O.M.P./716/2011 of FOCUS ENERGY LIMITED Vs REEBOK INTERNATIONAL LIMITED

CORAM:JUSTICE PRATHIBA M. SINGHJUDGMENT

Prathiba M. Singh, J.

1.The present petitions under Section 34 of the Arbitration andConciliation Act, 1996 (“the Act”) challenge the partial and final awards

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dated 4[th]November, 2010 and 24[th]May, 2011, respectively, delivered by theLondon Court of International Arbitration (LCIA).

2.The Petitioner and the Respondent had entered into Joint VentureAgreement (hereinafter, ‘JVA’) dated 1[st]March, 1995 to establish acompany in India by the name `Reebok India Company’. According to theRespondent, written request was sent by it to the Petitioner, seeking topurchase shares of Reebok India as per Section 4 of the Agreement. Sincethe Petitioner did not agree to the said sale of shares, the Respondentinvoked arbitration in terms of Section 4 and Section 11 of the JVA.

3.The invocation took place on 17[th]March, 2008. The parties nominatedtheir respective arbitrators and the LCIA appointed the chairman. i.e. thepresiding arbitrator. It was further agreed by the parties that the time limitsfor issuance of the award, as set out in Section 11(B), were waived and theRules of LCIA would apply instead.

4.After completion of pleadings, the interim award was rendered on 4[th]November, 2009. The same came to be challenged before this Court underSection 34, vide OMP 214/2010. On 20[th]April, 2010, notice was issued inthe petition. On the said date, the court directed as under.

“Issue notice to the respondent.

Mr. Amar Gupta, Adv. accepts notice on behalf of

respondent.

He prays for and is granted six weeks’ time to file

reply affidavit.

Rejoinder, if any, be filed before the next date ofhearing.

Without prejudice to the rights and contentions of theparties, it is agreed that the Arbitral Tribunal may inthe meantime pass final award after valuing theshares.

List on 23[rd]September, 2010.”

5.On 15[th]December, 2010, an application moved by the Petitionerunder Order VI Rule 17 was decided. Further grounds of challengeincluding those to the effect that Section 4 of the JVA is void, illegal andopposed to public policy, were permitted to be added, while reserving theright of the Respondent to rebut these submissions. The amended petitionwas thereafter filed.

6.The tribunal rendered its final award on 24[th]May, 2011. ThePetitioner then filed OMP 716/2011, challenging the final award.

7.The Respondent initially filed its replies to the substantive grounds ofchallenge raised against the award. Thereafter the Respondent filed IA No.16732 of 2011 seeking to place on record an additional reply. The additionalreply takes preliminary objection as to the maintainability of the Petitionitself, under Section 34 of the Act.

8.The submission of the Respondent is that since the arbitrationagreement is governed by the laws of England, Part I of the Act is excluded,hence challenge under Section 34 is not maintainable. The matter wastaken up for hearing on 20[th]July, 2018 on which date this preliminaryobjection was raised by the Respondent, and thereafter submissions havebeen heard on behalf of parties only in respect of the said preliminaryobjection. On behalf of the Respondent it is submitted by Mr. Rajiv Nayarand Mr. Joy Basu, Senior Counsels that the Petition is not maintainable, inview of the settled pronouncements of the Supreme Court in variousjudgments, starting with Bhatia International v Bulk Trading S.A. (2002) 4SCC 105 (hereinafter, ‘Bhatia International’). They rely on Sections 4 and11 of the JVA to argue that an award rendered by LCIA in England, in

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proceeding where the arbitration agreement is governed by the laws ofEngland, is foreign award. It is further submitted that though thesubstantive law governing the agreement is Indian law, since the seat is inLondon, the Arbitration Agreement is governed by English law and partieshave also accepted the same during the course of arbitral proceedings. Thus,the Petition itself is not maintainable. According to Ld. Counsels, there is nodoubt that parties have clearly agreed to the exclusion of Part I.

9.On the other hand, Mr. Kathpalia appearing for the Petitioner submitsthat the entire objection is complete afterthought. The matter has beenpending before this court since 2010, when the partial award waschallenged, and in response to paragraph 48 of Focus’s petition underSection 34 i.e. OMP 214/2010, where the Petitioner specifically averred thatthis Court had jurisdiction, the Respondent, in its reply to the said petition,did not dispute the same. In its reply, the Respondent simply pleaded that the`contents of paragraph no. 48 require no comment’. Thus, according to thePetitioner, the Respondent has admitted to the jurisdiction of the courts inDelhi. He further submits that there has been no implied or expressexclusion of Part I of the Act. Further, as per the principle laid down inBhatiaInternational(supra),eveninaninternationalcommercialarbitration, Part I is not excluded. It is submitted by Counsel that thejudgment of the Supreme Court in Bharat Aluminium Company Ltd. vKaiser Aluminium Technical Services Inc., (2012) 9 SCC 649 (hereinafter,‘BALCO-I’) has no application to the present case, as the agreement is pre-BALCO-I and the BALCO-I judgement is of prospective application. It isfurther submitted that even if it is presumed under Section 11(B) of the JVAthat the law governing the arbitration agreement is English law, this is not

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the case in respect of disputes arising under Section 4. The dispute in thepresent case purely relates to disputes under Section 4, which provide thatonly the appointment process would be as per Section 11(B). Thus, 11(B)cannot be read to apply to Section 4 in entirety. Section 4 is silent on the lawgoverning the arbitration agreement and therefore, there is neither impliedexpress nor implied exclusion of Part I of the Act.

