthe arbitration agreement was not specified, yet this Courtheld, having regard to various circumstances, that the seat ofarbitration would be London and therefore, by necessaryimplication, the ratio of Bhatia International [BhatiaInternational v. Bulk Trading S.A., (2002) 4 SCC 105] wouldnot apply.

21. The last paragraph of BALCO [BALCO v. KaiserAluminium Technical Services Inc., (2012) 9 SCC 552 : (2012)4 SCC (Civ) 810] judgment has now to be read with twocaveats, both emanating from para 32 of Bhatia International[Bhatia International v. Bulk Trading S.A., (2002) 4 SCC 105]itself — that where the Court comes to a determination thatthe juridical seat is outside India or where law other thanIndian law governs the arbitration agreement, Part I of theArbitration Act, 1996 would be excluded by necessaryimplication. Therefore, even in the cases governed bythe Bhatia [Bhatia International v. Bulk Trading S.A., (2002)4 SCC 105] principle, it is only those cases in whichagreements stipulate that the seat of the arbitration is in Indiaor on whose facts a judgment cannot be reached on the seatof the arbitration as being outside India that would continueto be governed by the Bhatia [Bhatia International v. Bulk Trading S.A., (2002) 4 SCC 105] principle. Also, it is onlythose agreements which stipulate or can be read to stipulatethat the law governing the arbitration agreement is Indianlaw which would continue to be governed by theBhatia [Bhatia International v. Bulk Trading S.A., (2002) 4SCC 105] rule.

22. On the facts in the present case, it is clear that this Courthas already determined both that the juridical seat of thearbitration is at London and that the arbitration agreement isgoverned by English law. This being the case, it is not opento the Union of India to argue that Part I of the ArbitrationAct, 1996 would be applicable. A Section 14 application madeunder Part I would consequently not be maintainable.”

19. Again, in Roger Shashoua[25 ]this court spelt out the principlein the following terms:

“46. As stated earlier, in Shashoua [Roger Shashouav. Mukesh Sharma, 2009 EWHC 957 (Comm)] Cooke, J., inthe course of analysis, held that “London arbitration” is awell-known phenomenon which is often chosen by foreignnationals with a different law, such as the law of New York,governing the substantive rights of the parties and it isbecause of the legislative framework and supervisory powersof the courts here which many parties are keen to adopt. Thelearned Judge has further held that when there is an expressdesignation of the arbitration venue as London and nodesignation of any alternative place as the seat, combinedwith a supranational body of rules governing the arbitrationand no other significant contrary indicia, the inexorableconclusion is that London is the juridical seat and Englishlaw the curial law.

47. In BALCO [BALCO v. Kaiser Aluminium Technical ServicesInc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810] theConstitution Bench referred to Shashoua [Roger Shashouav. Mukesh Sharma, 2009 EWHC 957 (Comm)] and reproducedcertain paragraphs from the same. To appreciate thecontroversy from a proper perspective, we have already A

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reproduced para 54 of the said judgment which has succinctlystated the proposition.

50. Proceeding further the Court in Enercon (India) Ltd.case [Enercon (India) Ltd. v. Enercon GmbH, (2014) 5 SCC1 : (2014) 3 SCC (Civ) 59] approved the Shashoua [RogerShashoua v. Mukesh Sharma, 2009 EWHC 957 (Comm)]principle and referred to McDonnell Douglas Corpn. [Unionof India v. McDonnell Douglas Corpn., (1993) 2 Lloyd’s Rep48] wherein the principles stated in Naviera AmazonicaPeruana S.A. [Naviera Amazonica Peruana S.A. v. CompaniaInternational de Seguros del Peru, (1988) 1 Lloyd’s Rep 116(CA)] were reiterated. Construing the clauses in the agreement,the said authority has held: (Enercon (India) case [Enercon(India) Ltd. v. Enercon GmbH, (2014) 5 SCC 1 : (2014) 3SCC (Civ) 59] , SCC p. 56, para 129)

“129. … ‘On the contrary, for the reasons given, it seemsto me that by their agreement the parties have chosenEnglish law as the law to govern their arbitrationproceedings, while contractually importing from the IndianAct those provisions of that Act which are concerned withthe internal conduct of their arbitration and which are notinconsistent with the choice of English arbitral procedurallaw.”