Analysis and Findings

10.The agreement in the present case is dated 1[st]March, 1995. Section11(A) and 11(B) of the agreement read as under:

“SECTION 11 - GOVERNING LAW

A. Subject to the provision of Section 11(B) below, theparties agree that the validity, construction andinterpretation of this Agreement shall be governed bythe law of India.

B.RIL and PHOENIX hereby agreed to submit toarbitration in London, Englandany disputes arisinghereunder.Such arbitration shall be conducted bythreearbitratorsintheEnglishlanguageinaccordance with the rules then in force of theInternational Court of Arbitration, London, England.The appointment of the arbitrators shall fall on suchpersonsasthepartiesmayappointbymutualagreement within period not to exceed 30 days fromthe statement by either of the parties that it intends tosubmit the matter to arbitration, or if not agreed by theparties on such arbitrators as may be appointed by thePresident of the International Court of Arbitration.The arbitrator shall render an award within periodnottoexceedonemonthfromthearbitrator’sacceptance, and the parties undertake to observe allthe terms of said award.Any expenses incurred insuch arbitration shall be awarded as the arbitratorshall decide. In the event for whatsoever reason that

the dispute is not resolved within 90 days of writtennotice to the other Party, either Party may terminatethis agreement with immediate effect.The arbitrationagreementscontainedinthissectionshallbegoverned by the internal laws of England.”

11.A reading of the above two clauses clearly shows that in thisagreement, the parties agree as under:

1) Validity, construction and interpretation of the agreement was tobe governed by Indian Law i.e., substantive law of the contractwas Indian Law.be governed by Indian Law i.e., substantive law of the contractwas Indian Law.

2) Parties agreed to submit to arbitration in London and the venue ofthe arbitration proceedings was London, England.the arbitration proceedings was London, England.

3) The arbitration was to be conducted in accordance with the Rulesin force of ICA, London, England, thus the procedural law was ofthe ICA, London.in force of ICA, London, England, thus the procedural law was ofthe ICA, London.

4) In case of disputes between the parties, the Arbitrators were to beappointed by the President of ICA.appointed by the President of ICA.

5) The arbitration agreement was to be governed by the laws ofEngland.England.

12.Section 4 of the Agreement reads as under:

“SECTION 4 – TRANSFER OF SHARES IN REEBOKINDIA TO RIL

PHOENIX has agreed that, in any event and for anyreasonwhatsoeverfrom31[st]March,2001,andadditionally in the event of a)the termination orexpiration of this Agreement or any of the Agreementsreferred to in Section 2(A) above, or b)theappointment of receiver or liquidator of PHOENIXor any PHOENIX operating entity involved in the

REEBOK business, or c) PHOENIX’s breach of thisagreement, that PHOENIX (or any of its successors orassigns or any such company owning shares inREEBOK INDIA) shall, upon the written request ofRIL and within 30 days, offer to sell to RIL, or to aparty designated by RIL, all of the shares in REEBOKINDIA held by PHOENIX or its successors or assignson the date of RIL’s request. The price to be paid byRIL for each of these shares shall be the pro rata (pershare) equivalent of the percentage of the net assetvalue of REEBOK INIDA which such shares representof the total outstanding shares of REEBOK INDIA asat the close of business on the acquisition date. Thisvaluation will assume that the “goodwill” of REEBOKINDIA at this date shall be zero. The accounts will beprepared in accordance with US GAAP and willcontain accounting provisions for returns, defectives,bad debts and inventory in accordance with REEBOKgroup policies. The valuation shall be determined byan Ernst & Young auditor appointed by RIL. In theevent of dispute/the final price shall be determined bythree arbitrators appointed in the manner set forth inparagraph 11(B) below, who shall have appropriateregard for both parties’ valuations except in no eventis any value for goodwill or similar value to beassigned to the shares.In the event that anygovernment regulation or entity prevents the transferof such shares to RIL, such shares may be transferredto such party as RIL shall designate in writing toPHOENIX. ”

13.As per the above clause, any disputes as to pricing of the shares wereto be determined by three arbitrators appointed in the manner set forth inpara 11(B).

14.One of the arguments of Mr. Kathpalia, appearing for the Petitioner isthat in case of disputes under Section 4, while the procedure for the

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appointment of the Arbitrators would be determined in the manner asprovided in Section 11(B), this did not mean that the arbitration agreementwould be governed by the laws of England or that the seat is England.According to him, the sentence relating to the law governing the arbitrationagreement, as contained in Section 11(B), applied only to the said sectionand not to Section 4.

15.This argument though appealing, at first blush, is liable to be rejectedfor two reasons. First, the disputes, which have been adjudicated by way ofthe partial award and the final award, are not restricted only to disputes,which arise under Section 4. They relate to contractual disputes outsideSection 4 as well. This is clear from reading of Para 63 of the award whichreads as under: -

“TheRespondenthaselaboratedanumberofvariations or sub-divisions of such headings which willbe addressed to the extent necessary in the discussionbelow. What is certain, as recognised by Claimant inits Post-Hearing Submission (Cl. Post-Hearing Briefpara. A-1), is that this is not case of simple call-option for shares, but far more complex contractualdispute.”

16.Secondly, the phrase “in the manner set forth in paragraph 11(B)below” has to, in the absence of any intention to the contrary, mean andinclude the procedures and other stipulations contained in 11(B).If theintention was to include Part-I of the Arbitration Act for disputes in respectof Section 4, considering that there was clear exclusion in 11(B) with thestipulation that the arbitration agreement is governed by the laws ofEngland, clause 4 would have had stipulation to the contrary. In theabsence of such specific provision, the intention of the parties clearly is to

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have the law of England as the law governing the arbitration agreement. It isthe settled position in law as laid down in Dozco India Pvt. Ltd. v DoosanInfracore Co. Ltd. (2011) 6 SCC 179 (hereinafter, ‘Dozco’)that theenforcement of the award is governed by the law of the arbitrationagreement. The relevant observation of the Supreme Court in Dozco is setout hereinbelow:

“12. In the backdrop of these conflicting claims, thequestion boils down to as to what is the trueinterpretation of Article 23. This Article 23 will have tobe read in the backdrop of Article 22 and moreparticularly, Article 22.1. It is clear from the languageof Article 22.1 that the whole agreement would begoverned by and construed in accordance with thelaws of The Republic of Korea. It is for this reason thatthe respondent heavily relied on the law laid downin Sumitomo Heavy Industries Ltd. v. ONGC Ltd. &Ors. (cited supra). This judgment is completeauthority on the proposition that the arbitrability of thedispute is to be determined in terms of the lawgoverning arbitration agreement and the arbitrationproceedings have to be conducted in accordance withthe curial law. This Court, in that judgment, relying onMustill and Boyd: the Law and Practice of CommercialArbitrationinEngland,2ndEdition,observedin paragraph 15 that where the law governing theconduct of the reference is different from the lawgoverning the underlying arbitration agreement, theCourt looks to the arbitration agreement to see if thedispute is arbitrable, then to the curial law to see howthe reference should be conducted, and then returns tothe first law in order to give effect to the resultingaward. In para 16, this Court, in no uncertain terms,declared that the law which would apply to the filing ofthe award, to its enforcement and to its setting asidewould be the law governing the agreement to arbitrate

and the performance of that agreement.

13. The Court relied on the observations in Mustill andBoyd to the effect:-

"It may, therefore, be seen that problems arising outof an arbitration may, at least in theory, call for theapplication of any one or more of the following laws -

1. The proper law of the contract, i.e. the lawgoverningthecontractwhichcreatesthesubstantive rights of the parties, in respect of whichthe dispute has arisen.

2. The proper law of the arbitration agreement, i.e.the law governing the obligation of the parties tosubmit the disputes to arbitration, and to honour anaward.the law governing the obligation of the parties tosubmit the disputes to arbitration, and to honour anaward.

3. The curial law, i.e. the law governing theconduct of the individual reference.conduct of the individual reference.

1. The proper law of the arbitration agreementgoverns the validity of the arbitration agreement,the question whether dispute lies within the scopeof the arbitration agreement; the validity of thenoticeofarbitration;theconstitutionofthetribunal; the question whether an award lies withinthe jurisdiction of the arbitrator; the formal validityof the award;the question whether the parties havebeen discharged from any obligation to arbitratefuture disputes.governs the validity of the arbitration agreement,the question whether dispute lies within the scopeof the arbitration agreement; the validity of thenoticeofarbitration;theconstitutionofthetribunal; the question whether an award lies withinthe jurisdiction of the arbitrator; the formal validityof the award;the question whether the parties havebeen discharged from any obligation to arbitratefuture disputes.

2. The curial law governs the manner in which thereference is to be conducted; the proceduralpowers and duties of the arbitrator; questions ofevidence; the determination of the proper law of thecontract.reference is to be conducted; the proceduralpowers and duties of the arbitrator; questions ofevidence; the determination of the proper law of thecontract.

3. The proper law of the reference governs thequestion whether the parties have been dischargedquestion whether the parties have been discharged

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from their obligation to continue with the referenceof the individual dispute."