49. In Enercon (India) Ltd. [Enercon (India) Ltd. v. EnerconGmbH, (2014) 5 SCC 1 : (2014) 3 SCC (Civ) 59] , the Courtaddressed to the issue of “seat/place of arbitration” and“venue of arbitration” for the purpose of conferment ofexclusive jurisdiction on the Court. The Court appreciatedthe point posing the question whether the use of the phrase“venue shall be in London” actually refers to designation ofthe seat of arbitration in London. The Court did not treatLondon as seat/place of arbitration. The Court referredto Naviera Amazonica [Naviera Amazonica PeruanaS.A. v. Compania International de Seguros del Peru, (1988)1 Lloyd’s Rep 116 (CA)], Alfred McAlpine [Braes of DouneWind Farm (Scotland) Ltd. v. Alfred McAlpine BusinessServices Ltd., 2008 Bus LR D 137 (QBD) : 2008 EWHC 426(TCC)] and C v. D [C v. D, 2008 Bus LR 843 : 2007 EWCA

Civ 1282 (CA)] and then opined: (Enercon (India)case [Enercon (India) Ltd. v. Enercon GmbH, (2014) 5 SCC1 : (2014) 3 SCC (Civ) 59] , SCC p. 54, paras 123-124)

“123. The cases relied upon by Dr Singhvi relate to thephrase “arbitration in London” or expressions similarthereto. The same cannot be equated with the term“venue of arbitration proceedings shall be in London”.Arbitration in London can be understood toinclude venue as well as seat; but it would be ratherstretching the imagination if “venue of arbitration shallbe in London” could be understood as “seat of arbitrationshall be London”, in the absence of any other factorconnecting the arbitration to London. In spite ofDr Singhvi’s seemingly attractive submission to convinceus, we decline to entertain the notion that India would notbe the natural forum for all remedies in relation to thedisputes, having such a close and intimate connection withIndia. In contrast, London is described only as avenue which Dr Singhvi says would be the natural forum.

124. In Shashoua [Roger Shashoua v. Mukesh Sharma,2009 EWHC 957 (Comm)], such an expression wasunderstood as seat instead of venue, as the parties hadagreed that the ICC Rules would apply to the arbitrationproceedings. In Shashoua [Roger Shashoua v. MukeshSharma, 2009 EWHC 957 (Comm)], the ratioin Naviera [Naviera Amazonica Peruana S.A. v. CompaniaInternational de Seguros del Peru, (1988) 1 Lloyd’s Rep116 (CA)] and Braes of Doune [Braes of Doune Wind Farm(Scotland) Ltd. v. Alfred McAlpine Business Services Ltd.,2008 Bus LR D 137 (QBD) : 2008 EWHC 426 (TCC)] hasbeen followed. In that case, the Court was concerned withthe construction of the shareholders’ agreement betweenthe parties, which provided that “the venue of thearbitration shall be London, United Kingdom”. It providedthat the arbitration proceedings should be conducted inEnglish in accordance with the ICC Rules and that thegoverning law of the shareholders’ agreement itself wouldbe the law of India. …”

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A20. In IMAX Corporation v. E-City Entertainment (India) (P.)Ltd[26], this rule was again followed. The award was a pre-BALCO award.Taking into consideration the fact that the parties had expressly chosento resolve the dispute through the ICC, in the form of a London basedarbitration, the court stated that “ICC having chosen London, leavesno doubt that the place of arbitration will attract the law of UK inBall matters concerning arbitration.” After holding that the parties’choice of seat was outside India, though there was no express term, andthat the ICC chose it under its rules, the court went on to hold:

“29. We find that in the present case, the seat ofarbitration has not been specified at all in the arbitrationCclause. There is however an agreement to have the arbitrationconducted according to the ICC Rules and thus a willingnessthat the seat of arbitration may be outside India. In any case,the parties having agreed to have the seat decided by ICCand ICC having chosen London after consulting the partiesDand the parties having abided by the decision, it must be heldthat upon the decision of ICC to hold the arbitration inLondon, the parties agreed that the seat shall be in Londonfor all practical purposes. Therefore, there is an agreementthat the arbitration shall be held in London and thus Part I ofthe Act should be excluded.”EThe judgment in BGS SOMA JV v. National Hydro ElectricPower Corporation[27], re-stated these principles in the following terms:

“38. A reading of paras 75, 76, 96, 110, 116, 123 and 194of BALCO [BALCO v. Kaiser Aluminium Technical Services Inc.,F(2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810] would showthat where parties have selected the seat of arbitration intheir agreement, such selection would then amount to anexclusive jurisdiction clause, as the parties have nowindicated that the courts at the “seat” would alone havejurisdiction to entertain challenges against the arbitral awardGwhich have been made at the seat. The example given in para96 buttresses this proposition, and is supported by the previousand subsequent paragraphs pointed out hereinabove.