17.A similar clause, as in the present case, was considered by theSupreme Court in Reliance Industries Limited and Anr. v Union of India(2014) 7 SCC 603 (hereinafter, ‘Reliance – I’). The arbitration clause in thesaid case had stipulated that the substantive law would be the laws of India.The Chairman of the Tribunal, in the absence of agreement between the twonominated Arbitrators, was to be appointed by the Secretary General ofPermanent Court of Arbitration at The Hague. The arbitral proceedings wereto be governed by the UNCITRAL Rules. The Arbitration Agreement wasgoverned by the laws of England and the venue was London.

18.The Supreme Court, in Reliance-I after considering the entire law onthe subject, observed as under.

“65. This principle of separability permits the partiesto agree: that law of one country would govern thesubstantive contract and laws of another countrywould apply to the arbitration agreement. The partiescan also agree that even the conduct of the referencewould be governed by the law of another country. Thiswould be rare, as it would lead to extremely complexproblems. It is expected that reasonable businessmendo not intend absurd results. In the present case, theparties had by agreement provided that the substantivecontract (PSC) will be governed by the laws of India.Incontradistinction,itwasprovidedthatthearbitration agreement will be governed by laws ofEngland. Therefore, there was no scope for anyconfusion of the law governing the PSC with the lawgoverning the arbitration agreement. This principle ofseverability is also accepted specifically under Article33.10 of the PSC, which is as under:-

“The right to arbitrate disputes and claims under this

Contractshallsurvivetheterminationofthiscontract.”

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73. In view of the aforesaid binding precedent, we areunable to accept the submission of Mr. Ganguli thatthe Arbitration Act, 1996 has not been excluded by theparties by agreement. For the same reasons, we areunable to approve the conclusions reached by theDelhi High Court that reference to laws of England isonly confined to the procedural aspects of the conductof the arbitration reference.

74. We are also unable to agree with the submission ofMr. Ganguli that since the issues involved herein relateto the public policy of India, Part I of the ArbitrationAct, 1996 would be applicable. Applicability of Part Iof Arbitration Act, 1996 is not dependent on the natureof challenge to the award. Whether or not the award ischallenged on the ground of public policy, it wouldhave to satisfy the precondition that the ArbitrationAct, 1996 is applicable to the arbitration agreement. Inouropinion,theHighCourthascommittedajurisdictional error in holding that the provisionscontained in Article 33.12 is relevant only for thedetermination of the curial law applicable too theproceedings. We have already noticed earlier that theparties by agreement have provided that the juridicalseat of the arbitration shall be in London. NecessaryamendmenthasalsobeenmadeinthePSCs,as recorded by the final partial consent award dated14-9-2011. It is noteworthy that the Arbitration Act,1996 does not define or mention juridical seat. Theterm ‘juridical seat’ on the other hand is specificallydefined in Section 3 of the English Arbitration Act.Therefore, this would clearly indicate that the partiesunderstood that the arbitration law of England wouldbe applicable to the arbitration agreement.

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76. In view of the above, we hold that:

76.1 The petition filed by respondents under Section34 of the Arbitration Act, 1996 in the Delhi High Courtis not maintainable.

76.2Wefurtherover-ruleandsetasidetheconclusion of the High Court that, even though thearbitration agreement would be governed by the lawsof England and that juridical seat of arbitration wouldbe in London, Part I of the Arbitration Act would stillbe applicable as the laws governing the substantivecontract are Indian Laws.

76.3 In the event, final award is made against therespondent, the enforceability of the same in India, canbe resisted on the ground of Public Policy.

76.4 The conclusion of the High Court that in theevent, the award is sought to be enforced outside India,it would leave the Indian party remediless is withoutany basis as the parties have consensually providedthat the arbitration agreement will be governed by theEnglish law. Therefore, the remedy against the awardwill have to be sought in England, where the juridicalseat is located. However, we accept the submission ofthe appellant that since substantive law governing thecon- tract is Indian Law, even the Courts in England,in case the arbitrability is challenged, will have todecide the issue by applying Indian Law viz. theprinciple of public policy etc. as it prevails in IndianLaw.”

19.There has been considerable debate in the present case between thetwo parties in respect of the applicability of Bhatia International (supra)and BALCO-I (supra). While it is the submission of the Petitioner that thepresent case is governed by Bhatia International, Ld. counsel forRespondent on the other hand submits that the case is governed by BALCO-I.20.The said issue is not germane to the present case, inasmuch aswhether one applies Bhatia International or BALCO-I, the consequences

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would be the same. In Bharat Aluminium Company v Kaiser AluminiumTechnical Services Inc. (2016) 4 SCC 126 (hereinafter ‘BALCO-II’), theSupreme Court, in para 14 further clarified the position as under:

“14. It is clear that the law applicable to arbitrationagreement in the present case is English Law. Once itis found that the law governing the arbitrationagreement is English Law, Part I of the IndianArbitration Act stands impliedly excluded. This hasbeen long settled position and the latest judgmentin Union of India v. Reliance Industries Limited andothers reaffirms the same. In the words of R.F.Nariman J.,

“21. The last paragraph of Bharat Aluminium'sjudgment has now to be read with two caveats,both emanating from paragraph 32 of BhatiaInternational itself-that where the Court comes toa determination that the juridical seat is outsideIndia or where law other than Indian law governsthearbitrationagreement,Part-IoftheArbitration Act, 1996 would be excluded bynecessary implication. Therefore, even in thecases governed by the Bhatia principle, it is onlythose cases in which agreements stipulate that theseat of the arbitration is in India or on whosefacts judgment cannot be reached on the seat ofthe arbitration as being outside India that wouldcontinue to be governed by the Bhatia principle.judgment has now to be read with two caveats,both emanating from paragraph 32 of BhatiaInternational itself-that where the Court comes toa determination that the juridical seat is outsideIndia or where law other than Indian law governsthearbitrationagreement,Part-IoftheArbitration Act, 1996 would be excluded bynecessary implication. Therefore, even in thecases governed by the Bhatia principle, it is onlythose cases in which agreements stipulate that theseat of the arbitration is in India or on whosefacts judgment cannot be reached on the seat ofthe arbitration as being outside India that wouldcontinue to be governed by the Bhatia principle.

Also, it is only those agreements which stipulateor can be read to stipulate that the law governingthe arbitration agreement is Indian law whichwould continue to be governed by the Bhatiarule.”or can be read to stipulate that the law governingthe arbitration agreement is Indian law whichwould continue to be governed by the Bhatiarule.”

21.However, Mr. Kathpalia submitted that BALCO-I (supra) hasprospective application and it is Bhatia International(supra), whichgoverns the dispute at hand. Specific reliance is placed on paras 21, 26, 32 &

35 of Bhatia International, which read as under:

“21. Now let us look at sub-sections (2), (3), (4) and (5)of Section 2. Sub-section (2) of Section (2) providesthat Part I would apply where the place of arbitrationis in India. To be immediately noted that it is notproviding that Part I shall not apply where the place ofarbitration is not in India. It is also not providing thatPart I will "only" apply where the place of arbitrationis in India (emphasis supplied). Thus the Legislaturehas not provided that Part I is not to apply toarbitrations which take place outside India. The use ofthelanguageissignificantandimportant.Thelegislature is emphasising that the provisions of Part Iwould apply to arbitrations which take place in India,but not providing that the provisions of Part I will notapply to arbitrations which take place out of India. Thewording of sub-section (2) of Section 2 suggests thatthe intention of the legislature was to make provisionsof Part I compulsorily applicable to an arbitration,including an international commercial arbitration,whichtakesplaceinIndia.Partiescannot,byagreement, override or exclude the non-derogableprovisions of Part I in such arbitrations. By omitting toprovide that Part I will not apply to internationalcommercial arbitrations which take place outside Indiathe affect would be that Part I would also apply tointernational commercial arbitrations held out ofIndia. But by not specifically providing that theprovisions of Part I apply to international commercialarbitrations held out of India, the intention of thelegislature appears to be to ally (sic allow) parties toprovide by agreement that Part I or any provisiontherein will not apply. Thus in respect of arbitrationswhich take place outside India even the non-derogableprovisions of Part I can be excluded. Such anagreement may be express or implied.

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26. Mr. Sen had also submitted that Part II, which

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deals with enforcement of foreign awards does notcontain any provision similar to Section 9 or Section17.As indicated earlier Mr. Sen had submitted thatthis indicated the intention of Legislature not to applySections 9 and 17 to arbitrations, like the present,which are taking place in foreign country. The saidAct is one consolidated and integrated Act. Generalprovisions applicable to all arbitrations will not berepeatedinallchaptersorparts.Thegeneralprovisions will apply to all chapters or parts unless thestatute expressly states that they are not to apply orwhere, in respect of matter, there is separateprovision in separate Chapter or Part. Part II dealswith enforcement of foreign awards. Thus Sections44 in (Chapter I) and Section 53 (in Chapter II) defineforeignawards,asbeingawardscoveredbyarbitrations under the New York Convention and theGeneva Convention respectively. Part II then containsprovisions for enforcement of "foreign awards" whichnecessarily would be different. For that reason specialprovisions for enforcement of foreign awards are madein Part II. To the extent that Part II provides separatedefinition of an arbitral award and separate provisionsfor enforcement of foreign awards, the provisions inPart I dealing with these aspects will not apply to suchforeign awards. It must immediately be clarified thatthe arbitration not having taken place in India, all orsome of the provisions of Part I may also get excludedby an express or implied agreement of parties. But ifnot so excluded the provisions of Part I will also applyto "foreign awards". The opening words of Sections 45and 54, which are in Part II, read “notwithstandinganything contained in Part I”. Such non-obstanteclause had to be put in because the provisions of Part Iapply to Part II.