26 2017 (5) SCC 331H27 2020 (4) SCC 234

The BALCO [BALCO v. Kaiser Aluminium Technical Services Inc.,(2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810] judgment, whenread as a whole, applies the concept of “seat” as laid downby the English judgments (and which is in Section 20 of theArbitration Act, 1996), by harmoniously construing Section20 with Section 2(1)(e), so as to broaden the definition of“court”, and bring within its ken courts of the “seat” of thearbitration….

40. Para 96 of BALCO case [BALCO v. Kaiser AluminiumTechnical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC(Civ) 810] is in several parts. First and foremost, Section2(1)(e), which is the definition of “court” under the ArbitrationAct, 1996 was referred to, and was construed keeping in viewthe provisions in Section 20 of the Arbitration Act, 1996, whichgive recognition to party autonomy in choosing the seat ofthe arbitration proceedings. Secondly, the Court went on tostate in two places in the said paragraph that jurisdiction isgiven to two sets of courts, namely, those courts which wouldhave jurisdiction where the cause of action is located; andthose courts where the arbitration takes place. However, whenit came to providing a neutral place as the “seat” of-arbitration proceedings, the example given by the fiveJudgeBench made it clear that appeals under Section 37 of theArbitration Act, 1996 against interim orders passed underSection 17 of the Arbitration Act, 1996 would lie only to thecourts of the seat — which is Delhi in that example — whichare the courts having supervisory control, or jurisdiction, overthe arbitration proceedings. The example then goes on to statethat this would be irrespective of the fact that the obligationsto be performed under the contract, that is the cause of action,may arise in part either at Mumbai or Kolkata. The fact thatthe arbitration is to take place in Delhi is of importance.However, the next sentence in the said paragraph reiteratesthe concurrent jurisdiction of both courts.

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44. If paras 75, 76, 96, 110, 116, 123 and 194 ofBALCO [BALCO v. Kaiser Aluminium Technical Services Inc., A

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A(2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810] are to be readtogether, what becomes clear is that Section 2(1)(e) has to beconstrued keeping in view Section 20 of the Arbitration Act,1996, which gives recognition to party autonomy — theArbitration Act, 1996 having accepted the territorialityprinciple in Section 2(2), following the UNCITRAL Model Law.BThe narrow construction of Section 2(1)(e) was expresslyrejected by the five-Judge Bench in BALCO [BALCO v. KaiserAluminium Technical Services Inc., (2012) 9 SCC 552 : (2012)4 SCC (Civ) 810] . This being so, what has then to be seen iswhat is the effect Section 20 would have on Section 2(1)(e)Cof the Arbitration Act, 1996.

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50. In fact, subsequent Division Benches of this Court haveunderstood the law to be that once the seat of arbitration ischosen, it amounts to an exclusive jurisdiction clause, insofarDas the courts at that seat are concerned…. In Enercon (India)Ltd. v. Enercon GmbH [Enercon (India) Ltd. v. EnerconGmbH, (2014) 5 SCC 1 : (2014) 3 SCC (Civ) 59], this Courtapproved the dictum in Shashoua [Shashoua v. Sharma, 2009EWHC 957 (Comm) : (2009) 2 Lloyd’s Law Rep 376]…

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51. The Court in Enercon [Enercon (India) Ltd. v. EnerconGmbH, (2014) 5 SCC 1:(2014) 3 SCC (Civ) 59] then concluded: (SCC p. 60, para 138)

F“138. Once the seat of arbitration has been fixed in India,it would be in the nature of exclusive jurisdiction to exercisethe supervisory powers over the arbitration.”

(emphasis)”

21. The latest decision on this issue is Government of India vGVedanta Ltd[28]. The dispute arose out of a pre-BALCO contract; theaward was rendered on 18.01.2011 (prior to the BALCO decision). Theseat of arbitration was Kuala Lumpur; however, the governing law ofthe agreement or contract, was English law. This court, in its three- H28 2020 SCC Online (SC) 749

NOY VALLESINA ENGINEERING SPA, (NOW KNOWN AS NOYAMBIENTE S.P.A.) v. JINDAL DRUGS LIMITED [S. RAVINDRA BHAT, J.]

judge decision, held that the curial law, i.e. the law governing thechallenge to the award, was Malaysian law, in the following words:[29]

“(i) In the present case, the law governing the agreement toarbitrate was the English law as per Article 34.12 of the PSC,which provides that the arbitration agreement shall begoverned by the laws of England. Even though there seemsto have been some confusion in the application of the lawgoverning the agreement to arbitrate by the seat courts, aspointed out by the learned Amicus, we will not dwell on thisissue, since the enforcement court does not sit in appeal overthe findings of the seat court. Furthermore, in view of theprinciples of comity of nations, this Court would not commenton the judgments passed by Courts in other jurisdictions.