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32. To conclude we hold that the provisions of Part Iwould apply to all arbitrations and to all proceedings

relating thereto. Where such arbitration is held inIndia the provisions of Part I would compulsory applyand parties are free to deviate only to the extentpermitted by the derogable provisions of Part I. Incases of international commercial arbitrations held outof India provisions of Part I would apply unless theparties by agreement, express or implied, exclude allor any of its provisions.In that case the laws or ruleschosen by the parties would prevail. Any provision, inPart I, which is contrary to or excluded by that law orrules will not apply.

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35. Lastly it must be stated that the said Act does notappear to be well drafted legislation. Therefore theHigh Courts of Orissa, Bombay, Madras, Delhi andCalcutta cannot be faulted for interpreting it in themanner indicated above. However, in our view aproper and conjoint reading of all the provisionsindicates that Part I is to apply also to internationalcommercial arbitrations which take place out of India,unless the parties by agreement, express or impliedexcludeitoranyofitsprovisions.Suchaninterpretation does not lead to any conflict betweenany of the provisions of the said Act. On thisinterpretation there is no lacunae in the said Act. Thisinterpretation also does not leave party remediless.Thus such an interpretation has to be preferred to theone adopted by the High Courts of Orissa, Bombay,Madras, Delhi and Calcutta. It will therefore have tobe held that the contrary view taken by these HighCourts is not good law.”

22.Insofar as the facts of the present case are concerned, the onlyquestion that needs to be answered in view of the ratio of BhatiaInternational (supra) is, whether there is an express or implied exclusion ofPart-I. Section 11(B) leaves no manner of doubt that the arbitrationagreement is governed by English law.The fact that at the initial stage,

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when the present petition was filed or during the arbitration proceedings,either of the parties may have proceeded under the wrong assumption thatIndian Courts would have jurisdiction as Part-I is not excluded, would notresult in change in the legal position. The question, as to whether thepetition is maintainable or not, involves the determination of legal issues, onwhich an admission by either party would be of no relevance. The Court, inthis case, has to decide the said issue only on the basis of the clauses in theagreement. The agreement is clear and categorical i.e. the arbitrationagreement is governed by the laws of England.23.The reliance by the Petitioner on the judgment of the Supreme Courtin Union of India v. Reliance Industries Limited & Ors. (2015) 10 SCC213 (hereinafter, ‘Reliance-II’) to argue that the petition is maintainable inview of the observation, in para 21 of the said judgment, is not tenable. ThePetitioner relies on para 197 of BALCO-I to argue that since the presentagreement is governed by the decision in Bhatia International and there isno express or implied exclusion, coupled with the admission of theRespondent, this Court has jurisdiction.Para 197 of BALCO-I is set outherein below:

“197. The judgment in Bhatia International (supra)was rendered by this Court on 13-3-2002. Since then,the aforesaid judgment has been followed by all theHigh Courts as well as by this Court on numerousoccasions. In fact, the judgment in Venture GlobalEngineering (supra) has been rendered on 10- 1-2008in terms of the ratio of the decision in BhatiaInternational (supra). Thus, in order to do completejustice, we hereby order, that the law now declared bythisCourtshallapplyprospectively,toallthearbitration agreements executed hereafter.”

24.This decision of BALCO-I has also been subsequently explained bythe Supreme Court in Reliance-II (supra). The relevant portion is extractedhereinbelow:

“21. The last paragraph of Bharat Aluminium’sjudgment has now to be read with two caveats, bothemanating from para 32 of Bhatia International itself –that where the Court comes to determination that thejuridical seat is outside India or where law other thanIndian law governs the arbitration agreement, Part-Iof the Arbitration Act, 1996 would be excluded bynecessary implication.Therefore, even in the casesgoverned by the Bhatia principle, it is only those casesin which agreements stipulate that the seat of thearbitration is in India or on whose facts judgmentcannot be reached on the seat of the arbitration asbeing outside India that would continue to be governedbytheBhatiaprinciple.Also,itisonlythoseagreements which stipulate or can be read to stipulatethat the law governing the arbitration agreement isIndian law which would continue to be governed by theBhatia rule.22. On the facts in the present case, it is clear that thisCourt has already determined both that the juridicalseat of the arbitration is at London and that thearbitration agreement is governed by English law. ”

25.Thus, Reliance-II has clarified the legal position insofar as the casesto which the Bhatia International principle applies.26.The Petitioner has also relied upon the following observations inSasan Power Limited v. North American Coal Corporation (India) PrivateLimited, (2016) 10 SCC 813 (hereinafter, ‘Sasan’).

“40. From plain reading of Part I of the 1996 Act,having regard to the scheme of the Act and language ofSection2(2),Part Iof theAct appliesto allOMP 214/2010 & 716/2011

arbitrations which take place in India. It is irrelevantwhether any one of the parties to such arbitrationagreement is an Indian entity (either citizen or bodycorporate incorporated in India etc.) or not. If twonon-Indianentities agree tohave their disputesresolved through the process of arbitration with seat ofarbitrationinIndia,suchanarbitrationwouldobviously be governed by the provisions of Part I of theAct. By virtue of the law declared by this Court in thecase of Bhatia International (supra), even if the seat ofarbitration is not in India, if one of the parties to sucharbitration is an Indian entity, Part I would applyunless parties by an agreement in such case chooseto exclude the application of all or some of theprovisions of Part I by an agreement.

41. The question, therefore, is whether the arbitrationagreement in question is one falling exclusively underPart-I of the 1996 Act or falling under both parts of the1996 Act. Bhatia International never declared that thearbitration agreement falling under the scope of Part-Iof the 1996 Act would automatically cease to fall underPart-II of the 1996 Act. On the other hand there areobservations to the contra. recent judgment of thisCourtclearlyrecordedthatBhatia Internationaljudgment leads to such possibility. However, withreference to the agreements entered into subsequent toBALCO, this question does not arise. It is only for theinterregnum between the date of the 1996 Act and thedate of the judgment, in BALCO such question arises.42. To determine the question, whether an arbitrationagreement governed by the law laid down by BhatiaInternational is one which falls exclusively within the-operation of PartI or one which falls within theoperation of both Part-I and Part-II of the 1996 Act,depends on three factors:i. who are the parties to the arbitration agreement;ii. the venue of the arbitration; and

iii. in foreign seated arbitration where one of the

parties is not an Indian entity whether parties agreedto exclude the application of Part I.”

27.Applying the test in para 42 above, if the parties have agreed toexclude the application of Part-I, then the challenge to the award cannot liein this Court. The present case is case of foreign seated arbitration whereone of the parties is not an Indian entity and the law governing thearbitration agreement is clearly English Law, and not Indian law.EvenSasan (supra) does not help the Petitioner’s case.

28.The Petitioner is incorrect in urging that there is an admission by theRespondent that Part I applies. There are further facts/correspondence,exchanged during the course of the arbitration proceedings which alsoclearly show that the parties understood that the Indian Courts would haveno jurisdiction.

1) Procedural Order No.1 dated 25[th]September, 2008 also records as

under:

Whereas,Section 11-B of the JV Agreementprovides eg., that any disputes arising thereunderare to be submitted to arbitration in London,England and that such arbitration is to beconducted in accordance with the rules in force ofthe International Court of Arbitration, London,England;

Now, therefore, it is hereby Orderedthat:

1. Place of Arbitration: As set out in Section 11-Bof the JV Agreement, the Seat of Arbitration shallbe London, England,provided that the ArbitralTribunal may hold meetings and deliberations inany location it may deem desirable, and may, withthe agreement of the Parties, hold any or allhearings,examinations,orothermeeting

requiring the attendance of the Parties or theirrepresentatives, in such other location(s) as itmay deem convenient or desirable.

4.Procedural Rules

4.1TheArbitrationshallbeconductedinaccordance with the LCIA Arbitration Rules as ineffect on 1 January 1998 (The LCIA Rules). Nomunicipal or national rules of procedure shall beapplicable, other than the mandatory laws orrules of procedure (if any) applicable in England,the seat of arbitration.”

2)The Respondent had, in its email dated 9[th]February, 2010, afterpassing of the partial award taken the stand that the Indian courtswould have no jurisdiction. The relevant portion of the said emailis extracted hereinbelow.

“We note that the Respondent is now threatening toappeal under the Arbitration and Conciliation Act,1996 (“The Indian Act”). We can see no basis uponwhich the Indian Courts will accept jurisdiction giventhat the seat of arbitration is London and the”arbitration agreement is governed by English Law.

29.When the parties chose juridical seat outside India and provide forthe laws of England to apply, the challenge to the award has to be raised inEngland as per the decision of the Supreme Court in Eitzen Bulk A/S v.Ashapura Minechem Limited & Anr. (2016) 11 SC 508.The SupremeCourt held as under:

“26. According to the learned Counsel, Clause 28,which is the arbitration clause in the contract clearlystipulates that any dispute under the contract “is to besettled and referred to arbitration in London.” Itfurther stipulates that English law to apply. The

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parties have thus clearly intended that the arbitrationwill be conducted in accordance with English law andthe seat of the arbitration will be at London.

27. The question is whether the above stipulationsshow the intention of the parties to expressly orimpliedly exclude the provisions of Part I to thearbitration, which was to be held outside India i.e. inLondon. We think that the clause evinces such anintention by providing that the English law will applyto the arbitration.The clause expressly provides thatIndian law or any other law will not apply by positingthat English law will apply. The intention is thatEnglish lawwill applytotheconduct of thearbitration. It must also follow that any objection tothe conduct of the arbitration or the award will begoverned by English law. Clearly, this implies that thechallenge to the award must be in accordance withEnglish law. There is thus an express exclusion of theapplicability of Part Ito the instant arbitration byClause 28.In fact, Clause 28 deals with not only theseat of arbitration but also provides that there shallbe two arbitrators, one appointed by the charterersand one by the owners and they shall appoint anumpire, in case there is no agreement. In this contextit may be noted that the Indian Arbitration andConciliationAct, 1996makes no provision forumpires and the intention is that arbitration should beconducted under the English law i.e. the EnglishArbitration Act, 1996. It may also be noted thatSections 67,68 and 69 of the English Arbitration Actprovide for challenge to an award on grounds statedtherein. The intention is thus clearly to exclude theapplicability of Part I to the instant arbitrationproceedings.”30.The Petitioner has relied on GedelaSatchidananda Murthy v Dy.Commissioner Endowments Deptt. A.P. and others (2007) 5 SCC 677 to