The enforcement of the award is a subsequent and distinctproceeding from the setting aside proceedings at the seat.The enforcement court would independently determine theissue of recognition and enforceability of the foreign awardin India, in accordance with the provisions of Chapter 1 PartII of the Indian Arbitration Act, 1996.

(ii) The courts having jurisdiction to annul or suspend a NewYork Convention award are the courts of the State where theaward was made, or is determined to have been made i.e. atthe seat of arbitration. The seat of the arbitration is a legalconcept i.e. the juridical home of the arbitration. The legal“seat” must not be confused with a geographically convenientvenue chosen to conduct some of the hearings in thearbitration. The courts at the seat of arbitration are referredto as the courts which exercise “supervisory” or “primary”jurisdiction over the award. The “laws under which the awardwas made” used in Article V (1)(e) of the New YorkConvention, is mirrored in Section 48(1)(e) of the IndianArbitration Act, which refers to the country of the seat of thearbitration, and not the State whose laws govern thesubstantive contract.”

29 In fact, even the Government of India understood that to be the correct position, andhad challenged the award, on a substantive basis, in Kuala Lumpur.

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The court then proceeded to rely on BALCO especially Paras 76and 123, and thereafter stated as follows:

“(iii) The courts before which the foreign award is broughtfor recognition and enforcement would exercise “secondary”or “enforcement” jurisdiction over the award, to determinethe recognition and enforceability of the award in thatjurisdiction.

(iv) We will now briefly touch upon the four types of lawswhich are applicable in an international commercialarbitration, and court proceedings arising therefrom. Theseare:

Statutes

a) The governing law determines the substantive rights andobligations of the parties in the underlying commercialcontract. The parties normally make a choice of the governinglaw of the substantive contract; in the absence of a choice ofthe governing law, it would be determined by the tribunal inaccordance with the conflict of law rules, which are consideredto be applicable.

b) The law governing the arbitration agreement must bedetermined separately from the law applicable to thesubstantive contract.[44]The arbitration agreement constitutesa separate and autonomous agreement, which woulddetermine the validity and extent of the arbitration agreement;limits of party autonomy, the jurisdiction of the tribunal, etc.

c) The curial law of the arbitration is determined by the seatof arbitration. In an international commercial arbitration, itis necessary that the conduct of the arbitral proceedings areconnected with the law of the seat of arbitration, which wouldregulate the various aspects of the arbitral proceedings. Theparties have the autonomy to determine the choice of law,which would govern the arbitral procedure, which is referredto as the lex arbitri, and is expressed in the choice of the seatof arbitration.[45]

The curial law governs the procedure of the arbitration, thecommencement of the arbitration, appointment of arbitrator/s in exercise of the default power by the court, grant of provisional measures, collection of evidence, hearings, andchallenge to the award.

The courts at the seat of arbitration exercise supervisory or“primary” jurisdiction over the arbitral proceedings, exceptif the parties have made an express and effective choice of adifferent lex arbitri, in which event, the role of the courts atthe seat will be limited to those matters which are specified tobe internationally mandatory and of a nonderogable nature.[46]

d) The lex fori governs the proceedings for recognition andenforcement of the award in other jurisdictions. Article III ofthe New York Convention provides that the national courtsapply their respective lex fori regarding limitation periodsapplicable for recognition and enforcement proceedings; thedate from which the limitation period would commence,whether there is power to extend the period of limitation.The lex fori determines the court which is competent and hasthe jurisdiction to decide the issue of recognition andenforcement of the foreign award, and the legal remediesavailable to the parties for enforcement of the foreign award.

(v) In view of the above-mentioned position, the MalaysianCourts being the seat courts were justified in applying theMalaysian Act to the public policy challenge raised by theGovernment of India.

The enforcement court would, however, examine the challengeto the award in accordance with the grounds available underSection 48 of the Act, without being constrained by thefindings of the Malaysian Courts. Merely because theMalaysian Courts have upheld the award, it would not be animpediment for the Indian courts to examine whether the awardwas opposed to the public policy of India under Section 48of the Indian Arbitration Act, 1996. If the award is found tobe violative of the public policy of India, it would not beenforced by the Indian courts. The enforcement court wouldhowever not second-guess or review the correctness of thejudgment of the Seat Courts, while deciding the challenge tothe award.”