argue that the conduct of the parties would imply that the Part-I of the Actwas not excluded. In the present case, though in the reply to the Petitioner,the Respondent simply said “no comment”, the other documents i.e. emailsand procedural orders point to the contrary.

31.The fact that in its initial reply filed, the Respondent did not take thisobjection, does not mean that the objection cannot be raised at this stage. Inany event, the Respondent has filed specific additional reply taking anobjection as to the maintainability of the present petition. In RogerShashoua & Others v. Mukesh Sharma & Others 2017 (14) SCC 722, theSupreme Court has clearly held that even if party has wrongly approachedthe Court in India and accepted the applicability of Part-I of the Act, thesame would not confer jurisdiction on Indian Courts. The relevantobservations are:

“60. The other ground of attack is that the appellantshad themselves approached the courts in India and,therefore, by their own conduct applicability of Part Ihas been accepted by the appellants and the right toraise the issue of jurisdiction has been waived.

62. In Kanwar Singh Saini (supra), this Court has laiddown that conferment of jurisdiction is legislativefunction and it can neither be conferred with theconsent of the parties nor by superior court, and ifthe court passes an order/or decree having nojurisdiction over the matter, it would amount to anullity as the matter goes to the root of the cause. Forthe said purpose the two-Judge Bench has placedreliance upon United Commercial Bank Ltd. (supra),State of Gujarat v. Rajesh Kumar Chimanlal BarotKesar Singh v. Sadhu, Kondiba Dagadu Kadam v.Savitribai Sopan Gujar and Collector of CentralExcise, Kanpur v. Flock (India) Pvt. Ltd.

63. In Zuari Cement Ltd. (supra), the Court ruled thatthough the petitioner and the Corporation thereinhave subjected themselves to the ESI Court, the samecould not confer jurisdiction upon the ESI Court todeterminethequestionofexemptionfromtheoperation of the Act, for by consent, the partiescannot agree to vest jurisdiction in court to try thedispute which the court does not possess.

64. In view of the aforesaid, there cannot be any traceof doubt that any filing of an application by theappellant in the courts in India can clothe such courtswith jurisdiction unless the law vests the same inthem.”

32.The issues as to jurisdiction in the case of arbitral proceedings, havebeen repeatedly decided by the Supreme Court and the ratio of the variousjudgments is quite clear. Despite the same, there are several disputespending before various courts, in respect of international commercialarbitrations, where jurisdictional issues continue to be raised. The variousdecisions rendered in respect of the applicability of Part I would show thatwhere the law of the arbitration agreement is not Indian law, Part I wouldhave no application, in spite of the substantive law governing the contractbeing Indian law or the venue of the arbitration proceedings being in India.In order to have an easy reference of some of the decisions rendered till date,

the following tabular analysis is set out.

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33.The above discussion clearly shows that even in those cases, whichare governed by the Bhatia International (supra) principle, it is only whenthe seat of the arbitration is in India or the arbitration agreement is governedby the Indian law, or where judgment cannot be reached as to the seat ofarbitration that Bhatia International (supra) would continue to govern. Inthe present case, neither situation exists.

34.Conclusions:

(i)The contract in the present case is pre-BALCO-I.

(ii)It is governed by the principles in Bhatia International (supra).

(iii)The contract clearly specifies that the seat of arbitration is Englandand the law governing the arbitration agreement is that of England.and the law governing the arbitration agreement is that of England.

(iv)Part-I is clearly excluded in view of these clauses.

(v)The disputes adjudicated in the Award include disputes falling underSection 4 as also other contractual issues which would be governed bySection 11.Section 4 as also other contractual issues which would be governed bySection 11.

(vi)The ambiguity in the Reply filed by the Respondent, as to jurisdiction,cannot vest jurisdiction in this Court.

(vii)The Respondent, even during arbitral proceedings, has taken the standthat Courts in India have no jurisdiction.that Courts in India have no jurisdiction.

(viii) This court, thus, has no jurisdiction to entertain challenges to the

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impugned awards passed by the ICA of the LCIA.

35.The petitions are, accordingly, dismissed. The Petitioner is left toavail its remedies in accordance with the applicable laws. All I.As aredisposed of. In the facts and circumstances of the present case, there shall beno order as to costs.

NOVEMBER 01, 2018/dk

PRATHIBA M. SINGHJUDGE