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AThis court, therefore, categorically ruled that a substantivechallenge to the award, correctly was adjudicated by the Malaysian court,because the seat of arbitration was Kuala Lumpur.

22. Article 12 of the contract[30] in this case deals with miscellaneousmatters. Clause 12.4 reads as follows:B

“12.4.1 This Engineering Contract shall be governed by thelaws of India.

12.4.2 In case of disputes or disagreement between the partiesas any matter arising out of or relating to this engineeringThat Contract and provided no understanding between theCparties can be reached for the settlement of the difference,the matter shall be finally settled by arbitration. That underthe rules of conciliation That and Arbitration That of theInternational That Chamber of commerce Paris, andArbitration proceedings shall be in English language and shallDtake place in London. The decisions of such arbitration shallbe final and binding on the parties.”

23. Having regard to the precedential unanimity, so to say, aboutthe manner of applicability of BALCO in respect of agreements enteredinto and awards rendered earlier, with respect to the law of the seat ofEarbitration (or the curial law) excluding applicability of Part I of the Act,and the unambiguous intention of the parties in the present case(expressed in Clause 12.4.2) that the seat of arbitration was London,where the ICC arbitration proceedings were in fact held, and the awardsrendered, this court is of the opinion that the impugned judgment cannotbe sustained.F

24. The above discussion would have been sufficient to disposeof this appeal. However, it is noticeable that the decision in Feurest DayLawson[31 ]unambiguously ruled out the maintainability of any appealagainst an order granting enforcement of a foreign arbitration award. Inthe present case, both the partial and final awards are foreign awards.GTherefore, the provisions of Sections 47/48 were correctly invoked byNV Engineering, for enforcement of the awards (through ApplicationNo 156/2005). Jindal objected to the enforcement proceedings, in 30 ECAAP, i.e. the plant contractH31 Supra n. 17

accordance with grounds articulated in Part II of the Act. A single judgesubstantially upheld the award, and proceeded to its enforcement, by ajudgment dated 05.06.2006, at the same time rejecting the challenge toenforcement laid out by Jindal. Both parties appealed to the DivisionBench; Jindal, on the challenge to the order rejecting its objection toenforcement (Appeal No. 492/2006), and NV Engineering, as to thatpart of the order of the single judge, refusing to enforce a part of theaward (Appeal. No. 740/2006).

25. In the decision in Fuerst Day Lawson[32 ]this court had tointerpret Section 50 of the Act (quoted in the footnote below[33]), whichprovides for a restrictive category of appealable subject matters, andprohibits appeals in other matters. The court after noticing previousjudgments held as follows:

“88. Mohindra Supply Co. [Union of India v. MohindraSupply Co., AIR 1962 SC 256] was last referred in aConstitution Bench decision of this Court in P.S. Sathappan[P.S. Sathappan v. Andhra Bank Ltd., (2004) 11 SCC 672],and the way the Constitution Bench understood andinterpreted Mohindra Supply Co. [Union of India v.Mohindra Supply Co., AIR 1962 SC 256] would be clear fromthe following para 10 of the judgment: (P.S. Sathappancase [P.S. Sathappan v. Andhra Bank Ltd., (2004) 11 SCC672], SCC pp. 689-90)

‘10. … The provisions in the Letters Patent providing forappeal, insofar as they related to orders passed inarbitration proceedings, were held to be subject to theprovisions of Sections 39(1) and (2) of the ArbitrationAct, as the same is a self-contained code relating toarbitration.’

32 Supra n. 17

33 “50.Appealable orders.—(1) An appeal shall lie from the order refusing to—

(a) refer the parties to arbitration under Section 45; (b) enforce a foreign award under Section 48, to the court authorised by law to hearappeals from such order.

(2) No second appeal shall lie from an order passed in appeal under this section, butnothing in this section shall affect or take away any right to appeal to the SupremeCourt.”

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A89. It is, thus, to be seen that the Arbitration Act, 1940, fromits inception and right through to 2004 (in P.S. Sathappan [P.S.Sathappan v. Andhra Bank Ltd., (2004) 11 SCC 672] ) washeld to be a self-contained code. Now, if the Arbitration Act,1940 was held to be a self-contained code, on matterspertaining to arbitration, the Arbitration and Conciliation Act,B1996, which consolidates, amends and designs the lawrelating to arbitration to bring it, as much as possible, inharmony with the UNCITRAL Model must be held only to be moreso. Once it is held that the Arbitration Act is a self-containedcode and exhaustive, then it must also be held, using the lucidCexpression of Tulzapurkar, J., that it carries with it “a negativeimport that only such acts as are mentioned in the Act arepermissible to be done and acts or things not mentionedtherein are not permissible to be done” [The reference isto S.N. Srikantia and Co. v. Union of India, 1965 SCC OnLineBom 133 : AIR 1967 Bom 347 at p. 354, para 9.] . In otherDwords, a letters patent appeal would be excluded by theapplication of one of the general principles that where thespecial Act sets out a self-contained code the applicability ofthe general law procedure would be impliedly excluded.”

These observations were quoted with approval in Union of IndiaEv Simplex Infrastructures Ltd[34 ]and the court further held:

“10. After this decision, there is no scope to contend that theremedy of letters patent appeal was available in relation tothe judgment of the learned Single Judge in question. Thislegal position has been restated in the recent decision of thisFCourt (to which one of us was party, Justice Dipak Misra),in Arun Dev Upadhyaya v. Integrated Sales Service Ltd.[Arun Dev Upadhyaya v. Integrated Sales Service Ltd., (2016)9 SCC 524 : (2016) 4 SCC (Civ) 564]”

This court, in Kandla Export Corpn. v. OCI Corpn[35 ]held that aGfurther appeal by a party aggrieved by an order of enforcement, evenunder the later enacted Commercial Courts Act, 2015 is not maintainable:

“20. Given the judgment of this Court in Fuerst DayLawson [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011)

34 2017 (14) SCC 225H35 (2018) 14 SCC 715

8 SCC 333 : (2011) 4 SCC (Civ) 178] , which Parliament ispresumed to know when it enacted the Arbitration AmendmentAct, 2015, and given the fact that no change was made inSection 50 of the Arbitration Act when the Commercial CourtsAct was brought into force, it is clear that Section 50 is aprovision contained in a self-contained code on matterspertaining to arbitration, and which is exhaustive in nature.It carries the negative import mentioned in para 89 of FuerstDay Lawson [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.,(2011) 8 SCC 333 : (2011) 4 SCC (Civ) 178] that appealswhich are not mentioned therein, are not permissible. Thisbeing the case, it is clear that Section 13(1) of the CommercialCourts Act, being a general provision vis-à-vis arbitrationrelating to appeals arising out of commercial disputes, wouldobviously not apply to cases covered by Section 50 of theArbitration Act.

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22. This, in fact, follows from the language of Section 50 itself.In all arbitration cases of enforcement of foreign awards, itis Section 50 alone that provides an appeal. Having providedfor an appeal, the forum of appeal is left “to the Courtauthorised by law to hear appeals from such orders”. Section50 properly read would, therefore, mean that if an appeallies under the said provision, then alone would Section 13(1)of the Commercial Courts Act be attracted as laying down theforum which will hear and decide such an appeal.”

In view of the categorical holdings in the judgments of this court,Jindal’s appeal to the Division Bench, (Appeal No. 492/2006) is notmaintainable. However, in view of the above decisions, and the expressterms of Section 50, NV Engineering’s appeal (Appeal. No. 740/2006),against the order of the single judge (to the extent it refuses enforcement)is maintainable.

26. This court has not considered the merits of the substantivechallenge to the enforcement order, because the parties were not heardand therefore, it would not be fair to comment on it. Further, Jindal hasproceeded on the assumption that its appeal to the Division Bench onthis aspect is pending. In view of the finding of this court that such an A

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Aappeal (against an order of enforcement) is untenable by reason of Section50, the merits of Jindal’s objections to the single judge’s order, are openfor it to be canvassed in appropriate proceedings. Such proceedingscannot also be a resort to any remedy under the Code of Civil Procedure.In the event Jindal chooses to avail of such remedy, the question oflimitation is left open, as this court is conscious of the fact that FuerstBDay Lawson[36]is a decision rendered over 10 years ago; it settled thelaw decisively and has been followed in later judgments. It cannot besaid that Jindal was ignorant of the law.

27. In view of the foregoing discussion, the impugned judgmentand order is hereby set aside; the appeal is allowed in the above terms.CCosts quantified at ` 1,50,000/- shall be paid by the respondent No.1.

Kalpana K. Tripathy

Appeal allowed.

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